<PAGE> 1
As filed with the Securities and Exchange Commission on February 1, 1996
File No. 2-92260
File No. 811-4068
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
---
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X/
---
---
POST-EFFECTIVE AMENDMENT NO. 49 / X/
---
AND
---
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X/
---
---
AMENDMENT NO. 52 / X/
---
PACIFICA FUNDS TRUST
------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
237 Park Avenue, New York, New York 10017
-------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including area code: (212) 808-3900
-------------
Jeffrey L. Steele, Esq. Joan V. Fiore, Esq.
Dechert Price & Rhoads Furman Selz Incorporated
1500 K Street, N.W. 237 Park Avenue
Washington, D.C. 20005 New York, NY 10017
(Name and Address of Agent for Service)
It is proposed that this filing will become effective in accordance with Rule
485 (check appropriate box)
60 days after filing pursuant to paragraph (a)(1)
-----
on (date) pursuant to paragraph (a)(1)
-----
75 days after filing pursuant to paragraph (a)(2)
-----
on (date) pursuant to paragraph (a)(2)
-----
X immediately upon filing pursuant to paragraph (b)
-----
on (date) pursuant to paragraph (b)
-----
- --------------------
* Registrant has registered an indefinite number of shares of beneficial
interest pursuant to Rule 24f-2 under the Investment Company Act of
1940. The Registrant filed the Notice required by Rule 24f-2 on
November 30, 1995.
<PAGE> 2
PACIFICA FUNDS TRUST
CROSS-REFERENCE SHEET
REQUIRED BY RULE 495
UNDER THE SECURITIES ACT OF 1933
This Amendment to the Registration Statement relates to:
PART A
I. The Prospectuses that describe the Investor Shares and the
Institutional Shares of the Registrant's following Funds: the Growth
Fund; Equity Value Fund; Balanced Fund; Asset Preservation Fund;
Short-Term Government Bond Fund; Intermediate Government Bond Fund;
Government Income Fund; Intermediate Bond Fund; Oregon Tax-Exempt Fund;
Arizona Tax-Exempt Fund; California Short-Term Tax-Exempt Fund;
California Tax-Exempt Fund; National Tax-Exempt Fund; 100% U.S.
Treasury Money Market Fund; California Tax-Exempt Money Market Fund;
National Tax-Exempt Money Market Fund; Equity Index Fund and
International Equity Fund.
(Investor Shares Prospectus)
<TABLE>
<CAPTION>
ITEM NO. IN PART A HEADING IN INVESTOR SHARES
- ------------------ --------------------------
PROSPECTUS
----------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Highlights; Fund Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant The Funds: Investment Policies
and Practices of the Funds; Description
of Securities and Investment Practices;
Investment Restrictions
5. Management of the Fund Management of the Funds
5A. Management's Discussion of Fund Information is contained in the
Performance Annual Reports of the Registrant
6. Capital Stock and Other Securities Dividends, Distributions and Federal
Income Tax; Other Information
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
7. Purchase of Securities Being Offered Fund Share Valuation; Minimum Purchase
Requirements; Purchase of Investor
Shares; Management of the Funds
8. Redemption or Repurchase Redemption of Investor Shares
9. Pending Legal Proceedings Not Applicable
(Institutional Shares Prospectus)
<CAPTION>
ITEM NO. IN PART A HEADING IN INSTITUTIONAL SHARES
- ------------------ -------------------------------
PROSPECTUS
----------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Highlights; Fund Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant The Funds: Investment Policies and
Practices of the Funds; Description
of Securities and Investment Practices;
Investment Restrictions
5. Management of the Fund Management of the Funds
5A. Management's Discussion of Fund Information is contained in the
Performance Annual Reports of the Registrant
6. Capital Stock and Other Securities Dividends, Distributions and Federal
Income Tax; Other Information
7. Purchase of Securities Being Offered Fund Share Valuation; Purchase and Redemption
of Institutional Shares; Management of the Funds
</TABLE>
- 2 -
<PAGE> 4
<TABLE>
<S> <C> <C>
8. Redemption or Repurchase Purchase and Redemption of Institutional Shares
9. Pending Legal Proceedings Not Applicable
II. The Prospectus that describes the Registrant's Government Money Market Fund
and Money Market Fund;
<CAPTION>
ITEM NO. IN PART A HEADING IN PROSPECTUS
- ------------------ ---------------------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Highlights; Fund Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant The Funds: Investment Policies and Practices
of the Funds; Description of Securities and
Investment Practices; Investment Restrictions
5. Management of the Fund Management of the Funds
5A. Management's Discussion of Fund Information is contained in the
Performance Annual Reports of the Registrant
6. Capital Stock and Other Securities Dividends, Distributions and Federal Income
Tax; Other Information
7. Purchase of Securities Being Offered Fund Share Valuation; Minimum Purchase Requirements;
Purchase of Fund Shares; Management of the Funds
</TABLE>
- 3 -
<PAGE> 5
<TABLE>
<S> <C> <C>
8. Redemption or Repurchase Redemption of Fund Shares
9. Pending Legal Proceedings Not Applicable
III. The Prospectus that describes the Registrant's Money Market Trust;
<CAPTION>
ITEM NO. IN PART A HEADING IN PROSPECTUS
- ------------------ ---------------------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Fund Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant The Fund; Investment Policies and
Practices of the Fund; Investment
Restrictions
5. Management of the Fund Management of the Fund
5A. Management's Discussion of Fund Information is contained in the
Performance Annual Reports of the Registrant
6. Capital Stock and Other Securities Dividends, Distributions and Federal
Income Tax; Other Information
7. Purchase of Securities Being Offered Purchase and Redemption of Fund Shares;
Management of the Fund
8. Redemption or Repurchase Purchase and Redemption of Fund Shares
9. Pending Legal Proceedings Not Applicable
</TABLE>
- 4 -
<PAGE> 6
<TABLE>
<S> <C>
IV. The Prospectuses that describe the Investor Shares, the Institutional Shares and
Service Shares of the Registrant's Prime Money Market Fund and Treasury
Money Market Fund.
(Investor Shares Prospectus)
<CAPTION>
ITEM NO. IN PART A HEADING IN INVESTOR SHARES
- ------------------ --------------------------
PROSPECTUS
----------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Fund Expenses
3. Condensed Financial Information Financial History
4. General Description of Registrant The Funds: Investment Policies and Practices
of the Funds; Description of Securities and
Investment Practices; Investment Restrictions
5. Management of the Fund Management of the Funds
5A. Management's Discussion of Fund Information is contained in the
Performance Annual Reports of the Registrant
6. Capital Stock and Other Securities Dividends, Distributions and Federal Income Taxes;
Other Information
7. Purchase of Securities Being Offered Minimum Purchase Requirements; Purchase of
Investor Shares of the Funds; Management of the Funds
8. Redemption or Repurchase Redemption of Investor Shares
9. Pending Legal Proceedings Not Applicable
</TABLE>
- 5 -
<PAGE> 7
(Institutional Shares Prospectus)
<TABLE>
<CAPTION>
ITEM NO. IN PART A HEADING IN INSTITUTIONAL SHARES
- ------------------ -------------------------------
PROSPECTUS
----------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Fund Expenses
3. Condensed Financial Information Financial History
4. General Description of Registrant The Funds: Investment Policies and Practices
of the Funds; Description of Securities and
Investment Practices; Investment Restrictions
5. Management of the Fund Management of the Funds
5A. Management's Discussion of Fund Information is contained in the
Performance Annual Reports of the Registrant
6. Capital Stock and Other Securities Dividends, Distributions and Federal Income Taxes;
Other Information
7. Purchase of Securities Being Offered How to Buy Institutional Shares; How to Redeem
Institutional Shares; Management of the Funds
8. Redemption or Repurchase How to Redeem Institutional Shares
9. Pending Legal Proceedings Not Applicable
(Service Shares Prospectus)
<CAPTION>
ITEM NO. IN PART A HEADING IN SERVICE SHARES
- ------------------ -------------------------
PROSPECTUS
----------
<S> <C> <C>
1. Cover Page Cover Page
</TABLE>
- 6 -
<PAGE> 8
<TABLE>
<S> <C> <C>
2. Synopsis Fund Expenses
3. Condensed Financial Information Financial History
4. General Description of Registrant The Funds: Investment Policies and Practices
of the Funds; Description of Securities and
Investment Practices; Investment Restrictions
5. Management of the Fund Management of the Funds
5A. Management's Discussion of Fund Information is contained in the
Performance Annual Reports of the Registrant
6. Capital Stock and Other Securities Dividends, Distributions and Federal Income
Taxes; Other Information
7. Purchase of Securities Being Offered How to Buy Service Shares; How to Redeem Service
Shares; Management of the Funds
8. Redemption or Repurchase How to Redeem Service Shares;
9. Pending Legal Proceedings Not Applicable
V. The Statement of Additional Information that describes the Registrant's
following Funds: the Growth Fund; Equity Value Fund; Balanced Fund;
Asset Preservation Fund; Short-Term Government Bond Fund; Intermediate
Government Bond Fund; Government Income Fund; Intermediate Bond Fund;
Oregon Tax-Exempt Fund; Arizona Tax-Exempt Fund; California Short-Term
Tax-Exempt Fund; California Tax-Exempt Fund; National Tax-Exempt Fund;
100% U.S. Treasury Money Market Fund; California Tax-Exempt Money
Market Fund; National Tax-Exempt Money Market Fund; Equity Index Fund,
International Equity Fund; Money Market Fund and Government Money
Market Fund.
<CAPTION>
ITEM NO. IN PART B HEADING IN STATEMENT OF
- ------------------ -----------------------
ADDITIONAL INFORMATION
-----------------------
<S> <C> <C>
10. Cover Page Cover Page
</TABLE>
- 7 -
<PAGE> 9
<TABLE>
<S> <C> <C>
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objectives and Policies Investment Policies
14. Management of the Fund Management
15. Control Persons and Principal Other Information
Holders of Securities
16. Investment Advisory and Other Management
Services
17. Brokerage Allocation and Other Portfolio Transactions
Practices
18. Capital Stock and Other Securities Other Information
19. Purchase, Redemption and Pricing Additional Purchase and
of Securities Being Offered Redemption Information;
Determination of Net Asset Value
20. Tax Status Taxation
21. Underwriters Management
22. Calculation of Performance Data Other Information
23. Financial Statements Financial Statements
VI. The Statement of Additional Information that describes the Service and
Institutional Shares of the Registrant's Prime Money Market Fund and
Treasury Money Market Fund.
<CAPTION>
ITEM NO. IN PART B HEADING IN STATEMENT OF
- ------------------ -----------------------
ADDITIONAL INFORMATION
-----------------------
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
</TABLE>
- 8 -
<PAGE> 10
<TABLE>
<S> <C> <C>
12. General Information and History Not Applicable
13. Investment Objectives and Policies Investment Objectives and
Management Polices
14. Management of the Fund Management of the Funds
15. Control Persons and Principal Description of the Funds
Holders of Securities
16. Investment Advisory and Other Management of the Funds
Services
17. Brokerage Allocation and Other Portfolio Transactions
Practices
18. Capital Stock and Other Securities Description of the Funds
19. Purchase, Redemption and Pricing Purchase of Service and
of Securities Being offered Institutional Shares; Redemption of Service and
Institutional Shares; Determination of Net Asset Value
20. Tax Status Taxes
21. Underwriters Management of the Funds
22. Calculation of Performance Data Yield Calculations
23. Financial Statements Financial Statements
VII. The Statement of Additional Information that describes the Investor Shares
of the Registrant's Prime Money Market Fund and Treasury Money Market Fund.
<CAPTION>
ITEM NO. IN PART B HEADING IN STATEMENT OF
- ------------------ -----------------------
ADDITIONAL INFORMATION
-----------------------
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
</TABLE>
- 9 -
<PAGE> 11
<TABLE>
<S> <C> <C>
12. General Information and History Not Applicable
13. Investment Objectives and Policies Investment Objectives and
Management Policies
14. Management of the Fund Management of the Funds
15. Control Persons and Principal Description of the Funds
Holders of Securities
16. Investment Advisory and Other Management of the Funds
Services
17. Brokerage Allocation and Other Portfolio Transactions
Practices
18. Capital Stock and Other Securities Description of the Funds
19. Purchase, Redemption and Pricing Purchase of Investor Shares;
of Securities Being Offered Redemption of Investor Shares;
Determination of Net Asset Value
20. Tax Status Taxes
21. Underwriters Management of the Funds
22. Calculation of Performance Data Yield Calculations
23. Financial Statements Financial Statements
VIII. The Statement of Additional Information that describes the Registrant's Money
Market Trust.
<CAPTION>
ITEM NO. IN PART B HEADING IN STATEMENT OF
- ------------------ -----------------------
ADDITIONAL INFORMATION
-----------------------
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
</TABLE>
- 10 -
<PAGE> 12
<TABLE>
<S> <C> <C>
13. Investment Objectives and Policies Investment Policies
14. Management of the Fund Management
15. Control Persons and Principal Other Information
Holders of Securities
16. Investment Advisory and Other Management
Services
17. Brokerage Allocation and Other Portfolio Transactions
Practices
18. Capital Stock and Other Securities Other Information
19. Purchase, Redemption and Pricing Additional Purchase and
of Securities Being Offered Redemption Information;
Determination of Net Asset Value
20. Tax Status Taxation
21. Underwriters Management
22. Calculation of Performance Data Other Information
23. Financial Statements Financial Statements
IX. The Statement of Additional Information that describes the Service Shares of the
Registrant's 100% U.S. Treasury Money Market Fund.
<CAPTION>
ITEM NO. IN PART B HEADING IN STATEMENT OF
- ------------------ -----------------------
ADDITIONAL INFORMATION
-----------------------
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objectives and Policies Investment Policies
</TABLE>
- 11 -
<PAGE> 13
<TABLE>
<S> <C> <C>
14. Management of the Fund Management
15. Control Persons and Principal Other Information
Holders of Securities
16. Investment Advisory and Other Management
Services
17. Brokerage Allocation and Other Portfolio Transactions
Practices
18. Capital Stock and Other Securities Other Information
19. Purchase, Redemption and Pricing Additional Purchase and
of Securities Being Offered Redemption Information;
Determination of Net Asset Value
20. Tax Status Taxation
21. Underwriters Management
22. Calculation of Performance Data Other Information
23. Financial Statements Financial Statements
</TABLE>
- 12 -
<PAGE> 14
[PACIFICA LOGO]
(INVESTOR SHARES)
PACIFICA EQUITY VALUE FUND
PACIFICA GROWTH FUND
PACIFICA BALANCED FUND
PROSPECTUS
FEBRUARY 1, 1996
[FIRST INTERSTATE BANK LOGO]
Investment Advisor to The Pacifica Funds
<PAGE> 15
PACIFICA FUNDS TRUST
(INVESTOR SHARES)
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) 662-8417
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. --
INVESTMENT ADVISOR
("FICM" OR THE "ADVISOR")
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
("FURMAN SELZ" OR THE "SPONSOR")
PACIFICA FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
("PFD INC." OR THE "DISTRIBUTOR")
Pacifica Funds Trust (the "Trust") is an open-end investment company (a
mutual fund) that offers a selection of separate investment portfolios. This
Prospectus describes the Investor Shares of the following three portfolios (the
"Funds"):
- Pacifica Equity Value Fund
- Pacifica Growth Fund
- Pacifica Balanced Fund
This Prospectus sets forth concisely the information a prospective investor
should know before investing in any of the Funds and should be read and retained
for information about each Fund. A Statement of Additional Information (the
"SAI"), dated February 1, 1996 (which may be revised from time to time),
containing additional and more detailed information about the Funds, has been
filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Funds at the address or
information number printed above.
----------------------------
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FIRST INTERSTATE OR OTHER BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN 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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1996.
<PAGE> 16
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS.............................................. 3
FUND EXPENSES........................................... 7
FEE TABLE -- INVESTOR SHARES............................ 7
FINANCIAL HIGHLIGHTS.................................... 9
THE FUNDS............................................... 13
INVESTMENT POLICIES AND PRACTICES OF THE FUNDS.......... 13
RISKS OF INVESTING IN THE FUNDS......................... 15
MANAGEMENT OF THE FUNDS................................. 17
FUND SHARE VALUATION.................................... 23
PRICING OF INVESTOR SHARES.............................. 24
MINIMUM PURCHASE REQUIREMENTS........................... 27
PURCHASE OF INVESTOR SHARES............................. 27
INDIVIDUAL RETIREMENT ACCOUNTS.......................... 29
EXCHANGE OF INVESTOR SHARES............................. 29
REDEMPTION OF INVESTOR SHARES........................... 30
DIVIDENDS, DISTRIBUTIONS AND FEDERAL
INCOME TAX............................................ 34
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES...... 37
INVESTMENT RESTRICTIONS................................. 47
OTHER INFORMATION....................................... 48
APPENDIX................................................ A-1
</TABLE>
2
<PAGE> 17
HIGHLIGHTS
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
This Prospectus describes three diversified investment portfolios managed
by First Interstate Capital Management, Inc. Each Fund has a distinct investment
objective and policies.
The Equity Value Fund. The investment objective of the Equity Value Fund
is to provide investors with long-term capital appreciation. The Fund pursues
this objective by investing primarily in common stocks of both domestic and
foreign companies. The Fund may invest in large, well-established companies and
smaller companies with market capitalization exceeding $50 million. The Fund may
invest up to 5% of its assets in equity securities listed or traded exclusively
on a foreign exchange. Income generation is a secondary consideration for the
Fund. However, the Fund may purchase dividend paying stocks of particular
issuers when the issuer's dividend record may, in the Advisor's opinion, have a
favorable influence on the market value of the securities. Under normal market
conditions, the Fund will invest at least 65% of its total assets in common
stocks and securities convertible into common stocks.
The Growth Fund. The investment objective of the Growth Fund is to seek
superior, risk-adjusted total return through capital appreciation. The Fund
invests primarily in equity securities, concentrating on those securities whose
growth prospects, in the opinion of the Advisor, appear to exceed that of the
overall market. The Advisor may also consider the potential for income in
selecting portfolio securities. Under normal market conditions, the Fund will
invest at least 65% of its total assets in equity securities.
The Balanced Fund. The investment objective of the Balanced Fund is to
realize both capital appreciation and current income resulting in a high total
investment return consistent with prudent investment risk and a balanced
investment approach. The Fund pursues this objective through a balanced and
diversified program of investing in equity securities and debt instruments. The
Fund will normally invest between 30% and 70% of its assets in common stocks
that are considered by the Advisor to have better than average prospects for
growth of capital and income. The Fund will invest primarily in domestic equity
securities, but may invest up to 5% of its assets in equity securities listed or
traded exclusively on a foreign exchange. The remaining balance of the Fund's
assets will be invested in senior fixed income securities, including corporate
debt securities, commercial paper and mortgage-backed and asset-backed
securities, based on the relative
3
<PAGE> 18
stability of income and principal of such securities. The debt instruments in
which the Fund invests will be rated at least investment grade.
For additional information concerning the investment policies, practices
and risk considerations of the Funds, see "The Funds," "Investment Policies and
Practices of the Funds" and "Risks of Investing in the Funds" in this
Prospectus.
RISKS OF INVESTING IN THE FUNDS
The price per share of the Funds will fluctuate with changes in value of
the investments held by each Fund. A Fund's performance will change daily based
on many factors, including the quality of the instruments in each Fund's
investment portfolio, national and international economic conditions, interest
rate levels, the overall level of equity prices, general market conditions and
international exchange rates. Depending on these factors, the net asset value of
a Fund may decrease instead of increase. The Funds may seek to achieve their
investment objectives through investments in securities of foreign issuers
(which involve risks not typically associated with U.S. issuers), instruments
with the lowest investment grade rating which have speculative characteristics,
and by the use of certain options, futures and currency swap strategies. In
addition, the Funds may invest in securities issued by emerging growth
companies, which may involve greater price volatility and risk than those
incurred by funds that do not invest in such companies. The market value of a
Fund's investments in fixed income securities will change in response to changes
in interest rates and the relative financial strength of each issuer. During
periods of falling interest rates, the value of fixed income securities
generally rises. Conversely, during periods of rising interest rates the value
of such securities generally declines.
There is no assurance that any Fund will achieve its investment objective.
MANAGEMENT OF THE FUNDS
First Interstate Capital Management, Inc. acts as investment advisor to the
Funds. For its services, the Advisor is entitled to receive a fee from each Fund
at an annual rate based on the Fund's average daily net assets. See "Fee
Table -- Investor Shares" and "Management of the Funds" in this Prospectus.
Furman Selz acts as administrator and sponsor to the Funds. Furman Selz
provides certain management and administrative services to the Funds, and is
entitled to receive a fee from each Fund at an annual rate
4
<PAGE> 19
based on the Fund's average daily net assets. PFD Inc. distributes the
Funds' shares and may be reimbursed for certain of its distribution-related
expenses.
Fees and expenses charged to the Funds are outlined on pages 7 and 8 of
this Prospectus.
5
<PAGE> 20
GUIDE TO INVESTING IN THE PACIFICA FAMILY OF FUNDS
Purchase orders for the Funds received by your broker or Service
Organization in proper order by 4:15 p.m., Eastern time, and transmitted to the
Trust prior to 5:00 p.m. Eastern time will become effective that day.
<TABLE>
<S> <C>
- MINIMUM INITIAL INVESTMENT............ $500
- MINIMUM INITIAL INVESTMENT FOR IRAS... $250
- MINIMUM SUBSEQUENT INVESTMENT......... $ 50
</TABLE>
Investor Shares of the Funds are purchased at net asset value plus a sales
charge of no more than 4.5%.
Shareholders may exchange Investor Shares between Funds by telephone or
mail.
<TABLE>
<S> <C>
- MINIMUM INITIAL EXCHANGE.............. $500
(NO MINIMUM FOR SUBSEQUENT EXCHANGES.)
</TABLE>
Shareholders may redeem Investor Shares by telephone, mail or wire.
- The Funds reserve the right upon not less than 30 days' notice to redeem
involuntarily all the Investor Shares in an investor's account which have
an aggregate value of $500 or less for any particular Fund.
(The above redemption services are not available for IRAs and trust clients
of First Interstate Bancorp and its affiliates.)
All dividends and distributions will be automatically reinvested at net
asset value in additional Investor Shares of the applicable Fund unless cash
payment is requested.
- Distributions for the Funds are generally paid quarterly.
For additional information on how to purchase and redeem Investor Shares of
the Funds, see "Purchase of Investor Shares," "Exchange of Investor Shares" and
"Redemption of Investor Shares."
6
<PAGE> 21
FUND EXPENSES
The following table lists the costs and expenses that an investor will
incur either directly or indirectly as an Investor shareholder of a Fund based
upon the Fund's operating expenses for its most recent fiscal year, adjusted to
reflect current fees and expenses.
FEE TABLE -- INVESTOR SHARES
<TABLE>
<CAPTION>
EQUITY
VALUE GROWTH BALANCED
FUND FUND FUND
------ ------ --------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).... 4.50% 4.50% 4.50%
Maximum Sales Load Imposed on Reinvested
Dividends
(as a percentage of offering price).... None None None
Deferred Sales Load
(as a percentage of redemption
proceeds).............................. None + None + None+
Redemption Fees.......................... None None None
Exchange Fee............................. None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (after waivers)(++)...... 0.60% 0.08% 0.60%
12b-1 Fees(++)++......................... 0.25% 0.00% 0.20%
Other Expenses (after waivers)(++)++++... 0.50% 0.82% 0.55%
-----
----- -----
TOTAL FUND OPERATING EXPENSES:
(after waivers)(++)++++++................ 1.35% 0.90% 1.35%
-----
----- -----
-----
----- -----
</TABLE>
- ---------------
(++) Management Fees (before waivers) would be 0.60%, 0.75% and 0.60%,
respectively.
(++)++ Under rules of the National Association of Securities Dealers, Inc.
(the "NASD"), a 12b-1 fee may be treated as a sales charge for certain
purposes. Because a 12b-1 fee is an annual fee charged against the
assets of a Fund, long-term shareholders may indirectly pay more in
total sales charges than the economic equivalent of the maximum
front-end sales charge permitted by the rules of the NASD. See
"Management of the Funds -- The Sponsor and Distributor."
(++)++++ Other Expenses (before waivers) would be 0.50%, 1.23% and 0.67%,
respectively.
(++)++++++ Total Fund Operating Expenses (before waivers) would be 1.35%, 1.98%
and 1.47%, respectively.
+ Investor Shares sold pursuant to a complete waiver of the initial sales
charge available to purchases of $1 million or more are subject to a 1%
contingent deferred sales charge if redeemed within one year from the date
of purchase.
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Funds' Investor Shares will
bear. The table does not reflect any charges that may be imposed by a
7
<PAGE> 22
First Interstate Bank or other institutions directly on their customer
accounts in connection with investments in the Funds.
EXAMPLE:(++)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
EQUITY
VALUE GROWTH BALANCED
FUND FUND FUND
------ ------ --------
<S> <C> <C> <C>
1 year................................ $ 58 $ 54 $ 58
3 years............................... 86 72 86
5 years............................... 116 93 116
10 years.............................. 200 151 200
</TABLE>
- ---------------
(++) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED
AMOUNT.
8
<PAGE> 23
FINANCIAL HIGHLIGHTS
The financial information shown below is to assist investors in evaluating
the performance of the Funds since their commencement of operations. The
following supplementary information for the year ended September 30, 1995 for
the Equity Value Fund and Balanced Fund has been audited by Ernst & Young, LLP,
whose report on the financial statements appears in the 1995 Annual Report to
Shareholders for the Funds. The following supplementary information for the
periods through September 30, 1995 for the Growth Fund has been audited by that
Fund's former independent accountants, whose report on the financial statements
appears in the Fund's September 30, 1995 Report to Shareholders. These reports
and financial statements are incorporated by reference into the SAI. The
supplementary information for each of the four years in the period ended
September 30, 1994 for the Equity Value and Balanced Fund has been audited by
the former independent accountants for these Funds. The following financial data
should be read in conjunction with the related financial statements and notes
thereto. Further information about the Funds is contained in their Annual
Reports to Shareholders, which may be obtained without charge by calling
1-800-662-8417. For the periods shown, the Equity Value Fund and Balanced Fund
offered only one class of shares to both institutional and retail investors. See
"Other Information -- Capitalization."
9
<PAGE> 24
Selected data for a share outstanding throughout the periods shown:
EQUITY VALUE FUND
<TABLE>
<CAPTION>
PERIOD
YEAR ENDED SEPTEMBER 30, ENDED
------------------------------------------------------------------ SEPTEMBER 30,
1995 1994 1993 1992 1991 1990(a)
---------- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........ $ 12.36 $ 13.17 $ 10.73 $ 10.45 $ 8.48 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(++)................. 0.24 0.20 0.21 0.20 0.28 0.08
Net gain (loss) on securities (both
realized and unrealized)(++)............ 1.63 0.74 2.75 0.49 1.98 (1.60)
---------- ---------- ---------- ---------- ---------- -------------
Total from Investment Operations........ 1.87 0.94 2.96 0.69 2.26 (1.52)
---------- ---------- ---------- ---------- ---------- -------------
LESS DISTRIBUTIONS:
Dividends from net investment income...... (0.25) (0.21) (0.23) (0.22) (0.29) --
Distributions from capital gains.......... (0.71) (1.54) (0.29) (0.19) -- --
---------- ---------- ---------- ---------- ---------- -------------
Total Distributions..................... (0.96) (1.75) (0.52) (0.41) (0.29) --
---------- ---------- ---------- ---------- ---------- -------------
Net Asset Value, End of Period............ $ 13.27 $ 12.36 $ 13.17 $ 10.73 $ 10.45 $ 8.48
========= ======== ======== ======= ======= ===========
Total Return (excluding sales load)..... 16.58% 7.49% 28.22% 6.81% 27.05% (15.20)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000)........... $170,406 $ 168,852 $ 140,551 $ 92,915 $ 68,412 $26,100
Ratio of Expenses to Average Net Assets... 0.96% 0.99% 0.98% 1.02% 0.98% 0.91%+
Effect of Waivers on above Ratio.......... 0.02% 0.02% 0.01% -- 0.13% 0.95%+
Ratio of Net Investment Income to Average
Net Assets.............................. 1.97% 1.60% 1.73% 1.86% 2.69% 3.38%+
Portfolio Turnover Rate................... 75% 41% 82% 78% 36% 21%
</TABLE>
- ---------------
(a) Commencement of operations, July 2, 1990.
(++) Per share data based upon average monthly shares outstanding.
+ Annualized.
10
<PAGE> 25
For a share outstanding throughout the periods indicated:
GROWTH FUND*
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 1995** MAY 31, 1995 MAY 31, 1994
-------------------- ------------- -------------
<S> <C> <C> <C>
Net asset value, beginning of period.................................... $17.27 $ 15.42 $ 15.39
INCOME FROM INVESTMENT OPERATIONS
Net investment income................................................. 0.10 0.25 0.17
Net realized and unrealized gain (loss) on investments................ 1.28 1.90 (0.04)
------ ------ ------
Total income (loss) from investment operations...................... 1.38 2.15 0.13
------ ------ ------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income.................................. (0.16) (0.24) (0.10)
Distributions from net realized gain on investments................... (0.09) (0.06) (0.00)
------ ------ ------
Total dividends and distributions to shareholders................... (0.25) (0.30) (0.10)
------ ------ ------
Net asset value, end of period........................................ $18.40 $ 17.27 $ 15.42
================= =========== ===========
Total return (excluding sales load)................................. 25.89%+ 14.18% 1.27%+
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)....................................... $ 197 $ 200 $ 80
Ratio of expenses to average net assets............................... 0.90%+ 0.90% 0.92%+
Ratio of net investment income to average net assets.................. 1.53%+ 1.81% 0.95%+
Ratio of expenses to average net assets without fee waivers........... 1.99%+ 2.41% 5.69%+
Ratio of net investment income (loss) to average net assets without
fee waivers......................................................... 0.64%+ 0.30% (3.82%)+
Portfolio turnover rate (1)........................................... 51.31% 59.71% 50.90%
</TABLE>
- ---------------
* The Fund operated as the Growth Fund of Westcore Trust from its commencement
of operations until its reorganization as a portfolio of the Trust on October
1, 1995. The initial sale of Investor Shares occurred on October 11, 1993.
During the periods shown, the Fund was advised by First Interstate Bank of
Washington, N.A. and First Interstate Bank of Oregon, N.A. In connection with
the Fund's reorganization, FICM assumed investment advisory responsibilities
for the Fund.
** The Fund changed its fiscal year end from May 31 to September 30.
+ Annualized.
(1) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period. Purchases and sales of
investment securities (excluding short-term securities) for the year ended
September 30, 1995 were $3,146,452 and $2,197,415, respectively.
11
<PAGE> 26
Selected data for a share outstanding throughout the periods shown:
BALANCED FUND
<TABLE>
<CAPTION>
PERIOD
ENDED
YEAR ENDED SEPTEMBER 30, SEPTEMBER
----------------------------------------------------- 30,
1995 1994 1993 1992 1991 1990(a)
------- -------- -------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 11.67 $ 12.71 $ 11.18 $ 10.80 $ 9.50 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(++)................................. 0.46 0.43 0.44 0.42 0.52 0.14
Net gain (loss) on securities (both realized and
unrealized)(++)......................................... 0.68 (0.13) 1.72 0.53 1.40 (0.64)
------- -------- -------- ------- ------- -----------
Total from Investment Operations........................ 1.14 0.30 2.16 0.95 1.92 (0.50)
------- -------- -------- ------- ------- -----------
LESS DISTRIBUTIONS:
Dividends from net investment income...................... (0.47) (0.46) (0.43) (0.43) (0.62) --
Distributions from capital gains.......................... (0.50) (0.88) (0.20) (0.14) -- --
------- -------- -------- ------- ------- -----------
Total Distributions..................................... (0.97) (1.34) (0.63) (0.57) (0.62) --
------- -------- -------- ------- ------- -----------
Net Asset Value, End of Period............................ $ 11.84 $ 11.67 $ 12.71 $ 11.18 $ 10.80 $ 9.50
======= ======== ======== ======= ======= ===========
Total Return (excluding sales load)..................... 10.62% 2.30% 19.83% 9.03% 20.78% (5.00)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000)........................... $89,034 $108,290 $104,434 $65,226 $50,038 $33,185
Ratio of Expenses to Average Net Assets................... 1.03% 1.09% 1.01% 1.02% 0.96% 0.93%+
Effect of Waivers on above Ratio.......................... 0.02% 0.02% 0.05% 0.08% 0.22% 0.67%+
Ratio of Net Investment Income to Average Net Assets...... 4.05% 3.55% 3.62% 3.76% 5.88% 5.87%+
Portfolio Turnover Rate................................... 90% 35% 60% 49% 30% 12%
</TABLE>
- ---------------
(a) Commencement of operations, July 2, 1990.
(++) Per share data based upon average monthly shares outstanding.
+ Annualized.
12
<PAGE> 27
THE FUNDS
The Funds are portfolios of Pacifica Funds Trust, a business trust
organized under the laws of the Commonwealth of Massachusetts as an open-end,
management investment company. The Trust's Board of Trustees oversees the
overall management of the Funds and elects the officers of the Funds.
INVESTMENT POLICIES AND PRACTICES OF THE FUNDS
- The Equity Value Fund's investment objective is to provide investors with
long-term capital appreciation.
- The Growth Fund's investment objective is to seek superior, risk-adjusted
total return through capital appreciation.
- The Balanced Fund's investment objective is to realize both capital
appreciation and current income resulting in a high total investment
return consistent with prudent investment risk and a balanced investment
approach.
Each Fund follows its own investment policies and practices, including
certain investment restrictions. The SAI contains the specific investment
restrictions which govern the Funds' investments. The investment objectives of
the Equity Value Fund and Balanced Fund are fundamental policies, which means
that they may not be changed without a majority vote of shareholders of the
affected Fund. Any change in the investment objective of the Growth Fund by the
Board of Trustees may result in the Fund having an investment objective
different from the objective which a shareholder considered appropriate at the
time of investment in the Fund. Except for the objectives and those restrictions
specifically identified as fundamental, all other investment policies and
practices described in this Prospectus and in the SAI are not fundamental.
The Advisor selects investments and makes investment decisions based on the
investment objective and policies of each Fund.
The Equity Value Fund and The Balanced Fund. In selecting equity
investments (which include common stocks of both domestic and foreign companies)
for the Equity Value Fund and Balanced Fund, the Advisor selects companies for
investment using both quantitative and qualitative analysis to identify those
issuers that, in the Advisor's opinion, exhibit below-average valuation
multiples, above-average financial strength, a strong position in their industry
and a history of steady profit growth.
13
<PAGE> 28
The Advisor may also select other equity securities in addition to common
stocks for investment by the Equity Value Fund and Balanced Fund. Such other
equity securities are preferred stocks, high grade securities convertible into
common stocks, and warrants. Neither Fund will invest more than 5% of its net
assets in warrants, no more than 2% of which will be invested in warrants which
are not listed on the New York or American Stock Exchanges. Under normal market
conditions, the Equity Value Fund will invest at least 65% of its total assets
in common stocks or securities convertible into common stocks. For temporary
defensive purposes, however, both the Equity Value Fund and Balanced Fund may
invest in U.S. Government securities, certificates of deposit, bankers'
acceptances, commercial paper, repurchase agreements (maturing in seven days or
less) and debt obligations of corporations (corporate bonds, debentures, notes
and other similar corporate debt instruments) which are rated investment grade
or better by Standard & Poor's Ratings Group ("S&P") or Moody's Investors
Service, Inc. ("Moody's").
In selecting senior fixed income securities for the Balanced Fund, the
Advisor seeks to select those debt instruments that appear best calculated to
achieve the Fund's investment objective within the credit and risk tolerances
established for the Fund. In accordance with those policies, the Balanced Fund
may purchase commercial paper rated A-2 or better by S&P or Prime-2 or better by
Moody's, corporate debt securities rated BBB or better by S&P or Baa or better
by Moody's (which contain some speculative characteristics) and mortgage-backed
and asset-backed securities rated AA or better by S&P or Aa or better by Moody's
(or the foregoing types of debt securities given equivalent ratings by at least
two other nationally recognized statistical rating organizations ("NRSROs"), or,
if any such securities are not rated, are of comparable quality in the Advisor's
opinion).
Growth Fund. The Growth Fund's investment objective is to seek superior,
risk-adjusted total return through capital appreciation. The Advisor may also
consider the potential for income in selecting portfolio securities. The Fund
invests primarily in equity securities, concentrating on those securities whose
growth prospects, in the opinion of the Advisor, appear to exceed that of the
overall market. The Fund's holdings are typically spread across industry and
economic sectors.
The Advisor attempts to invest in the common stocks of companies with
strong financial characteristics and growth tendencies. The Advisor seeks to
acquire stock in companies that will, in its opinion, experience growth in
sales, earnings and dividends greater than the growth experienced by the
Standard & Poor's 500 Composite Stock Price Index (the "S&P
14
<PAGE> 29
500"). The Advisor also monitors the profitability, market capitalization, price
to earnings ratio and capital structures as part of its selection process. The
Fund may invest in non-dividend paying companies which, in the opinion of the
Advisor, offer better total return prospects. In addition, the Fund may invest
up to 25% of its assets in securities issued by foreign issuers and in American
Depository Receipts which may or may not exhibit the particular growth
tendencies and capitalization characteristics described above.
The Fund's Advisor anticipates that from time to time certain industry
sectors will not be represented in the Fund's portfolio while other sectors will
represent a significant portion of invested assets. As a matter of fundamental
policy, however, the Advisor will not purchase any securities which would cause
25% or more of the Fund's total assets at the time of purchase to be invested in
the securities of issuers conducting their principal business activities in the
same industry, and the Fund's investments will be diversified among individual
issuers.
As stated, investment emphasis is on equity securities, primarily common
stocks and, to a lesser extent, preferred stocks and debt securities which are
convertible into common stocks. The Fund's policy is to invest at least 65% of
the value of its total assets in equity securities under normal market
conditions.
All Funds. The Funds may also hold short-term U.S. Government obligations,
money market instruments, repurchase agreements, securities issued by other
investment companies within the limits prescribed by the Investment Company Act
of 1940, as amended (the "1940 Act"), and cash, pending investment, to meet
anticipated redemption requests or if, in the opinion of the Advisor, suitable
investments for a Fund are unavailable. Such investments may be made in such
proportions as, in the opinion of the Advisor, existing circumstances may
warrant, and may include obligations of foreign banks and foreign branches of
U.S. banks. The types of securities and investment practices used by the Funds
are described in greater detail under the section "Description of Securities and
Investment Practices" on pages 37-47 of this Prospectus.
RISKS OF INVESTING IN THE FUNDS
The price per share of each of the Funds will fluctuate with changes in
value of the investments held by the Fund. Shareholders of a Fund should,
therefore, expect the value of their shares to fluctuate with changes in the
value of the securities owned by that Fund. For example, investments by the
Funds in smaller companies may involve greater risks than investments
15
<PAGE> 30
in large companies due to such factors as limited product lines, markets and
financial or managerial resources, and less frequently traded securities that
may be subject to more abrupt price movements than securities of larger
companies.
The market value of a Fund's investment in fixed income securities will
change in response to changes in interest rates and the relative financial
strength of each issuer. During periods of falling interest rates, the value of
fixed income securities generally rises. Conversely, during periods of rising
interest rates the value of such securities generally declines. Debt securities
with longer maturities, which tend to produce higher yields, are subject to
potentially greater capital appreciation and depreciation than obligations with
shorter maturities. Changes in the financial strength of an issuer or changes in
the ratings of any particular security may also affect the value of these
investments. Fluctuations in the market value of fixed income securities
subsequent to their acquisition will not affect cash income from such
securities, but will be reflected in a Fund's net asset value. The Balanced Fund
may also purchase zero-coupon bonds (i.e., discount debt obligations that do not
make periodic interest payments) which are subject to greater market
fluctuations from changing interest rates than debt obligations of comparable
maturities which make current distributions of interest.
Investing in the securities of issuers in any foreign country, including
ADRs and EDRs, involves special risks and considerations not typically
associated with investing in U.S. companies. These include differences in
accounting, auditing and financial reporting standards; generally higher
commission rates on foreign portfolio transactions; the possibility of
nationalization, expropriation or confiscatory taxation; adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country); and political instability which
could affect U.S. investments in foreign countries. Additionally, foreign
securities and dividends and interest payable on those securities may be subject
to foreign taxes, including taxes withheld from payments on those securities.
Foreign securities often trade with less frequency and volume than domestic
securities and, therefore, may exhibit greater price volatility. Additional
costs associated with an investment in foreign securities may include higher
custodial fees than apply to domestic custodial arrangements and transaction
costs of foreign currency conversions. Changes in foreign exchange rates also
will affect the value of securities denominated or quoted in currencies other
than the U.S. dollar. A Fund's objective may be affected either unfavorably or
favorably by fluctuations in the relative rates of exchange between the
currencies of different nations, by exchange control regulations and by
indigenous economic and political developments. See the SAI for further
information about foreign securities.
16
<PAGE> 31
There is, of course, no assurance that a Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products.
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction of
the Board of Trustees. The Trustees are Dennis W. Draper, Joseph N. Hankin, John
E. Heilmann, Jack D. Henderson and Richard A. Wedemeyer. Information about the
Trustees, as well as the Funds' executive officers, may be found in the SAI
under the heading "Management -- Trustees and Officers."
THE ADVISOR: FIRST INTERSTATE CAPITAL MANAGEMENT, INC.
First Interstate Capital Management, Inc., 7501 E. McCormick Parkway,
Scottsdale, Arizona 85258, serves as investment advisor to the Trust. FICM
manages the investment and reinvestment of the assets of the Funds and
continuously reviews, supervises and administers the Funds' investments. The
Advisor is responsible for placing orders for the purchase and sale of the
Funds' investments directly with brokers and dealers selected by it in its
discretion.
FICM is a wholly-owned subsidiary of First Interstate Bank of California,
which is the largest banking subsidiary of First Interstate Bancorp, a
multi-bank holding company. First Interstate Bancorp provides financial products
and services marketed at the local level to nearly five million households in
over 500 communities in 13 western states. Prior to March 18, 1994, the
investment advisor for the Equity Value Fund and Balanced Fund was San Diego
Financial Capital Management, Inc., which was acquired by First Interstate
Bancorp through its merger with San Diego Financial Corporation. Prior to
October 1, 1995, First Interstate Bank of Oregon, N.A. and First Interstate of
Washington, N.A., both affiliates of FICM, served as co-investment advisors for
the Growth Fund.
On January 24, 1996, First Interstate Bancorp signed a definitive merger
agreement to merge with Wells Fargo & Company ("Wells Fargo"), a publicly-held
bank holding company with its head office at 420 Montgomery Street, San
Francisco, California 94104. The merger is conditioned upon, among other things,
certain regulatory approvals. Upon completion of the merger, currently expected
to occur during the second quarter of 1996, FICM will be wholly-owned by Wells
Fargo, and the existing investment advisory agreement between the Trust and FICM
will automatically terminate. It is contemplated that an application will be
filed
17
<PAGE> 32
with the Securities and Exchange Commission to ensure there is no disruption as
a result of the merger in the provision of investment advisory services to the
Funds, and that a meeting of shareholders will be held not later than 120 days
after the merger to approve ongoing investment advisory arrangements for the
Funds.
Mr. David Underwood serves as FICM's Director of Equity Funds Management.
Mr. Underwood joined FICM in 1995. From 1993 to 1995 Mr. Underwood was employed
by Integra Trust Company as Director of Research. From 1990 to 1993 he was a
Portfolio Manager with the firm of C.S. McKee Investment Advisors. Mr. G. Edward
Means serves as FICM's Director of Fixed Income Management. Mr. Means joined
FICM in January 1995. From 1992 through 1994 he was employed by Clayton Brown &
Associates as Senior Vice President, Fixed Income. From 1984 to 1992 he was
employed by First National Bank of Chicago as a Senior Vice President.
Mr. Leon Newcomb has been responsible for the day-to-day management of the
Equity Value Fund since May 1995. Mr. Newcomb joined First Interstate in 1994
and FICM in March 1995. From 1989 through 1993 Mr. Newcomb was employed by
Knights of Columbus, a Connecticut life insurance company, as an equity
portfolio manager. Since May 1995, Mr. Newcomb has also been responsible for the
day-to-day management of the equity portion of the Balanced Fund.
Mr. Richard A. Ferguson has been responsible for the day-to-day management
of the Growth Fund since October 1, 1995. Mr. Ferguson joined FICM in March
1995. From 1968 to 1995, Mr. Ferguson held various managerial positions with
First Interstate Bank of Arizona, N.A. and served as a manager of balanced
portfolios and equity funds.
Mr. Michael Hughes has been responsible for the day-to-day management of
the fixed income portion of the Balanced Fund since April 1995. Mr. Hughes has
been employed by First Interstate since November 1988. He currently serves as a
Fixed Income Fund Manager for FICM.
18
<PAGE> 33
For the advisory services it provides to the Funds, FICM is entitled to
receive from each Fund fees, payable monthly, at the annual rates, based on
average daily net assets, as set forth below:
<TABLE>
<CAPTION>
INVESTMENT
FUND ADVISORY FEE
----------------------------------------- ------------
<S> <C>
Equity Value Fund........................ 0.60%
Growth Fund.............................. 0.75%
Balanced Fund............................ 0.60%
</TABLE>
The Advisor has agreed that during the current fiscal year, it will waive a
portion of its fees so that total operating expenses will not exceed 0.90% of
the average daily net assets of the Investor Shares of the Growth Fund. For
their fiscal year ended September 30, 1995, the Equity Value Fund and Balanced
Fund each paid advisory fees at the annual rate of 0.60% of their average daily
net assets.
THE SPONSOR AND DISTRIBUTOR
Furman Selz LLC, 230 Park Avenue, New York, New York 10169, acts as Sponsor
of the Funds. Furman Selz is primarily an institutional brokerage firm with
memberships on the New York, American, Boston, Midwest, Pacific and Philadelphia
Stock Exchanges. Furman Selz also serves as administrator and distributor of
other mutual funds. Pacifica Funds Distributor Inc. is an affiliate of Furman
Selz and was organized specifically to distribute shares of the Trust, however,
offers and sales of shares of the Trust will be made only through Furman Selz or
other registered (or exempt) dealers.
Under the Distribution Plan (the "Plan") adopted by the Funds for their
Investor Shares, each Fund may pay directly or reimburse PFD Inc. monthly
(subject to a limit of 0.50% per annum of the average daily net asset value of
the outstanding Investor Shares of each Fund) for costs and expenses of PFD Inc.
in connection with the distribution of Investor Shares of the Funds. These costs
and expenses include (i) advertising by radio, television, newspapers,
magazines, brochures, sales literature, direct mail or any other form of
advertising; (ii) expenses of sales employees or agents of PFD Inc., including
salary, commissions, travel and related expenses; (iii) payments to
broker-dealers and financial institutions for services in connection with the
distribution of Investor Shares, including promotional incentives and fees
calculated with reference to the average daily net asset value of Investor
Shares held by shareholders who have a brokerage or other service relationship
with the broker-dealer or other institution receiving such fees; (iv) costs of
printing prospectuses and other materials to be
19
<PAGE> 34
given or sent to prospective investors; and (v) such other similar services as
the Trustees determine to be reasonably calculated to result in the sale of
Investor Shares of the Funds. Each Fund will pay all costs and expenses in
connection with the preparation, printing and distribution of prospectuses to
current shareholders and the operation of its Plan, including related legal and
accounting fees. A Fund will not be liable for distribution expenditures made by
PFD Inc. in any given year in excess of the maximum annual amount payable under
the Plan for that Fund. All payments made under the Plan for Investor Shares are
borne entirely by a Fund's Investor Shares.
In addition to sales charges paid to dealers, PFD Inc. may from time to
time pay a bonus or other incentive to dealers which employ registered
representatives who sell a minimum dollar amount of Investor Shares of the Funds
and/or other funds distributed by Furman Selz or PFD Inc. during a specific
period of time. Such bonus or other incentive may take the form of payment for
travel expenses, including lodging, incurred in connection with trips taken by
qualifying registered representatives and members of their families to places
within or outside the United States, or other bonuses, such as gift certificates
or the cash equivalent of such bonuses. PFD Inc. has established such a special
promotional incentive program with First Interstate Investments, Inc.
ADMINISTRATIVE SERVICES
The Funds have also entered into an Administrative Services Contract with
Furman Selz pursuant to which Furman Selz provides certain management and
administrative services necessary for the Funds' operations including: (i)
general supervision of the operation of the Funds including coordination of the
services performed by the Funds' investment advisor, transfer agent, custodian,
independent accountants and legal counsel, regulatory compliance, including the
compilation of information for documents such as reports to, and filings with,
the SEC and state securities commissions, and preparation of proxy statements
and shareholder reports for the Funds; (ii) general supervision relative to the
compilation of data required for the preparation of periodic reports distributed
to the Funds' officers and Board of Trustees; and (iii) furnishing office space
and certain facilities required for conducting the business of the Funds. For
these services, Furman Selz is entitled to receive a fee, payable monthly, at
the annual rate of 0.15% of the average daily net assets of the Funds. Pursuant
to a Services Agreement with the Trust, Furman Selz assists the Trust with
certain transfer and dividend disbursing agent functions and receives a fee of
$15.00 per account per year plus out-of-pocket expenses. Pursuant to a Fund
Accounting Agreement with the Trust, Furman Selz assists the Trust
20
<PAGE> 35
in calculating net asset values and provides certain other accounting services
for each Fund for an annual fee of $30,000 per Fund plus out-of-pocket expenses.
SERVICE ORGANIZATIONS
Various banks (including banks affiliated with First Interstate Bancorp),
trust companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative services with respect to the Funds' Investor Shares, such as
maintaining shareholder accounts and records. The Funds may pay fees to Service
Organizations (which vary depending upon the services provided) in amounts up to
an annual rate of 0.25% of the average daily net asset value of the outstanding
Investor Shares of the Funds owned by shareholders with whom a Service
Organization has a servicing relationship. These fees will be borne entirely by
the Funds' Investor Shares.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest a specified amount in
the Funds or charging a direct fee for servicing. If imposed, these fees would
be in addition to any amounts which might be paid to the Service Organization by
the Funds. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged to
consult with them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Funds and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
21
<PAGE> 36
OTHER EXPENSES
Each Fund bears all costs of its operations other than expenses
specifically assumed by Furman Selz, PFD Inc. or the Advisor. The costs borne by
the Funds include legal and accounting expenses; Trustees' fees and expenses;
insurance premiums; advisory, administration, fund accounting, custodian and
transfer agent fees and expenses; expenses incurred in acquiring or disposing of
the Funds' portfolio securities; expenses of registering and qualifying the
Funds' shares for sale with the SEC and with various state securities
commissions; expenses of obtaining quotations on the Funds' portfolio securities
and pricing of the Funds' shares; expenses of maintaining the Funds' legal
existence and of shareholders' meetings; and expenses of preparation and
distribution to existing shareholders of reports, proxies and prospectuses. Each
Fund bears its own expenses associated with its establishment as a series of the
Trust; these expenses are amortized over a five-year period from the
commencement of a Fund's operations. See "Management" in the SAI for additional
information on expenses borne by the Funds. Trust expenses directly attributable
to a particular Fund are charged to that Fund, and expenses attributable to a
particular class of shares of a Fund (such as distribution payments under the
Plan and Service Organization fees) are charged to that class. Other expenses
are allocated proportionately among all of the investment portfolios in the
Trust in relation to the net assets of each portfolio or by other means deemed
fair and equitable by the Board of Trustees.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Advisor places orders for
the purchase and sale of portfolio investments for the Funds' accounts with
brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Funds, the Advisor will seek the best execution of the Funds' orders.
Purchases and sales of common stocks are generally placed by the Advisor with
broker-dealers which, in the Advisor's judgment, provide prompt and reliable
execution at favorable security prices and reasonable commission rates.
Broker-dealers are selected on the basis of a variety of factors such as
reputation, capital strength, size and difficulty of the order, sale of Fund
shares by the broker-dealer, and research provided to the Advisor by the
broker-dealer. The Advisor may cause a Fund to pay commissions higher than
another broker-dealer would have charged if the Advisor believes the commission
paid is reasonable in relation to the value of the brokerage and research
services received by the Advisor. Purchases and sales of debt securities are
generally placed by the Advisor with primary market makers
22
<PAGE> 37
for these securities on a net basis, i.e., without any brokerage commission
being paid by the Funds. Trading does, however, involve transaction costs.
Transactions with dealers serving as primary market makers reflect the spread
between the bid and asked prices. Purchases of underwritten issues may be made
which will include an underwriting fee paid to the underwriter.
A high portfolio turnover rate involves larger brokerage commission
expenses or transaction costs which must be borne directly by a Fund. Short-term
capital gains realized from portfolio transactions are taxable to shareholders
as ordinary income. The Advisor will not consider portfolio turnover rate a
limiting factor in making investment decisions consistent with a Fund's
objective and policies.
FUND SHARE VALUATION
The net asset value of each class of shares of the Funds is calculated at
4:15 p.m. (Eastern time), Monday through Friday, on each day the New York Stock
Exchange is open for trading (a "Business Day"), which excludes the following
business holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share for each class of shares is computed by dividing the value of a
Fund's assets allocable to a particular class, less the liabilities charged to
that class by the total number of the outstanding shares of that class. All
expenses, including fees paid to the Advisor, Furman Selz and PFD Inc., are
accrued daily and taken into account for the purpose of determining the net
asset value.
Securities listed on an exchange are valued on the basis of the last sale
prior to the time the valuation is made. If there has been no sale since the
immediately previous valuation, then the current bid price is used. Quotations
are taken from the exchange where the security is primarily traded. Portfolio
securities which are primarily traded on foreign exchanges may be valued with
the assistance of a pricing service and are generally valued at the preceding
closing values of such securities on their respective exchanges, except that
when an occurrence subsequent to the time a foreign security is valued is likely
to have changed such value, then the fair value of those securities will be
determined by consideration of other factors by or under the direction of the
Board of Trustees. Over-the-counter securities are valued on the basis of the
bid price at the close of business on each business day. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Trustees.
Notwithstanding the above, bonds
23
<PAGE> 38
and other fixed-income securities are valued by using market quotations
and may be valued on the basis of prices provided by a pricing service approved
by the Board of Trustees. All assets and liabilities initially expressed in
foreign currencies will be converted into U.S. dollars at the mean between the
bid and asked prices of such currencies against U.S. dollars as last quoted by
any major bank.
With respect to option contracts entered into by a Fund, the premium
received is recorded as an asset and equivalent liability, and thereafter the
liability is adjusted to the market value of the option determined in accordance
with the preceding paragraph. The premium paid for an option purchased by a Fund
is recorded as an asset and subsequently adjusted to market value.
PRICING OF INVESTOR SHARES
Orders for the purchase of Investor Shares will be executed at the net
asset value per share plus any applicable sales charge (the "public offering
price") next determined after an order has become effective. The sales charge on
purchases of Investor Shares of the Funds varies with the size of the purchase
made according to the following schedule:
<TABLE>
<CAPTION>
AMOUNT OF
SALES CHARGE AS A SALES CHARGE
PERCENTAGE OF REALLOWED TO
-------------------- DEALERS AS A
PUBLIC NET PERCENTAGE OF
OFFERING AMOUNT PUBLIC
AMOUNT OF INVESTMENT PRICE INVESTED OFFERING PRICE
- -------------------------------- -------- -------- --------------
<S> <C> <C> <C>
Less than $100,000.............. 4.50% 4.71% 4.00%
$100,000 but less than
$250,000...................... 3.50% 3.63% 3.00%
$250,000 but less than
$500,000...................... 2.60% 2.67% 2.25%
$500,000 but less than
$1,000,000.................... 2.00% 2.04% 1.75%
$1,000,000 and over............. None+ None+ None+
</TABLE>
- ---------------
+ There is no initial sales charge on purchases of $1 million or more; however,
the Distributor pays investment dealers and financial institutions a
commission from its own resources of 0.70% of the amount invested, and
shareholders who redeem their Investor Shares within one year of the date of
purchase will be subject to a 1% contingent deferred sales charge for the
purpose of reimbursing the Distributor for the commission paid.
The initial sales load will not apply to Investor Shares purchased by: (i)
trust, investment management, advisory and fiduciary accounts man-
24
<PAGE> 39
aged or administered by First Interstate Bancorp, its subsidiaries and
affiliates, or the Advisor pursuant to a written agreement; (ii) any person
purchasing Investor Shares with the proceeds of a distribution from a trust,
investment management, advisory or other fiduciary account managed or
administered by First Interstate Bancorp, its subsidiaries and affiliates, or
the Advisor pursuant to a written agreement; (iii) any person purchasing
Investor Shares with the proceeds of a redemption from a mutual fund, other than
an investment portfolio offered by the Trust, that was originally purchased with
a sales load; (iv) Furman Selz or any of its affiliates; (v) Trustees or
officers of the Funds; (vi) directors or officers of Furman Selz, the Advisor,
or their affiliates or bona fide employees or former employees of any of the
foregoing who have acted as such for not less than 90 days (including members of
their immediate families and their retirement plans or accounts); or (vii)
retirement accounts or plans for which a depository institution, which is a
client or customer of the Advisor, Furman Selz or PFD Inc. serves as custodian
or trustee, or to any trust, pension, Individual Retirement Account ("IRA"),
spousal IRA, profit-sharing or other benefit plan for such persons so long as
such Investor Shares are purchased through PFD Inc. The initial sales load also
does not apply to Investor Shares sold to representatives of selling brokers and
members of their immediate families. In addition, the initial sales load does
not apply to sales to bank trust departments, acting on behalf of one or more
clients, of Investor Shares having an aggregate value equal to or exceeding
$200,000.
See "Dividends, Distributions and Federal Income Tax," for an explanation
of circumstances in which a sales load paid to acquire Investor Shares of a
mutual fund may not be taken into account in determining gain or loss on the
disposition of those Investor Shares.
QUANTITY DISCOUNTS IN THE SALES CHARGES
The following quantity discounts shall be available to: (a) an individual,
his or her spouse, and their children under the age of 21, and any trust,
pension, IRA, spousal IRA, profit sharing or other benefit plan for such
persons; (b) a trustee or other fiduciary of a single trust estate or a single
fiduciary account; (c) a pension, profit-sharing or other employee benefit plan
qualified under Section 401 of the Internal Revenue Code of 1986, and (d)
tax-exempt organizations under Section 501(c)(3) of the Code.
Right of Accumulation. The schedule of reduced sales charges will be
applicable once the accumulated value of the account has reached $100,000. For
this purpose, the dollar amount of the qualifying concurrent or subsequent
purchase is added to the net asset value of any Investor Shares of those
investment portfolios of the Trust that are subject to a sales charge and are
25
<PAGE> 40
owned at the time of such purchase by the investor. The sales charge imposed on
the Investor Shares being purchased will then be at the rate applicable to the
aggregate value of Investor Shares owned and to be purchased by the investor.
For example, if the investor held Investor Shares valued at $100,000 and
purchased an additional $20,000 of Investor Shares (totalling an investment of
$120,000), the sales charge for the $20,000 purchase would be at the next lower
sales charge on the schedule (i.e., the sales charge for purchases over $100,000
but less than $250,000). There can be no assurance that investors will receive
the cumulative discounts to which they may be entitled unless, at the time of
placing their purchase order, the investors or their dealers make a written
request for the discount. The cumulative discount program may be amended or
terminated at any time. This particular privilege does not entitle the investor
to any adjustment in the sales charge paid previously on purchases of Investor
Shares. If the investor knows that he will be making additional purchases of
Investor Shares in the future, he may wish to consider executing a Letter of
Intent.
Letter of Intent. The schedule of reduced sales charges is also available
to investors who enter into a written Letter of Intent providing for the
purchase, within a 13-month period, of Investor Shares of a particular Fund
which is subject to a sales charge. Investor Shares of such a Fund previously
purchased during the 90-day period prior to the date of receipt by the Fund of
the Letter of Intent which are still owned by the shareholder may also be
included in determining the applicable reduction, provided the shareholder or
the dealer notifies the Fund of such prior purchases.
A Letter of Intent permits an investor to establish a total investment goal
to be achieved by any number of investments over a 13-month period. Each
investment made during the period will receive the reduced sales commission
applicable to the amount represented by the goal as if it were a single
investment. A number of Investor Shares totalling 5% of the dollar amount of the
Letter of Intent will be held in escrow by the Fund in the name of the
shareholder. The initial purchase under a Letter of Intent must be equal to at
least 5% of the stated investment goal.
The Letter of Intent does not obligate the investor to purchase, or a Fund
to sell, the indicated amount. In the event the Letter of Intent goal is not
achieved within the 13-month period, the investor is required to pay the
difference between the sales charge otherwise applicable to the purchases made
during this period and sales charges actually paid. The Fund is authorized by
the shareholder to liquidate a sufficient number of escrowed Investor Shares to
obtain such difference. If the goal is exceeded and purchases pass the next
sales charge level, the sales charge on the entire amount of the purchase that
results in passing that level and on subsequent
26
<PAGE> 41
purchases will be subject to further reduced sales charges in the same manner as
set forth under "Right of Accumulation," but there will be no retroactive
reduction of sales charges on previous purchases. At any time while a Letter of
Intent is in effect, a shareholder may, by written notice to PFD Inc., increase
the amount of the stated goal. In that event, Investor Shares purchased during
the previous 90-day period and still owned by the shareholder will be included
in determining the applicable sales charge reduction. The 5% escrow and minimum
purchase requirements will be applicable to the new stated goal. Investors
electing to purchase Investor Shares pursuant to a Letter of Intent should
carefully read the application for a Letter of Intent which is available from
the Trust.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in the Funds is $500, except that the
minimum is $250 for an IRA. Any subsequent investments must be at least $50,
including an IRA investment. All initial investments should be accompanied by a
completed Purchase Application. A separate application is required for IRA
investments.
PURCHASE OF INVESTOR SHARES
THE FOLLOWING PURCHASE PROCEDURES DO NOT APPLY TO CERTAIN TRUST OR OTHER
ACCOUNTS THAT ARE MANAGED BY FIRST INTERSTATE BANCORP, ITS SUBSIDIARIES OR
AFFILIATES. AN ACCOUNT CUSTOMER SHOULD CONSULT HIS OR HER ACCOUNT OFFICER FOR
PROPER INSTRUCTIONS.
All funds received by the Trust are invested in full and fractional
Investor Shares of the appropriate Fund. Certificates for Investor Shares are
not issued. Furman Selz maintains records of each shareholder's holdings of Fund
shares, and each shareholder receives a statement of transactions, holdings and
dividends. The Funds reserve the right to reject any purchase.
An investment may be made using any of the following methods:
Through an Authorized Broker, Investment Advisor or Service
Organization. Investor Shares are available to new and existing shareholders
through authorized brokers, investment advisors and Service Organizations. To
make an investment using this method, simply complete a Purchase Application and
contact your broker, investment advisor or Service Organization with
instructions as to the amount you wish to invest. Your broker will then contact
the Fund to place the order on your behalf on that day.
27
<PAGE> 42
Orders received by your broker or Service Organization for the Funds in
proper order prior to the determination of a Fund's net asset value and
transmitted to the Trust prior to the close of its business day (which is
currently 5:00 p.m., Eastern time), will become effective that day. Brokers who
receive orders are obligated to transmit them promptly. You should receive
written confirmation of your order within a few days of receipt of instructions
from your broker.
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the applicable Fund. In most cases, your bank will either be a member
of the Federal Reserve Banking System or have a relationship with a bank that
is. Your bank will normally charge you a fee for handling the transaction. To
purchase Investor Shares by a Federal funds wire, please first contact Furman
Selz Mutual Funds Client Services. They will establish a record of information
for the wire to ensure its correct processing. You can reach the Wire Desk at
1-800-662-8417.
Have your bank wire funds using the following instructions:
Investors Fiduciary Trust Company
Kansas City, MO 64105
ABA #1010-0362-1
Account #7527950
Further Credit to: Fund Name
As long as you have read the Prospectus, you may establish a new regular
account through the Wire Desk; IRAs may not be opened in this way. When new
accounts are established by wire, the distribution options will be set to
reinvest and the social security or tax identification number ("TIN") will not
be certified until a signed application is received. Completed applications
should be forwarded immediately to the Funds. With the Purchase Application, the
shareholder can specify other distribution options and add any special features
offered by a Fund. Should any dividend distributions or redemptions be paid
before the TIN is certified, they will be subject to 31% Federal tax
withholding.
Automatic Investment Program. An eligible shareholder may also participate
in the Pacifica Automatic Investment Program, an investment plan that
automatically debits money from the shareholder's bank account and invests it in
one or more of the Funds through the use of electronic funds transfers or
automatic bank drafts. Shareholders may elect to make subsequent investments by
transfers of a minimum of $50 on either the fifth or twentieth day of each month
into their established Fund accounts.
28
<PAGE> 43
Contact the Trust at 1-800-662-8417 for more information about the Pacifica
Automatic Investment Program.
INDIVIDUAL RETIREMENT ACCOUNTS
The Funds may be used as a funding medium for IRAs. Investor Shares may
also be purchased for IRAs established with an affiliate of First Interstate
Bancorp or other authorized custodians. In addition, an IRA may be established
through a custodial account with Investors Fiduciary Trust Company. Completion
of a special application is required in order to create such an account, and the
minimum initial investment for an IRA is $250. Contributions to IRAs are subject
to prevailing amount limits set by the Internal Revenue Service. A $5.00
establishment fee and an annual $12.00 maintenance and custody fee is payable
with respect to each IRA, and there will be a $10.00 termination fee when the
account is closed. For more information, call the Funds at 1-800-662-8417.
EXCHANGE OF INVESTOR SHARES
The Funds offer two convenient ways to exchange Investor Shares in a Fund
for Investor Shares in another investment portfolio of the Trust. Before
engaging in an exchange transaction, a shareholder should read carefully the
Prospectus describing the investment portfolio into which the exchange will
occur, which is available without charge and can be obtained by writing to the
Funds at 237 Park Avenue, Suite 910, New York, New York 10017, or by calling
1-800-662-8417. A shareholder may not exchange Investor Shares of one portfolio
for Investor Shares of another portfolio if both or either are not qualified for
sale in the state of the shareholder's residence. The minimum amount for an
initial exchange is $500. No minimum is required in subsequent exchanges. The
Trust may terminate or amend the terms of the exchange privilege at any time.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the net asset value next determined following receipt of the
request by the Trust in good order, plus any applicable sales charge.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
In the case of transactions subject to a sales charge, the sales charge
will be assessed on an exchange of Investor Shares, equal to the excess of the
sales
29
<PAGE> 44
load applicable to the Investor Shares to be acquired over the amount of any
sales load previously paid on the Investor Shares to be exchanged. No service
fee is imposed. See "Dividends, Distributions and Federal Income Tax" for an
explanation of circumstances in which a sales load paid to acquire Investor
Shares of the Funds may not be taken into account in determining gain or loss on
the disposition of those Investor Shares.
In addition, Institutional Shares of a Fund may be exchanged for Investor
Shares of the same Fund in connection with the distribution of assets held in a
qualified trust, agency or custodial account maintained with the trust
department of a First Interstate or other bank, trust company or thrift
institution, or in other cases where Institutional Shares are not held in such
qualified accounts. Similarly, Investor Shares may be exchanged for
Institutional Shares of the same Fund if the shares are to be held in such a
qualified trust, agency or custodial account. These exchanges are made without a
sales charge at the net asset value of the respective share classes.
Exchange by Mail. To exchange Investor Shares of a Fund by mail, simply
send a letter of instruction to Furman Selz. The letter of instruction must
include: (i) your account number; (ii) the Fund from and the Fund into which you
wish to exchange your investment; (iii) the dollar or share amount you wish to
exchange; and (iv) the signatures of all registered owners or authorized
parties. All signatures must be guaranteed by an eligible guarantor institution
including a member of a national securities exchange or by a commercial bank or
trust company, broker-dealers, credit unions and savings associations.
Exchange by Telephone. To exchange Investor Shares of a Fund by telephone,
or if you have any questions, simply call the Trust at 1-800-662-8417. You
should be prepared to give the telephone representative the following
information: (i) your account number, social security number and account
registration; (ii) the name of the portfolio from and the portfolio into which
you wish to transfer your investment; and (iii) the dollar or share amount you
wish to exchange. The conversation may be recorded to protect you and the Funds.
Telephone exchanges are available only if the shareholder so indicates by
checking the "yes" box on the Purchase Application. See "Redemption of Investor
Fund Shares -- By Telephone" for a discussion of telephone transactions
generally.
REDEMPTION OF INVESTOR SHARES
Shareholders may redeem their Investor Shares, in whole or in part, on any
Business Day. Investor Shares will be redeemed at the net asset value next
determined after a redemption request in good order has been received
30
<PAGE> 45
and accepted by the Trust. See "Fund Share Valuation." A redemption may be a
taxable transaction on which gain or loss may be recognized.
Where the Investor Shares to be redeemed have been purchased by check, the
Trust may delay payment of the redemption proceeds until the purchasing check
has cleared, which may take up to 15 days. Shareholders may avoid this delay by
investing through wire transfers of Federal funds. During the period prior to
the time the Investor Shares are redeemed, dividends on the Investor Shares will
continue to accrue and be payable and the shareholder will be entitled to
exercise all other beneficial rights of ownership.
Once the Investor Shares are redeemed, a Fund will ordinarily send the
proceeds by check to the shareholder at the address of record on the next
Business Day. The Funds may, however, take up to seven days to make payment.
This will not be the customary practice. Also, if the New York Stock Exchange is
closed (or when trading is restricted) for any reason other than the customary
weekend or holiday closing or if an emergency condition as determined by the SEC
merits such action, the Funds may suspend redemptions or postpone payment dates.
To ensure acceptance of your redemption request, it is important to follow
the procedures described below. Although the Trust has no present intention to
do so, it reserves the right to refuse or to limit the frequency of any
telephone or wire redemptions. Of course, it may be difficult to place orders by
telephone during periods of severe market or economic change, and a shareholder
should consider alternative methods of communications, such as couriers or U.S.
mail. The services offered by the Funds may be modified or terminated at any
time. If the Funds terminate any particular service, they will do so only after
giving written notice to shareholders.
You may redeem your Investor Shares using any of the following methods:
Through an Authorized Broker, Investment Advisor or Service
Organization. You may redeem your Investor Shares by contacting your broker or
investment advisor and instructing him or her to redeem your Investor Shares. He
or she will then contact PFD Inc. and place a redemption trade on your behalf.
He or she may charge you a fee for this service.
By Mail. You may redeem your Investor Shares by sending a letter directly
to the Funds. To be accepted, a letter requesting redemption must include: (i)
the Fund name and account registration from which you are redeeming Investor
Shares; (ii) your account number; (iii) the amount to be redeemed; (iv) the
signatures of all registered owners; and (v) a
31
<PAGE> 46
signature guarantee by any eligible guarantor institution including a member of
a national securities exchange or a commercial bank or trust company,
broker-dealers, credit unions and savings associations. Corporations,
partnerships, trusts or other legal entities will be required to submit
additional documentation.
By Telephone. You may redeem your Investor Shares by calling the Funds
toll free at 1-800-662-8417. You should be prepared to give the telephone
representative the following information: (i) your account number, social
security number and account registration; (ii) the Fund name from which you are
redeeming Investor Shares; and (iii) the amount to be redeemed. The conversation
may be recorded to protect you and the Funds. Telephone redemptions are
available only if the shareholder so indicates by checking the "yes" box on the
Purchase Application. The Funds employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. If the Funds fail to employ
such reasonable procedures, they may be liable for any loss, damage or expense
arising out of any telephone transactions purporting to be on a shareholder's
behalf. In order to assure the accuracy of instructions received by telephone,
the Funds require some form of personal identification prior to acting upon
instructions received by telephone, record telephone instructions and provide
written confirmation to investors of such transactions.
By Wire. You may redeem your Investor Shares by contacting the Funds by
mail or telephone and instructing them to send a wire transmission to your
personal bank.
Your instructions should include: (i) your account number, social security
number and account registration; (ii) the Fund name from which you are redeeming
Investor Shares; and (iii) the amount to be redeemed. Wire redemptions can be
made only if the "yes" box has been checked on your Purchase Application, and a
copy of a void check from the account where proceeds are to be wired is attached
to the Purchase Application. Your bank may charge you a fee for receiving a wire
payment on your behalf.
The above-mentioned services "By Telephone" and "By Wire" are not available
for IRAs and trust clients of an affiliate of First Interstate Bancorp.
Systematic Withdrawal Plan. An owner of $10,000 or more of Investor Shares
of a Fund may elect to have periodic redemptions from his or her account to be
paid on a monthly, quarterly, semi-annual or annual basis. The minimum periodic
payment is $100. A sufficient number of Investor Shares to make the scheduled
redemption will normally be
32
<PAGE> 47
redeemed on the date selected by the shareholder. Depending on the size of the
payment requested and fluctuation in the net asset value, if any, of the
Investor Shares redeemed, redemptions for the purpose of making such payments
may reduce or even exhaust the account. A shareholder may request that these
payments be sent to a predesignated bank or other designated party. Capital
gains and dividend distributions paid to the account will automatically be
reinvested at net asset value on the distribution payment date.
Reinstatement Privilege. A shareholder in the Funds who has redeemed
Investor Shares may reinvest, without a sales charge, up to the full amount of
such redemption at the net asset value determined at the time of the
reinvestment within 30 days of the original redemption. This privilege must be
effected within 30 days of the redemption. The shareholder must reinvest in the
same Fund and the same account from which the Investor Shares were redeemed. A
redemption is a taxable transaction and gain or loss may be recognized for
Federal income tax purposes even if the reinstatement privilege is exercised.
Any loss realized upon the redemption will not be recognized as to the number of
Investor Shares acquired by reinstatement, except through an adjustment in the
tax basis of the Investor Shares so acquired. See "Dividends, Distributions and
Federal Income Tax" for an explanation of circumstances in which a sales load
paid to acquire Investor Shares of a Fund may not be taken into account in
determining gain or loss on the disposition of those Investor Shares.
Redemption of Small Accounts. Due to the disproportionately higher cost of
servicing small accounts, each Fund reserves the right to redeem, on not less
than 30 days' notice, an account in a Fund that has been reduced by a
shareholder to $500 or less. However, if during the 30-day notice period the
shareholder purchases sufficient Investor Shares to bring the value of the
account above $500, this restriction will not apply.
Redemption in Kind. All redemptions of Investor Shares of the Funds shall
be made in cash, except that the commitment to redeem Investor Shares in cash
extends only to redemption requests made by each shareholder of a Fund during
any 90-day period of up to the lesser of $250,000 or 1% of the net asset value
of that Fund at the beginning of such period. This commitment is irrevocable
without the prior approval of the SEC and is a fundamental policy of the Funds
that may not be changed without shareholder approval. In the case of redemption
requests by shareholders in excess of such amounts, the Board of Trustees
reserves the right to have the Funds make payment, in whole or in part, in
securities or other assets, in case of an emergency or any time a cash
distribution would impair the liquidity of a Fund to the detriment of the
existing shareholders.
33
<PAGE> 48
In this event, the securities would be valued in the same manner as the
securities of that Fund are valued. If the recipient were to sell such
securities, he or she would incur brokerage charges.
DIVIDENDS, DISTRIBUTIONS AND
FEDERAL INCOME TAX
Each Fund has qualified and intends to continue to qualify annually and to
elect to be treated as a regulated investment company pursuant to the provisions
of Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
By so qualifying and electing, each Fund generally will not be subject to
Federal income tax to the extent that it distributes investment company taxable
income and net capital gains in the manner required under the Code.
Each Fund intends to distribute to its shareholders substantially all of
its investment company taxable income (which includes, among other items,
dividends and interest and the excess, if any, of net short-term capital gains
(generally including any net option premium income) over net long-term capital
losses). Investment company taxable income will be distributed by the Funds
quarterly. Each Fund intends to distribute, at least annually, substantially all
net capital gain (the excess of net long-term capital gains over net short-term
capital losses). In determining amounts of capital gains to be distributed, any
capital loss carryovers from prior years will be applied against capital gains.
Distributions will be paid in additional shares of the same class held by a
shareholder based on the net asset value at the close of business on the payment
date of the distribution, unless the shareholder elects in writing, which is
received by Furman Selz not less than five full business days prior to the
record date, to receive such distributions in cash. Investors who redeem all or
a portion of Fund shares prior to a dividend payment date will be entitled on
the next dividend payment date to all dividends declared but unpaid on those
shares at the time of their redemption.
Distributions of investment company taxable income (regardless of whether
derived from dividends, interest or net short-term capital gains) will be
taxable to shareholders as ordinary income. Distributions of net long-term
capital gains designated by a Fund as capital gain dividends will be taxable as
long-term capital gains, regardless of how long a shareholder has held his Fund
shares. Distributions are taxable in the same manner whether received in
additional shares or in cash.
34
<PAGE> 49
Earnings of the Funds not distributed on a timely basis in accordance with
a calendar year distribution requirement are subject to a nondeductible 4%
excise tax. To prevent imposition of this tax, each Fund intends to comply with
this distribution requirement.
A distribution, including an "exempt-interest dividend," will be treated as
paid on December 31 of a calendar year if it is declared by a Fund during
October, November, or December of that year to shareholders of record in such a
month and paid by a Fund during January of the following calendar year. Such
distributions will be treated as received by shareholders in the calendar year
in which the distributions are declared, rather than the calendar year in which
the distributions are received.
Special tax rules may apply to a Fund's acquisition of financial futures
contracts, forward contracts, and options on futures contracts. Such rules may,
among other things, affect whether gains and losses from such transactions are
considered to be short-term or long-term, may have the effect of deferring
losses and/or accelerating the recognition of gains or losses, and, for purposes
of qualifying as a regulated investment company, may limit the extent to which a
Fund may be able to engage in such transactions.
A Fund's distributions with respect to a given taxable year may exceed the
current and accumulated earnings and profits of that Fund available for
distribution. In that event, distributions in excess of such earnings and
profits would be characterized as a return of capital to shareholders for
Federal income tax purposes, thus reducing each shareholder's cost basis in his
Fund shares. Distributions in excess of a shareholder's cost basis in his shares
would be treated as a gain realized from a sale of such shares.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of a Fund, or upon receipt of a distribution in complete
liquidation of a Fund, generally will be a capital gain or loss which will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares. A loss realized by a shareholder on a redemption, sale,
or exchange of shares of a Fund that were not held for more than six months with
respect to which capital gain dividends have been paid will be characterized as
a long-term capital loss to the extent of such capital gain dividends.
Before purchasing shares in the Funds, the impact of dividends or
distributions which are expected to be declared or have been declared, but not
paid, should be carefully considered. Any dividend or distribution declared
shortly after a purchase of such shares prior to the record date will have the
effect of reducing the per share net asset value by the per share
35
<PAGE> 50
amount of the dividend or distribution. All or a portion of such dividend or
distribution, although in effect a return of capital, may be subject to tax.
It is anticipated that a portion of the dividends paid by the Funds will
qualify for the dividends-received deduction available to corporations.
Under certain circumstances, the sales charge incurred in acquiring shares
of a Fund may not be taken into account in determining the gain or loss on the
disposition of those shares. This rule applies where shares of a Fund are
exchanged within 90 days after the date they were purchased and new shares of
the Fund or of another investment portfolio of the Trust are acquired without a
sales charge or at a reduced sales charge. In that case, the gain or loss
recognized on the exchange will be determined by excluding from the tax basis of
the shares exchanged all or a portion of the sales charge incurred in acquiring
those shares. This exclusion applies to the extent that the otherwise applicable
sales charge with respect to the newly acquired shares is reduced as a result of
having incurred a sales charge initially. The portion of the sales charge
affected by this rule will be treated as a sales charge paid for the new shares.
The Funds may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where a Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Most corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Income or gain from investments in foreign securities may be subject to
foreign withholding or other taxes. It is expected that the Funds may be subject
to foreign withholding taxes with respect to income received from sources within
foreign countries.
If a Fund invests in certain "passive foreign investment companies"
("PFICs"), it would be subject to Federal income tax (and possibly additional
interest charges) on a portion of any excess distribution or gain from the
disposition of such shares even if it distributes such income to its
shareholders. If a Fund elects to treat the PFIC as a qualified electing fund
("QEF") and the PFIC furnishes certain financial information in the required
form to such Fund, the Fund would instead be required to include in income each
year its allocable share of the ordinary earnings and net capital gains on the
QEF, regardless of whether received, and such
36
<PAGE> 51
amounts would be subject to the various distribution requirements described
above.
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund(s) in which they invest. Depending on
the residence of the shareholder for tax purposes, distributions also may be
subject to state and local taxes, including withholding taxes. Foreign
shareholders may, for example, be subject to special withholding requirements.
Special tax treatment, including a penalty on certain pre-retirement
distributions, is accorded to accounts maintained as IRAs. Shareholders should
consult their own tax advisors as to the Federal, state and local tax
consequences of ownership of shares of the Funds in their particular
circumstances.
DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES
FIXED INCOME SECURITIES
The Balanced Fund and, to a lesser extent, the Equity Value Fund and Growth
Fund, may invest in the types of fixed income securities described below.
U.S. Government Obligations. U.S. Government securities are obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
U.S. Treasury obligations are direct obligations of the United States and are
the most frequently issued marketable U.S. Government security. U.S. Government
agency and instrumentality obligations are debt securities issued by U.S.
Government-sponsored enterprises and Federal agencies. Some obligations of
agencies are supported by the full faith and credit of the United States or by
U.S. Treasury guarantees, such as mortgage-backed certificates, which may be
guaranteed by the Government National Mortgage Association; others, such as
obligations of the Federal Home Loan Banks, Federal Farm Credit Bank, Bank for
Cooperatives, Federal Intermediate Credit Banks and the Federal Land Bank, are
guaranteed by the right of the issuer to borrow from the U.S. Treasury; others,
such as obligations of the Federal National Mortgage Association, are supported
by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, such as obligations of
the Student Loan Marketing Association and the Tennessee Valley Authority, are
backed only by the credit of the agency or instrumentality issuing the
obligation. In the case of obligations not backed by the full faith and credit
of the United States, the
37
<PAGE> 52
investor must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment.
Repurchase Agreements. The Funds may agree to purchase securities subject
to the seller's agreement to repurchase them at a mutually agreed upon date and
price. The Funds will enter into such repurchase agreements only with financial
institutions that are deemed to be creditworthy by the Advisor, pursuant to
guidelines established by the Trust's Board of Trustees. During the term of any
repurchase agreement, the Advisor will continue to monitor the creditworthiness
of the seller. The Funds will not enter into repurchase agreements with the
Advisor or its affiliates. Although the securities subject to repurchase
agreements may bear maturities exceeding 13 months, the Funds do not presently
intend to enter into repurchase agreements with deemed maturities in excess of
seven days. If in the future a Fund was to enter into repurchase agreements with
deemed maturities in excess of seven days, such Fund would do so only if such
investment, together with other illiquid securities, did not exceed 10% (15% in
the case of the Growth Fund) of the value of that Fund's net assets.
The seller under a repurchase agreement will be required to maintain the
value of the securities that are subject to the agreement and held by a Fund at
not less than the repurchase price. Default or bankruptcy of the seller would,
however, expose a Fund to possible delay in connection with the disposition of
the underlying securities or loss to the extent that proceeds from a sale of the
underlying securities were less than the repurchase price under the agreement.
Bank Obligations. Bank obligations include bankers' acceptances,
negotiable certificates of deposit and non-negotiable time deposits issued by a
U.S. bank, savings bank or savings association that is a member of the Federal
Reserve System or insured by the Federal Deposit Insurance Corporation. The
Funds may also invest in U.S. dollar-denominated obligations of foreign banks.
Obligations of foreign banks or foreign branches of U.S. banks entail risks that
are different from those of investments in domestic obligations of U.S. banks.
These additional risks include future political and economic developments, the
possible imposition of withholding taxes on interest income, possible seizure or
nationalization of foreign deposits, the possible establishment of exchange
controls, or the adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on such obligations. In
addition, foreign branches of U.S. banks and U.S. branches of foreign banks may
be subject to less stringent reserve requirements and to different accounting,
auditing, reporting, and recordkeeping standards than those
38
<PAGE> 53
applicable to domestic branches of U.S. banks. Investments in domestic and
foreign bank obligations are limited to the obligations of financial
institutions having $1 billion or more in total assets at the time of purchase.
Commercial Paper. Commercial paper includes short-term unsecured
promissory notes, variable rate demand notes and variable rate master demand
notes issued by domestic and foreign bank holding companies, corporations and
financial institutions, as well as similar instruments issued by government
agencies and instrumentalities. Investments by the Funds in commercial paper
will consist of issues that are rated in one of the two highest rating
categories by a NRSRO. In addition, the Funds may acquire unrated commercial
paper and corporate bonds that are determined by the Advisor at the time of
purchase to be of comparable quality to rated instruments that may be acquired
by the Funds. Commercial paper may include variable and floating rate
instruments.
Variable and Floating Rate Instruments. Instruments purchased by a Fund
may include variable and floating rate demand instruments issued by
corporations, industrial development authorities and governmental entities.
These instruments may include variable amount master demand notes that permit
the indebtedness to vary in addition to providing for periodic adjustments in
the interest rate. Although variable and floating rate demand instruments are
frequently not rated by credit rating agencies, unrated instruments purchased by
a Fund will be determined to be of comparable quality to rated instruments that
may be purchased by the Fund. While there may be no active secondary market with
respect to a particular variable or floating rate instrument purchased by a
Fund, the Funds may, from time to time as specified in the instrument, demand
payment in full of the principal of the instrument or may resell the instrument
to a third party. The absence of such an active secondary market, however, could
make it difficult for a Fund to dispose of a variable or floating rate demand
instrument if the issuer defaulted on its payment obligations or during periods
that the Fund is not entitled to exercise its demand rights, and the Fund could,
for these or other reasons, suffer a loss. Variable and floating rate
instruments with no active secondary market will be included in the calculation
of a Fund's illiquid assets.
Mortgage-Related Securities. Mortgage pass-through securities are
securities representing interests in "pools" of mortgages in which payments of
both interest and principal on the securities are made monthly, in effect
"passing through" monthly payments made by the individual borrowers on the
residential mortgage loans which underlie the securities (net of fees paid to
the issuer or guarantor of the securities). Early repayment of principal on
mortgage pass-through securities (arising from prepayments of
39
<PAGE> 54
principal due to sale of the underlying property, refinancing, or foreclosure,
net of fees and costs which may be incurred) may expose a Fund to a lower rate
of return upon reinvestment of principal. Also, if a security subject to
prepayment has been purchased at a premium, in the event of prepayment the value
of the premium would be lost. Like other fixed-income securities, when interest
rates rise, the value of a mortgage-related security generally will decline;
however, when interest rates decline, the value of mortgage-related securities
with prepayment features may not increase as much as other fixed-income
securities. Payment of principal and interest on some mortgage pass-through
securities (but not the market value of the securities themselves) may be
guaranteed by the full faith and credit of the U.S. Government or its agencies
or instrumentalities. Mortgage pass-through securities created by
non-governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers) may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance, and
letters of credit, which may be issued by governmental entities, private
insurers or the mortgage poolers. The Balanced Fund may also invest in
investment grade Collateralized Mortgage Obligations ("CMOs"). CMOs may be
collateralized by whole mortgage loans but are more typically collateralized by
portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC or
FNMA. CMOs are structured into multiple classes, with each class bearing a
different stated maturity. Payments of principal, including prepayments, are
first returned to investors holding the shortest maturity class; investors
holding the longer maturity classes receive principal only after the first class
has been retired. As new types of mortgage-related securities are developed and
offered to investors, the Advisor will, consistent with a Fund's investment
objective, policies and quality standards, consider making investments in such
new types of mortgage-related securities.
Other Asset-Backed Securities. Other asset-backed securities (unrelated to
mortgage loans) have been offered to investors. These asset-backed securities
may consist of undivided fractional interests in pools of consumer loans or
receivables held in a trust. Examples include certificates for automobile
receivables (CARS) and credit card receivables (CARDS). Payments of principal
and interest on these asset-backed securities are "passed through" on a monthly
or other periodic basis to certificate holders and are typically supported by
some form of credit enhancement, such as a letter of credit, surety bond,
limited guaranty, or subordination. The extent of credit enhancement varies, but
usually amounts to only a fraction of the asset-backed security's par value
until exhausted. Ultimately, asset-backed securities are dependent upon payment
of the consumer loans or receiv-
40
<PAGE> 55
ables by individuals, and the certificate holder frequently has no recourse to
the entity that originated the loans or receivables. The actual maturity and
realized yield will vary based upon the prepayment experience of the underlying
asset pool and prevailing interest rates at the time of prepayment. Asset-backed
securities are relatively new instruments and may be subject to greater risk of
default during periods of economic downturn than other instruments. Also, the
secondary market for certain asset-backed securities may not be as liquid as the
market for other types of securities, which could result in a Fund experiencing
difficulty in valuing or liquidating such securities.
Derivative Securities. The Funds may invest in structured notes, bonds or
other instruments with interest rates that are determined by reference to
changes in the value of other interest rates, indices or financial indicators
("References") or the relative change in two or more References. The Funds may
also hold derivative instruments that have interest rates that re-set inversely
to changing current market rates and/or have embedded interest rate floors and
caps that require the issuer to pay an adjusted interest rate if market rates
fall below or rise above a specified rate. These instruments represent
relatively recent innovations in the bond markets, and the trading market for
these instruments is less developed than the markets for traditional types of
debt instruments. It is uncertain how these instruments will perform under
different economic and interest-rate scenarios. Because certain of these
instruments are leveraged, their market values may be more volatile than other
types of bonds and may present greater potential for capital gain or loss. On
the other hand, the imbedded option features of other derivative instruments
could limit the amount of appreciation a Fund can realize on its investment,
could cause a Fund to hold a security it might otherwise sell or could force the
sale of a security at inopportune times or for prices that do not reflect
current market value. The possibility of default by the issuer or the issuer's
credit provider may be greater for these structured and derivative instruments
than for other types of instruments. In some cases it may be difficult to
determine the fair value of a structured or derivative instrument because of a
lack of reliable objective information and an established secondary market for
some instruments may not exist. As new types of derivative securities are
developed and offered to investors, the Advisor will, consistent with each
Fund's investment objective, policies and quality standards, consider making
investments in such new types of derivative securities.
Stripped Obligations. To the extent consistent with their respective
investment objectives, the Funds may purchase Treasury receipts and other
"stripped" securities that evidence ownership in either the future interest
41
<PAGE> 56
payments or the future principal payments on U.S. Government and other
obligations. These participations, which may be issued by the U.S. Government
(or a U.S. Government agency or instrumentality) or by private issuers such as
banks and other institutions, are issued at a discount to their "face value,"
and, with respect to the Balanced Fund, may include stripped mortgage-backed
securities ("SMBS"). Stripped securities, particularly, SMBS, may exhibit
greater price volatility than ordinary debt securities because of the manner in
which their principal and interest are returned to investors.
Custodial Receipts for Treasury Securities. To the extent consistent with
their respective investment objectives, the Funds may purchase participations in
trusts that hold U.S. Treasury securities (such as TIGRs and CATS) or other
obligations where the trust participations evidence ownership in either the
future interest payments or the future principal payments on the obligations.
These participations are normally issued at a discount to their "face value,"
and can exhibit greater price volatility than ordinary debt securities because
of the way in which their principal and interest are returned to investors.
Investments by a Fund in such participations will not exceed 5% of the value of
that Fund's total assets.
FOREIGN SECURITIES
The Growth Fund may invest up to 25% of the value of its total assets in
securities issued by foreign issuers either directly or through investments in
American Depository Receipts ("ADRs") and European Depository Receipts ("EDRs").
The Equity Value and Balanced Fund may also invest directly in foreign equity
securities and in securities represented by ADRs or EDRs. ADRs are
dollar-denominated receipts generally issued by domestic banks, which represent
the deposit with the bank of a security of a foreign issuer, and which are
publicly traded on exchanges or over-the-counter in the United States. EDRs are
receipts similar to ADRs and are issued and traded in Europe.
There are certain risks associated with investments in unsponsored ADR
programs. Because the non-U.S. company does not actively participate in the
creation of the ADR program, the underlying agreement for service and payment
will be between the depositary and the shareholder. The company issuing the
stock underlying the ADRs pays nothing to establish the unsponsored facility, as
fees for ADR issuance and cancellation are paid by brokers. Investors directly
bear the expenses associated with certificate transfer, custody and dividend
payment.
42
<PAGE> 57
In addition, in an unsponsored ADR program, there may be several
depositaries with no defined legal obligations to the non-U.S. company. The
duplicate depositaries may lead to marketplace confusion because there would be
no central source of information to buyers, sellers and intermediaries. The
efficiency of centralization gained in a sponsored program can greatly reduce
the delays in delivery of dividends and annual reports.
Investments in foreign securities involve certain inherent risks, such as
political or economic instability of the issuer or the country of the issue, the
difficulty of predicting international trade patterns, changes in exchange rates
of foreign currencies and the possibility of adverse changes in investment or
exchange control regulations. There may be less publicly available information
about a foreign company than about a domestic company. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic companies.
Further, foreign stock markets are generally not as developed or efficient as
those in the United States, and in most foreign markets volume and liquidity are
less than in the United States. Fixed commissions on foreign stock exchanges are
generally higher than the negotiated commissions on U.S. exchanges, and there is
generally less government supervision and regulation of foreign stock exchanges,
brokers and companies than in the United States. With respect to certain foreign
countries, there is a possibility of expropriation or confiscatory taxation,
limitations on the removal of funds or other assets, or diplomatic developments
that could affect investment within those countries. Because of these and other
factors, securities of foreign companies acquired by a Fund may be subject to
greater fluctuation in price than securities of domestic companies.
FORWARD CURRENCY TRANSACTIONS
The Equity Value Fund and Balanced Fund may enter into forward foreign
currency exchange contracts in order to protect against uncertainty in the level
of future foreign exchange rates. See the SAI for further information concerning
foreign currency transactions.
SECURITIES ISSUED BY OTHER INVESTMENT COMPANIES
Each Fund may invest in securities issued by other investment companies
within the limits prescribed by the 1940 Act. Each Fund currently intends to
limit its investments so that, as determined immediately after a securities
purchase is made: (a) not more than 5% of the value of its total assets will be
invested in the securities of any one investment
43
<PAGE> 58
company; (b) not more than 10% of the value of its total assets will be invested
in the aggregate in securities of investment companies as a group; (c) not more
than 3% of the outstanding voting stock of any one investment company will be
owned by the Fund; and (d) not more than 10% of the outstanding voting stock of
any one investment company will be owned in the aggregate by a Fund and other
investment companies advised by the Advisor or any other affiliate of First
Interstate Bancorp. The Funds may invest in Standard & Poor's Depository
Receipts ("SPDRs") and shares of other investment companies that are structured
to seek a similar correlation to the performance of the S&P 500 and other
similar equity indices. SPDRs are securities traded on the American Stock
Exchange that represent ownership in the SPDR Trust, a long-term unit investment
trust which is intended to provide investment results that generally correspond
to the performance of the S&P 500. As a shareholder of another investment
company, a Fund would bear, along with other shareholders, its pro rata portion
of the expenses of such other investment company, including advisory fees. These
expenses would be in addition to the advisory and other expenses that each Fund
bears directly in connection with its own operations, and may represent a
duplication of fees to shareholders of that Fund.
LOANS OF PORTFOLIO SECURITIES
To increase return, a Fund may lend its portfolio securities to broker/
dealers and other institutional investors pursuant to agreements requiring that
the loans be continuously secured by collateral equal at all times in value to
at least the market value of the securities loaned. The collateral for such
loans may include cash, securities of the U.S. Government, its agencies or
instrumentalities, or irrevocable letters of credit issued by a bank, or any
combination thereof. For each Fund, such loans will not be made if, as a result,
the aggregate of all outstanding loans exceeds 30% of the value of its total
assets. There may be risks of delay in receiving additional collateral or in
recovering the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially. However, loans are made
only to borrowers deemed by the Advisor to be of good standing and when, in
their judgment, the income to be earned from the loan justifies the attendant
risks.
FORWARD COMMITMENTS, WHEN-ISSUED PURCHASES AND DELAYED-DELIVERY TRANSACTIONS
The Funds may purchase or sell securities on a when-issued or
delayed-delivery basis and make contracts to purchase or sell securities for
44
<PAGE> 59
a fixed price at a future date beyond customary settlement time. Securities
purchased or sold on a when-issued, delayed-delivery or forward commitment basis
involve a risk of loss if the value of the security to be purchased declines, or
the value of the security to be sold increases, before the settlement date.
Although a Fund will generally purchase securities with the intention of
acquiring them, a Fund may dispose of securities purchased on a when-issued,
delayed-delivery or a forward commitment basis before settlement when deemed
appropriate by the Advisor.
OPTIONS
Each Fund may purchase put and call options listed on a national securities
exchange and issued by the Options Clearing Corporation in an amount not
exceeding 5% of its net assets. Purchasing options is a specialized investment
technique that entails a substantial risk of a complete loss of the amounts paid
as premiums to the writer of the option.
The Funds may also write covered call and secured put options from time to
time as the Advisor deems appropriate. By writing a covered call option, a Fund
forgoes the opportunity to profit from an increase in the market price of the
underlying security above the exercise price except insofar as the premium
represents such a profit, and it is not able to sell the underlying security
until the option expires or is exercised or the Fund effects a closing purchase
transaction by purchasing an option of the same series. If a Fund writes a
secured put option, it assumes the risk of loss should the market value of the
underlying security decline below the exercise price of the option. The
aggregate value of the securities subject to options written by a Fund will not
exceed 25% of the value of its net assets. The use of covered call options and
secured put options will not be a primary investment technique of the Funds, and
they are expected to be used infrequently. If the Advisor is incorrect in its
forecast of market value or other factors when writing the foregoing options, a
Fund would be in a worse position than it would have been had the foregoing
investment techniques not been used.
Each Fund may engage in unlisted over-the-counter options with
broker/dealers deemed creditworthy by the Advisor. Closing transactions for such
options are usually effected directly with the same broker/dealer that effected
the original option transaction. A Fund bears the risk that the broker/dealer
will fail to meet its obligations. There is no assurance that a liquid secondary
trading market exists for closing out an unlisted option position. Furthermore,
unlisted options are not subject to the protections, afforded purchasers of
listed options by the Options Clearing Corporation,
45
<PAGE> 60
which performs the obligations of its members who fail to perform in connection
with the purchase or sale of options.
For additional information relating to option trading practices, including
the particular risks thereof, see the SAI.
STOCK INDEX FUTURES CONTRACTS
Each Fund may enter into stock index futures contracts in order to protect
the value of common stock investments or to maintain liquidity, provided that
not more than 5% of a Fund's net assets are committed to such transactions. See
the SAI for further information about stock index futures contracts.
The Funds may also purchase put options on stock index futures as another
method of protecting their assets against market declines. See the SAI for
further information about these options contracts.
There can be no assurance that a liquid market will exist at a time when a
Fund seeks to close out a futures contract or a futures option position. Most
futures exchanges and boards of trade limit the amount of fluctuation permitted
in futures contract prices during a single day; once the daily limit has been
reached on a particular contract, no trades may be made that day at a price
beyond that limit. In addition, certain of these instruments are relatively new
and without a significant trading history. As a result, there is no assurance
that an active secondary market will develop or continue to exist. Lack of a
liquid market for any reason may prevent a Fund from liquidating an unfavorable
position and that Fund would remain obligated to meet margin requirements until
the position is closed.
The use of the techniques listed above which involve the segregation of
assets to cover future obligations may impair the liquidity of a Fund's assets
and its ability to operate as an open-end investment company. Furman Selz and
the Advisor will monitor each Fund's use of such techniques and report to the
Trustees concerning their impact, if any, on liquidity and a Fund's ability to
meet redemptions.
ILLIQUID SECURITIES
Each Fund will not knowingly invest more than 10% (15% in the case of the
Growth Fund) of the value of its net assets in securities that are illiquid
because of restrictions on transferability or other reasons. Repurchase
agreements with deemed maturities in excess of seven days, time deposits
maturing in more than seven days and securities that are not registered under
the Securities Act of 1933 but may be purchased by
46
<PAGE> 61
institutional buyers under Rule 144A are subject to this limit (unless such
securities are variable amount master demand notes with maturities of nine
months or less or unless the Advisor determines under the supervision of the
Board that a liquid trading market exists).
Rule 144A allows for a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the Securities
Act of 1933 for resales of certain securities to qualified institutional buyers.
The Advisor believes that the market for certain restricted securities may
expand further as a result of this regulation and the development of automated
systems for the trading, clearance and settlement of unregistered securities of
domestic and foreign issuers, such as the PORTAL System sponsored by the NASD.
The Advisor monitors the liquidity of restricted securities in each of the
Funds under the supervision of the Board of Trustees. In reaching liquidity
decisions, the Advisor will consider such factors as: (a) the frequency of
trades and quotes for the security; (b) the number of dealers wishing to
purchase or sell the security and number of other potential purchasers; (c)
dealer undertakings to make a market in the security; and (d) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer). The use of Rule 144A transactions could have the effect of
increasing the level of illiquidity of the Funds during periods that qualified
institutional buyers become uninterested in purchasing restricted securities.
INVESTMENT RESTRICTIONS
Each Fund has adopted certain fundamental investment restrictions that may
be changed only with the approval of a majority of a Fund's outstanding shares.
The following description summarizes several of the Funds' fundamental
restrictions, which are set forth in full in the SAI.
No Fund may:
1. Purchase securities (except U.S. Government securities and repurchase
agreements collateralized by such securities) if more than 5% of its
total assets at the time of purchase will be invested in securities of
any one issuer, except that up to 25% of a Fund's total assets may be
invested without regard to this 5% limitation.
2. Subject to the foregoing 25% exception, purchase more than 10% of the
outstanding voting securities of any issuer.
47
<PAGE> 62
3. Invest 25% or more of its total assets at the time of purchase in
securities of issuers whose principal business activities are in the
same industry.
4. Borrow money except in amounts up to 10% of the value of its total
assets at the time of borrowing.
If a percentage restriction on the investment or use of assets set forth in
this Prospectus is adhered to at the time a transaction is effected, later
changes in percentage resulting from changing values will not be considered a
violation, however, the Funds will not at any time have more than 10% (15% in
the case of the Growth Fund) of their respective net assets invested in illiquid
securities.
OTHER INFORMATION
CAPITALIZATION
Pacifica Funds Trust (formerly Fund Source) was organized as a
Massachusetts business trust on July 17, 1984. The capitalization of the Trust
consists solely of an unlimited number of shares of beneficial interest with a
par value of $0.001 each. When issued, shares of the Funds are fully paid,
non-assessable and freely transferable.
The Board of Trustees has authorized the issuance of two classes of shares
in each of the Funds described in this Prospectus -- Investor Shares and
Institutional Shares. Each share of a Fund represents an equal proportionate
interest in a particular Fund with other shares of the same class and is
entitled to such dividends and distributions earned on such shares as are
declared in the discretion of the Board of Trustees.
Each Fund's Investor Shares and Institutional Shares bear their pro rata
portion of all operating expenses paid by the Fund except for the distribution
payments, Service Organization fees and other "class" expenses that are
allocated to a particular share class. The Board of Trustees has not approved a
Distribution Plan with respect to Institutional Shares. Each Fund may pay fees
to Service Organizations in amounts up to an annual rate of 0.25% of the average
daily net asset value of the Funds' outstanding Institutional Shares owned by
shareholders with whom a Service Organization has a servicing relationship.
Institutional Shares of the Funds are purchased at net asset value per share
without a sales charge. Because of the "class expenses" and sales charges, the
performance of a Fund's Institutional Shares is expected to be higher than the
performance of its Investor Shares. The Trust offers various services and
privileges in
48
<PAGE> 63
connection with its Investor Shares that are not offered in connection with its
Institutional Shares, including an automatic investment plan, automatic
withdrawal plan and, with respect to certain portfolios, checkwriting. For
information regarding the Funds' Institutional Shares, contact Furman Selz at
1-800-662-8417 or your Service Organization.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust. The Declaration of Trust also
provides for indemnification out of the property of a Fund of any shareholder
held personally liable solely by reason of being or having been a shareholder of
the Fund. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a Fund itself would
be unable to meet its obligations and should be considered remote.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Trust is not required to hold regular
annual meetings of the Funds' shareholders, but in the event that a special
meeting is held, shareholders of each portfolio offered by the Trust will be
entitled to one vote for each full share held and fractional votes for
fractional shares held, and will vote in the aggregate and not on a
portfolio-by-portfolio basis, except as required by the 1940 Act or other
applicable law. It is contemplated that, as required by the 1940 Act, the
shareholders of a portfolio will vote separately on a portfolio-by-portfolio
basis on matters relating to a particular portfolio's investment advisory
agreement or changes in a portfolio's fundamental investment limitations, and on
other matters where the interests of the respective portfolios are not
substantially identical. Similarly, shareholders of each portfolio will vote in
the aggregate and not by class unless the Trustees determine that the matter to
be voted on affects only the interests of the holders of a particular class of a
Fund's shares. Voting rights are not cumulative.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding
49
<PAGE> 64
shares of the Trust and in connection with such meeting to comply with the
shareholders' communications provisions of Section 16(c) of the 1940 Act.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of a Fund means, with respect to the
approval of an investment advisory agreement or a change in a fundamental
investment policy, the vote of the lesser of: (1) 67% of the shares of a Fund
present at a meeting if the holders of more than 50% of the outstanding shares
are present in person or by proxy; or (2) more than 50% of the outstanding
shares of a Fund. For purposes of the 1940 Act, any person who owns either
directly or through one or more controlled companies more than 25 percent of the
voting securities of a company is presumed to "control" such company. Under this
definition, First Interstate Bancorp and its affiliates may be deemed to be
controlling persons of the Trust.
PERFORMANCE INFORMATION
A Fund may, from time to time, include yield and total return data for its
Investor Shares and Institutional Shares in advertisements or reports to
shareholders or prospective investors. The methods used to calculate the yields
and total returns of the Funds are mandated by the SEC.
Quotations of "yield" for a class of shares of a Fund will be based on the
investment income per share during a particular 30-day (or one month) period
(including dividends and interest), less expenses accrued during the period
("net investment income"), and will be computed by dividing net investment
income by the maximum public offering price per share on the last day of the
period.
Quotations of yield reflect only the performance of a class of shares
during the particular period on which the calculations are based. Yield will
vary based on changes in market conditions, the level of interest rates and the
level of the expenses of a particular class of shares, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
Quotations of average annual total return for a class of shares of a Fund
will be expressed in terms of the average annual compounded rate of return of a
hypothetical investment in that class over periods of 1, 5 and 10 years (up to
the life of that class), reflect the deduction of a proportional share of
expenses allocated to that class (on an annual basis), and assume that all
dividends and distributions are reinvested when paid.
Performance information for a Fund may be compared to various unmanaged
indices, such as the Standard & Poor's 500 Stock Index, the
50
<PAGE> 65
Dow Jones Industrial Average, indices prepared by Lipper Analytical Services,
and other entities or organizations which track the performance of investment
companies. Any performance information should be considered in light of a Fund's
investment objective and policies, characteristics and quality of the Fund and
the market conditions during the time period indicated, and should not be
considered to be representative of what may be achieved in the future. For a
description of the methods used to determine yield and total return for the
Funds, see "Other Information -- Performance Information" in the SAI.
ACCOUNT SERVICES
All transactions in shares of the Funds will be reflected in a statement
for each shareholder. In those cases where a Service Organization or its nominee
is shareholder of record of shares purchased for its customer, the Funds have
been advised that the statement may be transmitted to the customer at the
discretion of the Service Organization.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Funds at 237 Park
Avenue, Suite 910, New York, New York 10017.
General and Account Information: (800) 662-8417
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
FUNDS OR BY THEIR DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY FIRST INTERSTATE BANCORP OR ITS AFFILIATES,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
51
<PAGE> 66
APPENDIX
DESCRIPTION OF MOODY'S BOND RATINGS:
Excerpts from Moody's description of its four highest bond ratings are
listed as follows: Aaa -- judged to be the best quality and they carry the
smallest degree of investment risk; Aa -- judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds; A -- possess many favorable investment attributes and are
to be considered as "upper medium grade obligations"; Baa -- considered to be
medium grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Other Moody's bond
descriptions include: Ba -- judged to have speculative elements, their future
cannot be considered as well assured; B -- generally lack characteristics of the
desirable investment; Caa -- are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; Ca -- speculative in a high degree, often in default; C -- lowest
rated class of bonds, regarded as having extremely poor prospects.
Moody's also supplies numerical indicators 1, 2 and 3 to rating categories.
The modifier 1 indicates that the security is in the higher end of its rating
category; the modifier 2 indicates a mid-range ranking; and modifier 3 indicates
a ranking toward the lower end of the category.
DESCRIPTION OF S&P'S BOND RATINGS:
Excerpts from S&P's description of its four highest bond ratings are listed
as follows: AAA -- highest grade obligations, in which capacity to pay interest
and repay principal is extremely strong; AA -- also qualify as high grade
obligations, having a very strong capacity to pay interest and repay principal,
and differs from AAA issues only in a small degree; A -- regarded as upper
medium grade, having a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories;
BBB -- regarded as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories. This group is the lowest which qualifies for
commercial bank investment. BB, B, CCC, CC -- predominantly speculative with
respect to
A-1
<PAGE> 67
capacity to pay interest and repay principal in accordance with terms of the
obligations; BB indicates the highest grade and CC the lowest within the
speculative rating categories.
S&P applies indicators "+," no character, and "-" to its rating categories.
The indicators show relative standing within the major rating categories.
DESCRIPTION OF MOODY'S RATINGS OF NOTES AND VARIABLE RATE DEMAND INSTRUMENTS:
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or MIG. Such ratings recognize the
differences between short-term credit and long-term risk. Short-term ratings on
issues with demand features (variable rate demand obligations) are
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payments
relying on external liquidity.
MIG 1/VMIG 1: This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This denotes high quality. Margins of protection are ample
although not as large as in the preceding group.
DESCRIPTION OF MOODY'S TAX-EXEMPT COMMERCIAL PAPER RATINGS:
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations which have an original maturity not
exceeding nine months. Moody's makes no representation that such obligations are
exempt from registration under the Securities Act of 1933, nor does it represent
that any specific note is a valid obligation of a rated issuer or issued in
conformity with any applicable law. The following designations, all judged to be
investment grade, indicate the relative repayment ability of rated issuers of
securities in which the Trust may invest.
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term promissory obligations.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term promissory obligations.
A-2
<PAGE> 68
DESCRIPTION OF S&P'S RATINGS FOR MUNICIPAL BONDS:
INVESTMENT GRADE
AAA: Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA: Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A: Debt rated "A" has strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
SPECULATIVE GRADE
BB, B, CCC, CC: Debt rated in these categories is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
CI: The "CI" rating is reserved for income bonds on which no interest is
being paid.
D: Debt rated "D" is in default, and payment of interest and/or repayment
of principal is in arrears.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
DESCRIPTION OF S&P'S RATINGS FOR INVESTMENT GRADE MUNICIPAL NOTES AND SHORT-TERM
DEMAND OBLIGATIONS:
SP-1: Issues carrying this designation have a very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus (+) designation.
A-3
<PAGE> 69
SP-2: Issues carrying this designation have a satisfactory capacity to pay
principal and interest.
DESCRIPTION OF S&P'S RATINGS FOR DEMAND OBLIGATIONS AND TAX-EXEMPT COMMERCIAL
PAPER:
An S&P commercial paper rating is a current assessment of the likelihood of
timely repayment of debt having an original maturity of no more than 365 days.
The two rating categories for securities in which the Trust may invest are as
follows:
A-1: This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics will be denoted with a plus (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-4
<PAGE> 70
INVESTMENT ADVISOR
First Interstate Capital Management, Inc.
7501 East McCormick Parkway
Scottsdale, Arizona 85258
ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Pacifica Funds Distributor Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
First Interstate Bank of California
707 Wilshire Boulevard
Los Angeles, California 90017
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
[PACIFICA LOGO] PACEBIV-2/96
<PAGE> 71
[PACIFICA LOGO]
(INSTITUTIONAL SHARES)
PACIFICA EQUITY VALUE FUND
PACIFICA GROWTH FUND
PACIFICA BALANCED FUND
PROSPECTUS
FEBRUARY 1, 1996
[FIRST INTERSTATE BANK LOGO]
Investment Advisor to The Pacifica Funds
<PAGE> 72
PACIFICA FUNDS TRUST
(INSTITUTIONAL SHARES)
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) 662-8417
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. --
INVESTMENT ADVISOR
("FICM" OR THE "ADVISOR")
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
("FURMAN SELZ" OR THE "SPONSOR")
PACIFICA FUNDS DISTRIBUTOR INC. -- DISTRIBUTOR
("PFD INC." OR THE "DISTRIBUTOR")
Pacifica Funds Trust (the "Trust") is an open-end investment company (a
mutual fund) that offers a selection of separate investment portfolios. This
Prospectus describes the Institutional Shares of the following three portfolios
(the "Funds"):
- Pacifica Equity Value Fund
- Pacifica Growth Fund
- Pacifica Balanced Fund
This Prospectus sets forth concisely the information a prospective investor
should know before investing in any of the Funds and should be read and retained
for information about each Fund. A Statement of Additional Information (the
"SAI"), dated February 1, 1996 (which may be revised from time to time),
containing additional and more detailed information about the Funds, has been
filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Funds at the address or
information number printed above.
----------------------------
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FIRST INTERSTATE OR OTHER BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN 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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1996.
<PAGE> 73
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS............................................... 3
FUND EXPENSES............................................ 6
FEE TABLE -- INSTITUTIONAL SHARES........................ 6
FINANCIAL HIGHLIGHTS..................................... 8
THE FUNDS................................................ 12
INVESTMENT POLICIES AND PRACTICES
OF THE FUNDS........................................... 12
RISKS OF INVESTING IN THE FUNDS.......................... 14
MANAGEMENT OF THE FUNDS.................................. 16
FUND SHARE VALUATION..................................... 21
PURCHASE AND REDEMPTION OF
INSTITUTIONAL SHARES................................... 22
EXCHANGE OF INSTITUTIONAL SHARES......................... 25
DIVIDENDS, DISTRIBUTIONS AND
FEDERAL INCOME TAX..................................... 26
DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES................................... 29
INVESTMENT RESTRICTIONS.................................. 39
OTHER INFORMATION........................................ 40
APPENDIX................................................. A-1
</TABLE>
2
<PAGE> 74
HIGHLIGHTS
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
This Prospectus describes three diversified investment portfolios managed
by First Interstate Capital Management, Inc. Each Fund has a distinct investment
objective and policies.
The Equity Value Fund. The investment objective of the Equity Value Fund
is to provide investors with long-term capital appreciation. The Fund pursues
this objective by investing primarily in common stocks of both domestic and
foreign companies. The Fund may invest in large, well-established companies and
smaller companies with market capitalization exceeding $50 million. The Fund may
invest up to 5% of its assets in equity securities listed or traded exclusively
on a foreign exchange. Income generation is a secondary consideration for the
Fund. However, the Fund may purchase dividend paying stocks of particular
issuers when the issuer's dividend record may, in the Advisor's opinion, have a
favorable influence on the market value of the securities. Under normal market
conditions, the Fund will invest at least 65% of its total assets in common
stocks and securities convertible into common stocks.
The Growth Fund. The investment objective of the Growth Fund is to seek
superior, risk-adjusted total return through capital appreciation. The Fund
invests primarily in equity securities, concentrating on those securities whose
growth prospects, in the opinion of the Advisor, appear to exceed that of the
overall market. The Advisor may also consider the potential for income in
selecting portfolio securities. Under normal market conditions, the Fund will
invest at least 65% of its total assets in equity securities.
The Balanced Fund. The investment objective of the Balanced Fund is to
realize both capital appreciation and current income resulting in a high total
investment return consistent with prudent investment risk and a balanced
investment approach. The Fund pursues this objective through a balanced and
diversified program of investing in equity securities and debt instruments. The
Fund will normally invest between 30% and 70% of its assets in common stocks
that are considered by the Advisor to have better than average prospects for
growth of capital and income. The Fund will invest primarily in domestic equity
securities, but may invest up to 5% of its assets in equity securities listed or
traded exclusively on a foreign exchange. The remaining balance of the Fund's
assets will be invested in senior fixed income securities, including corporate
debt securities, commercial paper and mortgage-backed and asset-backed
securities, based on the relative
3
<PAGE> 75
stability of income and principal of such securities. The debt instruments in
which the Fund invests will be rated at least investment grade.
For additional information concerning the investment policies, practices
and risk considerations of the Funds, see "The Funds," "Investment Policies and
Practices of the Funds" and "Risks of Investing in the Funds" in this
Prospectus.
RISKS OF INVESTING IN THE FUNDS
The price per share of the Funds will fluctuate with changes in value of
the investments held by each Fund. A Fund's performance will change daily based
on many factors, including the quality of the instruments in each Fund's
investment portfolio, national and international economic conditions, interest
rate levels, the overall level of equity prices, general market conditions and
international exchange rates. Depending on these factors, the net asset value of
a Fund may decrease instead of increase. The Funds may seek to achieve their
investment objectives through investments in securities of foreign issuers
(which involve risks not typically associated with U.S. issuers), instruments
with the lowest investment grade rating which have speculative characteristics,
and by the use of certain options, futures and currency swap strategies. In
addition, the Funds may invest in securities issued by emerging growth
companies, which may involve greater price volatility and risk than those
incurred by funds that do not invest in such companies. The market value of a
Fund's investments in fixed income securities will change in response to changes
in interest rates and the relative financial strength of each issuer. During
periods of falling interest rates, the value of fixed income securities
generally rises. Conversely, during periods of rising interest rates the value
of such securities generally declines.
There is no assurance that any Fund will achieve its investment objective.
MANAGEMENT OF THE FUNDS
First Interstate Capital Management, Inc. acts as investment advisor to the
Funds. For its services, the Advisor is entitled to receive a fee from each Fund
at an annual rate based on the Fund's average daily net assets. See "Fee
Table -- Institutional Shares" and "Management of the Funds" in this Prospectus.
Furman Selz acts as administrator and sponsor to the Funds. Furman Selz
provides certain management and administrative services to the Funds, and is
entitled to receive a fee from each Fund at an annual rate
4
<PAGE> 76
based on the Fund's average daily net assets. PFD Inc. distributes the
Funds' shares.
Fees and expenses charged to the Funds are outlined on page 6 of this
Prospectus.
GUIDE TO INVESTING IN THE PACIFICA FAMILY OF FUNDS
Purchase orders for the Funds received in proper order by 4:15 p.m.,
Eastern time, will become effective that day.
Institutional Shares of the Funds are purchased at net asset value without
a sales charge.
Shareholders may purchase, redeem or exchange Institutional Shares by
telephone.
All dividends and distributions will be automatically reinvested at net
asset value in additional Institutional Shares of the applicable Fund unless
cash payment is requested.
- Distributions for the Funds are generally paid quarterly.
For additional information on how to purchase and redeem Institutional
Shares of the Funds, see "Purchase and Redemption of Institutional Shares" and
"Exchange of Institutional Shares."
5
<PAGE> 77
FUND EXPENSES
The following table lists the costs and expenses that an investor will
incur either directly or indirectly as an Institutional shareholder of a Fund
based upon the Fund's operating expenses for its most recent fiscal year,
adjusted to reflect current fees and expenses.
FEE TABLE -- INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
EQUITY VALUE GROWTH BALANCED
FUND FUND FUND
------------ ------ --------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price).............. None None None
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering
price)....................... None None None
Deferred Sales Load (as a
percentage of redemption
proceeds).................... None None None
Redemption Fees................. None None None
Exchange Fee.................... None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net
assets)
Management Fees (after
waivers)(++)................. 0.60% 0.08% 0.60%
Other Expenses (after
waivers)(++)++............... 0.35% 0.82% 0.35%
----- ------ --------
TOTAL FUND OPERATING EXPENSES:
(after waivers)(++)++++......... 0.95% 0.90% 0.95%
========= ===== =======
</TABLE>
- ---------------
<TABLE>
<C> <S>
(++) Management Fees (before waivers) would be 0.60%, 0.75% and
0.60%, respectively.
(++)++ Other Expenses (before waivers) would be 0.48%, 0.90% and
0.42%, respectively.
(++)++++ Total Fund Operating Expenses (before waivers) would be
1.08%, 1.65% and 1.02%, respectively.
</TABLE>
6
<PAGE> 78
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Funds' Institutional Shares
will bear. The table does not reflect any charges that may be imposed by a First
Interstate Bank or other institutions directly on their customer accounts in
connection with investments in the Funds.
EXAMPLE:(++)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
EQUITY VALUE GROWTH BALANCED
FUND FUND FUND
------------ ------ --------
<S> <C> <C> <C>
1 year............................. $ 10 $ 9 $ 10
3 years............................ 30 29 30
5 years............................ 53 50 53
10 years........................... 117 111 117
</TABLE>
- ---------------
(++) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
7
<PAGE> 79
FINANCIAL HIGHLIGHTS
The financial information shown below is to assist investors in evaluating
the performance of the Funds since their commencement of operations. The
following supplementary information for the year ended September 30, 1995 for
the Equity Value Fund and Balanced Fund has been audited by Ernst & Young LLP,
whose report on the financial statements appears in the 1995 Annual Report to
Shareholders for these Funds. The following supplementary information for the
periods through September 30, 1995 for the Growth Fund has been audited by that
Fund's former independent accountants, whose report on the financial statements
appears in the Fund's September 30, 1995 Report to Shareholders. These reports
and financial statements are incorporated by reference into the SAI. The
supplementary information for each of the four years in the period ended
September 30, 1994 for the Equity Value Fund and Balanced Fund has been audited
by the former independent accountants for these Funds. For the periods shown,
the Equity Value Fund and Balanced Fund offered only one class of shares to both
institutional and retail investors. The financial data shown below for these
Funds pertains to the Investor Shares of such Funds, which are not offered
through this Prospectus. No financial data is shown for the Institutional Shares
of such Funds because that class of shares did not commence operations prior to
October 1, 1995. See "Other Information -- Capitalization." The following
financial data should be read in conjunction with the related financial
statements and notes thereto. Further information about the Funds is contained
in their Annual Reports to Shareholders, which may be obtained without charge by
calling 1-800-662-8417.
8
<PAGE> 80
Selected data for a share outstanding for the periods shown:
EQUITY VALUE FUND
<TABLE>
<CAPTION>
PERIOD
YEAR ENDED SEPTEMBER 30, ENDED
--------------------------------------------------- SEPTEMBER 30,
1995 1994 1993 1992 1991 1990(a)
-------- -------- -------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period....................... $ 12.36 $ 13.17 $ 10.73 $ 10.45 $ 8.48 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(++)................................ 0.24 0.20 0.21 0.20 0.28 0.08
Net gain (loss) on securities (both realized and
unrealized)(++)........................................ 1.63.... 0.74 2.75 0.49 1.98 (1.60)
-------- -------- -------- -------- -------- --------
Total from Investment Operations....................... 1.87 0.94 2.96 0.69 2.26 (1.52)
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income..................... (0.25) (0.21) (0.23) (0.22) (0.29) --
Distributions from capital gains......................... (0.71) (1.54) (0.29) (0.19) -- --
-------- -------- -------- -------- -------- --------
Total Distributions...................................... (0.96) (1.75) (0.52) (0.41) (0.29) --
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period........................... $ 13.27 $ 12.36 $ 13.17 $ 10.73 $ 10.45 $ 8.48
======== ======== ======== ======== ======== ========
Total Return (excluding sales load).................... 16.58% 7.49% 28.22% 6.81% 27.05% (15.20)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000).......................... $170,406 $168,852 $140,551 $92,915 $68,412 $26,100
Ratio of Expenses to Average Net Assets.................. 0.96% 0.99% 0.98% 1.02% 0.98% 0.91%+
Effect of Waivers on above Ratio......................... 0.02% 0.02% 0.01% -- 0.13% 0.95%+
Ratio of Net Investment Income to Average Net Assets..... 1.97% 1.60% 1.73% 1.86% 2.69% 3.38%+
Portfolio Turnover Rate.................................. 75% 41% 82% 78% 36% 21%
</TABLE>
- ---------------
(a) Commencement of operations, July 2, 1990.
(++) Per share data based upon average monthly shares outstanding.
+ Annualized.
9
<PAGE> 81
For a share outstanding throughout the periods indicated:
GROWTH FUND*
<TABLE>
<CAPTION>
PERIOD YEAR PERIOD
ENDED ENDED ENDED
SEPTEMBER 30, MAY 31, MAY 31,
1995** 1995 1994
------------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period.................................................. $ 17.28 $15.42 $15.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income................................................................ 0.10 0.25 0.17
Net realized and unrealized gain on investments...................................... 1.27 1.91 0.38
------ ------- -------
Total income from investment operations............................................ 1.37 2.16 0.55
------ ------- -------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income................................................. (0.16) (0.24 ) (0.13 )
Distributions from net realized gain on investments.................................. (0.09) (0.06 ) (0.00 )
------ ------- -------
Total dividends and distributions to shareholders.................................... (0.25) (0.30 ) (0.13 )
------ ------- -------
Net Asset Value, End of Period....................................................... $ 18.40 $17.28 $15.42
============== ======== ========
Total return (excluding sales load)................................................ 25.68%+ 14.27 % 4.43 %+
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)...................................................... $14,120 $12,630 $3,738
Ratio of expenses to average net assets.............................................. 0.90%+ 0.90 % 0.67 %
Ratio of net investment income to average net assets................................. 1.54%+ 1.82 % 1.20 %
Ratio of expenses to average net assets without fee waivers.......................... 1.79%+ 2.15 % 5.36 %
Ratio of net investment income (loss) to average net assets without fee waivers...... 0.43%+ 0.57 % (3.49 %)
Portfolio turnover rate(1)........................................................... 51.31% 59.71 % 50.90 %
</TABLE>
- ---------------
* The Fund operated as the Growth Fund of Westcore Trust from its commencement
of operations on August 2, 1993 until its reorganization as a portfolio of
the Trust on October 1, 1995. During the periods shown, the Fund was advised
by First Interstate Bank of Washington, N.A. and First Interstate Bank of
Oregon, N.A. In connection with the Fund's reorganization, FICM assumed
investment advisory responsibilities for the Fund.
** The Fund changed its fiscal year from May 31 to September 30.
+ Annualized.
(1) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period. Purchases and sales of
investment securities (excluding short-term securities) for the year ended
September 30, 1995 were $3,146,452 and $2,197,417, respectively.
10
<PAGE> 82
Selected data for a share outstanding throughout the periods shown:
BALANCED FUND
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------
1995 1994 1993 1992
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............................... $ 11.67 $ 12.71 $ 11.18 $ 10.80
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(++)........................................ 0.46 0.43 0.44 0.42
Net gain (loss) on securities (both realized and
unrealized)(++)................................................ 0.68 (0.13) 1.72 0.53
-------- -------- -------- --------
Total from Investment Operations............................... 1.14 0.30 2.16 0.95
-------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income............................. (0.47) (0.46) (0.43) (0.43)
Distributions from capital gains................................. (0.50) (0.88) (0.20) (0.14)
-------- -------- -------- --------
Total Distributions.............................................. (0.97) (1.34) (0.63) (0.57)
-------- -------- -------- --------
Net Asset Value, End of Period................................... $ 11.84 $ 11.67 $ 12.71 $ 11.18
======== ======== ======== ========
Total Return (excluding sales load)............................ 10.62% 2.30% 19.83% 9.03%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000).................................. $89,034 $ 108,290 $ 104,434 $ 65,226
Ratio of Expenses to Average Net Assets.......................... 1.03% 1.09% 1.01% 1.02%
Effect of Waivers on above Ratio................................. 0.02% 0.02% 0.05% 0.08%
Ratio of Net Investment Income to Average Net Assets............. 4.05% 3.55% 3.62% 3.76%
Portfolio Turnover Rate.......................................... 90% 35% 60% 49%
<CAPTION>
PERIOD
ENDED
SEPTEMBER 30,
1991 1990(a)
----------- -------------
<S> <C<C> <C>
Net Asset Value, Beginning of Period............................... $ 9.50 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(++)........................................ 0.52 0.14
Net gain (loss) on securities (both realized and
unrealized)(++)................................................ 1.40 (0.64)
-------- --------
Total from Investment Operations............................... 1.92 (0.50)
-------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income............................. (0.62) --
Distributions from capital gains................................. -- --
-------- --------
Total Distributions.............................................. (0.62) --
-------- --------
Net Asset Value, End of Period................................... $ 10.80 $ 9.50
======== ========
Total Return (excluding sales load)............................ 20.78% (5.00)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000).................................. $ 50,038 $33,185
Ratio of Expenses to Average Net Assets.......................... 0.96% 0.93%+
Effect of Waivers on above Ratio................................. 0.22% 0.67%+
Ratio of Net Investment Income to Average Net Assets............. 5.88% 5.87%+
Portfolio Turnover Rate.......................................... 30% 12%
</TABLE>
- ---------------
(a) Commencement of operations, July 2, 1990.
(++) Per share data based upon average monthly shares outstanding.
+ Annualized.
11
<PAGE> 83
THE FUNDS
The Funds are portfolios of Pacifica Funds Trust, a business trust
organized under the laws of the Commonwealth of Massachusetts as an open-end,
management investment company. The Trust's Board of Trustees oversees the
overall management of the Funds and elects the officers of the Funds.
INVESTMENT POLICIES AND PRACTICES OF THE FUNDS
- The Equity Value Fund's investment objective is to provide investors with
long-term capital appreciation.
- The Growth Fund's investment objective is to seek superior, risk-adjusted
total return through capital appreciation.
- The Balanced Fund's investment objective is to realize both capital
appreciation and current income resulting in a high total investment
return consistent with prudent investment risk and a balanced investment
approach.
Each Fund follows its own investment policies and practices, including
certain investment restrictions. The SAI contains the specific investment
restrictions which govern the Funds' investments. The investment objectives of
the Equity Value Fund and Balanced Fund are fundamental policies, which means
that they may not be changed without a majority vote of shareholders of the
affected Fund. Any change in the investment objective of the Growth Fund by the
Board of Trustees may result in the Fund having an investment objective
different from the objective which a shareholder considered appropriate at the
time of investment in the Fund. Except for the objectives and those restrictions
specifically identified as fundamental, all other investment policies and
practices described in this Prospectus and in the SAI are not fundamental.
The Advisor selects investments and makes investment decisions based on the
investment objective and policies of each Fund.
The Equity Value Fund and The Balanced Fund. In selecting equity
investments (which include common stocks of both domestic and foreign companies)
for the Equity Value Fund and Balanced Fund, the Advisor selects companies for
investment using both quantitative and qualitative analysis to identify those
issuers that, in the Advisor's opinion, exhibit below-average valuation
multiples, above-average financial strength, a strong position in their industry
and a history of steady profit growth.
12
<PAGE> 84
The Advisor may also select other equity securities in addition to common
stocks for investment by the Equity Value Fund and Balanced Fund. Such other
equity securities are preferred stocks, high grade securities convertible into
common stocks, and warrants. Neither Fund will invest more than 5% of its net
assets in warrants, no more than 2% of which will be invested in warrants which
are not listed on the New York or American Stock Exchanges. Under normal market
conditions, the Equity Value Fund will invest at least 65% of its total assets
in common stocks or securities convertible into common stocks. For temporary
defensive purposes, however, both the Equity Value Fund and Balanced Fund may
invest in U.S. Government securities, certificates of deposit, bankers'
acceptances, commercial paper, repurchase agreements (maturing in seven days or
less) and debt obligations of corporations (corporate bonds, debentures, notes
and other similar corporate debt instruments) which are rated investment grade
or better by Standard & Poor's Ratings Group ("S&P") or Moody's Investors
Service, Inc. ("Moody's").
In selecting senior fixed income securities for the Balanced Fund, the
Advisor seeks to select those debt instruments that appear best calculated to
achieve the Fund's investment objective within the credit and risk tolerances
established for the Fund. In accordance with those policies, the Balanced Fund
may purchase commercial paper rated A-2 or better by S&P or Prime-2 or better by
Moody's, corporate debt securities rated BBB or better by S&P or Baa or better
by Moody's (which contain some speculative characteristics) and mortgage-backed
and asset-backed securities rated AA or better by S&P or Aa or better by Moody's
(or the foregoing types of debt securities given equivalent ratings by at least
two other nationally recognized statistical rating organizations ("NRSROs"), or,
if any such securities are not rated, are of comparable quality in the Advisor's
opinion).
Growth Fund. The Growth Fund's investment objective is to seek superior,
risk-adjusted total return through capital appreciation. The Advisor may also
consider the potential for income in selecting portfolio securities. The Fund
invests primarily in equity securities, concentrating on those securities whose
growth prospects, in the opinion of the Advisor, appear to exceed that of the
overall market. The Fund's holdings are typically spread across industry and
economic sectors.
The Advisor attempts to invest in the common stocks of companies with
strong financial characteristics and growth tendencies. The Advisor seeks to
acquire stock in companies that will, in its opinion, experience growth in
sales, earnings and dividends greater than the growth experienced by the
Standard & Poor's 500 Composite Stock Price Index (the "S&P
13
<PAGE> 85
500"). The Advisor also monitors the profitability, market capitalization, price
to earnings ratio and capital structures as part of its selection process. The
Fund may invest in non-dividend paying companies which, in the opinion of the
Advisor, offer better total return prospects. In addition, the Fund may invest
up to 25% of its assets in securities issued by foreign issuers and in American
Depository Receipts which may or may not exhibit the particular growth
tendencies and capitalization characteristics described above.
The Fund's Advisor anticipates that from time to time certain industry
sectors will not be represented in the Fund's portfolio while other sectors will
represent a significant portion of invested assets. As a matter of fundamental
policy, however, the Advisor will not purchase any securities which would cause
25% or more of the Fund's total assets at the time of purchase to be invested in
the securities of issuers conducting their principal business activities in the
same industry, and the Fund's investments will be diversified among individual
issuers.
As stated, investment emphasis is on equity securities, primarily common
stocks and, to a lesser extent, preferred stocks and debt securities which are
convertible into common stocks. The Fund's policy is to invest at least 65% of
the value of its total assets in equity securities under normal market
conditions.
All Funds. The Funds may also hold short-term U.S. Government obligations,
money market instruments, repurchase agreements, securities issued by other
investment companies within the limits prescribed by the Investment Company Act
of 1940, as amended (the "1940 Act"), and cash, pending investment, to meet
anticipated redemption requests or if, in the opinion of the Advisor, suitable
investments for a Fund are unavailable. Such investments may be made in such
proportions as, in the opinion of the Advisor, existing circumstances may
warrant, and may include obligations of foreign banks and foreign branches of
U.S. banks. The types of securities and investment practices used by the Funds
are described in greater detail under the section "Description of Securities and
Investment Practices" on pages 29-38 of this Prospectus.
RISKS OF INVESTING IN THE FUNDS
The price per share of each of the Funds will fluctuate with changes in
value of the investments held by the Fund. Shareholders of a Fund should,
therefore, expect the value of their shares to fluctuate with changes in the
value of the securities owned by that Fund. For example, investments by the
Funds in smaller companies may involve greater risks than investments
14
<PAGE> 86
in large companies due to such factors as limited product lines, markets and
financial or managerial resources, and less frequently traded securities that
may be subject to more abrupt price movements than securities of larger
companies.
The market value of a Fund's investment in fixed income securities will
change in response to changes in interest rates and the relative financial
strength of each issuer. During periods of falling interest rates, the value of
fixed income securities generally rises. Conversely, during periods of rising
interest rates the value of such securities generally declines. Debt securities
with longer maturities, which tend to produce higher yields, are subject to
potentially greater capital appreciation and depreciation than obligations with
shorter maturities. Changes in the financial strength of an issuer or changes in
the ratings of any particular security may also affect the value of these
investments. Fluctuations in the market value of fixed income securities
subsequent to their acquisition will not affect cash income from such
securities, but will be reflected in a Fund's net asset value. The Balanced Fund
may also purchase zero-coupon bonds (i.e., discount debt obligations that do not
make periodic interest payments) which are subject to greater market
fluctuations from changing interest rates than debt obligations of comparable
maturities which make current distributions of interest.
Investing in the securities of issuers in any foreign country, including
ADRs and EDRs, involves special risks and considerations not typically
associated with investing in U.S. companies. These include differences in
accounting, auditing and financial reporting standards; generally higher
commission rates on foreign portfolio transactions; the possibility of
nationalization, expropriation or confiscatory taxation; adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country); and political instability which
could affect U.S. investments in foreign countries. Additionally, foreign
securities and dividends and interest payable on those securities may be subject
to foreign taxes, including taxes withheld from payments on those securities.
Foreign securities often trade with less frequency and volume than domestic
securities and, therefore, may exhibit greater price volatility. Additional
costs associated with an investment in foreign securities may include higher
custodial fees than apply to domestic custodial arrangements and transaction
costs of foreign currency conversions. Changes in foreign exchange rates also
will affect the value of securities denominated or quoted in currencies other
than the U.S. dollar. A Fund's objective may be affected either unfavorably or
favorably by fluctuations in the relative rates of exchange between the
currencies of different nations, by exchange
15
<PAGE> 87
control regulations and by indigenous economic and political developments. See
the SAI for further information about foreign securities.
There is, of course, no assurance that a Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products.
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction of
the Board of Trustees. The Trustees are Dennis W. Draper, Joseph N. Hankin, John
E. Heilmann, Jack D. Henderson and Richard A. Wedemeyer. Information about the
Trustees, as well as the Funds' executive officers, may be found in the SAI
under the heading "Management -- Trustees and Officers."
THE ADVISOR: FIRST INTERSTATE CAPITAL MANAGEMENT, INC.
First Interstate Capital Management, Inc., 7501 E. McCormick Parkway,
Scottsdale, Arizona 85258, serves as investment advisor to the Trust. FICM
manages the investment and reinvestment of the assets of the Funds and
continuously reviews, supervises and administers the Funds' investments. The
Advisor is responsible for placing orders for the purchase and sale of the
Funds' investments directly with brokers and dealers selected by it in its
discretion.
FICM is a wholly-owned subsidiary of First Interstate Bank of California,
which is the largest banking subsidiary of First Interstate Bancorp, a
multi-bank holding company. First Interstate Bancorp provides financial products
and services marketed at the local level to nearly five million households in
over 500 communities in 13 western states. Prior to March 18, 1994, the
investment advisor for the Equity Value Fund and Balanced Fund was San Diego
Financial Capital Management, Inc., which was acquired by First Interstate
Bancorp through its merger with San Diego Financial Corporation. Prior to
October 1, 1995, First Interstate Bank of Oregon, N.A. and First Interstate of
Washington, N.A., both affiliates of FICM, served as co-investment advisors for
the Growth Fund.
On January 24, 1996, First Interstate Bancorp signed a definitive merger
agreement to merge with Wells Fargo & Company ("Wells Fargo"), a publicly-held
bank holding company with its head office at 420 Montgomery Street, San
Francisco, California 94104. The merger is conditioned upon, among other things,
certain regulatory approvals. Upon completion of the merger, currently expected
to occur during the second
16
<PAGE> 88
quarter of 1996, FICM will be wholly-owned by Wells Fargo, and the existing
investment advisory agreement between the Trust and FICM will automatically
terminate. It is contemplated that an application will be filed with the
Securities and Exchange Commission to ensure there is no disruption as a result
of the merger in the provision of investment advisory services to the Funds, and
that a meeting of shareholders will be held not later than 120 days after the
merger to approve ongoing investment advisory arrangements for the Funds.
Mr. David Underwood serves as FICM's Director of Equity Funds Management.
Mr. Underwood joined FICM in 1995. From 1993 to 1995 Mr. Underwood was employed
by Integra Trust Company as Director of Research. From 1990 to 1993 he was a
Portfolio Manager with the firm of C.S. McKee Investment Advisors. Mr. G. Edward
Means serves as FICM's Director of Fixed Income Management. Mr. Means joined
FICM in January 1995. From 1992 through 1994 he was employed by Clayton Brown &
Associates as Senior Vice President, Fixed Income. From 1984 to 1992 he was
employed by First National Bank of Chicago as a Senior Vice President.
Mr. Leon Newcomb has been responsible for the day-to-day management of the
Equity Value Fund since May 1995. Mr. Newcomb joined First Interstate in 1994
and FICM in March 1995. From 1989 through 1993 Mr. Newcomb was employed by
Knights of Columbus, a Connecticut life insurance company, as an equity
portfolio manager. Since May 1995, Mr. Newcomb has also been responsible for the
day-to-day management of the equity portion of the Balanced Fund.
Mr. Richard A. Ferguson has been responsible for the day-to-day management
of the Growth Fund since October 1, 1995. Mr. Ferguson joined FICM in March
1995. From 1968 to 1995, Mr. Ferguson held various managerial positions with
First Interstate Bank of Arizona, N.A. and served as a manager of balanced
portfolios and equity funds.
Mr. Michael Hughes has been responsible for the day-to-day management of
the fixed income portion of the Balanced Fund since April 1995. Mr. Hughes has
been employed by First Interstate since November 1988. He currently serves as a
Fixed Income Fund Manager for FICM.
17
<PAGE> 89
For the advisory services it provides to the Funds, FICM is entitled to
receive from each Fund fees, payable monthly, at the annual rates, based on
average daily net assets, as set forth below:
<TABLE>
<CAPTION>
FUND INVESTMENT ADVISORY FEE
------------------------------------ -----------------------
<S> <C>
Equity Value Fund................... 0.60%
Growth Fund......................... 0.75%
Balanced Fund....................... 0.60%
</TABLE>
The Advisor has agreed that during the current fiscal year, it will waive a
portion of its fees so that total operating expenses will not exceed 0.90% of
the average daily net assets of the Institutional Shares of the Growth Fund. For
their fiscal period ended September 30, 1995, the Equity Value Fund and Balanced
Fund each paid advisory fees at the annual rate of 0.60% of their average daily
net assets.
THE SPONSOR AND DISTRIBUTOR
Furman Selz LLC, 230 Park Avenue, New York, New York 10169, acts as Sponsor
of the Funds. Furman Selz is primarily an institutional brokerage firm with
memberships on the New York, American, Boston, Midwest, Pacific and Philadelphia
Stock Exchanges. Furman Selz also serves as administrator and distributor of
other mutual funds. Pacifica Funds Distributor Inc. is an affiliate of Furman
Selz and was organized specifically to distribute shares of the Trust, however,
offers and sales of shares of the Trust will be made only through Furman Selz or
other registered (or exempt) dealers.
PFD Inc. may from time to time pay a bonus or other incentive to dealers
which employ registered representatives who sell a minimum dollar amount of
Institutional Shares of the Funds and/or other funds distributed by Furman Selz
or PFD Inc. during a specific period of time. Such bonus or other incentive may
take the form of payment for travel expenses, including lodging, incurred in
connection with trips taken by qualifying registered representatives and members
of their families to places within or outside the United States, or other
bonuses, such as gift certificates or the cash equivalent of such bonuses. PFD
Inc. has established such a special promotional incentive program with First
Interstate Investments, Inc.
ADMINISTRATIVE SERVICES
The Funds have also entered into an Administrative Services Contract with
Furman Selz pursuant to which Furman Selz provides certain management and
administrative services necessary for the Funds' operations
18
<PAGE> 90
including: (i) general supervision of the operation of the Funds including
coordination of the services performed by the Funds' investment advisor,
transfer agent, custodian, independent accountants and legal counsel, regulatory
compliance, including the compilation of information for documents such as
reports to, and filings with, the SEC and state securities commissions, and
preparation of proxy statements and shareholder reports for the Funds; (ii)
general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Funds' officers and Board of
Trustees; and (iii) furnishing office space and certain facilities required for
conducting the business of the Funds. For these services, Furman Selz is
entitled to receive a fee, payable monthly, at the annual rate of 0.15% of the
average daily net assets of the Funds. Pursuant to a Services Agreement with the
Trust, Furman Selz assists the Trust with certain transfer and dividend
disbursing agent functions and receives a fee of $15.00 per account per year
plus out-of-pocket expenses. Pursuant to a Fund Accounting Agreement with the
Trust, Furman Selz assists the Trust in calculating net asset values and
provides certain other accounting services for each Fund for an annual fee of
$30,000 per Fund plus out-of-pocket expenses.
SERVICE ORGANIZATIONS
Various banks (including banks affiliated with First Interstate Bancorp),
trust companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative services with respect to the Funds' Institutional Shares, such as
maintaining shareholder accounts and records. The Funds may pay fees to Service
Organizations (which vary depending upon the services provided) in amounts up to
an annual rate of 0.25% of the average daily net asset value of the outstanding
Institutional Shares of the Funds owned by shareholders with whom a Service
Organization has a servicing relationship. These fees will be borne entirely by
the Funds' Institutional Shares. However, the Funds do not currently intend to
make any payments to Service Organizations with respect to Institutional Shares.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest a specified amount in
the Funds or charging a direct fee for servicing. If imposed, these fees would
be in addition to any amounts which might be paid to the Service Organization by
the Funds. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged to
consult with them regarding any such fees or conditions.
19
<PAGE> 91
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Funds and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
OTHER EXPENSES
Each Fund bears all costs of its operations other than expenses
specifically assumed by Furman Selz, PFD Inc. or the Advisor. The costs borne by
the Funds include legal and accounting expenses; Trustees' fees and expenses;
insurance premiums; advisory, administration, fund auditing, custodian and
transfer agent fees and expenses; expenses incurred in acquiring or disposing of
the Funds' portfolio securities; expenses of registering and qualifying the
Funds' shares for sale with the SEC and with various state securities
commissions; expenses of obtaining quotations on the Funds' portfolio securities
and pricing of the Funds' shares; expenses of maintaining the Funds' legal
existence and of shareholders' meetings; and expenses of preparation and
distribution to existing shareholders of reports, proxies and prospectuses. Each
Fund bears its own expenses associated with its establishment as a series of the
Trust; these expenses are amortized over a five-year period from the
commencement of a Fund's operations. See "Management" in the SAI for additional
information on expenses borne by the Funds. Trust expenses directly attributable
to a particular Fund are charged to that Fund, and expenses attributable to a
particular class of shares of a Fund (such as Service Organization fees) are
charged to that class. Other expenses are allocated proportionately among all of
the investment portfolios in the Trust in relation to the net assets of each
portfolio or by other means deemed fair and equitable by the Board of Trustees.
20
<PAGE> 92
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Advisor places orders for
the purchase and sale of portfolio investments for the Funds' accounts with
brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Funds, the Advisor will seek the best execution of the Funds' orders.
Purchases and sales of common stocks are generally placed by the Advisor with
broker-dealers which, in the Advisor's judgment, provide prompt and reliable
execution at favorable security prices and reasonable commission rates.
Broker-dealers are selected on the basis of a variety of factors such as
reputation, capital strength, size and difficulty of the order, sale of Fund
shares by the broker-dealer, and research provided to the Advisor by the broker-
dealer. The Advisor may cause a Fund to pay commissions higher than another
broker-dealer would have charged if the Advisor believes the commission paid is
reasonable in relation to the value of the brokerage and research services
received by the Advisor. Purchases and sales of debt securities are generally
placed by the Advisor with primary market makers for these securities on a net
basis, i.e., without any brokerage commission being paid by the Funds. Trading
does, however, involve transaction costs. Transactions with dealers serving as
primary market makers reflect the spread between the bid and asked prices.
Purchases of underwritten issues may be made which will include an underwriting
fee paid to the underwriter.
A high portfolio turnover rate involves larger brokerage commission
expenses or transaction costs which must be borne directly by a Fund. Short-term
capital gains realized from portfolio transactions are taxable to shareholders
as ordinary income. The Advisor will not consider portfolio turnover rate a
limiting factor in making investment decisions consistent with a Fund's
objective and policies.
FUND SHARE VALUATION
The net asset value of each class of shares of the Funds is calculated at
4:15 p.m. (Eastern time), Monday through Friday, on each day the New York Stock
Exchange is open for trading (a "Business Day"), which excludes the following
business holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share for each class of shares is computed by dividing the value of a
Fund's assets allocable to a particular class, less the liabilities charged to
that class by the total number of the outstanding shares of that class. All
expenses, including fees paid to
21
<PAGE> 93
the Advisor and Furman Selz, are accrued daily and taken into account for the
purpose of determining the net asset value.
Securities listed on an exchange are valued on the basis of the last sale
prior to the time the valuation is made. If there has been no sale since the
immediately previous valuation, then the current bid price is used. Quotations
are taken from the exchange where the security is primarily traded. Portfolio
securities which are primarily traded on foreign exchanges may be valued with
the assistance of a pricing service and are generally valued at the preceding
closing values of such securities on their respective exchanges, except that
when an occurrence subsequent to the time a foreign security is valued is likely
to have changed such value, then the fair value of those securities will be
determined by consideration of other factors by or under the direction of the
Board of Trustees. Over-the-counter securities are valued on the basis of the
bid price at the close of business on each business day. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Trustees.
Notwithstanding the above, bonds and other fixed-income securities are valued by
using market quotations and may be valued on the basis of prices provided by a
pricing service approved by the Board of Trustees. All assets and liabilities
initially expressed in foreign currencies will be converted into U.S. dollars at
the mean between the bid and asked prices of such currencies against U.S.
dollars as last quoted by any major bank.
With respect to option contracts entered into by a Fund, the premium
received is recorded as an asset and equivalent liability, and thereafter the
liability is adjusted to the market value of the option determined in accordance
with the preceding paragraph. The premium paid for an option purchased by a Fund
is recorded as an asset and subsequently adjusted to market value.
PURCHASE AND REDEMPTION OF INSTITUTIONAL SHARES
Institutional Shares of the Funds are sold without a sales load on a
continuous basis primarily to customers ("Customers") of affiliate, franchise or
correspondent banks of First Interstate Bancorp and other selected institutions
("Institutions"). Customers may include individuals, trusts, partnerships and
corporations. Share purchases are effected through a Customer's account at an
Institution through procedures established in connection with the requirements
of the account, and confirmations of share purchases and redemptions will be
sent to the Institution involved. Institutions (or their nominees) will normally
be the holders of record of
22
<PAGE> 94
Institutional Shares acting on behalf of their Customers, and will reflect their
Customers' beneficial ownership of Institutional Shares in the account
statements provided by them to their Customers. The exercise of voting rights
and the delivery to Customers of shareholder communications from the Funds will
be governed by the Customers' account agreements with an Institution. Investors
wishing to purchase Institutional Shares of a Fund should contact their account
representatives.
Shares of a Fund are sold at net asset value per share next determined
after a purchase order has become effective. Purchase orders by an Institution
for Institutional Shares in the Funds must be received by the Trust by 4:15 p.m.
(Eastern time) on any Business Day. Payment for such shares may be made by
Institutions in Federal funds or other funds immediately available to the
Trust's custodian no later than 4:15 p.m. (Eastern time) on the next Business
Day following the receipt of the purchase order.
It is the responsibility of Institutions to transmit orders for purchases
by their Customers and to deliver required funds on a timely basis. If funds are
not received within the periods described above, the order will be canceled,
notice thereof will be given, and the Institution will be responsible for any
loss to the Fund or its shareholders. Institutions may charge certain account
fees depending on the type of account the investor has established with an
Institution. In addition, an Institution may receive fees from the Funds with
respect to the investments of its Customers as described above under "Management
of the Funds." Payment for Institutional Shares of a Fund may, in the discretion
of the Advisor, be made in the form of securities that are permissible
investments for the Fund. For further information see "Additional Purchase and
Redemption Information" in the SAI.
The Trust reserves the right to reject any purchase order. Payment for
orders which are not received will be returned after prompt inquiry. The
issuance of Institutional Shares is recorded on the books of the Funds, and
share certificates are not issued.
Neither the Trust, the Distributor nor Furman Selz will be responsible for
the authenticity of telephone instructions for the purchase or redemption of
Institutional Shares where such instructions are reasonably believed to be
genuine. The Trust will attempt to confirm that telephone instructions are
genuine and will use such procedures as are considered reasonable. To the extent
that the Trust fails to use reasonable procedures to verify the genuineness of
telephone instructions, it or its service providers may be
23
<PAGE> 95
liable for any loss, damage or expense arising from such instructions that prove
to be fraudulent or unauthorized.
Redemption requests are effected at the net asset value per share next
determined after receipt of a redemption request in good order by the Trust.
Institutional Shares held by an Institution on behalf of its Customers must be
redeemed in accordance with instructions and limitations pertaining to the
account at the Institution. It is the responsibility of an Institution to
transmit redemption requests to the Trust and to credit its Customers' accounts
with the redemption proceeds on a timely basis. The redemption proceeds for
Institutional Shares of a Fund are normally wired to the redeeming Institution
the following Business Day after receipt of the request by the Trust. The Trust
reserves the right to delay the wiring of redemption proceeds for up to seven
days after it receives a redemption order if, in the judgment of the Advisor, an
earlier payment could adversely affect a Fund.
With respect to former shareholders of Westcore Trust who do not have a
relationship with an Institution, shares of the Funds may be redeemed by writing
or calling the Funds directly at 237 Park Avenue, Suite 910, New York, NY 10017
or 1-800-662-8417. When Institutional Shares are redeemed directly from a Fund,
the Fund will ordinarily send the proceeds by check to the shareholder at the
address of record on the next Business Day unless payment by wire is requested.
The Funds may, however, take up to seven days to make payment. This will not be
the customary practice. Also, if the New York Stock Exchange is closed (or when
trading is restricted) for any reason other than the customary weekend or
holiday closing or if an emergency condition as determined by the SEC merits
such action, the Funds may suspend redemptions or postpone payment dates.
To be accepted by a Fund, a letter requesting redemption must include: (i)
the Fund name and account registration from which you are redeeming
Institutional Shares; (ii) your account number; (iii) the amount to be redeemed;
(iv) the signatures of all registered owners; and (v) a signature guarantee by
any eligible guarantor institution including a member of a national securities
exchange or a commercial bank or trust company, broker-dealers, credit unions
and savings associations. Corporations, partnerships, trusts or other legal
entities may be required to submit additional documentation.
24
<PAGE> 96
All redemptions of Institutional Shares of the Funds shall be made in cash,
except that the commitment to redeem Institutional Shares in cash extends only
to redemption requests made by each shareholder of a Fund during any 90-day
period of up to the lesser of $250,000 or 1% of the net asset value of that Fund
at the beginning of such period. This commitment is irrevocable without the
prior approval of the SEC and is a fundamental policy of the Funds that may not
be changed without shareholder approval. In the case of redemption requests by
shareholders in excess of such amounts, the Board of Trustees reserves the right
to have the Funds make payment, in whole or in part, in securities or other
assets, in case of an emergency or any time a cash distribution would impair the
liquidity of a Fund to the detriment of the existing shareholders. In this
event, the securities would be valued in the same manner as the securities of
that Fund are valued. If the recipient were to sell such securities, he or she
would incur brokerage charges.
A redemption may be a taxable transaction on which gain or loss may be
recognized.
EXCHANGE OF INSTITUTIONAL SHARES
The Funds offer a convenient way to exchange Institutional Shares in one
Fund for Institutional Shares in another investment portfolio of the Trust.
Before engaging in an exchange transaction, a shareholder should read carefully
the Prospectus describing the investment portfolio into which the exchange will
occur, which is available without charge and can be obtained by writing to the
Funds, 237 Park Avenue, Suite 910, New York, New York 10017, or by calling
1-800-662-8417. A shareholder may not exchange Institutional Shares of one
portfolio for Institutional Shares of another portfolio if both or either are
not qualified for sale in the state of the shareholder's residence. The Trust
may terminate or amend the terms of the exchange privilege at any time.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the net asset value next determined following receipt of the
request by the Trust in good order.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
25
<PAGE> 97
To exchange Institutional Shares, or if you have any questions, simply call
the Trust at 1-800-662-8417. You should be prepared to give the telephone
representative the following information: (i) your account number, social
security number and account registration; (ii) the name of the portfolio from
and the portfolio into which you wish to transfer your investment; and (iii) the
dollar or share amount you wish to exchange. The conversation may be recorded to
protect you and the Funds. Telephone exchanges are available only if the
shareholder so indicates by checking the "yes" box on the Purchase Application.
In addition, Institutional Shares of a Fund may be exchanged for Investor
Shares of the same Fund in connection with the distribution of assets held in a
qualified trust, agency or custodial account maintained with the trust
department of a First Interstate or other bank, trust company or thrift
institution, or in other cases where Institutional Shares are not held in such
qualified accounts. Similarly, Investor Shares may be exchanged for
Institutional Shares of the same Fund if the shares are to be held in such a
qualified trust, agency or custodial account. These exchanges are made without a
sales charge at the net asset value of the respective share classes.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
Each Fund has qualified and intends to continue to qualify annually and to
elect to be treated as a regulated investment company pursuant to the provisions
of Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
By so qualifying and electing, each Fund generally will not be subject to
Federal income tax to the extent that it distributes investment company taxable
income and net capital gains in the manner required under the Code.
Each Fund intends to distribute to its shareholders substantially all of
its investment company taxable income (which includes, among other items,
dividends and interest and the excess, if any, of net short-term capital gains
(generally including any net option premium income) over net long-term capital
losses). Investment company taxable income will be distributed by the Funds
quarterly. Each Fund intends to distribute, at least annually, substantially all
net capital gain (the excess of net long-term capital gains over net short-term
capital losses). In determining amounts of capital gains to be distributed, any
capital loss carryovers from prior years will be applied against capital gains.
Distributions will be paid in additional shares of the same class held by a
shareholder based on the net asset value at the close of business on the payment
date of the distribution, unless the shareholder elects in writing, which is
received by Furman Selz not less than five full business days prior
26
<PAGE> 98
to the record date, to receive such distributions in cash. Investors who redeem
all or a portion of Fund shares prior to a dividend payment date will be
entitled on the next dividend payment date to all dividends declared but unpaid
on those shares at the time of their redemption.
Distributions of investment company taxable income (regardless of whether
derived from dividends, interest or net short-term capital gains) will be
taxable to shareholders as ordinary income. Distributions of net long-term
capital gains designated by a Fund as capital gain dividends will be taxable as
long-term capital gains, regardless of how long a shareholder has held his Fund
shares. Distributions are taxable in the same manner whether received in
additional shares or in cash.
Earnings of the Funds not distributed on a timely basis in accordance with
a calendar year distribution requirement are subject to a nondeductible 4%
excise tax. To prevent imposition of this tax, each Fund intends to comply with
this distribution requirement.
A distribution, including an "exempt-interest dividend," will be treated as
paid on December 31 of a calendar year if it is declared by a Fund during
October, November, or December of that year to shareholders of record in such a
month and paid by a Fund during January of the following calendar year. Such
distributions will be treated as received by shareholders in the calendar year
in which the distributions are declared, rather than the calendar year in which
the distributions are received.
Special tax rules may apply to a Fund's acquisition of financial futures
contracts, forward contracts, and options on futures contracts. Such rules may,
among other things, affect whether gains and losses from such transactions are
considered to be short-term or long-term, may have the effect of deferring
losses and/or accelerating the recognition of gains or losses, and, for purposes
of qualifying as a regulated investment company, may limit the extent to which a
Fund may be able to engage in such transactions.
A Fund's distributions with respect to a given taxable year may exceed the
current and accumulated earnings and profits of that Fund available for
distribution. In that event, distributions in excess of such earnings and
profits would be characterized as a return of capital to shareholders for
Federal income tax purposes, thus reducing each shareholder's cost basis in his
Fund shares. Distributions in excess of a shareholder's cost basis in his shares
would be treated as a gain realized from a sale of such shares.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of a Fund, or upon receipt of a distribution in complete
liquidation of a Fund, generally will be a capital gain or loss which will be
27
<PAGE> 99
long-term or short-term, generally depending upon the shareholder's holding
period for the shares. A loss realized by a shareholder on a redemption, sale,
or exchange of shares of a Fund that were not held for more than six months with
respect to which capital gain dividends have been paid will be characterized as
a long-term capital loss to the extent of such capital gain dividends.
Before purchasing shares in the Funds, the impact of dividends or
distributions which are expected to be declared or have been declared, but not
paid, should be carefully considered. Any dividend or distribution declared
shortly after a purchase of such shares prior to the record date will have the
effect of reducing the per share net asset value by the per share amount of the
dividend or distribution. All or a portion of such dividend or distribution,
although in effect a return of capital, may be subject to tax.
It is anticipated that a portion of the dividends paid by the Funds will
qualify for the dividends-received deduction available to corporations.
The Funds may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where a Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Most corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Income or gain from investments in foreign securities may be subject to
foreign withholding or other taxes. It is expected that the Funds may be subject
to foreign withholding taxes with respect to income received from sources within
foreign countries.
If a Fund invests in certain "passive foreign investment companies"
("PFICs"), it would be subject to Federal income tax (and possibly additional
interest charges) on a portion of any excess distribution or gain from the
disposition of such shares even if it distributes such income to its
shareholders. If a Fund elects to treat the PFIC as a qualified electing fund
("QEF") and the PFIC furnishes certain financial information in the required
form to such Fund, the Fund would instead be required to include in income each
year its allocable share of the ordinary earnings and net capital gains on the
QEF, regardless of whether received, and such amounts would be subject to the
various distribution requirements described above.
28
<PAGE> 100
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund(s) in which they invest. Depending on
the residence of the shareholder for tax purposes, distributions also may be
subject to state and local taxes, including withholding taxes. Foreign
shareholders may, for example, be subject to special withholding requirements.
Special tax treatment, including a penalty on certain preretirement
distributions, is accorded to accounts maintained as IRAs. Shareholders should
consult their own tax advisors as to the Federal, state and local tax
consequences of ownership of shares of the Funds in their particular
circumstances.
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
FIXED INCOME SECURITIES
The Balanced Fund and, to a lesser extent, the Equity Value Fund and Growth
Fund, may invest in the types of fixed income securities described below.
U.S. Government Obligations. U.S. Government securities are obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
U.S. Treasury obligations are direct obligations of the United States and are
the most frequently issued marketable U.S. Government security. U.S. Government
agency and instrumentality obligations are debt securities issued by U.S.
Government-sponsored enterprises and Federal agencies. Some obligations of
agencies are supported by the full faith and credit of the United States or by
U.S. Treasury guarantees, such as mortgage-backed certificates, which may be
guaranteed by the Government National Mortgage Association; others, such as
obligations of the Federal Home Loan Banks, Federal Farm Credit Bank, Bank for
Cooperatives, Federal Intermediate Credit Banks and the Federal Land Bank, are
guaranteed by the right of the issuer to borrow from the U.S. Treasury; others,
such as obligations of the Federal National Mortgage Association, are supported
by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, such as obligations of
the Student Loan Marketing Association and the Tennessee Valley Authority, are
backed only by the credit of the agency or instrumentality issuing the
obligation. In the case of obligations not backed by the full faith and credit
of the United States, the investor must look principally to the agency issuing
or guaranteeing the obligation for ultimate repayment.
29
<PAGE> 101
Repurchase Agreements. The Funds may agree to purchase securities subject
to the seller's agreement to repurchase them at a mutually agreed upon date and
price. The Funds will enter into such repurchase agreements only with financial
institutions that are deemed to be creditworthy by the Advisor, pursuant to
guidelines established by the Trust's Board of Trustees. During the term of any
repurchase agreement, the Advisor will continue to monitor the creditworthiness
of the seller. The Funds will not enter into repurchase agreements with the
Advisor or its affiliates. Although the securities subject to repurchase
agreements may bear maturities exceeding 13 months, the Funds do not presently
intend to enter into repurchase agreements with deemed maturities in excess of
seven days. If in the future a Fund was to enter into repurchase agreements with
deemed maturities in excess of seven days, such Fund would do so only if such
investment, together with other illiquid securities, did not exceed 10% (15% in
the case of the Growth Fund) of the value of that Fund's net assets.
The seller under a repurchase agreement will be required to maintain the
value of the securities that are subject to the agreement and held by a Fund at
not less than the repurchase price. Default or bankruptcy of the seller would,
however, expose a Fund to possible delay in connection with the disposition of
the underlying securities or loss to the extent that proceeds from a sale of the
underlying securities were less than the repurchase price under the agreement.
Bank Obligations. Bank obligations include bankers' acceptances,
negotiable certificates of deposit and non-negotiable time deposits issued by a
U.S. bank, savings bank or savings association that is a member of the Federal
Reserve System or insured by the Federal Deposit Insurance Corporation. The
Funds may also invest in U.S. dollar-denominated obligations of foreign banks.
Obligations of foreign banks or foreign branches of U.S. banks entail risks that
are different from those of investments in domestic obligations of U.S. banks.
These additional risks include future political and economic developments, the
possible imposition of withholding taxes on interest income, possible seizure or
nationalization of foreign deposits, the possible establishment of exchange
controls, or the adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on such obligations. In
addition, foreign branches of U.S. banks and U.S. branches of foreign banks may
be subject to less stringent reserve requirements and to different accounting,
auditing, reporting, and recordkeeping standards than those applicable to
domestic branches of U.S. banks. Investments in domestic
30
<PAGE> 102
and foreign bank obligations are limited to the obligations of financial
institutions having $1 billion or more in total assets at the time of purchase.
Commercial Paper. Commercial paper includes short-term unsecured
promissory notes, variable rate demand notes and variable rate master demand
notes issued by domestic and foreign bank holding companies, corporations and
financial institutions, as well as similar instruments issued by government
agencies and instrumentalities. Investments by the Funds in commercial paper
will consist of issues that are rated in one of the two highest rating
categories by a NRSRO. In addition, the Funds may acquire unrated commercial
paper and corporate bonds that are determined by the Advisor at the time of
purchase to be of comparable quality to rated instruments that may be acquired
by the Funds. Commercial paper may include variable and floating rate
instruments.
Variable and Floating Rate Instruments. Instruments purchased by a Fund
may include variable and floating rate demand instruments issued by
corporations, industrial development authorities and governmental entities.
These instruments may include variable amount master demand notes that permit
the indebtedness to vary in addition to providing for periodic adjustments in
the interest rate. Although variable and floating rate demand instruments are
frequently not rated by credit rating agencies, unrated instruments purchased by
a Fund will be determined to be of comparable quality to rated instruments that
may be purchased by the Fund. While there may be no active secondary market with
respect to a particular variable or floating rate instrument purchased by a
Fund, the Funds may, from time to time as specified in the instrument, demand
payment in full of the principal of the instrument or may resell the instrument
to a third party. The absence of such an active secondary market, however, could
make it difficult for a Fund to dispose of a variable or floating rate demand
instrument if the issuer defaulted on its payment obligations or during periods
that the Fund is not entitled to exercise its demand rights, and the Fund could,
for these or other reasons, suffer a loss. Variable and floating rate
instruments with no active secondary market will be included in the calculation
of a Fund's illiquid assets.
Mortgage-Related Securities. Mortgage pass-through securities are
securities representing interests in "pools" of mortgages in which payments of
both interest and principal on the securities are made monthly, in effect
"passing through" monthly payments made by the individual borrowers on the
residential mortgage loans which underlie the securities (net of fees paid to
the issuer or guarantor of the securities). Early repayment of principal on
mortgage pass-through securities (arising from prepayments of principal due to
sale of the underlying property, refinancing, or foreclosure,
31
<PAGE> 103
net of fees and costs which may be incurred) may expose a Fund to a lower rate
of return upon reinvestment of principal. Also, if a security subject to
prepayment has been purchased at a premium, in the event of prepayment the value
of the premium would be lost. Like other fixed-income securities, when interest
rates rise, the value of a mortgage-related security generally will decline;
however, when interest rates decline, the value of mortgage-related securities
with prepayment features may not increase as much as other fixed-income
securities. Payment of principal and interest on some mortgage pass-through
securities (but not the market value of the securities themselves) may be
guaranteed by the full faith and credit of the U.S. Government or its Mortgage
pass-through securities created by non-governmental issuers (such as commercial
banks, savings and loan institutions, private mortgage insurance companies,
mortgage bankers and other secondary market issuers) may be supported by various
forms of insurance or guarantees, including individual loan, title, pool and
hazard insurance, and letters of credit, which may be issued by governmental
entities, private insurers or the mortgage poolers. The Balanced Fund may also
invest in investment grade Collateralized Mortgage Obligations ("CMOs"). CMOs
may be collateralized by whole mortgage loans but are more typically
collateralized by portfolios of mortgage pass-through securities guaranteed by
GNMA, FHLMC or FNMA. CMOs are structured into multiple classes, with each class
bearing a different stated maturity. Payments of principal, including
prepayments, are first returned to investors holding the shortest maturity
class; investors holding the longer maturity classes receive principal only
after the first class has been retired. As new types of mortgage-related
securities are developed and offered to investors, the Advisor will, consistent
with a Fund's investment objective, policies and quality standards, consider
making investments in such new types of mortgage-related securities.
Other Asset-Backed Securities. Other asset-backed securities (unrelated to
mortgage loans) have been offered to investors. These asset-backed securities
may consist of undivided fractional interests in pools of consumer loans or
receivables held in a trust. Examples include certificates for automobile
receivables (CARS) and credit card receivables (CARDS). Payments of principal
and interest on these asset-backed securities are "passed through" on a monthly
or other periodic basis to certificate holders and are typically supported by
some form of credit enhancement, such as a letter of credit, surety bond,
limited guaranty, or subordination. The extent of credit enhancement varies, but
usually amounts to only a fraction of the asset-backed security's par value
until exhausted. Ultimately, asset-backed securities are dependent upon payment
of the consumer loans or receivables by individuals, and the certificate holder
frequently has no recourse to
32
<PAGE> 104
the entity that originated the loans or receivables. The actual maturity and
realized yield will vary based upon the prepayment experience of the underlying
asset pool and prevailing interest rates at the time of prepayment. Asset-backed
securities are relatively new instruments and may be subject to greater risk of
default during periods of economic downturn than other instruments. Also, the
secondary market for certain asset-backed securities may not be as liquid as the
market for other types of securities, which could result in a Fund experiencing
difficulty in valuing or liquidating such securities.
Derivative Securities. The Funds may invest in structured notes, bonds or
other instruments with interest rates that are determined by reference to
changes in the value of other interest rates, indices or financial indicators
("References") or the relative change in two or more References. The Funds may
also hold derivative instruments that have interest rates that re-set inversely
to changing current market rates and/or have embedded interest rate floors and
caps that require the issuer to pay an adjusted interest rate if market rates
fall below or rise above a specified rate. These instruments represent
relatively recent innovations in the bond markets, and the trading market for
these instruments is less developed than the markets for traditional types of
debt instruments. It is uncertain how these instruments will perform under
different economic and interest-rate scenarios. Because certain of these
instruments are leveraged, their market values may be more volatile than other
types of bonds and may present greater potential for capital gain or loss. On
the other hand, the imbedded option features of other derivative instruments
could limit the amount of appreciation a Fund can realize on its investment,
could cause a Fund to hold a security it might otherwise sell or could force the
sale of a security at inopportune times or for prices that do not reflect
current market value. The possibility of default by the issuer or the issuer's
credit provider may be greater for these structured and derivative instruments
than for other types of instruments. In some cases it may be difficult to
determine the fair value of a structured or derivative instrument because of a
lack of reliable objective information and an established secondary market for
some instruments may not exist. As new types of derivative securities are
developed and offered to investors, the Advisor will, consistent with each
Fund's investment objective, policies and quality standards, consider making
investments in such new types of derivative securities.
Stripped Obligations. To the extent consistent with their respective
investment objectives, the Funds may purchase Treasury receipts and other
"stripped" securities that evidence ownership in either the future interest
payments or the future principal payments on U.S. Government and other
33
<PAGE> 105
obligations. These participations, which may be issued by the U.S. Government
(or a U.S. Government agency or instrumentality) or by private issuers such as
banks and other institutions, are issued at a discount to their "face value,"
and, with respect to the Balanced Fund, may include stripped mortgage-backed
securities ("SMBS"). Stripped securities, particularly, SMBS, may exhibit
greater price volatility than ordinary debt securities because of the manner in
which their principal and interest are returned to investors.
Custodial Receipts for Treasury Securities. To the extent consistent with
their respective investment objectives, the Funds may purchase participations in
trusts that hold U.S. Treasury securities (such as TIGRs and CATS) or other
obligations where the trust participations evidence ownership in either the
future interest payments or the future principal payments on the obligations.
These participations are normally issued at a discount to their "face value,"
and can exhibit greater price volatility than ordinary debt securities because
of the way in which their principal and interest are returned to investors.
Investments by a Fund in such participations will not exceed 5% of the value of
that Fund's total assets.
FOREIGN SECURITIES
The Growth Fund may invest up to 25% of the value of its total assets in
securities issued by foreign issuers either directly or through investments in
American Depository Receipts ("ADRs") and European Depository Receipts ("EDRs").
The Equity Value and Balanced Fund may also invest directly in foreign equity
securities and in securities represented by ADRs or EDRs. ADRs are
dollar-denominated receipts generally issued by domestic banks, which represent
the deposit with the bank of a security of a foreign issuer, and which are
publicly traded on exchanges or over-the-counter in the United States. EDRs are
receipts similar to ADRs and are issued and traded in Europe.
There are certain risks associated with investments in unsponsored ADR
programs. Because the non-U.S. company does not actively participate in the
creation of the ADR program, the underlying agreement for service and payment
will be between the depositary and the shareholder. The company issuing the
stock underlying the ADRs pays nothing to establish the unsponsored facility, as
fees for ADR issuance and cancellation are paid by brokers. Investors directly
bear the expenses associated with certificate transfer, custody and dividend
payment.
In addition, in an unsponsored ADR program, there may be several
depositaries with no defined legal obligations to the non-U.S. company.
34
<PAGE> 106
The duplicate depositaries may lead to marketplace confusion because there would
be no central source of information to buyers, sellers and intermediaries. The
efficiency of centralization gained in a sponsored program can greatly reduce
the delays in delivery of dividends and annual reports.
Investments in foreign securities involve certain inherent risks, such as
political or economic instability of the issuer or the country of the issue, the
difficulty of predicting international trade patterns, changes in exchange rates
of foreign currencies and the possibility of adverse changes in investment or
exchange control regulations. There may be less publicly available information
about a foreign company than about a domestic company. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic companies.
Further, foreign stock markets are generally not as developed or efficient as
those in the United States, and in most foreign markets volume and liquidity are
less than in the United States. Fixed commissions on foreign stock exchanges are
generally higher than the negotiated commissions on U.S. exchanges, and there is
generally less government supervision and regulation of foreign stock exchanges,
brokers and companies than in the United States. With respect to certain foreign
countries, there is a possibility of expropriation or confiscatory taxation,
limitations on the removal of funds or other assets, or diplomatic developments
that could affect investment within those countries. Because of these and other
factors, securities of foreign companies acquired by a Fund may be subject to
greater fluctuation in price than securities of domestic companies.
FORWARD CURRENCY TRANSACTIONS
The Equity Value Fund and Balanced Fund may enter into forward foreign
currency exchange contracts in order to protect against uncertainty in the level
of future foreign exchange rates. See the SAI for further information concerning
foreign currency transactions.
SECURITIES ISSUED BY OTHER INVESTMENT COMPANIES
Each Fund may invest in securities issued by other investment companies
within the limits prescribed by the 1940 Act. Each Fund currently intends to
limit its investments so that, as determined immediately after a securities
purchase is made: (a) not more than 5% of the value of its total assets will be
invested in the securities of any one investment company; (b) not more than 10%
of the value of its total assets will be invested in the aggregate in securities
of investment companies as a group;
35
<PAGE> 107
(c) not more than 3% of the outstanding voting stock of any one investment
company will be owned by the Fund; and (d) not more than 10% of the outstanding
voting stock of any one investment company will be owned in the aggregate by a
Fund and other investment companies advised by the Advisor or any other
affiliate of First Interstate Bancorp. The Funds may invest in Standard & Poor's
Depository Receipts ("SPDRs") and shares of other investment companies that are
structured to seek a similar correlation to the performance of the S&P 500 and
other similar equity indices. SPDRs are securities traded on the American Stock
Exchange that represent ownership in the SPDR Trust, a long-term unit investment
trust which is intended to provide investment results that generally correspond
to the performance of the S&P 500. As a shareholder of another investment
company, a Fund would bear, along with other shareholders, its pro rata portion
of the expenses of such other investment company, including advisory fees. These
expenses would be in addition to the advisory and other expenses that each Fund
bears directly in connection with its own operations, and may represent a
duplication of fees to shareholders of that Fund.
LOANS OF PORTFOLIO SECURITIES
To increase return, a Fund may lend its portfolio securities to
broker/dealers and other institutional investors pursuant to agreements
requiring that the loans be continuously secured by collateral equal at all
times in value to at least the market value of the securities loaned. The
collateral for such loans may include cash, securities of the U.S. Government,
its agencies or instrumentalities, or irrevocable letters of credit issued by a
bank, or any combination thereof. For each Fund, such loans will not be made if,
as a result, the aggregate of all outstanding loans exceeds 30% of the value of
its total assets. There may be risks of delay in receiving additional collateral
or in recovering the securities loaned or even a loss of rights in the
collateral should the borrower of the securities fail financially. However,
loans are made only to borrowers deemed by the Advisor to be of good standing
and when, in their judgment, the income to be earned from the loan justifies the
attendant risks.
FORWARD COMMITMENTS, WHEN-ISSUED PURCHASES AND DELAYED-DELIVERY TRANSACTIONS
The Funds may purchase or sell securities on a when-issued or
delayed-delivery basis and make contracts to purchase or sell securities for a
fixed price at a future date beyond customary settlement time. Securities
purchased or sold on a when-issued, delayed-delivery or forward commit-
36
<PAGE> 108
ment basis involve a risk of loss if the value of the security to be purchased
declines, or the value of the security to be sold increases, before the
settlement date. Although a Fund will generally purchase securities with the
intention of acquiring them, a Fund may dispose of securities purchased on a
when-issued, delayed-delivery or a forward commitment basis before settlement
when deemed appropriate by the Advisor.
OPTIONS
Each Fund may purchase put and call options listed on a national securities
exchange and issued by the Options Clearing Corporation in an amount not
exceeding 5% of its net assets. Purchasing options is a specialized investment
technique that entails a substantial risk of a complete loss of the amounts paid
as premiums to the writer of the option.
The Funds may also write covered call and secured put options from time to
time as the Advisor deems appropriate. By writing a covered call option, a Fund
forgoes the opportunity to profit from an increase in the market price of the
underlying security above the exercise price except insofar as the premium
represents such a profit, and it is not able to sell the underlying security
until the option expires or is exercised or the Fund effects a closing purchase
transaction by purchasing an option of the same series. If a Fund writes a
secured put option, it assumes the risk of loss should the market value of the
underlying security decline below the exercise price of the option. The
aggregate value of the securities subject to options written by a Fund will not
exceed 25% of the value of its net assets. The use of covered call options and
secured put options will not be a primary investment technique of the Funds, and
they are expected to be used infrequently. If the Advisor is incorrect in its
forecast of market value or other factors when writing the foregoing options, a
Fund would be in a worse position than it would have been had the foregoing
investment techniques not been used.
Each Fund may engage in unlisted over-the-counter options with
broker/dealers deemed creditworthy by the Advisor. Closing transactions for such
options are usually effected directly with the same broker/dealer that effected
the original option transaction. A Fund bears the risk that the broker/dealer
will fail to meet its obligations. There is no assurance that a liquid secondary
trading market exists for closing out an unlisted option position. Furthermore,
unlisted options are not subject to the protections, afforded purchasers of
listed options by the Options Clearing Corporation, which performs the
obligations of its members who fail to perform in connection with the purchase
or sale of options.
37
<PAGE> 109
For additional information relating to option trading practices, including
the particular risks thereof, see the SAI.
STOCK INDEX FUTURES CONTRACTS
Each Fund may enter into stock index futures contracts in order to protect
the value of common stock investments or to maintain liquidity, provided that
not more than 5% of a Fund's net assets are committed to such transactions. See
the SAI for further information about stock index futures contracts.
The Funds may also purchase put options on stock index futures as another
method of protecting their assets against market declines. See the SAI for
further information about these options contracts.
There can be no assurance that a liquid market will exist at a time when a
Fund seeks to close out a futures contract or a futures option position. Most
futures exchanges and boards of trade limit the amount of fluctuation permitted
in futures contract prices during a single day; once the daily limit has been
reached on a particular contract, no trades may be made that day at a price
beyond that limit. In addition, certain of these instruments are relatively new
and without a significant trading history. As a result, there is no assurance
that an active secondary market will develop or continue to exist. Lack of a
liquid market for any reason may prevent a Fund from liquidating an unfavorable
position and that Fund would remain obligated to meet margin requirements until
the position is closed.
The use of the techniques listed above which involve the segregation of
assets to cover future obligations may impair the liquidity of a Fund's assets
and its ability to operate as an open-end investment company. Furman Selz and
the Advisor will monitor each Fund's use of such techniques and report to the
Trustees concerning their impact, if any, on liquidity and a Fund's ability to
meet redemptions.
ILLIQUID SECURITIES
Each Fund will not knowingly invest more than 10% (15% in the case of the
Growth Fund) of the value of its net assets in securities that are illiquid
because of restrictions on transferability or other reasons. Repurchase
agreements with deemed maturities in excess of seven days, time deposits
maturing in more than seven days and securities that are not registered under
the Securities Act of 1933 but may be purchased by institutional buyers under
Rule 144A are subject to this limit (unless such securities are variable amount
master demand notes with maturities of nine
38
<PAGE> 110
months or less or unless the Advisor determines under the supervision of the
Board that a liquid trading market exists).
Rule 144A allows for a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the Securities
Act of 1933 for resales of certain securities to qualified institutional buyers.
The Advisor believes that the market for certain restricted securities may
expand further as a result of this regulation and the development of automated
systems for the trading, clearance and settlement of unregistered securities of
domestic and foreign issuers, such as the PORTAL System sponsored by the NASD.
The Advisor monitors the liquidity of restricted securities in each of the
Funds under the supervision of the Board of Trustees. In reaching liquidity
decisions, the Advisor will consider such factors as: (a) the frequency of
trades and quotes for the security; (b) the number of dealers wishing to
purchase or sell the security and number of other potential purchasers; (c)
dealer undertakings to make a market in the security; and (d) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer). The use of Rule 144A transactions could have the effect of
increasing the level of illiquidity of the Funds during periods that qualified
institutional buyers become uninterested in purchasing restricted securities.
INVESTMENT RESTRICTIONS
Each Fund has adopted certain fundamental investment restrictions that may
be changed only with the approval of a majority of a Fund's outstanding shares.
The following description summarizes several of the Funds' fundamental
restrictions, which are set forth in full in the SAI.
No Fund may:
1. Purchase securities (except U.S. Government securities and repurchase
agreements collateralized by such securities) if more than 5% of its
total assets at the time of purchase will be invested in securities of
any one issuer, except that up to 25% of a Fund's total assets may be
invested without regard to this 5% limitation.
2. Subject to the foregoing 25% exception, purchase more than 10% of the
outstanding voting securities of any issuer.
39
<PAGE> 111
3. Invest 25% or more of its total assets at the time of purchase in
securities of issuers whose principal business activities are in the
same industry.
4. Borrow money except in amounts up to 10% of the value of its total
assets at the time of borrowing.
If a percentage restriction on the investment or use of assets set forth in
this Prospectus is adhered to at the time a transaction is effected, later
changes in percentage resulting from changing values will not be considered a
violation, however, the Funds will not at any time have more than 10% (15% in
the case of the Growth Fund) of their respective net assets invested in illiquid
securities.
OTHER INFORMATION
CAPITALIZATION
Pacifica Funds Trust (formerly Fund Source) was organized as a
Massachusetts business trust on July 17, 1984. The capitalization of the Trust
consists solely of an unlimited number of shares of beneficial interest with a
par value of $0.001 each. When issued, shares of the Funds are fully paid,
non-assessable and freely transferable.
The Board of Trustees has authorized the issuance of two classes of shares
in each of the Funds described in this Prospectus -- Institutional Shares and
Investor Shares. Each share of a Fund represents an equal proportionate interest
in a particular Fund with other shares of the same class and is entitled to such
dividends and distributions earned on such shares as are declared in the
discretion of the Board of Trustees.
Each Fund's Institutional Shares and Investor Shares bear their pro rata
portion of all operating expenses paid by the Fund except for the distribution
payments, Service Organization fees and other "class" expenses that are
allocated to a particular share class. The Board of Trustees has approved a
Distribution Plan with respect to Investor Shares of each Fund under which the
Trust may pay the Distributor in connection with the distribution of Investor
Shares at a rate or rates set from time to time by the Board of Trustees,
provided that no rate may exceed the annual rate of 0.50% of the average daily
net asset value of Investor Shares of a Fund. In addition, each Fund may pay
fees to Service Organizations in amounts up to an annual rate of 0.25% of the
daily net asset value of the Funds' outstanding Investor Shares owned by
shareholders with whom a Service Organization has a servicing relationship.
Investor Shares of the Funds are
40
<PAGE> 112
purchased at net asset value per share plus a maximum 4.50% sales charge
(subject to certain exceptions). Because of the "class expenses" and sales
charges, the performance of a Fund's Investor Shares is expected to be lower
than the performance of its Institutional Shares. The Trust offers various
services and privileges in connection with its Investor Shares that are not
offered in connection with its Institutional Shares, including an automatic
investment plan, automatic withdrawal plan and, with respect to certain
portfolios, checkwriting. For information regarding the Funds' Investor Shares,
contact Furman Selz at 1-800-662-8417 or your Service Organization.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust. The Declaration of Trust also
provides for indemnification out of the property of a Fund of any shareholder
held personally liable solely by reason of being or having been a shareholder of
the Fund. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a Fund itself would
be unable to meet its obligations and should be considered remote.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Trust is not required to hold regular
annual meetings of the Funds' shareholders, but in the event that a special
meeting is held, shareholders of each portfolio offered by the Trust will be
entitled to one vote for each full share held and fractional votes for
fractional shares held, and will vote in the aggregate and not on a
portfolio-by-portfolio basis, except as required by the 1940 Act or other
applicable law. It is contemplated that, as required by the 1940 Act, the
shareholders of a portfolio will vote separately on a portfolio-by-portfolio
basis on matters relating to a particular portfolio's investment advisory
agreement or changes in a portfolio's fundamental investment limitations, and on
other matters where the interests of the respective portfolios are not
substantially identical. Similarly, shareholders of each portfolio will vote in
the aggregate and not by class unless the Trustees determine that the matter to
be voted on affects only the interests of the holders of a particular class of a
Fund's shares. Voting rights are not cumulative.
41
<PAGE> 113
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust and in connection with such meeting to comply with the shareholders'
communications provisions of Section 16(c) of the 1940 Act.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of a Fund means, with respect to the
approval of an investment advisory agreement or a change in a fundamental
investment policy, the vote of the lesser of: (1) 67% of the shares of a Fund
present at a meeting if the holders of more than 50% of the outstanding shares
are present in person or by proxy; or (2) more than 50% of the outstanding
shares of a Fund. For purposes of the 1940 Act, any person who owns either
directly or through one or more controlled companies more than 25 percent of the
voting securities of a company is presumed to "control" such company. Under this
definition, First Interstate Bancorp and its affiliates may be deemed to be
controlling persons of the Trust.
PERFORMANCE INFORMATION
A Fund may, from time to time, include yield and total return data for its
Institutional Shares and Investor Shares in advertisements or reports to
shareholders or prospective investors. The methods used to calculate the yields
and total returns of the Funds are mandated by the SEC.
Quotations of "yield" for a class of shares of a Fund will be based on the
investment income per share during a particular 30-day (or one month) period
(including dividends and interest), less expenses accrued during the period
("net investment income"), and will be computed by dividing net investment
income by the maximum public offering price per share on the last day of the
period.
Quotations of yield reflect only the performance of a class of shares
during the particular period on which the calculations are based. Yield will
vary based on changes in market conditions, the level of interest rates and the
level of the expenses of a particular class of shares, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
Quotations of average annual total return for a class of shares of a Fund
will be expressed in terms of the average annual compounded rate of
42
<PAGE> 114
return of a hypothetical investment in that class over periods of 1, 5 and 10
years (up to the life of that class), reflect the deduction of a proportional
share of expenses allocated to that class (on an annual basis), and assume that
all dividends and distributions are reinvested when paid.
Performance information for a Fund may be compared to various unmanaged
indices, such as the Standard & Poor's 500 Stock Index, the Dow Jones Industrial
Average, indices prepared by Lipper Analytical Services, and other entities or
organizations which track the performance of investment companies. Any
performance information should be considered in light of a Fund's investment
objective and policies, characteristics and quality of the Fund and the market
conditions during the time period indicated, and should not be considered to be
representative of what may be achieved in the future. For a description of the
methods used to determine yield and total return for the Funds, see "Other
Information -- Performance Information" in the SAI.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Funds at 237 Park
Avenue, Suite 910, New York, New York 10017.
General and Account Information: (800) 662-8417
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
FUNDS OR BY THEIR DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY FIRST INTERSTATE BANCORP OR ITS AFFILIATES,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
43
<PAGE> 115
APPENDIX
DESCRIPTION OF MOODY'S BOND RATINGS:
Excerpts from Moody's description of its four highest bond ratings are
listed as follows: Aaa -- judged to be the best quality and they carry the
smallest degree of investment risk; Aa -- judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds; A -- possess many favorable investment attributes and are
to be considered as "upper medium grade obligations"; Baa -- considered to be
medium grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Other Moody's bond
descriptions include: Ba -- judged to have speculative elements, their future
cannot be considered as well assured; B -- generally lack characteristics of the
desirable investment; Caa -- are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; Ca -- speculative in a high degree, often in default; C -- lowest
rated class of bonds, regarded as having extremely poor prospects.
Moody's also supplies numerical indicators 1, 2 and 3 to rating categories.
The modifier 1 indicates that the security is in the higher end of its rating
category; the modifier 2 indicates a mid-range ranking; and modifier 3 indicates
a ranking toward the lower end of the category.
DESCRIPTION OF S&P'S BOND RATINGS:
Excerpts from S&P's description of its four highest bond ratings are listed
as follows: AAA -- highest grade obligations, in which capacity to pay interest
and repay principal is extremely strong; AA -- also qualify as high grade
obligations, having a very strong capacity to pay interest and repay principal,
and differs from AAA issues only in a small degree; A -- regarded as upper
medium grade, having a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories;
BBB -- regarded as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories. This group is the lowest which qualifies for
commercial bank investment. BB, B, CCC, CC -- predominantly speculative with
respect to
A-1
<PAGE> 116
capacity to pay interest and repay principal in accordance with terms of the
obligations; BB indicates the highest grade and CC the lowest within the
speculative rating categories.
S&P applies indicators "+," no character, and "-" to its rating categories.
The indicators show relative standing within the major rating categories.
DESCRIPTION OF MOODY'S RATINGS OF NOTES AND VARIABLE RATE
DEMAND INSTRUMENTS:
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or MIG. Such ratings recognize the
differences between short-term credit and long-term risk. Short-term ratings on
issues with demand features (variable rate demand obligations) are
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payments
relying on external liquidity.
MIG 1/VMIG 1: This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This denotes high quality. Margins of protection are ample
although not as large as in the preceding group.
DESCRIPTION OF MOODY'S TAX-EXEMPT COMMERCIAL PAPER RATINGS:
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations which have an original maturity not
exceeding nine months. Moody's makes no representation that such obligations are
exempt from registration under the Securities Act of 1933, nor does it represent
that any specific note is a valid obligation of a rated issuer or issued in
conformity with any applicable law. The following designations, all judged to be
investment grade, indicate the relative repayment ability of rated issuers of
securities in which the Trust may invest.
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term promissory obligations.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term promissory obligations.
A-2
<PAGE> 117
DESCRIPTION OF S&P'S RATINGS FOR MUNICIPAL BONDS:
INVESTMENT GRADE
AAA: Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA: Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A: Debt rated "A" has strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
SPECULATIVE GRADE
BB, B, CCC, CC: Debt rated in these categories is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
CI: The "CI" rating is reserved for income bonds on which no interest is
being paid.
D: Debt rated "D" is in default, and payment of interest and/or repayment
of principal is in arrears.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
DESCRIPTION OF S&P'S RATINGS FOR INVESTMENT GRADE MUNICIPAL NOTES AND SHORT-TERM
DEMAND OBLIGATIONS:
SP-1: Issues carrying this designation have a very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus (+) designation.
A-3
<PAGE> 118
SP-2: Issues carrying this designation have a satisfactory capacity to pay
principal and interest.
DESCRIPTION OF S&P'S RATINGS FOR DEMAND OBLIGATIONS AND TAX-EXEMPT COMMERCIAL
PAPER:
An S&P commercial paper rating is a current assessment of the likelihood of
timely repayment of debt having an original maturity of no more than 365 days.
The two rating categories for securities in which the Trust may invest are as
follows:
A-1: This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics will be denoted with a plus (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-4
<PAGE> 119
INVESTMENT ADVISOR
First Interstate Capital Management, Inc.
7501 East McCormick Parkway
Scottsdale, Arizona 85258
ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Pacifica Funds Distributor Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
First Interstate Bank of California
707 Wilshire Boulevard
Los Angeles, California 90017
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
[PACIFICA LOGO] PACEBIS-2/96
<PAGE> 120
[PACIFICA LOGO]
(INVESTOR SHARES)
PACIFICA SHORT-TERM GOVERNMENT
BOND FUND
PACIFICA INTERMEDIATE GOVERNMENT
BOND FUND
PACIFICA INTERMEDIATE BOND FUND
PACIFICA ASSET PRESERVATION FUND
PACIFICA GOVERNMENT INCOME FUND
PROSPECTUS
FEBRUARY 1, 1996
[FIRST INTERSTATE BANK LOGO]
Investment Advisor to The Pacifica Funds
<PAGE> 121
PACIFICA FUNDS TRUST
(INVESTOR SHARES)
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) 662-8417
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. --
INVESTMENT ADVISOR
("FICM" OR THE "ADVISOR")
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
("FURMAN SELZ" OR THE "SPONSOR")
PACIFICA FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
("PFD INC." OR THE "DISTRIBUTOR")
Pacifica Funds Trust (the "Trust") is an open-end investment company (a
mutual fund) that offers a selection of separate investment portfolios. This
Prospectus describes the Investor Shares of the following five portfolios (the
"Funds"):
- Pacifica Short-Term Government Bond Fund
- Pacifica Intermediate Government Bond Fund
- Pacifica Intermediate Bond Fund
- Pacifica Asset Preservation Fund
- Pacifica Government Income Fund
This Prospectus sets forth concisely the information a prospective investor
should know before investing in any of the Funds and should be read and retained
for information about each Fund. A Statement of Additional Information (the
"SAI"), dated February 1, 1995 (which may be revised from time to time),
containing additional and more detailed information about the Funds, has been
filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Funds at the address or
information number printed above.
----------------------------
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FIRST INTERSTATE OR OTHER BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN 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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1996.
<PAGE> 122
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS.............................................. 3
FUND EXPENSES........................................... 7
FEE TABLE -- INVESTOR SHARES............................ 7
FINANCIAL HIGHLIGHTS.................................... 11
THE FUNDS............................................... 17
INVESTMENT POLICIES AND PRACTICES OF THE FUNDS.......... 17
RISKS OF INVESTING IN THE FUNDS......................... 21
MANAGEMENT OF THE FUNDS................................. 23
FUND SHARE VALUATION.................................... 29
PRICING OF INVESTOR SHARES.............................. 30
MINIMUM PURCHASE REQUIREMENTS........................... 33
PURCHASE OF INVESTOR SHARES............................. 34
INDIVIDUAL RETIREMENT ACCOUNTS.......................... 35
EXCHANGE OF INVESTOR SHARES............................. 36
REDEMPTION OF INVESTOR SHARES........................... 37
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX......... 40
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES...... 44
INVESTMENT RESTRICTIONS................................. 54
OTHER INFORMATION....................................... 55
APPENDIX................................................ A-1
</TABLE>
2
<PAGE> 123
HIGHLIGHTS
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
This Prospectus describes five diversified investment portfolios managed by
First Interstate Capital Management, Inc. Each Fund has a distinct investment
objective and policies.
The Short-Term Government Bond Fund. The investment objective of the
Short-Term Government Bond Fund is to seek current income with relative
stability of principal. In seeking to attain its objective, the Fund will invest
primarily in U.S. Treasury bills, notes and other obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities with
remaining maturities less than three and one half years, and repurchase
agreements with respect to such obligations.
The Intermediate Government Bond Fund. The investment objective of the
Intermediate Government Bond Fund is to seek a high level of current income,
consistent with prudent investment risk. In seeking to attain its objective, the
Fund will invest primarily in U.S. Treasury bills, notes and other obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
and repurchase agreements with respect to such obligations. The Fund will
maintain a dollar-weighted average portfolio maturity between three and ten
years.
The Intermediate Bond Fund. The investment objective of the Intermediate
Bond Fund is to seek a high level of current income consistent with the
preservation of capital and maintenance of liquidity. In pursuing its investment
objective, the Fund may invest in a broad range of corporate debt obligations,
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, dollar-denominated debt obligations of foreign issuers, and
money market instruments. The Fund will maintain a dollar-weighted average
portfolio maturity between three and ten years.
The Asset Preservation Fund. The investment objective of the Asset
Preservation Fund is to provide investors with as high a level of current income
as is consistent with limiting the risk of potential loss. The Fund pursues this
objective by investing primarily in short-term debt instruments which results in
a dollar-weighted average portfolio maturity of one year or less. The maximum
maturity for any individual security held by the Fund is 39 months.
The Government Income Fund. The investment objective of the Government
Income Fund is to provide investors with as high a level of current income as is
consistent with prudent risk of capital. Total return,
3
<PAGE> 124
within given quality parameters, is a secondary consideration of the Fund. The
Fund pursues its objective by investing primarily in securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
For additional information concerning the investment policies, practices
and risk considerations of the Funds, see "The Funds," "Investment Policies and
Practices of the Funds" and "Risks of Investing in the Funds" in this
Prospectus.
RISKS OF INVESTING IN THE FUNDS
The price per share of the Funds will fluctuate with changes in value of
the investments held by each Fund. A Fund's performance will change daily based
on many factors, including the quality of the instruments in each Fund's
investment portfolio, national and international economic conditions, interest
rate levels, general market conditions and international exchange rates.
Depending on these factors, the net asset value of a Fund may decrease instead
of increase. Certain Funds may seek to achieve their investment objectives
through investments in securities of foreign issuers (which involve risks not
typically associated with U.S. issuers), instruments with the lowest investment
grade rating which have speculative characteristics, and by the use of certain
options, futures and currency swap strategies.
During periods of falling interest rates, the value of fixed income
securities generally rises. Conversely, during periods of rising interest rates
the value of such securities generally declines. Debt securities with longer
maturities, which tend to produce higher yields, are subject to potentially
greater capital appreciation and depreciation than obligations with shorter
maturities. Changes in the financial strength of an issuer or changes in the
ratings of any particular security may also affect the value of these
investments. Fluctuations in the market value of fixed income securities
subsequent to their acquisition will not affect cash income from such
securities, but will be reflected in a Fund's net asset value.
Securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities have historically involved little risk of loss of principal if
held to maturity. However, due to fluctuations in interest rates, the market
value of such securities may vary during the period a shareholder owns shares of
the Funds. It should be noted that neither the United States, nor any agency or
instrumentality thereof, has guaranteed, sponsored or approved the Funds or
their shares.
There is no assurance that any Fund will achieve its investment objective.
4
<PAGE> 125
MANAGEMENT OF THE FUNDS
First Interstate Capital Management, Inc. acts as investment advisor to the
Funds. For its services, the Advisor is entitled to receive a fee from each Fund
at an annual rate based on the Fund's average daily net assets. See "Fee
Table -- Investor Shares" and "Management of the Funds" in this Prospectus.
Furman Selz acts as administrator and sponsor to the Funds. Furman Selz
provides certain management and administrative services to the Funds, and is
entitled to receive a fee from each Fund at an annual rate based on the Fund's
average daily net assets. PFD Inc. distributes the Funds' shares and may be
reimbursed for certain of its distribution-related expenses.
Fees and expenses charged to the Funds are outlined on pages 7 through 10
of this Prospectus.
5
<PAGE> 126
GUIDE TO INVESTING IN THE PACIFICA FAMILY OF FUNDS
Purchase orders for the Funds received by your broker or Service
Organization in proper order by 4:15 p.m., Eastern time, and transmitted to the
Trust prior to 5:00 p.m. Eastern time will become effective that day.
<TABLE>
<S> <C>
- MINIMUM INITIAL INVESTMENT............. $500
- MINIMUM INITIAL INVESTMENT FOR IRAS.... $250
- MINIMUM SUBSEQUENT INVESTMENT.......... $ 50
</TABLE>
Investor Shares of the Asset Preservation Fund are purchased at net asset
value without a sales charge. Investor Shares of the Short-Term Government Bond
Fund are purchased at net asset value plus a sales charge of no more than 3.00%.
Investor Shares of the other Funds are purchased at net asset value plus a sales
charge of no more than 4.5%.
Shareholders may exchange Investor Shares between Funds by telephone or
mail.
<TABLE>
<S> <C>
- MINIMUM INITIAL EXCHANGE............... $500
(NO MINIMUM FOR SUBSEQUENT
EXCHANGES.)
</TABLE>
Shareholders may redeem Investor Shares by telephone, mail or wire.
- The Funds reserve the right upon not less than 30 days' notice to redeem
involuntarily all the Investor Shares in an investor's account which have
an aggregate value of $500 or less for any particular Fund.
(The above redemption services are not available for IRAs and trust clients
of First Interstate Bancorp and its affiliates.)
All dividends and distributions will be automatically reinvested at net
asset value in additional Investor Shares of the applicable Fund unless cash
payment is requested.
- Distributions for the Funds are generally paid monthly.
For additional information on how to purchase and redeem Investor Shares of
the Funds, see "Purchase of Investor Shares," "Exchange of Investor Shares" and
"Redemption of Investor Shares."
6
<PAGE> 127
FUND EXPENSES
The following tables list the costs and expenses that an investor will
incur either directly or indirectly as an Investor shareholder of a Fund based
upon the Fund's operating expenses for its most recent fiscal year, adjusted to
reflect current fees and expenses.
FEE TABLE -- INVESTOR SHARES
<TABLE>
<CAPTION>
SHORT-TERM INTERMEDIATE
GOVERNMENT GOVERNMENT INTERMEDIATE
BOND FUND BOND FUND BOND FUND
----------- ------------- -------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price).................. 3.00% 4.50% 4.50%
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering
price)........................... None None None
Deferred Sales Load (as a
percentage of redemption
proceeds)........................ None+ None+ None+
Redemption Fees.................... None None None
Exchange Fee....................... None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net
assets)
Management Fees (after waivers)*... 0.15% 0.20% 0.40%
12b-1 Fees**....................... 0.05% 0.05% 0.05%
Other Expenses (after waivers)***.. 0.54% 0.70% 0.35%
---- ---- ----
TOTAL FUND OPERATING EXPENSES:
(after waivers)****................ 0.74% 0.95% 0.80%
==== ==== ====
</TABLE>
- ---------------
* Management Fees (before waivers) would be 0.50%, 0.50% and 0.50%,
respectively.
** Under rules of the National Association of Securities Dealers, Inc.
(the "NASD"), a 12b-1 fee may be treated as a sales charge for certain
purposes. Because a 12b-1 fee is an annual fee charged against the
assets of a Fund, long-term shareholders may indirectly pay more in
total sales charges than the economic equivalent of the maximum
front-end sales charge permitted by the rules of the NASD. See
"Management of the Funds -- The Sponsor and Distributor."
*** Other Expenses (before waivers) would be 0.69%, 1.01% and 0.59%,
respectively.
**** Total Fund Operating Expenses (before waivers) would be 1.24%, 1.56%
and 1.14%, respectively.
+ Investor Shares sold pursuant to a complete waiver of the initial sales
charge available to purchases of $1 million or more are subject to a 1%
contingent deferred sales charge if redeemed within one year from the date
of purchase.
7
<PAGE> 128
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Funds' Investor Shares will
bear. The table does not reflect any charges that may be imposed by a First
Interstate Bank or other institutions directly on their customer accounts in
connection with investments in the Funds.
EXAMPLE:(++)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
SHORT-TERM INTERMEDIATE
GOVERNMENT GOVERNMENT INTERMEDIATE
BOND FUND BOND FUND BOND FUND
---------- ---------- ------------
<S> <C> <C> <C>
1 year......................... $ 37 $ 54 $ 53
3 years........................ 53 74 69
5 years........................ 70 95 87
10 years....................... 119 156 140
</TABLE>
- ---------------
(++) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED
AMOUNT.
8
<PAGE> 129
FEE TABLE -- INVESTOR SHARES
<TABLE>
<CAPTION>
ASSET GOVERNMENT
PRESERVATION INCOME
FUND FUND
------------ ----------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price)............................... None 4.50%
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of
offering price)...................... None None
Deferred Sales Load (as a percentage of
redemption proceeds)................. None None+
Redemption Fees......................... None None
Exchange Fee............................ None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (after waivers)*........ 0.30% 0.50%
12b-1 Fees**............................ 0.05% 0.05%
Other Expenses (after waivers)***....... 0.45% 0.40%
---- ----
TOTAL FUND OPERATING EXPENSES:
(after waivers)****..................... 0.80% 0.95%
==== ====
</TABLE>
- ---------------
* Management Fees (before waivers) would be 0.35% and 0.50%, respectively.
** Under rules of the NASD, a 12b-1 fee may be treated as a sales charge
for certain purposes. Because the 12b-1 fee is an annual fee charged
against the assets of a Fund, long-term shareholders may indirectly pay
more in total sales charges than the economic equivalent of the maximum
front-end sales charge permitted by the rules of the NASD. See
"Management of the Funds -- The Sponsor and Distributor."
*** Other Expenses (before waivers) would be 0.45% and 0.41%,
respectively.
**** Total Fund Operating Expenses (before waivers) would be 0.85% and
0.96%, respectively.
+ Investor Shares sold pursuant to a complete waiver of the initial sales
charge available to purchases of $1 million or more are subject to a 1%
contingent deferred sales charge if redeemed within one year from the date
of purchase.
9
<PAGE> 130
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Funds' Investor Shares will
bear. The table does not reflect any charges that may be imposed by a First
Interstate Bank or other institutions directly on their customer accounts in
connection with investments in the Funds.
EXAMPLE:(++)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
ASSET GOVERNMENT
PRESERVATION INCOME
FUND FUND
------------ ----------
<S> <C> <C>
1 year.................................... $ 8 $ 54
3 years................................... 26 74
5 years................................... 44 95
10 years.................................. 99 156
</TABLE>
- ---------------
(++) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED
AMOUNT.
10
<PAGE> 131
FINANCIAL HIGHLIGHTS
The financial information shown below is to assist investors in evaluating
the performance of the Funds since their commencement of operations. The
following supplementary information for the periods through September 30, 1995
for the Short-Term Government Bond Fund, Intermediate Government Bond Fund and
Intermediate Bond Fund has been audited by the former independent accountants of
these Funds, whose report on the financial statements appears in the September
30, 1995 Report to Shareholders for the Funds. The following supplementary
information for the year ended September 30, 1995 for the Asset Preservation
Fund and Government Income Fund has been audited by Ernst & Young LLP, whose
report on the financial statements appears in the 1995 Annual Report to
Shareholders for the Funds. These reports and financial statements are
incorporated by reference into the SAI. The supplementary information for each
of the four years in the period ended September 30, 1994 for the Asset
Preservation Fund and the Government Income Fund has been audited by the former
independent accountants for these Funds. The following financial data should be
read in conjunction with the related financial statements and notes thereto.
Further information about the Funds is contained in their Annual Reports to
Shareholders, which may be obtained without charge by calling 1-800-662-8417.
For the periods shown, the Intermediate Bond Fund, Asset Preservation Fund and
Government Income Fund offered only one class of shares to both institutional
and retail investors. See "Other Information -- Capitalization."
11
<PAGE> 132
For a share outstanding throughout the periods indicated:
SHORT-TERM GOVERNMENT BOND FUND*
(INVESTOR SHARES)
<TABLE>
<CAPTION>
PERIOD YEAR PERIOD
ENDED ENDED ENDED
SEPTEMBER 30, MAY 31, MAY 31,
1995** 1995 1994
------------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period.................................................... $15.49 $15.31 $15.90
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................................................................. 0.29 0.75 0.37
Net realized and unrealized gain (loss) on investments................................. (0.02) 0.22 (0.43)
----- ------- -------
Total income (loss) from investment operations....................................... 0.27 0.97 (0.06)
----- ------- -------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income................................................... (0.30) (0.79) (0.37)
Distributions from net realized gain on investments.................................... (0.00) (0.00) (0.16)
----- ------- -------
Total dividends and distributions to shareholders.................................... (0.30) (0.79) (0.53)
----- ------- -------
Net asset value, end of period......................................................... $15.46 $15.49 $15.31
====== ====== ======
Total return (excluding sales load).................................................... 5.38%+ 6.57% (0.66%)+
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)........................................................ $3,622 $4,515 $8,081
Ratio of expenses to average net assets................................................ 0.74%+ 0.74% 0.72%
Ratio of net investment income to average net assets................................... 5.48%+ 4.84% 3.45%+
Ratio of expenses to average net assets without fee waivers............................ 1.25%+ 1.04% 1.10%+
Ratio of net investment income to average net assets without fee waivers............... 4.97%+ 4.54% 3.07%+
Portfolio turnover rate (1)............................................................ 20.28% 100.44% 127.06%
</TABLE>
- ---------------
* The Fund operated as the Short-Term Government Bond Fund of Westcore Trust
from its commencement of operations until its reorganization as a portfolio
of the Trust on October 1, 1995. The initial sale of Investor Shares
occurred on October 11, 1993. During the periods shown, the Fund was advised
by First Interstate Bank of Oregon, N.A. In connection with the Fund's
reorganization, FICM assumed investment advisory responsibilities for the
Fund.
** The Fund changed its fiscal year from May 31 to September 30.
+ Annualized.
(1) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period. Purchases and sales of
investment securities (excluding short-term securities) for the period ended
September 30, 1995 were $2,539,766 and $4,601,208, respectively.
12
<PAGE> 133
For a share outstanding throughout the periods indicated:
INTERMEDIATE
GOVERNMENT BOND FUND*
(INVESTOR SHARES)
<TABLE>
<CAPTION>
PERIOD YEAR PERIOD
ENDED ENDED ENDED
SEPTEMBER 30, MAY 31, MAY 31,
1995** 1995 1994
------------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period.................................................... $15.67 $15.28 $16.47
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................................................................. 0.31 0.99 0.74
Net realized and unrealized gain (loss) on investments................................. 0.03 0.46 (1.27)
----- ------ ------
Total income (loss) from investment operations....................................... 0.34 1.45 (0.53)
----- ------ ------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income................................................... (0.34) (1.06) (0.64)
Distributions from net realized gain on investments.................................... (0.00) (0.00) (0.02)
----- ------ ------
Total dividends and distributions to shareholders...................................... (0.34) (1.06) (0.66)
------ ------ ------
Net asset value, end of period......................................................... $15.67 $15.67 $15.28
====== ====== ======
Total return (excluding sales load).................................................. 6.65%+ 10.01% (5.17%)+
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)........................................................ $7,169 $9,162 $8,538
Ratio of expenses to average net assets................................................ 1.40%+ 1.27% 1.13%+
Ratio of net investment income to average net assets................................... 6.10%+ 6.53% 5.86%+
Ratio of expenses to average net assets without fee waivers............................ 1.63%+ 1.50% 1.33%+
Ratio of net investment income to average net assets without fee waivers............... 5.87%+ 6.30% 5.66%+
Portfolio turnover rate (1)............................................................ 0.00% 11.39% 38.22%
</TABLE>
- ---------------
* The Fund operated as the GNMA Fund of Westcore Trust from its commencement
of operations until its reorganization as a portfolio of the Trust on
November 15, 1995. The initial sale of Investor Shares occurred on October
11, 1993. During the periods shown, the Fund was advised by First Interstate
Bank of Oregon, N.A. In connection with the Fund's reorganization, FICM
assumed investment advisory responsibilities for the Fund.
** The Fund changed its fiscal year from May 31 to September 30.
+ Annualized.
(1) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period. Purchases and sales of
investment securities (excluding short-term securities) for the period ended
September 30, 1995 were $0, and $3,725,523, respectively.
13
<PAGE> 134
For a share outstanding throughout the periods indicated:
INTERMEDIATE BOND FUND*
<TABLE>
<CAPTION>
FOR THE
PERIOD** YEAR ENDED MAY 31,
ENDED -------------------------------------------------------------------
SEPT. 30, 1995 1995 1994 1993 1992 1991 1990 1989
-------------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 14.77 $ 14.36 $ 15.72 $ 15.69 $ 15.52 $ 15.08 $ 15.13 $ 15.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income..................... 0.30 0.91 0.99 1.17 1.14 1.25 1.26 1.22
Net realized and unrealized gain (loss) on
investments............................. (0.01) 0.47 (0.90) 0.40 0.65 0.54 (0.05) 0.08
------- ------- ------- ------- ------- ------- ------- -------
Total income from investment
operations............................ 0.29 1.38 0.09 1.57 1.79 1.79 1.21 1.30
------- ------- ------- ------- ------- ------- ------- -------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income...... (0.30) (0.97) (0.85) (1.04) (1.41) (1.25) (1.26) (1.17)
Distributions from net realized gain on
investments............................. (0.00) 0.00 (0.60) (0.50) (0.21) (0.10) -- --
------- ------- ------- ------- ------- ------- ------- -------
Total dividends and distributions to
shareholders.......................... (0.30) (0.97) (1.45) (1.54) (1.62) (1.35) (1.26) (1.17)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of period............ $ 14.76 $ 14.77 $ 14.36 $ 15.72 $ 15.69 $ 15.52 $ 15.08 $ 15.13
======= ======= ======= ======= ======= ======= ======= =======
Total return (excluding sales load)..... 6.14%+ 10.13% 0.35% 10.42% 11.96% 12.36% 8.25% 9.07%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)........... $ 55,628 $56,087 $58,199 $61,207 $54,203 $54,074 $79,471 $74,002
Ratio of expenses to average net assets... 0.89%+ 0.81% 0.79% 0.76% 0.68% 0.66% 0.68% 0.69%
Ratio of net investment income to average
net assets.............................. 5.94%+ 6.35% 5.33% 6.01% 7.14% 8.00% 8.25% 8.25%
Ratio of expenses to average net assets
without fee waivers..................... 0.94%+ 0.85% 0.83% 0.79% 0.73% 0.71% 0.73% 0.74%
Ratio of net investment income to average
net assets without
fee waivers............................. 5.89%+ 6.31% 5.30% 5.98% 7.09% 7.95% 8.20% 8.20%
Portfolio turnover rate (1)............... 54.02% 75.76% 162.91% 145.95% 101.91% 77.97% 31.58% 35.73%
</TABLE>
- ---------------
* The Fund operated as the Bonds Plus Fund of Westcore Trust from its
commencement of operations on June 1, 1988 until its reorganization as a
portfolio of the Trust on October 1, 1995. During the periods shown, the
Fund was advised by First Interstate Bank of Oregon, N.A. In connection with
the Fund's reorganization, FICM assumed investment advisory responsibilities
for the Fund.
** The Fund changed its fiscal year from May 31 to September 30.
+ Annualized.
(1) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period. Purchases and sales of
investment securities (excluding short-term securities) for the period ended
September 30, 1995 were $12,757,969 and $9,531,336, respectively.
14
<PAGE> 135
Selected data for a share outstanding for the periods shown:
ASSET PRESERVATION FUND
<TABLE>
<CAPTION>
PERIOD
YEAR ENDED SEPTEMBER 30, ENDED
------------------------------------------------------- SEPTEMBER 30,
1995 1994 1993 1992 1991 1990(a)
-------- -------- -------- -------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value -- Beginning of Period................ $ 10.04 $ 10.21 $ 10.32 $ 10.17 $ 9.99 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income*.............................. 0.50 0.40 0.47 0.57 0.72 0.20
Net gain (loss) on securities (both realized and
unrealized)*...................................... 0.04 (0.13) (0.10) 0.15 0.18 (0.01)
------- -------- -------- -------- ------- -------
Total from Investment Operations.................. 0.54 0.27 0.37 0.72 0.90 0.19
------- -------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income................ (0.49) (0.40) (0.47) (0.57) (0.72) (0.20)
Distributions from capital gains.................... -- (0.01) (0.01) -- -- --
Distributions from paid-in capital.................. (0.01) (0.03) -- -- -- --
------- -------- -------- -------- ------- -------
Total Distributions............................... (0.50) (0.44) (0.48) (0.57) (0.72) (0.20)
------- -------- -------- -------- ------- -------
Net Asset Value, End of Period........................ $ 10.08 $ 10.04 $ 10.21 $ 10.32 $ 10.17 $ 9.99
======= ======== ======== ======== ======= =======
Total Return (excluding sales load)............... 5.56% 2.74% 3.68% 7.30% 9.29% 1.90%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000)..................... $51,607 $103,179 $163,755 $160,083 $73,412 $31,820
Ratio of Expenses to Average Net Assets............. 0.94% 0.84% 0.80% 0.75% 0.62% 0.36%+
Effect of Waivers on above Ratio.................... 0.02% 0.02% 0.03% 0.01% 0.24% 1.09%+
Ratio of Net Investment Income to Average Net
Assets............................................ 5.03% 3.92% 4.64% 5.52% 6.90% 8.67%+
Portfolio Turnover Rate............................. 52% 32% 49% 21% 30% 0%
</TABLE>
- ---------------
(a) Commencement of operations, July 2, 1990.
* Per share data based upon average monthly shares outstanding.
+ Annualized.
15
<PAGE> 136
Selected data for a share outstanding for the periods shown:
GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
PERIOD
YEAR ENDED SEPTEMBER 30, ENDED
---------------------------------------------------------- SEPTEMBER 30,
1995 1994 1993 1992 1991 1990(a)
------- -------- -------- -------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value -- Beginning of Period............. $ 9.51 $ 10.87 $ 10.76 $ 10.44 $ 9.91 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income*........................... 0.57 0.57 0.71 0.76 0.81 0.21
Net gain (loss) on securities (both realized and
unrealized)*................................... 0.32 (1.11) 0.17 0.33 0.53 (0.09)
------- -------- -------- -------- ------- -------
Total from Investment Operations............... 0.89 (0.54) 0.88 1.09 1.34 0.12
------- -------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income............. (0.52) (0.59) (0.71) (0.76) (0.81) (0.21)
Distributions from capital gains................. -- (0.23) (0.06) (0.01) -- --
Distributions from paid-in capital............... (0.05) -- -- -- -- --
------- -------- -------- -------- ------- -------
Total Distributions............................ (0.57) (0.82) (0.77) (0.77) (0.81) (0.21)
------- -------- -------- -------- ------- -------
Net Asset Value, End of Period..................... $ 9.83 $ 9.51 $ 10.87 $ 10.76 $ 10.44 $ 9.91
======= ======== ======== ======== ======= =======
Total Return (excluding sales load)............ 9.63% (5.20)% 8.17% 10.77% 14.06% 1.20%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000).................. $84,981 $124,372 $171,073 $138,150 $76,711 $39,855
Ratio of Expenses to Average Net Assets.......... 0.99% 0.94% 0.85% 0.79% 0.54% 0.15%+
Effect of Waivers on above Ratio................. 0.02% 0.02% 0.09% 0.12% 0.44% 1.34%+
Ratio of Net Investment Income to Average Net
Assets......................................... 5.92% 5.88% 6.49% 7.11% 7.97% 8.52%+
Portfolio Turnover Rate.......................... 72% 55% 52% 22% 7% 0%
</TABLE>
- ---------------
(a) Commencement of operations July 2, 1990.
* Per share data based upon average monthly shares outstanding.
+ Annualized.
16
<PAGE> 137
THE FUNDS
The Funds are portfolios of Pacifica Funds Trust, a business trust
organized under the laws of the Commonwealth of Massachusetts as an open-end,
management investment company. The Trust's Board of Trustees oversees the
overall management of the Funds and elects the officers of the Funds.
INVESTMENT POLICIES AND PRACTICES OF THE FUNDS
- The Short-Term Government Bond Fund's investment objective is to seek
current income with relative stability of principal.
- The Intermediate Government Bond Fund's investment objective is to seek a
high level of current income, consistent with prudent investment risk.
- The Intermediate Bond Fund's investment objective is to seek a high level
of current income consistent with the preservation of capital and
maintenance of liquidity.
- The Asset Preservation Fund's investment objective is to provide
investors with as high a level of current income as is consistent with
limiting the risk of potential loss.
- The Government Income Fund's investment objective is to provide investors
with as high a level of current income as is consistent with prudent risk
of capital.
Each Fund follows its own investment policies and practices, including
certain investment restrictions. The SAI contains the specific investment
restrictions which govern the Funds' investments. The investment objectives of
the Asset Preservation Fund and Government Income Fund are fundamental policies,
which means that they may not be changed without a majority vote of shareholders
of the affected Fund. Any change in the investment objective of the Short-Term
Government Bond Fund, Intermediate Government Bond Fund or Intermediate Bond
Fund by the Board of Trustees may result in a Fund having an investment
objective different from the objective which a shareholder considered
appropriate at the time of investment in the Fund. Except for the objectives and
those restrictions specifically identified as fundamental, all other investment
policies and practices described in this Prospectus and in the SAI are not
fundamental.
The Advisor selects investments and makes investment decisions based on the
investment objective and policies of each Fund.
17
<PAGE> 138
Short-Term Government Bond Fund and Intermediate Government Bond Fund. The
Short-Term Government Bond Fund's investment objective is to seek current income
with relative stability of principal. The Short-Term Government Bond Fund is
designed for investors seeking current income that is greater than normally
available from a money market fund and principal volatility that is less than
that normally associated with long-term bonds. The Intermediate Government Bond
Fund's investment objective is to seek a high level of current income,
consistent with prudent investment risk. In seeking current income from its
investments, the Intermediate Government Bond Fund may also consider the
potential for capital gain. In seeking to attain their objectives, each of these
Funds will invest primarily in U.S. Treasury bills, notes and other obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements with respect to such obligations. Securities purchased
by the Short-Term Government Bond Fund will have a remaining maturity of three
and one half years or less. During normal market conditions, the Intermediate
Government Bond Fund will maintain a dollar-weighted average portfolio maturity
between three and ten years.
Each Fund may purchase mortgage-backed and certain other asset-backed
securities. The average life of these securities varies with the maturities of
the underlying mortgage or other instruments, which may have maximum maturities
of forty years. The average life is likely to be substantially less than the
original maturity of the mortgage pools or other assets underlying the
securities as the result of prepayments. The rate of such prepayments, and hence
the life of the securities, will be a function of current market rates and
current conditions in the relevant markets. In calculating the average weighted
maturity of a Fund's portfolio, the maturity of asset-backed instruments will be
based on estimates of average life.
Government securities that have variable or floating interest rates or
demand or put features will be deemed to have maturities tied to the period
remaining to the next interest rate adjustment or the time the Fund can recover
payment of principal as described in the SAI.
Under normal market conditions, at least 65% of the total assets of each
Fund will be invested in bonds issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
Intermediate Bond Fund. The Intermediate Bond Fund's investment objective
is to seek a high level of current income consistent with the preservation of
capital and maintenance of liquidity. In pursuing its
18
<PAGE> 139
investment objective, the Fund may invest in a broad range of corporate debt
obligations such as fixed and variable-rate bonds, zero coupon bonds,
debentures, obligations convertible into common stock and various types of
demand instruments, obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, dollar-denominated debt obligations of foreign
issuers, including foreign corporations and foreign governments, and money
market instruments. The Fund is also permitted to acquire obligations issued by
state and local governments ("municipal obligations"). The purchase of municipal
obligations may be advantageous when, as a result of prevailing economic,
regulatory or other circumstances, the yield of such securities, on a pre-tax
basis, is comparable to that of corporate or U.S. Government obligations. The
Fund may also purchase mortgage-backed and certain other asset-backed
securities. During normal market conditions, the Fund will maintain a
dollar-weighted average portfolio maturity between three and ten years.
In acquiring particular portfolio securities, the Advisor will consider,
among other things, historical yield relationships between corporate and
government bonds, intermarket yield relationships among various industry
sectors, current economic cycles and the attractiveness and creditworthiness of
particular issuers. Depending upon its analysis of these and other factors, the
Fund's holdings in issuers in particular industry sectors may be overweighted
when compared to the relative industry weightings in the Shearson Lehman
Brothers Intermediate Index or other recognized indexes.
The policy of the Fund is to invest at least 65% of the total value of its
assets in corporate and government bonds during normal market conditions. Debt
obligations acquired by the Fund will be investment grade at the time of
purchase -- that is, obligations rated AAA, AA, A or BBB by Standard & Poor's
Ratings Group ("S&P") or Aaa, Aa, A or Baa by Moody's Investors Service, Inc.
("Moody's"). Debt obligations may also be unrated but deemed by the Investment
Advisor to be comparable in quality to instruments that are so rated. The Fund's
dollar weighted average portfolio quality of the corporate bond portion of the
Fund's portfolio is expected to be "A" or better. Obligations rated in the
lowest of the top four rating categories (Baa by Moody's or BBB by S&P) are
considered to have speculative characteristics. See Appendix A for a description
of applicable S&P and Moody's debt ratings.
The Fund may also invest in obligations convertible into common stocks, and
may purchase common stocks, warrants or other rights to buy shares if they are
attached to a fixed income obligation. As a general matter, however, the Fund
will not invest in common stocks. Common
19
<PAGE> 140
stock received through the conversion of convertible debt obligations will
normally be sold in an orderly manner as soon as possible. Up to 20% of the
total assets of the Fund may be invested directly in dollar-denominated debt
obligations of foreign issuers. These obligations may include obligations of
foreign corporations as well as investments in obligations of foreign
governments and their political subdivisions (which will be limited to direct
government obligations and government-guaranteed securities).
The Asset Preservation Fund. The investment objective of the Asset
Preservation Fund is to provide investors with as high a level of current income
as is consistent with limiting the risk of potential loss. Securities held by
the Fund will consist of U.S. Government securities, certificates of deposit,
bankers' acceptances, investment grade commercial paper, corporate debt
securities, mortgage- and asset-backed securities and other instruments which
the Advisor believes are of comparable quality as those above, including
securities issued by foreign issuers. The securities of foreign issuers in which
the Fund will invest may include: foreign currency-denominated corporate debt
securities, preferred stock, certificates of deposit and bankers' acceptances
issued by foreign banks, and obligations of foreign governments or their
subdivisions, agencies and instrumentalities, international agencies and
supranational entities.
In selecting debt securities for the Fund, the Advisor seeks to select
those instruments that appear best calculated to achieve the Fund's investment
objective within the credit and risk tolerances established for the Fund. In
accordance with those policies, the Fund may purchase commercial paper rated in
one of the two highest rating categories by a nationally recognized statistical
rating organization ("NRSRO"), corporate debt securities rated in one of the
four highest major rating categories by an NRSRO, mortgage- and asset-backed
securities rated in one of the two highest rating categories by an NRSRO, and
other debt instruments which are of comparable quality in the Advisor's opinion.
Assumptions generally accepted by the industry concerning the probability of
early payment may be used in the calculation of maturities for pre-refunding,
sometimes resulting in a calculated maturity different than the stated maturity
of the security. The maximum maturity for any individual security held by the
Fund is 39 months.
The Government Income Fund. The investment objective of the Government
Income Fund is to provide investors with as high a level of current income as is
consistent with prudent risk of capital. The Fund pursues this objective by
investing at least 65% of its assets in securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. The Fund may also invest in
certificates of deposit, bankers' accept-
20
<PAGE> 141
ances, investment grade commercial paper, corporate debt securities, investment
grade mortgage- and asset-backed securities and other instruments which the
Advisor believes are of comparable quality as those above, including securities
issued by foreign issuers. The securities of foreign issuers in which the Fund
will invest are: corporate debt securities, preferred stock, certificates of
deposit and bankers' acceptances issued by foreign banks, and obligations of
foreign governments or their subdivisions, agencies and instrumentalities,
international agencies and supranational entities.
In selecting debt securities for the Fund, the Advisor seeks to select
those instruments that appear best calculated to achieve the Fund's investment
objective within the credit and risk tolerances established for the Fund. In
accordance with those policies, the Fund may purchase commercial paper rated in
one of the two highest rating categories by an NRSRO, corporate debt securities
rated in one of the four highest rating categories by an NRSRO, mortgage- and
asset-backed securities rated in one of the two highest rating categories by an
NRSRO, and other debt instruments which are of comparable quality in the
Advisor's opinion.
All Funds. The Funds may also hold short-term U.S. Government obligations,
money market instruments, repurchase agreements, securities issued by other
investment companies within the limits prescribed by the Investment Company Act
of 1940, as amended (the "1940 Act"), and cash, pending investment, to meet
anticipated redemption requests or if, in the opinion of the Advisor, suitable
investments for a Fund are unavailable. Such investments may be made in such
proportions as, in the opinion of the Advisor, existing circumstances may
warrant, and may include obligations of foreign banks and foreign branches of
U.S. banks. The types of securities and investment practices used by the Funds
are described in greater detail under the section "Description of Securities and
Investment Practices" on pages 43-53 of this Prospectus.
RISKS OF INVESTING IN THE FUNDS
The price per share of each of the Funds will fluctuate with changes in
value of the investments held by the Fund. Shareholders of a Fund should,
therefore, expect the value of their shares to fluctuate with changes in the
value of the securities owned by that Fund.
The market value of a Fund's investment in fixed income securities will
change in response to changes in interest rates and the relative financial
strength of each issuer. During periods of falling interest rates, the value of
fixed income securities generally rises. Conversely, during periods of rising
21
<PAGE> 142
interest rates the value of such securities generally declines. Debt securities
with longer maturities, which tend to produce higher yields, are subject to
potentially greater capital appreciation and depreciation than obligations with
shorter maturities. Changes in the financial strength of an issuer or changes in
the ratings of any particular security may also affect the value of these
investments. Fluctuations in the market value of fixed income securities
subsequent to their acquisition will not affect cash income from such
securities, but will be reflected in a Fund's net asset value. The Funds may
also purchase zero-coupon bonds (i.e., discount debt obligations that do not
make periodic interest payments) which are subject to greater market
fluctuations from changing interest rates than debt obligations of comparable
maturities which make current distributions of interest.
Certain Funds may invest in foreign securities. Investing in the securities
of issuers in any foreign country involves special risks and considerations not
typically associated with investing in U.S. companies. These include differences
in accounting, auditing and financial reporting standards; generally higher
commission rates on foreign portfolio transactions; the possibility of
nationalization, expropriation or confiscatory taxation; adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country); and political instability which
could affect U.S. investments in foreign countries. Additionally, foreign
securities and dividends and interest payable on those securities may be subject
to foreign taxes, including taxes withheld from payments on those securities.
Foreign securities often trade with less frequency and volume than domestic
securities and, therefore, may exhibit greater price volatility. Additional
costs associated with an investment in foreign securities may include higher
custodial fees than apply to domestic custodial arrangements and transaction
costs of foreign currency conversions. Changes in foreign exchange rates also
will affect the value of securities denominated or quoted in currencies other
than the U.S. dollar. A Fund's objective may be affected either unfavorably or
favorably by fluctuations in the relative rates of exchange between the
currencies of different nations, by exchange control regulations and by
indigenous economic and political developments. See the SAI for further
information about foreign securities.
There is, of course, no assurance that a Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products.
22
<PAGE> 143
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction of
the Board of Trustees. The Trustees are Dennis W. Draper, Joseph N. Hankin, John
E. Heilmann, Jack D. Henderson and Richard A. Wedemeyer. Information about the
Trustees, as well as the Funds' executive officers, may be found in the SAI
under the heading "Management -- Trustees and Officers."
THE ADVISOR: FIRST INTERSTATE CAPITAL MANAGEMENT, INC.
First Interstate Capital Management, Inc., 7501 E. McCormick Parkway,
Scottsdale, Arizona 85258, serves as investment advisor to the Trust. FICM
manages the investment and reinvestment of the assets of the Funds and
continuously reviews, supervises and administers the Funds' investments. The
Advisor is responsible for placing orders for the purchase and sale of the
Funds' investments directly with brokers and dealers selected by it in its
discretion.
