<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1996
FILE NOS. 33-9421
811-5526
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [_]
POST-EFFECTIVE AMENDMENT NO. 18 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 22 [X]
----------------
AVESTA TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
26-TCBE-45
P.O. BOX 2558, HOUSTON, TEXAS 77252-8045
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
----------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 216-8188
----------------
JEFFREY B. REITMAN, ESQ.
GENERAL COUNSEL
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
712 MAIN STREET, HOUSTON, TEXAS 77002
(NAME AND ADDRESS OF AGENT FOR SERVICE)
----------------
COPY TO:
GARY S. SCHPERO, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
----------------
It is proposed that this filing will become effective:
[X] immediately upon filing pursuant to paragraph (b)
[_] on pursuant to paragraph (b)
[_] on pursuant to paragraph (a)(i)
[_] 75 days after filing pursuant to paragraph (a)(ii)
[_] on pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[_]this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has previously elected, pursuant to Rule 24f-2 under the
Investment Company Act of 1940, to register an indefinite number of units of
beneficial interest for sale under the Securities Act of 1933. Registrant's
Rule 24f-2 Notice for the fiscal year 1995 was filed on or about February 28,
1996.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AVESTA TRUST
----------------
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART A
OF FORM N-1A AND PROSPECTUS
<TABLE>
<CAPTION>
ITEM NUMBER LOCATION
OF FORM N-1A IN PROSPECTUS
------------ -------------
<C> <S> <C>
1. Cover Page..................... Cover Page
2. Synopsis....................... Standardized Fee Table
3. Condensed Financial Financial Highlights
Information...................
4. General Description of General Description of the Trust;
Registrant.................... Investment Objectives and Policies
5. Management of the Trust........ Administration of the Trust
5A. Management's Discussion of the Not Applicable
Trust's Performance...........
6. Capital Stock and Other Description of Units and Voting Rights;
Securities.................... Tax Treatment of the Trust
7. Purchase of Securities Being How to Invest in the Trust; Valuation of
Offered....................... Units
8. Redemption or Repurchase....... Redemptions; Exchange Privileges
9. Pending Legal Proceedings...... Not Applicable
BETWEEN ITEMS ENUMERATED IN PART B
OF FORM N-1A AND STATEMENT OF ADDITIONAL INFORMATION
<CAPTION>
ITEM NUMBER LOCATION IN STATEMENT
OF FORM N-1A OF ADDITIONAL INFORMATION
------------ -------------------------
<C> <S> <C>
10. Cover Page..................... Cover Page
11. Table of Contents.............. Table of Contents
12. General Information and Not Applicable
History.......................
13. Investment Objectives and Investment Restrictions; Other
Policies...................... Investment Policies
14. Management of the Trust........ Administration of the Trust
15. Control Persons and Principal Unit Ownership
Holders of Securities.........
16. Investment Advisory and Other Administration of the Trust
Services......................
17. Brokerage Allocation and Other Portfolio Transactions
Practices.....................
18. Capital Stock and Other Not Applicable--See Description of
Securities.................... Units and Voting Rights in
the Prospectus
19. Purchase, Redemption and General Information; Valuation of
Pricing of Securities Being Units; see How to Invest in the Trust
Offered....................... in the Prospectus
20. Tax Status..................... Income Tax Information
21. Underwriters................... Not Applicable
22. Calculation of Performance Computation of Yields and Total Returns
Data..........................
23. Financial Statements........... Financial Statements
</TABLE>
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS AVESTA TRUST
26-TCBE-45
P.O. BOX 2558
HOUSTON, TEXAS 77252-8045
TELEPHONE (713) 216-8188
The AVESTA Trust (the "Trust") is an open-end, management investment company
that currently offers fifteen Funds for the collective investment of
retirement accounts for which Texas Commerce Bank National Association ("TCB")
or one of its affiliated banks serves as trustee. TCB is the Trustee of the
Trust and, as such, provides, or arranges for the provision of, investment
advisory, administrative and custodial services and Unitholder accounting.
Chase Securities of Texas, Inc., an affiliate of TCB, is the distributor of
the Trust.
INVESTMENTS IN UNITS OF THE AVESTA TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF,
OR GUARANTEED OR ENDORSED BY, TEXAS COMMERCE BANK NATIONAL ASSOCIATION, OR ITS
AFFILIATES. SUCH UNITS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. UNITS
OF THE TRUST INVOLVE INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
The Trust consists of fifteen Funds, each with a different investment
objective, for investment of retirement assets held in certain Eligible
Retirement Accounts. This Prospectus relates to the following Funds of the
Trust:
The MONEY MARKET FUND seeks to increase retirement assets by investing
only in instruments with a remaining maturity of thirteen months or less to
provide a high level of current income with equal emphasis on liquidity and
stability of principal.
INVESTMENTS IN THE MONEY MARKET FUND ARE NEITHER INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT. WHILE IT IS THE MONEY MARKET FUND'S OBJECTIVE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER UNIT, THERE IS NO ASSURANCE
THAT IT WILL DO SO ON A CONTINUOUS BASIS.
The INCOME FUND seeks to increase retirement assets by investing
primarily in domestic debt securities that earn a high level of current
income with consideration also given to safety of principal.
The INTERMEDIATE TERM BOND FUND seeks to increase retirement assets by
investing primarily in debt securities with intermediate term maturities to
provide current income, with consideration given to stability of principal.
The EQUITY GROWTH FUND seeks to increase retirement assets primarily by
investing in equity-based securities, which include common stocks and those
debt securities and preferred stocks convertible into common stock, that
provide capital appreciation. Current income is a secondary objective.
The EQUITY INCOME FUND seeks to increase retirement assets by investing
primarily in equity-based securities that provide capital appreciation as
well as current income.
The BALANCED FUND seeks to increase retirement assets by investing in a
combination of bonds and equity-based securities to provide a balance of
current income and capital appreciation.
The RISK MANAGER--INCOME FUND seeks to increase retirement assets by
investing in a combination of debt and, to a lesser extent, equity-based
securities to achieve high current income and, when appropriate, capital
appreciation.
The RISK MANAGER--BALANCED FUND seeks to increase retirement assets by
investing in a combination of debt and equity-based securities for high
total return.
The RISK MANAGER--GROWTH FUND seeks to increase retirement assets by
investing in a combination of equity-based and, to a lesser extent, debt
securities to achieve capital appreciation and, secondarily, current
income.
The SHORT-INTERMEDIATE TERM U.S. GOVERNMENT SECURITIES FUND seeks to
increase retirement assets by investing primarily in shorter-term
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, and repurchase agreements with respect thereto, to
provide as high a level of current income as is consistent with the
preservation of capital.
The U.S. GOVERNMENT SECURITIES FUND seeks to increase retirement assets
by investing primarily in securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, and repurchase agreements
with respect thereto, to provide current income with emphasis on
preservation of capital. There is no restriction on the maturity of the
Fund's portfolio or any particular portfolio security.
The SMALL CAPITALIZATION FUND seeks to increase retirement assets by
investing primarily in common stocks and other equity-based securities of
small capitalization U.S. companies that can provide capital appreciation.
The CORE EQUITY FUND seeks to increase retirement assets by investing
primarily in common stocks of U.S. companies to maximize total investment
return through emphasis on capital appreciation and current income
consistent with reasonable risk.
The INTERNATIONAL EQUITY FUND seeks to increase retirement assets by
investing primarily in common stocks and other equity-based securities of
non-U.S. issuers that provide capital appreciation.
The INTERNATIONAL BOND FUND seeks to increase retirement assets by
investing primarily in debt securities of non-U.S. issuers to provide as
high a level of current income as is consistent with the preservation of
capital.
The INTERNATIONAL EQUITY and INTERNATIONAL BOND FUNDS are not yet available
for investment. Prospective investors will be notified of the availability of
these Funds by a supplement to this Prospectus. This Prospectus sets forth
concisely the information about the Trust that a prospective investor ought to
know before investing. Please read and retain this Prospectus for future
reference. Additional information about the Trust has been filed with the
Securities and Exchange Commission in a Statement of Additional Information
dated April 29, 1996. The Statement of Additional Information is incorporated
by reference into this Prospectus, and a copy can be obtained without charge
by writing to AVESTA Trust, 26-TCBE-45, P.O. Box 2558, Houston, Texas 77252-
8045.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
April 29, 1996
<PAGE>
Since each Fund will pursue different types of investments, the risks of
participating in the Trust will vary depending on the Fund or Funds chosen by
the Participant. The net asset value per Unit of the Money Market Fund is
expected to remain at $1.00 per Unit, although there can be no assurance that
it will do so on a continuous basis, while the net asset value of the remaining
Funds of the Trust will fluctuate.
"Eligible Retirement Accounts" include individual retirement trust accounts
for which TCB or one of its affiliated banks serves as trustee ("Eligible
IRAs") and single or commingled pension or profit-sharing trusts, including
corporate pension or profit-sharing trusts and pension or profit-sharing trusts
benefiting one or more self-employed individuals (generally referred to as H.R.
10 or Keogh plans) for which TCB or one of its affiliated banks serves as
trustee ("Eligible Pension Trusts"). Eligible IRAs and Eligible Pension Trusts
are sometimes referred to collectively as Eligible Retirement Accounts. For
federal income tax purposes, money invested in the Trust and income earned by
the Trust will not be taxable to an investor until the investor receives a
distribution from the Eligible Retirement Account.
i
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY OF FUNDS' EXPENSES.............................................. 1
FINANCIAL HIGHLIGHTS.................................................... 2
GENERAL DESCRIPTION OF THE TRUST........................................ 16
INVESTMENT OBJECTIVES AND POLICIES...................................... 16
Money Market Fund..................................................... 16
Income Fund........................................................... 18
Intermediate Term Bond Fund........................................... 20
Equity Growth Fund.................................................... 21
Equity Income Fund.................................................... 22
Balanced Fund......................................................... 23
Risk Manager Funds.................................................... 24
Risk Manager--Income Fund........................................... 24
Risk Manager--Balanced Fund......................................... 25
Risk Manager--Growth Fund........................................... 26
Short-Intermediate Term U.S. Government Securities Fund............... 27
U.S. Government Securities Fund....................................... 30
Small Capitalization Fund............................................. 31
Core Equity Fund...................................................... 32
International Equity Fund............................................. 33
International Bond Fund............................................... 34
Risk Factors and Special Considerations............................... 36
HOW TO INVEST IN THE TRUST.............................................. 44
Eligibility for Admission............................................. 44
Establishing an Eligible IRA.......................................... 44
Establishing an Eligible Pension Trust................................ 44
Investing in the Trust................................................ 44
REDEMPTIONS............................................................. 45
EXCHANGE PRIVILEGES..................................................... 46
VALUATION OF UNITS...................................................... 46
ADMINISTRATION OF THE TRUST............................................. 47
The Supervisory Committee............................................. 47
The Trustee........................................................... 47
Management of the Trust............................................... 48
The Management Agreements............................................. 48
Expenses of the Trust................................................. 49
Trustee's Management Fee.............................................. 49
The Sub-Advisers...................................................... 50
Custodian............................................................. 51
Performance Calculation............................................... 52
GLASS-STEAGALL ACT CONSIDERATIONS....................................... 53
TAX TREATMENT OF THE TRUST.............................................. 53
DESCRIPTION OF UNITS AND VOTING RIGHTS.................................. 53
COUNSEL AND AUDITORS.................................................... 54
APPENDIX................................................................ 55
</TABLE>
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION, AND, IF GIVEN
OR MADE, SUCH REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES, OR AN OFFER TO OR A SOLICITATION OF ANY PERSON IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
ii
<PAGE>
SUMMARY OF FUNDS' EXPENSES
The purpose of the table below is to assist investors in understanding the
various costs and expenses which an investor in any of the Funds will bear
directly or indirectly. For a more complete description of the various costs
and expenses, see "ADMINISTRATION OF THE TRUST".
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
AFTER VOLUNTARY FEE WAIVERS AND IF THE FUNDS WERE NOT SUBJECT
EXPENSE REIMBURSEMENTS TO VOLUNTARY FEE WAIVERS AND
(IF APPLICABLE) EXPENSE REIMBURSEMENTS
---------------------------------- ------------------------------
TOTAL FUND TOTAL FUND
MANAGEMENT OTHER OPERATING MANAGEMENT OTHER OPERATING
FUND FEES(1) EXPENSES(2) EXPENSES FEES(1) EXPENSES EXPENSES
---- ---------- ----------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Money Market............ 0.50%(3) 0% 0.50% 0.65% 0.07% 0.72%
Income.................. 0.75%(3) 0% 0.75% 1.00% 0.08% 1.08%
Intermediate Term Bond.. 0.75% 0% 0.75% 0.75% 0.68% 1.43%
Equity Growth........... 1.00% 0% 1.00% 1.00% 0.10% 1.10%
Equity Income........... 1.00% 0% 1.00% 1.00% 0.09% 1.09%
Balanced................ 1.00% 0% 1.00% 1.00% 0.17% 1.17%
Risk Manager--Income.... 1.10% 0% 1.10% 1.10% 0.39% 1.49%
Risk Manager--Balanced.. 1.10% 0% 1.10% 1.10% 0.48% 1.58%
Risk Manager--Growth.... 1.10% 0% 1.10% 1.10% 0.74% 1.84%
Short-Intermediate Term
U.S.
Government Securities.. 0.75% 0% 0.75% 0.75% 0.16% 0.91%
U.S. Government Securi-
ties................... 0.75%(3) 0% 0.75% 0.85% 1.37% 2.22%
Small Capitalization.... 1.00%(3) 0% 1.00% 1.15% 0.35% 1.50%
Core Equity............. 1.00% 0% 1.00% 1.00% 0.17% 1.17%
International Equity(4). 2.00% 0% 2.00% 2.00% 2.52% 4.52%
International Bond(4)... 1.50% 0% 1.50% 1.50% 2.52% 4.02%
</TABLE>
- -------
(1) Assuming the average daily net assets of each Fund (other than the Money
Market Fund) does not exceed $250 million.
(2) Pursuant to its management agreements with the Trust, the Trustee has
agreed to reimburse each Fund for the amount by which the expenses of that
Fund (including the management fee but excluding interest, taxes, brokerage
commissions and extraordinary expenses) during any year exceed the
management fee payable by the Fund, provided the net assets of the Fund do
not exceed $250 million.
(3) Net of voluntary waiver.
(4) As of the date of this Prospectus, the Fund had not commenced investment
operations. The amounts set forth for "Other Expenses" are therefore based
on estimates of expenses and the amount expected to be reimbursed.
EXAMPLE:
Based on the expenses noted above, you would pay the following expenses on
a $1,000 investment,
(1) assuming a 5% annual return and
(2) whether or not a redemption occurs at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market................................ $ 5 $16 $28 $ 63
Income...................................... 8 24 41 94
Intermediate Term Bond...................... 8 24 41 94
Equity Growth............................... 10 32 55 126
Equity Income............................... 10 32 55 126
Balanced Fund............................... 10 32 55 126
Risk Manager--Income........................ 11 35 61 138
Risk Manager--Balanced...................... 11 35 61 138
Risk Manager--Growth........................ 11 35 61 138
Short-Intermediate Term U.S. Government Se-
curities................................... 8 24 41 94
U.S. Government Securities.................. 8 24 41 94
Small Capitalization........................ 10 32 55 126
Core Equity................................. 10 32 55 126
International Equity........................ 20 63 N/A N/A
International Bond.......................... 15 47 N/A N/A
</TABLE>
This example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown above.
Moreover, while the example assumes a 5% annual return, each Fund's actual
performance will vary and may result in actual returns that are greater or less
than 5%.
1
<PAGE>
AVESTA TRUST
FINANCIAL HIGHLIGHTS
The following per unit data and ratios should be read in conjunction with the
financial statements of the applicable Fund contained in the Statement of
Additional Information. The Statement of Additional Information may be obtained
by Unitholders by writing or calling at the address or telephone number printed
on the front cover.
EXPENSE REIMBURSEMENT: The Trustee has agreed to reimburse each Fund for the
amount by which the expenses of that Fund (including the management fee but
excluding interest, taxes, brokerage commissions and extraordinary expenses)
during any year exceed a certain percentage, provided that the net assets of
the Fund do not exceed $250 million. Under this voluntary reimbursement, on an
annual basis, the expenses of the Equity Growth Fund, the Equity Income Fund,
the Balanced Fund, the Income Fund and the Core Equity Fund are limited to
1.00% of average net assets; the Money Market Fund's expenses are limited to
0.65% of average net assets; the Small Capitalization Fund's expenses are
limited to 1.15% of average net assets; the expenses of the Short-Intermediate
Term Fund and the Intermediate Term Bond Fund are limited to 0.75% of average
net assets; the U.S. Government Securities Fund's expenses are limited to 0.85%
of average net assets; and the expenses of the Risk Manager--Income Fund, the
Risk Manager--Balanced Fund and the Risk Manager--Growth Fund are limited to
1.10% of average net assets.
The FINANCIAL HIGHLIGHTS have been audited by Price Waterhouse LLP, whose
unqualified report thereon appears in the Statement of Additional Information.
Information for the years 1988 to 1991 have been examined by other accountants
whose opinion was unqualified. The International Equity and International Bond
Funds had not commenced operations at December 31, 1995.
2
<PAGE>
THE MONEY MARKET FUND
(FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FOR THE YEARS ENDING DECEMBER 31,
---------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988^
------- ------- ------- -------- -------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
Beginning of period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------- -------- -------- ------- ------
Investment income....... 0.059 0.045 0.032 0.041 0.063 0.082 0.091 0.061
Expenses................ (0.006)** (0.007)** (0.008) (0.008) (0.007) (0.009) (0.010) (0.016)
Expense
reimbursement***....... 0.001 0.001 0.002 0.002 0.001 0.002 0.003 0.011
------- ------- ------- -------- -------- -------- ------- ------
Net investment income... 0.054 0.039 0.026 0.035 0.057 0.075 0.084 0.056
Dividends to
unitholders............ (0.054) (0.039) (0.026) (0.035) (0.057) (0.075) (0.084) (0.056)
------- ------- ------- -------- -------- -------- ------- ------
Net asset value, end of
period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======== ======== ======== ======= ======
Total return.............. 5.57% 3.80% 2.60% 3.44% 6.01% 7.80% 8.91% 7.45%
Ratios/supplemental data:
Net assets, end of
period (000)........... $71,310 $55,505 $28,024 $ 32,861 $ 32,230 $ 25,832 $18,891 $5,079
Ratio of expenses to
average net assets..... 0.57% 0.68% 0.82% 0.81% 0.80% 0.88% 0.96% 2.16%****
Ratio of expense
reimbursement to
average net assets***.. (0.07%) (0.18%) (0.17%) (0.16%) (0.15%) (0.23%) (0.31%) (1.51%)****
------- ------- ------- -------- -------- -------- ------- ------
Ratio of net expenses to
average net assets..... 0.50%* 0.50%* 0.65% 0.65% 0.65% 0.65% 0.65% 0.65%****
======= ======= ======= ======== ======== ======== ======= ======
Ratio of net income to
average net assets..... 5.43% 3.90% 2.57% 3.37% 5.69% 7.53% 8.49% 6.11%****
</TABLE>
- -------
Commenced investment operations on March 29, 1988.
* Reflects management fee reduction of 0.15% or $100,525 and $27,802 for the
years ended December 31, 1995 and 1994 respectively. For the year ended
December 31, 1994 the actual net expense ratio for the year was 0.56% of
average net assets as the fee reduction went into effect on 5/2/94.
** Reflects management fee reduction of $100,525 or $0.002 per unit and
$27,802 or $0.001 per unit for the years ended December 31, 1995 and 1994
respectively. Without management fee reduction, expense per unit is $0.007
and $0.008 for the years ended December 31, 1995 and 1994 respectively.
*** See page 2 for an explanation of expense reimbursement.
**** Annualized.
3
<PAGE>
THE INCOME FUND+
(FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FOR THE YEARS ENDING DECEMBER 31,
---------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988^
------- ------- ------- -------- -------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
Beginning of period...... $ 15.39 $ 16.11 $ 14.62 $ 13.90 $ 12.22 $ 11.47 $ 10.39 $10.00
------- ------- ------- -------- -------- -------- ------- ------
Investment income....... 1.09 0.97 0.97 1.02 0.97 1.02 0.96 0.69
Expenses................ (0.14)* (0.14)* (0.17) (0.16) (0.15) (0.14) (0.15) (0.16)
Expense
reimbursement***....... 0.02 0.01 0.02 0.02 0.02 0.03 0.04 0.08
------- ------- ------- -------- -------- -------- ------- ------
Net investment income... 0.97 0.84 0.82 0.88 0.84 0.91 0.85 0.61
Net gains or (losses) on
securities (both
realized and
unrealized)............ 1.85 (1.56) 0.67 (0.16) 0.84 (0.16) 0.23 (0.22)
------- ------- ------- -------- -------- -------- ------- ------
Total from investment
operations............. 2.82 (0.72) 1.49 0.72 1.68 0.75 1.08 0.39
------- ------- ------- -------- -------- -------- ------- ------
Net asset value, end of
period................... $ 18.21 $ 15.39 $ 16.11 $ 14.62 $ 13.90 $ 12.22 $ 11.47 $10.39
======= ======= ======= ======== ======== ======== ======= ======
Total return.............. 18.38% (4.47%) 10.18% 5.13% 13.73% 6.60% 10.37% 5.23%
Ratios/supplemental data:
Net assets, end of
period (000)........... $57,452 $52,235 $76,085 $ 64,509 $ 41,872 $ 19,353 $13,548 $6,095
Ratio of expenses to
average net assets..... 0.83% 0.82% 1.09% 1.17% 1.18% 1.24% 1.32% 2.15%****
Ratio of expense
reimbursement to
average net assets***.. (0.08%) (0.07%) (0.09%) (0.17%) (0.18%) (0.24%) (0.32%) (1.15%)****
------- ------- ------- -------- -------- -------- ------- ------
Ratio of net expenses to
average net assets..... 0.75%** 0.75%** 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%****
======= ======= ======= ======== ======== ======== ======= ======
Ratio of net income to
average net assets..... 5.77% 5.43% 5.20% 6.21% 6.57% 7.91% 7.65% 7.97%****
Portfolio turnover rate. 93% 239% 156% 285% 304% 241% 361% 110%
Number of units
outstanding at end of
period (000)........... 3,154 3,395 4,724 4,413 3,012 1,583 1.181 586
</TABLE>
- -------
+ Amounts for the years 1988-1993 are adjusted to reflect 10:1 reverse split
of the Fund's units on May 7, 1993.
Commenced investment operations on March 29, 1988.
* Reflects management fee reduction of $136,617 or $0.04 per unit and $99,627
or $0.03 per unit for the years ended December 31, 1995 and 1994
respectively. Without management fee reduction, expense per unit is $0.18
and $0.17 for the years ended December 31, 1995 and 1994 respectively.
** Reflects management fee reductions of 0.25% or $136,617 and $99,627 for the
years ended December 31, 1995 and 1994 respectively. For the year ended
December 31, 1994 the actual net expense ratio for the year was 0.80% of
average net assets as the fee reduction went into effect on 5/2/94.
*** See page 2 for an explanation of expense reimbursement.
**** Annualized.
4
<PAGE>
THE INTERMEDIATE TERM BOND FUND
(FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
OCTOBER 3,
YEAR ENDED 1994* TO
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Net asset value,
Beginning of period................................ $ 9.99 $10.00
------ ------
Investment income................................. 0.72 0.17
Expenses.......................................... (0.16) (0.08)
Expense reimbursement***.......................... 0.08 0.06
------ ------
Net investment income............................. 0.64 0.15
Net gains or (losses) on securities (both realized
and unrealized).................................. 1.04 (0.16)
------ ------
Total from investment operations.................. 1.68 (0.01)
------ ------
Net asset value, end of period...................... $11.67 $ 9.99
====== ======
Total return........................................ 16.79% (0.32%)
Ratios/supplemental data:
Net assets, end of period (000)................... $5,031 $5,124
Ratio of expenses to average net assets........... 1.43% 1.38% **
Ratio of expense reimbursement to average net as-
sets***.......................................... (0.68%) (0.63%)**
------ ------
Ratio of net expenses to average net assets....... 0.75% 0.75% **
====== ======
Ratio of net income to average net assets......... 5.89% 6.12% **
Portfolio turnover rate........................... 198% 7%
Number of units outstanding at end of period
(000)............................................ 431 513
</TABLE>
- --------
* Commencement of operations.
** Annualized.
*** See page 2 for an explanation of expense reimbursement.
5
<PAGE>
THE EQUITY GROWTH FUND+
(FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FOR THE YEARS ENDING DECEMBER 31,
---------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988^
------- ------- ------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
Beginning of period...... $ 18.44 $ 18.61 $ 18.16 $ 17.06 $ 12.96 $13.15 $10.48 $10.00
------- ------- ------- ------- ------- ------ ------ ------
Investment income....... 0.38 0.38 0.38 0.36 0.42 0.39 0.49 0.21
Expenses................ (0.23) (0.21) (0.21)# (0.21) (0.21) (0.20) (0.24) (0.22)
Expense reimbursement*.. 0.02 0.03 0.03 0.04 0.05 0.07 0.11 0.15
------- ------- ------- ------- ------- ------ ------ ------
Net investment income... 0.17 0.20 0.20 0.19 0.26 0.26 0.36 0.14
Net gains or (losses) on
securities (both
realized and
unrealized)............ 4.59 (0.37) 0.25 0.91 3.84 (0.45) 2.31 0.34
------- ------- ------- ------- ------- ------ ------ ------
Total from investment
operations............. 4.76 (0.17) 0.45 1.10 4.10 (0.19) 2.67 0.48
------- ------- ------- ------- ------- ------ ------ ------
Net asset value, end of
period................... $ 23.20 $ 18.44 $ 18.61 $ 18.16 $ 17.06 $12.96 $13.15 $10.48
======= ======= ======= ======= ======= ====== ====== ======
Total return.............. 25.78% (0.90%) 2.48% 6.43% 31.69% (1.45%) 25.73% 6.15%
Ratios/supplemental data:
Net assets, end of
period (000)........... $45,578 $36,683 $30,648 $25,514 $16,716 $5,357 $2,839 $2,576
Ratio of expenses to
average net assets..... 1.10% 1.17% 1.21% 1.23% 1.32% 1.56% 1.91% 2.92%**
Ratio of expense
reimbursement to
average net assets*.... (0.10%) (0.17%) (0.21%) (0.23%) (0.32%) (0.56%) (0.91%) (1.92%)**
------- ------- ------- ------- ------- ------ ------ ------
Ratio of net expenses to
average net
assets................. 1.00% 1.00% 1.00%## 1.00% 1.00% 1.00% 1.00% 1.00%**
======= ======= ======= ======= ======= ====== ====== ======
Ratio of net income to
average net assets..... 0.78% 1.07% 1.12% 1.16% 1.73% 2.03% 2.95% 1.84%**
Portfolio turnover rate. 99% 116% 97% 99% 135% 156% 235% 80%
Number of units
outstanding at end of
period (000)........... 1,965 1,989 1,646 1,405 980 413 216 246
</TABLE>
- -------
+ Amounts for the years 1988-1993 are adjusted to reflect 10:1 reverse split
of the Fund's units on May 7, 1993.
Commenced investment operations on March 29, 1988.
# Reflects voluntary fee waiver of $11,479 or $0.01 per unit. Without
voluntary fee waiver, expense per unit is $0.22.
## Does not reflect voluntary waiver of management fees of $11,479. Net of the
voluntary management fee waiver, the net expense ratio is 0.96% of average
net assets.
* See page 2 for an explanation of expense reimbursement.
** Annualized.
6
<PAGE>
THE EQUITY INCOME FUND+
(FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FOR THE YEARS ENDING DECEMBER 31,
---------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988++
------- ------- ------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
Beginning of period...... $ 17.90 $ 18.52 $ 16.49 $ 15.60 $ 12.79 $13.38 $10.93 $10.00
------- ------- ------- ------- ------- ------ ------ ------
Investment income....... 0.65 0.57 0.52 0.55 0.61 0.66 0.59 0.42
Expenses................ (0.23) (0.20) (0.20)# (0.19) (0.20) (0.18) (0.20) (0.22)
Expense reimbursement*.. 0.02 0.02 0.03 0.03 0.05 0.06 0.07 0.14
------- ------- ------- ------- ------- ------ ------ ------
Net investment income... 0.44 0.39 0.35 0.39 0.46 0.54 0.46 0.34
Net gains or (losses) on
securities (both
realized and
unrealized)............ 5.59 (1.01) 1.68 0.50 2.35 (1.13) 1.99 0.59
------- ------- ------- ------- ------- ------ ------ ------
Total from investment
operations............. 6.03 (0.62) 2.03 0.89 2.81 (0.59) 2.45 0.93
------- ------- ------- ------- ------- ------ ------ ------
Net asset value, end of
period................... $ 23.93 $ 17.90 $ 18.52 $ 16.49 $ 15.60 $12.79 $13.38 $10.93
======= ======= ======= ======= ======= ====== ====== ======
Total return.............. 33.72% (3.37%) 12.34% 5.61% 22.10% (4.40%) 22.50% 12.44%
Ratios/supplemental data:
Net assets, end of
period (000)........... $54,985 $39,296 $41,605 $22,908 $14,092 $6,180 $4,948 $3,782
Ratio of expenses to
average net assets..... 1.09% 1.12% 1.21% 1.24% 1.34% 1.46% 1.59% 2.80%**
Ratio of expense
reimbursement to
average net assets*.... (0.09%) (0.12%) (0.21)% (0.24%) (0.34%) (0.46%) (0.59%) (1.80%)**
------- ------- ------- ------- ------- ------ ------ ------
Ratio of net expenses to
average net assets..... 1.00% 1.00% 1.00%## 1.00% 1.00% 1.00% 1.00% 1.00%**
======= ======= ======= ======= ======= ====== ====== ======
Ratio of net income to
average net assets..... 2.10% 2.13% 1.98% 2.52% 3.25% 4.26% 3.73% 4.37%**
Portfolio turnover rate. 11% 42% 40% 25% 39% 42% 124% 15%
Number of units
outstanding at end of
period (000)........... 2,297 2,195 2,246 1,389 903 483 370 346
</TABLE>
- -------
+ Amounts for the years 1988-1993 are adjusted to reflect 10:1 reverse split
of the Fund's units on May 7, 1993.
++ Commenced investment operations on March 29, 1988.
# Reflects voluntary fee waiver of $17,330 or $0.01 per unit. Without
voluntary fee waiver, expense per unit is $0.21.
## Does not reflect voluntary waiver of management fees of $17,330. Net of the
voluntary management fee waiver, the net expense ratio is 0.95% of average
net assets.
* See page 2 for an explanation of expense reimbursement.
** Annualized.
7
<PAGE>
THE BALANCED FUND+
(FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FOR THE YEARS ENDING DECEMBER 31,
----------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988++
------- ------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
Beginning of period...... $ 17.16 $ 17.56 $ 16.57 $ 15.73 $ 12.67 $ 12.50 $ 10.57 $10.00
------- ------- ------- ------- ------- ------- ------- ------
Investment income....... 0.76 0.63 0.64 0.68 0.68 0.77 0.77 0.44
Expenses................ (0.23) (0.20) (0.19) (0.18) (0.18) (0.16) (0.18) (0.28)
Expense reimbursement*.. 0.04 0.03 0.02 0.02 0.04 0.03 0.06 0.21
------- ------- ------- ------- ------- ------- ------- ------
Net investment income... 0.57 0.46 0.47 0.52 0.54 0.64 0.65 0.37
Net gains or (losses) on
securities (both
realized and
unrealized)............ 3.52 (0.86) 0.52 0.32 2.52 (0.47) 1.28 0.20
------- ------- ------- ------- ------- ------- ------- ------
Total from investment
operations............. 4.09 (0.40) 0.99 0.84 3.06 0.17 1.93 0.57
------- ------- ------- ------- ------- ------- ------- ------
Net asset value, end of
period................... $ 21.25 $ 17.16 $ 17.56 $ 16.57 $ 15.73 $ 12.67 $ 12.50 $10.57
======= ======= ======= ======= ======= ======= ======= ======
Total return.............. 23.83% (2.27%) 6.01% 5.32% 24.16% 1.34% 18.26% 7.68%
Ratios/supplemental data:
Net assets, end of
period (000)........... $21,471 $22,802 $37,276 $51,092 $30,542 $17,373 $10,965 $2,890
Ratio of expenses to
average net assets..... 1.17% 1.17% 1.10% 1.17% 1.20% 1.26% 1.49% 3.83%**
Ratio of expense
reimbursement to
average net assets*.... (0.17%) (0.17%) (0.10%) (0.17%) (0.20%) (0.26%) (0.49%) (2.83%)**
------- ------- ------- ------- ------- ------- ------- ------
Ratio of net expenses to
average net assets..... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%**
======= ======= ======= ======= ======= ======= ======= ======
Ratio of net income to
average net assets..... 2.94% 2.69% 2.78% 3.33% 3.77% 5.27% 5.35% 4.92%**
Portfolio turnover rate
(fixed income)......... 98% 98% 84% 187% 213% 141% 217% 90%
Portfolio turnover rate
(equity based)......... 98% 60% 64% 25% 39% 42% 124% 15%
Number of units
outstanding at end of
period (000)........... 1,011 1,328 2,123 3,084 1,942 1,371 877 273
</TABLE>
- -------
+ Amounts for the years 1988-1993 are adjusted to reflect 10:1 reverse split
of the Fund's units on May 7, 1993.
++ Commenced investment operations on March 29, 1988.
*See page 2 for an explanation of expense reimbursement.
**Annualized.
8
<PAGE>
THE RISK MANAGER-INCOME FUND
(FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
OCTOBER 3,
YEAR ENDED 1994* TO
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Net asset value,
Beginning of period................................ $ 9.97 $10.00
------ ------
Investment income................................. 0.60 0.15
Expenses.......................................... (0.16) (0.06)
Expense reimbursement***.......................... 0.04 0.03
------ ------
Net investment income............................. 0.48 0.12
Net gains or (losses) on securities (both realized
and unrealized).................................. 1.06 (0.15)
------ ------
Total from investment operations.................. 1.54 (0.03)
------ ------
Net asset value, end of period...................... $11.51 $ 9.97
====== ======
Total return........................................ 15.41% (1.22%)
Ratios/supplemental data:
Net assets, end of period (000)................... $5,369 $9,645
Ratio of expenses to average net assets........... 1.49% 1.43% **
Ratio of expense reimbursement to average net as-
sets***.......................................... (0.39%) (0.33%)**
------ ------
Ratio of net expenses to average net assets....... 1.10% 1.10% **
====== ======
Ratio of net income to average net assets......... 4.52% 4.77% **
Portfolio turnover rate........................... 278% 15%
Number of units outstanding at end of period
(000)............................................ 467 967
</TABLE>
- --------
* Commencement of operations.
** Annualized.
*** See page 2 for an explanation of expense reimbursement.
9
<PAGE>
THE RISK MANAGER-GROWTH FUND
(FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
OCTOBER 3,
YEAR ENDED 1994* TO
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Net asset value,
Beginning of period................................ $ 9.90 $10.00
------ ------
Investment income................................. 0.43 0.11
Expenses.......................................... (0.20) (0.09)
Expense reimbursement***.......................... 0.08 0.06
------ ------
Net investment income............................. 0.31 0.08
Net gains or (losses) on securities (both realized
and unrealized).................................. 1.88 (0.18)
------ ------
Total from investment operations.................. 2.19 (0.10)
------ ------
Net asset value, end of period...................... $12.09 $ 9.90
====== ======
Total return........................................ 22.15% (4.10%)
Ratios/supplemental data:
Net assets, end of period (000)................... $2,391 $4,952
Ratio of expenses to average net assets........... 1.84% 1.77%**
Ratio of expense reimbursement to average net as-
sets***.......................................... (0.74%) (0.67%)**
------ ------
Ratio of net expenses to average net assets....... 1.10% 1.10%**
====== ======
Ratio of net income to average net assets......... 2.84% 3.14%**
Portfolio turnover rate........................... 191% 31%
Number of units outstanding at end of period
(000)............................................ 198 500
</TABLE>
- --------
* Commencement of operations.
** Annualized.
*** See page 2 for an explanation of expense reimbursement.
10
<PAGE>
THE RISK MANAGER-BALANCED FUND
(FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
OCTOBER 3,
YEAR ENDED 1994* TO
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Net asset value,
Beginning of period................................ $ 9.94 $10.00
------ ------
Investment income................................. 0.50 0.13
Expenses.......................................... (0.17) (0.09)
Expense reimbursement***.......................... 0.05 0.06
------ ------
Net investment income............................. 0.38 0.10
Net gains or (losses) on securities (both realized
and unrealized).................................. 1.36 (0.16)
------ ------
Total from investment operations.................. 1.74 (0.06)
------ ------
Net asset value, end of period...................... $11.68 $ 9.94
====== ======
Total return........................................ 17.59% (2.64%)
Ratios/supplemental data:
Net assets, end of period (000)................... $5,917 $5,098
Ratio of expenses to average net assets........... 1.58% 1.73%**
Ratio of expense reimbursement to average net as-
sets***.......................................... (0.48%) (0.63%)**
------ ------
Ratio of net expenses to average net assets....... 1.10% 1.10% **
====== ======
Ratio of net income to average net assets......... 3.54% 3.99% **
Portfolio turnover rate........................... 337% 17%
Number of units outstanding at end of period
(000)............................................ 506 513
</TABLE>
- --------
* Commencement of operations.
** Annualized.
*** See page 2 for an explanation of expense reimbursement.
11
<PAGE>
THE SHORT-INTERMEDIATE TERM
U.S. GOVERNMENT SECURITIES FUND
(FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
---------------------------
1995 1994 1993+
------- ------- -------
<S> <C> <C> <C>
Net asset value,
Beginning of period........................... $ 10.14 $ 10.24 $ 10.00
------- ------- -------
Investment income............................ 0.66 0.52 0.33
Expenses..................................... (0.10) (0.09) (0.11)#
Expense reimbursement**...................... 0.02 0.02 0.07
------- ------- -------
Net investment income........................ 0.58 0.45 0.29
Net gains or (losses) on securities (both re-
alized and unrealized)...................... 0.63 (0.55) (0.05)
------- ------- -------
Total from investment operations............. 1.21 (0.10) 0.24
------- ------- -------
Net asset value, end of period................. $ 11.35 $ 10.14 $ 10.24
======= ======= =======
Total return................................... 12.01% (1.05%) 2.43
Ratios/supplemental data:
Net assets, end of period (000).............. $28,783 $22,992 $17,391
Ratio of expenses to average net assets...... 0.91% 0.96% 1.66% *
Ratio of expense reimbursement to average net
assets*..................................... (0.16%) (0.21%) (0.91%)*
------- ------- -------
Ratio of net expenses to average net assets.. 0.75% 0.75% 0.75% ##
======= ======= =======
Ratio of net income to average net assets.... 5.38% 4.41% 3.76% *
Portfolio turnover rate...................... 187% 268% 247%
Number of units outstanding at end of period
(000)....................................... 2,536 2,269 1,698
</TABLE>
- --------
+ Commenced investment operations on April 1, 1993.
* Annualized.
** See page 2 for an explanation of expense reimbursement.
# Reflects voluntary fee waiver of $9,789 or $0.02 per unit. Without voluntary
fee waiver, expense per unit is $0.13.
## Does not reflect voluntary waiver of management fees of $9,789. Net of the
voluntary management fee waiver, the net expense ratio is 0.60% of average
net assets. This figure is annualized.
12
<PAGE>
THE U.S. GOVERNMENT SECURITIES FUND
(FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1995 1994 1993+
------ ------ ------
<S> <C> <C> <C>
Net asset value,
Beginning of period........................... $10.00 $10.91 $10.00
------ ------ ------
Investment income............................ 0.81 0.70 0.45
Expenses..................................... (0.24)** (0.23)** (0.36)#
Expense reimbursement****.................... 0.16 0.15 0.31
------ ------ ------
Net investment income........................ 0.73 0.62 0.40
Net gains or (losses) on securities (both re-
alized and unrealized)...................... 2.28 (1.53) 0.51
------ ------ ------
Total from investment operations............. 3.01 (0.91) 0.91
------ ------ ------
Net asset value, end of period................. $13.01 $10.00 $10.91
====== ====== ======
Total return................................... 30.11% (8.39%) 9.12%
Ratios/supplemental data:
Net assets, end of period (000).............. $2,877 $2,628 $2,916
Ratio of expenses to average net assets...... 2.12% 2.28% 4.69% ***
Ratio of expense reimbursement to average net
assets****.................................. (1.37%) (1.53%) (3.84%)***
------ ------ ------
Ratio of net expenses to average net assets.. 0.75%* 0.75%* 0.85 ##
====== ====== ======
Ratio of net income to average net assets.... 6.38% 6.23% 4.91%***
Portfolio turnover rate...................... 17% 174% 232%
Number of units outstanding at end of period
(000)....................................... 221 263 267
</TABLE>
- --------
+ Commenced investment operations on April 1, 1993.
* Reflects management fee reduction of 0.10% or $2,527 and $1,886 for the
years ended December 31, 1995 and 1994 respectively. For the year ended
December 31, 1994 the actual net expense ratio for the year was 0.80% of
average net assets as the fee reduction went into effect on 5/2/94.
** Reflects management fee reduction of $2,527 or $0.01 per unit and $1,886 or
$0.01 per unit for the years ended December 31, 1995 and 1994 respectively.
Without management fee reduction, expense per unit is $0.25 and $0.24 for
the years ended December 31, 1995 and 1994 respectively.
*** Annualized.
**** See p. 2 for explanation of expense reimbursement.
# Reflects voluntary fee waiver of $3,040 or $0.02 per unit. Without
voluntary fee waiver, expense per unit is $0.38.
## Does not reflect voluntary waiver of management fees of $3,040. Net of the
voluntary management fee waiver, the net expense ratio is 0.64% of average
net assets. This figure is annualized.
13
<PAGE>
THE SMALL CAPITALIZATION FUND
(FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
---------------------------
1995 1994 1993+
------- ------ ------
<S> <C> <C> <C>
Net asset value,
Beginning of period.......................... $10.23 $10.89 $10.00
------- ------ ------
Investment income........................... 0.17 0.16 0.09
Expenses.................................... (0.16)** (0.15)** (0.17)#
Expense reimbursement****................... 0.04 0.05 0.10
------- ------ ------
Net investment income....................... 0.05 0.06 0.02
Net gains or (losses) on securities (both
realized and unrealized)................... 3.13 (0.72) 0.87
------- ------ ------
Total from investment operations............ 3.18 (0.66) 0.89
------- ------ ------
Net asset value, end of period................ $ 13.41 $10.23 $10.89
======= ====== ======
Total return.................................. 31.14% (6.12%) 8.94%
Ratios/supplemental data:
Net assets, end of period (000)............. $12,848 $9,267 $9,838
Ratio of expenses to average net assets..... 1.35% 1.45% 2.46%***
Ratio of expense reimbursement to average
net assets****............................. (0.35%) (0.45%) (1.31%)***
------- ------ ------
Ratio of net expenses to average net assets. 1.00%* 1.00% * 1.15% ##
======= ====== ======
Ratio of net income to average net assets... 0.46% 0.55% 0.28% ***
Portfolio turnover rate..................... 89% 120% 161%
Number of units outstanding at end of period
(000)...................................... 958 906 903
</TABLE>
- --------
+ Commenced investment operations on April 1, 1993.
* Reflects management fee reduction of 0.15% or $15,584 and $9,153 for the
years ended December 31, 1995 and 1994 respectively. For the year ended
December 31, 1994 the actual net expense ratio for the year was 1.06% of
average net assets as the fee reduction went into effect on 5/2/94.
** Reflects management fee reduction of $15,584 or $0.02 per unit and $9,153
or $0.01 per unit for the years ended December 31, 1995 and 1994
respectively. Without management fee reduction, expense per unit is $0.17
and $0.16 for the years ended December 31, 1995 and 1994 respectively.
*** Annualized.
**** See p. 2 for explanation of expense reimbursement.
# Reflects voluntary fee waiver of $14,349 or $0.02 per unit. Without
voluntary fee waiver, expense per unit is $0.19.
## Does not reflect voluntary waiver of management fees of $14,349. Net of the
voluntary management fee waiver, the net expense ratio is 0.82% of average
net assets. This figure is annualized.
14
<PAGE>
THE CORE EQUITY FUND
(FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1995 1994 1993+
------- ------- -------
<S> <C> <C> <C>
Net asset value,
Beginning of period........................... $10.36 $10.80 $ 10.00
------- ------- -------
Investment income............................ 0.29 0.28 0.21
Expenses..................................... (0.14) (0.13) (0.20)#
Expense reimbursement**...................... 0.02 0.03 0.13
------- ------- -------
Net investment income........................ 0.17 0.18 0.14
Net gains or (losses) on securities (both re-
alized and unrealized)...................... 2.48 (0.62) 0.66
------- ------- -------
Total from investment operations............. 2.65 (0.44) 0.80
------- ------- -------
Net asset value, end of period................. $ 13.01 $ 10.36 $ 10.80
======= ======= =======
Total return................................... 25.53% (4.03%) 7.95%
Ratios/supplemental data:
Net assets, end of period (000).............. $24,367 $21,035 $11,718
Ratio of expenses to average net assets...... 1.17% 1.27% 2.74%*
Ratio of expense reimbursement to average net
assets**.................................... (0.17%) (0.27%) (1.74%)*
------- ------- -------
Ratio of net expenses to average net assets.. 1.00% 1.00% 1.00% ##
======= ======= =======
Ratio of net income to average net assets.... 1.44% 1.68% 1.84% *
Portfolio turnover rate...................... 133% 129% 83%
Number of units outstanding at end of period
(000)....................................... 1,874 2,030 1,086
</TABLE>
- --------
+ Commencement of operations April 1, 1993.
* Annualized.
** See p. 2 for explanation of expense reimbursement.
# Reflects voluntary fee waiver of $6,949 or $0.01 per unit. Without voluntary
fee waiver, expense per unit is $0.21.
## Does not reflect voluntary waiver of management fees of $6,949. Net of the
voluntary management fee waiver, the net expense ratio is 0.79% of average
net assets. This figure is annualized.
15
<PAGE>
AVESTA TRUST
GENERAL DESCRIPTION OF THE TRUST
The AVESTA Trust (the "Trust") is a collective trust established under the
laws of the State of Texas by Texas Commerce Bank National Association ("TCB")
as Trustee under an Amended and Restated Declaration of Trust dated as of May
1, 1994. The Trust is registered with the Securities and Exchange Commission
("SEC") as an open-end, management investment company. Registration of the
Trust with the SEC does not involve supervision of management and policies by
the SEC. Except for the International Bond Fund, each of the Funds of the Trust
is a "diversified" portfolio as defined in the Investment Company Act of 1940.
Chase Securities of Texas, Inc. ("CST"), an affiliate of TCB, is the
distributor of the Trust. The Trust consists of fifteen Funds for the
collective investment of assets held in Eligible Retirement Accounts. See "HOW
TO INVEST IN THE TRUST--Eligibility for Admission" for a definition of
"Eligible Retirement Accounts."
Only Eligible Retirement Accounts can participate in the Trust. Eligible
Retirement Accounts that have been admitted to the Trust are referred to as
"Participating Trusts." An individual for whose benefit a Participating Trust
is maintained, or who may be entitled to receive benefits from a Participating
Trust, is referred to as a "Participant."
INVESTMENT OBJECTIVES AND POLICIES
The Trust consists of fifteen Funds, each with a different investment
objective, for investment of assets held in Eligible Retirement Accounts. A
Participating Trust may select one or more Funds and may exchange Units of one
Fund for Units of another Fund. Each Fund is represented by a separate series
of Units of beneficial interest in the Trust. There can be no assurance that
the investment objective of any Fund can be attained.
Although all the Funds achieve current income to some degree, the purpose of
each Fund in earning current income is for reinvestment and further
accumulation of assets for retirement. Accordingly, except in the case of the
Money Market Fund, no current income or capital gains will be distributed. This
policy is unlike that of most investment companies, which do not exclusively
invest retirement assets as the Trust does. Participating Trusts do, however,
receive a benefit from current income of the Trust comparable to the benefit
received from the distributions made by most other investment companies. In the
Money Market Fund, this benefit is received in the form of daily dividends of
net investment income that are automatically reinvested in additional Units. In
the other Funds, this benefit is received in the form of an increase in net
asset value per Unit.
