<PAGE> 1
As filed with the Securities and Exchange Commission on May 30, 1996
Registration Nos. 33-26205/811-5712
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
---- ---
Post-Effective Amendment No. 11 X
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and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 12 ---
----
(Check appropriate box or boxes.)
THE ACHIEVEMENT FUNDS TRUST
----------------------------------------------------
(Exact name of Registrant as Specified in Charter)
680 East Swedesford Road, Wayne, Pennsylvania 19087-0451
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (610) 254-1000
--------------
CT Corporation
2 Oliver Street, Boston, MA 02109
---------------------------------------
(Name and Address of Agent for Service)
Copy to:
William H. Rheiner, Esq. Kathryn L. Stanton, Esq.
[/R]
Ballard Spahr Andrews & Ingersoll SEI Corporation
1735 Market Street, 51st Floor 680 East Swedesford Road
Philadelphia, PA 19103-7599 Wayne, PA 19087
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this
Registration Statement
It is proposed that this filing will become effective (check appropriate box)
X immediately upon filing pursuant to paragraph (b)
---
on (Date) pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a)(i)
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on (Date) pursuant to paragraph (a)(i)
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75 days after filing pursuant to paragraph (a)(ii)
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on (Date) pursuant to paragraph (a)(ii) of Rule 485
---
Registrant continues its election to register an indefinite number of shares of
Common Stock pursuant to Rule 24f-2 under the Investment Company Act of 1940 and
filed its Rule 24f-2 Notice for the fiscal year ended January 31, 1996 on March
25, 1996.
<PAGE> 2
THE ACHIEVEMENT FUNDS TRUST
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
NOTE: The Registrant currently offers shares of six investment
portfolios, the Equity Fund, Balanced Fund, Intermediate Term Bond
Fund, Short Term Bond Fund, Short Term Municipal Bond Fund and Idaho
Municipal Bond Fund (the "Existing Portfolios"). The Registrant has
also registered shares of another portfolio, the Municipal Bond Fund,
but has not commenced a public offering of those shares. Each portfolio
is comprised of two classes of shares, the Institutional shares and the
Retail Class A shares. Each class of shares is offered pursuant to a
separate Prospectus and a combined Statement of Additional Information.
Shares of the Municipal Bond Fund will be offered pursuant to
prospectuses separate from the prospectuses of the Existing Portfolios.
I. Institutional Shares - Existing Portfolios
Part A - Prospectus
<TABLE>
<CAPTION>
Item No. Location
- -------- --------
<S> <C>
1. Cover Page Cover Page
2. Synopsis Summary; Expense Summary
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Cover Page; The Trust; Investment
Objectives and Policies; Investment
Limitations; Fundamental Policies;
Description of Certain Permitted
Investments
5. Management of the Fund Summary; Expense Summary; Adviser;
Administrator; Distributor; Transfer Agent;
General Information - The Trust, - Trustees
of the Trust, - Voting Rights, - Custodian
6. Capital Stock and Other Securities Taxes; General Information - The Trust,
- Dividends
7. Purchase of Securities Being Offered Purchase, Exchange and Redemption of
Shares
8. Redemption or Repurchase Purchase, Exchange and Redemption of
Shares
9. Pending Legal Proceedings Not Applicable
</TABLE>
Part B - Statement of Additional Information
<TABLE>
<CAPTION>
Item No. Location
- -------- --------
<S> <C>
10. Cover Page Cover Page
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Form N-1A
Item Number Location
- ----------- --------
<S> <C>
11. Table of Contents Table of Contents
12. General Information and History The Trust and Description of Shares
13. Investment Objectives and Policies Description of Permitted Investments;
Investment Policies and Limitations
14. Management of the Registrant Trustees and Officers of the Trust;
Limitation of Trustee's Liability
15. Control Persons and Principal Holders Control Persons and Principal Holders of
Securities
16. Investment Advisory and Other Services The Advisor; The Administrator;
Distribution
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Other Securities The Trust and Description of Shares
19. Purchase, Redemption and Pricing of Purchase and Redemption of Shares;
Securities Being Offered Determination of Net Asset Value
20. Tax Status Taxes
21. Underwriters Distribution
22. Calculation of Performance Data Performance
23. Financial Statements Financial Statements
</TABLE>
II. Retail Class A Shares - Existing Portfolios
Part A - Prospectus
<TABLE>
<CAPTION>
Item No. Location
- -------- --------
<S> <C>
1. Cover Page Cover Page
2. Synopsis Summary; Expense Summary
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Cover Page; The Trust; Investment
Objectives and Policies; Investment
Limitations; Fundamental Policies;
Description of Certain Permitted
Investments
</TABLE>
2
<PAGE> 4
<TABLE>
<CAPTION>
Form N-1A
Item Number Location
- ----------- --------
<S> <C>
5. Management of the Fund Summary; Expense Summary; Adviser;
Administrator; Distributor; Transfer Agent;
General Information - The Trust, - Trustees
of the Trust, - Voting Rights, - Custodian
6. Capital Stock and Other Securities Taxes; General Information - The Trust,
- Dividends
7. Purchase of Securities Being Offered Purchase, Exchange and Redemption of
Shares
8. Redemption or Repurchase Purchase, Exchange and Redemption of
Shares
9. Pending Legal Proceedings Not Applicable
</TABLE>
Part B - Statement of Additional Information
<TABLE>
<CAPTION>
Item No. Location
- -------- --------
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History The Trust and Description of Shares
13. Investment Objectives and Policies Description of Permitted Investments;
Investment Policies and Limitations
14. Management of the Registrant Trustees and Officers of the Trust;
Limitation of Trustee's Liability
15. Control Persons and Principal Holders Control Persons and Principal Holders of
Securities
16. Investment Advisory and Other Services The Advisor; The Administrator;
Distribution
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Other Securities The Trust and Description of Shares
19. Purchase, Redemption and Pricing of Purchase and Redemption of Shares;
Securities Being Offered Determination of Net Asset Value
20. Tax Status Taxes
21. Underwriters Distribution
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
Form N-1A
Item Number Location
- ----------- --------
<S> <C>
22. Calculation of Performance Data Performance
23. Financial Statements Financial Statements
</TABLE>
III. Institutional Shares - Municipal Bond Fund
Part A - Prospectus
<TABLE>
<CAPTION>
Item No. Location
- -------- --------
<S> <C>
1. Cover Page Cover Page
2. Synopsis Summary; Expense Summary
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Cover Page; The Trust; Investment
Objective and Policies; Investment
Limitations; Fundamental Policies;
Description of Certain Permitted
Investments
5. Management of the Fund Summary; Expense Summary; Adviser;
Administrator; Distributor; Transfer Agent;
General Information - The Trust, - Trustees
of the Trust, - Voting Rights, - Custodian
6. Capital Stock and Other Securities Taxes; General Information - The Trust,
- Dividends
7. Purchase of Securities Being Offered Purchase, Exchange and Redemption of
Shares
8. Redemption or Repurchase Purchase, Exchange and Redemption of
Shares
9. Pending Legal Proceedings Not Applicable
</TABLE>
Part B - Statement of Additional Information
<TABLE>
<CAPTION>
Item No. Location
- -------- --------
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History The Trust and Description of Shares
</TABLE>
4
<PAGE> 6
<TABLE>
<S> <C>
13. Investment Objectives and Policies Description of Permitted Investments;
Investment Policies and Limitations
14. Management of the Registrant Trustees and Officers of the Trust;
Limitation of Trustee's Liability
15. Control Persons and Principal Holders Control Persons and Principal Holders of
Securities
16. Investment Advisory and Other Services The Advisor; The Administrator;
Distribution
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Other Securities The Trust and Description of Shares
19. Purchase, Redemption and Pricing of Purchase and Redemption of Shares;
Securities Being Offered Determination of Net Asset Value
20. Tax Status Taxes
21. Underwriters Distribution
22. Calculation of Performance Data Performance
23. Financial Statements Financial Statements
</TABLE>
IV. Retail Class A Shares - Municipal Bond Fund
Part A - Prospectus
<TABLE>
<CAPTION>
Item No. Location
- -------- --------
<S> <C>
1. Cover Page Cover Page
2. Synopsis Summary; Expense Summary
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Cover Page; The Trust; Investment
Objective and Policies; Investment
Limitations; Fundamental Policies;
Description of Certain Permitted
Investments
5. Management of the Fund Summary; Expense Summary; Adviser;
Administrator; Distributor; Transfer Agent;
General Information - The Trust, - Trustees
of the Trust, - Voting Rights, - Custodian
</TABLE>
5
<PAGE> 7
<TABLE>
<S> <C>
6. Capital Stock and Other Securities Taxes; General Information - The Trust,
- Dividends
7. Purchase of Securities Being Offered Purchase, Exchange and Redemption of
Shares
8. Redemption or Repurchase Purchase, Exchange and Redemption of
Shares
9. Pending Legal Proceedings Not Applicable
</TABLE>
Part B - Statement of Additional Information
<TABLE>
<CAPTION>
Item No. Location
- -------- --------
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History The Trust and Description of Shares
13. Investment Objectives and Policies Description of Permitted Investments;
Investment Policies and Limitations
14. Management of the Registrant Trustees and Officers of the Trust;
Limitation of Trustee's Liability
15. Control Persons and Principal Holders Control Persons and Principal Holders of
Securities
16. Investment Advisory and Other Services The Advisor; The Administrator;
Distribution
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Other Securities The Trust and Description of Shares
19. Purchase, Redemption and Pricing of Purchase and Redemption of Shares;
Securities Being Offered Determination of Net Asset Value
20. Tax Status Taxes
21. Underwriters Distribution
22. Calculation of Performance Data Performance
23. Financial Statements Financial Statements
</TABLE>
6
<PAGE> 8
V. All Classes and Series of Registrant
Part C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration
Statement.
7
<PAGE> 9
THE ACHIEVEMENT FUNDS TRUST
-- EQUITY FUND
-- BALANCED FUND
-- INTERMEDIATE TERM BOND FUND
-- SHORT TERM BOND FUND
-- SHORT TERM MUNICIPAL BOND FUND
-- IDAHO MUNICIPAL BOND FUND
THE ACHIEVEMENT FUNDS TRUST (the "Trust") is a mutual fund that offers separate
classes of shares of beneficial interest in the six portfolios listed above (the
"Portfolios"). This Prospectus relates solely to the Institutional class of
shares of the Portfolios (the "shares") which are designed to offer financial
institutions ("shareholders") a convenient means of investing their own funds or
funds for which they act in a fiduciary, agency or custodial capacity in one or
more professionally managed portfolios of securities. Each Portfolio also offers
Retail Class A shares that differ from the Institutional shares with respect to
distribution costs, sales charges and dividends.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, INCLUDING ANY OF THE FIRST SECURITY BANKS OR ANY OF
THEIR AFFILIATES OR CORRESPONDENTS. THE TRUST'S SHARES ARE NOT FEDERALLY
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THE SHARES
INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
This Prospectus sets forth concisely the basic information about the Trust and
each Portfolio that a prospective investor should know before investing.
Investors are advised to read this Prospectus and retain it for future
reference. A Statement of Additional Information dated June 1, 1996 has been
filed with the Securities and Exchange Commission (the "SEC") and is available
without charge through the Distributor, SEI Financial Services Company, by
written request addressed to the Distributor at 680 East Swedesford Road, Wayne,
PA 19087-1658 or by calling 1-800-472-0577. The Statement of Additional
Information is incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
JUNE 1, 1996
<PAGE> 10
2
SUMMARY
The Achievement Funds Trust (the "Trust") is an open-end management investment
company which offers shares of beneficial interest to provide a convenient way
to invest in professionally managed portfolios of securities. This Summary
provides basic information about the Institutional class of shares of Trust's
Equity Fund, Balanced Fund, Intermediate Term Bond Fund, Short Term Bond Fund,
Short Term Municipal Bond Fund and Idaho Municipal Bond Fund (each a "Portfolio"
and collectively the "Portfolios"). Each of the Portfolios is diversified,
except for the Idaho Municipal Bond Fund, which is a non-diversified portfolio
of securities.
INVESTMENT OBJECTIVES OF THE PORTFOLIOS
The EQUITY FUND seeks to provide long-term capital appreciation with current
income as a secondary consideration in selecting portfolio securities. The
BALANCED FUND seeks to provide a total return (both income and capital
appreciation) consistent with prudent investment risk. The INTERMEDIATE TERM
BOND FUND seeks income consistent with prudent investment risk and maintenance
of appropriate liquidity. The SHORT TERM BOND FUND seeks to preserve principal
value and maintain a high degree of liquidity while providing current income.
The SHORT TERM MUNICIPAL BOND FUND seeks to provide as high a level of current
income that is exempt from Federal income tax as is consistent with preservation
of capital. The IDAHO MUNICIPAL BOND FUND seeks to provide as high a level of
current income exempt from Federal and Idaho state income taxes as is consistent
with the preservation of capital. There is no assurance that any Portfolio will
meet its investment objective. See "INVESTMENT OBJECTIVES AND POLICIES" and
"DESCRIPTION OF CERTAIN PERMITTED INVESTMENTS."
RISK FACTORS INVOLVED WITH AN INVESTMENT IN THE PORTFOLIOS
The net asset value of the shares of the Portfolios will fluctuate with changes
in the prices of their underlying portfolio securities. Values of fixed income
securities and, correspondingly, share prices of Portfolios that invest in such
securities tend to vary inversely with interest rates and may be affected by
other market and economic factors as well. Common stocks in which the Equity
Fund and the Balanced Fund invest may be more volatile and may fluctuate in
value more than other types of investments. The Idaho Municipal Bond Fund is a
non-diversified portfolio that invests primarily in Idaho Municipal Securities.
There are other risks associated with the ownership of shares of a mutual fund.
See "RISK FACTORS" and "DESCRIPTION OF CERTAIN PERMITTED INVESTMENTS."
THE ADVISER
First Security Investment Management, Inc. serves as investment adviser (the
"Adviser") to the Portfolios. See "THE ADVISER."
THE ADMINISTRATOR
SEI Fund Resources serves as administrator of the Trust. See "THE
ADMINISTRATOR."
<PAGE> 11
3
THE TRANSFER AGENT
DST Systems, Inc. serves as transfer agent and dividend disbursing agent for the
Trust. See "GENERAL INFORMATION--Transfer Agent."
THE DISTRIBUTOR
SEI Financial Services Company serves as distributor of the Trust's shares. See
"THE DISTRIBUTOR."
THE CUSTODIAN
CoreStates Bank, N.A., serves as custodian for the cash, securities and other
assets of the Trust. See "GENERAL INFORMATION--Custodian."
PURCHASE, EXCHANGE OR REDEMPTION OF SHARES
Purchases, exchanges or redemptions of shares may be made on any day during
which the New York Stock Exchange is open for business (a "Business Day"). A
purchase, exchange or redemption order must be placed with the Distributor and
will be executed at a per share price equal to the net asset value per share
next determined after the receipt of the purchase, exchange or redemption order.
Orders must be placed prior to 4:00 p.m. Eastern time for the order to be
effective on that day. The minimum initial investment is $500,000, which minimum
amount may be waived by the Distributor. There is no minimum amount for
subsequent purchases of shares. Net asset value is determined as of the close of
trading on the New York Stock Exchange (presently 4:00 p.m. Eastern time) on
each Business Day. See "PURCHASE AND REDEMPTION OF SHARES."
PAYMENT OF DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) of
each Portfolio is distributed in the form of periodic dividends. Any net capital
gain is distributed at least annually. Distributions are paid in cash unless the
shareholder elects to take payment in another form. See "GENERAL
INFORMATION--Dividends."
<PAGE> 12
4
ANNUAL OPERATING EXPENSES
(as a % of net assets)
The following table summarizes the expenses incurred by the Portfolios based on
the Trust's most recent fiscal year.
<TABLE>
<CAPTION>
SHORT IDAHO
INTERMEDIATE TERM MUNICIPAL
EQUITY BALANCED TERM SHORT TERM MUNICIPAL BOND
FUND FUND BOND FUND BOND FUND BOND FUND FUND
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Management Fees (after waivers)(1)... .51% .51% .34% .37% .17% .17%
Other Expenses(2).................... .39% .39% .41% .38% .58% .58%
- -------------------------------------------------------------------------------------------------------------
Total Fund Operating Expenses
(after waivers)(3)................. .90% .90% .75% .75% .75% .75%
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Trust's investment adviser (the "Adviser") has agreed to waive, on a
voluntary basis, a portion of its fee, and the management fee shown reflects
that voluntary waiver. The Adviser reserves the right to terminate its fee
waiver at any time at its sole discretion without notice to current or
prospective shareholders. Absent such fee waiver, the management fee would
be 0.74% for the Equity Fund and the Balanced Fund, and 0.60% for the
Intermediate Term Bond Fund, the Short Term Bond Fund, the Short Term
Municipal Bond Fund and the Idaho Municipal Bond Fund.
(2) Other Expenses of the Portfolios include all expenses except nonrecurring
account fees, brokerage commissions and other capital items and management
fees. Although no fee is imposed in connection with share redemptions, a $15
fee is charged in connection with a wire transfer of redemption proceeds.
The Trust's administrator (the "Administrator") has agreed to waive, on a
voluntary basis, a portion of its fee chargeable to the Short Term Municipal
Bond Fund and the Idaho Municipal Bond Fund, and the administration fee
shown for those Portfolios reflects that voluntary fee waiver. The
Administrator reserves the right to terminate its fee waiver at any time at
its sole discretion without notice to current or prospective shareholders.
Absent such fee waiver, the annual administration fee would be the greater
of 0.20% of net assets or $100,000 for the Short Term Municipal Bond Fund
and the Idaho Municipal Bond Fund.
(3) Absent the voluntary fee waivers described above, total estimated operating
expenses for the Institutional shares of the Portfolios stated as a
percentage of net assets would be as follows: the Equity Fund--1.13%; the
Balanced Fund--1.13%; the Intermediate Term Bond Fund--1.01%; the Short Term
Bond Fund--0.98%; the Short Term Municipal Bond Fund--1.30%; the Idaho
Municipal Bond Fund--1.35%.
EXAMPLE
The following example assumes that all dividends and distributions are
reinvested and that the percentage totals listed under "Annual Operating
Expenses" remain the same in the years shown. THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN.
<TABLE>
<CAPTION>
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1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment, assuming a 5% annual
return and redemption at the end of each time period:
Equity Fund................................................ $ 9 $ 29 $ 50 $ 111
Balanced Fund.............................................. 9 29 50 111
Intermediate Term Bond Fund................................ 8 24 42 93
Short Term Bond Fund....................................... 8 24 42 93
Short Term Municipal Bond Fund............................. 8 24 42 93
Idaho Municipal Bond Fund.................................. 8 24 42 93
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The Annual Operating Expenses and Example presented above are designed to assist
an investor in understanding the various costs and expenses that an investor in
a Portfolio will bear directly or indirectly. For more complete descriptions of
the various costs and expenses, see "THE ADVISER" and "THE DISTRIBUTOR" in this
Prospectus. The information set forth in the Annual Operating Expenses and
Example relates only to the Institutional shares. Each Portfolio also offers
Retail Class A shares which are subject to the same expenses except that Retail
Class A shares bear additional distribution costs and sales charges.
<PAGE> 13
5
FINANCIAL HIGHLIGHTS
Shown below are per share data, ratios and supplemental data for the Trust's
fiscal year ended January 31, 1996. The financial information, for a share
outstanding for the year ended January 31, 1996, has been audited by Deloitte &
Touche LLP, independent accountants, whose report thereon was unqualified. This
information should be read in conjunction with the Trust's financial statements
and notes thereto, which are included in the Trust's Statement of Additional
Information. The Trust's financial statements for the year ended January 31,
1996, also appear, along with the report of Deloitte & Touche LLP, in the
Trust's 1996 Annual Report to shareholders. Additional performance information
is set forth in the 1996 Annual Report to shareholders and is available upon
request and without charge by calling 1-800-472-0577.
For a Share Outstanding Throughout the Year or Period
<TABLE>
<CAPTION>
EQUITY FUND BALANCED FUND
------------------------- -------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
JANUARY JANUARY 31, JANUARY JANUARY 31,
31, 1996 1995(1)** 31, 1996 1995(1)**
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period....................... $ 10.24 $ 10.00 $ 10.20 $ 10.00
- ------------------------------------------------------------------------------------------------------------------
Net Investment Income...................................... 0.17 0.01 0.39 0.04
- ------------------------------------------------------------------------------------------------------------------
Dividends from Net Investment Income....................... (0.17) -- (0.39) --
- ------------------------------------------------------------------------------------------------------------------
Distributions from Capital Gains........................... (0.72) -- (0.42) --
- ------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gains on Investments............... 3.12 0.23 2.01 0.16
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period............................. $ 12.64 $ 10.24 $ 11.79 $ 10.20
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Total Return+.............................................. 32.55% 2.40%* 24.15% 2.00%*
- ------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000)............................ $150,957 $ 97,052 $147,357 $112,896
Ratio of Expenses to Average Net Assets.................... 0.90% 0.90% 0.90% 0.90%
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................. 1.14% 1.26% 1.14% 1.26%
Ratio of Net Income to Average Net Assets.................. 1.43% 1.22% 3.48% 3.61%
Ratio of Net Income to Average Net Assets (Excluding
Waivers)................................................. 1.19% 0.86% 3.24% 3.25%
Portfolio Turnover Rate.................................... 103.85% 6.03% 59.74% 1.70%
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
* Returns are for the period indicated and have not been annualized.
** Ratios for the period have been annualized.
+ Returns do not reflect any sales load that may be applicable.
(1) Commenced operations on December 28, 1994.
</TABLE>
<PAGE> 14
6
<TABLE>
<CAPTION>
INTERMEDIATE TERM SHORT TERM
BOND FUND BOND FUND
------------------------- -------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
JANUARY JANUARY 31, JANUARY JANUARY 31,
31, 1996 1995(1)** 31, 1996 1995(1)**
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period....................... $ 10.09 $ 10.00 $ 10.02 $ 10.00
- ------------------------------------------------------------------------------------------------------------------
Net Investment Income...................................... 0.71 0.05 0.67 0.04
- ------------------------------------------------------------------------------------------------------------------
Dividends from Net Investment Income....................... (0.70) (0.06) (0.65) (0.06)
- ------------------------------------------------------------------------------------------------------------------
Distributions from Capital Gains........................... -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gains on Investments............... 0.69 0.10 0.14 0.04
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period............................. $ 10.79 $ 10.09 $ 10.18 $ 10.02
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Total Return+.............................................. 13.62% 1.54%* 7.80% 0.79%*
- ------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000)............................ $115,307 $ 65,633 $ 75,632 $ 70,380
Ratio of Expenses to Average Net Assets.................... 0.75% 0.75% 0.75% 0.75%
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................. 1.02% 1.13% 0.99% 1.13%
Ratio of Net Income to Average Net Assets.................. 6.14% 5.60% 6.11% 4.21%
Ratio of Net Income to Average Net Assets (Excluding
Waivers)................................................. 5.87% 5.22% 5.87% 3.83%
Portfolio Turnover Rate.................................... 85.16% 10.57% 83.64% 11.95%
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
* Returns are for the period indicated and have not been annualized.
** Ratios for the period have been annualized.
+ Returns do not reflect any sales load that may be applicable.
(1) Commenced operations on December 28, 1994.
</TABLE>
<PAGE> 15
7
<TABLE>
<CAPTION>
SHORT TERM MUNICIPAL BOND IDAHO MUNICIPAL
FUND BOND FUND
------------------------- -------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
JANUARY JANUARY 31, JANUARY JANUARY 31,
31, 1996 1995(1)** 31, 1996 1995(1)**
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period....................... $ 10.01 $ 10.00 $ 10.13 $ 10.00
- ------------------------------------------------------------------------------------------------------------------
Net Investment Income...................................... 0.43 0.03 0.52 0.04
- ------------------------------------------------------------------------------------------------------------------
Dividends from Net Investment Income....................... (0.42) (0.03) (0.51) (0.04)
- ------------------------------------------------------------------------------------------------------------------
Distributions from Capital Gains........................... (0.05) -- (0.12) --
- ------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gains on Investments............... 0.26 0.01 0.78 0.13
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period............................. $ 10.23 $ 10.01 $ 10.80 $ 10.13
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Total Return+.............................................. 6.71% 0.43%* 12.68% 1.74%*
- ------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000)............................ $ 31,304 $ 33,682 $ 25,873 $ 25,894
Ratio of Expenses to Average Net Assets.................... 0.75% 0.75% 0.75% 0.75%
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................. 1.30% 1.26% 1.35% 1.38%
Ratio of Net Income to Average Net Assets.................. 3.88% 3.67% 4.52% 4.21%
Ratio of Net Income to Average Net Assets (Excluding
Waivers)................................................. 3.33% 3.16% 3.92% 3.58%
Portfolio Turnover Rate.................................... 114.09% 11.80% 58.94% 5.66%
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
* Returns are for the period indicated and have not been annualized.
** Ratios for the period have been annualized.
+ Returns do not reflect any sales load that may be applicable.
(1) Commenced operations on December 28, 1994.
</TABLE>
<PAGE> 16
8
THE TRUST
THE ACHIEVEMENT FUNDS TRUST (the "Trust") is an open-end series management
investment company that offers shares of beneficial interest in separate
investment portfolios. Each Portfolio has two separate classes of shares,
Institutional and Retail Class A, which differ with respect to distribution
costs, sales charges and dividends. This Prospectus offers the Institutional
shares (the "shares") of the Trust's Equity Fund, Balanced Fund, Intermediate
Term Bond Fund, Short Term Bond Fund, Short Term Municipal Bond Fund and Idaho
Municipal Bond Fund. Each of the Portfolios are diversified, except for the
Idaho Municipal Bond Fund which is a non-diversified portfolio. The Trust has
also authorized the issuance of shares of beneficial interest in an additional
portfolio designated the Municipal Bond Fund, but the Trust has not commenced a
public offering of those shares. Additional information pertaining to the Trust
may be obtained by writing to SEI Financial Services Company, 680 East
Swedesford Road, Wayne, PA 19087 or by calling 1-800-472-0577.
INVESTMENT OBJECTIVES AND POLICIES
EQUITY FUND
INVESTMENT OBJECTIVE
The Equity Fund seeks to provide long-term capital appreciation with current
income as a secondary consideration in selecting portfolio securities.
INVESTMENT POLICIES
Under normal market conditions, the Equity Fund invests in a diversified
portfolio of common stocks (including American Depository Receipts ("ADRs") and
securities convertible into or exchangeable for common stock) traded on U.S.
national securities exchanges (including NASDAQ). The Adviser selects securities
for the Equity Fund using an investment strategy often characterized as "Growth
at a Price." Under this strategy, the Adviser purchases for the Equity Fund
securities of companies that have experienced growth in earnings provided that
the securities appear attractively priced based on proprietary valuation
methods. Generally, the Equity Fund will purchase securities of companies with
mid to large size market capitalization (over $100 million). If the Trust's
Adviser believes, however, that the securities of a company with a smaller
market capitalization have an attractive value, it may purchase such securities
for the Portfolio. Under normal conditions, the Equity Fund will invest at least
80% of its total assets in common stocks. The Equity Fund will not invest more
than 20% of its total assets in securities convertible into or exchangeable for
common stock. The Equity Fund may invest only in convertible debentures that
have received a rating of A or higher by Standard & Poor's Corporation ("S&P")
or A or higher by Moody's Investors Service ("Moody's") or are determined to be
of comparable quality by the Adviser at time of purchase.
The Equity Fund may purchase securities on a "when-issued" basis, may engage in
securities repurchase transactions and may borrow money in aggregate amounts not
in excess of 5% of its total assets. The Equity Fund may also write (sell)
covered call options.
In addition, under normal market conditions, the Equity Fund may invest up to
10% of its total assets in money market and U.S. equity index mutual funds.
For additional information regarding risks and permitted investments of the
Equity Fund, see "RISK FACTORS" and "DESCRIPTION OF CERTAIN PERMITTED
INVESTMENTS." For a description of ratings, see the "APPENDIX."
BALANCED FUND
INVESTMENT OBJECTIVE
The Balanced Fund seeks to provide total return (both income and capital
appreciation) consistent with prudent investment risk.
<PAGE> 17
9
INVESTMENT POLICIES
The Balanced Fund invests in a combination of equity and fixed income securities
and money market instruments. The Balanced Fund seeks total return in all market
conditions, with a special emphasis on minimizing declines in net asset value
during falling equity markets. The Balanced Fund invests primarily in equity
securities, intermediate maturity fixed income securities and money market
instruments.
Under normal market conditions, the Balanced Fund invests between 30-70% of its
total assets in a diversified portfolio of common stocks (including ADRs and
securities convertible into or exchangeable for common stock) traded on U.S.
national securities exchanges (including NASDAQ). The Adviser selects securities
for the Balanced Fund using an investment strategy often characterized as
"Growth at a Price." Under this strategy, the Adviser purchases for the Balanced
Fund securities of companies that have experienced growth in earnings provided
that the securities appear attractively priced based on proprietary valuation
methods. Generally, the Balanced Fund will purchase securities of companies with
mid to large size market capitalization (over $100 million). If the Adviser
believes, however, that the securities of a company with a smaller market
capitalization have an attractive value, it may purchase such securities for the
Portfolio. The Balanced Fund will not invest more than 20% of its total assets
in securities convertible into or exchangeable for common stock. The Balanced
Fund may invest only in convertible debentures that have received a rating of A
or higher by S&P or Moody's or are determined to be of comparable quality by the
Adviser at time of purchase. It is currently anticipated that the Balanced Fund
will invest on the average over time approximately 60% of its total assets in
the foregoing types of securities.
The Balanced Fund will, under normal market conditions, invest a minimum of 25%
of its total assets in fixed income securities, obligations issued by the U.S.
Government and its agencies and instrumentalities, zero coupon receipts
involving U.S. Treasury obligations and corporate bonds and debentures,
asset-backed securities, floating or variable rate corporate notes and Yankee
Bonds. The Portfolio may also invest in mortgage-backed securities (including
collateralized mortgage obligations), which are securities issued by government
sponsored entities, such as the Government National Mortgage Association, or by
private issuers that entitle the holder to a share of all interest and principal
payments from a pool of mortgage loans underlying the security. All of the
foregoing investment securities will be rated A or higher by S&P or by Moody's
at the time of purchase or determined to be of comparable quality by the Adviser
at the time of purchase. In the event the credit quality of these securities
declines below the applicable criteria, the Adviser may consider selling such
securities. The Balanced Fund's investments in mortgage-backed securities,
asset-backed securities, floating or variable rate corporate notes and Yankee
Bonds will not exceed 20% of the Balanced Fund's total assets. The fixed income
securities held by the Balanced Fund will have an aggregate average weighted
maturity of three to seven years and individual securities may have a maximum
maturity of twelve years.
In addition, the Balanced Fund may invest in money market instruments, including
money market and U.S. equity index mutual funds, securities issued or guaranteed
by the United States Government and its agencies or instrumentalities,
repurchase agreements, certificates of deposit or bankers' acceptances issued by
domestic banks or savings institutions with assets exceeding $2.5 billion at the
end of their most recent fiscal year and commercial paper rated, at the time of
purchase, in the top two categories by a national rating agency or determined to
be of comparable quality by the Adviser at time of purchase.
The Balanced Fund may purchase securities on a "when-issued" basis, may engage
in securities repurchase transactions and may borrow money in aggregate amounts
not in excess of 5% of its total assets. The Balanced Fund may also write (sell)
covered call options.
<PAGE> 18
10
For additional information regarding risks and permitted investments of the
Balanced Fund, see "RISK FACTORS" and "DESCRIPTION OF CERTAIN PERMITTED
INVESTMENTS." For a description of ratings, see the "APPENDIX."
INTERMEDIATE TERM BOND FUND
INVESTMENT OBJECTIVE
The Intermediate Term Bond Fund seeks income consistent with prudent investment
risk and maintenance of appropriate liquidity.
INVESTMENT POLICIES
The Intermediate Term Bond Fund's permitted investments consist of the following
debt securities: fixed income securities, obligations issued by the U.S.
Government and its agencies and instrumentalities, zero coupon receipts
involving U.S. Treasury obligations and corporate bonds and debentures,
asset-backed securities, floating or variable rate corporate notes and Yankee
Bonds. The Portfolio may also invest in mortgage-backed securities (including
collateralized mortgage obligations), which are securities issued by government
sponsored entities, such as the Government National Mortgage Association, or by
private issuers that entitle the holder to a share of all interest and principal
payments from a pool of mortgage loans underlying the security. All of the
foregoing investment securities will be rated A or higher by S&P or by Moody's
at the time of purchase or determined to be of comparable quality by the Adviser
at the time of purchase, and are considered by the Trust to be bonds. In the
event the credit quality of bonds purchased by the Intermediate Term Bond Fund
declines below the applicable criteria, the Adviser may consider selling such
securities. The Intermediate Term Bond Fund's investments in mortgagebacked
securities, asset-backed securities, floating or variable rate corporate notes
and Yankee Bonds will not exceed 20% of its total assets.
In addition, the Intermediate Term Bond Fund may invest in money market
instruments, including securities issued or guaranteed by the United States
Government and its agencies or instrumentalities, repurchase agreements,
certificates of deposit or bankers' acceptances issued by domestic banks or
savings institutions with assets exceeding $2.5 billion at the end of their most
recent fiscal year and commercial paper rated, at the time of purchase, in the
top two categories by a national rating agency or determined to be of comparable
quality by the Adviser at time of purchase. The Intermediate Term Bond Fund may
also invest up to 10% of its total assets in money market mutual funds.
The Portfolio will have an aggregate average weighted maturity of three to seven
years and individual securities held in the Portfolio may have a maximum
maturity of twelve years. By so limiting the maturity of its investments, the
Intermediate Term Bond Fund's assets are expected to experience less price
volatility in response to changes in interest rates than similar securities with
longer maturities.
The Intermediate Term Bond Fund may purchase securities on a "when-issued" basis
and reserves the right to engage in transactions involving standby commitments.
The Intermediate Term Bond Fund may also borrow money in aggregate amounts not
in excess of 5% of its total assets.
For additional information regarding risks and permitted investments of the
Intermediate Term Bond Fund, see "RISK FACTORS" and "DESCRIPTION OF CERTAIN
PERMITTED INVESTMENTS." For a description of ratings, see the "APPENDIX."
SHORT TERM BOND FUND
INVESTMENT OBJECTIVE
The Short Term Bond Fund seeks to preserve principal value and maintain a high
degree of liquidity while providing current income.
<PAGE> 19
11
INVESTMENT POLICIES
The Short Term Bond Fund's permitted investments consist of the following debt
securities: fixed income securities, obligations issued by the U.S. Government
and its agencies and instrumentalities, zero coupon receipts involving U.S.
Treasury obligations and corporate bonds and debentures, asset-backed
securities, floating or variable rate corporate notes and Yankee Bonds. The
Portfolio may also invest in mortgage-backed securities (including
collateralized mortgage obligations), which are securities issued by government
sponsored entities, such as the Government National Mortgage Association, or by
private issuers that entitle the holder to a share of all interest and principal
payments from a pool of mortgage loans underlying the security. All of the
foregoing investment securities will be rated A or higher by S&P or by Moody's
at the time of purchase or determined to be of comparable quality by the Adviser
at the time of purchase, and are considered by the Trust to be bonds. In the
event the credit quality of the bonds purchased by the Short Term Bond Fund
declines below the applicable criteria, the Adviser will consider selling such
securities. The Short Term Bond Fund's investments in mortgage-backed
securities, asset-backed securities, floating or variable rate corporate notes
and Yankee Bonds will not exceed 30% of its total assets.
In addition, the Short Term Bond Fund may invest in money market instruments,
including securities issued or guaranteed by the United States Government and
its agencies or instrumentalities, repurchase agreements, certificates of
deposit or bankers' acceptances issued by domestic banks or savings institutions
with assets exceeding $2.5 billion at the end of their most recent fiscal year
and commercial paper rated, at the time of purchase, in the top two categories
by a national rating agency or determined to be of comparable quality by the
Adviser at the time of purchase. The Short Term Bond Fund may also invest up to
10% of its total assets in money market mutual funds.
The Portfolio will have an aggregate average weighted maturity of not more than
two years and individual securities held in the Portfolio may have a maximum
maturity of three years. By so limiting the maturity of its investments, the
Short Term Bond Fund's assets are expected to experience less price volatility
in response to changes in interest rates than similar securities with longer
maturities.
The Short Term Bond Fund may purchase securities on a "when-issued" basis and
reserves the right to engage in transactions involving standby commitments. In
addition, the Short Term Bond Fund may borrow money in aggregate amounts not in
excess of 5% of its total assets.
For additional information regarding risks and permitted investments of the
Short Term Bond Fund, see "RISK FACTORS" and "DESCRIPTION OF CERTAIN PERMITTED
INVESTMENTS." For a description of ratings, see the "APPENDIX."
SHORT TERM MUNICIPAL BOND FUND
INVESTMENT OBJECTIVE
The Short Term Municipal Bond Fund seeks to provide as high a level of current
income that is exempt from Federal income tax as is consistent with preservation
of capital.
INVESTMENT POLICIES
Under normal market conditions, the Short Term Municipal Bond Fund will invest
at least 80% and up to 100% of its assets in municipal securities the interest
on which is exempt from Federal income taxes, based on opinions from bond
counsel for the issuers. This investment policy is a fundamental policy of the
Short Term Municipal Bond Fund. The issuers of these securities can be located
in all fifty states, the District of Columbia, Puerto Rico and other U.S.
territories and possessions. The Short Term Municipal Bond Fund will not invest
in securities the interest on which is a preference item for purposes of the
alternative minimum tax. The Short Term Municipal Bond Fund will generally
maintain a dollar-weighted average portfolio maturity of no more
<PAGE> 20
12
than three years and an individual security maturity of no more than four years.
The Short Term Municipal Bond Fund may purchase the following types of municipal
securities, but only if such securities, at the time of purchase, have the
requisite ratings set forth below or are of comparable quality as determined by
the Adviser: (i) municipal bonds rated A or better by S&P or Moody's; (ii)
municipal notes rated at least SP-1 by S&P or MIG-1 or VMIG-1 by Moody's; and
(iii) tax-exempt commercial paper rated at least A-1 by S&P or Prime-1 by
Moody's. In the event the credit quality of municipal securities owned by the
Short Term Municipal Bond Fund declines below the applicable criteria outlined
above the Adviser may consider selling such securities. The Short Term Municipal
Bond Fund may also purchase other types of tax exempt instruments as long as
they are of a quality equivalent to the bond, note or commercial paper ratings
stated above, and may invest up to 10% of its total assets in tax-exempt money
market mutual funds.
The Short Term Municipal Bond Fund may invest in variable and floating rate
obligations, may purchase securities on a "when-issued" basis, and reserves the
right to engage in transactions involving standby commitments. The Short Term
Municipal Bond Fund may also borrow money in aggregate amounts not in excess of
5% of its total assets.
For additional information regarding risks and permitted investments of the
Short Term Municipal Bond Fund, see "RISK FACTORS" and "DESCRIPTION OF CERTAIN
PERMITTED INVESTMENTS." For a description of ratings, see the "APPENDIX."
IDAHO MUNICIPAL BOND FUND
INVESTMENT OBJECTIVE
The Idaho Municipal Bond Fund seeks to provide as high a level of current income
exempt from Federal and Idaho state income taxes as is consistent with
preservation of capital.
INVESTMENT POLICIES
The Idaho Municipal Bond Fund will invest at least 65% of its total assets in
municipal securities the interest on which is exempt from Federal and Idaho
state income taxes, based upon opinions from bond counsel for the issuers. This
investment policy is a fundamental policy of the Idaho Municipal Bond Fund. The
Idaho Municipal Bond Fund may purchase the following types of municipal
securities of issuers located in Idaho, but only if such securities, at the time
of purchase, have the requisite ratings set forth below or are of comparable
quality as determined by the Adviser at the time of purchase: (i) municipal
bonds rated A or better by S&P or Moody's; (ii) municipal notes rated at least
SP-1 by S&P or MIG-1 or VMIG-1 by Moody's; and (iii) tax-exempt commercial paper
rated at least A-1 by S&P or Prime-1 by Moody's. The Adviser will consider
selling municipal securities owned by the Idaho Municipal Bond Fund for which
credit quality declines below the applicable criteria outlined above.
Under normal market conditions, the Idaho Municipal Bond Fund will invest at
least 80% of its total assets in securities the interest on which is not a
preference item for purposes of the alternative minimum tax. In addition, up to
20% of the Idaho Municipal Bond Fund's total assets may be invested in
tax-exempt money market funds and other municipal securities, the interest on
which is exempt from Federal income taxes, but not from Idaho income tax, based
upon opinions from bond counsel for the issuers. Such investments will be of the
same credit quality discussed above. The weighted average maturity of the Idaho
Municipal Bond Fund's securities will be twelve years or less.
The Idaho Municipal Bond Fund may invest in variable and floating rate
obligations, may purchase securities on a "when-issued" basis, and reserves the
right to engage in transactions involving standby commitments. The Idaho
Municipal Bond Fund may
<PAGE> 21
13
also borrow money in aggregate amounts not in excess of 5% of its total assets.
For additional information regarding risks and permitted investments of the
Idaho Municipal Bond Fund, see "RISK FACTORS" and "DESCRIPTION OF CERTAIN
PERMITTED INVESTMENTS." For a description of ratings, see the "APPENDIX."
GENERAL INVESTMENT POLICIES
For temporary defensive purposes when the Adviser determines that market
conditions warrant, (i) the Equity Fund, the Balanced Fund, the Intermediate
Term Bond Fund and the Short Term Bond Fund each may invest up to 100% of its
assets in money market instruments consisting of securities issued or guaranteed
by the United States Government, its agencies or instrumentalities, repurchase
agreements, certificates of deposit and bankers' acceptances issued by domestic
banks or savings and loan associations having net assets of at least $2.5
billion as of the end of their most recent fiscal year, and commercial paper
rated, at the time of purchase, in the top two categories by a national rating
agency or determined to be of comparable quality by the Adviser at the time of
purchase, and other long- and short-term debt instruments which are rated A or
higher by S&P or Moody's at the time of purchase, and may hold a portion of its
assets in cash reserves, and (ii) the Short Term Municipal Bond Fund and Idaho
Municipal Bond Fund may each invest up to 100% of its assets in tax-exempt money
market mutual funds and may hold a portion of its assets in cash reserves. To
the extent that any Portfolio is engaged in temporary defensive investments, it
will not be pursuing its investment objective.
The Advisor expects that under normal circumstances the annual turnover rate of
the investments of the Portfolios will be less than 100%. However, the annual
turnover rate of the investments of the Equity Fund and the Short Term Municipal
Bond Fund was in excess of 100% for the fiscal year ended January 31, 1996. That
rate of portfolio turnover will result in higher transaction costs for, and may
result in additional taxes for shareholders of, those Portfolios. See "Taxes".
In placing orders for the execution of transactions in portfolio securities, it
is the Trust's policy to obtain the best net results taking into account such
factors as price, size, type and difficulty of the transaction involved, a
brokerage firm's general execution and operational facilities and the firm's
risk in positioning the securities involved. The Portfolios may execute
brokerage or other agency transactions through the Distributor or its affiliates
or through affiliates of the Adviser for a commission in conformity with the
Investment Company Act of 1940 (the "1940 Act"), the Securities Exchange Act of
1934 and rules of the SEC. The Trust will not purchase portfolio securities from
any affiliated person acting as a principal except in conformity with the
regulations of the SEC.
RISK FACTORS
EQUITY SECURITIES (EQUITY FUND AND BALANCED FUND)--Investments in common stocks
are subject to market risks which may cause their prices to fluctuate.
Accordingly, the Equity Fund and the Balanced Fund may be more suitable for
long-term investors who can bear the risk of short-term fluctuations. Changes in
the value of portfolio securities will not necessarily affect cash income
derived from those securities but will affect the net asset value of a
Portfolio's shares.
FIXED INCOME SECURITIES (BALANCED FUND, INTERMEDIATE TERM BOND FUND, SHORT TERM
BOND FUND, SHORT TERM MUNICIPAL BOND FUND AND IDAHO MUNICIPAL BOND FUND)--The
market value of fixed income securities will change in response to interest rate
changes and other factors. During periods of falling interest rates, the value
of outstanding fixed income securities generally rises. Conversely, during
periods of rising interest rates, the value of such securities generally
declines. Moreover, while securities with longer maturities tend to produce
higher yields, the prices of longer maturity securities are also subject to
greater market fluctuations as a result of changes in interest rates. Changes by
<PAGE> 22
14
recognized agencies in the rating of any fixed income security and in the
ability of an issuer to make payments of interest and principal also affect the
value of these investments. Changes in the value of portfolio securities will
not necessarily affect cash income derived from those securities but will affect
the net asset value of a Portfolio's shares.
NON-DIVERSIFICATION (IDAHO MUNICIPAL BOND FUND)--Investment in the Idaho
Municipal Bond Fund, a non-diversified mutual fund, may entail greater risk than
would investment in a diversified investment company because the concentration
in securities of relatively few issuers could result in greater fluctuation in
the total market value of this Portfolio's holdings. Any economic, political or
regulatory developments affecting the value of the securities the Idaho
Municipal Bond Fund holds could have a greater impact on the total value of its
holdings than would be the case if the securities were diversified among more
issuers. The Idaho Municipal Bond Fund intends to comply with the
diversification requirements of Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). In accordance with these requirements, the Idaho
Municipal Bond Fund will not invest more than 5% of its total assets in any one
issuer; this limitation applies to 50% of its total assets.
COVERED CALL OPTIONS (EQUITY FUND AND BALANCED FUND)--Risks associated with
covered call option transactions include: (1) the success of a hedging strategy
may depend on an ability to predict movements in the prices of individual
securities, fluctuations in markets and movements in interest rates; (2) there
may be an imperfect correlation between the movement in prices of options and
the securities underlying them; (3) there may not be a liquid secondary market
for options; and (4) while the Portfolios will receive a premium when it writes
covered call options, they may not participate fully in a rise in the market
value of the underlying security.
IDAHO RISK FACTORS (IDAHO MUNICIPAL BOND FUND)--Certain risks are inherent in
the Idaho
Municipal Bond Fund's investments in Idaho municipal securities. The State of
Idaho currently has no outstanding general obligation debt. In the past, tax
anticipation notes have been issued by the State of Idaho that are backed by the
full faith and credit of the State of Idaho. Other securities issued by Idaho
state agencies are secured only by a pledge of revenues generated by investment
of bond proceeds in assets such as low-income housing loans or loans for the
construction of hospital facilities, and of reserve funds and other funds
created from bond proceeds. Timely payment of general obligation bonds issued by
political subdivisions of the State of Idaho is dependent upon the ability of
those entities to collect anticipated tax revenues, which may be affected by
general economic conditions and political changes. Timely payment of revenue
bonds issued by political subdivisions of the State of Idaho is dependent upon
collection of revenues from investments made with bond proceeds. A more complete
description of risks associated with Idaho municipal securities is contained in
the Statement of Additional Information.
OTHER PERMITTED INVESTMENTS--Certain of the other investments permitted for the
Portfolios pose special risks in addition to those risks described above. See
"DESCRIPTION OF CERTAIN PERMITTED INVESTMENTS--Repurchase Agreements," and
"--Standby Commitments," in this Prospectus and the description of permitted
investments in the Statement of Additional Information.
THERE IS NO ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS INVESTMENT OBJECTIVE.
INVESTMENT LIMITATIONS
No Portfolio may:
1. With respect to 75% of its total assets, purchase securities of any issuer
(other than securities issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities) if, as a result, (a) more than 5% of the
Portfolio's total assets would be invested in the securities of such issuer, or
(b) the Portfolio would hold more than 10% of the outstanding securities of that
issuer, except that this
<PAGE> 23
15
limitation shall not be applicable to the Idaho Municipal Bond Fund.
2. Purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities)
if, as a result, more than 25% of the Portfolio's total assets would be invested
in the securities of companies whose principal business activities are in the
same industry.
3. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding 5% of the value of the total assets of the Portfolio. All
borrowings will be repaid before making additional investments and any interest
paid on such borrowings will reduce the income of the Portfolio.
The foregoing percentage limitations will apply at the time of the purchase of a
security or the time that money is borrowed. Additional investment limitations
are set forth in the Statement of Additional Information.
FUNDAMENTAL POLICIES
The investment objectives and investment limitations stated above are
fundamental policies of the Portfolios. Fundamental policies cannot be changed
with respect to a Portfolio without the consent of the holders of a majority of
that Portfolio's outstanding shares. The term "majority of the outstanding
shares" of a Portfolio as used in this Prospectus means the vote of (i) 67% or
more of a Portfolio's shares present at a meeting, if the holders of more than
50% of the outstanding shares of the Portfolio are present or represented by
proxy, or (ii) more than 50% of a Portfolio's outstanding shares, whichever is
less.
THE ADVISER
First Security Investment Management, Inc. ("FSIM" or the "Adviser") serves as
investment adviser to the Portfolios pursuant to an investment advisory
agreement (the "Advisory Agreement") with the Trust. The selection of FSIM to
serve as investment adviser to the Portfolios was approved by the Trustees and
the initial shareholder of each Portfolio. Under the Advisory Agreement, the
Adviser makes the investment decisions for the Portfolios and continuously
reviews, supervises and administers each Portfolio's investment program.
Under the Advisory Agreement, FSIM is entitled to receive a fee for the services
it provides, which is calculated daily and paid monthly, at an annual rate of
0.74% of the average daily net assets of the Equity Fund and the Balanced Fund,
and at an annual rate of 0.60% of the average daily net assets of the
Intermediate Term Bond Fund, the Short Term Bond Fund, the Short Term Municipal
Bond Fund and the Idaho Municipal Bond Fund. The Adviser has voluntarily waived
a portion of its fee for the Trust's current fiscal year so that total operating
expenses for the Equity Fund and the Balanced Fund will not exceed 0.90% and the
total operating expenses for the Intermediate Term Bond Fund, the Short Term
Bond Fund, the Short Term Municipal Bond Fund and Idaho Municipal Bond Fund will
not exceed 0.75%. The Adviser may revoke its fee waivers at any time at its sole
discretion without notice to any current or prospective shareholder. For the
fiscal year ended January 31, 1996, the Adviser received advisory fees in
amounts equal to the following annual percentage rates applied to the average
daily net assets of the Portfolios indicated: 0.51% for the Equity Fund; 0.51%
for the Balanced Fund; 0.34% for the Intermediate Term Bond Fund; 0.37% for the
Short Term Bond Fund; 0.17% for the Short Term Municipal Bond Fund; and 0.17%
for the Idaho Municipal Bond Fund.
FSIM, incorporated in August 1984, is a wholly-owned, indirect subsidiary of
First Security Corporation, a financial services organization and registered
bank holding company with headquarters in Utah. In addition to advising the
Portfolios, FSIM's advisory experience includes the management of various
collective and common investment funds and the provision of investment
management services to another investment company, banks and thrift
institutions, corporate and profit-sharing trusts, Taft-
<PAGE> 24
16
Hartley organizations, municipal and state retirement funds, charitable
foundations, endowments and individual investors throughout the United States.
FSIM had approximately $4.3 billion under management at December 31, 1995. FSIM
is registered as an investment adviser under the Investment Advisers Act of
1940, as amended, and has offices at 61 South Main Street, Salt Lake City, Utah
84111, at 119 North 9th Street, Boise, Idaho 83730 and at 219 Central Avenue NW,
3rd Floor, Albuquerque, New Mexico 87102.
The following individuals are responsible for the day-to-day management of the
Portfolios indicated.
EQUITY FUND--Sterling K. Jenson, CFA, is President of the Adviser and has been
responsible for the Equity Fund since inception. He joined the Adviser in 1990
as a Vice President and Senior Portfolio Manager, and has managed the First
Security Common Stock Fund and EB Common Stock Fund since December, 1994.
BALANCED FUND--Curtis J. Anderson, CFA, is a Vice President and Senior Portfolio
Manager of the Adviser and has been responsible for the Balanced Fund since
inception. He joined the Adviser in 1991 serving as Assistant Vice President and
Portfolio Manager. Prior to joining the Adviser, Mr. Anderson served as a Trust
Investment Officer with West One Trust Company from 1989 to 1991.
INTERMEDIATE TERM BOND FUND AND SHORT TERM BOND FUND--Mark L. Anderson is a Vice
President and Senior Portfolio Manager of the Adviser and has been responsible
for the Intermediate Term Bond Fund and Short Term Bond Fund since inception.
Mr. Anderson joined the Adviser in 1984 and has managed bond, money market,
balanced and equity portfolios since that time.
SHORT TERM MUNICIPAL BOND FUND AND IDAHO MUNICIPAL BOND FUND--James A. Schuck is
a Vice President and Senior Portfolio Manager of the Adviser and has been
responsible for the Short Term Municipal Bond Fund and Idaho Municipal Bond Fund
since inception. Mr. Schuck has been a Vice President and Senior Portfolio
Manager of the Adviser since 1984 and has managed collective investment funds
with investment objectives similar to those of the Short Term Municipal Bond
Fund and the Idaho Municipal Bond Fund since that time.
Banking laws and regulations, including the Glass-Steagall Act as currently
interpreted by the Board of Governors of the Federal Reserve System, prohibit a
bank holding company registered under the Bank Holding Company Act of 1956 or
any affiliate thereof from sponsoring, organizing, controlling, or distributing
the shares of a registered, open-end investment company continuously engaged in
the issuance of its shares, and prohibit banks generally from issuing,
underwriting, selling or distributing securities, but do not prohibit such a
bank holding company or affiliate from acting as investment adviser, transfer
agent, or custodian to such an investment company, or from purchasing shares of
such a company as agent for and upon the order of a customer, or from performing
any combination of such services. FSIM and the Trust believe that FSIM may
perform the advisory services for the Trust described in this Prospectus.
However, future changes in legal requirements relating to the permissible
activities of banks and their affiliates, as well as future interpretations of
present requirements, could prevent FSIM from continuing to perform investment
advisory services for the Trust.
If FSIM or any other service providers were prohibited from performing services
for the Trust, it is expected that the Board of Trustees of the Trust would
recommend to the Trust's shareholders that they approve new agreements with
another entity or entities qualified to perform such services and selected by
the Board.
THE ADMINISTRATOR
SEI Fund Resources, 680 East Swedesford Road, Wayne, PA 19087, a wholly-owned
subsidiary of SEI Financial Management Corporation, a wholly-owned subsidiary of
SEI Corporation ("SEI"), provides the Trust with administrative services (other
than
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17
investment advisory services), accounting services, regulatory reporting, all
necessary office space, equipment, personnel and facilities, pursuant to an
administration agreement with the Trust (the "Administration Agreement"). For
these services, the Administrator is entitled to a fee from the Equity Fund, the
Balanced Fund, the Intermediate Term Bond Fund and the Short Term Bond Fund in
an amount which is calculated at an annual rate of 0.20% of their average daily
net assets. The Administrator is entitled to a fee from the Short Term Municipal
Bond Fund and the Idaho Municipal Bond Fund in an amount equal to the greater of
0.20% of their daily net assets or $100,000. The Administrator has voluntarily
agreed to waive a portion of its fee for the Short Term Municipal Bond Fund and
the Idaho Municipal Bond Fund. The Administrator reserves the right to terminate
its fee waiver for the Short Term Municipal Bond Fund and the Idaho Municipal
Bond Fund at any time at its sole discretion and without notice to any current
or prospective shareholder.
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), 680 East Swedesford Road,
Wayne, Pennsylvania, 19087, a wholly-owned subsidiary of SEI, serves as the
distributor for the Portfolios pursuant to a distribution agreement
("Distribution Agreement") with the Trust. The Distributor receives no fee for
its services in connection with distribution of the Institutional shares.
Financial institutions that are the record owners of shares for the account of
their customers may impose separate fees for account services to their
customers.
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
Financial institutions may acquire shares of the Portfolios for their own
account or as record owner on behalf of fiduciary, agency or custody accounts by
placing orders with the Distributor. Institutions that use certain SEI
proprietary systems may place orders electronically through those systems. State
securities laws may require banks and financial institutions purchasing shares
for their customers to register as dealers pursuant to state laws. Shares of
each Portfolio are offered only to residents of states in which the shares are
eligible for purchase.
Shares of each Portfolio may be purchased or redeemed on days during which the
New York Stock Exchange is open for business ("Business Days"). The minimum
initial investment by financial institutions purchasing shares is $500,000;
however the minimum investment may be waived at the Distributor's discretion. No
minimum amount is required for subsequent investments.
Shareholders who desire to purchase shares for cash must place their orders with
the Distributor prior to 4:00 p.m. Eastern time on any Business Day for the
order to be accepted on that Business Day. Financial institutions may impose an
earlier cut-off time for receipt of purchase orders directed through them to
allow for processing and transmittal of these orders to the Distributor for
effectiveness the same day. Cash payment for investments must be transmitted or
delivered in federal funds to the wire agent on the next Business Day following
the day the order is placed. The Trust reserves the right to reject a purchase
order when the Distributor determines that it is not in the best interest of the
Trust or its shareholders to accept such purchase order. Purchases will be made
in full and fractional shares of the Portfolios calculated to three decimal
places. The Trust will send shareholders a statement of shares owned after each
transaction.
The purchase price of shares is the net asset value next determined after a
purchase order is received and accepted by the Trust. The net asset value per
share of each Portfolio is determined by dividing the total market value of a
Portfolio's investments and other assets, less any liabilities, by the total
outstanding shares of that Portfolio. Net asset value per share is determined
daily as of the close of trading on the New York Stock Exchange (presently 4:00
p.m. Eastern time) on any Business Day in the manner described in the Statement
of Additional Information. Financial institutions which purchase shares for the
accounts of their customers may
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18
impose separate charges on these customers for account services.
An exchange between the Institutional class and the Retail Class A shares of any
Portfolio is generally not permitted, except that exchanges between the classes
will occur automatically should an investor in the Institutional class become
ineligible to purchase additional Institutional class shares. For example, an
automatic exchange would occur if an Institutional class investor receives a
distribution from a trust, and such investor would be investing individually
(and becomes a shareholder of record) rather than through a qualified account.
An exchange from the Institutional class to the Retail Class A shares of a
Portfolio will occur automatically when an Institutional class shareholder's
account falls below the $500,000 minimum balance. The Trust will provide thirty
days' notice of any such exchange. The exchange will take place at net asset
value, without the imposition of a sales load, fee or other charge. After the
exchange, the exchanged shares will be subject to all fees applicable to Retail
Class A shares. In the event that a shareholder declines to accept an automatic
exchange, and if the shareholder does not meet the requirements for investing in
Institutional class shares, the Trust reserves the right to redeem the shares
upon expiration of the thirty-day period. The Trust reserves the right to
require shareholders to complete an application or other documentation in
connection with the exchange.
Retail Class A shares of a Portfolio may be exchanged for Institutional Class
shares of the same Portfolio should the shareholder establish a trust, custodial
or money management relationship with a qualified institution.
To exchange shares held of record by a financial institution but beneficially
owned by a customer, the customer should contact the financial institution,
which will contact the Distributor and effect the exchange on behalf of the
customer. If an exchange request in good order is received by the Distributor by
4:00 p.m. Eastern time on any Business Day, the exchange will ordinarily be
effective on that day. Any shareholder or customer of a shareholder who wishes
to make an exchange must have received a current prospectus of the Portfolio
into which the exchange is being made before the exchange will be effected.
Each Portfolio anticipates earning income on its portfolio securities and other
investments in the form of interest income, dividends and capital gains. That
income, after payment of expenses, will be passed along to shareholders as
dividends or capital gain distributions. See "GENERAL INFORMATION--Dividends"
for a discussion of the dividend policy of each Portfolio. Such distributions to
shareholders will automatically be paid in cash, unless the shareholder makes a
different election with respect to such distributions.
Distributions of dividends and capital gains made by the Portfolios may be
invested in shares of one of the other Portfolios if shares of the other
Portfolio are available for sale. Such investments will be subject to initial
investment minimums, as well as additional purchase minimums. A shareholder
considering this distribution investment option should consider the differences
in investment objectives and policies of another Portfolio before making any
investment in such Portfolio. The Trust reserves the right to terminate this
distribution investment option without further notice to shareholders.
Shareholders who desire to redeem shares of a Portfolio must place their
redemption orders with the Distributor prior to 4:00 p.m. Eastern time on any
Business Day. The redemption price is the net asset value per share of the
Portfolio next determined after receipt by the Distributor of the redemption
order. Payment on redemption will be made as promptly as possible and, in any
event, within seven days after the redemption order is received.
Purchase, redemption and exchange orders may be placed by telephone. Neither the
Trust nor the Trust's transfer agent will be responsible for any loss,
liability, cost or expense for acting upon telephone instructions that it
reasonably believes to be genuine. The Trust and the Trust's transfer agent will
each employ reasonable procedures to confirm that instructions communicated by
telephone are genuine,
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19
including requiring a form of personal identification prior to acting upon
instructions received by telephone and recording telephone instructions. The
Trust or the Trust's transfer agent may be liable for losses resulting from
fraudulent or unauthorized instructions if it does not employ these procedures.
If market conditions are extraordinarily active, or other extraordinary
circumstances exist, and a shareholder experiences difficulties placing
redemption orders by telephone, the shareholder may wish to consider placing its
order by other means.
PERFORMANCE
GENERAL
From time to time the Portfolios may advertise yield and total return. The Short
Term Municipal Bond Fund and the Idaho Municipal Bond Fund each may also
advertise a "taxable equivalent yield." These figures are based on historical
earnings and are not intended to indicate future performance. No representation
can be made concerning actual future yields or returns. The yield of each
Portfolio refers to the income generated by a hypothetical investment in such
Portfolio over a thirty day period. This income is then "annualized," i.e., the
income over thirty days is assumed to be generated over one year and is shown as
a percentage of the investment.
A "taxable equivalent yield" is calculated by determining the yield that would
have been achieved on a fully taxable investment to produce the after-tax
equivalent of a Portfolio's yield, assuming certain rates of taxation for a
shareholder.
The total return of each Portfolio refers to the average compounded rate of
return on a hypothetical investment for designated time periods, assuming that
the entire investment is redeemed at the end of each period and assuming the
reinvestment of all dividend and capital gain distributions.
A Portfolio may periodically compare its performance to that of other mutual
funds tracked by mutual funds rating services (such as Lipper Analytical
Services, Inc.), financial and business publications and periodicals, broad
groups of comparable mutual funds or unmanaged indices which may assume
investment of dividends but generally do not reflect deductions for
administrative and management costs. A Portfolio may quote a service that ranks
mutual funds on the basis of risk-adjusted performance (such as Morningstar,
Inc.). A Portfolio may use long-term performance of appropriate capital markets
to demonstrate general long-term risk versus reward scenarios and could include
the value of a hypothetical investment in the appropriate capital markets. A
Portfolio may also quote financial and business publications and periodicals as
they relate to fund management, investment philosophy and investment techniques.
Each Portfolio may quote various measures of volatility and benchmark
correlation in advertising and may compare these measures to those of other
funds. Measures of volatility attempt to compare historical share price
fluctuations or total returns to a benchmark while measures of benchmark
correlation indicate how valid a comparative benchmark might be. Measures of
volatility and correlation are calculated using averages of historical data and
cannot be calculated precisely.
Additional performance information for the Portfolios is set forth in the
Trust's Annual Report to shareholders for its fiscal year ended January 31,
1996, which is available upon request and without charge by calling
1-800-472-0577.
TAXES
The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to present a detailed
explanation of the federal, state, or local income tax treatment of the
Portfolios or their shareholders. Accordingly, shareholders are urged to consult
their tax advisers regarding specific questions as to federal, state and local
income taxes. State and local tax consequences of an investment in
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the Portfolios may differ from the federal income tax consequences described
below. Additional information concerning taxes is set forth in the Statement of
Additional Information.
TAX STATUS OF THE PORTFOLIOS
Each Portfolio is treated as a separate entity for federal income tax purposes
and is not combined with the Trust's other portfolios. Each Portfolio intends to
qualify for the special tax treatment afforded regulated investment companies
("RICs") under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), so as to be relieved of federal income tax on investment company
taxable income and net capital gains (the excess of net long-term capital gains
over net short-term capital losses) distributed to Shareholders.
TAX STATUS OF DISTRIBUTIONS (EQUITY FUND, BALANCED FUND, INTERMEDIATE TERM BOND
FUND, AND SHORT TERM BOND FUND)
Each Portfolio intends to distribute substantially all of its net investment
income (including net short-term capital gains and realized market discounts)
and net capital gains to shareholders. Dividends from a Portfolio's investment
company taxable income are taxable to its shareholders as ordinary income
(whether received in cash or in additional shares) to the extent of the
Portfolio's earnings and profits. Dividends paid by a Portfolio to corporate
shareholders will qualify for the deduction for dividends received by
corporations to the extent of the dividends received by the Portfolio from
domestic corporations. However, the full amount of such dividends will be taken
into account in determining liability (if any) for corporate alternative minimum
tax. Distributions of net capital gains do not qualify for the corporate
dividends received deduction and are taxable to shareholders as long-term
capital gains, regardless of how long shareholders have held their shares and
regardless of whether the distributions are received in cash or in additional
shares. The Portfolios provide annual reports to shareholders of the federal
income tax status of all distributions.
The sale, exchange or redemption of Portfolio shares is a taxable transaction to
the shareholder.
TAX STATUS OF DISTRIBUTIONS (SHORT TERM MUNICIPAL BOND FUND AND IDAHO MUNICIPAL
BOND FUND)
Each Portfolio intends to distribute substantially all of its net investment
income (including net short-term capital gains and realized market discounts) to
shareholders. If, at the close of each quarter of its taxable year, at least 50%
of the value of a Portfolio's total assets consists of obligations the interest
on which is excludable from gross income, that Portfolio may distribute its net
tax-exempt interest income as "exempt-interest dividends" to its shareholders.
Exempt-interest dividends are excludable from a shareholder's gross income for
federal income tax purposes but may have certain collateral federal tax
consequences including alternative minimum tax consequences. In addition, the
receipt of exempt-interest dividends may cause persons receiving Social Security
or Railroad Retirement benefits to be taxable on a portion of such benefits. See
the Statement of Additional Information.
Current federal tax law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect on the
ability of a Portfolio to purchase sufficient amounts of tax-exempt securities
to satisfy the Code's requirements for the payment of exempt-interest dividends.
Any dividends paid out of net short-term capital gains and realized market
discounts or out of any income realized by a Portfolio on taxable securities
will be taxable to shareholders as ordinary income (whether received in cash or
in additional shares) to the extent of that Portfolio's earnings and profits and
will not qualify for the dividends-received deduction for corporate
shareholders. Distributions to shareholders of net capital gains of a Portfolio
also will not qualify for the corporate dividends-received deduction and will be
taxable to shareholders as long-term capital gain, whether received in cash or
additional shares, and regardless of how long a shareholder has held the shares.
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The Portfolios will report annually to shareholders the percentages of their net
investment income which are exempt from the regular federal income tax, which
constitute items of tax preference for purposes of the federal alternative
minimum tax, and which are fully taxable. In addition, the Idaho Municipal Bond
Fund will report annually to shareholders the percentages of its net investment
income which are exempt from Idaho corporate and personal income tax (discussed
below). The Portfolios will apply such percentages uniformly to all
distributions declared from net investment income during each report year. These
percentages may differ significantly from the actual percentages for any
particular day.
An investment in these Portfolios is not intended to constitute a balanced
investment program. Shares of the Short Term Municipal Bond Fund or the Idaho
Municipal Bond Fund would not be suitable for tax-exempt institutions and may
not be suitable for retirement plans qualified under Section 401 of the Code,
H.R. 10 plans and individual retirement accounts since such plans and accounts
generally qualify for deferral of taxes on income or gains and, therefore, not
only would not gain any additional benefit from the dividends of those
Portfolios being tax-exempt but also such dividends would be taxable when
distributed to the beneficiary.
ADDITIONAL FEDERAL TAX INFORMATION
Dividends declared by each Portfolio in October, November or December of any
year and payable to shareholders of record on a date in any such month will be
deemed to have been paid by the Portfolio and received by the shareholders on
December 31 of that year if paid by the Portfolio at any time during the
following January.
Each Portfolio intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax.
Shareholders should consult their tax advisers concerning the state and local
tax consequences of investment in a Portfolio, which may differ from federal
income tax consequences described above.
IDAHO TAXES
Exempt-interest dividends that are paid by the Idaho Municipal Bond Fund will
not be subject to Idaho corporate and personal income taxes to the extent that
they are attributable to interest earned on municipal securities that is exempt
from Idaho state income taxes in the opinion of bond counsel for their issuers.
GENERAL INFORMATION
THE TRUST
The Trust was organized as an unincorporated business trust under the laws of
Massachusetts on December 16, 1988 pursuant to a Master Trust Agreement of that
date, which agreement was amended and restated on October 7, 1994 and was
further amended on December 1, 1994 (as further amended from time to time, the
"Trust Agreement").
The Trust currently offers shares of beneficial interest in six separate
portfolios. The Trust has also authorized the issuance of shares of beneficial
interest in an additional portfolio designated the Municipal Bond Fund, but the
Trust has not commenced a public offering of those shares. The Trust may issue
an unlimited number of shares of each of its portfolios. Each share is entitled
to such dividends and distributions out of income earned on the assets of such
portfolio as are declared in the discretion of the Trust's Board of Trustees.
When issued and paid for, shares will be fully paid and non-assessable by the
Trust and will have no preference, conversion or preemptive rights. The Trust
Agreement authorizes the Board of Trustees to classify or reclassify any shares
of any portfolio into one or more other portfolio and to create classes in such
portfolio. Each portfolio is divided into two classes of shares, the
Institutional and Retail Class A classes. Both classes of a Portfolio have a
common investment objective and investment limitations and policies. Shares of
the Institutional class are offered by this prospectus. Shares of the Retail
Class A class are offered through a separate prospectus.
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TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws of Massachusetts. The Trustees supervise the business activities of the
Trust and have approved contracts under which, as described above, certain
companies provide essential management services to the Trust.
VOTING RIGHTS
All shares of the Trust have equal voting rights and will be voted in the
aggregate, and not by series or class, except where voting by series or class is
required by law or where the matter involved affects only one series or class.
The Trust is not required under Massachusetts law to hold annual meetings of
shareholders, but will hold shareholder meetings if required to do so by the
1940 Act. Special meetings may be called for specific Portfolios for purposes
such as changing fundamental policies or approving certain contracts.
Shareholders will be permitted to call a meeting of shareholders and will
receive assistance in communicating with other shareholders, for the purpose of
voting upon the removal of any Trustee as long as such shareholder request is in
writing and is signed by shareholders of record of no less than 10% of the
Trust's outstanding shares.
REPORTING
The Trust issues unaudited financial information semiannually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to shareholders of record.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to SEI Financial Services Company in
writing to 680 East Swedesford Road, Wayne, PA 19087 or by calling
1-800-472-0577.
DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) of
each Portfolio is distributed in the form of dividends that are declared and
paid quarterly by the Equity Fund, declared and paid monthly by the Balanced
Fund and declared daily and paid monthly by the Intermediate Term Bond Fund, the
Short Term Bond Fund, the Short Term Municipal Bond Fund and the Idaho Municipal
Bond Fund. Shareholders of record on the last Business Day of each month will be
entitled to receive the monthly dividend distribution, which is generally paid
on the 10th Business Day of the following month. If any net capital gains are
realized, they will be distributed by the Portfolios at least annually.
Shareholders automatically receive all income dividends and capital gains
distributions in cash, unless the shareholder has elected to take such payments
in another form. Shareholders may change their election by providing written
notice to the Transfer Agent at least 15 days prior to the change.
Dividends and distributions of a Portfolio are paid on a per-share basis. The
value of each share will be reduced by the amount of any such payment. If shares
are purchased shortly before the record date for a dividend or the distribution
of capital gains, a shareholder will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or distribution.
THE TRANSFER AGENT
DST Systems, Inc., P.O. Box 419448, Kansas City, Missouri 64141-6448 (the
"Transfer Agent") acts as the transfer agent and dividend disbursing agent for
the Portfolios under a transfer agency agreement with the Trust.
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COUNSEL AND INDEPENDENT ACCOUNTANTS
Ballard Spahr Andrews & Ingersoll serves as counsel to the Trust. Deloitte &
Touche LLP serves as independent accountants of the Trust.
CUSTODIAN
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box 7618, Philadelphia,
PA 19101 (the "Custodian"), acts as custodian of the Trust. The Custodian holds
cash, securities and other assets of the Trust as required by the 1940 Act.
DESCRIPTION OF CERTAIN PERMITTED INVESTMENTS
BANKERS' ACCEPTANCES--Bankers' acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank. Bankers' acceptances are used by
corporations to finance the shipment and storage of goods. Maturities are
generally six months or less.
CERTIFICATES OF DEPOSIT--Certificates of deposit are interest bearing
instruments with a specific maturity. They are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market prior to maturity. Certificates of deposit with
penalties for early withdrawal will be considered illiquid.
COMMERCIAL PAPER--Commercial paper is a term used to describe unsecured
short-term promissory notes issued by banks, municipalities, corporations and
other entities. Maturities on these issues vary from a few to 270 days.
CONVERTIBLE SECURITIES--Convertible securities are corporate securities that are
exchangeable for a set number of another security at a prestated price.
Convertible securities typically have characteristics similar to both fixed
income and equity securities. Because of the conversion feature, the market
value of a convertible security tends to move with the market value of the
underlying stock. The value of a convertible security is also affected by
prevailing interest rates, the credit quality of the issuer, and any call
provisions.
COVERED CALL OPTIONS--A call option gives the purchaser of the option the right
to buy, and the writer of the option the obligation to sell, a specified
underlying security at any time during the option period. In a covered call
option, the writer of the option owns a sufficient amount of the underlying
securities to "cover" the option through delivery of the optioned securities
upon exercise of the option. The Equity Fund and Balanced Fund may write covered
call options as a means of increasing the yield of these portfolios and as a
means of providing limited protection against decreases in the market value of
portfolio securities.
EQUITY INDEX MUTUAL FUNDS--Equity index mutual funds are open-end investment
companies that structure their securities investments so that the performance of
the portfolio approximates the performance of a target equity securities index.
EQUITY SECURITIES--Equity securities include common stock, preferred stock and
other securities that are convertible to or grant the right to acquire common
stock or preferred stock.
FIXED INCOME SECURITIES--Fixed income securities are debt obligations bearing a
specified rate of interest during their term that are issued by the United
States government and its agencies and instrumentalities, corporations,
municipalities and other borrowers.
MONEY MARKET FUNDS--Money market funds are open-end investment companies that
are continuously engaged in the issuance of shares. In connection with
management of their daily cash positions, a Portfolio may invest in money market
fund shares having investment objectives and policies consistent with those of
the Portfolio. Investments by a money market fund are subject to limitations
imposed under regulations adopted by the Securities and Exchange Commission.
Under these regulations, money market funds may only acquire obligations that
present minimal credit risk and that are "eligible securities,"
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which means they are (i) rated, at the time of investment, by at least two
nationally recognized security rating organizations (one if it is the only
organization rating such obligation) in the highest rating category or, if
unrated, determined to be of comparable quality (a "first tier security"), or
(ii) rated according to the foregoing criteria in the second highest rating
category or, if unrated, determined to be of comparable quality ("second tier
security"). A security is not considered to be unrated if the issuer has
outstanding obligations of comparable priority and security that have a short-
term rating. In the case of taxable money market funds, investments in second
tier securities are subject to the further constraints in that (i) no more than
5% of a Fund's assets may be invested in second tier securities and (ii) any
investment in securities of any one such issuer is limited to the greater of 1%
of the Fund's total assets or $1 million. A taxable money market fund may also
hold more than 5% of its assets in first tier securities of a single issuer for
three "business days" (that is, any day other than a Saturday, Sunday or
customary business holiday).
MUNICIPAL SECURITIES--Municipal securities consist of (i) debt obligations
issued by or on behalf of public authorities for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, mass transportation, schools, streets and
water and sewer works, the refunding of outstanding obligations, for general
operating expenses, and for lending such funds to other public institutions and
facilities, and (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated facilities.
Municipal securities include both municipal notes and municipal bonds. Municipal
notes include general obligation notes, tax anticipation notes, revenue
anticipation notes, bond anticipation notes, certificates of indebtedness,
demand notes and construction loan notes and participation interests in
municipal notes. Municipal bonds include general obligation bonds, revenue or
special obligation bonds, private activity and industrial development bonds and
participation interests in municipal bonds.
General obligation bonds are backed by the taxing power of the issuing
municipality. Revenue bonds are backed by the revenues of a project or facility
(tolls from a bridge, for example). Certificates of participation represent an
interest in an underlying obligation or commitment, such as an obligation issued
in connection with a leasing arrangement. Private activity bonds are bonds that
are issued by municipalities, the proceeds of which are used in an activity
considered a nonessential government function under the Internal Revenue Code,
which may include activities such as construction and operation of airports,
convention centers, auditoriums, sports facilities, hospitals and mass commuting
facilities. The payment of principal and interest on private activity and
industrial development bonds generally is dependent solely on the ability of a
facility's user to meet its financial obligations and the pledge, if any, of
real and personal property as security for such payment.
Economic, business, or political developments might affect all municipal
securities of a similar type. To the extent that a significant portion of the
Short Term Municipal Bond Fund's or Idaho Municipal Bond Fund's assets are
invested in municipal securities payable from revenue on similar projects, those
Portfolios will be subject to the peculiar risks presented by such projects to a
greater extent than it would be if its assets were not so invested. For example,
certain municipal securities may be obligations of issuers who rely in whole or
in part on ad valorem real property taxes as a source of revenue and legislation
may have the effect of limiting ad valorem taxes on real property or restricting
the ability of taxing entities to increase real property tax revenues. Municipal
securities that are payable only from the revenues derived from a particular
facility, such as a utility or housing project, may be adversely affected by
laws or regulations that make it more difficult for the particular facility to
generate revenues
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sufficient to pay such interest and principal, including laws and regulations
that limit the amount of fees, rates or other charges that may be imposed for
use of the facility or that increase competition among facilities of that type
or that limit or otherwise have the effect of reducing the use of such
facilities generally, thereby reducing the revenues generated by the particular
facility. If the payment of interest and principal on municipal securitie is
insured in whole or in part by a government created fund the municipal
securities may be adversely affected by laws or regulations that restrict the
aggregate insurance proceeds available for payment of principal and interest in
the event of a default on such securities. State and local tax revenues
generally mirror economic conditions and may be adversely affected by regional
or national recessions.
RECEIPTS--Receipts are sold as zero coupon securities which means that they are
sold at a substantial discount and redeemed at face value at their maturity date
without interim cash payments of interest or principal. The amount of this
discount accretes over the life of the security, and such accretion will
constitute the income earned on the security for both accounting and tax
purposes. Because of these features, such securities may be subject to greater
interest rate volatility than interest paying investments.
REPURCHASE AGREEMENTS--Repurchase agreements are agreements by which a Portfolio
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price on an agreed upon date within a number of days
from the date of purchase. The custodian will hold the security as collateral
for the repurchase agreement. A Portfolio bears a risk of loss in the event the
other party defaults on its obligations and the Portfolio is delayed or
prevented from exercising its right to dispose of the collateral or if the
Portfolio realizes a loss on the sale of the collateral. A Portfolio will enter
into repurchase agreements only with financial institutions deemed to present
minimal risk of bankruptcy during the term of the agreement based on established
guidelines. Repurchase agreements are considered loans under the 1940 Act.
STANDBY COMMITMENTS--Securities subject to standby commitments permit the holder
thereof to sell the securities at a fixed price prior to maturity. Securities
subject to a standby commitment may be sold at any time at the current market
price. However, unless the standby commitment was an integral part of the
security as originally issued, it may not be marketable or assignable;
therefore, the standby commitment would only have value to the Portfolio owning
the security to which it relates. In certain cases, a premium may be paid for a
standby commitment, which premium will have the effect of reducing the yield
otherwise payable on the underlying security. The Portfolios will limit standby
commitment transactions to institutions believed to present minimal credit risk.