FICM is a wholly-owned subsidiary of First Interstate Bank of California,
which is the largest banking subsidiary of First Interstate Bancorp, a
multi-bank holding company. First Interstate Bancorp provides financial products
and services marketed at the local level to nearly five million households in
over 500 communities in 13 western states. Prior to October 1, 1995, First
Interstate Bank of Oregon, N.A., an affiliate of FICM, served as investment
advisor to the Short-Term Government Bond Fund, and Intermediate Bond Fund (and
also served as investment advisor to the Intermediate Government Bond Fund prior
to November 15, 1995). Prior to March 18, 1994, San Diego Financial Capital
Management, Inc., which was acquired by First Interstate Bancorp through its
merger with San Diego Financial Corporation, served as investment advisor to the
Asset Preservation Fund and Government Income Fund.
On January 24, 1996, First Interstate Bancorp signed a definitive merger
agreement to merge with Wells Fargo & Company ("Wells Fargo"), a publicly-held
bank holding company with its head office at 420 Montgomery Street, San
Francisco, California 94104. The merger is conditioned upon, among other things,
certain regulatory approvals. Upon completion of the merger, currently expected
to occur during the second quarter of 1996, FICM will be wholly-owned by Wells
Fargo, and the existing investment advisory agreement between the Trust and FICM
will automatically terminate. It is contemplated that an application will be
filed with the Securities and Exchange Commission to ensure there is no
disruption as a result of the merger in the provision of investment advisory
services to the Funds, and that a meeting of shareholders will be held not
23
<PAGE> 144
later than 120 days after the merger to approve ongoing investment
advisory arrangements for the Funds.
Mr. David Underwood serves as FICM's Director of Equity Funds Management.
Mr. Underwood joined FICM in 1995. From 1993 to 1995 Mr. Underwood was employed
by Integra Trust Company as Director of Research. From 1990 to 1993 he was a
Portfolio Manager with the firm of C.S. McKee Investment Advisors. Mr. G. Edward
Means serves as FICM's Director of Fixed Income Management. Mr. Means joined
FICM in January 1995. From 1992 to 1994 he was employed by Clayton Brown &
Associates as Senior Vice President, Fixed Income. From 1984 to 1992 he was
employed by First National Bank of Chicago as a Senior Vice President.
Mr. Michael Hughes has been responsible for the day-to-day management of
the Short-Term Government Bond Fund and Intermediate Government Bond Fund since
October 1995. In addition, he has been responsible for the day-to-day management
of the Asset Preservation Fund and the Government Income Fund since April 1995.
Mr. Hughes has been employed by First Interstate since November 1988. He
currently serves as a Fixed Income Fund Manager for FICM.
Mr. Robert Daviduk has been responsible for the day-to-day management of
the Intermediate Bond Fund since October 1995. Mr. Daviduk has been employed by
First Interstate since April 1993. Prior to joining First Interstate, Mr.
Daviduk was employed by Payden & Rygel Investment Counsel as a fixed income
portfolio analyst.
For the advisory services it provides to the Funds, FICM is entitled to
receive from each Fund fees, payable monthly, at the annual rates, based on
average daily net assets, as set forth below:
<TABLE>
<CAPTION>
FUND INVESTMENT ADVISORY FEE
---- -----------------------
<S> <C>
Short-Term Government Bond Fund.... 0.50%
Intermediate Government Bond Fund.. 0.50%
Intermediate Bond Fund............. 0.50%
Asset Preservation Fund............ 0.35%
Government Income Fund............. 0.50%
</TABLE>
The Advisor has agreed that during the current fiscal year it will waive a
portion of its fees so that total operating expenses will not exceed 0.74% and
1.27% of the average daily net assets of the Investor Shares of the Short-Term
Government Bond Fund and Intermediate Government Bond Fund, respectively. For
their fiscal year ended September 30, 1995, the Short-Term Government Bond Fund,
Intermediate Government Bond Fund and Intermediate Bond Fund paid advisory fees,
after fee waivers, at
24
<PAGE> 145
the annual rates of 0.02%, 0.35% and 0.50%, respectively, of their average
daily net assets. For their fiscal year ended September 30, 1995, the Asset
Preservation Fund and Government Income Fund paid advisory fees at the annual
rates of 0.35% and 0.50%, respectively, of their average daily net assets.
THE SPONSOR AND DISTRIBUTOR
Furman Selz LLC, 230 Park Avenue, New York, New York 10169, acts as Sponsor
of the Funds. Furman Selz is primarily an institutional brokerage firm with
memberships on the New York, American, Boston, Midwest, Pacific and Philadelphia
Stock Exchanges. Furman Selz also serves as administrator and distributor of
other mutual funds. Pacifica Funds Distributor Inc. is an affiliate of Furman
Selz and was organized specifically to distribute shares of the Trust, however,
offers and sales of shares of the Trust will be made only through Furman Selz or
other registered (or exempt) dealers.
Under the Distribution Plan (the "Plan") adopted by the Funds for their
Investor Shares, each Fund may pay directly or reimburse PFD Inc. monthly
(subject to a limit of 0.50% per annum of the average daily net asset value of
the outstanding Investor Shares of each Fund) for costs and expenses of PFD Inc.
in connection with the distribution of Investor Shares of the Funds. These costs
and expenses include (i) advertising by radio, television, newspapers,
magazines, brochures, sales literature, direct mail or any other form of
advertising; (ii) expenses of sales employees or agents of PFD Inc., including
salary, commissions, travel and related expenses; (iii) payments to
broker-dealers and financial institutions for services in connection with the
distribution of Investor Shares, including promotional incentives and fees
calculated with reference to the average daily net asset value of Investor
Shares held by shareholders who have a brokerage or other service relationship
with the broker-dealer or other institution receiving such fees; (iv) costs of
printing prospectuses and other materials to be given or sent to prospective
investors; and (v) such other similar services as the Trustees determine to be
reasonably calculated to result in the sale of Investor Shares of the Funds.
Each Fund will pay all costs and expenses in connection with the preparation,
printing and distribution of prospectuses to current shareholders and the
operation of its Plan, including related legal and accounting fees. A Fund will
not be liable for distribution expenditures made by PFD Inc. in any given year
in excess of the maximum annual amount payable under the Plan for that Fund. All
payments made under the Plan for Investor Shares are borne entirely by a Fund's
Investor Shares.
25
<PAGE> 146
In addition to sales charges paid to dealers, PFD Inc. may from time to
time pay a bonus or other incentive to dealers which employ registered
representatives who sell a minimum dollar amount of Investor Shares of the Funds
and/or other funds distributed by Furman Selz or PFD Inc. during a specific
period of time. Such bonus or other incentive may take the form of payment for
travel expenses, including lodging, incurred in connection with trips taken by
qualifying registered representatives and members of their families to places
within or outside the United States, or other bonuses, such as gift certificates
or the cash equivalent of such bonuses. PFD Inc. has established such a special
promotional incentive program with First Interstate Securities, Inc.
ADMINISTRATIVE SERVICES
The Funds have also entered into an Administrative Services Contract with
Furman Selz pursuant to which Furman Selz provides certain management and
administrative services necessary for the Funds' operations including: (i)
general supervision of the operation of the Funds including coordination of the
services performed by the Funds' investment advisor, transfer agent, custodian,
independent accountants and legal counsel, regulatory compliance, including the
compilation of information for documents such as reports to, and filings with,
the SEC and state securities commissions, and preparation of proxy statements
and shareholder reports for the Funds; (ii) general supervision relative to the
compilation of data required for the preparation of periodic reports distributed
to the Funds' officers and Board of Trustees; and (iii) furnishing office space
and certain facilities required for conducting the business of the Funds. For
these services, Furman Selz is entitled to receive a fee, payable monthly, at
the annual rate of 0.15% of the average daily net assets of the Funds. Pursuant
to a Services Agreement with the Trust, Furman Selz assists the Trust with
certain transfer and dividend disbursing agent functions and receives a fee of
$15.00 per account per year plus out-of-pocket expenses. Pursuant to a Fund
Accounting Agreement with the Trust, Furman Selz assists the Trust in
calculating net asset values and provides certain other accounting services for
each Fund for an annual fee of $30,000 per Fund plus out-of-pocket expenses.
SERVICE ORGANIZATIONS
Various banks (including banks affiliated with First Interstate Bancorp),
trust companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative services with respect to the Funds' Investor
26
<PAGE> 147
Shares, such as maintaining shareholder accounts and records. The Funds may pay
fees to Service Organizations (which vary depending upon the services provided)
in amounts up to an annual rate of 0.25% of the average daily net asset value of
the outstanding Investor Shares of the Funds owned by shareholders with whom a
Service Organization has a servicing relationship. These fees will be borne
entirely by the Funds' Investor Shares.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest a specified amount in
the Funds or charging a direct fee for servicing. If imposed, these fees would
be in addition to any amounts which might be paid to the Service Organization by
the Funds. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged to
consult with them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Funds and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
OTHER EXPENSES
Each Fund bears all costs of its operations other than expenses
specifically assumed by Furman Selz, PFD Inc. or the Advisor. The costs borne by
the Funds include legal and auditing expenses; Trustees' fees and expenses;
insurance premiums; advisory, administration, fund accounting, custodian and
transfer agent fees and expenses; expenses incurred in acquiring or disposing of
the Funds' portfolio securities; expenses of registering and qualifying the
Funds' shares for sale with the SEC and with various state securities
commissions; expenses of obtaining quotations on the Funds' portfolio securities
and pricing of the Funds' shares; expenses of maintaining the Funds' legal
existence and of shareholders' meetings; and expenses of preparation and
distribution to existing shareholders of reports,
27
<PAGE> 148
proxies and prospectuses. Each Fund bears its own expenses associated with its
establishment as a series of the Trust; these expenses are amortized over a
five-year period from the commencement of a Fund's operations. See "Management"
in the SAI for additional information on expenses borne by the Funds. Trust
expenses directly attributable to a particular Fund are charged to that Fund,
and expenses attributable to a particular class of shares of a Fund (such as
distribution payments under the Plan and Service Organization fees) are charged
to that class. Other expenses are allocated proportionately among all of the
investment portfolios in the Trust in relation to the net assets of each
portfolio or by other means deemed fair and equitable by the Board of Trustees.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Advisor places orders for
the purchase and sale of portfolio investments for the Funds' accounts with
brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Funds, the Advisor will seek the best execution of the Funds' orders.
Purchases and sales of debt securities are generally placed by the Advisor with
primary market makers for these securities on a net basis, i.e., without any
brokerage commission being paid by the Funds. Trading does, however, involve
transaction costs. Transactions with dealers serving as primary market makers
reflect the spread between the bid and asked prices. Purchases of underwritten
issues may be made which will include an underwriting fee paid to the
underwriter. Broker-dealers are selected on the basis of a variety of factors
such as reputation, capital strength, size and difficulty of the order, sale of
Fund shares by the broker-dealer, and research provided to the Advisor by the
broker-dealer. The Advisor may cause a Fund to pay commissions higher than
another broker-dealer would have charged if the Advisor believes the commission
paid is reasonable in relation to the value of the brokerage and research
services received by the Advisor.
A high portfolio turnover rate involves larger brokerage commission
expenses or transaction costs which must be borne directly by a Fund. Short-term
capital gains realized from portfolio transactions are taxable to shareholders
as ordinary income. The Advisor will not consider portfolio turnover rate a
limiting factor in making investment decisions consistent with a Fund's
objective and policies.
28
<PAGE> 149
FUND SHARE VALUATION
The net asset value of each class of shares of the Funds is calculated at
4:15 p.m. (Eastern time), Monday through Friday, on each day the New York Stock
Exchange is open for trading (a "Business Day"), which excludes the following
business holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share for each class of shares is computed by dividing the value of a
Fund's assets allocable to a particular class, less the liabilities charged to
that class by the total number of the outstanding shares of that class. All
expenses, including fees paid to the Advisor, Furman Selz and PFD Inc., are
accrued daily and taken into account for the purpose of determining the net
asset value.
Bonds and other fixed-income securities are normally valued by using market
quotations and may be valued on the basis of prices provided by a pricing
service approved by the Board of Trustees. Securities listed on an exchange are
valued on the basis of the last sale prior to the time the valuation is made. If
there has been no sale since the immediately previous valuation, then the
current bid price is used. Quotations are taken from the exchange where the
security is primarily traded. Portfolio securities which are primarily traded on
foreign exchanges may be valued with the assistance of a pricing service and are
generally valued at the preceding closing values of such securities on their
respective exchanges, except that when an occurrence subsequent to the time a
foreign security is valued is likely to have changed such value, then the fair
value of those securities will be determined by consideration of other factors
by or under the direction of the Board of Trustees. Over-the-counter securities
are valued on the basis of the bid price at the close of business on each
business day. Securities for which market quotations are not readily available
are valued at fair value as determined in good faith by or under the direction
of the Board of Trustees. All assets and liabilities initially expressed in
foreign currencies will be converted into U.S. dollars at the mean between the
bid and asked prices of such currencies against U.S. dollars as last quoted by
any major bank.
With respect to option contracts entered into by a Fund, the premium
received is recorded as an asset and equivalent liability, and thereafter the
liability is adjusted to the market value of the option determined in accordance
with the preceding paragraph. The premium paid for an option purchased by a Fund
is recorded as an asset and subsequently adjusted to market value.
29
<PAGE> 150
PRICING OF INVESTOR SHARES
Orders for the purchase of Investor Shares will be executed at the net
asset value per share plus any applicable sales charge (the "public offering
price") next determined after an order has become effective. Investor Shares of
the Asset Preservation Fund are sold without a sales charge. The sales charge on
purchases of Investor Shares of the other Funds varies with the size of the
purchase made according to the following schedules:
Short-Term Government Bond Fund:
<TABLE>
<CAPTION>
SALES CHARGE AS A AMOUNT OF SALES
PERCENTAGE OF CHARGE REALLOWED
---------------------- TO DEALERS AS A
PUBLIC NET PERCENTAGE
OFFERING AMOUNT OF PUBLIC
AMOUNT OF INVESTMENT PRICE INVESTED OFFERING PRICE
- --------------------------------- --------- -------- -----------------
<S> <C> <C> <C>
Less than $100,000............... 3.00% 3.09% 2.75%
$100,000 but less than
$250,000....................... 2.50% 2.04% 2.25%
$250,000 but less than
$500,000....................... 1.50% 1.52% 1.25%
$500,000 but less than
$1,000,000..................... 1.00% 1.01% 0.75%
$1,000,000 and over.............. None+ None+ None+
</TABLE>
- ---------------
+ There is no initial sales charge on purchases of $1 million or more; however,
the Distributor pays investment dealers and financial institutions a
commission from its own resources of 0.70% of the amount invested, and
shareholders who redeem their Investor Shares within one year of the date of
purchase will be subject to a 1% contingent deferred sales charge for the
purpose of reimbursing the Distributor for the commission paid.
30
<PAGE> 151
Intermediate Government Bond Fund, Intermediate Bond Fund and Government
Income Fund:
<TABLE>
<CAPTION>
SALES CHARGE AS A AMOUNT OF SALES
PERCENTAGE OF CHARGE REALLOWED
---------------------- TO DEALERS AS A
PUBLIC NET PERCENTAGE
OFFERING AMOUNT OF PUBLIC
AMOUNT OF INVESTMENT PRICE INVESTED OFFERING PRICE
- --------------------------------- --------- -------- -----------------
<S> <C> <C> <C>
Less than $100,000............... 4.50% 4.71% 4.00%
$100,000 but less than
$250,000....................... 3.50% 3.63% 3.00%
$250,000 but less than
$500,000....................... 2.60% 2.67% 2.25%
$500,000 but less than
$1,000,000..................... 2.00% 2.04% 1.75%
$1,000,000 and over.............. None+ None+ None+
</TABLE>
- ---------------
+ There is no initial sales charge on purchases of $1 million or more; however,
the Distributor pays investment dealers and financial institutions a
commission from its own resources of 0.70% of the amount invested, and
shareholders who redeem their Investor Shares within one year of the date of
purchase will be subject to a 1% contingent deferred sales charge for the
purpose of reimbursing the Distributor for the commission paid.
The initial sales load will not apply to Investor Shares purchased by: (i)
trust, investment management, advisory and fiduciary accounts managed or
administered by First Interstate Bancorp, its subsidiaries and affiliates, or
the Advisor pursuant to a written agreement; (ii) any person purchasing Investor
Shares with the proceeds of a distribution from a trust, investment management,
advisory or other fiduciary account managed or administered by First Interstate
Bancorp, its subsidiaries and affiliates, or the Advisor pursuant to a written
agreement; (iii) any person purchasing Investor Shares with the proceeds of a
redemption from a mutual fund, other than an investment portfolio offered by the
Trust, that was originally purchased with a sales load; (iv) Furman Selz or any
of its affiliates; (v) Trustees or officers of the Funds; (vi) directors or
officers of Furman Selz, the Advisor, or their affiliates or bona fide employees
or former employees of any of the foregoing who have acted as such for not less
than 90 days (including members of their immediate families and their retirement
plans or accounts); or (vii) retirement accounts or plans for which a depository
institution, which is a client or customer of the Advisor, Furman Selz or PFD
Inc. serves as custodian or trustee, or to any trust, pension, Individual
Retirement Account ("IRA"), spousal IRA, profit-sharing or other benefit plan
for such persons so long as such Investor Shares are purchased through PFD Inc.
The initial sales load also does not apply to Investor Shares sold to
representatives of selling brokers and members of their immediate families. In
addition, the initial sales load does not apply to
31
<PAGE> 152
sales to bank trust departments, acting on behalf of one or more clients, of
Investor Shares having an aggregate value equal to or exceeding $200,000.
See "Dividends, Distributions and Federal Income Tax," for an explanation
of circumstances in which a sales load paid to acquire Investor Shares of a
mutual fund may not be taken into account in determining gain or loss on the
disposition of those Investor Shares.
QUANTITY DISCOUNTS IN THE SALES CHARGES
The following quantity discounts shall be available to: (a) an individual,
his or her spouse, and their children under the age of 21, and any trust,
pension, IRA, spousal IRA, profit sharing or other benefit plan for such
persons; (b) a trustee or other fiduciary of a single trust estate or a single
fiduciary account; (c) a pension, profit-sharing or other employee benefit plan
qualified under Section 401 of the Internal Revenue Code of 1986, and (d)
tax-exempt organizations under Section 501(c)(3) of the Code.
Right of Accumulation. For Investor Shares of the Funds that are subject
to a sales charge, the schedule of reduced sales charges will be applicable once
the accumulated value of the account has reached $100,000. For this purpose, the
dollar amount of the qualifying concurrent or subsequent purchase is added to
the net asset value of any Investor Shares of those investment portfolios of the
Trust that are subject to a sales charge and are owned at the time of such
purchase by the investor. The sales charge imposed on the Investor Shares being
purchased will then be at the rate applicable to the aggregate value of Investor
Shares owned and to be purchased by the investor. For example, if the investor
held Investor Shares valued at $100,000 and purchased an additional $20,000 of
Investor Shares (totalling an investment of $120,000), the sales charge for the
$20,000 purchase would be at the next lower sales charge on the schedule (i.e.,
the sales charge for purchases over $100,000 but less than $250,000). There can
be no assurance that investors will receive the cumulative discounts to which
they may be entitled unless, at the time of placing their purchase order, the
investors or their dealers make a written request for the discount. The
cumulative discount program may be amended or terminated at any time. This
particular privilege does not entitle the investor to any adjustment in the
sales charge paid previously on purchases of Investor Shares. If the investor
knows that he will be making additional purchases of Investor Shares in the
future, he may wish to consider executing a Letter of Intent.
Letter of Intent. The schedule of reduced sales charges is also available
to investors who enter into a written Letter of Intent providing for
32
<PAGE> 153
the purchase, within a 13-month period, of Investor Shares of a particular Fund
which is subject to a sales charge. Investor Shares of such a Fund previously
purchased during the 90-day period prior to the date of receipt by the Fund of
the Letter of Intent which are still owned by the shareholder may also be
included in determining the applicable reduction, provided the shareholder or
the dealer notifies the Fund of such prior purchases.
A Letter of Intent permits an investor to establish a total investment goal
to be achieved by any number of investments over a 13-month period. Each
investment made during the period will receive the reduced sales commission
applicable to the amount represented by the goal as if it were a single
investment. A number of Investor Shares totalling 5% of the dollar amount of the
Letter of Intent will be held in escrow by the Fund in the name of the
shareholder. The initial purchase under a Letter of Intent must be equal to at
least 5% of the stated investment goal.
The Letter of Intent does not obligate the investor to purchase, or a Fund
to sell, the indicated amount. In the event the Letter of Intent goal is not
achieved within the 13-month period, the investor is required to pay the
difference between the sales charge otherwise applicable to the purchases made
during this period and sales charges actually paid. The Fund is authorized by
the shareholder to liquidate a sufficient number of escrowed Investor Shares to
obtain such difference. If the goal is exceeded and purchases pass the next
sales charge level, the sales charge on the entire amount of the purchase that
results in passing that level and on subsequent purchases will be subject to
further reduced sales charges in the same manner as set forth under "Right of
Accumulation," but there will be no retroactive reduction of sales charges on
previous purchases. At any time while a Letter of Intent is in effect, a
shareholder may, by written notice to PFD Inc., increase the amount of the
stated goal. In that event, Investor Shares purchased during the previous 90-day
period and still owned by the shareholder will be included in determining the
applicable sales charge reduction. The 5% escrow and minimum purchase
requirements will be applicable to the new stated goal. Investors electing to
purchase Investor Shares pursuant to a Letter of Intent should carefully read
the application for a Letter of Intent which is available from the Trust.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in the Funds is $500, except that the
minimum is $250 for an IRA. Any subsequent investments must be at least $50,
including an IRA investment. All initial investments should be
33
<PAGE> 154
accompanied by a completed Purchase Application. A separate application is
required for IRA investments.
PURCHASE OF INVESTOR SHARES
THE FOLLOWING PURCHASE PROCEDURES DO NOT APPLY TO CERTAIN TRUST OR OTHER
ACCOUNTS THAT ARE MANAGED BY FIRST INTERSTATE BANCORP, ITS SUBSIDIARIES OR
AFFILIATES. AN ACCOUNT CUSTOMER SHOULD CONSULT HIS OR HER ACCOUNT OFFICER FOR
PROPER INSTRUCTIONS.
All funds received by the Trust are invested in full and fractional
Investor Shares of the appropriate Fund. Certificates for Investor Shares are
not issued. Furman Selz maintains records of each shareholder's holdings of Fund
shares, and each shareholder receives a statement of transactions, holdings and
dividends. The Funds reserve the right to reject any purchase.
An investment may be made using any of the following methods:
Through an Authorized Broker, Investment Advisor or Service
Organization. Investor Shares are available to new and existing shareholders
through authorized brokers, investment advisors and Service Organizations. To
make an investment using this method, simply complete a Purchase Application and
contact your broker, investment advisor or Service Organization with
instructions as to the amount you wish to invest. Your broker will then contact
the Fund to place the order on your behalf on that day.
Orders received by your broker or Service Organization for the Funds in
proper order prior to the determination of a Fund's net asset value and
transmitted to the Trust prior to the close of its business day (which is
currently 5:00 p.m., Eastern time), will become effective that day. Brokers who
receive orders are obligated to transmit them promptly. You should receive
written confirmation of your order within a few days of receipt of instructions
from your broker.
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the applicable Fund. In most cases, your bank will either be a member
of the Federal Reserve Banking System or have a relationship with a bank that
is. Your bank will normally charge you a fee for handling the transaction. To
purchase Investor Shares by a Federal funds wire, please first contact Furman
Selz Mutual Funds Client Services. They will establish a record of information
for the wire to ensure its correct processing. You can reach the Wire Desk at
1-800-662-8417.
34
<PAGE> 155
Have your bank wire funds using the following instructions:
Investors Fiduciary Trust Company
Kansas City, MO 64105
ABA #1010-0362-1
Account #7527950
Further Credit to: Fund Name
As long as you have read the Prospectus, you may establish a new regular
account through the Wire Desk; IRAs may not be opened in this way. When new
accounts are established by wire, the distribution options will be set to
reinvest and the social security or tax identification number ("TIN") will not
be certified until a signed application is received. Completed applications
should be forwarded immediately to the Funds. With the Purchase Application, the
shareholder can specify other distribution options and add any special features
offered by a Fund. Should any dividend distributions or redemptions be paid
before the TIN is certified, they will be subject to 31% Federal tax
withholding.
Automatic Investment Program. An eligible shareholder may also participate
in the Pacifica Automatic Investment Program, an investment plan that
automatically debits money from the shareholder's bank account and invests it in
one or more of the Funds through the use of electronic funds transfers or
automatic bank drafts. Shareholders may elect to make subsequent investments by
transfers of a minimum of $50 on either the fifth or twentieth day of each month
into their established Fund accounts. Contact the Trust at 1-800-662-8417 for
more information about the Pacifica Automatic Investment Program.
INDIVIDUAL RETIREMENT ACCOUNTS
The Funds may be used as a funding medium for IRAs. Investor Shares may
also be purchased for IRAs established with an affiliate of First Interstate
Bancorp or other authorized custodians. In addition, an IRA may be established
through a custodial account with Investors Fiduciary Trust Company. Completion
of a special application is required in order to create such an account, and the
minimum initial investment for an IRA is $250. Contributions to IRAs are subject
to prevailing amount limits set by the Internal Revenue Service. A $5.00
establishment fee and an annual $12.00 maintenance and custody fee is payable
with respect to each IRA, and there will be a $10.00 termination fee when the
account is closed. For more information, call the Funds at 1-800-662-8417.
35
<PAGE> 156
EXCHANGE OF INVESTOR SHARES
The Funds offer two convenient ways to exchange Investor Shares in a Fund
for Investor Shares in another investment portfolio of the Trust. Before
engaging in an exchange transaction, a shareholder should read carefully the
Prospectus describing the investment portfolio into which the exchange will
occur, which is available without charge and can be obtained by writing to the
Funds at 237 Park Avenue, Suite 910, New York, New York 10017, or by calling
1-800-662-8417. A shareholder may not exchange Investor Shares of one portfolio
for Investor Shares of another portfolio if both or either are not qualified for
sale in the state of the shareholder's residence. The minimum amount for an
initial exchange is $500. No minimum is required in subsequent exchanges. The
Trust may terminate or amend the terms of the exchange privilege at any time.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the net asset value next determined following receipt of the
request by the Trust in good order, plus any applicable sales charge.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
In the case of transactions subject to a sales charge, the sales charge
will be assessed on an exchange of Investor Shares, equal to the excess of the
sales load applicable to the Investor Shares to be acquired over the amount of
any sales load previously paid on the Investor Shares to be exchanged. No
service fee is imposed. See "Dividends, Distributions and Federal Income Tax"
for an explanation of circumstances in which a sales load paid to acquire
Investor Shares of the Funds may not be taken into account in determining gain
or loss on the disposition of those Investor Shares.
In addition, Institutional Shares of a Fund may be exchanged for Investor
Shares of the same Fund in connection with the distribution of assets held in a
qualified trust, agency or custodial account maintained with the trust
department of a First Interstate or other bank, trust company or thrift
institution, or in other cases where Institutional Shares are not held in such
qualified accounts. Similarly, Investor Shares may be exchanged for
Institutional Shares of the same Fund if the shares are to be held in such a
qualified trust, agency or custodial account. These exchanges are made without a
sales charge at the net asset value of the respective share classes.
36
<PAGE> 157
Exchange by Mail. To exchange Investor Shares of a Fund by mail, simply
send a letter of instruction to Furman Selz. The letter of instruction must
include: (i) your account number; (ii) the Fund from and the Fund into which you
wish to exchange your investment; (iii) the dollar or share amount you wish to
exchange; and (iv) the signatures of all registered owners or authorized
parties. All signatures must be guaranteed by an eligible guarantor institution
including a member of a national securities exchange or by a commercial bank or
trust company, broker-dealers, credit unions and savings associations.
Exchange by Telephone. To exchange Investor Shares of a Fund by telephone,
or if you have any questions, simply call the Trust at 1-800-662-8417. You
should be prepared to give the telephone representative the following
information: (i) your account number, social security number and account
registration; (ii) the name of the portfolio from and the portfolio into which
you wish to transfer your investment; and (iii) the dollar or share amount you
wish to exchange. The conversation may be recorded to protect you and the Funds.
Telephone exchanges are automatically available unless the shareholder indicates
that he does not wish to have this privilege by checking the "no" box on the
Purchase Application. See "Redemption of Investor Fund Shares -- By Telephone"
for a discussion of telephone transactions generally.
REDEMPTION OF INVESTOR SHARES
Shareholders may redeem their Investor Shares, in whole or in part, on any
Business Day. Investor Shares will be redeemed at the net asset value next
determined after a redemption request in good order has been received and
accepted by the Trust. See "Fund Share Valuation." A redemption may be a taxable
transaction on which gain or loss may be recognized.
Where the Investor Shares to be redeemed have been purchased by check, the
Trust may delay payment of the redemption proceeds until the purchasing check
has cleared, which may take up to 15 days. Shareholders may avoid this delay by
investing through wire transfers of Federal funds. During the period prior to
the time the Investor Shares are redeemed, dividends on the Investor Shares will
continue to accrue and be payable and the shareholder will be entitled to
exercise all other beneficial rights of ownership.
Once the Investor Shares are redeemed, a Fund will ordinarily send the
proceeds by check to the shareholder at the address of record on the next
Business Day. The Funds may, however, take up to seven days to make payment.
This will not be the customary practice. Also, if the New
37
<PAGE> 158
York Stock Exchange is closed (or when trading is restricted) for any reason
other than the customary weekend or holiday closing or if an emergency condition
as determined by the SEC merits such action, the Funds may suspend redemptions
or postpone payment dates.
To ensure acceptance of your redemption request, it is important to follow
the procedures described below. Although the Trust has no present intention to
do so, it reserves the right to refuse or to limit the frequency of any
telephone or wire redemptions. Of course, it may be difficult to place orders by
telephone during periods of severe market or economic change, and a shareholder
should consider alternative methods of communications, such as couriers or U.S.
mail. The services offered by the Funds may be modified or terminated at any
time. If the Funds terminate any particular service, they will do so only after
giving written notice to shareholders.
You may redeem your Investor Shares using any of the following methods:
Through an Authorized Broker, Investment Advisor or Service
Organization. You may redeem your Investor Shares by contacting your broker or
investment advisor and instructing him or her to redeem your Investor Shares. He
or she will then contact the Funds and place a redemption trade on your behalf.
He or she may charge you a fee for this service.
By Mail. You may redeem your Investor Shares by sending a letter directly
to the Funds. To be accepted, a letter requesting redemption must include: (i)
the Fund name and account registration from which you are redeeming Investor
Shares; (ii) your account number; (iii) the amount to be redeemed; (iv) the
signatures of all registered owners; and (v) a signature guarantee by any
eligible guarantor institution including a member of a national securities
exchange or a commercial bank or trust company, broker-dealers, credit unions
and savings associations. Corporations, partnerships, trusts or other legal
entities will be required to submit additional documentation.
By Telephone. You may redeem your Investor Shares by calling the Funds
toll free at 1-800-662-8417. You should be prepared to give the telephone
representative the following information: (i) your account number, social
security number and account registration; (ii) the Fund name from which you are
redeeming Investor Shares; and (iii) the amount to be redeemed. The conversation
may be recorded to protect you and the Funds. Telephone redemptions are
automatically available unless the shareholder indicates that he does not wish
to have this privilege by checking the "no" box on the Purchase Application. The
Funds employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. If the
38
<PAGE> 159
Funds fail to employ such reasonable procedures, they may be liable for any
loss, damage or expense arising out of any telephone transactions purporting to
be on a shareholder's behalf. In order to assure the accuracy of instructions
received by telephone, the Funds require some form of personal identification
prior to acting upon instructions received by telephone, record telephone
instructions and provide written confirmation to investors of such transactions.
By Wire. You may redeem your Investor Shares by contacting the Funds by
mail or telephone and instructing them to send a wire transmission to your
personal bank.
Your instructions should include: (i) your account number, social security
number and account registration; (ii) the Fund name from which you are redeeming
Investor Shares; and (iii) the amount to be redeemed. Wire redemptions can be
made only if the "yes" box has been checked on your Purchase Application, and a
copy of a void check from the account where proceeds are to be wired is attached
to the Purchase Application. Your bank may charge you a fee for receiving a wire
payment on your behalf.
Check Writing. A check redemption ($500 minimum, no maximum) feature is
available. Checks are free and may be obtained from the Funds. It is not
possible to use a check to close out your account since additional shares accrue
daily.
The above-mentioned services "By Telephone", "By Wire" and "Check Writing"
are not available for IRAs and trust clients of an affiliate of First Interstate
Bancorp.
Systematic Withdrawal Plan. An owner of $10,000 or more of Investor Shares
of a Fund may elect to have periodic redemptions from his or her account to be
paid on a monthly, quarterly, semi-annual or annual basis. The minimum periodic
payment is $100. A sufficient number of Investor Shares to make the scheduled
redemption will normally be redeemed on the date selected by the shareholder.
Depending on the size of the payment requested and fluctuation in the net asset
value, if any, of the Investor Shares redeemed, redemptions for the purpose of
making such payments may reduce or even exhaust the account. A shareholder may
request that these payments be sent to a predesignated bank or other designated
party. Capital gains and dividend distributions paid to the account will
automatically be reinvested at net asset value on the distribution payment date.
Reinstatement Privilege. A shareholder in the Funds who has redeemed
Investor Shares may reinvest, without a sales charge, up to the full
39
<PAGE> 160
amount of such redemption at the net asset value determined at the time of
the reinvestment within 30 days of the original redemption. This privilege must
be effected within 30 days of the redemption. The shareholder must reinvest in
the same Fund and the same account from which the Investor Shares were redeemed.
A redemption is a taxable transaction and gain or loss may be recognized for
Federal income tax purposes even if the reinstatement privilege is exercised.
Any loss realized upon the redemption will not be recognized as to the number of
Investor Shares acquired by reinstatement, except through an adjustment in the
tax basis of the Investor Shares so acquired. See "Dividends, Distributions and
Federal Income Tax" for an explanation of circumstances in which a sales load
paid to acquire Investor Shares of a Fund may not be taken into account in
determining gain or loss on the disposition of those Investor Shares.
Redemption of Small Accounts. Due to the disproportionately higher cost of
servicing small accounts, each Fund reserves the right to redeem, on not less
than 30 days' notice, an account in a Fund that has been reduced by a
shareholder to $500 or less. However, if during the 30-day notice period the
shareholder purchases sufficient Investor Shares to bring the value of the
account above $500, this restriction will not apply.
Redemption in Kind. All redemptions of Investor Shares of the Funds shall
be made in cash, except that the commitment to redeem Investor Shares in cash
extends only to redemption requests made by each shareholder of a Fund during
any 90-day period of up to the lesser of $250,000 or 1% of the net asset value
of that Fund at the beginning of such period. This commitment is irrevocable
without the prior approval of the SEC and is a fundamental policy of the Funds
that may not be changed without shareholder approval. In the case of redemption
requests by shareholders in excess of such amounts, the Board of Trustees
reserves the right to have the Funds make payment, in whole or in part, in
securities or other assets, in case of an emergency or any time a cash
distribution would impair the liquidity of a Fund to the detriment of the
existing shareholders. In this event, the securities would be valued in the same
manner as the securities of that Fund are valued. If the recipient were to sell
such securities, he or she would incur brokerage charges.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
Each Fund has qualified and intends to continue to qualify annually and to
elect to be treated as a regulated investment company pursuant to the provisions
of Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
By so qualifying and electing, each Fund generally will not be subject to
Federal income tax to the extent that it distributes
40
<PAGE> 161
investment company taxable income and net capital gains in the manner required
under the Code.
Each Fund intends to distribute to its shareholders substantially all of
its investment company taxable income (which includes, among other items,
dividends and interest and the excess, if any, of net short-term capital gains
(generally including any net option premium income) over net long-term capital
losses). Investment company taxable income will be distributed by the
Intermediate Government Bond Fund and Intermediate Bond Fund monthly. The other
Funds will declare distributions of such income daily and pay those dividends
monthly. Each Fund intends to distribute, at least annually, substantially all
net capital gain (the excess of net long-term capital gains over net short-term
capital losses). In determining amounts of capital gains to be distributed, any
capital loss carryovers from prior years will be applied against capital gains.
In the case of the Short-Term Government Bond Fund, Asset Preservation Fund
and Government Income Fund, the amount declared each day as a dividend may be
based on projections of estimated monthly net investment income and may differ
from the actual investment income determined in accordance with generally
accepted accounting principles. An adjustment will be made to the dividend each
month to account for any difference between the projected and actual monthly
investment income.
Distributions will be paid in additional shares of the same class held by a
shareholder based on the net asset value at the close of business on the payment
date of the distribution, unless the shareholder elects in writing, which is
received by Furman Selz not less than five full business days prior to the
record date, to receive such distributions in cash. In the case of the Funds
that declare daily dividends, shares purchased will begin earning dividends on
the day after the purchase order is executed, and shares redeemed will earn
dividends through the day the redemption is executed. Investors who redeem all
or a portion of Fund shares prior to a dividend payment date will be entitled on
the next dividend payment date to all dividends declared but unpaid on those
shares at the time of their redemption.
Distributions of investment company taxable income (regardless of whether
derived from dividends, interest or net short-term capital gains) will be
taxable to shareholders as ordinary income. Distributions of net long-term
capital gains designated by a Fund as capital gain dividends will be taxable as
long-term capital gains, regardless of how long a shareholder has held his Fund
shares. Distributions are taxable in the same manner whether received in
additional shares or in cash.
41
<PAGE> 162
Earnings of the Funds not distributed on a timely basis in accordance with
a calendar year distribution requirement are subject to a nondeductible 4%
excise tax. To prevent imposition of this tax, each Fund intends to comply with
this distribution requirement.
A distribution, including an "exempt-interest dividend," will be treated as
paid on December 31 of a calendar year if it is declared by a Fund during
October, November, or December of that year to shareholders of record in such a
month and paid by a Fund during January of the following calendar year. Such
distributions will be treated as received by shareholders in the calendar year
in which the distributions are declared, rather than the calendar year in which
the distributions are received.
Special tax rules may apply to a Fund's acquisition of financial futures
contracts, forward contracts, and options on futures contracts. Such rules may,
among other things, affect whether gains and losses from such transactions are
considered to be short-term or long-term, may have the effect of deferring
losses and/or accelerating the recognition of gains or losses, and, for purposes
of qualifying as a regulated investment company, may limit the extent to which a
Fund may be able to engage in such transactions.
A Fund's distributions with respect to a given taxable year may exceed the
current and accumulated earnings and profits of that Fund available for
distribution. In that event, distributions in excess of such earnings and
profits would be characterized as a return of capital to shareholders for
Federal income tax purposes, thus reducing each shareholder's cost basis in his
Fund shares. Distributions in excess of a shareholder's cost basis in his shares
would be treated as a gain realized from a sale of such shares.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of a Fund, or upon receipt of a distribution in complete
liquidation of a Fund, generally will be a capital gain or loss which will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares. A loss realized by a shareholder on a redemption, sale,
or exchange of shares of a Fund that were not held for more than six months with
respect to which capital gain dividends have been paid will be characterized as
a long-term capital loss to the extent of such capital gain dividends.
Before purchasing shares in the Funds, the impact of dividends or
distributions which are expected to be declared or have been declared, but not
paid, should be carefully considered. Any dividend or distribution declared
shortly after a purchase of such shares prior to the record date will have the
effect of reducing the per share net asset value by the per share
42
<PAGE> 163
amount of the dividend or distribution. All or a portion of such dividend or
distribution, although in effect a return of capital, may be subject to tax.
The dividends paid by the Funds are not expected to qualify for the
dividends-received deduction available to corporations.
Under certain circumstances, the sales charge incurred in acquiring shares
of a Fund may not be taken into account in determining the gain or loss on the
disposition of those shares. This rule applies where shares of a Fund are
exchanged within 90 days after the date they were purchased and new shares of
the Fund or of another investment portfolio of the Trust are acquired without a
sales charge or at a reduced sales charge. In that case, the gain or loss
recognized on the exchange will be determined by excluding from the tax basis of
the shares exchanged all or a portion of the sales charge incurred in acquiring
those shares. This exclusion applies to the extent that the otherwise applicable
sales charge with respect to the newly acquired shares is reduced as a result of
having incurred a sales charge initially. The portion of the sales charge
affected by this rule will be treated as a sales charge paid for the new shares.
The Funds may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where a Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Most corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Income or gain from investments in foreign securities may be subject to
foreign withholding or other taxes. It is expected that the Funds may be subject
to foreign withholding taxes with respect to income received from sources within
foreign countries.
If a Fund invests in certain "passive foreign investment companies"
("PFICs"), it would be subject to Federal income tax (and possibly additional
interest charges) on a portion of any excess distribution or gain from the
disposition of such shares even if it distributes such income to its
shareholders. If a Fund elects to treat the PFIC as a qualified electing fund
("QEF") and the PFIC furnishes certain financial information in the required
form to such Fund, the Fund would instead be required to include in income each
year its allocable share of the ordinary earnings and net capital gains on the
QEF, regardless of whether received, and such
43
<PAGE> 164
amounts would be subject to the various distribution requirements described
above.
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund(s) in which they invest. Depending on
the residence of the shareholder for tax purposes, distributions also may be
subject to state and local taxes, including withholding taxes. Foreign
shareholders may, for example, be subject to special withholding requirements.
Special tax treatment, including a penalty on certain preretirement
distributions, is accorded to accounts maintained as IRAs. Shareholders should
consult their own tax advisors as to the Federal, state and local tax
consequences of ownership of shares of the Funds in their particular
circumstances.
DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES
U.S. Government Obligations. U.S. Government securities are obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
U.S. Treasury obligations are direct obligations of the United States and are
the most frequently issued marketable U.S. Government security.
U.S. Government agency and instrumentality obligations are debt securities
issued by U.S. Government-sponsored enterprises and Federal agencies. Some
obligations of agencies are supported by the full faith and credit of the United
States or by U.S. Treasury guarantees, such as mortgage-backed certificates,
which may be guaranteed by the Government National Mortgage Association; others,
such as obligations of the Federal Home Loan Banks, Federal Farm Credit Bank,
Bank for Cooperatives, Federal Intermediate Credit Banks and the Federal Land
Bank, are guaranteed by the right of the issuer to borrow from the U.S.
Treasury; others, such as obligations of the Federal National Mortgage
Association, are supported by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others, such
as obligations of the Student Loan Marketing Association and the Tennessee
Valley Authority, are backed only by the credit of the agency or instrumentality
issuing the obligation. In the case of obligations not backed by the full faith
and credit of the United States, the investor must look principally to the
agency issuing or guaranteeing the obligation for ultimate repayment.
Repurchase Agreements. The Funds may agree to purchase securities subject
to the seller's agreement to repurchase them at a mutually
44
<PAGE> 165
agreed upon date and price. The Funds will enter into such repurchase agreements
only with financial institutions that are deemed to be creditworthy by the
Advisor, pursuant to guidelines established by the Trust's Board of Trustees.
During the term of any repurchase agreement, the Advisor will continue to
monitor the creditworthiness of the seller. The Funds will not enter into
repurchase agreements with the Advisor or its affiliates. Although the
securities subject to repurchase agreements may bear maturities exceeding 13
months, the Funds do not presently intend to enter into repurchase agreements
with deemed maturities in excess of seven days. If in the future a Fund was to
enter into repurchase agreements with deemed maturities in excess of seven days,
such Fund would do so only if such investment, together with other illiquid
securities, did not exceed 15% (10% in the case of the Asset Preservation Fund
and Government Income Fund) of the value of that Fund's net assets.
The seller under a repurchase agreement will be required to maintain the
value of the securities that are subject to the agreement and held by a Fund at
not less than the repurchase price. Default or bankruptcy of the seller would,
however, expose a Fund to possible delay in connection with the disposition of
the underlying securities or loss to the extent that proceeds from a sale of the
underlying securities were less than the repurchase price under the agreement.
Bank Obligations. Bank obligations include bankers' acceptances,
negotiable certificates of deposit and non-negotiable time deposits issued by a
U.S. bank, savings bank or savings association that is a member of the Federal
Reserve System or insured by the Federal Deposit Insurance Corporation. The
Funds may also invest in U.S. dollar-denominated obligations of foreign banks.
Obligations of foreign banks or foreign branches of U.S. banks entail risks that
are different from those of investments in domestic obligations of U.S. banks.
These additional risks include future political and economic developments, the
possible imposition of withholding taxes on interest income, possible seizure or
nationalization of foreign deposits, the possible establishment of exchange
controls, or the adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on such obligations. In
addition, foreign branches of U.S. banks and U.S. branches of foreign banks may
be subject to less stringent reserve requirements and to different accounting,
auditing, reporting, and recordkeeping standards than those applicable to
domestic branches of U.S. banks. Investments in domestic and foreign bank
obligations are limited to the obligations of financial institutions having $1
billion or more in total assets at the time of purchase.
45
<PAGE> 166
Commercial Paper. Commercial paper includes short-term unsecured
promissory notes, variable rate demand notes and variable rate master demand
notes issued by domestic and foreign bank holding companies, corporations and
financial institutions, as well as similar instruments issued by government
agencies and instrumentalities. Investments by the Funds in commercial paper
will consist of issues that are rated in one of the two highest rating
categories by a NRSRO. In addition, the Funds may acquire unrated commercial
paper and corporate bonds that are determined by the Advisor at the time of
purchase to be of comparable quality to rated instruments that may be acquired
by the Funds. Commercial paper may include variable and floating rate
instruments.
Securities Issued by Other Investment Companies. Each Fund may invest in
securities issued by other investment companies within the limits prescribed by
the 1940 Act. Each Fund currently intends to limit its investments so that, as
determined immediately after a securities purchase is made: (a) not more than 5%
of the value of its total assets will be invested in the securities of any one
investment company; (b) not more than 10% of the value of its total assets will
be invested in the aggregate in securities of investment companies as a group;
(c) not more than 3% of the outstanding voting stock of any one investment
company will be owned by the Fund; and (d) not more than 10% of the outstanding
voting stock of any one investment company will be owned in the aggregate by a
Fund and other investment companies advised by the Advisor or any other
affiliate of First Interstate Bancorp. As a shareholder of another investment
company, a Fund would bear, along with other shareholders, its pro rata portion
of the expenses of such other investment company, including advisory fees. These
expenses would be in addition to the advisory and other expenses that each Fund
bears directly in connection with its own operations, and may represent a
duplication of fees to shareholders of that Fund.
Variable and Floating Rate Instruments. Instruments purchased by a Fund
may include variable and floating rate demand instruments issued by
corporations, industrial development authorities and governmental entities.
These instruments may include variable amount master demand notes that permit
the indebtedness to vary in addition to providing for periodic adjustments in
the interest rate. Although variable and floating rate demand instruments are
frequently not rated by credit rating agencies, unrated instruments purchased by
a Fund will be determined to be of comparable quality to rated instruments that
may be purchased by the Fund. While there may be no active secondary market with
respect to a particular variable or floating rate instrument purchased by a
Fund, the Funds may, from time to time as specified in the instrument, demand
46
<PAGE> 167
payment in full of the principal of the instrument or may resell the instrument
to a third party. The absence of such an active secondary market, however, could
make it difficult for a Fund to dispose of a variable or floating rate demand
instrument if the issuer defaulted on its payment obligations or during periods
that the Fund is not entitled to exercise its demand rights, and the Fund could,
for these or other reasons, suffer a loss.
Loans of Portfolio Securities. To increase return, a Fund may lend its
portfolio securities to broker/dealers and other institutional investors
pursuant to agreements requiring that the loans be continuously secured by
collateral equal at all times in value to at least the market value of the
securities loaned. The collateral for such loans may include cash, securities of
the U.S. Government, its agencies or instrumentalities, or irrevocable letters
of credit issued by a bank, or any combination thereof. For each Fund, such
loans will not be made if, as a result, the aggregate of all outstanding loans
exceeds 30% of the value of the Fund's total assets. There may be risks of delay
in receiving additional collateral or in recovering the securities loaned or
even a loss of rights in the collateral should the borrower of the securities
fail financially. However, loans are made only to borrowers deemed by the
Advisor to be of good standing and when, in their judgment, the income to be
earned from the loan justifies the attendant risks.
Forward Commitments, When-Issued Purchases and Delayed-Delivery
Transactions. The Funds may purchase or sell securities on a when-issued or
delayed-delivery basis and make contracts to purchase or sell securities for a
fixed price at a future date beyond customary settlement time. Securities
purchased or sold on a when-issued, delayed-delivery or forward commitment basis
involve a risk of loss if the value of the security to be purchased declines, or
the value of the security to be sold increases, before the settlement date.
Although a Fund will generally purchase securities with the intention of
acquiring them, a Fund may dispose of securities purchased on a when-issued,
delayed-delivery or a forward commitment basis before settlement when deemed
appropriate by the Advisor.
Mortgage-Related Securities. Mortgage pass-through securities are
securities representing interests in "pools" of mortgages in which payments of
both interest and principal on the securities are made monthly, in effect
"passing through" monthly payments made by the individual borrowers on the
residential mortgage loans which underlie the securities (net of fees paid to
the issuer or guarantor of the securities). Early repayment of principal on
mortgage pass-through securities (arising from prepayments of principal due to
sale of the underlying property, refinancing, or foreclosure,
47
<PAGE> 168
net of fees and costs which may be incurred) may expose a Fund to a lower rate
of return upon reinvestment of principal. Also, if a security subject to
prepayment has been purchased at a premium, in the event of prepayment the value
of the premium would be lost. Like other fixed-income securities, when interest
rates rise, the value of a mortgage-related security generally will decline;
however, when interest rates decline, the value of mortgage-related securities
with prepayment features may not increase as much as other fixed-income
securities. In recognition of this prepayment risk to investors, the Public
Securities Association (the "PSA") has standardized the method of measuring the
rate of mortgage loan principal prepayments. The PSA formula, the Constant
Prepayment Rate (the "CPR") or other similar models that are standard in the
industry will be used by a Fund in calculating maturity for purposes of its
investment in mortgage-related securities. Because the average life of
mortgage-related securities may lengthen with increases in interest rates, the
portfolio-weighted average life of the securities in which a Fund is invested
may at times lengthen due to this effect. Under these circumstances, the Advisor
may, but is not required to, sell securities in order to maintain an appropriate
dollar-weighted average portfolio maturity.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by the
full faith and credit of the U.S. Government (in the case of securities
guaranteed by the Government National Mortgage Association ("GNMA"); or
guaranteed by agencies or instrumentalities of the U.S. Government (in the case
of securities guaranteed by the Federal National Mortgage Association ("FNMA")
or the Federal Home Loan Mortgage Corporation ("FHLMC"), which are supported
only by the discretionary authority of the U.S. Government to purchase the
agency's obligations). Mortgage pass-through securities created by
non-governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers) may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance, and
letters of credit, which may be issued by governmental entities, private
insurers or the mortgage poolers.
The Funds may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs") which are hybrid instruments with characteristics of both
mortgage-backed bonds and mortgage pass-through securities. CMOs may be
collateralized by whole mortgage loans but are more typically collateralized by
portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC or
FNMA. CMOs are structured into
48
<PAGE> 169
multiple classes, with each class bearing a different stated maturity. Payments
of principal, including prepayments, are first returned to investors holding the
shortest maturity class; investors holding the longer maturity classes receive
principal only after the first class has been retired.
Assumptions generally accepted by the industry concerning the probability
of early payment may be used in the calculation of maturities for debt
securities that contain put or call provisions, sometimes resulting in a
calculated maturity different than the stated maturity of the security.
The Advisor expects that governmental, government-related or private
entities may create mortgage loan pools and other mortgage-related securities
offering mortgage pass-through and mortgage-collateralized investments in
addition to those described above. As new types of mortgage-related securities
are developed and offered to investors, the Advisor will, consistent with a
Fund's investment objective, policies and quality standards, consider making
investments in such new types of mortgage-related securities.
Other Asset-Backed Securities. Other asset-backed securities (unrelated to
mortgage loans) have been offered to investors. These asset-backed securities
may consist of undivided fractional interests in pools of consumer loans or
receivables held in a trust. Examples include certificates for automobile
receivables (CARS) and credit card receivables (CARDS). Payments of principal
and interest on these asset-backed securities are "passed through" on a monthly
or other periodic basis to certificate holders and are typically supported by
some form of credit enhancement, such as a letter of credit, surety bond,
limited guaranty, or subordination. The extent of credit enhancement varies, but
usually amounts to only a fraction of the asset-backed security's par value
until exhausted. Ultimately, asset-backed securities are dependent upon payment
of the consumer loans or receivables by individuals, and the certificate holder
frequently has no recourse to the entity that originated the loans or
receivables.
The underlying assets may be prepaid with the result of shortening the
certificates' weighted average life. Prepayment rates vary widely and may be
affected by changes in market interest rates. It is not possible to accurately
predict the average life of a particular pool of loans or receivables. The
proceeds of prepayments received by a Fund must be reinvested in securities
whose yields reflect interest rates prevailing at the time. Thus, a Fund's
ability to maintain a portfolio which includes high-yielding asset-backed
securities will be adversely affected to the extent reinvestments are in lower
yielding securities. The actual maturity and realized yield will therefore vary
based upon the prepayment experience of the underlying
49
<PAGE> 170
asset pool and prevailing interest rates at the time of prepayment. Asset-backed
securities are relatively new instruments and may be subject to greater risk of
default during periods of economic downturn than other instruments. Also, the
secondary market for certain asset-backed securities may not be as liquid as the
market for other types of securities, which could result in a Fund's
experiencing difficulty in valuing or liquidating such securities. For
asset-backed securities, the industry standard uses a principal prepayment
model, the "ABS Model," which is similar to the PSA described previously under
"Mortgage-Related Securities." Either the PSA model, the ABS model or other
similar models that are standard in the industry will be used by the Funds in
calculating maturity for purposes of its investment in asset-backed securities.
Derivative Securities. The Funds may invest in structured notes, bonds or
other instruments with interest rates that are determined by reference to
changes in the value of other interest rates, indices or financial indicators
("References") or the relative change in two or more References. The Funds may
also hold derivative instruments that have interest rates that reset inversely
to changing current market rates and/or have embedded interest rate floors and
caps that require the issuer to pay an adjusted interest rate if market rates
fall below or rise above a specified rate. These instruments represent
relatively recent innovations in the bond markets, and the trading market for
these instruments is less developed than the markets for traditional types of
debt instruments. It is uncertain how these instruments will perform under
different economic and interest-rate scenarios. Because certain of these
instruments are leveraged, their market values may be more volatile than other
types of bonds and may present greater potential for capital gain or loss. On
the other hand, the imbedded option features of other derivative instruments
could limit the amount of appreciation a Fund can realize on its investment,
could cause a Fund to hold a security it might otherwise sell or could force the
sale of a security at inopportune times or for prices that do not reflect
current market value. The possibility of default by the issuer or the issuer's
credit provider may be greater for these structured and derivative instruments
than for other types of instruments. In some cases it may be difficult to
determine the fair value of a structured or derivative instrument because of a
lack of reliable objective information and an established secondary market for
some instruments may not exist.
Stripped Obligations. To the extent consistent with their respective
investment objectives, the Funds may purchase Treasury receipts and other
"stripped" securities that evidence ownership in either the future interest
payments or the future principal payments on U.S. Government and other
50
<PAGE> 171
obligations. These participations, which may be issued by the U.S. Government
(or a U.S. Government agency or instrumentality) or by private issuers such as
banks and other institutions, are issued at a discount to their "face value,"
and may include stripped mortgage-backed securities ("SMBS"). Stripped
securities, particularly, SMBS, may exhibit greater price volatility than
ordinary debt securities because of the manner in which their principal and
interest are returned to investors.
SMBS are usually structured with two or more classes that receive different
proportions of the interest and principal distributors from a pool of
mortgage-backed obligations. A common type of SMBS will have one class receiving
all of the interest, while the other class receives all of the principal.
However, in some cases, one class will receive some of the interest and most of
the principal while the other class will receive most of the interest and the
remainder of the principal. If the underlying obligations experience greater
than anticipated prepayments of principal, a Fund may fail to fully recoup its
initial investment. The market value of the class consisting entirely of
principal payments can be extremely volatile in response to changes in interest
rates. The yields on a class of SMBS that receives all or most of the interest
are generally higher than prevailing market yields on other mortgage-backed
obligations because their cash flow patterns are also volatile and there is a
greater risk that the initial investment will not be fully recouped.
SMBS issued by the U.S. Government (or a U.S. Government agency or
instrumentality) may be considered liquid under guidelines established by the
Board of Trustees if they can be disposed of promptly in the ordinary course of
business at a value reasonably close to that used in the calculation of a Fund's
per share net asset value.
Custodial Receipts for Treasury Securities. To the extent consistent with
their respective investment objectives, the Funds may purchase participations in
trusts that hold U.S. Treasury securities (such as TIGRs and CATS) or other
obligations where the trust participations evidence ownership in either the
future interest payments or the future principal payments on the obligations.
These participations are normally issued at a discount to their "face value,"
and can exhibit greater price volatility than ordinary debt securities because
of the way in which their principal and interest are returned to investors.
Investments by a Fund in such participations will not exceed 5% of the value of
that Fund's total assets.
Foreign Securities. The Intermediate Bond Fund may invest up to 20% of the
value of its total assets in U.S. dollar-denominated debt obligations of foreign
issuers. The Asset Preservation Fund and Govern-
51
<PAGE> 172
ment Income Fund will ordinarily purchase U.S. dollar-denominated or foreign
currency-denominated securities that are traded in the United States, but they
may invest up to 5% of their total assets directly in foreign markets.
Investments in foreign securities involve certain inherent risks, such as
political or economic instability of the issuer or the country of the issue, the
difficulty of predicting international trade patterns, changes in exchange rates
of foreign currencies and the possibility of adverse changes in investment or
exchange control regulations. There may be less publicly available information
about a foreign company than about a domestic company. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic companies.
Further, foreign stock markets are generally not as developed or efficient as
those in the United States, and in most foreign markets volume and liquidity are
less than in the United States. Fixed commissions on foreign stock exchanges are
generally higher than the negotiated commissions on U.S. exchanges, and there is
generally less government supervision and regulation of foreign stock exchanges,
brokers and companies than in the United States. With respect to certain foreign
countries, there is a possibility of expropriation or confiscatory taxation,
limitations on the removal of funds or other assets, or diplomatic developments
that could affect investment within those countries. Because of these and other
factors, securities of foreign companies acquired by a Fund may be subject to
greater fluctuation in price than securities of domestic companies.
Forward Currency Transactions. The Asset Preservation Fund and Government
Income Fund may enter into forward foreign currency exchange contracts in order
to protect against uncertainty in the level of future foreign exchange rates.
See the SAI for further information concerning foreign currency transactions.
Options. Each Fund may purchase put and call options listed on a national
securities exchange and issued by the Options Clearing Corporation in an amount
not exceeding 5% of its net assets. Purchasing options is a specialized
investment technique that entails a substantial risk of a complete loss of the
amounts paid as premiums to the writer of the option.
The Funds may also write covered call and secured put options from time to
time as the Advisor deems appropriate. By writing a covered call option, a Fund
forgoes the opportunity to profit from an increase in the market price of the
underlying security above the exercise price except insofar as the premium
represents such a profit, and it is not able to sell the
52
<PAGE> 173
underlying security until the option expires or is exercised or the Fund
effects a closing purchase transaction by purchasing an option of the same
series. If a Fund writes a secured put option, it assumes the risk of loss
should the market value of the underlying security decline below the exercise
price of the option. The aggregate value of the securities subject to options
written by a Fund will not exceed 25% of the value of its net assets. The use of
covered call options and secured put options will not be a primary investment
technique of the Funds, and they are expected to be used infrequently. If the
Advisor is incorrect in its forecast of market value or other factors when
writing the foregoing options, a Fund would be in a worse position than it would
have been had the foregoing investment techniques not been used.
The Asset Preservation Fund and Government Income Fund may also engage in
unlisted over-the-counter options with broker/dealers deemed creditworthy by the
Advisor. Closing transactions for such options are usually effected directly
with the same broker/dealer that effected the original option transaction. A
Fund bears the risk that the broker/dealer will fail to meet its obligations.
There is no assurance that a liquid secondary trading market exists for closing
out an unlisted option position. Furthermore, unlisted options are not subject
to the protections afforded purchasers of listed options by the Options Clearing
Corporation, which performs the obligations of its members who fail to perform
in connection with the purchase or sale of options.
For additional information relating to option trading practices, including
the particular risks thereof, see the SAI.
Interest Rate Futures. Each Fund may purchase and sell interest rate
future contracts as a hedge against changes in interest rates, provided that not
more than 5% of a Fund's net assets are committed to such transactions. See the
SAI for further information about interest rate futures.
Illiquid Securities. Each Fund will not knowingly invest more than 15%
(10% in the case of the Asset Preservation Fund and Government Income Fund) of
the value of its net assets in securities that are illiquid because of
restrictions on transferability or other reasons. Repurchase agreements with
deemed maturities in excess of seven days, time deposits maturing in more than
seven days and securities that are not registered under the Securities Act of
1933 but may be purchased by institutional buyers under Rule 144A are subject to
this limit (unless such securities are variable amount master demand notes with
maturities of nine months or less or unless the Advisor determines under the
supervision of the Board that a liquid trading market exists).
53
<PAGE> 174
Rule 144A allows for a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the Securities
Act of 1933 for resales of certain securities to qualified institutional buyers.
The Advisor believes that the market for certain restricted securities may
expand further as a result of this regulation and the development of automated
systems for the trading, clearance and settlement of unregistered securities of
domestic and foreign issuers, such as the PORTAL System sponsored by the NASD.
The Advisor monitors the liquidity of restricted securities in each of the
Funds under the supervision of the Board of Trustees. In reaching liquidity
decisions, the Advisor will consider such factors as: (a) the frequency of
trades and quotes for the security; (b) the number of dealers wishing to
purchase or sell the security and number of other potential purchasers; (c)
dealer undertakings to make a market in the security; and (d) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer). The use of Rule 144A transactions could have the effect of
increasing the level of illiquidity of the Funds during periods that qualified
institutional buyers become uninterested in purchasing restricted securities.
INVESTMENT RESTRICTIONS
Each Fund has adopted certain fundamental investment restrictions that may
be changed only with the approval of a majority of a Fund's outstanding shares.
The following description summarizes several of the Funds' fundamental
restrictions, which are set forth in full in the SAI.
No Fund may:
1. Purchase securities (except U.S. Government securities and repurchase
agreements collateralized by such securities) if more than 5% of its
total assets at the time of purchase will be invested in securities of
any one issuer, except that up to 25% of a Fund's total assets may be
invested without regard to this 5% limitation.
2. Subject to the foregoing 25% exception, purchase more than 10% of the
outstanding voting securities of any issuer.
3. Invest 25% or more of its total assets at the time of purchase in
securities of issuers whose principal business activities are in the
same industry.
54
<PAGE> 175
4. Borrow money except in amounts up to 10% of the value of its total
assets at the time of borrowing.
If a percentage restriction on the investment or use of assets set forth in
this Prospectus is adhered to at the time a transaction is effected, later
changes in percentage resulting from changing values will not be considered a
violation, however, the Funds will not at any time have more than 15% of their
respective net assets invested in illiquid securities.
OTHER INFORMATION
CAPITALIZATION
Pacifica Funds Trust (formerly Fund Source) was organized as a
Massachusetts business trust on July 17, 1984. The capitalization of the Trust
consists solely of an unlimited number of shares of beneficial interest with a
par value of $0.001 each. When issued, shares of the Funds are fully paid,
non-assessable and freely transferable.
The Board of Trustees has authorized the issuance of two classes of shares
in each of the Funds described in this Prospectus -- Investor Shares and
Institutional Shares. Each share of a Fund represents an equal proportionate
interest in a particular Fund with other shares of the same class and is
entitled to such dividends and distributions earned on such shares as are
declared in the discretion of the Board of Trustees.
Each Fund's Investor Shares and Institutional Shares bear their pro rata
portion of all operating expenses paid by the Fund except for the distribution
payments, Service Organization fees and other "class" expenses that are
allocated to a particular share class. The Board of Trustees has not approved a
Distribution Plan with respect to Institutional Shares. Each Fund may pay fees
to Service Organizations in amounts up to an annual rate of 0.25% of the average
daily net asset value of the Funds' outstanding Institutional Shares owned by
shareholders with whom a Service Organization has a servicing relationship.
Institutional Shares of the Funds are purchased at net asset value per share
without a sales charge. Because of the "class expenses" and sales charges, the
performance of a Fund's Institutional Shares is expected to be higher than the
performance of its Investor Shares. The Trust offers various services and
privileges in connection with its Investor Shares that are not offered in
connection with its Institutional Shares, including an automatic investment
plan, automatic withdrawal plan and, with respect to certain portfolios,
checkwriting. For information regarding the Funds' Institutional Shares, contact
Furman Selz at 1-800-662-8417 or your Service Organization.
55
<PAGE> 176
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust. The Declaration of Trust also
provides for indemnification out of the property of a Fund of any shareholder
held personally liable solely by reason of being or having been a shareholder of
the Fund. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a Fund itself would
be unable to meet its obligations and should be considered remote.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Trust is not required to hold regular
annual meetings of the Funds' shareholders, but in the event that a special
meeting is held, shareholders of each portfolio offered by the Trust will be
entitled to one vote for each full share held and fractional votes for
fractional shares held, and will vote in the aggregate and not on a
portfolio-by-portfolio basis, except as required by the 1940 Act or other
applicable law. It is contemplated that, as required by the 1940 Act, the
shareholders of a portfolio will vote separately on a portfolio-by-portfolio
basis on matters relating to a particular portfolio's investment advisory
agreement or changes in a portfolio's fundamental investment limitations, and on
other matters where the interests of the respective portfolios are not
substantially identical. Similarly, shareholders of each portfolio will vote in
the aggregate and not by class unless the Trustees determine that the matter to
be voted on affects only the interests of the holders of a particular class of a
Fund's shares. Voting rights are not cumulative.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust and in connection with such meeting to comply with the shareholders'
communications provisions of Section 16(c) of the 1940 Act.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of a Fund means, with respect to the
56
<PAGE> 177
approval of an investment advisory agreement or a change in a fundamental
investment policy, the vote of the lesser of: (1) 67% of the shares of a Fund
present at a meeting if the holders of more than 50% of the outstanding shares
are present in person or by proxy; or (2) more than 50% of the outstanding
shares of a Fund. For purposes of the 1940 Act, any person who owns either
directly or through one or more controlled companies more than 25 percent of the
voting securities of a company is presumed to "control" such company. Under this
definition, First Interstate Bancorp and its affiliates may be deemed to be
controlling persons of the Trust.
PERFORMANCE INFORMATION
A Fund may, from time to time, include yield and total return data for its
Investor Shares and Institutional Shares in advertisements or reports to
shareholders or prospective investors. The methods used to calculate the yields
and total returns of the Funds are mandated by the SEC.
Quotations of "yield" for a class of shares of a Fund will be based on the
investment income per share during a particular 30-day (or one month) period
(including dividends and interest), less expenses accrued during the period
("net investment income"), and will be computed by dividing net investment
income by the maximum public offering price per share on the last day of the
period.
Quotations of yield reflect only the performance of a class of shares
during the particular period on which the calculations are based. Yield will
vary based on changes in market conditions, the level of interest rates and the
level of the expenses of a particular class of shares, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
Quotations of average annual total return for a class of shares of a Fund
will be expressed in terms of the average annual compounded rate of return of a
hypothetical investment in that class over periods of 1, 5 and 10 years (up to
the life of that class), reflect the deduction of a proportional share of
expenses allocated to that class (on an annual basis), and assume that all
dividends and distributions are reinvested when paid.
Performance information for a Fund may be compared to various unmanaged
indices, such as the Standard & Poor's 500 Stock Index, the Dow Jones Industrial
Average, indices prepared by Lipper Analytical Services, and other entities or
organizations which track the performance of investment companies. Any
performance information should be considered in light of a Fund's investment
objective and policies, characteristics and quality of the Fund and the market
conditions during the time period
57
<PAGE> 178
indicated, and should not be considered to be representative of what may be
achieved in the future. For a description of the methods used to determine yield
and total return for the Funds, see "Other Information -- Performance
Information" in the SAI.
ACCOUNT SERVICES
All transactions in shares of the Funds will be reflected in a statement
for each shareholder. In those cases where a Service Organization or its nominee
is shareholder of record of shares purchased for its customer, the Funds have
been advised that the statement may be transmitted to the customer at the
discretion of the Service Organization.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Funds at 237 Park
Avenue, Suite 910, New York, New York 10017.
General and Account Information: (800) 662-8417
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
FUNDS OR BY THEIR DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY FIRST INTERSTATE BANCORP OR ITS AFFILIATES,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
58
<PAGE> 179
APPENDIX
DESCRIPTION OF MOODY'S BOND RATINGS:
Excerpts from Moody's description of its four highest bond ratings are
listed as follows: Aaa -- judged to be the best quality and they carry the
smallest degree of investment risk; Aa -- judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds; A -- possess many favorable investment attributes and are
to be considered as "upper medium grade obligations"; Baa -- considered to be
medium grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Other Moody's bond
descriptions include: Ba -- judged to have speculative elements, their future
cannot be considered as well assured; B -- generally lack characteristics of the
desirable investment; Caa -- are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; Ca -- speculative in a high degree, often in default; C -- lowest
rated class of bonds, regarded as having extremely poor prospects.
Moody's also supplies numerical indicators 1, 2 and 3 to rating categories.
The modifier 1 indicates that the security is in the higher end of its rating
category; the modifier 2 indicates a mid-range ranking; and modifier 3 indicates
a ranking toward the lower end of the category.
DESCRIPTION OF S&P'S BOND RATINGS:
Excerpts from S&P's description of its four highest bond ratings are listed
as follows: AAA -- highest grade obligations, in which capacity to pay interest
and repay principal is extremely strong; AA -- also qualify as high grade
obligations, having a very strong capacity to pay interest and repay principal,
and differs from AAA issues only in a small degree; A -- regarded as upper
medium grade, having a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories;
BBB -- regarded as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories. This group is the lowest which qualifies for
commercial bank investment. BB, B, CCC, CC -- predominantly speculative with
respect to
A-1
<PAGE> 180
capacity to pay interest and repay principal in accordance with terms of the
obligations; BB indicates the highest grade and CC the lowest within the
speculative rating categories.
S&P applies indicators "+," no character, and "-" to its rating categories.
The indicators show relative standing within the major rating categories.
DESCRIPTION OF MOODY'S RATINGS OF NOTES AND VARIABLE RATE DEMAND INSTRUMENTS:
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or MIG. Such ratings recognize the
differences between short-term credit and long-term risk. Short-term ratings on
issues with demand features (variable rate demand obligations) are
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payments
relying on external liquidity.
MIG 1/VMIG 1: This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This denotes high quality. Margins of protection are ample
although not as large as in the preceding group.
DESCRIPTION OF MOODY'S TAX-EXEMPT COMMERCIAL PAPER RATINGS:
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations which have an original maturity not
exceeding nine months. Moody's makes no representation that such obligations are
exempt from registration under the Securities Act of 1933, nor does it represent
that any specific note is a valid obligation of a rated issuer or issued in
conformity with any applicable law. The following designations, all judged to be
investment grade, indicate the relative repayment ability of rated issuers of
securities in which the Trust may invest.
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term promissory obligations.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term promissory obligations.
A-2
<PAGE> 181
DESCRIPTION OF S&P'S RATINGS FOR MUNICIPAL BONDS:
INVESTMENT GRADE
AAA: Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA: Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A: Debt rated "A" has strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
SPECULATIVE GRADE
BB, B, CCC, CC: Debt rated in these categories is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
CI: The "CI" rating is reserved for income bonds on which no interest is
being paid.
D: Debt rated "D" is in default, and payment of interest and/or repayment
of principal is in arrears.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
DESCRIPTION OF S&P'S RATINGS FOR INVESTMENT GRADE MUNICIPAL NOTES AND SHORT-TERM
DEMAND OBLIGATIONS:
SP-1: Issues carrying this designation have a very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus (+) designation.
A-3
<PAGE> 182
SP-2: Issues carrying this designation have a satisfactory capacity to pay
principal and interest.
DESCRIPTION OF S&P'S RATINGS FOR DEMAND OBLIGATIONS AND TAX-EXEMPT COMMERCIAL
PAPER:
An S&P commercial paper rating is a current assessment of the likelihood of
timely repayment of debt having an original maturity of no more than 365 days.
The two rating categories for securities in which the Trust may invest are as
follows:
A-1: This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics will be denoted with a plus (+)designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-4
<PAGE> 183
INVESTMENT ADVISOR
First Interstate Capital Management, Inc.
7501 East McCormick Parkway
Scottsdale, Arizona 85258
ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Pacifica Funds Distributor Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
First Interstate Bank of California
707 Wilshire Boulevard
Los Angeles, California 90017
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
[PACIFICA LOGO] PACBDIV-2/96
<PAGE> 184
[PACIFICA LOGO]
(INSTITUTIONAL SHARES)
PACIFICA SHORT-TERM GOVERNMENT
BOND FUND
PACIFICA INTERMEDIATE GOVERNMENT
BOND FUND
PACIFICA INTERMEDIATE
BOND FUND
PACIFICA ASSET PRESERVATION FUND
PACIFICA GOVERNMENT INCOME FUND
PROSPECTUS
FEBRUARY 1, 1996
[FIRST INTERSTATE BANK LOGO]
Investment Advisor to The Pacifica Funds
<PAGE> 185
PACIFICA FUNDS TRUST
(INSTITUTIONAL SHARES)
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) 662-8417
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. --
INVESTMENT ADVISOR
("FICM" OR THE "ADVISOR")
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
("FURMAN SELZ" OR THE "SPONSOR")
PACIFICA FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
("PFD INC." OR THE "DISTRIBUTOR")
Pacifica Funds Trust (the "Trust") is an open-end investment company (a
mutual fund) that offers a selection of separate investment portfolios. This
Prospectus describes the Institutional Shares of the following five portfolios
(the "Funds"):
- Pacifica Short-Term Government Bond Fund
- Pacifica Intermediate Government Bond Fund
- Pacifica Intermediate Bond Fund
- Pacifica Asset Preservation Fund
- Pacifica Government Income Fund
This Prospectus sets forth concisely the information a prospective investor
should know before investing in any of the Funds and should be read and retained
for information about each Fund. A Statement of Additional Information (the
"SAI"), dated February 1, 1996 (which may be revised from time to time),
containing additional and more detailed information about the Funds, has been
filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Funds at the address or
information number printed above.
----------------------------
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FIRST INTERSTATE OR OTHER BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN 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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1996.
<PAGE> 186
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS................................................ 3
FUND EXPENSES............................................. 6
FEE TABLE -- INSTITUTIONAL SHARES......................... 6
FINANCIAL HIGHLIGHTS...................................... 10
THE FUNDS................................................. 16
INVESTMENT POLICIES AND PRACTICES
OF THE FUNDS............................................ 16
RISKS OF INVESTING IN THE FUNDS........................... 20
MANAGEMENT OF THE FUNDS................................... 22
FUND SHARE VALUATION...................................... 27
PURCHASE AND REDEMPTION OF
INSTITUTIONAL SHARES.................................... 28
EXCHANGE OF INSTITUTIONAL SHARES.......................... 31
DIVIDENDS, DISTRIBUTIONS AND
FEDERAL INCOME TAX...................................... 32
DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES.................................... 35
INVESTMENT RESTRICTIONS................................... 45
OTHER INFORMATION......................................... 46
APPENDIX.................................................. A-1
</TABLE>
2
<PAGE> 187
HIGHLIGHTS
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
This Prospectus describes five diversified investment portfolios managed by
First Interstate Capital Management, Inc. Each Fund has a distinct investment
objective and policies.
The Short-Term Government Bond Fund. The investment objective of the
Short-Term Government Bond Fund is to seek current income with relative
stability of principal. In seeking to attain its objective, the Fund will invest
primarily in U.S. Treasury bills, notes and other obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities with
remaining maturities less than three and one half years, and repurchase
agreements with respect to such obligations.
The Intermediate Government Bond Fund. The investment objective of the
Intermediate Government Bond Fund is to seek a high level of current income,
consistent with prudent investment risk. In seeking to attain its objective, the
Fund will invest primarily in U.S. Treasury bills, notes and other obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
and repurchase agreements with respect to such obligations. The Fund will
maintain a dollar-weighted average portfolio maturity between three and ten
years.
The Intermediate Bond Fund. The investment objective of the Intermediate
Bond Fund is to seek a high level of current income consistent with the
preservation of capital and maintenance of liquidity. In pursuing its investment
objective, the Fund may invest in a broad range of corporate debt obligations,
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, dollar-denominated debt obligations of foreign issuers, and
money market instruments. The Fund will maintain a dollar-weighted average
portfolio maturity between three and ten years.
The Asset Preservation Fund. The investment objective of the Asset
Preservation Fund is to provide investors with as high a level of current income
as is consistent with limiting the risk of potential loss. The Fund pursues this
objective by investing primarily in short-term debt instruments which results in
a dollar-weighted average portfolio maturity of one year or less. The maximum
maturity for any individual security held by the Fund is 39 months.
The Government Income Fund. The investment objective of the Government
Income Fund is to provide investors with as high a level of current income as is
consistent with prudent risk of capital. Total return,
3
<PAGE> 188
within given quality parameters, is a secondary consideration of the Fund. The
Fund pursues its objective by investing primarily in securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
For additional information concerning the investment policies, practices
and risk considerations of the Funds, see "The Funds," "Investment Policies and
Practices of the Funds" and "Risks of Investing in the Funds" in this
Prospectus.
RISKS OF INVESTING IN THE FUNDS
The price per share of the Funds will fluctuate with changes in value of
the investments held by each Fund. A Fund's performance will change daily based
on many factors, including the quality of the instruments in each Fund's
investment portfolio, national and international economic conditions, interest
rate levels, general market conditions and international exchange rates.
Depending on these factors, the net asset value of a Fund may decrease instead
of increase. Certain Funds may seek to achieve their investment objectives
through investments in securities of foreign issuers (which involve risks not
typically associated with U.S. issuers), instruments with the lowest investment
grade rating which have speculative characteristics, and by the use of certain
options, futures and currency swap strategies.
During periods of falling interest rates, the value of fixed income
securities generally rises. Conversely, during periods of rising interest rates
the value of such securities generally declines. Debt securities with longer
maturities, which tend to produce higher yields, are subject to potentially
greater capital appreciation and depreciation than obligations with shorter
maturities. Changes in the financial strength of an issuer or changes in the
ratings of any particular security may also affect the value of these
investments. Fluctuations in the market value of fixed income securities
subsequent to their acquisition will not affect cash income from such
securities, but will be reflected in a Fund's net asset value.
Securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities have historically involved little risk of loss of principal if
held to maturity. However, due to fluctuations in interest rates, the market
value of such securities may vary during the period a shareholder owns shares of
the Funds. It should be noted that neither the United States, nor any agency or
instrumentality thereof, has guaranteed, sponsored or approved the Funds or
their shares.
There is no assurance that any Fund will achieve its investment objective.
4
<PAGE> 189
MANAGEMENT OF THE FUNDS
First Interstate Capital Management, Inc. acts as investment advisor to the
Funds. For its services, the Advisor is entitled to receive a fee from each Fund
at an annual rate based on the Fund's average daily net assets. See "Fee
Table -- Institutional Shares" and "Management of the Funds" in this Prospectus.
Furman Selz acts as administrator and sponsor to the Funds. Furman Selz
provides certain management and administrative services to the Funds, and is
entitled to receive a fee from each Fund at an annual rate based on the Fund's
average daily net assets. PFD Inc. distributes the Funds' shares.
Fees and expenses charged to the Funds are outlined on pages 6 through 9 of
this Prospectus.
GUIDE TO INVESTING IN THE PACIFICA FAMILY OF FUNDS
Purchase orders for the Funds received in proper order by 4:15 p.m.,
Eastern time, will become effective that day.
Institutional Shares of the Funds are purchased at net asset value without
a sales charge.
Shareholders may purchase, redeem or exchange Institutional Shares by
telephone.
All dividends and distributions will be automatically reinvested at net
asset value in additional Institutional Shares of the applicable Fund unless
cash payment is requested.
- Distributions for the Funds are generally paid monthly.
For additional information on how to purchase and redeem Institutional
Shares of the Funds, see "Purchase and Redemption of Institutional Shares" and
"Exchange of Institutional Shares."
5
<PAGE> 190
FUND EXPENSES
The following tables list the costs and expenses that an investor will
incur either directly or indirectly as an Institutional shareholder of a Fund
based upon the Fund's operating expenses for its most recent fiscal year,
adjusted to reflect current fees and expenses.
FEE TABLE -- INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
SHORT-TERM INTERMEDIATE
GOVERNMENT GOVERNMENT INTERMEDIATE
BOND FUND BOND FUND BOND FUND
---------- ------------ ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES:
Maximum Sales Load Imposed on
Purchases (as a percentage
of offering price)......... None None None
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering
price)..................... None None None
Deferred Sales Load (as a
percentage of redemption
proceeds).................. None None None
Redemption Fees............... None None None
Exchange Fee.................. None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average
net assets)
Management Fees (after
waivers)(++)............... 0.15% 0.20% 0.40%
Other Expenses (after
waivers)(++)++............. 0.50% 0.70% 0.35%
---- ---- ----
TOTAL FUND OPERATING EXPENSES:
(after waivers)(++)++++....... 0.65% 0.90% 0.75%
==== ==== ====
</TABLE>
- ---------------
(++) Management Fees (before waivers) would be 0.50%, 0.50% and 0.50%,
respectively.
(++)++ Other Expenses (before waivers) would be 0.53%, 0.81% and 0.39%,
respectively.
(++)++++ Total Fund Operating Expenses (before waivers) would be 1.03%, 1.31%
and 0.89%, respectively.
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Funds' Institutional Shares
will bear. The table does not reflect any charges that may be
6
<PAGE> 191
imposed by a First Interstate Bank or other institutions directly on their
customer accounts in connection with investments in the Funds.
EXAMPLE:(++)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
SHORT-TERM INTERMEDIATE
GOVERNMENT GOVERNMENT INTERMEDIATE
BOND FUND BOND FUND BOND FUND
---------- ------------ ------------
<S> <C> <C> <C>
1 year........................ $ 7 $ 9 $ 8
3 years....................... 21 29 24
5 years....................... 36 50 42
10 years...................... 81 111 93
</TABLE>
- ---------------
(++) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED
AMOUNT.
7
<PAGE> 192
FEE TABLE -- INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
ASSET
PRESERVATION GOVERNMENT
FUND INCOME FUND
------------ -----------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price).................... None None
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering price)...... None None
Deferred Sales Load (as a percentage
of redemption proceeds)............ None None
Redemption Fees....................... None None
Exchange Fee.......................... None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net
assets)
Management Fees (after waivers)(++)... 0.30% 0.50%
Other Expenses (after
waivers)(++)++..................... 0.45% 0.40%
------ ------
(after waivers)(++)++++............... 0.75% 0.90%
====== ======
</TABLE>
- ---------------
(++) Management Fees (before waivers) would be 0.35% and 0.50%, respectively.
(++)++ Other Expenses (before waivers) would be 0.45% and 0.41%, respectively.
(++)++++ Total Fund Operating Expenses (before waivers) would be 0.80% and
0.91%, respectively.
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Funds' Institutional Shares
will bear. The table does not reflect any charges that may be imposed by a First
Interstate Bank or other institutions directly on their customer accounts in
connection with investments in the Funds.
8
<PAGE> 193
EXAMPLE:(++)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
ASSET
PRESERVATION GOVERNMENT
FUND INCOME FUND
------------ -----------
<S> <C> <C>
1 year................................... $ 8 $ 9
3 years.................................. 24 29
5 years.................................. 42 50
10 years................................. 93 111
</TABLE>
- ---------------
(++) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED
AMOUNT.
9
<PAGE> 194
FINANCIAL HIGHLIGHTS
The financial information shown below is to assist investors in evaluating
the performance of the Funds since their commencement of operations. The
following information for the year ended September 30, 1995 for the Asset
Preservation Fund and the Government Income Fund has been audited by Ernst &
Young LLP whose report on the financial statements appears in the 1995 Annual
Report to Shareholders for these Funds. The following supplementary information
for the periods through September 30, 1995 for the Short-Term Government Bond
Fund, Intermediate Government Bond Fund and Intermediate Bond Fund has been
audited by the former independent accountants of these Funds, whose report on
the financial statements appears in the September 30, 1995 Report to
Shareholders for the Funds. The following supplementary information for each of
the four years in the period ended September 30, 1994 for the Asset Preservation
Fund and Government Income Fund has been audited by the former independent
accountants of these Funds. For the periods shown, the Intermediate Government
Bond Fund, the Asset Preservation Fund and Government Income Fund offered only
one class of shares to both institutional and retail investors. The financial
data shown below for these Funds pertains to the Investor Shares of such Funds,
which are not offered through this Prospectus. No financial data is shown for
the Institutional Shares of such Funds because that class of shares did not
commence operations prior to October 1, 1995. See "Other
Information -- Capitalization." These reports and financial statements are
incorporated by reference into the SAI. The following financial data should be
read in conjunction with the related financial statements and notes thereto.
Further information about the Funds is contained in their Annual Reports to
Shareholders, which may be obtained without charge by calling 1-800-662-8417.
10
<PAGE> 195
For a share outstanding throughout the periods indicated:
SHORT-TERM GOVERNMENT BOND FUND*
(INSTITUTIONAL SHARES)
<TABLE>
<CAPTION>
FOR THE
PERIOD ENDED YEAR ENDED MAY 31,
SEPTEMBER 30, -----------------------------------------------------------------------
1995** 1995 1994 1993 1992 1991 1990 1989
------------- ------- ------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.............................. $ 15.49 $ 15.32 $ 15.80 $ 15.78 $ 15.49 $ 15.02 $14.99 $15.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income............... 0.29 0.78 0.58 0.82 1.01 1.10 1.21 1.10
Net realized and unrealized gain
(loss) on investments............. (0.00) 0.20 (0.32) 0.07 0.39 0.50 0.01 (0.03)
------ ------ ------ ------ ------ ------ ------
Total income from investment
operations...................... 0.29 0.98 0.26 0.89 1.40 1.60 1.22 1.07
------ ------ ------ ------ ------ ------ ------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net investment
income............................ (0.31) (0.81) (0.58) (0.74) (1.10) (1.10) (1.19) (1.08)
Distributions from net realized gain
on investments.................... (0.00) (0.00) (0.16) (0.13) (0.01) (0.03) -- --
------ ------ ------ ------ ------ ------ ------
Total dividends and distributions
to shareholders................. (0.31) (0.81) (0.74) (0.87) (1.11) (1.13) (1.19) (1.08)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of period........ $ 15.47 $ 15.49 $ 15.32 $ 15.80 $ 15.78 $ 15.49 $15.02 $14.99
====== ====== ====== ====== ====== ====== ======
Total return (excluding sales
load)........................... 5.66%+ 6.61% 1.60% 5.79% 9.33% 11.04% 8.29% 7.57%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)..... $34,046 $37,036 $46,277 $51,232 $30,305 $18,006 $8,212 $7,470
Ratio of expenses to average net
assets............................ 0.65%+ 0.65% 0.63% 0.62% 0.62% 0.57% 0.50% 0.50%
Ratio of net investment income to
average net assets................ 5.57%+ 4.98% 3.73% 4.62% 6.22% 7.28% 8.01% 7.96%
Ratio of expenses to average net
assets without fee waivers........ 1.16%+ 0.95% 0.97% 0.85% 0.92% 0.91% 0.94% 1.28%
Ratio of net investment income to
average net assets without fee
waivers........................... 5.06%+ 4.68% 3.39% 4.39% 5.92% 6.94% 7.57% 7.18%
Portfolio turnover rate(1).......... 20.28% 100.44% 127.06% 163.74% 100.24% 96.47% 38.36% 50.38%
</TABLE>
- ---------------
* The Fund operated as the Short-Term Government Bond Fund of Westcore Trust
from its commencement of operations on June 1, 1988 until its reorganization
as a portfolio of the Trust on October 1, 1995. During the periods shown,
the Fund was advised by First Interstate Bank of Oregon, N.A. In connection
with the Fund's reorganization, FICM assumed investment advisory
responsibilities for the Fund.
** The Fund changed its fiscal year from May 31 to September 30.
(1) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period. Purchases and sales of
investment securities (excluding short-term securities) for the period ended
September 30, 1995 were $2,539,766 and $4,601,208, respectively.
+ Annualized.
11
<PAGE> 196
For a share outstanding throughout the periods indicated:
INTERMEDIATE GOVERNMENT BOND FUND*
(INSTITUTIONAL SHARES)
<TABLE>
<CAPTION>
FOR THE
PERIOD ENDED YEAR ENDED MAY 31,
SEPTEMBER 30, -----------------------------------------------
1995** 1995 1994 1993
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 15.69 $ 15.29 $ 16.39 $ 16.18
INCOME FROM INVESTMENT OPERATIONS
Net investment income.............................. 0.34 1.04 0.95 1.14
Net realized and unrealized gain (loss) on
investments...................................... 0.01 0.45 (1.05) 0.20
------- ---------- ---------- ----------
Total income (loss) from investment operations... 0.35 1.49 (0.10) 1.34
------- ---------- ---------- ----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income............... (0.35) (1.09) (0.98) (1.08)
Distributions from net realized gain on
investments...................................... (0.00) (0.00) (0.02) (0.05)
------- ---------- ---------- ----------
Total dividends and distributions to
shareholders................................... (0.35) (1.09) (1.00) (1.13)
------- ---------- ---------- ----------
Net asset value, end of period....................... $ 15.69 $ 15.69 $ 15.29 $ 16.39
======== ========== ========== ==========
Total return (excluding sales load).............. 6.88%+ 10.33% (0.76%) 8.57%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000).................... $22,042 $ 24,072 $ 34,274 $ 31,385
Ratio of expenses to average net assets............ 1.18%+ 1.02% 0.82% 0.90%
Ratio of net investment income to average net
assets........................................... 6.33%+ 6.77% 6.18% 6.66%
Ratio of expenses to average net assets without fee
waivers.......................................... 1.41%+ 1.24% 0.95% 0.98%
Ratio of net investment income to average net
assets without fee waivers....................... 6.10%+ 6.54% 6.05% 6.58%
Portfolio turnover rate(1)......................... 0.00% 11.39% 38.22% 58.42%
<CAPTION>
1992 1991 1990 1989
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 15.68 $ 15.27 $ 15.26 $ 15.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income.............................. 1.18 1.26 1.31 1.30
Net realized and unrealized gain (loss) on
investments...................................... 0.61 0.55 0.01 0.22
---------- ---------- ---------- ----------
Total income (loss) from investment operations... 1.79 1.81 1.32 1.52
---------- ---------- ---------- ----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income............... (1.25) (1.26) (1.31) (1.26)
Distributions from net realized gain on
investments...................................... (0.04) (0.14) -- --
---------- ---------- ---------- ----------
Total dividends and distributions to
shareholders................................... (1.29) (1.40) (1.31) (1.26)
---------- ---------- ---------- ----------
Net asset value, end of period....................... $ 16.18 $ 15.68 $ 15.27 $ 15.26
========== ========== ========== ==========
Total return (excluding sales load).............. 11.80% 12.42% 8.97% 10.60%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000).................... $ 16,329 $ 10,708 $ 8,086 $ 7,449
Ratio of expenses to average net assets............ 0.96% 0.87% 0.92% 1.11%
Ratio of net investment income to average net
assets........................................... 7.33% 8.21% 8.53% 8.52%
Ratio of expenses to average net assets without fee
waivers.......................................... 1.07% 0.94% 0.97% 1.16%
Ratio of net investment income to average net
assets without fee waivers....................... 7.22% 8.14% 8.48% 8.47%
Portfolio turnover rate(1)......................... 16.04% 48.47% 16.63% 67.60%
</TABLE>
- ---------------
* The Fund operated as the GNMA Fund of Westcore Trust from its commencement
of operations on June 1, 1988 until its reorganization as a portfolio of the
Trust on November 15, 1995. During the periods shown, the Fund was advised
by First Interstate Bank of Oregon, N.A. In connection with the Fund's
reorganization, FICM assumed investment advisory responsibilities for the
Fund.
** The Fund changed its fiscal year from May 31, to September 30.
(1) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period. Purchases and sales of
investment securities (excluding short-term securities) for the period ended
September 31, 1995 were $0 and $3,725,523, respectively.
+ Annualized.
12
<PAGE> 197
For a share outstanding throughout the periods indicated:
INTERMEDIATE BOND FUND*
<TABLE>
<CAPTION>
FOR THE
PERIOD ENDED YEAR ENDED MAY 31,
SEPTEMBER 30, -----------------------------------------------
1995** 1995 1994 1993
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 14.77 $ 14.36 $ 15.72 $ 15.69
INCOME FROM INVESTMENT OPERATIONS
Net investment income............................ 0.30 0.91 0.99 1.17
Net realized and unrealized gain (loss) on
investments.................................... (0.01) 0.47 (0.90) 0.40
------- ---------- ---------- ----------
Total income from investment operations........ 0.29 1.38 0.09 1.57
------- ---------- ---------- ----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income............. (0.30) (0.97) (0.85) (1.04)
Distributions from net realized gain on
investments.................................... (0.00) (0.00) (0.60) (0.50)
------- ---------- ---------- ----------
Total dividends and distributions to
shareholders................................. (0.30) (0.97) (1.45) (1.54)
------- ---------- ---------- ----------
Net asset value, end of period..................... $ 14.76 $ 14.77 $ 14.36 $ 15.72
======= ========== ========== ==========
Total return (excluding sales load)............ 6.14%+ 10.13% 0.35% 10.42%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000).................. $55,628 $ 56,087 $ 58,199 $ 61,207
Ratio of expenses to average net assets.......... 0.89%+ 0.81% 0.79% 0.76%
Ratio of net investment income to average net
assets......................................... 5.94%+ 6.35% 5.33% 6.01%
Ratio of expenses to average net assets
without fee waivers............................ 0.94%+ 0.85% 0.83% 0.79%
Ratio of net investment income to average net
assets
without fee waivers............................ 5.89%+ 6.31% 5.30% 5.98%
Portfolio turnover rate(1)....................... 54.02% 75.76% 162.91% 145.95%
<CAPTION>
1992 1991 1990 1989
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 15.52 $ 15.08 $ 15.13 $ 15.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income............................ 1.14 1.25 1.26 1.22
Net realized and unrealized gain (loss) on
investments.................................... 0.65 0.54 (0.05) 0.08
---------- ---------- ---------- ----------
Total income from investment operations........ 1.79 1.79 1.21 1.30
---------- ---------- ---------- ----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income............. (1.41) (1.25) (1.26) (1.17)
Distributions from net realized gain on
investments.................................... (0.21) (0.10) -- --
---------- ---------- ---------- ----------
Total dividends and distributions to
shareholders................................. (1.62) (1.35) (1.26) (1.17)
---------- ---------- ---------- ----------
Net asset value, end of period..................... $ 15.69 $ 15.52 $ 15.08 $ 15.13
========== ========== ========== ==========
Total return (excluding sales load)............ 11.96% 12.36% 8.25% 9.07%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000).................. $ 54,203 $ 54,074 $ 79,471 $ 74,002
Ratio of expenses to average net assets.......... 0.68% 0.66% 0.68% 0.69%
Ratio of net investment income to average net
assets......................................... 7.14% 8.00% 8.25% 8.25%
Ratio of expenses to average net assets
without fee waivers............................ 0.73% 0.71% 0.73% 0.74%
Ratio of net investment income to average net
assets
without fee waivers............................ 7.09% 7.95% 8.20% 8.20%
Portfolio turnover rate(1)....................... 101.91% 77.97% 31.58% 35.73%
</TABLE>
- ---------------
* The Fund operated as the Bonds Plus Fund of Westcore Trust from its
commencement of operations on June 1, 1988 until its reorganization as a
portfolio of the Trust on October 1, 1995. During the periods shown, the
Fund was advised by First Interstate Bank of Oregon, N.A. In connection with
the Fund's reorganization, FICM assumed investment advisory responsibilities
for the Fund.
** The Fund changed its fiscal year from May 31 to September 30.
(1) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period. Purchases and sales of
investment securities (excluding short-term securities) for the period ended
September 30, 1995 were $12,757,969 and $9,531,336, respectively.
+ Annualized.
13
<PAGE> 198
Selected data for a share outstanding for the periods shown:
ASSET PRESERVATION FUND
<TABLE>
<CAPTION>
PERIOD
YEAR ENDED SEPTEMBER 30, ENDED
----------------------------------------------------------------------- SEPTEMBER 30,
1995 1994 1993 1992 1991 1990(a)
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $ 10.04 $ 10.21 $ 10.32 $ 10.17 $ 9.99 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(++)........... 0.50 0.40 0.47 0.57 0.72 0.20
Net gain (loss) on securities (both
realized and unrealized)(++)...... 0.04 (0.13) (0.10) 0.15 0.18 (0.01)
----------- ----------- ----------- ----------- ----------- -------------
Total from Investment
Operations...................... 0.54 0.27 0.37 0.72 0.90 0.19
----------- ----------- ----------- ----------- ----------- -------------
LESS DISTRIBUTIONS:
Dividends from net investment
income............................ (0.49) (0.40) (0.47) (0.57) (0.72) (0.20)
Distributions from capital gains.... -- (0.01) (0.01) -- -- --
Distributions from paid-in
capital........................... (0.01) (0.03) -- -- -- --
----------- ----------- ----------- ----------- ----------- -------------
Total Distributions............... (0.50) (0.44) (0.48) (0.57) (0.72) (0.20)
----------- ----------- ----------- ----------- ----------- -------------
Net Asset Value, End of Period........ $ 10.08 $ 10.04 $ 10.21 $ 10.32 $ 10.17 $ 9.99
========== ======== ======== ======== ======= ===========
Total Return (excluding sales
load)........................... 5.56% 2.74% 3.68% 7.30% 9.29% 1.90%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000)..... $51,607 $ 103,179 $ 163,755 $ 160,083 $ 73,412 $31,820
Ratio of Expenses to Average Net
Assets............................ 0.94% 0.84% 0.80% 0.75% 0.62% 0.36%+
Effect of Waivers on above Ratio.... 0.02% 0.02% 0.03% 0.01% 0.24% 1.09%+
Ratio of Net Investment Income to
Average Net Assets................ 5.03% 3.92% 4.64% 5.52% 6.90% 8.67%+
Portfolio Turnover Rate............. 52% 32% 49% 21% 30% 0%
</TABLE>
- ---------------
(a) Commencement of operations, July 2, 1990.
(++) Per share data based upon average monthly shares outstanding.
+ Annualized.
14
<PAGE> 199
Selected data for a share outstanding for the periods shown:
GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
PERIOD
YEAR ENDED SEPTEMBER 30, ENDED
------------------------------------------------------------------------ SEPTEMBER 30,
1995 1994 1993 1992 1991 1990(a)
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................. $ 9.51 $ 10.87 $ 10.76 $ 10.44 $ 9.91 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(++).......... 0.57 0.57 0.71 0.76 0.81 0.21
Net gain (loss) on securities (both
realized and unrealized)(++)..... 0.32 (1.11) 0.17 0.33 0.53 (0.09)
--------- ----------- ----------- ----------- ----------- -------------
Total from Investment
Operations..................... 0.89 (0.54) 0.88 1.09 1.34 0.12
--------- ----------- ----------- ----------- ----------- -------------
LESS DISTRIBUTIONS:
Dividends from net investment
income........................... (0.52) (0.59) (0.71) (0.76) (0.81) (0.21)
Distributions from capital gains... -- (0.23) (0.06) (0.01) -- --
Distributions from paid in
capital.......................... (0.05) -- -- -- -- --
--------- ----------- ----------- ----------- ----------- ----------
Total Distributions.............. (0.57) (0.82) (0.77) (0.77) (0.81) (0.21)
--------- ----------- ----------- ----------- ----------- ----------
Net Asset Value, End of Period....... $ 9.83 $ 9.51 $ 10.87 $ 10.76 $ 10.44 $ 9.91
========= ======== ======== ======== ======= ===========
Total Return (excluding sales
load).......................... 9.63% (5.20)% 8.17% 10.77% 14.06% 1.20%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000).... $84,981 $ 124,372 $ 171,073 $ 138,150 $ 76,711 $39,855
Ratio of Expenses to Average Net
Assets........................... 0.99% 0.94% 0.85% 0.79% 0.54% 0.15%+
Effect of Waivers on above Ratio... 0.02% 0.02% 0.09% 0.12% 0.44% 1.34%+
Ratio of Net Investment Income to
Average Net Assets............... 5.92% 5.88% 6.49% 7.11% 7.97% 8.52%+
Portfolio Turnover Rate............ 72% 55% 52% 22% 7% 0%
</TABLE>
- ---------------
(a) Commencement of operations July 2, 1990.
(++) Per share data based upon average monthly shares outstanding.
+ Annualized.
15
<PAGE> 200
THE FUNDS
The Funds are portfolios of Pacifica Funds Trust, a business trust
organized under the laws of the Commonwealth of Massachusetts as an open-end,
management investment company. The Trust's Board of Trustees oversees the
overall management of the Funds and elects the officers of the Funds.
INVESTMENT POLICIES AND PRACTICES OF THE FUNDS
- The Short-Term Government Bond Fund's investment objective is to seek
current income with relative stability of principal.
- The Intermediate Government Bond Fund's investment objective is to seek a
high level of current income, consistent with prudent investment risk.
- The Intermediate Bond Fund's investment objective is to seek a high level
of current income consistent with the preservation of capital and
maintenance of liquidity.
- The Asset Preservation Fund's investment objective is to provide
investors with as high a level of current income as is consistent with
limiting the risk of potential loss.
- The Government Income Fund's investment objective is to provide investors
with as high a level of current income as is consistent with prudent risk
of capital.
Each Fund follows its own investment policies and practices, including
certain investment restrictions. The SAI contains the specific investment
restrictions which govern the Funds' investments. The investment objectives of
the Asset Preservation Fund and Government Income Fund are fundamental policies,
which means that they may not be changed without a majority vote of shareholders
of the affected Fund. Any change in the investment objective of the Short-Term
Government Bond Fund, Intermediate Government Bond Fund or Intermediate Bond
Fund by the Board of Trustees may result in a Fund having an investment
objective different from the objective which a shareholder considered
appropriate at the time of investment in the Fund. Except for the objectives and
those restrictions specifically identified as fundamental, all other investment
policies and practices described in this Prospectus and in the SAI are not
fundamental.
The Advisor selects investments and makes investment decisions based on the
investment objective and policies of each Fund.
16
<PAGE> 201
Short-Term Government Bond Fund and Intermediate Government Bond Fund. The
Short-Term Government Bond Fund's investment objective is to seek current income
with relative stability of principal. The Short-Term Government Bond Fund is
designed for investors seeking current income that is greater than normally
available from a money market fund and principal volatility that is less than
that normally associated with long-term bonds. The Intermediate Government Bond
Fund's investment objective is to seek a high level of current income,
consistent with prudent investment risk. In seeking current income from its
investments, the Intermediate Government Bond Fund may also consider the
potential for capital gain. In seeking to attain their objectives, each of these
Funds will invest primarily in U.S. Treasury bills, notes and other obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements with respect to such obligations. Securities purchased
by the Short-Term Government Bond Fund will have a remaining maturity of three
and one half years or less. During normal market conditions, the Intermediate
Government Bond Fund will maintain a dollar-weighted average portfolio maturity
between three and ten years.
Each Fund may purchase mortgage-backed and certain other asset-backed
securities. The average life of these securities varies with the maturities of
the underlying mortgage or other instruments, which may have maximum maturities
of forty years. The average life is likely to be substantially less than the
original maturity of the mortgage pools or other assets underlying the
securities as the result of prepayments. The rate of such prepayments, and hence
the life of the securities, will be a function of current market rates and
current conditions in the relevant markets. In calculating the average weighted
maturity of a Fund's portfolio, the maturity of asset-backed instruments will be
based on estimates of average life.
Government securities that have variable or floating interest rates or
demand or put features will be deemed to have maturities tied to the period
remaining to the next interest rate adjustment or the time the Fund can recover
payment of principal as described in the SAI.
Under normal market conditions, at least 65% of the total assets of each
Fund will be invested in bonds issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
Intermediate Bond Fund. The Intermediate Bond Fund's investment objective
is to seek a high level of current income consistent with the preservation of
capital and maintenance of liquidity. In pursuing its
17
<PAGE> 202
investment objective, the Fund may invest in a broad range of corporate debt
obligations such as fixed and variable-rate bonds, zero coupon bonds,
debentures, obligations convertible into common stock and various types of
demand instruments, obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, dollar-denominated debt obligations of foreign
issuers, including foreign corporations and foreign governments, and money
market instruments. The Fund is also permitted to acquire obligations issued by
state and local governments ("municipal obligations"). The purchase of municipal
obligations may be advantageous when, as a result of prevailing economic,
regulatory or other circumstances, the yield of such securities, on a pre-tax
basis, is comparable to that of corporate or U.S. Government obligations. The
Fund may also purchase mortgage-backed and certain other asset-backed
securities. During normal market conditions, the Fund will maintain a
dollar-weighted average portfolio maturity between three and ten years.
In acquiring particular portfolio securities, the Advisor will consider,
among other things, historical yield relationships between corporate and
government bonds, intermarket yield relationships among various industry
sectors, current economic cycles and the attractiveness and creditworthiness of
particular issuers. Depending upon its analysis of these and other factors, the
Fund's holdings in issuers in particular industry sectors may be overweighted
when compared to the relative industry weightings in the Shearson Lehman
Brothers Intermediate Index or other recognized indices.
The policy of the Fund is to invest at least 65% of the total value of its
assets in corporate and government bonds during normal market conditions. Debt
obligations acquired by the Fund will be investment grade at the time of
purchase -- that is, obligations rated AAA, AA, A or BBB by Standard & Poor's
Ratings Group ("S&P") or Aaa, Aa, A or Baa by Moody's Investors Service, Inc.
("Moody's"). Debt obligations may also be unrated but deemed by the Investment
Advisor to be comparable in quality to instruments that are so rated. The Fund's
dollar weighted average portfolio quality of the corporate bond portion of the
Fund's portfolio is expected to be "A" or better. Obligations rated in the
lowest of the top four rating categories (Baa by Moody's or BBB by S&P) are
considered to have speculative characteristics. See Appendix A for a description
of applicable S&P and Moody's debt ratings.
The Fund may also invest in obligations convertible into common stocks, and
may purchase common stocks, warrants or other rights to buy shares if they are
attached to a fixed income obligation. As a general matter, however, the Fund
will not invest in common stocks. Common
18
<PAGE> 203
stock received through the conversion of convertible debt obligations will
normally be sold in an orderly manner as soon as possible. Up to 20% of the
total assets of the Fund may be invested directly in dollar-denominated debt
obligations of foreign issuers. These obligations may include obligations of
foreign corporations as well as investments in obligations of foreign
governments and their political sub-divisions (which will be limited to direct
government obligations and government-guaranteed securities).
The Asset Preservation Fund. The investment objective of the Asset
Preservation Fund is to provide investors with as high a level of current income
as is consistent with limiting the risk of potential loss. Securities held by
the Fund will consist of U.S. Government securities, certificates of deposit,
bankers' acceptances, investment grade commercial paper, corporate debt
securities, mortgage- and asset-backed securities and other instruments which
the Advisor believes are of comparable quality as those above, including
securities issued by foreign issuers. The securities of foreign issuers in which
the Fund will invest may include: foreign currency-denominated corporate debt
securities, preferred stock, certificates of deposit and bankers' acceptances
issued by foreign banks, and obligations of foreign governments or their
subdivisions, agencies and instrumentalities, international agencies and
supranational entities.
In selecting debt securities for the Fund, the Advisor seeks to select
those instruments that appear best suited to achieve the Fund's investment
objective within the credit and risk tolerances established for the Fund. In
accordance with those policies, the Fund may purchase commercial paper rated in
one of the two highest rating categories by a nationally recognized statistical
rating organization ("NRSRO"), corporate debt securities rated in one of the
four highest major rating categories by an NRSRO, mortgage- and asset-backed
securities rated in one of the two highest rating categories by an NRSRO, and
other debt instruments which are of comparable quality in the Advisor's opinion.
Assumptions generally accepted by the industry concerning the probability of
early payment may be used in the calculation of maturities for pre-refunding,
sometimes resulting in a calculated maturity different than the stated maturity
of the security. The maximum maturity for any individual security held by the
Fund is 39 months.
The Government Income Fund. The investment objective of the Government
Income Fund is to provide investors with as high a level of current income as is
consistent with prudent risk of capital. The Fund pursues this objective by
investing at least 65% of its assets in securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. The Fund may also invest in
certificates of deposit, bankers' accept-
19
<PAGE> 204
ances, investment grade commercial paper, corporate debt securities, investment
grade mortgage- and asset-backed securities and other instruments which the
Advisor believes are of comparable quality as those above, including securities
issued by foreign issuers. The securities of foreign issuers in which the Fund
will invest are: corporate debt securities, preferred stock, certificates of
deposit and bankers' acceptances issued by foreign banks, and obligations of
foreign governments or their subdivisions, agencies and instrumentalities,
international agencies and supranational entities.
In selecting debt securities for the Fund, the Advisor seeks to select
those instruments that appear best suited to achieve the Fund's investment
objective within the credit and risk tolerances established for the Fund. In
accordance with those policies, the Fund may purchase commercial paper rated in
one of the two highest rating categories by an NRSRO, corporate debt securities
rated in one of the four highest rating categories by an NRSRO, mortgage- and
asset-backed securities rated in one of the two highest rating categories by an
NRSRO, and other debt instruments which are of comparable quality in the
Advisor's opinion.
All Funds. The Funds may also hold short-term U.S. Government obligations,
money market instruments, repurchase agreements, securities issued by other
investment companies within the limits prescribed by the Investment Company Act
of 1940, as amended (the "1940 Act"), and cash, pending investment, to meet
anticipated redemption requests or if, in the opinion of the Advisor, suitable
investments for a Fund are unavailable. Such investments may be made in such
proportions as, in the opinion of the Advisor, existing circumstances may
warrant, and may include obligations of foreign banks and foreign branches of
U.S. banks. The types of securities and investment practices used by the Funds
are described in greater detail under the section "Description of Securities and
Investment Practices" on pages 35-45 of this Prospectus.
RISKS OF INVESTING IN THE FUNDS
The price per share of each of the Funds will fluctuate with changes in
value of the investments held by the Fund. Shareholders of a Fund should,
therefore, expect the value of their shares to fluctuate with changes in the
value of the securities owned by that Fund.
The market value of a Fund's investment in fixed income securities will
change in response to changes in interest rates and the relative financial
strength of each issuer. During periods of falling interest rates, the value of
fixed income securities generally rises. Conversely, during periods of rising
20
<PAGE> 205
interest rates the value of such securities generally declines. Debt securities
with longer maturities, which tend to produce higher yields, are subject to
potentially greater capital appreciation and depreciation than obligations with
shorter maturities. Changes in the financial strength of an issuer or changes in
the ratings of any particular security may also affect the value of these
investments. Fluctuations in the market value of fixed income securities
subsequent to their acquisition will not affect cash income from such
securities, but will be reflected in a Fund's net asset value. The Funds may
also purchase zero-coupon bonds (i.e., discount debt obligations that do not
make periodic interest payments) which are subject to greater market
fluctuations from changing interest rates than debt obligations of comparable
maturities which make current distributions of interest.
Certain Funds may invest in foreign securities. Investing in the securities
of issuers in any foreign country involves special risks and considerations not
typically associated with investing in U.S. companies. These include differences
in accounting, auditing and financial reporting standards; generally higher
commission rates on foreign portfolio transactions; the possibility of
nationalization, expropriation or confiscatory taxation; adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country); and political instability which
could affect U.S. investments in foreign countries. Additionally, foreign
securities and dividends and interest payable on those securities may be subject
to foreign taxes, including taxes withheld from payments on those securities.
Foreign securities often trade with less frequency and volume than domestic
securities and, therefore, may exhibit greater price volatility. Additional
costs associated with an investment in foreign securities may include higher
custodial fees than apply to domestic custodial arrangements and transaction
costs of foreign currency conversions. Changes in foreign exchange rates also
will affect the value of securities denominated or quoted in currencies other
than the U.S. dollar. A Fund's objective may be affected either unfavorably or
favorably by fluctuations in the relative rates of exchange between the
currencies of different nations, by exchange control regulations and by
indigenous economic and political developments. See the SAI for further
information about foreign securities.
There is, of course, no assurance that a Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products.
21
<PAGE> 206
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction of
the Board of Trustees. The Trustees are Dennis W. Draper, Joseph N. Hankin, John
E. Heilmann, Jack D. Henderson and Richard A. Wedemeyer. Information about the
Trustees, as well as the Funds' executive officers, may be found in the SAI
under the heading "Management -- Trustees and Officers."
THE ADVISOR: FIRST INTERSTATE CAPITAL MANAGEMENT, INC.
First Interstate Capital Management, Inc., 7501 E. McCormick Parkway,
Scottsdale, Arizona 85258, serves as investment advisor to the Trust. FICM
manages the investment and reinvestment of the assets of the Funds and
continuously reviews, supervises and administers the Funds' investments. The
Advisor is responsible for placing orders for the purchase and sale of the
Funds' investments directly with brokers and dealers selected by it in its
discretion.
FICM is a wholly-owned subsidiary of First Interstate Bank of California,
which is the largest banking subsidiary of First Interstate Bancorp, a
multi-bank holding company. First Interstate Bancorp provides financial products
and services marketed at the local level to nearly five million households in
over 500 communities in 13 western states. Prior to October 1, 1995, First
Interstate Bank of Oregon, N.A., an affiliate of FICM, served as investment
advisor to the Short-Term Government Bond Fund and Intermediate Bond Fund (and
also served as investment advisor to the Intermediate Government Bond Fund prior
to November 15, 1995). Prior to March 18, 1994, San Diego Financial Capital
Management, Inc., which was acquired by First Interstate Bancorp through its
merger with San Diego Financial Corporation, served as investment advisor to the
Asset Preservation Fund and Government Income Fund.
On January 24, 1996, First Interstate Bancorp signed a definitive merger
agreement to merge with Wells Fargo & Company ("Wells Fargo"), a publicly-held
bank holding company with its head office at 420 Montgomery Street, San
Francisco, California 94104. The merger is conditioned upon, among other things,
certain regulatory approvals. Upon completion of the merger, currently expected
to occur during the second quarter of 1996, FICM will be wholly-owned by Wells
Fargo, and the existing investment advisory agreement between the Trust and FICM
will automatically terminate. It is contemplated that an application will be
filed with the Securities and Exchange Commission to ensure there is no
disruption as a result of the merger in the provision of investment advisory
services to the Funds, and that a meeting of shareholders will be held not
22
<PAGE> 207
later than 120 days after the merger to approve ongoing investment
advisory arrangements for the Funds.
Mr. David Underwood serves as FICM's Director of Equity Funds Management.
Mr. Underwood joined FICM in 1995. From 1993 to 1995 Mr. Underwood was employed
by Integra Trust Company as Director of Research. From 1990 to 1993 he was a
Portfolio Manager with the firm of C.S. McKee Investment Advisors. Mr. G. Edward
Means serves as FICM's Director of Fixed Income Management. Mr. Means joined
FICM in January 1995. From 1992 to 1994 he was employed by Clayton Brown &
Associates as Senior Vice President, Fixed Income. From 1984 to 1992 he was
employed by First National Bank of Chicago as a Senior Vice President.
Mr. Michael Hughes has been responsible for the day-to-day management of
the Short-Term Government Bond Fund and Intermediate Government Bond Fund since
October 1995. In addition, he has been responsible for the day-to-day management
of the Asset Preservation Fund and Government Income Fund since April 1995. Mr.
Hughes has been employed by First Interstate since November 1988. He currently
serves as a Fixed Income Fund Manager for FICM.
Mr. Robert Daviduk has been responsible for the day-to-day management of
the Intermediate Bond Fund since October 1995. Mr. Daviduk has been employed by
First Interstate since April 1993. Prior to joining First Interstate, Mr.
Daviduk was employed by Payden & Rygel Investment Counsel as a fixed income
portfolio analyst.
For the advisory services it provides to the Funds, FICM is entitled to
receive from each Fund fees, payable monthly, at the annual rates, based on
average daily net assets, as set forth below:
<TABLE>
<CAPTION>
FUND INVESTMENT ADVISORY FEE
------------------------------------ -----------------------
<S> <C>
Short-Term Government Bond Fund..... 0.50%
Intermediate Government Bond Fund... 0.50%
Intermediate Bond Fund.............. 0.50%
Asset Preservation Fund............. 0.35%
Government Income Fund.............. 0.50%
</TABLE>
The Advisor has agreed that during the current fiscal year it will
voluntarily waive a portion of its fees so that total operating expenses will
not exceed 0.65%, 1.02% and 0.81% of the average daily net assets of the
Institutional Shares of the Short-Term Government Bond Fund, Intermediate
Government Bond Fund and Intermediate Bond Fund, respectively. For their fiscal
year ended September 30, 1995, the Short-Term Government Bond Fund, Intermediate
Government Bond Fund and Intermediate
23
<PAGE> 208
Bond Fund paid advisory fees, after fee waivers, at the annual rates of
0.02%, 0.35% and 0.50%, respectively, of their average daily net assets. For
their fiscal year ended September 30, 1995, the Asset Preservation Fund and
Government Income Fund paid advisory fees at the annual rates of 0.35% and
0.50%, respectively, of their average daily net assets.
THE SPONSOR AND DISTRIBUTOR
Furman Selz LLC, 230 Park Avenue, New York, New York 10169, acts as Sponsor
of the Funds. Furman Selz is primarily an institutional brokerage firm with
memberships on the New York, American, Boston, Midwest, Pacific and Philadelphia
Stock Exchanges. Furman Selz also serves as administrator and distributor of
other mutual funds. Pacifica Funds Distributor Inc. is an affiliate of Furman
Selz and was organized specifically to distribute shares of the Trust, however,
offers and sales of shares of the Trust will be made only through Furman Selz or
other registered (or exempt) dealers.
PFD Inc. may from time to time pay a bonus or other incentive to dealers
which employ registered representatives who sell a minimum dollar amount of
Institutional Shares of the Funds and/or other funds distributed by Furman Selz
or PFD Inc. during a specific period of time. Such bonus or other incentive may
take the form of payment for travel expenses, including lodging, incurred in
connection with trips taken by qualifying registered representatives and members
of their families to places within or outside the United States, or other
bonuses, such as gift certificates or the cash equivalent of such bonuses. PFD
Inc. has established such a special promotional incentive program with First
Interstate Investment, Inc.
ADMINISTRATIVE SERVICES
The Funds have also entered into an Administrative Services Contract with
Furman Selz pursuant to which Furman Selz provides certain management and
administrative services necessary for the Funds' operations including: (i)
general supervision of the operation of the Funds including coordination of the
services performed by the Funds' investment advisor, transfer agent, custodian,
independent accountants and legal counsel, regulatory compliance, including the
compilation of information for documents such as reports to, and filings with,
the SEC and state securities commissions, and preparation of proxy statements
and shareholder reports for the Funds; (ii) general supervision relative to the
compilation of data required for the preparation of periodic reports distributed
to the Funds' officers and Board of Trustees; and (iii) furnishing office space
and certain
24
<PAGE> 209
facilities required for conducting the business of the Funds. For these
services, Furman Selz is entitled to receive a fee, payable monthly, at the
annual rate of 0.15% of the average daily net assets of the Funds. Pursuant to a
Services Agreement with the Trust, Furman Selz assists the Trust with certain
transfer and dividend disbursing agent functions and receives a fee of $15.00
per account per year plus out-of-pocket expenses. Pursuant to a Fund Accounting
Agreement with the Trust, Furman Selz assists the Trust in calculating net asset
values and provides certain other accounting services for each Fund for an
annual fee of $30,000 per Fund plus out-of-pocket expenses.
SERVICE ORGANIZATIONS
Various banks (including banks affiliated with First Interstate Bancorp),
trust companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative services with respect to the Funds' Institutional Shares, such as
maintaining shareholder accounts and records. The Funds may pay fees to Service
Organizations (which vary depending upon the services provided) in amounts up to
an annual rate of 0.25% of the average daily net asset value of the outstanding
Institutional Shares of the Funds owned by shareholders with whom a Service
Organization has a servicing relationship. These fees will be borne entirely by
the Funds' Institutional Shares. However, the Funds do not currently intend to
make any payments to Service Organizations with respect to Institutional Shares.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest a specified amount in
the Funds or charging a direct fee for servicing. If imposed, these fees would
be in addition to any amounts which might be paid to the Service Organization by
the Funds. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged to
consult with them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were
25
<PAGE> 210
prohibited from so acting, its shareholder clients would be permitted to remain
shareholders of the Funds and alternative means for continuing the servicing of
such shareholders would be sought. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these
occurrences.
OTHER EXPENSES
Each Fund bears all costs of its operations other than expenses
specifically assumed by Furman Selz, PFD Inc. or the Advisor. The costs borne by
the Funds include legal and auditing expenses; Trustees' fees and expenses;
insurance premiums; advisory, administration, fund accounting, custodian and
transfer agent fees and expenses; expenses incurred in acquiring or disposing of
the Funds' portfolio securities; expenses of registering and qualifying the
Funds' shares for sale with the SEC and with various state securities
commissions; expenses of obtaining quotations on the Funds' portfolio securities
and pricing of the Funds' shares; expenses of maintaining the Funds' legal
existence and of shareholders' meetings; and expenses of preparation and
distribution to existing shareholders of reports, proxies and prospectuses. Each
Fund bears its own expenses associated with its establishment as a series of the
Trust; these expenses are amortized over a five-year period from the
commencement of a Fund's operations. See "Management" in the SAI for additional
information on expenses borne by the Funds. Trust expenses directly attributable
to a particular Fund are charged to that Fund, and expenses attributable to a
particular class of shares of a Fund (such as Service Organization fees) are
charged to that class. Other expenses are allocated proportionately among all of
the investment portfolios in the Trust in relation to the net assets of each
portfolio or by other means deemed fair and equitable by the Board of Trustees.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Advisor places orders for
the purchase and sale of portfolio investments for the Funds' accounts with
brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Funds, the Advisor will seek the best execution of the Funds' orders.
Purchases and sales of debt securities are generally placed by the Advisor with
primary market makers for these securities on a net basis, i.e., without any
brokerage commission being paid by the Funds. Trading does, however, involve
transaction costs. Transactions with dealers serving as primary market makers
reflect the spread between the bid and asked prices.
26
<PAGE> 211
Purchases of underwritten issues may be made which will include an underwriting
fee paid to the underwriter. Broker-dealers are selected on the basis of a
variety of factors such as reputation, capital strength, size and difficulty of
the order, sale of Fund shares by the broker-dealer, and research provided to
the Advisor by the broker-dealer. The Advisor may cause a Fund to pay
commissions higher than another broker-dealer would have charged if the Advisor
believes the commission paid is reasonable in relation to the value of the
brokerage and research services received by the Advisor.
A high portfolio turnover rate involves larger brokerage commission
expenses or transaction costs which must be borne directly by a Fund. Short-term
capital gains realized from portfolio transactions are taxable to shareholders
as ordinary income. The Advisor will not consider portfolio turnover rate a
limiting factor in making investment decisions consistent with a Fund's
objective and policies.
FUND SHARE VALUATION
The net asset value of each class of shares of the Funds is calculated at
4:15 p.m. (Eastern time), Monday through Friday, on each day the New York Stock
Exchange is open for trading (a "Business Day"), which excludes the following
business holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share for each class of shares is computed by dividing the value of a
Fund's assets allocable to a particular class, less the liabilities charged to
that class by the total number of the outstanding shares of that class. All
expenses, including fees paid to the Advisor and Furman Selz, are accrued daily
and taken into account for the purpose of determining the net asset value.
Bonds and other fixed-income securities are normally valued by using market
quotations and may be valued on the basis of prices provided by a pricing
service approved by the Board of Trustees. Securities listed on an exchange are
valued on the basis of the last sale prior to the time the valuation is made. If
there has been no sale since the immediately previous valuation, then the
current bid price is used. Quotations are taken from the exchange where the
security is primarily traded. Portfolio securities which are primarily traded on
foreign exchanges may be valued with the assistance of a pricing service and are
generally valued at the preceding closing values of such securities on their
respective exchanges, except that when an occurrence subsequent to the time a
foreign security is valued is likely to have changed such value, then the fair
value of those securities will be
27
<PAGE> 212
determined by consideration of other factors by or under the direction of the
Board of Trustees. Over-the-counter securities are valued on the basis of the
bid price at the close of business on each business day. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Trustees. All
assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars at the mean between the bid and asked prices of such
currencies against U.S. dollars as last quoted by any major bank.
With respect to option contracts entered into by a Fund, the premium
received is recorded as an asset and equivalent liability, and thereafter the
liability is adjusted to the market value of the option determined in accordance
with the preceding paragraph. The premium paid for an option purchased by a Fund
is recorded as an asset and subsequently adjusted to market value.
PURCHASE AND REDEMPTION OF INSTITUTIONAL SHARES
Institutional Shares of the Funds are sold without a sales load on a
continuous basis primarily to customers ("Customers") of affiliate, franchise or
correspondent banks of First Interstate Bancorp and other selected institutions
("Institutions"). Customers may include individuals, trusts, partnerships and
corporations. Share purchases are effected through a Customer's account at an
Institution through procedures established in connection with the requirements
of the account, and confirmations of share purchases and redemptions will be
sent to the Institution involved. Institutions (or their nominees) will normally
be the holders of record of Institutional Shares acting on behalf of their
Customers, and will reflect their Customers' beneficial ownership of
Institutional Shares in the account statements provided by them to their
Customers. The exercise of voting rights and the delivery to Customers of
shareholder communications from the Funds will be governed by the Customers'
account agreements with an Institution. Investors wishing to purchase
Institutional Shares of a Fund should contact their account representatives.
Shares of a Fund are sold at net asset value per share next determined
after a purchase order has become effective. Purchase orders by an Institution
for Institutional Shares in the Funds must be received by the Trust by 4:15 p.m.
(Eastern time) on any Business Day. Payment for such shares may be made by
Institutions in Federal funds or other funds immediately available to the
Trust's custodian no later than 4:15 p.m.
28
<PAGE> 213
(Eastern time) on the next Business Day following the receipt of the purchase
order.
It is the responsibility of Institutions to transmit orders for purchases
by their Customers and to deliver required funds on a timely basis. If funds are
not received within the periods described above, the order will be canceled,
notice thereof will be given, and the Institution will be responsible for any
loss to the Fund or its shareholders. Institutions may charge certain account
fees depending on the type of account the investor has established with an
Institution. In addition, an Institution may receive fees from the Funds with
respect to the investments of its Customers as described above under "Management
of the Funds." Payment for Institutional Shares of a Fund may, in the discretion
of the Advisor, be made in the form of securities that are permissible
investments for the Fund. For further information see "Additional Purchase and
Redemption Information" in the SAI.
With respect to former shareholders of Westcore Trust who do not have a
relationship with an Institution, additional shares of the Funds may be
purchased by writing or calling the Funds directly at 237 Park Avenue, Suite
910, New York, NY 10017 or 1-800-662-8417.
The Trust reserves the right to reject any purchase order. Payment for
orders which are not received will be returned after prompt inquiry. The
issuance of Institutional Shares is recorded on the books of the Funds, and
share certificates are not issued.
Neither the Trust, the Distributor nor Furman Selz will be responsible for
the authenticity of telephone instructions for the purchase or redemption of
Institutional Shares where such instructions are reasonably believed to be
genuine. The Trust will attempt to confirm that telephone instructions are
genuine and will use such procedures as are considered reasonable. To the extent
that the Trust fails to use reasonable procedures to verify the genuineness of
telephone instructions, it or its service providers may be liable for any loss,
damage or expense arising from such instructions that prove to be fraudulent or
unauthorized.
Redemption requests are effected at the net asset value per share next
determined after receipt of a redemption request in good order by the Trust.
Institutional Shares held by an Institution on behalf of its Customers must be
redeemed in accordance with instructions and limitations pertaining to the
account at the Institution. It is the responsibility of an Institution to
29
<PAGE> 214
transmit redemption requests to the Trust and to credit its Customers' accounts
with the redemption proceeds on a timely basis. The redemption proceeds for
Institutional Shares of a Fund are normally wired to the redeeming Institution
the following Business Day after receipt of the request by the Trust. The Trust
reserves the right to delay the wiring of redemption proceeds for up to seven
days after it receives a redemption order if, in the judgment of the Advisor, an
earlier payment could adversely affect a Fund.
With respect to former shareholders of Westcore Trust who do not have a
relationship with an Institution, shares of the Funds may be redeemed by writing
or calling the Funds directly at 237 Park Avenue, Suite 910, New York, NY 10017
or 1-800-662-8417. When Institutional Shares are redeemed directly from a Fund,
the Fund will ordinarily send the proceeds by check to the shareholder at the
address of record on the next Business Day unless payment by wire is requested.
The Funds may, however, take up to seven days to make payment. This will not be
the customary practice. Also, if the New York Stock Exchange is closed (or when
trading is restricted) for any reason other than the customary weekend or
holiday closing or if an emergency condition as determined by the SEC merits
such action, the Funds may suspend redemptions or postpone payment dates.
To be accepted by a Fund, a letter requesting redemption must include: (i)
the Fund name and account registration from which you are redeeming
Institutional Shares; (ii) your account number; (iii) the amount to be redeemed;
(iv) the signatures of all registered owners; and (v) a signature guarantee by
any eligible guarantor institution including a member of a national securities
exchange or a commercial bank or trust company, broker-dealers, credit unions
and savings associations. Corporations, partnerships, trusts or other legal
entities may be required to submit additional documentation.
All redemptions of Institutional Shares of the Funds shall be made in cash,
except that the commitment to redeem Institutional Shares in cash extends only
to redemption requests made by each shareholder of a Fund during any 90-day
period of up to the lesser of $250,000 or 1% of the net asset value of that Fund
at the beginning of such period. This commitment is irrevocable without the
prior approval of the SEC and is a fundamental policy of the Funds that may not
be changed without shareholder approval. In the case of redemption requests by
shareholders in excess of such amounts, the Board of Trustees reserves the right
to have the Funds make
30
<PAGE> 215
payment, in whole or in part, in securities or other assets, in case of an
emergency or any time a cash distribution would impair the liquidity of a Fund
to the detriment of the existing shareholders. In this event, the securities
would be valued in the same manner as the securities of that Fund are valued. If
the recipient were to sell such securities, he or she would incur brokerage
charges.
A redemption may be a taxable transaction on which gain or loss may be
recognized.
EXCHANGE OF INSTITUTIONAL SHARES
The Funds offer a convenient way to exchange Institutional Shares in one
Fund for Institutional Shares in another investment portfolio of the Trust.
Before engaging in an exchange transaction, a shareholder should read carefully
the Prospectus describing the investment portfolio into which the exchange will
occur, which is available without charge and can be obtained by writing to
Furman Selz, Mutual Fund Department, 237 Park Avenue, Suite 910, New York, New
York 10017, or by calling 1-800-662-8417. A shareholder may not exchange
Institutional Shares of one portfolio for Institutional Shares of another
portfolio if both or either are not qualified for sale in the state of the
shareholder's residence. The Trust may terminate or amend the terms of the
exchange privilege at any time.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the net asset value next determined following receipt of the
request by the Trust in good order.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
To exchange Institutional Shares, or if you have any questions, simply call
the Trust at 1-800-662-8417. You should be prepared to give the telephone
representative the following information: (i) your account number, social
security number and account registration; (ii) the name of the portfolio from
and the portfolio into which you wish to transfer your investment; and (iii) the
dollar or share amount you wish to exchange. The conversation may be recorded to
protect you and the Funds. Telephone exchanges are automatically available
unless if the shareholder indicates he does not want this option by checking the
"no" box on the Purchase Application.
31
<PAGE> 216
In addition, Institutional Shares of a Fund may be exchanged for Investor
Shares of the same Fund in connection with the distribution of assets held in a
qualified trust, agency or custodial account maintained with the trust
department of a First Interstate or other bank, trust company or thrift
institution, or in other cases where Institutional Shares are not held in such
qualified accounts. Similarly, Investor Shares may be exchanged for
Institutional Shares of the same Fund if the shares are to be held in such a
qualified trust, agency or custodial account. These exchanges are made without a
sales charge at the net asset value of the respective share classes.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
Each Fund has qualified and intends to continue to qualify annually and to
elect to be treated as a regulated investment company pursuant to the provisions
of Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
By so qualifying and electing, each Fund generally will not be subject to
Federal income tax to the extent that it distributes investment company taxable
income and net capital gains in the manner required under the Code.
Each Fund intends to distribute to its shareholders substantially all of
its investment company taxable income (which includes, among other items,
dividends and interest and the excess, if any, of net short-term capital gains
(generally including any net option premium income) over net long-term capital
losses). Investment company taxable income will be distributed by the
Intermediate Government Bond Fund and Intermediate Bond Fund monthly. The other
Funds will declare distributions of such income daily and pay those dividends
monthly. Each Fund intends to distribute, at least annually, substantially all
net capital gain (the excess of net long-term capital gains over net short-term
capital losses). In determining amounts of capital gains to be distributed, any
capital loss carryovers from prior years will be applied against capital gains.
In the case of the Short-Term Government Bond Fund, Asset Preservation Fund
and Government Income Fund, the amount declared each day as a dividend may be
based on projections of estimated monthly net investment income and may differ
from the actual investment income determined in accordance with generally
accepted accounting principles. An adjustment will be made to the dividend each
month to account for any difference between the projected and actual monthly
investment income.
Distributions will be paid in additional shares of the same class held by a
shareholder based on the net asset value at the close of business on the payment
date of the distribution, unless the shareholder elects in writing,
32
<PAGE> 217
which is received by Furman Selz not less than five full business days prior to
the record date, to receive such distributions in cash. In the case of the Funds
that declare daily dividends, shares purchased will begin earning dividends on
the day after the purchase order is executed, and shares redeemed will earn
dividends through the day the redemption is executed. Investors who redeem all
or a portion of Fund shares prior to a dividend payment date will be entitled on
the next dividend payment date to all dividends declared but unpaid on those
shares at the time of their redemption.
Distributions of investment company taxable income (regardless of whether
derived from dividends, interest or net short-term capital gains) will be
taxable to shareholders as ordinary income. Distributions of net long-term
capital gains designated by a Fund as capital gain dividends will be taxable as
long-term capital gains, regardless of how long a shareholder has held his Fund
shares. Distributions are taxable in the same manner whether received in
additional shares or in cash.
Earnings of the Funds not distributed on a timely basis in accordance with
a calendar year distribution requirement are subject to a nondeductible 4%
excise tax. To prevent imposition of this tax, each Fund intends to comply with
this distribution requirement.
A distribution, including an "exempt-interest dividend," will be treated as
paid on December 31 of a calendar year if it is declared by a Fund during
October, November, or December of that year to shareholders of record in such a
month and paid by a Fund during January of the following calendar year. Such
distributions will be treated as received by shareholders in the calendar year
in which the distributions are declared, rather than the calendar year in which
the distributions are received.
Special tax rules may apply to a Fund's acquisition of financial futures
contracts, forward contracts, and options on futures contracts. Such rules may,
among other things, affect whether gains and losses from such transactions are
considered to be short-term or long-term, may have the effect of deferring
losses and/or accelerating the recognition of gains or losses, and, for purposes
of qualifying as a regulated investment company, may limit the extent to which a
Fund may be able to engage in such transactions.
A Fund's distributions with respect to a given taxable year may exceed the
current and accumulated earnings and profits of that Fund available for
distribution. In that event, distributions in excess of such earnings and
profits would be characterized as a return of capital to shareholders for
Federal income tax purposes, thus reducing each shareholder's cost basis in
33
<PAGE> 218
his Fund shares. Distributions in excess of a shareholder's cost basis in his
shares would be treated as a gain realized from a sale of such shares.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of a Fund, or upon receipt of a distribution in complete
liquidation of a Fund, generally will be a capital gain or loss which will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares. A loss realized by a shareholder on a redemption, sale,
or exchange of shares of a Fund that were not held for more than six months with
respect to which capital gain dividends have been paid will be characterized as
a long-term capital loss to the extent of such capital gain dividends.
Before purchasing shares in the Funds, the impact of dividends or
distributions which are expected to be declared or have been declared, but not
paid, should be carefully considered. Any dividend or distribution declared
shortly after a purchase of such shares prior to the record date will have the
effect of reducing the per share net asset value by the per share amount of the
dividend or distribution. All or a portion of such dividend or distribution,
although in effect a return of capital, may be subject to tax.
The dividends paid by the Funds are not expected to qualify for the
dividends-received deduction available to corporations.
The Funds may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where a Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Most corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Income or gain from investments in foreign securities may be subject to
foreign withholding or other taxes. It is expected that the Funds may be subject
to foreign withholding taxes with respect to income received from sources within
foreign countries.
If a Fund invests in certain "passive foreign investment companies"
("PFICs"), it would be subject to Federal income tax (and possibly additional
interest charges) on a portion of any excess distribution or gain from the
disposition of such shares even if it distributes such income to its
shareholders. If a Fund elects to treat the PFIC as a qualified electing fund
34
<PAGE> 219
("QEF") and the PFIC furnishes certain financial information in the required
form to such Fund, the Fund would instead be required to include in income each
year its allocable share of the ordinary earnings and net capital gains on the
QEF, regardless of whether received, and such amounts would be subject to the
various distribution requirements described above.
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund(s) in which they invest. Depending on
the residence of the shareholder for tax purposes, distributions also may be
subject to state and local taxes, including withholding taxes. Foreign
shareholders may, for example, be subject to special withholding requirements.
Special tax treatment, including a penalty on certain pre-retirement
distributions, is accorded to accounts maintained as IRAs. Shareholders should
consult their own tax advisors as to the Federal, state and local tax
consequences of ownership of shares of the Funds in their particular
circumstances.
DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES
U.S. Government Obligations. U.S. Government securities are obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
U.S. Treasury obligations are direct obligations of the United States and are
the most frequently issued marketable U.S. Government security.
U.S. Government agency and instrumentality obligations are debt securities
issued by U.S. Government-sponsored enterprises and Federal agencies. Some
obligations of agencies are supported by the full faith and credit of the United
States or by U.S. Treasury guarantees, such as mortgage-backed certificates,
which may be guaranteed by the Government National Mortgage Association; others,
such as obligations of the Federal Home Loan Banks, Federal Farm Credit Bank,
Bank for Cooperatives, Federal Intermediate Credit Banks and the Federal Land
Bank, are guaranteed by the right of the issuer to borrow from the U.S.
Treasury; others, such as obligations of the Federal National Mortgage
Association, are supported by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others, such
as obligations of the Student Loan Marketing Association and the Tennessee
Valley Authority, are backed only by the credit of the agency or instrumentality
issuing the obligation. In the case of obligations not backed by the full faith
and credit of the United States, the investor must look
35
<PAGE> 220
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment.
Repurchase Agreements. The Funds may agree to purchase securities subject
to the seller's agreement to repurchase them at a mutually agreed upon date and
price. The Funds will enter into such repurchase agreements only with financial
institutions that are deemed to be creditworthy by the Advisor, pursuant to
guidelines established by the Trust's Board of Trustees. During the term of any
repurchase agreement, the Advisor will continue to monitor the creditworthiness
of the seller. The Funds will not enter into repurchase agreements with the
Advisor or its affiliates. Although the securities subject to repurchase
agreements may bear maturities exceeding 13 months, the Funds do not presently
intend to enter into repurchase agreements with deemed maturities in excess of
seven days. If in the future a Fund was to enter into repurchase agreements with
deemed maturities in excess of seven days, such Fund would do so only if such
investment, together with other illiquid securities, did not exceed 15% (10% in
the case of the Asset Preservation Fund and Government Income Fund) of the value
of that Fund's net assets.
The seller under a repurchase agreement will be required to maintain the
value of the securities that are subject to the agreement and held by a Fund at
not less than the repurchase price. Default or bankruptcy of the seller would,
however, expose a Fund to possible delay in connection with the disposition of
the underlying securities or loss to the extent that proceeds from a sale of the
underlying securities were less than the repurchase price under the agreement.
Bank Obligations. Bank obligations include bankers' acceptances,
negotiable certificates of deposit and non-negotiable time deposits issued by a
U.S. bank, savings bank or savings association that is a member of the Federal
Reserve System or insured by the Federal Deposit Insurance Corporation. The
Funds may also invest in U.S. dollar-denominated obligations of foreign banks.
Obligations of foreign banks or foreign branches of U.S. banks entail risks that
are different from those of investments in domestic obligations of U.S. banks.
These additional risks include future political and economic developments, the
possible imposition of withholding taxes on interest income, possible seizure or
nationalization of foreign deposits, the possible establishment of exchange
controls, or the adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on such obligations. In
addition, foreign branches of U.S. banks and U.S. branches of foreign banks may
be subject to less stringent reserve requirements and to different accounting,
auditing, reporting, and recordkeeping standards than those
36
<PAGE> 221
applicable to domestic branches of U.S. banks. Investments in domestic and
foreign bank obligations are limited to the obligations of financial
institutions having $1 billion or more in total assets at the time of purchase.
Commercial Paper. Commercial paper includes short-term unsecured
promissory notes, variable rate demand notes and variable rate master demand
notes issued by domestic and foreign bank holding companies, corporations and
financial institutions, as well as similar instruments issued by government
agencies and instrumentalities. Investments by the Funds in commercial paper
will consist of issues that are rated in one of the two highest rating
categories by a NRSRO. In addition, the Funds may acquire unrated commercial
paper and corporate bonds that are determined by the Advisor at the time of
purchase to be of comparable quality to rated instruments that may be acquired
by the Funds. Commercial paper may include variable and floating rate
instruments.
Securities Issued by Other Investment Companies. Each Fund may invest in
securities issued by other investment companies within the limits prescribed by
the 1940 Act. Each Fund currently intends to limit its investments so that, as
determined immediately after a securities purchase is made: (a) not more than 5%
of the value of its total assets will be invested in the securities of any one
investment company; (b) not more than 10% of the value of its total assets will
be invested in the aggregate in securities of investment companies as a group;
(c) not more than 3% of the outstanding voting stock of any one investment
company will be owned by the Fund; and (d) not more than 10% of the outstanding
voting stock of any one investment company will be owned in the aggregate by a
Fund and other investment companies advised by the Advisor or any other
affiliate of First Interstate Bancorp. As a shareholder of another investment
company, a Fund would bear, along with other shareholders, its pro rata portion
of the expenses of such other investment company, including advisory fees. These
expenses would be in addition to the advisory and other expenses that each Fund
bears directly in connection with its own operations, and may represent a
duplication of fees to shareholders of that Fund.
Variable and Floating Rate Instruments. Instruments purchased by a Fund
may include variable and floating rate demand instruments issued by
corporations, industrial development authorities and governmental entities.
These instruments may include variable amount master demand notes that permit
the indebtedness to vary in addition to providing for periodic adjustments in
the interest rate. Although variable and floating rate demand instruments are
frequently not rated by credit rating agencies, unrated instruments purchased by
a Fund will be determined to be of comparable quality to rated instruments that
may be purchased by the
37
<PAGE> 222
Fund. While there may be no active secondary market with respect to a particular
variable or floating rate instrument purchased by a Fund, the Funds may, from
time to time as specified in the instrument, demand payment in full of the
principal of the instrument or may resell the instrument to a third party. The
absence of such an active secondary market, however, could make it difficult for
a Fund to dispose of a variable or floating rate demand instrument if the issuer
defaulted on its payment obligations or during periods that the Fund is not
entitled to exercise its demand rights, and the Fund could, for these or other
reasons, suffer a loss.
Loans of Portfolio Securities. To increase return, a Fund may lend its
portfolio securities to broker/dealers and other institutional investors
pursuant to agreements requiring that the loans be continuously secured by
collateral equal at all times in value to at least the market value of the
securities loaned. The collateral for such loans may include cash, securities of
the U.S. Government, its agencies or instrumentalities, or irrevocable letters
of credit issued by a bank, or any combination thereof. For each Fund, such
loans will not be made if, as a result, the aggregate of all outstanding loans
exceeds 30% of the value of its total assets. There may be risks of delay in
receiving additional collateral or in recovering the securities loaned or even a
loss of rights in the collateral should the borrower of the securities fail
financially. However, loans are made only to borrowers deemed by the Advisor to
be of good standing and when, in their judgment, the income to be earned from
the loan justifies the attendant risks.
Forward Commitments, When-Issued Purchases and Delayed-Delivery
Transactions. The Funds may purchase or sell securities on a when-issued or
delayed-delivery basis and make contracts to purchase or sell securities for a
fixed price at a future date beyond customary settlement time. Securities
purchased or sold on a when-issued, delayed-delivery or forward commitment basis
involve a risk of loss if the value of the security to be purchased declines, or
the value of the security to be sold increases, before the settlement date.
Although a Fund will generally purchase securities with the intention of
acquiring them, a Fund may dispose of securities purchased on a when-issued,
delayed-delivery or a forward commitment basis before settlement when deemed
appropriate by the Advisor.
Mortgage-Related Securities. Mortgage pass-through securities are
securities representing interests in "pools" of mortgages in which payments of
both interest and principal on the securities are made monthly, in effect
"passing through" monthly payments made by the individual borrowers on the
residential mortgage loans which underlie the securities (net of fees paid to
the issuer or guarantor of the securities). Early repayment of
38
<PAGE> 223
principal on mortgage pass-through securities (arising from prepayments of
principal due to sale of the underlying property, refinancing, or foreclosure,
net of fees and costs which may be incurred) may expose a Fund to a lower rate
of return upon reinvestment of principal. Also, if a security subject to
prepayment has been purchased at a premium, in the event of prepayment the value
of the premium would be lost. Like other fixed-income securities, when interest
rates rise, the value of a mortgage-related security generally will decline;
however, when interest rates decline, the value of mortgage-related securities
with prepayment features may not increase as much as other fixed-income
securities. In recognition of this prepayment risk to investors, the Public
Securities Association (the "PSA") has standardized the method of measuring the
rate of mortgage loan principal prepayments. The PSA formula, the Constant
Prepayment Rate (the "CPR") or other similar models that are standard in the
industry will be used by a Fund in calculating maturity for purposes of its
investment in mortgage-related securities. Because the average life of
mortgage-related securities may lengthen with increases in interest rates, the
portfolio-weighted average life of the securities in which a Fund is invested
may at times lengthen due to this effect. Under these circumstances, the Advisor
may, but is not required to, sell securities in order to maintain an appropriate
dollar-weighted average portfolio maturity.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by the
full faith and credit of the U.S. Government (in the case of securities
guaranteed by the Government National Mortgage Association ("GNMA"); or
guaranteed by agencies or instrumentalities of the U.S. Government (in the case
of securities guaranteed by the Federal National Mortgage Association ("FNMA")
or the Federal Home Loan Mortgage Corporation ("FHLMC"), which are supported
only by the discretionary authority of the U.S. Government to purchase the
agency's obligations). Mortgage pass-through securities created by
non-governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers) may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance, and
letters of credit, which may be issued by governmental entities, private
insurers or the mortgage poolers.
The Funds may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs") which are hybrid instruments with characteristics of both
mortgage-backed bonds and mortgage pass-through securities. CMOs may be
collateralized by whole mortgage loans but are
39
<PAGE> 224
more typically collateralized by portfolios of mortgage pass-through securities
guaranteed by GNMA, FHLMC or FNMA. CMOs are structured into multiple classes,
with each class bearing a different stated maturity. Payments of principal,
including prepayments, are first returned to investors holding the shortest
maturity class; investors holding the longer maturity classes receive principal
only after the first class has been retired.
Assumptions generally accepted by the industry concerning the probability
of early payment may be used in the calculation of maturities for debt
securities that contain put or call provisions, sometimes resulting in a
calculated maturity different than the stated maturity of the security.
The Advisor expects that governmental, government-related or private
entities may create mortgage loan pools and other mortgage-related securities
offering mortgage pass-through and mortgage-collateralized investments in
addition to those described above. As new types of mortgage-related securities
are developed and offered to investors, the Advisor will, consistent with a
Fund's investment objective, policies and quality standards, consider making
investments in such new types of mortgage-related securities.
Other Asset-Backed Securities. Other asset-backed securities (unrelated to
mortgage loans) have been offered to investors. These asset-backed securities
may consist of undivided fractional interests in pools of consumer loans or
receivables held in a trust. Examples include certificates for automobile
receivables (CARS) and credit card receivables (CARDS). Payments of principal
and interest on these asset-backed securities are "passed through" on a monthly
or other periodic basis to certificate holders and are typically supported by
some form of credit enhancement, such as a letter of credit, surety bond,
limited guaranty, or subordination. The extent of credit enhancement varies, but
usually amounts to only a fraction of the asset-backed security's par value
until exhausted. Ultimately, asset-backed securities are dependent upon payment
of the consumer loans or receivables by individuals, and the certificate holder
frequently has no recourse to the entity that originated the loans or
receivables.
The underlying assets may be prepaid with the result of shortening the
certificates' weighted average life. Prepayment rates vary widely and may be
affected by changes in market interest rates. It is not possible to accurately
predict the average life of a particular pool of loans or receivables. The
proceeds of prepayments received by a Fund must be reinvested in securities
whose yields reflect interest rates prevailing at the time. Thus, a Fund's
ability to maintain a portfolio which includes high-yielding asset-backed
securities will be adversely affected to the extent reinvestments are
40
<PAGE> 225
in lower yielding securities. The actual maturity and realized yield will
therefore vary based upon the prepayment experience of the underlying asset pool
and prevailing interest rates at the time of prepayment. Asset-backed securities
are relatively new instruments and may be subject to greater risk of default
during periods of economic downturn than other instruments. Also, the secondary
market for certain asset-backed securities may not be as liquid as the market
for other types of securities, which could result in a Fund's experiencing in
valuing or liquidating such securities. For asset-backed securities, the
industry standard uses a principal prepayment model, the "ABS Model," which is
similar to the PSA described previously under "Mortgage-Related Securities."
Either the PSA model, the ABS model or other similar models that are standard in
the industry will be used by the Funds in calculating maturity for purposes of
its investment in asset-backed securities.
Derivative Securities. The Funds may invest in structured notes, bonds or
other instruments with interest rates that are determined by reference to
changes in the value of other interest rates, indices or financial indicators
("References") or the relative change in two or more References. The Funds may
also hold derivative instruments that have interest rates that reset inversely
to changing current market rates and/or have embedded interest rate floors and
caps that require the issuer to pay an adjusted interest rate if market rates
fall below or rise above a specified rate. These instruments represent
relatively recent innovations in the bond markets, and the trading market for
these instruments is less developed than the markets for traditional types of
debt instruments. It is uncertain how these instruments will perform under
different economic and interest-rate scenarios. Because certain of these
instruments are leveraged, their market values may be more volatile than other
types of bonds and may present greater potential for capital gain or loss. On
the other hand, the imbedded option features of other derivative instruments
could limit the amount of appreciation a Fund can realize on its investment,
could cause a Fund to hold a security it might otherwise sell or could force the
sale of a security at inopportune times or for prices that do not reflect
current market value. The possibility of default by the issuer or the issuer's
credit provider may be greater for these structured and derivative instruments
than for other types of instruments. In some cases it may be difficult to
determine the fair value of a structured or derivative instrument because of a
lack of reliable objective information and an established secondary market for
some instruments may not exist.
Stripped Obligations. To the extent consistent with their respective
investment objectives, the Funds may purchase Treasury receipts and other
41
<PAGE> 226
"stripped" securities that evidence ownership in either the future interest
payments or the future principal payments on U.S. Government and other
obligations. These participations, which may be issued by the U.S. Government
(or a U.S. Government agency or instrumentality) or by private issuers such as
banks and other institutions, are issued at a discount to their "face value,"
and may include stripped mortgage-backed securities ("SMBS"). Stripped
securities, particularly, SMBS, may exhibit greater price volatility than
ordinary debt securities because of the manner in which their principal and
interest are returned to investors.
SMBS are usually structured with two or more classes that receive different
proportions of the interest and principal distributors from a pool of
mortgage-backed obligations. A common type of SMBS will have one class receiving
all of the interest, while the other class receives all of the principal.
However, in some cases, one class will receive some of the interest and most of
the principal while the other class will receive most of the interest and the
remainder of the principal. If the underlying obligations experience greater
than anticipated prepayments of principal, a Fund may fail to fully recoup its
initial investment. The market value of the class consisting entirely of
principal payments can be extremely volatile in response to changes in interest
rates. The yields on a class of SMBS that receives all or most of the interest
are generally higher than prevailing market yields on other mortgage-backed
obligations because their cash flow patterns are also volatile and there is a
greater risk that the initial investment will not be fully recouped.
SMBS issued by the U.S. Government (or a U.S. Government agency or
instrumentality) may be considered liquid under guidelines established by the
Board of Trustees if they can be disposed of promptly in the ordinary course of
business at a value reasonably close to that used in the calculation of a Fund's
per share net asset value.
Custodial Receipts for Treasury Securities. To the extent consistent with
their respective investment objectives, the Funds may purchase participations in
trusts that hold U.S. Treasury securities (such as TIGRs and CATS) or other
obligations where the trust participations evidence ownership in either the
future interest payments or the future principal payments on the obligations.
These participations are normally issued at a discount to their "face value,"
and can exhibit greater price volatility than ordinary debt securities because
of the way in which their principal and interest are returned to investors.
Investments by a Fund in such participations will not exceed 5% of the value of
that Fund's total assets.
42
<PAGE> 227
Foreign Securities. The Intermediate Bond Fund may invest up to 20% of the
value of its total assets in U.S. dollar-denominated debt obligations of foreign
issuers. The Asset Preservation Fund and Government Income Fund will ordinarily
purchase U.S. dollar-denominated or foreign currency-denominated securities that
are traded in the United States, but they may invest up to 5% of their total
assets directly in foreign markets.
Investments in foreign securities involve certain inherent risks, such as
political or economic instability of the issuer or the country of the issue, the
difficulty of predicting international trade patterns, changes in exchange rates
of foreign currencies and the possibility of adverse changes in investment or
exchange control regulations. There may be less publicly available information
about a foreign company than about a domestic company. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic companies.
Further, foreign stock markets are generally not as developed or efficient as
those in the United States, and in most foreign markets volume and liquidity are
less than in the United States. Fixed commissions on foreign stock exchanges are
generally higher than the negotiated commissions on U.S. exchanges, and there is
generally less government supervision and regulation of foreign stock exchanges,
brokers and companies than in the United States. With respect to certain foreign
countries, there is a possibility of expropriation or confiscatory taxation,
limitations on the removal of funds or other assets, or diplomatic developments
that could affect investment within those countries. Because of these and other
factors, securities of foreign companies acquired by a Fund may be subject to
greater fluctuation in price than securities of domestic companies.
Forward Currency Transactions. The Asset Preservation Fund and Government
Income Fund may enter into forward foreign currency exchange contracts in order
to protect against uncertainty in the level of future foreign exchange rates.
See the SAI for further information concerning foreign currency transactions.
Options. Each Fund may purchase put and call options listed on a national
securities exchange and issued by the Options Clearing Corporation in an amount
not exceeding 5% of its net assets. Purchasing options is a specialized
investment technique that entails a substantial risk of a complete loss of the
amounts paid as premiums to the writer of the option.
The Funds may also write covered call and secured put options from time to
time as the Advisor deems appropriate. By writing a covered call
43
<PAGE> 228
option, a Fund forgoes the opportunity to profit from an increase in the market
price of the underlying security above the exercise price except insofar as the
premium represents such a profit, and it is not able to sell the underlying
security until the option expires or is exercised or the Fund effects a closing
purchase transaction by purchasing an option of the same series. If a Fund
writes a secured put option, it assumes the risk of loss should the market value
of the underlying security decline below the exercise price of the option. The
aggregate value of the securities subject to options written by a Fund will not
exceed 25% of the value of its net assets. The use of covered call options and
secured put options will not be a primary investment technique of the Funds, and
they are expected to be used infrequently. If the Advisor is incorrect in its
forecast of market value or other factors when writing the foregoing options, a
Fund would be in a worse position than it would have been had the foregoing
investment techniques not been used.
The Asset Preservation Fund and Government Income Fund may also engage in
unlisted over-the-counter options with broker/dealers deemed creditworthy by the
Advisor. Closing transactions for such options are usually effected directly
with the same broker/dealer that effected the original option transaction. A
Fund bears the risk that the broker/dealer will fail to meet its obligations.
There is no assurance that a liquid secondary trading market exists for closing
out an unlisted option position. Furthermore, unlisted options are not subject
to the protections afforded purchasers of listed options by the Options Clearing
Corporation, which performs the obligations of its members who fail to perform
in connection with the purchase or sale of options.
For additional information relating to option trading practices, including
the particular risks thereof, see the SAI.
Interest Rate Futures. Each Fund may purchase and sell interest rate
futures contracts as a hedge against changes in interest rates, provided that
not more than 5% of a Fund's net assets are committed to such transactions. See
the SAI for further information about interest rate futures.
Illiquid Securities. Each Fund will not knowingly invest more than 15%
(10% in the case of the Asset Preservation Fund and Government Income Fund) of
the value of its net assets in securities that are illiquid because of
restrictions on transferability or other reasons. Repurchase agreements with
deemed maturities in excess of seven days, time deposits maturing in more than
seven days and securities that are not registered under the Securities Act of
1933 but may be purchased by institutional buyers under Rule 144A are subject to
this limit (unless such securities are
44
<PAGE> 229
variable amount master demand notes with maturities of nine months or less or
unless the Advisor determines under the supervision of the Board that a liquid
trading market exists).
Rule 144A allows for a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the Securities
Act of 1933 for resales of certain securities to qualified institutional buyers.
The Advisor believes that the market for certain restricted securities may
expand further as a result of this regulation and the development of automated
systems for the trading, clearance and settlement of unregistered securities of
domestic and foreign issuers, such as the PORTAL System sponsored by the NASD.
The Advisor monitors the liquidity of restricted securities in each of the
Funds under the supervision of the Board of Trustees. In reaching liquidity
decisions, the Advisor will consider such factors as: (a) the frequency of
trades and quotes for the security; (b) the number of dealers wishing to
purchase or sell the security and number of other potential purchasers; (c)
dealer undertakings to make a market in the security; and (d) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer). The use of Rule 144A transactions could have the effect of
increasing the level of illiquidity of the Funds during periods that qualified
institutional buyers become uninterested in purchasing restricted securities.
INVESTMENT RESTRICTIONS
Each Fund has adopted certain fundamental investment restrictions that may
be changed only with the approval of a majority of a Fund's outstanding shares.
The following description summarizes several of the Funds' fundamental
restrictions, which are set forth in full in the SAI.
No Fund may:
1. Purchase securities (except U.S. Government securities and repurchase
agreements collateralized by such securities) if more than 5% of its
total assets at the time of purchase will be invested in securities of
any one issuer, except that up to 25% of a Fund's total assets may be
invested without regard to this 5% limitation.
2. Subject to the foregoing 25% exception, purchase more than 10% of the
outstanding voting securities of any issuer.
45
<PAGE> 230
3. Invest 25% or more of its total assets at the time of purchase in
securities of issuers whose principal business activities are in the
same industry.
4. Borrow money except in amounts up to 10% of the value of its total
assets at the time of borrowing.
If a percentage restriction on the investment or use of assets set forth in
this Prospectus is adhered to at the time a transaction is effected, later
changes in percentage resulting from changing values will not be considered a
violation, however, the Funds will not at any time have more than 15% of their
respective net assets invested in illiquid securities.
OTHER INFORMATION
CAPITALIZATION
Pacifica Funds Trust (formerly Fund Source) was organized as a
Massachusetts business trust on July 17, 1984. The capitalization of the Trust
consists solely of an unlimited number of shares of beneficial interest with a
par value of $0.001 each. When issued, shares of the Funds are fully paid,
non-assessable and freely transferable.
The Board of Trustees has authorized the issuance of two classes of shares
in each of the Funds described in this Prospectus -- Institutional Shares and
Investor Shares. Each share of a Fund represents an equal proportionate interest
in a particular Fund with other shares of the same class and is entitled to such
dividends and distributions earned on such shares as are declared in the
discretion of the Board of Trustees.
Each Fund's Institutional Shares and Investor Shares bear their pro rata
portion of all operating expenses paid by the Fund except for the distribution
payments, Service Organization fees and other "class" expenses that are
allocated to a particular share class. The Board of Trustees has approved a
Distribution Plan with respect to Investor Shares of each Fund under which the
Trust may pay the Distributor in connection with the distribution of Investor
Shares at a rate or rates set from time to time by the Board of Trustees,
provided that no rate may exceed the annual rate of 0.50% of the average daily
net asset value of Investor Shares of a Fund. In addition, each Fund may pay
fees to Service Organizations in amounts up to an annual rate of 0.25% of the
daily net asset value of the Funds' outstanding Investor Shares owned by
shareholders with whom a Service Organization has a servicing relationship.
Investor Shares of the Funds are purchased at net asset value per share plus a
maximum 4.50% sales charge
46
<PAGE> 231
(subject to certain exceptions). Because of the "class expenses" and sales
charges, the performance of a Fund's Investor Shares is expected to be lower
than the performance of its Institutional Shares. The Trust offers various
services and privileges in connection with its Investor Shares that are not
offered in connection with its Institutional Shares, including an automatic
investment plan, automatic withdrawal plan and, with respect to certain
portfolios, checkwriting. For information regarding the Funds' Investor Shares,
contact Furman Selz at 1-800-662-8417 or your Service Organization.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust. The Declaration of Trust also
provides for indemnification out of the property of a Fund of any shareholder
held personally liable solely by reason of being or having been a shareholder of
the Fund. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a Fund itself would
be unable to meet its obligations and should be considered remote.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Trust is not required to hold regular
annual meetings of the Funds' shareholders, but in the event that a special
meeting is held, shareholders of each portfolio offered by the Trust will be
entitled to one vote for each full share held and fractional votes for
fractional shares held, and will vote in the aggregate and not on a
portfolio-by-portfolio basis, except as required by the 1940 Act or other
applicable law. It is contemplated that, as required by the 1940 Act, the
shareholders of a portfolio will vote separately on a portfolio-by-portfolio
basis on matters relating to a particular portfolio's investment advisory
agreement or changes in a portfolio's fundamental investment limitations, and on
other matters where the interests of the respective portfolios are not
substantially identical. Similarly, shareholders of each portfolio will vote in
the aggregate and not by class unless the Trustees determine that the matter to
be voted on affects only the interests of the holders of a particular class of a
Fund's shares. Voting rights are not cumulative.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person
47
<PAGE> 232
serving as Trustee either by declaration in writing or at a meeting called for
such purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust and in connection with such meeting to comply with the shareholders'
communications provisions of Section 16(c) of the 1940 Act.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of a Fund means, with respect to the
approval of an investment advisory agreement or a change in a fundamental
investment policy, the vote of the lesser of: (1) 67% of the shares of a Fund
present at a meeting if the holders of more than 50% of the outstanding shares
are present in person or by proxy; or (2) more than 50% of the outstanding
shares of a Fund. For purposes of the 1940 Act, any person who owns either
directly or through one or more controlled companies more than 25 percent of the
voting securities of a company is presumed to "control" such company. Under this
definition, First Interstate Bancorp and its affiliates may be deemed to be
controlling persons of the Trust.
PERFORMANCE INFORMATION
A Fund may, from time to time, include yield and total return data for its
Institutional Shares and Investor Shares in advertisements or reports to
shareholders or prospective investors. The methods used to calculate the yields
and total returns of the Funds are mandated by the SEC.
Quotations of "yield" for a class of shares of a Fund will be based on the
investment income per share during a particular 30-day (or one month) period
(including dividends and interest), less expenses accrued during the period
("net investment income"), and will be computed by dividing net investment
income by the maximum public offering price per share on the last day of the
period.
Quotations of yield reflect only the performance of a class of shares
during the particular period on which the calculations are based. Yield will
vary based on changes in market conditions, the level of interest rates and the
level of the expenses of a particular class of shares, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
Quotations of average annual total return for a class of shares of a Fund
will be expressed in terms of the average annual compounded rate of return of a
hypothetical investment in that class over periods of 1, 5 and 10 years (up to
the life of that class), reflect the deduction of a proportional
48
<PAGE> 233
share of expenses allocated to that class (on an annual basis), and assume that
all dividends and distributions are reinvested when paid.
Performance information for a Fund may be compared to various unmanaged
indices, such as the Standard & Poor's 500 Stock Index, the Dow Jones Industrial
Average, indices prepared by Lipper Analytical Services, and other entities or
organizations which track the performance of investment companies. Any
performance information should be considered in light of a Fund's investment
objective and policies, characteristics and quality of the Fund and the market
conditions during the time period indicated, and should not be considered to be
representative of what may be achieved in the future. For a description of the
methods used to determine yield and total return for the Funds, see "Other
Information -- Performance Information" in the SAI.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Funds at 237 Park
Avenue, Suite 910, New York, New York 10017.
General and Account Information: (800) 662-8417
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
FUNDS OR BY THEIR DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY FIRST INTERSTATE BANCORP OR ITS AFFILIATES,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
49
<PAGE> 234
APPENDIX
DESCRIPTION OF MOODY'S BOND RATINGS:
Excerpts from Moody's description of its four highest bond ratings are
listed as follows: Aaa -- judged to be the best quality and they carry the
smallest degree of investment risk; Aa -- judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds; A -- possess many favorable investment attributes and are
to be considered as "upper medium grade obligations"; Baa -- considered to be
medium grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Other Moody's bond
descriptions include: Ba -- judged to have speculative elements, their future
cannot be considered as well assured; B -- generally lack characteristics of the
desirable investment; Caa -- are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; Ca -- speculative in a high degree, often in default; C -- lowest
rated class of bonds, regarded as having extremely poor prospects.
Moody's also supplies numerical indicators 1, 2 and 3 to rating categories.
The modifier 1 indicates that the security is in the higher end of its rating
category; the modifier 2 indicates a mid-range ranking; and modifier 3 indicates
a ranking toward the lower end of the category.
DESCRIPTION OF S&P'S BOND RATINGS:
Excerpts from S&P's description of its four highest bond ratings are listed
as follows: AAA -- highest grade obligations, in which capacity to pay interest
and repay principal is extremely strong; AA -- also qualify as high grade
obligations, having a very strong capacity to pay interest and repay principal,
and differs from AAA issues only in a small degree; A -- regarded as upper
medium grade, having a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories;
BBB -- regarded as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories. This group is the lowest which qualifies for
commercial bank investment. BB, B, CCC, CC -- predominantly speculative with
respect to
A-1
<PAGE> 235
capacity to pay interest and repay principal in accordance with terms of the
obligations; BB indicates the highest grade and CC the lowest within the
speculative rating categories.
S&P applies indicators "+," no character, and "-" to its rating categories.
The indicators show relative standing within the major rating categories.
DESCRIPTION OF MOODY'S RATINGS OF NOTES AND VARIABLE RATE DEMAND INSTRUMENTS:
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or MIG. Such ratings recognize the
differences between short-term credit and long-term risk. Short-term ratings on
issues with demand features (variable rate demand obligations) are
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payments
relying on external liquidity.
MIG 1/VMIG 1: This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This denotes high quality. Margins of protection are ample
although not as large as in the preceding group.
DESCRIPTION OF MOODY'S TAX-EXEMPT COMMERCIAL PAPER RATINGS:
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations which have an original maturity not
exceeding nine months. Moody's makes no representation that such obligations are
exempt from registration under the Securities Act of 1933, nor does it represent
that any specific note is a valid obligation of a rated issuer or issued in
conformity with any applicable law. The following designations, all judged to be
investment grade, indicate the relative repayment ability of rated issuers of
securities in which the Trust may invest.
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term promissory obligations.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term promissory obligations.
A-2
<PAGE> 236
DESCRIPTION OF S&P'S RATINGS FOR MUNICIPAL BONDS:
INVESTMENT GRADE
AAA: Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA: Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A: Debt rated "A" has strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
SPECULATIVE GRADE
BB, B, CCC, CC: Debt rated in these categories is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
CI: The "CI" rating is reserved for income bonds on which no interest is
being paid.
D: Debt rated "D" is in default, and payment of interest and/or repayment
of principal is in arrears.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
DESCRIPTION OF S&P'S RATINGS FOR INVESTMENT GRADE MUNICIPAL NOTES AND SHORT-TERM
DEMAND OBLIGATIONS:
SP-1: Issues carrying this designation have a very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus (+) designation.
A-3
<PAGE> 237
SP-2: Issues carrying this designation have a satisfactory capacity to
pay principal and interest.
DESCRIPTION OF S&P'S RATINGS FOR DEMAND OBLIGATIONS AND
TAX-EXEMPT COMMERCIAL PAPER:
An S&P commercial paper rating is a current assessment of the likelihood of
timely repayment of debt having an original maturity of no more than 365 days.
The two rating categories for securities in which the Trust may invest are as
follows:
A-1: This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics will be denoted with a plus (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-4
<PAGE> 238
INVESTMENT ADVISOR
First Interstate Capital Management, Inc.
7501 East McCormick Parkway
Scottsdale, Arizona 85258
ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Pacifica Funds Distributor Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
First Interstate Bank of California
707 Wilshire Boulevard
Los Angeles, California 90017
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
[PACIFICA LOGO] PACBDIS-2/96
<PAGE> 239
[PACIFICA LOGO]
(INVESTOR SHARES)
PACIFICA OREGON TAX-EXEMPT FUND
PACIFICA ARIZONA TAX-EXEMPT FUND
PACIFICA CALIFORNIA TAX-EXEMPT FUND
PACIFICA CALIFORNIA SHORT-TERM
TAX-EXEMPT FUND
PACIFICA NATIONAL TAX-EXEMPT FUND
PROSPECTUS
FEBRUARY 1, 1996
[FIRST INTERSTATE BANK LOGO]
Investment Advisor to The Pacifica Funds
<PAGE> 240
PACIFICA FUNDS TRUST
(INVESTOR SHARES)
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) 662-8417
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. --
INVESTMENT ADVISOR
("FICM" OR THE "ADVISOR")
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
("FURMAN SELZ" OR THE "SPONSOR")
PACIFICA FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
("PFD INC." OR THE "DISTRIBUTOR")
Pacifica Funds Trust (the "Trust") is an open-end investment company (a
mutual fund) that offers a selection of separate investment portfolios. This
Prospectus describes the Investor Shares of the following five portfolios (the
"Funds"):
- Pacifica Oregon Tax-Exempt Fund
- Pacifica Arizona Tax-Exempt Fund
- Pacifica California Tax-Exempt Fund
- Pacifica California Short-Term Tax-Exempt Fund
- Pacifica National Tax-Exempt Fund
This Prospectus sets forth concisely the information a prospective investor
should know before investing in any of the Funds and should be read and retained
for information about each Fund. A Statement of Additional Information (the
"SAI"), dated February 1, 1996 (which may be revised from time to time),
containing additional and more detailed information about the Funds, has been
filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Funds at the address or
information number printed above.
----------------------------
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FIRST INTERSTATE OR OTHER BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN 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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1996.
<PAGE> 241
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS............................................... 3
FUND EXPENSES............................................ 7
FEE TABLE -- INVESTOR SHARES............................. 7
FINANCIAL HIGHLIGHTS..................................... 11
THE FUNDS................................................ 17
INVESTMENT POLICIES AND PRACTICES
OF THE FUNDS........................................... 17
RISKS OF INVESTING IN THE FUNDS.......................... 19
MANAGEMENT OF THE FUNDS.................................. 22
FUND SHARE VALUATION..................................... 28
PRICING OF INVESTOR SHARES............................... 29
MINIMUM PURCHASE REQUIREMENTS............................ 32
PURCHASE OF INVESTOR SHARES.............................. 32
EXCHANGE OF INVESTOR SHARES.............................. 34
REDEMPTION OF INVESTOR SHARES............................ 35
DIVIDENDS, DISTRIBUTIONS AND
FEDERAL INCOME TAX..................................... 39
DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES................................... 45
INVESTMENT RESTRICTIONS.................................. 49
OTHER INFORMATION........................................ 50
APPENDIX................................................. A-1
</TABLE>
2
<PAGE> 242
HIGHLIGHTS
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
This Prospectus describes five non-diversified investment portfolios
managed by First Interstate Capital Management, Inc. Each Fund has a distinct
investment objective and policies.
The Oregon Tax-Exempt Fund. The investment objective of the Oregon
Tax-Exempt Fund is to provide investors with income exempt from Federal and
Oregon personal income taxes. The Fund's assets will be primarily invested in
debt instruments issued by or on behalf of the State of Oregon, other states,
territories and possessions of the United States, the District of Columbia and
their respective authorities, agencies, instrumentalities and political
subdivisions.
The Arizona Tax-Exempt Fund. The investment objective of the Arizona
Tax-Exempt Fund is to provide investors with income exempt from Federal and
Arizona personal income taxes. The Fund's assets will be primarily invested in
debt instruments issued by or on behalf of the State of Arizona, other states,
territories and possessions of the United States, the District of Columbia and
their respective authorities, agencies, instrumentalities and political
subdivisions.
The California Tax-Exempt Fund. The investment objective of the California
Tax-Exempt Fund is to provide investors with as high a level of current income,
exempt from both Federal and California personal income taxes, as is consistent
with limiting the risk of potential capital loss. The Fund pursues this
objective by investing primarily in debt instruments issued by or on behalf of
the State of California, other states, territories and possessions of the United
States, the District of Columbia and their respective authorities, agencies,
instrumentalities and political subdivisions.
The California Short-Term Tax-Exempt Fund. The investment objective of the
California Short-Term Tax-Exempt Fund is to provide investors with as high a
level of current income, exempt from both Federal and California personal income
taxes, as is consistent with limiting the risk of potential loss. The Fund
pursues this objective by investing primarily in short-term debt instruments
issued by or on behalf of the State of California, other states, territories and
possessions of the United States, the District of Columbia and their respective
authorities, agencies, instrumentalities and political subdivisions. The Fund
will maintain a dollar-weighted average portfolio maturity of three years or
less.
3
<PAGE> 243
The National Tax-Exempt Fund. The investment objective of the National
Tax-Exempt Fund is to provide investors with income exempt from Federal income
taxes. The Fund's assets will be primarily invested in debt instruments issued
by or on behalf of states, territories and possessions of the United States, the
District of Columbia and their respective authorities, agencies,
instrumentalities and political subdivisions.
For additional information concerning the investment policies, practices
and risk considerations of the Funds, see "The Funds," "Investment Policies and
Practices of the Funds" and "Risks of Investing in the Funds" in this
Prospectus.
RISKS OF INVESTING IN THE FUNDS
The price per share of the Funds will fluctuate with changes in the value
of the investments held by each Fund. A Fund's performance will change daily
based on many factors, including the quality of the instruments in each Fund's
investment portfolio, national economic conditions, interest rate levels and
general market conditions. Depending on these factors, the net asset value of a
Fund may decrease instead of increase. Certain Funds may seek to achieve their
investment objectives through investments in instruments with the lowest
investment grade rating which have speculative characteristics. The policy of
the Oregon Tax-Exempt Fund, Arizona Tax-Exempt Fund, California Tax-Exempt Fund
and California Short-Term Tax-Exempt Fund to invest primarily in Oregon, Arizona
and California municipal obligations also presents certain risks because each
Fund's performance will be closely tied to the economic and political conditions
of a particular state. All of the Funds are also classified as non-diversified
portfolios under the Investment Company Act of 1940, as amended (the "1940
Act"), which means that the Funds may be more sensitive to factors affecting a
particular issuer.
During periods of falling interest rates, the value of fixed income
securities generally rises. Conversely, during periods of rising interest rates
the value of such securities generally declines. Debt securities with longer
maturities, which tend to produce higher yields, are subject to potentially
greater capital appreciation and depreciation than obligations with shorter
maturities. Changes in the financial strength of an issuer or changes in the
ratings of any particular security may also affect the value of these
investments. Fluctuations in the market value of fixed income securities
subsequent to their acquisition will not affect cash income from such
securities, but will be reflected in a Fund's net asset value.
4
<PAGE> 244
There is no assurance that any Fund will achieve its investment objective.
MANAGEMENT OF THE FUNDS
First Interstate Capital Management, Inc. acts as investment advisor to the
Funds. For its services, the Advisor is entitled to receive a fee from each Fund
at an annual rate based on the Fund's average daily net assets. See "Fee
Table -- Investor Shares" and "Management of the Funds" in this Prospectus.
Furman Selz acts as administrator and sponsor to the Funds. Furman Selz
provides certain management and administrative services to the Funds, and is
entitled to receive a fee from each Fund at an annual rate based on the Fund's
average daily net assets. PFD Inc. distributes the Funds' shares and may be
reimbursed for certain of its distribution-related expenses.
Fees and expenses charged to the Funds are outlined on pages 7 through 10
of this Prospectus.
5
<PAGE> 245
GUIDE TO INVESTING IN THE PACIFICA FAMILY OF FUNDS
Purchase orders for the Funds received by your broker or Service
Organization in proper order by 4:15 p.m., Eastern time, and transmitted to the
Trust prior to 5:00 p.m. Eastern time will become effective that day.
<TABLE>
<S> <C>
- - MINIMUM INITIAL INVESTMENT............ $500
- - MINIMUM INITIAL INVESTMENT FOR IRAS... $250
- - MINIMUM SUBSEQUENT INVESTMENT......... $ 50
</TABLE>
Investor Shares of the California Short-Term Tax-Exempt Fund are purchased
at net asset value without a sales charge. Investor Shares of the other Funds
are purchased at net asset value plus a sales charge of no more than 4.5%.
Shareholders may exchange Investor Shares between Funds by telephone or
mail.
<TABLE>
<S> <C>
- - MINIMUM INITIAL EXCHANGE.............. $500
(NO MINIMUM FOR SUBSEQUENT EXCHANGES.)
</TABLE>
Shareholders may redeem Investor Shares by telephone, mail or wire.
- The Funds reserve the right upon not less than 30 days' notice to redeem
involuntarily all the Investor Shares in an investor's account which have
an aggregate value of $500 or less for any particular Fund.
(The above redemption services are not available for IRAs and trust clients
of First Interstate Bancorp and its affiliates.)
All dividends and distributions will be automatically reinvested at net
asset value in additional Investor Shares of the applicable Fund unless cash
payment is requested.
- Distributions for the Funds are generally paid monthly.
For additional information on how to purchase and redeem Investor Shares of
the Funds, see "Purchase of Investor Shares," "Exchange of Investor Shares" and
"Redemption of Investor Shares."
6
<PAGE> 246
FUND EXPENSES
The following tables list the costs and expenses that an investor will
incur either directly or indirectly as an Investor shareholder of a Fund based
upon the Fund's operating expenses for its most recent fiscal year, adjusted to
reflect current fees and expenses.
FEE TABLE -- INVESTOR SHARES
<TABLE>
<CAPTION>
OREGON ARIZONA
TAX-EXEMPT TAX-EXEMPT
FUND FUND
---------- ----------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)... 4.50% 4.50%
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering
price)................................ None None
Deferred Sales Load (as a percentage of
redemption proceeds).................. None+ None+
Redemption Fees......................... None None
Exchange Fee............................ None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (after waivers)(++)..... 0.30% 0.00%
12b-1 Fees(++)(++)...................... 0.10% 0.25%
Other Expenses (after
waivers)(++)++++...................... 0.40% 0.40%
------- ------
TOTAL FUND OPERATING EXPENSES:
(after waivers)(++)++++++............... 0.80% 0.65%
======= ======
</TABLE>
- ---------------
(++) Management Fees (before waivers) would be 0.50% and 0.50%, respectively.
(++)++ Under rules of the National Association of Securities Dealers, Inc.
(the "NASD"), a 12b-1 fee may be treated as a sales charge for certain
purposes. Because the 12b-1 fee is an annual fee charged against the
assets of a Fund, long-term shareholders may indirectly pay more in
total sales charges than the economic equivalent of the maximum
front-end sales charge permitted by the rules of the NASD. See
"Management of the Funds -- The Sponsor and Distributor."
(++)++++ Other expenses (before waivers) would be 0.58% and 0.61%,
respectively.
(++)++++++ Total Fund Operating Expenses (before waivers) would be 1.18% and
1.36%, respectively.
+ Investor Shares sold pursuant to a complete waiver of the initial sales
charge available to purchases of $1 million or more are subject to a 1%
contingent deferred sales charge if redeemed within one year from the date
of purchase.
7
<PAGE> 247
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Funds' Investor Shares will
bear. The table does not reflect any charges that may be imposed by a First
Interstate Bank or other institutions directly on their customer accounts in
connection with investments in the Funds.
EXAMPLE:(++)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
OREGON ARIZONA
TAX-EXEMPT TAX-EXEMPT
FUND FUND
---------- ----------
<S> <C> <C>
1 year................................. $ 53 $ 51
3 years................................ 69 65
5 years................................ 87 80
10 years............................... 140 122
</TABLE>
- ---------------
(++) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
8
<PAGE> 248
FEE TABLE -- INVESTOR SHARES
<TABLE>
<CAPTION>
CALIFORNIA
CALIFORNIA SHORT-TERM NATIONAL
TAX-EXEMPT TAX-EXEMPT TAX- EXEMPT
FUND FUND FUND
---------- ---------- ----------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES:
Maximum Sales Load Imposed on
Purchases (as a percentage
of offering price)......... 4.50% None 4.50%
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering
price)..................... None None None
Deferred Sales Load (as a
percentage of redemption
proceeds).................. None+ None None+
Redemption Fees.............. None None None
Exchange Fee................. None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average
net assets)
Management Fees (after
waivers)(++)............... 0.50% 0.05% 0.00%
12b-1 Fees(++)++............. 0.05% 0.10% 0.00%
Other Expenses (after
waivers)(++)++++........... 0.40% 0.60% 0.35%
------ ----- -----
TOTAL FUND OPERATING EXPENSES:
(after waivers)(++)++++++.... 0.95% 0.75% 0.35%
====== ===== =====
</TABLE>
- ---------------
(++) Management Fees (before waivers) would be 0.50%, 0.35% and 0.50%,
respectively.
(++)++ Under rules of the NASD, a 12b-1 fee may be treated as a sales charge
for certain purposes. Because the 12b-1 fee is an annual fee charged
against the assets of a Fund, long-term shareholders may indirectly pay
more in total sales charges than the economic equivalent of the maximum
front-end sales charge permitted by the rules of the NASD. See
"Management of the Funds -- The Sponsor and Distributor."
(++)++++ Other Expenses (before waivers) would be 0.43%, 0.68% and 0.60%,
respectively.
(++)++++++ Total Fund Operating Expenses (before waivers) would be 0.98%, 1.13%
and 1.10%, respectively.
+ Investor Shares sold pursuant to a complete waiver of the initial sales
charge available to purchases of $1 million or more are subject to a 1%
contingent deferred sales charge if redeemed within one year from the date
of purchase.
9
<PAGE> 249
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Funds' Investor Shares will
bear. The table does not reflect any charges that may be imposed by a First
Interstate Bank or other institutions directly on their customer accounts in
connection with investments in the Funds.
EXAMPLE:(++)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
CALIFORNIA
CALIFORNIA SHORT-TERM NATIONAL
TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
FUND FUND FUND
---------- ---------- ----------
<S> <C> <C> <C>
1 year........................ $ 54 $ 8 $ 48
3 years....................... 74 24 56
5 years....................... 95 42 64
10 years...................... 156 93 87
</TABLE>
- ---------------
(++) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
10
<PAGE> 250
FINANCIAL HIGHLIGHTS
The financial information shown below is to assist investors in evaluating
the performance of the Funds since their commencement of operations. The
following supplementary information for the periods through September 30, 1995
for the Oregon Tax-Exempt Fund, Arizona Tax-Exempt Fund and National Tax-Exempt
Fund has been audited by the former independent accountants of these Funds,
whose report on the financial statements appears in the September 30, 1995
Report to Shareholders for the Funds. The following supplementary information
for the year ended September 30, 1995 for the California Tax-Exempt Fund and
California Short-Term Tax-Exempt Fund (collectively, the "California Funds") has
been audited by Ernst & Young LLP, whose report on the financial statements
appears in the 1995 Annual Report to Shareholders for the Funds. These reports
and financial statements are incorporated by reference into the SAI. The
supplementary information for each of the four years in the period ended
September 30, 1994 for the California Funds has been audited by the former
independent accountants for these Fund. The following financial data should be
read in conjunction with the related financial statements and notes thereto.
Further information about the Funds is contained in their Annual Reports to
Shareholders, which may be obtained without charge by calling 1-800-662-8417.
For the periods shown, the Funds offered only one class of shares to both
institutional and retail investors. See "Other Information -- Capitalization."
11
<PAGE> 251
For a share outstanding throughout the periods indicated:
OREGON TAX-EXEMPT FUND*
<TABLE>
<CAPTION>
PERIOD ENDED FOR THE YEAR ENDED MAY 31,
SEPT. 30, -------------------------------------------
1995** 1995 1994 1993 1992
------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value -- Beginning of Period...................... $ 16.47 $ 16.17 $ 16.79 $ 16.07 $ 15.74
INCOME FROM INVESTMENT OPERATIONS
Net investment income...................................... 0.28 0.82 0.84 0.86 0.91
Net realized and unrealized gain (loss) on investments..... (0.08) 0.39 (0.43) 0.76 0.38
------- ------- ------- ------- -------
Total income from investment operations.................. 0.20 1.21 0.41 1.62 1.29
------- ------- ------- ------- -------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income....................... (0.29) (0.87) (0.82) (0.86) (0.92)
Distributions from net realized gain on investments........ (0.00) (0.04) (0.21) (0.04) (0.04)
------- ------- ------- ------- -------
Total dividends and distributions to shareholders........ (0.29) (0.91) (1.03) (0.90) (0.96)
------- ------- ------- ------- -------
Net asset value -- End of Period........................... $ 16.38 $ 16.47 $ 16.17 $ 16.79 $ 16.07
======= ======= ======= ======= =======
Total return (excluding sales load)...................... 3.67%+ 7.92% 2.33% 10.36% 8.45%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)............................ $50,077 $52,245 $53,846 $45,435 $25,002
Ratio of expenses to average net assets.................... 0.70%+ 0.70% 0.62% 0.60% 0.60%
Ratio of net investment income to average net assets....... 5.01%+ 5.19% 4.90% 5.34% 5.81%
Ratio of expenses to average net assets without fee
waivers.................................................. 1.01%+ 0.90% 0.84% 0.91% 0.98%
Ratio of net investment income to average net assets
without fee waivers...................................... 4.70%+ 4.99% 4.69% 5.03% 5.43%
Portfolio turnover rate(1)................................. 56.53% 15.46% 22.10% 5.62% 16.96%
<CAPTION>
1991 1990 1989
------- ------ ------
<S> <<C> <C> <C>
Net asset value -- Beginning of Period...................... $ 15.27 $15.35 $15.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income...................................... 0.94 0.93 0.93
Net realized and unrealized gain (loss) on investments..... 0.47 (0.06) 0.31
------- ------- ------
Total income from investment operations.................. 1.41 0.87 1.24
------- ------- ------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income....................... (0.94) (0.93) (0.89)
Distributions from net realized gain on investments........ (0.00) (0.02) (0.00)
------- ------- ------
Total dividends and distributions to shareholders........ (0.94) (0.95) (0.89)
------- ------- ------
Net asset value -- End of Period........................... $ 15.74 $15.27 $15.35
======= ======= ======
Total return (excluding sales load)...................... 9.58% 5.80% 8.55%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)............................ $14,607 $7,550 $3,175
Ratio of expenses to average net assets.................... 0.55% 0.50% 0.50%
Ratio of net investment income to average net assets....... 6.27% 6.26% 6.64%
Ratio of expenses to average net assets without fee
waivers.................................................. 1.03% 1.35% 3.29%
Ratio of net investment income to average net assets
without fee waivers...................................... 5.79% 5.41% 3.85%
Portfolio turnover rate(1)................................. 22.89% 93.67% 9.12%
</TABLE>
- ---------------
* The Fund operated as the Oregon Tax-Exempt Fund of Westcore Trust from its
commencement of operations on June 1, 1988 until its reorganization as a
portfolio of the Trust on October 10, 1995. During the periods shown, the
Fund was advised by First Interstate Bank of Oregon, N.A. In connection with
the Fund's reorganization, FICM assumed investment advisory responsibilities
for the Fund.
** The Fund changed its fiscal year from May 31 to September 30.
(1) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period. Purchases and sales of
investment securities (excluding short-term securities) for the year ended
September 30, 1995 were $9,296,225 and $9,230,944, respectively.
+ Annualized.
12
<PAGE> 252
For a share outstanding throughout the periods indicated:
ARIZONA TAX-EXEMPT FUND*
<TABLE>
<CAPTION>
FOR THE YEAR
FOR THE PERIOD ENDED MAY 31,
ENDED ----------------
SEPT. 30, 1995** 1995
---------------- ------
<S> <C> <C>
Net asset value -- Beginning of Period................................................ $ 10.68 $ 10.48
INCOME FROM INVESTMENT OPERATIONS
Net investment income................................................................ 0.17 0.51
Net realized and unrealized gain (loss) on investments............................... 0.06 0.23
------- -------
Total income from investment operations............................................ 0.23 0.74
------- -------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income................................................. (0.20) (0.53)
Distributions from net realized gain on investments.................................. (0.00) (0.01)
------- -------
Total dividends and distributions to shareholders.................................. (0.20) (0.54)
------- -------
Net asset value -- End of Period..................................................... $ 10.71 $ 10.68
======= =======
Total return (excluding sales load)................................................ 6.55%+ 7.35%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)...................................................... $ 24,622 $ 24,581
Ratio of expenses to average net assets.............................................. 0.45%+ 0.40%
Ratio of net investment income to average net assets................................. 4.73%+ 4.89%
Ratio of expenses to average net assets without fee waivers.......................... 1.35%+ 1.13%
Ratio of net investment income to average net assets without fee waivers............. 3.83%+ 4.16%
Portfolio turnover rate(1)........................................................... 62.10% 13.65%
<CAPTION>
FOR THE YEAR
ENDED MAY 31,
----------------
1994 1993
------ ------
<S> <C>
Net asset value -- Beginning of Period................................................ $ 10.64 $ 10.09
INCOME FROM INVESTMENT OPERATIONS
Net investment income................................................................ 0.50 0.49
Net realized and unrealized gain (loss) on investments............................... (0.15) 0.55
------- -------
Total income from investment operations............................................ 0.35 1.04
------- -------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income................................................. (0.50) (0.49)
Distributions from net realized gain on investments.................................. (0.01) (0.00)
------- -------
Total dividends and distributions to shareholders.................................. (0.51) (0.49)
------- -------
Net asset value -- End of Period..................................................... $ 10.48 $ 10.64
======= =======
Total return (excluding sales load)................................................ 3.28% 10.50%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)...................................................... $ 25,153 $ 22,430
Ratio of expenses to average net assets.............................................. 0.31% 0.20%
Ratio of net investment income to average net assets................................. 4.72% 4.98%
Ratio of expenses to average net assets without fee waivers.......................... 1.00% 1.18%
Ratio of net investment income to average net assets without fee waivers............. 4.03% 4.00%
Portfolio turnover rate(1)........................................................... 27.81% 3.96%
<CAPTION>
FOR THE PERIOD
ENDED
MAY 31, 1992
--------------
Net asset value -- Beginning of Period................................................ $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income................................................................ 0.09
Net realized and unrealized gain (loss) on investments............................... 0.08
-------
Total income from investment operations............................................ 0.17
-------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income................................................. (0.08)
Distributions from net realized gain on investments.................................. (0.00)
-------
Total dividends and distributions to shareholders.................................. (0.08)
-------
Net asset value -- End of Period..................................................... $10.09
=======
Total return (excluding sales load)................................................ 7.02%+
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)...................................................... $4,690
Ratio of expenses to average net assets.............................................. 0.68%+
Ratio of net investment income to average net assets................................. 4.32%+
Ratio of expenses to average net assets without fee waivers.......................... 2.08%+
Ratio of net investment income to average net assets without fee waivers............. 2.92%+
Portfolio turnover rate(1)........................................................... 0.00%
</TABLE>
- ---------------
* The Fund operated as the Arizona Intermediate Tax-Free Fund of Westcore Trust
from its commencement of operations on March 2, 1992 until its reorganization
as a portfolio of the Trust on October 1, 1995. During the periods shown, the
Fund was advised by First Interstate Bank of Arizona, N.A. In connection with
the Fund's reorganization, FICM assumed investment advisory responsibilities
for the Fund.
** The Fund changed its fiscal year from May 31 to September 30.
+ Annualized.
(1) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period. Purchases and sales of
investment securities (excluding short-term securities) for the period ended
September 30, 1995 were $5,546,887 and $4,984,8666, respectively.
13
<PAGE> 253
Selected data for a share outstanding throughout the periods shown:
CALIFORNIA TAX-EXEMPT FUND*
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, PERIOD
------------------------------------------------------------ ENDED
SEPTEMBER 30,
1995 1994 1993 1992 1991 1990(A)
-------- -------- -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.......... $ 10.42 $ 11.49 $ 10.82 $ 10.52 $ 9.88 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(++).................... 0.54 0.54 0.57 0.59 0.62 0.17
Net gain (loss) on securities (both realized
and unrealized)(++)........................ 0.44 (0.87) 0.73 0.30 0.64 (0.12)
------- ------- ------- ------- ------- ------
Total from Investment Operations........... 0.98 (0.33) 1.30 0.89 1.26 0.05
------- ------- ------- ------- ------- ------
LESS DISTRIBUTIONS:
Dividends from net investment income......... (0.54) (0.54) (0.57) (0.59) (0.62) (0.17)
Distributions from capital gains............. (0.11) (0.20) (0.06) -- -- --
------- ------- ------- ------- ------- ------
Total Distributions........................ (0.65) (0.74) (0.63) (0.59) (0.62) (0.17)
------- ------- ------- ------- ------- ------
Net Asset Value, End of Period............... $ 10.75 $ 10.42 $ 11.49 $ 10.82 $ 10.52 $ 9.88
======= ======= ======= ======= ======= ======
Total Return (excluding sales load)........ 9.82% (2.99)% 12.34% 8.71% 13.13% 0.42%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000).............. $161,343 $194,419 $226,303 $198,347 $140,127 $ 53,746
Ratio of Expenses to Average Net Assets...... 0.91% 0.94% 0.87% 0.80% 0.57% 0.07%+
Effect of Waivers/Reimbursement on above
Ratio...................................... 0.02% 0.02% 0.07% 0.11% 0.43% 1.33%+
Ratio of Net Investment Income to Average Net
Assets..................................... 5.13% 4.96% 5.11% 5.51% 6.06% 6.75%+
Portfolio Turnover Rate...................... 42% 36% 40% 14% 5% 3%
</TABLE>
- ---------------
* Prior to October 1, 1995 the Fund operated as The California Tax-Free Fund.
(a) Commencement of operations, July 2, 1990.
(++) Per share data based upon average monthly shares outstanding.
+ Annualized.
14
<PAGE> 254
Selected data for a share outstanding for the periods shown:
CALIFORNIA SHORT-TERM TAX-EXEMPT FUND*
<TABLE>
<CAPTION>
JANUARY 20, 1993
(COMMENCEMENT OF
YEAR YEAR OPERATIONS)
ENDED ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1993
------------- ------------- ------------------
<S> <C> <C> <C>
Net Asset Value -- Beginning of Period................................. $ 9.96 $ 10.16 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(++)............................................. 0.41 0.39 0.24
Net gain (loss) on securities (both realized and unrealized)(++)...... 0.19 (0.20) 0.16
------- ------- -------
Total from Investment Operations.................................... 0.60 0.19 0.40
------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income.................................. (0.41) (0.39) (0.24)
Distributions from capital gains...................................... -- -- --
------- ------- -------
Total Distributions................................................. (0.41) (0.39) (0.24)
------- ------- -------
Net Asset Value -- End of Period....................................... $ 10.15 $ 9.96 $ 10.16
======= ======= =======
Total Return........................................................ 6.13% 1.93% 4.09%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000)....................................... $19,095 $25,315 $ 40,637
Ratio of Expenses to Average Net Assets............................... 0.64% 0.56% 0.28%+
Effect of Waivers/Reimbursement on above Ratio........................ 0.53% 0.53% 0.78%+
Ratio of Net Investment Income to Average Net Assets.................. 4.12% 3.88% 3.53%+
Portfolio Turnover Rate............................................... 96% 31% 23%
</TABLE>
- ---------------
* Prior to October 1, 1995 the Fund operated as The Short Term California
Tax-Free Fund.
(++) Per share data based upon average monthly shares outstanding.
+ Annualized.
15
<PAGE> 255
For a share outstanding throughout the periods indicated:
NATIONAL TAX-EXEMPT FUND*
<TABLE>
<CAPTION>
FOR THE YEAR
FOR THE PERIOD ENDED MAY 31,
ENDED -----------------
SEPT. 30, 1995** 1995
----------------- -------
<S> <C> <C>
Net asset value -- Beginning of Period......................................... $ 15.28 $ 14.98
INCOME FROM INVESTMENT OPERATIONS
Net investment income......................................................... 0.24 0.68
Net realized and unrealized gain (loss) on investments........................ 0.08 0.32
------- -------
Total income from investment operations..................................... 0.32 1.00
------- -------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income.......................................... (0.26) (0.70)
Distributions from net realized gain on investments........................... (0.00) (0.00)
------- -------
Total dividends and distributions to shareholders........................... (0.26) (0.70)
------- -------
Net asset value -- End of Period............................................... $ 15.34 $ 15.28
======= =======
Total return (excluding sales load)......................................... (6.53%)+ %6.97
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)............................................... $14,305 $ 14,458
Ratio of expenses to average net assets....................................... 0.35%+ %0.35
Ratio of net investment income to average net assets.......................... 4.65%+ %4.59
Ratio of expenses to average net assets without fee waivers................... 1.85%+ %1.51
Ratio of net investment income to average net assets without fee waivers...... 3.15%+ %3.43
Portfolio turnover rate(1).................................................... 86.11% 23.35%
<CAPTION>
FOR THE YEAR
ENDED MAY 31, FOR THE PERIOD
----------------- ENDED MAY 31,
1994 1993
----------------- -------------
<S> <C> <C>
Net asset value -- Beginning of Period......................................... $ 15.17 $ 15.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income......................................................... 0.64 0.17
Net realized and unrealized gain (loss) on investments........................ (0.17) 0.15
------- ------
Total income from investment operations..................................... 0.47 0.32
------- ------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income.......................................... (0.64) (0.15)
Distributions from net realized gain on investments........................... (0.02) (0.00)
------- ------
Total dividends and distributions to shareholders........................... (0.66) (0.15)
------- ------
Net asset value -- End of Period............................................... $ 14.98 $ 15.17
======= ======
Total return (excluding sales load)......................................... %3.07 5.65%+
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)............................................... $ 13,600 $ 7,457
Ratio of expenses to average net assets....................................... %0.27 0.25%+
Ratio of net investment income to average net assets.......................... %4.29 3.88%+
Ratio of expenses to average net assets without fee waivers................... %1.58 1.99%+
Ratio of net investment income to average net assets without fee waivers...... %2.99 2.14%+
Portfolio turnover rate(1).................................................... 18.81% 18.30%
</TABLE>
- ---------------
* The Fund operated as the Quality Tax-Exempt Income Fund of Westcore Trust
from its commencement of operations on January 15, 1993 until its
reorganization as a portfolio of the Trust on October 1, 1995. During the
periods shown, the Fund was advised by First Interstate Bank of Oregon, N.A.
and First Interstate Bank of Washington, N.A. In connection with the Fund's
reorganization, FICM assumed investment advisory responsibilities for the
Fund.
** The Fund changed its fiscal year from May 31 to September 30.
+ Annualized.
(1) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period. Purchases and sales of
investment securities (excluding short-term securities) for the period ended
September 30, 1995 were $4,847,223 and $4,001,951, respectively.
16
<PAGE> 256
THE FUNDS
The Funds are portfolios of Pacifica Funds Trust, a business trust
organized under the laws of the Commonwealth of Massachusetts as an open-end,
management investment company. The Trust's Board of Trustees oversees the
overall management of the Funds and elects the officers of the Funds.
INVESTMENT POLICIES AND PRACTICES OF THE FUNDS
Each Fund follows its own investment policies and practices, including
certain investment restrictions. The SAI contains the specific investment
restrictions which govern the Funds' investments. The investment objectives of
the California Funds are fundamental policies, which means that they may not be
changed without a majority vote of shareholders of the affected Fund. The
investment objectives of the other Funds are not fundamental, and may be changed
without shareholder approval. Any such change may result in a Fund having an
investment objective different from the objective which a shareholder considered
appropriate at the time of investment in the Fund. Except for the objectives and
those restrictions specifically identified as fundamental, all other investment
policies and practices described in this Prospectus and in the SAI are not
fundamental.
The Advisor selects investments and makes investment decisions based on the
investment objective and policies of each Fund.
The investment objective of the Oregon Tax-Exempt Fund, Arizona Tax-Exempt
Fund and National Tax-Exempt Fund is to provide investors with income exempt
from Federal income taxes and, with respect to the Oregon Tax-Exempt Fund and
Arizona Tax-Exempt Fund, to also seek to provide such income exempt from Oregon
and Arizona personal income taxes, respectively.
The investment objective of the California Tax-Exempt Fund is to provide
investors with as high a level of current income, exempt from both Federal and
California personal income taxes, as is consistent with limiting the risk of
potential capital loss.
The investment objective of the California Short-Term Tax-Exempt Fund is to
provide investors with as high a level of current income, exempt from both
Federal and California personal income taxes, as is consistent with limiting the
risk of potential loss.
None of the Funds has any restrictions as to the minimum or maximum
maturity of any individual security held by it. However, except
17
<PAGE> 257
for temporary defensive purposes or during unusual market conditions, the
dollar-weighted average portfolio maturity of the California Short-Term
Tax-Exempt Fund will be 3 years or less. The average portfolio maturity of the
other Funds will vary from time to time in light of current market and economic
conditions, the comparative yields on instruments with different maturities and
other factors.
Each Fund's assets will be primarily invested in debt instruments issued by
or on behalf of states, territories and possessions of the United States, the
District of Columbia and their respective authorities, agencies,
instrumentalities and political subdivisions ("municipal obligations"). Each of
the Oregon Tax-Exempt Fund, Arizona Tax-Exempt Fund and the California Funds
expects that, except during temporary defensive periods or when acceptable
securities are unavailable for investment by the Fund, at least 65% of such
Fund's total assets will be invested in municipal obligations of issuers located
in a particular state ("Oregon obligations," "Arizona obligations" and
"California obligations," respectively), although the amount of each Fund's
assets invested in such obligations will vary from time to time. As a
fundamental policy, each of the Funds will have at least 80% of their respective
net assets invested in securities the interest on which is exempt from Federal
income tax, except during periods of unusual market conditions. For purposes of
this investment limitation, securities the interest on which is treated as a
specific tax preference item under the Federal alternative minimum tax are
considered taxable.
Municipal obligations acquired by a Fund will be rated in one of the three
highest investment grade categories at the time of purchase by a nationally
recognized statistical rating organization ("NRSRO"). The California Funds,
however, may purchase investment grade obligations within the fourth highest
category. In addition, the Oregon Tax-Exempt Fund and Arizona Tax-Exempt Fund
may purchase investment grade obligations within the fourth highest category
when acceptable obligations with higher ratings are unavailable for investment
by such Funds. While obligations rated within the fourth highest category are
regarded as having an adequate capacity to pay principal and interest, such
obligations lack outstanding investment characteristics and in fact have
speculative characteristics as well. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade bonds. No more than 10%
of the Arizona Tax-Exempt Fund's total assets will be invested in municipal
obligations which are rated at the time of purchase below one of the three
highest categories.
18
<PAGE> 258
If, subsequent to its purchase by a Fund, an issue of debt securities
should cease to be rated by one or more of the Fund's selected NRSROs due to
factors relating to the value of the security, or should its rating be reduced
by one or more of such NRSROs below the minimum rating required for purchase by
such Fund, the Advisor will consider such event in determining whether the Fund
should continue to hold the security.
Each of the Funds may also acquire tax-exempt commercial paper rated within
the highest rating category or, when deemed advisable by the Fund's Advisor,
rated within the second highest rating category. Each Fund may acquire municipal
notes and variable rate demand obligations rated within one of the two highest
rating categories.
The California Funds may invest more than 15% of their net assets in
municipal lease obligations determined by the Board of Trustees to be liquid
investments based upon guidelines established for the Advisor providing for
analysis of such factors as the frequency of trades and quotes for the security,
the number of dealers willing to purchase or sell the security and the number of
other potential buyers, and the willingness of dealers to undertake to make a
market in the security.
Unrated obligations purchased by a Fund will be determined by the Advisor
to be comparable in quality to instruments that are so rated. (See Appendix A
for a description of applicable debt obligation ratings).
Each Fund may from time to time invest a portion of its assets on a
temporary basis (for example, when appropriate municipal obligations are
unavailable) or for temporary defensive purposes in short-term taxable money
market instruments, in securities issued by other investment companies which
invest in taxable or tax-exempt money market instruments and in U.S. Government
obligations. In addition, each Fund may hold uninvested cash reserves pending
investment, during temporary defensive periods, or if, in the opinion of the
Advisor, suitable tax-exempt obligations are unavailable.
The types of securities and investment practices used by the Funds are
described in greater detail under the section "Description of Securities and
Investment Practices" on pages 44-49 of this Prospectus.
RISKS OF INVESTING IN THE FUNDS
The price per share of each of the Funds will fluctuate with changes in
value of the investments held by the Fund. Shareholders of a Fund should,
therefore, expect the value of their shares to fluctuate with changes in the
value of the securities owned by that Fund.
19
<PAGE> 259
The market value of a Fund's investment in fixed income securities will
change in response to changes in interest rates and the relative financial
strength of each issuer. During periods of falling interest rates, the value of
fixed income securities generally rises. Conversely, during periods of rising
interest rates the value of such securities generally declines. Debt securities
with longer maturities, which tend to produce higher yields, are subject to
potentially greater capital appreciation and depreciation than obligations with
shorter maturities. Changes in the financial strength of an issuer or changes in
the ratings of any particular security may also affect the value of these
investments. Fluctuations in the market value of fixed income securities
subsequent to their acquisition will not affect cash income from such
securities, but will be reflected in a Fund's net asset value. The Funds may
also purchase zero-coupon bonds (i.e., discount debt obligations that do not
make periodic interest payments) which are subject to greater market
fluctuations from changing interest rates than debt obligations of comparable
maturities which make current distributions of interest.
In seeking to achieve its investment objective, each Fund may invest in
municipal obligations that are private activity bonds the interest on which is
subject to the Federal alternative minimum tax. Investments in such securities,
however, will not exceed under normal market conditions 20% of each Fund's total
assets when added together with any taxable investments held by the Fund.
Moreover, although each Fund does not presently intend to do so on a regular
basis, it may invest 25% or more of its assets in industrial development bonds
issued before August 7, 1986 that are not subject to the Federal alternative
minimum tax and in municipal obligations the interest on which is paid solely
from revenues of similar projects if such investment is deemed necessary or
appropriate by the Fund's Advisor. To the extent that each Fund's assets are
concentrated in municipal obligations payable from revenues on similar projects,
the Fund will be subject to the peculiar risks presented by such projects to a
greater extent than it would be if the Fund's assets were not so concentrated.
Furthermore, payment of municipal obligations of certain projects may be secured
by mortgages or deeds of trust. In the event of a default, enforcement of the
mortgages or deeds of trust will be subject to statutory enforcement procedures
and limitations, including rights of redemption and limitations on obtaining
deficiency judgments. In the event of a foreclosure, collection of the proceeds
of the foreclosure may be delayed and the amount of proceeds from the
foreclosure may not be sufficient to pay the principal of and accrued interest
on the defaulted municipal obligations.
Each Fund is classified as a non-diversified investment company under the
1940 Act. Investment return on a non-diversified portfolio typically is
20
<PAGE> 260
dependent upon the performance of a smaller number of securities relative to the
number held in a diversified portfolio. Consequently, the change in value of any
one security may affect the overall value of a non-diversified portfolio more
than it would a diversified portfolio, and thereby subject the market-based net
asset value per share of the non-diversified portfolio to greater fluctuations.
In addition, a non-diversified portfolio may be more susceptible to economic,
political and regulatory developments than a diversified investment portfolio
with a similar objective may be.
The concentration of the Oregon Tax-Exempt Fund, Arizona Tax-Exempt Fund
and California Funds in municipal obligations of particular states raises
additional considerations. Payment of the interest on and the principal of these
obligations is dependent upon the continuing ability of Oregon, Arizona and
California issuers and/or obligors of state, municipal and public authority debt
obligations to meet their obligations thereunder. Investors should consider the
greater risk inherent in a Fund's concentration in such obligations versus the
safety that comes with a less geographically concentrated investment portfolio
and should compare the yield available on a portfolio of state-specific issues
with the yield of a more diversified portfolio including issues of other states
before making an investment decision.
Many of the California Funds' investments are likely to be obligations of
California governmental issuers which rely in whole or in part, directly or
indirectly, on real property taxes as a source of revenue. "Proposition
Thirteen" and similar California constitutional and statutory amendments and
initiatives in recent years have restricted the ability of California taxing
entities to increase real property tax revenues. Other initiative measures
approved by California voters in recent years, through limiting various other
taxes, have resulted in a substantial reduction in state revenues. Decreased
state revenues may result in reductions in allocations of state revenues to
local governments. In addition, both Oregon and Arizona have constitutional
and/or statutory restrictions that affect government revenues.
Because of the complex nature of the various initiatives and restrictions
mentioned above, the certain possible ambiguities and inconsistencies in their
terms and the scope of various exemptions and exceptions, as well as the
impossibility of predicting the level of future appropriations for state and
local governmental entities, it is not presently possible to determine the
impact of these initiatives and related measures on the ability of governmental
issuers in California, as well as Oregon and Arizona, to pay interest or repay
principal on their obligations. There have, however, been certain adverse
developments with respect to municipal obligations of governmental issuers in
these states over the past several years.
21
<PAGE> 261
In addition to the various initiatives and restrictions discussed above,
economic factors such as the reduction in defense spending, a decline in tourism
and high levels of unemployment have had an adverse impact on the economy of
California in particular. These economic factors have reduced revenues to the
state government at a time when expenses of state government such as education
costs, various welfare costs and other expenses have been rising. Such economic
factors have also adversely impacted the ability of state and local California
governmental entities to repay debt.
In addition to the risk of nonpayment of state and local California
governmental debt, if such debt declines in quality and is downgraded by the
NRSROs, it may become ineligible for purchase by a Fund. Since there are large
numbers of buyers of such debt that may be similarly restricted, the supply of
eligible securities could become inadequate at certain times. Similarly, there
is a relatively small active market for municipal obligations of Oregon and
Arizona issues other than the general obligations of the states themselves, and
the market price of such bonds may therefore be volatile. If the Oregon
Tax-Exempt Fund or Arizona Tax-Exempt Fund was forced to sell a large volume of
Oregon obligations and Arizona obligations owned by it for any reason, such as
to meet redemption requests for a large number of shares, there is a risk that
the large sale itself would adversely offset the value of the Fund's portfolios.
A more detailed description of special factors affecting investment in
California, Oregon and Arizona municipal obligations is set forth in the
Appendix to the SAI.
There is, of course, no assurance that a Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products.
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction of
the Board of Trustees. The Trustees are Dennis W. Draper, Joseph N. Hankin, John
E. Heilmann, Jack D. Henderson and Richard A. Wedemeyer. Information about the
Trustees, as well as the Funds' executive officers, may be found in the SAI
under the heading "Management -- Trustees and Officers."
22
<PAGE> 262
THE ADVISOR: FIRST INTERSTATE CAPITAL MANAGEMENT, INC.
First Interstate Capital Management, Inc., 7501 E. McCormick Parkway,
Scottsdale, Arizona 85258, serves as investment advisor to the Trust. FICM
manages the investment and reinvestment of the assets of the Funds and
continuously reviews, supervises and administers the Funds' investments. The
Advisor is responsible for placing orders for the purchase and sale of the
Funds' investments directly with brokers and dealers selected by it in its
discretion.
FICM is a wholly-owned subsidiary of First Interstate Bank of California,
which is the largest banking subsidiary of First Interstate Bancorp, a
multi-bank holding company. First Interstate Bancorp provides financial products
and services marketed at the local level to nearly five million households in
over 500 communities in 13 western states. Prior to October 1, 1995 affiliates
of FICM served as investment advisors for certain Funds as follows: First
Interstate Bank of Oregon, N.A. served as investment advisor to the Oregon
Tax-Exempt Fund; First Interstate Bank of Arizona, N.A. served as investment
advisor to the Arizona Tax-Exempt Fund; and First Interstate Bank of Washington,
N.A. and First Interstate Bank of Oregon, N.A. served as co-investment advisors
to the National Tax-Exempt Fund. Prior to March 18, 1994, San Diego Financial
Capital Management, Inc., which was acquired by First Interstate Bancorp through
its merger with San Diego Financial Corporation, served as investment advisor to
the California Funds.
On January 24, 1996, First Interstate Bancorp signed a definitive merger
agreement to merge with Wells Fargo & Company ("Wells Fargo"), a publicly-held
bank holding company with its head office at 420 Montgomery Street, San
Francisco, California 94104. The merger is conditioned upon, among other things,
certain regulatory approvals. Upon completion of the merger, currently expected
to occur during the second quarter of 1996, FICM will be wholly-owned by Wells
Fargo, and the existing investment advisory agreement between the Trust and FICM
will automatically terminate. It is contemplated that an application will be
filed with the Securities and Exchange Commission to ensure there is no
disruption as a result of the merger in the provision of investment advisory
services to the Funds, and that a meeting of shareholders will be held not later
than 120 days after the merger to approve ongoing investment advisory
arrangements for the Funds.
Mr. David Underwood serves as FICM's Director of Equity Funds Management.
Mr. Underwood joined FICM in 1995. From 1993 to 1995 Mr. Underwood was employed
by Integra Trust Company as Director of
23
<PAGE> 263
Research. From 1990 to 1993 he was a Portfolio Manager with the firm of
C.S. McKee Investment Advisors. Mr. G. Edward Means serves as FICM's Director of
Fixed Income Management. Mr. Means joined FICM in January 1995. From 1992 to
1994 he was employed by Clayton Brown & Associates as Senior Vice President,
Fixed Income. From 1984 to 1992 he was employed by First National Bank of
Chicago as a Senior Vice President.
Ms. Mary Gail Walton has been responsible for the day-to-day management of
the Oregon Tax-Exempt Fund since February 1994 and the National Tax-Exempt Fund
since the inception of the Fund. Ms. Walton has been employed by First
Interstate since 1991. She joined FICM in April 1995. She currently serves as a
Vice President, portfolio manager/analyst. From 1989 through 1990 Ms. Walton was
employed by Badgley, Phelps & Bell, Inc.
Mr. Richard Carhidi has been responsible for the day-to-day management of
the Arizona Tax-Exempt Fund since the inception of the Fund, and the California
Funds since June 1995. Mr. Carhidi has been employed by First Interstate since
1989. He joined FICM in April 1995. He currently serves as a Vice President.
For the advisory services it provides to the Funds, FICM is entitled to
receive from each Fund fees, payable monthly, at the annual rates, based on
average daily net assets, as set forth below:
<TABLE>
<CAPTION>
INVESTMENT
FUND ADVISORY FEE
-------------------------------------------- ------------
<S> <C>
Oregon Tax-Exempt Fund...................... 0.50%
Arizona Tax-Exempt Fund..................... 0.50%
California Tax-Exempt Fund.................. 0.50%
California Short-Term Tax-Exempt Fund....... 0.35%
National Tax-Exempt Fund.................... 0.50%
</TABLE>
The Advisor has agreed that during the current fiscal year, it will waive a
portion of its fees so that total operating expenses will not exceed 1.20% of
the average daily net assets of the Investor Shares of the California Tax-Exempt
Fund. For its period ended September 30, 1995, the Oregon Tax-Exempt Fund paid
advisory fees, after fee waivers, at the annual rate of 0.24% of its average
daily net assets. For the same time period, the previous advisors to the Arizona
Tax-Exempt Fund and National Tax-Exempt Fund waived their entire advisory fees.
For their fiscal year ended September 30, 1995, the California Tax-Exempt Fund
and California Short-Term Tax-
24
<PAGE> 264
Exempt Fund paid advisory fees, after fee waivers, at the annual rates of 0.50%
and 0.01%, respectively, of their average daily net assets.
THE SPONSOR AND DISTRIBUTOR
Furman Selz LLC, 230 Park Avenue, New York, New York 10169, acts as Sponsor
of the Funds. Furman Selz is primarily an institutional brokerage firm with
memberships on the New York, American, Boston, Midwest, Pacific and Philadelphia
Stock Exchanges. Furman Selz also serves as administrator and distributor of
other mutual funds. Pacifica Funds Distributor Inc. is an affiliate of Furman
Selz and was organized specifically to distribute shares of the Trust, however,
offers and sales of shares of the Trust will be made only through Furman Selz or
other registered (or exempt) dealers.
Under the Distribution Plan (the "Plan") adopted by the Funds for their
Investor Shares, each Fund may pay directly or reimburse PFD Inc. monthly
(subject to a limit of 0.50% per annum of the average daily net asset value of
the outstanding Investor Shares of each Fund) for costs and expenses of PFD Inc.
in connection with the distribution of Investor Shares of the Funds. These costs
and expenses include (i) advertising by radio, television, newspapers,
magazines, brochures, sales literature, direct mail or any other form of
advertising; (ii) expenses of sales employees or agents of PFD Inc., including
salary, commissions, travel and related expenses; (iii) payments to
broker-dealers and financial institutions for services in connection with the
distribution of Investor Shares, including promotional incentives and fees
calculated with reference to the average daily net asset value of Investor
Shares held by shareholders who have a brokerage or other service relationship
with the broker-dealer or other institution receiving such fees; (iv) costs of
printing prospectuses and other materials to be given or sent to prospective
investors; and (v) such other similar services as the Trustees determine to be
reasonably calculated to result in the sale of Investor Shares of the Funds.
Each Fund will pay all costs and expenses in connection with the preparation,
printing and distribution of prospectuses to current shareholders and the
operation of its Plan, including related legal and accounting fees. A Fund will
not be liable for distribution expenditures made by PFD Inc. in any given year
in excess of the maximum annual amount payable under the Plan for that Fund. All
payments made under the Plan for Investor Shares are borne entirely by a Fund's
Investor Shares.
In addition to sales charges paid to dealers, PFD Inc. may from time to
time pay a bonus or other incentive to dealers which employ registered
representatives who sell a minimum dollar amount of Investor Shares of the Funds
and/or other funds distributed by Furman Selz or PFD Inc.
25
<PAGE> 265
during a specific period of time. Such bonus or other incentive may take the
form of payment for travel expenses, including lodging, incurred in connection
with trips taken by qualifying registered representatives and members of their
families to places within or outside the United States, or other bonuses, such
as gift certificates or the cash equivalent of such bonuses. PFD Inc. has
established such a special promotional incentive program with First Interstate
Securities, Inc.
ADMINISTRATIVE SERVICES
The Funds have also entered into an Administrative Services Contract with
Furman Selz pursuant to which Furman Selz provides certain management and
administrative services necessary for the Funds' operations including: (i)
general supervision of the operation of the Funds including coordination of the
services performed by the Funds' investment advisor, transfer agent, custodian,
independent accountants and legal counsel, regulatory compliance, including the
compilation of information for documents such as reports to, and filings with,
the SEC and state securities commissions, and preparation of proxy statements
and shareholder reports for the Funds; (ii) general supervision relative to the
compilation of data required for the preparation of periodic reports distributed
to the Funds' officers and Board of Trustees; and (iii) furnishing office space
and certain facilities required for conducting the business of the Funds. For
these services, Furman Selz is entitled to receive a fee, payable monthly, at
the annual rate of 0.15% of the average daily net assets of the Funds. Pursuant
to a Services Agreement with the Trust, Furman Selz assists the Trust with
certain transfer and dividend disbursing agent functions and receives a fee of
$15.00 per account per year plus out-of-pocket expenses. Pursuant to a Fund
Accounting Agreement with the Trust, Furman Selz assists the Trust in
calculating net asset values and provides certain other accounting services for
each Fund for an annual fee of $30,000 per Fund plus out-of-pocket expenses.
SERVICE ORGANIZATIONS
Various banks (including banks affiliated with First Interstate Bancorp),
trust companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative services with respect to the Funds' Investor Shares, such as
maintaining shareholder accounts and records. The Funds may pay fees to Service
Organizations (which vary depending upon the services provided) in amounts up to
an annual rate of 0.25% of the average daily net asset value of the outstanding
Investor Shares of the Funds owned
26
<PAGE> 266
by shareholders with whom a Service Organization has a servicing relationship.
These fees will be borne entirely by the Funds' Investor Shares.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest a specified amount in
the Funds or charging a direct fee for servicing. If imposed, these fees would
be in addition to any amounts which might be paid to the Service Organization by
the Funds. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged to
consult with them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Funds and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
OTHER EXPENSES
Each Fund bears all costs of its operations other than expenses
specifically assumed by Furman Selz, PFD Inc. or the Advisor. The costs borne by
the Funds include legal and auditing expenses; Trustees' fees and expenses;
insurance premiums; advisory, administration, fund accounting, custodian and
transfer agent fees and expenses; expenses incurred in acquiring or disposing of
the Funds' portfolio securities; expenses of registering and qualifying the
Funds' shares for sale with the SEC and with various state securities
commissions; expenses of obtaining quotations on the Funds' portfolio securities
and pricing of the Funds' shares; expenses of maintaining the Funds' legal
existence and of shareholders' meetings; and expenses of preparation and
distribution to existing shareholders of reports, proxies and prospectuses. Each
Fund bears its own expenses associated with its establishment as a series of the
Trust; these expenses are amortized over a five-year period from the
commencement of a Fund's operations. See "Management" in the SAI for additional
information on expenses
27
<PAGE> 267
borne by the Funds. Trust expenses directly attributable to a particular Fund
are charged to that Fund, and expenses attributable to a particular class of
shares of a Fund (such as distribution payments under the Plan and Service
Organization fees) are charged to that class. Other expenses are allocated
proportionately among all of the investment portfolios in the Trust in relation
to the net assets of each portfolio or by other means deemed fair and equitable
by the Board of Trustees.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Advisor places orders for
the purchase and sale of portfolio investments for the Funds' accounts with
brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Funds, the Advisor will seek the best execution of the Funds' orders.
Purchases and sales of debt securities are generally placed by the Advisor with
primary market makers for these securities on a net basis, i.e., without any
brokerage commission being paid by the Funds. Trading does, however, involve
transaction costs. Transactions with dealers serving as primary market makers
reflect the spread between the bid and asked prices. Purchases of underwritten
issues may be made which will include an underwriting fee paid to the
underwriter. Broker-dealers are selected on the basis of a variety of factors
such as reputation, capital strength, size and difficulty of the order, sale of
Fund shares by the broker-dealer, and research provided to the Advisor by the
broker-dealer. The Advisor may cause a Fund to pay commissions higher than
another broker-dealer would have charged if the Advisor believes the commission
paid is reasonable in relation to the value of the brokerage and research
services received by the Advisor.
A high portfolio turnover rate involves larger brokerage commission
expenses or transaction costs which must be borne directly by a Fund. Short-term
capital gains realized from portfolio transactions are taxable to shareholders
as ordinary income. The Advisor will not consider portfolio turnover rate a
limiting factor in making investment decisions consistent with a Fund's
objective and policies.
FUND SHARE VALUATION
The net asset value of each class of shares of the Funds is calculated at
4:15 p.m. (Eastern time), Monday through Friday, on each day the New York Stock
Exchange is open for trading (a "Business Day"), which excludes the following
business holidays: New Year's Day, Presidents' Day,
28
<PAGE> 268
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The net asset value per share for each class of shares is
computed by dividing the value of a Fund's assets allocable to a particular
class, less the liabilities charged to that class by the total number of the
outstanding shares of that class. All expenses, including fees paid to the
Advisor, Furman Selz and PFD Inc., are accrued daily and taken into account for
the purpose of determining the net asset value.
Bonds and other fixed-income securities are normally valued by using market
quotations and may be valued on the basis of prices provided by a pricing
service approved by the Board of Trustees. Over-the-counter securities are
valued on the basis of the bid price at the close of business on each business
day. Securities for which market quotations are not readily available are valued
at fair value as determined in good faith by or under the direction of the Board
of Trustees.
PRICING OF INVESTOR SHARES
Orders for the purchase of Investor Shares will be executed at the net
asset value per share plus any applicable sales charge (the "public offering
price") next determined after an order has become effective. Investor Shares of
the California Short-Term Tax-Exempt Fund are sold without a sales charge. The
sales charge on purchases of Investor Shares of the other Funds varies with the
size of the purchase made according to the following schedule:
<TABLE>
<CAPTION>
SALES CHARGE AS A AMOUNT OF SALES
PERCENTAGE OF CHARGE REALLOWED
-------------------- TO DEALERS AS A
PUBLIC NET PERCENTAGE
OFFERING AMOUNT OF PUBLIC
AMOUNT OF INVESTMENT PRICE INVESTED OFFERING PRICE
- -------------------------------- -------- -------- ----------------
<S> <C> <C> <C>
Less than $100,000.............. 4.50% 4.71% 4.00%
$100,000 but less than
$250,000...................... 3.50% 3.63% 3.00%
$250,000 but less than
$500,000...................... 2.60% 2.67% 2.25%
$500,000 but less than
$1,000,000.................... 2.00% 2.04% 1.75%
$1,000,000 and over............. None+ None+ None+
</TABLE>
- ---------------
+ There is no initial sales charge on purchases of $1 million or more; however,
the Distributor pays investment dealers and financial institutions a
commission from its own resources of 0.70% of the amount invested, and
shareholders who redeem their Investor Shares within one year of the date of
purchase will be subject to a 1% contingent deferred sales charge for the
purpose of reimbursing the Distributor for the commission paid.
29
<PAGE> 269
The initial sales load will not apply to Investor Shares purchased by: (i)
trust, investment management, advisory and fiduciary accounts managed or
administered by First Interstate Bancorp, its subsidiaries and affiliates, or
the Advisor pursuant to a written agreement; (ii) any person purchasing Investor
Shares with the proceeds of a distribution from a trust, investment management,
advisory or other fiduciary account managed or administered by First Interstate
Bancorp, its subsidiaries and affiliates, or the Advisor pursuant to a written
agreement; (iii) any person purchasing Investor Shares with the proceeds of a
redemption from a mutual fund, other than an investment portfolio offered by the
Trust, that was originally purchased with a sales load; (iv) Furman Selz or any
of its affiliates; (v) Trustees or officers of the Funds; (vi) directors or
officers of Furman Selz, the Advisor, or their affiliates or bona fide employees
or former employees of any of the foregoing who have acted as such for not less
than 90 days (including members of their immediate families and their retirement
plans or accounts); or (vii) retirement accounts or plans for which a depository
institution, which is a client or customer of the Advisor, Furman Selz or PFD
Inc. serves as custodian or trustee, or to any trust, pension, Individual
Retirement Account ("IRA"), spousal IRA, profit-sharing or other benefit plan
for such persons so long as such Investor Shares are purchased through PFD, Inc.
The initial sales load also does not apply to Investor Shares sold to
representatives of selling brokers and members of their immediate families. In
addition, the initial sales load does not apply to sales to bank trust
departments, acting on behalf of one or more clients, of Investor Shares having
an aggregate value equal to or exceeding $200,000.
See "Dividends, Distributions and Federal Income Tax," for an explanation
of circumstances in which a sales load paid to acquire Investor Shares of a
mutual fund may not be taken into account in determining gain or loss on the
disposition of those Investor Shares.
QUANTITY DISCOUNTS IN THE SALES CHARGES
The following quantity discounts shall be available to: (a) an individual,
his or her spouse, and their children under the age of 21, and any trust,
pension, IRA, spousal IRA, profit sharing or other benefit plan for such
persons; (b) a trustee or other fiduciary of a single trust estate or a single
fiduciary account; (c) a pension, profit-sharing or other employee benefit plan
qualified under Section 401 of the Internal Revenue Code of 1986, and (d)
tax-exempt organizations under Section 501(c)(3) of the Code.
Right of Accumulation. For Investor Shares of the Funds that are subject
to a sales charge, the schedule of reduced sales charges will be applicable once
the accumulated value of the account has reached
30
<PAGE> 270
$100,000. For this purpose, the dollar amount of the qualifying concurrent or
subsequent purchase is added to the net asset value of any Investor Shares of
those investment portfolios of the Trust that are subject to a sales charge and
are owned at the time of such purchase by the investor. The sales charge imposed
on the Investor Shares being purchased will then be at the rate applicable to
the aggregate value of Investor Shares owned and to be purchased by the
investor. For example, if the investor held Investor Shares valued at $100,000
and purchased an additional $20,000 of Investor Shares (totalling an investment
of $120,000), the sales charge for the $20,000 purchase would be at the next
lower sales charge on the schedule (i.e., the sales charge for purchases over
$100,000 but less than $250,000). There can be no assurance that investors will
receive the cumulative discounts to which they may be entitled unless, at the
time of placing their purchase order, the investors or their dealers make a
written request for the discount. The cumulative discount program may be amended
or terminated at any time. This particular privilege does not entitle the
investor to any adjustment in the sales charge paid previously on purchases of
Investor Shares. If the investor knows that he will be making additional
purchases of Investor Shares in the future, he may wish to consider executing a
Letter of Intent.
Letter of Intent. The schedule of reduced sales charges is also available
to investors who enter into a written Letter of Intent providing for the
purchase, within a 13-month period, of Investor Shares of a particular Fund
which is subject to a sales charge. Investor Shares of such a Fund previously
purchased during the 90-day period prior to the date of receipt by the Fund of
the Letter of Intent which are still owned by the shareholder may also be
included in determining the applicable reduction, provided the shareholder or
the dealer notifies the Fund of such prior purchases.
A Letter of Intent permits an investor to establish a total investment goal
to be achieved by any number of investments over a 13-month period. Each
investment made during the period will receive the reduced sales commission
applicable to the amount represented by the goal as if it were a single
investment. A number of Investor Shares totalling 5% of the dollar amount of the
Letter of Intent will be held in escrow by the Fund in the name of the
shareholder. The initial purchase under a Letter of Intent must be equal to at
least 5% of the stated investment goal.
The Letter of Intent does not obligate the investor to purchase, or a Fund
to sell, the indicated amount. In the event the Letter of Intent goal is not
achieved within the 13-month period, the investor is required to pay the
difference between the sales charge otherwise applicable to the purchases made
during this period and sales charges actually paid. The Fund is
31
<PAGE> 271
authorized by the shareholder to liquidate a sufficient number of escrowed
Investor Shares to obtain such difference. If the goal is exceeded and purchases
pass the next sales charge level, the sales charge on the entire amount of the
purchase that results in passing that level and on subsequent purchases will be
subject to further reduced sales charges in the same manner as set forth under
"Right of Accumulation," but there will be no retroactive reduction of sales
charges on previous purchases. At any time while a Letter of Intent is in
effect, a shareholder may, by written notice to PFD Inc., increase the amount of
the stated goal. In that event, Investor Shares purchased during the previous
90-day period and still owned by the shareholder will be included in determining
the applicable sales charge reduction. The 5% escrow and minimum purchase
requirements will be applicable to the new stated goal. Investors electing to
purchase Investor Shares pursuant to a Letter of Intent should carefully read
the application for a Letter of Intent which is available from the Trust.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in the Funds is $500. Any subsequent
investments must be at least $50. All initial investments should be accompanied
by a completed Purchase Application. The Funds reserve the right to reject
purchase orders.