Except as specifically noted otherwise, the following investment objectives
and policies are not fundamental and may be changed by the Supervisory
Committee of the Trust without approval by a Majority of the outstanding Units
of the affected Fund or Funds. See "DESCRIPTION OF UNITS AND VOTING RIGHTS" for
a definition of "Majority."
MONEY MARKET FUND
The Money Market Fund seeks to increase retirement funds by providing a high
level of current income with equal emphasis on liquidity and stability of
principal. The Money Market Fund will purchase
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only United States dollar-denominated securities, which present minimal credit
risks, with a remaining maturity of thirteen months or less and will maintain a
dollar-weighted average portfolio maturity of 90 days or less. Because the
Money Market Fund invests in short-term securities which present minimal credit
risk, the Fund will not achieve as high a level of current income as would be
the case if it had the ability to invest in lower-quality, longer-term
securities. Investments by the Money Market Fund will include, but are not
limited to, the instruments described below.
Securities issued by or guaranteed by the United States Government, its
agencies or instrumentalities. United States Government securities are bills,
notes, bonds and other debt securities issued by the Treasury that are direct
obligations of the United States Government and differ primarily in length of
their maturity. These securities are backed by the full faith and credit of the
United States. Agency or instrumentality securities are not direct obligations
of the Treasury. They include notes, bonds and discount notes of the Treasury.
These securities may or may not be backed by the full faith and credit of the
United States. In the case of securities not backed by the full faith and
credit of the United States, the Money Market Fund must look principally to the
agency issuing or guaranteeing the security for ultimate repayment and may not
be able to assert a claim against the United States itself in the event the
agency or instrumentality does not meet its commitments. Securities in which
the Money Market Fund may invest that are not backed by the full faith and
credit of the United States include, but are not limited to, obligations of the
Tennessee Valley Authority, the Federal National Mortgage Association, and the
United States Postal Service, each of which has the right to borrow from the
United States Treasury to meet its obligations, and obligations of the Federal
Farm Credit System, the Federal Home Loan Banks and the Student Loan Marketing
Association, each of whose obligations may be satisfied only by the individual
credits of each issuing agency. Securities that are backed by the full faith
and credit of the United States include obligations of the Government National
Mortgage Association, the Farmers Home Administration, and the Export-Import
Bank.
Certificates of deposit of domestic and foreign banks, which are certificates
issued against funds on deposit in a commercial bank earning a specific rate of
return for a set period of time.
Bankers' acceptances of United States and foreign banks, which are drafts or
bills of exchange "accepted" by a bank or trust company as an obligation to pay
at maturity.
Commercial paper issued by domestic and foreign issuers, which is unsecured
promissory notes that have maturities not exceeding nine months issued to
finance short-term credit requirements and variable rate master demand notes.
The Money Market Fund's investments in commercial paper will be limited to
commercial paper (i) rated in the highest short-term rating category for such
obligations by two nationally recognized statistical rating organizations
("NRSRO") (e.g., Prime-1 by Moody's Investors Service, Inc. ("Moody's"), and A-
1 or higher by Standard & Poor's Corporation ("S&P")) or rated in the highest
rating category for such obligations by only one NRSRO if only one has issued a
rating; or (ii) if not rated, issued by an issuer that has a class of short-
term debt obligations, or any security within that class, that is comparable in
priority and security with the unrated security and is rated in the highest
short-term rating category by two NRSRO's or the only NRSRO that has rated the
obligation. If the commercial paper is not rated, and there is no class of
obligations comparable in priority and security, the Fund may purchase it if it
has comparable quality. Master notes are demand obligations that permit the
investment of fluctuating amounts at varying market rates of interest pursuant
to arrangements between the issuer and a United States commercial bank acting
as agent for the payees of such notes. Master notes are callable on demand by
the Money Market Fund, but are not
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marketable to third parties. Consequently, the right to redeem such notes
depends on the borrower's ability to pay on demand which will be continuously
monitored by the Trustee.
Bonds or Notes issued by domestic and foreign corporations, which are
obligations of the issuing company to repay a set amount of money on a specific
date and to pay interest (usually semi-annually) at a definite rate to the
maturity. The corporate bonds and notes purchased by the Money Market Fund will
consist of bonds and notes that are issued by an issuer that has a class of
short-term debt obligations, or any security within that class, that is
comparable in priority and security with the obligation and is rated in the
highest two short-term rating categories by two NRSRO's or the only NRSRO that
has rated the obligation. If there is no class of short-term obligations
comparable in priority and security, the Fund may purchase them if they
otherwise have comparable quality. See "APPENDIX" for an explanation of Moody's
and S&P's ratings.
The Money Market Fund will limit its investment in United States bank
obligations to United States banks that have more than $1 billion in total
assets at the time of investment and are either members of the Federal Reserve
System or have their deposits insured by the Federal Deposit Insurance
Corporation. The Money Market Fund limits its investments in foreign bank
obligations to United States dollar-denominated obligations of foreign banks
which at the time of investment have more than $10 billion, or the equivalent
in other currencies, in total assets, and have branches or agencies in the
United States. The Money Market Fund may also invest in obligations of foreign
branches of United States banks, as well as obligations of United States
branches of foreign banks, if the Fund is permitted to invest directly in
obligations of the United States bank or foreign bank, respectively, in
accordance with the above limitations. The obligation must be rated in the
highest two short-term rating categories (e.g., Prime-1 by Moody's and A-1 or
higher by S&P), by two NRSRO's (or one if only one NRSRO has so rated) or if
not rated, must be issued by an issuer that has a class of short-term debt
obligations, or any security within that class, that is comparable in priority
and security with the unrated security and is rated in the highest two
categories by two NRSRO's (or one if only one NRSRO has so rated). If not rated
and there is no obligation comparable in priority and security, the obligation
may be purchased if it is determined to have comparable quality.
As permitted by Rule 2a-7 under the Investment Company Act of 1940, the Money
Market Fund utilizes the amortized cost method to value its portfolio
securities. The net asset value per Unit of the Money Market Fund is expected
to remain at $1.00, although there can be no assurance that it will do so on a
continuous basis. The Money Market Fund is also subject to various other
provisions of Rule 2a-7. As permitted under the Rule, determinations of whether
unrated securities are of comparable quality to rated securities in which the
Money Market Fund may invest are initially made by the Trustee based on
guidelines established by the Fund's Supervisory Committee. The Money Market
Fund's investment in "second-tier" securities (as defined in Rule 2a-7) are
limited to 5% of the Fund's assets overall, and with respect to a single
issuer, the greater of $1 million or 1% of the total assets of the Fund at the
time of investment.
INCOME FUND
The Income Fund seeks to increase retirement assets by investing in
securities that earn a high level of current income with consideration also
given to safety of principal. By stressing current yield through fixed-income
securities, and managing maturities, the Income Fund will attempt to provide
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greater stability of Unit value than certain of the other Funds. The Income
Fund will participate to a limited extent in the general equity markets, and
capital appreciation is an incidental consideration. Investment emphasis is on
fixed-income securities, primarily domestic debt securities, such as bonds,
notes and debentures issued by domestic corporations, U. S. Government
Securities (as described below under "Short-Intermediate Term U.S. Government
Securities Fund"), debt obligations collateralized by U.S. Government
Securities or by private mortgages and preferred stock of domestic
corporations. Under normal market conditions, at least 65% of the Income Fund's
total assets will be invested in such securities. The Income Fund may also
invest in debt securities issued by foreign corporations.
U.S. Government Securities provide greater safety of principal, but they
generally provide a lower current income than debt obligations of corporations.
The Income Fund may invest up to two-thirds of its assets in Collateralized
Mortgage Obligations ("CMOs") rated investment grade and pass-through
certificates rated investment grade by a NRSRO and evidencing interests in
pools of assets, primarily mortgages but also automobile retail installment
contracts, consumer credit card receivables, computer leases and timber leases.
Prepayment at a time when reinvestment of such funds would be at a lower rate,
default and impairment of collateral are the main risks associated with these
certificates. In addition, certain of these securities are relatively new and
there may be developments which could adversely affect the value of any such
instruments held by the Fund. In the case of Federal National Mortgage
Association ("FNMA"), Government National Mortgage Association ("GNMA") and
Federal Home Loan Mortgage Corporation ("FHLMC") certificates, the most common
pass-throughs, the full and timely payment of principal and interest is
guaranteed by the issuers. For a further discussion of CMOs and mortgage pass-
through certificates issued or guaranteed by the United States Government, its
agencies or instrumentalities, see below under "Short-Intermediate Term U.S.
Government Securities Fund." Other pass-throughs typically include some form of
third-party enhancement such as a letter of credit issued by an institution
other than TCB or its affiliates or an insurance bond. Securities rated in the
lowest investment grade category may possess speculative characteristics. See
"APPENDIX" for an explanation of Moody's and S&P's ratings. The Fund will
invest in such securities when consistent with its investment objective. The
Trustee is not required to dispose of securities which are downgraded below
investment grade subsequent to acquisition.
The Income Fund will invest in debt securities of domestic and foreign
corporations (other than issues of CMOs and pass-through certificates) only if
they are rated investment grade by Moody's, S&P or any other NRSRO, or are
determined to be of comparable quality by the Trustee. See "APPENDIX" for an
explanation of the ratings of Moody's and S&P. The Income Fund's investments in
securities other than debt of domestic and foreign corporations and debt
obligations issued or guaranteed by the United States Government, its agencies
or instrumentalities (e.g., preferred stock) will be based on the Trustee's
judgment of the quality of the securities. This judgment may be based upon such
considerations as the issuer's financial strength, including its historic and
current financial condition, its historic and projected earnings; the issuer's
market position; and other factors relevant to an analysis of a particular
issuer, as determined by the Trustee.
It is anticipated that the only non-income-producing securities to be held in
the Income Fund will be zero-coupon obligations of corporations and zero-coupon
securities relating to United States Treasury securities as described below
under "Short-Intermediate Term U.S. Government Securities
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Fund." The Income Fund will only purchase zero-coupon obligations if, at the
time of purchase, the market value of such investments held in the Fund does
not exceed 25% of the value of the Income Fund's total assets.
The Income Fund may also engage in certain other activities as discussed
below under "Risk Factors and Special Considerations."
Fixed-income securities purchased by the Income Fund will normally have a
maturity in excess of one year. The average maturity of securities in the
Income Fund will be based primarily upon the Trustee's expectations for the
future course of interest rates and the then prevailing price and yield levels
in the fixed-income market. Under current market conditions it is expected that
the dollar weighted average maturity of the Income Fund will range between five
to fifteen years. Fixed-income securities with longer maturities generally have
less stable market values.
Changes in interest rates generally will cause the value of securities held
in the Income Fund to vary inversely to changes in prevailing interest rates.
If, however, a security is held to maturity, no gain or loss will be realized
as a result of changes in prevailing rates. The value of these securities will
also be affected by general market and economic conditions and by the
creditworthiness of the issuer. Fluctuations in value of the portfolio
securities will cause net asset value per Unit to fluctuate in the same
direction. The Income Fund is expected to have an annual portfolio turnover
rate in the range of 100-400%. See "Risk Factors and Special Considerations"
regarding certain considerations associated with portfolio turnover.
INTERMEDIATE TERM BOND FUND
The Intermediate Term Bond Fund seeks to increase retirement assets primarily
through current income, with consideration also given to stability of
principal. Primary investment emphasis will be on intermediate term, investment
grade fixed-income debt securities. The Fund will maintain a dollar weighted
average portfolio maturity ranging from three to ten years.
Under normal market conditions, at least 65% of the Intermediate Term Bond
Fund's total assets will be invested in "bonds". For purposes of the foregoing
policy the Intermediate Term Bond Fund defines "bonds" to include bonds, notes
and debentures, issued by domestic or foreign corporations, U.S. Government
Securities (as described below under "Short-Intermediate Term U.S. Government
Securities Fund") and debt obligations collateralized by U.S. Government
Securities or by private mortgages.
The Intermediate Term Bond Fund may invest up to two-thirds of its assets in
CMOs rated investment grade and pass-through certificates rated investment
grade by a NRSRO and evidencing interests in pools of assets, primarily
mortgages but also automobile retail installment contracts, consumer credit
card receivables, computer leases and timber leases. Prepayment at a time when
reinvestment of such funds would be at a lower rate, default and impairment of
collateral are the main risks associated with these certificates. In addition,
certain of these securities are relatively new and there may be developments
which could adversely affect the value of any such instruments held by the
Fund. In the case of FNMA, GNMA and FHLMC certificates, the most common pass-
throughs, the full and timely payment of principal and interest is guaranteed
by the issuers. For a further discussion of CMOs and mortgage pass-through
certificates issued or guaranteed by the United States Government,
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its agencies or instrumentalities, see below under "Short-Intermediate Term
U.S. Government Securities Fund." Other pass-throughs may include some form of
third-party enhancement such as a letter of credit issued by an institution
other than TCB or its affiliates or an insurance bond. Securities rated in the
lowest investment grade category may possess speculative characteristics. See
"APPENDIX" for an explanation of Moody's and S&P's ratings. The Fund will
invest in such securities when consistent with its investment objective. The
Trustee is not required to dispose of securities which are downgraded below
investment grade subsequent to acquisition.
The Intermediate Term Bond Fund will invest in debt securities of domestic
and foreign corporations (other than issuers of CMOs and pass-through
certificates) only if they are rated investment grade by Moody's, S&P or any
other NRSRO, or are determined to be of comparable quality by the Trustee. See
"APPENDIX" for an explanation of the ratings of Moody's and S&P. The
Intermediate Term Bond Fund's investments in securities other than debt of
domestic and foreign corporations and U.S. Government Securities will be based
on the Trustee's judgment of the quality of the securities. The judgment may be
based upon such considerations as the issuer's financial strength, including
its historic and current financial condition, its historic and projected
earnings; the issuer's market position; and other factors relevant to an
analysis of a particular issuer, as determined by the Trustee.
It is anticipated that the only non-income-producing securities to be held in
the Intermediate Term Bond Fund will be zero-coupon obligations of corporations
and zero-coupon securities relating to United States Treasury securities as
described below under "Short-Intermediate Term U.S. Government Securities
Fund." The Intermediate Term Bond Fund will only purchase zero-coupon
obligations if, at the time of purchase, the market value of such investments
held in the Fund does not exceed 25% of the value of the Intermediate Term Bond
Fund's total assets.
The Intermediate Term Bond Fund may also engage in certain other activities
as discussed below under "Risk Factors and Special Considerations."
Fixed-income securities purchased by the Intermediate Term Bond Fund will
normally have a maturity in excess of one year. The average maturity of
securities in the Intermediate Term Bond Fund will be based primarily upon the
Trustee's expectations for the future course of interest rates and the then
prevailing price and yield levels in the fixed-income market. Fixed-income
securities with longer maturities generally have less stable market values.
Changes in interest rates generally will cause the value of securities held
in the Intermediate Term Bond Fund to vary inversely to changes in prevailing
interest rates. If, however, a security is held to maturity, no gain or loss
will be realized as a result of changes in prevailing rates. The value of these
securities will also be affected by general market and economic conditions and
by the creditworthiness of the issuer. Fluctuation in value of the portfolio
securities will cause net asset value per Unit to fluctuate in the same
direction. The Intermediate Term Bond Fund is expected to have an annual
portfolio turnover rate in the range of 100-400%. See "Risk Factors and Special
Considerations" regarding certain considerations associated with portfolio
turnover.
EQUITY GROWTH FUND
The Equity Growth Fund seeks to increase retirement assets primarily through
capital appreciation. Current income is a secondary objective. Primary
investment emphasis will be on equity-based
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securities, which include common stocks and those debt securities and preferred
stocks that are convertible into common stocks. Under normal market conditions,
at least 65% of the value of the total assets of the Equity Growth Fund will be
invested in equity-based securities.
Equity-based securities of a company will be selected considering such
factors as the sales growth and profitability prospects for the economic sector
and markets in which the company operates and for the products or services it
provides; the financial condition of the company; the prevailing price of the
security; how that price compares to historical price levels, to current price
levels in the general market, to the company's net asset value and to the
prices of competing companies; the Trustee's projected earnings estimates and
earnings growth rate for the company and how those figures relate to the
current price.
When, in the Trustee's judgment, there is a significant probability that
there will be a substantial stock market decline or that returns from fixed-
income securities or money market securities will substantially exceed returns
from equity-based securities, investments may be made in fixed-income
securities or money market securities. Investment in fixed-income securities or
money market securities will be based on the same ratings standards and other
criteria established for investment in fixed-income securities and money market
securities by the Income Fund and the Money Market Fund, respectively. The
Equity Growth Fund will invest in debt securities of domestic and foreign
corporations only if they are rated investment grade by Moody's, S&P or any
other NRSRO, or are determined to be of comparable quality by the Trustee.
Under normal market conditions, the Equity Growth Fund will invest no more than
35% of the value of its total assets in fixed-income securities and money
market securities. When market conditions dictate a temporary defensive
strategy, more than 35% of the Fund's total assets may be invested in fixed-
income securities and money market securities.
The Equity Growth Fund may also engage in certain other activities as
discussed below under "Risk Factors and Special Considerations".
Because the Equity Growth Fund will participate in the equity markets, it may
provide greater potential for capital appreciation over the long-term than
funds that invest primarily in corporate or government debt securities.
However, the Equity Growth Fund may also have a more volatile Unit value and
lower current yield than such funds. It is expected that the portfolio turnover
rate will generally be in the range of 150-275%. See "Risk Factors and Special
Considerations" regarding certain considerations associated with portfolio
turnover.
EQUITY INCOME FUND
The Equity Income Fund seeks to increase retirement assets through
investments in securities that provide both capital appreciation as well as
current income. Investment emphasis will be on equity-based securities, which
include common stocks and those debt securities and preferred stocks
convertible into common stocks. Under normal market conditions, it is expected
that at least 70% of the value of the total assets of the Equity Income Fund
will be invested in equity-based securities.
Investments in equity-based securities will be based on the same general
criteria used by the Equity Growth Fund in selecting equity-based securities.
Equity-based investments that produce a portfolio yield above the market
average and have good potential for dividend growth will be emphasized in the
Equity Income Fund. Typical companies whose equity-based securities will be
represented in the Equity
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Income Fund are characterized by: a sound balance sheet, consistency of
profitability, less price volatility resulting from market or below-market
price/earnings ratios, a consistent dividend record, a dividend yield in excess
of the market, and market capitalization in excess of $100 million.
When, in the Trustee's judgment, there is a significant probability that
there will be a substantial stock market decline or that returns from fixed-
income securities will substantially exceed returns from equity-based
securities, investments may be made in fixed-income securities or money market
securities. Investment in fixed-income securities and money market securities
will be based on the same ratings standards and other criteria established for
investment in fixed-income securities and money market securities by the Income
Fund and the Money Market Fund, respectively. The Equity Income Fund will
invest in debt securities of domestic and foreign corporations only if they are
rated investment grade by Moody's, S&P or any other NRSRO, or are determined to
be of comparable quality by the Trustee. Under normal market conditions, the
Equity Income Fund will invest no more than 30% of the value of its total
assets in fixed-income securities and money market securities. When market
conditions dictate a temporary defensive strategy, more than 30% of the Fund's
total assets may be invested in fixed-income securities and money market
securities.
The Equity Income Fund may also engage in certain other activities as
discussed below under "Risk Factors and Special Considerations".
The Equity Income Fund is considered a low-volatility equity portfolio
because the higher dividend income provides downside protection for the
underlying equity in a declining market. In a strong upward market, the Equity
Income Fund may lag behind aggressive growth-oriented funds; however, it should
be less volatile than the overall market in a declining market. It is expected
that the portfolio turnover rate will generally be in the range of 150-275%.
See "Risk Factors and Special Considerations" regarding certain considerations
associated with portfolio turnover.
BALANCED FUND
The Balanced Fund seeks to increase retirement assets by investing in a
combination of bonds and equity-based securities, which include common stocks
and debt securities and preferred stocks that are convertible into common
stocks, to provide a balance of current income and growth of capital.
Investment emphasis will be on common stocks and on fixed-income securities.
Investments in fixed-income securities and securities of foreign issuers will
be based on the same ratings standards and other criteria established for
investment in fixed-income securities by the Income Fund.
Investments in equity-based securities will be based on the same criteria
used by the Equity Growth Fund in selecting equity-based securities. A
particular equity-based security may be more appropriate for the Equity Growth
Fund than for the Balanced Fund, or vice versa, when such factors as current
yield and expected earnings and dividend growth rates are considered.
At least 25% of the value of the total assets of the Balanced Fund will be
invested in fixed-income senior securities other than convertible securities.
The Balanced Fund's investments in equity-based securities may provide
greater potential for capital appreciation than funds that invest exclusively
in corporate or government debt securities. The Balanced Fund may also have a
more volatile Unit value and lower current yield than such funds. The
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fixed-income portion of the Balanced Fund is expected to have an annual
portfolio turnover rate in the range of 100-400% and the equity-based portion
of the Fund is expected to have an annual portfolio turnover rate in the range
of 150-275%. See "Risk Factors and Special Considerations" regarding certain
considerations associated with portfolio turnover.
RISK MANAGER FUNDS
The Trust offers three funds that provide the opportunity for diversification
among equity-based, debt and money market securities. Each fund follows a
flexible asset allocation strategy within certain parameters and maintains a
different risk profile.
RISK MANAGER--INCOME FUND. The Risk Manager--Income Fund seeks to increase
retirement assets by investing in a combination of debt and, to a lesser
extent, equity-based securities to achieve high current income and, when
appropriate, capital appreciation. The Fund seeks to achieve its objectives by
following an asset allocation strategy that contemplates investing in a
flexible portfolio of fixed-income, equity-based and money market securities of
domestic and foreign issuers.
The asset allocation mix selected by the Trustee will be a significant
determinant of the Risk Manager--Income Fund's investment performance. Fixed-
income securities typically will constitute the greatest percentage of the
Fund's assets. The ranges for the Fund's asset allocation mix, under normal
conditions, are 50-80% of total assets in fixed-income securities, 0-25% of
total assets in equity-based securities and 0-40% of total assets in money
market securities. Over the long-term, the Trustee expects that, under normal
market conditions, the Fund's total assets generally will be allocated 70% in
fixed-income securities, 20% in equity-based securities and 10% in money market
securities.
The Trustee will select the classes of instruments and market sectors in
which the Risk Manager--Income Fund will invest, within the specified ranges
discussed above. The percentages of the Fund's assets invested in fixed-income,
equity-based and money market securities will be adjusted by the Trustee from
time to time in light of its assessment of current economic conditions and
investment opportunities, trends in yields and interest rates, and historical
investment returns for each asset class in which the Fund can invest relative
to the business cycle. In pursuit of the Risk Manager--Income Fund's objective,
the Trustee will not try to pinpoint the precise point in time when a major
change in the asset allocation mix should be made. Asset shifts will be made
gradually over time. Under normal market conditions, a single reallocation will
not involve more than 10% of the Fund's total assets.
Investments in fixed-income and money market securities will be based on the
same ratings standards and other criteria established for investment in fixed-
income securities and money market securities by the Income Fund and Money
Market Fund, respectively. The Risk Manager--Income Fund will invest in debt
securities of foreign and domestic corporations only if they are rated
investment grade by Moody's, S&P or any other NRSRO, or are determined to be of
comparable quality by the Trustee.
Investment in equity-based securities will be based on factors such as the
sales and profitability prospects for the economic sector and markets in which
the company operates and for the products or services it provides; the
financial condition of the company; the prevailing price of the security; how
the price compares to historical price levels, to current price levels in the
general market, and the prices of competing companies; and earnings for the
company.
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Up to 30% of the Risk Manager--Income Fund's total assets may be invested in
securities of foreign issuers. As discussed below under "Risk Factors and
Special Considerations", investment in securities of non-U.S. issuers involves
certain special considerations, including political and economic risks,
currency fluctuations, and less publicly available information and different
accounting standards.
The Risk Manager--Income Fund may also engage in certain other activities as
discussed below under "Risk Factors and Special Considerations."
Changes in interest rates generally will cause the value of fixed-income
securities held in the Risk Manager--Income Fund to vary inversely to changes
in prevailing interest rates. If, however, a security is held to maturity, no
gain or loss will be realized as a result of changes in prevailing rates. The
value of these securities will also be affected by general market and economic
conditions and by the creditworthiness of the issuer. The Risk Manager--Income
Fund is expected to have an annual portfolio turnover of 100-400%. See "Risk
Factors and Special Considerations" regarding certain considerations associated
with portfolio turnover.
RISK MANAGER--BALANCED FUND. The Risk Manager--Balanced Fund seeks to
increase retirement assets by investing in a combination of debt and equity-
based securities, which include common stocks and debt securities and preferred
stocks that are convertible into common stocks, to provide high total return.
The Fund seeks to achieve its objectives by following an asset allocation
strategy that contemplates investing in a flexible portfolio of equity-based,
fixed-income and money market securities of domestic and foreign issuers.
The asset allocation mix selected by the Trustee will be a significant
determinant of the Risk Manager--Balanced Fund's investment performance. The
ranges for the Fund's asset allocation mix, under normal conditions, are 20-50%
of total assets in equity-based securities, 40-80% of total assets in fixed-
income securities and 0-40% of total assets in money market securities. Over
the long-term, the Trustee expects that, under current market conditions, the
Fund's total assets generally will be allocated 40% in equity-based securities,
50% in fixed-income securities, and 10% in money market securities.
The Trustee will select the classes of instruments and market sectors in
which the Risk Manager--Balanced Fund will invest, within the specified ranges
discussed above. The percentages of the Fund's assets invested in equity-based,
fixed-income and money market securities will be adjusted by the Trustee from
time to time in light of its assessment of current economic conditions and
investment opportunities, trends in yields and interest rates, and historical
investment returns for each asset class in which the Fund can invest relative
to the business cycle. In pursuit of the Risk Manager--Balanced Fund's
objective, the Trustee will not try to pinpoint the precise point in time when
a major change in the asset allocation mix should be made. Asset shifts will be
made gradually over time. Under normal market conditions, a single reallocation
will not involve more than 10% of the Fund's total assets.
Investment in equity-based securities will be based on factors such as the
sales and profitability prospects for the economic sector and markets in which
the company operates and for the products or services it provides; the
financial condition of the company; the prevailing price of the security; how
the price compares to historical price levels, to current price levels in the
general market and the prices of securities of competing companies; and
earnings for the company.
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Investments in fixed-income and money market securities will be based on the
same ratings standards and other criteria established for investment in fixed-
income securities and money market securities by the Income Fund and Money
Market Fund, respectively. The Fund will invest in debt securities of foreign
and domestic corporations only if they are rated investment grade by Moody's,
S&P or any other NRSRO, or are determined to be of comparable quality by the
Trustee. At least 25% of the value of the total assets of the Risk Manager--
Balanced Fund will be invested in fixed-income senior securities other than
convertible securities.
Up to 30% of the Risk Manager--Balanced Fund's total assets may be invested
in securities of foreign issuers. As discussed below under "Risk Factors and
Special Considerations", investment in securities of non-U.S. issuers involves
certain special considerations, including political and economic risks,
currency fluctuations, and less publicly available information and different
accounting standards.
The Risk Manager--Balanced Fund may also engage in certain other activities
as discussed below under "Risk Factors and Special Considerations".
Changes in interest rates generally will cause the value of fixed-income
securities held in the Risk Manager--Balanced Fund to vary inversely to changes
in prevailing interest rates. If, however, a security is held to maturity, no
gain or loss will be realized as a result of changes in prevailing rates. The
value of these securities will also be affected by general market and economic
conditions and by the creditworthiness of the issuer. The fixed-income portion
of the Risk Manager--Balanced Fund is expected to have an annual portfolio
turnover rate in the range of 100-400% and the equity-based portion of the Fund
is expected to have an annual portfolio turnover in the range of 150-275%. See
"Risk Factors and Special Considerations" regarding certain considerations
associated with portfolio turnover.
RISK MANAGER--GROWTH FUND. The Risk Manager--Growth Fund seeks to increase
retirement assets by investing in a combination of equity-based and, to a
lesser extent, debt securities to achieve capital appreciation and,
secondarily, current income. The Fund seeks to achieve its objective by
following an asset allocation strategy that contemplates investing in a
flexible portfolio of equity-based, fixed income and money market securities of
domestic and foreign issuers.
The asset allocation mix selected by the Trustee will be a significant
determinant of the Risk Manager--Growth Fund's investment performance. Equity-
based securities will constitute the greatest percentage of the Fund's assets.
The ranges for the Fund's asset allocation mix, under normal conditions, are
30-65% of total assets in equity-based securities, 30-70% of total assets in
fixed-income securities and 0-10% of total assets in money market securities.
Over the long-term, the Trustee expects that, under current market conditions,
the Fund's total assets generally will be allocated 60% in equity-based
securities, 30% in fixed-income securities and 10% in money market securities.
The Trustee will select the classes of instruments and market sectors in
which the Risk Manager--Growth Fund will invest, within the specified ranges
discussed above. The percentages of the Fund's assets invested in equity-based,
fixed-income and money market securities will be adjusted by the Trustee from
time to time in light of its assessment of current economic conditions and
investment opportunities, trends in yields and interest rates, and historical
investment returns for each asset class in which the Fund can invest relative
to the business cycle. In pursuit of the Risk Manager--Growth Fund's objective,
the Trustee will not try to pinpoint the precise point in time when a major
change in
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the asset allocation mix should be made. Asset shifts will be made gradually
over time. Under normal market conditions, a single reallocation will not
involve more than 10% of the Fund's total assets.
Investment in equity-based securities will be based on factors such as the
sales and profitability prospects for the economic sector and markets in which
the company operates and for the products or services it provides; the
financial condition of the company; the prevailing price of the security; how
the price compares to historical price levels, to current price levels in the
general market and the prices of securities of competing companies; and
earnings for the company.
Up to 30% of the Risk Manager--Growth Fund's total assets may be invested in
securities of foreign issuers. As discussed below under "Risk Factors and
Special Considerations", investment in securities of non-U.S. issuers involves
certain special considerations, including political and economic risks,
currency fluctuations, and less publicly available information and different
accounting standards.
Investments in fixed-income and money market securities will be based on the
same ratings standards and other criteria established for investment in fixed-
income securities and money market securities by the Income Fund and Money
Market Fund, respectively. The Fund will invest in debt securities of foreign
and domestic corporations only if they are rated investment grade by Moody's,
S&P or any other NRSRO, or are determined to be of comparable quality by the
Trustee.
The Risk Manager--Growth Fund may also engage in certain other activities as
discussed below under "Risk Factors and Special Considerations".
Changes in interest rates generally will cause the value of fixed-income
securities held in the Risk Manager--Growth Fund to vary inversely to changes
in prevailing interest rates. If, however, a security is held to maturity, no
gain or loss will be realized as a result of changes in prevailing rates. The
value of these securities will also be affected by general market and economic
conditions and by the creditworthiness of the issuer. The Risk Manager--Growth
Fund is expected to have an annual portfolio turnover of 100-400%. See "Risk
Factors and Special Considerations" regarding certain considerations associated
with portfolio turnover.
SHORT-INTERMEDIATE TERM U.S. GOVERNMENT SECURITIES FUND
The Short-Intermediate Term Fund seeks to increase retirement assets by
providing as high a level of current income as is consistent with the
preservation of capital. The Short-Intermediate Term Fund invests primarily in
securities issued or guaranteed by the United States Government, its agencies
or instrumentalities, as described below ("U.S. Government Securities"), and
repurchase agreements with respect thereto. The Short-Intermediate Term Fund
seeks to preserve capital by investing in shorter-term securities; it expects
the volatility in the principal value of its shorter-term investments to be
more limited than that associated with investments in comparable securities
having longer maturities. Guarantees of principal and interest on obligations
that may be purchased by the Short-Intermediate Term Fund are not guarantees of
the market value of such obligations, nor do they extend to the value of the
Units of the Fund. Since the Fund invests extensively in shorter-term U.S.
Government Securities, certain of which have less credit risk than that
associated with other securities, the level of income achieved by the Fund may
not be as high as that of other funds which invest in lower-quality, longer-
term securities.
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Under normal circumstances, at least 65% of the value of the Fund's total
assets will be invested in U.S. Government Securities and repurchase agreements
with respect thereto. The Fund expects that substantially all of its assets
will be so invested. As a matter of operating policy, under normal market
conditions, the dollar-weighted average maturity of the Short-Intermediate Term
Fund's portfolio, measured at the time an investment is made, will be between
two and five years. There is no restriction on the maturity of any individual
asset which may be acquired by the Short-Intermediate Term Fund.
U.S. Government Securities include bills, notes, bonds and other debt
securities issued by the Treasury that are direct obligations of the United
States Government and differ primarily in length of their maturity. These
securities are backed by the full faith and credit of the United States. Agency
or instrumentality securities are not direct obligations of the Treasury. They
include notes, bonds and discount notes of the Treasury. These securities may
or may not be backed by the full faith and credit of the United States. In the
case of securities not backed by the full faith and credit of the United
States, the Fund must look principally to the agency issuing or guaranteeing
the security for ultimate repayment and may not be able to assert a claim
against the United States itself in the event the agency or instrumentality
does not meet its commitments. Securities in which the Fund may invest that are
not backed by the full faith and credit of the United States include, but are
not limited to, obligations of the Tennessee Valley Authority, FNMA and the
United States Postal Service, each of which has the right to borrow from the
United States Treasury to meet its obligations, and obligations of the Federal
Farm Credit System, the Federal Home Loan Banks and the Student Loan Marketing
Association, each of whose obligations may be satisfied only by the individual
credits of each issuing agency. Securities that are backed by the full faith
and credit of the United States include obligations of GNMA, the Farmers Home
Administration, and the Export-Import Bank.
The Short-Intermediate Term Fund may invest without limitation in zero coupon
securities, which are debt securities that do not pay regular interest
payments. Instead, zero coupon securities are sold at substantial discounts
from their value at maturity. When a zero coupon security is held to maturity,
its entire return, which consists of the amortization of discount, comes from
the difference between its purchase price and maturity value. Because interest
on a zero coupon security is not distributed on a current basis, it tends to be
subject to greater price fluctuations in response to changes in interest rates
than are ordinary interest-paying debt securities with similar maturities. The
risk is greater when the period to maturity is longer. The value of zero coupon
securities appreciates more during periods of declining interest rates and
depreciates more during periods of rising interest rates. Under the stripped
bond rules of the Internal Revenue Code of 1986, investments by the Fund in
zero coupon securities will result in the accrual of interest income on such
investments in advance of the receipt of cash corresponding to such income.
Among the zero coupon securities in which the Short-Intermediate Term Fund
may invest are separately traded principal and interest components of United
States Treasury securities. United States Treasury securities with remaining
maturities of longer than ten years are eligible to be traded independently
under the Separate Trading of Registered Interest and Principal of Securities
("STRIPS") program. Under the STRIPS program, the principal and interest
components are separately issued by the United States Treasury at the request
of depository financial institutions, which then trade the component parts
separately. Bonds issued by the Resolution Funding Corporation and other United
States Government agencies may also be stripped.
The Short-Intermediate Term Fund may invest without limitation in mortgage-
related securities which are issued or guaranteed by the United States
Government, its agencies or instrumentalities.
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Mortgage pass-through securities are securities representing interest 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 the sale of the underlying property,
refinancing, or foreclosure, net of fees and costs which may be incurred) may
expose the 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 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 assumptions, the Constant Prepayment Rate (the "CPR") or other similar
models that are standard in the industry will be used by the Fund in
calculating maturity for purposes of its investment in mortgage-related
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 United States Government (in the case of
securities guaranteed by GNMA) or guaranteed by agencies or instrumentalities
of the United States Government (in the case of securities guaranteed by FNMA
or FHLMC which are supported only by the discretionary authority of the United
States Government to purchase the agency's obligations). Mortgage-related
securities issued by FNMA include Guaranteed Mortgage Pass-Through
Certificates, also known as "Fannie Maes," which are guaranteed as to timely
payment of principal and interest by FNMA, and mortgage-related securities
issued by FHLMC include Mortgage Participation Certificates, also known as
"Freddie Macs," which are guaranteed as to timely payment of interest and
timely or ultimate payment of principal on the underlying mortgage loan by
FHLMC. The Short-Intermediate Term Fund will not invest in principal-only or
interest-only stripped mortgage-related securities.
The Short-Intermediate Term Fund may also invest in investment grade CMOs
which are hybrid instruments with characteristics of both mortgage-backed bonds
and mortgage pass-through securities. Similar to a bond, interest and prepaid
principal on a CMO are paid, in most cases, monthly. CMOs may be collateralized
by whole mortgage loans but are typically collateralized by portfolios of
mortgage pass-through securities guaranteed by GNMA, FHLMC or FNMA. CMOs may be
issued through real estate mortgage investment conduits or REMICs. CMOs are
structured into multiple classes, with each class bearing a different expected
average life or stated maturity. Monthly 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. To the extent a particular CMO is
issued by an investment company, the Fund's ability to invest in such CMOs will
be limited. Securities rated in the lowest investment grade category may
possess speculative characteristics. See "APPENDIX" for an explanation of
Moody's and S&P's ratings. The Fund will invest in such securities when
consistent with its investment objective. The Trustee is not required to
dispose of securities which are downgraded to below investment grade subsequent
to acquisition.
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.
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Certain types of mortgage pass-through securities in which the Short-
Intermediate Term Fund may invest have interest rates that fluctuate based on
multiples of a stated index. These securities are designed to be highly
sensitive to changes in prepayment and interest rates and can subject the
holders thereof to extreme reductions of yield and possible loss of principal
even if the securities are rated in the highest categories.
The Short-Intermediate Term Fund 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 Fund will,
consistent with its investment objectives, policies and quality standards,
consider making investments in such new types of mortgage-related securities.
The Short-Intermediate Term Fund may also engage in certain other activities
as discussed below under "Risk Factors and Special Considerations."
Changes in interest rates generally will cause the value of securities held
in the Short-Intermediate Term Fund to vary inversely with changes in
prevailing interest rates. The average maturity of securities in the Short-
Intermediate Term Fund will be based primarily upon the Trustee's expectations
for the future course of interest rates and the then prevailing price and yield
levels in the U.S. Government securities market. The value of these securities
will also be affected by general market and economic conditions. Fluctuations
in the value of the portfolio securities will cause net asset value per Unit to
fluctuate in the same direction. The Short-Intermediate Term Fund is expected
to have an annual portfolio turnover rate in the range of 100-400%. See "Risk
Factors and Special Considerations" regarding certain considerations associated
with portfolio turnover.
U.S. GOVERNMENT SECURITIES FUND
The U.S. Government Securities Fund seeks to increase retirement assets by
providing current income with emphasis on the preservation of capital. The Fund
intends to invest primarily in U.S. Government Securities, as described above
under "Short-Intermediate Term U.S. Government Securities Fund", and repurchase
agreements with respect thereto. Under normal conditions, at least 65% of the
value of the Fund's total assets will be invested in U.S. Government Securities
and repurchase agreements with respect thereto. Guarantees of principal and
interest on obligations that may be purchased by the Fund are not guarantees of
the market value of such obligations, nor do they extend to the market value of
Units of the Fund. There is no restriction on the maturity of the Fund's
portfolio or any individual asset which may be acquired by the Fund. The U.S.
Government Securities Fund may invest in zero-coupon securities, mortgage-
related securities and CMOs as described above under "Short-Intermediate Term
U.S. Government Securities Fund." Since the Fund invests extensively in U.S.
Government Securities, certain of which have less credit risk than that
associated with other securities, the level of income achieved by the Fund may
not be as high as that of other funds which invest in lower-quality securities.
Securities rated in the lowest investment grade category may possess
speculative characteristics. See "APPENDIX" for an explanation of Moody's and
S&P's ratings. The Fund will invest in such securities when consistent with its
investment objective. The Trustee is not required to dispose of securities
which are downgraded below investment grade subsequent to acquisition.
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The U.S. Government Securities Fund may, at any time, hold up to 35% of the
Fund's assets in domestic or foreign corporate fixed-income securities or money
market securities. Investment in corporate fixed-income securities or money
market securities will be based on the same ratings standards and other
criteria established by the Income Fund or the Money Market Fund, respectively.
The U.S. Government Securities Fund will invest in debt securities of domestic
and foreign corporations (other than issuers of CMOs and pass-through
certificates) only if they are rated investment grade by Moody's, S&P or any
other NRSRO, or are determined to be of comparable quality by the Trustee.
The U.S. Government Securities Fund may also engage in certain other
activities as discussed below under "Risk Factors and Special Considerations".
Changes in interest rates generally will cause the value of securities held
in the U.S. Government Securities Fund to vary inversely with changes in
prevailing interest rates. The average maturity of securities in the Fund will
be based primarily upon the Trustee's expectations for the future course of
interest rates and the then prevailing price and yield levels in the U.S.
Government securities market. The value of these securities will also be
affected by general market and economic conditions. Fluctuations in value of
the portfolio securities will cause net asset value per Unit to fluctuate in
the same direction. The U.S. Government Securities Fund is expected to have an
annual portfolio turnover rate in the range of 100%-400%. See "Risk Factors and
Special Considerations" regarding certain considerations associated with
portfolio turnover.
SMALL CAPITALIZATION FUND
The Small Cap Fund seeks to increase retirement assets primarily through
capital appreciation. Although the Fund, in seeking its objective, may receive
current income from dividends and interest, income is only an incidental
consideration of the Fund. The Small Cap Fund invests primarily in common
stocks of U.S. companies having stock market capitalizations of up to $750
million. Under normal market conditions, at least 65% of the value of the
Fund's total assets will be invested in common stocks of such companies. The
Fund may also invest in other equity-based securities, which include debt
securities and preferred stocks that are convertible into common stocks. A
company's stock market capitalization is calculated by multiplying the total
number of shares of its common stock outstanding by the market price per share
of its stock.
Investments in equity-based securities of small capitalization companies will
be based on the same general criteria used by the Equity Growth Fund in
selecting equity-based securities. In addition, small capitalization companies
that possess one or more of a variety of characteristics, including high
quality management, a leading or dominant market position in a major product
line, new or innovative products, services or processes, a sound financial
position and a relatively high rate of return on invested capital so that
future growth can be financed from internal sources, will be sought. The Small
Cap Fund may also invest in companies that offer the possibility of
accelerating earnings growth because of management changes or structural
changes in the economy.
When, in the Trustee's judgment, there is a significant probability that
there will be a substantial stock market decline or that returns from fixed-
income securities or money market securities will substantially exceed returns
from equity-based securities of small capitalization companies, investment may
be made in fixed-income securities or money market securities. Investment in
fixed-income securities or money market securities will be based on the same
ratings standards and other criteria
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established for investment in fixed-income securities and money market
securities by the Income Fund and the Money Market Fund, respectively. The
Small Cap Fund will invest in debt securities of domestic and foreign
corporations only if they are rated investment grade by Moody's, S&P or any
other NRSRO, or are determined to be of comparable quality by the Trustee.
Under normal market conditions, the Small Cap Fund will invest no more than 35%
of the value of its total assets in fixed-income securities and money market
securities. When market conditions dictate a temporary defensive strategy, more
than 35% of the Fund's total assets may be invested in fixed-income securities
and money market securities.
In focusing on smaller, less well known companies, the Small Cap Fund is
designed to provide investors with the potential for greater long-term rewards
than those available from certain of the other Funds, which generally invest
the equity portion of their portfolios in the securities of larger
capitalization companies. However, the Small Cap Fund may also have a more
volatile Unit value and lower current yield than those Funds. Small
capitalization companies typically are subject to a greater degree of changes
in earnings and business prospects than larger, more established companies. In
addition, securities of small capitalization companies are traded in lower
volume than are those issued by larger companies and are more volatile than
those of larger companies.
The Small Cap Fund may also engage in certain other activities as discussed
below under "Risk Factors and Special Considerations".
The portfolio turnover rate for the Small Cap Fund is expected to generally
be in the range of 150-275%. See "Risk Factors and Special Considerations"
regarding certain considerations associated with portfolio turnover.
CORE EQUITY FUND
The Core Equity Fund seeks to increase retirement assets by maximizing total
investment return through emphasis on long-term capital appreciation and
current income consistent with reasonable risk. The Fund pursues its objective
by investing at least 70% of its total assets in a diversified portfolio of
common stocks of well-established companies domiciled in the U.S. The Fund may
also invest in other equity-based securities, such as debt securities and
preferred stocks that are convertible into common stocks.
The Core Equity Fund seeks to achieve investment results that outperform
publicly-traded common stocks. Emphasis is placed on companies with a growing
stream of income and dividends based upon the investment philosophy that higher
earnings and dividends lead to higher equity valuations.
The Core Equity Fund's investments will be selected using the same general
selection criteria used by the Equity Growth Fund in selecting equity-based
securities. As a result, emphasis will be placed on selecting individual
companies for inclusion in the portfolio that typically have one or more of the
following characteristics: superior and stable record of earnings growth
relative to the equity markets in general, return on assets and equity equal to
or greater than the equity markets, projected earnings growth over the next two
to three years at a rate equal to or greater than the equity markets and
favorable price-to-book relationship relative to the equity markets.
When, in the Trustee's judgment, there is a significant probability that
there will be a substantial decline in the stock market or that returns from
fixed-income securities or money market securities will
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substantially exceed returns from equity-based securities, the Core Equity Fund
may invest in fixed-income securities or money market securities. Investment in
fixed-income securities or money market securities will be based on the same
ratings standards and other criteria established for investment in fixed-income
securities and money market securities that are used by the Income Fund and the
Money Market Fund, respectively. The Core Equity Fund will invest in debt
securities of domestic and foreign corporations only if they are rated
investment grade by Moody's, S&P or any other NRSRO, or are determined to be of
comparable quality by the Trustee. Under normal market conditions, the Core
Equity Fund will invest no more than 30% of the value of its total assets in
fixed-income securities and money market securities. When market conditions
dictate a temporary defensive strategy, more than 30% of the Fund's total
assets may be invested in fixed-income securities and money market securities.
The Core Equity Fund may also engage in certain other activities as discussed
below under "Risk Factors and Special Considerations."
It is expected that the portfolio turnover rate for the Core Equity Fund
will generally be in the range of 150-275%. See "Risk Factors and Special
Considerations" regarding certain considerations associated with portfolio
turnover.
INTERNATIONAL EQUITY FUND
The International Equity Fund seeks to increase retirement assets primarily
through capital appreciation. Although the Fund, in seeking its objective, may
receive current income from dividends and interest, income is only an
incidental consideration of the Fund. Investment emphasis will be on common
stocks of non-U.S. issuers believed by the Trustee to have a potential for
growth of capital. The Fund may also invest in other equity-based securities of
non-U.S. issuers, which include debt securities and preferred stocks that are
convertible into common stock. The International Equity Fund will emphasize
established companies, although it may invest in companies of varying sizes as
measured by assets, sales or capitalization. Under normal market conditions, at
least 65% of the value of the total assets of the International Equity Fund
will be invested in common stocks and other equity-based securities of non-U.S.
issuers. The Trustee has engaged Chemical Global Investors Limited to act as
sub-adviser with respect to the International Equity Fund.
In pursuit of its objective, the International Equity Fund may purchase
securities of companies, wherever organized, which, in the judgment of the
Trustee, have their principal business activities and interests outside the
United States. The Trustee 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 (iii) the equity securities of which are traded principally on a non-
U.S. securities exchange. Investments in equity-based securities will be based
on the same general criteria used by the Equity Growth Fund in selecting
equity-based securities. The International Equity Fund intends to diversify
among countries and normally intends to include in its portfolio securities
issuers in no fewer than three countries. The percentage of the International
Equity Fund's assets invested in particular countries or regions of the world
will vary depending on political and economic conditions. If market conditions
so warrant, such as when the Trustee believes that the capital appreciation of
debt obligations will equal or exceed that of equity securities, the
International Equity Fund may invest in debt obligations issued or guaranteed
by countries that are members of the Organization for Economic Cooperation and
Development, which is an intergovernmental institution
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established in 1961 to foster the financial development of member countries, or
obligations issued or guaranteed by international agencies (such as the World
Bank or the European Investment Bank). Although these obligations may not be
rated by independent agencies like Moody's or S&P, the International Equity
Fund will not acquire such obligations unless the Trustee believes that they
have credit characteristics comparable to U.S. obligations rated investment
grade by Moody's or S&P. Under normal market conditions, no more than 35% of
the Fund's assets will be invested in such debt obligations.