U.S. GOVERNMENT AGENCIES--U.S. Government agency obligations are obligations
issued or guaranteed by agencies of the U.S. Government, including, among
others, the Federal Farm Credit Bank, the Federal Housing Administration and the
Small Business Administration, and obligations issued or guaranteed by
instrumentalities of the U.S. Government, including, among others, the Federal
Home Loan Mortgage Corporation, the Federal Land Banks and the U.S. Postal
Service. Some of these securities are supported by the full faith and credit of
the U.S. Treasury (e.g., Government National Mortgage Association), others are
supported by the right of the issuer to borrow from the Treasury (e.g., Federal
Farm Credit Bank), while still others are supported only by the credit of the
instrumentality (e.g., Federal National Mortgage Association). Guarantees of
principal by agencies or instrumentalities of the U.S. Government may be a
guarantee of payment at the maturity of the obligation so that in the event of a
default prior to maturity there might not be a market and thus no means of
realizing on the obligation prior to maturity. Guarantees as to the timely
payment of principal and interest do not extend to the value or yield of these
securities nor to the value of the Portfolio's shares.
<PAGE> 34
26
U.S. TREASURY OBLIGATIONS--U.S. Treasury obligations consist of bills, notes and
bonds issued by the U.S. Treasury and separately traded interest and principal
component parts of such obligations that are transferable through the Federal
book-entry system known as Separately Traded Registered Interest and Principal
Securities ("STRIPS").
For additional information regarding permitted investments see "Description of
Permitted Investments" in the Trust's Statement of Additional Information.
<PAGE> 35
27
APPENDIX
DESCRIPTION OF CORPORATE AND MUNICIPAL BOND RATINGS
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degrees.
Debt rated A by S&P 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. 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.
Bonds which are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or an exceptionally
stable, margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. Bonds rated Aa by
Moody's are judged by Moody's to be of high quality by all standards. Together
with bonds rated Aaa, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A by Moody's possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Bonds which are rated Baa by Moody's are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1+, 1, 2 and 3 to indicate the relative degree of safety. Issues rated
A-1+ are those with an "overwhelming degree" of credit protection. Those rated
A-1 reflect a "very strong" degree of safety regarding timely payment. Those
rated A-2 reflect a safety regarding timely payment but not as high as A-1.
Commercial paper issuers rated Prime-1 and Prime-2 by Moody's are judged by
Moody's to be of the two highest quality ratings on the basis of relative
repayment capacity.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating. The following criteria will be used in making that assessment:
Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
<PAGE> 36
28
Source of Payment (the more dependent the issue is on the market for its
refinancing the more likely it will be treated as a note).
The note rating symbol SP-1 reflects very strong or strong capacity to pay
principal and interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) description.
Moody's highest rating for state and municipal and other short-term notes is
MIG-1 and VMIG-1. Short-term municipal securities rated MIG-1 or VMIG-1 are of
the best quality. They have strong protection from established cash flows of
funds for their servicing or from established and broad-based access to the
market for refinancing or both.
<PAGE> 37
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Summary.......................................... 2
Financial Highlights............................. 5
The Trust........................................ 8
Investment Objectives and Policies............... 8
Risk Factors..................................... 13
Investment Limitations........................... 14
Fundamental Policies............................. 15
The Adviser...................................... 15
The Administrator................................ 16
The Distributor.................................. 17
Purchase, Exchange and Redemption of Shares...... 17
Performance...................................... 19
Taxes............................................ 19
General Information.............................. 21
Description of Certain Permitted Investments..... 23
Appendix......................................... 27
</TABLE>
<PAGE> 38
<TABLE>
<S> <C>
[THE ACHIEVEMENT FUNDS LOGO]
THIS FUND IS OFFERED THE ACHIEVEMENT FUNDS
IN CONJUNCTION WITH THE ACHIEVEMENT FUNDS TRUST
THE ACHIEVEMENT FUNDS INSTITUTIONAL
(PORTFOLIOS OF CERTAIN PROSPECTUS
MUTUAL FUNDS) TO AFFORD EQUITY FUND
A CONVENIENT RANGE OF BALANCED FUND
INVESTMENT CHOICES INTERMEDIATE TERM BOND FUND
TO INVESTORS. SHORT TERM BOND FUND
SHORT TERM MUNICIPAL BOND FUND
IDAHO MUNICIPAL BOND FUND
JUNE 1, 1996
DISTRIBUTED BY
SEI FINANCIAL SERVICES COMPANY
680 EAST SWEDESFORD ROAD
WAYNE, PENNSYLVANIA 19087-1658
800-472-0577
ACH-F-003-03
</TABLE>
<PAGE> 39
THE ACHIEVEMENT FUNDS TRUST
-- EQUITY FUND
-- BALANCED FUND
-- INTERMEDIATE TERM BOND FUND
-- SHORT TERM BOND FUND
-- SHORT TERM MUNICIPAL BOND FUND
-- IDAHO MUNICIPAL BOND FUND
THE ACHIEVEMENT FUNDS TRUST (the "Trust") is a mutual fund that offers separate
classes of shares of beneficial interest in the six portfolios listed above (the
"Portfolios"). This Prospectus relates solely to the Retail Class A shares (the
"shares") of the Portfolios, a class of shares designed to offer investors
("shareholders") a convenient means of investing in one or more professionally
managed portfolios of securities through a participating dealer. Each Portfolio
also offers Institutional shares that differ from the Retail Class A shares with
respect to distribution costs, sales charges and dividends.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, INCLUDING ANY OF THE FIRST SECURITY BANKS OR ANY OF
THEIR AFFILIATES OR CORRESPONDENTS. THE TRUST'S SHARES ARE NOT FEDERALLY
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THE SHARES
INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
This Prospectus sets forth concisely the basic information about the Trust and
each Portfolio that a prospective investor should know before investing.
Investors are advised to read this Prospectus and retain it for future
reference. A Statement of Additional Information dated June 1, 1996 has been
filed with the Securities and Exchange Commission (the "SEC") and is available
without charge through the Distributor, SEI Financial Services Company, by
written request addressed to the Distributor at 680 East Swedesford Road, Wayne,
PA 19087-1658 or by calling 1-800-472-0577. The Statement of Additional
Information is incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
JUNE 1, 1996
<PAGE> 40
2
SUMMARY
The Achievement Funds Trust (the "Trust") is an open-end management investment
company which provides a convenient way to invest in professionally managed
portfolios of securities. This Summary provides basic information about the
Retail Class A shares of the Trust's Equity Fund, Balanced Fund, Intermediate
Term Bond Fund, Short Term Bond Fund, Short Term Municipal Bond Fund and Idaho
Municipal Bond Fund (each a "Portfolio," and collectively the "Portfolios").
Each of the Portfolios is diversified, except for the Idaho Municipal Bond Fund,
which is a non-diversified portfolio of securities.
INVESTMENT OBJECTIVES OF THE PORTFOLIOS
The EQUITY FUND seeks to provide long-term capital appreciation with current
income as a secondary consideration in selecting portfolio securities. The
BALANCED FUND seeks to provide a total return (both income and capital
appreciation) consistent with prudent investment risk. The INTERMEDIATE TERM
BOND FUND seeks income consistent with prudent investment risk and maintenance
of appropriate liquidity. The SHORT TERM BOND FUND seeks to preserve principal
value and maintain a high degree of liquidity while providing current income.
The SHORT TERM MUNICIPAL BOND FUND seeks to provide as high a level of current
income that is exempt from Federal income tax as is consistent with preservation
of capital. The IDAHO MUNICIPAL BOND FUND seeks to provide as high a level of
current income exempt from Federal and Idaho state income taxes as is consistent
with the preservation of capital. There is no assurance that any Portfolio will
meet its investment objective. See "INVESTMENT OBJECTIVES AND POLICIES" and
"DESCRIPTION OF CERTAIN PERMITTED INVESTMENTS."
RISK FACTORS INVOLVED WITH AN INVESTMENT IN THE PORTFOLIOS
The net asset value of the shares of the Portfolios will fluctuate with changes
in the prices of their underlying portfolio securities. Values of fixed income
securities and, correspondingly, share prices of Portfolios that invest in such
securities, tend to vary inversely with interest rates and may be affected by
other market and economic factors as well. Common stocks in which the Equity
Fund and the Balanced Fund invest may be more volatile and may fluctuate in
value more than other types of investments. The Idaho Municipal Bond Fund is a
non-diversified portfolio that invests primarily in Idaho Municipal Securities.
There are other risks associated with the ownership of shares of a mutual fund.
See "RISK FACTORS" and "DESCRIPTION OF CERTAIN PERMITTED INVESTMENTS."
THE ADVISER
First Security Investment Management, Inc. serves as investment adviser (the
"Adviser") to the Portfolios. See "THE ADVISER."
THE ADMINISTRATOR
SEI Fund Resources serves as administrator of the Trust. See "THE
ADMINISTRATOR."
THE TRANSFER AGENT
DST Systems, Inc. serves as transfer agent and dividend disbursing agent for the
Trust. See "GENERAL INFORMATION--Transfer Agent."
<PAGE> 41
3
THE DISTRIBUTOR
SEI Financial Services Company serves as distributor of the Trust's shares. See
"THE DISTRIBUTOR."
THE CUSTODIAN
CoreStates Bank, N.A. serves as custodian for the cash, securities and other
assets of the Trust. See "GENERAL INFORMATION--Custodian."
PURCHASE, EXCHANGE OR REDEMPTION OF SHARES
Purchases, exchanges or redemptions of shares may be made on any day on which
the New York Stock Exchange is open for business (a "Business Day"). A purchase,
exchange or redemption order may be placed through a financial institution or a
broker dealer that has established a dealer agreement with the Distributor, or
directly with the Transfer Agent.
The Distributor has entered into an agreement with First Security Investor
Services, Inc. ("FSIS") authorizing FSIS to sell Portfolio shares as a
participating dealer. Representatives of FSIS may be contacted at:
First Security Investor Services
61 South Main Street
Salt Lake City, Utah 84111
(800) 574-6609
A purchase, exchange or redemption order will be executed at a per share price
equal to the net asset value per share next determined after the receipt of the
purchase, exchange or redemption order. Orders must be placed prior to 4:00 p.m.
Eastern time for the order to be effective on that day. The minimum initial
investment is $1,000, which minimum amount may be waived by the Distributor. The
minimum amount for subsequent purchases of shares is $100. Net asset value is
determined as of the close of trading on the New York Stock Exchange (currently
4:00 p.m. Eastern time) on each Business Day. See "PURCHASE AND REDEMPTION OF
SHARES."
PAYMENT OF DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) of
each Portfolio is distributed in the form of periodic dividends. Any net capital
gain is distributed at least annually. Distributions are paid in the form of
additional shares of the Portfolio making such distributions, unless the
shareholder elects to take payment in another form. See "GENERAL
INFORMATION--Dividends."
<PAGE> 42
4
ANNUAL OPERATING EXPENSES
(as a % of net assets)
The following table summarizes the expenses incurred by the Portfolios based on
the Trust's most recent fiscal year.
<TABLE>
<CAPTION>
SHORT IDAHO
INTERMEDIATE TERM MUNICIPAL
EQUITY BALANCED TERM SHORT TERM MUNICIPAL BOND
FUND FUND BOND FUND BOND FUND BOND FUND FUND
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum sales load imposed on purchase of shares
(as a % of the offering price).................. 4.50% 4.50% 3.50% 1.50% 1.50% 4.00%
ESTIMATED ANNUAL OPERATING EXPENSES
(AS A % OF NET ASSETS)
Management Fees (after waivers)(2)................ .51% .51% .34% .37% .17% .17%
12b-1 Fees........................................ .25% .25% .25% .25% .25% .25%
Other Expenses(3)................................. .39% .39% .41% .38% .58% .58%
- ------------------------------------------------------------------------------------------------------------------
Total Fund Operating Expenses
(after waivers)(4).............................. 1.15% 1.15% 1.00% 1.00% 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Although no fee is imposed in connection with share redemptions, a $15 fee
will be charged in connection with a wire transfer of redemption proceeds.
(2) The Trust's investment adviser (the "Adviser") has agreed to waive, on a
voluntary basis, a portion of its fee, and the management fee shown reflects
that voluntary waiver. The Adviser reserves the right to terminate its fee
waiver at any time at its sole discretion without notice to current or
prospective shareholders. Absent such fee waiver, the management fee would
be 0.74% for the Equity Fund and the Balanced Fund, and 0.60% for the
Intermediate Term Bond Fund, the Short Term Bond Fund, the Short Term
Municipal Bond Fund and the Idaho Municipal Bond Fund.
(3) Other Expenses of the Portfolios include all expenses except nonrecurring
account fees, brokerage commissions and other capital items, and management
fees. The Trust's administrator (the "Administrator") has agreed to waive,
on a voluntary basis, a portion of its fee for the Short Term Municipal Bond
Fund and the Idaho Municipal Bond Fund, and the administration fee shown for
those Portfolios reflects that voluntary waiver. The Administrator reserves
the right to terminate its fee waiver at any time at its sole discretion
without notice to current or prospective shareholders. Absent such fee
waiver, the annual administration fee would be the greater of 0.20% of net
assets or $100,000 for the Short Term Bond Fund and the Idaho Municipal Bond
Fund.
(4) Absent the voluntary fee waivers described above, total estimated operating
expenses for the Retail Class A shares of the Portfolios would be as
follows: the Equity Fund--1.38%; the Balanced Fund--1.38%; the Intermediate
Term Bond Fund--1.26%; the Short Term Bond Fund--1.23%; the Short Term
Municipal Bond Fund--1.55%; the Idaho Municipal Bond Fund--1.60%.
EXAMPLE
The following example assumes that all dividends and distributions are
reinvested and that the percentage totals listed under "Annual Operating
Expenses" remain the same in the years shown. THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor would pay the following expenses (which include sales charges) on a $1,000 investment, assuming a 5% annual
return and redemption at the end of each time period:
Equity Fund............................................................. $56 $ 80 $105 $ 178
Balanced Fund........................................................... 56 80 105 178
Intermediate Term Bond Fund............................................. 45 66 88 153
Short Term Bond Fund.................................................... 25 46 69 136
Short Term Municipal Bond Fund.......................................... 25 46 69 136
Idaho Municipal Bond Fund............................................... 50 71 93 158
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
The Annual Operating Expenses and Example presented above are designed to assist
an investor in understanding the various costs and expenses that an investor in
a Portfolio will bear directly or indirectly. For more complete descriptions of
the various costs and expenses, see "THE ADVISER" and "THE DISTRIBUTOR" in this
Prospectus. The information set forth in the Annual Operating Expenses and
Example relates only to the Retail Class A shares. Each Portfolio also offers
Institutional shares which are subject to the same expenses except that
Institutional shares do not bear certain distribution costs or sales charges.
<PAGE> 43
5
FINANCIAL HIGHLIGHTS
Shown below are per share data, ratios and supplemental data for the Trust's
fiscal year ended January 31, 1996. The financial information, for a share
outstanding for the year ended January 31, 1996, has been audited by Deloitte &
Touche LLP, independent accountants, whose report thereon was unqualified. This
information should be read in conjunction with the Trust's financial statements
and notes thereto, which are included in its Statement of Additional
Information. The Trust's financial statements for the year ended January 31,
1996, also appear, along with the report of Deloitte & Touche LLP, in the
Trust's 1996 Annual Report to shareholders. Additional performance information
is set forth in the 1996 Annual Report to shareholders and is available upon
request and without charge by calling 1-800-472-0577.
For a Share Outstanding Throughout the Year or Period
<TABLE>
<CAPTION>
EQUITY BALANCED
FUND FUND
------------ ------------
FOR THE FOR THE
PERIOD ENDED PERIOD ENDED
JANUARY 31, JANUARY 31,
1996(1)** 1996(1)**
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period................................................. $10.52 $10.34
- ------------------------------------------------------------------------------------------------------------------
Net Investment Income................................................................ 0.14 0.32
- ------------------------------------------------------------------------------------------------------------------
Dividends from Net Investment Income................................................. (0.15) (0.31)
- ------------------------------------------------------------------------------------------------------------------
Distributions from Capital Gains..................................................... (0.72) (0.42)
- ------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gains on Investments......................................... 2.86 1.85
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period....................................................... $12.65 $11.78
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Total Return+........................................................................ 32.34% 23.88%
- ------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000)...................................................... $1,769 $1,664
Ratio of Expenses to Average Net Assets.............................................. 1.15% 1.15%
Ratio of Expenses to Average Net Assets (Excluding Waivers).......................... 1.37% 1.38%
Ratio of Net Income to Average Net Assets............................................ 0.99% 3.06%
Ratio of Net Income to Average Net Assets (Excluding Waivers)........................ 0.77% 2.83%
Portfolio Turnover Rate.............................................................. 103.85% 59.74%
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
** Ratios and returns for the period have been annualized.
+ Returns do not reflect any sales load that may be applicable.
(1) Commenced operations on March 6, 1995.
</TABLE>
<PAGE> 44
6
<TABLE>
<CAPTION>
INTERMEDIATE SHORT
TERM TERM
BOND FUND BOND FUND
------------ ------------
FOR THE FOR THE
PERIOD ENDED PERIOD ENDED
JANUARY 31, JANUARY 31,
1996(1)** 1996(1)**
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period................................................. $10.16 $10.03
- ------------------------------------------------------------------------------------------------------------------
Net Investment Income................................................................ 0.56 0.53
- ------------------------------------------------------------------------------------------------------------------
Dividends from Net Investment Income................................................. (0.55) (0.52)
- ------------------------------------------------------------------------------------------------------------------
Distributions from Capital Gains..................................................... -- --
- ------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gains on Investments......................................... 0.65 0.14
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period....................................................... $10.82 $10.18
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Total Return+........................................................................ 13.49% 7.55%
- ------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000)...................................................... $ 963 $ 39
Ratio of Expenses to Average Net Assets.............................................. 1.00% 1.00%
Ratio of Expenses to Average Net Assets (Excluding Waivers).......................... 1.26% 1.23%
Ratio of Net Income to Average Net Assets............................................ 5.74% 5.75%
Ratio of Net Income to Average Net Assets (Excluding Waivers)........................ 5.48% 5.52%
Portfolio Turnover Rate.............................................................. 85.16% 83.64%
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S>
** Ratios and returns for the period have been annualized.
+ Returns do not reflect any sales load that may be applicable.
(1) Commenced operations on March 6, 1995.
</TABLE>
<PAGE> 45
7
<TABLE>
<CAPTION>
SHORT TERM IDAHO
MUNICIPAL MUNICIPAL
BOND FUND BOND FUND
------------ ------------
FOR THE FOR THE
PERIOD ENDED PERIOD ENDED
JANUARY 31, JANUARY 31,
1996(1)** 1996(1)**
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period................................................. $10.01 $10.21
- ------------------------------------------------------------------------------------------------------------------
Net Investment Income................................................................ 0.33 0.41
- ------------------------------------------------------------------------------------------------------------------
Dividends from Net Investment Income................................................. (0.33) (0.40)
- ------------------------------------------------------------------------------------------------------------------
Distributions from Capital Gains..................................................... (0.05) (0.12)
- ------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gains on Investments......................................... 0.29 0.73
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period....................................................... $10.25 $10.83
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Total Return+........................................................................ 6.99% 12.60%
- ------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000)...................................................... $ 212 $3,109
Ratio of Expenses to Average Net Assets.............................................. 1.00% 1.00%
Ratio of Expenses to Average Net Assets (Excluding Waivers).......................... 1.54% 1.58%
Ratio of Net Income to Average Net Assets............................................ 3.49% 4.18%
Ratio of Net Income to Average Net Assets (Excluding Waivers)........................ 2.95% 3.60%
Portfolio Turnover Rate.............................................................. 114.09% 58.94%
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
** Ratios and returns for the period have been annualized.
+ Returns do not reflect any sales load that may be applicable.
(1) Commenced operations on March 6, 1995.
</TABLE>
<PAGE> 46
8
THE TRUST
THE ACHIEVEMENT FUNDS TRUST (the "Trust") is an open-end series management
investment company that offers shares of beneficial interest in separate
investment portfolios. Each Portfolio has two separate classes of shares,
Institutional and Retail Class A, which differ with respect to distribution
costs, sales charges and dividends. This Prospectus offers the Retail Class A
shares (the "shares") of the Trust's Equity Fund, Balanced Fund, Intermediate
Term Bond Fund, Short Term Bond Fund, Short Term Municipal Bond Fund and Idaho
Municipal Bond Fund. Institutional shares of the Portfolios are only available
for purchase by financial institutions investing their own funds or funds for
which they act in a fiduciary, agency or custodial capacity. Each of the
Portfolios is diversified, except for the Idaho Municipal Bond Fund which is a
non-diversified portfolio. The Trust has also authorized the issuance of shares
of beneficial interest in an additional portfolio designated the Municipal Bond
Fund, but the Trust has not commenced a public offering of those shares.
Additional information pertaining to the Trust may be obtained by writing to SEI
Financial Services Company, 680 East Swedesford Road, Wayne, PA 19087 or by
calling 1-800-472-0577.
INVESTMENT OBJECTIVES AND POLICIES
EQUITY FUND
INVESTMENT OBJECTIVE
The Equity Fund seeks to provide long-term capital appreciation with current
income as a secondary consideration in selecting portfolio securities.
INVESTMENT POLICIES
Under normal market conditions, the Equity Fund invests in a diversified
portfolio of common stocks (including American Depository Receipts ("ADRs") and
securities convertible into or exchangeable for common stock) traded on U.S.
national securities exchanges (including NASDAQ). The Adviser selects securities
for this Portfolio using an investment strategy often characterized as "Growth
at a Price." Under this strategy, the Adviser purchases for the Equity Fund
securities of companies that have experienced growth in earnings provided that
the securities appear attractively priced based on proprietary valuation
methods. Generally, the Equity Fund will purchase securities of companies with
mid to large size market capitalization (over $100 million). If the Trust's
Adviser believes, however, that the securities of a company with a smaller
market capitalization have an attractive value, it may purchase such securities
for the Portfolio. Under normal conditions, the Equity Fund will invest at least
80% of its total assets in common stocks. The Equity Fund will not invest more
than 20% of its total assets in securities convertible into or exchangeable for
common stock. The Equity Fund may invest only in convertible debentures that
have received a rating of A or higher by Standard & Poor's Corporation ("S&P")
or A or higher by Moody's Investors Service ("Moody's") or are determined to be
of comparable quality by the Adviser at time of purchase.
The Equity Fund may purchase securities on a "when-issued" basis, may engage in
securities repurchase transactions and may borrow money in aggregate amounts not
in excess of 5% of its total assets. The Equity Fund may also write (sell)
covered call options.
In addition, under normal market conditions, the Equity Fund may invest up to
10% of its total assets in money market and U.S. equity index mutual funds.
For additional information regarding risks and permitted investments of the
Equity Fund, see "RISK FACTORS" and "DESCRIPTION OF CERTAIN PERMITTED
INVESTMENTS." For a description of ratings, see the "APPENDIX."
<PAGE> 47
9
BALANCED FUND
INVESTMENT OBJECTIVE
The Balanced Fund seeks to provide total return (both income and capital
appreciation) consistent with prudent investment risk.
INVESTMENT POLICIES
The Balanced Fund invests in a combination of equity and fixed income securities
and money market instruments. The Portfolio seeks total return in all market
conditions, with a special emphasis on minimizing declines in net asset value
during falling equity markets. The Balanced Fund invests primarily in equity
securities, intermediate maturity fixed income securities and money market
instruments.
Under normal market conditions, the Balanced Fund invests between 30-70% of its
total assets in a diversified portfolio of common stocks (including ADRs and
securities convertible into or exchangeable for common stock) traded on U.S.
national securities exchanges (including NASDAQ). The Adviser selects securities
for the Portfolio using an investment strategy often characterized as "Growth at
a Price." Under this strategy, the Adviser purchases for the Balanced Fund
securities of companies that have experienced growth in earnings provided that
the securities appear attractively priced based on proprietary valuation
methods. Generally, the Balanced Fund will purchase securities of companies with
mid to large size market capitalization (over $100 million). If the Adviser
believes, however, that the securities of a company with a smaller market
capitalization have an attractive value, it may purchase such securities for the
Portfolio. The Balanced Fund will not invest more than 20% of its total assets
in securities convertible into or exchangeable for common stock. The Portfolio
may invest only in convertible debentures that have received a rating of A or
higher by S&P or by Moody's or are determined to be of comparable quality by the
Adviser at time of purchase. It is currently anticipated that the Balanced Fund
will invest on the average over time approximately 60% of its total assets in
the foregoing types of securities.
The Balanced Fund will, under normal market conditions, invest a minimum of 25%
of its total assets in fixed income securities, obligations issued by the U.S.
Government and its agencies and instrumentalities, zero coupon receipts
involving U.S. Treasury obligations and corporate bonds and debentures,
asset-backed securities, floating or variable rate corporate notes and Yankee
Bonds. The Portfolio may also invest in mortgage-backed securities (including
collateralized mortgage obligations), which are securities issued by government
sponsored entities, such as the Government National Mortgage Association, or by
private issuers that entitle the holder to a share of all interest and principal
payments from a pool of mortgage loans underlying the security. All of the
foregoing investment securities will be rated A or higher by S&P or by Moody's
at the time of purchase or determined to be of comparable quality by the Adviser
at the time of purchase. In the event the credit quality of these securities
declines below the applicable criteria, the Adviser may consider selling such
securities. The Balanced Fund's investments in mortgage-backed securities,
asset-backed securities, floating or variable rate corporate notes and Yankee
Bonds will not exceed 20% of the Portfolio's total assets. The fixed income
securities held by the Balanced Fund will have an aggregate average weighted
maturity of three to seven years and individual securities may have a maximum
maturity of twelve years.
In addition, the Balanced Fund may invest in U.S. equity index mutual funds and
in money market instruments, including money market mutual funds, securities
issued or guaranteed by the United States Government and its agencies or
instrumentalities, repurchase agreements, certificates of deposit or bankers'
acceptances issued by domestic banks or savings institutions with assets
exceeding $2.5 billion at the end of their most recent fiscal year and
commercial paper rated, at the time of purchase, in the top two categories by a
national rating agency or
<PAGE> 48
10
determined to be of comparable quality by the Adviser at time of purchase.
The Balanced Fund may purchase securities on a "when-issued" basis, may engage
in securities repurchase transactions and may borrow money in aggregate amounts
not in excess of 5% of its total assets. The Balanced Fund may also write (sell)
covered call options.
For additional information regarding risks and permitted investments of the
Balanced Fund, see "RISK FACTORS" and "DESCRIPTION OF CERTAIN PERMITTED
INVESTMENTS." For a description of ratings, see the "APPENDIX."
INTERMEDIATE TERM BOND FUND
INVESTMENT OBJECTIVE
The Intermediate Term Bond Fund seeks income consistent with prudent investment
risk and maintenance of appropriate liquidity.
INVESTMENT POLICIES
The Intermediate Term Bond Fund's permitted investments consist of the following
debt securities: fixed income securities, obligations issued by the U.S.
Government and its agencies and instrumentalities, zero coupon receipts
involving U.S. Treasury obligations and corporate bonds and debentures,
asset-backed securities, floating or variable rate corporate notes and Yankee
Bonds and debentures. The Portfolio may also invest in mortgage-backed
securities (including collateralized mortgage obligations), which are securities
issued by government sponsored entities, such as the Government National
Mortgage Association, or by private issuers that entitle the holder to a share
of all interest and principal payments from a pool of mortgage loans underlying
the security. All of the foregoing investment securities will be rated A or
higher by S&P or by Moody's at the time of purchase or determined to be of
comparable quality by the Adviser at the time of purchase, and are considered by
the Trust to be bonds. In the event the credit quality of bonds purchased by the
Intermediate Term Bond Fund declines below the applicable criteria, the Adviser
may consider selling such securities. The Portfolio's investments in
mortgage-backed securities, asset-backed securities, floating or variable rate
corporate notes and Yankee Bonds will not exceed 20% of its total assets.
In addition, the Intermediate Term Bond Fund may invest in money market
instruments, including securities issued or guaranteed by the United States
Government and its agencies or instrumentalities, repurchase agreements,
certificates of deposit or bankers' acceptances issued by domestic banks or
savings institutions with assets exceeding $2.5 billion at the end of their most
recent fiscal year and commercial paper rated, at the time of purchase, in the
top two categories by a national rating agency or determined to be of comparable
quality by the Adviser at time of purchase. The Intermediate Term Bond Fund may
also invest up to 10% of its total assets in money market mutual funds.
The Portfolio will have an aggregate average weighted maturity of three to seven
years and individual securities held in the Portfolio may have maximum maturity
of twelve years. By so limiting the maturity of its investments, the Portfolio's
assets are expected to experience less price volatility in response to changes
in interest rates than similar securities with longer maturities.
The Intermediate Term Bond Fund may purchase securities on a "when-issued" basis
and reserves the right to engage in transactions involving standby commitments.
The Intermediate Term Bond Fund may also borrow money in aggregate amounts not
in excess of 5% of its total assets.
For additional information regarding risks and permitted investments of the
Intermediate Term Bond Fund, see "RISK FACTORS" and "DESCRIPTION OF CERTAIN
PERMITTED INVESTMENTS." For a description of ratings, see the "APPENDIX."
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SHORT TERM BOND FUND
INVESTMENT OBJECTIVE
The Short Term Bond Fund seeks to preserve principal value and maintain a high
degree of liquidity while providing current income.
INVESTMENT POLICIES
The Short Term Bond Fund's permitted investments consist of the following debt
securities: fixed income securities, obligations issued by the U.S. Government
and its agencies and instrumentalities, zero coupon receipts involving U.S.
Treasury obligations and corporate bonds and debentures, asset-backed
securities, floating or variable rate corporate notes and Yankee Bonds. The
Portfolio may also invest in mortgage-backed securities (including
collateralized mortgage obligations), which are securities issued by government
sponsored entities, such as the Government National Mortgage Association, or by
private issuers that entitle the holder to a share of all principal and interest
payments from a pool of mortgage loans underlying the security. All of the
foregoing investment securities will be rated A or higher by S&P or by Moody's
at the time of purchase or determined to be of comparable quality by the Adviser
at the time of purchase, and are considered by the Trust to be bonds. In the
event the credit quality of the bonds purchased by the Short Term Bond Fund
declines below the applicable criteria, the Adviser will consider selling such
securities. The Portfolio's investments in mortgage-backed securities,
asset-backed securities, floating or variable rate corporate notes and Yankee
Bonds will not exceed 30% of its total assets.
In addition, the Short Term Bond Fund may invest in money market instruments,
including securities issued or guaranteed by the United States Government and
its agencies or instrumentalities, repurchase agreements, certificates of
deposit or bankers' acceptances issued by domestic banks or savings institutions
with assets exceeding $2.5 billion at the end of their most recent fiscal year
and commercial paper rated, at the time of purchase, in the top two categories
by a national rating agency or determined to be of comparable quality by the
Adviser at the time of purchase. The Short Term Bond Fund may also invest up to
10% of its total assets in money market mutual funds.
The Portfolio will have an aggregate average weighted maturity of not more than
two years and individual securities held in the Portfolio may have a maximum
maturity of three years. By so limiting the maturity of its investments, the
Portfolio's assets are expected to experience less price volatility in response
to changes in interest rates than similar securities with longer maturities.
The Short Term Bond Fund may purchase securities on a "when-issued" basis and
reserves the right to engage in transactions involving standby commitments. In
addition, the Portfolio may borrow money in aggregate amounts not in excess of
5% of its total assets.
For additional information regarding risks and permitted investments of the
Short Term Bond Fund, see "RISK FACTORS" and "DESCRIPTION OF CERTAIN PERMITTED
INVESTMENTS." For a description of ratings, see the "APPENDIX."
SHORT TERM MUNICIPAL BOND FUND
INVESTMENT OBJECTIVE
The Short Term Municipal Bond Fund seeks to provide as high a level of current
income that is exempt from Federal income tax as is consistent with preservation
of capital.
INVESTMENT POLICIES
Under normal market conditions, the Short Term Municipal Bond Fund will invest
at least 80% and up to 100% of its assets in municipal securities the interest
on which is exempt from Federal income taxes, based on opinions from bond
counsel for the issuers. This investment policy is a fundamental
<PAGE> 50
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policy of the Short Term Municipal Bond Fund. The issuers of these securities
can be located in all fifty states, the District of Columbia, Puerto Rico and
other U.S. territories and possessions. The Short Term Municipal Bond Fund will
not invest in securities the interest on which is a preference item for purposes
of the alternative minimum tax. The Portfolio will generally maintain a
dollar-weighted average portfolio maturity of no more than three years and an
individual security maturity of no more than four years.
The Short Term Municipal Bond Fund may purchase the following types of municipal
securities, but only if such securities, at the time of purchase, have the
requisite ratings set forth below or are of comparable quality as determined by
the Adviser: (i) municipal bonds rated A or better by S&P or Moody's; (ii)
municipal notes rated at least SP-1 by S&P or MIG-1 or VMIG-1 by Moody's; and
(iii) tax-exempt commercial paper rated at least A-1 by S&P or Prime-1 by
Moody's. In the event the credit quality of municipal securities owned by the
Portfolio declines below the applicable criteria outlined above the Adviser may
consider selling such securities. The Short Term Municipal Bond Fund may also
purchase other types of tax exempt instruments as long as they are of a quality
equivalent to the bond, note or commercial paper ratings stated above, and may
invest up to 10% of its total assets in tax-exempt money market mutual funds.
The Short Term Municipal Bond Fund may invest in variable and floating rate
obligations, may purchase securities on a "when-issued" basis, and reserves the
right to engage in transactions involving standby commitments. The Portfolio may
also borrow money in aggregate amounts not in excess of 5% of its total assets.
For additional information regarding risks and permitted investments of the
Short Term Municipal Bond Fund, see "RISK FACTORS" and "DESCRIPTION OF CERTAIN
PERMITTED INVESTMENTS." For a description of ratings, see the "APPENDIX."
IDAHO MUNICIPAL BOND FUND
INVESTMENT OBJECTIVE
The Idaho Municipal Bond Fund seeks to provide as high a level of current income
exempt from Federal and Idaho state income taxes as is consistent with
preservation of capital.
INVESTMENT POLICIES
The Idaho Municipal Bond Fund will invest at least 65% of its total assets in
municipal securities the interest on which is exempt from Federal and Idaho
state income taxes, based upon opinions from bond counsel for the issuers. This
investment policy is a fundamental policy of the Portfolio. The Idaho Municipal
Bond Fund may purchase the following types of municipal securities of issuers
located in Idaho, but only if such securities, at the time of purchase, have the
requisite ratings set forth below or are of comparable quality as determined by
the Adviser at the time of purchase: (i) municipal bonds rated A or better by
S&P or Moody's; (ii) municipal notes rated at least SP-1 by S&P or MIG-1 or
VMIG-1 by Moody's; and (iii) tax-exempt commercial paper rated at least A-1 by
S&P or Prime-1 by Moody's. The Adviser will consider selling municipal
securities owned by the Portfolio for which credit quality declines below the
applicable criteria outlined above.
Under normal market conditions, the Idaho Municipal Bond Fund will invest at
least 80% of its total assets in securities the interest on which is not a
preference item for purposes of the alternative minimum tax. In addition, up to
20% of the Portfolio's total assets may be invested in tax-exempt money market
funds and other municipal securities, the interest on which is exempt from
Federal income taxes, but not from Idaho income tax, based upon opinions from
bond counsel for the issuers. Such investments will be of the same credit
quality discussed above. The weighted average maturity of the Portfolio's
securities will be twelve years or less.
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13
The Idaho Municipal Bond Fund may invest in variable and floating rate
obligations, may purchase securities on a "when-issued" basis, and reserves the
right to engage in transactions involving standby commitments. The Portfolio may
also borrow money in aggregate amounts not in excess of 5% of its total assets.
For additional information regarding risks and permitted investments of the
Idaho Municipal Bond Fund, see "RISK FACTORS" and "DESCRIPTION OF CERTAIN
PERMITTED INVESTMENTS." For a description of ratings, see the "APPENDIX."
GENERAL INVESTMENT POLICIES
For temporary defensive purposes when the Adviser determines that market
conditions warrant, (i) the Equity Fund, the Balanced Fund, the Intermediate
Term Bond Fund and the Short Term Bond Fund each may invest up to 100% of its
assets in money market instruments consisting of securities issued or guaranteed
by the United States Government, its agencies or instrumentalities, repurchase
agreements, certificates of deposit and bankers' acceptances issued by domestic
banks or savings and loan associations having net assets of at least $2.5
billion as of the end of their most recent fiscal year, and commercial paper
rated, at the time of purchase, in the top two categories by a national rating
agency or determined to be of comparable quality by the Adviser at the time of
purchase, and other long- and short-term debt instruments which are rated A or
higher by S&P or Moody's at the time of purchase, and may hold a portion of its
assets in cash reserves, and (ii) the Short Term Municipal Bond Fund and Idaho
Municipal Bond Fund may each invest up to 100% of its assets in tax-exempt money
market mutual funds and may hold a portion of its assets in cash reserves. To
the extent that any Portfolio is engaged in temporary defensive investments, it
will not be pursuing its investment objective.
The Advisor expects that under normal circumstances the annual turnover rate for
the investments of the Portfolios will be less then 100%. However, the annual
turnover rate of the investments of the Equity Fund and the Short Term Municipal
Bond Fund was in excess of 100% for the fiscal year ended January 31, 1996. That
rate of portfolio turnover will result in higher transaction costs for, and may
result in additional taxes for shareholders of, those Portfolios. See "Taxes."
In placing orders for the execution of transactions in portfolio securities, it
is the Trust's policy to obtain the best net results taking into account such
factors as price, size, type and difficulty of the transaction involved, a
brokerage firm's general execution and operational facilities and the firm's
risk in positioning the securities involved. The Portfolios may execute
brokerage or other agency transactions through the Distributor or its affiliates
or through affiliates of the Adviser for a commission in conformity with the
Investment Company Act of 1940 (the "1940 Act"), the Securities Exchange Act of
1934 and rules of the SEC. The Trust will not purchase portfolio securities from
any affiliated person acting as a principal except in conformity with the
regulations of the SEC.
RISK FACTORS
EQUITY SECURITIES (EQUITY FUND AND BALANCED FUND)--Investments in common stocks
are subject to market risks which may cause their prices to fluctuate.
Accordingly, the Equity Fund and the Balanced Fund may be more suitable for
long-term investors who can bear the risk of short-term fluctuations. Changes in
the value of portfolio securities will not necessarily affect cash income
derived from those securities but will affect the net asset value of a
Portfolio's shares.
FIXED INCOME SECURITIES (BALANCED FUND, INTERMEDIATE TERM BOND FUND, SHORT TERM
BOND FUND, SHORT TERM MUNICIPAL BOND FUND AND IDAHO MUNICIPAL BOND FUND)--The
market value of fixed income securities will change in response to interest rate
changes and other factors. During periods of falling interest rates, the value
of outstanding fixed income securities generally rises. Conversely, during
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14
periods of rising interest rates, the value of such securities generally
declines. Moreover, while securities with longer maturities tend to produce
higher yields, the prices of longer maturity securities are also subject to
greater market fluctuations as a result of changes in interest rates. Changes by
recognized agencies in the credit rating of any fixed income security and in the
ability of an issuer to make payments of interest and principal also affect the
value of these investments. Changes in the value of portfolio securities will
not necessarily affect cash income derived from those securities but will affect
the net asset value of a Portfolio's shares.
NON-DIVERSIFICATION (IDAHO MUNICIPAL BOND FUND)--Investment in the Idaho
Municipal Bond Fund, a non-diversified mutual fund, may entail greater risk than
would investment in a diversified investment company because the concentration
in securities of relatively few issuers could result in greater fluctuation in
the total market value of this Portfolio's holdings. Any economic, political or
regulatory developments affecting the value of the securities the Idaho
Municipal Bond Fund holds could have a greater impact on the total value of its
holdings than would be the case if the securities were diversified among more
issuers. The Idaho Municipal Bond Fund intends to comply with the
diversification requirements of Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). In accordance with these requirements, the Idaho
Municipal Bond Fund will not invest more than 5% of its total assets in any one
issuer; this limitation applies to 50% of its total assets.
COVERED CALL OPTIONS (EQUITY FUND AND BALANCED FUND)--Risks associated with
covered call option transactions include: (1) the success of a hedging strategy
may depend on an ability to predict movements in the prices of individual
securities, fluctuations in markets and movements in interest rates; (2) there
may be an imperfect correlation between the movement in prices of options and
the securities underlying them; (3) there may not be a liquid secondary market
for options; and (4) while the Portfolios will receive a premium when it writes
covered call options, they may not participate fully in a rise in the market
value of the underlying security.
IDAHO RISK FACTORS (IDAHO MUNICIPAL BOND FUND)--Certain risks are inherent in
the Idaho Municipal Bond Fund's investments in Idaho municipal securities. The
State of Idaho currently has no outstanding general obligation debt. In the
past, tax anticipation notes have been issued by the State of Idaho that are
backed by the full faith and credit of the State of Idaho. Other securities
issued by Idaho state agencies are secured only by a pledge of revenues
generated by investment of bond proceeds in assets such as low-income housing
loans or loans for the construction of hospital facilities, and of reserve funds
and other funds created from bond proceeds. Timely payment of general obligation
bonds issued by political subdivisions of the State of Idaho is dependent upon
the ability of those entities to collect anticipated tax revenues, which may be
affected by general economic conditions and political changes. Timely payment of
revenue bonds issued by political subdivisions of the State of Idaho is
dependent upon collection of revenues from investments made with bond proceeds.
A more complete description of risks associated with Idaho municipal securities
is contained in the Statement of Additional Information.
OTHER PERMITTED INVESTMENTS--Certain of the other investments permitted for the
Portfolios pose special risks in addition to those risks described above. See
"DESCRIPTION OF CERTAIN PERMITTED INVESTMENTS--Repurchase Agreements," and
"--Standby Commitments," in this Prospectus and the description of permitted
investments in the Statement of Additional Information.
THERE IS NO ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS INVESTMENT OBJECTIVE.
INVESTMENT LIMITATIONS
No Portfolio may:
1. With respect to 75% of its total assets, purchase the securities of any
issuer (other than securities
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15
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities) if, as a result, (a) more than 5% of the Portfolio's total
assets would be invested in the securities of such issuer, or (b) the Portfolio
would hold more than 10% of the outstanding securities of that issuer, except
that this limitation shall not be applicable to the Idaho Municipal Bond Fund.
2. Purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agents or instrumentalities),
if, as a result, more than 25% of the total assets of the Portfolio would be
invested in the securities of one or more companies whose principal business
activities are in the same industry.
3. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding 5% of the value of the total assets of the Portfolio. All
borrowings will be repaid before making additional investments and any interest
paid on such borrowings will reduce the income of the Portfolio.
The foregoing percentage limitations will apply at the time of the purchase of a
security or the time that money is borrowed. Additional investment limitations
are set forth in the Statement of Additional Information.
FUNDAMENTAL POLICIES
The investment objectives and investment limitations stated above are
fundamental policies of the Portfolios. Fundamental policies cannot be changed
with respect to a Portfolio without the consent of the holders of a majority of
that Portfolio's outstanding shares. The term "majority of the outstanding
shares" of a Portfolio as used in this Prospectus means the vote of (i) 67% or
more of the Portfolio's shares present at a meeting, if the holders of more than
50% of the outstanding shares of the Portfolio are present or represented by
proxy, or (ii) more than 50% of the Portfolio's outstanding shares, whichever is
less.
THE ADVISER
First Security Investment Management, Inc. ("FSIM" or the "Adviser") serves as
investment adviser to the Portfolios pursuant to an investment advisory
agreement (the "Advisory Agreement") with the Trust. The selection of FSIM to
serve as investment adviser to the Portfolios was approved by the Trustees and
the initial shareholder of each Portfolio. Under the Advisory Agreement, the
Adviser makes the investment decisions for the Portfolios and continuously
reviews, supervises and administers each Portfolio's investment program.
Under the Advisory Agreement, FSIM is entitled to receive a fee for the services
it provides, which is calculated daily and paid monthly, at an annual rate of
0.74% of the average daily net assets of the Equity Fund and the Balanced Fund,
and at an annual rate of 0.60% of the average daily net assets of the
Intermediate Term Bond Fund, the Short Term Bond Fund, the Short Term Municipal
Bond Fund and the Idaho Municipal Bond Fund. The Adviser has voluntarily waived
a portion of its fee for the Trust's current fiscal year so that total operating
expenses for the Equity Fund and the Balanced Fund (excluding 12b-1 fees) will
not exceed 0.90% and the total operating expenses for the Intermediate Term Bond
Fund, the Short Term Bond Fund, the Short Term Municipal Bond Fund and Idaho
Municipal Bond Fund (excluding 12b-1 fees) will not exceed 0.75%. The Adviser
may revoke its fee waivers at any time at its sole discretion without notice to
any current or prospective shareholder. For the fiscal year ended January 31,
1996, the Adviser received advisory fees in amounts equal to the following
annual percentage rates applied to the average daily net assets of the
Portfolios indicated: 0.51% for the Equity Fund; 0.51% for the Balanced Fund;
0.34% for the Intermediate Term Bond Fund; 0.37% for the Short Term Bond Fund;
0.17% for the Short Term Municipal Bond Fund; and 0.17% for the Idaho Municipal
Bond Fund.
FSIM, incorporated in August 1984, is a wholly-owned, indirect subsidiary of
First Security Corporation, a financial services organization and
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16
registered bank holding company with headquarters in Utah. In addition to
advising the Portfolios, FSIM's advisory experience includes the management of
various collective and common investment funds and the provision of investment
management services to another investment company, banks and thrift
institutions, corporate and profit-sharing trusts, Taft-Hartley organizations,
municipal and state retirement funds, charitable foundations, endowments and
individual investors throughout the United States. FSIM had approximately $4.3
billion under management at December 31, 1995. FSIM is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended, and
has offices at 61 South Main Street, Salt Lake City, Utah 84111, at 119 North
9th Street, Boise, Idaho 83730 and at 219 Central Avenue NW, 3rd Floor,
Albuquerque, New Mexico 87102.
The following individuals are responsible for the day-to-day management of the
Portfolios indicated.
EQUITY FUND--Sterling K. Jenson, CFA, is President of the Adviser and has been
responsible for the Equity Fund since inception. He joined the Adviser in 1990
as a Vice President and Senior Portfolio Manager, and has managed the First
Security Common Stock Fund and EB Common Stock Fund since December, 1994.
BALANCED FUND--Curtis J. Anderson, CFA, is a Vice President and Senior Portfolio
Manager of the Adviser and has been responsible for the Balanced Fund since
inception. He joined the Adviser in 1991 as an Assistant Vice President and
Portfolio Manager. Prior to joining the Adviser, Mr. Anderson served as a Trust
Investment Officer with West One Trust Company from 1989 to 1991.
INTERMEDIATE TERM BOND FUND AND SHORT TERM BOND FUND--Mark L. Anderson is a Vice
President and Senior Portfolio Manager of the Adviser and has been responsible
for the Intermediate Term Bond Fund and Short Term Bond Fund since inception.
Mr. Anderson joined the Adviser in 1984 and has managed bond, money market,
balanced and equity portfolios since that time.
SHORT TERM MUNICIPAL BOND FUND AND IDAHO MUNICIPAL BOND FUND--James A. Schuck is
a Vice President and Senior Portfolio Manager of the Adviser and has been
responsible for the Short Term Municipal Bond Fund and Idaho Municipal Bond Fund
since inception. Mr. Schuck has been a Vice President and Senior Portfolio
Manager of the Adviser since 1984 and has managed collective investment funds
with investment objectives similar to those of the Short Term Municipal Bond
Fund and the Idaho Municipal Bond Fund since that time.
Banking laws and regulations, including the Glass-Steagall Act as currently
interpreted by the Board of Governors of the Federal Reserve System, prohibit a
bank holding company registered under the Bank Holding Company Act of 1956 or
any affiliate thereof from sponsoring, organizing, controlling, or distributing
the shares of a registered, open-end investment company continuously engaged in
the issuance of its shares, and prohibit banks generally from issuing,
underwriting, selling or distributing securities, but do not prohibit such a
bank holding company or affiliate from acting as investment adviser, transfer
agent, or custodian to such an investment company, or from purchasing shares of
such a company as agent for and upon the order of a customer, or from performing
any combination of such services. FSIM and the Trust believe that FSIM may
perform the advisory services for the Trust described in this Prospectus.
However, future changes in legal requirements relating to the permissible
activities of banks and their affiliates, as well as future interpretations of
present requirements, could prevent FSIM from continuing to perform investment
advisory services for the Trust.
If FSIM or any other service providers were prohibited from performing services
for the Trust, it is expected that the Board of Trustees of the Trust would
recommend to the Trust's shareholders that they approve new agreements with
another entity or
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entities qualified to perform such services and selected by the Board.
THE ADMINISTRATOR
SEI Fund Resources, 680 East Swedesford Road, Wayne, PA 19087, a wholly-owned
subsidiary of SEI Financial Management Corporation, a wholly-owned subsidiary of
SEI Corporation ("SEI"), provides the Trust with administrative services (other
than investment advisory services), accounting services, regulatory reporting,
all necessary office space, equipment, personnel and facilities, pursuant to an
administration agreement with the Trust (the "Administration Agreement"). For
these services, the Administrator is entitled to a fee from the Equity Fund, the
Balanced Fund, the Intermediate Term Bond Fund and the Short Term Bond Fund in
an amount which is calculated at an annual rate of 0.20% of their average daily
net assets. The Administrator is entitled to a fee from the Short Term Municipal
Bond Fund and the Idaho Municipal Bond Fund in an amount equal to the greater of
0.20% of their daily net assets or $100,000 per annum. The Administrator has
voluntarily agreed to waive a portion of its fee for the Short Term Municipal
Bond Fund and the Idaho Municipal Bond Fund. The Administrator reserves the
right to terminate its fee waiver for the Short Term Municipal Bond Fund and the
Idaho Municipal Bond Fund at any time at its sole discretion and without notice
to any current or prospective shareholder.
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), 680 East Swedesford Road,
Wayne, PA 19087, a wholly-owned subsidiary of SEI, serves as the distributor for
the Portfolios pursuant to a distribution agreement (the "Distribution
Agreement") which applies to Institutional and Retail Class A shares of the
Portfolios. The Trust has adopted a distribution plan for the Retail Class A
shares (the "Retail Plan") of the Portfolios in accordance with the provisions
of Rule 12b-1 under the 1940 Act. The Trust may also execute brokerage or other
agency transactions through the Distributor for which the Distributor may
receive usual and customary compensation. The Trust intends to operate the
Retail Plan in accordance with its terms and with the National Association of
Securities Dealers, Inc. ("NASD") rules concerning sales charges.
The Distribution Agreement and Retail Plan provide for payment to the
Distributor of a total fee in connection with the servicing of shareholder
accounts of the Retail Class A shares, calculated and payable monthly, at the
annual rate of 0.25% of the value of the average daily net assets of such class.
All or any portion of such total fee may be payable as a Shareholder Servicing
Fee, and all or any portion of such total fee may be payable as a Distribution
Fee, as determined from time to time by the Trustees of the Trust. All such fees
are currently designated and payable as a Shareholder Servicing Fee.
The Shareholder Servicing Fee may be used by the Distributor to provide
compensation for ongoing servicing or maintenance of shareholder accounts with
respect to the Retail Class A class of the Portfolios of the Trust. Compensation
may be paid by the Distributor to persons, including employees of the
Distributor, and institutions who respond to inquiries of holders of Retail
Class A shares regarding their ownership of shares or their accounts with the
Trust or who provide other administrative or accounting services not otherwise
provided by the Adviser, transfer agent or other agent of the Trust.
Payments under the Retail Plan are not tied exclusively to the expenses for
shareholder servicing activities actually incurred by the Distributor, so that
such payments may exceed expenses actually incurred by the Distributor. The
Trust's Board of Trustees will evaluate the appropriateness of the Retail Plan
and its payment terms on a continuing basis and in doing so will consider all
relevant factors, including expenses borne by the Distributor and amounts it
receives under the plan.
The Trust's Adviser and the Distributor may, at their option and in their sole
discretion, make payments
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from their own resources to cover costs of additional shareholder servicing
activities.
PURCHASE, EXCHANGE AND REDEMPTION OF
SHARES
PARTICIPATING DEALERS
Shares of the Portfolios may be purchased, exchanged or redeemed through a
financial intermediary, such as a brokerdealer, bank or other financial
institution or organization, which has entered into an agreement with the
Distributor to sell shares (a "Participating Dealer"). Persons ("Customers")
wishing to purchase shares, or who wish to exchange or redeem shares already
purchased, should contact their Participating Dealer for information about the
services available to them and for specific instructions on how to purchase,
exchange or redeem shares.
The Distributor has entered into an agreement with First Security Investor
Services, Inc. ("FSIS") authorizing FSIS to sell Portfolio shares as a
Participating Dealer. FSIS representatives may be contacted at:
First Security Investor Services
61 South Main Street
Salt Lake City, Utah 84111
(800) 574-6609
Participating Dealers may impose a cut-off time earlier than those described
below for receipt of purchase, exchange or redemption orders directed through
them to allow for processing and transmittal of those orders to the Transfer
Agent for effectiveness the same day. Shares purchased by Customers through
Participating Dealers may be held of record by the Participating Dealer.
Customers who desire to transfer the registration of shares beneficially owned
by them but held of record by a Participating Dealer should contact their
Participating Dealer to accomplish such change. Depending upon the terms of a
particular Customer account, a Participating Dealer may charge a Customer
account fees. Information concerning these services and any charges should be
obtained by the Customer from the Participating Dealer.
GENERAL INFORMATION ON SHARE PURCHASES
Customers wishing to purchase shares of the Portfolios should contact a
Participating Dealer for information on the services available to them and for
specific instructions on how to purchase shares. The Participating Dealer may
indicate that the Customer may purchase shares by contacting the Transfer Agent
directly by mail or by wire as described below. Existing shareholders may
purchase additional shares through an automatic investment plan or exercise of a
distribution investment option.
The minimum initial investment in the shares is $1,000; however, the minimum
investment may be waived at the Distributor's discretion. All subsequent
purchases must be in amounts of at least $100 (including purchases through
payroll deductions authorized pursuant to pre-approved payroll deduction plans).
Shares may be purchased on days on which the New York Stock Exchange is open for
business ("Business Days"). Orders for the purchase of shares must be received
before 4:00 p.m. Eastern time on any Business Day for the order to be accepted
on that Business Day. The Trust reserves the right to reject a purchase order
when the Distributor determines that it is not in the best interest of the Trust
or shareholders to accept such purchase order.
PURCHASE BY MAIL
A Customer may purchase shares of a Portfolio by completing and signing an
Account Application form and mailing it, along with a check (or other negotiable
bank instrument or money order) payable to "The Achievement Funds Trust,
(Portfolio Name)" to a Participating Dealer, or in some cases to the Transfer
Agent at P.O. Box 419448, Kansas City, Missouri 64141-6448. All purchases made
by check should be in U.S. dollars and made payable to "The Achievement Funds
Trust, (Portfolio Name)." Third party checks, credit card checks and cash will
not be accepted. Orders placed by mail will be executed on receipt of payment by
the Transfer Agent. If a Customer's check does not clear, the purchase will
<PAGE> 57
19
be canceled and the Customer could be liable for any losses or fees incurred.
Account Application forms may be obtained by calling the Distributor at
1-800-472-0577.
PURCHASE BY WIRE
A Customer may purchase shares by wiring funds through the Federal Reserve wire
transfer system ("Fedwire"), provided that an Account Application has been
previously received. Customers purchasing shares by wire should instruct their
bank to transfer funds by wire to: United Missouri Bank of Kansas, N.A.; ABA
#10-10-00695; for Account #98-7060-046-3; further credit [Name of Portfolio].
The wire instructions must include the Customer's name and account number. An
order to purchase shares by wire will be deemed to have been received by the
Trust on the Business Day of the wire, provided that the Customer wires funds to
the Transfer Agent prior to 4:00 p.m. Eastern time. If the Transfer Agent does
not receive the wire by 4:00 p.m. Eastern time, the order will be executed the
next business day.
AUTOMATIC INVESTMENT PLAN
Shares of a Portfolio may be purchased systematically through transfers from
checking or savings accounts maintained by certain banks. Customers may purchase
shares on a fixed schedule (monthly, quarterly, semi-annually or annually) with
a minimum investment amount of $100. The Automatic Investment Plan is subject to
sales charges, minimum purchase amounts and minimum maintained balance
requirements disclosed in "General Information on Share Purchases", "Sales
Charges" and under "Other Information Regarding Redemptions".
DISTRIBUTION INVESTMENT OPTION
If directed by the Customer, distributions of dividends and capital gains made
by a Portfolio may be invested in shares of one of the other Portfolios, if such
shares are available for sale. Investments of distributions in shares of other
Portfolios must meet the applicable initial investment minimum, or be made in an
existing account and meet the applicable additional purchase minimum. Such
investments will not be subject to sales charges. A Customer considering the
Distribution Investment Option should consider the differences in objectives and
policies of another Portfolio before making any investment in such Portfolio.
The Trust reserves the right to terminate this Distribution Investment Option
without further notice to shareholders.
SALES CHARGES
The purchase of shares of a Portfolio is subject to a sales charge which varies
depending on the size of the purchase and which of the Portfolios shares are
being purchased. The following tables show the regular sales charges on
Portfolio shares to a single purchaser, together with the reallowance paid to
dealers and the agency commission paid to brokers (collectively, the
"Commission").
<PAGE> 58
20
EQUITY FUND AND BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REALLOWANCE AND
SALES CHARGE AS SALES CHARGE AS BROKERAGE COMMISSIONS
A PERCENTAGE OF A PERCENTAGE OF AS A PERCENTAGE
AMOUNT OF PURCHASE OFFERING PRICE NET AMOUNT INVESTED OF OFFERING PRICE
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
less than $25,000................... 4.50% 4.71% 4.05%
$25,000 but less than $50,000....... 4.00% 4.17% 3.60%
$50,000 but less than $100,000...... 3.50% 3.63% 3.15%
$100,000 but less than $250,000..... 3.00% 3.09% 2.70%
$250,000 but less than $500,000..... 2.50% 2.56% 2.25%
$500,000 but less than $1,000,000... 2.00% 2.04% 1.80%
$1,000,000 and over(1).............. -- -- --
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REALLOWANCE AND
SALES CHARGE AS SALES CHARGE AS A BROKERAGE COMMISSIONS
A PERCENTAGE OF PERCENTAGE OF AS A PERCENTAGE
AMOUNT OF PURCHASE OFFERING PRICE NET AMOUNT INVESTED OF OFFERING PRICE
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
less than $50,000................... 3.50% 3.63% 3.15%
$50,000 but less than $100,000...... 3.00% 3.09% 2.70%
$100,000 but less than $250,000..... 2.50% 2.56% 2.25%
$250,000 but less than $500,000..... 2.00% 2.04% 1.80%
$500,000 but less than $1,000,000... 1.50% 1.52% 1.35%
$1,000,000 and over(1).............. -- -- --
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT TERM BOND FUND AND SHORT TERM MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REALLOWANCE AND
SALES CHARGE AS SALES CHARGE AS A BROKERAGE COMMISSIONS
A PERCENTAGE OF PERCENTAGE OF AS A PERCENTAGE
AMOUNT OF PURCHASE OFFERING PRICE NET AMOUNT INVESTED OF OFFERING PRICE
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
less than $100,000................. 1.50% 1.52% 1.35%
$100,000 but less than $250,000.... 1.00% 1.01% 0.90%
$250,000 but less than $500,000.... 0.75% 0.76% 0.68%
$500,000 but less then
$1,000,000....................... 0.50% 0.50% 0.45%
$1,000,000 and over(1)............. -- -- --
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IDAHO MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REALLOWANCE AND
SALES CHARGE AS SALES CHARGE AS A BROKERAGE COMMISSIONS
A PERCENTAGE OF PERCENTAGE OF AS A PERCENTAGE
AMOUNT OF PURCHASE OFFERING PRICE NET AMOUNT INVESTED OF OFFERING PRICE
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
less than $50,000.................. 4.00% 4.17% 3.60%
$50,000 but less than $100,000..... 3.50% 3.63% 3.15%
$100,000 but less than $250,000.... 3.00% 3.09% 2.70%
$250,000 but less than $500,000.... 2.50% 2.56% 2.25%
$500,000 but less than
$1,000,000....................... 2.00% 2.04% 1.80%
$1,000,000 and over(1)............. -- -- --
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Although no sales charge is paid by a Customer investing amounts over
$1,000,000, a brokerage commission may be paid in connection with such
transactions.
<PAGE> 59
21
Under certain circumstances, commissions up to the amount of the entire sales
charge may be reallowed to certain investment professionals, who might then be
deemed to be "underwriters" under the Securities Act of 1933, as amended.
REDUCTION OF SALES CHARGE: RIGHT OF ACCUMULATION. In calculating the sales
charge rates applicable to current purchases of a Portfolio's shares, a single
purchaser is entitled to combine current purchases with the current market value
of previously purchased shares of a Portfolio, or previously purchased shares of
the ProVantage class of shares of certain portfolios of the SEI Family of Funds
offered as part of The Achievement Funds, which are sold subject to a comparable
sales charge. See the tables above for the sales charge on quantity purchases.
REDUCTION OF SALES CHARGE: LETTER OF INTENT. Reduced sales charges are also
applicable to the aggregate amount of purchases made by any qualified Customer
within a 13-month period pursuant to a written Letter of Intent provided to the
Distributor that does not legally bind the signer to purchase any set number of
shares and provides for the holding in escrow by the Distributor of 5% of the
amount purchased until such purchase is completed within the 13-month period. A
Letter of Intent may be dated to include shares purchased up to 90 days prior to
the date the Letter of Intent is signed. The 13-month period begins on the date
of the earliest purchase. If the intended investment is not completed, the
Distributor will surrender an appropriate number of the escrowed shares for
redemption in order to recover the difference between the sales charge imposed
under the Letter of Intent and the sales charge that would have otherwise been
imposed.
REINSTATEMENT PRIVILEGE: A shareholder who has redeemed shares of any Portfolio
has a one-time right to reinvest the redemption proceeds in shares of that
Portfolio at net asset value as of the time of reinvestment. Such a reinvestment
must be made within 30 days of the redemption and is limited to the amount of
the redemption proceeds. Although redemptions and repurchases of shares are
taxable events, a reinvestment within such 30-day period in the same fund is
considered a "wash sale" and results in the inability to recognize currently all
or a portion of a loss realized on the original redemption for federal income
tax purposes. The shareholder or his or her Participating Dealer must notify the
Transfer Agent at the time the trade is placed that the transaction is a
reinvestment.
SALES CHARGE WAIVERS: No sales charge is imposed on shares of the Portfolios
(i) issued in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Trust is a party, (ii) sold to dealers or brokers
that have a sales agreement with the Distributor for their own account or for
retirement plans for employees or sold to present employees of dealers or
brokers that certify to the Distributor at the time of purchase that such
purchase is for their own account, (iii) sold to present employees of SEI or one
of its affiliates; (iv) sold to present employees of First Security Corporation
or one of its affiliates; (v) sold to persons participating in certain financial
services programs offered by the bank affiliates of First Security Corporation
and authorized for sales charge waiver by the Distributor; (vi) sold to tax
exempt organizations enumerated in Section 501(c) of the Internal Revenue Code
or qualified employee benefit plans created under Section 401, 403(b)(7) or 457
of the Internal Revenue Code (but not IRAs or SEPs); (vii) sold to Trustees and
officers of the Trust; (viii) purchased with the proceeds from the recent
redemption of shares of another Portfolio as set forth above under Reinstatement
Privilege; (ix) purchased through the exercise of a Distribution Option
described above; and (x) purchased with proceeds from the recent redemption of
shares of a registered open-end management investment company for which a
front-end sales load was paid (deferred sales charges paid upon redemption do
not qualify for this waiver).
The waiver of the sales charge under clause (x) applies only if the following
conditions are met: the purchase must be made within 30 days of the redemption;
the Distributor must be notified in writing
<PAGE> 60
22
by the investor, or his or her agent, at the time the purchase is made; and a
copy of the investor's account statement showing such redemption must accompany
such notice. The waiver policy with respect to the purchase of shares through
the use of proceeds from a recent redemption above may be discontinued at any
time without notice. Investors should contact the Distributor to confirm
continued availability prior to initiating the procedures described above.
OTHER INFORMATION REGARDING PURCHASES
Shares of the Portfolio are sold on a continuous basis and are offered only to
residents of states in which the shares are eligible for purchase. No
certificates representing shares will be issued. The purchase price of shares is
the net asset value next determined after a purchase order is received and
accepted plus the applicable sales charge. The net asset value per share of a
Portfolio is determined by dividing the total value of its investments and other
assets, less any liabilities, by the total outstanding shares of the Portfolio.
The Portfolio's investments will be valued at their last sales price as
described in the Statement of Additional Information. Net asset value per share
is determined daily as of the close of trading on the New York Stock Exchange
(currently 4:00 p.m. Eastern time) on each Business Day.
The Distributor may, from time to time and at its own expense, provide
promotional incentives in the form of cash or other compensation to certain
investment professionals or financial institutions whose registered
representatives have sold or are expected to sell significant amounts of the
shares of the Portfolios. Such other compensation may take the form of payments
for travel expenses, including lodging, incurred in connection with trips taken
by qualifying registered representatives to places within or outside of the
United States.
EXCHANGE PRIVILEGES
Once payment for shares has been received (i.e., an account has been
established), a shareholder may exchange some or all of such shares for Retail
Class A shares of other Portfolios of the Trust or for ProVantage class shares
of certain portfolios of the SEI Family of Funds currently offered as part of
The Achievement Funds, including the Treasury Securities Portfolio of the SEI
Liquid Asset Trust and the Tax Free Portfolio of the SEI Tax Exempt Trust (the
"SEI Money Market Funds"), the Small Cap Growth Portfolio of the SEI
Institutional Managed Trust and the Core International Equity Portfolio of the
SEI International Trust (together with the SEI Money Market Funds, the "SEI
Funds").
Exchanges are made at net asset value plus any applicable sales charge. If,
within 6 months of their acquisition, Portfolio shares are exchanged for shares
of another Portfolio or the SEI Funds with a higher sales charge, the customer
will pay the difference between the sales charges in connection with the
exchange. No refund of a sales charge will be made if shares of a Portfolio are
exchanged for shares of another Portfolio or an SEI Fund that imposes a lower
sales charge. No additional sales charge will be imposed in connection with an
exchange of shares of a Portfolio for shares of another Portfolio or an SEI Fund
if such exchange occurs more than 6 months after the Customer's purchase of the
Portfolio shares disposed of in the exchange. Shares of a Portfolio may be
exchanged for shares of an SEI Money Market Fund without imposition of a sales
charge by the SEI Money Market Fund. Such SEI Money Market Fund shares may
subsequently be exchanged for shares of a Portfolio, but such an exchange, if
consummated after 30 days of the initial exchange, will be subject to imposition
of the full sales charge associated with an acquisition of shares of that
Portfolio.
If a shareholder buys shares of a Portfolio and receives a sales charge waiver,
the shareholder will be deemed to have paid the sales charge for purposes of
this exchange privilege. In calculating any sales charge payable on an exchange,
the Trust will assume that the first shares exchanged are those on which a sales
charge has already been paid. Sales charge waivers may also be available under
certain
<PAGE> 61
23
circumstances, as described in this Prospectus. The Trust reserves the right to
change the terms and conditions of the exchange privilege discussed herein, or
to terminate the exchange privilege, upon sixty days' notice.
Shareholders should contact a Participating Dealer for instructions on how to
exchange shares. Exchanges will be made only after receipt of proper
instructions in writing or by telephone (an "Exchange Request") for an
established account by the Transfer Agent. The liability of the Trust, the
Distributor or the Transfer Agent for unauthorized or fraudulent telephone
instructions may be limited as described under "PURCHASE, EXCHANGE AND
REDEMPTION OF SHARES--Redemption of Shares--By Telephone." If an Exchange
Request in good order is received by the Transfer Agent by 4:00 p.m. Eastern
time on any Business Day, the exchange will ordinarily be effective on that day.
Any Customer who wishes to make an exchange must have received a current
prospectus of the Portfolio or SEI Fund into which the exchange is being made
before the exchange will be effected. Information contained in this Prospectus
concerning sales charges imposed by SEI Funds is subject to change by the SEI
Funds.
An exchange between the Retail Class A shares and the Institutional class shares
of any Portfolio is generally not permitted, except that exchanges between the
classes will be permitted should a Retail Class A shareholder become eligible to
purchase Institutional class shares. For example, a Retail Class A shareholder
may establish a trust account that is eligible to purchase shares of the
Institutional class. In this case, an exchange will be permitted between the
Retail Class A class of a Portfolio and the Institutional class of that same
Portfolio at net asset value, without the imposition of a sales charge, fee or
other charge. An exchange from the Institutional class of a Portfolio to the
Retail Class A class of that same Portfolio will occur automatically when an
Institutional class shareholder becomes ineligible to invest in the
Institutional class at net asset value, without the imposition of a sales load,
fee or other charge. The Trust will provide at least thirty days' notice of any
such exchange. After the exchange, the exchanged shares will be subject to all
fees applicable to the Retail Class A shares. The Trust reserves the right to
require shareholders to complete an application or other documentation in
connection with the exchange.
Each exchange between Portfolios or between a Portfolio and an SEI Fund actually
represents the sale of shares of one Portfolio and the purchase of shares in the
other, which may produce a gain or loss for tax purposes. In order to protect
each Portfolio's performance and its shareholders, the Trust discourages
frequent exchange activity in response to short-term market fluctuations. The
Trust reserves the right to modify or withdraw the exchange privilege or to
suspend the offering of shares in any class without notice to shareholders if,
in the Adviser's judgment, a Portfolio would be unable to invest effectively in
accordance with its investment objective and policies, or would otherwise
potentially be adversely affected. Each Portfolio also reserves the right to
reject any specific purchase order, including certain purchases by exchange.
REDEMPTION OF SHARES
Shareholders may redeem their shares without charge on any Business Day by mail,
by telephone or through a systematic withdrawal plan. Shareholders should
contact a Participating Dealer for information on how to redeem shares.
Redemption proceeds will be sent by check, by the Federal Reserve System's
automated clearance house ("ACH") or by Fedwire to or for the account of the
record owner of the shares redeemed. A wire redemption charge (presently $15.00)
will be deducted from the amount of proceeds of a redemption that are
transferred by ACH or Fedwire.
REDEMPTIONS BY MAIL
A written request for redemption must be received by the Transfer Agent, P.O.
Box 419448, Kansas City, Missouri 64141-6448 in order to constitute a valid
redemption request.
<PAGE> 62
24
If the redemption request exceeds $5,000, or if the request directs the proceeds
to be sent to an address different from that of record, the Transfer Agent may
require that the signature on the written redemption request be guaranteed.
Customers should be able to obtain a signature guarantee from a bank,
broker-dealer, credit union, securities exchange or association, clearing agency
or savings association. Notaries public cannot guarantee signatures. The
signature guarantee requirement will be waived if all of the following
conditions apply: (1) the redemption is for not more than $5,000 worth of
shares, (2) the redemption check is payable to the shareholder of record and (3)
the redemption check is mailed to the shareholder at his or her address of
record.
REDEMPTIONS BY TELEPHONE
If authorized by a Shareholder in the account application, shares may be
redeemed upon request made by the Shareholder by telephone to the Transfer Agent
at 1-800-472-0577, or by contacting a Participating Dealer. Shareholders may not
close their accounts by telephone.
Neither the Trust, the Distributor nor the Transfer Agent will be responsible
for any loss, liability, cost or expense for acting upon wire instructions or
upon telephone instructions that it reasonably believes to be genuine. The
Trust, the Distributor and the Transfer Agent will each employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
including requiring a form of personal identification prior to acting upon
instructions received by telephone and recording telephone instructions. The
Trust, the Distributor or Transfer Agent may be liable for losses resulting from
fraudulent or unauthorized instructions if it does not employ these procedures.
If market conditions are extraordinarily active, or other extraordinary
circumstances exist, and a shareholder experiences difficulties placing
redemption orders by telephone, the shareholder may wish to consider placing an
order by mail.
SYSTEMATIC WITHDRAWAL PLAN
A systematic withdrawal plan can be established for a Portfolio account. Under
the plan, redemptions can be automatically processed from accounts (monthly,
quarterly, semi-annually or annually) by check or by ACH transfer with a minimum
redemption amount of $100. The Portfolio account must maintain a minimum balance
of $10,000 at all times while the systematic withdrawal plan is in effect.
OTHER INFORMATION REGARDING REDEMPTIONS
All redemption orders are effected at the net asset value per share next
determined after receipt and effectiveness of a valid request for redemption, as
described above. A redemption order will be effective on the same Business Day
it is received if it is received by the Transfer Agent before 4:00 p.m. Eastern
time; otherwise, the redemption order will be effective on the following
Business Day. Net asset value per share is determined as of the close of trading
on the New York Stock Exchange (currently 4:00 p.m. Eastern time) on each
Business Day. Payment to shareholders for shares redeemed will be made within
seven days after receipt by the Transfer Agent of the redemption request in good
order. Participating Dealers may impose an earlier cut-off time for receipt of
redemption orders directed through them to allow for processing and transmittal
of these orders to the Distributor for effectiveness the same day.
At various times, a Portfolio may be requested to redeem shares for which it has
not yet received good payment. In such circumstances, redemption proceeds will
be forwarded upon collection of payment for the shares; collection of payment
may take 10 or more days. The Portfolios intend to pay cash for all shares
redeemed, but under abnormal conditions which make payment in cash unwise,
payment may be made wholly or partly in portfolio securities with a market value
equal to the redemption price. In such cases, an investor may incur brokerage
costs in converting such securities to cash.
<PAGE> 63
25
Due to the relatively high cost of handling small investments, the Trust
reserves the right to redeem, at net asset value, the shares of any shareholder
if, because of redemptions of shares by or on behalf of the shareholder, the
account of such shareholder in a Portfolio has a value of less than $1,000.
Before the Trust exercises its right to redeem such shares and send the proceeds
to the shareholder, the shareholder will be given notice that the value of the
shares in his or her account is less than the minimum amount and will be allowed
60 days to make an additional investment in the Portfolio in an amount which
will increase the value of the account to at least $1,000.
See "Purchase and Redemption of Shares" in the Statement of Additional
Information for examples of when the right of redemption may be suspended.
PERFORMANCE
GENERAL
From time to time the Portfolios may advertise yield and total return. The Short
Term Municipal Bond Fund and the Idaho Municipal Bond Fund each may also
advertise a "taxable equivalent yield." These figures are based on historical
earnings and are not intended to indicate future performance. No representation
can be made concerning actual future yields or returns. The yield of each
Portfolio refers to the income generated by a hypothetical investment, net of
any sales charge, in such Portfolio over a thirty day period. This income is
then "annualized," i.e., the income over thirty days is assumed to be generated
over one year and is shown as a percentage of the investment.
A "taxable equivalent yield" is calculated by determining the yield that would
have been achieved on a fully taxable investment to produce the after-tax
equivalent of a Portfolio's yield, assuming certain rates of taxation for a
shareholder.
The total return of each Portfolio refers to the average compounded rate of
return on a hypothetical investment for designated time periods, assuming that
the entire investment is redeemed at the end of each period and assuming the
reinvestment of all dividend and capital gain distributions.
A Portfolio may periodically compare its performance to that of other mutual
funds tracked by mutual funds rating services (such as Lipper Analytical
Services, Inc.), financial and business publications and periodicals, broad
groups of comparable mutual funds or unmanaged indices which may assume
investment of dividends but generally do not reflect deductions for
administrative and management costs. A Portfolio may quote a service that ranks
mutual funds on the basis of risk-adjusted performance (such as Morningstar,
Inc.). A Portfolio may use long-term performance of appropriate capital markets
to demonstrate general long-term risk versus reward scenarios and could include
the value of a hypothetical investment in the appropriate capital markets. A
Portfolio may also quote financial and business publications and periodicals as
they relate to fund management, investment philosophy and investment techniques.
Each Portfolio may quote various measures of volatility and benchmark
correlation in advertising and may compare these measures to those of other
funds. Measures of volatility attempt to compare historical share price
fluctuations or total returns to a benchmark while measures of benchmark
correlation indicate how valid a comparative benchmark might be. Measures of
volatility and correlation are calculated using averages of historical data and
cannot be calculated precisely.
Additional performance information for the Portfolios is set forth in the
Trust's Annual Report to shareholders for its fiscal year ended January 31,
1996, which is available upon request and without charge by calling
1-800-472-0577.
TAXES
The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative,
<PAGE> 64
26
judicial or administrative action. No attempt has been made to present a
detailed explanation of the federal, state or local income tax treatment of the
Portfolios or their shareholders. Accordingly, shareholders are urged to consult
their tax advisers regarding specific questions as to federal, state and local
income taxes. State and local tax consequences of an investment in a Portfolio
may differ from the federal income tax consequences described below. Additional
information concerning taxes is set forth in the Statement of Additional
Information.
TAX STATUS OF THE PORTFOLIOS
Each Portfolio is treated as a separate entity for federal income tax purposes
and is not combined with the Trust's other portfolios. Each Portfolio intends to
qualify for the special tax treatment afforded regulated investment companies
("RICs") under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), so as to be relieved of federal income tax on investment company
taxable income and net capital gains (the excess of net long-term capital gains
over net short-term capital losses) distributed to Shareholders.
TAX STATUS OF DISTRIBUTIONS BY THE EQUITY FUND, BALANCED FUND, INTERMEDIATE TERM
BOND FUND, AND SHORT TERM BOND FUND
Each Portfolio intends to distribute substantially all of its net investment
income (including net short-term capital gains and realized market discounts)
and net capital gains to shareholders. Dividends from a Portfolio's investment
company taxable income are taxable to its shareholders as ordinary income
(whether received in cash or in additional shares) to the extent of the
Portfolio's earnings and profits. Dividends paid by a Portfolio to corporate
shareholders will qualify for the deduction for dividends received by
corporations to the extent of the dividends received by the Portfolio from
domestic corporations. However, the full amount of such dividends will be taken
into account in determining liability (if any) for corporate alternative minimum
tax. Distributions of net capital gains do not qualify for the corporate
dividends received deduction and are taxable to shareholders as long-term
capital gains, regardless of how long shareholders have held their shares and
regardless of whether the distributions are received in cash or in additional
shares. The Portfolios provide annual reports to shareholders of the federal
income tax status of all distributions.
The sale, exchange or redemption of Portfolio shares is a taxable transaction to
the shareholder.
TAX STATUS OF DISTRIBUTIONS BY THE SHORT TERM MUNICIPAL BOND FUND AND IDAHO
MUNICIPAL BOND FUND
Each Portfolio intends to distribute substantially all of its net investment
income (including net short-term capital gains and realized market discounts) to
shareholders. If, at the close of each quarter of its taxable year, at least 50%
of the value of a Portfolio's total assets consists of obligations the interest
on which is excludable from gross income, that Portfolio may distribute its net
tax-exempt interest income as "exempt-interest dividends" to its shareholders.
Exempt-interest dividends are excludable from a shareholder's gross income for
federal income tax purposes but may have certain collateral federal tax
consequences including alternative minimum tax consequences. In addition, the
receipt of exempt-interest dividends may cause persons receiving Social Security
or Railroad Retirement benefits to be taxable on a portion of such benefits. See
the Statement of Additional Information.
Current federal tax law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect on the
ability of a Portfolio to purchase sufficient amounts of tax-exempt securities
to satisfy the Code's requirements for the payment of exempt-interest dividends.