PURCHASE OF INVESTOR SHARES
THE FOLLOWING PURCHASE PROCEDURES DO NOT APPLY TO CERTAIN TRUST OR OTHER
ACCOUNTS THAT ARE MANAGED BY FIRST INTERSTATE BANCORP, ITS SUBSIDIARIES OR
AFFILIATES. AN ACCOUNT CUSTOMER SHOULD CONSULT HIS OR HER ACCOUNT OFFICER FOR
PROPER INSTRUCTIONS.
All funds received by the Trust are invested in full and fractional
Investor Shares of the appropriate Fund. Certificates for Investor Shares are
not issued. Furman Selz maintains records of each shareholder's holdings of Fund
shares, and each shareholder receives a statement of transactions, holdings and
dividends. The Funds reserve the right to reject any purchase.
An investment may be made using any of the following methods:
Through an Authorized Broker, Investment Advisor or Service
Organization. Investor Shares are available to new and existing shareholders
through authorized brokers, investment advisors and Service Organizations. To
make an investment using this method, simply complete a Purchase Application and
contact your broker, investment advisor or Service Organi-
32
<PAGE> 272
zation with instructions as to the amount you wish to invest. Your broker will
then contact the Fund to place the order on your behalf on that day.
Orders received by your broker or Service Organization for the Funds in
proper order prior to the determination of a Fund's net asset value and
transmitted to the Trust prior to the close of its business day (which is
currently 5:00 p.m., Eastern time), will become effective that day. Brokers who
receive orders are obligated to transmit them promptly. You should receive
written confirmation of your order within a few days of receipt of instructions
from your broker.
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the applicable Fund. In most cases, your bank will either be a member
of the Federal Reserve Banking System or have a relationship with a bank that
is. Your bank will normally charge you a fee for handling the transaction. To
purchase Investor Shares by a Federal funds wire, please first contact Furman
Selz Mutual Funds Client Services. They will establish a record of information
for the wire to ensure its correct processing. You can reach the Wire Desk at
1-800-662-8417.
Have your bank wire funds using the following instructions:
Investors Fiduciary Trust Company
Kansas City, MO 64105
ABA #1010-0362-1
Account #7527950
Further Credit to: Fund Name
As long as you have read the Prospectus, you may establish a new regular
account through the Wire Desk; IRAs may not be opened in this way. When new
accounts are established by wire, the distribution options will be set to
reinvest and the social security or tax identification number ("TIN") will not
be certified until a signed application is received. Completed applications
should be forwarded immediately to the Funds. With the Purchase Application, the
shareholder can specify other distribution options and add any special features
offered by a Fund. Should any dividend distributions or redemptions be paid
before the TIN is certified, they will be subject to 31% Federal tax
withholding.
Automatic Investment Program. An eligible shareholder may also participate
in the Pacifica Automatic Investment Program, an investment plan that
automatically debits money from the shareholder's bank account and invests it in
one or more of the Funds through the use of electronic funds transfers or
automatic bank drafts. Shareholders may elect to make subsequent investments by
transfers of a minimum of $50 on either the fifth
33
<PAGE> 273
or twentieth day of each month into their established Fund accounts. Contact the
Trust at 1-800-662-8417 for more information about the Pacifica Automatic
Investment Program.
EXCHANGE OF INVESTOR SHARES
The Funds offer two convenient ways to exchange Investor Shares in a Fund
for Investor Shares in another investment portfolio of the Trust. Before
engaging in an exchange transaction, a shareholder should read carefully the
Prospectus describing the investment portfolio into which the exchange will
occur, which is available without charge and can be obtained by writing to the
Funds at 237 Park Avenue, Suite 910, New York, New York 10017, or by calling
1-800-662-8417. A shareholder may not exchange Investor Shares of one portfolio
for Investor Shares of another portfolio if both or either are not qualified for
sale in the state of the shareholder's residence. The minimum amount for an
initial exchange is $500. No minimum is required in subsequent exchanges. The
Trust may terminate or amend the terms of the exchange privilege at any time.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the net asset value next determined following receipt of the
request by the Trust in good order, plus any applicable sales charge.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
In the case of transactions subject to a sales charge, the sales charge
will be assessed on an exchange of Investor Shares, equal to the excess of the
sales load applicable to the Investor Shares to be acquired, over the amount of
any sales load previously paid on the Investor Shares to be exchanged. No
service fee is imposed. See "Dividends, Distributions and Federal Income Tax"
for an explanation of circumstances in which a sales load paid to acquire
Investor Shares of the Funds may not be taken into account in determining gain
or loss on the disposition of those Investor Shares.
In addition, Institutional Shares of a Fund may be exchanged for Investor
Shares of the same Fund in connection with the distribution of assets held in a
qualified trust, agency or custodial account maintained with the trust
department of a First Interstate or other bank, trust company or thrift
institution, or in other cases where Institutional Shares are not held in
34
<PAGE> 274
such qualified accounts. Similarly, Investor Shares may be exchanged for
Institutional Shares of the same Fund if the shares are to be held in such a
qualified trust, agency or custodial account. These exchanges are made without a
sales charge at the net asset value of the respective share classes.
Exchange by Mail. To exchange Investor Shares of a Fund by mail, simply
send a letter of instruction to Furman Selz. The letter of instruction must
include: (i) your account number; (ii) the Fund from and the Fund into which you
wish to exchange your investment; (iii) the dollar or share amount you wish to
exchange; and (iv) the signatures of all registered owners or authorized
parties. All signatures must be guaranteed by an eligible guarantor institution
including a member of a national securities exchange or by a commercial bank or
trust company, broker-dealers, credit unions and savings associations.
Exchange by Telephone. To exchange Investor Shares of a Fund by telephone,
or if you have any questions, simply call the Trust at 1-800-662-8417. You
should be prepared to give the telephone representative the following
information: (i) your account number, social security number and account
registration; (ii) the name of the portfolio from and the portfolio into which
you wish to transfer your investment; and (iii) the dollar or share amount you
wish to exchange. The conversation may be recorded to protect you and the Funds.
Telephone exchanges are available only if the shareholder so indicates by
checking the "yes" box on the Purchase Application. See "Redemption of Investor
Fund Shares -- By Telephone" for a discussion of telephone transactions
generally.
REDEMPTION OF INVESTOR SHARES
Shareholders may redeem their Investor Shares, in whole or in part, on any
Business Day. Investor Shares will be redeemed at the net asset value next
determined after a redemption request in good order has been received and
accepted by the Trust. See "Fund Share Valuation." A redemption may be a taxable
transaction on which gain or loss may be recognized.
Where the Investor Shares to be redeemed have been purchased by check, the
Trust may delay payment of the redemption proceeds until the purchasing check
has cleared, which may take up to 15 days. Shareholders may avoid this delay by
investing through wire transfers of Federal funds. During the period prior to
the time the Investor Shares are redeemed, dividends on the Investor Shares will
continue to accrue and be payable and the shareholder will be entitled to
exercise all other beneficial rights of ownership.
35
<PAGE> 275
Once the Investor Shares are redeemed, a Fund will ordinarily send the
proceeds by check to the shareholder at the address of record on the next
Business Day. The Funds may, however, take up to seven days to make payment.
This will not be the customary practice. Also, if the New York Stock Exchange is
closed (or when trading is restricted) for any reason other than the customary
weekend or holiday closing or if an emergency condition as determined by the SEC
merits such action, the Funds may suspend redemptions or postpone payment dates.
To ensure acceptance of your redemption request, it is important to follow
the procedures described below. Although the Trust has no present intention to
do so, it reserves the right to refuse or to limit the frequency of any
telephone or wire redemptions. Of course, it may be difficult to place orders by
telephone during periods of severe market or economic change, and a shareholder
should consider alternative methods of communications, such as couriers or U.S.
mail. The services offered by the Funds may be modified or terminated at any
time. If the Funds terminate any particular service, they will do so only after
giving written notice to shareholders.
You may redeem your Investor Shares using any of the following methods:
Through an Authorized Broker, Investment Advisor or Service
Organization. You may redeem your Investor Shares by contacting your broker or
investment advisor and instructing him or her to redeem your Investor Shares. He
or she will then contact PFD Inc. and place a redemption trade on your behalf.
He or she may charge you a fee for this service.
By Mail. You may redeem your Investor Shares by sending a letter directly
to the Funds. To be accepted, a letter requesting redemption must include: (i)
the Fund name and account registration from which you are redeeming Investor
Shares; (ii) your account number; (iii) the amount to be redeemed; (iv) the
signatures of all registered owners; and (v) a signature guarantee by any
eligible guarantor institution including a member of a national securities
exchange or a commercial bank or trust company, broker-dealers, credit unions
and savings associations. Corporations, partnerships, trusts or other legal
entities will be required to submit additional documentation.
By Telephone. You may redeem your Investor Shares by calling the Funds
toll free at 1-800-662-8417. You should be prepared to give the telephone
representative the following information: (i) your account number, social
security number and account registration; (ii) the Fund name from which you are
redeeming Investor Shares; and (iii) the amount to be redeemed. The conversation
may be recorded to protect you and the Funds.
36
<PAGE> 276
Telephone redemptions are available only if the shareholder so indicates by
checking the "yes" box on the Purchase Application. The Funds employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
If the Funds fail to employ such reasonable procedures, they may be liable for
any loss, damage or expense arising out of any telephone transactions purporting
to be on a shareholder's behalf. In order to assure the accuracy of instructions
received by telephone, the Funds require some form of personal identification
prior to acting upon instructions received by telephone, record telephone
instructions and provide written confirmation to investors of such transactions.
By Wire. You may redeem your Investor Shares by contacting the Funds by
mail or telephone and instructing them to send a wire transmission to your
personal bank.
Your instructions should include: (i) your account number, social security
number and account registration; (ii) the Fund name from which you are redeeming
Investor Shares; and (iii) the amount to be redeemed. Wire redemptions can be
made only if the "yes" box has been checked on your Purchase Application, and a
copy of a void check from the account where proceeds are to be wired is attached
to the Purchase Application. Your bank may charge you a fee for receiving a wire
payment on your behalf.
Check Writing. A check redemption ($500 minimum, no maximum) feature is
available. Checks are free and may be obtained from the Funds. It is not
possible to use a check to close out your account since additional shares accrue
daily.
The above-mentioned services "By Telephone," "By Wire," and Check Writing
are not available for IRAs and trust clients of an affiliate of First Interstate
Bancorp.
Systematic Withdrawal Plan. An owner of $10,000 or more of Investor Shares
of a Fund may elect to have periodic redemptions from his or her account to be
paid on a monthly, quarterly, semi-annual or annual basis. The minimum periodic
payment is $100. A sufficient number of Investor Shares to make the scheduled
redemption will normally be redeemed on the date selected by the shareholder.
Depending on the size of the payment requested and fluctuation in the net asset
value, if any, of the Investor Shares redeemed, redemptions for the purpose of
making such payments may reduce or even exhaust the account. A shareholder may
request that these payments be sent to a predesignated bank or other designated
party. Capital gains and dividend distributions paid to the
37
<PAGE> 277
account will automatically be reinvested at net asset value on the distribution
payment date.
Reinstatement Privilege. A shareholder in the Funds who has redeemed
Investor Shares may reinvest, without a sales charge, up to the full amount of
such redemption at the net asset value determined at the time of the
reinvestment within 30 days of the original redemption. This privilege must be
effected within 30 days of the redemption. The shareholder must reinvest in the
same Fund and the same account from which the Investor Shares were redeemed. A
redemption is a taxable transaction and gain or loss may be recognized for
Federal income tax purposes even if the reinstatement privilege is exercised.
Any loss realized upon the redemption will not be recognized as to the number of
Investor Shares acquired by reinstatement, except through an adjustment in the
tax basis of the Investor Shares so acquired. See "Dividends, Distributions and
Federal Income Tax" for an explanation of circumstances in which a sales load
paid to acquire Investor Shares of a Fund may not be taken into account in
determining gain or loss on the disposition of those Investor Shares.
Redemption of Small Accounts. Due to the disproportionately higher cost of
servicing small accounts, each Fund reserves the right to redeem, on not less
than 30 days' notice, an account in a Fund that has been reduced by a
shareholder to $500 or less. However, if during the 30-day notice period the
shareholder purchases sufficient Investor Shares to bring the value of the
account above $500, this restriction will not apply.
Redemption in Kind. All redemptions of Investor Shares of the Funds shall
be made in cash, except that the commitment to redeem Investor Shares in cash
extends only to redemption requests made by each shareholder of a Fund during
any 90-day period of up to the lesser of $250,000 or 1% of the net asset value
of that Fund at the beginning of such period. This commitment is irrevocable
without the prior approval of the SEC and is a fundamental policy of the Funds
that may not be changed without shareholder approval. In the case of redemption
requests by shareholders in excess of such amounts, the Board of Trustees
reserves the right to have the Funds make payment, in whole or in part, in
securities or other assets, in case of an emergency or any time a cash
distribution would impair the liquidity of a Fund to the detriment of the
existing shareholders. In this event, the securities would be valued in the same
manner as the securities of that Fund are valued. If the recipient were to sell
such securities, he or she would incur brokerage charges.
38
<PAGE> 278
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
FEDERAL TAXES
Each Fund has qualified and intends to continue to qualify annually and to
elect to be treated as a regulated investment company pursuant to the provisions
of Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
By so qualifying and electing, each Fund generally will not be subject to
Federal income tax to the extent that it distributes its earnings in accordance
with the Code.
Each Fund intends to distribute to its shareholders substantially all of
its net tax-exempt interest income and its investment company taxable income
(which includes, among other items, dividends and taxable interest and the
excess, if any, of net short-term capital gains (generally including any net
option premium income) over net long-term capital losses). The California Funds
will declare distributions of such income daily and pay those dividends monthly.
The other Funds will declare dividends and distribute such income monthly. Each
Fund intends to distribute, at least annually, substantially all net capital
gain (the excess of net long-term capital gains over net short-term capital
losses). In determining amounts of capital gains to be distributed, any capital
loss carryovers from prior years will be applied against capital gains.
With respect to the California Funds the amount declared each day as a
dividend may be based on projections of estimated monthly net investment income
and may differ from the actual investment income determined in accordance with
generally accepted accounting principles. An adjustment will be made to the
dividend each month to account for any difference between the projected and
actual monthly investment income.
Distributions will be paid in additional shares of the same class held by a
shareholder based on the net asset value at the close of business on the payment
date of the distribution, unless the shareholder elects in writing, which is
received by Furman Selz not less than five full business days prior to the
record date, to receive such distributions in cash.
In the case of the California Funds, shares purchased will begin earning
dividends on the day after the purchase order is executed, and shares redeemed
will earn dividends through the day the redemption is executed. Investors who
redeem all or a portion of Fund shares prior to a dividend payment date will be
entitled on the next dividend payment date to all dividends declared but unpaid
on those shares at the time of their redemption.
39
<PAGE> 279
Earnings of the Funds not distributed on a timely basis in accordance with
a calendar year distribution requirement are subject to a nondeductible 4%
excise tax. To prevent imposition of this tax, each Fund intends to comply with
this distribution requirement.
Dividends derived from interest excludable from gross income under the Code
on obligations issued by states or political subdivisions thereof and which are
designated by the Funds as "exempt-interest dividends" are not subject to the
regular Federal income tax. Each of the Funds will be qualified to designate and
pay exempt-interest dividends if, at the close of each quarter of its taxable
year, at least 50% of the value of its total assets consists of securities on
which the interest payments are exempt from Federal income tax under Code
Section 103. To the extent that a Fund's dividends distributed to shareholders
are derived from earnings on interest income exempt from Federal income tax and
are designated as "exempt-interest dividends" by that Fund, they will be
excludable from a shareholder's gross income for regular Federal income tax
purposes. Other dividends paid by the Funds, if any, will be taxable to
shareholders.
The Funds may derive interest on temporary taxable investments and realize
capital gains or losses from its portfolio transactions, including the sale of
securities. Dividends derived from such interest, short-term capital gains, and
long-term capital gains, respectively, will be taxable to shareholders as
described, whether such distributions are made in cash or in additional shares
of the Fund. In addition, a sale of shares in Funds (including a redemption of
such shares and an exchange of shares between Funds) may be a taxable event and
may result in a taxable gain or loss to the shareholder. It is possible that a
portion of the distributions of the Funds may constitute taxable rather than
tax-exempt income in the hands of a shareholder. A loss realized by a
shareholder on the redemption, sale, or exchange of shares of a Fund with
respect to which exempt-interest dividends have been paid will be disallowed to
the extent of the exempt-interest dividends received if such shares have been
held by the shareholder for six months or less.
Tax-exempt interest from certain private activity bonds and exempt-interest
dividends attributable to that interest income constitute an item of tax
preference under the alternative minimum tax. Therefore, if a Fund invests in
such private activity bonds, certain shareholders may become subject to the
alternative minimum tax on that part of such Fund's exempt-interest dividends
derived from interest income on such bonds. See the SAI for further information
about the tax consequences for certain types of investors of a Fund investing in
private activity bonds.
40
<PAGE> 280
The entire amount of exempt-interest dividends received from the Funds by
most corporations will be part of an adjustment in computing alternative minimum
taxable income and will have to be taken into account for purposes of the
environmental tax under the Code.
There could be retroactive revocation of the tax-exempt status of certain
municipal obligations after their issuance. In addition, in connection with
budget and tax reform efforts, proposals may be made or adopted which would
change the tax treatment arising from an investment in the Funds. It is not
possible to predict the precise impact of any of these events, but they may
affect the value of the securities in the Fund's portfolio.
Deductions for interest expense incurred (or deemed incurred) to acquire or
carry shares of a Fund may be subject to limitations that reduce or eliminate
such deductions. In addition, under rules issued by the Internal Revenue Service
for determining when borrowed funds are considered used for the purposes of
purchasing or carrying particular assets, the purchase of shares may be
considered to have been made with borrowed funds, even though the borrowed funds
are not directly traceable to the purchase of shares.
Up to 85% of an individual's social security benefits and certain railroad
retirement benefits may be subject to Federal income tax. Along with other
factors, total tax-exempt income, including exempt-interest dividends, is used
to calculate the portion of such benefits that are taxed.
The treatment for state, local and municipal tax purposes of distributions
of exempt-interest dividends from the Funds will vary according to the laws of
state and local taxing authorities. Exempt-interest dividends and other
dividends may be subject to state and local taxation. Investors should consult
with their tax advisors as to the availability of any exemptions from such
taxes. Persons who may be "substantial users" (or "related persons" of
substantial users) of facilities financed by private activity bonds may suffer
adverse tax consequences from investing in a Fund and, therefore, should consult
their tax advisors before purchasing Fund shares. In some instances, a state or
city may exempt from tax the portion of the distribution from the Fund that
represents interest received on obligations of that state or its political
subdivisions. Under the laws of certain other states and cities, the entire
amount of any such distribution may be taxable. Shareholders will be notified
annually of the Federal income tax status of distributions and the percentage of
municipal obligation interest income received, with its source indicated.
A distribution, including an "exempt-interest dividend," will be treated as
paid on December 31 of a calendar year if it is declared by a
41
<PAGE> 281
Fund during October, November, or December of that year to shareholders of
record in such a month and paid by a Fund during January of the following
calendar year. Such distributions will be treated as received by shareholders in
the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
A Fund's distributions with respect to a given taxable year may exceed the
current and accumulated earnings and profits of that Fund available for
distribution. In that event, distributions in excess of such earnings and
profits would be characterized as a return of capital to shareholders for
Federal income tax purposes, thus reducing each shareholder's cost basis in his
Fund shares. Distributions in excess of a shareholder's cost basis in his shares
would be treated as a gain realized from a sale of such shares.
Before purchasing shares in the Funds, the impact of dividends and
distributions which are expected to be declared or have been declared, but not
paid, should be carefully considered. Any dividend or distribution declared
shortly after a purchase of such shares prior to the record date will have the
effect of reducing the per share net asset value by the per share amount of the
dividend or distribution. All or a portion of such dividend or distribution,
although in effect a return of capital, may be subject to tax.
The dividends paid by the Funds are not expected to qualify for the
dividends-received deduction available to corporations.
Under certain circumstances, the sales charge incurred in acquiring shares
of a Fund may not be taken into account in determining the gain or loss on the
disposition of those shares. This rule applies where shares of a Fund are
exchanged within 90 days after the date they were purchased and new shares of
the Fund or of another investment portfolio of the Trust are acquired without a
sales charge or at a reduced sales charge. In that case, the gain or loss
recognized on the exchange will be determined by excluding from the tax basis of
the shares exchanged all or a portion of the sales charge incurred in acquiring
those shares. This exclusion applies to the extent that the otherwise applicable
sales charge with respect to the newly acquired shares is reduced as a result of
having incurred a sales charge initially. The portion of the sales charge
affected by this rule will be treated as a sales charge paid for the new shares.
The Funds may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where a Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Most corporate shareholders
42
<PAGE> 282
and certain other shareholders specified in the Code are exempt from backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against the shareholder's U.S. Federal income tax liability.
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund(s) in which they invest. Depending on
the residence of the shareholder for tax purposes, distributions also may be
subject to state and local taxes, including withholding taxes. Foreign
shareholders may, for example, be subject to special withholding requirements.
Special tax treatment, including a penalty on certain pre-retirement
distributions, is accorded to accounts maintained as IRAs. Shareholders should
consult their own tax advisors as to the Federal, state and local tax
consequences of ownership of shares of the Funds in their particular
circumstances.
STATE TAXES
OREGON STATE AND LOCAL TAXES. Individuals, trusts and estates resident in
Oregon will not be subject to Oregon personal income tax on distributions from
the Oregon Tax-Exempt Fund that represent tax-exempt interest paid on municipal
obligations of the State of Oregon and its political subdivisions and certain
other issuers, including Puerto Rico and Guam. Such individuals, trusts and
estates will be subject to Oregon personal income tax on other types of
distributions received from the Oregon Tax-Exempt Fund, including distributions
of interest on municipal obligations issued by other issuers and all long-term
and short-term capital gains. Except as noted above with respect to Oregon
personal income taxation of individuals, trusts and estates resident in Oregon,
distributions from the Oregon Tax-Exempt Fund may be taxable to investors under
state or local law as dividend income even though all or a portion of such
distributions may be derived from interest on tax-exempt obligations which, if
realized directly, would be exempt from such income taxes.
Corporations subject to the Oregon corporate excise tax will generally be
subject to tax on all distributions from the Oregon Tax-Exempt Fund, including
distributions of income that is exempt for Federal tax purposes. Shares of the
Oregon Tax-Exempt Fund will not be subject to the Oregon property tax.
Shareholders of the Oregon Tax-Exempt Fund, including part-year residents
of Oregon, should consult their tax advisors about other state and local tax
consequences of their investments in the Oregon Tax-Exempt
43
<PAGE> 283
Fund, which may have different consequences from those under Federal income tax
law.
ARIZONA STATE TAXES. Individuals, trusts and estates who are subject to
Arizona income tax will not be subject to such tax on dividends paid by the
Arizona Tax-Exempt Fund, to the extent that such dividends qualify as
exempt-interest dividends of a regulated investment company under sec.852(b)(5)
of the Code and are attributable to either (i) obligations of the State of
Arizona or its political subdivisions thereof or (ii) obligations issued by the
governments of Guam, Puerto Rico, or the Virgin Islands. In addition, dividends
paid by the Arizona Tax-Exempt Fund which are attributable to interest payments
on direct obligations of the United States government will not be subject to
Arizona income tax to the extent the Arizona Tax-Exempt Fund qualifies as a
regulated investment company under subchapter M of the Code. Other distributions
from the Arizona Tax-Exempt Fund, however, such as distributions of short-term
or long-term capital gains, will generally not be exempt from Arizona income
tax.
There are no municipal income taxes in Arizona. Moreover, because shares of
the Arizona Tax-Exempt Fund are intangibles, they are not subject to Arizona
property tax. Shareholders of the Arizona Tax-Exempt Fund should consult their
tax advisor about other state and local tax consequences of their investment in
the Arizona Tax-Exempt Fund.
CALIFORNIA STATE TAXES. If, at the close of each quarter of the California
Funds' taxable year, at least 50% of the value of their respective total assets
consists of California municipal obligations and certain specified federal
obligations, and if the Funds qualify as a regulated investment company for
federal tax purposes, then the Funds will be qualified to pay dividends exempt
from California state personal income tax to its shareholders. If the Funds so
qualify, dividends derived from interest attributable to California municipal
obligations and such federal obligations will be exempt from California state
personal income tax. (Such treatment may not apply, however, to investors who
are "substantial users" or "related persons" with respect to facilities financed
by portfolio securities held by the Fund.) For this purpose, federal obligations
are any obligations the interest on which is excludable from income under the
United States Constitution or the laws of the United States. Any dividends paid
to shareholders subject to California state franchise tax or California state
corporate income tax may be taxed as ordinary or capital gain dividends to such
shareholders notwithstanding that all or a portion of such dividends are exempt
from California state personal income tax.
44
<PAGE> 284
NATIONAL TAX-EXEMPT FUND -- STATE AND LOCAL TAXES. Investors are advised
to consult their tax advisors concerning the application of state and local
taxes, which may have different consequences from those under Federal income tax
law.
DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES
Municipal Obligations. The two principal classifications of municipal
obligations which may be held by the Funds are "general obligation" securities
and "revenue" securities. General obligation securities are secured by the
issuer's pledge of its full faith, credit and ad valorem taxing power for the
payment of principal and interest. Revenue securities are payable only from the
revenues derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise tax or other specific revenue
source such as the user of the facility being financed. Private activity bonds
(e.g., bonds issued by industrial development authorities) that are issued by or
on behalf of public authorities to finance various privately-operated facilities
are included within the term "municipal obligations" if the interest paid
thereon is exempt from regular Federal income tax (See "Dividends, Distributions
and Federal Income Tax" above) and not treated as a specific tax preference item
under the Federal alternative minimum tax. Private activity bonds are in most
cases revenue securities and are not payable from the unrestricted revenues of
the issuer. The credit quality of such bonds is usually directly related to the
credit standing of the corporate user of the facility involved.
Municipal obligations may also include "moral obligation" securities, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation securities is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
Certain of the municipal obligations held by the Funds may be insured as to
the timely payment of principal and interest. The insurance policies will
usually be obtained by the issuer of the municipal obligation at the time of its
original issuance. In the event that the issuer defaults on an interest or
principal payment, the insurer will be notified and will be required to make
payment to the bondholders. There is, however, no guarantee that the insurer
will meet its obligations. In addition, such insurance will not protect against
market fluctuations caused by changes in interest rates and other factors.
45
<PAGE> 285
Further, the Funds may purchase municipal obligations known as
"certificates of participation" which represent undivided proportional interests
in lease payments by a governmental or nonprofit entity. The lease payments and
other rights under the lease provide for and secure the payments on the
certificates. Lease obligations may be limited by applicable municipal charter
provisions or the nature of the appropriation for the lease. In particular,
lease obligations may be subject to periodic appropriation. Lease obligations
may also be abated if the leased property is damaged or becomes unsuitable for
the lessee's purpose. If the entity does not appropriate funds for future lease
payments, the entity cannot be compelled to make such payments. Furthermore, a
lease may or may not provide that the certificate trustee can accelerate lease
obligations upon default. If the trustee could not accelerate lease obligations
upon default, the trustee would only be able to enforce lease payments as they
became due. In the event of a default or failure of appropriation, it is
unlikely that the trustee would be able to obtain an acceptable substitute
source of payment. Certificates of participation are generally subject to
redemption by the issuing municipal entity under specified circumstances. If a
specified event occurs, a certificate is callable at par either at any interest
payment date or, in some cases, at any time. As a result, certificates of
participation are not as liquid or marketable as other types of municipal
obligations and are generally valued at par or less than par in the open market.
The Advisor for the Funds, under the supervision of the Board of Trustees,
will make determinations concerning the liquidity of a municipal lease
obligation based on all relevant factors. A Fund may also purchase unrated
municipal lease obligations. The Advisor, under the supervision of the Board of
Trustees, will determine the credit quality of such leases on an ongoing basis,
including an assessment of the likelihood that the underlying lease will not be
canceled.
Opinions relating to the validity of municipal obligations and to the
exemption of interest thereon from regular Federal income tax (and to the
exemption of interest from state personal income tax) are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Funds,
the Advisor nor their counsel will review the proceedings relating to the
issuance of municipal obligations or the bases for such opinions.
Securities Issued by Other Investment Companies. Each Fund may invest in
securities issued by other investment companies within the limits prescribed by
the 1940 Act. Each Fund currently intends to limit its investments so that, as
determined immediately after a securities purchase is made: (a) not more than 5%
of the value of its total assets will be invested in the securities of any one
investment company; (b) not more
46
<PAGE> 286
than 10% of the value of its total assets will be invested in the aggregate in
securities of investment companies as a group; (c) not more than 3% of the
outstanding voting stock of any one investment company will be owned by the
Fund; and (d) not more than 10% of the outstanding voting stock of any one
investment company will be owned in the aggregate by a Fund and other investment
companies advised by the Advisor or any other affiliate of First Interstate
Bancorp. As a shareholder of another investment company, a Fund would bear,
along with other shareholders, its pro rata portion of the expenses of such
other investment company, including advisory fees. These expenses would be in
addition to the advisory and other expenses that each Fund bears directly in
connection with its own operations, and may represent a duplication of fees to
shareholders of that Fund.
Variable and Floating Rate Instruments. Instruments purchased by a Fund
may include variable and floating rate demand instruments issued by
corporations, industrial development authorities and governmental entities.
These instruments may include variable amount master demand notes that permit
the indebtedness to vary in addition to providing for periodic adjustments in
the interest rate. Although variable and floating rate demand instruments are
frequently not rated by credit rating agencies, unrated instruments purchased by
a Fund will be determined to be of comparable quality to rated instruments that
may be purchased by the Fund. While there may be no active secondary market with
respect to a particular variable or floating rate instrument purchased by a
Fund, the Funds may, from time to time as specified in the instrument, demand
payment in full of the principal of the instrument or may resell the instrument
to a third party. The absence of such an active secondary market, however, could
make it difficult for a Fund to dispose of a variable or floating rate demand
instrument if the issuer defaulted on its payment obligations or during periods
that the Fund is not entitled to exercise its demand rights, and the Fund could,
for these or other reasons, suffer a loss. Variable and floating rate
instruments with no active secondary market will be included in the calculation
of a Fund's illiquid assets.
Forward Commitments, When-Issued Purchases and Delayed-Delivery
Transactions. The Funds may purchase or sell securities on a when-issued or
delayed-delivery basis and make contracts to purchase or sell securities for a
fixed price at a future date beyond customary settlement time. Securities
purchased or sold on a when-issued, delayed-delivery or forward commitment basis
involve a risk of loss if the value of the security to be purchased declines, or
the value of the security to be sold increases, before the settlement date.
Although a Fund will generally purchase securities with the intention of
acquiring them, a Fund may dispose of
47
<PAGE> 287
securities purchased on a when-issued, delayed-delivery or a forward commitment
basis before settlement when deemed appropriate by the Advisor.
Stand-by Commitments. The Funds may acquire "stand-by commitments" with
respect to municipal obligations held in their respective portfolios. Under a
stand-by commitment, a dealer agrees to purchase at a Fund's option specified
municipal obligations at a price equal to their amortized cost value plus
accrued interest. The Funds will acquire stand-by commitments solely to
facilitate portfolio liquidity and do not intend to exercise their respective
rights thereunder for trading purposes.
Derivative Securities. The Funds may invest in structured notes, bonds or
other instruments with interest rates that are determined by reference to
changes in the value of other interest rates, indices or financial indicators
("References") or the relative change in two or more References. The Funds may
also hold derivative instruments that have interest rates that re-set inversely
to changing current market rates and/or have embedded interest rate floors and
caps that require the issuer to pay an adjusted interest rate if market rates
fall below or rise above a specified rate. These instruments represent
relatively recent innovations in the bond markets, and the trading market for
these instruments is less developed than the markets for traditional types of
debt instruments. It is uncertain how these instruments will perform under
different economic and interest-rate scenarios. Because certain of these
instruments are leveraged, their market values may be more volatile than other
types of bonds and may present greater potential for capital gain or loss. On
the other hand, the imbedded option features of other derivative instruments
could limit the amount of appreciation a Fund can realize on its investment,
could cause a Fund to hold a security it might otherwise sell or could force the
sale of a security at inopportune times or for prices that do not reflect
current market value. The possibility of default by the issuer or the issuer's
credit provider may be greater for these structured and derivative instruments
than for other types of instruments. In some cases it may be difficult to
determine the fair value of a structured or derivative instrument because of a
lack of reliable objective information and an established secondary market for
some instruments may not exist.
Illiquid Securities. Each Fund will not knowingly invest more than 15%
(10% in the case of the California Tax-Exempt Fund) of the value of its net
assets in securities that are illiquid because of restrictions on
transferability or other reasons. Securities that are not registered under the
Securities Act of 1933 but may be purchased by institutional buyers under Rule
144A are subject to this limit (unless such securities are variable
48
<PAGE> 288
amount master demand notes with maturities of nine months or less or unless the
Advisor determines under the supervision of the Board that a liquid trading
market exists).
Rule 144A allows for a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the Securities
Act of 1933 for resales of certain securities to qualified institutional buyers.
The Advisor believes that the market for certain restricted securities may
expand further as a result of this regulation and the development of automated
systems for the trading, clearance and settlement of unregistered securities of
domestic and foreign issuers, such as the PORTAL System sponsored by the NASD.
The Advisor monitors the liquidity of restricted securities in each of the
Funds under the supervision of the Board of Trustees. In reaching liquidity
decisions, the Advisor will consider such factors as: (a) the frequency of
trades and quotes for the security; (b) the number of dealers wishing to
purchase or sell the security and number of other potential purchasers; (c)
dealer undertakings to make a market in the security; and (d) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer). The use of Rule 144A transactions could have the effect of
increasing the level of illiquidity of the Funds during periods that qualified
institutional buyers become uninterested in purchasing restricted securities.
INVESTMENT RESTRICTIONS
Each Fund has adopted certain fundamental investment restrictions that may
be changed only with the approval of a majority of a Fund's outstanding shares.
The following description summarizes several of the Funds' fundamental
restrictions, which are set forth in full in the SAI.
No Fund may:
1. Purchase securities (except U.S. Government securities and repurchase
agreements collateralized by such securities) if more than 5% of its
total assets at the time of purchase will be invested in securities of
any one issuer, except that up to 50% of a Fund's total assets may be
invested without regard to this 5% limitation.
2. Invest 25% or more of its total assets at the time of purchase in
securities of issuers whose principal business activities are in the
same industry.
49
<PAGE> 289
3. Borrow money except in amounts up to 10% of the value of its total
assets at the time of borrowing.
Restriction 1 does not apply to the California Funds. Instead, as a non-
fundamental investment restriction, each California Fund will not hold any
securities (except U.S. Government securities and repurchase agreements
collateralized by such securities) that would cause, at the end of any tax
quarter, more than 5% of its total assets to be invested in securities of any
one issuer, except that up to 50% of a Fund's total assets may be invested
without regard to this limitation so long as no more than 25% of the Fund's
total assets are invested in any one issuer (except U.S. Government, its
agencies and instrumentalities).
If a percentage restriction on the investment or use of assets set forth in
this Prospectus is adhered to at the time a transaction is effected, later
changes in percentage resulting from changing values will not be considered a
violation, however, the Funds will not at any time have more than 15% of their
respective net assets invested in illiquid securities.
OTHER INFORMATION
CAPITALIZATION
Pacifica Funds Trust (formerly Fund Source) was organized as a
Massachusetts business trust on July 17, 1984. The capitalization of the Trust
consists solely of an unlimited number of shares of beneficial interest with a
par value of $0.001 each. When issued, shares of the Funds are fully paid,
non-assessable and freely transferable.
The Board of Trustees has authorized the issuance of two classes of shares
in each of the Funds described in this Prospectus -- Investor Shares and
Institutional Shares. Each share of a Fund represents an equal proportionate
interest in a particular Fund with other shares of the same class and is
entitled to such dividends and distributions earned on such shares as are
declared in the discretion of the Board of Trustees.
Each Fund's Investor Shares and Institutional Shares bear their pro rata
portion of all operating expenses paid by the Fund except for the distribution
payments, Service Organization fees and other "class" expenses that are
allocated to a particular share class. The Board of Trustees has not approved a
Distribution Plan with respect to Institutional Shares. Each Fund may pay fees
to Service Organizations in amounts up to an annual rate of 0.25% of the average
daily net asset value of the Funds' outstanding Institutional Shares owned by
shareholders with whom a
50
<PAGE> 290
Service Organization has a servicing relationship. Institutional Shares of the
Funds are purchased at net asset value per share without a sales charge. Because
of the "class expenses" and sales charges, the performance of a Fund's
Institutional Shares is expected to be higher than the performance of its
Investor Shares. The Trust offers various services and privileges in connection
with its Investor Shares that are not offered in connection with its
Institutional Shares, including an automatic investment plan, automatic
withdrawal plan and, with respect to certain portfolios, checkwriting. For
information regarding the Funds' Institutional Shares, contact Furman Selz at
1-800-662-8417 or your Service Organization.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust. The Declaration of Trust also
provides for indemnification out of the property of a Fund of any shareholder
held personally liable solely by reason of being or having been a shareholder of
the Fund. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a Fund itself would
be unable to meet its obligations and should be considered remote.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Trust is not required to hold regular
annual meetings of the Funds' shareholders, but in the event that a special
meeting is held, shareholders of each portfolio offered by the Trust will be
entitled to one vote for each full share held and fractional votes for
fractional shares held, and will vote in the aggregate and not on a
portfolio-by-portfolio basis, except as required by the 1940 Act or other
applicable law. It is contemplated that, as required by the 1940 Act, the
shareholders of a portfolio will vote separately on a portfolio-by-portfolio
basis on matters relating to a particular portfolio's investment advisory
agreement or changes in a portfolio's fundamental investment limitations, and on
other matters where the interests of the respective portfolios are not
substantially identical. Similarly, shareholders of each portfolio will vote in
the aggregate and not by class unless the Trustees determine that the matter to
be voted on affects only the interests of the holders of a particular class of a
Fund's shares. Voting rights are not cumulative.
51
<PAGE> 291
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust and in connection with such meeting to comply with the shareholders'
communications provisions of Section 16(c) of the 1940 Act.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of a Fund means, with respect to the
approval of an investment advisory agreement or a change in a fundamental
investment policy, the vote of the lesser of: (1) 67% of the shares of a Fund
present at a meeting if the holders of more than 50% of the outstanding shares
are present in person or by proxy; or (2) more than 50% of the outstanding
shares of a Fund. For purposes of the 1940 Act, any person who owns either
directly or through one or more controlled companies more than 25 percent of the
voting securities of a company is presumed to "control" such company. Under this
definition, First Interstate Bancorp and its affiliates may be deemed to be
controlling persons of the Trust.
PERFORMANCE INFORMATION
A Fund may, from time to time, include yield and total return data for its
Investor Shares and Institutional Shares in advertisements or reports to
shareholders or prospective investors. The methods used to calculate the yields
and total returns of the Funds are mandated by the SEC.
Quotations of "yield" for a class of shares of a Fund will be based on the
investment income per share during a particular 30-day (or one month) period
(including dividends and interest), less expenses accrued during the period
("net investment income"), and will be computed by dividing net investment
income by the maximum public offering price per share on the last day of the
period.
Quotations of yield reflect only the performance of a class of shares
during the particular period on which the calculations are based. Yield will
vary based on changes in market conditions, the level of interest rates and the
level of the expenses of a particular class of shares, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
Quotations of average annual total return for a class of shares of a Fund
will be expressed in terms of the average annual compounded rate of
52
<PAGE> 292
return of a hypothetical investment in that class over periods of 1, 5 and 10
years (up to the life of that class), reflect the deduction of a proportional
share of expenses allocated to that class (on an annual basis), and assume that
all dividends and distributions are reinvested when paid.
The Funds may also advertise "taxable equivalent yield." Taxable equivalent
yield is the yield that an investment, subject to Federal and/or state taxes,
would need to earn in order to equal, on an after-tax basis, the yield on an
investment exempt from such taxes (normally calculated assuming the maximum
applicable marginal tax rate). A taxable equivalent yield quotation for a Fund
will be higher than the Fund's yield quotations.
The following charts show the approximate yield a taxable investment would
have to earn to keep up with the yield of a tax-exempt investment. Across the
top of each table are various tax-exempt rates of return. On the left are tax
rates reflecting different state tax brackets plus a 28% Federal Income Tax
rate. By following across the table at the appropriate tax rate, you can find
the taxable yield you would need to achieve in order to equal the tax-exempt
yield at the top of the table.
<TABLE>
<CAPTION>
1994 FEDERAL TAX RATES
INCOME INCOME INCOME INCOME INCOME
<S> <C> <C> <C> <C> <C>
$22,750- $ 55,100- $115,000- Over
Single Return $55,100 $115,000 N/A $250,000 $250,000
$38,000- $ 91,850- $140,000- Over
Joint Return $91,850 $140,000 $250,000 N/A $250,000
Federal Tax Rate+ 28% 31% 36% 38% 39.6%
</TABLE>
+ This rate assumes the maximum effective Federal income tax rate. Your
effective tax rate may vary depending upon your filing status and taxable
income level. For some investors, alternative minimum tax considerations may
apply.
OREGON TAX-EXEMPT FUND*
<TABLE>
<CAPTION>
ASSUMED OREGON &
28% FEDERAL COMBINED
TAX-FREE RATE OF
RETURN 4.00% 4.50% 5.00% 5.50% 6.00%
<S> <C> <C> <C> <C> <C>
Tax Rate: 31.0% 5.80% 6.52% 7.25% 7.97% 8.70%
Tax Rate: 33.0% 5.97% 6.72% 7.46% 8.21% 8.96%
Tax Rate: 43.0% 7.02% 7.90% 8.77% 9.65% 10.53%
Tax Rate: 48.6% 7.78% 8.76% 9.73% 10.70% 11.67%
</TABLE>
53
<PAGE> 293
ARIZONA TAX-EXEMPT FUND*
<TABLE>
<CAPTION>
ASSUMED ARIZONA &
28% FEDERAL COMBINED
TAX-FREE RATE OF
RETURN 4.00% 4.50% 5.00% 5.50% 6.00%
<S> <C> <C> <C> <C> <C>
Tax Rate: 32.4% 5.92% 6.66% 7.40% 8.14% 8.88%
Tax Rate: 36.25% 6.28% 7.06% 7.84% 8.63% 9.41%
Tax Rate: 41.5% 6.84% 7.69% 8.55% 9.40% 10.26%
Tax Rate: 46.6% 7.49% 8.43% 9.36% 10.30% 11.24%
</TABLE>
THE CALIFORNIA FUNDS*
<TABLE>
<CAPTION>
ASSUMED CALIFORNIA &
28% FEDERAL COMBINED
TAX-FREE RATE OF
RETURN 4.00% 4.50% 5.00% 5.50% 6.00%
<S> <C> <C> <C> <C> <C>
Tax Rate: 32.32% 5.91% 6.65% 7.39% 8.13% 8.87%
Tax Rate: 37.42% 6.39% 7.19% 7.99% 8.79% 9.59%
Tax Rate: 41.95% 6.89% 7.75% 8.61% 9.47% 10.34%
Tax Rate: 45.64% 7.36% 8.28% 9.20% 10.12% 11.04%
</TABLE>
NATIONAL TAX-EXEMPT BOND FUND*
<TABLE>
<CAPTION>
ASSUMED FEDERAL
TAX-FREE RATE OF
RETURN 4.00% 4.50% 5.00% 5.50% 6.00%
<S> <C> <C> <C> <C> <C>
Tax Rate: 28.0% 5.56% 6.25% 6.94% 7.64% 8.33%
Tax Rate: 31.0% 5.80% 6.52% 7.25% 7.97% 8.70%
Tax Rate: 36.0% 6.25% 7.03% 7.81% 8.59% 9.38%
Tax Rate: 38.0% 6.45% 7.26% 8.07% 8.87% 9.68%
Tax Rate: 39.6% 6.62% 7.45% 8.28% 9.11% 9.93%
</TABLE>
* Each chart shows the taxable rate of return an investor needs to achieve in
order to equal various tax-free returns. At higher tax rates a higher yield is
required to overcome the tax burden. Yields set forth are for illustrative
purposes only and do not reflect a Fund's past and/or future performance. Your
investment in the Funds may be subject to Alternative Minimum Tax (AMT).
Performance information for a Fund may be compared to various unmanaged
indices, such as the Standard & Poor's 500 Stock Index, the Dow Jones Industrial
Average, indices prepared by Lipper Analytical
54
<PAGE> 294
Services, and other entities or organizations which track the performance of
investment companies. Any performance information should be considered in light
of a Fund's investment objective and policies, characteristics and quality of
the Fund and the market conditions during the time period indicated, and should
not be considered to be representative of what may be achieved in the future.
For a description of the methods used to determine yield and total return for
the Funds, see "Other Information -- Performance Information" in the SAI.
ACCOUNT SERVICES
All transactions in shares of the Funds will be reflected in a statement
for each shareholder. In those cases where a Service Organization or its nominee
is shareholder of record of shares purchased for its customer, the Funds have
been advised that the statement may be transmitted to the customer at the
discretion of the Service Organization.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Funds, 237 Park Avenue,
Suite 910, New York, New York 10017.
General and Account Information: (800) 662-8417
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
FUNDS OR BY THEIR DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY FIRST INTERSTATE BANCORP OR ITS AFFILIATES,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
55
<PAGE> 295
APPENDIX
DESCRIPTION OF MOODY'S BOND RATINGS:
Excerpts from Moody's description of its four highest bond ratings are
listed as follows: Aaa -- judged to be the best quality and they carry the
smallest degree of investment risk; Aa -- judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds; A -- possess many favorable investment attributes and are
to be considered as "upper medium grade obligations"; Baa -- considered to be
medium grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Other Moody's bond
descriptions include: Ba -- judged to have speculative elements, their future
cannot be considered as well assured; B -- generally lack characteristics of the
desirable investment; Caa -- are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; Ca -- speculative in a high degree, often in default; C -- lowest
rated class of bonds, regarded as having extremely poor prospects.
Moody's also supplies numerical indicators 1, 2 and 3 to rating categories.
The modifier 1 indicates that the security is in the higher end of its rating
category; the modifier 2 indicates a mid-range ranking; and modifier 3 indicates
a ranking toward the lower end of the category.
DESCRIPTION OF S&P'S BOND RATINGS:
Excerpts from S&P's description of its four highest bond ratings are listed
as follows: AAA -- highest grade obligations, in which capacity to pay interest
and repay principal is extremely strong; AA -- also qualify as high grade
obligations, having a very strong capacity to pay interest and repay principal,
and differs from AAA issues only in a small degree; A -- regarded as upper
medium grade, having a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories;
BBB -- regarded as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories. This group is the lowest which qualifies for
commercial bank investment. BB, B, CCC, CC -- predominantly speculative with
respect to
A-1
<PAGE> 296
capacity to pay interest and repay principal in accordance with terms of the
obligations; BB indicates the highest grade and CC the lowest within the
speculative rating categories.
S&P applies indicators "+," no character, and "-" to its rating categories.
The indicators show relative standing within the major rating categories.
DESCRIPTION OF MOODY'S RATINGS OF NOTES AND VARIABLE RATE DEMAND INSTRUMENTS:
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or MIG. Such ratings recognize the
differences between short-term credit and long-term risk. Short-term ratings on
issues with demand features (variable rate demand obligations) are
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payments
relying on external liquidity.
MIG 1/VMIG 1: This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This denotes high quality. Margins of protection are ample
although not as large as in the preceding group.
DESCRIPTION OF MOODY'S TAX-EXEMPT COMMERCIAL PAPER RATINGS:
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations which have an original maturity not
exceeding nine months. Moody's makes no representation that such obligations are
exempt from registration under the Securities Act of 1933, nor does it represent
that any specific note is a valid obligation of a rated issuer or issued in
conformity with any applicable law. The following designations, all judged to be
investment grade, indicate the relative repayment ability of rated issuers of
securities in which the Trust may invest.
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term promissory obligations.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term promissory obligations.
A-2
<PAGE> 297
DESCRIPTION OF S&P'S RATINGS FOR MUNICIPAL BONDS:
INVESTMENT GRADE
AAA: Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA: Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A: Debt rated "A" has strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
SPECULATIVE GRADE
BB, B, CCC, CC: Debt rated in these categories is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
CI: The "CI" rating is reserved for income bonds on which no interest is
being paid.
D: Debt rated "D" is in default, and payment of interest and/or repayment
of principal is in arrears.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
DESCRIPTION OF S&P'S RATINGS FOR INVESTMENT GRADE MUNICIPAL NOTES AND SHORT-TERM
DEMAND OBLIGATIONS:
SP-1: Issues carrying this designation have a very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus (+) designation.
A-3
<PAGE> 298
SP-2: Issues carrying this designation have a satisfactory capacity to pay
principal and interest.
DESCRIPTION OF S&P'S RATINGS FOR DEMAND OBLIGATIONS AND TAX-EXEMPT COMMERCIAL
PAPER:
An S&P commercial paper rating is a current assessment of the likelihood of
timely repayment of debt having an original maturity of no more than 365 days.
The two rating categories for securities in which the Trust may invest are as
follows:
A-1: This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics will be denoted with a plus (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-4
<PAGE> 299
INVESTMENT ADVISOR
First Interstate Capital Management, Inc.
7501 East McCormick Parkway
Scottsdale, Arizona 85258
ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Pacifica Funds Distributor Inc.
230 Park Avenue
New York New York 10169
CUSTODIAN
First Interstate Bank of California
707 Wilshire Boulevard
Los Angeles, California 90017
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
[PACIFICA LOGO] PACTFIV-2/96
<PAGE> 300
[PACIFICA LOGO]
(INSTITUTIONAL SHARES)
PACIFICA OREGON TAX-EXEMPT FUND
PACIFICA ARIZONA TAX-EXEMPT FUND
PACIFICA CALIFORNIA TAX-EXEMPT FUND
PACIFICA CALIFORNIA SHORT-TERM
TAX-EXEMPT FUND
PACIFICA NATIONAL TAX-EXEMPT FUND
PROSPECTUS
FEBRUARY 1, 1996
[FIRST INTERSTATE BANK LOGO]
Investment Advisor to The Pacifica Funds
<PAGE> 301
PACIFICA FUNDS TRUST
(INSTITUTIONAL SHARES)
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) 662-8417
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. --
INVESTMENT ADVISOR
("FICM" OR THE "ADVISOR")
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
("FURMAN SELZ" OR THE "SPONSOR")
PACIFICA FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
("PFD INC." OR THE "DISTRIBUTOR")
Pacifica Funds Trust (the "Trust") is an open-end investment company (a
mutual fund) that offers a selection of separate investment portfolios. This
Prospectus describes the Institutional Shares of the following five portfolios
(the "Funds"):
- Pacifica Oregon Tax-Exempt Fund
- Pacifica Arizona Tax-Exempt Fund
- Pacifica California Tax-Exempt Fund
- Pacifica California Short-Term Tax-Exempt Fund
- Pacifica National Tax-Exempt Fund
This Prospectus sets forth concisely the information a prospective investor
should know before investing in any of the Funds and should be read and retained
for information about each Fund. A Statement of Additional Information (the
"SAI"), dated February 1, 1996 (which may be revised from time to time),
containing additional and more detailed information about the Funds, has been
filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Funds at the address or
information number printed above.
----------------------------
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FIRST INTERSTATE OR OTHER BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN 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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1996.
<PAGE> 302
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS............................................... 3
FUND EXPENSES............................................ 6
FEE TABLE -- INSTITUTIONAL SHARES........................ 6
FINANCIAL HIGHLIGHTS..................................... 10
THE FUNDS................................................ 16
INVESTMENT POLICIES AND PRACTICES OF THE FUNDS........... 16
RISKS OF INVESTING IN THE FUNDS.......................... 18
MANAGEMENT OF THE FUNDS.................................. 21
FUND SHARE VALUATION..................................... 27
PURCHASE AND REDEMPTION OF INSTITUTIONAL SHARES.......... 27
EXCHANGE OF INSTITUTIONAL SHARES......................... 30
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX.......... 31
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES....... 36
INVESTMENT RESTRICTIONS.................................. 41
OTHER INFORMATION........................................ 42
APPENDIX................................................. A-1
</TABLE>
2
<PAGE> 303
HIGHLIGHTS
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
This Prospectus describes five non-diversified investment portfolios
managed by First Interstate Capital Management, Inc. Each Fund has a distinct
investment objective and policies.
The Oregon Tax-Exempt Fund. The investment objective of the Oregon
Tax-Exempt Fund is to provide investors with income exempt from Federal and
Oregon personal income taxes. The Fund's assets will be primarily invested in
debt instruments issued by or on behalf of the State of Oregon, other states,
territories and possessions of the United States, the District of Columbia and
their respective authorities, agencies, instrumentalities and political
subdivisions.
The Arizona Tax-Exempt Fund. The investment objective of the Arizona
Tax-Exempt Fund is to provide investors with income exempt from Federal and
Arizona personal income taxes. The Fund's assets will be primarily invested in
debt instruments issued by or on behalf of the State of Arizona, other states,
territories and possessions of the United States, the District of Columbia and
their respective authorities, agencies, instrumentalities and political
subdivisions.
The California Tax-Exempt Fund. The investment objective of the California
Tax-Exempt Fund is to provide investors with as high a level of current income,
exempt from both Federal and California personal income taxes, as is consistent
with limiting the risk of potential capital loss. The Fund pursues this
objective by investing primarily in debt instruments issued by or on behalf of
the State of California, other states, territories and possessions of the United
States, the District of Columbia and their respective authorities, agencies,
instrumentalities and political subdivisions.
The California Short-Term Tax-Exempt Fund. The investment objective of the
California Short-Term Tax-Exempt Fund is to provide investors with as high a
level of current income, exempt from both Federal and California personal income
taxes, as is consistent with limiting the risk of potential loss. The Fund
pursues this objective by investing primarily in short-term debt instruments
issued by or on behalf of the State of California, other states, territories and
possessions of the United States, the District of Columbia and their respective
authorities, agencies, instrumentalities and political subdivisions. The Fund
will maintain a dollar-weighted average portfolio maturity of three years or
less.
3
<PAGE> 304
The National Tax-Exempt Fund. The investment objective of the National
Tax-Exempt Fund is to provide investors with income exempt from Federal income
taxes. The Fund's assets will be primarily invested in debt instruments issued
by or on behalf of states, territories and possessions of the United States, the
District of Columbia and their respective authorities, agencies,
instrumentalities and political subdivisions.
For additional information concerning the investment policies, practices
and risk considerations of the Funds, see "The Funds," "Investment Policies and
Practices of the Funds" and "Risks of Investing in the Funds" in this
Prospectus.
RISKS OF INVESTING IN THE FUNDS
The price per share of the Funds will fluctuate with changes in the value
of the investments held by each Fund. A Fund's performance will change daily
based on many factors, including the quality of the instruments in each Fund's
investment portfolio, national economic conditions, interest rate levels and
general market conditions. Depending on these factors, the net asset value of a
Fund may decrease instead of increase. Certain Funds may seek to achieve their
investment objectives through investments in instruments with the lowest
investment grade rating which have speculative characteristics. The policy of
the Oregon Tax-Exempt Fund, Arizona Tax-Exempt Fund, California Tax-Exempt Fund
and California Short-Term Tax-Exempt Fund to invest primarily in Oregon, Arizona
and California municipal obligations also presents certain risks because each
Fund's performance will be closely tied to the economic and political conditions
of a particular state. All of the Funds are also classified as non-diversified
portfolios under the Investment Company Act of 1940, as amended (the "1940
Act"), which means that the Funds may be more sensitive to factors affecting a
particular issuer.
During periods of falling interest rates, the value of fixed income
securities generally rises. Conversely, during periods of rising interest rates
the value of such securities generally declines. Debt securities with longer
maturities, which tend to produce higher yields, are subject to potentially
greater capital appreciation and depreciation than obligations with shorter
maturities. Changes in the financial strength of an issuer or changes in the
ratings of any particular security may also affect the value of these
investments. Fluctuations in the market value of fixed income securities
subsequent to their acquisition will not affect cash income from such
securities, but will be reflected in a Fund's net asset value.
4
<PAGE> 305
There is no assurance that any Fund will achieve its investment objective.
MANAGEMENT OF THE FUNDS
First Interstate Capital Management, Inc. acts as investment advisor to the
Funds. For its services, the Advisor is entitled to receive a fee from each Fund
at an annual rate based on the Fund's average daily net assets. See "Fee
Table -- Institutional Shares" and "Management of the Funds" in this Prospectus.
Furman Selz acts as administrator and sponsor to the Funds. Furman Selz
provides certain management and administrative services to the Funds, and is
entitled to receive a fee from each Fund at an annual rate based on the Fund's
average daily net assets. PFD Inc. distributes the Funds' shares.
Fees and expenses charged to the Funds are outlined on pages 6-9 of this
Prospectus.
GUIDE TO INVESTING IN THE PACIFICA FAMILY OF FUNDS
Purchase orders for the Funds received in proper order by 4:15 p.m.,
Eastern time, will become effective that day.
Institutional Shares of the Funds are purchased at net asset value without
a sales charge.
Shareholders may purchase, redeem or exchange Institutional Shares by
telephone.
All dividends and distributions will be automatically reinvested at net
asset value in additional Institutional Shares of the applicable Fund unless
cash payment is requested.
- Distributions for the Funds are generally paid monthly.
For additional information on how to purchase and redeem Institutional
Shares of the Funds, see "Purchase and Redemption of Institutional Shares" and
"Exchange of Institutional Shares."
5
<PAGE> 306
FUND EXPENSES
The following tables list the costs and expenses that an investor will
incur either directly or indirectly as an Institutional shareholder of a Fund
based upon the Fund's operating expenses for its most recent fiscal year,
adjusted to reflect current fees and expenses.
FEE TABLE -- INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
OREGON ARIZONA
TAX-EXEMPT TAX-EXEMPT
FUND FUND
---------- ----------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price)............................... None None
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of
offering price)...................... None None
Deferred Sales Load (as a percentage of
redemption proceeds)................. None None
Redemption Fees......................... None None
Exchange Fee............................ None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (after waivers)(++)..... 0.30% 0.00%
Other Expenses (after waivers)(++)++.... 0.40% 0.40%
------ ------
TOTAL FUND OPERATING EXPENSES:
(after waivers)(++)++++................. 0.70% 0.40%
------ ------
------ ------
</TABLE>
- ---------------
(++) Management Fees (before waivers) would be 0.50% and 0.50%, respectively.
(++)++ Other Expenses (before waivers) would be 0.43% and 0.61%, respectively.
(++)++++ Total Fund Operating Expenses (before waivers) would be 0.93% and
1.11%, respectively.
6
<PAGE> 307
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Funds' Institutional Shares
will bear. The table does not reflect any charges that may be imposed by a First
Interstate Bank or other institutions directly on their customer accounts in
connection with investments in the Funds.
EXAMPLE:(++)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
OREGON ARIZONA
TAX-EXEMPT TAX-EXEMPT
FUND FUND
---------- ----------
<S> <C> <C>
1 year.................................... $ 7 $ 4
3 years................................... 22 13
5 years................................... 39 22
10 years.................................. 87 51
</TABLE>
- ---------------
(++) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED
AMOUNT.
7
<PAGE> 308
FEE TABLE -- INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
CALIFORNIA
CALIFORNIA SHORT-TERM NATIONAL
TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
FUND FUND FUND
---------- ---------- ----------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES:
Maximum Sales Load Imposed on
Purchases (as a percentage
of offering price)........ None None None
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering
price).................... None None None
Deferred Sales Load (as a
percentage of redemption
proceeds)................. None None None
Redemption Fees.............. None None None
Exchange Fee................. None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average
net assets)
Management Fees (after
waivers)(++).............. 0.50% 0.05% 0.00%
Other Expenses(++)++......... 0.35% 0.55% 0.35%
------ ------ ------
TOTAL FUND OPERATING EXPENSES
(after waivers)(++)++++...... 0.85% 0.60% 0.35%
====== ====== ======
</TABLE>
- ---------------
(++) Management Fees (before waivers) would be 0.50%, 0.35% and 0.50%,
respectively.
(++)++ Other Expenses (before waivers) would be 0.37%, 0.68% and 0.35%,
respectively.
(++)++++ Total Fund Operating Expenses (before waivers) would be 0.87%, 1.03%
and 0.85%, respectively.
8
<PAGE> 309
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Funds' Institutional Shares
will bear. The table does not reflect any charges that may be imposed by a First
Interstate Bank or other institutions directly on their customer accounts in
connection with investments in the Funds.
EXAMPLE:(++)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
CALIFORNIA
CALIFORNIA SHORT-TERM NATIONAL
TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
FUND FUND FUND
---------- ---------- ----------
<S> <C> <C> <C>
1 year......................... $ 9 $ 6 $ 4
3 years........................ 27 19 11
5 years........................ 47 33 20
10 years....................... 105 75 44
</TABLE>
- ---------------
(++) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED
AMOUNT.
9
<PAGE> 310
FINANCIAL HIGHLIGHTS
The financial information shown below is to assist investors in evaluating
the performance of the Funds since their commencement of operations. The
following information for the periods through September 30, 1995 for the Oregon
Tax-Exempt Fund, Arizona Tax-Exempt Fund and National Tax-Exempt Fund has been
audited by the former independent accountants of these Funds, whose report on
the financial statements appears in the September 30, 1995 Report to
Shareholders for the Funds. The following information for the year ended
September 30, 1995 for the California Tax-Exempt Fund and California Short-Term
Tax-Exempt Fund (collectively, the "California Funds") has been audited by Ernst
Young LLP, whose report on the financial statements appears in the 1995 Annual
Report to Shareholders for the Funds. These reports and financial statements are
incorporated by reference into the SAI. The supplementary information for each
of the four years in the period ended September 30, 1994 for the California
Funds has been audited by the former independent accountants for these Funds.
For the periods shown, the California Tax-Exempt Fund and California Short-Term
Tax-Exempt Fund offered only one class of shares to both institutional and
retail investors. The financial data shown below for these Funds pertains to the
Investor Shares of such Funds, which are not offered through this Prospectus. No
financial data is shown for the Institutional Shares of such Funds because that
class of shares did not commence operations prior to October 1, 1995. See "Other
Information - Capitalization. The following financial data should be read in
conjunction with the related financial statements and notes thereto. Further
information about the Funds is contained in their Annual Reports to
Shareholders, which may be obtained without charge by calling 1-800-662-8417.
10
<PAGE> 311
For a share outstanding throughout the periods indicated:
OREGON TAX-EXEMPT FUND*
<TABLE>
<CAPTION>
PERIOD ENDED FOR THE YEAR ENDED MAY 31,
SEPTEMBER 30, -------------------------------
1995** 1995 1994
------------- ------ ------
<S> <C> <C> <C>
Net asset value -- Beginning of Period........................ $ 16.47 $ 16.17 $ 16.79
INCOME FROM INVESTMENT OPERATIONS
Net investment income........................................ 0.28 0.82 0.84
Net realized and unrealized gain (loss) on investments....... (0.08) 0.39 (0.43)
------ ------ ------
Total income from investment operations...................... 0.20 1.21 0.41
------ ------ ------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income......................... (0.29) (0.87) (0.82)
Distributions from net realized gain on investments.......... (0.00) (0.04) (0.21)
------ ------ ------
Total dividends and distributions to shareholders............ (0.29) (0.91) (1.03)
------ ------ ------
Net asset value -- End of Period............................. $ 16.38 $ 16.47 $ 16.17
============== ======== ========
Total return (excluding sales load)........................ 3.67%+ 7.92% 2.33%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000).............................. $50,077 $ 52,245 $ 53,846
Ratio of expenses to average net assets...................... 0.70%+ 0.70% 0.62%
Ratio of net investment income to average net assets......... 5.01%+ 5.19% 4.90%
Ratio of expenses to average net assets without fee
waivers.................................................... 1.01%+ 0.90% 0.84%
Ratio of net investment income to average net assets without
fee waivers................................................ 4.70%+ 4.99% 4.69%
Portfolio turnover rate(1)................................... 56.53% 15.46% 22.10%
<CAPTION>
FOR THE YEAR ENDED MAY 31,
-------------------------------
1993 1992 1991 1990
------ ------ ------ -----
<S> <C> <C> <C> <C>
Net asset value -- Beginning of Period........................ $ 16.07 $ 15.74 $ 15.27 $ 15.35
INCOME FROM INVESTMENT OPERATIONS
Net investment income........................................ 0.86 0.91 0.94 0.93
Net realized and unrealized gain (loss) on investments....... 0.76 0.38 0.47 (0.06)
------ ------ ------ -----
Total income from investment operations...................... 1.62 1.29 1.41 0.87
------ ------ ------ -----
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income......................... (0.86) (0.92) (0.94) (0.93)
Distributions from net realized gain on investments.......... (0.04) (0.04) (0.00) (0.02)
------ ------ ------ -----
Total dividends and distributions to shareholders............ (0.90) (0.96) (0.94) (0.95)
------ ------ ------ -----
Net asset value -- End of Period............................. $ 16.79 $ 16.07 $ 15.74 $ 15.27
======== ======== ======== =======
Total return (excluding sales load)........................ 10.36% 8.45% 9.58% 5.80%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000).............................. $ 45,435 $ 25,002 $ 14,607 $ 7,550
Ratio of expenses to average net assets...................... 0.60% 0.60% 0.55% 0.50%
Ratio of net investment income to average net assets......... 5.34% 5.81% 6.27% 6.26%
Ratio of expenses to average net assets without fee
waivers.................................................... 0.91% 0.98% 1.03% 1.35%
Ratio of net investment income to average net assets without
fee waivers................................................ 5.03% 5.43% 5.79% 5.41%
Portfolio turnover rate(1)................................... 5.62% 16.96% 22.89% 93.67%
<CAPTION>
FOR THE YEAR
ENDED
MAY 31,
------------
1989
-----
<S> <C>
Net asset value -- Beginning of Period........................ $ 15.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income........................................ 0.93
Net realized and unrealized gain (loss) on investments....... 0.31
-----
Total income from investment operations...................... 1.24
-----
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income......................... (0.89)
Distributions from net realized gain on investments.......... (0.00)
-----
Total dividends and distributions to shareholders............ (0.89)
-----
Net asset value -- End of Period............................. $ 15.35
=======
Total return (excluding sales load)........................ 8.55%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000).............................. $ 3,175
Ratio of expenses to average net assets...................... 0.50%
Ratio of net investment income to average net assets......... 6.64%
Ratio of expenses to average net assets without fee
waivers.................................................... 3.29%
Ratio of net investment income to average net assets without
fee waivers................................................ 3.85%
Portfolio turnover rate(1)................................... 9.12%
</TABLE>
- ---------------
* The Fund operated as the Oregon Tax-Exempt Fund of Westcore Trust from its
commencement of operations on June 1, 1988 until its reorganization as a
portfolio of the Trust on October 10, 1995. During the periods shown, the
Fund was advised by First Interstate Bank of Oregon, N.A. In connection with
the Fund's reorganization, FICM assumed investment advisory responsibilities
for the Fund.
** The Fund changed its fiscal year from May 31 to September 30.
(1) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period. Purchases and sales of
investment securities (excluding short-term securities) for the period ended
September 30, 1995 were $9,296,225 and $9,230,944, respectively.
+ Annualized.
11
<PAGE> 312
For a share outstanding throughout the periods indicated:
ARIZONA TAX-EXEMPT FUND*
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE YEAR
ENDED ENDED MAY 31,
SEPTEMBER 30, --------------
1995** 1995
-------------- ------
<S> <C> <C>
Net asset value -- Beginning of Period.......................................... $ 10.68 $ 10.48
INCOME FROM INVESTMENT OPERATIONS
Net investment income.......................................................... 0.17 0.51
Net realized and unrealized gain (loss) on investments......................... 0.06 0.23
------ ------
Total income from investment operations........................................ 0.23 0.74
------ ------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income........................................... (0.20) (0.53)
Distributions from net realized gain on investments............................ (0.00) (0.01)
------ ------
Total dividends and distributions to shareholders.............................. (0.20) (0.54)
------ ------
Net asset value -- End of Period............................................... $ 10.71 $ 10.68
=============== ========
Total return (excluding sales load).......................................... 6.55%+ 7.35%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)................................................ $ 24,622 $ 24,581
Ratio of expenses to average net assets........................................ 0.45%+ 0.40%
Ratio of net investment income to average net assets........................... 4.73%+ 4.89%
Ratio of expenses to average net assets without fee waivers.................... 1.35%+ 1.13%
Ratio of net investment income to average net assets without fee waivers....... 3.83%+ 4.16%
Portfolio turnover rate(1)..................................................... 62.10% 13.65%
<CAPTION>
FOR THE YEAR ENDED MAY 31,
--------------------------------
1994 1993
------ ------
<S> <C>
Net asset value -- Beginning of Period.......................................... $ 10.64 $ 10.09
INCOME FROM INVESTMENT OPERATIONS
Net investment income.......................................................... 0.50 0.49
Net realized and unrealized gain (loss) on investments......................... (0.15) 0.55
------ ------
Total income from investment operations........................................ 0.35 1.04
------ ------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income........................................... (0.50) (0.49)
Distributions from net realized gain on investments............................ (0.01) (0.00)
------ ------
Total dividends and distributions to shareholders.............................. (0.51) (0.49)
------ ------
Net asset value -- End of Period............................................... $ 10.48 $ 10.64
======== ========
Total return (excluding sales load).......................................... 3.28% 10.50%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)................................................ $ 25,153 $ 22,430
Ratio of expenses to average net assets........................................ 0.31% 0.20%
Ratio of net investment income to average net assets........................... 4.72% 4.98%
Ratio of expenses to average net assets without fee waivers.................... 1.00% 1.18%
Ratio of net investment income to average net assets without fee waivers....... 4.03% 4.00%
Portfolio turnover rate(1)..................................................... 27.81% 3.96%
<CAPTION>
FOR THE PERIOD
ENDED
MAY 31, 1992
--------------
Net asset value -- Beginning of Period.......................................... $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income.......................................................... 0.09
Net realized and unrealized gain (loss) on investments......................... 0.08
-----
Total income from investment operations........................................ 0.17
-----
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income........................................... (0.08)
Distributions from net realized gain on investments............................ (0.00)
-----
Total dividends and distributions to shareholders.............................. (0.08)
-----
Net asset value -- End of Period............................................... $10.09
===============
Total return (excluding sales load).......................................... 7.02%+
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)................................................ $4,690
Ratio of expenses to average net assets........................................ 0.68%+
Ratio of net investment income to average net assets........................... 4.32%+
Ratio of expenses to average net assets without fee waivers.................... 2.08%+
Ratio of net investment income to average net assets without fee waivers....... 2.92%+
Portfolio turnover rate(1)..................................................... 0.00%
</TABLE>
- ---------------
* The Fund operated as the Arizona Intermediate Tax-Free Fund of Westcore Trust
from its commencement of operations on March 2, 1992 until its reorganization
as a portfolio of the Trust on October 1, 1995. During the periods shown, the
Fund was advised by First Interstate Bank of Arizona, N.A. In connection with
the Fund's reorganization, FICM assumed investment advisory responsibilities
for the Fund.
** The Fund changed its fiscal year from May 31 to September 30.
+ Annualized.
(1) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period. Purchases and sales of
investment securities (excluding short-term securities) for the period ended
September 30, 1995 were $5,546,887 and $4,984,866, respectively.
12
<PAGE> 313
Selected data for a share outstanding throughout the periods shown:
CALIFORNIA TAX-EXEMPT FUND*
<TABLE>
<CAPTION>
PERIOD ENDED
YEAR ENDED SEPTEMBER 30, SEPTEMBER
------------------------------------------------------------ 30,
1995 1994 1993 1992 1991 1990(a)
-------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value -- Beginning of Period.......... $ 10.42 $ 11.49 $ 10.82 $ 10.52 $ 9.88 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(++)...................... 0.54 0.54 0.57 0.59 0.62 0.17
Net gain (loss) on securities (both realized
and unrealized)(++).......................... 0.44 (0.87) 0.73 0.30 0.64 (0.12)
-------- -------- -------- -------- -------- ------
Total from Investment Operations............... 0.98 (0.33) 1.30 0.89 1.26 0.05
-------- -------- -------- -------- -------- ------
LESS DISTRIBUTIONS:
Dividends from net investment income........... (0.54) (0.54) (0.57) (0.59) (0.62) (0.17)
Distributions from capital gains............... (0.11) (0.20) (0.06) -- -- --
-------- -------- -------- -------- -------- ------
Total Distributions............................ (0.65) (0.74) (0.63) (0.59) (0.62) (0.17)
-------- -------- -------- -------- -------- ------
Net Asset Value, End of Period................. $ 10.75 $ 10.42 $ 11.49 $ 10.82 $ 10.52 $ 9.88
========= ========= ========= ========= ========= ==============
Total Return (excluding sales load).......... 9.82% (2.99)% 12.34% 8.71% 13.13% 0.42%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000)................ $161,343 $194,419 $226,303 $198,347 $140,127 $ 53,746
Ratio of Expenses to Average Net Assets........ 0.91% 0.94% 0.87% 0.80% 0.57% 0.07%+
Effect of Waivers/Reimbursement on above
Ratio........................................ 0.02% 0.02% 0.07% 0.11% 0.43% 1.33%+
Ratio of Net Investment Income to Average Net
Assets....................................... 5.13% 4.96% 5.11% 5.51% 6.06% 6.75%+
Portfolio Turnover Rate........................ 42% 36% 40% 14% 5% 3%
</TABLE>
- ---------------
(a) Commencement of operations, July 2, 1990.
* Prior to October 1, 1995 the Fund operated as the California Tax-Free Fund.
(++) Per share data based upon average monthly shares outstanding.
+ Annualized.
13
<PAGE> 314
Selected data for a share outstanding for the periods shown:
CALIFORNIA SHORT-TERM TAX-EXEMPT FUND**
<TABLE>
<CAPTION>
JANUARY 20, 1993
(COMMENCEMENT OF
YEAR ENDED SEPTEMBER 30, OPERATIONS) THROUGH
------------------------------- SEPTEMBER 30,
1995 1994 1993
-------------- ------------ -------------------
<S> <C> <C> <C>
Net Asset Value -- Beginning of Period................................ $ 9.96 $ 10.16 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(++)............................................ 0.41 0.39 0.24
Net gain (loss) on securities (both realized and unrealized)(++)..... 0.19 (0.20) 0.16
------ ------ ------
Total from Investment Operations..................................... 0.60 0.19 0.40
------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income................................. (0.41) (0.39) (0.24)
Distributions from capital gains..................................... -- -- --
------ ------ ------
Total Distributions.................................................. (0.41) (0.39) (0.24)
------ ------ ------
Net Asset Value -- End of Period..................................... $ 10.15 $ 9.96 $ 10.16
================ ============== ====================
Total Return (excluding sales load)................................ 6.13% 1.93% 4.09%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000)...................................... $ 19,095 $ 25,315 $40,637
Ratio of Expenses to Average Net Assets.............................. 0.64%+ 0.56% 0.28%+
Effect of Waivers/Reimbursement on above Ratio....................... 0.53%+ 0.53% 0.78%+
Ratio of Net Investment Income to Average Net Assets................. 4.12%+ 3.88% 3.53%+
Portfolio Turnover Rate.............................................. 96% 31% 23%
</TABLE>
- ---------------
(++) Per share data based upon average monthly shares outstanding.
** Prior to October 1, 1995 the Fund operated as the Short-Term California
Tax-Free Fund.
+ Annualized.
14
<PAGE> 315
For a share outstanding throughout the periods indicated:
NATIONAL TAX-EXEMPT FUND*
<TABLE>
<CAPTION>
FOR THE YEAR
FOR THE PERIOD ENDED
ENDED MAY 31,
SEPTEMBER 30, --------------
1995** 1995
-------------- ------
<S> <C> <C>
Net asset value -- Beginning of Period.................................................... $ 15.28 $ 14.98
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................................................................... 0.24 0.68
Net realized and unrealized gain (loss) on investments................................... 0.08 0.32
------ ------
Total income from investment operations.................................................. 0.32 1.00
------ ------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income..................................................... (0.26) (0.70)
Distributions from net realized gain on investments...................................... (0.00) (0.00)
------ ------
Total dividends and distributions to shareholders........................................ (0.26) (0.70)
------ ------
Net asset value -- End of Period......................................................... $ 15.34 $ 15.28
=============== ========
Total return (excluding sales load).................................................... 6.53%+ 6.97%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000).......................................................... $ 14.305 $ 14,458
Ratio of expenses to average net assets.................................................. 0.35%+ 0.35%
Ratio of net investment income to average net assets..................................... 4.65%+ 4.59%
Ratio of expenses to average net assets without fee waivers.............................. 1.85%+ 1.51%
Ratio of net investment income to average net assets without fee waivers................. 3.15%+ 3.43%
Portfolio turnover rate(1)............................................................... 86.11% 23.35%
<CAPTION>
FOR THE YEAR FOR THE PERIOD
ENDED ENDED
MAY 31, MAY 31,
1994 1993
------ --------------
<S> <C> <C>
Net asset value -- Beginning of Period.................................................... $ 15.17 $15.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................................................................... 0.64 0.17
Net realized and unrealized gain (loss) on investments................................... (0.17) 0.15
------ -----
Total income from investment operations.................................................. 0.47 0.32
------ -----
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income..................................................... (0.64) (0.15)
Distributions from net realized gain on investments...................................... (0.02) (0.00)
------ -----
Total dividends and distributions to shareholders........................................ (0.66) (0.15)
------ -----
Net asset value -- End of Period......................................................... $ 14.98 $15.17
======== ============
Total return (excluding sales load).................................................... 3.07% 5.65%+
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000).......................................................... $ 13,600 $7,457
Ratio of expenses to average net assets.................................................. 0.27% 0.25%+
Ratio of net investment income to average net assets..................................... 4.29% 3.88%+
Ratio of expenses to average net assets without fee waivers.............................. 1.58% 1.99%+
Ratio of net investment income to average net assets without fee waivers................. 2.99% 2.14%+
Portfolio turnover rate(1)............................................................... 18.81% 18.30%
</TABLE>
- ---------------
* The Fund operated as the Quality Tax-Exempt Income Fund of Westcore Trust
from its commencement of operations on January 15, 1993 until its
reorganization as a portfolio of the Trust on October 1, 1995. During the
periods shown, the Fund was advised by First Interstate Bank of Oregon, N.A.
and First Interstate Bank of Washington, N.A. In connection with the Fund's
reorganization, FICM assumed investment advisory responsibilities for the
Fund.
** The Fund changed its fiscal year from May 31 to September 30.
+ Annualized.
(1) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period. Purchases and sales of
investment securities (excluding short-term securities) for the period ended
September 30, 1995 were $4,847,223 and $4,001,951, respectively.
15
<PAGE> 316
THE FUNDS
The Funds are portfolios of Pacifica Funds Trust, a business trust
organized under the laws of the Commonwealth of Massachusetts as an open-end,
management investment company. The Trust's Board of Trustees oversees the
overall management of the Funds and elects the officers of the Funds.
INVESTMENT POLICIES AND PRACTICES OF THE FUNDS
Each Fund follows its own investment policies and practices, including
certain investment restrictions. The SAI contains the specific investment
restrictions which govern the Funds' investments. The investment objectives of
the California Funds are fundamental policies, which means that they may not be
changed without a majority vote of shareholders of the affected Fund. The
investment objectives of the other Funds are not fundamental, and may be changed
without shareholder approval. Any such change may result in a Fund having an
investment objective different from the objective which a shareholder considered
appropriate at the time of investment in the Fund. Except for the objectives and
those restrictions specifically identified as fundamental, all other investment
policies and practices described in this Prospectus and in the SAI are not
fundamental.
The Advisor selects investments and makes investment decisions based on the
investment objective and policies of each Fund.
The investment objective of the Oregon Tax-Exempt Fund, Arizona Tax-Exempt
Fund and National Tax-Exempt Fund is to provide investors with income exempt
from Federal income taxes and, with respect to the Oregon Tax-Exempt Fund and
Arizona Tax-Exempt Fund, to also seek to provide such income exempt from Oregon
and Arizona personal income taxes, respectively.
The investment objective of the California Tax-Exempt Fund is to provide
investors with as high a level of current income, exempt from both Federal and
California personal income taxes, as is consistent with limiting the risk of
potential capital loss.
The investment objective of the California Short-Term Tax-Exempt Fund is to
provide investors with as high a level of current income, exempt from both
Federal and California personal income taxes, as is consistent with limiting the
risk of potential loss.
None of the Funds has any restrictions as to the minimum or maximum
maturity of any individual security held by it. However, except for temporary
defensive purposes or during unusual market conditions, the dollar-weighted
average portfolio maturity of the California Short-Term
16
<PAGE> 317
Tax-Exempt Fund will be 3 years or less. The average portfolio maturity of the
other Funds will vary from time to time in light of current market and economic
conditions, the comparative yields on instruments with different maturities and
other factors.
Each Fund's assets will be primarily invested in debt instruments issued by
or on behalf of states, territories and possessions of the United States, the
District of Columbia and their respective authorities, agencies,
instrumentalities and political subdivisions ("municipal obligations"). Each of
the Oregon Tax-Exempt Fund, Arizona Tax-Exempt Fund and the California Funds
expects that, except during temporary defensive periods or when acceptable
securities are unavailable for investment by the Fund, at least 65% of such
Fund's total assets will be invested in municipal obligations of issuers located
in a particular state ("Oregon obligations," "Arizona obligations" and
"California obligations," respectively), although the amount of each Fund's
assets invested in such obligations will vary from time to time. As a
fundamental policy, each of the Funds will have at least 80% of their respective
net assets invested in securities the interest on which is exempt from Federal
income tax, except during periods of unusual market conditions. For purposes of
this investment limitation, securities the interest on which is treated as a
specific tax preference item under the Federal alternative minimum tax are
considered taxable.
Municipal obligations acquired by a Fund will be rated in one of the three
highest investment grade categories at the time of purchase by a nationally
recognized statistical rating organization ("NRSRO"). The California Funds,
however, may purchase investment grade obligations within the fourth highest
category. In addition, the Oregon Tax-Exempt Fund and Arizona Tax-Exempt Fund
may purchase investment grade obligations within the fourth highest category
when acceptable obligations with higher ratings are unavailable for investment
by such Funds. While obligations rated within the fourth highest category are
regarded as having an adequate capacity to pay principal and interest, such
obligations lack outstanding investment characteristics and in fact have
speculative characteristics as well. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade bonds. No more than 10%
of the Arizona Tax-Exempt Fund's total assets will be invested in municipal
obligations which are rated at the time of purchase below one of the three
highest categories.
If, subsequent to its purchase by a Fund, an issue of debt securities
should cease to be rated by one or more of the Fund's selected NRSROs due to
factors relating to the value of the security, or should its rating be
17
<PAGE> 318
reduced by one or more of such NRSROs below the minimum rating required for
purchase by such Fund, the Advisor will consider such event in determining
whether the Fund should continue to hold the security.
Each of the Funds may also acquire tax-exempt commercial paper rated within
the highest rating category or, when deemed advisable by the Fund's Advisor,
rated within the second highest rating category. Each Fund may acquire municipal
notes and variable rate demand obligations rated within one of the two highest
rating categories.
The California Funds may invest more than 15% of their net assets in
municipal lease obligations determined by the Board of Trustees to be liquid
investments based upon guidelines established for the Advisor providing for
analysis of such factors as the frequency of trades and quotes for the security,
the number of dealers willing to purchase or sell the security and the number of
other potential buyers, and the willingness of dealers to undertake to make a
market in the security.
Unrated obligations purchased by a Fund will be determined by the Advisor
to be comparable in quality to instruments that are so rated. (See Appendix A
for a description of applicable debt obligation ratings.)
Each Fund may from time to time invest a portion of its assets on a
temporary basis (for example, when appropriate municipal obligations are
unavailable) or for temporary defensive purposes in short-term taxable money
market instruments, in securities issued by other investment companies which
invest in taxable or tax-exempt money market instruments and in U.S. Government
obligations. In addition, each Fund may hold uninvested cash reserves pending
investment, during temporary defensive periods, or if, in the opinion of the
Advisor, suitable tax-exempt obligations are unavailable.
The types of securities and investment practices used by the Funds are
described in greater detail under the section "Description of Securities and
Investment Practices" on pages 36-40 of this Prospectus.
RISKS OF INVESTING IN THE FUNDS
The price per share of each of the Funds will fluctuate with changes in
value of the investments held by the Fund. Shareholders of a Fund should,
therefore, expect the value of their shares to fluctuate with changes in the
value of the securities owned by that Fund.
The market value of a Fund's investment in fixed income securities will
change in response to changes in interest rates and the relative financial
strength of each issuer. During periods of falling interest rates, the value of
fixed income securities generally rises. Conversely, during periods of rising
18
<PAGE> 319
interest rates the value of such securities generally declines. Debt securities
with longer maturities, which tend to produce higher yields, are subject to
potentially greater capital appreciation and depreciation than obligations with
shorter maturities. Changes in the financial strength of an issuer or changes in
the ratings of any particular security may also affect the value of these
investments. Fluctuations in the market value of fixed income securities
subsequent to their acquisition will not affect cash income from such
securities, but will be reflected in a Fund's net asset value. The Funds may
also purchase zero-coupon bonds (i.e., discount debt obligations that do not
make periodic interest payments) which are subject to greater market
fluctuations from changing interest rates than debt obligations of comparable
maturities which make current distributions of interest.
In seeking to achieve its investment objective, each Fund may invest in
municipal obligations that are private activity bonds the interest on which is
subject to the Federal alternative minimum tax. Investments in such securities,
however, will not exceed under normal market conditions 20% of each Fund's total
assets when added together with any taxable investments held by the Fund.
Moreover, although each Fund does not presently intend to do so on a regular
basis, it may invest 25% or more of its assets in industrial development bonds
issued before August 7, 1986 that are not subject to the Federal alternative
minimum tax and in municipal obligations the interest on which is paid solely
from revenues of similar projects if such investment is deemed necessary or
appropriate by the Fund's Advisor. To the extent that each Fund's assets are
concentrated in municipal obligations payable from revenues on similar projects,
the Fund will be subject to the peculiar risks presented by such projects to a
greater extent than it would be if the Fund's assets were not so concentrated.
Furthermore, payment of municipal obligations of certain projects may be secured
by mortgages or deeds of trust. In the event of a default, enforcement of the
mortgages or deeds of trust will be subject to statutory enforcement procedures
and limitations, including rights of redemption and limitations on obtaining
deficiency judgments. In the event of a foreclosure, collection of the proceeds
of the foreclosure may be delayed and the amount of proceeds from the
foreclosure may not be sufficient to pay the principal of and accrued interest
on the defaulted municipal obligations.
Each Fund is classified as a non-diversified investment company under the
1940 Act. Investment return on a non-diversified portfolio typically is
dependent upon the performance of a smaller number of securities relative to the
number held in a diversified portfolio. Consequently, the change in value of any
one security may affect the overall value of a non-diversified portfolio more
than it would a diversified portfolio, and thereby subject the
19
<PAGE> 320
market-based net asset value per share of the non-diversified portfolio to
greater fluctuations. In addition, a non-diversified portfolio may be more
susceptible to economic, political and regulatory developments than a
diversified investment portfolio with a similar objective may be.
The concentration of the Oregon Tax-Exempt Fund, Arizona Tax-Exempt Fund
and California Funds in municipal obligations of particular states raises
additional considerations. Payment of the interest on and the principal of these
obligations is dependent upon the continuing ability of Oregon, Arizona and
California issuers and/or obligors of state, municipal and public authority debt
obligations to meet their obligations thereunder. Investors should consider the
greater risk inherent in a Fund's concentration in such obligations versus the
safety that comes with a less geographically concentrated investment portfolio
and should compare the yield available on a portfolio of state-specific issues
with the yield of a more diversified portfolio including issues of other states
before making an investment decision.
Many of the California Funds' investments are likely to be obligations of
California governmental issuers which rely in whole or in part, directly or
indirectly, on real property taxes as a source of revenue. "Proposition
Thirteen" and similar California constitutional and statutory amendments and
initiatives in recent years have restricted the ability of California taxing
entities to increase real property tax revenues. Other initiative measures
approved by California voters in recent years, through limiting various other
taxes, have resulted in a substantial reduction in state revenues. Decreased
state revenues may result in reductions in allocations of state revenues to
local governments. In addition, both Oregon and Arizona have constitutional
and/or statutory restrictions that affect government revenues.
Because of the complex nature of the various initiatives and restrictions
mentioned above, the certain possible ambiguities and inconsistencies in their
terms and the scope of various exemptions and exceptions, as well as the
impossibility of predicting the level of future appropriations for state and
local governmental entities, it is not presently possible to determine the
impact of these initiatives and related measures on the ability of governmental
issuers in California, as well as Oregon and Arizona, to pay interest or repay
principal on their obligations. There have, however, been certain adverse
developments with respect to municipal obligations of governmental issuers in
these states over the past several years.
In addition to the various initiatives and restrictions discussed above,
economic factors such as the reduction in defense spending, a decline in tourism
and high levels of unemployment have had an adverse impact on the economy of
California in particular. These economic factors have
20
<PAGE> 321
reduced revenues to the state government at a time when expenses of state
government such as education costs, various welfare costs and other expenses
have been rising. Such economic factors have also adversely impacted the ability
of state and local California governmental entities to repay debt.
In addition to the risk of nonpayment of state and local California
governmental debt, if such debt declines in quality and is downgraded by the
NRSROs, it may become ineligible for purchase by a Fund. Since there are large
numbers of buyers of such debt that may be similarly restricted, the supply of
eligible securities could become inadequate at certain times. Similarly, there
is a relatively small active market for municipal obligations of Oregon and
Arizona issues other than the general obligations of the states themselves, and
the market price of such bonds may therefore be volatile. If the Oregon
Tax-Exempt Fund or Arizona Tax-Exempt Fund was forced to sell a large volume of
Oregon obligations and Arizona obligations owned by it for any reason, such as
to meet redemption requests for a large number of shares, there is a risk that
the large sale itself would adversely offset the value of the Fund's portfolios.
A more detailed description of special factors affecting investment in
California, Oregon and Arizona municipal obligations is set forth in the
Appendix to the SAI.
There is, of course, no assurance that a Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products.
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction of
the Board of Trustees. The Trustees are Dennis W. Draper, Joseph N. Hankin, John
E. Heilmann, Jack D. Henderson and Richard A. Wedemeyer. Information about the
Trustees, as well as the Funds' executive officers, may be found in the SAI
under the heading "Management -- Trustees and Officers."
THE ADVISOR: FIRST INTERSTATE CAPITAL MANAGEMENT, INC.
First Interstate Capital Management, Inc., 7501 E. McCormick Parkway,
Scottsdale, Arizona 85258, serves as investment advisor to the Trust. FICM
manages the investment and reinvestment of the assets of the Funds and
continuously reviews, supervises and administers the Funds' investments. The
Advisor is responsible for placing orders for the purchase and sale of the
Funds' investments directly with brokers and dealers selected by it in its
discretion.
21
<PAGE> 322
FICM is a wholly-owned subsidiary of First Interstate Bank of California,
which is the largest banking subsidiary of First Interstate Bancorp, a
multi-bank holding company. First Interstate Bancorp provides financial products
and services marketed at the local level to nearly five million households in
over 500 communities in 13 western states. Prior to October 1, 1995 affiliates
of FICM served as investment advisors for certain Funds as follows: First
Interstate Bank of Oregon, N.A. served as investment advisor to the Oregon
Tax-Exempt Fund; First Interstate Bank of Arizona, N.A. served as investment
advisor to the Arizona Tax-Exempt Fund; and First Interstate Bank of Washington,
N.A. and First Interstate Bank of Oregon, N.A. served as co-investment advisors
to the National Tax-Exempt Fund. Prior to March 18, 1994, San Diego Financial
Capital Management, Inc., which was acquired by First Interstate Bancorp through
its merger with San Diego Financial Corporation, served as investment advisor to
the California Funds.
On January 24, 1996, First Interstate Bancorp signed a definitive merger
agreement to merge with Wells Fargo & Company ("Wells Fargo"), a publicly-held
bank holding company with its head office at 420 Montgomery Street, San
Francisco, California 94104. The merger is conditioned upon, among other things,
certain regulatory approvals. Upon completion of the merger, currently expected
to occur during the second quarter of 1996, FICM will be wholly-owned by Wells
Fargo, and the existing investment advisory agreement between the Trust and FICM
will automatically terminate. It is contemplated that an application will be
filed with the Securities and Exchange Commission to ensure there is no
disruption as a result of the merger in the provision of investment advisory
services to the Funds, and that a meeting of shareholders will be held not later
than 120 days after the merger to approve ongoing investment advisory
arrangements for the Funds.
Mr. David Underwood serves as FICM's Director of Equity Funds Management.
Mr. Underwood joined FICM in 1995. From 1993 to 1995 Mr. Underwood was employed
by Integra Trust Company as Director of Research. From 1990 to 1993 he was a
Portfolio Manager with the firm of C.S. McKee Investment Advisors. Mr. G. Edward
Means serves as FICM's Director of Fixed Income Management. Mr. Means joined
FICM in January, 1995. From 1992 to 1994 he was employed by Clayton Brown &
Associates as Senior Vice President, Fixed Income. From 1984 to 1992 he was
employed by First National Bank of Chicago as a Senior Vice President.
Ms. Mary Gail Walton has been responsible for the day-to-day management of
the Oregon Tax-Exempt Fund since February 1994 and the
22
<PAGE> 323
National Tax-Exempt Fund since the inception of the Fund. Ms. Walton
has been employed by First Interstate since 1991. She joined FICM in April 1995.
She currently serves as a Vice President, portfolio manager/analyst. From 1989
through 1990 Ms. Walton was employed by Badgley, Phelps & Bell, Inc.
Mr. Richard Carhidi has been responsible for the day-to-day management of
the Arizona Tax-Exempt Fund since the inception of the Fund, and the California
Funds since June 1995. Mr. Carhidi has been employed by First Interstate since
1989. He joined FICM in April 1995. He currently serves as a Vice President.
For the advisory services it provides to the Funds, FICM is entitled to
receive from each Fund fees, payable monthly, at the annual rates, based on
average daily net assets, as set forth below:
<TABLE>
<CAPTION>
FUND INVESTMENT ADVISORY FEE
- -------------------------------------------- -----------------------
<S> <C>
Oregon Tax-Exempt Fund...................... 0.50%
Arizona Tax-Exempt Fund..................... 0.50%
California Tax-Exempt Fund.................. 0.50%
California Short-Term Tax-Exempt Fund....... 0.35%
National Tax-Exempt Fund.................... 0.50%
</TABLE>
The Advisor has agreed that during the current fiscal year, it will waive a
portion of its fees so that total operating expenses will not exceed 0.70%,
0.40%, 0.95% and 0.35% of the average daily net assets of the Institutional
Shares of the Oregon Tax-Exempt Fund, Arizona Tax-Exempt Fund, California
Tax-Exempt Fund and National Tax-Exempt Fund, respectively. For the period ended
September 30, 1995, the Oregon Tax-Exempt Fund paid advisory fees, after fee
waivers, at the annual rate of 0.24% of its average daily net assets. For the
same time period, the previous advisors to the Arizona Tax-Exempt Fund and
National Tax-Exempt Fund waived their entire advisory fees. For their fiscal
year ended September 30, 1995, the California Tax-Exempt Fund and California
Short-Term Tax-Exempt Fund paid advisory fees, after fee waivers, at the annual
rates of 0.50% and 0.01%, respectively, of their average daily net assets.
THE SPONSOR AND DISTRIBUTOR
Furman Selz LLC, 230 Park Avenue, New York, New York 10169, acts as Sponsor
of the Funds. Furman Selz is primarily an institutional brokerage firm with
memberships on the New York, American, Boston, Midwest, Pacific and Philadelphia
Stock Exchanges. Furman Selz also serves as administrator and distributor of
other mutual funds. Pacifica Funds Distributor Inc. is an affiliate of Furman
Selz and was organized
23
<PAGE> 324
specifically to distribute shares of the Trust, however, offers and sales of
shares of the Trust will be made only through Furman Selz or other registered
(or exempt) dealers.
PFD Inc. may from time to time pay a bonus or other incentive to dealers
which employ registered representatives who sell a minimum dollar amount of
Institutional Shares of the Funds and/or other funds distributed by Furman Selz
or PFD Inc. during a specific period of time. Such bonus or other incentive may
take the form of payment for travel expenses, including lodging, incurred in
connection with trips taken by qualifying registered representatives and members
of their families to places within or outside the United States, or other
bonuses, such as gift certificates or the cash equivalent of such bonuses. PFD
Inc. has established such a special promotional incentive program with First
Interstate Investments, Inc.
ADMINISTRATIVE SERVICES
The Funds have also entered into an Administrative Services Contract with
Furman Selz pursuant to which Furman Selz provides certain management and
administrative services necessary for the Funds' operations including: (i)
general supervision of the operation of the Funds including coordination of the
services performed by the Funds' investment advisor, transfer agent, custodian,
independent accountants and legal counsel, regulatory compliance, including the
compilation of information for documents such as reports to, and filings with,
the SEC and state securities commissions, and preparation of proxy statements
and shareholder reports for the Funds; (ii) general supervision relative to the
compilation of data required for the preparation of periodic reports distributed
to the Funds' officers and Board of Trustees; and (iii) furnishing office space
and certain facilities required for conducting the business of the Funds. For
these services, Furman Selz is entitled to receive a fee, payable monthly, at
the annual rate of 0.15% of the average daily net assets of the Funds. Pursuant
to a Services Agreement with the Trust, Furman Selz assists the Trust with
certain transfer and dividend disbursing agent functions and receives a fee of
$15.00 per account per year plus out-of-pocket expenses. Pursuant to a Fund
Accounting Agreement with the Trust, Furman Selz assists the Trust in
calculating net asset values and provides certain other accounting services for
each Fund for an annual fee of $30,000 per Fund plus out-of-pocket expenses.
SERVICE ORGANIZATIONS
Various banks (including banks affiliated with First Interstate Bancorp),
trust companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also
24
<PAGE> 325
may provide administrative services with respect to the Funds' Institutional
Shares, such as maintaining shareholder accounts and records. The Funds may pay
fees to Service Organizations (which vary depending upon the services provided)
in amounts up to an annual rate of 0.25% of the average daily net asset value of
the outstanding Institutional Shares of the Funds owned by shareholders with
whom a Service Organization has a servicing relationship. These fees will be
borne entirely by the Funds' Institutional Shares. However, the Funds do not
currently intend to make any payments to Service Organizations with respect to
Institutional Shares.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest a specified amount in
the Funds or charging a direct fee for servicing. If imposed, these fees would
be in addition to any amounts which might be paid to the Service Organization by
the Funds. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged to
consult with them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Funds and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
OTHER EXPENSES
Each Fund bears all costs of its operations other than expenses
specifically assumed by Furman Selz, PFD Inc. or the Advisor. The costs borne by
the Funds include legal and auditing expenses; Trustees' fees and expenses;
insurance premiums; advisory, administration, fund accounting, custodian and
transfer agent fees and expenses; expenses incurred in acquiring or disposing of
the Funds' portfolio securities; expenses of registering and qualifying the
Funds' shares for sale with the SEC and with various state securities
commissions; expenses of obtaining quotations on
25
<PAGE> 326
the Funds' portfolio securities and pricing of the Funds' shares; expenses of
maintaining the Funds' legal existence and of shareholders' meetings; and
expenses of preparation and distribution to existing shareholders of reports,
proxies and prospectuses. Each Fund bears its own expenses associated with its
establishment as a series of the Trust; these expenses are amortized over a
five-year period from the commencement of a Fund's operations. See "Management"
in the SAI for additional information on expenses borne by the Funds. Trust
expenses directly attributable to a particular Fund are charged to that Fund,
and expenses attributable to a particular class of shares of a Fund (such as
Service Organization fees) are charged to that class. Other expenses are
allocated proportionately among all of the investment portfolios in the Trust in
relation to the net assets of each portfolio or by other means deemed fair and
equitable by the Board of Trustees.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Advisor places orders for
the purchase and sale of portfolio investments for the Funds' accounts with
brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Funds, the Advisor will seek the best execution of the Funds' orders.
Purchases and sales of debt securities are generally placed by the Advisor with
primary market makers for these securities on a net basis, i.e., without any
brokerage commission being paid by the Funds. Trading does, however, involve
transaction costs. Transactions with dealers serving as primary market makers
reflect the spread between the bid and asked prices. Purchases of underwritten
issues may be made which will include an underwriting fee paid to the
underwriter. Broker-dealers are selected on the basis of a variety of factors
such as reputation, capital strength, size and difficulty of the order, sale of
Fund shares by the broker-dealer, and research provided to the Advisor by the
broker-dealer. The Advisor may cause a Fund to pay commissions higher than
another broker-dealer would have charged if the Advisor believes the commission
paid is reasonable in relation to the value of the brokerage and research
services received by the Advisor.
A high portfolio turnover rate involves larger brokerage commission
expenses or transaction costs which must be borne directly by a Fund. Short-term
capital gains realized from portfolio transactions are taxable to shareholders
as ordinary income. The Advisor will not consider portfolio turnover rate a
limiting factor in making investment decisions consistent with a Fund's
objective and policies.
26
<PAGE> 327
FUND SHARE VALUATION
The net asset value of each class of shares of the Funds is calculated at
4:15 p.m. (Eastern time), Monday through Friday, on each day the New York Stock
Exchange is open for trading (a "Business Day"), which excludes the following
business holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share for each class of shares is computed by dividing the value of a
Fund's assets allocable to a particular class, less the liabilities charged to
that class by the total number of the outstanding shares of that class. All
expenses, including fees paid to the Advisor and Furman Selz, are accrued daily
and taken into account for the purpose of determining the net asset value.
Bonds and other fixed-income securities are normally valued by using market
quotations and may be valued on the basis of prices provided by a pricing
service approved by the Board of Trustees. Over-the-counter securities are
valued on the basis of the bid price at the close of business on each business
day. Securities for which market quotations are not readily available are valued
at fair value as determined in good faith by or under the direction of the Board
of Trustees.
PURCHASE AND REDEMPTION OF INSTITUTIONAL SHARES
Institutional Shares of the Funds are sold without a sales load on a
continuous basis primarily to customers ("Customers") of affiliate, franchise or
correspondent banks of First Interstate Bancorp and other selected institutions
("Institutions"). Customers may include individuals, trusts, partnerships and
corporations. Share purchases are effected through a Customer's account at an
Institution through procedures established in connection with the requirements
of the account, and confirmations of share purchases and redemptions will be
sent to the Institution involved. Institutions (or their nominees) will normally
be the holders of record of Institutional Shares acting on behalf of their
Customers, and will reflect their Customers' beneficial ownership of
Institutional Shares in the account statements provided by them to their
Customers. The exercise of voting rights and the delivery to Customers of
shareholder communications from the Funds will be governed by the Customers'
account agreements with an Institution. Investors wishing to purchase
Institutional Shares of a Fund should contact their account representatives.
Shares of a Fund are sold at net asset value per share next determined
after a purchase order has become effective. Purchase orders by an Institution
for Institutional Shares in the Funds must be received by the Trust by 4:15 p.m.
(Eastern time) on any Business Day. Payment for such
27
<PAGE> 328
shares may be made by Institutions in Federal funds or other funds immediately
available to the Trust's custodian no later than 4:15 p.m. (Eastern time) on the
next Business Day following the receipt of the purchase order.
It is the responsibility of Institutions to transmit orders for purchases
by their Customers and to deliver required funds on a timely basis. If funds are
not received within the periods described above, the order will be canceled,
notice thereof will be given, and the Institution will be responsible for any
loss to the Fund or its shareholders. Institutions may charge certain account
fees depending on the type of account the investor has established with an
Institution. In addition, an Institution may receive fees from the Funds with
respect to the investments of its Customers as described above under "Management
of the Funds." Payment for Institutional Shares of a Fund may, in the discretion
of the Advisor, be made in the form of securities that are permissible
investments for the Fund. For further information see "Additional Purchase and
Redemption Information" in the SAI.
The Trust reserves the right to reject any purchase order. Payment for
orders which are not received will be returned after prompt inquiry. The
issuance of Institutional Shares is recorded on the books of the Funds, and
share certificates are not issued.
Neither the Trust, the Distributor nor Furman Selz will be responsible for
the authenticity of telephone instructions for the purchase or redemption of
Institutional Shares where such instructions are reasonably believed to be
genuine. The Trust will attempt to confirm that telephone instructions are
genuine and will use such procedures as are considered reasonable. To the extent
that the Trust fails to use reasonable procedures to verify the genuineness of
telephone instructions, it or its service providers may be liable for any loss,
damage or expense arising from such instructions that prove to be fraudulent or
unauthorized.
Redemption requests are effected at the net asset value per share next
determined after receipt of a redemption request in good order by the Trust.
Institutional Shares held by an Institution on behalf of its Customers must be
redeemed in accordance with instructions and limitations pertaining to the
account at the Institution. It is the responsibility of an Institution to
transmit redemption requests to the Trust and to credit its Customers' accounts
with the redemption proceeds on a timely basis. The redemption proceeds for
Institutional Shares of a Fund are normally wired to the redeeming Institution
the following Business Day after receipt of the request by the Trust. The Trust
reserves the right to delay the wiring of redemption proceeds for up to seven
days after it receives a redemption
28
<PAGE> 329
order if, in the judgment of the Advisor, an earlier payment could adversely
affect a Fund.
With respect to former shareholders of Westcore Trust who do not have a
relationship with an Institution, shares of the Funds may be redeemed by writing
or calling the Funds directly at 237 Park Avenue, Suite 910, New York, NY 10017
or 1-800-662-8417. When Institutional Shares are redeemed directly from a Fund,
the Fund will ordinarily send the proceeds by check to the shareholder at the
address of record on the next Business Day unless payment by wire is requested.
The Funds may, however, take up to seven days to make payment. This will not be
the customary practice. Also, if the New York Stock Exchange is closed (or when
trading is restricted) for any reason other than the customary weekend or
holiday closing or if an emergency condition as determined by the SEC merits
such action, the Funds may suspend redemptions or postpone payment dates.
To be accepted by a Fund, a letter requesting redemption must include: (i)
the Fund name and account registration from which you are redeeming
Institutional Shares; (ii) your account number; (iii) the amount to be redeemed;
(iv) the signatures of all registered owners; and (v) a signature guarantee by
any eligible guarantor institution including a member of a national securities
exchange or a commercial bank or trust company, broker-dealers, credit unions
and savings associations. Corporations, partnerships, trusts or other legal
entities may be required to submit additional documentation.
All redemptions of Institutional Shares of the Funds shall be made in cash,
except that the commitment to redeem Institutional Shares in cash extends only
to redemption requests made by each shareholder of a Fund during any 90-day
period of up to the lesser of $250,000 or 1% of the net asset value of that Fund
at the beginning of such period. This commitment is irrevocable without the
prior approval of the SEC and is a fundamental policy of the Funds that may not
be changed without shareholder approval. In the case of redemption requests by
shareholders in excess of such amounts, the Board of Trustees reserves the right
to have the Funds make payment, in whole or in part, in securities or other
assets, in case of an emergency or any time a cash distribution would impair the
liquidity of a Fund to the detriment of the existing shareholders. In this
event, the securities would be valued in the same manner as the securities of
that Fund are valued. If the recipient were to sell such securities, he or she
would incur brokerage charges.
A redemption may be a taxable transaction on which gain or loss may be
recognized.
29
<PAGE> 330
EXCHANGE OF INSTITUTIONAL SHARES
The Funds offer a convenient way to exchange Institutional Shares in one
Fund for Institutional Shares in another investment portfolio of the Trust.
Before engaging in an exchange transaction, a shareholder should read carefully
the Prospectus describing the investment portfolio into which the exchange will
occur, which is available without charge and can be obtained by writing to the
Funds at, 237 Park Avenue, Suite 910, New York, New York 10017, or by calling
1-800-662-8417. A shareholder may not exchange Institutional Shares of one
portfolio for Institutional Shares of another portfolio if both or either are
not qualified for sale in the state of the shareholder's residence. The Trust
may terminate or amend the terms of the exchange privilege at any time.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the net asset value next determined following receipt of the
request by the Trust in good order.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
To exchange Institutional Shares, or if you have any questions, simply call
the Trust at 1-800-622-8417. You should be prepared to give the telephone
representative the following information: (i) your account number, social
security number and account registration; (ii) the name of the portfolio from
and the portfolio into which you wish to transfer your investment; and (iii) the
dollar or share amount you wish to exchange. The conversation may be recorded to
protect you and the Funds. Telephone exchanges are available only if the
shareholder so indicates by checking the "yes" box on the Purchase Application.
In addition, Institutional Shares of a Fund may be exchanged for Investor
Shares of the same Fund in connection with the distribution of assets held in a
qualified trust, agency or custodial account maintained with the trust
department of a First Interstate or other bank, trust company or thrift
institution, or in other cases where Institutional Shares are not held in such
qualified accounts. Similarly, Investor Shares may be exchanged for
Institutional Shares of the same Fund if the shares are to be held in such a
qualified trust, agency or custodial account. These exchanges are made without a
sales charge at the net asset value of the respective share classes.
30
<PAGE> 331
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
FEDERAL TAXES
Each Fund has qualified and intends to continue to qualify annually and to
elect to be treated as a regulated investment company pursuant to the provisions
of Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
By so qualifying and electing, each Fund generally will not be subject to
Federal income tax to the extent that it distributes its earnings in accordance
with the Code.
Each Fund intends to distribute to its shareholders substantially all of
its net tax-exempt interest income and its investment company taxable income
(which includes, among other items, dividends and taxable interest and the
excess, if any, of net short-term capital gains (generally including any net
option premium income) over net long-term capital losses). The California Funds
will declare distributions of such income daily and pay those dividends monthly.
The other Funds will declare dividends and distribute such income monthly. Each
Fund intends to distribute, at least annually, substantially all net capital
gain (the excess of net long-term capital gains over net short-term capital
losses). In determining amounts of capital gains to be distributed, any capital
loss carryovers from prior years will be applied against capital gains.
With respect to the California Funds the amount declared each day as a
dividend may be based on projections of estimated monthly net investment income
and may differ from the actual investment income determined in accordance with
generally accepted accounting principles. An adjustment will be made to the
dividend each month to account for any difference between the projected and
actual monthly investment income.
Distributions will be paid in additional shares of the same class held by a
shareholder based on the net asset value at the close of business on the payment
date of the distribution, unless the shareholder elects in writing, which is
received by Furman Selz not less than five full business days prior to the
record date, to receive such distributions in cash.
In the case of the California Funds, shares purchased will begin earning
dividends on the day after the purchase order is executed, and shares redeemed
will earn dividends through the day the redemption is executed. Investors who
redeem all or a portion of Fund shares prior to a dividend payment date will be
entitled on the next dividend payment date to all dividends declared but unpaid
on those shares at the time of their redemption.
31
<PAGE> 332
Earnings of the Funds not distributed on a timely basis in accordance with
a calendar year distribution requirement are subject to a nondeductible 4%
excise tax. To prevent imposition of this tax, each Fund intends to comply with
this distribution requirement.
Dividends derived from interest excludable from gross income under the
Code on obligations issued by states or political subdivisions thereof and
which are designated by the Funds as "exempt-interest dividends" are not
subject to the regular Federal income tax. Each of the Funds will be qualified
to designate and pay exempt-interest dividends if, at the close of each quarter
of its taxable year, at least 50% of the value of its total assets consists of
securities on which the interest payments are exempt from Federal income tax
under Code Section 103. To the extent that a Fund's dividends distributed to
shareholders are derived from earnings on interest income exempt from Federal
income tax and are designated as "exempt-interest dividends" by that Fund, they
will be excludable from a shareholder's gross income for regular Federal income
tax purposes. Other dividends paid by the Funds, if any, will be taxable to
shareholders.
The Funds may derive interest on temporary taxable investments and realize
capital gains or losses from its portfolio transactions, including the sale of
securities. Dividends derived from such interest, short-term capital gains, and
long-term capital gains, respectively, will be taxable to shareholders as
described, whether such distributions are made in cash or in additional shares
of the Fund. In addition, a sale of shares in Funds (including a redemption of
such shares and an exchange of shares between Funds) may be a taxable event and
may result in a taxable gain or loss to the shareholder. It is possible that a
portion of the distributions of the Funds may constitute taxable rather than
tax-exempt income in the hands of a shareholder. A loss realized by a
shareholder on the redemption, sale, or exchange of shares of a Fund with
respect to which exempt-interest dividends have been paid will be disallowed to
the extent of the exempt-interest dividends received if such shares have been
held by the shareholder for six months or less.
Tax-exempt interest from certain private activity bonds and exempt-interest
dividends attributable to that interest income constitute an item of tax
preference under the alternative minimum tax. Therefore, if a Fund invests in
such private activity bonds, certain shareholders may become subject to the
alternative minimum tax on that part of such Fund's exempt-interest dividends
derived from interest income on such bonds. See the SAI for further information
about the tax consequences for certain types of investors of a Fund investing in
private activity bonds.
32
<PAGE> 333
The entire amount of exempt-interest dividends received from the Funds by
most corporations will be part of an adjustment in computing alternative minimum
taxable income and will have to be taken into account for purposes of the
environmental tax under the Code.
There could be retroactive revocation of the tax-exempt status of certain
municipal obligations after their issuance. In addition, in connection with
budget and tax reform efforts, proposals may be made or adopted which would
change the tax treatment arising from an investment in the Funds. It is not
possible to predict the precise impact of any of these events, but they may
affect the value of the securities in the Fund's portfolio.
Deductions for interest expense incurred (or deemed incurred) to acquire or
carry shares of a Fund may be subject to limitations that reduce or eliminate
such deductions. In addition, under rules issued by the Internal Revenue Service
for determining when borrowed funds are considered used for the purposes of
purchasing or carrying particular assets, the purchase of shares may be
considered to have been made with borrowed funds, even though the borrowed funds
are not directly traceable to the purchase of shares.
Up to 85% of an individual's social security benefits and certain railroad
retirement benefits may be subject to Federal income tax. Along with other
factors, total tax-exempt income, including exempt-interest dividends, is used
to calculate the portion of such benefits that are taxed.
The treatment for state, local and municipal tax purposes of distributions
of exempt-interest dividends from the Funds will vary according to the laws of
state and local taxing authorities. Exempt-interest dividends and other
dividends may be subject to state and local taxation. Investors should consult
with their tax advisors as to the availability of any exemptions from such
taxes. Persons who may be "substantial users" (or "related persons" of
substantial users) of facilities financed by private activity bonds may suffer
adverse tax consequences from investing in a Fund and, therefore, should consult
their tax advisors before purchasing Fund shares. In some instances, a state or
city may exempt from tax the portion of the distribution from the Fund that
represents interest received on obligations of that state or its political
subdivisions. Under the laws of certain other states and cities, the entire
amount of any such distribution may be taxable. Shareholders will be notified
annually of the Federal income tax status of distributions and the percentage of
municipal obligation interest income received, with its source indicated.
A distribution, including an "exempt-interest dividend," will be treated as
paid on December 31 of a calendar year if it is declared by a
33
<PAGE> 334
Fund during October, November, or December of that year to shareholders of
record in such a month and paid by a Fund during January of the following
calendar year. Such distributions will be treated as received by shareholders in
the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
A Fund's distributions with respect to a given taxable year may exceed the
current and accumulated earnings and profits of that Fund available for
distribution. In that event, distributions in excess of such earnings and
profits would be characterized as a return of capital to shareholders for
Federal income tax purposes, thus reducing each shareholder's cost basis in his
Fund shares. Distributions in excess of a shareholder's cost basis in his shares
would be treated as a gain realized from a sale of such shares.
Before purchasing shares in the Funds, the impact of dividends and
distributions which are expected to be declared or have been declared, but not
paid, should be carefully considered. Any dividend or distribution declared
shortly after a purchase of such shares prior to the record date will have the
effect of reducing the per share net asset value by the per share amount of the
dividend or distribution. All or a portion of such dividend or distribution,
although in effect a return of capital, may be subject to tax.
The dividends paid by the Funds are not expected to qualify for the
dividends-received deduction available to corporations.
The Funds may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where a Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Most corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund(s) in which they invest. Depending on
the residence of the shareholder for tax purposes, distributions also may be
subject to state and local taxes, including withholding taxes. Foreign
shareholders may, for example, be subject to special withholding requirements.
Special tax treatment, including a penalty on certain pre-retirement
distributions, is accorded to accounts maintained as IRAs. Shareholders should
consult their own tax advisors as to the Federal, state and local tax
consequences of ownership of shares of the Funds in their particular
circumstances.
34
<PAGE> 335
STATE TAXES
OREGON STATE AND LOCAL TAXES. Individuals, trusts and estates resident in
Oregon will not be subject to Oregon personal income tax on distributions from
the Oregon Tax-Exempt Fund that represent tax-exempt interest paid on municipal
obligations of the State of Oregon and its political subdivisions and certain
other issuers, including Puerto Rico and Guam. Such individuals, trusts and
estates will be subject to Oregon personal income tax on other types of
distributions received from the Oregon Tax-Exempt Fund, including distributions
of interest on municipal obligations issued by other issuers and all long-term
and short-term capital gains. Except as noted above with respect to Oregon
personal income taxation of individuals, trusts and estates resident in Oregon,
distributions from the Oregon Tax-Exempt Fund may be taxable to investors under
state or local law as dividend income even though all or a portion of such
distributions may be derived from interest on tax-exempt obligations which, if
realized directly, would be exempt from such income taxes.
Corporations subject to the Oregon corporate excise tax will generally be
subject to tax on all distributions from the Oregon Tax-Exempt Fund, including
distributions of income that is exempt for Federal tax purposes. Shares of the
Oregon Tax-Exempt Fund will not be subject to the Oregon property tax.
Shareholders of the Oregon Tax-Exempt Fund, including part-year residents
of Oregon, should consult their tax advisors about other state and local tax
consequences of their investments in the Oregon Tax-Exempt Fund, which may have
different consequences from those under Federal income tax law.
ARIZONA STATE TAXES. Individuals, trusts and estates who are subject to
Arizona income tax will not be subject to such tax on dividends paid by the
Arizona Tax-Exempt Fund, to the extent that such dividends qualify as
exempt-interest dividends of a regulated investment company under Section
852(b)(5) of the Code and are attributable to either (i) obligations of the
State of Arizona or its political subdivisions thereof or (ii) obligations
issued by the governments of Guam, Puerto Rico, or the Virgin Islands. In
addition, dividends paid by the Arizona Tax-Exempt Fund which are attributable
to interest payments on direct obligations of the United States government will
not be subject to Arizona income tax to the extent the Arizona Tax-Exempt Fund
qualifies as a regulated investment company under Subchapter M of the Code.
Other distributions from the Arizona Tax-Exempt Fund, however, such as
distributions of short-term or long-term capital gains, will generally not be
exempt from Arizona income tax.
35
<PAGE> 336
There are no municipal income taxes in Arizona. Moreover, because shares of
the Arizona Tax-Exempt Fund are intangibles, they are not subject to Arizona
property tax. Shareholders of the Arizona Tax-Exempt Fund should consult their
tax advisor about other state and local tax consequences of their investment in
the Arizona Tax-Exempt Fund.
CALIFORNIA STATE TAXES. If, at the close of each quarter of the California
Funds' taxable year, at least 50% of the value of their respective total assets
consists of California municipal obligations and certain specified federal
obligations, and if the Funds qualify as a regulated investment company for
federal tax purposes, then the Funds will be qualified to pay dividends exempt
from California state personal income tax to its shareholders. If the Funds so
qualify, dividends derived from interest attributable to California municipal
obligations and such federal obligations will be exempt from California state
personal income tax. (Such treatment may not apply, however, to investors who
are "substantial users" or "related persons" with respect to facilities financed
by portfolio securities held by the Fund.) For this purpose, federal obligations
are any obligations the interest on which is excludable from income under the
United States Constitution or the laws of the United States. Any dividends paid
to shareholders subject to California state franchise tax or California state
corporate income tax may be taxed as ordinary or capital gain dividends to such
shareholders notwithstanding that all or a portion of such dividends are exempt
from California state personal income tax.
NATIONAL TAX-EXEMPT FUND -- STATE AND LOCAL TAXES. Investors are advised
to consult their tax advisors concerning the application of state and local
taxes, which may have different consequences from those under Federal income tax
law.
DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES
Municipal Obligations. The two principal classifications of municipal
obligations which may be held by the Funds are "general obligation" securities
and "revenue" securities. General obligation securities are secured by the
issuer's pledge of its full faith, credit and ad valorem taxing power for the
payment of principal and interest. Revenue securities are payable only from the
revenues derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise tax or other specific revenue
source such as the user of the facility being financed. Private activity bonds
(e.g., bonds issued by industrial development authorities) that are issued by or
on behalf of public authorities to finance various privately-operated facilities
are included within the term "municipal obli-
36
<PAGE> 337
gations" if the interest paid thereon is exempt from regular Federal income tax
(See "Dividends, Distributions and Federal Income Tax" above) and not treated as
a specific tax preference item under the Federal alternative minimum tax.
Private activity bonds are in most cases revenue securities and are not payable
from the unrestricted revenues of the issuer. The credit quality of such bonds
is usually directly related to the credit standing of the corporate user of the
facility involved.
Municipal obligations may also include "moral obligation" securities, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation securities is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
Certain of the municipal obligations held by the Funds may be insured as to
the timely payment of principal and interest. The insurance policies will
usually be obtained by the issuer of the municipal obligation at the time of its
original issuance. In the event that the issuer defaults on an interest or
principal payment, the insurer will be notified and will be required to make
payment to the bondholders. There is, however, no guarantee that the insurer
will meet its obligations. In addition, such insurance will not protect against
market fluctuations caused by changes in interest rates and other factors.
Further, the Funds may purchase municipal obligations known as
"certificates of participation" which represent undivided proportional interests
in lease payments by a governmental or nonprofit entity. The lease payments and
other rights under the lease provide for and secure the payments on the
certificates. Lease obligations may be limited by applicable municipal charter
provisions or the nature of the appropriation for the lease. In particular,
lease obligations may be subject to periodic appropriation. Lease obligations
may also be abated if the leased property is damaged or becomes unsuitable for
the lessee's purpose. If the entity does not appropriate funds for future lease
payments, the entity cannot be compelled to make such payments. Furthermore, a
lease may or may not provide that the certificate trustee can accelerate lease
obligations upon default. If the trustee could not accelerate lease obligations
upon default, the trustee would only be able to enforce lease payments as they
became due. In the event of a default or failure of appropriation, it is
unlikely that the trustee would be able to obtain an acceptable substitute
source of payment. Certificates of participation are generally subject to
redemption by the issuing municipal entity under specified circumstances. If a
specified event occurs, a certificate is callable at par either at any interest
payment
37
<PAGE> 338
date or, in some cases, at any time. As a result, certificates of participation
are not as liquid or marketable as other types of municipal obligations and are
generally valued at par or less than par in the open market.
The Advisor for the Funds, under the supervision of the Board of Trustees,
will make determinations concerning the liquidity of a municipal lease
obligation based on all relevant factors. A Fund may also purchase unrated
municipal lease obligations. The Advisor, under the supervision of the Board of
Trustees, will determine the credit quality of such leases on an ongoing basis,
including an assessment of the likelihood that the underlying lease will not be
canceled.
Opinions relating to the validity of municipal obligations and to the
exemption of interest thereon from regular Federal income tax (and to the
exemption of interest from state personal income tax) are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Funds,
the Advisor nor their counsel will review the proceedings relating to the
issuance of municipal obligations or the bases for such opinions.
Securities Issued by Other Investment Companies. Each Fund may invest in
securities issued by other investment companies within the limits prescribed by
the 1940 Act. Each Fund currently intends to limit its investments so that, as
determined immediately after a securities purchase is made: (a) not more than 5%
of the value of its total assets will be invested in the securities of any one
investment company; (b) not more than 10% of the value of its total assets will
be invested in the aggregate in securities of investment companies as a group;
(c) not more than 3% of the outstanding voting stock of any one investment
company will be owned by the Fund; and (d) not more than 10% of the outstanding
voting stock of any one investment company will be owned in the aggregate by a
Fund and other investment companies advised by the Advisor or any other
affiliate of First Interstate Bancorp. As a shareholder of another investment
company, a Fund would bear, along with other shareholders, its pro rata portion
of the expenses of such other investment company, including advisory fees. These
expenses would be in addition to the advisory and other expenses that each Fund
bears directly in connection with its own operations, and may represent a
duplication of fees to shareholders of that Fund.
Variable and Floating Rate Instruments. Instruments purchased by a Fund
may include variable and floating rate demand instruments issued by
corporations, industrial development authorities and governmental entities.
These instruments may include variable amount master demand notes that permit
the indebtedness to vary in addition to providing for periodic adjustments in
the interest rate. Although variable and floating rate
38
<PAGE> 339
demand instruments are frequently not rated by credit rating agencies, unrated
instruments purchased by a Fund will be determined to be of comparable quality
to rated instruments that may be purchased by the Fund. While there may be no
active secondary market with respect to a particular variable or floating rate
instrument purchased by a Fund, the Funds may, from time to time as specified in
the instrument, demand payment in full of the principal of the instrument or may
resell the instrument to a third party. The absence of such an active secondary
market, however, could make it difficult for a Fund to dispose of a variable or
floating rate demand instrument if the issuer defaulted on its payment
obligations or during periods that the Fund is not entitled to exercise its
demand rights, and the Fund could, for these or other reasons, suffer a loss.
Variable and floating rate instruments with no active secondary market will be
included in the calculation of a Fund's illiquid assets.
Forward Commitments, When-Issued Purchases and Delayed-Delivery
Transactions. The Funds may purchase or sell securities on a when-issued or
delayed-delivery basis and make contracts to purchase or sell securities for a
fixed price at a future date beyond customary settlement time. Securities
purchased or sold on a when-issued, delayed-delivery or forward commitment basis
involve a risk of loss if the value of the security to be purchased declines, or
the value of the security to be sold increases, before the settlement date.
Although a Fund will generally purchase securities with the intention of
acquiring them, a Fund may dispose of securities purchased on a when-issued,
delayed-delivery or a forward commitment basis before settlement when deemed
appropriate by the Advisor.
Stand-by Commitments. The Funds may acquire "stand-by commitments" with
respect to municipal obligations held in their respective portfolios. Under a
stand-by commitment, a dealer agrees to purchase at a Fund's option specified
municipal obligations at a price equal to their amortized cost value plus
accrued interest. The Funds will acquire stand-by commitments solely to
facilitate portfolio liquidity and do not intend to exercise their respective
rights thereunder for trading purposes.
Derivative Securities. The Funds may invest in structured notes, bonds or
other instruments with interest rates that are determined by reference to
changes in the value of other interest rates, indices or financial indicators
("References") or the relative change in two or more References. The Funds may
also hold derivative instruments that have interest rates that re-set inversely
to changing current market rates and/or have embedded interest rate floors and
caps that require the issuer to pay an adjusted interest rate if market rates
fall below or rise above a specified
39
<PAGE> 340
rate. These instruments represent relatively recent innovations in the bond
markets, and the trading market for these instruments is less developed than the
markets for traditional types of debt instruments. It is uncertain how these
instruments will perform under different economic and interest-rate scenarios.
Because certain of these instruments are leveraged, their market values may be
more volatile than other types of bonds and may present greater potential for
capital gain or loss. On the other hand, the imbedded option features of other
derivative instruments could limit the amount of appreciation a Fund can realize
on its investment, could cause a Fund to hold a security it might otherwise sell
or could force the sale of a security at inopportune times or for prices that do
not reflect current market value. The possibility of default by the issuer or
the issuer's credit provider may be greater for these structured and derivative
instruments than for other types of instruments. In some cases it may be
difficult to determine the fair value of a structured or derivative instrument
because of a lack of reliable objective information and an established secondary
market for some instruments may not exist.
Illiquid Securities. Each Fund will not knowingly invest more than 15%
(10% in the case of the California Tax-Exempt Fund) of the value of its net
assets in securities that are illiquid because of restrictions on
transferability or other reasons. Securities that are not registered under the
Securities Act of 1933 but may be purchased by institutional buyers under Rule
144A are subject to this limit (unless such securities are variable amount
master demand notes with maturities of nine months or less or unless the Advisor
determines under the supervision of the Board that a liquid trading market
exists).
Rule 144A allows for a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the Securities
Act of 1933 for resales of certain securities to qualified institutional buyers.
The Advisor believes that the market for certain restricted securities may
expand further as a result of this regulation and the development of automated
systems for the trading, clearance and settlement of unregistered securities of
domestic and foreign issuers, such as the PORTAL System sponsored by the NASD.
The Advisor monitors the liquidity of restricted securities in each of the
Funds under the supervision of the Board of Trustees. In reaching liquidity
decisions, the Advisor will consider such factors as: (a) the frequency of
trades and quotes for the security; (b) the number of dealers wishing to
purchase or sell the security and number of other potential purchasers; (c)
dealer undertakings to make a market in the security; and
40
<PAGE> 341
(d) the nature of the security and the nature of the marketplace trades (e.g.,
the time needed to dispose of the security, the method of soliciting offers and
the mechanics of the transfer). The use of Rule 144A transactions could have the
effect of increasing the level of illiquidity of the Funds during periods that
qualified institutional buyers become uninterested in purchasing restricted
securities.
INVESTMENT RESTRICTIONS
Each Fund has adopted certain fundamental investment restrictions that may
be changed only with the approval of a majority of a Fund's outstanding shares.
The following description summarizes several of the Funds' fundamental
restrictions, which are set forth in full in the SAI.
No Fund may:
1. Purchase securities (except U.S. Government securities and repurchase
agreements collateralized by such securities) if more than 5% of its
total assets at the time of purchase will be invested in securities of
any one issuer, except that up to 50% of a Fund's total assets may be
invested without regard to this 5% limitation.
2. Invest 25% or more of its total assets at the time of purchase in
securities of issuers whose principal business activities are in the
same industry.
3. Borrow money except in amounts up to 10% of the value of its total
assets at the time of borrowing.
Restriction 1 does not apply to the California Funds. Instead, as a non-
fundamental investment restriction, each California Fund will not hold any
securities (except U.S. Government securities and repurchase agreements
collateralized by such securities) that would cause, at the end of any tax
quarter, more than 5% of its total assets to be invested in securities of any
one issuer, except that up to 50% of a Fund's total assets may be invested
without regard to this limitation so long as no more than 25% of the Fund's
total assets are invested in any one issuer (except U.S. Government, its
agencies and instrumentalities).
If a percentage restriction on the investment or use of assets set forth in
this Prospectus is adhered to at the time a transaction is effected, later
changes in percentage resulting from changing values will not be considered a
violation, however, the Funds will not at any time have more than 15% of their
respective net assets invested in illiquid securities.
41
<PAGE> 342
OTHER INFORMATION
CAPITALIZATION
Pacifica Funds Trust (formerly Fund Source) was organized as a
Massachusetts business trust on July 17, 1984. The capitalization of the Trust
consists solely of an unlimited number of shares of beneficial interest with a
par value of $0.001 each. When issued, shares of the Funds are fully paid,
non-assessable and freely transferable.
The Board of Trustees has authorized the issuance of two classes of shares
in each of the Funds described in this Prospectus -- Institutional Shares and
Investor Shares. Each share of a Fund represents an equal proportionate interest
in a particular Fund with other shares of the same class and is entitled to such
dividends and distributions earned on such shares as are declared in the
discretion of the Board of Trustees.
Each Fund's Institutional Shares and Investor Shares bear their pro rata
portion of all operating expenses paid by the Fund except for the distribution
payments, Service Organization fees and other "class" expenses that are
allocated to a particular share class. The Board of Trustees has approved a
Distribution Plan with respect to Investor Shares of each Fund under which the
Trust may pay the Distributor in connection with the distribution of Investor
Shares at a rate or rates set from time to time by the Board of Trustees,
provided that no rate may exceed the annual rate of 0.50% of the average daily
net asset value of Investor Shares of a Fund. In addition, each Fund may pay
fees to Service Organizations in amounts up to an annual rate of 0.25% of the
daily net asset value of the Funds' outstanding Investor Shares owned by
shareholders with whom a Service Organization has a servicing relationship.
Investor Shares of the Funds are purchased at net asset value per share plus a
maximum 4.50% sales charge (subject to certain exceptions). Because of the
"class expenses" and sales charges, the performance of a Fund's Investor Shares
is expected to be lower than the performance of its Institutional Shares. The
Trust offers various services and privileges in connection with its Investor
Shares that are not offered in connection with its Institutional Shares,
including an automatic investment plan, automatic withdrawal plan and, with
respect to certain portfolios, checkwriting. For information regarding the
Funds' Investor Shares, contact Furman Selz at 1-800-662-8417 or your Service
Organization.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
42
<PAGE> 343
only on the assets and property of the Trust. The Declaration of Trust also
provides for indemnification out of the property of a Fund of any shareholder
held personally liable solely by reason of being or having been a shareholder of
the Fund. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a Fund itself would
be unable to meet its obligations and should be considered remote.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Trust is not required to hold regular
annual meetings of the Funds' shareholders, but in the event that a special
meeting is held, shareholders of each portfolio offered by the Trust will be
entitled to one vote for each full share held and fractional votes for
fractional shares held, and will vote in the aggregate and not on a
portfolio-by-portfolio basis, except as required by the 1940 Act or other
applicable law. It is contemplated that, as required by the 1940 Act, the
shareholders of a portfolio will vote separately on a portfolio-by-portfolio
basis on matters relating to a particular portfolio's investment advisory
agreement or changes in a portfolio's fundamental investment limitations, and on
other matters where the interests of the respective portfolios are not
substantially identical. Similarly, shareholders of each portfolio will vote in
the aggregate and not by class unless the Trustees determine that the matter to
be voted on affects only the interests of the holders of a particular class of a
Fund's shares. Voting rights are not cumulative.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust and in connection with such meeting to comply with the shareholders'
communications provisions of Section 16(c) of the 1940 Act.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of a Fund means, with respect to the
approval of an investment advisory agreement or a change in a fundamental
investment policy, the vote of the lesser of: (1) 67% of the shares of a Fund
present at a meeting if the holders of more than 50% of the outstanding shares
are present in person or by proxy; or (2) more than 50% of the
43
<PAGE> 344
outstanding shares of a Fund. For purposes of the 1940 Act, any person who owns
either directly or through one or more controlled companies more than 25 percent
of the voting securities of a company is presumed to "control" such company.
Under this definition, First Interstate Bancorp and its affiliates may be deemed
to be controlling persons of the Trust.
PERFORMANCE INFORMATION
A Fund may, from time to time, include yield and total return data for its
Institutional Shares and Investor Shares in advertisements or reports to
shareholders or prospective investors. The methods used to calculate the yields
and total returns of the Funds are mandated by the SEC.
Quotations of "yield" for a class of shares of a Fund will be based on the
investment income per share during a particular 30-day (or one month) period
(including dividends and interest), less expenses accrued during the period
("net investment income"), and will be computed by dividing net investment
income by the maximum public offering price per share on the last day of the
period.
Quotations of yield reflect only the performance of a class of shares
during the particular period on which the calculations are based. Yield will
vary based on changes in market conditions, the level of interest rates and the
level of the expenses of a particular class of shares, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
Quotations of average annual total return for a class of shares of a Fund
will be expressed in terms of the average annual compounded rate of return of a
hypothetical investment in that class over periods of 1, 5 and 10 years (up to
the life of that class), reflect the deduction of a proportional share of
expenses allocated to that class (on an annual basis), and assume that all
dividends and distributions are reinvested when paid.
The Funds may also advertise "taxable equivalent yield." Taxable equivalent
yield is the yield that an investment, subject to Federal and/or state taxes,
would need to earn in order to equal, on an after-tax basis, the yield on an
investment exempt from such taxes (normally calculated assuming the maximum
applicable marginal tax rate). A taxable equivalent yield quotation for a Fund
will be higher than the Fund's yield quotations.
The following charts show the approximate yield a taxable investment would
have to earn to keep up with the yield of a tax-exempt investment. Across the
top of each table are various tax-exempt rates of return. On the left are tax
rates reflecting different state tax brackets plus a 28% Federal Income Tax
rate. By following across the table at the appropriate tax rate,
44
<PAGE> 345
you can find the taxable yield you would need to achieve in order to equal the
tax-exempt yield at the top of the table.
<TABLE>
<CAPTION>
1994 FEDERAL TAX RATES
INCOME INCOME INCOME INCOME INCOME
<S> <C> <C> <C> <C> <C>
$22,750- $ 55,100- $115,000- Over
Single Return $55,100 $115,000 N/A $250,000 $250,000
$38,000- $ 91,850- $140,000- Over
Joint Return $91,850 $140,000 $250,000 N/A $250,000
Federal Tax Rate+ 28% 31% 36% 38% 39.6%
</TABLE>
+ This rate assumes the maximum effective Federal income tax rate. Your
effective tax rate may vary depending upon your filing status and taxable
income level. For some investors, alternative minimum tax considerations may
apply.
OREGON TAX-EXEMPT FUND*
<TABLE>
<CAPTION>
ASSUMED OREGON & 28%
FEDERAL COMBINED
TAX-FREE RATE OF
RETURN 4.00% 4.50% 5.00% 5.50% 6.00%
<S> <C> <C> <C> <C> <C>
Tax Rate: 31.0% 5.80% 6.52% 7.25% 7.97% 8.70%
Tax Rate: 33.0% 5.97% 6.72% 7.46% 8.21% 8.96%
Tax Rate: 43.0% 7.02% 7.90% 8.77% 9.65% 10.53%
Tax Rate: 48.6% 7.78% 8.76% 9.73% 10.70% 11.67%
</TABLE>
ARIZONA TAX-EXEMPT FUND*
<TABLE>
<CAPTION>
ASSUMED ARIZONA & 28%
FEDERAL COMBINED
TAX-FREE RATE OF
RETURN 4.00% 4.50% 5.00% 5.50% 6.00%
<S> <C> <C> <C> <C> <C>
Tax Rate: 32.4% 5.92% 6.66% 7.40% 8.14% 8.88%
Tax Rate: 36.25% 6.28% 7.06% 7.84% 8.63% 9.41%
Tax Rate: 41.5% 6.84% 7.69% 8.55% 9.40% 10.26%
Tax Rate: 46.6% 7.49% 8.43% 9.36% 10.30% 11.24%
</TABLE>
45
<PAGE> 346
THE CALIFORNIA FUNDS*
<TABLE>
<CAPTION>
ASSUMED CALIFORNIA & 28%
FEDERAL COMBINED
TAX-FREE RATE OF
RETURN 4.00% 4.50% 5.00% 5.50% 6.00%
<S> <C> <C> <C> <C> <C>
Tax Rate: 32.32% 5.91% 6.65% 7.39% 8.13% 8.87%
Tax Rate: 37.42% 6.39% 7.19% 7.99% 8.79% 9.59%
Tax Rate: 41.95% 6.89% 7.75% 8.61% 9.47% 10.34%
Tax Rate: 45.64% 7.36% 8.28% 9.20% 10.12% 11.04%
</TABLE>
NATIONAL TAX-EXEMPT BOND FUND*
<TABLE>
<CAPTION>
ASSUMED FEDERAL
TAX-FREE RATE OF
RETURN 4.00% 4.50% 5.00% 5.50% 6.00%
<S> <C> <C> <C> <C> <C>
Tax Rate: 28.0% 5.56% 6.25% 6.94% 7.64% 8.33%
Tax Rate: 31.0% 5.80% 6.52% 7.25% 7.97% 8.70%
Tax Rate: 36.0% 6.25% 7.03% 7.81% 8.59% 9.38%
Tax Rate: 38.0% 6.45% 7.26% 8.07% 8.87% 9.68%
Tax Rate: 39.6% 6.62% 7.45% 8.28% 9.11% 9.93%
</TABLE>
* Each chart shows the taxable rate of return an investor needs to achieve in
order to equal various tax-free returns. At higher tax rates a higher yield is
required to overcome the tax burden. Yields set forth are for illustrative
purposes only and do not reflect a Fund's past and/or future performance. Your
investment in the Funds may be subject to Alternative Minimum Tax (AMT).
Performance information for a Fund may be compared to various unmanaged
indices, such as the Standard & Poor's 500 Stock Index, the Dow Jones Industrial
Average, indices prepared by Lipper Analytical Services, and other entities or
organizations which track the performance of investment companies. Any
performance information should be considered in light of a Fund's investment
objective and policies, characteristics and quality of the Fund and the market
conditions during the time period indicated, and should not be considered to be
representative of what may be achieved in the future. For a description of the
methods used to determine yield and total return for the Funds, see "Other
Information -- Performance Information" in the SAI.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Funds at 237 Park
Avenue, Suite 910, New York, New York 10017.
General and Account Information: (800) 662-8417
46
<PAGE> 347
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
FUNDS OR BY THEIR DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY FIRST INTERSTATE BANCORP OR ITS AFFILIATES,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
47
<PAGE> 348
APPENDIX
DESCRIPTION OF MOODY'S BOND RATINGS:
Excerpts from Moody's description of its four highest bond ratings are
listed as follows: Aaa -- judged to be the best quality and they carry the
smallest degree of investment risk; Aa -- judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds; A -- possess many favorable investment attributes and are
to be considered as "upper medium grade obligations"; Baa -- considered to be
medium grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Other Moody's bond
descriptions include: Ba -- judged to have speculative elements, their future
cannot be considered as well assured; B -- generally lack characteristics of the
desirable investment; Caa -- are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; Ca -- speculative in a high degree, often in default; C -- lowest
rated class of bonds, regarded as having extremely poor prospects.
Moody's also supplies numerical indicators 1, 2 and 3 to rating categories.
The modifier 1 indicates that the security is in the higher end of its rating
category; the modifier 2 indicates a mid-range ranking; and modifier 3 indicates
a ranking toward the lower end of the category.
DESCRIPTION OF S&P'S BOND RATINGS:
Excerpts from S&P's description of its four highest bond ratings are listed
as follows: AAA -- highest grade obligations, in which capacity to pay interest
and repay principal is extremely strong; AA -- also qualify as high grade
obligations, having a very strong capacity to pay interest and repay principal,
and differs from AAA issues only in a small degree; A -- regarded as upper
medium grade, having a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories;
BBB -- regarded as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories. This group is the lowest which qualifies for
commercial bank investment. BB, B, CCC, CC -- predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with terms
of the
A-1
<PAGE> 349
obligations; BB indicates the highest grade and CC the lowest within the
speculative rating categories.
S&P applies indicators "+," no character, and "-" to its rating categories.
The indicators show relative standing within the major rating categories.
DESCRIPTION OF MOODY'S RATINGS OF NOTES AND VARIABLE RATE DEMAND INSTRUMENTS:
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or MIG. Such ratings recognize the
differences between short-term credit and long-term risk. Short-term ratings on
issues with demand features (variable rate demand obligations) are
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payments
relying on external liquidity.
MIG 1/VMIG 1: This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This denotes high quality. Margins of protection are ample
although not as large as in the preceding group.
DESCRIPTION OF MOODY'S TAX-EXEMPT COMMERCIAL PAPER RATINGS:
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations which have an original maturity not
exceeding nine months. Moody's makes no representation that such obligations are
exempt from registration under the Securities Act of 1933, nor does it represent
that any specific note is a valid obligation of a rated issuer or issued in
conformity with any applicable law. The following designations, all judged to be
investment grade, indicate the relative repayment ability of rated issuers of
securities in which the Trust may invest.
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term promissory obligations.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term promissory obligations.
DESCRIPTION OF S&P'S RATINGS FOR MUNICIPAL BONDS:
INVESTMENT GRADE
AAA: Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
A-2
<PAGE> 350
AA: Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A: Debt rated "A" has strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
SPECULATIVE GRADE
BB, B, CCC, CC: Debt rated in these categories is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
CI: The "CI" rating is reserved for income bonds on which no interest is
being paid.
D: Debt rated "D" is in default, and payment of interest and/or repayment
of principal is in arrears.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
DESCRIPTION OF S&P'S RATINGS FOR INVESTMENT GRADE MUNICIPAL NOTES AND SHORT-TERM
DEMAND OBLIGATIONS:
SP-1: Issues carrying this designation have a very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus (+) designation.
SP-2: Issues carrying this designation have a satisfactory capacity to pay
principal and interest.
A-3
<PAGE> 351
DESCRIPTION OF S&P'S RATINGS FOR DEMAND OBLIGATIONS AND TAX-EXEMPT COMMERCIAL
PAPER:
An S&P commercial paper rating is a current assessment of the likelihood of
timely repayment of debt having an original maturity of no more than 365 days.
The two rating categories for securities in which the Trust may invest are as
follows:
A-1: This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics will be denoted with a plus (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-4
<PAGE> 352
INVESTMENT ADVISOR
First Interstate Capital Management, Inc.
7501 East McCormick Parkway
Scottsdale, Arizona 85258
ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Pacifica Funds Distributor Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
First Interstate Bank of California
707 Wilshire Boulevard
Los Angeles, California 90017
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
[PACIFICA LOGO] PACTFIS-2/96
<PAGE> 353
[PACIFICA LOGO]
(INVESTOR SHARES)
PACIFICA NATIONAL TAX-EXEMPT
MONEY MARKET FUND
PACIFICA CALIFORNIA TAX-EXEMPT
MONEY MARKET FUND
PROSPECTUS
FEBRUARY 1, 1996
[FIRST INTERSTATE BANK LOGO]
Investment Advisor to The Pacifica Funds
<PAGE> 354
PACIFICA FUNDS TRUST
(INVESTOR SHARES)
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) 662-8417
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. --
INVESTMENT ADVISOR
("FICM" OR THE "ADVISOR")
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
("FURMAN SELZ" OR THE "SPONSOR")
PACIFICA FUNDS DISTRIBUTOR INC. -- DISTRIBUTOR
("PFD INC." OR THE "DISTRIBUTOR")
Pacifica Funds Trust (the "Trust") is an open-end investment company (a
mutual fund) that offers a selection of separate investment portfolios. This
Prospectus describes the Investor Shares of the following two portfolios (the
"Funds"):
- Pacifica National Tax-Exempt Money Market Fund
- Pacifica California Tax-Exempt Money Market Fund
This Prospectus sets forth concisely the information a prospective investor
should know before investing in any of the Funds and should be read and retained
for information about each Fund. A Statement of Additional Information (the
"SAI"), dated February 1, 1996 (which may be revised from time to time),
containing additional and more detailed information about the Funds, has been
filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Funds at the address or
information number printed above.
----------------------------
AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FIRST INTERSTATE OR OTHER BANK, AND ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN 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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1996.
<PAGE> 355
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS............................................... 3
FUND EXPENSES............................................ 6
FEE TABLE -- INVESTOR SHARES............................. 6
THE FUNDS................................................ 8
INVESTMENT POLICIES AND PRACTICES
OF THE FUNDS........................................... 8
RISKS OF INVESTING IN THE FUNDS.......................... 9
MANAGEMENT OF THE FUNDS.................................. 11
FUND SHARE VALUATION..................................... 16
MINIMUM PURCHASE REQUIREMENTS............................ 16
PURCHASE OF INVESTOR SHARES.............................. 16
INDIVIDUAL RETIREMENT ACCOUNTS........................... 18
EXCHANGE OF INVESTOR SHARES.............................. 18
REDEMPTION OF INVESTOR SHARES............................ 20
DIVIDENDS, DISTRIBUTIONS AND
FEDERAL INCOME TAX..................................... 23
DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES................................... 25
INVESTMENT RESTRICTIONS.................................. 29
OTHER INFORMATION........................................ 29
</TABLE>
2
<PAGE> 356
HIGHLIGHTS
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
This Prospectus describes two investment portfolios managed by First
Interstate Capital Management, Inc. Each Fund has distinct investment objectives
and policies.
The California Tax-Exempt Money Market Fund. The investment objective of
the California Tax-Exempt Money Market Fund is to provide investors with as high
a level of current interest income exempt from both Federal and California
personal income taxes as is consistent with the preservation of capital and
liquidity. To achieve its objective, the California Tax-Exempt Money Market Fund
invests primarily in high quality, short-term California Municipal Obligations
which have remaining maturities not exceeding 397 days.
The National Tax-Exempt Money Market Fund. The investment objective of the
National Tax-Exempt Money Market Fund is to seek as high a level of current
income exempt from Federal income tax as is consistent with liquidity and
stability of principal. To achieve its objective, the National Tax-Exempt Money
Market Fund invests primarily in a diversified portfolio of high-quality,
short-term municipal obligations the interest on which is exempt from Federal
income tax and which have remaining maturities not exceeding 397 days.
For additional information concerning the investment policies, practices
and risk considerations of the Funds, see "The Funds," "Investment Policies and
Practices of the Funds" and "Risks of Investing in the Funds" in this
Prospectus.
RISKS OF INVESTING IN THE FUNDS
Each Fund attempts to maintain the value of its shares at a constant $1.00
per share, although there can be no assurance that the Funds will always be able
to do so. The Funds' performance will change daily based on many factors,
including the quality of the instruments in the Funds' investment portfolios,
national and international economic conditions, interest rate levels and general
market conditions. The policy of the California Tax-Exempt Money Market Fund to
invest primarily in California Municipal Obligations presents certain risks
because the Fund's performance will be closely tied to the economic and
political conditions of California and its municipalities. Because each Fund is
classified as non-diversified under the Investment Company Act of 1940 (the
"1940 Act"), each Fund may be more sensitive to factors affecting a particular
issuer.
3
<PAGE> 357
There is no assurance that the Funds will achieve their investment
objectives.
MANAGEMENT OF THE FUNDS
First Interstate Capital Management, Inc. acts as investment advisor to the
Funds. For its services, the Advisor is entitled to receive a fee from each Fund
at an annual rate based on the Fund's average daily net assets. See "Fee
Table -- Investor Shares" and "Management of the Funds" in this Prospectus.
Furman Selz acts as administrator and sponsor to the Funds. Furman Selz
provides certain management and administrative services to the Funds, and is
entitled to receive a fee from each Fund at an annual rate based on the Fund's
average daily net assets. PFD Inc. distributes the Funds' shares and may be
reimbursed for certain of its distribution-related expenses.
Fees and expenses charged to the Funds are outlined on page of this
Prospectus.
4
<PAGE> 358
GUIDE TO INVESTING IN THE PACIFICA FAMILY OF FUNDS
Purchase orders for the Funds received by 9:00 a.m., Pacific time (12:00
p.m., Eastern time) will become effective that day.
<TABLE>
<S> <C>
- MINIMUM INITIAL INVESTMENT........................ $500
- MINIMUM INITIAL INVESTMENT FOR IRAS............... $250
- MINIMUM SUBSEQUENT INVESTMENT..................... $ 50
Investor Shares of the Funds are purchased at net asset
value.
Shareholders may exchange Investor Shares between Funds by
telephone or mail.
- MINIMUM INITIAL EXCHANGE.......................... $500
(No minimum for subsequent exchanges.)
</TABLE>
Shareholders may redeem Investor Shares by telephone, mail or wire.
- The Funds reserve the right upon not less than 30 days' notice to redeem
involuntarily all the Investor Shares in an investor's account which have
an aggregate value of $500 or less for any particular Fund.
(The above redemption services are not available for IRAs and trust clients
of First Interstate Bancorp and its affiliates.)
All dividends and distributions will be automatically reinvested at net
asset value in additional Investor Shares of the applicable Fund unless cash
payment is requested.
- Distributions for the Funds are generally paid monthly.
For additional information on how to purchase and redeem Investor Shares of
the Funds, see "Purchase of Investor Shares," "Exchange of Investor Shares" and
"Redemption of Investor Shares."
5
<PAGE> 359
FUND EXPENSES
The following table lists the costs and expenses that an investor will
incur either directly or indirectly as an Investor shareholder of a Fund. The
information is based on estimated amounts for the initial fiscal year of each
Fund.
FEE TABLE -- INVESTOR SHARES
<TABLE>
<CAPTION>
NATIONAL CALIFORNIA
TAX-EXEMPT TAX-EXEMPT
MONEY MARKET MONEY MARKET
FUND FUND
------------ ------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)........ None None
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering
price)................................... None None
Deferred Sales Load (as a percentage of
redemption proceeds)....................... None None
Redemption Fees.............................. None None
Exchange Fees................................ None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waivers)(++)........ 0.15% 0.08%
----- -----
12b-1 Fees(++)++........................... 0.10% 0.10%
----- -----
Other Expenses (after waivers)(++)++++..... 0.40% 0.47%
----- -----
TOTAL FUND OPERATING EXPENSES
(after waivers)(++)++++++.................. 0.65% 0.65%
===== =====
</TABLE>
- ---------------
(++) Management Fee (before waivers) would be 0.35% for the National Tax-
Exempt Money Market Fund and 0.35% for the California Tax-Exempt Money
Market Fund.
(++)++ Under rules of the National Association of Securities Dealers, Inc.
(the "NASD"), a 12b-1 fee may be treated as a sales charge for certain
purposes. Because a 12b-1 fee is an annual fee charged against the
assets of a Fund, long-term shareholders may indirectly pay more in
total sales charges than the economic equivalent of the maximum
front-end sales charge permitted by the rules of the NASD. See
"Management of the Funds -- The Sponsor and Distributor."
(++)++++ Other Expenses (before waivers) would be 0.55% for the National Tax-
Exempt Money market Fund and 0.62% for the California Tax-Exempt Fund,
and are estimated.
(++)++++++ Total Fund Operating Expenses (before waivers) would be 1.00% for the
National Tax-Exempt Money Market Fund and 1.07% for the California
Tax-Exempt Money Market Fund.
6
<PAGE> 360
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Funds' Investor Shares will
bear. The table does not reflect any charges that may be imposed by a First
Interstate Bank or other institutions directly on their customer accounts in
connection with investments in the Funds.
EXAMPLE:(++)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
NATIONAL CALIFORNIA
TAX-EXEMPT TAX-EXEMPT
MONEY MARKET MONEY MARKET
FUND FUND
------------ ------------
<S> <C> <C>
1 year.............................. $ 6 $ 6
3 years............................. $ 20 $ 20
</TABLE>
- ---------------
(++) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED
AMOUNT.
7
<PAGE> 361
THE FUNDS
The Funds are portfolios of a Massachusetts business trust, Pacifica Funds
Trust, organized under the laws of the Commonwealth of Massachusetts as an
open-end, management investment company. The Trust's Board of Trustees oversees
the overall management of the Funds and elects the officers of the Funds.
INVESTMENT POLICIES AND PRACTICES OF THE FUNDS
Each Fund follows its own investment policies and practices, including
certain investment restrictions. The SAI contains the specific investment
restrictions which govern the Funds' investments. The Funds' investment
objectives are fundamental policies, which means that they may not be changed
without a majority vote of shareholders of the affected Fund. Except for the
objectives and those restrictions specifically identified as fundamental, all
other investment policies and practices described in this Prospectus and in the
SAI are not fundamental. The Advisor selects investments and makes investment
decisions based on the investment objective and policies of each Fund.
The National Tax-Exempt Money Market Fund's investment objective is to seek
as high a level of current income exempt from Federal income tax as is
consistent with liquidity and stability of principal. To achieve its objective
the National Tax-Exempt Money Market Fund invests primarily in a diversified
portfolio of high-quality, short-term municipal obligations the interest on
which is exempt from Federal income tax.
The California Tax-Exempt Money Market Fund's investment objective is to
provide investors with as high a level of current interest income exempt from
both Federal and California personal income taxes as is consistent with the
preservation of capital and liquidity. To achieve its objective, the California
Tax-Exempt Money Market Fund invests primarily in high quality short-term
California Municipal Obligations.
Each Fund seeks to maintain a net asset value of $1.00 per share. Their
assets consist only of obligations with remaining maturities (as defined by the
Securities and Exchange Commission) of 397 days or less at the date of
acquisition, and the dollar-weighted average maturity of each Fund's investments
is 90 days or less. There can be no assurance that each Fund's investment
objective will be achieved or that the Funds will be able to maintain a net
asset value of $1.00 per share.
8
<PAGE> 362
Municipal obligations acquired by the Funds must be rated at the time of
purchase in one of the two highest rating categories by at least two nationally
recognized statistical rating organizations ("NRSROs"), (or by only one in the
event only one rating service has rated the security) or, if unrated, must be
determined to be of comparable quality by the Advisor. Municipal obligations are
debt instruments issued by or on behalf of states, territories and possessions
of the United States, the District of Columbia and their respective authorities,
agencies, instrumentalities and political subdivisions ("municipal
obligations"). The California Tax-Exempt Money Market Fund invests primarily in
municipal obligations of the State of California and its respective authorities,
agencies, instrumentalities and political subdivisions ("California Municipal
Obligations"). Under normal market conditions, each Fund will invest at least
80% of its total assets in obligations the interest on which is exempt from
Federal income tax. For purposes of this investment limitation, securities, the
interest on which is treated as a tax preference item under the Federal
alternative minimum tax, are considered taxable. In addition, under normal
market conditions, the California Tax-Exempt Money market Fund will invest at
least 65% of its total assets in California Municipal Obligations.
The types of securities and investment practices used by the Funds are
described in greater detail below under "Description of Securities and
Investment Practices."
RISKS OF INVESTING IN THE FUNDS
The Funds attempt to maintain the value of their shares at a constant $1.00
per share, although there can be no assurance that the Funds will always be able
to do so. The Funds' performance will fluctuate based on many factors, including
the quality of the instruments in each Funds' investment portfolio, national and
international economic conditions, interest rate levels and general market
conditions.
The California Tax-Exempt Money Market Fund is classified as a
non-diversified investment company under the 1940 Act. Investment return on a
non-diversified portfolio typically is dependent upon the performance of a
smaller number of securities relative to the number held in a diversified
portfolio. In addition, a non-diversified portfolio may be more susceptible to
economic, political and regulatory developments than a diversified investment
portfolio with a similar objective may be.
In seeking to achieve its investment objective, each Fund may invest in
municipal obligations that are private activity bonds the interest on which is
subject to the Federal alternative minimum tax. Investments in
9
<PAGE> 363
such securities, however, will not exceed under normal market conditions 20% of
each Fund's total assets when added together with any taxable investments held
by the Fund.
The concentration of the California Tax-Exempt Money Market Fund in
California Municipal Obligations raises additional considerations. Payment of
the interest on and the principal of these obligations is dependent upon the
continuing ability of California issuers and/or obligors to meet their
obligations thereunder. Many of the California Tax-Exempt Money Market Fund's
investments are likely to be obligations of California governmental issuers
which rely in whole or in part, directly or indirectly, on real property taxes
as a source of revenue. "Proposition Thirteen" and similar California
constitutional and statutory amendments and initiatives in recent years have
restricted the ability of California taxing entities to increase real property
tax revenues. Other initiative measures approved by California voters in recent
years, through limiting various other taxes, have resulted in a substantial
reduction in state revenues. Decreased state revenues may result in reductions
in allocations of state revenues to local governments.
Because of the complex nature of the various initiatives and restrictions
mentioned above, certain possible ambiguities and inconsistencies in their terms
and the scope of various exemptions and exceptions, as well as the impossibility
of predicting the level of future appropriations for state and local
governmental entities, it is not presently possible to determine the impact of
these initiatives and related measures on the ability of governmental issuers in
California to pay interest or repay principal on their obligations. There have,
however, been certain adverse developments with respect to municipal obligations
of governmental issuers in the state over the past several years.
In addition to the various initiatives and restrictions discussed above,
economic factors such as the reduction in defense spending, a decline in tourism
and high levels of unemployment have had an adverse impact on the economy of
California. These economic factors have reduced revenues to the state government
at a time when expenses of state government such as education costs, various
welfare costs and other expenses have been rising. Such economic factors have
also adversely impacted the ability of state and local California governmental
entities to repay debt.
In addition to the risk of nonpayment of state and local California
governmental debt, if such debt declines in quality and is downgraded by the
NRSROs, it may become ineligible for purchase by the Fund. Since there are large
numbers of buyers of such debt that may be similarly
10
<PAGE> 364
restricted, the supply of eligible securities could become inadequate at certain
times.
A more detailed description of special factors affecting investment in
California municipal obligations is set forth in the Appendix to the SAI.
Because the National Tax-Exempt Money Market Fund invests primarily in
municipal obligations of issuers in various states and localities, it is subject
to many of the same risks and special considerations with respect to its
portfolio investments as discussed above relating to the State of California and
its municipalities.
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction of
the Board of Trustees. The Trustees are Dennis W. Draper, Joseph N. Hankin, John
E. Heilmann, Jack D. Henderson and Richard A. Wedemeyer. Information about the
Trustees, as well as the Funds' executive officers, may be found in the SAI
under the heading "Management Trustees and Officers."
THE ADVISOR: FIRST INTERSTATE CAPITAL MANAGEMENT, INC.
First Interstate Capital Management, Inc., 7501 E. McCormick Parkway,
Scottsdale, Arizona 85258, serves as investment advisor to the Trust. FICM
manages the investment and reinvestment of the assets of the Funds and
continuously reviews, supervises and administers the Funds' investments. The
Advisor is responsible for placing orders for the purchase and sale of the
Funds' investments directly with brokers and dealers selected by it in its
discretion.
FICM is a wholly-owned subsidiary of First Interstate Bank of California,
which is the largest banking subsidiary of First Interstate Bancorp, a
multi-bank holding company. First Interstate Bancorp provides financial products
and services marketed at the local level to nearly five million households in
over 500 communities in 13 western states.
On January 24, 1996, First Interstate Bancorp signed a definitive merger
agreement to merge with Wells Fargo & Company ("Wells Fargo"), a publicly-held
bank holding company with its head office at 420 Montgomery Street, San
Francisco, California 94104. The merger is conditioned upon, among other things,
certain regulatory approvals. Upon completion of the merger, currently expected
to occur during the second quarter of 1996, FICM will be wholly-owned by Wells
Fargo, and the existing investment advisory agreement between the Trust and FICM
will
11
<PAGE> 365
automatically terminate. It is contemplated that an application will be filed
with the Securities and Exchange Commission to ensure there is no disruption as
a result of the merger in the provision of investment advisory services to the
Funds, and that a meeting of shareholders will be held not later than 120 days
after the merger to approve ongoing investment advisory arrangements for the
Funds.
For the advisory services it provides to the Funds, FICM is entitled to
receive from each Fund fees, payable monthly, at the annual rate of 0.35% of the
first $500 million of a Fund's average daily net assets, 0.30% of the next $500
million of a Fund's average daily net assets, and 0.25% of a Fund's average
daily net assets in excess of $1 billion.
THE SPONSOR AND DISTRIBUTOR
Furman Selz LLC, 230 Park Avenue, New York, New York 10169, acts as Sponsor
of the Funds. Furman Selz is primarily an institutional brokerage firm with
memberships on the New York, American, Boston, Midwest, Pacific and Philadelphia
Stock Exchanges. Furman Selz also serves as administrator and distributor of
other mutual funds. Pacifica Funds Distributor Inc. is an affiliate of Furman
Selz and was organized specifically to distribute shares of the Trust; however,
offers and sales of shares of the Trust will be made only through Furman Selz or
other registered (or exempt) dealers.
Under the Distribution Plan (the "Plan") adopted by the Funds for their
Investor Shares, each Fund may pay directly or reimburse PFD Inc. monthly
(subject to a limit of 0.50% per annum of the average daily net asset value of
the outstanding Investor Shares of each Fund) for costs and expenses of PFD Inc.
in connection with the distribution of Investor Shares of the Funds. These costs
and expenses include (i) advertising by radio, television, newspapers,
magazines, brochures, sales literature, direct mail or any other form of
advertising; (ii) expenses of sales employees or agents of PFD Inc., including
salary, commissions, travel and related expenses; (iii) payments to
broker-dealers and financial institutions for services in connection with the
distribution of Investor Shares, including promotional incentives and fees
calculated with reference to the average daily net asset value of Investor
Shares held by shareholders who have a brokerage or other service relationship
with the broker-dealer or other institution receiving such fees; (iv) costs of
printing prospectuses and other materials to be given or sent to prospective
investors; and (v) such other similar services as the Trustees determine to be
reasonably calculated to result in the sale of Investor Shares of the Funds.
Each Fund will pay all costs and expenses in connection with the preparation,
printing and distribution of prospectuses
12
<PAGE> 366
to current shareholders and the operation of its Plan, including related legal
and accounting fees. A Fund will not be liable for distribution expenditures
made by PFD Inc. in any given year in excess of the maximum annual amount
payable under the Plan for that Fund. All payments made under the Plan for
Investor Shares are borne entirely by a Fund's Investor Shares.
PFD Inc. may from time to time pay a bonus or other incentive to dealers
which employ registered representatives who sell a minimum dollar amount of
Investor Shares of the Funds and/or other funds distributed by Furman Selz or
PFD Inc. during a specific period of time. Such bonus or other incentive will
take the form of payment for travel expenses, including lodging, incurred in
connection with trips taken by qualifying registered representatives and members
of their families to places within or outside the United States, or other
bonuses, such as gift certificates or the cash equivalent of such bonuses. PFD
Inc. has established such a special promotional incentive program with First
Interstate Incorporated, Inc.
ADMINISTRATIVE SERVICES
The Funds have also entered into an Administrative Services Contract with
Furman Selz pursuant to which Furman Selz provides certain management and
administrative services necessary for the Funds' operations including: (i)
general supervision of the operation of the Funds including coordination of the
services performed by the Funds' investment advisor, transfer agent, custodian,
independent accountants and legal counsel, regulatory compliance, including the
compilation of information for documents such as reports to, and filings with,
the SEC and state securities commissions, and preparation of proxy statements
and shareholder reports for the Funds; (ii) general supervision relative to the
compilation of data required for the preparation of periodic reports distributed
to the Funds' Officers and Board of Trustees; and (iii) furnishing office space
and certain facilities required for conducting the business of the Funds. For
these services, Furman Selz is entitled to receive a fee, payable monthly, at
the annual rate of 0.15% of the average daily net assets of the Funds. Pursuant
to a Services Agreement with the Trust, Furman Selz assists the Trust with
certain transfer and dividend disbursing agent functions and receives a fee of
$15.00 per account per year plus out-of-pocket expenses. Pursuant to a Fund
Accounting Agreement with the Trust, Furman Selz assists the Trust in
calculating net asset values and provides certain other accounting services for
each Fund for an annual fee of $30,000 per Fund plus out-of-pocket expenses.
13
<PAGE> 367
SERVICE ORGANIZATIONS
Various banks (including banks affiliated with First Interstate Bancorp),
trust companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative services with respect to the Funds' Institutional Shares, such as
maintaining shareholder accounts and records. The Funds may pay fees to Service
Organizations (which vary depending upon the services provided) in amounts up to
an annual rate of 0.25% of the average daily net asset value of the outstanding
Investor Shares of the Funds owned by shareholders with whom a Service
Organization has a servicing relationship. These fees will be home entirely by
the Funds' Investor Shares.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest a specified amount in
the Funds or charging a direct fee for servicing. If imposed, these fees would
be in addition to any amounts which might be paid to the Service Organization by
the Funds. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged to
consult with them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Funds and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
OTHER EXPENSES
Each Fund bears all costs of its operations other than expenses
specifically assumed by Furman Selz, PFD Inc. or the Advisor. The costs borne by
the Funds include legal and auditing expenses; Trustees' fees and expenses;
insurance premiums; custodian and transfer agent fees and expenses; expenses
incurred in acquiring or disposing of the Funds' portfo-
14
<PAGE> 368
lio securities; expenses of registering and qualifying the Funds' shares for
sale with the SEC and with various state securities commissions; expenses of
obtaining quotations on the Funds' portfolio securities and pricing of the
Funds' shares; expenses of maintaining the Funds' legal existence and of
shareholders' meetings; and expenses of preparation and distribution to existing
shareholders of reports, proxies and prospectuses. Each Fund bears its own
expenses associated with its establishment as a series of the Trust; these
expenses are amortized over a five-year period from the commencement of a Fund's
operations. See "Management" in the SAI for additional information on expenses
borne by the Funds. Trust expenses directly attributable to a particular Fund
are charged to that Fund, and expenses attributable to a particular class of
shares of a Fund (such as Service Organization fees) are charged to that class.
Other expenses are allocated proportionately among all of the investment
portfolios in the Trust in relation to the net assets of each portfolio or by
other means deemed fair and equitable by the Board of Trustees.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Advisor places orders for
the purchase and sale of portfolio investments for the Funds' accounts with
brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Funds, the Advisor will seek the best execution of the Funds' orders.
Purchases and sales of debt securities are generally placed by the Advisor with
primary market makers for these securities on a net basis, i.e., without any
brokerage commission being paid by the Funds. Trading does, however, involve
transaction costs. Transactions with dealers serving as primary market makers
reflect the spread between the bid and asked prices. Purchases of underwritten
issues may be made which will include an underwriting fee paid to the
underwriter. Broker-dealers are selected on the basis of a variety of factors
such as reputation, capital strength, size and difficulty of the order, sale of
Fund shares by the broker-dealer, and research provided to the Advisor by the
broker-dealer. The Advisor may cause a Fund to pay commissions higher than
another broker-dealer would have charged if the Advisor believes the commission
paid is reasonable in relation to the value of the brokerage and research
services received by the Advisor.
15
<PAGE> 369
FUND SHARE VALUATION
The net asset value of each class of shares of the Funds is calculated at
3:00 p.m. (Eastern time), Monday through Friday, on each day the New York Stock
Exchange is open for trading (a "Business Day"), which excludes the following
business holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share for each class of shares is computed by dividing the value of a
Fund's assets allocable to a particular class, less the liabilities charged to
that class by the total number of the outstanding shares of that class. All
expenses, including fees paid to the Advisor, Furman Selz and PFD Inc., are
accrued daily and taken into account for the purpose of determining the net
asset value.
The Funds use the amortized cost method to value their portfolio securities
and seek to maintain a constant net asset value of $1.00 per share, although
there may be circumstances under which this goal cannot be achieved. The
amortized cost method involves valuing a security at its cost and amortizing any
discount or premium over the period until maturity, regardless of the impact of
fluctuating interest rates on the market value of the security. See the SAI for
a more complete description of the amortized cost method.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in the Funds is $500, except that the
minimum is $250 for an IRA. Any subsequent investments must be at least $50,
including an IRA investment. All initial investments should be accompanied by a
completed Purchase Application. A separate application is required for IRA
investments.
PURCHASE OF INVESTOR SHARES
The following purchase procedures do not apply to certain trust or other
accounts that are managed by First Interstate Bancorp, its subsidiaries or
affiliates. An account customer should consult his or her account officer for
proper instructions.
All funds received by the Trust are invested in full and fractional
Investor Shares of the appropriate Fund. Certificates for Investor Shares are
not issued. Furman Selz maintains records of each shareholder's holdings of Fund
shares, and each shareholder receives a statement of transactions, holdings and
dividends. The Funds reserve the right to reject any purchase.
16
<PAGE> 370
An investment may be made using any of the following methods:
Through an Authorized Broker, Investment Advisor or Service
Organization. Investor Shares are available to new and existing shareholders
through authorized brokers, investment advisors and Service Organizations. To
make an investment using this method, simply complete a Purchase Application and
contact your broker, investment advisor or Service Organization with
instructions as to the amount you wish to invest. Your broker will then contact
the Fund to place the order on your behalf on that day.
Orders received by your broker or Service Organization for the Funds in
proper order prior to the determination of a Fund's net asset value and
transmitted to the Trust prior to the close of its business day (which is
currently 9:00 a.m., Pacific time (12:00 p.m., Eastern time), will become
effective that day. Brokers who receive orders are obligated to transmit them
promptly. You should receive written confirmation of your order within a few
days of receipt of instructions from your broker.
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the applicable Fund. In most cases, your bank will either be a member
of the Federal Reserve Banking System or have a relationship with a bank that
is. Your bank will normally charge you a fee for handling the transaction. To
purchase Investor Shares by a Federal funds wire, please first contact Furman
Selz Mutual Funds Client Services. They will establish a record of information
for the wire to ensure its correct processing. You can reach the Wire Desk at
1-800-662-9417.
Have your bank wire funds using the following instructions: Fiduciary Trust
Company
Kansas City, MO 64105
ABA #1010-0362-1
Account #7527950
Further Credit to: Fund Name
As long as you have read the Prospectus, you may establish a new regular
account through the Wire Desk; IRAs may not be opened in this way. When new
accounts are established by wire, the distribution options will be set to
reinvest and the social security or tax identification number ("TIN") will not
be certified until a signed application is received. Completed applications
should be forwarded immediately to the Funds. With the Purchase Application, the
shareholder can specify other distribution options and add any special features
offered by a Fund. Should any dividend distributions or redemptions be paid
before the TIN is certified, they will be subject to 31% Federal tax
withholding.
17
<PAGE> 371
Automatic Investment Program. An eligible shareholder may also participate
in the Pacifica Automatic Investment Program, an investment plan that
automatically debits money from the shareholder's bank account and invests it in
one or more of the Funds through the use of electronic funds transfers or
automatic bank drafts. Shareholders may elect to make subsequent investments by
transfers of a minimum of $50 on either the fifth or twentieth day of each month
into their established Fund accounts. Contact the Trust at 1-800-662-8417 for
more information about the Pacifica Automatic Investment Program.
INDIVIDUAL RETIREMENT ACCOUNTS
The Funds may be used as a funding medium for IRAs. Investor Shares may
also be purchased for IRAs established with an affiliate of First Interstate
Bancorp or other authorized custodians. In addition, an IRA may be established
through a custodial account with Investors Fiduciary Trust Company. Completion
of a special application is required in order to create such an account, and the
minimum initial investment for an IRA is $250. Contributions to IRAs are subject
to prevailing amount limits set by the Internal Revenue Service. A $5.00
establishment fee and an annual $12.00 maintenance and custody fee is payable
with respect to each IRA, and there will be a $10.00 termination fee when the
account is closed. For more information, call the Funds at 1-800-662-8417.
EXCHANGE OF INVESTOR SHARES
The Funds offer two convenient ways to exchange Investor Shares in a Fund
for Investor Shares in another investment portfolio of the Trust. Before
engaging in an exchange transaction, a shareholder should read carefully the
Prospectus describing the investment portfolio into which the exchange will
occur, which is available without charge and can be obtained by writing to
Furman Selz, Mutual Fund Department, 237 Park Avenue, Suite 910, New York, New
York 10017, or by calling 1-800-662-8417. A shareholder may not exchange
Investor Shares of one portfolio for Investor Shares of another portfolio if
both or either are not qualified for sale in the state of the shareholder's
residence. The minimum amount for an initial exchange is $500. No minimum is
required in subsequent exchanges. The Trust may terminate or amend the terms of
the exchange privilege at any time.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the net asset value next determined
18
<PAGE> 372
following receipt of the request by the Trust in good order, plus any applicable
sales charge.
An exchange is taxable as a sale of a security; however, if a Fund
maintains a net asset value of $1.00 per share, no gain or loss would be
realized upon an exchange of Fund shares. Shareholders should receive written
confirmation of the exchange within a few days of the completion of the
transaction.
In the case of transactions subject to a sales charge, the sales charge
will be assessed on an exchange of Investor Shares, equal to the excess of the
sales load applicable to the Investor Shares to be acquired over the amount of
any sales load previously paid on the Investor Shares to be exchanged. No
service fee is imposed. See "Dividends, Distributions and Federal Income Tax"
for an explanation of circumstances in which a sales load paid to acquire
Investor Shares of the Funds may not be taken into account in determining gain
or loss on the disposition of those Investor Shares.
In addition, Institutional Shares of a Fund may be exchanged for Investor
Shares of the same Fund in connection with the distribution of assets held in a
qualified trust, agency or custodial account maintained with the trust
department of a First Interstate or other bank, trust company or thrift
institution, or in other cases where Institutional Shares are not held in such
qualified accounts. Similarly, Investor Shares may be exchanged for
Institutional Shares of the same Fund if the shares are to be held in such a
qualified trust, agency or custodial account. These exchanges are made without a
sales charge at the net asset value of the respective share classes.
Exchange by Mail. To exchange Investor Shares of a Fund by mail, simply
send a letter of instruction to Furman Selz. The letter of instruction must
include: (i) your account number, (ii) the Fund from and the Fund into which you
wish to exchange your investment; (iii) the dollar or share amount you wish to
exchange; and (iv) the signatures of all registered owners or authorized
parties. All signatures must be guaranteed by an eligible guarantor institution
including a member of a national securities exchange or by a commercial bank or
trust company, broker-dealers, credit unions and savings associations.
Exchange by Telephone. To exchange Investor Shares of a Fund by telephone,
or if you have any questions, simply call the Trust at 1-800-662-8417. You
should be prepared to give the telephone representative the following
information: (i) your account number, social security number and account
registration; (ii) the name of the portfolio from and the portfolio into which
you wish to transfer your investment; and (iii) the
19
<PAGE> 373
dollar or share amount you wish to exchange. The conversation may be recorded to
protect you and the Funds. Telephone exchanges are automatically available
unless the shareholder indicates he is not interested in having this privilege
by checking the "no" box on the Purchase Application. See "Redemption of
Investor Fund Shares -- By Telephone" for a discussion of telephone transactions
generally.
REDEMPTION OF INVESTOR SHARES
Shareholders may redeem their Investor Shares, in whole or in part, on any
Business Day. Investor Shares will be redeemed at the net asset value next
determined after a redemption request in good order has been received and
accepted by the Trust. See "Fund Share Valuation." A redemption may be a taxable
transaction on which gain or loss may be recognized. Generally, however, gain or
loss is not expected to be recognized on a redemption of shares of the Funds,
both of which seek to maintain a net asset value of $1.00 per share.
Where the Investor Shares to be redeemed have been purchased by check, the
Trust may delay payment of the redemption proceeds until the purchasing check
has cleared, which may take up to 15 days. Shareholders may avoid this delay by
investing through wire transfers of Federal funds. During the period prior to
the time the Investor Shares are redeemed, dividends on the Investor Shares will
continue to accrue and be payable and the shareholder will be entitled to
exercise all other beneficial rights of ownership.
Once the Investor Shares are redeemed, a Fund will ordinarily send the
proceeds by check to the shareholder at the address of record on the next
Business Day. The Funds may, however, take up to seven days to make payment.
This will not be the customary practice. Also, if the New York Stock Exchange is
closed (or when trading is restricted) for any reason other than the customary
weekend or holiday closing or if an emergency condition as determined by the SEC
merits such action, the Funds may suspend redemptions or postpone payment dates.
To ensure acceptance of your redemption request, it is important to follow
the procedures described below. Although the Trust has no present intention to
do so, it reserves the right to refuse or to limit the frequency of any
telephone or wire redemptions. Of course, it may be difficult to place orders by
telephone during periods of severe market or economic change, and a shareholder
should consider alternative methods of communications, such as couriers or U.S.
mail. The services offered by the Funds may be
20
<PAGE> 374
modified or terminated at any time. If the Funds terminate any particular
service, they will do so only after giving written notice to shareholders.
You may redeem your Investor Shares using any of the following methods:
Through an Authorized Broker, Investment Advisor or Service
Organization. You may redeem your Investor Shares by contacting your broker or
investment advisor and instructing him or her to redeem your Investor Shares. He
or she will then contact PFD Inc. and place a redemption trade on your behalf.
He or she may charge you a fee for this service.
By Mail. You may redeem your Investor Shares by sending a letter directly
to the Funds. To be accepted, a letter requesting redemption must include: (i)
the Fund name and account registration from which you are redeeming Investor
Shares; (ii) your account number, (iii) the amount to be redeemed; (iv) the
signatures of all registered owners; and (v) a signature guarantee by any
eligible guarantor institution including a member of a national securities
exchange or a commercial bank or trust company, broker-dealers, credit unions
and savings associations. Corporations, partnerships, trusts or other legal
entities will be required to submit additional documentation.
By Telephone. You may redeem your Investor Shares by calling the Funds
toll free at 1-800-662-8417. You should be prepared to give the telephone
representative the following information: (i) your account number, social
security number and account registration; (ii) the Fund name from which you are
redeeming Investor Shares; and (iii) the amount to be redeemed. The conversation
may be recorded to protect you and the Funds. Telephone redemptions are
automatically available unless the shareholder indicates that he is not
interested in having this privilege by checking the "no" box on the Purchase
Application. The Funds employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. If the Funds fail to employ such
reasonable procedures, they may be liable for any loss, damage or expense
arising out of any telephone transactions purporting to be on a shareholder's
behalf. In order to assure the accuracy of instructions received by telephone,
the Funds require some form of personal identification prior to acting upon
instructions received by telephone, record telephone instructions and provide
written confirmation to investors of such transactions.
By Wire. You may redeem your Investor Shares by contacting the Funds by
mail or telephone and instructing them to send a wire transmission to your
personal bank.
21
<PAGE> 375
Your instructions should include: (i) your account number, social security
number and account registration; (ii) the Fund name from which you are redeeming
Investor Shares; and (iii) the amount to be redeemed. Wire redemptions can be
made only if the "yes" box has been checked on your Purchase Application, and a
copy of a void check from the account where proceeds are to be wired is attached
to the Purchase Application. Your bank may charge you a fee for receiving a wire
payment on your behalf.
The above-mentioned services "By Telephone" and "By Wire" are not available
for IRAs and trust clients of an affiliate of First Interstate Bancorp.
Systematic Withdrawal Plan. An owner of $10,000 or more of Investor Shares
of a Fund may elect to have periodic redemptions from his or her account to be
paid on a monthly, quarterly, semi-annual or annual basis. The minimum periodic
payment is $100. A sufficient number of Investor Shares to make the scheduled
redemption will normally be redeemed on the date selected by the shareholder.
Depending on the size of the payment requested and fluctuation in the net asset
value, if any, of the Investor Shares redeemed, redemptions for the purpose of
making such payments may reduce or even exhaust the account. A shareholder may
request that these payments be sent to a predesignated bank or other designated
party. Capital gains and dividend distributions paid to the account will
automatically be reinvested at net asset value on the distribution payment date.
Redemption of Small Accounts. Due to the disproportionately higher cost of
servicing small accounts, each Fund reserves the right to redeem, on not less
than 30 days' notice, an account in a Fund that has been reduced by a
shareholder to $500 or less. However, if during the 30-day notice period the
shareholder purchases sufficient Investor Shares to bring the value of the
account above $500, this restriction will not apply.
Redemption in Kind. All redemptions of Investor Shares of the Funds shall
be made in cash, except that the commitment to redeem Investor Shares in cash
extends only to redemption requests made by each shareholder of a Fund during
any 90-day period of up to the lesser of $250,000 or 1% of the net asset value
of that Fund at the beginning of such period. This commitment is irrevocable
without the prior approval of the SEC and is a fundamental policy of the Funds
that may not be changed without shareholder approval. In the case of redemption
requests by shareholders in excess of such amounts, the Board of Trustees
reserves the right to have the Funds make payment, in whole or in part, in
securities or other assets, in case of an emergency or any time a cash
distribution would
22
<PAGE> 376
impair the liquidity of a Fund to the detriment of the existing shareholders. In
this event, the securities would be valued in the same manner as the securities
of that Fund are valued. If the recipient were to sell such securities, he or
she would incur brokerage charges.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
Each Fund intends to be treated as a regulated investment company under the
Federal tax law. As such, the Funds generally will not pay Federal income tax on
the income and gains they pay as dividends to their shareholders. In order to
avoid a 4% Federal excise tax, each Fund intends to distribute each year all of
its income and gains.
Shareholders will be subject to tax on dividends (other than exempt-
interest dividends as described below) received from a Fund, regardless of
whether received in cash or reinvested in additional shares. Shareholders must
treat dividends, other than capital gain or exempt-interest dividends, as
ordinary income. Dividends designated as capital gain dividends are taxable to
shareholders as long-term capital gain. Certain dividends declared in October,
November, or December of a calendar year are treated for Federal income tax
purposes as though received on December 31 of that year if paid to shareholders
during January of the following calendar year.
To the extent that a Fund's dividends distributed to shareholders are
derived from interest income exempt from Federal income tax and are designated
as exempt-interest dividends by the Fund, they will be excludable from a
shareholder's gross income for regular Federal income tax purposes. A Fund will
be qualified to pay exempt-interest dividends if, at the close of each quarter
of its taxable year, at least 50% of the value of its total assets consists of
securities on which interest payments are exempt from Federal income tax under
Code Section 103. A Fund will inform shareholders annually as to the portion of
the distribution paid by it which constitutes exempt-interest dividends. A Fund
is authorized to make investments which will give rise to taxable rather than
tax-exempt income. To the extent that a Fund's dividends are derived from income
from its taxable investments and from gain recognized by the Fund, they will be
taxable to shareholders as ordinary income.
Tax-exempt interest on private activity bonds and exempt-interest dividends
attributable to private activity bonds generally are treated as tax preference
items for purposes of the Federal alternative minimum tax. Therefore, if a Fund
invests in such private activity bonds, certain shareholders may become subject
to the alternative minimum tax on that part of
23
<PAGE> 377
the Fund's exempt-interest dividends derived from interest income on such bonds.
The entire amount of exempt-interest dividends received from a Fund by most
corporations will be part of an adjustment in computing Federal alternative
minimum taxable income for purposes of the alternative minimum tax and the
environmental tax under Code section 59A.
Up to 85% of an individual's social security benefits and certain railroad
retirement benefits may be subject to Federal income tax. Along with other
factors, total tax-exempt income, including exempt-interest dividends, is used
to calculate the portion of such benefits that are taxed.
There could be retroactive revocation of the tax-exempt status of certain
municipal obligations after their issuance. In addition, in connection with
budget and tax reform efforts, proposals may be made or adopted which would
change the tax treatment arising from an investment in a Fund. It is not
possible to predict the precise impact of these events, but they may affect the
value of the securities in a Fund's portfolio.
Deductions for interest expense incurred (or deemed incurred) to acquire or
carry shares of a Fund may be subject to limitations that reduce or eliminate
such deductions. In addition, under rules issued by the Internal Revenue Service
for determining when borrowed funds are considered used for the purposes of
purchasing or carrying particular assets, the purchase of shares may be
considered to have been made with borrowed funds, even though the borrowed funds
are not directly traceable to the purchase of shares.
A Fund may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct TIN or to make required
certifications, or where the Fund or shareholder has been notified by the
Internal Revenue Service that the shareholder is subject to backup withholding.
Most corporate shareholders and certain other shareholders specified in the Code
are exempt from backup withholding. Backup withholding is not an additional tax.
Any amounts withheld may be credited against the shareholder's U.S. Federal
income tax liability.
The treatment for state, local and municipal tax purposes of distributions
of exempt-interest dividends from a Fund will vary according to the laws of
state and local taxing authorities. Exempt-interest dividends and other
dividends may be subject to state and local taxation. Investors should consult
with their tax advisors as to the availability of any exemptions from such
taxes. Persons who may be "substantial users" (or "related persons"
24
<PAGE> 378
of substantial users) of facilities financed by private activity bonds may
suffer adverse tax consequences from investing in a Fund and, therefore, should
consult their tax advisors before purchasing Fund shares. In some instances, a
state or city may exempt from tax the portion of the distribution from the Fund
that represents interest received on obligations of that state or its political
subdivisions. Under the laws of certain other states and cities, the entire
amount of any such distribution may be taxable.
California law provides that if, at the close of each quarter of its
taxable year, at least 50% of the value of the total assets of a regulated
investment company consists of obligations the interest of which is exempt from
tax under California law or of obligations the interest of which is exempt from
tax under U.S. law, distributions designated as "exempt-interest" dividends for
California purposes are exempt from California personal income taxes.
Shareholders will be notified annually of the Federal income tax status of
distributions and the percentage of municipal obligation interest income
received.
The preceding discussion primarily relates to Federal income taxes; the
consequences under other tax laws may differ. For additional information
relating to taxation, see the SAI.
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
Municipal Obligations. The Funds invest primarily (at least 65% of total
assets) in various types of Municipal Obligations. The California Tax-Exempt
Money Market Fund invests primarily in California Municipal Obligations. The
National Tax-Exempt Money Market Fund invests primarily in municipal
obligations, the interest on which is exempt from Federal income tax. Such
municipal securities consist of debt obligations issued to obtain funds for
various public purposes, including general financing for state and local
governments as well as for specific projects or public facilities. Municipal
securities may be backed by the taxing power of the municipality that has issued
the security, by revenues from a specific project or facility being financed, or
by the credit of a private entity.
Tax-Exempt Notes. The Funds may invest in tax-exempt notes. These
instruments are generally used to meet short term capital needs and usually have
maturities of one year or less. Tax and revenue anticipation notes are issued by
municipalities in expectation of future tax or other revenues, and are payable
from those specific taxes or revenues. Bond anticipation notes normally provide
interim financing in advance of an issue of bonds or notes, the proceeds of
which are used to repay the anticipation
25
<PAGE> 379
notes. Tax-exempt commercial paper is issued by municipalities to help finance
short term capital or operating needs.
Municipal Lease Obligations. The Funds may invest in municipal lease
obligations including certificates of participation (COPs), which finance a
variety of public projects. Because of the way these instruments are structured,
they carry a greater risk than other types of municipal securities. The Funds
may invest in lease obligations only when they are rated by a rating agency or
are deemed by the Advisor, under the direction of the Board of Trustees, to be
of a quality comparable to a Fund's quality standards. Prior to purchasing a
municipal lease obligation and on a regular basis thereafter, the Advisor will
evaluate the credit quality and liquidity of the security. In making its
evaluation, the Advisor will consider various credit factors, such as the
necessity of the project, the municipality's credit quality, future borrowing
plans, and sources of revenue pledged for lease repayment, general economic
conditions in the region where the security is issued, and liquidity factors,
such as dealer activity. For further discussion regarding municipal lease
obligations, see "Investment Policies" in the SAI.
Variable and Floating Rate Demand and Master Demand Notes. The Funds may,
from time to time, buy variable or floating rate demand notes issued by
government agencies and instrumentalities. These securities will typically have
a maturity over one year but carry with them the right of the holder to put the
securities to a remarketing agent or other entity at designated time intervals
and on specified notice. The obligation of the issuer of the put to repurchase
the securities may be backed by a letter of credit or other obligation issued by
a financial institution. The purchase price is ordinarily par plus accrued and
unpaid interest. Generally, the remarketing agent will adjust the interest rate
every seven days (or at other specified intervals) in order to maintain the
interest rate at the prevailing rate for securities with a seven-day or other
designated maturity. A Fund's investment in demand instruments which provide
that the Fund will not receive the principal note amount within seven days'
notice, in combination with each Fund's other investments in illiquid
instruments, will be limited to an aggregate total of 10% of each Fund's net
assets.
The Funds may also buy variable rate master demand notes. The terms of
these obligations permit a Fund to invest fluctuating amounts at varying rates
of interest pursuant to direct arrangements between the Fund, as lender, and the
borrower. These instruments permit weekly and, in some instances, daily changes
in the amounts borrowed. A Fund has the right to increase the amount under the
note at any time up to the full amount provided by the note agreement, or to
decrease the amount, and the
26
<PAGE> 380
borrower may repay up to the full amount of the note without penalty. The notes
may or may not be backed by bank letters of credit. Because the notes are direct
lending arrangements between the Fund and borrower, it is not generally
contemplated that they will be traded, and there is no secondary market for
them, although they are redeemable (and, thus, immediately repayable by the
borrower) at principal amount, plus accrued interest, at any time. In connection
with any such purchase and on an ongoing basis, the Advisor will consider the
earning power, cash flow and other liquidity ratios of the issuer, and its
ability to pay principal and interest on demand, including a situation in which
all holders of such notes make demand simultaneously.
U.S. Government Securities. U.S. Government securities are obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
U.S. Treasury bills, which have a maturity of up to one year, are direct
obligations of the United States and are the most frequently issued marketable
U.S. Government security. The U.S. Treasury also issues securities with longer
maturities in the form of notes and bonds.
U.S. Government agency and instrumentality obligations are debt securities
issued by U.S. Government-sponsored enterprises and Federal agencies. Some
obligations of agencies are supported by the full faith and credit of the United
States or by U.S. Treasury guarantees, such as mortgage-backed certificates,
which may be guaranteed by the Government National Mortgage Association; others,
such as obligations of the Federal Home Loan Banks, Federal Farm Credit Bank,
Bank for Cooperatives, Federal Intermediate Credit Banks and the Federal Land
Bank, are guaranteed by the right of the issuer to borrow from the U.S.
Treasury; others, such as obligations of the Federal National Mortgage
Association, are supported by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others, such
as obligations of the Student Loan Marketing Association and the Tennessee
Valley Authority, are backed only by the credit of the agency or instrumentality
issuing the obligation. In the case of obligations not backed by the full faith
and credit of the United States, the investor must look principally to the
agency issuing or guaranteeing the obligation for ultimate repayment.
Repurchase Agreements. Securities held by a Fund may be subject to
repurchase agreements. A repurchase agreement is a transaction in which the
seller of a security commits itself at the time of the sale to repurchase that
security from the buyer at a mutually agreed-upon time and price. These
agreements may be considered to be loans by the purchaser collateralized by the
underlying securities. These agreements will
27
<PAGE> 381
be fully collateralized and the collateral will be marked-to-market daily. A
Fund will enter into repurchase agreements only with dealers, domestic banks or
recognized financial institutions which, in the opinion of the Advisor, present
minimal credit risks in accordance with guidelines adopted by the Board of
Trustees. The maturity of the underlying securities in a repurchase agreement
transaction may not exceed seven days. See "Investment Restrictions." In the
event of default by the seller under the repurchase agreement, a Fund may have
problems in exercising its rights to the underlying securities and may
experience time delays in connection with the disposition of such securities.
Loans of Portfolio Securities. Each Fund may lend its portfolio securities
up to 5% of its total assets to brokers, dealers and financial institutions,
provided certain conditions are met, including the condition that each loan is
secured continuously by collateral maintained on a daily mark-to-market basis in
an amount at least equal to the current market value of the securities loaned.
Forward Commitments and When-Issued Securities. The Funds may purchase
when-issued securities and make contracts to purchase securities for a fixed
price at a future date beyond customary settlement time if the Fund holds, and
maintains until the settlement date in a segregated account, cash, U.S.
Government securities or high-grade debt obligations in an amount sufficient to
meet the purchase price, or if the Fund enters into offsetting contracts for the
forward sale of other securities it owns. Purchasing securities on a when-issued
basis and forward commitments involve a risk of loss if the value of the
security to be purchased declines prior to the settlement date, which risk is in
addition to the risk of decline in value of the Fund's other assets. No income
accrues on securities purchased on a when-issued basis prior to the time
delivery of the securities is made, although the Fund may earn interest on
securities it has deposited in the segregated account because it does not pay
for the when-issued securities until they are delivered. Investing in
when-issued securities has the effect of (but is not the same as) leveraging the
Fund's assets. Although the Fund would generally purchase securities on a
when-issued basis or enter into forward commitments with the intention of
actually acquiring securities, the Fund may dispose of a when-issued security or
forward commitment prior to settlement, if the Advisor deems it appropriate to
do so. The Fund may realize short-term profits or losses upon such sales which
profits are not tax-exempt.
Illiquid Investments. It is the policy of each Fund that restricted
securities and other illiquid securities may not constitute, at the time of
28
<PAGE> 382
purchase or at any time, more than 10% of the value of the total net assets
of the Fund.
When, in the opinion of the Advisor, market conditions dictate a temporary
defensive strategy, a Fund may invest more than 20% of its assets in securities
that are subject to Federal income tax, California personal income tax, or both,
as applicable. Such investments would be made for temporary purposes only, and
under normal market conditions each Fund intends to invest at least 80% of its
assets in tax-exempt securities.
INVESTMENT RESTRICTIONS
Each Fund has adopted certain fundamental investment restrictions that may
be changed only with the approval of a majority of the outstanding shares of the
Fund. The following descriptions summarize several of the Funds' fundamental
investment restrictions, which are set forth in full in the Statement of
Additional Information.
No Fund may:
1. Invest 25% or more of its total assets at the time of purchase in
securities of issuers whose principal business activities are in the
same industry; and
2. Borrow money except in amounts up to 10% of the value of its total
assets at the time of borrowing.
These investment restrictions are applied at the time investment securities
are purchased.
OTHER INFORMATION
CAPITALIZATION
Pacifica Funds Trust (formerly Fund Source) was organized as a
Massachusetts business trust on July 17, 1984. The capitalization of the Trust
consists solely of an unlimited number of shares of beneficial interest with a
par value of $0.001 each. When issued, shares of the Funds are fully paid,
non-assessable and freely transferable.
The Board of Trustees has authorized the issuance of multiple classes of
shares in each of the Funds described in this Prospectus, including Investor
Shares and Institutional Shares. Each share of a Fund represents an equal
proportionate interest in a particular Fund with other shares of the
29
<PAGE> 383
same class and is entitled to cash dividends and distributions earned on such
shares as are declared in the discretion of the Board of Trustees.
Each Fund's Institutional Shares and Investor Shares bear their pro rata
portion of all operating expenses paid by the Fund except for the distribution
payments, Service Organization fees and other "class" expenses that are
allocated to a particular share class. The Board of Trustees has not approved a
Distribution Plan with respect to Institutional Shares. Each Fund may pay fees
to Service Organizations in amounts up to an annual rate of 0.25% of the daily
net asset value of the Funds' outstanding Institutional Shares owned by
shareholders with whom a Service Organization has a servicing relationship.
Because of the "class expenses," the performance of a Fund's Institutional
Shares is expected to be higher than the performance of its Investor Shares. The
Trust offers various services and privileges in connection with its Investor
Shares that are not offered in connection with its Institutional Shares,
including an automatic investment plan, automatic withdrawal plan and, with
respect to certain portfolios, checkwriting. For information regarding the
Funds' Institutional Shares, contact Furman Selz at 1-800-662-8417 or your
Service Organization.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust. The Declaration of Trust also
provides for indemnification out of the property of a Fund of any shareholder
held personally liable solely by reason of being or having been a shareholder of
the Fund. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a Fund itself would
be unable to meet its obligations and should be considered remote.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Trust is not required to hold regular
annual meetings of the Funds' shareholders, but in the event that a special
meeting is held, shareholders of each portfolio offered by the Trust will be
entitled to one vote for each full share held and fractional votes for
fractional shares held, and will vote in the aggregate and not on a
portfolio-by-portfolio basis, except as required by the 1940 Act or other
applicable law. It is contemplated that, as required by the 1940 Act, the
shareholders of a portfolio will vote separately on a portfolio-by-portfolio
30
<PAGE> 384
basis on matters relating to a particular portfolio's investment advisory
agreement or changes in a portfolio's fundamental investment limitations, and on
other matters where the interests of the respective portfolios are not
substantially identical. Similarly, shareholders of each portfolio will vote in
the aggregate and not by class unless the Trustees determine that the matter to
be voted on affects only the interests of the holders of a particular class of a
Fund's shares. Voting rights are not cumulative.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust and in connection with such meeting to comply with the shareholders'
communications provisions of Section 16(c) of the 1940 Act.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of a Fund means, with respect to the
approval of an investment advisory agreement, a distribution plan or a change in
a fundamental investment policy, the vote of the lesser of (1) 67% of the shares
of a Fund present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy, or (2) more than 50% of
the outstanding shares of a Fund. For purposes of the 1940 Act, any person who
owns either directly or through one or more controlled companies more than 25
percent of the voting securities of a company is presumed to "control" such
company. Under this definition, First Interstate Bancorp and its affiliates may
be deemed to be controlling persons of the Trust.
PERFORMANCE INFORMATION
Each Fund may, from time to time, include its yield and effective yield for
its Investor Shares in advertisements or reports to shareholders or prospective
investors. The methods used to calculate the yield of the Funds are mandated by
the SEC.
Quotations of "yield" for a class of shares of a Fund will be based on the
investment income per share during a particular a seven-day period (including
dividends and interest), less expenses accrued during the period ("net
investment income"), and will be computed by dividing net investment income by
the maximum public offering price per share on the last day of the period.
31
<PAGE> 385
Quotations of yield reflect only the performance of a class of shares
during the particular period on which the calculations are based. Yield will
vary based on changes in market conditions, the level of interest rates and the
level of expenses of a particular class of shares, and no reported performance
figure should be considered an indication of performance which may be expected
in the future.
The funds may also advertise their "taxable equivalent yield." Taxable
equivalent yield is the yield that an investment, subject to Federal and/or
state taxes, would need to earn in order to equal, on an after-tax basis, the
yield on an investment exempt from such taxes (normally calculated assuming the
maximum applicable marginal tax rate). A taxable equivalent yield quotation for
a Fund will be higher than the Fund's yield quotations.
Any fees which may be imposed by Service Organizations directly on their
customer accounts for cash management services in connection with investments in
the Funds are not reflected in yield figures and any such fees, if charged, will
reduce the actual return received by customers on their investments.
For purpose of comparison, a Fund may, from time to time, quote performance
information from IBC/Donoghue's MONEY FUND REPORT of Holliston, Massachusetts
01746. IBC/Donoghue's MONEY MARKET AVERAGE is widely recognized index of money
fund performance. Any performance information should be considered in light of a
Fund's investment objective and policies, characteristics and quality of the
fund and the market conditions during the time period indicated, and should not
be considered to be representative of what may be achieved in the future. For a
description of the methods used to determine yield for the Funds, see "Other
Information -- Performance Information" in the SAI.
ACCOUNT SERVICES
All transactions in shares of the Funds will be reflected in a statement
for each shareholder. In those cases where a Service Organization or its nominee
is shareholder of record of shares purchased for its customer, the Funds have
been advised that the statement may be transmitted to the customer at the
discretion of the Service Organization.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Fund at 237 Park
Avenue, Suite 910, New York, New York 10017.
General and Account Information: (800) 662-8417.
32
<PAGE> 386
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
FUNDS OR BY ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY FIRST INTERSTATE BANCORP OR ITS AFFILIATES,
AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
33
<PAGE> 387
INVESTMENT ADVISOR
First Interstate Capital Management, Inc.
7501 East McCormick Parkway
Scottsdale, Arizona 85258
ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Pacifica Funds Distributor Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
First Interstate Bank of California
707 Wilshire Boulevard
Los Angeles, California 90017
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
[PACIFICA LOGO] PACTMMIV-2/96
<PAGE> 388
[PACIFICA LOGO]
(INSTITUTIONAL SHARES)
PACIFICA NATIONAL TAX-EXEMPT
MONEY MARKET FUND
PACIFICA CALIFORNIA TAX-EXEMPT
MONEY MARKET FUND
PROSPECTUS
FEBRUARY 1, 1996
[FIRST INTERSTATE BANK LOGO]
Investment Advisor to The Pacifica Funds
<PAGE> 389
PACIFICA FUNDS TRUST
(INSTITUTIONAL SHARES)
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) 662-8417
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. --
INVESTMENT ADVISOR
("FICM" OR THE "ADVISOR")
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
("FURMAN SELZ" OR THE "SPONSOR")
PACIFICA FUNDS DISTRIBUTOR INC. -- DISTRIBUTOR
("PFD INC." OR THE "DISTRIBUTOR")
Pacifica Funds Trust (the "Trust") is an open-end investment company (a
mutual fund) that offers a selection of separate investment portfolios. This
Prospectus describes the Institutional Shares of the following two portfolios
(the "Funds"):
- Pacifica National Tax-Exempt Money Market Fund
- Pacifica California Tax-Exempt Money Market Fund
This Prospectus sets forth concisely the information a prospective investor
should know before investing in any of the Funds and should be read and retained
for information about each Fund. A Statement of Additional Information (the
"SAI"), dated February 1, 1996 (which may be revised from time to time),
containing additional and more detailed information about the Funds, has been
filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Funds at the address or
information number printed above.
----------------------------
AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FIRST INTERSTATE OR OTHER BANK, AND ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN 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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1996
<PAGE> 390
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS............................................... 3
FUND EXPENSES............................................ 5
FEE TABLE -- INSTITUTIONAL SHARES........................ 5
THE FUNDS................................................ 7
INVESTMENT POLICIES AND PRACTICES
OF THE FUNDS........................................... 7
RISKS OF INVESTING IN THE FUNDS.......................... 8
MANAGEMENT OF THE FUNDS.................................. 10
FUND SHARE VALUATION..................................... 14
PURCHASE AND REDEMPTION OF
INSTITUTIONAL SHARES................................... 14
EXCHANGE OF INSTITUTIONAL SHARES......................... 17
DIVIDENDS, DISTRIBUTIONS AND
FEDERAL INCOME TAX..................................... 18
DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES................................... 20
INVESTMENT RESTRICTIONS.................................. 24
OTHER INFORMATION........................................ 24
APPENDIX................................................. A-1
</TABLE>
2
<PAGE> 391
HIGHLIGHTS
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
This Prospectus describes two investment portfolios managed by First
Interstate Capital Management, Inc. Each Fund has a distinct investment
objective and policies.
The California Tax-Exempt Money Market Fund. The investment objective of
the California Tax-Exempt Money Market Fund is to provide investors with as high
a level of current interest income exempt from both Federal and California
personal income taxes as is consistent with the preservation of capital and
liquidity. To achieve its objective, the California Tax-Exempt Money Market Fund
invests primarily in high quality, short-term California Municipal Obligations
which have remaining maturities not exceeding 397 days.
The National Tax-Exempt Money Market Fund. The investment objective of the
National Tax-Exempt Money Market Fund is to seek as high a level of current
income exempt from Federal income tax as is consistent with liquidity and
stability of principal. To achieve its objective the National Tax-Exempt Money
Market Fund invests primarily in a diversified portfolio of high-quality,
short-term municipal obligations the interest on which is exempt from Federal
income tax and which have remaining maturities not exceeding 397 days.
For additional information concerning the investment policies, practices
and risk considerations of the Funds, see "The Funds," "Investment Policies and
Practices of the Funds" and "Risks of Investment in the Funds" in this
Prospectus.
RISKS OF INVESTING IN THE FUNDS
Each Fund attempts to maintain the value of its shares at a constant $1.00
per share, although there can be no assurance that the Funds will always be able
to do so. The Funds' performance will change daily based on many factors,
including the quality of the instruments in the Funds' investment portfolios,
national and international economic conditions, interest rate levels and general
market conditions. The policy of the California Tax-Exempt Money Market Fund to
invest primarily in California Municipal Obligations presents certain risks
because the Fund's performance will be closely tied to the economic and
political conditions of California and its municipalities. Because each Fund is
classified as non-diversified under the Investment Company Act of 1940 (the
"1940 Act"), each Fund may be more sensitive to factors affecting a particular
issuer.
3
<PAGE> 392
There is no assurance that the Funds will achieve their investment
objectives.
MANAGEMENT OF THE FUNDS
First Interstate Capital Management, Inc. acts as investment advisor to the
Funds. For its services, the Advisor is entitled to receive a fee from each Fund
at an annual rate based on the Fund's average daily net assets. See "Fee
Table -- Institutional Shares" and "Management of the Funds" in this Prospectus.
Furman Selz acts as administrator and sponsor to the Funds. Furman Selz
provides certain management and administrative services to the Funds, and is
entitled to receive a fee from each Fund at an annual rate based on the Fund's
average daily net assets. PFD Inc. distributes the Funds' shares.
Fees and expenses charged to the Funds are outlined on page 5 of this
Prospectus.
GUIDE TO INVESTING IN THE PACIFICA FAMILY OF FUNDS
Purchase orders for the Funds received by 9:00 a.m., Pacific time (12:00
p.m., Eastern time), will become effective that day.
Institutional Shares of the Funds are purchased at net asset value without
a sales charge.
Shareholders may purchase, redeem or exchange Institutional Shares by
telephone.
All dividends and distributions will be automatically reinvested at net
asset value in additional Institutional Shares of the applicable Fund unless
cash payment is requested.
- Distributions for the Funds are generally paid quarterly.
For additional information on how to purchase and redeem Institutional
Shares of the Funds, see "Purchase and Redemption of Institutional Shares" and
"Exchange of Institutional Shares."
4
<PAGE> 393
FUND EXPENSES
The following table lists the costs and expenses that an investor will
incur either directly or indirectly as an Institutional shareholder of a Fund.
The information is based on estimated amounts for the initial fiscal year of
each Fund.
FEE TABLE -- INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
NATIONAL CALIFORNIA
TAX-EXEMPT TAX-EXEMPT
MONEY MARKET FUND MONEY MARKET FUND
----------------- -----------------
<S> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES:
Maximum Sales Load Imposed on
Purchases (as a percentage
of offering price)......... None None
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering
price)..................... None None
Deferred Sales Load (as a
percentage of redemption
proceeds).................. None None
Redemption Fees............... None None
Exchange Fee.................. None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average
net assets)
Management Fees (after
waivers)(++)............... 0.15% 0.08%
Other Expenses (after
waivers)(++)++............. 0.30% 0.37%
------ ------
TOTAL FUND OPERATING EXPENSES:
(after waivers)(++)++++....... 0.45% 0.45%
===== =====
</TABLE>
- ---------------
(++) Management Fees (before waivers) would be .35% and .35%,
respectively.
(++)++ Other Expenses (before waivers) would be .30% and .40%,
respectively and are estimated.
(++)++++ Total Fund Operating Expenses (before waivers) would be
.65% and .75%, respectively.
5
<PAGE> 394
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Funds' Institutional Shares
will bear. The table does not reflect any charges that may be imposed by a First
Interstate Bank or other institutions directly on their customer accounts in
connection with investments in the Funds.
EXAMPLE:(++)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
NATIONAL CALIFORNIA
TAX-EXEMPT TAX-EXEMPT
MONEY MARKET FUND MONEY MARKET FUND
----------------- -----------------
<S> <C> <C>
1 year.................... $ 4 $ 4
3 years................... $ 14 $ 14
</TABLE>
- ---------------
(++) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE
ASSUMED AMOUNT.
6
<PAGE> 395
THE FUNDS
The Funds are portfolios of a Massachusetts business trust, Pacifica Funds
Trust, organized under the laws of the Commonwealth of Massachusetts as an
open-end, management investment company. The Trust's Board of Trustees oversees
the overall management of the Funds and elects the officers of the Funds.
INVESTMENT POLICIES AND PRACTICES OF THE FUNDS
Each Fund follows its own investment policies and practices, including
certain investment restrictions. The SAI contains the specific investment
restrictions which govern the Funds' investments. The Funds' investment
objectives are fundamental policies, which means that they may not be changed
without a majority vote of shareholders of the affected Fund. Except for the
objectives and those restrictions specifically identified as fundamental, all
other investment policies and practices described in this Prospectus and in the
SAI are not fundamental. The Advisor selects investments and makes investment
decisions based on the investment objective and policies of each Fund.
The National Tax-Exempt Money Market Fund's investment objective is to seek
as high a level of current income exempt from Federal income tax as is
consistent with liquidity and stability of principal. To achieve its objective
the National Tax-Exempt Money Market Fund invests primarily in a diversified
portfolio of high-quality, short-term municipal obligations the interest on
which is exempt from Federal income tax.
The California Tax-Exempt Money Market Fund's investment objective is to
provide investors with as high a level of current interest income exempt from
both Federal and California personal income taxes as is consistent with the
preservation of capital and liquidity. To achieve its objective, the California
Tax-Exempt Money Market Fund invests primarily in high quality short-term
California Municipal Obligations.
Each Fund seeks to maintain a net asset value of $1.00 per share. Their
assets consist only of obligations with remaining maturities (as defined by the
Securities and Exchange Commission) of 397 days or less at the date of
acquisition, and the dollar-weighted average maturity of each Fund's investments
is 90 days or less. There can be no assurance that each Fund's investment
objective will be achieved or that the Funds will be able to maintain a net
asset value of $1.00 per share.
7
<PAGE> 396
Municipal obligations acquired by the Funds must be rated at the time of
purchase in one of the two highest rating categories by at least two nationally
recognized statistical rating organizations ("NRSROs"), (or by only one in the
event only one rating service has rated the security) or, if unrated, must be
determined to be of comparable quality by the Advisor. Municipal obligations are
debt instruments issued by or on behalf of states, territories and possessions
of the United States, the District of Columbia and their respective authorities,
agencies, instrumentalities and political subdivisions ("municipal
obligations"). The California Tax-Exempt Money Market Fund invests primarily in
municipal obligations of the State of California and its respective authorities,
agencies, instrumentalities and political subdivisions ("California Municipal
Obligations"). Under normal market conditions, each Fund will invest at least
80% of its total assets in obligations the interest on which is exempt from
Federal income tax. For purposes of this investment limitation, securities, the
interest on which is treated as a tax preference item under the Federal
alternative minimum tax, are considered taxable. In addition, under normal
market conditions, the California Tax-Exempt Money market Fund will invest at
least 65% of its total assets in California Municipal Obligations.
The types of securities and investment practices used by the Funds are
described in greater detail below under "Description of Securities and
Investment Practices."
RISKS OF INVESTING IN THE FUNDS
The Funds attempt to maintain the value of their shares at a constant $1.00
per share, although there can be no assurance that the Funds will always be able
to do so. The Funds' performance will fluctuate based on many factors, including
the quality of the instruments in each Funds' investment portfolio, national and
international economic conditions, interest rate levels and general market
conditions.
The California Tax-Exempt Money Market Fund is classified as a
non-diversified investment company under the 1940 Act. Investment return on a
non-diversified portfolio typically is dependent upon the performance of a
smaller number of securities relative to the number held in a diversified
portfolio. In addition, a non-diversified portfolio may be more susceptible to
economic, political and regulatory developments than a diversified investment
portfolio with a similar objective may be.
In seeking to achieve its investment objective, each Fund may invest in
municipal obligations that are private activity bonds the interest on which is
subject to the Federal alternative minimum tax. Investments in
8
<PAGE> 397
such securities, however, will not exceed under normal market conditions 20% of
each Fund's total assets when added together with any taxable investments held
by the Fund.
The concentration of the California Tax-Exempt Money Market Fund in
California Municipal Obligations raises additional considerations. Payment of
the interest on and the principal of these obligations is dependent upon the
continuing ability of California issuers and/or obligors to meet their
obligations thereunder. Many of the California Tax-Exempt Money Market Fund's
investments are likely to be obligations of California governmental issuers
which rely in whole or in part, directly or indirectly, on real property taxes
as a source of revenue. "Proposition Thirteen" and similar California
constitutional and statutory amendments and initiatives in recent years have
restricted the ability of California taxing entities to increase real property
tax revenues. Other initiative measures approved by California voters in recent
years, through limiting various other taxes, have resulted in a substantial
reduction in state revenues. Decreased state revenues may result in reductions
in allocations of state revenues to local governments.
Because of the complex nature of the various initiatives and restrictions
mentioned above, certain possible ambiguities and inconsistencies in their terms
and the scope of various exemptions and exceptions, as well as the impossibility
of predicting the level of future appropriations for state and local
governmental entities, it is not presently possible to determine the impact of
these initiatives and related measures on the ability of governmental issuers in
California to pay interest or repay principal on their obligations. There have,
however, been certain adverse developments with respect to municipal obligations
of governmental issuers in the state over the past several years.
In addition to the various initiatives and restrictions discussed above,
economic factors such as the reduction in defense spending, a decline in tourism
and high levels of unemployment have had an adverse impact on the economy of
California. These economic factors have reduced revenues to the state government
at a time when expenses of state government such as education costs, various
welfare costs and other expenses have been rising. Such economic factors have
also adversely impacted the ability of state and local California governmental
entities to repay debt.
In addition to the risk of nonpayment of state and local California
governmental debt, if such debt declines in quality and is downgraded by the
NRSROs, it may become ineligible for purchase by the Fund. Since there are large
numbers of buyers of such debt that may be similarly
9
<PAGE> 398
restricted, the supply of eligible securities could become inadequate at certain
times.
A more detailed description of special factors affecting investment in
California municipal obligations is set forth in the Appendix to the SAI.
Because the National Tax-Exempt Money Market Fund invests primarily in
municipal obligations of issuers in various states and localities, it is subject
to many of the same risks and special considerations with respect to its
portfolio investments as discussed above relating to the State of California and
its municipalities.
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction of
the Board of Trustees. The Trustees are Dennis W. Draper, Joseph N. Hankin, John
E. Heilmann, Jack D. Henderson and Richard A. Wedemeyer. Information about the
Trustees, as well as the Funds' executive officers, may be found in the SAI
under the heading "Management Trustees and Officers."
THE ADVISOR: FIRST INTERSTATE CAPITAL MANAGEMENT, INC.
First Interstate Capital Management, Inc., 7501 E. McCormick Parkway,
Scottsdale, Arizona 85258, serves as investment advisor to the Trust. FICM
manages the investment and reinvestment of the assets of the Funds and
continuously reviews, supervises and administers the Funds' investments. The
Advisor is responsible for placing orders for the purchase and sale of the
Funds' investments directly with brokers and dealers selected by it in its
discretion.
FICM is a wholly-owned subsidiary of First Interstate Bank of California,
which is the largest banking subsidiary of First Interstate Bancorp, a
multi-bank holding company. First Interstate Bancorp provides financial products
and services marketed at the local level to nearly five million households in
over 500 communities in 13 western states.
On January 24, 1996, First Interstate Bancorp signed a definitive merger
agreement to merge with Wells Fargo & Company ("Wells Fargo"), a publicly-held
bank holding company with its head office at 420 Montgomery Street, San
Francisco, California 94104. The merger is conditioned upon, among other things,
certain regulatory approvals. Upon completion of the merger, currently expected
to occur during the second quarter of 1996, FICM will be wholly-owned by Wells
Fargo, and the existing investment advisory agreement between the Trust and FICM
will
10
<PAGE> 399
automatically terminate. It is contemplated that an application will be filed
with the Securities and Exchange Commission to ensure there is no disruption as
a result of the merger in the provision of investment advisory services to the
Funds, and that a meeting of shareholders will be held not later than 120 days
after the merger to approve ongoing investment advisory arrangements for the
Funds.
For the advisory services it provides to the Funds, FICM is entitled to
receive from each Fund fees, payable monthly, at the annual rate of 0.35% of the
first $500 million of a Fund's average daily net assets, 0.30% of the next $500
million of a Fund's average daily net assets, and 0.25% of a Fund's average
daily net assets in excess of $1 billion.
THE SPONSOR AND DISTRIBUTOR
Furman Selz LLC, 230 Park Avenue, New York, New York 10169, acts as Sponsor
of the Funds. Furman Selz is primarily an institutional brokerage firm with
memberships on the New York, American, Boston, Midwest, Pacific and Philadelphia
Stock Exchanges. Furman Selz also serves as administrator and distributor of
other mutual funds. Pacifica Funds Distributor Inc. is an affiliate of Furman
Selz and was organized specifically to distribute shares of the Trust; however,
offers and sales of shares of the Trust will be made only through Furman Selz or
other registered (or exempt) dealers.
PFD Inc. may from time to time pay a bonus or other incentive to dealers
which employ registered representatives who sell a minimum dollar amount of
Institutional Shares of the Funds and/or other funds distributed by Furman Selz
or PFD Inc. during a specific period of time. Such bonus or other incentive will
take the form of payment for travel expenses, including lodging, incurred in
connection with trips taken by qualifying registered representatives and members
of their families to places within or outside the United States, or other
bonuses, such as gift certificates or the cash equivalent of such bonuses. PFD
Inc. has established such a special promotional incentive program with First
Interstate Securities, Inc.
ADMINISTRATIVE SERVICES
The Funds have also entered into an Administrative Services Contract with
Furman Selz pursuant to which Furman Selz provides certain management and
administrative services necessary for the Funds' operations including: (i)
general supervision of the operation of the Funds including coordination of the
services performed by the Funds' investment advisor, transfer agent, custodian,
independent accountants and legal counsel,
11
<PAGE> 400
regulatory compliance, including the compilation of information for documents
such as reports to, and filings with, the SEC and state securities commissions,
and preparation of proxy statements and shareholder reports for the Funds; (ii)
general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Funds' Officers and Board of
Trustees; and (iii) furnishing office space and certain facilities required for
conducting the business of the Funds. For these services, Furman Selz is
entitled to receive a fee, payable monthly, at the annual rate of 0.15% of the
average daily net assets of the Funds. Pursuant to a Services Agreement with the
Trust, Furman Selz assists the Trust with certain transfer and dividend
disbursing agent functions and receives a fee of $15.00 per account per year
plus out-of-pocket expenses. Pursuant to a Fund Accounting Agreement with the
Trust, Furman Selz assists the Trust in calculating net asset values and
provides certain other accounting services for each Fund for an annual fee of
$30,000 per Fund plus out-of-pocket expenses.
SERVICE ORGANIZATIONS
Various banks (including banks affiliated with First Interstate Bancorp),
trust companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative services with respect to the Funds' Institutional Shares, such as
maintaining shareholder accounts and records. The Funds may pay fees to Service
Organizations (which vary depending upon the services provided) in amounts up to
an annual rate of 0.25% of the average daily net asset value of the outstanding
Institutional Shares of the Funds owned by shareholders with whom a Service
Organization has a servicing relationship. These fees will be home entirely by
the Funds' Institutional Shares.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest a specified amount in
the Funds or charging a direct fee for servicing. If imposed, these fees would
be in addition to any amounts which might be paid to the Service Organization by
the Funds. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged to
consult with them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as
12
<PAGE> 401
Service Organizations. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either Federal or state
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, could prevent a bank Service Organization from
continuing to perform all or a part of its servicing activities. If a bank were
prohibited from so acting, its shareholder clients would be permitted to remain
shareholders of the Funds and alternative means for continuing the servicing of
such shareholders would be sought. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these
occurrences.
OTHER EXPENSES
Each Fund bears all costs of its operations other than expenses
specifically assumed by Furman Selz, PFD Inc. or the Advisor. The costs borne by
the Funds include legal and auditing expenses; Trustees' fees and expenses;
insurance premiums; custodian and transfer agent fees and expenses; expenses
incurred in acquiring or disposing of the Funds' portfolio securities; expenses
of registering and qualifying the Funds' shares for sale with the SEC and with
various state securities commissions; expenses of obtaining quotations on the
Funds' portfolio securities and pricing of the Funds' shares; expenses of
maintaining the Funds' legal existence and of shareholders' meetings; and
expenses of preparation and distribution to existing shareholders of reports,
proxies and prospectuses. Each Fund bears its own expenses associated with its
establishment as a series of the Trust; these expenses are amortized over a
five-year period from the commencement of a Fund's operations. See "Management"
in the SAI for additional information on expenses borne by the Funds. Trust
expenses directly attributable to a particular Fund are charged to that Fund,
and expenses attributable to a particular class of shares of a Fund (such as
Service Organization fees) are charged to that class. Other expenses are
allocated proportionately among all of the investment portfolios in the Trust in
relation to the net assets of each portfolio or by other means deemed fair and
equitable by the Board of Trustees.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Advisor places orders for
the purchase and sale of portfolio investments for the Funds' accounts with
brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Funds, the Advisor will seek the best execution of the Funds' orders.
Purchases and sales of debt securities are generally placed by the Advisor
13
<PAGE> 402
with primary market makers for these securities on a net basis, i.e., without
any brokerage commission being paid by the Funds. Trading does, however, involve
transaction costs. Transactions with dealers serving as primary market makers
reflect the spread between the bid and asked prices. Purchases of underwritten
issues may be made which will include an underwriting fee paid to the
underwriter. Broker-dealers are selected on the basis of a variety of factors
such as reputation, capital strength, size and difficulty of the order, sale of
Fund shares by the broker-dealer, and research provided to the Advisor by the
broker-dealer. The Advisor may cause a Fund to pay commissions higher than
another broker-dealer would have charged if the Advisor believes the commission
paid is reasonable in relation to the value of the brokerage and research
services received by the Advisor.
FUND SHARE VALUATION
The net asset value of each class of shares of the Funds is calculated at
3:00 p.m. (Eastern time), Monday through Friday, on each day the New York Stock
Exchange is open for trading (a "Business Day"), which excludes the following
business holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share for each class of shares is computed by dividing the value of a
Fund's assets allocable to a particular class, less the liabilities charged to
that class by the total number of the outstanding shares of that class. All
expenses, including fees paid to the Advisor, Furman Selz and PFD Inc., are
accrued daily and taken into account for the purpose of determining the net
asset value.
The Funds use the amortized cost method to value their portfolio securities
and seek to maintain a constant net asset value of $1.00 per share, although
there may be circumstances under which this goal cannot be achieved. The
amortized cost method involves valuing a security at its cost and amortizing any
discount or premium over the period until maturity, regardless of the impact of
fluctuating interest rates on the market value of the security. See the SAI for
a more complete description of the amortized cost method.
PURCHASE AND REDEMPTION OF INSTITUTIONAL SHARES
Institutional Shares of the Funds are sold without a sales load on a
continuous basis primarily to customers ("Customers") of affiliate, franchise or
correspondent banks of First Interstate Bancorp and other selected institutions
("Institutions"). Customers may include individuals,
14
<PAGE> 403
trusts, partnerships and corporations. Share purchases are effected through
a Customer's account at an Institution through procedures established in
connection with the requirements of the account, and confirmations of share
purchases and redemptions will be sent to the Institution involved. Institutions
(or their nominees) will normally be the holders of record of Institutional
Shares acting on behalf of their Customers, and will reflect their Customers'
beneficial ownership of Institutional Shares in the account statements provided
by them to their Customers. The exercise of voting rights and the delivery to
Customers of shareholder communications from the Funds will be governed by the
Customers' account agreements with an Institution. Investors wishing to purchase
Institutional Shares of a Fund should contact their account representatives.
Shares of a Fund are sold at net asset value per share next determined
after a purchase order has become effective. Purchase orders by an Institution
for Institutional Shares in the Funds must be received by the Trust by 9:00
a.m., Pacific time (12:00 p.m., Eastern time) on any Business Day. Payment for
such shares may be made by Institutions in Federal funds or other funds
immediately available to the Trust's custodian no later than 9:00 a.m., Pacific
time (12:00 p.m., Eastern time) on the next Business Day following the receipt
of the purchase order.
It is the responsibility of Institutions to transmit orders for purchases
by their Customers and to deliver required funds on a timely basis. If funds are
not received within the periods described above, the order will be canceled,
notice thereof will be given, and the Institution will be responsible for any
loss to the Fund or its shareholders. Institutions may charge certain account
fees depending on the type of account the investor has established with an
Institution. In addition, an Institution may receive fees from the Funds with
respect to the investments of its Customers as described above under "Management
of the Funds." Payments for Institutional Shares of a Fund may, in the
discretion of the Advisor, be made in the form of securities that are
permissible investments for the Fund. For further information see "Additional
Purchase and Redemption Information" in the SAI.
The Trust reserves the right to reject any purchase order. Payment for
orders which are not received will be returned after prompt inquiry. The
issuance of Institutional Shares is recorded on the books of the Funds, and
share certificates are not issued.
Neither the Trust, the Distributor nor Furman Selz will be responsible for
the authenticity of telephone instructions for the purchase or redemption of
Institutional Shares where such instructions are reasonably believed
15
<PAGE> 404
to be genuine. Accordingly, the Institution will bear the risk of loss. The
Trust will attempt to confirm that telephone instructions are genuine and will
use such procedures as are considered reasonable. To the extent that the Trust
fails to use reasonable procedures to verify the genuineness of telephone
instructions, it or its service providers may be liable for any loss, damage or
expense arising from such instructions that prove to be fraudulent or
unauthorized.
Redemption requests are effected at the net asset value per share next
determined after receipt of a redemption request in good order by the Trust.
Institutional Shares held by an Institution on behalf of its Customers must be
redeemed in accordance with instructions and limitations pertaining to the
account at the Institution. The Trust intends to pay cash for all Institutional
Shares redeemed, but in unusual circumstances may make payment wholly or partly
in portfolio securities at their then market value equal to the redemption
price. In such cases, an investor may incur brokerage costs in converting such
securities to cash.
Share balances may be redeemed pursuant to arrangements between
Institutions and investors. It is the responsibility of an Institution to
transmit redemption requests to the Trust and to credit its Customers' accounts
with the redemption proceeds on a timely basis. The redemption proceeds for
Institutional Shares of a Fund are normally wired to the redeeming Institution
the following Business Day after receipt of the request by the Trust. The Trust
reserves the right to delay the wiring of redemption proceeds for up to seven
days after it receives a redemption order if, in the judgment of the Advisor, an
earlier payment could adversely affect a Fund.
All redemptions of Institutional Shares of the Funds shall be made in cash,
except that the commitment to redeem Institutional Shares in cash extends only
to redemption requests made by each shareholder of a Fund during any 90-day
period of up to the lesser of $250,000 or 1% of the net asset value of that Fund
at the beginning of such period. This commitment is irrevocable without the
prior approval of the SEC and is a fundamental policy of the Funds that may not
be changed without shareholder approval. In the case of redemption requests by
shareholders in excess of such amounts, the Board of Trustees reserves the right
to have the Funds make payment, in whole or in part, in securities or other
assets, in case of an emergency or any time a cash distribution would impair the
liquidity of a Fund to the detriment of the existing shareholders. In this
event, the securities would be valued in the same manner as the securities of
that Fund are valued. If the recipient were to sell such securities, he or she
would incur brokerage charges.
16
<PAGE> 405
A redemption may be a taxable transaction on which gain or loss may be
recognized. Generally, however, gain or loss is not expected to be recognized on
a redemption of shares of the Funds, both of which seek to maintain a net asset
value of $1.00 per share.
EXCHANGE OF INSTITUTIONAL SHARES
The Funds offer a convenient way to exchange Institutional Shares in one
Fund for Institutional Shares in another investment portfolio of the Trust
(except the Prime Money Market Fund and Treasury Money Market Fund). Before
engaging in an exchange transaction, a shareholder should read carefully the
Prospectus describing the investment portfolio into which the exchange will
occur, which is available without charge and can be obtained by writing to
Furman Selz, Mutual Fund Department, 237 Park Avenue, Suite 910, New York, New
York 10017, or by calling 1-800-662-8417. A shareholder may not exchange
Institutional Shares of one portfolio for Institutional Shares of another
portfolio if both or either are not qualified for sale in the state of the
shareholder's residence. The Trust may terminate or amend the terms of the
exchange privilege at any time.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the net asset value next determined following receipt of the
request by the Trust in good order.
An exchange is taxable as a sale of a security; however, if a Fund
maintains a net asset value of $1.00 per share, no gain or loss would be
realized upon an exchange of Fund shares. Shareholders should receive written
confirmation of the exchange within a few days of the completion of the
transaction.
To exchange Institutional Shares, or if you have any questions, simply call
the Trust at 1-800-662-8417. You should be prepared to give the telephone
representative the following information: (i) your account number, social
security number and account registration; (ii) the name of the portfolio from
and the portfolio into which you wish to transfer your investment; and (iii) the
dollar or share amount you wish to exchange. The conversation may be recorded to
protect you and the Funds. Telephone exchanges are available only if the
shareholder so indicates by checking the "yes" box on the Purchase Application.
In addition, Institutional Shares of a Fund may be exchanged for Investor
Shares of the same Fund in connection with the distribution of
17
<PAGE> 406
assets held in a qualified trust, agency or custodial account maintained with
the trust department of a First Interstate or other bank, trust company or
thrift institution, or in other cases where Institutional Shares are not held in
such qualified accounts. Similarly, Investor Shares may be exchanged for
Institutional Shares of the same Fund if the shares are to be held in such a
qualified trust, agency or custodial account. These exchanges are made without a
sales charge at the net asset value of the respective share classes.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
Each Fund intends to be treated as a regulated investment company under the
Federal tax law. As such, the Funds generally will not pay Federal income tax on
the income and gains they pay as dividends to their shareholders. In order to
avoid a 4% Federal excise tax, each Fund intends to distribute each year all of
its income and gains.
Shareholders will be subject to tax on dividends (other than exempt-
interest dividends as described below) received from a Fund, regardless of
whether received in cash or reinvested in additional shares. Shareholders must
treat dividends, other than capital gain or exempt-interest dividends, as
ordinary income. Dividends designated as capital gain dividends are taxable to
shareholders as long-term capital gain. Certain dividends declared in October,
November, or December of a calendar year are treated for Federal income tax
purposes as though received on December 31 of that year if paid to shareholders
during January of the following calendar year.
To the extent that a Fund's dividends distributed to shareholders are
derived from interest income exempt from Federal income tax and are designated
as exempt-interest dividends by the Fund, they will be excludable from a
shareholder's gross income for regular Federal income tax purposes. A Fund will
be qualified to pay exempt-interest dividends if, at the close of each quarter
of its taxable year, at least 50% of the value of its total assets consists of
securities on which interest payments are exempt from Federal income tax under
Code Section 103. A Fund will inform shareholders annually as to the portion of
the distribution paid by it which constitutes exempt-interest dividends. A Fund
is authorized to make investments which will give rise to taxable rather than
tax-exempt income. To the extent that a Fund's dividends are derived from income
from its taxable investments and from gain recognized by the Fund, they will be
taxable to shareholders as ordinary income.