The International Equity Fund may invest in the securities of companies in
(or governments of) developing countries and may engage in foreign currency
exchange transactions in order to protect against uncertainty in future
exchange rates. When, in the Trustee's judgment, a temporary defensive posture
is warranted, the International Equity Fund may invest all or a substantial
portion of its assets in obligations of companies incorporated in and having
their principal business activities in the United States, or in money market
securities. In addition, the International Equity Fund may invest in put and
call options on foreign stock indexes in an effort to hedge against adverse
market shifts affecting portfolio securities.
In focusing on non-U.S. issuers, the International Equity Fund is designed to
provide investors with the opportunity to diversify their investments and
participate in economies and markets outside the United States, many of which
are growing faster than the United States. However, the International Equity
Fund may also have a more volatile Unit value and lower current yield than
certain of the other Funds. Since securities in the International Equity Fund
will be selected primarily on the basis of their appreciation potential, the
International Equity Fund may provide greater growth of capital (excluding
reinvested income) than funds that invest primarily in corporate or government
debt securities. As discussed below under "Risk Factors and Special
Considerations", investment in securities of non-U.S. issuers involves certain
special considerations, including political and economic risks, currency
fluctuations, and less publicly available information and different accounting
standards.
In order to seek to protect against a decline in value of the International
Equity Fund's assets due to fluctuating currency values, the International
Equity Fund intends to engage in certain hedging strategies, as discussed below
under "Risk Factors and Special Considerations".
It is expected that the portfolio turnover rate will generally be in the
range of 150-275%. See "Risk Factors and Special Considerations" regarding
certain considerations associated with portfolio turnover.
INTERNATIONAL BOND FUND
The International Bond Fund seeks to increase retirement assets primarily
through current income, with consideration also given to preservation of
capital. Investment emphasis will be on fixed-income debt securities of non-
U.S. issuers, including foreign governments, non-U.S. corporations and banks,
and supranational organizations. Under normal market conditions, at least 65%
of the value of the International Bond Fund's total assets will be invested in
"bonds" (which the Fund defines to include bonds, debentures and notes) of
issuers in at least three countries other than the United States. Issuers
located in any one country (other then the United States) will not represent
more than 40% of the International Bond Fund's total assets, and the Fund will
not invest 25% or more of its assets in securities issued by any one foreign
government, its agencies or instrumentalities, or more than 25%
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in supranational organizations as a group. The Fund will primarily invest in
fixed-income debt securities denominated in foreign currencies. The Trustee has
engaged Julius Baer Investment Management Inc. to act as sub-adviser with
respect to the International Bond Fund.
The Fund may invest in (i) debt obligations issued by non-U.S. corporations
and banks; (ii) debt obligations issued or guaranteed by foreign national
governments, their agencies, instrumentalities or political subdivisions; (iii)
debt obligations issued by supranational organizations established or supported
by more than one national government, such as (for example) the World Bank and
the European Union; (iv) any other debt security denominated in any foreign
currency or multinational currency unit, such as the European Currency Unit;
and (v) any foreign currency. Although these obligations may not be rated by
independent rating agencies like Moody's or S&P, the International Bond Fund
will not acquire such obligations unless the Trustee believes that they have
credit characteristics comparable to U.S. obligations rated investment grade by
Moody's or S&P. See "APPENDIX" for an explanation of the ratings of Moody's and
S&P.
The Fund will allocate its assets among various issuers, geographic regions,
and currency denominations depending on political and economic conditions in
the world. While the International Bond Fund will invest primarily in the debt
obligations of corporations and governments of developed countries, the Fund
may also invest in corporations and governments of developing countries. The
Fund may purchase and sell foreign currency contracts in order to hedge against
uncertainty in future currency exchange rates.
When, in the Trustee's judgment, a temporary defensive posture is warranted,
the International Bond Fund may invest all or a substantial portion of its
assets in U.S. Government Securities, obligations of companies incorporated in
and having their principal business activities in the United States, or in
money market securities. In addition, the International Bond Fund may invest in
put and call options on foreign debt indexes in an effort to hedge against
adverse market shifts affecting portfolio securities.
The International Bond Fund is a "non-diversified" portfolio of the Trust
under the Investment Company Act of 1940, which means that the Fund is not
limited by the 1940 Act in the proportion of its assets that may be invested in
the securities of a single issuer. As a non-diversified portfolio, the
International Bond Fund may invest a greater proportion of its assets in the
obligations of a smaller number of issuers and, as a result, may be subject to
greater risk with respect to its portfolio securities.
Movements in foreign currency exchange rates versus the U.S. dollar are
likely to impact the International Bond Fund's share price stability relative
to domestic income funds. Fluctuation in foreign currencies can have a positive
or negative impact on return. As discussed below under "Risk Factors and
Special Considerations," investment in securities of non-U.S. issuers involves
certain special considerations, including political and economic risks,
currency fluctuations, and less publicly available information and different
accounting standards.
In order to seek to protect against a decline in value of the International
Bond Fund's assets due to fluctuating currency values, the International Bond
Fund intends to engage in certain hedging strategies as discussed below under
"Risk Factors and Special Considerations."
It is expected that the portfolio turnover rate will generally be in the
range of 150-275%. See "Risk Factors and Special Considerations" regarding
certain considerations associated with portfolio turnover.
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RISK FACTORS AND SPECIAL CONSIDERATIONS
Monies invested in any of the Funds are not insured deposits and are subject
to certain market risks. Since each of the Funds will pursue different types of
investments, the risks of participating in the Trust will vary depending on the
Fund or Funds chosen by the Participating Trust. Before selecting Funds, the
Participating Trust should assess the risks associated with the types of
investments made by the Funds.
From time to time, a portion (up to 100% for temporary defensive purposes) of
each of the Funds' assets (except for the Money Market Fund) may be held in
cash equivalents. Cash equivalents are high quality, short-term, interest-
bearing instruments in which funds are invested temporarily pending longer-term
investment or in which funds are invested when market conditions dictate a
temporary defensive investment strategy. The purpose of investment in cash
equivalents is to provide income at money market rates while minimizing the
risk of decline in value to the maximum extent possible. The instruments may
include, but are not limited to, commercial paper, certificates of deposit,
repurchase agreements, bankers acceptances, and United States Treasury Bills.
All Funds may invest in securities of non-U.S. issuers that are not publicly
traded in the United States; however, it is a fundamental policy of the Funds
(other than the International Equity Fund, the International Bond Fund, the
Intermediate Term Bond Fund, the Risk Manager--Income Fund, the Risk Manager--
Balanced Fund and the Risk Manager--Growth Fund) that not more than 30% of the
assets of each Fund will be invested in securities of foreign issuers. The
Funds may be subjected to additional risks associated with the holding of
property abroad. Such risks include future political, economic and social
developments; currency fluctuations; possible withholding of tax payments;
seizure or nationalization of foreign assets; possible establishment of
currency exchange control regulations or the adoption of other foreign
government restrictions that might adversely affect the payment of principal,
interest or dividends on foreign securities in the Funds; less publicly
available information about foreign companies; and the fact that foreign
issuers are not generally subject to accounting, auditing and financial
reporting standards, practices and requirements comparable to those applicable
to domestic issuers. Foreign stock markets have substantially less volume than
most domestic exchanges, and securities of some foreign issuers are less liquid
and more volatile than securities of comparable domestic issuers. Also, there
may be less government supervision and regulation of stock exchanges, brokers
and listed companies than in the United States. The Funds may experience
settlement delays in respect to foreign securities. To the extent that the Fund
invests in securities of issuers located in developing countries, the Fund will
be exposed to economic structures that are generally less diverse and mature,
and to political systems that can be expected to have less stability than those
of developed countries. Historical experience indicates that the markets of
developing countries have been more volatile than the markets of the more
mature economies of developed countries; however, such markets often have
higher rates of returns to investors. The Funds will invest in debt securities
of foreign issuers only if they are rated investment grade by Moody's, S&P or
any other NRSRO, or are determined to be of comparable quality by the Trustee.
See "APPENDIX" for an explanation of the ratings of Moody's and S&P.
Each of the Funds, other than the Money Market Fund and the Short-
Intermediate Term Fund, may purchase American Depositary Receipts ("ADRs").
ADRs are receipts issued by U.S. banks or trust companies in respect of
securities of foreign issuers held on deposit for use in the U.S. securities
markets. While ADRs may not necessarily be denominated in the same currency
into which they may be converted, certain of the risks associated with foreign
securities may also apply to ADRs. Each Fund
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will limit its investment in unsponsored ADRs to no more than 5% of the value
of its net assets (at the time of investment). A purchaser of an unsponsored
ADR may not have unlimited voting rights and may not receive as much
information about the issuer of the underlying securities as with a sponsored
ADR. Each of the Funds, other than the Money Market Fund and the Short-
Intermediate Term Fund, may also invest in European Depositary Receipts
("EDRs") or Global Depositary Receipts ("GDRs"), which are receipts evidencing
an arrangement with a European or other non-U.S. bank and which are designed
for use in the European or international securities markets. EDRs or GDRs are
not necessarily denominated in the currency of the underlying security.
From time to time, in the ordinary course of business, the Funds may purchase
securities on a when-issued or delayed delivery basis, i.e., delivery and
payment can take place a month or more after the date of the transaction. The
purchase price and the interest rate payable for the securities are fixed on
the transaction date. The securities so purchased are subject to market
fluctuation, and because no interest accrues to the purchasing Fund until
delivery and payment take place the practice may be considered somewhat
speculative and one involving more risk. When the purchasing Fund makes the
commitment to purchase securities on a when-issued or delayed delivery basis,
it will record the transaction and thereafter reflect the value, each day, of
such securities in determining its net asset value. A Fund will make
commitments for when-issued transactions only with the intention of actually
acquiring the securities. If the purchasing Fund chooses to dispose of the
right to acquire a when-issued security prior to its acquisition, it could, as
with the disposition of any other obligation, incur a gain or loss due to
market fluctuation. With regard to each when-issued or delayed delivery
commitment, each Fund will maintain a segregated account consisting of cash,
cash equivalents, U.S. Government Securities or other liquid high grade debt
securities with the custodian, beginning on the date the Fund enters into the
commitment, equal in value to the purchase price due on the settlement date
under the commitment agreement.
All Funds, except the Money Market Fund, may purchase derivative instruments
exchange-listed and over-the-counter put and call options on securities and
securities indices ("index options"), in order to take advantage of market
inefficiencies or to provide portfolio protection in expectation of a declining
market. A Fund may not write put options, except that it may sell put options
to close out existing positions, but may write fully covered call options as
long as the Fund remains fully covered throughout the life of the option, by
either (i) owning the optioned securities, (ii) possessing a call issued by
another writer that is identical in all respects to the call written by the
Fund or (iii) maintaining in a segregated account with the Fund's custodian,
cash, cash equivalents, U.S. Government Securities or other high grade debt
securities with a value sufficient to enable the Fund to purchase the optioned
securities or index. A Fund may not purchase additional put and call options,
if, as a result, the aggregate premiums paid for options held by that Fund
would exceed 20% of the net assets of the Fund.
A put option on a security gives the purchaser of the option the right to
sell and the writer the obligation to buy the underlying security at the
exercise price during the option period. Index options are similar to options
on securities except that, rather than taking or making delivery of securities
underlying the option at a specified price upon exercise, an index option gives
the holder the right to receive cash upon exercise of the option if the level
of the index upon which the option is based is greater, in the case of a call,
or less in the case of a put, than the exercise price of the option. The
purchase of a put option on a security would be designed to protect against a
substantial decline in the market value of a security held by the Fund. A call
option on a security gives the purchaser of the option the right to buy and the
writer the obligation to sell the underlying security at the exercise price
during
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the option period. The purchase of a call option on a security would be
intended to protect the Funds against an increase in the price of a security
that it intended to purchase in the future. In the case of either put or call
options that any Fund has purchased, if the option expires without being sold
or exercised, the Fund will experience a loss in the amount of the option
premium plus any related commissions. When the Fund sells put and call options,
it receives a premium as the seller of the option. The premium that the Fund
receives for writing the option will serve as a partial hedge, in the amount of
the option premium, against changes in the value of the securities in its
portfolio. During the term of the option, however, a covered call seller has,
in return for the premium on the option, given up the opportunity for capital
appreciation above the exercise price of the option if the value of the
underlying security increases, but has retained the risk of loss should the
price of the underlying security decline. Conversely, a secured put seller
retains the risk of loss should the market value of the underlying security
decline below the exercise price of the option, less the premium received on
the sale of the option. All Funds, except the Money Market Fund, are authorized
to purchase and sell exchange listed options and over-the-counter options ("OTC
Options") which are privately negotiated with the counterparty to such
contract. Listed options in the United States are issued by the Options
Clearing Corporation ("OCC"), which guarantees the performance of the
obligations of the parties to such options. OTC Options are considered by the
staff of the SEC to be illiquid.
Each Fund's ability to close out its position as a purchaser or seller of an
exchange-listed put or call option is dependent upon the existence of a liquid
secondary market. Among the possible reasons for the absence of a liquid
secondary market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange;
(iii) trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities; (iv)
interruption of the normal trading volume; or (vi) a decision by one or more
exchanges 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
the class or series of options) would cease to exist, although outstanding
options on that exchange that had been listed by the OCC as a result of trades
on that exchange would generally continue to be exercisable in accordance with
their terms. OTC Options are purchased from or sold to dealers, financial
institutions or other counterparties which have entered into direct agreements
with any Fund. With OTC Options, such variables as expiration date, exercise
price and premium will be agreed upon between any Fund and the counterparty,
without the intermediation of a third party such as the OCC. If the
counterparty fails to make or take delivery of the securities underlying an
option it has written, or otherwise settle the transaction in accordance with
the terms of that option as written, the Fund would lose the premium paid for
the option as well as any anticipated benefit of the transaction. As a Fund
must rely on the credit quality of the counterparty rather than the guarantee
of the OCC, it will only enter into OTC options with counterparties with the
highest long-term credit ratings, and with primary United States government
securities dealers recognized by the Federal Reserve Bank of New York.
The hours of trading for options on securities may not conform to the hours
during which the underlying securities are traded. To the extent that the
option markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying markets
that cannot be reflected in the option markets.
The Funds may invest in master demand notes. Although payable on demand by
the investing Fund, these obligations are not marketable to third parties and
thus may be deemed illiquid. The ability
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to redeem such notes depends on the borrower's ability to pay on demand, which
will be continuously monitored by the Trustee. For investment in master demand
notes by all Funds, except the Money Market Fund, such notes will be purchased
only from domestic corporations that on the date of investment either (a) have
an outstanding senior long-term debt issue rated Aa or better by Moody's
Investors Service, Inc. or AA or better by Standard & Poor's Corporation, (b)
do not have rated long-term debt outstanding but have commercial paper rated at
least Prime-1 by Moody's Investors Service, Inc. or A-1 by Standard & Poor's
Corporation, or (c) are backed by a bank letter of credit suitable to the
Trustee.
The Funds may enter into repurchase agreements, however, the Money Market
Fund may not enter into repurchase agreements with a maturity exceeding
thirteen months. Under these agreements, a Fund purchases securities from a
bank, broker-dealer or other recognized financial institution and the seller
agrees to repurchase them within a specified time at a fixed price (equal to
the purchase price plus interest). Repurchase agreements will be entered into
only when they are collaterized by debt obligations issued or guaranteed by the
United States Government, its agencies or instrumentalities, certificates of
deposit, bankers' acceptances or commercial paper, and either the Trustee will
have physical possession of the securities or the securities will be
transferred to the Trustee as custodian by appropriate entry in the records of
a registered clearing agency or the Federal Reserve Banks' records. Collateral
for repurchase agreements are subject to the same credit quality determinations
applicable to direct investments by the Money Market Fund.
Collateral will be valued daily for all repurchase agreements and if the
value of the securities purchased should decline below a designated percentage
of the sales price (such percentage to exceed 100%), additional securities
sufficient to make the value of the securities equal to such percentage of the
sales price must be deposited with the custodian. If the seller defaults, the
Fund that entered the repurchase agreement might incur a loss if the value of
the securities securing the repurchase agreement declines and might incur
disposition costs in connection with liquidating the securities. In addition,
if bankruptcy proceedings are commenced with respect to the seller, realization
upon disposition of the securities by the Fund may be delayed or denied. The
Trustee will monitor on an ongoing basis both the value of the collateral and
the creditworthiness of the other parties to repurchase agreements.
Each Fund may not borrow money except for temporary emergency purposes and
then only in an amount not exceeding 5% (33 1/3% with respect to the Short-
Intermediate Term Fund, the U.S. Government Securities Fund, the Intermediate
Term Bond Fund, the Small Cap Fund, the Core Equity Fund, the Risk Manager--
Income Fund, the Risk Manager--Balanced Fund, the Risk Manager--Growth Fund,
the International Equity Fund and the International Bond Fund), of the value of
the total assets of the Fund. Each Fund will repay all borrowings before making
additional investments and interest paid on such borrowings will reduce income.
The Trust may not pledge, mortgage or hypothecate the assets of any Fund to
any extent greater than 10% (33 1/3% with respect to the Short-Intermediate
Term Fund, the U.S. Government Securities Fund, the Risk Manager--Income Fund,
the Risk Manager--Balanced Fund, the Risk Manager--Growth Fund, the
Intermediate Term Bond Fund, the Small Cap Fund, the Core Equity Fund, the
International Equity Fund and the International Bond Fund), of the value of the
total assets of the Fund.
The Funds are not commodity pools and may not purchase or sell commodities or
commodity contracts, except that any Fund, other than the Money Market Fund,
may purchase or sell futures
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contracts on financial instruments, such as bank certificates of deposit and
United States Treasury securities, foreign currencies and stock indexes and
options on any such futures, for hedging or for other appropriate risk
management purposes under the rules and regulations promulgated by the
Commodity Futures Trading Commission (the "CFTC") under the Commodity Exchange
Act, if such options are written by other persons and if (i) except as
indicated below, the futures or options are listed on a national securities or
commodities exchange, (ii) the aggregate premiums paid on all such options that
are held at any time do not exceed 20% of the total net assets of that Fund and
(iii), except as indicated below, the aggregate margin deposits required on all
such futures or options held at any time do not exceed 5% of the total assets
of that Fund. The margin deposits required on all such futures and options
shall be placed in a segregated account and marked to market daily. The Short-
Intermediate Term Fund, the Intermediate Term Bond Fund, the U.S. Government
Securities Fund, the Small Cap Fund, the Core Equity Fund, the Risk Manager--
Income Fund, the Risk Manager--Balanced Fund, the Risk Manager--Growth Fund,
the International Equity Fund and the International Bond Fund may also purchase
and sell OTC Options, which are privately negotiated with the counterparty to
such contract, and each such Fund is subject to the limitation in clause (iii)
above only with respect to transactions that do not constitute bona fide
hedging.
There are certain risks associated with the use of futures contracts and
related options. Although the Funds will use these techniques to hedge against
market changes that might adversely affect the prices of securities held or
contemplated for purchase by the Funds, there can be no assurance that the
market prices of those securities will correlate with the price movements of
the futures contracts that the Funds acquire, so a Fund could realize a loss or
gain from its futures transactions. Moreover, the risk of loss from investing
in futures transactions is potentially unlimited. If an anticipated market
change that is hedged against does not occur, a Fund's performance will be
adversely affected by the hedge. In addition, there is a risk of loss by a Fund
of margin deposits in the event of bankruptcy of a broker with whom such Fund
has an open position in a futures contract or option thereon.
Futures positions may be closed out only on an exchange or board of trade
that provides a market for such futures contracts. Although the Funds intend to
purchase or sell futures contracts that have an active market, there is no
assurance that a liquid market will exist for a particular contract at a
particular time. Thus, it may not be possible to close a futures position in
anticipation of adverse price movements. Moreover, some United States commodity
exchanges limit the amount of fluctuation permitted in futures contract prices
during a single trading day. The daily limit establishes the maximum amount
that the price of a futures contract may vary either up or down from the
previous day's settlement price at the end of a trading session. Once the daily
limit has been reached in a particular type of contract, no trades may be made
on that day at a price beyond that limit, and this may prevent the liquidation
of unfavorable positions.
Parties to a futures contract must make "initial margin" payments,
established by exchanges, equal to approximately 1-5% of the contract amount,
to secure performance of the contract. There are also requirements to make
"variation margin" payments from time to time as the value of the futures
contract fluctuates. Brokers may establish deposit requirements higher than
exchange minimums. Upon purchasing an option, the Fund would pay a "premium",
an amount which is small in relation to the market value of the investment
underlying such option. The Fund will receive a premium when it writes options,
which increases the Fund's return on the underlying security in the event the
option expires unexercised or is closed out at a profit.
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All Funds, except the Money Market Fund, may invest in foreign currencies and
related options either on a spot (i.e., cash) basis at the rate prevailing in
the currency exchange market, or through entering into forward contracts to
purchase or sell currencies. A Fund's dealings in spot and forward currency
exchange will be limited to hedging. A forward currency 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. Transaction hedging is the
purchase or sale of forward currency with respect to specific receivables or
payables of a Fund generally arising in connection with the purchase or sale of
its portfolio securities. Position hedging is the sale of forward currency with
respect to portfolio security positions denominated or quoted in the currency.
These contracts are entered into in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers.
Although such contracts tend to minimize the risk of loss due to a decline in
the value of the subject currency, at the same time they tend to limit any
potential gain which might result should the value of such currency increase
during the contract period.
All Funds, except the Money Market Fund, may purchase and sell stock index
futures contracts for hedging purposes. A stock index future contract obligates
the seller to deliver (and the purchaser to take) 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. No physical delivery of the underlying stocks
in the index is made.
There can be no assurance of a Fund's successful use of stock index futures
contracts as a hedging device. One risk arises because of the imperfect
correlation between movements in the price of the stock index future contract
and movements in the price of the securities which are the subject of the
hedge. In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the stock index
future contract and the portion of the portfolio being hedged, the price of
stock index futures contracts may not correlate perfectly with the movement in
the stock index due to certain market distortions. First, all participants in
the futures market are subject to margin deposit and maintenance requirements.
Rather than meeting additional margin deposit requirements, investors may close
futures contracts through offsetting transactions which would distort the
normal relationship between the index and futures markets. Secondly, from the
point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market also may cause
temporary price distortions. Due to the possibility of price distortions in the
futures market and because of the imperfect correlation between movements in
the stock index and movements in the price of stock index futures, a correct
forecast of general market trends by a Fund still may not result in a
successful hedging transaction.
Successful use of stock index futures contracts by a Fund also is subject to
the ability to predict correctly movements in the direction of the market. For
example, if the Fund had hedged against the possibility of a decline in the
market adversely affecting stocks held in its portfolio and stock prices
increase instead, the Fund will lose part or all of the benefit of the
increased value of its stocks which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such situations, if
the Fund has insufficient cash, it may have to sell securities to meet daily
variation margin requirements. Such sales of securities may be, but will not
necessarily be, at increased prices which reflect the rising market. The Fund
may have to sell securities at a time when it may be disadvantageous to do so.
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The effectiveness of purchasing or selling stock index options will depend
upon the extent to which price movements in a Fund's portfolio correlate with
price movements of the stock index selected. Because the value of an index
option depends upon movements in the level of the index rather than the price
of a particular stock, whether the Fund will realize a gain or loss from the
purchase or writing of options on an Index depends upon movements in the level
of stock prices in the stock market generally or, in the case of certain
indexes, in an industry or market segment, rather than movements in the price
of a particular stock. Accordingly, successful use by the Fund of options on
stock indexes will be subject to the Fund's ability to predict correctly the
movements in the direction of the stock market generally or of a particular
industry. This requires different skills and techniques than predicting changes
in the price of individual stocks.
The International Equity Fund, the International Bond Fund, the Risk
Manager--Income Fund, the Risk Manager--Balanced Fund and the Risk Manager--
Growth Fund may enter into interest rate or equity swaps and may purchase or
sell interest rate or equity caps and floors. The Funds would enter into these
transactions primarily to preserve a return or spread on a particular
investment or portion of their portfolios, to manage the duration of their
portfolios or to protect against any increase in the price of the securities
the Funds anticipate purchasing at a later date. The Funds will not sell
interest rate or equity caps or floors that they do not own.
The International Equity Fund, the International Bond Fund, the Risk
Manager--Income Fund, the Risk Manager--Balanced Fund and the Risk Manager--
Growth Fund may enter into interest rate or equity swaps, caps and floors on
either an asset-based or liability-based basis, depending on whether they are
hedging their assets or liabilities, and will usually enter into interest rate
or equity swaps on a net basis, i.e., the two payment streams are netted out,
with the Funds receiving or paying, as the case may be, only the net amount of
the two payments on the payment date. The Funds will not enter into any
interest rate or equity swap, cap or floor transaction unless the unsecured
senior debt of the claims-paying ability of the other party thereto is rated in
the highest rating category of at least one nationally recognized rating
organization at the time of entering into such transaction. If there is a
default by the other party to such a transaction, the Funds will have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. Caps and floors are more recent
innovations for which standardized documentation has not yet been developed
and, accordingly, they are less liquid than swaps. The staff of the SEC
considers swaps, caps and floors to be illiquid.
Much of the hedging activities undertaken by a Fund such as futures
contracts, interest rate swaps, caps, floors and collars, and options on
securities, indices and futures contracts sold by any Fund are generally
subject to segregation and coverage requirements established by either the CFTC
or the SEC, with the result that, if the participating Fund does not hold the
instrument underlying the futures contract or option, the Fund will be required
to segregate on an ongoing basis with its custodian, cash, U.S. Government
Securities, or other liquid high grade debt obligations in an amount at least
equal to the Fund's obligations with respect to such instruments. Such amounts
will fluctuate as the market value of the obligations increases or decreases.
The segregation requirement can result in a Fund maintaining positions it would
otherwise liquidate and consequently segregating assets with respect thereto at
a time when they might be disadvantageous to do so. In addition, with respect
to futures contracts purchased by a Fund, the Fund will also be subject to the
segregation requirements with respect to the value of the instruments
underlying the futures contract.
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The Trust may acquire securities of any other investment company provided
that: (i) immediately after such purchase or acquisition not more than 3% of
the total outstanding stock of such issuer is owned by the Trust and all
affiliated persons of the Trust, and (ii) the Trust has not offered or sold and
is not proposing to offer or sell any security issued by it through a principal
underwriter or otherwise at a public offering price that includes a sales load
of more than 1 1/2%.
The Trust may not invest the assets of any Fund in securities that are not
readily marketable (including repurchase agreements maturing in more than seven
days), debt securities for which there is no established market (including
variable rate master demand notes for which there is no established market),
except for the U.S. Government Securities Fund, the Small Cap Fund, the Core
Equity Fund, the Intermediate Term Bond Fund, the International Equity Fund,
the International Bond Fund, the Risk Manager--Income Fund, the Risk Manager--
Balanced Fund and the Risk Manager--Growth Fund, securities of foreign issuers
that are not listed on a recognized domestic or foreign securities exchange,
time deposits that mature in more than seven days and any other assets for
which a readily available market does not exist at the time of the purchase or
subsequent valuation, to any extent greater than 10% (15% with respect to the
Short-Intermediate Term Fund, the Intermediate Term Bond Fund, the U.S.
Government Securities Fund, the Small Cap Fund, the Core Equity Fund, the
International Equity Fund, the International Bond Fund, the Risk Manager--
Income Fund, the Risk Manager--Balanced Fund and the Risk Manager--Growth Fund)
of the value of the net assets of the Fund. If through the appreciation of
illiquid assets, or the depreciation of liquid assets, the Fund has more than
10% (or 15%, as applicable) of its net assets invested in illiquid assets, the
Fund will reduce its holdings of illiquid assets to 10% (or 15%, as applicable)
or less of its net assets.
Each Fund, other than the Money Market Fund, the Short-Intermediate Term Fund
and the U.S. Government Securities Fund, may from time to time purchase certain
equity securities which are subject to restrictions on resale to the public.
Investments in securities which are "restricted" may involve added expenses to
the Funds, should the Funds be required to bear registration costs with respect
to such securities, and could involve delays in disposing of such securities,
which might have an adverse effect upon the price and timing of sales of such
securities and the liquidity of the Funds with respect to redemptions.
Restricted securities which are illiquid will be subject to the limitation
above that each of the Funds may not invest more than 10% (or 15%, as
applicable) of net assets in illiquid assets. Restricted securities for which
there is a secondary market of qualified institutional buyers as contemplated
by Rule 144A under the Securities Act of 1933, and which are determined to be
liquid, will not be subject to the 10% (or 15%, as applicable) limitation. Rule
144A is a recent development and there is no assurance that a liquid market for
Rule 144A securities will develop or be maintained. To the extent that the
number of qualified institutional buyers is reduced, a previously liquid Rule
144A security may be determined to be illiquid, thus increasing the percentage
of illiquid assets in the Fund's portfolio. The Supervisory Committee has
adopted policies and procedures for the purpose of determining whether
securities that are eligible for resale under Rule 144A are liquid or illiquid,
and has delegated to the Trustee that determination by requiring that
consideration be given to, among other things, the frequency of trades and
quotes for the security, the number of dealers willing to sell the security and
the number of potential purchasers, dealer undertakings to make a market in the
security, the nature of the security and the time needed to dispose of the
security. The Supervisory Committee will periodically review purchases and
sales of Rule 144A securities and the compliance with the above procedures.
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The portfolio turnover rate for each of the Funds may be greater than that of
other investment companies. Each of the Funds may make investments based
substantially on short-term considerations and may sell securities without
regard to the length of time that they are held. Consequently, in light of
current market conditions and in furtherance of the investment objectives of
each Fund, investment strategies utilized by the Funds may result in turnover
rates that vary from those anticipated. The Funds need not be concerned about
the restrictions on gross income from short-term trading applicable to
regulated investment companies under the Internal Revenue Code due to the tax-
exempt nature of the Funds. However, a policy of short-term trading does
involve correspondingly higher transaction costs.
HOW TO INVEST IN THE TRUST
ELIGIBILITY FOR ADMISSION
Only Eligible Retirement Accounts are eligible to invest in the Trust.
Eligible Retirement Accounts are:
--Individual retirement trust accounts (including Simplified Employee
Pension Programs ("SEPS") and IRA Rollover Accounts) for which TCB or one
of its affiliated banks serves as trustee and that are maintained in
conformity with Section 408(a) of the Internal Revenue Code ("Eligible
IRAs") and
--Single or commingled pension or profit-sharing trusts, including
corporate pension or profit-sharing trusts and pension or profit-sharing
trusts benefiting one or more self-employed individuals (generally referred
to as H.R. 10 or Keogh plans) for which TCB or one of its affiliated banks
serves as trustee and that are maintained in conformity with Section 401(a)
of the Internal Revenue Code ("Eligible Pension Trusts").
Maintenance of Eligible Retirement Account status is a prerequisite to all
transactions with the Trust described below.
ESTABLISHING AN ELIGIBLE PENSION TRUST
A set of documents for establishing an Eligible Pension Trust can be obtained
from designated Eligible Banks. New Eligible Pension Trusts will be opened no
later than the next business day after satisfactorily completed application
materials are received by the client advisor or other appropriate bank officer
and submitted to the Trust. If you do not currently have an advisor at the
bank, please call 713-216-4681 for further information.
INVESTING IN THE TRUST
An Eligible Retirement Account can direct the investment of assets into one
or more Funds of the Trust using a form typically included with materials for
establishing an Eligible Retirement Account. The form can also be obtained from
designated Eligible Banks. Completed investment forms should be sent to the
client advisor or other appropriate bank officer for submission to the Trust.
All purchases of Units will be made through CST, a brokerage firm that is a
subsidiary of The Chase Manhattan Corporation, the indirect parent corporation
of TCB. CST will be paid no sales charge or commission for purchasing or
redeeming Units.
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Unless there are sufficient funds in the Eligible Retirement Account,
completed forms should be accompanied by a check in the amount of the intended
investment.
The minimum initial investment in the Trust is $100,000, subject to waiver at
the Supervisory Committee's discretion. The minimum initial investment for
admission to any Fund is $100 and minimum subsequent investments are $100. The
Supervisory Committee reserves the right to increase or decrease the minimum
investment amounts. The Trustee in its sole discretion may decline to accept
other assets of any type or class of Eligible Retirement Account or of any
Eligible Retirement Account. All assets will be invested in full and fractional
Units at a purchase price equal to the net asset value per Unit next determined
following receipt of a Participating Trust's satisfactorily completed
investment instructions and payment by the client advisor or other appropriate
bank officer prior to its close of business. See "VALUATION OF UNITS."
Investments are subject to determination by CST that the investment instruction
form has been properly completed.
Because Units are not transferable, certificates representing Units will not
be issued. All Units purchased are confirmed by mail to the Participating Trust
and are credited to the account of the Participating Trust on the Trust's
books.
The Trust reserves the right in its sole discretion to (i) suspend the
availability of its Units and (ii) to reject investment instructions when, in
the judgment of the Trustee, such suspension or rejection is in the best
interest of the Trust.
REDEMPTIONS
All or a portion of the Units held in a Fund can be redeemed (withdrawn) at
any time. Redemption forms can be obtained from and returned to the client
advisor or other appropriate bank officer. All redemptions of Units will be
made through CST.
The redemption price will be the net asset value per Unit next determined
following receipt of a Participating Trust's satisfactorily completed form by
the client advisor or other appropriate bank officer prior to its close of
business. See "VALUATION OF UNITS." The value of a Unit upon redemption may be
more or less than the value upon admission to the Fund, depending upon the
value of the assets of the Fund at the time of the redemption. Redemptions are
subject to determination by CST that the redemption form is complete. While
payment for Units redeemed normally will be made in cash, if conditions exist
making payment in cash undesirable, the Fund may make payment for the Units
redeemed wholly or partly in readily marketable securities of the Fund,
provided that all distributions made as of any one Valuation Date shall be made
pro rata and on the same basis. See "VALUATION OF UNITS" for a definition of
"Valuation Date." If Units are redeemed in readily marketable securities of the
Fund, Participants may incur brokerage costs if they sell the securities.
Payment for Units redeemed will normally be made to TCB, or the affiliated
bank that serves as trustee of the relevant Eligible Retirement Account, within
one business day of receipt by the client advisor or other appropriate bank
officer of the redemption form but in no event will payment be made more than
seven days after receipt of the redemption form except in the circumstances
described below. Payment will be made for Units purchased by check only if the
check has been cleared for payment by the Participating Trust's bank, in
accordance with TCB's policy with respect to clearance of
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such instruments. The payment may be delayed or the right of redemption
suspended at times when (a) trading on the New York Stock Exchange is
restricted or the Exchange is closed, for other than customary weekends and
holidays, (b) an emergency, as defined by rules of the SEC, exists making
disposal of portfolio securities or determination of the value of the net
assets of the Fund not reasonably practicable or (c) the SEC has by order
permitted such suspension.
If at any time a Participating Trust ceases to be eligible for investment in
the Trust, the Trustee will redeem all Units of such Participating Trust at the
net asset value next determined after the Trustee is apprised of such
disqualification. Payment for Units redeemed by the Trustee upon
disqualification will be made in the same manner as described above for payment
for Units redeemed upon request.
Some Eligible Pension Trusts may be subject to restrictions on redemptions or
exchanges pursuant to their governing plans. Participants should check with the
administrators of their plans to see if any such restrictions apply.
EXCHANGE PRIVILEGES
Units in any Fund may be exchanged without cost for Units of equivalent value
in any other Fund. Exchanges by Participating Trusts can be effected by
contacting the Unitholder's client advisor or other appropriate bank officer.
All exchanges will be made through CST.
Any exchange will be based on the respective net asset values of the Units
involved next determined following receipt of a Participating Trust's request
by the AVESTA client advisor or other appropriate bank officer prior to its
close of business. Exchanges are subject to determination by the AVESTA client
advisor or other appropriate bank officer that the investment instructions are
complete and that, if required, the Units have been registered in the state of
the Participating Trust. The exchange privileges applicable to the Units of the
Trust may be amended at the discretion of the Trust.
VALUATION OF UNITS
Net asset value per Unit for each Fund is determined by dividing the total
value of the Fund's assets less any liabilities, including the fee payable to
the Trustee for advisory and other services, by the number of outstanding Units
of such Fund.
The value of the assets held in each Fund is determined at the close of
business on the New York Stock Exchange (normally 3:00 P.M. Houston time) on
each Valuation Date. A Valuation Date is each day on which the New York Stock
Exchange is open for trading. The New York Stock Exchange is closed on New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. Except as noted below, in valuing the
Trust's assets all domestic or foreign securities for which market quotations
are readily available are valued (i) at the last sale price prior to the time
of determination if there was a sale on the date of determination, (ii) at the
mean between the last current bid and asked prices if there was no sales price
on such date and bid and asked quotations are available, and (iii) at the bid
price if there was no sales price on such date and only bid quotations are
available. Securities that are primarily traded on foreign exchanges generally
are valued at the preceding closing values of such securities on their
respective exchanges, except that when an occurrence subsequent to the time a
value was so established is likely to have changed
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such value, then the fair market value of those securities will be determined
by consideration of other factors by or under the direction of the Supervisory
Committee or its delegates. In valuing assets, prices denominated in foreign
currencies are converted to U.S. dollar equivalents at the current exchange
rate. Investments in U.S. Government Securities (other than short-term
securities) are valued at the average of the quoted bid and asked prices in the
over-the-counter market. Debt securities held by the Money Market Fund and debt
securities held by the other Funds with remaining maturities of 60 days or less
are valued on the basis of amortized cost, which has been determined by the
Supervisory Committee to represent fair value. Amortized cost valuation, which
may be used so long as it approximates market value, involves valuing a
security at its cost and adding or subtracting, ratably to maturity, any
discount or premium regardless of the impact of fluctuating interest rates on
the market value of the security. When approved by the Supervisory Committee of
the Trust, certain securities may be valued on the basis of valuations provided
by an independent pricing service when such prices are believed to reflect the
fair market value of such securities. In the absence of an ascertainable market
value, assets are valued at their fair value as determined by the Trustee in
good faith using methods and procedures reviewed and approved by the
Supervisory Committee.
Except in the case of the Money Market Fund, the Trust does not declare and
pay dividends on its investment income. In the case of the Money Market Fund, a
daily dividend of all of its net investment income is declared on each day the
Fund is open for business to Unitholders of record as of the close of business
the preceding day. Dividends are automatically reinvested each day in
additional Units of the Fund. For the other Funds, income earned on assets in
the Trust is included in the total value of the Trust's assets.
ADMINISTRATION OF THE TRUST
THE SUPERVISORY COMMITTEE
The business and affairs of the Trust are managed under the direction of the
Supervisory Committee in compliance with Sections 16 and 36 of the Investment
Company Act of 1940. The Supervisory Committee will perform duties and
undertake responsibilities similar to those of a board of directors of an
investment company.
THE TRUSTEE
Subject to the direction of the Supervisory Committee, TCB acts as the
Trustee of the Trust and, as such, manages all of the business and affairs of
the Trust. TCB may arrange for the performance of certain of its obligations by
third parties. TCB is a national bank and is a wholly-owned subsidiary of Texas
Commerce Equity Holdings, Inc., which, in turn, is a wholly-owned subsidiary of
The Chase Manhattan Corporation. TCB is investment adviser for The Cash
Management Fund and The Tax Free Money Market Fund portfolios of The Hanover
Funds, Inc. which are anticipated to merge on May 4, 1996 into Vista Global
Money Market Fund (which will be renamed Vista Cash Management Fund) and Vista
Tax-Free Money Market Fund, respectively.
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The Trustee will not purchase securities of federal agencies during the
existence of any underwriting or selling group of which The Chase Manhattan
Corporation or any of its affiliates or subsidiaries is a member. As a result,
it is anticipated that substantially all of the Trust's purchases of federal
agency securities will be made in the secondary market. These limitations, in
the opinion of the Supervisory Committee, will not significantly affect the
Trust's ability to pursue its present objectives. Nevertheless, in the future
should circumstances change, the Trust may be at a disadvantage because of
this limitation in comparison to other funds with similar investment
objectives but not subject to such limitations.
MANAGEMENT OF THE TRUST
The following persons are employed by TCB and are the current portfolio
managers of the Funds of the Trust included in this Prospectus. Guy Barba,
Senior Investment Officer, has served as the portfolio manager of the Money
Market Fund since April 1, 1993 and the Short-Intermediate Term U.S.
Government Securities Fund since its inception. Mr. Barba has been employed by
TCB since before 1991. Robert Heintz, Senior Investment Officer, has served as
the portfolio manager of the Equity Income Fund since its inception. Mr.
Heintz has been employed by TCB since before 1991. Henry Lartigue, Chief
Investment Officer, has served as the portfolio manager for the Equity Growth
Fund since July 1, 1994, the equity portion of the Balanced Fund since July
22, 1994 and each of the Core Equity Fund and the equity portion of the Risk
Manager-Income Fund, the Risk Manager-Balanced Fund and the Risk Manager-
Growth Fund since January 5, 1996. Mr. Lartigue also serves as Chairman of the
Supervisory Committee; he was employed by TCB from before 1991 through July of
1992. Between July of 1992 and July of 1994, Mr. Lartigue was self-employed as
a registered investment adviser. Theodore Davis, Senior Investment Officer,
has served as the portfolio manager for the International Equity Fund since
its inception. Mr. Davis has been employed by TCB since March of 1993. From
before 1991 to March of 1993, Mr. Davis was employed as a portfolio manager by
First City Texas. Juliet Ellis, Senior Investment Officer, has served as the
portfolio manager of the Small Cap Fund since September 22, 1993. Ms. Ellis
has been employed by TCB since before 1991. Prior to becoming portfolio
manager for the Small Cap Fund, Ms. Ellis was the director of research and an
equity analyst. John Miller, Senior Investment Officer, has served as the
portfolio manager for each of the Income Fund and the fixed income portion of
the Balanced Fund since July 1, 1994 and each of the U.S. Government
Securities Fund and the fixed income portion of the Risk Manager-Income Fund,
the Risk Manager-Balanced and Risk Manager-Growth Fund since June 19, 1995.
Mr. Miller has been employed with TCB since before 1991. H. Mitchell Harper,
Senior Investment Officer, has served as the portfolio manager of the
International Bond Fund and Intermediate Term Bond Fund since their inception.
Mr. Harper has been employed by TCB since before 1991.
THE MANAGEMENT AGREEMENTS
Under the Management Agreements between TCB and the Trust (the
"Agreements"), the Trustee, as investment adviser, manages the investment of
the assets of the Trust in conformity with the stated objectives and policies
of the Trust. Pursuant to the Agreements, the Trustee, subject to the
authority of the Supervisory Committee, is responsible for overall management
of the Trust's business and affairs. TCB may arrange for the performance of
certain of its obligations by third parties. The Trustee, at no additional
expense to the Trust, has contracted with Chemical Global Investors Limited
and Julius Baer Investment Management, Inc. (together, the "Sub-Advisers") to
provide recommendations with respect
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to specific securities to be purchased for the International Equity and the
International Bond Funds, respectively, and to provide additional services as
described below under "The Sub-Advisers."
EXPENSES OF THE TRUST
The Trustee will pay: (i) all costs and expenses arising in connection with
the organization of the Trust, including the initial registration and
qualification of the Trust and the Units under federal and state law; (ii) all
marketing and advertising expenses of the Trust; (iii) expenses of all
employees, office space and facilities necessary to carry out its duties under
the Agreements; and (iv) all expenses incurred by it in connection with acting
as investment adviser, other than costs (including taxes and brokerage
commissions) of securities purchased for the Trust and expenses of the use of
certain computer facilities of third parties by personnel of the Trustee in
connection with Unitholder accounting.
For the fiscal year ended December 31, 1995, total expenses of each Fund in
operation as of that date expressed as a percentage of their respective average
net assets, before and after expense reimbursements and any voluntary waivers
of management fees were 1.10% and 1.00% for the Equity Growth Fund, 1.09% and
1.00% for the Equity Income Fund, 1.17% and 1.00% for the Balanced Fund, 1.08%
and .75% for the Income Fund, .72% and .50% for the Money Market Fund, .91% and
.75% for the Short-Intermediate Term Fund, 1.43% and .75% for the Intermediate
Term Bond Fund, 2.22% and .75% for the U.S. Government Securities Fund, 1.50%
and 1.00% for the Small Cap Fund, 1.17% and 1.00% for the Core Equity Fund,
1.49% and 1.10% for the Risk Manager--Income Fund, 1.58% and 1.10% for the
Risk-Manager Balanced Fund, and 1.84% and 1.10% for the Risk Manager--Growth
Fund. The International Equity and International Bond Funds had not commenced
operations at December 31, 1995.
Except for the expenses described above that have been assumed by the
Trustee, all expenses incurred in administration of the Trust are charged to
the Trust.
TRUSTEE'S MANAGEMENT FEE
For its services with respect to the Income Fund, the Equity Growth Fund, the
Equity Income Fund, the Balanced Fund and the Core Equity Fund, the Trustee is
paid a monthly management fee at the annual rate of 1.00% of the first $250
million of the average daily net assets of each Fund, 0.90% of the next $250
million of such net assets, and 0.80% of such net assets in excess of $500
million. For its services with respect to the Short-Intermediate Term Fund and
the Intermediate Term Bond Fund, the Trustee is paid a monthly management fee
at the annual rate of 0.75% of the first $250 million of the average daily net
assets of the Fund, 0.65% of the next $250 million of such net assets, and
0.55% of such net assets in excess of $500 million. For its services with
respect to the Small Cap Fund, the Trustee is paid a monthly management fee at
the annual rate of 1.15% of the first $250 million of the average daily net
assets of the Fund, 1.05% of the next $250 million of such net assets, and
0.95% of such net assets in excess of $500 million. For its services with
respect to the U.S. Government Securities Fund, the Trustee is paid a monthly
management fee at the annual rate of 0.85% of the first $250 million of the
average daily net assets of the Fund, 0.75% of the next $250 million of such
net assets, and 0.65% of such net assets in excess of $500 million. For its
services with respect to the Risk Manager--Income Fund, the Risk Manager--
Balanced Fund, and the Risk Manager--Growth Fund, the Trustee is paid a monthly
management fee at the annual rate of 1.10% of the first $250 million
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of the average net daily assets of the Fund, 1.00% of the next $250 million of
such net assets, and .90% of such net assets in excess of $500 million. For its
services with respect to the International Equity Fund, the Trustee is paid a
monthly management fee at the annual rate of 2.00% for the first $250 million
of the average net daily assets of the Fund, 1.90% for the next $250 million of
such net assets, and 1.80% of such net assets in excess of $500 million. For
its services with respect to the International Bond Fund, the Trustee is paid a
monthly management fee at the annual rate of 1.50% for the first $250 million
of the average net daily assets of the Fund, 1.40% for the next $250 million of
such assets, and 1.30% of such net assets in excess of $500 million. For its
services with respect to the Money Market Fund, the Trustee is paid a monthly
management fee at the annual rate of 0.65%. There is currently no separate fee
for establishing an Eligible Retirement Account, and no fees or expenses are
charged directly to the accounts for participation in the Trust. Eligible
Pension Trusts, whether or not invested in the Trust, however, are subject to
the fees provided for in their governing plans. The management fee is higher
than the fees that would be charged an IRA or pension trust account invested in
most other investment companies, which typically retain separate firms for
investment advisory, custodial and shareholder account services (often referred
to as transfer agent and registrar services), but investment companies
typically have an arrangement with a bank that, as IRA or pension trustee or
custodian, charges an initial and annual fee for IRA and pension trust
customers.
The Trustee has agreed to reimburse each Fund on a monthly basis for the
amount by which the expenses of that Fund (including the management fee but
excluding interest, taxes, brokerage commissions and extraordinary expenses)
during any year exceed the management fee payable by each Fund, provided that
the assets of the Fund do not exceed $250 million.
THE SUB-ADVISERS
The Trustee has engaged as sub-advisers Julius Baer Investment Management
Inc. ("JBIM") and Chemical Global Investors Limited ("CGIL") to assist in the
management of the International Bond Fund and the International Equity Fund,
respectively. Pursuant to advisory agreements (the "Sub-Advisory Agreements")
among the Trustee, the Trust and each of the Sub-Advisers, the Sub-Advisers
will act as advisers to the International Bond Fund (in the case of JBIM) and
the International Equity Fund (in the case of CGIL). In such capacity the Sub-
Advisers will furnish advice and make recommendations to the Trustee regarding
the purchase, sale or holding of particular securities, provide research and
statistical data to the Trustee on behalf of these Funds and assist in the
implementation and execution of investment decisions.
