<PAGE>
P R O S P E C T U S
DATED NOVEMBER 1, 1999
AHA INVESTMENT FUNDS, INC.
LIMITED MATURITY FIXED INCOME PORTFOLIO
FULL MATURITY FIXED INCOME PORTFOLIO
DIVERSIFIED EQUITY PORTFOLIO
BALANCED PORTFOLIO
100 Half Day Road
Lincolnshire, Illinois 60069
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This Prospectus sets forth concisely the information about the Fund that you
should know before investing. It should be read carefully and retained for
future reference.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved of these securities and has not passed on the adequacy
or accuracy of the information in this Prospectus. It is a criminal offense to
state otherwise.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Objective and Strategy......................................................1
Main Risks..................................................................5
Past Performance............................................................7
Fees And Expenses..........................................................11
Portfolio Investments And Related Risks....................................12
Management Of The Fund.....................................................15
Expenses And Fees..........................................................16
How To Buy Shares..........................................................17
How To Redeem Shares.......................................................18
Exchange Privilege.........................................................20
Dividends, Distributions And Taxes.........................................20
Fund Performance Information...............................................21
Financial Highlights.......................................................22
General Information........................................................27
Investment Manager Profiles................................................27
</TABLE>
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<PAGE>
OBJECTIVE AND STRATEGY
BASIC FUND BACKGROUND
The Fund is a diversified fund designed for use by participants in the
American Hospital Association Investment Program. The Program is a service
offered by Hewitt Associates LLC pursuant to arrangements with the American
Hospital Association and is available to American Hospital Association member
hospitals and their affiliated organizations, including employee benefit plans
and hospital insurance funds. To become a participant in the Program an eligible
organization must enter into a Program Services Agreement with Hewitt. Other
hospital associations affiliated with AHA and their sponsored and affiliated
organizations are also eligible to become participants.
The Fund is comprised of four independently managed investment
portfolios. Subject to the approval of the Fund's Board of Directors, Hewitt
selects the Investment Managers of the portfolios. Each portfolio, with the
exception of the Limited Maturity Fixed Income Portfolio, has multiple
Investment Managers. The assets of these portfolios are divided into segments to
be invested using specific investment styles.
LIMITED MATURITY FIXED INCOME PORTFOLIO
INVESTMENT OBJECTIVE: The investment objective of the Portfolio is to
provide shareholders a high level of current income, consistent with the
preservation of capital and liquidity.
PRINCIPAL INVESTMENT STRATEGIES: In pursuing its investment objective,
the Portfolio invests its assets primarily in fixed income securities (i.e.,
debt). The investments of the Portfolio are limited to debt issued or guaranteed
by the U.S. Government or by its agents or instrumentalities (including, among
others, U.S. Treasury obligations and securities issued by the Federal Home Loan
Bank and the Federal National Mortgage Association), high quality
non-convertible debt of other issuers and money market instruments. High quality
debt securities are those debt securities having one of the three highest grades
issued by Moody's Investors Service, Inc. (Aaa, Aa or A) or Standard and Poor's
(AAA, AA or A), or which if not rated are of comparable quality as determined by
the Portfolio's Investment Manager. The Portfolio is not required to sell a
security if the rating or credit quality of the security deteriorates after its
purchase. However, the Investment Manager will evaluate and monitor the quality
of all investments, and will dispose of investments which have deteriorated in
their creditworthiness or ratings as determined to be necessary to assure the
Portfolio's overall investments are constituted in a manner consistent with its
investment objective. Subject to certain limitations, the Portfolio may invest
in options on securities, interest rate futures and options on interest rate
futures. The Portfolio may invest in futures and options on futures only for
hedging and other non-speculative purposes.
The Investment Manager of the Portfolio determines which securities to
purchase or sell and adjusts the average maturity of the Portfolio based upon a
variety of factors aimed at controlling risk while capturing market
opportunities. The factors considered in determining the appropriate average
maturity of the Portfolio and when to purchase or sell securities include the
Investment Manager's assessment of interest rate trends and movements and its
analysis of yields, the quality of securities, and the comparative risks and
returns of alternative investments. The dollar-weighted average maturity of the
Portfolio is normally less than three years. In no event will the
dollar-weighted average maturity exceed five years. However, there is no limit
on the maturities of individual securities.
FULL MATURITY FIXED INCOME PORTFOLIO
INVESTMENT OBJECTIVE: The investment objective of the Portfolio is to
provide shareholders over the long-term with the highest level of income
consistent with preservation of capital.
<PAGE>
PRINCIPAL INVESTMENT STRATEGIES: In pursuing its investment objective,
the Portfolio invests at least 75% of its total assets in fixed income
securities (i.e., debt) issued or guaranteed by the U.S. Government or its
agents or instrumentalities (including among others, U.S. Treasury obligations,
Inflation Index Bonds and Strips, securities issued by the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association, the Government
National Mortgage Association and the Student Loan Marketing Association), high
quality non-convertible debt of other issuers and money market instruments.
Although the Portfolio invests primarily in high quality debt securities (as
defined above), it may invest up to 25% of its total assets in securities rated
Baa by Moody's Investors Services, Inc. or BBB by Standard and Poor's, or which
if not rated, are of comparable quality as determined by the Portfolio's
Investment Managers. The Portfolio is not required to sell a security if the
rating or credit quality of the security deteriorates after its purchase.
However, the Investment Managers will evaluate and monitor the quality of all
investments, and will dispose of investments which have deteriorated in their
creditworthiness or ratings as determined to be necessary to assure the
Portfolio's overall investments are constituted in a manner consistent with its
investment objective. Subject to certain limitations, the Portfolio may also
invest in options on securities, interest rate futures and options on interest
rate futures. The Portfolio may invest in futures and options on futures only
for hedging and other non-speculative purposes.
The Portfolio uses multiple Investment Managers with distinct
investment styles. Hewitt Associates, LLC, the Fund's Investment Consultant,
selects the Portfolio's Investment Managers (subject to approval of the Fund's
Board of Directors) based on its consideration of a variety of factors,
including the Investment Manager's investment style and performance record, as
well as the characteristics of the Investment Manager's typical investments.
The Investment Managers may vary the average maturity of the
Portfolio's assets substantially and make buy and sell decisions, based upon
their individual market analyses. Such analyses may consider, for example,
interest rate trends and movements, yields, the quality and value (e.g., whether
over- or under-valued) of particular securities, and the comparative risks and
returns of alternative investment choices. The Portfolio has no minimum or
maximum maturity with respect to the securities it may purchase. Its
dollar-weighted average maturity may at times exceed 20 years and at other times
fall below five years.
DIVERSIFIED EQUITY PORTFOLIO
INVESTMENT OBJECTIVE. The investment objective of the Portfolio is
long-term capital growth.
PRINCIPAL INVESTMENT STRATEGIES. In pursuing its investment objective,
the Portfolio normally invests at least 75% of its total assets in equity
securities. These securities include common and preferred stocks, and other
securities, such as convertible securities, warrants and stock options, having
equity characteristics. The Portfolio may also invest in high quality debt
obligations and, subject to certain limitations, in options on securities, stock
index options, futures contracts and options on futures contracts. The Portfolio
may invest in futures and options on futures only for hedging and other
non-speculative purposes.
The Portfolio uses multiple Investment Managers with distinct
investment styles. The Investment Consultant selects the Portfolio's Investment
Managers (subject to approval of the Fund's Board of Directors) based on its
consideration of a variety of factors, including the Investment Manager's
investment style and performance record, as well as the characteristics of the
Investment Manager's typical investments.
The investment strategies of the Investment Managers will differ, but typically
will emphasize securities which in their opinions contain one or more of the
following characteristics:
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<PAGE>
- - prices that are judged to be significantly below the intrinsic value of the
company;
- - favorable prospects for earnings growth;
- - above average return on equity and dividend yield; and
- - sound overall financial condition of the issuer.
Investment Managers may determine to sell securities if it is believed
that the characteristics above which led to the securities purchase, are no
longer applicable. Additionally, securities might be sold, for example, if a
"target price" has been achieved, anticipated positive developments fail to
materialize or a stock becomes overweighted in the Portfolio.
BALANCED PORTFOLIO
INVESTMENT OBJECTIVE. The investment objective of the Portfolio is to
provide a combination of growth of capital and income.