Tax-exempt interest on private activity bonds and exempt-interest dividends
attributable to private activity bonds generally are treated as tax preference
items for purposes of the Federal alternative minimum tax.
18
<PAGE> 407
Therefore, if a Fund invests in such private activity bonds, certain
shareholders may become subject to the alternative minimum tax on that part of
the Fund's exempt-interest dividends derived from interest income on such bonds.
The entire amount of exempt-interest dividends received from a Fund by most
corporations will be part of an adjustment in computing Federal alternative
minimum taxable income for purposes of the alternative minimum tax and the
environmental tax under Code section 59A.
Up to 85% of an individual's social security benefits and certain railroad
retirement benefits may be subject to Federal income tax. Along with other
factors, total tax-exempt income, including exempt-interest dividends, is used
to calculate the portion of such benefits that are taxed.
There could be retroactive revocation of the tax-exempt status of certain
municipal obligations after their issuance. In addition, in connection with
budget and tax reform efforts, proposals may be made or adopted which would
change the tax treatment arising from an investment in a Fund. It is not
possible to predict the precise impact of these events, but they may affect the
value of the securities in a Fund's portfolio.
Deductions for interest expense incurred (or deemed incurred) to acquire or
carry shares of a Fund may be subject to limitations that reduce or eliminate
such deductions. In addition, under rules issued by the Internal Revenue Service
for determining when borrowed funds are considered used for the purposes of
purchasing or carrying particular assets, the purchase of shares may be
considered to have been made with borrowed funds, even though the borrowed funds
are not directly traceable to the purchase of shares.
A Fund may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct TIN or to make required
certifications, or where the Fund or shareholder has been notified by the
Internal Revenue Service that the shareholder is subject to backup withholding.
Most corporate shareholders and certain other shareholders specified in the Code
are exempt from backup withholding. Backup withholding is not an additional tax.
Any amounts withheld may be credited against the shareholder's U.S. Federal
income tax liability.
The treatment for state, local and municipal tax purposes of distributions
of exempt-interest dividends from a Fund will vary according to the laws of
state and local taxing authorities. Exempt-interest dividends and other
dividends may be subject to state and local taxation. Investors should
19
<PAGE> 408
consult with their tax advisors as to the availability of any exemptions from
such taxes. Persons who may be "substantial users" (or "related persons" of
substantial users) of facilities financed by private activity bonds may suffer
adverse tax consequences from investing in a Fund and, therefore, should consult
their tax advisors before purchasing Fund shares. In some instances, a state or
city may exempt from tax the portion of the distribution from the Fund that
represents interest received on obligations of that state or its political
subdivisions. Under the laws of certain other states and cities, the entire
amount of any such distribution may be taxable.
California law provides that if, at the close of each quarter of its
taxable year, at least 50% of the value of the total assets of a regulated
investment company consists of obligations the interest of which is exempt from
tax under California law or of obligations the interest of which is exempt from
tax under U.S. law, distributions designated as "exempt-interest" dividends for
California purposes are exempt from California personal income taxes.
Shareholders will be notified annually of the Federal income tax status of
distributions and the percentage of municipal obligation interest income
received.
The preceding discussion primarily relates to Federal income taxes; the
consequences under other tax laws may differ. For additional information
relating to taxation, see the SAI.
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
Municipal Obligations. The Funds invest primarily (at least 65% of total
assets) in various types of Municipal Obligations. The California Tax-Exempt
Money Market Fund invests primarily in California Municipal Obligations. The
National Tax-Exempt Money Market Fund invests primarily in municipal obligations
the interest on which is exempt from Federal income tax. Such municipal
securities consist of debt obligations issued to obtain funds for various public
purposes, including general financing for state and local governments as well as
for specific projects or public facilities. Municipal securities may be backed
by the taxing power of the municipality that has issued the security, by
revenues from a specific project or facility being financed, or by the credit of
a private entity.
Tax-Exempt Notes. The Funds may invest in tax-exempt notes. These
instruments are generally used to meet short term capital needs and usually have
maturities of one year or less. Tax and revenue anticipation notes are issued by
municipalities in expectation of future tax or other revenues, and are payable
from those specific taxes or revenues. Bond anticipation notes normally provide
interim financing in advance of an issue
20
<PAGE> 409
of bonds or notes, the proceeds of which are used to repay the anticipation
notes. Tax-exempt commercial paper is issued by municipalities to help finance
short term capital or operating needs.
Municipal Lease Obligations. The Funds may invest in municipal lease
obligations including certificates of participation (COPs), which finance a
variety of public projects. Because of the way these instruments are structured,
they carry a greater risk than other types of municipal securities. The Funds
may invest in lease obligations only when they are rated by a rating agency or
are deemed by the Advisor, under the direction of the Board of Trustees, to be
of a quality comparable to a Fund's quality standards. Prior to purchasing a
municipal lease obligation and on a regular basis thereafter, the Advisor will
evaluate the credit quality and liquidity of the security. In making its
evaluation, the Advisor will consider various credit factors, such as the
necessity of the project, the municipality's credit quality, future borrowing
plans, and sources of revenue pledged for lease repayment, general economic
conditions in the region where the security is issued, and liquidity factors,
such as dealer activity. For further discussion regarding municipal lease
obligations, see "Investment Policies" in the SAI.
Variable and Floating Rate Demand and Master Demand Notes. The Funds may,
from time to time, buy variable or floating rate demand notes issued by
government agencies and instrumentalities. These securities will typically have
a maturity over one year but carry with them the right of the holder to put the
securities to a remarketing agent or other entity at designated time intervals
and on specified notice. The obligation of the issuer of the put to repurchase
the securities may be backed by a letter of credit or other obligation issued by
a financial institution. The purchase price is ordinarily par plus accrued and
unpaid interest. Generally, the remarketing agent will adjust the interest rate
every seven days (or at other specified intervals) in order to maintain the
interest rate at the prevailing rate for securities with a seven-day or other
designated maturity. A Fund's investment in demand instruments which provide
that the Fund will not receive the principal note amount within seven days'
notice, in combination with each Fund's other investments in illiquid
instruments, will be limited to an aggregate total of 10% of each Fund's net
assets.
The Funds may also buy variable rate master demand notes. The terms of
these obligations permit a Fund to invest fluctuating amounts at varying rates
of interest pursuant to direct arrangements between the Fund, as lender, and the
borrower. These instruments permit weekly and, in some instances, daily changes
in the amounts borrowed. A Fund has the right to increase the amount under the
note at any time up to the full amount
21
<PAGE> 410
provided by the note agreement, or to decrease the amount, and the borrower may
repay up to the full amount of the note without penalty. The notes may or may
not be backed by bank letters of credit. Because the notes are direct lending
arrangements between the Fund and borrower, it is not generally contemplated
that they will be traded, and there is no secondary market for them, although
they are redeemable (and, thus, immediately repayable by the borrower) at
principal amount, plus accrued interest, at any time. In connection with any
such purchase and on an ongoing basis, the Advisor will consider the earning
power, cash flow and other liquidity ratios of the issuer, and its ability to
pay principal and interest on demand, including a situation in which all holders
of such notes make demand simultaneously.
U.S. Government Securities. U.S. Government securities are obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
U.S. Treasury bills, which have a maturity of up to one year, are direct
obligations of the United States and are the most frequently issued marketable
U.S. Government security. The U.S. Treasury also issues securities with longer
maturities in the form of notes and bonds.
U.S. Government agency and instrumentality obligations are debt securities
issued by U.S. Government-sponsored enterprises and Federal agencies. Some
obligations of agencies are supported by the full faith and credit of the United
States or by U.S. Treasury guarantees, such as mortgage-backed certificates,
which may be guaranteed by the Government National Mortgage Association; others,
such as obligations of the Federal Home Loan Banks, Federal Farm Credit Bank,
Bank for Cooperatives, Federal Intermediate Credit Banks and the Federal Land
Bank, are guaranteed by the right of the issuer to borrow from the U.S.
Treasury; others, such as obligations of the Federal National Mortgage
Association, are supported by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others, such
as obligations of the Student Loan Marketing Association and the Tennessee
Valley Authority, are backed only by the credit of the agency or instrumentality
issuing the obligation. In the case of obligations not backed by the full faith
and credit of the United States, the investor must look principally to the
agency issuing or guaranteeing the obligation for ultimate repayment.
Repurchase Agreements. Securities held by a Fund may be subject to
repurchase agreements. A repurchase agreement is a transaction in which the
seller of a security commits itself at the time of the sale to repurchase that
security from the buyer at a mutually agreed-upon time and price. These
agreements may be considered to be loans by the
22
<PAGE> 411
purchaser collateralized by the underlying securities. These agreements will be
fully collateralized and the collateral will be marked-to-market daily. A Fund
will enter into repurchase agreements only with dealers, domestic banks or
recognized financial institutions which, in the opinion of the Advisor, present
minimal credit risks in accordance with guidelines adopted by the Board of
Trustees. The maturity of the underlying securities in a repurchase agreement
transaction may not exceed seven days. See "Investment Restrictions." In the
event of default by the seller under the repurchase agreement, a Fund may have
problems in exercising its rights to the underlying securities and may
experience time delays in connection with the disposition of such securities.
Loans of Portfolio Securities. Each Fund may lend its portfolio securities
up to 5% of its total assets to brokers, dealers and financial institutions,
provided certain conditions are met, including the condition that each loan is
secured continuously by collateral maintained on a daily mark-to-market basis in
an amount at least equal to the current market value of the securities loaned.
Forward Commitments and When-Issued Securities. The Funds may purchase
when-issued securities and make contracts to purchase securities for a fixed
price at a future date beyond customary settlement time if the Fund holds, and
maintains until the settlement date in a segregated account, cash, U.S.
Government securities or high-grade debt obligations in an amount sufficient to
meet the purchase price, or if the Fund enters into offsetting contracts for the
forward sale of other securities it owns. Purchasing securities on a when-issued
basis and forward commitments involve a risk of loss if the value of the
security to be purchased declines prior to the settlement date, which risk is in
addition to the risk of decline in value of the Fund's other assets. No income
accrues on securities purchased on a when-issued basis prior to the time
delivery of the securities is made, although the Fund may earn interest on
securities it has deposited in the segregated account because it does not pay
for the when-issued securities until they are delivered. Investing in
when-issued securities has the effect of (but is not the same as) leveraging the
Fund's assets. Although the Fund would generally purchase securities on a
when-issued basis or enter into forward commitments with the intention of
actually acquiring securities, the Fund may dispose of a when-issued security or
forward commitment prior to settlement, if the Advisor deems it appropriate to
do so. The Fund may realize short-term profits or losses upon such sales which
profits are not tax-exempt.
Illiquid Investments. It is the policy of each Fund that restricted
securities and other illiquid securities may not constitute, at the time of
23
<PAGE> 412
purchase or at any time, more than 10% of the value of the total net assets
of the Fund.
When, in the opinion of the Advisor, market conditions dictate a temporary
defensive strategy, a Fund may invest more than 20% of its assets in securities
that are subject to Federal income tax, California personal income tax, or both,
as applicable. Such investments would be made for temporary purposes only, and
under normal market conditions each Fund intends to invest at least 80% of its
assets in tax-exempt securities.
INVESTMENT RESTRICTIONS
Each Fund has adopted certain fundamental investment restrictions that may
be changed only with the approval of a majority of the outstanding shares of the
Fund. The following descriptions summarize several of the Funds' fundamental
investment restrictions, which are set forth in full in the Statement of
Additional Information.
No Fund may:
1. Invest 25% or more of its total assets at the time of purchase in
securities of issuers whose principal business activities are in the
same industry.
2. Borrow money except in amounts up to 10% of the value of its total
assets at the time of borrowing.
If a percentage restriction on the investment or use of assets set forth in
this Prospectus is adhered to at the time a transaction is effected, later
changes in percentage resulting from changing values will not be considered a
violation, however, the Fund will not at any time have more than 15% of its net
assets invested in illiquid securities.
OTHER INFORMATION
CAPITALIZATION
Pacifica Funds Trust (formerly Fund Source) was organized as a
Massachusetts business trust on July 17, 1984. The capitalization of the Trust
consists solely of an unlimited number of shares of beneficial interest with a
par value of $0.001 each. When issued, shares of the Funds are fully paid,
non-assessable and freely transferable.
The Board of Trustees has authorized the issuance of multiple classes of
shares in each of the Funds described in this Prospectus, including
Institutional Shares and Investor Shares. Each share of a Fund represents an
equal proportionate interest in a particular Fund with other shares of the
24
<PAGE> 413
same class and is entitled to cash dividends and distributions earned on such
shares as are declared in the discretion of the Board of Trustees.
Each Fund's Institutional Shares and Investor Shares bear their pro rata
portion of all operating expenses paid by the Fund except for the distribution
payments, Service Organization fees and other "class" expenses that are
allocated to a particular share class. The Board of Trustees has approved a
Distribution Plan with respect to Investor Shares of each Fund under which the
Trust may pay the Distributor in connection with the distribution of Investor
Shares at a rate or rates set from time to time by the Board of Trustees,
provided that no rate may exceed the annual rate of 0.50% of the average daily
net asset value of Investor Shares of a Fund. In addition, each Fund may pay
fees to Service Organizations in amounts up to an annual rate of 0.25% of the
daily net asset value of the Funds' outstanding Investor Shares owned by
shareholders with whom a Service Organization has a servicing relationship.
Because of the "class expenses", the performance of a Fund's Investor Shares is
expected to be lower than the performance of its Institutional Shares. The Trust
offers various services and privileges in connection with its Investor Shares
that are not offered in connection with its Institutional Shares, including an
automatic investment plan, automatic withdrawal plan and, with respect to
certain portfolios, checkwriting. For information regarding the Funds' Investor
Shares, contact Furman Selz at 1-800-662-8417 or your Service Organization.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust. The Declaration of Trust also
provides for indemnification out of the property of a Fund of any shareholder
held personally liable solely by reason of being or having been a shareholder of
the Fund. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a Fund itself would
be unable to meet its obligations and should be considered remote.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Trust is not required to hold regular
annual meetings of the Funds' shareholders, but in the event that a special
meeting is held, shareholders of each portfolio offered by the
25
<PAGE> 414
Trust will be entitled to one vote for each full share held and fractional votes
for fractional shares held, and will vote in the aggregate and not on a
portfolio-by-portfolio basis, except as required by the 1940 Act or other
applicable law. It is contemplated that, as required by the 1940 Act, the
shareholders of a portfolio will vote separately on a portfolio-by-portfolio
basis on matters relating to a particular portfolio's investment advisory
agreement or changes in a portfolio's fundamental investment limitations, and on
other matters where the interests of the respective portfolios are not
substantially identical. Similarly, shareholders of each portfolio will vote in
the aggregate and not by class unless the Trustees determine that the matter to
be voted on affects only the interests of the holders of a particular class of a
Fund's shares. Voting rights are not cumulative.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust and in connection with such meeting to comply with the shareholders'
communications provisions of Section 16 (c) of the 1940 Act.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of a Fund means, with respect to the
approval of an investment advisory agreement, a distribution plan or a change in
a fundamental investment policy, the vote of the lesser of (1) 67% of the shares
of a Fund present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy, or (2) more than 50% of
the outstanding shares of a Fund. For purposes of the 1940 Act, any person who
owns either directly or through one or more controlled companies more than 25
percent of the voting securities of a company is presumed to "control" such
company. Under this definition, First Interstate Bancorp and its affiliates may
be deemed to be controlling persons of the Trust.
PERFORMANCE INFORMATION
Each Fund may, from time to time, include its yield and effective yield for
its Institutional Shares, Service Shares and Investor Shares in advertisements
or reports to shareholders or prospective investors. The methods used to
calculate the yield of the Funds are mandated by the SEC.
26
<PAGE> 415
Quotations of "yield" for a class of shares of a Fund will be based on the
investment income per share during a particular a seven-day period (including
dividends and interest), less expenses accrued during the period ("net
investment income"), and will be computed by dividing net investment income by
the maximum public offering price per share on the last day of the period.
Quotations of yield reflect only the performance of a class of shares
during the particular period on which the calculations are based. Yield will
vary based on changes in market conditions, the level of interest rates and the
level of expenses of a particular class of shares, and no reported performance
figure should be considered an indication of performance which may be expected
in the future.
The Funds may also advertise their "taxable equivalent yield." Taxable
equivalent yield is the yield that an investment, subject to Federal and/or
state taxes, would need to earn in order to equal, on an after-tax basis, the
yield on an investment exempt from such taxes (normally calculated assuming the
maximum applicable marginal tax rate). A taxable equivalent yield quotation for
a Fund will be higher than the Fund's yield quotations.
For purposes of comparison, a Fund may, from time to time, quote
performance information from IBC/Donoghue's MONEY FUND REPORT of Holliston,
Massachusetts 01746. IBC/Donoghue's MONEY MARKET AVERAGE is a widely recognized
index of money market fund performance. Any performance information should be
considered in light of a Fund's investment objective and policies,
characteristics and quality of the fund and the market conditions during the
time period indicated, and should not be considered to be representative of what
may be achieved in the future. For a description of the methods used to
determine yield for the Funds, see "Other Information -- Performance
Information" in the SAI.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Fund at 237 Park
Avenue, Suite 910, New York, New York 10017.
General and Account Information: (800) 662-8417.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFER-
27
<PAGE> 416
ING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
FUNDS OR BY ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY FIRST INTERSTATE BANCORP OR ITS AFFILIATES,
AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
28
<PAGE> 417
INVESTMENT ADVISOR
First Interstate Capital Management, Inc.
7501 East McCormick Parkway
Scottsdale, Arizona 85258
ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Pacifica Funds Distributor Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
First Interstate Bank of California
707 Wilshire Boulevard
Los Angeles, California 90017
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
<PAGE> 418
INVESTMENT ADVISOR
First Interstate Capital Management, Inc.
7501 East McCormick Parkway
Scottsdale, Arizona 85258
ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Pacifica Funds Distributor Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
First Interstate Bank of California
707 Wilshire Boulevard
Los Angeles, California 90017
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
[PACIFICA LOGO] PACTMMIS-2/96
<PAGE> 419
[PACIFICA LOGO]
(INVESTOR SHARES)
PACIFICA EQUITY INDEX FUND
PROSPECTUS
FEBRUARY 1, 1996
[FIRST INTERSTATE BANK LOGO]
Investment Advisor to The Pacifica Funds
<PAGE> 420
PACIFICA FUNDS TRUST
(INSTITUTIONAL SHARES)
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) 662-8417
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. --
INVESTMENT ADVISOR
("FICM" OR THE "ADVISOR")
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
("FURMAN SELZ" OR THE "SPONSOR")
PACIFICA FUNDS DISTRIBUTOR INC. -- DISTRIBUTOR
("PFD INC." OR THE "DISTRIBUTOR")
Pacifica Funds Trust (the "Trust") is an open-end investment company (a
mutual fund) that offers a selection of separate investment portfolios. This
Prospectus describes the Institutional Shares of the following portfolio (the
"Fund"):
- Pacifica Equity Index Fund
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund and should be read and retained for
information about the Fund. A Statement of Additional Information (the "SAI"),
dated February 1, 1996 (which may be revised from time to time), containing
additional and more detailed information about the Fund, has been filed with the
Securities and Exchange Commission ("SEC") and is hereby incorporated by
reference into this Prospectus. It is available without charge and can be
obtained by writing or calling the Fund at the address or information number
printed above.
----------------------------
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FIRST INTERSTATE OR OTHER BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN 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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1996.
<PAGE> 421
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS............................................... 3
FUND EXPENSES............................................ 5
FEE TABLE -- INSTITUTIONAL SHARES........................ 5
THE FUND................................................. 7
INVESTMENT POLICIES AND PRACTICES
OF THE FUND............................................ 7
RISKS OF INVESTING IN THE FUND........................... 8
MANAGEMENT OF THE FUND................................... 9
FUND SHARE VALUATION..................................... 13
PURCHASE AND REDEMPTION OF
INSTITUTIONAL SHARES................................... 14
EXCHANGE OF INSTITUTIONAL SHARES......................... 17
DIVIDENDS, DISTRIBUTIONS AND
FEDERAL INCOME TAX..................................... 18
DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES................................... 21
INVESTMENT RESTRICTIONS.................................. 27
OTHER INFORMATION........................................ 28
</TABLE>
2
<PAGE> 422
HIGHLIGHTS
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND
This Prospectus describes a diversified investment portfolio managed by
First Interstate Capital Management, Inc.
The investment objective of the Fund is to replicate the investment
performance of the Standard & Poor's 500 Composite Stock Price Index (the "S&P
500 Index" or the "Index").1 The Fund seeks to achieve this investment objective
by investing in all 500 stocks in the S&P 500 Index in approximately the same
proportions as they are represented in the Index. Most of the stocks included in
the S&P 500 Index are listed on the New York Stock Exchange and represent large
capitalization companies.
For additional information concerning the investment policies, practices
and risk considerations of the Fund, see "The Fund," "Investment Policies and
Practices of the Fund" and "Risks of Investing in the Fund" in this Prospectus.
RISKS OF INVESTING IN THE FUND
The price per share of the Fund will fluctuate with changes in value of the
investments held by the Fund. The Fund's performance will change daily based on
many factors, including the quality of the instruments in the Fund's investment
portfolio, national and international economic conditions, interest rate levels,
the overall level of equity prices, general market conditions and international
exchange rates. Depending on these factors, the net asset value of the Fund may
decrease instead of increase.
There is no assurance that the Fund will achieve its investment objective.
MANAGEMENT OF THE FUND
First Interstate Capital Management, Inc. acts as investment advisor to the
Fund. For its services, the Advisor is entitled to receive a fee from the Fund
at an annual rate based on the Fund's average daily net assets. See "Fee
Table -- Institutional Shares" and "Management of the Fund" in this Prospectus.
Furman Selz acts as administrator and sponsor to the Fund. Furman Selz
provides certain management and administrative services to the Fund,
- ---------------
1 "Standard & Poor's 500" is a registered service mark of Standard & Poor's
Corporation, which does not sponsor and is in no way affiliated with the
Equity Index Fund.
3
<PAGE> 423
and is entitled to receive a fee from the Fund at an annual rate based on the
Fund's average daily net assets. PFD Inc. distributes the Fund's shares.
Fees and expenses charged to the Fund are outlined on pages 5 and 6 of this
Prospectus.
GUIDE TO INVESTING IN THE PACIFICA FAMILY OF FUNDS
Purchase orders for the Fund received in proper order by 4:15 p.m., Eastern
time, will become effective that day.
Institutional Shares of the Fund are purchased at net asset value without a
sales charge.
Shareholders may purchase, redeem or exchange Institutional Shares by
telephone.
All dividends and distributions will be automatically reinvested at net
asset value in additional Institutional Shares of the Fund unless cash payment
is requested.
- Distributions for the Fund are generally paid quarterly.
For additional information on how to purchase and redeem Institutional
Shares of the Fund, see "Purchase and Redemption of Institutional Shares" and
"Exchange of Institutional Shares."
4
<PAGE> 424
FUND EXPENSES
The following table lists the costs and expenses that an investor will
incur either directly or indirectly as an Institutional shareholder of the Fund.
The information is based on estimated amounts for the initial fiscal year of the
Fund.
FEE TABLE -- INSTITUTIONAL SHARES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) ............... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................ None
Deferred Sales Load (as a percentage of redemption
proceeds) ......................................... None
Redemption Fees....................................... None
Exchange Fee.......................................... None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (after waivers)(++)................... 0.05%
Other Expenses (after waivers)(++)++.................. 0.30%
-----
TOTAL FUND OPERATING EXPENSES:
(after waivers)(++)++++............................... 0.35%
=====
</TABLE>
- ---------------
<TABLE>
<C> <S>
(++) Management Fees (before waivers) would be 0.25%.
(++)++ Other Expenses (before waivers) would be 0.40%.
(++)++++ Total Fund Operating Expenses (before waivers) would be
0.65%.
</TABLE>
5
<PAGE> 425
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Fund's Institutional Shares
will bear. The table does not reflect any charges that may be imposed by a First
Interstate Bank or other institutions directly on their customer accounts in
connection with investments in the Fund.
EXAMPLE:(++)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C>
1 year................................................... $ 3
3 years.................................................. $11
</TABLE>
- ---------------
(++) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
6
<PAGE> 426
THE FUND
The Fund is a portfolio of Pacifica Funds Trust, a business trust organized
under the laws of the Commonwealth of Massachusetts as an open-end, management
investment company. The Trust's Board of Trustees oversees the overall
management of the Fund and elects the officers of the Fund.
INVESTMENT POLICIES AND PRACTICES OF THE FUND
- The Fund's investment objective is to replicate the investment
performance of the S&P 500 Index.
The SAI contains the specific investment restrictions which govern the
Fund's investments. The Fund's investment objective is not a fundamental policy
and may be changed by the Board of Trustees without shareholder approval. Any
change in the investment objective of the Fund by the Board of Trustees may
result in the Fund having an investment objective different from the objective
which a shareholder considered appropriate at the time of investment in the
Fund. Except for those restrictions specifically identified as fundamental, all
other investment policies and practices described in this Prospectus and in the
SAI are not fundamental.
The Advisor selects investments and makes investment decisions based on the
investment objective and policies of the Fund.
The Fund's investment objective is to replicate the investment performance
of the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index" or
the "Index"). The S&P 500 Index consists of 500 common stocks selected by
Standard & Poor's Corporation for inclusion in the Index on the basis of market
value and industry diversification. Most of the stocks included in the S&P 500
Index are listed on the New York Stock Exchange and represent large
capitalization companies. The Fund invests in all 500 stocks in the S&P 500
Index in approximately the same proportions as they are represented in the
Index.
The Fund is not managed according to traditional methods of "active"
investment management, which involve the purchase and sale of securities based
upon economic, financial and market analysis as well as investment judgment.
Rather, the Fund employs a "passive" investment approach typical of "indexing"
in its effort to replicate the investment performance of the S&P 500 Index.
Because the Fund is subject to various brokerage costs, fees and operating
expenses which the Index is not subject to, it is likely that the Fund's total
return will be somewhat lower than that of the Index.
7
<PAGE> 427
The Fund intends to remain fully invested in the common stocks comprising
the Index, to the extent practicable, in order to carry out its stated
investment objective. The Fund may utilize certain additional investment
techniques in carrying out its investment objective. These additional techniques
involve the use of certain types of stock options, futures contracts including
stock index futures contracts, options on futures contracts, warrants and equity
swaps. These investment techniques will not be used for speculative purposes and
will only be used in furtherance of achieving the Fund's investment objective.
These investment techniques are described more fully in this Prospectus under
"Description of Securities and Investment Practices." The Fund may also invest
in Standard & Poor's Depository Receipts ("SPDRs"), which are securities traded
on the American Stock Exchange that represent ownership in the SPDR Trust, a
long-term unit investment trust which is intended to provide investment results
that generally correspond to the performance of the S&P 500.
For temporary or defensive purposes the Fund may vary from its investment
objective and may invest, without limit (except for the limitations described
under "Investment Restrictions"), in cash and/or certain high quality short-term
debt instruments described below. The Fund may also at any time invest its
assets in such instruments for cash management purposes, pending investment in
accordance with the Fund's investment objective and policies and to meet
operating expenses and redemption requests.
The Fund may also hold short-term U.S. Government obligations, money market
instruments, repurchase agreements, securities issued by other investment
companies within the limits prescribed by the Investment Company Act of 1940, as
amended (the "1940 Act"), and cash, pending investment, to meet anticipated
redemption requests or if, in the opinion of the Advisor, suitable investments
for the Fund are unavailable. Such investments may be made in such proportions
as, in the opinion of the Advisor, existing circumstances may warrant, and may
include obligations of foreign banks and foreign branches of U.S. banks. The
types of securities and investment practices used by the Fund are described in
greater detail under the section "Description of Securities and Investment
Practices" on pages 20-27 of this Prospectus.
RISKS OF INVESTING IN THE FUND
The price per share of the Fund will fluctuate with changes in value of the
investments held by the Fund. Shareholders of the Fund should, therefore, expect
the value of their shares to fluctuate with changes in the value of the
securities owned by the Fund.
8
<PAGE> 428
There is, of course, no assurance that the Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of the
Board of Trustees. The Trustees are Dennis W. Draper, Joseph N. Hankin, John E.
Heilmann, Jack D. Henderson and Richard A. Wedemeyer. Information about the
Trustees, as well as the Fund's executive officers, may be found in the SAI
under the heading "Management -- Trustees and Officers."
THE ADVISOR: FIRST INTERSTATE CAPITAL MANAGEMENT, INC.
First Interstate Capital Management, Inc., 7501 E. McCormick Parkway,
Scottsdale, Arizona 85258, serves as investment advisor to the Trust. FICM
manages the investment and reinvestment of the assets of the Fund and
continuously reviews, supervises and administers the Fund's investments. The
Advisor is responsible for placing orders for the purchase and sale of the
Funds' investments directly with brokers and dealers selected by it in its
discretion.
FICM is a wholly-owned subsidiary of First Interstate Bank of California,
which is the largest banking subsidiary of First Interstate Bancorp, a
multi-bank holding company. First Interstate Bancorp provides financial products
and services marketed at the local level to nearly five million households in
over 500 communities in 13 western states.
On January 24, 1996, First Interstate Bancorp signed a definitive merger
agreement to merge with Wells Fargo & Company ("Wells Fargo"), a publicly-held
bank holding company with its head office at 420 Montgomery Street, San
Francisco, California 94104. The merger is conditioned upon, among other things,
certain regulatory approvals. Upon completion of the merger, currently expected
to occur during the second quarter of 1996, FICM will be wholly-owned by Wells
Fargo, and the existing investment advisory agreement between the Trust and FICM
will automatically terminate. It is contemplated that an application will be
filed with the Securities and Exchange Commission to ensure there is no
disruption as a result of the merger in the provision of investment advisory
services to the Funds, and that a meeting of shareholders will be held not later
than 120 days after the merger to approve ongoing investment advisory
arrangements for the Funds.
9
<PAGE> 429
For the advisory services it provides to the Fund, FICM is entitled to
receive from the Fund fees, payable monthly, at the annual rate, based on
average daily net assets, of 0.25%.
THE SPONSOR AND DISTRIBUTOR
Furman Selz LLC, 230 Park Avenue, New York, New York 10169, acts as Sponsor
of the Fund. Furman Selz is primarily an institutional brokerage firm with
memberships on the New York, American, Boston, Midwest, Pacific and Philadelphia
Stock Exchanges. Furman Selz also serves as administrator and distributor of
other mutual funds. Pacifica Funds Distributor Inc. is an affiliate of Furman
Selz and was organized specifically to distribute shares of the Trust, however,
offers and sales of shares of the Trust will be made only through Furman Selz or
other registered (or exempt) dealers.
PFD Inc. may from time to time pay a bonus or other incentive to dealers
that employ registered representatives who sell a minimum dollar amount of
Institutional Shares of the Fund and/or other funds distributed by Furman Selz
or PFD Inc. during a specific period of time. Such bonus or other incentive may
take the form of payment for travel expenses, including lodging, incurred in
connection with trips taken by qualifying registered representatives and members
of their families to places within or outside the United States, or other
bonuses, such as gift certificates or the cash equivalent of such bonuses. PFD
Inc. has established such a special promotional incentive program with First
Interstate Investments, Inc.
ADMINISTRATIVE SERVICES
The Fund has also entered into an Administrative Services Contract with
Furman Selz pursuant to which Furman Selz provides certain management and
administrative services necessary for the Fund's operations including: (i)
general supervision of the operation of the Fund including coordination of the
services performed by the Fund's investment advisor, transfer agent, custodian,
independent accountants and legal counsel, regulatory compliance, including the
compilation of information for documents such as reports to, and filings with,
the SEC and state securities commissions, and preparation of proxy statements
and shareholder reports for the Fund; (ii) general supervision relative to the
compilation of data required for the preparation of periodic reports distributed
to the Fund's officers and Board of Trustees; and (iii) furnishing office space
and certain facilities required for conducting the business of the Fund. For
these services, Furman Selz is entitled to receive a fee, payable monthly, at
the annual rate of 0.15% of the average daily net assets of the Fund. Pursuant
10
<PAGE> 430
to a Services Agreement with the Trust, Furman Selz assists the Trust with
certain transfer and dividend disbursing agent functions and receives a fee of
$15.00 per account per year plus out-of-pocket expenses. Pursuant to a Fund
Accounting Agreement with the Trust, Furman Selz assists the Trust in
calculating net asset values and provides certain other accounting services for
the Fund for an annual fee of $30,000 plus out-of-pocket expenses.
SERVICE ORGANIZATIONS
Various banks (including banks affiliated with First Interstate Bancorp),
trust companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative services with respect to the Fund's Institutional Shares, such as
maintaining shareholder accounts and records. The Fund may pay fees to Service
Organizations (which vary depending upon the services provided) in amounts up to
an annual rate of 0.25% of the average daily net asset value of the outstanding
Institutional Shares of the Fund owned by shareholders with whom a Service
Organization has a servicing relationship. These fees will be borne entirely by
the Fund's Institutional Shares. However, the Fund does not currently intend to
make any payments to Service Organizations with respect to Institutional Shares.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest a specified amount in
the Fund or charging a direct fee for servicing. If imposed, these fees would be
in addition to any amounts which might be paid to the Service Organization by
the Fund. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged to
consult with them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Fund and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that
11
<PAGE> 431
shareholders would suffer any adverse financial consequences as a result of any
of these occurrences.
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by Furman Selz, PFD Inc. or the Advisor. The costs borne by the Fund
include legal and auditing expenses; Trustees' fees and expenses; insurance
premiums; advisory, administration, fund accounting, custodian and transfer
agent fees and expenses; expenses incurred in acquiring or disposing of the
Fund's portfolio securities; expenses of registering and qualifying the Fund's
shares for sale with the SEC and with various state securities commissions;
expenses of obtaining quotations on the Fund's portfolio securities and pricing
of the Fund's shares; expenses of maintaining the Fund's legal existence and of
shareholders' meetings; and expenses of preparation and distribution to existing
shareholders of reports, proxies and prospectuses. The Fund bears its own
expenses associated with its establishment as a series of the Trust; these
expenses are amortized over a five-year period from the commencement of the
Fund's operations. See "Management" in the SAI for additional information on
expenses borne by the Fund. Trust expenses directly attributable to the Fund are
charged to the Fund, and expenses attributable to a particular class of shares
of the Fund (such as Service Organization fees) are charged to that class. Other
expenses are allocated proportionately among all of the investment portfolios in
the Trust in relation to the net assets of each portfolio or by other means
deemed fair and equitable by the Board of Trustees.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Advisor places orders for
the purchase and sale of portfolio investments for the Fund's accounts with
brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Fund, the Advisor will seek the best execution of the Fund's orders.
Purchases and sales of common stocks are generally placed by the Advisor with
broker-dealers which, in the Advisor's judgment, provide prompt and reliable
execution at favorable security prices and reasonable commission rates.
Broker-dealers are selected on the basis of a variety of factors such as
reputation, capital strength, size and difficulty of the order, sale of Fund
shares by the broker-dealer, and research provided to the Advisor by the broker-
dealer. The Advisor may cause the Fund to pay commissions higher than another
broker-dealer would have charged if the Advisor believes the commission paid is
reasonable in relation to the value of the brokerage and research
12
<PAGE> 432
services received by the Advisor. Purchases and sales of debt securities are
generally placed by the Advisor with primary market makers for these securities
on a net basis, i.e., without any brokerage commission being paid by the Fund.
Trading does, however, involve transaction costs. Transactions with dealers
serving as primary market makers reflect the spread between the bid and asked
prices. Purchases of underwritten issues may be made which will include an
underwriting fee paid to the underwriter.
A high portfolio turnover rate involves larger brokerage commission
expenses or transaction costs which must be borne directly by the Fund.
Short-term capital gains realized from portfolio transactions are taxable to
shareholders as ordinary income. The Advisor will not consider portfolio
turnover rate a limiting factor in making investment decisions consistent with
the Fund's objective and policies.
FUND SHARE VALUATION
The net asset value of each class of shares of the Fund is calculated at
4:15 p.m. (Eastern time), Monday through Friday, on each day the New York Stock
Exchange is open for trading (a "Business Day"), which excludes the following
business holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share for each class of shares is computed by dividing the value of
the Fund's assets allocable to a particular class, less the liabilities charged
to that class by the total number of the outstanding shares of that class. All
expenses, including fees paid to the Advisor and Furman Selz, are accrued daily
and taken into account for the purpose of determining the net asset value.
Securities listed on an exchange are valued on the basis of the last sale
prior to the time the valuation is made. If there has been no sale since the
immediately previous valuation, then the current bid price is used. Quotations
are taken from the exchange where the security is primarily traded. Portfolio
securities which are primarily traded on foreign exchanges may be valued with
the assistance of a pricing service and are generally valued at the preceding
closing values of such securities on their respective exchanges, except that
when an occurrence subsequent to the time a foreign security is valued is likely
to have changed such value, then the fair value of those securities will be
determined by consideration of other factors by or under the direction of the
Board of Trustees. Over-the-counter securities are valued on the basis of the
bid price at the close of business on each business day. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under
13
<PAGE> 433
the direction of the Board of Trustees. Notwithstanding the above, bonds and
other fixed-income securities are valued by using market quotations and may be
valued on the basis of prices provided by a pricing service approved by the
Board of Trustees. All assets and liabilities initially expressed in foreign
currencies will be converted into U.S. dollars at the mean between the bid and
asked prices of such currencies against U.S. dollars as last quoted by any major
bank.
With respect to option contracts entered into by the Fund, the premium
received is recorded as an asset and equivalent liability, and thereafter the
liability is adjusted to the market value of the option determined in accordance
with the preceding paragraph. The premium paid for an option purchased by the
Fund is recorded as an asset and subsequently adjusted to market value.
PURCHASE AND REDEMPTION OF INSTITUTIONAL SHARES
Institutional Shares of the Fund are sold without a sales load on a
continuous basis primarily to customers ("Customers") of affiliate, franchise or
correspondent banks of First Interstate Bancorp and other selected institutions
("Institutions"). Customers may include individuals, trusts, partnerships and
corporations. Share purchases are effected through a Customer's account at an
Institution through procedures established in connection with the requirements
of the account, and confirmations of share purchases and redemptions will be
sent to the Institution involved. Institutions (or their nominees) will normally
be the holders of record of Institutional Shares acting on behalf of their
Customers, and will reflect their Customers' beneficial ownership of
Institutional Shares in the account statements provided by them to their
Customers. The exercise of voting rights and the delivery to Customers of
shareholder communications from the Fund will be governed by the Customers'
account agreements with an Institution. Investors wishing to purchase
Institutional Shares of the Fund should contact their account representatives.
Shares of the Fund are sold at net asset value per share next determined
after a purchase order has become effective. Purchase orders by an Institution
for Institutional Shares in the Fund must be received by the Trust by 4:15 p.m.
(Eastern time) on any Business Day. Payment for such shares may be made by
Institutions in Federal funds or other funds immediately available to the
Trust's custodian no later than 4:15 p.m. (Eastern time) on the next Business
Day following the receipt of the purchase order.
14
<PAGE> 434
It is the responsibility of Institutions to transmit orders for purchases
by their Customers and to deliver required funds on a timely basis. If funds are
not received within the periods described above, the order will be canceled,
notice thereof will be given, and the Institution will be responsible for any
loss to the Fund or its shareholders. Institutions may charge certain account
fees depending on the type of account the investor has established with an
Institution. In addition, an Institution may receive fees from the Fund with
respect to the investments of its Customers as described above under "Management
of the Fund." Payment for Institutional Shares of the Fund may, in the
discretion of the Advisor, be made in the form of securities that are
permissible investments for the Fund. For further information see "Additional
Purchase and Redemption Information" in the SAI.
With respect to former shareholders of Westcore Trust who do not have a
relationship with an Institution, additional shares of the Fund may be purchased
by writing or calling the Fund directly at 237 Park Avenue, Suite 910, New York,
NY 10017 or 1-800-662-8417.
The Trust reserves the right to reject any purchase order. Payment for
orders which are not received will be returned after prompt inquiry. The
issuance of Institutional Shares is recorded on the books of the Fund, and share
certificates are not issued.
Neither the Trust, the Distributor nor Furman Selz will be responsible for
the authenticity of telephone instructions for the purchase or redemption of
Institutional Shares where such instructions are reasonably believed to be
genuine. The Trust will attempt to confirm that telephone instructions are
genuine and will use such procedures as are considered reasonable. To the extent
that the Trust fails to use reasonable procedures to verify the genuineness of
telephone instructions, it or its service providers may be liable for any loss,
damage or expense arising from such instructions that prove to be fraudulent or
unauthorized.
Redemption requests are effected at the net asset value per share next
determined after receipt of a redemption request in good order by the Trust.
Institutional Shares held by an Institution on behalf of its Customers must be
redeemed in accordance with instructions and limitations pertaining to the
account at the Institution. It is the responsibility of an Institution to
transmit redemption requests to the Trust and to credit its Customers' accounts
with the redemption proceeds on a timely basis. The redemption proceeds for
Institutional Shares of the Fund are normally wired to the redeeming Institution
the following Business Day after receipt of the
15
<PAGE> 435
request by the Trust. The Trust reserves the right to delay the wiring of
redemption proceeds for up to seven days after it receives a redemption order
if, in the judgment of the Advisor, an earlier payment could adversely affect
the Fund.
With respect to former shareholders of Westcore Trust who do not have a
relationship with an Institution, shares of the Fund may be redeemed by writing
or calling the Fund directly at 237 Park Avenue, Suite 910, New York, NY 10017
or 1-800-662-8417. When Institutional Shares are redeemed directly from the
Fund, the Fund will ordinarily send the proceeds by check to the shareholder at
the address of record on the next Business Day unless payment by wire is
requested. The Fund may, however, take up to seven days to make payment. This
will not be the customary practice. Also, if the New York Stock Exchange is
closed (or when trading is restricted) for any reason other than the customary
weekend or holiday closing or if an emergency condition as determined by the SEC
merits such action, the Fund may suspend redemptions or postpone payment dates.
To be accepted by the Fund, a letter requesting redemption must include:
(i) the Fund name and account registration from which you are redeeming
Institutional Shares; (ii) your account number; (iii) the amount to be redeemed;
(iv) the signatures of all registered owners; and (v) a signature guarantee by
any eligible guarantor institution including a member of a national securities
exchange or a commercial bank or trust company, broker-dealers, credit unions
and savings associations. Corporations, partnerships, trusts or other legal
entities may be required to submit additional documentation.
All redemptions of Institutional Shares of the Fund shall be made in cash,
except that the commitment to redeem Institutional Shares in cash extends only
to redemption requests made by each shareholder of the Fund during any 90-day
period of up to the lesser of $250,000 or 1% of the net asset value of the Fund
at the beginning of such period. This commitment is irrevocable without the
prior approval of the SEC and is a fundamental policy of the Fund that may not
be changed without shareholder approval. In the case of redemption requests by
shareholders in excess of such amounts, the Board of Trustees reserves the right
to have the Fund make payment, in whole or in part, in securities or other
assets, in case of an emergency or any time a cash distribution would impair the
liquidity of the Fund to the detriment of the existing shareholders. In this
event, the securities would be valued in the same manner as the securities of
the Fund are valued. If the recipient were to sell such securities, he or she
would incur brokerage charges.
16
<PAGE> 436
A redemption may be a taxable transaction on which gain or loss may be
recognized.
EXCHANGE OF INSTITUTIONAL SHARES
The Fund offers a convenient way to exchange Institutional Shares in the
Fund for Institutional Shares in another investment portfolio of the Trust.
Before engaging in an exchange transaction, a shareholder should read carefully
the Prospectus describing the investment portfolio into which the exchange will
occur, which is available without charge and can be obtained by writing to the
Fund, 237 Park Avenue, Suite 910, New York, New York 10017, or by calling
1-800-662-8417. A shareholder may not exchange Institutional Shares of one
portfolio for Institutional Shares of another portfolio if both or either are
not qualified for sale in the state of the shareholder's residence. The Trust
may terminate or amend the terms of the exchange privilege at any time.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the net asset value next determined following receipt of the
request by the Trust in good order.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
To exchange Institutional Shares, or if you have any questions, simply call
the Trust at 1-800-662-8417. You should be prepared to give the telephone
representative the following information: (i) your account number, social
security number and account registration; (ii) the name of the portfolio from
and the portfolio into which you wish to transfer your investment; and (iii) the
dollar or share amount you wish to exchange. The conversation may be recorded to
protect you and the Fund. Telephone exchanges are automatically available unless
the shareholder indicates that he does not wish to have this privilege by
checking the box on the Purchase Application.
In addition, Institutional Shares of the Fund may be exchanged for Investor
Shares of the Fund in connection with the distribution of assets held in a
qualified trust, agency or custodial account maintained with the trust
department of a First Interstate or other bank, trust company or thrift
institution, or in other cases where Institutional Shares are not held in such
qualified accounts. Similarly, Investor Shares may be exchanged for
Institutional Shares of the Fund if the shares are to be held in such a
17
<PAGE> 437
qualified trust, agency or custodial account. These exchanges are made without a
sales charge at the net asset value of the respective share classes.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
The Fund intends to qualify annually and to elect to be treated as a
regulated investment company pursuant to the provisions of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). By so qualifying and
electing, the Fund generally will not be subject to Federal income tax to the
extent that it distributes investment company taxable income and net capital
gains in the manner required under the Code.
The Fund intends to distribute to its shareholders substantially all of its
investment company taxable income (which includes, among other items, dividends
and interest and the excess, if any, of net short-term capital gains (generally
including any net option premium income) over net long-term capital losses).
Investment company taxable income will be distributed by the Fund quarterly. The
Fund intends to distribute, at least annually, substantially all net capital
gain (the excess of net long-term capital gains over net short-term capital
losses). In determining amounts of capital gains to be distributed, any capital
loss carryovers from prior years will be applied against capital gains.
Distributions will be paid in additional shares of the same class held by a
shareholder based on the net asset value at the close of business on the payment
date of the distribution, unless the shareholder elects in writing, which is
received by Furman Selz not less than five full business days prior to the
record date, to receive such distributions in cash. Investors who redeem all or
a portion of Fund shares prior to a dividend payment date will be entitled on
the next dividend payment date to all dividends declared but unpaid on those
shares at the time of their redemption.
Distributions of investment company taxable income (regardless of whether
derived from dividends, interest or net short-term capital gains) will be
taxable to shareholders as ordinary income. Distributions of net long-term
capital gains designated by the Fund as capital gain dividends will be taxable
as long-term capital gains, regardless of how long a shareholder has held his
Fund shares. Distributions are taxable in the same manner whether received in
additional shares or in cash.
Earnings of the Fund not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To prevent imposition of this tax, the Fund intends to comply with this
distribution requirement.
18
<PAGE> 438
A distribution, including an "exempt-interest dividend," will be treated as
paid on December 31 of a calendar year if it is declared by the Fund during
October, November, or December of that year to shareholders of record in such a
month and paid by the Fund during January of the following calendar year. Such
distributions will be treated as received by shareholders in the calendar year
in which the distributions are declared, rather than the calendar year in which
the distributions are received.
Special tax rules may apply to the Fund's acquisition of financial futures
contracts, forward contracts, and options on futures contracts. Such rules may,
among other things, affect whether gains and losses from such transactions are
considered to be short-term or long-term, may have the effect of deferring
losses and/or accelerating the recognition of gains or losses, and, for purposes
of qualifying as a regulated investment company, may limit the extent to which
the Fund may be able to engage in such transactions.
The Fund's distributions with respect to a given taxable year may exceed
the current and accumulated earnings and profits of the Fund available for
distribution. In that event, distributions in excess of such earnings and
profits would be characterized as a return of capital to shareholders for
Federal income tax purposes, thus reducing each shareholder's cost basis in his
Fund shares. Distributions in excess of a shareholder's cost basis in his shares
would be treated as a gain realized from a sale of such shares.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of the Fund, or upon receipt of a distribution in complete
liquidation of the Fund, generally will be a capital gain or loss which will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares. A loss realized by a shareholder on a redemption, sale,
or exchange of shares of the Fund that were not held for more than six months
with respect to which capital gain dividends have been paid will be
characterized as a long-term capital loss to the extent of such capital gain
dividends.
Before purchasing shares in the Fund, the impact of dividends or
distributions which are expected to be declared or have been declared, but not
paid, should be carefully considered. Any dividend or distribution declared
shortly after a purchase of such shares prior to the record date will have the
effect of reducing the per share net asset value by the per share amount of the
dividend or distribution. All or a portion of such dividend or distribution,
although in effect a return of capital, may be subject to tax.
19
<PAGE> 439
It is anticipated that a portion of the dividends paid by the Fund will
qualify for the dividends-received deduction available to corporations.
The Fund may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where the Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Most corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Income or gain from investments in foreign securities may be subject to
foreign withholding or other taxes. It is expected that the Fund may be subject
to foreign withholding taxes with respect to income received from sources within
foreign countries.
If the Fund invests in certain "passive foreign investment companies"
("PFICs"), it would be subject to Federal income tax (and possibly additional
interest charges) on a portion of any excess distribution or gain from the
disposition of such shares even if it distributes such income to its
shareholders. If the Fund elects to treat the PFIC as a qualified electing fund
("QEF") and the PFIC furnishes certain financial information in the required
form to the Fund, the Fund would instead be required to include in income each
year its allocable share of the ordinary earnings and net capital gains on the
QEF, regardless of whether received, and such amounts would be subject to the
various distribution requirements described above.
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund. Depending on the residence of the
shareholder for tax purposes, distributions also may be subject to state and
local taxes, including withholding taxes. Foreign shareholders may, for example,
be subject to special withholding requirements. Special tax treatment, including
a penalty on certain preretirement distributions, is accorded to accounts
maintained as IRAs. Shareholders should consult their own tax advisors as to the
Federal, state and local tax consequences of ownership of shares of the Fund in
their particular circumstances.
20
<PAGE> 440
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
OPTIONS
The Fund may purchase put and call options listed on a national securities
exchange and issued by the Options Clearing Corporation in an amount not
exceeding 5% of its net assets. Purchasing options is a specialized investment
technique that entails a substantial risk of a complete loss of the amounts paid
as premiums to the writer of the option.
The Fund may also write covered call and secured put options from time to
time as the Advisor deems appropriate. By writing a covered call option, the
Fund forgoes the opportunity to profit from an increase in the market price of
the underlying security above the exercise price except insofar as the premium
represents such a profit, and it is not able to sell the underlying security
until the option expires or is exercised or the Fund effects a closing purchase
transaction by purchasing an option of the same series. If the Fund writes a
secured put option, it assumes the risk of loss should the market value of the
underlying security decline below the exercise price of the option. The
aggregate value of the securities subject to options written by the Fund will
not exceed 25% of the value of its net assets. The use of covered call options
and secured put options will not be a primary investment technique of the Fund,
and they are expected to be used infrequently. If the Advisor is incorrect in
its forecast of market value or other factors when writing the foregoing
options, the Fund would be in a worse position than it would have been had the
foregoing investment techniques not been used.
The Fund may engage in unlisted over-the-counter options with
broker/dealers deemed creditworthy by the Advisor. Closing transactions for such
options are usually effected directly with the same broker/dealer that effected
the original option transaction. The Fund bears the risk that the broker/dealer
will fail to meet its obligations. There is no assurance that a liquid secondary
trading market exists for closing out an unlisted option position. Furthermore,
unlisted options are not subject to the protections, afforded purchasers of
listed options by the Options Clearing Corporation, which performs the
obligations of its members who fail to perform in connection with the purchase
or sale of options.
For additional information relating to option trading practices, including
the particular risks thereof, see the SAI.
21
<PAGE> 441
STOCK INDEX FUTURES CONTRACTS AND OPTIONS ON STOCK INDEX FUTURES CONTRACTS
The Fund may enter into stock index futures contracts in order to protect
the value of common stock investments or to maintain liquidity, provided that
not more than 5% of the Fund's net assets are committed to such transactions.
See the SAI for further information about stock index futures contracts.
The Fund may also purchase put options on stock index futures as another
method of protecting its assets against market declines. See the SAI for further
information about these options contracts.
There can be no assurance that a liquid market will exist at a time when
the Fund seeks to close out a futures contract or a futures option position.
Most futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single day; once the daily limit
has been reached on a particular contract, no trades may be made that day at a
price beyond that limit. In addition, certain of these instruments are
relatively new and without a significant trading history. As a result, there is
no assurance that an active secondary market will develop or continue to exist.
Lack of a liquid market for any reason may prevent the Fund from liquidating an
unfavorable position and the Fund would remain obligated to meet margin
requirements until the position is closed.
The use of the techniques listed above which involve the segregation of
assets to cover future obligations may impair the liquidity of the Fund's assets
and its ability to operate as an open-end investment company. Furman Selz and
the Advisor will monitor the Fund's use of such techniques and report to the
Trustees concerning their impact, if any, on liquidity and the Fund's ability to
meet redemptions.
FIXED INCOME SECURITIES
The Fund may invest in the types of fixed income securities described
below.
U.S. Government Obligations. U.S. Government securities are obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
U.S. Treasury obligations are direct obligations of the United States and are
the most frequently issued marketable U.S. Government security. U.S. Government
agency and instrumentality obligations are debt securities issued by U.S.
Government-sponsored enterprises and Federal agencies. Some obligations of
agencies are supported by the full faith and credit of the United States or by
U.S. Treasury guarantees, such as mortgage-backed certificates, which may be
guaranteed
22
<PAGE> 442
by the Government National Mortgage Association; others, such as obligations of
the Federal Home Loan Banks, Federal Farm Credit Bank, Bank for Cooperatives,
Federal Intermediate Credit Banks and the Federal Land Bank, are guaranteed by
the right of the issuer to borrow from the U.S. Treasury; others, such as
obligations of the Federal National Mortgage Association, are supported by
discretionary authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality; and others, such as obligations of the Student
Loan Marketing Association and the Tennessee Valley Authority, are backed only
by the credit of the agency or instrumentality issuing the obligation. In the
case of obligations not backed by the full faith and credit of the United
States, the investor must look principally to the agency issuing or guaranteeing
the obligation for ultimate repayment.
Repurchase Agreements. The Fund may agree to purchase securities subject
to the seller's agreement to repurchase them at a mutually agreed upon date and
price. The Fund will enter into such repurchase agreements only with financial
institutions that are deemed to be creditworthy by the Advisor, pursuant to
guidelines established by the Trust's Board of Trustees. During the term of any
repurchase agreement, the Advisor will continue to monitor the creditworthiness
of the seller. The Fund will not enter into repurchase agreements with the
Advisor or its affiliates. Although the securities subject to repurchase
agreements may bear maturities exceeding 13 months, the Fund does not presently
intend to enter into repurchase agreements with deemed maturities in excess of
seven days. If in the future the Fund was to enter into repurchase agreements
with deemed maturities in excess of seven days, the Fund would do so only if
such investment, together with other illiquid securities, did not exceed 10% of
the value of the Fund's net assets.
The seller under a repurchase agreement will be required to maintain the
value of the securities that are subject to the agreement and held by the Fund
at not less than the repurchase price. Default or bankruptcy of the seller
would, however, expose the Fund to possible delay in connection with the
disposition of the underlying securities or loss to the extent that proceeds
from a sale of the underlying securities were less than the repurchase price
under the agreement.
Bank Obligations. Bank obligations include bankers' acceptances,
negotiable certificates of deposit and non-negotiable time deposits issued by a
U.S. bank, savings bank or savings association that is a member of the Federal
Reserve System or insured by the Federal Deposit Insurance Corporation. The Fund
may also invest in U.S. dollar-denominated obligations of foreign banks.
Obligations of foreign banks or foreign branches of
23
<PAGE> 443
U.S. banks entail risks that are different from those of investments in domestic
obligations of U.S. banks. These additional risks include future political and
economic developments, the possible imposition of withholding taxes on interest
income, possible seizure or nationalization of foreign deposits, the possible
establishment of exchange controls, or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on such obligations. In addition, foreign branches of U.S. banks
and U.S. branches of foreign banks may be subject to less stringent reserve
requirements and to different accounting, auditing, reporting, and recordkeeping
standards than those applicable to domestic branches of U.S. banks. Investments
in domestic and foreign bank obligations are limited to the obligations of
financial institutions having $1 billion or more in total assets at the time of
purchase.
Commercial Paper. Commercial paper includes short-term unsecured
promissory notes, variable rate demand notes and variable rate master demand
notes issued by domestic and foreign bank holding companies, corporations and
financial institutions, as well as similar instruments issued by government
agencies and instrumentalities. Investments by the Fund in commercial paper will
consist of issues that are rated in one of the two highest rating categories by
a NRSRO. In addition, the Fund may acquire unrated commercial paper and
corporate bonds that are determined by the Advisor at the time of purchase to be
of comparable quality to rated instruments that may be acquired by the Fund.
Commercial paper may include variable and floating rate instruments.
Variable and Floating Rate Instruments. Instruments purchased by the Fund
may include variable and floating rate demand instruments issued by
corporations, industrial development authorities and governmental entities.
These instruments may include variable amount master demand notes that permit
the indebtedness to vary in addition to providing for periodic adjustments in
the interest rate. Although variable and floating rate demand instruments are
frequently not rated by credit rating agencies, unrated instruments purchased by
the Fund will be determined to be of comparable quality to rated instruments
that may be purchased by the Fund. While there may be no active secondary market
with respect to a particular variable or floating rate instrument purchased by
the Fund, the Fund may, from time to time as specified in the instrument, demand
payment in full of the principal of the instrument or may resell the instrument
to a third party. The absence of such an active secondary market, however, could
make it difficult for the Fund to dispose of a variable or floating rate demand
instrument if the issuer defaulted on its payment obligations or during periods
that the Fund is not entitled to
24
<PAGE> 444
exercise its demand rights, and the Fund could, for these or other reasons,
suffer a loss. Variable and floating rate instruments with no active secondary
market will be included in the calculation of the Fund's illiquid assets.
Derivative Securities. The Fund may invest in structured notes, bonds or
other instruments with interest rates that are determined by reference to
changes in the value of other interest rates, indices or financial indicators
("References") or the relative change in two or more References. The Fund may
also hold derivative instruments that have interest rates that re-set inversely
to changing current market rates and/or have embedded interest rate floors and
caps that require the issuer to pay an adjusted interest rate if market rates
fall below or rise above a specified rate. These instruments represent
relatively recent innovations in the bond markets, and the trading market for
these instruments is less developed than the markets for traditional types of
debt instruments. It is uncertain how these instruments will perform under
different economic and interest-rate scenarios. Because certain of these
instruments are leveraged, their market values may be more volatile than other
types of bonds and may present greater potential for capital gain or loss. On
the other hand, the imbedded option features of other derivative instruments
could limit the amount of appreciation the Fund can realize on its investment,
could cause the Fund to hold a security it might otherwise sell or could force
the sale of a security at inopportune times or for prices that do not reflect
current market value. The possibility of default by the issuer or the issuer's
credit provider may be greater for these structured and derivative instruments
than for other types of instruments. In some cases it may be difficult to
determine the fair value of a structured or derivative instrument because of a
lack of reliable objective information and an established secondary market for
some instruments may not exist. As new types of derivative securities are
developed and offered to investors, the Advisor will, consistent with the Fund's
investment objective, policies and quality standards, consider making
investments in such new types of derivative securities.
SECURITIES ISSUED BY OTHER INVESTMENT COMPANIES
The Fund may invest in securities issued by other investment companies
within the limits prescribed by the 1940 Act. The Fund currently intends to
limit its investments so that, as determined immediately after a securities
purchase is made: (a) not more than 5% of the value of its total assets will be
invested in the securities of any one investment company; (b) not more than 10%
of the value of its total assets will be invested in the aggregate in securities
of investment companies as a group; (c) not more than 3% of the outstanding
voting stock of any one investment company will be owned by the Fund; and (d)
not more than 10% of the outstanding
25
<PAGE> 445
voting stock of any one investment company will be owned in the aggregate by the
Fund and other investment companies advised by the Advisor or any other
affiliate of First Interstate Bancorp. Such investments may include investments
in SPDRs, which are unit investment trusts that are structured to seek an
investment performance that correlates to the performance of the S&P 500. As a
shareholder of another investment company, the Fund would bear, along with other
shareholders, its pro rata portion of the expenses of such other investment
company, including advisory fees. These expenses would be in addition to the
advisory and other expenses that the Fund bears directly in connection with its
own operations, and may represent a duplication of fees to shareholders of the
Fund.
LOANS OF PORTFOLIO SECURITIES
To increase return, the Fund may lend its portfolio securities to
broker/dealers and other institutional investors pursuant to agreements
requiring that the loans be continuously secured by collateral equal at all
times in value to at least the market value of the securities loaned. The
collateral for such loans may include cash, securities of the U.S. Government,
its agencies or instrumentalities, or irrevocable letters of credit issued by a
bank, or any combination thereof. Such loans will not be made if, as a result,
the aggregate of all outstanding loans exceeds 30% of the value of the Fund's
total assets. There may be risks of delay in receiving additional collateral or
in recovering the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially. However, loans are made
only to borrowers deemed by the Advisor to be of good standing and when, in
their judgment, the income to be earned from the loan justifies the attendant
risks.
FORWARD COMMITMENTS, WHEN-ISSUED PURCHASES AND DELAYED-DELIVERY TRANSACTIONS
The Fund may purchase or sell securities on a when-issued or delayed-
delivery basis and make contracts to purchase or sell securities for a fixed
price at a future date beyond customary settlement time. Securities purchased or
sold on a when-issued, delayed-delivery or forward commitment basis involve a
risk of loss if the value of the security to be purchased declines, or the value
of the security to be sold increases, before the settlement date. Although the
Fund will generally purchase securities with the intention of acquiring them,
the Fund may dispose of securities purchased on a when-issued, delayed-delivery
or a forward commitment basis before settlement when deemed appropriate by the
Advisor.
26
<PAGE> 446
ILLIQUID SECURITIES
The Fund will not knowingly invest more than 10% of the value of its net
assets in securities that are illiquid because of restrictions on
transferability or other reasons. Repurchase agreements with deemed maturities
in excess of seven days, time deposits maturing in more than seven days and
securities that are not registered under the Securities Act of 1933 but may be
purchased by institutional buyers under Rule 144A are subject to this limit
(unless such securities are variable amount master demand notes with maturities
of nine months or less or unless the Advisor determines under the supervision of
the Board that a liquid trading market exists).
Rule 144A allows for a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the Securities
Act of 1933 for resales of certain securities to qualified institutional buyers.
The Advisor believes that the market for certain restricted securities may
expand further as a result of this regulation and the development of automated
systems for the trading, clearance and settlement of unregistered securities of
domestic and foreign issuers, such as the PORTAL System sponsored by the NASD.
The Advisor monitors the liquidity of restricted securities in each of the
Fund under the supervision of the Board of Trustees. In reaching liquidity
decisions, the Advisor will consider such factors as: (a) the frequency of
trades and quotes for the security; (b) the number of dealers wishing to
purchase or sell the security and number of other potential purchasers; (c)
dealer undertakings to make a market in the security; and (d) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer). The use of Rule 144A transactions could have the effect of
increasing the level of illiquidity of the Fund during periods that qualified
institutional buyers become uninterested in purchasing restricted securities.
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment restrictions that may
be changed only with the approval of a majority of the Fund's outstanding
shares. The following description summarizes several of the Fund's fundamental
restrictions, which are set forth in full in the SAI.
The Fund may not:
1. Purchase securities (except U.S. Government securities and repurchase
agreements collateralized by such securities) if more than 5%
27
<PAGE> 447
of its total assets at the time of purchase will be invested in
securities of any one issuer, except that up to 25% of the Fund's total
assets may be invested without regard to this 5% limitation.
2. Subject to the foregoing 25% exception, purchase more than 10% of the
outstanding voting securities of any issuer.
3. Invest 25% or more of its total assets at the time of purchase in
securities of issuers whose principal business activities are in the
same industry.
4. Borrow money except in amounts up to 10% of the value of its total
assets at the time of borrowing.
If a percentage restriction on the investment or use of assets set forth in
this Prospectus is adhered to at the time a transaction is effected, later
changes in percentage resulting from changing values will not be considered a
violation, however, the Fund will not at any time have more than 15% of its net
assets invested in illiquid securities.
OTHER INFORMATION
CAPITALIZATION
Pacifica Funds Trust (formerly Fund Source) was organized as a
Massachusetts business trust on July 17, 1984. The capitalization of the Trust
consists solely of an unlimited number of shares of beneficial interest with a
par value of $0.001 each. When issued, shares of the Fund are fully paid,
non-assessable and freely transferable.
The Board of Trustees has authorized the issuance of two classes of shares
in the Fund described in this Prospectus -- Institutional Shares and Investor
Shares. Each share of the Fund represents an equal proportionate interest in the
Fund with other shares of the same class and is entitled to such dividends and
distributions earned on such shares as are declared in the discretion of the
Board of Trustees.
The Fund's Institutional Shares and Investor Shares bear their pro rata
portion of all operating expenses paid by the Fund except for the distribution
payments, Service Organization fees and other "class" expenses that are
allocated to a particular share class. The Board of Trustees has approved a
Distribution Plan with respect to Investor Shares of the Fund under which the
Trust may pay the Distributor in connection with the distribution of Investor
Shares at a rate or rates set from time to time by the Board of Trustees,
provided that no rate may exceed the annual rate of 0.50% of the average daily
net asset value of Investor Shares of the Fund. In addition, the Fund may pay
fees to Service Organizations in amounts up to an annual rate of 0.25% of the
daily net asset value of the Fund's
28
<PAGE> 448
outstanding Investor Shares owned by shareholders with whom a Service
Organization has a servicing relationship. Investor Shares of the Fund are
purchased at net asset value per share plus a maximum 3.00% sales charge
(subject to certain exceptions). Because of the "class expenses" and sales
charges, the performance of the Fund's Investor Shares is expected to be lower
than the performance of its Institutional Shares. The Trust offers various
services and privileges in connection with its Investor Shares that are not
offered in connection with its Institutional Shares, including an automatic
investment plan, automatic withdrawal plan and, with respect to certain
portfolios, checkwriting. For information regarding the Fund's Investor Shares,
contact Furman Selz at 1-800-662-8417 or your Service Organization.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust. The Declaration of Trust also
provides for indemnification out of the property of the Fund of any shareholder
held personally liable solely by reason of being or having been a shareholder of
the Fund. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Fund itself would
be unable to meet its obligations and should be considered remote.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Trust is not required to hold regular
annual meetings of the Fund's shareholders, but in the event that a special
meeting is held, shareholders of each portfolio offered by the Trust will be
entitled to one vote for each full share held and fractional votes for
fractional shares held, and will vote in the aggregate and not on a
portfolio-by-portfolio basis, except as required by the 1940 Act or other
applicable law. It is contemplated that, as required by the 1940 Act, the
shareholders of a portfolio will vote separately on a portfolio-by-portfolio
basis on matters relating to a particular portfolio's investment advisory
agreement or changes in a portfolio's fundamental investment limitations, and on
other matters where the interests of the respective portfolios are not
substantially identical. Similarly, shareholders of each portfolio will vote in
the aggregate and not by class unless the Trustees determine that the matter to
be voted on affects only the interests of the holders of a particular class of
the Fund's shares. Voting rights are not cumulative.
29
<PAGE> 449
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust and in connection with such meeting to comply with the shareholders'
communications provisions of Section 16(c) of the 1940 Act.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of the Fund means, with respect to the
approval of an investment advisory agreement or a change in a fundamental
investment policy, the vote of the lesser of: (1) 67% of the shares of the Fund
present at a meeting if the holders of more than 50% of the outstanding shares
are present in person or by proxy; or (2) more than 50% of the outstanding
shares of the Fund. For purposes of the 1940 Act, any person who owns either
directly or through one or more controlled companies more than 25 percent of the
voting securities of a company is presumed to "control" such company. Under this
definition, First Interstate Bancorp and its affiliates may be deemed to be
controlling persons of the Trust.
PERFORMANCE INFORMATION
The Fund may, from time to time, include yield and total return data for
its Institutional Shares and Investor Shares in advertisements or reports to
shareholders or prospective investors. The methods used to calculate the yields
and total returns of the Fund are mandated by the SEC.
Quotations of "yield" for a class of shares of the Fund will be based on
the investment income per share during a particular 30-day (or one month) period
(including dividends and interest), less expenses accrued during the period
("net investment income"), and will be computed by dividing net investment
income by the maximum public offering price per share on the last day of the
period.
Quotations of yield reflect only the performance of a class of shares
during the particular period on which the calculations are based. Yield will
vary based on changes in market conditions, the level of interest rates and the
level of the expenses of a particular class of shares, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
Quotations of average annual total return for a class of shares of the Fund
will be expressed in terms of the average annual compounded rate of
30
<PAGE> 450
return of a hypothetical investment in that class over periods of 1, 5 and 10
years (up to the life of that class), reflect the deduction of a proportional
share of expenses allocated to that class (on an annual basis), and assume that
all dividends and distributions are reinvested when paid.
Performance information for the Fund may be compared to various unmanaged
indices, such as the Standard & Poor's 500 Stock Index, the Dow Jones Industrial
Average, indices prepared by Lipper Analytical Services, and other entities or
organizations which track the performance of investment companies. Any
performance information should be considered in light of the Fund's investment
objective and policies, characteristics and quality of the Fund and the market
conditions during the time period indicated, and should not be considered to be
representative of what may be achieved in the future. For a description of the
methods used to determine yield and total return for the Fund, see "Other
Information -- Performance Information" in the SAI.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Fund at 237 Park
Avenue, Suite 910, New York, New York 10017.
General and Account Information: (800) 662-8417
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR
BY ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY FIRST INTERSTATE BANCORP OR ITS AFFILIATES,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
31
<PAGE> 451
INVESTMENT ADVISOR
First Interstate Capital Management, Inc.
7501 East McCormick Parkway
Scottsdale, Arizona 85258
ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Pacifica Funds Distributor Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
First Interstate Bank of California
707 Wilshire Boulevard
Los Angeles, California 90017
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
[PACIFICA LOGO] PACEIIV-2/96
<PAGE> 452
[PACIFICA LOGO]
(INSTITUTIONAL SHARES)
PACIFICA EQUITY INDEX FUND
PROSPECTUS
FEBRUARY 1, 1996
[FIRST INTERSTATE BANK LOGO]
Investment Advisor to The Pacifica Funds
<PAGE> 453
PACIFICA FUNDS TRUST
(INVESTOR SHARES)
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) 662-8417
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. --
INVESTMENT ADVISOR
("FICM" OR THE "ADVISOR")
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
("FURMAN SELZ" OR THE "SPONSOR")
PACIFICA FUNDS DISTRIBUTOR INC. -- DISTRIBUTOR
("PFD INC." OR THE "DISTRIBUTOR")
Pacifica Funds Trust (the "Trust") is an open-end investment company (a
mutual fund) that offers a selection of separate investment portfolios. This
Prospectus describes the Investor Shares of the following portfolio (the
"Fund"):
- Pacifica Equity Index Fund
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund and should be read and retained for
information about the Fund. A Statement of Additional Information (the "SAI"),
dated February 1, 1996 (which may be revised from time to time), containing
additional and more detailed information about the Fund, has been filed with the
Securities and Exchange Commission ("SEC") and is hereby incorporated by
reference into this Prospectus. It is available without charge and can be
obtained by writing or calling the Fund at the address or information number
printed above.
----------------------------
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FIRST INTERSTATE OR OTHER BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN 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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1996.
<PAGE> 454
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS.............................................. 3
FUND EXPENSES........................................... 6
FEE TABLE -- INVESTOR SHARES............................ 6
THE FUND................................................ 8
INVESTMENT POLICIES AND PRACTICES OF THE FUND........... 8
RISKS OF INVESTING IN THE FUND.......................... 9
MANAGEMENT OF THE FUND.................................. 10
FUND SHARE VALUATION.................................... 14
PRICING OF INVESTOR SHARES.............................. 15
MINIMUM PURCHASE REQUIREMENTS........................... 18
PURCHASE OF INVESTOR SHARES............................. 19
INDIVIDUAL RETIREMENT ACCOUNTS.......................... 21
EXCHANGE OF INVESTOR SHARES............................. 21
REDEMPTION OF INVESTOR SHARES........................... 22
DIVIDENDS, DISTRIBUTIONS AND FEDERAL
INCOME TAX............................................ 25
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES...... 28
INVESTMENT RESTRICTIONS................................. 35
OTHER INFORMATION....................................... 36
</TABLE>
2
<PAGE> 455
HIGHLIGHTS
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND
This Prospectus describes a diversified investment portfolio managed by
First Interstate Capital Management, Inc.
The investment objective of the Fund is to replicate the investment
performance of the Standard & Poor's 500 Composite Stock Price Index (the "S&P
500 Index" or the "Index").1 The Fund seeks to achieve this investment objective
by investing in all 500 stocks in the S&P 500 Index in approximately the same
proportions as they are represented in the Index. Most of the stocks included in
the S&P 500 Index are listed on the New York Stock Exchange and represent large
capitalization companies.
For additional information concerning the investment policies, practices
and risk considerations of the Fund, see "The Fund," "Investment Policies and
Practices of the Fund" and "Risks of Investing in the Fund" in this Prospectus.
RISKS OF INVESTING IN THE FUND
The price per share of the Fund will fluctuate with changes in value of the
investments held by the Fund. The Fund's performance will change daily based on
many factors, including the quality of the instruments in the Fund's investment
portfolio, national and international economic conditions, interest rate levels,
the overall level of equity prices, and general market conditions. Depending on
these factors, the net asset value of the Fund may decrease instead of increase.
There is no assurance that the Fund will achieve its investment objective.
MANAGEMENT OF THE FUND
First Interstate Capital Management, Inc. acts as investment advisor to the
Fund. For its services, the Advisor is entitled to receive a fee from the Fund
at an annual rate based on the Fund's average daily net assets. See "Fee
Table -- Investor Shares" and "Management of the Fund" in this Prospectus.
Furman Selz acts as administrator and sponsor to the Fund. Furman Selz
provides certain management and administrative services to the Fund,
- ---------------
1 "Standard & Poor's 500" is a registered service mark of Standard & Poor's
Corporation, which does not sponsor and is in no way affiliated with the
Equity Index Fund.
3
<PAGE> 456
and is entitled to receive a fee from the Fund at an annual rate based on the
Fund's average daily net assets. PFD Inc. distributes the Fund's shares and may
be reimbursed for certain of its distribution-related expenses.
Fees and expenses charged to the Fund are outlined on pages 6 and 7 of this
Prospectus.
4
<PAGE> 457
GUIDE TO INVESTING IN THE PACIFICA FAMILY OF FUNDS
Purchase orders for the Fund received by your broker or Service
Organization in proper order by 4:15 p.m., Eastern time, and transmitted to the
Trust prior to 5:00 p.m. Eastern time will become effective that day.
<TABLE>
<S> <C>
- - MINIMUM INITIAL INVESTMENT............ $500
- - MINIMUM INITIAL INVESTMENT FOR IRAS... $250
- - MINIMUM SUBSEQUENT INVESTMENT......... $ 50
</TABLE>
Investor Shares of the Fund are purchased at net asset value plus a sales
charge of no more than 3.0%.
Shareholders may exchange Investor Shares between portfolios by telephone
or mail.
<TABLE>
<S> <C>
- - MINIMUM INITIAL EXCHANGE.............. $500
(NO MINIMUM FOR SUBSEQUENT EXCHANGES)
</TABLE>
Shareholders may redeem Investor Shares by telephone, mail or wire.
- The Fund reserves the right upon not less than 30 days' notice to redeem
involuntarily all the Investor Shares in an investor's account which have
an aggregate value of $500 or less.
(The above redemption services are not available for IRAs and trust clients
of First Interstate Bancorp and its affiliates.)
All dividends and distributions will be automatically reinvested at net
asset value in additional Investor Shares of the Fund unless cash payment is
requested.
- Distributions for the Fund are generally paid quarterly.
For additional information on how to purchase and redeem Investor Shares of
the Fund, see "Purchase of Investor Shares," "Exchange of Investor Shares" and
"Redemption of Investor Shares."
5
<PAGE> 458
FUND EXPENSES
The following table lists the costs and expenses that an investor will
incur either directly or indirectly as an Investor shareholder of the Fund. The
information is based on estimated amounts for the initial fiscal year of the
Fund.
FEE TABLE -- INVESTOR SHARES
<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................ 3.00%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................ None
Deferred Sales Load
(as a percentage of redemption proceeds)........... None+
Redemption Fees....................................... None
Exchange Fee.......................................... None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (after waivers)(++)................... 0.05%
12b-1 Fees(++)++...................................... 0.05%
Other Expenses (after waivers)(++)++++................ 0.30%
------
TOTAL FUND OPERATING EXPENSES:
(after waivers)(++)++++++............................. 0.40%
=====
</TABLE>
- ---------------
(++) Management Fees (before waivers) would be 0.25%.
(++)++ Under rules of the National Association of Securities Dealers, Inc.
(the "NASD"), a 12b-1 fee may be treated as a sales charge for certain
purposes. Because a 12b-1 fee is an annual fee charged against the
assets of the Fund, long-term shareholders may indirectly pay more in
total sales charges than the economic equivalent of the maximum
front-end sales charge permitted by the rules of the NASD. See
"Management of the Fund -- The Sponsor and Distributor."
(++)++++ Other Expenses (before waivers) would be 0.65%.
(++)++++++ Total Fund Operating Expenses (before waivers) would be 0.95%.
()+ Investor Shares sold pursuant to a complete waiver of the initial sales
charge available to purchases of $1 million or more are subject to a 1%
contingent deferred sales charge if redeemed within one year from the
date of purchase.
6
<PAGE> 459
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Fund's Investor Shares will
bear. The table does not reflect any charges that may be imposed by a First
Interstate Bank or other institutions directly on their customer accounts in
connection with investments in the Fund.
EXAMPLE:(++)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C>
1 year................................................... $ 4
3 years.................................................. $12
</TABLE>
- ---------------
(++) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED
AMOUNT.
7
<PAGE> 460
THE FUND
The Fund is a portfolio of Pacifica Funds Trust, a business trust organized
under the laws of the Commonwealth of Massachusetts as an open-end, management
investment company. The Trust's Board of Trustees oversees the overall
management of the Fund and elects the officers of the Fund.
INVESTMENT POLICIES AND PRACTICES OF THE FUND
- The Fund's investment objective is to replicate the investment
performance of the S&P 500 Index.
The SAI contains the specific investment restrictions which govern the
Fund's investments. The Fund's investment objective is not a fundamental policy
and may be changed by the Board of Trustees without shareholder approval. Any
change in the investment objective of the Fund by the Board of Trustees may
result in the Fund having an investment objective different from the objective
which a shareholder considered appropriate at the time of investment in the
Fund. Except for those restrictions specifically identified as fundamental, all
other investment policies and practices described in this Prospectus and in the
SAI are not fundamental.
The Advisor selects investments and makes investment decisions based on the
investment objective and policies of the Fund.
The Fund's investment objective is to replicate the investment performance
of the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index" or
the "Index"). The S&P 500 Index consists of 500 common stocks selected by
Standard & Poor's Corporation for inclusion in the Index on the basis of market
value and industry diversification. Most of the stocks included in the S&P 500
Index are listed on the New York Stock Exchange and represent large
capitalization companies. The Fund invests in all 500 stocks in the S&P 500
Index in approximately the same proportions as they are represented in the
Index.
The Fund is not managed according to traditional methods of "active"
investment management, which involve the purchase and sale of securities based
upon economic, financial and market analysis as well as investment judgment.
Rather, the Fund employs a "passive" investment approach typical of "indexing"
in its effort to replicate the investment performance of the S&P 500 Index.
Because the Fund is subject to various brokerage costs, fees and operating
expenses which the Index is not subject to, it is likely that the Fund's total
return will be somewhat lower than that of the Index.
8
<PAGE> 461
The Fund intends to remain fully invested in the common stocks comprising
the Index, to the extent practicable, in order to carry out its stated
investment objective. The Fund may utilize certain additional investment
techniques in carrying out its investment objective. These additional techniques
involve the use of certain types of stock options, futures contracts including
stock index futures contracts, options on futures contracts, warrants and equity
swaps. These investment techniques will not be used for speculative purposes and
will only be used in furtherance of achieving the Fund's investment objective.
These investment techniques are described more fully in this Prospectus under
"Description of Securities and Investment Practices." The Fund may also invest
in Standard & Poor's Depository Receipts ("SPDRs"), which are securities traded
on the American Stock Exchange that represent ownership in the SPDR Trust, a
long-term unit investment trust which is intended to provide investment results
that generally correspond to the performance of the S&P 500.
For temporary or defensive purposes the Fund may vary from its investment
objective and may invest, without limit (except for the limitations described
under "Investment Restrictions"), in cash and/or certain high quality short-term
debt instruments described below. The Fund may also at any time invest its
assets in such instruments for cash management purposes, pending investment in
accordance with the Fund's investment objective and policies and to meet
operating expenses and redemption requests.
The Fund may also hold short-term U.S. Government obligations, money market
instruments, repurchase agreements, securities issued by other investment
companies within the limits prescribed by the Investment Company Act of 1940, as
amended (the "1940 Act"), and cash, pending investment, to meet anticipated
redemption requests or if, in the opinion of the Advisor, suitable investments
for the Fund are unavailable. Such investments may be made in such proportions
as, in the opinion of the Advisor, existing circumstances may warrant, and may
include obligations of foreign banks and foreign branches of U.S. banks. The
types of securities and investment practices used by the Fund are described in
greater detail under the section "Description of Securities and Investment
Practices" on pages 29-36 of this Prospectus.
RISKS OF INVESTING IN THE FUND
The price per share of the Fund will fluctuate with changes in value of the
investments held by the Fund. Shareholders of the Fund should, therefore, expect
the value of their shares to fluctuate with changes in the value of the
securities owned by the Fund.
9
<PAGE> 462
There is, of course, no assurance that the Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of the
Board of Trustees. The Trustees are Dennis W. Draper, Joseph N. Hankin, John E.
Heilmann, Jack D. Henderson and Richard A. Wedemeyer. Information about the
Trustees, as well as the Fund's executive officers, may be found in the SAI
under the heading "Management -- Trustees and Officers."
THE ADVISOR: FIRST INTERSTATE CAPITAL MANAGEMENT, INC.
First Interstate Capital Management, Inc., 7501 E. McCormick Parkway,
Scottsdale, Arizona 85258, serves as investment advisor to the Trust. FICM
manages the investment and reinvestment of the assets of the Fund and
continuously reviews, supervises and administers the Fund's investments. The
Advisor is responsible for placing orders for the purchase and sale of the
Fund's investments directly with brokers and dealers selected by it in its
discretion.
FICM is a wholly-owned subsidiary of First Interstate Bank of California,
which is the largest banking subsidiary of First Interstate Bancorp, a
multi-bank holding company. First Interstate Bancorp provides financial products
and services marketed at the local level to nearly five million households in
over 500 communities in 13 western states.
On January 24, 1996, First Interstate Bancorp signed a definitive merger
agreement to merge with Wells Fargo & Company ("Wells Fargo"), a publicly-held
bank holding company with its head office at 420 Montgomery Street, San
Francisco, California 94104. The merger is conditioned upon, among other things,
certain regulatory approvals. Upon completion of the merger, currently expected
to occur during the second quarter of 1996, FICM will be wholly-owned by Wells
Fargo, and the existing investment advisory agreement between the Trust and FICM
will automatically terminate. It is contemplated that an application will be
filed with the Securities and Exchange Commission to ensure there is no
disruption as a result of the merger in the provision of investment advisory
services to the Funds, and that a meeting of shareholders will be held not later
than 120 days after the merger to approve ongoing investment advisory
arrangements for the Funds.
10
<PAGE> 463
For the advisory services it provides to the Fund, FICM is entitled to
receive from the Fund fees, payable monthly, at the annual rate, based on
average daily net assets, of 0.25%.
THE SPONSOR AND DISTRIBUTOR
Furman Selz LLC, 230 Park Avenue, New York, New York 10169, acts as Sponsor
of the Fund. Furman Selz is primarily an institutional brokerage firm with
memberships on the New York, American, Boston, Midwest, Pacific and Philadelphia
Stock Exchanges. Furman Selz also serves as administrator and distributor of
other mutual funds. Pacifica Funds Distributor Inc. is an affiliate of Furman
Selz and was organized specifically to distribute shares of the Trust; however,
offers and sales of shares of the Trust will be made only through Furman Selz or
other registered (or exempt) dealers.
Under the Distribution Plan (the "Plan") adopted by the Fund for its
Investor Shares, the Fund may pay directly or reimburse PFD Inc. monthly
(subject to a limit of 0.50% per annum of the average daily net asset value of
the outstanding Investor Shares of the Fund) for costs and expenses of PFD Inc.
in connection with the distribution of Investor Shares of the Fund. These costs
and expenses include (i) advertising by radio, television, newspapers,
magazines, brochures, sales literature, direct mail or any other form of
advertising; (ii) expenses of sales employees or agents of PFD Inc., including
salary, commissions, travel and related expenses; (iii) payments to
broker-dealers and financial institutions for services in connection with the
distribution of Investor Shares, including promotional incentives and fees
calculated with reference to the average daily net asset value of Investor
Shares held by shareholders who have a brokerage or other service relationship
with the broker-dealer or other institution receiving such fees; (iv) costs of
printing prospectuses and other materials to be given or sent to prospective
investors; and (v) such other similar services as the Trustees determine to be
reasonably calculated to result in the sale of Investor Shares of the Fund. The
Fund will pay all costs and expenses in connection with the preparation,
printing and distribution of prospectuses to current shareholders and the
operation of its Plan, including related legal and accounting fees. The Fund
will not be liable for distribution expenditures made by PFD Inc. in any given
year in excess of the maximum annual amount payable under the Plan for the Fund.
All payments made under the Plan for Investor Shares are borne entirely by the
Fund's Investor Shares.
In addition to sales charges paid to dealers, PFD Inc. may from time to
time pay a bonus or other incentive to dealers that employ registered
representatives who sell a minimum dollar amount of Investor Shares of
11
<PAGE> 464
the Fund and/or other funds distributed by Furman Selz or PFD Inc. during a
specific period of time. Such bonus or other incentive may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and members of their
families to places within or outside the United States, or other bonuses, such
as gift certificates or the cash equivalent of such bonuses. PFD Inc. has
established such a special promotional incentive program with First Interstate
Investments, Inc.
ADMINISTRATIVE SERVICES
The Fund has also entered into an Administrative Services Contract with
Furman Selz pursuant to which Furman Selz provides certain management and
administrative services necessary for the Fund's operations including: (i)
general supervision of the operation of the Fund including coordination of the
services performed by the Fund's investment advisor, transfer agent, custodian,
independent accountants and legal counsel, regulatory compliance, including the
compilation of information for documents such as reports to, and filings with,
the SEC and state securities commissions, and preparation of proxy statements
and shareholder reports for the Fund; (ii) general supervision relative to the
compilation of data required for the preparation of periodic reports distributed
to the Fund's officers and Board of Trustees; and (iii) furnishing office space
and certain facilities required for conducting the business of the Fund. For
these services, Furman Selz is entitled to receive a fee, payable monthly, at
the annual rate of 0.15% of the average daily net assets of the Fund. Pursuant
to a Services Agreement with the Trust, Furman Selz assists the Trust with
certain transfer and dividend disbursing agent functions and receives a fee of
$15.00 per account per year plus out-of-pocket expenses. Pursuant to a Fund
Accounting Agreement with the Trust, Furman Selz assists the Trust in
calculating net asset values and provides certain other accounting services for
the Fund for an annual fee of $30,000 plus out-of-pocket expenses.
SERVICE ORGANIZATIONS
Various banks (including banks affiliated with First Interstate Bancorp),
trust companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative services with respect to the Fund's Investor Shares, such as
maintaining shareholder accounts and records. The Fund may pay fees to Service
Organizations (which vary depending upon the services provided) in amounts up to
an annual rate of 0.25% of the average daily net asset value of the outstanding
Investor Shares of the Fund owned
12
<PAGE> 465
by shareholders with whom a Service Organization has a servicing
relationship. These fees will be borne entirely by the Fund's Investor Shares.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest a specified amount in
the Fund or charging a direct fee for servicing. If imposed, these fees would be
in addition to any amounts which might be paid to the Service Organization by
the Fund. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged to
consult with them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Fund and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by Furman Selz, PFD Inc. or the Advisor. The costs borne by the Fund
include legal and auditing expenses; Trustees' fees and expenses; insurance
premiums; advisory, administration, fund accounting, custodian and transfer
agent fees and expenses; expenses incurred in acquiring or disposing of the
Fund's portfolio securities; expenses of registering and qualifying the Fund's
shares for sale with the SEC and with various state securities commissions;
expenses of obtaining quotations on the Fund's portfolio securities and pricing
of the Fund's shares; expenses of maintaining the Fund's legal existence and of
shareholders' meetings; and expenses of preparation and distribution to existing
shareholders of reports, proxies and prospectuses. The Fund bears its own
expenses associated with its establishment as a series of the Trust; these
expenses are amortized over a five-year period from the commencement of the
Fund's operations. See "Management" in the SAI for additional information on
expenses borne by the Fund. Trust expenses directly attributable to the Fund are
charged to
13
<PAGE> 466
the Fund, and expenses attributable to a particular class of shares of the Fund
(such as distribution payments under the Plan and Service Organization fees) are
charged to that class. Other expenses are allocated proportionately among all of
the investment portfolios in the Trust in relation to the net assets of each
portfolio or by other means deemed fair and equitable by the Board of Trustees.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Advisor places orders for
the purchase and sale of portfolio investments for the Fund's accounts with
brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Fund, the Advisor will seek the best execution of the Fund's orders.
Purchases and sales of common stocks are generally placed by the Advisor with
broker-dealers which, in the Advisor's judgment, provide prompt and reliable
execution at favorable security prices and reasonable commission rates.
Broker-dealers are selected on the basis of a variety of factors such as
reputation, capital strength, size and difficulty of the order, sale of Fund
shares by the broker-dealer, and research provided to the Advisor by the
broker-dealer. The Advisor may cause the Fund to pay commissions higher than
another broker-dealer would have charged if the Advisor believes the commission
paid is reasonable in relation to the value of the brokerage and research
services received by the Advisor. Purchases and sales of debt securities are
generally placed by the Advisor with primary market makers for these securities
on a net basis, i.e., without any brokerage commission being paid by the Fund.
Trading does, however, involve transaction costs. Transactions with dealers
serving as primary market makers reflect the spread between the bid and asked
prices. Purchases of underwritten issues may be made which will include an
underwriting fee paid to the underwriter.
A high portfolio turnover rate involves larger brokerage commission
expenses or transaction costs which must be borne directly by the Fund.
Short-term capital gains realized from portfolio transactions are taxable to
shareholders as ordinary income. The Advisor will not consider portfolio
turnover rate a limiting factor in making investment decisions consistent with
the Fund's objective and policies.
FUND SHARE VALUATION
The net asset value of each class of shares of the Fund is calculated at
4:15 p.m. (Eastern time), Monday through Friday, on each day the New York Stock
Exchange is open for trading (a "Business Day"), which excludes the following
business holidays: New Year's Day, Presidents' Day,
14
<PAGE> 467
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The net asset value per share for each class of shares is
computed by dividing the value of the Fund's assets allocable to a particular
class, less the liabilities charged to that class by the total number of the
outstanding shares of that class. All expenses, including fees paid to the
Advisor, Furman Selz and PFD Inc., are accrued daily and taken into account for
the purpose of determining the net asset value.
Securities listed on an exchange are valued on the basis of the last sale
prior to the time the valuation is made. If there has been no sale since the
immediately previous valuation, then the current bid price is used. Quotations
are taken from the exchange where the security is primarily traded. Portfolio
securities which are primarily traded on foreign exchanges may be valued with
the assistance of a pricing service and are generally valued at the preceding
closing values of such securities on their respective exchanges, except that
when an occurrence subsequent to the time a foreign security is valued is likely
to have changed such value, then the fair value of those securities will be
determined by consideration of other factors by or under the direction of the
Board of Trustees. Over-the-counter securities are valued on the basis of the
bid price at the close of business on each business day. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Trustees.
Notwithstanding the above, bonds and other fixed-income securities are valued by
using market quotations and may be valued on the basis of prices provided by a
pricing service approved by the Board of Trustees. All assets and liabilities
initially expressed in foreign currencies will be converted into U.S. dollars at
the mean between the bid and asked prices of such currencies against U.S.
dollars as last quoted by any major bank.
With respect to option contracts entered into by the Fund, the premium
received is recorded as an asset and equivalent liability, and thereafter the
liability is adjusted to the market value of the option determined in accordance
with the preceding paragraph. The premium paid for an option purchased by the
Fund is recorded as an asset and subsequently adjusted to market value.
PRICING OF INVESTOR SHARES
Orders for the purchase of Investor Shares will be executed at the net
asset value per share plus any applicable sales charge (the "public offering
price") next determined after an order has become effective. The sales
15
<PAGE> 468
charge on purchases of Investor Shares of the Fund varies with the size of the
purchase made according to the following schedule:
<TABLE>
<CAPTION>
AMOUNT OF
SALES CHARGE AS A SALES CHARGE
PERCENTAGE OF REALLOWED TO
-------------------- DEALERS AS A
PUBLIC NET PERCENTAGE OF
OFFERING AMOUNT PUBLIC
AMOUNT OF INVESTMENT PRICE INVESTED OFFERING PRICE
- --------------------------------- -------- -------- --------------
<S> <C> <C> <C>
Less than $100,000............... 3.00% 3.09% 2.75%
$100,000 but less than
$250,000....................... 2.50% 2.56% 2.25%
$250,000 but less than
$500,000....................... 2.00% 2.04% 1.75%
$500,000 but less than
$1,000,000..................... 1.25% 1.28% 1.00%
$1,000,000 and over.............. None+ None+ None+
</TABLE>
- ---------------
+ There is no initial sales charge on purchases of $1 million or more; however,
the Distributor pays investment dealers and financial institutions a
commission from its own resources of 0.70% of the amount invested, and
shareholders who redeem their Investor Shares within one year of the date of
purchase will be subject to a 1% contingent deferred sales charge for the
purpose of reimbursing the Distributor for the commission paid.
The initial sales load will not apply to Investor Shares purchased by: (i)
trust, investment management, advisory and fiduciary accounts managed or
administered by First Interstate Bancorp, its subsidiaries and affiliates, or
the Advisor pursuant to a written agreement; (ii) any person purchasing Investor
Shares with the proceeds of a distribution from a trust, investment management,
advisory or other fiduciary account managed or administered by First Interstate
Bancorp, its subsidiaries and affiliates, or the Advisor pursuant to a written
agreement; (iii) any person purchasing Investor Shares with the proceeds of a
redemption from a mutual fund, other than an investment portfolio offered by the
Trust, that was originally purchased with a sales load; (iv) Furman Selz or any
of its affiliates; (v) Trustees or officers of the Fund; (vi) directors or
officers of Furman Selz, the Advisor, or their affiliates or bona fide employees
or former employees of any of the foregoing who have acted as such for not less
than 90 days (including members of their immediate families and their retirement
plans or accounts); or (vii) retirement accounts or plans for which a depository
institution, which is a client or customer of the Advisor, Furman Selz or PFD
Inc. serves as custodian or trustee, or to any trust, pension, Individual
Retirement Account ("IRA"), spousal IRA, profit-sharing or other benefit plan
for such persons so long as such Investor Shares are purchased through PFD Inc.
The initial sales load also does not apply to Investor Shares sold to
representatives of selling brokers and members of their immediate families. In
addition, the initial sales load does not apply to
16
<PAGE> 469
sales to bank trust departments, acting on behalf of one or more clients, of
Investor Shares having an aggregate value equal to or exceeding $200,000.
See "Dividends, Distributions and Federal Income Tax," for an explanation
of circumstances in which a sales load paid to acquire Investor Shares of a
mutual fund may not be taken into account in determining gain or loss on the
disposition of those Investor Shares.
QUANTITY DISCOUNTS IN THE SALES CHARGES
The following quantity discounts shall be available to: (a) an individual,
his or her spouse, and their children under the age of 21, and any trust,
pension, IRA, spousal IRA, profit sharing or other benefit plan for such
persons; (b) a trustee or other fiduciary of a single trust estate or a single
fiduciary account; (c) a pension, profit-sharing or other employee benefit plan
qualified under Section 401 of the Internal Revenue Code of 1986, and (d)
tax-exempt organizations under Section 501(c)(3) of the Code.
Right of Accumulation. The schedule of reduced sales charges will be
applicable once the accumulated value of the account has reached $100,000. For
this purpose, the dollar amount of the qualifying concurrent or subsequent
purchase is added to the net asset value of any Investor Shares of those
investment portfolios of the Trust that are subject to a sales charge and are
owned at the time of such purchase by the investor. The sales charge imposed on
the Investor Shares being purchased will then be at the rate applicable to the
aggregate value of Investor Shares owned and to be purchased by the investor.
For example, if the investor held Investor Shares valued at $100,000 and
purchased an additional $20,000 of Investor Shares (totalling an investment of
$120,000), the sales charge for the $20,000 purchase would be at the next lower
sales charge on the schedule (i.e., the sales charge for purchases over $100,000
but less than $250,000). There can be no assurance that investors will receive
the cumulative discounts to which they may be entitled unless, at the time of
placing their purchase order, the investors or their dealers make a written
request for the discount. The cumulative discount program may be amended or
terminated at any time. This particular privilege does not entitle the investor
to any adjustment in the sales charge paid previously on purchases of Investor
Shares. If the investor knows that he will be making additional purchases of
Investor Shares in the future, he may wish to consider executing a Letter of
Intent.
Letter of Intent. The schedule of reduced sales charges is also available
to investors who enter into a written Letter of Intent providing for the
purchase, within a 13-month period, of Investor Shares of the Fund. Investor
Shares of the Fund previously purchased during the 90-day period prior to the
date of receipt by the Fund of the Letter of Intent which are
17
<PAGE> 470
still owned by the shareholder may also be included in determining the
applicable reduction, provided the shareholder or the dealer notifies the Fund
of such prior purchases.
A Letter of Intent permits an investor to establish a total investment goal
to be achieved by any number of investments over a 13-month period. Each
investment made during the period will receive the reduced sales commission
applicable to the amount represented by the goal as if it were a single
investment. A number of Investor Shares totalling 5% of the dollar amount of the
Letter of Intent will be held in escrow by the Fund in the name of the
shareholder. The initial purchase under a Letter of Intent must be equal to at
least 5% of the stated investment goal.
The Letter of Intent does not obligate the investor to purchase, or the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the 13-month period, the investor is required to pay the
difference between the sales charge otherwise applicable to the purchases made
during this period and sales charges actually paid. The Fund is authorized by
the shareholder to liquidate a sufficient number of escrowed Investor Shares to
obtain such difference. If the goal is exceeded and purchases pass the next
sales charge level, the sales charge on the entire amount of the purchase that
results in passing that level and on subsequent purchases will be subject to
further reduced sales charges in the same manner as set forth under "Right of
Accumulation," but there will be no retroactive reduction of sales charges on
previous purchases. At any time while a Letter of Intent is in effect, a
shareholder may, by written notice to PFD Inc., increase the amount of the
stated goal. In that event, Investor Shares purchased during the previous 90-day
period and still owned by the shareholder will be included in determining the
applicable sales charge reduction. The 5% escrow and minimum purchase
requirements will be applicable to the new stated goal. Investors electing to
purchase Investor Shares pursuant to a Letter of Intent should carefully read
the application for a Letter of Intent which is available from the Trust.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in the Fund is $500, except that the minimum
is $250 for an IRA. Any subsequent investments must be at least $50, including
an IRA investment. All initial investments should be accompanied by a completed
Purchase Application. A separate application is required for IRA investments.
18
<PAGE> 471
PURCHASE OF INVESTOR SHARES
THE FOLLOWING PURCHASE PROCEDURES DO NOT APPLY TO CERTAIN TRUST OR OTHER
ACCOUNTS THAT ARE MANAGED BY FIRST INTERSTATE BANCORP, ITS SUBSIDIARIES OR
AFFILIATES. AN ACCOUNT CUSTOMER SHOULD CONSULT HIS OR HER ACCOUNT OFFICER FOR
PROPER INSTRUCTIONS.
All funds received by the Trust are invested in full and fractional
Investor Shares of the Fund. Certificates for Investor Shares are not issued.
Furman Selz maintains records of each shareholder's holdings of Fund shares, and
each shareholder receives a statement of transactions, holdings and dividends.
The Fund reserves the right to reject any purchase.
An investment may be made using any of the following methods:
Through an Authorized Broker, Investment Advisor or Service
Organization. Investor Shares are available to new and existing shareholders
through authorized brokers, investment advisors and Service Organizations. To
make an investment using this method, simply complete a Purchase Application and
contact your broker, investment advisor or Service Organization with
instructions as to the amount you wish to invest. Your broker will then contact
the Fund to place the order on your behalf on that day.
Orders received by your broker or Service Organization for the Fund in
proper order prior to the determination of the Fund's net asset value and
transmitted to the Trust prior to the close of its business day (which is
currently 5:00 p.m., Eastern time), will become effective that day. Brokers who
receive orders are obligated to transmit them promptly. You should receive
written confirmation of your order within a few days of receipt of instructions
from your broker.
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the Fund. In most cases, your bank will either be a member of the
Federal Reserve Banking System or have a relationship with a bank that is. Your
bank will normally charge you a fee for handling the transaction. To purchase
Investor Shares by a Federal funds wire, please first contact Furman Selz Mutual
Funds Client Services. They will establish a record of information for the wire
to ensure its correct processing. You can reach the Wire Desk at 1-800-662-8417.
Have your bank wire funds using the following instructions:
Investors Fiduciary Trust Company
Kansas City, MO 64105
ABA #1010-0362-1
Account #7527950
Further Credit to: Pacifica Equity Index Fund
19
<PAGE> 472
As long as you have read the Prospectus, you may establish a new regular
account through the Wire Desk; IRAs may not be opened in this way. When new
accounts are established by wire, the distribution options will be set to
reinvest and the social security or tax identification number ("TIN") will not
be certified until a signed application is received. Completed applications
should be forwarded immediately to the Fund. With the Purchase Application, the
shareholder can specify other distribution options and add any special features
offered by the Fund. Should any dividend distributions or redemptions be paid
before the TIN is certified, they will be subject to 31% Federal tax
withholding.
Automatic Investment Program. An eligible shareholder may also participate
in the Pacifica Automatic Investment Program, an investment plan that
automatically debits money from the shareholder's bank account and invests it in
the Fund through the use of electronic funds transfers or automatic bank drafts.
Shareholders may elect to make subsequent investments by transfers of a minimum
of $50 on either the fifth or twentieth day of each month into their established
Fund accounts. Contact the Trust at 1-800-662-8417 for more information about
the Pacifica Automatic Investment Program.
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund may be used as a funding medium for IRAs. Investor Shares may also
be purchased for IRAs established with an affiliate of First Interstate Bancorp
or other authorized custodians. In addition, an IRA may be established through a
custodial account with Investors Fiduciary Trust Company. Completion of a
special application is required in order to create such an account, and the
minimum initial investment for an IRA is $250. Contributions to IRAs are subject
to prevailing amount limits set by the Internal Revenue Service. A $5.00
establishment fee and an annual $12.00 maintenance and custody fee is payable
with respect to each IRA, and there will be a $10.00 termination fee when the
account is closed. For more information, call the Fund at 1-800-662-8417.
EXCHANGE OF INVESTOR SHARES
The Fund offers two convenient ways to exchange Investor Shares in the Fund
for Investor Shares in another investment portfolio of the Trust. Before
engaging in an exchange transaction, a shareholder should read carefully the
Prospectus describing the investment portfolio into which the exchange will
occur, which is available without charge and can be obtained by writing to the
Fund at 237 Park Avenue, Suite 910, New York, New York 10017, or by calling
1-800-662-8417. A shareholder may not exchange
20
<PAGE> 473
Investor Shares of one portfolio for Investor Shares of another portfolio if
both or either are not qualified for sale in the state of the shareholder's
residence. The minimum amount for an initial exchange is $500. No minimum is
required in subsequent exchanges. The Trust may terminate or amend the terms of
the exchange privilege at any time.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the net asset value next determined following receipt of the
request by the Trust in good order, plus any applicable sales charge.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
In the case of transactions subject to a sales charge, the sales charge
will be assessed on an exchange of Investor Shares, equal to the excess of the
sales load applicable to the Investor Shares to be acquired over the amount of
any sales load previously paid on the Investor Shares to be exchanged. No
service fee is imposed. See "Dividends, Distributions and Federal Income Tax"
for an explanation of circumstances in which a sales load paid to acquire
Investor Shares of the Fund may not be taken into account in determining gain or
loss on the disposition of those Investor Shares.
In addition, Institutional Shares of the Fund may be exchanged for Investor
Shares of the Fund in connection with the distribution of assets held in a
qualified trust, agency or custodial account maintained with the trust
department of a First Interstate or other bank, trust company or thrift
institution, or in other cases where Institutional Shares are not held in such
qualified accounts. Similarly, Investor Shares may be exchanged for
Institutional Shares of the Fund if the shares are to be held in such a
qualified trust, agency or custodial account. These exchanges are made without a
sales charge at the net asset value of the respective share classes.
Exchange by Mail. To exchange Investor Shares of the Fund by mail, simply
send a letter of instruction to Furman Selz. The letter of instruction must
include: (i) your account number; (ii) the portfolio from and the portfolio into
which you wish to exchange your investment; (iii) the dollar or share amount you
wish to exchange; and (iv) the signatures of all registered owners or authorized
parties. All signatures must be guaranteed by an eligible guarantor institution
including a member of a national securities exchange or by a commercial bank or
trust company, broker-dealers, credit unions and savings associations.
21
<PAGE> 474
Exchange by Telephone. To exchange Investor Shares of the Fund by
telephone, or if you have any questions, simply call the Trust at 1-800-
662-8417. You should be prepared to give the telephone representative the
following information: (i) your account number, social security number and
account registration; (ii) the name of the portfolio from and the portfolio into
which you wish to transfer your investment; and (iii) the dollar or share amount
you wish to exchange. The conversation may be recorded to protect you and the
Fund. Telephone exchanges are automatically available unless the shareholder
indicates that he does not wish to have this privilege by checking the "no" box
on the Purchase Application. See "Redemption of Investor Fund Shares -- By
Telephone" for a discussion of telephone transactions generally.
REDEMPTION OF INVESTOR SHARES
Shareholders may redeem their Investor Shares, in whole or in part, on any
Business Day. Investor Shares will be redeemed at the net asset value next
determined after a redemption request in good order has been received and
accepted by the Trust. See "Fund Share Valuation." A redemption may be a taxable
transaction on which gain or loss may be recognized.
Where the Investor Shares to be redeemed have been purchased by check, the
Trust may delay payment of the redemption proceeds until the purchasing check
has cleared, which may take up to 15 days. Shareholders may avoid this delay by
investing through wire transfers of Federal funds. During the period prior to
the time the Investor Shares are redeemed, dividends on the Investor Shares will
continue to accrue and be payable and the shareholder will be entitled to
exercise all other beneficial rights of ownership.
Once the Investor Shares are redeemed, the Fund will ordinarily send the
proceeds by check to the shareholder at the address of record on the next
Business Day. The Fund may, however, take up to seven days to make payment. This
will not be the customary practice. Also, if the New York Stock Exchange is
closed (or when trading is restricted) for any reason other than the customary
weekend or holiday closing or if an emergency condition as determined by the SEC
merits such action, the Fund may suspend redemptions or postpone payment dates.
To ensure acceptance of your redemption request, it is important to follow
the procedures described below. Although the Trust has no present intention to
do so, it reserves the right to refuse or to limit the frequency of any
telephone or wire redemptions. Of course, it may be difficult to place orders by
telephone during periods of severe market or economic change,
22
<PAGE> 475
and a shareholder should consider alternative methods of communications, such as
couriers or U.S. mail. The services offered by the Fund may be modified or
terminated at any time. If the Fund terminates any particular service, it will
do so only after giving written notice to shareholders.
You may redeem your Investor Shares using any of the following methods:
Through an Authorized Broker, Investment Advisor or Service
Organization. You may redeem your Investor Shares by contacting your broker or
investment advisor and instructing him or her to redeem your Investor Shares. He
or she will then contact PFD Inc. and place a redemption trade on your behalf.
He or she may charge you a fee for this service.
By Mail. You may redeem your Investor Shares by sending a letter directly
to the Fund. To be accepted, a letter requesting redemption must include: (i)
the Fund name and account registration from which you are redeeming Investor
Shares; (ii) your account number; (iii) the amount to be redeemed; (iv) the
signatures of all registered owners; and (v) a signature guarantee by any
eligible guarantor institution including a member of a national securities
exchange or a commercial bank or trust company, broker-dealers, credit unions
and savings associations. Corporations, partnerships, trusts or other legal
entities will be required to submit additional documentation.
By Telephone. You may redeem your Investor Shares by calling the Fund toll
free at 1-800-662-8417. You should be prepared to give the telephone
representative the following information: (i) your account number, social
security number and account registration; (ii) the Fund name from which you are
redeeming Investor Shares; and (iii) the amount to be redeemed. The conversation
may be recorded to protect you and the Fund. Telephone redemptions are
automatically available unless the shareholder indicates he does not wish to
have this privilege by checking the "no" box on the Purchase Application. The
Fund employs reasonable procedures to confirm that instructions communicated by
telephone are genuine. If the Fund fails to employ such reasonable procedures,
it may be liable for any loss, damage or expense arising out of any telephone
transactions purporting to be on a shareholder's behalf. In order to assure the
accuracy of instructions received by telephone, the Fund requires some form of
personal identification prior to acting upon instructions received by telephone,
records telephone instructions and provides written confirmation to investors of
such transactions.
23
<PAGE> 476
By Wire. You may redeem your Investor Shares by contacting the Fund by
mail or telephone and instructing it to send a wire transmission to your
personal bank.
Your instructions should include: (i) your account number, social security
number and account registration; (ii) the Fund name from which you are redeeming
Investor Shares; and (iii) the amount to be redeemed. Wire redemptions can be
made only if the "yes" box has been checked on your Purchase Application, and a
copy of a void check from the account where proceeds are to be wired is attached
to the Purchase Application. Your bank may charge you a fee for receiving a wire
payment on your behalf.
The above-mentioned services "By Telephone" and "By Wire" are not available
for IRAs and trust clients of an affiliate of First Interstate Bancorp.
Systematic Withdrawal Plan. An owner of $10,000 or more of Investor Shares
of the Fund may elect to have periodic redemptions from his or her account to be
paid on a monthly, quarterly, semi-annual or annual basis. The minimum periodic
payment is $100. A sufficient number of Investor Shares to make the scheduled
redemption will normally be redeemed on the date selected by the shareholder.
Depending on the size of the payment requested and fluctuation in the net asset
value, if any, of the Investor Shares redeemed, redemptions for the purpose of
making such payments may reduce or even exhaust the account. A shareholder may
request that these payments be sent to a predesignated bank or other designated
party. Capital gains and dividend distributions paid to the account will
automatically be reinvested at net asset value on the distribution payment date.
Reinstatement Privilege. A shareholder in the Fund who has redeemed
Investor Shares may reinvest, without a sales charge, up to the full amount of
such redemption at the net asset value determined at the time of the
reinvestment within 30 days of the original redemption. This privilege must be
effected within 30 days of the redemption. The shareholder must reinvest in the
Fund and the same account from which the Investor Shares were redeemed. A
redemption is a taxable transaction and gain or loss may be recognized for
Federal income tax purposes even if the reinstatement privilege is exercised.
Any loss realized upon the redemption will not be recognized as to the number of
Investor Shares acquired by reinstatement, except through an adjustment in the
tax basis of the Investor Shares so acquired. See "Dividends, Distributions and
Federal Income Tax" for an explanation of circumstances in which a sales load
paid to
24
<PAGE> 477
acquire Investor Shares of the Fund may not be taken into account in determining
gain or loss on the disposition of those Investor Shares.
Redemption of Small Accounts. Due to the disproportionately higher cost of
servicing small accounts, the Fund reserves the right to redeem, on not less
than 30 days' notice, an account in the Fund that has been reduced by a
shareholder to $500 or less. However, if during the 30-day notice period the
shareholder purchases sufficient Investor Shares to bring the value of the
account above $500, this restriction will not apply.
Redemption in Kind. All redemptions of Investor Shares of the Fund shall
be made in cash, except that the commitment to redeem Investor Shares in cash
extends only to redemption requests made by each shareholder of the Fund during
any 90-day period of up to the lesser of $250,000 or 1% of the net asset value
of the Fund at the beginning of such period. This commitment is irrevocable
without the prior approval of the SEC and is a fundamental policy of the Fund
that may not be changed without shareholder approval. In the case of redemption
requests by shareholders in excess of such amounts, the Board of Trustees
reserves the right to have the Fund make payment, in whole or in part, in
securities or other assets, in case of an emergency or any time a cash
distribution would impair the liquidity of the Fund to the detriment of the
existing shareholders. In this event, the securities would be valued in the same
manner as the securities of the Fund are valued. If the recipient were to sell
such securities, he or she would incur brokerage charges.
DIVIDENDS, DISTRIBUTIONS AND
FEDERAL INCOME TAX
The Fund intends to qualify annually and to elect to be treated as a
regulated investment company pursuant to the provisions of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). By so qualifying and
electing, the Fund generally will not be subject to Federal income tax to the
extent that it distributes investment company taxable income and net capital
gains in the manner required under the Code.
The Fund intends to distribute to its shareholders substantially all of its
investment company taxable income (which includes, among other items, dividends
and interest and the excess, if any, of net short-term capital gains (generally
including any net option premium income) over net long-term capital losses).
Investment company taxable income will be distributed by the Fund quarterly. The
Fund intends to distribute, at least annually, substantially all net capital
gain (the excess of net long-term capital gains over net short-term capital
losses). In determining amounts of
25
<PAGE> 478
capital gains to be distributed, any capital loss carryovers from prior years
will be applied against capital gains.
Distributions will be paid in additional shares of the same class held by a
shareholder based on the net asset value at the close of business on the payment
date of the distribution, unless the shareholder elects in writing, which is
received by Furman Selz not less than five full business days prior to the
record date, to receive such distributions in cash. Investors who redeem all or
a portion of Fund shares prior to a dividend payment date will be entitled on
the next dividend payment date to all dividends declared but unpaid on those
shares at the time of their redemption.
Distributions of investment company taxable income (regardless of whether
derived from dividends, interest or net short-term capital gains) will be
taxable to shareholders as ordinary income. Distributions of net long-term
capital gains designated by the Fund as capital gain dividends will be taxable
as long-term capital gains, regardless of how long a shareholder has held his
Fund shares. Distributions are taxable in the same manner whether received in
additional shares or in cash.
Earnings of the Fund not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To prevent imposition of this tax, the Fund intends to comply with this
distribution requirement.
A distribution, including an "exempt-interest dividend," will be treated as
paid on December 31 of a calendar year if it is declared by a Fund during
October, November, or December of that year to shareholders of record in such a
month and paid by the Fund during January of the following calendar year. Such
distributions will be treated as received by shareholders in the calendar year
in which the distributions are declared, rather than the calendar year in which
the distributions are received.
Special tax rules may apply to the Fund's acquisition of financial futures
contracts, forward contracts, and options on futures contracts. Such rules may,
among other things, affect whether gains and losses from such transactions are
considered to be short-term or long-term, may have the effect of deferring
losses and/or accelerating the recognition of gains or losses, and, for purposes
of qualifying as a regulated investment company, may limit the extent to which
the Fund may be able to engage in such transactions.
The Fund's distributions with respect to a given taxable year may exceed
the current and accumulated earnings and profits of the Fund available for
distribution. In that event, distributions in excess of such earnings and
profits would be characterized as a return of capital to
26
<PAGE> 479
shareholders for Federal income tax purposes, thus reducing each shareholder's
cost basis in his Fund shares. Distributions in excess of a shareholder's cost
basis in his shares would be treated as a gain realized from a sale of such
shares.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of the Fund, or upon receipt of a distribution in complete
liquidation of the Fund, generally will be a capital gain or loss which will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares. A loss realized by a shareholder on a redemption, sale,
or exchange of shares of the Fund that were not held for more than six months
with respect to which capital gain dividends have been paid will be
characterized as a long-term capital loss to the extent of such capital gain
dividends.
Before purchasing shares in the Fund, the impact of dividends or
distributions which are expected to be declared or have been declared, but not
paid, should be carefully considered. Any dividend or distribution declared
shortly after a purchase of such shares prior to the record date will have the
effect of reducing the per share net asset value by the per share amount of the
dividend or distribution. All or a portion of such dividend or distribution,
although in effect a return of capital, may be subject to tax.
It is anticipated that a portion of the dividends paid by the Fund will
qualify for the dividends-received deduction available to corporations.
Under certain circumstances, the sales charge incurred in acquiring shares
of the Fund may not be taken into account in determining the gain or loss on the
disposition of those shares. This rule applies where shares of the Fund are
exchanged within 90 days after the date they were purchased and new shares of
the Fund or of another investment portfolio of the Trust are acquired without a
sales charge or at a reduced sales charge. In that case, the gain or loss
recognized on the exchange will be determined by excluding from the tax basis of
the shares exchanged all or a portion of the sales charge incurred in acquiring
those shares. This exclusion applies to the extent that the otherwise applicable
sales charge with respect to the newly acquired shares is reduced as a result of
having incurred a sales charge initially. The portion of the sales charge
affected by this rule will be treated as a sales charge paid for the new shares.
The Fund may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where the Fund or shareholder has been
notified by the Internal Revenue Service that the
27
<PAGE> 480
shareholder is subject to backup withholding. Most corporate shareholders and
certain other shareholders specified in the Code are exempt from backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against the shareholder's U.S. Federal income tax liability.
Income or gain from investments in foreign securities may be subject to
foreign withholding or other taxes. It is expected that the Funds may be subject
to foreign withholding taxes with respect to income received from sources within
foreign countries.
If the Fund invests in certain "passive foreign investment companies"
("PFICs"), it would be subject to Federal income tax (and possibly additional
interest charges) on a portion of any excess distribution or gain from the
disposition of such shares even if it distributes such income to its
shareholders. If the Fund elects to treat the PFIC as a qualified electing fund
("QEF") and the PFIC furnishes certain financial information in the required
form to the Fund, the Fund would instead be required to include in income each
year its allocable share of the ordinary earnings and net capital gains on the
QEF, regardless of whether received, and such amounts would be subject to the
various distribution requirements described above.
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund in which they invest. Depending on the
residence of the shareholder for tax purposes, distributions also may be subject
to state and local taxes, including withholding taxes. Foreign shareholders may,
for example, be subject to special withholding requirements. Special tax
treatment, including a penalty on certain pre-retirement distributions, is
accorded to accounts maintained as IRAs. Shareholders should consult their own
tax advisors as to the Federal, state and local tax consequences of ownership of
shares of the Fund in their particular circumstances.
DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES
OPTIONS
The Fund may purchase put and call options listed on a national securities
exchange and issued by the Options Clearing Corporation in an amount not
exceeding 5% of its net assets. Purchasing options is a specialized investment
technique that entails a substantial risk of a complete loss of the amounts paid
as premiums to the writer of the option.
28
<PAGE> 481
The Fund may also write covered call and secured put options from time to
time as the Advisor deems appropriate. By writing a covered call option, the
Fund forgoes the opportunity to profit from an increase in the market price of
the underlying security above the exercise price except insofar as the premium
represents such a profit, and it is not able to sell the underlying security
until the option expires or is exercised or the Fund effects a closing purchase
transaction by purchasing an option of the same series. If the Fund writes a
secured put option, it assumes the risk of loss should the market value of the
underlying security decline below the exercise price of the option. The
aggregate value of the securities subject to options written by the Fund will
not exceed 25% of the value of its net assets. The use of covered call options
and secured put options will not be a primary investment technique of the Fund,
and they are expected to be used infrequently. If the Advisor is incorrect in
its forecast of market value or other factors when writing the foregoing
options, the Fund would be in a worse position than it would have been had the
foregoing investment techniques not been used.
The Fund may engage in unlisted over-the-counter options with
broker/dealers deemed creditworthy by the Advisor. Closing transactions for such
options are usually effected directly with the same broker/dealer that effected
the original option transaction. The Fund bears the risk that the broker/dealer
will fail to meet its obligations. There is no assurance that a liquid secondary
trading market exists for closing out an unlisted option position. Furthermore,
unlisted options are not subject to the protections, afforded purchasers of
listed options by the Options Clearing Corporation, which performs the
obligations of its members who fail to perform in connection with the purchase
or sale of options.
For additional information relating to option trading practices, including
the particular risks thereof, see the SAI.
STOCK INDEX FUTURES CONTRACTS AND OPTIONS ON STOCK INDEX FUTURES CONTRACTS
The Fund may enter into stock index futures contracts in order to protect
the value of common stock investments or to maintain liquidity, provided that
not more than 5% of the Fund's net assets are committed to such transactions.
See the SAI for further information about stock index futures contracts.
The Funds may also purchase put options on stock index futures as another
method of protecting its assets against market declines. See the SAI for further
information about these options contracts.
29
<PAGE> 482
There can be no assurance that a liquid market will exist at a time when
the Fund seeks to close out a futures contract or a futures option position.
Most futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single day; once the daily limit
has been reached on a particular contract, no trades may be made that day at a
price beyond that limit. In addition, certain of these instruments are
relatively new and without a significant trading history. As a result, there is
no assurance that an active secondary market will develop or continue to exist.
Lack of a liquid market for any reason may prevent the Fund from liquidating an
unfavorable position and the Fund would remain obligated to meet margin
requirements until the position is closed.
The use of the techniques listed above which involve the segregation of
assets to cover future obligations may impair the liquidity of the Fund's assets
and its ability to operate as an open-end investment company. Furman Selz and
the Advisor will monitor the Fund's use of such techniques and report to the
Trustees concerning their impact, if any, on liquidity and the Fund's ability to
meet redemptions.
FIXED INCOME SECURITIES
The Fund may invest in the types of fixed income securities described
below.
U.S. Government Obligations. U.S. Government securities are obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
U.S. Treasury obligations are direct obligations of the United States and are
the most frequently issued marketable U.S. Government security. U.S. Government
agency and instrumentality obligations are debt securities issued by U.S.
Government-sponsored enterprises and Federal agencies. Some obligations of
agencies are supported by the full faith and credit of the United States or by
U.S. Treasury guarantees, such as mortgage-backed certificates, which may be
guaranteed by the Government National Mortgage Association; others, such as
obligations of the Federal Home Loan Banks, Federal Farm Credit Bank, Bank for
Cooperatives, Federal Intermediate Credit Banks and the Federal Land Bank, are
guaranteed by the right of the issuer to borrow from the U.S. Treasury; others,
such as obligations of the Federal National Mortgage Association, are supported
by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, such as obligations of
the Student Loan Marketing Association and the Tennessee Valley Authority, are
backed only by the credit of the agency or instrumentality issuing the
obligation. In the case of obligations not backed by the full faith and credit
of the United States, the
30
<PAGE> 483
investor must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment.
Repurchase Agreements. The Fund may agree to purchase securities subject
to the seller's agreement to repurchase them at a mutually agreed upon date and
price. The Fund will enter into such repurchase agreements only with financial
institutions that are deemed to be creditworthy by the Advisor, pursuant to
guidelines established by the Trust's Board of Trustees. During the term of any
repurchase agreement, the Advisor will continue to monitor the creditworthiness
of the seller. The Fund will not enter into repurchase agreements with the
Advisor or its affiliates. Although the securities subject to repurchase
agreements may bear maturities exceeding 13 months, the Fund does not presently
intend to enter into repurchase agreements with deemed maturities in excess of
seven days. If in the future the Fund was to enter into repurchase agreements
with deemed maturities in excess of seven days, the Fund would do so only if
such investment, together with other illiquid securities, did not exceed 10% of
the value of the Fund's net assets.
The seller under a repurchase agreement will be required to maintain the
value of the securities that are subject to the agreement and held by the Fund
at not less than the repurchase price. Default or bankruptcy of the seller
would, however, expose the Fund to possible delay in connection with the
disposition of the underlying securities or loss to the extent that proceeds
from a sale of the underlying securities were less than the repurchase price
under the agreement.
Bank Obligations. Bank obligations include bankers' acceptances,
negotiable certificates of deposit and non-negotiable time deposits issued by a
U.S. bank, savings bank or savings association that is a member of the Federal
Reserve System or insured by the Federal Deposit Insurance Corporation. The Fund
may also invest in U.S. dollar-denominated obligations of foreign banks.
Obligations of foreign banks or foreign branches of U.S. banks entail risks that
are different from those of investments in domestic obligations of U.S. banks.
These additional risks include future political and economic developments, the
possible imposition of withholding taxes on interest income, possible seizure or
nationalization of foreign deposits, the possible establishment of exchange
controls, or the adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on such obligations. In
addition, foreign branches of U.S. banks and U.S. branches of foreign banks may
be subject to less stringent reserve requirements and to different accounting,
auditing, reporting, and recordkeeping standards than those applicable to
domestic branches of U.S. banks. Investments in domestic and foreign bank
obliga-
31
<PAGE> 484
tions are limited to the obligations of financial institutions having $1 billion
or more in total assets at the time of purchase.
Commercial Paper. Commercial paper includes short-term unsecured
promissory notes, variable rate demand notes and variable rate master demand
notes issued by domestic and foreign bank holding companies, corporations and
financial institutions, as well as similar instruments issued by government
agencies and instrumentalities. Investments by the Fund in commercial paper will
consist of issues that are rated in one of the two highest rating categories by
a NRSRO. In addition, the Fund may acquire unrated commercial paper and
corporate bonds that are determined by the Advisor at the time of purchase to be
of comparable quality to rated instruments that may be acquired by the Fund.
Commercial paper may include variable and floating rate instruments.
Variable and Floating Rate Instruments. Instruments purchased by the Fund
may include variable and floating rate demand instruments issued by
corporations, industrial development authorities and governmental entities.
These instruments may include variable amount master demand notes that permit
the indebtedness to vary in addition to providing for periodic adjustments in
the interest rate. Although variable and floating rate demand instruments are
frequently not rated by credit rating agencies, unrated instruments purchased by
the Fund will be determined to be of comparable quality to rated instruments
that may be purchased by the Fund. While there may be no active secondary market
with respect to a particular variable or floating rate instrument purchased by
the Fund, the Fund may, from time to time as specified in the instrument, demand
payment in full of the principal of the instrument or may resell the instrument
to a third party. The absence of such an active secondary market, however, could
make it difficult for the Fund to dispose of a variable or floating rate demand
instrument if the issuer defaulted on its payment obligations or during periods
that the Fund is not entitled to exercise its demand rights, and the Fund could,
for these or other reasons, suffer a loss. Variable and floating rate
instruments with no active secondary market will be included in the calculation
of the Fund's illiquid assets.
Derivative Securities. The Fund may invest in structured notes, bonds or
other instruments with interest rates that are determined by reference to
changes in the value of other interest rates, indices or financial indicators
("References") or the relative change in two or more References. The Fund may
also hold derivative instruments that have interest rates that re-set inversely
to changing current market rates and/or have embedded interest rate floors and
caps that require the issuer to pay an adjusted interest rate if market rates
fall below or rise above a specified
32
<PAGE> 485
rate. These instruments represent relatively recent innovations in the bond
markets, and the trading market for these instruments is less developed than the
markets for traditional types of debt instruments. It is uncertain how these
instruments will perform under different economic and interest-rate scenarios.
Because certain of these instruments are leveraged, their market values may be
more volatile than other types of bonds and may present greater potential for
capital gain or loss. On the other hand, the imbedded option features of other
derivative instruments could limit the amount of appreciation the Fund can
realize on its investment, could cause the Fund to hold a security it might
otherwise sell or could force the sale of a security at inopportune times or for
prices that do not reflect current market value. The possibility of default by
the issuer or the issuer's credit provider may be greater for these structured
and derivative instruments than for other types of instruments. In some cases it
may be difficult to determine the fair value of a structured or derivative
instrument because of a lack of reliable objective information and an
established secondary market for some instruments may not exist. As new types of
derivative securities are developed and offered to investors, the Advisor will,
consistent with the Fund's investment objective, policies and quality standards,
consider making investments in such new types of derivative securities.
SECURITIES ISSUED BY OTHER INVESTMENT COMPANIES
The Fund may invest in securities issued by other investment companies
within the limits prescribed by the 1940 Act. The Fund currently intends to
limit its investments so that, as determined immediately after a securities
purchase is made: (a) not more than 5% of the value of its total assets will be
invested in the securities of any one investment company; (b) not more than 10%
of the value of its total assets will be invested in the aggregate in securities
of investment companies as a group; (c) not more than 3% of the outstanding
voting stock of any one investment company will be owned by the Fund; and (d)
not more than 10% of the outstanding voting stock of any one investment company
will be owned in the aggregate by the Fund and other investment companies
advised by the Advisor or any other affiliate of First Interstate Bancorp. Such
investments may include investments in SPDRs, which are unit investment trusts
that are structured to seek an investment performance that correlates to the
performance of the S&P 500. As a shareholder of another investment company, the
Fund would bear, along with other shareholders, its pro rata portion of the
expenses of such other investment company, including advisory fees. These
expenses would be in addition to the advisory and other expenses that the Fund
bears directly in connection with its own operations, and may represent a
duplication of fees to shareholders of the Fund.
33
<PAGE> 486
LOANS OF PORTFOLIO SECURITIES
To increase return, the Fund may lend its portfolio securities to
broker/dealers and other institutional investors pursuant to agreements
requiring that the loans be continuously secured by collateral equal at all
times in value to at least the market value of the securities loaned. The
collateral for such loans may include cash, securities of the U.S. Government,
its agencies or instrumentalities, or irrevocable letters of credit issued by a
bank, or any combination thereof. Such loans will not be made if, as a result,
the aggregate of all outstanding loans exceeds 30% of the value of the Fund's
total assets. There may be risks of delay in receiving additional collateral or
in recovering the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially. However, loans are made
only to borrowers deemed by the Advisor to be of good standing and when, in
their judgment, the income to be earned from the loan justifies the attendant
risks.
FORWARD COMMITMENTS, WHEN-ISSUED PURCHASES AND DELAYED-DELIVERY TRANSACTIONS
The Fund may purchase or sell securities on a when-issued or delayed-
delivery basis and make contracts to purchase or sell securities for a fixed
price at a future date beyond customary settlement time. Securities purchased or
sold on a when-issued, delayed-delivery or forward commitment basis involve a
risk of loss if the value of the security to be purchased declines, or the value
of the security to be sold increases, before the settlement date. Although the
Fund will generally purchase securities with the intention of acquiring them,
the Fund may dispose of securities purchased on a when-issued, delayed-delivery
or a forward commitment basis before settlement when deemed appropriate by the
Advisor.
ILLIQUID SECURITIES
The Fund will not knowingly invest more than 10% of the value of its net
assets in securities that are illiquid because of restrictions on
transferability or other reasons. Repurchase agreements with deemed maturities
in excess of seven days, time deposits maturing in more than seven days and
securities that are not registered under the Securities Act of 1933 but may be
purchased by institutional buyers under Rule 144A are subject to this limit
(unless such securities are variable amount master demand notes with maturities
of nine months or less or unless the Advisor determines under the supervision of
the Board that a liquid trading market exists).
Rule 144A allows for a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public.
34
<PAGE> 487
Rule 144A establishes a "safe harbor" from the registration requirements of the
Securities Act of 1933 for resales of certain securities to qualified
institutional buyers. The Advisor believes that the market for certain
restricted securities may expand further as a result of this regulation and the
development of automated systems for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the NASD.
The Advisor monitors the liquidity of restricted securities in the Fund
under the supervision of the Board of Trustees. In reaching liquidity decisions,
the Advisor will consider such factors as: (a) the frequency of trades and
quotes for the security; (b) the number of dealers wishing to purchase or sell
the security and number of other potential purchasers; (c) dealer undertakings
to make a market in the security; and (d) the nature of the security and the
nature of the marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers and the mechanics of the transfer).
The use of Rule 144A transactions could have the effect of increasing the level
of illiquidity of the Fund during periods that qualified institutional buyers
become uninterested in purchasing restricted securities.
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment restrictions that may
be changed only with the approval of a majority of the Fund's outstanding
shares. The following description summarizes several of the Fund's fundamental
restrictions, which are set forth in full in the SAI.
The Fund may not:
1. Purchase securities (except U.S. Government securities and repurchase
agreements collateralized by such securities) if more than 5% of its
total assets at the time of purchase will be invested in securities of
any one issuer, except that up to 25% of the Fund's total assets may be
invested without regard to this 5% limitation.
2. Subject to the foregoing 25% exception, purchase more than 10% of the
outstanding voting securities of any issuer.
3. Invest 25% or more of its total assets at the time of purchase in
securities of issuers whose principal business activities are in the
same industry.
4. Borrow money except in amounts up to 10% of the value of its total
assets at the time of borrowing.
35
<PAGE> 488
If a percentage restriction on the investment or use of assets set forth in
this Prospectus is adhered to at the time a transaction is effected, later
changes in percentage resulting from changing values will not be considered a
violation, however, the Fund will not at any time have more than 15% of its net
assets invested in illiquid securities.
OTHER INFORMATION
CAPITALIZATION
Pacifica Funds Trust (formerly Fund Source) was organized as a
Massachusetts business trust on July 17, 1984. The capitalization of the Trust
consists solely of an unlimited number of shares of beneficial interest with a
par value of $0.001 each. When issued, shares of the Fund are fully paid,
non-assessable and freely transferable.
The Board of Trustees has authorized the issuance of two classes of shares
in the Fund described in this Prospectus -- Investor Shares and Institutional
Shares. Each share of the Fund represents an equal proportionate interest in the
Fund with other shares of the same class and is entitled to such dividends and
distributions earned on such shares as are declared in the discretion of the
Board of Trustees.
The Fund's Investor Shares and Institutional Shares bear their pro rata
portion of all operating expenses paid by the Fund except for the distribution
payments, Service Organization fees and other "class" expenses that are
allocated to a particular share class. The Board of Trustees has not approved a
Distribution Plan with respect to Institutional Shares. The Fund may pay fees to
Service Organizations in amounts up to an annual rate of 0.25% of the average
daily net asset value of the Fund's outstanding Institutional Shares owned by
shareholders with whom a Service Organization has a servicing relationship.
Institutional Shares of the Fund are purchased at net asset value per share
without a sales charge. Because of the "class expenses" and sales charges, the
performance of the Fund's Institutional Shares is expected to be higher than the
performance of its Investor Shares. The Trust offers various services and
privileges in connection with its Investor Shares that are not offered in
connection with its Institutional Shares, including an automatic investment
plan, automatic withdrawal plan and, with respect to certain portfolios,
checkwriting. For information regarding the Fund's Institutional Shares, contact
Furman Selz at 1-800-662-8417 or your Service Organization.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
36
<PAGE> 489
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust. The Declaration of Trust also
provides for indemnification out of the property of the Fund of any shareholder
held personally liable solely by reason of being or having been a shareholder of
the Fund. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Fund itself would
be unable to meet its obligations and should be considered remote.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Trust is not required to hold regular
annual meetings of the Fund's shareholders, but in the event that a special
meeting is held, shareholders of each portfolio offered by the Trust will be
entitled to one vote for each full share held and fractional votes for
fractional shares held, and will vote in the aggregate and not on a
portfolio-by-portfolio basis, except as required by the 1940 Act or other
applicable law. It is contemplated that, as required by the 1940 Act, the
shareholders of a portfolio will vote separately on a portfolio-by-portfolio
basis on matters relating to a particular portfolio's investment advisory
agreement or changes in a portfolio's fundamental investment limitations, and on
other matters where the interests of the respective portfolios are not
substantially identical. Similarly, shareholders of each portfolio will vote in
the aggregate and not by class unless the Trustees determine that the matter to
be voted on affects only the interests of the holders of a particular class of
the Fund's shares. Voting rights are not cumulative.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust and in connection with such meeting to comply with the shareholders'
communications provisions of Section 16(c) of the 1940 Act.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of the Fund means, with respect to the
approval of an investment advisory agreement or a change in a fundamental
investment policy, the vote of the lesser of: (1) 67% of the shares of the Fund
present at a meeting if the holders of more than 50% of
37
<PAGE> 490
the outstanding shares are present in person or by proxy; or (2) more than 50%
of the outstanding shares of the Fund. For purposes of the 1940 Act, any person
who owns either directly or through one or more controlled companies more than
25 percent of the voting securities of a company is presumed to "control" such
company. Under this definition, First Interstate Bancorp and its affiliates may
be deemed to be controlling persons of the Trust.
PERFORMANCE INFORMATION
The Fund may, from time to time, include yield and total return data for
its Investor Shares and Institutional Shares in advertisements or reports to
shareholders or prospective investors. The methods used to calculate the yields
and total returns of the Fund are mandated by the SEC.
Quotations of "yield" for a class of shares of the Fund will be based on
the investment income per share during a particular 30-day (or one month) period
(including dividends and interest), less expenses accrued during the period
("net investment income"), and will be computed by dividing net investment
income by the maximum public offering price per share on the last day of the
period.
Quotations of yield reflect only the performance of a class of shares
during the particular period on which the calculations are based. Yield will
vary based on changes in market conditions, the level of interest rates and the
level of the expenses of a particular class of shares, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
Quotations of average annual total return for a class of shares of the Fund
will be expressed in terms of the average annual compounded rate of return of a
hypothetical investment in that class over periods of 1, 5 and 10 years (up to
the life of that class), reflect the deduction of a proportional share of
expenses allocated to that class (on an annual basis), and assume that all
dividends and distributions are reinvested when paid.
Performance information for the Fund may be compared to various unmanaged
indices, such as the Standard & Poor's 500 Stock Index, the Dow Jones Industrial
Average, indices prepared by Lipper Analytical Services, and other entities or
organizations which track the performance of investment companies. Any
performance information should be considered in light of the Fund's investment
objective and policies, characteristics and quality of the Fund and the market
conditions during the time period indicated, and should not be considered to be
representative of what may be achieved in the future. For a description of the
methods used to determine
38
<PAGE> 491
yield and total return for the Fund, see "Other Information -- Performance
Information" in the SAI.
ACCOUNT SERVICES
All transactions in shares of the Fund will be reflected in a statement for
each shareholder. In those cases where a Service Organization or its nominee is
shareholder of record of shares purchased for its customer, the Fund has been
advised that the statement may be transmitted to the customer at the discretion
of the Service Organization.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Fund at 237 Park
Avenue, Suite 910, New York, New York 10017.
General and Account Information: (800) 662-8417
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND
OR BY ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY FIRST INTERSTATE BANCORP OR ITS AFFILIATES,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
39
<PAGE> 492
INVESTMENT ADVISOR
First Interstate Capital Management, Inc.
7501 East McCormick Parkway
Scottsdale, Arizona 85258
ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Pacifica Funds Distributor Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
First Interstate Bank of California
707 Wilshire Boulevard
Los Angeles, California 90017
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
[PACIFICA LOGO] PACEIDS-2/96
<PAGE> 493
[PACIFICA LOGO]
(INVESTOR SHARES)
PACIFICA INTERNATIONAL EQUITY FUND
PROSPECTUS
FEBRUARY 1, 1996
[FIRST INTERSTATE BANK LOGO]
Investment Advisor to The Pacifica Funds
<PAGE> 494
PACIFICA FUNDS TRUST
(INVESTOR SHARES)
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) 662-8417
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. --
INVESTMENT ADVISOR
("FICM" OR THE "ADVISOR")
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
("FURMAN SELZ" OR THE "SPONSOR")
PACIFICA FUNDS DISTRIBUTOR INC. -- DISTRIBUTOR
("PFD INC." OR THE "DISTRIBUTOR")
Pacifica Funds Trust (the "Trust") is an open-end investment company (a
mutual fund) that offers a selection of separate investment portfolios. This
Prospectus describes the Investor Shares of the following portfolio (the
"Fund"):
- Pacifica International Equity Fund
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund and should be read and retained for
information about the Fund. A Statement of Additional Information (the "SAI"),
dated February 1, 1996 (which may be revised from time to time), containing
additional and more detailed information about the Fund, has been filed with the
Securities and Exchange Commission ("SEC") and is hereby incorporated by
reference into this Prospectus. It is available without charge and can be
obtained by writing or calling the Fund at the address or information number
printed above.
----------------------------
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FIRST INTERSTATE OR OTHER BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN 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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1996.
<PAGE> 495
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS.............................................. 3
FUND EXPENSES........................................... 6
FEE TABLE -- INVESTOR SHARES............................ 6
THE FUND................................................ 8
INVESTMENT POLICIES AND PRACTICES OF THE FUND........... 8
RISKS OF INVESTING IN THE FUND.......................... 10
MANAGEMENT OF THE FUND.................................. 11
FUND SHARE VALUATION.................................... 16
PRICING OF INVESTOR SHARES.............................. 17
MINIMUM PURCHASE REQUIREMENTS........................... 20
PURCHASE OF INVESTOR SHARES............................. 20
INDIVIDUAL RETIREMENT ACCOUNTS.......................... 22
EXCHANGE OF INVESTOR SHARES............................. 22
REDEMPTION OF INVESTOR SHARES........................... 23
DIVIDENDS, DISTRIBUTIONS AND FEDERAL
INCOME TAX............................................ 27
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES...... 30
INVESTMENT RESTRICTIONS................................. 38
OTHER INFORMATION....................................... 39
</TABLE>
2
<PAGE> 496
HIGHLIGHTS
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND
This Prospectus describes a diversified investment portfolio managed by
First Interstate Capital Management, Inc.
The investment objective of the Fund is to maximize total return,
consisting of capital appreciation (both realized and unrealized) and income, by
investing primarily in the equity securities of non-U.S. issuers. The equity
securities in which the Fund invests generally include common stock, preferred
stock and securities convertible into or exchangeable for common or preferred
stock. The Fund may also invest in various types of depositary receipts, which
are described below. Under normal market conditions, at least 65% of the value
of the total assets of the Fund will be invested in the equity securities of
issuers in at least three countries other than the United States.
For additional information concerning the investment policies, practices
and risk considerations of the Fund, see "The Fund," "Investment Policies and
Practices of the Fund" and "Risks of Investing in the Fund" in this Prospectus.
RISKS OF INVESTING IN THE FUND
The price per share of the Fund will fluctuate with changes in value of the
investments held by the Fund. The Fund's performance will change daily based on
many factors, including the quality of the instruments in the Fund's investment
portfolio, national and international economic conditions, interest rate levels,
the overall level of equity prices, general market conditions and international
exchange rates. Depending on these factors, the net asset value of the Fund may
decrease instead of increase. The Fund may seek to achieve its investment
objective through investments in securities of foreign issuers (which involve
risks not typically associated with U.S. issuers), instruments with the lower
investment grade rating which have speculative characteristics, and by the use
of certain options, futures and currency swap strategies. In addition, the Fund
may invest in securities issued by emerging growth companies, which may involve
greater price volatility and risk than those incurred by funds that do not
invest in such companies. The market value of the Fund's investments in fixed
income securities will change in response to changes in interest rates and the
relative financial strength of each issuer. During periods of falling interest
rates, the value of fixed income securities generally rises. Con-
3
<PAGE> 497
versely, during periods of rising interest rates the value of such securities
generally declines.
There is no assurance that the Fund will achieve its investment objective.
MANAGEMENT OF THE FUND
First Interstate Capital Management, Inc. acts as investment advisor to the
Fund. For its services, the Advisor is entitled to receive a fee from the Fund
at an annual rate based on the Fund's average daily net assets. See "Fee
Table -- Investor Shares" and "Management of the Fund" in this Prospectus.
Furman Selz acts as administrator and sponsor to the Fund. Furman Selz
provides certain management and administrative services to the Fund, and is
entitled to receive a fee from the Fund at an annual rate based on the Fund's
average daily net assets. PFD Inc. distributes the Fund's shares and may be
reimbursed for certain of its distribution-related expenses.
Fees and expenses charged to the Fund are outlined on pages 6 and 7 of this
Prospectus.
4
<PAGE> 498
GUIDE TO INVESTING IN THE PACIFICA FAMILY OF FUND
Purchase orders for the Fund received by your broker or Service
Organization in proper order by 4:15 p.m., Eastern time, and transmitted to the
Trust prior to 5:00 p.m. Eastern time will become effective that day.
<TABLE>
<S> <C>
- - MINIMUM INITIAL INVESTMENT............ $500
- - MINIMUM INITIAL INVESTMENT FOR IRAS... $250
- - MINIMUM SUBSEQUENT INVESTMENT......... $ 50
</TABLE>
Investor Shares of the Fund are purchased at net asset value plus a sales
charge of no more than 4.5%.
Shareholders may exchange Investor Shares between portfolios by telephone
or mail.
<TABLE>
<S> <C>
- - MINIMUM INITIAL EXCHANGE.............. $500
(NO MINIMUM FOR SUBSEQUENT EXCHANGES)
</TABLE>
Shareholders may redeem Investor Shares by telephone, mail or wire.
- The Fund reserves the right upon not less than 30 days' notice to redeem
involuntarily all the Investor Shares in an investor's account which have
an aggregate value of $500 or less.
(The above redemption services are not available for IRAs and trust clients
of First Interstate Bancorp and its affiliates.)
All dividends and distributions will be automatically reinvested at net
asset value in additional Investor Shares of the Fund unless cash payment is
requested.
- Distributions for the Fund are generally paid quarterly.
For additional information on how to purchase and redeem Investor Shares of
the Fund, see "Purchase of Investor Shares," "Exchange of Investor Shares" and
"Redemption of Investor Shares."
5
<PAGE> 499
FUND EXPENSES
The following table lists the costs and expenses that an investor will
incur either directly or indirectly as an Investor shareholder of the Fund. The
information is based on estimated amounts for the initial fiscal year of the
Fund.
FEE TABLE -- INVESTOR SHARES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................. 4.50%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................. None
Deferred Sales Load
(as a percentage of redemption proceeds)............ None+
Redemption Fees........................................ None
Exchange Fee........................................... None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (after waivers)(++).................... 0.30%
12b-1 Fees(++)++....................................... 0.10%
Other Expenses (after waivers)(++)++++................. 1.40%
----
TOTAL FUND OPERATING EXPENSES:
(after waivers)(++)++++++.............................. 1.80%
----
----
</TABLE>
- ---------------
(++) Management Fees (before waivers) would be 1.00%.
(++)++ Under rules of the National Association of Securities Dealers, Inc.
(the "NASD"), a 12b-1 fee may be treated as a sales charge for certain
purposes. Because a 12b-1 fee is an annual fee charged against the
assets of the Fund, long-term shareholders may indirectly pay more in
total sales charges than the economic equivalent of the maximum
front-end sales charge permitted by the rules of the NASD. See
"Management of the Fund -- The Sponsor and Distributor."
(++)++++ Other Expenses (before waivers) would be 1.65%.
(++)++++++ Total Fund Operating Expenses (before waivers) would be 2.75%.
+ Investor Shares sold pursuant to a complete waiver of the initial sales
charge available to purchases of $1 million or more are subject to a 1%
contingent deferred sales charge if redeemed within one year from the date
of purchase.
6
<PAGE> 500
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Fund's Investor Shares will
bear. The table does not reflect any charges that may be imposed by a First
Interstate Bank or other institutions directly on their customer accounts in
connection with investments in the Fund.
EXAMPLE:(++)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C>
1 year................................................. $ 62
3 years................................................ $ 99
</TABLE>
- ---------------
(++) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED
AMOUNT.
7
<PAGE> 501
THE FUND
The Fund is a portfolio of Pacifica Funds Trust, a business trust organized
under the laws of the Commonwealth of Massachusetts as an open-end, management
investment company. The Trust's Board of Trustees oversees the overall
management of the Fund and elects the officers of the Fund.
INVESTMENT POLICIES AND PRACTICES OF THE FUND
- The Fund's investment objective is to maximize total return, consisting
of capital appreciation (both realized and unrealized) and income, by
investing primarily in the equity securities of non-U.S. issuers (as
described below).
The SAI contains the specific investment restrictions which govern the
Fund's investments. The Fund's investment objective is not a fundamental policy
and may be changed by the Board of Trustees without shareholder approval. Any
change in the investment objective of the Fund by the Board of Trustees may
result in the Fund having an investment objective different from the objective
which a shareholder considered appropriate at the time of investment in the
Fund. Except for those restrictions specifically identified as fundamental, all
other investment policies and practices described in this Prospectus and in the
SAI are not fundamental.
The Advisor selects investments and makes investment decisions based on the
investment objective and policies of the Fund.
The investment objective of the Fund is to maximize total return,
consisting of capital appreciation (both realized and unrealized) and income, by
investing primarily in the equity securities of non-U.S. issuers (as described
below). The equity securities in which the Fund invests generally include common
stock, preferred stock and securities convertible into or exchangeable for
common or preferred stock. The Fund may also invest in various types of
depositary receipts, which are described below. Under normal market conditions,
at least 65% of the value of the total assets of the Fund will be invested in
the equity securities of issuers in at least three countries other than the
United States.
In pursuit of its objective, the Fund may purchase securities of companies,
wherever organized, which, in the judgment of the Fund's investment adviser,
have their principal business activities and interests outside the United States
("non-U.S. issuers"). The investment adviser generally considers such companies
to include those companies (i) that derive 50% or more of their revenues outside
the United States, (ii) 50% or more of the assets of which are located outside
the United States, or
8
<PAGE> 502
(iii) the equity securities of which are traded principally on a
non-U.S. securities exchange. Investment in foreign securities and depositary
receipts involves certain risks as described under "Risks of Investing in the
Fund" below.
The Fund expects to invest in a number of countries and normally intends to
include in its portfolio securities issuers in no fewer than three countries.
The percentage of the Fund's assets invested in particular countries or regions
of the world will vary depending on political and economic conditions. The Fund
currently contemplates that it will invest in securities of issuers located in,
or securities denominated in the currencies of, a variety of countries selected
from the following: Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia, the Netherlands,
New Zealand, Norway, Singapore, Spain, Sweden, Switzerland and the United
Kingdom, and in securities denominated in a multinational currency unit, such as
the European Currency Unit. The Fund will not invest more than 25% of its total
assets in the equity securities of issuers in developing countries (i.e.,
countries which are generally considered to be in the initial stages of
industrialization, as determined by the investment adviser) not included in the
foregoing list, which countries may include any country in the world not listed
above. The Fund may invest up to 35% of the value of its total assets in the
equity securities of U.S. issuers.
In focusing on non-U.S. issuers, the Fund is designed to provide investors
with the opportunity to diversify their investments and participate in economies
and markets outside the United States. The Fund's portfolio will emphasize
established companies, although the Fund may invest in companies of varying
sizes as measured by assets, sales or market capitalization. The equity
securities in which the Fund invests are expected to be either listed on an
exchange or traded in an over-the-counter market. The payment or non-payment of
dividends will not be a significant factor in the investment adviser's selection
of investment.
The Fund may also hold short-term U.S. Government obligations, money market
instruments, repurchase agreements, securities issued by other investment
companies within the limits prescribed by the Investment Company Act of 1940, as
amended (the "1940 Act"), and cash, pending investment, to meet anticipated
redemption requests or if, in the opinion of the Advisor, suitable investments
for the Fund are unavailable. Such investments may be made in such proportions
as, in the opinion of the Advisor, existing circumstances may warrant, and may
include obligations of foreign banks and foreign branches of U.S. banks. The
types of securities and investment practices used by the Fund are described in
greater detail
9
<PAGE> 503
under the section "Description of Securities and Investment Practices" on
pages 30-38 of this Prospectus.
RISKS OF INVESTING IN THE FUND
The price per share of the Fund will fluctuate with changes in value of the
investments held by the Fund. Shareholders of the Fund should, therefore, expect
the value of their shares to fluctuate with changes in the value of the
securities owned by the Fund. For example, investments by the Fund in smaller
companies may involve greater risks than investments in large companies due to
such factors as limited product lines, markets and financial or managerial
resources, and less frequently traded securities that may be subject to more
abrupt price movements than securities of larger companies.
Investing in the securities of issuers in any foreign country, including
American Depositary Receipts ("ADRs") and European Depositary Receipts ("EDRs"),
involves special risks and considerations not typically associated with
investing in U.S. companies. These include differences in accounting, auditing
and financial reporting standards; generally higher commission rates on foreign
portfolio transactions; the possibility of nationalization, expropriation or
confiscatory taxation; adverse changes in investment or exchange control
regulations (which may include suspension of the ability to transfer currency
from a country); and political instability which could affect U.S. investments
in foreign countries. Additionally, foreign securities and dividends and
interest payable on those securities may be subject to foreign taxes, including
taxes withheld from payments on those securities. Foreign securities often trade
with less frequency and volume than domestic securities and, therefore, may
exhibit greater price volatility. Additional costs associated with an investment
in foreign securities may include higher custodial fees than apply to domestic
custodial arrangements and transaction costs of foreign currency conversions.
Changes in foreign exchange rates also will affect the value of securities
denominated or quoted in currencies other than the U.S. dollar. The Fund's
objective may be affected either unfavorably or favorably by fluctuations in the
relative rates of exchange between the currencies of different nations, by
exchange control regulations and by indigenous economic and political
developments. See the SAI for further information about foreign securities.
There is, of course, no assurance that the Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products.
10
<PAGE> 504
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of the
Board of Trustees. The Trustees are Dennis W. Draper, Joseph N. Hankin, John E.
Heilmann, Jack D. Henderson and Richard A. Wedemeyer. Information about the
Trustees, as well as the Fund's executive officers, may be found in the SAI
under the heading "Management -- Trustees and Officers."
THE ADVISOR: FIRST INTERSTATE CAPITAL MANAGEMENT, INC.
First Interstate Capital Management, Inc., 7501 E. McCormick Parkway,
Scottsdale, Arizona 85258, serves as investment advisor to the Trust. FICM
manages the investment and reinvestment of the assets of the Fund and
continuously reviews, supervises and administers the Fund's investments. The
Advisor is responsible for placing orders for the purchase and sale of the
Fund's investments directly with brokers and dealers selected by it in its
discretion.
FICM is a wholly-owned subsidiary of First Interstate Bank of California,
which is the largest banking subsidiary of First Interstate Bancorp, a
multi-bank holding company. First Interstate Bancorp provides financial products
and services marketed at the local level to nearly five million households in
over 500 communities in 13 western states.
On January 24, 1996, First Interstate Bancorp signed a definitive merger
agreement to merge with Wells Fargo & Company ("Wells Fargo"), a publicly-held
bank holding company with its head office at 420 Montgomery Street, San
Francisco, California 94104. The merger is conditioned upon, among other things,
certain regulatory approvals. Upon completion of the merger, currently expected
to occur during the second quarter of 1996, FICM will be wholly-owned by Wells
Fargo, and the existing investment advisory agreement between the Trust and FICM
will automatically terminate. It is contemplated that an application will be
filed with the Securities and Exchange Commission to ensure there is no
disruption as a result of the merger in the provision of investment advisory
services to the Funds, and that a meeting of shareholders will be held not later
than 120 days after the merger to approve ongoing investment advisory
arrangements for the Funds.
Deborah Selz Goodman and Ronald Florance will be responsible for the
day-to-day management of the Fund. Ms. Selz Goodman joined First Interstate Bank
of California in August 1985. Since that time she has served as a financial
analyst with responsibility for domestic and international asset allocation
management. Mr. Florance joined FICM in
11
<PAGE> 505
July 1995. From 1992 to 1995 Mr. Florance was affiliated with Palos Verdes
Investment Corp., an investment services firm. From 1990 to 1992, Mr. Florance
was employed by The Vanguard Group where his responsibilities included
management of several domestic and international equity mutual funds.
For the advisory services it provides to the Fund, FICM is entitled to
receive from the Fund fees, payable monthly, at the annual rate, based on
average daily net assets, of 1.00%. The advisory fees payable by the Fund are
higher than those paid by most other investment companies that invest only or
primarily in domestic equities, but they are comparable to the advisory fees
paid by other investment companies that, like the Fund, invest primarily in
international equities.
THE SPONSOR AND DISTRIBUTOR
Furman Selz LLC, 230 Park Avenue, New York, New York 10169, acts as Sponsor
of the Fund. Furman Selz is primarily an institutional brokerage firm with
memberships on the New York, American, Boston, Midwest, Pacific and Philadelphia
Stock Exchanges. Furman Selz also serves as administrator and distributor of
other mutual funds. Pacifica Funds Distributor Inc. is an affiliate of Furman
Selz and was organized specifically to distribute shares of the Trust, however,
offers and sales of shares of the Trust will be made only through Furman Selz or
other registered (or exempt) dealers.
Under the Distribution Plan (the "Plan") adopted by the Fund for its
Investor Shares, the Fund may pay directly or reimburse PFD Inc. monthly
(subject to a limit of 0.50% per annum of the average daily net asset value of
the outstanding Investor Shares of the Fund) for costs and expenses of PFD Inc.
in connection with the distribution of Investor Shares of the Fund. These costs
and expenses include (i) advertising by radio, television, newspapers,
magazines, brochures, sales literature, direct mail or any other form of
advertising; (ii) expenses of sales employees or agents of PFD Inc., including
salary, commissions, travel and related expenses; (iii) payments to
broker-dealers and financial institutions for services in connection with the
distribution of Investor Shares, including promotional incentives and fees
calculated with reference to the average daily net asset value of Investor
Shares held by shareholders who have a brokerage or other service relationship
with the broker-dealer or other institution receiving such fees; (iv) costs of
printing prospectuses and other materials to be given or sent to prospective
investors; and (v) such other similar services as the Trustees determine to be
reasonably calculated to result in the sale of Investor Shares of the Fund. The
Fund will pay all costs and expenses in connection
12
<PAGE> 506
with the preparation, printing and distribution of prospectuses to current
shareholders and the operation of its Plan, including related legal and
accounting fees. The Fund will not be liable for distribution expenditures made
by PFD Inc. in any given year in excess of the maximum annual amount payable
under the Plan for the Fund. All payments made under the Plan for Investor
Shares are borne entirely by the Fund's Investor Shares.
In addition to sales charges paid to dealers, PFD Inc. may from time to
time pay a bonus or other incentive to dealers that employ registered
representatives who sell a minimum dollar amount of Investor Shares of the Fund
and/or other funds distributed by Furman Selz or PFD Inc. during a specific
period of time. Such bonus or other incentive may take the form of payment for
travel expenses, including lodging, incurred in connection with trips taken by
qualifying registered representatives and members of their families to places
within or outside the United States, or other bonuses, such as gift certificates
or the cash equivalent of such bonuses. PFD Inc. has established such a special
promotional incentive program with First Interstate Investments, Inc.
ADMINISTRATIVE SERVICES
The Fund has also entered into an Administrative Services Contract with
Furman Selz pursuant to which Furman Selz provides certain management and
administrative services necessary for the Fund's operations including: (i)
general supervision of the operation of the Fund including coordination of the
services performed by the Fund's investment advisor, transfer agent, custodian,
independent accountants and legal counsel, regulatory compliance, including the
compilation of information for documents such as reports to, and filings with,
the SEC and state securities commissions, and preparation of proxy statements
and shareholder reports for the Fund; (ii) general supervision relative to the
compilation of data required for the preparation of periodic reports distributed
to the Fund's officers and Board of Trustees; and (iii) furnishing office space
and certain facilities required for conducting the business of the Fund. For
these services, Furman Selz is entitled to receive a fee, payable monthly, at
the annual rate of 0.15% of the average daily net assets of the Fund. Pursuant
to a Services Agreement with the Trust, Furman Selz assists the Trust with
certain transfer and dividend disbursing agent functions and receives a fee of
$15.00 per account per year plus out-of-pocket expenses. Pursuant to a Fund
Accounting Agreement with the Trust, Furman Selz assists the Trust in
calculating net asset values and provides certain other accounting services for
the Fund for an annual fee of $30,000 plus out-of-pocket expenses.
13
<PAGE> 507
SERVICE ORGANIZATIONS
Various banks (including banks affiliated with First Interstate Bancorp),
trust companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative services with respect to the Fund's Investor Shares, such as
maintaining shareholder accounts and records. The Fund may pay fees to Service
Organizations (which vary depending upon the services provided) in amounts up to
an annual rate of 0.25% of the average daily net asset value of the outstanding
Investor Shares of the Fund owned by shareholders with whom a Service
Organization has a servicing relationship. These fees will be borne entirely by
the Fund's Investor Shares.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest a specified amount in
the Fund or charging a direct fee for servicing. If imposed, these fees would be
in addition to any amounts which might be paid to the Service Organization by
the Fund. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged to
consult with them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Fund and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by Furman Selz, PFD Inc. or the Advisor. The costs borne by the Fund
include legal and auditing expenses; Trustees' fees and expenses; insurance
premiums; advisory, administration, fund accounting, custodian and transfer
agent fees and expenses; expenses incurred in acquiring or disposing of
14
<PAGE> 508
the Fund's portfolio securities; expenses of registering and qualifying the
Fund's shares for sale with the SEC and with various state securities
commissions; expenses of obtaining quotations on the Fund's portfolio securities
and pricing of the Fund's shares; expenses of maintaining the Fund's legal
existence and of shareholders' meetings; and expenses of preparation and
distribution to existing shareholders of reports, proxies and prospectuses. The
Fund bears its own expenses associated with its establishment as a series of the
Trust; these expenses are amortized over a five-year period from the
commencement of the Fund's operations. See "Management" in the SAI for
additional information on expenses borne by the Fund. Trust expenses directly
attributable to the Fund are charged to the Fund, and expenses attributable to a
particular class of shares of the Fund (such as distribution payments under the
Plan and Service Organization fees) are charged to that class. Other expenses
are allocated proportionately among all of the investment portfolios in the
Trust in relation to the net assets of each portfolio or by other means deemed
fair and equitable by the Board of Trustees.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Advisor places orders
for the purchase and sale of portfolio investments for the Fund's accounts with
brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account
of the Fund, the Advisor will seek the best execution of the Fund's orders.
Purchases and sales of common stocks are generally placed by the Advisor with
broker-dealers which, in the Advisor's judgment, provide prompt and reliable
execution at favorable security prices and reasonable commission rates. Broker-
dealers are selected on the basis of a variety of factors such as reputation,
capital strength, size and difficulty of the order, sale of Fund shares by the
broker-dealer, and research provided to the Advisor by the broker-dealer. The
Advisor may cause the Fund to pay commissions higher than another broker-dealer
would have charged if the Advisor believes the commission paid is reasonable in
relation to the value of the brokerage and research services received by the
Advisor. Purchases and sales of debt securities are generally placed by the
Advisor with primary market makers for these securities on a net basis, i.e.,
without any brokerage commission being paid by the Fund. Trading does, however,
involve transaction costs. Transactions with dealers serving as primary market
makers reflect the spread between the bid and asked prices. Purchases of under-
15
<PAGE> 509
written issues may be made which will include an underwriting fee paid to the
underwriter.
A high portfolio turnover rate involves larger brokerage commission
expenses or transaction costs which must be borne directly by the Fund.
Short-term capital gains realized from portfolio transactions are taxable to
shareholders as ordinary income. The Advisor will not consider portfolio
turnover rate a limiting factor in making investment decisions consistent with
the Fund's objective and policies.
FUND SHARE VALUATION
The net asset value of each class of shares of the Fund is calculated at
4:15 p.m. (Eastern time), Monday through Friday, on each day the New York Stock
Exchange is open for trading (a "Business Day"), which excludes the following
business holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share for each class of shares is computed by dividing the value of
the Fund's assets allocable to a particular class, less the liabilities charged
to that class by the total number of the outstanding shares of that class. All
expenses, including fees paid to the Advisor, Furman Selz and PFD Inc., are
accrued daily and taken into account for the purpose of determining the net
asset value.
Securities listed on an exchange are valued on the basis of the last sale
prior to the time the valuation is made. If there has been no sale since the
immediately previous valuation, then the current bid price is used. Quotations
are taken from the exchange where the security is primarily traded. Portfolio
securities which are primarily traded on foreign exchanges may be valued with
the assistance of a pricing service and are generally valued at the preceding
closing values of such securities on their respective exchanges, except that
when an occurrence subsequent to the time a foreign security is valued is likely
to have changed such value, then the fair value of those securities will be
determined by consideration of other factors by or under the direction of the
Board of Trustees. Over-the-counter securities are valued on the basis of the
bid price at the close of business on each business day. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Trustees.
Notwithstanding the above, bonds and other fixed-income securities are valued by
using market quotations
16
<PAGE> 510
and may be valued on the basis of prices provided by a pricing service approved
by the Board of Trustees. All assets and liabilities initially expressed in
foreign currencies will be converted into U.S. dollars at the mean between the
bid and asked prices of such currencies against U.S. dollars as last quoted by
any major bank.
With respect to option contracts entered into by the Fund, the premium
received is recorded as an asset and equivalent liability, and thereafter the
liability is adjusted to the market value of the option determined in accordance
with the preceding paragraph. The premium paid for an option purchased by the
Fund is recorded as an asset and subsequently adjusted to market value.
PRICING OF INVESTOR SHARES
Orders for the purchase of Investor Shares will be executed at the net
asset value per share plus any applicable sales charge (the "public offering
price") next determined after an order has become effective. The sales charge on
purchases of Investor Shares of the Fund varies with the size of the purchase
made according to the following schedule:
<TABLE>
<CAPTION>
AMOUNT OF
SALES CHARGE AS A SALES CHARGE
PERCENTAGE OF REALLOWED TO
-------------------- DEALERS AS A
PUBLIC NET PERCENTAGE OF
OFFERING AMOUNT PUBLIC
AMOUNT OF INVESTMENT PRICE INVESTED OFFERING PRICE
- -------------------------------- -------- -------- --------------
<S> <C> <C> <C>
Less than $100,000.............. 4.50% 4.71% 4.00%
$100,000 but less than
$250,000...................... 3.50% 3.63% 3.00%
$250,000 but less than
$500,000...................... 2.60% 2.67% 2.25%
$500,000 but less than
$1,000,000.................... 2.00% 2.04% 1.75%
$1,000,000 and over............. None+ None+ None+
</TABLE>
- ---------------
+ There is no initial sales charge on purchases of $1 million or more; however,
the Distributor pays investment dealers and financial institutions a
commission from its own resources of 0.70% of the amount invested, and
shareholders who redeem their Investor Shares within one year of the date of
purchase will be subject to a 1% contingent deferred sales charge for the
purpose of reimbursing the Distributor for the commission paid.
The initial sales load will not apply to Investor Shares purchased by: (i)
trust, investment management, advisory and fiduciary accounts managed or
administered by First Interstate Bancorp, its subsidiaries and
17
<PAGE> 511
affiliates, or the Advisor pursuant to a written agreement; (ii) any person
purchasing Investor Shares with the proceeds of a distribution from a trust,
investment management, advisory or other fiduciary account managed or
administered by First Interstate Bancorp, its subsidiaries and affiliates, or
the Advisor pursuant to a written agreement; (iii) any person purchasing
Investor Shares with the proceeds of a redemption from a mutual fund, other than
an investment portfolio offered by the Trust, that was originally purchased with
a sales load; (iv) Furman Selz or any of its affiliates; (v) Trustees or
officers of the Fund; (vi) directors or officers of Furman Selz, the Advisor, or
their affiliates or bona fide employees or former employees of any of the
foregoing who have acted as such for not less than 90 days (including members of
their immediate families and their retirement plans or accounts); or (vii)
retirement accounts or plans for which a depository institution, which is a
client or customer of the Advisor, Furman Selz or PFD Inc. serves as custodian
or trustee, or to any trust, pension, Individual Retirement Account ("IRA"),
spousal IRA, profit-sharing or other benefit plan for such persons so long as
such Investor Shares are purchased through PFD Inc. The initial sales load also
does not apply to Investor Shares sold to representatives of selling brokers and
members of their immediate families. In addition, the initial sales load does
not apply to sales to bank trust departments, acting on behalf of one or more
clients, of Investor Shares having an aggregate value equal to or exceeding
$200,000.
See "Dividends, Distributions and Federal Income Tax," for an explanation
of circumstances in which a sales load paid to acquire Investor Shares of a
mutual fund may not be taken into account in determining gain or loss on the
disposition of those Investor Shares.
QUANTITY DISCOUNTS IN THE SALES CHARGES
The following quantity discounts shall be available to: (a) an individual,
his or her spouse, and their children under the age of 21, and any trust,
pension, IRA, spousal IRA, profit sharing or other benefit plan for such
persons; (b) a trustee or other fiduciary of a single trust estate or a single
fiduciary account; (c) a pension, profit-sharing or other employee benefit plan
qualified under Section 401 of the Internal Revenue Code of 1986, and (d)
tax-exempt organizations under Section 501(c)(3) of the Code.
Right of Accumulation. The schedule of reduced sales charges will be
applicable once the accumulated value of the account has reached $100,000. For
this purpose, the dollar amount of the qualifying concurrent or subsequent
purchase is added to the net asset value of any Investor Shares of those
investment portfolios of the Trust that are subject to a sales charge and are
owned at the time of such purchase by the investor. The sales charge
18
<PAGE> 512
imposed on the Investor Shares being purchased will then be at the rate
applicable to the aggregate value of Investor Shares owned and to be purchased
by the investor. For example, if the investor held Investor Shares valued at
$100,000 and purchased an additional $20,000 of Investor Shares (totalling an
investment of $120,000), the sales charge for the $20,000 purchase would be at
the next lower sales charge on the schedule (i.e., the sales charge for
purchases over $100,000 but less than $250,000). There can be no assurance that
investors will receive the cumulative discounts to which they may be entitled
unless, at the time of placing their purchase order, the investors or their
dealers make a written request for the discount. The cumulative discount program
may be amended or terminated at any time. This particular privilege does not
entitle the investor to any adjustment in the sales charge paid previously on
purchases of Investor Shares. If the investor knows that he will be making
additional purchases of Investor Shares in the future, he may wish to consider
executing a Letter of Intent.
Letter of Intent. The schedule of reduced sales charges is also available
to investors who enter into a written Letter of Intent providing for the
purchase, within a 13-month period, of Investor Shares of the Fund. Investor
Shares of the Fund previously purchased during the 90-day period prior to the
date of receipt by the Fund of the Letter of Intent which are still owned by the
shareholder may also be included in determining the applicable reduction,
provided the shareholder or the dealer notifies the Fund of such prior
purchases.
A Letter of Intent permits an investor to establish a total investment goal
to be achieved by any number of investments over a 13-month period. Each
investment made during the period will receive the reduced sales commission
applicable to the amount represented by the goal as if it were a single
investment. A number of Investor Shares totalling 5% of the dollar amount of the
Letter of Intent will be held in escrow by the Fund in the name of the
shareholder. The initial purchase under a Letter of Intent must be equal to at
least 5% of the stated investment goal.
The Letter of Intent does not obligate the investor to purchase, or the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the 13-month period, the investor is required to pay the
difference between the sales charge otherwise applicable to the purchases made
during this period and sales charges actually paid. The Fund is authorized by
the shareholder to liquidate a sufficient number of escrowed Investor Shares to
obtain such difference. If the goal is exceeded and purchases pass the next
sales charge level, the sales charge on the entire amount of the purchase that
results in passing that level and on subsequent purchases will be subject to
further reduced sales charges in the same
19
<PAGE> 513
manner as set forth under "Right of Accumulation," but there will be no
retroactive reduction of sales charges on previous purchases. At any time while
a Letter of Intent is in effect, a shareholder may, by written notice to PFD
Inc., increase the amount of the stated goal. In that event, Investor Shares
purchased during the previous 90-day period and still owned by the shareholder
will be included in determining the applicable sales charge reduction. The 5%
escrow and minimum purchase requirements will be applicable to the new stated
goal. Investors electing to purchase Investor Shares pursuant to a Letter of
Intent should carefully read the application for a Letter of Intent which is
available from the Trust.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in the Fund is $500, except that the minimum
is $250 for an IRA. Any subsequent investments must be at least $50, including
an IRA investment. All initial investments should be accompanied by a completed
Purchase Application. A separate application is required for IRA investments.
PURCHASE OF INVESTOR SHARES
THE FOLLOWING PURCHASE PROCEDURES DO NOT APPLY TO CERTAIN TRUST OR OTHER
ACCOUNTS THAT ARE MANAGED BY FIRST INTERSTATE BANCORP, ITS SUBSIDIARIES OR
AFFILIATES. AN ACCOUNT CUSTOMER SHOULD CONSULT HIS OR HER ACCOUNT OFFICER FOR
PROPER INSTRUCTIONS.
All funds received by the Trust are invested in full and fractional
Investor Shares of the Fund. Certificates for Investor Shares are not issued.
Furman Selz maintains records of each shareholder's holdings of Fund shares, and
each shareholder receives a statement of transactions, holdings and dividends.
The Fund reserves the right to reject any purchase.
An investment may be made using any of the following methods:
Through an Authorized Broker, Investment Advisor or Service
Organization. Investor Shares are available to new and existing shareholders
through authorized brokers, investment advisors and Service Organizations. To
make an investment using this method, simply complete a Purchase Application and
contact your broker, investment advisor or Service Organization with
instructions as to the amount you wish to invest. Your broker will then contact
the Fund to place the order on your behalf on that day.
Orders received by your broker or Service Organization for the Fund in
proper order prior to the determination of the Fund's net asset value and
20
<PAGE> 514
transmitted to the Trust prior to the close of its business day (which is
currently 5:00 p.m., Eastern time), will become effective that day. Brokers who
receive orders are obligated to transmit them promptly. You should receive
written confirmation of your order within a few days of receipt of instructions
from your broker.
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the Fund. In most cases, your bank will either be a member of the
Federal Reserve Banking System or have a relationship with a bank that is. Your
bank will normally charge you a fee for handling the transaction. To purchase
Investor Shares by a Federal funds wire, please first contact Furman Selz Mutual
Funds Client Services. They will establish a record of information for the wire
to ensure its correct processing. You can reach the Wire Desk at 1-800-662-8417.
Have your bank wire funds using the following instructions:
Investors Fiduciary Trust Company
Kansas City, MO 64105
ABA #1010-0362-1
Account #7527950
Further Credit to: Pacifica International Equity Fund
As long as you have read the Prospectus, you may establish a new regular
account through the Wire Desk; IRAs may not be opened in this way. When new
accounts are established by wire, the distribution options will be set to
reinvest and the social security or tax identification number ("TIN") will not
be certified until a signed application is received. Completed applications
should be forwarded immediately to the Fund. With the Purchase Application, the
shareholder can specify other distribution options and add any special features
offered by the Fund. Should any dividend distributions or redemptions be paid
before the TIN is certified, they will be subject to 31% Federal tax
withholding.
Automatic Investment Program. An eligible shareholder may also participate
in the Pacifica Automatic Investment Program, an investment plan that
automatically debits money from the shareholder's bank account and invests it in
the Fund through the use of electronic funds transfers or automatic bank drafts.
Shareholders may elect to make subsequent investments by transfers of a minimum
of $50 on either the fifth or twentieth day of each month into their established
Fund accounts. Contact the Trust at 1-800-662-8417 for more information about
the Pacifica Automatic Investment Program.
21
<PAGE> 515
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund may be used as a funding medium for IRAs. Investor Shares may also
be purchased for IRAs established with an affiliate of First Interstate Bancorp
or other authorized custodians. In addition, an IRA may be established through a
custodial account with Investors Fiduciary Trust Company. Completion of a
special application is required in order to create such an account, and the
minimum initial investment for an IRA is $250. Contributions to IRAs are subject
to prevailing amount limits set by the Internal Revenue Service. A $5.00
establishment fee and an annual $12.00 maintenance and custody fee is payable
with respect to each IRA, and there will be a $10.00 termination fee when the
account is closed. For more information, call the Fund at 1-800-662-8417.
EXCHANGE OF INVESTOR SHARES
The Fund offers two convenient ways to exchange Investor Shares in the Fund
for Investor Shares in another investment portfolio of the Trust. Before
engaging in an exchange transaction, a shareholder should read carefully the
Prospectus describing the investment portfolio into which the exchange will
occur, which is available without charge and can be obtained by writing to the
Fund at 237 Park Avenue, Suite 910, New York, New York 10017, or by calling
1-800-662-8417. A shareholder may not exchange Investor Shares of one portfolio
for Investor Shares of another portfolio if both or either are not qualified for
sale in the state of the shareholder's residence. The minimum amount for an
initial exchange is $500. No minimum is required in subsequent exchanges. The
Trust may terminate or amend the terms of the exchange privilege at any time.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the net asset value next determined following receipt of the
request by the Trust in good order, plus any applicable sales charge.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
In the case of transactions subject to a sales charge, the sales charge
will be assessed on an exchange of Investor Shares, equal to the excess of the
sales load applicable to the Investor Shares to be acquired over the amount of
any sales load previously paid on the Investor Shares to be exchanged. No
service fee is imposed. See "Dividends, Distributions and
22
<PAGE> 516
Federal Income Tax" for an explanation of circumstances in which a sales load
paid to acquire Investor Shares of the Fund may not be taken into account in
determining gain or loss on the disposition of those Investor Shares.
In addition, Institutional Shares of the Fund may be exchanged for Investor
Shares of the Fund in connection with the distribution of assets held in a
qualified trust, agency or custodial account maintained with the trust
department of a First Interstate or other bank, trust company or thrift
institution, or in other cases where Institutional Shares are not held in such
qualified accounts. Similarly, Investor Shares may be exchanged for
Institutional Shares of the Fund if the shares are to be held in such a
qualified trust, agency or custodial account. These exchanges are made without a
sales charge at the net asset value of the respective share classes.
Exchange by Mail. To exchange Investor Shares of the Fund by mail, simply
send a letter of instruction to Furman Selz. The letter of instruction must
include: (i) your account number; (ii) the portfolio from and the portfolio into
which you wish to exchange your investment; (iii) the dollar or share amount you
wish to exchange; and (iv) the signatures of all registered owners or authorized
parties. All signatures must be guaranteed by an eligible guarantor institution
including a member of a national securities exchange or by a commercial bank or
trust company, broker-dealers, credit unions and savings associations.
Exchange by Telephone. To exchange Investor Shares of the Fund by
telephone, or if you have any questions, simply call the Trust at 1-800-
662-8417. You should be prepared to give the telephone representative the
following information: (i) your account number, social security number and
account registration; (ii) the name of the portfolio from and the portfolio into
which you wish to transfer your investment; and (iii) the dollar or share amount
you wish to exchange. The conversation may be recorded to protect you and the
Fund. Telephone exchanges are automatically available only unless the
shareholder indicates he does not wish to have this privilege by checking the
"no" box on the Purchase Application. See "Redemption of Investor Fund
Shares -- By Telephone" for a discussion of telephone transactions generally.
REDEMPTION OF INVESTOR SHARES
Shareholders may redeem their Investor Shares, in whole or in part, on any
Business Day. Investor Shares will be redeemed at the net asset value next
determined after a redemption request in good order has been received
23
<PAGE> 517
and accepted by the Trust. See "Fund Share Valuation." A redemption may be a
taxable transaction on which gain or loss may be recognized.
Where the Investor Shares to be redeemed have been purchased by check, the
Trust may delay payment of the redemption proceeds until the purchasing check
has cleared, which may take up to 15 days. Shareholders may avoid this delay by
investing through wire transfers of Federal funds. During the period prior to
the time the Investor Shares are redeemed, dividends on the Investor Shares will
continue to accrue and be payable and the shareholder will be entitled to
exercise all other beneficial rights of ownership.
Once the Investor Shares are redeemed, the Fund will ordinarily send the
proceeds by check to the shareholder at the address of record on the next
Business Day. The Fund may, however, take up to seven days to make payment. This
will not be the customary practice. Also, if the New York Stock Exchange is
closed (or when trading is restricted) for any reason other than the customary
weekend or holiday closing or if an emergency condition as determined by the SEC
merits such action, the Fund may suspend redemptions or postpone payment dates.
To ensure acceptance of your redemption request, it is important to follow
the procedures described below. Although the Trust has no present intention to
do so, it reserves the right to refuse or to limit the frequency of any
telephone or wire redemptions. Of course, it may be difficult to place orders by
telephone during periods of severe market or economic change, and a shareholder
should consider alternative methods of communications, such as couriers or U.S.
mail. The services offered by the Fund may be modified or terminated at any
time. If the Fund terminates any particular service, it will do so only after
giving written notice to shareholders.
You may redeem your Investor Shares using any of the following methods:
Through an Authorized Broker, Investment Advisor or Service
Organization. You may redeem your Investor Shares by contacting your broker or
investment advisor and instructing him or her to redeem your Investor Shares. He
or she will then contact PFD Inc. and place a redemption trade on your behalf.
He or she may charge you a fee for this service.
By Mail. You may redeem your Investor Shares by sending a letter directly
to the Fund. To be accepted, a letter requesting redemption must include: (i)
the Fund name and account registration from which you are redeeming Investor
Shares; (ii) your account number; (iii) the amount to be redeemed; (iv) the
signatures of all registered owners; and (v) a
24
<PAGE> 518
signature guarantee by any eligible guarantor institution including a member of
a national securities exchange or a commercial bank or trust company,
broker-dealers, credit unions and savings associations. Corporations,
partnerships, trusts or other legal entities will be required to submit
additional documentation.
By Telephone. You may redeem your Investor Shares by calling the Fund toll
free at 1-800-662-8417. You should be prepared to give the telephone
representative the following information: (i) your account number, social
security number and account registration; (ii) the Fund name from which you are
redeeming Investor Shares; and (iii) the amount to be redeemed. The conversation
may be recorded to protect you and the Fund. Telephone redemptions are
automatically available unless shareholder indicates he does not wish to have
this privilege by checking the "no" box on the Purchase Application. The Fund
employs reasonable procedures to confirm that instructions communicated by
telephone are genuine. If the Fund fails to employ such reasonable procedures,
it may be liable for any loss, damage or expense arising out of any telephone
transactions purporting to be on a shareholder's behalf. In order to assure the
accuracy of instructions received by telephone, the Fund requires some form of
personal identification prior to acting upon instructions received by telephone,
records telephone instructions and provides written confirmation to investors of
such transactions.
By Wire. You may redeem your Investor Shares by contacting the Fund by
mail or telephone and instructing it to send a wire transmission to your
personal bank.
Your instructions should include: (i) your account number, social security
number and account registration; (ii) the Fund name from which you are redeeming
Investor Shares; and (iii) the amount to be redeemed. Wire redemptions can be
made only if the "yes" box has been checked on your Purchase Application, and a
copy of a void check from the account where proceeds are to be wired is attached
to the Purchase Application. Your bank may charge you a fee for receiving a wire
payment on your behalf.
The above-mentioned services "By Telephone" and "By Wire" and are not
available for IRAs and trust clients of an affiliate of First Interstate
Bancorp.
Systematic Withdrawal Plan. An owner of $10,000 or more of Investor Shares
of the Fund may elect to have periodic redemptions from his or her account to be
paid on a monthly, quarterly, semi-annual or annual basis. The minimum periodic
payment is $100. A sufficient number
25
<PAGE> 519
of Investor Shares to make the scheduled redemption will normally be redeemed on
the date selected by the shareholder. Depending on the size of the payment
requested and fluctuation in the net asset value, if any, of the Investor Shares
redeemed, redemptions for the purpose of making such payments may reduce or even
exhaust the account. A shareholder may request that these payments be sent to a
predesignated bank or other designated party. Capital gains and dividend
distributions paid to the account will automatically be reinvested at net asset
value on the distribution payment date.
Reinstatement Privilege. A shareholder in the Fund who has redeemed
Investor Shares may reinvest, without a sales charge, up to the full amount of
such redemption at the net asset value determined at the time of the
reinvestment within 30 days of the original redemption. This privilege must be
effected within 30 days of the redemption. The shareholder must reinvest in the
Fund and the same account from which the Investor Shares were redeemed. A
redemption is a taxable transaction and gain or loss may be recognized for
Federal income tax purposes even if the reinstatement privilege is exercised.
Any loss realized upon the redemption will not be recognized as to the number
of Investor Shares acquired by reinstatement, except through an adjustment in
the tax basis of the Investor Shares so acquired. See "Dividends, Distributions
and Federal Income Tax" for an explanation of circumstances in which a sales
load paid to acquire Investor Shares of the Fund may not be taken into account
in determining gain or loss on the disposition of those Investor Shares.
Redemption of Small Accounts. Due to the disproportionately higher cost
of servicing small accounts, the Fund reserves the right to redeem, on not less
than 30 days' notice, an account in the Fund that has been reduced by a
shareholder to $500 or less. However, if during the 30-day notice period the
shareholder purchases sufficient Investor Shares to bring the value of the
account above $500, this restriction will not apply.
Redemption in Kind. All redemptions of Investor Shares of the Fund shall
be made in cash, except that the commitment to redeem Investor Shares in cash
extends only to redemption requests made by each shareholder of the Fund during
any 90-day period of up to the lesser of $250,000 or 1% of the net asset value
of the Fund at the beginning of such period. This commitment is irrevocable
without the prior approval of the SEC and is a fundamental policy of the Fund
that may not be changed without shareholder approval. In
26
<PAGE> 520
the case of redemption requests by shareholders in excess of such amounts, the
Board of Trustees reserves the right to have the Fund make payment, in whole or
in part, in securities or other assets, in case of an emergency or any time a
cash distribution would impair the liquidity of the Fund to the detriment of
the existing shareholders. In this event, the securities would be valued in the
same manner as the securities of the Fund are valued. If the recipient were to
sell such securities, he or she would incur brokerage charges.
DIVIDENDS, DISTRIBUTIONS AND
FEDERAL INCOME TAX
The Fund intends to qualify annually and to elect to be treated as a
regulated investment company pursuant to the provisions of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). By so qualifying and
electing, the Fund generally will not be subject to Federal income tax to the
extent that it distributes investment company taxable income and net capital
gains in the manner required under the Code.
The Fund intends to distribute to its shareholders substantially all of its
investment company taxable income (which includes, among other items, dividends
and interest and the excess, if any, of net short-term capital gains (generally
including any net option premium income) over net long-term capital losses).
Investment company taxable income will be distributed by the Fund quarterly. The
Fund intends to distribute, at least annually, substantially all net capital
gain (the excess of net long-term capital gains over net short-term capital
losses). In determining amounts of capital gains to be distributed, any capital
loss carryovers from prior years will be applied against capital gains.
Distributions will be paid in additional shares of the same class held by a
shareholder based on the net asset value at the close of business on the payment
date of the distribution, unless the shareholder elects in writing, which is
received by Furman Selz not less than five full business days prior to the
record date, to receive such distributions in cash. Investors who redeem all or
a portion of Fund shares prior to a dividend payment date will be entitled on
the next dividend payment date to all dividends declared but unpaid on those
shares at the time of their redemption.
Distributions of investment company taxable income (regardless of whether
derived from dividends, interest or net short-term capital gains) will be
taxable to shareholders as ordinary income. Distributions of net long-term
capital gains designated by the Fund as capital gain dividends
27
<PAGE> 521
will be taxable as long-term capital gains, regardless of how long a shareholder
has held his Fund shares. Distributions are taxable in the same manner whether
received in additional shares or in cash.
Earnings of the Fund not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To prevent imposition of this tax, the Fund intends to comply with this
distribution requirement.
A distribution, including an "exempt-interest dividend," will be treated as
paid on December 31 of a calendar year if it is declared by the Fund during
October, November, or December of that year to shareholders of record in such a
month and paid by the Fund during January of the following calendar year. Such
distributions will be treated as received by shareholders in the calendar year
in which the distributions are declared, rather than the calendar year in which
the distributions are received.
Special tax rules may apply to the Fund's acquisition of financial futures
contracts, forward contracts, and options on futures contracts. Such rules may,
among other things, affect whether gains and losses from such transactions are
considered to be short-term or long-term, may have the effect of deferring
losses and/or accelerating the recognition of gains or losses, and, for purposes
of qualifying as a regulated investment company, may limit the extent to which
the Fund may be able to engage in such transactions.
The Fund's distributions with respect to a given taxable year may exceed
the current and accumulated earnings and profits of the Fund available for
distribution. In that event, distributions in excess of such earnings and
profits would be characterized as a return of capital to shareholders for
Federal income tax purposes, thus reducing each shareholder's cost basis in his
Fund shares. Distributions in excess of a shareholder's cost basis in his shares
would be treated as a gain realized from a sale of such shares.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of the Fund, or upon receipt of a distribution in complete
liquidation of the Fund, generally will be a capital gain or loss which will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares. A loss realized by a shareholder on a redemption, sale,
or exchange of shares of the Fund that were not held for more than six months
with respect to which capital gain dividends have been paid will be
characterized as a long-term capital loss to the extent of such capital gain
dividends.
28
<PAGE> 522
Before purchasing shares in the Fund, the impact of dividends or
distributions which are expected to be declared or have been declared, but not
paid, should be carefully considered. Any dividend or distribution declared
shortly after a purchase of such shares prior to the record date will have the
effect of reducing the per share net asset value by the per share amount of the
dividend or distribution. All or a portion of such dividend or distribution,
although in effect a return of capital, may be subject to tax.
It is anticipated that a portion of the dividends paid by the Fund will
qualify for the dividends-received deduction available to corporations.
Under certain circumstances, the sales charge incurred in acquiring shares
of the Fund may not be taken into account in determining the gain or loss on the
disposition of those shares. This rule applies where shares of the Fund are
exchanged within 90 days after the date they were purchased and new shares of
the Fund or of another investment portfolio of the Trust are acquired without a
sales charge or at a reduced sales charge. In that case, the gain or loss
recognized on the exchange will be determined by excluding from the tax basis of
the shares exchanged all or a portion of the sales charge incurred in acquiring
those shares. This exclusion applies to the extent that the otherwise applicable
sales charge with respect to the newly acquired shares is reduced as a result of
having incurred a sales charge initially. The portion of the sales charge
affected by this rule will be treated as a sales charge paid for the new shares.
The Fund may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where the Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Most corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Income or gain from investments in foreign securities may be subject to
foreign withholding or other taxes. It is expected that the Fund may be subject
to foreign withholding taxes with respect to income received from sources within
foreign countries.
If the Fund invests in certain "passive foreign investment companies"
("PFICs"), it would be subject to Federal income tax (and possibly additional
interest charges) on a portion of any excess distribution or gain from the
disposition of such shares even if it distributes such income to its
29
<PAGE> 523
shareholders. If the Fund elects to treat the PFIC as a qualified electing fund
("QEF") and the PFIC furnishes certain financial information in the required
form to the Fund, the Fund would instead be required to include in income each
year its allocable share of the ordinary earnings and net capital gains on the
QEF, regardless of whether received, and such amounts would be subject to the
various distribution requirements described above.
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund in which they invest. Depending on the
residence of the shareholder for tax purposes, distributions also may be subject
to state and local taxes, including withholding taxes. Foreign shareholders may,
for example, be subject to special withholding requirements. Special tax
treatment, including a penalty on certain pre-retirement distributions, is
accorded to accounts maintained as IRAs. Shareholders should consult their own
tax advisors as to the Federal, state and local tax consequences of ownership of
shares of the Fund in their particular circumstances.
DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES
FOREIGN SECURITIES
Under normal market conditions, the Fund will invest at least 65% of the
value of its total assets in securities issued by foreign issuers either
directly or through investments in ADRs and EDRs. ADRs are dollar denominated
receipts generally issued by domestic banks, which represent the deposit with
the bank of a security of a foreign issuer, and which are publicly traded on
exchanges or over-the-counter in the United States. EDRs are receipts similar to
ADRs and are issued and traded in Europe.
There are certain risks associated with investments in unsponsored ADR
programs. Because the non-U.S. company does not actively participate in the
creation of the ADR program, the underlying agreement for service and payment
will be between the depositary and the shareholder. The company issuing the
stock underlying the ADRs pays nothing to establish the unsponsored facility, as
fees for ADR issuance and cancellation are paid by brokers. Investors directly
bear the expenses associated with certificate transfer, custody and dividend
payment.
In addition, in an unsponsored ADR program, there may be several
depositaries with no defined legal obligations to the non-U.S. company. The
duplicate depositaries may lead to marketplace confusion because
30
<PAGE> 524
there would be no central source of information to buyers, sellers and
intermediaries. The efficiency of centralization gained in a sponsored program
can greatly reduce the delays in delivery of dividends and annual reports.
Investments in foreign securities involve certain inherent risks, such as
political or economic instability of the issuer or the country of the issue, the
difficulty of predicting international trade patterns, changes in exchange rates
of foreign currencies and the possibility of adverse changes in investment or
exchange control regulations. There may be less publicly available information
about a foreign company than about a domestic company. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic companies.
Further, foreign stock markets are generally not as developed or efficient as
those in the United States, and in most foreign markets volume and liquidity are
less than in the United States. Fixed commissions on foreign stock exchanges are
generally higher than the negotiated commissions on U.S. exchanges, and there is
generally less government supervision and regulation of foreign stock exchanges,
brokers and companies than in the United States. With respect to certain foreign
countries, there is a possibility of expropriation or confiscatory taxation,
limitations on the removal of funds or other assets, or diplomatic developments
that could affect investment within those countries. Because of these and other
factors, securities of foreign companies acquired by the Fund may be subject to
greater fluctuation in price than securities of domestic companies.
FIXED INCOME SECURITIES
The Fund may invest in the types of fixed income securities described
below.
U.S. Government Obligations. U.S. Government securities are obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
U.S. Treasury obligations are direct obligations of the United States and are
the most frequently issued marketable U.S. Government security. U.S. Government
agency and instrumentality obligations are debt securities issued by U.S.
Government-sponsored enterprises and Federal agencies. Some obligations of
agencies are supported by the full faith and credit of the United States or by
U.S. Treasury guarantees, such as mortgage-backed certificates, which may be
guaranteed by the Government National Mortgage Association; others, such as
obligations of the Federal Home Loan Banks, Federal Farm Credit Bank, Bank for
Cooperatives, Federal Intermediate Credit Banks and the Federal Land
31
<PAGE> 525
Bank, are guaranteed by the right of the issuer to borrow from the U.S.
Treasury; others, such as obligations of the Federal National Mortgage
Association, are supported by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others, such
as obligations of the Student Loan Marketing Association and the Tennessee
Valley Authority, are backed only by the credit of the agency or instrumentality
issuing the obligation. In the case of obligations not backed by the full faith
and credit of the United States, the investor must look principally to the
agency issuing or guaranteeing the obligation for ultimate repayment.
Repurchase Agreements. The Fund may agree to purchase securities subject
to the seller's agreement to repurchase them at a mutually agreed upon date and
price. The Fund will enter into such repurchase agreements only with financial
institutions that are deemed to be creditworthy by the Advisor, pursuant to
guidelines established by the Trust's Board of Trustees. During the term of any
repurchase agreement, the Advisor will continue to monitor the creditworthiness
of the seller. The Fund will not enter into repurchase agreements with the
Advisor or its affiliates. Although the securities subject to repurchase
agreements may bear maturities exceeding 13 months, the Fund does not presently
intend to enter into repurchase agreements with deemed maturities in excess of
seven days. If in the future the Fund was to enter into repurchase agreements
with deemed maturities in excess of seven days, the Fund would do so only if
such investment, together with other illiquid securities, did not exceed 10% of
the value of the Fund's net assets.
The seller under a repurchase agreement will be required to maintain the
value of the securities that are subject to the agreement and held by the Fund
at not less than the repurchase price. Default or bankruptcy of the seller
would, however, expose the Fund to possible delay in connection with the
disposition of the underlying securities or loss to the extent that proceeds
from a sale of the underlying securities were less than the repurchase price
under the agreement.
Bank Obligations. Bank obligations include bankers' acceptances,
negotiable certificates of deposit and non-negotiable time deposits issued by a
U.S. bank, savings bank or savings association that is a member of the Federal
Reserve System or insured by the Federal Deposit Insurance Corporation. The Fund
may also invest in U.S. dollar-denominated obligations of foreign banks.
Obligations of foreign banks or foreign branches of U.S. banks entail risks that
are different from those of investments in domestic obligations of U.S. banks.
These additional risks include future political and economic developments, the
possible imposition of withhold-
32
<PAGE> 526
ing taxes on interest income, possible seizure or nationalization of foreign
deposits, the possible establishment of exchange controls, or the adoption of
other foreign governmental restrictions which might adversely affect the payment
of principal and interest on such obligations. In addition, foreign branches of
U.S. banks and U.S. branches of foreign banks may be subject to less stringent
reserve requirements and to different accounting, auditing, reporting, and
recordkeeping standards than those applicable to domestic branches of U.S.
banks. Investments in domestic and foreign bank obligations are limited to the
obligations of financial institutions having $1 billion or more in total assets
at the time of purchase.
Commercial Paper. Commercial paper includes short-term unsecured
promissory notes, variable rate demand notes and variable rate master demand
notes issued by domestic and foreign bank holding companies, corporations and
financial institutions, as well as similar instruments issued by government
agencies and instrumentalities. Investments by the Fund in commercial paper will
consist of issues that are rated in one of the two highest rating categories by
a NRSRO. In addition, the Fund may acquire unrated commercial paper and
corporate bonds that are determined by the Advisor at the time of purchase to be
of comparable quality to rated instruments that may be acquired by the Fund.
Commercial paper may include variable and floating rate instruments.
Variable and Floating Rate Instruments. Instruments purchased by the Fund
may include variable and floating rate demand instruments issued by
corporations, industrial development authorities and governmental entities.
These instruments may include variable amount master demand notes that permit
the indebtedness to vary in addition to providing for periodic adjustments in
the interest rate. Although variable and floating rate demand instruments are
frequently not rated by credit rating agencies, unrated instruments purchased by
the Fund will be determined to be of comparable quality to rated instruments
that may be purchased by the Fund. While there may be no active secondary market
with respect to a particular variable or floating rate instrument purchased by
the Fund, the Fund may, from time to time as specified in the instrument, demand
payment in full of the principal of the instrument or may resell the instrument
to a third party. The absence of such an active secondary market, however, could
make it difficult for the Fund to dispose of a variable or floating rate demand
instrument if the issuer defaulted on its payment obligations or during periods
that the Fund is not entitled to exercise its demand rights, and the Fund could,
for these or other reasons, suffer a loss. Variable and floating rate
instruments with no active secondary market will be included in the calculation
of the Fund's illiquid assets.
33
<PAGE> 527
Derivative Securities. The Fund may invest in structured notes, bonds or
other instruments with interest rates that are determined by reference to
changes in the value of other interest rates, indices or financial indicators
("References") or the relative change in two or more References. The Fund may
also hold derivative instruments that have interest rates that re-set inversely
to changing current market rates and/or have embedded interest rate floors and
caps that require the issuer to pay an adjusted interest rate if market rates
fall below or rise above a specified rate. These instruments represent
relatively recent innovations in the bond markets, and the trading market for
these instruments is less developed than the markets for traditional types of
debt instruments. It is uncertain how these instruments will perform under
different economic and interest-rate scenarios. Because certain of these
instruments are leveraged, their market values may be more volatile than other
types of bonds and may present greater potential for capital gain or loss. On
the other hand, the imbedded option features of other derivative instruments
could limit the amount of appreciation the Fund can realize on its investment,
could cause the Fund to hold a security it might otherwise sell or could force
the sale of a security at inopportune times or for prices that do not reflect
current market value. The possibility of default by the issuer or the issuer's
credit provider may be greater for these structured and derivative instruments
than for other types of instruments. In some cases it may be difficult to
determine the fair value of a structured or derivative instrument because of a
lack of reliable objective information and an established secondary market for
some instruments may not exist. As new types of derivative securities are
developed and offered to investors, the Advisor will, consistent with the Fund's
investment objective, policies and quality standards, consider making
investments in such new types of derivative securities.
FORWARD CURRENCY TRANSACTIONS
The Fund may conduct its foreign currency exchange transactions either on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or it may enter into forward foreign currency exchange
contracts in order to protect against uncertainty in the level of future foreign
exchange rates. See the SAI for further information concerning foreign currency
transactions.
SECURITIES ISSUED BY OTHER INVESTMENT COMPANIES
The Fund may invest in securities issued by other investment companies
within the limits prescribed by the 1940 Act. The Fund currently intends to
limit its investments so that, as determined immediately after a securities
purchase is made: (a) not more than 5% of the value of its total
34
<PAGE> 528
assets will be invested in the securities of any one investment company; (b) not
more than 10% of the value of its total assets will be invested in the aggregate
in securities of investment companies as a group; (c) not more than 3% of the
outstanding voting stock of any one investment company will be owned by the
Fund; and (d) not more than 10% of the outstanding voting stock of any one
investment company will be owned in the aggregate by the Fund and other
investment companies advised by the Advisor or any other affiliate of First
Interstate Bancorp. As a shareholder of another investment company, the Fund
would bear, along with other shareholders, its pro rata portion of the expenses
of such other investment company, including advisory fees. These expenses would
be in addition to the advisory and other expenses that the Fund bears directly
in connection with its own operations, and may represent a duplication of fees
to shareholders of the Fund.
LOANS OF PORTFOLIO SECURITIES
To increase return, the Fund may lend its portfolio securities to
broker/dealers and other institutional investors pursuant to agreements
requiring that the loans be continuously secured by collateral equal at all
times in value to at least the market value of the securities loaned. The
collateral for such loans may include cash, securities of the U.S. Government,
its agencies or instrumentalities, or irrevocable letters of credit issued by a
bank, or any combination thereof. Such loans will not be made if, as a result,
the aggregate of all outstanding loans exceeds 30% of the value of the Fund's
total assets. There may be risks of delay in receiving additional collateral or
in recovering the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially. However, loans are made
only to borrowers deemed by the Advisor to be of good standing and when, in
their judgment, the income to be earned from the loan justifies the attendant
risks.
FORWARD COMMITMENTS, WHEN-ISSUED PURCHASES AND DELAYED-DELIVERY TRANSACTIONS
The Fund may purchase or sell securities on a when-issued or delayed-
delivery basis and make contracts to purchase or sell securities for a fixed
price at a future date beyond customary settlement time. Securities purchased or
sold on a when-issued, delayed-delivery or forward commitment basis involve a
risk of loss if the value of the security to be purchased declines, or the value
of the security to be sold increases, before the settlement date. Although the
Fund will generally purchase securities with the intention of acquiring them,
the Fund may dispose of securities
35
<PAGE> 529
purchased on a when-issued, delayed-delivery or a forward commitment basis
before settlement when deemed appropriate by the Advisor.
OPTIONS
The Fund may purchase put and call options listed on a national securities
exchange and issued by the Options Clearing Corporation in an amount not
exceeding 5% of its net assets. Purchasing options is a specialized investment
technique that entails a substantial risk of a complete loss of the amounts paid
as premiums to the writer of the option.
The Fund may also write covered call and secured put options from time to
time as the Advisor deems appropriate. By writing a covered call option, the
Fund forgoes the opportunity to profit from an increase in the market price of
the underlying security above the exercise price except insofar as the premium
represents such a profit, and it is not able to sell the underlying security
until the option expires or is exercised or the Fund effects a closing purchase
transaction by purchasing an option of the same series. If the Fund writes a
secured put option, it assumes the risk of loss should the market value of the
underlying security decline below the exercise price of the option. The
aggregate value of the securities subject to options written by the Fund will
not exceed 25% of the value of its net assets. The use of covered call options
and secured put options will not be a primary investment technique of the Fund,
and they are expected to be used infrequently. If the Advisor is incorrect in
its forecast of market value or other factors when writing the foregoing
options, the Fund would be in a worse position than it would have been had the
foregoing investment techniques not been used.
The Fund may engage in unlisted over-the-counter options with
broker/dealers deemed creditworthy by the Advisor. Closing transactions for such
options are usually effected directly with the same broker/dealer that effected
the original option transaction. The Fund bears the risk that the broker/dealer
will fail to meet its obligations. There is no assurance that a liquid secondary
trading market exists for closing out an unlisted option position. Furthermore,
unlisted options are not subject to the protections, afforded purchasers of
listed options by the Options Clearing Corporation, which performs the
obligations of its members who fail to perform in connection with the purchase
or sale of options.
For additional information relating to option trading practices, including
the particular risks thereof, see the SAI.
36
<PAGE> 530
STOCK INDEX FUTURES CONTRACTS AND OPTIONS ON STOCK INDEX FUTURES CONTRACTS
The Fund may enter into stock index futures contracts in order to protect
the value of common stock investments or to maintain liquidity, provided that
not more than 5% of the Fund's net assets are committed to such transactions.
See the SAI for further information about stock index futures contracts.
The Fund may also purchase put options on stock index futures as another
method of protecting its assets against market declines. See the SAI for further
information about these options contracts.
There can be no assurance that a liquid market will exist at a time when
the Fund seeks to close out a futures contract or a futures option position.
Most futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single day; once the daily limit
has been reached on a particular contract, no trades may be made that day at a
price beyond that limit. In addition, certain of these instruments are
relatively new and without a significant trading history. As a result, there is
no assurance that an active secondary market will develop or continue to exist.
Lack of a liquid market for any reason may prevent the Fund from liquidating an
unfavorable position and the Fund would remain obligated to meet margin
requirements until the position is closed.
The use of the techniques listed above which involve the segregation of
assets to cover future obligations may impair the liquidity of the Fund's assets
and its ability to operate as an open-end investment company. Furman Selz and
the Advisor will monitor the Fund's use of such techniques and report to the
Trustees concerning their impact, if any, on liquidity and the Fund's ability to
meet redemptions.
ILLIQUID SECURITIES
The Fund will not knowingly invest more than 10% of the value of its net
assets in securities that are illiquid because of restrictions on
transferability or other reasons. Repurchase agreements with deemed maturities
in excess of seven days, time deposits maturing in more than seven days and
securities that are not registered under the Securities Act of 1933 but may be
purchased by institutional buyers under Rule 144A are subject to this limit
(unless such securities are variable amount master demand notes with maturities
of nine months or less or unless the Advisor determines under the supervision of
the Board that a liquid trading market exists).
37
<PAGE> 531
Rule 144A allows for a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the Securities
Act of 1933 for resales of certain securities to qualified institutional buyers.
The Advisor believes that the market for certain restricted securities may
expand further as a result of this regulation and the development of automated
systems for the trading, clearance and settlement of unregistered securities of
domestic and foreign issuers, such as the PORTAL System sponsored by the NASD.
The Advisor monitors the liquidity of restricted securities in the Fund
under the supervision of the Board of Trustees. In reaching liquidity decisions,
the Advisor will consider such factors as: (a) the frequency of trades and
quotes for the security; (b) the number of dealers wishing to purchase or sell
the security and number of other potential purchasers; (c) dealer undertakings
to make a market in the security; and (d) the nature of the security and the
nature of the marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers and the mechanics of the transfer).
The use of Rule 144A transactions could have the effect of increasing the level
of illiquidity of the Fund during periods that qualified institutional buyers
become uninterested in purchasing restricted securities.
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment restrictions that may
be changed only with the approval of a majority of the Fund's outstanding
shares. The following description summarizes several of the Fund's fundamental
restrictions, which are set forth in full in the SAI.
The Fund may not:
1. Purchase securities (except U.S. Government securities and repurchase
agreements collateralized by such securities) if more than 5% of its
total assets at the time of purchase will be invested in securities of
any one issuer, except that up to 25% of the Fund's total assets may be
invested without regard to this 5% limitation.
2. Subject to the foregoing 25% exception, purchase more than 10% of the
outstanding voting securities of any issuer.
3. Invest 25% or more of its total assets at the time of purchase in
securities of issuers whose principal business activities are in the
same industry.
38
<PAGE> 532
4. Borrow money except in amounts up to 10% of the value of its total
assets at the time of borrowing.
If a percentage restriction on the investment or use of assets set forth in
this Prospectus is adhered to at the time a transaction is effected, later
changes in percentage resulting from changing values will not be considered a
violation, however, the Fund will not at any time have more than 15% of its net
assets invested in illiquid securities.
OTHER INFORMATION
CAPITALIZATION
Pacifica Funds Trust (formerly Fund Source) was organized as a
Massachusetts business trust on July 17, 1984. The capitalization of the Trust
consists solely of an unlimited number of shares of beneficial interest with a
par value of $0.001 each. When issued, shares of the Fund are fully paid,
non-assessable and freely transferable.
The Board of Trustees has authorized the issuance of two classes of shares
in the Fund described in this Prospectus -- Investor Shares and Institutional
Shares. Each share of the Fund represents an equal proportionate interest in the
Fund with other shares of the same class and is entitled to such dividends and
distributions earned on such shares as are declared in the discretion of the
Board of Trustees.
The Fund's Investor Shares and Institutional Shares bear their pro rata
portion of all operating expenses paid by the Fund except for the distribution
payments, Service Organization fees and other "class" expenses that are
allocated to a particular share class. The Board of Trustees has not approved a
Distribution Plan with respect to Institutional Shares. The Fund may pay fees to
Service Organizations in amounts up to an annual rate of 0.25% of the average
daily net asset value of the Fund's outstanding Institutional Shares owned by
shareholders with whom a Service Organization has a servicing relationship.
Institutional Shares of the Fund are purchased at net asset value per share
without a sales charge. Because of the "class expenses" and sales charges, the
performance of the Fund's Institutional Shares is expected to be higher than the
performance of its Investor Shares. The Trust offers various services and
privileges in connection with its Investor Shares that are not offered in
connection with its Institutional Shares, including an automatic investment
plan, automatic withdrawal plan and, with respect to certain portfolios,
checkwriting. For information regarding the Fund's Institutional Shares, contact
Furman Selz at 1-800-662-8417 or your Service Organization.
39
<PAGE> 533
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust. The Declaration of Trust also
provides for indemnification out of the property of the Fund of any shareholder
held personally liable solely by reason of being or having been a shareholder of
the Fund. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Fund itself would
be unable to meet its obligations and should be considered remote.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Trust is not required to hold regular
annual meetings of the Fund's shareholders, but in the event that a special
meeting is held, shareholders of each portfolio offered by the Trust will be
entitled to one vote for each full share held and fractional votes for
fractional shares held, and will vote in the aggregate and not on a
portfolio-by-portfolio basis, except as required by the 1940 Act or other
applicable law. It is contemplated that, as required by the 1940 Act, the
shareholders of a portfolio will vote separately on a portfolio-by-portfolio
basis on matters relating to a particular portfolio's investment advisory
agreement or changes in a portfolio's fundamental investment limitations, and on
other matters where the interests of the respective portfolios are not
substantially identical. Similarly, shareholders of each portfolio will vote in
the aggregate and not by class unless the Trustees determine that the matter to
be voted on affects only the interests of the holders of a particular class of
the Fund's shares. Voting rights are not cumulative.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust and in connection with such meeting to comply with the shareholders'
communications provisions of Section 16(c) of the 1940 Act.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of the Fund means, with respect to
40
<PAGE> 534
the approval of an investment advisory agreement or a change in a fundamental
investment policy, the vote of the lesser of: (1) 67% of the shares of the Fund
present at a meeting if the holders of more than 50% of the outstanding shares
are present in person or by proxy; or (2) more than 50% of the outstanding
shares of the Fund. For purposes of the 1940 Act, any person who owns either
directly or through one or more controlled companies more than 25 percent of the
voting securities of a company is presumed to "control" such company. Under this
definition, First Interstate Bancorp and its affiliates may be deemed to be
controlling persons of the Trust.
PERFORMANCE INFORMATION
The Fund may, from time to time, include yield and total return data for
its Investor Shares and Institutional Shares in advertisements or reports to
shareholders or prospective investors. The methods used to calculate the yields
and total returns of the Fund are mandated by the SEC.
Quotations of "yield" for a class of shares of the Fund will be based on
the investment income per share during a particular 30-day (or one month) period
(including dividends and interest), less expenses accrued during the period
("net investment income"), and will be computed by dividing net investment
income by the maximum public offering price per share on the last day of the
period.
Quotations of yield reflect only the performance of a class of shares
during the particular period on which the calculations are based. Yield will
vary based on changes in market conditions, the level of interest rates and the
level of the expenses of a particular class of shares, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
Quotations of average annual total return for a class of shares of the Fund
will be expressed in terms of the average annual compounded rate of return of a
hypothetical investment in that class over periods of 1, 5 and 10 years (up to
the life of that class), reflect the deduction of a proportional share of
expenses allocated to that class (on an annual basis), and assume that all
dividends and distributions are reinvested when paid.
Performance information for the Fund may be compared to various unmanaged
indices, such as the Standard & Poor's 500 Stock Index, the Dow Jones Industrial
Average, indices prepared by Lipper Analytical Services, and other entities or
organizations which track the performance of investment companies. Any
performance information should be considered in light of the Fund's investment
objective and policies, characteristics and
41
<PAGE> 535
quality of the Fund and the market conditions during the time period indicated,
and should not be considered to be representative of what may be achieved in the
future. For a description of the methods used to determine yield and total
return for the Fund, see "Other Information -- Performance Information" in the
SAI.
ACCOUNT SERVICES
All transactions in shares of the Fund will be reflected in a statement for
each shareholder. In those cases where a Service Organization or its nominee is
shareholder of record of shares purchased for its customer, the Fund has been
advised that the statement may be transmitted to the customer at the discretion
of the Service Organization.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Fund at 237 Park
Avenue, Suite 910, New York, New York 10017.
General and Account Information: (800) 662-8417
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND
OR BY ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY FIRST INTERSTATE BANCORP OR ITS AFFILIATES,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
42
<PAGE> 536
INVESTMENT ADVISOR
First Interstate Capital Management, Inc.
7501 East McCormick Parkway
Scottsdale, Arizona 85258
ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Pacifica Funds Distributor Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
First Interstate Bank of California
707 Wilshire Boulevard
Los Angeles, California 90017
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
[PACIFICA LOGO] PACIEIV-2/96
<PAGE> 537
[PACIFICA LOGO]
(INSTITUTIONAL SHARES)
PACIFICA INTERNATIONAL EQUITY FUND
PROSPECTUS
FEBRUARY 1, 1996
[FIRST INTERSTATE BANK LOGO]
Investment Advisor to The Pacifica Funds
<PAGE> 538
PACIFICA FUNDS TRUST
(INSTITUTIONAL SHARES)
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) 662-8417
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. --
INVESTMENT ADVISOR
("FICM" OR THE "ADVISOR")
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
("FURMAN SELZ" OR THE "SPONSOR")
PACIFICA FUNDS DISTRIBUTOR INC. -- DISTRIBUTOR
("PFD INC." OR THE "DISTRIBUTOR")
Pacifica Funds Trust (the "Trust") is an open-end investment company (a
mutual fund) that offers a selection of separate investment portfolios. This
Prospectus describes the Institutional Shares of the following portfolio (the
"Fund"):
- Pacifica International Equity Fund
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund and should be read and retained for
information about the Fund. A Statement of Additional Information (the "SAI"),
dated February 1, 1996 (which may be revised from time to time), containing
additional and more detailed information about the Fund, has been filed with the
Securities and Exchange Commission ("SEC") and is hereby incorporated by
reference into this Prospectus. It is available without charge and can be
obtained by writing or calling the Fund at the address or information number
printed above.
----------------------------
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FIRST INTERSTATE OR OTHER BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN 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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1996.
<PAGE> 539
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS............................................... 3
FUND EXPENSES............................................ 5
FEE TABLE -- INSTITUTIONAL SHARES........................ 5
THE FUND................................................. 7
INVESTMENT POLICIES AND PRACTICES
OF THE FUND............................................ 7
RISKS OF INVESTING IN THE FUND........................... 9
MANAGEMENT OF THE FUND................................... 10
FUND SHARE VALUATION..................................... 14
PURCHASE AND REDEMPTION OF
INSTITUTIONAL SHARES................................... 15
EXCHANGE OF INSTITUTIONAL SHARES......................... 18
DIVIDENDS, DISTRIBUTIONS AND
FEDERAL INCOME TAX..................................... 19
DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES................................... 22
INVESTMENT RESTRICTIONS.................................. 30
OTHER INFORMATION........................................ 30
</TABLE>
2
<PAGE> 540
HIGHLIGHTS
INVESTMENT OBJECTIVES AND POLICIES OF THE FUND
This Prospectus describes a diversified investment portfolio managed by
First Interstate Capital Management, Inc.
The investment objective of the Fund is to maximize total return,
consisting of capital appreciation (both realized and unrealized) and income, by
investing primarily in the equity securities of non-U.S. issuers. The equity
securities in which the Fund invests generally include common stock, preferred
stock and securities convertible into or exchangeable for common or preferred
stock. The Fund may also invest in various types of depositary receipts, which
are described below. Under normal market conditions, at least 65% of the value
of the total assets of the Fund will be invested in the equity securities of
issuers in at least three countries other than the United States.
For additional information concerning the investment policies, practices
and risk considerations of the Fund, see "The Fund," "Investment Policies and
Practices of the Fund" and "Risks of Investing in the Fund" in this Prospectus.
RISKS OF INVESTING IN THE FUND
The price per share of the Fund will fluctuate with changes in value of the
investments held by the Fund. The Fund's performance will change daily based on
many factors, including the quality of the instruments in the Fund's investment
portfolio, national and international economic conditions, interest rate levels,
the overall level of equity prices, general market conditions and international
exchange rates. Depending on these factors, the net asset value of the Fund may
decrease instead of increase. The Fund may seek to achieve its investment
objective through investments in securities of foreign issuers (which involve
risks not typically associated with U.S. issuers), instruments with the lowest
investment grade rating which have speculative characteristics, and by the use
of certain options, futures and currency swap strategies. In addition, the Fund
may invest in securities issued by emerging growth companies, which may involve
greater price volatility and risk than those incurred by funds that do not
invest in such companies. The market value of the Fund's investments in fixed
income securities will change in response to changes in interest rates and the
relative financial strength of each issuer. During periods of falling interest
rates, the value of fixed income securities generally rises. Con-
3
<PAGE> 541
versely, during periods of rising interest rates the value of such securities
generally declines.
There is no assurance that the Fund will achieve its investment objective.
MANAGEMENT OF THE FUND
First Interstate Capital Management, Inc. acts as investment advisor to the
Fund. For its services, the Advisor is entitled to receive a fee from the Fund
at an annual rate based on the Fund's average daily net assets. See "Fee
Table -- Institutional Shares" and "Management of the Fund" in this Prospectus.
Furman Selz acts as administrator and sponsor to the Fund. Furman Selz
provides certain management and administrative services to the Fund, and is
entitled to receive a fee from the Fund at an annual rate based on the Fund's
average daily net assets. PFD Inc. distributes the Fund's shares.
Fees and expenses charged to the Fund are outlined on pages 5 and 6 of this
Prospectus.
GUIDE TO INVESTING IN THE PACIFICA FAMILY OF FUNDS
Purchase orders for the Fund received in proper order by 4:15 p.m., Eastern
time, will become effective that day.
Institutional Shares of the Fund are purchased at net asset value without a
sales charge.
Shareholders may purchase, redeem or exchange Institutional Shares by
telephone.
All dividends and distributions will be automatically reinvested at net
asset value in additional Institutional Shares of the Fund unless cash payment
is requested.
- Distributions for the Fund are generally paid quarterly.
For additional information on how to purchase and redeem Institutional
Shares of the Fund, see "Purchase and Redemption of Institutional Shares" and
"Exchange of Institutional Shares."
4
<PAGE> 542
FUND EXPENSES
The following table lists the costs and expenses that an investor will
incur either directly or indirectly as an Institutional shareholder of the Fund.
The information is based on estimated amounts for the initial fiscal year of the
Fund.
FEE TABLE -- INSTITUTIONAL SHARES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) ............... None
Maximum Sales Load Imposed on Reinvested Dividends (as
a percentage of offering price).................... None
Deferred Sales Load (as a percentage of redemption
proceeds) ......................................... None
Redemption Fees....................................... None
Exchange Fee.......................................... None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (after waivers)(++)................... 0.30%
Other Expenses (after waivers)(++)++.................. 1.40%
-----
TOTAL FUND OPERATING EXPENSES:
(after waivers)(++)++++............................... 1.70%
=====
</TABLE>
- ---------------
<TABLE>
<C> <S>
(++) Management Fees (before waivers) would be 1.00%.
(++)++ Other Expenses (before waivers) would be 1.40%.
(++)++++ Total Fund Operating Expenses (before waivers) would be
2.40%.
</TABLE>
5
<PAGE> 543
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Fund's Institutional Shares
will bear. The table does not reflect any charges that may be imposed by a First
Interstate Bank or other institutions directly on their customer accounts in
connection with investments in the Fund.
EXAMPLE:(++)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C>
1 year................................................... $17
3 years.................................................. $51
</TABLE>
- ---------------
(++) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN
IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE
ASSUMED AMOUNT.
6
<PAGE> 544
THE FUND
The Fund is a portfolio of Pacifica Funds Trust, a business trust organized
under the laws of the Commonwealth of Massachusetts as an open-end, management
investment company. The Trust's Board of Trustees oversees the overall
management of the Fund and elects the officers of the Fund.
INVESTMENT POLICIES AND PRACTICES OF THE FUND
- The Fund's investment objective is to maximize total return, consisting
of capital appreciation (both realized and unrealized) and income, by
investing primarily in the equity securities of non-U.S. issuers (as
described below).
The SAI contains the specific investment restrictions which govern the
Fund's investments. The Fund's investment objective is not a fundamental policy
and may be changed by the Board of Trustees without Shareholder approval. Any
change in the investment objective of the Fund by the Board of Trustees may
result in the Fund having an investment objective different from the objective
which a shareholder considered appropriate at the time of investment in the
Fund. Except for those restrictions specifically identified as fundamental, all
other investment policies and practices described in this Prospectus and in the
SAI are not fundamental.
The Advisor selects investments and makes investment decisions based on the
investment objective and policies of the Fund.
The investment objective of the Fund is to maximize total return,
consisting of capital appreciation (both realized and unrealized) and income, by
investing primarily in the equity securities of non-U.S. issuers (as described
below). The equity securities in which the Fund invests generally include common
stock, preferred stock and securities convertible into or exchangeable for
common or preferred stock. The Fund may also invest in various types of
depositary receipts, which are described below. Under normal market conditions,
at least 65% of the value of the total assets of the Fund will be invested in
the equity securities of issuers in at least three countries other than the
United States.
In pursuit of its objective, the Fund may purchase securities of companies,
wherever organized, which, in the judgment of the Fund's investment adviser,
have their principal business activities and interests outside the United States
("non-U.S. issuers"). The investment adviser generally considers such companies
to include those companies (i) that derive 50% or more of their revenues outside
the United States, (ii) 50% or more of the assets of which are located outside
the United States, or
7
<PAGE> 545
(iii) the equity securities of which are traded principally on a non-U.S.
securities exchange. Investment in foreign securities and depositary receipts
involves certain risks as described under "Risks of Investing in the Fund"
below.
The Fund expects to invest in a number of countries and normally intends to
include in its portfolio securities issuers in no fewer than three countries.
The percentage of the Fund's assets invested in particular countries or regions
of the world will vary depending on political and economic conditions. The Fund
currently contemplates that it will invest in securities of issuers located in,
or securities denominated in the currencies of, a variety of countries selected
from the following: Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia, the Netherlands,
New Zealand, Norway, Singapore, Spain, Sweden, Switzerland and the United
Kingdom, and in securities denominated in a multinational currency unit, such as
the European Currency Unit. The Fund will not invest more than 25% of its total
assets in the equity securities of issuers in developing countries (i.e.,
countries which are generally considered to be in the initial stages of
industrialization, as determined by the investment adviser) not included in the
foregoing list, which countries may include any country in the world not listed
above. The Fund may invest up to 35% of the value of its total assets in the
equity securities of U.S. issuers.
In focusing on non-U.S. issuers, the Fund is designed to provide investors
with the opportunity to diversify their investments and participate in economies
and markets outside the United States. The Fund's portfolio will emphasize
established companies, although the Fund may invest in companies of varying
sizes as measured by assets, sales or market capitalization. The equity
securities in which the Fund invests are expected to be either listed on an
exchange or traded in an over-the-counter market. The payment or non-payment of
dividends will not be a significant factor in the investment adviser's selection
of investment.
The Fund may also hold short-term U.S. Government obligations, money market
instruments, repurchase agreements, securities issued by other investment
companies within the limits prescribed by the Investment Company Act of 1940, as
amended (the "1940 Act"), and cash, pending investment, to meet anticipated
redemption requests or if, in the opinion of the Advisor, suitable investments
for the Fund are unavailable. Such investments may be made in such proportions
as, in the opinion of the Advisor, existing circumstances may warrant, and may
include obligations of foreign banks and foreign branches of U.S. banks. The
types of securities and investment practices used by the Fund are described in
greater detail
8
<PAGE> 546
under the section "Description of Securities and Investment Practices" on pages
21-29 of this Prospectus.
RISKS OF INVESTING IN THE FUND
The price per share of the Fund will fluctuate with changes in value of the
investments held by the Fund. Shareholders of the Fund should, therefore, expect
the value of their shares to fluctuate with changes in the value of the
securities owned by the Fund. For example, investments by the Fund in smaller
companies may involve greater risks than investments in large companies due to
such factors as limited product lines, markets and financial or managerial
resources, and less frequently traded securities that may be subject to more
abrupt price movements than securities of larger companies.
Investing in the securities of issuers in any foreign country, including
American Depositary Receipts ("ADRs") and European Depositary Receipts ("EDRs"),
involves special risks and considerations not typically associated with
investing in U.S. companies. These include differences in accounting, auditing
and financial reporting standards; generally higher commission rates on foreign
portfolio transactions; the possibility of nationalization, expropriation or
confiscatory taxation; adverse changes in investment or exchange control
regulations (which may include suspension of the ability to transfer currency
from a country); and political instability which could affect U.S. investments
in foreign countries. Additionally, foreign securities and dividends and
interest payable on those securities may be subject to foreign taxes, including
taxes withheld from payments on those securities. Foreign securities often trade
with less frequency and volume than domestic securities and, therefore, may
exhibit greater price volatility. Additional costs associated with an investment
in foreign securities may include higher custodial fees than apply to domestic
custodial arrangements and transaction costs of foreign currency conversions.
Changes in foreign exchange rates also will affect the value of securities
denominated or quoted in currencies other than the U.S. dollar. The Fund's
objective may be affected either unfavorably or favorably by fluctuations in the
relative rates of exchange between the currencies of different nations, by
exchange control regulations and by indigenous economic and political
developments. See the SAI for further information about foreign securities.
There is, of course, no assurance that the Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products.
9
<PAGE> 547
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of the
Board of Trustees. The Trustees are Dennis W. Draper, Joseph N. Hankin, John E.
Heilmann, Jack D. Henderson and Richard A. Wedemeyer. Information about the
Trustees, as well as the Fund's executive officers, may be found in the SAI
under the heading "Management -- Trustees and Officers."
THE ADVISOR: FIRST INTERSTATE CAPITAL MANAGEMENT, INC.
First Interstate Capital Management, Inc., 7501 E. McCormick Parkway,
Scottsdale, Arizona 85258, serves as investment advisor to the Trust. FICM
manages the investment and reinvestment of the assets of the Fund and
continuously reviews, supervises and administers the Fund's investments. The
Advisor is responsible for placing orders for the purchase and sale of the
Fund's investments directly with brokers and dealers selected by it in its
discretion.
FICM is a wholly-owned subsidiary of First Interstate Bank of California,
which is the largest banking subsidiary of First Interstate Bancorp, a
multi-bank holding company. First Interstate Bancorp provides financial products
and services marketed at the local level to nearly five million households in
over 500 communities in 13 western states.
On January 24, 1996, First Interstate Bancorp signed a definitive merger
agreement to merge with Wells Fargo & Company ("Wells Fargo"), a publicly-held
bank holding company with its head office at 420 Montgomery Street, San
Francisco, California 94104. The merger is conditioned upon, among other things,
certain regulatory approvals. Upon completion of the merger, currently expected
to occur during the second quarter of 1996, FICM will be wholly-owned by Wells
Fargo, and the existing investment advisory agreement between the Trust and FICM
will automatically terminate. It is contemplated that an application will be
filed with the Securities and Exchange Commission to ensure there is no
disruption as a result of the merger in the provision of investment advisory
services to the Funds, and that a meeting of shareholders will be held not later
than 120 days after the merger to approve ongoing investment advisory
arrangements for the Funds.
Deborah Selz Goodman and Ronald Florance will be responsible for the
day-to-day management of the Fund. Ms. Selz Goodman joined First Interstate Bank
of California in August 1985. Since that time she has served as a financial
analyst with responsibility for domestic and international asset allocation
management. Mr. Florance joined FICM in
10
<PAGE> 548
July 1995. From 1992 to 1995 Mr. Florance was affiliated with Palos
Verdes Investment Corp., an investment services firm. From 1990 to 1992, Mr.
Florance was employed by The Vanguard Group where his responsibilities included
management of several domestic and international equity mutual funds.
For the advisory services it provides to the Fund, FICM is entitled to
receive from the Fund fees, payable monthly, at the annual rate, based on
average daily net assets, of 1.00%. The advisory fees payable by the Fund are
higher than those paid by most other investment companies that invest only or
primarily in domestic equities, but they are comparable to the advisory fees
paid by other investment companies that, like the Fund, invest primarily in
international equities.
THE SPONSOR AND DISTRIBUTOR
Furman Selz LLC, 230 Park Avenue, New York, New York 10169, acts as Sponsor
of the Fund. Furman Selz is primarily an institutional brokerage firm with
memberships on the New York, American, Boston, Midwest, Pacific and Philadelphia
Stock Exchanges. Furman Selz also serves as administrator and distributor of
other mutual funds. Pacifica Funds Distributor Inc. is an affiliate of Furman
Selz and was organized specifically to distribute shares of the Trust, however,
offers and sales of shares of the Trust will be made only through Furman Selz or
other registered (or exempt) dealers.
PFD Inc. may from time to time pay a bonus or other incentive to dealers
that employ registered representatives who sell a minimum dollar amount of
Institutional Shares of the Fund and/or other funds distributed by Furman Selz
or PFD Inc. during a specific period of time. Such bonus or other incentive may
take the form of payment for travel expenses, including lodging, incurred in
connection with trips taken by qualifying registered representatives and members
of their families to places within or outside the United States, or other
bonuses, such as gift certificates or the cash equivalent of such bonuses. PFD
Inc. has established such a special promotional incentive program with First
Interstate Investments, Inc.
ADMINISTRATIVE SERVICES
The Fund has also entered into an Administrative Services Contract with
Furman Selz pursuant to which Furman Selz provides certain management and
administrative services necessary for the Fund's operations including: (i)
general supervision of the operation of the Fund including coordination of the
services performed by the Fund's investment advisor,
11
<PAGE> 549
transfer agent, custodian, independent accountants and legal counsel, regulatory
compliance, including the compilation of information for documents such as
reports to, and filings with, the SEC and state securities commissions, and
preparation of proxy statements and shareholder reports for the Fund; (ii)
general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Fund's officers and Board of
Trustees; and (iii) furnishing office space and certain facilities required for
conducting the business of the Fund. For these services, Furman Selz is entitled
to receive a fee, payable monthly, at the annual rate of 0.15% of the average
daily net assets of the Fund. Pursuant to a Services Agreement with the Trust,
Furman Selz assists the Trust with certain transfer and dividend disbursing
agent functions and receives a fee of $15.00 per account per year plus
out-of-pocket expenses. Pursuant to a Fund Accounting Agreement with the Trust,
Furman Selz assists the Trust in calculating net asset values and provides
certain other accounting services for the Fund for an annual fee of $30,000 plus
out-of-pocket expenses.