JBIM provides investment management services to a wide variety of individual
and institutional clients, including registered investment companies.
Investment management and advice is provided by a team of five portfolio
managers and a chief investment officer. This team is supported by economists
responsible for monitoring, analyzing and interpreting data covering 21 markets
using proprietary econometric models, an asset allocation specialist and an
administrative staff. JBIM has been
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registered as an investment adviser under the Investment Advisers Act of 1940
since April 1983 and as of March 31, 1996, it had assets under management of
approximately $3.6 billion. JBIM is an indirect wholly owned subsidiary of Baer
Holding A.G., the securities of which are publicly traded on the Zurich, Basel,
Geneva and Frankfurt stock exchanges. JBIM's affiliates are principally engaged
in securities and banking related businesses, such as international portfolio
management, securities brokerage and dealing, and private merchant banking. The
principal executive office of JBIM is located at 330 Madison Avenue, New York,
New York 10017.
CGIL provides global investment management services to clients worldwide. Its
products include a full range of liquidity, fixed income, equity and financial
investments. CGIL's clients consist of insurance companies, corporations,
banks, governmental entities, pension funds and individuals. CGIL had assets
under management of approximately $800 million at March 31, 1996. CGIL employs
a staff of more than 20 persons led by four portfolio managers in the fixed
income and equity areas, respectively. CGIL was formed in 1978 and is a wholly-
owned subsidiary of The Chase Manhattan Corporation and as such is an affiliate
of the Trustee. CGIL has applied for registration as an investment adviser
under the Investment Advisers Act of 1940. CGIL is registered as an investment
adviser under the Investment Advisers Act of 1940. The principal executive
office of CGIL is 125 London Wall, 8th Floor, London, England EC2Y 5AJ.
As compensation for its services, JBIM will receive from the Trustee
quarterly fees at the annual rate of .50% on the first $30 million of the
average daily net assets of the International Bond Fund, .40% of the next $30
million of such net assets, .30% on the next $30 million of such net assets and
.20% on the remaining average daily net assets of the Fund. JBIM will be
responsible for all of its expenses incurred in connection with the performance
of its obligations under the Sub-Advisory Agreement. As compensation for its
services, CGIL will receive from the Trustee quarterly fees at the annual rate
of .80% on the first $10 million of the average daily net assets of the
International Equity Fund, .60% of the next $20 million of such net assets and
.50% on the remaining average daily net assets of the Fund. CGIL will be
responsible for all of its expenses incurred in connection with the performance
of its obligations under the Sub-Advisory Agreement.
CUSTODIAN
The Trustee acts as custodian of each of the Fund's assets other than the
International Equity Fund and the International Bond Fund. State Street Bank
and Trust Company ("State Street") acts as custodian and provides accounting
services for the International Equity Fund and the International Bond Fund.
State Street may employ subcustodians for each such Fund's assets maintained
outside the U.S. in accordance with the Investment Company Act of 1940.
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PERFORMANCE CALCULATION
Performance for the Trust may be advertised and is reported on the basis of
current yield and effective yield for the Money Market Fund, and current yield
and total return for the other Funds. The Trust may use comparative performance
information available from certain industry research and publications,
including its performance ranking by Lipper Analytical Services, Inc., for the
purpose of promoting the sale of its Units in advertisements, sales literature
and other communications to unitholders and investors. These materials include
comparisons to recognized market indices.
Money Market Fund:
From time to time the Fund advertises its "yield" and "effective yield."
Both yield figures 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 the 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 that investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an
investment in 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 Money Market Fund may, from time to time, also present returns for
other periods, which may include, but are not limited to, returns since the
Money Market Fund's inception, for annual, quarterly or monthly periods, or
for a particular market cycle. Such returns are calculated by adding one to
the sum of the daily dividends for the most recent month in the period and
multiplying by the index for the prior month, which was similarly
calculated. The return for the period is the index at the end of the period
divided by the index at the beginning of the period minus one and expressed
as a percent.
Income Fund, Balanced Fund, Intermediate Term Bond Fund, Risk Manager--
Income Fund, Risk Manager--Balanced Fund, Risk Manager--Growth Fund, Equity
Income Fund, Equity Growth Fund, Short-Intermediate Term Fund, U.S.
Government Securities Fund, Small Cap Fund, Core Equity Fund, International
Equity Fund and International Bond Fund:
Current Yield: The current yield for the above Funds is based on the net
investment income over a 30 day period, divided by the net asset value on
the last day of the period, according to the following formula:
a-b
Yield= 2 [(___ + 1)/6/- 1]
cd
Where a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of Units outstanding during the period
that were entitled to receive the dividends.
d = the net asset value per Unit on the last day of the period
Total Return: The total return is calculated by dividing the net asset
value at the end of the reporting period by the net asset value at the
beginning of the reporting period minus 1.
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The average annual compounded rate of return is the yearly rate that when
applied evenly each year in a given period and compounded annually, would
produce the total return for the period. The average annual compounded rate
of return will be quoted for periods of 1, 5 and 10 years and, if the Fund
has not been in existence for any one of those periods, a quotation of the
average annual compounded rate of return since the commencement of public
offering will be substituted. The Fund may, from time to time, also present
total returns calculated in the same manner for other periods. These may
include, but are not limited to, total returns since the Fund's inception,
for annual, quarterly or monthly periods, or for a particular market cycle.
GLASS-STEAGALL ACT CONSIDERATIONS
TCB believes that it may provide investment advisory, administrative,
custodial and Unitholder account services to the Trust and that its personnel
may serve as members of the Supervisory Committee and as officers of the Trust
without violating the Glass-Steagall Act. A more complete discussion of these
matters is in the Statement of Additional Information.
TAX TREATMENT OF THE TRUST
The Trust has received a ruling from the Internal Revenue Service that (1)
the Trust is a pooled fund arrangement exempt from federal income taxation
under Section 408(e) of the Internal Revenue Code of 1986 (the "Code"), as
applicable, with respect to the IRAs participating in the Trust and under
Section 501(a) of the Code with respect to the qualified plans participating in
the Trust and (2) the participating IRAs or qualified plans in the Trust do not
lose their tax-exempt status because they participate in the Trust.
Individuals considering investments in the Trust or in IRAs or qualified
plans may obtain additional tax information by requesting a copy of the Trust's
Statement of Additional Information and should consult their own tax advisers
with respect to their personal situations.
DESCRIPTION OF UNITS AND VOTING RIGHTS
The Trust may issue an unlimited number of Units of beneficial interest
without par value, which are fully paid and nonassessable and have no
preference as to conversion, exchange, retirement or other features and have no
preemptive rights. No document will be issued evidencing any interest in the
Trust. Further, no Participant or his or her Eligible Retirement Account will
have the power to sell, assign or transfer any Unit or all or any part of its
equity or interest in the Trust or use it as security for a loan.
A Participating Trust exercises the voting rights of the Units and is
entitled to one vote for each full Unit (and a fractional vote for each
fractional Unit) outstanding on the books of the Trust in the name of such
Participating Trust or its nominee. Where the Participating Trust is maintained
for a single Participant, the voting will be according to the Participant's
instructions. Where the Participating Trust is maintained for more than one
Participant, the voting will be according to the instructions of the
Participating Trust's investment committee or similar body that is empowered to
act on behalf of the Trust. The Trustee shall exercise the voting rights of
those Participants that do not vote and shall do so
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in proportion to the vote received from Participants. The Units have
noncumulative voting rights, which means that the holders of more than 50% of
the Units voting in the election for members of the Supervisory Committee can
elect 100% of the members if they choose to do so. On any matter submitted to a
vote of Participating Trusts, all Units of the Trust then issued, outstanding
and entitled to vote will be voted in the aggregate and not by Fund except (i)
when required by the Investment Company Act, Units shall be voted by Fund; and
(ii) when the matter affects an interest of less than all of the Funds, then
only Participating Trusts that own Units of the affected Fund or Funds shall be
entitled to vote. When referring to the approvals to be obtained from
Participating Trusts, the term "Majority" means the vote of the lesser of (a)
67% of the outstanding Units of the Funds, or of a particular Fund, as the case
may be, present at a meeting if more than 50% of the outstanding Units of the
Funds, or of a particular Fund, as the case may be, are present in person or by
proxy, or (b) more than 50% of the Trust's outstanding Units of the Funds, or
of a particular Fund, as the case may be. Under the Trust's Declaration of
Trust and the Investment Company Act of 1940, the Trust is not required and
does not currently intend to hold annual meetings for the election of members
of the Supervisory Committee. Participants will have the right to call for a
special meeting of Participants if such request is made, in writing, by the
holders of at least 10% of the Trust's Units. In such case, the Trust will
assist in calling the meeting as required under the Investment Company Act and
will pay the expenses of calling and holding the meeting.
While the Trust has been established to continue for such time as may be
necessary to accomplish the purposes for which it was created, subject to
approval of Participating Trusts that own at least a Majority of the
outstanding Units, the Trustee may (i) sell the assets of the Trust to another
trust or corporation in exchange for cash or securities of such trust or
corporation, and distribute such cash or securities ratably among the
Participating Trusts, or (ii) sell and convert into money the assets of the
Trust and distribute the proceeds remaining after payment of liabilities
ratably among the Participating Trusts. Upon completion of the distribution of
the remaining proceeds or the remaining assets of the Trust, the Trust will
terminate and the Trustee will be discharged of any and all further liabilities
and duties and the right, title and interest of all parties will be cancelled
and discharged.
The Trustee may terminate any Fund upon 60 days' notice to the Participating
Trusts owning Units of that Fund in the event that the net asset value of such
Fund is less than $5 million on the date of such notice. Upon making provision
for the payment of all outstanding obligations, taxes and other liabilities,
accrued or contingent, of the Fund, the Trustee shall distribute the remaining
assets of the Fund ratably among the Participating Trusts owning outstanding
Units of the Fund.
COUNSEL AND AUDITORS
Liddell, Sapp, Zivley, Hill & LaBoon has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the Units
of beneficial interest in the Trust being sold pursuant to this Prospectus.
Simpson Thacher & Bartlett (a partnership which includes professional
corporations) serves as counsel for the Trust. Price Waterhouse LLP serves as
independent auditors of the Trust.
54
<PAGE>
APPENDIX
Description of Standard & Poor's Corporation's corporate debt ratings of BBB or
better:
<TABLE>
<S> <C>
AAA --Debt rated AAA has the highest rating assigned by Standard & Poor's. 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 small degree.
A --Debt rated A has a 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.
</TABLE>
Description of Moody's Investors Service, Inc.'s long-term debt ratings of Baa
or better:
<TABLE>
<S> <C>
Aaa --Bonds that are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt-
edged," Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa --Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present that make the long-term risks appear somewhat larger than the Aaa
securities.
A --Bonds that are rated A possess many favorable investment attributes and are
to be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
that suggest a susceptibility to impairment sometime in the future.
Baa --Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
</TABLE>
55
<PAGE>
Description of commercial paper rated A-1 by Standard & Poor's Corporation:
Commercial paper rated A-1 by Standard & Poor's Corporation has the following
characteristics: liquidity ratios are adequate to meet cash requirements; long-
term senior debt is rated A or better; the issuer has access to at least two
additional channels of borrowing; basic earnings and cash flow are in an upward
trend with allowance made for unusual circumstances. Typically, the issuer's
industry is well established and the issuer has a strong position within the
industry. The reliability and quality of management are unquestioned.
Description of short-term debt rated Prime-1 by Moody's Investors Service, Inc.
The rating Prime-1 is the highest short-term debt paper rating assigned by
Moody's Investors Service, Inc. Among the factors considered in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks that may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships that exist with the issuer; and (8) recognition by the management
of obligations that may be present or may arise as a result of public interest
questions and preparations to meet such obligations.
56
<PAGE>
AVESTA
TRUST
April 29, 1996
___________________________________PROSPECTUS___________________________________
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
AVESTA TRUST
APRIL 29, 1996
26-TCBE-45
P.O. Box 2558
Houston, Texas 77252-8045
Telephone (713) 216-8188
The AVESTA Trust (the "Trust") is an open-end, management investment company
that currently offers fifteen Funds for the collective investment of retirement
accounts for which Texas Commerce Bank National Association ("TCB") or one of
its affiliated banks serves as trustee or in some other fiduciary capacity. TCB
is the Trustee of the Trust and, as such, provides or arranges for the provision
of, investment advisory, administrative and custodial services and Unitholder
accounting. Chase Securities of Texas, Inc., an affiliate of TCB, is the
distributor of the Trust.
The Trust consists of fifteen Funds, each with a different investment objective,
for investment of retirement assets held in certain Eligible Retirement
Accounts.
The MONEY MARKET FUND seeks to increase retirement assets by investing only in
instruments with a remaining maturity of thirteen months or less to provide a
high level of current income with equal emphasis on liquidity and stability of
principal.
The INCOME FUND seeks to increase retirement assets by investing primarily in
domestic debt securities that earn a high level of current income with
consideration also given to safety of principal.
The EQUITY GROWTH FUND seeks to increase retirement assets primarily by
investing in equity-based securities, which include common stocks and those
debt securities and preferred stocks convertible into common stock, that
provide capital appreciation. Current income is a secondary objective.
The EQUITY INCOME FUND seeks to increase retirement assets by investing
primarily in equity-based securities that provide capital appreciation as well
as current income.
The BALANCED FUND seeks to increase retirement assets by investing in a
combination of bonds and equity-based securities to provide a balance of
current income and capital appreciation.
<PAGE>
The SHORT-INTERMEDIATE TERM U.S. GOVERNMENT SECURITIES FUND seeks to increase
retirement assets by investing primarily in securities issued or guaranteed by
the U.S. Government or its agencies or instrumentalities, and repurchase
agreements with respect thereto, to provide as high a level of current income
as is consistent with the preservation of capital.
The U.S. GOVERNMENT SECURITIES FUND seeks to increase retirement assets by
investing primarily in securities issued or guaranteed by the U.S. Government
or its agencies or instrumentalities, and repurchase agreements with respect
thereto, to provide current income with emphasis on preservation of capital.
There is no restriction on the maturity of the Fund's portfolio or any
particular portfolio security.
The SMALL CAPITALIZATION FUND seeks to increase retirement assets by investing
primarily in common stocks and other equity-based securities of small
capitalization U.S. companies that can provide capital appreciation.
The CORE EQUITY FUND seeks to increase retirement assets by investing
primarily in common stocks of U.S. companies to maximize total investment
return through emphasis on capital appreciation and current income consistent
with reasonable risk.
The INTERMEDIATE TERM BOND FUND seeks to increase retirement assets by
investing primarily in domestic debt securities with intermediate term
maturities to provide current income, with consideration given to stability of
principal.
The RISK MANAGER-INCOME FUND seeks to increase retirement assets by investing
in a combination of debt and, to a lesser extent, equity-based securities to
achieve high current income and, when appropriate, capital appreciation.
The RISK MANAGER-BALANCED FUND seeks to increase retirement assets by
investing in a combination of debt and equity-based securities for high total
return.
The RISK MANAGER-GROWTH FUND seeks to increase retirement assets by investing
in a combination of equity-based and, to a lesser extent, debt securities to
achieve capital appreciation and, secondarily, current income.
The following Funds have not commenced operations. Prospective investors will
be notified by a supplement to this Statement of Additional Information when
these Funds become available as investment alternatives.
The INTERNATIONAL EQUITY FUND seeks to increase retirement assets by investing
primarily in common stocks and other equity-based securities of non-U.S.
issuers that provide capital appreciation.
<PAGE>
The INTERNATIONAL BOND FUND seeks to increase retirement assets by investing
primarily in debt securities of non-U.S. issuers to provide as high a level of
current income as is consistent with the preservation of capital.
A prospectus for the Trust dated April 29, 1996, which provides the basic
information an investor should know before investing, may be obtained without
charge by writing to AVESTA Trust, 26-TCBE-45, P.O. Box 2558, Houston, Texas
77252-8045. This Statement of Additional Information is not a prospectus, but
contains information in addition to and more detailed than that set forth in the
Prospectus. It is intended to provide additional information regarding the
activities and operations of the Trust and the Funds and should be read in
conjunction with the Prospectus.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GENERAL INFORMATION.............................. B 1
INVESTMENT RESTRICTIONS.......................... B 1
OTHER INVESTMENT POLICIES........................ B 5
VALUATION OF UNITS............................... B 5
ADMINISTRATION OF THE TRUST...................... B 8
Supervisory Committee and Officers.......... B 8
Compensation of the Supervisory Committee... B 11
The Management Agreements................... B 13
The Sub-Advisers............................ B 18
The Custodian............................... B 19
Trustee Liability........................... B 19
PORTFOLIO TRANSACTIONS........................... B 20
UNIT OWNERSHIP................................... B 22
INCOME TAX INFORMATION........................... B 22
Tax Treatment of the Trust.................. B 23
Tax Treatment of Participating Trusts....... B 23
IRAs....................................... B 23
Qualified Retirement Plans................. B 27
COMPUTATION OF CURRENT YIELDS AND TOTAL RETURNS.. B 30
GLASS-STEAGALL ACT CONSIDERATIONS................ B 34
COUNSEL AND AUDITORS............................. B 35
FINANCIAL STATEMENTS............................. B 36
</TABLE>
<PAGE>
GENERAL INFORMATION
The AVESTA Trust (the "Trust") is an open-end, management investment company
that offers fifteen funds (the "Funds" and each a "Fund") for the collective
investment of Eligible Retirement Accounts. Texas Commerce Bank National
Association is the Trustee of the Trust ("TCB" or the "Trustee").
For more detailed information about investing in the Trust see the Prospectus of
the Trust (HOW TO INVEST IN THE TRUST).
Capitalized terms used herein have the same meaning as in the Prospectus.
INVESTMENT RESTRICTIONS
The following restrictions and fundamental policies cannot be changed for any
Fund without the approval of Participating Trusts holding a majority (as defined
in the Investment Company Act of 1940, as amended (the "Investment Company Act")
of the outstanding Units of the affected Fund or Funds. Absent such approval
the Trust may not:
(a) Except for the International Bond Fund, invest more than 5% of its assets
in any one issuer (except securities issued or guaranteed as to principal
or interest by the United States Government, its agencies and
instrumentalities) with respect to 75% of the assets of the Trust or
purchase more than 10% of the outstanding voting securities of such
issuer; for purposes of this limitation, identification of the "issuer"
will be based on a determination of the source of assets and revenues
committed to paying dividends or meeting interest and principal payments
on each security;
(b) Invest in companies for the purpose of exercising control;
(c) Borrow money for any Fund except for temporary emergency purposes and then
only in an amount not exceeding 5% of the value of the total assets of the
Fund, with respect to the Money Market Fund, the Income Fund, the Equity
Growth Fund, the Equity Income Fund and the Balanced Fund, and 33-1/3% of
the value of the total assets of the Fund with respect to the Short-
Intermediate Term U.S. Government Securities Fund, the Intermediate Term
Bond Fund, the U.S. Government Securities Fund, the Small Capitalization
Fund, the Core Equity Fund, the International Equity Fund, the
International Bond Fund, the Risk Manager-Income Fund, the Risk Manager-
Balanced Fund and the Risk Manager-Growth Fund. Each Fund will repay all
borrowings before making additional investments and interest paid on such
borrowings will reduce income;
-B1-
<PAGE>
INVESTMENT RESTRICTIONS
CONTINUED
(d) Pledge, mortgage or hypothecate the assets of any Fund to any extent
greater than 10% of the value of the total assets of the Fund, with
respect to the Money Market Fund, the Income Fund, the Equity Growth Fund,
the Equity Income Fund and the Balanced Fund, and 33-1/3% of the value of
the total assets of the Fund with respect to the Short-Intermediate Term
U.S. Government Securities Fund, the Intermediate Term Bond Fund, the U.S.
Government Securities Fund, the Small Capitalization Fund, the Core Equity
Fund, the International Equity Fund, the International Bond Fund, the Risk
Manager-Income Fund, the Risk Manager-Balanced Fund and the Risk Manager-
Growth Fund;
(e) Issue senior securities;
(f) Underwrite any issue of securities;
(g) Purchase or sell real estate or real estate mortgage loans, but this shall
not prevent investments in instruments secured by real estate or interests
therein or in marketable securities of issuers that engage in real estate
operations;
(h) Make loans to other persons, except the Trust may make time or demand
deposits with banks, provided that time deposits that mature in more than
seven days do not exceed 10% of the value of the net assets of the Fund
for whose account the Trust has made the time deposits. The Trust also
may purchase bonds, debentures or similar obligations that are publicly
distributed. Further, the Trust may loan to a bank, broker-dealer or
other recognized financial institution portfolio securities not in excess
of 10% of the value of the net assets of any Fund if collateral values are
continuously maintained at no less than 100% by marking to market daily.
The Trust may enter into repurchase agreements as long as repurchase
agreements maturing in more than seven days do not exceed 10% of the value
of the net assets of the Fund. Any investment in illiquid assets made
pursuant to this subparagraph (h) is subject to the restrictions of
subparagraph (o);
(i) Purchase securities on margin or sell short;
(j) Purchase or retain securities of an issuer if those members of the
Supervisory Committee, each of whom owns more than 1/2 of 1% of such
securities, together own more than 5% of the securities of such issuer;
-B2-
<PAGE>
INVESTMENT RESTRICTIONS
CONTINUED
(k) Purchase or sell commodities or commodity contracts, except that any Fund
may purchase or sell futures contracts on financial instruments, such as
bank certificates of deposit and United States Treasury securities,
foreign currencies and stock indexes and options on any such futures if
such options are written by other persons and if (i) the futures or
options are listed on a national securities or commodities exchange, (ii)
the aggregate premiums paid on all such options that are held at any time
do not exceed 20% of the total net assets of that Fund and (iii) the
aggregate margin deposits required on all such futures or options thereon
held at any time do not exceed 5% of the total assets of that Fund;
provided, however, that the Short-Intermediate Term U.S. Government
Securities Fund, the Intermediate Term Bond Fund, the U.S. Government
Securities Fund, the Small Capitalization Fund, the Core Equity Fund, the
International Equity Fund, the International Bond Fund, the Risk Manager-
Income Fund, the Risk Manager-Balanced Fund and the Risk Manager-Growth
Fund are not subject to the limitations set forth in (i) and (iii);
(l) Acquire securities of any other investment company unless (i) immediately
after such purchase or acquisition not more than 3% of the total
outstanding stock of such issuer is owned by the Trust and all affiliated
persons of the Trust; and (ii) the Trust has not offered or sold and is
not proposing to offer or sell any security issued by it through a
principal underwriter or otherwise at a public offering price that
includes a sales load of more than 1 1/2%;
(m) Invest in interests, or sell put, call, straddle or spread options or
interests, in oil, gas or other mineral exploration or development
programs;
(n) Purchase any securities for any Fund that would cause more than 10% of the
value of the Fund's total assets at the time of such purchase to be
invested in the securities of one issuer, provided that there is no
limitation with respect to investments in obligations issued or guaranteed
by the United States Government, its agencies and instrumentalities or
obligations of domestic branches of United States banks;
-B3-
<PAGE>
INVESTMENT RESTRICTIONS
CONTINUED
(o) Invest the assets of any Fund in securities that are not readily
marketable (including repurchase agreements maturing in more than seven
days), debt securities for which there is no established market (including
variable rate master demand notes for which there is no established
market), and except as described below, securities of foreign issuers that
are not listed on a recognized domestic or foreign securities exchange,
and any other assets for which a readily available market does not exist
at the time of the purchase or subsequent valuation, to any extent greater
than 10% (15% with respect to the Short-Intermediate Term U.S. Government
Securities Fund, the U.S. Government Securities Fund, the Intermediate
Term Bond Fund, the Small Capitalization Fund, the Core Equity Fund, the
International Equity Fund, the International Bond Fund, the Risk Manager-
Income Fund, the Risk Manager-Balanced Fund and the Risk Manager-Growth
Fund) of the value of the net assets of the Fund. With respect to the
U.S. Government Securities Fund, the Intermediate Term Bond Fund, the
Small Capitalization Fund, the Core Equity Fund, the International Equity
Fund, the International Bond Fund, the Risk Manager-Income Fund, the Risk
Manager-Balanced Fund and the Risk Manager-Growth Fund, the Fund's
determination of whether securities of foreign issuers are subject to the
foregoing limitation shall be based on whether the securities are "liquid"
irrespective of whether the issue is listed on a recognized domestic or
foreign securities exchange. If through the appreciation of illiquid
assets, or the depreciation of liquid assets, the Fund has more than 10%
(or 15% as applicable) of its net assets invested in illiquid assets, the
Fund will reduce its holdings of illiquid assets to 10% (or 15% as
applicable) or less of its net assets;
(p) The investment in warrants, valued at the lower of cost or market, may not
exceed 5.0% of the value of any Fund's net assets. Included within that
amount, but not to exceed 2.0% of the value of any Fund's net assets, may
be warrants that are not listed on the New York Stock Exchange or the
American Stock Exchange. Warrants acquired by any Fund in units or
attached to securities may be deemed to be without value; or
(q) Purchase any securities for any Fund that would cause more than 25% of the
value of the Fund's total assets at the time of such purchase to be
invested in the securities of one or more issuers conducting their
principal activities in the same industry, provided that there is no
limitation with respect to investments in obligations issued or guaranteed
by the United States Government, its agencies and instrumentalities or
obligations of domestic branches of United States banks.
-B4-
<PAGE>
INVESTMENT RESTRICTIONS
CONTINUED
Except as provided in subparagraph (o) above, if a percentage restriction is
adhered to at the time of investment, a later increase or decrease in percentage
resulting from a change in values of assets will not constitute a violation of
that restriction. With respect to (a) above, the International Bond Fund is a
"non-diversified" portfolio of the Trust within the meaning of the Investment
Company Act, and thus is not subject to the limitations contained in (a). With
respect to the investment restriction in subparagraph (h) above, the Trust does
not have any present intent to make loans of portfolio securities to banks,
broker-dealers or other recognized financial institutions. With respect to the
investment restriction in subparagraph (q) above, only the Money Market Fund is
at present permitted under the current position of the Staff of the Securities
and Exchange Commission to invest more than 25% of the value of its total assets
in obligations of domestic branches of United States banks. The Money Market
Fund has no current intention to do so.
OTHER INVESTMENT POLICIES
The following restrictions are not fundamental and may be changed by the
Supervisory Committee of the Trust without the approval of the Participating
Trusts.
From time to time, the Income Fund and the Intermediate Term Bond Fund may
purchase common or preferred stocks provided such stocks pay dividends. The
current yields will be a prime consideration in selection with potential for
price appreciation a secondary factor.
Under normal market conditions, common stocks will only be purchased if such
investments are less than 25% of the value of the total assets of the Fund at
the time of purchase. The turnover rate for a Fund will not be a factor
preventing sale or purchase when the Trustee believes investment considerations
warrant such sale or purchase.
VALUATION OF UNITS
Net asset value per Unit of each Fund is determined by dividing the total value
of the Fund's assets less any liabilities by the number of outstanding Units.
Each Fund shall be charged with the liabilities in respect to such Fund, and
shall also be charged with a share of the general liabilities of the Trust
proportionate to the net asset value of such Fund.
-B5-
<PAGE>
VALUATION OF UNITS
CONTINUED
The value of the assets held in each Fund is determined as of the close of
trading on the New York Stock Exchange (presently 3:00 p.m. Houston time) on
each Valuation Date. Except as noted below, in valuing the Trust's assets all
domestic or foreign securities for which market quotations are readily available
are valued (i) at the last sale price prior to the time of determination if
there was a sale on the date of determination, (ii) at the mean between the last
current bid and asked prices if there was no sales price on such date and bid
and asked quotations are available, and (iii) at the bid price if there was no
sales price on such date and only bid quotations are available. Securities that
are primarily traded on foreign exchanges generally are valued at the preceding
closing values of such securities on their respective exchanges, except that
when an occurrence subsequent to the time a value was so established is likely
to have changed such value, then the fair market value of those securities will
be determined by consideration of other factors by or under the direction of the
Supervisory Committee or its delegates. In valuing assets, prices denominated
in foreign currencies are converted to U.S. dollar equivalents at the current
exchange rate. United States Government and agency obligations are valued based
upon bid quotations from the Federal Reserve Bank for identical or similar
obligations and short-term money market instruments (such as certificates of
deposit, bankers acceptances and commercial paper) are most often valued by bid
quotations or by reference to bid quotations of available yields for similar
instruments of issuers with similar credit ratings. The Supervisory Committee
has determined that the values obtained using the procedures described above
represent the fair values of the securities valued by such procedures. Except
as otherwise described below, all of these prices are obtained from a service
that collects and disseminates such market prices. Bid quotations for short-
term money market instruments reported by such service are the bid quotations
reported to it by major dealers in such instruments.
Debt securities held by the Money Market Fund and debt securities held by the
other Funds with remaining maturities of 60 days or less are valued on the basis
of amortized cost. Under this method of valuation, the security is initially
valued at cost on the date of purchase or, in the case of securities purchased
by funds other than the Money Market Fund with more than 60 days remaining to
maturity, the market value on the 61st day prior to maturity. Thereafter the
Trust assumes a constant proportionate amortization in value until maturity of
any discount or premium, regardless of the impact of fluctuating interest rates
on the market value of the security, unless the Supervisory Committee determines
that amortized cost no longer represents fair value. The Trust will monitor the
market value of these investments for the purpose of ascertaining whether any
such circumstances exist.
-B6-
<PAGE>
VALUATION OF UNITS
CONTINUED
When approved by the Supervisory Committee, certain securities may be valued on
the basis of valuations provided by an independent pricing service when such
prices are believed to reflect the fair market value of such securities. These
securities will normally be those that have no available recent market value,
have few outstanding shares and therefore infrequent trades, or for which there
is a lack of consensus on the value, with quoted prices covering a wide range.
The lack of consensus might result from relatively unusual circumstances such as
no trading in the security for long periods of time, or a company's involvement
in merger or acquisition activity, with widely varying valuations placed on the
company's assets or stock. Prices provided by an independent pricing service
may be determined without exclusive reliance on quoted prices and may take into
account appropriate factors such as institutional-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data.
In the absence of an ascertainable market value, assets are valued at their fair
value as determined by the Trustee using methods and procedures reviewed and
approved by the Supervisory Committee.
In the case of the Money Market Fund, a daily dividend of all of its net
investment income is declared on each day the Fund is open for business to
Unitholders of record as of the close of business the preceding day. Dividends
are automatically reinvested monthly in additional Units of the Fund. In the
case of the other Funds, the Trust does not declare or pay dividends. Income
earned on assets in these Funds is included in the total value of the Funds'
assets. Interest income on debt securities is accrued and added to asset value
daily. Dividend income is recognized and added to asset value on the ex-
dividend date. In addition, unrealized gains or losses will be added to or
subtracted from, respectively, the asset value of the Funds.
Portfolio turnover of the following Funds for the years ended December 31, 1994
and December 31, 1995, respectively, is:
116% and 99% for the Equity Growth Fund;
42% and 11% for the Equity Income Fund;
157% and 98% for the Balanced Fund;
239% and 93% for the Income Fund;
129% and 133% for the Core Equity Fund;
120% and 89% for the Small Capitalization Fund;
268% and 187% for the Short-Intermediate Term U.S. Government Securities Fund;
174% and 17% for the U.S. Government Securities Fund.
-B7-
<PAGE>
VALUATION OF UNITS
CONTINUED
Portfolio turnover of the following Funds for the period October 4, 1994
(commencement of operations) through December 31, 1994 and the year ended
December 31, 1995, is:
7% and 198% for the Intermediate Term Bond Fund;
15% and 278% for the Risk Manager-Income Fund;
17% and 337% for the Risk Manager-Balanced Fund;
31% and 191% for the Risk Manager-Growth Fund.
The remaining Funds of the Trust had not commenced investment operations at
December 31, 1995. With respect to these Funds, however, it is estimated that
portfolio turnover will not exceed 275% for the International Equity Fund, and
275% for the International Bond Fund.
Portfolio turnover ratios are calculated excluding short-term investments.
Therefore, Money Market Fund does not calculate portfolio turnover.
ADMINISTRATION OF THE TRUST
Supervisory Committee and Officers
- ----------------------------------
The business and affairs of the Trust are managed under the direction of the
Supervisory Committee. The Supervisory Committee will perform duties and
undertake responsibilities similar to those of a board of directors of an
investment company. The members of the Supervisory Committee and the officers
of the Trust, their principal occupations for the last five years and their
affiliations, if any, with the Trustee, are as follows:
<TABLE>
<CAPTION>
Position Held Principal Occupation
Name, Age and Address With the Trust For the Past 5 Years
- ---------------------------- -------------- ----------------------------------------
<S> <C> <C>
Frank A. Liddell, Jr., 67, Member, Private Investor from before 1989. Of
P. O. Box 2558 Supervisory Counsel, Liddell, Sapp, Zivley, Hill &
Houston, Texas 77252 Committee LaBoon.**
George E. McDavid, 65, Member, President, Houston Chronicle Publishing
P. O. Box 2558 Supervisory Company since 1990. Vice President
Houston, Texas 77252 Committee and General Manager prior to and until
1990.
Kenneth L. Otto, 65, Member, Senior Vice President, Tenneco Inc. from
P. O. Box 2558 Supervisory before 1990.
Houston, Texas 77252 Committee
H. Michael Tyson*, 57, Member, Retired. Executive Vice President,
--------
P. O. Box 2558 Supervisory Texas Commerce Bank National
Houston, Texas 77252 Committee Association from before 1990 to 1995.
</TABLE>
-B8-
<PAGE>
ADMINISTRATION OF THE TRUST
CONTINUED
<TABLE>
<CAPTION>
Position Held Principal Occupation
Name, Age and Address With the Trust For the Past 5 Years
- -------------------------- -------------- ----------------------------------------
<S> <C> <C>
Henry J. Lartigue*, 38, Chairman, Chief Investment Officer, Texas
P. O. Box 2558 Supervisory Commerce Bank National Association
Houston, Texas 77252 Committee since 1995. Institutional and Equity
Investment Officer from before 1990
until 1992. Between July of 1992 and
July of 1994, Mr. Lartigue was self-
employed as an Investment Adviser.
Effective July 1994, Mr. Lartigue served
as a Senior Investment Officer.
Cheryl M. Morgan, 47, Treasurer Vice President, Texas Commerce Bank
P. O. Box 2558 National Association since 1990.
Houston, Texas 77252 Assistant Vice President, Texas
Commerce Bank National Association
prior to and until 1990.
Marguerite Williams, 35, Controller Assistant Vice President, Texas
P. O. Box 2558 and Chief Commerce Bank National Association
Houston, Texas 77252 Accounting since 1994. Trust Operations Officer,
Officer Texas Commerce Bank National
Association from 1992 through 1994.
Fund Accountant, Texas Commerce
Bank National Association from 1991
until 1992. Trust Accountant, Texas
Commerce Bank National Association
from prior to 1990 until 1991.
Thomas J. Press, 51, Compliance Senior Vice President, Chief Compliance
P. O. Box 2558 Officer and Officer and Chief Fiduciary Officer,
Houston, TX 77252 Secretary Texas Commerce Bank National
Association since 1995. Senior Vice
President and General Counsel,
Transamerica Fund Management
Company from 1984 until 1995.
Sylvia Cruz, 39, Assistant Investment Officer, Texas Commerce
P. O. Box 2558 Compliance Bank National Association since 1990.
Houston, Texas 77252 Officer
</TABLE>
-B9-
<PAGE>
ADMINISTRATION OF THE TRUST
CONTINUED
<TABLE>
<CAPTION>
Position Held Principal Occupation
Name, Age and Address With the Trust For the Past 5 Years
- ----------------------------- -------------- -----------------------------------
<S> <C> <C>
Joy H. Rose, 33, Assistant Assistant Vice President since 1994,
P. O. Box 2558 Compliance Investment Officer from 1993 through
Houston, Texas 77252 Officer 1994, Trust Officer in 1993, Bond
Accountant from prior to 1990 until
1993, Texas Commerce Bank National
Association.
Guy Barba, 44, Portfolio Senior Investment Officer, Texas
P. O. Box 2558 Officer Commerce Bank National Association
Houston, Texas 77252 since before 1990.
Denise Byington, 31, Portfolio Investment Officer, Texas Commerce
P. O. Box 2558 Officer Bank National Association since 1992.
Houston, Texas 77252 Equity/Convertible Trader, AIM Capital
Management from prior to 1990 until
1992.
H. Mitchell Harper, 51, Portfolio Senior Investment Officer, Texas
P. O. Box 2558 Officer Commerce Bank National Association
Houston, Texas 77252 since before 1990.
Deborah Williams- Portfolio Senior Investment Officer, Texas
McGehee, 44, Officer Commerce Bank National Association
P. O. Box 2558 since 1994. Senior Investment Trader
Houston, Texas 77252 from prior to 1990 until 1993, First
City Bancorp.
</TABLE>
* Denotes an "interested person" of the Trust within the meaning of the
Investment Company Act.
** Mr. Liddell's position with Liddell, Sapp, Zivley, Hill & LaBoon is an
honorary position. Mr.Liddell is primarily engaged in the investment
business and no longer has an interest in Liddell, Sapp, Zivley, Hill &
LaBoon.
-B10-
<PAGE>
ADMINISTRATION OF THE TRUST
CONTINUED
As of April 19, 1996, H. Michael Tyson and Frank A. Liddell, Jr. were the only
members of the Supervisory Committee or the officers of the Trust who owned any
outstanding units of the Trust.
Mr. Tyson owned 9,622.500 units (0.41% of outstanding units) of the Equity
Income Fund and 3,055.025 units (0.004% of outstanding units) of the Small
Capitalization Fund and 6,639.910 units (0.66% of outstanding units) of the
Money Market Fund. Mr. Liddell owned 34,632.891 units (1.34% of outstanding
units) of the Short-Intermediate Term U.S. Government Securities Fund and
5,326.000 units (0.006% of outstanding units) of the Money Market Fund.
Compensation of the Supervisory Committee
- -----------------------------------------
The Trust pays members of the Supervisory Committee who are not affiliated with
TCB a fee of $5,000 per year and $500 for each Supervisory Committee meeting
attended, together with reimbursement for reasonable expenses incurred in
attending such meetings. The Trust does not pay or otherwise provide any
pension or retirement benefits to any Supervisory Committee member or any of the
Trust's officers. Members of the Supervisory Committee who are officers of TCB
or an affiliate of TCB receive no compensation from the Trust. The officers of
the Trust receive no compensation for acting as such from the Trust.
The following table provides information concerning the compensation paid during
the fiscal year ended December 31, 1995 to each Supervisory Committee member who
is not affiliated with TCB. The Trust does not provide any pension or
retirement benefits to Supervisory Committee members.
Aggregate Total Compensation
Compensation from Other Funds with
Name, Position Held from the an Investment Advisor Total
with the Trust Registrant Affiliated with TCB Compensation
--------------------- -------------- --------------------- ------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Frank A. Liddell, Jr., $7,000 -- $7,000
Supervisory
Committee Member
George E. McDavid, $7,000 -- $7,000
Supervisory
Committee Member
Kenneth L. Otto, $7,000 -- $7,000
Supervisory
Committee Member
H. Michael Tyson $7,000 -- $7,000
Supervisory
Committee Member
</TABLE>
-B11-
<PAGE>
COMPENSATION OF THE SUPERVISORY COMMITTEE
CONTINUED
Rule 17j-1 under the 1940 Act requires all registered investment companies and
their investment advisers and principal underwriters to adopt written codes of
ethics and institute procedures designed to prevent "access persons" (as defined
in Rule 17j-1) from engaging in any fraudulent, deceptive or manipulative
trading practices. The Trust's Supervisory Committee has adopted a code of
ethics (the "Trust Code") that incorporates personal trading policies and
procedures applicable to access persons of the Trust, which includes officers,
directors and other specified persons who may make, participate in or otherwise
obtain information concerning the purchase or sale of securities by the Trust.
In addition, the Trust Code attaches and incorporates personal trading policies
and procedures applicable to access persons of the Trustee (the "Trustee Code").
The Trust and Trustee Codes have been designed to address potential conflicts of
interest that can arise in connection with the personal trading activities of
investment company and investment advisory personnel.
Pursuant to the Trust and Trustee Codes, access persons are generally permitted
to engage in personal securities transactions, provided that a transaction does
not involve securities that are being purchased or sold, are being considered
for purchase or sale, or are being recommended for purchase or sale by or for
the Trust. In addition, the Trustee Code contains specified prohibitions and
blackout periods for certain categories of securities and transactions,
including a prohibition on purchasing securities during an initial public
offering. The Trustee Code also requires that access persons obtain
preclearance to engage in personal securities transactions. Finally, the Trust
and Trustee Codes require access persons to report periodically all personal
securities transactions.
-B12-
<PAGE>
THE MANAGEMENT AGREEMENTS
The Management Agreements
- -------------------------
Services Performed. The Trust has entered into four separate, but substantially
similar, Management Agreements with the Trustee with respect to the portfolios
of the Trust. The continuance of the Management Agreement, dated as of March
29, 1988, between TCB and the Trust was approved by the Participating Trusts of
each Fund in operation on April 25, 1991. The Management Agreement with respect
to the Short-Intermediate Term U.S. Government Securities Fund, the U.S.
Government Securities Fund, the Small Capitalization Fund and the Core Equity
Fund was approved by the Supervisory Committee on February 17, 1993. The
Management Agreements with respect to the Intermediate Term Bond Fund, the
International Bond Fund, the International Equity Fund, the Risk Manager-Income
Fund, the Risk Manager-Balanced Fund and the Risk Manager-Growth Fund were
approved by the Supervisory Committee on April 22, 1994. Under the Management
Agreements, the Trustee as investment adviser manages the investment of the
assets of the Trust in conformity with the stated objectives and policies of the
Trust. The Trustee is obligated to supervise the Trust's investments and
maintain a continuous investment program, place purchase and sale orders and pay
costs of certain clerical and administrative services involved in managing and
servicing the Trust's investments and complying with regulatory reporting
requirements. The Trustee also is obligated to perform certain administrative
and account servicing functions under the Agreements, including preparation and
distribution of communications to the Participating Trusts, accounting and
recordkeeping. The Trustee may arrange for the performance of certain of its
obligations by third parties. In order to provide fund accounting services to
the Trust (other than the International Equity Fund and the International Bond
Fund), the Trustee has contracted for the use by its personnel of certain
computer facilities (mainly consisting of the use of a software program and use
of the hardware on which it is programmed on a time-sharing basis) of a third
party. The expense of the use of these facilities will be paid by the Trust.
The Trustee will pay for its employees and facilities used in connection with
the computer facilities.
The Trustee, at no additional expense to the Trust, has contracted with Chemical
Global Investors Limited and Julius Baer Investment Management, Inc. (together,
the "Sub-Advisers") to provide recommendations with respect to specific
securities to be purchased for the International Equity and the International
Bond Funds, respectively, and to provide additional services as described under
"the Sub-Advisers".
-B13-
<PAGE>
THE AGREEMENTS
CONTINUED
The investment management services of the Trustee to the Trust are not exclusive
under the terms of the Agreements. The Trustee is free to, and does, render
investment advisory services to others. Included among the Trustee's Trust
Department accounts are personal advisory accounts, trusts and estates, pension
and profit-sharing funds for major corporations, commingled trust funds and a
broad spectrum of institutional accounts.
The Trustee is investment adviser for The Cash Management Fund and the Tax Free
Money Market Fund portfolios of The Hanover Funds, Inc. which are anticipated to
merge on May 4, 1996 into Vista Global Money Market Fund (which will be renamed
Vista Cash Management Fund) and Vista Tax-Free Money Market Fund, respectively.
The Trust will have the benefit of the investment analysis and research, the
review of current economic conditions and trends and the consideration of long-
range investment policy now generally available to customers of the Trustee's
Trust Department.
The Trustee is obligated to manage the Trust in accordance with applicable laws
and regulations, including the regulations and rulings of the United States
Comptroller of the Currency relating to fiduciary powers of national banks. In
accordance with these regulations, the Trustee will not invest the Trust's
assets in stock or obligations of, or property acquired from, the Trustee, its
affiliates or directors, officers or employees or other persons with substantial
connections with the Trustee, and, further, assets of the Trust will not be sold
or transferred, by loan or otherwise, to the Trustee or persons connected with
the Trustee as described above. However, as expressly permitted by applicable
law, the Trustee may invest funds of the Trust awaiting investment or
distribution in certificates of deposit or securities of the Trustee.
Expenses of the Trust. The Trustee will pay: (i) all costs and expenses arising
in connection with the organization of the Trust, including the initial
registration and qualification of the Trust and the Units under federal and
state law; (ii) all marketing and advertising expenses of the Trust; (iii)
expenses of all employees, office space and facilities necessary to carry out
its duties under the Agreements; and (iv) all expenses incurred by it in
connection with acting as investment adviser, other than costs (including taxes
and brokerage commissions) of securities purchased for the Trust and the
expenses of the use of the computer facilities of third parties in connection
with fund accounting. Expenses incurred by the Trustee in connection with
acting as investment adviser include the costs of statistical and research data;
other accounting, data processing, bookkeeping and internal auditing services;
rendering periodic and special reports to the Supervisory Committee; and other
costs associated with providing investment research and portfolio management.
-B14-
<PAGE>
THE AGREEMENTS
CONTINUED
Except for the expenses described above that have been assumed by the Trustee,
all expenses incurred in the administration of the Trust are charged to the
Trust, including: (i) the Trustee's management fee (discussed below); (ii) fees
and expenses of members of the Supervisory Committee who are not affiliated with
the Trustee; (iii) interest charges; (iv) taxes; (v) facilities of third parties
in connection with fund accounting; (x) fees and disbursements of independent
accountants and legal counsel; (xi) expenses of preparing, printing and mailing
prospectuses (except the cost of printing and mailing of prospectuses to
potential IRA and pension trust customers of TCB, which is paid by TCB),
reports, proxies, notices and statements sent to Participating Trusts; (xii)
expenses of meetings of Participating Trusts; (xiii) association membership
dues; (xiv) insurance premiums; and (xv) nonrecurring expenses, including any
expenses relating to litigation to which the Trust or the Trustee as trustee of
the Trust is a party.
Trustee's Management Fee. For its services under the Management Agreements, the
Trustee is compensated as follows:
<TABLE>
<CAPTION>
Average Daily Net Assets
---------------------------------------------
In Excess of $250
Up To Million but Less In Excess of
Fund $250 Million Than $500 Million $500 Million
- ------------------------------ ------------ ----------------- ------------
<S> <C> <C> <C>
Money Market 0.65% 0.65% 0.65%
Income 1.00% 0.90% 0.80%
Equity Growth 1.00% 0.90% 0.80%
Equity Income 1.00% 0.90% 0.80%
Balanced 1.00% 0.90% 0.80%
Short-Intermediate Term U.S.
Government Securities 0.75% 0.65% 0.55%
U.S. Government Securities 0.85% 0.75% 0.65%
Small Capitalization 1.15% 1.05% 0.95%
Core Equity 1.00% 0.90% 0.80%
Intermediate Term Bond 0.75% 0.65% 0.55%
Risk Manager-Income 1.10% 1.00% 0.90%
Risk Manager-Balanced 1.10% 1.00% 0.90%
Risk Manager-Growth 1.10% 1.00% 0.90%
International Equity 2.00% 1.90% 1.80%
International Bond 1.50% 1.40% 1.30%
</TABLE>
-B15-
<PAGE>
THE AGREEMENTS
CONTINUED
The Funds in operation paid management fees to the Trustee, net of voluntary
waivers/1/, for the years ended, respectively, as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------
Fund 1993 1994 1995
- --------------------------------- ---------- -------- --------
<S> <C> <C> <C>
Money Market Fund $ 200,962 $177,507 $435,936
Income Fund 707,274 538,547 546,375
Intermediate Term Bond Fund 9,332* 44,818
Balanced Fund 519,707 278,203 218,177
Risk Manager-Income Fund 25,746* 116,580
Risk Manager-Balanced Fund 13,699* 92,979
Risk Manager-Growth Fund 13,424* 60,623
Equity Growth Fund 281,571 308,089 407,599
Equity Income Fund 295,744 418,900 446,506
Short-Intermediate Term U.S.