Any dividends paid out of net short-term capital gains and realized market
discount or out of any income
<PAGE> 65
27
realized by a Portfolio on taxable securities will be taxable to shareholders as
ordinary income (whether received in cash or in additional shares) to the extent
of the Portfolio's earnings and profits and will not qualify for the
dividends-received deduction for corporate shareholders. Distributions to
shareholders of net capital gains of a Portfolio also will not qualify for the
corporate dividends-received deduction and will be taxable to shareholders as
long-term capital gain, whether received in cash or additional shares, and
regardless of how long a shareholder has held the shares.
The Portfolios will report annually to shareholders the percentages of their net
investment income which are exempt from the regular federal income tax, which
constitute items of tax preference for purposes of the federal alternative
minimum tax, and which are fully taxable. In addition, the Idaho Municipal Bond
Fund will report annually to shareholders the percentages of its net investment
income which are exempt from Idaho corporate and personal income tax (discussed
below). The Portfolios will apply such percentages uniformly to all
distributions declared from net investment income during each report year. These
percentages may differ significantly from the actual percentages for any
particular day.
An investment in the Short Term Municipal Bond Fund or the Idaho Municipal Bond
Fund is not intended to constitute a balanced investment program. Shares of
those Portfolios would not be suitable for tax-exempt institutions and may not
be suitable for retirement plans qualified under Section 401 of the Code, H.R.
10 plans and individual retirement accounts since such plans and accounts
generally qualify for deferral of taxes on income or gains and, therefore, not
only would not gain any additional benefit from the dividends of those
Portfolios being tax-exempt, but also such dividends would be taxable when
distributed to the beneficiary.
ADDITIONAL FEDERAL TAX INFORMATION
Dividends declared by each Portfolio in October, November or December of any
year and payable to
shareholders of record on a date in any such month will be deemed to have been
paid by the Portfolio and received by the shareholders on December 31 of that
year if paid by the Portfolio at any time during the following January.
Each Portfolio intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax.
Shareholders should consult their tax advisers concerning the state and local
tax consequences of investment in a Portfolio, which may differ from federal
income tax consequences described above.
IDAHO TAXES
Exempt-interest dividends that are paid by the Idaho Municipal Bond Fund will
not be subject to Idaho corporate and personal income taxes to the extent that
they are attributable to interest earned on municipal securities that is exempt
from Idaho state income taxes in the opinion of bond counsel for their issuers.
GENERAL INFORMATION
THE TRUST
The Trust was organized as an unincorporated business trust under the laws of
Massachusetts on December 16, 1988 pursuant to a Master Trust Agreement of that
date, which agreement was amended and restated on October 7, 1994 and was
further amended on December 1, 1994 (as further amended from time to time, the
"Trust Agreement").
The Trust currently offers shares of beneficial interest in six separate
portfolios. The Trust has also authorized the issuance of shares of beneficial
interest in an additional portfolio designated the Municipal Bond Fund, but the
Trust has not commenced a public offering of those shares. The Trust may issue
an unlimited number of shares of each of its portfolios. Each share is entitled
to such dividends and distributions out of income earned on
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28
the assets of such portfolio as are declared in the discretion of the Trust's
Board of Trustees. When issued and paid for, shares will be fully paid and non-
assessable by the Trust and will have no preference, conversion or preemptive
rights. The Trust Agreement authorizes the Board of Trustees to classify or
reclassify any shares of any portfolio into one or more other portfolio and to
create classes in such portfolio. Each portfolio is divided into two classes of
shares, the Institutional and Retail Class A classes. Both classes of a
Portfolio have a common investment objective and investment limitations and
policies. Shares of the Retail Class A class are offered by this prospectus.
Shares of the Institutional class are offered through a separate prospectus.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws of Massachusetts. The Trustees supervise the business activities of the
Trust and have approved contracts under which, as described above, certain
companies provide essential management services to the Trust.
VOTING RIGHTS
All shares of the Trust have equal voting rights and will be voted in the
aggregate, and not by series or class, except where voting by series or class is
required by law or where the matter involved affects only one series or class.
The Trust is not required under Massachusetts law to hold annual meetings of
shareholders, but will hold shareholder meetings if required to do so by the
1940 Act. Special meetings may be called for a specific Portfolio for purposes
such as changing fundamental policies or approving certain contracts.
Shareholders will be permitted to call a meeting of shareholders and will
receive assistance in communicating with other shareholders, for the purpose of
voting upon the removal of any Trustee as long as such shareholder request is in
writing and is signed by shareholders of record of no less than 10% of the
Trust's outstanding shares.
REPORTING
The Trust issues unaudited financial information semiannually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to shareholders of record.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to SEI Financial Services Company in
writing to 680 East Swedesford Road, Wayne, PA 19087 or by calling
1-800-472-0577.
DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) of
each Portfolio is distributed in the form of dividends that are declared and
paid quarterly by the Equity Fund, declared and paid monthly by the Balanced
Fund and declared daily and paid monthly by the Intermediate Term Bond Fund, the
Short Term Bond Fund, the Short Term Municipal Bond Fund and the Idaho Municipal
Bond Fund. Shareholders of record on the last Business Day of each month will be
entitled to receive the monthly dividend distribution, which is generally paid
on the 10th Business Day of the following month. If any net capital gains are
realized, they will be distributed by the Portfolio at least annually.
Shareholders automatically receive all income dividends and capital gains
distributions in additional shares of the Portfolio making the distribution
(which will be issued at the net asset value next determined following the
record date), unless the shareholder has elected to take such payment in another
form. Shareholders may change their election by providing written notice to the
Transfer Agent at least 15 days prior to the change.
Dividends and distributions of a Portfolio are paid on a per-share basis. The
value of each share will be reduced by the amount of any such payment. If shares
are purchased shortly before the record date
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29
for a dividend or the distribution of capital gains, a shareholder will pay the
full price for the shares and receive some portion of the price back as a
taxable dividend or distribution.
THE TRANSFER AGENT
DST Systems, Inc., P.O. Box 419448, Kansas City, Missouri 64141-6448 (the
"Transfer Agent") acts as the transfer agent and dividend disbursing agent for
the Portfolios under a transfer agency agreement with the Trust.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Ballard Spahr Andrews & Ingersoll serves as counsel to the Trust. Deloitte &
Touche LLP serves as independent accountants of the Trust.
CUSTODIAN
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box 7618, Philadelphia,
PA 19101 (the "Custodian"), acts as custodian of the Trust. The Custodian holds
cash, securities and other assets of the Trust as required by the 1940 Act.
DESCRIPTION OF CERTAIN PERMITTED INVESTMENTS
BANKERS' ACCEPTANCES--Bankers' acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank. Bankers' acceptances are used by
corporations to finance the shipment and storage of goods. Maturities are
generally six months or less.
CERTIFICATES OF DEPOSIT--Certificates of deposit are interest bearing
instruments with a specific maturity. They are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market prior to maturity. Certificates of deposit with
penalties for early withdrawal will be considered illiquid.
COMMERCIAL PAPER--Commercial paper is a term used to describe unsecured
short-term promissory notes issued by banks, municipalities, corporations and
other entities. Maturities on these issues vary from a few to 270 days.
CONVERTIBLE SECURITIES--Convertible securities are corporate securities that are
exchangeable for a set number of another security at a prestated price.
Convertible securities typically have characteristics similar to both fixed
income and equity securities. Because of the conversion feature, the market
value of a convertible security tends to move with the market value of the
underlying stock. The value of a convertible security is also affected by
prevailing interest rates, the credit quality of the issuer, and any call
provisions.
COVERED CALL OPTIONS--A call option gives the purchaser of the option the right
to buy, and the writer of the option the obligation to sell, a specified
underlying security at any time during the option period. In a covered call
option, the writer of the option owns a sufficient amount of the underlying
securities to "cover" the option through delivery of the optioned securities
upon exercise of the option. The Equity Fund and Balanced Fund may write covered
call options as a means of increasing the yield of these portfolios and as a
means of providing limited protection against decreases in the market value of
portfolio securities.
EQUITY INDEX MUTUAL FUNDS--Equity index mutual funds are open-end investment
companies that structure their securities investments so that the performance of
the portfolio approximates the performance of a target equity securities index.
EQUITY SECURITIES--Equity securities include common stock, preferred stock and
other securities that are convertible to or grant the right to acquire common
stock or preferred stock.
FIXED INCOME SECURITIES--Fixed income securities are debt obligations bearing a
specified rate of interest during their term that are issued by the United
States government and its agencies and
<PAGE> 68
30
instrumentalities, corporations, municipalities and other borrowers.
MONEY MARKET FUNDS--Money market funds are open-end investment companies that
are continuously engaged in the issuance of shares. In connection with
management of their daily cash positions, a Portfolio may invest in money market
fund shares having investment objectives and policies consistent with those of
the Portfolio. Investments by a money market fund are subject to limitations
imposed under regulations adopted by the Securities and Exchange Commission.
Under these regulations, money market funds may only acquire obligations that
present minimal credit risk and that are "eligible securities," which means they
are (i) rated, at the time of investment, by at least two nationally recognized
security rating organizations (one if it is the only organization rating such
obligation) in the highest rating category or, if unrated, determined to be of
comparable quality (a "first tier security"), or (ii) rated according to the
foregoing criteria in the second highest rating category or, if unrated,
determined to be of comparable quality ("second tier security"). A security is
not considered to be unrated if the issuer has outstanding obligations of
comparable priority and security that have a short-term rating. In the case of
taxable money market funds, investments in second tier securities are subject to
the further constraints in that (i) no more than 5% of a Fund's assets may be
invested in second tier securities and (ii) any investment in securities of any
one such issuer is limited to the greater of 1% of the Fund's total assets or $1
million. A taxable money market fund may also hold more than 5% of its assets in
first tier securities of a single issuer for three "business days" (that is, any
day other than a Saturday, Sunday or customary business holiday).
MUNICIPAL SECURITIES--Municipal securities consist of (i) debt obligations
issued by or on behalf of public authorities for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, mass transportation, schools, streets and
water and sewer works, the refunding of outstanding obligations, for general
operating expenses, and for lending such funds to other public institutions and
facilities, and (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated facilities.
Municipal securities include both municipal notes and municipal bonds. Municipal
notes include general obligation notes, tax anticipation notes, revenue
anticipation notes, bond anticipation notes, certificates of indebtedness,
demand notes and construction loan notes and participation interests in
municipal notes. Municipal bonds include general obligation bonds, revenue or
special obligation bonds, private activity and industrial development bonds and
participation interests in municipal bonds.
General obligation bonds are backed by the taxing power of the issuing
municipality. Revenue bonds are backed by the revenues of a project or facility
(tolls from a bridge, for example). Certificates of participation represent an
interest in an underlying obligation or commitment, such as an obligation issued
in connection with a leasing arrangement. Private activity bonds are bonds that
are issued by municipalities, the proceeds of which are used in an activity
considered a nonessential government function under the Internal Revenue Code,
which may include activities such as construction and operation of airports,
convention centers, auditoriums, hospitals and mass commuting facilities. The
payment of principal and interest on private activity and industrial development
bonds generally is dependent solely on the ability of a facility's user to meet
its financial obligations and the pledge, if any, of real and personal property
as security for such payment.
Economic, business or political developments might affect all municipal
securities of a similar type. To the extent that a significant portion of the
Short Term Municipal Bond Fund's or Idaho Municipal Bond Fund's assets are
invested in municipal securities payable from revenue on similar projects, those
Portfolios will be subject to the peculiar risks
<PAGE> 69
31
presented by such projects to a greater extent than they would be if its assets
were not so invested. For example, certain municipal securities may be
obligations of issuers who rely in whole or in part on ad valorem real property
taxes as a source of revenue and legislation may have the effect of limiting ad
valorem taxes on real property or restricting the ability of taxing entities to
increase real property tax revenues. Municipal securities that are payable only
from the revenues derived from a particular facility, such as a utility or
housing project, may be adversely affected by laws or regulations that make it
more difficult for the particular facility to generate revenues sufficient to
pay such interest and principal, including laws and regulations that limit the
amount of fees, rates or other charges that may be imposed for use of the
facility or that increase competition among facilities of that type or that
limit or otherwise have the effect of reducing the use of such facilities
generally, thereby reducing the revenues generated by the particular facility.
If the payment of interest and principal on municipal securities is insured in
whole or in part by a government created fund, the municipal securities may be
adversely affected by laws or regulations that restrict the aggregate insurance
proceeds available for payment of principal and interest in the event of a
default on such securities. State and local tax revenues generally mirror
economic conditions and may be adversely affected by regional or national
recessions.
RECEIPTS--Receipts are sold as zero coupon securities which means that they are
sold at a substantial discount and redeemed at face value at their maturity date
without interim cash payments of interest or principal. The amount of this
discount accretes over the life of the security, and such accretion will
constitute the income earned on the security for both accounting and tax
purposes. Because of these features, such securities may be subject to greater
interest rate volatility than interest paying investments.
REPURCHASE AGREEMENTS--Repurchase agreements are agreements by which a Portfolio
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price on an agreed upon date within a number of days
from the date of purchase. The custodian will hold the security as collateral
for the repurchase agreement. A Portfolio bears a risk of loss in the event the
other party defaults on its obligations and the Portfolio is delayed or
prevented from exercising its right to dispose of the collateral or if the
Portfolio realizes a loss on the sale of the collateral. A Portfolio will enter
into repurchase agreements only with financial institutions deemed to present
minimal risk of bankruptcy during the term of the agreement based on established
guidelines. Repurchase agreements are considered loans under the 1940 Act.
STANDBY COMMITMENTS--Securities subject to standby commitments permit the holder
thereof to sell the securities at a fixed price prior to maturity. Securities
subject to a standby commitment may be sold at any time at the current market
price. However, unless the standby commitment was an integral part of the
security as originally issued, it may not be marketable or assignable;
therefore, the standby commitment would only have value to the Portfolio owning
the security to which it relates. In certain cases, a premium may be paid for a
standby commitment, which premium will have the effect of reducing the yield
otherwise payable on the underlying security. The Portfolios will limit standby
commitment transactions to institutions believed to present minimal credit risk.
U.S. GOVERNMENT AGENCIES--U.S. Government agency obligations are obligations
issued or guaranteed by agencies of the U.S. Government, including, among
others, the Federal Farm Credit Bank, the Federal Housing Administration and the
Small Business Administration, and obligations issued or guaranteed by
instrumentalities of the U.S. Government, including, among others, the Federal
Home Loan Mortgage Corporation, the Federal Land Banks and the U.S. Postal
Service. Some of these securities are supported by the full faith and credit of
the U.S. Treasury (e.g., Government National Mortgage Association), others
<PAGE> 70
32
are supported by the right of the issuer to borrow from the Treasury (e.g.,
Federal Farm Credit Bank), while still others are supported only by the credit
of the instrumentality (e.g., Federal National Mortgage Association). Guarantees
of principal by agencies or instrumentalities of the U.S. Government may be a
guarantee of payment at the maturity of the obligation so that in the event of a
default prior to maturity there might not be a market and thus no means of
realizing on the obligation prior to maturity. Guarantees as to the timely
payment of principal and interest do not extend to the value or yield of these
securities nor to the value of a Portfolio's shares.
U.S. TREASURY OBLIGATIONS--U.S. Treasury obligations consist of bills, notes and
bonds issued by the U.S. Treasury and separately traded interest and principal
component parts of such obligations that are transferable through the Federal
book-entry system known as Separately Traded Registered Interest and Principal
Securities ("STRIPS").
For additional information regarding permitted investments see "Description of
Permitted Investments" in the Trust's Statement of Additional Information.
<PAGE> 71
33
APPENDIX
DESCRIPTION OF CORPORATE AND MUNICIPAL BOND RATINGS
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degrees.
Debt rated A by S&P 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. 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.
Bonds which are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or an exceptionally
stable, margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. Bonds rated Aa by
Moody's are judged by Moody's to be of high quality by all standards. Together
with bonds rated Aaa, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A by Moody's possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Bonds which are rated Baa by Moody's are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1+, 1, 2 and 3 to indicate the relative degree of safety. Issues rated
A-1+ are those with an "overwhelming degree" of credit protection. Those rated
A-1 reflect a "very strong" degree of safety regarding timely payment. Those
rated A-2 reflect a safety regarding timely payment but not as high as A-1.
Commercial paper issuers rated Prime-1 and Prime-2 by Moody's are judged by
Moody's to be of the two highest quality ratings on the basis of relative
repayment capacity.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating. The following criteria will be used in making that assessment:
Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
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34
Source of Payment (the more dependent the issue is on the market for its
refinancing the more likely it will be treated as a note).
The note rating symbol SP-1 reflects very strong or strong capacity to pay
principal and interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) description.
Moody's highest rating for state and municipal and other short-term notes is
MIG-1 and VMIG-1. Short-term municipal securities rated MIG-1 or VMIG-1 are of
the best quality. They have strong protection from established cash flows of
funds for their servicing or from established and broad-based access to the
market for refinancing or both.
<PAGE> 73
TABLE OF CONTENTS
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<TABLE>
<S> <C>
Summary.......................................... 2
Financial Highlights............................. 5
The Trust........................................ 8
Investment Objectives and Policies............... 8
Risk Factors..................................... 13
Investment Limitations........................... 14
Fundamental Policies............................. 15
The Adviser...................................... 15
The Administrator................................ 17
The Distributor.................................. 17
Purchase, Exchange and Redemption of Shares...... 18
Performance...................................... 25
Taxes............................................ 25
General Information.............................. 27
Description of Certain Permitted Investments..... 29
Appendix......................................... 33
</TABLE>
<PAGE> 74
<TABLE>
<S> <C>
[THE ACHIEVEMENT FUNDS LOGO]
THIS FUND IS OFFERED THE ACHIEVEMENT FUNDS
IN CONJUNCTION WITH THE ACHIEVEMENT FUNDS TRUST
THE ACHIEVEMENT FUNDS RETAIL
(PORTFOLIOS OF CERTAIN PROSPECTUS
MUTUAL FUNDS) TO AFFORD EQUITY FUND
A CONVENIENT RANGE OF BALANCED FUND
INVESTMENT CHOICES INTERMEDIATE TERM BOND FUND
TO INVESTORS. SHORT TERM BOND FUND
SHORT TERM MUNICIPAL BOND FUND
IDAHO MUNICIPAL BOND FUND
JUNE 1, 1996
DISTRIBUTED BY
SEI FINANCIAL SERVICES COMPANY
680 EAST SWEDESFORD ROAD
WAYNE, PENNSYLVANIA 19087-1658
800-472-0577
ACH-F-009-03
</TABLE>
<PAGE> 75
THE ACHIEVEMENT FUNDS TRUST
-- MUNICIPAL BOND FUND
THE ACHIEVEMENT FUNDS TRUST (the "Trust") is a mutual fund that offers separate
classes of shares of beneficial interest in seven separate portfolios. This
Prospectus relates solely to the Institutional class of shares of the Municipal
Bond Fund (the "shares") which are designed to offer financial institutions
("shareholders") a convenient means of investing their own funds or funds for
which they act in a fiduciary, agency or custodial capacity in a professionally
managed portfolio of securities. The Municipal Bond Fund also offers Retail
Class A shares that differ from the Institutional shares with respect to
distribution costs, sales charges and dividends.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, INCLUDING ANY FIRST SECURITY BANK OR ANY OF THEIR
AFFILIATES OR CORRESPONDENTS. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
This Prospectus sets forth concisely the basic information about the Trust and
its Municipal Bond Fund that a prospective investor should know before
investing. Investors are advised to read this Prospectus and retain it for
future reference. A Statement of Additional Information dated June 1, 1996 has
been filed with the Securities and Exchange Commission (the "SEC") and is
available without charge through the Distributor, SEI Financial Services
Company, by written request addressed to 680 East Swedesford Road, Wayne, PA
19087-1658 or by calling 1-800-472-0577. The Statement of Additional Information
is incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
JUNE 1, 1996
<PAGE> 76
2
SUMMARY
The Achievement Funds Trust (the "Trust") is an open-end management investment
company which offers shares of beneficial interest to provide a convenient way
to invest in professionally managed portfolios of securities. This Summary
provides basic information about the Institutional class of shares of the
Trust's Municipal Bond Fund. The Municipal Bond Fund is a diversified portfolio
of securities.
INVESTMENT OBJECTIVE AND POLICIES
The MUNICIPAL BOND FUND seeks to provide as high a level of current income that
is exempt from Federal income tax as is consistent with preservation of capital.
The Municipal Bond Fund intends to invest primarily in municipal securities, the
interest on which is exempt from Federal income taxes, which meet specified
credit quality standards. There is no assurance that the Municipal Bond Fund
will meet its investment objective. See "INVESTMENT OBJECTIVES AND POLICIES" and
"DESCRIPTION OF CERTAIN PERMITTED INVESTMENTS."
RISK FACTORS INVOLVED WITH AN INVESTMENT IN THE MUNICIPAL BOND FUND
The net asset value of the shares of the Municipal Bond Fund will fluctuate with
changes in the prices of its underlying portfolio securities. Values of fixed
income securities and, correspondingly, share prices of the Municipal Bond Fund
will tend to vary inversely with interest rates and may be affected by other
market and economic factors as well. There are other risks associated with the
ownership of shares of a mutual fund. See "RISK FACTORS" and "DESCRIPTION OF
CERTAIN PERMITTED INVESTMENTS."
THE ADVISER
First Security Investment Management, Inc. serves as investment adviser (the
"Adviser") to the Municipal Bond Fund. See "THE ADVISER."
THE ADMINISTRATOR
SEI Fund Resources serves as administrator of the Trust. See "THE
ADMINISTRATOR."
THE TRANSFER AGENT
DST Systems, Inc. serves as transfer agent and dividend disbursing agent for the
Trust. See "GENERAL INFORMATION--Transfer Agent."
<PAGE> 77
3
THE DISTRIBUTOR
SEI Financial Services Company serves as distributor of the Trust's shares. See
"THE DISTRIBUTOR."
THE CUSTODIAN
CoreStates Bank, N.A. serves as custodian for the cash, securities and other
assets of the Trust. See "GENERAL INFORMATION--Custodian."
PURCHASE, EXCHANGE OR REDEMPTION OF SHARES
Purchases, exchanges or redemptions of shares may be made on any day during
which the New York Stock Exchange is open for business (a "Business Day"). A
purchase, exchange or redemption order must be placed with the Distributor and
will be executed at a per share price equal to the net asset value per share
next determined after the receipt of the purchase, exchange or redemption order.
Orders must be placed prior to 4:00 p.m. Eastern time for the order to be
effective on that day. The minimum initial investment is $500,000, which minimum
amount may be waived by the Distributor. There is no minimum amount for
subsequent purchases of shares. Net asset value is determined as of the close of
trading on the New York Stock Exchange (presently 4:00 p.m. Eastern time) on
each Business Day. See "PURCHASE AND REDEMPTION OF SHARES."
PAYMENT OF DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) of
the Municipal Bond Fund is distributed in the form of dividends that are paid
monthly. Any net capital gain is distributed at least annually. Distributions
are paid in cash unless the shareholder elects to take payment in another form.
See "GENERAL INFORMATION--Dividends."
<PAGE> 78
4
ESTIMATED ANNUAL OPERATING EXPENSES
(as a % of average net assets)
<TABLE>
<S> <C>
Management Fees (after waivers)(1)............................................................. 0.30%
Administration Fees............................................................................ 0.20%
Other Expenses(2).............................................................................. 0.25%
- -------------------------------------------------------------------------------------------------------
Total Fund Operating Expenses (after waivers)(3)............................................... 0.75%
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Trust's investment adviser (the "Adviser") has agreed to waive, on a
voluntary basis, a portion of its fee, and the management fee shown reflects
that voluntary waiver. The Adviser reserves the right to terminate its fee
waiver at any time at its sole discretion without notice to current or
prospective shareholders. Absent such fee waiver, the management fee for the
Municipal Bond Fund would be 0.60%.
(2) Other Expenses of the Municipal Bond Fund include all expenses except
nonrecurring account fees, brokerage commissions and other capital items and
management fees. See "GENERAL INFORMATION--Expenses." Although no fee is
imposed in connection with share redemptions, a $15 fee is charged in
connection with a wire transfer of redemption proceeds.
(3) Absent the voluntary fee waiver described above, total estimated operating
expenses for the Institutional shares of the Municipal Bond Fund stated as a
percentage of net assets would be 1.05%.
EXAMPLE
The following example assumes that all dividends and distributions are
reinvested and that the percentage totals listed under "Estimated Annual
Operating Expenses" remain the same in the years shown. THE EXAMPLE SHOULD NOT
BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
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<TABLE>
<CAPTION>
1 YEAR 3 YEARS
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<S> <C> <C>
An investor would pay the following expenses on a $1,000 investment, assuming a
5% annual return and redemption at the end of each time period:................... $ 8 $24
Absent the fee waiver described in the footnote above and in this Prospectus, an
investor
would pay the following expenses on the same investment:.......................... $ 11 $33
</TABLE>
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- --------------------------------------------------------------------------------
The Estimated Annual Operating Expenses and Example presented above are designed
to assist an investor in understanding the various costs and expenses that an
investor in the Municipal Bond Fund will bear directly or indirectly. For more
complete descriptions of the various costs and expenses, see "THE ADVISER," "THE
DISTRIBUTOR" and "GENERAL INFORMATION--Expenses" in this Prospectus. The expense
figures for "Administration Fees" and "Other Expenses" presented under the
caption "Estimated Annual Operating Expenses" are based upon estimates of costs,
size of total assets of the Municipal Bond Fund and fees to be charged in the
current fiscal year; actual expenses may be greater or less than those
estimated. The information set forth in the Estimated Annual Operating Expenses
and Example relates only to the Institutional shares. The Municipal Bond Fund
also offers Retail Class A shares which are subject to the same expenses except
that Retail Class A shares bear additional distribution costs and sales charges.
<PAGE> 79
5
THE TRUST
THE ACHIEVEMENT FUNDS TRUST (the "Trust") is an open-end series management
investment company that offers shares of beneficial interest in separate
investment portfolios. Each portfolio has two separate classes of shares,
Institutional and Retail Class A, which differ with respect to distribution
costs, sales charges and dividends. This Prospectus offers the Institutional
shares (the "shares") of the Trust's Municipal Bond Fund. The Municipal Bond
Fund is a diversified portfolio. Additional information pertaining to the Trust
may be obtained by writing to SEI Financial Services Company, 680 East
Swedesford Road, Wayne, PA 19087 or by calling 1-800-472-0577.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Municipal Bond Fund seeks to provide as high a level of current income that
is exempt from Federal income tax as is consistent with preservation of capital.
INVESTMENT POLICIES
Under normal market conditions, the Municipal Bond Fund will invest at least 80%
of its assets in municipal securities the interest on which is exempt from
Federal income taxes, based on opinions from bond counsel for the issuers. This
investment policy is a fundamental policy of the Municipal Bond Fund. The
issuers of these securities can be located in all fifty states, the District of
Columbia, Puerto Rico and other U.S. territories and possessions. The Municipal
Bond Fund will not invest more than 10% of its assets in municipal securities of
issuers located in any single state, territory or possession. Under normal
market conditions, the Municipal Bond Fund will invest at least 80% of its total
assets in securities the interest on which is not a preference item for purposes
of the alternative minimum tax. Although the Adviser intends to invest solely in
municipal securities, up to 20% of all of the assets of the Municipal Bond Fund
can be invested in U.S. Treasury obligations when suitable municipal securities
are not available.
The Municipal Bond Fund may purchase the following types of municipal
securities, but only if such securities, at the time of purchase, have the
requisite ratings set forth below or are of comparable quality as determined by
the Adviser.
(i) Municipal bonds rated BBB or better by S&P or Baa or better by Moody's.
Municipal bonds held by the Municipal Bond Fund will, on a dollar-weighted
basis, have a rating of A or better. The Municipal Bond Fund may not invest
more than 20% of its assets in municipal bonds rated BBB by S&P or Baa by
Moody's.
(ii) Municipal notes rated at least SP-1 by S&P or MIG-1 by Moody's.
(iii) Tax-exempt commercial paper rated at least A-1 by S&P or Prime-1 by
Moody's.
(iv) Municipal lease obligations that have the ratings specified in (i)
above or that are of comparable quality as determined by the Adviser upon
consideration of relevant factors specified by the board of trustees of the
Trust (the "Trustees"), including the likelihood that the lease related to
the obligation will be cancelled or that funds will not be appropriated for
payment thereof. Municipal lease obligations that are subject to an annual
appropriation by the issuer may be purchased by the Municipal Bond Fund only
if the security in question is insured by an approved municipal insurance
company (e.g. AMBAC Indemnity Corporation, Municipal Bond Investors
Assurance Corporation, Financial Guaranty Insurance Company).
(v) Shares of mutual funds that invest primarily in municipal bonds,
municipal notes, tax-exempt commercial paper or municipal lease obligations
that have the ratings specified above. Up to 10% of the assets of the
Municipal Bond Fund may be invested in such mutual fund shares.
<PAGE> 80
6
In the event the credit quality of municipal securities owned by the Municipal
Bond Fund declines below the applicable criteria outlined above, the Adviser may
consider selling such securities. For a description of ratings, see "Appendix."
The Municipal Bond Fund may invest in variable and floating rate obligations,
municipal zero coupon securities, may purchase securities on a "when-issued"
basis and reserves the right to engage in transactions involving standby
commitments. The Municipal Bond Fund may invest up to 15% of its assets in
illiquid securities that are of comparable quality, as determined by the
Adviser, to the ratings discussed above. The Municipal Bond Fund may also borrow
money in aggregate amounts not in excess of 5% of its total assets.
For temporary defensive purposes when the Adviser determines that market
conditions warrant, the Municipal Bond Fund may invest up to 100% of its assets
in tax-exempt money market mutual funds, U.S. Treasury obligations and cash
reserves. To the extent that the Municipal Bond Fund is engaged in temporary
defensive investments, it will not be pursuing its investment objective.
Under normal circumstances, it is anticipated that the annual turnover rate of
the investments of the Municipal Bond Fund will be less than 100%.
In placing orders for the execution of transactions in portfolio securities, it
is the Trust's policy to obtain the best net results taking into account such
factors as price, size, type and difficulty of the transaction involved, a
brokerage firm's general execution and operational facilities and the firm's
risk in positioning the securities involved. The Municipal Bond Fund may execute
brokerage or other agency transactions through the Distributor or its affiliates
or through affiliates of the Adviser for a commission in conformity with the
Investment Company Act of 1940 (the "1940 Act"), the Securities Exchange Act of
1934 and rules of the SEC. The Trust will not purchase portfolio securities from
any affiliated person acting as a principal except in conformity with the
regulations of the SEC.
For additional information regarding risks and permitted investments of the
Municipal Bond Fund, see "RISK FACTORS" and "DESCRIPTION OF CERTAIN PERMITTED
INVESTMENTS."
RISK FACTORS
FIXED INCOME SECURITIES--The market value of fixed income securities will change
in response to interest rate changes and other factors. During periods of
falling interest rates, the value of outstanding fixed income securities
generally rises. Conversely, during periods of rising interest rates, the value
of such securities generally declines. Moreover, while securities with longer
maturities tend to produce higher yields, the prices of longer maturity
securities are also subject to greater market fluctuations as a result of
changes in interest rates. Changes by recognized agencies in the rating of any
fixed income security and in the ability of an issuer to make payments of
interest and principal also affect the value of these investments. Changes in
the value of portfolio securities will not necessarily affect cash income
derived from those securities but will affect the net asset value of the
Municipal Bond Fund's shares.
RATED SECURITIES--The Municipal Bond Fund may invest in municipal securities
rated no less than investment grade by either S&P or Moody's. Up to 20% of the
Municipal Bond Fund's assets may be invested in municipal bonds in the lowest
investment grade debt category (i.e, bonds rated BBB by S&P or Baa by Moody's),
which have speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity on the part of
issuers of such municipal bonds to make principal and interest payments than is
the case with higher grade bonds. The Municipal Bond Fund may retain a municipal
security which was rated as investment grade at the time of purchase but whose
rating is subsequently downgraded below investment grade.
OTHER PERMITTED INVESTMENTS--Certain of the other investments permitted for the
Municipal Bond Fund
<PAGE> 81
7
pose special risks in addition to those risks described above. See "DESCRIPTION
OF CERTAIN PERMITTED INVESTMENTS--Repurchase Agreements," and "--Standby
Commitments," in this Prospectus and the description of permitted investments in
the Statement of Additional Information.
THERE IS NO ASSURANCE THAT THE MUNICIPAL BOND FUND WILL ACHIEVE ITS INVESTMENT
OBJECTIVE.
INVESTMENT LIMITATIONS
The Municipal Bond Fund may not:
1. With respect to 75% of its total assets, purchase securities of any issuer
(except securities issued or guaranteed by the United States Government, its
agencies or instrumentalities) if, as a result, more than 5% of the total assets
of the Municipal Bond Fund would be invested in the securities of such issuer or
it would hold more than 10% of the outstanding voting securities of that issuer.
2. Purchase securities of any issuer (except securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities) if, as a result, more
than 25% of the total assets of the Municipal Bond Fund would be invested in the
securities of companies whose principal business activities are in the same
industry.
3. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding 5% of the value of the total assets of the Municipal Bond
Fund. All borrowings will be repaid before making additional investments and any
interest paid on such borrowings will reduce the income of the Municipal Bond
Fund.
The foregoing percentage limitations will apply at the time of the purchase of a
security or the time that money is borrowed. Additional investment limitations
are set forth in the Statement of Additional Information.
FUNDAMENTAL POLICIES
The investment objective and investment limitations stated above are fundamental
policies of the Municipal Bond Fund. Fundamental policies of the Municipal Bond
Fund cannot be changed without the consent of the holders of a majority of the
Municipal Bond Fund's outstanding shares. The term "majority of the outstanding
shares" of the Municipal Bond Fund as used in this Prospectus means the vote of
(i) 67% or more of the Municipal Bond Fund's shares present at a meeting, if the
holders of more than 50% of the outstanding shares of the Municipal Bond Fund
are present or represented by proxy, or (ii) more than 50% of the Municipal Bond
Fund's outstanding shares, whichever is less.
THE ADVISER
First Security Investment Management, Inc. ("FSIM" or the "Adviser") serves as
investment adviser to the Municipal Bond Fund pursuant to an investment advisory
agreement (the "Advisory Agreement") with the Trust. The selection of FSIM to
serve as investment adviser to the Municipal Bond Fund was approved by the
Trustees and the initial shareholder of the Municipal Bond Fund. Under the
Advisory Agreement, the Adviser makes the investment decisions for the Municipal
Bond Fund and continuously reviews, supervises and administers the Municipal
Bond Fund's investment program.
Under the Advisory Agreement, FSIM is entitled to receive a fee for the services
it provides, which is calculated daily and paid monthly, at an annual rate of
0.60% of the average daily net assets of the Municipal Bond Fund. The Adviser
has voluntarily waived a portion of its fee for the Municipal Bond Fund's
current fiscal year so that total operating expenses for the Municipal Bond Fund
will not exceed 0.75%. When the fee waiver is in effect, the fee payable to the
Adviser will be calculated by applying 0.30% to the average daily net assets of
the Municipal Bond Fund. The Adviser may revoke its fee waiver at any time at
its sole discretion without notice to any current or prospective shareholder.
FSIM, incorporated in August 1984, is a wholly-owned, indirect subsidiary of
First Security Corporation, a financial services organization and registered
bank holding company with headquarters
<PAGE> 82
8
in Utah. In addition to advising the Municipal Bond Fund and the Trust's other
investment portfolios, FSIM's advisory experience includes the management of
various collective and common investment funds and the provision of investment
management services to another investment company, banks and thrift
institutions, corporate and profit-sharing trusts, Taft-Hartley organizations,
municipal and state retirement funds, charitable foundations, endowments and
individual investors throughout the United States. FSIM had approximately $4.3
billion under management at December 31, 1995. FSIM is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended, and
has offices at 61 South Main Street, Salt Lake City, Utah 84111, at 119 North
9th Street, Boise, Idaho 83730 and at 219 Central Avenue NW, 3rd Floor,
Albuquerque, New Mexico 87102.
The following individual is responsible of the day-to-day management of the
Municipal Bond Fund:
James A. Schuck has been a Vice President and Senior Portfolio Manager of the
Adviser since 1985 and has managed collective investment funds with investment
objectives similar to those of the Municipal Bond Fund since that time. Mr.
Schuck also is responsible for management of the Trust's Short Term Municipal
Bond Fund and Idaho Municipal Bond Fund.
Banking laws and regulations, including the Glass-Steagall Act as currently
interpreted by the Board of Governors of the Federal Reserve System, prohibit a
bank holding company registered under the Bank Holding Company Act of 1956 or
any affiliate thereof from sponsoring, organizing, controlling, or distributing
the shares of a registered, open-end investment company continuously engaged in
the issuance of its shares, and prohibit banks generally from issuing,
underwriting, selling or distributing securities, but do not prohibit such a
bank holding company or affiliate from acting as investment adviser, transfer
agent, or custodian to such an investment company, or from purchasing shares of
such a company as agent for and upon the order of a customer, or from performing
any combination of such services. FSIM and the Trust believe that FSIM may
perform the advisory services for the Trust described in this Prospectus.
However, future changes in legal requirements relating to the permissible
activities of banks and their affiliates, as well as future interpretations of
present requirements, could prevent FSIM from continuing to perform investment
advisory services for the Trust.
If FSIM or any other service providers were prohibited from performing services
for the Trust, it is expected that the Board of Trustees of the Trust would
recommend to the Trust's shareholders that they approve new agreements with
another entity or entities qualified to perform such services and selected by
the Board.
THE ADMINISTRATOR
SEI Fund Resources, 680 East Swedesford Road, Wayne, PA 19087, a wholly-owned
subsidiary of SEI Financial Corporation, a wholly-owned subsidiary of SEI
Corporation ("SEI"), provides the Trust with administrative services (other than
investment advisory services), accounting services, regulatory reporting, all
necessary office space, equipment, personnel and facilities, pursuant to an
administration agreement with the Trust (the "Administration Agreement"). For
these services, the Administrator is entitled to a fee from the Municipal Bond
Fund in an amount which is calculated at an annual rate of 0.20% of its average
daily net assets.
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), 680 East Swedesford Road,
Wayne, Pennsylvania, 19087, a wholly-owned subsidiary of SEI, serves as the
distributor for the Municipal Bond Fund pursuant to a distribution agreement
("Distribution Agreement") with the Trust. The Distributor receives no fee for
its services in connection with distribution of the Institutional shares.
Financial institutions that are the record owners of shares for the account of
their customers may impose separate fees for account services to their
customers.
<PAGE> 83
9
PURCHASE, EXCHANGE AND REDEMPTION
OF SHARES
Financial institutions may acquire shares of the Municipal Bond Fund for their
own account or as record owner on behalf of fiduciary, agency or custody
accounts by placing orders with the Distributor. Institutions that use certain
SEI proprietary systems may place orders electronically through those systems.
State securities laws may require banks and financial institutions purchasing
shares for their customers to register as dealers pursuant to state laws. Shares
of the Municipal Bond Fund are offered only to residents of states in which the
shares are eligible for purchase.
Shares of the Municipal Bond Fund may be purchased or redeemed on days during
which the New York Stock Exchange is open for business ("Business Days"). The
minimum initial investment by financial institutions purchasing shares is
$500,000; however the minimum investment may be waived at the Distributor's
discretion. No minimum amount is required for subsequent investments.
Shareholders who desire to purchase shares for cash must place their orders with
the Distributor prior to 4:00 p.m. Eastern time on any Business Day for the
order to be accepted on that Business Day. Financial institutions may impose an
earlier cut-off time for receipt of purchase orders directed through them to
allow for processing and transmittal of these orders to the Distributor for
effectiveness the same day. Cash payment for investments must be transmitted or
delivered in federal funds to the wire agent on the next Business Day following
the day the order is placed. The Trust reserves the right to reject a purchase
order when the Distributor determines that it is not in the best interest of the
Trust or its shareholders to accept such purchase order. Purchases will be made
in full and fractional shares of the Municipal Bond Fund calculated to three
decimal places. The Trust will send shareholders a statement of shares owned
after each transaction.
The purchase price of shares is the net asset value next determined after a
purchase order is received and accepted by the Trust. The net asset value per
share of the Municipal Bond Fund is determined by dividing the total market
value of the Municipal Bond Fund's investments and other assets, less any
liabilities, by the total outstanding shares of the Municipal Bond Fund. Net
asset value per share is determined daily as of the close of trading on the New
York Stock Exchange (presently 4:00 p.m. Eastern time) on any Business Day in
the manner described in the Statement of Additional Information. Financial
institutions which purchase shares for the accounts of their customers may
impose separate charges on these customers for account services.
An exchange between the Institutional class and the Retail Class A shares of the
Municipal Bond Fund is generally not permitted, except that exchanges between
the classes will occur automatically should an investor in the Institutional
class become ineligible to purchase additional Institutional class shares. For
example, an automatic exchange would occur if an Institutional class investor
receives a distribution from a trust, and such investor would be investing
individually (and becomes a shareholder of record) rather than through a
qualified account. An exchange from the Institutional class to the Retail Class
A shares of the Municipal Bond Fund will occur automatically when an
Institutional class shareholder's account falls below the $500,000 minimum
balance. The Trust will provide thirty days' notice of any such exchange. The
exchange will take place at net asset value, without the imposition of a sales
load, fee or other charge. After the exchange, the exchanged shares will be
subject to all fees applicable to Retail Class A shares. In the event that a
shareholder declines to accept an automatic exchange, and if the shareholder
does not meet the requirements for investing in Institutional class shares, the
Trust reserves the right to redeem the shares upon expiration of the thirty-day
period. The Trust reserves the right to require shareholders to complete an
application or other documentation in connection with the exchange.
Retail Class A shares of the Municipal Bond Fund may be exchanged for
Institutional Class shares
<PAGE> 84
10
should the shareholder establish a trust, custodial or money management
relationship with a qualified institution.
To exchange shares held of record by a financial institution but beneficially
owned by a customer, the customer should contact the financial institution,
which will contact the Distributor and effect the exchange on behalf of the
customer. If an exchange request in good order is received by the Distributor by
4:00 p.m. Eastern time on any Business Day, the exchange will ordinarily be
effective on that day.
The Municipal Bond Fund anticipates earning income on its portfolio securities
and other investments in the form of interest income, dividends and capital
gains. That income, after payment of expenses, will be passed along to
shareholders as dividends or capital gain distributions. See "GENERAL
INFORMATION-- Dividends" for a discussion of the dividend policy of the
Municipal Bond Fund. Such distributions to shareholders will automatically be
paid in cash, unless the shareholder makes a different election with respect to
such distributions.
Distributions of dividends and capital gains made by the Municipal Bond Fund may
be invested in shares of one of the other investment portfolios offered by the
Trust if shares of such other portfolio are available for sale. Such investments
will be subject to initial investment minimums, as well as additional purchase
minimums. A shareholder considering this distribution investment option should
consider the differences in investment objectives and policies of the other
investment portfolio before making any investment in such portfolio. The Trust
reserves the right to terminate this distribution investment option without
further notice to shareholders.
Shareholders who desire to redeem shares of the Municipal Bond Fund must place
their redemption orders with the Distributor prior to 4:00 p.m. Eastern time on
any Business Day. The redemption price is the net asset value per share of the
Municipal Bond Fund next determined after receipt by the Distributor of the
redemption order. Payment on redemption will be made as promptly as possible
and, in any event, within seven days after the redemption order is received.
Purchase, redemption and exchange orders may be placed by telephone. Neither the
Trust nor the Trust's transfer agent will be responsible for any loss,
liability, cost or expense for acting upon telephone instructions that it
reasonably believes to be genuine. The Trust and the Trust's transfer agent will
each employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of personal identification
prior to acting upon instructions received by telephone and recording telephone
instructions. The Trust or the Trust's transfer agent may be liable for losses
resulting from fraudulent or unauthorized instructions if it does not employ
these procedures. If market conditions are extraordinarily active, or other
extraordinary circumstances exist, and a shareholder experiences difficulties
placing redemption orders by telephone, the shareholder may wish to consider
placing its order by other means.
PERFORMANCE
GENERAL
From time to time the Municipal Bond Fund may advertise yield and total return,
and may also advertise a "taxable equivalent yield." These figures are based on
historical earnings and are not intended to indicate future performance. No
representation can be made concerning actual future yields or returns. The yield
of the Municipal Bond Fund refers to the income generated by a hypothetical
investment in the Municipal Bond Fund over a thirty day period. This income is
then "annualized," i.e., the income over thirty days is assumed to be generated
over one year and is shown as a percentage of the investment.
A "taxable equivalent yield" is calculated by determining the yield that would
have been achieved on a fully taxable investment to produce the after-tax
equivalent of the Municipal Bond Fund's yield, assuming certain rates of
taxation for a shareholder.
<PAGE> 85
11
The total return of the Municipal Bond Fund refers to the average compounded
rate of return on a hypothetical investment for designated time periods,
assuming that the entire investment is redeemed at the end of each period and
assuming the reinvestment of all dividend and capital gain distributions.
The Municipal Bond Fund may periodically compare its performance to that of
other mutual funds tracked by mutual funds rating services (such as Lipper
Analytical Services, Inc.), financial and business publications and periodicals,
broad groups of comparable mutual funds or unmanaged indices which may assume
investment of dividends but generally do not reflect deductions for
administrative and management costs. The Municipal Bond Fund may quote a service
that ranks mutual funds on the basis of risk-adjusted performance (such as
Morningstar, Inc.). The Municipal Bond Fund may use long-term performance of
appropriate capital markets to demonstrate general long-term risk versus reward
scenarios and could include the value of a hypothetical investment in the
appropriate capital markets. The Municipal Bond Fund may also quote financial
and business publications and periodicals as they relate to fund management,
investment philosophy and investment techniques.
The Municipal Bond Fund may quote various measures of volatility and benchmark
correlation in advertising and may compare these measures to those of other
funds. Measures of volatility attempt to compare historical share price
fluctuations or total returns to a benchmark while measures of benchmark
correlation indicate how valid a comparative benchmark might be. Measures of
volatility and correlation are calculated using averages of historical data and
cannot be calculated precisely.
PERFORMANCE OF PREDECESSOR COLLECTIVE INVESTMENT FUND
The Municipal Bond Fund is the successor to a collective investment fund
formerly managed by the Adviser. A substantial portion of the assets of the
collective investment fund was transferred to the Municipal Bond Fund on or
about , 1996 in connection with the commencement of operations by the
Municipal Bond Fund. Set forth below is certain performance data for the
predecessor collective investment fund, which is deemed relevant because the
collective investment fund was managed by the Adviser using the same investment
objective, and similar investment policies and restrictions as those that will
be used by the Adviser in managing the Municipal Bond Fund. However, the
performance data is not necessarily indicative of the future performance of the
Municipal Bond Fund.
The predecessor collective investment fund did not incur expenses that
correspond to the advisory, administrative and other fees to which the Municipal
Bond Fund is subject. Accordingly, the following performance information
restates the actual performance of the collective investment fund after
adjusting such information by applying the anticipated total expense ratios for
the Municipal Bond Fund, which reduces the actual performance for the collective
investment fund. These expense ratios are those set forth under "Estimated
Annual Operating Expenses" (after giving effect to fee waivers).
AVERAGE ANNUAL TOTAL RETURN*
<TABLE>
<CAPTION>
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COLLECTIVE INVESTMENT FUND 1 YR. 3 YRS. 5 YRS.
- ------------------------------------------------------
<S> <C> <C> <C>
Municipal Bond................. % % %
</TABLE>
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* Adjusted to reflect estimated expenses, net of waivers, for the periods ended
, 1996.
TAXES
The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to present a detailed
explanation of the federal, state, or local income tax treatment of the
Municipal Bond Fund or its shareholders. Accordingly,
<PAGE> 86
12
shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state and local income taxes. State and local tax
consequences of an investment in the Municipal Bond Fund may differ from the
federal income tax consequences described below. Additional information
concerning taxes is set forth in the Statement of Additional Information.
TAX STATUS OF THE MUNICIPAL BOND FUND
The Municipal Bond Fund is treated as a separate entity for federal income tax
purposes and is not combined with the Trust's other portfolios. The Municipal
Bond Fund intends to qualify for the special tax treatment afforded regulated
investment companies ("RICs") under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), so as to be relieved of federal income tax on
investment company taxable income and net capital gains (the excess of net
long-term capital gains over net short-term capital losses) distributed to
Shareholders.
TAX STATUS OF DISTRIBUTIONS
The Municipal Bond Fund intends to distribute substantially all of its net
investment income (including net short-term capital gains and realized market
discounts) to shareholders. If, at the close of each quarter of its taxable
year, at least 50% of the value of the Municipal Bond Fund's total assets
consists of obligations the interest on which is excludable from gross income,
the Municipal Bond Fund may distribute its net tax-exempt interest income as
"exempt- interest dividends" to its shareholders. Exempt-interest dividends are
excludable from a shareholder's gross income for federal income tax purposes but
may have certain collateral federal tax consequences including alternative
minimum tax consequences. In addition, the receipt of exempt-interest dividends
may cause persons receiving Social Security or Railroad Retirement benefits to
be taxable on a portion of such benefits. See the Statement of Additional
Information.
Current federal tax law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect on the
ability of the Municipal Bond Fund to purchase sufficient amounts of tax-exempt
securities to satisfy the Code's requirements for the payment of exempt-interest
dividends.
Any dividends paid out of net short-term capital gains and realized market
discounts or out of any income received by the Municipal Bond Fund from taxable
securities will be taxable to shareholders as ordinary income (whether received
in cash or in additional shares) to the extent of the Municipal Bond Fund's
earnings and profits and will not qualify for the dividends-received deduction
for corporate shareholders. Distributions to shareholders of net capital gains
of the Municipal Bond Fund also will not qualify for the corporate dividends
received deduction and will be taxable to shareholders as long-term capital
gain, whether received in cash or additional shares, and regardless of how long
a shareholder has held the shares.
The Municipal Bond Fund will report annually to shareholders the percentages of
their net investment income which are exempt from the regular federal income
tax, which constitute items of tax preference for purposes of the federal
alternative minimum tax, and which are fully taxable. The Municipal Bond Fund
will apply such percentages uniformly to all distributions declared from net
investment income during each report year. These percentages may differ
significantly from the actual percentages for any particular day.
An investment in the Municipal Bond Fund is not intended to constitute a
balanced investment program. Shares of the Municipal Bond Fund would not be
suitable for tax-exempt institutions and may not be suitable for retirement
plans qualified under Section 401 of the Code, H.R. 10 plans and individual
retirement accounts since such plans and accounts generally qualify for deferral
of taxes on income or gains and, therefore, not only would not gain any
additional benefit from the dividends of the Municipal Bond Fund being
tax-exempt, but also such
<PAGE> 87
13
dividends would be taxable when distributed to the beneficiary.
ADDITIONAL FEDERAL TAX INFORMATION
Dividends declared by the Municipal Bond Fund in October, November or December
of any year and payable to shareholders of record on a date in any such month
will be deemed to have been paid by the Municipal Bond Fund and received by the
shareholders on December 31 of that year if paid at any time during the
following January.
The Municipal Bond Fund intends to make sufficient distributions prior to the
end of each calendar year to avoid liability for federal excise tax.
Shareholders should consult their tax advisers concerning the state and local
tax consequences of investment in the Municipal Bond Fund, which may differ from
federal income tax consequences described above.
GENERAL INFORMATION
THE TRUST
The Trust was organized as an unincorporated business trust under the laws of
Massachusetts on December 16, 1988 pursuant to a Master Trust Agreement of that
date, which agreement was amended and restated on October 7, 1994 and was
further amended on December 1, 1994 (as further amended from time to time, the
"Trust Agreement").
In addition to the Municipal Bond Fund, the Trust currently offers shares of
beneficial interest in six separate investment portfolios designated as the
Equity Fund, Balanced Fund, Intermediate Term Bond Fund, Short Term Bond Fund,
Short Term Municipal Bond Fund and Idaho Municipal Bond Fund. The Trust may
issue an unlimited number of shares of each of its portfolios. Each share is
entitled to such dividends and distributions out of income earned on the assets
of such portfolio as are declared in the discretion of the Trust's Board of
Trustees. When issued and paid for, shares will be fully paid and non-assessable
by the Trust and will have no preference, conversion or preemptive rights. The
Trust Agreement authorizes the Board of Trustees to classify or reclassify any
shares of any portfolio into one or more other portfolio and to create classes
in such portfolio. The Trust currently offers two classes of shares of each of
its portfolios, the Institutional and Retail Class A classes. Both classes of a
portfolio have a common investment objective and investment limitations and
policies. Shares of the Institutional class of the Municipal Bond Fund are
offered by this prospectus. Shares of the Retail Class A class of the Municipal
Bond Fund are offered through a separate prospectus.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws of Massachusetts. The Trustees supervise the business activities of the
Trust and have approved contracts under which, as described above, certain
companies provide essential management services to the Trust.
VOTING RIGHTS
All shares of the Trust have equal voting rights and will be voted in the
aggregate, and not by series or class, except where voting by series or class is
required by law or where the matter involved affects only one series or class.
The Trust is not required under Massachusetts law to hold annual meetings of
shareholders, but will hold shareholder meetings if required to do so by the
1940 Act. Special meetings may be called for specific portfolios for purposes
such as changing fundamental policies or approving certain contracts.
Shareholders will be permitted to call a meeting of shareholders and will
receive assistance in communicating with other shareholders, for the purpose of
voting upon the removal of any Trustee as long as such shareholder request is in
writing and is signed by shareholders of record of no less than 10% of the
Trust's outstanding shares.
<PAGE> 88
14
EXPENSES
The Municipal Bond Fund will incur expenses in the conduct of its operations in
addition to the fees to be paid to the Adviser and the Administrator described
above. Those expenses will include custodial fees, professional fees,
registration fees, printing expenses, certain organizational costs and other
third party expenses. See "Estimated Annual Operating Expenses" for an estimate
of the amount of such other expenses expressed as a percentage of the Municipal
Bond Fund's net assets.
REPORTING
The Trust issues unaudited financial information semiannually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to shareholders of record.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to SEI Financial Services Company in
writing to 680 East Swedesford Road, Wayne, PA 19087 or by calling
1-800-472-0577.
DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) of
the Municipal Bond Fund is distributed in the form of dividends that are
declared daily and paid monthly. Shareholders of record on the last Business Day
of each month will be entitled to receive the monthly dividend distribution,
which is generally paid on the 10th Business Day of the following month. If any
net capital gains are realized, they will be distributed by the Municipal Bond
Fund at least annually.
Shareholders automatically receive all income dividends and capital gains
distributions in cash, unless the shareholder has elected to take such payments
in another form. Shareholders may change their election by providing written
notice to the Transfer Agent at least 15 days prior to the change.
Dividends and distributions of the Municipal Bond Fund are paid on a per-share
basis. The value of each share will be reduced by the amount of any such
payment. If shares are purchased shortly before the record date for a dividend
or the distribution of capital gains, a shareholder will pay the full price for
the shares and receive some portion of the price back as a taxable dividend or
distribution.
THE TRANSFER AGENT
DST Systems, Inc., P.O. Box 419448, Kansas City, Missouri 64141-6448 (the
"Transfer Agent") acts as the transfer agent and dividend disbursing agent for
the Municipal Bond Fund under a transfer agency agreement with the Trust.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Ballard Spahr Andrews & Ingersoll serves as counsel to the Trust. Deloitte &
Touche LLP serves as independent accountants of the Trust.
CUSTODIAN
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box 7618, Philadelphia,
PA 19101 (the "Custodian"), acts as custodian of the Trust. The Custodian holds
cash, securities and other assets of the Trust as required by the 1940 Act.
DESCRIPTION OF CERTAIN PERMITTED INVESTMENTS
COMMERCIAL PAPER--Commercial paper is a term used to describe unsecured
short-term promissory notes issued by banks, municipalities, corporations and
other entities. Maturities on these issues vary from a few to 270 days.
FIXED INCOME SECURITIES--Fixed income securities are debt obligations bearing a
specified rate of interest during their term that are issued by the United
States government and its agencies and instrumentalities, corporations,
municipalities and other borrowers.
<PAGE> 89
15
MONEY MARKET FUNDS--Money market funds are open-end investment companies that
are continuously engaged in the issuance of shares. In connection with
management of its daily cash positions, the Municipal Bond Fund may invest in
money market fund shares having investment objectives and policies consistent
with those of the Municipal Bond Fund. Investments by a money market fund are
subject to limitations imposed under regulations adopted by the Securities and
Exchange Commission. Under these regulations, money market funds may only
acquire obligations that present minimal credit risk and that are "eligible
securities," which means they are (i) rated, at the time of investment, by at
least two nationally recognized security rating organizations (one if it is the
only organization rating such obligation) in the highest rating category or, if
unrated, determined to be of comparable quality (a "first tier security"), or
(ii) rated according to the foregoing criteria in the second highest rating
category or, if unrated, determined to be of comparable quality ("second tier
security"). A security is not considered to be unrated if the issuer has
outstanding obligations of comparable priority and security that have a
short-term rating. In the case of taxable money market funds, investments in
second tier securities are subject to the further constraints in that (i) no
more than 5% of a fund's assets may be invested in second tier securities and
(ii) any investment in securities of any one such issuer is limited to the
greater of 1% of the fund's total assets or $1 million. A taxable money market
fund may also hold more than 5% of its assets in first tier securities of a
single issuer for three "business days" (that is, any day other than a Saturday,
Sunday or customary business holiday).
MUNICIPAL LEASE OBLIGATIONS--Municipal lease obligations are securities issued
by state and local governments and authorities to finance the acquisition of
equipment and facilities. They may take the form of a lease, an installment
purchase contract, a conditional sales contract, or a participation interest in
any of the above. Municipal lease obligations are subject to the risk that the
issuing municipality will fail to appropriate funds for the payments due
thereunder in future years. Depending upon the market for such securities,
municipal lease obligations may be illiquid. The Trust's Board of Trustee's has
adopted guidelines that direct the Municipal Bond Fund's investment adviser to
consider the following factors in determining whether municipal lease
obligations are liquid securities: (i) the frequency of trades and market
quotations for the securities; (ii) the number of dealers willing and ready to
purchase and sell the securities; (iii) the number of potential purchasers of
the securities; (iv) whether any dealers have agreed to make a market in the
securities; (v) the nature of the securities and the nature of marketplace
trades, including the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer; (vi) whether the lease can be
cancelled; (vii) what assurances, if any, exist that the assets represented by
the lease can be sold; (viii) the strength of the lessee's general credit; (ix)
the likelihood that the municipality will discontinue appropriating funding for
the leased property because the property is no longer deemed essential to the
operation of the municipality; and (x) the legal recourse in the event of
failure to appropriate.
MUNICIPAL SECURITIES--Municipal securities consist of (i) debt obligations
issued by or on behalf of public authorities for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, mass transportation, schools, streets and
water and sewer works, the refunding of outstanding obligations, for general
operating expenses, and for lending such funds to other public institutions and
facilities, (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated facilities,
(iii) municipal lease obligations, and (iv) tax-exempt mutual funds, including
tax-exempt money market funds.
Municipal securities include municipal notes and municipal bonds. Municipal
notes include general obligation notes, tax anticipation notes, revenue
<PAGE> 90
16
anticipation notes, bond anticipation notes, certificates of indebtedness,
demand notes and construction loan notes and participation interests in
municipal notes. Municipal bonds include general obligation bonds, revenue or
special obligation bonds, private activity and industrial development bonds and
participation interests in municipal bonds.
General obligation bonds are backed by the taxing power of the issuing
municipality. Revenue bonds are backed by the revenues of a project or facility
(tolls from a bridge, for example). Certificates of participation represent an
interest in an underlying obligation or commitment, such as an obligation issued
in connection with a leasing arrangement. Private activity bonds are bonds that
are issued by municipalities, the proceeds of which are used in an activity
considered a nonessential government function under the Internal Revenue Code,
which may include activities such as construction and operation of airports,
convention centers, auditoriums, sports facilities, hospitals and mass commuting
facilities. The payment of principal and interest on private activity and
industrial development bonds generally is dependent solely on the ability of a
facility's user to meet its financial obligations and the pledge, if any, of
real and personal property as security for such payment.
Economic, business, or political developments might affect all municipal
securities of a similar type. To the extent that a significant portion of the
Municipal Bond Fund's assets are invested in municipal securities payable from
revenue on similar projects, the Municipal Bond Fund will be subject to the
peculiar risks presented by such projects to a greater extent than it would be
if its assets were not so invested. For example, certain municipal securities
may be obligations of issuers who rely in whole or in part on ad valorem real
property taxes as a source of revenue and legislation may have the effect of
limiting ad valorem taxes on real property or restricting the ability of taxing
entities to increase real property tax revenues. Municipal securities that are
payable only from the revenues derived from a particular facility, such as a
utility or housing project, may be adversely affected by laws or regulations
that make it more difficult for the particular facility to generate revenues
sufficient to pay such interest and principal, including laws and regulations
that limit the amount of fees, rates or other charges that may be imposed for
use of the facility or that increase competition among facilities of that type
or that limit or otherwise have the effect of reducing the use of such
facilities generally, thereby reducing the revenues generated by the particular
facility. If the payment of interest and principal on municipal securities is
insured in whole or in part by a government created fund the municipal
securities may be adversely affected by laws or regulations that restrict the
aggregate insurance proceeds available for payment of principal and interest in
the revenue of a default on such securities. State and local tax revenues
generally mirror economic conditions and may be adversely affected by regional
or national recessions.
STANDBY COMMITMENTS--Securities subject to standby commitments permit the holder
thereof to sell the securities at a fixed price prior to maturity. Securities
subject to a standby commitment may be sold at any time at the current market
price. However, unless the standby commitment was an integral part of the
security as originally issued, it may not be marketable or assignable;
therefore, the standby commitment would only have value to the Municipal Bond
Fund owning the security to which it relates. In certain cases, a premium may be
paid for a standby commitment, which premium will have the effect of reducing
the yield otherwise payable on the underlying security. The Municipal Bond Fund
will limit standby commitment transactions to institutions believed to present
minimal credit risk.
U.S. TREASURY OBLIGATIONS--U.S. Treasury obligations consist of bills, notes and
bonds issued by the U.S. Treasury and separately traded interest and principal
component parts of such obligations that are transferable through the Federal
book-entry system known as Separately Traded Registered Interest and Principal
Securities ("STRIPS").
For additional information regarding permitted investments see "Description of
Permitted Investments" in the Trust's Statement of Additional Information.
<PAGE> 91
17
APPENDIX
DESCRIPTION OF CORPORATE AND MUNICIPAL BOND RATINGS
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degrees.
Debt rated A by S&P 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. 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.
Bonds which are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or an exceptionally
stable, margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. Bonds rated Aa by
Moody's are judged by Moody's to be of high quality by all standards. Together
with bonds rated Aaa, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A by Moody's possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Bonds which are rated Baa by Moody's are considered as medium-grade obligations
(e.g., 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.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1+, 1, 2 and 3 to indicate the relative degree of safety. Issues rated
A-1+ are those with an "overwhelming degree" of credit protection. Those rated
A-1 reflect a "very strong" degree of safety regarding timely payment. Those
rated A-2 reflect a safety regarding timely payment but not as high as A-1.
Commercial paper issuers rated Prime-1 and Prime-2 by Moody's are judged by
Moody's to be of the two highest quality ratings on the basis of relative
repayment capacity.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating. The following criteria will be used in making that assessment:
Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
<PAGE> 92
18
Source of Payment (the more dependent the issue is on the market for its
refinancing the more likely it will be treated as a note).
The note rating symbol SP-1 reflects very strong or strong capacity to pay
principal and interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) description.
Moody's highest rating for state and municipal and other short-term notes is
MIG-1 and VMIG-1. Short-term municipal securities rated MIG-1 or VMIG-1 are of
the best quality. They have strong protection from established cash flows of
funds for their servicing or from established and broad-based access to the
market for refinancing or both.
<PAGE> 93
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
Summary.......................................... 2
Estimated Annual Operating Expenses.............. 4
The Trust........................................ 5
Investment Objectives and Policies............... 5
Risk Factors..................................... 6
Investment Limitations........................... 7
Fundamental Policies............................. 7
The Adviser...................................... 7
The Administrator................................ 8
The Distributor.................................. 8
Purchase, Exchange and Redemption of Shares...... 9
Performance...................................... 10
Taxes............................................ 11
General Information.............................. 13
Description of Certain Permitted Investments..... 14
Appendix......................................... 17
</TABLE>
<PAGE> 94
<TABLE>
<S> <C>
[THE ACHIEVEMENT FUNDS LOGO]
THIS FUND IS OFFERED THE ACHIEVEMENT FUNDS
IN CONJUNCTION WITH THE ACHIEVEMENT FUNDS TRUST
THE ACHIEVEMENT FUNDS INSTITUTIONAL
(PORTFOLIOS OF CERTAIN PROSPECTUS
MUTUAL FUNDS) TO AFFORD
A CONVENIENT RANGE OF
INVESTMENT CHOICES
TO INVESTORS.
MUNICIPAL BOND FUND
JUNE 1, 1996
DISTRIBUTED BY
SEI FINANCIAL SERVICES COMPANY
680 EAST SWEDESFORD ROAD
WAYNE, PENNSYLVANIA 19087-1658
800-472-0577
ACH-F-017-02
</TABLE>
<PAGE> 95
THE ACHIEVEMENT FUNDS TRUST
-- MUNICIPAL BOND FUND
THE ACHIEVEMENT FUNDS TRUST (the "Trust") is a mutual fund that offers separate
classes of shares of beneficial interest in seven separate portfolios. This
Prospectus relates solely to the Retail Class A shares (the "shares") of the
Municipal Bond Fund, a class of shares designed to offer investors
("shareholders") a convenient means of investing in a professionally managed
portfolio of securities through a participating dealer. The Municipal Bond Fund
also offers Institutional shares that differ from the Retail Class A shares with
respect to distribution costs, sales charges and dividends.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, INCLUDING ANY OF THE FIRST SECURITY BANKS OR ANY OF
THEIR AFFILIATES OR CORRESPONDENTS. THE TRUST'S SHARES ARE NOT FEDERALLY
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THE SHARES
INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
This Prospectus sets forth concisely the basic information about the Trust and
the Municipal Bond Fund that a prospective investor should know before
investing. Investors are advised to read this Prospectus and retain it for
future reference. A Statement of Additional Information dated June 1, 1996 has
been filed with the Securities and Exchange Commission (the "SEC") and is
available without charge through the Distributor, SEI Financial Services
Company, by written request addressed to the Distributor at 680 East Swedesford
Road, Wayne, PA 19087-1658 or by calling 1-800-472-0577. The Statement of
Additional Information is incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
JUNE 1, 1996
<PAGE> 96
2
SUMMARY
The Achievement Funds Trust (the "Trust") is an open-end management investment
company which provides a convenient way to invest in professionally managed
portfolios of securities. This Summary provides basic information about the
Retail Class A shares of the Trust's Municipal Bond Fund. The Municipal Bond
Fund is a diversified portfolio of securities.
INVESTMENT OBJECTIVES AND POLICIES
The MUNICIPAL BOND FUND seeks to provide as high a level of current income that
is exempt from Federal income tax as is consistent with preservation of capital.
The Municipal Bond Fund intends to invest primarily in municipal securities, the
interest on which is exempt from Federal income taxes, which meet specified
credit quality standards. There is no assurance that the Municipal Bond Fund
will meet its investment objective. See "INVESTMENT OBJECTIVES AND POLICIES" and
"DESCRIPTION OF CERTAIN PERMITTED INVESTMENTS."
RISK FACTORS INVOLVED WITH AN INVESTMENT IN THE MUNICIPAL BOND FUND
The net asset value of the shares of the Municipal Bond Fund will fluctuate with
changes in the prices of its underlying portfolio securities. Values of fixed
income securities and, correspondingly, share prices of the Municipal Bond Fund,
will tend to vary inversely with interest rates and may be affected by other
market and economic factors as well. There are other risks associated with the
ownership of shares of a mutual fund. See "RISK FACTORS" and "DESCRIPTION OF
CERTAIN PERMITTED INVESTMENTS."
THE ADVISER
First Security Investment Management, Inc. serves as investment adviser (the
"Adviser") to the Municipal Bond Fund. See "THE ADVISER."
THE ADMINISTRATOR
SEI Fund Resources serves as administrator of the Trust. See "THE
ADMINISTRATOR."
THE TRANSFER AGENT
DST Systems, Inc. serves as transfer agent and divided disbursing agent for the
Trust. See "GENERAL INFORMATION--Transfer Agent."
THE DISTRIBUTOR
SEI Financial Services Company serves as distributor of the Trust's shares. See
"THE DISTRIBUTOR."
<PAGE> 97
3
THE CUSTODIAN
CoreStates Bank, N.A. serves as custodian for the cash, securities and other
assets of the Trust. See "GENERAL INFORMATION--Custodian."
PURCHASE, EXCHANGE OR REDEMPTION OF SHARES
Purchases, exchanges or redemptions of shares may be made on any day on which
the New York Stock Exchange is open for business (a "Business Day"). A purchase,
exchange or redemption order may be placed through a financial institution or a
broker dealer that has established a dealer agreement with the Distributor, or
directly with the Transfer Agent.
The Distributor has entered into an agreement with First Security Investor
Services, Inc. ("FSIS") authorizing FSIS to sell Municipal Bond Fund shares as a
participating dealer. Representatives of FSIS may be contacted at:
First Security Investor Services
61 South Main Street
Salt Lake City, Utah 84111
(800) 574-6609
A purchase, exchange or redemption order will be executed at a per share price
equal to the net asset value per share next determined after the receipt of the
purchase, exchange or redemption order. Orders must be placed prior to 4:00 p.m.
Eastern time for the order to be effective on that day. The minimum initial
investment is $1,000, which minimum amount may be waived by the Distributor. The
minimum amount for subsequent purchases of shares is $100. Net asset value is
determined as of the close of trading on the New York Stock Exchange (currently
4:00 p.m. Eastern time) on each Business Day. See "PURCHASE AND REDEMPTION OF
SHARES."
PAYMENT OF DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) of
the Municipal Bond Fund is distributed in the form of dividends that are paid
monthly. Any net capital gain is distributed at least annually. Distributions
are paid in the form of additional shares of the Municipal Bond Fund making such
distributions, unless the shareholder elects to take payment in another form.
See "GENERAL INFORMATION--Dividends."
<PAGE> 98
4
ESTIMATED ANNUAL OPERATING EXPENSES
(as a % of net assets)
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<TABLE>
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SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum sales load imposed on purchase of shares
(as a % of the offering price)............................................................... 4.00%
ESTIMATED ANNUAL OPERATING EXPENSES
(AS A % OF NET ASSETS)
Management Fees (after waivers)(2)............................................................. 0.30%
Administration Fees............................................................................ 0.20%
12b-1 Fees..................................................................................... 0.25%
Other Expenses(3).............................................................................. 0.25%
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Total Fund Operating Expenses
(after waivers)(4)........................................................................... 1.00%
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</TABLE>
(1) Although no fee is imposed in connection with share redemptions, a $15 fee
will be charged in connection with a wire transfer of redemption proceeds.
(2) The Trust's investment adviser (the "Adviser") has agreed to waive, on a
voluntary basis, a portion of its fee, and the management fee shown reflects
that voluntary waiver. The Adviser reserves the right to terminate its fee
waiver at any time at its sole discretion without notice to current or
prospective shareholders. Absent such fee waiver, the management fee for the
Municipal Bond Fund would be 0.60%.
(3) Other Expenses of the Municipal Bond Fund include all expenses except
nonrecurring account fees, brokerage commissions and other capital items,
Rule 12b-1 fees and management fees. See "GENERAL INFORMATION--Expenses."
(4) Absent the voluntary fee waiver described above, total estimated operating
expenses for the Retail Class A shares of the Municipal Bond Fund would be
1.30%.
EXAMPLE
The following example assumes that all dividends and distributions are
reinvested and that the percentage totals listed under "Estimated Annual
Operating Expenses" remain the same in the years shown. THE EXAMPLE SHOULD NOT
BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
<TABLE>
<CAPTION>
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1 YEAR 3 YEARS
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<S> <C> <C>
An investor would pay the following expenses (which include sales charges) on a
$1,000 investment, assuming a 5% annual return and redemption at the end of each
time period:...................................................................... $ 50 $71
Absent the fee waiver described in the footnote above and in this Prospectus, an
investor would pay the following expenses on the same investment:................. $ 53 $80
- --------------------------------------------------------------------------------------------------------
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</TABLE>
The Estimated Annual Operating Expenses and Example presented above are designed
to assist an investor in understanding the various costs and expenses that an
investor in the Municipal Bond Fund will bear directly or indirectly. For more
complete descriptions of the various costs and expenses, see "THE ADVISER," "THE
DISTRIBUTOR" and "GENERAL INFORMATION--Expenses" in this Prospectus. The expense
figures for "Administration Fees" and "Other Expenses" presented under the
caption "Estimated Annual Operating Expenses" are based upon estimates of costs,
size of total assets of the Municipal Bond Fund and fees to be charged in the
current fiscal year; actual expenses may be greater or less than those
estimated. The information set forth in the Estimated Annual Operating Expenses
and Example relates only to the Retail Class A shares. The Municipal Bond Fund
also offers Institutional shares which are subject to the same expenses except
that Institutional shares do not bear certain distribution costs or sales
charges.
<PAGE> 99
5
THE TRUST
THE ACHIEVEMENT FUNDS TRUST (the "Trust") is an open-end series management
investment company that offers shares of beneficial interest in separate
investment portfolios. Each portfolio has two separate classes of shares,
Institutional and Retail Class A, which differ with respect to distribution
costs, sales charges and dividends. This Prospectus offers the Retail Class A
shares (the "shares") of the Trust's Municipal Bond Fund. Institutional shares
of the Municipal Bond Fund are only available for purchase by financial
institutions investing their own funds or funds for which they act in a
fiduciary, agency or custodial capacity. The Municipal Bond Fund is a
diversified portfolio. Additional information pertaining to the Trust may be
obtained by writing to SEI Financial Services Company, 680 East Swedesford Road,
Wayne, PA 19087 or by calling 1-800-472-0577.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Municipal Bond Fund seeks to provide as high a level of current income that
is exempt from Federal income tax as is consistent with preservation of capital.
INVESTMENT POLICIES
Under normal market conditions, the Municipal Bond Fund will invest at least 80%
of its assets in municipal securities the interest on which is exempt from
Federal income taxes, based on opinions from bond counsel for the issuers. This
investment policy is a fundamental policy of the Municipal Bond Fund. The
issuers of these securities can be located in all fifty states, the District of
Columbia, Puerto Rico and other U.S. territories and possessions. The Municipal
Bond Fund will not invest more than 10% of its assets in municipal securities of
issuers located in any single state, territory or possession. Under normal
market conditions, the Municipal Bond Fund will invest at least 80% of its total
assets in securities the interest on which is not a preference item for purposes
of the alternative minimum tax. Although the Adviser intends to invest solely in
municipal securities, up to 20% of all of the assets of the Municipal Bond Fund
can be invested in U.S. Treasury obligations or when suitable municipal
securities are not available.
The Municipal Bond Fund may purchase the following types of municipal
securities, but only if such securities, at the time of purchase, have the
requisite ratings set forth below or are of comparable quality as determined by
the Adviser.
(i) Municipal bonds rated BBB or better by S&P or Baa or better by Moody's.
Municipal bonds held by the Municipal Bond Fund will, on a dollar-weighted
basis, have a rating of A or better. The Municipal Bond Fund may not invest
more than 20% of its assets in municipal bonds rated BBB by S&P or Baa by
Moody's.
(ii) Municipal notes rated at least SP-1 by S&P or MIG-1 by Moody's.
(iii) Tax-exempt commercial paper rated at least A-1 by S&P or Prime-1 by
Moody's.
(iv) Municipal lease obligations that have the ratings specified in (i)
above or that are of comparable quality as determined by the Adviser upon
consideration of relevant factors specified by the board of trustees of the
Trust (the "Trustees"), including the likelihood that the lease related to
the obligation will be cancelled or that funds will not be appropriated for
payment thereof. Municipal lease obligations that are subject to an annual
appropriation by the issuer may be purchased by the Municipal Bond Fund only
if the security in question is insured by an approved municipal insurance
company (e.g. AMBAC Indemnity Corporation, Municipal Bond Investors
Assurance Corporation, Financial Guaranty Insurance Company).
(v) Shares of mutual funds that invest primarily in municipal bonds,
municipal notes, tax-exempt commercial paper or municipal lease obligations
<PAGE> 100
6
that have the ratings specified above. Up to 10% of the assets of the
Municipal Bond Fund may be invested in such mutual fund shares.
In the event the credit quality of municipal securities owned by the Municipal
Bond Fund declines below the applicable criteria outlined above, the Adviser may
consider selling such securities. For a description of ratings, see "Appendix."
The Municipal Bond Fund may invest in variable and floating rate obligations,
municipal zero coupon securities, may purchase securities on a "when-issued"
basis and reserves the right to engage in transactions involving standby
commitments. The Municipal Bond Fund may invest up to 15% of its assets in
illiquid securities that are of comparable quality, as determined by the
Adviser, to the ratings discussed above. The Municipal Bond Fund may also borrow
money in aggregate amounts not in excess of 5% of its total assets.
For temporary defensive purposes when the Adviser determines that market
conditions warrant, the Municipal Bond Fund may invest up to 100% of its assets
in tax-exempt money market mutual funds, U.S. Treasury obligations and cash
reserves. To the extent that the Municipal Bond Fund is engaged in temporary
defensive investments, it will not be pursuing its investment objective.
Under normal circumstances, it is anticipated that the annual turnover rate of
the investments of the Municipal Bond Fund will be less than 100%.
In placing orders for the execution of transactions in portfolio securities, it
is the Trust's policy to obtain the best net results taking into account such
factors as price, size, type and difficulty of the transaction involved, a
brokerage firm's general execution and operational facilities and the firm's
risk in positioning the securities involved. The Municipal Bond Fund may execute
brokerage or other agency transactions through the Distributor or its affiliates
or through affiliates of the Adviser for a commission in conformity with the
Investment Company Act of 1940 (the "1940 Act"), the Securities Exchange Act of
1934 and rules of the SEC. The Trust will not purchase portfolio securities from
any affiliated person acting as a principal except in conformity with the
regulations of the SEC.
For additional information regarding risks and permitted investments of the
Municipal Bond Fund, see "RISK FACTORS" and "DESCRIPTION OF CERTAIN PERMITTED
INVESTMENTS."
RISK FACTORS
FIXED INCOME SECURITIES--The market value of fixed income securities will change
in response to interest rate changes and other factors. During periods of
falling interest rates, the value of outstanding fixed income securities
generally rises. Conversely, during periods of rising interest rates, the value
of such securities generally declines. Moreover, while securities with longer
maturities tend to produce higher yields, the prices of longer maturity
securities are also subject to greater market fluctuations as a result of
changes in interest rates. Changes by recognized agencies in the credit rating
of any fixed income security and in the ability of an issuer to make payments of
interest and principal also affect the value of these investments. Changes in
the value of portfolio securities will not necessarily affect cash income
derived from those securities but will affect the net asset value of the
Municipal Bond Fund's shares.
RATED SECURITIES--The Municipal Bond Fund may invest in municipal securities
rated no less than investment grade by either S&P or Moody's. Up to 20% of the
Municipal Bond Fund's assets may be invested in municipal bonds in the lowest
investment grade debt category (i.e, bonds rated BBB by S&P or Baa by Moody's),
which have speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity on the part of
issuers of such municipal bonds to make principal and interest payments than is
the case with higher grade bonds. The Municipal Bond Fund may retain a municipal
security which was rated as investment grade at the
<PAGE> 101
7
time of purchase but whose rating is subsequently downgraded below investment
grade.
OTHER PERMITTED INVESTMENTS--Certain of the other investments permitted for the
Municipal Bond Fund pose special risks in addition to those risks described
above. See "DESCRIPTION OF CERTAIN PERMITTED INVESTMENTS--Repurchase
Agreements," and "--Standby Commitments," in this Prospectus and the description
of permitted investments in the Statement of Additional Information.