SERVICE ORGANIZATIONS
Various banks (including banks affiliated with First Interstate Bancorp),
trust companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative services with respect to the Fund's Institutional Shares, such as
maintaining shareholder accounts and records. The Fund may pay fees to Service
Organizations (which vary depending upon the services provided) in amounts up to
an annual rate of 0.25% of the average daily net asset value of the outstanding
Institutional Shares of the Fund owned by shareholders with whom a Service
Organization has a servicing relationship. These fees will be borne entirely by
the Fund's Institutional Shares. However, the Fund does not currently intend to
make any payments to Service Organizations with respect to Institutional Shares.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest a specified amount in
the Fund or charging a direct fee for servicing. If imposed, these fees would be
in addition to any amounts which might be paid to the Service Organization by
the Fund. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged to
consult with them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling
12
<PAGE> 550
or distributing securities. There is currently no precedent prohibiting banks
from performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Fund and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by Furman Selz, PFD Inc. or the Advisor. The costs borne by the Fund
include legal and auditing expenses; Trustees' fees and expenses; insurance
premiums; advisory, administration, fund accounting, custodian and transfer
agent fees and expenses; expenses incurred in acquiring or disposing of the
Fund's portfolio securities; expenses of registering and qualifying the Fund's
shares for sale with the SEC and with various state securities commissions;
expenses of obtaining quotations on the Fund's portfolio securities and pricing
of the Fund's shares; expenses of maintaining the Fund's legal existence and of
shareholders' meetings; and expenses of preparation and distribution to existing
shareholders of reports, proxies and prospectuses. The Fund bears its own
expenses associated with its establishment as a series of the Trust; these
expenses are amortized over a five-year period from the commencement of the
Fund's operations. See "Management" in the SAI for additional information on
expenses borne by the Fund. Trust expenses directly attributable to the Fund are
charged to the Fund, and expenses attributable to a particular class of shares
of the Fund (such as Service Organization fees) are charged to that class. Other
expenses are allocated proportionately among all of the investment portfolios in
the Trust in relation to the net assets of each portfolio or by other means
deemed fair and equitable by the Board of Trustees.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Advisor places orders for
the purchase and sale of portfolio investments for the Fund's accounts with
brokers or dealers selected by it in its discretion.
13
<PAGE> 551
In effecting purchases and sales of portfolio securities for the account of
the Fund, the Advisor will seek the best execution of the Fund's orders.
Purchases and sales of common stocks are generally placed by the Advisor with
broker-dealers which, in the Advisor's judgment, provide prompt and reliable
execution at favorable security prices and reasonable commission rates.
Broker-dealers are selected on the basis of a variety of factors such as
reputation, capital strength, size and difficulty of the order, sale of Fund
shares by the broker-dealer, and research provided to the Advisor by the broker-
dealer. The Advisor may cause the Fund to pay commissions higher than another
broker-dealer would have charged if the Advisor believes the commission paid is
reasonable in relation to the value of the brokerage and research services
received by the Advisor. Purchases and sales of debt securities are generally
placed by the Advisor with primary market makers for these securities on a net
basis, i.e., without any brokerage commission being paid by the Fund. Trading
does, however, involve transaction costs. Transactions with dealers serving as
primary market makers reflect the spread between the bid and asked prices.
Purchases of underwritten issues may be made which will include an underwriting
fee paid to the underwriter.
A high portfolio turnover rate involves larger brokerage commission
expenses or transaction costs which must be borne directly by the Fund.
Short-term capital gains realized from portfolio transactions are taxable to
shareholders as ordinary income. The Advisor will not consider portfolio
turnover rate a limiting factor in making investment decisions consistent with
the Fund's objective and policies.
FUND SHARE VALUATION
The net asset value of each class of shares of the Fund is calculated at
4:15 p.m. (Eastern time), Monday through Friday, on each day the New York Stock
Exchange is open for trading (a "Business Day"), which excludes the following
business holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share for each class of shares is computed by dividing the value of
the Fund's assets allocable to a particular class, less the liabilities charged
to that class by the total number of the outstanding shares of that class. All
expenses, including fees paid to the Advisor and Furman Selz, are accrued daily
and taken into account for the purpose of determining the net asset value.
Securities listed on an exchange are valued on the basis of the last sale
prior to the time the valuation is made. If there has been no sale since the
immediately previous valuation, then the current bid price is used. Quota-
14
<PAGE> 552
tions are taken from the exchange where the security is primarily traded.
Portfolio securities which are primarily traded on foreign exchanges may be
valued with the assistance of a pricing service and are generally valued at the
preceding closing values of such securities on their respective exchanges,
except that when an occurrence subsequent to the time a foreign security is
valued is likely to have changed such value, then the fair value of those
securities will be determined by consideration of other factors by or under the
direction of the Board of Trustees. Over-the-counter securities are valued on
the basis of the bid price at the close of business on each business day.
Securities for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction of the Board of
Trustees. Notwithstanding the above, bonds and other fixed-income securities are
valued by using market quotations and may be valued on the basis of prices
provided by a pricing service approved by the Board of Trustees. All assets and
liabilities initially expressed in foreign currencies will be converted into
U.S. dollars at the mean between the bid and asked prices of such currencies
against U.S. dollars as last quoted by any major bank.
With respect to option contracts entered into by the Fund, the premium
received is recorded as an asset and equivalent liability, and thereafter the
liability is adjusted to the market value of the option determined in accordance
with the preceding paragraph. The premium paid for an option purchased by the
Fund is recorded as an asset and subsequently adjusted to market value.
PURCHASE AND REDEMPTION OF INSTITUTIONAL SHARES
Institutional Shares of the Fund are sold without a sales load on a
continuous basis primarily to customers ("Customers") of affiliate, franchise or
correspondent banks of First Interstate Bancorp and other selected institutions
("Institutions"). Customers may include individuals, trusts, partnerships and
corporations. Share purchases are effected through a Customer's account at an
Institution through procedures established in connection with the requirements
of the account, and confirmations of share purchases and redemptions will be
sent to the Institution involved. Institutions (or their nominees) will normally
be the holders of record of Institutional Shares acting on behalf of their
Customers, and will reflect their Customers' beneficial ownership of
Institutional Shares in the account statements provided by them to their
Customers. The exercise of voting rights and the delivery to Customers of
shareholder communications from the Fund will be governed by the Customers'
account agreements with an
15
<PAGE> 553
Institution. Investors wishing to purchase Institutional Shares of the Fund
should contact their account representatives.
Shares of the Fund are sold at net asset value per share next determined
after a purchase order has become effective. Purchase orders by an Institution
for Institutional Shares in the Fund must be received by the Trust by 4:15 p.m.
(Eastern time) on any Business Day. Payment for such shares may be made by
Institutions in Federal funds or other funds immediately available to the
Trust's custodian no later than 4:15 p.m. (Eastern time) on the next Business
Day following the receipt of the purchase order.
It is the responsibility of Institutions to transmit orders for purchases
by their Customers and to deliver required funds on a timely basis. If funds are
not received within the periods described above, the order will be canceled,
notice thereof will be given, and the Institution will be responsible for any
loss to the Fund or its shareholders. Institutions may charge certain account
fees depending on the type of account the investor has established with an
Institution. In addition, an Institution may receive fees from the Fund with
respect to the investments of its Customers as described above under "Management
of the Fund." Payment for Institutional Shares of the Fund may, in the
discretion of the Advisor, be made in the form of securities that are
permissible investments for the Fund. For further information see "Additional
Purchase and Redemption Information" in the SAI.
With respect to former shareholders of Westcore Trust who do not have a
relationship with an Institution, additional shares of the Fund may be purchased
by writing or calling the Fund directly at 237 Park Avenue, Suite 910, New York,
NY 10017 or 1-800-662-8417.
The Trust reserves the right to reject any purchase order. Payment for
orders which are not received will be returned after prompt inquiry. The
issuance of Institutional Shares is recorded on the books of the Fund, and share
certificates are not issued.
Neither the Trust, the Distributor nor Furman Selz will be responsible for
the authenticity of telephone instructions for the purchase or redemption of
Institutional Shares where such instructions are reasonably believed to be
genuine. The Trust will attempt to confirm that telephone instructions are
genuine and will use such procedures as are considered reasonable. To the extent
that the Trust fails to use reasonable procedures to verify the genuineness of
telephone instructions, it or its service providers may be
16
<PAGE> 554
liable for any loss, damage or expense arising from such instructions that prove
to be fraudulent or unauthorized.
Redemption requests are effected at the net asset value per share next
determined after receipt of a redemption request in good order by the Trust.
Institutional Shares held by an Institution on behalf of its Customers must be
redeemed in accordance with instructions and limitations pertaining to the
account at the Institution. It is the responsibility of an Institution to
transmit redemption requests to the Trust and to credit its Customers' accounts
with the redemption proceeds on a timely basis. The redemption proceeds for
Institutional Shares of the Fund are normally wired to the redeeming Institution
the following Business Day after receipt of the request by the Trust. The Trust
reserves the right to delay the wiring of redemption proceeds for up to seven
days after it receives a redemption order if, in the judgment of the Advisor, an
earlier payment could adversely affect the Fund.
With respect to former shareholders of Westcore Trust who do not have a
relationship with an Institution, shares of the Fund may be redeemed by writing
or calling the Fund directly at 237 Park Avenue, Suite 910, New York, NY 10017
or 1-800-662-8417. When Institutional Shares are redeemed directly from the
Fund, the Fund will ordinarily send the proceeds by check to the shareholder at
the address of record on the next Business Day unless payment by wire is
requested. The Fund may, however, take up to seven days to make payment. This
will not be the customary practice. Also, if the New York Stock Exchange is
closed (or when trading is restricted) for any reason other than the customary
weekend or holiday closing or if an emergency condition as determined by the SEC
merits such action, the Fund may suspend redemptions or postpone payment dates.
To be accepted by the Fund, a letter requesting redemption must include:
(i) the Fund name and account registration from which you are redeeming
Institutional Shares; (ii) your account number; (iii) the amount to be redeemed;
(iv) the signatures of all registered owners; and (v) a signature guarantee by
any eligible guarantor institution including a member of a national securities
exchange or a commercial bank or trust company, broker-dealers, credit unions
and savings associations. Corporations, partnerships, trusts or other legal
entities may be required to submit additional documentation.
All redemptions of Institutional Shares of the Fund shall be made in cash,
except that the commitment to redeem Institutional Shares in cash extends only
to redemption requests made by each shareholder of the Fund
17
<PAGE> 555
during any 90-day period of up to the lesser of $250,000 or 1% of the net asset
value of the Fund at the beginning of such period. This commitment is
irrevocable without the prior approval of the SEC and is a fundamental policy of
the Fund that may not be changed without shareholder approval. In the case of
redemption requests by shareholders in excess of such amounts, the Board of
Trustees reserves the right to have the Fund make payment, in whole or in part,
in securities or other assets, in case of an emergency or any time a cash
distribution would impair the liquidity of the Fund to the detriment of the
existing shareholders. In this event, the securities would be valued in the same
manner as the securities of the Fund are valued. If the recipient were to sell
such securities, he or she would incur brokerage charges.
A redemption may be a taxable transaction on which gain or loss may be
recognized.
EXCHANGE OF INSTITUTIONAL SHARES
The Fund offers a convenient way to exchange Institutional Shares in the
Fund for Institutional Shares in another investment portfolio of the Trust.
Before engaging in an exchange transaction, a shareholder should read carefully
the Prospectus describing the investment portfolio into which the exchange will
occur, which is available without charge and can be obtained by writing to the
Fund, 237 Park Avenue, Suite 910, New York, New York 10017, or by calling
1-800-662-8417. A shareholder may not exchange Institutional Shares of one
portfolio for Institutional Shares of another portfolio if both or either are
not qualified for sale in the state of the shareholder's residence. The Trust
may terminate or amend the terms of the exchange privilege at any time.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the net asset value next determined following receipt of the
request by the Trust in good order.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
To exchange Institutional Shares, or if you have any questions, simply call
the Trust at 1-800-662-8417. You should be prepared to give the telephone
representative the following information: (i) your account number, social
security number and account registration; (ii) the name of the portfolio from
and the portfolio into which you wish to transfer your investment; and (iii) the
dollar or share amount you wish to exchange. The
18
<PAGE> 556
conversation may be recorded to protect you and the Fund. Telephone exchanges
are automatically available unless the shareholder indicates he does not wish to
have this privilege by checking the "no" box on the Purchase Application.
In addition, Institutional Shares of the Fund may be exchanged for Investor
Shares of the Fund in connection with the distribution of assets held in a
qualified trust, agency or custodial account maintained with the trust
department of a First Interstate or other bank, trust company or thrift
institution, or in other cases where Institutional Shares are not held in such
qualified accounts. Similarly, Investor Shares may be exchanged for
Institutional Shares of the Fund if the shares are to be held in such a
qualified trust, agency or custodial account. These exchanges are made without a
sales charge at the net asset value of the respective share classes.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
The Fund intends to qualify annually and to elect to be treated as a
regulated investment company pursuant to the provisions of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). By so qualifying and
electing, the Fund generally will not be subject to Federal income tax to the
extent that it distributes investment company taxable income and net capital
gains in the manner required under the Code.
The Fund intends to distribute to its shareholders substantially all of its
investment company taxable income (which includes, among other items, dividends
and interest and the excess, if any, of net short-term capital gains (generally
including any net option premium income) over net long-term capital losses).
Investment company taxable income will be distributed by the Fund quarterly. The
Fund intends to distribute, at least annually, substantially all net capital
gain (the excess of net long-term capital gains over net short-term capital
losses). In determining amounts of capital gains to be distributed, any capital
loss carryovers from prior years will be applied against capital gains.
Distributions will be paid in additional shares of the same class held by a
shareholder based on the net asset value at the close of business on the payment
date of the distribution, unless the shareholder elects in writing, which is
received by Furman Selz not less than five full business days prior to the
record date, to receive such distributions in cash. Investors who redeem all or
a portion of Fund shares prior to a dividend payment date will be entitled on
the next dividend payment date to all dividends declared but unpaid on those
shares at the time of their redemption.
19
<PAGE> 557
Distributions of investment company taxable income (regardless of whether
derived from dividends, interest or net short-term capital gains) will be
taxable to shareholders as ordinary income. Distributions of net long-term
capital gains designated by the Fund as capital gain dividends will be taxable
as long-term capital gains, regardless of how long a shareholder has held his
Fund shares. Distributions are taxable in the same manner whether received in
additional shares or in cash.
Earnings of the Fund not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To prevent imposition of this tax, the Fund intends to comply with this
distribution requirement.
A distribution, including an "exempt-interest dividend," will be treated as
paid on December 31 of a calendar year if it is declared by the Fund during
October, November, or December of that year to shareholders of record in such a
month and paid by the Fund during January of the following calendar year. Such
distributions will be treated as received by shareholders in the calendar year
in which the distributions are declared, rather than the calendar year in which
the distributions are received.
Special tax rules may apply to the Fund's acquisition of financial futures
contracts, forward contracts, and options on futures contracts. Such rules may,
among other things, affect whether gains and losses from such transactions are
considered to be short-term or long-term, may have the effect of deferring
losses and/or accelerating the recognition of gains or losses, and, for purposes
of qualifying as a regulated investment company, may limit the extent to which
the Fund may be able to engage in such transactions.
The Fund's distributions with respect to a given taxable year may exceed
the current and accumulated earnings and profits of the Fund available for
distribution. In that event, distributions in excess of such earnings and
profits would be characterized as a return of capital to shareholders for
Federal income tax purposes, thus reducing each shareholder's cost basis in his
Fund shares. Distributions in excess of a shareholder's cost basis in his shares
would be treated as a gain realized from a sale of such shares.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of the Fund, or upon receipt of a distribution in complete
liquidation of the Fund, generally will be a capital gain or loss which will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares. A loss realized by a shareholder on a redemption, sale,
or exchange of shares of the Fund that were not held
20
<PAGE> 558
for more than six months with respect to which capital gain dividends have been
paid will be characterized as a long-term capital loss to the extent of such
capital gain dividends.
Before purchasing shares in the Fund, the impact of dividends or
distributions which are expected to be declared or have been declared, but not
paid, should be carefully considered. Any dividend or distribution declared
shortly after a purchase of such shares prior to the record date will have the
effect of reducing the per share net asset value by the per share amount of the
dividend or distribution. All or a portion of such dividend or distribution,
although in effect a return of capital, may be subject to tax.
It is anticipated that a portion of the dividends paid by the Fund will
qualify for the dividends-received deduction available to corporations.
The Fund may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where the Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Most corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Income or gain from investments in foreign securities may be subject to
foreign withholding or other taxes. It is expected that the Fund may be subject
to foreign withholding taxes with respect to income received from sources within
foreign countries.
If the Fund invests in certain "passive foreign investment companies"
("PFICs"), it would be subject to Federal income tax (and possibly additional
interest charges) on a portion of any excess distribution or gain from the
disposition of such shares even if it distributes such income to its
shareholders. If the Fund elects to treat the PFIC as a qualified electing fund
("QEF") and the PFIC furnishes certain financial information in the required
form to the Fund, the Fund would instead be required to include in income each
year its allocable share of the ordinary earnings and net capital gains on the
QEF, regardless of whether received, and such amounts would be subject to the
various distribution requirements described above.
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund. Depending on the residence of
21
<PAGE> 559
the shareholder for tax purposes, distributions also may be subject to state and
local taxes, including withholding taxes. Foreign shareholders may, for example,
be subject to special withholding requirements. Special tax treatment, including
a penalty on certain preretirement distributions, is accorded to accounts
maintained as IRAs. Shareholders should consult their own tax advisors as to the
Federal, state and local tax consequences of ownership of shares of the Fund in
their particular circumstances.
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
FOREIGN SECURITIES
Under normal market conditions, the Fund invests at least 65% of the value
of its total assets in securities issued by foreign issuers either directly or
through investments in ADRs and EDRs. ADRs are dollar-denominated receipts
generally issued by domestic banks, which represent the deposit with the bank of
a security of a foreign issuer, and which are publicly traded on exchanges or
over-the-counter in the United States. EDRs are receipts similar to ADRs and are
issued and traded in Europe.
There are certain risks associated with investments in unsponsored ADR
programs. Because the non-U.S. company does not actively participate in the
creation of the ADR program, the underlying agreement for service and payment
will be between the depositary and the shareholder. The company issuing the
stock underlying the ADRs pays nothing to establish the unsponsored facility, as
fees for ADR issuance and cancellation are paid by brokers. Investors directly
bear the expenses associated with certificate transfer, custody and dividend
payment.
In addition, in an unsponsored ADR program, there may be several
depositaries with no defined legal obligations to the non-U.S. company. The
duplicate depositaries may lead to marketplace confusion because there would be
no central source of information to buyers, sellers and intermediaries. The
efficiency of centralization gained in a sponsored program can greatly reduce
the delays in delivery of dividends and annual reports.
Investments in foreign securities involve certain inherent risks, such as
political or economic instability of the issuer or the country of the issue, the
difficulty of predicting international trade patterns, changes in exchange rates
of foreign currencies and the possibility of adverse changes in investment or
exchange control regulations. There may be less publicly available information
about a foreign company than about a domestic company. Foreign companies
generally are not subject to uniform account-
22
<PAGE> 560
ing, auditing and financial reporting standards comparable to those applicable
to domestic companies. Further, foreign stock markets are generally not as
developed or efficient as those in the United States, and in most foreign
markets volume and liquidity are less than in the United States. Fixed
commissions on foreign stock exchanges are generally higher than the negotiated
commissions on U.S. exchanges, and there is generally less government
supervision and regulation of foreign stock exchanges, brokers and companies
than in the United States. With respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets, or diplomatic developments that could affect
investment within those countries. Because of these and other factors,
securities of foreign companies acquired by the Fund may be subject to greater
fluctuation in price than securities of domestic companies.
FIXED INCOME SECURITIES
The Fund may invest in the types of fixed income securities described
below.
U.S. Government Obligations. U.S. Government securities are obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
U.S. Treasury obligations are direct obligations of the United States and are
the most frequently issued marketable U.S. Government security. U.S. Government
agency and instrumentality obligations are debt securities issued by U.S.
Government-sponsored enterprises and Federal agencies. Some obligations of
agencies are supported by the full faith and credit of the United States or by
U.S. Treasury guarantees, such as mortgage-backed certificates, which may be
guaranteed by the Government National Mortgage Association; others, such as
obligations of the Federal Home Loan Banks, Federal Farm Credit Bank, Bank for
Cooperatives, Federal Intermediate Credit Banks and the Federal Land Bank, are
guaranteed by the right of the issuer to borrow from the U.S. Treasury; others,
such as obligations of the Federal National Mortgage Association, are supported
by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, such as obligations of
the Student Loan Marketing Association and the Tennessee Valley Authority, are
backed only by the credit of the agency or instrumentality issuing the
obligation. In the case of obligations not backed by the full faith and credit
of the United States, the investor must look principally to the agency issuing
or guaranteeing the obligation for ultimate repayment.
23
<PAGE> 561
Repurchase Agreements. The Fund may agree to purchase securities subject
to the seller's agreement to repurchase them at a mutually agreed upon date and
price. The Fund will enter into such repurchase agreements only with financial
institutions that are deemed to be creditworthy by the Advisor, pursuant to
guidelines established by the Trust's Board of Trustees. During the term of any
repurchase agreement, the Advisor will continue to monitor the creditworthiness
of the seller. The Fund will not enter into repurchase agreements with the
Advisor or its affiliates. Although the securities subject to repurchase
agreements may bear maturities exceeding 13 months, the Fund does not presently
intend to enter into repurchase agreements with deemed maturities in excess of
seven days. If in the future the Fund was to enter into repurchase agreements
with deemed maturities in excess of seven days, the Fund would do so only if
such investment, together with other illiquid securities, did not exceed 10% of
the value of the Fund's net assets.
The seller under a repurchase agreement will be required to maintain the
value of the securities that are subject to the agreement and held by the Fund
at not less than the repurchase price. Default or bankruptcy of the seller
would, however, expose the Fund to possible delay in connection with the
disposition of the underlying securities or loss to the extent that proceeds
from a sale of the underlying securities were less than the repurchase price
under the agreement.
Bank Obligations. Bank obligations include bankers' acceptances,
negotiable certificates of deposit and non-negotiable time deposits issued by a
U.S. bank, savings bank or savings association that is a member of the Federal
Reserve System or insured by the Federal Deposit Insurance Corporation. The Fund
may also invest in U.S. dollar-denominated obligations of foreign banks.
Obligations of foreign banks or foreign branches of U.S. banks entail risks that
are different from those of investments in domestic obligations of U.S. banks.
These additional risks include future political and economic developments, the
possible imposition of withholding taxes on interest income, possible seizure or
nationalization of foreign deposits, the possible establishment of exchange
controls, or the adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on such obligations. In
addition, foreign branches of U.S. banks and U.S. branches of foreign banks may
be subject to less stringent reserve requirements and to different accounting,
auditing, reporting, and recordkeeping standards than those applicable to
domestic branches of U.S. banks. Investments in domestic and foreign bank
obligations are limited to the obligations of financial institutions having $1
billion or more in total assets at the time of purchase.
24
<PAGE> 562
Commercial Paper. Commercial paper includes short-term unsecured
promissory notes, variable rate demand notes and variable rate master demand
notes issued by domestic and foreign bank holding companies, corporations and
financial institutions, as well as similar instruments issued by government
agencies and instrumentalities. Investments by the Fund in commercial paper will
consist of issues that are rated in one of the two highest rating categories by
a NRSRO. In addition, the Fund may acquire unrated commercial paper and
corporate bonds that are determined by the Advisor at the time of purchase to be
of comparable quality to rated instruments that may be acquired by the Fund.
Commercial paper may include variable and floating rate instruments.
Variable and Floating Rate Instruments. Instruments purchased by the Fund
may include variable and floating rate demand instruments issued by
corporations, industrial development authorities and governmental entities.
These instruments may include variable amount master demand notes that permit
the indebtedness to vary in addition to providing for periodic adjustments in
the interest rate. Although variable and floating rate demand instruments are
frequently not rated by credit rating agencies, unrated instruments purchased by
the Fund will be determined to be of comparable quality to rated instruments
that may be purchased by the Fund. While there may be no active secondary market
with respect to a particular variable or floating rate instrument purchased by
the Fund, the Fund may, from time to time as specified in the instrument, demand
payment in full of the principal of the instrument or may resell the instrument
to a third party. The absence of such an active secondary market, however, could
make it difficult for the Fund to dispose of a variable or floating rate demand
instrument if the issuer defaulted on its payment obligations or during periods
that the Fund is not entitled to exercise its demand rights, and the Fund could,
for these or other reasons, suffer a loss. Variable and floating rate
instruments with no active secondary market will be included in the calculation
of the Fund's illiquid assets.
Derivative Securities. The Fund may invest in structured notes, bonds or
other instruments with interest rates that are determined by reference to
changes in the value of other interest rates, indices or financial indicators
("References") or the relative change in two or more References. The Fund may
also hold derivative instruments that have interest rates that re-set inversely
to changing current market rates and/or have embedded interest rate floors and
caps that require the issuer to pay an adjusted interest rate if market rates
fall below or rise above a specified rate. These instruments represent
relatively recent innovations in the bond markets, and the trading market for
these instruments is less developed
25
<PAGE> 563
than the markets for traditional types of debt instruments. It is uncertain how
these instruments will perform under different economic and interest-rate
scenarios. Because certain of these instruments are leveraged, their market
values may be more volatile than other types of bonds and may present greater
potential for capital gain or loss. On the other hand, the imbedded option
features of other derivative instruments could limit the amount of appreciation
the Fund can realize on its investment, could cause the Fund to hold a security
it might otherwise sell or could force the sale of a security at inopportune
times or for prices that do not reflect current market value. The possibility of
default by the issuer or the issuer's credit provider may be greater for these
structured and derivative instruments than for other types of instruments. In
some cases it may be difficult to determine the fair value of a structured or
derivative instrument because of a lack of reliable objective information and an
established secondary market for some instruments may not exist. As new types of
derivative securities are developed and offered to investors, the Advisor will,
consistent with the Fund's investment objective, policies and quality standards,
consider making investments in such new types of derivative securities.
FORWARD CURRENCY TRANSACTIONS
The Fund may conduct its foreign currency exchange transactions either on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or it may enter into forward foreign currency exchange
contracts in order to protect against uncertainty in the level of future foreign
exchange rates. See the SAI for further information concerning foreign currency
transactions.
SECURITIES ISSUED BY OTHER INVESTMENT COMPANIES
The Fund may invest in securities issued by other investment companies
within the limits prescribed by the 1940 Act. The Fund currently intends to
limit its investments so that, as determined immediately after a securities
purchase is made: (a) not more than 5% of the value of its total assets will be
invested in the securities of any one investment company; (b) not more than 10%
of the value of its total assets will be invested in the aggregate in securities
of investment companies as a group; (c) not more than 3% of the outstanding
voting stock of any one investment company will be owned by the Fund; and (d)
not more than 10% of the outstanding voting stock of any one investment company
will be owned in the aggregate by the Fund and other investment companies
advised by the Advisor or any other affiliate of First Interstate Bancorp. As a
shareholder of another investment company, the Fund would bear, along with other
shareholders, its pro rata portion of the expenses of such other investment
company,
26
<PAGE> 564
including advisory fees. These expenses would be in addition to the advisory and
other expenses that the Fund bears directly in connection with its own
operations, and may represent a duplication of fees to shareholders of the Fund.
LOANS OF PORTFOLIO SECURITIES
To increase return, the Fund may lend its portfolio securities to
broker/dealers and other institutional investors pursuant to agreements
requiring that the loans be continuously secured by collateral equal at all
times in value to at least the market value of the securities loaned. The
collateral for such loans may include cash, securities of the U.S. Government,
its agencies or instrumentalities, or irrevocable letters of credit issued by a
bank, or any combination thereof. Such loans will not be made if, as a result,
the aggregate of all outstanding loans exceeds 30% of the value of the Fund's
total assets. There may be risks of delay in receiving additional collateral or
in recovering the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially. However, loans are made
only to borrowers deemed by the Advisor to be of good standing and when, in
their judgment, the income to be earned from the loan justifies the attendant
risks.
FORWARD COMMITMENTS, WHEN-ISSUED PURCHASES AND DELAYED-DELIVERY TRANSACTIONS
The Fund may purchase or sell securities on a when-issued or delayed-
delivery basis and make contracts to purchase or sell securities for a fixed
price at a future date beyond customary settlement time. Securities purchased or
sold on a when-issued, delayed-delivery or forward commitment basis involve a
risk of loss if the value of the security to be purchased declines, or the value
of the security to be sold increases, before the settlement date. Although the
Fund will generally purchase securities with the intention of acquiring them,
the Fund may dispose of securities purchased on a when-issued, delayed-delivery
or a forward commitment basis before settlement when deemed appropriate by the
Advisor.
OPTIONS
The Fund may purchase put and call options listed on a national securities
exchange and issued by the Options Clearing Corporation in an amount not
exceeding 5% of its net assets. Purchasing options is a specialized investment
technique that entails a substantial risk of a complete loss of the amounts paid
as premiums to the writer of the option.
27
<PAGE> 565
The Fund may also write covered call and secured put options from time to
time as the Advisor deems appropriate. By writing a covered call option, the
Fund forgoes the opportunity to profit from an increase in the market price of
the underlying security above the exercise price except insofar as the premium
represents such a profit, and it is not able to sell the underlying security
until the option expires or is exercised or the Fund effects a closing purchase
transaction by purchasing an option of the same series. If the Fund writes a
secured put option, it assumes the risk of loss should the market value of the
underlying security decline below the exercise price of the option. The
aggregate value of the securities subject to options written by the Fund will
not exceed 25% of the value of its net assets. The use of covered call options
and secured put options will not be a primary investment technique of the Fund,
and they are expected to be used infrequently. If the Advisor is incorrect in
its forecast of market value or other factors when writing the foregoing
options, the Fund would be in a worse position than it would have been had the
foregoing investment techniques not been used.
The Fund may engage in unlisted over-the-counter options with
broker/dealers deemed creditworthy by the Advisor. Closing transactions for such
options are usually effected directly with the same broker/dealer that effected
the original option transaction. The Fund bears the risk that the broker/dealer
will fail to meet its obligations. There is no assurance that a liquid secondary
trading market exists for closing out an unlisted option position. Furthermore,
unlisted options are not subject to the protections, afforded purchasers of
listed options by the Options Clearing Corporation, which performs the
obligations of its members who fail to perform in connection with the purchase
or sale of options.
For additional information relating to option trading practices, including
the particular risks thereof, see the SAI.
STOCK INDEX FUTURES CONTRACTS AND OPTIONS ON STOCK INDEX FUTURES CONTRACTS
The Fund may enter into stock index futures contracts in order to protect
the value of common stock investments or to maintain liquidity, provided that
not more than 5% of the Fund's net assets are committed to such transactions.
See the SAI for further information about stock index futures contracts.
The Fund may also purchase put options on stock index futures as another
method of protecting their assets against market declines. See the SAI for
further information about these options contracts.
28
<PAGE> 566
There can be no assurance that a liquid market will exist at a time when
the Fund seeks to close out a futures contract or a futures option position.
Most futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single day; once the daily limit
has been reached on a particular contract, no trades may be made that day at a
price beyond that limit. In addition, certain of these instruments are
relatively new and without a significant trading history. As a result, there is
no assurance that an active secondary market will develop or continue to exist.
Lack of a liquid market for any reason may prevent the Fund from liquidating an
unfavorable position and the Fund would remain obligated to meet margin
requirements until the position is closed.
The use of the techniques listed above which involve the segregation of
assets to cover future obligations may impair the liquidity of the Fund's assets
and its ability to operate as an open-end investment company. Furman Selz and
the Advisor will monitor the Fund's use of such techniques and report to the
Trustees concerning their impact, if any, on liquidity and the Fund's ability to
meet redemptions.
ILLIQUID SECURITIES
The Fund will not knowingly invest more than 10% of the value of its net
assets in securities that are illiquid because of restrictions on
transferability or other reasons. Repurchase agreements with deemed maturities
in excess of seven days, time deposits maturing in more than seven days and
securities that are not registered under the Securities Act of 1933 but may be
purchased by institutional buyers under Rule 144A are subject to this limit
(unless such securities are variable amount master demand notes with maturities
of nine months or less or unless the Advisor determines under the supervision of
the Board that a liquid trading market exists).
Rule 144A allows for a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the Securities
Act of 1933 for resales of certain securities to qualified institutional buyers.
The Advisor believes that the market for certain restricted securities may
expand further as a result of this regulation and the development of automated
systems for the trading, clearance and settlement of unregistered securities of
domestic and foreign issuers, such as the PORTAL System sponsored by the NASD.
The Advisor monitors the liquidity of restricted securities in the Fund
under the supervision of the Board of Trustees. In reaching liquidity decisions,
the Advisor will consider such factors as: (a) the frequency of
29
<PAGE> 567
trades and quotes for the security; (b) the number of dealers wishing to
purchase or sell the security and number of other potential purchasers; (c)
dealer undertakings to make a market in the security; and (d) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer). The use of Rule 144A transactions could have the effect of
increasing the level of illiquidity of the Fund during periods that qualified
institutional buyers become uninterested in purchasing restricted securities.
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment restrictions that may
be changed only with the approval of a majority of the Fund's outstanding
shares. The following description summarizes several of the Fund's fundamental
restrictions, which are set forth in full in the SAI.
The Fund may not:
1. Purchase securities (except U.S. Government securities and repurchase
agreements collateralized by such securities) if more than 5% of its
total assets at the time of purchase will be invested in securities of
any one issuer, except that up to 25% of the Fund's total assets may be
invested without regard to this 5% limitation.
2. Subject to the foregoing 25% exception, purchase more than 10% of the
outstanding voting securities of any issuer.
3. Invest 25% or more of its total assets at the time of purchase in
securities of issuers whose principal business activities are in the
same industry.
4. Borrow money except in amounts up to 10% of the value of its total
assets at the time of borrowing.
If a percentage restriction on the investment or use of assets set forth in
this Prospectus is adhered to at the time a transaction is effected, later
changes in percentage resulting from changing values will not be considered a
violation; however, the Fund will not at any time have more than 15% of its net
assets invested in illiquid securities.
OTHER INFORMATION
CAPITALIZATION
Pacifica Funds Trust (formerly Fund Source) was organized as a
Massachusetts business trust on July 17, 1984. The capitalization of the
30
<PAGE> 568
Trust consists solely of an unlimited number of shares of beneficial interest
with a par value of $0.001 each. When issued, shares of the Fund are fully paid,
non-assessable and freely transferable.
The Board of Trustees has authorized the issuance of two classes of shares
in the Fund described in this Prospectus -- Institutional Shares and Investor
Shares. Each share of the Fund represents an equal proportionate interest in the
Fund with other shares of the same class and is entitled to such dividends and
distributions earned on such shares as are declared in the discretion of the
Board of Trustees.
The Fund's Institutional Shares and Investor Shares bear their pro rata
portion of all operating expenses paid by the Fund except for the distribution
payments, Service Organization fees and other "class" expenses that are
allocated to a particular share class. The Board of Trustees has approved a
Distribution Plan with respect to Investor Shares of the Fund under which the
Trust may pay the Distributor in connection with the distribution of Investor
Shares at a rate or rates set from time to time by the Board of Trustees,
provided that no rate may exceed the annual rate of 0.50% of the average daily
net asset value of Investor Shares of the Fund. In addition, the Fund may pay
fees to Service Organizations in amounts up to an annual rate of 0.25% of the
daily net asset value of the Fund's outstanding Investor Shares owned by
shareholders with whom a Service Organization has a servicing relationship.
Investor Shares of the Fund are purchased at net asset value per share plus a
maximum 4.50% sales charge (subject to certain exceptions). Because of the
"class expenses" and sales charges, the performance of the Fund's Investor
Shares is expected to be lower than the performance of its Institutional Shares.
The Trust offers various services and privileges in connection with its Investor
Shares that are not offered in connection with its Institutional Shares,
including an automatic investment plan, automatic withdrawal plan and, with
respect to certain portfolios, checkwriting. For information regarding the
Fund's Investor Shares, contact Furman Selz at 1-800-662-8417 or your Service
Organization.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust. The Declaration of Trust also
provides for indemnification out of the property of the Fund of any shareholder
held personally liable solely by reason of being or having been a shareholder of
the Fund. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the
31
<PAGE> 569
Fund itself would be unable to meet its obligations and should be considered
remote.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Trust is not required to hold regular
annual meetings of the Fund's shareholders, but in the event that a special
meeting is held, shareholders of each portfolio offered by the Trust will be
entitled to one vote for each full share held and fractional votes for
fractional shares held, and will vote in the aggregate and not on a
portfolio-by-portfolio basis, except as required by the 1940 Act or other
applicable law. It is contemplated that, as required by the 1940 Act, the
shareholders of a portfolio will vote separately on a portfolio-by-portfolio
basis on matters relating to a particular portfolio's investment advisory
agreement or changes in a portfolio's fundamental investment limitations, and on
other matters where the interests of the respective portfolios are not
substantially identical. Similarly, shareholders of each portfolio will vote in
the aggregate and not by class unless the Trustees determine that the matter to
be voted on affects only the interests of the holders of a particular class of
the Fund's shares. Voting rights are not cumulative.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust and in connection with such meeting to comply with the shareholders'
communications provisions of Section 16(c) of the 1940 Act.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of the Fund means, with respect to the
approval of an investment advisory agreement or a change in a fundamental
investment policy, the vote of the lesser of: (1) 67% of the shares of the Fund
present at a meeting if the holders of more than 50% of the outstanding shares
are present in person or by proxy; or (2) more than 50% of the outstanding
shares of the Fund. For purposes of the 1940 Act, any person who owns either
directly or through one or more controlled companies more than 25 percent of the
voting securities of a company is presumed to "control" such company. Under this
definition, First Interstate
32
<PAGE> 570
Bancorp and its affiliates may be deemed to be controlling persons of the Trust.
PERFORMANCE INFORMATION
The Fund may, from time to time, include yield and total return data for
its Institutional Shares and Investor Shares in advertisements or reports to
shareholders or prospective investors. The methods used to calculate the yields
and total returns of the Fund are mandated by the SEC.
Quotations of "yield" for a class of shares of the Fund will be based on
the investment income per share during a particular 30-day (or one month) period
(including dividends and interest), less expenses accrued during the period
("net investment income"), and will be computed by dividing net investment
income by the maximum public offering price per share on the last day of the
period.
Quotations of yield reflect only the performance of a class of shares
during the particular period on which the calculations are based. Yield will
vary based on changes in market conditions, the level of interest rates and the
level of the expenses of a particular class of shares, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
Quotations of average annual total return for a class of shares of the Fund
will be expressed in terms of the average annual compounded rate of return of a
hypothetical investment in that class over periods of 1, 5 and 10 years (up to
the life of that class), reflect the deduction of a proportional share of
expenses allocated to that class (on an annual basis), and assume that all
dividends and distributions are reinvested when paid.
Performance information for the Fund may be compared to various unmanaged
indices, such as the Standard & Poor's 500 Stock Index, the Dow Jones Industrial
Average, indices prepared by Lipper Analytical Services, and other entities or
organizations which track the performance of investment companies. Any
performance information should be considered in light of the Fund's investment
objective and policies, characteristics and quality of the Fund and the market
conditions during the time period indicated, and should not be considered to be
representative of what may be achieved in the future. For a description of the
methods used to determine yield and total return for the Fund, see "Other
Information -- Performance Information" in the SAI.
33
<PAGE> 571
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Fund at 237 Park
Avenue, Suite 910, New York, New York 10017.
General and Account Information: (800) 662-8417
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR
BY ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY FIRST INTERSTATE BANCORP OR ITS AFFILIATES,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
34
<PAGE> 572
INVESTMENT ADVISOR
First Interstate Capital Management, Inc.
7501 East McCormick Parkway
Scottsdale, Arizona 85258
ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Pacifica Funds Distributor Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
First Interstate Bank of California
707 Wilshire Boulevard
Los Angeles, California 90017
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
[PACIFICA LOGO] PACIEIS-2/96
<PAGE> 573
[PACIFICA LOGO]
PACIFICA GOVERNMENT MONEY
MONEY MARKET FUND
PACIFICA MONEY MARKET FUND
PROSPECTUS
FEBRUARY 1, 1996
[FIRST INTERSTATE BANK LOGO]
Investment Advisor to The Pacifica Funds
<PAGE> 574
PACIFICA FUNDS TRUST
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) 662-8417
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. --
INVESTMENT ADVISOR
("FICM" OR THE "ADVISOR")
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
("FURMAN SELZ" OR THE "SPONSOR")
PACIFICA FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
("PFD INC." OR THE "DISTRIBUTOR")
Pacifica Funds Trust (the "Trust") is an open-end investment company (a
mutual fund) that offers a selection of separate investment portfolios. This
Prospectus describes the following two portfolios (the "Funds"):
- Pacifica Government Money Market Fund
- Pacifica Money Market Fund
This Prospectus sets forth concisely the information a prospective investor
should know before investing in either of the Funds and should be read and
retained for information about each Fund. A Statement of Additional Information
(the "SAI"), dated February 1, 1996 (which may be revised from time to time),
containing additional and more detailed information about the Funds, has been
filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Funds at the address or
information number printed above.
----------------------------
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FIRST INTERSTATE OR OTHER BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1996.
<PAGE> 575
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS............................................... 3
FUND EXPENSES............................................ 6
FEE TABLE................................................ 6
FINANCIAL HIGHLIGHTS..................................... 8
THE FUNDS................................................ 10
INVESTMENT POLICIES AND PRACTICES OF THE FUNDS........... 10
RISKS OF INVESTING IN THE FUNDS.......................... 11
MANAGEMENT OF THE FUNDS.................................. 12
FUND SHARE VALUATION..................................... 17
PRICING OF FUND SHARES................................... 17
MINIMUM PURCHASE REQUIREMENTS............................ 17
PURCHASE OF FUND SHARES.................................. 17
INDIVIDUAL RETIREMENT ACCOUNTS........................... 19
EXCHANGE OF FUND SHARES.................................. 19
REDEMPTION OF FUND SHARES................................ 20
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX.......... 23
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES....... 26
INVESTMENT RESTRICTIONS.................................. 30
OTHER INFORMATION........................................ 31
APPENDIX................................................. A-1
</TABLE>
2
<PAGE> 576
HIGHLIGHTS
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
This Prospectus describes two diversified investment portfolios managed by
First Interstate Capital Management, Inc. Each Fund has a distinct investment
objective and policies.
The Government Money Market Fund. The investment objective of the
Government Money Market Fund is to provide investors with as high a level of
current income as is consistent with preservation of capital and liquidity. The
Fund pursues this objective by investing its assets exclusively in obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
which have remaining maturities not exceeding 397 days, and in certain
repurchase agreements. The Fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less.
The Money Market Fund. The investment objective of the Money Market Fund
is to provide investors with as high a level of current income as is consistent
with preservation of capital and liquidity. The Fund pursues its objective by
investing its assets in a broad range of high quality, short-term, money market
instruments which have remaining maturities not exceeding 397 days. The Fund
will maintain a dollar-weighted average portfolio maturity of 90 days or less.
For additional information concerning the investment policies, practices
and risk considerations of the Funds, see "The Funds," "Investment Policies and
Practices of the Funds" and "Risks of Investing in the Funds" in this
Prospectus.
RISKS OF INVESTING IN THE FUNDS
Each Fund attempts to maintain the value of its shares at a constant $1.00
per share, although there can be no assurance that the Funds will always be able
to do so. The Funds may not achieve as high a level of current income as other
funds that do not limit their investments to the high quality securities in
which the Funds invest. A Fund's performance will change daily based on many
factors, including the quality of the instruments in each Fund's investment
portfolio, national and international economic conditions, interest rate levels
and general market conditions.
There is no assurance that either Fund will achieve its investment
objective.
3
<PAGE> 577
MANAGEMENT OF THE FUNDS
First Interstate Capital Management, Inc. acts as investment advisor to the
Funds. For its services, the Advisor is entitled to receive a fee from each Fund
at an annual rate based on the Fund's average daily net assets. See "Fee Table"
and "Management of the Funds" in this Prospectus.
Furman Selz acts as administrator and sponsor to the Funds. Furman Selz
provides certain management and administrative services to the Funds, and is
entitled to receive a fee from each Fund at an annual rate based on the Fund's
average daily net assets. PFD Inc. distributes the Funds' shares and may be
reimbursed for certain of its distribution-related expenses.
Fees and expenses charged to the Funds are outlined on page 6 of this
Prospectus.
4
<PAGE> 578
GUIDE TO INVESTING IN THE PACIFICA FAMILY OF FUNDS
Purchase orders for the Funds received by 12:00 p.m., Pacific time (3:00
p.m. Eastern time) will become effective that day.
<TABLE>
<S> <C>
- - MINIMUM INITIAL INVESTMENT............ $500
- - MINIMUM INITIAL INVESTMENT FOR IRAS... $250
- - MINIMUM SUBSEQUENT INVESTMENT......... $ 50
</TABLE>
Shares of the Funds are purchased at net asset value without a sales
charge.
Shareholders may exchange shares of the Funds for Investor Shares in other
investment portfolios of the Trust by telephone or mail.
<TABLE>
<S> <C>
- - MINIMUM INITIAL EXCHANGE.............. $500
(NO MINIMUM FOR SUBSEQUENT EXCHANGES.)
</TABLE>
Shareholders may redeem shares of the Funds by telephone, mail, wire or by
writing a check.
- Minimum check amount is $500.
- The Funds reserve the right upon not less than 30 days' notice to redeem
involuntarily all the shares in an investor's account which have an
aggregate value of $500 or less for a particular Fund.
(The above redemption services are not available for IRAs and trust clients
of First Interstate Bancorp and its affiliates.)
All dividends and distributions will be automatically reinvested at net
asset value in additional shares of the applicable Fund unless cash payment is
requested.
- Distributions for the Funds are generally paid monthly.
For additional information on how to purchase and redeem shares of the
Funds, see "Purchase of Fund Shares," "Redemption of Fund Shares" and "Exchange
of Fund Shares."
5
<PAGE> 579
FUND EXPENSES
The following table lists the costs and expenses that an investor will
incur either directly or indirectly as a shareholder of a Fund based upon the
Fund's operating expenses for its most recent fiscal year, adjusted to reflect
current fees and expenses.
FEE TABLE
<TABLE>
<CAPTION>
GOVERNMENT
MONEY MONEY
MARKET MARKET
FUND FUND
---------- ------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)..... None None
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering
price).................................. None None
Deferred Sales Load (as a percentage of
redemption proceeds).................... None None
Redemption Fees............................ None None
Exchange Fee............................... None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees............................ 0.30% 0.30%
12b-1 Fees(*).............................. 0.03% 0.10%
Other Expenses (after waivers)(**)......... 0.44% 0.25%
----- -----
TOTAL FUND OPERATING EXPENSES:
(after waivers)(***)....................... 0.77% 0.65%
===== =====
</TABLE>
- ---------------
(*) Under rules of the National Association of Securities Dealers, Inc. (the
"NASD"), a 12b-1 fee may be treated as a sales charge for certain
purposes. Because a 12b-1 fee is an annual fee charged against the assets
of a Fund, long-term shareholders may indirectly pay more in total sales
charges than the economic equivalent of the maximum front-end sales
charge permitted by the rules of the NASD. See "Management of the
Funds -- The Sponsor and Distributor."
(**) Other Expenses (before waivers) would be 0.45% and 0.45%, respectively.
(***) Total Fund Operating Expenses (before waivers) would be 0.78% and
0.85%, respectively.
6
<PAGE> 580
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Funds' shares will bear. The
table does not reflect any charges that may be imposed by a First Interstate
Bank or other institutions directly on their customer accounts in connection
with investments in the Funds.
EXAMPLE:(*)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
GOVERNMENT
MONEY MONEY
MARKET MARKET
FUND FUND
-------- --------
<S> <C> <C>
1 year..................................... $ 8 $ 7
3 years.................................... 25 21
5 years.................................... 43 36
10 years................................... 95 81
</TABLE>
- ---------------
(*) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED
AMOUNT.
7
<PAGE> 581
FINANCIAL HIGHLIGHTS
The financial information shown below is to assist investors in evaluating
the performance of the Funds since their commencement of operations. The
following supplementary information for the year ended September 30, 1995 has
been audited by Ernst & Young LLP, whose report on the financial statements
appears in the 1995 Annual Report to Shareholders for the Funds. These reports
and financial statements are incorporated by reference into the SAI. The
supplementary information for the periods through September 30, 1994 has been
audited by the Fund's former independent accountants. This financial data should
be read in conjunction with the related financial statements and notes thereto.
Selected data for a share outstanding for the periods shown:
GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(++)........................................... 0.047 0.031 0.027 0.039 0.061
Net realized gain on investments.................................... 0.004 -- -- -- --
-------- -------- -------- -------- --------
Total from Investment Operations.................................... 0.051 0.031 0.027 0.039 0.061
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income................................ (0.047) (0.031) (0.027) (0.039) (0.061)
Dividends from net realized gain on investments..................... (0.004) -- -- -- --
-------- -------- -------- -------- --------
Total Distributions................................................. (0.051) (0.031) (0.027) (0.039) (0.061)
-------- -------- -------- -------- --------
Net Asset Value, End of Year........................................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ========
Total Return...................................................... 5.22% 3.16% 2.77% 3.99% 6.30%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000)..................................... $109,368 $194,276 $188,934 $184,705 $171,375
Ratio of Expenses to Average Net Assets............................. 0.79% 0.77% 0.83% 0.82% 0.85%
Effect of Waivers on above Ratio.................................... 0.02% 0.02% 0.01% 0.00% 0.03%
Ratio of Net Investment Income to Average Net Assets................ 5.08% 3.07% 2.73% 3.85% 6.13%
<CAPTION>
YEAR ENDED PERIOD
SEPTEMBER 30, ENDED
------------------ SEPTEMBER 30,
1990 1989 1988(A)
-------- -------- ------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................................. $ 1.000 $ 1.000 $ 1.000
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(++)........................................... 0.076 0.084 0.030
Net realized gain on investments.................................... -- -- --
-------- -------- --------
Total from Investment Operations.................................... 0.076 0.084 0.030
-------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income................................ (0.076) (0.084) (0.030)
Dividends from net realized gain on investments..................... -- -- --
-------- -------- --------
Total Distributions................................................. (0.076) (0.084) (0.030)
-------- -------- --------
Net Asset Value, End of Year........................................ $ 1.000 $ 1.000 $ 1.000
======== ======== ========
Total Return...................................................... 7.85% 8.71% 3.04%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000)..................................... $160,436 $162,726 $125,856
Ratio of Expenses to Average Net Assets............................. 0.73% 0.68% 0.66%
Effect of Waivers on above Ratio.................................... 0.10% 0.16% 0.26%
Ratio of Net Investment Income to Average Net Assets................ 7.60% 8.42% 6.94%
</TABLE>
- ---------------
(a) Commencement of operations, April 26, 1988.
(++) Per share data based upon average monthly shares outstanding.
+ Annualized.
8
<PAGE> 582
Selected data for a share outstanding for the periods shown:
MONEY MARKET FUND
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.......... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
INCOME FROM INVESTMENT OPERATIONS:
Net investment income*....................... 0.053 0.033 0.030 0.040 0.063 0.079
-------- -------- -------- -------- -------- --------
Total from Investment Operations............. 0.053 0.033 0.030 0.040 0.063 0.079
-------- -------- -------- -------- -------- --------
Less Distributions from net investment
income..................................... (0.053) (0.033) (0.030) (0.040) (0.063) (0.079)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period............... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======== ========
Total Return............................... 5.47% 3.37% 3.04% 4.07% 6.47% 8.19%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000).............. $162,658 $158,711 $160,475 $126,727 $136,552 $173,477
Ratio of Expenses to Average Net Assets...... 0.64% 0.63% 0.64% 0.68% 0.73% 0.55%
Effect of Waivers on above Ratio............. 0.10% 0.10% 0.10% 0.08% 0.01% 0.21%
Ratio of Net Investment Income to Average Net
Assets..................................... 5.35% 3.31% 2.99% 3.95% 6.33% 7.89%
<CAPTION>
PERIOD
YEAR ENDED SEPTEMBER 30, ENDED
---------------------------------- SEPTEMBER 30,
1989 1988 1987 1986(a)
-------- -------- -------- -------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.......... $ 1.000 $ 1.000 $ 1.000 $ 1.000
INCOME FROM INVESTMENT OPERATIONS:
Net investment income*....................... 0.087 0.067 0.061 0.048
-------- -------- -------- -------
Total from Investment Operations............. 0.087 0.067 0.061 0.048
-------- -------- -------- -------
Less Distributions from net investment
income..................................... (0.087) (0.067) (0.061) (0.048)
-------- -------- -------- -------
Net Asset Value, End of Period............... $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== =======
Total Return............................... 9.86% 6.91% 6.27% 4.90%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000).............. $117,910 $132,061 $182,672 $44,830
Ratio of Expenses to Average Net Assets...... 0.50% 0.50% 0.50% 0.50%+
Effect of Waivers on above Ratio............. 0.18% 0.23% 0.20% 0.13%+
Ratio of Net Investment Income to Average Net
Assets..................................... 8.79% 6.72% 6.10% 6.25%
</TABLE>
- ---------------
(a) Commencement of operations, December 26, 1985.
* Per share data based upon average monthly shares outstanding.
+ Annualized.
9
<PAGE> 583
THE FUNDS
The Funds are portfolios of Pacifica Funds Trust, a business trust
organized under the laws of the Commonwealth of Massachusetts as an open-end,
management investment company. The Trust's Board of Trustees oversees the
overall management of the Funds and elects the officers of the Funds.
INVESTMENT POLICIES AND PRACTICES OF THE FUNDS
The investment objective of each of the Money Market Fund and the
Government Money Market Fund is to provide investors with as high a level of
current income as is consistent with preservation of capital and liquidity. Each
Fund follows its own investment policies and practices, including certain
investment restrictions. The SAI contains the specific investment restrictions
which govern the Funds' investments. The Funds' investment objectives are
fundamental policies, which means that they may not be changed without a
majority vote of shareholders of the affected Fund. Except for the objectives
and those restrictions specifically identified as fundamental, all other
investment policies and practices described in this Prospectus and in the SAI
are not fundamental, which means that the Board of Trustees may change them
without shareholder approval. The Advisor selects investments and makes
investment decisions based on the investment objective and policies of each
Fund.
The Advisor selects only those U.S. dollar-denominated debt instruments for
the Funds which meet the high quality, credit risk standards established by the
Funds' Board of Trustees. The Funds will purchase commercial paper which, at the
time of investment, is rated in one of the two highest rating categories by at
least two nationally recognized statistical rating organizations ("NRSROs");
issued or guaranteed as to principal and interest by issuers having an existing
debt security rating in one of the two highest rating categories by at least two
NRSROs, or by issuers rated with respect to a class of short-term debt
obligations, or any security within that class, that is comparable in priority
and security with the security to be purchased by the Funds; or, if not rated,
is in the opinion of the Advisor of an investment quality comparable to rated
commercial paper in which the Funds may invest. Investments in the lower rating
categories described above will not exceed 5% of each Fund's respective total
assets and investments in any single issuer of commercial paper rated in the
lower rating categories will not exceed the greater of $1 million or 1% of the
total assets of a Fund at the time of such investment. Corporate debt securities
(bonds, debentures, notes and other similar debt instruments) in which the
10
<PAGE> 584
Funds may invest have 397 days or less to maturity and must satisfy the same
level of issuer, guarantee and rating criteria as discussed above for commercial
paper. The Funds will not maintain a dollar-weighted average portfolio maturity
that exceeds 90 days nor purchase any instrument with a remaining maturity of
greater than 397 calendar days.
The Funds may agree to purchase portfolio securities from financial
institutions, such as banks and broker-dealers, subject to the seller's
agreement to repurchase them at an agreed upon time and price. Although the
securities subject to such repurchase agreements might bear maturities exceeding
thirteen months, the Funds do not presently intend to enter into repurchase
agreement with deemed maturities in excess of seven days. The seller under a
repurchase agreement will be required to maintain the value of the securities
subject to the agreement at not less than the repurchase price. Default by or
bankruptcy of the seller may, however, expose a Fund to possible loss because of
adverse market action or delay in connection with the disposition of the
underlying obligations.
The Government Money Market Fund restricts its investment to U.S.
Government securities that meet all of the standards described above but does
not limit the types of U.S. Government securities in which it may invest.
Securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities have historically involved little risk of loss of principal if
held to maturity. However, due to fluctuations in interest rates, the market
value of such securities may vary during the period a shareholder owns shares of
the Funds. It should be noted that neither the United States, nor any agency or
instrumentality thereof, has guaranteed, sponsored or approved the Fund or its
shares.
Generally, securities in which the Funds invest will not earn as high a
yield as securities of longer maturity and/or of lesser quality which are more
subject to market volatility. The Funds attempt to maintain the value of their
shares at a constant $1.00 per share, although there can be no assurance that
the Fund will always be able to do so.
The types of securities and investment practices used by the Funds are
described in greater detail under the section "Description of Securities and
Investment Practices" on pages 25-30 of this Prospectus.
RISKS OF INVESTING IN THE FUNDS
The market value of a Fund's investment in fixed income securities will
change in response to changes in interest rates and the relative financial
strength of each issuer. During periods of falling interest rates, the value of
11
<PAGE> 585
fixed income securities generally rises. Conversely, during periods of rising
interest rates the value of such securities generally declines. Changes in the
financial strength of an issuer or changes in the ratings of any particular
security may also affect the value of these investments.
There is, of course, no assurance that a Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products.
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction of
the Board of Trustees. The Trustees are Dennis W. Draper, Joseph N. Hankin, John
E. Heilmann, Jack D. Henderson and Richard A. Wedemeyer. Information about the
Trustees, as well as the Funds' executive officers, may be found in the SAI
under the heading "Management -- Trustees and Officers."
THE ADVISOR: FIRST INTERSTATE CAPITAL MANAGEMENT, INC.
First Interstate Capital Management, Inc., 7501 E. McCormick Parkway,
Scottsdale, Arizona 85258, serves as investment advisor to the Trust. FICM
manages the investment and reinvestment of the assets of the Funds and
continuously reviews, supervises and administers the Funds' investments. The
Advisor is responsible for placing orders for the purchase and sale of the
Funds' investments directly with brokers and dealers selected by it in its
discretion.
FICM is a wholly-owned subsidiary of First Interstate Bank of California,
which is the largest banking subsidiary of First Interstate Bancorp, a
multi-bank holding company. First Interstate Bancorp provides financial products
and services marketed at the local level to nearly five million households in
over 500 communities in 13 western states. Prior to March 18, 1994, the Funds'
investment advisor was San Diego Financial Capital Management, Inc., which was
acquired by First Interstate Bancorp through its merger with San Diego Financial
Corporation.
On January 24, 1996, First Interstate Bancorp signed a definitive merger
agreement to merge with Wells Fargo & Company ("Wells Fargo"), a publicly-held
bank holding company with its head office at 420 Montgomery Street, San
Francisco, California 94104. The merger is conditioned upon, among other things,
certain regulatory approvals. Upon completion of the merger, currently expected
to occur during the second quarter of 1996, FICM will be wholly-owned by Wells
Fargo, and the
12
<PAGE> 586
existing investment advisory agreement between the Trust and FICM will
automatically terminate. It is contemplated that an application will be filed
with the Securities and Exchange Commission to ensure there is no disruption as
a result of the merger in the provision of investment advisory services to the
Funds, and that a meeting of shareholders will be held not later than 120 days
after the merger to approve ongoing investment advisory arrangements for the
Funds.
For the advisory services it provides to the Funds, FICM is entitled to
receive from each Fund fees, payable monthly, at the annual rate of 0.30% of the
first $500 million of each Fund's average daily net assets, 0.25% of the next
$500 million of each Fund's average daily net assets, and 0.20% of each Fund's
average daily net assets in excess of $1 billion.
For their fiscal year ended September 30, 1995, the Government Money Market
Fund and the Money Market Fund paid advisory fees at the annual rates of 0.30%
and 0.22%, respectively, of their average daily net assets.
THE SPONSOR AND DISTRIBUTOR
Furman Selz LLC, 230 Park Avenue, New York, New York 10169, acts as Sponsor
of the Funds. Furman Selz is primarily an institutional brokerage firm with
memberships on the New York, American, Boston, Midwest, Pacific and Philadelphia
Stock Exchanges. Furman Selz also serves as administrator and distributor of
other mutual funds. Pacifica Funds Distributor Inc. is an affiliate of Furman
Selz and was organized specifically to distribute shares of the Trust, however,
offers and sales of shares of the Trust will be made only through Furman Selz or
other registered (or exempt) dealers.
Under the Distribution Plan (the "Plan") adopted by the Funds, each Fund
may pay directly or reimburse PFD Inc. monthly (subject to a limit of 0.50% per
annum of the average daily net asset value of the outstanding shares of each
Fund) for costs and expenses of PFD Inc. in connection with the distribution of
shares of the Funds. These costs and expenses include (i) advertising by radio,
television, newspapers, magazines, brochures, sales literature, direct mail or
any other form of advertising; (ii) expenses of sales employees or agents of PFD
Inc., including salary, commissions, travel and related expenses; (iii) payments
to broker-dealers and financial institutions for services in connection with the
distribution of shares, including promotional incentives and fees calculated
with reference to the average daily net asset value of shares held by
shareholders who have a brokerage or other service relationship with the
broker-dealer or other institution receiving such fees; (iv) costs of printing
prospectuses and other materials to be given or sent to prospective investors;
and (v) such other
13
<PAGE> 587
similar services as the Trustees determine to be reasonably calculated to
result in the sale of shares of the Funds. Each Fund will pay all costs and
expenses in connection with the preparation, printing and distribution of
prospectuses to current shareholders and the operation of its Plan, including
related legal and accounting fees. A Fund will not be liable for distribution
expenditures made by PFD Inc. in any given year in excess of the maximum annual
amount payable under the Plan for that Fund.
In addition to sales charges paid to dealers, PFD Inc. may from time to
time pay a bonus or other incentive to dealers which employ registered
representatives who sell a minimum dollar amount of the shares of the Funds
and/or other funds distributed by Furman Selz or PFD Inc. during a specific
period of time. Such bonus or other incentive may take the form of payment for
travel expenses, including lodging, incurred in connection with trips taken by
qualifying registered representatives and members of their families to places
within or outside the United States, or other bonuses, such as gift certificates
or the cash equivalent of such bonuses. PFD Inc. has established such a special
promotional incentive program with First Interstate Securities, Inc.
ADMINISTRATIVE SERVICES
The Funds have also entered into an Administrative Services Contract with
Furman Selz pursuant to which Furman Selz provides certain management and
administrative services necessary for the Funds' operations including: (i)
general supervision of the operation of the Funds including coordination of the
services performed by the Funds' investment advisor, transfer agent, custodian,
independent accountants and legal counsel, regulatory compliance, including the
compilation of information for documents such as reports to, and filings with,
the SEC and state securities commissions, and preparation of proxy statements
and shareholder reports for the Funds; (ii) general supervision relative to the
compilation of data required for the preparation of periodic reports distributed
to the Funds' officers and Board of Trustees; and (iii) furnishing office space
and certain facilities required for conducting the business of the Funds. For
these services, Furman Selz is entitled to receive a fee, payable monthly, at
the annual rate of 0.15% of the average daily net assets of the Funds. Pursuant
to a Services Agreement with the Trust, Furman Selz assists the Trust with
certain transfer and dividend disbursing agent functions and receives a fee of
$15.00 per account per year plus out-of-pocket expenses. Pursuant to a Fund
Accounting Agreement with the Trust, Furman Selz assists the Trust in
calculating net asset values and provides certain other accounting
14
<PAGE> 588
services for each Fund for an annual fee of $30,000 per Fund plus out-of-pocket
expenses.
SERVICE ORGANIZATIONS
Various banks (including banks affiliated with First Interstate Bancorp),
trust companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative services with respect to the Funds' shares, such as maintaining
shareholder accounts and records. The Funds may pay fees to Service
Organizations (which may vary depending upon the services provided) in amounts
up to an annual rate of 0.25% of the average daily net asset value of the
outstanding shares of the Funds owned by shareholders with whom a Service
Organization has a servicing relationship.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest a specified amount in
the Funds or charging a direct fee for servicing. If imposed, these fees would
be in addition to any amounts which might be paid to the Service Organization by
the Funds. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged to
consult with them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Funds and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
OTHER EXPENSES
Each Fund bears all costs of its operations other than expenses
specifically assumed by Furman Selz, PFD Inc. or the Advisor. The costs borne by
the Funds include legal and accounting expenses; Trustees' fees and expenses;
insurance premiums; advisory, administration, fund account-
15
<PAGE> 589
ing, custodian and transfer agent fees and expenses; expenses incurred in
acquiring or disposing of the Funds' portfolio securities; expenses of
registering and qualifying the Funds' shares for sale with the SEC and with
various state securities commissions; expenses of obtaining quotations on the
Funds' portfolio securities and pricing of the Funds' shares; expenses of
maintaining the Funds' legal existence and of shareholders' meetings; and
expenses of preparation and distribution to existing shareholders of reports,
proxies and prospectuses. Each Fund bears its own expenses associated with its
establishment as a series of the Trust; these expenses are amortized over a
five-year period from the commencement of a Fund's operations. See "Management"
in the SAI for additional information on expenses borne by the Funds. Trust
expenses directly attributable to a particular Fund are charged to that Fund.
Other expenses are allocated proportionately among all of the investment
portfolios in the Trust in relation to the net assets of each portfolio or by
other means deemed fair and equitable by the Board of Trustees.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Advisor places orders for
the purchase and sale of portfolio investments for the Funds' accounts with
brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Funds, the Advisor will seek the best execution of the Funds' orders.
Purchases and sales of debt securities are generally placed by the Advisor with
primary market makers for these securities on a net basis, i.e., without any
brokerage commission being paid by the Funds. Trading does, however, involve
transaction costs. Transactions with dealers serving as primary market makers
reflect the spread between the bid and asked prices. Purchases of underwritten
issues may be made, which will include an underwriting fee paid to the
underwriter. Broker-dealers are selected on the basis of a variety of factors
such as reputation, capital strength, size and difficulty of the order, sale of
Fund shares by the broker-dealer, and research provided to the Advisor by the
broker-dealer. The Advisor may cause a Fund to pay commissions higher than
another broker-dealer would have charged if the Advisor believes the commission
paid is reasonable in relation to the value of the brokerage and research
services received by the Advisor.
Short-term capital gains realized from portfolio transactions are taxable
to shareholders as ordinary income. The Advisor will not consider portfolio
turnover rate a limiting factor in making investment decisions consistent with a
Fund's objective and policies.
16
<PAGE> 590
FUND SHARE VALUATION
The net asset value of each class of shares of the Funds is calculated at
3:00 p.m. (Eastern time), Monday through Friday, on each day the New York Stock
Exchange is open for trading (a "Business Day"), which excludes the following
business holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share for the Funds is computed by dividing the value of a Fund's
assets, less the liabilities, by the total number of the outstanding shares of
the Fund. All expenses, including fees paid to the Advisor, Furman Selz and PFD
Inc., are accrued daily and taken into account for the purpose of determining
the net asset value.
The Funds use the amortized cost method to value their portfolio securities
and seeks to maintain a constant net asset value of $1.00 per share, although
there may be circumstances under which this goal cannot be achieved. The
amortized cost method involves valuing a security at its cost and amortizing any
discount or premium over the period until maturity, regardless of the impact of
fluctuating interest rates on the market value of the security. See the SAI for
a more complete description of the amortized cost method.
PRICING OF FUND SHARES
Orders for the purchase of Fund shares will be executed at the net asset
value per share (the "public offering price") next determined after an order has
become effective. Shares of the Funds are sold without a sales charge.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in the Funds is $500, except that the
minimum is $250 for an IRA. Any subsequent investments must be at least $50,
including an IRA investment. All initial investments should be accompanied by a
completed Purchase Application. A separate application is required for IRA
investments.
PURCHASE OF FUND SHARES
THE FOLLOWING PURCHASE PROCEDURES DO NOT APPLY TO CERTAIN TRUST OR OTHER
ACCOUNTS THAT ARE MANAGED BY FIRST INTERSTATE BANCORP, ITS SUBSIDIARIES OR
AFFILIATES. AN ACCOUNT CUSTOMER SHOULD CONSULT HIS OR HER ACCOUNT OFFICER FOR
PROPER INSTRUCTIONS.
17
<PAGE> 591
All funds received by the Trust are invested in full and fractional shares
of the appropriate Fund. Certificates for shares are not issued. Furman Selz
maintains records of each shareholder's holdings of Fund shares, and each
shareholder receives a statement of transactions, holdings and dividends. The
Funds reserve the right to reject any purchase.
An investment may be made using any of the following methods:
Through an Authorized Broker, Investment Advisor or Service
Organization. Shares are available to new and existing shareholders through
authorized brokers, investment advisors and Service Organizations. To make an
investment using this method, simply complete a Purchase Application and contact
your broker, investment advisor or Service Organization with instructions as to
the amount you wish to invest. Your broker will then contact the Fund to place
the order on your behalf on that day.
Orders received by your broker or Service Organization for the Funds
received prior to 12:00 p.m., Pacific time (3:00 p.m., Eastern time), will
become effective that day. Brokers who receive orders are obligated to transmit
them promptly. You should receive written confirmation of your order within a
few days of receipt of instructions from your broker.
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the applicable Fund. In most cases, your bank will either be a member
of the Federal Reserve Banking System or have a relationship with a bank that
is. Your bank will normally charge you a fee for handling the transaction. To
purchase shares by a Federal funds wire, please first contact Furman Selz Mutual
Funds Client Services. They will establish a record of information for the wire
to ensure its correct processing. You can reach the Wire Desk at 1-800-662-8417.
Have your bank wire funds using the following instructions:
Investors Fiduciary Trust Company
Kansas City, MO 64105
ABA #1010-0362-1
Account #7527950
Further Credit to: Fund Name
As long as you have read the Prospectus, you may establish a new regular
account through the Wire Desk; IRAs may not be opened in this way. When new
accounts are established by wire, the distribution options will be set to
reinvest and the social security or tax identification number ("TIN") will not
be certified until a signed application is received. Completed applications
should be forwarded immediately to the Funds.
18
<PAGE> 592
With the Purchase Application, the shareholder can specify other distribution
options and add any special features offered by a Fund. Should any dividend
distributions or redemptions be paid before the TIN is certified, they will be
subject to 31% Federal tax withholding.
Automatic Investment Program. An eligible shareholder may also participate
in the Pacifica Automatic Investment Program, an investment plan that
automatically debits money from the shareholder's bank account and invests it in
one or more of the Funds through the use of electronic funds transfers or
automatic bank drafts. Shareholders may elect to make subsequent investments by
transfers of a minimum of $50 on either the fifth or twentieth day of each month
into their established Fund accounts. Contact the Trust at 1-800-662-8417 for
more information about the Pacifica Automatic Investment Program.
INDIVIDUAL RETIREMENT ACCOUNTS
The Funds may be used as a funding medium for IRAs. Shares may also be
purchased for IRAs established with an affiliate of First Interstate Bancorp or
other authorized custodians. In addition, an IRA may be established through a
custodial account with Investors Fiduciary Trust Company. Completion of a
special application is required in order to create such an account, and the
minimum initial investment for an IRA is $250. Contributions to IRAs are subject
to prevailing amount limits set by the Internal Revenue Service. A $5.00
establishment fee and an annual $12.00 maintenance and custody fee is payable
with respect to each IRA, and there will be a $10.00 termination fee when the
account is closed. For more information, call the Funds at 1-800-662-8417.
EXCHANGE OF FUND SHARES
The Funds offer two convenient ways to exchange shares in a Fund for
Investor Shares in another investment portfolio of the Trust. Before engaging in
an exchange transaction, a shareholder should read carefully the Prospectus
describing the investment portfolio into which the exchange will occur, which is
available without charge and can be obtained by writing to the Fund at 237 Park
Avenue, Suite 910, New York, New York 10017, or by calling 1-800-662-8417. A
shareholder may not exchange shares of one portfolio for shares of another
portfolio if both or either are not qualified for sale in the state of the
shareholder's residence. The minimum amount for an initial exchange is $500. No
minimum is required in subsequent exchanges. The Trust may terminate or amend
the terms of the exchange privilege at any time.
19
<PAGE> 593
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the net asset value next determined following receipt of the
request by the Trust in good order, plus any applicable sales charge.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
In the case of transactions subject to a sales charge, the sales charge
will be assessed on an exchange of shares, equal to the excess of the sales load
applicable to the shares to be acquired over the amount of any sales load
previously paid on the shares to be exchanged. No service fee is imposed.
Exchange by Mail. To exchange shares of a Fund by mail, simply send a
letter of instruction to Furman Selz. The letter of instruction must include:
(i) your account number; (ii) the Fund from and the Fund into which you wish to
exchange your investment; (iii) the dollar or share amount you wish to exchange;
and (iv) the signatures of all registered owners or authorized parties. All
signatures must be guaranteed by an eligible guarantor institution including a
member of a national securities exchange or by a commercial bank or trust
company, broker-dealers, credit unions and savings associations.
Exchange by Telephone. To exchange shares of a Fund by telephone, or if
you have any questions, simply call the Trust at 1-800-662-8417. You should be
prepared to give the telephone representative the following information: (i)
your account number, social security number and account registration; (ii) the
name of the portfolio from and the portfolio into which you wish to transfer
your investment; and (iii) the dollar or share amount you wish to exchange. The
conversation may be recorded to protect you and the Funds. Telephone exchanges
are automatically available unless the shareholder indicates that he does not
wish to have this privilege, by checking the "no" box on the Purchase
Application. See "Redemption of Fund Shares -- By Telephone" for a discussion of
telephone transactions generally.
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares, in whole or in part, on any Business
Day. Shares will be redeemed at the net asset value next determined after a
redemption request in good order has been received and accepted by the Trust.
See "Fund Share Valuation." A redemption may be
20
<PAGE> 594
a taxable transaction on which gain or loss may be recognized. Generally,
however, gain or loss is not expected to be realized on a redemption of shares
of the Funds, which seek to maintain a net asset value per share of $1.00.
Where the shares to be redeemed have been purchased by check, the Trust may
delay payment of the redemption proceeds until the purchasing check has cleared,
which may take up to 15 days. Shareholders may avoid this delay by investing
through wire transfers of Federal funds. During the period prior to the time the
shares are redeemed, dividends on the shares will continue to accrue and be
payable and the shareholder will be entitled to exercise all other beneficial
rights of ownership.
Once the shares are redeemed, a Fund will ordinarily send the proceeds by
check to the shareholder at the address of record on the next Business Day. The
Funds may, however, take up to seven days to make payment. This will not be the
customary practice. Also, if the New York Stock Exchange is closed (or when
trading is restricted) for any reason other than the customary weekend or
holiday closing or if an emergency condition as determined by the SEC merits
such action, the Funds may suspend redemptions or postpone payment dates.
To ensure acceptance of your redemption request, it is important to follow
the procedures described below. Although the Trust has no present intention to
do so, it reserves the right to refuse or to limit the frequency of any
telephone or wire redemptions. Of course, it may be difficult to place orders by
telephone during periods of severe market or economic change, and a shareholder
should consider alternative methods of communications, such as couriers or U.S.
mail. The services offered by the Funds may be modified or terminated at any
time. If the Funds terminate any particular service, they will do so only after
giving written notice to shareholders.
You may redeem your shares using any of the following methods:
Through an Authorized Broker, Investment Advisor or Service
Organization. You may redeem your shares by contacting your broker or
investment advisor and instructing him or her to redeem your shares. He or she
will then contact the Fund and place a redemption trade on your behalf. He or
she may charge you a fee for this service.
By Mail. You may redeem your shares by sending a letter directly to the
Funds. To be accepted, a letter requesting redemption must include: (i) the Fund
name and account registration from which you are redeeming shares; (ii) your
account number; (iii) the amount to be redeemed; (iv) the signatures of all
registered owners; and (v) a signature guarantee by any eligible guarantor
institution including a member of a national
21
<PAGE> 595
securities exchange or a commercial bank or trust company, broker-dealers,
credit unions and savings associations. Corporations, partnerships, trusts or
other legal entities will be required to submit additional documentation.
By Telephone. You may redeem your shares by calling the Funds toll free at
1-800-662-8417. You should be prepared to give the telephone representative the
following information: (i) your account number, social security number and
account registration; (ii) the Fund name from which you are redeeming shares;
and (iii) the amount to be redeemed. The conversation may be recorded to protect
you and the Funds. Telephone redemptions are available only if the shareholder
so indicates by checking the "yes" box on the Purchase Application. The Funds
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. If the Funds fail to employ such reasonable procedures,
they may be liable for any loss, damage or expense arising out of any telephone
transactions purporting to be on a shareholder's behalf. In order to assure the
accuracy of instructions received by telephone, the Funds require some form of
personal identification prior to acting upon instructions received by telephone,
record telephone instructions and provide written confirmation to investors of
such transactions.
By Wire. You may redeem your shares by contacting the Funds by mail or
telephone and instructing them to send a wire transmission to your personal
bank. Proceeds of wire redemption for the Funds generally will be transferred to
the designated account on the day the request is received provided that it is
received by 12:00 Noon (Pacific time).
Your instructions should include: (i) your account number, social security
number and account registration; (ii) the Fund name from which you are redeeming
shares; and (iii) the amount to be redeemed. Wire redemptions can be made only
if the "yes" box has been checked on your Purchase Application, and a copy of a
void check from the account where proceeds are to be wired is attached to the
Purchase Application. Your bank may charge you a fee for receiving a wire
payment on your behalf.
Check Writing. A check redemption ($500 minimum, no maximum) feature is
available with respect to the Funds. Checks are free and may be obtained from
the Fund. It is not possible to use a check to close out your account since
additional shares accrue daily.
The above mentioned services "By Telephone" and "By Wire" are not available
for IRAs and trust clients of an affiliate of First Interstate Bancorp.
22
<PAGE> 596
Systematic Withdrawal Plan. An owner of $10,000 or more of shares of a
Fund may elect to have periodic redemptions from his or her account to be paid
on a monthly, quarterly, semi-annual or annual basis. The minimum periodic
payment is $100. A sufficient number of shares to make the scheduled redemption
will normally be redeemed on the date selected by the shareholder. Depending on
the size of the payment requested and fluctuation in the net asset value, if
any, of the shares redeemed, redemptions for the purpose of making such payments
may reduce or even exhaust the account. A shareholder may request that these
payments be sent to a predesignated bank or other designated party. Capital
gains and dividend distributions paid to the account will automatically be
reinvested at net asset value on the distribution payment date.
Redemption of Small Accounts. Due to the disproportionately higher cost of
servicing small accounts, each Fund reserves the right to redeem, on not less
than 30 days' notice, an account in a Fund that has been reduced by a
shareholder to $500 or less. However, if during the 30-day notice period the
shareholder purchases sufficient shares to bring the value of the account above
$500, this restriction will not apply.
Redemption in Kind. All redemptions of shares of the Funds shall be made
in cash, except that the commitment to redeem shares in cash extends only to
redemption requests made by each shareholder of a Fund during any 90-day period
of up to the lesser of $250,000 or 1% of the net asset value of that Fund at the
beginning of such period. This commitment is irrevocable without the prior
approval of the SEC and is a fundamental policy of the Funds that may not be
changed without shareholder approval. In the case of redemption requests by
shareholders in excess of such amounts, the Board of Trustees reserves the right
to have the Funds make payment, in whole or in part, in securities or other
assets, in case of an emergency or any time a cash distribution would impair the
liquidity of a Fund to the detriment of the existing shareholders. In this
event, the securities would be valued in the same manner as the securities of
that Fund are valued. If the recipient were to sell such securities, he or she
would incur brokerage charges.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
Each Fund has qualified and intends to continue to qualify annually and to
elect to be treated as a regulated investment company pursuant to the provisions
of Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
By so qualifying and electing, each Fund generally will not be subject to
Federal income tax to the extent that it distributes
23
<PAGE> 597
investment company taxable income and net capital gains in the manner required
under the Code.
Each Fund intends to distribute to its shareholders substantially all of
its investment company taxable income (which includes, among other items,
dividends and interest and the excess, if any, of net short-term capital gains
(generally including any net option premium income) over net long-term capital
losses). The Funds will declare distributions of investment company income daily
and pay those dividends monthly. Each Fund intends to distribute, at least
annually, substantially all net capital gain (the excess of net long-term
capital gains over net short-term capital losses). In determining amounts of
capital gains to be distributed, any capital loss carryovers from prior years
will be applied against capital gains.
Distributions will be paid in additional shares of the Funds based on the
net asset value at the close of business on the payment date of the
distribution, unless the shareholder elects in writing, which is received by
Furman Selz not less than five full business days prior to the record date, to
receive such distributions in cash.
Shares purchased will begin earning dividends on the day the purchase order
is executed and shares redeemed will earn dividends through the previous day.
Net investment income for a Saturday, Sunday or a holiday will be declared as a
dividend on the previous business day. Investors who redeem all or a portion of
Fund shares prior to a dividend payment date will be entitled on the next
dividend payment date to all dividends declared but unpaid on those shares at
the time of their redemption.
Distributions of investment company taxable income (regardless of whether
derived from dividends, interest or net short-term capital gains) will be
taxable to shareholders as ordinary income. Distributions of net long-term
capital gains designated by a Fund as capital gain dividends will be taxable as
long-term capital gains, regardless of how long a shareholder has held his Fund
shares. Distributions are taxable in the same manner whether received in
additional shares or in cash.
Earnings of the Funds not distributed on a timely basis in accordance with
a calendar year distribution requirement are subject to a nondeductible 4%
excise tax. To prevent imposition of this tax, each Fund intends to comply with
this distribution requirement.
A distribution, including an "exempt-interest dividend," will be treated as
paid on December 31 of a calendar year if it is declared by a Fund during
October, November, or December of that year to shareholders of record in such a
month and paid by a Fund during January of the
24
<PAGE> 598
following calendar year. Such distributions will be treated as received by
shareholders in the calendar year in which the distributions are declared,
rather than the calendar year in which the distributions are received.
A Fund's distributions with respect to a given taxable year may exceed the
current and accumulated earnings and profits of that Fund available for
distribution. In that event, distributions in excess of such earnings and
profits would be characterized as a return of capital to shareholders for
Federal income tax purposes, thus reducing each shareholder's cost basis in his
Fund shares. Distributions in excess of a shareholder's cost basis in his shares
would be treated as a gain realized from a sale of such shares.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of a Fund, or upon receipt of a distribution in complete
liquidation of a Fund, generally will be a capital gain or loss which will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares. A loss realized by a shareholder on a redemption, sale,
or exchange of shares of a Fund that were not held for more than six months with
respect to which capital gain dividends have been paid will be characterized as
a long-term capital loss to the extent of such capital gain dividends.
The dividends paid by the Funds are not expected to qualify for the
dividends-received deduction available to corporations.
The Funds may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where a Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Most corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund(s) in which they invest. Depending on
the residence of the shareholder for tax purposes, distributions also may be
subject to state and local taxes, including withholding taxes. Foreign
shareholders may, for example, be subject to special withholding requirements.
Special tax treatment, including a penalty on certain preretirement
distributions, is accorded to accounts maintained as IRAs. Shareholders should
consult their own tax advisors as to the Federal, state
25
<PAGE> 599
and local tax consequences of ownership of shares of the Funds in their
particular circumstances.
DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES
U.S. Government Obligations. U.S. Government securities are obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
U.S. Treasury obligations are direct obligations of the United States and are
the most frequently issued marketable U.S. Government security.
U.S. Government agency and instrumentality obligations are debt securities
issued by U.S. Government-sponsored enterprises and Federal agencies. Some
obligations of agencies are supported by the full faith and credit of the United
States or by U.S. Treasury guarantees, such as mortgage-backed certificates,
which may be guaranteed by the Government National Mortgage Association; others,
such as obligations of the Federal Home Loan Banks, Federal Farm Credit Bank,
Bank for Cooperatives, Federal Intermediate Credit Banks and the Federal Land
Bank, are guaranteed by the right of the issuer to borrow from the U.S.
Treasury; others, such as obligations of the Federal National Mortgage
Association, are supported by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others, such
as obligations of the Student Loan Marketing Association and the Tennessee
Valley Authority, are backed only by the credit of the agency or instrumentality
issuing the obligation. In the case of obligations not backed by the full faith
and credit of the United States, the investor must look principally to the
agency issuing or guaranteeing the obligation for ultimate repayment.
Repurchase Agreements. The Funds may agree to purchase securities subject
to the seller's agreement to repurchase them at a mutually agreed upon date and
price. The Funds will enter into such repurchase agreements only with financial
institutions that are deemed to be creditworthy by the Advisor, pursuant to
guidelines established by the Trust's Board of Trustees. During the term of any
repurchase agreement, the Advisor will continue to monitor the creditworthiness
of the seller. The Funds will not enter into repurchase agreements with the
Advisor or its affiliates. Although the securities subject to repurchase
agreements may bear maturities exceeding 13 months, as a fundamental policy, the
term of the repurchase agreement transactions entered into by the Funds will
always be seven days or less.
26
<PAGE> 600
The seller under a repurchase agreement will be required to maintain the
value of the securities that are subject to the agreement and held by a Fund at
not less than the repurchase price. Default or bankruptcy of the seller would,
however, expose a Fund to possible delay in connection with the disposition of
the underlying securities or loss to the extent that proceeds from a sale of the
underlying securities were less than the repurchase price under the agreement.
Bank Obligations. Bank obligations purchased by the Money Market Fund
include bankers' acceptances, negotiable certificates of deposit and
non-negotiable time deposits issued by a U.S. bank, savings bank or savings
association that is a member of the Federal Reserve System or insured by the
Federal Deposit Insurance Corporation. The Fund may also invest in U.S.
dollar-denominated obligations of foreign banks. Although the Fund will invest
in obligations of foreign banks or foreign branches of U.S. banks only where the
Advisor deems the instrument to present minimal credit risks, such investments
nevertheless entail risks that are different from those of investments in
domestic obligations of U.S. banks. These additional risks include future
political and economic developments, the possible imposition of withholding
taxes on interest income, possible seizure or nationalization of foreign
deposits, the possible establishment of exchange controls, or the adoption of
other foreign governmental restrictions which might adversely affect the payment
of principal and interest on such obligations. In addition, foreign branches of
U.S. banks and U.S. branches of foreign banks may be subject to less stringent
reserve requirements and to different accounting, auditing, reporting, and
recordkeeping standards than those applicable to domestic branches of U.S.
banks. Investments in domestic and foreign bank obligations are limited to the
obligations of financial institutions having $1 billion or more in total assets
at the time of purchase.
Commercial Paper. Commercial paper includes short-term unsecured promissory
notes, variable rate demand notes and variable rate master demand notes issued
by domestic and foreign bank holding companies, corporations and financial
institutions, as well as similar instruments issued by government agencies and
instrumentalities. Commercial paper may include paper issued in reliance on the
so-called "private placement" exemption under Section 4(2) of the Securities Act
of 1933 ("Section 4(2) paper"). Section 4(2) paper is restricted as to
disposition under the federal securities laws and generally is sold to
institutional investors such as mutual funds that agree that they are purchasing
the paper for investment and not with a view to public distribution. Any resale
by the purchaser must be in an exempt transaction. Section 4(2) paper normally
is resold to other
27
<PAGE> 601
institutional investors through or with the assistance of the issuer or
investment dealers that make a market in Section 4(2) paper. Section 4(2) paper
will not be subject to a Fund's 10% limitation on illiquid securities where the
Board of Trustees or FICM (pursuant to guidelines adopted by the Board)
determines that a liquid trading market exists.
Securities Issued by Other Investment Companies. Each Fund may invest in
securities issued by other investment companies within the limits prescribed by
the 1940 Act. Each Fund currently intends to limit its investments so that, as
determined immediately after a securities purchase is made: (a) not more than 5%
of the value of its total assets will be invested in the securities of any one
investment company; (b) not more than 10% of the value of its total assets will
be invested in the aggregate in securities of investment companies as a group;
(c) not more than 3% of the outstanding voting stock of any one investment
company will be owned by the Fund; and (d) not more than 10% of the outstanding
voting stock of any one investment company will be owned in the aggregate by a
Fund and other investment companies advised by the Advisor or any other
affiliate of First Interstate Bancorp. As a shareholder of another investment
company, a Fund would bear, along with other shareholders, its pro rata portion
of the expenses of such other investment company, including advisory fees. These
expenses would be in addition to the advisory and other expenses that each Fund
bears directly in connection with its own operations, and may represent a
duplication of fees to shareholders of that Fund. The Funds may only invest in
investment companies which invest in high quality, short-term instruments and
which determine their net asset value per share on the amortized cost or
penny-rounding method.
Variable and Floating Rate Instruments. Instruments purchased by a Fund may
include variable and floating rate demand instruments issued by corporations,
industrial development authorities and governmental entities. These instruments
may include variable amount master demand notes that permit the indebtedness to
vary in addition to providing for periodic adjustments in the interest rate.
Although variable and floating rate demand instruments are frequently not rated
by credit rating agencies, unrated instruments purchased by a Fund will be
determined to be of comparable quality to rated instruments that may be
purchased by the Fund. While there may be no active secondary market with
respect to a particular variable or floating rate instrument purchased by a
Fund, the Funds may, from time to time as specified in the instrument, demand
payment in full of the principal of the instrument or may resell the instrument
to a third party. The absence of such an active secondary market, however, could
make it difficult for a Fund to dispose of a variable
28
<PAGE> 602
or floating rate demand instrument if the issuer defaulted on its payment
obligations or during periods that the Fund is not entitled to exercise its
demand rights, and the Fund could, for these or other reasons, suffer a loss.
The Funds will only purchase demand instruments which provide that the Fund may
receive the principal amount of the note upon not more than 30 days' notice or
that are subject to a demand feature to shorten maturities authorized by SEC
regulations. Variable and floating rate instruments with no active secondary
market will be included in the calculation of a Fund's illiquid assets.
Loans of Portfolio Securities. To increase return, a Fund may lend its
portfolio securities to broker/dealers and other institutional investors
pursuant to agreements requiring that the loans be continuously secured by
collateral equal at all times in value to at least the market value of the
securities loaned. The collateral for such loans may include cash, securities of
the U.S. Government, its agencies or instrumentalities, or irrevocable letters
of credit issued by a bank, or any combination thereof. For each Fund, such
loans will not be made if, as a result, the aggregate of all outstanding loans
exceeds 30% of the value of the Fund's total assets. There may be risks of delay
in receiving additional collateral or in recovering the securities loaned or
even a loss of rights in the collateral should the borrower of the securities
fail financially. However, loans are made only to borrowers deemed by the
Advisor to be of good standing and when, in their judgment, the income to be
earned from the loan justifies the attendant risks.
Stripped Obligations. To the extent consistent with their respective
investment objectives, the Funds may purchase Treasury receipts and other
"stripped" securities that evidence ownership in either the future interest
payments or the future principal payments on U.S. Government and other
obligations. These participations, which may be issued by the U.S. Government
(or a U.S. Government agency or instrumentality) or by private issuers such as
banks and other institutions, are issued at a discount to their "face value."
Custodial Receipts for Treasury Securities. To the extent consistent with
their respective investment objectives, the Funds may purchase participations in
trusts that hold U.S. Treasury securities (such as TIGRs and CATS) or other
obligations where the trust participations evidence ownership in either the
future interest payments or the future principal payments on the obligations.
These participations are normally issued at a discount to their "face value,"
and can exhibit greater price volatility than ordinary debt securities because
of the way in which their principal and interest are returned to investors.
Investments by a Fund in such participations will not exceed 5% of the value of
that Fund's total assets.
29
<PAGE> 603
Illiquid Securities. Each Fund will not knowingly invest more than 10% of
the value of its net assets in securities that are illiquid because of
restrictions on transferability or other reasons. Repurchase agreements with
deemed maturities in excess of seven days, time deposits maturing in more than
seven days and securities that are not registered under the Securities Act of
1933 but may be purchased by institutional buyers under Rule 144A are subject to
this limit (unless the Advisor determines under the supervision of the Board
that a liquid trading market exists).
Rule 144A allows for a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the Securities
Act of 1933 for resales of certain securities to qualified institutional buyers.
The Advisor believes that the market for certain restricted securities may
expand further as a result of this regulation and the development of automated
systems for the trading, clearance and settlement of unregistered securities of
domestic and foreign issuers, such as the PORTAL System sponsored by the NASD.
The Advisor monitors the liquidity of restricted securities in each of the
Funds under the supervision of the Board of Trustees. In reaching liquidity
decisions, the Advisor will consider such factors as: (a) the frequency of
trades and quotes for the security; (b) the number of dealers wishing to
purchase or sell the security and number of other potential purchasers; (c)
dealer undertakings to make a market in the security; and (d) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer). The use of Rule 144A transactions could have the effect of
increasing the level of illiquidity of the Funds during periods that qualified
institutional buyers become uninterested in purchasing restricted securities.
INVESTMENT RESTRICTIONS
Each Fund has adopted certain fundamental investment restrictions that may
be changed only with the approval of a majority of a Fund's outstanding shares.
The following description summarizes several of the Funds' fundamental
restrictions, which are set forth in full in the SAI.
No Fund may:
1. Purchase securities (except U.S. Government securities and repurchase
agreements collateralized by such securities) if more than 5% of its
total assets at the time of purchase will be invested in
30
<PAGE> 604
securities of any one issuer, except that up to 25% of a Fund's total
assets may be invested without regard to this 5% limitation under
certain limited circumstances discussed below.
2. Subject to the foregoing 25% exception, purchase more than 10% of the
outstanding voting securities of any issuer.
3. Invest 25% or more of its total assets at the time of purchase in
securities of issuers whose principal business activities are in the
same industry.
4. Borrow money except in amounts up to 10% of the value of its total
assets at the time of borrowing.
If a percentage restriction on the investment or use of assets set forth in
this Prospectus is adhered to at the time a transaction is effected, later
changes in percentage resulting from changing values will not be considered a
violation, however, the Funds will not at any time have more than 10% of their
respective net assets invested in illiquid securities. In accordance with
the current regulations of the SEC, each Fund intends to limit its investments
in the obligations of any one issuer (other than U.S. Treasury and other
government securities) to not more than 5% of its total assets at the time of
purchase, provided that each fund may invest up to 25% of its assets in the
highest rated obligations of any one issuer for a period of up to three business
days.
OTHER INFORMATION
CAPITALIZATION
Pacifica Funds Trust (formerly Fund Source) was organized as a
Massachusetts business trust on July 17, 1984. The capitalization of the Trust
consists solely of an unlimited number of shares of beneficial interest with a
par value of $0.001 each. When issued, shares of the Funds are fully paid,
non-assessable and freely transferable.
The Board of Trustees has authorized the issuance of one class of shares in
each of the Funds described in this Prospectus. Each share of a Fund represents
an equal proportionate interest in a particular Fund with the Fund's other
shares and is entitled to such dividends and distributions earned on such Fund's
shares as are declared in the discretion of the Board of Trustees.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
31
<PAGE> 605
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust. The Declaration of Trust also
provides for indemnification out of the property of a Fund of any shareholder
held personally liable solely by reason of being or having been a shareholder of
the Fund. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a Fund itself would
be unable to meet its obligations and should be considered remote.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Trust is not required to hold regular
annual meetings of the Funds' shareholders, but in the event that a special
meeting is held, shareholders of each portfolio offered by the Trust will be
entitled to one vote for each full share held and fractional votes for
fractional shares held, and will vote in the aggregate and not on a
portfolio-by-portfolio basis, except as required by the 1940 Act or other
applicable law. It is contemplated that, as required by the 1940 Act, the
shareholders of a portfolio will vote separately on a portfolio-by-portfolio
basis on matters relating to a particular portfolio's investment advisory
agreement or changes in a portfolio's fundamental investment limitations, and on
other matters where the interests of the respective portfolios are not
substantially identical. Voting rights are not cumulative.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust and in connection with such meeting to comply with the shareholders'
communications provisions of Section 16(c) of the 1940 Act.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of a Fund means, with respect to the
approval of an investment advisory agreement or a change in a fundamental
investment policy, the vote of the lesser of: (1) 67% of the shares of a Fund
present at a meeting if the holders of more than 50% of the outstanding shares
are present in person or by proxy; or (2) more than 50% of the outstanding
shares of a Fund. For purposes of the 1940 Act, any person who owns either
directly or through one or more controlled companies
32
<PAGE> 606
more than 25 percent of the voting securities of a company is presumed to
"control" such company. Under this definition, First Interstate Bancorp and its
affiliates may be deemed to be controlling persons of the Trust.
PERFORMANCE INFORMATION
A Fund may, from time to time, include yield data in advertisements or
reports to shareholders or prospective investors. The methods used to calculate
the yields of the Funds are mandated by the SEC.
Quotations of "yield" for the Funds will be based on the income received by
a hypothetical investment (less a pro-rata share of Fund expenses) over a
particular seven-day period, which is then "annualized" (i.e., assuming that the
seven-day yield would be received for 52 weeks, stated in terms of an annual
percentage return on the investment).
"Effective yield" for the Funds is calculated in a manner similar to that
used to calculate yield, but includes the compounding effect of earnings on
reinvested dividends.
Quotations of yield reflect only the performance of a Fund during the
particular period on which the calculations are based. Yield and effective yield
for a Fund will vary based on changes in market conditions, the level of
interest rates and the level of the expenses of a particular class of shares,
and no reported performance figure should be considered an indication of
performance which may be expected in the future.
For purposes of comparison, the Fund may, from time to time, quote
performance information from IBC/Donoghue's MONEY FUND REPORT of Holliston,
Massachusetts 01746. IBC/Donoghue's MONEY MARKET AVERAGE is a widely recognized
index of money market fund performance. Figures reflect average yields of all
taxable money funds included in IBC/Donoghue's index. IBC/Donoghue's U.S.
TREASURY & REPO MONEY FUND AVERAGE is a component of this average and reflects
average yields of all taxable U.S. Treasury money funds. Any performance
information should be considered in light of a Fund's investment objective and
policies, characteristics and quality of the Fund and the market conditions
during the time period indicated, and should not be considered to be
representative of what may be achieved in the future. For a description of the
methods used to determine yield for the Funds, see "Other
Information -- Performance Information" in the SAI.
33
<PAGE> 607
ACCOUNT SERVICES
All transactions in shares of the Funds will be reflected in a statement
for each shareholder. In those cases where a Service Organization or its nominee
is shareholder of record of shares purchased for its customer, the Funds have
been advised that the statement may be transmitted to the customer at the
discretion of the Service Organization.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Funds at 237 Park
Avenue, Suite 910, New York, New York 10017.
General and Account Information: (800) 662-8417
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
FUNDS OR BY THEIR DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY FIRST INTERSTATE BANCORP OR ITS AFFILIATES,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
34
<PAGE> 608
APPENDIX
DESCRIPTION OF MOODY'S BOND RATINGS:
Excerpts from Moody's description of its four highest bond ratings are
listed as follows: Aaa -- judged to be the best quality and they carry the
smallest degree of investment risk; Aa -- judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds; A -- possess many favorable investment attributes and are
to be considered as "upper medium grade obligations"; Baa -- considered to be
medium grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Other Moody's bond
descriptions include: Ba -- judged to have speculative elements, their future
cannot be considered as well assured; B -- generally lack characteristics of the
desirable investment; Caa -- are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; Ca -- speculative in a high degree, often in default; C -- lowest
rated class of bonds, regarded as having extremely poor prospects.
Moody's also supplies numerical indicators 1, 2 and 3 to rating categories.
The modifier 1 indicates that the security is in the higher end of its rating
category; the modifier 2 indicates a mid-range ranking; and modifier 3 indicates
a ranking toward the lower end of the category.
DESCRIPTION OF S&P'S BOND RATINGS:
Excerpts from S&P's description of its four highest bond ratings are listed
as follows: AAA -- highest grade obligations, in which capacity to pay interest
and repay principal is extremely strong; AA -- also qualify as high grade
obligations, having a very strong capacity to pay interest and repay principal,
and differs from AAA issues only in a small degree; A -- regarded as upper
medium grade, having a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories;
BBB -- regarded as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories. This group is the lowest which qualifies for
commercial bank investment. BB, B, CCC, CC -- predominantly speculative with
respect to
A-1
<PAGE> 609
capacity to pay interest and repay principal in accordance with terms of the
obligations; BB indicates the highest grade and CC the lowest within the
speculative rating categories.
S&P applies indicators "+," no character, and "-" to its rating categories.
The indicators show relative standing within the major rating categories.
DESCRIPTION OF MOODY'S RATINGS OF NOTES AND VARIABLE RATE DEMAND INSTRUMENTS:
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or MIG. Such ratings recognize the
differences between short-term credit and long-term risk. Short-term ratings on
issues with demand features (variable rate demand obligations) are
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payments
relying on external liquidity.
MIG 1/VMIG 1: This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This denotes high quality. Margins of protection are ample
although not as large as in the preceding group.
DESCRIPTION OF MOODY'S TAX-EXEMPT COMMERCIAL PAPER RATINGS:
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations which have an original maturity not
exceeding nine months. Moody's makes no representation that such obligations are
exempt from registration under the Securities Act of 1933, nor does it represent
that any specific note is a valid obligation of a rated issuer or issued in
conformity with any applicable law. The following designations, all judged to be
investment grade, indicate the relative repayment ability of rated issuers of
securities in which the Trust may invest.
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term promissory obligations.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term promissory obligations.
A-2
<PAGE> 610
DESCRIPTION OF S&P'S RATINGS FOR MUNICIPAL BONDS:
INVESTMENT GRADE
AAA: Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA: Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A: Debt rated "A" has strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
SPECULATIVE GRADE
BB, B, CCC, CC: Debt rated in these categories is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
CI: The "CI" rating is reserved for income bonds on which no interest is
being paid.
D: Debt rated "D" is in default, and payment of interest and/or repayment
of principal is in arrears.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
DESCRIPTION OF S&P'S RATINGS FOR INVESTMENT GRADE MUNICIPAL NOTES AND SHORT-TERM
DEMAND OBLIGATIONS:
SP-1: Issues carrying this designation have a very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus (+) designation.
A-3
<PAGE> 611
SP-2: Issues carrying this designation have a satisfactory capacity to pay
principal and interest.
DESCRIPTION OF S&P'S RATINGS FOR DEMAND OBLIGATIONS AND TAX-EXEMPT COMMERCIAL
PAPER:
An S&P commercial paper rating is a current assessment of the likelihood of
timely repayment of debt having an original maturity of no more than 365 days.
The two rating categories for securities in which the Trust may invest are as
follows:
A-1: This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics will be denoted with a plus (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-4
<PAGE> 612
INVESTMENT ADVISOR
First Interstate Capital Management, Inc.
7501 East McCormick Parkway
Scottsdale, Arizona 85258
ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Pacifica Funds Distributor Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
First Interstate Bank of California
707 Wilshire Boulevard
Los Angeles, California 90017
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
[PACIFICA LOGO] PACMM-2/96
<PAGE> 613
PACIFICA FUNDS TRUST
MONEY MARKET TRUST
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) 662-8417
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. --
INVESTMENT ADVISOR
("FICM" OR THE "ADVISOR")
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
("FURMAN SELZ" OR THE "SPONSOR")
PACIFICA FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
("PFD INC." OR THE "DISTRIBUTOR")
Pacifica Funds Trust (the "Trust") is an open-end investment company (a
mutual fund) that offers a selection of separate investment portfolios. This
Prospectus describes the Money Market Trust (the "Fund").
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund and should be read and retained for
information about the Fund. A Statement of Additional Information (the "SAI"),
dated February 1, 1996 (which may be revised from time to time), containing
additional and more detailed information about the Fund, has been filed with the
Securities and Exchange Commission ("SEC") and is hereby incorporated by
reference into this Prospectus. It is available without charge and can be
obtained by writing or calling the Fund at the address or information number
printed above.
----------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FIRST INTERSTATE OR OTHER BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1996.
<PAGE> 614
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FUND EXPENSES............................................ 3
FEE TABLE................................................ 3
FINANCIAL HIGHLIGHTS..................................... 5
THE FUND................................................. 7
INVESTMENT POLICIES AND PRACTICES
OF THE FUND............................................ 7
MANAGEMENT OF THE FUND................................... 11
PURCHASE AND REDEMPTION OF FUND SHARES................... 15
DIVIDENDS, DISTRIBUTIONS AND
FEDERAL INCOME TAX..................................... 17
INVESTMENT RESTRICTIONS.................................. 19
OTHER INFORMATION........................................ 20
</TABLE>
2
<PAGE> 615
FUND EXPENSES
The following table lists the costs and expenses that an investor will
incur either directly or indirectly as a shareholder of the Fund based upon the
Fund's operating expenses for its most recent fiscal year, adjusted to reflect
current fees and expenses.
FEE TABLE
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).............. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).............. None
Deferred Sales Load (as a percentage of
redemption proceeds)............................. None
Redemption Fees..................................... None
Exchange Fee........................................ None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (after waivers)(++)................. 0.00%
Other Expenses...................................... 0.20%
----
TOTAL FUND OPERATING EXPENSES:
(after waivers)(++)++............................... 0.20%
====
</TABLE>
- ---------------
<TABLE>
<C> <S>
(++) Management Fees (before waivers) would be payable at a
maximum annual rate of 0.30%.
(++)++ Total Fund Operating Expenses (before waivers) would be
0.50%.
</TABLE>
3
<PAGE> 616
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Fund will bear. The table
does not reflect any charges that may be imposed by a First Interstate Bank
directly on its customer accounts in connection with an investment in the Fund.
EXAMPLE:(++)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$2 $ 6 $11 $ 26
</TABLE>
- ---------------
<TABLE>
<C> <S>
(++) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN.
THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT
BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL
RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED
AMOUNT.
</TABLE>
4
<PAGE> 617
FINANCIAL HIGHLIGHTS
The financial information shown below is to assist investors in evaluating
the performance of the Fund since its commencement of operations. The following
supplementary information has been audited by the Fund's former independent
accountant, whose report on the financial statements appears in the Fund's
September 30, 1995 Report to Shareholders, which is incorporated by reference
into the SAI. The following financial data should be read in conjunction with
the related financial statements and notes thereto.
5
<PAGE> 618
Selected data for a share outstanding throughout the periods shown:
PACIFICA MONEY MARKET TRUST*
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD PERIOD
ENDED FOR THE YEAR ENDED MAY 31, ENDED
SEPTEMBER 30, ------------------------------------------------------------- MAY 31,
1995** 1995 1994 1993 1992 1991
------------- ------------- ------------- ------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value -- Beginning of
Period............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................ 0.02 0.05 0.03 0.03 0.05 0.05
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from Net Investment
Income........................... (0.02) (0.05) (0.03) (0.03) (0.05) (0.05)
-------- -------- -------- ------- ------- --------
Net Asset Value -- End of Period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======= ======= ========
Total Return (excluding sales
load).......................... 5.70%+ 5.05% 3.21% 2.94% 4.56% 6.48%+
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000).... $ 286,863 $ 290,483 $ 300,894 $ 74,375 $ 87,039 $113,141
Ratio of Expenses to Average Net
Assets........................... 0.19%+ 0.17% 0.18% 0.46% 0.48% 0.69%+
Ratio of Net Investment Income to
Average Net Assets............... 5.70%+ 5.06% 3.21% 2.94% 4.56% 6.48%+
Ratio of Expenses to Average Net
Assets without Fee Waivers....... 1.11%+ 1.07% 1.02% 1.08% 1.04% 1.08%+
Ratio of Net Investment Income to
Average Net Assets
without Fee Waivers.............. 4.78%+ 4.16% 2.38% 2.32% 4.00% 6.09%+
</TABLE>
- ---------------
* The Fund operated as the Prime Money Market Fund of Westcore Trust from its
commencement of operations on September 17, 1990 until its reorganization as
a portfolio of the Trust on October 1, 1995. During the periods shown, the
Fund was advised by First Interstate Bank of Oregon, N.A. In connection with
the Fund's reorganization, FICM assumed investment advisory responsibilities
for the Fund.
** The Fund changed its fiscal year from May 31 to September 30.
+ Annualized.
6
<PAGE> 619
THE FUND
The Fund is a portfolio of Pacifica Funds Trust, a business trust organized
under the laws of the Commonwealth of Massachusetts as an open-end, management
investment company. The Trust's Board of Trustees oversees the overall
management of the Fund and elects its officers.
INVESTMENT POLICIES AND PRACTICES OF THE FUND
The Fund's investment objective is to seek current income and stability of
principal. The securities held by the Fund have remaining maturities of 13
months or less, although certain variable and floating rate instruments and
securities subject to repurchase agreements may have longer maturities. The
average weighted maturity of the securities held by the Fund will not exceed 90
days. The Fund's investment objective may not be changed without a vote of a
majority of its outstanding shares (as defined under "Other
Information -- Voting").
In seeking to achieve its investment objective, the Fund invests in "money
market" instruments such as those described below. During normal market
conditions, the Fund will invest at least 80% of its assets in money market
securities.
The Fund may invest in bankers' acceptances guaranteed by U.S. commercial
banks having total assets at the time of purchase in excess of $1.5 billion, and
in certificates of deposit of domestic branches of U.S. banks, savings banks and
savings and loan associations which are members of the Federal Reserve System or
the Federal Deposit Insurance Corporation and have total assets at the time of
purchase in excess of $1.5 billion. The Fund may also make interest-bearing
savings deposits in commercial and savings banks in amounts not in excess of 5%
of its total assets.
In addition, the Fund may invest in dollar-denominated time deposits and
certificates of deposit issued by foreign branches of such United States banks
and savings and loan associations. Investments by the Fund in the obligations of
foreign branches of domestic banks will not exceed 25% of the value of the
Fund's total assets at the time of investment. Although time deposits made by
the Fund will normally mature within seven days, the Fund may make time deposits
with longer maturities.
Since the Fund may invest in securities issued by foreign branches of
domestic banks, it may be subject to investment risks that are different in some
respects from those experienced by a fund which invests only in the debt
obligations of domestic issuers. Such potential risks include future political
and economic developments, the possible imposition of foreign
7
<PAGE> 620
withholding taxes on interest income payable on such securities, the possible
establishment of exchange controls, the possible seizure or nationalization of
foreign deposits, or the adoption of other foreign governmental restrictions
which might affect adversely the payment of principal and interest on such
securities held by the Fund. In addition, foreign branches of U.S. banks may be
subject to less stringent reserve requirements and to different accounting,
auditing, reporting and recordkeeping standards than those applicable to
domestic branches of U.S. banks. The Fund will acquire securities issued by
foreign branches of U.S. banks only when FICM believes that the risks associated
with such instruments are minimal.
The Fund may invest in commercial paper (including variable and floating
rate instruments) and corporate bonds with remaining maturities of 13 months or
less. All securities acquired by the Fund will be U.S. Government securities or
other "First Tier Securities" as defined by the SEC. First Tier Securities
generally consist of instruments that are either rated at the time of purchase
in the top rating category by one or more unaffiliated nationally recognized
statistical rating organizations or issued by issuers with such ratings. The
Appendix to the SAI includes a description of the applicable ratings. Unrated
instruments purchased by the Fund will be of comparable quality as determined by
FICM pursuant to guidelines approved by the Board.
Commercial paper purchased by the Fund may include paper issued in reliance
on the so-called "private placement" exemption under Section 4(2) of the
Securities Act of 1933 ("Section 4(2) paper"). Section 4(2) paper is restricted
as to disposition under the federal securities laws and generally is sold to
institutional investors such as the Fund that agree that they are purchasing the
paper for investment and not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction. Section 4(2) paper normally is
resold to other institutional investors through or with the assistance of the
issuer or investment dealers that make a market in Section 4(2) paper. Section
4(2) paper will not be subject to the Fund's 10% limitation on illiquid
securities described above where the Board of Trustees or FICM (pursuant to
guidelines adopted by the Board) determines that a liquid trading market exists.
The Fund may purchase asset-backed securities, which are securities backed
by mortgages, installment sales contracts, credit card receivables or other
assets. The average life of asset-backed securities varies with the maturities
of the underlying instruments, and the average life of a mortgage-backed
instrument, in particular, is likely to be substantially less than the original
maturity of the mortgage pools underlying the securities as the result of
mortgage prepayments. For this and other reasons, an asset-
8
<PAGE> 621
backed security's stated maturity may be shortened, and the securities' total
return may be difficult to predict precisely. Such difficulties are not,
however, expected to have a significant effect on the Fund since the remaining
maturity of any asset-backed security acquired will be thirteen months or less.
Asset-backed securities purchased by the Fund may include collateralized
mortgage obligations ("CMOs") issued by private companies.
The Fund may invest in obligations issued or guaranteed by the U.S.
Government, its agencies and instrumentalities. Obligations of certain agencies
and instrumentalities of the U.S. Government, such as the Government National
Mortgage Association, are supported by the full faith and credit of the U.S.
Treasury; others, such as those of the Export-import Bank of the United States,
are supported by the right of the issuer to borrow from the Treasury; others,
such, as those of the Federal National Mortgage Association, are supported by
the discretionary authority of the U.S. Government to purchase the agency's
obligations; still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government would provide financial support
to U.S. Government sponsored instrumentalities if it is not obligated to do so
by law. The Fund will invest in the obligations of such instrumentalities only
when FICM believes that the credit risk with respect to the instrumentality is
minimal.
The Fund may also purchase "stripped securities," which include
participations in trusts that hold U.S. Treasury obligations (such as TIGRs and
CATS) and interests in U.S. Treasury obligations reflected in the Federal
Reserve-Book Entry System which represent ownership in either the future
interest payments or the future principal payments on the U.S. Treasury
obligations. Stripped securities are issued at a discount to their "face value,"
and may exhibit greater price volatility than ordinary debt securities because
of the manner in which their principal and interest are paid to investors.
The Fund may engage in repurchase agreements with financial institutions
such as banks or broker-dealers. In these transactions, the Fund buys a security
at one price and simultaneously promises to sell that same security back to the
seller at a higher price. Securities purchased subject to repurchase agreements
are deposited with the Fund's custodian and sub-custodians and, pursuant to the
terms of the repurchase agreement, must have an aggregate market value greater
than or equal to the repurchase price plus accrued interest at all times. If the
value of the underlying securities falls below the value of the repurchase price
plus accrued interest, the Fund will require the seller to deposit additional
collateral by
9
<PAGE> 622
the next business day. The repurchase date is generally within seven days of the
original purchase. In all cases, FICM must be satisfied with the
creditworthiness of the other party to the agreement before entering into a
repurchase agreement. In the event of the bankruptcy or default of the other
party to a repurchase agreement, the Fund could experience delays and costs in
recovering its cash. To the extent that, in the meantime, the value of the
securities purchased may have decreased, the Fund could experience a loss.
Repurchase agreements may be considered to be loans by the Fund under the
Investment Company Act of 1940, as amended (the "1940 Act").
Securities purchased by the Fund may include variable and floating rate
instruments, which may have a stated maturity in excess of the Fund's maturity
limitations but are deemed to have shorter maturities because the Fund can
demand payment of the principal of the instrument at least once every thirteen
months upon not more than thirty days' notice (this demand feature is not
required if an instrument is guaranteed by the U.S. Government or an agency or
instrumentality thereof). These instruments may include variable amount master
demand notes that permit the indebtedness thereunder to vary in addition to
providing for periodic adjustments in the interest rate. There may be no active
secondary market with respect to a particular variable or floating rate
instrument. Nevertheless, the periodic readjustments of their interest rates
tend to assure that their value to the Fund will approximate their par value.
Illiquid variable and floating rate instruments (instruments which are not
payable upon seven days notice and do not have an active trading market) that
are acquired by the Fund are subject to the percentage limitations described
below.
The Fund will not knowingly invest more than 10% of the value of its net
assets in securities that are illiquid. Repurchase agreements and time deposits
that do not provide for payment to the Fund within seven days after notice, and
securities that are not registered under the Securities Act of 1933 but that may
be purchased by institutional buyers under Rule 144A, are subject to this 10%
limit, unless such securities are variable amount master demand notes with
maturities of nine months or less or unless the Board or FICM, pursuant to
guidelines adopted by the Board, determines that a liquid trading market exists.
The Fund may purchase securities on a "when-issued" basis and may purchase
or sell securities on a "forward commitment" basis. The Fund may also purchase
or sell securities on a "delayed settlement" basis. When-issued and forward
commitment transactions, which involve a commitment by the Fund to purchase or
sell particular securities with payment and delivery taking place at a future
date (perhaps one or two months later),
10
<PAGE> 623
permit the Fund to lock in a price or yield on a security it owns or intends to
purchase, regardless of future changes in interest rates. Delayed settlement
describes settlement of a securities transaction in the secondary market which
will occur sometime in the future. When-issued, forward commitment and delayed
settlement transactions involve the risk, however, that the yield or price
obtained in a transaction may be less favorable than the yield or price
available in the market when the securities delivery takes place. The Fund's
forward commitments, when-issued purchases and delayed settlements are not
expected to exceed 25% of the value of the Fund's total assets absent unusual
market conditions. The Fund does not intend to engage in these transactions for
speculative purposes but only in furtherance of their investment objectives.
The Fund may borrow monies for temporary purposes by entering into reverse
repurchase agreements in accordance with the investment restrictions described
below. Pursuant to such agreements, the Fund would sell portfolio securities to
financial institutions and agree to repurchase them at an agreed upon date and
price. At the time the Fund enters into a reverse repurchase agreement, it will
place in a segregated custodial account liquid assets or high grade debt
securities having a value equal to or greater than the repurchase price and FICM
will continuously monitor the account to ensure that the value is maintained.
The Fund would only enter into reverse repurchase agreements to avoid otherwise
selling securities during unfavorable market conditions to meet redemptions.
Reverse repurchase agreements involve the risk that the market value of the
portfolio securities sold by the Fund may decline below the price of the
securities the Fund is obligated to repurchase. Interest paid by the Fund in
connection with a reverse repurchase agreement will reduce the Fund's net
investment income. Reverse repurchase agreements are considered to be borrowings
under the 1940 Act.
The Fund may attempt to increase yields by trading to take advantage of
short-term market variations. This policy could result in high portfolio
turnover, but should not adversely affect the Fund since it does not ordinarily
pay brokerage commissions on the purchase of short-term debt obligations.
MANAGEMENT OF THE FUND
The business and affairs of each Fund are managed under the direction of
the Board of Trustees. The Trustees are Dennis W. Draper, Joseph N. Hankin, John
E. Heilmann, Jack D. Henderson and Richard A. Wedemeyer. Information about the
Trustees, as well as the Fund's execu-
11
<PAGE> 624
tive officers, may be found in the SAI under the heading "Management -- Trustees
and Officers."
THE ADVISOR: FIRST INTERSTATE CAPITAL MANAGEMENT, INC.
First Interstate Capital Management, Inc., 7501 E. McCormick Parkway,
Scottsdale, Arizona 85258, serves as investment advisor to the Trust. FICM
manages the investment and reinvestment of the assets of the Fund and
continuously reviews, supervises and administers the Fund's investments. The
Advisor is responsible for placing orders for the purchase and sale of the
Fund's investments directly with brokers and dealers selected by it in its
discretion.
FICM is a wholly-owned subsidiary of First Interstate Bank of California,
which is the largest banking subsidiary of First Interstate Bancorp, a
multi-bank holding company. First Interstate Bancorp provides financial products
and services marketed at the local level to nearly five million households in
over 500 communities in 13 western states. Prior to October 1, 1995 the Fund's
investment advisor was First Interstate Bank of Oregon, N.A., which is an
affiliate of FICM.
On January 24, 1996, First Interstate Bancorp signed a definitive merger
agreement to merge with Wells Fargo & Company ("Wells Fargo"), a publicly-held
bank holding company with its head office at 420 Montgomery Street, San
Francisco, California 94104. The merger is conditioned upon, among other things,
certain regulatory approvals. Upon completion of the merger, currently expected
to occur during the second quarter of 1996, FICM will be wholly-owned by Wells
Fargo, and the existing investment advisory agreement between the Trust and FICM
will automatically terminate. It is contemplated that an application will be
filed with the Securities and Exchange Commission to ensure there is no
disruption as a result of the merger in the provision of investment advisory
services to the Funds, and that a meeting of shareholders will be held not later
than 120 days after the merger to approve ongoing investment advisory
arrangements for the Funds.
For the advisory services it provides to the Fund, FICM is entitled to
receive from the Fund a fee, computed daily and payable monthly, at the annual
rate of 0.30% of the first $500 million of the Fund's average daily net assets,
0.25% of the next $500 million of the Fund's average daily net assets, and 0.20%
of the Fund's average daily net assets in excess of $1 billion. FICM may
voluntarily waive a portion of the advisory fee payable by the Fund from time to
time. During the Fund's last fiscal year, all investment advisory fees were
waived by the Fund's former investment
12
<PAGE> 625
advisor. FICM has agreed that during the current fiscal year it will waive a
portion of its fees so that total operating expenses for the Fund will not
exceed 0.25% of its average daily net assets.
THE SPONSOR AND DISTRIBUTOR
Furman Selz LLC, 230 Park Avenue, New York, New York 10169, acts as Sponsor
of the Fund. Furman Selz is primarily an institutional brokerage firm with
memberships on the New York, American, Boston, Midwest, Pacific and Philadelphia
Stock Exchanges. Furman Selz also serves as administrator and distributor of
other mutual funds. Pacifica Funds Distributor, Inc. is an affiliate of Furman
Selz and was organized specifically to distribute shares of the Trust, however,
offers and sales of shares of the Trust will be made only through Furman Selz or
other registered (or exempt) dealers.
ADMINISTRATIVE SERVICES
The Fund has also entered into an Administrative Services Contract with
Furman Selz pursuant to which Furman Selz provides certain management and
administrative services necessary for the Fund's operations including: (i)
general supervision of the operation of the Fund including coordination of the
services performed by the Fund's investment advisor, transfer agent, custodian,
independent accountants and legal counsel, regulatory compliance, including the
compilation of information for documents such as reports to, and filings with,
the SEC and state securities commissions, and preparation of proxy statements
and shareholder reports for the Fund; (ii) general supervision relative to the
compilation of data required for the preparation of periodic reports distributed
to the Fund's officers and Board of Trustees; and (iii) furnishing office space
and certain facilities required for conducting the business of the Fund. For
these services, Furman Selz is entitled to receive a fee, payable monthly, at
the annual rate of 0.15% of the average daily net assets of the Fund. Pursuant
to a Services Agreement with the Trust, Furman Selz assists the Trust with
certain transfer and dividend disbursing agent functions and receives a fee of
$15.00 per account per year plus out-of-pocket expenses. Pursuant to a Fund
Accounting Agreement with the Trust, Furman Selz assists the Trust in
calculating net asset values and provides certain other accounting services for
the Fund for an annual fee of $30,000 plus out-of-pocket expenses.
13
<PAGE> 626
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by Furman Selz, PFD Inc. or the Advisor. The costs borne by the Fund
include legal and accounting expenses; Trustees' fees and expenses; insurance
premiums; advisory, administration, fund accounting, custodian and transfer
agent fees and expenses; expenses incurred in acquiring or disposing of the
Fund's portfolio securities; expenses of registering and qualifying the Fund's
shares for sale with the SEC and with various state securities commissions;
expenses of obtaining quotations on the Fund's portfolio securities and pricing
of the Fund's shares; expenses of maintaining the Fund's legal existence and of
shareholders' meetings; and expenses of preparation and distribution to existing
shareholders of reports, proxies and prospectuses. See "Management" in the SAI
for additional information on expenses borne by the Fund. Trust expenses
directly attributable to the Fund are charged to the Fund. Expenses that are not
directly attributable to any particular investment portfolio of the Trust are
allocated proportionately among all of the investment portfolios in the Trust in
relation to the net assets of each portfolio or by other means deemed fair and
equitable by the Board of Trustees.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Advisor places orders for
the purchase and sale of portfolio investments for the Fund's account with
brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Fund, the Advisor will seek the best execution of the Fund's orders.
Purchases and sales of debt securities are generally placed by the Advisor with
primary market makers for these securities on a net basis, i.e., without any
brokerage commission being paid by the Fund. Trading does, however, involve
transaction costs. Transactions with dealers serving as primary market makers
reflect the spread between the bid and asked prices. Purchases of underwritten
issues may be made which will include an underwriting fee paid to the
underwriter. Broker-dealers are selected on the basis of a variety of factors
such as reputation, capital strength, size and difficulty of the order, sale of
Fund shares by the broker-dealer, and research provided to the Advisor by the
broker-dealer. The Advisor may cause a Fund to pay commissions higher than
another broker-dealer would have charged if the Advisor believes the commission
paid is reasonable in relation to the value of the brokerage and research
services received by the Advisor. The Fund's annual portfolio turnover rate will
be relatively high, but because brokerage commissions are normally not paid on
money
14
<PAGE> 627
market instruments, portfolio turnover is not expected to have a material
effect on the Fund's net income.
PURCHASE AND REDEMPTION OF FUND SHARES
The net asset value per share of the Fund is calculated at 3:00 p.m.
(Eastern time) on days when the Fund is open for business (a "Business Day")
(i.e. days on which the San Francisco branch of the Federal Reserve Bank and
First Interstate Bank of California as the Fund's custodian are open). The net
asset value per share of the Fund is computed by dividing the value of the
Fund's net assets (i.e, the value of the assets less the liabilities) by the
total number of the Fund's outstanding shares. All expenses, including fees paid
to the Advisor and Furman Selz, are accrued daily and taken into account for the
purpose of determining the net asset value.
The Fund uses the amortized cost method to value its portfolio securities
and seeks to maintain a constant net asset value of $1.00 per share, although
there may be circumstances under which this goal cannot be achieved. The
amortized cost method involves valuing a security at its cost and amortizing any
discount or premium over the period until maturity, regardless of the impact of
fluctuating interest rates on the market value of the security. See the SAI for
a more complete description of the amortized cost method.
Shares of the Fund are sold without a sales load on a continuous basis to
customers ("Customers") who maintain qualified accounts with the trust division
of a First Interstate Bank. Customers may include individuals, trusts,
partnerships and corporations. All share purchases are effected through a
Customer's account at a First Interstate Bank through procedures established in
connection with the requirements of the account, and confirmations of share
purchases and redemptions will be sent to the First Interstate Bank involved.
First Interstate Banks (or their nominees) will normally be the holders of
record of Fund shares acting on behalf of their Customers, and will reflect
their Customers' beneficial ownership of shares in the account statements
provided by them to their Customers. The exercise of voting rights and the
delivery to Customers of shareholder communications from the Fund will be
governed by a Customer's account agreement with a First Interstate Bank.
Investors wishing to purchase shares of the Fund should contact their account
representatives.
Purchase orders for shares in the Fund must be received by the Trust by
12:00 noon (Pacific time) on a Business Day. Payment for such shares must also
be made in Federal funds or other funds immediately available to
15
<PAGE> 628
the Custodian no later than 12:00 noon (Pacific time) on the same Business Day
that the purchase order is received. Orders for the purchase of shares will be
executed at the net asset value per share (the "public offering price") next
determined after receipt of both an order and payment in proper order. The Fund
has no minimum initial or subsequent investment requirement, although First
Interstate Banks may impose certain minimum Customer account requirements.
It is the responsibility of First Interstate Banks to transmit orders for
purchases by their Customers and to deliver required funds on a timely basis. If
funds are not received within the period described above, the order will be
canceled, notice thereof will be given, and the First Interstate Bank will be
responsible for any loss to the Fund or its shareholders. First Interstate Banks
may charge certain account fees depending on the type of account the investor
has established. Payment for shares of the Fund may, in the discretion of the
Advisor, be made in the form of securities that are permissible investments for
the Fund. For further information see "Additional Purchase and Redemption
Information" in the SAI.
The Trust reserves the right to reject any purchase order. Payment for
orders which are not received will be returned after prompt inquiry. The
issuance of shares is recorded on the books of the Fund, and share certificates
are not issued.
Neither the Trust, the Distributor nor Furman Selz will be responsible for
the authenticity of telephone instructions for the purchase or redemption of
shares where such instructions are reasonably believed to be genuine. The Trust
will attempt to confirm that telephone instructions are genuine and will use
such procedures as are considered reasonable. To the extent that the Trust fails
to use reasonable procedures to verify the genuineness of telephone
instructions, it or its service providers may be liable for any loss, damage or
expense arising from such instructions that prove to be fraudulent or
unauthorized.
Redemption requests are effected at the net asset value per share next
determined after receipt of a redemption request in good order by the Trust.
Shares held by a First Interstate Bank on behalf of its Customers must be
redeemed in accordance with instructions and limitations pertaining to the
account at the First Interstate Bank. The Trust intends to pay cash for all
shares redeemed, but in unusual circumstances may make payment wholly or partly
in portfolio securities at their then market value equal to the redemption
price. In such cases, an investor may incur brokerage costs in converting such
securities to cash.
16
<PAGE> 629
Share balances may be redeemed pursuant to arrangements between First
Interstate Banks and their Customers. It is the responsibility of a First
Interstate Bank to transmit redemption requests to the Trust and to credit its
Customers' accounts with the redemption proceeds on a timely basis. The
redemption proceeds for shares of the Fund are normally wired to the redeeming
First Interstate Bank within two Business Days after receipt of the request by
the Trust. The Trust reserves the right to delay the wiring of redemption
proceeds for up to seven days after it receives a redemption order if, in the
judgment of the Advisor, an earlier payment could adversely affect the Fund.
All redemptions of shares shall be made in cash, except that the commitment
to redeem shares in cash extends only to redemption requests made by each
shareholder of the Fund during any 90-day period of up to the lesser of $250,000
or 1% of the net asset value of the Fund at the beginning of such period. This
commitment is irrevocable without the prior approval of the SEC and is a
fundamental policy of the Fund that may not be changed without shareholder
approval. In the case of redemption requests by shareholders in excess of such
amounts, the Board of Trustees reserves the right to have the Fund make payment,
in whole or in part, in securities or other assets, in case of an emergency or
any time a cash distribution would impair the liquidity of the Fund to the
detriment of the existing shareholders. In this event, the securities would be
valued in the same manner as the securities of the Fund are valued. If the
recipient were to sell such securities, he or she would incur brokerage charges.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
The Fund's net investment income ordinarily is declared as a dividend on
each day that the Fund is open for business. Dividends are paid within five
business days after the end of each month. Shares begin accruing dividends on
the day the purchase is effected and continue to accrue dividends through the
day before the redemption request is executed. The Fund's earnings for
non-business days are declared as dividends to shareholders of record on the
preceding business day. All dividends are reinvested automatically in additional
shares of the Fund at net asset value or, at the option of the shareholder, are
credited to the shareholder's account at a First Interstate Bank or paid in
cash. Distributions from net realized securities gains are declared and paid
once a year, but the Fund may make distributions on a more frequent basis. In
all cases distributions will be made in a manner that is consistent with the
provisions of the 1940 Act. The Fund will not make distributions from net
realized securities gains unless capital loss carryovers, if any, have been
utilized or have expired.
17
<PAGE> 630
These distributions, if any, are reinvested automatically in additional shares
of the Fund at net asset value or, at the shareholder's option, are credited as
described above. If all shares in the account are redeemed at any time during
the month, all dividends to which the shareholder is entitled will be paid
within five business days after the end of the month by crediting the
shareholder's bank account or, if this is not possible, in cash. All expenses
are accrued daily and deducted before declaration of dividends.
Notice as to the tax status of dividends and distributions declared by the
Fund is mailed annually. Investors will also receive periodic account summaries
which will include information as to income dividends and distributions from
securities gains, if any, declared during the year.
Since the Fund's income is derived from interest rather than dividends, no
portion of the Fund's dividends or distributions will qualify for the dividends
received deduction allowable to certain U.S. corporations. Dividends from net
investment income, together with distributions from the excess, if any of net
realized short-term over net realized long-term losses and all or a portion of
the gains from the sale or other disposition of certain market discount bonds,
are taxable to those shareholders who are not exempt from federal income taxes
as ordinary income, whether or not reinvested in additional shares.
Distributions from net realized long-term securities gains, if any, are taxable
to those shareholders who are not exempt from federal income taxes as long-term
capital gains. Shareholders may be subject to state and local taxes on dividends
and distributions declared by the Fund.
To avoid a federal excise tax, the Fund must distribute substantially all
of its ordinary income, and capital gain net income, if any, by the end of each
calendar year. Dividends or distributions, if any, payable to shareholders of
record on a date in October, November or December of any year are deemed to have
been paid in that year, if they are paid by the following January.
Federal regulations may require, in certain cases, the Fund to withhold
("backup withholding") and remit to the U.S. Treasury 31% of dividends and
distributions paid to a shareholder if the shareholder (i) has provided either
an incorrect TIN or no TIN at all, (ii) is subject to backup withholding by the
Internal Revenue Service for failure to report the receipt of taxable interest
or dividend income properly, or (iii) has failed to certify that he or she is
not subject to backup withholding or that he or she is an "exempt recipient."
A TIN is either the Social Security number or employer identification
number of the beneficial owner of the account. Any tax withheld as a result
18
<PAGE> 631
of backup withholding does not constitute an additional tax imposed on the
beneficial owner of the account, and may be claimed as a credit on the
beneficial owner's federal income tax return.
The Fund will be treated as a separate entity for tax purposes, and has
qualified and intends to continue to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"), as long as
this qualification is in the best interest of its shareholders. Such
qualification generally relieves the Fund of liability for federal income taxes
to the extent its earnings are distributed in accordance with the applicable
provisions of the Code.
Investors should consult their tax advisors regarding specific questions as
to federal, state or local taxes.
INVESTMENT RESTRICTIONS
The Fund is subject to a number of investment limitations that may be
changed only by a vote of a majority of the outstanding shares of the Fund.
The Fund may not:
1. Make loans, except that the Fund may purchase or hold debt instruments
lend portfolio securities and enter into repurchase agreements in
accordance with its investment objective and policies.
2. Purchase any securities which would cause 25% or more of the value of
the Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that (a) there is no
limitation with respect to obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, certificates of deposit
issued by domestic branches of U.S. banks, bankers' acceptances and
repurchase agreements secured by instruments issued by domestic branches
of U.S. banks or obligations of the U.S. Government, its agencies or
instrumentalities; (b) wholly-owned finance companies will be considered
to be in the industries of their parents if their activities are
primarily related to financing the activities of the parents; and (c)
utilities will be divided according to their services, for example, gas,
gas transmission, electric and gas, electric and telephone will each be
considered a separate industry.
19
<PAGE> 632
3. Borrow money or issue senior securities, except that the Fund may borrow
from banks or enter into reverse repurchase agreements for temporary
purposes in amounts up to 10% of the value of its total assets at the
time of such borrowing; or mortgage, pledge or hypothecate any assets,
except in connection with any such borrowing and in amounts not in
excess of the lesser of the dollar amounts borrowed or 10% of the value
of the Fund's assets at the time of its borrowing. The Fund will not
purchase securities while its borrowings (including reverse repurchase
agreements) are outstanding.
If the securities held by the Fund should decline in value while
borrowings by the Fund are outstanding, the net asset value of shares of
the Fund would decline in value by proportionately more than the decline
in value suffered by the securities held by the Fund.
4. Enter into repurchase agreements providing for settlement more than
seven days after notice if such investment together with other illiquid
securities in the Fund exceeds 10% of the Fund's total assets.
In accordance with current regulations of the SEC, the Fund intends to
limit investments in the securities of any single issuer (other than securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities)
to not more than 5% of the Fund's total assets at the time of purchase, provided
that the Fund may invest up to 25% of its total assets in the securities of any
one issuer for a period of up to three business days. (The policy stated in this
paragraph is not fundamental, and may be changed without a vote of
shareholders.)
If a percentage restriction on the investment or use of assets set forth in
this Prospectus is adhered to at the time a transaction is effected, later
changes in percentage resulting from changing values will not be considered a
violation, however, the Fund will not at any time have more than 10% of its net
assets invested in illiquid securities.
OTHER INFORMATION
CAPITALIZATION
Pacifica Funds Trust (formerly Fund Source) was organized as a
Massachusetts business trust on July 17, 1984. The capitalization of the Trust
consists solely of an unlimited number of shares of beneficial interest
20
<PAGE> 633
with a par value of $0.001 each. When issued, shares of the Fund are fully paid,
non-assessable and freely transferable.
The Board of Trustees has authorized the issuance of one class of shares in
the Fund. Each share of the Fund represents an equal proportionate interest in
the Fund with the Fund's other shares and is entitled to such dividends and
distributions earned on such Fund's shares as are declared in the discretion of
the Board of Trustees.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust. The Declaration of Trust also
provides for indemnification out of the property of the Fund of any shareholder
held personally liable solely by reason of being or having been a shareholder of
the Fund. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Fund itself would
be unable to meet its obligations and should be considered remote.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Trust is not required to hold regular
annual meetings of the Fund's shareholders, but in the event that a special
meeting is held, shareholders of each portfolio offered by the Trust will be
entitled to one vote for each full share held and fractional votes for
fractional shares held, and will vote in the aggregate and not on a
portfolio-by-portfolio basis, except as required by the 1940 Act or other
applicable law. It is contemplated that, as required by the 1940 Act, the
shareholders of a portfolio will vote separately on a portfolio-by-portfolio
basis on matters relating to a particular portfolio's investment advisory
agreement or changes in a portfolio's fundamental investment limitations, and on
other matters where the interests of the respective portfolios are not
substantially identical. Voting rights are not cumulative.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding
21
<PAGE> 634
shares of the Trust and in connection with such meeting to comply with the
shareholders' communications provisions of Section 16(c) of the 1940 Act.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of the Fund means, with respect to the
approval of an investment advisory agreement or a change in a fundamental
investment policy, the vote of the lesser of: (1) 67% of the shares of the Fund
present at a meeting if the holders of more than 50% of the outstanding shares
are present in person or by proxy; or (2) more than 50% of the outstanding
shares of the Fund. For purposes of the 1940 Act, any person who owns either
directly or through one or more controlled companies more than 25 percent of the
voting securities of a company is presumed to "control" such company. Under this
definition, First Interstate Bancorp and its affiliates may be deemed to be
controlling persons of the Trust.
PERFORMANCE INFORMATION
From time to time the Fund may advertise the yield and effective yield of
its shares. Both yield figures will fluctuate and are based on historical
earnings and are not intended to indicate future performance. The yield of the
Fund refers to the income generated by an investment in its shares over a
seven-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 week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The effective yield is calculated
similarly but, when annualized, the income earned by an investment in shares of
the Fund is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed
reinvestment. The Fund's yield and effective yield may reflect voluntary fee
waivers. See "Management of the Fund."
Yield information is useful in reviewing the Fund's performance, but
because yields will fluctuate, such information may not provide a basis for
comparison with domestic bank deposits or other investments which pay a fixed
yield for a stated period of time.
For purposes of comparison, the Fund may, from time to time, quote
performance information from IBC/Donoghue's MONEY FUND REPORT of Holliston,
Massachusetts 01746. IBC/Donoghue's MONEY FUND AVERAGE is a widely recognized
index of money market fund performance. Figures reflect average yields of all
taxable money funds included in IBC/Donoghue's index. IBC/Donoghue's U.S.
TREASURY
22
<PAGE> 635
& REPO MONEY FUND AVERAGE is a component of this average and reflects average
yields of all taxable U.S. Treasury money funds. Any performance information
should be considered in light of the Fund's investment objective and policies,
characteristics and quality of the Fund and the market conditions during the
time period indicated, and should not be considered to be representative of what
may be achieved in the future. For a description of the methods used to
determine yield for the Fund, see "Other Information -- Performance Information"
in the SAI.
Any fees which may be imposed by a First Interstate Bank directly on its
Customer accounts for cash management services in connection with investments in
the Fund are not reflected in yield figures and any such fees, if charged, will
reduce the actual return received by Customers on their investments.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to Furman Selz, Mutual Funds
Department, 237 Park Avenue, Suite 910, New York, New York 10017.
General and Account Information: (800) 662-8417
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR
BY ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY FIRST INTERSTATE BANCORP OR ITS AFFILIATES,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
23
<PAGE> 636
PACMMT-2/96
<PAGE> 637
[PACIFICA LOGO]
(INVESTOR SHARES)
PACIFICA PRIME MONEY
MARKET FUND
PACIFICA TREASURY
MONEY MARKET FUND
PROSPECTUS
FEBRUARY 1, 1996
[FIRST INTERSTATE BANK LOGO]
Investment Advisor to The Pacifica Funds
<PAGE> 638
PACIFICA FUNDS TRUST
(INVESTOR SHARES)
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) 662-8417
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. --
INVESTMENT ADVISOR
("FICM" OR THE "ADVISOR")
THE DREYFUS CORPORATION -- ADMINISTRATOR
(THE "ADMINISTRATOR")
PACIFICA FUNDS DISTRIBUTOR INC. -- DISTRIBUTOR
("PFD INC." OR THE "DISTRIBUTOR")
Pacifica Funds Trust (the "Trust") is an open-end investment company (a
mutual fund) that offers a selection of separate investment portfolios. This
Prospectus describes the Investor Shares of the following two money market funds
(the "Funds"):
- Pacifica Prime Money Market Fund
- Pacifica Treasury Money Market Fund
Investor Shares of the Funds are sold to the public by PFD Inc. as an
investment vehicle for individuals, institutions, corporations and fiduciaries.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in either of the Funds and should be read and
retained for future reference. A Statement of Additional Information for the
Funds' Investor Shares (the "SAI") dated February 1, 1996 (which may be revised
from time to time), containing additional and more detailed information about
the Funds, has been filed with the Securities and Exchange Commission (the
"SEC") and is hereby incorporated by reference into this Prospectus. For a free
copy, call the telephone number above.
----------------------------
AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FIRST INTERSTATE OR OTHER BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN 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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1996.
<PAGE> 639
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FUND EXPENSES............................................. 3
FEE TABLE -- INVESTOR SHARES.............................. 3
FINANCIAL HISTORY......................................... 5
THE FUNDS................................................. 10
INVESTMENT POLICIES AND PRACTICES OF THE
FUNDS................................................... 10
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES........ 11
INVESTMENT RESTRICTIONS................................... 16
MANAGEMENT OF THE FUNDS................................... 17
PRICING OF INVESTOR SHARES................................ 21
MINIMUM PURCHASE REQUIREMENTS............................. 21
PURCHASE OF INVESTOR SHARES OF THE FUNDS.................. 21
INDIVIDUAL RETIREMENT ACCOUNTS............................ 23
EXCHANGE OF INVESTOR SHARES............................... 23
REDEMPTION OF INVESTOR SHARES............................. 25
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAXES......... 28
OTHER INFORMATION......................................... 29
</TABLE>
2
<PAGE> 640
FUND EXPENSES
The following table is an estimate of the annual costs and expenses that an
investor will incur either directly or indirectly as a shareholder of a Fund's
Investor Shares based upon the Fund's operating expenses for the fiscal year
ended September 30, 1995, adjusted to reflect current fees and expenses. See
"Other Information -- Capitalization."
FEE TABLE -- INVESTOR SHARES
<TABLE>
<CAPTION>
PRIME MONEY TREASURY MONEY
MARKET FUND MARKET FUND
------------ --------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price).................. None None
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering price).... None None
Deferred Sales Load (as a percentage
of redemption proceeds).......... None None
Redemption Fees..................... None None
Exchange Fee........................ None None
ANNUAL FUND OPERATING EXPENSES: (as a
percentage of average net assets)
Management Fees (after
waivers)(++)..................... 0.12% 0.12%
12b-1 Fees.......................... 0.05 0.05
Other Expenses...................... 0.38 0.38
----- -----
TOTAL FUND OPERATING EXPENSES: (after
waivers)(++)++...................... 0.55% 0.55%
========== ============
</TABLE>
- ---------------
(++) The investment advisory agreement for the Funds provides for management
fees payable at an annual rate of 0.30% of the first $500 million of the
average daily net assets of each Fund (considered separately on a
Fund-by-Fund basis), 0.25% of the next $500 million of each Fund's average
daily net assets, and 0.20% of each Fund's average daily net assets in
excess of $1 billion. These amounts may be reduced pursuant to
undertakings by the Advisor.
(++)++ Total Fund Operating Expenses (before waivers) would be 0.68% for the
Prime Money Market Fund and 0.67% for the Treasury Money Market Fund.
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Fund's Investor Shares will
bear. The table does not reflect any charges that may be imposed by a First
Interstate Bank or other institution directly on their customer accounts in
connection with investments in the Funds.
3
<PAGE> 641
EXAMPLE:(++)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:(++)++
<TABLE>
<CAPTION>
PRIME TREASURY
MONEY MARKET MONEY MARKET
FUND FUND
------------ ------------
<S> <C> <C>
1 year............................... $ 6 $ 6
3 years.............................. 18 18
5 years.............................. 31 31
10 years.............................. 69 69
</TABLE>
- ---------------
(++) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN
IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE MORE OR LESS THAN THE ASSUMED
AMOUNT.
(++)++ The amount of expenses an Investor class shareholder would pay without
waivers under these assumptions and assuming redemption after one, three,
five and ten years would be $7, $22, $38 and $85, respectively, for the
Prime Money Market Fund and $7, $21, $37 and $83, respectively, for the
Treasury Money Market Fund.
4
<PAGE> 642
FINANCIAL HISTORY
The financial data shown below is to assist investors in evaluating the
performance of the Funds for each of the ten years in the period ended September
30, 1995. The following information for the year ended September 30, 1995 and
six months ended September 30, 1994 has been audited by Ernst & Young LLP, the
Funds' current independent auditors, whose report thereon appears in the SAI.
The following information for each of the four years in the period ended March
31, 1994 has been audited by the Funds' former independent accountants whose
report thereon appears in the SAI. Further data relating to the Funds and
related notes are also included in the SAI. Prior to August 11, 1995, the Funds
offered only one class of shares to institutional investors, which class is now
known as Service Shares. Currently, each Fund offers two classes of shares to
institutional investors in addition to offering Investor Shares. The financial
data shown below pertains to the Service Shares of the Funds, which are not
offered through this Prospectus. No financial data is shown for Investor Shares
because that class of shares had not yet commenced operations during the periods
shown. See "Other Information -- Capitalization."
5
<PAGE> 643
PRIME MONEY MARKET FUND*
(SERVICE SHARES)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
--------------------------------------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991 1992 1993 1994
-------- -------- -------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning
of year........... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ .9997 $ .9998
-------- -------- -------- -------- ------- ------- -------- ------- --------
INVESTMENT
OPERATIONS:
Investment
income -- net..... .0754 .0581 .0634 .0764 .0849 .0745 .0510 .0327 .0296
Net realized gain
(loss) on
investments....... -- -- -- -- -- -- (.0003) .0001 --
------- ------- ------- ------- ------ ------- ------- ------- -------
Total from
Investment
Operations....... .0754 .0581 .0634 .0764 .0849 .0745 .0507 .0328 .0296
------- ------- ------- ------- ------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from
investment
income -- net..... (.0754) (.0581) (.0634) (.0764) (.0849) (.0745) (.0510) (.0327) (.0296)
-------- -------- -------- ------- ------- -------- ------- ------- -------
Net asset value, end
of year........... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ .9997 $ .9998 $ .9998
======== ======== ======= ======== ======= ======== ======= ======= =======
Total Investment
Return........... 7.80% 5.97% 6.50% 7.88% 8.82% 7.72% 5.22% 3.32% 3.00%
RATIOS/SUPPLEMENTAL
DATA:
Ratio of expenses to
average net
assets............ .66%(2) .68%(3) .58%(4) .56%(4) .54%(5) .47%(6) .43%(7) .41%(8) .41%(9)
Ratio of net
investment income
to average net
assets............ 7.47%(2) 5.81%(3) 6.38%(4) 7.58%(4) 7.95%(5) 7.38%(6) 5.09%(7) 3.27%(8) 2.96%(9)
Net Assets, end of
year (000's
Omitted).......... $350,344 $407,815 $628,987 $496,675 $493,641 $543,834 $528,397 $468,479 $527,599
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS FISCAL
ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994** 1995
------------- -------------
<S> <C> <C>
PER SHARE DATA:
Net asset value,
beginning
of year........... $ .9998 $ .9998
--------- ---------
INVESTMENT
OPERATIONS:
Investment
income -- net..... .0185 .0546
Net realized gain
(loss) on
investments....... -- --
--------- ---------
Total from
Investment
Operations....... .0185 .0546
--------- --------
DISTRIBUTIONS:
Dividends from
investment
income -- net..... (.0185) (.0546)
--------- ----------
Net asset value, end
of year........... $ .9998 $ .9998
========= =========
Total Investment
Return........... 3.71%(1) 5.60%
RATIOS/SUPPLEMENTAL
DATA:
Ratio of expenses to
average net
assets............ .41%(1)(10) .41%(11)
Ratio of net
investment income
to average net
assets............ 3.67%(1)(10) 5.47%(11)
Net Assets, end of
year (000's
Omitted).......... $ 565,305 $ 614,101
</TABLE>
- ---------------
* The Prime Money Market Fund operated as Pacific American Liquid Assets, Inc.
from commencement of operations on April 30, 1981 until it was reorganized
as a portfolio of Pacific American Fund on October 1, 1985. On October 1,
1994, the Fund was reorganized as the "Pacific American Money Market
Portfolio," a portfolio of Pacifica Funds Trust. In July 1995, the Fund was
renamed the "Pacifica Prime Money Market Fund."
** On October 1, 1994, the Fund's fiscal year end changed from March 31 to
September 30.
(Footnotes continued on next page)
6
<PAGE> 644
(Footnotes continued from previous page)
(1) Annualized basis.
(2) During the year ended March 31, 1986, the Fund's investment advisor waived
a portion of its fees (.13% of average net assets).
(3) During the year ended March 31, 1987, the Fund's investment advisor waived
a portion of its fees (.25% of average net assets). In addition, during the
period from January 1, 1987 to March 31, 1987, the Fund's investment
advisor waived an additional portion of its fees (.02% of average net
assets).
(4) During the years ended March 31, 1988 and 1989, the Fund's investment
advisor waived a portion of its fees (.35% and .34% of average net assets,
respectively).
(5) During the year ended March 31, 1990, the Fund's investment advisor and the
Fund's prior distributor waived a portion of their respective fees (.36% of
average net assets).
(6) During the year ended March 31, 1991, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.47% of average net assets).
(7) During the year ended March 31, 1992, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.48% of average net assets).
(8) During the year ended March 31, 1993, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.48% of average net assets).
(9) During the year ended March 31, 1994, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.48% of average net assets).
(10) During the six month period ended September 30, 1994, the Fund's investment
advisor and the Fund's Service Organizations waived a portion of their
respective fees (.48% (annualized) of average net assets).
(11) During the year ended September 30, 1995, the Fund's investment advisor and
the Fund's Service Organizations waived a portion of their respective fees
(.27% of average net assets).
7
<PAGE> 645
TREASURY MONEY MARKET FUND*
(SERVICE SHARES)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
--------------------------------------------------------------------------------------------------------
1986(1) 1987 1988 1989 1990 1991 1992 1993 1994
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of
year............... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0001 $ .9999 $ 1.0001
-------- -------- -------- -------- -------- -------- -------- -------- --------
INVESTMENT OPERATIONS:
Investment
income -- net...... .0353 .0550 .0604 .0743 .0827 .0716 .0489 .0309 .0277
Net realized gain
(loss) on
investments........ -- -- -- -- -- .0003 .0002 .0002 --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
Investment
Operations........ .0353 .0550 .0604 .0743 .0827 .0719 .0491 .0311 .0277
-------- -------- -------- -------- -------- -------- -------- -------- --------
DISTRIBUTIONS:
Dividends from
investment
income -- net...... (.0353) (.0550) (.0604) (.0743) (.0827) (.0716) (.0489) (.0309) (.0277)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Dividends from net
realized gain on
investment......... -- -- -- -- -- (.0002) (.0004) -- (.0001)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total
Distributions..... (.0353) (.0550) (.0604) (.0743) (.0827) (.0718) (.0493) (.0309) (.0278)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end
of year............. $ 1.0000 $ 1.0000 $ 1.0000 $1.0000 $1.0000 $ 1.0001 $ .9999 $ 1.0001 $ 1.0000
======== ======== ======== ======== ======== ======== ======== ======== ========
Total Investment
Return............ 7.18%(2) 5.64% 6.20% 7.63% 8.58% 7.42% 5.03% 3.13% 2.81%
RATIOS/SUPPLEMENTAL
DATA:
Ratio of expenses to
average net
assets............. .80%(2)(3) .69%(4) .69%(5) .63%(6) .56%(7) .48%(8) .45%(9) .43%(10) .43%(11)
Ratio of net
investment income
to average net
assets............. 6.91%(2)(3) 5.50%(4) 6.12%(5) 7.36%(6) 7.73%(7) 7.10%(8) 4.73%(9) 3.04%(10) 2.77%(11)
Net Assets, end of
year (000's
Omitted)........... $123,243 $134,375 $101,066 $90,672 $98,398 $118,623 $281,343 $614,237 $654,950
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994** 1995
------------- -------------
<S> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of
year............... $ 1.0000 $ 1.0000
--------- -----------
INVESTMENT OPERATIONS:
Investment
income -- net...... .0186 .0529
Net realized gain
(loss) on
investments........ -- --
--------- -----------
Total from
Investment
Operations........ .0186 .0529
--------- -----------
DISTRIBUTIONS:
Dividends from
investment
income -- net...... (.0186) (.0529)
--------- -----------
Dividends from net
realized gain on
investment......... -- --
--------- -----------
Total
Distributions..... (.0186) (.0529)
--------- -----------
Net asset value, end
of year............. $ 1.0000 $ 1.0000
========= ============
Total Investment
Return............ 3.75%(2) 5.42%
RATIOS/SUPPLEMENTAL
DATA:
Ratio of expenses to
average net
assets............. .43%(2)(12) .42%(13)
Ratio of net
investment income
to average net
assets............. 3.72%(2)(12) 5.32%(13)
Net Assets, end of
year (000's
Omitted)........... $ 690,630 $ 1,001,707
</TABLE>
- ---------------
* Prior to August 1, 1990, the Treasury Money Market Fund was known as the
Short-Term Government Fund and invested in obligations issued or guaranteed
by agencies and instrumentalities of the U.S. Government in accordance with
fundamental policies that were then effective for the Fund. The Treasury
Money Market Fund operated as a portfolio of Pacific American Fund through
October 1, 1994 when it was reorganized as the "Pacific American U.S.
Treasury Portfolio," a portfolio of Pacifica Funds Trust. In July 1995, the
Fund was renamed the "Pacifica Treasury Money Market Fund."
** On October 1, 1994, the Fund's fiscal year end was changed from March 31 to
September 30.
(Footnotes continued on next page)
8
<PAGE> 646
(Footnotes continued from previous page)
(1) From October 1, 1985 (commencement of operations) to March 31, 1986.
(2) Annualized basis.
(3) During the period from October 1, 1985 (Commencement of Operations) to
March 31, 1986, the Fund's investment advisor waived a portion of its fees
(.25% (annualized) of average net assets).
(4) During the year ended March 31, 1987, the Fund's investment advisor waived
a portion of its fees aggregating $264,629 (.25% of average net assets). In
addition, during the period from January 1, 1987 to March 31, 1987, the
Fund's investment advisor and the Fund's prior distributor waived a portion
of their respective fees (.09% of average net assets).
(5) During the year ended March 31, 1988, the Fund's investment advisor and the
Fund's prior distributor waived a portion of their respective fees (.36% of
average net assets).
(6) During the year ended March 31, 1989, the Fund's investment advisor waived
a portion of its fees (.35% of average net assets).
(7) During the year ended March 31, 1990, the Fund's investment advisor and the
Fund's prior distributor waived a portion of their respective fees (.41% of
average net assets).
(8) During the year ended March 31, 1991, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.46% of average net assets).
(9) During the year ended March 31, 1992, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.48% of average net assets).
(10) During the year ended March 31, 1993, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.48% of average net assets).
(11) During the year ended March 31, 1994, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.47% of average net assets).
(12) During the six month period ended September 30, 1994, the Fund's investment
advisor and the Fund's Service Organizations waived a portion of their
respective fees (.47% (annualized) of average net assets).
(13) During the year ended September 30, 1995, the Fund's investment advisor and
the Fund's Service Organizations waived a portion of their respective fees
(.24% of average net assets).
9
<PAGE> 647
THE FUNDS
The Funds are portfolios of Pacifica Funds Trust, a business trust
organized under the laws of the Commonwealth of Massachusetts as an open-end,
management investment company. The Trust's Board of Trustees oversees the
overall management of the Funds and elects the officers of each Fund.
INVESTMENT POLICIES AND PRACTICES OF THE FUNDS
Each Fund seeks to maintain a net asset value of $1.00 per share. Their
assets consist only of obligations with remaining maturities (as defined by the
SEC) of 13 months or less at the date of acquisition, and the dollar-weighted
average maturity of each Fund's investments is 90 days or less. There can be no
assurance that each Fund's investment objective as described below will be
achieved or that the Funds will be able to maintain a net asset value of $1.00
per share.
The Prime Money Market Fund's investment objective is to seek the
maximization of current income to the extent consistent with the preservation of
capital and maintenance of liquidity. To achieve its objective the Prime Money
Market Fund may invest in a broad range of short-term, high quality U.S.
dollar-denominated instruments, consisting of commercial paper, certificates of
deposit, bankers' acceptances, time deposits, bank notes, variable rate master
demand note agreements, medium-term notes, corporate notes, U.S. Agency
obligations and U.S. Treasury obligations. The Prime Money Market Fund also
invests in repurchase agreements collateralized or secured by U.S. Agency
obligations and U.S. Treasury obligations.
The Treasury Money Market Fund's investment objective is to seek current
income and stability of principal. To achieve its objective, the Treasury Money
Market Fund's fundamental policy is to invest only in obligations issued or
guaranteed by the U.S. Treasury and in notes and other instruments, including
repurchase agreements, collateralized or secured by such obligations. The Funds'
investment objectives, and the Treasury Money Market Fund's fundamental policy
stated above, may not be changed without the vote of a majority of the
outstanding shares of the particular Fund.
Each Fund will purchase only "First Tier Eligible Securities" (as defined
by the SEC) that present minimal credit risks as determined by FICM pursuant to
guidelines approved by the Trust's Board of Trustees. First Tier Eligible
Securities consist of (i) securities that either (a) have short-term debt
ratings at the time of purchase in the highest rating
10
<PAGE> 648
category by at least two unaffiliated nationally recognized statistical rating
organizations ("NRSROs") (or one NRSRO if the security was rated by only one
NRSRO), or (b) are issued by issuers with such ratings, and (ii) certain
securities that are unrated (including securities of issuers that have long-term
but not short-term ratings) but are of comparable quality as determined in
accordance with guidelines approved by the Board of Trustees. The Appendix to
the SAI includes a description of applicable NRSRO ratings.
The types of securities and investment practices used by the Funds are
described in greater detail below under "Description of Securities and
Investment Practices."
DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES
INFORMATION FOR BOTH FUNDS
The Treasury Money Market Fund may invest only in obligations issued or
guaranteed by the U.S. Treasury such as bills, notes, bonds and certificates of
indebtedness, and in notes and repurchase agreements collateralized or secured
by such obligations. These obligations may also include U.S. Treasury STRIPS
(U.S. Treasury securities that have been separated into their component parts of
principal and interest payments and recorded as such in the Federal Reserve
book-entry record keeping system). The Prime Money Market Fund may invest in
U.S. Treasury obligations, as well as in obligations of agencies and
instrumentalities of the U.S. Government. Some obligations issued or guaranteed
by U.S. Government agencies and instrumentalities, such as Government National
Mortgage Association pass-through certificates, are supported by the full faith
and credit of the U.S. Government; others, such as those of the Federal Home
Loan Banks, by the right of the issuer to borrow from the U.S. Treasury; others,
such as those issued by the Federal National Mortgage Association, by
discretionary authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality; and others, such as some obligations issued by
the Student Loan Marketing Association, only by the credit of the agency or
instrumentality. While the U.S. Government provides financial support to these
latter U.S. Government-sponsored agencies and instrumentalities, no assurance
can be given that it will always do so since such support is not required by
law. The Prime Money Market Fund will invest in such securities only when FICM
is satisfied that the credit risk with respect to the issuer is minimal.
11
<PAGE> 649
Each Fund may engage in repurchase agreements with financial institutions
such as banks or broker-dealers. In these transactions, a Fund buys a security
at one price and simultaneously promises to sell that same security back to the
seller at a higher price. Securities purchased subject to repurchase agreements
are deposited with the Fund's custodian and subcustodians and, pursuant to the
terms of the repurchase agreement, must have an aggregate market value greater
than or equal to the repurchase price plus accrued interest at all times. If the
value of the underlying securities falls below the value of the repurchase price
plus accrued interest, the Fund will require the seller to deposit additional
collateral by the next business day. The repurchase date is generally within
seven days of the original purchase, but in no event more than 365 days. In all
cases, FICM must be satisfied with the creditworthiness of the other party to
the agreement before entering into a repurchase agreement. In the event of the
bankruptcy or default of the other party to a repurchase agreement, the Fund
could experience delays and costs in recovering its cash. To the extent that, in
the meantime, the value of the securities purchased may have decreased, the Fund
could experience a loss. Repurchase agreements may be considered to be loans by
the Fund under the Investment Company Act of 1940, as amended (the "1940 Act").
Securities purchased by a Fund may include variable and floating rate
instruments, which may have a stated maturity in excess of the Fund's maturity
limitations but are deemed to have shorter maturities because the Fund can
demand payment of the principal of the instrument at least once every thirteen
months upon not more than thirty days' notice (this demand feature is not
required if an instrument is guaranteed by the U.S. Government or an agency or
instrumentality thereof). These instruments may include variable amount master
demand notes that permit the indebtedness thereunder to vary in addition to
providing for periodic adjustments in the interest rate. There may be no active
secondary market with respect to a particular variable or floating rate
instrument. Nevertheless, the periodic readjustments of their interest rates
tend to assure that their value to a Fund will approximate their par value.
Illiquid variable and floating rate instruments (instruments which are not
payable upon seven days notice and do not have an active trading market) that
are acquired by a Fund are subject to the percentage limitations described
below.
Each Fund will not knowingly invest more than 10% of the value of its net
assets in securities that are illiquid. Repurchase agreements that do not
provide for payment to a Fund within seven days after notice, and securities
that are not registered under the Securities Act of 1933 but that may be
purchased by institutional buyers under Rule 144A, are subject to this 10%
12
<PAGE> 650
limit (unless, in the case of the Prime Money Market Fund, such securities are
variable amount master demand notes with maturities of nine months or less or
unless the Board or FICM, pursuant to guidelines adopted by the Board,
determines that a liquid trading market exists).
Each Fund may purchase securities on a "when-issued" basis and may purchase
or sell securities on a "forward commitment" basis. The Funds may also purchase
or sell securities on a "delayed settlement" basis. When-issued and forward
commitment transactions, which involve a commitment by a Fund to purchase or
sell particular securities with payment and delivery taking place at a future
date (perhaps one or two months later), permit the Fund to lock in a price or
yield on a security it owns or intends to purchase, regardless of future changes
in interest rates. Delayed settlement describes settlement of a securities
transaction in the secondary market which will occur sometime in the future.
When-issued, forward commitment and delayed settlement transactions involve the
risk, however, that the yield or price obtained in a transaction may be less
favorable than the yield or price available in the market when the securities
delivery takes place. A Fund's forward commitments, when-issued purchases and
delayed settlements are not expected to exceed 25% of the value of the Fund's
total assets absent unusual market conditions. The Funds do not intend to engage
in these transactions for speculative purposes but only in furtherance of their
investment objectives.
Each Fund may borrow monies for temporary purposes by entering into reverse
repurchase agreements in accordance with the investment restrictions described
below. Pursuant to such agreements, a Fund would sell portfolio securities to
financial institutions and agree to repurchase them at an agreed upon date and
price. At the time a Fund enters into a reverse repurchase agreement, it will
place in a segregated custodial account liquid assets or high grade debt
securities having a value equal to or greater than the repurchase price and FICM
will continuously monitor the account to ensure that the value is maintained. A
Fund would only enter into reverse repurchase agreements to avoid otherwise
selling securities during unfavorable market conditions to meet redemptions.
Reverse repurchase agreements involve the risk that the market value of the
portfolio securities sold by a Fund may decline below the price of the
securities the Fund is obligated to repurchase. Interest paid by a Fund in
connection with a reverse repurchase agreement will reduce the Fund's net
investment income. The Funds currently intend to limit their investments in
reverse repurchase agreements to no more than 20% of their total assets and will
only engage in such transactions with primary dealers. Reverse repurchase
agreements are considered to be borrowings under the 1940 Act.
13
<PAGE> 651
The Funds may attempt to increase yields by trading to take advantage of
short-term market variations. This policy could result in high portfolio
turnover, but should not adversely affect the Funds since they do not ordinarily
pay brokerage commissions on the purchase of short-term debt obligations.
In connection with the management of their daily cash positions, each Fund
may invest up to 10% of its assets in securities issued by other investment
companies which invest in short-term, high-quality debt securities and which
determine their net asset value per share based on the amortized cost or
penny-rounding method of valuation. The Treasury Money Market Fund may only
invest in shares of other investment companies that are structured to seek a
similar investment objective. As a shareholder of another investment company, a
Fund would bear, along with other shareholders, its pro rata portion of the
other investment company's expenses including advisory fees. These expenses
would be in addition to the advisory fees and other expenses the Fund bears
directly in connection with its own operations. Securities of other investment
companies will be acquired by the Funds within the limits prescribed by the 1940
Act.
ADDITIONAL PORTFOLIO INFORMATION FOR PRIME MONEY MARKET FUND
In addition to the types of instruments described above, the Prime Money
Market Fund may purchase U.S. dollar-denominated bank obligations such as time
deposits, certificates of deposit, bankers' acceptances, bank notes and deposit
notes issued by domestic and foreign banks. Time deposits are non-negotiable
deposits maintained at a banking institution for a specified period of time
normally at a stated interest rate. Certificates of deposit are certificates
evidencing the obligation of a bank to repay funds deposited with it for a
specified period of time. Bankers acceptances are negotiable deposits or bills
of exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank (meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument at maturity).
Bank notes usually represent senior debt of the bank.
The Prime Money Market Fund may also purchase commercial paper, short-term
notes, medium-term notes and bonds issued by domestic and foreign corporations
that meet the Fund's maturity limitations.
Commercial paper purchased by the Fund may include paper issued in reliance
on the so-called "private placement" exemption under Section 4(2) of the
Securities Act of 1933 ("Section 4(2) paper"). Section 4(2) paper is restricted
as to disposition under the federal securities laws and generally is sold to
institutional investors such as the Fund that
14
<PAGE> 652
agree that they are purchasing the paper for investment and not with a view to
public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) paper normally is resold to other institutional
investors through or with the assistance of the issuer or investment dealers
that make a market in Section 4(2) paper. Section 4(2) paper will not be subject
to the Fund's 10% limitation on illiquid securities described above where the
Board of Trustees or FICM (pursuant to guidelines adopted by the Board)
determines that a liquid trading market exists.
The Prime Money Market Fund may also lend its portfolio securities in order
to increase income to broker-dealers and other institutional investors pursuant
to agreements requiring that the loans be continuously secured by collateral
equal at all times in value to at least the market value of the securities
loaned plus accrued interest. Collateral for such loans may include cash, U.S.
Treasury securities or other U.S. government securities or an irrevocable letter
of credit issued by a bank which meets the investment standards of the Fund.
Such loans will not be made if, as a result, the aggregate of all outstanding
loans of the Fund exceeds one-third of the value of its total assets. There may
be risks of delay in receiving additional collateral or in recovering the
securities loaned or even a loss of rights in the collateral should the borrower
of the securities fail financially.
The Prime Money Market Fund may also invest in U.S. dollar denominated
obligations issued or guaranteed by foreign governments or any of their
political subdivisions, agencies or instrumentalities. Such obligations include
debt obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Examples of these include the
International Bank for Reconstruction and Development (the "World Bank"), the
Asian Development Bank and the InterAmerican Development Bank.
The Prime Money Market Fund may purchase asset-backed securities, which are
securities backed by mortgages, installment sales contracts, credit card
receivables or other assets. The average life of asset-backed securities varies
with the maturities of the underlying instruments, and the average life of a
mortgage-backed instrument, in particular, is likely to be substantially less
than the original maturity of the mortgage pools underlying the securities as
the result of mortgage prepayments. For this and other reasons, an asset-backed
security's stated maturity may be shortened, and the securities' total return
may be difficult to predict precisely. Such difficulties are not, however,
expected to have a significant effect on the Fund since the remaining maturity
of any asset-backed security acquired
15
<PAGE> 653
will be thirteen months or less. Asset-backed securities purchased by the Fund
may include collateralized mortgage obligations ("CMOs") issued by private
companies.
Since the Prime Money Market Fund may purchase securities issued by foreign
issuers, the Fund may be subject to investment risks that are different in some
respects from those incurred by a fund which invests exclusively in debt
obligations of domestic issuers. Such potential risks include future political
and economic developments, the possible imposition of withholding taxes on
interest income payable on the securities by the particular country in which the
issuer is located, the possible seizure or nationalization of foreign deposits,
the possible establishment of exchange controls or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on these securities. In addition, foreign banks and other issuers
are not necessarily subject to the same regulatory requirements that apply to
domestic issuers (such as reserve requirements, loan limitations, examinations,
accounting, auditing and recordkeeping requirements, and public availability of
information), and the Fund may experience difficulties in obtaining or enforcing
a judgment against a foreign issuer. Absent any unusual market conditions, the
Fund will not invest more than 25% of its total assets in securities issued by
foreign issuers.
INVESTMENT RESTRICTIONS
Each Fund has adopted certain fundamental investment restrictions that may
be changed only with the approval of a majority of the outstanding shares of the
Fund. The following descriptions summarize several of the Funds' fundamental
investment restrictions, which are set forth in full in the SAI.
Neither Fund may:
(1) purchase securities (with certain exceptions including U.S.
Treasury securities) if more than 5% of its total assets will be invested
in the securities of any one issuer, except that up to 25% of the Fund's
total assets may be invested without regard to this 5% limitation; and
(2) invest 25% or more of its total assets in one or more issuers
conducting their principal business activities in the same industry (with
certain exceptions including U.S. Government securities and, with respect
to the Prime Money Market Fund, the obligations of U.S. banks and certain
U.S. branches of foreign banks).
16
<PAGE> 654
These investment restrictions are applied at the time investment securities
are purchased. As a matter of non-fundamental policy and in accordance with the
current regulations of the SEC, the Prime Money Market Fund intends to limit its
investments in the obligations of any one non-U.S. governmental issuer to not
more than 5% of its total assets at the time of purchase, provided that the
Prime Money Market Fund may invest up to 25% of its assets in the obligations of
one non-U.S. governmental issuer for a period of up to three business days.
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction of
the Board of Trustees. Information about the Trustees, as well as the Funds'
executive officers, may be found in the SAI under the heading "Trustees and
Officers."
ADVISOR
First Interstate Capital Management, Inc. serves as the Funds' investment
advisor. FICM is an indirect wholly-owned subsidiary of First Interstate
Bancorp, a publicly-held, multi-state bank holding company.
FICM supervises and assists in the overall management of the Funds' affairs
pursuant to an Investment Advisory and Management Agreement, subject to the
overall authority of the Board of Trustees. These management responsibilities
include, among other things, making decisions and placing orders for all
purchases and sales of the Funds' investment securities, furnishing economic and
statistical information as requested by the Board of Trustees, and monitoring
the Funds' arrangements with Service Organizations. Under its Agreement, FICM is
entitled to a fee, computed daily and payable monthly, at the annual rate of
0.30% of the first $500 million of the average daily net assets of each Fund
(considered separately on a Fund-by-Fund basis), 0.25% of the next $500 million
of each Fund's average daily net assets, and 0.20% of each Fund's average daily
net assets in excess of $1 billion. The advisory fee FICM receives may be
reduced in some cases by the amount paid to the Funds' Service Organizations
(see "Servicing Agreements" below), and FICM may voluntarily waive an additional
portion of the advisory fee payable by the Funds from time to time. The
annualized effective rates of the advisory fees paid by the Prime Money Market
Fund and the Treasury Money Market Fund were (after fee reductions and waivers)
0.12% and 0.13%, respectively, of the average net assets of the Funds for the
fiscal year ended September 30, 1995.
17
<PAGE> 655
FICM maintains offices at 7501 East McCormick Parkway, Scottsdale, Arizona
85258.
On January 24, 1996, First Interstate Bancorp signed a definitive merger
agreement to merge with Wells Fargo & Company ("Wells Fargo"), a publicly-held
bank holding company with its head office at 420 Montgomery Street, San
Francisco, California 94104. The merger is conditioned upon, among other things,
certain regulatory approvals. Upon completion of the merger, currently expected
to occur during the second quarter of 1996, FICM will be wholly-owned by Wells
Fargo, and the existing investment advisory agreement between the Trust and FICM
will automatically terminate. It is contemplated that an application will be
filed with the Securities and Exchange Commission to ensure there is no
disruption as a result of the merger in the provision of investment advisory
services to the Funds, and that a meeting of shareholders will be held not later
than 120 days after the merger to approve ongoing investment advisory
arrangements for the Funds.
ADMINISTRATOR
The Dreyfus Corporation, located at 200 Park Avenue, New York, New York
10166, was formed in 1947. The Administrator, as of November 30, 1995, managed
or administered approximately $83 billion in assets for more than 1.7 million
investor accounts nationwide. Pursuant to its Administration Agreement with the
Funds, the Administrator supplies office facilities; provides statistical and
research data, data processing services, clerical, accounting and bookkeeping
services, internal auditing and legal services, and internal executive and
administrative services; prepares reports to shareholders; prepares reports to
and filings with the SEC and state securities authorities; prepares tax returns;
calculates the net asset value of each Fund's shares and dividends and capital
gains distributions to shareholders; and generally assists in the Funds'
operations (except with respect to investment management services). For its
administrative services for the fiscal year ended September 30, 1995, the
Administrator received a fee from each Fund at the annual rate of 0.10% of each
Fund's average daily net assets. From time to time, the Administrator may waive
all or a portion of its fees with respect to a Fund.
DISTRIBUTOR
Pacifica Funds Distributor Inc., located at 230 Park Avenue, New York, New
York 10169, acts as distributor for the Funds. PFD Inc. is an affiliate of
Furman Selz LLC ("Furman Selz") and was organized specifically to distribute
shares of the Trust; however, offers and sales of shares of
18
<PAGE> 656
the Trust will be made only through Furman Selz or other registered (or exempt)
dealers.
Under the Distribution Plan (the "Plan") adopted by the Funds for their
Investor Shares, each Fund may pay directly or reimburse the Distributor monthly
for (subject to a limit of 0.30% per annum of the average daily net asset value
of the outstanding Investor Shares of each Fund) costs and expenses of the
Distributor incurred in connection with the distribution of Investor Shares of
the Funds. These costs and expenses include (i) advertising by radio,
television, newspapers, magazines, brochures, sales literature, direct mail or
any other form of advertising; (ii) expenses of sales employees or agents of the
Distributor, including salary, commissions, travel and related expenses; (iii)
payments to broker-dealers and financial institutions for services in connection
with the distribution of Investor Shares, including promotional incentives and
fees calculated with reference to the average daily net asset value of Investor
Shares held by shareholders who have a brokerage or other service relationship
with the broker-dealer or other institution receiving such fees; (iv) costs of
printing prospectuses and other materials to be given or sent to prospective
investors; and (v) such other similar services as the Trustees determine to be
reasonably calculated to result in the sale of Investor Shares of the Funds.
Each Fund will pay all costs and expenses in connection with the preparation,
printing and distribution of prospectuses to current shareholders and the
operation of its Plan, including related legal and accounting fees. A Fund will
not be liable for distribution expenditures made by the Distributor in any given
year in excess of the maximum annual amount payable under the Plan for that
Fund. All payments made under the Plan for Investor Shares are borne entirely by
a Fund's Investor Shares.
The Distributor may from time to time pay a bonus or other incentive to
dealers which employ registered representatives who sell a minimum dollar amount
of the Investor Shares of the Funds and/or other funds distributed by Furman
Selz or the Distributor during a specific period of time. Such bonus or other
incentive may take the form of payment for travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered representatives
and members of their families to places within or outside the United States, or
other bonuses, such as gift certificates or the cash equivalent of such bonuses.
The Distributor has established such a special promotional incentive program
with First Interstate Securities, Inc.
19
<PAGE> 657
SERVICE ORGANIZATIONS
Various banks (including banks affiliated with First Interstate Bancorp),
trust companies, broker-dealers (other than Furman Selz) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative services with respect to the Funds' Investor Shares, such as
maintaining shareholder accounts and records. The Funds may pay fees to Service
Organizations (which vary depending upon the services provided) in amounts up to
an annual rate of 0.25% of the average daily net asset value of the outstanding
Investor Shares of the Funds owned by shareholders with whom a Service
Organization has a servicing relationship. These fees will be borne entirely by
the Funds' Investor Shares. FICM intends to waive a portion of the advisory fee
otherwise payable by a Fund to Service Organizations to the extent that the
investment advisory fees paid by a Fund to FICM plus the fees paid by the Fund
to Service Organizations exceed the annual rate of 0.50% of the Funds average
daily net assets. The Funds currently intend to limit the total of payments made
to Service Organizations and payments made pursuant to the Distribution Plan to
no more than 0.30% per annum of the average daily net asset value of the
outstanding Investor Shares of each Fund.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest a specified amount in
the Funds or charging a direct fee for servicing. If imposed, these fees would
be in addition to any amounts which might be paid to the Service Organization by
the Funds. Shareholders using Service Organizations are urged to consult with
them regarding any such fees or conditions.
CUSTODIAN
First Interstate Bank of California ("FICAL") is the Funds' Custodian and
receives fees for its custodial services as described in the SAI. FICAL
maintains offices at 707 Wilshire Blvd., Los Angeles, California 90017.
TRANSFER AND DIVIDEND DISBURSING AGENT
Furman Selz serves as the Funds' Transfer and Dividend Disbursing Agent.
Furman Selz maintains offices at 230 Park Avenue, New York, New York 10169.
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any non-bank
affiliate thereof from sponsoring, organizing, controlling, or
20
<PAGE> 658
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks generally
from underwriting securities, but do not prohibit such a holding company or
affiliate, or banks generally, from acting as investment advisor, transfer
agent, or custodian to such an investment company, or from purchasing shares of
such a company as agent for and upon the order of customers. FICM and FICAL and
certain of the Service Organizations are subject to such banking laws and
regulations.
In the event of changes in federal or state statutes or regulations or in
interpretations or decisions pertaining to permissible activities by banks, FICM
and FICAL or certain of the Service Organizations could be prevented from
continuing their arrangements with the Funds; however, in such an event it is
expected that the Funds' Board of Trustees would make other arrangements and
shareholders would not suffer adverse financial consequences.
PRICING OF INVESTOR SHARES
Orders for the purchase of Investor Shares will be executed at the net
asset value per share next determined after an order has become effective.
Investor Shares of the Funds are sold without a sales charge. The net asset
value per share ("NAV") for each Fund is calculated daily at 12:00 noon, Pacific
time, on days when the Funds are open for business (i.e., days on which the San
Francisco branch of the Federal Reserve Bank, FICAL as the Funds' Custodian and,
in the case of the Treasury Money Market Fund, the New York Stock Exchange are
open). The NAV of the Investor Shares of the Funds is computed by dividing the
value of a Fund's assets allocated to its Investor Shares, less the liabilities
charged to that class, by the total number of outstanding shares of that class.
Each Fund uses the amortized cost method of valuing its securities. This
technique involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower than the
price a Fund would receive if it sold the instrument.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in the Funds is $500, except that the
minimum is $250 for an IRA. Any subsequent investments must be at least $50,
including an IRA investment. All initial investments should be
21
<PAGE> 659
accompanied by a completed Purchase Application. A separate application is
required for IRA investments.
PURCHASE OF INVESTOR SHARES OF THE FUNDS
THE FOLLOWING PURCHASE PROCEDURES DO NOT APPLY TO CERTAIN TRUST OR OTHER
ACCOUNTS THAT ARE MANAGED BY FIRST INTERSTATE BANCORP, ITS SUBSIDIARIES OR
AFFILIATES. AN ACCOUNT CUSTOMER SHOULD CONSULT HIS OR HER ACCOUNT OFFICER FOR
PROPER INSTRUCTIONS.
All funds received by the Trust are invested in full and fractional
Investor Shares of the appropriate Fund. Certificates for Investor Shares are
not issued. Furman Selz maintains records of each shareholder's holdings of Fund
shares, and each shareholder receives a statement of transactions, holdings and
dividends. The Funds reserve the right to reject any purchase.
An investment may be made using any of the following methods:
Through an Authorized Broker, Investment Advisor or Service
Organization. Investor Shares are available to new and existing shareholders
through authorized brokers, investment advisors and Service Organizations. To
make an investment using this method, simply complete a Purchase Application and
contact your broker, investment advisor or Service Organization with
instructions as to the amount you wish to invest. Your broker will then contact
the Fund to place the order on your behalf on that day.
Orders received by your broker or Service Organization for the Funds in
proper order (and transmitted to the Trust prior to 12:00 noon Pacific time),
will become effective that day. Brokers who receive orders are obligated to
transmit them promptly. You should receive written confirmation of your order
within a few days of receipt of instructions from your broker.
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the applicable Fund. In most cases, your bank will either be a member
of the Federal Reserve Banking System or have a relationship with a bank that
is. Your bank will normally charge you a fee for handling the transaction. To
purchase Investor Shares by a Federal funds wire, please first contact Furman
Selz Mutual Funds Client Services. They will establish a record of information
for the wire to ensure its correct processing. You can reach the Wire Desk at
1-800-662-8417.
22
<PAGE> 660
Have your bank wire funds using the following instructions:
Investors Fiduciary Trust Company
Kansas City, MO 64105
ABA #1010-0362-1
Account #7527950
Further Credit to: Fund Name
As long as you have read the Prospectus, you may establish a new regular
account through the Wire Desk; IRAs may not be opened in this way. When new
accounts are established by wire, the distribution options will be set to
reinvest and the social security or tax identification number ("TIN") will not
be certified until a signed application is received. Completed applications
should be forwarded immediately to the Funds. With the Purchase Application, the
shareholder can specify other distribution options and add any special features
offered by a Fund. Should any dividend distributions or redemptions be paid
before the TIN is certified, they will be subject to 31% Federal tax
withholding.
Automatic Investment Program. An eligible shareholder may also participate
in the Pacifica Automatic Investment Program, an investment plan that
automatically debits money from the shareholder's bank account and invests it in
one or more of the Funds through the use of electronic funds transfers or
automatic bank drafts. Shareholders may elect to make subsequent investments by
transfers of a minimum of $50 on either the fifth or twentieth day of each month
into their established Fund accounts. Contact the Trust at 1-800-662-8417 for
more information about the Pacifica Automatic Investment Program.
INDIVIDUAL RETIREMENT ACCOUNTS
The Funds may be used as a funding medium for IRAs. Investor Shares may
also be purchased for IRAs established with an affiliate of First Interstate
Bancorp or other authorized custodians. In addition, an IRA may be established
through a custodial account with Investors Fiduciary Trust Company. Completion
of a special application is required in order to create such an account, and the
minimum initial investment for an IRA is $250. Contributions to IRAs are subject
to prevailing amount limits set by the Internal Revenue Service. A $5.00
establishment fee and an annual $12.00 maintenance and custody fee is payable
with respect to each IRA, and there will be a $10.00 termination fee when the
account is closed. For more information, call the Funds at 1-800-662-8417.
23
<PAGE> 661
EXCHANGE OF INVESTOR SHARES
The Funds offer two convenient ways to exchange Investor Shares in a Fund
for Investor Shares in another investment portfolio of the Trust. Before
engaging in an exchange transaction, a shareholder should read carefully the
Prospectus describing the investment portfolio into which the exchange will
occur, which is available without charge and can be obtained by writing to the
Funds at 237 Park Avenue, Suite 910, New York, New York 10017, or by calling
1-800-662-8417. A shareholder may not exchange Investor Shares of one portfolio
for Investor Shares of another portfolio if both or either are not qualified for
sale in the state of the shareholder's residence. The minimum amount for an
initial exchange is $500. No minimum is required in subsequent exchanges. The
Trust may terminate or amend the terms of the exchange privilege at any time.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the net asset value next determined following receipt of the
request by the Trust in good order, plus any applicable sales charge.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
In the case of transactions subject to a sales charge, the sales charge
will be assessed on an exchange of Investor Shares, equal to the excess of the
sales load applicable to the Investor Shares to be acquired, over the amount of
any sales load previously paid on the Investor Shares to be exchanged. No
service fee is imposed.
In addition, Institutional Shares of a Fund may be exchanged for Investor
Shares of the same Fund in connection with the distribution of assets held in a
qualified trust, agency or custodial account maintained with the trust
department of a First Interstate or other bank, trust company or thrift
institution, or in other cases where Institutional Shares are not held in such
qualified accounts. Similarly, Investor Shares may be exchanged for
Institutional Shares of the same Fund if the shares are to be held in such a
qualified trust, agency or custodial account. These exchanges are made without a
sales charge at the net asset value of the respective share classes.
Exchange by Mail. To exchange Investor Shares of a Fund by mail, simply
send a letter of instruction to Furman Selz. The letter of instruction must
include: (i) your account number; (ii) the Fund from and the Fund into which you
wish to exchange your investment; (iii) the dollar or share amount you wish to
exchange; and (iv) the signatures of all registered
24
<PAGE> 662
owners or authorized parties. All signatures must be guaranteed by an eligible
guarantor institution including a member of a national securities exchange or by
a commercial bank or trust company, broker-dealers, credit unions and savings
associations.
Exchange by Telephone. To exchange Investor Shares of a Fund by telephone,
or if you have any questions, simply call the Trust at 1-800-662-8417. You
should be prepared to give the telephone representative the following
information: (i) your account number, social security number and account
registration; (ii) the name of the portfolio from and the portfolio into which
you wish to transfer your investment; and (iii) the dollar or share amount you
wish to exchange. The conversation may be recorded to protect you and the Funds.
Telephone exchanges are available only if the shareholder so indicates by
checking the "yes" box on the Purchase Application. See "Redemption of Investor
Fund Shares -- By Telephone" for a discussion of telephone transactions
generally.
REDEMPTION OF INVESTOR SHARES
Shareholders may redeem their Investor Shares, in whole or in part, on any
Business Day. Investor Shares will be redeemed at the net asset value next
determined after a redemption request in good order has been received and
accepted by the Trust. A redemption may be a taxable transaction on which gain
or loss may be recognized. Generally, however, gain or loss is not expected to
be recognized on a redemption of shares of the Funds, both of which seek to
maintain a net asset value of $1.00 per share.
Where the Investor Shares to be redeemed have been purchased by check, the
Trust may delay payment of the redemption proceeds until the purchasing check
has cleared, which may take up to 15 days. Shareholders may avoid this delay by
investing through wire transfers of Federal funds. During the period prior to
the time the Investor Shares are redeemed, dividends on the Investor Shares will
continue to accrue and be payable and the shareholder will be entitled to
exercise all other beneficial rights of ownership.
Once the Investor Shares are redeemed, a Fund will ordinarily send the
proceeds by check to the shareholder at the address of record on the next
Business Day. The Funds may, however, take up to seven days to make payment.
This will not be customary practice. Also, if the New York Stock Exchange is
closed (or when trading is restricted) for any reason other than the customary
weekend or holiday closing or if an emergency condition as determined by the SEC
merits such action, the Funds may suspend redemptions or postpone payment dates.
25
<PAGE> 663
To ensure acceptance of your redemption request, it is important to follow
the procedures described below. Although the Trust has no present intention to
do so, it reserves the right to refuse or to limit the frequency of any
telephone or wire redemptions. Of course, it may be difficult to place orders by
telephone during periods of severe market or economic change, and a shareholder
should consider alternative methods of communications, such as couriers or U.S.
mail. The services offered by the Funds may be modified or terminated at any
time. If the Funds terminate any particular service, they will do so only after
giving written notice to shareholders.
If Investor Shares of the Funds are represented by a share certificate, the
certificate must be surrendered to the Funds' transfer agent for cancellation
before the shares can be redeemed.
You may redeem your Investor Shares using any of the following methods:
Through an Authorized Broker, Investment Advisor or Service
Organization. You may redeem your Investor Shares by contacting your broker or
investment advisor and instructing him or her to redeem your Investor Shares. He
or she will then contact PFD Inc. and place a redemption trade on your behalf.
He or she may charge you a fee for this service.
By Mail. You may redeem your Investor Shares by sending a letter directly
to the Funds. To be accepted, a letter requesting redemption must include: (i)
the Fund name and account registration from which you are redeeming Investor
Shares; (ii) your account number; (iii) the amount to be redeemed; (iv) the
signatures of all registered owners; and (v) a signature guarantee by any
eligible guarantor institution including a member of a national securities
exchange or a commercial bank or trust company, broker-dealers, credit unions
and savings associations. Corporations, partnerships, trusts or other legal
entities will be required to submit additional documentation.
By Telephone. You may redeem your Investor Shares by calling the Funds
toll free at 1-800-662-8417. You should be prepared to give the telephone
representative the following information: (i) your account number, social
security number and account registration; (ii) the Fund name from which you are
redeeming Investor Shares; and (iii) the amount to be redeemed. The conversation
may be recorded to protect you and the Fund. Telephone redemptions are available
only if the shareholder so indicates by checking the "yes" box on the Purchase
Application or on the Optional Services Form. The Funds employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
If a Fund fails to employ such reasonable procedures, it may be liable for any
loss, damage or
26
<PAGE> 664
expense arising out of any telephone transactions purporting to be on a
shareholder's behalf. In order to assure the accuracy of instructions received
by telephone, the Funds require some form of personal identification prior to
acting upon instructions received by telephone, record telephone instructions
and provide written confirmation to investors of such transactions.
By Wire. You may redeem your Investor Shares by contacting the Funds by
mail or telephone and instructing them to send a wire transmission to your
personal bank.
Your instructions should include: (i) your account number, social security
number and account registration; (ii) the Fund name from which you are redeeming
Investor Shares; and (iii) the amount to be redeemed. Wire redemptions can be
made only if the "yes" box has been checked on your Purchase Application, and a
copy of a void check from the account where proceeds are to be wired is attached
to the Purchase Application. Your bank may charge you a fee for receiving a wire
payment on your behalf.
Check Writing. A check redemption ($500 minimum, no maximum) feature is
available with respect to the Funds. Checks are free and may be obtained from
PFD Inc. It is not possible to use a check to close out your account since
additional shares accrue daily.
The above-mentioned services "By Telephone," "By Wire" and "Check Writing"
are not available for IRAs and trust clients of an affiliate of First Interstate
Bancorp.
Systematic Withdrawal Plan. An owner of $10,000 or more of Investor Shares
of a Fund may elect to have periodic redemptions from his or her account to be
paid on a monthly, quarterly, semi-annual or annual basis. The minimum periodic
payment is $100. A sufficient number of Investor Shares to make the scheduled
redemption will normally be redeemed on the date selected by the shareholder.
Depending on the size of the payment requested and fluctuation in the net asset
value, if any, of the Investor Shares redeemed, redemptions for the purpose of
making such payments may reduce or even exhaust the account. A shareholder may
request that these payments be sent to a predesignated bank or other designated
party. Capital gains and dividend distributions paid to the account will
automatically be reinvested at net asset value on the distribution payment date.
Redemption of Small Accounts. Due to the disproportionately higher cost of
servicing small accounts, the Funds reserve the right to redeem, on not less
than 30 days notice, an account in a Fund that has been reduced by
27
<PAGE> 665
a shareholder to $500 or less. However, if during the 30-day notice period the
shareholder purchases sufficient Investor Shares to bring the value of the
account above $500, this restriction will not apply.
Redemption in Kind. All redemptions of Investor Shares of the Funds shall
be made in cash, except that the commitment to redeem Investor Shares in cash
extends only to redemption requests made by each shareholder of a Fund during
any 90-day period of up to the lesser of $250,000 or 1% of the net asset value
of that Fund at the beginning of such period. This commitment is irrevocable
without the prior approval of the SEC and is a fundamental policy of the Funds
that may not be changed without shareholder approval. In the case of redemption
requests by shareholders in excess of such amounts, the Board of Trustees
reserves the right to have the Funds make payment, in whole or in part, in
securities or other assets, in case of an emergency or any time a cash
distribution would impair the liquidity of a Fund to the detriment of the
existing shareholders. In this event, the securities would be valued in the same
manner as the securities of that Fund are valued. If the recipient were to sell
such securities, he or she would incur brokerage charges.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAXES
Each Fund's net investment income ordinarily is declared as a dividend on
each day that the Funds are open for business. Dividends are paid within five
business days after the end of each month. Investor Shares begin accruing
dividends on the day the purchase is effected and continue to accrue dividends
through the day before the redemption request is executed. Each Fund's earnings
for non-business days are declared as dividends to shareholders of record on the
preceding business day. All dividends are reinvested automatically in additional
Investor Shares of that Fund at net asset value unless the shareholder elects in
writing, not less than five full business days prior to the record date, to
receive dividends in cash. Distributions from net realized securities gains are
normally declared and paid once a year, but each Fund may make distributions on
a more frequent basis to comply with the distribution requirements of the
Internal Revenue Code of 1986, as amended (the "Code"). In all cases
distributions will be made in a manner that is consistent with the provisions of
the 1940 Act. Neither Fund will make distributions from net realized securities
gains unless capital loss carryovers, if any, have been utilized or have
expired. These distributions, if any, are reinvested automatically in additional
Investor Shares of the Fund involved at net asset value or, at the Customer's
option, are paid in cash. If all Investor Shares in the account are redeemed at
any time during the month, all dividends to which the
28
<PAGE> 666
shareholder is entitled will be paid within five business days after the end of
the month in cash. All expenses are accrued daily and deducted before
declaration of dividends.
Notice as to the tax status of dividends and distributions declared by each
Fund is mailed annually. Each shareholder will also receive periodic account
summaries which will include information as to income dividends and
distributions from securities gains, if any, declared during the year.
Since each Fund's income is derived from interest rather than dividends, no
portion of either Fund's dividends or distributions will qualify for the
dividends received deduction allowable to certain U.S. corporations. Dividends
from net investment income, together with distributions from the excess, if any,
of net realized short-term over net realized long-term losses and all or a
portion of the gains from the sale or other disposition of certain market
discount bonds, are taxable to those shareholders who are not exempt from
federal income taxes as ordinary income, whether or not reinvested in additional
shares. Distributions from net realized long-term securities gains, if any, are
taxable to those shareholders who are not exempt from federal income taxes as
long-term capital gains. Shareholders in the Funds may be subject to state and
local taxes on dividends and distributions declared by the Funds.
To avoid a federal excise tax, each Fund must distribute substantially all
of its ordinary income, and capital gain net income, if any, by the end of each
calendar year. Dividends or distributions, if any, payable to shareholders of
record on a date in October, November or December of any year are deemed to have
been paid in that year, if they are paid by the following January.
Federal regulations may require, in certain cases, the Funds to withhold
("backup withholding") and remit to the U.S. Treasury 31% of dividends and
distributions paid to an investor if the investor (i) has provided either an
incorrect TIN or no TIN at all, (ii) is subject to backup withholding by the
Internal Revenue Service for failure to report the receipt of taxable interest
or dividend income properly, or (iii) has failed to certify that he or she is
not subject to backup withholding or that he or she is an "exempt recipient."
A TIN is either the Social Security number or employer identification
number of the beneficial owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
beneficial owner of the account, and may be claimed as a credit on the
beneficial owner's federal income tax return.
29
<PAGE> 667
Each Fund will be treated as a separate entity for tax purposes, and has
qualified and intends to continue to qualify as a regulated investment company
under the Code as long as this qualification is in the best interest of its
shareholders. Such qualification generally relieves each Fund of liability for
federal income taxes to the extent its earnings are distributed in accordance
with the applicable provisions of the Code.
Investors should consult their tax advisors regarding specific questions as
to federal, state or local taxes.
OTHER INFORMATION
CAPITALIZATION
Pacifica Funds Trust (formerly Fund Source) was organized as a
Massachusetts business trust on July 17, 1984, and consists of a series of
separately managed portfolios. This Prospectus relates to the Investor Shares of
two of these managed portfolios -- the Pacifica Prime Money Market Fund and
Pacifica Treasury Money Market Fund -- which were reorganized as portfolios of
Pacifica Funds Trust on October 1, 1994 and which are classified as diversified,
open-end management investment companies under the 1940 Act.
The capitalization of the Trust consists solely of an unlimited number of
shares of beneficial interest with a par value of $0.001 per share. The Board of
Trustees has authorized the issuance of three classes of shares in each of the
Funds - Investor Shares, Service Shares and Institutional Shares. Each share of
a Fund is entitled to cash dividends and distributions earned on such Fund's
shares as are declared in the discretion of the Board of Trustees, and
represents the same proportionate interest in a particular Fund with other
shares of the Fund, except that a Fund's Service, Institutional and Investor
Shares each bear all of the Service Organization fees, distribution plan
payments (if any) and other "class" expenses that are allocated to a particular
class.
Investor Shares pay higher combined fees for shareholder support and
distribution services than Service Shares, and Service Shares pay higher
shareholder support fees than Institutional Shares. This difference in expenses
will create different performance results for the three classes. The Funds offer
various services and privileges in connection with their Investor Shares that
are not offered in connection with their Service Shares or Institutional Shares,
such as an automatic investment plan, an automatic withdrawal plan and certain
check writing privileges. Additional information concerning each class of shares
may be obtained by calling the Trust at 1-800-662-8417 or by contacting a
Service Organization.
30
<PAGE> 668
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust. The Declaration of Trust also
provides for indemnification out of the property of a Fund of any shareholder
held personally liable solely by reason of being or having been a shareholder of
the Fund. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a Fund itself would
be unable to meet its obligations and should be considered remote.
When issued, shares of the Trust are fully paid, nonassessable and freely
transferable.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Trust is not required to hold regular
annual meetings of the Funds' shareholders, but in the event that a special
meeting is held, shareholders of each portfolio offered by the Trust will be
entitled to one vote for each full share held and fractional votes for
fractional shares held, and will vote in the aggregate and not on a
portfolio-by-portfolio basis, except as required by the 1940 Act or other
applicable law. It is contemplated that, as required by the 1940 Act, the
shareholders of a portfolio will vote separately on a portfolio-by-portfolio
basis on matters relating to a particular portfolio's investment advisory
agreement, distribution plan or changes in a portfolio's fundamental investment
limitations, and on other matters where the interests of the respective
portfolios are not substantially identical. Similarly, shareholders of each
portfolio will vote in the aggregate and not by class unless the Trustees
determine that the matter to be voted on affects only the interests of the
holders of a particular class of a Fund's shares. Voting rights are not
cumulative.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust and in connection with the meeting to comply with the
31
<PAGE> 669
shareholders' communications provisions of Section 16(c) of the 1940 Act. See
"Description of the Funds" in the SAI.
PERFORMANCE INFORMATION
From time to time each Fund advertises the yield and effective yield of its
Investor Shares. Both yield figures will fluctuate, are based on historical
earnings and are not intended to indicate future performance. The yield for
Investor Shares of each Fund refers to the income generated by an investment in
Investor Shares of a Fund over a seven-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 week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the investment.
The effective yield is calculated similarly but, when annualized, the income
earned by an investment in Investor Shares of a Fund is assumed to be
reinvested. The effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment. Each Fund's yield and
effective yield for Investor Shares may reflect voluntary fee waivers. See
"Management of the Funds."
Yield information is useful in reviewing each Fund's performance, but
because yields will fluctuate, such information may not provide a basis for
comparison with domestic bank deposits or other investments which pay a fixed
yield for a stated period of time.
For purposes of comparison, the Funds may, from time to time, quote
performance information from IBC/Donoghue's MONEY FUND REPORT of Holliston,
Massachusetts 01746. IBC/Donoghue's MONEY FUND AVERAGE is a widely recognized
index of money market fund performance. Figures reflect average yields of all
taxable money funds included in IBC/Donoghue's index. IBC/Donoghue's U.S.
TREASURY & REPO MONEY FUND AVERAGE is a component of this average and reflects
average yields of all taxable U.S. Treasury money funds.
Any fees which may be imposed by Service Organizations directly on their
customer accounts for cash management services in connection with investments in
the Funds are not reflected in yield figures and any such fees, if charged, will
reduce the actual return received by customers on their investments.
ACCOUNT SERVICES
All transactions in shares of the Funds will be reflected in a statement
for each shareholder. In those cases where a Service Organization or its nominee
is shareholder of record of shares purchased for its customer, the
32
<PAGE> 670
Funds have been advised that the statement may be transmitted to the customer at
the discretion of the Service Organization.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Funds at 237 Park
Avenue, Suite 910, New York, New York 10017.
General and Account Information: (800) 662-8417.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
FUNDS OR BY THEIR DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY FIRST INTERSTATE BANCORP OR ITS AFFILIATES,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
33
<PAGE> 671
INVESTMENT ADVISOR
First Interstate Capital Management, Inc.
7501 East McCormick Parkway
Scottsdale, Arizona 85258
ADMINISTRATOR
The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
DISTRIBUTOR
Pacifica Funds Distributor Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
First Interstate Bank of California
707 Wilshire Boulevard
Los Angeles, California 90017
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
[PACIFICA LOGO] PACPTMMIV-2/96
<PAGE> 672
[PACIFICA LOGO]
(INSTITUTIONAL SHARES)
PACIFICA PRIME MONEY
MARKET FUND
PACIFICA TREASURY
MONEY MARKET FUND
PROSPECTUS
FEBRUARY 1, 1996
[FIRST INTERSTATE BANK LOGO]
Investment Advisor to The Pacifica Funds
<PAGE> 673
PACIFICA FUNDS TRUST
(INSTITUTIONAL SHARES)
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) 662-8417
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. --
INVESTMENT ADVISOR
("FICM" OR THE "ADVISOR")
THE DREYFUS CORPORATION -- ADMINISTRATOR
(THE "ADMINISTRATOR")
PACIFICA FUNDS DISTRIBUTOR INC. -- DISTRIBUTOR
("PFD INC." OR THE "DISTRIBUTOR")
Pacifica Funds Trust (the "Trust") is an open-end investment company (a
mutual fund) that offers a selection of separate investment portfolios. This
Prospectus describes the Institutional Shares of the following two money market
funds (the "Funds"):
- Pacifica Prime Money Market Fund
- Pacifica Treasury Money Market Fund
Institutional Shares of the Funds are sold to investors maintaining
qualified accounts at bank affiliates of First Interstate Bancorp or other banks
or institutions designated by First Interstate Bancorp ("Banks").
This Prospectus sets forth concisely the information a prospective investor
should know before investing in either of the Funds and should be read and
retained for future reference. A Statement of Additional Information for the
Funds' Service and Institutional Shares (the "SAI") dated February 1, 1996
(which may be revised from time to time), containing additional and more
detailed information about the Funds, has been filed with the Securities and
Exchange Commission (the "SEC") and is hereby incorporated by reference into
this Prospectus. For a free copy, call the telephone number above.
----------------------------
AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FIRST INTERSTATE OR OTHER BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN 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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1996.
<PAGE> 674
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FUND EXPENSES............................................ 3
FEE TABLE -- INSTITUTIONAL SHARES........................ 3
FINANCIAL HISTORY........................................ 5
THE FUNDS................................................ 10
INVESTMENT POLICIES AND PRACTICES OF THE FUNDS........... 10
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES....... 11
INVESTMENT RESTRICTIONS.................................. 16
MANAGEMENT OF THE FUNDS.................................. 17
HOW TO BUY INSTITUTIONAL SHARES.......................... 20
HOW TO EXCHANGE INSTITUTIONAL SHARES..................... 22
HOW TO REDEEM INSTITUTIONAL SHARES....................... 23
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAXES........ 23
OTHER INFORMATION........................................ 25
</TABLE>
2
<PAGE> 675
FUND EXPENSES
The following table is an estimate of the annual costs and expenses that an
investor will incur either directly or indirectly as a shareholder of a Fund's
Institutional Shares based upon the Fund's operating expenses for the year ended
September 30, 1995, adjusted to reflect current fees and expenses. See "Other
Information -- Capitalization."
FEE TABLE -- INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
PRIME TREASURY
MONEY MONEY
MARKET MARKET
FUND FUND
------ --------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)....... None None
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering
price).................................... None None
Deferred Sales Load (as a percentage of
redemption proceeds)...................... None None
Redemption Fees.............................. None None
Exchange Fee................................. None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (after waivers)*............. 0.12% 0.12%
Other Expenses (after waivers)**............. 0.13 0.13
------ --------
TOTAL FUND OPERATING EXPENSES:
(after waivers)***........................... 0.25% 0.25%
===== ======
</TABLE>
- ---------------
* The investment advisory agreement for the Funds provides for management
fees payable at an annual rate of 0.30% of the first $500 million of the
average daily net assets of each Fund (considered separately on a
Fund-by-Fund basis), 0.25% of the next $500 million of each Fund's average
daily net assets, and 0.20% of each Fund's average daily net assets in
excess of $1 billion. These amounts may be reduced pursuant to undertakings
by the Advisor.
** The Funds do not expect to make any payments to Service Organizations
with respect to Institutional Shares (otherwise payable at an annual rate
of up to 0.25%) for the current fiscal year.
*** Total Fund Operating Expenses (before waivers) would be 0.63% for the
Prime Money Market Fund and 0.62% for the Treasury Money Market Fund.
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Funds' Institutional
3
<PAGE> 676
Shares will bear. The table does not reflect any charges that may be imposed by
a First Interstate Bank or other institution directly on their customer accounts
in connection with investments in the Funds.
EXAMPLE:*
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:**
<TABLE>
<CAPTION>
PRIME TREASURY
MONEY MONEY
MARKET MARKET
FUND FUND
------ --------
<S> <C> <C>
1 year......................................... $ 3 $ 3
3 years........................................ 8 8
5 years........................................ 14 14
10 years....................................... 32 32
</TABLE>
- ---------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE MORE OR LESS THAN THE ASSUMED
AMOUNT.
** The amount of expenses an Institutional shareholder would pay without
waivers under these assumptions and assuming redemption after one, three,
five and ten years would be $6, $20, $35 and $79, respectively, for the
Prime Money Market Fund and $6, $20, $35 and $77, respectively, for the
Treasury Money Market Fund.
4
<PAGE> 677
FINANCIAL HISTORY
The financial data shown below is to assist investors in evaluating the
performance of the Funds for each of the ten years in the period ended September
30, 1995. The following information for the year ended September 30, 1995 and
the six-months ended September 30, 1994 has been audited by Ernst & Young LLP,
the Funds' current independent auditors, whose report thereon appears in the
SAI. The following information for each of the four years in the period ended
March 31, 1994 has been audited by the Funds' former independent accountants
whose report thereon appears in the SAI. Further data relating to the Funds and
related notes are also included in the SAI. Prior to August 11, 1995, the Funds
offered only one class of shares to institutional investors, which class is now
known as Service Shares. The Funds currently offer three classes of shares to
institutional and non-institutional investors. Contained below is the financial
data for Institutional Shares of each Fund for the period from August 11, 1995
to September 30, 1995. The financial data shown below for each of the ten years
in the period ended September 30, 1995 pertains to the Service Shares of the
Funds, which are not offered through this Prospectus. See "Other
Information -- Capitalization."
5
<PAGE> 678
PRIME MONEY MARKET FUND*
<TABLE>
<CAPTION>
SERVICE SHARES
--------------------------------------------------------------------------------------------
FISCAL YEAR ENDED MARCH 31,
--------------------------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991 1992 1993
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
year.......................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ .9997
-------- -------- -------- -------- -------- -------- -------- --------
INVESTMENT OPERATIONS:
Investment income -- net...... .0754 .0581 .0634 .0764 .0849 .0745 .0510 .0327
Net realized gain (loss) on
investments................. -- -- -- -- -- -- (.0003) .0001
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS................. .0754 .0581 .0634 .0764 .0849 .0745 .0507 .0328
-------- -------- -------- -------- -------- -------- -------- --------
DISTRIBUTIONS:
Dividends from investment
income -- net............... (.0754) (.0581) (.0634) (.0764) (.0849) (.0745) (.0510) (.0327)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year........................ $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ .9997 $ .9998
======== ======== ======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN..... 7.80% 5.97% 6.50% 7.88% 8.82% 7.72% 5.22% 3.32%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets.................. .66%(3) .68%(4) .58%(5) .56%(5) .54%(6) .47%(7) .43%(8) .41%(9)
Ratio of net investment income
to average net assets....... 7.47%(3) 5.81%(4) 6.38%(5) 7.58%(5) 7.95%(6) 7.38%(7) 5.09%(8) 3.27%(9)
Net Assets, end of year (000's
Omitted).................... $350,344 $407,815 $628,987 $496,675 $493,641 $543,834 $528,397 $468,479
<CAPTION>
INSTITUTIONAL
SERVICE SHARES SHARES
------------------------------------------ -------------
SIX MONTHS FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1994 1994** 1995 1995(1)
-------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
year.......................... $ .9998 $ .9998 $ .9998 $ 1.000
-------- ------------- ------------- ------
INVESTMENT OPERATIONS:
Investment income -- net...... .0296 .0185 .0546 .0079
Net realized gain (loss) on
investments................. -- -- -- --
-------- ------------- ------------- ------
TOTAL FROM INVESTMENT
OPERATIONS................. .0296 .0185 .0546 .0079
-------- ------------- ------------- ------
DISTRIBUTIONS:
Dividends from investment
income -- net............... (.0296) (.0185) (.0546) (.0079)
-------- ------------- ------------- ------
Net asset value, end of
year........................ $ .9998 $ .9998 $ .9998 $ 1.000
======== ============ ============ ============
TOTAL INVESTMENT RETURN..... 3.00% 3.71%(2) 5.60% 5.65%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets.................. .41%(10) .41%(2)(11) .41%(12) .26%(2)(13)
Ratio of net investment income
to average net assets....... 2.96%(10) 3.67%(2)(11) 5.47%(12) 5.67%(2)(13)
Net Assets, end of year (000's
Omitted).................... $527,599 $ 565,305 $ 614,101 $30,606
</TABLE>
(footnotes on next page)
6
<PAGE> 679
(footnotes from previous page)
- ---------------
* The Prime Money Market Fund operated as Pacific American Liquid Assets,
Inc. from commencement of operations on April 30, 1981 until it was
reorganized as a portfolio of Pacific American Fund on October 1, 1985. On
October 1, 1994, the Fund was reorganized as the "Pacific American Money
Market Portfolio," a portfolio of Pacifica Funds Trust. In July 1995, the
Fund was renamed the "Pacifica Prime Money Market Fund."
** On October 1, 1994, the Fund's fiscal year end changed from March 31 to
September 30.
(1) From August 11, 1995 (commencement of initial offering) to September 30,
1995.
(2) Annualized basis.
(3) During the year ended March 31, 1986, the Fund's investment advisor waived
a portion of its fees (.13% of average net assets).
(4) During the year ended March 31, 1987, the Fund's investment advisor waived
a portion of its fees (.25% of average net assets). In addition, during the
period from January 1, 1987 to March 31, 1987, the Fund's investment
advisor waived an additional portion of its fees (.02% of average net
assets).
(5) During the years ended March 31, 1988 and 1989, the Fund's investment
advisor waived a portion of its fees (.35% and .34% of average net assets,
respectively.)
(6) During the year ended March 31, 1990, the Fund's investment advisor and the
Fund's prior distributor waived a portion of their respective fees (.36% of
average net assets).
(7) During the year ended March 31, 1991, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.47% of average net assets).
(8) During the year ended March 31, 1992, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.48% of average net assets).
(9) During the year ended March 31, 1993, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.48% of average net assets).
(10) During the year ended March 31, 1994, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.48% of average net assets).
(11) During the six month period ended September 30, 1994, the Fund's investment
advisor and the Fund's Service Organizations waived a portion of their
respective fees (.48% (annualized) of average net assets).
(12) During the year ended September 30, 1995, the Fund's investment advisor and
the Fund's Service Organizations waived a portion of their respective fees
(.27% of average net assets).
(13) During the year ended September 30, 1995, the Fund's investment advisor and
the Fund's Service Organizations waived a portion of their respective fees
(.43% (annualized) of average net assets).
7
<PAGE> 680
TREASURY MONEY MARKET FUND*
<TABLE>
<CAPTION>
SERVICE SHARES
------------------------------------------------------------------------------------------
FISCAL YEAR ENDED MARCH 31,
------------------------------------------------------------------------------------------
1986(1) 1987 1988 1989 1990 1991 1992
-------- -------- -------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
year....................... $ 1.0000 $ 1.0000 $ 1.0000 $1.0000 $1.0000 $ 1.0000 $ 1.0001
-------- -------- -------- ------- ------- -------- --------
INVESTMENT OPERATIONS:
Investment income -- net..... .0353 .0550 .0604 .0743 .0827 .0716 .0489
Net realized gain (loss) on
investments................ -- -- -- -- -- .0003 .0002
-------- -------- -------- ------- ------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS................ .0353 .0550 .0604 .0743 .0827 .0719 .0491
-------- -------- -------- ------- ------- -------- --------
DISTRIBUTIONS:
Dividends from investment
income -- net.............. (.0353) (.0550) (.0604) (.0743) (.0827) (.0716) (.0489)
Dividends from net realized
gain on investment......... -- -- -- -- -- (.0002) (.0004)
-------- -------- -------- ------- ------- -------- --------
TOTAL DISTRIBUTIONS........ (.0353) (.0550) (.0604) (.0743) (.0827) (.0718) (.0493)
-------- -------- -------- ------- ------- -------- --------
Net asset value, end of
year....................... $ 1.0000 $ 1.0000 $ 1.0000 $1.0000 $1.0000 $ 1.0001 $ .9999
======== ======== ======== ======= ======= ======== ========
TOTAL INVESTMENT RETURN.... 7.18%(3) 5.64% 6.20% 7.63% 8.58% 7.42% 5.03%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets................. .80%(3)(4) .69%(5) .69%(6) .63%(7) .56%(8) .48%(9) .45%(10)
Ratio of net investment
income to average net
assets..................... 6.91%(3)(4) 5.50%(5) 6.12%(6) 7.36%(7) 7.73%(8) 7.10%(9) 4.73%(10)
Net Assets, end of year
(000's Omitted)............ $123,243 $134,375 $101,066 $90,672 $98,398 $118,623 $281,343
<CAPTION>
INSTITUTIONAL
SERVICE SHARES SHARES
---------------------------------------------------------- -------------
FISCAL YEAR ENDED SIX MONTHS FISCAL YEAR FISCAL YEAR
MARCH 31, ENDED ENDED ENDED
---------------------- SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1993 1994 1994** 1995 1995(2)
-------- -------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
year....................... $ .9999 $ 1.0001 $ 1.0000 $ 1.0000 $1.0000
-------- -------- --------- ----------- -------
INVESTMENT OPERATIONS:
Investment income -- net..... .0309 .0277 .0186 .0529 .0077
Net realized gain (loss) on
investments................ .0002 -- -- -- --
-------- -------- --------- ----------- -------
TOTAL FROM INVESTMENT
OPERATIONS................ .0311 .0277 .0186 .0529 .0077
-------- -------- --------- ----------- -------
DISTRIBUTIONS:
Dividends from investment
income -- net.............. (.0309) (.0277) (.0186) (.0529) (.0077)
Dividends from net realized
gain on investment......... -- (.0001) -- -- --
-------- -------- --------- ----------- -------
TOTAL DISTRIBUTIONS........ (.0309) (.0278) (.0186) (.0529) (.0077)
-------- -------- --------- ----------- -------
Net asset value, end of
year....................... $ 1.0001 $ 1.0000 $ 1.0000 $ 1.0000 $1.0000
======== ======== ========= =========== =======
TOTAL INVESTMENT RETURN.... 3.13% 2.81% 3.75%(3) 5.42% 5.51%(3)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets................. .43%(11) .43%(12) .43%(3)(13) .42%(14) .26%(3)(15)
Ratio of net investment
income to average net
assets..................... 3.04%(11) 2.77%(12) 3.72%(3)(13) 5.32%(14) 5.42%(3)(15)
Net Assets, end of year
(000's Omitted)............ $614,237 $654,950 $ 690,630 $ 1,001,707 $36,443
</TABLE>
(footnotes on next page)
8
<PAGE> 681
(footnotes from previous page)
- ---------------
* Prior to August 1, 1990, the Treasury Money Market Fund was known as the
Short-Term Government Fund and invested in obligations issued or guaranteed
by agencies and instrumentalities of the U.S. Government in accordance with
fundamental policies that were then effective for the Fund. The Treasury
Money Market Fund operated as a portfolio of Pacific American Fund through
October 1, 1994 when it was reorganized as the "Pacific American U.S.
Treasury Portfolio," a portfolio of Pacifica Funds Trust. In July 1995, the
Fund was renamed the "Pacifica Treasury Money Market Fund."
** On October 1, 1994, the Fund's fiscal year end changed from March 31 to
September 30.
(1) From October 1, 1985 (commencement of operations) to March 31, 1986.
(2) From August 11, 1995 (commencement of initial offerings) to September 30,
1995.
(3) Annualized basis.
(4) During the period from October 1, 1985 (Commencement of Operations) to
March 31, 1986, the Fund's investment advisor waived a portion of its fees
(.25% (annualized) of average net assets).
(5) During the year ended March 31, 1987, the Fund's investment advisor waived
a portion of its fees (.25% of average net assets). In addition, during the
period from January 1, 1987 to March 31, 1987, the Fund's investment
advisor and the Fund's prior distributor waived a portion of their
respective fees (.09% of average net assets).
(6) During the year ended March 31, 1988, the Fund's investment advisor and the
Fund's prior distributor waived a portion of their respective fees (.36% of
average net assets).
(7) During the year ended March 31, 1989, the Fund's investment advisor waived
a portion of its fees (.35% of average net assets).
(8) During the year ended March 31, 1990, the Fund's investment advisor and the
Fund's prior distributor waived a portion of their respective fees (.41% of
average net assets).
(9) During the year ended March 31, 1991, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.46% of average net assets).
(10) During the year ended March 31, 1992, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.48% of average net assets).
(11) During the year ended March 31, 1993, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.48% of average net assets).
(12) During the year ended March 31, 1994, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.47% of average net assets).
(13) During the six month period ended September 30, 1994, the Fund's investment
advisor and the Fund's Service Organizations waived a portion of their
respective fees (.47% (annualized) of average net assets).
(14) During the year ended September 30, 1995, the Fund's investment advisor and
Fund's Service Organizations waived a portion of their respective fees
(.24% of average net assets).
(15) During the year ended September 30, 1995, the Fund's investment advisor and
the Fund's Service Organizations waived a portion of their respective fees
(.43% (annualized) of average net assets).
9
<PAGE> 682
THE FUNDS
The Funds are portfolios of Pacifica Funds Trust, a business trust
organized under the laws of the Commonwealth of Massachusetts as an open-end,
management investment company. The Trust's Board of Trustees oversees the
overall management of the Funds and elects the officers of each Fund.
INVESTMENT POLICIES AND PRACTICES OF THE FUNDS
Each Fund seeks to maintain a net asset value of $1.00 per share. Their
assets consist only of obligations with remaining maturities (as defined by the
SEC) of 13 months or less at the date of acquisition, and the dollar-weighted
average maturity of each Fund's investments is 90 days or less. There can be no
assurance that each Fund's investment objective as described below will be
achieved or that the Funds will be able to maintain a net asset value of $1.00
per share.
The Prime Money Market Fund's investment objective is to seek the
maximization of current income to the extent consistent with the preservation of
capital and maintenance of liquidity. To achieve its objective the Prime Money
Market Fund may invest in a broad range of short-term, high quality U.S.
dollar-denominated instruments, consisting of commercial paper, certificates of
deposit, bankers' acceptances, time deposits, bank notes, variable rate master
demand note agreements, medium-term notes, corporate notes, U.S. Agency
obligations and U.S. Treasury obligations. The Prime Money Market Fund also
invests in repurchase agreements collateralized or secured by U.S. Agency
obligations and U.S. Treasury obligations.
The Treasury Money Market Fund's investment objective is to seek current
income and stability of principal. To achieve its objective, the Treasury Money
Market Fund's fundamental policy is to invest only in obligations issued or
guaranteed by the U.S. Treasury and in notes and other instruments, including
repurchase agreements, collateralized or secured by such obligations. The Funds'
investment objectives, and the Treasury Money Market Fund's fundamental policy
stated above, may not be changed without the vote of a majority of the
outstanding shares of the particular Fund.
Each Fund will purchase only "First Tier Eligible Securities" (as defined
by the SEC) that present minimal credit risks as determined by FICM pursuant to
guidelines approved by the Trust's Board of Trustees. First Tier Eligible
Securities consist of (i) securities that either (a) have
10
<PAGE> 683
short-term debt ratings at the time of purchase in the highest rating category
by at least two unaffiliated nationally recognized statistical rating
organizations ("NRSROs") (or one NRSRO if the security was rated by only one
NRSRO), or (b) are issued by issuers with such ratings, and (ii) certain
securities that are unrated (including securities of issuers that have long-term
but not short-term ratings) but are of comparable quality as determined in
accordance with guidelines approved by the Board of Trustees. The Appendix to
the SAI includes a description of applicable NRSRO ratings.
The types of securities and investment practices used by the Funds are
described in greater detail below under "Description of Securities and
Investment Practices."
DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES
INFORMATION FOR BOTH FUNDS
The Treasury Money Market Fund may invest only in obligations issued or
guaranteed by the U.S. Treasury such as bills, notes, bonds and certificates of
indebtedness, and in notes and repurchase agreements collateralized or secured
by such obligations. These obligations may also include U.S. Treasury STRIPS
(U.S. Treasury securities that have been separated into their component parts of
principal and interest payments and recorded as such in the Federal Reserve
book-entry record keeping system). The Prime Money Market Fund may invest in
U.S. Treasury obligations, as well as in obligations of agencies and
instrumentalities of the U.S. Government. Some obligations issued or guaranteed
by U.S. Government agencies and instrumentalities, such as Government National
Mortgage Association pass-through certificates, are supported by the full faith
and credit of the U.S. Government; others, such as those of the Federal Home
Loan Banks, by the right of the issuer to borrow from the U.S. Treasury; others,
such as those issued by the Federal National Mortgage Association, by
discretionary authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality; and others, such as some obligations issued by
the Student Loan Marketing Association, only by the credit of the agency or
instrumentality. While the U.S. Government provides financial support to these
latter U.S. Government-sponsored agencies and instrumentalities, no assurance
can be given that it will always do so since such support is not required by
law. The Prime Money Market Fund will invest in such securities only
11
<PAGE> 684
when FICM is satisfied that the credit risk with respect to the issuer is
minimal.
Each Fund may engage in repurchase agreements with financial institutions
such as banks or broker-dealers. In these transactions, a Fund buys a security
at one price and simultaneously promises to sell that same security back to the
seller at a higher price. Securities purchased subject to repurchase agreements
are deposited with the Fund's custodian and sub-custodians and, pursuant to the
terms of the repurchase agreement, must have an aggregate market value greater
than or equal to the repurchase price plus accrued interest at all times. If the
value of the underlying securities falls below the value of the repurchase price
plus accrued interest, the Fund will require the seller to deposit additional
collateral by the next business day. The repurchase date is generally within
seven days of the original purchase, but in no event more than 365 days. In all
cases, FICM must be satisfied with the creditworthiness of the other party to
the agreement before entering into a repurchase agreement. In the event of the
bankruptcy or default of the other party to a repurchase agreement, the Fund
could experience delays and costs in recovering its cash. To the extent that, in
the meantime, the value of the securities purchased may have decreased, the Fund
could experience a loss. Repurchase agreements may be considered to be loans by
the Fund under the Investment Company Act of 1940, as amended (the "1940 Act").
Securities purchased by a Fund may include variable and floating rate
instruments, which may have a stated maturity in excess of the Fund's maturity
limitations but are deemed to have shorter maturities because the Fund can
demand payment of the principal of the instrument at least once every thirteen
months upon not more than thirty days' notice (this demand feature is not
required if an instrument is guaranteed by the U.S. Government or an agency or
instrumentality thereof). These instruments may include variable amount master
demand notes that permit the indebtedness thereunder to vary in addition to
providing for periodic adjustments in the interest rate. There may be no active
secondary market with respect to a particular variable or floating rate
instrument. Nevertheless, the periodic readjustments of their interest rates
tend to assure that their value to a Fund will approximate their par value.
Illiquid variable and floating rate instruments (instruments which are not
payable upon seven days notice and do not have an active trading market) that
are acquired by a Fund are subject to the percentage limitations described
below.
Each Fund will not knowingly invest more than 10% of the value of its net
assets in securities that are illiquid. Repurchase agreements that do not
provide for payment to a Fund within seven days after notice, and securities
12
<PAGE> 685
that are not registered under the Securities Act of 1933 but that may be
purchased by institutional buyers under Rule 144A, are subject to this 10% limit
(unless, in the case of the Prime Money Market Fund, such securities are
variable amount master demand notes with maturities of nine months or less or
unless the Board or FICM, pursuant to guidelines adopted by the Board,
determines that a liquid trading market exists).
Each Fund may purchase securities on a "when-issued" basis and may purchase
or sell securities on a "forward commitment" basis. The Funds may also purchase
or sell securities on a "delayed settlement" basis. When-issued and forward
commitment transactions, which involve a commitment by a Fund to purchase or
sell particular securities with payment and delivery taking place at a future
date (perhaps one or two months later), permit the Fund to lock in a price or
yield on a security it owns or intends to purchase, regardless of future changes
in interest rates. Delayed settlement describes settlement of a securities
transaction in the secondary market which will occur sometime in the future.
When-issued, forward commitment and delayed settlement transactions involve the
risk, however, that the yield or price obtained in a transaction may be less
favorable than the yield or price available in the market when the securities
delivery takes place. A Fund's forward commitments, when-issued purchases and
delayed settlements are not expected to exceed 25% of the value of the Fund's
total assets absent unusual market conditions. The Funds do not intend to engage
in these transactions for speculative purposes but only in furtherance of their
investment objectives.
Each Fund may borrow monies for temporary purposes by entering into reverse
repurchase agreements in accordance with the investment restrictions described
below. Pursuant to such agreements, a Fund would sell portfolio securities to
financial institutions and agree to repurchase them at an agreed upon date and
price. At the time a Fund enters into a reverse repurchase agreement, it will
place in a segregated custodial account liquid assets or high grade debt
securities having a value equal to or greater than the repurchase price and FICM
will continuously monitor the account to ensure that the value is maintained. A
Fund would only enter into reverse repurchase agreements to avoid otherwise
selling securities during unfavorable market conditions to meet redemptions.
Reverse repurchase agreements involve the risk that the market value of the
portfolio securities sold by a Fund may decline below the price of the
securities the Fund is obligated to repurchase. Interest paid by a Fund in
connection with a reverse repurchase agreement will reduce the Fund's net
investment income. The Funds currently intend to limit their investments in
reverse repurchase agreements to no more than 20% of their total asset and will
13
<PAGE> 686
only engage in such transactions with primary dealers. Reverse repurchase
agreements are considered to be borrowings under the 1940 Act.
The Funds may attempt to increase yields by trading to take advantage of
short-term market variations. This policy could result in high portfolio
turnover, but should not adversely affect the Funds since they do not ordinarily
pay brokerage commissions on the purchase of short-term debt obligations.
In connection with the management of their daily cash positions, each Fund
may invest up to 10% of its assets in securities issued by other investment
companies which invest in short-term, high-quality debt securities and which
determine their net asset value per share based on the amortized cost or
penny-rounding method of valuation. The Treasury Money Market Fund may only
invest in shares of other investment companies that are structured to seek a
similar investment objective. As a shareholder of another investment company, a
Fund would bear, along with other shareholders, its pro rata portion of the
other investment company's expenses including advisory fees. These expenses
would be in addition to the advisory fees and other expenses the Fund bears
directly in connection with its own operations. Securities of other investment
companies will be acquired by the Funds within the limits prescribed by the 1940
Act.
ADDITIONAL PORTFOLIO INFORMATION FOR PRIME MONEY MARKET FUND
In addition to the types of instruments described above, the Prime Money
Market Fund may purchase U.S. dollar-denominated bank obligations such as time
deposits, certificates of deposit, bankers' acceptances, bank notes and deposit
notes issued by domestic and foreign banks. Time deposits are non-negotiable
deposits maintained at a banking institution for a specified period of time
normally at a stated interest rate. Certificates of deposit are certificates
evidencing the obligation of a bank to repay funds deposited with it for a
specified period of time. Bankers acceptances are negotiable deposits or bills
of exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank (meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument at maturity).
Bank notes usually represent senior debt of the bank.
The Prime Money Market Fund may also purchase commercial paper, short-term
notes, medium-term notes and bonds issued by domestic and foreign corporations
that meet the Fund's maturity limitations.
Commercial paper purchased by the Fund may include paper issued in reliance
on the so-called "private placement" exemption under Sec-
14
<PAGE> 687
tion 4(2) of the Securities Act of 1933 ("Section 4(2) paper"). Section 4(2)
paper is restricted as to disposition under the federal securities laws and
generally is sold to institutional investors such as the Fund that agree that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of the issuer or investment dealers that make a market in
Section 4(2) paper. Section 4(2) paper will not be subject to the Fund's 10%
limitation on illiquid securities described above where the Board of Trustees or
FICM (pursuant to guidelines adopted by the Board) determines that a liquid
trading market exists.
The Prime Money Market Fund may also lend its portfolio securities in order
to increase income to broker-dealers and other institutional investors pursuant
to agreements requiring that the loans be continuously secured by collateral
equal at all times in value to at least the market value of the securities
loaned plus accrued interest. Collateral for such loans may include cash, U.S.
Treasury securities or other U.S. government securities or an irrevocable letter
of credit issued by a bank which meets the investment standards of the Fund.
Such loans will not be made if, as a result, the aggregate of all outstanding
loans of the Fund exceeds one-third of the value of its total assets. There may
be risks of delay in receiving additional collateral or in recovering the
securities loaned or even a loss of rights in the collateral should the borrower
of the securities fail financially.
The Prime Money Market Fund may also invest in U.S. dollar denominated
obligations issued or guaranteed by foreign governments or any of their
political subdivisions, agencies or instrumentalities. Such obligations include
debt obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Examples of these include the
International Bank for Reconstruction and Development (the "World Bank"), the
Asian Development Bank and the InterAmerican Development Bank.
The Prime Money Market Fund may purchase asset-backed securities, which are
securities backed by mortgages, installment sales contracts, credit card
receivables or other assets. The average life of asset-backed securities varies
with the maturities of the underlying instruments, and the average life of a
mortgage-backed instrument, in particular, is likely to be substantially less
than the original maturity of the mortgage pools underlying the securities as
the result of mortgage prepayments. For this and other reasons, an asset-backed
security's stated maturity may be shortened, and
15
<PAGE> 688
the securities' total return may be difficult to predict precisely. Such
difficulties are not, however, expected to have a significant effect on the Fund
since the remaining maturity of any asset-backed security acquired will be
thirteen months or less. Asset-backed securities purchased by the Fund may
include collateralized mortgage obligations ("CMOs") issued by private
companies.
Since the Prime Money Market Fund may purchase securities issued by foreign
issuers, the Fund may be subject to investment risks that are different in some
respects from those incurred by a fund which invests exclusively in debt
obligations of domestic issuers. Such potential risks include future political
and economic developments, the possible imposition of withholding taxes on
interest income payable on the securities by the particular country in which the
issuer is located, the possible seizure or nationalization of foreign deposits,
the possible establishment of exchange controls or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on these securities. In addition, foreign banks and other issuers
are not necessarily subject to the same regulatory requirements that apply to
domestic issuers (such as reserve requirements, loan limitations, examinations,
accounting, auditing and recordkeeping requirements, and public availability of
information), and the Fund may experience difficulties in obtaining or enforcing
a judgment against a foreign issuer. Absent any unusual market conditions, the
Fund will not invest more than 25% of its total assets in securities issued by
foreign issuers.
INVESTMENT RESTRICTIONS
Each Fund has adopted certain fundamental investment restrictions that may
be changed only with the approval of a majority of the outstanding shares of the
Fund. The following descriptions summarize several of the Funds' fundamental
investment restrictions, which are set forth in full in the SAI.
Neither Fund may:
1. purchase securities (with certain exceptions including U.S. Treasury
securities) if more than 5% of its total assets will be invested in the
securities of any one issuer, except that up to 25% of the Fund's total
assets may be invested without regard to this 5% limitation; and
2. invest 25% or more of its total assets in one or more issuers conducting
their principal business activities in the same industry
16
<PAGE> 689
(with certain exceptions including U.S. Government securities and, with
respect to the Prime Money Market Fund, the obligations of U.S. banks
and certain U.S. branches of foreign banks).