Government Securities Fund 38,651** 161,289 182,714
U.S. Government Securities Fund 19,121** 22,444 21,549
Small Capitalization Fund 35,469** 102,189 119,346
Core Equity Fund 25,791** 169,483 223,368
</TABLE>
* Reflects fees for the period of October 4, 1994 (commencement of operations)
through December 31, 1994.
**Reflects fees for the period of April 1, 1993 (commencement of operations)
through December 31, 1993.
/1/ For the year ended December 31, 1995, the Trustee waived management fees for
the Money Market, Income, U.S. Government Securities and Small
Capitalization Funds of $100,525, $136,617, $2,527 and $15,584,
respectively. For the year ended December 31, 1994, the Trustee waived
management fees for the Money Market, Income, U.S. Government Securities and
Small Capitalization Funds of $27,802, $99,627, $1,886 and $9,153,
respectively. For the year ended December 31, 1993, the Trustee waived
management fees for the Equity Growth, Equity Income, Short-Intermediate
Term U.S. Government Securities, U.S. Government Securities, Small
Capitalization and Core Equity Funds of $27,802, $99,627, $1,886 and $9,153,
respectively.
-B16-
<PAGE>
THE AGREEMENTS
CONTINUED
There is currently no separate fee for establishing a Texas Commerce Retirement
Account and no fees or expenses are charged directly to the Participating Trusts
for participation in the Trust. The management fee is higher than fees charged
by the managers of most other investment companies for giving investment advice,
but other investment companies often pay separate fees for investment advisory,
custodial and shareholder accounting services while the Trustee's management fee
covers these services (except the use of certain computer facilities discussed
above). Accordingly, the management fee paid to the Trustee may be higher or
lower than the fees that would be charged an IRA account or pension trust
account invested in another investment company. The fee charged to the Trust by
the Trustee is comparable to that charged by other banks that maintain similar
collective investment programs for IRA trust assets.
The Trustee has agreed to reimburse each Fund for the amount by which the
expenses of that Fund (including the management fee, but excluding interest,
taxes, brokerage commissions and extraordinary expenses) during any year exceed
the management fee payable by the Fund, provided that the average daily value of
the Fund's net assets during such year provided that the assets of the Fund do
not exceed $250 million. As such, the total reimbursements paid to the Funds
below by the Trustee for the years ended December 31, 1993, December 31, 1994,
and December 31, 1995, respectively, were:
$58,385, $51,822 and $40,517 for the Equity Growth Fund;
$62,850, $49,282 and $41,135 for the Equity Income Fund;
$51,462, $47,431 and $37,986 for the Balanced Fund;
$61,207, $42,217 and $42,439 for the Income Fund;
$53,028, $55,847 and $45,354 for the Money Market Fund.
The total reimbursements paid to the Funds below by the Trustee for the period
of April 1, 1993 (commencement of operations) through December 31, 1993, and for
the years ended December 31, 1994 and December 31, 1995, were:
$56,808, $46,037 and $37,619 for the Core Equity Fund;
$56,464, $43,310 and $35,928 for the Small Capitalization Fund;
$58,449, $44,620 and $38,430 for the Short-Intermediate Term U.S.
Government Securities Fund;
$54,904, $43,058 and $34,649 for the U.S. Government Securities Fund.
The total reimbursements paid to the Funds below by the Trustee for the period
of October 4, 1994 (commencement of operations) through December 31, 1994, and
for the year ended December 31, 1995, were:
$31,738 and $40,849 for the Intermediate Term Bond Fund;
$31,692 and $41,161 for the Risk Manager-Income Fund;
$31,755 and $40,900 for the Risk Manager-Balanced Fund;
$33,295 and $40,945 for the Risk Manager-Growth Fund.
-B17-
<PAGE>
TERM OF THE AGREEMENTS
Term of the Agreements. The Agreement with respect to the Money Market Fund,
the Income Fund, the Balanced Fund, the Equity Income Fund and the Equity Growth
Fund shall continue in effect as to each Fund through March 29, 1997. The
Agreement with respect to the Short-Intermediate Term U.S. Government Securities
Fund, the U.S. Government Securities Fund, the Small Capitalization Fund and the
Core Equity Fund shall remain in effect until March 1, 1997. The Agreement with
respect to the Risk Manager-Income Fund, the Risk Manager-Balanced Fund, the
Risk Manager-Growth Fund and the Intermediate Term Bond Fund shall remain in
effect until May 1, 1997. The Agreement with respect to the International
Equity Fund and the International Bond Fund will also remain in effect until May
1, 1997. Each Agreement shall remain in effect from year to year thereafter if
its continuance is approved annually either by the vote of a majority of the
outstanding Units of the Trust or by the Supervisory Committee, including by the
vote of a majority of the members of the Supervisory Committee who are not
parties to the Agreement or "interested persons" of the Trust or TCB within the
meaning of the Investment Company Act. Each of the Agreements can be terminated
on 60 days' notice given at any time and will terminate automatically if it is
assigned.
The Sub-Advisers. The Trustee has engaged as sub-advisers Julius Baer
Investment Management Inc. ("JBIM") and Chemical Global Investors Limited
("CGIL") to assist in the management of the International Bond Fund and the
International Equity Fund, respectively. Pursuant to advisory agreements among
the Trustee, the Trust and each of the Sub-Advisers, the Sub-Advisers will act
as advisers to the International Bond Fund (in the case of JBIM) and the
International Equity Fund (in the case of CGIL). In such capacity the Sub-
Advisers will furnish advice and make recommendations to the Trustee regarding
the purchase, sale or holding of particular securities, provide research and
statistical data to the Trustee on behalf of these Funds and assist in the
implementation and execution of investment decisions.
JBIM provides investment management services to a wide variety of individual and
institutional clients, including registered investment companies. Investment
management and advice is provided by a team of five portfolio managers and a
chief investment officer. This team is supported by economists responsible for
monitoring, analyzing and interpreting data covering 21 markets using
proprietary econometric models, an asset allocation specialist and an
administrative staff. JBIM has been registered as an investment adviser under
the Investment Advisers Act of 1940 since April 1983 and as of March 31, 1996,
it had assets under management of approximately $3.6 billion. JBIM is an
indirect wholly owned subsidiary of Baer Holding A.G., the securities of which
are publicly traded on the Zurich, Basel, Geneva and Frankfurt stock exchanges.
JBIM's affiliates are principally engaged in securities and banking related
businesses, such as international portfolio management, securities brokerage and
dealing, and private merchant banking. The principal executive office of JBIM
is located at 330 Madison Avenue, New York, New York 10017.
-B18-
<PAGE>
THE SUB-ADVISERS
CONTINUED
CGIL provides global investment management services to clients worldwide. Its
products include a full range of liquidity, fixed income, equity and financial
investments. CGIL's clients consist of insurance companies, corporations,
banks, governmental entities, pension funds and individuals, and CGIL had assets
under management of approximately $800 million at March 31, 1996. CGIL employs
a staff of more than 20 persons led by four portfolio managers in the fixed
income and equity areas, respectively. CGIL was formed in 1978 and is a wholly-
owned subsidiary of The Chase Manhattan Corporation and as such is an affiliate
of the Trustee. CGIL is registered as an investment adviser under the
Investment Advisers Act of 1940. The principal office of CGIL is located at 125
London Wall, 8th Floor, London, England EC2Y 5AJ.
As compensation for its services, JBIM will receive from the Trustee quarterly
fees at the annual rate of .50% on the first $30 million of the average daily
net assets of the International Bond Fund, .40% of the next $30 million of such
net assets, .30% on the next $30 million of such net assets and .20% on the
average daily net assets of the remaining assets in the Fund. JBIM will be
responsible for all of its expenses incurred in connection with the performance
of its obligations under the Sub-Advisory Agreement. As compensation for its
services, CGIL will receive from the Trustee quarterly fees at the annual rate
of .80% on the first $10 million of the average daily net assets of the
International Equity Fund, .60% of the next $20 million of such net assets and
.50% on the average daily net assets of the remaining assets in the Fund. CGIL
will be responsible for all of its expenses incurred in connection with the
performance of its obligations under the Sub-Advisory Agreement.
The Custodian. The Trustee acts as custodian of each of the Fund's assets other
than the International Equity Fund and the International Bond Fund. State
Street Bank and Trust Company ("State Street") acts as custodian and provides
accounting services for the International Equity Fund and the International Bond
Fund. State Street may employ subcustodians for each such Fund's assets
maintained outside the U.S. in accordance with the Investment Company Act of
1940.
Trustee Liability
- -----------------
The Trustee must discharge its duties with the judgment and care under the
current circumstances that persons of ordinary prudence, discretion and
intelligence exercise in the management of their own affairs, not in regard to
speculation, but in regard to the permanent disposition of their funds,
considering probable income from, as well as the probable increase in value and
the safety of, their capital. The Declaration of Trust provides that the
Trustee shall not be liable for any loss sustained by the Trust by reason of the
purchase, retention, sale or exchange of any investment in good faith and in
accordance with the provisions of the Declaration of Trust and of any applicable
law.
-B19-
<PAGE>
PORTFOLIO TRANSACTIONS
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Supervisory Committee, the Trustee is
responsible for the investment decisions and the placing of orders for portfolio
transactions for the Trust. The aggregate amount of brokerage commissions paid
by the Funds below for the years ended December 31, 1993, December 31, 1994, and
December 31, 1995, respectively were:
$87,446, $105,860 and $94,430 for the Equity Growth Fund;
$55,484, $64,821 and $17,134 for the Equity Income Fund;
$103,182, $58,564 and $31,889 for the Balanced Fund;
$784, $0 and $45 for the Income Fund.
The aggregate amount of brokerage commissions paid for the period April 1, 1993
(commencement of operations) through December 31, 1993, and for the years ended
December 31, 1994 and December 31, 1995, respectively were:
$24,853, $74,725 and $78,529 for the Core Equity Fund;
$26,938, $29,834 and $21,765 for the Small Capitalization Fund.
The aggregate amount of brokerage commissions paid for the period October 4,
1994 (commencement of operations) through December 31, 1994 and for the year
ended December 31, 1995, were:
$4,858 and $15,477 for the Risk Manager-Income Fund;
$4,974 and $25,765 for the Risk Manager-Balanced Fund;
$8,124 and $19,061 for the Risk Manager-Growth Fund.
There were no brokerage commissions paid by the Intermediate Term Bond, Short-
Intermediate Term U.S. Government Securities, U.S. Government Securities or
Money Market Funds for the three years ended December 31, 1995 (to the extent
each such Fund had commenced investment operations). The remaining Funds of the
Trust had not commenced investment operations at December 31, 1995.
Most of the purchases and sales of securities for the Funds, whether transacted
on a securities exchange or over-the-counter, will be effected in the primary
trading market for the securities. 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, which may include dealer spreads and underwriting
commissions. Transactions on domestic stock exchanges involve the payment of
negotiated brokerage commissions. On exchanges on which commissions are
negotiated, the cost of transactions may vary among different brokers. There is
generally no stated commission in the case of securities traded in over-the-
counter markets, but the prices of those securities include undisclosed
commissions or mark-ups. The cost of securities purchased from underwriters
includes an underwriting commission or concession.
-B20-
<PAGE>
PORTFOLIO TRANSACTIONS
CONTINUED
The general policy of each Fund in selecting brokers and dealers is to obtain
the best result taking into account factors such as the general execution and
operational facilities involved, the creditworthiness of the broker or dealer,
the stability of the broker or dealer, execution and settlement capabilities,
time required to negotiate and execute the trade, research services and the
Trustee's arrangements related thereto (as described below), overall
performance, and the broker's commissions and dealer's spread or mark-up. While
the Trustee generally seeks the best price in placing its orders, a Fund may not
necessarily be paying the lowest price available.
Notwithstanding the above, in compliance with Section 28(e) of the Securities
Exchange Act of 1934, the Trustee may select brokers or dealers who charge a
commission in excess of that charged by other brokers or dealers, if the Trustee
determines in good faith that the commission in excess of that charged is
reasonable in relation to the brokerage and research services provided to the
Trustee by such brokers or dealers. Research services generally consist of
published materials, newsletters and research or statistical reports or oral
advice from brokers and dealers regarding particular companies, industries or
general economic conditions. The Trustee may also have arrangements with
brokers or dealers pursuant to which such brokers or dealers provide research
services to the Trustee in exchange for a certain volume of brokerage
transactions to be executed by such broker or dealer. While the payment of
higher commissions increases a Fund's costs, the Trustee does not believe that
the receipt of such brokerage and research services significantly reduces its
expenses as a Fund's investment manager. Furthermore, research services
furnished by brokers or dealers through whom the Trustee effects securities
transactions for the Funds may be used by them in servicing other accounts, and
not all of these services may be used by the Trustee in connection with advising
the Funds. During the fiscal year ended December 31, 1995, the Trustee, with
respect to the Trust, directed brokerage transactions in an amount of
approximately $80,901,530 to certain brokers and dealers that furnished research
services to the Trustee. Commissions on these transactions totaled
approximately $125,904. The research services may not directly benefit or
relate to the Trust but may directly or indirectly benefit or relate to other
accounts to which the Trustee provides investment advice.
-B21-
<PAGE>
PORTFOLIO TRANSACTIONS
CONTINUED
Under the 1940 Act, persons affiliated with the Trust are prohibited from
dealing with the Trust as a principal in the purchase or sale of securities
unless an exemptive order allowing such transactions is obtained from the
Commission, and subject to the rules and regulations of the Comptroller of the
Currency. Affiliated persons of the Trustee include The Chase Manhattan
Corporation and their subsidiaries, officers and directors. In addition, the
Trust will not purchase securities of federal agencies during the existence of
any underwriting or selling group of which TCB or any affiliate of TCB is a
member. As a result, it is anticipated that substantially all of the Trust's
purchases of federal agency securities will be made in the secondary market.
These limitations, in the opinion of the Supervisory Committee, will not
significantly affect the Trust's ability to pursue its present objectives.
However, in the future and under other circumstances, the Trust may be at a
disadvantage because of this limitation in comparison to other funds with
similar investment objectives but not subject to such limitations.
Certain investments may be appropriate for the Trust and also for other clients
advised by the Trustee. Investment decisions for the Trust and other clients
are made with a view to achieving their respective investment objectives and
after consideration of such factors as their current holdings, availability of
cash for investment and the size of their investments generally.
Investment decisions for a particular Fund are made independently from those of
other funds or accounts managed by the Trustee. Such other funds or accounts
may also invest in the same securities as a Fund. If those funds or accounts
are prepared to invest in, or desire to dispose of, the same security at the
same time as a Fund, however, transactions in such securities will be made,
insofar as feasible, for the respective funds and accounts in a manner deemed
equitable to all. In some cases, this procedure may adversely affect the size
of the position obtained for or disposed of by a Fund or the price paid or
received by a Fund. In addition, because of different investment objectives, a
particular security may be purchased for one or more funds or accounts when one
or more funds or accounts are selling the same security.
UNIT OWNERSHIP
As of December 31, 1995 no persons were known to the Trust to own more than 5%
of the outstanding Units of any one of the Funds in operation at that date.
INCOME TAX INFORMATION
The following discussion describes in general terms the federal income tax
consequences of investments by individual retirement accounts ("IRAs") and
certain employer-sponsored qualified retirement plans ("qualified plans") in
group trusts such as the Trust and of investments by individuals in IRAs or
qualified plans. It does not describe other tax laws, such as state or local
taxes.
Individuals considering investments in the Trust or in IRAs or qualified plans
should consult their own tax advisers with respect to their personal situations.
-B22-
<PAGE>
INCOME TAX INFORMATION
CONTINUED
Tax Treatment of the Trust
- --------------------------
The Trust received a ruling from the Internal Revenue Service that stated (1)
the Trust is a pooled fund arrangement exempt from federal income taxation under
Section 408(e) of the Internal Revenue Code of 1986 (the "Code") with respect to
the IRAs participating in the Trust and under Section 501(a) of the Code with
respect to the qualified plans participating in the Trust and (2) the
participating IRAs or qualified plans in the Trust do not lose their tax-exempt
status because they participate in the Trust.
Tax Treatment of Participating Trusts
- -------------------------------------
IRAs
- ----
Contributions. Subject to certain limitations (described below), an individual
may deduct from his or her gross income, without regard to whether the
individual itemizes deductions, his or her contributions to an IRA maintained in
conformity with Section 408(a) of the Code. Contributions can be made and
deductions taken with respect to a taxable year up to the deadline for filing a
federal income tax return for that year (excluding extensions). For most
taxpayers, this date is April 15.
Except as limited below, the following are the maximum amounts that may be
contributed to an IRA in any taxable year and for which a deduction is allowed.
For an individual under age 70 1/2 at the end of the individual's taxable year,
whether or not married, the maximum deductible contribution allowed in any
taxable year is the lower of $2,000 or 100% of the amount of the individual's
compensation that is includible in gross income for such taxable year (including
earned income if the individual is self-employed) ("compensation"). For a
married couple filing jointly the maximum deductible contribution per spouse
allowed is the lower of $2,000 or 100% of such spouse's compensation. A married
individual is allowed an additional $250 maximum deduction on behalf of a spouse
who has no compensation or elects to be treated as having no compensation for
the year, has not attained age 70 1/2 and is filing jointly with the individual.
However, the corresponding maximum deduction of $2,000 ($2,250 for a spousal
IRA) for contributions to an IRA will be phased out if an individual is
considered to be an active participant for any part of a plan year ending with
or within the individual's tax year in certain employer sponsored retirement
plans.
An individual who is, or whose spouse is, during any part of any plan year
ending with or within a taxable year, an active participant in an employer-
maintained qualified retirement plan, a qualified annuity plan, an annuity
contract described in Section 403(b) of the Code, a plan established for its
employees by the United States, a State or political subdivision thereof, or an
agency or instrumentality of any of the foregoing, or a simplified employee
pension plan, or makes deductible contributions to a trust described in Section
501(c)(18) of the Code (an "active participant"), may be unable to deduct all or
a portion of his or her IRA contributions during such taxable year. An
individual is considered an active participant in a defined benefit qualified
plan if the individual is eligible to participate in the plan, even if the
individual elects not to do so.
-B23-
<PAGE>
IRAS - CONTRIBUTIONS
CONTINUED
If an individual who is an active participant, or a married couple filing a
joint return either of whom is an active participant, has adjusted gross income
("AGI") above a certain maximum amount in a taxable year, the maximum deductible
IRA contribution which the individual or couple is allowed for that year is
reduced from the amounts specified above. The amount of AGI above which there
is a reduction is $25,000 for an unmarried individual, $40,000 for a married
couple filing jointly and $0 for a married individual filing separately. (A
husband and wife who file separate returns and live apart at all times during
the taxable year are each treated as an unmarried individual in determining
the AGI limits.)
If an individual's or married couple's AGI exceeds the maximum amounts specified
above by $10,000 or more, they may not deduct any portion of their IRA
contributions. If an individual's or married couple's AGI exceeds such amounts
by less than $10,000, the maximum deductible IRA contribution which can be made
is proportionately reduced, generally, by 10% for each $1,000 AGI in excess of
applicable reduction amount. For example, an unmarried individual with AGI of
$31,000 may make a maximum deductible IRA contribution of $800 ($2,000 - (6 x
10% x $2,000)). A married couple filing jointly with AGI of $20,500 each, may
make a maximum deductible IRA contribution of $3,600 ($4,000 - (1 x 10% x
$4,000).
Taxpayers whose maximum deductible IRA contributions are reduced or eliminated
pursuant to the rules described in the preceding paragraph may make
nondeductible IRA contributions in the amount of the reduction. In other words,
if an individual's maximum deductible IRA contribution were reduced, for
example, from $2,000 to $1,000, he or she could still make an IRA contribution
of $2,000, with $1,000 being deductible and the other $1,000 being
nondeductible. In addition, taxpayers may elect to treat allowed deductible
contributions as nondeductible contributions. See discussion under
Distributions below as to treatment of nondeductible contributions upon
distribution.
Contributions to an IRA in excess of the applicable maximum deductible IRA
contribution plus allowed nondeductible contributions are subject to an annual
excise tax of 6% of the excess amount. The tax will not be imposed if such
excess, along with any earnings there on, are withdrawn before the deadline for
filing federal income tax returns for the taxable year in which the excess
contributions were made. Otherwise, this excise tax is imposed annually until
corrected.
-B24-
<PAGE>
IRAS - CONTRIBUTIONS
CONTINUED
Rollover Contributions. Effective for distributions made after December 31,
1992, a taxpayer may rollover (i.e., transfer tax free) to an IRA any taxable
portion of an "eligible rollover distribution" from a qualified plan. In
general, an "eligible rollover distribution" is any taxable distribution (other
than a minimum required distribution) from an IRA or qualified plan, unless the
distribution is to be made in substantially equal periodic payments (made no
less frequently than annually) (1) over the life (or life expectancy) of the
participant or joint lives (or joint life expectancies) of the participant and
beneficiary; or (2) for a specified period of at least 10 years. The amount of
a rollover contribution to an IRA is not deductible to the taxpayer and is not
included in determining the maximum amount which the taxpayer may contribute to
the IRA with respect to the taxable year in which the rollover is made. No tax
will be imposed on an eligible rollover distribution from another tax qualified
plan or IRA which is directly transferred to an eligible transferee plan, which
includes an IRA. Qualified plans must provide for, and notify distributees of,
the availability of such tax-free direct rollover contributions. If the
eligible rollover distribution is not contributed directly to the IRA as
discussed above, a mandatory withholding tax is imposed at a rate of 20 percent
on any part of the taxable portion of an eligible rollover distribution that is
distributed to an individual and then rolled over to an IRA. In general, this
withholding tax is refundable if the taxpayer contributes an amount equal to
the entire distribution into an IRA within 60 days after the receipt of the
distribution. The rules relating to rollover contributions are complicated, and
individuals should consult with their own tax adviser to determine the effect
of, and any alternatives to, making a rollover contribution.
Income Accumulation. In general, an IRA is exempt from taxation on income
earned by the IRA. This includes income earned on nondeductible contributions
to the IRA.
Distributions. In general, distributions from an IRA of deductible
contributions and of earnings of the IRA are taxed as ordinary income in the
year in which they are received.
Distributions from an IRA which are not considered to be annuity payments and to
which both deductible and nondeductible contributions have been made are deemed
to contain an amount of nondeductible contributions (treated to such extent as a
return of capital, and therefore as nontaxable) that bears the same ratio to the
total amount distributed as (1) the aggregate amount of nondeductible
contributions of the beneficiary to all his or her IRAs bears to (2) the sum of
(A) the aggregate of the balances (including earnings) in all of the
beneficiary's IRAs as of the close of the taxable year in which the distribution
is made and (B) the amount of the distribution. For this purpose, all
distributions from a taxpayer's IRAs during the taxable year are treated as a
single distribution. The same general principle applies to distributions from
an IRA which are considered to be annuity payments, although the calculation is
somewhat different.
-B25-
<PAGE>
IRAS - DISTRIBUTIONS
CONTINUED
Distributions from an IRA are subject to an additional 10% penalty tax on the
amount of the distribution included in income if made before the individual for
whose benefit such IRA was established reaches the age of 59 1/2, unless made on
account of the IRA owner's death or disability or in a series of substantially
equal periodic payments (not less frequently than annually) made for the life
(or life expectancy) of such owner or the joint lives (or joint life
expectancies) of such owner and the designated beneficiary.
Distributions from an IRA must begin not later than April 1 of the calendar year
following the calendar year in which the individual for whose benefit the IRA
was established reaches the age of 70 1/2. The failure to make such
distributions subjects the individual to a 50% penalty tax on the difference
between the minimum required distribution and the amount distributed from the
IRA.
There is a 15% penalty tax on "excess distributions" from tax favored retirement
savings arrangements including IRAs. Subject to a number of special exceptions
and transition rules, a distribution would be an "excess distribution" for this
purpose to the extent the aggregate distributions received in a taxable year
from all such plans exceeds (in 1996) $155,000. This tax is reduced by any
payment of the 10% penalty tax on premature distributions, as discussed above.
The exceptions and transition rules pertaining to the determination of such
"excess distributions" are complicated, and individuals should consult their own
tax advisers.
If the individual for whose benefit an IRA is established engages in certain
"prohibited transactions" with the IRA, all of the assets of the IRA will be
deemed to have been distributed to the individual on the first day of the tax
year in which such a transaction occurs and if this individual has not yet
reached the age of 59 1/2 he or she is also subject to the 10% penalty tax
discussed above. The 15% penalty tax on excess distributions may also apply.
Prohibited transactions include, but are not limited to, the sale, exchange or
leasing of any property between the IRA and the individual, lending of money or
other extension of credit between the IRA and the individual or furnishing of
goods, services or facilities between the IRA and the individual. If the
individual uses the IRA or any portion thereof as security for a loan, the
portion so used will be deemed to have been distributed to the individual.
Additional information regarding the establishment and maintenance of, and
distributions from, an IRA can be found in IRS Publication 590, which is
available from your local IRS District Office by calling 1-800-TAX-FORM.
Simplified Employee Pension Programs. Under a simplified employee pension
program ("SEP") an employer may contribute amounts on behalf of an employee to
an IRA which amounts are excludable by the employee from gross income. The
amounts allowed are in addition to those that an employee can contribute to an
individual IRA. The employee is treated as an "active participant" to the
extent SEP contributions are made on his or her behalf by the employer, which
may affect the deductibility of the person's own IRA contributions.
-B26-
<PAGE>
SIMPLIFIED EMPLOYEE PENSION PROGRAMS
CONTINUED
An employee can exclude a maximum of the lesser of (1) 15% of compensation
(determined without regard to the SEP contribution) or (2) $30,000 (potentially
subject to a cost of living adjustment for future taxable years) on account of
employer contributions on his or her behalf to a SEP. Employer contributions
must bear a uniform relationship to the total compensation of each employee
participating in the SEP program. For this purpose, a maximum of $150,000 of
compensation (subject to a cost of living adjustment in subsequent years) may be
considered as compensation in determining the amount of a contribution on behalf
of any single employee. If you are self-employed and contribute to your own
SEP, special rules may apply when determining your maximum deductions for these
contributions.
In each year in which an employer makes a contribution to a SEP the employer
must make a contribution on behalf of each employee who (1) has attained age 21,
(2) has performed services for the employer during at least three of the
immediately preceding five calendar years and (3) has received at least $300
(subject to a cost of living adjustment in subsequent years: $400 in 1996) in
compensation from the employer in the year of the contribution.
Salary reduction SEP programs may allow employees to elect to contribute (an
"elective deferral") up to a maximum of $7,000 (subject to a cost of living
adjustment in subsequent years: $9,500 in 1996) out of their compensation.
Amounts contributed to the SEP as an elective deferral are not included in the
gross income of the employee for income tax purposes in the year contributed.
Salary reduction SEPs are available only (1) if at least 50% of the employees of
an employer elect to have amounts contributed and (2) if the employer did not
have more than 25 employees at any time during the employer's prior taxable year
who would have been eligible, under the rules described in the preceding
paragraph, to receive SEP contributions. The average percentage of elective
deferrals by "highly compensated employees" (as such term is defined below) may
not exceed 1.25% of the average percentage of elective deferrals by non-highly
compensated employees.
Additional information regarding SEPs can be found in IRS Publication 590, which
is available at your local IRS district office or by calling 1-800-TAX-FORM.
Qualified Retirement Plans
- --------------------------
A qualified retirement plan may be adopted by an employer for its employees or
may benefit one or more self-employed individuals or partners in a partnership,
alone or together with one or more employees. Qualified retirement plans are
either defined benefit plans (e.g., pension plans) or defined contribution plans
(e.g., profit-sharing plans, money purchase pension plans, 401(k) plans, etc.).
The discussion below describes only the general federal income tax consequences
of defined contribution qualified retirement plans. Individuals should consult
their own tax advisers with respect to the federal income tax consequences of
establishing and maintaining defined benefit qualified retirement plans.
-B27-
<PAGE>
QUALIFIED RETIREMENT PLAN
CONTINUED
Contributions. An individual may exclude from gross income, contributions to a
qualified retirement plan. Generally, the maximum allowable contribution for a
taxable year ("annual addition") is the lesser of (1) 25% of the employee's
compensation and (2) For 1996, $30,000 (potentially subject to cost of living
adjustments in future years). In calculating the amount of annual additions
under the preceding sentence, the total amount of nondeductible (after tax)
employee contributions to the qualified plan, if any, are taken into account.
Additional limitations apply in the case of participants who are also
participants in one or more other qualified retirement plans.
If a profit sharing plan maintains a cash or deferred arrangement under section
401(k) of the Code, employees may elect to contribute elective deferrals up to a
maximum of $7,000 (subject to a cost of living adjustment in subsequent years)
out of the compensation. For 1996, this adjusted dollar limitation was $9,500.
Amounts contributed under a qualified cash or deferred arrangement are not
included in the gross income tax purposes in the year contributed if various
nondiscrimination requirements established by the Code are met.
Coverage Requirements. A qualified retirement plan may not require as a
condition of participation that an otherwise eligible employee complete a period
of service extending beyond the later of the date on which the employee attains
the age of 21 or the date on which he or she completes one year of service,
unless the plan provides for full and immediate vesting, in which case two years
of service may be required in plans other than cash or deferred arrangements
qualified pursuant to section 401(k) of the Code.
A qualified retirement plan must (1) benefit at least 70% of all nonhighly
compensated employees, (2) benefit a percentage of nonhighly compensated
employees that is at least 70% of the percentage of highly compensated employees
benefiting under the plan or (3) meet a specified test that considers both
employer classifications and the level of benefits of nonhighly compensated
employees relative to those of highly compensated employees. Generally, a
highly compensated employee is any employee who, is a person described in clause
(1) below or is described in clauses (2) through (4) below and is one of the 100
most highly compensated employees of the employer or who during the preceding
taxable year, (1) was at any time an owner of 5% or more of the stock of the
employer or controlled 5% or more of the voting power of all of the stock of
the employer, (2) received compensation from the employer in excess of $75,000
(subject to cost of living adjustments in subsequent years: $93,518 in 1992,
$96,368 in 1993, $99,000 in 1994 and $100,000 in 1995 and 1996), (3) received
compensation in excess of $50,000 (subject to cost of living adjustments in
subsequent years: $62,345 in 1992, $64,245 in 1993 and $66,000 in 1994, 1995
and 1996) from the employer and was among the top 20% of the most highly paid
employees of the employer or (4) was at any time an officer of the employer and
received compensation in excess of $45,000 (subject to cost of living
adjustments in subsequent years: $56,110 in 1992, $57,820.50 in 1993, $59,400
in 1994 and $60,000 in 1995 and 1996.)
-B28-
<PAGE>
QUALIFIED RETIREMENT PLAN
CONTINUED
Vesting Requirements. In general, a qualified retirement plan must provide that
(1) a participant's benefits be fully vested (i.e., nonforfeitable) upon the
participant's attainment of normal retirement age under the plan, (2) a
participant be fully vested at all times in the benefits derived from his or her
own contributions and (3) employer-provided benefits must vest at least as
rapidly as (A) 100% after five years of service or (B) 20% after three years and
an additional 20% after each of the following years. More rapid vesting may be
required of plans that are top-heavy. Generally, a plan is top heavy if the
benefits attributable to "key" employees (as such term is defined in the Code)
exceed 60% of the plan assets.
Income Accumulation. A qualified retirement plan is generally exempt from
taxation on income earned by the plan.
Distributions. In general, distributions from a qualified retirement plan are
taxed as ordinary income in the year in which they are received, unless such
distributions are rolled over to another tax-qualified plan or IRA (see IRAs-
Rollover Contributions, above).
If a distribution from a qualified retirement plan qualifies as a "lump-sum
distribution," the special rules described below apply to such distribution.
"Lump-sum distributions" are distributions of the entire balance to the credit
of an employee or self-employed individual under all plans of the same type
within one taxable year of the recipient that become payable to the recipient
(1) because of the death of the employee or self-employed individual, (2) after
the employee or self-employed individual attains age 59 1/2, (3) because of the
employee's separation from service or (4) after the self-employed individual has
become disabled, in each case (except for death payments) provided that the
employee or self-employed individual had been a plan participant for five full
taxable years prior to the year of distribution.
Generally, lump-sum distributions may qualify for special five-year or ten-year
forward income averaging treatment. Such treatment can apply only once and only
with respect to distributions received after age 59 1/2. Under five-year
forward income averaging, federal income tax liability is computed by
essentially treating a distribution as if it were received in equal installments
over a 5 year period. The rates applied to these amounts are based on the
single rate table in the year of distribution. A transition rule allows
individuals who have attained age 50 before January 1, 1986, to elect (i) ten-
year forward income averaging as under prior law with respect to a single lump-
sum distribution, or (ii) the current five year averaging provision (using the
tax rates in effect in the year of distribution) and (iii) also to apply the
pre-1986 capital gains rules (using a 20% rate) on the portion of the lump sum
distribution attributable to pre-1974 participation, even if they are not 59
1/2. Under 10-year forward income averaging, a distribution is generally
treated as if received in equal installments over a ten-year period using the
1986 single rate. For both five and ten-year averaging and capital gains
treatment an affirmative election must be made through filing of a designated
form along with the taxpayers income tax return for the taxable year of the
distribution. This form is currently designated as Form 4972.
-B29-
<PAGE>
QUALIFIED RETIREMENT PLAN
CONTINUED
Additional information regarding the tax treatment of payments from qualified
retirement plans can be found in IRS Publication 575, "Pension and Annuity
Income", which is available from your local IRS office, or by calling 1-800-TAX-
FORM.
COMPUTATION OF CURRENT YIELDS AND TOTAL RETURNS
The seven-day current yield of the Money Market Fund may be quoted in reports,
sales literature and advertisements published by the Trust. Seven-day current
yield is computed by dividing the average daily net investment income per Unit
earned by the Money Market Fund during a seven calendar day period by the Money
Market Fund's average daily price per Unit over the same period and multiplying
the result by 365. Net investment income is accrued interest income plus or
minus any amortized purchase discount or premium, less all paid and accrued
expenses. For yield quotation purposes net investment income will not include
either capital gains and losses or unrealized appreciation and depreciation, but
the average price per Unit will include any changes in net asset value during
the seven-day period. It is expected that the net asset value will change over
the seven-day period.
The Money Market Fund may also quote an effective yield, computed by dividing
the base period return by 7, adding one to the quotient, raising the sum to the
365th power and subtracting one from the result.
The Money Market Fund may, from time to time, also present returns for other
periods, which may include, but are not limited to, returns since the Money
Market Fund's inception, for annual, quarterly or monthly periods, or for a
particular market cycle. Such returns are calculated by adding one to the sum
of the daily dividends for the most recent month in the period and multiplying
by the index for the prior month, which was similarly calculated. The return
for the period is the index at the end of the period divided by the index at the
beginning of the period minus one and expressed as a percent.
The yields should not be considered a representation of the yields of the Money
Market Fund in the future since the yields are not fixed. Actual yields depend
on the type, quality and maturities of the investments held by the Money Market
Fund, changes in interest rates on investments and the Money Market Fund's
expenses during the period.
For the seven days ended December 31, 1995, the yield and effective yield for
the Money Market Fund were 5.29% and 5.27%, respectively.
-B30-
<PAGE>
COMPUTATION OF CURRENT YIELDS AND TOTAL RETURNS
CONTINUED
The Income, Equity Growth, Equity Income, Balanced, Short-Intermediate Term U.S.
Government Securities, U.S. Government Securities, Core Equity, Small
Capitalization, Intermediate Term Bond, International Equity, International
Bond, Risk Manager-Income, Risk Manager-Balanced and Risk Manager-Growth Funds
may advertise current yield, which is based on the net investment income over a
30-day (or one month) period, divided by the net asset value on the last day of
the period according to the following formula:
yield = 2 [(a-b) + 1)/6/ - 1]
___
cd
where a = dividends and interest earned during the period,
b = expenses accrued for the period (net of reimbursements),
c = the average daily number of Units outstanding during the
period that were entitled to receive the dividends,
d = the net asset value per Unit on the last day of the period.
For the month ending December 31, 1995, the yield of a) the Equity Growth Fund
was 0.44%, b) the Equity Income Fund was 1.94%, c) the Balanced Fund was 2.44%,
(d) the Income Fund was 5.22% (e) the Core Equity Fund was 1.24%, (f) the Small
Capitalization Fund was 0.56%, (g) the Short-Intermediate Term U.S. Government
Securities Fund was 4.73%, (h) the U.S. Government Securities Fund was 5.34%,
(i) the Intermediate Term Bond Fund was 4.94%, (j) the Risk Manager-Income Fund
was 3.75%, (k) the Risk Manager-Balanced Fund was 2.91% and (l) the Risk
Manager-Growth Fund was 2.28%. For these funds, the total return is calculated
by dividing the net asset value at the end of the reporting period by the net
asset value at the beginning of the period minus 1. The other funds had not yet
commenced operations at December 31, 1995.
The average annual total return is the average annual compounded rates of return
over the one-, five-, and 10-year periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P(1+T)/n/ = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the one-, five-, or 10-year period at the end of
the one-, five-, or 10-year period (or fractional portion thereof)
-B31-
<PAGE>
COMPUTATION OF CURRENT YIELDS AND TOTAL RETURNS
CONTINUED
If a Fund has not been in existence for any one of those periods, a quotation of
total return since the commencement of public offering will be substituted. The
Funds may, from time to time, also present total returns calculated in the same
manner for other periods. These may include, but are not limited to, total
returns since the Fund's inception, annual, quarterly or monthly periods, or for
a particular market cycle.
At December 31, 1995, average annual returns for the following Funds for the one
year, five year and since commencement of operations periods ended on December
31, 1995 were:
Income Fund:
a) 18.37% for the one year period beginning January 1, 1995 and
b) 5.55% for the 60 month period beginning January 1, 1991 and
c) 8.04% for the 93 month period beginning March 29, 1988
Equity Growth Fund:
a) 25.79% for the one year period beginning January 1, 1995 and
b) 6.34% for the 60 month period beginning January 1, 1991 and
c) 11.47% for the 93 month period beginning March 29, 1988
Equity Income Fund:
a) 33.71% for the one year period beginning January 1, 1995 and
b) 8.92% for the 60 month period beginning January 1, 1991 and
c) 11.92% for the 93 month period beginning March 29, 1988
Balanced Fund:
a) 23.79% for the one year period beginning January 1, 1995 and
b) 6.20% for the 60 month period beginning January 1, 1991 and
c) 10.21% for the 93 month period beginning March 29, 1988
Short-Intermediate Term U.S. Government Securities Fund:
a) 12.01% for the one year period beginning January 1, 1995 and
b) 4.72% for the 33 month period beginning April 1, 1993
U.S. Government Securities Fund:
a) 30.12% for the one year period beginning January 1, 1995 and
b) 10.04% for the 33 month period beginning April 1, 1993
Small Cap Fund:
a) 31.14% for the one year period beginning January 1, 1995 and
b) 11.27% for the 33 month period beginning April 1, 1993
-B32-
<PAGE>
COMPUTATION OF CURRENT YIELDS AND TOTAL RETURNS
CONTINUED
Core Equity Fund:
a) 25.54% for the one year period beginning January 1, 1995 and
b) 10.03% for the 33 month period beginning April 1, 1993
Intermediate Term Bond Fund:
a) 16.80% for the one year period beginning January 1, 1995 and
b) 5.78% for the 15 month period beginning October 4, 1994
Risk Manager-Income Fund:
a) 15.40% for the one year period beginning January 1, 1995 and
b) 11.88% for the 15 month period beginning October 4, 1994
Risk Manager-Balanced Fund:
a) 17.59% for the one year period beginning January 1, 1995 and
b) 13.25% for the 15 month period beginning October 4, 1994
Risk Manager-Growth Fund:
a) 22.14% for the one year period beginning January 1, 1995 and
b) 16.40% for the 15 month period beginning October 4, 1994
Current yield and total return calculations do not reflect any sales loads or
other nonrecurring charges because Units of the Funds are sold without these
charges.
Advertised performance data for the Funds represent past performance, and the
investment return and principal value of an investment will fluctuate so that an
investor's Units, when redeemed, may be worth more or less than their original
cost. Also, the Trustee has agreed to reimburse each Fund for certain expenses.
See "ADMINISTRATION OF THE TRUST - The Management Agreements" for further
discussion of reimbursement. Discontinuance of reimbursement at this time would
have a material adverse impact on the performance of the Funds.
GLASS-STEAGALL ACT CONSIDERATIONS
In 1971, the United States Supreme Court held, in Investment Company Institute
v. Camp, 401 U.S. 617 (1971), that certain provisions of federal law (commonly
referred to as the "Glass-Steagall Act") prohibit a national bank from operating
a common trust fund to collectively invest the assets of individuals for whom
the bank acted as "managing agent". The Camp case did not, however, affect the
collective investment of the assets of tax exempt retirement trusts.
-B33-
<PAGE>
COMPUTATION OF CURRENT YIELDS AND TOTAL RETURNS
CONTINUED
To date, the Comptroller of the Currency (the "Comptroller") has approved the
applications of several national banks to establish and maintain collective
investment funds, similar to the Trust, for the purpose of collectively
investing assets of individual retirement accounts. In approving these
applications, the Comptroller determined that the commingling of retirement
trust assets by a national bank is a traditional bank fiduciary activity
authorized by the Comptroller's regulations. The Comptroller determined that
Congress expressly recognized and approved the commingling of individual
retirement trust assets by a bank through the vehicle of a collective investment
fund by enacting the Employee Retirement Income Security Act of 1974. The
Comptroller also determined that the commingling of individual retirement trust
assets as part of a bona fide fiduciary service is consistent with the
requirements of the Glass-Steagall Act as construed by the United States Supreme
Court in Camp. The Comptroller's approvals have been upheld by the U.S. Courts
of Appeals for the Second, Ninth and District of Columbia Circuits.
Investment Company Institute v. Clarke, 789 F.2d 175 (2d. Cir. 1986) (per
curiam), cert. denied, 479 U.S. 939 (1986); Investment Company Institute v.
Conover, 790 F.2d 925 (D.C. Cir. 1986), cert. denied, 479 U.S. 939 (1986);
Investment Company Institute v. Conover, 793 F.2d 220 (9th Cir. 1986), cert.
denied, 479 U.S. 939 (1986).
TCB has received a ruling from the Comptroller that its operation of the Trust
is a permissible fiduciary activity rather than a securities activity and,
accordingly, it will not violate the Glass-Steagall Act. Based upon this and
the Supreme Court's decision not to review the circuit court cases upholding the
Comptroller's prior approvals, TCB acts as Trustee of the Trust, and its
personnel will serve as members of the Supervisory Committee and as officers of
the Trust.
However, a future court decision or other changes in the law could prevent TCB
from continuing to perform some or all of the services under the Declaration of
Trust and the Management Agreements or prevent its personnel from serving as
members of the Supervisory Committee or officers of the Trust. If TCB were
prevented from performing any of the services contemplated by the Declaration of
Trust or the Management Agreements, the Trust would consider the situation at
that time and retain another qualified person to perform the services or seek
approval of the Participating Trusts to discontinue the Trust. In such case,
TCB has agreed to pay or reimburse the Trust for all reasonable out-of-pocket
expenses of the Trust associated with finding another qualified person to
perform services for the Trust or discontinuing the Trust. If TCB personnel
were prevented from serving as members of the Supervisory Committee or as
officers of the Trust, the Trust would retain non-TCB personnel to serve in such
capacities.
If the Trust is discontinued, Participants will suffer no adverse tax
consequences as long as they do not request that assets be distributed from
their Eligible IRAs or Eligible Pension Trusts or, if a distribution is made,
they reinvest in another qualified retirement plan.
A Participant may realize a loss if the amount received upon the discontinuance
of the Trust, which would be based on the market value of the securities in the
Trust at the time of its discontinuance, is less than the amounts invested in
the Trust by the Participating Trust.
-B34-
<PAGE>
COMPUTATION OF CURRENT YIELDS AND TOTAL RETURNS
CONTINUED
COUNSEL AND AUDITORS
Liddell, Sapp, Zivley, Hill & LaBoon, Houston, Texas, has rendered its opinion
as to certain legal matters regarding the due authorization and valid issuance
of the Units of beneficial interest in the Trust being sold pursuant to the
Prospectus and this Statement of Additional Information. Simpson Thacher &
Bartlett (a partnership which includes professional corporations) serves as
counsel for the Trust. Price Waterhouse LLP, 1201 Louisiana, Suite 2900,
Houston, Texas, 77002, serves as independent auditors of the Trust.
-B35-
<PAGE>
FINANCIAL STATEMENTS
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
--------- ----------
<C> <S> <C>
COMMON STOCKS-93.5%
Consumer Discretionary-19.5%
11,000 Disney (Walt) Company $ 649,000
46,600 Federated Department Stores* 1,281,500
10,500 Gannett Company, Inc. 644,438
43,100 Gap, Inc. 1,810,200
38,800 Kroger Company* 1,455,000
7,100 McDonalds Corporation 320,388
13,200 Omnicom Group, Inc. 491,700
4,800 Sears Roebuck & Company 187,200
26,500 Viacom, Inc.* 1,255,437
35,000 Wal Mart Stores, Inc. 783,125
----------
Total Consumer Discretionary 8,877,988
----------
Consumer Staples-10.7%
24,600 Coca Cola Company 1,826,550
8,900 Gillette Company 463,913
15,900 Phillip Morris Companies, Inc. 1,438,950
13,800 Procter & Gamble Company 1,145,400
----------
Total Consumer Staples 4,874,813
----------
Financial Services-4.7%
31,900 American Express Company 1,319,862
5,000 American International Group, Inc. 462,500
2,800 Federal National Mortgage Association 347,550
----------
Total Financial Services 2,129,912
----------
</TABLE>
1
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
--------- ----------
<C> <S> <C>
Healthcare-19.2%
28,200 Amgen, Inc.* $1,674,375
11,000 Johnson & Johnson 941,875
19,800 Medtronic, Inc. 1,106,325
24,800 Merck & Company, Inc. 1,630,600
13,400 Pfizer, Inc. 844,200
16,700 Schering Plough Corporation 914,325
35,400 Teva Pharmaceutical Industries, Ltd. ADR 1,641,675
----------
Total Healthcare 8,753,375
----------
Integrated Oil-1.0%
6,000 Exxon Corporation 480,750
----------
Materials & Processing-8.2%
15,100 Aluminum Company of America 798,413
19,200 Inco, Ltd. 638,400
5,200 Minnesota Mining & Manufacturing Company 344,500
10,200 Phelps Dodge Corporation 634,950
18,900 Potash Corporation of Saskatchewan, Inc. 1,339,537
----------
Total Materials & Processing 3,755,800
----------
Producer Durables-7.8%
7,300 Boeing Company 572,138
15,600 Fluor Corporation 1,029,600
26,900 General Electric Company 1,936,800
----------
Total Producer Durables 3,538,538
----------
</TABLE>
2
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
--------- ----------
<C> <S> <C>
Technology-14.0%
9,900 Adobe Systems, Inc. $ 613,800
15,400 Cisco Systems* 1,149,225
13,200 Hewlett Packard Company 1,105,500
18,300 Intel Corporation 1,038,525
14,000 Microsoft Corporation* 1,228,500
10,000 Motorola, Inc. 570,000
15,700 Newbridge Networks Corporation* 649,588
-----------
Total Technology 6,355,138
-----------
Utilities-8.4%
31,100 AT&T Company 2,013,725
7,000 Bell Atlantic Corporation 468,125
15,500 QUALCOMM, Inc.* 666,500
19,500 WorldCom, Inc.* 687,375
-----------
Total Utilities 3,835,725
-----------
Total Common Stocks (Cost $34,951,487) 42,602,039
-----------
Principal
Amount SHORT-TERM INVESTMENTS-6.3%
-----------
Repurchase Agreements-6.1%
$ 527,000 Goldman Sachs and Company, dated 12/29/95, 5.75%, due 527,000
01/02/96 in the amount of $527,000 (collateralized by
$456,733 U.S. Treasury Note, 7.25%, due 08/15/22,
with a market value of $540,906 at 12/31/95),
repurchase proceeds $527,336.
2,270,000 Lehman Government Securities, dated 12/29/95, 6.10%, due 2,270,000
01/02/96 in the amount of $2,270,000 (collateralized by
$2,130,395 U.S. Treasury Note, 7.13%, due 02/29/00 with
a market value of $2,318,912 at 12/31/95), repurchase
proceeds $2,271,538.