PRINCIPAL INVESTMENT STRATEGIES. In pursuing its investment
objective, the Portfolio invests in equity securities for growth, in equity
securities that offer both growth and income, and in fixed income securities
(i.e., debt), some of which may be convertible into common stocks. The
Portfolio invests no more than 75% of its total assets in equity securities
and at least 25% of its total assets in fixed income securities. Equity
securities in which the Portfolio invests include common and preferred stocks
and other securities, such as convertible securities, warrants and stock
options, having equity characteristics. Fixed income investments may include
U.S. Government Securities, non-convertible debt of "investment grade"
quality (e.g., rated Baa or higher by Moody's Investors Services, Inc. or BBB
or higher by Standard and Poor's, or if unrated, of comparable quality as
determined by the Investment Managers) and money market instruments. The
Portfolio has no restrictions concerning the minimum or maximum maturity of
its fixed income investments. The Portfolio may also invest in futures and
options on futures only for hedging and other non-speculative purposes.
With respect to the fixed income portion of the Portfolio, the
Investment Managers may vary the average maturity of the Portfolio's assets
substantially and make buy and sell decisions, based upon their individual
market analyses. Such analyses may consider, for example, interest rate trends
and movements, yields, the quality and value (e.g., whether over- or
under-valued) of particular securities, and the comparative risks and returns of
alternative investment choices. With respect to equities, Investment Managers
choose securities based upon a number of characteristics, based upon their
individual investment strategies. These characteristics will differ, but may
include, among others:
- - prices that are judged to be significantly below the intrinsic value of the
company;
- - favorable prospects for earnings growth;
- - above average return on equity and dividend yield; and
- - sound overall financial condition of the issuer.
Investment Managers may determine to sell securities if it is believed
that the characteristics upon which they relied when purchasing the securities
are no longer applicable. Additionally, securities might be sold, for
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<PAGE>
example, if a "target price" has been achieved, anticipated positive
developments fail to materialize, or a stock becomes overweighted in the
Portfolio.
The Portfolio uses multiple Investment Managers to obtain expertise in
both the equity and fixed-income markets. The Fund's Investment Consultant
selects Investment Managers (subject to approval of the Fund's Board of
Directors) based on a variety of factors, including the Investment Manager's
investment style and performance record, as well as the characteristics of the
Investment Manager's typical investments. Investment policies are structured so
as to allow the Investment Managers to pursue the Portfolio's objectives in a
way that seeks to reduce the magnitude and rapidity of short term movements in
the net asset value of its shares.
SUMMARY PORTFOLIO COMPARISON
<TABLE>
<CAPTION>
Investment in Debt
Rated Baa by
Moody's or BBB by
Anticipated Equity Anticipated Debt Standard &
Portfolio Investments* Investments* Poor's* Objective
--------- ------------ ------------ ------------------ ---------
<S> <C> <C> <C> <C>
Limited Maturity
Fixed Income 0% At least 75% 0% High level of current
income consistent
with preservation of
capital and liquidity
Full Maturity Fixed
Income 0% At least 75% Up to 25% Highest level of
income consistent
with preservation of
capital
Diversified Equity At least 75% Up to 25% 0% Long-term capital
growth
Balanced Up to 75% At least 25% Up to 25% Growth of capital
and income
</TABLE>
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* As a percentage of total assets.
-4-
<PAGE>
MAIN RISKS
An investment in the Fund, like any investment, is subject to certain
risks. The value of a Portfolio's investments will increase or decrease. This
will cause the value of the Portfolios' shares to increase or decrease, and a
participant could lose money on its investment. The following describes, with
respect to each Portfolio, the principal types of risks that the Portfolio is
subject to. A Portfolio that does not list a particular risk may hold
investments that are subject to that risk, but will not do so in a way that is
expected to affect materially the Portfolio's overall performance.
LIMITED MATURITY FIXED INCOME PORTFOLIO
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RISK DESCRIPTION
Interest Rate and The value of fixed income securities generally
Credit Risk will fall if interest rates rise. The value of
these securities may also fall as a result of
other factors such as the financial condition of
the issuer, the market perception of the issuer or
general economic conditions. These investments
also involve a risk that the issuer may not be
able to meet its principal and interest payment
obligations. Fixed income securities having longer
maturities involve greater risk of fluctuations in
value.
Futures and Options on Transactions involving futures and options on
Futures futures involve certain risks, even though such
transactions may be engaged in solely for hedging
and other non-speculative purposes. A lack of
correlation between the value of the instruments
underlying an option or futures contract and the
value of assets being hedged, or unexpected
adverse price movement, could render a hedging
strategy ineffective and could result in a loss.
FULL MATURITY FIXED INCOME PORTFOLIO
------------------------------------
RISK DESCRIPTION
Use of multiple Investment The investment styles employed by a Portfolio's
Managers Investment Managers may not be complementary and
may result in the Portfolio's holdings focusing on
certain types of securities or positions which
offset each other. This focus may benefit or harm
the Portfolio's performance depending on the
performance of those securities and the overall
economic environment. The use of multiple
Investment Managers could result in a high level
of portfolio turnover, resulting in higher
brokerage expenses and increased tax liability
from the Portfolio's realization of capital gains.
Interest Rate and Credit The value of fixed income securities generally
Risk will fall if interest rates rise. The value of
these securities may also fall as a result of
other factors such as the financial condition of
the issuer, the market perception of the issuer or
general economic conditions. These investments
also involve a risk that the issuer may not be
able to meet its principal and interest payment
obligations. Fixed income securities having longer
maturities involve greater risk of fluctuations in
value.
Fixed income securities Although debt securities rated below "high
rated below high quality quality" generally offer a higher yield than high
quality-rated debt securities, they generally
involve higher risks. They tend to be more subject
to:
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<PAGE>
- Adverse changes in general economic conditions
and in the industries in which their issuers
are engaged;
- Changes in the financial conditions of their
issuers; and
- Price fluctuations in response to changes in
interest rates.
As a result, issuers of such debt securities are
more likely than issuers of high quality debt to
miss principal and interest payments or to
default.
Futures and Options on Transactions involving futures and options on
Futures futures involve certain risks, even though such
transactions may be engaged in solely for hedging
and other non-speculative purposes. A lack of
correlation between the value of the instruments
underlying an option or futures contract and the
value of assets being hedged, or unexpected
adverse price movement, could render a hedging
strategy ineffective and could result in a loss.
DIVERSIFIED EQUITY PORTFOLIO
----------------------------
RISK DESCRIPTION
Use of multiple Investment The investment styles employed by a Portfolio's
Managers Investment Managers may not be complementary and
may result in the Portfolio's holdings focusing on
certain types of securities or positions which
offset each other. This focus may benefit or harm
the Portfolio's performance depending on the
performance of those securities and the overall
economic environment. The use of multiple
Investment Managers could result in a high level
of portfolio turnover, resulting in higher
brokerage expenses and increased tax liability
from the Portfolio's realization of capital gains.
Market Value Risk The value of equity securities rise and fall based
upon a variety of factors including activities of
the company that issued the stock, conditions
related to the industry of the issuer and general
market and economic conditions.
Futures and Options on Transactions involving futures and options on
Futures futures involve certain risks, even though such
transactions may be engaged in solely for hedging
and other non-speculative purposes. A lack of
correlation between the value of the instruments
underlying an option or futures contract and the
value of assets being hedged, or unexpected
adverse price movement, could render a hedging
strategy ineffective and could result in a loss.
BALANCED PORTFOLIO
------------------
RISK DESCRIPTION
Use of multiple Investment The investment styles employed by a Portfolio's
Managers Investment Managers may not be complementary and
may result in the Portfolio's holdings focusing on
certain types of securities or positions which
offset each other. This focus may benefit or harm
the Portfolio's performance depending on the
performance of those securities and the overall
economic environment. The use of multiple
Investment Managers could result in a high level
of portfolio turnover, resulting in higher
brokerage expenses and increased tax liability
from the Portfolio's realization of capital gains.
-6-
<PAGE>
Market Value Risk The value of equity securities rise and fall based
upon a variety of factors including activities of
the company that issued the stock, conditions
related to the industry of the issuer and general
market and economic conditions.
Interest Rate and The value of fixed income securities generally
Credit Risk will fall if interest rates rise. The value of
these securities may also fall as a result of
other factors such as the financial condition of
the issuer, the market perception of the issuer or
general economic conditions. These investments
also involve a risk that the issuer may not be
able to meet its principal and interest payment
obligations. Fixed income securities having longer
maturities involve greater risk of fluctuations in
value.