These investment restrictions are applied at the time investment securities
are purchased. As a matter of non-fundamental policy and in accordance with the
current regulations of the SEC, the Prime Money Market Fund intends to limit its
investments in the obligations of any one non-U.S. governmental issuer to not
more than 5% of its total assets at the time of purchase, provided that the
Prime Money Market Fund may invest up to 25% of its assets in the obligations of
one non-U.S. governmental issuer for a period of up to three business days.
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction of
the Board of Trustees. Information about the Trustees, as well as the Funds'
executive officers, may be found in the SAI under the heading "Trustees and
Officers."
ADVISOR
First Interstate Capital Management, Inc. serves as the Funds' investment
advisor. FICM is an indirect wholly-owned subsidiary of First Interstate
Bancorp, a publicly-held, multi-state bank holding company.
FICM supervises and assists in the overall management of the Funds' affairs
pursuant to an Investment Advisory and Management Agreement, subject to the
overall authority of the Board of Trustees. These management responsibilities
include, among other things, making decisions and placing orders for all
purchases and sales of the Funds' investment securities, furnishing economic and
statistical information as requested by the Board of Trustees, and monitoring
the Funds' arrangements with Service Organizations. Under its Agreement, FICM is
entitled to a fee, computed daily and payable monthly, at the annual rate of
0.30% of the first $500 million of the average daily net assets of each Fund
(considered separately on a Fund-by-Fund basis), 0.25% of the next $500 million
of each Fund's average daily net assets, and 0.20% of each Fund's average daily
net assets in excess of $1 billion. The advisory fee FICM receives may be
reduced in some cases by the amount paid to the Funds' Service Organizations
(see "Servicing Agreements" below), and FICM may voluntarily waive an additional
portion of the advisory fee payable by the Funds from time to time. The
annualized effective rates of the advisory fees paid by the Prime Money Market
Fund and the Treasury Money Market
17
<PAGE> 690
Fund were (after fee reductions and waivers) 0.12% and 0.13%, respectively, of
the average net assets of the Funds for the fiscal year ended September 30,
1995.
FICM maintains offices at 7501 East McCormick Parkway, Scottsdale, Arizona
85258.
On January 24, 1996, First Interstate Bancorp signed a definitive merger
agreement to merge with Wells Fargo & Company ("Wells Fargo"), a publicly-held
bank holding company with its head office at 420 Montgomery Street, San
Francisco, California 94104. The merger is conditioned upon, among other things,
certain regulatory approvals. Upon completion of the merger, currently expected
to occur during the second quarter of 1996, FICM will be wholly-owned by Wells
Fargo, and the existing investment advisory agreement between the Trust and FICM
will automatically terminate. It is contemplated that an application will be
filed with the Securities and Exchange Commission to ensure there is no
disruption as a result of the merger in the provision of investment advisory
services to the Funds, and that a meeting of shareholders will be held not later
than 120 days after the merger to approve ongoing investment advisory
arrangements for the Funds.
ADMINISTRATOR
The Dreyfus Corporation, located at 200 Park Avenue, New York, New York
10166, was formed in 1947. The Administrator, as of November 30, 1995, managed
or administered approximately $83 billion in assets for more than 1.7 million
investor accounts nationwide. Pursuant to its Administration Agreement with the
Funds, the Administrator supplies office facilities; provides statistical and
research data, data processing services, clerical, accounting and bookkeeping
services, internal auditing and legal services, and internal executive and
administrative services; prepares reports to shareholders; prepares reports to
and filings with the SEC and state securities authorities; prepares tax returns;
calculates the net asset value of each Fund's shares and dividends and capital
gains distributions to shareholders; and generally assists in all aspects of the
Funds' operations (except with respect to investment management services). For
its administrative services for the fiscal year ended September 30, 1995, the
Administrator received a fee from each Fund at the annual rate of 0.10% of each
Fund's average daily net assets. From time to time, the Administrator may waive
all or a portion of its fees with respect to a Fund.
18
<PAGE> 691
DISTRIBUTOR
Pacifica Funds Distributor Inc., located at 230 Park Avenue, New York, New
York 10169, acts as distributor for the Funds. PFD Inc. is an affiliate of
Furman Selz LLC ("Furman Selz") and was organized specifically to distribute
shares of the Trust; however, offers and sales of shares of the Trust will be
made only through Furman Selz or other registered (or exempt) dealers.
CUSTODIAN
First Interstate Bank of California ("FICAL") is the Funds' Custodian and
receives fees for its custodial services as described in the SAI. FICAL
maintains offices at 707 Wilshire Blvd., Los Angeles, California 90017.
TRANSFER AND DIVIDEND DISBURSING AGENT
Furman Selz serves as the Fund's Transfer and Dividend Disbursing Agent.
Furman Selz maintains offices at 230 Park Avenue, New York, New York 10169.
SERVICING AGREEMENTS
Although the Funds do not expect to do so during the current fiscal year,
the Funds may enter into Servicing Agreements with certain banks and other
institutions that are record shareholders of the Funds' Institutional Shares
("Service Organizations"). The Service Organizations would render support
services to their customers ("Customers"), who are the beneficial owners of
Institutional Shares, in consideration of the Funds' payment (on an annualized
basis) of up to 0.25% of the average daily net asset value of the Institutional
Shares held by the Service Organizations for the benefit of their Customers.
From time to time, the Service Organizations may waive all or a portion of their
fees with respect to Institutional Shares of a Fund. FICM, FICAL and their
affiliates are eligible to become Service Organizations and receive fees under
Servicing Agreements. Such services, which are described more fully in the SAI,
include aggregating and processing purchase and redemption requests for Fund
shares from Customers and placing net purchase and redemption orders with the
Distributor, processing dividend payments from the Funds on behalf of Customers,
providing information periodically to Customers showing their positions in Fund
shares, and providing sub-accounting with respect to Fund shares beneficially
owned by Customers or the information necessary for sub-accounting. FICM intends
to waive a portion of the advisory fee
19
<PAGE> 692
otherwise payable by a Fund on assets invested by Customers of Service
Organizations to the extent that the investment advisory fees paid by a Fund to
FICM plus the fees paid by the Fund to Service Organizations exceed the annual
rate of 0.50% of the Fund's average daily net assets.
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any non-bank
affiliate thereof from sponsoring, organizing, controlling, or distributing the
shares of a registered, open-end investment company continuously engaged in the
issuance of its shares, and prohibit banks generally from underwriting
securities, but do not prohibit such a holding company or affiliate, or banks
generally, from acting as investment advisor, transfer agent, or custodian to
such an investment company, or from purchasing shares of such a company as agent
for and upon the order of Customers. FICM and FICAL and certain of the Service
Organizations are subject to such banking laws and regulations.
In the event of changes in federal or state statutes or regulations or in
interpretations or decisions pertaining to permissible activities by banks, FICM
and FICAL or certain of the Service Organizations could be prevented from
continuing their arrangements with the Funds; however, in such an event it is
expected that the Funds' Board of Trustees would make other arrangements and
shareholders would not suffer adverse financial consequences.
HOW TO BUY INSTITUTIONAL SHARES
Institutional Shares of each Fund are sold to Customers of affiliate,
franchise or correspondent banks of First Interstate Bancorp and other selected
institutions (the "Banks"). Clients of a Bank's trust division, as well as
individuals, corporations, partnerships and other businesses which maintain
qualified accounts at a Bank (including Individual Retirement and Keogh Plan
accounts) may invest in the Funds. Investors purchasing Fund shares may include
officers, directors or employees of a Bank.
All Institutional Share purchases are effected through Customers' accounts
at their Banks. Differing types of Bank accounts may from time to time purchase
Institutional Shares, including discretionary and non-discretionary personal and
other trust accounts, managing agency accounts and custodian accounts. The Funds
have no minimum investment requirement, although the Banks may impose account
minimums in connection with investments in the Funds.
20
<PAGE> 693
Institutional Shares are purchased through procedures established in
connection with the requirements of such Bank accounts. These procedures may
include instructions under which a Customer's account is "swept" automatically,
usually not less frequently than weekly, and amounts (federal funds) in excess
of a minimum balance agreed to by the Bank and the Customer are invested in
Institutional Shares of one or both of the Funds as directed by the Customer.
The Funds expect that Banks will transmit orders for the purchase of
Institutional Shares arising from automatic investment programs the same day as
the "excess" balances are swept. Depending upon the terms of the particular
account, a Bank may charge a Customer's account fees for the automatic sweep and
other cash management services provided, including, for example, account
maintenance fees, compensating balance requirements, or fees based upon account
transactions, assets, or income. Banks are responsible for providing information
concerning these services and their charges to their Customers prior to any
purchase of Institutional Shares, and an investor should read this Prospectus in
light of the terms of the investor's Bank account before investing.
Institutional Shares normally will be registered in the name of a Bank or a
nominee of a Bank. The Bank will receive a written statement at least monthly of
each purchase or redemption of shares. Beneficial ownership of Institutional
Shares will be recorded by the Banks and reflected in the account statements
provided by such Banks to their Customers at such times as the Banks may
determine.
It is the responsibility of the Banks to transmit orders for purchases of
Institutional Shares by their Customers to the Transfer Agent, and for the Banks
to deliver required funds on a timely basis. Each Fund's Institutional Shares
are sold on a continuous basis, without a sales charge imposed by the Funds, at
the per share net asset value next determined after federal funds (which are
held on deposit at a Federal Reserve Bank) are received by the Funds. The net
asset value per share ("NAV") for each Fund is calculated daily at 12:00 noon,
Pacific time, on days when the Funds are open for business (i.e., days on which
the San Francisco branch of the Federal Reserve Bank, FICAL as the Funds'
Custodian and, in the case of the Treasury Money Market Fund, the New York Stock
Exchange are open).
The NAV of the Institutional Shares of the Funds is computed by dividing
the value of a Fund's assets allocated to its Institutional Shares, less the
liabilities charged to that class, by the total number of outstanding shares of
that class. Each Fund uses the amortized cost method of valuing its securities.
This technique involves valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or
21
<PAGE> 694
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price a Fund would receive if it sold the instrument.
Federal regulations generally require that investors provide a certified
Taxpayer Identification Number ("TIN") upon opening an account. See "Dividends,
Distributions and Federal Income Taxes" for further information concerning this
requirement. Failure to furnish a certified TIN could subject the investor to a
$50 penalty by the Internal Revenue Service (the "IRS"). In the interest of
economy and convenience, certificates for Fund shares will not be issued.
Shareholder inquiries and further information regarding purchases of Fund shares
or the names of participating Banks may be obtained by calling (800) 662-8417.
The Funds reserve the right to reject any purchase order.
HOW TO EXCHANGE INSTITUTIONAL SHARES
Each Fund's Institutional Shares may be exchanged without cost for
Institutional Shares in another investment portfolio of the Trust. Exchange
requests may be made by a Customer to the Customer's Bank in accordance with the
procedures or instructions specified by the Bank. Consult your Bank for the
proper procedure to be followed. Banks will be responsible for transmitting
exchange requests from their Customers to the Funds. Exchanges will be made by
the Funds following the receipt by its Transfer Agent of an exchange request
from a Bank.
An exchange involves a redemption of all or a portion of the Institutional
Shares in one Fund and the investment of the redemption proceeds in
Institutional Shares of the other Fund. The redemption will be made at the per
share NAV of the Institutional Shares to be redeemed next determined after the
exchange request is received and accepted by the Funds' Transfer Agent. The
Institutional Shares of the Fund to be acquired will be purchased at the NAV of
those shares next determined after acceptance of the purchase order by the
Transfer Agent, in accordance with the Funds' customary policy for accepting
investments.
In addition, Institutional Shares of a Fund may be exchanged for Investor
Shares of the same Fund in connection with the distribution of assets held in a
qualified trust, agency or custodial account maintained with the trust
department of a First Interstate or other bank, trust company or thrift
institution, or in other cases where Institutional Shares are not held in
22
<PAGE> 695
such qualified accounts. Similarly, Investor Shares may be exchanged for
Institutional Shares of the same Fund if the shares are to be held in such a
qualified trust, agency or custodial account. These exchanges are made without a
sales charge at the net asset value of the respective share classes.
Bank Customers may find the exchange privilege useful if their investment
objectives or market outlook should change. Before making an exchange request,
please obtain and read the current prospectus for the Funds.
HOW TO REDEEM INSTITUTIONAL SHARES
A Customer may redeem all or part of the value of the Customer's
Institutional Shares in accordance with instructions and limitations pertaining
to the account at the Customer's Bank. Consult your Bank for the appropriate
procedures to be followed.
All redemption requests properly received by Furman Selz as the Funds'
Transfer Agent from a Bank prior to 12:00 noon, Pacific time, on a day the Funds
are open for business, are effected at the next determined NAV calculated that
day. If the redemption request is received at or after 12:00 noon, Pacific time,
Institutional Shares will be redeemed at their next determined NAV the next
business day. It is the responsibility of Banks to transmit redemption orders on
a timely basis in accordance with their agreements with Customers.
The Funds ordinarily will transmit payment for all Institutional Shares
redeemed within two business days after receipt of a redemption request in
proper form, but in any event payment will be made within seven days thereafter,
except as provided by the rules of the SEC. During the period prior to the time
the redemption request is executed, dividends on such Institutional Shares will
accrue and be payable as described under "Dividends, Distributions and Federal
Income Taxes," and investors will be entitled to exercise all other beneficial
rights of ownership.
If an investor has agreed with a particular Bank to maintain a minimum
balance in an account, and the balance in the account falls below that minimum,
the investor may be obliged to redeem all of the investor's Institutional Shares
in the Funds.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAXES
Each Fund's net investment income ordinarily is declared as a dividend on
each day that the Funds are open for business. Dividends are paid
23
<PAGE> 696
within five business days after the end of each month. Institutional Shares
begin accruing dividends on the day the purchase is effected and continue to
accrue dividends through the day before the redemption request is executed. Each
Fund's earnings for non-business days are declared as dividends to shareholders
of record on the preceding business day. All dividends are reinvested
automatically in additional Institutional Shares of that Fund at net asset value
or, at the option of the Bank Customer, as indicated on the authorization form
provided by the Customer's Bank, are either credited to the Customer's Bank
account or paid in cash. Distributions from net realized securities gains are
normally declared and paid once a year, but each Fund may make distributions on
a more frequent basis to comply with the distribution requirements of the
Internal Revenue Code of 1986, as amended (the "Code"). In all cases
distributions will be made in a manner that is consistent with the provisions of
the 1940 Act. Neither Fund will make distributions from net realized securities
gains unless capital loss carryovers, if any, have been utilized or have
expired. These distributions, if any, are reinvested automatically in additional
Institutional Shares of the Fund involved at net asset value or, at the
Customer's option, are credited as described above. If all Institutional Shares
in the account are redeemed at any time during the month, all dividends to which
the Customer is entitled will be paid within five business days after the end of
the month by crediting the Customer's Bank account or, if this is not possible,
in cash. All expenses are accrued daily and deducted before declaration of
dividends.
Notice as to the tax status of dividends and distributions declared by each
Fund is mailed annually. Each Customer will also receive periodic account
summaries which will include information as to income dividends and
distributions from securities gains, if any, declared during the year.
Since each Fund's income is derived from interest rather than dividends, no
portion of either Fund's dividends or distributions will qualify for the
dividends received deduction allowable to certain U.S. corporations. Dividends
from net investment income, together with distributions from the excess, if any,
of net realized short-term over net realized long-term losses and all or a
portion of the gains from the sale or other disposition of certain market
discount bonds, are taxable to those shareholders who are not exempt from
federal income taxes as ordinary income, whether or not reinvested in additional
shares. Distributions from net realized long-term securities gains, if any, are
taxable to those shareholders who are not exempt from federal income taxes as
long-term capital gains. Shareholders in the Funds may be subject to state and
local taxes on dividends and distributions declared by the Funds.
24
<PAGE> 697
To avoid a federal excise tax, each Fund must distribute substantially all
of its ordinary income, and capital gain net income, if any, by the end of each
calendar year. Dividends or distributions, if any, payable to shareholders of
record on a date in October, November or December of any year are deemed to have
been paid in that year, if they are paid by the following January.
Federal regulations may require, in certain cases, a Customer's Bank to
withhold ("backup withholding") and remit to the U.S. Treasury 31% of dividends
and distributions paid to such Customer if the Customer (i) has provided either
an incorrect TIN or no TIN at all, (ii) is subject to backup withholding by the
Internal Revenue Service for failure to report the receipt of taxable interest
or dividend income properly, or (iii) has failed to certify to the Bank that he
or she is not subject to backup withholding or that he or she is an "exempt
recipient."
A TIN is either the Social Security number or employer identification
number of the beneficial owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
beneficial owner of the account, and may be claimed as a credit on the
beneficial owner's federal income tax return.
Each Fund will be treated as a separate entity for tax purposes, and has
qualified and intends to continue to qualify as a regulated investment company
under the Code as long as this qualification is in the best interest of its
shareholders. Such qualification generally relieves each Fund of liability for
federal income taxes to the extent its earnings are distributed in accordance
with the applicable provisions of the Code.
Investors should consult their tax advisors regarding specific questions as
to federal, state or local taxes.
OTHER INFORMATION
CAPITALIZATION
Pacifica Funds Trust (formerly Fund Source) was organized as a
Massachusetts business trust on July 17, 1984, and consists of a series of
separately managed portfolios. This Prospectus relates to the Institutional
Shares of two of these managed portfolios -- the Pacifica Prime Money Market
Fund and Pacifica Treasury Money Market Fund -- which were reorganized as
portfolios of Pacifica Funds Trust on October 1, 1994 and which are classified
as diversified, open-end management investment companies under the 1940 Act.
25
<PAGE> 698
The capitalization of the Trust consists solely of an unlimited number of
shares of beneficial interest with a par value of $0.001 per share. The Board of
Trustees has authorized the issuance of three classes of shares in each of the
Funds -- Institutional Shares, Service Shares and Investor Shares. Each share of
a Fund is entitled to cash dividends and distributions earned on such Fund's
shares as are declared in the discretion of the Board of Trustees, and
represents the same proportionate interest in a particular Fund with other
shares of the Fund, except that a Fund's Institutional, Service and Investor
Shares each bear all of the Service Organization fees, distribution payments (if
any) and other "class" expenses that are allocated to a particular class.
Investor Shares pay higher combined fees for shareholder support and
distribution services than Service Shares, and Service Shares pay higher
shareholder support fees than Institutional Shares. This difference in expenses
will create different performance results for the three classes. The Funds will
offer various services and privileges in connection with their Investor Shares
that are not offered in connection with their Service Shares or Institutional
Shares, such as an automatic investment plan, an automatic withdrawal plan and
certain check writing privileges. Additional information concerning each class
of shares may be obtained by calling (800) 662-8417 or by contacting a
Customer's Service Organization.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust. The Declaration of Trust also
provides for indemnification out of the property of a Fund of any shareholder
held personally liable solely by reason of being or having been a shareholder of
the Fund. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a Fund itself would
be unable to meet its obligations and should be considered remote.
When issued, shares of the Trust are fully paid, non-assessable and freely
transferable.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Trust is not required to hold annual
meetings, but in the event that a special meeting is held, shareholders of each
Fund will be entitled to one vote for each full share
26
<PAGE> 699
held and fractional votes for fractional shares held, and will vote in the
aggregate and not on a Fund-by-Fund basis, except as required by the 1940 Act or
other applicable law. It is contemplated that, as required by the 1940 Act, the
shareholders of the respective Funds will vote separately on a Fund-by-Fund
basis on matters relating to a particular Fund's investment advisory agreement
or changes in a Fund's fundamental investment limitations, and on other matters
where the interests of the respective Funds are not substantially identical.
Similarly, shareholders of each of the Funds will vote in the aggregate and not
by class unless the matter to be voted on affects only the interests of the
holders of a particular class of a Fund's shares. Voting rights are not
cumulative.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust and in connection with the meeting to comply with the shareholders'
communications provisions of Section 16(c) of the 1940 Act. See "Description of
the Funds" in the SAI.
PERFORMANCE INFORMATION
From time to time each Fund advertises the yield and effective yield of its
Institutional Shares. Both yield figures will fluctuate, are based on historical
earnings and are not intended to indicate future performance. The yield for
Institutional Shares of each Fund refers to the income generated by an
investment in Institutional Shares of a Fund over a seven-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 week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The effective yield is calculated similarly but,
when annualized, the income earned by an investment in Institutional Shares of a
Fund is assumed to be reinvested. The effective yield will be slightly higher
than the yield because of the compounding effect of this assumed reinvestment.
Each Fund's yield and effective yield for Institutional Shares may reflect
voluntary fee waivers. See "Management of the Funds."
Yield information is useful in reviewing each Fund's performance, but
because yields will fluctuate, such information may not provide a basis for
comparison with domestic bank deposits or other investments which pay a fixed
yield for a stated period of time.
27
<PAGE> 700
For purposes of comparison, the Funds may, from time to time, quote
performance information from IBC/Donoghue's MONEY FUND REPORT of Holliston,
Massachusetts 01746. IBC/Donoghue's MONEY FUND AVERAGE is a widely recognized
index of money market fund performance. Figures reflect average yields of all
taxable money funds included in IBC/Donoghue's index. IBC/Donoghue's U.S.
TREASURY & REPO MONEY FUND AVERAGE is a component of this average and reflects
average yields of all taxable U.S. Treasury money funds.
Any fees which may be imposed by Banks directly on their Customer accounts
for cash management services in connection with investments in the Funds are not
reflected in yield figures and any such fees, if charged, will reduce the actual
return received by Bank Customers on their investments.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Funds, 237 Park Avenue,
Suite 910, New York, New York 10017.
General and Account Information: (800) 662-8417.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
FUNDS OR BY THEIR DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY FIRST INTERSTATE BANCORP OR ITS AFFILIATES,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
28
<PAGE> 701
INVESTMENT ADVISOR
First Interstate Capital Management, Inc.
7501 East McCormick Parkway
Scottsdale, Arizona 85258
ADMINISTRATOR
The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
DISTRIBUTOR
Pacifica Funds Distributor Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
First Interstate Bank of California
707 Wilshire Boulevard
Los Angeles, California 90017
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
[PACIFICA LOGO] PACPTMMIS-2/96
<PAGE> 702
[PACIFICA LOGO]
(SERVICE SHARES)
PACIFICA PRIME MONEY
MARKET FUND
PACIFICA TREASURY
MONEY MARKET FUND
PROSPECTUS
FEBRUARY 1, 1996
[FIRST INTERSTATE BANK LOGO]
Investment Advisor to The Pacifica Funds
<PAGE> 703
PACIFICA FUNDS TRUST
(SERVICE SHARES)
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) 662-8417
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. --
INVESTMENT ADVISOR
("FICM" OR THE "ADVISOR")
THE DREYFUS CORPORATION -- ADMINISTRATOR
(THE "ADMINISTRATOR")
PACIFICA FUNDS DISTRIBUTOR INC. -- DISTRIBUTOR
("PFD INC." OR THE "DISTRIBUTOR")
Pacifica Funds Trust (the "Trust") is an open-end investment company (a
mutual fund) that offers a selection of separate investment portfolios. This
Prospectus describes the Service Shares of the following two money market funds
(the "Funds"):
- Pacifica Prime Money Market Fund
- Pacifica Treasury Money Market Fund
Service Shares of the Funds are sold to investors maintaining qualified
accounts at bank affiliates of First Interstate Bancorp or other banks or
institutions designated by First Interstate Bancorp ("Banks").
This Prospectus sets forth concisely the information a prospective investor
should know before investing in either of the Funds and should be read and
retained for future reference. A Statement of Additional Information for the
Funds' Service and Institutional Shares (the "SAI") dated February 1, 1996
(which may be revised from time to time), containing additional and more
detailed information about the Funds, has been filed with the Securities and
Exchange Commission (the "SEC") and is hereby incorporated by reference into the
Prospectus. For a free copy, call the telephone number above.
----------------------------
AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FIRST INTERSTATE OR OTHER BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN 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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1996.
<PAGE> 704
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FUND EXPENSES............................................ 3
FEE TABLE -- SERVICE SHARES.............................. 3
FINANCIAL HISTORY........................................ 5
THE FUNDS................................................ 10
INVESTMENT POLICIES AND PRACTICES OF THE FUNDS........... 10
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES....... 11
INVESTMENT RESTRICTIONS.................................. 16
MANAGEMENT OF THE FUNDS.................................. 17
HOW TO BUY SERVICE SHARES................................ 20
HOW TO EXCHANGE SERVICE SHARES........................... 22
HOW TO REDEEM SERVICE SHARES............................. 23
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAXES........ 23
OTHER INFORMATION........................................ 25
</TABLE>
2
<PAGE> 705
FUND EXPENSES
The following table lists the annual costs and expenses that an investor
will incur either directly or indirectly as a shareholder of a Fund's Service
Shares based upon the Fund's operating expenses for the year ended September 30,
1995, adjusted to reflect current fees and expenses. See "Other
Information -- Capitalization."
FEE TABLE -- SERVICE SHARES
<TABLE>
<CAPTION>
PRIME TREASURY
MONEY MONEY
MARKET MARKET
FUND FUND
------ --------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price)............. None None
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering
price).................................... None None
Deferred Sales Load (as a percentage of
redemption proceeds)...................... None None
Redemption Fees.............................. None None
Exchange Fee................................. None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (after waivers)+............. 0.12% 0.12%
Other Expenses (after waivers)++............. 0.33 0.34
----- -----
TOTAL FUND OPERATING EXPENSES:
(after waivers)+++........................... 0.45% 0.46%
===== =====
</TABLE>
- ---------------
+ The investment advisory agreement for the Funds provides for management
fees payable at an annual rate of 0.30% of the first $500 million of the
average daily net assets of each Fund (considered separately on a
Fund-by-Fund basis), 0.25% of the next $500 million of each Fund's
average daily net assets, and 0.20% of each Fund's average daily net
assets in excess of $1 billion. These amounts may be reduced pursuant to
undertakings by the Advisor.
++ Other Expenses (before waivers) would be 0.38% for the Prime Money
Market Fund and 0.38% for the Treasury Money Market Fund.
+++ Total Fund Operating Expenses (before waivers) would be 0.63% for the
Prime Money Market Fund and 0.62% for the Treasury Money Market Fund.
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Fund's Service Shares
3
<PAGE> 706
will bear. The table does not reflect any charges that may be imposed by a First
Interstate Bank or other institution directly on their customer accounts in
connection with investments in the Funds.
EXAMPLE:+
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:++
<TABLE>
<CAPTION>
PRIME TREASURY
MONEY MONEY
MARKET MARKET
FUND FUND
------ --------
<S> <C> <C>
1 year....................................... $ 5 $ 5
3 years...................................... 14 15
5 years...................................... 25 26
10 years..................................... 57 58
</TABLE>
- ---------------
+ THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN
IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE MORE OR LESS THAN THE ASSUMED
AMOUNT.
++ The amount of expenses a Service class shareholder would pay without
waivers under these assumptions and assuming redemption after one, three,
five and ten years would be $6, $20, $35 and $79, respectively, for the
Prime Money Market Fund and $6, $20, $35 and $77, respectively, for the
Treasury Money Market Fund.
4
<PAGE> 707
FINANCIAL HISTORY
The financial data shown below is to assist investors in evaluating the
performance of the Funds for each of the ten years in the period ended September
30, 1995. The following information for the year ended September 30, 1995 and
the six months ended September 30, 1994 has been audited by Ernst & Young LLP,
the Funds' current independent auditors, whose report thereon appears in the
SAI. The following information for each of the four years in the period ended
March 31, 1994 has been audited by the Funds' former independent accountants
whose report thereon appears in the SAI. Further data relating to the Funds and
related notes are also included in the SAI. Prior to August 11, 1995, the Funds
offered only one class of shares to institutional investors, which class is now
known as Service Shares. The Funds currently offer three classes of shares to
institutional and non-institutional investors. See "Other Information --
Capitalization."
5
<PAGE> 708
PRIME MONEY MARKET FUND*
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
--------------------------------------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991 1992 1993 1994
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning
of year.......... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ .9997 $ .9998
-------- -------- -------- -------- -------- -------- -------- -------- --------
INVESTMENT
OPERATIONS:
Investment
income -- net.... .0754 .0581 .0634 .0764 .0849 .0745 .0510 .0327 .0296
Net realized gain
(loss) on
investments...... -- -- -- -- -- -- (.0003) .0001 --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
Investment
Operations...... .0754 .0581 .0634 .0764 .0849 .0745 .0507 .0328 .0296
-------- -------- -------- -------- -------- -------- -------- -------- --------
DISTRIBUTIONS:
Dividends from
investment
income -- net.... (.0754) (.0581) (.0634) (.0764) (.0849) (.0745) (.0510) (.0327) (.0296)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value,
end
of year.......... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ .9997 $ .9998 $ .9998
======== ======== ======== ======== ======== ======== ======== ======== ========
Total Investment
Return.......... 7.80% 5.97% 6.50% 7.88% 8.82% 7.72% 5.22% 3.32% 3.00%
RATIOS/SUPPLEMENTAL
DATA:
Ratio of expenses
to average net
assets........... .66%(2) .68%(3) .58%(4) .56%(4) .54%(5) .47%(6) .43%(7) .41%(8) .41%(9)
Ratio of net
investment income
to average net
assets........... 7.47%(2) 5.81%(3) 6.38%(4) 7.58%(4) 7.95%(5) 7.38%(6) 5.09%(7) 3.27%(8) 2.96%(9)
Net Assets, end of
year (000's
Omitted)......... $350,344 $407,815 $628,987 $496,675 $493,641 $543,834 $528,397 $468,479 $527,599
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS FISCAL
ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994** 1995
------------- -------------
<S> <C> <C>
PER SHARE DATA:
Net asset value,
beginning
of year.......... $ .9998 $ .9998
--------- ---------
INVESTMENT
OPERATIONS:
Investment
income -- net.... .0185 .0546
Net realized gain
(loss) on
investments...... -- --
--------- ---------
Total from
Investment
Operations...... .0185 .0546
--------- ---------
DISTRIBUTIONS:
Dividends from
investment
income -- net.... (.0185) (.0546)
--------- ---------
Net asset value,
end
of year.......... $ .9998 $ .9998
=========== =========
Total Investment
Return.......... 3.71%(1) 5.60%
RATIOS/SUPPLEMENTAL
DATA:
Ratio of expenses
to average net
assets........... .41%(1)(10) .41%(11)
Ratio of net
investment income
to average net
assets........... 3.67%(1)(10) 5.47%(11)
Net Assets, end of
year (000's
Omitted)......... $ 565,305 $ 614,101
</TABLE>
- ---------------
* The Prime Money Market Fund operated as Pacific American Liquid Assets, Inc.
from commencement of operations on April 30, 1981 until it was reorganized
as a portfolio of Pacific American Fund on October 1, 1985. On October 1,
1994, the Fund was reorganized as the "Pacific American Money Market
Portfolio," a portfolio of Pacifica Funds Trust. In July 1995, the Fund was
renamed the "Pacifica Prime Money Market Fund."
** On October 1, 1994, the Fund's fiscal year end changed from March 31 to
September 30.
(Footnotes continued on next page)
6
<PAGE> 709
(Footnotes continued from previous page)
(1) Annualized basis.
(2) During the year ended March 31, 1986, the Fund's investment advisor waived
a portion of its fees (.13% of average net assets).
(3) During the year ended March 31, 1987, the Fund's investment advisor waived
a portion of its fees (.25% of average net assets). In addition, during the
period from January 1, 1987 to March 31, 1987, the Fund's investment
advisor waived an additional portion of its fees (.02% of average net
assets).
(4) During the years ended March 31, 1988 and 1989, the Fund's investment
advisor waived a portion of its fees (.35% and .34% of average net assets,
respectively.)
(5) During the year ended March 31, 1990, the Fund's investment advisor and the
Fund's prior distributor waived a portion of their respective fees (.36% of
average net assets).
(6) During the year ended March 31, 1991, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.47% of average net assets).
(7) During the year ended March 31, 1992, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.48% of average net assets).
(8) During the year ended March 31, 1993, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.48% of average net assets).
(9) During the year ended March 31, 1994, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.48% of average net assets).
(10) During the six month period ended September 30, 1994, the Fund's investment
advisor and the Fund's Service Organizations waived a portion of their
respective fees (.48% (annualized) of average net assets).
(11) During the year ended September 30, 1995, the Fund's investment advisor and
the Fund's Service Organizations waived a portion of their respective fees
(.27% of average net assets).
7
<PAGE> 710
TREASURY MONEY MARKET FUND*
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
--------------------------------------------------------------------------
1986(1) 1987 1988 1989 1990 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of
year............. $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- -------- --------
INVESTMENT
OPERATIONS:
Investment
income -- net.... .0353 .0550 .0604 .0743 .0827 .0716
Net realized gain
(loss) on
investments...... -- -- -- -- -- .0003
-------- -------- -------- -------- -------- --------
Total from
Investment
Operations...... .0353 .0550 .0604 .0743 .0827 .0719
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS:
Dividends from
investment
income -- net.... (.0353) (.0550) (.0604) (.0743) (.0827) (0.716)
-------- -------- -------- -------- -------- --------
Dividends from net
realized gain on
investment....... -- -- -- -- -- (.0002)
-------- -------- -------- -------- -------- --------
Total
Distributions... (.0353) (.0550) (.0604) (.0743) (.0827) (.0718)
-------- -------- -------- -------- -------- --------
Net asset value,
end of year....... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0001
======== ======== ======== ======== ======== ========
Total Investment
Return.......... 7.18%(2) 5.64% 6.20% 7.63% 8.58% 7.42%
RATIOS/SUPPLEMENTAL
DATA:
Ratio of expenses
to average net
assets........... .80%(2)(3) .69%(4) .69%(5) .63%(6) .56%(7) .48%(8)
Ratio of net
investment income
to average net
assets........... 6.91%(2)(3) 5.50%(4) 6.12%(5) 7.36%(6) 7.73%(7) 7.10%(8)
Net Assets, end of
year (000's
Omitted)......... $123,243 $134,375 $101,066 $ 90,672 $ 98,398 $118,623
<CAPTION>
SIX MONTHS FISCAL
FISCAL YEAR ENDED MARCH 31, ENDED YEAR ENDED
---------------------------------- SEPTEMBER 30, SEPTEMBER 30,
1992 1993 1994 1994** 1995
-------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of
year............. $ 1.0001 $ .9999 $ 1.0001 $ 1.0000 $ 1.0000
-------- -------- -------- -------- ----------
INVESTMENT
OPERATIONS:
Investment
income -- net.... .0489 .0309 .0277 .0186 .0529
Net realized gain
(loss) on
investments...... .0002 .0002 -- -- --
-------- -------- -------- -------- ----------
Total from
Investment
Operations...... .0491 .0311 .0277 .0186 .0529
-------- -------- -------- -------- ----------
DISTRIBUTIONS:
Dividends from
investment
income -- net.... (.0489) (.0309) (.0277) (.0186) (.0529)
-------- -------- -------- -------- ----------
Dividends from net
realized gain on
investment....... (.0004) -- (.0001) -- --
-------- -------- -------- -------- ----------
Total
Distributions... (.0493) (.0309) (.0278) (.0186) (.0529)
-------- -------- -------- -------- ----------
Net asset value,
end of year....... $ .9999 $ 1.0001 $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ======== ======== ==========
Total Investment
Return.......... 5.03% 3.13% 2.81% 3.75%(2) 5.42%
RATIOS/SUPPLEMENTAL
DATA:
Ratio of expenses
to average net
assets........... .45%(9) .43%(10) .43%(11) .43%(2)(12) .42%(13)
Ratio of net
investment income
to average net
assets........... 4.73%(9) 3.04%(10) 2.77%(11) 3.72%(2)(12) 5.32%(13)
Net Assets, end of
year (000's
Omitted)......... $281,343 $614,237 $654,950 $690,630 $1,001,707
</TABLE>
- ---------------
* Prior to August 1, 1990, the Treasury Money Market Fund was known as the
Short-Term Government Fund and invested in obligations issued or guaranteed
by agencies and instrumentalities of the U.S. Government in accordance with
fundamental policies that were then effective for the Fund. The Treasury
Money Market Fund operated as a portfolio of Pacific American Fund through
October 1, 1994 when it was reorganized as the "Pacific American U.S.
Treasury Portfolio," a portfolio of Pacifica Funds Trust. In July 1995, the
Fund was renamed the "Pacifica Treasury Money Market Fund."
** On October 1, 1994, the Fund's fiscal year end changed from March 31 to
September 30.
(Footnotes continued on next page)
8
<PAGE> 711
(Footnotes continued from previous page)
(1) From October 1, 1985 (commencement of operations) to March 31, 1986.
(2) Annualized basis.
(3) During the period from October 1, 1985 (Commencement of Operations) to
March 31, 1986, the Fund's investment advisor waived a portion of its fees
(.25% (annualized) of average net assets).
(4) During the year ended March 31, 1987, the Fund's investment advisor waived
a portion of its fees aggregating $264,629 (.25% of average net assets). In
addition, during the period from January 1, 1987 to March 31, 1987, the
Fund's investment advisor and the Fund's prior distributor waived a portion
of their respective fees (.09% of average net assets).
(5) During the year ended March 31, 1988, the Fund's investment advisor and the
Fund's prior distributor waived a portion of their respective fees (.36% of
average net assets).
(6) During the year ended March 31, 1989, the Fund's investment advisor waived
a portion of its fees (.35% of average net assets).
(7) During the year ended March 31, 1990, the Fund's investment advisor and the
Fund's prior distributor waived a portion of their respective fees (.41% of
average net assets).
(8) During the year ended March 31, 1991, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.46% of average net assets).
(9) During the year ended March 31, 1992, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.48% of average net assets).
(10) During the year ended March 31, 1993, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.48% of average net assets).
(11) During the year ended March 31, 1994, the Fund's investment advisor and the
Fund's Service Organizations waived a portion of their respective fees
(.47% of average net assets).
(12) During the six month period ended September 30, 1994, the Fund's investment
advisor and the Fund's Service Organizations waived a portion of their
respective fees (.47% (annualized) of average net assets).
(13) During the year ended September 30, 1995, the Fund's investment advisor and
the Fund's Service Organizations waived a portion of their respective fees
(.24% of average net assets).
9
<PAGE> 712
THE FUNDS
The Funds are portfolios of Pacifica Funds Trust, a business trust
organized under the laws of the Commonwealth of Massachusetts as an open-end,
management investment company. The Trust's Board of Trustees oversees the
overall management of the Funds and elects the officers of each Fund.
INVESTMENT POLICIES AND PRACTICES OF THE FUNDS
Each Fund seeks to maintain a net asset value of $1.00 per share. Their
assets consist only of obligations with remaining maturities (as defined by the
SEC) of 13 months or less at the date of acquisition, and the dollar-weighted
average maturity of each Fund's investments is 90 days or less. There can be no
assurance that each Fund's investment objective as described below will be
achieved or that the Funds will be able to maintain a net asset value of $1.00
per share.
The Prime Money Market Fund's investment objective is to seek the
maximization of current income to the extent consistent with the preservation of
capital and maintenance of liquidity. To achieve its objective the Prime Money
Market Fund may invest in a broad range of short-term, high quality U.S.
dollar-denominated instruments, consisting of commercial paper, certificates of
deposit, bankers' acceptances, time deposits, bank notes, variable rate master
demand note agreements, medium-term notes, corporate notes, U.S. Agency
obligations and U.S. Treasury obligations. The Prime Money Market Fund also
invests in repurchase agreements collateralized or secured by U.S. Agency
obligations and U.S. Treasury obligations.
The Treasury Money Market Fund's investment objective is to seek current
income and stability of principal. To achieve its objective, the Treasury Money
Market Fund's fundamental policy is to invest only in obligations issued or
guaranteed by the U.S. Treasury and in notes and other instruments, including
repurchase agreements, collateralized or secured by such obligations. The Funds'
investment objectives, and the Treasury Money Market Fund's fundamental policy
stated above, may not be changed without the vote of a majority of the
outstanding shares of the particular Fund.
Each Fund will purchase only "First Tier Eligible Securities" (as defined
by the SEC) that present minimal credit risks as determined by FICM pursuant to
guidelines approved by the Trust's Board of Trustees. First Tier Eligible
Securities consist of (i) securities that either (a) have
10
<PAGE> 713
short-term debt ratings at the time of purchase in the highest rating category
by at least two unaffiliated nationally recognized statistical rating
organizations ("NRSROs") (or one NRSRO if the security was rated by only one
NRSRO), or (b) are issued by issuers with such ratings, and (ii) certain
securities that are unrated (including securities of issuers that have long-term
but not short-term ratings) but are of comparable quality as determined in
accordance with guidelines approved by the Board of Trustees. The Appendix to
the SAI includes a description of applicable NRSRO ratings.
The types of securities and investment practices used by the Funds are
described in greater detail below under "Description of Securities and
Investment Practices."
DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES
INFORMATION FOR BOTH FUNDS
The Treasury Money Market Fund may invest only in obligations issued or
guaranteed by the U.S. Treasury such as bills, notes, bonds and certificates of
indebtedness, and in notes and repurchase agreements collateralized or secured
by such obligations. These obligations may also include U.S. Treasury STRIPS
(U.S. Treasury securities that have been separated into their component parts of
principal and interest payments and recorded as such in the Federal Reserve
book-entry record keeping system). The Prime Money Market Fund may invest in
U.S. Treasury obligations, as well as in obligations of agencies and
instrumentalities of the U.S. Government. Some obligations issued or guaranteed
by U.S. Government agencies and instrumentalities, such as Government National
Mortgage Association pass-through certificates, are supported by the full faith
and credit of the U.S. Government; others, such as those of the Federal Home
Loan Banks, by the right of the issuer to borrow from the U.S. Treasury; others,
such as those issued by the Federal National Mortgage Association, by
discretionary authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality; and others, such as some obligations issued by
the Student Loan Marketing Association, only by the credit of the agency or
instrumentality. While the U.S. Government provides financial support to these
latter U.S. Government-sponsored agencies and instrumentalities, no assurance
can be given that it will always do so since such support is not required by
law. The Prime Money Market Fund will invest in such securities only
11
<PAGE> 714
when FICM is satisfied that the credit risk with respect to the issuer is
minimal.
Each Fund may engage in repurchase agreements with financial institutions
such as banks or broker-dealers. In these transactions, a Fund buys a security
at one price and simultaneously promises to sell that same security back to the
seller at a higher price. Securities purchased subject to repurchase agreements
are deposited with the Fund's custodian and sub-custodians and, pursuant to the
terms of the repurchase agreement, must have an aggregate market value greater
than or equal to the repurchase price plus accrued interest at all times. If the
value of the underlying securities falls below the value of the repurchase price
plus accrued interest, the Fund will require the seller to deposit additional
collateral by the next business day. The repurchase date is generally within
seven days of the original purchase, but in no event more than 365 days. In all
cases, FICM must be satisfied with the creditworthiness of the other party to
the agreement before entering into a repurchase agreement. In the event of the
bankruptcy or default of the other party to a repurchase agreement, the Fund
could experience delays and costs in recovering its cash. To the extent that, in
the meantime, the value of the securities purchased may have decreased, the Fund
could experience a loss. Repurchase agreements may be considered to be loans by
the Fund under the Investment Company Act of 1940, as amended (the "1940 Act") .
Securities purchased by a Fund may include variable and floating rate
instruments, which may have a stated maturity in excess of the Fund's maturity
limitations but are deemed to have shorter maturities because the Fund can
demand payment of the principal of the instrument at least once every thirteen
months upon not more than thirty days' notice (this demand feature is not
required if an instrument is guaranteed by the U.S. Government or an agency or
instrumentality thereof). These instruments may include variable amount master
demand notes that permit the indebtedness thereunder to vary in addition to
providing for periodic adjustments in the interest rate. There may be no active
secondary market with respect to a particular variable or floating rate
instrument. Nevertheless, the periodic readjustments of their interest rates
tend to assure that their value to a Fund will approximate their par value.
Illiquid variable and floating rate instruments (instruments which are not
payable upon seven days notice and do not have an active trading market) that
are acquired by a Fund are subject to the percentage limitations described
below.
Each Fund will not knowingly invest more than 10% of the value of its net
assets in securities that are illiquid. Repurchase agreements that do not
provide for payment to a Fund within seven days after notice, and securities
12
<PAGE> 715
that are not registered under the Securities Act of 1933 but that may be
purchased by institutional buyers under Rule 144A, are subject to this 10% limit
(unless, in the case of the Prime Money Market Fund, such securities are
variable amount master demand notes with maturities of nine months or less or
unless the Board or FICM, pursuant to guidelines adopted by the Board,
determines that a liquid trading market exists).
Each Fund may purchase securities on a "when-issued" basis and may purchase
or sell securities on a "forward commitment" basis. The Funds may also purchase
or sell securities on a "delayed settlement" basis. When-issued and forward
commitment transactions, which involve a commitment by a Fund to purchase or
sell particular securities with payment and delivery taking place at a future
date (perhaps one or two months later), permit the Fund to lock in a price or
yield on a security it owns or intends to purchase, regardless of future changes
in interest rates. Delayed settlement describes settlement of a securities
transaction in the secondary market which will occur sometime in the future.
When issued, forward commitment and delayed settlement transactions involve the
risk, however, that the yield or price obtained in a transaction may be less
favorable than the yield or price available in the market when the securities
delivery takes place. A Fund's forward commitments, when-issued purchases and
delayed settlements are not expected to exceed 25% of the value of the Fund's
total assets absent unusual market conditions. The Funds do not intend to engage
in these transactions for speculative purposes but only in furtherance of their
investment objectives.
Each Fund may borrow monies for temporary purposes by entering into reverse
repurchase agreements in accordance with the investment restrictions described
below. Pursuant to such agreements, a Fund would sell portfolio securities to
financial institutions and agree to repurchase them at an agreed upon date and
price. At the time a Fund enters into a reverse repurchase agreement, it will
place in a segregated custodial account liquid assets or high grade debt
securities having a value equal to or greater than the repurchase price and FICM
will continuously monitor the account to ensure that the value is maintained. A
Fund would only enter into reverse repurchase agreements to avoid otherwise
selling securities during unfavorable market conditions to meet redemptions.
Reverse repurchase agreements involve the risk that the market value of the
portfolio securities sold by a Fund may decline below the price of the
securities the Fund is obligated to repurchase. Interest paid by a Fund in
connection with a reverse repurchase agreement will reduce the Fund's net
investment income. The Funds currently intend to limit their investments in
reverse repurchase agreements to no more than 20% of their total assets and will
13
<PAGE> 716
only engage in such transactions with primary dealers. Reverse repurchase
agreements are considered to be borrowings under the 1940 Act.
The Funds may attempt to increase yields by trading to take advantage of
short-term market variations. This policy could result in high portfolio
turnover, but should not adversely affect the Funds since they do not ordinarily
pay brokerage commissions on the purchase of short-term debt obligations.
In connection with the management of their daily cash positions, each Fund
may invest up to 10% of its assets in securities issued by other investment
companies which invest in short-term, high-quality debt securities and which
determine their net asset value per share based on the amortized cost or
penny-rounding method of valuation. The Treasury Money Market Fund may only
invest in shares of other investment companies that are structured to seek a
similar investment objective. As a shareholder of another investment company, a
Fund would bear, along with other shareholders, its pro rata portion of the
other investment company's expenses including advisory fees. These expenses
would be in addition to the advisory fees and other expenses the Fund bears
directly in connection with its own operations. Securities of other investment
companies will be acquired by the Funds within the limits prescribed by the 1940
Act.
ADDITIONAL PORTFOLIO INFORMATION FOR PRIME MONEY MARKET FUND
In addition to the types of instruments described above, the Prime Money
Market Fund may purchase U.S. dollar-denominated bank obligations such as time
deposits, certificates of deposit, bankers' acceptances, bank notes and deposit
notes issued by domestic and foreign banks. Time deposits are non-negotiable
deposits maintained at a banking institution for a specified period of time
normally at a stated interest rate. Certificates of deposit are certificates
evidencing the obligation of a bank to repay funds deposited with it for a
specified period of time. Bankers acceptances are negotiable deposits or bills
of exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank (meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument at maturity).
Bank notes usually represent senior debt of the bank.
The Prime Money Market Fund may also purchase commercial paper, short-term
notes, medium-term notes and bonds issued by domestic and foreign corporations
that meet the Fund's maturity limitations.
Commercial paper purchased by the Fund may include paper issued in reliance
on the so-called "private placement" exemption under Sec-
14
<PAGE> 717
tion 4(2) of the Securities Act of 1933 ("Section 4(2) paper"). Section 4(2)
paper is restricted as to disposition under the federal securities laws and
generally is sold to institutional investors such as the Fund that agree that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of the issuer or investment dealers that make a market in
Section 4(2) paper. Section 4(2) paper will not be subject to the Fund's 10%
limitation on illiquid securities described above where the Board of Trustees or
FICM (pursuant to guidelines adopted by the Board) determines that a liquid
trading market exists.
The Prime Money Market Fund may also lend its portfolio securities in order
to increase income to broker-dealers and other institutional investors pursuant
to agreements requiring that the loans be continuously secured by collateral
equal at all times in value to at least the market value of the securities
loaned plus accrued interest. Collateral for such loans may include cash, U.S.
Treasury securities or other U.S. government securities or an irrevocable letter
of credit issued by a bank which meets the investment standards of the Fund.
Such loans will not be made if, as a result, the aggregate of all outstanding
loans of the Fund exceeds one-third of the value of its total assets. There may
be risks of delay in receiving additional collateral or in recovering the
securities loaned or even a loss of rights in the collateral should the borrower
of the securities fail financially.
The Prime Money Market Fund may also invest in U.S. dollar denominated
obligations issued or guaranteed by foreign governments or any of their
political subdivisions, agencies or instrumentalities. Such obligations include
debt obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Examples of these include the
International Bank for Reconstruction and Development (the "World Bank"), the
Asian Development Bank and the InterAmerican Development Bank.
The Prime Money Market Fund may purchase asset-backed securities, which are
securities backed by mortgages, installment sales contracts, credit card
receivables or other assets. The average life of asset-backed securities varies
with the maturities of the underlying instruments, and the average life of a
mortgage-backed instrument, in particular, is likely to be substantially less
than the original maturity of the mortgage pools underlying the securities as
the result of mortgage prepayments. For this and other reasons, an asset-backed
security's stated maturity may be shortened, and
15
<PAGE> 718
the securities' total return may be difficult to predict precisely. Such
difficulties are not, however, expected to have a significant effect on the Fund
since the remaining maturity of any asset-backed security acquired will be
thirteen months or less. Asset-backed securities purchased by the Fund may
include collateralized mortgage obligations ("CMOs") issued by private
companies.
Since the Prime Money Market Fund may purchase securities issued by foreign
issuers, the Fund may be subject to investment risks that are different in some
respects from those incurred by a fund which invests exclusively in debt
obligations of domestic issuers. Such potential risks include future political
and economic developments, the possible imposition of withholding taxes on
interest income payable on the securities by the particular country in which the
issuer is located, the possible seizure or nationalization of foreign deposits,
the possible establishment of exchange controls or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on these securities. In addition, foreign banks and other issuers
are not necessarily subject to the same regulatory requirements that apply to
domestic issuers (such as reserve requirements, loan limitations, examinations,
accounting, auditing and recordkeeping requirements, and public availability of
information), and the Fund may experience difficulties in obtaining or enforcing
a judgment against a foreign issuer. Absent any unusual market conditions, the
Fund will not invest more than 25% of its total assets in securities issued by
foreign issuers.
INVESTMENT RESTRICTIONS
Each Fund has adopted certain fundamental investment restrictions that may
be changed only with the approval of a majority of the outstanding shares of the
Fund. The following descriptions summarize several of the Funds' fundamental
investment restrictions, which are set forth in full in the SAI.
Neither Fund may:
1. purchase securities (with certain exceptions including U.S. Treasury
securities) if more than 5% of its total assets will be invested in the
securities of any one issuer, except that up to 25% of the Fund's total
assets may be invested without regard to this 5% limitation; and
2. invest 25% or more of its total assets in one or more issuers conducting
their principal business activities in the same industry
16
<PAGE> 719
(with certain exceptions including U.S. Government securities and, with
respect to the Prime Money Market Fund, the obligations of U.S. banks
and certain U.S. branches of foreign banks).
These investment restrictions are applied at the time investment securities
are purchased. As a matter of non-fundamental policy and in accordance with the
current regulations of the SEC, the Prime Money Market Fund intends to limit its
investments in the obligations of any one non-U.S. governmental issuer to not
more than 5% of its total assets at the time of purchase, provided that the
Prime Money Market Fund may invest up to 25% of its assets in the obligations of
one non-U.S. governmental issuer for a period of up to three business days.
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction of
the Board of Trustees. Information about the Trustees, as well as the Funds'
executive officers, may be found in the SAI under the heading "Trustees and
Officers."
ADVISOR
First Interstate Capital Management, Inc. serves as the Funds' investment
advisor. FICM is an indirect wholly-owned subsidiary of First Interstate
Bancorp, a publicly-held, multi-state bank holding company.
FICM supervises and assists in the overall management of the Funds' affairs
pursuant to an Investment Advisory and Management Agreement, subject to the
overall authority of the Board of Trustees. These management responsibilities
include, among other things, making decisions and placing orders for all
purchases and sales of the Funds' investment securities, furnishing economic and
statistical information as requested by the Board of Trustees, and monitoring
the Funds' arrangements with Service Organizations. Under its Agreement, FICM is
entitled to a fee, computed daily and payable monthly, at the annual rate of
0.30% of the first $500 million of the average daily net assets of each Fund
(considered separately on a Fund-by-Fund basis), 0.25% of the next $500 million
of each Fund's average daily net assets, and 0.20% of each Fund's average daily
net assets in excess of $1 billion. The advisory fee FICM receives may be
reduced in some cases by the amount paid to the Funds' Service Organizations
(see "Servicing Agreements" below), and FICM may voluntarily waive an additional
portion of the advisory fee payable by the Funds from time to time. The
annualized effective rates of the advisory fees paid by the Prime Money Market
Fund and the Treasury Money Market
17
<PAGE> 720
Fund were (after fee reductions and waivers) 0.12% and 0.13%, respectively, of
the average net assets of the Funds for the fiscal year ended September 30,
1995.
FICM maintains offices at 7501 East McCormick Parkway, Scottsdale, Arizona
85258.
On January 24, 1996, First Interstate Bancorp signed a definitive merger
agreement to merge with Wells Fargo & Company ("Wells Fargo"), a publicly-held
bank holding company with its head office at 420 Montgomery Street, San
Francisco, California 94104. The merger is conditioned upon, among other things,
certain regulatory approvals. Upon completion of the merger, currently expected
to occur during the second quarter of 1996, FICM will be wholly-owned by Wells
Fargo, and the existing investment advisory agreement between the Trust and FICM
will automatically terminate. It is contemplated that an application will be
filed with the Securities and Exchange Commission to ensure there is no
disruption as a result of the merger in the provision of investment advisory
services to the Funds, and that a meeting of shareholders will be held not later
than 120 days after the merger to approve ongoing investment advisory
arrangements for the Funds.
ADMINISTRATOR
The Dreyfus Corporation, located at 200 Park Avenue, New York, New York
10166, was formed in 1947. The Administrator, as of November 30, 1995, managed
or administered approximately $83 billion in assets for more than 1.7 million
investor accounts nationwide. Pursuant to its Administration Agreement with the
Funds, the Administrator supplies office facilities; provides statistical and
research data, data processing services, clerical, accounting and bookkeeping
services, internal auditing and legal services, and internal executive and
administrative services; prepares reports to shareholders; prepares reports to
and filings with the SEC and state securities authorities; prepares tax returns;
calculates the net asset value of each Fund's shares and dividends and capital
gains distributions to shareholders; and generally assists in all aspects of the
Funds' operations (except with respect to investment management services). For
its administrative services for the fiscal year ended September 30, 1995, the
Administrator received a fee from each Fund at the annual rate of 0.10% of each
Fund's average daily net assets. From time to time, the Administrator may waive
all or a portion of its fees with respect to a Fund.
18
<PAGE> 721
DISTRIBUTOR
Pacifica Funds Distributor Inc., located at 230 Park Avenue, New York, New
York 10169, acts as distributor for the Funds. PFD Inc. is an affiliate of
Furman Selz LLC ("Furman Selz") and was organized specifically to distribute
shares of the Trust; however, offers and sales of shares of the Trust will be
made only through Furman Selz or other registered (or exempt) dealers.
CUSTODIAN
First Interstate Bank of California ("FICAL") is the Funds' Custodian and
receives fees for its custodial services as described in the SAI. FICAL
maintains offices at 707 Wilshire Blvd., Los Angeles, California 90017.
TRANSFER AND DIVIDEND DISBURSING AGENT
Furman Selz serves as the Funds' Transfer and Dividend Disbursing Agent.
Furman Selz maintains offices at 230 Park Avenue, New York, New York 10169.
SERVICING AGREEMENTS
The Funds have entered into Servicing Agreements with certain banks and
other institutions that are record shareholders of the Funds' Service Shares
("Service Organizations"). The Service Organizations render support services to
their customers ("Customers"), who are the beneficial owners of Service Shares,
in consideration of the Funds' payment (on an annualized basis) of up to 0.25%
of the average daily net asset value of the Service Shares held by the Service
Organizations for the benefit of their Customers. From time to time, the Service
Organizations may waive all or a portion of their fees with respect to Service
Shares of a Fund. FICM, FICAL and their affiliates are eligible to become
Service Organizations and receive fees under Servicing Agreements. Such
services, which are described more fully in the SAI, include aggregating and
processing purchase and redemption requests for Fund shares from Customers and
placing net purchase and redemption orders with the Distributor, processing
dividend payments from the Funds on behalf of Customers, providing information
periodically to Customers showing their positions in Fund shares, and providing
sub-accounting with respect to Fund shares beneficially owned by Customers or
the information necessary for sub-accounting. FICM intends to waive a portion of
the advisory fee otherwise payable by a Fund on assets invested by Customers of
Service Organizations to the
19
<PAGE> 722
extent that the investment advisory fees paid by a Fund to FICM plus the fees
paid by the Fund to Service Organizations exceed the annual rate of 0.50% of the
Fund's average daily net assets.
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any non-bank
affiliate thereof from sponsoring, organizing, controlling, or distributing the
shares of a registered, open-end investment company continuously engaged in the
issuance of its shares, and prohibit banks generally from underwriting
securities, but do not prohibit such a holding company or affiliate, or banks
generally, from acting as investment advisor, transfer agent, or custodian to
such an investment company, or from purchasing shares of such a company as agent
for and upon the order of Customers. FICM and FICAL and certain of the Service
Organizations are subject to such banking laws and regulations.
In the event of changes in federal or state statutes or regulations or in
interpretations or decisions pertaining to permissible activities by banks, FICM
and FICAL or certain of the Service Organizations could be prevented from
continuing their arrangements with the Funds; however, in such an event it is
expected that the Funds' Board of Trustees would make other arrangements and
shareholders would not suffer adverse financial consequences.
HOW TO BUY SERVICE SHARES
Service Shares of each Fund are sold to Customers of affiliate, franchise
or correspondent banks of First Interstate Bancorp and other selected
institutions (the "Banks"). Clients of a Bank's trust division, as well as
individuals, corporations, partnerships and other businesses which maintain
qualified accounts at a Bank (including Individual Retirement and Keogh Plan
accounts) may invest in the Funds. Investors purchasing Fund shares may include
officers, directors or employees of a Bank.
All Service Share purchases are effected through Customers' accounts at
their Banks. Differing types of Bank accounts may from time to time purchase
Service Shares, including discretionary and non-discretionary personal and other
trust accounts, managing agency accounts and custodian accounts. The Funds have
no minimum investment requirement, although the Banks may impose account
minimums in connection with investments in the Funds.
20
<PAGE> 723
Service Shares are purchased through procedures established in connection
with the requirements of such Bank accounts. These procedures may include
instructions under which a Customer's account is "swept" automatically, usually
not less frequently than weekly, and amounts (federal funds) in excess of a
minimum balance agreed to by the Bank and the Customer are invested in Service
Shares of one or both of the Funds as directed by the Customer. The Funds expect
that Banks will transmit orders for the purchase of Service Shares arising from
automatic investment programs the same day as the "excess" balances are swept.
Depending upon the terms of the particular account, a Bank may charge a
Customer's account fees for the automatic sweep and other cash management
services provided, including, for example, account maintenance fees,
compensating balance requirements, or fees based upon account transactions,
assets, or income. Banks are responsible for providing information concerning
these services and their charges to their Customers prior to any purchase of
Service Shares, and an investor should read this Prospectus in light of the
terms of the investor's Bank account before investing.
Service Shares normally will be registered in the name of a Bank or a
nominee of a Bank. The Bank will receive a written statement at least monthly of
each purchase or redemption of shares. Beneficial ownership of Service Shares
will be recorded by the Banks and reflected in the account statements provided
by such Banks to their Customers at such times as the Banks may determine.
It is the responsibility of the Banks to transmit orders for purchases of
Service Shares by their Customers to the Transfer Agent, and for the Banks to
deliver required funds on a timely basis. Each Fund's Service Shares are sold on
a continuous basis, without a sales charge imposed by the Funds, at the per
share net asset value next determined after federal funds (which are held on
deposit at a Federal Reserve Bank) are received by Furman Selz as Transfer
Agent. The net asset value per share ("NAV") for each Fund is calculated daily
at 12:00 noon, Pacific time, on days when the Funds are open for business (i.e.,
days on which the San Francisco branch of the Federal Reserve Bank, FICAL as the
Funds' Custodian and, in the case of the Treasury Money Market Fund, the New
York Stock Exchange are open).
The NAV of the Service Shares of the Funds is computed by dividing the
value of a Fund's assets allocated to its Service Shares, less the liabilities
charged to that class, by the total number of outstanding shares of that class.
Each Fund uses the amortized cost method of valuing its securities. This
technique involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or
21
<PAGE> 724
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty valuation, it may
result in periods during which value, as determined by amortized cost, is higher
or lower than the price a Fund would receive if it sold the instrument.
Federal regulations generally require that investors provide a certified
Taxpayer Identification Number ("TIN") upon opening an account. See "Dividends,
Distributions and Federal Income Taxes" for further information concerning this
requirement. Failure to furnish a certified TIN could subject the investor to a
$50 penalty by the Internal Revenue Service (the "IRS"). In the interest of
economy and convenience, certificates for Fund shares will not be issued.
Shareholder inquiries and further information regarding purchases of Fund shares
or the names of participating Banks may be obtained by calling (800) 662-8417.
The Funds reserve the right to reject any purchase order.
HOW TO EXCHANGE SERVICE SHARES
Each Fund's Service Shares may be exchanged without cost for Service Shares
of the other Fund described in this Prospectus. Exchange requests may be made by
a Customer to the Customer's Bank in accordance with the procedures or
instructions specified by the Bank. Consult your Bank for the proper procedure
to be followed. Banks will be responsible for transmitting exchange requests
from their Customers to the Funds. Exchanges will be made by the Funds following
the receipt by its Transfer Agent of an exchange request from a Bank.
An exchange involves a redemption of all or a portion of the Service Shares
in one Fund and the investment of the redemption proceeds in Service Shares of
the other Fund. The redemption will be made at the per share NAV of the Service
Shares to be redeemed next determined after the exchange request is received and
accepted by the Funds' Transfer Agent. The Service Shares of the Fund to be
acquired will be purchased at the NAV of those shares next determined after
acceptance of the purchase order by the Transfer Agent, in accordance with the
Funds' customary policy for accepting investments.
Bank Customers may find the exchange privilege useful if their investment
objectives or market outlook should change. Before making an exchange request,
please obtain and read the current prospectus for the Funds.
22
<PAGE> 725
HOW TO REDEEM SERVICE SHARES
A Customer may redeem all or part of the value of the Customer's Service
Shares in accordance with instructions and limitations pertaining to the account
at the Customer's Bank. Consult your Bank for the appropriate procedures to be
followed.
All redemption requests properly received by Furman Selz as the Fund's
Transfer Agent from a Bank prior to 12:00 noon, Pacific time, on a day the Funds
are open for business, are effected at the next determined NAV calculated that
day. If the redemption request is received at or after 12:00 noon, Pacific time,
Service Shares will be redeemed at their next determined NAV the next business
day. It is the responsibility of Banks to transmit redemption orders on a timely
basis in accordance with their agreements with Customers.
The Funds ordinarily will transmit payment for all Service Shares redeemed
within two business days after receipt of a redemption request in proper form,
but in any event payment will be made within seven days thereafter, except as
provided by the rules of the SEC. During the period prior to the time the
redemption request is executed, dividends on such Service Shares will accrue and
be payable as described under "Dividends, Distributions and Federal Income
Taxes," and investors will be entitled to exercise all other beneficial rights
of ownership.
If an investor has agreed with a particular Bank to maintain a minimum
balance in an account, and the balance in the account falls below that minimum,
the investor may be obliged to redeem all of the investor's Service Shares in
the Funds.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAXES
Each Fund's net investment income ordinarily is declared as a dividend on
each day that the Funds are open for business. Dividends are paid within five
business days after the end of each month. Service Shares begin accruing
dividends on the day the purchase is effected and continue to accrue dividends
through the day before the redemption request is executed. Each Fund's earnings
for non-business days are declared as dividends to shareholders of record on the
preceding business day. All dividends are reinvested automatically in additional
Service Shares of that Fund at net asset value or, at the option of the Bank
Customer, as indicated on the authorization form provided by the Customer's
Bank, are either credited to the Customer's Bank account or paid in cash.
Distributions from net realized securities gains are normally declared and paid
once a
23
<PAGE> 726
year, but each Fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Internal Revenue Code of 1986, as
amended (the "Code"). In all cases distributions will be made in a manner that
is consistent with the provisions of the 1940 Act. Neither Fund will make
distributions from net realized securities gains unless capital loss carryovers,
if any, have been utilized or have expired. These distributions, if any, are
reinvested automatically in additional Service Shares of the Fund involved at
net asset value or, at the Customer's option, are credited as described above.
If all Service Shares in the account are redeemed at any time during the month,
all dividends to which the Customer is entitled will be paid within five
business days after the end of the month by crediting the Customer's Bank
account or, if this is not possible, in cash. All expenses are accrued daily and
deducted before declaration of dividends.
Notice as to the tax status of dividends and distributions declared by each
Fund is mailed annually. Each Customer will also receive periodic account
summaries which will include information as to income dividends and
distributions from securities gains, if any, declared during the year.
Since each Fund's income is derived from interest rather than dividends, no
portion of either Fund's dividends or distributions will qualify for the
dividends received deduction allowable to certain U.S. corporations. Dividends
from net investment income, together with distributions from the excess, if any,
of net realized short-term over net realized long-term losses and all or a
portion of the gains from the sale or other disposition of certain market
discount bonds, are taxable to those shareholders who are not exempt from
federal income taxes as ordinary income, whether or not reinvested in additional
shares. Distributions from net realized long-term securities gains, if any, are
taxable to those shareholders who are not exempt from federal income taxes as
long-term capital gains. Shareholders in the Funds may be subject to state and
local taxes on dividends and distributions declared by the Funds.
To avoid a federal excise tax, each Fund must distribute substantially all
of its ordinary income, and capital gain net income, if any, by the end of each
calendar year. Dividends or distributions, if any, payable to shareholders of
record on a date in October, November or December of any year are deemed to have
been paid in that year, if they are paid by the following January.
Federal regulations may require, in certain cases, a Customer's Bank to
withhold ("backup withholding") and remit to the U.S. Treasury 31% of dividends
and distributions paid to such Customer if the Customer (i) has provided either
an incorrect TIN or no TIN at all, (ii) is subject to backup
24
<PAGE> 727
withholding by the Internal Revenue Service for failure to report the
receipt of taxable interest or dividend income properly, or (iii) has failed to
certify to the Bank that he or she is not subject to backup withholding or that
he or she is an "exempt recipient."
A TIN is either the Social Security number or employer identification
number of the beneficial owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
beneficial owner of the account, and may be claimed as a credit on the
beneficial owner's federal income tax return.
Each Fund will be treated as a separate entity for tax purposes, and has
qualified and intends to continue to qualify as a regulated investment company
under the Code as long as this qualification is in the best interest of its
shareholders. Such qualification generally relieves each Fund of liability for
federal income taxes to the extent its earnings are distributed in accordance
with the applicable provisions of the Code.
Investors should consult their tax advisors regarding specific questions as
to federal, state or local taxes.
OTHER INFORMATION
CAPITALIZATION
Pacifica Funds Trust (formerly Fund Source) was organized as a
Massachusetts business trust on July 17, 1984, and consists of a series of
separately managed portfolios. This Prospectus relates to the Service Shares of
two of these managed portfolios -- the Pacifica Prime Money Market Fund and
Pacifica Treasury Money Market Fund -- which were reorganized as portfolios of
Pacifica Funds Trust on October l, 1994 and which are classified as diversified,
open-end management investment companies under the 1940 Act.
The capitalization of the Trust consists solely of an unlimited number of
shares of beneficial interest with a par value of $0.001 per share. The Board of
Trustees has authorized the issuance of three classes of shares in each of the
Funds -- Institutional Shares, Service Shares and Investor Shares. Each share of
a Fund is entitled to cash dividends and distributions earned on such Fund's
shares as are declared in the discretion of the Board of Trustees, and
represents the same proportionate interest in a particular Fund with other
shares of the Fund, except that a Fund's Institutional, Service and Investor
Shares each bear all of the Service Organization fees,
25
<PAGE> 728
distribution payments (if any) and other "class" expenses that are allocated to
a particular class.
Investor Shares pay higher combined fees for shareholder support and
distribution services than Service Shares, and Service Shares pay higher
shareholder support fees than Institutional Shares. This difference in expenses
will create different performance results for the three classes. The Funds will
offer various services and privileges in connection with their Investor Shares
that are not offered in connection with their Service Shares or Institutional
Shares, such as an automatic investment plan, an automatic withdrawal plan and
certain check writing privileges. Additional information concerning each class
of shares may be obtained by calling (800) 662-8417 or by contacting a
Customer's Service Organization.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust. The Declaration of Trust also
provides for indemnification out of the property of a Fund of any shareholder
held personally liable solely by reason of being or having been a shareholder of
the Fund. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a Fund itself would
be unable to meet its obligations and should be considered remote.
When issued, shares of the Trust are fully paid, non-assessable and freely
transferable.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Trust is not required to hold annual
meetings, but in the event that a special meeting is held, shareholders of each
Fund will be entitled to one vote for each full share held and fractional votes
for fractional shares held, and will vote in the aggregate and not on a
Fund-by-Fund basis, except as required by the 1940 Act or other applicable law.
It is contemplated that, as required by the 1940 Act, the shareholders of the
respective Funds will vote separately on a Fund-by-Fund basis on matters
relating to a particular Fund's investment advisory agreement or changes in a
Fund's fundamental investment limitations, and on other matters where the
interests of the respective Funds are not substantially identical. Similarly,
shareholders of each of the Funds will
26
<PAGE> 729
vote in the aggregate and not by class unless the matter to be voted on affects
only the interests of the holders of a particular class of a Fund's shares.
Voting rights are not cumulative.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust and in connection with the meeting to comply with the shareholders'
communications provisions of Section 16(c) of the 1940 Act. See "Description of
the Funds" in the SAI.
PERFORMANCE INFORMATION
From time to time each Fund advertises the yield and effective yield of its
Service Shares. Both yield figures will fluctuate, are based on historical
earnings and are not intended to indicate future performance. The yield for
Service Shares of each Fund refers to the income generated by an investment in
Service Shares of a Fund over a seven-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 week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the investment.
The effective yield is calculated similarly but, when annualized, the income
earned by an investment in Service Shares of a Fund is assumed to be reinvested.
The effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment. Each Fund's yield and effective
yield for Service Shares may reflect voluntary fee waivers. See "Management of
the Funds."
Yield information is useful in reviewing each Fund's performance, but
because yields will fluctuate, such information may not provide a basis for
comparison with domestic bank deposits or other investments which pay a fixed
yield for a stated period of time.
For purposes of comparison, the Funds may, from time to time,
quote performance information from IBC/Donoghue's MONEY FUND REPORT of
Holliston, Massachusetts 01746. IBC/Donoghue's MONEY FUND AVERAGE is a widely
recognized index of money market fund performance. Figures reflect average
yields of all taxable money funds included in IBC/Donoghue's index.
IBC/Donoghue's U.S. TREASURY & REPO MONEY FUND AVERAGE is a component of this
27
<PAGE> 730
average and reflects average yields of all taxable U.S. Treasury money funds.
Any fees which may be imposed by Banks directly on their Customer accounts
for cash management services in connection with investments in the Funds are not
reflected in yield figures and any such fees, if charged, will reduce the actual
return received by Bank Customers on their investments.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Funds at 237 Park
Avenue, Suite 910, New York, New York 10017.
General and Account Information: (800) 662-8417.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
FUNDS OR BY THEIR DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTED,
ENDORSED OR OTHERWISE SUPPORTED BY FIRST INTERSTATE BANCORP OR ITS AFFILIATES,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
28
<PAGE> 731
INVESTMENT ADVISOR
First Interstate Capital Management, Inc.
7501 East McCormick Parkway
Scottsdale, Arizona 85258
ADMINISTRATOR
The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
DISTRIBUTOR
Pacifica Funds Distributor Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
First Interstate Bank of California
707 Wilshire Boulevard
Los Angeles, California 90017
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
[PACIFICA LOGO] PACPTMMSE-2/96
<PAGE> 732
[PACIFICA LOGO]
(INVESTOR SHARES)
PACIFICA 100% U.S. TREASURY
MONEY MARKET FUND
PROSPECTUS
FEBRUARY 1, 1996
[FIRST INTERSTATE BANK LOGO]
Investment Advisor to The Pacifica Funds
<PAGE> 733
PACIFICA FUNDS TRUST
(INVESTOR SHARES)
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) 662-8417
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. --
INVESTMENT ADVISOR
("FICM" OR THE "ADVISOR")
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
("FURMAN SELZ" OR THE "SPONSOR")
PACIFICA FUNDS DISTRIBUTOR INC. -- DISTRIBUTOR
("PFD INC." OR THE "DISTRIBUTOR")
Pacifica Funds Trust (the "Trust") is an open-end investment company (a
mutual fund) that offers a selection of separate investment portfolios. This
Prospectus describes the Investor Shares of the following portfolio (the
"Fund"):
- Pacifica 100% U.S. Treasury Money Market Fund
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund and should be read and retained for
information about the Fund. A Statement of Additional Information (the "SAI"),
dated February 1, 1996 (which may be revised from time to time), containing
additional and more detailed information about the Fund, has been filed with the
Securities and Exchange Commission ("SEC") and is hereby incorporated by
reference into this Prospectus. It is available without charge and can be
obtained by writing or calling the Fund at the address or information number
printed above.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
----------------------------
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FIRST INTERSTATE OR OTHER BANK, AND ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN 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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1996.
<PAGE> 734
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS............................................... 3
FUND EXPENSES............................................ 5
FEE TABLE -- INVESTOR SHARES............................. 5
THE FUND................................................. 7
INVESTMENT POLICIES AND PRACTICES
OF THE FUND............................................ 7
RISKS OF INVESTING IN THE FUND........................... 8
MANAGEMENT OF THE FUND................................... 8
FUND SHARE VALUATION..................................... 13
MINIMUM PURCHASE REQUIREMENTS............................ 13
PURCHASE OF INVESTOR SHARES.............................. 13
INDIVIDUAL RETIREMENT ACCOUNTS........................... 15
EXCHANGE OF INVESTOR SHARES.............................. 15
REDEMPTION OF INVESTOR SHARES............................ 17
DIVIDENDS, DISTRIBUTIONS AND
FEDERAL INCOME TAX..................................... 20
DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES................................... 22
INVESTMENT RESTRICTIONS.................................. 22
OTHER INFORMATION........................................ 23
</TABLE>
2
<PAGE> 735
HIGHLIGHTS
INVESTMENT OBJECTIVES AND POLICIES OF THE FUND
The investment objective of the 100% U.S. Treasury Money Market Fund is to
seek as high a level of current income as is consistent with liquidity and
maximum safety of principal. The Fund pursues this objective by investing
exclusively in obligations of the U.S. Treasury which are backed by the full
faith and credit of the U.S. Government as to payment of principal and interest
and which have remaining maturities not exceeding 397 days.
For additional information concerning the investment policies, practices
and risk considerations of the Fund, see "The Fund," "Investment Policies and
Practices of the Fund" and "Risks of Investing in the Fund" in this Prospectus.
RISKS OF INVESTING IN THE FUND
The Fund attempts to maintain the value of its shares at a constant $1.00
per share, although there can be no assurance that the Fund will always be able
to do so. The Fund may not achieve as high a level of current income as other
funds that do not limit their investments to the high quality U.S. Treasury
securities in which the Fund invests. The Fund's performance will fluctuate
based on many factors, including the quality of the instruments in the Fund's
investment portfolio, national and international economic conditions, interest
rate levels and general market conditions.
There is no assurance that the Fund will achieve its investment objective.
MANAGEMENT OF THE FUND
First Interstate Capital Management, Inc. acts as investment advisor to the
Fund. For its services, the Advisor is entitled to receive a fee from the Fund
at an annual rate based on the Fund's average daily net assets. See "Fee
Table -- Investor Shares" and "Management of the Fund" in this Prospectus.
Furman Selz acts as administrator and sponsor to the Fund. Furman Selz
provides certain management and administrative services to the Fund, and is
entitled to receive a fee from the Fund at an annual rate based on the Fund's
average daily net assets. PFD Inc. distributes the Fund's shares and may be
reimbursed for certain of its distribution-related expenses.
Fees and expenses charged to the Fund are outlined on page 5 of this
Prospectus.
3
<PAGE> 736
GUIDE TO INVESTING IN THE PACIFICA FAMILY OF FUNDS
Purchase orders for the Fund received by 9:00 a.m., Pacific time (12:00
p.m., Eastern time) will become effective that day.
- MINIMUM INITIAL INVESTMENT...........................................$500
- MINIMUM INITIAL INVESTMENT FOR IRAS..................................$250
- MINIMUM SUBSEQUENT INVESTMENT.........................................$50
Investor Shares of the Fund are purchased at net asset value.
Shareholders may exchange Investor Shares between Funds by telephone or
mail.
- MINIMUM INITIAL EXCHANGE.............................................$500
(No minimum for subsequent exchanges.)
Shareholders may redeem Investor Shares by telephone, mail or wire.
- The Fund reserves the right upon not less than 30 days' notice to redeem
involuntarily all the Investor Shares in an investor's account which have
an aggregate value of $500 or less for any particular Fund.
(The above redemption services are not available for IRAs and trust clients
of First Interstate Bancorp and its affiliates.)
All dividends and distributions will be automatically reinvested at net
asset value in additional Investor Shares of the Fund unless cash payment is
requested.
- Distributions for the Fund are generally paid monthly.
For additional information on how to purchase and redeem Investor Shares of
the Fund, see "Purchase of Investor Shares," "Exchange of Investor Shares" and
"Redemption of Investor Shares."
4
<PAGE> 737
FUND EXPENSES
The following table lists the costs and expenses that an investor will
incur either directly or indirectly as an Investor shareholder of the Fund. The
information is based on estimated amounts for the initial fiscal year of the
Fund.
FEE TABLE -- INVESTOR SHARES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).............. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).............. None
Deferred Sales Load (as a percentage of redemption
proceeds)........................................ None
Redemption Fees..................................... None
Exchange Fee........................................ None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (after waivers)(++)................. .00%
12b-1 Fees(++)++.................................... .10%
Other Expenses (after waivers)(++)++++.............. .45%
-----
TOTAL FUND OPERATING EXPENSES:
(after waivers)(++)++++++........................... .55%
=====
</TABLE>
- ---------------
(++) Management fees (before waivers) would be .30%.
(++)++ Under rules of the National Association of Securities Dealers, Inc.
(the "NASD"), a 12b-1 fee may be treated as a sales charge for certain
purposes. Because a 12b-1 fee is an annual fee charged against the
assets of the Fund, long-term shareholders may indirectly pay more in
total sales charges than the economic equivalent of the maximum
front-end sales charge permitted by the rules of the NASD. See
"Management of the Fund -- The Sponsor and Distributor."
(++)++++ Other Expenses (before waivers) would be .50% and are estimated.
(++)++++++ Total Fund Operating Expenses (before waivers) would be .90%.
5
<PAGE> 738
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Fund's Investor Shares will
bear. The table does not reflect any charges that may be imposed by a First
Interstate Bank or other institutions directly on their customer accounts in
connection with investments in the Fund.
EXAMPLE:*
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
$ 5 $ 17
</TABLE>
- ---------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
6
<PAGE> 739
THE FUND
The Fund is a portfolio of a Massachusetts business trust, Pacifica Funds
Trust, organized under the laws of the Commonwealth of Massachusetts as an
open-end, management investment company. The Trust's Board of Trustees oversees
the overall management of the Fund and elects the officers of the Fund.
INVESTMENT POLICIES AND PRACTICES OF THE FUND
The investment objective of the Fund is to provide investors with as high a
level of current income as is consistent with liquidity and maximum safety of
principal. The SAI contains the specific investment restrictions which govern
the Fund's investments. Those restrictions and the Fund's investment objectives
are fundamental policies, which means that they may not be changed without a
majority vote of shareholders of the Fund. Except for the objectives and those
restrictions specifically identified as fundamental all other investment
policies and practices described in this Prospectus and in the SAI are not
fundamental, which means that the Board of Trustees may change them without
shareholder approval. The Advisor selects investments and makes investment
decisions based on the investment objective and policies of the Fund.
The Advisor selects only those U.S. dollar-denominated debt instruments for
the Fund which meet the high quality, credit risk standards established by the
Fund's Board of Trustees. The Fund will not maintain a dollar-weighted average
portfolio maturity that exceeds 90 days nor purchase any instrument with a
remaining maturity of greater than 397 calendar days.
The Fund restricts its investment to U.S. Treasury securities. Securities
issued by the U.S. Treasury have historically involved little risk of loss of
principal if held to maturity. It should be noted that neither the United States
Government, nor any agency or instrumentality thereof, has guaranteed, sponsored
or approved the Fund or its shares. Generally, securities in which the Fund
invests will not earn as high a yield as securities of longer maturity and/or of
lesser quality which are more subject to market volatility.
The types of securities and investment practices used by the Fund are
described in greater detail under the section "Description of Securities and
Investment Practices" on pages 21 and 22 of this Prospectus.
7
<PAGE> 740
RISKS OF INVESTING IN THE FUND
The Fund attempts to maintain the value of its shares at a constant $1.00
per share, although there can be no assurance that the Fund will always be able
to do so. The Fund's performance will fluctuate based on many factors, including
the quality of the instruments in the Fund's investment portfolio, national and
international economic conditions, interest rate levels and general market
conditions.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of the
Board of Trustees. The Trustees are Dennis W. Draper, Joseph N. Hankin, John E.
Heilmann, Jack D. Henderson and Richard A. Wedemeyer. Information about the
Trustees, as well as the Fund's executive officers, may be found in the SAI
under the heading "Management Trustees and Officers."
THE ADVISOR: FIRST INTERSTATE CAPITAL MANAGEMENT, INC.
First Interstate Capital Management, Inc., 7501 E. McCormick Parkway,
Scottsdale, Arizona 85258, serves as investment advisor to the Trust. FICM
manages the investment and reinvestment of the assets of the Fund and
continuously reviews, supervises and administers the Fund's investments. The
Advisor is responsible for placing orders for the purchase and sale of the
Fund's investments directly with brokers and dealers selected by it in its
discretion.
FICM is a wholly-owned subsidiary of First Interstate Bank of California,
which is the largest banking subsidiary of First Interstate Bancorp, a
multi-bank holding company. First Interstate Bancorp provides financial products
and services marketed at the local level to nearly five million households in
over 500 communities in 13 western states.
On January 24, 1996, First Interstate Bancorp signed a definitive merger
agreement to merge with Wells Fargo & Company ("Wells Fargo"), a publicly-held
bank holding company with its head office at 420 Montgomery Street, San
Francisco, California 94104. The merger is conditioned upon, among other things,
certain regulatory approvals. Upon completion of the merger, currently expected
to occur during the second quarter of 1996, FICM will be wholly-owned by Wells
Fargo, and the existing investment advisory agreement between the Trust and FICM
will automatically terminate. It is contemplated that an application will be
filed with the Securities and Exchange Commission to ensure there is no
8
<PAGE> 741
disruption as a result of the merger in the provision of investment advisory
services to the Funds, and that a meeting of shareholders will be held not later
than 120 days after the merger to approve ongoing investment advisory
arrangements for the Funds.
For the advisory services it provides to the Fund, FICM is entitled to
receive from the Fund fees, payable monthly, at the annual rate of 0.30% of the
first $500 million of the Fund's average daily net assets, 0.25% of the next
$500 million of the Fund's average daily net assets, and 0.20% of the Fund's
average daily net assets in excess of $1 billion.
THE SPONSOR AND DISTRIBUTOR
Furman Selz LLC, 230 Park Avenue, New York, New York 10169, acts as Sponsor
of the Fund. Furman Selz is primarily an institutional brokerage firm with
memberships on the New York, American, Boston, Midwest, Pacific and Philadelphia
Stock Exchanges. Furman Selz also serves as administrator and distributor of
other mutual funds. Pacifica Funds Distributor Inc. is an affiliate of Furman
Selz and was organized specifically to distribute shares of the Trust; however,
offers and sales of shares of the Trust will be made only through Furman Selz or
other registered (or exempt) dealers.
Under the Distribution Plan (the "Plan") adopted by the Fund for its
Investor Shares, the Fund may pay directly or reimburse PFD Inc. monthly
(subject to a limit of 0.50% per annum of the average daily net asset value of
the outstanding Investor Shares of the Fund) for costs and expenses of PFD Inc.
in connection with the distribution of Investor Shares of the Fund. These costs
and expenses include (i) advertising by radio, television, newspapers,
magazines, brochures, sales literature, direct mail or any other form of
advertising; (ii) expenses of sales employees or agents of PFD Inc., including
salary, commissions, travel and related expenses; (iii) payments to
broker-dealers and financial institutions for services in connection with the
distribution of Investor Shares, including promotional incentives and fees
calculated with reference to the average daily net asset value of Investor
Shares held by shareholders who have a brokerage or other service relationship
with the broker-dealer or other institution receiving such fees; (iv) costs of
printing prospectuses and other materials to be given or sent to prospective
investors; and (v) such other similar services as the Trustees determine to be
reasonably calculated to result in the sale of Investor Shares of the Fund. The
Fund will pay all costs and expenses in connection with the preparation,
printing and distribution of prospectuses to current shareholders and the
operation of its Plan, including related legal and accounting fees. The Fund
will not be liable for distribution expendi-
9
<PAGE> 742
tures made by PFD Inc. in any given year in excess of the maximum annual amount
payable under the Plan for that Fund. All payments made under the Plan for
Investor Shares are borne entirely by the Fund's Investor Shares.
PFD Inc. may from time to time pay a bonus or other incentive to dealers
which employ registered representatives who sell a minimum dollar amount of
Investor Shares of the Fund and/or other funds distributed by Furman Selz or PFD
Inc. during a specific period of time. Such bonus or other incentive will take
the form of payment for travel expenses, including lodging, incurred in
connection with trips taken by qualifying registered representatives and members
of their families to places within or outside the United States, or other
bonuses, such as gift certificates or the cash equivalent of such bonuses. PFD
Inc. has established such a special promotional incentive program with First
Interstate Investments, Inc.
ADMINISTRATIVE SERVICES
The Fund has also entered into an Administrative Services Contract with
Furman Selz pursuant to which Furman Selz provides certain management and
administrative services necessary for the Fund's operations including: (i)
general supervision of the operation of the Fund including coordination of the
services performed by the Fund's investment advisor, transfer agent, custodian,
independent accountants and legal counsel, regulatory compliance, including the
compilation of information for documents such as reports to, and filings with,
the SEC and state securities commissions, and preparation of proxy statements
and shareholder reports for the Fund; (ii) general supervision relative to the
compilation of data required for the preparation of periodic reports distributed
to the Fund's Officers and Board of Trustees; and (iii) furnishing office space
and certain facilities required for conducting the business of the Fund. For
these services, Furman Selz is entitled to receive a fee, payable monthly, at
the annual rate of 0.15% of the average daily net assets of the Fund. Pursuant
to a Services Agreement with the Trust, Furman Selz assists the Trust with
certain transfer and dividend disbursing agent functions and receives a fee of
$15.00 per account per year plus out-of-pocket expenses. Pursuant to the Fund
Accounting Agreement with the Trust, Furman Selz assists the Trust in
calculating net asset values and provides certain other accounting services for
the Fund for an annual fee of $30,000 per Fund plus out-of-pocket expenses.
10
<PAGE> 743
SERVICE ORGANIZATIONS
Various banks (including banks affiliated with First Interstate Bancorp),
trust companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative services with respect to the Fund's Institutional Shares, such as
maintaining shareholder accounts and records. The Fund may pay fees to Service
Organizations (which vary depending upon the services provided) in amounts up to
an annual rate of 0.25% of the average daily net asset value of the outstanding
Investor Shares of the Fund owned by shareholders with whom a Service
Organization has a servicing relationship. These fees will be home entirely by
the Fund's Investor Shares.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest a specified amount in
the Fund or charging a direct fee for servicing. If imposed, these fees would be
in addition to any amounts which might be paid to the Service Organization by
the Fund. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged to
consult with them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Fund and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by Furman Selz, PFD Inc. or the Advisor. The costs borne by the Fund
include legal auditing expenses; Trustees' fees and expenses; insurance
premiums; custodian and transfer agent fees and expenses; expenses incurred in
acquiring or disposing of the Fund's portfo-
11
<PAGE> 744
lio securities; expenses of registering and qualifying the Fund's shares for
sale with the SEC and with various state securities commissions; expenses of
obtaining quotations on the Fund's portfolio securities and pricing of the
Fund's shares; expenses of maintaining the Fund's legal existence and of
shareholders' meetings; and expenses of preparation and distribution to existing
shareholders of reports, proxies and prospectuses. The Fund bears its own
expenses associated with its establishment as a series of the Trust; these
expenses are amortized over a five-year period from the commencement of the
Fund's operations. See "Management" in the SAI for additional information on
expenses borne by the Fund. Trust expenses directly attributable to a particular
Investment portfolio in the Trust are charged to that portfolio, and expenses
attributable to a particular class of shares of a portfolio (such as Service
Organization fees) are charged to that class. Other expenses are allocated
proportionately among all of the investment portfolios in the Trust in relation
to the net assets of each portfolio or by other means deemed fair and equitable
by the Board of Trustees.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Advisor places orders for
the purchase and sale of portfolio investments for the Fund's accounts with
brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Fund, the Advisor will seek the best execution of the Fund's orders.
Purchases and sales of debt securities are generally placed by the Advisor with
primary market makers for these securities on a net basis, i.e., without any
brokerage commission being paid by the Fund. Trading does, however, involve
transaction costs. Transactions with dealers serving as primary market makers
reflect the spread between the bid and asked prices. Purchases of underwritten
issues may be made which will include an underwriting fee paid to the
underwriter. Broker-dealers are selected on the basis of a variety of factors
such as reputation, capital strength, size and difficulty of the order, sale of
Fund shares by the broker-dealer, and research provided to the Advisor by the
broker-dealer. The Advisor may cause the Fund to pay commissions higher than
another broker-dealer would have charged if the Advisor believes the commission
paid is reasonable in relation to the value of the brokerage and research
services received by the Advisor.
12
<PAGE> 745
FUND SHARE VALUATION
The net asset value of each class of shares of the Fund is calculated at
3:00 p.m. (Eastern time), Monday through Friday, on each day the New York Stock
Exchange is open for trading (a "Business Day"), which excludes the following
business holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share for each class of shares is computed by dividing the value of
the Fund's assets allocable to a particular class, less the liabilities charged
to that class by the total number of the outstanding shares of that class. All
expenses, including fees paid to the Advisor, Furman Selz and PFD Inc., are
accrued daily and taken into account for the purpose of determining the net
asset value.
The Fund uses the amortized cost method to value its portfolio securities
and seeks to maintain a constant net asset value of $1.00 per share, although
there may be circumstances under which this goal cannot be achieved. The
amortized cost method involves valuing a security at its cost and amortizing any
discount or premium over the period until maturity, regardless of the impact of
fluctuating interest rates on the market value of the security. See the SAI for
a more complete description of the amortized cost method of valuation of
portfolio securities.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in the Fund is $500, except that the minimum
is $250 for an IRA. Any subsequent investments must be at least $50, including
an IRA investment. All initial investments should be accompanied by a completed
Purchase Application. A separate application is required for IRA investments.
PURCHASE OF INVESTOR SHARES
The following purchase procedures do not apply to certain trust or other
accounts that are managed by First Interstate Bancorp, its subsidiaries or
affiliates. An account customer should consult his or her account officer for
proper instructions.
All funds received by the Trust are invested in full and fractional
Investor Shares of the Fund. Certificates for Investor Shares are not issued.
Furman Selz maintains records of each shareholder's holdings of Fund shares, and
each shareholder receives a statement of transactions, holdings and dividends.
The Fund reserves the right to reject any purchase.
13
<PAGE> 746
An investment may be made using any of the following methods:
Through an Authorized Broker, Investment Advisor or Service
Organization. Investor Shares are available to new and existing shareholders
through authorized brokers, investment advisors and Service Organizations. To
make an investment using this method, simply complete a Purchase Application and
contact your broker, investment advisor or Service Organization with
instructions as to the amount you wish to invest. Your broker will then contact
the Fund to place the order on your behalf on that day.
Orders received by your broker or Service Organization for the Fund in
proper order prior to the determination of the Fund's net asset value and
transmitted to the Trust prior to the close of its business day (which is
currently 9:00 a.m., Pacific time (12:00 p.m., Eastern time), will become
effective that day. Brokers who receive orders are obligated to transmit them
promptly. You should receive written confirmation of your order within a few
days of receipt of instructions from your broker.
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the Fund. In most cases, your bank will either be a member of the
Federal Reserve Banking System or have a relationship with a bank that is. Your
bank will normally charge you a fee for handling the transaction. To purchase
Investor Shares by a Federal funds wire, please first contact Furman Selz Mutual
Funds Client Services. They will establish a record of information for the wire
to ensure its correct processing. You can reach the Wire Desk at 1-800-662-9417.
Have your bank wire funds using the following instructions: Fiduciary Trust
Company
Kansas City, MO 64105
ABA #1010-0362-1
Account #7527950
Further Credit to: Fund Name
As long as you have read the Prospectus, you may establish a new regular
account through the Wire Desk; IRAs may not be opened in this way. When new
accounts are established by wire, the distribution options will be set to
reinvest and the social security or tax identification number ("TIN") will not
be certified until a signed application is received. Completed applications
should be forwarded immediately to the Fund. With the Purchase Application, the
shareholder can specify other distribution options and add any special features
offered by the Fund. Should any
14
<PAGE> 747
dividend distributions or redemptions be paid before the TIN is certified, they
will be subject to 31% Federal tax withholding.
Automatic Investment Program. An eligible shareholder may also participate
in the Pacifica Automatic Investment Program, an investment plan that
automatically debits money from the shareholder's bank account and invests it in
the Fund through the use of electronic funds transfers or automatic bank drafts.
Shareholders may elect to make subsequent investments by transfers of a minimum
of $50 on either the fifth or twentieth day of each month into their established
Fund accounts. Contact the Trust at 1-800-662-8417 for more information about
the Pacifica Automatic Investment Program.
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund may be used as a funding medium for IRAs. Investor Shares may also
be purchased for IRAs established with an affiliate of First Interstate Bancorp
or other authorized custodians. In addition, an IRA may be established through a
custodial account with Investors Fiduciary Trust Company. Completion of a
special application is required in order to create such an account, and the
minimum initial investment for an IRA is $250. Contributions to IRAs are subject
to prevailing amount limits set by the Internal Revenue Service. A $5.00
establishment fee and an annual $12.00 maintenance and custody fee is payable
with respect to each IRA, and there will be a $10.00 termination fee when the
account is closed. For more information, call the Fund at 1-800-662-8417.
EXCHANGE OF INVESTOR SHARES
The Fund offers two convenient ways to exchange Investor Shares in the Fund
for Investor Shares in another investment portfolio of the Trust. Before
engaging in an exchange transaction, a shareholder should read carefully the
Prospectus describing the investment portfolio into which the exchange will
occur, which is available without charge and can be obtained by writing to
Furman Selz, Mutual Fund Department 237 Park Avenue, Suite 910, New York, New
York 10017, or by calling 1-800-662-8417. A shareholder may not exchange
Investor Shares of one portfolio for Investor Shares of another portfolio if
both or either are not qualified for sale in the state of the shareholder's
residence. The minimum amount for an initial exchange is $500. No minimum is
required in subsequent exchanges. The Trust may terminate or amend the terms of
the exchange privilege at any time.
15
<PAGE> 748
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the net asset value next determined following receipt of the
request by the Trust in good order, plus any applicable sales charge.
An exchange is taxable as a sale of a security; however, if the Fund
maintains a net asset value of $1.00 per share, no gain or loss would be
realized upon an exchange of Fund shares. Shareholders should receive written
confirmation of the exchange within a few days of the completion of the
transaction.
In the case of transactions subject to a sales charge, the sales charge
will be assessed on an exchange of Investor Shares, equal to the excess of the
sales load applicable to the Investor Shares to be acquired over the amount of
any sales load previously paid on the Investor Shares to be exchanged. No
service fee is imposed. See "Dividends, Distributions and Federal Income Tax"
for an explanation of circumstances in which a sales load paid to acquire
Investor Shares of the Fund may not be taken into account in determining gain or
loss on the disposition of those Investor Shares.
In addition, Institutional Shares of the Fund may be exchanged for Investor
Shares of the Fund in connection with the distribution of assets held in a
qualified trust, agency or custodial account maintained with the trust
department of a First Interstate or other bank, trust company or thrift
institution, or in other cases where Institutional Shares are not held in such
qualified accounts. Similarly, Investor Shares may be exchanged for
Institutional Shares of the Fund if the shares are to be held in such a
qualified trust, agency or custodial account. These exchanges are made without a
sales charge at the net asset value of the respective share classes.
Exchange by Mail. To exchange Investor Shares of the Fund by mail, simply
send a letter of instruction to Furman Selz. The letter of instruction must
include: (i) your account number, (ii) the Fund from and the Fund into which you
wish to exchange your investment; (iii) the dollar or share amount you wish to
exchange; and (iv) the signatures of all registered owners or authorized
parties. All signatures must be guaranteed by an eligible guarantor institution
including a member of a national securities exchange or by a commercial bank or
trust company, broker-dealers, credit unions and savings associations.
Exchange by Telephone. To exchange Investor Shares of the Fund by
telephone, or if you have any questions, simply call the Trust at
1-800-662-8417. You should be prepared to give the telephone representa-
16
<PAGE> 749
tive the following information: (i) your account number, social security number
and account registration; (ii) the name of the portfolio from and the portfolio
into which you wish to transfer your investment; and (iii) the dollar or share
amount you wish to exchange. The conversation may be recorded to protect you and
the Fund. Telephone exchanges are automatically available unless the shareholder
indicates he does not wish to have this privilege by checking the "no" box on
the Purchase Application. See "Redemption of Investor Fund Shares -- By
Telephone" for a discussion of telephone transactions generally.
REDEMPTION OF INVESTOR SHARES
Shareholders may redeem their Investor Shares, in whole or in part, on any
Business Day. Investor Shares will be redeemed at the net asset value next
determined after a redemption request in good order has been received and
accepted by the Trust. See "Fund Share Valuation." A redemption may be a taxable
transaction on which gain or loss may be recognized. Generally, however, gain or
loss is not expected to be recognized on a redemption of shares of the Fund
because the Fund seeks to maintain a net asset value of $1.00 per share.
Where the Investor Shares to be redeemed have been purchased by check, the
Trust may delay payment of the redemption proceeds until the purchasing check
has cleared, which may take up to 15 days. Shareholders may avoid this delay by
investing through wire transfers of Federal funds. During the period prior to
the time the Investor Shares are redeemed, dividends on the Investor Shares will
continue to accrue and be payable and the shareholder will be entitled to
exercise all other beneficial rights of ownership.
Once the Investor Shares are redeemed, the Fund will ordinarily send the
proceeds by check to the shareholder at the address of record on the next
Business Day. The Fund may, however, take up to seven days to make payment. This
will not be the customary practice. Also, if the New York Stock Exchange is
closed (or when trading is restricted) for any reason other than the customary
weekend or holiday closing or if an emergency condition as determined by the SEC
merits such action, the Fund may suspend redemptions or postpone payment dates.
To ensure acceptance of your redemption request, it is important to follow
the procedures described below. Although the Trust has no present intention to
do so, it reserves the right to refuse or to limit the frequency of any
telephone or wire redemptions. Of course, it may be difficult to place orders by
telephone during periods of severe market or economic change,
17
<PAGE> 750
and a shareholder should consider alternative methods of communications, such as
couriers or U.S. mail. The services offered by the Fund may be modified or
terminated at any time. If the Fund terminates any particular service, they will
do so only after giving written notice to shareholders.
You may redeem your Investor Shares using any of the following methods:
Through an Authorized Broker, Investment Advisor or Service
Organization. You may redeem your Investor Shares by contacting your broker or
investment advisor and instructing him or her to redeem your Investor Shares. He
or she will then contact PFD Inc. and place a redemption trade on your behalf.
He or she may charge you a fee for this service.
By Mail. You may redeem your Investor Shares by sending a letter directly
to the Fund. To be accepted, a letter requesting redemption must include: (i)
the Fund name and account registration from which you are redeeming Investor
Shares; (ii) your account number, (iii) the amount to be redeemed; (iv) the
signatures of all registered owners; and (v) a signature guarantee by any
eligible guarantor institution including a member of a national securities
exchange or a commercial bank or trust company, broker-dealers, credit unions
and savings associations. Corporations, partnerships, trusts or other legal
entities will be required to submit additional documentation.
By Telephone. You may redeem your Investor Shares by calling the Fund toll
free at 1-800-662-8417. You should be prepared to give the telephone
representative the following information: (i) your account number, social
security number and account registration; (ii) the Fund name from which you are
redeeming Investor Shares; and (iii) the amount to be redeemed. The conversation
may be recorded to protect you and the Fund. Telephone redemptions are available
only if the shareholder so indicates by checking the "yes" box on the Purchase
Application. The Fund employs reasonable procedures to confirm that instructions
communicated by telephone are genuine. If the Fund fails to employ such
reasonable procedures, they may be liable for any loss, damage or expense
arising out of any telephone transactions purporting to be on a shareholder's
behalf. In order to assure the accuracy of instructions received by telephone,
the Fund requires some form of personal identification prior to acting upon
instructions received by telephone, record telephone instructions and provide
written confirmation to investors of such transactions.
By Wire. You may redeem your Investor Shares by contacting the Fund by
mail or telephone and instructing them to send a wire transmission to your
personal bank.
18
<PAGE> 751
Your instructions should include: (i) your account number, social security
number and account registration; (ii) the Fund name from which you are redeeming
Investor Shares; and (iii) the amount to be redeemed. Wire redemptions can be
made only if the "yes" box has been checked on your Purchase Application, and a
copy of a void check from the account where proceeds are to be wired is attached
to the Purchase Application. Your bank may charge you a fee for receiving a wire
payment on your behalf.
The above-mentioned services "By Telephone" and "By Wire" are not available
for IRAs and trust clients of an affiliate of First Interstate Bancorp.
Systematic Withdrawal Plan. An owner of $10,000 or more of Investor Shares
of the Fund may elect to have periodic redemptions from his or her account to be
paid on a monthly, quarterly, semi-annual or annual basis. The minimum periodic
payment is $100. A sufficient number of Investor Shares to make the scheduled
redemption will normally be redeemed on the date selected by the shareholder.
Depending on the size of the payment requested and fluctuation in the net asset
value, if any, of the Investor Shares redeemed, redemptions for the purpose of
making such payments may reduce or even exhaust the account. A shareholder may
request that these payments be sent to a predesignated bank or other designated
party. Capital gains and dividend distributions paid to the account will
automatically be reinvested at net asset value on the distribution payment date.
Redemption of Small Accounts. Due to the disproportionately higher cost of
servicing small accounts, the Fund reserves the right to redeem, on not less
than 30 days' notice, an account in the Fund that has been reduced by a
shareholder to $500 or less. However, if during the 30-day notice period the
shareholder purchases sufficient Investor Shares to bring the value of the
account above $500, this restriction will not apply.
Redemption in Kind. All redemptions of Investor Shares of the Fund shall
be made in cash, except that the commitment to redeem Investor Shares in cash
extends only to redemption requests made by each shareholder of the Fund during
any 90-day period of up to the lesser of $250,000 or 1% of the net asset value
of that Fund at the beginning of such period. This commitment is irrevocable
without the prior approval of the SEC and is a fundamental policy of the Fund
that may not be changed without shareholder approval. In the case of redemption
requests by shareholders in excess of such amounts, the Board of Trustees
reserves the right to have the Fund make payment, in whole or in part, in
securities or
19
<PAGE> 752
other assets, in case of an emergency or any time a cash distribution would
impair the liquidity of the Fund to the detriment of the existing shareholders.
In this event, the securities would be valued in the same manner as the
securities of that Fund are valued. If the recipient were to sell such
securities, he or she would incur brokerage charges.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
The Fund intends to qualify annually and to elect to be treated as a
regulated investment company pursuant to the provisions of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). By so qualifying and
electing, the Fund generally will not be subject to Federal income tax to the
extent that it distributes investment company taxable income and net capital
gains in the manner required under the Code.
The Fund intends to distribute to its Investor shareholders substantially
all of its investment company taxable income (which includes, among other items,
dividends and interest and the excess, if any, of net short-term capital gains
over net long-term capital losses). The Fund will declare distributions of
investment company income daily and pay those dividends monthly. The Fund
intends to distribute to its Investor shareholders, at least annually,
substantially all net capital gain (the excess of net long-term capital gains
over net short-term capital losses), if any. In determining amounts of capital
gains to be distributed, any capital loss carryovers from prior years will first
be applied against capital gains.
Distributions will be paid in additional Investor shares of the Fund based
on the net asset value at the close of business on the payment date of the
distribution, unless the Investor shareholder elects in writing, which is
received by Furman Selz not less than five full business days prior to the
record date, to receive such distributions in cash. Dividends declared in, and
attributable to, the preceding month will be paid within five business days
after the end of each month.
Investor shares purchased will begin earning dividends on the day the
purchase order is executed and shares redeemed will earn dividends through the
previous day. Net investment income for a Saturday, Sunday or a holiday will be
declared as a dividend on the previous business day. Investors who redeem all or
a portion of Fund shares prior to a dividend payment date will be entitled on
the next dividend payment date to all dividends declared but unpaid on those
shares at the time of their redemption.
20
<PAGE> 753
Distributions of investment company taxable income (regardless of whether
derived from dividends, interest or net short-term capital gains) will be
taxable to shareholders as ordinary income. Distributions of net long-term
capital gains designated by the Fund as capital gain dividends will be taxable
as long-term capital gains, regardless of how long a shareholder has held his
Investor shares. Distributions are taxable in the same manner whether received
in additional shares or in cash.
Earnings of the Fund not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To prevent imposition of this tax, the Fund intends to comply with this
distribution requirement.
A distribution will be treated as paid on December 31 of a calendar year if
it is declared by the Fund during October, November, or December of that year to
Investor shareholders of record in such a month and paid by the Fund during
January of the following calendar year. Such distributions will be treated as
received by Investor shareholders in the calendar year in which the
distributions are declared, rather than the calendar year in which the
distributions are received.
The dividends paid by the Fund are not expected to qualify for the
dividends-received deduction available to corporations.
The Fund may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to Investor shareholders who fail to provide a correct taxpayer identification
number or to make required certifications, or where the Fund or shareholder has
been notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Most corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Investor shareholders will be notified annually by the Trust as to the
Federal tax status of distributions made by the Fund. Depending on the residence
of the shareholder for tax purposes, distributions also may be subject to state
and local taxes, including withholding taxes. Foreign shareholders may, for
example, be subject to special withholding requirements. Special tax treatment,
including a penalty on certain pre-retirement distributions, is accorded to
accounts maintained as IRAs. Shareholders should consult their own tax advisors
as to the Federal, state and local tax consequences of ownership of shares of
the Fund in their particular circumstances.
21
<PAGE> 754
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
U.S. Treasury Obligations. U.S. Treasury securities are obligations issued
by the U.S. Treasury. U.S. Treasury bills, which have a maturity of up to one
year, are direct obligations of the United States and are the most frequently
issued marketable U.S. Government security. The U.S. Treasury also issues
securities with longer maturities in the form of notes and bonds.
Stripped Obligations. The Fund may invest in U.S. Treasury obligations
offered under the STRIPS or CUBES programs. Such obligations may represent
future interest or principal payments. These stripped securities are direct
obligations of the U.S. Government and clear through the Federal Reserve
book-entry system. Stripped securities are issued at a discount to their face
value and may exhibit greater price volatility than ordinary debt securities
because of the manner in which their principal and interest are returned to
investors.
Securities Issued by Other Investment Companies. The Fund may invest in
securities issued by other investment companies within the limits prescribed by
the 1940 Act. The Fund currently intends to limit its investments so that, as
determined immediately after a securities purchase is made: (a) not more than 5%
of the value of its total assets will be invested in the securities of any one
investment company; (b) not more than 10% of the value of its total assets will
be invested in the aggregate in securities of investment companies as a group;
(c) not more than 3% of the outstanding voting stock of any one investment
company will be owned by the Fund; and (d) not more than 10% of the outstanding
voting stock of any one investment company will be owned in the aggregate by the
Fund and other investment companies advised by the Advisor or any other
affiliate of First Interstate Bancorp. As a shareholder of another investment
company, the Fund would bear, along with other shareholders, its pro rata
portion of the expenses of such other investment company, including advisory
fees. These expenses would be in addition to the advisory and other expenses
that each Fund bears directly in connection with its own operations, and may
represent a duplication of fees to shareholders of the Fund. The Fund may only
invest in investment companies which restrict their portfolio investments solely
to the same investment instruments that are permissible investments for the
Fund.
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment restrictions that may
be changed only with the approval of a majority of the Fund's
22
<PAGE> 755
outstanding shares. The following description summarizes several of the Fund's
fundamental restrictions, which are set forth in full in the SAI.
The Fund may not:
1. Purchase securities (except U.S. Government securities and repurchase
agreements collateralized by such securities) if more than 5% of its
total assets at the time of purchase will be invested in securities of
any one issuer, except that up to 25% of the Fund's total assets may be
invested without regard to this 5% limitation.
2. Subject to the foregoing 25% exception, purchase more than 10% of the
outstanding voting securities of any issuer.
3. Invest 25% or more of its total assets at the time of purchase in
securities of issuers whose principal business activities are in the
same industry.
4. Borrow money except in amounts up to 10% of the value of its total
assets at the time of borrowing.
If a percentage restriction on the investment or use of assets set forth in
this Prospectus is adhered to at the time a transaction is effected, later
changes in percentage resulting from changing values will not be considered a
violation, however, the Fund will not at any time have more than 10% of its
respective net assets invested in illiquid securities.
OTHER INFORMATION
CAPITALIZATION
Pacifica Funds Trust (formerly Fund Source) was organized as a
Massachusetts business trust on July 17, 1984. The capitalization of the Trust
consists solely of an unlimited number of shares of beneficial interest with a
par value of $0.001 each. When issued, shares of the Fund are fully paid,
non-assessable and freely transferable.
The Board of Trustees has authorized the issuance of three classes of
shares in the Fund -- Investor Shares, Institutional Shares and Service Shares.
Each share of the Fund represents an equal proportionate interest in the Fund
with other shares of the same class and is entitled to cash dividends and
distributions earned on such shares as are declared in the discretion of the
Board of Trustees.
The Fund's Institutional Shares, Investor Shares and Service Shares bear
their pro rata portion of all operating expenses paid by the Fund except for the
distribution payments, Service Organization fees and other "class"
23
<PAGE> 756
expenses that are allocated to a particular share class. The Board of Trustees
has not approved a Distribution Plan with respect to Institutional Shares. The
Fund may pay fees to Service Organizations in amounts up to an annual rate of
0.25% of the daily net asset value of the Fund's outstanding Institutional
Shares and Service Shares owned by shareholders with whom a Service Organization
has a servicing relationship. Because of the "class expenses," the performance
of the Fund's Institutional Shares is expected to be higher than the performance
of its Investor Shares and Service Shares. The Trust offers various services and
privileges in connection with its Investor Shares that are not offered in
connection with its Institutional Shares and Service Shares, including an
automatic investment plan, automatic withdrawal plan and, with respect to
certain portfolios, checkwriting. For information regarding the Fund's
Institutional Shares and Service Shares, contact Furman Selz at 1-800-662-8417
or your Service Organization.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust. The Declaration of Trust also
provides for indemnification out of the property of the Fund of any shareholder
held personally liable solely by reason of being or having been a shareholder of
the Fund. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Fund itself would
be unable to meet its obligations and should be considered remote.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Trust is not required to hold regular
annual meetings of the Fund's shareholders, but in the event that a special
meeting is held, shareholders of each portfolio offered by the Trust will be
entitled to one vote for each full share held and fractional votes for
fractional shares held, and will vote in the aggregate and not on a
portfolio-by-portfolio basis, except as required by the 1940 Act or other
applicable law. It is contemplated that, as required by the 1940 Act, the
shareholders of a portfolio will vote separately on a portfolio-by-portfolio
basis on matters relating to a particular portfolio's investment advisory
agreement or changes in a portfolio's fundamental investment limitations, and on
other matters where the interests of the respective portfolios are not
substantially identical. Similarly, shareholders of each portfolio will vote in
24
<PAGE> 757
the aggregate and not by class unless the Trustees determine that the matter to
be voted on affects only the interests of the holders of a particular class of
the Fund's shares. Voting rights are not cumulative.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust and in connection with such meeting to comply with the shareholders'
communications provisions of Section 16 (c) of the 1940 Act.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of the Fund means, with respect to the
approval of an investment advisory agreement, a distribution plan or a change in
a fundamental investment policy, the vote of the lesser of (1) 67% of the shares
of the Fund present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy, or (2) more than 50% of
the outstanding shares of the Fund. For purposes of the 1940 Act, any person who
owns either directly or through one or more controlled companies more than 25
percent of the voting securities of a company is presumed to "control" such
company. Under this definition, First Interstate Bancorp and its affiliates may
be deemed to be controlling persons of the Trust.
PERFORMANCE INFORMATION
The Fund may, from time to time, include yield data in advertisements or
reports to shareholders or prospective investors. The methods used to calculate
the yields of the Fund are mandated by the SEC.
Quotations of "yield" for the Fund will be based on the income received by
a hypothetical investment (less a pro-rata share of Fund expenses) over a
particular seven-day period, which is then "annualized"' (i.e., assuming that
the seven-day yield would be received for 52 weeks, stated in terms of an annual
percentage return on the investment).
"Effective yield" for the Fund is calculated in a manner similar to that
used to calculate yield, but includes the compounding effect of earnings on
reinvested dividends.
Quotations of yield reflect only the performance of the Fund during the
particular period on which the calculations are based. Yield and
25
<PAGE> 758
effective yield for the Fund will vary based on changes in market conditions,
the level of interest rates and the level of the expenses of the Fund and no
reported performance figure should be considered an indication of performance
which may be expected in the future.
For purposes of comparison, the Fund may, from time to time, quote
performance information from IBC/Donoghue's MONEY FUND REPORT of Holliston,
Massachusetts 01746. IBC/Donoghue's MONEY MARKET AVERAGE is a widely recognized
index of money market fund performance. Figures reflect average yields of all
taxable money funds included in IBC/Donoghue's index. IBC/Donoghue's 100% U.S.
TREASURY MONEY FUND AVERAGE is a component of this average and reflects average
yields of all taxable U.S. Treasury money
funds. Any performance information should be considered in light of the Fund's
investment objective and policies, characteristics and quality of the Fund and
the market conditions during the time period indicated, and should not be
considered to be representative of what may be achieved in the future. For a
description of the methods used to determine yield for the Fund, see "Other
Information -- Performance Information" in the SAI.
ACCOUNT SERVICES
All transactions in shares of the Fund will be reflected in a statement for
each shareholder. In those cases where a Service Organization or its nominee is
shareholder of record of shares purchased for its customer, the Fund has been
advised that the statement may be transmitted to the customer at the discretion
of the Service Organization.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Fund at 237 Park
Avenue, Suite 910, New York, New York 10017.
General and Account Information: (800) 662-8417.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR
BY ITS DISTRIBUTOR
26
<PAGE> 759
IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY FIRST INTERSTATE BANCORP OR ITS AFFILIATES,
AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
27
<PAGE> 760
INVESTMENT ADVISOR
First Interstate Capital Management, Inc.
7501 East McCormick Parkway
Scottsdale, Arizona 85258
ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Pacifica Funds Distributor Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
First Interstate Bank of California
707 Wilshire Boulevard
Los Angeles, California 90017
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
[PACIFICA LOGO] PACUSIV-2/96
<PAGE> 761
[PACIFICA LOGO]
(INSTITUTIONAL SHARES)
PACIFICA 100% U.S. TREASURY
MONEY MARKET FUND
PROSPECTUS
FEBRUARY 1, 1996
[FIRST INTERSTATE BANK LOGO]
Investment Advisor to The Pacifica Funds
<PAGE> 762
PACIFICA FUNDS TRUST
(INSTITUTIONAL SHARES)
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) 662-8417
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. --
INVESTMENT ADVISOR
("FICM" OR THE "ADVISOR")
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
("FURMAN SELZ" OR THE "SPONSOR")
PACIFICA FUNDS DISTRIBUTOR INC. -- DISTRIBUTOR
("PFD INC." OR THE "DISTRIBUTOR")
Pacifica Funds Trust (the "Trust") is an open-end investment company (a
mutual fund) that offers a selection of separate investment portfolios. This
Prospectus describes the Institutional Shares of the following portfolio (the
"Fund"):
- Pacifica 100% U.S. Treasury Money Market Fund
This Prospectus sets forth concisely the information a prospective investor
should know before investing in any of the Funds and should be read and retained
for information about the Fund. A Statement of Additional Information (the
"SAI"), dated February 1, 1996 (which may be revised from time to time),
containing additional and more detailed information about the Fund, has been
filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Fund at the address or information
number printed above.
----------------------------
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FIRST INTERSTATE OR OTHER BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN 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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1996.
<PAGE> 763
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS............................................... 3
FUND EXPENSES............................................ 5
FEE TABLE -- INSTITUTIONAL SHARES........................ 5
THE FUND................................................. 7
INVESTMENT POLICIES AND PRACTICES
OF THE FUND............................................ 7
RISKS OF INVESTING IN THE FUND........................... 8
MANAGEMENT OF THE FUND................................... 8
FUND SHARE VALUATION..................................... 12
PURCHASE AND REDEMPTION OF
INSTITUTIONAL SHARES................................... 12
EXCHANGE OF INSTITUTIONAL SHARES......................... 15
DIVIDENDS, DISTRIBUTIONS AND
FEDERAL INCOME TAX..................................... 16
DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES................................... 18
INVESTMENT RESTRICTIONS.................................. 18
OTHER INFORMATION........................................ 19
</TABLE>
2
<PAGE> 764
HIGHLIGHTS
INVESTMENT OBJECTIVES AND POLICIES OF THE FUND
The investment objective of the 100% U.S. Treasury Money Market Fund is to
seek as high a level of current income as is consistent with liquidity and
maximum safety of principal. The Fund pursues this objective by investing
exclusively in obligations of the U.S. Treasury which are backed by the full
faith and credit of the U.S. Government as to payment of principal and interest
and which have remaining maturities not exceeding 397 days.
For additional information concerning the investment policies, practices
and risk considerations of the Fund, see "The Fund," "Investment Policies and
Practices of the Fund" and "Risks of Investing in the Fund" in this Prospectus.
RISKS OF INVESTING IN THE FUND
The Fund attempts to maintain the value of its shares at a constant $1.00
per share, although there can be no assurance that the Fund will always be able
to do so. The Fund may not achieve as high a level of current income as other
funds that do not limit their investments to the high quality U.S. Treasury
securities in which the Fund invests. The Fund's performance will fluctuate
based on many factors, including the quality of the instruments in the Fund's
investment portfolio, national and international economic conditions, interest
rate levels and general market conditions.
There is no assurance that the Fund will achieve its investment objective.
MANAGEMENT OF THE FUND
First Interstate Capital Management, Inc. acts as investment advisor to the
Fund. For its services, the Advisor is entitled to receive a fee from the Fund
at an annual rate based on the Fund's average daily net assets. See "Fee
Table -- Institutional Shares" and "Management of the Fund" in this Prospectus.
Furman Selz acts as administrator and sponsor to the Fund. Furman Selz
provides certain management and administrative services to the Fund, and is
entitled to receive a fee from the Fund at an annual rate based on the Fund's
average daily net assets. PFD Inc. distributes the Fund's shares.
3
<PAGE> 765
Fees and expenses charged to the Fund are outlined on page 5 of this
Prospectus.
GUIDE TO INVESTING IN THE PACIFICA FAMILY OF FUNDS
Purchase orders for the Fund received 9:00 a.m., Pacific time (12:00 p.m.,
Eastern time), will become effective that day.
Institutional Shares of the Fund are purchased at net asset value without a
sales charge.
Shareholders may purchase, redeem or exchange Institutional Shares by
telephone.
All dividends and distributions will be automatically reinvested at net
asset value in additional Institutional Shares of the Fund unless cash payment
is requested.
- Distributions for the Fund are generally paid quarterly.
For additional information on how to purchase and redeem Institutional
Shares of the Fund, see "Purchase and Redemption of Institutional Shares" and
"Exchange of Institutional Shares."
4
<PAGE> 766
FUND EXPENSES
The following table lists the costs and expenses that an investor will
incur either directly or indirectly as an Institutional shareholder of the Fund.
The information is based on estimated amounts for the initial fiscal year of the
Fund.
FEE TABLE -- INSTITUTIONAL SHARES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).......... None
Maximum Sales Load Imposed on Reinvested
Dividends
(as a percentage of offering price).......... None
Deferred Sales Load (as a percentage of
redemption proceeds)......................... None
Redemption Fees................................. None
Exchange Fee.................................... None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (after waivers)*................ 0.00%
Other Expenses (after waivers)**................ 0.25%
----
TOTAL FUND OPERATING EXPENSES:
(after waivers)***.............................. 0.25%
=====
</TABLE>
- ---------------
* Management Fees (before waivers) would be 0.30%.
** Other Expenses (before waivers) would be 0.35% and are estimated.
*** Total Fund Operating Expenses (before waivers) would be 0.65%.
5
<PAGE> 767
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Fund's Institutional Shares
will bear. The table does not reflect any charges that may be imposed by a First
Interstate Bank or other institutions directly on their customer accounts in
connection with investments in the Fund.
EXAMPLE:(++)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------- --------
<S> <C> <C>
$2 $8
</TABLE>
- ---------------
(++) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
6
<PAGE> 768
THE FUND
The Fund is a portfolio of a Massachusetts business trust, Pacifica Funds
Trust, organized under the laws of the Commonwealth of Massachusetts as an
open-end, management investment company. The Trust's Board of Trustees oversees
the overall management of the Fund and elects the officers of the Fund.
INVESTMENT POLICIES AND PRACTICES OF THE FUND
The investment objective of the Fund is to provide investors with as high a
level of current income as is consistent with liquidity and maximum safety of
principal. The SAI contains the specific investment restrictions which govern
the Fund's investments. Those restrictions and the Fund's investment objectives
are fundamental policies, which means that they may not be changed without a
majority vote of shareholders of the Fund. Except for the objectives and those
restrictions specifically identified as fundamental all other investment
policies and practices described in this Prospectus and in the SAI are not
fundamental, which means that the Board of Trustees may change them without
shareholder approval. The Advisor selects investments and makes investment
decisions based on the investment objective and policies of the Fund.
The Advisor selects only those U.S. dollar-denominated debt instruments for
the Fund which meet the high quality, credit risk standards established by the
Fund's Board of Trustees. The Fund will not maintain a dollar-weighted average
portfolio maturity that exceeds 90 days nor purchase any instrument with a
remaining maturity of greater than 397 calendar days.
The Fund restricts its investment to U.S. Treasury securities. Securities
issued by the U.S. Treasury have historically involved little risk of loss of
principal if held to maturity. It should be noted that neither the United States
Government, nor any agency or instrumentality thereof, has guaranteed, sponsored
or approved the Fund or its shares. Generally, securities in which the Fund
invests will not earn as high a yield as securities of longer maturity and/or of
lesser quality which are more subject to market volatility.
The types of securities and investment practices used by the Fund are
described in greater detail under the section "Description of Securities and
Investment Practices" on page 18 of this Prospectus.
7
<PAGE> 769
RISKS OF INVESTING IN THE FUND
The Fund attempts to maintain the value of its shares at a constant $1.00
per share, although there can be no assurance that the Fund will always be able
to do so. The Fund's performance will fluctuate based on many factors, including
the quality of the instruments in the Fund's investment portfolio, national and
international economic conditions, interest rate levels and general market
conditions.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of the
Board of Trustees. The Trustees are Dennis W. Draper, Joseph N. Hankin, John E.
Heilmann, Jack D. Henderson and Richard A. Wedemeyer. Information about the
Trustees, as well as the Fund's executive officers, may be found in the SAI
under the heading "Management Trustees and Officers."
THE ADVISOR: FIRST INTERSTATE CAPITAL MANAGEMENT, INC.
First Interstate Capital Management, Inc., 7501 E. McCormick Parkway,
Scottsdale, Arizona 85258, serves as investment advisor to the Trust. FICM
manages the investment and reinvestment of the assets of the Fund and
continuously reviews, supervises and administers the Fund's investments. The
Advisor is responsible for placing orders for the purchase and sale of the
Fund's investments directly with brokers and dealers selected by it in its
discretion.
FICM is a wholly-owned subsidiary of First Interstate Bank of California,
which is the largest banking subsidiary of First Interstate Bancorp, a
multi-bank holding company. First Interstate Bancorp provides financial products
and services marketed at the local level to nearly five million households in
over 500 communities in 13 western states.
On January 24, 1996, First Interstate Bancorp signed a definitive merger
agreement to merge with Wells Fargo & Company ("Wells Fargo"), a publicly-held
bank holding company with its head office at 420 Montgomery Street, San
Francisco, California 94104. The merger is conditioned upon, among other things,
certain regulatory approvals. Upon completion of the merger, currently expected
to occur during the second quarter of 1996, FICM will be wholly-owned by Wells
Fargo, and the existing investment advisory agreement between the Trust and FICM
will automatically terminate. It is contemplated that an application will be
filed with the Securities and Exchange Commission to ensure there is no
8
<PAGE> 770
disruption as a result of the merger in the provision of investment advisory
services to the Funds, and that a meeting of shareholders will be held not later
than 120 days after the merger to approve ongoing investment advisory
arrangements for the Funds.
For the advisory services it provides to the Fund, FICM is entitled to
receive from the Fund fees, payable monthly, at the annual rate of 0.30% of the
first $500 million of the Fund's average daily net assets, 0.25% of the next
$500 million of the Fund's average daily net assets, and 0.20% of the Fund's
average daily net assets in excess of $1 billion.
THE SPONSOR AND DISTRIBUTOR
Furman Selz LLC, 230 Park Avenue, New York, New York 10169, acts as Sponsor
of the Fund. Furman Selz is primarily an institutional brokerage firm with
memberships on the New York, American, Boston, Midwest, Pacific and Philadelphia
Stock Exchanges. Furman Selz also serves as administrator and distributor of
other mutual funds. Pacifica Funds Distributor Inc. is an affiliate of Furman
Selz and was organized specifically to distribute shares of the Trust. However,
offers and sales of shares of the Trust will be made only through Furman Selz or
other registered (or exempt) dealers.
PFD Inc. may from time to time pay a bonus or other incentive to dealers
which employ registered representatives who sell a minimum dollar amount of
Institutional Shares of the Fund and/or other funds distributed by Furman Selz
or PFD Inc. during a specific period of time. Such bonus or other incentive will
take the form of payment for travel expenses, including lodging, incurred in
connection with trips taken by qualifying registered representatives and members
of their families to places within or outside the United States, or other
bonuses, such as gift certificates or the cash equivalent of such bonuses. PFD
Inc. has established such a special promotional incentive program with First
Interstate Investments, Inc.
ADMINISTRATIVE SERVICES
The Fund has also entered into an Administrative Services Contract with
Furman Selz pursuant to which Furman Selz provides certain management and
administrative services necessary for the Fund's operations including: (i)
general supervision of the operation of the Fund including coordination of the
services performed by the Fund's investment advisor, transfer agent, custodian,
independent accountants and legal counsel, regulatory compliance, including the
compilation of information for documents such as reports to, and filings with,
the SEC and state securities
9
<PAGE> 771
commissions, and preparation of proxy statements and shareholder reports for the
Fund; (ii) general supervision relative to the compilation of data required for
the preparation of periodic reports distributed to the Fund's Officers and Board
of Trustees; and (iii) furnishing office space and certain facilities required
for conducting the business of the Fund. For these services, Furman Selz is
entitled to receive a fee, payable monthly, at the annual rate of 0.15% of the
average daily net assets of the Fund. Pursuant to a Services Agreement with the
Trust, Furman Selz assists the Trust with certain transfer and dividend
disbursing agent functions and receives a fee of $15.00 per account per year
plus out-of-pocket expenses. Pursuant to a Fund Accounting Agreement with the
Trust, Furman Selz assists the Trust in calculating net asset values and
provides certain other accounting services for the Fund for an annual fee of
$30,000 plus out-of-pocket expenses.
SERVICE ORGANIZATIONS
Various banks (including banks affiliated with First Interstate Bancorp),
trust companies, broker-dealers (other than the Sponsor) or other financial
organizations (collectively, "Service Organizations") also may provide
administrative services with respect to the Fund's Institutional Shares, such as
maintaining shareholder accounts and records. The Fund may pay fees to Service
Organizations (which vary depending upon the services provided) in amounts up to
an annual rate of 0.25% of the average daily net asset value of the outstanding
Institutional Shares of the Fund owned by shareholders with whom a Service
Organization has a servicing relationship. These fees will be borne entirely by
the Fund's Institutional Shares.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest a specified amount in
the Fund or charging a direct fee for servicing. If imposed, these fees would be
in addition to any amounts which might be paid to the Service Organization by
the Fund. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged to
consult with them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state
10
<PAGE> 772
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, could prevent a bank Service Organization from
continuing to perform all or a part of its servicing activities. If a bank were
prohibited from so acting, its shareholder clients would be permitted to remain
shareholders of the Fund and alternative means for continuing the servicing of
such shareholders would be sought. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these
occurrences.
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by Furman Selz, PFD Inc. or the Advisor. The costs borne by the Fund
include legal and accounting expenses; Trustees' fees and expenses; insurance
premiums; custodian and transfer agent fees and expenses; expenses incurred in
acquiring or disposing of the Fund's portfolio securities; expenses of
registering and qualifying the Fund's shares for sale with the SEC and with
various state securities commissions; expenses of obtaining quotations on the
Fund's portfolio securities and pricing of the Fund's shares; expenses of
maintaining the Fund's legal existence and of shareholders' meetings; and
expenses of preparation and distribution to existing shareholders of reports,
proxies and prospectuses. The Fund bears its own expenses associated with its
establishment as a series of the Trust; these expenses are amortized over a
five-year period from the commencement of a Fund's operations. See "Management"
in the SAI for additional information on expenses borne by the Fund. Trust
expenses directly attributable to the Fund are charged to the Fund, and expenses
attributable to a particular class of shares of a Fund (such as Service
Organization fees) are charged to that class. Other expenses are allocated
proportionately among all of the investment portfolios in the Trust in relation
to the net assets of each portfolio or by other means deemed fair and equitable
by the Board of Trustees.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Advisor places orders for
the purchase and sale of portfolio investments for the Fund's account with
brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Fund, the Advisor will seek the best execution of the Fund's orders.
Purchases and sales of debt securities are generally placed by the Advisor with
primary market makers for these securities on a net basis, i.e., without any
brokerage commission being paid by the Fund. Trading does, however,
11
<PAGE> 773
involve transaction costs. Transactions with dealers serving as primary market
makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made which will include an underwriting fee paid to
the underwriter. Broker-dealers are selected on the basis of a variety of
factors such as reputation, capital strength, size and difficulty of the order,
sale of Fund shares by the broker-dealer, and research provided to the Advisor
by the broker-dealer. The Advisor may cause a Fund to pay commissions higher
than another broker-dealer would have charged if the Advisor believes the
commission paid is reasonable in relation to the value of the brokerage and
research services received by the Advisor.
FUND SHARE VALUATION
The net asset value of each class of shares of the Fund is calculated at
3:00 p.m. (Eastern time), Monday through Friday, on each day the New York Stock
Exchange is open for trading (a "Business Day"), which excludes the following
business holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share for each class of shares is computed by dividing the value of
the Fund's assets allocable to a particular class, less the liabilities charged
to that class by the total number of the outstanding shares of that class. All
expenses, including fees paid to the Advisor, Furman Selz and PFD Inc., are
accrued daily and taken into account for the purpose of determining the net
asset value.
The Fund uses the amortized cost method to value its portfolio securities
and seeks to maintain a constant net asset value of $1.00 per share, although
there may be circumstances under which this goal cannot be achieved. The
amortized cost method involves valuing a security at its cost and amortizing any
discount or premium over the period until maturity, regardless of the impact of
fluctuating interest rates on the market value of the security. See the SAI for
a more complete description of the amortized cost method.
PURCHASE AND REDEMPTION OF INSTITUTIONAL SHARES
Institutional Shares of the Fund are sold without a sales load on a
continuous basis primarily to customers ("Customers") of affiliate, franchise or
correspondent banks of First Interstate Bancorp and other selected institutions
("Institutions"). Customers may include individuals, trusts, partnerships and
corporations. Share purchases are effected through a Customer's account at an
Institution through procedures established in
12
<PAGE> 774
connection with the requirements of the account, and confirmations of
share purchases and redemptions will be sent to the Institution involved.
Institutions (or their nominees) will normally be the holders of record of
Institutional Shares acting on behalf of their Customers, and will reflect their
Customers' beneficial ownership of Institutional Shares in the account
statements provided by them to their Customers. The exercise of voting rights
and the delivery to Customers of shareholder communications from the Fund will
be governed by the Customers' account agreements with an Institution. Investors
wishing to purchase Institutional Shares of the Fund should contact their
account representatives.
Shares of the Fund are sold at net asset value per share next determined
after a purchase order has become effective. Purchase orders by an Institution
for Institutional Shares in the Fund must be received by the Trust by 9:00 a.m.,
Pacific time (12:00 p.m., Eastern time), on any Business Day. Payment for such
shares may be made by Institutions in Federal funds or other funds immediately
available to the Trust's custodian no later than 9:00 a.m., Pacific time (12:00
p.m., Eastern time), on the next Business Day following the receipt of the
purchase order.
It is the responsibility of Institutions to transmit orders for purchases
by their Customers and to deliver required funds on a timely basis. If funds are
not received within the periods described above, the order will be canceled,
notice thereof will be given, and the Institution will be responsible for any
loss to the Fund or its shareholders. Institutions may charge certain account
fees depending on the type of account the investor has established with an
Institution. In addition, an Institution may receive fees from the Fund with
respect to the investments of its Customers as described above under "Management
of the Fund." Payments for Institutional Shares of the Fund may, in the
discretion of the Advisor, be made in the form of securities that are
permissible investments for the Fund. For further information see "Additional
Purchase and Redemption Information" in the SAI.
The Trust reserves the right to reject any purchase order. Payment for
orders which are not received will be returned after prompt inquiry. The
issuance of Institutional Shares is recorded on the books of the Fund, and share
certificates are not issued.
Neither the Trust, the Distributor nor Furman Selz will be responsible for
the authenticity of telephone instructions for the purchase or redemption of
Institutional Shares where such instructions are reasonably believed to be
genuine. Accordingly, the Institution will bear the risk of loss. The Trust will
attempt to confirm that telephone instructions are genuine and
13
<PAGE> 775
will use such procedures as are considered reasonable. To the extent that the
Trust fails to use reasonable procedures to verify the genuineness of telephone
instructions, it or its service providers may be liable for any loss, damage or
expense arising from such instructions that prove to be fraudulent or
unauthorized.
Redemption requests are effected at the net asset value per share next
determined after receipt of a redemption request in good order by the Trust.
Institutional Shares held by an Institution on behalf of its Customers must be
redeemed in accordance with instructions and limitations pertaining to the
account at the Institution. The Trust intends to pay cash for all Institutional
Shares redeemed, but in unusual circumstances may make payment wholly or partly
in portfolio securities at their then market value equal to the redemption
price. In such cases, an investor may incur brokerage costs in converting such
securities to cash.
Share balances may be redeemed pursuant to arrangements between
Institutions and investors. It is the responsibility of an Institution to
transmit redemption requests to the Trust and to credit its Customers' accounts
with the redemption proceeds on a timely basis. The redemption proceeds for
Institutional Shares of the Fund are normally wired to the redeeming Institution
the following Business Day after receipt of the request by the Trust. The Trust
reserves the right to delay the wiring of redemption proceeds for up to seven
days after it receives a redemption order if, in the judgment of the Advisor, an
earlier payment could adversely affect the Fund.
All redemptions of Institutional Shares of the Fund shall be made in cash,
except that the commitment to redeem Institutional Shares in cash extends only
to redemption requests made by each shareholder of a Fund during any 90-day
period of up to the lesser of $250,000 or 1% of the net asset value of the Fund
at the beginning of such period. This commitment is irrevocable without the
prior approval of the SEC and is a fundamental policy of the Fund that may not
be changed without shareholder approval. In the case of redemption requests by
shareholders in excess of such amounts, the Board of Trustees reserves the right
to have the Fund make payment, in whole or in part, in securities or other
assets, in case of an emergency or any time a cash distribution would impair the
liquidity of the Fund to the detriment of the existing shareholders. In this
event, the securities would be valued in the same manner as the securities of
the Fund are valued. If the recipient were to sell such securities, he or she
would incur brokerage charges.
14
<PAGE> 776
A redemption may be a taxable transaction on which gain or loss may be
recognized. Generally, however, gain or loss is not expected to be recognized on
a redemption of shares of the Fund because the Fund seeks to maintain a net
asset value of $1.00 per share.
EXCHANGE OF INSTITUTIONAL SHARES
The Fund offers a convenient way to exchange Institutional Shares in the
Fund for Institutional Shares in another investment portfolio of the Trust.
Before engaging in an exchange transaction, a shareholder should read carefully
the Prospectus describing the investment portfolio into which the exchange will
occur, which is available without charge and can be obtained by writing to
Furman Selz, Mutual Fund Department, 237 Park Avenue, Suite 910, New York, New
York 10017, or by calling 1-800-662-8417. A shareholder may not exchange
Institutional Shares of one portfolio for Institutional Shares of another
portfolio if both or either are not qualified for sale in the state of the
shareholder's residence. The Trust may terminate or amend the terms of the
exchange privilege at any time.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the net asset value next determined following receipt of the
request by the Trust in good order.
An exchange is taxable as a sale of a security; however, if the Fund
maintains a net asset value of $1.00 per share, no gain or loss would be
realized upon an exchange of Fund shares. Shareholders should receive written
confirmation of the exchange within a few days of the completion of the
transaction.
To exchange Institutional Shares, or if you have any questions, simply call
the Trust at 1-800-662-8417. You should be prepared to give the telephone
representative the following information: (i) your account number, social
security number and account registration; (ii) the name of the portfolio from
and the portfolio into which you wish to transfer your investment; and (iii) the
dollar or share amount you wish to exchange. The conversation may be recorded to
protect you and the Fund. Telephone exchanges are automatically available unless
the shareholder indicates he is not interested in having this privilege by
checking the "no" box on the Purchase Application.
In addition, Institutional Shares of the Fund may be exchanged for Investor
Shares of the Fund in connection with the distribution of assets held in a
qualified trust, agency or custodial account maintained with the trust
department of a First Interstate or other bank, trust company or thrift
15
<PAGE> 777
institution, or in other cases where Institutional Shares are not held in such
qualified accounts. Similarly, Investor Shares may be exchanged for
Institutional Shares of the Fund if the shares are to be held in such a
qualified trust, agency or custodial account. These exchanges are made without a
sales charge at the net asset value of the respective share classes.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
The Fund intends to qualify annually and to elect to be treated as a
regulated investment company pursuant to the provisions of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). By so qualifying and
electing, the Fund generally will not be subject to Federal income tax to the
extent that it distributes investment company taxable income and net capital
gains in the manner required under the Code.
The Fund intends to distribute to its shareholders substantially all of its
investment company taxable income (which includes, among other items, dividends
and interest and the excess, if any, of net short-term capital gains over net
long-term capital losses). The Fund will declare distributions of investment
company income daily and pay those dividends monthly. The Fund intends to
distribute, at least annually, substantially all net capital gain (the excess of
net long-term capital gains over net short-term capital losses), if any. In
determining amounts of capital gains to be distributed, any capital loss
carryovers from prior years will first be applied against capital gains.
Distributions will be paid in additional shares of the Fund based on the
net asset value at the close of business on the payment date of the
distribution, unless the shareholder elects in writing, which is received by
Furman Selz not less than five full business days prior to the record date, to
receive such distributions in cash. Dividends declared in, and attributable to,
the preceding month will be paid within five business days after the end of each
month.
Shares purchased will begin earning dividends on the day the purchase order
is executed and shares redeemed will earn dividends through the previous day.
Net investment income for a Saturday, Sunday or a holiday will be declared as a
dividend on the previous business day. Investors who redeem all or a portion of
Fund shares prior to a dividend payment date will be entitled on the next
dividend payment date to all dividends declared but unpaid on those shares at
the time of their redemption.
Distributions of investment company taxable income (regardless of whether
derived from dividends, interest or net short-term capital gains) will be
taxable to shareholders as ordinary income. Distributions of net
16
<PAGE> 778
long-term capital gains designated by the Fund as capital gain dividends will be
taxable as long-term capital gains, regardless of how long a shareholder has
held his Fund shares. Distributions are taxable in the same manner whether
received in additional shares or in cash.
Earnings of the Fund not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To prevent imposition of this tax, the Fund intends to comply with this
distribution requirement.
A distribution will be treated as paid on December 31 of a calendar year if
it is declared by the Fund during October, November, or December of that year to
shareholders of record in such a month and paid by the Fund during January of
the following calendar year. Such distributions will be treated as received by
shareholders in the calendar year in which the distributions are declared,
rather than the calendar year in which the distributions are received.
The dividends paid by the Fund are not expected to qualify for the
dividends-received deduction available to corporations.
The Fund may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where the Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Most corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund. Depending on the residence of the
shareholder for tax purposes, distributions also may be subject to state and
local taxes, including withholding taxes. Foreign shareholders may, for example,
be subject to special withholding requirements. Special tax treatment, including
a penalty on certain pre-retirement distributions, is accorded to accounts
maintained as IRAs. Shareholders should consult their own tax advisors as to the
Federal, state and local tax consequences of ownership of shares of the Fund in
their particular circumstances.
17
<PAGE> 779
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
U.S. Treasury Obligations. U.S. Treasury securities are obligations
issued by the U.S. Treasury. U.S. Treasury bills, which have a maturity of up to
one year, are direct obligations of the United States and are the most
frequently issued marketable U.S. Government security. The U.S. Treasury also
issues securities with longer maturities in the form of notes and bonds.
Stripped Obligations. The Fund may invest in U.S. Treasury obligations
offered under the STRIPS or CUBES programs. Such obligations may represent
future interest or principal payments. These stripped securities are direct
obligations of the U.S. Government and clear through the Federal Reserve
book-entry system. Stripped securities are issued at a discount to their face
value and may exhibit greater price volatility than ordinary debt securities
because of the manner in which their principal and interest are returned to
investors.
Securities Issued by Other Investment Companies. The Fund may invest in
securities issued by other investment companies within the limits prescribed by
the 1940 Act. The Fund currently intends to limit its investments so that, as
determined immediately after a securities purchase is made: (a) not more than 5%
of the value of its total assets will be invested in the securities of any one
investment company; (b) not more than 10% of the value of its total assets will
be invested in the aggregate in securities of investment companies as a group;
(c) not more than 3% of the outstanding voting stock of any one investment
company will be owned by the Fund; and (d) not more than 10% of the outstanding
voting stock of any one investment company will be owned in the aggregate by the
Fund and other investment companies advised by the Advisor or any other
affiliate of First Interstate Bancorp. As a shareholder of another investment
company, the Fund would bear, along with other shareholders, its pro rata
portion of the expenses of such other investment company, including advisory
fees. These expenses would be in addition to the advisory and other expenses
that each Fund bears directly in connection with its own operations, and may
represent a duplication of fees to shareholders of the Fund. The Fund may only
invest in investment companies which restrict their portfolio investments solely
to the same investment instruments that are permissible investments for the
Fund.
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment restrictions that may
be changed only with the approval of a majority of the Fund's
18
<PAGE> 780
outstanding shares. The following description summarizes several of the Fund's
fundamental restrictions, which are set forth in full in the SAI.
The Fund may not:
1. Purchase securities (except U.S. Government securities and repurchase
agreements collateralized by such securities) if more than 5% of its
total assets at the time of purchase will be invested in securities of
any one issuer, except that up to 25% of the Fund's total assets may be
invested without regard to this 5% limitation.
2. Subject to the foregoing 25% exception, purchase more than 10% of the
outstanding voting securities of any issuer.
3. Invest 25% or more of its total assets at the time of purchase in
securities of issuers whose principal business activities are in the
same industry.
4. Borrow money except in amounts up to 10% of the value of its total
assets at the time of borrowing.
If a percentage restriction on the investment or use of assets set forth in
this Prospectus is adhered to at the time a transaction is effected, later
changes in percentage resulting from changing values will not be considered a
violation, however, the Fund will not at any time have more than 10% of its
respective net assets invested in illiquid securities.
OTHER INFORMATION
CAPITALIZATION
Pacifica Funds Trust (formerly Fund Source) was organized as a
Massachusetts business trust on July 17, 1984. The capitalization of the Trust
consists solely of an unlimited number of shares of beneficial interest with a
par value of $0.001 each. When issued, shares of the Fund are fully paid,
non-assessable and freely transferable.
The Board of Trustees has authorized the issuance of three classes of
shares in the Fund -- Institutional Shares, Investor Shares and Service Shares.
Each share of the Fund represents an equal proportionate interest in the Fund
with other shares of the same class and is entitled to cash dividends and
distributions earned on such shares as are declared in the discretion of the
Board of Trustees.
The Fund's Institutional Shares, Investor Shares and Service Shares bear
their pro rata portion of all operating expenses paid by the Fund except
19
<PAGE> 781
for the distribution payments, Service Organization fees and other "class"
expenses that are allocated to a particular share class. The Board of Trustees
has approved a Distribution Plan with respect to Investor Shares of the Fund
under which the Trust may pay the Distributor in connection with the
distribution of Investor Shares at a rate or rates set from time to time by the
Board of Trustees, provided that no rate may exceed the annual rate of 0.50% of
the average daily net asset value of Investor Shares of the Fund. In addition,
the Fund may pay fees to Service Organizations in amounts up to an annual rate
of 0.25% of the daily net asset value of the Fund's Shares owned by shareholders
with whom a Service Organization has a servicing relationship. Because of the
"class expenses", the performance of the Fund's Investor Shares is expected to
be lower than the performance of its Institutional Shares and Service Shares.
The Trust offers various services and privileges in connection with its Investor
Shares that are not offered in connection with its Institutional Shares,
including an automatic investment plan, automatic withdrawal plan and, with
respect to certain portfolios, checkwriting. For information regarding the
Fund's Investor Shares and Service Shares, contact Furman Selz at 1-800-662-8417
or your Service Organization.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust. The Declaration of Trust also
provides for indemnification out of the property of a Fund of any shareholder
held personally liable solely by reason of being or having been a shareholder of
the Fund. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a Fund itself would
be unable to meet its obligations and should be considered remote.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Trust is not required to hold regular
annual meetings of the Fund's shareholders, but in the event that a special
meeting is held, shareholders of each portfolio offered by the Trust will be
entitled to one vote for each full share held and fractional votes for
fractional shares held, and will vote in the aggregate and not on a
portfolio-by-portfolio basis, except as required by the 1940 Act or other
applicable law. It is contemplated that, as required by the 1940 Act, the
20
<PAGE> 782
shareholders of a portfolio will vote separately on a portfolio-by-portfolio
basis on matters relating to a particular portfolio's investment advisory
agreement or changes in a portfolio's fundamental investment limitations, and on
other matters where the interests of the respective portfolios are not
substantially identical. Similarly, shareholders of each portfolio will vote in
the aggregate and not by class unless the Trustees determine that the matter to
be voted on affects only the interests of the holders of a particular class of a
Fund's shares. Voting rights are not cumulative.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust and in connection with such meeting to comply with the shareholders'
communications provisions of Section 16 (c) of the 1940 Act.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of the Fund means, with respect to the
approval of an investment advisory agreement, a distribution plan or a change in
a fundamental investment policy, the vote of the lesser of (1) 67% of the shares
of the Fund present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy, or (2) more than 50% of
the outstanding shares of the Fund. For purposes of the 1940 Act, any person who
owns either directly or through one or more controlled companies more than 25
percent of the voting securities of a company is presumed to "control" such
company. Under this definition, First Interstate Bancorp and its affiliates may
be deemed to be controlling persons of the Trust.
PERFORMANCE INFORMATION
The Fund may, from time to time, include yield data in advertisements or
reports to shareholders or prospective investors. The methods used to calculate
the yields of the Fund are mandated by the SEC.
Quotations of "yield" for the Fund will be based on the income received by
a hypothetical investment (less a pro-rata share of Fund expenses) over a
particular seven-day period, which is then "annualized" (i.e., assuming that the
seven-day yield would be received for 52 weeks, stated in terms of an annual
percentage return on the investment).
21
<PAGE> 783
"Effective yield" for the Fund is calculated in a manner similar to that
used to calculate yield, but includes the compounding effect of earnings on
reinvested dividends.
Quotations of yield reflect only the performance of the Fund during the
particular period on which the calculations are based. Yield and effective yield
for the Fund will vary based on changes in market conditions, the level of
interest rates and the level of the expenses of the Fund and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
For purposes of comparison, the Fund may, from time to time, quote
performance information from IBC/Donoghue's MONEY FUND REPORT of Holliston,
Massachusetts 01746. IBC/Donoghue's MONEY MARKET AVERAGE is a widely recognized
index of money market fund performance. Figures reflect average yields of all
taxable money funds included in IBC/Donoghue's index. IBC/Donoghue's 100% U.S.
TREASURY MONEY FUND AVERAGE is a component of this average and reflects average
yields of all taxable U.S. Treasury money funds. Any performance information
should be considered in light of the Fund's investment objective and policies,
characteristics and quality of the Fund and the market conditions during the
time period indicated, and should not be considered to be representative of what
may be achieved in the future. For a description of the methods used to
determine yield for the Fund, see "Other Information -- Performance Information"
in the SAI.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Fund at 237 Park
Avenue, Suite 910, New York, New York 10017.
General and Account Information: (800) 662-8417.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR
IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE FUND OR BY ITS DISTRIBUTOR IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
22
<PAGE> 784
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY FIRST INTERSTATE BANCORP OR ITS AFFILIATES,
AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
23
<PAGE> 785
INVESTMENT ADVISOR
First Interstate Capital Management, Inc.
7501 East McCormick Parkway
Scottsdale, Arizona 85258
ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Pacifica Funds Distributor Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
First Interstate Bank of California
707 Wilshire Boulevard
Los Angeles, California 90017
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
[PACIFICA LOGO] PACUSIS-2/96
<PAGE> 786
[PACIFICA LOGO]
(SERVICE SHARES)
PACIFICA 100% U.S. TREASURY
MONEY MARKET FUND
PROSPECTUS
FEBRUARY 1, 1996
[FIRST INTERSTATE BANK LOGO]
Investment Advisor to The Pacifica Funds
<PAGE> 787
PACIFICA FUNDS TRUST
(SERVICE SHARES)
237 PARK AVENUE, NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) 662-8417
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. --
INVESTMENT ADVISOR
("FICM" OR THE "ADVISOR")
FURMAN SELZ LLC -- ADMINISTRATOR AND SPONSOR
("FURMAN SELZ" OR THE "SPONSOR")
PACIFICA FUNDS DISTRIBUTOR INC. -- DISTRIBUTOR
("PFD INC." OR THE "DISTRIBUTOR")
Pacifica Funds Trust (the "Trust") is an open-end investment company (a
mutual fund) that offers a selection of separate investment portfolios. This
Prospectus describes the Service Shares of the following portfolio (the "Fund"):
- Pacifica 100% U.S. Treasury Money Market Fund
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund and should be read and retained for
information about the Fund. A Statement of Additional Information (the "SAI"),
dated February 1, 1996 (which may be revised from time to time), containing
additional and more detailed information about the Fund, has been filed with the
Securities and Exchange Commission ("SEC") and is hereby incorporated by
reference into this Prospectus. It is available without charge and can be
obtained by writing or calling the Fund at the address or information number
printed above.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
----------------------------
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FIRST INTERSTATE OR OTHER BANK, AND ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN 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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1996
<PAGE> 788
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS............................................... 3
FUND EXPENSES............................................ 5
FEE TABLE -- SERVICE SHARES.............................. 5
THE FUND................................................. 7
INVESTMENT POLICIES AND PRACTICES
OF THE FUND............................................ 7
RISKS OF INVESTING IN THE FUND........................... 8
MANAGEMENT OF THE FUND................................... 8
FUND SHARE VALUATION..................................... 12
PURCHASE AND REDEMPTION OF SERVICE SHARES................ 12
EXCHANGE OF SERVICE SHARES............................... 14
DIVIDENDS, DISTRIBUTIONS AND
FEDERAL INCOME TAX..................................... 15
DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES................................... 17
INVESTMENT RESTRICTIONS.................................. 18
OTHER INFORMATION........................................ 18
</TABLE>
2
<PAGE> 789
HIGHLIGHTS
INVESTMENT OBJECTIVES AND POLICIES OF THE FUND
The investment objective of the 100% U.S. Treasury Money Market Fund is to
seek as high a level of current income as is consistent with liquidity and
maximum safety of principal. The Fund pursues this objective by investing
exclusively in obligations of the U.S. Treasury which are backed by the full
faith and credit of the U.S. Government as to payment of principal and interest
and which have remaining maturities not exceeding 397 days.
For additional information concerning the investment policies, practices
and risk considerations of the Fund, see "The Fund," "Investment Policies and
Practices of the Fund" and "Risks of Investing in the Fund" in this Prospectus.
RISKS OF INVESTING IN THE FUND
The Fund attempts to maintain the value of its shares at a constant $1.00
per share, although there can be no assurance that the Fund will always be able
to do so. The Fund may not achieve as high a level of current income as other
funds that do not limit their investments to the high quality U.S. Treasury
securities in which the Fund invests. The Fund's performance will fluctuate
based on many factors, including the quality of the instruments in the Fund's
investment portfolio, national and international economic conditions, interest
rate levels and general market conditions.
There is no assurance that the Fund will achieve its investment objective.
MANAGEMENT OF THE FUND
First Interstate Capital Management, Inc. acts as investment advisor to the
Fund. For its services, the Advisor is entitled to receive a fee from the Fund
at an annual rate based on the Fund's average daily net assets. See "Fee
Table -- Service Shares" and "Management of the Fund" in this Prospectus.
Furman Selz acts as administrator and sponsor to the Fund. Furman Selz
provides certain management and administrative services to the Fund, and is
entitled to receive a fee from the Fund at an annual rate based on the Fund's
average daily net assets. PFD Inc. distributes the Fund's shares.
Fees and expenses charged to the Fund are outlined on page 5 of this
Prospectus.
3
<PAGE> 790
GUIDE TO INVESTING IN THE PACIFICA FAMILY OF FUNDS
Purchase orders for the Fund received in proper order by 9:00 a.m., Pacific
time (12:00 p.m., Eastern time), will become effective that day.
Service Shares of the Fund are purchased at net asset value without a sales
charge.
All dividends and distributions will be automatically reinvested at net
asset value in additional Service Shares of the Fund unless cash payment is
requested.
- Distributions for the Fund are generally paid monthly.
For additional information on how to purchase and redeem Service Shares of
the Fund, see "Purchase and Redemption of Service Shares" and "Exchange of
Service Shares."
4
<PAGE> 791
FUND EXPENSES
The following table lists the costs and expenses that an investor will
incur either directly or indirectly as a Service shareholder of the Fund. The
information is based on estimated amounts for the initial fiscal year of the
Fund.
FEE TABLE -- SERVICE SHARES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)............... None
Deferred Sales Load
(as a percentage of redemption proceeds).......... None
Redemption Fees...................................... None
Exchange Fee......................................... None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (after waivers)(++).................. .00%
Other Expenses (after waivers)(++)++................. .45%
------
TOTAL FUND OPERATING EXPENSES:
(after waivers)(++)++++.............................. .45%
------
</TABLE>
- ---------------
<TABLE>
<C> <S>
(++) Management Fees (before waivers) would be .30%.
(++)++ Other Expenses (before waivers) would be .50% and are
estimated.
(++)++++ Total Fund Operating Expenses (before waivers) would be
.80%.
</TABLE>
5
<PAGE> 792
The purpose of this table is to assist shareholders in understanding the
various costs and expenses that an investor in the Fund's Service Shares will
bear. The table does not reflect any charges that may be imposed by a First
Interstate Bank or other institutions directly on their customer accounts in
connection with investments in the Fund.
EXAMPLE:(++)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C>
$ 4 $ 14
</TABLE>
- ---------------
(++) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN
IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE
ASSUMED AMOUNT.
6
<PAGE> 793
THE FUND
The Fund is a portfolio of a Massachusetts business trust, Pacifica Funds
Trust, organized under the laws of the Commonwealth of Massachusetts as an
open-end, management investment company. The Trust's Board of Trustees oversees
the overall management of the Fund and elects the officers of the Fund.
INVESTMENT POLICIES AND PRACTICES OF THE FUND
The investment objective of the Fund is to provide investors with as high a
level of current income as is consistent with liquidity and maximum safety of
principal. The SAI contains the specific investment restrictions which govern
the Fund's investments. Those restrictions and the Fund's investment objectives
are fundamental policies, which means that they may not be changed without a
majority vote of shareholders of the Fund. Except for the objectives and those
restrictions specifically identified as fundamental all other investment
policies and practices described in this Prospectus and in the SAI are not
fundamental, which means that the Board of Trustees may change them without
shareholder approval. The Advisor selects investments and makes investment
decisions based on the investment objective and policies of the Fund.
The Advisor selects only those U.S. dollar-denominated debt instruments for
the Fund which meet the high quality, credit risk standards established by the
Fund's Board of Trustees. The Fund will not maintain a dollar-weighted average
portfolio maturity that exceeds 90 days nor purchase any instrument with a
remaining maturity of greater than 397 calendar days.
The Fund restricts its investment to U.S. Treasury securities. Securities
issued by the U.S. Treasury have historically involved little risk of loss of
principal if held to maturity. It should be noted that neither the United States
Government, nor any agency or instrumentality thereof, has guaranteed, sponsored
or approved the Fund or its shares. Generally, securities in which the Fund
invests will not earn as high a yield as securities of longer maturity and/or of
lesser quality which are more subject to market volatility.
The types of securities and investment practices used by the Fund are
described in greater detail under the section "Description of Securities and
Investment Practices" on pages 16 and 17 of this Prospectus.
7
<PAGE> 794
RISKS OF INVESTING IN THE FUND
The Fund attempts to maintain the value of its shares at a constant $1.00
per share, although there can be no assurance that the Fund will always be able
to do so. The Fund's performance will fluctuate based on many factors, including
the quality of the instruments in the Fund's investment portfolio, national and
international economic conditions, interest rate levels and general market
conditions.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of the
Board of Trustees. The Trustees are Dennis W. Draper, Joseph N. Hankin, John E.
Heilmann, Jack D. Henderson and Richard A. Wedemeyer. Information about the
Trustees, as well as the Fund's executive officers, may be found in the SAI
under the heading "Management Trustees and Officers."
THE ADVISOR: FIRST INTERSTATE CAPITAL MANAGEMENT, INC.
First Interstate Capital Management, Inc., 7501 E. McCormick Parkway,
Scottsdale, Arizona 85258, serves as investment advisor to the Trust. FICM
manages the investment and reinvestment of the assets of the Fund and
continuously reviews, supervises and administers the Fund's investments. The
Advisor is responsible for placing orders for the purchase and sale of the
Fund's investments directly with brokers and dealers selected by it in its
discretion.
FICM is a wholly-owned subsidiary of First Interstate Bank of California,
which is the largest banking subsidiary of First Interstate Bancorp, a
multi-bank holding company. First Interstate Bancorp provides financial products
and services marketed at the local level to nearly five million households in
over 500 communities in 13 western states.
On January 24, 1996, First Interstate Bancorp signed a definitive merger
agreement to merge with Wells Fargo & Company ("Wells Fargo"), a publicly-held
bank holding company with its head office at 420 Montgomery Street, San
Francisco, California 94104. The merger is conditioned upon, among other things,
certain regulatory approvals. Upon completion of the merger, currently expected
to occur during the second quarter of 1996, FICM will be wholly-owned by Wells
Fargo, and the existing investment advisory agreement between the Trust and FICM
will automatically terminate. It is contemplated that an application will be
filed with the Securities and Exchange Commission to ensure there is no
8
<PAGE> 795
disruption as a result of the merger in the provision of investment advisory
services to the Funds, and that a meeting of shareholders will be held not later
than 120 days after the merger to approve ongoing investment advisory
arrangements for the Funds.
For the advisory services it provides to the Fund, FICM is entitled to
receive from the Fund fees, payable monthly, at the annual rate of 0.30% of the
first $500 million of the Fund's average daily net assets, 0.25% of the next
$500 million of the Fund's average daily net assets, and 0.20% of the Fund's
average daily net assets in excess of $1 billion.
THE SPONSOR AND DISTRIBUTOR
Furman Selz LLC, 230 Park Avenue, New York, New York 10169, acts as Sponsor
of the Fund. Furman Selz is primarily an institutional brokerage firm with
memberships on the New York, American, Boston, Midwest, Pacific and Philadelphia
Stock Exchanges. Furman Selz also serves as administrator and distributor of
other mutual funds. Pacifica Funds Distributor Inc. is an affiliate of Furman
Selz and was organized specifically to distribute shares of the Trust. However,
offers and sales of shares of the Trust will be made only through Furman Selz or
other registered (or exempt) dealers.
PFD Inc. may from time to time pay a bonus or other incentive to dealers
which employ registered representatives who sell a minimum dollar amount of
Service Shares of the Fund and/or other funds distributed by Furman Selz or PFD
Inc. during a specific period of time. Such bonus or other incentive will take
the form of payment for travel expenses, including lodging, incurred in
connection with trips taken by qualifying registered representatives and members
of their families to places within or outside the United States, or other
bonuses, such as gift certificates or the cash equivalent of such bonuses. PFD
Inc. has established such a special promotional incentive program with First
Interstate Investments, Inc.
ADMINISTRATIVE SERVICES
The Fund has also entered into an Administrative Services Contract with
Furman Selz pursuant to which Furman Selz provides certain management and
administrative services necessary for the Fund's operations including: (i)
general supervision of the operation of the Fund including coordination of the
services performed by the Fund's investment advisor, transfer agent, custodian,
independent accountants and legal counsel, regulatory compliance, including the
compilation of information for documents such as reports to, and filings with,
the SEC and state securities
9
<PAGE> 796
commissions, and preparation of proxy statements and shareholder reports for the
Fund; (ii) general supervision relative to the compilation of data required for
the preparation of periodic reports distributed to the Fund's Officers and Board
of Trustees; and (iii) furnishing office space and certain facilities required
for conducting the business of the Fund. For these services, Furman Selz is
entitled to receive a fee, payable monthly, at the annual rate of 0.15% of the
average daily net assets of the Fund. Pursuant to a Services Agreement with the
Trust, Furman Selz assists the Trust with certain transfer and dividend
disbursing agent functions and receives a fee of $15.00 per account per year
plus out-of-pocket expenses. Pursuant to a Fund Accounting Agreement with the
Trust, Furman Selz assists the Trust in calculating net asset values and
provides certain other accounting services for the Fund for an annual fee of
$30,000 plus out-of-pocket expenses.
SERVICE ORGANIZATIONS
The Fund has entered into Servicing Agreements with certain banks and other
institutions that are record shareholders of the Fund's Service Shares ("Service
Organizations"). The Service Organizations render support services to their
customers ("Customers"), who are the beneficial owners of Service Shares, in
consideration of the Fund's payment (on an annualized basis) of up to 0.25% of
the average daily net asset value of the Service Shares held by the Service
Organizations for the benefit of their Customers. From time to time, the Service
Organizations may waive all or a portion of their fees with respect to Service
Shares of the Fund. Such services, which are described more fully in the SAI,
include aggregating and processing purchase and redemption requests for Fund
shares from Customers and placing net purchase and redemption orders with the
Distributor, processing dividend payments from the Fund on behalf of Customers,
providing information periodically to Customers showing their positions in Fund
shares, and providing sub-accounting with respect to Fund shares beneficially
owned by Customers or the information necessary for sub-accounting.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continu-
10
<PAGE> 797
ing to perform all or a part of its servicing activities. If a bank were
prohibited from so acting, its shareholder clients would be permitted to remain
shareholders of the Funds and alternative means for continuing the servicing of
such shareholders would be sought. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these
occurrences.
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by Furman Selz, PFD Inc. or the Advisor. The costs borne by the Fund
include legal and accounting expenses; Trustees' fees and expenses; insurance
premiums; custodian and transfer agent fees and expenses; expenses incurred in
acquiring or disposing of the Fund's portfolio securities; expenses of
registering and qualifying the Fund's shares for sale with the SEC and with
various state securities commissions; expenses of obtaining quotations on the
Fund's portfolio securities and pricing of the Fund's shares; expenses of
maintaining the Fund's legal existence and of shareholders' meetings; and
expenses of preparation and distribution to existing shareholders of reports,
proxies and prospectuses. The Fund bears its own expenses associated with its
establishment as a series of the Trust; these expenses are amortized over a
five-year period from the commencement of a Fund's operations. See "Management"
in the SAI for additional information on expenses borne by the Fund. Trust
expenses directly attributable to the Fund are charged to the Fund, and expenses
attributable to a particular class of shares of a Fund (such as Service
Organization fees) are charged to that class. Other expenses are allocated
proportionately among all of the investment portfolios in the Trust in relation
to the net assets of each portfolio or by other means deemed fair and equitable
by the Board of Trustees.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Advisor places orders for
the purchase and sale of portfolio investments for the Fund's account with
brokers or dealers selected by it in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Fund, the Advisor will seek the best execution of the Fund's orders.
Purchases and sales of debt securities are generally placed by the Advisor with
primary market makers for these securities on a net basis, i.e., without any
brokerage commission being paid by the Fund. Trading does, however, involve
transaction costs. Transactions with dealers serving as primary market makers
reflect the spread between the bid and asked prices.
11
<PAGE> 798
Purchases of underwritten issues may be made which will include an underwriting
fee paid to the underwriter. Broker-dealers are selected on the basis of a
variety of factors such as reputation, capital strength, size and difficulty of
the order, sale of Fund shares by the broker-dealer, and research provided to
the Advisor by the broker-dealer. The Advisor may cause a Fund to pay
commissions higher than another broker-dealer would have charged if the Advisor
believes the commission paid is reasonable in relation to the value of the
brokerage and research services received by the Advisor.
FUND SHARE VALUATION
The net asset value of each class of shares of the Fund is calculated at
3:00 p.m. (Eastern time), Monday through Friday, on each day the New York Stock
Exchange is open for trading (a "Business Day"), which excludes the following
business holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share for each class of shares is computed by dividing the value of
the Fund's assets allocable to a particular class, less the liabilities charged
to that class by the total number of the outstanding shares of that class. All
expenses, including fees paid to the Advisor, Furman Selz and PFD Inc., are
accrued daily and taken into account for the purpose of determining the net
asset value.
The Fund uses the amortized cost method to value its portfolio securities
and seeks to maintain a constant net asset value of $1.00 per share, although
there may be circumstances under which this goal cannot be achieved. The
amortized cost method involves valuing a security at its cost and amortizing any
discount or premium over the period until maturity, regardless of the impact of
fluctuating interest rates on the market value of the security. See the SAI for
a more complete description of the amortized cost method.
PURCHASE AND REDEMPTION OF SERVICE SHARES
Service Shares of the Fund are sold to Customers of affiliate, franchise or
correspondent banks of First Interstate Bancorp and other selected institutions
(the "Banks"). Clients of a Bank's trust division, as well as individuals,
corporations, partnerships and other businesses which maintain qualified
accounts at a Bank (including Individual Retirement and Keogh Plan accounts) may
invest in the Funds. Investors purchasing Fund shares may include officers,
directors, or employees of a Bank.
12
<PAGE> 799
All Service Share purchases are effected through Customers' accounts at
their Banks. Differing types of Bank accounts may from time to time purchase
Service Shares, including discretionary and non-discretionary personal and other
trust accounts, managing agency accounts and custodian accounts. The Fund has no
minimum investment requirement, although the Banks may impose account minimums
in connection with investments in the Fund.
Service Shares are purchased through procedures established in connection
with the requirements of such Bank accounts. These procedures may include
instructions under which a Customer's account is "swept" automatically, usually
not less frequently than weekly, and amounts (federal funds) in excess of a
minimum balance agreed to by the Bank and the Customer are invested in Service
Shares of the Fund as directed by the Customer. The Fund expects that Banks will
transmit orders for the purchase of Service Shares arising from automatic
investment programs the same day as the "excess" balances are swept. Depending
upon the terms of the particular account, a Bank may charge a Customer's account
fees for the automatic sweep and other cash management services provided,
including, for example, account maintenance fees, compensating balance
requirements, or fees based upon account transactions, assets, or income. Banks
are responsible for providing information concerning these services and any Bank
charges to their Customers prior to any purchase of Service Shares, and an
investor should read this Prospectus in light of the terms of the investor's
Bank account before investing.
Service Shares normally will be registered in the name of a Bank or a
nominee of a Bank. The Bank will receive a written statement at least monthly of
each purchase or redemption of shares. Beneficial ownership of Service Shares
will be recorded by the Banks and reflected in the account statements provided
by such Banks to their Customers at such times as the Banks may determine.
It is the responsibility of the Banks to transmit orders for purchases of
Service Shares by their Customers and for the Banks to deliver required funds on
a timely basis. The Fund's Service Shares are sold on a continuous basis,
without a sales charge imposed by the Fund, at the per share net asset value
next determined after federal funds (which are held on deposit at a Federal
Reserve Bank) are received by the Fund.
The net asset value of the Service Shares of the Fund is computed by
dividing the value of the Fund's assets allocated to its Service Shares, less
the liabilities charged to that class, by the total number of outstanding shares
of that class. The Fund uses the amortized cost method of valuing
13
<PAGE> 800
its securities. This method of valuation assumes a steady rate of payment
from the date of purchase until maturity instead of actual changes in market
value.
A Customer may redeem all or part of the value of the Customer's Service
Shares in accordance with instructions and limitations pertaining to the account
at the Customer's Bank. Consult your Bank for the appropriate procedures to be
followed.
All redemption requests properly received by the Fund from a Bank prior to
9:00 a.m., Pacific time (12:00 p.m. Eastern time), on a day the Fund is open for
business, are effected at the next determined net asset value calculated that
day. If the redemption request is received at or after 9:00 a.m., Pacific time
(12:00 p.m. Eastern time), Service Shares will be redeemed at their next
determined net asset value the next business day. It is the responsibility of
Banks to transmit redemption orders on a timely basis in accordance with their
agreements with Customers.
The Fund ordinarily will transmit payment for all Service Shares redeemed
within two business days after receipt of a redemption request in proper form,
but in any event payment will be made within seven days thereafter, except as
provided by the rules of the SEC. During the period prior to the time the
redemption request is executed, dividends on such Service Shares will accrue and
be payable as described under "Dividends, Distributions and Federal Income
Taxes," and investors will be entitled to exercise all other beneficial rights
of ownership.
If an investor has agreed with a particular Bank to maintain a minimum
balance in an account, and the balance in the account falls below that minimum,
the investor may be obliged to redeem all of the investor's Service Class shares
in the Fund.
EXCHANGE OF SERVICE SHARES
The Fund's Service Shares may be exchanged without cost for Service Shares
of the other Funds distributed by PFD Inc. Exchange requests may be made by a
Customer to the Customer's Bank in accordance with the procedures or
instructions specified by the Bank. Consult your Bank for the proper procedure
to be followed. Banks will be responsible for transmitting the exchange requests
from their Customers to the Fund. Exchanges will be made by the Fund following
the receipt of an exchange request from a Bank.
An exchange involves a redemption of all or a portion of the Service Shares
in one Fund and the investment of the redemption proceeds in
14
<PAGE> 801
Service Shares of the other Fund. The redemption will be made at the per share
net asset value of the Service Shares to be redeemed next determined after the
exchange request is received and accepted by the Fund. The Service Shares of the
Fund to be acquired will be purchased at the net asset value of those shares
next determined after acceptance of the purchase order in accordance with the
Fund's customary policy for accepting investments.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX
The Fund intends to qualify annually and to elect to be treated as a
regulated investment company pursuant to the provisions of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). By so qualifying and
electing, the Fund generally will not be subject to Federal income tax to the
extent that it distributes investment company taxable income and net capital
gains in the manner required under the Code.
The Fund intends to distribute to its shareholders substantially all of its
investment company taxable income (which includes, among other items, dividends
and interest and the excess, if any, of net short-term capital gains over net
long-term capital losses). The Fund will declare distributions of investment
company income daily and pay those dividends monthly. The Fund intends to
distribute, at least annually, substantially all net capital gain (the excess of
net long-term capital gains over net short-term capital losses), if any. In
determining amounts of capital gains to be distributed, any capital loss
carryovers from prior years will first be applied against capital gains.
Distributions will be paid in additional shares of the Fund based on the
net asset value at the close of business on the payment date of the
distribution, unless the shareholder elects in writing, which is received by
Furman Selz not less than five full business days prior to the record date, to
receive such distributions in cash. Dividends declared in, and attributable to,
the preceding month will be paid within five business days after the end of each
month.
Shares purchased will begin earning dividends on the day the purchase order
is executed and shares redeemed will earn dividends through the previous day.
Net investment income for a Saturday, Sunday or a holiday will be declared as a
dividend on the previous business day. Investors who redeem all or a portion of
Fund shares prior to a dividend payment date will be entitled on the next
dividend payment date to all dividends declared but unpaid on those shares at
the time of their redemption.
15
<PAGE> 802
Distributions of investment company taxable income (regardless of whether
derived from dividends, interest or net short-term capital gains) will be
taxable to shareholders as ordinary income. Distributions of net long-term
capital gains designated by the Fund as capital gain dividends will be taxable
as long-term capital gains, regardless of how long a shareholder has held his
Fund shares. Distributions are taxable in the same manner whether received in
additional shares or in cash.
Earnings of the Fund not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To prevent imposition of this tax, the Fund intends to comply with this
distribution requirement.
A distribution will be treated as paid on December 31 of a calendar year if
it is declared by the Fund during October, November, or December of that year to
shareholders of record in such a month and paid by the Fund during January of
the following calendar year. Such distributions will be treated as received by
shareholders in the calendar year in which the distributions are declared,
rather than the calendar year in which the distributions are received.
The dividends paid by the Fund are not expected to qualify for the
dividends-received deduction available to corporations.
The Fund may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where the Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Most corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Shareholders will be notified annually by the Trust as to the Federal tax
status of distributions made by the Fund. Depending on the residence of the
shareholder for tax purposes, distributions also may be subject to state and
local taxes, including withholding taxes. Foreign shareholders may, for example,
be subject to special withholding requirements. Special tax treatment, including
a penalty on certain pre-retirement distributions, is accorded to accounts
maintained as IRAs. Shareholders should consult their own tax advisors as to the
Federal, state and local tax consequences of ownership of shares of the Fund in
their particular circumstances.
16
<PAGE> 803
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
U.S. Treasury Obligations. U.S. Treasury securities are obligations issued
by the U.S. Treasury. U.S. Treasury bills, which have a maturity of up to one
year, are direct obligations of the United States and are the most frequently
issued marketable U.S. Government security. The U.S. Treasury also issues
securities with longer maturities in the form of notes and bonds.
Stripped Obligations. The Fund may invest in U.S. Treasury obligations
offered under the STRIPS or CUBES programs. Such obligations may represent
future interest or principal payments. These stripped securities are direct
obligations of the U.S. Government and clear through the Federal Reserve
book-entry system. Stripped securities are issued at a discount to their face
value and may exhibit greater price volatility than ordinary debt securities
because of the manner in which their principal and interest are returned to
investors.
Securities Issued by Other Investment Companies. The Fund may invest in
securities issued by other investment companies within the limits prescribed by
the 1940 Act. The Fund currently intends to limit its investments so that, as
determined immediately after a securities purchase is made: (a) not more than 5%
of the value of its total assets will be invested in the securities of any one
investment company; (b) not more than 10% of the value of its total assets will
be invested in the aggregate in securities of investment companies as a group;
(c) not more than 3% of the outstanding voting stock of any one investment
company will be owned by the Fund; and (d) not more than 10% of the outstanding
voting stock of any one investment company will be owned in the aggregate by the
Fund and other investment companies advised by the Advisor or any other
affiliate of First Interstate Bancorp. As a shareholder of another investment
company, the Fund would bear, along with other shareholders, its pro rata
portion of the expenses of such other investment company, including advisory
fees. These expenses would be in addition to the advisory and other expenses
that each Fund bears directly in connection with its own operations, and may
represent a duplication of fees to shareholders of the Fund. The Fund may only
invest in investment companies which restrict their portfolio investments solely
to the same investment instruments that are permissible investments for the
Fund.
17
<PAGE> 804
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment restrictions that may
be changed only with the approval of a majority of the Fund's outstanding
shares. The following description summarizes several of the Fund's fundamental
restrictions, which are set forth in full in the SAI.
The Fund may not:
1. Purchase securities (except U.S. Government securities and repurchase
agreements collateralized by such securities) if more than 5% of its
total assets at the time of purchase will be invested in securities of
any one issuer, except that up to 25% of the Fund's total assets may be
invested without regard to this 5% limitation.
2. Subject to the foregoing 25% exception, purchase more than 10% of the
outstanding voting securities of any issuer.
3. Invest 25% or more of its total assets at the time of purchase in
securities of issuers whose principal business activities are in the
same industry.
4. Borrow money except in amounts up to 10% of the value of its total
assets at the time of borrowing.
If a percentage restriction on the investment or use of assets set forth in
this Prospectus is adhered to at the time a transaction is effected, later
changes in percentage resulting from changing values will not be considered a
violation, however, the Fund will not at any time have more than 10% of its
respective net assets invested in illiquid securities.
OTHER INFORMATION
CAPITALIZATION
Pacifica Funds Trust (formerly Fund Source) was organized as a
Massachusetts business trust on July 17, 1984. The capitalization of the Trust
consists solely of an unlimited number of shares of beneficial interest with a
par value of $0.001 each. When issued, shares of the Fund are fully paid,
non-assessable and freely transferable.
The Board of Trustees has authorized the issuance of three classes of
shares in the Fund -- Institutional Shares, Investor Shares and Service Shares.
Each share of the Fund represents an equal proportionate interest in the Fund
with other shares of the same class and is entitled to cash
18
<PAGE> 805
dividends and distributions earned on such shares as are declared in the
discretion of the Board of Trustees.
The Fund's Institutional Shares, Investor Shares and Service Shares bear
their pro rata portion of all operating expenses paid by the Fund except for the
distribution payments, Service Organization fees and other "class" expenses that
are allocated to a particular share class. The Board of Trustees has approved a
Distribution Plan with respect to Investor Shares of the Fund under which the
Trust may pay the Distributor in connection with the distribution of Investor
Shares at a rate or rates set from time to time by the Board of Trustees,
provided that no rate may exceed the annual rate of 0.50% of the average daily
net asset value of Investor Shares of the Fund. In addition, the Fund may pay
fees to Service Organizations in amounts up to an annual rate of 0.25% of the
daily net asset value of the Fund's outstanding Investor Shares and Service
Shares owned by shareholders with whom a Service Organization has a servicing
relationship. Because of the "class expenses", the performance of the Fund's
Investor Shares is expected to be lower than the performance of its
Institutional Shares and Service Shares. The Trust offers various services and
privileges in connection with its Investor Shares that are not offered in
connection with its Institutional Shares and Service Shares, including an
automatic investment plan, automatic withdrawal plan and, certain checkwriting
privileges. For information regarding the Fund's Investor Shares and
Institutional Shares, contact Furman Selz at 1-800-662-8417 or your Service
Organization.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust. The Declaration of Trust also
provides for indemnification out of the property of a Fund of any shareholder
held personally liable solely by reason of being or having been a shareholder of
the Fund. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a Fund itself would
be unable to meet its obligations and should be considered remote.
VOTING
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Trust is not required to hold regular
annual meetings of the Fund's shareholders, but in the event
19
<PAGE> 806
that a special meeting is held, shareholders of each portfolio offered by the
Trust will be entitled to one vote for each full share held and fractional votes
for fractional shares held, and will vote in the aggregate and not on a
portfolio-by-portfolio basis, except as required by the 1940 Act or other
applicable law. It is contemplated that, as required by the 1940 Act, the
shareholders of a portfolio will vote separately on a portfolio-by-portfolio
basis on matters relating to a particular portfolio's investment advisory
agreement or changes in a portfolio's fundamental investment limitations, and on
other matters where the interests of the respective portfolios are not
substantially identical. Similarly, shareholders of each portfolio will vote in
the aggregate and not by class unless the Trustees determine that the matter to
be voted on affects only the interests of the holders of a particular class of a
Fund's shares. Voting rights are not cumulative.
The Declaration of Trust provides that the holders of not less than two-
thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust and in connection with such meeting to comply with the shareholders'
communications provisions of Section 16 (c) of the 1940 Act.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of the Fund means, with respect to the
approval of an investment advisory agreement, a distribution plan or a change in
a fundamental investment policy, the vote of the lesser of (1) 67% of the shares
of the Fund present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy, or (2) more than 50% of
the outstanding shares of the Fund. For purposes of the 1940 Act, any person who
owns either directly or through one or more controlled companies more than 25
percent of the voting securities of a company is presumed to "control" such
company. Under this definition, First Interstate Bancorp and its affiliates may
be deemed to be controlling persons of the Trust.
PERFORMANCE INFORMATION
The Fund may, from time to time, include yield data in advertisements or
reports to shareholders or prospective investors. The methods used to calculate
the yields of the Fund are mandated by the SEC.
20
<PAGE> 807
Quotations of "yield" for the Fund will be based on the income received by
a hypothetical investment (less a pro-rata share of Fund expenses) over a
particular seven-day period, which is then "annualized" (i.e., assuming that the
seven-day yield would be received for 52 weeks, stated in terms of an annual
percentage return on the investment).
"Effective yield" for the Fund is calculated in a manner similar to that
used to calculate yield, but includes the compounding effect of earnings on
reinvested dividends.
Quotations of yield reflect only the performance of the Fund during the
particular period on which the calculations are based. Yield and effective yield
for the Fund will vary based on changes in market conditions, the level of
interest rates and the level of the expenses of the Fund and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
For purposes of comparison, the Fund may, from time to time, quote
performance information from IBC/Donoghue's MONEY FUND REPORT of Holliston,
Massachusetts 01746. IBC/Donoghue's MONEY MARKET AVERAGE is a widely recognized
index of money market fund performance. Figures reflect average yields of all
taxable money funds included in IBC/Donoghue's index. IBC/Donoghue's 100% U.S.
TREASURY MONEY FUND AVERAGE is a component of this average and reflects average
yields of all taxable U.S. Treasury money funds. Any performance information
should be considered in light of the Fund's investment objective and policies,
characteristics and quality of the Fund and the market conditions during the
time period indicated, and should not be considered to be representative of what
may be achieved in the future. For a description of the methods used to
determine yield for the Fund, see "Other Information -- Performance Information"
in the SAI.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Fund at 237 Park
Avenue, Suite 910, New York, New York 10017.
General and Account Information: (800) 662-8417.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE,
21
<PAGE> 808
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFERING BY THE FUND OR BY ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY FIRST INTERSTATE BANCORP OR ITS AFFILIATES,
AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
22
<PAGE> 809
INVESTMENT ADVISOR
First Interstate Capital Management, Inc.
7501 East McCormick Parkway
Scottsdale, Arizona 85258
ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Pacifica Funds Distributor Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
First Interstate Bank of California
707 Wilshire Boulevard
Los Angeles, California 90017
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
<PAGE> 810
INVESTMENT ADVISOR
First Interstate Capital Management, Inc.
7501 East McCormick Parkway
Scottsdale, Arizona 85258
ADMINISTRATOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
DISTRIBUTOR
Pacifica Funds Distributor Inc.
230 Park Avenue
New York, New York 10169
CUSTODIAN
First Interstate Bank of California
707 Wilshire Boulevard
Los Angeles, California 90017
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
[PACIFICA LOGO] PACUSSER-2/96
<PAGE> 811
PACIFICA FUNDS TRUST
237 Park Avenue
New York, New York 10017
General and Account Information: (800) 662-8417
_________________________________________________________________
First Interstate Capital Management, Inc.--Investment Advisor
("FICM" or the "Advisor")
Furman Selz Incorporated--Administrator and Sponsor
("Furman Selz" or the "Sponsor")
Pacifica Funds Distributor Inc.--Distributor
("PFD Inc." or the "Distributor")
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information ("SAI") describes fifteen
investment portfolios (the "Funds") managed by First Interstate Capital
Management, Inc. The Funds are:
- Pacifica Growth Fund
- Pacifica Equity Value Fund
- Pacifica Balanced Fund
- Pacifica Equity Index Fund
- Pacifica International Equity Fund
- Pacifica Asset Preservation Fund
- Pacifica Short-Term Government Bond Fund
- Pacifica Intermediate Government Bond Fund
- Pacifica Government Income Fund
- Pacifica Intermediate Bond Fund
- Pacifica Oregon Tax-Exempt Fund
- Pacifica Arizona Tax-Exempt Fund
- Pacifica California Short-Term Tax-Exempt Fund
- Pacifica California Tax-Exempt Fund
- Pacifica National Tax-Exempt Fund
- Pacifica Government Money Market Fund
- Pacifica Money Market Fund
- Pacifica National Tax-Exempt Money Market Fund
- Pacifica California Tax-Exempt Money Market Fund
- Pacifica 100% U.S. Treasury Money Market Fund
This SAI is not a prospectus and is only authorized for distribution
when preceded or accompanied by the prospectuses for the Funds dated February
1, 1996, as may be revised from time to time (the "Prospectuses"). This SAI
contains additional and more detailed information than that set forth in the
Prospectuses and should be read in conjunction with the Prospectuses. The
Prospectuses may be obtained without charge by writing or calling the Funds at
the address or information number printed above. Capitalized terms not
otherwise defined herein have the same meaning as in the Prospectuses.
<PAGE> 812
Shares of the Trust are not deposits or obligations of, or guaranteed
or endorsed by, any First Interstate or other bank, and are not insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency. Mutual fund shares involve certain investment risks, including the
possible loss of principal.
February 1, 1996.
- 2 -
<PAGE> 813
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Government Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Bank Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Commercial Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Company Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Variable and Floating Rate Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Lending Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Forward Commitments, When-Issued Purchases and Delayed Delivery Transactions . . . . . . . . . . . . . . . . . . 4
Mortgage-Backed Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Asset-Backed Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Municipal Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Stand-By Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Foreign Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Options Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Interest Rate Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Stock Index Futures Contracts and Options on Stock Index Futures Contracts . . . . . . . . . . . . . . . . . . . 15
Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Nationally Recognized Statistical Ratings Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Trustees and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Distribution of Fund Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Administrative Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Service Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
EXPENSES AND EXPENSE LIMITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
All Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Tax-Exempt Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>
- i -
<PAGE> 814
<TABLE>
<S> <C>
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Custodian, Transfer Agent and Dividend Disbursing Agent . . . . . . . . . . . . . . . . . . . . 66
Performance Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
</TABLE>
- ii -
<PAGE> 815
GENERAL
Pacifica Funds Trust (the "Trust") is an open-end management investment
company currently offering shares in a series of separately managed investment
portfolios. The Trust was organized on July 17, 1984 under the name Fund
Source. The Trust changed its name to "Pacifica Funds Trust" on February 9,
1993. The Growth Fund, Short-Term Government Bond Fund, Intermediate
Government Bond Fund, Intermediate Bond Fund, Oregon Tax-Exempt Fund, Arizona
Tax-Exempt Fund and National Tax-Exempt Fund were originally organized as
investment portfolios of Westcore Trust under the following names: Growth
Fund, Short-Term Government Bond Fund, GAMA Fund, Bonds Plus Fund, Oregon
Tax-Exempt Fund, Arizona Intermediate Tax-Free Fund and Quality Tax-Exempt
Income Fund, respectively. On October 1, 1995, each of these Funds was
reorganized as an investment portfolio of the Trust. The Growth Fund, Equity
Value Fund, the International Equity Fund and the Equity Index Fund are
sometimes collectively referred to hereafter as the "Equity Funds." The Asset
Preservation Fund, Short-Term Government Bond Fund, Intermediate Government
Bond Fund, Government Income Fund and Intermediate Bond Fund are sometimes
collectively referred to hereafter as the "Bond Funds." The Oregon Tax-Exempt
Fund, Arizona Tax-Exempt Fund, California Short-Term Tax-Exempt Fund,
California Tax-Exempt Fund, National Tax-Exempt Fund, the California Tax-Exempt
Money Market Fund and the National Tax-Exempt Money Market Fund are sometimes
collectively referred to hereafter as the "Tax-Exempt Funds." The California
Short-Term Tax-Exempt Fund, California Tax-Exempt Fund and the California
Tax-Exempt Money Market Fund are sometimes collectively referred to hereafter
as the "California Funds." The Government Money Market Fund, the Money Market
Fund, the 100% U.S. Treasury Money Market Fund, the California Tax-Exempt Money
market Fund and the National Tax-Exempt Money Market Fund are sometimes
collectively referred to hereafter as the "Money Market Funds."
INVESTMENT POLICIES
The Prospectuses discuss the investment objectives of the Funds and the
policies to be employed to achieve those objectives. This section contains
supplemental information concerning certain types of securities and other
instruments in which the Funds may invest, the investment policies and
portfolio strategies that the Funds may utilize, and certain risks attendant to
such investments, policies and strategies.
Government Obligations. The Funds may invest in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. Examples
of the types of U.S. Government obligations that may be held by the Funds
include U.S.
- 1 -
<PAGE> 816
Treasury bonds, notes and bills and the obligations of Federal Home Loan Banks,
Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage
Association, Federal National Mortgage Association, General Services
Administration, Student Loan Marketing Association, Central Bank for
Cooperatives, Federal Home Loan Mortgage corporation, Federal Intermediate
Credit Banks and Maritime Administration.
Repurchase Agreements. The repurchase price under repurchase agreements
described in the Funds' Prospectuses generally equals the price paid by a Fund
plus interest negotiated on the basis of current short-term rates (which may be
more or less than the rate on the securities underlying the repurchase
agreement). Securities subject to repurchase agreements are held by the Funds'
custodian (or sub- custodian) or in the Federal Reserve/Treasury book-entry
system. The seller under a repurchase agreement will be required to maintain
the value of the securities subject to the agreement in an amount exceeding the
repurchase price (including accrued interest). Default by the seller would,
however, expose a Fund to possible loss because of adverse market action or
delay in connection with the disposition of the underlying obligations.
Bank Obligations. For purposes of the Funds' investment policies with
respect to bank obligations, the assets of a bank will be deemed to include the
assets of its domestic and foreign branches. A Fund's investments in the
obligations of foreign branches of U.S. banks and of foreign banks may subject
the Fund to investment risks that are different in some respects from those of
investments in obligations of U.S. domestic issuers. Such risks include future
political and economic developments, the possible imposition of withholding
taxes on interest income, possible seizure or nationalization of foreign
deposits, the possible establishment of exchange controls or the adoption of
other foreign governmental restrictions which might adversely affect the
payment of principal and interest on such obligations. In addition, foreign
branches of U.S. banks and foreign banks may be subject to less stringent
reserve requirements and to different accounting, auditing, reporting and
recordkeeping standards than those applicable to domestic branches of U.S.
banks. A Fund will acquire securities issued by foreign branches of U.S. banks
or foreign banks only when the Advisor believes that the risks associated with
such instruments are minimal.
Commercial Paper. Commercial paper includes short-term unsecured
promissory notes, variable rate demand notes and variable rate master demand
notes issued by domestic and foreign
- 2 -
<PAGE> 817
bank holding companies, corporations and financial institutions as well as
similar taxable instruments issued by government agencies and
instrumentalities.
Investment Company Securities. The Funds may invest in securities
issued by other investment companies. A Fund will limit its investments in
securities issued by other investment companies so that, as determined
immediately after a purchase of such securities is made: (i) not more than 5%
of the value of the Fund's total assets will be invested in the securities of
any one investment company; (ii) not more than 10% of the value of its total
assets will be invested in the aggregate in securities of investment companies
as a group; and (iii) not more than 3% of the outstanding voting stock of any
one investment company will be owned by the Fund or by the Trust as a whole.
It is the Funds' policy not to invest in securities issued by other investment
companies which pay asset-based fees to the Advisor, the Distributor or their
affiliates.
Variable and Floating Rate Instruments. The Funds may purchase
variable rate and floating rate obligations as described in the Prospectuses.
The Advisor will consider the earning power, cash flows and other liquidity
ratios of the issuers and guarantors of such obligations and, if the obligation
is subject to a demand feature, will monitor their financial ability to meet
payment on demand. In determining average weighted portfolio maturity, an
instrument will usually be deemed to have a maturity equal to the shorter of
the period remaining to the next interest rate adjustment or the time a Fund
can recover payment of principal as specified in the instrument.
Variable and floating rate demand instruments acquired by the
Tax-Exempt Funds may include participations in municipal obligations purchased
from and owned by financial institutions, primarily banks. Participation
interests provide these Funds with a specified undivided interest (up to 100%)
in the underlying obligation and the right to demand payment of the unpaid
principal balance plus accrued interest on the participation interest from the
institution upon a specified number of days' notice, not to exceed thirty days.
Each participation interest is backed by an irrevocable letter of credit or
guarantee of a bank that the Advisor has determined meets the prescribed
quality standards for these Funds. The bank typically retains fees out of the
interest paid on the obligation for servicing the obligation, providing the
letter of credit and issuing the repurchase commitment.
U.S. Government securities that have variable or floating interest
rates or demand or put features may be deemed to have remaining maturities as
follows: (a) a government
- 3 -
<PAGE> 818
security with a variable or floating rate of interest will be deemed to have a
maturity equal to the period remaining until the next readjustment of the
interest rate; (b) a government security with a demand or put feature that
entitles the holder to receive the principal amount of the underlying security
at the time of or sometime after the holder gives notice of demand or exercise
of the put will be deemed to have a maturity equal to the period remaining
until the principal amount can be recovered through demand or exercise of the
put; and (c) a government security with both a variable or floating rate of
interest as described in clause (a) and a demand or put feature as described in
clause (b) will be deemed to have a maturity equal to the shorter of the period
remaining until the next readjustment of the interest rate or the period
remaining until the principal amount can be recovered through demand or
exercise of the put.
Lending Securities. The Funds may lend their portfolio securities to
brokers, dealers and financial institutions, provided: (1) the loan is secured
continuously by collateral consisting of U.S. Government securities or cash or
letters of credit maintained on a daily mark-to-market basis in an amount at
least equal to the current market value of the securities loaned; (2) the Funds
may at any time call the loan and obtain the return of the securities loaned
within five business days; (3) the Funds will receive any interest or dividends
paid on the loaned securities; and (4) the aggregate market value of securities
loaned will not at any time exceed 30% of the total assets of a particular
Fund.
The Funds will earn income for lending their securities because cash
collateral pursuant to these loans will be invested in short-term money market
instruments. In connection with lending securities, the Funds may pay
reasonable finders, administrative and custodial fees. Loans of securities
involve a risk that the borrower may fail to return the securities or may fail
to provide additional collateral. When a Fund lends its securities, it
continues to receive interest or dividends on the securities loaned and may
simultaneously earn interest on the collateral received from the borrower or
from the investment of cash collateral in readily marketable, high-quality,
short-term obligations. Although voting rights, or rights to consent,
attendant to securities on loan pass to the borrower, such loans may be called
at any time and will be called so that the securities may be voted by a Fund if
a material event affecting the investment is to occur.
Forward Commitments, When-Issued Purchases and Delayed-Delivery
Transactions. When a Fund agrees to purchase securities on a when-issued basis
or enters into a forward commitment (sometimes called delayed-delivery) to
purchase securities, its
- 4 -
<PAGE> 819
custodian will set aside cash, U.S. government securities or other liquid
high-grade debt obligations equal to the amount of the purchase or the
commitment in a separate account. Normally, the custodian will set aside
portfolio securities to meet this requirement. The market value of the
separate account will be monitored and if such market value declines, the Fund
will be required to place additional assets in the separate account in order to
ensure that the value of the account remains equal to the amount of the Fund's
commitment. Because a Fund will set aside cash or liquid high grade debt
securities in the manner described, the Fund's liquidity and ability to manage
its portfolio might be affected in the event its when-issued purchases or
forward commitments ever exceeded 25% of the value of its assets. In the case
of a forward commitment to sell portfolio securities, the Fund's custodian will
hold the portfolio securities themselves in a segregated account while the
commitment is outstanding.
A Fund will make commitments to purchase securities on a when-issued
basis or to purchase or sell securities on a forward commitment basis only with
the intention of completing the transaction and actually purchasing or selling
the securities. If deemed advisable as a matter of investment strategy,
however, a Fund may dispose of or renegotiate a commitment after it is entered
into, and may sell securities it has committed to purchase before those
securities are delivered to the Fund on the settlement date. In these cases
the Fund may realize a capital gain or loss.
When a Fund engages in when-issued and forward commitment transactions,
it relies on the other party to consummate the trade. Failure of such party to
do so may result in the Funds incurring a loss or missing an opportunity to
obtain a price considered to be advantageous.
The value of the securities underlying a when-issued purchase or a
forward commitment to purchase securities, and any subsequent fluctuations in
their value, is taken into account when determining a Fund's net asset value
starting on the day the Fund agrees to purchase the securities. A Fund does
not earn interest on the securities it has committed to purchase until they are
paid for and delivered on the settlement date. When a Fund makes a forward
commitment to sell securities it owns, the proceeds to be received upon
settlement are included in the Fund's assets, and fluctuations in the value of
the underlying securities are not reflected in the Fund's net asset value as
long as the commitment remains in effect.
Mortgage-Backed Securities. As stated in the Prospectuses, certain
Funds may invest in mortgage-backed
- 5 -
<PAGE> 820
securities, including those representing an undivided ownership interest in a
pool of mortgages, such as certificates of the Government National Mortgage
Association ("GNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
These certificates are in most cases pass-through instruments, through which
the holder receives a share of all interest and principal payments from the
mortgages underlying the certificate, net of certain fees. The average life of
a mortgage-backed security varies with the underlying mortgage instruments,
which have maximum maturities of 40 years. The average life is likely to be
substantially less than the original maturity of the mortgage pools underlying
the securities as the result of prepayments, mortgage refinancings or
foreclosure. Mortgage prepayment rates are affected by factors including the
level of interest rates, general economic conditions, the location and age of
the mortgage and other social and demographic conditions. Such prepayments are
passed through to the registered holder with the regular monthly payments of
principal and interest and have the effect of reducing future payments.
There are risks inherent in the purchase of mortgage-packed securities.
For example, these securities are subject to a risk that default in payment
will occur on the underlying mortgages. In addition to default risk, these
securities are subject to the risk that prepayment on the underlying mortgages
will occur earlier or later or at a lessor or greater rate than expected. To
the extent that Advisor's assumptions about prepayments are inaccurate, these
securities may expose the Funds ,to significantly greater market risks than
expected.
Asset-Backed Securities. To the extent described in the prospectuses,
the Funds may purchase asset-backed securities, which are securities backed by
installment contracts, credit card receivables or other assets. Asset-backed
securities represent interests in "pools" of assets in which payments of both
interest and principal on the securities are made monthly, thus in effect
"passing through" monthly payments made by the individual borrowers on the
assets that underlie the securities, net of any fees paid to the issuer or
guarantor of the securities. The average life of asset-backed securities
varies with the maturities of the underlying instruments, and is likely to be
substantially less than the original maturity of the assets underlying
the-securities as a result of prepayments. For this and other reasons, an
asset-backed security's stated maturity may be shortened, and the security's
total return may be difficult to predict precisely.
Municipal Obligations. Municipal obligations include debt obligations
issued by governmental entities to obtain funds for various public purposes,
including the construction of a wide
- 6 -
<PAGE> 821
range of public facilities, the refunding of outstanding obligations, the
payment of general operating expenses and the extension of loans to public
institutions and facilities.
The two principal classifications of municipal obligations which may be
held by the Funds are "general obligation" securities and "revenue" securities.
General obligation securities are secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and interest.
Revenue securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the issuer of the
facility being financed. The Funds' portfolios may also include "moral
obligation" securities, which are normally issued by special purpose public
authorities. If the issuer of moral obligation securities is unable to meet
its debt service obligations from current revenues, it may draw on a reserve
fund, the restoration of which is a moral commitment but not a legal obligation
of the state or municipality which created the issuer.
There are, of course, variations in the quality of municipal
obligations both within a particular classification and between
classifications, and the yields on municipal obligations depend upon a variety
of factors, including general money market conditions, the financial condition
of the issuer, general conditions of the municipal bond market, the size of a
particular offering, the maturity of the obligation and the rating of the
issue.
Private activity bonds are issued to obtain funds to provide privately
operated housing facilities, pollution control facilities, convention or trade
show facilities, mass transit, airport, port or parking facilities and certain
local facilities for water supply, gas, electricity or sewage or solid waste
disposal. Private activity bonds are also issued to privately held or publicly
owned corporations in the financing of commercial or industrial facilities.
State and local governments are authorized in most states to issue private
activity bonds for such purposes in order to encourage corporations to locate
within their communities. Private activity bonds are in most cases revenue
securities and are not payable from the unrestricted revenues of the issuer.
The credit quality of such bonds is usually directly related to the credit
standing of the corporate user of the facility involved. Private activity
bonds issued by or on behalf of public authorities to finance various
privatelyoperated facilities are considered municipal obligations if the
interest paid thereon is (subject to Federal alternative minimum tax) exempt
from Federal income tax.
- 7 -
<PAGE> 822
The Tax-Exempt Funds may also purchase short-term General Obligation
Notes, Tax Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation
Notes, Tax-Exempt Commercial Paper, Construction Loan Notes and other forms of
short-term tax-exempt loans. Such instruments are issued with a short-term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements or other revenues.
Information about the financial condition of issuers of municipal
obligations may be less available than about corporations a class of whose
securities is registered under the Securities Exchange Act of 1934.
As stated in the Prospectuses, the Advisor, under the supervision of
the Board, will make determinations concerning the liquidity of a municipal
lease obligation based on all relevant factors. These factors may include,
among others: (1) the frequency of trades and quotes for the obligation; (2)
the number of dealers willing to purchase or sell the security and the number
of other potential buyers; (3) the willingness of dealers to undertake to make
a market in the security; and (4) the nature of the marketplace trades,
including the time needed to dispose of the security, the method of soliciting
offers, and the mechanics of transfer. In addition, the general credit quality
of the municipality and the essentiality to the municipality of the property
covered by the lease may be considered. In evaluating the credit quality of a
municipal lease obligation, the factors to be considered might include: (1)
whether the lease can be canceled; (2) what assurance there is that the assets
represented by the lease can be sold; (3) the strength of the lessee's general
credit (e.g., its debt, administrative, economic, and financial
characteristics); (4) the likelihood that the municipality will discontinue
appropriating funding for the leased property because the property is no longer
deemed essential to the operations of the municipality (e.g., the potential for
an "event of the nonappropriation"); and (5) the legal recourse in the event of
failure to appropriate.
From time to time, proposals have been introduced before Congress for
the purpose of restricting or eliminating the Federal income tax exemption for
interest on municipal obligations. For example, under Federal tax legislation
enacted in 1986, interest on certain private activity bonds must be included in
an investor's alternative minimum taxable income, and corporate investors must
treat all tax-exempt interest as an item of tax preference. Moreover, with
respect to Oregon obligations, Arizona obligations and California obligations,
as the case may be, the Funds cannot predict what legislation, if any, may be
proposed in the state legislature regarding the state income tax status of
interest on such obligations, or which proposals, if
- 8 -
<PAGE> 823
any, might be enacted. Such proposals, while pending or if enacted, might
materially and adversely affect the availability of municipal obligations
generally, or Oregon obligations, Arizona obligations or California
obligations, specifically, for investment by a Fund and the liquidity and value
of the Fund's portfolio. In such an event, the Fund involved would re-evaluate
its investment objective and policies and consider possible changes in its
structure or possible dissolution.
Opinions relating to the validity of municipal obligations and to the
exemption of interest thereon from Federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Funds
nor the Advisor will review the proceedings relating to the issuance of
municipal obligations or the bases for such opinions.
Certain of the municipal obligations held by the Funds may be insured
as to the timely payment of principal and interest. The insurance policies
will usually be obtained by the issuer of the municipal obligation at the time
of its original issuance. In the event that the issuer defaults on interest or
principal payment, the insurer will be notified and will be required to make
payment to the bondholders. There is, however, no guarantee that the insurer
will meet its obligations. In addition, such insurance will not protect
against market fluctuations caused by changes in interest rates and other
factors. The Oregon Tax-Exempt, Arizona Tax-Exempt Fund, National Tax-Exempt
Fund and California Short-Term Tax-Exempt Fund may, from time to time, invest
more than 25% of their assets in municipal obligations covered by insurance
policies.
As stated in the Prospectuses, certain Bond Funds may, when deemed
appropriate by the Advisor in light of a Fund's investment objective, invest in
obligations issued by state and local governmental issuers. Dividends paid by
one of the Bond Funds that are derived from interest of municipal obligations
would be taxable to the Fund's shareholders for Federal income tax purposes.
Stand-By Commitments. Each of the Tax-Exempt Funds may acquire
stand-by commitments with respect to municipal obligations held by it. Under a
stand-by commitment, a dealer or bank agrees to purchase from a Fund, at the
Fund's option, specified municipal obligations at a specified price. The amount
payable to a Fund upon its exercise of a stand-by commitment is normally (i)
the Fund's acquisition cost of the municipal obligations (excluding any accrued
interest which the Fund paid on their acquisition), less any amortized market
premium plus any amortized market or original issue discount during the period
the Fund owned the securities, plus (ii) all interest accrued on the
- 9 -
<PAGE> 824
securities since the last interest payment date during that period. Stand-by
commitments may be sold, transferred or assigned by a Fund only with the
underlying instrument.
Each Fund expects that stand-by commitments will generally be available
without the payment of any direct or indirect consideration. However, if
necessary or advisable, a Fund may pay for a stand-by commitment either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to the commitment (thus reducing the yield to maturity
otherwise available for the same securities). Where a Fund pays any
consideration directly or indirectly for a stand-by commitment, its cost would
be reflected as unrealized depreciation for the period during which the
commitment was held by the Fund.
Each Fund intends to enter into stand-by commitments only with dealers,
banks and broker-dealers which, in the Advisor's opinion, present minimal
credit risks. Each Fund's reliance upon the credit of these dealers, banks and
broker-dealers will be secured by the value of the underlying municipal
obligations that are subject to the commitment. In evaluating the
creditworthiness of the issuer of a stand-by commitment, the Advisor, will
review periodically the issuer's assets, liabilities, contingent claims and
other relevant financial information.
Each Fund would acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The acquisition of a stand-by commitment would not affect
the valuation or assumed maturity of the underlying municipal obligations,
which would continue to be valued in accordance with the ordinary method of
valuation employed by the Funds. Stand-by commitments acquired by a Fund would
be valued at zero in determining net asset value.
Foreign Securities. Because certain Funds may invest in securities
denominated in currencies other than the U.S. dollar and may temporarily hold
funds in bank deposits or other money market investments denominated in foreign
currencies, they may be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rate between such currencies and the
dollar. Changes in foreign currency exchange rates will influence values
within a Fund from the perspective of U.S. investors. Changes in foreign
currency exchange rates may also affect the value of dividends and interest
earned, gains and losses realized on the sale of securities, and net investment
income and gains, if any, to be distributed to shareholders by a Fund. The
rate of exchange between the U.S. dollar and other currencies is determined by
the forces of supply and demand in
- 10 -
<PAGE> 825
the foreign exchange markets. These forces are affected by the international
balance of payments and other economic and financial conditions, government
intervention, speculation and other factors.
The Equity Value Fund, Balanced Fund, Asset Prevention Fund, Government
Income Fund, the International Equity Fund and the Equity Index Fund may enter
into foreign currency exchange contracts in order to protect against
uncertainty in the level of future foreign exchange rates. A forward foreign
currency exchange contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are entered into in the interbank market
conducted between. currency traders (usually large commercial banks) and their
customers. Forward foreign currency exchange contracts may be bought or sold
to protect a Fund against a possible loss resulting from an adverse change in
the relationship between foreign currencies and the U.S. dollar, or between
foreign currencies. Although such contracts are intended to minimize the risk
of loss due to a decline in the value of the hedged currency, at the same time,
they tend to limit any potential gain which might result should the value of
such currency increase.
The Equity Funds and the Balanced Fund may also invest in ADRs. ADRs
are receipts issued by an American bank or trust company evidencing ownership
of underlying securities issued by a foreign issuer. ADRs may be listed on a
national securities exchange or may trade in the over-the-counter market. ADR
prices are denominated in United States dollars, although the underlying
security may be denominated in a foreign currency. The underlying security may
be subject to foreign government taxes which could reduce the yield on such
securities. Some institutions issuing ADRs may not be sponsored by the issuer.
A non-sponsored depository may not provide the same shareholder information
that a sponsored depository is required to provide under its contractual
arrangement with the issuer.
Investments in foreign securities also involve certain inherent risks,
such as political or economic instability of the issuer or the country of
issue, the difficulty of predicting international trade patterns and the
possibility of imposition of exchange controls. Such securities may also be
subject to greater fluctuations in price than securities of domestic
corporations. In addition, there may be less publicly available information
about a foreign company than about a domestic company. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic companies. With
respect to
- 11 -
<PAGE> 826
certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, or diplomatic developments which could affect
investments in those countries.
Options Trading. Certain Funds may buy put and call options and write
covered call and secured put options. Options trading is a highly specialized
activity which entails greater than ordinary investment risk. Options may be
more volatile than the underlying instruments, and therefore, on a percentage
basis, an investment in options may be subject to greater fluctuation than an
investment in the underlying instruments themselves.
A call option for a particular security gives the purchaser of the
option the right to buy, and a writer the obligation to sell, the underlying
security at the stated exercise price at any time prior to the expiration of
the option, regardless of the market price of the security. The premium paid
to the writer is in consideration for undertaking the obligation under the
option contract. A put option for a particular security gives the purchaser
the right to sell the security at the stated exercise price at any time prior
to the expiration date of the option, regardless of the market price of the
security. Options on indices provide the holder with the right to make or
receive a cash settlement upon exercise of the option. With respect to options
on indices, the amount of the settlement will equal the difference between the
closing price of the index at the time of exercise and the exercise price of
the option expressed in dollars, times a specified multiple.
The Funds will write call options only if they are "covered." In the
case of a call option on a security or currency, the option is "covered" if a
Fund owns the instrument underlying the call or has an absolute and immediate
right to acquire that instrument without additional cash consideration (or, if
additional cash consideration is required, cash, U.S. Government securities or
other liquid high grade debt obligations, in such amount are held in a
segregated account by the Fund's custodian) upon conversion or exchange of
other securities held by it. For a call option on an index, the option is
covered if a Fund maintains with its custodian a diversified portfolio of
securities comprising the index or liquid assets equal to the contract value.
A call option is also covered if a Fund holds a call on the same instrument or
index as the call written where the exercise price of the call held is (i)
equal to or less than the exercise price of the call written, or (ii) greater
than the exercise price of the call written provided the difference is
maintained by the Fund in liquid assets in a segregated account with its
custodian. The Funds will write put options only if they are "secured" by
liquid assets maintained in a segregated account by the Funds, custodian in an
amount not
- 12 -
<PAGE> 827
less than the exercise price of the option at all times during the option
period.
A Fund's obligation to sell an instrument subject to a covered call
option written by it, or to purchase an instrument subject to a secured put
option written by it, may be terminated prior to the expiration date of the
option by the Fund's execution of a closing purchase transaction, which is
effected by purchasing on an exchange an option of the same series (i.e., same
underlying instrument, exercise price and expiration date) as the option
previously written. Such a purchase does not result in the ownership of an
option. A closing purchase transaction will ordinarily be effected to realize
a profit on an outstanding option, to prevent an underlying instrument from
being called, to permit the sale of the underlying instrument or to permit the
writing of a new option containing different terms on such underlying
instrument. The cost of such a liquidation purchase plus transaction costs may
be greater than the premium received upon the original option, in which event
the Fund will have incurred a loss in the transaction. There is no assurance
that a liquid secondary market will exist for any particular option. An option
writer, unable to effect a closing purchase transaction, will not be able to
sell the underlying instrument (in the case of a covered call option) or
liquidate the segregated account (in the case of a secured put option) until
the option expires or the optioned instrument or currency is delivered upon
exercise with the result that the writer in such circumstances will be subject
to the risk of market decline or appreciation in the instrument during such
period.
When a Fund purchases an option, the premium paid by it is recorded as
an asset of the Fund. When a Fund writes an option, an amount equal to the net
premium (the premium less the commission) received by a Fund is included in the
liability section of the Fund's statement of assets and liabilities as a
deferred credit. The amount of this asset or deferred credit will be
subsequently marked-to-market to reflect the current value of the option
purchased or written. The current value of the traded option is the last sale
price or, in the absence of a sale, the current bid price. If an option
purchased by a Fund expires unexercised the Fund realizes a loss equal to the
premium paid. If a Fund enters into a closing sale transaction on an option
purchased by it, the Fund will realize a gain if the premium received by the
Fund on the closing transaction is more than the premium paid to purchase the
option, or a loss if it is less. If an option written by a Fund expires on the
stipulated expiration date or if a Fund enters into a closing purchase
transaction, it will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the net premium received when the option is sold) and the
deferred credit related to such
- 13 -
<PAGE> 828
option will be eliminated. If an option written by a Fund is exercised, the
proceeds of the sale will be increased by the net premium originally received
and the Fund will realize a gain or loss.
There are several risks associated with transactions in options. For
example, there are significant differences between the securities, currency and
options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. In
addition, a liquid secondary market for particular options, whether traded
over-the-counter or on an exchange may be absent for reasons which include the
following: there may be insufficient trading interest in certain options;
restrictions may be imposed by an exchange on opening transactions or closing
transactions or both; trading halts, suspensions or other restrictions may be
imposed with respect to particular classes or series of options or underlying
securities or currencies; unusual or unforeseen circumstances may interrupt
normal operations on an exchange; the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
value; or one or more exchanges could, for economic or other reasons, decide or
be compelled at some future date to discontinue the trading of options (or a
particular class or series of options), in which event the secondary market on
that exchange (or in that class or series of options) would cease to exist,
although outstanding options that had been issued by the Options Clearing
Corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms. A Fund will likely be unable to
control losses by closing its position where a liquid secondary market does not
exist. A decision as to whether, when and how to use options involves the
exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected events.
Interest Rate Futures Contracts. The Asset Preservation Fund and
Government Income Funds may purchase and sell interest rate futures contracts
as a hedge against changes in interest rates. A futures contract is an
agreement between two parties to buy and sell a security for a set price on a
future date. Future contracts are traded on designated "contracts markets"
which, through their clearing corporations, guarantee performance of the
contracts. Currently, there are futures contracts based on securities such as
long-term U.S. Treasury bonds, U.S. Treasury notes, GNMA Certificates and
threemonth U.S. Treasury bills.
Generally, if market interest rates increase, the value of outstanding
debt securities declines (and vice versa).
- 14 -
<PAGE> 829
Entering into a futures contract for the sale of securities has an effect
similar to the actual sale of securities, although sale of the futures contract
might be accomplished more easily and quickly. For example, if a Fund holds
long-term U.S. Government securities and the Advisor anticipates a rise in
long-term interest rates, it could, in lieu of disposing of its portfolio
securities, enter into futures contracts for the sale of similar long-term
securities. If rates increased and the value of the Fund's portfolio
securities declined, the value of the Fund's futures contracts would increase,
thereby protecting the Fund by preventing net asset value from declining as
much as it otherwise would have. Similarly, entering into futures contracts
for the purchase of securities has an effect similar to actual purchase of the
underlying securities, but permits the continued holding of securities other
than the underlying securities. For example, if the Advisor expects long-term
interest rates to decline, the Fund might enter into futures contracts for the
purchase of long-term securities, so that it could gain rapid market exposure
that may offset anticipated increases in the cost of securities it intends to
purchase, while continuing to hold higher-yielding short-term securities or
waiting for the long-term market to stabilize.
Stock Index Futures Contracts and Options on Stock Index Futures
Contracts (The Equity Value Fund, Balanced Fund, Equity Index Fund and Growth
Fund). A stock index futures contract is an agreement in which one party
agrees to deliver to the other an amount of cash equal to a specific dollar
amount times the difference between the value of a specific stock index at the
close of the last trading day of the contract and the price at which the
agreement is made. As the aggregate market value of the stocks in the index
changes, the value of the index also will change. In the event that the index
level rises above the level at which the stock index futures contract was sold,
the seller of the stock index futures contract will realize a loss determined
by the difference between the two index levels at the time of expiration of the
stock index futures contract, and the purchaser will realize a gain in that
amount. In the event the index level falls below the level at which the stock
index futures contract was sold, the seller will recognize a gain determined by
the difference between the two index levels at the expiration of the stock
index futures contract, and the purchaser will realize a loss. Stock index
futures contracts expire on a fixed date, currently one to seven months from
the date of the contract, and are settled upon expiration of the contract.
Stock index futures contracts may be purchased to protect a Fund
against an increase in prices of stocks which the Fund intends to purchase. If
the Fund is unable to invest its cash (or cash equivalents) in stock in an
orderly fashion, the Fund
- 15 -
<PAGE> 830
could purchase a stock index futures contract which may be used to offset any
increase in the price of the stock. However, it is possible that the market
may decline instead, resulting in a loss on the stock index futures contract.
If the Fund then concludes not to invest in stock at that time, or if the price
of the securities to be purchased remains constant or increases, the Fund will
realize a loss on the stock index futures contract that is not offset by a
reduction in the price of securities purchased. The Funds also may buy or sell
stock index futures contracts to close out existing futures positions.
The Equity Value Fund, Balanced Fund and the Equity Index Fund may also
purchase put options on stock index futures contracts. Sales of such options
may also be made to close out an open option position. The Funds may, for
example, purchase a put option on a particular stock index futures contract or
stock index to protect against a decline in the value of the common stocks it
holds. If the stocks in the index decline in value, the put should become more
valuable and the Funds could sell it to offset losses in the value of the
common stocks. In this way, put options may be used to achieve the same goals
the Funds seek in selling futures contracts. A put option on a stock index
future gives the purchaser the right, in return for a premium paid, to assume a
short (i.e., the right to sell stock index futures) position in a stock index
futures contract at a specified exercise price ("strike price") at any time
during the period of the option. If the option is exercised by the holder
before the last trading date during the option period, the holder receives the
futures position, as well as any balance in the futures margin account. If an
option is exercised on the last trading day prior to the expiration date of the
option, the settlement will be made entirely in cash in an amount equal to the
difference between the strike price and the closing level of the relevant index
on the expiration date.
The Advisor expects that an increase or decrease in the index in
relation to the strike price level would normally correlate to an increase or
decrease (but not necessarily to the same extent) in the value of the Funds,
common stock portfolio against which the option was written. Thus, any loss in
the option transaction may be offset by an increase in the value of the common
stock portfolio to the extent changes in the index correlate to changes in the
value of that portfolio. The Funds may liquidate the put options they have
purchased by effecting a closing sale transactions rather than exercising the
option. This is accomplished by selling an option of the same series as the
option previously purchased. There is no guarantee that the Funds will be able
to effect the closing sale transaction. The Funds will realize a gain from a
closing sale transaction if the price at which the transaction is effected
exceeds the premium
- 16 -
<PAGE> 831
paid to purchase the option and, if less, the Funds will realize a loss.
Borrowing. At the time a Fund enters into a reverse repurchase
agreement (an agreement under which the Fund sells portfolio securities and
agrees to repurchase them at an agreed-upon date and price), it will place in a
segregated custodial account liquid assets such as U.S. Government securities
or other liquid high-grade debt securities having a value equal to or greater
than the repurchase price (including accrued interest) and will subsequently
monitor the account to ensure that such value is maintained. Reverse
repurchase agreements involve the risk that the market value of the securities
sold by a Fund may decline below the price at which the Fund is obligated to
repurchase the securities. Reverse repurchase agreements are considered to be
borrowings under the 1940 Act. Each Fund intends to limit its borrowings
(including reverse repurchase agreements) during the current fiscal year to
not more than 10% of its net assets.
Nationally Recognized Statistical Ratings Organizations. The ratings
of Moody's Investors Service, Inc., Standard & Poor's Ratings Group, Division
of McGraw Hill, Duff & Phelps Credit Rating Co., Fitch Investors Service, Inc.
Thomson Bank Watch and IBCA Inc. represent their opinions as to the quality of
debt securities. It should be emphasized, however, that ratings are general
and are not absolute standards of quality, and debt securities with the same
maturity, interest rate and rating may have different yields while debt
securities of the same maturity and interest rate with different ratings may
have the same yield. Subsequent to purchase by a Fund, an issue of debt
securities may cease to be rated or its rating may be reduced below the minimum
rating required for purchase by a Fund. The Advisor will consider such an
event in determining whether the Fund involved should continue to hold the
obligation.
The payment of principal and interest on debt securities purchased by
the Funds will depend upon the ability of the issuers to meet their
obligations. An issuer's obligations under its debt securities are subject to
the provisions of bankruptcy, insolvency, and other laws affecting the rights
and remedies of creditors, such as the Federal Bankruptcy Code, and laws, if
any, which may be enacted by Federal or state legislatures extending the time
for payment of principal or interest, or both, or imposing other constraints
upon enforcement of such obligations or, in the case of governmental entities,
upon the ability of such entities to levy taxes. The power or ability of an
issuer to meet its obligations for the payment of interest and principal of its
debt securities may be materially adversely affected by litigation or other
conditions. Further, it should also be, noted
- 17 -
<PAGE> 832
with respect to all municipal obligations issued after August 15, 1986 (August
31, 1986 in the case of certain bonds), the issuer must comply with certain
rules formerly applicable only to "industrial development bonds" which, if the
issuer fails to observe them, could cause interest on the municipal obligations
to become taxable retroactive to the date of issue.
INVESTMENT RESTRICTIONS
The Funds are subject to the investment limitations enumerated below
which may be changed with respect to a particular Fund only by a vote of a
majority of the holders of such Fund's outstanding shares (as defined under
"Other Information -- Voting Rights" below).
With respect to the Growth Fund, Short-Term Government Bond Fund,
Intermediate Government Bond Fund, Intermediate Bond Fund, Oregon Tax-Exempt
Fund, Arizona Tax-Exempt Fund and National Tax-Exempt Fund, no Fund may:
1. Purchase or sell commodity contracts (including futures
contracts with respect to the Arizona Tax-Exempt Fund and the Tax-Exempt Bond
Fund), or invest in oil, gas or mineral exploration or development programs,
except that each Fund may, to the extent appropriate to its investment
objective, purchase publicly traded securities of companies engaging in whole
or in part in such activities, and with respect to the Growth Fund, Short-Term
Government Bond Fund, Intermediate Government Bond Fund, Intermediate Bond Fund
and Oregon Tax-Exempt Fund, each Fund may enter into futures contracts and
related options.
2. Purchase or sell real estate, except that each Fund may
purchase securities of issuers which deal in real estate and may purchase
securities which are secured by interests in real estate.
3. Purchase securities of companies for the purpose of exercising
control.
4. Acquire any other investment company or investment company
security except in connection with a merger, consolidation, reorganization or
acquisition of assets or where otherwise permitted by the Investment Company
Act of 1940.
5. Act as an underwriter of securities within the meaning of the
Securities Act of 1933 except insofar as a Fund might be deemed to be an
underwriter upon disposition of portfolio securities acquired within the
limitation on purchases of restricted securities and except to the extent that
the purchase of obligations directly from the issuer thereof in
- 18 -
<PAGE> 833
accordance with a Fund's investment objective, policies and limitations may be
deemed to be underwriting.
6. Write or sell put options, call options, straddles, spreads,
or any combination thereof, except that the Oregon Tax-Exempt Fund may enter
into transactions in futures contracts and related options and except that the
Growth Fund, Short-Term Government Bond Fund, Intermediate Government Bond Fund
and Intermediate Bond Fund may enter into transactions in options on
securities, futures contracts and options on futures contracts.
7. Borrow money or issue senior securities, except that each Fund
may borrow from banks and enter into reverse repurchase agreements for
temporary purposes in amounts up to 10% of the value of the total assets at the
time of such borrowing; or mortgage, pledge or hypothecate any assets, except
in connection with any such borrowing and in amounts not in excess of the
lesser of the dollar amounts borrowed or 10% of the value of a Fund's total
assets at the time of such borrowing. None of these Funds will purchase
securities while its borrowings (including reverse repurchase agreements) in
excess of 5% of its total assets are outstanding. Securities held in escrow or
separate accounts in connection with a Fund's investment practices described in
this Statement of Additional Information or in its Prospectus are not deemed to
be pledged for purposes of this limitation.
With respect to the Growth Fund, Short-Term Government Bond Fund,
Intermediate Government Bond Fund, and Intermediate Bond Fund, no Fund may:
1. Purchase securities of any one issuer (other than securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities)
if, immediately after such purchase, more than 5% of the value of a Fund's
total assets would be invested in the securities of such issuer, or more than
10% of the issuer's outstanding voting securities would be owned by a Fund or
the Trust, except that up to 25% of the value of a Fund's total assets may be
invested without regard to these limitations.
2. Purchase any securities that would cause 25% or more of a
Fund's total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the same
industry, provided that (a) there is no limitation with respect to obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities;
(b) wholly-owned finance companies will be considered to be in the industries
of their parents if
- 19 -
<PAGE> 834
their activities are primarily related to financing the activities of the
parents; and (c) utilities will be divided according to their services, for
example, gas, gas transmission, electric and gas, electric and telephone will
each be considered a separate industry.
3. Make loans, except that a Fund may purchase and hold debt
instruments and enter into repurchase agreements in accordance with its
investment objective and policies and may lend portfolio securities in an
amount not exceeding 30% of its total assets.
4. Purchase securities on margin, make short sales of securities
or maintain a short position, except that (a) this investment limitation shall
not apply to a Fund's transactions in futures contracts and related options,
and (b) a Fund may obtain short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities.
With respect to the Oregon Tax-Exempt Fund, Arizona Tax-Exempt Fund and
National Tax-Exempt Fund, no Fund may:
1. Purchase securities on margin, make short sales of securities
or maintain a short position, except that the Funds may obtain short-term
credit as may be necessary for the clearance of purchases and sales of
portfolio securities, and except that this limitation shall not apply to the
Oregon Tax-Exempt Fund's transactions in futures contracts and related options.
2. Purchase or sell commodity contracts, including futures
contracts, except for futures contracts and related options entered into or
purchased by the Oregon Tax-Exempt Fund, or invest in oil, gas or mineral
exploration or development programs, except that the Funds may, to the extent
appropriate to each Fund's investment objective, purchase publicly traded
securities of companies engaging in whole or in part in such activities.
3. Invest less than 80% of its net assets in securities the
interest on which is exempt from Federal income tax, except during periods of
unusual market conditions. For purposes of this investment limitation,
securities the interest on which is treated as a specific tax preference item
under the Federal alternative minimum tax are considered taxable.
4. Make loans, except that each Fund may purchase and hold debt
instruments and enter into repurchase agreements in accordance with its
investment objective and policies.
- 20 -
<PAGE> 835
The Oregon Tax-Exempt Fund may not:
1. Purchase securities of any one issuer if, immediately after
such purchase, more than 5% of the value of the Fund's total assets would be
invested in the securities of such issuer, except that (a) up to 50% of the
value of the Fund's total assets may be invested without regard to this 5%
limitation provided that no more than 25% of the value of the Fund's total
assets are invested in the securities of any one issuer and (b) this 5%
limitation does not apply to securities issued or guaranteed by the U.S.
Government, its agencies, authorities, instrumentalities or political
subdivisions. For purposes of this limitation, a security is considered to be
issued by the governmental entity (or entities) whose assets and revenues back
the security, or, with respect to a private activity bond that is backed only
by the assets and revenues of a nongovernmental user, such nongovernmental
user. In certain circumstances, the guarantor of a guaranteed security may
also be considered to be an issuer in connection with such guarantee, except
that a guarantee of a security shall not be deemed to be a security issued by
the guarantor when the value of all securities issued and guaranteed by the
guarantor, and owned by the Fund, does not exceed 10% of the value of the
Fund's total assets.
2. Purchase any securities, except securities issued (as defined
in the preceding Investment Limitation) or guaranteed by the United States, any
state, territory or possession of the United States, the District of Columbia
or any of their authorities, agencies, instrumentalities or political
subdivisions, which would cause 25% or more of the value of the Fund's total
assets at the time of purchase to be invested in the securities of issuers
conducting their principal business activities in the same industry.
The Arizona Tax-Exempt Fund may not:
1. Purchase securities of any one issuer if, immediately after
such purchase, more than 5% of the value of the Fund's total assets would be
invested in the securities of such issuer, or more than 10% of the issuer's
outstanding voting securities would be owned by the Fund, except that (a) up to
50% of the value of the Fund's total assets may be invested without regard to
these limitations provided that no more than 25% of the value of the Fund's
total assets are invested in the securities of any one issuer and (b) these
limitations do not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. For purposes of these
limitations, a security is considered to be issued by the governmental entity
(or entities) whose assets and revenues back the security, or, with respect to
a private activity bond that is
- 21 -
<PAGE> 836
backed only by the assets and revenues of a nongovernmental user, such
nongovernmental user. In certain circumstances, the guarantor of a guaranteed
security may also be considered to be an issuer in connection with such
guarantee, except that a guarantee of a security shall not be deemed to be a
security issued by the guarantor when the value of all securities issued and
guaranteed by the guarantor, and owned by the Fund, does not exceed 10% of the
value of the Fund's total assets.
2. Purchase any securities, except securities issued (as defined
in the preceding Investment Limitation) or guaranteed by the United States, any
state, territory or possession of the United States, the District of Columbia
or any of their authorities, agencies, instrumentalities or political
subdivisions, which would cause 25% or more of the value of the Fund's total
assets at the time of purchase to be invested in the securities of issuers
conducting their principal business activities in the same industry.
The National Tax-Exempt Fund may not:
1. Purchase securities of any one issuer if, immediately after
such purchase, more than 5% of the value of the Fund's total assets would be
invested in the securities of such issuer, or more than 10% of the issuer's
outstanding voting securities would be owned by the Fund, except that (a) up to
50% of the value of the Fund's total assets may be invested without regard to
these limitations provided that no more than 25% of the value of the Fund's
total assets are invested in the securities of any one issuer and (b) these
limitations do not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. For purposes of these
limitations, a security is considered to be issued by the governmental entity
(or entities) whose assets and revenues back the security, or, with respect to
a private activity bond that is backed only by the assets and revenues of a
nongovernmental user, such nongovernmental user. In certain circumstances, the
guarantor of a guaranteed security may also be considered to be an issuer in
connection with such guarantee, except that a guarantee of a security shall not
be deemed to be a security issued by the guarantor when the value of all
securities issued and guaranteed by the guarantor, and owned by the Fund, does
not exceed 10% of the value of the Fund's total assets.