THERE IS NO ASSURANCE THAT THE MUNICIPAL BOND FUND WILL ACHIEVE ITS INVESTMENT
OBJECTIVE.
INVESTMENT LIMITATIONS
The Municipal Bond Fund may not:
1. With respect to 75% of its total assets, purchase securities of any issuer
(except securities issued or guaranteed by the United States Government, its
agencies or instrumentalities) if, as a result, more than 5% of the total assets
of the Municipal Bond Fund would be invested in the securities of such issuer or
it would hold more than 10% of the outstanding voting securities of that issuer.
2. Purchase securities of any issuer (except securities issued or guaranteed by
the United States Government, its agencies or instrumentalities) if, as a
result, more than 25% of the total assets of the Municipal Bond Fund would be
invested in the securities of companies whose principal business activities are
in the same industry.
3. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding 5% of the value of the total assets of the Municipal Bond
Fund. All borrowings will be repaid before making additional investments and any
interest paid on such borrowings will reduce the income of the Municipal Bond
Fund.
The foregoing percentage limitations will apply at the time of the purchase of a
security or the time that money is borrowed. Additional investment limitations
are set forth in the Statement of Additional Information.
FUNDAMENTAL POLICIES
The investment objective and investment limitations stated above are fundamental
policies of the Municipal Bond Fund. Fundamental policies of the Municipal Bond
Fund cannot be changed without the consent of the holders of a majority of the
Municipal Bond Fund's outstanding shares. The term "majority of the outstanding
shares" of the Municipal Bond Fund as used in this Prospectus means the vote of
(i) 67% or more of the Municipal Bond Fund's shares present at a meeting, if the
holders of more than 50% of the outstanding shares of the Municipal Bond Fund
are present or represented by proxy, or (ii) more than 50% of the Municipal Bond
Fund's outstanding shares, whichever is less.
THE ADVISER
First Security Investment Management, Inc. ("FSIM" or the "Adviser") serves as
investment adviser to the Municipal Bond Fund pursuant to an investment advisory
agreement (the "Advisory Agreement") with the Trust. The selection of FSIM to
serve as investment adviser to the Municipal Bond Fund was approved by the
Trustees and the initial shareholder of the Municipal Bond Fund. Under the
Advisory Agreement, the Adviser makes investment decisions for the Municipal
Bond Fund and continuously reviews, supervises and administers the Municipal
Bond Fund's investment program.
Under the Advisory Agreement, FSIM is entitled to receive a fee for the services
it provides, which is calculated daily and paid monthly, at an annual rate of
0.60% of the average daily net assets of the Municipal Bond Fund. The Adviser
has voluntarily waived a portion of its fee for the Municipal Bond Fund's
current fiscal year so that total operating expenses for the Municipal Bond Fund
(excluding 12b-1 fees) will not exceed 0.75%. When the fee waiver is in effect,
the fee payable to the Adviser will be calculated by applying 0.30% to the
average daily
<PAGE> 102
8
net assets of the Municipal Bond Fund. The Adviser may revoke its fee waiver at
any time at its sole discretion without notice to any current or prospective
shareholders.
FSIM, incorporated in August 1984, is a wholly-owned, indirect subsidiary of
First Security Corporation, a financial services organization and registered
bank holding company with headquarters in Utah. In addition to advising the
Municipal Bond Fund, FSIM provides investment advisory services to the Trust's
other portfolios and its advisory experience includes the management of various
collective and common investment funds and the provision of investment
management services to another investment company, banks and thrift
institutions, corporate and profit-sharing trusts, Taft-Hartley organizations,
municipal and state retirement funds, charitable foundations, endowments and
individual investors throughout the United States. FSIM had approximately $4.3
billion under management at December 31, 1995. FSIM is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended, and
has offices at 61 South Main Street, Salt Lake City, Utah 84111, at 119 North
9th Street, Boise, Idaho 83730 and at 219 Central Avenue NW, 3rd Floor,
Albuquerque, New Mexico 87102.
The following individual is responsible for the day-to-day management of the
Municipal Bond Fund:
James A. Schuck has been a Vice President and Senior Portfolio Manager of the
Adviser since 1984 and has managed collective investment funds with investment
objectives similar to those of the Municipal Bond Fund since that time. Mr.
Schuck is also responsible for management of the Trust's Short Term Municipal
Bond Fund and Idaho Municipal Bond Fund.
Banking laws and regulations, including the Glass-Steagall Act as currently
interpreted by the Board of Governors of the Federal Reserve System, prohibit a
bank holding company registered under the Bank Holding Company Act of 1956 or
any affiliate thereof from sponsoring, organizing, controlling, or distributing
the shares of a registered, open-end investment company continuously engaged in
the issuance of its shares, and prohibit banks generally from issuing,
underwriting, selling or distributing securities, but do not prohibit such a
bank holding company or affiliate from acting as investment adviser, transfer
agent, or custodian to such an investment company, or from purchasing shares of
such a company as agent for and upon the order of a customer, or from performing
any combination of such services. FSIM and the Trust believe that FSIM may
perform the advisory services for the Trust described in this Prospectus.
However, future changes in legal requirements relating to the permissible
activities of banks and their affiliates, as well as future interpretations of
present requirements, could prevent FSIM from continuing to perform investment
advisory services for the Trust.
If FSIM or any other service providers were prohibited from performing services
for the Trust, it is expected that the Board of Trustees of the Trust would
recommend to the Trust's shareholders that they approve new agreements with
another entity or entities qualified to perform such services and selected by
the Board.
THE ADMINISTRATOR
SEI Fund Resources, 680 East Swedesford Road, Wayne, PA 19087, a wholly-owned
subsidiary of SEI Financial Management Corporation, a wholly-owned subsidiary of
SEI Corporation ("SEI"), provides the Trust with administrative services (other
than investment advisory services), accounting services, regulatory reporting,
all necessary office space, equipment, personnel and facilities, pursuant to an
administration agreement with the Trust (the "Administration Agreement"). For
these services, the Administrator is entitled to a fee from the Municipal Bond
Fund in an amount which is calculated at an annual rate of 0.20% of its average
daily net assets.
<PAGE> 103
9
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), 680 East Swedesford Road,
Wayne, PA 19087, a wholly-owned subsidiary of SEI, serves as the distributor for
the Municipal Bond Fund pursuant to a distribution agreement (the "Distribution
Agreement") which applies to Institutional and Retail Class A shares of the
Municipal Bond Fund. The Trust has adopted a distribution plan for the Retail
Class A shares (the "Retail Plan") of the Municipal Bond Fund in accordance with
the provisions of Rule 12b-1 under the 1940 Act. The Trust may also execute
brokerage or other agency transactions through the Distributor for which the
Distributor may receive usual and customary compensation. The Trust intends to
operate the Retail Plan in accordance with its terms and with the National
Association of Securities Dealers, Inc. ("NASD") rules concerning sales charges.
The Distribution Agreement and Retail Plan provide for payment to the
Distributor of a total fee in connection with the servicing of shareholder
accounts of the Retail Class A shares, calculated and payable monthly, at the
annual rate of 0.25% of the value of the average daily net assets of such class.
All or any portion of such total fee may be payable as a Shareholder Servicing
Fee, and all or any portion of such total fee may be payable as a Distribution
Fee, as determined from time to time by the Trustees of the Trust. All such fees
are currently designated and payable as a Shareholder Servicing Fee.
The Shareholder Servicing Fee may be used by the Distributor to provide
compensation for ongoing servicing or maintenance of shareholder accounts with
respect to the Retail Class A class of the Municipal Bond Fund. Compensation may
be paid by the Distributor to persons, including employees of the Distributor,
and institutions who respond to inquiries of holders of Retail Class A shares
regarding their ownership of shares or their accounts with the Trust or who
provide other administrative or accounting services not otherwise provided by
the Adviser, transfer agent or other agent of the Trust.
Payments under the Retail Plan are not tied exclusively to the expenses for
shareholder servicing activities actually incurred by the Distributor, so that
such payments may exceed expenses actually incurred by the Distributor. The
Trust's Board of Trustees will evaluate the appropriateness of the Retail Plan
and its payment terms on a continuing basis and in doing so will consider all
relevant factors, including expenses borne by the Distributor and amounts it
receives under the plan.
The Trust's Adviser and the Distributor may, at their option and in their sole
discretion, make payments from their own resources to cover costs of additional
shareholder servicing activities.
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
PARTICIPATING DEALERS
Shares of the Municipal Bond Fund may be purchased, exchanged or redeemed
through a financial intermediary, such as a broker-dealer, bank or other
financial institution or organization, which has entered into an agreement with
the Distributor to sell shares (a "Participating Dealer"). Persons ("Customers")
wishing to purchase shares, or who wish to exchange or redeem shares already
purchased, should contact their Participating Dealer for information about the
services available to them and for specific instructions on how to purchase,
exchange or redeem shares.
The Distributor has entered into an agreement with First Security Investor
Services, Inc. ("FSIS") authorizing FSIS to sell Municipal Bond Fund shares as a
Participating Dealer. FSIS representatives may be contacted at:
First Security Investor Services
61 South Main Street
Salt Lake City, Utah 84111
(800) 574-6609
Participating Dealers may impose a cut-off time earlier than those described
below for receipt of purchase,
<PAGE> 104
10
exchange or redemption orders directed through them to allow for processing and
transmittal of those orders to the Transfer Agent for effectiveness the same
day. Shares purchased by Customers through Participating Dealers may be held of
record by the Participating Dealer. Customers who desire to transfer the
registration of shares beneficially owned by them but held of record by a
Participating Dealer should contact their Participating Dealer to accomplish
such change. Depending upon the terms of a particular Customer account, a
Participating Dealer may charge a Customer account fees. Information concerning
these services and any charges should be obtained by the Customer from the
Participating Dealer.
GENERAL INFORMATION ON SHARE PURCHASES
Customers wishing to purchase shares of the Municipal Bond Fund should contact a
Participating Dealer for information on the services available to them and for
specific instructions on how to purchase shares. The Participating Dealer may
indicate that the Customer may purchase shares by contacting the Transfer Agent
directly by mail or by wire as described below. Existing shareholders may
purchase additional shares through an automatic investment plan or exercise of a
distribution investment option.
The minimum initial investment in the shares is $1,000; however, the minimum
investment may be waived at the Distributor's discretion. All subsequent
purchases must be in amounts of at least $100 (including purchases through
payroll deductions authorized pursuant to pre-approved payroll deduction plans).
Shares may be purchased on days on which the New York Stock Exchange is open for
business ("Business Days"). Orders for the purchase of shares must be received
before 4:00 p.m. Eastern time on any Business Day for the order to be accepted
on that Business Day. The Trust reserves the right to reject a purchase order
when the Distributor determines that it is not in the best interest of the Trust
or shareholders to accept such purchase order.
PURCHASE BY MAIL
A Customer may purchase shares of the Municipal Bond Fund by completing and
signing an Account Application form and mailing it, along with a check (or other
negotiable bank instrument or money order) payable to "The Achievement Funds
Trust, (Portfolio Name)" to a Participating Dealer, or in some cases to the
Transfer Agent at P.O. Box 419448, Kansas City, Missouri 64141-6448. All
purchases made by check shall be in U.S. dollars and made payable to "The
Achievement Funds Trust, (Portfolio Name)". Third party checks, credit card
checks and cash will not be accepted. Orders placed by mail will be executed on
receipt of payment by the Transfer Agent. If a Customer's check does not clear,
the purchase will be canceled and the Customer could be liable for any losses or
fees incurred.
Account Application forms may be obtained by calling the Distributor at
1-800-472-0577.
PURCHASE BY WIRE
A Customer may purchase shares by wiring funds through the Federal Reserve wire
transfer system ("Fedwire"), provided that an Account Application has been
previously received. Customers purchasing shares by wire should instruct their
bank to transfer funds by wire to: United Missouri Bank of Kansas, N.A.; ABA
#10-10-00695; for Account #98-7060-046-3; further credit Municipal Bond Fund.
The wire instructions must include the Customer's name and account number. An
order to purchase shares by wire will be deemed to have been received by the
Trust on the Business Day of the wire, provided that the Customer wires funds to
the Transfer Agent prior to 4:00 p.m. Eastern time. If the Transfer Agent does
not receive the wire by 4:00 p.m. Eastern time, the order will be executed the
next business day.
AUTOMATIC INVESTMENT PLAN
Shares of the Municipal Bond Fund may be purchased systematically through
transfers from
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11
checking or savings accounts maintained by certain banks. Customers may purchase
shares on a fixed schedule (monthly, quarterly, semi-annually or annually) with
a minimum investment amount of $100. The Automatic Investment Plan is subject to
sales charges, minimum purchase amounts and minimum maintained balance
requirements disclosed in "General Information on Share Purchases", "Sales
Charges" and under "Other Information Regarding Redemptions".
DISTRIBUTION INVESTMENT OPTION
If directed by the Customer, distributions of dividends and capital gains made
by the Municipal Bond Fund may be invested in shares of one of the other
portfolios of the Trust, if such shares are available for sale. Investments of
distributions in shares of other portfolios must meet the applicable initial
investment minimum, or be made in an existing account and meet the applicable
additional purchase minimum. Such investments will not be subject to sales
charges. A Customer considering the Distribution Investment Option should
consider the differences in objectives and policies of another portfolio before
making any investment in such portfolio. The Trust reserves the right to
terminate this Distribution Investment Option without further notice to
shareholders.
SALES CHARGES
The purchase of shares of the Municipal Bond Fund is subject to a sales charge
which varies depending on the size of the purchase. The following tables show
the regular sales charges on Municipal Bond Fund shares to a single purchaser,
together with the reallowance paid to dealers and the agency commission paid to
brokers (collectively, the "Commission").
<PAGE> 106
12
<TABLE>
<CAPTION>
REALLOWANCE AND
SALES CHARGE AS SALES CHARGE AS BROKERAGE COMMISSIONS
A PERCENTAGE OF A PERCENTAGE OF AS A PERCENTAGE
AMOUNT OF PURCHASE OFFERING PRICE NET AMOUNT INVESTED OF OFFERING PRICE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
less than $50,000................... 4.00% 4.17% 3.60%
$50,000 but less than $100,000...... 3.50% 3.63% 3.15%
$100,000 but less than $250,000..... 3.00% 3.09% 2.70%
$250,000 but less than $500,000..... 2.50% 2.56% 2.25%
$500,000 but less then $1,000,000... 2.00% 2.04% 1.80%
$1,000,000 and over(1).............. -- -- --
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Although no sales charge is paid by a Customer investing amounts over
$1,000,000, a brokerage commission may be paid in connection with such
transactions.
Under certain circumstances, commissions up to the amount of the entire sales
charge may be reallowed to certain investment professionals, who might then be
deemed to be "underwriters" under the Securities Act of 1933, as amended.
REDUCTION OF SALES CHARGE: RIGHT OF ACCUMULATION. In calculating the sales
charge rates applicable to current purchases of shares of the Municipal Bond
Fund, a single purchaser is entitled to combine current purchases with the
current market value of previously purchased shares of the Municipal Bond Fund,
or previously purchased shares of other portfolios of the Trust or of the
ProVantage class of shares of certain portfolio the SEI Family of Funds offered
as part of The Achievement Funds, which are sold subject to a comparable sales
charge. See the tables above for the sales charge on quantity purchases.
REDUCTION OF SALES CHARGE: LETTER OF INTENT. Reduced sales charges are also
applicable to the aggregate amount of purchases made by any qualified Customer
within a 13-month period pursuant to a written Letter of Intent provided to the
Distributor that does not legally bind the signer to purchase any set number of
shares and provides for the holding in escrow by the Distributor of 5% of the
amount purchased until such purchase is completed within the 13-month period. A
Letter of Intent may be dated to include shares purchased up to 90 days prior to
the date the Letter of Intent is signed. The 13-month period begins on the date
of the earliest purchase. If the intended investment is not completed, the
Distributor will surrender an appropriate number of the escrowed shares for
redemption in order to recover the difference between the sales charge imposed
under the Letter of Intent and the sales charge that would have otherwise been
imposed.
REINSTATEMENT PRIVILEGE: A shareholder who has redeemed shares of the Municipal
Bond Fund has a one-time right to reinvest the redemption proceeds in shares of
the Municipal Bond Fund at net asset value as of the time of reinvestment. Such
a reinvestment must be made within 30 days of the redemption and is limited to
the amount of the redemption proceeds. Although redemptions and repurchases of
shares are taxable events, a reinvestment within such 30-day period in the same
fund is considered a "wash sale" and results in the inability to recognize
currently all or a portion of a loss realized on the original redemption for
federal income tax purposes. The shareholder or his or her Participating Dealer
must notify the Transfer Agent at the time the trade is placed that the
transaction is a reinvestment.
SALES CHARGE WAIVERS: No sales charge is imposed on shares of the Municipal
Bond Fund (i) issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Trust is a party, (ii) sold to
dealers or brokers that have a sales agreement with the Distributor for their
own account or for retirement plans for employees or sold to present employees
of dealers or brokers that certify to the Distributor at the time of purchase
that such purchase is for their own account, (iii) sold to present employees of
SEI or
<PAGE> 107
13
one of its affiliates; (iv) sold to present employees of First Security
Corporation or one of its affiliates; (v) sold to persons participating in
certain financial services programs offered by the bank affiliates of First
Security Corporation and authorized for sales charge waiver by the Distributor;
(vi) sold to Trustees and officers of the Trust; (vii) purchased with the
proceeds from the recent redemption of shares of the Municipal Bond Fund as set
forth above under Reinstatement Privilege; (viii) purchased through the exercise
of a Distribution Option described above; and (ix) purchased with proceeds from
the recent redemption of shares of a registered open-end management investment
company for which a front-end sales load was paid (deferred sales charges paid
upon redemption do not qualify for this waiver).
The waiver of the sales charge under clause (ix) applies only if the following
conditions are met: the purchase must be made within 30 days of the redemption;
the Distributor must be notified in writing by the investor, or his or her
agent, at the time the purchase is made; and a copy of the investor's account
statement showing such redemption must accompany such notice. The waiver policy
with respect to the purchase of shares through the use of proceeds from a recent
redemption above may be discontinued at any time without notice. Investors
should contact the Distributor to confirm continued availability prior to
initiating the procedures described above.
OTHER INFORMATION REGARDING PURCHASES
Shares of the Municipal Bond Fund are sold on a continuous basis and are offered
only to residents of states in which the shares are eligible for purchase. No
certificates representing shares will be issued. The purchase price of shares is
the net asset value next determined after a purchase order is received and
accepted plus the applicable sales charge. The net asset value per share of the
Municipal Bond Fund is determined by dividing the total value of its investments
and other assets, less any liabilities, by the total outstanding shares of the
Municipal Bond Fund. The Municipal Bond Fund's investments will be valued at
their last sales price as described in the Statement of Additional Information.
Net asset value per share is determined daily as of the close of trading on the
New York Stock Exchange (currently 4:00 p.m. Eastern time) on each Business Day.
The Distributor may, from time to time and at its own expense, provide
promotional incentives in the form of cash or other compensation to certain
investment professionals or financial institutions whose registered
representatives have sold or are expected to sell significant amounts of the
shares of the Municipal Bond Fund. Such other compensation may take the form of
payments for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives to places within or outside
of the United States.
EXCHANGE PRIVILEGES
Once payment for shares has been received (i.e., an account has been
established), a shareholder may exchange some or all of such shares for Retail
Class A shares of other portfolios of the Trust including the Equity Fund,
Balanced Fund, Intermediate Term Bond Fund, Short Term Bond Fund, Short Term
Municipal Bond Fund and Idaho Municipal Bond Fund ("Trust Portfolios") or for
Class D shares of certain portfolios of the SEI Family of Funds currently
offered as part of The Achievement Funds, including the Treasury Securities
Portfolio of the SEI Liquid Asset Trust and the Tax Free Portfolio of the SEI
Tax Exempt Trust (the "SEI Money Market Funds"), the Small Cap Growth Portfolio
of the SEI Institutional Managed Trust and the Core International Equity
Portfolio of the SEI International Trust (together with the SEI Money Market
Funds, the "SEI Funds").
Exchanges are made at net asset value plus any applicable sales charge. If,
within 6 months of their acquisition, Municipal Bond Fund shares are exchanged
for shares of another Trust Portfolio or the SEI Funds with a higher sales
charge, the customer will pay the difference between the sales charges in
<PAGE> 108
14
connection with the exchange. No refund of a sales charge will be made if shares
of a Municipal Bond Fund are exchanged for shares of another Trust Portfolio or
an SEI Fund that imposes a lower sales charge. No additional sales charge will
be imposed in connection with an exchange of shares of a Municipal Bond Fund for
shares of another Trust Portfolio or an SEI Fund if such exchange occurs more
than 6 months after the Customer's purchase of the Municipal Bond Fund shares
disposed of in the exchange. Shares of a Municipal Bond Fund may be exchanged
for shares of an SEI Money Market Fund without imposition of a sales charge by
the SEI Money Market Fund. Such SEI Money Market Fund shares may subsequently be
exchanged for shares of the Municipal Bond Fund, but such an exchange, if
consummated after 30 days of the initial exchange, will be subject to imposition
of the full sales charge associated with an acquisition of shares of the
Municipal Bond Fund.
If a shareholder buys shares of the Municipal Bond Fund and receives a sales
charge waiver, the shareholder will be deemed to have paid the sales charge for
purposes of this exchange privilege. In calculating any sales charge payable on
an exchange, the Trust will assume that the first shares exchanged are those on
which a sales charge has already been paid. Sales charge waivers may also be
available under certain circumstances, as described in this Prospectus. The
Trust reserves the right to change the terms and conditions of the exchange
privilege discussed herein, or to terminate the exchange privilege, upon sixty
days' notice.
Shareholders should contact a Participating Dealer for instructions on how to
exchange shares. Exchanges will be made only after receipt of proper
instructions in writing or by telephone (an "Exchange Request") for an
established account by the Transfer Agent. The liability of the Trust, the
Distributor or the Transfer Agent for unauthorized or fraudulent telephone
instructions may be limited as described under "PURCHASE, EXCHANGE AND
REDEMPTION OF SHARES--Redemption of Shares--By Telephone." If an Exchange
Request in good order is received by the Transfer Agent by 4:00 p.m. Eastern
time on any Business Day, the exchange will ordinarily be effective on that day.
Any Customer who wishes to make an exchange must have received a current
prospectus of the Trust Portfolio or SEI Fund into which the exchange is being
made before the exchange will be effected. Information contained in this
Prospectus concerning sales charges imposed by SEI Funds is subject to change by
the SEI Funds.
An exchange between the Retail Class A shares and the Institutional class shares
of the Municipal Bond Fund is generally not permitted, except that exchanges
between the classes will be permitted should a Retail Class A shareholder become
eligible to purchase Institutional class shares. For example, a Retail Class A
shareholder may establish a trust account that is eligible to purchase shares of
the Institutional class. In this case, an exchange will be permitted between the
Retail Class A class of the Municipal Bond Fund and the Institutional class of
the Municipal Bond Fund at net asset value, without the imposition of a sales
charge, fee or other charge. An exchange from the Institutional class of the
Municipal Bond Fund to the Retail Class A class of the Municipal Bond Fund will
occur automatically when an Institutional class shareholder becomes ineligible
to invest in the Institutional class at net asset value, without the imposition
of a sales load, fee or other charge. The Trust will provide at least thirty
days' notice of any such exchange. After the exchange, the exchanged shares will
be subject to all fees applicable to the Retail Class A shares. The Trust
reserves the right to require shareholders to complete an application or other
documentation in connection with the exchange.
Each exchange between the Municipal Bond Fund and a Trust Portfolio or an SEI
Fund actually represents the sale of shares of one portfolio and the purchase of
shares in the other, which may produce a gain or loss for tax purposes. In order
to protect the Municipal Bond Fund's performance and its shareholders, the Trust
discourages frequent exchange activity in response to short-term market
fluctuations. The Trust reserves the right to modify or
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15
withdraw the exchange privilege or to suspend the offering of shares in any
class without notice to shareholders if, in the Adviser's judgment, the
Municipal Bond Fund would be unable to invest effectively in accordance with its
investment objective and policies, or would otherwise potentially be adversely
affected. The Municipal Bond Fund also reserves the right to reject any specific
purchase order, including certain purchases by exchange.
REDEMPTION OF SHARES
Shareholders may redeem their shares without charge on any Business Day by mail,
by telephone or through a systematic withdrawal plan. Shareholders should
contact a Participating Dealer for information on how to redeem shares.
Redemption proceeds will be sent by check by the Federal Reserve System's
automated clearance house ("ACH") or by Fedwire to or for the account of the
record owner of the shares redeemed. A wire redemption charge (presently $15.00)
will be deducted from the amount of proceeds of a redemption that are
transferred by ACH or Fedwire.
REDEMPTIONS BY MAIL
A written request for redemption must be received by the Transfer Agent, P.O.
Box 419448, Kansas City, Missouri 64141-6448 in order to constitute a valid
redemption request.
If the redemption request exceeds $5,000, or if the request directs the proceeds
to be sent to an address different from that of record, the Transfer Agent may
require that the signature on the written redemption request be guaranteed.
Customers should be able to obtain a signature guarantee from a bank,
broker-dealer, credit union, securities exchange or association, clearing agency
or savings association. Notaries public cannot guarantee signatures. The
signature guarantee requirement will be waived if all of the following
conditions apply: (1) the redemption is for not more than $5,000 worth of
shares, (2) the redemption check is payable to the shareholder of record and (3)
the redemption check is mailed to the shareholder at his or her address of
record.
REDEMPTIONS BY TELEPHONE
If authorized by a Shareholder in the account application, shares may be
redeemed upon request made by the Shareholder by telephone to the Transfer Agent
at 1-800-472-0577, or by contacting a Participating Dealer. Shareholders may not
close their accounts by telephone.
Neither the Trust, the Distributor nor the Transfer Agent will be responsible
for any loss, liability, cost or expense for acting upon wire instructions or
upon telephone instructions that it reasonably believes to be genuine. The
Trust, the Distributor and the Transfer Agent will each employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
including requiring a form of personal identification prior to acting upon
instructions received by telephone and recording telephone instructions. The
Trust, the Distributor or Transfer Agent may be liable for losses resulting from
fraudulent or unauthorized instructions if it does not employ these procedures.
If market conditions are extraordinarily active, or other extraordinary
circumstances exist, and a shareholder experiences difficulties placing
redemption orders by telephone, the shareholder may wish to consider placing an
order by mail.
SYSTEMATIC WITHDRAWAL PLAN
A systematic withdrawal plan can be established for the Municipal Bond Fund
account. Under the plan, redemptions can be automatically processed from
accounts (monthly, quarterly, semi-annually or annually) by check or by ACH
transfer with a minimum redemption amount of $100. The Municipal Bond Fund
account must maintain a minimum balance of $10,000 at all times while the
systematic withdrawal plan is in effect.
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OTHER INFORMATION REGARDING REDEMPTIONS
All redemption orders are effected at the net asset value per share next
determined after receipt and effectiveness of a valid request for redemption, as
described above. A redemption order will be effective on the same Business Day
it is received if it is received by the Transfer Agent before 4:00 p.m. Eastern
time; otherwise, the redemption order will be effective on the following
Business Day. Net asset value per share is determined as of the close of trading
on the New York Stock Exchange (currently 4:00 p.m. Eastern time) on each
Business Day. Payment to shareholders for shares redeemed will be made within
seven days after receipt by the Transfer Agent of the redemption request in good
order. Participating Dealers may impose an earlier cut-off time for receipt of
redemption orders directed through them to allow for processing and transmittal
of these orders to the Distributor for effectiveness the same day.
At various times, the Municipal Bond Fund may be requested to redeem shares for
which it has not yet received good payment. In such circumstances, redemption
proceeds will be forwarded upon collection of payment for the shares; collection
of payment may take 10 or more days. The Municipal Bond Fund intends to pay cash
for all shares redeemed, but under abnormal conditions which make payment in
cash unwise, payment may be made wholly or partly in portfolio securities with a
market value equal to the redemption price. In such cases, an investor may incur
brokerage costs in converting such securities to cash.
Due to the relatively high cost of handling small investments, the Trust
reserves the right to redeem, at net asset value, the shares of any shareholder
if, because of redemptions of shares by or on behalf of the shareholder, the
account of such shareholder in the Municipal Bond Fund has a value of less than
$1,000. Before the Trust exercises its right to redeem such shares and send the
proceeds to the shareholder, the shareholder will be given notice that the value
of the shares in his or her account is less than the minimum amount and will be
allowed 60 days to make an additional investment in the Municipal Bond Fund in
an amount which will increase the value of the account to at least $1,000.
See "Purchase and Redemption of Shares" in the Statement of Additional
Information for examples of when the right of redemption may be suspended.
PERFORMANCE
GENERAL
From time to time the Municipal Bond Fund may advertise yield and total return,
and may also advertise a "taxable equivalent yield." These figures are based on
historical earnings and are not intended to indicate future performance. No
representation can be made concerning actual future yields or returns. The yield
of the Municipal Bond Fund refers to the income generated by a hypothetical
investment, net of any sales charge, in the Municipal Bond Fund over a thirty
day period. This income is then "annualized," i.e., the income over thirty days
is assumed to be generated over one year and is shown as a percentage of the
investment.
A "taxable equivalent yield" is calculated by determining the yield that would
have been achieved on a fully taxable investment to produce the after-tax
equivalent of the Municipal Bond Fund's yield, assuming certain rates of
taxation for a shareholder.
The total return of the Municipal Bond Fund refers to the average compounded
rate of return on a hypothetical investment for designated time periods,
assuming that the entire investment is redeemed at the end of each period and
assuming the reinvestment of all dividend and capital gain distributions.
The Municipal Bond Fund may periodically compare its performance to that of
other mutual funds tracked by mutual funds rating services (such as Lipper
Analytical Services, Inc.), financial and business publications and periodicals,
broad groups of comparable mutual funds or unmanaged indices which may assume
investment of dividends but
<PAGE> 111
17
generally do not reflect deductions for administrative and management costs. The
Municipal Bond Fund may quote a service that ranks mutual funds on the basis of
risk-adjusted performance (such as Morningstar, Inc.). The Municipal Bond Fund
may use long-term performance of appropriate capital markets to demonstrate
general long-term risk versus reward scenarios and could include the value of a
hypothetical investment in the appropriate capital markets. The Municipal Bond
Fund may also quote financial and business publications and periodicals as they
relate to fund management, investment philosophy and investment techniques.
The Municipal Bond Fund may quote various measures of volatility and benchmark
correlation in advertising and may compare these measures to those of other
funds. Measures of volatility attempt to compare historical share price
fluctuations or total returns to a benchmark while measures of benchmark
correlation indicate how valid a comparative benchmark might be. Measures of
volatility and correlation are calculated using averages of historical data and
cannot be calculated precisely.
PERFORMANCE OF PREDECESSOR COLLECTIVE INVESTMENT FUND
The Municipal Bond Fund is the successor to a collective investment fund
formerly managed by the Adviser. A substantial portion of the assets of the
collective investment fund was transferred to the Municipal Bond Fund on or
about , 1996 in connection with the commencement of operations by the
Municipal Bond Fund. Set forth below is certain performance data for the
predecessor collective investment fund, which is deemed relevant because the
collective investment fund was managed using virtually the same investment
objectives, policies and restrictions as those used by the Municipal Bond Fund.
However, the performance data is not necessarily indicative of the future
performance of the Municipal Bond Fund.
The predecessor collective investment fund did not incur expenses that
correspond to the advisory, administrative and other fees to which the Municipal
Bond Fund is subject. Accordingly, the following performance information
restates the actual performance of the collective investment fund after
adjusting such information by applying the anticipated total expense ratios for
the Municipal Bond Fund, which reduces the actual performance for the collective
investment fund. These expense ratios are those set forth under "Estimated
Annual Operating Expenses" (after giving effect to fee waivers).
AVERAGE ANNUAL TOTAL RETURN(1)
<TABLE>
<CAPTION>
- ----------------------------------------------------
MUNICIPAL BOND
COLLECTIVE INVESTMENT
FUND 1 YR. 3 YRS. 5 YRS.
- ----------------------------------------------------
<S> <C> <C> <C>
Without Sales Charge....... % % %
With Sales Charge.......... % % %
- ----------------------------------------------------
- ----------------------------------------------------
</TABLE>
(1) Adjusted to reflect estimated expenses, net of waivers, for the periods
ended , 1996.
TAXES
The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to present a detailed
explanation of the federal, state or local income tax treatment of the Municipal
Bond Fund or their shareholders. Accordingly, shareholders are urged to consult
their tax advisers regarding specific questions as to federal, state and local
income taxes. State and local tax consequences of an investment in the Municipal
Bond Fund may differ from the federal income tax consequences described below.
Additional information concerning taxes is set forth in the Statement of
Additional Information.
TAX STATUS OF THE MUNICIPAL BOND FUND
The Municipal Bond Fund is treated as a separate entity for federal income tax
purposes and is not combined with the Trust's other portfolios. The
<PAGE> 112
18
Municipal Bond Fund intends to qualify for the special tax treatment afforded
regulated investment companies ("RICs") under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), so as to be relieved of federal
income tax on investment company taxable income and net capital gains (the
excess of net long-term capital gains over net short-term capital losses)
distributed to Shareholders.
TAX STATUS OF DISTRIBUTIONS
The Municipal Bond Fund intends to distribute substantially all of its net
investment income (including net short-term capital gains and realized market
discounts) to shareholders. If, at the close of each quarter of its taxable
year, at least 50% of the value of the Municipal Bond Fund's total assets
consists of obligations the interest on which is excludable from gross income,
the Municipal Bond Fund may distribute its net tax-exempt interest income as
"exempt-interest dividends" to its shareholders. Exempt-interest dividends are
excludable from a shareholder's gross income for federal income tax purposes but
may have certain collateral federal tax consequences including alternative
minimum tax consequences. In addition, the receipt of exempt-interest dividends
may cause persons receiving Social Security or Railroad Retirement benefits to
be taxable on a portion of such benefits. See the Statement of Additional
Information.
Current federal tax law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect on the
ability of the Municipal Bond Fund to purchase sufficient amounts of tax-exempt
securities to satisfy the Code's requirements for the payment of exempt-interest
dividends.
Any dividends paid out of net short-term capital gains and realized market
discount or out of any income received by the Municipal Bond Fund from taxable
securities will be taxable to shareholders as ordinary income (whether received
in cash or in additional shares) to the extent of the Municipal Bond Fund's
earnings and profits and will not qualify for the dividends-received deduction
for corporate shareholders. Distributions to shareholders of net capital gains
of the Municipal Bond Fund also will not qualify for the corporate dividends
received deduction and will be taxable to shareholders as long-term capital
gain, whether received in cash or additional shares, and regardless of how long
a shareholder has held the shares.
The Municipal Bond Fund will report annually to shareholders the percentage of
its net investment income which is exempt from the regular federal income tax,
which constitute items of tax preference for purposes of the federal alternative
minimum tax, and which are fully taxable. The Municipal Bond Fund will apply
such percentages uniformly to all distributions declared from net investment
income during each report year. These percentages may differ significantly from
the actual percentages for any particular day.
An investment in the Municipal Bond Fund is not intended to constitute a
balanced investment program. Shares of the Municipal Bond Fund would not be
suitable for tax-exempt institutions and may not be suitable for retirement
plans qualified under Section 401 of the Code, H.R. 10 plans and individual
retirement accounts since such plans and accounts generally qualify for deferral
of taxes on income or gains and, therefore, not only would not gain any
additional benefit from the dividends of the Municipal Bond Fund being
tax-exempt, but also such dividends would be taxable when distributed to the
beneficiary.
ADDITIONAL FEDERAL TAX INFORMATION
Dividends declared by the Municipal Bond Fund in October, November or December
of any year and payable to shareholders of record on a date in any such month
will be deemed to have been paid by the Municipal Bond Fund and received by the
shareholders on December 31 of that year if paid at any time during the
following January.
<PAGE> 113
19
The Municipal Bond Fund intends to make sufficient distributions prior to the
end of each calendar year to avoid liability for federal excise tax.
Shareholders should consult their tax advisers concerning the state and local
tax consequences of investment in the Municipal Bond Fund, which may differ from
federal income tax consequences described above.
GENERAL INFORMATION
THE TRUST
The Trust was organized as an unincorporated business trust under the laws of
Massachusetts on December 16, 1988 pursuant to a Master Trust Agreement of that
date, which agreement was amended and restated on October 7, 1994 and was
further amended on December 1, 1994 (as further amended from time to time, the
"Trust Agreement").
In addition to the Municipal Bond Fund, the Trust currently offers shares of
beneficial interest in six separate investment portfolios designated as the
Equity Fund, Balanced Fund, Intermediate Term Bond Fund, Short Term Bond Fund,
Short Term Municipal Bond Fund and Idaho Municipal Bond Fund. The Trust may
issue an unlimited number of shares of each of its portfolios. Each share is
entitled to such dividends and distributions out of income earned on the assets
of such portfolio as are declared in the discretion of the Trust's Board of
Trustees. When issued and paid for, shares will be fully paid and non-assessable
by the Trust and will have no preference, conversion or preemptive rights. The
Trust Agreement authorizes the Board of Trustees to classify or reclassify any
shares of any portfolio into one or more other portfolio and to create classes
in such portfolio. The Trust currently offers two classes of shares of each of
its portfolios, the Institutional and Retail Class A classes. Both classes of a
portfolio have a common investment objective and investment limitations and
policies. Shares of the Retail Class A class of the Municipal Bond Fund are
offered by this prospectus. Shares of the Institutional class of the Municipal
Bond Fund are offered through a separate prospectus.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws of Massachusetts. The Trustees supervise the business activities of the
Trust and have approved contracts under which, as described above, certain
companies provide essential management services to the Trust.
VOTING RIGHTS
All shares of the Trust have equal voting rights and will be voted in the
aggregate, and not by series or class, except where voting by series or class is
required by law or where the matter involved affects only one series or class.
The Trust is not required under Massachusetts law to hold annual meetings of
shareholders, but will hold shareholder meetings if required to do so by the
1940 Act. Special meetings may be called for a specific portfolio for purposes
such as changing fundamental policies or approving certain contracts.
Shareholders will be permitted to call a meeting of shareholders and will
receive assistance in communicating with other shareholders, for the purpose of
voting upon the removal of any Trustee as long as such shareholder request is in
writing and is signed by shareholders of record of no less than 10% of the
Trust's outstanding shares.
EXPENSES
The Municipal Bond Fund will incur expenses in the conduct of its operations in
addition to the fees to be paid to the Adviser, the Distributor and the
Administrator described above. Those expenses will include custodial fees,
professional fees, registration fees, printing expenses, certain organizational
costs and other third party expenses. See "Estimated Annual Operating Expenses"
for an estimate of the amount of such other expenses expressed as a percentage
of the Municipal Bond Fund's net assets.
<PAGE> 114
20
REPORTING
The Trust issues unaudited financial information semiannually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to shareholders of record.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to SEI Financial Services Company in
writing to 680 East Swedesford Road, Wayne, PA 19087 or by calling
1-800-472-0577.
DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) of
the Municipal Bond Fund is distributed in the form of dividends that are
declared daily and paid monthly. Shareholders of record on the last Business Day
of each month will be entitled to receive the monthly dividend distribution,
which is generally paid on the 10th Business Day of the following month. If any
net capital gains are realized, they will be distributed by the Municipal Bond
Fund at least annually.
Shareholders automatically receive all income dividends and capital gains
distributions in additional shares of the Municipal Bond Fund (which will be
issued at the net asset value next determined following the record date), unless
the shareholder has elected to take such payment in another form. Shareholders
may change their election by providing written notice to the Transfer Agent at
least 15 days prior to the change.
Dividends and distributions of the Municipal Bond Fund are paid on a per-share
basis. The value of each share will be reduced by the amount of any such
payment. If shares are purchased shortly before the record date for a dividend
or the distribution of capital gains, a shareholder will pay the full price for
the shares and receive some portion of the price back as a taxable dividend or
distribution.
THE TRANSFER AGENT
DST Systems, Inc., P.O. Box 419448, Kansas City, Missouri 64141-6448 (the
"Transfer Agent") acts as the transfer agent and dividend disbursing agent for
the Municipal Bond Fund under a transfer agency agreement with the Trust.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Ballard Spahr Andrews & Ingersoll serves as counsel to the Trust. Deloitte &
Touche LLP serves as independent accountants of the Trust.
CUSTODIAN
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box 7618, Philadelphia,
PA 19101 (the "Custodian"), acts as custodian of the Trust. The Custodian holds
cash, securities and other assets of the Trust as required by the 1940 Act.
DESCRIPTION OF CERTAIN PERMITTED INVESTMENTS
COMMERCIAL PAPER--Commercial paper is a term used to describe unsecured
short-term promissory notes issued by banks, municipalities, corporations and
other entities. Maturities on these issues vary from a few to 270 days.
FIXED INCOME SECURITIES--Fixed income securities are debt obligations bearing a
specified rate of interest during their term that are issued by the United
States government and its agencies and instrumentalities, corporations,
municipalities and other borrowers.
MONEY MARKET FUNDS--Money market funds are open-end investment companies that
are continuously engaged in the issuance of shares. In connection with
management of its daily cash positions, the Municipal Bond Fund may invest in
money market fund shares having investment objectives and policies consistent
with those of the Municipal Bond Fund. Investments by a money market fund are
subject to limitations
<PAGE> 115
21
imposed under regulations adopted by the Securities and Exchange Commission.
Under these regulations, money market funds may only acquire obligations that
present minimal credit risk and that are "eligible securities," which means they
are (i) rated, at the time of investment, by at least two nationally recognized
security rating organizations (one if it is the only organization rating such
obligation) in the highest rating category or, if unrated, determined to be of
comparable quality (a "first tier security"), or (ii) rated according to the
foregoing criteria in the second highest rating category or, if unrated,
determined to be of comparable quality ("second tier security"). A security is
not considered to be unrated if the issuer has outstanding obligations of
comparable priority and security that have a short-term rating. In the case of
taxable money market funds, investments in second tier securities are subject to
the further constraints in that (i) no more than 5% of a fund's assets may be
invested in second tier securities and (ii) any investment in securities of any
one such issuer is limited to the greater of 1% of the fund's total assets or $1
million. A taxable money market fund may also hold more than 5% of its assets in
first tier securities of a single issuer for three "business days" (that is, any
day other than a Saturday, Sunday or customary business holiday).
MUNICIPAL LEASE OBLIGATIONS--Municipal lease obligations are securities issued
by state and local governments and authorities to finance the acquisition of
equipment and facilities. They may take the form of a lease, an installment
purchase contract, a conditional sales contract, or a participation interest in
any of the above. Municipal lease obligations are subject to the risk that the
issuing municipality may fail to appropriate funds for the payments due
thereunder in future years. Depending upon the market for such securities,
municipal lease obligations may be illiquid. The Trust's Board of Trustee's has
adopted guidelines that direct the Municipal Bond Fund's investment adviser to
consider the following factors in determining whether municipal lease
obligations are liquid securities: (i) the frequency of trades and market
quotations for the securities; (ii) the number of dealers willing and ready to
purchase and sell the securities; (iii) the number of potential purchasers of
the securities; (iv) whether any dealers have agreed to make a market in the
securities; (v) the nature of the securities and the nature of marketplace
trades, including the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer; (vi) whether the lease can be
cancelled; (vii) what assurances, if any, exist that the assets represented by
the lease can be sold; (viii) the strength of the lessee's general credit; (ix)
the likelihood that the municipality will discontinue appropriating funding for
the leased property because the property is no longer deemed essential to the
operation of the municipality; and (x) the legal recourse in the event of
failure to appropriate.
MUNICIPAL SECURITIES--Municipal securities consist of (i) debt obligations
issued by or on behalf of public authorities for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, mass transportation, schools, streets and
water and sewer works, the refunding of outstanding obligations, for general
operating expenses, and for lending such funds to other public institutions and
facilities, (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated facilities,
(iii) municipal lease obligations, and (iv) tax-exempt mutual funds, including
tax-exempt money market funds.
Municipal securities include both municipal notes and municipal bonds. Municipal
notes include general obligation notes, tax anticipation notes, revenue
anticipation notes, bond anticipation notes, certificates of indebtedness,
demand notes and construction loan notes and participation interests in
municipal notes. Municipal bonds include general obligation bonds, revenue or
special obligation bonds, private activity and industrial development bonds and
participation interests in municipal bonds.
<PAGE> 116
22
General obligation bonds are backed by the taxing power of the issuing
municipality. Revenue bonds are backed by the revenues of a project or facility
(tolls from a bridge, for example). Certificates of participation represent an
interest in an underlying obligation or commitment, such as an obligation issued
in connection with a leasing arrangement. Private activity bonds are bonds that
are issued by municipalities, the proceeds of which are used in an activity
considered a nonessential government function under the Internal Revenue Code,
which may include activities such as construction and operation of airports,
convention centers, auditoriums, sports facilities, hospitals and mass commuting
facilities. The payment of principal and interest on private activity and
industrial development bonds generally is dependent solely on the ability of a
facility's user to meet its financial obligations and the pledge, if any, of
real and personal property as security for such payment.
Economic, business, or political developments might affect all municipal
securities of a similar type. To the extent that a significant portion of the
Municipal Bond Fund's assets are invested in municipal securities payable from
revenue on similar projects, the Municipal Bond Fund will be subject to the
peculiar risks presented by such projects to a greater extent than it would be
if its assets were not so invested. For example, certain municipal securities
may be obligations of issuers who rely in whole or in part on ad valorem real
property taxes as a source of revenue and legislation may have the effect of
limiting ad valorem taxes on real property or restricting the ability of taxing
entities to increase real property tax revenues. Municipal securities that are
payable only from the revenues derived from a particular facility, such as a
utility or housing project, may be adversely affected by laws or regulations
that make it more difficult for the particular facility to generate revenues
sufficient to pay such interest and principal, including laws and regulations
that limit the amount of fees, rates or other charges that may be imposed for
use of the facility or that increase competition among facilities of that type
or that limit or otherwise have the effect of reducing the use of such
facilities generally, thereby reducing the revenues generated by the particular
facility. If the payment of interest and principal on municipal securities are
insured in whole or in part by a government created fund the municipal
securities may be adversely affected by laws or regulations that restrict the
aggregate insurance proceeds available for payment of principal and interest in
the revenue of a default on such securities. State and local tax revenues
generally mirror economic conditions and may be adversely affected by regional
or national recessions.
STANDBY COMMITMENTS--Securities subject to standby commitments permit the holder
thereof to sell the securities at a fixed price prior to maturity. Securities
subject to a standby commitment may be sold at any time at the current market
price. However, unless the standby commitment was an integral part of the
security as originally issued, it may not be marketable or assignable;
therefore, the standby commitment would only have value to the Municipal Bond
Fund owning the security to which it relates. In certain cases, a premium may be
paid for a standby commitment, which premium will have the effect of reducing
the yield otherwise payable on the underlying security. The Municipal Bond Fund
will limit standby commitment transactions to institutions believed to present
minimal credit risk.
U.S. TREASURY OBLIGATIONS--U.S. Treasury obligations consist of bills, notes and
bonds issued by the U.S. Treasury and separately traded interest and principal
component parts of such obligations that are transferable through the Federal
book-entry system known as Separately Traded Registered Interest and Principal
Securities ("STRIPS").
For additional information regarding permitted investments see "Description of
Permitted Investments" in the Trust's Statement of Additional Information.
<PAGE> 117
23
APPENDIX
DESCRIPTION OF CORPORATE AND MUNICIPAL BOND RATINGS
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degrees.
Debt rated A by S&P 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. 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.
Bonds which are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or an exceptionally
stable, margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. Bonds rated Aa by
Moody's are judged by Moody's to be of high quality by all standards. Together
with bonds rated Aaa, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A by Moody's possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Bonds which are rated Baa by Moody's are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1+, 1, 2 and 3 to indicate the relative degree of safety. Issues rated
A-1+ are those with an "overwhelming degree" of credit protection. Those rated
A-1 reflect a "very strong" degree of safety regarding timely payment. Those
rated A-2 reflect a safety regarding timely payment but not as high as A-1.
Commercial paper issuers rated Prime-1 and Prime-2 by Moody's are judged by
Moody's to be of the two highest quality ratings on the basis of relative
repayment capacity.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating. The following criteria will be used in making that assessment:
Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
<PAGE> 118
24
Source of Payment (the more dependent the issue is on the market for its
refinancing the more likely it will be treated as a note).
The note rating symbol SP-1 reflects very strong or strong capacity to pay
principal and interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) description.
Moody's highest rating for state and municipal and other short-term notes is
MIG-1 and VMIG-1. Short-term municipal securities rated MIG-1 or VMIG-1 are of
the best quality. They have strong protection from established cash flows of
funds for their servicing or from established and broad-based access to the
market for refinancing or both.
<PAGE> 119
TABLE OF CONTENTS
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<TABLE>
<S> <C>
Summary.......................................... 2
Estimated Annual Operating Expenses.............. 4
The Trust........................................ 8
Investment Objective and Policies................ 8
Risk Factors..................................... 9
Investment Limitations........................... 10
Fundamental Policies............................. 10
The Adviser...................................... 10
The Administrator................................ 11
The Distributor.................................. 12
Purchase, Exchange and Redemption of Shares...... 12
Performance...................................... 19
Average Annual Total Return...................... 20
Taxes............................................ 20
General Information.............................. 22
Description of Certain Permitted Investments..... 23
Appendix......................................... 26
</TABLE>
<PAGE> 120
<TABLE>
<S> <C>
[THE ACHIEVEMENT FUNDS LOGO]
THIS FUND IS OFFERED THE ACHIEVEMENT FUNDS
IN CONJUNCTION WITH THE ACHIEVEMENT FUNDS TRUST
THE ACHIEVEMENT FUNDS RETAIL
(PORTFOLIOS OF CERTAIN PROSPECTUS
MUTUAL FUNDS) TO AFFORD MUNICIPAL BOND FUND
A CONVENIENT RANGE OF
INVESTMENT CHOICES
TO INVESTORS.
JUNE 1, 1996
DISTRIBUTED BY
SEI FINANCIAL SERVICES COMPANY
680 EAST SWEDESFORD ROAD
WAYNE, PENNSYLVANIA 19087-1658
800-472-0577
ACH-F-019-01
</TABLE>
<PAGE> 121
THE ACHIEVEMENT FUNDS TRUST
INVESTMENT ADVISER:
FIRST SECURITY INVESTMENT MANAGEMENT, INC.
ADMINISTRATOR:
SEI FUND RESOURCES
DISTRIBUTOR:
SEI FINANCIAL SERVICES COMPANY
CUSTODIAN:
CORESTATES BANK, N.A.
THIS STATEMENT OF ADDITIONAL INFORMATION is not a prospectus. It is intended to
provide additional information regarding activities and operations of The
Achievement Funds Trust (the "Trust"), and should be read in conjunction with
the Trust's Prospectuses dated June 1, 1996 for the Trust's Equity Fund,
Balanced Fund, Intermediate Bond Fund, Short Term Bond Fund, Short Term
Municipal Bond Fund and Idaho Municipal Bond Fund and for the Trust's Municipal
Bond Fund (collectively the "Portfolios," and each a "Portfolio"). The
Prospectuses may be obtained through SEI Financial Services Company, 680 East
Swedesford Road, Wayne, PA 19087.
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE TRUST AND DESCRIPTION OF SHARES......................................... 3
DESCRIPTION OF PERMITTED INVESTMENTS........................................ 3
INVESTMENT POLICIES AND LIMITATIONS......................................... 10
THE ADVISER................................................................. 12
THE ADMINISTRATOR........................................................... 13
DISTRIBUTION................................................................ 14
TRUSTEES AND OFFICERS OF THE TRUST.......................................... 15
PERFORMANCE................................................................. 18
PURCHASE AND REDEMPTION OF SHARES........................................... 20
DETERMINATION OF NET ASSET VALUE............................................ 20
TAXES ................................................................... 21
PORTFOLIO TRANSACTIONS...................................................... 27
LIMITATION OF TRUSTEE'S LIABILITY........................................... 28
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES......................... 29
COUNSEL TO THE TRUST........................................................ 29
FINANCIAL STATEMENTS........................................................ 29
</TABLE>
June 1, 1996
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THE TRUST AND DESCRIPTION OF SHARES
The Achievement Funds Trust (formerly known as The FSB Funds) was organized as
an unincorporated business trust under the laws of the Commonwealth of
Massachusetts pursuant to a Master Trust Agreement dated December 16, 1988,
which agreement was amended and restated on October 7, 1994 and was further
amended on December 1, 1994 (as further amended from time to time, the "Trust
Agreement"). Each of the Portfolios is a series of the shares of the Trust, and
the shares of each Portfolio are divided into Institutional and Retail Class A
classes (collectively, the "shares"). The Trust's Municipal Bond Fund has not
commenced operations and the Trust is not currently offering shares of that
portfolio to the public.
The shares do not have cumulative voting rights, which means that holders of
more than 50% of the shares voting for the election of Trustees can elect all
Trustees. Shares are transferable but have no preemptive, conversion or
subscription rights. Shareholders generally vote by series, except that
shareholders vote in the aggregate with respect to the election of Trustees and
the selection of independent public accountants and shareholders vote as a class
with respect to matters affecting a class of a series of Portfolio's shares.
The Trustees of the Trust were elected at the first meeting of shareholders
following the commencement of the Trust's operations. The Trustees so elected
are to serve during the lifetime of the Trust or until they die, resign or are
removed, and Trustees may elect their own successors. Under the Trust Agreement,
shareholders of record of no less than two-thirds of the outstanding shares of
the Trust may remove a Trustee through a declaration in writing or by vote cast
in person or by proxy at a meeting called for that purpose. The Trust Agreement
also requires the Trustees to call a meeting of shareholders for the purpose of
voting upon the question of removal of any Trustee when requested in writing to
do so by the shareholders of record of not less than 10% of the Trust's
outstanding shares.
Massachusetts law provides that shareholders, under certain circumstances, could
be held personally liable for the obligations of the Trust. However, the Trust
Agreement disclaims shareholder liability for acts or obligations of the Trust
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Trust or a Trustee. The
Trust Agreement provides for indemnification from the Trust's property for all
losses and expenses of any shareholder held personally liable for the
obligations of the Trust. Thus, the risk of a shareholder's incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Trust would be unable to meet its obligations, a possibility that the
Trust's management believes is remote. Upon payment of any liability incurred by
the Trust, the shareholder paying the liability will be entitled to
reimbursement from the general assets of the Trust. The Trustees intend to
conduct the operations of the Trust in such a way so as to avoid, as far as
possible, liability of the shareholders for liabilities of the Trust.
DESCRIPTION OF PERMITTED INVESTMENTS
A Portfolio may make the following investments if, and to the extent, such
investments are covered by the Portfolio's investment policies described in the
Prospectus.
AMERICAN DEPOSITARY RECEIPTS ("ADRS") -- ADRs are securities, typically issued
by a U.S. financial institution (a "depositary"), that evidence ownership
interests in a security or a pool of securities issued by a foreign issuer and
deposited with the depositary. ADRs may be available through "sponsored" or
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"unsponsored" facilities. A sponsored facility is established jointly by the
issuer of the security underlying the receipts and a depositary, whereas an
unsponsored facility may be established by a depositary without participation by
the issuer of the underlying security. Holders of unsponsored depositary
receipts generally bear all the costs of the unsponsored facility. The
depositary of an unsponsored facility frequently is under no obligation to
distribute shareholder communications received from the issuer of the deposited
security or to pass through, to the holders of the receipts, voting rights with
respect to the deposited securities.
ASSET-BACKED SECURITIES -- Asset-backed securities are securities secured by
non-mortgage assets such as company receivables, truck and auto loans, leases
and credit card receivables. Such securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in the underlying pools of assets. Such securities also may be debt
instruments, which are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity, such as a trust,
organized solely for the purpose of owning such assets and issuing such debts.
Asset-backed securities are not issued or guaranteed by the U.S. Government or
its agencies or instrumentalities; however, the payment of principal and
interest on such obligations may be guaranteed up to certain amounts and for a
certain period by a letter of credit issued by a financial institution (such as
a bank or insurance company) unaffiliated with the issuers of such securities.
The purchase of asset-backed securities raises risk considerations peculiar to
the financing of the instruments underlying such securities. For example, there
is a risk that another party could acquire an interest in the obligations
superior to that of the holders of the asset-backed securities. There also is
the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on those securities. In addition, credit
card receivables are unsecured obligations of the card holder. Asset-backed
securities entail prepayment risk, which may vary depending on the type of
asset, but is generally less than the prepayment risk associated with
mortgage-backed securities.
COVERED CALL OPTIONS -- A call option gives the purchaser of the option the
right to buy, and the writer of the option the obligation to sell, the
underlying security at any time during the option period. In a covered call
option, the writer of the option owns a sufficient amount of the underlying
security to "cover" the option. The premium paid to the writer is the
consideration for undertaking the obligations under the option contract. The
initial sale of an option contract is an "opening transaction." In order to
close out an option position, the Portfolio may enter into a "closing
transaction," which is simply the purchase of an option contract on the same
security with the same exercise price and expiration date as the option contract
originally opened.
The Portfolios may write covered call options as a means of increasing the yield
on its portfolio and as a means of providing limited protection against
decreases in its market value. When it sells an option, if the underlying
securities do not increase or decrease to a price level that would make the
exercise of the option profitable to the holder thereof, the option generally
will expire without being exercised and the Portfolio will realize as profit the
premium received for such option. When a call option of which the Portfolio is
the writer is exercised, it will be required to sell the underlying securities
to the option holder as the strike price, and will not participate in any
increase in the price of such securities above the strike price.
The Portfolios may write options on an exchange or over-the-counter.
Over-the-counter options ("OTC options") differ from exchange-traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation, and therefore entail the risk of non-performance by the
dealer.
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OTC options are available for a greater variety of securities and for a wider
range of expiration dates and exercise prices than are available for
exchange-traded options. Because OTC options are not traded on an exchange,
pricing is done normally by reference to information from a market maker.
ILLIQUID INVESTMENTS -- Illiquid investments are investments that cannot be sold
or disposed of in the ordinary course of business at approximately the price at
which they are valued. Under the supervision of the Trustees, the Trust's
investment adviser (the "Adviser"), determines the liquidity of each Portfolio's
investments and, through reports from the Adviser, the Trustees monitor
investments in illiquid instruments. In determining the liquidity of a
Portfolio's investments, the Adviser may consider various factors including (1)
the frequency of trades and quotations, (2) the number of dealers and
prospective purchasers in the marketplace, (3) dealer undertakings to make a
market, (4) the nature of the security (including any demand or tender
features); (5) the nature of the marketplace for trades (including the ability
to assign or offset a Portfolio's rights and obligations relating to the
investment); and (6) general credit quality. Investments currently considered by
the Trust to be illiquid include repurchase agreements not entitling the holder
to payment of principal and interest within seven days, non-government stripped
fixed-rate mortgage-backed securities and government stripped fixed-rate
mortgage-backed securities, loans and other direct debt instruments, over the
counter options and swap agreements. Although restricted securities and
municipal lease obligations are sometimes considered illiquid, the Adviser may
determine certain restricted securities and municipal lease obligations to be
liquid. In the absence of market quotations, illiquid investments are priced at
fair value as determined in good faith by the Adviser pursuant to guidelines
established by the Board of Trustees. If, as a result of a change in values, net
assets or other circumstances, a Portfolio were in a position where more than
15% of its assets were invested in illiquid securities it would seek to take
appropriate steps to protect liquidity.
MORTGAGE-BACKED SECURITIES -- Mortgage-backed securities are instruments that
entitle the holder to a share of all interest and principal payments from
mortgages underlying the security. The mortgages backing these securities
include conventional thirty-year fixed rate mortgages, graduated payment
mortgages, and adjustable rate mortgages. During periods of declining interest
rates, prepayment of mortgages underlying mortgage-backed securities can be
expected to accelerate. Prepayment of mortgages which underlie securities
purchased at a premium often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital gains. Because of
these unpredictable prepayment characteristics, it is often not possible to
predict accurately the average life or realized yield of a particular issue.
Collateralized Mortgage Obligations ("CMOs") are a type of mortgage-backed
security. CMOs are debt obligations or multiclass pass-through certificates
issued by agencies or instrumentalities of the U.S. Government or by private
originators or investors in mortgage loans. In a CMO, series of bonds or
certificates are usually issued in multiple classes. Principal and interest paid
on the underlying mortgage assets may be allocated among the several classes of
a CMO in a variety of ways. Each class of a CMO, often referred to as a
"tranche", is issued with a specific fixed or floating coupon rate and has a
stated maturity or final distribution date. Principal payments on the underlying
mortgage assets may cause CMOs to be retired substantially earlier then their
stated maturities or final distribution dates, resulting in a loss of all or
part of any premium paid.
There are particular risk factors underlying investments in mortgage-backed
securities. Due to the possibility of prepayments of the underlying mortgage
instruments, market participants generally refer to an estimated average life
for mortgage-backed securities that is shorter than their stated maturity. An
average life estimate is a function of an assumption regarding anticipated
prepayment patterns, based upon
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current interest rates, current conditions in the relevant housing markets and
other factors. The assumption is necessarily subjective, and thus different
market participants can produce different average life estimates with regard to
the same security. There can be no assurance that estimated average life will be
a security's actual average life.
SECURITIES LENDING -- In order to generate additional income, the Portfolios may
lend securities which they own pursuant to agreements requiring that the loan be
continuously secured by collateral consisting of cash or securities of the U.S.
Government or its agencies equal to at least 100% of the market value of the
securities lent. The Portfolios continue to receive interest on the securities
lent while simultaneously earning interest on the investment of cash collateral.
Collateral is marked to market daily. There may be risks of delay in recovery of
the securities or even loss of rights in the collateral should the borrower of
the securities fail financially or become insolvent.
VARIABLE AND FLOATING RATE INSTRUMENTS -- Certain obligations may carry variable
or floating rates of interest, and may involve a conditional or unconditional
demand feature. Such instruments bear interest at rates which are not fixed, but
which vary with changes in specified market rates or indices. The interest rates
on these securities may be reset daily, weekly, quarterly or some other reset
period, and may have a floor or ceiling on interest rate changes. There is a
risk that the current interest rate on such obligations may not accurately
reflect existing market interest rates. A demand instrument with a demand notice
exceeding seven days may be considered illiquid if there is no secondary market
for such security.
YANKEE OBLIGATIONS -- Yankee Obligations are U.S. dollar-denominated instruments
of foreign issuers who either register with the Securities and Exchange
Commission or issue securities under Rule 144(A). These instruments consist of
debt securities (including preferred or preference stock of non-governmental
issuers), certificates of deposit, fixed time deposits and bankers' acceptances
issued by foreign banks, and debt obligations of foreign governments or their
subdivisions, agencies and instrumentalities, international agencies and
supranational entities. Some securities issued by foreign governments or their
subdivisions, agencies and instrumentalities may not be backed by the full faith
and credit of the foreign government.
Investing in the securities of issuers based in any foreign country involves
special risks and considerations not typically associated with investing in U.S.
companies. These include risks resulting from differences in accounting,
auditing and financial reporting standards, lower liquidity than U.S. fixed
income or debt securities, the possibility of nationalization, expropriation or
confiscatory taxation, adverse changes in investment or exchange control
regulations and political instability. There may be less publicly available
information concerning foreign issuers of securities held by a Portfolio than is
available concerning U.S. issuers. Purchases and sales of foreign securities and
dividends and interest payable on those securities may be subject to foreign
taxes and taxes may be withheld from dividend and interest payments on those
securities. Foreign securities often trade with less frequency and volume than
domestic securities and therefore may exhibit greater price volatility and a
greater risk of liquidity.
The Yankee Obligations selected for a Portfolio will adhere to the same quality
standards as those utilized for the selection of domestic debt obligations.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES -- When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the purchase commitment.
A Portfolio will maintain with the custodian a separate account with liquid,
high-grade debt securities or cash in an amount at least equal to these
commitments. The interest rate realized on these securities is
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fixed as of the purchase date and no interest accrues to a Portfolio before
settlement. These securities are subject to market fluctuation due to changes in
market interest rates and it is possible that the market value at the time of
settlement could be higher or lower than the purchase price if the general level
of interest rates has changed. Although a Portfolio generally purchases
securities on a when-issued or forward commitment basis with the intention of
actually acquiring securities, it may dispose of a when-issued security or
forward commitment prior to settlement if it deems appropriate.
SPECIAL CONSIDERATIONS RELATING TO IDAHO MUNICIPAL SECURITIES
The following information as to certain risk factors relating to the State of
Idaho is given to investors in view of the policy of the Idaho Municipal Bond
Fund of concentrating its investments in Idaho issuers. Such information
constitutes only a brief summary, does not purport to be a complete description
and is based on information from official statements relating to securities
offerings of Idaho issuers available as of the date of this Statement of
Additional Information. The Trust has not independently verified any of the
information contained in those official statements.
Idaho Economic Overview and Outlook
After slowing from its record-setting pace of the last nine years, Idaho's
economy more closely paralleled the nations's growth last year. The increase in
the state's employment and personal income moderated to 3.5% and 6.5%,
respectively, last year. Idaho's general economic outlook for 1996 and the next
two years is for a continuation of these lower, but quite respectable, gains in
employment income. As the economy enters a period of more sustainable economic
growth, net in-migration will slow to under 2% per annum from its current 2.5%
rate. The national economy's soft landing engineered by the Federal Reserve
Board resulted in real Gross Domestic Product increasing 2% for 1995. With
aggressive anti-inflation policies by the Federal Reserve and budget impasses,
real Gross Domestic Product will continue to rise at this slower rate, and the
consumer price index measured inflation rate will be between 2.3 and 2.5%.
Current State Debt Outstanding
The State of Idaho has no outstanding general obligation bond debt.
Debt of State Government and Quasi-governmental Agencies, Authorities and
Commissions
1. The Idaho Housing and Finance Association
The Idaho Housing and Finance Association (formerly Idaho Housing
Agency) (the "IHFA"), an independent public body, corporate and politic, was
created in 1972, by the Idaho Legislature under the provisions of Chapter 62,
Title 67 of the Idaho Code, as amended (the "Act"). The Act empowers the IHFA,
among other things, to issue notes and bonds in furtherance of its purpose of
providing safe and sanitary housing for persons and families of low income
residing in the State of Idaho, and, in addition, to coordinate and encourage
cooperation among private enterprise and State and local governments to sponsor,
build and rehabilitate residential housing for such persons and families.
The IHFA is governed by seven commissioners, appointed for alternating
four-year terms by the Governor of the State, one of whom is selected chairman
by the Governor. The vice chairman and secretary-treasurer are elected annually
by the entire Board of Commissioners.
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The IHFA has no taxing power and neither the State nor any political subdivision
thereof is liable for its bond or other indebtedness. At the time of the IHFA's
inception, the Idaho Legislature enacted a continuing appropriation of the State
Sales Tax Account as additional collateral for designated bond issues or
portions thereof. The Legislature has eliminated the continuing appropriations
for all IHFA bonds issued on or after January 1, 1996.
No claims have ever been made by the IHFA for state sales tax funds and
none are anticipated. The IHFA's mortgage loans are either guaranteed by Federal
agencies, insured by private mortgage guarantee policies or collateralized by
the IHFA's fund balances. The aggregate amount of bond debt supported by Idaho
State Sales Tax totalled $90 million and $82 millon at December 31, 1995 and
1994, respectively.
As of December 31, 1995, 91.16% of the total bond debt has been used to
purchase single family mortgages, 8.46% has provided the construction and
permanent financing for multifamily developments.
As of December 31, 1995, the Agency's outstanding bond indebtedness was
$999.9 million. Funds balances, including reserves, were $95.8 million.
2. The Idaho Health Facilities Authority
Organized in 1972, the Idaho Health Facilities Authority (the
"Authority") is an independent public body, politic and corporate, constituting
a public instrumentality of the State of Idaho, functioning without any
financial support form the Legislature.
Seven appointees of the Governor comprise the Authority and they serve
staggered five-year terms. The Executive Director is hired by and serves at the
pleasure of the Authority members. The Authority has the power, among others, to
issue tax-exempt revenue bonds or notes and re-lend the funds to nonprofit and
governmental health facilities for the purposes of construction of or
improvements to facilities, acquisition of equipment, or for refinancing of
outstanding capital debt.
These debt instruments do not directly, indirectly, or contingently
obligate the State or any political subdivision thereof to levy any form of
taxation or to make any appropriations for the payment thereof and any such levy
or appropriation is prohibited.
As of December 31, 1995, the Authority's outstanding bond indebtedness
was $208,728,687.
3. The Idaho State Building Authority
The Idaho State Building Authority (the "Authority") is a public
corporation of the State established in 1974 by the State of Idaho under the
provisions of the Idaho State Building Authority Act. The Act empowers the
Authority, among other things, to issue notes and bonds to finance construction
or acquisition of facilities for rental to State governmental bodies with the
approval of the Legislature.
The Authority is governed by seven commissioners appointed by the
Governor to serve staggered five-year terms. The Authority, in turn, appoints an
executive director to administer the agency.
The bonded debt of the Authority is not a debt or obligation of the
State of Idaho, or of any department, board, commission, agency, political
subdivision, body corporate and politic or
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instrumentality of or municipality or county within the State of Idaho, nor
shall the bonded debt be payable out of any funds other than those of the
Authority. The Authority has no taxing power.
As of December 31, 1995, the Authority's outstanding bond indebtedness
was $59,149,249.
4. The Idaho State Lottery
The Idaho State Lottery was established in 1989. Total sales for 1995
were $88.5 million. Net proceeds for that year totalled $18 million and are
divided equally between the Permanent Building Account, for use in carrying out
state public works projects and the Public School Income Account for
distribution to Idaho's Public SchooL Districts.
Idaho Code stipulates that the State Treasurer will invest Lottery
receipts and the interest generated on the Lottery Account balance will be
transferred to the General fund. Interest earnings for 1995 were approximately
$438,500.
5. Public Employees' Retirement System of Idaho
The Public Employees Retirement System of Idaho ("PERSI") covers
eligible employees who work 20 hours per week or more. The membership of PERSI
includes employees of the State of Idaho, including state colleges and
universities, employees of political subdivisions, (e.g., counties, cities,
hospitals) and local school districts. As of June, 1995, PERSI had 55,881 active
members, 7,564 inactive (of whom 3,708 are entitled to vested benefits), and
19,272 annuitants. PERSI collects contributions from employees and employers to
fund retirement, disability, death and separation benefits, as provided by
Chapter 13, Title 59, Idaho code.
As of July 1, 1995, PERSI had an unfunded actuarial liability ("UAL")
of $990.5 million ($1,106.4 million pension benefit obligation (PBO)) of which
approximately $326.9 million UAL ($365.1 million PBO) is the direct
responsibility of the State. After actuarial review, the PERSI Retirement Board
determined the current schedule of contribution rates will meet the normal cost
of the system as they accrue, and amortize the unfunded actuarial liability in
18.1 years.
The employer contribution rate in effect on July 1, 1996 is 11.61% for
General Members and 11.85% for Police Officer Members. With the exception of
police and fire fighter members, the member contribution rate is 6.97% of
salary. The employee contribution rate for police and fire fighters is 8.53% of
salary.
The PERSI actuary has confirmed that the current schedule of
contribution rates will meet the normal costs of the system as they accrue and
will amortize and fund the unfunded actuarial liability.
6. The Idaho State Insurance Fund
The Idaho State Insurance Fund (the "Fund") was created in 1917 by the
Idaho State Legislature to insure employers against liability under the Workers'
Compensation Act. Although not a legal corporation, it has been ruled as
occupying similar status to be administered without liability to the State. The
money in the Fund does not belong to the State and is not in the State Treasury
within the meaning of Article 7, Section 13 of the Constitution (State v.
Musgrave, 84 Idaho 77, 370 P.2d 778 (1962)). It is deposited with the State
Treasurer as custodian and is held by her as such for contributing employers and
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the beneficiaries of the compensation laws and for the payment of the costs of
operation of the Fund. All public employers are required by law to obtain their
workers' compensation insurance through the State Insurance Fund. Private
employers may, at their discretion, also procure workers' compensation insurance
from the Fund.
As of December 31, 1995, the Fund had a surplus (fund balance) of $135
million. The Fund has no bonded debt.
The Fund is administered by the manager, who is appointed by the
Governor. The manager of the Fund is also the trustee for the Idaho Petroleum
Clean Water Trust Fund (Trust Fund), a not-for-profit entity created in 1990 by
the legislature to insure petroleum storage tank owners and operators.
Statutorily, neither the Fund nor the state has any liability for the Trust
Fund's obligations.
As of December 31, 1995, the Trust Fund had fund balances of $30
million. The Trust Fund has no bonded debt.
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise expressly noted, whenever an investment policy or
limitation states a maximum percentage of a Portfolio's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such percentage or standard will be determined immediately
after and as a result of the Portfolio's acquisition of such security or other
asset. Accordingly, any subsequent change in values, net assets or other
circumstances will not be considered when determining whether the investment
complies with the Portfolio's investment policies and limitations.
Unless otherwise expressly noted, a Portfolio's limitations and policies are
non-fundamental. Fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting securities"
(as defined in the Investment Company Act of 1940 (the 1940 Act)) of a
Portfolio. The Portfolios have adopted the following investment limitations, in
addition to those described in the Prospectus:
FUNDAMENTAL POLICIES
No Portfolio may:
1. Make loans, including securities lending, if, as a result, more than 33
1/3% of its total assets would be lent to other parties, except that
(i) a Portfolio may purchase or hold debt instruments, and (ii) a
Portfolio may enter into repurchase agreements as described in the
Prospectus.
2. Invest in companies for the purpose of exercising control.
3. With respect to 75% of its total assets, purchase the securities of any
issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result
(i) more than 5% of the Portfolio's total assets would be invested in
the securities of that issuer, or (ii) the Portfolio would hold more
than 10% of the outstanding voting securities of that issuer, except
that this limitation shall not be applicable of the Idaho Municipal
Bond Fund.
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4. Purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the Portfolio's
total assets would be invested in the securities of companies whose
principal business activities are in the same industry.
5. Purchase or sell real estate, real estate limited partnership
interests, commodities or commodities contracts (including commodities
future contracts), unless acquired as a result of ownership of other
securities or instruments. However, a Portfolio (other than the
Municipal Bond Fund, Short Term Municipal Bond Fund and Idaho Municipal
Bond Fund) may purchase obligations issued by companies which invest in
real estate, commodities or commodities contracts if the obligations of
such companies are permitted investments.
6. Act as an underwriter of securities of other issuers except as it may
be deemed an underwriter in selling a portfolio security.
7. Issue senior securities (as defined in the 1940 Act) except in
connection with permitted borrowing as described in the Prospectus and
this Statement of Additional Information or as permitted by rule,
regulation, order or interpretation of the Securities and Exchange
Commission (the "SEC").
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
No Portfolio may:
1. Pledge, mortgage or hypothecate assets except to secure temporary
borrowings permitted as described in its Prospectus.
2. Sell securities short, unless the Portfolio undertaking such
transaction owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short.
3. Purchase securities of other investment companies, except for the
purchase of shares of money market, U.S. equity index or tax-exempt
investment companies as described in the Prospectus.
4. Purchase any security while borrowings (including reverse repurchase
agreements) representing more than 5% of its total assets are
outstanding.
5. Purchase securities on margin, except that a Portfolio may obtain such
short term credits as are necessary for the clearance of transactions.
6. Engage in securities repurchase transactions or make loans, but this
limitation does not apply to the purchase of debt securities.
7. Purchase or retain the securities of an issuer if, to the knowledge of
the Trust, an officer, director, partner or Trustee of the Trust, or
any investment adviser of the Trust, owns beneficially more than 1/2 of
1% of the share or securities of such issuer and all such officers,
directors, partners or Trustees owning more than 1/2 of 1% of such
shares or securities together own more than 5% of such shares or
securities.
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8. Purchase securities of any company which has (with its predecessors) a
record of less than three years continuing operations if, as a result,
more than 5% of the total assets of such Portfolio (taken at fair
market value) would be invested in such securities.
9. Invest in interests in oil, gas or other mineral exploration or
development programs or oil, gas or mineral leases.
10. Purchase warrants, puts, calls, straddles, spreads or combinations
thereof, except that the Intermediate Term Bond Fund, the Short Term
Bond Fund, the Short Term Municipal Bond Fund and the Idaho Municipal
Bond Fund may invest in standby commitments and the Equity Fund and the
Balanced Fund may write (sell) covered call options.
THE ADVISER
The Trust and First Security Investment Management, Inc. (the "Adviser") have
entered into an advisory agreement dated as of February 1, 1989 and an amendment
to the advisory agreement dated as of December 27, 1994 (as further amended from
time to time, the "Advisory Agreement"). The Advisory Agreement provides that
the Adviser shall not be protected against any liability to the Trust or its
shareholders by reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless disregard of its
obligations or duties thereunder.
The Advisory Agreement provides that if, for any fiscal year, the expenses of
any Portfolio (including amounts payable to the Adviser but excluding interest,
taxes, brokerage, litigation, and other extraordinary expenses) exceed
limitations established by any applicable statute or regulatory authority of any
jurisdiction in which the shares are qualified for offer and sale, the Adviser
will bear the amount of such excess. The Adviser will not be required to bear
expenses of the Trust to an extent which would result in a Portfolio's inability
to qualify as a regulated investment company under provisions of the Internal
Revenue Code.
The continuance of the Advisory Agreement must be specifically approved at least
annually (i) by the vote of the Trustees or by vote of a majority of the
outstanding voting securities of each Portfolio, and (ii) by the vote of a
majority of the Trustees who are not parties to the Agreement or "interested
persons" of any party thereto, cast in person at a meeting called for the
purpose of voting on such approval. The Advisory Agreement will terminate
automatically in the event of its assignment, and is terminable at any time
without penalty by the Trustees of the Trust or, with respect to a Portfolio by
a majority of the outstanding shares of that Portfolio, on not less than 30 days
nor more than 60 days written notice to the Adviser, or by the Adviser on 90
days written notice to the Trust.
The Adviser is an indirect wholly-owned subsidiary of First Security
Corporation, a financial services organization and registered bank holding
company with headquarters in Salt Lake City, Utah.
For their first full fiscal year ended January 31, 1996, the Portfolios paid the
Adviser the following fees:
<TABLE>
<CAPTION>
Fee Fee
Paid Waived
---- ------
<S> <C> <C>
Equity Fund $620,489 $297,531
</TABLE>
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<TABLE>
<S> <C> <C>
Balanced Fund 656,712 315,940
Intermediate Term Bond Fund 286,782 233,801
Short Term Bond Fund 273,536 185,940
Short Term Municipal Bond Fund 53,630 135,172
Idaho Municipal Bond Fund 46,342 117,504
</TABLE>
The advisory fees paid by the Portfolios are allocated between the Institutional
and Retail Class A classes of shares based upon the total assets of the
respective classes. The Municipal Bond Fund has not commenced operations and
paid no fees to the Advisor during the Trust's fiscal year ended January 31,
1996.
THE ADMINISTRATOR
The Trust and SEI Financial Management Corporation entered into an
administration agreement (the "Administration Agreement") dated December 27,
1994. On May 1, 1996 SEI Fund Resources (the "Administrator") assumed the
responsibilities of SEI Financial Management Corporation under the
Administration Agreement. The Administration Agreement provides that the
Administrator shall not be liable for any error of judgment or mistake of law or
for any loss suffered by the Trust in connection with the matters to which the
Administration Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Administrator in
the performance of its duties or from reckless disregard by it of its duties and
obligations thereunder.
The Administration Agreement shall remain in effect for three years and
thereafter shall continue in effect for successive two-year periods unless
terminated by either party on not less than 90 days prior written notice to the
other party.