Fixed income securities Although debt securities rated below "high
rated below high quality quality" generally offer a higher yield than high
quality-rated debt securities, they generally
involve higher risks. They tend to be more subject
to:
- Adverse changes in general economic conditions
and in the industries in which their issuers
are engaged;
- Changes in the financial conditions of their
issuers; and
- Price fluctuations in response to changes in
interest rates.
As a result, issuers of such debt securities are
more likely than issuers of high quality debt to
miss principal and interest payments or to
default.
Futures and Options on Transactions involving futures and options on
Futures futures involve certain risks, even though such
transactions may be engaged in solely for hedging
and other non-speculative purposes. A lack of
correlation between the value of the instruments
underlying an option or futures contract and the
value of assets being hedged, or unexpected
adverse price movement, could render a hedging
strategy ineffective and could result in a loss.
PAST PERFORMANCE
The following bar charts illustrate the risks of investing in the
Portfolios by showing how Portfolio performance has varied from year-to-year
over a 10 year period(1). The table thereafter further illustrates the risks of
investing in the Portfolios by showing how the Portfolios' performance for 1, 5
and 10 years compare with certain indices that measure broad market performance.
- ----------------------------------
(1) The information assumes reinvestment of dividends and distributions.
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<PAGE>
As with all mutual funds, past performance is not a prediction of future
results.
YEAR-TO-YEAR TOTAL RETURN
AS OF 12/31 EACH YEAR
---------------------
LIMITED MATURITY FIXED INCOME PORTFOLIO(2)
------------------------------------------
[GRAPH]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
8.09% 8.18% 12.83% 3.58% 4.97% 0.33% 10.54% 4.09% 5.92% 6.32%
</TABLE>
FULL MATURITY FIXED INCOME PORTFOLIO(3)
---------------------------------------
[GRAPH]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
9.49% 7.08% 15.92% 5.72% 10.99% (-3.74)% 17.19% 2.24% 9.33% 7.98%
</TABLE>
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(2) As of September 30, 1999, the total year-to-date return was 2.16%.
Commencement date for the Portfolio was December 22, 1988.
(3) As of September 30, 1999, the total year-to-date return was (1.26)%.
Commencement date for the Portfolio was October 20, 1988.
-8-
<PAGE>
BALANCED PORTFOLIO(4)
---------------------
[GRAPH]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
17.26% (-5.07)% 27.97% 5.06% 10.76% (-1.94)% 25.04% 17.97% 24.44% 8.82%
</TABLE>
DIVERSIFIED EQUITY PORTFOLIO(5)
-------------------------------
[GRAPH]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
19.12% (-7.68)% 34.68% 9.51% 10.06% (-0.37)% 33.75% 23.37% 33.64% 16.66%
</TABLE>
During the periods shown in the bar chart, the highest and lowest
quarterly returns of the Portfolios were as follows:
<TABLE>
<CAPTION>
BEST AND WORST QUARTER RESULTS
------------------------------
PORTFOLIO BEST QUARTER WORST QUARTER
<S> <C> <C>
Limited Maturity Fixed Income 4.48% (4Q/91) (.70)% (1Q/92)
Full Maturity Fixed Income 6.08% (3Q/91) (3.00)% (1Q/96)
Diversified Equity 20.92% (4Q/98) (15.57)% (3Q/90)
Balanced 12.71% (4Q/98) (8.13)% (3Q/90)
</TABLE>
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(4) As of September 30, 1999, the total year-to-date return was 2.95%.
Commencement date for the Portfolio was October 20, 1988.
(5) As of September 30, 1999, the total year-to-date return was 3.41%.
Commencement date for the Portfolio was October 20, 1988.
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<PAGE>
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31 EACH YEAR
---------------------
<TABLE>
<CAPTION>
PORTFOLIO COMPARATIVE INDEX 1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Limited Maturity Fixed 6.32% 5.39% 6.43%
Income
Lehman Brothers 5.05% 6.30% 6.83%
Government 1-3 Year Bond
Index
Full Maturity Fixed Income 7.98% 6.37% 8.06%
Lehman Brothers 8.67% 7.27% 9.25%
Aggregate Bond Index
Diversified Equity 16.66% 20.71% 16.43%
S&P 500 Stock Index 28.70% 24.09% 19.22%
Balanced 8.82% 14.39% 12.50%
S&P 500 Stock Index(6) 28.70% 24.09% 19.22%
Lehman Brothers 8.67% 7.27% 9.25%
Aggregate Bond Index
</TABLE>
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(6) The Balanced Portfolio may invest more or less than 50% of its assets in
equity securities. During the 10 year period ended December 31, 1998, the
Portfolio generally invested more than 50% of its assets in equity
securities.
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<PAGE>
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Portfolios.
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
FULL MATURITY LIMITED MATURITY DIVERSIFIED BALANCED
FIXED INCOME FIXED INCOME EQUITY PORTFOLIO
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) None None None None
imposed on purchases (as a percentage
of offering price)
Maximum Deferred Sales Charge None None None None
(Load)
Maximum Sales Charge (Load) None None None None
imposed on reinvestment of dividends
Redemption Fees None None None None
Exchange Fees None None None None
</TABLE>
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
LIMITED
FULL MATURITY MATURITY FIXED DIVERSIFIED
FIXED INCOME INCOME EQUITY BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Management Fees None None None None
Distribution and Service (12b-1) Fees None None None None
Other Expenses
1. Custody fees 0.03% 0.02% 0.02% 0.05%
2. Audit, legal, administration and
miscellaneous 0.13% 0.10% 0.08% 0.13%
3. Fee to Hewitt Associates LLC(7) 0.50% 0.50% 0.75% 0.75%
----- ----- ----- -----
Total Other Expenses 0.66% 0.62% 0.85% 0.93%
----- ----- ----- -----
Total Annual Portfolio Operating Expenses 0.66% 0.62% 0.85% 0.93%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
EXAMPLE: The following examples are intended to help you compare the cost of
investing in each Portfolio with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in a Portfolio for the time
periods indicated. The examples also assume that your investment has a 5% return
each year and that the Portfolio's operating expenses remain the same. Although
actual costs or investment return may be higher or lower, based on these
assumptions, the costs would be:
- ------------------------
(7) As discussed below, shareholders will incur this fee individually as
participants in the American Hospital Association Investment Program. The
table assumes the standard fee applicable for the standard level of Program
Services.
-11-
<PAGE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Full Maturity Fixed Income $ 70 $220 $380 $ 850
Limited Maturity Fixed Income $ 60 $200 $350 $ 780
Diversified Equity $ 90 $280 $480 $1,070
Balanced Portfolio $100 $300 $520 $1,160
</TABLE>
PORTFOLIO
INVESTMENTS AND RELATED RISKS
The Portfolios may use various investment instruments and practices in
pursuing their investment programs. Descriptions of the primary instruments and
practices used by the Portfolios and the principal risks associated with them
are set forth above in the Sections "Objective and Strategy" and "Main Risks".
Information regarding the Portfolios' non-primary investment practices and their
associated risks, as well as additional information concerning risks associated
with the Portfolio's primary investment practices, are discussed below.
Participants should consider each Portfolio as a supplement to an
overall investment program and should invest in a Portfolio only if willing to
undertake the risks involved. Changes in the value of a Portfolio's investments
will result in changes in the value of the Portfolios' shares, and thus the
Portfolio's total return to participants.
FOREIGN SECURITIES
Each Portfolio is permitted to invest up to 10% of the value of its
total assets in securities of foreign issuers. In addition, each Portfolio may
invest up to 20% of its total assets in American Depositary Receipts ("ADRs")
and securities of Canadian issuers registered under the Securities Exchange Act
of 1934. These investments involve risks not associated with investments in U.S.
securities, including the risk of fluctuations in foreign currency exchange
rates, unreliable and untimely information about the issuers and political and
economic instability. These risks are more severe in emerging markets and could
result in an Investment Manager misjudging the value of certain securities or
result in a significant loss in the value of those securities.
ILLIQUID SECURITIES
Each Portfolio may invest up to 10% of the value of its net assets in
illiquid securities. These securities lack a ready market in which they can be
sold. Illiquid securities involve the risk that a Portfolio will not be able to
sell them when desired or at a favorable price.