2. Purchase any securities which would cause 25% or more of the
value of its total assets at the time of purchase to be invested in municipal
obligations with similar characteristics (such as private activity bonds where
the payment of principal and interest is the ultimate responsibility of issuers
in the same industry, pollution control revenue bonds, housing finance
- 22 -
<PAGE> 837
agency bonds or hospital bonds) or the securities of issuers conducting their
principal business activities in the same industry, provided that there is no
limitation with respect to obligations issued or guaranteed by the U.S.
Government, the District of Columbia, and their respective agencies,
authorities, instrumentalities or political subdivisions.
With respect to the Equity Value Fund, Balanced Fund, Asset
Preservation Fund, Government Income Fund, California Short-Term Tax-Exempt
Fund, California Tax-Exempt Fund, Government Money Market Fund, Money Market
Fund, 100% U.S. Treasury Money Market Fund, California Tax-Exempt Money Market
Fund, National Tax-Exempt Money Market Fund, Equity Index Fund and
International Equity Fund, no Fund, except as indicated, may:
1. With respect to the Government Money Market Fund, Money Market
Fund, 100% U.S. Treasury Money Market Fund, California Tax-Exempt Money Market
Fund and National Tax-Exempt Money Market Fund, invest more than 10% of the
aggregate value of its total assets in investments which are illiquid, or not
readily marketable (including repurchase agreements having maturities of more
than seven calendar days, variable and floating rate demand notes requiring
receipt of principal note amount on more than seven days notice and securities
of foreign issuers which are not listed on a recognized domestic or foreign
securities exchange).
2. Borrow money or pledge or mortgage its assets, except that a
Fund may borrow from banks up to 10% of the current value of its total net
assets for temporary or emergency purposes and those borrowings may be secured
by the pledge of not more than 15% of the current value of its total net assets
(but investments may not be purchased by a Fund while any such borrowings
exist).
3. Make loans, except loans of portfolio securities and except
that a Fund may enter into repurchase agreements with respect to its portfolio
securities and may purchase the types of debt instruments described in the
Prospectuses or the SAI.
4. Invest in companies for the purpose of exercising control or
management.
5. Knowingly purchase securities of other investment companies,
except (i) in connection with a merger, consolidation, acquisition, or
reorganization; and (ii) all Funds listed above except the Money Market Funds
may invest up to 10% of their net assets in shares of other investment
companies.
- 23 -
<PAGE> 838
6. Invest in real property (including limited partnership
interests), commodities, commodity contracts, or oil, gas and other mineral
resource, exploration, development, lease or arbitrage transactions.
7. Acquire securities subject to restrictions on disposition
imposed by the Securities Act of 1933, if, immediately after and as a result of
such acquisition, the value of such restricted securities and all other
illiquid securities held by a Fund would exceed 10% (15% in the case of The
California Short-Term Tax-Exempt Fund) of the value of the Fund's total assets.
8. Engage in the business of underwriting securities of other
issuers, except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933.
9. Make loans, except that the Funds may purchase readily
marketable debt securities and invest in repurchase agreements and make loans
of portfolio securities. No Fund will invest in repurchase agreements maturing
in more than seven days (unless subject to a demand feature) if any such
investment, together with any illiquid securities (including securities which
are subject to legal or contractual restrictions on resale) held by a Fund,
exceeds 10% (15% in the case of The California Short-Term Tax-Exempt Fund) of
the value of its total assets.
10. Sell securities short, except to the extent that a Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short.
11. Purchase securities on margin, except that a Fund may obtain
such short-term credits as may be necessary for the clearance of purchases and
sales of securities.
12. Mortgage, pledge, or hypothecate any of its assets, except as
described in Investment Restriction No. 2.
13. Purchase or retain the securities of any issuer, if those
individual officers and Trustees of the Trust, its Advisor, the Sponsor, or the
Distributor, each owning beneficially more than 1/2 of 1% of the securities of
such issuer, together own more than 5% of the securities of such issuer.
14. Invest more than 5% of its net assets in warrants which are
unattached to securities, included within that amount, no more than 2% of the
value of a Fund's net assets, may be
- 24 -
<PAGE> 839
warrants which are not listed on the New York or American Stock Exchanges.
15. Write, purchase or sell puts, calls or combinations thereof,
except that all Funds listed above except the Money Market Funds may purchase
or sell puts and calls as otherwise described in the Prospectus or SAI;
however, no Fund will invest more than 5% of its total assets in these classes
of securities.
16. Invest more than 5% of the current value of its total assets
in the securities of companies which, including predecessors, have a record of
less than three years' continuous operation.
If a percentage limitation is satisfied at the time of investment, a
later increase or decrease in such percentage resulting from a change in the
value of a Fund's investments will not constitute a violation of such
limitation, except that any borrowing by a Fund that exceeds the fundamental
investment limitations stated above must be reduced to meet such limitations
within the period required by the 1940 Act (currently three days) and the Funds
will not at any time hold more than 15% (10% in the case of the Money Market
Funds) of their net assets in illiquid securities. Otherwise, a Fund may
continue to hold a security even though it causes the Fund to exceed a
percentage limitation because of fluctuation in the value of the Fund's assets.
In order to permit the sale of shares in certain states, the Trust may
make commitments more restrictive than the investment policies and limitations
described above. Should the Trust determine that these commitments are no
longer in the best interests of the Trust, it will revoke the commitment by
terminating sales of its shares in the states involved.
In addition, in accordance with current SEC regulations, the Money
Market Funds intend, as a non-fundamental policy, to limit investments in the
securities of any single issuer (other than securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities and repurchase
agreements collateralized by such securities) to not more than 5% of the value
of their respective total assets at the time of purchase, except for 25% of the
value of their total assets which may be invested in any one issuer for a
period of up to three business days.
- 25 -
<PAGE> 840
MANAGEMENT
Trustees and Officers
The principal occupations of the Trustees and executive officers of the
Funds for the past five years and their ages are listed below. None of the
Trustees is deemed to be an "interested person" of the Trust for purposes of
the 1940 Act.
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation(s)
Name, Address and Age with Registrant During Past 5 Years
- --------------------- ----------------- -----------------------
<S> <C> <C>
Joseph N. Hankin Trustee President, Westchester Community
75 Grasslands Road College since 1971; President of
Valhalla, NY 10595 Hartford Junior College from 1967
Age: 55 to 1971; Adjunct Professor of
Columbia University Teachers
College since 1976.
Richard A. Wedemeyer Trustee Vice President of Performance
17 High Street Advantage, Inc., 17 High Street,
Suite 301 Norwalk, CT 06851 since 1992; Vice
Norwalk, CT 06851 President of Jim Henson
Age: 59 Productions from 1979 to 1992;
Author of In Transition (Harper
Collins); co-founder and
co-conductor of Harvard Business
School Club of New York Career
Seminar; Trustee of Jim Henson
Legacy trust.
John E. Heilmann Trustee Retired; Chairman, President and
Old Norwood Plantation Chief Executive Officer,
Wingina, VA 24599 Distillers Somerset, Inc. and
Age: 64 Norwood Enterprises, Inc. from
1987 to 1992.
Dennis W. Draper Trustee Associate Professor of Finance, at
University of Southern University of Southern California
California since 1978; Director of Data
School of Business Analysis, Inc. (financial services);
Hoffman 701-F and Editorial Board of Chicago
Los Angeles, CA 90089 Board of Trade.
Age: 46
</TABLE>
- 26 -
<PAGE> 841
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation(s)
Name, Address and Age with Registrant During Past 5 Years
- --------------------- ----------------- -----------------------
<S> <C> <C>
Jack D. Henderson Trustee Attorney; from April 1989 to
1600 Broadway November 1995, Partner of the law
Suite 1410 firm of Clanahan, Tanner, Downing
Denver, CO 80202 Knowlton, P.C.
Age: 68
Michael C. Petrycki President Executive Vice President and
230 Park Avenue Director of Furman Selz since 1984.
New York, NY 10169
Age: 53
Steven D. Blecher Executive Vice Executive Vice President and
230 Park Avenue President Director of Furman Selz since 1983;
New York, NY 10169 Vice President, Secretary and
Age: 52 Treasurer of Furman Selz Capital
Management, Inc. since 1984.
John J. Pileggi Vice President Managing Director of Furman Selz,
237 Park Avenue and Treasurer from 1984 to 1992; Senior Managing
New York, NY 10169 Director since 1992 and Director of
Age: 36 Furman Selz since 1994.
Joan V. Fiore Vice President Managing Director and Counsel of
237 Park Avenue and Secretary Furman Selz since 1991; Staff
New York, NY 10017 Attorney at the U.S. Securities and
Age: 39 Exchange Commission, Division of
Investment Management, from 1986
to 1991.
Donald E. Brostrom Assistant Director, Fund Services, Furman
237 Park Avenue Treasurer Selz Incorporated since 1986;
New York, NY 10169 Managing Director of Furman Selz
Age: 37 since 1995.
</TABLE>
- 27 -
<PAGE> 842
Trustees receive from the Trust an annual retainer of $5,000 and a fee
of $1,000 for each Board of Trustees meeting and $500 for each Board committee
meeting attended, and are reimbursed for all out-of-pocket expenses relating to
attendance at such meetings.
For the fiscal year ended September 30, 1995, the Trustees received the
following compensation from the Trust and from certain other investment
companies (as indicated) that have the same investment advisor as the Trust or
an investment advisor that is an affiliated person of the Trust's investment
advisor:
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT
AGGREGATE BENEFITS ACCRUED ESTIMATED TOTAL COMPENSATION
NAME OF COMPENSATION FROM AS PART OF TRUST ANNUAL BENEFITS FROM REGISTRANT
TRUSTEE THE TRUST EXPENSE UPON RETIREMENT AND FUND COMPLEX
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dennis W. $10,456 $0 $0 $10,456
Draper
Joseph N. $11,250 $0 $0 $11,250
Hankin
John E. $11,250 $0 $0 $11,250
Heilmann
Jack D. $10,456 $0 $0 $30,956*
Henderson
Richard A. $11,250 $0 $0 $11,250
Wedemeyer
==========================================================================================================================
</TABLE>
*Includes amounts received for service as a member of the Board of Trustees of
Westcore Trust.
The Trustees and officers of the Trust, as a group, own less than 1% of
the outstanding shares of the Funds as of the date of this SAI.
Advisor
First Interstate Capital Management, Inc., 7501 E. McCormick Parkway,
Scottsdale, Arizona 85258, serves as advisor to the Funds. FICM manages the
investment and reinvestment of the assets of the Funds and continuously reviews,
supervises and administers the Funds' investments. The Advisor is responsible
for placing orders for the purchase and sale of the Funds' investments directly
with brokers and dealers selected by it in its discretion. See "Portfolio
Transactions." FICM also furnishes to the Board of Trustees, which has overall
responsibility for the business and affairs of the Trust, periodic reports on
the investment performance of the Funds.
- 28 -
<PAGE> 843
FICM is a wholly-owned subsidiary of First Interstate Bank of
California ("FICAL"). FICAL is the largest banking subsidiary of First
Interstate Bancorp. First Interstate Bancorp provides financial products and
services marketed at the local level to nearly five million households in over
500 communities in 13 western states.
Under the terms of the Investment Advisory Contracts between the Trust
and FICM, FICM is obligated to manage the Funds' portfolios in accordance with
applicable laws and regulations. The investment advisory services provided by
FICM to the Funds are not exclusive under the terms of the Investment Advisory
Contracts. FICM is free to, and does, render investment advisory services to
others. In making its investment decisions, FICM does not use material inside
information in the possession of its affiliates.
The Investment Advisory Contracts for the Funds will continue in effect
for a period beyond more than two years from the date of their execution with
respect to a particular Fund, only as long as such continuance is approved
annually (i) by the holders of a majority of the outstanding voting securities
of the Funds or by the Board of Trustees and (ii) by a majority of the Trustees
who are not parties to such Contract or "interested persons" (as defined in the
1940 Act) of any such party. Each Investment Advisory Contract may be
terminated with respect to a particular Fund without penalty by vote of the
Trustees or the shareholders of such Fund, or by the Advisor, on 60 days
written notice by either party to the Contract and will terminate automatically
if assigned.
The Investment Advisory Contracts provide that FICM shall not be liable
for any error of judgment or mistake of law or for any loss suffered by a Fund
in connection with the performance of such contracts, except a loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of FICM in the performance of its duties or from
reckless disregard of its duties and obligations under the Contracts.
Prior to October 1, 1995, First Interstate Bank of Oregon, N.A. and
First Interstate Bank of Washington, N.A. served as the co-advisors to the
Growth Fund and the National Tax-Exempt Fund; First Interstate Bank of Oregon,
N.A. served as the advisor to the Short-Term Government Bond Fund, Intermediate
Government Bond Fund, Intermediate Bond Fund and Oregon Tax-Exempt Fund; First
Interstate Bank of Arizona, N.A. served as the advisor to the Arizona
Tax-Exempt Fund. For the fiscal years ended September 30, 1995, May 31, 1995
and May 31, 1994, the previous
- 29 -
<PAGE> 844
advisors for these Funds were entitled to receive advisory fees from the Funds
at the same annual rates as those currently in effect. For such fiscal years,
the previous advisors were entitled to receive the following amounts in
advisory fees:
<TABLE>
<CAPTION>
Investment Advisory Fees
------------------------
YEAR ENDED
SEPTEMBER 30, YEAR ENDED YEAR ENDED
FUND 1995* MAY 31, 1995 MAY 31, 1994
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Fund $34,878 $63,300 $13,655
Short-Term Government Bond
Fund $65,696 $249,204 $275,549
Intermediate Government Bond
Fund $52,756 $180,883 $197,768
Intermediate Bond Fund $94,698 $275,948 $318,000
Oregon Tax-Exempt Fund $84,999 $256,430 $269,574
Arizona Tax-Exempt Fund $41,159 $124,904 $128,905
National Tax-Exempt Fund $24,173 $67,845 $57,059
</TABLE>
* The Funds changed their fiscal year from May 31 to September 30.
For the fiscal years ended September 30, 1995, May 31, 1995 and May 31,
1994, the previous advisors for the Funds listed below waived advisory fees and
reimbursed expenses in the following amounts:
- 30 -
<PAGE> 845
Investment Advisory Fees Waived
and Expenses Reimbursed by Advisor
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
FUND SEPTEMBER 30, MAY 31, 1995 MAY 31, 1994
1995*
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Fund $37,894 $89,494 $75,741
Short-Term Government
Bond Fund $63,250 $135,679 $178,274
Intermediate Government
Bond Fund $15,827 $54,265 $43,013
Intermediate Bond Fund $ 0 $0 $0
Oregon Tax-Exempt
Fund $43,995 $84,770 $104,948
Arizona Tax-Exempt
Fund $66,373 $166,803 $172,383
National Tax-Exempt
Fund $68,667 $145,244 $141,590
</TABLE>
* The Funds changed their fiscal year from May 31 to September 30.
Prior to March 18, 1994, the advisor for the Equity Value Fund, Balanced
Fund, Asset Preservation Fund, Government Income Fund, California Short-Term
Tax-Exempt Fund, California Tax-Exempt Fund, Government Money Market Fund and
Money Market Fund was San Diego Financial Capital Management, Inc. ("San Diego
Financial"), which was a wholly-owned subsidiary of San Diego Trust & Savings
Bank ("San Diego Trust"), which in turn was a wholly-owned subsidiary of San
Diego Financial Corporation ("SDFC"). On that date, SDFC merged into First
Interstate Bancorp and San Diego Trust merged into FICAL. As a result of these
transactions, San Diego Financial became an indirect wholly-owned subsidiary of
FICAL. On January 12, 1995, San Diego Financial merged into First Interstate
Investment Services, Inc., a direct wholly-owned subsidiary of FICAL, which has
since changed its name to First Interstate Capital Management, Inc.
During the fiscal years ended September 30, 1995, September 30, 1994 and
September 30, 1993, the Advisor (and previous advisor, as the case may be) was
entitled to receive advisory fees from the Funds listed below at the same annual
rates as those currently in effect. For such fiscal years, the
- 31 -
<PAGE> 846
Advisor (and previous advisor, as the case may be) were entitled to receive the
following amounts in advisory fees:
Investment Advisory Fees
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
FUND SEPT. 30, 1995 SEPT. 30, 1994 SEPT. 30, 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Value Fund $992,870 $953,400 $ 701,500
Balanced Fund $579,850 $683,626 $ 503,720
Asset Preservation Fund $251,732 $446,807 $ 561,960
Government Income Fund $500,935 $792,907 $ 767,575
California Short-Term Tax-Exempt
Fund* $ 89,669 $ 117,116 $ 71,787
California Tax-Exempt Fund $844,113 $1,068,954 $1,036,999
Government Money Market Fund $383,269 $ 442,842 $ 534,447
Money Market Fund $461,445 $ 482,643 $ 463,402
</TABLE>
* The California Short-Term Tax-Exempt Fund commenced operations on
January 20, 1993.
During the fiscal years ended September 30, 1995, September 30, 1994 and
September 30, 1993, the Advisor (or previous advisor, as the case may be) waived
advisory fees and reimbursed expenses for the Funds listed below in the
following amounts:
- 32 -
<PAGE> 847
Investment Advisory Fees Waived
and Expenses Reimbursed by Advisor
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
FUND SEPT. 30, 1995 SEPT. 30, 1994 SEPT. 30, 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Value Fund $ 0 $0 $808
Balanced Fund $ 0 $0 $21,507
Asset Preservation Fund $ 0 $0 $33,487
Government Income Fund $ 0 $0 $91,292
California Short-Term Tax-Exempt
Fund* $ 84,544 $114,128 $95,431
California Tax-Exempt Fund $ 0 $0 $106,028
Government Money Market Fund $ 0 $0 $0
Money Market Fund $123,052 $128,705 $123,574
</TABLE>
* The California Short-Term Tax-Exempt Fund commenced operations on
January 20, 1993.
Distribution of Fund Shares
The Trust has retained Pacifica Funds Distributor Inc., a subsidiary of
Furman Selz, to serve as principal underwriter for the shares of the Funds
pursuant to a Distribution Contract. The Distribution Contract provides that
the Distributor will use its best efforts to maintain a broad distribution of
the Funds' shares among bona fide investors and may enter into selling group
agreements with responsible dealers and dealer managers as well as sell the
Funds' shares to individual investors. The Distributor is not obligated,
however, to sell any specific amount of shares.
Prior to October 1, 1995, ALPS Mutual Funds Service, Inc. ("ALPS")
served as the distributor of the Growth Fund, Short-Term Government Bond Fund,
Intermediate Government Bond Fund, Intermediate Bond Fund, Oregon Tax-Exempt
Fund, Arizona Tax-Exempt Fund and National Tax-Exempt Fund. ALPS was not
entitled to any compensation for its services as distributor for the Funds.
Under an Investor Shares Distribution Plan, the Funds may pay directly
or reimburse the Distributor monthly in amounts described in the Prospectuses
for costs and expenses of marketing the Investor Shares of the Equity, Bond and
Tax-Exempt Funds.
- 33 -
<PAGE> 848
Under a separate Distribution Plan for the Money Market Funds (together with
the Investor Shares Distribution Plan, the "Plans"), the Money Market Funds may
pay directly or reimburse. the Distributor monthly in amounts described in the
Prospectus for costs and expenses of marketing their shares. The Board of
Trustees has concluded that there is a reasonable likelihood that the Plan will
benefit the Funds and their shareholders covered by the Plan.
Each Plan provides that it may not be amended to increase materially
the costs which a Fund may bear pursuant to the Plan without approval of the
shareholders of the class of shares to which the Plan relates, and that other
material amendments of the Plan must be approved by the Board of Trustees, and
by the Trustees who are neither "interested persons" (as defined in the 1940
Act) of the Trust nor have any direct or indirect financial interest in the
operation of the Plan or in any related agreement, by vote cast in person at a
meeting called for the purpose of considering such amendments. The selection
and nomination of the Trustees of the Trust have been committed to the
discretion of the Trustees who are not "interested persons" of the Trust. The
Plans have been approved and are subject to annual approval by the Board of
Trustees and by the Trustees who are neither "interested persons" of the Trust
nor have any direct or indirect financial interest in the operation of the
Plans, by vote cast in person at a meeting called for the purpose of voting on
the Plans.
Each Plan is terminable with respect to a Fund time by a vote of a
majority of the Trustees who are not "interested persons" of the Trust and who
have no direct indirect financial interest in the operation of the Plan vote of
the holders of a majority of the class of shares of that Fund to which the Plan
relates.
During the fiscal year ended September 30, 1995, the following Funds
reimbursed the Distributor, pursuant to their Plans, the following amounts:
- 34 -
<PAGE> 849
<TABLE>
<CAPTION>
Calif-
ornia
Cali- Short-
Asset Govern- fornia Term Government
Equity Preser- ment Tax- Tax- Money Money
Value Balanced vation Income Exempt Exempt Market Market
Fund Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Advertising and $10,769 $3,303 $53,364 $67,100 $53,239 $7,998 $74,215 $38,685
Promotional
Materials
Printing and $7,068 $6,177 $16,308 $9,001 $27,842 $5,797 $6,448 $12,518
mailing of
financial
statements and
prospectuses to
other than current
shareholders
Compensation to 0 0 0 0 0 0 0 0
underwriters
Compensation to 0 0 0 0 0 0 0 0
broker/dealers
Compensation to 0 0 0 0 0 0 0 0
sales personnel
Financing charges 0 0 0 0 0 0 0 0
Total $17,837 $9,480 $69,672 $76,101 $81,081 $13,795 $80,663 $51,203
</TABLE>
Administrative Services
Furman Selz provides management and administrative services necessary
for the operation of the Funds, including among other things, (i) preparation of
shareholder reports and communications, (ii) regulatory compliance, such as
reports to and filings with the Securities and Exchange Commission ("SEC") and
state securities commissions and (iii) general supervision of the operation of
the Funds, including coordination of the services performed by the Funds'
advisor, distributor, transfer agent, custodians, independent accountants, legal
counsel and others. In addition, Furman Selz furnishes office space and
facilities required for conducting the business of the Funds and pays the
compensation of the Funds' officers, employees and Trustees affiliated with
Furman Selz. For these services, Furman Selz is entitled to receive a fee,
payable monthly, at the annual rate of 0.15% of the average daily net assets of
each Fund.
The Administrative Services Contract is terminable with respect to a
particular Fund without penalty, at any time, by vote of a majority of the
Trustees who are not "interested persons" of the Trust and who have no direct or
indirect financial interest in the Administrative Services Contract upon not
more than 60 days written notice to Furman Selz or by vote of the holders of a
majority of the shares of the Fund involved, or, upon 60 days notice, by Furman
Selz. The Administrative Services Contract will terminate automatically in the
event of its assignment.
- 35 -
<PAGE> 850
Prior to October 1, 1995, ALPS served as the administrator for each
Fund listed below. For its administration services, ALPS was entitled to
receive the following amounts for the fiscal years ended September 30, 1995,
May 31, 1995 and May 31, 1994:
Administration Fees
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, MAY 31, 1995 MAY 31, 1994
FUND 1995*
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Fund $2,329 $4,220 $910
Short-Term Government Bond $6,570 $24,921 $27,601
Fund
Intermediate Government Bond $5,276 $18,088 $20,580
Fund
Intermediate Bond Fund $9,470 $27,595 $31,800
Oregon Tax-Exempt Fund $8,500 $25,643 $26,957
Arizona Tax-Exempt Fund $4,116 $12,490 $12,890
National Tax-Exempt Fund $2,417 $6,785 $5,706
</TABLE>
* The Funds changed their fiscal year from May 31 to September 30.
For the fiscal years ended September 30, 1995, May 31, 1995 and May 31,
1994, ALPS waived administration fees for the Funds listed below in the
following amounts:
- 36 -
<PAGE> 851
Administration Fees Waived
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
FUND SEPTEMBER 30, 1995* MAY 31, 1995 MAY 31, 1994
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Fund $0 $1,223 $910
Short-Term Government Bond $0 $0 $0
Fund
Intermediate Government Bond $0 $0 $3,500
Fund
Intermediate Bond Fund $0 $0 $0
Oregon Tax-Exempt Fund $0 $0 $0
Arizona Tax-Exempt Fund $0 $0 $0
National Tax-Exempt Fund $0 $2,018 $4,210
</TABLE>
* The Funds changed their fiscal year from May 31 to September 30.
During the years ended September 30, 1995, September 30, 1994 and
September 30, 1993, Furman Selz was entitled to receive administration services
fees from the Funds listed below in the following amounts:
- 37 -
<PAGE> 852
Administration Fees
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
FUND SEPT. 30, 1995 SEPT. 30, 1994 SEPT. 30, 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Value Fund $330,957 $317,992 $233,834
Balanced Fund $193,283 $227,896 $167,907
Asset Preservation Fund $143,847 $266,358 $321,120
Government Income Fund $200,374 $317,694 $307,030
California Short-Term Tax-Exempt Fund* $ 51,239 $66,924 $41,021
California Tax-Exempt Fund $337,645 $427,178 $414,800
Government Money Market Fund $255,512 $295,228 $356,611
Money Market Fund $307,630 $321,762 $308,935
</TABLE>
* The California Short-Term Tax-Exempt Fund commenced operations on
January 20, 1993.
For the fiscal years ended September 30, 1995, September 30, 1994 and
September 30, 1993, Furman Selz waived administration fees for the Funds listed
below in the following amounts:
Administration Fees Waived
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
FUND SEPT. 30, 1995 SEPT. 30, 1994 SEPT. 30, 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Value Fund $33,096 $31,972 $16,972
Balanced Fund $19,328 $22,808 $21,652
Asset Preservation Fund $14,385 $26,286 $26,812
Government Income Fund $20,038 $32,247 $40,348
California Short-Term Tax-Exempt Fund* $51,239 $66,924 $64,664
California Tax-Exempt Fund $33,764 $42,354 $54,855
Government Money Market Fund $25,550 $29,523 $23,652
Money Market Fund $30,763 $32,176 $20,684
</TABLE>
* The California Short-Term Tax-Exempt Fund commenced operations
on January 20, 1993.
- 38 -
<PAGE> 853
Service Organizations
The Trust may also contract with banks (including affiliates of First
Interstate Bancorp), trust companies, broker-dealers (other than Furman Selz) or
other financial organizations ("Service Organizations") to provide certain
administrative services with respect to the Funds. Services provided by
Service Organizations may include among other things: providing necessary
personnel and facilities to establish and maintain certain shareholder accounts
and records; assisting in processing purchase and redemption transactions;
arranging for the wiring of funds; transmitting and receiving funds in
connection with client orders to purchase or redeem shares; verifying and
guaranteeing client signatures in connection with redemption orders, transfers
among and changes in client-designating accounts; providing periodic statements
showing a client's account balance and, to the extent practicable, integrating
such information with other client transactions; furnishing periodic and annual
statements and confirmations of all purchases and redemptions of shares in a
client's account; transmitting proxy statements, annual reports, and updating
prospectuses and other communications from the Funds to clients; and providing
such other services as the Funds or a client reasonably may request, to the
extent permitted by applicable statute, rule or regulation.
Some Service Organizations may impose additional or different
conditions on their clients, such as requiring their clients to invest more
than the minimum initial or subsequent investments specified by the Funds or
charging a direct fee for servicing. If imposed, these fees would be in
addition to any amounts which might be paid to the Service Organization by the
Funds. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged
to consult them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws, among other things,
prohibit banks from engaging in the business of underwriting, selling or
distributing securities. There currently is no precedent prohibiting banks
from performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either Federal or state
statutes or regulations relating to the permissible activities of banks and
their subsidiaries or affiliates, could prevent a bank from continuing to
perform all or a part of its servicing activities. In addition, state
securities laws on this issue may differ from the interpretations of federal
law expressed herein and banks and financial institutions may be required to
register as dealers pursuant to
- 39 -
<PAGE> 854
state law. If a bank were prohibited from so acting, its shareholder clients
would be permitted to remain shareholders of the Trust and alternative means
for continuing the servicing of such shareholders would be sought. In that
event, changes in the operation of the Trust might occur and a shareholder
serviced by such a bank might no longer be able to avail itself of any services
then being provided by the bank. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these
occurrences.
EXPENSES AND EXPENSE LIMITS
Except for the expenses paid by the Advisor, the Distributor and
Furman Selz, the Funds bear all costs of their operations.
Currently, California is the only state imposing limitations on the
expenses of the Funds. Those expense limitations are 2-1/2 percent of the
first $30 million of a Fund's average net assets, 2 percent of the next $70
million and 1-1/2 percent of a Fund's remaining average net assets. If in any
fiscal year expenses of the Funds (excluding taxes, interest, expenses under
the Plan, brokerage commissions and other portfolio transaction expenses, other
expenditures which are capitalized in accordance with generally accepted
accounting principles and extraordinary expenses, but including the advisory
and administrative fees) exceed the expense limitations applicable to the Funds
imposed by the securities regulations of any state, Furman Selz and the FICM
each will reimburse the Funds for a portion of the excess in accordance with
the following table:
- 40 -
<PAGE> 855
<TABLE>
<CAPTION>
FUND FURMAN SELZ FICM
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Growth Fund 16% 84%
Equity Value Fund 25% 75%
Balanced Fund 25% 75%
Asset Preservation Fund 37% 63%
Short-Term Government Bond Fund 23% 77%
Intermediate Government Bond Fund 23% 77%
Government Income Fund 29% 71%
Intermediate Bond Fund 23% 77%
Oregon Tax-Exempt Fund 23% 77%
Arizona Tax-Exempt Fund 23% 77%
California Short-Term Tax-Exempt Fund 29% 71%
California Tax-Exempt Fund 29% 71%
National Tax-Exempt Fund 23% 77%
Government Money Market Fund 40% 60%
Money Market Fund 40% 60%
100% U.S. Treasury Money Market Fund 33% 67%
California Tax-Exempt Money Market Fund 30% 70%
National Tax-Exempt Money Market Fund 30% 70%
Equity Index Fund 37% 63%
International Equity Fund 13% 87%
</TABLE>
DETERMINATION OF NET ASSET VALUE
The portfolio instruments of the Money Market Funds are valued on the
basis of amortized cost. This technique involves valuing an instrument at its
cost and thereafter assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price each Fund would receive if it sold the
instrument. During periods of declining interest rates, the daily yield on
- 41 -
<PAGE> 856
shares of each Fund computed as described above may tend to be higher than a
like computation made by a fund with identical investments utilizing a method
of valuation based upon market prices and estimates of market prices for all of
its instruments. Thus, if the use of amortized cost by each Fund resulted in a
lower aggregate portfolio value on a particular day, a prospective investor in
such Fund would be able to obtain a somewhat higher yield than would result
from investment in a fund utilizing solely market values and existing investors
in each Fund would receive less investment income. The converse would apply in
a period of rising interest rates.
The valuation of Money Market Funds' instruments, based upon their
amortized cost and the concomitant maintenance by each Fund of a net asset
value of $1.00, is permitted in accordance with Rule 2a-7 under the Act,
pursuant to which the Fund must adhere to certain conditions. Each Fund must
maintain a dollar-weighted average maturity of 90 days or less, purchase only
instruments having remaining maturities of thirteen months or less, and invest
only in securities which are determined to present minimal credit risks
pursuant to guidelines adopted by the Trustees. Instruments having variable or
floating interest rates or demand features may be deemed to have remaining
maturities as FOLLOWS: (a) a government security with a variable rate of
interest readjusted no less frequently than every thirteen months may be deemed
to have a maturity equal to the period remaining until the next readjustment of
the interest rate; (b) an instrument with a variable rate of interest, the
principal amount of which is scheduled on the face of the instrument to be paid
in thirteen months or less, may be deemed to have a maturity equal to the
period remaining until the next readjustment of the interest rate; (c) an
instrument with a variable rate of interest that is subject to a demand feature
may be deemed to have a maturity equal to the longer of the period remaining
until the next readjustment of the interest rate or the period remaining until
the principal amount can be recovered through demand; (d) an instrument with a
floating rate of interest that is subject to a demand feature may be deemed to
have a maturity equal to the period remaining until the principal amount can be
recovered through demand; and (e) a repurchase agreement may be deemed to have
a maturity equal to the period remaining until the date on which the repurchase
of the underlying securities is scheduled to occur or, where no date is
specified but the agreement is subject to demand, the notice period applicable
to a demand for the repurchase of the securities.
The Trustees have established procedures designed to stabilize, to the
extent reasonably possible, the Money Market Funds' price per share as computed
for the purpose of sales and
- 42 -
<PAGE> 857
redemptions at a single value. Such procedures will include the determination,
at such intervals as the Trustees deem appropriate, of the extent to which each
Fund's NAV as calculated by using available market quotations deviates from
$1.00 per share, such deviation may result in material dilution or other unfair
results to existing shareholders or investors. In the event the Trustees
determine that such a material deviation exists, they have agreed to take such
corrective action as they regard as necessary and appropriate, which may
include selling portfolio instruments prior to maturity to realize capital
gains or losses or to shorten average portfolio maturity; withholding
dividends; redeeming shares in kind or without monetary or other consideration;
or establishing a net asset value per share by using available market
quotations. It is the intention of the Money Market Funds to maintain a per
share net asset value of $1.00, but there can be no assurance that each Fund
will do so.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Payment for shares may, in the discretion of the Advisor, be made in
the form of securities that are permissible investments for the Funds as
described in the Prospectuses. For further information about this form of
payment please contact Furman Selz. In connection with an in-kind securities
payment, a Fund will require, among other things, that the securities be valued
on the day of purchase in accordance with the pricing methods used by the Fund
and that the Fund receive satisfactory assurances that (1) it will have good
and marketable title to the securities received by it; (2) that the securities
are in proper form for transfer to the Fund; and (3) adequate information will
be provided concerning the basis and other matters relating to the securities.
Under the 1940 Act, a Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
New York Stock Exchange is closed (other than customary weekend and holiday
closings), or during which trading on said Exchange is restricted, or during
which as determined by the SEC by rule or regulation) an emergency exists as a
result of which disposal or valuation of portfolio securities is not reasonably
practicable, or for such other periods as the SEC may permit. (A Fund may also
suspend or postpone the recordation of the transfer of its shares upon the
occurrence of any of the foregoing conditions.)
The Trust may suspend redemption rights or postpone redemption payments
(as well as suspend the recordation of the transfer of shares) for such periods
as are permitted under the 1940 Act. The Trust may also redeem shares
involuntarily or make payment for redemption in securities or other property if
it
- 43 -
<PAGE> 858
appears appropriate to do so in light of the Trust's responsibilities under the
1940 Act.
In addition, the Trust may redeem shares involuntarily to reimburse a
Fund for any loss sustained by reason of the failure of a shareholder to make
full payment for shares purchased by the shareholder or to collect any charge
relating to a transaction effected for the benefit of a shareholder which is
applicable to shares of a Fund as provided from time to time in the
Prospectuses.
If shares of the Funds are represented by a share certificate, the
certificate must be surrendered to the Funds' transfer agent for cancellation
before the shares can be redeemed.
All redemptions of shares of the Funds will be made in cash, except
that the commitment to redeem shares in cash extends only to redemption
requests made by each shareholder of a Fund during any 90-day period of up to
the lesser of $250,000 or 1% of the net asset value of that Fund at the
beginning of such period. This commitment is irrevocable without the prior
approval of the SEC and is a fundamental policy of the Funds that may not be
changed without shareholder approval. In the case of redemption requests by
shareholders in excess of such amounts, the Board of Trustees reserves the
right to have the Funds make payment, in whole or in part in securities or
other assets, in case of an emergency or any time a cash distribution would
impair the liquidity of a Fund to the detriment of the existing shareholders.
In this event, the securities would be valued in the same manner as the
securities of that Fund are valued. If the recipient were to sell such
securities, he or she would incur brokerage charges.
PORTFOLIO TRANSACTIONS
Investment decisions for the Funds and for the other investment
advisory clients of the Advisor are made with a view to achieving their
respective investment objectives. Investment decisions are the product of many
factors in addition to basic suitability for the particular client involved.
Thus, a particular security may be bought or sold only for certain clients even
though it could have been bought or sold for other clients at the same time.
Likewise, a particular security may be bought for one or more clients while at
the same time one or more clients are selling the security. In some instances,
one client may sell a particular security to another client. It also sometimes
happens that two or more clients simultaneously purchase or sell the same
security, in which event each day's
- 44 -
<PAGE> 859
transactions in such security are, insofar as possible, averaged as to price
and allocated between such clients in a manner which in the Advisor's opinion
is equitable to each and in accordance with the amount being purchased or sold
by each. There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on other
clients.
The Funds have no obligation to deal with any dealer or group of
dealers in the execution of transactions in portfolio securities. Subject to
policies established by the Trust's Board of Trustees, the Advisor is primarily
responsible for portfolio decisions and the placing of portfolio transactions.
In placing orders, it is the policy of the Funds to obtain the best results
taking into account the broker-dealer's general execution and operational
facilities, the type of transaction involved and other factors such as the
dealer's risk in positioning the securities. While the Advisor generally seeks
reasonably competitive spreads or commissions, the Funds will not necessarily
be paying the lowest spread or commission available.
Purchases and sales of securities will often be principal transactions
in the case of debt securities and equity securities traded otherwise than on
an exchange. The purchase or sale of equity securities will frequently involve
the payment of a commission to a broker-dealer who effects the transaction on
behalf of a Fund. Debt securities normally will be purchased or sold from or
to issuers directly or to dealers serving as market makers for the securities
at a net price. Generally, money market securities are traded on a net basis
and do not involve brokerage commissions. Under the 1940 Act, persons
affiliated with the Funds or the Sponsor are prohibited from dealing with the
Funds as a principal in the purchase and sale of securities except in limited
situations permitted by SEC regulations, unless a permissive order allowing
such transactions is obtained from the SEC.
The Advisor may, in circumstances in which two or more broker-dealers
are in a position to offer comparable results, give preference to a dealer
which has provided statistical or other research services to the Advisor. By
allocating transactions in this manner, the Advisor is able to supplement its
research and analysis with the views and information of securities firms.
These services, which in some cases may also be purchased for cash, include
such matters as general economic and security market reviews, industry and
company reviews, evaluations of securities and recommendations as to the
purchase and sale of securities. Some of these services are of value to the
Advisor in advising various of its clients (including the Funds), although not
all of these services are necessarily useful and of value in managing the
Funds. The management fee paid by
- 45 -
<PAGE> 860
the Funds is not reduced because the Advisor and its affiliates receive such
services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934
(the "1934 Act"), the Advisor may cause the Funds to pay a broker-dealer which
provides "brokerage and research services" (as defined in the 1934 Act) to the
Advisor an amount of disclosed commission for effecting a securities
transaction for the Funds in excess of the commission which another
broker-dealer would have charged for effecting that transaction.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Trustees may determine, the
Advisor may consider sales of shares of the Funds as a factor in the selection
of broker-dealers to execute portfolio transactions for the Funds.
During the fiscal years ended September 30, 1995, May 31, 1995 and May
31, 1994, the Short-Term Government Bond Fund, Intermediate Government Bond
Fund, Intermediate Bond Fund, Oregon Tax-Exempt Fund, Arizona Tax-Exempt Fund
and National Tax-Exempt Fund did not pay any brokerage commissions, because all
of their portfolio transactions occurred in the over-the-counter market.
During the fiscal years ended September 30, 1995, May 31, 1995 and May 31,
1994, the Growth Fund paid $9,137, $32,392 and $10,939, respectively, in
brokerage commissions.
During the fiscal years ended September 30, 1995, September 30, 1994
and September 30, 1993, the Asset Preservation Fund, Government Income Fund,
California Short-Term Tax-Exempt Fund, California Tax-Exempt Fund, Government
Money Market Fund and Money Market Fund did not pay any brokerage commissions,
because all of their portfolio transactions occurred in the over-the-counter
market. During the same time periods, the Equity Value Fund and Balanced Fund
paid the following amounts in brokerage commissions:
- 46 -
<PAGE> 861
Brokerage Commissions Paid
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
FUND SEPT. 30, 1995 SEPT. 30, 1994 SEPT. 30, 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Value Fund $619,124 $247,218 $368,789
Balanced Fund $197,751 $104,835 $149,294
</TABLE>
During the time periods stated above, no brokerage commissions were paid
by the Funds to an affiliated broker.
Portfolio Turnover
Changes may be made in the portfolio consistent with the investment
objectives and policies of the Funds whenever such changes are believed to be in
the best interests of the Funds and their shareholders. The portfolio turnover
rate is calculated by dividing the lesser of purchases or sales of portfolio
securities by the average monthly value of the Fund's portfolio securities. For
purposes of this calculation, portfolio securities exclude all securities having
a maturity when purchased of one year or less.
TAXATION
All Funds
The Funds intend to qualify and elect annually to be treated as
regulated investment companies under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). To qualify as a regulated investment company,
a Fund must (a) distribute to shareholders at least 90% of its investment
company taxable income (which includes, among other items, dividends, taxable
interest and the excess of net short-term capital gains over net long-term
capital losses); (b) derive in each taxable year at least 90% of its gross
income from dividends, interest, payments with respect to securities loans and
gains from the sale or other disposition of stock, securities or foreign
currencies or other income derived with respect to its business of investing in
such stock, securities or currencies; (c) derive less than 30% of its gross
income from the sale or other disposition of certain assets (namely, in the case
of the Funds, (i) stock or securities; (ii) options, futures, and forward
contracts (other than those on foreign currencies), and (iii) foreign currencies
(including options, futures, and forward contracts on such currencies) not
directly related to the Fund's principal business
- 47 -
<PAGE> 862
of investing in stock or securities (or options and futures with respect to
stocks or securities)) held less than 3 months; and (d) diversify its holdings
so that, at the end of each quarter of the taxable year, (i) at least 50% of
the market value of the Fund's assets is represented by cash and cash items
(including receivables), U.S. Government securities, the securities of other
regulated investment companies and other securities, with such other securities
of any one issuer limited for the purposes of this calculation to an amount not
greater than 5% of the value of the Fund's total assets and not greater than
10% of the outstanding voting securities of such issuer, and (ii) not more than
25% of the value of its total assets is invested in the securities of any one
issuer (other than U.S. Government securities or the securities of other
regulated investment companies). In addition, a Fund earning tax-exempt
interest must, in each year, distribute at least 90% of its net tax-exempt
income. By meeting these requirements, the Funds generally will not be subject
to Federal income tax on their investment company taxable income and net
capital gains which are distributed to shareholders. If the Funds do not meet
all of these Code requirements, they will be taxed as ordinary corporations and
their distributions will be taxed to shareholders as ordinary income.
Amounts, other than tax-exempt interest, not distributed on a timely
basis in accordance with a calendar year distribution requirement are subject
to a nondeductible 4% excise tax. To prevent imposition of the excise tax,
each Fund must distribute for each calendar year an amount equal to the sum of
(1) at least 98% of its ordinary income (excluding any capital gains or losses)
for the calendar year, (2) at least 98% of the excess of its capital gains over
capital losses (adjusted for certain ordinary losses) for the one-year period
ending October 31 of such year, and (3) all ordinary income and capital gain
net income (adjusted for certain ordinary losses) for previous years that were
not distributed during such years.
Some Funds may invest in stocks of foreign companies that are
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign company is classified as a PFIC under the Code if at least
one-half of its assets constitutes investment-type assets or 75% or more of its
gross income is investment-type income. Under the PFIC rules, an "excess
distribution" received with respect to PFIC stock is treated as having been
realized ratably over the period during which the Fund held the PFIC stock. A
Fund itself will be subject to tax on the portion, if any, of the excess
distribution that is allocated to the Fund's holding period in prior taxable
years (and an interest factor will be added to the tax, as if the tax has
actually been payable in such prior taxable years) even
- 48 -
<PAGE> 863
though the Fund distributes the corresponding income to stockholders. Excess
distributions include any gain from the sale of PFIC stock as well as certain
distributions from a PFIC. All excess distributions are taxable as ordinary
income.
A Fund may be able to elect alternative tax treatment with respect to
PFIC stock. Under an election that currently may be available, a Fund
generally would be required to include in its gross income its share of the
earnings of a PFIC on a current basis, regardless of whether any distributions
are received from the PFIC. If this election is made, the special rules,
discussed above, relating to the taxation of excess distributions, would not
apply. In addition, other elections may become available that would affect the
tax treatment of PFIC stock held by a Fund. Each Fund's intention to qualify
annually as a regulated investment company may limit its elections with respect
to PFIC stock.
Because the application of the PFIC rules may affect, among other
things, the character of gains, the amount of gain or loss and the timing of
the recognition of income with respect to PFIC stock, as well as subject a Fund
itself to tax on certain income from PFIC stock, the amount that must be
distributed to stockholders and that will be taxed to stockholders as ordinary
income or long-term capital gain may be increased or decreased substantially as
compared to a Fund that did not invest in PFIC stock.
Distributions of investment company taxable income generally are
taxable to shareholders as ordinary income. Distributions from certain of the
Funds may be eligible for the dividends-received deduction available to
corporations. Distributions of net long term capital gains, if any, designated
by the Funds as long-term capital gain dividends are taxable to shareholders as
long-term capital gain, regardless of the length of time the Funds' shares have
been held by a shareholder. All distributions are taxable to the shareholder
in the same manner whether reinvested in additional shares or received in cash.
Shareholders will be notified annually as to the Federal tax status of
distributions.
Distributions by a Fund reduce the net asset value of the Fund's
shares. Should a distribution reduce the net asset value below a stockholder's
cost basis, such distribution, nevertheless, would be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of capital.
In particular, investors should be careful to consider the tax implications of
buying shares just prior to a distribution by the Funds. The price of shares
purchased at that
- 49 -
<PAGE> 864
time includes the amount of the forthcoming distribution. Those purchasing
just prior to a distribution will receive a distribution which nevertheless
generally will be taxable to them.
Upon the taxable disposition (including a sale or redemption) of shares
of a Fund, a shareholder may realize a gain or loss depending upon his basis in
his shares. Such gain or loss generally will be treated as capital gain or
loss if the shares are capital assets in the shareholder's hands. Such gain or
loss will be long-term or short-term, generally depending upon the
shareholder's holding period for the shares. However, a loss realized by a
shareholder on the disposition of Fund shares with respect to which capital
gain dividends have been paid will, to the extent of such capital gain
dividends, be treated as long-term capital loss if such shares have been held by
the shareholder for six months or less. A loss realized on the redemption,
sale or exchange of Fund shares will be disallowed to the extent an
exempt-interest dividend was received with respect to those shares if the
shares have been held by the shareholder for six months or less. Further, a
loss realized on a disposition will be disallowed to the extent the shares
disposed of are replaced (whether by reinvestment of distributions or
otherwise) within a period of 61 days beginning 30 days before and ending 30
days after the shares are disposed of. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss. Shareholders
receiving distributions in the form of additional shares will have a cost basis
for Federal income tax purposes in each share received equal to the net asset
value of a share of the Funds on the reinvestment date.
Under certain circumstances, the sales charge incurred in acquiring
shares of a Fund may not be taken into account in determining the gain or lose
on the disposition of those shares. This rule applies where shares of a Fund
are exchanged within 90 days after the date they were purchased and new shares
of a Fund are acquired without a sales charge or at a reduced sales charge. In
that case, the gain or loss recognized on the exchange will be determined by
excluding from the tax basis of the shares exchanged all or a portion of the
sales charge incurred in acquiring those shares. This exclusion applies to the
extent that the otherwise applicable sales charge with respect to the newly
acquired shares is reduced as a result of having incurred the sales charge
initially. Instead, the portion of the sales charge affected by this rule will
be treated as a sales charge paid for the new shares.
The taxation of equity options is governed by section 1234 of the Code.
Pursuant to Code section 1234, the premium received by a Fund for selling a put
or call option is not
- 50 -
<PAGE> 865
included in income at the time of receipt. If the option expires, the premium
is short-term capital gain to the Fund. If the Fund enters into a closing
transaction, the difference between the amount paid to close out its position
and the premium received is short-term capital gain or loss. If a call option
written by a Fund is exercised, thereby requiring the Fund to sell the
underlying security, the premium will increase the amount realized upon the
sale of such security and any resulting gain or loss will be a capital gain or
loss, and will be long-term or short-term depending upon the holding period of
the security. With respect to a put or call option that is purchased by a
Fund, if the option is sold, any resulting gain or loss will be a capital gain
or loss, and will be long-term or short-term, depending upon the holding period
of the option. If the option expires, the resulting loss is a capital loss and
is long-term or short-term, depending upon the holding period of the option.
If the option is exercised, the cost of the option, in the case of a call
option, is added to the basis of the purchased security and, in the case of a
put option, reduces the amount realized on the underlying security in
determining gain or loss.
Certain of the options, futures contracts, and forward foreign currency
exchange contracts that several of the Funds may invest in are so-called
"section 1256 contracts." With certain exceptions, gains or losses on section
1256 contracts generally are considered 60% long-term and 40% short-term
capital gains or losses ("60/40"). Also, section 1256 contracts held by a Fund
at the end of each taxable year (and, generally, for purposes of the 4% excise
tax, on October 31 of each year) are "marked-to-market" with the result that
unrealized gains or losses are treated as though they were realized and the
resulting gain or loss is treated as 60/40 gain or loss.
Generally, the hedging transactions undertaken by a Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
character of gains (or losses) realized by a Fund. In addition, losses
realized by a Fund on a position that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which such losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to a Fund of hedging transactions are not
entirely clear. Hedging transactions may increase the amount of short-term
capital gain realized by a Fund which is taxed as ordinary income when
distributed to stockholders.
A Fund may make one or more of the elections available under the Code
which are applicable to straddles. If a Fund makes any of the elections, the
amount, character and timing of
- 51 -
<PAGE> 866
the recognition of gains or losses from the affected straddle positions will be
determined under rules that vary according to the election(s) made. The rules
applicable under certain of the elections may operate to accelerate the
recognition of gains or losses from the affected straddle positions.
Because application of the straddle rules may affect the character of
gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to shareholders and which will be taxed to shareholders as ordinary
income or long-term capital gain may be increased or decreased substantially as
compared to a Fund that did not engage in such hedging transactions.
Certain requirements that must be met under the Code in order for a
Fund to qualify as a regulated investment company may limit the extent to which
a Fund will be able to engage in transactions in options, futures, and forward
contracts.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time a Fund accrues interest, dividends
or other receivables, or accrues expenses or other liabilities denominated in a
foreign currency, and the time the Fund actually collects such receivables, or
pays such liabilities, generally are treated as ordinary income or ordinary
loss. Similarly, on disposition of debt securities denominated in a foreign
currency and on disposition of certain options and forward and futures
contracts, gains or losses attributable to fluctuations in the value of foreign
currency between the date of acquisition of the security or contract and the
date of disposition also are treated as ordinary gain or loss. These gains or
losses, referred to under the Code as "section 988" gains or losses, may
increase, decrease, or eliminate the amount of a Fund's investment company
taxable income to be distributed to its shareholders as ordinary income.
Income received by a Fund from sources within foreign countries may be
subject to withholding and other similar income taxes imposed by the foreign
country. If more than 50% of the value of a Fund's total assets at the close
of its taxable year consists of securities of foreign corporations, the Fund
will be eligible and intends to elect to "pass-through" to its shareholders the
amount of such foreign taxes paid by the Fund. Pursuant to this election, a
shareholder would be required to include in gross income (in addition to
taxable dividends actually received) his pro rata share of the foreign taxes
paid by a Fund and would be entitled either to deduct his pro rata share of
foreign taxes in computing his taxable income or to use it as a foreign tax
credit against his U.S. Federal income tax
- 52 -
<PAGE> 867
liability, subject to limitations. No deduction for foreign taxes may be
claimed by a shareholder who does not itemize deductions, but such a
shareholder may be eligible to claim the foreign tax credit (see below). Each
shareholder will be notified within 60 days after the close of a Fund's taxable
year if the foreign taxes paid by a Fund will "pass-through" for that year and,
if so, such notification will designate (a) the shareholder's portion of the
foreign taxes paid to each such country and (b) the portion of the dividend
which represents income derived from foreign sources.
Generally, a credit for foreign taxes is subject to the limitation that
it may not exceed the shareholder's U.S. tax attributable to his total foreign
source taxable income. For this purpose, if a Fund makes the election
described in the preceding paragraph, the source of the Fund's income flows
through to its shareholders. With respect to a Fund, gains from the sale of
securities will be treated as derived from U.S. sources and certain currency
fluctuations gains, including fluctuation gains from foreign
currency-denominated debt securities,, receivables and payables, will be
treated as ordinary income derived from U.S. sources. The limitation on the
foreign tax credit is applied separately to foreign source passive income (as
defined for purposes of the foreign tax credit) including foreign source
passive income of a Fund. The foreign tax credit may off-set only 90% of the
alternative minimum tax imposed on corporations and individuals, and foreign
taxes generally may not be deducted in computing alternative minimum taxable
income.
The Funds are required to report to the Internal Revenue Service
("IRS") all distributions except in the case of certain exempt shareholders.
All such distributions generally are subject to withholding of Federal income
tax at a rate of 31% ("backup withholding") in the case of non-exempt
shareholders if (1) the shareholder fails to furnish the Funds with and to
certify the shareholder's correct taxpayer identification number or social
security number, (2) the IRS notifies the Funds or a shareholder that the
shareholder has failed to report properly certain interest and dividend income
to the IRS and to respond to notices to that effect, or (3) when required to do
so, the shareholder fails to certify that he is not subject to backup
withholding. If the withholding provisions are applicable, any such
distributions, whether reinvested in additional shares or taken in cash, will
be reduced by the amounts required to be withheld. Backup withholding is not
an additional tax. Any amount withheld may be credited against the
shareholders U.S. Federal income tax liability. Investors may wish to consult
their tax advisors about the applicability of the backup withholding
provisions.
- 53 -
<PAGE> 868
The foregoing discussion relates only to Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S.
corporations, partnerships, trusts and estates). Distributions by the Funds
also may be subject to state and local taxes and their treatment under state
and local income tax laws may differ from the Federal income tax treatment.
Distributions of a Fund which are derived from interest on obligations of the
U.S. Government and certain of its agencies and instrumentalities may be exempt
from state and local taxes in certain states. Shareholders should consult
their tax advisors with respect to particular questions of Federal, state and
local taxation. Shareholders who are not U.S. persons should consult their tax
advisors regarding U.S. and foreign tax consequences of ownership of shares of
the Funds including the likelihood that distributions to them would be subject
to withholding of U.S. tax at a rate of 30% (or at a lower rate under a tax
treaty).
Tax-Exempt Funds
The Tax-Exempt Funds intend to manage their portfolios so that they
will be eligible to pay "exempt-interest dividends" to shareholders. The Funds
will so qualify if, at the close of each quarter of their taxable year, at
least 50% of the value of their total assets consists of state, municipal, and
certain other securities, the interest on which is exempt from the regular
Federal income tax. To the extent that a Fund's dividends distributed to
shareholders are derived from such interest income and are designated as
exempt-interest dividends by the Fund, they will be excludable from a
shareholder's gross income for Federal income tax purposes. Exempt-interest
dividends, however, must be taken into account by shareholders in determining
whether their total incomes are large enough to result in taxation of up to 85%
of their Social Security benefits and certain railroad retirement benefits. The
Funds will inform shareholders annually as to the portion of the distributions
from each Fund which constitute exempt-interest dividends. In addition, for
corporate shareholders of the Funds, exempt-interest dividends may comprise
part or all of an adjustment to alternative minimum taxable income.
Exempt-interest dividends that are attributable to certain private activity
bonds, while not subject to the regular Federal income tax, may constitute an
item of tax preference for purposes of the alternative minimum tax.
To the extent that a Tax-Exempt Fund's dividends are derived from its
investment company taxable income (which includes interest on its temporary
taxable investments and the excess of net short-term capital gain over net
long-term capital loss), they are considered ordinary (taxable) income for
Federal income tax purposes. Such dividends will not qualify for the
- 54 -
<PAGE> 869
dividends-received deduction for corporations. Distributions, if any, of net
long term capital gains (the excess of net long-term capital gain over net
short-term capital loss) designated by a Fund as long term capital gain
dividends are taxable to shareholders as long-term capital gain regardless of
the length of time the shareholder has owned shares of the Fund.
Upon redemption, sale or exchange of shares in a Tax-Exempt Fund, a
shareholder will realize a taxable gain or loss, depending on whether the gross
proceeds are more or less than the shareholder's tax basis for the shares. The
discussion above provides additional detail about the income tax consequences
of disposing of Fund shares.
Deductions for interest expense incurred to acquire or carry shares of
a Tax-Exempt Fund may be subject to limitations that reduce, defer, or
eliminate such deductions. This includes limitations on deducting interest on
indebtedness properly allocable to investment property (which may include
shares of a Fund). In addition, a shareholder may not deduct a portion of
interest on indebtedness incurred or continued to purchase or carry shares of
an investment company (such as the Funds) paying exempt-interest dividends.
Such disallowance would be in an amount which bears the same ratio to the total
of such interest as the exempt-interest dividends bear to the total dividends,
excluding net capital gain dividends received by the shareholder. Under rules
issued by the IRS for determining when borrowed funds are considered used for
the purposes of purchasing or carrying particular assets, the purchase of
shares may be considered to have been made with borrowed funds even though the
borrowed funds are not directly traceable to the purchase of shares.
Certain of the debt securities acquired by the Tax-Exempt Funds may be
treated as debt securities that were originally issued at a discount. Original
issue discount can generally be defined as the difference between the price at
which a security was issued and its stated redemption price at maturity.
Although no cash income is actually received by the Funds, original issue
discount on a taxable debt security earned in a given year generally is treated
for Federal income tax purposes as interest and, therefore, such income would
be subject to the distribution requirements of the Code. Original issue
discount on an obligation, the interest from which is exempt from Federal
income tax, generally will constitute tax-exempt interest income.
Some of the debt securities may be purchased by the Tax-Exempt Funds at
a discount which exceeds the original issue discount on such securities, if
any. This additional discount represents market discount for Federal income
tax purposes. The
- 55 -
<PAGE> 870
gain realized on the disposition of any debt security having market discount
will be treated as ordinary taxable income to the extent it does not exceed the
accrued market discount on such debt security. Generally, market discount
accrues on a daily basis for each day the debt security is held by a Fund at a
constant rate over the time remaining to the debt security's maturity or, at
the election of the Fund, at a constant yield to maturity which takes into
account the semi-annual compounding of interest.
The Tax-Exempt Funds will be required to report to the IRS all
distributions of investment company taxable income and net capital gains and
gross proceeds from the redemption or exchange of a Fund's shares, except in
the case of certain exempt shareholders. All such distributions and proceeds
from the redemption or exchange of a Fund's shares may be subject to
withholding of Federal income tax at the rate of 31% in the case of non-exempt
shareholders who fail to furnish the Fund with their taxpayer identification
numbers and with required certifications regarding their status under Federal
income tax laws.
A deductible "environmental tax" of 0.12% is imposed on a corporation's
modified alternative minimum taxable income in excess of $2 million. The
environmental tax will be imposed even if the corporation is not required to
pay an alternative minimum tax because the corporation's regular income tax
liability exceeds its minimum tax liability. To the extent that exempt-interest
dividends paid by a Fund are included in alternative minimum taxable income,
corporate shareholders may be subject to the environmental tax.
Opinions relating to the validity of municipal securities and the
exemption of interest thereon from Federal and state income tax are rendered by
bond counsel to the issuers. The Funds, the Advisor and their affiliates, and
the Funds' counsel make no review of proceedings relating to the issuance of
state or municipal securities or the bases of such opinions.
Persons who may be "substantial users" (or "related persons" of
substantial users) of facilities financed by private activity bonds should
consult their tax advisors before purchasing shares of a Tax-Exempt Fund since
the acquisition of shares of a Fund may result in adverse tax consequences to
them. In addition, all shareholders of a Fund should consult their tax
advisors about the tax consequences to them of their investments in the Fund.
- 56 -
<PAGE> 871
Changes in the tax law, including provisions relating to tax-exempt
income, frequently come under consideration. If such changes are enacted, the
tax consequences arising from an investment in the Funds may be affected.
Since the Trust does not undertake to furnish tax advice, it is important for
shareholders to consult their tax advisors regularly about the tax consequences
to them of investing in one or more of the Funds.
OTHER INFORMATION
Capitalization
The Trust is a Massachusetts business trust established under a
Declaration of Trust dated July 17, 1984, and consists of series of separately
managed portfolios which are described in this SAI. The capitalization of the
Trust consists solely of an unlimited number of shares of beneficial interest
with a par value of $0.001 each. The Board of Trustees may establish
additional portfolios (with different investment objectives and fundamental
policies) at any time in the future. Establishment and offering of additional
portfolios will not alter the rights of the Funds' shareholders. When issued,
shares are fully paid, non-assessable, redeemable and freely transferable.
Shares do not have preemptive rights or subscription rights.
In the event of a liquidation or dissolution of the Trust or an
individual Fund, shareholders of a particular Fund would be entitled to receive
the assets available for distribution belonging to such Fund, and a
proportionate distribution, based upon the relative net asset values of the
Trust's respective portfolios, of any general assets not belonging to any
particular portfolio which are available for distribution. Shareholders of a
Fund are entitled to participate in the net distributable assets of the Fund on
liquidation, based on the number of shares of the Fund that are held by each
shareholder, except that, in the case of a Fund offering more than one class of
shares, Institutional Shares and Investor Shares of a Fund will each be solely
responsible for Service Organization fees and other "class" expenses, if any,
that are attributable to the particular share class, and Investor Shares shall
be solely responsible for payments made under the Distribution Plan.
Principal Shareholders
On the dates indicated below primarily all of the outstanding shares of
the Funds were held of record by affiliates of First Interstate Bancorp or
their nominees as agent or custodian for their customers. On January 17, 1996
the name,
- 57 -
<PAGE> 872
address and percentage share ownership of the persons who may have possessed
voting or investment power with respect to more than 5% of the outstanding
shares of the Funds listed below are as follows:
DIM & Co, Attn: Mutual Funds A88-4, P.O. Box 9800, Calabasas, CA 91302:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- --------------------------------------------------------------------------------------
<S> <C>
Balanced Fund - Institutional 6.92%
Equity Value Fund - Institutional 39.78%
Government Income Fund - Institutional 63.92%
California Short-Term Tax-Exempt Fund - Institutional 70.90%
California Tax-Exempt Fund - Institutional 88.53%
</TABLE>
First Interstate Bank, TTEE, Choicemaster, Attn: Mutual Funds A88-4, P.O. Box
9800, Calabasas, CA 91302:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- --------------------------------------------------------------------------------------
<S> <C>
Balanced Fund - Institutional 24.10%
Equity Value Fund - Institutional 12.46%
Asset Preservation Fund - Institutional 14.56%
Government Income Fund - Institutional 12.64%
Money Market Fund 7.76%
Government Money Market Fund 14.58%
</TABLE>
First Interstate Bank of California, Attn: Fund Accounting ACM Desk, 26610
West Agoura Road, Calabasas, CA 91302:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- --------------------------------------------------------------------------------------
<S> <C>
Money Market Fund 45.11%
Government Money Market Fund 39.85%
</TABLE>
- 58 -
<PAGE> 873
First Fidelity Bank, N.A., ATTN: Brenda Roberts, 2-1/2 Witherspoon,
Philadelphia, PA 19109:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- --------------------------------------------------------------------------------------
<S> <C>
Government Money Market Fund 10.97%
</TABLE>
First Interstate Bank, ATTN: Sally Bourdanis, First Interstate Plaza, 100 W.
Washington St., Phoenix, AZ 85003-1800:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- --------------------------------------------------------------------------------------
<S> <C>
Money Market Fund 16.22%
Government Money Market Fund 21.98%
</TABLE>
VIRG & Co., ATTN: Mutual Funds Dept. A88-4, P.O. Box 9800, Calabasas, CA
91372-0800:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- ---------------------------------------------------------------------------------------------
<S> <C>
Money Market Trust 100%
Short-Term Government Bond Fund - Institutional 68.94%
Intermediate Bond Fund - Institutional 31.96%
Intermediate Government Bond Fund - Institutional 29.53%
National Tax-Exempt Fund - Institutional 69.41%
Arizona Tax-Exempt Fund - Institutional 97.56%
Growth Fund - Institutional 22.29%
Equity Value Fund - Institutional 7.16%
Asset Preservation Fund - Institutional 7.02%
Short-Term California Tax-Exempt Fund - Institutional 12.81%
</TABLE>
- 59 -
<PAGE> 874
HEP & Co., ATTN: MF Dept. A88-4, P.O. Box 9800, Calabasas, CA 91372-0800:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- ---------------------------------------------------------------------------------------------
<S> <C>
Short-Term Government Bond Fund - Institutional 68.94%
Intermediate Bond Fund - Institutional 66.84%
Intermediate Government Bond Fund - Institutional 18.53%
California Tax-Exempt Fund - Institutional 5.60%
Growth Fund - Institutional 73.82%
Government Income Fund - Institutional 20.42%
Equity Value Fund - Institutional 37.13%
Balanced Fund - Institutional 63.32%
Asset Preservation Fund - Institutional 73.64%
Short-Term California Tax-Exempt Fund - Institutional 16.28%
</TABLE>
At January 17, 1996, the following persons owned beneficially or of
record 5 percent or more of the outstanding shares of the Funds listed below:
Southern California Business Development Corp., 714 West Olympic Boulevard,
Suite 706, Los Angeles, CA 90015-1439:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- -------------------------------------------------------------------------------------
<S> <C>
Short-Term Government Bond Fund - Investor 6.20%
</TABLE>
State Street Bank & Trust Company as custodian for the IRA of James B.
Giguette, 7102 N. 43rd Avenue #418, Glendale, AR 85301-2930:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- -------------------------------------------------------------------------------------
<S> <C>
Growth Fund - Investor 6.47%
</TABLE>
- 60 -
<PAGE> 875
Firnap & Company, c/o First Interstate Bank of Oregon, P.O. Box 2971, Portland,
OR 97208-2971:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- -------------------------------------------------------------------------------------
<S> <C>
Oregon Tax-Exempt Fund - Institutional 100%
National Tax-Exempt Fund - Institutional 30.59%
</TABLE>
Jacob Brouwer & Jeanette Brouwer, 1508 W. Mission Road, Escondido, CA
92029-1105:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- -------------------------------------------------------------------------------------
<S> <C>
Asset Preservation Fund - Investor 8.98%
</TABLE>
California State University, Dominguez Hills Foundation, 1000 E. Victoria
Street, Carson, CA 90747-0001:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- -------------------------------------------------------------------------------------
<S> <C>
Asset Preservation Fund - Investor 6.93%
</TABLE>
Peter Peckham & Nancy Peckham, Trustees for the Peckham Family Trust, 2914
McCall Street, San Diego, CA 92106-3508:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- -------------------------------------------------------------------------------------
<S> <C>
California Tax-Free Fund - Investor 5.35%
</TABLE>
John C. Marshall, Jr., 6314 Hartley Drive, La Jolla, CA 92037-6325:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- -------------------------------------------------------------------------------------
<S> <C>
Short-Term California Tax-Exempt Fund - Investor 16.40%
</TABLE>
- 61 -
<PAGE> 876
William M. Shannon, Arlene D. Shannon, Trustees for The Shannon Family Trust,
P.O. Box 1227, Rancho Santa Fe, CA 92067-1227:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- ------------------------------------------------------------------------------------
<S> <C>
Short-Term California Tax-Exempt Fund - Investor 8.11%
</TABLE>
Byrne Family Trust, #2, 9011 W. Little York, Houston, TX 77040-4113:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- ------------------------------------------------------------------------------------
<S> <C>
National Tax-Exempt Income Fund - Investor 5.11%
</TABLE>
Jennifer Dean Blair, 10274 W. Foxhunt Lane, Tucson, AZ 85737:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- ------------------------------------------------------------------------------------
<S> <C>
Arizona Tax-Exempt Fund - Investor 7.01%
</TABLE>
C.W. & J.C. McGrath, Trustees, 4855 Ruffner Street, Suite B, San Diego, CA
92111:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- ------------------------------------------------------------------------------------
<S> <C>
Short-Term California Tax-Exempt Fund - Institutional 5.0%
</TABLE>
Sulo & Aileen Maki Trust, c/o Aileen H. Maki, 939 Coast Blvd. 8F, La Jolla, CA
92037:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- ------------------------------------------------------------------------------------
<S> <C>
Short-Term California Tax-Exempt Fund - Institutional 10.0%
</TABLE>
- 62 -
<PAGE> 877
Dr. Nancy Olmstead, Trustee, 6004 Vista de la Mesa, La Jolla, CA 92037:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- ----------------------------------------------------------------------------------------
<S> <C>
Short-Term California Tax-Exempt Fund - Institutional 10.4%
</TABLE>
Mercedes-Benz Credit Corp., c/o First Interstate Bank of Oregon, P.O. Box 2971
- - M/S: T-10, Portland, OR 97208:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- ----------------------------------------------------------------------------------------
<S> <C>
Intermediate Bond Fund - Institutional 5.6%
</TABLE>
Gil McCall Salaried Pension, c/o First Interstate Bank of Oregon, P.O. Box
2971-M/S: T-10, Portland, OR 97208:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- ----------------------------------------------------------------------------------------
<S> <C>
Intermediate Bond Fund - Institutional 7.3%
</TABLE>
Chalres C. Gardner, c/o First Interstate Bank of California, 4365 Executive
Drive, Ste. 1700, San Diego, CA 92121:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- ----------------------------------------------------------------------------------------
<S> <C>
Equity Value Fund - Institutional 8.9%
Government Income Fund - Institutional 10.8%
Balanced Fund - Institutional 11.6%
</TABLE>
- 63 -
<PAGE> 878
Pamela Carney, c/o First Interstate Bank of California, 707 Wilshire Blvd.,
W10-2, Los Angeles, CA 90017:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- ----------------------------------------------------------------------------------------
<S> <C>
Equity Value Fund - Institutional 6.0%
</TABLE>
David Snider, c/o First Interstate Bank of Oregon, 1300 S.W. Fifth Avenue,
Portland, OR 97201:
<TABLE>
<CAPTION>
Percentage of
Fund Outstanding Shares
- ----------------------------------------------------------------------------------------
<S> <C>
Money Market Fund 13.6%
</TABLE>
The Trust believes that all of the shares of the Funds were beneficially
owned by the record owners named above because they possessed or shared
investment or voting power with respect to them while owning the shares or while
acting in a fiduciary, advisory, custodial, or other similar capacity on behalf
of their customers, except that the shares owned by DIM & Company were
beneficially owned by First Interstate Bank of Arizona, N.A., and the shares
owned of record by Firnap & Company were beneficially owned by First Interstate
Bank of Oregon, N.A.
Voting Rights
Under the Declaration of Trust, the Trust is not required to hold annual
meetings of its shareholders to elect Trustees or for other purposes. It is not
anticipated that the Trust will hold shareholders' meetings unless required by
law or the Declaration of Trust. In this regard, the Trust will be required to
hold a meeting to elect Trustees to fill any existing vacancies on the Board if,
at any time, fewer than a majority of the Trustees have been elected by the
shareholders of the Trust. In addition, the Declaration of Trust provides that
the holders of not less than two-thirds of the outstanding shares of the Trust
may remove persons serving as Trustee either by declaration in writing or at a
meeting called for such purpose. The Trustees are required to call a meeting
for the purpose of considering the removal of persons serving as Trustee if
requested in writing to do so by the holders of not less than 10% of the
outstanding shares of the Trust. To the extent required by applicable law, the
Trustees shall assist shareholders who seek to remove any person serving as
Trustee.
- 64 -
<PAGE> 879
The Trust's shares do not have cumulative voting rights, so that the
holders of more than 50% of the outstanding shares may elect the entire Board
of Trustees, in which case the holders of the remaining shares would not be
able to elect any Trustees.
Holders of all outstanding shares of a particular Fund that offers more
than one class of shares will vote together in the aggregate and not by class
on all matters, except that only Institutional Shares of a Fund will be
entitled to vote on matters submitted to a vote of shareholders pertaining to
the Fund's arrangements with Service Organizations with respect to
Institutional Shares, and only Investor Shares of a Fund will be entitled to
vote on matters submitted to a vote of shareholders pertaining to the Fund's
Distribution Plan and the Fund's arrangements with Service Organizations with
respect to Investor Shares. Further, shareholders of all of the Funds, as well
as those of any other investment portfolio now or hereafter offered by the
Trust, will vote together in the aggregate and not separately on a
portfolio-by-portfolio basis, except as otherwise required by law or when
permitted by the Board of Trustees. Rule 18f-2 under the 1940 Act provides
that any matter required to be submitted to the holders of the outstanding
voting securities of an investment company such as the Trust shall not be
deemed to have been effectively acted upon unless approved by the holders of a
majority of the outstanding shares of each Fund affected by the matter. A
portfolio is affected by a matter unless it is clear that the interests of each
portfolio in the matter are substantially identical or that the matter does not
affect any interest of the portfolio. Under the Rule, the approval of an
investment advisory agreement or any change in a fundamental investment policy
would be effectively acted upon with respect to a portfolio only if approved by
a majority of the outstanding shares of such portfolio. However, the Rule also
provides that the ratification of the appointment of independent auditors, the
approval of principal underwriting contracts and the election of trustees may
be effectively acted upon by shareholders of the Trust voting together in the
aggregate without regard to a particular portfolio.
The term "majority of the outstanding shares" of a portfolio means the
vote of the lesser of (i) 67% or more of the shares of the portfolio present at
a meeting, if the holders of more than 50% of the outstanding shares of the
portfolio are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the portfolio.
- 65 -
<PAGE> 880
Custodian, Transfer Agent and Dividend Disbursing Agent
First Interstate Bank of California, 707 Wilshire Blvd., Los Angeles,
California 90017, acts as custodian of the Trust's assets, but plays no role in
making decisions as to the purchase or sale of portfolio securities for the
Funds. FICAL is entitled to receive a fee from the Trust, computed daily and
payable monthly, at the annual rate of 0.021% of the first $5 billion in
aggregate average daily net assets of the Funds; 0.0175% of the next $5 billion
in aggregate average daily net assets of the Funds; and 0.015% of the aggregate
average daily net assets of the Funds in excess of $10 billion.
Furman Selz acts as transfer agent for the Funds. The Trust
compensates Furman Selz for providing personnel and facilities to perform
transfer agency related services for the Trust at a rate intended to represent
the cost of providing such services.
Performance Information
The Funds may, from time to time, include their yields, tax equivalent
yields and average annual total returns in advertisements or reports to
shareholders or prospective investors. During the periods shown below the
Equity Value Fund, Balanced Fund, Asset Preservation Fund, Government Income
Fund, Intermediate Bond Fund, Oregon Tax-Exempt Fund, Arizona Tax-Exempt Fund,
National Tax-Exempt Fund, California Short-Term Tax-Exempt Fund and California
Tax-Exempt Fund offered one class of shares with a sales charge to both retail
and institutional investors.
Current yield for the Money Market Funds will be based on the change in
the value of a hypothetical investment (exclusive of capital changes) over a
particular seven-day period, less a pro-rata share of each Fund's expenses
accrued over that period (the "base period"), and stated as a percentage of the
investment at the start of the base period (the "base period return"). The
base period return is then annualized by multiplying by 365/7, with the
resulting yield figure carried to at least the nearest hundredth of one
percent. "Effective yield" for the Money Market Funds assumes that all
dividends received during an annual period have been reinvested. Calculation
of "effective yield" begins with the same "base period return" used in the
calculation of yield, which is then annualized to reflect weekly compounding
pursuant to the following formula:
365/7
Effective Yield = [(Base Period Return + 1) ] - 1.
- 66 -
<PAGE> 881
For the seven-day period ended September 30, 1995, the yields of the
Government Money Market Fund and Money Market Fund were 5.00% and 5.45%,
respectively, and the effective yields for the Government Money Market Fund and
Money Market Fund were 4.97% and 5.44%, respectively.
Quotations of yield for the Bond Funds and Tax-Exempt Funds will be
based on the investment income per share earned during a particular 30-day
period, less expenses accrued during a period ("net investment income") and
will be computed by dividing net investment income by the maximum offering
price per share on the last day of the period, according to the following
formula:
6
YIELD - 2[(a-b + 1) -1]
---
cd
where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of any reimbursements), c = the average daily number of
shares outstanding during the period that were entitled to receive dividends,
and d = the maximum offering price per share on the last day of the period.
For the one-month period ended September 30, 1995, the yields of the
Funds listed below were as follows:
<TABLE>
<CAPTION>
FUND 30-DAY YIELD
- --------------------------------------------------------------------------------------------
<S> <C>
Short-Term Government Bond Fund
Institutional Shares 5.56%
Investor Shares 5.42%
Intermediate Government Bond Fund
Institutional Shares 6.24%
Investor Shares 5.96%
Intermediate Bond Fund* 5.61%
Oregon Tax-Exempt Fund* 5.04%
Arizona Tax-Exempt Fund* 4.37%
National Tax-Exempt Fund* 4.37%
</TABLE>
- ---------------
* Prior to October 1, 1995, these Funds only offered a single class of
shares to both retail and institutional shareholders.
- 67 -
<PAGE> 882
For the one-month period ended September 30, 1995, the yields
of the Funds listed below were as follows:
<TABLE>
<CAPTION>
FUND 30-DAY YIELD
- -------------------------------------------------------------------------
<S> <C>
Asset Preservation Fund* 5.08%
Government Income Fund* 5.90%
California Tax-Exempt Fund* 4.95%
California Short-Term Tax-Exempt Fund* 4.02%
- ----------------------
</TABLE>
* Prior to October 1, 1995, these Funds only offered a single class of
shares to both retail and institutional shareholders.
Quotations of tax-equivalent yield for a Tax-Exempt Fund will be
calculated according to the following formula:
TAX EQUIVALENT YIELD = ( E ) + t
---
1-p
E = Tax-exempt yield
p = stated income tax rate
t = taxable yield
For the one-month period ended September 30, 1995, the tax-equivalent
yield of the Funds listed below were as follows:
<TABLE>
<CAPTION>
FUND TAX-EQUIVALENT YIELD**
- ---------------------------------------------------------------------------
<S> <C>
Oregon Tax-Exempt Fund* 8.00%
Arizona Tax-Exempt Fund* 6.52%
National Tax-Exempt Fund* 6.26%
- ----------------------
</TABLE>
* Prior to October 1, 1995, these Funds only offered a single class of
shares to both retail and institutional shareholders.
** Based on a combined Federal and state income tax rate of 37% and 33%
for the Oregon Tax-Exempt Fund and the Arizona Tax-Exempt Fund,
respectively, and a Federal income tax rate of 28% for the National
Tax-Exempt Fund.
- 68 -
<PAGE> 883
For the one-month period ended September 30, 1995, the tax-equivalent
yields of the California Short-Term Tax-Exempt Fund and the California
Tax-Exempt Fund were 7.48% and 9.21%, respectively, (based on combined Federal
and state income tax rate of 46.24%).
Quotations of average annual total return will be expressed in terms of
the average annual compounded rate of return of a hypothetical investment in a
Fund over periods of 1, 5 and 10 years (up to the life of the Fund), calculated
pursuant to the following formula:
P (1 + T)n = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of the maximum applicable sales
charge and a proportional share of Fund expenses (net of certain reimbursed
expenses) on an annual basis, and will assume that all dividends and
distributions are reinvested when paid.
For the fiscal year ended September 30, 1995, the average annual total
returns of the Funds listed below were as follows:
<TABLE>
<CAPTION>
COMMENCEMENT OF
YEAR ENDED FIVE YEARS ENDED OPERATIONS* TO
9/30/95 9/30/95 9/30/95
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Fund
Institutional 22.37% N/A 12.04%
Investor** 16.85% N/A 9.68%
Short-Term Government Bond Fund
Institutional 7.27% 6.41% 7.07%
Investor** 3.99% N/A 6.60%
Intermediate Government Bond Fund
Institutional 12.30% 8.36% 8.66%
Investor** 7.25% N/A 7.92%
Intermediate Bond Fund*** 6.93% 7.81% 8.06%
- ---------------------
</TABLE>
- 69 -
<PAGE> 884
<TABLE>
<CAPTION>
COMMENCEMENT OF
YEAR ENDED FIVE YEARS ENDED OPERATIONS* TO
9/30/95 9/30/95 9/30/95
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Oregon Tax-Exempt Fund*** 5.03% 6.71% 6.68%
Arizona Tax-Exempt Fund*** 5.60% N/A 5.61%
National Tax-Exempt Fund*** 4.48% N/A 3.89%
- ---------------------
</TABLE>
* The Growth Fund, Arizona Tax-Exempt Fund and National Tax-Exempt Fund
commenced operations on August 2, 1993, March 2, 1992 and January 15,
1993, respectively. The other Funds listed above all commenced
operations on June 1, 1988.
** On October 11, 1993, each Fund commenced offering a Investor class of
shares (prior to October 1, 1995, the "Retail" class).
*** Prior to October 1, 1995, each Fund offered one class of shares to
both retail and institutional shareholders.
For the fiscal year ended September 30, 1995, the average annual total
returns of the Funds listed below were as follows:
<TABLE>
<CAPTION>
FIVE YEARS COMMENCEMENT OF
YEAR ENDED ENDED OPERATIONS* TO
9/30/95 9/30/95 9/30/95
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Value Fund 11.36% 15.79% 11.44%
Balanced Fund 5.64% 11.26% 9.63%
Asset Preservation Fund 5.56% 5.68% 5.79%
Government Income Fund 4.68% 6.35% 6.29%
California Short-Term Tax-Exempt Fund
6.13% N/A 4.51%
California Tax-Exempt Fund 4.89% 7.03% 6.79%
- ---------------------
</TABLE>
* Each Fund commenced operations on July 2, 1990, with the exception of
the California Short-Term Tax-Exempt Fund, which commenced operations
on January 20, 1993.
- 70 -
<PAGE> 885
Quotations of yield and total return will reflect only the performance
of a hypothetical investment in the Funds during the particular time period
shown. Yield and total return for the Funds will vary based on changes in the
market conditions and the level of a Fund's expenses, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
In connection with communicating its yields or total return to current
or prospective shareholders, the Funds also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
other unmanaged indices which may assume reinvestment of dividends but
generally do not reflect deductions for administrative and management costs.
Performance information for the Funds may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index, Dow
Jones Industrial Average, or other unmanaged indices so that investors may
compare the Funds' results with those of a group of unmanaged securities widely
regarded by investors as representative of the securities markets in general;
(ii) other groups of mutual funds tracked by Lipper Analytical Services, a
widely used independent research firm which ranks mutual funds by overall
performance, investment objectives, and assets, or tracked by other services,
companies, publications, or persons who rank mutual funds on overall
performance or other criteria; and (iii) the Consumer Price Index (measure for
inflation) to assess the real rate of return from an investment of dividends
but generally do not reflect deductions for administrative and management costs
and expenses.
Investors who purchase and redeem shares of the Funds through a
customer account maintained at a Service Organization may be charged one or
more of the following types of fees as agreed upon by the Service Organization
and the investor, with respect to the provision of customer services: account
fees (a fixed amount per month or per year); transaction fees (a fixed amount
per transaction processed); compensating balance requirements (a minimum dollar
amount a customer must maintain in order to obtain the services offered); or
account maintenance fees (a periodic charge based upon a percentage of the
assets in the account or of the dividends paid on those assets). Such fees are
not reflected in the Funds, performance quotations, and will have the effect of
reducing the yield and average annual total return of the Funds for those
investors.
- 71 -
<PAGE> 886
Independent Auditors
Ernst & Young LLP, 515 South Flower Street, Los Angeles, California
90071 has been selected to serve as the independent auditors for the Funds for
the current fiscal year. The audited financial statements incorporated by
reference into this SAI and the audited financial highlights which appear in
the Prospectuses for the fiscal year ended September 30, 1995 for the Equity
Value Fund, the Balanced Fund, the Asset Preservation Fund, the Government
Income Fund, the California Short-Term Tax-Exempt Fund, the California
Tax-Exempt Fund, the Government Money Market Fund and the Money Market Fund
have been audited by Ernst & Young LLP. The audited financial statements
incorporated by reference into this SAI and the audited financial highlights
which appear in the Prospectuses for the fiscal year ended September 30, 1995
for the Growth Fund, the Short-Term Government Bond Fund, the Intermediate
Government Bond Fund, Intermediate Bond Fund, Oregon Tax-Exempt Fund, the
Arizona Tax-Exempt Fund and the National Tax-Exempt Fund have been audited by
the former independent auditors for these funds.
Registration Statement
This SAI and the Prospectuses do not contain all the information
included in the Trust's Registration Statement filed with the SEC under the
Securities Act of 1933 with respect to the securities offered hereby. Certain
portions of the Trust's Registration Statement have been omitted pursuant to
the rules and regulations of the SEC. The Registration Statement, including
the exhibits filed therewith, may be examined at the office of the SEC in
Washington, D.C.
Statements contained herein and in the Prospectuses as to the contents
of any contract or other documents referred to are not necessarily complete,
and, in each instance, reference is made to the copy of such contract or other
documents filed as an exhibit to the Trust's Registration Statement, each such
statement being qualified in all respects by such reference.
FINANCIAL STATEMENTS
The Financial Statements included in the September 30, 1995 Annual
Reports to Shareholders for the Equity Value Fund, Balanced Fund, Asset
Preservation Fund, Government Income Fund, California Short-Term Tax-Exempt
Fund, California Tax-Exempt Fund, Government Money Market Fund, Money Market
Fund, Growth Fund, Short-Term Government Bond Fund, Intermediate Government
Bond Fund, Intermediate Bond Fund, Oregon Tax-Exempt Fund, Arizona Tax-Exempt
Fund and National Tax-Exempt Fund are incorporated by reference into this SAI.
The Report of
- 72 -
<PAGE> 887
Independent Accountants on the statements of changes in net assets and the
financial highlights of The Asset Preservation Fund, The Government Income
Fund, The California Tax-Free Fund, The Short Term California Tax-Free Fund,
The Equity Value Fund, The Balanced Fund, The Government Money Market Fund and
The Money Market Fund, for the year ended September 30, 1994 and for each of
the four years in the period ended September 30, 1994 (for The Short Term
California Tax-Free Fund, for the year ended September 30, 1994 and for the
period January 20, 1993 (commencement of operations) through September 30,
1993), respectively, is included as Attachment A to this SAI. Copies of the
Financial Statements may be obtained upon request and without charge from the
Trust at the address and telephone number provided on the cover of this SAI.
- 73 -
<PAGE> 888
APPENDIX
SPECIAL CONSIDERATIONS REGARDING INVESTMENT IN STATE OBLIGATIONS
OREGON TAX-EXEMPT FUND
The concentration of the Oregon Tax-Exempt Fund in Oregon Obligations
raises additional considerations for investors in that portfolio, as discussed
below.
State Bonds and Revenues
As of September 1, 1995, $3.99 billion in general obligation bonds
issued by the State of Oregon and its agencies and instrumentalities were
outstanding, including $83.9 million in general obligation bonds supported by
the budget for the State's general fund and $3.91 billion of self-supporting
general obligation bonds. The State's self-supporting general obligation bonds
include $3.12 billion of State veteran's bonds, which, in the event of poor
economic conditions resulting in an increased number of mortgage defaults,
could cease to be self-supporting. All of the existing and outstanding general
obligation bonds of the State have been issued under specific State
constitutional provisions that authorize the issuance of such bonds and provide
authority for ad valorem taxation to pay the principal of and interest on such
bonds. With the exception of the veteran's bonds, for which no more than two
mills on each dollar valuation may be levied to pay principal and interest, the
authority of the State to tax property for the payment of its general
obligation bonds is unlimited. Since at least 1950, the State has not imposed
ad valorem tax for the payment of any of its obligations because other
revenues, including those generated by the self-supporting bonds, have been
sufficient.
In addition to general obligation bonds, various State statutes
authorize the issuance of State revenue bonds and certificates of
participation. These limited obligations of the State or its agencies or
instrumentalities may be payable from a specific project or source, including
lease rentals. The State is not authorized to impose ad valorem taxes on
property for the payment of principal and interest on these bonds, so they are
more sensitive to changes in the economy. There can be no assurance that
future economic problems will not adversely affect the market value of Oregon
obligations held by the Fund or the ability of the respective obligors (both
private and governmental) to make required payments on such obligations.
Oregon does not have a sales tax. As a result, State tax revenues are
particularly sensitive to economic recessions.
- 74 -
<PAGE> 889
The principal sources of State tax revenues are personal income and corporate
income taxes. For the 1993-95 biennium, approximately 96.7% of the State's
revenues are projected to come from combined income taxes, insurance taxes,
gift and inheritance taxes, and cigarette and tobacco taxes. Since 1983 State
revenues have improved substantially, and in recent years the State has granted
tax refunds because of budget surpluses, as required by statute. The State's
June 1995 economic and revenue forecast released on May 15, 1995 predicts that
State General Fund revenues will exceed the legislatively approved budget
forecast by approximately $314.0 million (or 5.1 percent).
The Economy
Oregon's economy generally has outperformed the national average in
recent years. According to the State's June 1995 economic and revenue forecast
released on May 15, 1995, the recent strong growth is expected to slow over the
next year. The major factors slowing the economy are a softening of the
State's housing markets, reductions in timber output and employment, and weaker
national demand for Oregon's manufactured products. These downward pressures
are expected to be offset to a degree by continued expansion of the high
technology manufacturing sector, a strong international export sector, further
nonresidential construction activity and a steady stream of in-migration. This
combination of forces is likely to generate growth, though increases in income
and jobs will likely be less than they were in 1994.
As they have since 1987, Oregon's job and income growth are expected to
exceed national growth rates through the next two years. The biggest
foreseeable short-term risk to the Oregon economy is the instability in the
national economy. Oregon's income, population, and employment growth are all
expected to exceed the national average for the seven-year period between 1994
and 2001. Population is expected to grow considerably faster than the national
average. On a per capita basis, Oregon's personal income is forecast to move
slowly toward the national average.
Recent Environmental Developments
In 1991 and 1992, in response to concerns over diminishing salmon runs,
three populations of Snake River salmon were placed on the Endangered Species
list. More recently, the National Marine Fisheries Service and the U.S. Fish
and Wildlife Service have commenced status reviews of hundreds of additional
salmon and trout populations in the Columbia Basin and throughout Western
Oregon. The Snake River salmon listings have already had substantial economic
impacts, primarily through increased
- 75 -
<PAGE> 890
electricity rates and related impacts on rate-sensitive industries such as the
aluminum industry. Efforts to protect salmon and steelhead populations may
eventually affect a wide variety of industrial, recreational and land use
activities, with corresponding impacts on long-term economic growth; however,
the magnitude and extent of any future environmental action is impossible to
predict at this time. The State's economic forecasts do not address the
potential impact of endangered species problems on Oregon's economy.
Recent Developments Affecting Government Revenues
BALLOT MEASURE 5. Article XI, section 11b of the Oregon Constitution, adopted
by Oregon's voters in November 1990 ("Ballot Measure 5"), imposes an aggregate
limit on the rate of property taxes, including ad valorem taxes, that may be
levied against any real or personal property. The limit is subject to certain
exceptions and is being phased in over a five-year period. Beginning with the
tax year that starts on July 1, 1996, the final year of the phase-in period,
not more than $15 per $1,000 of real market value can be levied against any
piece of property. Of this amount, $5 may be used for public education, and
the remaining $10 may be used for general governmental purposes.
The limitations of Ballot Measure 5 do not apply to taxes imposed to
pay the principal of and interest on bonded indebtedness authorized by a
specific provision of the State Constitution. Therefore, the ability of the
State to levy taxes to service its general obligation bonds is not subject to
the limit. In addition, because the State currently receives its revenues from
sources other than property taxes, Ballot Measure 5 has not directly affected
State revenues.
Ballot Measure 5 does affect the financial condition of the State,
however, since it (1) requires the State to replace losses to school funds
caused by its restriction on the levy of ad valorem taxes for education
through fiscal year 1995-96, and (2) restricts the ability of Oregon local
governments to raise revenues through the imposition of property tax increases.
The State's Legislative Revenue Office estimates that the State will make
payments in excess of its obligations to replace school revenues during the
1993-95 biennium and the 1995-96 fiscal year. The State's obligation to
replace school revenues terminates after fiscal year 1995-96.
Where two or more general governmental units have overlapping taxing
jurisdiction over a particular property, their tax levies will be in
competition if the property's aggregate tax levy for general government exceeds
$10 per $1,000 (in the case
- 76 -
<PAGE> 891
of taxes imposed to fund the public school system from pre-kindergarten through
post-graduate training, competition is for the remaining $5 per $1,000
allowable under Ballot Measure 5). In such cases, each governmental unit's tax
levy will be decreased on a pro rata basis and the amount of tax received will
be less than the amount budgeted. To date, only a few local governments have
experienced this problem. However, as governmental expenses increase, local
governments may experience increasing budget pressures unless property values
also increase. Ballot Measure 5 does not apply to ad valorem taxes imposed to
pay the principal and interest on general obligation bonds for capital
construction or improvements if the bonds were either: (1) issued on or prior
to November 6, 1990, or (2) approved by the electors of the issuing
governmental unit.
The effect that Ballot Measure 5 will ultimately have on local
government revenues is difficult to predict. Since passage of Ballot Measure
5, property values have been adjusted to more closely approximate real market
values. If the trend of increased property values in Oregon continues, the
real market value base of property against which the limited tax rate may be
imposed may be more than enough to support the needs of Oregon governments.
The tax limitations of Ballot Measure 5 do not apply to user fees,
licenses, excise or income taxes and incurred charges for local improvements.
Therefore, since 1990 local governments have begun to rely more heavily on such
fees and taxes to finance certain services and improvements.
THE INITIATIVE PROCESS. The Oregon Constitution reserves to the people of the
State initiative and referendum power pursuant to which measures designed to
amend the State Constitution or enact legislation, can be placed on the
statewide general election ballot for consideration by the voters. "Referendum"
generally means measures referred to the electors by a legislative body such as
the State Legislative Assembly or the governing body of a city, county or other
political subdivision, while "initiative" generally means a measure placed
before the voters as a result of a petition circulated by one or more private
citizens.
Any person may file a proposed initiative with the Oregon Secretary of
State's office. The Oregon Attorney General is required by law to draft a
proposed ballot title for the initiative, and interested parties may submit
comments on the legal sufficiency of the proposed ballot title and on whether
the proposed initiative complies with a "one subject only" rule for initiative
measures. After considering any public comments, the Attorney General must
either certify or revise the draft ballot title. In general, any elector who
timely submitted written
- 77 -
<PAGE> 892
comments on the draft ballot title may petition the Oregon Supreme Court
seeking a revision of the certified ballot title.
To have an initiative placed on a general election ballot, the
proponents Of the proposed initiative must submit to the Secretary of State
initiative petitions signed by a number of qualified voters equal to a
specified percentage of the total number of votes cast for all candidates for
governor in the most recent gubernatorial election. The initiative petition
must be filed with the Secretary of State not less than four months prior to
the general election at which the proposed measure is to be. voted upon. State
law permits persons circulating initiative petition to pay money to persons
obtaining signatures for the petition.
Over the past decade Oregon has witnessed increasing activity in the
number of initiative petitions that have qualified for the statewide general
election. As of September 6, 1995, no initiatives had qualified for the
statewide general election. As of September 6, 1995, no initiatives had
qualified to be placed on the 1996 general election ballot. In recent years, a
number of initiatives involving the fiscal operations of the State have been
proposed and placed on the ballot. One of these initiatives was approved by
the voters and has had a significant impact on the fiscal operations of the
State. See "Recent Developments Affecting Government Revenues - Ballot Measure
5." Other initiatives, had they been approved by the voters, also may have had
significant impacts on the fiscal operations of the State.
It is difficult to predict with certainty either the likelihood of a
proposed initiative measure obtaining the required number of valid initiative
petition signatures or the likelihood of an initiative which has acquired the
necessary number of valid signatures being approved by the voters. There can
be no assurance that an initiative which will have a material adverse impact on
the financial condition of the State or the State's ability to collect the
revenues required to repay its general obligation bonds will not be proposed,
placed on the ballot, or be approved by the voters.
The Oregon Bond Market
There is a relatively small active market for municipal bonds of Oregon
issuers other than the general obligations of the State itself, and the market
price of such other bonds may therefore be volatile. If the Oregon Tax-Exempt
Fund were forced to sell a large volume of Oregon Obligations owned by it for
any reason, such as to meet redemption requests for a large number of its
shares, there is a risk that the large sale itself would
- 78 -
<PAGE> 893
adversely affect the value of the Oregon Tax-Exempt Fund's portfolio.
ARIZONA TAX-EXEMPT FUND
The concentration of the Arizona Tax-Exempt Fund in securities issued
by governmental units of only one state exposes the Fund to risks greater than
those of a more diversified portfolio holding securities issued by governmental
units of different states and different regions of the country.
Under its constitution, the State of Arizona is not permitted to issue
general obligation bonds secured by the full faith and credit of the State.
However, certain agencies and instrumentalities of the State are authorized to
issue bonds secured by revenues from specific projects and activities. The
State enters into certain lease transactions which are subject to annual
renewal at the option of the State. Local governmental units in the State are
also authorized to incur indebtedness. The major source of financing for such
local government indebtedness is an ad valorem property tax. In addition, in
order to finance public projects, local governments in the State can issue
revenue bonds payable from the revenues of a utility or enterprise or from the
proceeds of an excise tax, or assessment bonds payable from special
assessments. Arizona local governments have also financed public projects
through leases which are subject to annual appropriation at the option of the
local government.
There is a statutory restriction on the amount of annual increases in
taxes that can be levied by the various taxing jurisdictions in the State
without electoral approval. This restriction does not apply to taxes levied to
pay general obligation debt.
There are periodic attempts in the form of voter initiatives and
legislative proposals to further limit the amount of annual increases in taxes
that can be levied by the various taxing jurisdictions without voter approval.
it is possible that if such a proposal were enacted, there would be an adverse
impact on State or local government financing. It is not possible to predict
whether any such proposals will be enacted in the future or what would be
their possible impact on state or local government financing.
Arizona is required by law to maintain a balanced budget. To achieve
this objective, the State has, in the past, utilized a combination of spending
reductions and tax increases. In recent years, the State's fiscal situation
has improved.
- 79 -
<PAGE> 894
Arizona state government general fund revenue growth in fiscal year
1995 exceeded projections, increasing 9.7% overall. The 9.8% increase in sales
tax revenue reflects continued strong economic growth in the state. With
revenue growth outpacing increased expenditures, the state general fund ended
fiscal year 1995 with a total general fund balance of approximately $494.3
million. The amount of this balance is greater than 11% of total general fund
expenditures for fiscal year 1995. Included in the total balance is a general
fund ending balance of approximately $271.3 million, and a budget stabilization
("rainy day") fund balance of approximately $223 million.
The fiscal year 1996 budget adopted by the legislature assumes that the
total general fund balance carried forward from fiscal year 1995 will be drawn
down by over $160 million during the course of fiscal year 1996. Based on this
assumption, the total general fund balance at the end of fiscal year 1996 will
be lower than for fiscal year 1995.
Additionally, the 1995 legislature enacted a $200 million income tax
reduction package and has committed to enact a $200 million property tax
reduction package in 1996. In 1992, Arizona voters passed a measure that
requires a two-thirds vote of the legislature to increase state revenue.
Accordingly, it will be more difficult to reverse the current year and future
planned tax reductions, which may adversely affect state fund balances and
fiscal conditions.
Arizona has a diversified economic base which is not dependent on any
single industry. Principal economic sectors include services, manufacturing,
mining, tourism, and the military. Agriculture, which was at one time a major
sector, now plays a much smaller role in the State's economy. For several
decades, the population of the State has grown at a substantially higher rate
than the population of the United States. While the State's economy flourished
during the early 80's, a substantial amount of overbuilding occurred, adversely
affecting Arizona-based financial institutions, many of which were placed under
the control of the Resolution Trust Corporation. The spillover effects
produced further weakening in the State's economy. The Arizona economy has
begun to grow again, albeit at a slower pace than experienced before the real
estate collapse. However, current and proposed reductions in Federal military
expenditures may adversely affect the Arizona economy.
THE CALIFORNIA FUNDS
The ability of the California Funds to achieve its investment objective
depends on the ability of issuers of California municipal obligations to meet
their continuing
- 80 -
<PAGE> 895
obligations for the payment of principal and interest. Recent amendments to
the California State Constitution and certain State statutes which limit the
taxing and spending authority of California governmental entitles may impair
the ability of the issuers of some California municipal obligations to maintain
debt service on their obligations.
In 1978, California voters approved "Proposition 13," adding Article
XIII A, an amendment to the state constitution which limits ad valorem taxes on
real property to it of "full cash value" and restricts the ability of taxing
entities to increase real property taxes. The full cash value may be adjusted
annually to reflect increases (not to exceed 2%) or decreases in the consumer
price index or comparable local data, or declining property value caused by
damage, destruction or other factors.
The foregoing limitation does not apply to ad valorem taxes or special
assessments to pay the interest and redemption charges on any indebtedness
approved by the voters before July 1, 1978 or, pursuant to an amendment to
Article XIII A, any bonded indebtedness for the acquisition or improvement of
real property approved by two-thirds of the votes cast by the voters voting on
the proposition.
Primarily as a result of the reductions in local property tax revenues
received by local governments following the passage of Proposition 13,
subsequent legislation provided for the redistribution of California's General
Fund surplus to local agencies, the reallocation of revenues to local agencies,
and the assumption of certain local obligations by the State so as to help
California municipal issuers to raise revenue to pay their bond obligations.
There can be no assurance that additional revenue redistribution legislation
will be enacted in the future and whether, if enacted, such legislation would
provide sufficient revenue for California issuers to pay their obligations.
The U.S. Supreme Court previously struck down as a violation of equal
protection certain property tax assessment practices in West Virginia which had
resulted in vastly different assessments of similar properties. Among other
provisions, Proposition 13 provides that property may only be reassessed up to
2% per year, except upon change of ownership or new construction. As a result,
recent purchasers may pay substantially higher property taxes than long-time
owners of comparable property in a community. The Supreme Court in the West
Virginia case expressly declined to comment in any way on the constitutionality
of Proposition 13.
- 81 -
<PAGE> 896
Based on this decision, however, property owners in California have
brought three suits challenging the acquisition value assessment provisions of
Proposition 13. Two cases involve residential property, and one case involves
commercial property. In all three cases, State trial and appellate courts have
upheld the constitutionality of Proposition 13's assessment rules and concluded
that the West Virginia case did not apply to California's laws. On June 3,
1991 the U.S. Supreme Court agreed to hear the appeal in the challenge relating
to commercial property, but the plaintiff subsequently withdrew its case. It
cannot be predicted whether the Supreme Court will decide to hear these
appeals, and if so, how it will resolve the challenge to Proposition 13. If
the Court strikes down the assessment rules of Proposition 13, it is not known
what rules will then become operative. Further legislation is also likely. It
cannot be predicted what impact any of these developments might have on the
State's financial obligations to local governments.
In 1979 California voters approved another constitutional amendment,
Article XIII B, which may have an adverse impact on California state and
municipal issuers. Article XIII B prohibits the State from spending
Appropriations subject to limitation" in excess of an annual appropriations
limit (the "Appropriations Limit"). Article XIII B was modified substantially
by Propositions 98 and III in 1988 and 1990, respectively. "Appropriations
subject to limitation" with respect to the State, are authorizations to spend
Proceeds of taxes," which consist of tax revenues, and certain other funds,
including proceeds from regulatory licenses, user charges or other fees to the
extent that such proceeds exceed "the cost reasonably borne by that entity in
providing the regulation, product or service," but "proceeds of taxes" exclude
most state subventions to local governments, tax refunds and some benefit
payments such as unemployment insurance. No limit is imposed on appropriations
of funds which are not "proceeds of taxes," such as reasonable user charges or
fees, and certain other non-tax funds.
Not included in the Appropriations Limit are appropriations for the
debt service costs of bonds existing or authorized by January 1, 1979, or
subsequently authorized by the voters, appropriations required to comply with
mandates of courts or the federal government and, pursuant to Proposition 111,
appropriations for qualified capital outlay projects and appropriations of
revenues derived from any increase in gasoline taxes and motor vehicle weight
fees above January 1, 1990 levels. The Proposition ill provisions are needed
to make effective the transportation funding package approved by the
Legislature and the Governor, which counts on raising over $15 billion in
additional taxes over the next 10 years to fund transportation
- 82 -
<PAGE> 897
programs. In addition, a number of recent initiatives were structured or
proposed to create new tax revenues dedicated to certain specific uses, with
such new taxes expressly exempted from the Article XIII B limits (e.g.,
increased cigarette and tobacco taxes enacted by Proposition 99 and 1988). The
Appropriations Limit may also be exceeded in cases of emergency. However,
unless the emergency arises from civil disturbance or natural disaster declared
by the Governor, and the appropriations are approved by two-thirds of the
Legislature, the Appropriations Limit for the next three years must be reduced
by the amount of the excess.
The Appropriations Limit in each year is based on the limit for the
prior year, adjusted annually for changes in California per capita personal
income and changes in population, and adjusted, when applicable, for any
transfer of financial responsibility of providing services to or from another
unit of government. The measurement of change in population is a blended
average of statewide overall population growth, and change in attendance at
local school and community college ("K-14") districts. As amended by
Proposition 111, the Appropriations Limit is tested over consecutive two-year
periods. Any excess of the aggregate "proceeds of taxes" received over such
two-year period above the combined Appropriations Limits for those two years is
divided equally between transfers to K-14 districts and refunds to taxpayers.
As originally enacted in 1979, the Appropriations Limit was based on
1978-79 Fiscal Year authorizations to expend proceeds of taxes and was adjusted
annually to reflect changes in cost of living and population (using different
definitions, which were modified by Proposition 111). Starting in the 1990-91
Fiscal Year, the State's Appropriations Limit will be recalculated by taking
the actual 1986-87 limit, and applying the annual adjustments as if Proposition
ill had been in effect. This recalculation has resulted in an increase of $1
billion to the Appropriations Limit in 1990-91. The Legislature has enacted
legislation to implement Article XIII B which defines certain terms used in
Article XIII B and sets forth the methods for determining the appropriations
Limit. Government Code Section 7912 requires an estimate of the Appropriations
Limit to be included in the annual budget proposed by the Governor in January
of each year for the next fiscal year, and thereafter to be subject to the
budget process and established in the Budget Act.
On November 4, 1986, California voters approved an initiative statute
known as Proposition 62. This statute (i) requires that any tax for general
governmental purposes imposed by local governments be approved by resolution or
ordinance adopted by a two-thirds vote of the governmental entity's
- 83 -
<PAGE> 898
legislative body and by a majority vote of the electorate of the governmental
entity; (ii) requires that any special tax (defined as taxes levied for other
than general governmental purposes) imposed by a local governmental entity be
approved by a two-thirds vote of the voters within that jurisdiction;
(restricts the use of revenues from a special tax to the purposes or for the
service for which the special tax was imposed; (i-v) prohibits the imposition
of ad valorem taxes on real property by local governmental entities except as
permitted by Article XIII A of the California Constitution; (v) prohibits the
imposition of transaction taxes and sales taxes on the sale of real property by
local governments; (vi) requires that any tax imposed by a local government on
or after August 1, 1985 be ratified by a majority of the electorate within two
years of the adoption of the initiative or be terminated by November 15, 1988;
(vii) requires that, in the event a local government fails to comply with the
provisions of this measure, a reduction in the amount of tax revenue allocated
to such local government occur in an amount equal to the revenues received by
such entity attributable to the tax levied in violation of the initiative; and
(viii) permits these provisions to be amended exclusively by the voters of the
State of California.
Other legislation and pending court cases, including those challenging
assessments, fees and other taxes as unconstitutional under Proposition 13, may
reduce the amount of state or local revenues available to California state and
municipal issuers for the purpose of paying their obligations.
Effective for the 1980-81 Fiscal Year and each fiscal year thereafter,
business inventories are entirely exempt from local taxation in California.
Although the State presently reimburses local agencies for lost revenue equal
to the total due in 1978-79 with annual increases allowed based on increases in
population and inflation, the Legislature has decreased the inflation
adjustment for State reimbursement revenues because of the need to reduce State
expenditures, and there is no assurance that further reductions in the
reimbursement formula or elimination of such reimbursements will not occur.
In June 1982, the voters of California passed two initiative measures
to repeal the California gift and inheritance tax laws and to enact, in lieu
thereof, a California death tax. California voters also passed an initiative
measure to increase, for taxable years commencing on or after January 1, 1982,
the amount by which personal income tax brackets will be adjusted annually in
an effort to index tax brackets to account for the effects of inflation. The
voters also passed an initiative measure to exclude from the definition of
"change of ownership," for purposes of the valuation of real property for
taxation, the
- 84 -
<PAGE> 899
replacement of real property taken through eminent domain proceedings.
Decreases in state and local revenues in future fiscal years as a consequence
of these initiatives may result in reductions in allocations of state revenues
to California municipal issuers or the ability of such California issuers to
pay their obligations. In addition, the State has increased expenditures by
providing a variety of tax credits, including renters' and senior citizens,
credits and energy credits.
As a result of expenditures and reductions in revenues following
approval of Proposition 13, the State's financial condition declined
significantly. The State's General Fund surplus of approximately $3.7 billion
that existed at the beginning of the 1978-79 fiscal year was depleted resulting
in a deficit of approximately $801 million at the close of the 1982-83 fiscal
year. Cash flow shortages were financed through internal and external sources
including the issuance of revenue anticipation warrants in November, 1982. In
response, legislation was enacted reducing General Fund expenditures and
assisting local governments, and changes to existing laws were made to raise
additional revenue.
On November 8, 1988, voters approved Proposition 98, which has
significantly altered the operation and effect of the Article XIII B spending
limit, the first changes since its adoption in 1979. This combined initiative
constitutional amendment and statute called the "Classroom Instructional
Improvement and AccountabiLity Act" (the "Act"), changes State funding of
public education below the university level, and the operation of the State's
Appropriations Limit. The Act (as modified by Proposition III, which was
enacted on June 5, 1990), guarantees State funding for K-12 school districts
and community college districts ("K-14 Schools") at a level equal to the
greater of (a) 40.3 percent of General Fund revenues (the "first test"), (b)
the amount appropriated to K-14 schools in the prior year, adjusted for changes
in the cost of living (measured as in Article XIII B by reference to California
per capita personal income) and enrollment (the "second test"), or (c) a third
test, which would replace the second test in any year when the percentage
growth in per capita General Fund revenues from the prior year plus one half of
one percent is less than the percentage growth in California per capita
personal income. Under the third test, schools would receive the amount
appropriated in the prior year adjusted for changes in enrollment and per
capita General Fund revenues, plus an additional small adjustment factor. If
the third test is used in any year, the difference between the third test and
the second test would become a "credit" to schools which would be the basis of
payments in future years when per capita General Fund revenue growth exceeds
per capita personal income growth.
- 85 -
<PAGE> 900
Proposition 98 permits the Legislature by two-thirds vote of both
houses, with the Governor's concurrence, to suspend the K-14 schools' minimum
funding formula for a one-year period. In the fall of 1989, the Legislature
and the Governor utilized this provision to avoid having 40.3 percent of
revenues generated by a special supplemental sales tax enacted for earthquake
relief go to K-14 schools. Proposition 98 also contains provisions
transferring certain State tax revenues in excess of the Article XIII B limit
to K-14 schools.
The 1990-91 Budget Act appropriated $16.7 billion for K-14 schools,
applying "test 2" of Proposition 98. During the course of the fiscal year,
revenues proved to be substantially below expectations. By the time the
Governor's Budget was introduced in January 1991, it became clear that per
capita growth in General Fund revenues for 1990-91 would be far smaller than
the growth in California per capita personal income and the Governor therefore
proposed reducing Proposition 98 funding in 1990-91 by applying "Test 3" rather
than "Test 2." The Governor also called for suspension of Proposition 98 and
1991-92 to save $1.4 billion for the General Fund.
In response to the changing revenue situation and to fully fund the
Proposition 98 guarantee in both years without exceeding it, the Legislature
enacted several bills prior to June 30, 1991 which responded to a fiscal crisis
in education funding. Fiscal Year 1990-91 Proposition 98 appropriations for
K-14 schools were reduced by $1.233 billion. In order to not adversely impact
cash received by school districts, however, a short-term loan was appropriated
from the non-Proposition 98 State General Fund. The Legislature then
appropriated $18.4 billion to K-14 schools for 1991-92 (the minimum guaranteed
by Proposition 98), but designated $1.233 billion of this amount to "repay" the
prior year loan, thereby reducing cash outlays in 1991-92 by that amount. The
minimum Proposition 98 guarantee requirements for 1989-90, thereby completing
the reduction in monies which count towards Proposition 98 in 1990-91 to the
minimum required amount.
Since the Act is unclear in some details, there can be no assurance
that the Legislature or a court might not interpret the Act to require a
different percentage of General Fund revenues to be allocated to K-14 Schools,
or to apply the relevant percentage to the State's budgets in a different way
than is proposed in the Governor's Budget. In any event, the Governor and
other fiscal observers expect the Act to place increasing pressure on the
State's budget over future years, potentially reducing resources available for
other State programs, especially to the extent the Article XIII B spending
- 86 -
<PAGE> 901
limit would restrain the State's ability to fund such other programs by raising
taxes.
On November 8, 1988, voters also approved another initiative,
Proposition 99, the "Tobacco Tax and Health Protection Act." It imposes, as of
January 1, 1989, an additional 25 cents per pack excise tax on cigarettes, and
a new, equivalent excise tax on other tobacco products. Funds from these new
taxes are allocated to a special fund, and are required to be used for
specified purposes in certain given amounts, including education to prevent and
reduce smoking, research on tobacco-related disease, certain environmental,
wildlife habitat and parks programs, and payment of hospital and physician
costs for persons who cannot afford to pay (not limited to tobacco-related
illness). Such funds are supposed to supplement current services, rather than
fund existing service levels. The Department of Finance projects that the new
taxes Will produce additional revenues of $329 million in 1988-89, $576 million
in 1989-90, and $561 million in 1990-91. Pursuant to the initiative,
expenditures of these new taxes are excluded from the Article XIII B
appropriations limit.
At the end of the 1988-89 Fiscal Year and during the 1989-90 Fiscal
Year, the Legislature and the governor agreed on a major initiative to increase
funding for transportation programs in the State by $18.5 billion over a
10-year period. This initiative includes increased motor vehicle fuel taxes
and vehicle weight fees and bond issues, which were approved by the voters at
the June 1990 election.
Due to continuing budgetary and financial difficulties, California's
bond ratings have deteriorated since December 1991. In December 1991, Standard
and Poor's Corporation ("S&P") downgraded its rating of the State's general
obligation bonds to "AA" from "AAA." As the State's economy worsened and its
budget deficit swelled, rating agency officials closely monitored the State's
budget progress. In February 1992, Moody's Investors Service Inc. ("Moody's")
downgraded its rating of the State's general obligation bonds to "Aa1" from
"Aaa". In April 1992, S&P placed the State's general obligation bonds on its
CreditWatch, indicating the possibility of further downgrades should the
State's budget and recessionary problems persist. In July 1992, Moody's and S&P
downgraded their ratings of the State's general obligation bonds to "Aa" from
"Aa1", and to "A+" from "AA," respectively. On July 15, 1993, Moody's
confirmed its "Aa" rating of the State's general obligation bonds. However, on
July 15, 1994, Moody's, S & P and Fitch Investors Service downgraded their
ratings of the State's general obligation bonds from "Aa" to "A1," "A+" to "A,"
and "AA" to "A," respectively.
- 87 -
<PAGE> 902
The 1994-95 Budget Act, signed by the Governor on July 8, 1994,
projected revenues and transfers of $41.9 billion, $2.1 billion higher than
revenues in 1993-94. This reflected the Administration's forecast of an
improving economy. Also included in this figure was a projected receipt of
about $360 million from the Federal Government to reimburse the State's cost of
incarcerating undocumented immigrants, most of which eventually was not
received. The Legislature took no action on a proposal in the January
Governor's Budget to undertake an expansion of the transfer of certain programs
to counties, which would also have transferred to counties 0.5% of the State's
current sales tax.
The 1994-95 Budget Act projected Special Fund revenues of $12.1
billion, a decrease of 2.4% from 1993-94 estimated revenues. The 1994-95
Budget Act also projected General Fund expenditures of $40.9 billion, an
increase of $1.6 billion over 1993-94. The Budget Act further projected
Special Fund expenditures of $12.3 billion, a 4.7% decrease from 1993-94
estimated expenditures.
Among other major features of the Budget Act were reductions in health
and welfare costs, increases in educational funding, and increased funding for
anticipated growth in the State's prison inmate population, including
provisions for implementing recent legislation which requires mandatory life
prison terms for certain third time felony offenders.
On January 17, 1994, southern California experienced a major earthquake
measuring 6.6 on the Richter scale. Significant property damage to private and
public facilities occurred in a four-county area including northern Los Angeles
County, Ventura County, and parts of Orange and San Bernardino Counties.
Although some individuals and businesses suffered losses totaling in the
billions of dollars, the overall effect of the earthquake on the regional and
state economy is not expected to be serious.
On November 8, 1994, California voters approved "Proposition 187,"
which bars public schooling, social services and non- emergency health care to
illegal immigrants. Since its adoption, at least eight lawsuits challenging
Proposition 187 have been filed in state and federal courts throughout
California. A federal district court judge has imposed a preliminary
injunction blocking enforcement of nearly all provisions of Proposition 187
until a trial determines the constitutionality of the initiative. The
preliminary injunction could prohibit enforcement Proposition 187's provisions
for six months to a year or more. Implementation of certain of Proposition
187's provisions could put at risk California's receipt of some federal funds.
- 88 -
<PAGE> 903
On December 6, 1994, Orange County filed for protection under Chapter 9
of the federal Bankruptcy Code. The filing was precipitated by the seizure by
lenders of securities serving as collateral for loans to Orange County's
investment pool. Approximately 187 local agencies, including 60 school
districts and 11 water districts, invested in Orange County's investment pool.
Orange County is currently engaged in bankruptcy proceedings and negotiations.
Since filing for bankruptcy protection, Orange County officials have
implemented a plan for the orderly liquidation of certain securities in Orange
County's investment pool. Pursuant to the plan, Orange County financial
advisors have sold approximately $2.9 billion face amount of the investment
pools securities. As of mid-January 1995, following a restructuring of most of
the pooled funds' assets to increase their liquidity and reduce their exposure
to interest rate increases, the County estimated the pooled funds' loss at
about $1.69 billion, or about 22% of their initial deposits of approximately
$7.5 billion. Many of the entities which deposited monies in the pooled funds,
including the County, are facing cash flow difficulties because of the
bankruptcy filing and may be required to reduce programs or capital projects.
This also may effect their ability to meet their outstanding obligations. It
is unclear what effect Orange County's filing for bankruptcy protection will
have on the Orange County economy and California's economy. The effect of the
filing on Orange County's municipal bonds also remains unclear. S&P has
downgraded its ratings on many Orange County bonds to "CCC" from "AA-." Moody's
has suspended its ratings on many of Orange County's bonds that are not covered
by bond insurance or backed by letters of credit. Moody's has downgraded
certain other Orange County bonds to speculative grade.
Revised employment data indicate that California's recession ended in
1993, and following a period of stability, a solid recovery is now underway.
The State's unemployment rate fell sharply in 1994, from 10.1% in January to
7.7% in October and November. The gap between the national and California
jobless rates narrowed from 3.4 percentage points at the beginning of 1994 to
an average of 2 percentage points in October and November 1994.
Personal income was severely affected by the 1994 earthquake, which
reduced the first quarter 1994 figure by $22 billion at an annual rate,
reflecting the uninsured damage to residences and unincorporated businesses. As
a result, personal income growth for all of 1994 was about 4.2%. However,
excluding the effects of the earthquake, growth would have been in excess of
5%.
- 89 -
<PAGE> 904
The State is a party to numerous legal proceedings, many of which
normally occur in governmental operations. In addition, the State is involved
in certain other legal proceedings that, if decided against the State, may
require the State to make significant future expenditures or may impair future
revenue sources. Because of the prospective nature of these proceedings, no
estimate of the potential loss can be made.
While at any given time, including the present, there are numerous
civil actions pending against the State which could, if determined adversely to
the State, affect the State's expenditures and, in some cases, its revenues,
the Attorney General of the State of California is of the opinion that no
pending actions are likely to have a material adverse effect on the State's
ability to pay debt service as it becomes due.
Because of the uncertain impact of the aforementioned statutes and
cases, the possible inconsistencies in the respective terms of the statutes and
the impossibility of predicting the level of future appropriations and
applicability of related statutes to such questions, it is not currently
possible to assess the impact of such legislation, cases and policies on the
long term ability of California state and municipal issuers to pay interest or
repay principal on their obligations.
- 90 -
<PAGE> 905
ATTACHMENT A
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of Pacifica Funds Trust
In our opinion, the statements of changes in net assets and the financial
highlights appearing in the Pacifica Funds Trust September 30, 1995 Annual
Report to Shareholders present fairly, in all material respects, the changes in
net assets of The Asset Preservation Fund, The Government Income Fund, The
California Tax-Free Fund, The Short Term California Tax-Free Fund, The Equity
Value Fund, The Balanced Fund, The Government Money Market Fund and The Money
Market Fund, separately managed portfolios of Pacifica Funds Trust (the
"Fund"), for the year ended September 30, 1994 and the financial highlights for
each of the four years in the period ended September 30, 1994 (for The Short
Term California Tax-Free Fund, for the year ended September 30, 1994 and for
the period January 20, 1993 (commencement of operations) through September 30,
1993), in conformity with generally accepted accounting principles. These
statements of changes in net assets and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management, our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining on a test basis evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 1994 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above. We have not audited the financial statements of any of the portfolios
comprising Pacifica Funds Trust for any period subsequent to September 30,
1994.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
November 22, 1994
- 91 -
<PAGE> 906
- --------------------------------------------------------------------------------
PACIFICA PRIME MONEY MARKET FUND
PACIFICA TREASURY MONEY MARKET FUND
PART B
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 1996
FOR INVESTOR SHARES
- --------------------------------------------------------------------------------
This Statement of Additional Information (the "SAI"), which is not a
prospectus, supplements and should be read in conjunction with the current
Prospectus for the Investor Shares of the Pacifica Prime Money Market Fund and
Pacifica Treasury Money Market Fund (collectively, the "Funds") of Pacifica
Funds Trust (the "Trust") dated February 1, 1996 (as it may be revised from time
to time). To obtain a copy of the Funds' Prospectus, please write to the Funds
at 237 Park Avenue, New York, New York 10017, or call 1-800-662-8417.
First Interstate Capital Management, Inc. ("FICM" or the "Advisor") serves
as the Funds' investment advisor.
The Dreyfus Corporation (the "Administrator") serves as the Funds'
administrator.
Pacifica Funds Distributor Inc. ("PFD Inc." or the "Distributor") is the
distributor of the Funds' Investor Shares.
Furman Selz LLC ("Furman Selz") is the transfer and dividend disbursing
agent for the Funds' Investor Shares.
First Interstate Bank of California ("FICAL") is the Funds' custodian.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Investment Objectives and Management Policies......................................... B-2
Trustees and Officers................................................................. B-6
Management of the Funds............................................................... B-8
Purchase of Investor Shares........................................................... B-12
Redemption of Investor Shares......................................................... B-12
Determination of Net Asset Value...................................................... B-13
Dividends and Distributions........................................................... B-14
Taxes................................................................................. B-14
Yield Calculations.................................................................... B-15
Portfolio Transactions................................................................ B-16
Description of the Funds.............................................................. B-17
Custodian, Transfer Agent, Counsel, and Independent Auditors.......................... B-18
Financial Statements.................................................................. B-19
Appendix.............................................................................. B-20
</TABLE>
B-1
<PAGE> 907
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
General
The assets of each of the Funds consist only of obligations maturing within
thirteen months from the date of acquisition (as determined in accordance with
the regulations of the Securities and Exchange Commission (the "SEC")), and the
dollar-weighted average maturity of each Fund may not exceed 90 days.
The securities in which each Fund may invest will not yield as high a level
of current income as may be achieved from securities with less liquidity and
less safety. There can be no assurance that each Fund's investment objective
will be realized as described in the Funds' Prospectus.
Subsequent to its purchase by a Fund, a rated security may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Board of Trustees or the Advisor, pursuant to
guidelines established by the Board, will consider such an event in determining
whether the Fund involved should continue to hold the security in accordance
with the interests of the Fund and applicable regulations of the SEC.
Subject to the general supervision and approval of the Board of Trustees,
the Advisor makes decisions with respect to and places orders for all purchases
and sales of securities for the Funds. Securities are generally purchased and
sold either directly from the issuer or from dealers who specialize in money
market instruments. Such purchases are usually effected as principal
transactions and therefore do not involve the payment of brokerage commissions.
The Funds may from time to time purchase securities issued by their regular
dealers. At September 30, 1994, the Funds held securities issued by Goldman
Sachs & Co., J.P. Morgan Securities, Inc., Salomon Brothers Inc., and HSBC
Securities Inc., valued at $159,111,345, $200,000,000, $126,043,763 and
$160,000,000, respectively.
Portfolio Securities
A description of the securities in which each of the Funds may invest is
set forth in their Prospectus, to which reference is hereby made. Additional
information about these instruments follows.
The Prime Money Market Fund may lend its securities to brokers, dealers and
financial institutions, provided (1) the loan is secured continuously by
collateral consisting of cash, U.S. Treasury securities, or other U.S.
Government securities or a letter of credit which is marked to market daily to
ensure that each loan is fully collateralized at all times; (2) the Fund may at
any time call the loan and obtain the return of the securities loaned within
five business days; (3) the Fund will receive any interest or dividends paid on
the securities loaned; and (4) the aggregate market value of securities loaned
will not at any time exceed one-third of the total assets of the Fund. The Fund
may earn income in connection with securities loans either through the
reinvestment of the cash collateral or the payment of fees by the borrower. The
Treasury Money Market Fund does not currently intend to lend its portfolio
securities.
Each Fund may engage in a repurchase agreement with respect to any security
in which that Fund is authorized to invest, including U.S. Treasury STRIPS,
although the underlying security may mature in more than thirteen months.
Repurchase agreements are transactions by which a Fund purchases a security and
simultaneously commits to resell that security to the seller at an agreed upon
price, on an agreed upon date within a number of days (usually not more than
seven, but in no event more than 365) from the date of purchase. The resale
price reflects the purchase price plus an agreed upon market rate of interest
which is unrelated to the coupon rate or maturity of the purchased security. A
repurchase agreement involves the obligation of the seller to pay the agreed
upon price, which obligation is in effect secured by the value of the underlying
security, which shall be at least equal to the amount of the agreed upon resale
price plus the transaction costs (including loss of interest) that the Fund
could reasonably expect to incur if the seller defaults. Securities subject to
repurchase agreements will be physically held by the Funds' custodian (or
sub-custodian) or registered in the name of the Funds or their custodian (or
sub-custodian) in a book-entry
B-2
<PAGE> 908
system, in the case of a security registered on a book-entry system. While it
does not presently appear possible to eliminate all risks from these
transactions (particularly the possibility of a decline in the market value of
the underlying securities, as well as delay and costs to a Fund in connection
with insolvency proceedings), it is the policy of each Fund to limit repurchase
agreements to selected creditworthy securities dealers or domestic banks or
other recognized financial institutions. Repurchase agreements are considered to
be loans by a Fund under the Investment Company Act of 1940 (the "1940 Act").
The Funds may acquire variable and floating rate instruments as described
in the Prospectus. Variable and floating rate instruments are frequently not
rated by credit rating agencies; however, unrated variable and floating rate
instruments purchased by a Fund will be determined by the Advisor under
guidelines established by the Board of Trustees to be of comparable quality at
the time of purchase to rated instruments eligible for purchase by the Funds. In
making such determinations, the Advisor will consider the earning power, cash
flows and other liquidity ratios of the issuers of such instruments (such
issuers include financial, merchandising, investment banking, bank holding and
other companies) and will continuously monitor their financial condition. There
may not be an active secondary market with respect to a particular variable or
floating rate instrument purchased by a Fund. The absence of such an active
secondary market could make it difficult for a Fund to dispose of the variable
or floating rate instrument involved. In the event the issuer of the instrument
defaulted on its payment obligations, a Fund could, for this or other reasons,
suffer a loss to the extent of the default. Variable and floating rate
instruments may be secured by bank letters of credit, guarantees or lending
commitments.
The Funds may purchase securities on a "when-issued," forward commitment or
delayed settlement basis (i.e., for delivery beyond the normal settlement date
at a stated price and yield). When a Fund agrees to purchase securities on this
basis, the Fund's custodian will set aside cash or liquid portfolio securities
equal to the amount of the commitment in a separate account. Normally the
custodian will set aside portfolio securities to satisfy a purchase commitment,
and in such case a Fund may be required subsequently to place additional assets
in the separate account so that the value of the account remains equal to the
amount of the Fund's commitment. A Fund's net assets may be expected to
fluctuate to a greater degree when it sets aside portfolio securities to cover
such purchase commitments than when it sets aside cash. The Funds do not intend
to engage in these transactions for speculative purposes but only in furtherance
of their investment objectives. Because a Fund will set aside cash or liquid
investments to satisfy its purchase commitments in the manner described above,
the Fund's liquidity may be affected in the event the Fund's forward
commitments, commitments to purchase "when-issued" securities and delayed
settlements ever exceeded 25% of the value of its assets.
A Fund will purchase securities on a "when-issued," forward commitment or
delayed settlement basis only with the intention of completing the transaction.
If deemed advisable as a matter of investment strategy, however, a Fund may
dispose of or renegotiate a commitment after it is entered into, and may sell
securities it has committed to purchase before those securities are delivered to
the Fund on the settlement date. In this case the Fund may realize a taxable
capital gain or loss. When a Fund engages in "when-issued," forward commitment
and delayed settlement transactions, it relies on the other party to consummate
the trade. Failure of such party to do so may result in the Fund's incurring a
loss or missing an opportunity to obtain a price considered to be advantageous.
The market value of the securities underlying a "when-issued" purchase, a
forward commitment to purchase securities, or a delayed settlement and any
subsequent fluctuations in their market value is taken into account when
determining the market value of a Fund starting on the day the Fund agrees to
purchase the securities. A Fund does not earn interest on the securities it has
committed to purchase until they are paid for and delivered on the settlement
date.
Each Fund currently intends to limit its investments in securities issued
by other investment companies so that, as determined immediately after a
purchase of such securities is made: (i) not more than 5% of the value of the
Fund's total assets will be invested in the securities of any one investment
company; (ii) not more than 10% of the value of its total assets will be
invested in the aggregate in securities of investment companies as a group; and
(iii) not more than 3% of the outstanding voting securities of any one
investment company will be owned by a Fund or by the Trust as a whole.
B-3
<PAGE> 909
It is possible that unregistered securities, purchased by the Prime Money
Market Fund in reliance upon Rule 144A under the Securities Act of 1933, could
have the effect of increasing the level of the Fund's illiquidity to the extent
that qualified institutional buyers become, for a period, uninterested in
purchasing these securities.
Investment Restrictions
The Prospectus summarizes certain fundamental investment restrictions that
have been adopted for the Funds. All of the Funds' restrictions are stated in
full herein and cannot be changed with respect to a Fund without approval by the
holders of a majority, as defined in the 1940 Act, of the Fund's outstanding
voting shares.
The Prime Money Market Fund may not:
1. Purchase common stocks, preferred stocks, warrants or other equity
securities, except for securities of other investment companies.
2. Borrow money or issue senior securities, except that the Fund may
borrow from banks or enter into reverse repurchase agreements for temporary
purposes in amounts up to one-third of the value of its total assets at the time
of such borrowing. The Fund will not purchase securities while its borrowings
(including reverse repurchase agreements) in excess of 5% of its total assets
are outstanding.
As a matter of non-fundamental policy, the Prime Money Market Fund intends
to limit its investments in reverse repurchase agreements to no more than 20% of
its total assets and will only engage in such transaction with primary dealers.
3. Mortgage, pledge, or hypothecate any assets, except in connection with
any such borrowing and in amounts not in excess of one-third of the value of the
Fund's total assets at the time of its borrowing. Securities held in escrow or
separate accounts in connection with the Fund's investment practices are not
deemed to be pledged for purposes of this investment restriction.
4. Sell securities short or purchase securities on margin, except for
delayed delivery or when-issued transactions or such short-term credits as are
necessary for the clearance of transactions.
5. Write put or call options.
6. Underwrite the securities of other issuers, except as the Fund may be
deemed to be an underwriter in connection with the purchase or sale of portfolio
instruments in accordance with its investment objective and portfolio management
policies.
7. Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or oil and gas interests, but this
restriction shall not prevent the Fund from investing directly or indirectly in
instruments secured by real estate or interest therein.
8. Make loans to others, except through the purchase of debt obligations
of the type which the Fund is permitted to purchase, loans of portfolio
securities and entry into repurchase agreements referred to in the Prospectus
and herein.
9. Invest in companies for the purpose of exercising control.
10. Invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation, acquisition of assets or where
otherwise permitted by the 1940 Act.
11. Lend its portfolio securities in excess of one-third of the value of
its total assets. Any loans of portfolio securities will be made according to
guidelines established by the SEC and the Trust's Board of Trustees, including
maintenance of collateral of the borrower equal at all times to at least the
current market value of the securities loaned.
12. Purchase the securities of any one issuer, other than obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
if immediately after such purchase more than 5% of the value of the Fund's total
assets would be invested in such issuer, except that (a) up to 25% of the value
of its total assets may be invested in any securities without regard to this 5%
limitation; and (b) such 5% limitation
B-4
<PAGE> 910
shall not apply to repurchase agreements collateralized by obligations of the
U.S. Government, its agencies or instrumentalities.
As a matter of nonfundamental policy and in accordance with the current
regulations of the SEC, the Prime Money Market Fund intends to limit its
investments in the obligations of any one non-U.S. governmental issuer to not
more than 5% of the Fund's total assets at the time of purchase provided,
however, that the Fund may invest up to 25% of its assets in the obligations of
one non-U.S. governmental issuer for a period of up to three business days.
13. Purchase any securities which cause 25% or more of the value of the
Fund's total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the same
industry, provided that there is no limitation with respect to: (a) instruments
that are issued or guaranteed by the United States, any state, territory or
possession of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political subdivisions; (b)
instruments issued or guaranteed by U.S. banks and U.S. branches of foreign
banks (provided that, with respect to U.S. branches of foreign banks, such
branches are subject to the same regulations as domestic branches of U.S. banks
and, with respect to foreign branches of U.S. banks, the domestic parent is
unconditionally liable in the event that the foreign branch fails to pay on its
instruments for any reason); and (c) repurchase agreements secured by the
instruments described in clauses (a) and (b).
The Treasury Money Market Fund may not:
1. Buy common stocks or voting securities (except for securities of other
investment companies) or state, municipal, or industrial revenue bonds.
2. Borrow money or issue senior securities, except that the Fund may
borrow from banks or enter into reverse, repurchase agreements for temporary
purposes in amounts up to one-third of the value of its total assets at the time
of such borrowing. The Fund will not purchase securities while its borrowings
(including reverse repurchase agreements) in excess of 5% of its total assets
are outstanding.
As a matter of non-fundamental policy, the Treasury Money Market Fund
intends to limit its investments in reverse repurchase agreements to no more
than 20% of its total assets and will only engage in such transaction with
primary dealers.
3. Mortgage, pledge, or hypothecate any assets, except in connection with
any such borrowing and in amounts not in excess of one-third of the value of the
Fund's total assets at the time of its borrowing. Securities held in escrow or
separate accounts in connection with the Fund's investment practices are not
deemed to be pledged for purposes of this investment restriction.
4. Purchase securities on margin, except for delayed delivery or
when-issued transactions or such short-term credits as are necessary for the
clearance of transactions; or make short sales of securities, or maintain a
short position.
5. Write put or call options.
6. Underwrite the securities of other issuers except as the Fund may be
deemed to be an underwriter in connection with the purchase and sale of
portfolio instruments in accordance with its investment objective and portfolio
management polices.
7. Purchase or sell real estate.
8. Purchase or sell commodity contracts, or invest in oil, gas, or
mineral exploration or development programs.
9. Make loans, except that the Fund may purchase or hold debt instruments
in accordance with its investment objective and policies and may enter into
loans of portfolio securities and repurchase agreements referred to in the
Prospectus and herein.
10. Acquire any other investment company or investment company security
except in connection with a merger, consolidation, reorganization, or
acquisition of assets or where otherwise permitted by the 1940 Act.
11. Lend its portfolio securities in excess of one-third of the value of
its total assets. Any loans of portfolio securities will be made according to
guidelines established by the SEC and the Trust's Board of
B-5
<PAGE> 911
Trustees, including maintenance of collateral of the borrower equal at all times
to at least the current market value of the securities loaned.
12. Purchase the securities of any one issuer, other than obligations
issued or guaranteed by the U.S. Treasury and repurchase agreements secured by
such obligations, if immediately after such purchase more than 5% of the value
of the Fund's total assets would be invested in such issuer, except that up to
25% of the value of the Fund's total assets may be invested without regard to
such 5% limitation.
13. Purchase any securities which would cause more than 25% of the value
of the Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business activities
in the same industry, provided that there is no limitation with respect to
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or repurchase agreements secured by such obligations.
The Trust may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states. Should
the Trust determine that such a commitment is no longer in the best interests of
the Fund involved and its shareholders, the Trust reserves the right to revoke
the commitment by terminating the sale of Fund shares in the state involved.
Pursuant to state securities regulations applicable to the Funds, the
Treasury Money Market Fund has adopted the following non-fundamental investment
limitation: the Fund will not purchase warrants, valued at the lower of cost or
market, in excess of 5% of the value of its net assets (included within that
amount, but not to exceed 2% of the value of the Fund's net assets, may be
warrants that are not listed on the New York or American Stock Exchanges) except
that warrants acquired by the Fund at any time in units or attached to
securities are not subject to this limitation. Investors should note, however,
that neither Fund currently intends to purchase any warrants whatsoever, or to
acquire any put option that may be sold, transferred or assigned separately from
the underlying security.
Whenever an investment policy or limitation states a maximum percentage of
a Fund's assets that may be invested in any security or other asset or sets
forth a policy regarding quality standards, such standard or percentage
limitation shall be determined immediately after and as a result of a Fund's
acquisition of such security or other asset. Accordingly, any later increase or
decrease resulting from a change in values, net assets, or other circumstances
will not be considered when determining whether the investment complies with
each Fund's investment policies and limitations.
For purposes of determining industry classifications of issuers,
wholly-owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of the parents, and utilities will be classified according to their
services (for example, gas, gas transmission, electric and gas, and electric and
telephone each will be considered a separate industry). In accordance with the
current views of the staff of the SEC and as a matter of nonfundamental policy
that may be changed without a vote of shareholders, a Fund will treat all
supranational organizations as a single industry and each foreign government
(and all of its agencies) as a separate industry.
TRUSTEES AND OFFICERS
Trustees and Officers
Trustees and officers of the Trust, together with information as to their
principal business occupations during at least the last five years, are shown
below. None of the Trustees is considered to be an "interested person" of the
Trust or of the Advisor, as defined in the 1940 Act.
DENNIS W. DRAPER, Trustee. Dr. Draper, age 46, has been an Associate Professor
of Finance, at University of Southern California since 1978; Director of
Data Analysis, Inc. (financial services); and Editorial Board Member of
Chicago Board of Trade. His address is School of Business, Hoffman 701-F,
University of Southern California, Los Angeles, California 90089.
B-6
<PAGE> 912
JOSEPH N. HANKIN, Trustee. Dr. Hankin, age 55, has been President, Westchester
Community College since 1971; President of Hartford Junior College from
1967 to 1971; Adjunct Professor of Columbia University Teachers College
since 1976. His address is Westchester Community College, 75 Grasslands
Road, Valhalla, New York 10595.
JOHN E. HEILMANN, Trustee. Mr. Heilmann, age 64, is retired and the former
Chairman, President and Chief Executive Officer of Distillers Somerset,
Inc. and Norwood Enterprises, Inc. from 1987-1992. His address is Old
Norwood Plantation, Route 1, Box II A, Winginia, Virginia 24599.
JACK D. HENDERSON, ESQ., Trustee. Mr. Henderson, age 68, is an attorney
currently working as a sole practitioner. From July 1990 to October 1995,
he was a partner of the law firm of Clanahan, Tanner, Downing & Knowlton,
P.C. He is a Trustee of Westcore Trust (a mutual fund family). His address
is 1600 Broadway, Suite 1410, Denver, Colorado 80202.
RICHARD A. WEDEMEYER, Trustee. Mr. Wedemeyer, age 60, has been Vice President
of Performance Advantage, Inc., since 1992; Vice President of Jim Henson
Productions from 1979 to 1992; Author of In Transition (Harper Collins);
co-founder and co-conductor of Harvard Business School Club of New York
Career Seminar; Trustee of Jim Henson Legacy Trust. His address is 17 High
Street, Suite 301, Norwalk, Connecticut 06851.
MICHAEL C. PETRYCKI, President. Mr. Petrycki, age 53, has been Executive Vice
President and Director of Furman Selz since 1984. His address is 237 Park
Avenue, New York, New York, 10017.
JOHN J. PILEGGI, Vice President and Treasurer. Mr. Pileggi, age 37, has been
Managing Director of Furman Selz, from 1984 to 1992, Senior Managing
Director, since 1992 and a Director of Furman Selz since 1994. His address
is 237 Park Avenue, New York, New York 10017.
MARK J. DUGGAN, Vice President and Secretary. Mr. Duggan, age 31, has been
Assistant Vice President and Counsel of The Boston Company Advisers, Inc.
("TBCA") since January 1994 and Counsel to TBCA since May 1993. From
September 1990 to May of 1993, he was a corporate associate in the law firm
of Ropes & Gray. His address is 1 Boston Place, Boston, MA 02108-4402.
ELLEN M. FURLONG, Vice President and Treasurer. Ms. Furlong, age 39, has been a
Vice President of Boston Safe Deposit and Trust Company, heading the firm's
custody administration division since 1991. From November 1989 to 1991, she
was Assistant Vice President of The Boston Company Advisors, Inc., also in
the area of custody administration. Her address is 1 Cabot Road, Medford,
MA 02155-5159.
KEVIN F. MAWE, Assistant Secretary. Since September 1994, Mr. Mawe, age 41, has
served as Senior Counsel to Boston Safe Deposit & Trust Company ("BSD&T").
From 1990 to September 1994 he was Associate Counsel to Mellon Bank, N.A.
His address is 1 Boston Place, Boston, MA 02108-4402.
STEPHEN P. BROWNE, Assistant Treasurer. Mr. Browne, age 33, has been a Vice
President of Boston Safe Deposit and Trust Company since August 1992. From
1990 to August of 1992, he served as an Assistant Vice President of The
Boston Company Advisers, Inc. His address is 1 Cabot Road, Medford, MA
02155-5159.
The authority of each of the officers listed above, with the exception of
Messrs. Petrycki and Pileggi, is limited solely to matters related to the Funds.
Such officers have no authority over the affairs of the other portfolios of the
Trust. By virtue of the responsibilities assumed by the Trust's service
contractors, the Trust requires no employees other than its officers. Further,
none of the Trust's officers devotes full time to the affairs of the Trust. No
officer, director, or employee of the Trust's service contractors, or of any of
their parents or subsidiaries, receives any compensation from the Trust for
serving as a Trustee or officer of the Trust, although such service contractors
receive fees for the advisory, administrative, custodial and other services they
provide to the Trust. Each Trustee receives $10,000 per annum plus $2,500 per
regular meeting attended, $2,500 per committee meeting attended, and
reimbursement for travel and out-of-pocket expenses.
B-7
<PAGE> 913
For the twelve-month period ended September 30, 1995, the Trustees received
the following compensation from the Trust:
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
AGGREGATE PENSION OR FROM
COMPENSATION RETIREMENT BENEFITS ESTIMATED REGISTRANT
FROM THE ACCRUED AS PART OF ANNUAL BENEFITS AND FUND
NAME OF TRUSTEE TRUST TRUST EXPENSE UPON RETIREMENT COMPLEX
- ---------------------------------- ------------ ------------------- --------------- ------------
<S> <C> <C> <C> <C>
Dennis W. Draper.................. $ 10,456 $ 0 $ 0 $ 10,456
Joseph N. Hankin.................. $ 11,250 $ 0 $ 0 $ 11,250
John E. Heilmann.................. $ 11,250 $ 0 $ 0 $ 11,250
Jack D. Henderson................. $ 10,456 $ 0 $ 0 $ 30,956(1)
Richard A. Wedemeyer.............. $ 11,250 $ 0 $ 0 $ 11,250
</TABLE>
- ---------------
(1) Includes amount received for service as a member of the Board of Trustees of
the Westcore Trust.
As of the date of this SAI, the Trust's Trustees and officers as a group
own less than 1% of the outstanding shares of each Fund.
MANAGEMENT OF THE FUNDS
Investment Advisory Agreement
First Interstate Capital Management, Inc., previously named First
Interstate Investment Services, Inc., serves as the Funds' investment advisor
pursuant to an Investment Advisory and Management Agreement dated October 1,
1994 (the "Investment Advisory and Management Agreement"). FICM is located at
7501 East McCormick Parkway, Scottsdale, Arizona 85258, and is a wholly-owned
subsidiary of First Interstate Bank of California ("FICAL"), which is a
wholly-owned subsidiary of First Interstate Bancorp (a bank holding company with
headquarters in Los Angeles, California).
The Investment Advisory and Management Agreement will continue in force
with respect to each Fund until March 17, 1996. Thereafter, its continuance with
respect to a Fund is subject to annual approval by (i) the Trust's Board of
Trustees or (ii) the affirmative vote of a majority (as defined in the 1940 Act)
of the outstanding voting securities of such Fund, provided that in either event
the continuance is also approved by a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of any party to such
agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. The Investment Advisory and Management Agreement is terminable
with respect to either Fund without penalty, by the Board of Trustees, by vote
of the holders of a majority of the Fund's outstanding shares, or by FICM upon
not less than sixty days' written notice. The Investment Advisory and Management
Agreement will terminate automatically in the event of its assignment.
Under the Investment Advisory and Management Agreement, FICM supervises and
assists in the overall management of the Trust. Subject to the supervision of
the Board of Trustees, FICM manages the Funds' investments in accordance with
the stated policies of each Fund. FICM makes investment decisions for the Funds
and places purchase and sale orders for portfolio transactions. FICM provides
the Funds with investment officers who are authorized by the Board of Trustees
to execute purchases and sales of securities. For this purpose the Trustees have
appointed the following officers or employees of FICM to serve as Assistant Vice
Presidents -- Investment and Administration of the Trust: G. Edward Means,
Senior Vice President of FICM; Michael Hughes, Vice President of FICM; Nicholas
Ro, Vice President of FICM; Michael Neitzke, Vice President of FICM and Kimberly
Savilonis, Assistant Vice President of FICM. In addition, FICM's management
responsibilities include, among other things, furnishing economic and
statistical information as requested by the Board of Trustees and monitoring the
Funds' arrangements with Service Organizations.
As compensation for services rendered by FICM to the Funds, FICM is
entitled to a fee, computed daily and paid monthly, at an annual rate of 0.30%
of the first $500 million of the average daily net assets of each
B-8
<PAGE> 914
Fund (considered separately on a Fund-by-Fund basis), 0.25% of the next $500
million of each Fund's average daily net assets, and 0.20% of each Fund's
average daily net assets in excess of $1 billion. Prior to October 1, 1994 FICM,
served as investment advisor to each of the Funds, and affiliates of FICM served
as sub-investment advisor. For the fiscal year ended September 30, 1995, FICM
voluntarily reduced its advisory and managment fee for each Fund by an annual
rate of 0.18% with respect to the Prime Money Market Fund and 0.18% with respect
to the Treasury Money Market Fund. For the six-month fiscal period ended
September 30, 1994, FICM voluntarily reduced its advisory and management fee for
each Fund by an annual rate of 0.38% with respect to the Prime Money Market Fund
and 0.37% with respect to the Treasury Money Market Fund. For the fiscal year
ended March 31, 1994, FICM voluntarily reduced its advisory and management fee
for each Fund by an annual rate of 0.38% with respect to the Prime Money Market
Fund and 0.37% with respect to the Treasury Money Market Fund. For the fiscal
year ended March 31, 1993, FICM voluntarily reduced its advisory and management
fee for each Fund by an annual rate of 0.37%. The monthly advisory and
management fee was further reduced voluntarily by the amounts the Funds agreed
to pay to Service Organizations. As a result, FICM actually received an advisory
and management fee at an annual rate of 0.12% of the value of the Prime Money
Market Fund's average daily net assets and 0.13% of the value of the Treasury
Money Market Fund's average daily net assets for the fiscal year ended September
30, 1995; 0.12% of the value of the Prime Money Market Fund's average daily net
assets and 0.13% of the value of the Treasury Money Market Fund's average daily
net assets for the six-month fiscal period ended September 30, 1994; 0.12% of
the value of the Prime Money Market Fund's average daily net assets and 0.13% of
the value of the Treasury Money Market Fund's average daily net assets for the
fiscal year ended March 31, 1994; 0.12% of the value of each Fund's average
daily net assets for the fiscal years ended March 31, 1993. During the fiscal
year ended September 30, 1995, the six-month fiscal period ended September 30,
1994 and the fiscal years ended March 31, 1994 and 1993, the advisory fees paid
to FICM by the Prime Money Market Fund were $693,315, $330,715, $737,811 and
$640,620, respectively. During the fiscal year ended September 30, 1995, the
six-month fiscal period ended September 30, 1994 and the fiscal years ended
March 31, 1994 and 1993, the advisory fees paid to FICM by the Treasury Money
Market Fund were $1,160,424, $454,029, $900,919 and $629,121, respectively.
Prior to October 1, 1994, all of these fees were, in turn, paid by FICM to its
affiliates which served as sub-investment advisors during the periods indicated.
Pursuant to state securities regulations applicable to the Fund, FICM has
agreed that if, in any fiscal year, the aggregate expenses of a Fund (as defined
under the securities regulations of any such state having jurisdiction over the
Fund), exceed the expense limitations of any such state, FICM will reimburse the
Fund for such excess expenses to the extent described in any written undertaking
provided by FICM or the Trust to such state. To the knowledge of the Trust, as
of the date of this SAI, the most restrictive expense limitation limits
aggregate annual expenses, including management and advisory fees but excluding
interest, taxes, brokerage commissions, and certain other expenses, to 2 1/2% of
the first $30 million of each Fund's average net assets, 2% of the next $70
million, and 1 1/2% of its remaining average net assets.
Expenses incurred in the organization and operation of each Fund, including
taxes, interest, penalties, brokerage and other fees and commissions, if any,
fees and expenses of Trustees, SEC fees and related expenses, state Blue Sky
qualification fees, advisory fees, administration fees, charges of custodians,
costs of transfer and dividend disbursing agents, certain insurance premiums,
outside auditing and legal expenses, costs of maintenance of trust existence,
costs of independent pricing services, investor services, preparation and
printing of prospectuses for regulatory purposes and for distribution to
shareholders, shareholders' reports and shareholders' meetings, costs of the
Funds' arrangements with Service Organizations, distribution payments and
extraordinary expenses, are borne by each Fund. Certain expenses that are
directly incurred by or attributed to a particular class of shares of a Fund
will be charged solely to shareholders of that class of shares. Currently, the
only expenses that are allocated differently between a Fund's separate classes
of shares are expenses arising from the Service Agreements entered into by the
Trust with certain institutions and distribution payments made by the Funds'
Investor Shares.
Banking laws and regulations, including the Glass-Steagall Act as presently
interpreted by the Board of Governors of the Federal Reserve System, (a)
prohibit a bank holding company registered under the Federal
B-9
<PAGE> 915
Bank Holding Company Act of 1956 (the "Holding Company Act") or any bank or
non-bank affiliate thereof from sponsoring, organizing, or controlling a
registered, open-end investment company continuously engaged in the issuance of
its shares, and prohibit banks generally from underwriting securities, but (b)
do not prohibit such a bank holding company or affiliate generally from acting
as investment advisor, transfer agent, or custodian to such an investment
company, or from purchasing shares of such a company as agent for and upon the
order of a customer. In some states, banks or other institutions through which
transactions in Fund shares are effected, may be required to register as dealers
pursuant to state law.
FICM, FICAL, and the Service Organizations that are governed by banking
laws and regulations believe that they may perform services for the Funds
without violating the Glass-Steagall Act. There have, however, been no cases
deciding whether a bank and its affiliates may perform services comparable to
those performed by either FICM, FICAL, or the Service Organizations, and future
changes in either federal or state statutes or regulations relating to the
permissible activities of banks or trust companies or their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of present and future statutes and regulations, could prevent
FICM, FICAL, or the Service Organizations from continuing to perform services
for the Funds or from continuing to purchase Fund shares for the accounts of
customers. If FICM, FICAL, or the Service Organizations were prohibited from
providing services to the Funds, it is expected that the Board of Trustees would
make other arrangements and that shareholders would not suffer adverse
consequences. Any new advisory agreement would be subject to shareholder
approval.
On the other hand, legislation has been introduced in Congress from time to
time which, if enacted, would permit a bank holding company subsidiary to
organize, sponsor and distribute shares of investment companies such as the
Funds notwithstanding present restrictions under the Glass-Steagall Act and the
Holding Company Act. As described herein, the Funds are currently distributed by
PFD Inc. and receive certain administrative services from The Dreyfus
Corporation. If current restrictions preventing a bank holding company
subsidiary from legally sponsoring, organizing, controlling and distributing
shares of an investment company were relaxed, it is anticipated that FICM,
FICAL, or the Service Organizations would consider the possibility of offering
to perform additional services for the Funds.
It is not possible of course, to predict whether or in what form such
legislation might be enacted or the terms upon which FICM, FICAL, or the Service
Organizations might offer to provide services for consideration by the Board of
Trustees.
FICM's investment advisory agreement provides that FICM shall not be liable
for any error of judgment or mistake of law, or in any other event whatsoever,
except by reason of a breach of fiduciary duty with respect to the receipt of
compensation for services or for loss resulting from willful misfeasance, bad
faith or gross negligence in the performance of its duties or from the reckless
disregard of its obligations and duties under the agreement.
Administration Agreement
Pursuant to an Administration Agreement dated as of October 1, 1994 (the
"Administration Agreement"), The Dreyfus Corporation (the "Administrator")
serves as administrator for the Funds. Under the Administration Agreement, the
Administrator supplies office facilities; provides statistical and research
data, data processing services, clerical, accounting and bookkeeping services,
internal auditing and legal services, and internal executive and administrative
services; prepares reports to shareholders; prepares reports to and filings with
the SEC and state securities authorities; prepares tax returns; calculates the
net asset value of Fund shares and dividends and capital gains distributions to
shareholders; and generally assists in all aspects of the Funds' operations
(except with respect to services provided by the Funds' investment advisor). For
these administrative services, the Administrator is entitled to receive a fee at
the annual rate of 0.10% of each Fund's average daily net assets. During the
fiscal year ended September 30, 1995, the six-month fiscal period ended
September 30, 1994 and the fiscal years ended March 31, 1994 and 1993, the
administration fees paid to the Administrator by the Prime Money Market Fund
were $577,763, $275,596, $614,901 and $533,850, respectively. During the fiscal
year ended September 30, 1995, the six-month fiscal period ended Septem-
B-10
<PAGE> 916
ber 30, 1994 and the fiscal years ended March 31, 1994 and 1993, the
administration fees paid to the Administrator by the Treasury Money Market Fund
were $921,886, $347,499, $690,137 and $524,268, respectively.
The Administration Agreement with the Administrator will continue in effect
automatically with respect to each Fund for successive annual periods ending on
March 17th of each year, provided such continuation is approved at least
annually by the Board of Trustees or by the vote of a majority of the
outstanding shares of the particular Fund involved (as defined in the 1940 Act),
and by a majority of the Trustees who are not interested persons of any party to
the Administration Agreement by vote cast in person at a meeting called for such
purpose. The Administration Agreement is terminable at any time with respect to
either Fund by the Board of Trustees or by a vote of a majority of the Fund's
outstanding shares upon 60 days' notice to the Administrator, or by the
Administrator upon not less than 90 days' notice to the Trust.
The Administration Agreement provides that the Administrator shall not be
liable for any error of judgment or mistake of law or any loss suffered by the
Funds or its security holders in connection with the performance of the
Administration Agreement, except a loss resulting from willful misfeasance, bad
faith or gross negligence in the performance of its duties or from the reckless
disregard by it of its obligations and duties thereunder.
If the aggregate expenses of either Fund in any fiscal year exceed the
expense limitations imposed by applicable state securities regulations, the Fund
may deduct from the fees to be paid with respect to such Fund to the
Administrator, or the Administrator will bear, to the extent required by such
regulations, that portion of such excess which bears the same relation to the
total excess as the Administrator's fees bear to the total administration and
investment advisory and management fees otherwise payable for the fiscal year by
the Fund involved to the Administrator and the Funds' investment advisor. Such
amount, if any, will be estimated daily, and reconciled and effected or paid, as
the case may be, on a monthly basis. The Administrator may also voluntarily
waive its fee from either Fund from time to time.
Distribution Contract
The Trust has retained Pacifica Funds Distributor Inc., an affiliate of
Furman Selz, to serve as principal underwriter for the Investor Shares of the
Funds pursuant to a Distribution Contract dated as of October 1, 1995. Investor
Shares of each Fund are sold on a continuous basis by PFD Inc. PFD Inc. is not
obligated to sell any specific amount of shares.
Under a Distribution Plan adopted by the Funds for their Investor Shares
(the "Plan"), the Funds may pay directly or reimburse the Distributor monthly in
amounts described in the Prospectus for costs and expenses of marketing the
Funds' Investor Shares. The Board of Trustees has concluded that there is a
reasonable likelihood that the Plan will benefit the Funds and their Investor
class shareholders.
The Plan provides that it may not be amended to increase materially the
costs which a Fund may bear pursuant to the Plan without approval of the Fund's
Investor class shareholders and that other material amendments of the Plan must
be approved by the Board of Trustees, and by the Trustees who are neither
"interested persons" (as defined in the 1940 Act) of the Trust nor have any
direct or indirect financial interest in the operation of the Plan or in any
related agreement, by vote cast in person at a meeting called for the purpose of
considering such amendments. The selection and nomination of the Trustees of the
Trust have been committed to the discretion of the Trustees who are not
"interested persons" of the Trust. The Plan between the Trust and the
Distributor has been approved and is subject to annual approval by the Board of
Trustees and by the Trustees who are neither "interested persons" of the Trust
nor have any direct or indirect financial interest in the operation of the Plan,
by vote cast in person at a meeting called for the purpose of voting on the
Plan.
The Plan is terminable with respect to the Funds at any time by a vote of a
majority of the Trustees who are not "interested persons" of the Trust and who
have no direct or indirect financial interest in the operation of the Plan or by
vote of the holders of a majority of the Investor Shares of the Funds.
B-11
<PAGE> 917
Service Organizations
The Trust may enter into Service Agreements with certain institutions that
are record shareholders in the Funds ("Service Organizations"), providing that
the Service Organizations will render support services to their customers
("Customers") who are the beneficial owners of Investor Shares in consideration
of the Funds' payment of up to 0.25% (on an annual basis) of the average daily
net asset value of the Investor Shares held by the Service Organizations for the
benefit of their Customers. All payments made under Servicing Agreements with
respect to Investor Shares are borne by that class. The services provided by a
Service Organization may include: (i) aggregating and processing purchase and
redemption requests from Customers; (ii) providing Customers with a service that
invests the assets of their accounts in Fund shares; (iii) processing dividend
payments from the Funds; (iv) providing information periodically to Customers;
(v) arranging for bank wires; (vi) responding to Customer inquiries; (vii)
providing sub-accounting with respect to Fund shares beneficially owned by
Customers; (viii) forwarding shareholder communications; and (ix) other similar
services requested by the Trust. Agreements with the Service Organizations are
terminable at any time by the Trust without penalty. FICM intends to waive a
portion of the advisory fee otherwise payable by a Fund on assets invested by
Customers of Service Organizations to the extent that the investment advisory
fees paid by a Fund to FICM plus the fees paid by the Fund to Service
Organizations exceed the annual rate of 0.50% the Fund's average daily net
assets. In addition, the Funds currently intend to limit total payments made to
Service Organizations and payments made pursuant to the Distribution Plan to no
more that 0.30% per annum of the average daily net asset value of the
outstanding Investor Shares of each Fund.
Depending upon the terms governing the particular Customer accounts,
Service Organizations may charge Customers directly for cash management and
other services provided in connection with the accounts, including, for example,
account maintenance fees, compensating balance requirements, or fees based upon
account transactions, assets, or income. A Customer should therefore read this
SAI in light of the terms of the account with a Service Organization before
purchasing Fund shares.
PURCHASE OF INVESTOR SHARES
All Investor Shares purchased are credited to the appropriate shareholder's
account at the net asset value determined as described below. Investor Shares
purchased begin accruing income dividends on the day on which shares are
purchased and continue to accrue dividends through the day before the shares are
redeemed.
In order to maximize earnings the Funds intend to be as completely invested
as is feasible. The Funds are required to make immediate settlement in federal
funds for portfolio securities purchased.
REDEMPTION OF INVESTOR SHARES
Upon receipt of a proper request by the transfer agent, the Funds will
redeem Investor Shares at their next determined net asset value.
Ordinarily, the Funds will transmit payment for all shares redeemed within
two business days after a redemption request is executed, but in any event
payment will be made within seven days thereafter. The right of redemption may
be suspended or the date of payment postponed (a) during any period when the New
York Stock Exchange is closed (other than customary weekend and holiday
closings), (b) when trading in the markets the Funds ordinarily utilize is
restricted, or when an emergency exists as determined by the SEC so that
disposal of a Fund's investments or determination of its net asset value is not
reasonably practicable, or (c) for such other periods as the SEC by order may
permit to protect the Funds' shareholders.
The Trust may suspend redemption rights or postpone redemption payments (as
well as suspend the recordation of the transfer of shares) for such periods as
are permitted under the 1940 Act. The Trust may also redeem Investor Shares
involuntarily or make payment for redemption in securities or other property if
it appears appropriate to do so in light of the Trust's responsibilities under
the 1940 Act.
B-12
<PAGE> 918
In addition, the Trust may redeem Investor Shares involuntarily to
reimburse a Fund for any loss sustained by reason of the failure of a
shareholder to make full payment for the shares purchased by the shareholder or
to collect any charge relating to a transaction effected for the benefit of a
shareholder which is applicable to Investor Shares of a Fund as provided from
time to time in the Prospectus.
All redemptions of shares of the Funds will be made in cash, except that
the commitment to redeem shares in cash extends only to redemption requests made
by each shareholder of a Fund during any 90-day period of up to the lesser of
$250,000 or 1% of the net asset value of that Fund at the beginning of such
period. This commitment is irrevocable without the prior approval of the SEC and
is a fundamental policy of the Funds that may not be changed without shareholder
approval. In the case of redemption requests by shareholders in excess of such
amounts, the Board of Trustees reserves the right to have the Funds make
payment, in whole or in part in securities or other assets, in case of an
emergency or any time a cash distribution would impair the liquidity of a Fund
to the detriment of the existing shareholders. In this event, the securities
would be valued in the same manner as the securities of that Fund are valued. If
the recipient were to sell such securities, he or she would incur brokerage
charges.
DETERMINATION OF NET ASSET VALUE
The net asset value per share ("NAV") for each share class of both Funds is
determined as of 12:00 noon, Pacific time, on days on which the Trust is open
for business (i.e., days on which the San Francisco branch of the Federal
Reserve Bank and First Interstate Bank of California, the Funds' custodian, and
in the case of the Treasury Money Market Fund, the New York Stock Exchange, are
open for business -- "business days"). For 1996, the San Francisco branch of the
Federal Reserve Bank and the Funds' custodian have designated the following
holiday closings: New Year's Day (observed), Martin Luther King, Jr. Day,
Presidents' Day (observed), Good Friday, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day, and Christmas Day. The San
Francisco branch of the Federal Reserve Bank or the Funds' custodian may
designate different dates for the observance of these holidays as well as
designate different holidays for closing in the future. To the extent that the
Funds' securities are traded on various markets on days when the Federal Reserve
Bank of San Francisco or the Funds' custodian is closed, a Fund's NAV may be
affected on days when the shareholders may not purchase or redeem shares. NAV of
each class of shares of the Funds is computed by dividing the value of a Fund's
assets allocable to that class, less the liabilities charged to that class, by
the total number of outstanding shares of that class.
The Funds' instruments are valued on the basis of amortized cost. This
technique involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower than the
price the Fund would receive if it sold the instrument. During periods of
declining interest rates, the daily yield on shares of a Fund computed as
described above may tend to be higher than a like computation made by a fund
with identical investments utilizing a method of valuation based upon market
prices and estimates of market prices for all of its instruments. Thus, if the
use of amortized cost by a Fund resulted in a lower aggregate portfolio value on
a particular day, a prospective investor in the Fund would be able to obtain a
somewhat higher yield than would result from investment in a fund utilizing
solely market values and existing investors in a Fund would receive less
investment income. The converse would apply in a period of rising interest
rates.
The valuation of the Funds' instruments, based upon their amortized cost
and the concomitant maintenance by each Fund of a net asset value of $1.00, is
permitted in accordance with Rule 2a-7 under the 1940 Act, pursuant to which
each Fund must adhere to certain conditions. Each Fund must maintain a dollar-
weighted average maturity of 90 days or less, purchase only instruments having
remaining maturities of thirteen months or less, and invest only in securities
which are determined to present minimal credit risks pursuant to guidelines
adopted by the Trustees. Instruments having variable or floating interest rates
or
B-13
<PAGE> 919
demand features may be deemed to have remaining maturities as follows: (a) a
government security with a variable rate of interest readjusted no less
frequently than every thirteen months may be deemed to have a maturity equal to
the period remaining until the next readjustment of the interest rate; (b) an
instrument with a variable rate of interest, the principal amount of which is
scheduled on the face of the instrument to be paid in thirteen months or less,
may be deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate; (c) an instrument with a variable rate of
interest that is subject to a demand feature may be deemed to have a maturity
equal to the longer of the period remaining until the next readjustment of the
interest rate or the period remaining until the principal amount can be
recovered through demand; (d) an instrument with a floating rate of interest
that is subject to a demand feature may be deemed to have a maturity equal to
the period remaining until the principal amount can be recovered through demand;
and (e) a repurchase agreement may be deemed to have a maturity equal to the
period remaining until the date on which the repurchase of the underlying
securities is scheduled to occur or, where no date is specified but the
agreement is subject to demand, the notice period applicable to a demand for the
repurchase of the securities.
The Trustees have established procedures designed to stabilize, to the
extent reasonably possible, each Fund's price per share as computed for the
purpose of sales and redemptions at a single value. Such procedures will include
the determination, at such intervals as the Trustees deem appropriate, of the
extent to which each Fund's NAV as calculated by using available market
quotations deviates from $1.00 per share, and whether such deviation may result
in material dilution or other unfair results to existing shareholders or
investors. In the event the Trustees determine that such a material deviation
exists, they have agreed to take such corrective action as they regard as
necessary and appropriate, which may include selling portfolio instruments prior
to maturity to realize capital gains or losses or to shorten average portfolio
maturity; withholding dividends; redeeming shares in kind or without monetary or
other consideration; or establishing a net asset value per share by using
available market quotations. It is the intention of each Fund to maintain a per
share net asset value of $1.00, but there can be no assurance that either Fund
will do so.
DIVIDENDS AND DISTRIBUTIONS
Each Fund ordinarily declares dividends from its net investment income on
each day that the Fund is open for business. Dividends usually are payable
within five business days after the end of each month. Each Fund's earnings for
non-business days are declared as dividends to the shareholders of record on the
preceding business day.
If an investor redeems all shares in its account at any time during the
month, all dividends declared to the day prior to redemption are paid to the
investor within five business days after the end of the month in cash.
Distributions of realized securities gains, if any, are declared and paid at
least annually.
Each Fund seeks to maintain a net asset value of $1.00 per share for
purposes of purchases and redemptions, although there can be no assurance that
either Fund will do so. To effectuate this policy, under certain circumstances
the Board of Trustees may consider the advisability of temporarily reducing or
suspending declaration of daily dividends, or the advisability of making a
capital gains or other distributions. See "Determination of Net Asset Value."
TAXES
Each Fund has qualified and intends to continue to qualify each year as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended. By so qualifying, the Funds will not be subject to federal
income taxes to the extent that they distribute their taxable net investment
income and net realized capital gains, if any. Net investment income and net
realized capital gains, if any, will be distributed to investors of the Fund
that realized the income or gain. Distributions of net investment income and
capital gains are taxable to those investors who are not exempt from federal
income taxes. It is expected that each Fund will distribute any net realized
short-term gains (unless negligible in amount) at least
B-14
<PAGE> 920
annually. Neither Fund expects to realize any long-term capital gains. Each Fund
will be treated separately for federal tax-purposes.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gain or loss. However, all or a portion of the gain realized
from the disposition of certain market discount bonds will be treated as
ordinary income under Section 1276 of the Code.
The Prime Money Market Fund has an unused capital loss carryover of
approximately $103,100 available for federal income tax purposes to be applied
against future profits from sales of securities, if any, realized subsequent to
September 30, 1995. If not applied, $46,700 expires on September 30, 1999 and
$56,400 expires on September 30, 2000.
For federal income tax purposes, an exchange of shares is a taxable event
and, accordingly, a capital gain or loss may be used. Please consult a tax or
other financial advisor to determine the tax consequences of a particular
exchange.
Dividends derived from net investment income, together with distributions
from the excess, if any, of net realized short-term gains over net realized
long-term losses and gains from the sale or other disposition of certain market
discount bonds paid by each Fund to a foreign investor generally are subject to
U.S. nonresident withholding taxes at the rate of 30%, unless the foreign
investor claims the benefit of a lower rate specified in a tax treaty.
Distributions from the excess, if any, of net realized long-term securities
gains over net realized short-term securities losses paid by each Fund to a
foreign investor will not be subject to any U.S. withholding taxes. However,
such distributions may be subject to backup withholding, as described in the
Funds' Prospectus, unless the foreign investor certifies his non-U.S. residency
status. Different tax consequences may apply to foreign investors engaged in a
U.S. trade or business. Foreign investors should consult their tax advisors
regarding the U.S. and foreign tax consequences of investing in the Funds.
YIELD CALCULATIONS
The "yields" and "effective yields" of each Fund described in the
Prospectus are calculated according to formulas prescribed by the SEC. The
standardized seven-day yields for the respective classes of shares of a Fund are
computed separately for each class by determining the net change, exclusive of
capital changes, in the value of a hypothetical pre-existing account in the Fund
having a balance of one share at the beginning of the period, dividing the net
change in account value by the value of the account at the beginning of the base
period to obtain the base period return, and multiplying the base period return
by (365/7). The net change in the value of an account in each Fund includes the
value of additional shares purchased with dividends from the original share, and
dividends declared on both the original share and any such additional shares,
and all fees, other than non-recurring account or sales charges, that are
charged to all shareholder accounts in proportion to the length of the base
period and the Fund's average account size. The capital changes to be excluded
from the calculation of the net change in account value are realized gains and
losses from the sale of securities and unrealized appreciation and depreciation.
The effective annualized yields for a Fund are also computed separately for each
class by compounding the unannualized base period return (calculated as above)
by adding 1 to the base period return, raising the sum to a power equal to 365
divided by 7, and subtracting 1 from the result. The fees which may be imposed
by Service Organizations for cash management services in connection with
investments in shares of the Funds are not reflected in the Funds' yields, and
any such fees, if charged, will reduce the actual return received by Customers
for their investments. Prior to October 1, 1995, neither Fund had sold Investor
Shares to the public.
Yield information may be useful in reviewing the Funds' performance and for
providing a basis for comparison with other investment alternatives. However,
yields fluctuate, unlike investments which pay a fixed yield for a stated period
of time. Yields for the Funds are calculated on the same basis as other money
market funds as required by applicable regulations. Investors should give
consideration to the quality and maturity of the portfolio securities of the
respective investment companies when comparing investment alternatives.
B-15
<PAGE> 921
Investors should recognize that in periods of declining interest rates, the
Funds' yields will tend to be somewhat higher than prevailing market rates, and
in periods of rising interest rates, the Funds' yields will tend to be somewhat
lower. Also, when interest rates are falling, the inflow of net new money to the
Funds from the continuous sale of their shares will likely be invested in
instruments producing lower yields than the balance of the Funds, thereby
reducing the current yields of the Funds. In periods of rising interest rates,
the opposite can be expected to occur.
PORTFOLIO TRANSACTIONS
Purchases and sales of portfolio securities usually are principal
transactions. Portfolio securities ordinarily are purchased directly from the
issuer or from an underwriter or market maker for the securities. There usually
are no brokerage commissions paid by either Fund for such purchases. Purchases
from underwriters of portfolio securities include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers serving as
market makers include the spread between the bid and asked price. While FICM
generally seeks competitive spreads or commissions, the Funds may not
necessarily be paying the lowest available spread or commission for the reasons
stated below.
The Funds' agreement with FICM provides that, in executing portfolio
transactions and selecting brokers or dealers, FICM will use its best efforts to
seek, on behalf of the Funds, the best overall terms available. In assessing the
best overall terms available for any transaction, FICM is to consider all
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the commission, if any, both for
the specific transaction and on a continuing basis.
In evaluating the best overall terms available, and in selecting the broker
or dealer to execute a particular transaction, FICM may also consider the
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) provided to either Fund and/or other
accounts over which it or an affiliate exercises investment discretion. FICM is
authorized, subject to the review of the Board of Trustees, to pay to a broker
or dealer which provides such brokerage and research services a commission for
executing a portfolio transaction for either Fund which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if, but only if, such commission is determined in good faith to
be reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer in accordance with the provisions of Section
28(e) of the Securities Exchange Act of 1934. Information so received will
supplement but will not replace that which is to be provided by FICM, and the
fees are not reduced as a consequence of the receipt of such supplemental
information. Such information may be useful to FICM in serving both the Funds
and other clients and conversely, supplemental information obtained by the
placement of business of other clients may be useful to FICM in carrying out its
obligations to the Funds.
Investment decisions for each Fund will be made independently from those of
any fiduciary or other accounts that may be managed by FICM. However, to the
extent that the same securities transaction may be deemed to be equally suitable
at the same time for two or more accounts, the transaction will be allocated in
a manner believed to be equitable to each account. In some cases, this procedure
may adversely affect the price paid or received, or the size of the position
obtained for or disposed of, by a Fund.
The Funds do not purchase any obligations issued by First Interstate
Bancorp or its affiliates. In addition, no portfolio securities are purchased
from, sold to, or executed through First Interstate Bancorp or its affiliates.
However, First Interstate Bancorp or its affiliates engage in transactions
involving bank obligations, commercial paper, repurchase agreements, and
securities of the U.S. Government and of certain U.S. Government agencies or
instrumentalities. Such activities may have some effect on the market of such
securities, and First Interstate Bancorp and its affiliates may be competing in
the market place with the Funds in the purchase and sale of such securities.
FICM has agreed to maintain a policy and practice of conducting its
investment advisory services to the Trust independently of the commercial
banking operations of any of its affiliates.
B-16
<PAGE> 922
DESCRIPTION OF THE FUNDS
Capitalization
The Trust is a Massachusetts business trust established under a Declaration
of Trust dated July 17, 1984 and consists of a series of separately managed
portfolios. Prior to February 9, 1993 the name of the Trust was Fund Source.
This SAI relates only to the Investor Shares of two of those portfolios -- the
Prime Money Market Fund and the Treasury Money Market Fund.
The capitalization of the Trust consists solely of an unlimited number of
shares of beneficial interest with a par value of $0.001 each. The Board of
Trustees may establish additional portfolios (with different investment
objectives and fundamental policies) at any time in the future. The
establishment and offering of additional portfolios will not alter the rights of
the Funds' shareholders. When issued, shares are fully paid, non-assessable,
redeemable and freely transferable. Shares do not have preemptive rights or
subscription rights.
In the event of a liquidation or dissolution of the Trust or an individual
Fund, shareholders of a particular Fund would be entitled to receive the assets
available for distribution belonging to such Fund, and a proportionate
distribution, based upon the relative net asset values of the Trust's respective
Funds, of any general assets not belonging to any particular Fund which are
available for distribution. Shareholders of a Fund are entitled to participate
in the net distributable assets of the Fund on liquidation, based on the number
of shares of the Fund that are held by each shareholder, except that each class
of shares of a Fund shall each be solely responsible for the Service
Organization fees, distribution payments and other "class" expenses, if any,
that are allocated to the particular share class.
Shareholder and Trustee Liability
The Trust is an entity of the type commonly known as a "Massachusetts
Business Trust." Under Massachusetts law, shareholders of such a trust may,
under certain circumstances, be held personally liable as partners for the
obligations of the trust. However, the Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust. The
Declaration of Trust also provides for indemnification out of the property of a
Fund of any shareholder held personally liable solely by reason of being or
having been a shareholder of the Fund. Thus, the risk of a shareholder incurring
financial loss because of status as a shareholder is limited to circumstances in
which a Fund itself would be unable to meet its obligations.
The Declaration of Trust further provides that the Trustees and officers
will not be liable except for liability to the Trust or its shareholders to
which he would be subject by reason of willful misfeasance, bad faith, gross
negligence in the performance of his duties, or reckless disregard of the duties
involved in the conduct of his office. The Trust may have an obligation to
indemnify its Trustees and officers with respect to any litigation.
Voting Rights
Shareholders are entitled to one vote for each full share held (and
fractional votes for fractional shares held) and will vote in the election of
Trustees (to the extent hereinafter provided) and on other matters submitted to
the vote of shareholders. Each matter to be voted on by shareholders shall be
voted by all of the Trust's outstanding shares, irrespective of portfolio,
unless a separate vote of one or more portfolios is required by the 1940 Act or
other applicable law or regulations or the Trustees determine that the
particular matter affects only the rights or interests of one or more portfolios
(and not all portfolios). Rule 18f-2 under the 1940 Act provides that any matter
required to be submitted to the holders of the outstanding voting securities of
an investment company such as the Trust shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each portfolio affected by the matter. A portfolio is
affected by a matter unless it is clear that the interests of each portfolio in
the matter are substantially identical or that the matter does not affect any
interest of the portfolio. Under the Rule, the
B-17
<PAGE> 923
approval of an investment advisory agreement or distribution plan, or any change
in a fundamental investment policy, would be effectively acted upon with respect
to a portfolio only if approved by a majority of the outstanding shares of such
portfolio. However, the Rule also provides that the ratification of the
appointment of independent public accountants, the approval of principal
underwriting contracts and the election of Trustees may be effectively acted
upon by shareholders of all portfolios voting together in the aggregate without
regard to particular portfolios. Shareholders of each of the Funds will vote in
the aggregate and not by class unless the matter to be voted on affects only the
interests of the holders of a particular class of a Fund's shares.
There normally will be no meetings of shareholders for the purpose of
electing Trustees unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders, at which time the
Trustees then in office will call a shareholders' meeting for the election of
Trustees. Pursuant to an undertaking, shareholder meetings will be called upon
the written request of the holders of at least 10% of the outstanding shares
entitled to vote. Except as set forth above, the Trustees shall continue to hold
office and may appoint successor Trustees. Voting rights are not cumulative.
As of January 17, 1996, First Interstate Bank of California and its
affiliated banks held of record substantially all of the outstanding shares of
each Fund as agent, custodian, trustee or investment advisor on behalf of their
customers. At such date the following shareholders held as beneficial owner five
percent or more of the outstanding shares of a Fund because they possessed sole
or shared voting or investment power with respect to such shares: Prime Money
Market Fund (Service Shares): SC UFCW JT Fds -- Benefit Operating, Colleen
Thompson, Administrator, SCUFCW, 6425 Katella Avenue, Cypress, CA
90630 -- 7.57%; Retail CLK -- Pacifica Income Advisers, 1299 Ocean Avenue, Santa
Monica, CA 90401 -- 7.81%; Prime Money Market Fund (Institutional Shares):
Cocopah Indian Tribe -- Bingo/Casino, Sherry Cordova, County 15 Avenue G,
Somerton, AZ 85350 -- 6.93%; Treasury Money Market Fund (Service Shares): San
Diego Port 95 Acquisition Fund, P.O. Box 488, San Diego, CA 92112 -- 5.17%;
Nevada Pers -- Putnam, Paul Seaman, 693 West Nye Lane, Carson City, NE
89703 -- 8.75%; Treasury Money Market Fund (Investor Shares): Pacificorp
Fdn/Becker, Brad Watkins, 700 NE Mulnomah, Suite 1600, Portland OR
97232 -- 5.42%; Nick Bunick, Nick Bunick Custom Homes, 5285 SW Meadows Road,
Suite 377, Lake Oswego, OR 97035 -- 9.78%; CH 2M Hill Pension Trust/Becker, Rudd
Little, P.O. Box 22508, Denver, CO 80222 -- 13.45%.
As used in this SAI and the Funds' Prospectus, a "majority of the
outstanding shares" of a portfolio means, with respect to the approval of an
investment advisory agreement, a distribution plan or a change in a fundamental
investment policy, the lesser of (1) 67% of the portfolio represented at a
meeting at which the holders of more than 50% of the outstanding shares of the
portfolio are present in person or by proxy, or (2) more than 50% of the
outstanding shares of the portfolio.
CUSTODIAN, TRANSFER AGENT,
COUNSEL, AND INDEPENDENT AUDITORS
FICAL, 707 Wilshire Boulevard, Los Angeles, California 90017, serves as
custodian for the Funds. As custodian, FICAL has agreed, among other things, to
keep and maintain the assets of each Fund, collect income due and payable to the
Funds, make disbursements of money on the Funds' behalf, and prepare and
maintain books and records relating to its duties. For its custodial services,
FICAL is entitled to a fee, computed daily and payable monthly, at the following
annual rates based upon the aggregate assets of the Trust: 0.021% of the first
$5 billion; 0.0175% of the next $5 billion; 0.015% of the balance over $10
billion. In addition, FICAL is entitled to certain transaction charges and to
reimbursement for its out-of-pocket expenses.
Furman Selz, 230 Park Avenue, New York, New York 10169, serves as transfer
agent for the Funds. As transfer agent, Furman Selz has agreed to perform such
services as maintaining shareholder accounts, preparing annual meeting lists,
mailing proxies, disbursing income dividends, and filing certain tax forms, and
is entitled to reimbursement from the Funds for certain reasonable out-of-pocket
expenses incurred in
B-18
<PAGE> 924
connection with the performance of its services. Furman Selz may appoint
co-transfer agents and sub-dividend disbursing agents to assist in the
performance of its services to the Funds, provided that Furman Selz shall be as
fully responsible to the Funds for the acts and omissions of any such agent as
it is for its own acts and omissions.
Drinker Biddle & Reath, 1345 Chestnut Street, Philadelphia, Pennsylvania
19107, serves as counsel for the Funds.
Ernst & Young LLP, 515 South Flower Street, Los Angeles, California, have
been selected to serve as the Funds' independent auditors for the current fiscal
year. The audited financial statements which are incorporated by reference into
this SAI and the audited financial information which appears in the Funds'
Prospectus under the heading "Financial History," for the fiscal year ended
September 30, 1995 and the six-month fiscal period ended September 30, 1994 have
been audited by Ernst & Young LLP, the Funds' current independent auditors. The
audited financial statements for the year ended March 31, 1994 which are
incorporated by reference in this SAI and the audited financial information
which appears in the Funds' Prospectus under the heading "Financial History,"
for each of the four years in the period ended March 31, 1994 for the Funds
have been audited by the Funds' former independent accountants, Price
Waterhouse LLP. The financial statements that have been incorporated by
reference herein and included or incorporated by reference in the Funds'
Prospectus are so included or incorporated in reliance on the reports of Ernst
& Young LLP and Price Waterhouse LLP given upon the authority of such firms as
experts in accounting and auditing.
FINANCIAL STATEMENTS
The financial statements included in the Funds' September 30, 1995 Annual
Report to Shareholders are incorporated by reference into this SAI. The Report
of Independent Accountants on the statements of changes in net assets of the
Funds for the year ended March 31, 1994 and the financial highlights for each
of the four years in the period ended March 31, 1994 is included as Attachment
A to this SAI. No other part of the Annual Report is incorporated by reference
herein. Copies of the financial statements may be obtained upon request and
without charge by writing to the Funds at 237 Park Avenue, New York, New York
10017 or calling 1-800-662-8417.
B-19
<PAGE> 925
APPENDIX
DESCRIPTION OF SECURITIES RATINGS
The following is a description of the securities ratings of Duff & Phelps
Credit Rating Co. ("D&P"), Fitch Investors Service, Inc. ("Fitch"), Standard &
Poor's Ratings Group, Division of McGraw Hill ("S&P"), Moody's Investors
Service, Inc. ("Moody's"), IBC Limited and IBCA Inc. ("IBCA") and Thomson
BankWatch, Inc. ("Thomson").
Long-Term Corporate Debt Rating
The two highest ratings of D&P for corporate fixed-income securities are
AAA and AA. Securities rated AAA are of the highest credit quality. The risk
factors are considered to be negligible, being only slightly more than for
risk-free U.S. Treasury debt. Securities rated AA are of high credit quality.
Protection factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions. The AA rating may be modified by an
addition of a plus (+) or minus (-) sign to show relative standing within the
major rating category.
The two highest ratings of Fitch for corporate bonds are AAA and AA. AAA
bonds are considered to be investment grade and of the highest credit quality.
The obligor is judged to have an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events. AA bonds are considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds rated in
the AAA and AA categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F-1+. Plus (+)
and minus (-) signs are used with the AA rating symbol to indicate relative
standing within the rating category.
The two highest ratings of S&P for corporate bonds are AAA and AA. Bonds
rated AAA bear the highest rating assigned by S&P to a debt obligation and the
AAA rating indicates in its opinion an extremely strong capacity to pay interest
and repay principal. Bonds rated AA by S&P are judged by it to have a very
strong capacity to pay interest and repay principal, and they differ from AAA
issues only in small degree. The AA rating may be modified by an addition of a
plus (+) or minus (-) sign to show relative standing within the major rating
category.
The two highest ratings of Moody's for corporate bonds are Aaa and Aa.
Bonds rated Aaa are judged to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt edged."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issuer. The rating of Aa is assigned to
bonds which are of "high quality by all standards." Aa bonds are rated lower
than Aaa bonds because margins of protection may not be as large or fluctuations
of protective elements may be of greater amplitude or there may be other
elements which make the long-term risks appear somewhat larger. Moody's may
modify a rating of Aa by adding numerical modifiers of 1, 2 or 3 to show
relative standing within the Aa category.
The two highest ratings of IBCA for corporate bonds are AAA and AA.
Obligations rated AAA by IBCA have the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial conditions are unlikely
to increase investment risk substantially. Obligations for which there is a very
low expectation of investment risk are rated AA. Capacity for timely repayment
of principal and interest is substantial. Adverse changes in business, economic
or financial conditions may increase investment risk albeit not very
significantly. IBCA may append a rating of plus (+) or minus (-) to a rating to
denote relative status within a major rating category.
The two highest ratings of Thomson for corporate bonds are AAA and AA.
Bonds rated AAA represent the highest category assigned to long-term debt. The
ability of the obligor to repay principal and interest on a timely basis is
considered to be extremely high. Bonds rated AA indicate a very strong ability
on the part of
B-20
<PAGE> 926
the obligor to repay principal and interest on a timely basis with limited
incremental risk versus issues rated in the highest category. These ratings may
be modified by the addition of a plus (+) or minus (-) sign to show relative
standing within the rating categories.
Short-Term Corporate Debt Ratings
The highest rating of D&P for commercial paper is D-1. D&P employs three
designations, D-1+, D-1 and D-1-, within the highest rating category. D-1+
indicates highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
judged to be outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations. D-1 indicates very high certainty of timely payment.
Liquidity factors are excellent and supported by strong fundamental protection
factors. Risk factors are considered to be minor. D-1 - indicates high certainty
of timely payment. Liquidity factors are strong and supported by good
fundamental protection factors. Risk factors are very small.
Fitch's short-term ratings apply to corporate debt obligations that are
payable on demand or have original maturities of up to three years. The highest
rating of Fitch for short-term securities encompasses both the F-1+ and F-1
ratings. F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of assurance
for timely payment. F-1 securities possess very strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only slightly less
in degree than issues rated F-1+.
S&P's commercial paper ratings are current assessments of the likelihood of
timely payment of debt having an original maturity of no more than 365 days. The
A-1 designation indicates that the degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics will be denoted A-1+.
Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Issuers rated Prime-1 (or related supporting
institutions) in the opinion of Moody's have a superior capacity for repayment
of short-term promissory obligations.
IBCA assesses the investment quality of unsecured debt with an original
maturity of less than one year which is issued by bank holding companies and
their principal banking subsidiaries. The designation A1+ by IBCA indicates that
the obligation is supported by the highest capacity for timely repayment. Where
issues possess a strong capacity for timely payment, a rating of A1 is assigned.
Thomson's short-term ratings assess the likelihood of an untimely or
incomplete payment of principal or interest of unsubordinated instruments having
a maturity of one year or less which is issued by U.S. commercial banks, thrifts
and non-bank banks; non-U.S. banks; and broker dealers. The designation TBW-1
represents the highest short-term rating category and indicates a very high
degree of likelihood that principal and interest will be paid on a timely basis.
B-21
<PAGE> 927
ATTACHMENT A
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of Pacific American Fund:
In our opinion, the statements of changes in net assets and the financial
highlights appearing in the September 30, 1995 Annual Report to Shareholders of
the Pacifica Prime Money Market Fund and the Pacifica Treasury Money Market
Fund (formerly, the Pacific American Fund) present fairly in all material
respects the changes in net assets for the year ended March 31, 1994 of Pacific
American Fund Money Market Portfolio and U.S. Treasury Portfolio and their
financial highlights for each of the four years in the period ended March 31,
1994, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Pacific American Fund's
management, our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards, which
require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining on a test basis evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at March 31, 1994 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above. We have not audited the financial statements of Pacific American Fund
Money Market Portfolio and U.S. Treasury Portfolio for any period subsequent to
March 31, 1994.
PRICE WATERHOUSE LLP
Los Angeles, California
May 4, 1994
<PAGE> 928
- --------------------------------------------------------------------------------
PACIFICA PRIME MONEY MARKET FUND
PACIFICA TREASURY MONEY MARKET FUND
PART B
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 1996
FOR SERVICE AND INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
This Statement of Additional Information (the "SAI"), which is not a
prospectus, supplements and should be read in conjunction with the current
Prospectuses for the Service and Institutional Shares of the Pacifica Prime
Money Market Fund and Pacifica Treasury Money Market Fund (collectively, the
"Funds") of Pacifica Funds Trust (the "Trust") dated February 1, 1996 (as they
may be revised from time to time). To obtain a copy of the Funds' Prospectuses,
please write to the Funds at 237 Park Avenue, New York, New York 10017, or call
1-800-662-8417.
First Interstate Capital Management, Inc. ("FICM" or the "Advisor") serves
as the Funds' investment advisor.
The Dreyfus Corporation (the "Administrator") serves as the Funds'
administrator.
Pacifica Funds Distributor Inc. ("PFD Inc." or the "Distributor") is the
distributor of the Funds' Service and Institutional Shares.
Furman Selz LLC ("Furman Selz") is the transfer and dividend disbursing
agent for the Funds' Service and Institutional Shares.
First Interstate Bank of California ("FICAL") is the Funds' custodian.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Management Policies......................................... B-2
Trustees and Officers................................................................. B-6
Management of the Funds............................................................... B-8
Purchase of Service and Institutional Shares.......................................... B-12
Redemption of Service and Institutional Shares........................................ B-12
Determination of Net Asset Value...................................................... B-13
Dividends and Distributions........................................................... B-14
Taxes................................................................................. B-15
Yield Calculations.................................................................... B-15
Portfolio Transactions................................................................ B-16
Description of the Funds.............................................................. B-17
Custodian, Transfer and Dividend Disbursing Agent, Counsel, and Independent
Auditors............................................................................ B-19
Financial Statements.................................................................. B-19
Appendix.............................................................................. B-20
</TABLE>
B-1
<PAGE> 929
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
General
The assets of each of the Funds consist only of obligations maturing within
thirteen months from the date of acquisition (as determined in accordance with
the regulations of the Securities and Exchange Commission (the "SEC")), and the
dollar-weighted average maturity of each Fund may not exceed 90 days.
The securities in which each Fund may invest will not yield as high a level
of current income as may be achieved from securities with less liquidity and
less safety. There can be no assurance that each Fund's investment objective
will be realized as described in the Funds' Prospectuses.
Subsequent to its purchase by a Fund, a rated security may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Board of Trustees or the Advisor, pursuant to
guidelines established by the Board, will consider such an event in determining
whether the Fund involved should continue to hold the security in accordance
with the interests of the Fund and applicable regulations of the SEC.
Subject to the general supervision and approval of the Board of Trustees,
the Advisor makes decisions with respect to and places orders for all purchases
and sales of securities for the Funds. Securities are generally purchased and
sold either directly from the issuer or from dealers who specialize in money
market instruments. Such purchases are usually effected as principal
transactions and therefore do not involve the payment of brokerage commissions.
The Funds may from time to time purchase securities issued by their regular
dealers. At September 30, 1995, the Funds held securities issued by Goldman
Sachs & Co., J.P. Morgan Securities, Inc., Salomon Brothers Inc., and HSBC
Securities Inc., valued at $159,111,345, $200,000,000, $126,043,763 and
$160,000,000, respectively.
Portfolio Securities
A description of the securities in which each of the Funds may invest is
set forth in their Prospectuses, to which reference is hereby made. Additional
information about these instruments follows.
The Prime Money Market Fund may lend its securities to brokers, dealers and
financial institutions, provided (1) the loan is secured continuously by
collateral consisting of cash, U.S. Treasury securities, or other U.S.
Government securities or a letter of credit which is marked to market daily to
ensure that each loan is fully collateralized at all times; (2) the Fund may at
any time call the loan and obtain the return of the securities loaned within
five business days; (3) the Fund will receive any interest or dividends paid on
the securities loaned; and (4) the aggregate market value of securities loaned
will not at any time exceed one-third of the total assets of the Fund. The Fund
may earn income in connection with securities loans either through the
reinvestment of the cash collateral or the payment of fees by the borrower. The
Treasury Money Market Fund does not currently intend to lend its portfolio
securities.
Each Fund may engage in a repurchase agreement with respect to any security
in which that Fund is authorized to invest, including U.S. Treasury STRIPS,
although the underlying security may mature in more than thirteen months.
Repurchase agreements are transactions by which a Fund purchases a security and
simultaneously commits to resell that security to the seller at an agreed upon
price, on an agreed upon date within a number of days (usually not more than
seven, but in no event more than 365) from the date of purchase. The resale
price reflects the purchase price plus an agreed upon market rate of interest
which is unrelated to the coupon rate or maturity of the purchased security. A
repurchase agreement involves the obligation of the seller to pay the agreed
upon price, which obligation is in effect secured by the value of the underlying
security, which shall be at least equal to the amount of the agreed upon resale
price plus the transaction costs (including loss of interest) that the Fund
could reasonably expect to incur if the seller defaults. Securities subject to
repurchase agreements will be physically held by the Funds' custodian (or sub-
custodian) or registered in the name of the Funds or their custodian (or
sub-custodian) in a book-entry
B-2
<PAGE> 930
system, in the case of a security registered on a book-entry system. While it
does not presently appear possible to eliminate all risks from these
transactions (particularly the possibility of a decline in the market value of
the underlying securities, as well as delay and costs to a Fund in connection
with insolvency proceedings), it is the policy of each Fund to limit repurchase
agreements to selected creditworthy, securities dealers or domestic banks or
other recognized financial institutions. Repurchase agreements are considered to
be loans by a Fund under the Investment Company Act of 1940 (the "1940 Act").
The Funds may acquire variable and floating rate instruments as described
in the Prospectuses. Variable and floating rate instruments are frequently not
rated by credit rating agencies; however, unrated variable and floating rate
instruments purchased by a Fund will be determined by the Advisor under
guidelines established by the Board of Trustees to be of comparable quality at
the time of purchase to rated instruments eligible for purchase by the Funds. In
making such determinations, the Advisor will consider the earning power, cash
flows and other liquidity ratios of the issuers of such instruments (such
issuers include financial, merchandising, investment banking, bank holding and
other companies) and will continuously monitor their financial condition. There
may not be an active secondary market with respect to a particular variable or
floating rate instrument purchased by a Fund. The absence of such an active
secondary market could make it difficult for a Fund to dispose of the variable
or floating rate instrument involved. In the event the issuer of the instrument
defaulted on its payment obligations, a Fund could, for this or other reasons,
suffer a loss to the extent of the default. Variable and floating rate
instruments may be secured by bank letters of credit, guarantees or lending
commitments.
The Funds may purchase securities on a "when-issued," forward commitment or
delayed settlement basis (i.e., for delivery beyond the normal settlement date
at a stated price and yield). When a Fund agrees to purchase securities on this
basis, the Fund's custodian will set aside cash or liquid portfolio securities
equal to the amount of the commitment in a separate account. Normally the
custodian will set aside portfolio securities to satisfy a purchase commitment,
and in such case a Fund may be required subsequently to place additional assets
in the separate account so that the value of the account remains equal to the
amount of the Fund's commitment. A Fund's net assets may be expected to
fluctuate to a greater degree when it sets aside portfolio securities to cover
such purchase commitments than when it sets aside cash. The Funds do not intend
to engage in these transactions for speculative purposes but only in furtherance
of their investment objectives. Because a Fund will set aside cash or liquid
investments to satisfy its purchase commitments in the manner described above,
the Fund's liquidity may be affected in the event the Fund's forward
commitments, commitments to purchase "when-issued" securities and delayed
settlements ever exceeded 25% of the value of its assets.
A Fund will purchase securities on a "when-issued," forward commitment or
delayed settlement basis only with the intention of completing the transaction.
If deemed advisable as a matter of investment strategy, however, a Fund may
dispose of or renegotiate a commitment after it is entered into, and may sell
securities it has committed to purchase before those securities are delivered to
the Fund on the settlement date. In this case the Fund may realize a taxable
capital gain or loss. When a Fund engages in "when-issued," forward commitment
and delayed settlement transactions, it relies on the other party to consummate
the trade. Failure of such party to do so may result in the Fund's incurring a
loss or missing an opportunity to obtain a price considered to be advantageous.
The market value of the securities underlying a "when-issued" purchase, a
forward commitment to purchase securities, or a delayed settlement and any
subsequent fluctuations in their market value is taken into account when
determining the market value of a Fund starting on the day the Fund agrees to
purchase the securities. A Fund does not earn interest on the securities it has
committed to purchase until they are paid for and delivered on the settlement
date.
Each Fund currently intends to limit its investments in securities issued
by other investment companies so that, as determined immediately after a
purchase of such securities is made: (i) not more than 5% of the value of the
Fund's total assets will be invested in the securities of any one investment
company; (ii) not more than 10% of the value of its total assets will be
invested in the aggregate in securities of investment companies as a group; and
(iii) not more than 3% of the outstanding voting securities of any one
investment company will be owned by a Fund or by the Trust as a whole.
B-3
<PAGE> 931
It is possible that unregistered securities, purchased by the Prime Money
Market Fund in reliance upon Rule 144A under the Securities Act of 1933, could
have the effect of increasing the level of the Fund's illiquidity to the extent
that qualified institutional buyers become, for a period, uninterested in
purchasing these securities.
Investment Restrictions
The Prospectuses summarize certain fundamental investment restrictions that
have been adopted for the Funds. All of the Funds' restrictions are stated in
full herein and cannot be changed with respect to a Fund without approval by the
holders of a majority, as defined in the 1940 Act, of the Fund's outstanding
voting shares.
The Prime Money Market Fund may not:
1. Purchase common stocks, preferred stocks, warrants or other equity
securities, except for securities of other investment companies.
2. Borrow money or issue senior securities, except that the Fund may
borrow from banks or enter into reverse repurchase agreements for temporary
purposes in amounts up to one-third of the value of its total assets at the time
of such borrowing. The Fund will not purchase securities while its borrowings
(including reverse repurchase agreements) in excess of 5% of its total assets
are outstanding.
As a matter of non-fundamental policy, the Prime Money Market Fund intends
to limit its investments in reverse repurchase agreements to no more than 20% of
its total assets and will only engage in such transaction with primary dealers.
3. Mortgage, pledge, or hypothecate any assets, except in connection with
any such borrowing and in amounts not in excess of one-third of the value of the
Fund's total assets at the time of its borrowing. Securities held in escrow or
separate accounts in connection with the Fund's investment practices are not
deemed to be pledged for purposes of this investment restriction.
4. Sell securities short or purchase securities on margin, except for
delayed delivery or when-issued transactions or such short-term credits as are
necessary for the clearance of transactions.
5. Write put or call options.
6. Underwrite the securities of other issuers, except as the Fund may be
deemed to be an underwriter in connection with the purchase or sale of portfolio
instruments in accordance with its investment objective and portfolio management
policies.
7. Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or oil and gas interests, but this
restriction shall not prevent the Fund from investing directly or indirectly in
instruments secured by real estate or interest therein.
8. Make loans to others, except through the purchase of debt obligations
of the type which the Fund is permitted to purchase, loans of portfolio
securities and entry into repurchase agreements referred to in the Prospectuses
and herein.
9. Invest in companies for the purpose of exercising control.
10. Invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation, acquisition of assets or where
otherwise permitted by the 1940 Act.
11. Lend its portfolio securities in excess of one-third of the value of
its total assets. Any loans of portfolio securities will be made according to
guidelines established by the SEC and the Trust's Board of Trustees, including
maintenance of collateral of the borrower equal at all times to at least the
current market value of the securities loaned.
B-4
<PAGE> 932
12. Purchase the securities of any one issuer, other than obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
if immediately after such purchase more than 5% of the value of the Fund's total
assets would be invested in such issuer, except that (a) up to 25% of the value
of its total assets may be invested in any securities without regard to this 5%
limitation; and (b) such 5% limitation shall not apply to repurchase agreements
collateralized by obligations of the U.S. Government, its agencies or
instrumentalities.
As a matter of nonfundamental policy and in accordance with the current
regulations of the SEC, the Prime Money Market Fund intends to limit its
investments in the obligations of any one non-U.S. governmental issuer to not
more than 5% of the Fund's total assets at the time of purchase provided,
however, that the Fund may invest up to 25% of its assets in the obligations of
one non-U.S. governmental issuer for a period of up to three business days.
13. Purchase any securities which cause 25% or more of the value of the
Fund's total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the same
industry, provided that there is no limitation with respect to: (a) instruments
that are issued or guaranteed by the United States, any state, territory or
possession of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political subdivisions; (b)
instruments issued or guaranteed by U.S. banks and U.S. branches of foreign
banks (provided that, with respect to U.S. branches of foreign banks, such
branches are subject to the same regulations as domestic branches of U.S. banks
and, with respect to foreign branches of U.S. banks, the domestic parent is
unconditionally liable in the event that the foreign branch fails to pay on its
instruments for any reason); and (c) repurchase agreements secured by the
instruments described in clauses (a) and (b).
The Treasury Money Market Fund may not:
1. Buy common stocks or voting securities (except for securities of other
investment companies) or state, municipal, or industrial revenue bonds.
2. Borrow money or issue senior securities, except that the Fund may
borrow from banks or enter into reverse, repurchase agreements for temporary
purposes in amounts up to one-third of the value of its total assets at the time
of such borrowing. The Fund will not purchase securities while its borrowings
(including reverse repurchase agreements) in excess of 5% of its total assets
are outstanding.
As a matter of non-fundamental policy, the Treasury Money Market Fund
intends to limit its investments in reverse repurchase agreements to no more
than 20% of its total assets and will only engage in such transaction with
primary dealers.
3. Mortgage, pledge, or hypothecate any assets, except in connection with
any such borrowing and in amounts not in excess of one-third of the value of the
Fund's total assets at the time of its borrowing. Securities held in escrow or
separate accounts in connection with the Fund's investment practices are not
deemed to be pledged for purposes of this investment restriction.
4. Purchase securities on margin, except for delayed delivery or
when-issued transactions or such short-term credits as are necessary for the
clearance of transactions; or make short sales of securities, or maintain a
short position.
5. Write put or call options.
6. Underwrite the securities of other issuers except as the Fund may be
deemed to be an underwriter in connection with the purchase and sale of
portfolio instruments in accordance with its investment objective and portfolio
management polices.
7. Purchase or sell real estate.
8. Purchase or sell commodity contracts, or invest in oil, gas, or mineral
exploration or development programs.
B-5
<PAGE> 933
9. Make loans, except that the Fund may purchase or hold debt instruments
in accordance with its investment objective and policies and may enter into
loans of portfolio securities and repurchase agreements referred to in the
Prospectuses and herein.
10. Acquire any other investment company or investment company security
except in connection with a merger, consolidation, reorganization, or
acquisition of assets or where otherwise permitted by the 1940 Act.
11. Lend its portfolio securities in excess of one-third of the value of
its total assets. Any loans of portfolio securities will be made according to
guidelines established by the SEC and the Trust's Board of Trustees, including
maintenance of collateral of the borrower equal at all times to at least the
current market value of the securities loaned.
12. Purchase the securities of any one issuer, other than obligations
issued or guaranteed by the U.S. Treasury and repurchase agreements secured by
such obligations, if immediately after such purchase more than 5% of the value
of the Fund's total assets would be invested in such issuer, except that up to
25% of the value of the Fund's total assets may be invested without regard to
such 5% limitation.
13. Purchase any securities which would cause more than 25% of the value
of the Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business activities
in the same industry, provided that there is no limitation with respect to
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or repurchase agreements secured by such obligations.
The Trust may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states. Should
the Trust determine that such a commitment is no longer in the best interests of
the Fund involved and its shareholders, the Trust reserves the right to revoke
the commitment by terminating the sale of Fund shares in the state involved.
Pursuant to state securities regulations applicable to the Funds, the
Treasury Money Market Fund has adopted the following non-fundamental investment
limitation: the Fund will not purchase warrants, valued at the lower of cost or
market, in excess of 5% of the value of its net assets (included within that
amount, but not to exceed 2% of the value of the Fund's net assets, may be
warrants that are not listed on the New York or American Stock Exchanges) except
that warrants acquired by the Fund at any time in units or attached to
securities are not subject to this limitation. Investors should note, however,
that neither Fund currently intends to purchase any warrants whatsoever, or to
acquire any put option that may be sold, transferred or assigned separately from
the underlying security.
Whenever an investment policy or limitation states a maximum percentage of
a Fund's assets that may be invested in any security or other asset or sets
forth a policy regarding quality standards, such standard or percentage
limitation shall be determined immediately after and as a result of a Fund's
acquisition of such security or other asset. Accordingly, any later increase or
decrease resulting from a change in values, net assets, or other circumstances
will not be considered when determining whether the investment complies with
each Fund's investment policies and limitations.
For purposes of determining industry classifications of issuers,
wholly-owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of the parents, and utilities will be classified according to their
services (for example, gas, gas transmission, electric and gas, and electric and
telephone each will be considered a separate industry). In accordance with the
current views of the staff of the SEC and as a matter of nonfundamental policy
that may be changed without a vote of shareholders, a Fund will treat all
supranational organizations as a single industry and each foreign government
(and all of its agencies) as a separate industry.
TRUSTEES AND OFFICERS
Trustees and officers of the Trust, together with information as to their
principal business occupations during at least the last five years, are shown
below. None of the Trustees is considered to be an "interested person" of the
Trust or of the Advisor, as defined in the 1940 Act.
B-6
<PAGE> 934
DENNIS W. DRAPER, Trustee. Dr. Draper, age 46, has been an Associate Professor
of Finance, at University of Southern California since 1978; Director of
Data Analysis, Inc. (financial services); and Editorial Board Member of
Chicago Board of Trade. His address is School of Business, Hoffman 701-F,
University of Southern California, Los Angeles, California 90089.
JOSEPH N. HANKIN, Trustee. Dr. Hankin, age 55, has been President, Westchester
Community College since 1971; President of Hartford Junior College from
1967 to 1971; Adjunct Professor of Columbia University Teachers College
since 1976. His address is Westchester Community College, 75 Grasslands
Road, Valhalla, New York 10595.
JOHN E. HEILMANN, Trustee. Mr. Heilmann, age 64, is retired and the former
Chairman, President and Chief Executive Officer of Distillers Somerset,
Inc. and Norwood Enterprises, Inc. from 1987-1992. His address is Old
Norwood Plantation, Route 1, Box II A, Winginia, Virginia 24599.
JACK D. HENDERSON, ESQ., Trustee. Mr. Henderson, age 68, is an attorney
currently working as a sole practitioner. From July 1990 to October 1995,
he was a partner of the law firm of Clanahan, Tanner, Downing & Knowlton,
P.C. He is a Trustee of Westcore Trust (a mutual fund family). His address
is 1600 Broadway, Suite 1410, Denver, Colorado 80202.
RICHARD A. WEDEMEYER, Trustee. Mr. Wedemeyer, age 60, has been Vice President
of Performance Advantage, Inc., since 1992; Vice President of Jim Henson
Productions from 1979 to 1992; Author of In Transition (Harper Collins);
co-founder and co-conductor of Harvard Business School Club of New York
Career Seminar; Trustee of Jim Henson Legacy Trust. His address is 17 High
Street, Suite 301, Norwalk, Connecticut 06851.
MICHAEL C. PETRYCKI, President. Mr. Petrycki, age 53, has been Executive Vice
President and Director of Furman Selz since 1984. His address is 237 Park
Avenue, New York, New York 10017.
JOHN J. PILEGGI, Vice President and Treasurer. Mr. Pileggi, age 37, has been
Managing Director of Furman Selz, from 1984 to 1992, Senior Managing
Director, since 1992 and a Director of Furman Selz since 1994. His address
is 237 Park Avenue, New York, New York 10017.
MARK J. DUGGAN, Vice President and Secretary. Mr. Duggan, age 31, has been
Assistant Vice President and Counsel of The Boston Company Advisers, Inc.
("TBCA") since January 1994 and Counsel to TBCA since May 1993. From
September 1990 to May of 1993, he was a corporate associate in the law firm
of Ropes & Gray. His address is 1 Boston Place, Boston, MA 02108-4402.
ELLEN M. FURLONG, Vice President and Treasurer. Ms. Furlong, age 39, has been a
Vice President of Boston Safe Deposit and Trust Company, heading the firm's
custody administration division since 1991. From November 1989 to 1991, she
was Assistant Vice President of The Boston Company Advisors, Inc., also in
the area of custody administration. Her address is 1 Cabot Road, Medford,
MA 02155-5159.
KEVIN F. MAWE, Assistant Secretary. Since September 1994, Mr. Mawe, age 41, has
served as Senior Counsel to Boston Safe Deposit & Trust Company ("BSD&T").
From 1990 to September 1994 he was Associate Counsel to Mellon Bank, N.A.
His address is 1 Boston Place, Boston, MA 02108-4402.
STEPHEN P. BROWNE, Assistant Treasurer. Mr. Browne, age 33, has been a Vice
President of Boston Safe Deposit and Trust Company since August 1992. From
1990 to August of 1992, he served as an Assistant Vice President of The
Boston Company Advisers, Inc. His address is 1 Cabot Road, Medford, MA
02155-5159.
The authority of each of the officers listed above, with the exception of
Messrs. Petrycki and Pileggi, is limited solely to matters related to the Funds.
Such officers have no authority over the affairs of the other portfolios of the
Trust. By virtue of the responsibilities assumed by the Trust's service
contractors, the Trust requires no employees other than its officers. Further,
none of the Trust's officers devotes full time to the affairs of the Trust. No
officer, director, or employee of the Trust's service contractors, or of any of
their parents or subsidiaries, receives any compensation from the Trust for
serving as a Trustee or officer of the
B-7
<PAGE> 935
Trust, although such service contractors receive fees for the advisory,
administrative, custodial and other services they provide to the Trust. Each
Trustee receives $10,000 per annum plus $2,500 per regular meeting attended,
$2,500 per committee meeting attended, and reimbursement for travel and
out-of-pocket expenses.
For the twelve-month period ended September 30, 1995, the Trustees received
the following compensation from the Trust:
<TABLE>
<CAPTION>
PENSION
OR RETIREMENT TOTAL
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL COMPENSATION FROM
COMPENSATION AS PART OF BENEFITS UPON REGISTRANT AND
NAME OF TRUSTEE FROM THE TRUST TRUST EXPENSE RETIREMENT FUND COMPLEX
- ------------------------------------ -------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Dennis W. Draper.................... $ 10,456 $0 $0 $10,456
Joseph N. Hankin.................... $ 11,250 $0 $0 $11,250
John E. Heilmann.................... $ 11,250 $0 $0 $11,250
Jack D. Henderson................... $ 10,456 $0 $0 $30,956(1)
Richard A. Wedemeyer................ $ 11,250 $0 $0 $11,250
</TABLE>
- ---------------
(1) Includes amounts received for services as a member of the Board of Trustees
of the Westcore Trust.
As of the date of this SAI, the Trust's Trustees and officers as a group
own less than 1% of the outstanding shares of each Fund.
MANAGEMENT OF THE FUNDS
Investment Advisory Agreement
First Interstate Capital Management, Inc., previously named First
Interstate Investment Services, Inc., serves as the Funds' investment advisor
pursuant to an Investment Advisory and Management Agreement dated October 1,
1994 (the "Investment Advisory and Management Agreement"). FICM is located at
7501 East McCormick Parkway, Scottsdale, Arizona 85258, and is a wholly-owned
subsidiary of First Interstate Bank of California ("FICAL") which is a
wholly-owned subsidiary of First Interstate Bancorp (a bank holding company with
headquarters in Los Angeles, California).
The Investment Advisory and Management Agreement will continue in force
with respect to each Fund until March 17, 1996. Thereafter, its continuance with
respect to a Fund is subject to annual approval by (i) the Trust's Board of
Trustees or (ii) the affirmative vote of a majority (as defined in the 1940 Act)
of the outstanding voting securities of such Fund, provided that in either event
the continuance is also approved by a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of any party to such
agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. The Investment Advisory and Management Agreement is terminable
with respect to either Fund without penalty, by the Board of Trustees, by vote
of the holders of a majority of the Fund's outstanding shares, or by FICM upon
not less than sixty days' written notice. The Investment Advisory and Management
Agreement will terminate automatically in the event of its assignment.
Under the Investment Advisory and Management Agreement, FICM supervises and
assists in the overall management of the Trust. Subject to the supervision of
the Board of Trustees, FICM manages the Funds' investments in accordance with
the stated policies of each Fund. FICM makes investment decisions for the Funds
and places purchase and sale orders for portfolio transactions. FICM provides
the Funds with investment officers who are authorized by the Board of Trustees
to execute purchases and sales of securities. For this purpose the Trustees have
appointed the following officers or employees of FICM to serve as Assistant Vice
Presidents -- Investment and Administration of the Trust: G. Edward Means,
Senior Vice President of FICM; Michael Hughes, Vice President of FICM; Michael
Neitzke, Vice President of FICM; Nicholas Ro, Vice President of FICM; and
Kimberly Savilonis, Assistant Vice President of FICM. In addition, FICM's
management responsibilities include, among other things, furnishing economic and
statistical information as requested by the Board of Trustees and monitoring the
Funds' arrangements with Service Organizations.
B-8
<PAGE> 936
As compensation for services rendered by FICM to the Funds, FICM is
entitled to a fee, computed daily and paid monthly, at an annual rate of 0.30%
of the first $500 million of the average daily net assets of each Fund
(considered separately on a Fund-by-Fund basis), 0.25% of the next $500 million
of each Fund's average daily net assets, and 0.20% of each Fund's average daily
net assets in excess of $1 billion. Prior to October 1, 1994 FICM, served as
investment advisor to each of the Funds, and affiliates of FICM served as
sub-investment advisor. For the year ended September 30, 1995, FICM voluntarily
reduced its advisory and management fee for each Fund by an annual rate of 0.18%
with respect to the Prime Money Market Fund and 0.18% with respect to the
Treasury Money Market Fund. For the six month period ended September 30, 1994,
FICM voluntarily reduced its advisory and management fee for each Fund by an
annual rate of 0.38% with respect to the Prime Money Market Fund and 0.37% with
respect to the Treasury Money Market Fund. For the fiscal year ended March 31,
1994, FICM voluntarily reduced its advisory and management fee for each Fund by
an annual rate of 0.38 % with respect to the Prime Money Market Fund and 0.37%
with respect to the Treasury Money Market Fund. For the fiscal year ended March
31, 1993, FICM voluntarily reduced its advisory and management fee for each Fund
by an annual rate of 0.37%. The monthly advisory and management fee was further
reduced voluntarily by the amounts the Funds agreed to pay to Service
Organizations. As a result, FICM actually received an advisory and management
fee at an annual rate of 0.12% of the value of the Prime Money Market Fund's
average daily net assets and 0.13% of the value of the Treasury Money Market
Fund's average daily net assets for the fiscal year ended September 30, 1995;
0.12% of the value of the Prime Money Market Fund's average daily net assets and
0.13% of the value of the Treasury Money Market Fund's average daily net assets
for the six-month fiscal period ended September 30, 1994; 0.12% of the value of
the Prime Money Market Fund's average daily net assets and 0.13% of the value of
the Treasury Money Market Fund's average daily net assets for the fiscal year
ended March 31, 1994; 0.12% of the value of each Fund's average daily net assets
for the fiscal year ended March 31, 1993. During the fiscal year ended September
30, 1995, the six-month fiscal period ended September 30, 1994 and the fiscal
years ended March 31, 1994 and 1993, the advisory fees paid to FICM by the Prime
Money Market Fund were $693,315, $330,715, $737,811 and $640,620, respectively.
During the fiscal year ended September 30, 1995, the six-month fiscal period
ended September 30, 1994 and the fiscal years ended March 31, 1994 and 1993, the
advisory fees paid to FICM by the Treasury Money Market Fund were $1,160,424,
$454,029, $900,919 and $629,121, respectively. Prior to October 1, 1994 all of
these fees were, in turn, paid by FICM to its affiliates which served as
sub-investment advisors during the periods indicated.
Pursuant to state securities regulations applicable to the Fund, FICM has
agreed that if, in any fiscal year, the aggregate expenses of a Fund (as defined
under the securities regulations of any such state having jurisdiction over the
Fund), exceed the expense limitations of any such state, FICM will reimburse the
Fund for such excess expenses to the extent described in any written undertaking
provided by FICM or the Trust to such state. To the knowledge of the Trust, as
of the date of this SAI, the most restrictive expense limitation limits
aggregate annual expenses, including management and advisory fees but excluding
interest, taxes, brokerage commissions, and certain other expenses, to 2 1/2% of
the first $30 million of each Fund's average net assets, 2% of the next $70
million, and 1 1/2% of its remaining average net assets.
Expenses incurred in the organization and operation of each Fund, including
taxes, interest, penalties, brokerage and other fees and commissions, if any,
fees and expenses of Trustees, SEC fees and related expenses, state Blue Sky
qualification fees, advisory fees, administration fees, charges of custodians,
costs of transfer and dividend disbursing agents, certain insurance premiums,
outside auditing and legal expenses, costs of maintenance of trust existence,
costs of independent pricing services, investor services, preparation and
printing of prospectuses for regulatory purposes and for distribution to
shareholders, shareholders' reports and shareholders' meetings, costs of the
Funds' arrangements with Service Organizations and extraordinary expenses, are
borne by each Fund. Certain expenses that are directly incurred by or attributed
to a particular class of shares of a Fund will be charged solely to shareholders
of that class of shares. Currently, the only expenses that are allocated
differently between a Fund's separate classes of shares are expenses arising
from the Service Agreements entered into by the Trust with certain institutions,
and distribution payments made by the Fund's Investor Shares.
B-9
<PAGE> 937
Banking laws and regulations, including the Glass-Steagall Act as presently
interpreted by the Board of Governors of the Federal Reserve System, (a)
prohibit a bank holding company registered under the Federal Bank Holding
Company Act of 1956 (the "Holding Company Act") or any bank or non-bank
affiliate thereof from sponsoring, organizing, or controlling a registered,
open-end investment company continuously engaged in the issuance of its shares,
and prohibit banks generally from underwriting securities, but (b) do not
prohibit such a bank holding company or affiliate generally from acting as
investment advisor, transfer agent, or custodian to such an investment company,
or from purchasing shares of such a company as agent for and upon the order of a
customer. In some states, banks or other institutions through which transactions
in Fund shares are effected, may be required to register as dealers pursuant to
state law.
FICM, FICAL, and the Service Organizations that are governed by banking
laws and regulations believe that they may perform services for the Funds
without violating the Glass-Steagall Act. There have, however, been no cases
deciding whether a bank and its affiliates may perform services comparable to
those performed by either FICM, FICAL, or the Service Organizations, and future
changes in either federal or state statutes or regulations relating to the
permissible activities of banks or trust companies or their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of present and future statutes and regulations, could prevent
FICM, FICAL, or the Service Organizations from continuing to perform services
for the Funds or from continuing to purchase Fund shares for the accounts of
customers. If FICM, FICAL, or the Service Organizations were prohibited from
providing services to the Funds, it is expected that the Board of Trustees would
make other arrangements and that shareholders would not suffer adverse
consequences. Any new advisory agreement would be subject to shareholder
approval.
On the other hand, legislation has been introduced in Congress from time to
time which, if enacted, would permit a bank holding company subsidiary to
organize, sponsor and distribute shares of investment companies such as the
Funds notwithstanding present restrictions under the Glass-Steagall Act and the
Holding Company Act. As described herein, the Funds are currently distributed by
PFD Inc. and receive certain administrative services from The Dreyfus
Corporation. If current restrictions preventing a bank holding company
subsidiary from legally sponsoring, organizing, controlling and distributing
shares of an investment company were relaxed, it is anticipated that FICM,
FICAL, or the Service Organizations would consider the possibility of offering
to perform additional services for the Funds.
It is not possible of course, to predict whether or in what form such
legislation might be enacted or the terms upon which FICM, FICAL, or the Service
Organizations might offer to provide services for consideration by the Board of
Trustees.
FICM's investment advisory agreement provides that FICM shall not be liable
for any error of judgment or mistake of law, or in any other event whatsoever,
except by reason of a breach of fiduciary duty with respect to the receipt of
compensation for services or for loss resulting from willful misfeasance, bad
faith or gross negligence in the performance of its duties or from the reckless
disregard of its obligations and duties under the agreement.
Administration Agreement
Pursuant to an Administration Agreement dated as of October 1, 1994 (the
"Administration Agreement"), The Dreyfus Corporation (the "Administrator")
serves as administrator for the Funds. Under the Administration Agreement, the
Administrator supplies office facilities; provides statistical and research
data, data processing services, clerical, accounting and bookkeeping services,
internal auditing and legal services, and internal executive and administrative
services; prepares reports to shareholders; prepares reports to and filings with
the SEC and state securities authorities; prepares tax returns; calculates the
net asset value of Fund shares and dividends and capital gains distributions to
shareholders; and generally assists in all aspects of the Funds' operations
(except with respect to services provided by the Funds' investment advisor). For
these administrative services, the Administrator is entitled to receive a fee at
the annual rate of 0.10% of each Fund's average daily net assets. During the
fiscal year ended September 30, 1995, the six-month fiscal period ended
September 30, 1994 and the fiscal years ended March 31, 1994 and 1993, the
administration fees paid
B-10
<PAGE> 938
to the Administrator by the Prime Money Market Fund were $577,763, $275,596,
$614,901 and $533,850, respectively. During the fiscal year ended September 30,
1995, the six-month fiscal period ended September 30, 1994 and the fiscal years
ended March 31, 1994 and 1993, the administration fees paid to the Administrator
by the Treasury Money Market Fund were $921,886, $347,499, $690,137 and
$524,268, respectively.
The Administration Agreement with the Administrator will continue in effect
automatically with respect to each Fund for successive annual periods ending on
March 17th of each year, provided such continuation is approved at least
annually by the Board of Trustees or by the vote of a majority of the
outstanding shares of the particular Fund involved (as defined in the 1940 Act),
and by a majority of the Trustees who are not interested persons of any party to
the Administration Agreement by vote cast in person at a meeting called for such
purpose. The Administration Agreement is terminable at any time with respect to
either Fund by the Board of Trustees or by a vote of a majority of the Fund's
outstanding shares upon 60 days' notice to the Administrator, or by the
Administrator upon not less than 90 days' notice to the Trust.
The Administration Agreement provides that the Administrator shall not be
liable for any error of judgment or mistake of law or any loss suffered by the
Funds or its security holders in connection with the performance of the
Administration Agreement, except a loss resulting from willful misfeasance, bad
faith or gross negligence in the performance of its duties or from the reckless
disregard by it of its obligations and duties thereunder.
If the aggregate expenses of either Fund in any fiscal year exceed the
expense limitations imposed by applicable state securities regulations, the Fund
may deduct from the fees to be paid with respect to such Fund to the
Administrator, or the Administrator will bear, to the extent required by such
regulations, that portion of such excess which bears the same relation to the
total excess as the Administrator's fees bear to the total administration and
investment advisory and management fees otherwise payable for the fiscal year by
the Fund involved to the Administrator and the Funds' investment advisor. Such
amount, if any, will be estimated daily, and reconciled and effected or paid, as
the case may be, on a monthly basis. The Administrator may also voluntarily
waive its fee from either Fund from time to time.
Distribution Contract
The Trust has retained Pacifica Funds Distributor Inc., an affiliate of
Furman Selz, to serve as principal underwriter for the Funds' Service and
Institutional Shares pursuant to a Distribution Contract dated as of October 1,
1995. Service and Institutional Shares of each Fund are sold on a continuous
basis by PFD Inc. PFD Inc. is not obliged to sell any particular amount of
shares.
Service Organizations
The Trust may enter into Service Agreements with certain institutions that
are record shareholders in the Funds ("Service Organizations"), providing that
the Service Organizations will render support services to their customers
("Customers") who are the beneficial owners of Service and Institutional Shares
in consideration of the Funds' payment of up to 0.25% (on an annual basis) of
the average daily net asset value of the Service and Institutional Shares held
by the Service Organizations for the benefit of their Customers. Currently, the
Funds make payments to Service Organizations at the rate of 0.21% (on an annual
basis) of the average daily net asset value of Service Shares. The Funds do not
intend to make any payments to Service Organizations with respect to
Institutional Shares during the current fiscal year. All payments made under
Servicing Agreements with respect to a particular class of shares are borne by
that class. The services provided by a Service Organization may include: (i)
aggregating and processing purchase and redemption requests from Customers; (ii)
providing Customers with a service that invests the assets of their accounts in
Fund shares; (iii) processing dividend payments from the Funds; (iv) providing
information periodically to Customers; (v) arranging for bank wires; (vi)
responding to Customer inquiries; (vii) providing sub-accounting with respect to
Fund shares beneficially owned by Customers; (viii) forwarding shareholder
communications; and (ix) other similar services requested by the Trust.
Agreements with the Service
B-11
<PAGE> 939
Organizations are terminable at any time by the Trust without penalty. FICM
intends to waive a portion of the advisory fee otherwise payable by a Fund on
assets invested by Customers of Service Organizations to the extent that the
investment advisory fees paid by a Fund to FICM plus the fees paid by the Fund
to Service Organizations exceed the annual rate of 0.50% the Fund's average
daily net assets. For the fiscal year ended September 30, 1995, the six-month
fiscal period ended September 30, 1994, and the fiscal years ended March 31,
1994 and 1993, the Prime Money Market Fund paid, with respect to Service Shares,
$899,761, $413,393, $922,351 and $800,774, respectively, to Service
Organizations. For the same periods, the Treasury Money Market Fund paid, with
respect to Service Shares, $1,461,465, $521,248, $1,035,205 and $786,402,
respectively, to Service Organizations. Of these amounts, for the fiscal year
ended September 30, 1995, the six-month fiscal period ended September 30, 1994
and the fiscal years ended March 31, 1994 and 1993, respectively, a total of
$2,356,348, $924,045, $1,935,703 and $1,551,971 was paid to FICAL, and other
affiliates of First Interstate Bancorp; and a total of $4,878, $10,596, $21,853
and $35,205 was paid to Western Asset Management Company, a prior affiliate of
FICAL. For the fiscal year ended September 30, 1995, the six-month fiscal period
ended September 30, 1994, and the fiscal years ended March 31, 1994 and 1993,
the Service Organizations voluntarily waived fees aggregating $531,426,
$275,596, $614,901 and $533,850, respectively, with respect to the Service
Shares of the Prime Money Market Fund and $831,033, $347,498, $690,137 and
$524,268 and $202,442, respectively, with respect to the Service Shares of the
Treasury Money Market Fund. With respect to the Institutional Shares of the
Funds, for the period from their commencement of operations on August 11, 1995
to the fiscal year end on September 30, 1995, no fees were paid to Service
Organizations.
Depending upon the terms governing the particular Customer accounts,
Service Organizations may charge Customers directly for cash management and
other services provided in connection with the accounts, including, for example,
account maintenance fees, compensating balance requirements, or fees based upon
account transactions, assets, or income. A Customer should therefore read this
SAI in light of the terms of the account with a Service Organization before
purchasing Fund shares.
PURCHASE OF SERVICE AND INSTITUTIONAL SHARES
The Funds' Service and Institutional Shares are sold at the net asset value
next determined after federal funds (monies of member banks within the Federal
Reserve System which are held on deposit at a Federal Reserve Bank) are received
by the transfer agent, as hereafter provided.
Orders for the purchase of Service and Institutional Shares are effected as
of the business day an order is received if federal funds are received by the
Funds by 12:00 noon, Pacific time. If federal funds are received at or after
12:00 noon, Pacific time, orders are effected the next business day.
All Service and Institutional Shares purchased are credited to the
appropriate shareholder's account at the net asset value determined as described
below. Service and Institutional Shares begin accruing income dividends on the
day on which shares are purchased and continue to accrue dividends through the
day before the Shares are redeemed.
In order to maximize earnings the Funds intend to be as completely invested
as is feasible. The Funds are required to make immediate settlement in federal
funds for portfolio securities purchased.
REDEMPTION OF SERVICE AND INSTITUTIONAL SHARES
Upon receipt of a proper request by the transfer agent, the Funds will
redeem Service and Institutional Shares at their next determined net asset
value. Customers should submit redemption requests to their Banks in accordance
with the instructions and limitations of the Banks.
Requests for redemption of Service and Institutional Shares are processed
after a proper redemption request is received by the Fund's transfer agent. If
such requests are received by the Fund's transfer agent on a business day by
12:00 noon, Pacific time, the Shares are redeemed at the net asset value
determined as of 12:00 noon, Pacific time, on that day; if requests are received
by the transfer agent at or after 12:00 noon, Pacific time, the redemption is
made at the net asset value determined as of 12:00 noon, Pacific time, on the
next business day.
B-12
<PAGE> 940
Ordinarily, the Funds will transmit payment for all Service and
Institutional Shares redeemed within two business days after a redemption
request is executed, but in any event payment will be made within seven days
thereafter. The right of redemption may be suspended or the date of payment
postponed (a) during any period when the New York Stock Exchange is closed
(other than customary weekend and holiday closings), (b) when trading in the
markets the Funds ordinarily utilize is restricted, or when an emergency exists
as determined by the SEC so that disposal of a Fund's investments or
determination of its net asset value is not reasonably practicable, or (c) for
such other periods as the SEC by order may permit to protect the Funds'
shareholders.
The Trust may suspend redemption rights or postpone redemption payments (as
well as suspend the recordation of the transfer of shares) for such periods as
are permitted under the 1940 Act. The Trust may also redeem Service and
Institutional Shares involuntarily or make payment for redemption in securities
or other property if it appears appropriate to do so in light of the Trust's
responsibilities under the 1940 Act.
In addition, the Trust may redeem Service and Institutional Shares
involuntarily to reimburse a Fund for any loss sustained by reason of the
failure of a shareholder to make full payment for the shares purchased by the
shareholder or to collect any charge relating to a transaction effected for the
benefit of a shareholder which is applicable to Service or Institutional Shares
of a Fund as provided from time to time in the Prospectus.