-----------
Total Repurchase Agreements 2,797,000
-----------
</TABLE>
3
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
--------- ----------
<C> <S> <C>
Short-Term Investment Fund-0.2%
98,758 Goldman Sachs-Institutional Liquid
Assets-Government Portfolio $ 98,758
-----------
Total Short-Term Investments
(Cost $2,895,758) 2,895,758
-----------
Total Investments (Cost
$37,847,245)-99.8% 45,497,797
-----------
Other assets in excess of
liabilities-0.2% 80,012
-----------
NET ASSETS - 100% $45,577,809
===========
</TABLE>
* Non-income producing security.
The accompanying notes are an integral part of this statement.
4
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
EQUITY GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $37,847,245) $45,497,797
Cash 804
Investment income receivable 64,228
Receivable for units issued 65,160
-----------
Total assets 45,627,989
-----------
LIABILITIES
Management fee payable 38,213
Payable for units redeemed 11,967
-----------
Total liabilities 50,180
-----------
NET ASSETS $45,577,809
===========
Net assets were comprised of:
Units of beneficial interest $30,506,243
Accumulated net investment income 1,602,744
Accumulated net realized gain 5,818,270
Net unrealized appreciation 7,650,552
-----------
Net assets at December 31, 1995 $45,577,809
===========
Unit value, offering price and redemp-
tion price per unit ($45,577,809 /
1,964,561 units of beneficial
interest issued and outstanding;
unlimited number of units authorized) $23.20
===========
</TABLE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
EQUITY GROWTH FUND
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME
Income
Dividends $ 543,227
Interest 183,667
----------
Total income 726,894
----------
Expenses
Management fee (Note 2) 407,599
Accounting fees 9,720
Audit fees 10,719
Directors' fees 2,288
Insurance 4,498
Legal fees 4,734
Registration fees 3,275
Shareholder reports 1,833
Miscellaneous 3,450
----------
Total expenses 448,116
Expense subsidy (Note 3) (40,517)
----------
Net expenses 407,599
----------
Net investment income 319,295
----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investments 2,467,251
Unrealized appreciation in value
of investments during the year 6,401,728
----------
Net gain on investments 8,868,979
----------
Net Increase in Net Assets
Resulting from Operations $9,188,274
==========
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
EQUITY GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase/(Decrease) in Net Assets Years ended December 31,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 319,295 $ 328,129
Net realized gain/(loss) on investments 2,467,251 (356,809)
Unrealized appreciation/(depreciation)
in value of investments during the year 6,401,728 (352,480)
----------- -----------
Net increase/(decrease) in net assets
resulting from operations 9,188,274 (381,160)
----------- -----------
FROM UNIT TRANSACTIONS
Net proceeds from units issued 9,610,716 20,327,923
Cost of units redeemed (9,904,550) (13,911,006)
----------- -----------
Net increase/(decrease) in net assets
resulting from unit transactions (293,834) 6,416,917
----------- -----------
Total increase in net assets 8,894,440 6,035,757
Net assets, beginning of year 36,683,369 30,647,612
----------- -----------
Net assets, end of year $45,577,809 $36,683,369
=========== ===========
Net Change in Units Outstanding
Units issued 447,019 1,097,025
Units redeemed (471,304) (754,845)
----------- -----------
(24,285) 342,180
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
6
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
EQUITY GROWTH FUND
SELECTED PER UNIT DATA AND RATIOS*
(Selected data for a unit outstanding throughout each of the years indicated)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------------------------------
SELECTED PER UNIT DATA: 1995 1994 1993 1992 1991
----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment income $ 0.38 $ 0.38 $ 0.38 $ 0.36 $ 0.42
Expenses (0.23) (0.21) (0.21)# (0.21) (0.21)
Expense subsidy 0.02 0.03 0.03 0.04 0.05
------ ------ ------ ------ ------
Net investment income 0.17 0.20 0.20 0.19 0.26
Net realized and unrealized gain/(loss)
on investments 4.59 (0.37) 0.25 0.91 3.84
------ ------ ------ ------ ------
Net increase/(decrease) in net asset
value 4.76 (0.17) 0.45 1.10 4.10
Net asset value, beginning of year 18.44 18.61 18.16 17.06 12.96
------ ------ ------ ------ ------
Net asset value, end of year $23.20 $18.44 $18.61 $18.16 $17.06
====== ====== ====== ====== ======
RATIO TO AVERAGE NET ASSETS:
Expenses 1.00% 1.00% 1.00%## 1.00% 1.00%
Net investment income 0.78% 1.07% 1.12% 1.16% 1.73%
OTHER:
Average net assets (000 omitted) $40,753 $30,806 $29,305 $20,343 $11,102
Portfolio turnover 99% 116% 97% 99% 135%
Number of units outstanding at
end of year (000 omitted) 1,965 1,989 1,646 1,405 980
Total return 25.78% (0.90%) 2.48% 6.43% 31.69%
</TABLE>
- -------------------
# Reflects voluntary fee waiver of $11,479 or $0.01 per unit. Without
voluntary fee waiver, expense per unit is $0.22.
## Does not reflect voluntary waiver of management fees of $11,479. Net of
the voluntary management fee waiver, the net expense ratio is 0.96% of
average net assets.
* Amounts adjusted to reflect 10:1 reverse split for the years ended 1991 -
1993.
Per unit amounts are calculated using average units outstanding for the period.
The accompanying notes are an integral part of this statement.
7
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
COMMON STOCKS-84.2%
Auto & Transportation-5.6%
26,200 Ford Motor Company $ 759,800
16,900 General Motors Corporation 893,587
10,000 Norfolk Southern Corporation 793,750
9,200 Union Pacific Corporation 607,200
----------
Total Auto & Transportation 3,054,337
----------
Bank-1.8%
14,900 Suntrust Banks, Inc. 1,020,650
----------
Consumer Discretionary-2.7%
16,450 International Flavors & Fragrances, Inc. 789,600
15,000 Penney (J.C.) Company, Inc. 714,375
----------
Total Consumer Discretionary 1,503,975
----------
Consumer Staples-2.0%
8,000 Anheuser-Busch Companies 535,000
6,500 Proctor & Gamble Company 539,500
----------
Total Consumer Staples 1,074,500
----------
Financial Services-10.0%
27,500 American Express Company 1,137,813
13,987 American International Group, Inc. 1,293,797
9,800 First Union Corporation 545,125
12,200 St. Paul Companies, Inc. 678,625
15,800 Transamerica Corporation 1,151,425
10,900 Travelers Corporation 685,338
----------
Total Financial Services 5,492,123
----------
</TABLE>
8
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Healthcare-7.0%
5,800 American Home Products Corporation $ 562,600
10,100 Bristol-Myers Squibb Company 867,337
6,000 Johnson & Johnson 513,750
12,000 Lilly (Eli) & Company 675,000
9,200 Merck & Company, Inc. 604,900
9,700 Pfizer, Inc. 611,100
----------
Total Healthcare 3,834,687
----------
Integrated Oils-9.0%
10,000 Amoco Corporation 718,750
15,300 Chevron Corporation 803,250
12,700 Mobil Corporation 1,422,400
9,393 Royal Dutch Petroleum Company ADR 1,325,587
8,550 Texaco, Inc. 671,175
----------
Total Integrated Oils 4,941,162
----------
Materials & Processing-11.1%
21,800 Dover Corporation 803,875
8,500 Dow Chemical Company 598,188
13,000 Dupont (E. I.) De Nemours & Company 908,375
32,900 Hanna (M.A.) Company 921,200
22,500 Hercules, Inc. 1,268,437
11,900 International Paper Company 450,713
9,500 Monsanto Company 1,163,750
----------
Total Materials & Processing 6,114,538
----------
Other Energy-1.9%
15,200 Enron Corporation 579,500
13,200 Sonat, Inc. 470,250
----------
Total Other Energy 1,049,750
----------
</TABLE>
9
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Producer Durables-9.6%
11,900 General Electric Company $ 856,800
18,400 Lockheed Martin Corporation 1,453,600
19,600 Raytheon Company 926,100
13,400 Sundstrand Corporation 943,025
21,525 Thermo Electron Corporation* 1,119,300
-----------
Total Producer Durables 5,298,825
-----------
Technology-8.0%
6,000 Hewlett Packard Company 502,500
12,500 International Business Machines Corporation 1,146,875
17,200 Motorola, Inc. 980,400
15,000 Texas Instruments, Inc. 776,250
7,200 Xerox Corporation 986,400
-----------
Total Technology 4,392,425
-----------
Utilities-15.5%
19,000 Ameritech Corporation 1,121,000
16,100 AT&T Company 1,042,475
14,700 Bell Atlantic Corporation 983,063
26,500 BellSouth Corporation 1,152,750
36,600 DQE, Inc. 1,125,450
20,000 Duke Power Company 947,500
25,400 Nipsco Industries, Inc. 971,550
20,100 SBC Communications, Inc. 1,155,750
-----------
Total Utilities 8,499,538
-----------
Total Common Stocks (Cost $33,497,476) 46,276,510
-----------
</TABLE>
10
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Value
--------- -----------
<S> <C> <C>
SHORT-TERM INVESTMENTS-9.5%
Repurchase Agreements-9.5%
$2,570,000 Goldman Sachs and Company, dated 12/29/95, 5.75%, due $ 2,570,000
01/02/96 in the amount of $2,570,000 (collateralized
by $2,227,333 U.S. Treasury Note, 7.25%, due 08/15/22,
with a market value of $2,637,816 at 12/31/95),
repurchase proceeds $2,571,642.
2,570,000 Lehman Government Securities, dated 12/29/95, 6.10%, due 2,570,000
01/02/96 in the amount of $2,570,000 (collateralized by $2,411,945
U.S. Treasury Note, 7.13%, due 02/29/00, with a market value of
$2,625,376 at 12/31/95), repurchase proceeds $2,571,742.
90,000 Merrill Lynch Government Securities, dated 12/29/95, 5.60% due 90,000
01/02/96 in the amount of $90,000 (collateralized by $90,450
U.S. Treasury Note, 5.63%, due 10/31/97, with a market value of
$91,981 at 12/31/95), repurchase proceeds $90,056.
-----------
Total Repurchase Agreements 5,230,000
-----------
Number
of Shares Short Term Investment Fund-0.0%
-----------
1,612 Goldman Sachs-Institutional Liquid Assets-Government Portfolio 1,612
-----------
Total Short-Term Investments (Cost $5,231,612) 5,231,612
-----------
Total Investments (Cost $38,729,088)-93.7% 51,508,122
-----------
Other assets in excess of liabilities-6.3% 3,476,955
-----------
NET ASSETS - 100% $54,985,077
===========
</TABLE>
* Non-income producing security.
The accompanying notes are an integral part of this statement.
11
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
EQUITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $38,729,088) $51,508,122
Cash 466
Investment income receivable 77,851
Receivable for units issued 3,446,717
-----------
Total assets 55,033,156
-----------
LIABILITIES
Management fee payable 43,548
Payable for units redeemed 4,531
-----------
Total liabilities 48,079
-----------
NET ASSETS $54,985,077
===========
Net assets were comprised of:
Units of beneficial interest $35,954,575
Accumulated net investment income 3,721,516
Accumulated net realized gain 2,529,952
Net unrealized appreciation 12,779,034
-----------
Net assets at December 31, 1995 $54,985,077
===========
Unit value, offering price and redemp-
tion price per unit ($54,985,077 /
2,297,324 units of beneficial
interest issued and outstanding;
unlimited number of units authorized) $23.93
===========
</TABLE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
EQUITY INCOME FUND
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME
Income
Dividends $ 1,154,363
Interest 230,446
-----------
Total income 1,384,809
-----------
Expenses
Management fee (Note 2) 446,506
Accounting fees 9,720
Audit fees 10,719
Directors' fees 2,288
Insurance 4,498
Legal fees 4,734
Registration fees 3,578
Shareholder reports 1,833
Miscellaneous 3,765
-----------
Total expenses 487,641
Expense subsidy (Note 3) (41,135)
-----------
Net expenses 446,506
-----------
Net investment income 938,303
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investments 884,985
Unrealized appreciation in value
of investments during the year 11,054,690
-----------
Net gain on investments 11,939,675
-----------
Net Increase in Net Assets
Resulting from Operations $12,877,978
===========
</TABLE>
The accompanying notes are an integral part of this statement.
12
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
EQUITY INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase/(Decrease) in Net Assets Years ended December 31,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income $938,303 $893,006
Net realized gain on investments 884,985 587,464
Unrealized appreciation/(depreciation)
in value of investments during the year 11,054,690 (2,995,916)
----------- -----------
Net increase/(decrease) in net assets
resulting from operations 12,877,978 (1,515,446)
----------- -----------
FROM UNIT TRANSACTIONS
Net proceeds from units issued 12,190,344 16,353,926
Cost of units redeemed (9,379,681) (17,147,240)
----------- -----------
Net increase/(decrease) in net assets
resulting from unit transactions 2,810,663 (793,314)
----------- -----------
Total increase/(decrease) in net assets 15,688,641 (2,308,760)
Net assets, beginning of year 39,296,436 41,605,196
----------- -----------
Net assets, end of year $54,985,077 $39,296,436
=========== ===========
Net Change in Units Outstanding
Units issued 552,331 902,344
Units redeemed (450,395) (952,989)
----------- -----------
101,936 (50,645)
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
13
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
EQUITY INCOME FUND
SELECTED PER UNIT DATA AND RATIOS*
(Selected data for a unit outstanding throughout each of the years indicated)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------------------------------
SELECTED PER UNIT DATA: 1995 1994 1993 1992 1991
----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment income $ 0.65 $ 0.57 $ 0.52 $ 0.55 $ 0.61
Expenses (0.23) (0.20) (0.20)# (0.19) (0.20)
Expense subsidy 0.02 0.02 0.03 0.03 0.05
------ ------ ------ ------ ------
Net investment income 0.44 0.39 0.35 0.39 0.46
Net realized and unrealized gain/(loss)
on investments 5.59 (1.01) 1.68 0.50 2.35
------ ------ ------ ------ ------
Net increase/(decrease) in net asset
value 6.03 (0.62) 2.03 0.89 2.81
Net asset value, beginning of year 17.90 18.52 16.49 15.60 12.79
------ ------ ------ ------ ------
Net asset value, end of year $23.93 $17.90 $18.52 $16.49 $15.60
====== ====== ====== ====== ======
RATIO TO AVERAGE NET ASSETS:
Expenses 1.00% 1.00% 1.00%## 1.00% 1.00%
Net investment income 2.10% 2.13% 1.98% 2.52% 3.25%
OTHER:
Average net assets (000 omitted) $44,651 $41,889 $31,308 $18,565 $10,298
Portfolio turnover 11% 42% 40% 25% 39%
Number of units outstanding at
end of year (000 omitted) 2,297 2,195 2,246 1,389 903
Total return 33.72% (3.37%) 12.34% 5.61% 22.10%
</TABLE>
- -------------------
# Reflects voluntary fee waiver of $17,330 or $0.01 per unit. Without
voluntary fee waiver, expense per unit is $0.21.
## Does not reflect voluntary waiver of management fees of $17,330. Net of
the voluntary management fee waiver, the net expense ratio is 0.95% of
average net assets.
* Amounts adjusted to reflect 10:1 reverse split for the years ended 1991 -
1993.
Per unit amounts are calculated using average units outstanding for the period.
The accompanying notes are an integral part of this statement.
14
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
---------- ----------
<C> <S> <C>
LONG-TERM INVESTMENTS-91.6%
Common Stocks-52.3%
Consumer Discretionary-11.0%
2,900 Disney (Walt) Company $ 171,100
12,300 Federated Department Stores * 338,250
2,800 Gannett Company, Inc. 171,850
11,400 Gap, Inc. 478,800
10,300 Kroger Company * 386,250
1,900 McDonalds Corporation 85,738
3,400 Omnicom Group, Inc. 126,650
1,300 Sears Roebuck & Company 50,700
7,000 Viacom, Inc. * 331,625
9,300 Wal Mart Stores, Inc. 208,087
----------
Total Consumer Discretionary 2,349,050
----------
Consumer Staples-6.1%
6,500 Coca Cola Company 482,625
2,400 Gillette Company 125,100
4,200 Phillip Morris Companies, Inc. 380,100
3,700 Procter & Gamble Company 307,100
----------
Total Consumer Staples 1,294,925
----------
Financial Services-2.6%
8,400 American Express Company 347,550
1,300 American International Group, Inc. 120,250
700 Federal National Mortgage Association 86,888
----------
Total Financial Services 554,688
----------
</TABLE>
15
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
---------- ----------
<C> <S> <C>
Healthcare-10.8%
7,500 Amgen, Inc. * $ 445,313
2,900 Johnson & Johnson 248,312
5,200 Medtronic, Inc. 290,550
6,600 Merck & Company, Inc. 433,950
3,500 Pfizer, Inc. 220,500
4,400 Schering Plough Corporation 240,900
9,400 Teva Pharmaceutical Industries, Ltd. ADR 435,925
----------
Total Healthcare 2,315,450
----------
Integrated Oil-0.6%
1,600 Exxon Corporation 128,200
----------
Materials & Processing-4.6%
4,000 Aluminum Company of America 211,500
5,100 Inco, Ltd. 169,575
1,400 Minnesota Mining & Manufacturing Company 92,750
2,700 Phelps Dodge Corporation 168,075
5,000 Potash Corporation of Saskatchewan, Inc. 354,375
----------
Total Materials & Processing 996,275
----------
Producer Durables-4.1%
1,900 Boeing Company 148,912
4,100 Fluor Corporation 270,600
6,500 General Electric Company 468,000
----------
Total Producer Durables 887,512
----------
</TABLE>
16
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
---------- ----------
<C> <S> <C>
Technology-7.8%
2,600 Adobe Systems, Inc. $ 161,200
4,050 Cisco Systems * 302,231
3,500 Hewlett Packard Company 293,125
4,800 Intel Corporation 272,400
3,700 Microsoft Corporation * 324,675
2,600 Motorola, Inc. 148,200
4,200 Newbridge Networks Corporation * 173,775
----------
Total Technology 1,675,606
----------
Utilities-4.7%
8,200 AT&T Company 530,950
1,900 Bell Atlantic Corporation 127,063
4,100 QUALCOMM, Inc. * 176,300
5,200 WorldCom, Inc. * 183,300
----------
Total Utilities 1,017,613
----------
Total Common Stocks (Cost $9,199,170) 11,219,319
----------
Principal
Amount Corporate Bonds-7.4%
-----------
Auto & Transportation-2.1%
$360,000 Ford Motor Company, 8.88%, due 01/15/22 448,388
----------
Banks-3.6%
400,000 BankAmerica Corporation, 6.85%, due 03/01/03 414,928
360,000 U.S. West Financial Services, Inc., 6.45%,
due 11/06/97 365,558
----------
Total Banks 780,486
----------
</TABLE>
17
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Value
---------- ----------
<C> <S> <C>
Financial Services-1.7%
$360,000 Beneficial Corporation, 6.60%, due 10/29/97 $ 366,394
----------
Total Corporate Bonds (Cost $1,482,615) 1,595,268
----------
U.S. Government and Agency Obligations-31.9%
U.S. Government Agency Obligations-4.4%
500,000 Federal Home Loan Mortgage Corporation, 8.35%,
due 10/06/04 518,947
400,000 Federal National Mortgage Association, 7.80%,
due 06/10/02 411,270
----------
Total U.S. Government Agency Obligations 930,217
----------
U.S. Treasury Obligations-27.5%
2,575,000 U.S. Treasury Bond, 6.25%, due 08/15/23 2,646,618
400,000 U.S. Treasury Bond, 8.13%, due 05/15/21 506,250
1,230,000 U.S. Treasury Note, 5.88%, due 02/15/04 1,254,984
1,450,000 U.S. Treasury Note, 6.25%, due 05/31/00 1,499,390
----------
Total U.S. Treasury Obligations 5,907,242
----------
Total U.S. Government and Agency Obligations
(Cost $6,363,516) 6,837,459
----------
Total Long-Term Investments (Cost $17,045,301) 19,652,046
----------
</TABLE>
18
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Value
---------- ----------
<C> <S> <C>
SHORT-TERM INVESTMENTS-4.7%
Repurchase Agreement-4.2%
$907,000 Lehman Government Securities, dated 12/29/95, 6.10%, due $ 907,000
01/02/96 in the amount of $907,000 (collateralized by $851,220 -----------
U.S. Treasury Note, 7.13%, due 02/29/00, with a market value
of $926,543 at 12/31/95), repurchase proceeds $907,615.
Number
of Shares Short-Term Investment Funds-0.5%
-----------
17,000 Fidelity Institutional Cash Portfolios-U.S. Government Portfolio 17,000
93,846 Goldman Sachs-Institutional Liquid Assets-Government Portfolio 93,846
-----------
Total Short-Term Investment Funds 110,846
-----------
Total Short-Term Investments (Cost $1,017,846) 1,017,846
-----------
Total Investments (Cost $18,063,147)-96.3% 20,669,892
-----------
Other assets in excess of liabilities-3.7% 801,555
-----------
NET ASSETS - 100% $21,471,447
===========
</TABLE>
- -------------
* Non-income producing security.
The accompanying notes are an integral part of this statement.
19
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $18,063,147) $20,669,892
Cash 543
Investment income receivable 161,856
Receivable for investment securities sold 634,123
Receivable for units issued 23,820
-----------
Total assets 21,490,234
-----------
LIABILITIES
Management fee payable 18,787
-----------
Total liabilities 18,787
-----------
NET ASSETS $21,471,447
===========
Net assets were comprised of:
Units of beneficial interest $ 5,796,617
Accumulated net investment income 6,206,148
Accumulated net realized gain 6,861,937
Net unrealized appreciation 2,606,745
-----------
Net assets at December 31, 1995 $21,471,447
===========
Unit value, offering price and redemp-
tion price per unit ($21,471,447 /
1,010,562 units of beneficial
interest issued and outstanding;
unlimited number of units authorized) $21.25
===========
</TABLE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
BALANCED FUND
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME
Income
Dividends $ 184,469
Interest 675,657
----------
Total income 860,126
----------
Expenses
Management fee (Note 2) 218,177
Accounting fees 9,720
Audit fees 10,719
Directors' fees 2,288
Insurance 4,019
Legal fees 4,734
Registration fees 2,185
Shareholder reports 1,833
Miscellaneous 2,488
----------
Total expenses 256,163
Expense subsidy (Note 3) (37,986)
----------
Net expenses 218,177
----------
Net investment income 641,949
----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investments 1,560,947
Unrealized appreciation in value
of investments during the year 2,414,091
----------
Net gain on investments 3,975,038
----------
Net Increase in Net Assets
Resulting from Operations $4,616,987
==========
</TABLE>
The accompanying notes are an integral part of this statement.
20
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase/(Decrease) in Net Assets Years ended December 31,
-----------------------------
1995 1994
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 641,949 $ 749,579
Net realized gain/(loss) on investments 1,560,947 (105,513)
Unrealized appreciation/(depreciation) in value
of investments during the year 2,414,091 (1,408,322)
----------- ------------
Net increase/(decrease) in net assets
resulting from operations 4,616,987 (764,256)
----------- ------------
FROM UNIT TRANSACTIONS
Net proceeds from units issued 3,492,374 8,354,427
Cost of units redeemed (9,439,693) (22,064,355)
----------- ------------
Net decrease in net assets resulting
from unit transactions (5,947,319) (13,709,928)
----------- ------------
Total decrease in net assets (1,330,332) (14,474,184)
Net assets, beginning of year 22,801,779 37,275,963
----------- ------------
Net assets, end of year $21,471,447 $ 22,801,779
=========== ============
Net Change in Units Outstanding
Units issued 179,016 487,228
Units redeemed (496,947) (1,281,307)
----------- ------------
(317,931) (794,079)
=========== ============
</TABLE>
The accompanying notes are an integral part of this statement.
21
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
BALANCED FUND
SELECTED PER UNIT DATA AND RATIOS*
(Selected data for a unit outstanding throughout each of the years indicated)
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------------------------------------------------
SELECTED PER UNIT DATA: 1995 1994 1993 1992 1991
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Investment income $0.76 $0.63 $0.64 $0.68 $0.68
Expenses (0.23) (0.20) (0.19) (0.18) (0.18)
Expense subsidy 0.04 0.03 0.02 0.02 0.04
------ ------ ------ ------ ------
Net investment income 0.57 0.46 0.47 0.52 0.54
Net realized and unrealized
gain/(loss) on investments 3.52 (0.86) 0.52 0.32 2.52
------ ------ ------ ------ ------
Net increase/(decrease) in net asset
value 4.09 (0.40) 0.99 0.84 3.06
Net asset value, beginning of year 17.16 17.56 16.57 15.73 12.67
------ ------ ------ ------ ------
Net asset value, end of year $21.25 $17.16 $17.56 $16.57 $15.73
====== ====== ====== ====== ======
RATIO TO AVERAGE NET ASSETS:
Expenses 1.00% 1.00% 1.00% 1.00% 1.00%
Net investment income 2.94% 2.69% 2.78% 3.33% 3.77%
OTHER:
Average net assets (000 omitted) $21,843 $27,825 $51,971 $43,061 $22,446
Portfolio turnover 98% 157% 148% 187% 213%
Number of units outstanding at
end of year (000 omitted) 1,011 1,328 2,123 3,084 1,942
Total return 23.83% (2.27%) 6.01% 5.32% 24.16%
</TABLE>
- --------------
* Amounts adjusted to reflect 10:1 reverse split for the years ended
1991 - 1993.
Per unit amounts are calculated using average units outstanding for the period.
The accompanying notes are an integral part of this statement.
22
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Value
------------ -----------
<C> <S> <C>
LONG-TERM INVESTMENTS-79.9%
Corporate Bonds-8.5%
Auto & Transportation-2.5%
$1,140,000 Ford Motor Company, 8.88%, due 01/15/22 $ 1,419,894
-----------
Banks-4.0%
1,100,000 BankAmerica Corporation, 6.85%, due 03/01/03 1,141,053
1,140,000 U.S. West Financial Services, Inc., 6.45%, due 11/06/97 1,157,602
-----------
Total Banks 2,298,655
-----------
Financial Services-2.0%
1,140,000 Beneficial Corporation, 6.60%, due 10/29/97 1,160,246
-----------
Total Corporate Bonds (Cost $4,530,890) 4,878,795
-----------
U.S. Government and Agency Obligations-71.4%
U.S. Government Agency Obligations-8.2%
2,550,000 Federal Home Loan Mortgage Corporation, 8.35%, due 10/06/04 2,646,632
2,000,000 Federal National Mortgage Association, 7.80%, due 06/10/02 2,056,352
-----------
Total U.S. Government Agency Obligations (Cost $4,595,746) 4,702,984
-----------
U.S. Treasury Obligations-63.2%
7,600,000 U.S. Treasury Bond, 6.25%, due 08/15/23 7,811,379
6,000,000 U.S. Treasury Bond, 8.13%, due 05/15/21 7,593,750
5,300,000 U.S. Treasury Note, 5.88%, due 02/15/04 5,407,653
15,000,000 U.S. Treasury Note, 6.25%, due 05/31/00 15,510,928
-----------
Total U.S. Treasury Obligations (Cost $34,248,032) 36,323,710
-----------
Total U.S. Government and Agency Obligations
(Cost $38,843,778) 41,026,694
-----------
Total Long-Term Investments (Cost $43,374,668) 45,905,489
-----------
</TABLE>
23
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Value
------------ -----------
<C> <S> <C>
SHORT-TERM INVESTMENTS-19.2%
Repurchase Agreements-9.9%
$2,866,000 Goldman Sachs and Company, dated 12/29/95, 5.75%, due 01/02/96 $2,866,000
in the amount of $2,866,000 (collateralized by $2,483,867 U.S.
Treasury Note, 7.25%, due 08/15/22, with a market value of $2,941,627
at 12/31/95), repurchase proceeds of $2,867,831.
972,000 Lehman Government Securities, dated 12/29/95, 6.10%, due 01/02/96 972,000
in the amount of $972,000 (collateralized by $912,222 U.S. Treasury
Note, 7.13%, due 02/29/00, with a market value of $992,944 at
12/31/95), repurchase proceeds $972,659.
1,836,000 Merrill Lynch Government Securities, dated 12/29/95, 5.60%, due 1,836,000
01/02/96 in the amount of $1,836,000 (collateralized by $1,845,180
U.S. Treasury Note, 5.63%, due 10/31/97, with a market value of
$1,876,419 at 12/31/95), repurchase proceeds $1,837,142. -----------
Total Repurchase Agreements 5,674,000
-----------
Number
of Shares Short-Term Investment Funds-4.6%
----------
2,562,000 Fidelity Institutional Cash Portfolios-U.S. Government Portfolio 2,562,000
76,091 Goldman Sachs-Institutional Liquid Assets-Government Portfolio 76,091
-----------
Total Short-Term Investment Funds 2,638,091
-----------
Principal
Amount U.S. Government Obligation-4.7%
- ------------
$2,728,000 U.S. Treasury Bill, 5.37%, due 02/22/96 2,710,145
-----------
Total Short-Term Investments (Cost $11,022,236) 11,022,236
-----------
Total Investments (Cost $54,396,904)-99.1% 56,927,725
-----------
Other assets in excess of liabilities-0.9% 523,902
-----------
NET ASSETS - 100% $57,451,627
===========
</TABLE>
The accompanying notes are an integral part of this statement.
24
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $54,396,904) $56,927,725
Cash 480
Investment income receivable 606,264
Receivable for units issued 15,550
-----------
Total assets 57,550,019
-----------
LIABILITIES
Management fee payable 36,908
Payable for units redeemed 61,484
-----------
Total liabilities 98,392
-----------
NET ASSETS $57,451,627
===========
Net assets were comprised of:
Units of beneficial interest $35,363,416
Accumulated net investment income 17,856,273
Accumulated net realized gain 1,701,117
Net unrealized appreciation 2,530,821
-----------
Net assets at December 31, 1995 $57,451,627
===========
Unit value, offering price and redemp-
tion price per unit ($57,451,627 /
3,154,357 units of beneficial
interest issued and outstanding;
unlimited number of units authorized) $18.21
===========
</TABLE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
INCOME FUND
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME
Income
Dividends $ 74,408
Interest 3,488,861
-----------
Total income 3,563,269
-----------
Expenses
Management fee (Note 2) 546,375
Accounting fees 9,720
Audit fees 10,719
Directors' fees 2,288
Insurance 4,738
Legal fees 4,734
Registration fees 3,734
Shareholder reports 1,833
Miscellaneous 4,673
-----------
Total expenses 588,814
Expense subsidy (Note 3) (42,439)
Voluntary fee reduction (Note 3) (136,617)
-----------
Net expenses 409,758
-----------
Net investment income 3,153,511
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investments 1,136,606
Unrealized appreciation in value
of investments during the year 4,897,758
-----------
Net gain on investments 6,034,364
-----------
Net Increase in Net Assets
Resulting from Operations $9,187,875
===========
</TABLE>
The accompanying notes are an integral part of this statement.
25
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase/(Decrease) in Net Assets Years ended December 31,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 3,153,511 $ 3,465,862
Net realized gain/(loss) on investments 1,136,606 (2,135,445)
Unrealized appreciation/(depreciation)
in value of investments during the year 4,897,758 (4,597,137)
------------ ------------
Net increase/(decrease) in net assets
resulting from operations 9,187,875 (3,266,720)
------------ ------------
FROM UNIT TRANSACTIONS
Net proceeds from units issued 10,958,151 12,905,219
Cost of units redeemed (14,929,065) (33,488,420)
------------ ------------
Net decrease in net assets resulting
from unit transactions (3,971,065) (20,583,201)
------------ ------------
Total increase/(decrease) in net assets 5,216,810 (23,849,921)
Net assets, beginning of year 52,234,817 76,084,738
------------ ------------
Net assets, end of year $57,451,627 $52,234,817
============ ============
Net Change in Units Outstanding
Units sold 643,190 828,838
Units redeemed (883,838) (2,157,807)
----------- -----------
(240,648) (1,328,969)
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
26
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
INCOME FUND
SELECTED PER UNIT DATA AND RATIOS*
(Selected data for a unit outstanding throughout each of the years indicated)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------------------------------
SELECTED PER UNIT DATA: 1995 1994 1993 1992 1991
----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment income $ 1.09 $ 0.97 $ 0.97 $ 1.02 $ 0.97
Expenses (0.14)** (0.14)** (0.17) (0.16) (0.15)
Expense subsidy 0.02 0.01 0.02 0.02 0.02
------ ------ ------ ------ ------
Net investment income 0.97 0.84 0.82 0.88 0.84
Net realized and unrealized gain/(loss)
on investments 1.85 (1.56) 0.67 (0.16) 0.84
------ ------ ------ ------ ------
Net increase/(decrease) in net asset
value 2.82 (0.72) 1.49 0.72 1.68
Net asset value, beginning of year 15.39 16.11 14.62 13.90 12.22
------ ------ ------ ------ ------
Net asset value, end of year $18.21 $15.39 $16.11 $14.62 $13.90
====== ====== ====== ====== ======
RATIO TO AVERAGE NET ASSETS:
Expenses 0.75%*** 0.75%*** 1.00% 1.00% 1.00%
Net investment income 5.77% 5.43% 5.20% 6.21% 6.57%
OTHER:
Average net assets (000 omitted) $54,637 $63,817 $70,750 $53,886 $29,199
Portfolio turnover 93% 239% 156% 285% 304%
Number of units outstanding at
end of year (000 omitted) 3,154 3,395 4,724 4,413 3,012
Total return 18.38% (4.47%) 10.18% 5.13% 13.73%
</TABLE>
- -------------------
* Amounts adjusted to reflect 10:1 reverse split for the years ended 1991 -
1993.
** Reflects management fee reduction of $136,617 or $0.04 per unit and $99,627
or $0.03 per unit for the years ended December 31, 1995 and 1994
respectively. Without management fee reduction, expense per unit is $0.18
and $0.17 for the years ended December 31, 1995 and 1994 respectively.
*** Reflects management fee reductions of .25% or $136,617 and $99,627 for the
years ended December 31, 1995 and 1994 respectively. For the year ended
December 31, 1994 the actual net expense ratio for the year was .8% of
average net assets as the fee reduction went into effect on 5/2/94.
Per unit amounts are calculated using average units outstanding for the period.
The accompanying notes are an integral part of this statement.
27
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
CORE EQUITY FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
- --------- -----
<S> <C> <C>
COMMON STOCKS-95.0%
Auto & Transportation-4.3%
5,000 AMR Corporation * $ 371,250
7,500 Chrysler Corporation 415,313
5,000 General Motors Corporation 264,375
----------
Total Auto & Transportation 1,050,938
----------
Consumer Discretionary-11.1%
4,000 Disney (Walt) Company 236,000
5,000 Eastman Kodak Company 335,000
10,000 Federated Department Stores * 275,000
9,500 Mattel, Inc. 292,125
6,750 McDonalds Corporation 304,594
13,500 News Corporation, Ltd. 288,563
9,500 Sears Roebuck & Company 370,500
6,750 Tambrands, Inc. 322,313
12,500 Wal Mart Stores, Inc. 279,688
-----------
Total Consumer Discretionary 2,703,783
-----------
Consumer Staples-8.3%
6,000 Clorox Company 429,750
5,000 Coca Cola Company 371,250
4,500 Philip Morris Companies, Inc. 407,250
10,500 Sara Lee Corporation 334,687
14,500 Sysco Corporation 471,250
-----------
Total Consumer Staples 2,014,187
-----------
</TABLE>
28
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
CORE EQUITY FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
- --------- -----
<S> <C> <C>
Financial Services-12.6%
8,500 American Express Company $ 351,688
6,000 American International Group, Inc. 555,000
4,500 Federal National Mortgage Association 558,563
6,000 MBIA, Inc. 450,000
8,000 Student Loan Marketing Association 527,000
10,000 Travelers Corporation 628,750
----------
Total Financial Services 3,071,001
----------
Healthcare-11.4%
4,500 American Home Products Corporation 436,500
6,000 Bristol-Myers Squibb Company 515,250
8,500 Columbia HCA/Healthcare 431,375
4,400 Genzyme Corporation * 274,450
12,500 Humana, Inc. * 342,187
3,000 Johnson & Johnson 256,875
8,000 Merck & Company, Inc. 526,000
----------
Total Healthcare 2,782,637
----------
Integrated Oils-8.4%
7,500 Amoco Corporation 539,063
4,553 British Petroleum Company PLC 464,975
6,000 Exxon Corporation 480,750
5,000 Mobil Corporation 560,000
----------
Total Integrated Oils 2,044,788
----------
Materials & Processing-6.6%
9,500 Dover Corporation 350,313
4,500 Dow Chemical Company 316,688
4,000 Dupont (E.I.) de Nemours & Company 279,500
11,500 James River Corporation of Virginia 277,438
5,750 Minnesota Mining & Manufacturing Company 380,938
----------
Total Materials & Processing 1,604,877
----------
</TABLE>
29
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
CORE EQUITY FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
- --------- -----
<S> <C> <C>
Other Energy-2.5%
8,800 Panhandle Eastern Corporation $ 245,300
7,500 Tenneco, Inc. 372,188
----------
Total Other Energy 617,488
----------
Producer Durables-6.6%
6,500 Allied Signal, Inc. 308,750
4,000 Caterpillar, Inc. 235,000
5,000 Emerson Electric Company 408,750
9,000 General Electric Company 648,000
----------
Total Producer Durables 1,600,500
----------
Technology-11.6%
9,500 Ceridian Corporation * 391,875
4,250 Hewlett Packard Company 355,938
6,500 Intel Corporation 368,875
4,250 International Business Machines Corporation 389,937
3,300 Microsoft Corporation * 289,575
6,500 Motorola, Inc. 370,500
11,500 Silicon Graphics, Inc. * 316,250
2,500 Xerox Corporation 342,500
----------
Total Technology 2,825,450
----------
Utilities-11.6%
8,500 AT & T Company 550,375
12,500 GTE Corporation 550,000
12,500 Nipsco Industries, Inc. 478,125
6,500 QUALCOMM, Inc. * 279,500
8,500 SBC Communications, Inc. 488,750
13,500 WorldCom, Inc. * 475,869
-----------
Total Utilities 2,822,619
-----------
Total Common Stocks (Cost $20,011,947) 23,138,268
-----------
</TABLE>
30
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
CORE EQUITY FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----
<S> <C> <C>
SHORT-TERM INVESTMENTS-4.9%
Repurchase Agreement-4.8%
$1,171,000 Goldman Sachs and Company, dated 12/29/95, 5.75%, due $ 1,171,000
01/02/96 in the amount of $1,171,000 (collateralized by $1,014,867 -----------
U.S. Treasury Note, 7.25%, due 08/15/22, with a market value of
$1,201,900 at 12/31/95), repurchase proceeds $1,171,748.
Number
of Shares
- ---------
Short-Term Investment Funds-0.1%
1,000 Fidelity Institutional Cash Portfolio-U.S. Government Portfolio 1,000
14,430 Goldman Sachs-Institutional Liquid Assets-Government Portfolio 14,430
-----------
Total Short-Term Investment Funds 15,430
-----------
Total Short-Term Investment (Cost $1,186,430) 1,186,430
-----------
Total Investments (Cost $21,198,377)-99.9% 24,324,698
Other assets in excess of liabilities-0.1% 42,436
-----------
NET ASSETS - 100% $24,367,134
===========
</TABLE>
* Non-income producing.
The accompanying notes are an integral part of this statement.
31
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
CORE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $21,198,377) $24,324,698
Cash 285
Investment income receivable 44,283
Receivable for units issued 22,951
-----------
Total assets 24,392,217
-----------
LIABILITIES
Management fee payable 20,762
Payable for units redeemed 4,321
-----------
Total liabilities 25,083
-----------
NET ASSETS $24,367,134
===========
Net assets were comprised of:
Units of beneficial interest $19,585,429
Accumulated net investment income 666,699
Accumulated net realized gain 988,685
Net unrealized appreciation 3,126,321
-----------
Net assets at December 31, 1995 $24,367,134
===========
Unit value, offering price and redemp-
tion price per unit ($24,367,134 /
1,873,587 units of beneficial
interest issued and outstanding;
unlimited number of units authorized) $13.01
===========
</TABLE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
CORE EQUITY FUND
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME
Income
Dividends $ 466,860
Interest 78,364
-----------
Total income 545,224
-----------
Expenses
Management fee (Note 2) 223,368
Accounting fees 9,720
Audit fees 10,719
Directors' fees 2,288
Insurance 4,019
Legal fees 4,734
Registration fees 2,385
Shareholder reports 1,833
Miscellaneous 1,921
-----------
Total expenses 260,987
Expense subsidy (Note 3) (37,619)
-----------
Net expenses 223,368
-----------
Net investment income 321,856
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investments 1,676,560
Unrealized appreciation in value
of investments during the year 3,034,911
-----------
Net gain on investments 4,711,471
-----------
Net Increase in Net Assets
Resulting from Operations $ 5,033,327
===========
</TABLE>
The accompanying notes are an integral part of this statement.
32
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
CORE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase/(Decrease) in Net Assets Years ended December 31,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 321,856 $ 284,826
Net realized gain/(loss) on investments 1,676,560 (577,754)
Unrealized appreciation/(depreciation)
in value of investments during the year 3,034,911 (331,898)
----------- -----------
Net increase/(decrease) in net assets
resulting from operations 5,033,327 (624,826)
----------- -----------
FROM UNIT TRANSACTIONS
Net proceeds from units issued 4,888,390 16,424,835
Cost of units redeemed (6,590,153) (6,482,572)
----------- -----------
Net increase/(decrease) in net assets
resulting from unit transactions (1,701,763) 9,942,263
----------- -----------
Total increase in net assets 3,331,564 9,317,437
Net assets, beginning of year 21,035,570 11,718,133
----------- -----------
Net assets, end of year $24,367,134 $21,035,570
=========== ===========
Net Change in Units Outstanding
Units issued 412,444 1,563,804
Units redeemed (569,249) (618,915)
----------- -----------
(156,805) 944,889
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
33
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
CORE EQUITY FUND
SELECTED PER UNIT DATA AND RATIOS
(Selected data for a unit outstanding throughout each of the periods indicated)
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------------
SELECTED PER UNIT DATA: 1995 1994 1993*
----------- --------- -----------
<S> <C> <C> <C>
Investment income $ 0.29 $ 0.28 $ 0.21
Expenses (0.14)# (0.13) (0.20)#
Expense subsidy 0.02 0.03 0.13
------ ------ ------
Net investment income 0.17 0.18 0.14
Net realized and unrealized gain/(loss)
on investments 2.48 (0.62) 0.66
------ ------ ------
Net increase/(decrease) in net asset
value 2.65 (0.44) 0.80
Net asset value, beginning of period 10.36 10.80 10.00
------ ------ ------
Net asset value, end of period $13.01 $10.36 $10.80
====== ====== ======
RATIO TO AVERAGE NET ASSETS:
Expenses 1.00% 1.00% 1.00%##
Net investment income 1.44% 1.68% 1.84%**
OTHER:
Average net assets (000 omitted) $22,336 $16,948 $ 4,356
Portfolio turnover 133% 129% 83%
Number of units outstanding at
end of period (000 omitted) 1,874 2,030 1,086
Total return 25.53% (4.03%) 7.95%***
</TABLE>
- -------------------
# Reflects voluntary fee waiver of $6,949 or $0.01 per unit. Without
voluntary fee waiver, expense per unit is $0.21.
## Does not reflect voluntary waiver of management fees of $6,949. Net of
the voluntary management fee waiver, the net expense ratio is 0.79% of
average net assets. This figure is annualized.
* Commencement of Operations April 1, 1993.
** Annualized.
*** Not annualized.
Per unit amounts are calculated using average units outstanding for the period.
The accompanying notes are an integral part of this statement.
34
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
SMALL CAPITALIZATION FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
- ---------- -----
COMMON STOCKS-86.7%
Consumer Discretionary-16.9%
<C> <S> <C>
6,600 Career Horizons, Inc. * $ 222,750
5,300 Central European Media Enterprises * 108,650
4,200 Clear Channel Communications * 185,325
12,200 Corrections Corporation of America* 452,925
9,390 Evergreen Media Corporation* 300,480
5,200 Gymboree Corporation * 107,250
3,885 Harman International Industries, Inc. 155,886
3,600 Proffitt's, Inc. * 94,500
6,850 St. John Knits, Inc. 363,906
8,450 Trump Hotels & Casino Resort, Inc. * 181,675
----------
Total Consumer Discretionary 2,173,347
----------
Financial Services-13.0%
5,250 Capstead Mortgage Corporation 120,094
16,700 City National Corporation 233,800
7,000 Collective Bancorp, Inc. 177,625
3,500 Evans Withycombe Residential, Inc. 75,250
10,400 Ideon Group, Inc. 105,300
6,500 Magna Group, Inc. 154,375
8,200 Mercer International, Inc. * 168,100
9,900 Roosevelt Financial Group, Inc. 191,812
3,200 Vesta Insurance Group, Inc. 174,400
3,200 Weeks Corporation 80,400
9,300 WFS Financial * 181,350
----------
Total Financial Services 1,662,506
----------
</TABLE>
35
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
SMALL CAPITALIZATION FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
- ---------- -----
<S> <C> <C>
Healthcare-18.4%
16,950 Applied Bioscience International, Inc.* $ 114,412
19,650 Centocor, Inc.* 606,694
11,950 Circon Corporation * 241,988
12,400 Immunex Corporation* 204,600
5,000 Martek Biosciences Corporation * 126,250
4,050 Nellcor, Inc.* 234,900
3,450 Occusystems, Inc. * 69,000
13,350 Sofamor/Danek Group, Inc. * 378,806
8,850 Sybron International Corporation * 210,187
3,700 Watson Pharmaceuticals * 181,300
----------
Total Healthcare 2,368,137
----------
Integrated Oil-0.7%
6,500 Cabot Oil & Gas Corporation 95,063
----------
Materials & Processing-9.4%
4,100 Dekalb Genetics Corporation 185,012
4,900 NCI Building Systems, Inc. * 121,275
6,400 Potash Corporation of Saskatchewan, Inc. 453,600
7,300 Vigoro Corporation 450,775
----------
Total Materials & Processing 1,210,662
----------
Other Energy-5.4%
4,550 Barrett Resources Corporation * 133,656
5,250 Energy Ventures, Inc. * 132,563
16,200 Falcon Drilling, Inc. * 243,000
8,200 Parker and Parsley Petroleum Company 180,400
---------
Total Other Energy 689,619
---------
</TABLE>
36
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
SMALL CAPITALIZATION FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
- --------- -----
Producer Durables-6.5%
<S> <C> <C>
8,700 Greenfield Industries, Inc. $ 271,875
7,800 Sanifill, Inc. * 260,325
10,700 Titan Wheel International, Inc. 173,875
6,800 USA Waste Services, Inc. * 128,350
-----------
Total Producer Durables 834,425
-----------
Technology-14.7%
9,500 Black Box Operating Corporation * 155,562
7,300 Burr Brown Corporation * 186,150
9,700 Computervision Corporation * 149,137
6,850 Global Direct Mail Corporation * 188,375
8,150 International Rectifier Corporation * 203,750
6,300 National Computer Systems, Inc. 118,912
8,650 Pacific Scientific Companies 214,088
4,900 Pair Gain Technologies, Inc. * 268,275
6,100 PSC, Inc. * 56,425
8,300 Rational Software Corporation * 185,713
12,000 Westcott Communications * 165,000
-----------
Total Technology 1,891,387
-----------
Utilities-1.7%
5,300 California Energy Company, Inc.* 103,350
2,200 Tejas Gas Corporation * 116,325
-----------
Total Utilities 219,675
-----------
Total Common Stocks (Cost $8,089,018) 11,144,821
-----------
</TABLE>
37
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
SMALL CAPITALIZATION FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----
<S> <C> <C>
SHORT-TERM INVESTMENTS-16.6%
Repurchase Agreements-13.1%
$414,000 Barclays BZW Securities, dated 12/29/95, 5.50%, due 01/02/96 $ 414,000
in the amount of $414,000 (collateralized by $400,249 U.S. Treasury
Note, 7.50%, due 01/31/97, with a market value of $422,073 at
12/31/95), repurchase proceeds $414,253.