OPTIONS AND WARRANTS
Options and warrants are forms of derivative instruments. They can have
equity-like characteristics and typically derive their value, at least in part,
from the value of an underlying asset or index. Each Portfolio may, but is not
obligated to, engage in options transactions. The Diversified Equity Portfolio
and the Balanced
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<PAGE>
Portfolio may trade in options on securities and options on stock indices as
well as invest in warrants and rights. The Limited Maturity Fixed Income
Portfolio and the Full Maturity Fixed Income Portfolio may trade in options on
securities. Any options on securities on stock indices that are written by the
Portfolios must be "covered". This means that the Portfolio must hold the
underlying security or segregate assets in the amount of its option position.
A put option gives the purchaser of the option the right to sell, and
obligates the writer to buy, an underlying asset or index at a stated exercise
price at any time prior to the expiration of the option. A call option gives the
purchaser of the option the right to buy, and obligates the writer to sell, an
underlying asset or index at a stated exercise price at any time prior to the
expiration of the option.
Warrants are instruments that permit, but do not obligate, the holder
to subscribe for other securities. Rights are similar to warrants, but normally
have a short duration and are distributed directly by the issuer to its
shareholders. Warrants and rights are not dividend-paying investments and do not
have voting rights like common stock. They also do not represent any rights in
the assets of the issuer. As a result, warrants and rights may be considered
more speculative than direct equity investments. In addition, the value of
warrants and rights do not necessarily change with the value of the underlying
securities and may cease to have value if they are not exercised prior to their
expiration dates.
Use of derivative instruments like options, rights and warrants can
increase the volatility of a Portfolio. They may entail investment exposures
that are greater than their costs would suggest. This means that a small
investment in these instruments could have a large potential positive or
negative impact on a Portfolio's performance. If a Portfolio invests in these
instruments at inappropriate times or judges market conditions incorrectly, they
may lower the Portfolio's return or result in substantial losses. Changes in the
liquidity of the secondary markets in which these instruments trade can result
in significant, rapid and unpredictable changes in prices, which could also
cause losses to the Portfolios. No Portfolio will purchase a call or put option
on a security or a stock index if as a result the premium paid for the option,
together with premiums paid for all other options on securities and options on
stock indices then held by that Portfolio, exceed 10% of the value of the
Portfolio's total assets. In addition, a Portfolio may not write options on
securities or stock indices with aggregate exercise prices in excess of 30% of
the value of the Portfolio's total assets measured at the time an option is
written.
FUTURES CONTRACTS AND OPTIONS ON FUTURES
Each Portfolio may, but is not obligated to, engage in transactions
involving the purchase of futures contracts and options on futures contracts for
hedging purposes and for other non-speculative purposes. The Diversified Equity
Portfolio and the Balanced Portfolio may purchase and sell stock index futures
contracts. The Limited Maturity Fixed Income Portfolio, the Full Maturity Fixed
Income Portfolio and the Balanced Portfolio may purchase and sell interest rate
futures contracts. All Portfolios may purchase and write call and put options on
the futures contracts in which they may effect transactions and may enter into
closing transactions with respect to such options to terminate existing
positions. The Portfolios may hedge up to the full value of their portfolios
through the use of futures and options on futures. However, a Portfolio will not
purchase or sell a stock index or interest rate future or an option on such
future if immediately thereafter the sum of the amount of initial margin
deposits on the Portfolio's existing futures positions and premiums paid for
options on such futures which are still outstanding would exceed 5% of the value
of the Portfolio's total assets.
Stock index futures contracts are agreements by which two parties agree
to take or make delivery of an amount of cash equal to a specified dollar amount
times the difference between the stock index value at the
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<PAGE>
close of the last trading day of the contract and the futures contract price. No
physical delivery of the stocks comprising the index is made. Interest rate
futures contracts are agreements by which two parties agree to take or make
delivery of the specific type of debt security called for in the contract at a
specified future time and at a specified price.
Options on futures are similar to options on securities, except than an
option on a futures contract gives the purchaser the right in return for the
premium paid to assume a position in a futures contract (a long position if the
option is a call and a short position if the option is a put). Purchases of
options on futures may present less risk than the purchase and sale of the
underlying futures contracts because the potential loss to a Portfolio is
limited to the premium paid, plus related transaction costs. The writing of
options on futures, however, does not present less risk than the purchase and
sale of the underlying futures contracts and only constitutes a partial hedge up
to the amount of premium income received. If an option on a futures contract
written by a Portfolio is exercised, the Portfolio may suffer a loss.
Futures contracts and options on futures contracts, like options on
securities, are forms of derivative instruments and entail many of the same
risks. A small investment in a futures contract or related option, like an
investment in an option on a security, could have a large potential positive or
negative impact on a Portfolio's performance relative to the investment.
It is expected that there will generally be a close, but not perfect,
correlation between the futures contracts and related options used and the
securities subject to a hedge. In addition, there can be no assurance that
liquid secondary markets will exist for all futures contracts purchased and sold
by the Portfolios. Under these conditions, a Portfolio may be required to
maintain a position until exercise or expiration, which could result in a loss.
Certain other risks related to trades in futures and options on futures are
discussed above under the section heading "Main Risks".
TEMPORARY DEFENSIVE INVESTMENTS
During periods of adverse market or economic conditions, the
Diversified Equity and Balanced Portfolios may temporarily invest all or a
substantial portion of their assets in high quality, fixed income securities,
money market instruments, or they may hold cash. These Portfolios will not be
pursuing their investment objectives in these circumstances. The Portfolios may
also hold these investments for liquidity purposes.
OTHER INVESTMENTS
The Portfolios may make other types of investments, including
investments in other derivative instruments, and may engage in various
investment practices, including securities lending and the purchase of
securities on a when-issued basis. These investments and practices, and their
risks, are described in the Statement of Additional Information.
YEAR 2000 ISSUES
Many computer software systems in use today recognize dates using a two
digit year code. These systems cannot distinguish between the years preceding
the year 2000 and years beginning after 1999. This is known as the "Year 2000"
problem. Most of the services provided to the Portfolios depend on the smooth
functioning of computer systems. Any failure to adapt these systems prior to the
year 2000 could interfere with the proper operations of the Portfolios. In
addition, because the Year 2000 problem affects virtually all organizations,
companies in which the Portfolios invest could be adversely impacted by this
issue. Although
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<PAGE>
this Year 2000 problem could have a negative impact on the Portfolios and their
operations, the Portfolios are working to avoid the problem and to obtain
assurances from their service providers that they are taking similar steps. The
Investment Managers consider the Year 2000 problem in making investment
decisions for the Portfolios.
PORTFOLIO TURNOVER
There are no fixed limitations regarding portfolio turnover. Although
the Portfolios generally do not trade for short-term profits, securities may be
sold without regard to the time they have been held when investment
considerations warrant such action. As a result, under certain market
conditions, the turnover rate for a particular Portfolio may be higher than that
of other investment companies and portfolios with similar investment objectives.
It is estimated that the portfolio turnover rates of the Limited Maturity Fixed
Income Portfolio and the Full Maturity Fixed Income Portfolio will not exceed
350%. The turnover rates of these Portfolios reflect the effect of their
policies to alter their maturity structures in response to market conditions. It
is estimated that the turnover rate for the fixed income segment of the Balanced
Portfolio will not exceed 200%, and that the portfolio turnover rate of the
Diversified Equity Portfolio and the equity segment of the Balanced Portfolio
will not exceed 150%. The Balanced Portfolio's assets may be shifted between
fixed income and equity securities, but it is estimated that overall portfolio
turnover rate of this Portfolio will not exceed 200%. Decisions to buy and sell
securities are made by the Portfolios' Investment Managers for the assets
assigned to them. A high portfolio turnover rate will result in greater
brokerage commissions and transaction costs. It may also result in greater
realization of gains, which may include short-term gains taxable at ordinary
income tax rates.
MANAGEMENT OF THE FUND
The Fund's Board of Directors is responsible for overseeing the general
operations of the Fund and the Portfolios and is responsible for reviewing and
approving the Fund's contracts with Hewitt and the Investment Managers. The
Fund's officers are all principals or employees of Hewitt or employees of the
American Hospital Association. The officers are responsible for the daily
management and administration of the Fund's operations. Investment Managers of
the Portfolios are responsible for the investment of the assets or segments of
the Portfolios assigned to them.
HEWITT ASSOCIATES LLC
Participants in the AHA Investment Program receive individualized asset
management consulting services to assist in determining an appropriate
investment program for their specific needs. Hewitt Associates LLC, 100 Half Day
Road, Lincolnshire, Illinois serves as the Fund's Investment Consultant. Hewitt
consults with each participant to define its investment objectives, desired
returns and tolerance for risk, and develops a plan for the allocation of the
participant's assets among different asset classes.