The Portfolios paid the Administrator the following fees pursuant to the
Administration Agreement for the Trust's fiscal year ended January 31, 1996:
Equity Fund - $248,113; Balanced Fund - $262,879; Intermediate Term Bond Fund -
$173,528; Short Term Bond Fund - $153,159; Short Term Municipal Bond Fund -
$62,934; Idaho Municipal Bond Fund - $54,615. For the fiscal year ended January
31, 1996, the Administrator waived fees due under the Administration Agreement
from the Short Term Municipal Bond Fund and the Idaho Municipal Bond Fund in the
amount of $37,066 and $45,385, respectively. The Municipal Bond Fund has not
commenced operations and paid no fees to the Administrator during the Trust's
fiscal year ended January 31, 1996.
The Administrator is a wholly owned subsidiary of SEI Financial Management
Corporation, which is a wholly-owned subsidiary of SEI Corporation ("SEI"). The
Administrator has its principal business offices at 680 East Swedesford Road,
Wayne, PA 19087. SEI and its subsidiaries are leading providers of funds
evaluation services, trust accounting systems, and brokerage and information
services to financial institutions, institutional investors and money managers.
The Administrator also serves as administrator to the following other
institutional
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mutual funds: SEI Liquid Asset Trust; SEI Tax Exempt Trust; SEI Asset Allocation
Trust; SEI Index Funds; SEI Institutional Managed Trust; SEI Daily Income Trust;
SEI International Trust; Stepstone Funds; The Advisor's Inner Circle Fund; The
Pillar Funds; CUFund; STI Classic Funds; First American Funds, Inc.; First
American Investment Funds, Inc.; Rembrandt Funds; Marquis Funds; Morgan Grenfell
Investment Trust, the PBHG Funds, Inc.; The Arbor Fund; CoreFunds, Inc.; STI
Classic Variable Trust; CrestFunds, Inc.; ARK Funds; Monitor Funds; FMB Funds,
Inc.; Bishop Street Funds; Inventor Funds, Inc.; and 1784 Funds.
DISTRIBUTION
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary of
SEI, and the Trust are parties to a distribution agreement ("Distribution
Agreement") dated December 27, 1994. The Distribution Agreement has an initial
term of 1 year and shall continue in force and effect from year to year
thereafter if such continuance is approved (i) by the Trust's Trustees or by the
vote of a majority of the outstanding shares of the Trust, and (ii) by the vote
of a majority of the Trustees of the Trust who are not parties to the
Distribution Agreement or interested persons (as defined in the 1940 Act) of any
party to the Distribution Agreement, cast in person at a meeting called for the
purpose of voting on such approval. The Distribution Agreement will terminate in
the event of any assignment, as defined in the 1940 Act, and is terminable with
respect to a particular Portfolio on not less than sixty days' notice by the
Trust's Trustees, by vote of a majority of the outstanding shares of such
Portfolio or by the Distributor.
The Trust has adopted a Distribution Plan for the Retail Class A shares of each
Portfolio (the "Distribution Plan") in accordance with the provisions of Rule
12b-1 under the 1940 Act which regulates circumstances under which an investment
company may directly or indirectly bear expenses relating to the distribution of
its shares. In this regard, the Board of Trustees has determined that the
Distribution Plan and the Distribution Agreement are in the best interests of
the Retail Class A shareholders. Continuance of the Distribution Plan must be
approved annually by a majority of the Trustees of the Trust and by a majority
of the Trustees who are not "interested persons" of the Trust as that term is
defined in the 1940 Act and who have no direct or indirect financial interest in
the operation of the Distribution Plan or in any agreements related thereto
("Qualified Trustees"). The Distribution Plan requires that quarterly written
reports of amounts spent under the Distribution Plan and the purposes of such
expenditures be furnished to and reviewed by the Trustees. The Distribution Plan
may not be amended to increase materially the amount which may be spent
thereunder without approval by a majority of the outstanding Retail Class A
shares of the Portfolio affected. All material amendments of the Distribution
Plan will require approval by a majority of the Trustees of the Trust and of the
Qualified Trustees.
The Distribution Plan adopted by the Retail Class A shareholders of the
Portfolio provides that the Trust will pay the Distributor a fee of up to .25%
of the average daily net assets of a Portfolio's Retail Class A shares which the
Distributor can use to compensate broker-dealer and service providers, including
SEI Financial Services Company and its affiliates which provide distribution
related services to Retail Class A shareholders. For the fiscal year ended
January 31, 1996, the Retail Class A classes of the Portfolios paid the
Distributor the following amounts: Equity Fund - $1,637; Balanced Fund - $1,486;
Intermediate Term Bond Fund - $1,223; Short Term Bond Fund - $87; Short Term
Municipal Bond Fund - $93; Idaho Municipal Bond Fund - $4,141. The Distributor
used those funds to make payments to third parties for distribution-related
services. The Municipal Bond Fund has not commenced operations and did not make
payments to the Distributor during the Trust's fiscal year ended January 31,
1996.
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<PAGE> 134
Except to the extent that the Administrator and Adviser benefitted through
increased fees from an increase in the net assets of the Trust which may have
resulted in part from the expenditures, no interested person of the Trust nor
any Trustee of the Trust who is not an interested person of the Trust had a
direct or indirect financial interest in the operation of the Distribution Plan
or related agreements.
Retail Class A shares of the Portfolios are offered for sale to the public at
net asset value of each Retail Class A share plus the applicable sales charge.
The following chart reflects the total sales charges paid in connection with the
sale of Retail Class A shares of each Portfolio (other than the Municipal Bond
Fund) and the amount retained by the Distributor for the period from March 6,
1995 to January 31, 1996.
<TABLE>
<CAPTION>
Sales Amount
Charges Retained
------- --------
<S> <C> <C>
Equity Fund $61,284 $6,149
Balanced Fund 60,565 6,087
Intermediate Term Bond Fund 26,161 2,529
Short Term Bond Fund 673 54
Short Term Municipal Bond Fund 1,917 228
Idaho Municipal Bond Fund 63,756 6,417
</TABLE>
TRUSTEES AND OFFICERS OF THE TRUST
The principal occupations of the Trustees and officers of the Trust for the past
five years are listed below. Trustees deemed to be "interested persons" of the
Trust for purposes of the 1940 Act are indicated by an asterisk.
<TABLE>
<CAPTION>
Position Principal
Held With Occupation(s)
Name and Address Registrant During Past 5 Years
---------------- ---------- -------------------
<S> <C> <C>
Frederick A. Moreton, Jr.* Trustee and Vice President, Paine Webber,
P.O. Box 45170 Chairman Incorporated
Salt Lake City, UT 84145-0170
Robert G. Love Trustee Chairman, Harris & Love Advertising
University Club Building
136 East South Temple,
Suite 1800
Salt Lake City, UT 84120
August Glissmeyer, Jr. Trustee Partner, Deloitte Haskins & Sells (prior
4458 Camille Street to 1986); retired (since 1986)
Salt Lake City, UT 84124
</TABLE>
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<TABLE>
<CAPTION>
Position Principal
Held With Occupation(s)
Name and Address Registrant During Past 5 Years
---------------- ---------- -------------------
<S> <C> <C>
Carl S. Minden Trustee Vice President, The National Asphalt
314 Federal Height Circle Co.
Salt Lake City, UT 84103
George L. Denton, Jr.* Trustee Executive President and Manager,
2915 Sherwood Drive Capital Markets and Funds Management
Salt Lake City, UT 84108 Division, First Security Corporation
(prior to April 30, 1990); retired (since
April 30, 1990).
David G. Lee President Senior Vice President of SEI since 1993.
SEI Financial Management Vice President of SEI since 1991.
Corporation President, GW Sierra Trust Funds prior
680 East Swedesford Road to 1991.
Wayne, PA 19087-1658
Kathryn L. Stanton Vice President Vice President, Assistant Secretary of
SEI Financial Management and Secretary SEI, the Administrator and the
Corporation Distributor since 1994. Associate,
680 East Swedesford Road Morgan, Lewis & Bockius (law firm)
Wayne, PA 19087-1658 1989-1994.
Sandra K. Orlow Vice President and Vice President and Assistant Secretary of
SEI Financial Management Assistant Secretary the Administrator and Distributor since
Corporation 1993.
680 East Swedesford Road
Wayne, PA 19087-1658
Kevin P. Robins Vice President and Senior Vice President and General
SEI Financial Management Assistant Secretary Counsel of SEI, the Administrator and
Corporation the Distributor since 1994. Vice
680 East Swedesford Road President of SEI, the Administrator and
Wayne, PA 19087-1658 the Distributor 1992-1994. Associate,
Morgan, Lewis & Bockius (law firm)
prior to 1992.
Barbara A. Nugent Vice President and Vice President and Assistant Secretary of
SEI Financial Management Assistant Secretary SEI, the Administrator and the
Corporation Distributor since 1996. Associate,
680 East Swedesford Road Drinker, Biddle & Reath (law firm)
Wayne, PA 19087-1658 1994-1996. Delaware Service
Company, Inc. prior to 1994.
</TABLE>
S-15
<PAGE> 136
<TABLE>
<CAPTION>
Position Principal
Held With Occupation(s)
Name and Address Registrant During Past 5 Years
---------------- ---------- -------------------
<S> <C> <C>
Todd Cipperman Vice President and Vice President and Assistant Secretary of
SEI Financial Management Assistant Secretary SEI, the Administrator and the
Corporation Distributor since 1995. Associate,
680 East Swedesford Road Dewey Ballantine (law firm) 1994-1995.
Wayne, PA 19087-1658 Associate, Winston & Strawn (law firm)
1991-1994.
Stephen Meyer Treasurer and Vice-President and Controller, Chief
SEI Financial Management Principal Financial Accounting Officer - SEI Corporation.
Corporation Officer Director - Internal Audit and Risk
680 East Swedesford Road Management - SEI Corporation - 1992
Wayne, PA 19087-1658 to March 1995. Coopers & Lybrand,
Senior Associate - 1990 to 1992.
</TABLE>
Trustees and officers of the Trust owned less than 1% of the outstanding shares
of the Trust as of May 6, 1996.
Trustees receive from the Trust an annual fee and are reimbursed for all
out-of-pocket expenses relating to attendance of meetings. The fees paid to
Trustees for the fiscal year ended January 31, 1996, are shown below. Officers
of the Trust do not receive compensation from the Trust for serving as officers.
No person who is a director, officer or employee of the Adviser serves as a
Trustee, officer or employee of the Trust.
<TABLE>
<CAPTION>
Pension or Total
Aggregate Retirement Compensation
Compensation Benefits Accrued Estimated from Trust
from the as Part of Annual Benefits and Fund
Trustee (1) Trust Trust Expenses upon Retirement Complex(2)
----------- ----- -------------- --------------- ----------
<S> <C> <C> <C> <C>
Frederick A. Moreton, Jr $4,000 $0 $0 $4,000
Robert G. Love 4,000 0 0 4,000
August Glissmeyer, Jr 4,000 0 0 4,000
Carl S. Minden 4,000 0 0 4,000
George L. Denton, Jr 4,000 0 0 4,000
</TABLE>
(1) Mitchell Melich served as a Trustee of the Trust until his resignation
on May 17, 1996. He received $4,000 in aggregate compensation from the
Trust during its fiscal year ended January 31, 1996. He is not entitled
to receive any pension or retirement benefits from the Trust.
(2) The Trust is not part of a Fund Complex.
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<PAGE> 137
PERFORMANCE
From time to time, each Portfolio may advertise yield or total return. These
figures will be based on historical earnings and are not intended to indicate
future performance.
The yield of a Portfolio refers to the annualized income generated by an
investment in the Portfolio over a specified 30-day period. The yield is
calculated by assuming that the income generated by the investment during that
period is generated in each such period over one year and is shown as a
percentage of the investment. In particular, yield will be calculated according
to the following formula: Yield = 2[(a-b)/cd) + 1)(6)-1], where a = dividends
and interest earned during the period; b= expenses accrued for the period (net
of reimbursement); c= the current daily number of shares outstanding during the
period that were entitled to receive dividends; and d= maximum offering price
per share on the last day of period.
For the 30 day period ended January 31, 1996, the yield for the Institutional
class of shares of each Portfolio (other than the Municipal Bond Fund, which has
not commenced operations) was: Equity Fund - 1.14%; Balanced Fund - 2.66%;
Intermediate Term Bond Fund - 4.95%; Short Term Bond Fund - 4.75%; Short Term
Municipal Bond Fund - 3.28%; Idaho Municipal Bond Fund - 3.96%.
For the 30 day period ended January 31, 1996, the yield for the Retail Class A
shares of each Portfolio (other than the Municipal Bond Fund, which has not
commenced operations) was: Equity Fund - 0.85%; Balanced Fund - 2.30%;
Intermediate Term Bond Fund - 4.54%; Short Term Bond Fund - 4.43%; Short Term
Municipal Bond Fund - 2.99%; Idaho Municipal Bond Fund - 3.56%.
The Municipal Bond Fund, Short Term Municipal Bond Fund and Idaho Municipal Bond
Fund may from time to time advertise a taxable equivalent yield. The taxable
equivalent yield for those Portfolios is the rate an investor would have to earn
from a fully taxable investment in order to equal it's yield after taxes.
Taxable equivalent yields are calculated by dividing the Portfolio's yield by
one minus the stated federal tax rate and one minus the stated federal tax rate
plus the state tax rate for state specific funds (if only a portion of the
Portfolio's yield was tax-exempt, only that portion is adjusted in the
calculation). For the 30 day period ended January 31, 1996 the taxable
equivalent yield for Institutional class of shares of the Short Term Municipal
Bond Fund and Idaho Municipal Bond Fund was 5.43% and 7.5%, respectively, and
for the Retail Class A shares of the Short Term Bond Fund and Idaho Municipal
Bond Fund was 4.95% and 6.82% respectively. The Municipal Bond Fund has not
commenced operations.
The total return of a Portfolio refers to the average compounded rate of return
to a hypothetical investment for designated time periods (including, but not
limited to, the period from which the Portfolio commenced operations through the
specified date), assuming that the entire investment is redeemed at the end of
each period. In particular, total return will be calculated 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; and ERV = ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
designated time period as of the end of such period.
Equity Fund
For the fiscal year ended January 31, 1996, the Institutional class of shares of
the Equity Fund had an annual total return of 32.55%. For the period from
December 28, 1994 (commencement of operations) through January 31, 1996, the
Institutional class of shares of the Equity Fund had an annual total return of
32.24%.
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<PAGE> 138
For the period from March 6, 1995 (commencement of operations) to January 31,
1996, the Retail Class A shares of the Equity Fund had a total return of 23.08%
(25.73% annualized).
Balanced Fund
For the fiscal year ended January 31, 1996, the Institutional class of shares of
the Balanced Fund had an annual return of 24.15%. For the period from December
28, 1994 (commencement of operations) to January 31, 1996, the Institutional
class of shares of the Balanced Fund had an average annual total return of
24.11%.
For the period from March 6, 1995 (commencement of operations) to January 31,
1996, the Retail Class A shares of the Balanced Fund had a total return of
15.94% (17.71% annualized).
Intermediate Term Bond Fund
For the fiscal year ended January 31, 1996, the Institutional class of shares of
the Intermediate Term Bond Fund had an annual return of 13.62%. For the period
from December 28, 1994 (commencement of operations) to January 31, 1996, the
Institutional class of shares of the Intermediate Term Bond Fund had an average
annual total return of 13.97%.
For the period from March 6, 1995 (commencement of operations) to January 31,
1996, the Retail Class A shares of the Intermediate Term Bond Fund had a total
return of 8.22% (9.10% annualized).
Short Term Bond Fund
For the fiscal year ended January 31, 1996, the Institutional class of shares of
the Short Term Bond Fund had an annual total return of 7.80%. For the period
from December 28, 1994 (commencement of operations) to January 31, 1996, the
Institutional class of shares of the Short Term Bond Fund had an average annual
total return of 7.89%.
For the period from March 6, 1995 (commencement of operations) to January 31,
1996, the Retail Class A shares of the Short Term Bond Fund had a total return
of 5.25% (5.81% annualized).
Short Term Municipal Bond Fund
For the fiscal year ended January 31, 1996, the Institutional class of shares of
the Short Term Municipal Bond Fund had an annual return of 6.71%. For the period
from December 28, 1994 (commencement of operations) to January 31, 1996, the
Institutional class of shares of the Short Term Municipal Bond Fund had an
average annual total return of 6.54%.
For the period from March 6, 1995 (commencement of operations) to January 31,
1996, the Retail Class A shares of the Short Term Municipal Bond Fund had a
total return of 4.75% (5.25% annualized).
Idaho Municipal Bond Fund
For the fiscal year ended January 31, 1996, the Institutional class of shares of
the Idaho Municipal Bond Fund had an annual return of 12.68%. For the period
from December 28, 1994 (commencement of
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<PAGE> 139
operations) to January 31, 1996, the Institutional class of shares of the Idaho
Municipal Bond Fund had an average annual total return of 13.31%.
For the period from March 6, 1995 (commencement of operations) to January 31,
1996, the Retail Class A shares of the Idaho Municipal Bond Fund had a total
return of 6.86% (7.59% annualized).
Each Portfolio may from time to time compare its performance to other mutual
funds tracked by mutual fund rating services, to broad groups of comparable
mutual funds or to unmanaged indices which may assume investment of dividends
but generally do not reflect deductions for sales charges, administrative and
management costs.
PURCHASE AND REDEMPTION OF SHARES
The purchase and redemption price of the Institutional shares is the net asset
value of each Institutional share. The purchase price of Retail Class A shares
is the net asset value of each Retail Class A share plus the applicable sales
load, and Retail Class A shares will be redeemed at a price equal to the net
asset value of such Retail Class A shares. Shareholders may at any time redeem
all or a portion of their shares at net asset value without charge. The
investor's price for purchase or redemption will be determined by the net asset
value of the applicable Portfolio's shares next determined following the receipt
of an order or purchase or a request to redeem such shares.
It is currently the Trust's policy to pay all redemptions in cash. The Trust
retains the right, however, to alter this policy to provide for redemptions in
whole or in part by a distribution in kind of readily marketable securities held
by a Portfolio in lieu of cash. Shareholders may incur brokerage charges on the
sale of any such securities so received in payment of redemptions.
A gain or loss for federal income tax purposes may be realized by a taxable
shareholder upon an in-kind redemption depending upon the shareholder's basis in
the shares of the Trust redeemed.
The Trust reserves the right to suspend the right of redemption or to postpone
the date of payment upon redemption for any period during which trading on the
New York Stock Exchange is restricted, or during the existence of an emergency
(as determined by the SEC by rule or regulation) as a result of which disposal
or evaluation of the portfolio securities is not reasonably practicable, or for
such other periods as the SEC may by order permit. The Trust also reserves the
right to suspend sales of shares of the Portfolio's for any period during which
the New York Stock Exchange, the Administrator, the Distributor, the Adviser or
the Custodian is not open for business.
DETERMINATION OF NET ASSET VALUE
In accordance with the current rules and regulations of the SEC, the net asset
value of a share of each Portfolio is determined once daily as of the close of
trading on the New York Stock Exchange (presently 4:00 p.m. Eastern time) on
each business day for the Portfolios. The net asset values per share of the
Institutional and the Retail Class A classes of the Portfolios will differ
because of different expenses attributable to each class. The income or loss and
the expenses common to both classes of a Portfolio are allocated to each class
on the basis of the net assets of each class of a Portfolio, calculated as of
the close of business on the previous business day of the Portfolio in relation
to the total net assets in the Portfolio
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<PAGE> 140
as of such date. In addition to certain common expenses which are allocated to
both classes of a Portfolio, certain expenses, such as those related to the
distribution of shares of a class, are allocated only to the class to which such
expenses relate. The net asset value per share of a class is determined by
subtracting the liabilities (e.g., the expenses) allocated to the class from the
assets allocated to the class and dividing the result by the total number of
shares outstanding of such class. Determination of each Portfolio's net asset
value per share is made in accordance with generally accepted accounting
principles.
A Portfolio's securities are valued by the Administrator pursuant to valuations
provided by an independent pricing service. Except as provided in the next
sentence, a security listed or traded on an exchange is valued at its last sales
price on the exchange where the security is principally traded or, lacking any
sales on a particular day, the security is valued at the most recently quoted
bid price. Each security traded in the over-the-counter market (but not
including securities reported on the NASDAQ National Market system) is valued at
the mean between the last bid and asked prices based upon quotes furnished by
market makers for such securities. Each security reported on the NASDAQ National
Market System is valued at the last sales price on the valuation date. The
pricing service may also use a matrix system to determine valuations. This
system considers such factors as security prices, yields, maturities, call
features, ratings and developments relating to specific securities in arriving
at valuations. The procedures of the pricing service and its valuations are
reviewed by the officers of the Trust under the general supervision of the
Trustees. Securities for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the supervision of
the Trust's officers in a manner specifically authorized by the Trustees of the
Trust. Short-term obligations having 60 days or less to maturity are valued at
amortized cost, which approximates fair market value.
Because net asset value per share of each Portfolio is determined only on
business days of the Portfolio, the net asset value per share of a Portfolio may
be significantly affected on days when an investor can not exchange or redeem
shares of the Portfolio.
TAXES
The following is only a summary of certain additional tax considerations
generally affecting the Portfolios and their shareholders that are not described
in the Prospectus. No attempt is made to present a detailed explanation of the
tax treatment of the Portfolios or their shareholders, and the discussion here
and in the Prospectus is not intended as a substitute for careful tax planning.
Investors are urged to consult their tax advisers with specific reference to
their own tax situation.
QUALIFICATION AS A RIC
In order to qualify for treatment as a regulated investment company ("RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended ("Code"), a
Portfolio must distribute annually to its shareholders at least 90% of its
investment company taxable income (generally, net investment income plus net
short-term capital gain and realized market discount) ("Distribution
Requirement") and must meet several additional requirements. Among these
requirements are the following (i) at least 90% of a Portfolio's gross income
each taxable year must be derived from dividends, interest, certain payments
with respect to securities loans, and gains from the sale or other disposition
of stock or securities, or other income derived with respect to its business of
investing in such stock or securities (the "Income Requirement"); (ii) less than
30% of a Portfolio's gross income each taxable year may be derived from the sale
or other disposition of stock, securities or options held for less than three
months (the "Short-Term
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<PAGE> 141
Gains Test"); (iii) at the close of each quarter of a Portfolio's taxable year,
at least 50% of the value of its total assets must be represented by cash and
cash items, U.S. Government securities, securities of other RICs and other
securities, with such other securities limited, in respect of any one issuer, to
an amount that does not exceed 5% of the value of a Portfolio's assets and that
does not represent more than 10% of the outstanding voting securities of such
issuer; and (iv) at the close of each quarter of a Portfolio's taxable year, not
more than 25% of the value of its assets may be invested in securities (other
than U.S. Government securities or the securities of other RICs) of any one
issuer or of two or more issuers which the Portfolio controls and which are
engaged in the same, similar or related trades or businesses. (The requirements
described in clauses (iii) and (iv) will collectively be referred to in the
following discussion as the "Asset Diversification Requirement".)
Income derived by a RIC from a partnership or trust will satisfy the Income
Requirement only to the extent such income is attributable to items of income of
the partnership or trust that would satisfy the Income Requirement if they were
realized by a RIC in the same manner as realized by the partnership or trust.
FEDERAL INCOME TAX CONSEQUENCES OF PORTFOLIO DISTRIBUTIONS
Although the Portfolios are not required by the Distribution Requirement to
distribute long-term capital gains, the Portfolios intend to distribute any net
realized long-term capital gains annually. The aggregate amount of distributions
designated by a Portfolio as capital gain dividends may not exceed the net
capital gain of such Portfolio for any taxable year, determined by excluding any
net capital loss or net long-term loss attributable to transactions occurring
after October 31 of such year and by treating any such loss as if it arose on
the first day of the following taxable year. Such distributions will be
designated as a capital gains dividend in a written notice mailed by the Trust
to shareholders not later than 60 days after the close of each Portfolio's
respective taxable year.
In the case of corporate shareholders, distributions (other than capital gain
dividends) of a RIC for any taxable year generally qualify for the 70%
dividends-received deduction to the extent of the gross amount of "qualifying
dividends" received by such RIC for the year. Generally, a dividend will be
treated as a "qualifying dividend" if it has been received from a domestic
corporation. However, a dividend received by a taxpayer will not be treated as a
"qualifying dividend" if (1) it has been received with respect to any share of
stock that the taxpayer has held for 45 days (90 days in the case of certain
preferred stock) or less (excluding any day more than 45 days (or 90 days in the
case of certain preferred stock) after the date on which the stock becomes
ex-dividend), or (2) to the extent that the taxpayer is under an obligation
(pursuant to a short sale or otherwise) to make related payments with respect to
positions in substantially similar or related property. The Trust will designate
the portion, if any, of the distribution made by a Portfolio that qualifies for
the dividends-received deduction in a written notice mailed by the Portfolio to
shareholders not later than 60 days after the close of the Portfolio's taxable
year. Only the Equity Fund and the Balanced Fund are expected to have any
portion of their dividends so designated.
Investors should note that changes made to the Code by the Revenue
Reconciliation Act of 1993 have increased the tax rate distinctions between
capital gain and ordinary income distributions. The nominal maximum marginal
rate on ordinary income for individuals, trusts and estates is now 39.6%, but
for individual taxpayers whose adjusted gross income exceeds certain threshold
amounts (that differ depending on the taxpayer's filing status), provisions
phasing out personal exemptions and limiting itemized deductions may cause the
actual marginal rate to exceed 39.6%. The maximum rate on the net capital gain
of individuals, trusts and estates, however, is in all cases 28%. Capital gains
and ordinary income of
S-21
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corporate taxpayers are taxed at a nominal maximum rate of 35% (an effective
marginal rate of 39% applies in the case of corporations having taxable income
between $100,000 and $335,000 and an effective marginal rate of 38% applies in
the case of corporations having taxable income between $15,000,000 and
$18,333,333).
Corporate taxpayers may be liable for alternative minimum tax, which is imposed
at the rate of 20% of "alternative minimum taxable income" (less the applicable
"exemption amount" in the case of corporate shareholders with "alternative
minimum taxable income" of less than $310,000), in lieu of the regular corporate
income tax. "Alternative minimum taxable income" is equal to "taxable income"
(as determined for regular corporate income tax purposes) with certain
adjustments. Although corporate taxpayers in determining "alternative minimum
taxable income" are allowed to exclude exempt-interest dividends (other than
exempt-interest dividends derived from certain private activity bonds, as
explained below) and to utilize the 70% dividends-received deduction at the
first level of computation, the Code requires (as a second computational step)
that "alternative minimum taxable income" be increased by 75% of the excess of
"adjusted current earnings" over other "alternative minimum taxable income."
In determining their "adjusted current earnings," corporate shareholders must
take into account (1) all exempt-interest dividends and (2) the full amount of
all dividends from a Portfolio that are treated as "qualifying dividends" for
purposes of the dividends-received deduction. As much as 75% of any
exempt-interest dividend and 82.5% of any "qualifying dividend" received by a
corporate shareholder could, as a consequence, be subject to alternative minimum
tax. Corporate investors should also note that the Superfund Amendments and
Reauthorization Act of 1986 imposes an environmental tax on corporate taxpayers
of 0.12% of the excess of "alternative minimum taxable income" (with certain
modifications) over $2,000,000 for taxable years beginning after 1986 and before
1996, regardless of whether such taxpayers are liable for alternative minimum
tax.
If for any taxable year any Portfolio does not qualify as a RIC, all of its
taxable income will be subject to tax at regular corporate rates without any
deduction for distributions to shareholders, and all distributions will be
taxable as ordinary dividends (including amounts derived from interest on
municipal securities in the case of the Municipal Bond Fund, Short Term
Municipal Bond Fund and the Idaho Municipal Bond Fund) to the extent of such
Portfolio's current and accumulated earning and profits. Such distributions will
be eligible for the dividends-received deduction in the case of corporate
shareholders.
SPECIAL CONSIDERATIONS RELATING TO MUNICIPAL BOND FUND, SHORT TERM MUNICIPAL
BOND FUND AND IDAHO MUNICIPAL BOND FUND
As described in the Prospectus, each of these Portfolios is designed to provide
investors with current tax-exempt interest income in the form of exempt-interest
dividends. Investors in these Portfolios should note, however, that taxpayers
are required to report the receipt of tax-exempt interest and exempt-interest
dividends in their Federal income tax returns. Furthermore, distributions made
by the Portfolios out of realized capital gain or realized market discount will
be taxable. Although the Portfolios generally do not expect to receive net
investment income other than interest on municipal securities, up to 20% of the
net assets of each Portfolio may be invested in securities that do not pay
tax-exempt interest. Any taxable income recognized by the Portfolios will be
distributed and taxed to their shareholders in accordance with the rules
described in the Prospectus with respect to the other Portfolios of the Trust.
See Prospectus, "Taxes - Tax Status of Distributions (Equity Fund, Balanced
Fund, Intermediate Term Bond Fund, and Short Term Bond Fund)."
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Investors should also note that in two circumstances exempt-interest dividends,
while exempt from regular Federal income tax, are subject to alternative minimum
tax at a maximum rate of 28%, in the case of individuals, trusts and estates,
and 20% in the case of corporate taxpayers. First, tax-exempt interest and
exempt-interest dividends derived from certain private activity bonds issued
after August 7, 1986, will generally constitute an item of tax preference for
corporate and non-corporate taxpayers in determining alternative minimum tax
liability. The Municipal Bond Fund, Short Term Municipal Bond Fund may invest in
such private activity bonds if consistent with the credit quality standards and
other investment policies of those Portfolios. Although it does not currently
intend to do so, the Idaho Municipal Bond Fund may invest up to 100% of its net
assets in such private activity bonds. Secondly (as discussed above), tax-exempt
interest and exempt-interest dividends derived from all municipal securities
must be taken into account by corporate taxpayers in determining their adjusted
current earnings adjustment for alternative minimum tax purposes and may as a
consequence be subject to tax at an effective rate of 15%.
Receipt of exempt-interest dividends may also result in collateral Federal
income tax consequences to certain taxpayers, including S corporations,
financial institutions, property and casualty insurance companies, individual
recipients of Social Security or Railroad Retirement benefits, and foreign
corporations engaged in a trade or business in the United States. Prospective
investors should consult their own tax advisors as to such consequences.
The Portfolios may also not be an appropriate investment for entities which are
"substantial users" of facilities financed by private activity bonds or "related
persons" thereof. "Substantial user" is defined under U.S. Treasury Regulations
to include a nonexempt person who regularly uses a part of such facilities in
his trade or business and (1) whose gross revenues derived with respect to the
facilities financed by the issuance of the bonds are more than 5% of the total
revenue derived by all users of such facilities, (2) who occupies more than 5%
of the entire usable area of such facilities, or (3) for whom such facilities or
a part thereof were specifically constructed, reconstructed or acquired.
"Related persons" include certain related natural persons, affiliated
corporations, a partnership and its partners and an S Corporation and its
shareholders.
Each of the Portfolios reserves the right to acquire standby commitments with
respect to municipal securities held in its portfolio and will treat any
interest received on municipal securities subject to such standby commitments as
tax-exempt income. In Rev. Rul. 82-144, 1982-2 C.B. 34, the Internal Revenue
Service held that a mutual fund acquired ownership of municipal obligations for
Federal income tax purposes, even though the fund simultaneously purchased "put"
agreements with respect to the same municipal obligations from the seller of the
obligations. The Portfolios will not engage in transactions involving the use of
standby commitments that differ materially from the transaction described in
Rev. Rul. 82-144 without first obtaining a private letter ruling from the
Internal Revenue Service or the opinion of counsel.
Interest on indebtedness incurred by a shareholder to purchase or carry shares
of the Portfolios is not deductible for income tax purposes if (as expected) the
Portfolios distribute exempt-interest dividends during the shareholder's taxable
year.
SPECIAL TAX CONSIDERATIONS RELATING TO THE EQUITY FUND AND THE BALANCED FUND
The following discussion relates to the particular Federal income tax
consequences of the investment policies of the Equity Fund and the Balanced
Fund. The ability of these Portfolios to engage in options and short sale
activities will be somewhat limited by the requirements for their continued
qualification as
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<PAGE> 144
RICs under the Code, in particular the Distribution Requirement, the Short-Term
Gains Test and the Asset Diversification Requirement.
The options transactions that the Equity Fund and Balanced Fund enter into may
result in "straddles" for Federal income tax purposes. The straddle rules of the
Code may affect the character of gains and losses realized by the Portfolios. In
addition, losses realized by the Portfolios on positions that are part of a
straddle may be deferred under the straddle rules, rather than being taken into
account in calculating the investment company taxable income and net capital
gain of the Portfolios for the taxable year in which such losses are realized.
Losses realized prior to October 31 of any year may be similarly deferred under
the straddle rules in determining the "required distribution" that the
Portfolios must make in order to avoid Federal excise tax. Furthermore, in
determining their investment company taxable income and ordinary income, the
Portfolios may be required to capitalize, rather than deduct currently, any
interest expense on indebtedness incurred or continued to purchase or carry any
positions that are part of a straddle. The tax consequences to the Portfolios of
holding straddle positions may be further affected by various annual and
transactional elections provided under the Code and Treasury regulations that
the Portfolios may make.
Because only a few regulations implementing the straddle rules have been
promulgated by the U.S. Treasury, the tax consequences to the Equity Fund and
Balanced Fund of engaging in options transactions are not entirely clear.
Nevertheless, it is evident that application of the straddle rules may
substantially increase or decrease the amount which must be distributed to
shareholders in satisfaction of the Distribution Requirement (or to avoid
Federal excise tax liability) for any taxable year in comparison to a fund that
did not engage in options transactions. For purposes of the Short-Term Gains
Test, current Treasury regulations provide that (except to the extent that the
short sale rules discussed below would otherwise apply) the straddle rules will
have no effect on the holding period of any straddle position. However, the U.S.
Treasury has announced that it is continuing to study the application of the
straddle rules for this purpose.
The writer of a covered call option generally does not recognize income upon
receipt of the option premium. If the option expires unexercised or is closed on
an exchange, the writer generally recognizes short-term capital gain. If the
option is exercised, the premium is included in the consideration received by
the writer in determining the capital gain or loss recognized in the resultant
sale.
Because of the Short-Term Gains Test, the Equity Fund may have to limit the sale
of appreciated (but not depreciated) securities that they have held for less
than three months. The short sale of (1) securities held on the date of the
short sale or acquired after the short sale and on or before the date of closing
thereof or (2) securities which are "substantially identical" to securities held
on the date of the short sale or acquired after the short sale and on or before
the date of the closing thereof may reduce the holding period of such securities
for purposes of the Short-Term Gains Test.
Any increase in value of a position that is part of a "designated hedge" will be
offset by any decrease in value (whether realized or not) of the offsetting
hedging position during the period of such hedge for purposes of the Short-Term
Gains Test. Thus, only the net gain (if any) from the designated hedge will be
included to gross income for purposes of the Short-Term Gains Test. Each of the
Equity Fund and Balanced Fund anticipates engaging in hedging transactions that
qualify as designated hedges. However, because of the failure of the U.S.
Treasury to promulgate regulations as authorized by the Code, it is not clear at
the present time whether this treatment will be available for all of the
Portfolios' hedging transactions. To the extent the Portfolios' transactions do
not qualify as designated hedges, the Portfolios' investments in short sales,
options or other transactions may be limited.
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For purposes of the Asset Diversification Requirement, the issuer of a call
option on a security (including an option written on an exchange) will be deemed
to be the issuer of the underlying security. The Internal Revenue Service has
informally ruled, however, that a call option that is written by a fund need not
be counted for purposes of the Asset Diversification Requirement where the fund
holds the underlying security. Under the Code, a fund may not rely on informal
rulings of the Internal Revenue Service issued to other taxpayers. Consequently,
the Equity Fund and Balanced Fund may find it necessary to seek a ruling from
the Internal Revenue Service on this issue or to curtail their writing of
covered call options in order to stay within the limits of the Asset
Diversification Requirement.
ADDITIONAL FEDERAL TAX CONSIDERATIONS
The Code imposes a non-deductible 4% excise tax on RICs that do not distribute
with respect to each calendar year an amount equal to 98 percent of their
ordinary income for the calendar year plus 98 percent of their capital gain net
income for the one-year period ending on October 31 of such calendar year. The
balance of such income must be distributed during the next calendar year. For
the foregoing purposes, a company is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year. Because each Portfolio intends to distribute all of its taxable income
currently, none of the Portfolios anticipates incurring any liability for this
excise tax.
Investors should be aware that any loss realized on a sale of shares of a
Portfolio will be disallowed to the extent an investor repurchases shares of the
same Portfolio within a period of 61 days (beginning 30 days before and ending
30 days after the day of disposition of the shares). Dividends paid by a
Portfolio in the form of shares within the 61-day period would be treated as a
purchase for this purpose.
A shareholder will recognize gain or loss upon an exchange of shares of a
Portfolio for shares of another Portfolio upon exercise of an exchange
privilege. Shareholders may not include the initial sales charge in the tax
basis of shares exchanged for shares of another Portfolio for the purpose of
determining gain or loss on the exchange, where the shares exchanged have been
held 90 days or less. The sales charge that was imposed on the exchanged shares
will instead increase the basis of the shares acquired through exercise
privilege (unless the shares acquired are also exchanged for shares of another
Portfolio within 90 days after the first exchange).
The Portfolios will be required in certain cases to withhold and remit to the
United States Treasury 31% of dividends (other than exempt-interest dividends)
paid to any shareholder (1) who has provided either an incorrect tax
identification number or no number at all, (2) who is subject to backup
withholding by the Internal Revenue Service for failure to report the receipt of
interest or dividend income properly, or (3) who has failed to certify to the
Portfolio that he is not subject to backup withholding or that he is an "exempt
recipient."
The foregoing general discussion of Federal income tax consequences is based on
the Code and the regulations issued thereunder as in effect on the date of this
Statement of Additional Information. Future legislative or administrative
changes or court decisions may significantly change the conclusions expressed
herein, and any such changes or decisions may have a retroactive effect with
respect to the transactions contemplated herein.
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STATE AND LOCAL TAX CONSIDERATIONS
Although each Portfolio expects to qualify as a RIC and to be relieved of all or
substantially all Federal income taxes, depending upon the extent of its
activities in states and localities in which its offices are maintained, in
which its agents or independent contractors are located or in which it is
otherwise deemed to be conducting business, each Portfolio may be subject to the
tax laws of such states or localities.
PORTFOLIO TRANSACTIONS
The Portfolios have no obligation to deal with any dealer or group of dealers in
the execution of transactions in securities. Subject to policies established by
the Trustees, the Adviser is responsible for placing orders to execute portfolio
transactions. In placing orders, it is the policy of each Portfolio to seek to
obtain the best net results taking into account such factors as price (including
the applicable dealer spread), size, type and difficulty of the transaction
involved, the firm's general execution and operational facilities, and the
firm's risk in positioning the securities involved. While the Adviser generally
seeks reasonably competitive spreads or commissions, the Portfolios will not
necessarily be paying the lowest spread or commissions available. A Portfolio
will not purchase securities from any affiliated person acting as principal
except in conformity with the regulations of the SEC.
The Portfolios may execute brokerage or other agency transactions through the
Distributor, a registered broker-dealer, for a commission, in conformity with
the 1940 Act, the Securities Exchange Act of 1934, as amended, and rules of the
SEC. Under these provisions, the Distributor is permitted to receive and retain
compensation for effecting portfolio transactions for a Portfolio on an exchange
if a written contract is in effect between the Distributor and the Trust
expressly permitting the Distributor to receive and retain such compensation.
The Portfolios may also execute brokerage or other agency transactions with
affiliates of the Adviser in compliance with those provisions.
Those provisions further require that commissions paid to the Distributor by the
Trust for exchange transactions not exceed "usual and customary" brokerage
commissions. The rules define "usual and customary" commissions to include
amounts which are "reasonable and fair compared to the commission, fee or other
remuneration received or to be received by other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
a securities exchange during a comparable period of time." In addition, a
Portfolio may direct commission business to one or more designated
broker-dealers, including the Distributor, in connection with such
broker-dealer's payment of certain of the Portfolio's expenses or the
performance of certain services, such as research services. The Trustees,
including those who are not "interested persons" of the Trust, have adopted
procedures for evaluating the reasonableness of commissions paid to the
Distributor and will review these procedures periodically.
Since the Trust does not currently market its shares through intermediary
brokers or dealers, it is not the Trust's practice to allocate brokerage or
principal business on the basis of sales of its shares which may be made through
such firms. However, the Adviser may place portfolio orders with qualified
broker-dealers who recommend the Trust to clients, and may, when a number of
brokers and dealers can provide best price and execution on a particular
transaction, consider such recommendations by a broker or dealer in selecting
among broker-dealers.
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<PAGE> 147
The Trust does not use one particular dealer, but the Adviser may, consistent
with the interests of the Portfolios, select brokers on the basis of the
research services they provide to the Adviser. Such services may include
analysis of the business or prospects of a company, industry or economic sector
or statistical and pricing services. Information so received by the Adviser will
be in addition to and not in lieu of the services required to be performed by
the Adviser under the Advisory Agreement. Research services furnished by brokers
through whom the Trust effects securities transactions may be used by the
Adviser in the servicing of its other accounts and not all such services may be
used by the Adviser in connection with the Portfolios. If in the judgment of the
Adviser the Portfolios, or other accounts managed by the Adviser, will be
benefitted by supplemental research services, the Adviser is authorized to pay
brokerage commissions to a broker furnishing such services which are in excess
of commissions which another broker may have charged for effecting the same
transaction. The expenses of an Adviser will not necessarily be reduced as a
result of the receipt of such supplemental information.
For the fiscal year ended January 31, 1996, the Equity Fund paid brokerage
commissions of $291,662. The Adviser allocated certain of the Equity Fund's
brokerage transactions to certain broker-dealers that provided the Adviser with
certain research, statistical and other information. Such transactions amounted
to $220,015,937 and the related brokerage commissions were $291,662.
For the fiscal year ended January 31, 1996, the Balanced Fund paid brokerage
commissions of $165,537. The Adviser allocated certain of the Balance Fund's
brokerage transactions to certain broker-dealers that provided the Adviser with
research, statistical and other information. Such transactions amounted to
$121,648,681 and the related brokerage commissions were $165,537.
The portfolio turnover rate for each of the Portfolios for the fiscal year ended
January 31, 1996, was as follows: Equity Fund - 104%; Balanced Fund - 60%;
Intermediate Term Bond Fund - 85%; Short Term Bond Fund - 84%; Short Term
Municipal Bond Fund - 114%; Idaho Municipal Bond Fund - 59%. The Municipal Bond
Fund has not commenced operations and, accordingly, has not experienced any
portfolio turnover. Portfolio turnover rates may vary from year to year and may
be affected by cash requirements for redemptions and by requirements which
enable a Portfolio to maintain its status as a regulated investment company
under the Code.
The Trust is required to identify any securities of its "regular brokers or
dealers" (as such term is defined in the 1940 Act) which the Trust has acquired
during its most recent fiscal year. As of January 31, 1996, the Balanced Fund,
Short Term Bond Fund and Intermediate Term Bond Fund held medium term notes
issued by Bear Sterns & Co., Inc. having a value of $1,999,960, $1,022,730 and
$1,022,730, respectively, and the Intermediate Term Bond Fund held bonds issued
by J. P. Morgan Securities, Inc. having a value of $1,072,500.
LIMITATION OF TRUSTEE'S LIABILITY
The Trust Agreement provides indemnities and waivers of liability to Trustees
based on certain actions or failures to act while serving as a Trustee.
Insurance has also been obtained by the Trust on behalf of the Trustees to cover
losses arising from certain errors or omissions of a Trustee.
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CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of May 6, 1996, the following entities owned 5% or more of the outstanding
Institutional shares: Equity Fund: First Security Bank of Utah, N.A., P.O. Box
25297, Salt Lake City, Utah 84125 (100%); Balanced Fund: First Security Bank of
Utah, N.A., P.O. Box 25297, Salt Lake City, Utah 84125 (99.4%); Intermediate
Term Bond Fund: First Security Bank of Utah, N.A., P.O. Box 25297, Salt Lake
City, Utah 84125 (100%); Short Term Bond Fund: First Security Bank of Utah,
N.A., P.O. Box 25297, Salt Lake City, Utah 84125 (100%); Short Term Municipal
Bond Fund: First Security Bank of Utah, N.A., P.O. Box 25297, Salt Lake City,
Utah 84125 (100%); Idaho Municipal Bond Fund: First Security Bank of Utah, N.A.,
P.O. Box 25297, Salt Lake City, Utah 84125 (99.3%).
As of May 6, 1996, the following entities owned 5% or more of the outstanding
Retail Class A shares: Equity Fund: BHC Securities, Inc., One Commerce Square,
2005 Market St., Philadelphia, PA 19103 (71.3%); Balanced Fund: BHC Securities,
Inc., One Commerce Square, 2005 Market St., Philadelphia, PA 19103 (77.1%);
Intermediate Term Bond Fund: BHC Securities, Inc., One Commerce Square, 2005
Market St., Philadelphia, PA 19103 (88.9%); Short Term Bond Fund: BHC
Securities, Inc., One Commerce Square, 2005 Market St., Philadelphia, PA 19103
(45.9%); Lynn Flance, Trustee, Harry and Leone Borchardt Trust, 4860B E. Fort
Lowell, Tucson, AZ 85712 (27%); Karen Bradley, Trustee, Harry and Leone
Borchardt Trust, 3812 Arlote Ave S.E., Albuquerque, N.M. 87108 (24.6%); Short
Term Municipal Bond Fund: BHC Securities, Inc., One Commerce Square, 2005 Market
St., Philadelphia, PA 19103 (100%); Idaho Municipal Bond Fund: BHC Securities,
Inc., One Commerce Square, 2005 Market St., Philadelphia, PA 19103 (70.4%);
Arthur P. Jensen, Trustee, Arthur P. Jensen Revocable Family Trust, 325 West 1st
South, Rigby, UT 83442 (5.0%).
COUNSEL TO THE TRUST
Ballard Spahr Andrews & Ingersoll serves as counsel to the Trust.
FINANCIAL STATEMENTS
Audited financial statements of the Trust for the fiscal year ended January 31,
1996 and the Independent Auditors' Report of Deloitte & Touche LLP dated March
22, 1996 are contained in the Trust's Annual Report to Shareholders for its
fiscal year ended January 31, 1996 and are incorporated in this Statement of
Additional Information by reference. A copy of the Trust's Annual Report to
Shareholders shall be provided along with this Statement of Additional
Information to each person to whom the Statement of Additional Information is
sent, unless such person then holds securities issued by the Trust, in which
case a copy of the Trust's Annual Report to Shareholders will be furnished to
such person without charge upon request made to SEI Financial Services Company,
by written request addressed to 680 E. Swedesford Road, Wayne, PA 19087-0481 or
by calling 1-800-472-0577.
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<PAGE> 149
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Institutional Class of Equity Fund, Balanced
Fund, Intermediate Term Bond Fund, Short
Term Bond Fund, Short Term Municipal Bond
Fund and Idaho Municipal Bond Fund
In Part A:
Condensed Financial Information.
In Part B:
Financial Statements as of January 31, 1996
(audited), with Independent Auditors' Report
incorporated by reference to Annual Report
to Shareholders.
(2) Retail Class A of Equity Fund, Balanced
Fund, Intermediate Term Bond Fund, Short
Term Bond Fund, Short Term Municipal Bond
Fund and Idaho Municipal Bond Fund:
In Part A:
Condensed Financial Information.
In Part B:
Financial Statements as of January 31, 1996
(audited), with Independent Auditors' Report
incorporated by reference to Annual Report
to Shareholders.
(3) Institutional Class of Municipal Bond Fund
In Part B:
Financial Statements as of January 31, 1996
(audited), with Independent Auditors' Report
incorporated by reference to Annual Report
to Shareholders
(4) Retail Class A of Municipal Bond Fund
In Part B:
<PAGE> 150
Financial Statements as of January 31, 1996
(audited) with Independent Auditors' Report
incorporated by reference to Annual Report
to Shareholders
(b) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description*
------ ------------
<S> <C>
1(a) - Amended and Restated Master Trust Agreement dated
October 7, 1994 was filed as Exhibit 1(a) to Post-Effective
Amendment No. 8 on May 31, 1995 and is filed herewith
electronically.
1(b) - Amendment No. 1 to Amended and Restated Master Trust
Agreement dated December 1, 1994 was filed as Exhibit 1(b)
to Post-Effective Amendment No. 8 on May 31, 1995 and is
filed herewith electronically.
2 - By-Laws were filed as Exhibit No. 2 to Registration Statement
on December 19, 1988 and are filed herewith electronically.
3 - Not Applicable.
4 - Not Applicable.
5(a) - Investment Advisory Agreement dated February 1, 1989
between Registrant and First Security Investment
Management, Inc. was filed as Exhibit No. 5 to Post-Effective
Amendment No. 1 on August 30, 1989 and is filed herewith
electronically.
5(b) - First Amendment to Investment Advisory Agreement dated
December 27, 1994 between Registrant and First Security
Investment Management, Inc. was filed as Exhibit 5(b) to
Post-Effective Amendment No. 8 on May 31, 1995 and is
filed herewith electronically.
</TABLE>
- ---------------------
* As used herein the term "Registration Statement" refers to the
Registration Statement of Registrant under the Securities Act of 1933 on Form
N-1A, No. 33-26205, and the term "Post-Effective Amendment" refers to a
post-effective amendment to the Registration Statement.
2
<PAGE> 151
<TABLE>
<S> <C>
5(c) - Form of Second Amendment to Investment Advisory
Agreement between Registrant and First Security Investment
Management is filed herewith electronically.
6 - Distribution Agreement dated December 27, 1994 between
Registrant and SEI Financial Services Company was filed as
Exhibit 6 to Post-Effective Amendment No. 8 on May 31,
1995 and is filed herewith electronically.
7 - Not Applicable.
8 - Custodian Agreement dated December 27, 1994 between
Registrant and CoreStates Bank, N.A. was filed as Exhibit 8
to Post-Effective Amendment No. 8 on May 31, 1995 and is
filed herewith electronically.
9(a) - Transfer Agency Agreement dated December 27, 1994
between Registrant and Supervised Service Company was filed
as Exhibit 9(a) to Post-Effective Amendment No. 8 on
May 31, 1995 and is filed herewith electronically.
9(b) - Consent of the Registrant to the Assignment of the Transfer
Agency Agreement between Registrant and Supervised Service
Company to DST Systems, Inc. was filed as Exhibit 9(b) to
Post-Effective Amendment No. 8 on May 31, 1995 and is
filed herewith electronically.
9(c) - Administration Agreement dated December 27, 1994 between
Registrant and SEI Financial Management Corporation was
filed as Exhibit 9(c) to Post-Effective Amendment No. 8 on
May 31, 1995 and is filed herewith electronically.
9(d) - Credit Agreement dated as of October 11, 1995 between
Registrant and Morgan Guaranty Trust Company was filed as
Exhibit 9(d) to Post-Effective Amendment No. 10 on October
13, 1995, and is filed herewith electronically.
10 - Opinion of Counsel was filed as Exhibit No. 10 to Pre-
Effective Amendment No. 1 on February 6, 1989 and is filed
herewith electronically.
11(a) - Consent of Ballard Spahr Andrews & Ingersoll.
11(b) - Consent of Deloitte & Touche LLP
</TABLE>
3
<PAGE> 152
<TABLE>
<S> <C>
12 - Not Applicable.
13 - Share Purchase Agreement dated December 14, 1994 between
Registrant and SEI Financial Management Corporation was
filed as Exhibit 13 to Post-Effective Amendment No. 8 on
May 31, 1995 and is filed herewith electronically.
14 - Not Applicable.
15 - Rule 12b-1 Plan with respect to Retail Class A Shares between
Registrant and SEI Financial Services Company was filed as
Exhibit 15 to Post-Effective Amendment No. 8 on May 31,
1995 and is filed herewith electronically.
16 - Not Applicable.
17 - Financial Data Schedules.
18 - Rule 18f-3 Multiple Class Plan dated August 4, 1995, was
filed as Exhibit 18 to Post-Effective Amendment No. 10 on
October 13, 1995, and is filed herewith electronically.
</TABLE>
Item 25. Persons Controlled by or under Common Control with Registrant.
Not Applicable.
Item 26. Number of Holders of Securities.
<TABLE>
<CAPTION>
Number of Record
Institutional Class Holders at May 6, 1996
------------------- ----------------------
<S> <C>
Equity Fund 12
Balanced Fund 13
Intermediate Term Bond Fund 11
Short Term Bond Fund 12
Short Term Municipal Bond Fund 11
Idaho Municipal Bond Fund 11
</TABLE>
<TABLE>
<CAPTION>
Number of Record
Retail Class A Holders at May 6, 1996
-------------- ----------------------
<S> <C>
Equity Fund 198
</TABLE>
4
<PAGE> 153
<TABLE>
<S> <C>
Balanced Fund 112
Intermediate Term Bond Fund 22
Short Term Bond Fund 9
Short Term Municipal Bond Fund 5
Idaho Municipal Bond Fund 41
</TABLE>
Item 27. Indemnification
Under Section 6.4 of the Registrant's Amended and Restated
Master Trust Agreement, any past or present Trustee or officer of Registrant
(including persons who serve at Registrant's request as directors, officers or
trustees of another organization in which Registrant has any interest as a
shareholder, creditor or otherwise (hereinafter referred to as a "Covered
Person")) is indemnified to the fullest extent permitted by law against
liability and all expenses reasonably incurred by him in connection with any
action, suit or proceeding to which he may be a party or otherwise involved by
reason of his being or having been a Covered Person. This provision does not
authorize indemnification when it is determined, in the manner specified in the
Amended and Restated Master Trust Agreement, that a Covered Person has not acted
in good faith in the reasonable belief that his actions were in or not opposed
to the best interests of Registrant. Moreover, this provision does not authorize
indemnification when it is determined, in the manner specified in the Amended
and Restated Master Trust Agreement, that the Covered Person would otherwise be
liable to Registrant or its shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of his duties. Expenses may be
paid by Registrant in advance of the final disposition of any action, suit or
proceeding upon receipt of an undertaking by a Covered Person to repay those
expenses to Registrant in the event that it is ultimately determined that
indemnification of the expenses is not authorized under the Amended and Restated
Master Trust Agreement and the Covered Person either provides security for such
undertaking or insures Registrant against losses from such advances or the
disinterested Trustees or independent legal counsel determines, in the manner
specified in the Amended and Restated Master Trust Agreement, that there is
reason to believe the Covered Person will be found to be entitled to
indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933, as amended (the "1933 Act"), may be permitted to
Trustees, officers and controlling persons of Registrant pursuant to the
foregoing provisions, or otherwise, Registrant has been advised that, in the
opinion of the Commission, such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment be
Registrant of expenses incurred or paid by a Trustee, officer or controlling
person of Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling person in
connection with the securities being registered, Registrant 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 1933 Act and
will be governed by the final adjudication of such issue.
5
<PAGE> 154
Item 28. Business and Other Connections of Investment Adviser.
<TABLE>
<CAPTION>
Principal Occupation or
Other Employment of a
Position with Substantial Nature During
Name Adviser The Past Two Years
- ---- ------------- -------------------------
<S> <C> <C>
Sterling K. Jenson President and Vice President and Senior Portfolio
Director Manager.
A. Robert Thorup Secretary Shareholder & Director, Ray, Quinney
& Nebeker, P.C. (law firm); Secretary
and General Counsel, First Security
Investment Services (retail securities
brokerage); President, ICHA
Management Corporation (hotel
ownership and management); President
and Director, Inns West Management,
Inc. (hotel management); President,
Bonneville Education Foundation
(charitable foundation); General
Partner, Ken Rey Associates, Ltd.
(private investment partnership).
Curtis J. Anderson Vice President Senior Portfolio Manager.
Mark L. Anderson Vice President Senior Portfolio Manager.
Steven R. Cowley Vice President Senior Portfolio Manager.
Bruce R. Mohr Vice President Senior Portfolio Manager.
Joni Pierce Vice President Senior Portfolio Manager.
James A. Schuck Vice President Senior Portfolio Manager.
</TABLE>
6
<PAGE> 155
Item 29. Principal Underwriter.
(a) The Registrant's distributor, SEI Financial Services
Company ("SFS") acts as distributor for: SEI Daily Income Trust, SEI Liquid
Asset Trust, SEI Tax Exempt Trust, SEI Index Funds, SEI Institutional Managed
Trust, SEI International Trust, Stepstone Funds, The Advisor's Inner Circle
Fund, The Pillar Funds, CUFUND, STI Classic Funds, CoreFunds, Inc., First
American Funds, Inc., First American Investment Funds, Inc., The Arbor Fund,
1784 Funds, The PBHG Fund, Inc., Marquis Funds, Morgan Grenfell Investment
Trust, Inventor Funds, Inc., Insurance Investment Products Trust, Bishop Street
Funds, CrestFunds, Inc., STI Classic Variable Trust, ARK Funds, Monitor Funds,
FMB Funds, Inc., SEI Asset Allocation Trust pursuant to distribution agreements
dated July 15, 1982, November 29, 1982, December 3, 1982, July 10, 1985, January
22, 1987, August 30, 1988, January 30, 1991, November 14, 1991, February 28,
1992, May 1, 1992, May 29, 1992, October 30, 1992, November 1, 1992, November 1,
1992, January 28, 1993, June 1, 1993, July 16, 1993, August 17, 1993, January 3,
1994, August 1, 1994, December 30, 1994, January 27, 1995, March 1, 1995, August
18, 1995, November 1, 1995, January 11, 1996, March 1, 1996, April 1, 1996.
SFS provides numerous financial services to investment
managers, pension plan sponsors, and bank trust departments. These services
include fund evaluation, performance measurement, and consulting services and
automated execution, clearing and settlement of securities transactions.
(b) The following are the directors and officers of SFS.
Unless otherwise noted, the business address of each director or officer is 680
East Swedesford Road, Wayne, PA 19087.
<TABLE>
<CAPTION>
Position and Positions and
Offices with Offices with
Name Underwriter Registrant
- ---- ------------ -------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman and --
Chief Executive Officer
Henry H. Greer Director, President & Chief --
Operating Officer
Carmen V. Romeo Director, Executive Vice --
President & Treasurer
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President --
Charles A. Marsh Executive Vice President of --
Capital Resources Division
Kenneth Zimmer Senior Vice President --
Leo J. Dolan, Jr. Senior Vice President --
</TABLE>
7
<PAGE> 156
<TABLE>
<CAPTION>
Position and Positions and
Offices with Offices with
Name Underwriter Registrant
- ---- ------------ -------------
<S> <C> <C>
Carl A. Guarino Senior Vice President --
Jerome Hickey Senior Vice President --
David G. Lee Senior Vice President President
William Madden Senior Vice President --
A. Keith McDowell Senior Vice President --
Dennis J. McGonigle Senior Vice President --
Hartland J. McKeown Senior Vice President --
James V. Morris Senior Vice President --
Steven Onofrio Senior Vice President --
Robert Wagner Senior Vice President --
Patrick K. Walsh Senior Vice President --
Kevin P. Robins Senior Vice President, Vice President & Assistant
General Counsel & Secretary
Secretary
Robert Crudup Managing Director --
Jeff Drennen Managing Director --
Victor Galef Managing Director --
Kim Kirk Managing Director --
Carolyn McLaurin Managing Director & Vice --
President
John Krzeminski Managing Director --
Barbara Moore Managing Director --
Donald Pepin Managing Director --
Mark Samuels Managing Director --
</TABLE>
8
<PAGE> 157
<TABLE>
<CAPTION>
Position and Positions and
Offices with Offices with
Name Underwriter Registrant
- ---- ------------ -------------
<S> <C> <C>
Wayne M. Withrow Managing Director --
Robert Ludwig Team Leader & Vice --
President
Vicki Malloy Team Leader --
Mick Duncan Team Leader --
Sandra K. Orlow Vice President & Assistant Vice President & Assistant
Secretary Secretary
Robert Aller Vice President --
Steve Bandinelli Vice President --
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Vice President & Assistant
Secretary Secretary
Lucinda Duncalfe Vice President --
Kathy Heilig Vice President --
Larry Hutchison Vice President --
Michael Kantor Vice President --
Samuel King Vice President --
Donald H. Korytowski Vice President --
Jack May Vice President --
W. Kelso Morrill Vice President --
Larry Pokora Vice President --
Kim Rainey Vice President --
Steven Smith Vice President --
Kathryn L. Stanton Vice President & Assistant Vice President & Secretary
Secretary
</TABLE>
9
<PAGE> 158
<TABLE>
<CAPTION>
Position and Positions and
Offices with Offices with
Name Underwriter Registrant
- ---- ------------ -------------
<S> <C> <C>
Paul Sachs Vice President --
Daniel Spaventa Vice President --
William Zawaski Vice President --
James Dougherty Director, Brokerage --
Services
</TABLE>
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940, as amended,
and the rules thereunder are maintained:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3); (6);
(8); (12); and 31a-1(d), the required books and records will be maintained at
the offices of Registrant's Custodian:
CoreStates Bank, N.A.
Broad and Chestnut Streets
P.O. Box 7618
Philadelphia, PA 19101
(b) With respect to Rules 31a-1(a); 31a-1(b)(1), (4); (2)(C) and (D); (4);
(5); (6); (8); (9); (10); (11); and 31a-1(f), the required books and records are
maintained at the offices of Registrant's Administrator:
SEI Financial Management Corporation
680 East Swedesford Road
Wayne, PA 19087
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f), the
required books and records are maintained at the principal offices of the
Registrant's Adviser:
First Security Investment Management, Inc.
61 South Main Street
Salt Lake City, Utah 84111
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
Not Applicable.
10
<PAGE> 159
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant certifies
that this Post-Effective Amendment No. 11 to the Registration Statement meets
the requirements for effectiveness pursuant to Rule 485(b) of the Securities Act
of 1933, as amended, and the Registrant has duly caused this Post-Effective
Amendment No. 9 to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Wayne, Commonwealth of
Pennsylvania, on the 30th day of May, 1996.
THE ACHIEVEMENT FUNDS TRUST
By: /s/ David G. Lee
----------------------------
David G. Lee
President and Principal
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 11 to the Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
* Chairman of the Board May 30, 1996
- ------------------------------ and Trustee
Frederick A. Moreton, Jr.
* Trustee May 30, 1996
- ------------------------------
Robert G. Love
* Trustee May 30, 1996
- ------------------------------
Carl S. Minden
* Trustee May 30, 1996
- ------------------------------
August Glissmeyer, Jr.
* Trustee May 30, 1996
- ------------------------------
George L. Denton
/s/ Stephen Meyer Treasurer and Principal May 30, 1996
- ------------------------------ Financial Officer
Stephen Meyer
</TABLE>
* By: /s/ David G. Lee
-------------------------
David G. Lee
Attorney In Fact
<PAGE> 160
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit
Number Description*
------- ------------
<S> <C>
1(a) -- Amended and Restated Master Trust Agreement dated
October 7, 1994 was filed as Exhibit 1(a) to Post-
Effective Amendment No. 8 on May 31, 1995 and is
filed herewith electronically.
1(b) -- Amendment No. 1 to Amended and Restated Master
Trust Agreement dated December 1, 1994 was filed as
Exhibit 1(b) to Post-Effective Amendment No. 8 on
May 31, 1995 and is filed herewith electronically.
2 -- By-Laws were filed as Exhibit No. 2 to Registration
Statement on December 19, 1988 and are filed
herewith electronically.
5(a) -- Investment Advisory Agreement dated February 1,
1989 between Registrant and First Security
Investment Management, Inc. was filed as Exhibit
No. 5 to Post-Effective Amendment No. 1 on
August 30, 1989 and is filed herewith
electronically
5(b) -- First Amendment to Investment Advisory Agreement dated
December 27, 1994 between Registrant and First Security
Investment Management, Inc. was filed as Exhibit 5(b) to
Post-Effective Amendment No. 8 on May 31, 1995 and is filed
herewith electronically.
5(c) -- Form of Second Amendment to Investment Advisory
Agreement between Registrant and First Security
Investment Management is filed herewith
electronically.
6 -- Distribution Agreement dated December 27, 1994
between Registrant and SEI Financial Services
Company was filed as Exhibit 6 to Post-Effective
Amendment No. 8 on May 31, 1995 and is filed
herewith electronically.
</TABLE>
______________
* As used herein the term "Registration Statement" refers to
the Registration Statement of Registrant under the Securities Act
of 1933 on Form N-1A, No. 33-26205, and the term "Post-Effective
Amendment" refers to a post-effective amendment to the Registration
Statement.
<PAGE> 161
<TABLE>
<S> <C>
8 -- Custodian Agreement dated December 27, 1994 between
Registrant and CoreStates Bank, N.A. was filed as
Exhibit 8 to Post-Effective Amendment No. 8 on May
31, 1995 and is filed herewith electronically.
9(a) -- Transfer Agency Agreement dated December 27, 1994
between Registrant and Supervised Service Company
was filed as Exhibit 9(a) to Post-Effective
Amendment No. 8 on May 31, 1995 and is filed
herewith electronically.
9(b) -- Consent of the Registrant to the Assignment of the
Transfer Agency Agreement between Registrant and
Supervised Service Company to DST Systems, Inc. was
filed as Exhibit 9(b) to Post-Effective Amendment
No. 8 on May 31, 1995 and is filed herewith
electronically.
9(c) -- Administration Agreement dated December 27, 1994
between Registrant and SEI Financial Management
Corporation was filed as Exhibit 9(c) to Post-
Effective Amendment No. 8 on May 31, 1995 and is
filed herewith electronically.
9(d) -- Credit Agreement dated as of October 11, 1995
between Registrant and Morgan Guaranty Trust
Company was filed as Exhibit 9(d) to Post-Effective
Amendment No. 10 on October 13, 1995, and is filed
herewith electronically.
10 -- Opinion of Counsel was filed as Exhibit No. 10 to
Pre-Effective Amendment No. 1 on February 6, 1989
and is filed herewith electronically.
11(a) -- Consent of Ballard Spahr Andrews & Ingersoll.
11(b) -- Consent of Deloitte & Touche LLP
13 -- Share Purchase Agreement dated December 14, 1994
between Registrant and SEI Financial Management
Corporation was filed as Exhibit 13 to Post-
Effective Amendment No. 8 on May 31, 1995 and is
filed herewith electronically.
15 -- Rule 12b-1 Plan with respect to Retail Class A
Shares between Registrant and SEI Financial
Services Company was filed as Exhibit 15 to Post-
Effective Amendment No. 8 on May 31, 1995 and is
filed herewith electronically.
17 -- Financial Data Schedules.
</TABLE>
2
<PAGE> 162
<TABLE>
<S> <C>
18 -- Rule 18f-3 Multiple Class Plan dated August 4, 1995, was
filed as Exhibit 18 to Post-Effective Amendment No. 10 on
October 13, 1995, and is filed herewith electronically.
</TABLE>
3
<PAGE> 1
EXHIBIT 1(a)
THE FSB FUNDS
AMENDED AND RESTATED
MASTER TRUST AGREEMENT
DECEMBER 16, 1988,
AS AMENDED AND
RESTATED OCTOBER 7, 1994
<PAGE> 2
THE FSB FUNDS
CROSS-REFERENCE SHEET
Pursuant to 950 CMR 109.00:
109.03 (a) Name of association or trust:
The FSB Funds
(b) Date of organization:
December 16, 1988
(c) Names and addresses of the trustees:
Mr. George L. Denton, Jr.
2915 Sherwood Drive
Salt Lake City, UT 84108
Mr. August Glissmeyer, Jr.
4458 Camille Street
Salt Lake City, UT 84124
Mr. Robert G. Love
University City Building
126 East South Temple, Ste. 1800
Salt Lake City, UT 84070
Mitchell Melich, Esq.
Ray, Quinney & Nebeker, P.C.
400 Deseret Building
79 South Main Street
Salt Lake City, UT 84145-0385
Mr. Carl S. Minden
314 Federal Height Circle
Salt Lake City, UT 84103
Mr. Frederick A. Moreton, Jr.
50 South Main Street, Ste. 1000
Salt Lake City, UT 84108
(d) Original signatures of all trustees:
See pages 21 and 22.
<PAGE> 3
(e) Principal place of business:
680 East Swedesford Road
Wayne, PA 19087
(f) Statement that beneficial interest is divided into
transferable certificates of participation or shares:
See Section 4.1, pages 9 and 10.
(g) Ability to merge:
See Section 7.2, page 20.
Name and address of registered agent:
C T Corporation System
2 Oliver Street
Boston, MA 02109
2
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I NAME AND DEFINITIONS . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Name . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Definitions . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II PURPOSE OF TRUST . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III THE TRUSTEES . . . . . . . . . . . . . . . . . . . . . . 3
Section 3.1 Number, Designation, Election, Term, etc. . . . . . 3
Section 3.2. Powers of Trustees . . . . . . . . . . . . . . . . 4
Section 3.3 Certain Contracts . . . . . . . . . . . . . . . . . 7
Section 3.4 Payment of Trust Expenses and Compensation of
Trustees . . . . . . . . . . . . . . . . . . . . . 8
Section 3.5 Ownership of Assets of the Trust . . . . . . . . . 9
ARTICLE IV SHARES . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.1 Description of Shares. . . . . . . . . . . . . . . 9
Section 4.2 Establishment and Designation of Sub-Trusts and
Classes . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.3 Ownership of Shares . . . . . . . . . . . . . . . . 14
Section 4.4 Investments in the Trust . . . . . . . . . . . . . 14
Section 4.5 No Pre-emptive Rights . . . . . . . . . . . . . . . 14
Section 4.6 Status of Shares and Limitation of Personal
Liability . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE V SHAREHOLDERS' VOTING POWERS AND MEETINGS . . . . . . . . . 15
Section 5.1 Voting Powers . . . . . . . . . . . . . . . . . . . 15
Section 5.2 Meetings . . . . . . . . . . . . . . . . . . . . . 15
Section 5.3 Record Dates . . . . . . . . . . . . . . . . . . . 16
Section 5.4 Ouorum and Required Vote . . . . . . . . . . . . . 16
Section 5.5 Action by Written Consent . . . . . . . . . . . . . 16
Section 5.6 Inspection of Records . . . . . . . . . . . . . . . 16
Section 5.7 Additional Provisions . . . . . . . . . . . . . . . 16
</TABLE>
i
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE VI LIMITATION OF LIABILITY; INDEMNIFICATION . . . . . . . . 17
Section 6.1 Trustees, Shareholders, etc. Not Personally Liable;
Notice . . . . . . . . . . . . . . . . . . . . . . 17
Section 6.2 Trustee's Good Faith Action: Expert Advice; No Bond
or Surety . . . . . . . . . . . . . . . . . . . . . 17
Section 6.3 Indemnification of Shareholders . . . . . . . . . . 18
Section 6.4 Indemnification of Trustees, Officers, etc. . . . . 18
Section 6.5 Compromise Payment . . . . . . . . . . . . . . . . 19
Section 6.6 Indemnification Not Exclusive, etc. . . . . . . . . 19
Section 6.7 Liability of Third Persons Dealing with Trustees . 19
ARTICLE VII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 19
Section 7.1 Duration and Termination of Trust . . . . . . . . . 19
Section 7.2 Reorganization . . . . . . . . . . . . . . . . . . 20
Section 7.3 Amendments . . . . . . . . . . . . . . . . . . . . 20
Section 7.4 Resident Agent . . . . . . . . . . . . . . . . . . 21
Section 7.5 Filing of Copies; References; Headings . . . . . . 21
Section 7.6 Applicable Law . . . . . . . . . . . . . . . . . . 21
</TABLE>
ii
<PAGE> 6
THE FSB FUNDS
AMENDED AND RESTATED
MASTER TRUST AGREEMENT
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST made at
Boston, Massachusetts the 16th day of December, 1988, as amended and
restated this 7th day of October, 1994, by the Trustees hereunder, and by
the holders of shares of beneficial interest to be issued hereunder as
hereinafter provided.
WITNESSETH
WHEREAS this Trust has been formed to carry on the business of an
investment company; and
WHEREAS this Trust is authorized to issue its shares of beneficial
interest in separate series, each separate series to be a Sub-Trust
hereunder, all in accordance with the provisions hereinafter set forth;
and
WHEREAS the Trustees have agreed to manage all property coming into
their hands as trustees of a Massachusetts business trust in accordance
with the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets which they may from time to time acquire
in any manner as Trustees hereunder IN TRUST to manage and dispose of the
same upon the following terms and conditions for the benefit of the
holders from time to time of shares of beneficial interest in this Trust
or Sub-Trusts created hereunder as hereinafter set forth.
<PAGE> 7
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 Name. This Trust shall be known as "The FSB Funds" and
the Trustees shall conduct the business of the Trust under that name or
any other name or names as they may from time to time determine.
Section 1.2 Definitions. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) "By-Laws" shall mean the By-Laws of the Trust as amended
from time to time;
(b) "Class" means a portion of Shares of a Sub-Trust of the
Trust established in accordance with the provisions of Article IV;
(c) "Declaration of Trust" shall mean this Amended and Restated
Agreement and Declaration of Trust, as further amended or amended and
restated from time to time;
(d) The "Trust" refers to the Massachusetts business trust
established by this Declaration of Trust, as amended from time to time,
inclusive of each and every Sub-Trust established hereunder;
(e) The "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from time to
time;
(f) The term "Commission" shall have the meaning given it in
the 1940 Act;
(g) "Trustees" refers to the Trustees of the Trust and of each
Sub-Trust hereunder named herein or elected in accordance with Article
III;
(h) "Shares" refers to the transferable units of interest into
which the beneficial interest in the Trust and each Sub-Trust of the Trust
and each Class of any Sub-Trust (as the context may require) shall be
divided from time to time;
(i) "Shareholder" means a record owner of Shares; and
(j) "Sub-Trust" means a series of Shares established and
designated under or in accordance with the provisions of Article IV.
2
<PAGE> 8
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to operate as an investment company and
to offer Shareholders of the Trust and each Sub-Trust of the Trust one or
more investment programs primarily in securities and debt instruments.
ARTICLE III
THE TRUSTEES
Section 3.1 Number, Designation, Election, Term, etc.
(a) Initial Trustees. Upon the execution of the original
Declaration of Trust on December 16, 1988, Patricia L. Bickimer and Peter
Meenan became the initial Trustees hereof. On January 27, 1989, Frederick
A. Moreton, Jr., Robert G. Love, August Glissmeyer, Jr., Carl S. Minden,
and Mitchell Melich agreed to be bound by the provisions of this
Declaration of Trust and were appointed Trustees of the Trust, and
Patricia L. Bickimer and Peter Meenan resigned as Trustees of the Trust.
Subsequent thereto, George L. Denton, Jr. agreed to be bound by the
provisions of this Declaration of Trust and was appointed a Trustee of the
Trust.
(b) Number. The Trustees serving as such, whether named above
or hereafter becoming a Trustee, may increase or decrease (to not less
than two) the number of Trustees to a number other than the number
theretofore determined. No decrease in the number of Trustees shall have
the effect of removing any Trustee from office prior to the expiration of
his term, but the number of Trustees may be decreased in conjunction with
the removal of a Trustee pursuant to subsection (e) of this Section 3.1.
(c) Election and Term. The Trustees were elected by the
Shareholders of the Trust at the first meeting of Shareholders following
the initial public offering of shares of the Trust. Each Trustee, whether
named above or hereafter becoming a Trustee, shall serve as a Trustee of
the Trust and of each Sub-Trust hereunder during the lifetime of this
Trust and until its termination as hereinafter provided except as such
Trustee sooner dies, resigns or is removed. Subject to Section 16(a) of
the 1940 Act, the Trustees may elect their own successors and may,
pursuant to Section 3.1(f) hereof, appoint Trustees to fill vacancies.
(d) Resignation and Retirement. Any Trustee may resign his
trust or retire as a Trustee, by written instrument signed by him and
delivered to the other Trustees or to any officer of the Trust, and such
resignation or retirement shall take effect upon such delivery or upon
such later date as is specified in such instrument and shall be effective
as to the Trust and each Sub-Trust hereunder.
(e) Removal. Any Trustee may be removed with or without cause
at any time: (i) by written instrument, signed by at least two-thirds of
the number of Trustees prior to such removal,
3
<PAGE> 9
specifying the date upon which such removal shall become effective; or
(ii) by vote of Shareholders holding not less than two-thirds of the
Shares then outstanding, cast in person or by proxy at any meeting called
for the purpose; or (iii) by a written declaration signed by Shareholders
holding not less than two-thirds of the Shares then outstanding and filed
with the Trust's Custodian. Any such removal shall be effective as to the
Trust and each Sub-Trust hereunder.
(f) Vacancies. Any vacancy or anticipated vacancy resulting
from any reason, including without limitation the death, resignation,
retirement, removal or incapacity of any of the Trustees, or resulting
from an increase in the number of Trustees by the other Trustees may (but
so long as there are at least two remaining Trustees, need not unless
required by the 1940 Act) be filled by a majority of the remaining
Trustees, subject to the provisions of Section 16(a) of the 1940 Act,
through the appointment in writing of such other person as such remaining
Trustees in their discretion shall determine and such appointment shall be
effective upon the written acceptance of the person named therein to serve
as a Trustee and agreement by such person to be bound by the provisions of
this Declaration of Trust, except that any such appointment in
anticipation of a vacancy to occur by reason of retirement, resignation,
or increase in number of Trustees to be effective at a later date shall
become effective only at or after the effective date of said retirement,
resignation, or increase in number of Trustees. As soon as any Trustee so
appointed shall have accepted such appointment and shall have agreed in
writing to be bound by this Declaration of Trust and the appointment is
effective, the Trust estate shall vest in the new Trustee, together with
the continuing Trustees, without any further act or conveyance.
(g) Effect of Death, Resignation, etc. The death, resignation,
retirement, removal, or incapacity of the Trustees, or any one of them,
shall not operate to annul or terminate the Trust or any Sub-Trust or
Class hereunder or to revoke or terminate any existing agency or contract
created or entered into pursuant to the terms of this Declaration of
Trust.
(h) No Accounting. Except to the extent required by the 1940
Act or under circumstances which would justify his removal for cause, no
person ceasing to be a Trustee as a result of his death, resignation,
retirement, removal or incapacity (nor the estate of any such person)
shall be required to make an accounting to the Shareholders or remaining
Trustees upon such cessation.