All redemptions of shares of the Funds will be made in cash, except that
the commitment to redeem shares in cash extends only to redemption requests made
by each shareholder of a Fund during any 90-day period of up to the lesser of
$250,000 or 1% of the net asset value of that Fund at the beginning of such
period. This commitment is irrevocable without the prior approval of the SEC and
is a fundamental policy of the Funds that may not be changed without shareholder
approval. In the case of redemption requests by shareholders in excess of such
amounts, the Board of Trustees reserves the right to have the Funds make
payment, in whole or in part in securities or other assets, in case of an
emergency or any time a cash distribution would impair the liquidity of a Fund
to the detriment of the existing shareholders. In this event, the securities
would be valued in the same manner as the securities of the Fund are valued. If
the recipient were to sell such securities, he or she would incur brokerage
charges.
DETERMINATION OF NET ASSET VALUE
The net asset value per share ("NAV") for each share class of both Funds is
determined as of 12:00 noon, Pacific time, on days on which the Trust is open
for business (i.e., days on which the San Francisco branch of the Federal
Reserve Bank and First Interstate Bank of California, the Funds' custodian, and
in the case of the Treasury Money Market Fund, the New York Stock Exchange, are
open for business -- "business days"). For 1996, the San Francisco branch of the
Federal Reserve Bank and the Funds' custodian have designated the following
holiday closings: New Year's Day (observed), Martin Luther King, Jr. Day,
Presidents' Day (observed), Good Friday, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day, and Christmas Day. The San
Francisco branch of the Federal Reserve Bank or the Funds' custodian may
designate different dates for the observance of these holidays as well as
designate different holidays for closing in the future. To the extent that the
Funds' securities are traded on various markets on days when the Federal Reserve
Bank of San Francisco or the Funds' custodian is closed, a Fund's NAV may be
affected on days when the shareholders may not purchase or redeem shares. NAV of
each class of shares of the Funds is computed by dividing the value of a Fund's
assets allocable to that class, less the liabilities charged to that class, by
the total number of outstanding shares of that class.
The Funds' instruments are valued on the basis of amortized cost. This
technique involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower than the
price the Fund would receive if it sold the instrument. During periods of
declining interest rates, the daily yield on shares of a Fund computed as
described above may tend to be higher than a
B-13
<PAGE> 941
like computation made by a fund with identical investments utilizing a method of
valuation based upon market prices and estimates of market prices for all of its
instruments. Thus, if the use of amortized cost by a Fund resulted in a lower
aggregate portfolio value on a particular day, a prospective investor in the
Fund would be able to obtain a somewhat higher yield than would result from
investment in a fund utilizing solely market values and existing investors in a
Fund would receive less investment income. The converse would apply in a period
of rising interest rates.
The valuation of the Funds' instruments, based upon their amortized cost
and the concomitant maintenance by each Fund of a net asset value of $1.00, is
permitted in accordance with Rule 2a-7 under the 1940 Act, pursuant to which
each Fund must adhere to certain conditions. Each Fund must maintain a dollar-
weighted average maturity of 90 days or less, purchase only instruments having
remaining maturities of thirteen months or less, and invest only in securities
which are determined to present minimal credit risks pursuant to guidelines
adopted by the Trustees. Instruments having variable or floating interest rates
or demand features may be deemed to have remaining maturities as follows: (a) a
government security with a variable rate of interest readjusted no less
frequently than every thirteen months may be deemed to have a maturity equal to
the period remaining until the next readjustment of the interest rate; (b) an
instrument with a variable rate of interest, the principal amount of which is
scheduled on the face of the instrument to be paid in thirteen months or less,
may be deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate; (c) an instrument with a variable rate of
interest that is subject to a demand feature may be deemed to have a maturity
equal to the longer of the period remaining until the next readjustment of the
interest rate or the period remaining until the principal amount can be
recovered through demand; (d) an instrument with a floating rate of interest
that is subject to a demand feature may be deemed to have a maturity equal to
the period remaining until the principal amount can be recovered through demand;
and (e) a repurchase agreement may be deemed to have a maturity equal to the
period remaining until the date on which the repurchase of the underlying
securities is scheduled to occur or, where no date is specified but the
agreement is subject to demand, the notice period applicable to a demand for the
repurchase of the securities.
The Trustees have established procedures designed to stabilize, to the
extent reasonably possible, each Fund's price per share as computed for the
purpose of sales and redemptions at a single value. Such procedures will include
the determination, at such intervals as the Trustees deem appropriate, of the
extent to which each Fund's NAV as calculated by using available market
quotations deviates from $1.00 per share, and whether such deviation may result
in material dilution or other unfair results to existing shareholders or
investors. In the event the Trustees determine that such a material deviation
exists, they have agreed to take such corrective action as they regard as
necessary and appropriate, which may include selling portfolio instruments prior
to maturity to realize capital gains or losses or to shorten average portfolio
maturity; withholding dividends; redeeming shares in kind or without monetary or
other consideration; or establishing a net asset value per share by using
available market quotations. It is the intention of each Fund to maintain a per
share net asset value of $1.00, but there can be no assurance that either Fund
will do so.
DIVIDENDS AND DISTRIBUTIONS
Each Fund ordinarily declares dividends from its net investment income on
each day that the Fund is open for business. Dividends usually are payable
within five business days after the end of each month. Each Fund's earnings for
non-business days are declared as dividends to the shareholders of record on the
preceding business day.
If an investor redeems all shares in its account at any time during the
month, all dividends declared to the day prior to redemption are paid to the
investor within five business days after the end of the month by crediting its
bank account or, if this is not possible, in cash. Distributions of realized
securities gains, if any, are declared and paid at least annually.
Each Fund seeks to maintain a net asset value of $1.00 per share for
purposes of purchases and redemptions, although there can be no assurance that
either Fund will do so. To effectuate this policy, under
B-14
<PAGE> 942
certain circumstances the Board of Trustees may consider the advisability of
temporarily reducing or suspending declaration of daily dividends, or the
advisability of making a capital gains or other distributions. See
"Determination of Net Asset Value."
TAXES
Each Fund has qualified and intends to continue to qualify each year as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended. By so qualifying, the Funds will not be subject to federal
income taxes to the extent that they distribute their taxable net investment
income and net realized capital gains, if any. Net investment income and net
realized capital gains, if any, will be distributed to investors of the Fund
that realized the income or gain. Distributions of net investment income and
capital gains are taxable to those investors who are not exempt from federal
income taxes. It is expected that each Fund will distribute any net realized
short-term gains (unless negligible in amount) at least annually. Neither Fund
expects to realize any long-term capital gains. Each Fund will be treated
separately for federal tax-purposes.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gain or loss. However, all or a portion of the gain realized
from the disposition of certain market discount bonds will be treated as
ordinary income under Section 1276 of the Code.
The Prime Money Market Fund has an unused capital loss carryover of
approximately $103,100 available for federal income tax purposes to be applied
against future profits from sales of securities, if any, realized subsequent to
September 30, 1995. If not applied, $46,700 expires on September 30, 1999 and
$56,400 expires on September 30, 2000.
For federal income tax purposes, an exchange of shares is a taxable event
and, accordingly, a capital gain or loss may be used. Please consult a tax or
other financial advisor to determine the tax consequences of a particular
exchange.
Dividends derived from net investment income, together with distributions
from the excess, if any, of net realized short-term gains over net realized
long-term losses and gains from the sale or other disposition of certain market
discount bonds paid by each Fund to a foreign investor generally are subject to
U.S. nonresident withholding taxes at the rate of 30%, unless the foreign
investor claims the benefit of a lower rate specified in a tax treaty.
Distributions from the excess, if any, of net realized long-term securities
gains over net realized short-term securities losses paid by each Fund to a
foreign investor will not be subject to any U.S. withholding taxes. However,
such distributions may be subject to backup withholding, as described in the
Fund's Prospectuses, unless the foreign investor certifies his non-U.S.
residency status. Different tax consequences may apply to foreign investors
engaged in a U.S. trade or business. Foreign investors should consult their tax
advisors regarding the U.S. and foreign tax consequences of investing in the
Funds.
YIELD CALCULATIONS
The "yields" and "effective yields" of each Fund described in the
Prospectuses are calculated according to formulas prescribed by the SEC. The
standardized seven-day yields for the respective classes of shares of a Fund are
computed separately for each class by determining the net change, exclusive of
capital changes, in the value of a hypothetical pre-existing account in the Fund
having a balance of one share at the beginning of the period, dividing the net
change in account value by the value of the account at the beginning of the base
period to obtain the base period return, and multiplying the base period return
by (365/7). The net change in the value of an account in each Fund includes the
value of additional shares purchased with dividends from the original share, and
dividends declared on both the original share and any such additional shares,
and all fees, other than non-recurring account or sales charges, that are
charged to all shareholder accounts in proportion to the length of the base
period and the Fund's average account size. The capital changes to be excluded
from the calculation of the net change in account value are realized gains and
losses from the sale of securities and unrealized appreciation and depreciation.
The effective annualized yields for a Fund are also computed separately for each
class by compounding the unannualized base period return (calculated as
B-15
<PAGE> 943
above) by adding 1 to the base period return, raising the sum to a power equal
to 365 divided by 7, and subtracting 1 from the result. The fees which may be
imposed by Banks for cash management services in connection with investments in
shares of the Funds are not reflected in the Funds' yields, and any such fees,
if charged, will reduce the actual return received by Customers for their
investments. For the seven-day period ended September 30, 1995, the Prime Money
Market Fund's yield and effective yield on Service Shares were 5.46% and 5.60%,
respectively, and on Institutional Shares were 5.67% and 5.83%, respectively.
For the seven-day period ended September 30, 1995, the Treasury Money Market
Fund's yield and effective yield on Service Shares were 5.29% and 5.42%
respectively, and on Institutional Shares were 5.52% and 5.66%, respectively.
During this seven-day period, the Investment Advisor and Service Organizations
waived portions of their fees amounting to 0.23% and 0.43% of the average daily
net assets of the Prime Money Market Fund for Service Shares and Institutional
Shares, respectively, and 0.23% and 0.43% of the average daily net assets of the
Treasury Money Market Fund for Service Shares and Institutional Shares,
respectively. With respect to the Prime Money Market Fund, had these expenses
not been waived, the yield and effective yield for the same period would have
been, 5.23 and 5.37%, respectively, for the Service Shares and 5.24% and 5.40%,
respectively, for Institutional Shares. With respect to the Treasury Money
Market Fund, had these expenses not been waived, the yield and effective yield
for the same period would have been 5.06% and 5.19%, respectively, for the
Service Shares and 5.09% and 5.23% respectively for Institutional Shares.
Yield information may be useful in reviewing the Funds' performance and for
providing a basis for comparison with other investment alternatives. However,
yields fluctuate, unlike investments which pay a fixed yield for a stated period
of time. Yields for the Funds are calculated on the same basis as other money
market funds as required by applicable regulations. Investors should give
consideration to the quality and maturity of the portfolio securities of the
respective investment companies when comparing investment alternatives.
Investors should recognize that in periods of declining interest rates, the
Funds' yields will tend to be somewhat higher than prevailing market rates, and
in periods of rising interest rates, the Funds' yields will tend to be somewhat
lower. Also, when interest rates are falling, the inflow of net new money to the
Funds from the continuous sale of their shares will likely be invested in
instruments producing lower yields than the balance of the Funds, thereby
reducing the current yields of the Funds. In periods of rising interest rates,
the opposite can be expected to occur.
PORTFOLIO TRANSACTIONS
Purchases and sales of portfolio securities usually are principal
transactions. Portfolio securities ordinarily are purchased directly from the
issuer or from an underwriter or market maker for the securities. There usually
are no brokerage commissions paid by either Fund for such purchases. Purchases
from underwriters of portfolio securities include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers serving as
market makers include the spread between the bid and asked price. While FICM
generally seeks competitive spreads or commissions, the Funds may not
necessarily be paying the lowest available spread or commission for the reasons
stated below.
The Funds' agreement with FICM provides that, in executing portfolio
transactions and selecting brokers or dealers, FICM will use its best efforts to
seek, on behalf of the Funds, the best overall terms available. In assessing the
best overall terms available for any transaction, FICM is to consider all
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the commission, if any, both for
the specific transaction and on a continuing basis.
In evaluating the best overall terms available, and in selecting the broker
or dealer to execute a particular transaction, FICM may also consider the
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) provided to either Fund and/or other
accounts over which it or an affiliate exercises investment discretion. FICM is
authorized, subject to the review of the Board of Trustees, to pay to a broker
or dealer which provides such brokerage and research services a commission for
B-16
<PAGE> 944
executing a portfolio transaction for either Fund which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if, but only if, such commission is determined in good faith to
be reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer in accordance with the provisions of Section
28(e) of the Securities Exchange Act of 1934. Information so received will
supplement but will not replace that which is to be provided by FICM, and the
fees are not reduced as a consequence of the receipt of such supplemental
information. Such information may be useful to FICM in serving both the Funds
and other clients and conversely, supplemental information obtained by the
placement of business of other clients may be useful to FICM in carrying out its
obligations to the Funds.
Investment decisions for each Fund will be made independently from those of
any fiduciary or other accounts that may be managed by FICM. However, to the
extent that the same securities transaction may be deemed to be equally suitable
at the same time for two or more accounts, the transaction will be allocated in
a manner believed to be equitable to each account. In some cases, this procedure
may adversely affect the price paid or received, or the size of the position
obtained for or disposed of, by a Fund.
The Funds do not purchase any obligations issued by First Interstate
Bancorp or its affiliates. In addition, no portfolio securities are purchased
from, sold to, or executed through First Interstate Bancorp or its affiliates.
However, First Interstate Bancorp or its affiliates engage in transactions
involving bank obligations, commercial paper, repurchase agreements, and
securities of the U.S. Government and of certain U.S. Government agencies or
instrumentalities. Such activities may have some effect on the market of such
securities, and First Interstate Bancorp and its affiliates may be competing in
the market place with the Funds in the purchase and sale of such securities.
FICM has agreed to maintain a policy and practice of conducting its
investment advisory services to the Trust independently of the commercial
banking operations of any of its affiliates.
DESCRIPTION OF THE FUNDS
Capitalization
The Trust is a Massachusetts business trust established under a Declaration
of Trust dated July 17, 1984 and consists of a series of separately managed
portfolios. Prior to February 9, 1993 the name of the Trust was Fund Source.
This SAI relates only to the Service and Institutional Shares of two of those
portfolios -- the Prime Money Market Fund and the Treasury Money Market Fund.
The capitalization of the Trust consists solely of an unlimited number of
shares of beneficial interest with a par value of $0.001 each. The Board of
Trustees may establish additional portfolios (with different investment
objectives and fundamental policies) at any time in the future. The
establishment and offering of additional portfolios will not alter the rights of
the Funds' shareholders. When issued, shares are fully paid, non-assessable,
redeemable and freely transferable. Shares do not have preemptive rights or
subscription rights.
In the event of a liquidation or dissolution of the Trust or an individual
Fund, shareholders of a particular Fund would be entitled to receive the assets
available for distribution belonging to such Fund, and a proportionate
distribution, based upon the relative net asset values of the Trust's respective
Funds, of any general assets not belonging to any particular Fund which are
available for distribution. Shareholders of a Fund are entitled to participate
in the net distributable assets of the Fund on liquidation, based on the number
of shares of the Fund that are held by each shareholder, except that each class
of shares of a Fund shall each be solely responsible for the Service
Organization fees, distribution payments and other "class" expenses, if any,
that are allocated to the particular share class.
Shareholder and Trustee Liability
The Trust is an entity of the type commonly known as a "Massachusetts
Business Trust." Under Massachusetts law, shareholders of such a trust may,
under certain circumstances, be held personally liable as partners for the
obligations of the trust. However, the Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust. The
Declaration of Trust also provides for
B-17
<PAGE> 945
indemnification out of the property of a Fund of any shareholder held personally
liable solely by reason of being or having been a shareholder of the Fund. Thus,
the risk of a shareholder incurring financial loss because of status as a
shareholder is limited to circumstances in which a Fund itself would be unable
to meet its obligations.
The Declaration of Trust further provides that the Trustees and officers
will not be liable except for liability to the Trust or its shareholders to
which he would be subject by reason of willful misfeasance, bad faith, gross
negligence in the performance of his duties, or reckless disregard of the duties
involved in the conduct of his office. The Trust may have an obligation to
indemnify its Trustees and officers with respect to any litigation.
Voting Rights
Shareholders are entitled to one vote for each full share held (and
fractional votes for fractional shares held) and will vote in the election of
Trustees (to the extent hereinafter provided) and on other matters submitted to
the vote of shareholders. Each matter to be voted on by shareholders shall be
voted by all of the Trust's outstanding shares, irrespective of portfolio,
unless a separate vote of one or more portfolios is required by the 1940 Act or
other applicable law or regulations or the Trustees determine that the
particular matter affects only the rights or interests of one or more portfolios
(and not all portfolios). Rule 18f-2 under the 1940 Act provides that any matter
required to be submitted to the holders of the outstanding voting securities of
an investment company such as the Trust shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each portfolio affected by the matter. A portfolio is
affected by a matter unless it is clear that the interests of each portfolio in
the matter are substantially identical or that the matter does not affect any
interest of the portfolio. Under the Rule, the approval of an investment
advisory agreement or any change in a fundamental investment policy, would be
effectively acted upon with respect to a portfolio only if approved by a
majority of the outstanding shares of such portfolio. However, the Rule also
provides that the ratification of the appointment of independent public
accountants, the approval of principal underwriting contracts and the election
of Trustees may be effectively acted upon by shareholders of all portfolios
voting together in the aggregate without regard to particular portfolios.
Shareholders of each of the Funds will vote in the aggregate and not by class
unless the matter to be voted on affects only the interests of the holders of a
particular class of a Fund's shares.
There normally will be no meetings of shareholders for the purpose of
electing Trustees unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders, at which time the
Trustees then in office will call a shareholders' meeting for the election of
Trustees. Pursuant to an undertaking, shareholder meetings will be called upon
the written request of the holders of at least 10% of the outstanding shares
entitled to vote. Except as set forth above, the Trustees shall continue to hold
office and may appoint successor Trustees. Voting rights are not cumulative.
As of January 17, 1996, First Interstate Bank of California and its
affiliated banks held of record substantially all of the outstanding shares of
each Fund as agent, custodian, trustee or investment advisor on behalf of their
customers. At such date the following persons held as beneficial owner five
percent or more of the outstanding shares of a Fund because they possessed sole
or shared voting or investment power with respect to such shares: Prime Money
Market Fund (Service Shares): SC UFCW JT Fds -- Benefit Operating, Colleen
Thompson, Administrator, SCUFCW, 6425 Katella Avenue, Cypress, CA
90630 -- 7.57%; Retail CLK -- Pacifica Income Advisers, 1299 Ocean Avenue, Santa
Monica, CA 90401 -- 7.81%; Prime Money Market Fund (Institutional Shares):
Cocopah Indian Tribe -- Bingo/Casino, Sherry Cordova, County 15 Avenue G,
Somerton, AZ 85350 -- 6.93%; Treasury Money Market Fund (Service Shares): San
Diego Port 95 Acquisition Fund, P.O. Box 488, San Diego, CA 92112 -- 5.17%;
Nevada Pers -- Putnam, Paul Seaman, 693 West Nye Lane, Carson City, NE
89703 -- 8.75%; Treasury Money Market Fund (Investor Shares): Pacificorp
Fdn/Becker, Brad Watkins, 700 NE Mulnomah, Suite 1600, Portland OR
97232 -- 5.42%; Nick Bunick, Nick Bunick Custom Homes, 5285 SW Meadows Road,
B-18
<PAGE> 946
Suite 377, Lake Oswego, OR 97035 -- 9.78%; CH 2M Hill Pension Trust/Becker, Rudd
Little, P.O. Box 22508, Denver, CO 80222 -- 13.45%.
As used in this SAI and the Funds' Prospectuses, a "majority of the
outstanding shares" of a portfolio means, with respect to the approval of an
investment advisory agreement, or a change in a fundamental investment policy,
the lesser of (1) 67% of the shares of the portfolio represented at a meeting at
which the holders of more than 50% of the outstanding shares of the portfolio
are present in person or by proxy, or (2) more than 50% of the outstanding
shares of the portfolio.
CUSTODIAN, TRANSFER AGENT,
COUNSEL, AND INDEPENDENT AUDITORS
FICAL, 707 Wilshire Boulevard, Los Angeles, California 90017, serves as
custodian for the Funds. As custodian, FICAL has agreed, among other things, to
keep and maintain the assets of each Fund, collect income due and payable to the
Funds, make disbursements of money on the Funds' behalf, and prepare and
maintain books and records relating to its duties. For its custodial services,
FICAL is entitled to a fee, computed daily and payable monthly, at the following
annual rates based upon the aggregate assets of the Trust: 0.021% of the first
$5 billion; 0.0175% of the next $5 billion; 0.015% of the balance over $10
billion. In addition, FICAL is entitled to certain transaction charges and to
reimbursement for its out-of-pocket expenses.
Furman Selz, 230 Park Avenue, New York, New York 10169, serves as the
transfer agent for the Funds. As transfer agent, Furman Selz has agreed to
perform such services as maintaining shareholder accounts, preparing annual
meeting lists, mailing proxies, disbursing income dividends, and filing certain
tax forms, and is entitled to reimbursement from the Funds for certain
reasonable out-of-pocket expenses incurred in connection with the performance of
its services. Furman Selz may appoint co-transfer agents and sub-dividend
disbursing agents to assist in the performance of its services to the Funds,
provided that Furman Selz shall be as fully responsible to the Funds for the
acts and omissions of any such agent as it is for its own acts and omissions.
Drinker Biddle & Reath, 1345 Chestnut Street, Philadelphia, Pennsylvania
19107, serves as counsel for the Funds.
Ernst & Young LLP, 515 South Flower Street, Los Angeles, California, have
been selected to serve as the Funds' independent auditors for the current fiscal
year. The audited financial statements which are incorporated by reference into
this SAI and the audited financial information which appears in the Funds'
Prospectuses under the heading "Financial History," for the fiscal year ended
September 30, 1995 and the six-month fiscal period ended September 30, 1994 have
been audited by Ernst & Young LLP, the Funds' current independent auditors. The
audited financial statements for the year ended March 31, 1994 which are
incorporated by reference into this SAI and the audited financial information
which appears in the Funds' Prospectuses under the heading "Financial History,"
for each of the four years in the period ended March 31, 1994 for the Funds
have been audited by the Funds' former independent accountants, Price
Waterhouse LLP. The audited financial statements that have been incorporated by
reference herein and included in the Funds' Prospectuses are so included or
incorporated in reliance on the reports of Ernst & Young LLP and Price
Waterhouse LLP given upon the authority of such firms as experts in accounting
and auditing.
FINANCIAL STATEMENTS
The financial statements included in the Funds' September 30, 1995 Annual
Report to Shareholders are incorporated by reference into this SAI. The Report
of Independent Accountants on the statements of changes in net assets of the
Funds for the year ended March 31, 1994 and the financial highlights for each
of the four years in the period ended March 31, 1994 is included as Attachment
A to this SAI. No other part of the Annual Report is incorporated by reference
herein. Copies of the financial statements may be obtained upon request and
without charge by writing to the Funds at 237 Park Avenue, New York, New York
10017 or calling 1-800-662-8417.
B-19
<PAGE> 947
APPENDIX
DESCRIPTION OF SECURITIES RATINGS
The following is a description of the securities ratings of Duff & Phelps
Credit Rating Co. ("D&P"), Fitch Investors Service, Inc. ("Fitch"), Standard &
Poor's Ratings Group, Division of McGraw Hill ("S&P"), Moody's Investors
Service, Inc. ("Moody's"), IBC Limited and IBCA Inc. ("IBCA") and Thomson
BankWatch, Inc. ("Thomson").
Long-Term Corporate Debt Rating
The two highest ratings of D&P for corporate fixed-income securities are
AAA and AA. Securities rated AAA are of the highest credit quality. The risk
factors are considered to be negligible, being only slightly more than for risk
free U.S. Treasury debt. Securities rated AA are of high credit quality.
Protection factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions. The AA rating may be modified by an
addition of a plus (+) or minus (-) sign to show relative standing within the
major rating category.
The two highest ratings of Fitch for corporate bonds are AAA and AA. AAA
bonds are considered to be investment grade and of the highest credit quality.
The obligor is judged to have an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events. AA bonds are considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds rated in
the AAA and AA categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F-1+. Plus (+)
and minus (-) signs are used with the AA rating symbol to indicate relative
standing within the rating category.
The two highest ratings of S&P for corporate bonds are AAA and AA. Bonds
rated AAA bear the highest rating assigned by S&P to a debt obligation and the
AAA rating indicates in its opinion an extremely strong capacity to pay interest
and repay principal. Bonds rated AA by S&P are judged by it to have a very
strong capacity to pay interest and repay principal, and they differ from AAA
issues only in small degree. The AA rating may be modified by an addition of a
plus (+) or minus (-) sign to show relative standing within the major rating
category.
The two highest ratings of Moody's for corporate bonds are Aaa and Aa.
Bonds rated Aaa are judged to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt edged."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issuer. The rating of Aa is assigned to
bonds which are of "high quality by all standards." Aa bonds are rated lower
than Aaa bonds because margins of protection may not be as large or fluctuations
of protective elements may be of greater amplitude or there may be other
elements which make the long-term risks appear somewhat larger. Moody's may
modify a rating of Aa by adding numerical modifiers of 1, 2 or 3 to show
relative standing within the Aa category.
The two highest ratings of IBCA for corporate bonds are AAA and AA.
Obligations rated AAA by IBCA have the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial conditions are unlikely
to increase investment risk substantially. Obligations for which there is a very
low expectation of investment risk are rated AA. Capacity for timely repayment
of principal and interest is substantial. Adverse changes in business, economic
or financial conditions may increase investment risk albeit not very
significantly. IBCA may append a rating of plus (+) or minus (-) to a rating to
denote relative status within a major rating category.
The two highest ratings of Thomson for corporate bonds are AAA and AA.
Bonds rated AAA represent the highest category assigned to long-term debt. The
ability of the obligor to repay principal and interest on a timely basis is
considered to be extremely high. Bonds rated AA indicate a very strong ability
on the part of
B-20
<PAGE> 948
the obligor to repay principal and interest on a timely basis with limited
incremental risk versus issues rated in the highest category. These ratings may
be modified by the addition of a plus (+) or minus (-) sign to show relative
standing within the rating categories.
Short-Term Corporate Debt Ratings
The highest rating of D&P for commercial paper is D-1. D&P employs three
designations, D-1+, D-1 and D-1-, within the highest rating category. D-1+
indicates highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
judged to be outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations. D-1 indicates very high certainty of timely payment.
Liquidity factors are excellent and supported by strong fundamental protection
factors. Risk factors are considered to be minor. D-1- indicates high certainty
of timely payment. Liquidity factors are strong and supported by good
fundamental protection factors. Risk factors are very small.
Fitch's short-term ratings apply to corporate debt obligations that are
payable on demand or have original maturities of up to three years. The highest
rating of Fitch for short-term securities encompasses both the F-1+ and F-1
ratings. F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of assurance
for timely payment. F-1 securities possess very strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only slightly less
in degree than issues rated F-1+.
S&P's commercial paper ratings are current assessments of the likelihood of
timely payment of debt having an original maturity of no more than 365 days. The
A-1 designation indicates that the degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics will be denoted A-1+.
Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Issuers rated Prime-1 (or related supporting
institutions) in the opinion of Moody's have a superior capacity for repayment
of short-term promissory obligations.
IBCA assesses the investment quality of unsecured debt with an original
maturity of less than one year which is issued by bank holding companies and
their principal banking subsidiaries. The designation A1+ by IBCA indicates that
the obligation is supported by the highest capacity for timely repayment. Where
issues posses a strong capacity for timely repayment, a rating of A1 is
assigned.
Thomson's short-term ratings assess the likelihood of an untimely or
incomplete payment of principal or interest of unsubordinated instruments having
a maturity of one year or less which is issued by U.S. commercial bank; thrifts
and non-bank banks; non-U.S. banks; and broker dealers. The designation TBW-1
represents the highest short-term rating category and indicates a very high
degree of likelihood that principal and interest will be paid on a timely basis.
B-21
<PAGE> 949
ATTACHMENT A
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of Pacific American Fund:
In our opinion, the statements of changes in net assets and the financial
highlights appearing in the September 30, 1995 Annual Report to Shareholders of
the Pacifica Prime Money Market Fund and the Pacifica Treasury Money Market
Fund (formerly, the Pacific American Fund) present fairly in all material
respects the changes in net assets for the year ended March 31, 1994 of Pacific
American Fund Money Market Portfolio and U.S. Treasury Portfolio and their
financial highlights for each of the four years in the period ended March 31,
1994, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Pacific American Fund's
management, our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards, which
require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining on a test basis evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at March 31, 1994 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above. We have not audited the financial statements of Pacific American Fund
Money Market Portfolio and U.S. Treasury Portfolio for any period subsequent to
March 31, 1994.
PRICE WATERHOUSE LLP
Los Angeles, California
May 4, 1994
<PAGE> 950
PACIFICA FUNDS TRUST
Money Market Trust
237 Park Avenue
New York, New York 10017
General and Account Information: (800) 662-8417
---------------------------------------------------------------------------
First Interstate Capital Management, Inc. - Investment Advisor
("FICM" or the "Advisor")
Furman Selz LLC Administrator and Sponsor
("Furman Selz" or the "Sponsor")
Pacifica Funds Distributor Inc. - Distributor
("PFD Inc." or the "Distributor")
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information ("SAI") describes the
Money Market Trust (the "Fund").
This SAI is not a prospectus and is only authorized for
distribution when preceded or accompanied by the prospectus for the Fund dated
February 1, 1996, as may be revised from time to time (the "Prospectus"). This
SAI contains additional and more detailed information than that set forth in
the Prospectus and should be read in conjunction with the Prospectus. The
Prospectus may be obtained without charge by writing or calling the Fund at the
address or information number printed above. Capitalized terms not otherwise
defined herein have the same meaning as in the Prospectus.
Shares of the Fund are not deposits or obligations of, or
guaranteed or endorsed by, any First Interstate or other bank, and are not
insured by the Federal Deposit Insurance Corporation, the Federal Reserve
Board, or any other agency. Mutual fund shares involve certain investment
risks, including the possible loss of principal.
February 1, 1996.
<PAGE> 951
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
DIVIDENDS AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . . . . . . . . . 16
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>
-2-
<PAGE> 952
GENERAL
Pacifica Funds Trust (the "Trust") is an open-end management
investment company currently offering shares in a series of separately managed
investment portfolios. This SAI relates to one of these portfolios -- Pacifica
Money Market Trust. The Trust was organized on July 17, 1984 under the name
"Fund Source." The Trust changed its name to "Pacifica Funds Trust" on
February 9, 1993. The Fund originally commenced operations on September 17,
1990 as a separate investment portfolio of Westcore Trust called the Prime
Money Market Fund. On October 1, 1995, the Fund was reorganized as a portfolio
of the Trust.
INVESTMENT POLICIES
The Prospectus discusses the investment objective of the Fund and
the policies to be employed to achieve that objective. This section contains
supplemental information concerning certain types of securities and other
instruments in which the Fund may invest, the investment policies and portfolio
strategies that the Fund may utilize, and certain risks attendant to such
investments, policies and strategies.
General
The assets of the Fund consist only of obligations maturing within
thirteen months from the date of acquisition (as determined in accordance with
the regulations of the Securities and Exchange Commission (the "SEC")), and the
dollar-weighted average maturity of the Fund may not exceed 90 days.
The securities in which the Fund may invest will not yield as high
a level of current income as may be achieved from securities with less
liquidity and less safety. There can be no assurance that the Fund's
investment objective will be realized as described in the Prospectus.
Subsequent to its purchase by the Fund, a rated security may cease
to be rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Board of Trustees or the Advisor, pursuant to
guidelines established by the Board, will consider such an event in determining
whether the Fund should continue to hold the security in accordance with the
interests of the Fund and applicable regulations of the SEC.
Subject to the general supervision and approval of the Board of
Trustees, the Advisor makes decisions with respect to and places orders for all
purchases and sales of securities for the Fund. Securities are generally
purchased and sold either directly from the issuer or from dealers who
specialize in money market instruments. Such purchases are usually effected as
-3-
<PAGE> 953
principal transactions and therefore do not involve the payment of brokerage
commissions.
Repurchase Agreements
The Fund may engage in a repurchase agreement with respect to any
security in which the Fund is authorized to invest, including U.S. Treasury
STRIPS, although the underlying security may mature in more than thirteen
months. Repurchase agreements are transactions by which the Fund purchases a
security and simultaneously commits to resell that security to the seller at an
agreed upon price, on an agreed upon date within a number of days (usually not
more than seven) from the date of purchase. The resale price reflects the
purchase price plus an agreed upon market rate of interest which is unrelated
to the coupon rate or maturity of the purchased security. A repurchase
agreement involves the obligation of the seller to pay the agreed upon price,
which obligation is in effect secured by the value of the underlying security,
which shall be at least equal to the amount of the agreed upon resale price
plus the transaction costs (including loss of interest) that the Fund could
reasonably expect to incur if the seller defaults. Securities subject to
repurchase agreements will be physically held by the Fund's custodian (or
sub-custodian) or registered in the name of the Trust or its custodian (or
sub-custodian) in a book-entry system, in the case of a security registered on
a book-entry system. While it does not presently appear possible to eliminate
all risks from these transactions (particularly the possibility of a decline in
the market value of the underlying securities, as well as delay and costs to
the Fund in connection with insolvency proceedings), it is the policy of the
Fund to limit repurchase agreements to selected securities dealers or domestic
banks or other recognized financial institutions. Repurchase agreements are
considered to be loans by the Fund under the Investment Company Act of 1940
(the "1940 Act").
Reverse Repurchase Agreements
The Fund may borrow funds for temporary purposes by entering into
reverse repurchase agreements with financial institutions such as banks and
broker-dealers in accordance with the investment limitations described in the
Prospectus. Pursuant to such an agreement, the Fund would sell portfolio
securities and agree to repurchase them at a mutually agreed upon date and
price. The Fund intends to enter into reverse repurchase agreements to avoid
otherwise having to sell securities during unfavorable market conditions in
order to meet redemptions. At the time the Fund enters into a reverse
repurchase agreement, it will place in a segregated custodial account liquid
assets such as U.S. Government securities or other liquid high-quality debt
securities having a value equal to or greater than the repurchase price
(including accrued interest) and will subsequently monitor
-4-
<PAGE> 954
the account to ensure that such equivalent value is maintained. Reverse
repurchase agreements involve the risk that the market value of the securities
sold by the Fund may decline below the price of the securities the Fund is
obligated to repurchase. Reverse repurchase agreements are considered to be
borrowings by the Fund under the 1940 Act.
Variable and Floating Rate Instruments
The Fund may acquire variable and floating rate instruments as
described in the Prospectus. Variable and floating rate instruments are
frequently not rated by credit rating agencies; however, unrated variable and
floating rate instruments purchased by the Fund will be determined by the
Advisor under guidelines established by the Board of Trustees to be of
comparable quality at the time of purchase to rated instruments eligible for
purchase by the Fund. In making such determinations, the Advisor will consider
the earning power, cash flows and other liquidity ratios of the issuers of such
instruments (such issuers include financial, merchandising, investment banking,
bank holding and other companies) and will continuously monitor their financial
condition. There may not be an active secondary market with respect to a
particular variable or floating rate instrument purchased by the Fund. The
absence of such an active secondary market could make it difficult for the Fund
to dispose of the variable or floating rate instrument involved. In the event
the issuer of the instrument defaulted on its payment obligations, the Fund
could, for this or other reasons, suffer a loss to the extent of the default.
Variable and floating rate instruments may be secured by bank letters of
credit, guarantees or lending commitments.
When-Issued Securities
The Fund may purchase securities on a "when-issued," forward
commitment or delayed settlement basis (i.e., for delivery beyond the normal
settlement date at a stated price and yield). When the Fund agrees to purchase
securities on this basis, the Fund's custodian will set aside cash or liquid
portfolio securities equal to the amount of the commitment in a separate
account. Normally the custodian will set aside portfolio securities to satisfy
a purchase commitment, and in such case the Fund may be required subsequently
to place additional assets in the separate account so that the value of the
account remains equal to the amount of the Fund's commitment. The Fund's net
assets may be expected to fluctuate to a greater degree when it sets aside
portfolio securities to cover such purchase commitments than when it sets aside
cash. The Fund does not intend to engage in these transactions for speculative
purposes but only in furtherance of its investment objective. Because the Fund
will set aside cash or liquid investments to satisfy its purchase commitments
in the manner described above,
-5-
<PAGE> 955
the Fund's liquidity may be affected in the event the Fund's forward
commitments, commitments to purchase "when-issued" securities and delayed
settlements ever exceeded 25% of the value of its assets.
The Fund will purchase securities on a "when-issued," forward
commitment or delayed settlement basis only with the intention of completing
the transaction. If deemed advisable as a matter of investment strategy,
however, the Fund may dispose of or renegotiate a commitment after it is
entered into, and may sell securities it has committed to purchase before those
securities are delivered to the Fund on the settlement date. In this case the
Fund may realize a taxable capital gain or loss. When the Fund engages in
"when-issued," forward commitment and delayed settlement transactions, it
relies on the other party to consummate the trade. Failure of such party to do
so may result in the Fund incurring a loss or missing an opportunity to obtain
a price considered to be advantageous. The market value of the securities
underlying a "when-issued" purchase, a forward commitment or a delayed
settlement (and any subsequent fluctuations in their market value) is taken
into account when determining the market value of the Fund starting on the day
the Fund agrees to purchase the securities. The Fund does not earn interest on
the securities it has committed to purchase until they are paid for and
delivered on the settlement date.
Restricted Securities
It is possible that unregistered securities purchased by the Fund
in reliance upon Rule 144A under the Securities Act of 1933, could have the
effect of increasing the level of the Fund's illiquidity to the extent that
qualified institutional buyers become, for a period, uninterested in purchasing
these securities.
INVESTMENT RESTRICTIONS
In addition to the investment limitations disclosed in the
Prospectus, the Fund is subject to the following investment limitations which
may be changed only by a vote of the holders of a majority of the outstanding
shares of the Fund (as defined in "Other Information -- Voting Rights").
The Fund may not:
1. Purchase securities of any one issuer, other than obligations of
the U.S. Government, its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of the
Fund's total assets would be invested in such issuer, except that
up to 25% of the value of the Fund's total assets may be invested
without regard to such 5% limitation.
-6-
<PAGE> 956
2. Purchase or sell real estate, except that the Fund may, to the
extent appropriate to its investment objective, purchase securities
issued by companies which invest in real estate or interests
therein.
3. Purchase securities on margin, make short sales of securities or
maintain a short position.
4. Underwrite the securities of other issuers.
5. Purchase or sell commodity contracts (including futures contracts),
or invest in oil, gas or mineral exploration or development
programs.
6. Buy common stocks or voting securities, or state, municipal or
industrial revenue bonds.
7. Write or purchase put or call options.
In order to permit the sale of the Fund's shares in certain states,
the Trust may make commitments with respect to the Fund that are more
restrictive than the investment policies listed above and in the Prospectus.
Should the Trust determine that the commitments made to permit the sale of the
Fund's shares in any state are no longer in the best interests of the Fund, it
will revoke the commitment by terminating sales of the Fund's shares in the
state involved.
If a percentage limitation is satisfied at the time of investment,
a later increase or decrease in such percentage resulting from a change in the
value of the Fund's investments will not constitute a violation of such
limitation, however, the Fund will not at any time hold more than 10% of its
net assets in illiquid securities. Otherwise, the Fund may continue to hold a
security even though it causes the Fund to exceed a percentage limitation
because of fluctuation in the value of the Fund's assets.
MANAGEMENT
Trustees and Officers
The principal occupations of the Trustees and executive officers of
the Fund for the past five years and their ages are listed below. None of the
Trustees is deemed to be an "interested person" of the Trust for purposes of
the 1940 Act.
-7-
<PAGE> 957
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation(s)
Name, Address and Age with Registrant During Past 5 Years
- --------------------- ---------------- -----------------------
<S> <C> <C>
Joseph N. Hankin Trustee President, Westchester
75 Grasslands Road Community College since
Valhalla, NY 10595 1971; President of
Age: 55 Hartford Junior College
from 1967 to 1971;
Adjunct Professor of
Columbia University
Teachers College since
1976.
Richard A. Wedemeyer Trustee Vice President of
17 High Street Performance Advantage,
Suite 301 Inc., 17 High Street,
Norwalk, CT 06851 Norwalk, CT 06851 since
Age: 59 1992; Vice President of
Jim Henson Productions
from 1979 to 1992;
Author of In Transition
-- ----------
(Harper Collins);
co-founder and
co-conductor of Harvard
Business School Club of
New York Career
Seminar; Trustee of Jim
Henson Legacy trust.
John E. Heilmann Trustee Retired; Chairman,
Old Norwood Plantation President and Chief
Wingina, VA 24599 Executive Officer,
Age: 64 Distillers Somerset,
Inc. and Norwood
Enterprises, Inc. from
1987 to 1992.
Dennis W. Draper Trustee Associate Professor of
University of Southern Finance, at University
California of Southern California
School of Business since 1978; Director of
Hoffman 701-F Data Analysis, Inc.
Los Angeles, CA 90089 (financial services);
Age: 46 and Editorial Board
Member of Chicago Board
of Trade.
Jack D. Henderson Trustee Private law practice;
1600 Broadway Partner of the law firm
Denver, CO 80202 of Clanahan, Tanner,
Age: 68 Downing & Knowlton,
P.C. from 1989 to
1995.
Michael C. Petrycki President Executive Vice
230 Park Avenue President and Director
New York, NY 10169 of Furman Selz since
Age: 53 1984.
</TABLE>
-8-
<PAGE> 958
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation(s)
Name, Address and Age with Registrant During Past 5 Years
- --------------------- ---------------- -----------------------
<S> <C> <C>
Steven D. Blecher Executive Vice Executive Vice
230 Park Avenue President President and Director
New York, NY 10169 of Furman Selz since
Age: 53 1983; Vice President,
Secretary and Treasurer
of Furman Selz Capital
Management, Inc. since
1984.
John J. Pileggi Vice President and Managing Director of
237 Park Avenue Treasurer Furman Selz, from 1984
New York, NY 10169 to 1992; Senior
Age: 36 Managing Director since
1992 and Director of
Furman Selz since 1994.
Joan V. Fiore Vice President and Managing Director and
237 Park Avenue Secretary Counsel of Furman Selz
New York, NY 10017 since 1991; Staff
Age: 39 Attorney at the U.S.
Securities and Exchange
Commission, Division of
Investment Management,
from 1986 to 1991.
Donald E. Brostrom Assistant Treasurer Director, Fund
237 Park Avenue Services, Furman Selz
New York, NY 10169 Incorporated since
Age: 37 1986; Managing Director
of Furman Selz since
1995.
</TABLE>
Trustees receive from the Trust an annual retainer of $5,000 and a
fee of $1,000 for each Board of Trustees meeting and $500 for each Board
committee meeting attended, and are reimbursed for all out-of-pocket expenses
relating to attendance at such meetings.
For the fiscal year ended September 30, 1995, the Trustees received
the following compensation from the Trust and from certain other investment
companies (as indicated) that have the same investment advisor as the Trust or
an investment advisor that is an affiliated person of the Trust's investment
advisor:
-9-
<PAGE> 959
<TABLE>
<CAPTION>
Pension or
Retirement Total Compensation
Aggregate Benefits Accrued Est. Annual From Registrant
Name of Compensation As Part of Trust Benefits Upon and Fund Complex
Trustee from the Trust Expenses Retirement Paid to Trustees
- ------- -------------- ---------------- ------------- ------------------
<S> <C> <C> <C> <C>
Dennis W. Draper $10,456 $0 $0 $10,456
Joseph N. Hankin $11,250 $0 $0 $11,250
John E. Heilmann $11,250 $0 $0 $11,250
Jack D. Henderson $10,456 $0 $0 $30,956*
Richard A. Wedemeyer $11,250 $0 $0 $11,250
</TABLE>
- ---------------
* Includes amounts received for service as a member of the Board of Trustees of
Westcore Trust.
The Trustees and officers of the Trust, as a group, own less than
1% of the outstanding shares of the Fund, as of the date of this SAI.
Advisor
First Interstate Capital Management, Inc., 7501 E. McCormick
Parkway, Scottsdale, Arizona 85258, serves as advisor to the Fund. FICM
manages the investment and reinvestment of the assets of the Fund and
continuously reviews, supervises and administers the Fund's investments. The
Advisor is responsible for placing orders for the purchase and sale of the
Fund's investments directly with brokers and dealers selected by it in its
discretion. See "Portfolio Transactions." FICM also furnishes to the Board of
Trustees, which has overall responsibility for the business and affairs of the
Trust, periodic reports on the investment performance of the Fund.
FICM is a wholly-owned subsidiary of First Interstate Bank of
California ("FICAL"). FICAL is the largest banking subsidiary of First
Interstate Bancorp. First Interstate Bancorp provides financial products and
services marketed at the local level to nearly five million households in over
500 communities in 13 western states.
Under the terms of the Investment Advisory Agreement between the
Trust and FICM, FICM is obligated to manage the Fund's portfolio in accordance
with applicable laws and regulations. The investment advisory services
provided by FICM to the Fund are not exclusive under the terms of the
Investment Advisory Agreement. FICM is free to, and does, render investment
advisory services to others. In making its investment decisions, FICM does not
use material inside information in the possession of its affiliates.
-10-
<PAGE> 960
The Investment Advisory Agreement for the Fund will continue in
effect for a period beyond more than two years from the date of its execution
only as long as such continuance is approved annually (i) by the holders of a
majority of the outstanding voting securities of the Fund or by the Board of
Trustees and (ii) by a majority of the Trustees who are not parties to such
Agreement or "interested persons" (as defined in the 1940 Act) of any such
party. The Investment Advisory Agreement may be terminated without penalty by
vote of the Trustees or the shareholders of the Fund, or by the Advisor, on 60
days written notice by either party to the Agreement and will terminate
automatically if assigned.
The Investment Advisory Agreement provides that FICM shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the performance of such Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of FICM in the performance of its duties
or from reckless disregard of its duties and obligations under the Agreement.
Prior to October 1, 1995, First Interstate of Oregon, N.A. (the
"Predecessor Advisor") served as the investment advisor to the Fund. For the
period ended September 30, 1995 and fiscal years ended May 31, 1995, 1994 and
1993, the Predecessor Advisor was entitled to receive $662,983, $1,932,733,
$1,193,856 and $570,505, respectively, in advisory fees from the Fund and
waived additional advisory fees and reimbursed expenses of $662,983,
$2,120,794, $1,104,228 and $387,505, respectively.
As compensation for services rendered by FICM to the Fund, FICM is
entitled to a fee, computed daily and paid monthly, at an annual rate of 0.30%
of the first $500 million of the average daily net assets of the Fund, 0.25% of
the next $500 million of the Fund's average daily net assets, and 0.20% of the
Fund's average daily net assets in excess of $1 billion.
FICM has agreed that if, in any fiscal year, the aggregate expenses
of the Fund (as defined under the securities regulations of any such state
having jurisdiction over the Fund), exceed the expense limitations of any such
state, FICM will reimburse the Fund for a portion of such excess expenses. To
the knowledge of the Trust, as of the date of this SAI, the most restrictive
expense limitation limits aggregate annual expenses, including management and
advisory fees but excluding interest, taxes, brokerage commissions, and certain
other expenses, to 2-1/2% of the first $30 million of the Fund's average net
assets, 2% of the next $70 million, and 1-1/2% of its remaining average net
assets.
-11-
<PAGE> 961
Expenses incurred in the organization and operation of the Fund,
including taxes, interest, penalties, brokerage and other fees and commissions,
if any, fees and expenses of Trustees, SEC fees and related expenses, state
Blue Sky qualification fees, advisory fees, administration fees, charges of
custodians, costs of transfer and dividend disbursing agents, certain insurance
premiums, outside auditing and legal expenses, costs of maintenance of trust
existence, costs of independent pricing services, investor services,
preparation and printing of prospectuses for regulatory purposes and for
distribution to shareholders, shareholders' reports and shareholders' meetings,
and extraordinary expenses, are borne by the Fund.
Banking laws and regulations, including the Glass-Steagall Act as
presently interpreted by the Board of Governors of the Federal Reserve System,
(a) prohibit a bank holding company registered under the Federal Bank Holding
Company Act of 1956 (the "Holding Company Act") or any bank or non-bank
affiliate thereof from sponsoring, organizing, or controlling a registered,
open-end investment company continuously engaged in the issuance of its shares,
and prohibit banks generally from underwriting securities, but (b) do not
prohibit such a bank holding company or affiliate generally from acting as
investment advisor, transfer agent, or custodian to such an investment company,
or from purchasing shares of such a company as agent for and upon the order of
a customer. In some states, banks or other institutions through which
transactions in Fund shares are effected, may be required to register as
dealers pursuant to state law.
FICM, FICAL, and the other First Interstate Banks believe that they
may perform services for the Fund without violating the Glass-Steagall Act.
There have, however, been no cases deciding whether a bank and its affiliates
may perform services comparable to those performed by either FICM, FICAL, or
other First Interstate Banks, and future changes in either federal or state
statutes or regulations relating to the permissible activities of banks or
trust companies or their subsidiaries or affiliates, as well as further
judicial or administrative decisions or interpretations of present and future
statutes and regulations, could prevent FICM, FICAL, or other First Interstate
Banks from continuing to perform services for the Fund or from continuing to
purchase Fund shares for the accounts of customers. If FICM, FICAL, or any
other First Intestate Banks were prohibited from providing services to the
Fund, it is expected that the Board of Trustees would make other arrangements
and that shareholders would not suffer adverse consequences. Any new advisory
agreement would be subject to shareholder approval.
On the other hand, legislation has been introduced in Congress from
time to time which, if enacted, would permit a bank
-12-
<PAGE> 962
holding company subsidiary to organize, sponsor and distribute shares of
investment companies such as the Fund notwithstanding present restrictions
under the Glass-Steagall Act and the Holding Company Act. If current
restrictions preventing a bank holding company subsidiary from legally
sponsoring, organizing, controlling and distributing shares of an investment
company were relaxed, it is anticipated that FICM, FICAL, or the other First
Interstate Banks would consider the possibility of offering to perform
additional services for the Fund.
It is not possible of course, to predict whether or in what form
such legislation might be enacted or the terms upon which FICM, FICAL, or the
other First Interstate Banks might offer to provide services for consideration
by the Board of Trustees.
Distribution of Fund Shares
The Trust has retained Pacifica Funds Distributor, Inc., a
subsidiary of Furman Selz, to serve as principal underwriter for the shares of
the Fund pursuant to a Distribution Contract. The Distribution Contract
provides that the Distributor will use its best efforts to maintain a broad
distribution of the Fund's shares among bona fide investors. The Distributor
is not obligated, however, to sell any specific amount of shares. The
Distributor is not entitled to any payments from the Fund for its distribution
services.
Prior to October 1, 1995, ALPS Mutual Funds Services, Inc. ("ALPS")
served as distributor for the Fund. ALPS was not entitled to any compensation
for its services as distributor.
Administrative Services
Furman Selz provides management and administrative services
necessary for the operation of the Fund, including among other things, (i)
preparation of shareholder reports and communications, (ii) regulatory
compliance, such as reports to and filings with the Securities and Exchange
Commission ("SEC") and state securities commissions and (iii) general
supervision of the operation of the Fund, including coordination of the
services performed by the Fund's advisor, distributor, transfer agent,
custodians, independent accountants, legal counsel and others. In addition,
Furman Selz furnishes office space and facilities required for conducting the
business of the Fund and pays the compensation of the Fund's officers,
employees and Trustees affiliated with Furman Selz. For these services, Furman
Selz is entitled to receive a fee, payable monthly, at the annual rate of 0.15%
of the average daily net assets of the Fund.
The Administrative Services Contract is terminable with respect to
the Fund without penalty, at any time, by vote of a
-13-
<PAGE> 963
majority of the Trustees who are not "interested persons" of the Trust and who
have no direct or indirect financial interest in the Administrative Services
Contract upon not more than 60 days written notice to Furman Selz or by vote of
the holders of a majority of the shares of the Fund involved, or, upon 60 days
notice by Furman Selz. The Administrative Services Contract will terminate
automatically in the event of its assignment.
Prior to October 1, 1995, ALPS served as the administrator to the
Fund. For the period ended September 30, 1995 and the fiscal years ended
May 31, 1995, 1994 and 1993, ALPS received $132,597 $387,803, $94,984 and
$44,825, respectively, in administrative fees from the Fund and waived
additional administrative fees of $0, $86,188, $146,794 and $69,276,
respectively.
DETERMINATION OF NET ASSET VALUE
The net asset value per share ("NAV") of the Fund is determined as
of 10:30 a.m., Pacific time, on days on which the Trust is open for business
(i.e., days on which the San Francisco branch of the Federal Reserve Bank and
First Interstate Bank of California, the Fund's custodian, are open for
business -- "business days"). For 1995, the San Francisco branch of the
Federal Reserve Bank and the Fund's custodian have designated the following
holiday closings: New Year's Day (observed), Martin Luther King, Jr. Day,
Presidents' Day (observed), Good Friday, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day, and Christmas Day. The San
Francisco branch of the Federal Reserve Bank or the Fund's custodian may
designate different dates for the observance of these holidays as well as
designate different holidays for closing in the future. To the extent that the
Fund's securities are traded on various markets on days when the Federal
Reserve Bank of San Francisco or the Fund's custodian is closed, the Fund's NAV
may be affected on days when the shareholders may not purchase or redeem
shares. NAV of the Fund is computed by dividing the value of the Fund's
assets, less the Fund's liabilities, by the total number of outstanding shares
of the Fund.
The Fund's portfolio holdings are valued on the basis of amortized
cost. This technique involves valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in valuation, it may
result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if it sold the
instrument. During periods of declining interest rates, the daily yield on
shares of the Fund computed as described above may tend to be higher than a
like computation made by a fund with identical investments utilizing a method
of valuation based upon
-14-
<PAGE> 964
market prices and estimates of market prices for all of its instruments. Thus,
if the use of amortized cost by the Fund resulted in a lower aggregate
portfolio value on a particular day, a prospective investor in the Fund would
be able to obtain a somewhat higher yield than would result from investment in
a fund utilizing solely market values and existing investors in the Fund would
receive less investment income. The converse would apply in a period of rising
interest rates.
The valuation of the Fund's instruments, based upon their amortized
cost and the concomitant maintenance by the Fund of a net asset value of $1.00,
is permitted in accordance with Rule 2a-7 under the 1940 Act, pursuant to which
the Fund must adhere to certain conditions. The Fund must maintain a
dollar-weighted average maturity of 90 days or less, purchase only instruments
having remaining maturities of thirteen months or less, and invest only in
securities which are determined to present minimal credit risks pursuant to
guidelines adopted by the Trustees. Instruments having variable or floating
interest rates or demand features may be deemed to have remaining maturities as
follows: (a) a government security with a variable rate of interest readjusted
no less frequently than every thirteen months may be deemed to have a maturity
equal to the period remaining until the next readjustment of the interest rate;
(b) an instrument with a variable rate of interest, the principal amount of
which is scheduled on the face of the instrument to be paid in thirteen months
or less, may be deemed to have a maturity equal to the period remaining until
the next readjustment of the interest rate; (c) an instrument with a variable
rate of interest that is subject to a demand feature may be deemed to have a
maturity equal to the longer of the period remaining until the next
readjustment of the interest rate or the period remaining until the principal
amount can be recovered through demand; (d) an instrument with a floating rate
of interest that is subject to a demand feature may be deemed to have a
maturity equal to the period remaining until the principal amount can be
recovered through demand; and (e) a repurchase agreement may be deemed to have
a maturity equal to the period remaining until the date on which the repurchase
of the underlying securities is scheduled to occur or, where no date is
specified but the agreement is subject to demand, the notice period applicable
to a demand for the repurchase of the securities.
The Trustees have established procedures designed to stabilize, to
the extent reasonably possible, the Fund's price per share as computed for the
purpose of sales and redemptions at a single value. Such procedures will
include the determination, at such intervals as the Trustees deem appropriate,
of the extent to which the Fund's NAV as calculated by using available market
quotations deviates from $1.00 per share, such deviation may result in material
dilution or other unfair results to existing
-15-
<PAGE> 965
shareholders or investors. In the event the Trustees determine that such a
material deviation exists, they have agreed to take such corrective action as
they regard as necessary and appropriate, which may include selling portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity; withholding dividends; redeeming shares in kind or
without monetary or other consideration; or establishing a net asset value per
share by using available market quotations. It is the intention of the Fund to
maintain a per share net asset value of $1.00, but there can be no assurance
that the Fund will do so.
DIVIDENDS AND DISTRIBUTIONS
The Fund ordinarily declares dividends from its net investment
income on each day that the Fund is open for business. Dividends usually are
payable within five business days after the end of each month. The Fund's
earnings for non-business days are declared as dividends to the shareholders of
record on the preceding business day.
If an investor redeems all shares in its account at any time during
the month, all dividends declared to the day prior to redemption are paid to
the investor within five business days after the end of the month by crediting
its bank account or, if this is not possible, in cash. Distributions of
realized securities gains, if any, are declared and paid at least annually.
The Fund seeks to maintain a net asset value of $1.00 per share for
purposes of purchases and redemptions. To effectuate this policy, under
certain circumstances the Board of Trustees may consider the advisability of
temporarily reducing or suspending declaration of daily dividends, or the
advisability of making a capital gains or other distributions. See
"Determination of Net Asset Value."
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Payment for shares may, in the discretion of the Advisor, be made
in the form of securities that are permissible investments for the Fund as
described in the Prospectus. For further information about this form of
payment please contact Furman Selz. In connection with an in-kind securities
payment, the Fund will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by
the Fund and that the Fund receive satisfactory assurances that (1) it will
have good and marketable title to the securities received by it; (2) that the
securities are in proper form for transfer to the Fund; and (3) adequate
information will be provided concerning the basis and other matters relating to
the securities.
-16-
<PAGE> 966
Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
New York Stock Exchange is closed (other than customary weekend and holiday
closings), or during which trading on said Exchange is restricted, or during
which as determined by the SEC by rule or regulation) an emergency exists as a
result of which disposal or valuation of portfolio securities is not reasonably
practicable, or for such other periods as the SEC may permit. (The Fund may
also suspend or postpone the recordation of the transfer of its shares upon the
occurrence of any of the foregoing conditions.)
The Trust may suspend redemption rights or postpone redemption
payments (as well as suspend the recordation of the transfer of shares) for
such periods as are permitted under the 1940 Act. The Trust may also redeem
shares involuntarily or make payment for redemption in securities or other
property if it appears appropriate to do so in light of the Trust's
responsibilities under the 1940 Act.
In addition, the Trust may redeem shares involuntarily to reimburse
the Fund for any loss sustained by reason of the failure of a shareholder to
make full payment for shares purchased by the shareholder or to collect any
charge relating to a transaction effected for the benefit of a shareholder
which is applicable to shares of the Fund as provided from time to time in the
Prospectus.
If shares of the Fund are represented by a share certificate, the
certificate must be surrendered to the Fund's transfer agent for cancellation
before the shares can be redeemed.
All redemptions of shares of the Fund will be made in cash, except
that the commitment to redeem shares in cash extends only to redemption
requests made by each shareholder of the Fund during any 90-day period of up to
the lesser of $250,000 or 1% of the net asset value of the Fund at the
beginning of such period. This commitment is irrevocable without the prior
approval of the SEC and is a fundamental policy of the Fund that may not be
changed without shareholder approval. In the case of redemption requests by
shareholders in excess of such amounts, the Board of Trustees reserves the
right to have the Fund make payment, in whole or in part in securities or other
assets, in case of an emergency or any time a cash distribution would impair
the liquidity of the Fund to the detriment of the existing shareholders. In
this event, the securities would be valued in the same manner as the securities
of the Fund are valued. If the recipient were to sell such securities, he or
she would incur brokerage charges.
-17-
<PAGE> 967
PORTFOLIO TRANSACTIONS
Purchases and sales of portfolio securities usually are principal
transactions. Portfolio securities ordinarily are purchased directly from the
issuer or from an underwriter or market maker for the securities. There
usually are no brokerage commissions paid by the Fund for such purchases.
Purchases from underwriters of portfolio securities include a commission or
concession paid by the issuer to the underwriter, and purchases from dealers
serving as market makers include the spread between the bid and asked price.
While FICM generally seeks competitive spreads or commissions, the Fund may not
necessarily be paying the lowest available spread or commission for the reasons
stated below.
The Fund's agreement with FICM provides that, in executing
portfolio transactions and selecting brokers or dealers, FICM will use its best
efforts to seek, on behalf of the Fund, the best overall terms available. In
assessing the best overall terms available for any transaction, FICM is to
consider all factors it deems relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the commission,
if any, both for the specific transaction and on a continuing basis.
In evaluating the best overall terms available, and in selecting
the broker or dealer to execute a particular transaction, FICM may also
consider the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) provided to the Fund
and/or other accounts over which it or an affiliate exercises investment
discretion. FICM is authorized, subject to the review of the Board of
Trustees, to pay to a broker or dealer which provides such brokerage and
research services a commission for executing a portfolio transaction for the
Fund which is in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction if, but only if, such
commission is determined in good faith to be reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer
in accordance with the provisions of Section 28(e) of the Securities Exchange
Act of 1934. Information so received will supplement but will not replace that
which is to be provided by FICM, and the fees are not reduced as a consequence
of the receipt of such supplemental information. Such information may be
useful to FICM in serving both the Fund and other clients and conversely,
supplemental information obtained by the placement of business of other clients
may be useful to FICM in carrying out its obligations to the Fund.
Investment decisions for the Fund will be made independently from
those of any fiduciary or other accounts that
-18-
<PAGE> 968
may be managed by FICM. However, to the extent that the same securities
transaction may be deemed to be equally suitable at the same time for two or
more accounts, the transaction will be allocated in a manner believed to be
equitable to each account. In some cases, this procedure may adversely affect
the price paid or received, or the size of the position obtained for or
disposed of, by the Fund.
The Fund does not purchase any obligations issued by First
Interstate Bancorp or its affiliates. In addition, no portfolio securities are
purchased from, sold to, or executed through First Interstate Bancorp or its
affiliates. However, First Interstate Bancorp or its affiliates engage in
transactions involving bank obligations, commercial paper, repurchase
agreements, and securities of the U.S. Government and of certain U.S.
Government agencies or instrumentalities. Such activities may have some effect
on the market of such securities, and First Interstate Bancorp and its
affiliates may be competing in the market place with the Trust in the purchase
and sale of such securities.
FICM has agreed to maintain a policy and practice of conducting its
investment advisory services to the Trust independently of the commercial
banking operations of any of its affiliates.
TAXATION
The Fund intends to qualify and elect annually to be treated as
regulated investment companies under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). To qualify as a regulated investment
company, the Fund must (a) distribute to shareholders at least 90% of its
investment company taxable income (which includes, among other items,
dividends, taxable interest and the excess of net short-term capital gains over
net long-term capital losses); (b) derive in each taxable year at least 90% of
its gross income from dividends, interest, payments with respect to securities
loans and gains from the sale or other disposition of stock, securities or
foreign currencies or other income derived with respect to its business of
investing in such stock, securities or currencies; (c) derive less than 30% of
its gross income from the sale or other disposition of certain assets held less
than 3 months; and (d) diversify its holdings so that, at the end of each
quarter of the taxable year, (i) at least 50% of the market value of the Fund's
assets is represented by cash and cash items (including receivables), U.S.
Government securities, the securities of other regulated investment companies
and other securities, with such other securities of any one issuer limited for
the purposes of this calculation to an amount not greater than 5% of the value
of the Fund's total assets and not greater than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the
-19-
<PAGE> 969
value of its total assets is invested in the securities of any one issuer
(other than U.S. Government securities or the securities of other regulated
investment companies). By meeting these requirements, the Fund generally will
not be subject to Federal income tax on its investment company taxable income
and net capital gains which are distributed to shareholders. If the Fund does
not meet all of these Code requirements, it will be taxed as a ordinary
corporation and its distributions will be taxed to shareholders as ordinary
income.
Amounts, other than tax-exempt interest, not distributed on a
timely basis in accordance with a calendar year distribution requirement are
subject to a nondeductible 4% excise tax. To prevent imposition of the excise
tax, the Fund must distribute for each calendar year an amount equal to the sum
of (1) at least 98% of its ordinary income (excluding any capital gains or
losses) for the calendar year, (2) at least 98% of the excess of its capital
gains over capital losses (adjusted for certain ordinary losses) for the
one-year period ending October 31 of such year, and (3) all ordinary income and
capital gain net income (adjusted for certain ordinary losses) for previous
years that were not distributed during such years. A distribution, including
an "exempt-interest dividend," will be treated as paid on December 31 of a
calendar year if it is declared by the Fund during October, November or
December of that year to shareholders of record on a date in such a month and
paid by the Fund during January of the following year. Such distributions will
be taxable to shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are
received.
Distributions of investment company taxable income generally are
taxable to shareholders as ordinary income. Distributions of net long term
capital gains, if any, designated by the Fund as long-term capital gain
dividends are taxable to shareholders as long-term capital gain, regardless of
the length of time the Fund's shares have been held by a shareholder. All
distributions are taxable to the shareholder in the same manner whether
reinvested in additional shares or received in cash. Shareholders will be
notified annually as to the Federal tax status of distributions.
Income received by the Fund from sources within foreign countries
may be subject to withholding and other similar income taxes imposed by the
foreign country.
The Fund is required to report to the Internal Revenue Service
("IRS") all distributions except in the case of certain exempt shareholders.
All such distributions generally are subject to withholding of Federal income
tax at a rate of 31% ("backup withholding") in the case of non-exempt
shareholders if (1) the shareholder fails to furnish the Fund with and to
certify
-20-
<PAGE> 970
the shareholder's correct taxpayer identification number or social security
number, (2) the IRS notifies the Fund or a shareholder that the shareholder has
failed to report properly certain interest and dividend income to the IRS and
to respond to notices to that effect, or (3) when required to do so, the
shareholder fails to certify that he is not subject to backup withholding. If
the withholding provisions are applicable, any such distributions, whether
reinvested in additional shares or taken in cash, will be reduced by the
amounts required to be withheld. Backup withholding is not an additional tax.
Any amount withheld may be credited against the shareholders U.S. Federal
income tax liability. Investors may wish to consult their tax advisors about
the applicability of the backup withholding provisions
The foregoing discussion relates only to Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S.
corporations, partnerships, trusts and estates). Distributions by the Fund
also may be subject to state and local taxes and their treatment under state
and local income tax laws may differ from the Federal income tax treatment.
Distributions of the Fund which are derived from interest on obligations of the
U.S. Government and certain of its agencies and instrumentalities may be exempt
from state and local taxes in certain states. Shareholders should consult
their tax advisors with respect to particular questions of Federal, state and
local taxation. Shareholders who are not U.S. persons should consult their
tax advisors regarding U.S. and foreign tax consequences of ownership of shares
of the Fund including the likelihood that distributions to them would be
subject to withholding of U.S. tax at a rate of 30% (or at a lower rate under a
tax treaty).
OTHER INFORMATION
Capitalization
The Trust is a Massachusetts business trust established under a
Declaration of Trust dated July 17, 1984 and consists of a series of separately
managed portfolios, only one of which is described in this SAI. The
capitalization of the Trust consists solely of an unlimited number of shares of
beneficial interest with a par value of $0.001 each. The Board of Trustees may
establish additional portfolios (with different investment objectives and
fundamental policies) at any time in the future. Establishment and offering of
additional portfolios will not alter the rights of the Fund's shareholders.
When issued, shares are fully paid, non-assessable, redeemable and freely
transferable. Shares do not have preemptive rights or subscription rights.
In the event of a liquidation or dissolution of the Trust or the
Fund, shareholders of the Fund would be entitled to
-21-
<PAGE> 971
receive the assets available for distribution belonging to the Fund, and a
proportionate distribution, based upon the relative net asset values of the
Trust's respective portfolios, of any general assets not belonging to any
particular portfolio which are available for distribution. Shareholders of the
Fund are entitled to participate in the net distributable assets of the Fund on
liquidation, based on the number of shares of the Fund that are held by each
shareholder.
Principal Shareholders
As of January 17, 1996, the following owned of record or
beneficially 5% or more of the shares of the Fund: First Interstate Bank of
Oregon, N.A., P.O. Box 2971, Portland, OR 97208-2971 -- 100%.
Shareholder and Trustee Liability
The Trust is an entity of the type commonly known as a
"Massachusetts Business Trust." Under Massachusetts law, shareholders of such
a trust may, under certain circumstances, be held personally liable as partners
for the obligations of the trust. However, the Declaration of Trust contains
an express disclaimer of shareholder liability for acts or obligations of the
Trust. The Declaration of Trust also provides for indemnification out of the
property of the Fund of any shareholder held personally liable solely by reason
of being or having been a shareholder of the Fund. Thus, the risk of a
shareholder incurring financial loss because of status as a shareholder is
limited to circumstances in which the Fund itself would be unable to meet its
obligations.
The Declaration of Trust further provides that the Trustees and officers
will not be liable except for liability to the Trust or its shareholders to
which he would be subject by reason of willful misfeasance, bad faith, gross
negligence in the performance of his duties, or reckless disregard of the
duties involved in the conduct of his office. The Trust may have an obligation
to indemnify its Trustees and officers with respect to any litigation.
Voting Rights
Under the Declaration of Trust, the Trust is not required to hold
annual meetings of the Trust's shareholders to elect Trustees or for other
purposes. It is not anticipated that the Trust will hold shareholders'
meetings unless required by law or the Declaration of Trust. In this regard,
the Trust will be required to hold a meeting to elect Trustees to fill any
existing vacancies on the Board if, at any time, fewer than a majority of the
Trustees have been elected by the shareholders of the Trust.
-22-
<PAGE> 972
In addition, the Declaration of Trust provides that the holders of not less
than two-thirds of the outstanding shares of the Trust may remove persons
serving as Trustee either by declaration in writing or at a meeting called for
such purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of persons serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust. To the extent required by applicable law, the Trust shall assist
shareholders who seek to remove any person serving as Trustee.
The Trust's shares do not have cumulative voting rights, so that
the holders of more than 50% of the outstanding shares may elect the entire
Board of Trustees, in which case the holders of the remaining shares would not
be able to elect any Trustees.
Shareholders of the Fund, as well as those of any other investment
portfolio now or hereafter offered by the Trust, will vote together in the
aggregate and not separately on the portfolio-by-portfolio basis, except as
otherwise required by law or when permitted by the Board of Trustees. Rule
18f-2 under the 1940 Act provides that any matter required to be submitted to
the holders of the outstanding voting securities of an investment company such
as the Trust shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of each
portfolio affected by the matter. A portfolio is affected by a matter unless
it is clear that the interests of each portfolio in the matter are
substantially identical or that the matter does not affect any interest of the
portfolio. Under the Rule, the approval of an investment advisory agreement or
any change in a fundamental investment policy would be effectively acted upon
with respect to a portfolio only if approved by a majority of the outstanding
shares of such portfolio. However, the Rule also provides that the
ratification of the appointment of independent auditors, the approval of
principal underwriting contracts and the election of Trustees may be
effectively acted upon by shareholders of the Trust voting together in the
aggregate without regard to a particular portfolio.
The term "majority of the outstanding shares" of a portfolio means
the vote of the lesser of (i) 67% or more of the shares of the portfolio
present at a meeting, if the holders of more than 50% of the outstanding shares
of the portfolio are present or represented by proxy, or (ii) more than 50% of
the outstanding shares of the portfolio.
-23-
<PAGE> 973
Custodian, Transfer Agent and Dividend Disbursing Agent
First Interstate Bank of California, 707 Wilshire Blvd., Los
Angeles, California 90017, acts as custodian of the Trust's assets, but plays
no role in making decisions as to the purchase or sale of portfolio securities
for the Fund.
As Custodian, FICAL has agreed, among other things, to keep and
maintain the assets of the Fund, collect income due and payable to the Fund,
make disbursements of money on the Fund's behalf, and prepare and maintain
books and records relating to its duties. FICAL is not entitled to receive a
fee for the custodial services provided to the Fund.
Furman Selz acts as transfer agent for the Fund. The Trust
compensates Furman Selz for providing personnel and facilities to perform
transfer agency related services for the Trust at a rate intended to represent
the cost of providing such services.
Performance Information
The Fund may, from time to time, include its yield or effective
yield in advertisements or reports to shareholders or prospective investors.
Current yield for the Fund will be based on the change in the value
of a hypothetical investment (exclusive of capital changes) over a particular
seven-day period, less a pro-rata share of the Fund's expenses accrued over
that period (the "base period"), and stated as a percentage of the investment
at the start of the base period (the "base period return"). The base period
return is then annualized by multiplying by 365/7, with the resulting yield
figure carried to at least the nearest hundredth of one percent. "Effective
yield" for the Fund assumes that all dividends received during an annual period
have been reinvested. Calculation of "effective yield" begins with the same
"base period return" used in the calculation of yield, which is then annualized
to reflect weekly compounding pursuant to the following formula:
365/7
Effective Yield = [(Base Period Return + 1) ] - 1.
For the seven-day period ended September 30, 1995, the yield of
the Fund was 5.62%, and the effective yield was 6.80%.
Yield information may be useful in reviewing the Fund's performance
and for providing a basis for comparison with other investment alternatives.
However, yields fluctuate, unlike investments which pay a fixed yield for a
stated period of time. Yields for the Fund are calculated on the same basis as
other
-24-
<PAGE> 974
money market funds as required by applicable regulations. Investors should
give consideration to the quality and maturity of the portfolio securities of
the respective investment companies when comparing investment alternatives.
Investors should recognize that in periods of declining interest
rates, the Fund's yields will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates, the Fund's yields will tend to
be somewhat lower. Also, when interest rates are falling, the inflow of net
new money to the Fund from the continuous sale of its shares will likely be
invested in instruments producing lower yields than the balance of the Fund,
thereby reducing the current yields of the Fund. In periods of rising interest
rates, the opposite can be expected to occur.
In connection with communicating its yields to current or
prospective shareholders, the Fund also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
other unmanaged indices which may assume reinvestment of dividends but
generally do not reflect deductions for administrative and management costs.
Independent Accountants
Ernst & Young LLP, 515 South Flower Street, Los Angeles, California
90071 has been selected to serve as the Fund's independent accountant for the
current fiscal year. The audited financial statements which are incorporated
by reference into this SAI and the audited financial highlights which appear in
the Prospectus have been audited by the Fund's former independent accountants.
Registration Statement
This SAI and the Prospectus do not contain all the information
included in the Trust's Registration Statement filed with the SEC under the
Securities Act of 1933 with respect to the securities offered hereby, certain
portions of which have been omitted pursuant to the rules and regulations of
the SEC. The Registration Statement, including the exhibits filed therewith,
may be examined at the office of the SEC in Washington, D.C.
Statements contained herein and in the Prospectus as to the
contents of any contract or other documents referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other documents filed as an exhibit to the Trust's Registration Statement,
each such statement being qualified in all respects by such reference.
-25-
<PAGE> 975
FINANCIAL STATEMENTS
The Financial Statements included in the Fund's 1995 Annual Report
to Shareholders are incorporated by reference into this SAI. Copies of the
Financial Statements may be obtained upon request and without charge from the
Trust at the address and telephone number provided on the cover of this SAI.
-26-
<PAGE> 976
APPENDIX
DESCRIPTION OF SECURITIES RATINGS
The following is a description of the securities ratings of Duff &
Phelps Credit Rating Co. ("D&P"), Fitch Investors Service, Inc. ("Fitch"),
Standard & Poor's Ratings Group, Division of McGraw Hill ("S&P"), Moody's
Investors Service, Inc. ("Moody's"), IBC Limited and IBCA Inc. ("IBCA") and
Thomson BankWatch, Inc. ("Thomson").
Long-Term Corporate Debt Rating
The two highest ratings of D&P for corporate fixed-income
securities are AAA and AA. Securities rated AAA are of the highest credit
quality. The risk factors are considered to be negligible, being only slightly
more than for risk-free U.S. Treasury debt. Securities rated AA are of high
credit quality. Protection factors are strong. Risk is modest but may vary
slightly from time to time because of economic conditions. The AA rating may
be modified by an addition of a plus (+) or minus (-) sign to show relative
standing within the major rating category.
The two highest ratings of Fitch for corporate bonds are AAA and
AA. AAA bonds are considered to be investment grade and of the highest credit
quality. The obligor is judged to have an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. AA bonds are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1+. Plus (+) and minus (-) signs are used with the AA rating symbol to
indicate relative standing within the rating category.
The two highest ratings of S&P for corporate bonds are AAA and AA.
Bonds rated AAA bear the highest rating assigned by S&P to a debt obligation
and the AAA rating indicates in its opinion an extremely strong capacity to pay
interest and repay principal. Bonds rated AA by S&P are judged by it to have a
very strong capacity to pay interest and repay principal, and they differ from
AAA issues only in small degree. The AA rating may be modified by an addition
of a plus (+) or minus (-) sign to show relative standing within the major
rating category.
The two highest ratings of Moody's for corporate bonds are Aaa and
Aa. Bonds rated Aaa are judged to be of the best quality. The rating of Aa is
assigned to bonds which are of
A-1
<PAGE> 977
"high quality by all standards." Aa bonds are rated lower than Aaa bonds
because margins of protection may not be as large or fluctuations of protective
elements may be of greater amplitude or there may be other elements which make
the long-term risks appear somewhat larger. Moody's may modify a rating of Aa
by adding numerical modifiers of 1, 2 or 3 to show relative standing within the
Aa category. Moody's has advised that the short-term credit risk of a
long-term instrument sometimes carries a MIG rating or one of the commercial
paper ratings described below.
The two highest ratings of IBCA for corporate bonds are AAA and AA.
Obligations rated AAA by IBCA have the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial conditions are unlikely
to increase investment risk substantially. Obligations for which there is a
very low expectation of investment risk are rated AA. IBCA may append a rating
of plus (+) or minus (-) to a rating to denote relative status within a major
rating category.
The two highest ratings of Thomson for corporate bonds are AAA and
AA. Bonds rated AAA are of the highest credit quality. The ability of the
obligor to repay principal and interest on a timely basis is considered to be
extremely high. Bonds rated AA indicate a very strong ability on the part of
the obligor to repay principal and interest on a timely basis with limited
incremental risk versus issues rated in the highest category. These ratings
may be modified by the addition of a plus (+) or minus (-) sign to show
relative standing within the rating categories.
Short-Term Corporate Debt Ratings
The highest rating of D&P for commercial paper is Duff 1. D&P
employs three designations, Duff 1 plus, Duff 1 and Duff 1 minus, within the
highest rating category. Duff 1 plus indicates highest certainty of timely
payment. Short-term liquidity, including internal operating factors and/or
access to alternative sources of funds, is judged to be outstanding, and safety
is just below risk-free U.S. Treasury short-term obligations. Duff 1 indicates
very high certainty of timely payment. Liquidity factors are excellent and
supported by strong fundamental protection factors. Risk factors are
considered to be minor. Duff 1 minus indicates high certainty of timely
payment. Liquidity factors are strong and supported by good fundamental
protection factors. Risk factors are very small.
Fitch's short-term ratings apply to corporate debt obligations that
are payable on demand or have original maturities of up to three years. The
highest rating of Fitch for short-term securities encompasses both the F-1+ and
F-1 ratings. F-1+ securities possess exceptionally strong credit quality.
A-2
<PAGE> 978
Issues assigned this rating are regarded as having the strongest degree of
assurance for timely payment. F-1 securities possess very strong credit
quality. Issues assigned this rating reflect an assurance of timely payment
only slightly less in degree than issues rated F-1+.
S&P's commercial paper ratings are current assessments of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. The A-1 designation indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics will be denoted with a plus (+)
designation.
Moody's short-term debt ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of nine months. Issuers rated Prime-1 (or related
supporting institutions) in the opinion of Moody's have a superior capacity for
repayment of short-term promissory obligations.
IBCA assesses the investment quality of unsecured debt with an
original maturity of less than one year which is issued by bank holding
companies and their principal banking subsidiaries. The designation A1 by IBCA
indicates that the obligation is supported by the highest capacity for timely
repayment. Where issues posses a particularly strong credit feature, a rating
of A1+ is assigned.
Thomson's short-term ratings assess the likelihood of an untimely
or incomplete payment of principal or interest of debt having a maturity of one
year or less which is issued by banks and other financial institutions. The
designation TBW-1 represents the highest short-term rating category and
indicates a very high degree of likelihood that principal and interest will be
paid on a timely basis.
A-3
<PAGE> 979
PACIFICA FUNDS TRUST
Pacifica 100% U.S. Treasury Money Market Fund
(Service Shares)
237 Park Avenue
New York, New York 10017
General and Account Information: (800) 662-8417
- --------------------------------------------------------------------------------
First Interstate Capital Management, Inc.--Investment Advisor
("FICM" or the "Advisor")
Furman Selz Incorporated--Administrator and Sponsor
("Furman Selz" or the "Sponsor")
Pacifica Funds Distributor Inc.--Distributor
("PFD Inc." or the "Distributor")
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information ("SAI") describes the
Service Shares of Pacifica 100% U.S. Treasury Money Market Fund (the "Fund")
which is managed by First Interstate Capital Management, Inc.
This SAI is not a prospectus and is only authorized for
distribution when preceded or accompanied by the prospectus for the Fund dated
February 1, 1996, as may be revised from time to time (the "Prospectus"). This
SAI contains additional and more detailed information than that set forth in the
Prospectus and should be read in conjunction with the Prospectus. The Prospectus
may be obtained without charge by writing or calling the Fund at the address or
information number printed above. Capitalized terms not otherwise defined herein
have the same meaning as in the Prospectus.
Shares of the Trust are not deposits or obligations of, or
guaranteed or endorsed by, any First Interstate or other bank, and are not
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other agency. Mutual fund shares involve certain investment risks,
including the possible loss of principal.
February 1, 1996.
<PAGE> 980
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
U.S. Treasury Securities . . . . . . . . . . . . . . . . . . . . . 1
Stripped Treasury Securities . . . . . . . . . . . . . . . . . . . 1
Investment Company Securities . . . . . . . . . . . . . . . . . . 2
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Trustees and Officers . . . . . . . . . . . . . . . . . . . . . . 5
Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Distribution of Fund Shares . . . . . . . . . . . . . . . . . . . 8
Administrative Services . . . . . . . . . . . . . . . . . . . . . 9
Service Organizations . . . . . . . . . . . . . . . . . . . . . . 9
EXPENSES AND EXPENSE LIMITS . . . . . . . . . . . . . . . . . . . . . . . . 10
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . 11
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . . 12
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 14
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Custodian, Transfer Agent and Dividend Disbursing Agent . . . . . 19
Performance Information . . . . . . . . . . . . . . . . . . . . . 20
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . 21
Registration Statement . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
- i -
<PAGE> 981
GENERAL
Pacifica Funds Trust (the "Trust") is an open-end management
investment company currently offering shares in a series of separately managed
investment portfolios. The Trust was organized on July 17, 1984 under the name
Fund Source. The Trust changed its name to "Pacifica Funds Trust" on February 9,
1993.
INVESTMENT POLICIES
The Prospectus discusses the investment objective of the Fund
and the policies to be employed to achieve its objective. This section contains
supplemental information concerning certain types of securities and other
instruments in which the Fund may invest, the investment policies and portfolio
strategies that the Fund may utilize, and certain risks attendant to such
investments, policies and strategies.
U.S. Treasury Securities. The Fund invests exclusively in
obligations of the U.S. Treasury which are backed by the full faith and credit
of the U.S. Government as to payment of principal and interest and which have
remaining maturities not exceeding 397 days. U.S. Treasury securities are
obligations issued by the U.S. Treasury. U.S. Treasury bills, which have a
maturity of up to one year, are direct obligations of the United States. The
U.S. Treasury also issues securities in the form of notes and bonds.
Stripped Treasury Securities. The Fund may invest in certain
U.S. Government Obligations referred to as "Stripped Treasury Securities."
Stripped Treasury Securities are U.S. Treasury securities that have been
stripped of their unmatured interest coupons (which typically provide for
interest payments semi-annually), interest coupons that have been stripped from
such U.S. Treasury securities, and receipts and certificates for such stripped
debt obligations and stripped coupons. Stripped bonds and stripped coupons are
sold at a deep discount because the buyer of those securities receives only the
right to receive a future fixed payment on the security and does not receive any
rights to periodic interest payments on the security.
Stripped Treasury Securities will include coupons that have been
stripped from U.S. Treasury bonds, which may be held through the Federal Reserve
Bank's book-entry system called "Separate Trading of Registered Interest and
Principal of Securities" ("STRIPS") or through a program entitled "Coupon Under
Book-Entry Safekeeping" ("CUBES").
- 1 -
<PAGE> 982
The U.S. Government does not issue Stripped Treasury Securities
directly. The STRIPS program, which is ongoing, is designed to facilitate the
secondary market in the stripping of selected U.S. Treasury notes and bonds into
separate interest and principal components. Under the program, the U.S. Treasury
continues to sell its notes and bonds through its customary auction process. A
purchaser of those specified notes and bonds who has access to a book-entry
account at a Federal Reserve bank, however, may separate the Treasury notes and
bonds into interest and principal components. The selected Treasury securities
thereafter may be maintained in the book-entry system operated by the Federal
Reserve in a manner that permits the separate trading and ownership of the
interest and principal payments.
CUBES, like STRIPS, are direct obligations of the U.S. Government.
CUBES are coupons that have previously been physically stripped from U.S.
Treasury notes and bonds, but which were deposited with the Federal Reserve
Bank's book-entry system and are now carried and transferable in book-entry form
only. Only stripped U.S. Treasury coupons maturing on or after January 15, 1988,
that were stripped prior to January 5, 1987, were eligible for conversion to
book-entry form under the CUBES program.
Investment Company Securities. The Fund may invest in
securities issued by other investment companies. The Fund may only invest in
investment companies which restrict their portfolio investments solely to the
same investment instruments that are permissible investments for the Fund. The
Fund will limit its investments in securities issued by other investment
companies so that, as determined immediately after a purchase of such securities
is made: (i) not more than 5% of the value of the Fund's total assets will be
invested in the securities of any one investment company; (ii) not more than 10%
of the value of its total assets will be invested in the aggregate in securities
of investment companies as a group; and (iii) not more than 3% of the
outstanding voting stock of any one investment company will be owned by the Fund
or by the Trust as a whole. It is the Fund's policy not to invest in securities
issued by other investment companies which pay asset-based fees to the Advisor,
the Distributor or their affiliates.
INVESTMENT RESTRICTIONS
The Fund is subject to the investment limitations enumerated
below which may be changed only by a vote of a majority of the holders of the
Fund's outstanding shares (as defined under "Other Information -- Voting Rights"
below).
- 2 -
<PAGE> 983
The Fund may not:
1. Invest more than 10% of the aggregate value of its total
assets in investments which are illiquid, or not readily marketable;
2. Borrow money or pledge or mortgage its assets, except that
the Fund may borrow from banks up to 10% of the current value of its total net
assets for temporary or emergency purposes and those borrowings may be secured
by the pledge of not more than 15% of the current value of its total net assets
(but investments may not be purchased by the Fund while any such borrowings
exist);
3. Make loans, except loans of portfolio securities and except
that the Fund may purchase the types of debt instruments described in the
Prospectus or the SAI;
4. Invest in companies for the purpose of exercising control or
management;
5. Knowingly purchase securities of other investment companies,
except (i) in connection with a merger, consolidation, acquisition, or
reorganization; and (ii) the Fund may invest up to 10% of its net assets in
shares of other investment companies;
6. Invest in real property (including limited partnership
interests), commodities, commodity contracts, or oil, gas and other mineral
resource, exploration, development, lease or arbitrage transactions;
7. Acquire securities subject to restrictions on disposition
imposed by the Securities Act of 1933, if, immediately after and as a result of
such acquisition, the value of such restricted securities and all other illiquid
securities held by the Fund would exceed 10% of the value of the Fund's total
assets;
8. Engage in the business of underwriting securities of other
issuers, except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933;
9. Make loans, except that the Fund may purchase readily
marketable debt securities;
10. Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
- 3 -
<PAGE> 984
11. Purchase securities on margin, except that the Fund may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities;
12. Mortgage, pledge, or hypothecate any of its assets, except
as described in Investment Restriction No. 2;
13. Purchase or retain the securities of any issuer, if those
individual officers and Trustees of the Trust, its Advisor, the Sponsor, or the
Distributor, each owning beneficially more than 1/2 of 1% of the securities of
such issuer, together own more than 5% of the securities of such issuer;
14. Invest more than 5% of its net assets in warrants which are
unattached to securities, included within that amount, no more than 2% of the
value of the Fund's net assets, may be warrants which are not listed on the New
York or American Stock Exchanges;
15. Write, purchase or sell puts, calls or combinations
thereof; or
16. Invest more than 5% of the current value of its total
assets in the securities of companies which, including predecessors, have a
record of less than three years' continuous operation.
If a percentage limitation is satisfied at the time of
investment, a later increase or decrease in such percentage resulting from a
change in the value of the Fund's investments will not constitute a violation of
such limitation, except that any borrowing by the Fund that exceeds the
fundamental investment limitations stated above must be reduced to meet such
limitations within the period required by the 1940 Act (currently three days)
and the Fund will not at any time hold more than 10% of its net assets in
illiquid securities. Otherwise, the Fund may continue to hold a security even
though it causes the Fund to exceed a percentage limitation because of
fluctuation in the value of the Fund's assets.
In order to permit the sale of shares in certain states, the
Trust may make commitments more restrictive than the investment policies and
limitations described above. Should the Trust determine that these commitments
are no longer in the best interests of the Trust, it will revoke the commitment
by terminating sales of its shares in the states involved.
- 4 -
<PAGE> 985
MANAGEMENT
Trustees and Officers
The principal occupations of the Trustees and executive
officers of the Fund for the past five years and their ages are listed below.
None of the Trustees is deemed to be an "interested person" of the Trust for
purposes of the 1940 Act.
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation(s)
Name, Address and Age with Registrant During Past 5 Years
- --------------------- ---------------- -----------------------
<S> <C> <C>
Joseph N. Hankin Trustee President, Westchester Community College
75 Grasslands Road since 1971; President of Hartford Junior
Valhalla, NY 10595 College from 1967 to 1971; Adjunct Professor
Age: 55 of Columbia University Teachers College
since 1976.
Richard A. Wedemeyer Trustee Vice President of Performance Advantage,
17 High Street Inc., 17 High Street, Norwalk, CT 06851
Suite 301 since 1992; Vice President of Jim Henson
Norwalk, CT 06851 Productions from 1979 to 1992; Author of In
Age: 59 Transition (Harper Collins); co-founder and
co-conductor of Harvard Business School Club
of New York Career Seminar; Trustee of Jim
Henson Legacy trust.
John E. Heilmann Trustee Retired; Chairman, President and Chief
Old Norwood Plantation Executive Officer, Distillers Somerset,
Wingina, VA 24599 Inc. and Norwood Enterprises, Inc.
Age: 64 from 1987 to 1992.
Dennis W. Draper Trustee Associate Professor of Finance, at
University of Southern University of Southern California since
California 1978; Director of Data Analysis, Inc.
School of Business (financial services); and Editorial Board of
Hoffman 701-F Chicago Board of Trade.
Los Angeles, CA 90089
Age: 46
</TABLE>
- 5 -
<PAGE> 986
<TABLE>
<S> <C> <C>
Jack D. Henderson Trustee Attorney; from April 1989 to November 1995,
1600 Broadway Partner of the law firm of Clanahan, Tanner,
Suite 1410 Downing Knowlton, P.C.
Denver, CO 80202
Age: 68
Michael C. Petrycki President Executive Vice President and Director of
230 Park Avenue Furman Selz since 1984.
New York, NY 10169
Age: 53
Steven D. Blecher Executive Vice Executive Vice President and Director of
230 Park Avenue President Furman Selz since 1983; Vice President,
New York, NY 10169 Secretary and Treasurer of Furman Selz
Age: 52 Capital Management, Inc. since 1984.
John J. Pileggi Vice President Managing Director of Furman Selz, from 1984
237 Park Avenue and Treasurer to 1992; Senior Managing Director since 1992
New York, NY 10169 and Director of Furman Selz since 1994.
Age: 36
Joan V. Fiore Vice President Managing Director and Counsel of Furman Selz
237 Park Avenue and Secretary since 1991; Staff Attorney at the U.S.
New York, NY 10017 Securities and Exchange Commission, Division
Age: 39 of Investment Management, from 1986 to 1991.
Donald E. Brostrom Assistant Director, Fund Services, Furman Selz
237 Park Avenue Treasurer Incorporated since 1986; Managing Director
New York, NY 10169 of Furman Selz since 1995.
Age: 37
</TABLE>
Trustees receive from the Trust an annual retainer of $5,000
and a fee of $1,000 for each Board of Trustees meeting and $500 for each Board
committee meeting attended, and are reimbursed for all out-of-pocket expenses
relating to attendance at such meetings.
- 6 -
<PAGE> 987
For the fiscal year ended September 30, 1995, the Trustees
received the following compensation from the Trust and from certain other
investment companies (as indicated) that have the same investment advisor as the
Trust or an investment advisor that is an affiliated person of the Trust's
investment advisor:
<TABLE>
<CAPTION>
===========================================================================================================
PENSION OR
RETIREMENT
AGGREGATE BENEFITS ACCRUED ESTIMATED TOTAL COMPENSATION
NAME OF COMPENSATION FROM AS PART OF TRUST ANNUAL BENEFITS FROM REGISTRANT
TRUSTEE THE TRUST EXPENSE UPON RETIREMENT AND FUND COMPLEX
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dennis W. $10,456 $0 $0 $10,456
Draper
- -----------------------------------------------------------------------------------------------------------
Joseph N. $11,250 $0 $0 $11,250
Hankin
- -----------------------------------------------------------------------------------------------------------
John E. $11,250 $0 $0 $11,250
Heilmann
- -----------------------------------------------------------------------------------------------------------
Jack D. $10,456 $0 $0 $30,956*
Henderson
- -----------------------------------------------------------------------------------------------------------
Richard A. $11,250 $0 $0 $11,250
Wedemeyer
===========================================================================================================
</TABLE>
*Includes amounts received for service as a member of the Board of Trustees of
Westcore Trust.
The Trustees and officers of the Trust, as a group, own less
than 1% of the outstanding shares of the Funds as of the date of this SAI.
Advisor
First Interstate Capital Management, Inc., 7501 E. McCormick
Parkway, Scottsdale, Arizona 85258, serves as advisor to the Fund. FICM manages
the investment and reinvestment of the assets of the Fund and continuously
reviews, supervises and administers the Fund's investments. The Advisor is
responsible for placing orders for the purchase and sale of the Fund's
investments directly with brokers and dealers selected by it in its discretion.
See "Portfolio Transactions." FICM also furnishes to the Board of Trustees,
which has overall responsibility for the business and affairs of the Trust,
periodic reports on the investment performance of the Fund.
FICM is a wholly-owned subsidiary of First Interstate Bank of
California ("FICAL"). FICAL is the largest banking subsidiary of First
Interstate Bancorp. First Interstate Bancorp provides financial products and
services marketed at the local
- 7 -
<PAGE> 988
level to nearly five million households in over 500 communities in 13 western
states.
Under the terms of the Investment Advisory Contract between the
Trust and FICM, FICM is obligated to manage the Fund's portfolio in accordance
with applicable laws and regulations. The investment advisory services provided
by FICM to the Fund are not exclusive under the terms of the Investment Advisory
Contract. FICM is free to, and does, render investment advisory services to
others. In making its investment decisions, FICM does not use material inside
information in the possession of its affiliates.
The Investment Advisory Contract for the Fund will continue in
effect for a period beyond more than two years from the date of its execution
only as long as such continuance is approved annually (i) by the holders of a
majority of the outstanding voting securities of the Fund or by the Board of
Trustees and (ii) by a majority of the Trustees who are not parties to such
Contract or "interested persons" (as defined in the 1940 Act) of any such party.
The Investment Advisory Contract may be terminated without penalty by vote of
the Trustees or the shareholders of the Fund, or by the Advisor, on 60 days
written notice by either party to the Contract and will terminate automatically
if assigned.
The Investment Advisory Contract provides that FICM shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Fund in connection with the performance of such contract, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of FICM in the performance of its duties
or from reckless disregard of its duties and obligations under the Contracts.
Distribution of Fund Shares
The Trust has retained Pacifica Funds Distributor Inc., a
subsidiary of Furman Selz, to serve as principal underwriter for the shares of
the Fund pursuant to a Distribution Contract. The Distribution Contract provides
that the Distributor will use its best efforts to maintain a broad distribution
of the Fund's shares among bona fide investors and may enter into selling group
agreements with responsible dealers and dealer managers as well as sell the
Fund's shares to individual investors. The Distributor is not obligated,
however, to sell any specific amount of shares.
- 8 -
<PAGE> 989
Administrative Services
Furman Selz provides management and administrative services
necessary for the operation of the Fund, including among other things, (i)
preparation of shareholder reports and communications, (ii) regulatory
compliance, such as reports to and filings with the Securities and Exchange
Commission ("SEC") and state securities commissions and (iii) general
supervision of the operation of the Fund, including coordination of the services
performed by the Fund's advisor, distributor, transfer agent, custodian,
independent accountants, legal counsel and others. In addition, Furman Selz
furnishes office space and facilities required for conducting the business of
the Fund and pays the compensation of the Fund's officers, employees and
Trustees affiliated with Furman Selz. For these services, Furman Selz is
entitled to receive a fee, payable monthly, at the annual rate of 0.15% of the
average daily net assets of the Fund.
The Administrative Services Contract is terminable without
penalty, at any time, by vote of a majority of the Trustees who are not
"interested persons" of the Trust and who have no direct or indirect financial
interest in the Administrative Services Contract upon not more than 60 days
written notice to Furman Selz or by vote of the holders of a majority of the
shares of the Fund, or, upon 60 days notice, by Furman Selz. The Administrative
Services Contract will terminate automatically in the event of its assignment.
Service Organizations
The Trust may also contract with banks (including affiliates of First
Interstate Bancorp), trust companies, broker-dealers (other than Furman Selz) or
other financial organizations ("Service Organizations") to provide certain
administrative services with respect to the Fund. Services provided by Service
Organizations may include among other things: providing necessary personnel and
facilities to establish and maintain certain shareholder accounts and records;
assisting in processing purchase and redemption transactions; arranging for the
wiring of funds; transmitting and receiving funds in connection with client
orders to purchase or redeem shares; verifying and guaranteeing client
signatures in connection with redemption orders, transfers among and changes in
client-designating accounts; providing periodic statements showing a client's
account balance and, to the extent practicable, integrating such information
with other client transactions; furnishing periodic and annual statements and
confirmations of all purchases and redemptions of shares in a client's account;
transmitting proxy statements, annual reports, and updating prospectuses and
other communications from the Fund to clients; and providing such other services
as the Fund or a
- 9 -
<PAGE> 990
client reasonably may request, to the extent permitted by applicable statute,
rule or regulation.
Some Service Organizations may impose additional or different
conditions on their clients, such as requiring their clients to invest more than
the minimum initial or subsequent investments specified by the Fund or charging
a direct fee for servicing. If imposed, these fees would be in addition to any
amounts which might be paid to the Service Organization by the Fund. Each
Service Organization has agreed to transmit to its clients a schedule of any
such fees. Shareholders using Service Organizations are urged to consult them
regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws, among other
things, prohibit banks from engaging in the business of underwriting, selling or
distributing securities. There currently is no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state statutes or
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, could prevent a bank from continuing to perform all
or a part of its servicing activities. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed herein
and banks and financial institutions may be required to register as dealers
pursuant to state law. If a bank were prohibited from so acting, its shareholder
clients would be permitted to remain shareholders of the Trust and alternative
means for continuing the servicing of such shareholders would be sought. In that
event, changes in the operation of the Trust might occur and a shareholder
serviced by such a bank might no longer be able to avail itself of any services
then being provided by the bank. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these
occurrences.
EXPENSES AND EXPENSE LIMITS
Except for the expenses paid by the Advisor, the Distributor
and Furman Selz, the Fund bears all costs of its operations.
Currently, California is the only state imposing limitations on
the expenses of the Fund. Those expense limitations are 2-1/2 percent of the
first $30 million of the Fund's average net assets, 2 percent of the next $70
million and 1-1/2 percent of the Fund's remaining average net assets. If in any
fiscal year expenses of the Fund (excluding taxes, interest,
- 10 -
<PAGE> 991
expenses under the Plan, brokerage commissions and other portfolio transaction
expenses, other expenditures which are capitalized in accordance with generally
accepted accounting principles and extraordinary expenses, but including the
advisory and administrative fees) exceed the expense limitations applicable to
the Fund imposed by the securities regulations of any state, Furman Selz and the
FICM each will reimburse the Fund for a portion of the excess as follows: Furman
Selz 33% and FICM 67%.
DETERMINATION OF NET ASSET VALUE
The portfolio instruments of the Fund are valued on the basis
of amortized cost. This technique involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if it sold the instrument.
During periods of declining interest rates, the daily yield on shares of the
Fund computed as described above may tend to be higher than a like computation
made by a fund with identical investments utilizing a method of valuation based
upon market prices and estimates of market prices for all of its instruments.
Thus, if the use of amortized cost by the Fund resulted in a lower aggregate
portfolio value on a particular day, a prospective investor in the Fund would be
able to obtain a somewhat higher yield than would result from investment in a
fund utilizing solely market values and existing investors in the Fund would
receive less investment income. The converse would apply in a period of rising
interest rates.
The valuation of the Fund's instruments, based upon their
amortized cost and the concomitant maintenance by the Fund of a net asset value
of $1.00, is permitted in accordance with Rule 2a-7 under the Act, pursuant to
which the Fund must adhere to certain conditions. The Fund must maintain a
dollar-weighted average maturity of 90 days or less, purchase only instruments
having remaining maturities of thirteen months or less, and invest only in
securities which are determined to present minimal credit risks pursuant to
guidelines adopted by the Trustees. Instruments having variable or floating
interest rates or demand features may be deemed to have remaining maturities as
follows: (a) a government security with a variable rate of interest readjusted
no less frequently than every thirteen months may be deemed to have a maturity
equal to the period remaining until the next readjustment of the interest rate;
(b) an instrument with a variable rate of interest, the principal amount of
which is
- 11 -
<PAGE> 992
scheduled on the face of the instrument to be paid in thirteen months or less,
may be deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate; (c) an instrument with a variable rate of
interest that is subject to a demand feature may be deemed to have a maturity
equal to the longer of the period remaining until the next readjustment of the
interest rate or the period remaining until the principal amount can be
recovered through demand; (d) an instrument with a floating rate of interest
that is subject to a demand feature may be deemed to have a maturity equal to
the period remaining until the principal amount can be recovered through demand;
and (e) a repurchase agreement may be deemed to have a maturity equal to the
period remaining until the date on which the repurchase of the underlying
securities is scheduled to occur or, where no date is specified but the
agreement is subject to demand, the notice period applicable to a demand for the
repurchase of the securities.
The Trustees have established procedures designed to stabilize,
to the extent reasonably possible, the Fund's price per share as computed for
the purpose of sales and redemptions at a single value. Such procedures will
include the determination, at such intervals as the Trustees deem appropriate,
of the extent to which the Fund's NAV as calculated by using available market
quotations deviates from $1.00 per share, such deviation may result in material
dilution or other unfair results to existing shareholders or investors. In the
event the Trustees determine that such a material deviation exists, they have
agreed to take such corrective action as they regard as necessary and
appropriate, which may include selling portfolio instruments prior to maturity
to realize capital gains or losses or to shorten average portfolio maturity;
withholding dividends; redeeming shares in kind or without monetary or other
consideration; or establishing a net asset value per share by using available
market quotations. It is the intention of the Fund to maintain a per share net
asset value of $1.00, but there can be no assurance that the Fund will do so.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Payment for shares may, in the discretion of the Advisor, be
made in the form of securities that are permissible investments for the Fund as
described in the Prospectus. For further information about this form of payment
please contact Furman Selz. In connection with an in-kind securities payment,
the Fund will require, among other things, that the securities be valued on the
day of purchase in accordance with the pricing methods used by the Fund and that
the Fund receive satisfactory assurances that (1) it will have good and
marketable title to the securities received by it; (2) that the securities are
in proper
- 12 -
<PAGE> 993
form for transfer to the Fund; and (3) adequate information will be provided
concerning the basis and other matters relating to the securities.
Under the 1940 Act, the Fund may suspend the right of
redemption or postpone the date of payment upon redemption for any period during
which the New York Stock Exchange is closed (other than customary weekend and
holiday closings), or during which trading on said Exchange is restricted, or
during which as determined by the SEC by rule or regulation) an emergency exists
as a result of which disposal or valuation of portfolio securities is not
reasonably practicable, or for such other periods as the SEC may permit. (The
Fund may also suspend or postpone the recordation of the transfer of its shares
upon the occurrence of any of the foregoing conditions.)
The Trust may suspend redemption rights or postpone redemption
payments (as well as suspend the recordation of the transfer of shares) for such
periods as are permitted under the 1940 Act. The Trust may also redeem shares
involuntarily or make payment for redemption in securities or other property if
it appears appropriate to do so in light of the Trust's responsibilities under
the 1940 Act.
In addition, the Trust may redeem shares involuntarily to
reimburse the Fund for any loss sustained by reason of the failure of a
shareholder to make full payment for shares purchased by the shareholder or to
collect any charge relating to a transaction effected for the benefit of a
shareholder which is applicable to shares of the Fund as provided from time to
time in the Prospectus.
All redemptions of shares of the Fund will be made in cash,
except that the commitment to redeem shares in cash extends only to redemption
requests made by each shareholder of the Fund during any 90-day period of up to
the lesser of $250,000 or 1% of the net asset value of the Fund at the beginning
of such period. This commitment is irrevocable without the prior approval of the
SEC and is a fundamental policy of the Fund that may not be changed without
shareholder approval. In the case of redemption requests by shareholders in
excess of such amounts, the Board of Trustees reserves the right to have the
Fund make payment, in whole or in part in securities or other assets, in case of
an emergency or any time a cash distribution would impair the liquidity of the
Fund to the detriment of the existing shareholders. In this event, the
securities would be valued in the same manner as the securities of the Fund are
valued. If the recipient were to sell such securities, he or she would incur
brokerage charges.
- 13 -
<PAGE> 994
There is no sales charge on the Fund.
PORTFOLIO TRANSACTIONS
Investment decisions for the Fund and for the other investment
advisory clients of the Advisor are made with a view to achieving their
respective investment objectives. Investment decisions are the product of many
factors in addition to basic suitability for the particular client involved.
Thus, a particular security may be bought or sold only for certain clients even
though it could have been bought or sold for other clients at the same time.
Likewise, a particular security may be bought for one or more clients while at
the same time one or more clients are selling the security. In some instances,
one client may sell a particular security to another client. It also sometimes
happens that two or more clients simultaneously purchase or sell the same
security, in which event each day's transactions in such security are, insofar
as possible, averaged as to price and allocated between such clients in a manner
which in the Advisor's opinion is equitable to each and in accordance with the
amount being purchased or sold by each. There may be circumstances when
purchases or sales of portfolio securities for one or more clients will have an
adverse effect on other clients.
The Fund has no obligation to deal with any dealer or group of
dealers in the execution of transactions in portfolio securities. Subject to
policies established by the Trust's Board of Trustees, the Advisor is primarily
responsible for portfolio decisions and the placing of portfolio transactions.
In placing orders, it is the policy of the Fund to obtain the best results
taking into account the broker-dealer's general execution and operational
facilities, the type of transaction involved and other factors such as the
dealer's risk in positioning the securities. While the Advisor generally seeks
reasonably competitive spreads or commissions, the Fund will not necessarily be
paying the lowest spread or commission available.
Purchases and sales of securities will primarily be principal
transactions. Debt securities normally will be purchased or sold from or to
issuers directly or to dealers serving as market makers for the securities at a
net price. Generally, money market securities are traded on a net basis and do
not involve brokerage commissions. Under the 1940 Act, persons affiliated with
the Fund or the Sponsor are prohibited from dealing with the Fund as a principal
in the purchase and sale of securities except in limited situations permitted by
SEC regulations, unless a permissive order allowing such transactions is
obtained from the SEC.
- 14 -
<PAGE> 995
The Advisor may, in circumstances in which two or more
broker-dealers are in a position to offer comparable results, give preference to
a dealer which has provided statistical or other research services to the
Advisor. By allocating transactions in this manner, the Advisor is able to
supplement its research and analysis with the views and information of
securities firms. These services, which in some cases may also be purchased for
cash, include such matters as general economic and security market reviews,
industry and company reviews, evaluations of securities and recommendations as
to the purchase and sale of securities. Some of these services are of value to
the Advisor in advising various of its clients (including the Fund), although
not all of these services are necessarily useful and of value in managing the
Fund. The management fee paid by the Fund is not reduced because the Advisor and
its affiliates receive such services.
As permitted by Section 28(e) of the Securities Exchange Act
of 1934 (the "1934 Act"), the Advisor may cause the Fund to pay a broker-dealer
which provides "brokerage and research services" (as defined in the 1934 Act) to
the Advisor an amount of disclosed commission for effecting a securities
transaction for the Fund in excess of the commission which another broker-dealer
would have charged for effecting that transaction.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. and subject to seeking the most
favorable price and execution available and such other policies as the Trustees
may determine, the Advisor may consider sales of shares of the Fund as a factor
in the selection of broker-dealers to execute portfolio transactions for the
Fund.
TAXATION
The Fund intends to qualify and elect annually to be treated
as a regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). To qualify as a regulated investment
company, the Fund must (a) distribute to shareholders at least 90% of its
investment company taxable income (which includes, among other items, dividends,
taxable interest and the excess of net short-term capital gains over net
long-term capital losses); (b) derive in each taxable year at least 90% of its
gross income from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of stock, securities or foreign
currencies or other income derived with respect to its business of investing in
such stock, securities or currencies; (c) derive less than 30% of its gross
income from the sale or other disposition of certain assets (namely, in the case
of the Fund, (i) stock or securities;
- 15 -
<PAGE> 996
(ii) options, futures, and forward contracts (other than those on foreign
currencies), and (iii) foreign currencies (including options, futures, and
forward contracts on such currencies) not directly related to the Fund's
principal business of investing in stock or securities (or options and futures
with respect to stocks or securities)) held less than 3 months; and (d)
diversify its holdings so that, at the end of each quarter of the taxable year,
(i) at least 50% of the market value of the Fund's assets is represented by cash
and cash items (including receivables), U.S. Government securities, the
securities of other regulated investment companies and other securities, with
such other securities of any one issuer limited for the purposes of this
calculation to an amount not greater than 5% of the value of the Fund's total
assets and not greater than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its total assets is invested
in the securities of any one issuer (other than U.S. Government securities or
the securities of other regulated investment companies). In addition, a Fund
earning tax-exempt interest must, in each year, distribute at least 90% of its
net tax-exempt income. By meeting these requirements, the Fund generally will
not be subject to Federal income tax on its investment company taxable income
and net capital gains which are distributed to shareholders. If the Fund does
not meet all of these Code requirements, it will be taxed as an ordinary
corporation and its distributions will be taxed to shareholders as ordinary
income.
Amounts, other than tax-exempt interest, not distributed on a
timely basis in accordance with a calendar year distribution requirement are
subject to a nondeductible 4% excise tax. To prevent imposition of the excise
tax, the Fund must distribute for each calendar year an amount equal to the sum
of (1) at least 98% of its ordinary income (excluding any capital gains or
losses) for the calendar year, (2) at least 98% of the excess of its capital
gains over capital losses (adjusted for certain ordinary losses) for the
one-year period ending October 31 of such year, and (3) all ordinary income and
capital gain net income (adjusted for certain ordinary losses) for previous
years that were not distributed during such years.
Distributions of investment company taxable income generally
are taxable to shareholders as ordinary income. All distributions are taxable to
the shareholder in the same manner whether reinvested in additional shares or
received in cash. Shareholders will be notified annually as to the Federal tax
status of distributions.
The Fund is required to report to the Internal Revenue Service
("IRS") all distributions except in the case of certain exempt shareholders. All
such distributions generally are
- 16 -
<PAGE> 997
subject to withholding of Federal income tax at a rate of 31% ("backup
withholding") in the case of non-exempt shareholders if (1) the shareholder
fails to furnish the Fund with and to certify the shareholder's correct taxpayer
identification number or social security number, (2) the IRS notifies the Fund
or a shareholder that the shareholder has failed to report properly certain
interest and dividend income to the IRS and to respond to notices to that
effect, or (3) when required to do so, the shareholder fails to certify that he
is not subject to backup withholding. If the withholding provisions are
applicable, any such distributions, whether reinvested in additional shares or
taken in cash, will be reduced by the amounts required to be withheld. Backup
withholding is not an additional tax. Any amount withheld may be credited
against the shareholder's U.S. Federal income tax liability. Investors may wish
to consult their tax advisors about the applicability of the backup withholding
provisions.
The foregoing discussion relates only to Federal income tax
law as applicable to U.S. persons (i.e., U.S. citizens and residents and U.S.
corporations, partnerships, trusts and estates). Distributions by the Fund also
may be subject to state and local taxes and their treatment under state and
local income tax laws may differ from the Federal income tax treatment.
Distributions of a Fund which are derived from interest on obligations of the
U.S. Government and certain of its agencies and instrumentalities may be exempt
from state and local taxes in certain states. Shareholders should consult their
tax advisors with respect to particular questions of Federal, state and local
taxation. Shareholders who are not U.S. persons should consult their tax
advisors regarding U.S. and foreign tax consequences of ownership of shares of
the Fund including the likelihood that distributions to them would be subject to
withholding of U.S. tax at a rate of 30% (or at a lower rate under a tax
treaty).
OTHER INFORMATION
Capitalization
The Trust is a Massachusetts business trust established under
a Declaration of Trust dated July 17, 1984, and consists of series of separately
managed portfolios. The capitalization of the Trust consists solely of an
unlimited number of shares of beneficial interest with a par value of $0.001
each. The Board of Trustees may establish additional portfolios (with different
investment objectives and fundamental policies) at any time in the future.
Establishment and offering of additional portfolios will not alter the rights of
the Fund's shareholders. When issued, shares are fully paid, non-assessable,
redeemable and
- 17 -
<PAGE> 998
freely transferable. Shares do not have preemptive rights or subscription
rights.
In the event of a liquidation or dissolution of the Trust or
an individual Fund, shareholders of a particular Fund would be entitled to
receive the assets available for distribution belonging to such Fund, and a
proportionate distribution, based upon the relative net asset values of the
Trust's respective portfolios, of any general assets not belonging to any
particular portfolio which are available for distribution. Shareholders of a
Fund are entitled to participate in the net distributable assets of the Fund on
liquidation, based on the number of shares of the Fund that are held by each
shareholder, except that, in the case of a Fund offering more than one class of
shares, Institutional Shares, Investor Shares and Service Shares of a Fund will
each be solely responsible for Service Organization fees and other "class"
expenses, if any, that are attributable to the particular share class, and
Investor Shares shall be solely responsible for payments made under the
applicable Distribution Plan.
Voting Rights
Under the Declaration of Trust, the Trust is not required to
hold annual meetings of its shareholders to elect Trustees or for other
purposes. It is not anticipated that the Trust will hold shareholders' meetings
unless required by law or the Declaration of Trust. In this regard, the Trust
will be required to hold a meeting to elect Trustees to fill any existing
vacancies on the Board if, at any time, fewer than a majority of the Trustees
have been elected by the shareholders of the Trust. In addition, the Declaration
of Trust provides that the holders of not less than two-thirds of the
outstanding shares of the Trust may remove persons serving as Trustee either by
declaration in writing or at a meeting called for such purpose. The Trustees are
required to call a meeting for the purpose of considering the removal of persons
serving as Trustee if requested in writing to do so by the holders of not less
than 10% of the outstanding shares of the Trust. To the extent required by
applicable law, the Trustees shall assist shareholders who seek to remove any
person serving as Trustee.
The Trust's shares do not have cumulative voting rights, so
that the holders of more than 50% of the outstanding shares may elect the entire
Board of Trustees, in which case the holders of the remaining shares would not
be able to elect any Trustees.
Holders of all outstanding shares of the Fund will vote
together in the aggregate and not by class on all matters, except
- 18 -
<PAGE> 999
that only Institutional Shares and Service Shares will be entitled to vote on
matters submitted to a vote of shareholders pertaining to the Fund's
arrangements with Service Organizations with respect to Institutional Shares and
Service Shares, and only Investor Shares of the Fund will be entitled to vote on
matters submitted to a vote of shareholders pertaining to the Fund's
Distribution Plan and the Fund's arrangements with Service Organizations with
respect to Investor Shares. Further, shareholders of all of the Funds, as well
as those of any other investment portfolio now or hereafter offered by the
Trust, will vote together in the aggregate and not separately on a portfolio-
by-portfolio basis, except as otherwise required by law or when permitted by the
Board of Trustees. Rule 18f-2 under the 1940 Act provides that any matter
required to be submitted to the holders of the outstanding voting securities of
an investment company such as the Trust shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each Fund affected by the matter. A portfolio is affected
by a matter unless it is clear that the interests of each portfolio in the
matter are substantially identical or that the matter does not affect any
interest of the portfolio. Under the Rule, the approval of an investment
advisory agreement or any change in a fundamental investment policy would be
effectively acted upon with respect to a portfolio only if approved by a
majority of the outstanding shares of such portfolio. However, the Rule also
provides that the ratification of the appointment of independent auditors, the
approval of principal underwriting contracts and the election of trustees may be
effectively acted upon by shareholders of the Trust voting together in the
aggregate without regard to a particular portfolio.
The term "majority of the outstanding shares" of a portfolio
means the vote of the lesser of (i) 67% or more of the shares of the portfolio
present at a meeting, if the holders of more than 50% of the outstanding shares
of the portfolio are present or represented by proxy, or (ii) more than 50% of
the outstanding shares of the portfolio.
Custodian, Transfer Agent and Dividend Disbursing Agent
First Interstate Bank of California, 707 Wilshire Blvd., Los
Angeles, California 90017, acts as custodian of the Trust's assets, but plays no
role in making decisions as to the purchase or sale of portfolio securities for
the Fund. FICAL is entitled to receive a fee from the Trust, computed daily and
payable monthly, at the annual rate of 0.021% of the first $5 billion in
aggregate average daily net assets of the Funds; 0.0175% of the next $5 billion
in aggregate average daily net
- 19 -
<PAGE> 1000
assets of the Funds; and 0.015% of the aggregate average daily net assets of the
Funds in excess of $10 billion.
Furman Selz acts as transfer agent for the Fund. The Trust
compensates Furman Selz for providing personnel and facilities to perform
transfer agency related services for the Trust at a rate intended to represent
the cost of providing such services.
Performance Information
The Fund may, from time to time, include its yields in
advertisements or reports to shareholders or prospective investors.
Current yield for the Fund will be based on the change in the
value of a hypothetical investment (exclusive of capital changes) over a
particular seven-day period, less a pro-rata share of the Fund's expenses
accrued over that period (the "base period"), and stated as a percentage of the
investment at the start of the base period (the "base period return"). The base
period return is then annualized by multiplying by 365/7, with the resulting
yield figure carried to at least the nearest hundredth of one percent.
"Effective yield" assumes that all dividends received during an annual period
have been reinvested. Calculation of "effective yield" begins with the same
"base period return" used in the calculation of yield, which is then annualized
to reflect weekly compounding pursuant to the following formula:
Effective Yield = [(Base Period Return + 1)365/7] - 1.
Quotations of yield will reflect only the performance of a
hypothetical investment in the Fund during the particular time period shown.
Yield for the Fund will vary based on changes in the market conditions and the
level of the Fund's expenses, and no reported performance figure should be
considered an indication of performance which may be expected in the future.
In connection with communicating its yields to current or
prospective shareholders, the Fund also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
other unmanaged indices which may assume reinvestment of dividends but generally
do not reflect deductions for administrative and management costs.
Performance information for the Fund may be compared,
in reports and promotional literature, to: (i) the Standard &
Poor's 500 Stock Index, Dow Jones Industrial Average, or other
- 20 -
<PAGE> 1001
unmanaged indices so that investors may compare the Funds' results with those of
a group of unmanaged securities widely regarded by investors as representative
of the securities markets in general; (ii) other groups of mutual funds tracked
by Lipper Analytical Services, a widely used independent research firm which
ranks mutual funds by overall performance, investment objectives, and assets, or
tracked by other services, companies, publications, or persons who rank mutual
funds on overall performance or other criteria; and (iii) the Consumer Price
Index (measure for inflation) to assess the real rate of return from an
investment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Investors who purchase and redeem shares of the Funds through
a customer account maintained at a Service Organization may be charged one or
more of the following types of fees as agreed upon by the Service Organization
and the investor, with respect to the provision of customer services: account
fees (a fixed amount per month or per year); transaction fees (a fixed amount
per transaction processed); compensating balance requirements (a minimum dollar
amount a customer must maintain in order to obtain the services offered); or
account maintenance fees (a periodic charge based upon a percentage of the
assets in the account or of the dividends paid on those assets). Such fees are
not reflected in the Fund's, performance quotations, and will have the effect of
reducing the yield of the Fund for those investors.
Independent Auditors
Ernst & Young LLP, 515 South Flower Street, Los Angeles,
California 90071 has been selected to serve as the independent auditors for the
Fund for the current fiscal year.
Registration Statement
This SAI and the Prospectus do not contain all the information
included in the Trust's Registration Statement filed with the SEC under the
Securities Act of 1933 with respect to the securities offered hereby. Certain
portions of the Trust's Registration Statement have been omitted pursuant to the
rules and regulations of the SEC. The Registration Statement, including the
exhibits filed therewith, may be examined at the office of the SEC in
Washington, D.C.
Statements contained herein and in the Prospectus as to the
contents of any contract or other documents referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other documents filed as an exhibit to the Trust's Registration Statement,
each such statement being qualified in all respects by such reference.
- 21 -
<PAGE> 1002
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) For Registrant's Equity Value Fund, Balanced Fund,
Growth Fund, Short-Term Government Bond Fund,
Intermediate Government Bond Fund, Intermediate
Bond Fund, Oregon Tax-Exempt Fund, Arizona
Tax-Exempt Fund, National Tax-Exempt Fund, Asset
Preservation Fund, Government Income Fund,
California Tax-Exempt Fund, California Short-Term
Tax-Exempt Fund, Money Market Fund, Government
Money Market Fund, Prime Money Market Fund,
Treasury Money Market Fund and Money Market Trust.
(A) Financial Highlights are included in Part A
(B) Audited Financial Statements for the fiscal
year ended September 30, 1995 are
incorporated by reference in Part B for each
Fund
(2) For Registrant's 100% U.S. Treasury Money Market
Fund, California Tax-Exempt Money Market Fund,
National Tax-Exempt Money Market Fund, Equity Index
Fund and International Equity Fund, Financial
Statements and Financial Highlights will be filed
by amendment.
(b) Exhibits:
(1) Declaration of Trust of Registrant(1)
(2) By-laws of Registrant(1)
(3) Not applicable
(4) Specimen certificates of shares of beneficial
interest of Registrant(3)
(5) (i) Advisory Contract for The Government
Money Market Fund(4)
(ii) Advisory Contract for The Money Market
Fund(5)
(iii) Master Advisory Contract between Fund
Source and San Diego Financial Capital
<PAGE> 1003
Management, Inc. for The Asset Preservation
Fund, The Government Income Fund, The Equity
Value Fund, The Balanced Fund and The
California Tax-Exempt Fund(5)
(iv) Advisory Contract Supplement between Fund
Source and San Diego Financial Capital
Management, Inc. relating to The Asset
Preservation Fund(5)
(v) Advisory Contract Supplement between Fund
Source and San Diego Financial Capital
Management, Inc. relating to The Government
Income Fund(5)
(vi) Advisory Contract Supplement between Fund
Source and San Diego Financial Capital
Management, Inc. relating to The Equity
Value Fund(5)
(vii) Advisory Contract Supplement between Fund
Source and San Diego Financial Capital
Management, Inc. relating to The Balanced
Fund(5)
(viii) Advisory Contract Supplement between Fund
Source and San Diego Financial Capital
Management, Inc. relating to The California
Tax-Exempt Fund(5)
(ix) Advisory Contract Supplement between Fund
Source and San Diego Financial Capital
Management, Inc. relating to The California
Short-Term Tax-Exempt Fund(7)
(x) Investment Advisory and Management Agreement
between the Registrant and First Interstate
Capital Management, Inc. for the Prime Money
Market Fund and Treasury Money Market
Fund(10)
(xi) Form of Investment Advisory Contract between
the Registrant and First Interstate Capital
Management, Inc. relating to the Money
Market Trust, Growth Fund, Short-Term
Government Bond Fund, Intermediate
Government Bond Fund, Intermediate Bond
Fund, Oregon Tax-
- 2 -
<PAGE> 1004
Exempt Fund, Arizona Tax-Exempt Fund and
National Tax-Exempt Fund(12)
(xii) Advisory Contract Supplements between the
Registrant and First Interstate Capital
Management, Inc. relating to the 100% U.S.
Treasury Money Market Fund, National
Tax-Exempt Money Market Fund, California
Tax-Exempt Money Market Fund, Equity Index
Fund and International Equity Fund.
(6) (i) Master Distribution Contract between Fund
Source and Pacifica Funds Distributor Inc.
for The Money Market Fund, The Government
Money Market Fund, The Asset Preservation
Fund, The Government Income Fund, The Equity
Value Fund, The Balanced Fund and The
California Tax-Exempt Fund(6)
(ii) Distribution Contract Supplement between
Fund Source and Pacifica Funds Distributor
Inc. relating to The Money Market Fund(6)
(iii) Distribution Contract Supplement between
Fund Source and Pacifica Funds Distributor
Inc. relating to The Government Money Market
Fund(6)
(iv) Distribution Contract Supplement between
Fund Source and Pacifica Funds Distributor
Inc. relating to The Asset Preservation
Fund(6)
(v) Distribution Contract Supplement between
Fund Source and Pacifica Funds Distributor
Inc. relating to The Government Income
Fund(6)
(vi) Distribution Contract Supplement between
Fund Source and Pacifica Funds Distributor
Inc. relating to The Equity Value Fund(6)
(vii) Distribution Contract Supplement between
Fund Source and Pacifica Funds
- 3 -
<PAGE> 1005
Distributor Inc. relating to The Balanced
Fund(6)
(viii) Distribution Contract Supplement between
Fund Source and Pacifica Funds Distributor
Inc. relating to The California Tax-Exempt
Fund(6)
(ix) Distribution Contract Supplement between
Fund Source and Pacifica Funds Distributor
Inc. relating to The California Short-Term
Tax-Exempt Fund(6)
(x) Distribution Contract Supplements between
the Registrant and Pacifica Funds
Distributor Inc. for the Prime Money Market
Fund and Treasury Money Market Fund(15)
(xi) Form of Distribution Contract Supplements
between the Registrant and Pacifica Funds
Distributor, Inc. relating to the Money
Market Trust, Growth Fund, Short-Term
Government Bond Fund, Intermediate
Government Bond Fund, Intermediate Bond
Fund, Oregon Tax-Exempt Fund, Arizona
Tax-Exempt Fund, National Tax-Exempt Fund,
Prime Money Market Fund and Treasury Money
Market Fund(13)
(xii) Distribution Contract Supplements between
the Registrant and Pacifica Funds
Distributor, Inc., relating to the 100% U.S.
Treasury Money Market Fund, California
Tax-Exempt Money Market Fund, National
Tax-Exempt Money Market Fund, Equity Index
Fund and International Index Fund
(7) Not applicable
(8) (i) Custodian Contract Between Pacifica Funds
Trust and First Interstate Bank of
California(8)
(ii) Custody Agreement between Pacifica Funds
Trust and First Interstate Bank of
- 4 -
<PAGE> 1006
California for the Prime Money Market Fund
and Treasury Money Market Fund(10)
(9) (i) Service Agreement between Pacifica Funds
Trust and Furman Selz LLC(13)
(ii) (a) Shareholder Services Plan for
Institutional Shares(14)
(b) Form of Shareholder Servicing
Agreement for Institutional
Shares(14)
(iii) (a) Shareholder Services Plan for
Service Shares(14)
(b) Form of Shareholder Servicing
Agreement for Service Shares(14)
(iv) (a) Shareholder Services Plan for
Investor Shares(14)
(b) Form of Shareholder Servicing
Agreement for Investor Shares(14)
(10) Filed on November 30, 1995 with the Trust's
Notices Pursuant to Rule 24f-2
(11) (i) Consent of Ernst & Young LLP
(ii) Consents of Price Waterhouse LLP
(iii) Consent of Deloitte & Touche LLP(15)
(12) Not applicable
(13) Not applicable
(14) Model retirement plans(2)
(15) (i) Form of Amended and Restated Master
Distribution Plan(12)
(ii) Form of Amended and Restated Master
Distribution Plan Supplements(13)
(iii) Master Administrative Services Contract
between Fund Source and Furman Selz LLC for
The Government Money Market Fund,
- 5 -
<PAGE> 1007
The Money Market Fund, The Asset
Preservation Fund, The Government Income
Fund, The Equity Value Fund, The Balanced
Fund and The California Tax- Exempt Fund(5)
(iv) Administrative Services Contract Supplement
between Fund Source and Furman Selz LLC
relating to The Government Money Market
Fund(5)
(v) Administrative Services Contract Supplement
between Fund Source and Furman Selz LLC
relating to The Money Market Fund(5)
(vi) Administrative Services Contract Supplement
between Fund Source and Furman Selz LLC
relating to The Asset Preservation Fund(5)
(vii) Administrative Services Contract Supplement
between Fund Source and Furman Selz LLC
relating to The Government Income Fund(5)
(viii) Administrative Services Contract Supplement
between Fund Source and Furman Selz LLC
relating to The Equity Value Fund(5)
(ix) Administrative Services Contract Supplement
between Fund Source and Furman Selz LLC
relating to The Balanced Fund(5)
(x) Administrative Services Contract Supplement
between Fund Source and Furman Selz LLC
relating to The California Tax-Exempt
Fund(5)
(xi) Administrative Services Contract Supplement
between Fund Source and Furman Selz LLC
relating to The California Short-Term
Tax-Exempt Fund(7)
(xii) Administration Agreement with The Dreyfus
Corporation for the Prime Money
- 6 -
<PAGE> 1008
Market Fund and Treasury Money Market
Fund(10)
(xiii) Form of Administrative Services Contract
Supplements between Registrant and
Furman Selz LLC relating to the Money
Market Trust, Growth Fund, Short-Term
Government Bond Fund, Intermediate
Government Bond Fund, Intermediate Bond
Fund, Oregon Tax-Exempt Fund, Arizona
Tax-Exempt Fund and National Tax-Exempt
Fund(13)
(xiv) Administrative Services Contract
Supplements between Registrant and
Furman Selz LLC relating to the 100%
U.S. Treasury Money Market Fund,
California Tax-Exempt Money Market Fund,
National Tax-Exempt Money Market Fund,
Equity Index Fund and International
Equity Fund
(16) Performance calculations for purposes of Item
22:
(i) For Registrant's Prime Money Market Fund
and Treasury Money Market Fund(9)
(ii) For Registrant's Money Market Fund,
Government Money Market Fund, Asset
Preservation Fund, California Short-Term
Tax-Exempt Fund, California Tax-Exempt
Fund, Government Income Fund, Balanced
Fund and Equity Value Fund(8)
(iii) For Registrant's Money Market Trust,
Growth Fund, Short-Term Government Bond
Fund, Intermediate Government Bond Fund,
Intermediate Bond Fund, Oregon Tax-
Exempt Fund, Arizona Tax-Exempt Fund and
National Tax-Exempt Fund(16)
(iv) For Registrant's 100% U.S. Treasury Money
Market Fund, California Tax-Exempt Money
Market Fund, National Tax-Exempt Money
Market Fund, Equity Index Fund and
International Equity Fund(15)
- 7 -
<PAGE> 1009
(17) Not Applicable
(18) (i) Plan pursuant to Rule 18f-3 for Operation of
a Multi-Class System - Each Series of the
Registrant other than the Prime Money Market
Fund, Treasury Money Market Fund, Money
Market Trust, Money Market Fund and Pacifica
Government Money Market Fund(13)
(ii) Plan pursuant to Rule 18f-3 for operation of
a Multi-Class System Prime Money Market Fund
and Treasury Money Market Fund(13)
(27) Financial Data Schedule
1 Filed as an exhibit to Registration Statement No. 2-92260 on July 17,
1984.
2 Filed as an exhibit to Pre-Effective Amendment No. 4 to Registration
Statement No. 2-92260 on November 9, 1984.
3 Filed as an exhibit to Post-Effective Amendment No. 4 to Registration
Statement No. 2-92260 on December 10, 1985.
4 Filed as an exhibit to Post-Effective Amendment No. 14 to Registration
Statement No. 2-92260 on November 30, 1987.
5 Filed as an exhibit to Post-Effective Amendment No. 22 to Registration
Statement No. 2-92260 on February 13, 1990.
6 Filed as an exhibit to Post-Effective Amendment No. 26 to Registration
Statement No. 2-92260 on December 3, 1991.
7 Filed as an exhibit to Post-Effective Amendment No. 28 to Registration
No. 2-92260 on October 16, 1992.
8 Filed as an exhibit to Post-Effective Amendment No. 33 to Registration
Statement No. 2-92260 on February 1, 1994.
9 Filed as an exhibit to Post-Effective Amendment No. 34 to Registration
Statement No. 2-92260 on July 29, 1994.
10 Filed as an exhibit to Post-Effective Amendment No. 37 to Registration
Statement No. 2-92260 on January 29, 1995.
- 8 -
<PAGE> 1010
11 Filed as an exhibit to Post-Effective Amendment No. 38 to Registration
Statement No. 2-92260 on February 1, 1995.
12 Filed as an appendix to Part A of Registration Statement No. 33-95022
on Form N-14 on July 26, 1995.
13 Filed as an exhibit to Registration Statement No. 33- 95022 on Form
N-14 on July 26, 1995.
14 Filed as an exhibit to Post-Effective Amendment No. 43 to Registration
Statement No. 2-92260 on August 24, 1995.
15 To be filed by amendment.
16 Filed as an exhibit to Post-Effective Amendment No. 44 to Registration
Statement No. 2-92260 on September 25, 1995.
Item 25. Persons Controlled by or Under Common Control with Registrant
None
Item 26. Number of Holders of Securities as of January 16, 1996
Pacifica Money Market Trust - 11
Pacifica Money Market Fund - 1,019
Pacifica Government Money Market Fund - 197
Pacifica Prime Money Market Fund
Institutional Shares - 67
Investor Shares - 670
Service Shares - 4
Pacifica Treasury Money Market Fund
Institutional Shares - 576
Investor Shares - 156
Service Shares - 4
Pacifica Short-Term Government Bond Fund
Institutional Shares - 737
Investor Shares - 641
Pacifica Intermediate Bond Fund
Institutional Shares - 6
Investor Shares - 203
Pacifica Intermediate Government Bond Fund
Institutional Shares - 1067
Investor Shares - 1110
Pacifica California Tax-Exempt Bond Fund
Institutional Shares - 70
Investor Shares - 820
- 9 -
<PAGE> 1011
Pacifica National Tax-Exempt Fund
Institutional Shares - 5
Investor Shares - 184
Pacifica Oregon Tax-Exempt Fund
Institutional Shares - 2
Investor Shares - 974
Pacifica Arizona Tax-Exempt Fund
Institutional Shares - 6
Investor Shares - 319
Pacifica Growth Fund
Institutional Shares - 48
Investor Shares - 87
Pacifica Equity Value Fund
Institutional Shares - 708
Investor Shares - 1450
Pacifica Balanced Fund
Institutional Shares - 1485
Investor Shares - 2458
Pacifica Asset Preservation Fund
Institutional Shares - 7
Investor Shares - 585
Pacifica Government Income Fund
Institutional Shares - 11
Investor Shares - 459
Pacifica California Short-Term Tax-Exempt Fund
Institutional Shares - 6
Investor Shares - 162
Item 27. Indemnification
Reference is made to Article IV of the Registrant's Declaration
of Trust.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Registrant by the Registrant pursuant
to the Declaration of Trust or otherwise, the Registrant is aware
that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the
Act and, therefore, is unenforceable. In the event that a claim
for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by
trustees, officers or controlling persons of the Registrant in
connection with the successful defense of any act, suit or
proceeding) is asserted by such trustees, officers or controlling
persons in connection with the shares being registered. The
Registrant will, unless in the opinion of its counsel
- 10 -
<PAGE> 1012
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
issues.
Item 28. Business and Other Connections of Investment Advisor
FIRST INTERSTATE CAPITAL MANAGEMENT, INC.
First Interstate Capital Management, Inc. serves as the
Registrant's Investment Adviser and, in addition, renders investment advisory
services to First Interstate Bancorp's employee benefit plans and various other
corporate and individual investors.
NAME AND POSITION
WITH INVESTMENT ADVISER: OTHER BUSINESSES:
- ------------------------ -----------------
Tom Slonaker Executive Vice President, First
Director and Interstate Bancorp(2)
Chairman of the Board
Chief Investment Officer, First
Interstate Bancorp(2)
Edward S. Claunch Senior Vice President, First
President and Chief Interstate Bank of Denver, N.A.(2)
Executive Officer
Deborah Goodman Senior Vice President, First
Senior Vice President Interstate Bank of California(1)
G. Edward Means Senior Vice President, First
Senior Vice President Interstate Bank of Arizona, N.A.(2)
G. David Underwood Senior Vice President, First
Senior Vice President Interstate Bank of Arizona, N.A.(2)
Thomas Hooker Senior Vice President, First
Senior Vice President Interstate Bank of California(2)
Richard A. Palmer Senior Vice President, First
Senior Vice President Interstate Management Services
Chief Financial Officer Company(4)
Senior Vice President, First
Interstate Bancorp(2)
- 11 -
<PAGE> 1013
Chief Financial Officer, D.A.G.
Management, Inc.(4)
Russell K. Snow, Jr. Executive Vice President, First
Director Interstate Bank of California(1)
Director, First Interstate
Portfolio Lending Services(1)
Vern Kozlen Executive Vice President, First
Director Interstate Bank of California(1)
President, First Interstate
Portfolio Lending Services(1)
Michael Neitzke Vice President, First Interstate
Vice President Bank of California(2)
Leon Newcomb Assistant Vice President, First
Vice President Interstate Bank of Utah, N.A.(2)
Michael Hughes Vice President, First Interstate
Vice President Bank of California(2)
David Williams Vice President, First Interstate
Vice President Bank of California(2)
Richard Ferguson Vice President, First Interstate
Vice President Bank of Arizona, N.A.(2)
Robert Daviduk Vice President, First Interstate
Vice President Bank of California(2)
Ronald Florance Vice President, First Interstate
Vice President Bank of Arizona, N.A.(2)
Roger S. Teetzel Vice President, First Interstate
Vice President Bank of California(3)
David Jeppson Assistant Vice President, First
Assistant Vice President Interstate Bank of California(3)
Richard Carhidi Assistant Vice President, First
Assistant Vice President Interstate Bank of Arizona, N.A.(2)
Marianne R. Minihane Assistant Vice President, First
Assistant Vice President Interstate Bank of California(3)
- 12 -
<PAGE> 1014
Sandra U. Torres Assistant Vice President, First
Assistant Vice President Interstate Bank of California(3)
Mary Gail Walton Assistant Vice President, First
Assistant Vice President Interstate Bank of Washington,
N.A.(2)
William J. Souza Managing Counsel, First Interstate
Secretary Management Services Company(1)
Secretary, First Interstate
Portfolio Lending Services(1)
(1) The address of the office is indicated as 707 Wilshire Boulevard, Los
Angeles, California 90017.
(2) The address of the office is indicated as 7501 E. McCormick Parkway,
Scottsdale, Arizona 85258.
(3) The address of the office is indicated as 4365 Executive Drive, Suite
1820, San Diego, California 92121.
(4) The address of the office is indicated as 100 W. Washington, Phoenix,
Arizona 85003.
Item 29. Principal Underwriter
(a) Pacifica Funds Distributor Inc. ("PFD Inc.") is the principal
underwriter for each class of each series of the Registrant. PFD Inc., an
affiliate of Furman Selz LLC, was organized specifically to distribute shares of
the Registrant.
(b) PFD Inc.:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH PFD, INC. WITH REGISTRANT
---------------- -------------- ---------------
<S> <C> <C>
Michael C. Petrycki President and Director President
Steven D. Blecher Vice President, Secretary Executive Vice
and Treasurer President*
Robert J. Miller Chief Financial Officer None
and Vice President
Elizabeth Q. Solazzo Assistant Secretary None
</TABLE>
* The authority of Mr. Blecher is limited to matters involving each
series of the Registrant other than the Prime Money Market Fund and
Treasury Money Market Fund.
- 13 -
<PAGE> 1015
(c)(i) Not Applicable
(ii) Not Applicable
Item 30. Location of Accounts and Records
1. First Interstate Capital
Management, Inc.
7501 E. McCormick Parkway
Scottsdale, Arizona 85258
Records relating to its function as Adviser for each portfolio
2. First Interstate Bank of
California
707 Wilshire Blvd, W10-6
Los Angeles, California 90017
Records relating to its function as Custodian for each portfolio
3. The Dreyfus Corporation
200 Park Avenue
New York, New York 10016
Records relating to its function as Administrator for the Prime Money
Market Fund and the Money Market Treasury Fund
4. Furman Selz LLC
230 Park Avenue
New York, New York 10169
Records relating to its function as Administrator for each portfolio
other than the Prime Money Market Fund and the Treasury Money Market
Fund and its function as Transfer Agent for each class of each series
of the Registrant
5. Pacifica Funds Distributor, Inc.
230 Park Avenue
New York, New York 10169
Records relating to its function as Distributor for each class of each
series of the Registrant
Item 31. Management Services
Not applicable
- 14 -
<PAGE> 1016
Item 32. Undertakings
(a) Registrant undertakes to call a meeting of Shareholders for the
purpose of voting upon the question of removal of a Trustee or
Trustees when requested to do so by the holders of at least 10%
of the Registrant's outstanding shares and in connection with
such meeting to comply with the provisions of Section 16(c) of
the Investment Company Act of 1940.
(b) Registrant undertakes to file a post-effective amendment, using
reasonably current financial statements which need not be
certified, within four to six months from the effective date of
Registrant's Registration Statement under the Securities Act of
1933.
(c) Registrant undertakes to provide its Annual Report upon request
without charge to any recipient of a Prospectus for the Funds.
- 15 -
<PAGE> 1017
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 49 to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Washington, District of Columbia on the 31st day of January, 1996.
PACIFICA FUNDS TRUST
(REGISTRANT)
By: Michael C. Petrycki
--------------------------------
Michael C. Petrycki, President*
By: Jeffrey L. Steele
---------------------
*Jeffrey L. Steele,
as attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 49 to the Registration Statement has been signed by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Michael C. Petrycki President January 31, 1996
- ------------------------
Michael C. Petrycki*
Dennis W. Draper Trustee January 31, 1996
- ------------------------
Dennis W. Draper*
Joseph N. Hankin Trustee January 31, 1996
- ------------------------
Joseph N. Hankin*
</TABLE>
<PAGE> 1018
<TABLE>
<S> <C> <C>
John E. Heilmann Trustee January 31, 1996
- ------------------------
John E. Heilmann*
Jack D. Henderson Trustee January 31, 1996
- ------------------------
Jack D. Henderson*
Richard A. Wedemeyer Trustee January 31, 1996
- ------------------------
Richard A. Wedemeyer*
John J. Pileggi Treasurer (Principal January 31, 1996
- ------------------------ Financial and
John J. Pileggi* Accounting Officer)
By: Jeffrey L. Steele
- ------------------------
*Jeffrey L. Steele,
as attorney-in-fact
</TABLE>
* Pursuant to power of attorney filed with Post-Effective Amendment No.
43 on August 24, 1995.
- 2 -
<PAGE> 1019
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
FILED
WITH
Post-Effective Amendment No. 49
to Registration Statement No. 2-92260
on Form N-1A
PACIFICA FUNDS TRUST
<PAGE> 1020
EXHIBIT INDEX
-------------
Exhibit
No. Description
------- -----------
(1) Declaration of Trust of Registrant(1)
(2) By-laws of Registrant(1)
(3) Not applicable
(4) Specimen certificates of shares of beneficial
interest of Registrant(3)
(5) (i) Advisory Contract for The Government
Money Market Fund(4)
(ii) Advisory Contract for The Money Market
Fund(5)
(iii) Master Advisory Contract between Fund
Source and San Diego Financial Capital
Management, Inc. for The Asset Preservation
Fund, The Government Income Fund, The Equity
Value Fund, The Balanced Fund and The
California Tax-Exempt Fund(5)
(iv) Advisory Contract Supplement between Fund
Source and San Diego Financial Capital
Management, Inc. relating to The Asset
Preservation Fund(5)
(v) Advisory Contract Supplement between Fund
Source and San Diego Financial Capital
Management, Inc. relating to The Government
Income Fund(5)
(vi) Advisory Contract Supplement between Fund
Source and San Diego Financial Capital
Management, Inc. relating to The Equity
Value Fund(5)
(vii) Advisory Contract Supplement between Fund
Source and San Diego Financial Capital
Management, Inc. relating to The Balanced
Fund(5)
(viii) Advisory Contract Supplement between Fund
Source and San Diego Financial Capital
Management, Inc. relating to The California
Tax-Exempt Fund(5)
(ix) Advisory Contract Supplement between Fund
Source and San Diego Financial Capital
Management, Inc. relating to The California
Short-Term Tax-Exempt Fund(7)
(x) Investment Advisory and Management Agreement
between the Registrant and First Interstate
Capital Management, Inc. for the Prime Money
Market Fund and Treasury Money Market
Fund(10)
(xi) Form of Investment Advisory Contract between
the Registrant and First Interstate Capital
Management, Inc. relating to the Money
Market Trust, Growth Fund, Short-Term
Government Bond Fund, Intermediate
Government Bond Fund, Intermediate Bond
Fund, Oregon Tax-
<PAGE> 1021
Exempt Fund, Arizona Tax-Exempt Fund and
National Tax-Exempt Fund(12)
(xii) Advisory Contract Supplements between the
Registrant and First Interstate Capital
Management, Inc. relating to the 100% U.S.
Treasury Money Market Fund, National
Tax-Exempt Money Market Fund, California
Tax-Exempt Money Market Fund, Equity Index
Fund and International Equity Fund.
(6) (i) Master Distribution Contract between Fund
Source and Pacifica Funds Distributor Inc.
for The Money Market Fund, The Government
Money Market Fund, The Asset Preservation
Fund, The Government Income Fund, The Equity
Value Fund, The Balanced Fund and The
California Tax-Exempt Fund(6)
(ii) Distribution Contract Supplement between
Fund Source and Pacifica Funds Distributor
Inc. relating to The Money Market Fund(6)
(iii) Distribution Contract Supplement between
Fund Source and Pacifica Funds Distributor
Inc. relating to The Government Money Market
Fund(6)
(iv) Distribution Contract Supplement between
Fund Source and Pacifica Funds Distributor
Inc. relating to The Asset Preservation
Fund(6)
(v) Distribution Contract Supplement between
Fund Source and Pacifica Funds Distributor
Inc. relating to The Government Income
Fund(6)
(vi) Distribution Contract Supplement between
Fund Source and Pacifica Funds Distributor
Inc. relating to The Equity Value Fund(6)
(vii) Distribution Contract Supplement between
Fund Source and Pacifica Funds
<PAGE> 1022
Distributor Inc. relating to The Balanced
Fund(6)
(viii) Distribution Contract Supplement between
Fund Source and Pacifica Funds Distributor
Inc. relating to The California Tax-Exempt
Fund(6)
(ix) Distribution Contract Supplement between
Fund Source and Pacifica Funds Distributor
Inc. relating to The California Short-Term
Tax-Exempt Fund(6)
(x) Distribution Contract Supplements between
the Registrant and Pacifica Funds
Distributor Inc. for the Prime Money Market
Fund and Treasury Money Market Fund(15)
(xi) Form of Distribution Contract Supplements
between the Registrant and Pacifica Funds
Distributor, Inc. relating to the Money
Market Trust, Growth Fund, Short-Term
Government Bond Fund, Intermediate
Government Bond Fund, Intermediate Bond
Fund, Oregon Tax-Exempt Fund, Arizona
Tax-Exempt Fund, National Tax-Exempt Fund,
Prime Money Market Fund and Treasury Money
Market Fund(13)
(xii) Distribution Contract Supplements between
the Registrant and Pacifica Funds
Distributor, Inc., relating to the 100% U.S.
Treasury Money Market Fund, California
Tax-Exempt Money Market Fund, National
Tax-Exempt Money Market Fund, Equity Index
Fund and International Index Fund
(7) Not applicable
(8) (i) Custodian Contract Between Pacifica Funds
Trust and First Interstate Bank of
California(8)
(ii) Custody Agreement between Pacifica Funds
Trust and First Interstate Bank of
<PAGE> 1023
California for the Prime Money Market Fund
and Treasury Money Market Fund(10)
(9) (i) Service Agreement between Pacifica Funds
Trust and Furman Selz LLC(13)
(ii) (a) Shareholder Services Plan for
Institutional Shares(14)
(b) Form of Shareholder Servicing
Agreement for Institutional
Shares(14)
(iii) (a) Shareholder Services Plan for
Service Shares(14)
(b) Form of Shareholder Servicing
Agreement for Service Shares(14)
(iv) (a) Shareholder Services Plan for
Investor Shares(14)
(b) Form of Shareholder Servicing
Agreement for Investor Shares(14)
(10) Filed on November 30, 1995 with the Trust's
Notices Pursuant to Rule 24f-2
(11) (i) Consent of Ernst & Young LLP
(ii) Consents of Price Waterhouse LLP
(iii) Consent of Deloitte & Touche LLP(15)
(12) Not applicable
(13) Not applicable
(14) Model retirement plans(2)
(15) (i) Form of Amended and Restated Master
Distribution Plan(12)
(ii) Form of Amended and Restated Master
Distribution Plan Supplements(13)
(iii) Master Administrative Services Contract
between Fund Source and Furman Selz LLC for
The Government Money Market Fund,
<PAGE> 1024
The Money Market Fund, The Asset
Preservation Fund, The Government Income
Fund, The Equity Value Fund, The Balanced
Fund and The California Tax- Exempt Fund(5)
(iv) Administrative Services Contract Supplement
between Fund Source and Furman Selz LLC
relating to The Government Money Market
Fund(5)
(v) Administrative Services Contract Supplement
between Fund Source and Furman Selz LLC
relating to The Money Market Fund(5)
(vi) Administrative Services Contract Supplement
between Fund Source and Furman Selz LLC
relating to The Asset Preservation Fund(5)
(vii) Administrative Services Contract Supplement
between Fund Source and Furman Selz LLC
relating to The Government Income Fund(5)
(viii) Administrative Services Contract Supplement
between Fund Source and Furman Selz LLC
relating to The Equity Value Fund(5)
(ix) Administrative Services Contract Supplement
between Fund Source and Furman Selz LLC
relating to The Balanced Fund(5)
(x) Administrative Services Contract Supplement
between Fund Source and Furman Selz LLC
relating to The California Tax-Exempt
Fund(5)
(xi) Administrative Services Contract Supplement
between Fund Source and Furman Selz LLC
relating to The California Short-Term
Tax-Exempt Fund(7)
(xii) Administration Agreement with The Dreyfus
Corporation for the Prime Money
<PAGE> 1025
Market Fund and Treasury Money Market
Fund(10)
(xiii) Form of Administrative Services Contract
Supplements between Registrant and
Furman Selz LLC relating to the Money
Market Trust, Growth Fund, Short-Term
Government Bond Fund, Intermediate
Government Bond Fund, Intermediate Bond
Fund, Oregon Tax-Exempt Fund, Arizona
Tax-Exempt Fund and National Tax-Exempt
Fund(13)
(xiv) Administrative Services Contract
Supplements between Registrant and
Furman Selz LLC relating to the 100%
U.S. Treasury Money Market Fund,
California Tax-Exempt Money Market Fund,
National Tax-Exempt Money Market Fund,
Equity Index Fund and International
Equity Fund
(16) Performance calculations for purposes of Item
22:
(i) For Registrant's Prime Money Market Fund
and Treasury Money Market Fund(9)
(ii) For Registrant's Money Market Fund,
Government Money Market Fund, Asset
Preservation Fund, California Short-Term
Tax-Exempt Fund, California Tax-Exempt
Fund, Government Income Fund, Balanced
Fund and Equity Value Fund(8)
(iii) For Registrant's Money Market Trust,
Growth Fund, Short-Term Government Bond
Fund, Intermediate Government Bond Fund,
Intermediate Bond Fund, Oregon Tax-
Exempt Fund, Arizona Tax-Exempt Fund and
National Tax-Exempt Fund(16)
(iv) For Registrant's 100% U.S. Treasury Money
Market Fund, California Tax-Exempt Money
Market Fund, National Tax-Exempt Money
Market Fund, Equity Index Fund and
International Equity Fund(15)
<PAGE> 1026
(17) Not Applicable
(18) (i) Plan pursuant to Rule 18f-3 for Operation of
a Multi-Class System - Each Series of the
Registrant other than the Prime Money Market
Fund, Treasury Money Market Fund, Money
Market Trust, Money Market Fund and Pacifica
Government Money Market Fund(13)
(ii) Plan pursuant to Rule 18f-3 for operation of
a Multi-Class System Prime Money Market Fund
and Treasury Money Market Fund(13)
(27) Financial Data Schedule
1 Filed as an exhibit to Registration Statement No. 2-92260 on July 17,
1984.
2 Filed as an exhibit to Pre-Effective Amendment No. 4 to Registration
Statement No. 2-92260 on November 9, 1984.
3 Filed as an exhibit to Post-Effective Amendment No. 4 to Registration
Statement No. 2-92260 on December 10, 1985.
4 Filed as an exhibit to Post-Effective Amendment No. 14 to Registration
Statement No. 2-92260 on November 30, 1987.
5 Filed as an exhibit to Post-Effective Amendment No. 22 to Registration
Statement No. 2-92260 on February 13, 1990.
6 Filed as an exhibit to Post-Effective Amendment No. 26 to Registration
Statement No. 2-92260 on December 3, 1991.
7 Filed as an exhibit to Post-Effective Amendment No. 28 to Registration
No. 2-92260 on October 16, 1992.
8 Filed as an exhibit to Post-Effective Amendment No. 33 to Registration
Statement No. 2-92260 on February 1, 1994.
9 Filed as an exhibit to Post-Effective Amendment No. 34 to Registration
Statement No. 2-92260 on July 29, 1994.
10 Filed as an exhibit to Post-Effective Amendment No. 37 to Registration
Statement No. 2-92260 on January 29, 1995.
11 Filed as an exhibit to Post-Effective Amendment No. 38 to Registration
Statement No. 2-92260 on February 1, 1995.
12 Filed as an appendix to Part A of Registration Statement No. 33-95022
on Form N-14 on July 26, 1995.
13 Filed as an exhibit to Registration Statement No. 33- 95022 on Form
N-14 on July 26, 1995.
14 Filed as an exhibit to Post-Effective Amendment No. 43 to Registration
Statement No. 2-92260 on August 24, 1995.
15 To be filed by amendment.
16 Filed as an exhibit to Post-Effective Amendment No. 44 to Registration
Statement No. 2-92260 on September 25, 1995.
<PAGE> 1
INVESTMENT ADVISORY CONTRACT SUPPLEMENT
PACIFICA FUNDS TRUST
237 Park Avenue
New York, New York 10017
February 1, 1996
First Interstate Capital Management, Inc.
7501 East McCormick Pkwy.
Scottsdale, Arizona 85258
Re: Pacifica 100% U.S. Treasury Money Market Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust")
and First Interstate Capital Management, Inc. (the "Advisor") as follows:
1. The Trust is an open-end management investment company organized as
a Massachusetts business trust, and consists of such separate investment
portfolios as have been or may be established by the Trustees of the Trust from
time to time. A separate series of shares of beneficial interest of the Trust is
offered to investors with respect to each investment portfolio. The 100% U.S.
Treasury Money Market Fund (the "Fund") is a separate investment portfolio of
the Trust.
2. The Trust and the Advisor have entered into a Master Investment
Advisory Contract ("Master Advisory Contract"), pursuant to which the Trust has
employed the Advisor to provide investment advisory and other services specified
in that contract and the Advisor has accepted such employment.
3. As provided for in paragraph 1 of the Master Advisory Contract, the
Trust hereby adopts the Master Advisory Contract with respect to the Fund and
the Advisor hereby acknowledges that the Master Advisory Contract shall pertain
to the Fund, the terms and conditions of such Master Advisory Contract being
hereby incorporated herein by reference.
4. The term "Funds" as used in the Master Advisory Contract shall, for
purposes of this Supplement, pertain to the Fund.
5. As provided in paragraph 6 of the Master Advisory Contract and
subject to further conditions as set forth therein, the Trust shall, with
respect to the Fund, pay the Advisor a monthly fee on the first business day of
each month based upon the average daily value (as determined on each business
day at the time set forth in the Prospectus for determining net asset
<PAGE> 2
value per share) of the net assets of the Fund during the preceding month at
the following rates:
<TABLE>
<CAPTION>
Portion of Average Daily Value of
Net Assets of the Fund Fee Rate
- --------------------------------- --------
<S> <C>
Assets up to $500 million .030%
Assets from $500 million to $1 billion .025%
Assets over $1 billion .020%
</TABLE>
6. As provided and defined in paragraph 7 of the Master Advisory
Contract, the "Advisor's reimbursement" shall for purposes of this Supplement
with respect to the Fund equal 67%.
7. This Supplement and the Master Advisory Contract, (together, the
"Contract") shall become effective on February 1, 1996, and shall continue in
effect with respect to the Fund for a period of two years and thereafter for
successive annual periods only so long as such continuance is specifically
approved at least annually by (a) the Trust's Board of Trustees or by the vote
of a majority of the Trust's outstanding voting securities (as defined in the
Investment Company Act of 1940 ("1940 Act")) and (b) by the vote, cast in person
at a meeting called for the purpose of a majority of the Trust's Trustees who
are not parties to this Contract or "interested persons" (as defined in the 1940
Act) of any such party. This Contract may be terminated with respect to the Fund
at any time, without the payment of any penalty, by vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act) or by a
vote of a majority of the Trustees of the Trust who are not "interested persons"
(as defined in the 1940 Act) and who have no direct or indirect financial
interest in this Contract on 60 days written notice to the Sponsor or by the
Sponsor on 60 days written notice to the Trust. The Contract shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
- 2 -
<PAGE> 3
If the foregoing correctly sets forth the agreement between the Trust
and the Advisors, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
PACIFICA FUNDS TRUST
By: __________________________
Name: ________________________
Title: _______________________
Accepted:
First Interstate Capital Management, Inc.
By: _____________________________________
Name: ___________________________________
Title: __________________________________
- 3 -
<PAGE> 4
INVESTMENT ADVISORY CONTRACT SUPPLEMENT
PACIFICA FUNDS TRUST
237 Park Avenue
New York, New York 10017
February 1, 1996
First Interstate Capital Management, Inc.
7501 East McCormick Pkwy.
Scottsdale, Arizona 85258
Re: Pacifica National Tax-Exempt Money Market Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust")
and First Interstate Capital Management, Inc. (the "Advisor") as follows:
1. The Trust is an open-end management investment company organized as
a Massachusetts business trust, and consists of such separate investment
portfolios as have been or may be established by the Trustees of the Trust from
time to time. A separate series of shares of beneficial interest of the Trust is
offered to investors with respect to each investment portfolio. The National
Tax-Exempt Money Market Fund (the "Fund") is a separate investment portfolio of
the Trust.
2. The Trust and the Advisor have entered into a Master Investment
Advisory Contract ("Master Advisory Contract"), pursuant to which the Trust has
employed the Advisor to provide investment advisory and other services specified
in that contract and the Advisor has accepted such employment.
3. As provided for in paragraph 1 of the Master Advisory Contract, the
Trust hereby adopts the Master Advisory Contract with respect to the Fund and
the Advisor hereby acknowledges that the Master Advisory Contract shall pertain
to the Fund, the terms and conditions of such Master Advisory Contract being
hereby incorporated herein by reference.
4. The term "Funds" as used in the Master Advisory Contract shall, for
purposes of this Supplement, pertain to the Fund.
5. As provided in paragraph 6 of the Master Advisory Contract and
subject to further conditions as set forth therein, the Trust shall, with
respect to the Fund, pay the Advisor a monthly fee on the first business day of
each month based upon the average daily value (as determined on each business
day at the time set forth in the Prospectus for determining net asset
<PAGE> 5
value per share) of the net assets of the Fund during the preceding month at
the following rates:
<TABLE>
<CAPTION>
Portion of Average Daily Value of
Net Assets of the Fund Fee Rate
- --------------------------------- --------
<S> <C>
Assets up to $500 million .035%
Assets from $500 million to $1 billion .030%
Assets over $1 billion .025%
</TABLE>
6. As provided and defined in paragraph 7 of the Master Advisory
Contract, the "Advisor's reimbursement" shall for purposes of this Supplement
with respect to the Fund equal 70%.
7. This Supplement and the Master Advisory Contract, (together, the
"Contract") shall become effective on February 1, 1996, and shall continue in
effect with respect to the Fund for a period of two years and thereafter for
successive annual periods only so long as such continuance is specifically
approved at least annually by (a) the Trust's Board of Trustees or by the vote
of a majority of the Trust's outstanding voting securities (as defined in the
Investment Company Act of 1940 ("1940 Act")) and (b) by the vote, cast in person
at a meeting called for the purpose of a majority of the Trust's Trustees who
are not parties to this Contract or "interested persons" (as defined in the 1940
Act) of any such party. This Contract may be terminated with respect to the Fund
at any time, without the payment of any penalty, by vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act) or by a
vote of a majority of the Trustees of the Trust who are not "interested persons"
(as defined in the 1940 Act) and who have no direct or indirect financial
interest in this Contract on 60 days written notice to the Sponsor or by the
Sponsor on 60 days written notice to the Trust. The Contract shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
- 2 -
<PAGE> 6
If the foregoing correctly sets forth the agreement between the Trust
and the Advisor, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
PACIFICA FUNDS TRUST
By: __________________________
Name: ________________________
Title: _______________________
Accepted:
First Interstate Capital Management, Inc.
By: _____________________________________
Name: ___________________________________
Title: __________________________________
- 3 -
<PAGE> 7
INVESTMENT ADVISORY CONTRACT SUPPLEMENT
PACIFICA FUNDS TRUST
237 Park Avenue
New York, New York 10017
February 1, 1996
First Interstate Capital Management, Inc.
7501 East McCormick Pkwy.
Scottsdale, Arizona 85258
Re: Pacifica California Tax-Exempt Money Market Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust")
and First Interstate Capital Management, Inc. (the "Advisor") as follows:
1. The Trust is an open-end management investment company organized as
a Massachusetts business trust, and consists of such separate investment
portfolios as have been or may be established by the Trustees of the Trust from
time to time. A separate series of shares of beneficial interest of the Trust is
offered to investors with respect to each investment portfolio. The California
Tax-Exempt Money Market Fund (the "Fund") is a separate investment portfolio of
the Trust.
2. The Trust and the Advisor have entered into a Master Investment
Advisory Contract ("Master Advisory Contract"), pursuant to which the Trust has
employed the Advisor to provide investment advisory and other services specified
in that contract and the Advisor has accepted such employment.
3. As provided for in paragraph 1 of the Master Advisory Contract, the
Trust hereby adopts the Master Advisory Contract with respect to the Fund and
the Advisor hereby acknowledges that the Master Advisory Contract shall pertain
to the Fund, the terms and conditions of such Master Advisory Contract being
hereby incorporated herein by reference.
4. The term "Funds" as used in the Master Advisory Contract shall, for
purposes of this Supplement, pertain to the Fund.
5. As provided in paragraph 6 of the Master Advisory Contract and
subject to further conditions as set forth therein, the Trust shall, with
respect to the Fund, pay the Advisor a monthly fee on the first business day of
each month based upon the average daily value (as determined on each business
day at the time set forth in the Prospectus for determining net asset
<PAGE> 8
value per share) of the net assets of the Fund during the preceding month at
the following rates:
<TABLE>
<CAPTION>
Portion of Average Daily Value of
Net Assets of the Fund Fee Rate
- --------------------------------- --------
<S> <C>
Assets up to $500 million .035%
Assets from $500 million to $1 billion .030%
Assets over $1 billion .025%
</TABLE>
6. As provided and defined in paragraph 7 of the Master Advisory
Contract, the "Advisor's reimbursement" shall for purposes of this Supplement
with respect to the Fund equal 70%.
7. This Supplement and the Master Advisory Contract, (together, the
"Contract") shall become effective on February 1, 1996, and shall continue in
effect with respect to the Fund for a period of two years and thereafter for
successive annual periods only so long as such continuance is specifically
approved at least annually by (a) the Trust's Board of Trustees or by the vote
of a majority of the Trust's outstanding voting securities (as defined in the
Investment Company Act of 1940 ("1940 Act")) and (b) by the vote, cast in person
at a meeting called for the purpose of a majority of the Trust's Trustees who
are not parties to this Contract or "interested persons" (as defined in the 1940
Act) of any such party. This Contract may be terminated with respect to the Fund
at any time, without the payment of any penalty, by vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act) or by a
vote of a majority of the Trustees of the Trust who are not "interested persons"
(as defined in the 1940 Act) and who have no direct or indirect financial
interest in this Contract on 60 days written notice to the Sponsor or by the
Sponsor on 60 days written notice to the Trust. The Contract shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
- 2 -
<PAGE> 9
If the foregoing correctly sets forth the agreement between the Trust
and the Advisor, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
PACIFICA FUNDS TRUST
By: __________________________
Name: ________________________
Title: _______________________
Accepted:
First Interstate Capital Management, Inc.
By: _____________________________________
Name: ___________________________________
Title: __________________________________
- 3 -
<PAGE> 10
INVESTMENT ADVISORY CONTRACT SUPPLEMENT
PACIFICA FUNDS TRUST
237 Park Avenue
New York, New York 10017
February 1, 1996
First Interstate Capital Management, Inc.
7501 East McCormick Pkwy.
Scottsdale, Arizona 85258
Re: Pacifica International Equity Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust")
and First Interstate Capital Management, Inc. (the "Advisor") as follows:
1. The Trust is an open-end management investment company organized as
a Massachusetts business trust, and consists of such separate investment
portfolios as have been or may be established by the Trustees of the Trust from
time to time. A separate series of shares of beneficial interest of the Trust is
offered to investors with respect to each investment portfolio. The
International Equity Fund (the "Fund") is a separate investment portfolio of the
Trust.
2. The Trust and the Advisor have entered into a Master Investment
Advisory Contract ("Master Advisory Contract"), pursuant to which the Trust has
employed the Advisor to provide investment advisory and other services specified
in that contract and the Advisor has accepted such employment.
3. As provided for in paragraph 1 of the Master Advisory Contract, the
Trust hereby adopts the Master Advisory Contract with respect to the Fund and
the Advisor hereby acknowledges that the Master Advisory Contract shall pertain
to the Fund, the terms and conditions of such Master Advisory Contract being
hereby incorporated herein by reference.
4. The term "Funds" as used in the Master Advisory Contract shall, for
purposes of this Supplement, pertain to the Fund.
5. As provided in paragraph 6 of the Master Advisory Contract and
subject to further conditions as set forth therein, the Trust shall, with
respect to the Fund, pay the Advisor a monthly fee on the first business day of
each month at the annual rate of 1.00% on the average daily value (as determined
on each business day at the time set forth in the Prospectus for
<PAGE> 11
determining net asset value per share) of the net assets of the Fund.
6. As provided and defined in paragraph 7 of the Master Advisory
Contract, the "Advisor's reimbursement" shall for purposes of this Supplement
with respect to the Fund equal 87%.
7. This Supplement and the Master Advisory Contract, (together, the
"Contract") shall become effective on February 1, 1996, and shall continue in
effect with respect to the Fund for a period of two years and thereafter for
successive annual periods only so long as such continuance is specifically
approved at least annually by (a) the Trust's Board of Trustees or by the vote
of a majority of the Trust's outstanding voting securities (as defined in the
Investment Company Act of 1940 ("1940 Act")) and (b) by the vote, cast in person
at a meeting called for the purpose of a majority of the Trust's Trustees who
are not parties to this Contract or "interested persons" (as defined in the 1940
Act) of any such party. This Contract may be terminated with respect to the Fund
at any time, without the payment of any penalty, by vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act) or by a
vote of a majority of the Trustees of the Trust who are not "interested persons"
(as defined in the 1940 Act) and who have no direct or indirect financial
interest in this Contract on 60 days written notice to the Sponsor or by the
Sponsor on 60 days written notice to the Trust. The Contract shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
- 2 -
<PAGE> 12
If the foregoing correctly sets forth the agreement between the Trust
and the Advisor, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
PACIFICA FUNDS TRUST
By: __________________________
Name: ________________________
Title: _______________________
Accepted:
First Interstate Capital Management, Inc.
By: _____________________________________
Name: ___________________________________
Title: __________________________________
- 3 -
<PAGE> 13
INVESTMENT ADVISORY CONTRACT SUPPLEMENT
PACIFICA FUNDS TRUST
237 Park Avenue
New York, New York 10017
February 1, 1996
First Interstate Capital Management, Inc.
7501 East McCormick Pkwy.
Scottsdale, Arizona 85258
Re: Pacifica Equity Index Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust")
and First Interstate Capital Management, Inc. (the "Advisor") as follows:
1. The Trust is an open-end management investment company organized as
a Massachusetts business trust, and consists of such separate investment
portfolios as have been or may be established by the Trustees of the Trust from
time to time. A separate series of shares of beneficial interest of the Trust is
offered to investors with respect to each investment portfolio. The Equity Index
Fund (the "Fund") is a separate investment portfolio of the Trust.
2. The Trust and the Advisor have entered into a Master Investment
Advisory Contract ("Master Advisory Contract"), pursuant to which the Trust has
employed the Advisor to provide investment advisory and other services specified
in that contract and the Advisor has accepted such employment.
3. As provided for in paragraph 1 of the Master Advisory Contract, the
Trust hereby adopts the Master Advisory Contract with respect to the Fund and
the Advisor hereby acknowledges that the Master Advisory Contract shall pertain
to the Fund, the terms and conditions of such Master Advisory Contract being
hereby incorporated herein by reference.
4. The term "Funds" as used in the Master Advisory Contract shall, for
purposes of this Supplement, pertain to the Fund.
5. As provided in paragraph 6 of the Master Advisory Contract and
subject to further conditions as set forth therein, the Trust shall, with
respect to the Fund, pay the Advisor a monthly fee on the first business day of
each month at the annual rate of 0.25% on the average daily value (as determined
on each business day at the time set forth in the Prospectus for
<PAGE> 14
determining net asset value per share) of the net assets of the Fund.
6. As provided and defined in paragraph 7 of the Master Advisory
Contract, the "Advisor's reimbursement" shall for purposes of this Supplement
with respect to the Fund equal 63%.
7. This Supplement and the Master Advisory Contract, (together, the
"Contract") shall become effective on February 1, 1996, and shall continue in
effect with respect to the Fund for a period of two years and thereafter for
successive annual periods only so long as such continuance is specifically
approved at least annually by (a) the Trust's Board of Trustees or by the vote
of a majority of the Trust's outstanding voting securities (as defined in the
Investment Company Act of 1940 ("1940 Act")) and (b) by the vote, cast in person
at a meeting called for the purpose of a majority of the Trust's Trustees who
are not parties to this Contract or "interested persons" (as defined in the 1940
Act) of any such party. This Contract may be terminated with respect to the Fund
at any time, without the payment of any penalty, by vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act) or by a
vote of a majority of the Trustees of the Trust who are not "interested persons"
(as defined in the 1940 Act) and who have no direct or indirect financial
interest in this Contract on 60 days written notice to the Sponsor or by the
Sponsor on 60 days written notice to the Trust. The Contract shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
- 2 -
<PAGE> 15
If the foregoing correctly sets forth the agreement between the Trust
and the Advisor, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
PACIFICA FUNDS TRUST
By: __________________________
Name: ________________________
Title: _______________________
Accepted:
First Interstate Capital Management, Inc.
By: _____________________________________
Name: ___________________________________
Title: __________________________________
- 3 -
<PAGE> 1
DISTRIBUTION CONTRACT SUPPLEMENT
PACIFICA FUNDS TRUST
237 Park Avenue
New York, New York 10017
February 1, 1996
Pacifica Funds Distributor, Inc.
237 Park Avenue
New York, New York 10017
Re: Pacifica 100% U.S. Treasury Money Market Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust")
and you (the "Distributor") as follows:
1. The Trust is an open-end management investment company organized as
a Massachusetts business trust and consists of such separate investment
portfolios as have been or may be established by the Trustees of the Trust from
time to time. A separate class of shares of beneficial interest of the Trust is
offered to investors with respect to each investment portfolio. The 100% U.S.
Treasury Money Market Fund (the "Fund") is a separate investment portfolio of
the Trust.
2. The Trust and the Distributor have entered into a Master
Distribution Contract ("Master Agreement") pursuant to which the Distributor has
agreed to be the distributor of shares of the Trust.
3. As provided in paragraph 1 of the Master Agreement, the Trust hereby
adopts the Master Agreement with respect to the Fund, and the Distributor hereby
acknowledges that the Master Agreement shall pertain to the Fund, the terms and
conditions of such Master Agreement being hereby incorporated herein by
reference.
4. The term "Funds" as used in the Master Agreement shall, for purposes
of this Supplement, pertain to the Fund.
5. This Supplement and the Master Agreement (together, the "Contract")
shall become effective with respect to the Fund on February 1, 1996 and shall
continue in effect until such time as there shall remain no unsold balance of
shares registered under the 1933 Act provided that this contract shall
continue in effect for a period of more than two years from the effective date
of this Supplement only so long as such continuance is specifically approved at
least annually by (a) the Trust's Board of Trustees or by the vote of a majority
of the Trust's outstanding voting securities (as defined in the Investment
Company Act of 1940
<PAGE> 2
("1940 Act")) and (b) by the vote, cast in person at a meeting called for the
purpose of a majority of the Trust's Trustees who are not parties to this
contract or "interested persons" (as defined in the 1940 Act) of any such party.
This contract shall terminate automatically in the event of its assignment (as
defined in the 1940 Act). This contract may, in any event, be terminated at any
time, without the payment of any penalty, by the Trust upon 60 days written
notice to the Distributor and by the Distributor upon 60 days written notice to
the Trust.
If the foregoing correctly sets forth the agreement between the Trust
and the Distributor, please so indicate by signing and returning to the Trust
the enclosed copy hereof.
Very truly yours,
PACIFICA FUNDS TRUST
By: __________________________
Name: ________________________
Title: _______________________
Accepted:
Pacifica Funds Distributor, Inc.
By: _____________________________________
Name: ___________________________________
Title: __________________________________
- 2 -
<PAGE> 3
DISTRIBUTION CONTRACT SUPPLEMENT
PACIFICA FUNDS TRUST
237 Park Avenue
New York, New York 10017
February 1, 1996
Pacifica Funds Distributor, Inc.
237 Park Avenue
New York, New York 10017
Re: Pacifica National Tax-Exempt Money Market Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust")
and you (the "Distributor") as follows:
1. The Trust is an open-end management investment company organized as
a Massachusetts business trust and consists of such separate investment
portfolios as have been or may be established by the Trustees of the Trust from
time to time. A separate class of shares of beneficial interest of the Trust is
offered to investors with respect to each investment portfolio. The National
Tax-Exempt Money Market Fund (the "Fund") is a separate investment portfolio of
the Trust.
2. The Trust and the Distributor have entered into a Master
Distribution Contract ("Master Agreement") pursuant to which the Distributor has
agreed to be the distributor of shares of the Trust.
3. As provided in paragraph 1 of the Master Agreement, the Trust hereby
adopts the Master Agreement with respect to the Fund, and the Distributor hereby
acknowledges that the Master Agreement shall pertain to the Fund, the terms and
conditions of such Master Agreement being hereby incorporated herein by
reference.
4. The term "Funds" as used in the Master Agreement shall, for purposes
of this Supplement, pertain to the Fund.
5. This Supplement and the Master Agreement (together, the "Contract")
shall become effective with respect to the Fund on February 1, 1996 and shall
continue in effect until such time as there shall remain no unsold balance of
shares registered under the 1933 Act provided that this contract shall
continue in effect for a period of more than two years from the effective date
of this Supplement only so long as such continuance is specifically approved at
least annually by (a) the Trust's Board of Trustees or by the vote of a majority
of the Trust's outstanding voting securities (as defined in the Investment
Company Act of 1940
<PAGE> 4
("1940 Act")) and (b) by the vote, cast in person at a meeting called for the
purpose of a majority of the Trust's Trustees who are not parties to this
contract or "interested persons" (as defined in the 1940 Act) of any such party.
This contract shall terminate automatically in the event of its assignment (as
defined in the 1940 Act). This contract may, in any event, by terminated at any
time, without the payment of any penalty, by the Trust upon 60 days written
notice to the Distributor and by the Distributor upon 60 days written notice to
the Trust.
If the foregoing correctly sets forth the agreement between the Trust
and the Distributor, please so indicate by signing and returning to the Trust
the enclosed copy hereof.
Very truly yours,
PACIFICA FUNDS TRUST
By: __________________________
Name: ________________________
Title: _______________________
Accepted:
Pacifica Funds Distributor, Inc.
By: _____________________________________
Name: ___________________________________
Title: __________________________________
- 2 -
<PAGE> 5
DISTRIBUTION CONTRACT SUPPLEMENT
PACIFICA FUNDS TRUST
237 Park Avenue
New York, New York 10017
February 1, 1996
Pacifica Funds Distributor, Inc.
237 Park Avenue
New York, New York 10017
Re: Pacifica California Tax-Exempt Money Market Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust")
and you (the "Distributor") as follows:
1. The Trust is an open-end management investment company organized as
a Massachusetts business trust and consists of such separate investment
portfolios as have been or may be established by the Trustees of the Trust from
time to time. A separate class of shares of beneficial interest of the Trust is
offered to investors with respect to each investment portfolio. The California
Tax-Exempt Money Market Fund (the "Fund") is a separate investment portfolio of
the Trust.
2. The Trust and the Distributor have entered into a Master
Distribution Contract ("Master Agreement") pursuant to which the Distributor has
agreed to be the distributor of shares of the Trust.
3. As provided in paragraph 1 of the Master Agreement, the Trust hereby
adopts the Master Agreement with respect to the Fund, and the Distributor hereby
acknowledges that the Master Agreement shall pertain to the Fund, the terms and
conditions of such Master Agreement being hereby incorporated herein by
reference.
4. The term "Funds" as used in the Master Agreement shall, for purposes
of this Supplement, pertain to the Fund.
5. This Supplement and the Master Agreement (together, the "Contract")
shall become effective with respect to the Fund on February 1, 1996 and shall
continue in effect until such time as there shall remain no unsold balance of
shares registered under the 1933 Act provided that this contract shall
continue in effect for a period of more than two years from the effective date
of this Supplement only so long as such continuance is specifically approved at
least annually by (a) the Trust's Board of Trustees or by the vote of a majority
of the Trust's outstanding voting securities (as defined in the Investment
Company Act of 1940
<PAGE> 6
("1940 Act")) and (b) by the vote, cast in person at a meeting called for the
purpose of a majority of the Trust's Trustees who are not parties to this
contract or "interested persons" (as defined in the 1940 Act) of any such party.
This contract shall terminate automatically in the event of its assignment (as
defined in the 1940 Act). This contract may, in any event, be terminated at any
time, without the payment of any penalty, by the Trust upon 60 days written
notice to the Distributor and by the Distributor upon 60 days written notice to
the Trust.
If the foregoing correctly sets forth the agreement between the Trust
and the Distributor, please so indicate by signing and returning to the Trust
the enclosed copy hereof.
Very truly yours,
PACIFICA FUNDS TRUST
By: __________________________
Name: ________________________
Title: _______________________
Accepted:
Pacifica Funds Distributor, Inc.
By: _____________________________________
Name: ___________________________________
Title: __________________________________
- 2 -
<PAGE> 7
DISTRIBUTION CONTRACT SUPPLEMENT
PACIFICA FUNDS TRUST
237 Park Avenue
New York, New York 10017
February 1, 1996
Pacifica Funds Distributor, Inc.
237 Park Avenue
New York, New York 10017
Re: Pacifica Equity Index Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust")
and you (the "Distributor") as follows:
1. The Trust is an open-end management investment company organized as
a Massachusetts business trust and consists of such separate investment
portfolios as have been or may be established by the Trustees of the Trust from
time to time. A separate class of shares of beneficial interest of the Trust is
offered to investors with respect to each investment portfolio. The Equity Index
Fund (the "Fund") is a separate investment portfolio of the Trust.
2. The Trust and the Distributor have entered into a Master
Distribution Contract ("Master Agreement") pursuant to which the Distributor has
agreed to be the distributor of shares of the Trust.
3. As provided in paragraph 1 of the Master Agreement, the Trust hereby
adopts the Master Agreement with respect to the Fund, and the Distributor hereby
acknowledges that the Master Agreement shall pertain to the Fund, the terms and
conditions of such Master Agreement being hereby incorporated herein by
reference.
4. The term "Funds" as used in the Master Agreement shall, for purposes
of this Supplement, pertain to the Fund.
5. This Supplement and the Master Agreement (together, the "Contract")
shall become effective with respect to the Fund on February 1, 1996 and shall
continue in effect until such time as there shall remain no unsold balance of
shares registered under the 1933 Act provided that this contract shall
continue in effect for a period of more than two years from the effective date
of this Supplement only so long as such continuance is specifically approved at
least annually by (a) the Trust's Board of Trustees or by the vote of a majority
of the Trust's outstanding voting securities (as defined in the Investment
Company Act of 1940
<PAGE> 8
("1940 Act")) and (b) by the vote, cast in person at a meeting called for the
purpose of a majority of the Trust's Trustees who are not parties to this
contract or "interested persons" (as defined in the 1940 Act) of any such party.
This contract shall terminate automatically in the event of its assignment (as
defined in the 1940 Act). This contract may, in any event, be terminated at any
time, without the payment of any penalty, by the Trust upon 60 days written
notice to the Distributor and by the Distributor upon 60 days written notice to
the Trust.
If the foregoing correctly sets forth the agreement between the Trust
and the Distributor, please so indicate by signing and returning to the Trust
the enclosed copy hereof.
Very truly yours,
PACIFICA FUNDS TRUST
By: __________________________
Name: ________________________
Title: _______________________
Accepted:
Pacifica Funds Distributor, Inc.
By: _____________________________________
Name: ___________________________________
Title: __________________________________
- 2 -
<PAGE> 9
DISTRIBUTION CONTRACT SUPPLEMENT
PACIFICA FUNDS TRUST
237 Park Avenue
New York, New York 10017
February 1, 1996
Pacifica Funds Distributor, Inc.
237 Park Avenue
New York, New York 10017
Re: Pacifica International Equity Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust")
and you (the "Distributor") as follows:
1. The Trust is an open-end management investment company organized as
a Massachusetts business trust and consists of such separate investment
portfolios as have been or may be established by the Trustees of the Trust from
time to time. A separate class of shares of beneficial interest of the Trust is
offered to investors with respect to each investment portfolio. The
International Equity Fund (the "Fund") is a separate investment portfolio of the
Trust.
2. The Trust and the Distributor have entered into a Master
Distribution Contract ("Master Agreement") pursuant to which the Distributor has
agreed to be the distributor of shares of the Trust.
3. As provided in paragraph 1 of the Master Agreement, the Trust hereby
adopts the Master Agreement with respect to the Fund, and the Distributor hereby
acknowledges that the Master Agreement shall pertain to the Fund, the terms and
conditions of such Master Agreement being hereby incorporated herein by
reference.
4. The term "Funds" as used in the Master Agreement shall, for purposes
of this Supplement, pertain to the Fund.
5. This Supplement and the Master Agreement (together, the "Contract")
shall become effective with respect to the Fund on February 1, 1996 and shall
continue in effect until such time as there shall remain no unsold balance of
shares registered under the 1933 Act provided that this contract shall
continue in effect for a period of more than two years from the effective date
of this Supplement only so long as such continuance is specifically approved at
least annually by (a) the Trust's Board of Trustees or by the vote of a majority
of the Trust's outstanding voting securities (as defined in the Investment
Company Act of 1940
<PAGE> 10
("1940 Act")) and (b) by the vote, cast in person at a meeting called for the
purpose of a majority of the Trust's Trustees who are not parties to this
contract or "interested persons" (as defined in the 1940 Act) of any such party.
This contract shall terminate automatically in the event of its assignment (as
defined in the 1940 Act). This contract may, in any event, be terminated at any
time, without the payment of any penalty, by the Trust upon 60 days written
notice to the Distributor and by the Distributor upon 60 days written notice to
the Trust.
If the foregoing correctly sets forth the agreement between the Trust
and the Distributor, please so indicate by signing and returning to the Trust
the enclosed copy hereof.
Very truly yours,
PACIFICA FUNDS TRUST
By: __________________________
Name: ________________________
Title: _______________________
Accepted:
Pacifica Funds Distributor, Inc.
By: _____________________________________
Name: ___________________________________
Title: __________________________________
- 2 -
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Financial Highlights"
in the Prospectuses and the various captions in the Statements of Additional
Information and to the incorporation by reference of our reports dated November
15, 1995 in this Registration Statement (Form N-1A No. 2-92260) of Pacifica
Funds Trust.
ERNST & YOUNG LLP
New York, New York
January 29, 1996
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 49 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
November 22, 1994, relating to the statements of changes in net assets and the
financial highlights for the periods indicated of The Asset Preservation Fund,
The Government Income Fund, The California Tax-Exempt Fund (formerly The
California Tax-Free Fund), The California Short-Term Tax-Exempt Fund (formerly
The Short Term California Tax-Free Fund), The Equity Value Fund, The Balanced
Fund, The Government Money Market Fund and The Money Market Fund, separately
managed portfolios of Pacifica Funds Trust appearing in the September 30, 1995
Annual Report to Shareholders, which is incorporated by reference into the
Statement of Additional Information, and to the incorporation by reference of
our report into the Prospectuses which constitute parts of this Registration
Statement.
PRICE WATERHOUSE LLP
New York, New York
January 29, 1996
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statements of Additional Information for the
Investor Shares and for the Service and Institutional Shares of the Pacifica
Prime Money Market Fund and Pacifica Treasury Money Market Fund (the "Statements
of Additional Information") constituting parts of this Post-Effective Amendment
No. 49 to the registration statement on Form N-1A (the "Registration Statement")
of Pacifica Funds Trust of our report dated May 4, 1994 relating to the
statements of changes in net assets for the year ended March 31, 1994 for the
Pacific American Fund which are incorporated by reference from the September 30,
1995 Annual Report to Shareholders of the Pacifica Prime Money Market Fund and
the Pacifica Treasury Money Market Fund and to the financial highlights for each
of the four years in the period ended March 31, 1994 for the Pacific American
Fund which appear in the Prospectuses for the Investor Shares, the Institutional
Shares and the Service Shares of the Pacifica Prime Money Market Fund and
Pacifica Treasury Money Market Fund which constitute parts of this Registration
Statement and to the incorporation by reference of our report into such
Prospectuses. We also consent to the reference to us under the heading
"Custodian, Transfer Agent, Counsel, and Independent Auditors" in the Statements
of Additional Information.
PRICE WATERHOUSE LLP
Los Angeles, California
January 29, 1996
<PAGE> 1
ADMINISTRATIVE SERVICES CONTRACT SUPPLEMENT
PACIFICA FUNDS TRUST
237 Park Avenue
New York, New York 10017
February 1, 1996
Furman Selz LLC
230 Park Avenue
New York, New York 10169
Re: Pacifica 100% U.S. Treasury Money Market Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust")
and Furman Selz LLC (the "Sponsor") as follows:
1. The Trust is an open-end management investment company organized as
a Massachusetts business trust, and consists of such separate investment
portfolios as have been or may be established by the Trustees of the Trust from
time to time. A separate series of shares of beneficial interest of the Trust is
offered to investors with respect to each investment portfolio. The 100% U.S.
Treasury Money Market Fund (the "Fund") is a separate investment portfolio of
the Trust.
2. The Trust and the Sponsor have entered into a Master Administrative
Services Contract ("Master Contract") dated October 26, 1993, pursuant to which
the Sponsor has agreed to provide management and administrative services to the
Trust as set forth in that Contract.
3. As provided for in paragraph 1 of the Master Contract, the Trust
hereby adopts the Master Contract with respect to the Fund and the Sponsor
hereby acknowledges that the Master Contract shall pertain to the Fund, the
terms and conditions of such Master Contract being hereby incorporated herein by
reference.
4. The term "Fund" as used in the Master Contract shall, for purposes
of this Supplement, pertain to the Fund.
5. As provided in paragraph 4 of the Master Contract and subject to
further conditions as set forth therein, the Trust shall, with respect to the
Fund, pay the Sponsor a monthly fee on the first business day of each month
based upon the average daily value of the net assets of the Fund during the
preceding month at an annual rate of 0.15% of the average daily value of net
assets of the Fund.
6. The "Sponsor's reimbursement," as the term is defined and used in
paragraph 5 of the Master Contract, shall for purposes of this Supplement with
respect to the Fund equal 33%.
<PAGE> 2
7. This Supplement and the Master Contract (together, the "Contract")
shall become effective on February 1, 1996, and shall continue in effect with
respect to the Fund for a period of two years and thereafter for successive
annual periods only so long as such continuance is specifically approved at
least annually by (a) the Trust's Board of Trustees or by the vote of a majority
of the Trust's outstanding voting securities (as defined in the Investment
Company Act of 1940 ("1940 Act")) and (b) by the vote, cast in person at a
meeting called for the purpose of a majority of the Trust's Trustees who are not
parties to this Contract or "interested persons" (as defined in the 1940 Act) of
any such party. This Contract may be terminated with respect to the Fund at any
time, without the payment of any penalty, by vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act) or by a
vote of a majority of the Trustees of the Trust who are not "interested persons"
(as defined in the 1940 Act) and who have no direct or indirect financial
interest in this Contract on 60 days written notice to the Sponsor or by the
Sponsor on 60 days written notice to the Trust. The Contract shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
If the foregoing correctly sets forth the agreement between the Trust
and the Sponsor, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
PACIFICA FUNDS TRUST
By: __________________________
Name: ________________________
Title: _______________________
Accepted:
Furman Selz LLC
By: _____________________________________
Name: ___________________________________
Title: __________________________________
- 2 -
<PAGE> 3
ADMINISTRATIVE SERVICES CONTRACT SUPPLEMENT
PACIFICA FUNDS TRUST
237 Park Avenue
New York, New York 10017
February 1, 1996
Furman Selz LLC
230 Park Avenue
New York, New York 10169
Re: Pacifica National Tax-Exempt Money Market Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust")
and Furman Selz LLC (the "Sponsor") as follows:
1. The Trust is an open-end management investment company organized as
a Massachusetts business trust, and consists of such separate investment
portfolios as have been or may be established by the Trustees of the Trust from
time to time. A separate series of shares of beneficial interest of the Trust is
offered to investors with respect to each investment portfolio. The National
Tax-Exempt Money Market Fund (the "Fund") is a separate investment portfolio of
the Trust.
2. The Trust and the Sponsor have entered into a Master Administrative
Services Contract ("Master Contract") dated October 26, 1993, pursuant to which
the Sponsor has agreed to provide management and administrative services to the
Trust as set forth in that Contract.
3. As provided for in paragraph 1 of the Master Contract, the Trust
hereby adopts the Master Contract with respect to the Fund and the Sponsor
hereby acknowledges that the Master Contract shall pertain to the Fund, the
terms and conditions of such Master Contract being hereby incorporated herein by
reference.
4. The term "Fund" as used in the Master Contract shall, for purposes
of this Supplement, pertain to the Fund.
5. As provided in paragraph 4 of the Master Contract and subject to
further conditions as set forth therein, the Trust shall, with respect to the
Fund, pay the Sponsor a monthly fee on the first business day of each month
based upon the average daily value of the net assets of the Fund during the
preceding month at an annual rate of 0.15% of the average daily value of net
assets of the Fund.
6. The "Sponsor's reimbursement," as the term is defined and used in
paragraph 5 of the Master Contract, shall for purposes of this Supplement with
respect to the Fund equal 30%.
<PAGE> 4
7. This Supplement and the Master Contract (together, the "Contract")
shall become effective on February 1, 1996, and shall continue in effect with
respect to the Fund for a period of two years and thereafter for successive
annual periods only so long as such continuance is specifically approved at
least annually by (a) the Trust's Board of Trustees or by the vote of a majority
of the Trust's outstanding voting securities (as defined in the Investment
Company Act of 1940 ("1940 Act")) and (b) by the vote, cast in person at a
meeting called for the purpose of a majority of the Trust's Trustees who are not
parties to this Contract or "interested persons" (as defined in the 1940 Act) of
any such party. This Contract may be terminated with respect to the Fund at any
time, without the payment of any penalty, by vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act) or by a
vote of a majority of the Trustees of the Trust who are not "interested persons"
(as defined in the 1940 Act) and who have no direct or indirect financial
interest in this Contract on 60 days written notice to the Sponsor or by the
Sponsor on 60 days written notice to the Trust. The Contract shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
If the foregoing correctly sets forth the agreement between the Trust
and the Sponsor, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
PACIFICA FUNDS TRUST
By: __________________________
Name: ________________________
Title: _______________________
Accepted:
Furman Selz LLC
By: _____________________________________
Name: ___________________________________
Title: __________________________________
- 2 -
<PAGE> 5
ADMINISTRATIVE SERVICES CONTRACT SUPPLEMENT
PACIFICA FUNDS TRUST
237 Park Avenue
New York, New York 10017
February 1, 1996
Furman Selz LLC
230 Park Avenue
New York, New York 10169
Re: Pacifica California Tax-Exempt Money Market Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust")
and Furman Selz LLC (the "Sponsor") as follows:
1. The Trust is an open-end management investment company organized as
a Massachusetts business trust, and consists of such separate investment
portfolios as have been or may be established by the Trustees of the Trust from
time to time. A separate series of shares of beneficial interest of the Trust is
offered to investors with respect to each investment portfolio. The California
Tax-Exempt Money Market Fund (the "Fund") is a separate investment portfolio of
the Trust.
2. The Trust and the Sponsor have entered into a Master Administrative
Services Contract ("Master Contract") dated October 26, 1993, pursuant to which
the Sponsor has agreed to provide management and administrative services to the
Trust as set forth in that Contract.
3. As provided for in paragraph 1 of the Master Contract, the Trust
hereby adopts the Master Contract with respect to the Fund and the Sponsor
hereby acknowledges that the Master Contract shall pertain to the Fund, the
terms and conditions of such Master Contract being hereby incorporated herein by
reference.
4. The term "Fund" as used in the Master Contract shall, for purposes
of this Supplement, pertain to the Fund.
5. As provided in paragraph 4 of the Master Contract and subject to
further conditions as set forth therein, the Trust shall, with respect to the
Fund, pay the Sponsor a monthly fee on the first business day of each month
based upon the average daily value of the net assets of the Fund during the
preceding month at an annual rate of 0.15% of the average daily value of net
assets of the Fund.
6. The "Sponsor's reimbursement," as the term is defined and used in
paragraph 5 of the Master Contract, shall for purposes of this Supplement with
respect to the Fund equal 30%.
<PAGE> 6
7. This Supplement and the Master Contract (together, the "Contract")
shall become effective on February 1, 1996, and shall continue in effect with
respect to the Fund for a period of two years and thereafter for successive
annual periods only so long as such continuance is specifically approved at
least annually by (a) the Trust's Board of Trustees or by the vote of a majority
of the Trust's outstanding voting securities (as defined in the Investment
Company Act of 1940 ("1940 Act")) and (b) by the vote, cast in person at a
meeting called for the purpose of a majority of the Trust's Trustees who are not
parties to this Contract or "interested persons" (as defined in the 1940 Act) of
any such party. This Contract may be terminated with respect to the Fund at any
time, without the payment of any penalty, by vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act) or by a
vote of a majority of the Trustees of the Trust who are not "interested persons"
(as defined in the 1940 Act) and who have no direct or indirect financial
interest in this Contract on 60 days written notice to the Sponsor or by the
Sponsor on 60 days written notice to the Trust. The Contract shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
If the foregoing correctly sets forth the agreement between the Trust
and the Sponsor, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
PACIFICA FUNDS TRUST
By: __________________________
Name: ________________________
Title: _______________________
Accepted:
Furman Selz LLC
By: _____________________________________
Name: ___________________________________
Title: __________________________________
- 2 -
<PAGE> 7
ADMINISTRATIVE SERVICES CONTRACT SUPPLEMENT
PACIFICA FUNDS TRUST
237 Park Avenue
New York, New York 10017
February 1, 1996
Furman Selz LLC
230 Park Avenue
New York, New York 10169
Re: Pacifica International Equity Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust")
and Furman Selz LLC (the "Sponsor") as follows:
1. The Trust is an open-end management investment company organized as
a Massachusetts business trust, and consists of such separate investment
portfolios as have been or may be established by the Trustees of the Trust from
time to time. A separate series of shares of beneficial interest of the Trust is
offered to investors with respect to each investment portfolio. The
International Equity Fund (the "Fund") is a separate investment portfolio of the
Trust.
2. The Trust and the Sponsor have entered into a Master Administrative
Services Contract ("Master Contract") dated October 26, 1993, pursuant to which
the Sponsor has agreed to provide management and administrative services to the
Trust as set forth in that Contract.
3. As provided for in paragraph 1 of the Master Contract, the Trust
hereby adopts the Master Contract with respect to the Fund and the Sponsor
hereby acknowledges that the Master Contract shall pertain to the Fund, the
terms and conditions of such Master Contract being hereby incorporated herein by
reference.
4. The term "Fund" as used in the Master Contract shall, for purposes
of this Supplement, pertain to the Fund.
5. As provided in paragraph 4 of the Master Contract and subject to
further conditions as set forth therein, the Trust shall, with respect to the
Fund, pay the Sponsor a monthly fee on the first business day of each month
based upon the average daily value of the net assets of the Fund during the
preceding month at an annual rate of 0.15% of the average daily value of net
assets of the Fund.
6. The "Sponsor's reimbursement," as the term is defined and used in
paragraph 5 of the Master Contract, shall for purposes of this Supplement with
respect to the Fund equal 13%.
<PAGE> 8
7. This Supplement and the Master Contract (together, the "Contract")
shall become effective on February 1, 1996, and shall continue in effect with
respect to the Fund for a period of two years and thereafter for successive
annual periods only so long as such continuance is specifically approved at
least annually by (a) the Trust's Board of Trustees or by the vote of a majority
of the Trust's outstanding voting securities (as defined in the Investment
Company Act of 1940 ("1940 Act")) and (b) by the vote, cast in person at a
meeting called for the purpose of a majority of the Trust's Trustees who are not
parties to this Contract or "interested persons" (as defined in the 1940 Act) of
any such party. This Contract may be terminated with respect to the Fund at any
time, without the payment of any penalty, by vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act) or by a
vote of a majority of the Trustees of the Trust who are not "interested persons"
(as defined in the 1940 Act) and who have no direct or indirect financial
interest in this Contract on 60 days written notice to the Sponsor or by the
Sponsor on 60 days written notice to the Trust. The Contract shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
If the foregoing correctly sets forth the agreement between the Trust
and the Sponsor, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
PACIFICA FUNDS TRUST
By: __________________________
Name: ________________________
Title: _______________________
Accepted:
Furman Selz LLC
By: _____________________________________
Name: ___________________________________
Title: __________________________________
- 2 -
<PAGE> 9
ADMINISTRATIVE SERVICES CONTRACT SUPPLEMENT
PACIFICA FUNDS TRUST
237 Park Avenue
New York, New York 10017
February 1, 1996
Furman Selz LLC
230 Park Avenue
New York, New York 10169
Re: Pacifica Equity Index Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust")
and Furman Selz LLC (the "Sponsor") as follows:
1. The Trust is an open-end management investment company organized as
a Massachusetts business trust, and consists of such separate investment
portfolios as have been or may be established by the Trustees of the Trust from
time to time. A separate series of shares of beneficial interest of the Trust is
offered to investors with respect to each investment portfolio. The Equity Index
Fund (the "Fund") is a separate investment portfolio of the Trust.
2. The Trust and the Sponsor have entered into a Master Administrative
Services Contract ("Master Contract") dated October 26, 1993, pursuant to which
the Sponsor has agreed to provide management and administrative services to the
Trust as set forth in that Contract.
3. As provided for in paragraph 1 of the Master Contract, the Trust
hereby adopts the Master Contract with respect to the Fund and the Sponsor
hereby acknowledges that the Master Contract shall pertain to the Fund, the
terms and conditions of such Master Contract being hereby incorporated herein by
reference.
4. The term "Fund" as used in the Master Contract shall, for purposes
of this Supplement, pertain to the Fund.
5. As provided in paragraph 4 of the Master Contract and subject to
further conditions as set forth therein, the Trust shall, with respect to the
Fund, pay the Sponsor a monthly fee on the first business day of each month
based upon the average daily value of the net assets of the Fund during the
preceding month at an annual rate of 0.15% of the average daily value of net
assets of the Fund.
6. The "Sponsor's reimbursement," as the term is defined and used in
paragraph 5 of the Master Contract, shall for purposes of this Supplement with
respect to the Fund equal 37%.
<PAGE> 10
7. This Supplement and the Master Contract (together, the "Contract")
shall become effective on February 1, 1996, and shall continue in effect with
respect to the Fund for a period of two years and thereafter for successive
annual periods only so long as such continuance is specifically approved at
least annually by (a) the Trust's Board of Trustees or by the vote of a majority
of the Trust's outstanding voting securities (as defined in the Investment
Company Act of 1940 ("1940 Act")) and (b) by the vote, cast in person at a
meeting called for the purpose of a majority of the Trust's Trustees who are not
parties to this Contract or "interested persons" (as defined in the 1940 Act) of
any such party. This Contract may be terminated with respect to the Fund at any
time, without the payment of any penalty, by vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act) or by a
vote of a majority of the Trustees of the Trust who are not "interested persons"
(as defined in the 1940 Act) and who have no direct or indirect financial
interest in this Contract on 60 days written notice to the Sponsor or by the
Sponsor on 60 days written notice to the Trust. The Contract shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
If the foregoing correctly sets forth the agreement between the Trust
and the Sponsor, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
PACIFICA FUNDS TRUST
By: __________________________
Name: ________________________
Title: _______________________
Accepted:
Furman Selz LLC
By: _____________________________________
Name: ___________________________________
Title: __________________________________
- 2 -
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> PACIFICA MONEY MARKET FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 162084
<INVESTMENTS-AT-VALUE> 162084
<RECEIVABLES> 741
<ASSETS-OTHER> 81
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 162906
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 248
<TOTAL-LIABILITIES> 248
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 162658
<SHARES-COMMON-STOCK> 162658
<SHARES-COMMON-PRIOR> 158711
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 162658
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9211
<OTHER-INCOME> 0
<EXPENSES-NET> 986
<NET-INVESTMENT-INCOME> 8225
<REALIZED-GAINS-CURRENT> 1
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 8224
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8224
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5790580
<NUMBER-OF-SHARES-REDEEMED> 5789188
<SHARES-REINVESTED> 2555
<NET-CHANGE-IN-ASSETS> 3947
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 461
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1140
<AVERAGE-NET-ASSETS> 170389
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .053
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .053
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> .006
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> PACIFICA GOVERNMENT MONEY MARKET FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 109377
<INVESTMENTS-AT-VALUE> 109377
<RECEIVABLES> 281
<ASSETS-OTHER> 59
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 109717
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 349
<TOTAL-LIABILITIES> 349
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 109368
<SHARES-COMMON-STOCK> 109368
<SHARES-COMMON-PRIOR> 194276
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 109368
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7502
<OTHER-INCOME> 0
<EXPENSES-NET> 1007
<NET-INVESTMENT-INCOME> 6495
<REALIZED-GAINS-CURRENT> 454
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 6949
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6495
<DISTRIBUTIONS-OF-GAINS> 454
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4140356
<NUMBER-OF-SHARES-REDEEMED> 4226851
<SHARES-REINVESTED> 1588
<NET-CHANGE-IN-ASSETS> 84908
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 383
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1032
<AVERAGE-NET-ASSETS> 100793
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .051
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .051
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> .008
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> PACIFICA ASSET PRESERVATION FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 51925
<INVESTMENTS-AT-VALUE> 51932
<RECEIVABLES> 962
<ASSETS-OTHER> 13
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 52907
<PAYABLE-FOR-SECURITIES> 980
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 320
<TOTAL-LIABILITIES> 1300
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 52452
<SHARES-COMMON-STOCK> 5120
<SHARES-COMMON-PRIOR> 10282
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (14)
<ACCUMULATED-NET-GAINS> (839)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8
<NET-ASSETS> 51607
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4275
<OTHER-INCOME> 0
<EXPENSES-NET> 671
<NET-INVESTMENT-INCOME> 3604
<REALIZED-GAINS-CURRENT> (839)
<APPREC-INCREASE-CURRENT> 917
<NET-CHANGE-FROM-OPS> 3682
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3553
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 51
<NUMBER-OF-SHARES-SOLD> 1453
<NUMBER-OF-SHARES-REDEEMED> 6914
<SHARES-REINVESTED> 299
<NET-CHANGE-IN-ASSETS> (51571)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 77
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 252
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 685
<AVERAGE-NET-ASSETS> 53391
<PER-SHARE-NAV-BEGIN> 10.04
<PER-SHARE-NII> .50
<PER-SHARE-GAIN-APPREC> .04
<PER-SHARE-DIVIDEND> .49
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> .01
<PER-SHARE-NAV-END> 10.08
<EXPENSE-RATIO> .009
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> PACIFICA BALANCED FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 80777
<INVESTMENTS-AT-VALUE> 88208
<RECEIVABLES> 910
<ASSETS-OTHER> 11
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 89129
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 95
<TOTAL-LIABILITIES> 95
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 81565
<SHARES-COMMON-STOCK> 7520
<SHARES-COMMON-PRIOR> 9280
<ACCUMULATED-NII-CURRENT> 24
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 14
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7431
<NET-ASSETS> 89034
<DIVIDEND-INCOME> 1291
<INTEREST-INCOME> 3623
<OTHER-INCOME> 0
<EXPENSES-NET> 999
<NET-INVESTMENT-INCOME> 3915
<REALIZED-GAINS-CURRENT> 38
<APPREC-INCREASE-CURRENT> 5217
<NET-CHANGE-FROM-OPS> 9170
<EQUALIZATION> (111)
<DISTRIBUTIONS-OF-INCOME> 3891
<DISTRIBUTIONS-OF-GAINS> 4373
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1143
<NUMBER-OF-SHARES-REDEEMED> 3620
<SHARES-REINVESTED> 717
<NET-CHANGE-IN-ASSETS> (19256)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4349
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 580
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1018
<AVERAGE-NET-ASSETS> 90010
<PER-SHARE-NAV-BEGIN> 11.67
<PER-SHARE-NII> .46
<PER-SHARE-GAIN-APPREC> .68
<PER-SHARE-DIVIDEND> .47
<PER-SHARE-DISTRIBUTIONS> .50
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.84
<EXPENSE-RATIO> .010
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 05
<NAME> PACIFICA CALIFORNIA TAX-EXEMPT FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 150749
<INVESTMENTS-AT-VALUE> 158863
<RECEIVABLES> 2900
<ASSETS-OTHER> 57
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 161820
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 477
<TOTAL-LIABILITIES> 477
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 156284
<SHARES-COMMON-STOCK> 15013
<SHARES-COMMON-PRIOR> 18666
<ACCUMULATED-NII-CURRENT> 28
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3083)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8114
<NET-ASSETS> 161343
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10199
<OTHER-INCOME> 0
<EXPENSES-NET> 1538
<NET-INVESTMENT-INCOME> 8661
<REALIZED-GAINS-CURRENT> (3124)
<APPREC-INCREASE-CURRENT> 9098
<NET-CHANGE-FROM-OPS> 14635
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8661
<DISTRIBUTIONS-OF-GAINS> 1722
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3249
<NUMBER-OF-SHARES-REDEEMED> 7211
<SHARES-REINVESTED> 310
<NET-CHANGE-IN-ASSETS> (33076)
<ACCUMULATED-NII-PRIOR> 28
<ACCUMULATED-GAINS-PRIOR> 1763
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 844
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1572
<AVERAGE-NET-ASSETS> 162463
<PER-SHARE-NAV-BEGIN> 10.42
<PER-SHARE-NII> .54
<PER-SHARE-GAIN-APPREC> .44
<PER-SHARE-DIVIDEND> .54
<PER-SHARE-DISTRIBUTIONS> .11
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.75
<EXPENSE-RATIO> .009
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 06
<NAME> PACIFICA EQUITY VALUE FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 144051
<INVESTMENTS-AT-VALUE> 170280
<RECEIVABLES> 294
<ASSETS-OTHER> 17
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 170591
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 185
<TOTAL-LIABILITIES> 185
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 135836
<SHARES-COMMON-STOCK> 12843
<SHARES-COMMON-PRIOR> 13657
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8341
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 26229
<NET-ASSETS> 170406
<DIVIDEND-INCOME> 4379
<INTEREST-INCOME> 471
<OTHER-INCOME> 0
<EXPENSES-NET> 1582
<NET-INVESTMENT-INCOME> 3268
<REALIZED-GAINS-CURRENT> 8515
<APPREC-INCREASE-CURRENT> 13331
<NET-CHANGE-FROM-OPS> 25114
<EQUALIZATION> (69)
<DISTRIBUTIONS-OF-INCOME> 3268
<DISTRIBUTIONS-OF-GAINS> 9614
<DISTRIBUTIONS-OTHER> 118
<NUMBER-OF-SHARES-SOLD> 8142
<NUMBER-OF-SHARES-REDEEMED> 9925
<SHARES-REINVESTED> 969
<NET-CHANGE-IN-ASSETS> 1555
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 9558
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 993
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1615
<AVERAGE-NET-ASSETS> 172360
<PER-SHARE-NAV-BEGIN> 12.36
<PER-SHARE-NII> .24
<PER-SHARE-GAIN-APPREC> 1.63
<PER-SHARE-DIVIDEND> .24
<PER-SHARE-DISTRIBUTIONS> .71
<RETURNS-OF-CAPITAL> .01
<PER-SHARE-NAV-END> 13.27
<EXPENSE-RATIO> .010
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 07
<NAME> PACIFICA GOVERNMENT INCOME FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 82854
<INVESTMENTS-AT-VALUE> 84037
<RECEIVABLES> 1253
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 85304
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 323
<TOTAL-LIABILITIES> 323
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 94765
<SHARES-COMMON-STOCK> 8643
<SHARES-COMMON-PRIOR> 13074
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (10966)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1182
<NET-ASSETS> 84981
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6915
<OTHER-INCOME> 093
<EXPENSES-NET> 993
<NET-INVESTMENT-INCOME> 5922
<REALIZED-GAINS-CURRENT> (6984)
<APPREC-INCREASE-CURRENT> 9797
<NET-CHANGE-FROM-OPS> 8735
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5360
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 562
<NUMBER-OF-SHARES-SOLD> 1558
<NUMBER-OF-SHARES-REDEEMED> 6241
<SHARES-REINVESTED> 251
<NET-CHANGE-IN-ASSETS> (39391)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3982)
<OVERDISTRIB-NII-PRIOR> 562
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 501
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1013
<AVERAGE-NET-ASSETS> 86178
<PER-SHARE-NAV-BEGIN> 9.51
<PER-SHARE-NII> .57
<PER-SHARE-GAIN-APPREC> .32
<PER-SHARE-DIVIDEND> .52
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> .05
<PER-SHARE-NAV-END> 9.83
<EXPENSE-RATIO> .010
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 08
<NAME> PACIFICA CALIFORNIA SHORT-TERM TAX-EXEMPT FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 18568
<INVESTMENTS-AT-VALUE> 18753
<RECEIVABLES> 294
<ASSETS-OTHER> 139
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 19186
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 91
<TOTAL-LIABILITIES> 91
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 18996
<SHARES-COMMON-STOCK> 1881
<SHARES-COMMON-PRIOR> 2541
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (86)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 185
<NET-ASSETS> 19095
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1217
<OTHER-INCOME> 0
<EXPENSES-NET> 164
<NET-INVESTMENT-INCOME> 1053
<REALIZED-GAINS-CURRENT> 165
<APPREC-INCREASE-CURRENT> 340
<NET-CHANGE-FROM-OPS> 1558
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1053
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2817
<NUMBER-OF-SHARES-REDEEMED> 3515
<SHARES-REINVESTED> 38
<NET-CHANGE-IN-ASSETS> (6220)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (252)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 90
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 300
<AVERAGE-NET-ASSETS> 21127
<PER-SHARE-NAV-BEGIN> 9.96
<PER-SHARE-NII> .41
<PER-SHARE-GAIN-APPREC> .19
<PER-SHARE-DIVIDEND> .41
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.15
<EXPENSE-RATIO> .006
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 091
<NAME> PACIFICA PRIME MONEY MARKET FUND-SERVICE SHARES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 643817
<INVESTMENTS-AT-VALUE> 643817
<RECEIVABLES> 846
<ASSETS-OTHER> 2990
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 647653
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3050
<TOTAL-LIABILITIES> 3050
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 644706
<SHARES-COMMON-STOCK> 614101
<SHARES-COMMON-PRIOR> 565408
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (103)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 644603
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 33982
<OTHER-INCOME> 0
<EXPENSES-NET> 2354
<NET-INVESTMENT-INCOME> 31628
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 31628
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 31328
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8252511
<NUMBER-OF-SHARES-REDEEMED> 8203819
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 79298
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (103)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1694
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3900
<AVERAGE-NET-ASSETS> 572475
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .055
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .055
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> .004
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 092
<NAME> PACIFICA PRIME MONEY MARKET FUND-INSTITUTIONAL SHARES
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 643817
<INVESTMENTS-AT-VALUE> 643817
<RECEIVABLES> 846
<ASSETS-OTHER> 2990
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 647653
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3050
<TOTAL-LIABILITIES> 3050
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 644706
<SHARES-COMMON-STOCK> 30606
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (103)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 644603
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 33982
<OTHER-INCOME> 0
<EXPENSES-NET> 2354
<NET-INVESTMENT-INCOME> 31628
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 31628
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 300
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 104661
<NUMBER-OF-SHARES-REDEEMED> 74055
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 79298
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (103)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1694
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3900
<AVERAGE-NET-ASSETS> 572475
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .008
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .008
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> .003
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 101
<NAME> PACIFICA TREASURY MONEY MARKET FUND-SERVICE SHARES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 1036789
<INVESTMENTS-AT-VALUE> 1036789
<RECEIVABLES> 2102
<ASSETS-OTHER> 4498
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1043389
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5239
<TOTAL-LIABILITIES> 5239
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1038150
<SHARES-COMMON-STOCK> 1001707
<SHARES-COMMON-PRIOR> 690630
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1038150
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 52925
<OTHER-INCOME> 0
<EXPENSES-NET> 3897
<NET-INVESTMENT-INCOME> 49028
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 49028
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 48763
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20388948
<NUMBER-OF-SHARES-REDEEMED> 20077871
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 347520
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2546
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6126
<AVERAGE-NET-ASSETS> 91699
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .053
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .053
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> .004
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 102
<NAME> PACIFICA TREASURY MONEY MARKET FUND-INSTITUTIONAL SHARES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 1036789
<INVESTMENTS-AT-VALUE> 1036789
<RECEIVABLES> 2102
<ASSETS-OTHER> 4498
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1043389
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5239
<TOTAL-LIABILITIES> 5239
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1038150
<SHARES-COMMON-STOCK> 36443
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1038150
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 52925
<OTHER-INCOME> 0
<EXPENSES-NET> 3897
<NET-INVESTMENT-INCOME> 49028
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 49028
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 265
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 120817
<NUMBER-OF-SHARES-REDEEMED> 84374
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 347520
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2546
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6126
<AVERAGE-NET-ASSETS> 91699
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .008
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .008
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> .003
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> PACIFICA INTERMEDIATE BOND FUND (FORMERLY WESTCORE BONDS PLUS FUND)
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 53982
<INVESTMENTS-AT-VALUE> 54888
<RECEIVABLES> 885
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 55783
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 155
<TOTAL-LIABILITIES> 155
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 56914
<SHARES-COMMON-STOCK> 3770
<SHARES-COMMON-PRIOR> 3797
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (73)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (3119)
<ACCUM-APPREC-OR-DEPREC> 906
<NET-ASSETS> 55628
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1297
<OTHER-INCOME> 0
<EXPENSES-NET> (169)
<NET-INVESTMENT-INCOME> 1128
<REALIZED-GAINS-CURRENT> 364
<APPREC-INCREASE-CURRENT> (383)
<NET-CHANGE-FROM-OPS> 1109
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1155)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 460
<NUMBER-OF-SHARES-REDEEMED> (541)
<SHARES-REINVESTED> 54
<NET-CHANGE-IN-ASSETS> (459)
<ACCUMULATED-NII-PRIOR> 73
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (2483)
<GROSS-ADVISORY-FEES> 95
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 178
<AVERAGE-NET-ASSETS> 56829
<PER-SHARE-NAV-BEGIN> 14.77
<PER-SHARE-NII> .30
<PER-SHARE-GAIN-APPREC> (.01)
<PER-SHARE-DIVIDEND> (.30)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.76
<EXPENSE-RATIO> .89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 121
<NAME> PACIFICA INTERMEDIATE GOVERNMENT BOND FUND - INVESTOR SHARES
(FORMERLY WESTCORE GNMA FUND - RETAIL SHARES)
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 29441
<INVESTMENTS-AT-VALUE> 29181
<RECEIVABLES> 183
<ASSETS-OTHER> 16
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 29380
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 169
<TOTAL-LIABILITIES> 169
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30555
<SHARES-COMMON-STOCK> 457
<SHARES-COMMON-PRIOR> 584
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (66)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (1018)
<ACCUM-APPREC-OR-DEPREC> (260)
<NET-ASSETS> 29211
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 794
<OTHER-INCOME> 0
<EXPENSES-NET> (131)
<NET-INVESTMENT-INCOME> 663
<REALIZED-GAINS-CURRENT> 48
<APPREC-INCREASE-CURRENT> (20)
<NET-CHANGE-FROM-OPS> 691
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (170)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12
<NUMBER-OF-SHARES-REDEEMED> (145)
<SHARES-REINVESTED> 6
<NET-CHANGE-IN-ASSETS> (4023)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (65)
<OVERDIST-NET-GAINS-PRIOR> (1066)
<GROSS-ADVISORY-FEES> 53
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 156
<AVERAGE-NET-ASSETS> 32622
<PER-SHARE-NAV-BEGIN> 15.67
<PER-SHARE-NII> .31
<PER-SHARE-GAIN-APPREC> .03
<PER-SHARE-DIVIDEND> (.34)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.67
<EXPENSE-RATIO> 1.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 122
<NAME> PACIFICA INTERMEDIATE GOVERNMENT BOND FUND-INSTITUTIONAL SHARES
(FORMERLY WESTCORE GNMA FUND-INSTITUTIONAL SHARES)
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 29441
<INVESTMENTS-AT-VALUE> 29181
<RECEIVABLES> 183
<ASSETS-OTHER> 16
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 29380
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 169
<TOTAL-LIABILITIES> 169
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30555
<SHARES-COMMON-STOCK> 1405
<SHARES-COMMON-PRIOR> 1534
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (66)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (1018)
<ACCUM-APPREC-OR-DEPREC> (260)
<NET-ASSETS> 29211
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 794
<OTHER-INCOME> 0
<EXPENSES-NET> (131)
<NET-INVESTMENT-INCOME> 663
<REALIZED-GAINS-CURRENT> 48
<APPREC-INCREASE-CURRENT> (20)
<NET-CHANGE-FROM-OPS> 691
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (508)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16
<NUMBER-OF-SHARES-REDEEMED> (163)
<SHARES-REINVESTED> 18
<NET-CHANGE-IN-ASSETS> (4023)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (65)
<OVERDIST-NET-GAINS-PRIOR> (1066)
<GROSS-ADVISORY-FEES> 53
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 156
<AVERAGE-NET-ASSETS> 31622
<PER-SHARE-NAV-BEGIN> 15.69
<PER-SHARE-NII> .34
<PER-SHARE-GAIN-APPREC> .01
<PER-SHARE-DIVIDEND> (.35)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.69
<EXPENSE-RATIO> 1.18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 131
<NAME> PACIFICA SHORT-TERM GOVERNMENT BOND FUND-INVESTOR SHARES (FORMERLY
WESTCORE SHORT-TERM GOVERNMENT BOND FUND-RETAIL SHARES)
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 36840
<INVESTMENTS-AT-VALUE> 37317
<RECEIVABLES> 741
<ASSETS-OTHER> 21
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 38079
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 412
<TOTAL-LIABILITIES> 412
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38317
<SHARES-COMMON-STOCK> 234
<SHARES-COMMON-PRIOR> 292
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (61)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (1066)
<ACCUM-APPREC-OR-DEPREC> 477
<NET-ASSETS> 37667
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 819
<OTHER-INCOME> 0
<EXPENSES-NET> (87)
<NET-INVESTMENT-INCOME> 732
<REALIZED-GAINS-CURRENT> (2)
<APPREC-INCREASE-CURRENT> (12)
<NET-CHANGE-FROM-OPS> 718
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (71)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10
<NUMBER-OF-SHARES-REDEEMED> (71)
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> (3884)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (49)
<OVERDIST-NET-GAINS-PRIOR> (1063)
<GROSS-ADVISORY-FEES> 66
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 154
<AVERAGE-NET-ASSETS> 39382
<PER-SHARE-NAV-BEGIN> 15.49
<PER-SHARE-NII> .29
<PER-SHARE-GAIN-APPREC> (.02)
<PER-SHARE-DIVIDEND> .3
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.46
<EXPENSE-RATIO> .74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 132
<NAME> PACIFICA SHORT-TERM GOVERNMENT BOND FUND-INSTITUTIONAL SHARES
(FORMERLY WESTCORE SHORT-TERM GOVERNMENT BOND FUND-
INSTITUTIONAL SHARES)
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 36840
<INVESTMENTS-AT-VALUE> 37317
<RECEIVABLES> 741
<ASSETS-OTHER> 21
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 38079
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 412
<TOTAL-LIABILITIES> 412
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38317
<SHARES-COMMON-STOCK> 2201
<SHARES-COMMON-PRIOR> 2390
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (61)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (1066)
<ACCUM-APPREC-OR-DEPREC> 477
<NET-ASSETS> 37667
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 819
<OTHER-INCOME> 0
<EXPENSES-NET> (87)
<NET-INVESTMENT-INCOME> 732
<REALIZED-GAINS-CURRENT> (2)
<APPREC-INCREASE-CURRENT> (12)
<NET-CHANGE-FROM-OPS> 718
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (690)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 80
<NUMBER-OF-SHARES-REDEEMED> (289)
<SHARES-REINVESTED> 20
<NET-CHANGE-IN-ASSETS> (3884)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (49)
<OVERDIST-NET-GAINS-PRIOR> (1063)
<GROSS-ADVISORY-FEES> 66
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 154
<AVERAGE-NET-ASSETS> 39382
<PER-SHARE-NAV-BEGIN> 15.49
<PER-SHARE-NII> .29
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.31)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.47
<EXPENSE-RATIO> .65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 14
<NAME> PACIFICA OREGON TAX-EXEMPT FUND
(FORMERLY WESTCORE OREGON TAX-EXEMPT FUND)
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 483321
<INVESTMENTS-AT-VALUE> 49219
<RECEIVABLES> 976
<ASSETS-OTHER> 4
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 50197
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 120
<TOTAL-LIABILITIES> 120
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 49466
<SHARES-COMMON-STOCK> 3057
<SHARES-COMMON-PRIOR> 3172
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (26)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (258)
<ACCUM-APPREC-OR-DEPREC> 895
<NET-ASSETS> 50077
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 972
<OTHER-INCOME> 0
<EXPENSES-NET> (119)
<NET-INVESTMENT-INCOME> 853
<REALIZED-GAINS-CURRENT> 14
<APPREC-INCREASE-CURRENT> (279)
<NET-CHANGE-FROM-OPS> 588
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (885)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 83
<NUMBER-OF-SHARES-REDEEMED> (231)
<SHARES-REINVESTED> 33
<NET-CHANGE-IN-ASSETS> (2168)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (14)
<OVERDIST-NET-GAINS-PRIOR> (272)
<GROSS-ADVISORY-FEES> 85
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 171
<AVERAGE-NET-ASSETS> 50984
<PER-SHARE-NAV-BEGIN> 16.47
<PER-SHARE-NII> .28
<PER-SHARE-GAIN-APPREC> (0.08)
<PER-SHARE-DIVIDEND> (.29)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.38
<EXPENSE-RATIO> .70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 15
<NAME> PACIFICA MONEY MARKET TRUST
(FORMERLY WESTCORE PRIME MONEY MARKET FUND)
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 286913
<INVESTMENTS-AT-VALUE> 286913
<RECEIVABLES> 102
<ASSETS-OTHER> 6
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 287021
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 158
<TOTAL-LIABILITIES> 158
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 286863
<SHARES-COMMON-STOCK> 286940
<SHARES-COMMON-PRIOR> 290482
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 286863
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5599
<OTHER-INCOME> 0
<EXPENSES-NET> (184)
<NET-INVESTMENT-INCOME> 5415
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 5415
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5491)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 206739
<NUMBER-OF-SHARES-REDEEMED> (210282)
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> (3619)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 663
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1058
<AVERAGE-NET-ASSETS> 284113
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.02)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 16
<NAME> PACIFICA ARIZONA TAX-EXEMPT FUND
(FORMERLY WESTCORE ARIZONA INTERMEDIATE TAX-FREE FUND)
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 23525
<INVESTMENTS-AT-VALUE> 24247
<RECEIVABLES> 402
<ASSETS-OTHER> 15
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 24664
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 42
<TOTAL-LIABILITIES> 42
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23901
<SHARES-COMMON-STOCK> 2298
<SHARES-COMMON-PRIOR> 2302
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (67)
<ACCUMULATED-NET-GAINS> 66
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 722
<NET-ASSETS> 24622
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 428
<OTHER-INCOME> 0
<EXPENSES-NET> (37)
<NET-INVESTMENT-INCOME> 391
<REALIZED-GAINS-CURRENT> 68
<APPREC-INCREASE-CURRENT> 81
<NET-CHANGE-FROM-OPS> 540
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (452)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 146
<NUMBER-OF-SHARES-REDEEMED> (160)
<SHARES-REINVESTED> 10
<NET-CHANGE-IN-ASSETS> 40
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (19)
<OVERDIST-NET-GAINS-PRIOR> (1)
<GROSS-ADVISORY-FEES> 41
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 111
<AVERAGE-NET-ASSETS> 24697
<PER-SHARE-NAV-BEGIN> 10.68
<PER-SHARE-NII> .17
<PER-SHARE-GAIN-APPREC> .06
<PER-SHARE-DIVIDEND> (.20)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.71
<EXPENSE-RATIO> .45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 171
<NAME> PACIFICA GROWTH FUND -- INVESTOR SHARES
(FORMERLY WESTCORE GROWTH FUND -- RETAIL SHARES)
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 12056
<INVESTMENTS-AT-VALUE> 14212
<RECEIVABLES> 47
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 63
<TOTAL-ASSETS> 14331
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14
<TOTAL-LIABILITIES> 14
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12143
<SHARES-COMMON-STOCK> 11
<SHARES-COMMON-PRIOR> 11
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (3)
<ACCUMULATED-NET-GAINS> 21
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2156
<NET-ASSETS> 14317
<DIVIDEND-INCOME> 93
<INTEREST-INCOME> 21
<OTHER-INCOME> 0
<EXPENSES-NET> (42)
<NET-INVESTMENT-INCOME> 72
<REALIZED-GAINS-CURRENT> 381
<APPREC-INCREASE-CURRENT> 600
<NET-CHANGE-FROM-OPS> 1043
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2)
<DISTRIBUTIONS-OF-GAINS> (1)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1
<NUMBER-OF-SHARES-REDEEMED> (1)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1487
<ACCUMULATED-NII-PRIOR> 38
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (283)
<GROSS-ADVISORY-FEES> 35
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 84
<AVERAGE-NET-ASSETS> 13987
<PER-SHARE-NAV-BEGIN> 17.27
<PER-SHARE-NII> .10
<PER-SHARE-GAIN-APPREC> 1.28
<PER-SHARE-DIVIDEND> (.16)
<PER-SHARE-DISTRIBUTIONS> (.09)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.40
<EXPENSE-RATIO> .90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 172
<NAME> PACIFICA GROWTH FUND-INSTITUTIONAL SHARES (FORMERLY WESTCORE GROWTH
FUND-INSTITUTIONAL SHARES)
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 12056
<INVESTMENTS-AT-VALUE> 14212
<RECEIVABLES> 47
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 63
<TOTAL-ASSETS> 14331
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14
<TOTAL-LIABILITIES> 14
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12143
<SHARES-COMMON-STOCK> 767
<SHARES-COMMON-PRIOR> 731
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (3)
<ACCUMULATED-NET-GAINS> 21
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2156
<NET-ASSETS> 14317
<DIVIDEND-INCOME> 93
<INTEREST-INCOME> 21
<OTHER-INCOME> 0
<EXPENSES-NET> (42)
<NET-INVESTMENT-INCOME> 72
<REALIZED-GAINS-CURRENT> 371
<APPREC-INCREASE-CURRENT> 600
<NET-CHANGE-FROM-OPS> 1043
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (121)
<DISTRIBUTIONS-OF-GAINS> (66)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 117
<NUMBER-OF-SHARES-REDEEMED> (88)
<SHARES-REINVESTED> 7
<NET-CHANGE-IN-ASSETS> 1487
<ACCUMULATED-NII-PRIOR> 38
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (283)
<GROSS-ADVISORY-FEES> 35
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 84
<AVERAGE-NET-ASSETS> 13987
<PER-SHARE-NAV-BEGIN> 17.28
<PER-SHARE-NII> .10
<PER-SHARE-GAIN-APPREC> 1.27
<PER-SHARE-DIVIDEND> (.16)
<PER-SHARE-DISTRIBUTIONS> (.09)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.4
<EXPENSE-RATIO> .90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 18
<NAME> PACIFICA NATIONAL TAX-EXEMPT FUND
(FORMERLY WESTCORE QUALITY TAX-EXEMPT INCOME FUND)
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 14326
<INVESTMENTS-AT-VALUE> 14475
<RECEIVABLES> 275
<ASSETS-OTHER> 29
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14779
<PAYABLE-FOR-SECURITIES> 248
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 226
<TOTAL-LIABILITIES> 474
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14241
<SHARES-COMMON-STOCK> 933
<SHARES-COMMON-PRIOR> 947
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (10)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (75)
<ACCUM-APPREC-OR-DEPREC> 149
<NET-ASSETS> 14305
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 252
<OTHER-INCOME> 0
<EXPENSES-NET> (16)
<NET-INVESTMENT-INCOME> 226
<REALIZED-GAINS-CURRENT> (1)
<APPREC-INCREASE-CURRENT> 82
<NET-CHANGE-FROM-OPS> 307
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (247)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 41
<NUMBER-OF-SHARES-REDEEMED> (62)
<SHARES-REINVESTED> 7
<NET-CHANGE-IN-ASSETS> (153)
<ACCUMULATED-NII-PRIOR> 2
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (75)
<GROSS-ADVISORY-FEES> 24
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 90
<AVERAGE-NET-ASSETS> 14503
<PER-SHARE-NAV-BEGIN> 15.28
<PER-SHARE-NII> .24
<PER-SHARE-GAIN-APPREC> .08
<PER-SHARE-DIVIDEND> (.26)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.34
<EXPENSE-RATIO> .35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