Hewitt is also responsible for evaluating, nominating and monitoring
the Fund's Investment Managers, and providing certain additional services to the
Fund. Hewitt provides the following services and facilities to the Fund, among
others: the supervision, monitoring and evaluation of services provided by the
Investment Managers and of administrative, accounting and other services
provided by the custodian and its affiliate; development of investment programs;
recommendation of Investment Managers for approval by the Board of Directors;
allocation of assets among Investment Managers for the Portfolios with more than
one Investment Manager; and furnishing such office space, equipment and
personnel as are required to perform such services. Hewitt is a limited
liability
-15-
<PAGE>
company having 430 principals and is engaged in providing a variety of
consulting services, principally in the areas of employee benefits, compensation
and asset management. Since the 1960s, Hewitt has provided asset management,
allocation and manager selection consulting services to institutional investors,
including employee benefit plans.
The following officers and employees of Hewitt are primarily
responsible for overseeing the Investment Managers:
- Ronald A. Jones, who has been President of the Fund since 1990 and
an Investment Consultant of Hewitt since January, 1978.
- Timothy G. Solberg, who has been the Marketing Director of the AHA
Investment Program since September, 1989.
INVESTMENT MANAGERS
The assets of the Portfolios are allocated among the Investment
Managers listed under "Investment Manager Profiles" at the end of this
Prospectus. Investment Managers are selected based upon their expertise in a
particular investment technique. Hewitt may change the allocation of assets
among these Investment Managers. Hewitt may also hire new Investment Managers or
terminate the services of existing Investment Managers at any time subject to
the approval of the Board of Directors.
The Fund has obtained an exemptive order from the Securities and
Exchange Commission, based upon the structure of the Fund under which Hewitt
selects and pays the fees of the Investment Managers, such that the Fund's
agreements with the Investment Managers need not be approved by shareholders.
Among other things, the order also exempts the Fund from the need to disclose in
various documents, including this Prospectus, the fees of the Investment
Managers. Participants holding shares of a Portfolio will be notified promptly
when a new Investment Manager is assigned to that Portfolio. Subject to
supervision by the Fund's Board of Directors, each Investment Manager has
complete discretion as to the purchase and sale of investments for its segment
of a Portfolio consistent with the Portfolio's investment objective, policies
and restrictions. Although the activities of the Investment Managers are subject
to general supervision by the Fund's Board of Directors and officers, none of
the Board, the officers nor Hewitt evaluates the merits of individual investment
selections or investment decisions made by the Investment Managers.
The fees of each Investment Manager are paid by Hewitt. These fees
presently are each computed as a percentage of assets under management and do
not involve any performance or incentive fees. Brokerage transactions in
securities purchased and sold by the Portfolios may be effected through
brokerage affiliates of the Investment Managers (or an Investment Manager if it
is a registered broker-dealer) which will receive commissions for their
services.
EXPENSES AND FEES
The Portfolios pay all of their expenses other than those expressly
assumed by Hewitt. Portfolio expenses are deducted from the Portfolio's total
income before dividends are paid. Expenses of the Portfolios include but are not
limited to: fees of the Fund's independent public accountants, transfer agent,
registrar, custodian, dividend disbursing agent fees and expenses; shareholder
and administrative servicing, accounting and recordkeeping fees and expenses;
taxes; brokerage fees and commissions; interest; costs incident to corporate
meetings, printing and mailing prospectuses and reports to shareholders, and the
filing of reports with regulatory bodies and the
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<PAGE>
maintenance of the Fund's corporate existence; legal fees; fees to federal and
state authorities for the registration of shares; directors' fees and expenses
to directors who are not principals, employees or officers of Hewitt or the
American Hospital Association; and any extraordinary expenses of a non-recurring
nature.
The Fund and the Portfolios do not pay any fees to Hewitt. Hewitt is
compensated for its services by fees it is paid by participants (sometimes
referred to as the "program services fee"). Hewitt is responsible for paying the
fees of the Investment Managers.
Fees paid by participants to Hewitt may vary based upon a number of
factors, including the level of services provided to a participant and the
amount of assets committed by the participant. In certain cases, minimum fees
may be applicable to compensate Hewitt for its consulting services. Hewitt's
fees also vary based upon the particular Portfolios in which a participant's
assets are invested. For Hewitt's standard level of service, a participant's fee
is presently determined and payable quarterly by applying one-fourth of the
following annual percentage rates to the participant's average daily assets
invested in the Portfolios: .75% of assets invested in the Diversified Equity
Portfolio and the Balanced Portfolio; and .50% of assets invested in the Limited
Maturity Fixed Income Portfolio and the Full Maturity Fixed Income Portfolio.
Reduced fees may be negotiated by Hewitt with participants committing in excess
of $50 million, and in other special circumstances.
HOW TO BUY SHARES
Shares of each Portfolio are available only to participants in the
American Hospital Association Investment Program and to the American Hospital
Association (and its affiliated companies) which have entered into program
agreements with Hewitt. Shares may be purchased on a continuous basis directly
from the Fund at the net asset value per share of the Portfolio next calculated
after receipt of a purchase order and federal funds. Shares are not available
for purchase by individuals. Shares may be redeemed (see "How to Redeem
Shares"), but are non-transferable.
Orders to purchase shares and federal funds in the amount of the
purchase order must be received by the Fund's custodian prior to 4:00 p.m.
Eastern time to be effected on that day. The minimum initial investment in the
Fund is $1 million. The initial minimum investment and subsequent investments in
any Portfolio is $100,000. These minimum investment requirements may be waived
for participants that do not have available for investment assets sufficient to
satisfy the minimums.
PURCHASE BY MAIL: Participants may purchase shares of one or more Portfolios by
sending a check drawn on a U.S. bank and made payable to AHA Investment Funds,
Inc., together with a completed application form, to: AHA Investment Funds,
Inc., c/o Firstar Mutual Fund Services, LLC, P.O. Box 701, Milwaukee, WI
53201-0701. Purchase orders will be effected at the net asset value per share
next computed after the check has been converted into federal funds. Checks
drawn on a member bank of the Federal Reserve System will normally be converted
into federal funds within two business days of receipt; however, checks drawn on
other banks may take considerably longer. Prior to conversion into federal
funds, an investor's money will not be invested in the Fund. Shares purchased by
check will not be entitled to dividends until the day following receipt of
federal funds. Checks are accepted subject to collection. Payment for
redemptions of shares purchased by check may be delayed to assure that the
purchase check clears, which may take up to 15 days from the date of purchase.
PURCHASE BY WIRE: The purchase of shares can be expedited by wiring federal
funds to the custodian. This procedure avoids the delays and restrictions that
apply in the case of shares purchased by check. To wire federal funds to the
custodian, funds should be transmitted to:
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<PAGE>
Firstar Bank Milwaukee, N.A.
Account of Firstar Mutual Fund Services, LLC
777 East Wisconsin Ave.
Milwaukee, WI
ABA Number 075000022
For Credit to AC #112-952-137
Account Name: Name of Investor
Portfolio Name:
Limited Maturity Fixed Income Portfolio (051)
Full Maturity Fixed Income Portfolio (052)
Diversified Equity Portfolio (053)
Balanced Portfolio (054)
ALL PURCHASE ORDERS MUST SPECIFY THE PORTFOLIO OR PORTFOLIOS IN WHICH
INVESTMENTS ARE TO BE MADE.
For further information regarding the procedures to be used when
purchasing shares, please call: 1 (800) 445-1341.
The Fund reserves the right in its sole discretion to reject any order
for purchase of shares (including purchase by exchange) when in the judgment of
management such rejection is in the best interest of the Fund.
SHARE PRICE
Net asset value per share is computed separately for each Portfolio
once daily as of the close of trading on the New York Stock Exchange (presently
4:00 p.m., New York time). A Portfolio's net asset value per share may also be
computed on other days when there is a sufficient degree of trading in the
securities held by that Portfolio if a purchase or redemption request is
received on that day. The net asset value per share will not be determined on
holidays observed by the New York Stock Exchange.