636,000 Goldman Sachs and Company, dated 12/29/95, 5.75%, due 01/02/96 636,000
in the amount of $636,000 (collateralized by $551,200 U.S. Treasury
Note, 7.25%, due 08/15/22, with a market value of $652,783 at
12/31/95), repurchase proceeds $636,406.
636,000 Merrill Lynch Government Securities, dated 12/29/95, 5.60%, due 636,000
01/02/96 in the amount of $639,180 (collateralized by $649,901
U.S. Treasury Note, 5.63%, due 10/31/97, with a market value of
$650,001 at 12/31/95), repurchase proceeds $636,396.
-----------
Total Repurchase Agreements 1,686,000
-----------
Number
of Shares
- --------- Short-Term Investment Funds-0.4%
26,000 Fidelity Institutional Cash Portfolios-U.S. Government Portfolio 26,000
24,350 Goldman Sachs-Institutional Liquid Assets-Government Portfolio 24,350
---------
Total Short-Term Investment Funds 50,350
---------
</TABLE>
38
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
SMALL CAPITALIZATION FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----
<S> <C> <C>
U.S. Government Obligation-3.1%
$400,000 U.S. Treasury Bill, 5.12%, due 03/21/96 $ 395,449
-----------
Total Short-Term Investments (Cost $2,131,799) 2,131,799
-----------
Total Investments (Cost $10,220,817)-103.3% 13,276,620
-----------
Liabilities in excess of other assets-(3.3%) (428,580)
-----------
NET ASSETS - 100% $12,848,040
===========
</TABLE>
* Non-income producing security.
The accompanying notes are an integral part of this statement.
39
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
SMALL CAPITALIZATION FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $10,220,817) $13,276,620
Cash 439
Investment income receivable 5,075
Receivable for units issued 4,633
-----------
Total assets 13,286,767
-----------
LIABILITIES
Investments securities purchased 427,213
Management fee payable 10,339
Payable for units redeemed 1,175
-----------
Total liabilities 438,727
-----------
NET ASSETS $12,848,040
===========
Net assets were comprised of:
Units of beneficial interest $10,058,092
Accumulated net investment income 112,845
Accumulated net realized loss (378,700)
Net unrealized appreciation 3,055,803
-----------
Net assets at December 31, 1995 $12,848,040
===========
Unit value, offering price and redemp-
tion price per unit ($12,848,040 /
957,968 units of beneficial
interest issued and outstanding;
unlimited number of units authorized) $13.41
===========
</TABLE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
SMALL CAPITALIZATION FUND
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME
Income
Dividends $ 80,961
Interest 70,156
-----------
Total income 151,117
-----------
Expenses
Management fee (Note 2) 119,346
Accounting fees 9,720
Audit fees 10,719
Directors' fees 2,288
Insurance 3,659
Legal fees 4,734
Registration fees 1,744
Shareholder reports 1,833
Miscellaneous 1,231
-----------
Total expenses 155,274
Expense subsidy (Note 3) (35,928)
Voluntary fee reduction (Note 3) (15,584)
-----------
Net expenses 103,762
-----------
Net investment income 47,355
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investments 370,797
Unrealized appreciation in value
of investments during the year 2,480,282
-----------
Net gain on investments 2,851,079
-----------
Net Increase in Net Assets
Resulting from Operations $2,898,434
===========
</TABLE>
The accompanying notes are an integral part of this statement.
40
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
SMALL CAPITALIZATION FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase/(Decrease) in Net Assets Years ended December 31,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 47,355 $ 53,358
Net realized gain/(loss) on investments 370,797 (641,446)
Unrealized appreciation in value of
investments during the year 2,480,282 (262,884)
----------- -----------
Net increase/(decrease) in net assets
resulting from operations 2,898,434 (850,972)
----------- -----------
FROM UNIT TRANSACTIONS
Net proceeds from units issued 2,518,482 5,609,939
Cost of units redeemed (1,835,378) (5,330,322)
----------- -----------
Net increase in net assets resulting
from unit transactions 683,104 279,617
----------- -----------
Total increase/(decrease) in net assets 3,581,538 (571,355)
Net assets, beginning of year 9,266,502 9,837,857
----------- -----------
Net assets, end of year $12,848,040 $9,266,502
=========== ===========
Net Change in Units Outstanding
Units issued 215,639 535,483
Units redeemed (163,732) (532,454)
----------- -----------
51,907 3,029
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
41
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
SMALL CAPITALIZATION FUND
SELECTED PER UNIT DATA AND RATIOS
(Selected data for a unit outstanding throughout each of the periods indicated)
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------------
SELECTED PER UNIT DATA: 1995 1994 1993***
----------- --------- -----------
<S> <C> <C> <C>
Investment income $ 0.17 $ 0.16 $ 0.09
Expenses (0.16)** (0.15)** (0.17)#
Expense subsidy 0.04 0.05 0.10
------ ------ ------
Net investment income 0.05 0.06 0.02
Net realized and unrealized gain/(loss)
on investments 3.13 (0.72) 0.87
------ ------ ------
Net increase/(decrease) in net asset
value 3.18 (0.66) 0.89
Net asset value, beginning of period 10.23 10.89 10.00
------ ------ ------
Net asset value, end of period $13.41 $10.23 $10.89
====== ====== ======
RATIO TO AVERAGE NET ASSETS:
Expenses 1.00%* 1.00%* 1.15%##
Net investment income 0.46% 0.55% 0.28%+
OTHER:
Average net assets (000 omitted) $10,378 $9,678 $5,768
Portfolio turnover 89% 120% 161%
Number of units outstanding at
end of period (000 omitted) 958 906 903
Total return 31.14% (6.12%) 8.94%****
</TABLE>
- -------------------
+ Annualized
# Reflects voluntary fee waiver of $14,349 or $0.02 per unit. Without
voluntary fee waiver, expense per unit is $0.19.
## Does not reflect voluntary waiver of management fees of $14,349. Net of
the voluntary management fee waiver, the net expense ratio is 0.82% of
average net assets. This figure is annualized.
* Reflects management fee reduction of .15% or $15,584 and $9,153 for the
years ended December 31, 1995 and 1994 respectively. For the year ended
December 31, 1994 the actual net expense ratio for the year was 1.06% of
average net assets as the fee reduction went into effect on 5/2/94.
** Reflects management fee reduction of $15,584 or $0.02 per unit and $9,153
or $0.01 per unit for the years ended December 31, 1995 and 1994
respectively. Without management fee reduction, expense per unit is $0.17
and $0.16 for the years ended December 31, 1995 and 1994 respectively.
*** Commencement of Operations April 1, 1993.
**** Not annualized.
Per unit amounts are calculated using average units outstanding for the period.
The accompanying notes are an integral part of this statement.
42
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
SHORT-INTERMEDIATE TERM U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------- -----------
<C> <S> <C>
INTERMEDIATE-TERM U.S. GOVERNMENT OBLIGATIONS-88.9%
U.S. Government Obligations-88.9%
$1,500,000 U.S. Treasury Note, 5.13%, due 04/30/98 $ 1,496,719
4,000,000 U.S. Treasury Note, 5.63%, due 01/31/98 4,032,500
5,000,000 U.S. Treasury Note, 5.75%, due 10/31/00 5,076,559
1,500,000 U.S. Treasury Note, 5.88%, due 06/30/00 1,530,938
3,000,000 U.S. Treasury Note, 6.00%, due 11/30/97 3,043,125
1,000,000 U.S. Treasury Note, 6.25%, due 08/31/00 1,035,000
1,000,000 U.S. Treasury Note, 6.50%, due 05/15/97 1,016,875
1,000,000 U.S. Treasury Note, 6.75%, due 04/30/00 1,052,500
3,800,000 U.S. Treasury Note, 7.13%, due 02/29/00 4,047,000
3,000,000 U.S. Treasury Note, 7.75%, due 11/30/99 3,250,311
-----------
Total U.S. Government Obligations 25,581,527
-----------
Total Long-Term U.S. Government Obligations (Cost $24,951,637) 25,581,527
-----------
SHORT-TERM INVESTMENT-1.8%
Repurchase Agreement-1.8%
507,000 Goldman Sachs and Company, dated 12/29/95, 5.75%, due 507,000
01/02/96 in the amount of $507,000 (collateralized by $583,050 -----------
U.S. Treasury Note, 7.25%, due 08/15/22, with a market value of
$520,379 at 12/31/95), repurchase proceeds $507,324.
</TABLE>
43
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
SHORT-INTERMEDIATE TERM U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
- ------------- ---------
<C> <S> <C>
Short-Term Investment Fund-0.0%
$13,391 Goldman Sachs-Institutional Liquid Assets-Government Portfolio $ 13,391
-----------
Total Short-Term Investment (Cost $ 520,391) 520,391
-----------
Total Investments (Cost $25,472,028)-90.7% 26,101,918
Other assets in excess of liabilities-9.3% 2,681,409
-----------
NET ASSETS - 100% $28,783,327
===========
</TABLE>
The accompanying notes are an integral part of this statement.
44
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
SHORT-INTERMEDIATE TERM U.S. GOVERNMENT
SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $25,472,028) $26,101,918
Cash 900
Investment income receivable 369,067
Receivable for units issued 2,334,942
-----------
Total assets 28,806,827
-----------
LIABILITIES
Management fee payable 16,632
Payable for units redeemed 6,868
-----------
Total liabilities 23,500
-----------
NET ASSETS $28,783,327
===========
Net assets were comprised of:
Units of beneficial interest $26,134,173
Accumulated net investment income 2,501,239
Accumulated net realized loss (481,975)
Net unrealized appreciation 629,890
-----------
Net assets at December 31, 1995 $28,783,327
===========
Unit value, offering price and redemp-
tion price per unit ($28,783,327 /
2,535,625 units of beneficial
interest issued and outstanding;
unlimited number of units authorized) $11.35
===========
</TABLE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
SHORT-INTERMEDIATE TERM U.S. GOVERNMENT
SECURITIES FUND
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME
Income
Dividends $ 13,569
Interest 1,479,497
-----------
Total income 1,493,066
-----------
Expenses
Management fee (Note 2) 182,714
Accounting fees 9,720
Audit fees 10,719
Directors' fees 2,288
Insurance 4,019
Legal fees 4,734
Registration fees 2,552
Shareholder reports 1,833
Miscellaneous 2,565
-----------
Total income 221,144
Expense subsidy (Note 3) (38,430)
-----------
Net expenses 182,714
-----------
Net investment income 1,310,352
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on securities 175,119
Net realized gain on options (2,738)
-----------
Net realized gain on investments 172,381
-----------
Unrealized appreciation in value of
investments during the year 1,250,842
-----------
Net gain on investments 1,423,223
-----------
Net Increase in Net Assets
Resulting from Operations $ 2,733,575
===========
</TABLE>
The accompanying notes are an integral part of this statement.
45
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
SHORT-INTERMEDIATE TERM U.S. GOVERNMENT
SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase/(Decrease) in Net Assets Years ended December 31,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 1,310,352 $ 948,222
Net realized gain/(loss) on investments 172,381 (593,298)
Unrealized appreciation/(depreciation)
in value of investments during the year 1,250,842 (576,673)
----------- -----------
Net increase/(decrease) in net assets
resulting from operations 2,733,575 (221,749)
----------- -----------
FROM UNIT TRANSACTIONS
Net proceeds from units issued 10,490,632 13,604,980
Cost of units redeemed (7,433,318) (7,782,147)
----------- -----------
Net increase/(decrease) in net assets
resulting from unit transactions 3,057,314 5,822,833
----------- -----------
Total increase in net assets 5,790,889 5,601,084
Net assets, beginning of year 22,992,438 17,391,354
----------- -----------
Net assets, end of year $28,783,327 $22,992,438
=========== ===========
Net Change in Units Outstanding
Units issued 960,197 1,337,764
Units redeemed (693,274) (767,011)
----------- -----------
266,923 570,753
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
46
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
SHORT-INTERMEDIATE TERM U.S. GOVERNMENT
SECURITIES FUND
SELECTED PER UNIT DATA AND RATIOS
(Selected data for a unit outstanding throughout each of the periods indicated)
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------------
SELECTED PER UNIT DATA: 1995 1994 1993*
----------- --------- -----------
<S> <C> <C> <C>
Investment income $ 0.66 $ 0.52 $ 0.33
Expenses (0.10) (0.09) (0.11)#
Expense subsidy 0.02 0.02 0.07
------ ------ ------
Net investment income 0.58 0.45 0.29
Net realized and unrealized gain/(loss)
on investments 0.63 (0.55) (0.05)
------ ------ ------
Net increase/(decrease) in net asset
value 1.21 (0.10) 0.24
Net asset value, beginning of period 10.14 10.24 10.00
------ ------ ------
Net asset value, end of period $11.35 $10.14 $10.24
====== ====== ======
RATIO TO AVERAGE NET ASSETS:
Expenses 0.75% 0.75% 0.75%##
Net investment income 5.38% 4.41% 3.76%**
OTHER:
Average net assets (000 omitted) $24,350 $21,504 $ 8,598
Portfolio turnover 187% 268% 247%
Number of units outstanding at
end of period (000 omitted) 2,536 2,269 1,698
Total return 12.01% (1.05%) 2.43%***
</TABLE>
- -------------------
# Reflects voluntary fee waiver of $9,789 or $0.02 per unit. Without
voluntary fee waiver, expense per unit is $0.13.
## Does not reflect voluntary waiver of management fees of $9,789. Net of
the voluntary management fee waiver, the net expense ratio is 0.60% of
average net assets. This figure is annualized.
* Commencement of Operations April 1, 1993.
** Annualized.
*** Not annualized.
Per unit amounts are calculated using average units outstanding for the period.
The accompanying notes are an integral part of this statement.
47
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------- ----------
<S> <C> <C>
LONG-TERM U.S. GOVERNMENT OBLIGATION-86.6%
$2,425,000 U.S. Treasury Bond, 6.25%, due 08/15/23 $2,492,446
----------
Total Long-Term U.S. Government Obligation (Cost $2,113,930) 2,492,446
----------
SHORT-TERM INVESTMENTS-11.4%
Repurchase Agreements-11.4%
72,000 Barclays BZW Securities, dated 12/29/95, 5.50%, due 01/02/96 72,000
in the amount of $72,000 (collateralized by $69,609 U.S. Treasury
Note, 7.50%, due 01/31/97 with a market value of $73,404 at
12/31/95), repurchase proceeds $72,044.
128,000 Goldman Sachs and Company, dated 12/29/95, 5.75%, due 128,000
01/02/96 in the amount of $128,000 (collateralized by $110,933
U.S. Treasury Note, 7.25%, due 08/15/22, with a market value of
$131,378 at 12/31/95), repurchase proceeds $128,082.
128,000 Merrill Lynch Government Securities, dated 12/29/95, 5.60%, due 128,000
01/02/96 in the amount of $128,000 (collateralized by $128,640
U.S. Treasury Note, 5.63%, due 10/31/97, with a market value of
$130,818 at 12/31/95), repurchase proceeds $128,080.
----------
Total Repurchase Agreements 328,000
----------
Total Short-Term Investments (Cost $328,000) 328,000
----------
Total Investments (Cost $2,441,930)-98.0% 2,820,446
Other assets in excess of liabilities-2.0% 56,843
----------
NET ASSETS - 100% $2,877,289
==========
</TABLE>
The accompanying notes are an integral part of this statement.
48
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $2,441,930) $2,820,446
Cash 879
Investment income receivable 57,402
Receivable for units issued 368
----------
Total assets 3,879,095
----------
LIABILITIES
Management fee payable 1,806
----------
Total liabilities 1,806
----------
NET ASSETS $2,877,289
==========
Net assets were comprised of:
Units of beneficial interest $2,337,502
Accumulated net investment income 407,069
Accumulated net realized loss (245,798)
Net unrealized appreciation 378,516
----------
Net assets at December 31, 1995 $2,877,289
==========
Unit value, offering price and redemp-
tion price per unit ($2,877,289 /
221,200 units of beneficial
interest issued and outstanding;
unlimited number of units authorized) $13.01
==========
</TABLE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME
Income
Dividends $ 2,826
Interest 177,876
----------
Total income 180,702
----------
Expenses
Management fee (Note 2) 21,549
Accounting fees 9,720
Audit fees 10,719
Legal fees 4,734
Insurance 3,299
Registration fees 1,286
Shareholder reports 1,833
Directors' fees 2,288
Miscellaneous 770
----------
Total expenses 56,198
Expense subsidy (Note 3) (34,649)
Voluntary fee reduction (Note 3) (2,527)
----------
Net expenses 19,022
----------
Net investment income 161,680
----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investments 23,350
Unrealized appreciation in value
of investments during the year 494,639
----------
Net gain on investments 517,989
----------
Net Increase in Net Assets
Resulting from Operations $ 679,669
==========
</TABLE>
The accompanying notes are an integral part of this statement.
49
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase/(Decrease) in Net Assets Years ended December 31,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 161,680 $ 175,147
Net realized gain/(loss) on investments 23,350 (294,113)
Unrealized appreciation/(depreciation)
in value of investments during the year 494,639 (139,310)
----------- -----------
Net increase/(decrease) in net assets
resulting from operations 679,669 (258,276)
----------- -----------
FROM UNIT TRANSACTIONS
Net proceeds from units issued 1,036,585 1,052,752
Cost of units redeemed (1,467,055) (1,082,703)
----------- -----------
Net decrease in net assets resulting
from unit transactions (430,470) (29,951)
----------- -----------
Total increase/(decrease) in net assets 249,199 (288,227)
Net assets, beginning of year 2,628,090 2,916,317
----------- -----------
Net assets, end of year $ 2,877,289 $ 2,628,090
=========== ===========
Net Change in Units Outstanding
Units issued 87,397 102,673
Units redeemed (129,083) (107,041)
----------- -----------
(41,686) (4,368)
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
50
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
U.S. GOVERNMENT SECURITIES FUND
SELECTED PER UNIT DATA AND RATIOS
(Selected data for a unit outstanding throughout each of the periods indicated)
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------------
SELECTED PER UNIT DATA: 1995 1994 1993***
----------- --------- -----------
<S> <C> <C> <C>
Investment income $ 0.81 $ 0.70 $ 0.45
Expenses (0.24)** (0.23)** (0.36)#
Expense subsidy 0.16 0.15 0.31
------ ------ ------
Net investment income 0.73 0.62 0.40
Net realized and unrealized gain/(loss)
on investments 2.28 (1.53) 0.51
------ ------ ------
Net increase/(decrease) in net asset
value 3.01 (0.91) 0.91
Net asset value, beginning of period 10.00 10.91 10.00
------ ------ ------
Net asset value, end of period $13.01 $10.00 $10.91
====== ====== ======
RATIO TO AVERAGE NET ASSETS:
Expenses 0.75%* 0.75%* 0.85%##
Net investment income 6.38% 6.23% 4.91%+
OTHER:
Average net assets (000 omitted) $ 2,535 $ 2,810 $ 1,905
Portfolio turnover 17% 174% 232%
Number of units outstanding at
end of period (000 omitted) 221 263 267
Total return 30.11% (8.39%) 9.12%****
</TABLE>
- -------------------
+ Annualized.
# Reflects voluntary fee waiver of $3,040 or $0.02 per unit. Without
voluntary waiver, expense per unit is $0.38.
## Does not reflect voluntary waiver of management fees of $3,040. Net of
the voluntary management fee waiver, the net expense ratio is 0.64% of
average net assets. This figure is annualized.
* Reflects management fee reduction of .10% or $2,527 and $1,886 for the
years ended December 31, 1995 and 1994, respectively. For the year ended
December 31, 1994 the actual net expense ratio for the year was .80% of
average net assets as the fee reduction went into effect on 5/2/94.
** Reflects management fee reduction of $2,527 or $0.01 per unit and $1,886 or
$0.01 per unit for the years ended December 31, 1995 and 1994
respectively. Without management fee reduction, expense per unit is $0.25
and $0.24 for the years ended December 31, 1995 and 1994 respectively.
*** Commencement of Operations April 1, 1993.
**** Not annualized.
Per unit amounts are calculated using average units outstanding for the period.
The accompanying notes are an integral part of this statement.
51
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
INTERMEDIATE TERM BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Value
- ---------- -------------
<S> <C> <C>
LONG-TERM INVESTMENTS-86.7%
Corporate Bonds-17.9%
Bank-3.1%
$150,000 BankAmerica Corporation, 6.85%, due 03/01/03 $155,598
-------------
Financial & Other-11.9%
150,000 Associates Corporation of North America, 7.70%, due 03/01/02 162,587
134,772 General Motors Acceptance Corporation, 7.15%, due 03/15/00 137,254
150,000 U.S. Leasing International, 5.95%, due 10/15/03 146,877
150,000 U.S. West Capital Funding, 6.43%, due 12/12/05 149,900
-------------
Total Financial & Other 596,618
-------------
Financial Services-2.9%
150,000 Commercial Credit Corporation, 6.13%, due 12/01/05 148,560
-------------
Total Corporate Bonds (Cost $872,290) 900,776
-------------
U.S. Government and Agency Obligations-68.8%
U.S. Government Agency Obligations-9.9%
100,000 Federal Home Loan Bank, 6.05%, due 06/28/00 101,907
400,000 Federal Home Loan Mortgage Corporation, 5.50%, due 12/15/00 397,125
-------------
Total U.S. Government Agency Obligations 499,032
-------------
</TABLE>
52
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
INTERMEDIATE TERM BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Value
- ---------- -------------
<S> <C> <C>
U.S. Treasury Obligations-58.9%
$ 720,000 U.S. Treasury Note, 6.38%, due 08/15/02 $ 756,450
1,195,000 U.S. Treasury Note, 7.25%, due 08/15/04 1,329,063
645,000 U.S. Treasury Note, 7.75%, due 01/31/00 700,832
165,000 U.S. Treasury Note, 7.88%, due 04/15/98 174,281
-------------
Total U.S. Treasury Obligations 2,960,626
-------------
Total U.S. Government and Agency Obligations (Cost $3,366,682) 3,459,658
-------------
Total Long-Term Investments (Cost $4,238,972) 4,360,434
-------------
SHORT-TERM INVESTMENTS-19.5%
Repurchase Agreements-13.4%
225,000 Barclays BZW Securities, dated 12/29/95, 5.50%, due 01/02/96 in 225,000
the amount of $225,000 (collateralized by $217,527 U.S. Treasury
Note, 7.50%, due 01/31/97, with a market value of $229,387 at
12/31/95), repurchase proceeds $225,138.
225,000 Goldman Sachs and Company, dated 12/29/95, 5.75%, due 225,000
01/02/96 in the amount of $225,000 (collateralized by $195,000
U.S. Treasury Note, 7.25%, due 08/15/22, with a market value of
$230,937 at 12/31/95), repurchase proceeds $225,144.
225,000 Merrill Lynch Government Securities, dated 12/29/95, 5.60%, due 225,000
01/02/96 in the amount of $225,000 (collateralized by $226,125
U.S. Treasury Note, 5.63%, due 10/31/97, with a market value of
$229,953 at 12/31/95), repurchase proceeds $225,140.
-------------
Total Repurchase Agreements 675,000
-------------
Number of
Shares Short-Term Investment Funds-4.9%
- ----------
225,000 Fidelity Institutional Cash Portfolios-U.S. Government Portfolio 225,000
22,826 Goldman Sachs-Institutional Liquid Assets-Government Portfolio 22,826
-------------
Total Short-Term Investment Funds 247,826
-------------
</TABLE>
53
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
INTERMEDIATE TERM BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Value
- ---------- -------------
<S> <C> <C>
U.S. Government Obligations-1.2%
$ 50,000 U.S. Treasury Bill, 4.43%, due 01/18/96 $49,895
10,000 U.S. Treasury Bill, 5.89%, due 05/02/96 # 9,823
-------------
Total U.S. Government Obligations 59,718
-------------
Total Short-Term Investments (Cost $982,544) 982,544
-------------
Total Investments (Cost $5,221,516)-106.2%" 5,342,978
Liabilities in excess of other assets-(6.2%) (312,297)
-------------
NET ASSETS-100% $5,030,681
=============
</TABLE>
# Security is held as collateral (pledged amount is $10,000) for futures
contracts and is restricted as to resale." The accompanying notes are an
integral part of this statement.
54
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
INTERMEDIATE TERM BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments, at value (cost $5,221,516) $5,342,978
Cash 802
Investment income receivable 85,258
Receivable for units issued 2,089
----------
Total assets 5,431,127
----------
LIABILITIES
Investments purchased payable 397,206
Management fee payable 3,184
Payable for units redeemed 56
----------
Total liabilities 400,446
----------
NET ASSETS $5,030,681
==========
Net assets were comprised of:
Units of beneficial interest $4,134,744
Accumulated net investment income 427,832
Accumulated net realized gain 346,643
Net unrealized appreciation 121,462
----------
Net assets at December 31, 1995 $5,030,681
==========
Unit value, offering price and redemp-
tion price per unit ($5,030,681 /
431,038 units of beneficial
interest issued and outstanding;
unlimited number of units authorized) $11.67
==========
</TABLE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
INTERMEDIATE TERM BOND FUND
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME
Income
Dividends $ 14,909
Interest 381,561
-------
Total income 396,470
-------
Expenses
Management fee (Note 2) 44,818
Accounting fees 9.720
Audit fees 10,719
Legal fees 11,283
Insurance 3,539
Registration fees 978
Shareholder reports 1,833
Directors' fees 2,288
Miscellaneous 489
-------
Total expenses 85,667
Expense subsidy (Note 3) (40,849)
-------
Net expenses 44,818
Net investment income 351,652
-------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investments 350,978
Unrealized appreciation in value
of investments during the year 196,223
-------
Net gain on investments 547,201
-------
Net Increase in Net Assets
Resulting from Operations $898,853
========
</TABLE>
The accompanying notes are an integral part of this statement.
55
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
INTERMEDIATE TERM BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------
Increase/(Decrease) in Net Assets 1995 1994*
-------- --------
<S> <C> <C>
FROM OPERATIONS
Net investment income $351,652 $76,180
Net realized gain/(loss) on investments 350,978 (4,335)
Unrealized appreciation/(depreciation) in value
of investments during the period 196,223 (74,761)
---------- ----------
Net increase/(decrease) in net assets
resulting from operations 898,853 (2,916)
---------- ----------
FROM UNIT TRANSACTIONS
Net proceeds from units issued 2,335,347 5,127,181
Cost of units redeemed (3,327,720) (74)
---------- ----------
Net increase/(decrease) in net assets resulting
from unit transactions (992,373) 5,127,107
---------- ----------
Total increase/(decrease) in net assets (93,520) 5,124,191
Net assets, beginning of period 5,124,201 10
---------- ----------
Net assets, end of period $5,030,681 $5,124,201
========== ==========
Net Change in Units Outstanding
Units issued 212,880 512,836
Units redeemed (294,670) (7)
---------- ----------
(81,790) 512,829
========== ==========
</TABLE>
*Commencement of Operations October 3,1994.
The accompanying notes are an integral part of this statement.
56
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
INTERMEDIATE TERM BOND FUND
SELECTED PER UNIT DATA AND RATIOS
(Selected data for a unit outstanding throughout the period indicated)
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------
SELECTED PER UNIT DATA: 1995 1994*
--------- ----------
<S> <C> <C>
Investment income $0.72 $0.17
Expenses (0.16) (0.08)
Expense subsidy 0.08 0.06
--------- ----------
Net investment income 0.64 0.15
Net realized and unrealized gain/(loss)
on investments 1.04 (0.16)
--------- ----------
Net increase/(decrease) in net asset value 1.68 (0.01)
Net asset value, beginning of period 9.99 10.00
--------- ----------
Net asset value, end of period $11.67 $9.99
========= ==========
RATIO TO AVERAGE NET ASSETS:
Expenses 0.75% 0.75%**
Net investment income 5.89% 6.12%**
OTHER:
Average net assets (000 omitted) $5,973 $5,046
Portfolio turnover 198% 7%
Number of units outstanding at
end of period (000 omitted) 431 513
Total return 16.79% (0.32%)**
</TABLE>
* Commencement of Operations October 3, 1994.
** Annualized
Per unit amounts are calculated using average units outstanding for the
period.
The accompanying notes are an integral part of this statement.
57
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
- --------- -----
<C> <S> <C>
LONG-TERM INVESTMENTS-73.1%
Common Stocks-20.5%
Auto & Transportation-0.7%
200 AMR Corporation* $ 14,850
200 Chrysler Corporation 11,075
250 General Motors Corporation 13,219
--------
Total Auto & Transportation 39,144
--------
Consumer Discretionary-2.5%
200 Disney (Walt) Company 11,800
300 Eastman Kodak Company 20,100
550 Federated Department Stores* 15,125
500 Mattel, Inc. 15,375
400 McDonalds Corporation 18,050
850 News Corporation, Ltd. 18,169
300 Tambrands, Inc. 14,325
850 Wal Mart Stores, Inc. 19,019
--------
Total Consumer Discretionary 131,963
--------
Consumer Staples-2.0%
300 Clorox Company 21,488
300 Coca Cola Company 22,275
250 Philip Morris Companies, Inc. 22,625
550 Sara Lee Corporation 17,531
650 Sysco Corporation 21,125
--------
Total Consumer Staples 105,044
--------
Financial Services-2.7%
550 American Express Company 22,756
200 American International Group, Inc. 18,500
200 Federal National Mortgage Association 24,825
300 MBIA, Inc. 22,500
400 Student Loan Marketing Association 26,350
450 Travelers Corporation 28,294
--------
Total Financial Services 143,225
--------
</TABLE>
58
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
- --------- -----
<C> <S> <C>
Healthcare-1.9%
250 American Home Products Corporation $ 24,250
200 Bristol-Myers Squibb Company 17,175
400 Columbia HCA/Healthcare 20,300
600 Humana, Inc.* 16,425
400 Merck & Company, Inc. 26,300
--------
Total Healthcare 104,450
--------
Integrated Oils-1.8%
400 Amoco Corporation 28,750
200 British Petroleum Company PLC 20,425
300 Exxon Corporation 24,038
200 Mobil Corporation 22,400
--------
Total Integrated Oils 95,613
--------
Materials & Processing-2.2%
400 Dover Corporation 14,750
200 Dow Chemical Company 14,075
300 Dupont (E.I.) de Nemours & Company 20,962
700 James River Corporation of Virginia 16,887
350 Kimberly Clark Corporation 28,963
300 Minnesota Mining & Manufacturing Company 19,875
--------
Total Materials & Processing 115,512
--------
Other Energy-0.7%
650 Panhandle Eastern Corporation 18,119
400 Tenneco, Inc. 19,850
--------
Total Other Energy 37,969
--------
Producer Durables-1.3%
400 Allied Signal, Inc. 19,000
300 Emerson Electric Company 24,525
400 General Electric Company 28,800
--------
Total Producer Durables 72,325
--------
</TABLE>
59
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
- --------- -----
<C> <S> <C>
Technology-2.1%
450 Ceridian Corporation* $ 18,563
150 Hewlett Packard Company 12,562
300 Intel Corporation 17,025
200 International Business Machines
Corporation 18,350
150 Microsoft Corporation* 13,162
300 Motorola, Inc. 17,100
125 Xerox Corporation 17,125
----------
Total Technology 113,887
----------
Utilities-2.6%
350 AT&T Company 22,662
550 GTE Corporation 24,200
650 Nipsco Industries, Inc. 24,863
400 QUALCOMM, Inc.* 17,200
400 SBC Communications, Inc. 23,000
750 WorldCom, Inc.* 26,437
----------
Total Utilities 138,362
----------
Total Common Stocks (Cost $982,937) 1,097,494
----------
Principal
Amount Corporate Bonds-10.3%
- ---------
Bank-5.0%
$260,000 BankAmerica Corporation, 6.85%,
due 03/01/03 269,703
---------
Financial & Other-5.3%
260,000 Associates Corporation of North America,
7.70%, due 03/01/02 281,817
---------
Total Corporate Bonds (Cost $522,102) 551,520
---------
</TABLE>
60
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----
<C> <S> <C>
U.S. Government and Agency Obligations-42.3%
U.S. Government Agency Obligation-2.8%
$150,000 Federal Home Loan Bank, 6.05%, due 06/28/00 $ 152,860
-----------
U.S. Government Obligations-39.5%
695,000 U.S. Treasury Note, 7.00%, due 04/15/99 730,401
630,000 U.S. Treasury Note, 7.25%, due 08/15/04 700,678
475,000 U.S. Treasury Note, 7.88%, due 04/15/98 501,719
170,000 U.S. Treasury Note, 9.25%, due 08/15/98 186,363
-----------
Total U.S. Government Obligations 2,119,161
-----------
Total U.S. Government and Agency Obligations
(Cost $2,192,793) 2,272,021
-----------
Total Long-Term Investments (Cost $3,697,832) 3,921,035
-----------
SHORT-TERM INVESTMENTS-26.0%
Repurchase Agreements-6.4%
8,000 Barclays BZW Securities, dated 12/29/95, 5.50%, 18,000
due 01/02/96 in the amount of $18,000
(collateralized by $17,402 U.S. Treasury Note,
7.50%, due 01/31/97, with a market value of
$18,351 at 12/31/95), repurchase proceeds $18,011.
241,000 Goldman Sachs and Company, dated 12/29/95, 5.75%, 241,000
due 01/02/96 in the amount of $241,000
(collateralized by $208,867 U.S. Treasury Note,
7.25%, due 08/15/22, with a market value of
$247,359 at 12/31/95), repurchase proceeds $241,154.
85,000 Merrill Lynch Government Securities, dated 12/29/95, 85,000
5.60%, due 01/02/96 in the amount of $85,000
(collateralized by $85,425 U.S. Treasury Note,
5.63%, due 10/31/97, with a market value of
$86,871 at 12/31/95), repurchase proceeds $85,053.
---------
Total Repurchase Agreements 344,000
---------
</TABLE>
61
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
- --------- -----
<C> <S> <C>
Short-Term Investment Funds--5.5%
240,000 Fidelity Institutional Cash Portfolios--U.S. Government Portfolio $ 240,000
56,165 Goldman Sachs - Institutional Liquid Assets - Government Portfolio 56,165
----------
Total Short-Term Investment Funds 296,165
----------
Principal
Amount U.S. Government Obligation-14.1%
- ---------
$760,000 U.S. Treasury Bill, 4.43%, due 01/18/96 758,094
----------
Total Short-Term Investments (Cost $1,398,259) 1,398,259
----------
Total Investments (Cost $5,096,091)-99.1% 5,319,294
----------
Other assets in excess of liabilities-0.9% 49,689
----------
NET ASSETS - 100% $5,368,983
==========
</TABLE>
* Non-income producing security.
The accompanying notes are an integral part of this statement.
62
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER--INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $5,096,091) $5,319,294
Cash 987
Investment income receivable 53,408
Receivable for units issued 306
----------
Total assets 5,373,995
----------
LIABILITIES
Management fee payable 5,012
----------
Total liabilities 5,012
----------
NET ASSETS $5,368,983
==========
Net assets were comprised of:
Units of beneficial interest $3,780,106
Accumulated net investment income 590,624
Accumulated net realized gain 775,050
Net unrealized appreciation 223,203
----------
Net assets at December 31, 1995 $5,368,983
==========
Unit value, offering price and redemp-
tion price per unit ($5,368,983 /
466,586 units of beneficial
interest issued and outstanding;
unlimited number of units authorized) $11.51
==========
</TABLE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER--INCOME FUND
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME
Income
Dividends $ 74,617
Interest 521,046
----------
Total income 595,663
----------
Expenses
Management fee (Note 2) 116,580
Accounting fees 9,720
Audit fees 10,719
Directors' fees 2,288
Insurance 3,659
Legal fees 11,283
Registration fees 1,009
Shareholder reports 1,833
Miscellaneous 650
----------
Total expenses 157,741
Expense subsidy (Note 3) (41,161)
----------
Net expenses 116,580
----------
Net investment income 479,083
----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investments 808,803
Unrealized appreciation in value
of investments during the year 307,656
----------
Net gain on investments 1,116,459
----------
Net Increase in Net Assets
Resulting from Operations $1,595,542
==========
</TABLE>
The accompanying notes are an integral part of this statement.
63
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER--INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase/(Decrease) in Net Assets Years ended December 31,
---------------------------
1995 1994*
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income $479,083 $111,541
Net realized gain/(loss) on investments 808,803 (33,753)
Unrealized appreciation/(depreciation)
in value of investments during the period 307,656 (84,452)
----------- -----------
Net increase/(decrease) in net assets
resulting from operations 1,595,542 (6,664)
----------- -----------
FROM UNIT TRANSACTIONS
Net proceeds from units issued 13,404,622 11,073,483
Cost of units redeemed (19,276,354) (1,421,656)
----------- -----------
Net increase/(decrease) in net assets
resulting from unit transactions (5,871,732) 9,651,827
----------- -----------
Total increase/(decrease) in net assets (4,276,190) 9,645,163
Net assets, beginning of period 9,645,173 10
----------- -----------
Net assets, end of period $ 5,368,983 $ 9,645,173
=========== ===========
Net Change in Units Outstanding
Units issued 1,270,206 1,113,034
Units redeemed (1,770,961) (145,695)
----------- -----------
(500,755) 967,339
=========== ===========
</TABLE>
* Commencement of Operations October 3, 1994.
The accompanying notes are an integral part of this statement.
64
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER--INCOME FUND
SELECTED PER UNIT DATA AND RATIOS
(Selected data for a unit outstanding throughout each of the years indicated)
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
SELECTED PER UNIT DATA: 1995 1994*
----------- ---------
<S> <C> <C>
Investment income $ 0.60 $ 0.15
Expenses (0.16) (0.06)
Expense subsidy 0.04 0.03
------ ------
Net investment income 0.48 0.12
Net realized and unrealized gain/(loss)
on investments 1.06 (0.15)
------ ------
Net increase/(decrease) in net asset
value 1.54 (0.03)
Net asset value, beginning of period 9.97 10.00
------ ------
Net asset value, end of period $11.51 $ 9.97
====== ======
RATIO TO AVERAGE NET ASSETS:
Expenses 1.10% 1.10%**
Net investment income 4.52% 4.77%**
OTHER:
Average net assets (000 omitted) $10,590 $9,491
Portfolio turnover 278% 15%
Number of units outstanding at
end of period (000 omitted) 467 967
Total return 15.41% (1.22%)
</TABLE>
- -------------------
* Commencement of Operations October 3, 1994.
** Annualized
Per unit amounts are calculated using average units outstanding for the period.
The accompanying notes are an integral part of this statement.
65
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
- --------- -----
<C> <S> <C>
LONG-TERM INVESTMENTS-77.2%
Common Stocks-42.1%
Auto & Transportation-1.6%
500 AMR Corporation* $ 37,125
500 Chrysler Corporation 27,688
550 General Motors Corporation 29,081
--------
Total Auto & Transportation 93,894
--------
Consumer Discretionary-4.7%
400 Disney (Walt) Company 23,600
400 Eastman Kodak Company 26,800
1,600 Federated Department Stores* 44,000
1,250 Mattel, Inc. 38,437
750 McDonalds Corporation 33,844
1,750 News Corporation, Ltd. 37,406
900 Tambrands, Inc. 42,975
1,500 Wal Mart Stores, Inc. 33,562
--------
Total Consumer Discretionary 280,624
--------
Consumer Staples-4.1%
750 Clorox Company 53,719
600 Coca Cola Company 44,550
550 Philip Morris Companies, Inc. 49,775
1,350 Sara Lee Corporation 43,031
1,650 Sysco Corporation 53,625
--------
Total Consumer Staples 244,700
--------
</TABLE>
66
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
- --------- -----
<C> <S> <C>
Financial Services-5.3%
1,000 American Express Company $ 41,375
500 American International Group, Inc. 46,250
450 Federal National Mortgage Association 55,856
700 MBIA, Inc. 52,500
850 Student Loan Marketing Association 55,994
1,000 Travelers Corporation 62,875
--------
Total Financial Services 314,850
--------
Healthcare-4.4%
650 American Home Products Corporation 63,050
650 Bristol-Myers Squibb Company 55,819
950 Columbia HCA/Healthcare 48,212
1,500 Humana, Inc. 41,062
750 Merck & Company, Inc. 49,312
--------
Total Healthcare 257,455
--------
Integrated Oils-4.1%
850 Amoco Corporation 61,094
600 British Petroleum Company PLC 61,275
700 Exxon Corporation 56,088
550 Mobil Corporation 61,600
--------
Total Integrated Oils 240,057
--------
Materials & Processing-4.2%
1,000 Dover Corporation 36,875
600 Dow Chemical Company 42,225
500 Dupont (E.I.) De Nemours & Company 34,938
1,400 James River Corporation of Virginia 33,775
750 Kimberly Clark Corporation 62,063
600 Minnesota Mining & Manufacturing Company 39,750
--------
Total Materials & Processing 249,626
--------
</TABLE>
67
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
- --------- -----
<C> <S> <C>
Other Energh--1.2%
1,000 Panhandle Eastern Corporation $ 27,875
850 Tenneco, Inc. 42,181
----------
Total Other Energy 70,056
----------
Producer Durables-2.5%
850 Allied Signal, Inc. 40,375
600 Emerson Electric Company 49,050
850 General Electric Company 61,200
----------
Total Producer Durables 150,625
----------
Technology-4.6%
1,000 Ceridian Corporation* 41,250
300 Hewlett Packard Company 25,125
600 Intel Corporation 34,050
400 International Business Machines Corporation 36,700
350 Microsoft Corporation* 30,713
600 Motorola, Inc. 34,200
1,000 Silicon Graphics, Inc. 27,500
300 Xerox Corporation 41,100
----------
Total Technology 270,638
----------
Utilities-5.4%
850 AT&T Company 55,038
1,500 GTE Corporation 66,000
1,350 Nipsco Industries, Inc. 51,638
850 QUALCOMM, Inc.* 36,550
1,000 SBC Communications, Inc. 57,500
1,500 WorldCom, Inc.* 52,875
----------
Total Utilities 319,601
----------
Total Common Stocks (Cost $2,235,113) 2,492,126
----------
</TABLE>
68
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----
<C> <S> <C>
Corporate Bonds-2.2%
Bank-1.1%
$ 60,000 BankAmerica Corporation, 6.85%, due 03/01/03 $ 62,239
----------
Financial & Other-1.1%
60,000 Associates Corporation of North America, 7.70%, due 03/01/02 65,035
----------
Total Corporate Bonds (Cost $120,485) 127,274
----------
U. S. Government and Agency Obligations-32.9%
U. S. Government Agency Obligation-2.6%
150,000 Federal Home Loan Bank Corporation, 6.05%, due 06/28/00 152,860
----------
U.S. Government Obligations-30.3%
500,000 U.S. Treasury Note, 6.38%, due 08/15/02 525,312
270,000 U.S. Treasury Note, 7.25%, due 08/15/04 300,290
225,000 U.S. Treasury Note, 7.75%, due 01/31/00 244,476
525,000 U.S. Treasury Note, 7.88%, due 04/15/98 554,531
150,000 U.S. Treasury Note, 8.50%, due 11/15/00 169,922
----------
Total U.S. Government Obligations 1,794,531
----------
Total U.S. Government and Agency Obligations (Cost $1,897,962) 1,947,391
----------
Total Long-Term Investments (Cost $4,253,560) 4,566,791
----------
</TABLE>
69
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----
<C> <S> <C>
SHORT-TERM INVESTMENTS-22.1%
Repurchase Agreements-4.2%
$ 7,000 Barclays BZW Securities, dated 12/29/95, 5.50%, due 01/02/96 in $ 7,000
the amount of $7,000 (collateralized by $6,767 U.S. Treasury
Note, 7.50%, due 01/31/97, with a market value of $7,136 at
12/31/95), repurchase proceeds $7,004.
245,000 Goldman Sachs and Company, dated 12/29/95, 5.75%, due 245,000
01/02/96 in the amount of $245,000 (collateralized by $212,333
U.S. Treasury Note, 7.25%, due 08/15/22, with a market value of
$251,465 at 12/31/95), repurchase proceeds $245,157.
----------
Total Repurchase Agreements 252,000
----------
Number
of Shares Short-Term Investment Funds-3.5%
- ---------
180,000 Fidelity-Institutional Cash Portfolio-Government Portfolio 180,000
28,497 Goldman Sachs-Institutional Liquid Assets-Government Portfolio 28,497
----------
Total Short-Term Investment Funds 208,497
----------
Principal
Amount U.S. Government Obligation-14.4%
- ---------
$850,000 U.S. Treasury Bill, 5.29%, due 01/04/96 849,626
----------
Total Short-Term Investments (Cost $1,310,123) 1,310,123
----------
Total Investments (Cost $5,563,683)-99.3% 5,876,914
----------
Other assets in excess of liabilities-0.7% 39,846
----------
NET ASSETS - 100% $5,916,760
==========
</TABLE>
* Non-income producing security.
The accompanying notes are an integral part of this statement.
70
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $5,563,683) $5,876,914
Cash 105
Investment income receivable 44,907
Receivable for units issued 344
----------
Total assets 5,922,270
----------
LIABILITIES
Management fee payable 5,510
-----------
Total liabilities 5,510
-----------
NET ASSETS $5,916,760
==========
Net assets were comprised of:
Units of beneficial interest $4,621,012
Accumulated net investment income 348,800
Accumulated net realized gain 633,717
Net unrealized appreciation 313,231
----------
Net assets at December 31, 1995 $5,916,760
==========
Unit value, offering price and redemp-
tion price per unit ($5,916,760 /
506,458 units of beneficial
interest issued and outstanding;
unlimited number of units authorized) $11.68
==========
</TABLE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RKS MANAGER-BALANCED FUND
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME
Income
Dividends $ 79,188
Interest 312,919
----------
Total income 392,107
----------
Expenses
Management fee (Note 2) 92,979
Accounting fees 9,720
Audit fees 10,719
Directors' fees 2,288
Insurance 3,539
Legal fees 11,283
Registration fees 972
Shareholder reports 1,833
Miscellaneous 546
----------
Total expenses 133,879
Expense subsidy (Note 3) (40,900)
----------
Net expenses 92,979
----------
Net investment income 299,128
----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investments 665,885
Net realized gain on futures 2,053
Net realized gain on options 4,424
----------
Net realized gain on investments 672,362
Unrealized appreciation in value
of investments during the year 356,487
----------
Net gain on investments 1,028,849
----------
Net Increase in Net Assets
Resulting from Operations $1,327,977
==========
</TABLE>
The accompanying notes are an integral part of this statement.
71
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase/(Decrease) in Net Assets Years ended December 31,
---------------------------
1995 1994*
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 299,128 $ 49,672
Net realized gain/(loss) on investments 672,362 (38,645)
Unrealized appreciation/(depreciation)
in value of investments during the period 356,487 (43,256)
----------- -----------
Net increase/(decrease) in net assets
resulting from operations 1,327,977 (32,229)
----------- -----------
FROM UNIT TRANSACTIONS
Net proceeds from units issued 14,814,714 5,130,255
Cost of units redeemed (15,323,567) (400)
----------- -----------
Net increase/(decrease) in net assets
resulting from unit transactions (508,853) 5,129,855
----------- -----------
Total increase in net assets 819,124 5,097,626
Net assets, beginning of period 5,097,636 10
----------- -----------
Net assets, end of period $ 5,916,760 $ 5,097,636
=========== ===========
Net Change in Units Outstanding
Units issued 1,379,553 513,150
Units redeemed (1,386,206) (40)
----------- -----------
(6,653) 513,110
=========== ===========
</TABLE>
* Commencement of Operations October 3, 1994.
The accompanying notes are an integral part of this statement.
72
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-BALANCED FUND
SELECTED PER UNIT DATA AND RATIOS
(Selected data for a unit outstanding throughout the period indicated)
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
SELECTED PER UNIT DATA: 1995 1994*
----------- ---------
<S> <C> <C>
Investment income $ 0.50 $ 0.13
Expenses (0.17) (0.09)
Expense subsidy 0.05 0.06
------ ------
Net investment income 0.38 0.10
Net realized and unrealized gain/(loss)
on investments 1.36 (0.16)
------ ------
Net increase/(decrease) in net asset
value 1.74 (0.06)
Net asset value, beginning of period 9.94 10.00
------ ------
Net asset value, end of period $11.68 $ 9.94
====== ======
RATIO TO AVERAGE NET ASSETS:
Expenses 1.10% 1.10%**
Net investment income 3.54% 3.99%**
OTHER:
Average net assets (000 omitted) $8,456 $5,051
Portfolio turnover 337% 17%
Number of units outstanding at
end of period (000 omitted) 506 513
Total return 17.59% (2.64%)
</TABLE>
- -------------------
* Commencement of Operations October 3, 1994.