Section 3.2. Powers of Trustees. Subject to the provisions of' this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry
out that responsibility and the purpose of the Trust. Without limiting
the foregoing, the Trustees may adopt By-Laws not inconsistent with this
Declaration of Trust providing for the conduct of the business and affairs
of the Trust and may amend and repeal them to the extent that such By-Laws
do not reserve that right to the Shareholders; they may from time to time
in accordance with the provisions of Section 4.1 hereof establish
Sub-Trusts, each such Sub-Trust to operate as a separate and distinct
investment medium and with separately defined investment objectives and
policies and distinct investment purpose; they may from time to time in
accordance with the provisions of Section 4.1 hereof establish two or more
Classes representing interests in each Sub-Trust; they may as they
consider appropriate elect and remove officers and appoint and terminate
agents and consultants and hire and terminate employees, any one or more
of the foregoing of whom may be a Trustee, and may provide for the
compensation of all of the foregoing; they may appoint from their own
number, and terminate, any one or more committees consisting of two or
more
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Trustees, including without implied limitation an executive committee,
which may, when the Trustees are not in session and subject to the 1940
Act, exercise some or all of the power and authority of the Trustees as
the Trustees may determine; in accordance with Section 3.3 they may employ
one or more advisers, administrators, distributors, depositories and
custodians and may authorize any depository or custodian to employ
subcustodians or agents and to deposit all or any part of such assets in a
system or systems for the central handling of securities and debt
instruments, retain transfer, dividend, accounting or Shareholder
servicing agents or any of the foregoing, provide for the distribution of
Shares by the Trust through the adoption of Rule 12b-1 Plans and through
one or more distributors, principal underwriters or otherwise, set record
dates or times for the determination of Shareholders or various of them
with respect to various matters; they may compensate or provide for the
compensation of the Trustees, officers, advisers, administrators,
custodians, distributors, transfer agents, other agents, consultants and
employees of the Trust or the Trustees on such terms as they deem
appropriate; and in general they may delegate to any officer of the Trust,
to any committee of the Trustees and to any employee, adviser,
administrator, distributor, depository, custodian, transfer and dividend
disbursing agent, or any other agent or consultant of the Trust such
authority, powers, functions and duties as they consider desirable or
appropriate for the conduct of the business and affairs of the Trust,
including without implied limitation the power and authority to act in the
name of the Trust and of the Trustees, to sign documents and to act as
attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent
with the 1940 Act or other applicable law, the Trustees shall have power
and authority for and on behalf of the Trust and each separate Sub-Trust
established hereunder:
(a) Investments. To invest and reinvest cash and other
property, and to hold cash or other property uninvested without in any
event being bound or limited by any present or future law or custom in
regard to investments by trustees;
(b) Disposition of Assets. To sell, exchange, lend, pledge,
mortgage, hypothecate, write options on and lease any or all of the assets
of the Trust;
(c) Ownership Powers. To vote or give assent, or exercise any
rights of ownership, with respect to stock or other securities, debt
instruments or property; and to execute and deliver proxies or powers of
attorney to such person or persons as the Trustees shall deem proper,
granting to such person or persons such power and discretion with relation
to securities, debt instruments or property as the Trustees shall deem
proper;
(d) Subscription. To exercise powers and rights of
subscription or otherwise which in any manner arise out of ownership of
securities or debt instruments;
(e) Form of Holding. To hold any security, debt instrument or
property in a form not indicating any trust, whether in bearer,
unregistered or other negotiable form, or in the name of the Trustees or
of the Trust or of any Sub-Trust or in the name of a custodian,
subcustodian or other depository or a nominee or nominees or otherwise;
(f) Reorganization, etc. To consent to or participate in any
plan for the reorganization, consolidation or merger of any corporation or
issuer, any security or debt instrument
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of which is or was held in the Trust; to consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or issuer, and
to pay calls or subscriptions with respect to any security or debt
instrument held in the Trust;
(g) Voting Trusts, etc. To join with other holders of any
securities or debt instruments in acting through a committee, depository,
voting trustee or otherwise, and in that connection to deposit any
security or debt instrument with, or transfer any security or debt
instrument to, any committee, depository or trustee, and to delegate to
them such power and authority with relation to any security or debt
instrument (whether or not so deposited or transferred) as the Trustees
shall deem proper, and to agree to pay, and to pay, such portion of the
expenses and compensation of such committee, depository or trustee as the
Trustees shall deem proper;
(h) Compromise. To compromise, arbitrate or otherwise adjust
claims in favor of or against the Trust or any Sub-Trust of any matter in
controversy, including but not limited to claims for taxes;
(i) Partnerships, etc. To enter into joint ventures, general
or limited partnerships and any other combinations or associations;
(j) Borrowing and Security. To borrow funds and to mortgage
and pledge the assets of the Trust or any part thereof to secure
obligations arising in connection with such borrowing;
(k) Guarantees, etc. To endorse or guarantee the payment of
any notes or other obligations of any person; to make contracts of
guaranty or suretyship, or otherwise assume liability for payment thereof;
and to mortgage and pledge the Trust property or any part thereof to
secure any of or all such obligations; and
(l) Insurance. To purchase and pay for entirely out of Trust
property such insurance as they may deem necessary or appropriate for the
conduct of the business, including, without limitation, insurance policies
insuring the assets of the Trust and payment of distributions and
principal on its portfolio investments, and insurance policies insuring
the Shareholders, Trustees, officers, employees, agents, consultants,
investment advisers, managers, administrators, distributors, principal
underwriters, or independent contractors, or any thereof (or any person
connected therewith), of the Trust individually against all claims and
liabilities of every nature arising by reason of holding, being or having
held any such office or position, or by reason of any action alleged to
have been taken or omitted by any such person in any such capacity,
including any action taken or omitted that may be determined to constitute
negligence, whether or not the Trust would have the power to indemnify
such person against such liability.
Except as otherwise provided by the 1940 Act or other applicable law,
this Declaration of Trust or the By-Laws, any action to be taken by the
Trustees on behalf of the Trust or any Sub-Trust or any Class may be taken
by a majority of the Trustees present at a meeting of Trustees (a quorum,
consisting of at least a majority of the Trustees then in office, being
present), within or without Massachusetts, including any meeting held by
means of a conference telephone or other communications equipment by means
of which all persons participating in the meeting can hear each
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other at the same time and participation by such means shall constitute
presence in person at a meeting, or by written consents of a majority of
the Trustees then in office (or such larger or different number as may be
required by the 1940 Act or other applicable law).
Section 3.3 Certain Contracts. Subject to compliance with the
provisions of the 1940 Act, but notwithstanding any limitations of present
and future law or custom in regard to delegation of powers by trustees
generally, the Trustees may, at any time and from time to time and without
limiting the generality of their powers and authority otherwise set forth
herein, enter into one or more contracts with any one or more
corporations, trusts, associations, partnerships, limited partnerships,
other types of organizations, or individuals ("Contracting Party"), to
provide for the performance and assumption of some or all of the following
services, duties and responsibilities to, for or on behalf of the Trust
and/or any Sub-Trust and/or any Class, and/or the Trustees, and to provide
for the performance and assumption of such other services, duties and
responsibilities in addition to those set forth below as the Trustees may
determine appropriate:
(a) Advisory. Subject to the general supervision of the
Trustees and in conformity with the stated policy of the Trustees with
respect to the investments of the Trust or of the assets belonging to any
Sub-Trust of the Trust (as that phrase is defined in subsection (a) of
Section 4.2), to manage such investments and assets, make investment
decisions with respect thereto, and to place purchase and sale orders for
portfolio transactions relating to such investments and assets;
(b) Administration. Subject to the general supervision of the
Trustees and in conformity with any policies of the Trustees with respect
to the operations of the Trust and each Sub-Trust and each Class thereof,
to supervise all or any part of the operations of the Trust and each Sub-
Trust and each Class thereof, and to provide all or any part of the
administrative and clerical personnel, office space and office equipment
and services appropriate for the efficient administration and operations
of the Trust and each Sub-Trust and each Class thereof;
(c) Distribution. To distribute the Shares of the Trust and
each Sub-Trust and each Class, to be principal underwriter of such Shares,
and/or to act as agent of the Trust and each Sub-Trust and each Class in
the sale of Shares and the acceptance or rejection of orders for the
purchase of Shares;
(d) Custodian and Depository. To act as depository for and to
maintain custody of the property of the Trust and each Sub-Trust and each
Class thereof and accounting records in connection therewith;
(e) Transfer and Dividend Disbursing Agency. To maintain
records of the ownership of outstanding Shares, the issuance and
redemption and the transfer thereof, and to disburse any dividends
declared by the Trustees and in accordance with the policies of the
Trustees and/or the instructions of any particular Shareholder to reinvest
any such dividends;
(f) Shareholder Servicing. To provide service with respect to
the relationship of the Trust and its Shareholders, records with respect
to Shareholders and their Shares, and similar matters; and
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(g) Accounting. To handle all or any part of the accounting
responsibilities, whether with respect to the Trust's or each Sub-Trust's
or each Class's properties, Shareholders or otherwise.
The same person may be the Contracting Party for some or all of the
services, duties and responsibilities to, for and of the Trust and/or the
Trustees, and the contracts with respect thereto may contain such terms
interpretive of or in addition to the delineation of the services, duties
and responsibilities provided for, including provisions that are not
inconsistent with the 1940 Act relating to the standard of duty of and the
rights to indemnification of the Contracting Party and others, as the
Trustees may determine. Nothing herein shall preclude, prevent or limit
the Trust or a Contracting Party from entering into sub-contractual
arrangements relative to any of the matters referred to in Sections 3.3(a)
through (g) hereof.
The fact that:
(i) any of the Shareholders, Trustees, or officers of the
Trust is a shareholder, director, officer, partner, trustee,
employee, manager, adviser, principal underwriter or distributor or
agent of or for any Contracting Party, or of or for any parent or
affiliate of any Contracting Party or that the Contracting Party or
any parent or affiliate thereof is a Shareholder or has an interest
in the Trust or any Sub-Trust or Class, or that
(ii) any Contracting Party may have a contract providing
for the rendering of any similar services to one or more other
corporations, trusts, associations, partnerships, limited
partnerships or other organizations, or have other business or
interests,
shall not affect the validity of any contract for the performance and
assumption of services, duties and responsibilities to, for or of the
Trust or any Sub-Trust or any Class and/or the Trustees or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing
the same or create any liability or accountability to the Trust, any Sub-
Trust or Class or its Shareholders, provided that in the case of any
relationship or interest referred to in the preceding clause (i) on the
part of any Trustee or officer of the Trust either (x) the material facts
as to such relationship or interest have been disclosed to or are known by
the Trustees not having any such relationship or interest and the contract
involved is approved in good faith by a majority of such Trustees not
having any such relationship or interest (even though such unrelated or
disinterested Trustees are less than a quorum of all of the Trustees), (y)
the material facts as to such relationship or interest and as to the
contract have been disclosed to or are known by the Shareholders entitled
to vote thereon and the contract involved is specifically approved in good
faith by vote of the Shareholders, or (z) the specific contract involved
is fair to the Trust as of the time it is authorized, approved or ratified
by the Trustees or by the Shareholders.
Section 3.4 Payment of Trust Expenses and Compensation of Trustees.
The Trustees are authorized to pay or to cause to be paid out of the
principal or income of the Trust or any Sub-Trust or Class, or partly out
of principal and partly out of income, and to charge or allocate the same
to, between or among such one or more of the Sub-Trusts or Classes that
may be established and designated pursuant to Article IV, as the Trustees
deem fair, all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the Trust or any Sub-Trust or Class, or in
connection with the management thereof, including, but not limited to, the
Trustees' compensation and such
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expenses and charges for the services of the Trust's officers, employees,
investment adviser, administrator, distributor, principal underwriter,
auditor, counsel, depository, custodian, transfer agent, dividend
disbursing agent, accounting agent, Shareholder servicing agent, and such
other agents, consultants, and independent contractors and such other
expenses and charges as the Trustees may deem necessary or proper to
incur. Without limiting the generality of any other provision hereof, the
Trustees shall be entitled to reasonable compensation from the Trust for
their services as Trustees and may fix the amount of such compensation.
Section 3.5 Ownership of Assets of the Trust. Title to all of the
assets of the Trust shall at all times be considered as vested in the
Trustees.
ARTICLE IV
SHARES
Section 4.1 Description of Shares. The beneficial interest in the
Trust shall be divided into Shares, all without par value and of one
class, but the Trustees shall have the authority from time to time to
divide the class of Shares into two or more series of Shares, each of
which series of Shares shall be a separate and distinct Sub-Trust of the
Trust, and to divide each Sub-Trust into two or more Classes (including
without limitation those Sub-Trusts and Classes specifically established
and designated in Section 4.2), as they deem necessary or desirable. Each
Sub-Trust shall be deemed to be a separate trust established under, and
subject to the terms of, this Declaration of Trust. The Trustees shall
have exclusive power without the requirement of shareholder approval to
establish and designate such separate and distinct Sub-Trusts, and to
establish and designate Classes of Shares representing interests in each
Sub-Trust, and to fix and determine the relative rights and preferences as
between the shares of the separate Sub-Trusts and Classes thereof as to
right of redemption and the price, terms and manner of redemption, special
and relative rights as to dividends and other distributions and on
liquidation, sinking or purchase fund provisions, conversion rights, and
conditions under which the several Sub-Trusts and Classes thereof shall
have separate voting rights or no voting rights.
The number of authorized Shares and the number of Shares of each Sub-
Trust and Class thereof that may be issued is unlimited, and the Trustees
may issue Shares of any Sub-Trust or Class thereof for such consideration
and on such terms as they may determine (or for no consideration if
pursuant to a Share dividend or split-up), all without action or approval
of the Shareholders. All Shares when so issued on the terms determined by
the Trustees shall be fully paid and non-assessable (but may be subject to
mandatory contribution back to the Trust as provided in subsection (h) of
Section 4.2). The Trustees may classify or reclassify any unissued Shares
or any Shares previously issued and reacquired of any Sub-Trust or any
Class thereof into one or more Sub-Trusts or Classes thereof that may be
established and designated from time to time. The Trustees may hold as
treasury Shares, reissue for such consideration and on such terms as they
may determine, or cancel, at their discretion from time to time, any
Shares of any Sub-Trust or any Class thereof as reacquired by the Trust.
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The Trustees may from time to time close the transfer books or
establish record dates and times for the purposes of determining the
holders of Shares entitled to be treated as such, to the extent provided
or referred to in Section 5.3.
The establishment and designation of any Sub-Trust and any Classes of
any Sub-Trust in addition to that established and designated in Section
4.2 shall be effective upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and designation
and the relative rights and preferences of the Shares of such Sub-Trust
and any Classes of any Sub-Trust, or as otherwise provided in such
instrument. At any time that there are no Shares outstanding of any
particular Sub-Trust or any Class thereof previously established and
designated the Trustees may by an instrument executed by a majority of
their number abolish that Sub-Trust or such Class and the establishment
and designation thereof. Each instrument referred to in this paragraph
shall have the status of an amendment to this Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any
organization in which any such person is interested may acquire, own, hold
and dispose of Shares of any Sub-Trust of the Trust or any Class thereof
to the same extent as if such person were not a Trustee, officer or other
agent of the Trust; and the Trust may issue and sell or cause to be issued
and sold and may purchase Shares of any Sub-Trust or any Class thereof
from any such person or any such organization subject only to the general
limitations, restrictions or other provisions applicable to the sale or
purchase of Shares of such Sub-Trust or any Class thereof generally.
Section 4.2 Establishment and Designation of Sub-Trusts and Classes.
Without limiting the authority of the Trustees set forth in Section 4.1 to
establish and designate any further Sub-Trusts, the Trustees hereby
establish and designate nine Sub-Trusts: the "Cash Management Fund", the
"Government Money Fund", the "Money Market Fund", the "Equity Fund," the
"Balanced Fund," the "Intermediate Term Bond Fund" the "Short Term Bond
Fund," the "Short Term Municipal Bond Fund," and the "Idaho Municipal Bond
Fund." The Cash Management Fund, the Government Money Fund and the Money
Market Fund have not been divided into Classes. Each of the remaining six
Sub-Trusts shall have two Classes, the Institutional Shares and the Retail
Class A Shares. The Shares of each of the nine Sub-Trusts, including with
respect to all Sub-Trusts other than the Cash Management Fund, the
Government Money Fund and the Money Market Fund, both the Institutional
Class and Retail Class A Shares thereof, and any Shares of any future
Classes of the foregoing nine Sub-Trusts as well as any further Sub-Trusts
and Classes thereof that may from time to time be established and
designated by the Trustees shall (unless the Trustees otherwise determine
with respect to some further Sub-Trust or any further Class at the time of
establishing and designating the same) have the following relative rights
and preferences:
(a) Assets Belonging to Sub-Trusts and Classes Thereof. All
consideration received by the Trust for the issue or sale of Shares of a
particular Sub-Trust or any Class thereof, together with all assets in
which such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same
may be, shall be held by the Trustees in trust for the benefit of the
holders of Shares of that Sub-Trust or such Class and shall irrevocably
belong to that Sub-Trust or such Class for all purposes, and shall be so
recorded upon the books of account of the Trust. Such
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consideration, assets, income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any reinvestment of
such proceeds, in whatever form the same may be, together with any General
Items allocated to that Sub-Trust or such Class as provided in the
following sentence, are herein referred to as "assets belonging to" that
Sub-Trust or such Class. In the event that there are any assets, income,
earnings, profits, and proceeds thereof, funds, or payments which are not
readily identifiable as belonging to any particular Sub-Trust or any Class
(collectively "General Items"), the Trustees shall allocate such General
Items to and among any one or more of the Sub-Trusts and Classes thereof
established and designated from time to time in such manner and on such
basis as they, in their sole discretion, deem fair and equitable; and any
General Items so allocated to a particular Sub-Trust or any Class thereof
shall belong to that Sub-Trust or such Class. Each such allocation by the
Trustees shall be conclusive and binding upon the Shareholders of all Sub-
Trusts and Classes thereof for all purposes.
(b) Liabilities Belonging to Sub-Trusts or Classes Thereof.
The assets belonging to each particular Sub-Trust and each Class thereof
shall be charged with the liabilities in respect of that Sub-Trust or such
Class and all expenses, costs, charges and reserves attributable to that
Sub-Trust or such Class, and any general liabilities, expenses, costs,
charges or reserves of the Trust which are not readily identifiable as
belonging to any particular Sub-Trust or Class thereof shall be allocated
and charged by the Trustees to and among any one or more of the Sub-Trusts
and Classes thereof established and designated from time to time in such
manner and on such basis as the Trustees in their sole discretion deem
fair and equitable. The liabilities, expenses, costs, charges and
reserves allocated and so charged to a Sub-Trust or any Class thereof are
herein referred to as "liabilities belonging to" that Sub-Trust or such
Class. Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon the
Shareholders of all Sub-Trusts and Classes thereof for all purposes. Any
creditor of any Sub-Trust or any Class thereof may look only to the assets
of that Sub-Trust or such Class to satisfy such creditor's debt.
The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be treated
as income and which items as capital; and each such determination and
allocation shall be conclusive and binding upon the Shareholders.
(c) Dividends. Dividends and distributions on Shares of a
particular Sub-Trust or any Class thereof may be paid with such frequency
as the Trustees may determine, which may be daily or otherwise pursuant to
a standing resolution or resolutions adopted only once or with such
frequency as the Trustees may determine, to the holders of Shares of that
Sub-Trust or such Class, from such of the income and capital gains,
accrued or realized, from the assets belonging to that Sub-Trust or such
Class, as the Trustees may determine, after providing for actual and
accrued liabilities belonging to that Sub-Trust or such Class. All
dividends and distributions on Shares of a particular Sub-Trust or any
Class thereof shall be distributed pro rata to the holders of Shares of
that Sub-Trust or such Class in proportion to the number of Shares of that
Sub-Trust or such Class held by such holders at the date and time of
record established for the payment of such dividends or distributions,
except that in connection with any dividend or distribution program or
procedure the Trustees may determine that no dividend or distribution
shall be payable on Shares as to which the Shareholder's purchase order
and/or payment have not been received by the time or times established by
the Trustees under such program or procedure. Such dividends and
distributions may be made in cash or
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Shares of that Sub-Trust or such Class or a combination thereof as
determined by the Trustees or pursuant to any program that the Trustees
may have in effect at the time for the election by each Shareholder of the
mode of the making of such dividend or distribution to that Shareholder.
Any such dividend or distribution paid in Shares will be paid at the net
asset value thereof as determined in accordance with subsection (h) of
Section 4.2.
(d) Liquidation. In the event of the liquidation or
dissolution of the Trust, the Shareholders of each Sub-Trust or any Class
thereof that has been established and designated shall be entitled to
receive, when and as declared by the Trustees, the excess of the assets
belonging to that Sub-Trust or such Class over the liabilities belonging
to that Sub-Trust or such Class. The assets so distributable to the
Shareholders of any particular Sub-Trust or any Class thereof shall be
distributed among such Shareholders in proportion to the number of Shares
of that Sub-Trust or such Class held by them and recorded on the books of
the Trust. The liquidation of any particular Sub-Trust or any Class
thereof may be authorized by vote of a majority of the Trustees then in
office subject to the approval of a majority of the outstanding voting
Shares of that Sub-Trust or such Class, as defined in the 1940 Act.
(e) Voting. On each matter submitted to a vote of the
Shareholders, each holder of a Share of each Sub-Trust and any Class
thereof shall be entitled to one vote for each whole Share and to a
proportionate fractional vote for each fractional Share standing in his
name on the books of the Trust. The Trustees shall cause each matter
required or permitted to be voted upon at a meeting or by written consent
of Shareholders to be submitted to a vote of all classes of outstanding
Shares entitled to vote thereon (irrespective of class), unless the 1940
Act or other applicable law or regulations require that the actions of the
Shareholders be taken by a separate vote of one or more Classes, or the
Trustees determine that any matter to be submitted to a vote of
Shareholders affects only the rights or interests of one or more (but not
all) Sub-Trusts or Classes of outstanding Shares, in which case only the
Shareholders of the Sub-Trust and Sub-Trusts or Class or Classes so
affected shall be entitled to vote thereon.
(f) Redemption by Shareholder. Each holder of Shares of a
particular Sub-Trust or any Class thereof shall have the right at such
times as may be permitted by the Trust, but no less frequently than once
each week, to require the Trust to redeem all or any part of his Shares of
that Sub-Trust or such Class at a redemption price equal to the net asset
value per Share of that Sub-Trust or such Class next determined in
accordance with subsection (h) of this Section 4.2 after the Shares are
properly tendered for redemption. Payment of the redemption price shall
be in cash; provided, however, that if the Trustees determine, which
determination shall be conclusive, that conditions exist which make
payment wholly in cash unwise or undesirable, the Trust may make payment
wholly or partly in securities or other assets belonging to the Sub-Trust
or such Class of which the Shares being redeemed are part at the value of
such securities or assets used in such determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of
the redemption price and may suspend the right of the holders of Shares of
any Sub-Trust and any Class thereof to require the Trust to redeem Shares
of that Sub-Trust or such Class during any period or at any time when and
to the extent permissible under the 1940 Act.
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(g) Redemption by Trust. Each Share of each Sub-Trust and any
Class thereof that has been established and designated is subject to
redemption by the Trust at the redemption price which would be applicable
if such Share was then being redeemed by the Shareholder pursuant to
subsection (f) of this Section 4.2: (a) at any time, if the Trustees
determine in their sole discretion that failure to so redeem may have
materially adverse consequences to the holders of the Shares of the Trust
or any Sub-Trust thereof or any Class thereof, or (b) upon such other
conditions as may from time to time be determined by the Trustees and set
forth in the then current Prospectus of the Trust with respect to
maintenance of Shareholder accounts of a minimum amount. Upon such
redemption the holders of the Shares so redeemed shall have no further
right with respect thereto other than to receive payment of such
redemption price.
(h) Net Asset Value. The net asset value per Share of any Sub-
Trust and any Class thereof shall be the quotient obtained by dividing the
value of the net assets of that Sub-Trust or such Class (being the value
of the assets belonging to that Sub-Trust or such Class less the
liabilities belonging to that Sub-Trust or such Class) by the total number
of Shares of that Sub-Trust or such Class outstanding, all determined in
accordance with the methods and procedures, including without limitation
those with respect to rounding, established by the Trustees from time to
time.
The Trustees may determine to maintain the net asset value per
Share of any Sub-Trust and any Class thereof at a designated constant
dollar amount and in connection therewith may adopt procedures not
inconsistent with the 1940 Act for the continuing declarations of income
attributable to that Sub-Trust or such Class as dividends payable in
additional Shares of that Sub-Trust or such Class at the designated
constant dollar amount and for the handling of any losses attributable to
that Sub-Trust or such Class. Such procedures may provide that in the
event of any loss each Shareholder shall be deemed to have contributed to
the capital of the Trust attributable to that Sub-Trust or such Class his
pro rata portion of the total number of Shares required to be cancelled in
order to permit the net asset value per Share of that Sub-Trust or such
Class to be maintained, after reflecting such loss, at the designated
constant dollar amount. Each Shareholder of the Trust shall be deemed to
have agreed, by his investment in any Sub-Trust or any Class thereof with
respect to which the Trustees shall have adopted any such procedure, to
make the contribution referred to in the preceding sentence in the event
of any such loss.
(i) Transfer. All Shares of each particular Sub-Trust and any
Class thereof shall be transferable, but transfers of Shares of a
particular Sub-Trust and any Class thereof will be recorded on the Share
transfer records of the Trust applicable to that Sub-Trust or such Class
only at such times as Shareholders shall have the right to require the
Trust to redeem Shares of that Sub-Trust or such Class and at such other
times as may be permitted by the Trustees.
(j) Equality. All Shares of each particular Sub-Trust and any
Class thereof shall represent an equal proportionate interest in the
assets belonging to that Sub-Trust, or such Class (subject to the
liabilities belonging to that Sub-Trust or such Class), and each Share of
any particular Sub-Trust and any Class thereof shall be equal to each
other Share of that Sub-Trust or such Class; but the provisions of this
sentence shall not restrict any distinctions permissible under subsection
(c) of this Section 4.2 that may exist with respect to dividends and
distributions on Shares of the same Sub-Trust and any Class thereof. The
Trustees may from time to time divide or combine the Shares of any
particular Sub-Trust and any Class thereof into a greater or lesser number
of Shares of that
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Sub-Trust or such Class without thereby changing the proportionate
beneficial interest in the assets belonging to that Sub-Trust and such
Class or in any way affecting the rights of Shares of any other Sub-Trust
and any Class thereof.
(k) Fractions. Any fractional Share of any Sub-Trust or any
Class thereof, if any such fractional Share is outstanding, shall carry
proportionately all the rights and obligations of a whole Share of that
Sub-Trust or such Class, including rights and obligations with respect to
voting, receipt of dividends and distributions, redemption of Shares, and
liquidation of the Trust.
(l) Conversion Rights. Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the authority to
provide that holders of Shares of any Sub-Trust or any Class thereof shall
have the right to convert said Shares into Shares of one or more other
Sub-Trust or any Class thereof in accordance with such requirements and
procedures as may be established by the Trustees.
Section 4.3 Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or of a transfer or similar agent for
the Trust, which books shall be maintained separately for the Shares of
each Sub-Trust and any Class thereof that has been established and
designated. No certificates certifying the ownership of Shares need be
issued except as the Trustees may otherwise determine from time to time.
The Trustees may make such rules as they consider appropriate for the
issuance of Share certificates, the use of facsimile signatures, the
transfer of Shares and similar matters. The record books of the Trust as
kept by the Trust or any transfer or similar agent, as the case may be,
shall be conclusive as to who are the Shareholders and as to the number of
Shares of each Sub-Trust and any Class thereof held from time to time by
each such Shareholder.
Section 4.4 Investments in the Trust. The Trustees may accept
investments in the Trust and each Sub-Trust thereof and any Class thereof
from such persons and on such terms and for such consideration, not
inconsistent with the provisions of the 1940 Act, as they from time to
time authorize. The Trustees may authorize any distributor, principal
underwriter, custodian, transfer agent or other person to accept orders
for the purchase of Shares that conform to such authorized terms and to
reject any purchase orders for Shares whether or not conforming to such
authorized terms.
Section 4.5 No Pre-emptive Rights. Shareholders shall have no pre-
emptive or other right to subscribe to any additional Shares or other
securities issued by the Trust.
Section 4.6 Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving only the rights
provided in this instrument. Every Shareholder by virtue of having become
a Shareholder shall be held to have expressly assented and agreed to the
terms hereof and to have become a party hereto. The death of a
Shareholder during the continuance of the Trust shall not operate to
terminate the Trust or any Sub-Trust thereof or any Class thereof nor
entitle the representative of any deceased Shareholder to an accounting or
to take any action in court or elsewhere against the Trust or the
Trustees, but only to the rights of said decedent under this Trust.
Ownership of Shares shall not entitle the Shareholder to any title in or
to the whole or any part of the Trust property or right to call for a
partition or division of the same or for an accounting, nor shall the
ownership of Shares constitute the Shareholders partners. Neither the
Trust nor the Trustees, nor
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<PAGE> 20
any officer, employee or agent of the Trust shall have any power to bind
personally any Shareholder, nor except as specifically provided herein to
call upon any Shareholder for the payment of any sum of money or
assessment whatsoever other than such as the Shareholder may at any time
personally agree to pay.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 5.1 Voting Powers. The Shareholders shall have power to
vote only (i) for the election or removal of Trustees as provided in
Section 3.1, (ii) with respect to any contract with a Contracting Party as
provided in Section 3.3 as to which Shareholder approval is required by
the 1940 Act, (iii) with respect to any termination or reorganization of
the Trust or any Sub-Trust or any Class thereof to the extent and as
provided in Sections 7.1 and 7.2, (iv) with respect to any amendment of
this Declaration of Trust to the extent and as provided in Section 7.3,
(v) to the same extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class
action on behalf of the Trust or any Sub-Trust thereof or any Class
thereof or the Shareholders (provided, however, that a shareholder of a
particular Sub-Trust or any Class thereof shall not be entitled to a
derivative or class action on behalf of any other Sub-Trust or any Class
thereof (or shareholder of any other Sub-Trust or any Class thereof) of
the Trust) and (vi) with respect to such additional matters relating to
the Trust as may be required by the 1940 Act, this Declaration of Trust,
the By-Laws or any registration of the Trust with the Commission (or any
successor agency) or any state, or as the Trustees may consider necessary
or desirable. There shall be no cumulative voting in the election of
Trustees. Shares may be voted in person or by proxy. A proxy with
respect to Shares held in the name of two or more persons shall be valid
if executed by or on behalf of any one of them unless at or prior to
exercise of the proxy the Trust receives a specific written notice to the
contrary from any one of them. A shareholder may authorize a person or
entity to act as his proxy through oral, written, telephone,
telecommunication, facsimile or telex communication or through any other
form of communication. A proxy purporting to be executed by or on behalf
of a Shareholder shall be deemed valid unless challenged at or prior to
its exercise and the burden of proving invalidity shall rest on the
challenger. Until Shares are issued, the Trustees may exercise all rights
of Shareholders and may take any action required by law, this Declaration
of Trust or the By-Laws to be taken by Shareholders.
Section 5.2 Meetings. Meetings of Shareholders may be called by the
Trustees from time to time for the purpose of taking action upon any
matter requiring the vote or authority of the Shareholders as herein
provided or upon any other matter deemed by the Trustees to be necessary
or desirable. Written notice of any meeting of Shareholders shall be
given or caused to be given by the Trustees by mailing such notice at
least seven days before such meeting, postage prepaid, stating the time,
place and purpose of the meeting, to each Shareholder at the Shareholder's
address as it appears on the records of the Trust. The Trustees shall
promptly call and give notice of a meeting of Shareholders for the purpose
of voting upon removal of any Trustee of the Trust when requested to do so
in writing by Shareholders holding not less than 10% of the Shares then
outstanding. If the Trustees fail to call or give notice of any meeting
of Shareholders for a period of 30 days after
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<PAGE> 21
written application by Shareholders holding at least 10% of the Shares
then outstanding requesting a meeting be called for any other purpose
requiring action by the Shareholders as provided herein or in the By-Laws,
then Shareholders holding at least 10% of the Shares then outstanding may
call and give notice of such meeting, and thereupon the meeting shall be
held in the manner provided for herein in case of call thereof by the
Trustees.
Section 5.3 Record Dates. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any
adjournment thereof, or who are entitled to participate in any dividend or
distribution, or for the purpose of any other action, the Trustees may
from time to time close the transfer books for such period, not exceeding
30 days (except at or in connection with the termination of the Trust), as
the Trustees may determine; or without closing the transfer books the
Trustees may fix a date and time not more than 90 days prior to the date
of any meeting of Shareholders or other action as the date and time of
record for the determination of Shareholders entitled to vote at such
meeting or any adjournment thereof or to be treated as Shareholders of
record for purposes of such other action, and any shareholder who was a
Shareholder at the date and time so fixed shall be entitled to vote at
such meeting or any adjournment thereof or to be treated as a Shareholder
of record for purposes of such other action, even though he has since that
date and time disposed of his Shares, and no Shareholder becoming such
after that date and time shall be so entitled to vote at such meeting or
any adjournment thereof or to be treated as a Shareholder of record for
purposes of such other action.
Section 5.4 Ouorum and Required Vote. A majority of the Shares
entitled to vote shall be a quorum for the transaction of business at a
Shareholders' meeting, but any lesser number shall be sufficient for
adjournments. Any adjourned session or sessions may be held, within a
reasonable time after the date set for the original meeting without the
necessity of further notice. A majority of the Shares voted, at a meeting
of which a quorum is present shall decide any questions and a plurality
shall elect a Trustee, except when a different vote is required or
permitted by any provision of the 1940 Act or other applicable law or by
this Declaration of Trust or the By-Laws.
Section 5.5 Action by Written Consent. Subject to the provisions of
the 1940 Act and other applicable law, any action taken by Shareholders
may be taken without a meeting if a majority of Shareholders entitled to
vote on the matter (or such larger proportion thereof as shall be required
by the 1940 Act or by any express provision of this Declaration of Trust
or the By-Laws) consent to the action in writing and such written consents
are filed with the records of the meetings of Shareholders. Such consent
shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
Section 5.6 Inspection of Records. The records of the Trust shall
be open to inspection by Shareholders to the same extent as is permitted
stockholders of a Massachusetts business corporation under the
Massachusetts Business Corporation Law.
Section 5.7 Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
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ARTICLE VI
LIMITATION OF LIABILITY; INDEMNIFICATION
Section 6.1 Trustees, Shareholders, etc. Not Personally Liable;
Notice. All persons extending credit to, contracting with or having any
claim against the Trust shall look only to the assets of the Sub-Trust or
any Class thereof with which such person dealt for payment under such
credit, contract or claim; and neither the Shareholders of any Sub-Trust
or any Class thereof nor the Trustees nor any of the Trust's officers,
employees or agents, whether past, present or future, nor any other Sub-
Trust or any Class thereof shall be personally liable therefor. Every
note, bond, contract, instrument, certificate or undertaking and every
other act or thing whatsoever executed or done by or on behalf of the
Trust, any Sub-Trust or any Class thereof or the Trustees or any of them
in connection with the Trust shall be conclusively deemed to have been
executed or done only by or for the Trust (or any Sub-Trust or any Class
thereof) or the Trustees and not personally. Nothing in this Declaration
of Trust shall protect any Trustee or officer against any liability to the
Trust or the Shareholders to which such Trustee or officer would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of the office
of Trustee or of such officer.
Every note, bond, contract, instrument, certificate or undertaking
made or issued by the Trustees or by any officers or officer shall give
notice that this Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts and shall recite to the effect that the same
was executed or made by or on behalf of the Trust or by them as Trustees
or Trustee or as officers or officer and not individually and that the
obligations of such instrument are not binding upon any of them or the
Shareholders individually but are binding only upon the assets and
property of the Trust, or the particular Sub-Trust in question, as the
case may be, but the omission thereof shall not operate to bind any
Trustees or Trustee or officers or officer or Shareholders or Shareholder
individually.
Section 6.2 Trustee's Good Faith Action: Expert Advice; No Bond or
Surety. The exercise by the Trustees of their powers and discretions
hereunder shall be binding upon everyone interested. A Trustee shall be
liable for his own willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the office of
Trustee, and for nothing else, and shall not be liable for errors of
judgment or mistakes of fact or law. Subject to the foregoing, (a) the
Trustees shall not be responsible or liable in any event for any neglect
or wrongdoing of any officer, agent, employee, consultant, adviser,
administrator, distributor or principal underwriter, custodian or
transfer, dividend disbursing, Shareholder servicing or accounting agent
of the Trust, nor shall any Trustee be responsible for the act or omission
of any other Trustee; (b) the Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration of
Trust and their duties as Trustees, and shall be under no liability for
any act or omission in accordance with such advice or for failing to
follow such advice; and (c) in discharging their duties, the Trustees,
when acting in good faith, shall be entitled to rely upon the books of
account of the Trust and upon written reports made to the Trustees by any
officer appointed by them, any independent public accountant, and (with
respect to the subject matter of the contract involved) any officer,
partner or responsible employee of a Contracting Party appointed by the
Trustees pursuant to Section 3.3. The Trustees as such shall not be
required to give any bond or surety or any other security for the
performance of their duties.
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<PAGE> 23
Section 6.3 Indemnification of Shareholders. In case any
Shareholder (or former Shareholder) of any Sub-Trust of the Trust or any
Class thereof shall be charged or held to be personally liable for any
obligation or liability of the Trust solely by reason of being or having
been a Shareholder and not because of such Shareholder's acts or omissions
or for some other reason, said Sub-Trust or such Class (upon proper and
timely request by the Shareholder) shall assume the defense against such
charge and satisfy any judgment thereon, and the Shareholder or former
Shareholder (or his heirs, executors, administrators or other legal
representatives or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled out of the assets
of the estate of said Sub-Trust or such Class to be held harmless from and
indemnified against all loss and expense arising from such liability.
Section 6.4 Indemnification of Trustees, Officers, etc. The Trust
shall indemnify (from the assets of the Sub-Trust or Sub-Trusts or any
Class thereof in question) each of its Trustees and officers (including
persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest as a
shareholder, creditor or otherwise (hereinafter referred to as a "Covered
Person") against all liabilities, including but not limited to amounts
paid in satisfaction of judgments, in compromise or as fines and
penalties, and expenses, including reasonable accountants' and counsel
fees, incurred by any Covered Person in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or legislative body, in which
such Covered Person may be or may have been involved as a party or
otherwise or with which such person may be or may have been threatened,
while in office or thereafter, by reason of being or having been such a
Trustee or officer, director or trustee, except with respect to any matter
as to which it has been determined that such Covered Person (i) did not
act in good faith in the reasonable belief that such Covered Person's
action was in or not opposed to the best interests of the Trust or (ii)
had acted with willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office (either and both of the conduct described in (i) and (ii)
being referred to hereafter as "Disabling Conduct"). A determination that
the Covered Person is entitled to indemnification may be made by (i) a
final decision on the merits by a court or other body before whom the
proceeding was brought that the person to be indemnified was not liable by
reason of Disabling Conduct, (ii) dismissal of a court action or an
administrative proceeding against a Covered Person for insufficiency of
evidence of Disabling Conduct, or (iii) a reasonable determination, based
upon a review of the facts, that the indemnitee was not liable by reason
of Disabling Conduct by (a) a vote of a majority of a quorum of Trustees
who are neither "interested persons" of the Trust as defined in section
2(a) (19) of the 1940 Act nor parties to the proceeding, or (b) an
independent legal counsel in a written opinion. Expenses, including
accountants' and counsel fees so incurred by any such Covered Person (but
excluding amounts paid in satisfaction of judgments, in compromise or as
fines or penalties), may be paid from time to time by the Sub-Trust or any
Class thereof in question in advance of the final disposition of any such
action, suit or proceeding, provided that the Covered Person shall have
undertaken to repay the amounts so paid to the Sub-Trust or any Class
thereof in question if it is ultimately determined that indemnification of
such expenses is not authorized under this Article VI and (i) the Covered
Person shall have provided security for such undertaking, (ii) the Trust
shall be insured against losses arising by reason of any lawful advances,
or (iii) a majority of a quorum of the disinterested Trustees who are not
a party to the proceeding, or an independent legal counsel in a written
opinion, shall have determined, based on a review of readily available
facts (as opposed to a
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<PAGE> 24
full trial-type inquiry), that there is reason to believe that the Covered
Person ultimately will be found entitled to indemnification.
Section 6.5 Compromise Payment. As to any matter disposed of by a
compromise payment by any such Covered Person referred to in Section 6.4,
pursuant to a consent decree or otherwise, no such indemnification either
for said payment or for any other expenses shall be provided unless such
indemnification shall be approved (a) by a majority of the disinterested
Trustees who are not a party to the proceeding or (b) by an independent
legal counsel in a written opinion. Approval by the Trustees pursuant to
clause (a) or by independent legal counsel pursuant to clause (b) shall
not prevent the recovery from any Covered Person of any amount paid to
such Covered Person in accordance with any of such clauses as
indemnification if such Covered Person is subsequently adjudicated by a
court of competent jurisdiction not to have acted in good faith in the
reasonable belief that such Covered Person's action was in or not opposed
to the best interests of the Trust or to have been liable to the Trust or
its Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
such Covered Person's office.
Section 6.6 Indemnification Not Exclusive, etc. The right of
indemnification provided by this Article VI shall not be exclusive of or
affect any other rights to which any such Covered Person may be entitled.
As used in this Article VI, "Covered Person" shall include such person's
heirs, executors and administrators, an "interested Covered Person" is one
against whom the action, suit or other proceeding in question or another
action, suit or other proceeding on the same or similar grounds is then or
has been pending or threatened, and a "disinterested" person is a person
against whom none of such actions, suits or other proceedings or another
action, suit or other proceeding on the same or similar grounds is then or
has been pending or threatened. Nothing contained in this article shall
affect any rights to indemnification to which personnel of the Trust,
other than Trustees and officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the Trust to purchase
and maintain liability insurance on behalf of any such person.
Section 6.7 Liability of Third Persons Dealing with Trustees. No
person dealing with the Trustees shall be bound to make any inquiry
concerning the validity of any transaction made or to be made by the
Trustees or to see to the application of any payments made or property
transferred to the Trust or upon its order.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Duration and Termination of Trust. Unless terminated as
provided herein, the Trust shall continue without limitation of time and,
without limiting the generality of the foregoing, no change, alteration or
modification with respect to any Sub-Trust or any Class thereof shall
operate to terminate the Trust. The Trust may be terminated at any time
by a majority of the Trustees then in office subject to a favorable vote
of a majority of the outstanding voting securities, as defined in the 1940
Act, of each Sub-Trust or any Class thereof voting separately by Sub-Trust
or Class.
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<PAGE> 25
Upon termination, after paying or otherwise providing for all
charges, taxes, expenses and liabilities, whether due or accrued or
anticipated as may be determined by the Trustees, the Trust shall in
accordance with such procedures as the Trustees consider appropriate
reduce the remaining assets to distributable form in cash, securities or
other property, or any combination thereof, and distribute the proceeds to
the Shareholders, in conformity with the provisions of subsection (d) of
Section 4.2.
Section 7.2 Reorganization. The Trust may merge or consolidate with
any other corporation, partnership, association, trust or other
organization and the Trustees may sell, convey, and transfer the assets of
the Trust, or the assets belonging to any one or more Sub-Trusts or any
Class thereof, to another trust, partnership, limited liability company,
association or corporation organized under the laws of any state of the
United States, or to the Trust to be held as assets belonging to another
Sub-Trust or any Class thereof, in exchange for cash, shares or other
securities (including, in the case of a transfer to another Sub-Trust of
the Trust or any Class thereof, Shares of such other Sub-Trust or such
Class) with such transfer being made subject to, or with the assumption by
the transferee of, the liabilities belonging to each Sub-Trust or any
Class thereof the assets of which are so transferred; provided, however,
that no assets belonging to any particular Sub-Trust or any Class thereof
shall be so transferred unless the terms of such transfer shall have first
been approved at a meeting called for the purpose by the affirmative vote
of the holders of a majority of the outstanding voting securities, as
defined in the 1940 Act, of that Sub-Trust or such Class. Any such
consolidation or merger shall require approval by the affirmative vote of
the holders of a majority of the outstanding voting securities, as defined
in the 1940 Act, of the Trust (or each Sub-Trust or Class thereof affected
thereby, as the case may be), except that such affirmative vote of the
holders of Shares shall not be required if the Trust (or Sub-Trust or
Class thereof affected thereby, as the case may be) shall be the survivor
of such consolidation or merger.
Section 7.3 Amendments. All rights granted to the Shareholders
under this Declaration of Trust are granted subject to the reservation of
the right to amend this Declaration of Trust as herein provided, except
that no amendment shall repeal the limitations on personal liability of
any Shareholder or Trustee or repeal the prohibition of assessment upon
the Shareholders without the express consent of each Shareholder or
Trustee involved. Subject to the foregoing, the provisions of this
Declaration of Trust (whether or not related to the rights of
Shareholders) may be amended at any time, so long as such amendment does
not adversely affect the rights of any Shareholder with respect to which
such amendment is or purports to be applicable and so long as such
amendment is not in contravention of applicable law, including the 1940
Act, by an instrument in writing signed by a majority of the then Trustees
(or by an officer of the Trust pursuant to the vote of a majority of such
Trustees). Any amendment to this Declaration of Trust that adversely
affects the rights of Shareholders may be adopted at any time by an
instrument in writing signed by a majority of the then Trustees (or by an
officer of the Trust pursuant to a vote of a majority of such Trustees)
when authorized to do so by the vote in accordance with subsection (e) of
Section 4.2 of Shareholders holding a majority of the Shares entitled to
vote. Subject to the foregoing, any such amendment shall be effective as
provided in the instrument containing the terms of such amendment or, if
there is no provision therein with respect to effectiveness, upon the
execution of such instrument and of a certificate (which may be a part of
such instrument) executed by a Trustee or officer of the Trust to the
effect that such amendment has been duly adopted.
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<PAGE> 26
Section 7.4 Resident Agent. The Trust may appoint and maintain a
resident agent in the Commonwealth of Massachusetts.
Section 7.5 Filing of Copies; References; Headings. The original or
a copy of this instrument and of each amendment hereto shall be kept at
the office of the Trust where it may be inspected by any Shareholder. A
copy of this instrument and of each amendment hereto shall be filed by the
Trust with the Secretary of the Commonwealth of Massachusetts and with the
Boston City Clerk, as well as any other governmental office where such
filing may from time to time be required, but the failure to make any such
filing shall not impair the effectiveness of this instrument or any such
amendment. Anyone dealing with the Trust may rely on a certificate by an
officer of the Trust as to whether or not any such amendments have been
made, as to the identities of the Trustees and officers, and as to any
matters in connection with the Trust hereunder; and, with the same effect
as if it were the original, may rely on a copy certified by an officer of
the Trust to be a copy of this instrument or of any such amendments. In
this instrument and in any such amendment, references to this instrument,
and all expressions like "herein", "hereof" and "hereunder" shall be
deemed to refer to this instrument as a whole as the same may be amended
or affected by any such amendments. The masculine gender shall include
the feminine and neuter genders. Headings are placed herein for
convenience of reference only and shall not be taken as a part hereof or
control or affect the meaning, construction or effect of this instrument.
This instrument may be executed in any number of counterparts each of
which shall be deemed an original.
Section 7.6 Applicable Law. This Declaration of Trust is created
under and is to be governed by and construed and administered according to
the laws of said Commonwealth, including the Massachusetts Business
Corporation Law as the same may be amended from time to time, to which
reference is made with the intention that matters not specifically covered
herein or as to which an ambiguity may exist shall be resolved as if the
Trust were a business corporation organized in Massachusetts, but the
reference to said Business Corporation Law is not intended to give the
Trust, the Trustees, the Shareholders or any other person any right,
power, authority or responsibility available only to or in connection with
an entity organized in corporate form. The Trust shall be of the type
referred to in Section l of Chapter 182 of the Massachusetts General Laws
and of the type commonly called a Massachusetts business trust, and
without limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals for themselves and their assigns, as of the 7th day of October,
1994.
/s/ George L. Denton, Jr.
----------------------------------------------------
George L. Denton, Jr., as Trustee and not individually
/s/ August Glissmeyer, Jr.
------------------------------------------------------
August Glissmeyer, Jr., as Trustee and not individually
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<PAGE> 27
/s/ Robert G. Love
----------------------------------------------------
Robert G. Love, as Trustee and not individually
/s/ Mitchell Melich
----------------------------------------------------
Mitchell Melich, as Trustee and not individually
/s/ Carl S. Minden
----------------------------------------------------
Carl S. Minden, as Trustee and not individually
/s/ Frederick A. Moreton, Jr.
----------------------------------------------------
Frederick A. Moreton, Jr., as Trustee and not individually
22
<PAGE> 1
EXHIBIT 1(b)
THE FSB FUNDS
AMENDMENT NO. 1 TO
AMENDED AND RESTATED
MASTER TRUST AGREEMENT
December 1, 1994
This Amendment is entered into as of the 1st day of December,
1994, by and among the Trustees of The FSB Funds, a Massachusetts business
trust (the "Trust").
The Trust has been formed pursuant to an Amended and Restated
Master Trust Agreement dated as of December 16, 1988, as amended and
restated as of October 7, 1994 (the "Declaration"). Section 7.3 of the
Declaration provides that a majority of the Trustees may amend the
Declaration without shareholder approval so long as such amendment does
not adversely affect the rights of shareholders with respect to which the
amendment is applicable. The Trustees desire to amend the Declaration to
change the name of the Trust and have determined that such amendment does
not adversely affect shareholder rights.
NOW, THEREFORE, in consideration of the foregoing, the
Declaration is amended as follows:
1. Article I, Section 1.1 of the Declaration is hereby amended
to read in full as follows:
Section 1.1 Name. This Trust shall be known as
"The Achievement Funds Trust," and the Trustees shall
conduct the business of the Trust under that name or
any other name or names as they may from time to time
determine.
2. All references in the Declaration to "The FSB Funds" in
addition to the reference contained in Article I, Section 1.1 are hereby
deemed to be to "The Achievement Funds Trust."
IN WITNESS WHEREOF, the undersigned have executed this Amendment
as of the date first above written.
/s/ George L. Denton, Jr.
-----------------------------------------------
George L. Denton, Jr., as Trustee and not individually
/s/ August Glissmeyer, Jr.
-----------------------------------------------
August Glissmeyer, Jr., as Trustee and not individually
/s/ Robert G. Love
-----------------------------------------------
Robert G. Love, as Trustee and not individually
<PAGE> 2
/s/ Mitchell Melich
-------------------------------------------------
Mitchell Melich, as Trustee and not individually
/s/ Carl S. Minden
-----------------------------------------------
Carl S. Minden, as Trustee and not individually
/s/ Frederick A. Moreton
-----------------------------------------------
Frederick A. Moreton, Jr., as Trustee and not
individually
2
<PAGE> 1
EXHIBIT 2
BY-LAWS
OF
THE FSB FUNDS
(December 16, 1988)
ARTICLE 1
Agreement and Declaration of Trust and Principal Office
1.1 Agreement and Declaration of Trust. These By-Laws shall be
subject to the Master Trust Agreement, as from time to time in effect (the
"Master Trust Agreement"), of The FSB Funds, the Massachusetts business trust
established by the Master Trust Agreement (the "Trust").
1.2 Principal Office of the Trust. The principal office of the Trust
shall be located in Boston, Massachusetts.
ARTICLE 2
Meetings of Trustees
2.1 Chairman. The Trustees may appoint one member of the Board of
Trustees to serve as Chairman thereof. The Chairman of the Trustees may but
need not be a Shareholder. Unless the Trustees otherwise provide, the
Chairman of the Trustees, or, if there is none, or in the absence of the
Chairman, such person as the Trustees shall designate shall preside at all
meetings of the Trustees.
2.2 Regular Meetings. Regular meetings of the Trustees may be held
without call or notice at such places and at such times as the Trustees may
from time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees.
2.3 Special Meetings. Special meetings of the Trustees may be held
at any time and at any place designated in the call of the meeting when called
by the Chairman of the Trustees, the President or the Treasurer or by two or
more Trustees, sufficient notice thereof being given to each Trustee by the
Secretary or an Assistant Secretary or by the officer of the Trustees calling
the meeting.
<PAGE> 2
2.4 Notice. It shall be sufficient notice to a Trustee of a special
meeting to send notice by mail at least forty-eight hours or by telegram at
least twenty-four hours before the meeting addressed to the Trustee at his or
her usual or last known business or residence address or to give notice to him
or her in person or by telephone at least twenty-four hours before the meeting.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by him or her before or after the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him or
her. Neithernotice of a meeting nor a waiver of a notice need specify the
purposes of the meeting.
2.5 Quorum. At any meeting of the Trustees a majority of the Trustees
then in office shall constitute a quorum. Any meeting may be adjourned from
time to time by a majority of the votes cast upon the question, whether or not
a quorum is present, and the meeting may be held as adjourned without further
notice.
2.6 Participation by Telephone. One or more of the Trustees or of any
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at a meeting.
ARTICLE 3
Officers
3.1 Enumeration; Qualification. The officers of the Trust shall be a
President, a Treasurer, a Secretary and such other officers, including Vice
Presidents, if any, as the Trustees from time to time may in their discretion
elect. The Trust may also have such agents as the Trustees from time to time
in their discretion may appoint. Any officer may be but none need be a Trustee
or shareholder. Any two or more offices may be held by the same person.
3.2 Election. The President, the Treasurer and the Secretary shall be
elected annually by the Trustees. Other officers, if any, may be elected or
appointed by the Trustees at any time. Vacancies in any office may be filled
at any time.
3.3 Tenure. The President, the Treasurer and the Secretary shall hold
office until their respective successors are chosen and qualified, or in each
case until he or she sooner dies, resigns, is removed or becomes disqualified.
Each other officer shall hold office and each agent shall retain authority at
the pleasure of the Trustees.
2
<PAGE> 3
3.4 Powers. Subject to the other provisions of these By-Laws, each
officer shall have, in addition to the duties and powers herein and in the
Master Trust Agreement set forth, such duties and powers as are commonly
incident to the office occupied by him or her as if the Trust were organized as
a Massachusetts business corporation and such other duties and powers as the
Trustees may from time to time designate.
3.5 President. Unless the Trustees otherwise provide, the President
shall preside at all meetings of the shareholders. The President shall be the
chief executive officer.
3.6 Treasurer. The Treasurer shall be the chief financial and
accounting officer of the Trust, and shall, subject to the provisions of the
Master Trust Agreement and to any arrangement made by the Trustees with a
custodian, investment adviser or manager, or transfer, shareholder servicing or
similar agent, be in charge of the valuable papers, books of account and
accounting records of the Trust, and shall have such other duties and powers as
may be designated from time to time by the Trustees or by the President.
3.7 Secretary. The Secretary shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust or at the
office of the Fund's counsel. In the absence of the Secretary from any meeting
of the shareholders or Trustees, an assistant secretary, or if there be none or
if he or she is absent, a temporary secretary chosen at such meeting shall
record the proceedings thereof in the aforesaid books.
3.8 Resignations and Removals. Any Trustee or officer may resign at
any time by written instrument signed by him or her and delivered to the
Chairman, the President or the Secretary or to a meeting of the Trustees. Such
resignation shall be effective upon receipt unless specified to be effective at
some other time. The Trustees may remove any officer elected by them with or
without cause. Except to the extent expressly provided in a written agreement
with the Trust, no Trustee or officer resigning and no officer removed shall
have any right to any compensation for any period following his or her
resignation or removal.
3
<PAGE> 4
ARTICLE 4
Committees
4.1 General. The Trustees, by vote of a majority of the Trustees then
in office, may elect from their number an Executive Committee or other
committees and may delegate thereto some or all of their powers except those
which by law, by the Master Trust Agreement, or by these By-Laws may not be
delegated. Except as the Trustees may otherwise determine, any such committee
may make rules for the conduct of its business, but unless otherwise provided
by the Trustees or in such rules, its business shall be conducted so far as
possible in the same manner as is provided by these By-Laws for the Trustees
themselves. All members of such committees shall hold such offices at the
pleasure of the Trustees. The Trustees may abolish any such committee at any
time. Any committee to which the Trustees delegate any of their powers or
duties shall keep records of its meetings and shall report its action to the
Trustees. The Trustees shall have power to rescind any action of any
committee, but no such rescission shall have retroactive effect.
ARTICLE 5
Reports
5.1 General. The Trustees and officers shall render reports at the
time and in the manner required by the Master Trust Agreement or any applicable
law. Officers and Committees shall render such additional reports as they may
deem desirable or as may from time to time be required by the Trustees.
ARTICLE 6
Seal
6.1 General. The seal of the Trust shall consist of a flat-faced die
with the word "Massachusetts", together with the name of the Trust and the year
of its organization cut or engraved thereon, but, unless otherwise required by
the Trustees, the seal shall not be necessary to be placed on, and its absence
shall not impair the validity of, any document, instrument or other paper
executed and delivered by or on behalf of the Trust.
4
<PAGE> 5
ARTICLE 7
Execution of Papers
7.1 General. Except as the Trustees may generally or in particular
cases authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed by
the President, any Vice President, or by the Treasurer and need not bear the
seal of the Trust.
ARTICLE 8
Issuance of Share Certificates
8.1 Share Certificates. In lieu of issuing certificates for shares,
the Trustees or the transfer agent may either issue receipts therefor or may
keep accounts upon the books of the Trust for the record holders of such
shares, who shall in either case be deemed, for all purposes hereunder, to be
the holders of certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and agreed to the
terms hereof.
The Trustees may at any time authorize the issuance of share
certificates. In that event, each shareholder shall be entitled to a
certificate stating the number of shares owned by him, in such form as shall be
prescribed from time to time by the Trustees. Such certificate shall be signed
by the President or a Vice-President and by the Treasurer or Assistant
Treasurer. Such signatures may be facsimiles if the certificate is signed by a
transfer agent, or by a registrar, other than a Trustee, officer or employee of
the Trust. In case any officer who has signed or whose facsimile signature
has been placed on such certificate shall cease to be such officer before such
certificate is issued, it may be issued by the Trust with the same effect as if
he were such officer at the time of its issue.
8.2 Loss of Certificates. In case of the alledged loss or destruction
or the mutilation of a share certificate, a duplicate certificate may be issued
in place thereof, upon such terms as the Trustees shall prescribe.
8.3 Issuance of New Certificate to Pledgee. A pledgee of shares
transferred as collateral security shall be entitled to a new certificate if
the instrument of transfer substantially describes the debt or duty that is
intended to be secured thereby. Such new certificate shall express on its face
that it is held as collateral security, and the name of the pledgor shall be
stated thereon, who alone shall be liable as a shareholder, and entitled to
vote theron.
5
<PAGE> 6
8.4 Discontinuance of Issuance of Certificates. The Trustees may at
any time discontinue the issuance of share certificates and may, by written
notice to each shareholder, require the surrender of share certificates to the
Trust for cancellation. Such surrender and cancellation shall not affect the
ownership of shares in the Trust.
ARTICLE 9
Custodian
9.1 General. The Trust shall at all times employ a bank or trust
company having a capital, surplus and undivided profits of at least Two Million
Dollars ($2,000,000) as Custodian of the capital assets of the Trust. The
Custodian shall be compensated for its services by the Trust and upon such
basis as shall be agreed upon from time to time between the Trust and the
Custodian.
ARTICLE 10
Dealings with Trustees and Officers
Any Trustee, officer or other agent of the Trust may acquire, own and
dispose of shares of the Trust to the same extent as if he were not a trustee,
officer or agent; and the Trustees may accept subscriptions to shares or
repurchase shares from any firm or company in which he is interested.
ARTICLE 11
Shareholders
11.1 Meetings. A meeting of the shareholders of the Trust shall be
held whenever called by the Trustees and whenever election of a Trustee or
Trustees by shareholders is required by the provisions of section 16(a) of the
Investment Company Act of 1940 for that purpose. The Trustees shall promptly
call and give notice of a meeting of shareholders for the purpose of voting
upon removal of any Trustee of the Trust when requested to do so in writing by
shareholders holding not less than 10% of the shares then outstanding.
Meetings of shareholders for any other purpose shall also be called by the
Trustees when requested in writing by shareholders holding at least 10% of the
shares then outstanding, or if the Trustees shall fail to call or give notice
of any meeting of shareholders for a period of 30 days after such application,
then shareholders holding at least 10% of the shares then outstanding may call
and give notice of such meeting.
6
<PAGE> 7
11.2 Record Dates. For the purpose of determining the shareholders
who are entitled to vote or act at any meeting or any adjournment thereof, or
who are entitled to receive payment of any dividend or of any other
distribution, the Trustees may from time to time fix a time, which shall be not
more than 60 days before the date of any meeting of shareholders or the date
for the payment of any dividend or of any other distribution, as the record
date for determining the shareholders having the right to notice of and to vote
at such meeting and any adjournment thereof or the right to receive such
dividend or distribution, and in such case only shareholders of record on such
record date shall have such right, notwithstanding any transfer of shares on
the books of the Trust after the record date; or without fixing such record
date the Trustees may for any such purposes close the register or transfer
books for all or any part of such period.
ARTICLE 12
Amendments to the By-Laws
12.1 General. These By-Laws may be amended or repealed, in whole or
in part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.
ARTICLE 13
Declaration of Trust
The Master Trust Agreement establishing The FSB Funds dated December
16, 1988, a copy of which, together with all amendments thereto, is on file in
the office of the Secretary of the Commonwealth of Massachusetts, provides that
the name The FSB Funds refers to the Trustees under the Master Trust Agreement
collectively as Trustees, but not as individuals or personally; and no Trustee,
shareholder, officer, employee or agent of The FSB Funds shall be held to any
personal liability, nor shall resort be had to their private property, for the
satisfaction of any obligation or claim or otherwise, in connection with the
affairs of The FSB Funds, but the Trust Estate only shall be liable.
7
<PAGE> 1
EXHIBIT 5(a)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of February 1, 1989 between The FSB FUNDS, a
business trust organized under the laws of the Commonwealth of Massachusetts
(herein called the "Company"), and First Security Investment Management, Inc.
("FSIM"), which is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended, and is a subsidiary of First Security
Investment Services, Inc., which is in turn a wholly-owned subsidiary of First
Security Corporation.
WHEREAS, the Company is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended ("1940 Act"); and
WHEREAS, the Company has three investment portfolios: The Cash
Management Fund, The Government Money Fund and The Money Market Fund (the
"Portfolios"); and
WHEREAS, the Company desires to retain FSIM to furnish investment
advisory services to the Portfolios, and FSIM is willing to furnish such
services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows;
1. Appointment. The Company hereby appoints FSIM to act as investment
adviser to the Company's Portfolios for the period and on the terms set forth
in this Agreement. FSIM accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
2. Delivery of Documents. The Company has furnished FSIM with
properly certified or authenticated copies of each of the following:
(a) The Company's Master Trust Agreement dated December 16,
1988 as amended from time to time (the "Master Trust Agreement");
(b) The Company's By-Laws as currently in effect (such
By-Laws, and any amendments thereto made from time to time, are herein
called the "By-Laws");
(c) Resolutions of the Company's Board of Trustees authorizing
the appointment of FSIM as investment adviser and approving this Agreement;
(d) The Company's Notification of Registration on Form N-8A
under the 1940 Act as filed with the Securities and Exchange Commission
("the SEC") on December 19, 1988 and all amendments thereto;
(e) The Company's Registration Statement on Form N-1A under
the Securities Act of 1933 as amended ("1933
- 1 -
<PAGE> 2
Act") (SEC File No. 33-26205) and under the 1940 Act as filed with the
SEC on December 19, 1988 and all amendments thereto; and
(f) The Company's most recent prospectus. (such prospectus and
all amendments and supplements thereto are herein called "the Prospectus").
The Fund will furnish FSIM from time to time with copies of all
amendments of or supplements to the foregoing.
3. Management.
(a) Subject to the supervision of the Company's Board of Trustees,
FSIM will provide a continuous investment program for the Company's Portfolios,
including investment research and management with respect to all securities and
investments and cash equivalents in said Portfolios. FSIM will determine from
time to time what securities and other investments will be purchased, retained
or sold by the Company with respect to the Portfolios; and shall execute or
direct the execution of all such transactions with the issuer of such
securities, with brokers and dealers, and in any other manner permitted by law
that is in the best interest of the Company and its shareholders.
(b) FSIM will provide the services under this Agreement in accordance
with the Portfolio's investment objective, policies and restrictions as stated
in the Prospectus and resolutions of the Company's Board of Trustees.
(c) In the event that the Company establishes additional portfolios
with respect to which it desires to retain FSIM to act as investment adviser
hereunder, it shall notify FSIM in writing. If FSIM is willing to render such
services it shall notify the Company in writing whereupon such portfolio shall
become a "Portfolio" hereunder.
(d) FSIM further agrees that it:
(i) will comply with all applicable Rules and Regulations of
the SEC, the provisions of the Internal Revenue Code relating to regulated
investment companies, applicable banking laws and regulations, and policy
decisions adopted by the Company's Trustees as made from time to time;
(ii) pursuant to its investment determinations for the
Company, in placing orders with brokers and dealers, FSIM will attempt
to obtain the best net price and the most favorable execution of its
orders. Consistent with this obligation, when the execution and price
offered by two or more brokers or dealers are comparable, FSIM may, in its
discretion, purchase and sell portfolio securities to and from brokers and
dealers who provide the Company with research advice and other services.
- 2 -
<PAGE> 3
(iii) will maintain books and records with respect to the
securities transactions of the Company's Portfolios, and will furnish
the Company's Board of Trustees such periodic, regular and special reports
as the Board may request; and
(iv) will treat confidentially and as proprietary information
of the Company all records and other information relative to the
Company and prior, present or potential shareholders; and will not use
such records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to
and approval in writing by the Company, which approval shall not be
unreasonably withheld and such records may not be withheld where FSIM may
be exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Company.
4. Services Not Exclusive. The investment management services
furnished by FSIM hereunder are not to be deemed exclusive, and FSIM shall be
free to furnish similar services to others so long as its services under this
Agreement are not impaired thereby.
5. Upon expiration or earlier termination of this Agreement, the
Company shall, if reference to "FSB" is made in the corporate name of the
Company or in the name of the Portfolios and if FSIM requests in writing, as
promptly as practicable change its corporate name and the name of the
Portfolios so as to eliminate all reference to "FSB", and thereafter the
Company and the Portfolios shall cease transacting business in any corporate
name using the word "FSB" or any other reference to FSIM or "FSB". The
foregoing rights of FSIM and obligations of the Company shall not deprive FSIM,
or any affiliate thereof which has "FSB" in its name, of, but shall be in
addition to, any other rights or remedies to which FSIM and any such affiliate
may be entitled in law or equity by reason of any breach of this Agreement by
the Company, and the failure or omission of FSIM to request a change of the
Company's or the Portfolios' names or a cessation of the use of the name "FSB"
as described in this paragraph 5 shall not under any circumstances be deemed a
waiver of the right to require such change or cessation at any time thereafter
for the same or any subsequent breach.
6. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, FSIM hereby agrees that all records which it
maintains for the Company are the property of the Company and further agrees to
surrender promptly to the Company any of such records upon the Company's
request. FSIM further agrees to preserve for the periods prescribed by Rule
31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1
under the 1940 Act.
- 3 -
<PAGE> 4
7. Expenses. During the term of this Agreement, FSIM will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commissions, if any)
purchased for the Company.
8. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, effective as of the date hereof, the Company will
pay FSIM and FSIM will accept as full compensation therefor, subject to the
provisions of paragraph 6, above, a fee, computed daily and paid monthly (in
arrears), at an annual rate of .30% of the average net assets held in each
Portfolio.
If in any fiscal year the aggregate expenses of any Portfolio exceeds
the expense limitations of any state having jurisdiction over a Portfolio, FSIM
will reimburse the Company for such excess expenses. The obligation of FSIM to
reimburse the Company hereunder is limited in any fiscal year to the amount of
its fee hereunder for such fiscal year, provided, however, that notwithstanding
the foregoing, FSIM shall reimburse the Company for such excess expenses
regardless of the amount of fees paid to it during such fiscal year to the
extent that the securities regulations of any state having jurisdiction over
such Portfolio so requires. Such expense reimbursement, if any, will be
estimated, reconciled and paid on a monthly basis.
9. Limitation of Liability. FSIM shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Company in
connection with the performance of this Agreement, except a loss resulting from
a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith, reckless
disregard or gross negligence on the part of FSIM in the performance of its
obligations and duties under this Agreement.
10. Duration and Termination.
(a) This Agreement shall continue in effect until two years from the
date hereof with respect to shares of the Portfolios and, with respect to each
investment portfolio established after the date hereof, for twelve months from
the date on which such portfolio becomes a Portfolio hereunder, and shall
continue thereafter in full force and effect for successive annual periods,
provided that such continuance is specifically approved at least annually (i)
by the vote of a majority of those members of the Company's Board of Trustees
who are not interested persons of any party to this Agreement, cast in person
at a meeting called for the purpose of voting on such approval, and (ii) by the
Company's Board of Trustees or by vote of a majority of the outstanding voting
securities of such Portfolio.
- 4 -
<PAGE> 5
(b) Notwithstanding the foregoing, this Agreement may be terminated at
any time, without the payment of any penalty, by the Company (by vote of the
Company's Board of Trustees or by vote of a majority of the outstanding voting
securities of the Company's Portfolios, or by FSIM on sixty days' written
notice.
(c) This Agreement will immediately terminate in the event of its
assignment.
(d) As used in this Agreement, the terms "majority of the outstanding
voting securities," "interested persons" and "assignment" shall have the same
meaning of such terms in the 1940 Act.
(e) Any approval of this Agreement by the holders of a majority of the
outstanding shares (as defined in the 1940 Act) of any Portfolio shall be
effective to continue this Agreement with respect to any such Portfolio
notwithstanding (a) that this Agreement has not been approved by the holders of
a majority of the outstanding shares of any other Portfolio affected thereby,
and (b) that this Agreement has not been approved by vote of a majority of the
outstanding shares of the Company, unless such approval shall be required by
applicable law or otherwise.
11. Amendment of this Agreement. No provision of this Agreement may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Agreement shall be
effective with respect to any Portfolio until approved by vote of a majority of
the outstanding voting securities of such Portfolio.
12. Limitation of Liability. The term "The FSB Funds" means and
refers to the Trustees from time to time serving under the Declaration of Trust
of the Company dated December 16, 1988 as the same may subsequently thereto
have been, or subsequently hereto be, amended. It is expressly agreed that the
obligations of the Company hereunder shall not be binding upon any of the
Trustees, shareholders, nominees, officers, agents or employees of the Company,
personally, but bind only the trust property of the Company, as provided in the
Declaration of Trust of the Company. The execution and delivery of this
Agreement have been authorized by the Trustees and shareholders of the Funds
and signed by the President of the Company, acting as such, and neither such
authorization by such Trustees and shareholders nor such execution and delivery
by such officer shall be deemed to have been made by any of them individually
or to impose any liability on any of them personally, but shall bind only the
trust property of the Company as provided in the Declaration of Trust.
- 5 -
<PAGE> 6
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by Delaware law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
THE FSB FUNDS
By /s/
--------------------------
FIRST SECURITY INVESTMENT
MANAGEMENT, INC.
By /s/
--------------------------
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<PAGE> 1
Exhibit 5(b)
FIRST AMENDMENT TO
INVESTMENT ADVISORY AGREEMENT
The Amendment to Investment Advisory Agreement is made as of the 27th
day of December by and between The Achievement Funds Trust, a Massachusetts
business trust (the "Trust"), and First Security Investment Management, Inc.
(the "Adviser").
WHEREAS, the Trust and the Adviser entered into an Investment Advisory
Agreement as of February 1, 1989 (the "Advisory Agreement") with respect to the
provision of investment advisory services by the Adviser to the Trust's three
then existing portfolios (the "Current Portfolios");
WHEREAS, the Trust and the Adviser now desire to amend the Advisory
Agreement to include six new portfolios;
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Addition of Certain Portfolios. The definition of Portfolios as
used in the Advisory Agreement shall be amended effective on the date hereof to
include six newly created investment portfolios of the Trust: Equity Fund,
Balanced Fund, Short-Term Bond Fund, Intermediate-Term Bond Fund, Idaho
Tax-Free Bond Fund and Short-Term Municipal Bond Fund.
2. Compensation. The first paragraph of Section 8 Compensation of
the Advisory Agreement is hereby deleted in its entirety and replaced with the
following paragraph:
"For the services provided and the expense assumed pursuant to the
Agreement, effective as of the date hereof, the Trust will pay to the Adviser
and the Adviser will accept as full compensation therefor, subject to the
provisions of paragraph 6 above, a fee, computed daily and paid monthly (in
arrears), at the annual rates for each Portfolio as set forth below:
<PAGE> 2
<TABLE>
<CAPTION>
Portfolio Maximum Fee (as percentage of Net Assets)
--------- ----------------------------------------
<S> <C>
Equity Fund .74%
Balanced Fund .74%
Short-Term Bond Fund .60%
Intermediate Term Bond .60%
Idaho Tax Free Bond .60%
Short-Term Municipal Bond .60%
</TABLE>
3. Effect of Amendment. Except as expressly set forth herein, the
Advisory Agreement shall remain in full force and effect and shall not be
amended in any way.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
THE ACHIEVEMENT FUNDS TRUST
By: /s/ Kathryn L. Stanton
----------------------------
Title: Vice President
FIRST SECURITY INVESTMENT
MANAGEMENT, INC.
By: /s/ James Darcy
----------------------------
Title: President
2
<PAGE> 1
Exhibit 5(c)
SECOND AMENDMENT TO
INVESTMENT ADVISORY AGREEMENT
The Amendment to Investment Advisory Agreement is made as of the
th day of December by and between The Achievement Funds Trust, a Massachusetts
business trust (the "Trust"), and First Security Investment Management, Inc.
(the "Adviser").
WHEREAS, the Trust and the Adviser entered into an Investment Advisory
Agreement as of February 1, 1989 (the "Advisory Agreement") with respect to the
provision of investment advisory services by the Adviser to the Trust's three
then existing portfolios (the "Current Portfolios");
WHEREAS, the Trust and the Adviser now desire to amend the Advisory
Agreement to include one new portfolio;
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Addition of Certain Portfolios. The definition of Portfolios as
used in the Advisory Agreement shall be amended effective on the date hereof to
include a newly created investment portfolio of the Trust: Municipal Bond
Fund.
2. Compensation. The first paragraph of Section 8 Compensation of
the Advisory Agreement is hereby deleted in its entirety and replaced with the
following paragraph:
"For the services provided and the expense assumed pursuant to the
Agreement, effective as of the date hereof, the Trust will pay to the Adviser
and the Adviser will accept as full compensation therefor, subject to the
provisions of paragraph 6 above, a fee, computed daily and paid monthly (in
arrears), at the annual rates for each Portfolio as set forth below:
1
<PAGE> 2
<TABLE>
<CAPTION>
Portfolio Maximum Fee (as percentage of Net Assets)
--------- ----------------------------------------
<S> <C>
Equity Fund .74%
Balanced Fund .74%
Short-Term Bond Fund .60%
Intermediate Term Bond .60%
Idaho Tax Free Bond .60%
Short-Term Municipal Bond .60%
Municipal Bond .60%
</TABLE>
3. Effect of Amendment. Except as expressly set forth herein, the
Advisory Agreement shall remain in full force and effect and shall not be
amended in any way.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
THE ACHIEVEMENT FUNDS TRUST
By:_______________________
Title:
FIRST SECURITY INVESTMENT
MANAGEMENT, INC.
By:_________________________
Title:
2
<PAGE> 1
Exhibit 6
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of this 27th day of December, 1994, between
The Achievement Funds Trust, a Massachusetts business trust (the "Trust"), and
SEI Financial Services Company, a Pennsylvania corporation (the Distributor").
WHEREAS, the Trust is registered as an investment company with the
Securities and Exchange Commission ("SEC") under the Investment Company Act of
1940, as amended ("1940 Act"), and its Shares are registered with the SEC under
the Securities Act of 1933, as amended ("1933 Act"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (the "1934 Act");
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the Trust and Distributor hereby agree as follows:
ARTICLE 1. Sale of Shares. The Trust grants to the Distributor the
exclusive right to sell Shares of the Trust at the offering price per Share in
accordance with the current prospectus, as agent and on behalf of the Trust,
during the term of this Agreement and subject to the registration requirements
of the 1933 Act, the rules and regulations of the SEC and the laws governing
the sale of securities in the various states ("Blue Sky Laws").
ARTICLE 2. Solicitation of Sales. In consideration of these rights
granted to the Distributor, the Distributor agrees to use all reasonable
efforts to promote the Trust and solicit orders for the purchase of the Trust's
shares, and it shall undertake such advertising and promotion as is reasonable
in connection with the distribution of Shares of the Trust; provided, however,
that the Distributor shall not be prevented from entering into like
arrangements with other issuers. The provisions of this paragraph do not
obligate the Distributor to register as a broker or dealer under the Blue Sky
Laws of any jurisdiction when it determines it would be uneconomical for it to
do so or to maintain its registration in any jurisdiction in which it is now
registered nor obligate the Distributor to sell any particular number of
Shares. All activities of the Distributor and its agents and employees as
Distributor of the Shares shall comply with all applicable laws, rules and
regulations, including, without limitation, all rules and regulations under the
1940 Act, the 1934 Act and of the National Association of Securities Dealers.
ARTICLE 3. Authorized Representations. The Distributor is not
authorized by the Trust to give any information or to make any representations
other than those contained in the current registration statements and
prospectuses of the Trust filed with the SEC or contained in Shareholder
reports or other material that may be prepared by or on behalf of
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<PAGE> 2
the Trust for the Distributor's use. The Distributor may prepare and
distribute sales literature and other material as it may deem appropriate,
provided that such literature and materials have been approved by the Trust
prior to their use.
ARTICLE 4. Registration of Shares. The Trust agrees that it will
take all action necessary to register Shares under the federal and state
securities laws so that there will be available for sale the number of Shares
the Distributor may reasonably be expected to sell and to pay all fees
associated with said registration. The Trust shall make available to the
Distributor such number of copies of its currently effective prospectus and
statement of additional information as the Distributor may reasonably request.
The Trust shall furnish to the Distributor copies of all information, financial
statements and other papers which the Distributor may reasonably request for
use in connection with the distribution of Shares of the Trust.
ARTICLE 5. Compensation. As compensation for providing the services
under this Agreement:
(a) Pursuant to the Fund's retail class Plan of Distribution adopted
by the Portfolios in accordance with Rule 12b-1 under the 1940 Act (the
"Plan"), the retail class of each Portfolio will pay the Distributor a total
fee in connection with the servicing of shareholder accounts of such class and
in connection with distribution-related services provided in respect of such
class, calculated and payable monthly, at the annual rate of .25% of the value
of the average daily net assets of such class. All or any portion of such
total fee may be payable as a Shareholder Servicing Fee as described in the
Plan, and all or any portion of such total fee may be payable as a Distribution
Fee as described in the Plan, as determined from time to time by the Fund's
Board of Directors. Until further action by the Board of Directors, all of
such fee shall be designated and payable as a Shareholder Serviceing Fee.
Amounts payable to the Distributor under the Plan may exceed or be less than
the Distributor's actual Distribution Expenses and Shareholder Servicing Costs
as described in (b) below. In the event such Distribution Expenses and
Shareholder Servicing Costs exceed amounts payable to the Distributor under the
Plan, the Distributor shall not be entitled to reimbursement by the Fund.
(b) During the period of this Agreement, the Fund shall pay or cause
to be paid all expenses, costs and fees incurred by the Fund which are not
assumed by the Distributor. The Distributor agrees to provide, and shall pay
costs which it incurs in connection with providing, administrative or
accounting services to shareholders of the retail class of each Portfolio (such
costs are referred to as "Shareholder Servicing Costs"). The Distributor shall
also pay all of its own costs incurred in connection with the distribution of
the shares of each such class ("Distribution Expenses"). Distribution Expenses
include, but are not limited to, the following expenses incurred by the
Distributor: initial and ongoing sales compensation (in addition to sales
loads) paid to investment executives of the Distributor and to other broker-
dealers and participating financial institutions which the Distributor has
agreed to pay; expenses incurred in the printing of prospectuses, statements of
additional
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information and reports used for sales purposes; expenses of preparation and
distribution of sales literature; expenses of advertising of any type; an
allocation of the Distributor's overhead; payments to and expenses of persons
who provide support services in connection with the distribution of Fund
shares; and other distribution-related expenses. Shareholder Servicing Costs
include all expenses of the Distributor incurred in connection with providing
administrative or accounting services to shareholders of each such class,
including, but not limited to, an allocation of the Distributor's overhead and
payments made to persons, including employees of the Distributor, who respond
to inquiries of shareholders regarding their ownership of such classes of
shares, or who provide other administrative or accounting services not
otherwise required to be provided by the applicable Portfolio's investment
adviser, administrator, transfer agent or other agent.
(c) In each year during which this Agreement remains in effect, the
Distributor will prepare and furnish to the Board of Directors of the Fund, on
a quarterly basis, written reports complying with the requirements of Rule
12b-1 under the 1940 Act that set forth the amounts expended under this
Agreement and the Plan on a class by class basis and the purposes for which
those expenditures were made.