Net asset value per share for each Portfolio is calculated by dividing
the market value of all of the Portfolio's investments plus the value of its
other assets (including dividends and interest accrued but not collected), less
all liabilities (including accrued expenses, but excluding capital and surplus),
by the number of shares of that Portfolio outstanding. Prices of shares of each
Portfolio fluctuate daily based on changes in the values of securities held by
that Portfolio. If market quotations are not readily available, a security is
valued at fair value as determined under procedures adopted by the Board of
Directors of the Fund. Debt securities held by the Portfolios with remaining
maturities of 60 days or less are valued at amortized cost, absent unusual
circumstances.
HOW TO REDEEM SHARES
WRITTEN REDEMPTION REQUESTS
Participants may redeem all or any portion of the shares they own of a
Portfolio on any business day. Shares are redeemed at their current net asset
value next determined after a request in proper form is received as described
below. The business days on which net asset values are determined are described
under "How to Buy Shares -- Share Price." If stock certificates have been
issued, they must be forwarded to the Transfer Agent together with a written
request for redemption and a stock power, each signed on behalf of the
registered
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<PAGE>
shareholder by an authorized signatory. If no certificates have been issued,
only a properly signed written redemption request need be submitted.
All requests to redeem shares should be sent to:
AHA Investment Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
For further information regarding the procedures to be used for
redemptions, please call: 1 (800) 445-1341.
Payment of redemption proceeds will ordinarily be made within seven
days by wire transfer of federal funds to the participant's account at a
commercial bank which is a member of the Federal Reserve System. The bank
account must be designated by the participant on the application form used in
opening an account with the Fund. Upon request, redemption proceeds will be paid
by check mailed to the participant's address of record. The Fund does not
currently impose a fee for wire redemptions, but reserves the right to impose
such a fee in the future.
The Fund reserves the right to suspend the right of redemption or
postpone the date of payment (including redemption through an exchange of
shares) if unlikely emergency conditions, which are specified in the Investment
Company Act of 1940 or determined by the Securities and Exchange Commission,
should exist.
EXPEDITED REDEMPTION PROCEDURES. Participants may redeem shares by
telephone, avoiding the need to submit a written redemption request, provided
that certificates for shares have not been issued. Arrangements for telephone
redemptions must be established prior to the time of redemption. Please call the
Transfer Agent at 1 (800) 445-1341 for further information.
In the event a shareholder cannot reach the Transfer Agent to place a
telephone redemption order as a result of telephone system problems or during
periods of unusual economic or market change, a redemption request may be
expedited by sending a written request by overnight service to:
AHA Investment Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
615 East Michigan Street, 3rd Floor
Milwaukee, WI 53202
The Fund's transfer agent employs reasonable procedures to confirm that
telephone redemption instructions are genuine such as recording telephone calls,
providing written confirmation of transactions, or requiring a form of personal
identification or other information prior to effecting a telephone redemption.
To the extent these procedures are used, none of the Fund, Hewitt or the
Transfer Agent will be liable for any loss due to fraudulent or unauthorized
telephone instructions.
INVOLUNTARY AND AUTOMATIC REDEMPTION. The Board of Directors has the
authority to redeem the accounts of a participant having an aggregate value, as
a result of redemptions, of less than $1 million in all Portfolios or such
lesser amount as may be established by the Board. In these situations, the
participant will be notified that the account will be redeemed, and the proceeds
paid to the participant, unless additional investments are made to increase the
account value to $1 million or such other determined amount within 60 days. The
Fund does not presently intend to utilize this procedure, but reserves the right
to do so. In addition, under the Program
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Agreements with Hewitt, shares may be automatically redeemed if the Program
Agreement is terminated or if the participant fails to pay applicable fees.
EXCHANGE PRIVILEGE
Shares of any Portfolio may be exchanged for shares of any other
Portfolio of the Fund on the basis of the respective net asset values of the
Portfolios at the time of exchange. Exchanges must be in the amount of $100,000
or more.
An exchange involves the redemption of shares of one Portfolio and
investment of the redemption proceeds in shares of another Portfolio. Redemption
will, except as noted below, be made at the net asset value per share next
determined after receipt of an exchange request in proper order. Shares of the
Portfolio to be acquired will be purchased when the proceeds from redemption
become available (normally on the day the request is received, but under certain
circumstances up to seven days thereafter if a Portfolio determines to delay the
payment of redemption proceeds) at the net asset value of those shares next
determined after satisfaction of the purchase order requirements of the
Portfolio whose shares are being acquired. Any gain or loss realized on an
exchange is recognized for federal income tax purposes.
Before making an exchange, participants should review the investment
objectives and policies of the Portfolios and should consider their differences.
Instructions to effect an exchange may be given in writing or by telephone. The
exchange privilege is not available by telephone if certificates for the shares
to be exchanged have been issued. To effect an exchange, or for further
information, please contact the Transfer Agent at: 1 (800) 445-1341. In the
event the Transfer Agent cannot be reached by telephone as a result of telephone
system problems or during periods of unusual economic or market changes, an
order to exchange shares may be expedited by sending a written request by
overnight service to:
AHA Investment Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
615 East Michigan Street, 3rd Floor
Milwaukee, WI 53202
The Fund reserves the right to modify or terminate the exchange
privilege and to impose fees for and limitations on its use upon not less than
sixty days written notice to participants.
As in the case of telephone redemption requests, the transfer agent
employs reasonable procedures to confirm that telephone exchange instructions
are genuine. To the extent these procedures are used, none of the Fund, Hewitt,
or the Transfer Agent will be liable for any loss due to fraudulent or
unauthorized telephone exchange instructions.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund pays dividends from its net investment income and distributes
any net capital gains that it realizes.
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It is expected that dividends from net investment income will be
declared and paid on the following schedule:
<TABLE>
<CAPTION>
DECLARED PAYABLE PORTFOLIOS
-------- ------- ----------
<S> <C> <C>
Daily Last day of each month. Limited Maturity Fixed Income Portfolio
Full Maturity Fixed Income Portfolio
Quarterly Mid: March, June, September, and Diversified Equity Portfolio
December Balanced Portfolio
</TABLE>
Distributions of capital gains, if any, generally will be paid once a
year. An additional distribution will be paid if required for a Portfolio to
avoid imposition of a federal income or excise tax on undistributed capital
gains. Dividends and other distributions will be reinvested unless the
participant instructs the Fund otherwise.
TAXES
Because the Portfolios intend to distribute all of their net investment
income and capital gains to shareholders, it is not expected that the Portfolios
will be required to pay any federal income taxes. The Portfolios may be subject
to nominal, if any, state taxes. Should a Portfolio fail to distribute the
amount required by the Internal Revenue Code to be distributed during any
calendar year, the Portfolio would be required to pay a four percent,
nondeductible excise tax on the amount of the under-distribution.
Shareholders that are subject to federal income taxation normally will
have to pay any applicable federal income taxes, and any state and local income
taxes, on the dividends and distributions they receive from the Portfolios,
whether paid in cash or in additional shares. Redemptions of shares (including
redemptions to pay fees to Hewitt if a shareholder has elected to pay fees in
such manner) and exchanges of shares among the Portfolios will result in the
recognition of any gain or loss for federal income tax purposes for those
shareholders subject to federal income taxation.
The tax status of the dividends and distributions for each calendar
year will be detailed in each participant's annual tax statement from the Fund.
FUND PERFORMANCE INFORMATION
From time to time the Fund may provide reports of a Portfolio's total
return performance or yield to shareholders and prospective investors in
advertisements and other materials. Certain sales materials, but not
advertisements, may quote distribution rates for the Portfolios. These reports
are based upon investment results during specified periods and in the case of
total return, assume reinvestment of all dividends and capital gains, if any,
paid during that period. Quotations of total return, yield and distribution rate
are adjusted to include the effect of the standard fees that participants pay to
Hewitt. These adjustments are made by using the applicable fees for Hewitt's
standard level of service for the average size shareholder account in the
Portfolio. Because dividends, net asset value and expenses of the Portfolios
will fluctuate, any given report of total return, yield or distribution rate
should not be considered as representative or a prediction of a Portfolio's
performance for any specified period in the future. Rankings, ratings and
comparisons appearing in publications such as Money, Forbes, and similar
sources, or based upon data disseminated by Lipper Analytical Services Inc.,
Morningstar, Inc. or other similar services, and comparisons to recognized
market indices, may also be used in advertisements and other materials. Certain
additional comparisons may also be made. See "Performance Information" in the
Statement of Additional Information.