** Annualized
Per unit amounts are calculated using average units outstanding for the period.
The accompanying notes are an integral part of this statement.
73
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----
<S> <C> <C>
LONG-TERM INVESTMENTS-80.9%
Common Stocks-55.6%
Auto & Transportation-2.1%
250 AMR Corporation* $ 18,563
300 Chrysler Corporation 16,613
300 General Motors Corporation 15,863
--------
Total Auto & Transportation 51,039
--------
Consumer Discretionary-6.4%
250 Disney (Walt) Company 14,750
350 Eastman Kodak Company 23,450
750 Federated Department Stores* 20,625
600 McDonalds Corporation 27,075
550 Sears Roebuck & Company 21,450
500 Tambrands, Inc. 23,875
1,000 Wal Mart Stores, Inc. 22,375
--------
Total Consumer Discretionary 153,600
--------
Consumer Staples-5.4%
350 Clorox Company 25,069
350 Coca Cola Company 25,987
250 Philip Morris Companies, Inc. 22,625
750 Sara Lee Corporation 23,906
1,000 Sysco Corporation 32,500
--------
Total Consumer Staples 130,087
--------
Financial Services-7.0%
500 American Express Company 20,687
300 American International Group, Inc. 27,750
250 Federal National Mortgage Association 31,031
300 MBIA, Inc. 22,500
500 Student Loan Marketing Association 32,938
500 Travelers Corporation 31,438
--------
Total Financial Services 166,344
--------
</TABLE>
74
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----
<S> <C> <C>
Healthcare-6.1%
300 American Home Products Corporation $ 29,100
350 Bristol-Myers Squibb Company 30,056
500 Columbia HCA/Healthcare 25,375
1,150 Humana, Inc.* 31,481
450 Merck & Company, Inc. 29,587
--------
Total Healthcare 145,599
--------
Integrated Oils-5.2%
450 Amoco Corporation 32,344
300 British Petroleum Company PLC 30,637
350 Exxon Corporation 28,044
300 Mobil Corporation 33,600
--------
Total Integrated Oils 124,625
--------
Materials & Processing-5.5%
600 Dover Corporation 22,125
300 Dow Chemical Company 21,112
250 Dupont (E.I.) De Nemours & Company 17,469
800 James River Corporation of Virginia 19,300
300 Kimberly Clark Corporation 24,825
400 Minnesota Mining & Manufacturing Company 26,500
--------
Total Materials & Processing 131,331
--------
Other Energy-1.6%
600 Panhandle Eastern Corporation 16,725
450 Tenneco, Inc. 22,331
--------
Other Energy 39,056
--------
</TABLE>
75
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Shares Value
- --------- -----
<S> <C> <C>
Producer Durables-3.6%
600 Allied Signal, Inc. $ 28,500
400 Emerson Electric Company 32,700
350 General Electric Company 25,200
----------
Total Producer Durables 86,400
----------
Technology-6.1%
650 Ceridian Corporation* 26,812
200 Hewlett Packard Company 16,750
400 Intel Corporation 22,700
200 International Business Machines Corporation 18,350
200 Microsoft Corporation* 17,550
400 Motorola, Inc. 22,800
150 Xerox Corporation 20,550
----------
Total Technology 145,512
----------
Utilities-6.6%
450 AT&T Company 29,137
550 GTE Corporation 24,200
750 Nipsco Industries, Inc. 28,688
550 QUALCOMM, Inc.* 23,650
500 SBC Communications, Inc. 28,750
650 WorldCom, Inc. * 22,913
----------
Total Utilities 157,338
----------
Total Common Stocks (Cost $1,229,653) 1,330,931
----------
</TABLE>
76
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----
<S> <C> <C>
Bank-1.3%
$ 30,000 BankAmerica Corporation, 6.85%, due 03/01/03 $ 31,120
---------
Financial & Other-1.4%
30,000 Associates Corporation of North America, 7.70%, due 03/01/02 32,517
---------
Total Corporate Bonds (Cost $60,243) 63,637
---------
U.S. Government and Agency Obligations-22.6%
U.S. Government Agency Obligation-2.1%
50,000 Federal Home Loan Bank 6.05%, due 06/28/00 50,953
---------
U.S. Government Obligations-20.5%
30,000 U.S. Treasury Note, 7.25%, due 08/15/04 33,366
50,000 U.S. Treasury Note, 7.50%, due 05/15/02 55,469
130,000 U.S. Treasury Note, 7.75%, due 01/31/00 141,253
245,000 U.S. Treasury Note, 7.88%, due 04/15/98 258,781
---------
Total U.S. Government Obligations 488,869
---------
Total U.S. Government and Agency Obligations
(Cost $513,337) 539,822
---------
Total Long-Term Investments (Cost $1,803,233) 1,934,390
---------
</TABLE>
77
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----
<S> <C> <C>
SHORT-TERM INVESTMENTS-18.6%
Repurchase Agreement-4.5%
$107,000 Barclays BZW Securities, dated 12/29/95, 5.50%, due 01/02/96 $ 107,000
in the amount of $107,000 (collateralized by $112,700 U.S. ----------
Treasury Note, 7.50%, due 01/31/97, with a market value of
$109,086 at 12/31/95), repurchase proceeds $107,065.
Number
of Shares Short-Term Investment Funds-5.5%
- ---------
107,000 Fidelity Institutional Cash Portfolios-U.S. Government Portfolio 107,000
25,006 Goldman Sachs-Institutional Liquid Assets-Government Portfolio 25,006
----------
Total Short-Term Investment Funds 132,006
----------
Principal
Amount U.S. Government Obligation-8.6%
- ---------
$205,000 U.S. Treasury Bill, 4.43%, due 01/18/96 204,497
----------
Total Short-Term Investments (Cost $443,503) 443,503
----------
Total Investments (Cost $2,246,736)-99.5% 2,377,893
----------
Other assets in excess of liabilities-0.5% 12,784
----------
NET ASSETS - 100% $2,390,677
==========
</TABLE>
* Non-income producing security.
The accompanying notes are an integral part of this statement.
78
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $2,246,736) $2,377,893
Cash 865
Investment income receivable 13,662
Receivable for units sold 467
----------
Total assets 2,392,887
----------
LIABILITIES
Management fee payable 2,210
----------
Total liabilities 2,210
----------
NET ASSETS $2,390,677
==========
Net assets were comprised of:
Units of beneficial interest $1,428,677
Accumulated net investment income 195,354
Accumulated net realized gain 635,489
Net unrealized appreciation 131,157
----------
Net assets at December 31, 1995 $2,390,677
==========
Unit value, offering price and redemp-
tion price per unit ($2,390,677 /
197,726 units of beneficial
interest issued and outstanding;
unlimited number of units authorized) $12.09
==========
</TABLE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-GROWTH FUND
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME
Income
Dividends $ 75,311
Interest 142,296
----------
Total income 217,607
----------
Expenses
Management fee (Note 2) 60,623
Accounting fees 9,720
Audit fees 10,719
Legal fees 11,283
Insurance 3,539
Registration fees 1,116
Shareholder reports 1,833
Directors' fees 2,288
Miscellaneous 447
----------
Total expenses 101,568
Expense subsidy (Note 3) (40,945)
----------
Net expenses 60,623
----------
Net investment income 156,984
----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investments 693,488
Unrealized appreciation in value
of investments during the year 162,228
----------
Net gain on investments 855,716
----------
Net Increase in Net Assets
Resulting from Operations $1,012,700
==========
</TABLE>
The accompanying notes are an integral part of this statement.
79
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase/(Decrease) in Net Assets Years ended December 31,
---------------------------
1995 1994*
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income $156,984 $ 38,370
Net realized gain/(loss) on investments 693,488 (57,999)
Unrealized appreciation/(depreciation)
in value of investments during the period 162,228 (31,067)
----------- -----------
Net increase/(decrease) in net assets
resulting from operations 1,012,700 (50,696)
----------- -----------
FROM UNIT TRANSACTIONS
Net proceeds from units issued 2,678,624 5,002,565
Cost of units redeemed (6,252,526) 0
----------- -----------
Net increase/(decrease) in net assets
resulting from unit transactions (3,573,902) 5,002,565
----------- -----------
Total increase/(decrease) in net assets (2,561,202) 4,951,869
Net assets, beginning of period 4,951,879 10
----------- -----------
Net assets, end of period $ 2,390,677 $ 4,951,879
=========== ===========
Net Change in Units Outstanding
Units issued 246,984 500,263
Units redeemed (549,521) 0
----------- -----------
(302,537) 500,263
=========== ===========
</TABLE>
* Commencement of Operations October 3, 1994.
The accompanying notes are an integral part of this statement.
80
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
RISK MANAGER-GROWTH FUND
SELECTED PER UNIT DATA AND RATIOS
(Selected data for a unit outstanding throughout the periods indicated)
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
SELECTED PER UNIT DATA: 1995 1994*
----------- ---------
<S> <C> <C>
Investment income $ 0.43 $ 0.11
Expenses (0.20) (0.09)
Expense subsidy 0.08 0.06
------ ------
Net investment income 0.31 0.08
Net realized and unrealized gain/(loss)
on investments 1.88 (0.18)
------ ------
Net increase/(decrease) in net asset
value 2.19 (0.10)
Net asset value, beginning of period 9.90 10.00
------ ------
Net asset value, end of period $12.09 $ 9.90
====== ======
RATIO TO AVERAGE NET ASSETS:
Expenses 1.10% 1.10%**
Net investment income 2.84% 3.14%**
OTHER:
Average net assets (000 omitted) $5,532 $4,949
Portfolio turnover 191% 31%
Number of units outstanding at
end of period (000 omitted) 198 500
Total return 22.15% (4.10%)**
</TABLE>
- -------------------
* Commencement of Operations October 3, 1994.
** Annualized
Per unit amounts are calculated using average units outstanding for the period.
The accompanying notes are an integral part of this statement.
81
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Annualized Yield
Principal Maturity on Date of
Amount Date Purchase Value
- ---------- -------- ---------------- -----
<S> <C> <C> <C> <C>
COMMERCIAL PAPER-74.0%
$3,000,000 American Express Credit Corporation 03/11/96 5.53% $ 2,967,742
3,000,000 AT&T Company 02/23/96 5.57% 2,975,399
1,000,000 AT&T Company 01/18/96 5.67% 997,323
3,500,000 Associates Corporation of North America 02/02/96 5.68% 3,482,329
2,000,000 Cargill, Inc. 01/10/96 5.68% 1,997,160
3,000,000 Commerzbank AG 01/16/96 5.67% 2,992,913
3,000,000 CoreStates Capital Corporation 01/31/96 5.71% 2,985,725
2,500,000 Daimler-Benz North America Corporation 02/16/96 5.66% 2,481,919
2,000,000 Dupont (E.I.) De Nemours & Company 01/03/96 6.08% 1,999,324
2,000,000 General Electric Capital Corporation 04/04/96 5.47% 1,971,434
1,100,000 General Electric Capital Corporation 01/31/96 5.60% 1,094,867
3,000,000 Goldman Sachs Group, LP 04/02/96 5.50% 2,957,833
3,000,000 Hewlett-Packard Company 03/05/96 5.55% 2,970,304
1,000,000 International Lease Finance Corporation 02/05/96 5.65% 994,507
1,000,000 International Lease Finance Corporation 01/10/96 5.71% 998,573
1,000,000 International Lease Finance Corporation 01/26/96 6.02% 995,819
3,000,000 Merrill Lynch & Company, Inc. 01/03/96 5.72% 2,999,047
1,000,000 Merrill Lynch & Company, Inc. 01/12/96 5.72% 998,252
3,000,000 National Rural Utilities Cooperative Finance
Corporation 02/26/96 5.62% 2,973,773
1,000,000 Smithline Beecham Corporation 01/30/96 5.90% 995,247
2,500,000 Toronto Dominion Bank 04/25/96 5.60% 2,455,278
1,000,000 Toronto Dominion Bank 02/20/96 5.62% 992,195
2,000,000 Transamerica Finance Corporation 02/09/96 5.60% 1,987,867
1,000,000 Transamerica Finance Corporation 02/16/96 5.63% 992,806
3,500,000 U.S.A.A. Capital Corporation 01/31/96 5.64% 3,483,550
-----------
Total Commercial Paper 52,741,186
-----------
CORPORATE BONDS-12.1%
2,000,000 FCC National Bank, 6.14%, due 01/19/96* 2,000,000
1,000,000 FCC National Bank, 6.51%, due 05/06/96* 1,000,262
3,000,000 Morgan, (J.P.) and Company, Inc., 5.75%, due 08/07/96 2,999,138
1,100,000 Norwest Corporation, 7.75%, due 12/31/96 1,123,255
1,000,000 Toyota Motor Credit Corporation, 6.74%, due 03/18/96 1,000,189
500,000 Virginia Electric & Power Company, 8.20%, due 08/15/96 506,542
-----------
Total Corporate Bonds 8,629,386
-----------
</TABLE>
82
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----
<C> <S> <C>
REPURCHASE AGREEMENTS-8.6%
$2,884,000 Goldman Sachs and Company, dated 12/29/95, 5.75%, due $2,884,000
01/02/96 in the amount of $2,884,000 (collateralized by $2,499,467
U.S. Treasury Note, 7.25%, due 08/15/22, with a market value of
$2,960,102 at 12/31/95), repurchase proceeds $2,885,843.
3,281,000 Lehman Government Securities, dated 12/29/95, 6.10%, due 01/02/96 in 3,281,000
the amount of $3,281,000 (collateralized by $3,079,219 U.S. Treasury
Note, 7.13%, due 02/29/00, with a market value of $3,351,696 at 12/31/95),
repurchase proceeds $3,283,224.
----------
Total Repurchase Agreements 6,165,000
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS-7.0%
2,000,000 Federal Home Loan Bank, 6.01%, due 05/15/96 1,999,575
3,000,000 Federal Home Loan Mortgage Corporation, 6.84%, due 02/28/96 3,004,373
----------
Total U.S. Government Agency Obligations 5,003,948
----------
Total Investments (Cost $72,539,520)-101.7% 72,539,520
Liabilities in excess of other assets-(1.7%) (1,229,298)
----------
NET ASSETS-100% $71,310,222
==========
</TABLE>
* Interest rates are reset weekly based on the three month U.S. Treasury Bill.
Rates shown are the rates in effect on December 31, 1995 plus ten
basis points.
The accompanying notes are an integral part of this statement.
83
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at amortized cost, which
approximates value $72,539,520
Cash 211
Investment income receivable 294,282
Receivable for units issued 44,164
-----------
Total assets 72,878,177
-----------
LIABILITIES
Income due participants 21,084
Management fee payable 31,497
Payable for units redeemed 1,515,374
-----------
Total liabilities 1,567,955
-----------
NET ASSETS $71,310,222
===========
Unit value, offering price and redemp-
tion price per unit ($71,310,222/
71,310,222 units of beneficial
interest issued and outstanding;
unlimited number of units authorized) $1.00
===========
</TABLE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
MONEY MARKET FUND
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME
Income
Dividends $ 51,797
Interest 3,924,454
-----------
Total income 3,976,251
-----------
Expenses
Management fee (Note 2) 435,936
Accounting fees 8,925
Audit fees 10,719
Directors' fees 2,288
Insurance 4,738
Legal fees 4,734
Registration fees 7,969
Shareholder reports 1,833
Miscellaneous 4,148
-----------
Total expenses 481,290
Expense subsidy (Note 3) (45,354)
Voluntary fee reduction (Note 3) (100,525)
-----------
Net expenses 335,411
-----------
Net investment income $ 3,640,840
===========
</TABLE>
The accompanying notes are an integral part of this statement.
84
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase in Net Assets Years ended December 31,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 3,640,840 $ 1,230,291
------------ -----------
Dividends to unitholders (3,640,840) (1,230,291)
------------ -----------
FROM UNIT TRANSACTIONS (at $1 per unit)
Net proceeds from units issued 143,467,408 61,259,645
Net asset value of units issued for
dividends reinvested 3,640,840 1,230,291
Cost of units redeemed (131,303,078) (35,008,679)
------------ -----------
Net increase in net assets
resulting from unit transactions 15,805,170 27,481,257
------------ -----------
Total increase in net assets 15,805,170 27,481,257
Net assets, beginning of year 55,505,052 28,023,795
------------ -----------
Net assets, end of year $71,310,222 $55,505,052
============ ===========
Net Change in Units Outstanding
Units issued 143,467,408 62,259,645
Units redeemed (131,303,078) (35,008,679)
Units issued for dividends reinvested 3,640,840 1,230,291
------------ -----------
15,805,170 27,481,257
============ ===========
</TABLE>
The accompanying notes are an integral part of this statement.
85
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
MONEY MARKET FUND
SELECTED PER UNIT DATA AND RATIOS
(Selected data for a unit outstanding throughout each of the years indicated)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------------------------------
SELECTED PER UNIT DATA: 1995 1994 1993 1992 1991
----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment income $ 0.059 $ 0.045 $ 0.032 $ 0.041 $ 0.063
Expenses (0.006)** (0.007)** (0.008) (0.008) (0.007)
Expense subsidy 0.001 0.001 0.002 0.002 0.001
------- ------ ------- ------- -------
Net investment income 0.054 0.039 0.026 0.035 0.057
Dividends to unitholders (0.054) (0.039) (0.026) (0.035) (0.057)
------- ------- ------- ------- --------
Net asset value, beginning of year 1.000 1.000 1.000 1.000 1.000
------- ------ ------- ------- -------
Net asset value, end of year $ 1.000 $1.000 $ 1.000 $ 1.000 $ 1.000
======= ====== ======= ======= =======
RATIO TO AVERAGE NET ASSETS:
Expenses 0.50%* 0.50%* 0.65% 0.65% 0.65%
Net investment income 5.43% 3.90% 2.57% 3.37% 5.69%
OTHER:
Average net assets (000 omitted) $67,067 $31,587 $30,917 $34,125 $31,036
Number of units outstanding at
end of year (000 omitted) 71,310 55,505 28,024 32,861 32,230
Total return 5.57% 3.80% 2.60% 3.44% 6.01%
</TABLE>
- -------------------
* Reflects management fee reduction of .15% of $100,525 and $27,802 for the
years ended December 31, 1995 and 1994 respectively. For the year ended
December 31, 1994 the actual net expense ratio for the year was .56% of
average net assets as the fee reduction went into effect on 5/2/94.
** Reflects management fee reduction of $100,525 or $0.002 per unit and $27,802
or $0.001 per unit for the years ended December 31, 1995 and 1994
respectively. Without management fee reduction, expense per unit is $0.007
and $0.008 for the years ended December 31, 1995 and 1994 respectively.
Per unit amounts are calculated using average units outstanding for the period.
The accompanying notes are an integral part of this statement.
86
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
a: The AVESTA Trust (the "Trust"), formerly the Retirement Investment Trust, is
registered under the Investment Company Act of 1940 as an open-end, diversified,
management investment company that consists of fifteen Funds for the collective
investment of retirement accounts for which Texas Commerce Bank National
Association ("TCB") or one of its affiliated banks serves as trustee. Under an
amended and restated Declaration of Trust, TCB is the Trustee of the Trust and,
as such, provides, or arranges for the provision of, investment advisory,
administrative and custodial services and unitholder accounting. Chemical
Securities of Texas, Inc., an affiliate of TCB, is the distributor of the Trust.
Each Fund has an unlimited number of units authorized.
The Trust currently offers thirteen Funds, each of which is accounted for
separately and has a different investment objective.
The EQUITY GROWTH FUND seeks to increase retirement assets primarily by
investing in equity-based securities, which include common stocks and those debt
securities and preferred stocks convertible into common stock, that provide
capital appreciation. Current income is a secondary objective.
The EQUITY INCOME FUND seeks to increase retirement assets by investing
primarily in equity-based securities that provide capital appreciation as well
as current income.
The BALANCED FUND seeks to increase retirement assets by investing in a
combination of bonds and equity-based securities to provide a balance of current
income and capital appreciation.
The INCOME FUND seeks to increase retirement assets by investing primarily in
domestic debt securities that earn a high level of current income with
consideration also given to safety of principal.
The CORE EQUITY FUND seeks to increase retirement assets by investing primarily
in common stocks of U.S. companies to maximize total investment return through
emphasis on capital appreciation and current income consistent with reasonable
risk.
The SMALL CAPITALIZATION FUND seeks to increase retirement assets by investing
primarily in common stocks and other equity-based securities of small
capitalization U.S. companies that can provide capital appreciation.
The SHORT-INTERMEDIATE TERM U.S. GOVERNMENT SECURITIES FUND seeks to increase
retirement assets by investing primarily in shorter-term securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, and
repurchase agreements with respect thereto, to provide as high a level of
current income as is consistent with the preservation of capital.
The U.S. GOVERNMENT SECURITIES FUND seeks to increase retirement assets by
investing primarily in securities issued or guaranteed by the U.S. Government or
its agencies or instrumentalities, and repurchase agreements with respect
thereto, to provide current income with emphasis on preservation of capital.
There is no restriction on the maturity of the Fund's portfolio or any
particular portfolio security.
The INTERMEDIATE TERM BOND FUND seeks to increase retirement assets by investing
primarily in debt securities with intermediate term maturities to provide
current income, with consideration given to stability of principal.
The RISK MANAGER-INCOME FUND seeks to increase retirement assets by investing in
a combination of debt and, to a lesser extent, equity-based securities to
achieve high current income and, when appropriate, capital appreciation.
The RISK MANAGER-BALANCED FUND seeks to increase retirement assets by investing
in a combination of debt and equity-based securities for high total return.
The RISK MANAGER-GROWTH FUND seeks to increase retirement assets by investing in
a combination of equity-based and, to a lesser extent, debt securities to
achieve capital appreciation and, secondarily, current income.
The MONEY MARKET FUND seeks to increase retirement assets by investing only in
instruments with a remaining maturity of thirteen months or less to provide a
high level of current income with equal emphasis on liquidity and stability of
principal.
The INTERNATIONAL EQUITY FUND had not commenced operations at December 31, 1995.
The INTERNATIONAL BOND FUND had not commenced operations at December 31, 1995.
The ability of the issuers of the securities held by the Trust to meet their
obligations may be affected by economic developments in a specific industry or
region.
87
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note 1 - Accounting Policies
A. Securities Valuation
Securities listed or traded on a national securities exchange are valued at the
last reported sales price on the primary exchange on which they are traded,
usually 3:00 p.m. Houston time. Unlisted securities and listed securities for
which the last sales price is not available are valued at the last reported bid
price. U.S. Government securities are valued at the last reported bid price.
For all funds except for the Money Market Fund, short-term securities which
mature in more than 60 days are valued at current market quotations. Short-term
securities are valued at amortized cost if, (1) their term to maturity from date
of purchase was 60 days or less, (2) their maturity is 60 days or less, or (3)
their original term to maturity from date of purchase exceeded 60 days, by
amortizing their value on the 61st day prior to maturity. The Money Market Fund
values all securities at amortized cost.
A repurchase agreement is a short-term investment in which a fund acquires
ownership of a debt security and the seller agrees to repurchase the security at
a future time at a specified price. Repurchase agreements are entered into only
with approved counterparties which are monitored on a daily basis. It is the
Trust's policy that its custodian take possession of the underlying collateral
securities, through physical delivery or book entry transfer, the value of which
exceeds the principal amount of the repurchase transaction, including accrued
interest. To the extent that any repurchase transaction exceeds one business
day, the value of the collateral is marked-to-market on a daily basis to ensure
the adequacy of the collateral.
B. Options and Futures Contracts
Put and Call Options
All funds, except the Money Market Fund, may invest in exchange-listed and over-
the-counter put and call options in order to take advantage of market
inefficiencies or to provide portfolio protection in expectation of a declining
market. During 1995, the Trust invested in options contracts soley for the
purpose of hedging its existing portfolio.
When the Trust writes (sells) a call option, an amount equal to the premium
received by the Trust is recorded as a liability and is subsequently adjusted to
the current market value of the option written. Premiums received from writing
call options which expire unexercised are treated by the Trust on the expiration
date as realized gains from the sale of options. The difference between the
premium received and the amount paid on effecting a closing purchase
transaction, including brokerage commissions, is also treated as a realized
gain, or if the premium is less than the amount paid for the closing purchase
transaction, as a realized loss. If a written call option is exercised, the
premium is added to the proceeds from the sale of the underlying security in
determining whether the Trust has realized a gain or loss. The Trust, as writer
of a call option, may have no control over whether the underlying securities may
be sold, and as a result, bears the market risk of an unfavorable change in the
price of the security underlying the written call option. If a written call
option on a futures contract is exercised, the premium is recognized as a gain.
Thereafter, such futures contracts are accounted for as described under
"Financial Futures Contracts". The Trust may not write put options.
The premium paid by the Trust for the purchase of a call or put option is
recorded as an investment and is subsequently valued to reflect the current
market value of the option purchased. If a purchased option expires, the Trust
realizes a loss in the amount of the premium paid for the option. If the Trust
enters into a closing transaction, it realizes a gain or loss, depending on
whether the proceeds from the sale are more or less than the cost of the option.
If the Trust exercises a purchased put option, it realizes a gain or loss from
the sale of the underlying security and the proceeds from such sale are
decreased by the premium originally paid. If the Trust exercises a purchased
call option, the amount of the premium originally paid increases the cost of the
security which the Trust purchases upon exercise of the option.
Financial Futures Contracts
A financial futures contract is an agreement between two parties to purchase
(long) or sell (short) a financial instrument at a set price for delivery on a
future date. Upon entering into a financial futures contract, the Trust is
required to pledge to the broker an amount of cash and/or U.S. Government
securities equal to a certain percentage of the contract amount. This amount is
known as the "initial margin." Subsequent payments, known as "variation
margin," are made or received by the Trust each day, depending on the daily
fluctuations in the value of the underlying security. Such variation margin is
recorded for financial statement purposes on a daily basis as a realized gain or
loss. The Trust invests in
88
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
financial futures contracts solely for the purpose of hedging its existing
portfolio securities or securities the Trust intends to purchase against
fluctuations in value caused by changes in prevailing market interest rates.
Should market values move unexpectedly, the Trust may not achieve the
anticipated benefits of the financial futures contracts and may realize a loss.
The use of futures transactions involves the risk of imperfect correlation in
movements in the price of futures contracts, interest rates and the underlying
hedged assets.
C. Federal Income Taxes
No provision for federal income taxes is required because the IRS has ruled that
the Trust is a pooled-fund arrangement exempt from Federal Income Tax. To
maintain this tax-exempt status, only Individual Retirement Accounts, Keogh
plans, 401(k) plans and other plans exempt from federal taxation may invest in
the Funds.
D. Securities Transactions and Investment Income
Securities transactions are recorded on the trade date. Realized gains and
losses on sales of investments are calculated on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income is
recorded on the accrual basis. Discounts and premiums are amortized using the
scientific method except for the Money Market Fund which utilizes the straight-
line method.
E. Dividend Distributions
The Money Market Fund declares daily and pays monthly dividend distributions
from net investment income and short-term capital gains; such dividend
distributions are automatically reinvested. Dividend distributions are recorded
on ex-dividend date. The other twelve funds do not declare or pay dividends on
investment income.
Note 2 - Management Fees
- ------------------------
The Trust has management agreements with TCB. Pursuant to these agreements, TCB
has responsibility for all investment advisory services in connection with the
management of the Trust. TCB pays the compensation of officers and employees of
the Trust, occupancy and certain accounting and clerical costs of the Trust.
The Trust bears all other costs and expenses.
The investment management fee paid by each Fund is accrued daily and paid
monthly. With respect to the Equity Growth Fund, the Equity Income Fund, the
Balanced Fund, the Income Fund, and the Core Equity Fund, the management fee is
limited to an annual rate of 1.00% of the first $250 million of the average
daily net assets of each Fund, 0.90% of the next $250 million of such net
assets, and 0.80% of such net assets in excess of $500 million. The Short-
Intermediate Term U.S. Government Securities Fund and the Intermediate Term Bond
Fund pay a management fee limited to an annual rate of 0.75% of the first $250
million of the average daily net assets of the Fund, 0.65% of the next $250
million of such net assets, and 0.55% of such net assets in excess of $500
million. The U.S. Government Securities Fund pays a management fee limited to
an annual rate of 0.85% of the first $250 million of the average daily net
assets of the Fund, 0.75% of the next $250 million of such net assets, and 0.65%
of such net assets in excess of $500 million. The Small Capitalization Fund
pays a management fee limited to an annual rate of 1.15% of the first $250
million of the average daily net assets of the Fund, 1.05% of the next $250
million of such net assets, and 0.95% of such net assets in excess of $500
million. The Risk Manager-Income Fund, the Risk Manager-Balanced Fund, and the
Risk Manager-Growth Fund pay a management fee limited to an annual rate of 1.10%
of the first $250 million of the average daily net assets of the fund, 1.00% of
the next $250 million of such net assets, and .90% of such net assets in excess
of $500 million. The Money Market Fund pays a management fee limited to an
annual rate of 0.65% of the Fund's average daily net assets.
Note 3 - Expense Subsidy and Voluntary Fee Waiver
- -------------------------------------------------
In accordance with the management agreement, TCB has agreed to subsidize 100% of
the operating expenses in excess of the management fee of each Fund until net
assets of each Fund exceeds $250 million. Generally, expenses applicable to all
funds are allocated equally. Expenses incurred for specific funds are allocated
to the respective funds.
For the year ended December 31, 1995, TCB elected to reduce management fees on
an ongoing basis by a total of $255,253 resulting in the following amounts of
fees reduced per fund: $136,617 in the Income Fund, $15,584 in the Small
Capitalization Fund, $2,527 in the U.S. Government Securities Fund, and $100,525
in the Money Market Fund.
From time to time, TCB may voluntarily elect to waive a portion of the Trust's
management fee. The voluntary fee waiver may be discontinued at any time
without prior notice.
89
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AVESTA TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
Note 4 - Portfolio Securities
- -----------------------------
Purchases and sales of investment securities, excluding short-term securities,
futures and written options, for the year ended December 31, 1995 and gross
unrealized appreciation and depreciation at December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Purchases Sales Appreciation Depreciation
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Equity Growth Fund $37,077,281 $35,288,357 $ 8,540,554 $890,002
Equity Income Fund 5,903,610 8,590,773 12,859,636 80,602
Balanced Fund 20,356,229 24,100,757 2,851,380 237,184
Income Fund 44,743,249 47,660,066 2,530,821 0
Core Equity Fund 27,764,372 25,782,111 3,578,743 452,562
Small Capitalization Fund 8,319,412 7,750,743 3,314,022 258,218
Short-Intermediate Term U.S.
Government Securities Fund 68,960,514 66,727,581 664,170 34,281
U.S. Government Securities Fund 376,188 867,933 378,516 0
Intermediate Term Bond Fund 11,118,571 11,531,867 121,463 0
Risk Manager-Income Fund 24,997,805 29,507,887 242,457 19,254
Risk Manager-Balanced Fund 21,267,744 21,328,020 363,774 50,543
Risk Manager-Growth Fund 8,338,309 10,741,022 158,185 27,024
</TABLE>
Purchases and sales of long-term U.S. Government Obligations included in the
purchase and sale amounts above for the year ended December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Purchases Sales Appreciation Depreciation
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Balanced Fund $ 9,666,242 $10,464,947 $ 452,903 $ 0
Income Fund 43,661,047 45,564,437 2,072,339 0
Short-Intermediate Term U.S.
Government Securities Fund 61,775,801 66,727,581 664,171 34,281
U.S. Government Securities Fund 376,188 867,933 378,516 0
Intermediate Term Bond Fund 8,123,661 9,410,603 89,207 0
Risk Manager-Income Fund 18,101,230 22,396,531 76,310 0
Risk Manager-Balanced Fund 11,321,405 11,930,018 49,429 0
Risk Manager-Growth Fund 2,342,015 3,261,591 25,515 0
</TABLE>
The Money Market Fund held only short-term securities and, therefore, is not
included above.
Note 5 - 10:1 Reverse Split
- ---------------------------
On May 7, 1993, the Equity Growth Fund, the Equity Income Fund, the Balanced
Fund and the Income Fund effected a 10 for 1 reverse split. One unit of
beneficial interest was exchanged for each ten units of beneficial interest
outstanding.
90
<PAGE>
PART C - OTHER INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
24. FINANCIAL STATEMENTS AND EXHIBITS.... C 1
25. PERSONS CONTROLLED BY OR UNDER COMMON
CONTROL WITH REGISTRANT.............. C 2
26. NUMBER OF HOLDERS OF SECURITIES...... C 3
27. INDEMNIFICATION...................... C 3
28. BUSINESS AND OTHER CONNECTIONS OF
INVESTMENT ADVISER................... C 4
29. PRINCIPAL UNDERWRITERS............... C 8
30. LOCATION OF ACCOUNTS AND RECORDS..... C 8
31. MANAGEMENT SERVICES.................. C 9
32. UNDERTAKINGS......................... C 9
SIGNATURES
Signatures and Power of Attorney
EXHIBITS
</TABLE>
<PAGE>
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- -------------------------------------------
(a) Financial Statements
Included in Prospectus:
Financial Highlights
Included in the Statement of Additional Information:
Portfolio of Investments as of December 31, 1995
Statement of Assets and Liabilities as of December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statement of Changes in Net Assets for each of the two years
in the period ended December 31, 1995 and December 31, 1994
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
(b) Exhibits
1. Amended and Restated Declaration of Trust dated as of May 1, 1994.*
2. None
3. None.
4. None.
5.1 Form of Management Agreement between Trust and Texas Commerce Bank
National Association, as Trustee.*
5.2 Form of Sub-Advisory Agreement between the Trust, Texas Commerce Bank
National Association, as Trustee, and Sub-Advisers.*
-C1-
<PAGE>
FINANCIAL STATEMENTS AND EXHIBITS
CONTINUED
6. Form of Amended and Restated Distribution Agreement dated as of May
1, 1994.*
7. None.
8.1 Form of Custodian Agreement between the Trust, Texas Commerce Bank
National Association, as Trustee, and State Street Bank and Trust
Company.*
8.2 Form of Sub-Custodian Agreement between State Street Bank and Trust
Company and various Sub-Custodians.*
9. None.
10. Opinion and consent of counsel as to the legality of the securities
being registered, indicating whether they will when sold, be legally
issued, fully-paid and non-assessable was filed with the Securities
and Exchange Commission on February 28, 1996, pursuant to Rule 24f-2
and is herein incorporated by reference.*
11. Consent of Independent Auditors.
12. None.
13. Agreements with initial Participating Trusts.*
14. None.
15. None.
16. Schedules for computation of each performance quotation provided in
the Registration Statement.*
17. Financial Data Schedules.
18. None.
* Previously filed with Registration Statement and Post-effective Amendments and
are herein incorporated by reference.
-C2-
<PAGE>
INDEMNIFICATION
CONTINUED
Item 25. Persons Controlled by or under Common Control with Registrant
- -----------------------------------------------------------------------
Inapplicable.
Item 26. Number of Holders of Securities
- -----------------------------------------
<TABLE>
<CAPTION>
Number of Record
Holders as of
Title of Class March 31, 1996
- --------------------------------- ---------------
<S> <C>
Money Market Fund 849
Income Fund 488
Intermediate Term Bond Fund 55
Equity Growth Fund 470
Equity Income Fund 531
Balanced Fund 155
Risk Manager-Income Fund 14
Risk Manager-Balanced Fund 14
Risk Manager-Growth Fund 11
Short-Intermediate U.S.
Government Securities Fund 341
U.S. Government Securities Fund 78
Small Capitalization Fund 339
Core Equity Fund 317
</TABLE>
Item 27. Indemnification
- -------------------------
Sections 10.2 and 10.4 of the Amended and Restated Declaration of Trust, filed
as Exhibit 1, are incorporated herein by reference. Section 10.2 contains
provisions limiting the liabilities of members of the Supervisory Committee and
Section 10.4 contains provisions for indemnification of the Trustee, members of
the Supervisory Committee and officers of the Trust.
-C3-
<PAGE>
BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
CONTINUED
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the Trust and the Trustee pursuant to the foregoing provisions or otherwise,
the Trust has been advised that, in the opinion of the SEC, such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Trust of expenses incurred or paid by
a director, officer, or controlling person of the Trust and the Trustee in
connection with the successful defense of any action, suit or proceeding) is
asserted against the Trust by such director, officer or controlling person or
the Trustee in connection with the Units being registered, the Trust will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
- --------------------------------------------------------------
Texas Commerce Bank National Association is the investment adviser of the Trust
and its business has been solely that of a national bank.
The directors and executive officers (i.e., members of management committee) of
the investment adviser have held during the past two fiscal years the following
positions of a substantial nature:
<TABLE>
<CAPTION>
Position(s)
and Offices Position(s)
with and Offices Other Substantial
Investment with Business, Profession,
Name Adviser Registrant Vocation or Employment
- ------------------- -------------- -------------- ----------------------
<S> <C> <C> <C>
John L. Adams Director, None None
Vice
Chairman
Elaine B. Agather Chairman None None
and CEO,
TCB-Fort
Worth, Vice
Chairman,
TCB-
Metroplex
</TABLE>
-C4-
<PAGE>
BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
CONTINUED
<TABLE>
<CAPTION>
Position(s)
and Offices Position(s)
with and Offices Other Substantial
Investment with Business, Profession,
Name Adviser Registrant Vocation or Employment
- ------------------------- -------------- -------------- ------------------------------
<S> <C> <C> <C>
David W. Biegler Director None Chairman, President and CEO,
ENSERCH Corporation, 300 South
St. Paul St., Dallas TX 75201
Robert W. Bishop Executive None None
Vice
President
Alan R. Buckwalter, III Director, None None
Vice
Chairman
H. Worth Burke Executive None None
Vice
President
Charles W. Duncan Director None Investments, 600 Travis,
Houston, TX 77002-3007
Dan S. Hallmark Chairman None None
and CEO
TCB-
Beaumont
Dennis R. Hendrix Director None Chairman, PanEnergy Corp.,
P. O. Box 1642, Houston, TX
77251-1642
Harold S. Hook Director None Chairman and CEO, American
General Corporation, P.O. Box
3247, Houston TX 77253
</TABLE>
-C5-
<PAGE>
BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
CONTINUED
<TABLE>
<CAPTION>
Position(s)
and Offices Position(s)
with and Offices Other Substantial
Investment with Business, Profession,
Name Adviser Registrant Vocation or Employment
- ---------------------- -------------- -------------- --------------------------------
<S> <C> <C> <C>
Robert C. Hunter Director, None None
Vice
Chairman
Ed Jones President None None
and CEO
TCB-
Midland
R. Bruce LaBoon Director None Managing Partner, Liddell, Sapp,
Zivley, Hill & LaBoon, L.L.P.,
3400 Texas Commerce Tower,
Houston, TX 77002-3004
Shelaghmichael Executive None None
C. Lents Vice
President
S. Todd Maclin President, None None
TCB-Dallas,
Execuitve
Vice
President
Beverly H. McCaskill Executive None None
Vice
President
Joe C. McKinney Chairman None None
and CEO
TCB-San
Antonio
</TABLE>
-C6-
<PAGE>
BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
CONTINUED
<TABLE>
<CAPTION>
Position(s)
and Offices Position(s)
with and Offices Other Substantial
Investment with Business, Profession,
Name Adviser Registrant Vocation or Employment
- --------------------- -------------- -------------- ----------------------
<S> <C> <C> <C>
Scott J. McLean Chairman None None
and CEO
TCB-
El Paso
Randal B. McLelland President None None
and CEO,
TCB-Rio
Grande
Valley
David L. Mendez Executive None None
Vice
President
W. Merriman Morton Chairman None None
and CEO
TCB-Austin
Paul Poullard Executive None None
Vice
President
Jeffrey B. Reitman General None None
Counsel
Edward N. Robinson Executive None None
Vice
President
Ann V. Rogers Executive None None
Vice
President
</TABLE>
-C7-
<PAGE>
BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
CONTINUED
<TABLE>
<CAPTION>
Position(s)
and Offices Position(s)
with and Offices Other Substantial
Investment with Business, Profession,
Name Adviser Registrant Vocation or Employment
- ------------------------ ---------------- -------------- ----------------------
<S> <C> <C> <C>
Marc J. Shapiro Director, None None
Chairman,
President
and CEO
Larry L. Shryock Executive None None
Vice
President
Kenneth L. Tilton Executive None None
Vice
President and
Controller
Harriet S. Wasserstrum Executive None None
Vice
President
Gary K. Wright Executive None None
Vice
President
</TABLE>
Item 29. Principal Underwriters
- --------------------------------
Inapplicable.
-C8-
<PAGE>
BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
CONTINUED
Item 30. Location of Accounts and Records
- ------------------------------------------
Accounts and other documents are maintained at the offices of the Trustee, Texas
Commerce Bank National Association, 600 Travis Street, Houston, Texas 77002.
With respect to the International Equity Fund and the International Bond Fund,
other accounts and documents are maintained at the offices of State Street Bank
and Trust Company, 225 Franklin Street, Boston, Massachusetts 02105.
Item 31. Management Services
- -----------------------------
Inapplicable.
Item 32. Undertakings
- ----------------------
(a) Registrant hereby undertakes to call a meeting shareholders for the
purpose of voting upon the question of removal of one or more of
Registrant's directors when requested in writing to do so by the holders
of at least 10% of Registrant's outstanding shares of common stock and, in
connection with such meeting, to assist in communications with other
shareholders in this regard, as provided under Section 16(c) of the 1940
Act.
(b) Registrant hereby undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without change.
-C9-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Amendment to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, and State of
Texas, on the 29th day of April, 1996. The Registrant certifies that this
Amendment meets the requirements for effectiveness pursuant to Rule 485(b) under
the Securities Act of 1933.
AVESTA TRUST
By: TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
Trustee
By: /s/ Cheryl M. Morgan
----------------------------------
Cheryl M. Morgan
Treasurer and Chief Financial Officer
<PAGE>
SIGNATURES
CONTINUED
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------- -------------------- --------
<S> <C> <C>
/s/ Frank A. Liddell, Jr. Member, April 29, 1996
- --------------------------- Supervisory Committee
Frank A. Liddell, Jr.*
/s/George E. McDavid Member, April 29, 1996
- ------------------------ Supervisory Committee
George E. McDavid*
/s/Kenneth L. Otto Member, April 29, 1996
- -------------------------- Supervisory Committee
Kenneth L. Otto*
/s/H. Michael Tyson Member, April 29, 1996
- ------------------------- Supervisory Committee
H. Michael Tyson*
/s/ Henry J. Lartigue Chairman, April 29, 1996
- --------------------------- Supervisory Committee
Henry J. Lartigue*
</TABLE>
* Melanie McKittrick, pursuant to power of attorney, by signing her name hereto
does hereby sign and execute this Registration Statement of the AVESTA Trust
on behalf of each of the members of the Supervisory Committee named above, in
the capacities in which the name of each appears above.
By: /s/ Melanie McKittrick
-----------------------
Melanie McKittrick
Attorney-In-Fact
<PAGE>
AVESTA TRUST
EXHIBIT INDEX
APRIL 29, 1996
Exhibit 23 Consent of Independent Auditors Page EX-1
Exhibit 27 Financial Data Schedules Page EX-2
<PAGE>
Price Waterhouse LLP [PRICE WATERHOUSE LLP LOGO APPEARS HERE]
CONSENT OF INDEPENDENT ACCOUNTANTS
April 26, 1996
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 18 to the Registration
Statement under the Securities Act of 1933 and Amendment No. 22 to the
Registration Statement under the Investment Company Act of 1940 on Form N-1A
(the "Registration Statement") of our report dated February 16, 1996, relating
to the financial statements and selected per unit data and ratios of the AVESTA
Trust, formerly known as the Retirement Investment Trust, which appears in such
Statement of Additional Information, and to the incorporation by reference of
our report into the Prospectus which constitutes part of this Registration
Statement. We also consent to the references to us under the headings "Financial
Highlights" and "Counsel and Auditors" in such Prospectus and to the reference
to us under the headings "Counsel and Auditors" in such Statement of Additional
Information.
/s/ Price Waterhouse LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000803747
<NAME> AVESTA TRUST
<SERIES>
<NUMBER> 1
<NAME> EQUITY GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 37,847,245
<INVESTMENTS-AT-VALUE> 45,497,797
<RECEIVABLES> 129,388
<ASSETS-OTHER> 804
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 45,627,989
<PAYABLE-FOR-SECURITIES> 11,967
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 38,213
<TOTAL-LIABILITIES> 50,180
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<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> 45,577,809
<DIVIDEND-INCOME> 543,227
<INTEREST-INCOME> 183,667
<OTHER-INCOME> 0
<EXPENSES-NET> 407,599
<NET-INVESTMENT-INCOME> 319,295
<REALIZED-GAINS-CURRENT> 2,467,251
<APPREC-INCREASE-CURRENT> 6,401,728
<NET-CHANGE-FROM-OPS> 9,188,274
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 447,019
<NUMBER-OF-SHARES-REDEEMED> 471,304
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (293,834)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 40,753,000
<PER-SHARE-NAV-BEGIN> 18.44
<PER-SHARE-NII> 0.17
<PER-SHARE-GAIN-APPREC> 4.59
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 23.20
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000803747
<NAME>AVESTA TRUST
<SERIES>
<NUMBER> 2
<NAME> EQUITY INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 38,729,088
<INVESTMENTS-AT-VALUE> 51,508,122
<RECEIVABLES> 3,524,568
<ASSETS-OTHER> 466
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 55,033,156
<PAYABLE-FOR-SECURITIES> 4,531
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 43,548
<TOTAL-LIABILITIES> 48,079
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<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> 54,985,077
<DIVIDEND-INCOME> 1,154,363
<INTEREST-INCOME> 230,446
<OTHER-INCOME> 0
<EXPENSES-NET> 446,506
<NET-INVESTMENT-INCOME> 938,303
<REALIZED-GAINS-CURRENT> 884,985
<APPREC-INCREASE-CURRENT> 11,054,690
<NET-CHANGE-FROM-OPS> 12,877,978
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 552,331
<NUMBER-OF-SHARES-REDEEMED> 450,395
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,810,663
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 44,651,000
<PER-SHARE-NAV-BEGIN> 17.90
<PER-SHARE-NII> 0.44
<PER-SHARE-GAIN-APPREC> 5.59
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 23.93
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000803747
<NAME> AVESTA TRUST
<SERIES>
<NUMBER> 3
<NAME> BALANCED FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 18,063,147
<INVESTMENTS-AT-VALUE> 20,669,892
<RECEIVABLES> 819,799
<ASSETS-OTHER> 543
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 21,490,234
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18,787
<TOTAL-LIABILITIES> 18,787
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<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> 21,471,447
<DIVIDEND-INCOME> 184,469
<INTEREST-INCOME> 675,657
<OTHER-INCOME> 0
<EXPENSES-NET> 218,177
<NET-INVESTMENT-INCOME> 641,949
<REALIZED-GAINS-CURRENT> 1,560,947
<APPREC-INCREASE-CURRENT> 2,414,091
<NET-CHANGE-FROM-OPS> 4,616,987
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 179,016
<NUMBER-OF-SHARES-REDEEMED> 496,947
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (5,947,319)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 21,843,000
<PER-SHARE-NAV-BEGIN> 17.16
<PER-SHARE-NII> 0.57
<PER-SHARE-GAIN-APPREC> 3.52
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.25
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000803747
<NAME> AVESTA TRUST
<SERIES>
<NUMBER> 4
<NAME> INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 54,396,904
<INVESTMENTS-AT-VALUE> 56,927,725
<RECEIVABLES> 621,814
<ASSETS-OTHER> 480
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 57,550,019
<PAYABLE-FOR-SECURITIES> 61,484
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 36,908
<TOTAL-LIABILITIES> 98,392
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
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<NAME> CORE EQUITY FUND
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<NAME> SHORT-INTERMEDIATE TERM U.S. GOVERNMENT SECURITIES FUND
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<NAME> INTERMEDIATE TERM BOND FUND
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<NAME> AVESTA TRUST
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<NAME> AVESTA TRUST
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<NAME> RISK MANAGER-GROWTH FUND
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</TABLE>