ARTICLE 6. Indemnification of Distributor. The Trust agrees to
indemnify and hold harmless the Distributor and each of its directors and
officers and each person, if any, who controls the Distributor within the
meaning of Section 15 of the 1933 Act against any loss, liability, claim,
damages or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damages, or expense and reasonable counsel
fees and disbursements incurred in connection therewith), arising by reason of
any person acquiring any Shares, based upon the ground that the registration
statement, prospectus, Shareholder reports or other information filed or made
public by the Trust (as from time to time amended) included an untrue statement
of a material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements made not misleading. However, the
Trust does not agree to indemnify the Distributor or hold it harmless to the
extent that the statements or omission was made in reliance upon, and in
conformity with, information furnished to the Trust by or on behalf of the
Distributor.
In no case (i) is the indemnity of the Trust to be deemed to protect
the Distributor against any liability to the Trust or its Shareholders to which
the Distributor or such person otherwise would be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under this
Agreement, or (ii) is the Trust to be liable to the Distributor under the
indemnity agreement contained in this paragraph with respect to any claim made
against the Distributor or any person indemnified unless the Distributor or
other person shall have notified the Trust in writing of the claim within a
reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon the
Distributor or such other person (or after the Distributor or the person shall
have received notice of service on any designated agent). However, failure to
notify the Trust of any claim shall not relieve the Trust from any liability
which it may have to the
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Distributor or any person against whom such action is brought otherwise than on
account of its indemnity agreement contained in this paragraph.
The Trust shall be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any claims subject to this indemnity provision. If the Trust elects to
assume the defense of any such claim, the defense shall be conducted by counsel
chosen by the Trust and satisfactory to the indemnified defendants in the suit
whose approval shall not be unreasonably withheld. In the event that the Trust
elects to assume the defense of any suit and retain counsel, the indemnified
defendants shall bear the fees and expenses of any additional counsel retained
by them. If the Trust does not elect to assume the defense of a suit, it will
reimburse the indemnified defendants for the reasonable fees and expenses of
any counsel retained by the indemnified defendants.
The Trust agrees to notify the Distributor promptly of the
commencement of any litigation or proceedings against it or any of its officers
or Trustees in connection with the issuance or sale of any of its Shares.
ARTICLE 7. Indemnification of Trust. The Distributor covenants and
agrees that it will indemnify and hold harmless the Trust and each of its
Trustees and officers and each person, if any, who controls the Trust within
the meaning of Section 15 of the Act, against any loss, liability, damages,
claim or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, damages, claim or expense and reasonable counsel
fees incurred in connection therewith) based upon the 1933 Act or any other
statute or common law and arising by reason of any person acquiring any Shares,
and alleging a wrongful act of the Distributor or any of its employees or
alleging that the registration statement, prospectus, Shareholder reports or
other information filed or made public by the Trust (as from time to time
amended) included an untrue statement of a material fact or omitted to state a
material fact required to be stated or necessary in order to make the
statements not misleading, insofar as the statement or omission was made in
reliance upon and in conformity with information furnished to the Trust by or
on behalf of the Distributor.
In no case (i) is the indemnity of the Distributor in favor of the
Trust or any other person indemnified to be deemed to protect the Trust or any
other person against any liability to which the Trust or such other person
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement, or (ii) is the
Distributor to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Trust or any person
indemnified unless the Trust or person, as the case may be, shall have notified
the Distributor in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the nature of
the claim shall have been served upon the Trust or upon any person (or after
the Trust or such person shall have received notice of service on any
designated agent).
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However, failure to notify the Distributor of any claim shall not relieve the
Distributor from any liability which it may have to the Trust or any person
against whom the action is brought otherwise than on account of its indemnity
agreement contained in this paragraph.
The Distributor shall be entitled to participate, at its own expense,
in the defense or, if it so elects, to assume the defense of any suit brought
to enforce the claim, but if the Distributor elects to assume the defense, the
defense shall be conducted by counsel chosen by the Distributor and
satisfactory to the indemnified defendants whose approval shall not be
unreasonably withheld. In the event that the Distributor elects to assume the
defense of any suit and retain counsel, the defendants in the suit shall bear
the fees and expenses of any additional counsel retained by them. If the
Distributor does not elect to assume the defense of any suit, it will reimburse
the indemnified defendants in the suit for the reasonable fees and expenses of
any counsel retained by them.
The Distributor agrees to notify the Trust promptly of the
commencement of any litigation or proceedings against it in connection with the
issue and sale of any of the Trusts' Shares.
ARTICLE 8. Confidentiality. The Distributor agrees on behalf of
itself and its employees to treat confidentially and as proprietary information
of the Trust all records and other information relative to the Trust and its
prior, present or potential shareholders, and not to use such records and
information for any purpose other than performance of its responsibilities and
approval in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld where the Distributor may be exposed to civil
or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Trust.
ARTICLE 9. Effective Date. This Agreement shall be effective upon
its execution, and unless terminated as provided, shall continue in force for
one year from the effective date and thereafter from year to year, provided
that such annual continuance is approved by (i) either the vote of a majority
of the Trustees of the Trust, or the vote of a majority of the outstanding
voting securities of the Trust, and (ii) the vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or the Trust's
Distribution Plan or interested persons of any such party ("Qualified
Trustees"), cast in person at a meeting called for the purpose of voting on the
approval. This Agreement shall automatically terminate in the event of its
assignment. As used in this paragraph the terms "vote of a majority of the
outstanding voting securities", "assignment" and "interested person" shall
have the respective meanings specified in the 1940 Act. In addition, this
Agreement may at any time be terminated without penalty by SFS, by a vote of a
majority of Qualified Trustees or by vote of a majority of the outstanding
voting securities of the Trust upon not less than sixty days prior written
notice to the other party.
ARTICLE 10. Notices. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage
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prepaid, addressed by the party giving notice to the other party at the last
address furnished by the other party to the party giving notice: if to the
Trust, at 680 East Swedesford Road, Wayne, Pennsylvania 19087, and if to the
Distributor, at 680 East Swedesford Road, Wayne, Pennsylvania 19087.
ARTICLE 11. Limitation of Liability. A copy of the Declaration of
Trust of the Trust is on file with the Secretary of State of the Commonwealth
of Massachusetts, and notice is hereby given that this Agreement is executed on
behalf of the Trustees of the Trust as Trustees and not individually and that
the obligations of this instrument are not binding upon any of the Trustees,
officers or shareholders of the Trust individually but binding only upon the
assets and property of the Trust.
ARTICLE 12. Governing Law. This Agreement shall be construed in
accordance with the laws of the Commonwealth of Massachusetts and the
applicable provisions of the 1940 Act. To the extent that the applicable laws
of the Commonwealth of Massachusetts, or any of the provisions herein, conflict
with the applicable provisions of the 1940 Act, the latter shall control.
ARTICLE 13. Multiple Originals. This Agreement may be executed in
two or more counterparts, each of which when so executed shall be deemed to be
an original, but such counterparts shall together constitute but one and the
same instrument.
IN WITNESS, the Trust and Distributor have each duly executed this
Agreement, as of the day and year above written.
THE ACHIEVEMENT FUNDS TRUST
By: /s/ Kathryn L. Stanton
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Attest: /s/ Rick Shoch
------------------------
SEI FINANCIAL SERVICES COMPANY
By: /s/ Robert B. Carroll
----------------------------
Attest: /s/ Rick Shoch
-----------------------
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<PAGE> 1
Exhibit 8
CUSTODIAN AGREEMENT
THE ACHIEVEMENT FUNDS TRUST
This Agreement, dated as of the 27th day of December, 1994 by and
between The Achievement Funds Trust (the "Trust"), a business trust duly
organized under the laws of the Commonwealth of Massachusetts and CoreStates
Bank, N.A. (the "Bank").
WITNESSETH:
WHEREAS, the Trust desires to appoint the Bank to act as Custodian of
its portfolio securities, cash and other property from time to time deposited
with or collected by the Bank for the Trust;
WHEREAS, the Bank is qualified and authorized to act as Custodian for
the Trust and the separate series thereof (each a "Fund" and, collectively, the
"Funds"), and is willing to act in such capacity upon the terms and conditions
herein set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
do hereby agree as follows:
SECTION 1. The terms as defined in this Section wherever used in this
Agreement, or in any amendment or supplement hereto, shall have meanings herein
specified unless the context otherwise requires.
CUSTODIAN: The term Custodian shall mean the Bank in its capacity as Custodian
under this Agreement.
DEPOSITORY: The term Depository means any depository service which acts as a
system for the central handling of securities where all securities of any
particular class or series of an issuer deposited within the system are treated
as fungible and may be transferred by bookkeeping entry without physical
delivery.
PROPER INSTRUCTIONS. For purposes of this Agreement, the Custodian shall be
deemed to have received Proper Instructions upon receipt of written (including
instructions received by means of computer terminals or facsimile
transmissions), telephone or telegraphic instructions from a person or persons
authorized from time to time by the Trustees of the Trust to give the
particular class of instructions. Telephone or telegraphic instructions shall
be confirmed in writing by such person or persons as said Trustees shall have
from time to time authorized to give the
<PAGE> 2
particular class of instructions in question. The Custodian may act upon
telephone or telegraphic instructions without awaiting receipt of written
confirmation, and shall not be liable for the Trust's failure to confirm such
instructions in writing.
SECURITIES: The term Securities means stocks, bonds, rights, warrants and all
other negotiable or non-negotiable paper issued in certificated or book-entry
form commonly known as "securities" in banking custom or practice.
SHAREHOLDERS: The term Shareholders shall mean the registered owners from time
to time of the Shares of the Trust in accordance with the registry records
maintained by the Trust or agents on its behalf.
SHARES: The term Shares of the Trust shall mean the units of beneficial
interest.
SECTION 2. The Trust hereby appoints the Custodian as Custodian of the Trust's
cash, Securities and other property, to be held by the Custodian as provided in
this Agreement. The Custodian hereby accepts such appointment subject to the
terms and conditions hereinafter provided. The Bank shall open a separate
custodial account in the name of the Trust on the books and records of the Bank
to hold the Securities of the Trust deposited with, transferred to or collected
by the Bank for the account of each Fund of the Trust, and a separate cash
account to which the Bank shall credit monies received by the Bank for the
account of or from each Fund of the Trust. Such cash shall be segregated from
the assets of others and shall be and remain the sole property of the Trust.
SECTION 3. The Trust shall from time to time file with the Custodian a
certified copy of each resolution of its Board of Trustees authorizing the
person or persons to give Proper Instructions and specifying the class of
instructions that may be given by each person to the Custodian under this
Agreement, together with certified signatures of such persons authorized to
sign, which shall constitute conclusive evidence of the authority of the
officers and signatories designated therein to act, and shall be considered in
full force and effect with the Custodian fully protected in acting in reliance
thereon until it receives written notice to the contrary; provided, however,
that if the certifying officer is authorized to give Proper Instructions, the
certification shall be also signed by a second officer of the Trust.
SECTION 4. The Trust will cause to be deposited with the Custodian hereunder
the applicable net asset value of Shares sold from time to time whether
representing initial issue, other stock or reinvestments of dividends and/or
distributions payable to Shareholders.
SECTION 5. The Bank, acting as agent for the Trust, is authorized, directed
and instructed subject to the further provisions of this Agreement:
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(a) to hold Securities issued only in bearer form in bearer form;
(b) to register in the name of the nominee of the Bank, the Bank's
Depositories, or sub-custodians, (i) Securities issued only in
registered form, and (ii) Securities issued in both bearer and
registered form, which are freely interchangeable without
penalty;
(c) to deposit any Securities which are eligible for deposit (i)
with any domestic or foreign Depository on such terms and
conditions as such Depository may require, including
provisions for limitation or exclusion of liability on the
part of the Depository; and (ii) with any sub-custodian which
the Bank uses, including any subsidiary or affiliate of the
Bank;
(d) (i) to credit for the account of the Trust all proceeds
received and payable on or in respect of the assets
maintained hereunder,
(ii) to debit the account of the Trust for the cost of
acquiring Securities the Bank has received for the
Trust, against delivery of such Securities to the
Bank,
(iii) to present for payment Securities and other
obligations (including coupons) upon maturity, when
called for redemption, and when income payments are
due, and
(iv) to make exchanges of Securities which, in the Bank's
opinion, are purely ministerial as, for example, the
exchange of Securities in temporary form for
Securities in definitive form or the mandatory
exchange of certificates;
(e) to forward to the Trust, and/or any other person designated by
the Trust, all proxies and proxy materials received by the
Bank in connection with Securities held in the Trust's
account, which have been registered in the name of the Bank's
nominee, or are being held by any Depository, or
sub-custodian, on behalf of the Bank;
(f) to sell any fractional interest of any Securities which the
Bank has received resulting from any stock dividend, stock
split, distribution, exchange, conversion or similar activity;
(g) to release the Trust's name, address and aggregate share
position to the issuers of any domestic Securities in the
account of the Trust, provided, however, the Trust may
instruct the Bank not to provide any such information to any
issuer;
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<PAGE> 4
(h) to endorse and collect all checks, drafts or other orders for
the payment of money received by the Bank for the account of
or from the Trust;
(i) at the direction of the Trust, to enroll designated Securities
belonging to the Trust and held hereunder in a program for the
automatic reinvestment of all income and capital gains
distributions on those Securities in new shares (an "Automatic
Reinvestment Program"), or instruct any Depository holding
such Securities to enroll those Securities in an Automatic
Reinvestment Program;
(j) at the direction of the Trust, to receive, deliver and
transfer Securities and make payments and collections of
monies in connection therewith, enter purchase and sale orders
and perform any other acts incidental or necessary to the
performance of the above acts with brokers, dealers or similar
agents selected by the Trust, including any broker, dealer or
similar agent affiliated with the Bank, for the account and
risk of the Trust in accordance with accepted industry
practice in the relevant market, provided, however, if it is
determined that any certificated Securities transferred to a
Depository or sub-custodian, the Bank, or the Bank's nominee,
the Bank's sole responsibility for such Securities under this
Agreement shall be to safekeep the Securities in accordance
with Section 11 hereof; and
(k) to notify the Trust and/or any other person designated by the
Trust upon receipt of notice by the Bank of any call for
redemption, tender offer, subscription rights, merger,
consolidation, reorganization or recapitalization which (i)
appears in The Wall Street Journal (New York edition), The
Standard & Poor's Called Bond Record for Preferred Stocks,
Financial Daily Called Bond Service, The Kenny Services, any
official notifications from The Depository Trust Company and
such other publications or services to which the Bank may from
time to time subscribe, (ii) requires the Bank to act in
response thereto, and (iii) pertain to Securities belonging to
the Trust and held hereunder which have been registered in the
name of the Bank's nominee or are being held by a Depository
or sub-custodian on behalf of the Bank. Notwithstanding
anything contained herein to the contrary, the Trust shall
have the sole responsibility for monitoring the applicable
dates on which Securities with put option features must be
exercised. All solicitation fees payable to the Bank as agent
in connection herewith will be retained by the Bank unless
expressly agreed to the contrary in writing by the Bank.
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Notwithstanding anything in this Section to the contrary, the Bank is
authorized to hold Securities for the Trust which have transfer limitations
imposed upon them by the Securities Act of 1933, as amended, or represent
shares of mutual funds (i) in the name of the Trust, (ii) in the name of the
Bank's nominee, or (iii) with any Depository or sub-custodian.
SECTION 6. The Custodian's compensation shall be as set forth in Schedule A
hereto attached, or as shall be set forth in amendments to such schedule
approved by the Trust and the Custodian. The Bank is authorized to charge the
a Fund's account for such compensation to the extent such compensation relates
to services provided hereunder to such Fund. All expenses and taxes payable
with respect to the Securities in the account of the Trust including, without
limitation, commission charges on purchases and sales and the amount of any
loss or liability for stockholders' assessments or otherwise, claimed or
asserted against the bank or against the Bank's nominee by reason of any
registration hereunder shall be charged to the Trust.
SECTION 7. In connection with its functions under this Agreement, the
Custodian shall:
(a) render to the Trust a daily report of all monies received or
paid on behalf of the Trust; and
(b) create, maintain and retain all records relating to its
activities and obligations under this Agreement in such manner
as will meet the obligations of the Trust with respect to said
Custodian's activities in accordance with generally accepted
accounting principles. All records maintained by the
Custodian in connection with the performance of its duties
under this Agreement will remain the property of the Trust and
in the event of termination of this Agreement will be
relinquished to the Trust.
SECTION 8. Any Securities deposited with any Depository or with any
sub-custodian will be represented in accounts in the name of the Bank which
include only property held by the Bank as Custodian for customers in which the
Bank acts in a fiduciary or agency capacity.
Should any Securities which are forwarded to the Bank by the Trust, and which
are subsequently deposited to the Bank's account in any Depository or with any
sub-custodian, or which the Trust may arrange to deposit in the Bank's account
in any Depository or with any sub- custodian, not be deemed acceptable for
deposit by such Depository or sub-custodian, for any reason, and as a result
thereof there is a short position in the account of the Bank with the
Depository for such Security,
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<PAGE> 6
the Trust agrees to furnish the Bank immediately with like Securities in
acceptable form.
SECTION 9. The Trust represents and warrants that: (i) it has the legal right,
power and authority to execute, deliver and perform this Agreement and to carry
out all of the transactions contemplated hereby; (ii) it has obtained all
necessary authorizations; (iii) the execution, delivery and performance of this
Agreement and the carrying out of any of the transactions contemplated hereby
will not be in conflict with, result in a breach of or constitute a default
under any agreement or other instrument to which the Trust is a party or which
is otherwise known to the Trust; (iv) it does not require the consent or
approval of any governmental agency or instrumentality, except any such
consents and approvals which the Trust has obtained; (v) the execution and
delivery of this Agreement by the Trust will not violate any law, regulation,
charter, by-law, order of any court or governmental agency or judgment
applicable to the Trust; and (vi) all persons executing this Agreement on
behalf of the Trust and carrying out the transactions contemplated hereby on
behalf of the Trust are duly authorized to do so.
In the event any of the foregoing representations should become untrue,
incorrect or misleading, the Trust agrees to notify the Bank immediately in
writing thereof.
SECTION 10. The Bank represents and warrants that: (i) it has the legal right,
power and authority to execute, deliver and perform this Agreement and to carry
out all of the transactions contemplated hereby; (ii) it has obtained all
necessary authorizations; (iii) the execution, delivery and performance of this
Agreement and the carrying out of any of the transactions contemplated hereby
will not be in conflict with, result in a breach of or constitute a default
under any agreement or other instrument to which the Bank is a party or which
is otherwise known to the Bank; (iv) it does not require the consent or
approval of any governmental agency or instrumentality, except any such
consents and approvals which the Bank has obtained; (v) the execution and
delivery of this Agreement by the Bank will not violate any law, regulation,
charter, by-law, order of any court or governmental agency or judgment
applicable to the Bank; and (vi) all persons executing this Agreement on behalf
of the Bank and carrying out the transactions contemplated hereby on behalf of
the Bank are duly authorized to do so. In the event that any of the foregoing
representations should become untrue, incorrect or misleading, the Bank agrees
to notify the Trust immediately in writing thereof.
SECTION 11. All cash and Securities held by the Bank hereunder shall be kept
with the care exercised as to the Bank's own similar property. The Bank may at
its option insure itself against loss from any cause but shall be under no
obligation to insure for the benefit of the Trust.
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<PAGE> 7
SECTION 12. No liability of any kind shall be attached to or incurred by the
Custodian by reason of its custody of the Trust's assets held by it from time
to time under this Agreement, or otherwise by reason of its position as
Custodian hereunder except only for its own negligence, bad faith, or willful
misconduct in the performance of its duties as specifically set forth in the
Custodian Agreement. Without limiting the generality of the foregoing
sentence, the Custodian:
(a) may rely upon the advice of counsel for the Trust; and for any
action taken or suffered in good faith based upon such advice
or statements the Custodian shall not be liable to anyone;
(b) shall not be liable for anything done or suffered to be done
in good faith in accordance with any request or advice of, or
based upon information furnished by, the Trust or its
authorized officers or agents;
(c) is authorized to accept a certificate of the Secretary or
Assistant Secretary of the Trust, or Proper Instructions, to
the effect that a resolution in the form submitted has been
duly adopted by its Board of Trustees or by the Shareholders,
as conclusive evidence that such resolution has been duly
adopted and is in full force and effect; and
(d) may rely and shall be protected in acting upon any signature,
written (including telegraph or other mechanical)
instructions, request, letter of transmittal, certificate,
opinion of counsel, statement, instrument, report, notice,
consent, order, or other paper or document reasonably believed
by it to be genuine and to have been signed, forwarded or
presented by the purchaser, Trust or other proper party or
parties.
SECTION 13. The Trust, its successors and assigns do hereby fully indemnify
and hold harmless the Custodian its successors and assigns, from any and all
loss, liability, claims, demand, actions, suits and expenses of any nature as
the same may arise from the failure of the Trust to comply with any law, rule,
regulation or order of the United States, any state or any other jurisdiction,
governmental authority, body, or board relating to the sale, registration,
qualification of units of beneficial interest in the Trust, or from the failure
of the Trust to perform any duty or obligation under this Agreement.
Upon written request of the Custodian, the Trust shall assume the entire
defense of any claim subject to the foregoing indemnity, or the joint defense
with the Custodian of such claim, as the Custodian shall request. The
indemnities and defense provisions of this Section 13 shall indefinitely
survive termination of this Agreement.
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SECTION 14. This Agreement may be amended from time to time without notice to
or approval of the Shareholders by a supplemental agreement executed by the
Trust and the Bank and amending and supplementing this Agreement in the manner
mutually agreed.
SECTION 15. Either the Trust or the Custodian may give one hundred twenty
(120) days' written notice to the other of the termination of this Agreement,
such termination to take effect at the time specified in the notice. In case
such notice of termination is given either by the Trust or by the Custodian,
the Trustees of the Trust shall, by resolution duly adopted, promptly appoint a
successor Custodian (the "Successor Custodian") which Successor Custodian shall
be a bank, trust company, or a bank and trust company in good standing, with
legal capacity to accept custody of the cash and Securities of a mutual fund.
Upon receipt of written notice from the Trust of the appointment of such
Successor Custodian and upon receipt of Proper Instructions, the Custodian
shall deliver such cash and Securities as it may then be holding hereunder
directly and only to the Successor Custodian. Unless or until a Successor
Custodian has been appointed as above provided, the Custodian then acting shall
continue to act as Custodian under this Agreement.
Every Successor Custodian appointed hereunder shall execute and deliver an
appropriate written acceptance of its appointment and shall thereupon become
vested with the rights, powers, obligations and custody of its predecessor
Custodian. The Custodian ceasing to act shall nevertheless, upon request of
the Trust and the Successor Custodian and upon payment of its charges and
disbursements, execute an instrument in form approved by its counsel
transferring to the Successor Custodian all the predecessor Custodian's rights,
duties, obligations and custody.
Subject to the provisions of Section 21 hereof, in case the Custodian shall
consolidate with or merge into any other corporation, the corporation remaining
after or resulting from such consolidation or merger shall ipso facto without
the execution of filing of any papers or other documents, succeed to and be
substituted for the Custodian with like effect as though originally named as
such, provided, however, in every case that said Successor corporation
maintains the qualifications set out in Section 17(f) of the Investment Company
Act of 1940, as amended.
SECTION 16. This Agreement shall take effect when assets of the Trust are
first delivered to the Custodian.
SECTION 17. This Agreement may be executed in two or more counterparts, each
of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
-8-
<PAGE> 9
SECTION 18. A copy of the Declaration of Trust of the Trust is on file with
the Secretary of State of the Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees, officers or Shareholders
of the Trust individually, but binding only upon the assets and property of the
Trust. No Fund of the Trust shall be liable for the obligations of any other
Fund of the Trust.
SECTION 19. The Custodian shall create and maintain all records relating to
its activities and obligations under this Agreement in such manner as will meet
the obligations of the Trust under the Investment Company Act of 1940, as
amended, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder, applicable Federal and state tax laws and any other law or
administrative rules or procedures which may be applicable to the Trust.
Subject to security requirements of the Custodian applicable to its own
employees having access to similar records within the Custodian, the books and
records of the Custodian pertaining to this Agreement shall be open to
inspection and audit at any reasonable times by officers of, attorneys for, and
auditors employed by, the Trust.
SECTION 20. Any sub-custodian appointed hereunder shall be qualified under
Section 17(f) of the 1940 Act and will perform its duties in accordance with
the requirements of this Agreement.
SECTION 21. Nothing contained in this Agreement is intended to or shall
require the Custodian in any capacity hereunder to perform any functions or
duties on any holiday or other day of special observance on which the Custodian
is closed. Functions or duties normally scheduled to be performed on such days
shall be performed on, and as of, the next business day the Custodian is open.
SECTION 22. This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the Trust without the written
consent of the Custodian, or by the Custodian without the written consent of
the Trust, authorized or approved by a resolution of its Board of Trustees.
SECTION 23. All communications (other than Proper Instructions which are to be
furnished hereunder to either party, or under any amendment hereto), shall be
sent by mail to the address listed below, provided that in the event that the
Bank, in its sole discretion, shall determine that an emergency exists, the
Bank may use such other means of communications as the Bank deems advisable.
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<PAGE> 10
To the Trust: Attn: Kevin P. Robins, Esq.
SEI Corporation
680 East Swedesford Road
Wayne, PA 19087
To the Bank:
-----------------------------------
-----------------------------------
-----------------------------------
SECTION 20. This Agreement, and any amendments hereto, shall be governed,
construed and interpreted in accordance with the laws of The Commonwealth of
Pennsylvania applicable to agreements made and to be performed entirely within
such Commonwealth.
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<PAGE> 11
IN WITNESS WHEREOF, the Trust and the Custodian have caused this Agreement to
be signed by their respective officers as of the day and year first above
written.
THE ACHIEVEMENT FUNDS TRUST
By: /s/ Kathryn L. Stanton
--------------------------
Name: Kathryn L. Stanton
Title: Vice President
CORESTATES BANK, N.A.
By: /s/ Rebecca B. Ley
--------------------------
Name: Rebecca B. Ley
Title: Vice President
-11-
<PAGE> 12
SCHEDULE A
FEE SCHEDULE
1.00 basis points on the first $2.5 billion
.75 basis points on the next $2.5 billion
.50 basis points son the next $5 billion
.40 basis points on remainder
Transactions billed separately by portfolio at the now current rates. Asset
level charges billed as one invoice covering all Achievement Funds Trust
portfolios custodied at CoreStates. SEI will allocate Charges back to
individual portfolios. Transactions charges are subject to change.
-12-
<PAGE> 13
SCHEDULE B
CUSTODY SERVICES
<TABLE>
<CAPTION>
Transaction Fees
<S> <C>
$ 4.00 Per trade and maturity clearing through Depository Trust
Company.
$10.00 Per trade and maturity clearing book entry through Federal
Reserve.
$15.00 Per trade and maturity for assets requiring physical
settlement.
$10.00 Per trade and maturity clearing through Participants Trust
Company.
$ 4.00 Paydowns on mortgage-backed securities.
$ 5.50 Fed wire charge on Repo collateral in/out.
$ 5.50/7.50 Other cash wire transfers in/out.
$ 5.50 Dividend reinvestment.
$ 2.50 Fed charge for sale/return of collateral.
</TABLE>
-13-
<PAGE> 1
EXHIBIT 9(a)
TRANSFER AGENCY AGREEMENT
This Agreement made as of the 27th of December, 1994, by and between
Achievement Funds Trust (hereinafter referred to as the "Trust") a
Massachusetts business trust, having its principal office and place of business
at 680 East Swedesford Road, Wayne, Pennsylvania and Supervised Service
Company, Inc. (hereinafter referred to as the "Transfer Agent") a Delaware
corporation having its principal office and place of business at 120 South
LaSalle, Chicago, Illinois 60603.
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set forth, the
parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases shall have the
following meanings:
1. "APPROVED INSTITUTION" shall mean an entity so named in a
Certificate. From time to time, the Trust may amend a previously delivered
Certificate by delivering to the Transfer Agent a Certificate naming an
additional entity or deleting an existing one.
2. THE "BOARD OF TRUSTEES" shall mean the Board of Trustees of the
Trust.
3. "CERTIFICATE" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this
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<PAGE> 2
Agreement to be given to the Transfer Agent by the Trust which is signed by any
Officer and actually received by the Transfer Agent.
4. "CUSTODIAN" shall mean the financial institution appointed as
custodian under the terms and conditions of the Custody Agreement between the
financial institution and the Trust, or its successor(s).
5. "TRUST BUSINESS DAY" shall be deemed to be each day on which
the New York Stock Exchange, Inc. is open for trading.
6. "OFFICER" shall be deemed to be the Trust's President, Vice
President, Secretary, Treasurer, Controller, Assistant Controller, Assistant
Treasurer, Assistant Secretary, and any other person duly authorized by the
Board of Trustees to execute any Certificate, instruction, notice or other
instrument on behalf of the Trust and named in the Certificate annexed hereto
as Appendix A, as such Certificate may be amended from time to time, and any
person reasonably believed by the Transfer Agent to be such a person.
7. "OUT-OF-POCKET EXPENSES" means amounts reasonably necessary and
actually incurred by Transfer Agent in the provision of Transfer Agent services
or pursuant to this Agreement for the following purposes: postage, envelopes,
check forms, continuous forms, forms for reports and statements, stationery,
and other similar items, telephone and telegraph charges incurred in answering
inquiries from dealers or shareholders, microfilm used to record transactions
in shareholder accounts and computer tapes used for permanent storage of
records and cost of insertion of materials
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<PAGE> 3
in mailing envelopes by outside firms, any charges associated with special or
exception processing and such other expenses as are paid or incurred by
Transfer Agent at the request of the Trust. Transfer Agent may, at its option,
arrange to have various service providers submit invoices directly to the Trust
for payment of out-of-pocket expenses reimbursable hereunder.
8. "PROSPECTUS" shall mean the most recent Trust prospectus
actually received by the Transfer Agent from the Trust with respect to which
the Trust has indicated a registration statement under the Federal Securities
Act of 1933 has become effective, including the Statement of Additional
Information, incorporated by reference therein.
9 "SHARES" shall mean all or any part of each class or series of
the shares of beneficial interest of the Trust or Portfolio listed in the
Certificate as to which the Transfer Agent acts as transfer agent hereunder, as
may be amended from time to time, which are authorized and/or issued by the
Trust.
10. "TRANSFER AGENT" shall mean Supervised Service Company, Inc.,
("SSC"), as transfer agent and dividend disbursing agent under the terms and
conditions of this Agreement, its successor(s) or assign(s).
ARTICLE II
APPOINTMENT OF TRANSFER AGENT
1. The Trust hereby constitutes and appoints the Transfer Agent as
transfer agent of all the Shares of the Trust and as dividend disbursing agent
during the period of this Agreement.
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<PAGE> 4
2. The Transfer Agent hereby accepts appointment as transfer agent
and dividend disbursing agent and agrees to perform duties thereof as
hereinafter set forth.
3. In connection with such appointment, the Trust upon the request
of the Transfer Agent, shall deliver the following documents to the Transfer
Agent:
(i) A copy of the Declaration of Trust of the Trust and all
amendments thereto certified by the Secretary of the Trust;
(ii) A copy of the By-Laws of the Trust certified by the
Secretary of the Trust;
(iii) A copy of a resolution of the Board of Trustees of the
Trust certified by the Secretary of the Trust appointing the Transfer Agent and
authorizing the execution of this Transfer Agency Agreement;
(iv) A Certificate signed by the Secretary of the Trust
specifying: the number of authorized Shares, the number of such authorized
Shares issued, the number of such authorized Shares issued and currently
outstanding; the names and specimen signatures of the Officers of the Trust;
and the name and address of the legal counsel for the Trust;
(v) Copies of the Trust's Registration Statement, as
amended to date, and the most recently filed Post-Effective Amendment thereto,
filed by the Trust with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, together with any applications filed in connection therewith;
and
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<PAGE> 5
(vi) Opinion of counsel for the Trust with respect to the
validity of the authorized and outstanding Shares, whether such Shares are
fully paid and non-assessable and the status of such Shares under the
Securities Act of 1933, as amended, and any other applicable federal law or
regulation (i.e., if subject to registration, that they have been registered
and that the Registration Statement has become effective or, if exempt, the
specific grounds therefor).
ARTICLE III
ISSUANCE,
REDEMPTION AND TRANSFER OF SHARES
1. (a) The Transfer Agent acknowledges that it has received a
copy of the Trust's Prospectus, which Prospectus describes how sales and
redemption of shares of the Trust shall be made, and the Transfer Agent agrees
to accept purchase orders and redemption requests with respect to Trust shares
on each Trust Business Day in accordance with such Prospectus. The Trust agrees
to provide the Transfer Agent with sufficient advance notice to enable the
Transfer Agent to effect any changes in the procedures set forth in the
Prospectus regarding such purchase and redemption procedure; provided, however,
that in no event will such advance notice be less than 30 days.
(b) The Transfer Agent shall also accept with respect to
each Trust Business Day, at such times as are agreed upon from time to time by
the Transfer Agent and the Trust, a computer tape or electronic data
transmission consistent in all respects with the
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<PAGE> 6
Transfer Agent's record format, as amended from time to time, which is believed
by the Transfer Agent to be furnished by or on behalf of any Approved
Institution. The Transfer Agent shall not be liable for any losses or damages
to the Trust or its shareholders in the event that a computer tape or
electronic data transmission from an Approved Institution is unable to be
processed for any reason beyond the control of the Transfer Agent, or if any of
the information on such tape or transmission is found to be incorrect.
2. On each Trust Business Day, the Transfer Agent shall, as of the
time at which the Trust computes the net asset value of the Trust, issue to and
redeem from the accounts specified in a purchase order, redemption request, or
computer tape or electronic data transmission, which in accordance with the
Prospectus is effective on such Trust Business Day, the appropriate number of
full and fractional Shares based on the net asset value per Share of such Trust
specified in an advice received on such Trust Business Day from the Trust.
Notwithstanding the foregoing, if a redemption specified in a computer tape or
electronic data transmission is for a dollar value of Shares in excess of the
dollar value of Shares in the specified account, the Transfer Agent shall not
effect such redemption in whole or in part and shall within twenty-four hours
orally advise the Approved Institution which supplied such tape of the
discrepancy.
3. In connection with a reinvestment of a dividend or distribution
of Shares of the Trust, the Transfer Agent shall as of each Trust Business Day,
as specified in a Certificate or
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<PAGE> 7
resolution described in paragraph 1 of succeeding Article IV, issue Shares of
the Trust based on the net asset value per Share of such Trust specified in an
advice received from the Trust on such Trust Business Day.
4. On each Trust Business Day the Transfer Agent shall supply the
Trust with a statement specifying with respect to the immediately preceding
Trust Business Day: the total number of Shares of the Trust (including
fractional Shares) issued and outstanding at the opening of business on such
day; the total number of Shares of the Trust sold on such day, pursuant to
preceding paragraph 2 of this Article; the total number of Shares of the Trust
redeemed from Shareholders by the Transfer Agent on such day; the total number
of Shares of the Trust, if any, sold on such day pursuant to preceding
paragraph 3 of this Article, and the total number of Shares of the Trust issued
and outstanding.
5. In connection with each purchase and each redemption of Shares,
the Transfer Agent shall send such statements as are prescribed by the Federal
Securities laws applicable to transfer agents or as described in the
Prospectus.
6. As of each Trust Business Day the Transfer Agent shall furnish
the Trust with an advice setting forth the number and dollar amount of Shares
to be redeemed on such Trust Business Day in accordance with paragraph 2 of
this Article.
7. Upon receipt of a proper redemption request and moneys paid to
it by the Custodian in connection with a redemption of Shares, the Transfer
Agent shall cancel the redeemed Shares and
7
<PAGE> 8
after making appropriate deduction for any withholding of taxes required of it
by applicable law (a) in the case of a redemption of Shares pursuant to a
redemption described in preceding paragraph 1(a) of this Article, make payment
in accordance with the Trust's redemption and payment procedures described in
the Prospectus, and (b) in the case of a redemption of Shares pursuant to a
computer tape or electronic data transmission described in preceding paragraph
1(b) of this Article, make payment by directing a federal funds wire order to
the account previously designated by the Approved Institution specified in said
computer tape or electronic data transmission.
8. The Transfer Agent shall not be required to issue any Shares
after it has received from an Officer of the Trust or from an appropriate
federal or state authority written notification that the sale of Shares has
been suspended or discontinued, and the Transfer Agent shall be entitled to
rely upon such written notification.
9. Upon the issuance of any Shares in accordance with this
Agreement the Transfer Agent shall not be responsible for the payment of any
original issue or other taxes required to be paid by the Trust in connection
with such issuance of any Shares.
10. The Transfer Agent shall accept a computer tape or electronic
data transmission consistent with the Transfer Agent's record format, as
amended from time to time, which is reasonably believed by the Transfer Agent
to be furnished by or on behalf of any Approved Institution and is represented
to be instructions with
8
<PAGE> 9
respect to the transfer of Shares from one account of such Approved Institution
to another such account, and shall effect the transfers specified in said
computer tape or electronic data transmission. The Transfer Agent shall not be
liable for any losses to the Trust or its shareholders in the event that a
computer tape or electronic data transmission from an Approved Institution is
unable to be processed for any reason beyond the control of the Transfer Agent,
or if any of the information on such tape or transmission is found to be
incorrect.
11.(a) Except as otherwise provided in sub-paragraph (b) of this
paragraph and in paragraph 13 of this Article, Shares will be transferred or
redeemed upon presentation to the Transfer Agent of instructions properly
endorsed for transfer or redemption, accompanied by such documents as the
Transfer Agent deems necessary to evidence the authority of the person making
such transfer or redemption, and bearing satisfactory evidence of the payment
of stock transfer taxes. In the case of estates where no administration is
contemplated, the Transfer Agent may, without further approval of the Trust,
transfer or redeem Shares registered in the name of a decedent where the
current market value of the Shares being transferred does not exceed such
amount as may from time to time be prescribed by various states. The Transfer
Agent reserves the right to refuse to transfer or redeem Shares until it is
satisfied that the instructions are valid and genuine, and for that purpose it
will require, unless otherwise instructed by an authorized officer of the
Trust, a guarantee of signature by an
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<PAGE> 10
"Eligible Guarantor Institution" as that term is defined by SEC Rule 17Ad-15.
The Transfer Agent also reserves the right to refuse to transfer or redeem
Shares until it is satisfied that the requested transfer or redemption is
legally authorized, and it shall incur no liability to the Trust for its
refusal, in good faith, to make transfers or redemptions which the Transfer
Agent, in its reasonable judgment, deems improper or unauthorized, or until it
is satisfied that there is no basis to any claims adverse to such transfer or
redemption. The Transfer Agent may, in effecting transfers and redemptions of
Shares, rely upon those provisions of the Uniform Act for the Simplification of
Fiduciary Security Transfers or the Uniform Commercial Code, as the same may be
amended from time to time, applicable to the transfer of securities, and the
Trust shall indemnify the Transfer Agent for any act done or omitted by it in
good faith in reliance upon such laws. In no event, however, will the Trust
indemnify the Transfer Agent for any act done by it as a result of willful
misfeasance, bad faith, negligence or reckless disregard of its duties.
(b) Notwithstanding the foregoing or any other provision contained
in this Agreement to the contrary, the Transfer Agent shall be fully protected
by the Trust in not requiring any instruments, documents, assurances,
endorsements or guarantees, including, without limitation, any signature
guarantees, in connection with a redemption, or transfer, of Shares whenever
the Transfer Agent reasonably believes that requiring the same would be
inconsistent with the transfer and redemption procedures as
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<PAGE> 11
described in the Prospectus.
12. Notwithstanding any provision contained in this agreement to
the contrary, the Transfer Agent shall not be required, as a condition to any
transfer of Shares pursuant to paragraph 11 of this Article or any redemption
of any Shares pursuant to a computer tape or electronic data transmission
described in this Agreement, any documents, including, without limitation, any
documents of the kind described in sub-paragraph (a) of paragraph 11 of this
Article, to evidence the authority of the person requesting the transfer or
redemption and/or the payment of any stock transfer taxes, and shall be fully
protected in acting in accordance with the applicable provisions of this
Article.
13. (a) As used in this Agreement, the terms "computer tape" or
electronic data transmission and "computer tape believed by the Transfer Agent
to be furnished by an Approved Institution," shall include any tapes generated
by the Transfer Agent to reflect information believed by the Transfer Agent to
have been input by an Approved Institution, via a remote terminal or other
similar link, into a data processing, storage, or collection system, or similar
system (the "System"), located on the Transfer Agent's premises. For purposes
of paragraph 1 of this Article, such a computer tape or electronic data
transmission shall be deemed to have been furnished at such times as are agreed
upon from time to time by the Transfer Agent and Trust only if the information
reflected thereon was input to the System at such times as are agreed upon from
time to time by the Transfer Agent and the Trust.
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<PAGE> 12
(b) Nothing contained in this Agreement shall constitute any
agreement or representation by the Transfer Agent to permit, or to agree to
permit, any Approved Institution to input information into a System.
(c) The Transfer Agent reserves the right to approve, in advance,
any Approved Institution, such approval not to be unreasonably withheld. The
Transfer Agent also reserves the right to terminate any and all automated data
communications, at its discretion, upon a reasonable attempt to notify the
Trust when in the opinion of the Transfer Agent continuation of such
communications would jeopardize the accuracy and/or integrity of the Trust's
records on the System.
ARTICLE IV
DIVIDENDS AND DISTRIBUTIONS
1. The Trust shall furnish to the Transfer Agent a copy of a
resolution of its Board of Trustees, certified by the Secretary or any
Assistant Secretary, either (i) setting forth the date of the declaration of a
dividend or distribution, the date of accrual or payment, as the case may be,
thereof, the record date as of which Shareholders entitled to payment, or
accrual, as the case may be, shall be determined, the amount per Share of such
dividend or distribution, the payment date on which all previously accrued and
unpaid dividends are to be paid, and the total amount, if any, payable to the
Transfer Agent on such payment date, or (ii) authorizing the declaration of
dividends and distributions on a daily or other periodic basis and authorizing
the Transfer Agent to
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<PAGE> 13
rely on a Certificate setting forth the information described in subsection (i)
of this paragraph.
2. Upon the mail date specified in such Certificate or resolution,
as the case may be, the Trust shall, in the case of a cash dividend or
distribution, cause the Custodian to deposit in an account in the name of the
Transfer Agent on behalf of the Trust an amount of cash, if any, sufficient for
the Transfer Agent to make the payment, as of the mail date, specified in such
Certificate or resolution, as the case may be, to the Shareholders who were of
record on the record date. The Transfer Agent will, upon receipt of any such
cash, make payment of such cash dividends or distributions to the shareholders
of record as of the record date by: (i) mailing a check, payable to the
registered shareholder, to the address of record or dividend mailing address,
or (ii) wiring such amounts to the accounts previously designated by an
Approved Institution, as the case may be. The Transfer Agent shall not be
liable for any improper payments made in good faith and without negligence, in
accordance with a Certificate or resolution described in the preceding
paragraph. If the Transfer Agent shall not receive from the Custodian
sufficient cash to make payments of any cash dividend or distribution to all
shareholders of the Trust as of the record date, the Transfer Agent shall, upon
notifying the Trust, withhold payment to all shareholders of record as of the
record date until sufficient cash is provided to the Transfer Agent.
3. It is understood that the Transfer Agent shall in no way
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<PAGE> 14
be responsible for the determination of the rate or form of dividends or
capital gain distributions due to the shareholders. It is expressly agreed and
understood that the Transfer Agent is not liable for any loss as a result of
processing a distribution based on information provided in the Certificate that
is incorrect. The Trust agrees to pay the Transfer Agent for any and all costs,
both direct and out-of-pocket expenses, incurred in such corrective work as
necessary to remedy such error.
4. It is understood that the Transfer Agent shall file such
appropriate information returns concerning the payment of dividend and capital
gain distributions with the proper federal, state and local authorities as are
required by law to be filed by the Trust but shall in no way be responsible for
the collection or withholding of taxes due on such dividends or distributions
due to shareholders, except and only to the extent, required by applicable law.
ARTICLE V
CONCERNING THE TRUST
1. The Trust represents to the Transfer Agent that:
(a) It is a business trust duly organized and existing
under the laws of the Commonwealth of Massachusetts.
(b) It is empowered under applicable laws and by its
Declaration of Trust and By-Laws to enter into and perform this Agreement.
(c) All requisite proceedings have been taken to
authorize it to enter into and perform this Agreement.
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<PAGE> 15
(d) It is an investment company registered under the
Investment Company Act of 1940, as amended.
(e) A registration statement under the Securities Act of
1933, as amended, with respect to the Shares is effective. The Trust shall
notify the Transfer Agent if such registration statement or any state
securities registrations have been terminated or a stop order has been entered
with respect to the Shares.
2. Each copy of the Declaration of Trust of the Trust and copies
of all amendments thereto shall be certified by the Secretary of State (or
other appropriate official) of the state of organization, and if such
Declaration of Trust and/or amendments are required by law also to be filed
with a county or other officer or official body, a certificate of such filing
shall be filed with a certified copy submitted to the Transfer Agent. Each copy
of the By-Laws and copies of all amendments thereto, and copies of resolutions
of the Board of Trustees of the Trust, shall be certified by the Secretary of
the Trust under seal.
3. The Trust shall promptly deliver to the Transfer Agent written
notice of any change in the Officers authorized to sign Share Certificates,
notifications or requests, together with a specimen signature of each new
Officer.
4. It shall be the sole responsibility of the Trust to deliver to
the Transfer Agent the Trust's currently effective Prospectus and, for purposes
of this Agreement, the Transfer Agent shall not be deemed to have notice of any
information contained in
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<PAGE> 16
such Prospectus until a reasonable time after it is actually received by the
Transfer Agent.
ARTICLE VI
CONCERNING THE TRANSFER AGENT
1. The Transfer Agent represents and warrants to the Trust that:
(a) It is a corporation duly organized and existing under
the laws of the State of Delaware.
(b) It is empowered under applicable law and by its Charter
and By-laws to enter into and perform this Agreement.
(c) All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
(d) It is duly registered as a transfer agent under Section
17A of the Securities Exchange Act of 1934, as amended.
2. The Transfer Agent shall not be liable and shall be indemnified
in acting upon any computer tape or electronic data transmission, writing or
document reasonably believed by it to be genuine and to have been signed or
made by an Officer of the Trust or person designated by the Trust and shall not
be held to have any notice of any change of authority of any person until
receipt of written notice thereof from the Trust or such person.
3. The Transfer Agent upon notice to the Trust may establish such
additional procedures, rules and regulations governing the transfer or
registration of Shares as it may deem advisable and consistent with such rules
and regulations generally adopted by mutual fund transfer agents.
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<PAGE> 17
4. The Transfer Agent shall keep such records as are specified in
Schedule II hereto in the form and manner, and for such period, as it may deem
advisable and is agreeable to the Trust but not inconsistent with the rules and
regulations of appropriate government authorities, in particular Rules 31a-2
and 31a-3 under the Investment Company Act of 1940, as amended. The Transfer
Agent acknowledges that such records are the property of the Trust. The
Transfer Agent may deliver to the Trust from time to time at its discretion,
for safekeeping or disposition by the Trust in accordance with law, such
records, papers, documents accumulated in the execution of its duties as such
Transfer Agent, as the Transfer Agent may deem expedient, other than those
which the Transfer Agent is itself required to maintain pursuant to applicable
laws and regulations. The Trust shall assume all responsibility for any failure
thereafter to produce any record, paper, or other document so returned, if and
when required. The records specified in Schedule II hereto maintained by the
Transfer Agent pursuant to this paragraph 4, which have not been previously
delivered to the Trust pursuant to the foregoing provisions of this paragraph
4, shall be considered to be the property of the Trust, shall be made available
upon request for inspection by the officers, employees, and auditors of the
Trust, and records shall be delivered to the Trust upon request and in any
event upon the date of termination of this Agreement, as specified in Article
VII of this Agreement, in the form and manner kept by the Transfer Agent on
such date of termination or such earlier date as may be requested by the Trust.
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<PAGE> 18
5. The Transfer Agent shall not be liable for any loss or damage,
including reasonable counsel fees, resulting from its actions or omissions to
act or otherwise, except for any loss or damage arising out of its bad faith,
negligence, willful misfeasance or reckless disregard of its duties under
this agreement.
6. (a) The Trust shall indemnify and exonerate, save and hold
harmless the Transfer Agent from and against any and all claims (whether with
or without basis in fact or law), demands, expenses (including reasonable
attorney's fees) and liabilities of any and every nature which the Transfer
Agent may sustain or incur or which may be asserted against the Transfer Agent
by any person by reason of or as a result of any action taken or omitted to be
taken by any prior transfer agent of the Trust or as a result of any action
taken or omitted to be taken by the Transfer Agent in good faith and without
negligence or willful misconduct or in reliance upon (i) any provision of this
Agreement; (ii) the Prospectus; (iii) any instruction or order including,
without limitation, any computer tape or electronic data transmission
reasonably believed by the Transfer Agent to have been received from an
Approved Institution; (iv) any instrument or order reasonably believed by it to
be genuine and to be signed, countersigned or executed by any duly authorized
Officer of the Trust; (v) any Certificate or other instructions of an Officer;
or (vi) any opinion of legal counsel for the Trust. The Trust shall indemnify
and exonerate, save and hold the Transfer Agent harmless
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<PAGE> 19
from and against any and all claims (whether with or without basis in fact or
law), demands, expenses (including reasonable attorney's fees) and liabilities
of any and every nature which the Transfer Agent may sustain or incur or which
may be asserted against the Transfer Agent by any person by reason of or as a
result of any action taken or omitted to be taken by the Transfer Agent in good
faith and without negligence in connection with its appointment or in reliance
upon any law, act, regulation or any interpretation of the same even though
such law, act or regulation may thereafter have been altered, changed, amended
or repealed.
(b) The Transfer Agent shall not settle any claim, demand,
expense or liability to which it may seek indemnity pursuant to paragraph 6(a)
above (each, an "Indemnifiable Claim") without the express written consent of an
Officer of the Trust. The Transfer Agent shall notify the Trust within 15 days
of receipt of notification of an Indemnifiable Claim, provided that the failure
by the Transfer Agent to furnish such notification shall not impair its right
to seek indemnification from the Trust unless the Trust is unable to adequately
defend the Indemnifiable Claim as a result of such failure, and further
provided, that if as a result of the Transfer Agent's failure to provide the
Trust with timely notice of the institution of litigation a judgment by default
is entered, prior to seeking indemnification from the Trust the Transfer Agent,
at its own cost and expense, shall open such judgment. The Trust shall have the
right to defend any Indemnifiable Claim at its own expense, provided that such
defense
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shall be conducted by counsel selected by the Trust and reasonably acceptable
to the Transfer Agent. The Transfer Agent may join in such defense at its own
expense, but to the extent that it shall so desire the Trust shall direct such
defense. The Trust shall not settle any Indemnifiable Claim without the express
written consent of the Transfer Agent if the Transfer Agent determines that
such settlement would have a material adverse effect on the Transfer Agent
beyond the scope of this Agreement. In such event, each of the Trust and the
Transfer Agent shall be responsible for their own defense at their own cost and
expense, and such claim shall not be deemed an Indemnifiable Claim hereunder.
If the Trust shall fail or refuse to defend an Indemnifiable Claim, the
Transfer Agent may provide its own defense at the cost and expense of the
Trust. Anything in this Agreement to the contrary notwithstanding, the Trust
shall not indemnify the Transfer Agent against any liability or expense arising
out of the Transfer Agent's willful misfeasance, bad faith, negligence or
reckless disregard of its duties and obligations under this Agreement. The
Transfer Agent shall indemnify and hold the Trust harmless from and against any
and all losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to any action or failure or omission
to act by the Transfer Agent as a result of the Transfer Agent's lack of good
faith, negligence or willful misconduct.
7. The Transfer Agent shall not be liable to the Trust with respect to
any redemption draft on which the signature of the
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<PAGE> 21
drawer is forged and as to which the Trust's Custodian has advised the Transfer
Agent to honor the redemption; nor shall Transfer Agent be liable for any
material alteration to or absence or forgery of any endorsement, it being
understood that the Transfer Agent's sole responsibility with respect to
inspecting redemption drafts is to use reasonable care to verify the drawer's
signature against signatures on file.
8. There shall be excluded from the consideration of whether the
Transfer Agent has been negligent or has breached this Agreement, any period of
time, and only such period of time, during which the Transfer Agent's
performance is materially affected, by reason of circumstances beyond its
reasonable control (collectively, "Causes"), including, without limitation
(except as provided below), (a) mechanical breakdowns of equipment (including
any alternative power supply and operating systems software), flood or
catastrophe, acts of God, failures of transportation, communication or power
supply, strikes, lockouts, work stoppages or other similar circumstances.
9. At any time the Transfer Agent may apply to an Officer of the
Trust for written instructions with respect to any matter arising in connection
with the Transfer Agent's duties and obligations under this Agreement, and the
Transfer Agent shall not be liable for any action taken or permitted by it in
good faith in accordance with such written instructions. Such application by
the Transfer Agent for written instructions from an Officer of the Trust shall
set forth in writing any action proposed to be taken or
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<PAGE> 22
omitted by the Transfer Agent with respect to its duties or obligations under
this Agreement and the date on and/or after which such action shall be taken.
The Transfer Agent shall not be liable for any action taken or omitted in
accordance with a proposal included in any such application on or after the
date specified therein unless, prior to taking or omitting any such action, the
Transfer Agent has received written instructions in response to such
application specifying the action to be taken or omitted. The Transfer Agent
may consult counsel of the Trust, or upon notice to the Trust, its own counsel,
at the expense of the Trust and shall be fully protected with respect to
anything done or omitted by it in good faith in accordance with the advice or
opinion of counsel to the Trust or its own counsel.
10. In case of any requests or demands for the inspection of the
shareholder records of the Trust, the Transfer Agent will endeavor to notify
the Trust promptly and to secure instructions from an Officer as to such
inspection. The Transfer Agent reserves the right, however, to exhibit the
shareholder records to any person whenever it receives an opinion from its
counsel that there is a reasonable likelihood that the Transfer Agent will be
held liable for the failure to exhibit the shareholder records to such person;
provided, however, that in connection with any such disclosure the Transfer
Agent shall promptly notify the Trust that such disclosure has been made or is
to be made.
11. At the request of an Officer of the Trust the Transfer Agent
will address and mail such appropriate notices to
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<PAGE> 23
shareholders as the Trust may direct.
12. Notwithstanding any of the foregoing provisions of this
Agreement, the Transfer Agent shall be under no duty or obligation to inquire
into, and shall not be liable for:
(a) The legality of the issue or sale of any Shares, the
sufficiency of the amount to be received therefor, or the authority of the
Approved Institution or of the Trust, as the case may be, to request such sale
or issuance;
(b) The legality of a transfer of Shares, or of a
redemption of any Shares, the propriety of the amount to be paid therefor, or
the authority of the Approved Institution or of the Trust, as the case may be,
to request such transfer or redemption;
(c) The legality of the declaration of any dividend by the
Trust, or the legality of the issue of any Shares in payment of any stock
dividend; or
(d) The legality of any recapitalization or readjustment
of Shares.
13. The Transfer Agent shall be entitled to receive and the Trust
hereby agrees to pay to the Transfer Agent for its performance hereunder,
including its performance of the duties and functions set forth in Schedule I
hereto, (i) its reasonable out-of-pocket expenses (including reasonable legal
expenses and attorney's fees) incurred in connection with its performance
hereunder and (ii) such compensation as may be agreed upon in writing from time
to time by the Transfer Agent and the Trust.
14. The Transfer Agent shall have no duties or
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<PAGE> 24
responsibilities whatsoever except such duties and responsibilities as are
specifically set forth in this Agreement, and no covenant or obligation shall
be implied in this Agreement against the Transfer Agent.
15. Purchase and Prices of Services.
(a) The Trust will compensate the Transfer Agent for, and
Transfer Agent will provide, beginning on the execution date of this Agreement
and continuing until the termination of this Agreement as provided hereinafter,
the Services set forth in Schedule I.
(b) The current unit prices for the Services are set forth
in Schedule III (the "Schedule III Fee Schedule"). Once in each calendar year,
the Transfer Agent may elect to raise the Schedule III Fees upon ninety (90)
days prior notice to the Trust. Notwithstanding the annual right to raise the
Schedule III Fees, the Transfer Agent may increase prices due to changes in
legal or regulatory requirements subject to the approval of the Trust, which
approval shall not be unreasonably withheld.
16. Billing and Payment.
(a) The Transfer Agent shall bill the Trust as follows: (i)
monthly in arrears for Accounts maintained and Out-of-Pocket Expenses; and (ii)
monthly in advance for estimated postage expenses to be incurred by the
Transfer Agent for the following month. Documentation to support reconciliation
of actual postage expenses will be provided to the Trust monthly. The Transfer
Agent may from time to time request the Trust to make additional advances
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<PAGE> 25
when appropriate.
(b) The Trust shall pay the Transfer Agent in immediately
available funds at United Missouri Bank in Kansas City, Missouri within thirty
(30) days of the date of the bill. Any amounts due under this Agreement which
are not paid within said thirty (30) day period shall bear interest at the rate
of one and one half percent (1 1/2%) per month from such date until paid in
full.
ARTICLE VII
TERMINATION
Either of the parties hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than ninety (90) days after the date of
receipt of such notice. In the event such notice is given by the Trust, it
shall be accompanied by a copy of a resolution of the Board of Trustees of the
Trust, certified by the Secretary or any Assistant Secretary, electing to
terminate this Agreement and designating the successor transfer agent or
transfer agents. In the event such notice is given by the Transfer Agent, the
Trust shall on or before the termination date, deliver to the Transfer Agent a
copy of a resolution of its Board of Trustees certified by the Secretary or any
Assistant Secretary designating a successor transfer agent or transfer agents.
In the absence of such designation by the Trust, the Trust shall upon the date
specified in the notice of termination of this Agreement and delivery of the
records maintained hereunder, be deemed to be its
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<PAGE> 26
own transfer agent and the Transfer Agent shall thereby be relieved of all
duties and responsibilities pursuant to this Agreement.
In the event this Agreement is terminated as provided herein, the
Transfer Agent shall deliver the records of the Trust on electromagnetic media
to the Trust or its successor transfer agent. The Trust shall be responsible to
the Transfer Agent for the reasonable costs and expenses associated with the
preparation and delivery of such media. In the event the Agreement is
terminated, the Transfer Agent also shall cooperate in facilitating the
transfer of the Services provided under this Agreement to the Trust or a
successor transfer agent.
ARTICLE VIII
MISCELLANEOUS
1. The Trust agrees that prior to effecting any change in the
Prospectus which would increase or alter the duties and obligations of the
Transfer Agent hereunder, it shall advise the Transfer Agent of such proposed
change at least 30 days prior to the intended date of the same, and shall
proceed with such change only if it shall have received the written consent of
the Transfer Agent thereto, which consent shall not be unreasonably withheld.
2. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Trust shall be sufficiently given
if addressed to the Trust and sent by first class mail, postage paid or
delivered to it at its office at the address first above written, or at such
other place as the Trust may from time to time designate in writing.
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<PAGE> 27
3. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Transfer Agent shall be
sufficiently given if addressed to the Transfer Agent and mailed or delivered
to the Secretary at 120 South LaSalle, Chicago, IL 60603, with a copy to the
President at 811 Main Street, Kansas City, MO 64105, or at such other place as
the Transfer Agent may from time to time designate in writing.
4. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the formality of
this Agreement.
5. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns. This Agreement
shall not be assignable by either party without the written consent of the
other party, except that the Transfer Agent may assign this Agreement to a
corporate affiliate with advance written notice to and consent by the Trust,
which consent shall not be unreasonably withheld.
6. This Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois.
7. This Agreement may be executed in any number of counterparts
each of which shall be deemed to be an original; but such counterparts shall,
together, constitute only one instrument.
8. The provisions of this Agreement are intended to benefit only
the Transfer Agent and the Trust, and no rights shall be granted to any other
person by virtue of this Agreement.
9. (a) The Transfer Agent will endeavor to assist in
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<PAGE> 28
resolving shareholder inquiries and errors relating to the period during which
prior transfer agents acted as such for the Trust. Any such inquiries or errors
which cannot be expediently resolved by the Transfer Agent will be referred to
the Trust.
(b) The Transfer Agent shall only be responsible for the
safekeeping and maintenance of transfer agency records and correspondence of
the Trust created or produced prior to the time of conversion which are under
its control and acknowledged in a writing to the Trust to be in its possession.
Any expenses or liabilities incurred by the Transfer Agent as a result of
shareholder inquiries, regulatory compliance or audits related to such records
and not caused as a result of Transfer Agent's bad faith, willful malfeasance
or negligence shall be the responsibility of the Trust.
10. A copy of the Declaration of Trust of the Trust is on file with
the Secretary of State of the Commonwealth of Massachusetts, and notice is
hereby given that this Agreement is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
Agreement are not binding on any of the Trustees, officers or unitholders of
the Trust individually but are binding only on the assets and property of the
Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officer,
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<PAGE> 29
thereunto duly authorized and their respective corporate seals to be hereunto
affixed, as the day and year first above written.
SUPERVISED SERVICE COMPANY, INC. ACHIEVEMENT FUNDS TRUST
By: /s/ THOMAS M. BLODGETT By: /s/ KATHRYN STENTON
---------------------- ----------------------
(Signature) (Signature)
Thomas M. Blodgett Kathryn Stenton
---------------------- ----------------------
(Name) (Name)
Senior Vice President Vice President
---------------------- ----------------------
(Title) (Title)
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<PAGE> 30
SCHEDULE I
DESCRIPTION OF SERVICES
In consideration of the fees to be paid in such manner and at such
times as Trust and Transfer Agent may agree, Transfer Agent will provide the
services set forth below:
Examine and Process New Accounts, Subsequent Payments, Liquidations,
Exchanges, Telephone Transactions, Check Redemptions, Automatic Withdrawals,
Wire Order Trades, Dividends, Dividend Statements, Dealer Statements.
DAILY ACTIVITY
Maintain the following shareholder information in such a manner as the
Transfer Agent shall determine:
Name and Address, including Zip Code
Balance of Shares
Number of Shares, issuance date of each Share outstanding and
cancellation date of each share no longer outstanding, if issued
Balance of dollars available for redemption
Dividend code (daily accrual, monthly reinvest, monthly cash or
quarterly cash)
Type of account code
Establishment date indicating the date an account was opened, carrying
forward pre-conversion data as available
Original establishment date for accounts opened by exchange
W-9 withholding status and periodic reporting
State of residence code
Social Security or taxpayer identification number, and indication of
certification
Historical transactions on the account for the most recent 18 months,
or other period as mutually agreed to from time-to-time
Indication as to whether phone transactions can be accepted for this
account. Beneficial owner code, i.e. male, female, joint tenant, etc.
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<PAGE> 31
An alternate or "secondary" account number issued by a dealer (or bank,
etc.) to a customer for use, inquiry and transaction input by "remote
accessors"
FUNCTIONS
Answer investor and dealer telephone and/or written inquiries,
except those concerning Trust policy, or requests for
investment advice which will be referred to the Trust, or those
which the Trust chooses to answer
Examine and process transfers of shares insuring that all
transfer requirements and legal documents have been supplied
Process and confirm address changes
Process standard account record changes as required, i.e. Dividend
Codes, etc.
Microfilm source documents for transactions, such as account
applications and correspondence
Perform backup withholding for those accounts which federal
government regulations indicate is necessary
Perform withholdings on liquidations, if applicable, for
employee benefit plans. Prepare and mail 5498s and 1099R's
Solicit missing taxpayer identification numbers
Provide remote access inquiry to Trust records via Trust
supplied hardware (Trust responsible for connection line and monthly
fee)
REPORTS PROVIDED
Daily Journals Reflecting all shares and
dollar activity for the
previous day
Blue Sky Report Supply information monthly
for Trust's preparation of
Blue Sky Reporting
N-SAR Report Supply monthly correspondence,
redemption and liquidation
information for use in Trust's
N-SAR Report
Additionally, monthly average daily balance reports will be
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<PAGE> 32
provided at the Trust's request to the Trust at no charge.
Prepare and mail copies of summary statements to dealers and
investment advisers
Generate and mail confirmation statements for financial
transactions
DIVIDEND ACTIVITY
Reinvest or pay in cash including reinvesting in other funds
within the fund group serviced by the Transfer Agent as described in
each Trust Prospectus
Distribute capital gains simultaneously with income dividends
DEALER SERVICES
Prepare and mail confirmation statements to dealers daily
Prepare and mail copies of statements to dealers, same frequency as
investor statements
ANNUAL MEETINGS
Assist Trust in obtaining a qualified service to: address and
mail proxies and related material, tabulate returned proxies and supply
daily reports when sufficient proxies have been received
Prepare certified list of stockholders, hard copy or microform
PERIODIC ACTIVITIES
Mail transaction confirmation statements daily to investors
Address and mail four (4) periodic financial reports (material
must be adaptable to Transfer Agent's mechanical equipment as
reasonably specified by the Transfer Agent)
Mail periodic statement to investors
Compute, prepare and furnish all necessary reports to
Governmental authorities: Forms 1099R, 1099DIV, 1099B, 1042 and 1042S
Enclose various marketing material as designated by the Trust
in statement mailings, i.e. monthly and quarterly statements (material
must be adaptable to mechanical equipment as reasonably specified by
the Transfer Agent)
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<PAGE> 33
SCHEDULE II
RECORDS MAINTAINED BY TRANSFER AGENT
- - Account applications
- - Checks including check registers, reconciliation records, any
adjustment records and tax withholding documentation
- - Liquidation, redemption, withdrawal and transfer requests
including stock powers, signature guarantees and any
supporting documentation
33
<PAGE> 1
EXHIBIT 9(b)
[SUPERVISED SERVICE COMPANY, INC. LETTERHEAD]
April 4, 1995
VIA AIRBORNE EXPRESS
The Achievement Funds Trust
Attn: Mr. David G. Lee
680 E. Swedesford Road
Wayne, PA 19087-1658
Dear Mr. Lee:
As we have advised you, Supervised Service Company, Inc. (SSC) has entered an
agreement to sell substantially all of its assets, including its mutual fund
transfer agency business to DST Systems, Inc. (DST). DST has agreed to assume
and perform all of SSC's obligations under the Transfer Agency Agreement
between The Achievement Funds Trust and SSC dated December 27, 1994, (the
"Agreement"). All of the terms and conditions of your agreement, including the
fee schedule, will remain in effect in accordance with the terms of the
Agreement.
We believe this transaction will ensure continued excellent service to you and
your shareholders. Please indicate your consent to the assignment of your
agreement to DST by executing and returning the enclosed copy of this letter in
the return Airborne Express envelope provided.
We would appreciate your prompt response. If you have questions, please contact
either of us at the numbers indicated below.
Supervised Service Company, Inc. DST Systems, Inc.
By /s/ ROBERT W. CIARLELLI By /s/ THOMAS A. MCCULLOUGH
----------------------- ------------------------
Robert W. Ciarlelli Thomas A. McCullough
(816) 292-6206 (816) 435-8656
The ACHIEVEMENT FUNDS TRUST hereby consents to the assignment of the Agreement
to DST Systems, Inc. as described above
by /s/ [SIG]
--------------------------
Title
-----------------------
Date
------------------------
* This consent is subject
to ratification by the
Board of Trustees of the
Trust.
<PAGE> 1
Exhibit 9(c)
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this 27th day of December, 1994, by and
between THE ACHIEVEMENT FUNDS TRUST. a Massachusetts business trust (the
"Trust"), and SEI Financial Management Corporation (the "Administrator"), a
Delaware corporation.
WHEREAS, the Trust is an open-end diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), consisting of several series of shares of Common Stock; and
WHEREAS, the Trust desires the Administrator to provide, and the
Administrator is willing to provide, management and administrative services to
such portfolios of the Trust as the Trust and the Administrator may agree on
("Portfolios") and as listed on the schedules attached hereto ("Schedules") and
made a part of this Agreement, on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Trust and the Administrator hereby agree as follows:
ARTICLE 1. Retention of the Administrator. The Trust hereby retains
the Administrator to act as the administrator of the Portfolios and to furnish
the Portfolios with the management and administrative services as set forth in
Article 2 below. The Administrator hereby accepts such employment to perform the
duties set forth below.
The Administrator shall, for all purposes herein, be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Trust in any way and shall
not be deemed an agent of the Trust.
ARTICLE 2. Administrative and Accounting Services. The Administrator
shall perform or supervise the performance by others of other administrative
services in connection with the operations of the Portfolios, and, on behalf of
the Trust, will investigate, assist in the selection of and conduct relations
with custodians, depositories, accountants, legal counsel, underwriters,
brokers and dealers, corporate fiduciaries, insurers, banks and persons in any
other capacity deemed to be necessary or desirable for the Portfolios'
operations. The Administrator shall provide the Trustees of the Trust with such
reports regarding investment performance and compliance with investment
policies and applicable laws, rules and regulations as they may reasonably
request but shall have no responsibility for supervising the performance by any
investment adviser or sub-adviser of its responsibilities.
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<PAGE> 2
The Administrator shall provide the Trust with administrative
services, regulatory reporting, fund accounting and related portfolio
accounting services, all necessary office space, equipment, personnel,
compensation and facilities (including facilities for Shareholders' and
Trustees' meetings) for handling the affairs of the Portfolios and such other
services as the Trustees may, from time to time, reasonably request and the
Administrator shall, from time to time, reasonably determine to be necessary to
perform its obligations under this Agreement. In addition, at the request of
the Trust's Board of Trustees (the "Trustees"), the Administrator shall make
reports to the Trustees concerning the performance of its obligations
hereunder.
Without limiting the generality of the foregoing, the Administrator shall:
(a) calculate contractual Trust expenses and control all
disbursements for the Trust, and as appropriate compute the
Trust's yields, total return, expense ratios, portfolio
turnover rate and, if required, portfolio average
dollar-weighed maturity;
(b) assist Trust counsel with the preparation of prospectuses,
statements of additional information, registration
statements, proxy materials;
(c) prepare such reports, applications and documents (including
reports regarding the sale and redemption of Shares as may be
required in order to comply with Federal and state securities
law) as may be necessary or desirable to register the Trust's
shares with state securities authorities, monitor sale of
Trust shares for compliance with state securities laws. and
file with the appropriate state securities authorities the
registration statements and reports for the Trust and the
Trust's shares and all amendments thereto, as may be necessary
or convenient to register and keep effective the Trust and the
Trust's shares with state securities authorities to enable the
Trust to make a continuous offering of its shares;
(d) develop and prepare communications to shareholders, including
the annual report to shareholders, coordinate mailing
prospectuses, notices, proxy statements, proxies and other
reports to Trust shareholders, and supervise and facilitate
the solicitation of proxies solicited by the Trust for all
shareholder meetings, including tabulation process for
shareholder meetings;
(e) coordinate with Trust counsel the preparation and negotiation
of, and administer, contracts on behalf of the Trust with,
among others, the Trust's investment adviser, distributor,
custodian, and transfer agent;
(f) maintain the Trust's general ledger and prepare the Trust's
financial
2
<PAGE> 3
statements, including expense accruals and payments, determine
the net asset value of the Trust's assets and of the Trust's
shares, and supervise the Trust's transfer agent with respect
to the payment of dividends and other distributions to
shareholders;
(g) calculate performance data of the Trust and its portfolios for
dissemination to information services covering the investment
company industry;
(h) coordinate and supervise the preparation and filing of the
Trust's tax returns;
(i) examine and review the operations and performance of the
various organizations providing services to the Trust or any
Portfolio of the Trust, including, without limitation, the
Trust's investment adviser, distributor, custodian, transfer
agent, outside legal counsel and independent public
accountants, and at the request of the Trustees, report to the
Trustees on the performance of organizations;
(j) assist with the layout and printing of publicly disseminated
prospectuses and assist with and coordinate layout and
printing of the Trust's semi-annual and annual reports to
shareholders;
(k) provide internal legal and administrative services as
requested by the Trust from time to time;
(l) assist with the design, development, and operation of the
Trust, including new portfolio and class investment
objectives, policies and structure;
(m) provide individuals acceptable to the Trustees for nomination,
appointment, or election as officers of the Trust, who will be
responsible for the management of certain of the Trust's
affairs as determined by the Trustees;
(n) advise the Trust and its Trustees on matters concerning the
Trust and its affairs;
(o) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the Trust
in accordance with the requirements of Rules 17g-1 and
17d-1(7) under the 1940 Act as such bonds and policies are
approved by the Trust's Board of Trustees;
(p) monitor and advise the Trust and its Portfolios on their
registered
3
<PAGE> 4
investment company status under the Internal Revenue Code of
1986, as amended;
(q) perform all administrative services and functions of the Trust
and each Portfolio to the extent administrative services and
functions are not provided to the Trust or such Portfolio
pursuant to the Trust's or such Portfolio's investment
advisory agreement, distribution agreement, custodian
agreement and transfer agent agreement;
(r) furnish advice and recommendations with respect to other
aspects of the business and affairs of the Portfolios as the
Trust and the Administrator shall determine desirable; and
(s) prepare and file with the SEC the semi-annual report for the
Trust on Form N-SAR and all required notices pursuant to Rule
24f-2.
4
<PAGE> 5
Also, the Administrator will perform other services for the Trust as agreed
from time to time, including, but not limited to performing internal audit
examinations; mailing the annual reports of the Portfolios; preparing an annual
list of shareholders; and mailing notices of shareholders' meetings, proxies
and proxy statements, for all of which the Trust will pay the Administrator's
out-of-pocket expenses.
ARTICLE 3. Allocation of Charges and Expenses.
(A) The Administrator. The Administrator shall furnish at its own
expense the executive, supervisory and clerical personnel necessary to perform
its obligations under this Agreement. The Administrator shall also provide the
items which it is obligated to provide under this Agreement, and shall pay all
compensation, if any, of officers of the Trust as well as all Trustees of the
Trust who are affiliated persons of the Administrator or any affiliated
corporation of the Administrator; provided, however, that unless otherwise
specifically provided, the Administrator shall not be obligated to pay the
compensation of any employee of the Trust retained by the Trustees of the Trust
to perform services on behalf of the Trust.
(B) The Trust. The Trust assumes and shall pay or cause to be paid
all other expenses of the Trust not otherwise allocated herein, including,
without limitation, organizational costs, taxes, expenses for legal and
auditing services, the expenses of preparing (including typesetting), printing
and mailing reports, prospectuses, statements of additional information, proxy
solicitation material and notices to existing Shareholders, all expenses
incurred in connection with issuing and redeeming Shares, the costs of
custodial services, the cost of initial and ongoing registration of the Shares
under Federal and state securities laws, fees and out-of-pocket expenses of
Trustees who are not affiliated persons of the Administrator or the investment
adviser to the Trust or any affiliated corporation of the Administrator or the
investment Adviser, insurance, interest, brokerage costs, litigation and other
extraordinary or nonrecurring expenses, and all fees and charges of investment
advisers to the Trust.
ARTICLE 4. Compensation of the Administrator.
(A) Administration Fee. For the services to be rendered, the
facilities furnished and the expenses assumed by the Administrator pursuant to
this Agreement, the Trust shall pay to the Administrator compensation at an
annual rate specified in the Schedules. Such compensation shall be calculated
and accrued daily, and paid to the Administrator monthly.
If this Agreement becomes effective subsequent to the first day of a
month or terminates before the last day of a month, the Administrator's
compensation for that part of the month in which this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as
set forth above. Payment of the Administrator's compensation for the preceding
month shall be made promptly.
5
<PAGE> 6
(B) Compensation from Transactions. The Trust hereby authorizes any
entity or person associated with the Administrator which is a member of a
national securities exchange to effect any transaction on the exchange for the
account of the Trust which is permitted by Section 11 (a) of the Securities
Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and the Trust hereby
consents to the retention of compensation for such transactions in accordance
with Rule 11a2-2(T) (a) (2) (iv).
(C) Survival of Compensation Rates. All rights of compensation under
this Agreement for services performed as of the termination date shall survive
the termination of this Agreement.
ARTICLE 5. Limitation of Liability of the Administrator. The
duties of the Administrator shall be confined to those expressly set forth
herein, and no implied duties are assumed by or may be asserted against the
Administrator hereunder. The Administrator shall not be liable for any error of
judgment or mistake of law or for any loss arising out of any investment or for
any act or omission in carrying out its duties hereunder, except a loss
resulting from willful misfeasance, bad faith or negligence in the performance
of its duties, or by reason of reckless disregard of its obligations and duties
hereunder, except as may otherwise be provided under provisions of applicable
law which cannot be waived or modified hereby. (As used in this Article 7, the
term "Administrator" shall include directors, officers, employees and other
corporate agents of the Administrator as well as that corporation itself.)
So long as the Administrator acts in good faith and with due diligence
and without negligence, the Trust assumes full responsibility and shall
indemnify the Administrator and hold it harmless from and against any and all
actions, suits and claims, whether groundless or otherwise, and from and
against any and all losses, damages, costs, charges, reasonable counsel fees
and disbursements, payments, expenses and liabilities (including reasonable
investigation expenses) arising directly or indirectly out of said
administration, transfer agency, and dividend disbursing relationships to the
Trust or any other service rendered to the Trust hereunder. The indemnity and
defense provisions set forth herein shall indefinitely survive the termination
of this Agreement.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited. In order
that the indemnification provision contained herein shall apply, however, it is
understood that if in any case the Trust may be asked to indemnify or hold the
Administrator harmless, the Trust shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and it is further
understood that the Administrator will use all reasonable care to identify and
notify the Trust promptly concerning any situation which presents or appears
likely to present the probability of such a claim for indemnification against
the Trust, but failure to do so in good faith shall not affect the rights
hereunder.
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<PAGE> 7
The Trust shall be entitled to participate at its own expense or, if
it so elects, to assume the defense of any suit brought to enforce any claims
subject to this indemnity provision. If the Trust elects to assume the defense
of any such claim, the defense shall be conducted by counsel chosen by the
Trust and satisfactory to the Administrator, whose approval shall not be
unreasonably withheld. In the event that the Trust elects to assume the
defense of any suit and retain counsel, the Administrator shall bear the fees
and expenses of any additional counsel retained by it. If the Trust does not
elect to assume the defense of a suit, it will reimburse the Administrator for
the reasonable fees and expenses of any counsel retained by the Administrator.
The Administrator may apply to the Trust at any time for instructions
and may consult counsel for the Trust or its own counsel and with accountants
and other experts with respect to any matter arising in connection with the
Administrator's duties, and the Administrator shall not be liable or
accountable for any action taken or omitted by it in good faith in accordance
with such instruction or with the opinion of such counsel, accountants or other
experts.
Also, the Administrator shall be protected in acting upon any document
which it reasonably believes to be genuine and to have been signed or presented
by the proper person or persons. Nor shall the Administrator be held to have
notice of any change of authority of any officers, employee or agent of the
Trust until receipt of written notice thereof from the Trust.
ARTICLE 6. Activities of the Administrator. The services of the
Administrator rendered to the Trust are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests. It is understood that Trustees, officers, employees
and Shareholders of the Trust are or may be or become interested in the
Administrator, as directors, officers, employees and shareholders or otherwise
and that directors, officers, employees and shareholders of the Administrator
and its counsel are or may be or become similarly interested in the Trust, and
that the Administrator may be or become interested in the Trust as a
Shareholder or otherwise.
ARTICLE 7. Confidentiality. The Administrator agrees on behalf
of itself and its employees to treat confidentially all records and other
information relative to the Trust and its prior, present or potential
Shareholders and relative to the Adviser and its prior, present or potential
customers, except, after prior notification to and approval in writing by the
Trust, which approval shall not be unreasonably withheld and may not be
withheld where the Administrator may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information
by duly constituted authorities, or when so requested by the Trust.
ARTICLE 8. Equipment Failures. In the event of equipment
failures beyond the
7
<PAGE> 8
Administrator's control, the Administrator shall, at no additional expense to
the Trust, take reasonable steps to minimize service interruptions but shall
have no liability with respect thereto. The Administrator shall develop and
maintain a plan for recovery from equipment failures which may include
contractual arrangements with appropriate parties making reasonable provision
for emergency use of electronic data processing equipment to the extent
appropriate equipment is available.