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YIELD QUOTATIONS
Yield quotations may be disseminated by the Limited Maturity Fixed
Income Portfolio and the Full Maturity Fixed Income Portfolio and used in
advertising and sales materials. They are based on historical earnings and will
reflect net investment income generated over a 30 day period based on the
average number of shares of the Portfolio outstanding entitled to receive
dividends over the period. This income is then "annualized" and shown as a
percentage of the shareholder's investment at net asset value per share on the
last day of the period.
Yield quotations do not generally reflect the impact of changes in net
asset value on an investor's return.
TOTAL RETURN
The total returns of the Portfolios may also be disseminated. Total
return is calculated by determining the difference between the net asset value
of all shares held at the end of the period for each share held at the beginning
of the period (assuming reinvestment of dividends and other distributions), and
then dividing that difference by the net asset value per share at the beginning
of the period. These calculations implicitly reflect the compounding of
dividends and distributions by assuming reinvestment. The average annual
compounded rate of return is the yearly rate that, when applied evenly to each
annual period and compounded, would produce the total return for the period
quoted. Unlike yield and distribution rate quotations, total return reflects all
changes in a Portfolio's net asset value.
FINANCIAL HIGHLIGHTS
The following financial highlights tables summarize the financial
performance of the Portfolios for the past 5 years. Certain information reflects
financial results for a single Portfolio share throughout each year or period
ended June 30. The total returns in the table represent how much a participant's
investment in the Portfolio would have increased (or decreased) during each
period, assuming reinvestment of all dividends and distributions. This
information has been audited by Arthur Andersen LLP, whose report, along with
the Portfolios' financial statements, are included in the Fund's annual report,
which is available without charge upon request.
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FULL MATURITY FIXED INCOME PORTFOLIO
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
-------- -------- -------- -------- --------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $9.48 $9.88 $9.63 $9.79 $10.18
Income From Investment Operations:
Net investment income............................. 0.65 0.65 0.65 0.64 0.60
Net realized and unrealized gain (loss) on
investments and futures........................... 0.40 (0.25) 0.16 0.39 (0.33)
Total Income from Investment Operations........... 1.05 0.40 0.81 1.02 0.27
Less Distributions:
Net investment income............................. (0.65) (0.65) (0.65) (0.64) (0.60)
Net realized capital gain (loss).................. 0 0 0 0 0
Total Distributions............................... (0.65) (0.65) (0.65) (0.64) (0.60)
Net Asset Value, End of Period.................... $9.88 $9.63 $9.79 $10.18 $9.85
Total Return on Net Asset Value(A)................ 10.99% 3.58% 8.09% 10.20% 2.11%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands).......... $39,874 $53,292 $50,796 $71,829 $73,420
Ratio of Expenses to Average Net Assets(B)........ 0.21% 0.21% 0.21% 0.17% 0.16%
Ratio of Net Investment Income to
Average Net Assets(B)............................. 6.88% 6.52% 6.63% 6.19% 5.90%
Portfolio Turnover Rate........................... 279.42% 283.13% 304.93% 178.52% 273.61%
</TABLE>
- -----------
(A) Total Return on Net Asset Value is net of the standard management fee of
0.50%.
(B) Ratios include all standard management fees and expenses except for the
program services fee.
-23-
<PAGE>
LIMITED MATURITY FIXED INCOME PORTFOLIO
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
-------- -------- -------- -------- --------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............... $10.09 $10.22 $10.12 $10.16 $10.22
Income From Investment Operations:
Net investment income............................ 0.62 0.62 0.61 0.60 0.53
Net realized and unrealized gain (loss) on
investments and futures........................ 0.13 (0.10) 0.04 0.06 (0.02)
Total Income from Investment Operations........ 0.75 0.52 0.65 0.66 0.51
Less Distributions:
Net investment income............................ (0.62) (0.62) (0.61) (0.60) (0.53)
Net realized capital gain (loss)................. 0 0 0 0 0
Total Distributions............................ (0.62) (0.62) (0.61) (0.60) (0.53)
Net Asset Value, End of Period..................... $10.22 $10.12 $10.16 $10.22 $10.20
Total Return on Net Asset Value(A)................. 7.19% 4.66% 6.03% 6.11% 4.59%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)......... $186,856 $201,196 $141,023 $129,717 $104,675
Ratio of Expenses to Average Net Assets(B)....... 0.12% 0.10% 0.12% 0.12% 0.12%
Ratio of Net Investment Income to Average Net
Assets(B)...................................... 6.17% 6.03% 6.04% 5.92% 5.30%
Portfolio Turnover Rate.......................... 155.12% 132.75% 121.70% 144.97% 176.78%
</TABLE>
- -----------
(A) Total Return on Net Asset Value is net of the standard management fee of
0.50%.
(B) Ratios include all standard management fees and expenses except for the
program services fee.
-24-
<PAGE>
DIVERSIFIED EQUITY PORTFOLIO
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
-------- -------- -------- -------- --------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............... $13.90 $14.76 $17.59 $20.72 $20.37
Income From Investment Operations:
Net investment income............................ 0.29 0.35 0.34 0.32 0.29
Net realized and unrealized gain on investments
and futures..................................... 2.34 3.57 5.18 4.14 3.42
Total Income from Investment Operations......... 2.63 3.92 5.52 4.46 3.71
Less Distributions:
Net investment income............................ (0.29) (0.35) (0.34) (0.32) (0.29)
Net realized capital gain (loss)................. (1.48) (0.74) (2.05) (4.49) (1.64)
Total Distributions............................. (1.77) (1.09) (2.39) (4.81) (1.93)
Net Asset Value, End of Period..................... $14.76 $17.59 $20.72 $20.37 $22.15
Total Return on Net Asset Value(A)................. 20.11% 26.42% 32.97% 24.05% 18.90%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)......... $39,634 $54,435 $70,590 $85,736 $126,892
Ratio of Expenses to Average Net Assets(B)....... 0.31% 0.18% 0.17% 0.14% 0.10%
Ratio of Net Investment Income to Average Net
Assets(B)....................................... 2.30% 2.09% 1.83% 1.51% 1.43%
Portfolio Turnover Rate.......................... 68.12% 57.76% 67.31% 65.82% 74.35%
</TABLE>
- -----------
(A) Total Return on Net Asset Value is net of the standard management fee of
0.75%.
(B) Ratios include all standard management fees and expenses except for the
program services fee.
-25-
<PAGE>
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
-------- -------- -------- -------- --------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............... $11.66 $12.63 $13.38 $14.86 $14.61
Income From Investment Operations:
Net investment income............................ 0.32 0.41 0.37 0.41 0.36
Net realized and unrealized gain on investments
and futures..................................... 1.44 1.98 2.65 2.01 1.45
Total Income from Investment Operations......... 1.76 2.39 3.02 2.42 1.81
Less Distributions:
Net investment income............................ (0.32) (0.41) (0.39) (0.44) (0.35)
Net realized capital gain (loss)................. (0.47) (1.23) (1.15) (2.23) (1.37)
Total Distributions............................. (0.79) (1.64) (1.54) (2.67) (1.73)
Net Asset Value, End of Period..................... $12.63 $13.38 $14.86 $14.61 $14.69
Total Return on Net Asset Value(A)................. 14.97% 19.20% 23.23% 16.79% 13.10%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)......... $46,646 $43,130 $52,137 $59,360 $63,301
Ratio of Expenses to Average Net Assets(B)....... 0.21% 0.23% 0.23% 0.18% 0.18%
Ratio of Net Investment Income to Average Net
Assets(B)....................................... 4.12% 3.08% 2.81% 2.86% 2.55%
Portfolio Turnover Rate.......................... 160.41% 146.69% 173.60% 169.04% 206.43%
</TABLE>
- -----------
(A) Total Return on Net Asset Value is net of the standard management fee of
0.75%.
(B) Ratios include all standard management fees and expenses except for the
program services fee.
-26-
<PAGE>
GENERAL INFORMATION
AMA COALITION OF TOBACCO-FREE INVESTMENTS
The Fund is a member of the American Medical Association ("AMA")
Coalition of Tobacco-Free Investments and has adopted a non-fundamental
policy under which the Portfolios will not purchase the stocks or bonds of
companies that are identified by the AMA as engaged in growing, processing or
otherwise handling tobacco. If a Portfolio holds any such securities of an
issuer which is subsequently identified by the AMA as engaged in such
activities, the securities will be sold within a reasonable time period,
consistent with prudent investment practice. (The AMA does not endorse any
investment vehicle and does not guarantee any rate of return.)
ARRANGEMENTS WITH AHA AND OTHER ORGANIZATIONS
The American Hospital Association has granted Hewitt a non-exclusive
right to use the name "American Hospital Association" and derivations thereof in
connection with the AHA Investment Program and the Fund. Hewitt pays a royalty
for these rights. Any termination of the licensing arrangement would require the
Fund promptly to take steps to change its name. For its assistance to Hewitt in
making the Program available to members of AHA and their affiliated
organizations, and in communicating to members, Hewitt also pays from its own
resources a fee to American Hospital Association. Similar fees may be paid by
Hewitt to other organizations which provide similar services. The Fund may
contract directly with American Hospital Association for certain
non-distribution related services such as printing.
CONTROL PERSONS
As of July 31, 1999, American Hospital Association may be deemed to
control the Fund through its direct and indirect beneficial ownership of more
than 25 percent of the Fund's outstanding shares. In addition, as of such date,
American Hospital Association and American Hospital Association Retirement Trust
may be deemed to control the Limited Maturity Fixed Income, Full Maturity Fixed
Income, Balanced and Diversified Equity Portfolios through their direct and
indirect beneficial ownership of more than 25 percent of the outstanding shares
of such Portfolios.
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES
Firstar Bank Milwaukee acts as custodian for the Fund. As custodian,
Firstar holds all securities and cash of the Portfolios. The custodian is
authorized to deposit securities in securities depositories and to use
sub-custodians approved by the Fund. Firstar Mutual Fund Services, LLC serves as
the Fund's transfer agent, dividend disbursing agent and registrar and acts as
shareholder servicing agent. It also provides the Fund with accounting services.
INVESTMENT MANAGER PROFILES
The Investment Managers have no affiliation with Hewitt or the Fund's
officers and directors. Each Investment Manager is principally engaged in
managing institutional investment accounts. They may also serve as managers or
advisers to other investment companies and other clients, including clients of
Hewitt.
-27-
<PAGE>
The present Investment Managers of the Fund, and the year in which they
commenced providing services to the Portfolios are as follows:
LIMITED MATURITY FIXED INCOME PORTFOLIO DIVERSIFIED EQUITY PORTFOLIO
The Patterson Capital Corporation (1988) Cambiar Investors, Inc. (1988)
Investment Research Company (1993)
FULL MATURITY FIXED INCOME PORTFOLIO BALANCED PORTFOLIO
Firstar Investment Research & Western Asset Management
Management Company, LLC (1996) Company (1995)
Western Asset Management Cambiar Investors, Inc. (1993)
Company (1995) Investment Research Company (1999)
The following profiles set forth information regarding the Investment
Managers and the persons (or groups) within such organizations responsible for
making investment decisions for the Portfolios:
CAMBIAR INVESTORS, INC., 8400 E. Prentice Avenue, Englewood, Colorado
80111, is a wholly owned subsidiary of United Asset Management Corporation, a
publicly held company. Cambiar was organized in 1973 and has approximately $2.1
billion of assets under management.
Michael S. Barish Michael J. Gardner
President Vice President
Cambiar Investors, Inc. (1973-present) Cambiar Investors, Inc. (1995-present)
AHA Investment Funds, Inc. Simmons & Company (1991-1995)
Portfolio Manager (1988-present) AHA Investment Funds, Inc.
Portfolio Manager (1999-present)
Darrel D. Hershey Brian M. Barish
Senior Vice President Vice President
Cambiar Investors, Inc. (1985-present) Cambiar Investors, Inc. (1997-present)
AHA Investment Funds, Inc. Lazzard Freres & Co. LLC (1993-1997)
Portfolio Manager (1988-present) AHA Investment Funds, Inc.
Portfolio Manager (1997-present)
FIRSTAR INVESTMENT RESEARCH & MANAGEMENT COMPANY, LLC, 777 East
Wisconsin Avenue, Suite 800, Milwaukee, Wisconsin 53202, is a wholly owned
subsidiary of Firstar Corporation, a publicly owned company. The firm has
approximately $25.0 billion in assets under management.
Gary A. Elfe Daniel A. Tranchita
Senior Vice President Senior Vice President
Firstar Investment Research & Firstar Investment Research &
Management Company, LLC Management Company, LLC
(1978-present) (1989-present)
AHA Investment Funds, Inc. AHA Investment Funds, Inc.
Portfolio Manager Portfolio Manager
(1996-present) (1999-present)
-28-
<PAGE>
INVESTMENT RESEARCH COMPANY, 16236 San Dieguito Road #2-20, P.O. Box
9210, Rancho Santa Fe, California 92067, is a wholly owned subsidiary of United
Asset Management Corporation, a publicly held company. The firm was organized in
1985 and has approximately $1.3 billion of assets under management.
John D. Freeman C.B. (Tom) Garcia
President Senior Research Consultant
Investment Research Company (1996-present) Investment Research
AHA Investment Funds, Inc. Company (1985-present)
Portfolio Manager (1996-present) AHA Investment Funds, Inc.
Martingale Asset Management Portfolio Manager (1993-present)
Portfolio Manager (1992-1996)
Ming Wang
Sr. Vice President
Investment Research Company (1996-present)
AHA Investment Funds, Inc.
Portfolio Manager (1996-present)
TIAA CREFF Investment Management
Portfolio Manager (1991-1996)
THE PATTERSON CAPITAL CORPORATION, 2029 Century Park East #2950, Los
Angeles, California 90067, is a privately held advisory organization headed by
Joseph B. Patterson. Patterson Capital provides investment management services
to a variety of institutions, including investment companies and employee
benefit plans, and has approximately $1.9 billion under management.
Jean M. Clark Joseph B. Patterson
Sr. Vice President/Portfolio Manager Chief Investment Strategist
The Patterson Capital Corporation The Patterson Capital Corporation
(1983-1988) (1991-present) (1977-present)
AHA Investment Funds, Inc. AHA Investment Funds, Inc.
Portfolio Manager (1991-present) Portfolio Manager (1988-present)
WESTERN ASSET MANAGEMENT COMPANY, 117 East Colorado Boulevard,
Pasadena, California 91105, is a wholly owned subsidiary of Legg Mason, Inc., a
publicly held financial services organization that engages through its
subsidiaries in the businesses of securities brokerage, investment management,
corporate and public finance and real estate services. The firm manages more
than $27.4 billion for its institutional clients, plus $4.2 billion of assets
for mutual funds. Western Asset Management's Fixed-Income team has
responsibility for the management of the Portfolios.
-29-
<PAGE>
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS OR IN APPROVED SALES LITERATURE IN CONNECTION WITH THE OFFER
CONTAINED HEREIN, AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY THE FUND TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER.
INVESTMENT CONSULTANT
HEWITT ASSOCIATES LLC
100 Half Day Road
Lincolnshire, Illinois 60069
CUSTODIAN
FIRSTAR BANK MILWAUKEE
615 East Michigan Street
Milwaukee, WI 53202
TRANSFER AGENT
FIRSTAR MUTUAL FUND SERVICES, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
LEGAL COUNSEL
SCHULTE ROTH & ZABEL LLP
900 Third Avenue
New York, New York 10022
INDEPENDENT PUBLIC ACCOUNTANTS
ARTHUR ANDERSEN LLP
33 West Monroe Street
Chicago, Illinois 60603
<PAGE>
FOR MORE INFORMATION
For more information about the Fund, the following documents are
available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS - Additional information is available in the
Fund's annual and semi-annual reports to shareholders. The annual report
contains a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI) - The SAI provides more
details about the Fund and its policies. A current SAI is on file with the SEC
and is incorporated by reference into (and is legally a part of) this
Prospectus.
TO OBTAIN INFORMATION
To obtain free copies of the annual or semi-annual report or the SAI or
to discuss questions about the Fund:
BY TELEPHONE - 1-800-445-1341
BY MAIL - AHA Investment Funds, Inc., c/o Firstar Mutual Fund Services,
LLC, P.O. Box 701, Milwaukee, Wisconsin 53201-0701
Information about the Fund (including the SAI) can be reviewed and
copied at the SEC's Public Reference Room in Washington D.C. Information on the
operation of the Public Reference Room may be obtained by calling the SEC at
1-202-942-8090. Free text only versions of the annual report, semi-annual report
and the SAI are available on the EDGAR Database on the SEC's Internet web-site,
http://www.sec.gov. You can also obtain copies of this information, after paying
a duplication fee, by electronic request at the following Email address:
[email protected], or by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
Investment Company Act File Number 811-05534.