ARTICLE 9. Compliance With Governmental Rules and Regulations. The
Administrator undertakes to comply with all applicable requirements of the 1933
Act, the 1934 Act, the 1940 Act and any laws, rules and regulations of
governmental authorities having jurisdiction with respect to the duties to be
performed by the Administrator hereunder.
ARTICLE 10. Duration of this Agreement. The Term of this Agreement
shall be as specified in the Schedules.
This Agreement shall not be assignable by either party without the
written consent of the other party.
ARTICLE 11. Amendments. This Agreement or any part hereof may be
changed or waived only by an instrument in writing signed by the party against
which enforcement of such change or waiver is sought.
ARTICLE 12. Certain Records. The Administrator shall maintain
customary records in connection with its duties as specified in this Agreement.
Any records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by the Administrator
on behalf of the Trust shall be prepared and maintained at the expense of the
Administrator, but shall be the property of the Trust and will be made
available to or surrendered promptly to the Trust on request.
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify the Trust and follow the Trust's
instructions as to permitting or refusing such inspection; provided that the
Administrator may exhibit such records to any person in any case where it is
advised by its counsel that it may be held liable for failure to do so, unless
(in cases involving potential exposure only to civil liability) the Trust has
agreed to indemnify the Administrator against such liability.
ARTICLE 13. Definitions of Certain Terms. The terms "interested
person" and "affiliated person," when used in this Agreement, shall have the
respective meanings specified in the 1940 Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission.
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<PAGE> 9
ARTICLE 14. Notice. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party to the party
giving notice: if to the Trust, at c/o Kevin P. Robins, General Counsel, SEI
Financial Management Corporation, 680 East Swedesford Road, Wayne, PA 19087;
and if to the Administrator at 680 East Swedesford Road, Wayne, PA 19087-1658.
ARTICLE 15. Governing Law. This Agreement shall be construed in
accordance with the laws of the Commonwealth of Massachusetts the applicable
provisions of the 1940 Act. To the extent that the applicable laws of the
Commonwealth of Massachusetts, or any of the provisions herein, conflict with
the applicable provisions of the 1940 Act, the latter shall control.
ARTICLE 16. Multiple Originals. This Agreement may be executed i two
or more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
ARTICLE 17. Limitation of Liability. The Administrator is hereby
expressly put on notice of the limitation of liability as set forth in Article
XI of the Trust's Declaration of Trust and agrees that the obligations pursuant
to this Agreement of a particular Portfolio and of the Trust with respect to
that Portfolio shall be limited solely to the assets of that Portfolio, and the
Administrator shall not seek satisfaction of any such obligation from any other
Portfolio, the shareholders of any Portfolio, the Trustees, officers, employees
or agents of the Trust, or any of them.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
THE ACHIEVEMENT FUNDS TRUST
By: /s/ Kathryn L. Stanton
-------------------------------
Attest: /s/ Rick Shoch
---------------------------
SEI FINANCIAL MANAGEMENT CORPORATION
By: /s/ Robert B. Carroll
-------------------------------
Attest: /s/ Rick Shoch
---------------------------
9
<PAGE> 10
SCHEDULE
TO THE ADMINISTRATION AGREEMENT
DATED AS OF DECEMBER 27, 1994
BETWEEN
THE ACHIEVEMENT FUNDS TRUST
AND
SEI FINANCIAL MANAGEMENT CORPORATION
Portfolios: This Agreement shall apply to all Portfolios of the Trust,
either now in the future created. The following is a listing
of the current portfolios of the Trust: Equity Fund, Balanced
Fund, Intermediate Term Bond Fund, Short Term Municipal Bond
Fund, and Idaho Municipal Bond Fund (collectively, the
"Portfolios").
Fees: Pursuant to Article 6, Section A, the Trust shall pay the
Administrator compensation for services rendered to the
Portfolios at an annual rate, which is calculated daily and
paid monthly, at a maximum administrative fee equal to the
greater of .20% of each Portfolios' average daily net assets,
or $100,000 for the Short Term Municipal Bond Fund and the
Idaho Municipal Bond Fund.
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<PAGE> 11
Term: Pursuant to Article 10, the term of this Agreement shall
commence on December 27, 1994 and shall remain in effect
through December 27, 1997 ("Initial Term"). This Agreement
shall continue in effect for successive periods of 2 years
after the Initial Term, unless terminated by either party,
with or without cause, on not less than 90 days prior written
notice to the other party. In the event of a material breach
of this Agreement by either party, the non-breaching party
shall notify the breaching party in writing of such breach and
upon receipt of such notice, the breaching party shall have 45
days to remedy the breach or the nonbreaching party may
immediately terminate this Agreement.
11
<PAGE> 1
EXHIBIT 9(d)
CREDIT AGREEMENT
AGREEMENT dated as of October 11, 1995 between THE ACHIEVEMENT FUNDS
TRUST, a business trust formed under the laws of the Commonwealth of
Massachusetts and a registered investment company under the Investment Company
Act of 1940, as amended (the "Fund"), on behalf of each of the investment
portfolios listed on Schedule 1 hereto (each a "Borrower" and collectively the
"Borrowers"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York State
banking corporation (the "Bank").
The Fund on behalf of the Borrowers has requested and the Bank is willing
to provide on the terms and conditions set forth herein revolving credit loans
to the Fund for the respective benefit of and payable from the respective
assets of the Borrowers from time to time prior to October 10, 1996 (the
"Termination Date") in an aggregate principal amount not to exceed $10,000,000
at any time outstanding to all Borrowers.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. The following terms, as used herein, have the
following meanings:
"Adjusted CD Rate", has the meaning set forth in Section 2.5(b).
"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.5(c).
"Applicable Lending Office" means, with respect to the Bank, (i) in the
case of Domestic Loans including Quoted Rate Loans (except Euro-Dollar Loans),
its Domestic Lending Office and (ii) in the case of Euro-Dollar Loans including
Quoted Rate Loans (except Domestic Loans), its Euro-Dollar Lending Office.
"Assessment Rate" has the meaning set forth in Section 2.5(b).
"Assignee" has the meaning set forth in Section 8.% 5(c).
"Average Net Assets" has the meaning set forth in Section 2.6.
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"Base Rate" means, for any day, a rate per annum equal to the higher of
(i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal
Funds Rate for such day.
"Base Rate Loan" means a Loan to be made by the Bank as a Base Rate Loan
in accordance with a Notice of Borrowing.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer
Plan and which is maintained or otherwise contributed to by any member of the
ERISA Group.
"Borrowing Base" with respect to any Borrower means the difference, if
positive, computed as of the date of any borrowing by such Borrower, of (a) 5%
of the Total Net Assets of such Borrower less (b) the outstanding principal
amount of Loans to such Borrower.
"Borrowing Base Certificate" shall have the meaning set forth in Section
6.1(e).
"CD Base Rate" has the meaning set forth in Section 2.5(b).
"CD Loan" means a Loan to be made by the Bank as a CD Loan in accordance
with a Notice of Borrowing.
"CD Margin" has the meaning set forth in Section 2.5(b).
"Closing Date" means the date on or after the Effective Date on which the
Bank shall have received the documents specified in or pursuant to Section 3.1.
"Committed Loans" means Loans made pursuant to Section 2.1(a).
"Commitment" means the amount set forth opposite the name of the Bank on
the signature page hereof, as such amount may be reduced from time to time
pursuant to Sections 2.7 and 2.8.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee which are
capitalized in accordance with generally accepted accounting principles, (v)
all non-contingent obligations (and, for purposes of Section 6.7 and the
definitions of Material Debt and Material Financial Obligations, all contingent
obligations) of such Person to reimburse any bank or other Person in respect of
amounts paid under a letter of credit or similar instrument, (vi) all Debt
secured by a Lien on any asset of such Person,
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whether or not such Debt is otherwise an obligation of such Person, and (vii)
all Debt of others Guaranteed by such Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with respect to
any of the foregoing transactions) or any combination of the foregoing
transactions.
"Domestic Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in New York City are authorized by law to close.
"Domestic Lending Office" means the principal office of the Bank located
at 60 Wall Street, New York, New York 10260-0060, or such other branch (or
affiliate) as the Bank may hereafter designate as its Domestic Lending Office;
provided that the Bank may designate separate Domestic Lending Offices for its
Base Rate Loans, on the one hand, and its CD Loans, on the other hand, in which
case all references herein to the Domestic Lending Office shall be deemed to
refer to either or both of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section 2.5(b).
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 8.6.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Fund, each Borrower, any Subsidiary and all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together with the
Fund, each Borrower or any Subsidiary, are treated as a single employer under
Section 414 of the Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
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"Euro-Dollar Lending Office" means the office of the Bank located at
Nassau, Bahamas or such other branch (or affiliate) of the Bank as it may
hereafter designate as its Euro-Dollar Lending Office.
"Euro-Dollar Loan" means a Loan to be made by the Bank as a Euro-Dollar
Loan in accordance with the applicable Notice of Borrowing.
"Euro-Dollar Margin" has the meaning set forth in Section 2.5(c).
"Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 2.5(c)
"Event of Default" has the meaning set forth in Section 7.1.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to the Bank on such day on such
transactions as determined by the Bank.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or both, including
any Quoted Rate Loan.
"Guarantee" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Debt or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt or other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods, securities
or services, to take-or-pay, or to maintain financial statement conditions or
otherwise) or (ii) entered into for the purpose of assuring in any other manner
the obligee of such Debt or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part),
provided that the term Guarantee shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
<PAGE> 5
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"Indemnitee" has the meaning set forth in Section 8.3(b).
"Interest Period" means: (1) with respect to each Euro-Dollar Loan, the
period commencing on the date of such Loan and ending one, two, three or six
months thereafter, as the Borrower may elect in the applicable Notice of
Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day which is not a
Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar
Business Day unless such Euro-Dollar Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding
Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of
a calendar month; and
(c) any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date.
(2) with respect to each CD Loan, the period commencing on the date of such
Loan and ending 30, 60, 90 or 180 days thereafter, as the Borrower may elect in
the applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day which is not a
Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar
Business Day; and
(b) any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date.
(3) with respect to each Base Rate Loan, the period commencing on the date of
such Loan and ending 30 days thereafter; provided that:
(a) any Interest Period which would otherwise end on a day which is not a
Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar
Business Day; and
(b) any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date.
(4) with respect to any Quoted Rate Loan, the period commencing on the date of
such Loan and ending at the end of the term agreed upon between the Fund on
behalf of the applicable Borrower and the Bank.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
<PAGE> 6
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"Investment" means any investment in any Person, whether by means of share
purchase, capital contribution, loan, time deposit or otherwise.
"Investment Adviser" has the meaning set forth in Section 7.1(i).
"Investment Advisers Act" means the Investment Advisers Act of 1940, as
amended, and the rules and regulations promulgated thereunder.
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and the rules and regulations promulgated thereunder.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement, a
Borrower shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan and "Loans" means
Domestic Loans or Euro-Dollar Loans or any combination of the foregoing. The
term "Loan" or "Loans" shall refer to Committed Loans or Quoted Rate Loans, or
both, as the context may require.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.5(c).
"Material Debt" with respect to a Borrower means Debt (other than the
Notes) of the Fund payable from the assets of such Borrower arising in one or
more related or unrelated transactions, in an aggregate principal or face
amount exceeding $5,000,000.
"Material Financial Obligations" with respect to a Borrower means a
principal or face amount of Debt and/or payment obligations in respect of
Derivatives Obligations of the Fund payable from the assets of such Borrower,
arising in one or more related or unrelated transactions, exceeding in the
aggregate $5,000,000.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for
these purposes any
<PAGE> 7
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Person which ceased to be a member of the ERISA Group during such five year
period.
"1933 Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"Note" means, as to any Borrower, the promissory note of the Fund on
behalf of such Borrower, substantially in the form of Exhibit A hereto,
evidencing the obligation of such Borrower to repay the Loans made to it.
"Notice of Borrowing" has the meaning set forth in Section 2.2(a).
"Parent" means, with respect to the Bank, any Person controlling the Bank.
"Participant" has the meaning set forth in Section 8.5(b).
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person
which was at such time a member of the ERISA Group for employees of any Person
which was at such time a member of the ERISA Group.
"Prime Rate" means the rate of interest publicly announced by the Bank
from time to time as its Prime Rate. The Prime Rate is not intended to be the
lowest rate of interest charged by the Bank in connection with extensions of
credit to borrowers.
"Pro Rata Portion" has the meaning set forth in Section 2.3(d).
"Prospectus" means, with respect to any Borrower, the prospectus and
statement of additional information relating to such Borrower filed under the
1933 Act and the Investment Company Act.
"Quoted Rate" has the meaning set forth in Section 2.2(d).
"Quoted Rate Loan" has the meaning set forth in Section 2.1(b).
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"Refunding Loan" means a Loan which, after application of the proceeds
thereof, results in no net increase in the outstanding principal amount of
Loans made by the Bank.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Revolving Credit Period" means the period from and including the
Effective Date to and including the Termination Date.
"SEC" means the Securities and Exchange Commission.
"Subsidiary" means, as to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person. Unless
otherwise specified, "Subsidiary" means a Subsidiary of the Fund or any
Borrower.
"Termination Date" is defined in the recitals to this Agreement.
"Total Assets" means, with respect to any Borrower, as of any date, an
amount equal to the aggregate Fair Market Value of all items which would be set
forth as assets on a balance sheet of such Borrower on such date in accordance
with generally accepted accounting principles. "Fair Market Value," for
purposes of this definition, shall be the fair market value of such assets
determined in the manner set forth in the then current Prospectus of such
Borrower. Upon the written request of the Bank, such Borrower shall promptly
furnish all such information as the Bank shall reasonably request relating to
the value of any portfolio security or other asset of such Borrower or the
assignment of values thereto by such Borrower or any other Person.
"Total Liabilities" means, at any date, all liabilities (including the
aggregate liquidation value of any outstanding shares of preferred stock issued
by the Borrower) of the Borrower which in accordance with generally accepted
accounting principles would be classified as liabilities upon a balance sheet
of the Borrower prepared as of such date.
"Total Net Assets" of any Borrower means, at any date, Total Assets less
Total Liabilities of such Borrower.
SECTION 1.2 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time
<PAGE> 9
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to time, applied on a basis consistent (except for changes concurred in by the
applicable Borrower's independent public accountants) with the most recent
audited financial statements of such Borrower delivered to the Bank; provided
that, if the Fund notifies the Bank that the Fund wishes to amend any covenant
in Article VI to eliminate the effect of any change in generally accepted
accounting principles on the operation of such covenant (or if the Bank
notifies the Fund that the Bank wishes to amend Article VI for such purpose),
then the Fund's and the Borrowers' compliance with such covenant shall be
determined on the basis of generally accepted accounting principles in effect
immediately before the relevant change in generally accepted accounting
principles became effective, until either such notice is withdrawn or such
covenant is amended in a manner satisfactory to the Fund and the Bank.
ARTICLE II
THE CREDITS
SECTION 2.1 Commitment to Lend.
(a) During the Revolving Credit Period the Bank agrees, on the terms and
conditions set forth in this Agreement, to make Loans to the Fund on behalf of
any Borrower from time to time in amounts such that the aggregate principal
amount of Loans by the Bank at any one time outstanding to the Fund on behalf
of all Borrowers shall not exceed the amount of its Commitment; provided, that
the aggregate amount of all Loans outstanding from time to time to the Fund on
behalf of any Borrower shall not exceed the Borrowing Base for such Borrower.
Each Loan under this Section shall be in the principal amount of $500,000 or
any larger multiple of $500,000 (or, if less, the then available amount of the
Commitment). Within the foregoing limits, the Fund on behalf of each Borrower
may borrow under this Section, repay or to the extent permitted by Section 2.9
prepay Loans and reborrow at any time during the Revolving Credit Period under
this Section.
(b) In addition to the Committed Loans, the Fund on behalf of any Borrower
may from time to time during the Revolving Credit Period request the Bank to
make Loans ("Quoted Rate Loans") to the Fund on behalf of such Borrower on an
uncommitted basis at a rate of interest and in such amount and for such term as
may be agreed upon by the Bank and the Fund on behalf of such Borrower, which
shall serve to reduce the available Commitment by an amount equal to the amount
of such Quoted Rate Loans. The Bank shall have no obligation to extend any
Quoted Rate Loan to the Fund on behalf of any Borrower or to quote any rate to
the Fund on behalf of any Borrower as hereinafter described.
<PAGE> 10
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SECTION 2.2 Method of Borrowing.
(a) The Fund on behalf of a Borrower requesting a Loan shall give the Bank
notice substantially in the form of Exhibit C hereto (a "Notice of Borrowing")
not later than 10:00 A.M. (New York City time) on (x) the date of each Base
Rate Loan, (y) the second Domestic Business Day before each CD Loan and (z) the
third Euro-Dollar Business Day before each Euro-Dollar Loan, specifying the
Borrower and:
(i) the date of such Loan, which shall be a Domestic Business Day in
the case of a Domestic Loan and a Euro-Dollar Business Day in the case of a
Euro-Dollar Loan;
(ii) the principal amount of such Loan;
(iii) whether the Loan is to be a Base Rate Loan, a CD Loan or a
Euro-Dollar Loan; and
(iv) in the case of a Fixed Rate Loan, the duration of the Interest
Period applicable thereto, subject to the provisions of the definition of
Interest Period.
(b) Unless the Bank determines that any applicable condition specified in
Article III has not been satisfied, on the date of each Loan the Bank will make
the proceeds thereof available to the Fund on behalf of such Borrower
requesting the Loan at the Domestic Lending Office.
(c) If the Bank makes a new Loan hereunder to the Fund on behalf of a
Borrower on a day on which the Fund on behalf of such Borrower is to repay all
or any part of an outstanding Loan, the Bank shall apply the proceeds of its
new Loan to make such repayment and only an amount equal to the difference (if
any) between the amount being borrowed and the amount being repaid shall be
made available by the Bank to the Fund on behalf of such Borrower as provided
in subsection (b), or remitted by the Fund on behalf of such Borrower to the
Bank as provided in Section 2.10, as the case may be.
(d) When the Fund on behalf of a Borrower wishes to request a Quoted Rate
Loan hereunder, the Fund on behalf of such Borrower shall transmit to the Bank
by telephone a request for such Quoted Rate Loan not later than 10:00 a.m.
(New York City time) on the Business Day (or, if such Quoted Rate Loan is
proposed to be a Eurodollar Loan, on the third Euro-Dollar Business Day before
the day) on which the Quoted Rate Loan is proposed to be made. Any Quoted Rate
Loan requested pursuant to this Section 2.2(d) shall be for a minimum principal
amount of $500,000 or a larger multiple of $500,000, and for a minimum term of
one week. Subject to the preceding sentence, such request for a Quoted Rate
Loan shall specify: (i) the date thereof, which shall be a Business Day, (ii)
the principal amount thereof and (iii) the Interest Period therefor. In the
event that the Bank desires to
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make such a Quoted Rate Loan, the Bank shall specify its quoted rate (the
"Quoted Rate") for such Quoted Rate Loan. Acceptance by the Fund on behalf of
such Borrower requesting such Quoted Rate Loan shall be irrevocable and shall
bind the Fund on behalf of such Borrower to the proposed Quoted Rate Loan.
SECTION 2.3 The Note.
(a) The Loans to the Fund on behalf of each Borrower shall be evidenced by
a single Note of the Fund on behalf of such Borrower payable to the order of
the Bank for the account of its Applicable Lending Office.
(b) The Bank may, by notice to the Fund, request that Loans to the Fund on
behalf of any Borrower of a particular type be evidenced by a separate Note in
an amount equal to the Loans of that type. Each such Note shall be
substantially in the form of Exhibit A hereto with appropriate modifications to
reflect the fact that it evidences solely Loans of the relevant type. Each
reference in this Agreement to the "Note" shall be deemed to refer to and
include any or all of the Notes delivered under this Agreement, as the context
may require.
(c) The Bank shall record the date, the amount and the maturity of each
Loan to the Fund on behalf of a Borrower made by it and the date and amount of
each payment of principal made by the Fund on behalf of such Borrower with
respect thereto and may, if the Bank so elects in connection with any transfer
or enforcement of the Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect to
each Loan then outstanding; provided that the failure of the Bank to make any
such recordation or endorsement shall not affect the obligations of the Fund on
behalf of such Borrower hereunder or under the Note. The Bank is hereby
irrevocably authorized by the Fund on behalf of each Borrower so to endorse
each Note delivered by the Fund on behalf of such Borrower and to attach to and
make a part of each such Note a continuation of any such schedule as and when
required.
(d) The obligations of each Borrower under its respective Note or Notes
shall be several and not joint. Notwithstanding anything to the contrary
contained in this Agreement, the parties hereto acknowledge and agree that the
sole source of payment of the obligations of each Borrower hereunder,
including, without limitation, the principal of and interest on each Loan made
hereunder to any Borrower, the commitment fee payable pursuant to Section 2.6,
the amounts payable under Section 2.12 or Article IV and any other amounts
attributable to the Loans made hereunder to the Fund on behalf of a Borrower
shall be the revenues and assets of such Borrower. Under no circumstances
shall First Security Investment Management, Inc., First Security Corporation or
any of its Subsidiaries (but excluding the Fund and the Borrowers) be liable
for any such amounts. The parties agree that the Borrowers are separate
portfolios of the Fund and as such are not
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separately existing legal entities entitled to enter into contractual
agreements or to execute instruments and, for these reasons, the Fund is
executing this Agreement and the other documents, instruments, certificates and
notices on behalf of each Borrower and that such Borrowers will utilize the
Loans thus made on their behalf.
SECTION 2.4 Maturity of Loans. Each Loan shall mature, and the principal
amount thereof shall be due and payable, on the last day of the Interest Period
applicable to such Loan.
SECTION 2.5 Interest Rates.
(a) Each Base Rate Loan shall bear interest on the outstanding principal
amount thereof, for each day from the date such Loan is made until it becomes
due, at a rate per annum equal to the Base Rate for such day. Such interest
shall be payable for each Interest Period on the last day thereof. Any overdue
principal of or interest on any Base Rate Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the sum of 2% plus
the rate otherwise applicable to Base Rate Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding principal amount
thereof, for each day during the Interest Period applicable thereto, at a rate
per annum equal to the sum of the CD Margin for such day plus the Adjusted CD
Rate applicable to such Interest Period; provided that if any CD Loan or any
portion thereof shall, as a result of clause (2)(b) of the definition of
Interest Period, have an Interest Period of less than 30 days, such portion
shall bear interest during such Interest Period at the rate applicable to Base
Rate Loans during such period. Such interest shall be payable for each
Interest Period on the last day thereof and, if such Interest Period is longer
than 90 days, at intervals of 90 days after the first day thereof. Any overdue
principal of or interest on any CD Loan shall bear interest, payable on demand,
for each day until paid at a rate per annum equal to the sum of 2% plus the
higher of (i) the sum of the CD Margin for such day plus the Adjusted CD Rate
applicable to the Interest Period for such Loan and (ii) the rate applicable to
Base Rate Loans for such day.
"CD Margin" means a rate per annum equal to 0.375%.
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The "Adjusted CD Rate" applicable to any Interest Period means a rate per
annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [----------] + AR
[1.00 - DRP]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
AR = Assessment Rate
DRP = Domestic Reserve Percentage
- ----------
* The amount in brackets being rounded upward, if necessary, to the next higher
1/100 of 1%.
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Bank to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum
bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable)
on the first day of such Interest Period by two or more New York certificate of
deposit dealers of recognized standing selected by the Bank for the purchase at
face value from the Bank of its certificates of deposit in an amount comparable
to the principal amount of the CD Loan to which such Interest Period applies
and having a maturity comparable to such Interest Period.
"Domestic Reserve Percentage" means for any day that percentage (expressed
as a decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including without limitation any basic,
supplemental or emergency reserves) for a member bank of the Federal Reserve
System in New York City with deposits exceeding five billion dollars in respect
of new non-personal time deposits in dollars in New York City having a maturity
comparable to the related Interest Period and in an amount of $100,000 or more.
The Adjusted CD Rate shall be adjusted automatically on and as of the effective
date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any Interest Period the net annual assessment
rate (rounded upwards, if necessary, to the next higher 1/100 of 1%) actually
incurred by the Bank to the Federal Deposit Insurance Corporation (or any
successor) for such Corporation's (or such successor's) insuring time deposits
at offices of the Bank in the United States during the most recent period for
which such rate has been determined prior to the commencement of such Interest
Period.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding principal
amount thereof, for each day during the Interest Period applicable thereto, at
a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus
the Adjusted
<PAGE> 14
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London Interbank Offered Rate applicable to such Interest Period. Such
interest shall be payable for each Interest Period on the last day thereof and,
if such Interest Period is longer than three months, at intervals of three
months after the first day thereof.
"Euro-Dollar Margin" means a rate per annum equal to 0.25%.
The "Adjusted London Interbank Offered Rate" applicable to any Interest
Period means a rate per annum equal to the quotient obtained (rounded upward,
if necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable
London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve
Percentage.
The "London Interbank Offered Rate" applicable to any Interest Period
means the rate per annum at which deposits in dollars are offered to the Bank
in the London interbank market at approximately 11:00 A.M. (London time) two
Euro-Dollar Business Days before the first day of such Interest Period in an
amount approximately equal to the principal amount of the Euro-Dollar Loan to
which such Interest Period is to apply and for a period of time comparable to
such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of the Bank to
United States residents). The Adjusted London Interbank Offered Rate shall be
adjusted automatically on, and as of the effective date of any change in the
Euro-Dollar Reserve Percentage.
(d) Each Quoted Rate Loan shall bear interest for each Interest Period at
the rate agreed upon between the Fund on behalf of the applicable Borrower of
such Loan and the Bank, payable at the end of each Interest Period, and, if
such Interest Period is longer than three months, at intervals of three months
after the first day thereof.
(e) Any overdue principal of or interest on any Euro-Dollar Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for such
day plus the Adjusted London Interbank Offered Rate applicable to the Interest
Period for such Loan and (ii) the sum of 2% plus the Euro-Dollar Margin for
such day plus the quotient obtained (rounded upward, if necessary, to the next
higher 1/100 of l%) by dividing (x) the average (rounded
<PAGE> 15
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upward, if necessary, to the next higher 1/16 of l%) of the respective rates
per annum at which one day (or, if such amount due remains unpaid more than
three Euro-Dollar Business Days, then for such other period of time not longer
than two (2) months as the Bank may select) deposits in dollars in an amount
approximately equal to such overdue payment due to the Bank are offered to the
Bank in the London interbank market for the applicable period determined as
provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the
circumstances described in clause (a) or (b) of Section 4.1 shall exist, at a
rate per annum equal to the sum of 2% plus the rate applicable to Base Rate
Loans for such day). Any overdue principal of or interest on any Quoted Rate
Loan shall bear interest, payable on demand, for each day from and including
the date payment thereof was due to but excluding the date of actual payment at
a rate per annum equal to the sum of 2% plus the Base Rate for such day.
SECTION 2.6 Facility Fee. The Fund shall pay to the Bank a facility fee
from the assets of the Borrowers as provided below computed at the rate of .10%
per annum. Such facility fee shall accrue (a) from and including October 11,
1995 to but excluding the Termination Date (or earlier date of termination of
the Commitment in its entirety), on the daily amount of the Commitment (whether
used or unused) and (b) from and including the Termination Date (or such
earlier date of termination) to but excluding the date the Loans shall be
repaid in their entirety, on the daily aggregate outstanding principal amount
of the Loans. Accrued facility fees shall be payable quarterly on each March
31, June 30, September 30 and December 31 (in arrears) commencing on December
31, 1995 and upon the date of termination of the Commitment in its entirety
(and, if later, the date the Loans shall be repaid in their entirety). Each
Borrower shall be liable only for that portion (the "Pro Rata Portion") of the
facility fee as the daily average Total Net Asset Value (the "Average Net
Assets") of such Borrower bears to the total Average Net Assets of all
Borrowers as to whom the Commitment has not been terminated, in each case
computed during the period during which such facility fee has accrued.
SECTION 2.7 Optional Termination or Reduction of Commitment. During the
Revolving Credit Period, the Fund on behalf of all Borrowers may, upon at least
three Domestic Business Days' notice to the Bank, (i) terminate the Commitment
at any time, if no Loans are outstanding at such time or (ii) reduce from time
to time by an aggregate amount of $5,000,000 or any larger multiple thereof,
the Commitment in excess of the aggregate outstanding principal amount of the
Loans.
SECTION 2.8 Mandatory Termination of Commitment. The Commitment shall
terminate on the Termination Date, and any Loans then outstanding (together
with accrued interest thereon) shall be due and payable on such date.
<PAGE> 16
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SECTION 2.9 Optional Prepayments. Subject in the case of any Fixed Rate
Borrowing to Section 2.12, each Borrower may, upon at least one Domestic
Business Day's notice to the Bank, prepay any Domestic Loan or upon at least
three Euro-Dollar Business Days' notice to the Bank, prepay any Euro-Dollar
Loan, in each case in whole at any time, or from time to time in part in
amounts aggregating $500,000 or any multiple of $500,000, by paying the
principal amount to be prepaid together with accrued interest thereon to the
date of prepayment and any amount payable under Section 2.12.
SECTION 2.10 General Provisions as to Payments. The Fund shall make each
payment of principal of, and interest on, the Loans and of facility fees
hereunder from the assets of the Borrower from which such payment is due, not
later than 12:00 Noon (New York City time) on the date when due, in Federal or
other funds immediately available in New York City, at the principal office of
the Bank in New York for the account of (i) the Domestic Lending Office in the
case of Domestic Loans or (ii) the Euro-Dollar Lending Office in the case of
Euro-Dollar Loans. Whenever any payment of principal of, or interest on, the
Domestic Loans or of any fee due hereunder shall be due on a day which is not a
Domestic Business Day, the date for payment thereof shall be extended to the
next succeeding Domestic Business Day. Whenever any payment of principal of,
or interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
SECTION 2.11 Computation of Interest and Fees. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
fees shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
SECTION 2.12 Funding Losses. If the Fund on behalf of a Borrower makes
any payment of principal with respect to any Fixed Rate Loan (pursuant to
Article II, IV or Article VII or otherwise) on any day other than the last day
of an Interest Period applicable thereto, or the last day of an applicable
period fixed pursuant to Section 2.5(e), or if the Fund on behalf of a Borrower
fails to borrow or prepay any Fixed Rate Loan after a Notice of Borrowing has
been given to the Bank in accordance with Section 2.2(a), the Fund on behalf of
such Borrower shall reimburse the Bank within 15 days after demand for any
resulting loss or expense incurred by it (or by any existing or prospective
<PAGE> 17
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Participant in the related Loan) including (without limitation) any loss
incurred in obtaining, liquidating or employing deposits from third parties,
but excluding loss of margin for the period after any such payment or failure
to borrow or prepay, provided that the Bank shall have delivered to the Fund on
behalf of such Borrower a certificate as to the amount of such loss, which
certificate shall be conclusive in the absence of manifest error.
ARTICLE III
CONDITIONS
SECTION 3.1 Closing. The closing hereunder shall occur upon receipt by
the Bank of the following documents, each dated the Closing Date unless
otherwise indicated:
(a) a duly executed Note by the Fund on behalf of each Borrower dated
on or before the Closing Date complying with the provisions of Section 2.3;
(b) an opinion of Ballard Spahr Andrews & Ingersoll, counsel for the
Fund and the Borrowers, substantially in the form of Exhibit D hereto and
covering such additional matters relating to the transactions contemplated
hereby as the Bank may reasonably request; and
(c) all documents the Bank may reasonably request relating to the
existence of the Fund and the Borrowers, the trust authority for and the
validity of this Agreement and the Notes, and any other matters relevant
hereto, all in form and substance satisfactory to the Bank.
The Bank shall promptly notify the Fund of the Closing Date, and such notice
shall be conclusive and binding on the parties hereto.
SECTION 3.2 Loans. The obligation of the Bank to make any Loan to the
Fund on behalf of a Borrower is subject to the satisfaction of the following
conditions:
(a) the fact that the Closing Date shall have occurred on or prior to
November 30, 1995;
(b) receipt by the Bank of the Notice of Borrowing as required by
Section 2.2(a);
(c) the fact that, immediately after such Loan, the aggregate
outstanding principal amount of the Loans will not exceed the amount of the
Commitment or the Borrowing Base of such Borrower;
<PAGE> 18
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(d) the fact that, immediately before and after such Loan, no Default
shall have occurred and be continuing;
(e) the fact that, after giving effect to such Loan, the asset coverage
(as such term is defined in the Investment Company Act) of such Borrower,
determined in accordance with the Investment Company Act as of the Business Day
immediately prior to the date of the proposed borrowing is at least 300%; and
(f) the fact that the representations and warranties of such Borrower
contained in this Agreement (except, in the case of a Refunding Loan, the
representations and warranties set forth in Sections 5.4(b) and 5.5 as to any
matter which has theretofore been disclosed in writing by the Borrower to the
Bank) shall be true on and as of the date of such Loan.
Each Loan hereunder shall be deemed to be a representation and warranty by such
Borrower on the date of such Loan as to the facts specified in clauses (c),
(d), (e) and (f) of this Section.
ARTICLE IV
CHANGE IN CIRCUMSTANCES
SECTION 4.1 Basis for Determining Interest Rate Inadequate or Unfair. If
on or prior to the first day of any Interest Period for any Fixed Rate Loan:
(a) deposits in dollars (in the applicable amounts) are not being
offered to the Bank in the relevant market for such Interest-Period, or
(b) the Adjusted CD Rate or the Adjusted London Interbank Offered Rate,
as the case may be, will not adequately and fairly reflect the cost to the Bank
of funding its CD Loans or Euro-Dollar Loans, as the case may be, for such
Interest Period,
the Bank shall forthwith give notice thereof to the Fund, whereupon the
obligations of the Bank to make CD Loans or Euro-Dollar Loans, as the case may
be, shall be suspended until the Bank notifies the Fund that the circumstances
giving rise to such suspension no longer exist. Unless a Borrower notifies the
Bank at least two Domestic Business Days before the date of any Fixed Rate Loan
for which a Notice of Borrowing has previously been given by such Borrower that
such Borrower elects not to borrow on such date, such Loan shall instead be
made as a Base Rate Loan.
SECTION 4.2 Illegality. If, on or after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration
<PAGE> 19
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thereof by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by the
Bank (or its Euro-Dollar Lending Office) with any request or directive (whether
or not having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for the Bank (or its
Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans, the
Bank shall forthwith give notice thereof to the Fund, whereupon until the Bank
notifies the Fund that the circumstances giving rise to such suspension no
longer exist, the obligation of the Bank to make Euro-Dollar Loans shall be
suspended. Before giving any notice to the Fund pursuant to this Section, the
Bank shall designate a different Euro-Dollar Lending Office if such designation
will avoid the need for giving such notice and will not, in the judgment of the
Bank, be otherwise disadvantageous to the Bank. If the Bank shall determine
that it may not lawfully continue to maintain and fund any of its outstanding
Euro-Dollar Loans to maturity and shall so specify in such notice, each
Borrower shall immediately prepay in full the then outstanding principal amount
of each such Euro-Dollar Loan, together with accrued interest thereon.
Concurrently with prepaying each such Euro-Dollar Loan, the Fund on behalf of
each Borrower shall borrow a Base Rate Loan in an equal principal amount from
the Bank for an Interest Period coincident with the remaining term of the
Interest Period applicable to such Euro-Dollar Loan, and the Bank shall make
such a Base Rate Loan.
SECTION 4.3 Increased Cost and Reduced Return.
(a) If on or after the date hereof the adoption of any applicable law, rule
or regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall impose, modify
or deem applicable any reserve (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve System,
but excluding (i) with respect to any CD Loan any such requirement included in
an applicable Domestic Reserve Percentage and (ii) with respect to any
Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar
Reserve Percentage), special deposit, insurance assessment (excluding, with
respect to any CD Loan, any such requirement reflected in an applicable
Assessment Rate) or similar requirement against assets of, deposits with or for
the account of, or credit extended by, the Bank (or its Applicable Lending
Office) or shall impose on the Bank (or its Applicable Lending Office) or on
the United States market for certificates of deposit or the London interbank
market any other condition affecting its Fixed Rate Loans, its Notes or its
obligation to make Fixed Rate Loans, and the result of any of the foregoing is
<PAGE> 20
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to increase the cost to the Bank (or its Applicable Lending Office) of making
or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received
or receivable by the Bank (or its Applicable Lending Office) under this
Agreement or under its Note with respect thereto, by an amount deemed by the
Bank to be material, then, within 15 days after demand by the Bank, the
applicable Borrower (limited, in the case of costs relating to the Commitment,
to the Pro Rata Portion of such Borrower) shall pay to the Bank such additional
amount or amounts as will compensate the Bank for such increased cost or
reduction.
(b) If the Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on capital
of the Bank (or its Parent) as a consequence of the Bank's obligations
hereunder to a level below that which the Bank (or its Parent) could have
achieved but for such adoption, change, request or directive (taking into
consideration its policies with respect to capital adequacy) by an amount
deemed by the Bank to be material, then from time to time, within 15 days after
demand by the Bank, the applicable Borrower shall pay to the Bank such
additional amount or amounts as will compensate the Bank (or its Parent) for
such reduction.
(c) The Bank will promptly notify the Fund of any event of which it has
knowledge, occurring after the date hereof, which will entitle the Bank to
compensation pursuant to this Section and will designate a different Applicable
Lending Office if such designation will avoid the need for, or reduce the
amount of, such compensation and will not, in the judgment of the Bank, be
otherwise disadvantageous to the Bank. A certificate of the Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, the Bank may use any reasonable
averaging and attribution methods.
SECTION 4.4 Base Rate Loans Substituted for Affected Fixed Rate Loans. If
(i) the obligation of the Bank to make Euro-Dollar Loans has been suspended
pursuant to Section 4.2 or (ii) the Bank has demanded compensation under
Section 4.3(a) and the Borrower shall, by at least five Euro-Dollar Business
Days' prior notice to the Bank, have elected that the provisions of this
Section shall apply to the Bank, then, unless and until the Bank notifies the
Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer exist:
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(a) all Loans which would otherwise be made by the Bank as CD
Loans or Euro-Dollar Loans, as the case may be, shall be made instead as Base
Rate Loans for an Interest Period coincident with the remaining term of the
Interest Period applicable to such CD Loan or Euro-Dollar Loan, and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case may
be, has been repaid, all payments of principal which would otherwise be applied
to repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans
instead.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Fund as to itself, and each Borrower as to itself and as to the Fund,
represents and warrants that:
SECTION 5.1 Existence and Power; Availability of Portfolio Assets. (a)
The Fund is a trust duly organized, validly existing and in good standing under
the laws of the Commonwealth of Massachusetts, and has all trust powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted.
(b) The Fund is an open-end investment company, registered under the
Investment Company Act, and has registered the sale of the Borrower's common
stock under the 1933 Act, pursuant to a registration statement which includes a
Prospectus that is currently effective. Such Borrower is a sub-trust of the
Fund and its shares of beneficial interest legally constitutes a separate
series of shares able to be marketed to investors pursuant to the provisions of
the Investment Company Act.
(c) All assets of such portfolio are available to satisfy the obligations
of the Fund on behalf of the Borrower hereunder.
SECTION 5.2 Corporate and Governmental Authorization; No Contravention.
The execution, delivery and performance by the Fund and such Borrower of this
Agreement and the Notes of such Borrower are within the Fund's and Borrower's
trust powers, have been duly authorized by all necessary trust action, require
no action by or in respect of, or filing with, any governmental body, agency or
official and do not contravene, or constitute a default under, any provision of
applicable law (including, without limitation, the Investment Company Act and
Section 17(d) thereof) or regulation or of the amended and restated declaration
of trust or by-laws of the Fund or of any agreement, judgment, injunction,
order, decree or other instrument binding upon the Fund, such Borrower or any
of its Subsidiaries or result in the creation or imposition of any Lien on any
asset of the Fund, such Borrower or any of its Subsidiaries.
<PAGE> 22
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SECTION 5.3 Binding Effect. This Agreement constitutes a valid and
binding agreement of the Fund, and the Notes of such Borrower, when executed
and delivered in accordance with this Agreement, will constitute a valid and
binding obligation of the Fund payable from the assets of such Borrower in each
case enforceable in accordance with its terms.
SECTION 5.4 Financial Information. (a) Such Borrower's most recently
available audited statement of assets and liabilities, statement of operations
and statement of changes in net assets and its most recent semi-annual asset
statement, copies of which have been furnished to the Bank, have been prepared
in conformity with generally accepted accounting principles applied on a basis
consistent with that of the prior fiscal year or period and present fairly the
financial condition of such Borrower as at such dates and the results of its
operations for the periods then ended, subject, in the case of the interim
financial statements, to year-end adjustments. (b) Since the date of such
statement of assets and liabilities and such semi-annual asset statement, there
has been no material adverse change in the financial condition of such
Borrower.
SECTION 5.5 Litigation. There is no action, suit or proceeding pending
against, or to the knowledge of the Fund or such Borrower threatened against or
affecting, the Fund or such Borrower before any court or arbitrator or any
governmental body, agency or official in which there is a reasonable
possibility of an adverse decision which could materially adversely affect the
business, financial position or results of operations of the Borrower or which
in any manner draws into question the validity of this Agreement or the Notes
of such Borrower or any such material contract or agreement.
SECTION 5.6 Compliance with ERISA. (a) The Fund and the Borrowers are not
members of an ERISA Group and have no Benefit Arrangement, Plan or
Multiemployer Plan subject to ERISA.
(b) No Loan will constitute a "prohibited transaction" within the meaning
of Section 406 of ERISA or Section 4975 of the Internal Revenue Code for which
an exemption is not available.
SECTION 5.7 Taxes. Each Borrower qualifies as a "regulated investment
company" within the meaning of the Internal Revenue Code and is in compliance
with the provisions thereof such that its income is not subject to tax at the
corporate level under the Internal Revenue Code. Each Borrower has filed all
United States Federal income tax returns and all other material tax returns
which are required to be filed by it, and has paid all taxes due pursuant to
such returns, or pursuant to any assessment received by such Borrower. The
charges, accruals and reserves on the books of the Borrower in respect of taxes
or other governmental charges, are, in the opinion of such Borrower, adequate.
<PAGE> 23
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SECTION 5.8 Compliance with Laws. The Fund and such Borrower are in
compliance with all applicable laws, statutes, ordinances, decrees,
requirements, orders, judgments, rules, regulations of, and the terms of any
license or permit issued by, and governmental authority including, but not
limited to, the Investment Company Act and the 1933 Act except to the extent
that failure to comply therewith could not reasonably be expected to have a
material adverse effect on the Fund or the Borrower or on their ability to
repay the principal of or interest on the Loans.
SECTION 5.9 Investment Policies. The assets of such Borrower are being
invested in accordance with the investment objectives, policies and
restrictions set forth in its most recent Prospectus and the borrowings
hereunder by such Borrower are permitted thereunder.
SECTION 5.10 Full Disclosure. All information heretofore furnished by the
Fund or such Borrower to the Bank for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all such information
hereafter furnished by the Fund or such Borrower to the Bank will be, true and
accurate in all material respects on the date as of which such information is
stated or certified. Each of the Fund and such Borrower has disclosed to the
Bank in writing any and all facts which, to the best of the Fund's and such
Borrower's knowledge after due inquiry, materially and adversely affect or may
affect (to the extent the Fund or such Borrower can now reasonably foresee) the
business, operations or financial condition of such Borrower to perform its
obligations under this Agreement.
SECTION 5.11 Purpose. The proceeds of the Loans will be used by such
Borrower to fund redemptions of shares of such Borrower from shareholders of
the Borrower in accordance with the terms of such Borrower's then-current
Prospectus. No part of any of the proceeds of any Loan will be used, directly
or indirectly, by such Borrower for the purpose of purchasing or carrying any
securities which constitute "margin stock" as promulgated in Regulation U or
for the purpose of purchasing or carrying or trading in any securities under
such circumstances as to involve a violation of Regulation U or Regulation X
promulgated by the Board of Governors of the Federal Reserve System.
SECTION 5.12 No Subsidiaries. The Fund and such Borrower do not have any
Subsidiaries or any equity investment or interest in any other Person (other
than portfolio securities which may have been acquired in the ordinary course
of business).
ARTICLE VI
COVENANTS
<PAGE> 24
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The Fund and each Borrower agrees as to the Fund and to itself (but not
any other Borrower) that, so long as the Bank has a Commitment hereunder or any
amount payable under any Note remains unpaid:
SECTION 6.1 Information. Such Borrower will deliver to the Bank:
(a) as soon as available and in any event within 60 days after the end
of each fiscal year of such Borrower, a statement of assets and
liabilities of such Borrower as at the end of such year, and statement of
operations of such Borrower for the most recent fiscal year and statement
of changes in net assets of such Borrower for the two most recent fiscal
years, and a portfolio of investments as of the end of such fiscal year,
all reported in a manner acceptable to the SEC together with an audit
report thereon issued by independent certified public accountants of
nationally recognized standing;
(b) as soon as available and in any event within 60 days after the end
of the first semi-annual period of each fiscal year of such Borrower, a
statement of assets and liabilities of such Borrower, including the
portfolio of investments, as of the end of such period and the related
statements of operations and changes in net assets of such Borrower for
such period, and a statement of assets and liabilities of such Borrower
including the portfolio of investments, as of the end of the corresponding
semi-annual period of such Borrower's preceding fiscal year and the
related statements of operations and changes in net assets for such
corresponding semi-annual period, all certified (subject to normal
year-end adjustment) as to fairness of presentation, in accordance with
generally accepted accounting principles, by the chief financial officer
or the chief accounting officer of the Fund;
(c) simultaneously with the delivery of each set of financial statements
referred to in clauses (a) and (b) above, a certificate of the chief
financial officer or the chief accounting officer of the Fund (i) setting
forth in reasonable detail the calculations required to establish whether
such Borrower was in compliance with the requirements of Section 6.9 on
the date of such financial statements and (ii) stating whether any Default
exists on the date of such certificate and, if any Default then exists,
setting forth the details thereof and the action which such Borrower is
taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial statements
referred to in clause (a) above, a statement of the firm of independent
public accountants which reported on such statements to the effect that
nothing
<PAGE> 25
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has come to their attention to cause them to believe that any Default
existed on the date of such statements;
(e) not later than 7 days after the end of each calendar month, or at
any other time reasonably requested by the Bank, a certificate of the
Fund's chief financial officer in the form of Exhibit D hereto (a
"Borrowing Base Certificate"), certifying, as of the end of such month, as
to the current Borrowing Base for each Borrower, and showing all
calculations used in determining such amounts;
(f) within 15 days after the last day of each month when a Loan is
outstanding to a Borrower, a calculation of such Borrower's Total Net
Assets as at the end of such month;
(g) within five days after any officer of the Borrower obtains
knowledge of any Default, if such Default is then continuing, a
certificate of the chief financial officer or the chief accounting officer
of the Borrower setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto;
(h) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(i) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto) and reports which the Fund on
behalf of such Borrower shall have filed with the SEC;
(j) if at any time the value of all "margin stock" (as defined in
Regulation U) owned by such Borrower (other than the Equity Fund and the
Balanced Fund) exceeds (or would, following application of the proceeds of
an intended Loan hereunder, exceed) 25% of the value of the total assets
of such Borrower, in each case as reasonably determined by such Borrower,
prompt notice of such fact; and
(k) from time to time such additional information regarding the
financial position or business of the Fund or such Borrower as the Bank
may reasonably request.
SECTION 6.2 Payment of Obligations. Such Borrower will pay and discharge,
at or before maturity, all of its material obligations and liabilities,
including, without limitation, tax liabilities, except where the same may be
contested in good faith by appropriate proceedings, and will maintain, in
accordance with generally accepted accounting principles, appropriate reserves
for the accrual of any of the same.
<PAGE> 26
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SECTION 6.3 Insurance. The Fund and such Borrower will maintain in force,
with financially sound and reputable insurers, policies with respect to their
respective property and business against such risks and contingencies
(including fidelity bond coverage) and in such amounts as is customary in the
case of registered open-end investment companies engaged in similar lines of
business of comparable size and financial strength.
SECTION 6.4 Conduct of Business and Maintenance of Existence. The Fund
will (a) maintain and preserve its existence as a registered investment company
and the existence of such Borrower as a "series" within the meaning of the
Investment Company Act, (b) continue in, and limit its operations to, the
business of an open-end management company, within the meaning of the
Investment Company Act, (c) maintain in full force and effect at all times all
governmental licenses, registrations, permits and approvals necessary for the
continued conduct of such Borrower's business, including registrations with the
SEC under the 1933 Act and (d) preserve, renew and keep in full force and
effect its rights, privileges and franchises necessary or desirable in the
normal conduct of business.
SECTION 6.5 Compliance with Laws. The Fund and such Borrower will comply
in all material respects with all applicable laws, ordinances, rules,
regulations, and requirements of governmental authorities (including, without
limitation, the Investment Company Act, including provisions relating to
transactions with affiliates and the payment of dividends) except where the
necessity of compliance therewith is contested in good faith by appropriate
proceedings and where the failure to prevail in such contest would not have a
material adverse effect on the Fund or such Borrower or on the Fund's or such
Borrower's ability to perform its obligations under this Agreement.
SECTION 6.6 Inspection of Property, Books and Records. The Fund and such
Borrower will keep proper books of record and account in which full, true and
correct entries shall be made of all dealings and transactions in relation to
its business and activities; and will permit representatives of the Bank at the
Bank's expense to visit and inspect any of their respective properties, to
examine and make abstracts from any of their respective books and records and
to discuss their respective affairs, finances and accounts with their
respective officers, employees and independent public accountants, all at such
reasonable times and as often as may reasonably be desired.
SECTION 6.7 Negative Pledge. Neither the Fund on behalf of such Borrower
nor such Borrower will create, assume or suffer to exist any Lien on any asset
now owned or hereafter acquired by it, except (but subject to the limitations
of Section 6.9):
(a) Liens existing on the date hereof in the amount of $100,000;
<PAGE> 27
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(b) any Lien existing on any asset prior to the acquisition thereof by
such Borrower and not created in contemplation of such acquisition.
(c) Liens incidental to the conduct of its business or the ownership of
its assets which do not secure Debt, including Liens which may arise from
such Borrower's engaging in the investment practices described in its
currently effective Prospectus; and
(d) any Lien under a repurchase agreement which may arise from such
Borrower's engaging in the investment practices described in its currently
effective Prospectus.
SECTION 6.8 Consolidations, Mergers and Sales of Assets. Such Borrower
will not (i) consolidate or merge with or into any other Person or (ii) sell,
lease or otherwise transfer, directly or indirectly, all or any substantial
part of the assets of such Borrower to any other Person other than in the
ordinary course of business.
SECTION 6.9 Debt. Such Borrower will not create, assume or suffer to
exist any Debt other than in the ordinary course of business of the Borrower
and in accordance with the investment policies set forth in such Borrower's
current Prospectus; provided, however, that under no circumstances will such
Borrower permit at any time (a) the asset coverage of such Borrower (as defined
in the Investment Company Act) determined in accordance with the Investment
Company to be less than 300% or (b) the amount of Debt to be in excess of the
amount permitted under its then current Prospectus.
SECTION 6.10 Compliance with Prospectus. Such Borrower will at all times
comply in all material respects with the investment objectives, policies and
restrictions set forth in its current Prospectus.
SECTION 6.11 Regulated Investment Company. Such Borrower shall remain at
all times qualified as a "regulated investment company" under the Internal
Revenue Code.
SECTION 6.12 Modifications of Certain Documents. The Fund will not
consent to any modification, supplement or waiver of any of the provisions of
its Amended and Restated Declaration of Trust or its by-laws or of its Custody
Agreement dated as of December 28, 1994 with CoreStates Bank N.A. if such
modification, supplement or waiver could reasonably be expected to have an
adverse effect on the ability of the Fund or any Borrower to perform its
obligations under this Agreement or any of the Notes.
<PAGE> 28
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ARTICLE VII
DEFAULTS
SECTION 7.1 Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing (it being
understood that an Event of Default with respect to a Borrower shall not in
itself constitute an Event of Default with respect to another Borrower although
an Event of Default relating to the Fund shall constitute an Event of Default
with respect to all Borrowers and an event giving rise to an Event of Default
with respect to one Borrower might also give rise to an Event of Default with
respect to another Borrower):
(a) any Borrower or the Fund on behalf of any Borrower shall fail to pay
when due any principal on any Loan or to pay within 5 days when due interest on
any Loan, any fees or any other amount payable hereunder;
(b) any Borrower shall fail to observe or perform any covenant contained
in Sections 6.7 to 6.9, inclusive;
(c) any Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause (a)
or (b) above) for 10 days after written notice thereof has been given to such
Borrower by the Bank;
(d) any representation, warranty, certification or statement made by the
Fund or any Borrower in this Agreement or in any certificate, financial
statement or other document delivered pursuant to this Agreement shall prove to
have been incorrect in any material respect when made (or deemed made);
(e) any Borrower or the Fund on behalf of any such Borrower shall fail
to make any payment in respect of any Material Financial Obligations when due
or within any applicable grace period;
(f) any event or condition shall occur which results in the acceleration
of the maturity of any Material Debt of any Borrower or enables (or, with the
giving of notice or lapse of time or both, would enable) the holder of such
Debt or any Person acting on such holder's behalf to accelerate the maturity
thereof;
(g) the Fund or any Borrower shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part
of its property, or shall consent to any such relief or to the appointment of
or taking possession by any such
<PAGE> 29
- 29 -
official in an involuntary case or other proceeding commenced against it, or
shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced against
the Fund or any Borrower seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against the Fund or any Borrower under the federal
bankruptcy laws as now or hereafter in effect;
(i) First Security Investment Management, Inc. or a successor thereto
acceptable to the Bank (each, an "Investment Adviser") shall cease for any
reason at any time to be the investment adviser to the Fund or any Borrower;
(j) judgments or orders for the payment of money in excess of
$5,000,000 in the aggregate shall be rendered against any Borrower and such
judgments or orders shall continue unsatisfied and unstayed for a period of 10
days; or
(k) any person or group of persons (within the meaning of Section 13 or
14 of the Securities Exchange Act of 1934, as amended) shall after the date
hereof have acquired beneficial ownership (within the meaning of Rule 13d-3
promulgated by the SEC under said Act) of 20% or more of the outstanding shares
of common stock of the Investment Adviser; or, during any period of twelve
consecutive calendar months, individuals who were directors of the Investment
Adviser on the first day of such period shall cease to constitute a majority of
the board of directors of the Investment Adviser.
then, and in every such event, the Bank may (i) by notice to the Fund terminate
the Commitment with respect to the defaulting Borrower and it shall thereupon
terminate and (ii) by notice to the Fund declare the Notes of such Borrower
(together with accrued interest thereon) to be, and such Notes shall thereupon
become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Fund and the
Fund on behalf of such Borrower; provided that in the case of any of the Events
of Default specified in clause (g) or (h) above with respect to any Borrower,
without notice to the Fund or any Borrower or any other act by the Bank, the
Commitment shall thereupon terminate with respect to, and without notice to,
such Borrower and the Notes of the Fund on behalf of such Borrower (together
with accrued interest thereon) shall become immediately due and payable
<PAGE> 30
- 30 -
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Fund and the Borrowers; and provided, further, that
in the case of any of the Events of Default specified in clause (g) or (h)
above with respect to the Fund, without notice to the Fund or any Borrower or
any other act by the Bank, the Commitment shall thereupon terminate with
respect to all Borrowers and the Notes of the Fund on behalf of all Borrowers
(together with accrued interest thereon) shall become immediately due and
payable without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Fund and the Fund on behalf of the Borrowers.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telex facsimile
transmission or similar writing) and shall be given to such party at its
address, facsimile number or telex number set forth on the signature pages
hereof. Each such notice, request or other communication shall be effective
(i) if given by telex, when such telex is transmitted to the telex number
specified in this Section and the appropriate answerback is received, (ii) if
given by facsimile transmission, when transmitted to the facsimile number
specified in this Section and confirmation of receipt is received, (iii) if
given by mail, 72 hours after such communication is deposited in the mails with
first class postage prepaid, addressed as aforesaid or (iv) if given by any
other means, when delivered at the address specified in this Section; provided
that notices to the Bank pursuant to Article II shall not be effective until
received.
Any notice or other communication to be given by the Bank to any Borrower
shall be deemed given if given to the Fund on such Borrower's behalf.
SECTION 8.2 No Waivers. No failure or delay by the Bank in exercising any
right, power or privilege hereunder or under the Note shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
SECTION 8.3 Expenses; Documentary Taxes; Indemnification.
(a) Each Borrower shall pay (i) its Pro Rata Portion of all
out-of-pocket expenses and internal charges of the Bank (including fees and
disbursements of counsel and time charges of attorneys who may be employees of
the Bank) in connection with
<PAGE> 31
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the preparation and administration of this Agreement, any waiver or consent
hereunder or any amendment hereof or any Default or alleged Default hereunder
and (ii) if an Event of Default occurs as a result of which the Bank is
entitled to terminate the Commitment with respect to a Borrower, all
out-of-pocket expenses and internal charges incurred by the Bank (including
(without duplication) the fees and disbursements of outside counsel and the
allocated cost of inside counsel) in connection with such Event of Default and
collection, bankruptcy, insolvency and other enforcement proceedings against
such Borrower resulting therefrom. Each Borrower shall indemnify the Bank
against any transfer taxes, documentary taxes, assessments or charges made by
any governmental authority by reason of the execution and delivery of this
Agreement or the Notes of such Borrower, but each Borrower shall be liable
solely for its Pro Rata Portion of such amounts.
(b) Each Borrower agrees to indemnify the Bank, its affiliates and its
directors, officers, agents and employees (each an "Indemnitee") and hold each
Indemnitee harmless from and against any and all liabilities, losses, damages,
costs and expenses of any kind, including, without limitation, the reasonable
fees and disbursements of counsel, which may be incurred by such Indemnitee in
connection with any investigative, administrative or judicial proceeding
(whether or not such Indemnitee shall be designated a party thereto) brought or
threatened relating to or arising out of this Agreement or any actual or
proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall
have the right to be indemnified hereunder for such Indemnitee's own gross
negligence or willful misconduct as determined by a court of competent
jurisdiction and provided, further, that each Borrower shall be liable solely
for its Pro Rata Portion of such amounts.
(d) The provisions of this Section 8.3 shall survive termination of the
Commitment and repayment of the Notes.
SECTION 8.4 Amendments and Waivers. Any provision of this Agreement or
the Note may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by the Bank and the Fund on behalf of each Borrower.
SECTION 8.5 Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
assigns, except that neither the Fund nor any Borrower may assign or otherwise
transfer any of its rights under this Agreement without the prior written
consent of the Bank.
(b) The Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment
or any or all of its Loans. In the event of
<PAGE> 32
- 32 -
any such grant by the Bank of a participating interest to a Participant,
whether or not upon notice to the Fund or any Borrower, the Bank shall remain
responsible for the performance of its obligations hereunder, and the Fund and
Borrowers shall continue to deal solely and directly with the Bank in
connection with the Bank's rights and obligations under this Agreement. Any
agreement pursuant to which the Bank may grant such a participating interest
shall provide that the Bank shall retain the sole right and responsibility to
enforce the obligations of the Fund and the Borrowers hereunder including,
without limitation, the right to approve any amendment, modification or waiver
of any provision of this Agreement; provided that such participation agreement
may provide that the Bank will not agree to any modification, amendment or
waiver of this Agreement (i) which increases or decreases the Commitment, (ii)
reduces the principal of or rate of interest on any Loan or fees hereunder or
(iii) postpones the date fixed for any payment of principal of or interest on
any Loan or any fees hereunder without the consent of the Participant. The
Fund and the Borrowers agree that each Participant shall, to the extent
provided in its participation agreement, be entitled to the benefits of Section
2.12 and Article IV with respect to its participating interest.
(c) The Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part of all, of its
rights and obligations under this Agreement and the Notes, and such Assignee
shall assume such rights and obligations, pursuant to an assignment and
assumption agreement executed by such Assignee and the Bank, with (and subject
to) the subscribed consent of the Fund and the applicable Borrower, which shall
not be unreasonably withheld; provided that if an Assignee is an affiliate of
the Bank, no such consent shall be required. Upon execution and delivery of
such instrument and payment by such Assignee to the Bank of an amount equal to
the purchase price agreed between the Bank and such Assignee, such Assignee
shall be a Bank party to this Agreement and shall have all the rights and
obligations of a Bank with a Commitment as set forth in such instrument of
assumption, and the Bank shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by any party shall be
required. Upon the consummation of any assignment pursuant to this subsection
(c), the Bank and the Fund and the applicable Borrowers shall make appropriate
arrangements so that, if required, a new Note or Notes are issued to the
Assignee.
(d) The Bank may at any time assign all or any portion of its rights under
this Agreement and the Note to a Federal Reserve Bank. No such assignment
shall release the Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of the Bank's rights
shall be entitled to receive any greater payment under Section 4.3 than the
Bank would have been entitled to receive with respect to the rights
transferred, unless such
<PAGE> 33
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transfer is made with the applicable Borrower's prior written consent or by
reason of the provisions of Sections 4.2 or 4.3 requiring the Bank to designate
a different Applicable Lending Office under certain circumstances or at a time
when the circumstances giving rise to such greater payment did not exist.
SECTION 8.6 Counterparts; Integration; Effectiveness. This Agreement may
be signed in any number of counterparts with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
constitutes the entire agreement and understanding between the parties hereto
and supersedes any and all prior agreements and understandings, oral or
written, relating to the subject matter hereof. This Agreement shall become
effective upon receipt by the Bank of counterparts hereof signed by the parties
hereto.
SECTION 8.7 GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT AND
THE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
STATE OF NEW YORK. The Fund and each Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Fund and each Borrower
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such
a court has been brought in an inconvenient forum.
SECTION 8.8. Limitation on Recourse. Notice is hereby given, and the
parties hereby agree, that this Agreement and the Notes described herein have
been executed by an officer of the Fund on behalf of the Fund and the Borrowers
and not individually, and that all persons dealing with the Fund and the
Borrowers must look solely to the assets of the Fund and a Borrower as
described herein for the enforcement of any claim against the Fund or such
Borrower as none of the Trustees, officers, agents or shareholders of the Fund
assume any personal liability for obligations entered into on behalf of the
Fund or any Borrower.
SECTION 8.9 WAIVER OF JURY TRIAL. THE FUND, EACH BORROWER AND THE BANK
EACH HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
<PAGE> 34
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
THE ACHIEVEMENT FUNDS TRUST
FUND on behalf of the
Portfolios listed below
By: /s/ DAVID G. LEE
--------------------------------------
David G. Lee, President
Portfolios:
Equity Fund
Balanced Fund
Intermediate Bond Fund
Short Term Bond Fund
Short Term Municipal Bond
Fund
Idaho Municipal Bond Fund
Address:
680 East Swedesford Road
Wayne, PA 19087-0451
Attn: Kathryn L. Stanton
Telecopy No:(610) 254-1040
$10,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ RICHARD J. HERDER
--------------------------------------
Richard J. Herder
Vice President
60 Wall Street
New York, New York 10260-0060
Attention: Mr. Richard Herder
Telecopy number:(212) 648-5548
Domestic Lending Office:
Morgan Guaranty Trust Company
of New York
60 Wall Street Branch
c/o J.P. Morgan Services Inc.
500 Stanton-Christiana Road
Loan Operations - 3rd Floor
Newark, Delaware 19713
Attention: Domestic Loan
Servicing
Telex number: 177615 MGT UT
Telecopy number: 302-634-1094
<PAGE> 35
- 35 -
Euro-Dollar Lending Office:
Nassau, Bahamas Office
c/o J.P. Morgan Services Inc.
500 Stanton-Christiana Road
Newark, Delaware 19713
Attention: Euro-Loan Servicing
Telex number: 177615 MGT UT
Telecopy number: 302-634-1094
<PAGE> 36
EXHIBIT A
PROMISSORY NOTE
$10,000,000.00 Due: October 10, 1996
Dated: __________, 1995 New York, New York
FOR VALUE RECEIVED, THE ACHIEVEMENT FUNDS TRUST, a Massachusetts business
trust (the "Fund") on behalf of _____, a sub-trust of the Fund (the
"Borrower"), promises to pay to the order of MORGAN GUARANTY TRUST COMPANY OF
NEW YORK (the "Bank"), on October 10, 1996, or such earlier date as set forth
in the Credit Agreement hereinafter referred to, the principal sum of TEN
MILLION AND 00/100 DOLLARS ($10,000,000.00), or if less, the then aggregate
unpaid principal amount of Loans (as such term is defined in the Credit
Agreement and other capitalized terms used herein and not defined herein having
the meaning given to them in the Credit Agreement) as may be borrowed by the
Fund for the benefit of and payable from the assets Fund, on behalf of such
Borrower, may borrow, repay and reborrow hereunder in accordance with the
provisions of the Credit Agreement.
Anything in this Note to the contrary notwithstanding, the Fund, on behalf
of the Borrower, shall be liable hereunder only for Loans borrowed by the Fund
on behalf of such Borrower under the Credit Agreement and shall not be liable
hereunder for the borrowings of the Fund on behalf of the other Borrowers
specified in the Credit Agreement. The sole source of repayment of the
principal of and interest on each Loan hereunder made with respect to the
Borrower shall be the revenues and assets of the Borrower.
The Fund, on behalf of the Borrower, further promises to pay to the order
of the Bank interest on the aggregate unpaid principal amount hereof from time
to time outstanding from the date hereof until paid in full at the rates per
annum which shall be determined in accordance with the provisions of the Credit
Agreement. Accrued interest shall be payable on the dates specified in the
Credit Agreement.
All payments of principal and interest under this Note shall be made in
lawful money of the United States of America in immediately available funds at
the Bank's office at 60 Wall Street, New York, New York, or at such other place
as may be designated by the Bank to the Fund in writing, for the account of the
Domestic Lending Office or the Euro-Dollar Lending Office (as set forth in the
Credit Agreement).
This Note is one of the Notes referred to in, and evidences indebtedness
incurred under, the Credit Agreement dated as of October 11, 1995 (herein, as
it may be amended, modified or supplemented from time to time, called the
"Credit Agreement")
<PAGE> 37
- 2 -
among the Fund on behalf of the Borrower and the other Borrowers specified in
the Credit Agreement, the Borrowers and the Bank, to which Credit Agreement
reference is made for a statement of the terms and provisions thereof,
including those under which the Fund on behalf of the Borrower is permitted and
required to make prepayments and repayments of principal of such indebtedness
and under which such indebtedness may be declared to be immediately due and
payable.
This Note has been executed by the Fund on behalf of the Borrower by an
officer of the Fund. The obligations of this Note shall be binding upon the
revenues, assets and properties of the Borrower only and shall not be binding
upon any trustee, officer or shareholder of the Fund individually.
The holder of this Note shall be entitled to endorse on a schedule (and to
attach to and make a part of this Note a continuation of any such schedule as
and when required) to this Note the date, the amount, type, interest rate and
the maturity of each Loan to the Fund on behalf of the Borrower made by it and
the date and the amount of each payment of principal made by the Fund on behalf
of such Borrower with respect thereto, provided that the failure of the holder
to make any such recordation shall not affect the obligations of the Borrower
under the Credit Agreement or this Note.
All parties hereto, whether as makers, endorsers or otherwise, severally
waive presentment, demand, protest and notice of dishonor in connection with
this Note.
This Note is made under and governed by the internal laws of the State of
New York.
Address: THE ACHIEVEMENT FUNDS
TRUST on behalf of
[insert name of Borrower]
By:
--------------------------
Title:
-----------------------
<PAGE> 38
EXHIBIT B
BORROWING BASE CERTIFICATE
Reference is made to that certain Credit Agreement dated as of October 11,
1995 (the "Credit Agreement") between THE ACHIEVEMENT FUNDS TRUST, a
Massachusetts business trust, on behalf of certain sub-trusts named therein,
and Morgan Guaranty Trust Company of New York (the "Bank"). Capitalized terms
used herein and not otherwise defined shall have the meaning given to such
terms in the Credit Agreement. Pursuant to the terms of the Credit Agreement,
the undersigned, on behalf of the portfolio set forth below (which is one of
the Borrowers under the Credit Agreement), hereby certifies to the Bank as
follows:
1. As of _________, the Borrowing Base of [NAME OF BORROWER] is
calculated as follows:
(a) Total Net Asset Value: $
--------------------
(b) 5% of Total Net
Asset Value: $
--------------------
(c) Total Loans outstanding
excluding the current
day's requested amount: $
--------------------
(d) Borrowing Base:
[(b) minus (c)] $
--------------------
2. As of the date hereof, and after giving effect to the borrowing
requested to be made on this date by such Borrower, the asset coverage of such
Borrower (as defined in the Investment Company Act) determined in accordance
with said Act as of the Business Day immediately preceding the date hereof is
at least 300%.
Date: THE ACHIEVEMENT FUNDS
-------------------- TRUST on behalf of
[insert name of Borrower]
By:
-------------------
Name:
Title:
<PAGE> 39
EXHIBIT C
NOTICE OF BORROWING
Reference is made to that certain Credit Agreement dated as of October 11,
1995 (the "Credit Agreement") between THE ACHIEVEMENT FUNDS TRUST, a
Massachusetts business trust, on behalf of certain sub-trusts named therein,
and Morgan Guaranty Trust Company of New York (the "Bank"). Capitalized terms
used herein and not otherwise defined shall have the meaning given to such
terms in the Credit Agreement. Pursuant to Section 2.2 of the Credit
Agreement, the Bank is hereby notified that on ___________, 19 __, the Fund on
behalf of the Borrower specified in Item 1 below will borrow a Committed Loan
of $ ___________ from the Bank. Such Loan shall be a [Base Rate Loan] [CD
Loan] [EuroDollar Loan]. The Interest Period for such Loan shall be of
________ duration. Pursuant to the terms of the Credit Agreement, the
undersigned, on behalf of the portfolio specified in Item 1 below (which is
a Borrower under the Credit Agreement), hereby represents and certifies to
the Bank as follows:
1. The Borrower which will use the proceeds of such Loan is ___________ .
2. The purpose for which such Loan will be used is to fund shareholder
redemptions of the Borrower.
3. As of the date hereof, and after giving effect to the borrowing
requested to be made on this date by such Borrower, the asset coverage (as
defined in the Investment Company Act) determined in accordance with the
Investment Company Act as of the Business Day immediately preceding the date
hereof is at least 300% and the outstanding principal amount of the Loans to
such Borrower will not exceed the Borrowing Base.
4. The undersigned further certifies that (a) the proceeds of such Loan
will be utilized solely by the Borrower designated above, (b) no Default or
Event of Default has occurred and is continuing as of the date of this Notice
of Borrowing, (c) the representations and warranties of such Borrower contained
in the Credit Agreement (except, in the case of a Refunding Loan, the
representations and warranties set forth in Sections 5.4(b) and 5.5 of the
Credit Agreement) as to any matter which has theretofore been disclosed in
writing by the Borrower to the Bank) are true on and as of the date hereof.
Date: THE ACHIEVEMENT FUNDS
------------------------ TRUST on behalf of
[insert name of Borrower]
By:
--------------------
Name:
Title:
<PAGE> 40
EXHIBIT D
[Opinion of Counsel to the Fund and the Borrowers]
October 11, 1995
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10260-0060
Re: Credit Agreement dated October 11, 1995
among the Borrowers named therein and
Morgan Guaranty Trust company of New York
Ladies and Gentlemen:
We have acted as counsel to The Achievement Funds Trust, a Massachusetts
business trust ("Fund"), and the separate series thereof which are set forth
an Schedule I hereto (the "Borrowers" and each, individually a "Borrower") in
connection with that certain Credit Agreement, dated October 11, 1995 (the
"Credit Agreement"), between the Fund on behalf of the Borrowers and Morgan
Guaranty Trust Company of New York (the "Bank"). The opinions expressed below
are furnished to you pursuant to Section 3.1 of the Credit Agreement. Terms
used but not otherwise defined herein shall have the meanings given to them in
the credit Agreement.
In so acting, we have examined executed originals, or copies certified or
otherwise identified to our satisfaction, of each of the Credit Agreement and
the Notes referred to therein, each dated the date hereof. We have also
examined originals or copies, certified or otherwise identified to our
satisfaction, of such documents and records of the Fund and the Borrowers, and
such other instruments and certificates of public officials and officers and
representatives of the Fund and the Borrowers, and have made such examinations
of law, as we have deemed necessary for the purposes of this letter.
We have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity to original documents
of documents submitted to us as certified, conformed or photostatic copies. [We
have also assumed, without verification, the legal capacity of each
<PAGE> 41
Morgan Guaranty Trust Company of New York
October 11, 1995
Page 2
individual who has executed documents or instruments in connection with the
transaction contemplated hereby.] We have made no independent factual
investigations as to factual matters, and have relied exclusively on the facts
stated in the representations and warranties contained in the Credit Agreement
and on facts stated in certificates of authorized officers of the Fund. With
respect to the opinions expressed in paragraphs 4 and 5 below, we have also
assumed that the Bank is not, and will not become, an affiliated person (as
defined in Section 2 of the Investment Company Act of 1940 (the "1940 Act")),
of the Fund or any Borrower, or an affiliated person of such affiliated person.
We have also assumed, without verification (i) that the Bank has the power
(including, without limitation, corporate power) and authority to enter into
and perform its obligations under the Credit Agreement, (ii) the due
authorization, execution and delivery by the Bank of the Credit Agreement and
(iii) that the Credit Agreement constitutes the legal, valid and binding
obligation of the Bank, enforceable against the Bank in accordance with its
terms.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Fund is a business trust validly existing and in good standing
under the laws of the Commonwealth of Massachusetts.
2. The Fund and each of the Borrowers has the requisite power and
authority to own and operate its properties and assets, to carry on its
business as presently conducted, to execute, deliver and perform its
obligations under the Credit Agreement, the Notes and each other instrument,
document or agreement executed and delivered in connection therewith or
pursuant thereto to which it is a party and the Fund, on behalf of each
Borrower, has the requisite power and authority to borrow money under the
Credit Agreement.
3. The execution and delivery of the Credit Agreement, the performance by
each of the Fund and the Borrowers of its respective obligations thereunder and
the borrowings by each of the Borrowers under the Credit Agreement, have been
duly authorized by all necessary Fund action. No action by the shareholders of
the Fund is required to authorize the execution and delivery of the Credit
Agreement, the performance by each of the Fund and the Borrowers of its
respective obligations thereunder and the borrowings of each of the Borrowers
under the Credit Agreement.
4. The Credit Agreement and the Notes have been duly executed and
delivered by the Fund on behalf of each of the
<PAGE> 42
Morgan Guaranty Trust Company of New York
October 11, 1995
Page 3
Borrowers and constitute legal, valid and binding obligations of the Fund on
behalf of the Borrowers, enforceable in accordance with their terms.
5. The execution, delivery and performance of the Credit Agreement and
the Notes to which the Fund or any of the Borrowers is a party will not
contravene or violate (a) any statutory law, rule or regulation of the United
States or Chapter 182 of the General Laws of the Commonwealth of
Massachusetts, (b) any provision of the declaration of trust or bylaws of the
Fund, (c) any provision of any agreement listed on Schedule II attached hereto,
or (d) to our knowledge, any writ, order or decision of any court or
governmental entity binding on the Fund or any of the Borrowers. No consent or
authorization of, notice to or filing with, any regulatory authority of the
United States or the Commonwealth of Massachusetts under Chapter 182 of the
General Laws of the Commonwealth of Massachusetts is required in connection
with the execution, delivery or performance of the Credit Agreement or the
Notes. The basis for the opinions expressed in this paragraph 5 as they relate
to Section 17(d) of the 1940 Act and Rule 17d-1 promulgated thereunder by the
Securities and Exchange Commission (the "Commission") is explained below.
Section 17(d) of the 1940 Act provides, in pertinent part, as follows:
It shall be unlawful for any affiliated person of . . . a registered
investment company . . . or any affiliated person of such person . . .
acting as principal to effect any transaction in which such registered
company . . . is a joint or a joint and several participant with such
person . . . or affiliated person, in contravention of such rules and
regulations as the Commission may prescribe for the purpose of limiting or
preventing participation by such registered or controlled company on a
basis different from or less advantageous than that of such other
participant.
Rule 17d-1 under the 1940 Act provides, in relevant part, as follows:
No affiliated person of . . . any registered investment company . . . and
no affiliated person of such a person . . . acting as principal, shall
participate in, or effect any transaction in connection with, any joint
enterprise or other joint arrangement or profit-sharing plan in which any
such registered company . . . is a participant, and which is entered into,
adopted or modified subsequent to the effective date of this rule, unless
an application regarding such joint enterprise, arrangement or
profit-sharing plan has been filed with the Commission and has been
granted by
<PAGE> 43
Morgan Guaranty Trust Company of New York
October 11, 1995
Page 4
an order entered prior to the submission of such plan or modification to
security holders for approval . . . . Rule 17d-l(a).
A "joint enterprise or other joint arrangement or profit-sharing plan" as
used in this rule shall mean any written or oral plan, contract,
authorization or arrangement, or any practice or understanding concerning
an enterprise or undertaking whereby a registered investment company . . .
and any affiliated person of . . . such registered investment company, or
an affiliated person of such a person . . . . have a joint or a joint and
several participation, or share in the profits of such enterprise or
undertaking . . . . Rule 17(d)-1(c).
Execution and delivery of the Credit Agreement by the Borrowers could
be considered a "joint enterprise or other joint arrangement or profit-sharing
plan" as defined in Rule 17d-1(c) under the 1940 Act, so as to require the
Borrowers to obtain a prior order from the Commission authorizing such action
pursuant to Rule 17(d)-1(a). However, in a letter (the "T. Rowe Price
Letter") publicly available July 31, 1995 addressed to the T. Rowe Price Funds
(the "TRP Funds"), the Office of the Chief Counsel of the Division of
Investment Management at the Commission stated that it would not recommend that
the Commission take enforcement action against the TRP Funds under
Section 17(d) of the 1940 Act or Rule 17d-1 thereunder if the TRP Funds jointly
entered into a credit facility having terms and conditions set forth in the
T. Rowe Price Letter.
Our opinion with respect to the necessity of obtaining authorizations
from or making filings with any regulatory authority of the United States in
connection with execution, delivery and performance of the Credit Agreement by
the Fund on behalf of the Borrowers, and our opinion with respect to execution,
delivery and performance of the Credit Agreement by the Fund on behalf of the
Borrowers not violating any statutory law, rule or regulation of the United
States, as they relate to Section 17(d) of the 1940 Act and Rule 17d-1, are
based upon the interpretation of those provisions in the T. Rowe Price Letter.
We believe that the Commission's Division of Investment Management would, upon
request, issue a "no-action" letter to the Fund and the Borrowers similar to
the T. Rowe Price Letter, because the terms and conditions of the Credit
Agreement are not materially different from the terms and conditions of the
credit arrangement described in the T. Rowe Price Letter. We note, however,
that while members of the public are entitled to rely upon "no-action" letters
like the T. Rowe Price Letter, such letters are only expressions of the views
of the Commission's staff, and are not an expression of the views of the
Commission. 17 C.F.R Section 202.1(d). We also note that the T. Rowe Price
Letter
<PAGE> 44
Morgan Guaranty Trust Company of New York
October 11, 1995
Page 5
is the only authoritative pronouncement of the Commission or its staff that we
found relating to the application of Section 17(d) of the 1940 Act and Rule
17d-1 to arrangements like those contemplated by the Credit Agreement.
The foregoing opinions are subject to the following exceptions,
limitations and qualifications:
(a) Our opinion is subject to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, fraudulent
transfer or similar laws affecting creditors' rights and remedies
generally; and general principles of equity, including without limitation,
concepts of materiality, reasonableness, good faith and fair dealing
(regardless of whether such enforceability is considered in a proceeding
in equity or at law).
(b) We express no opinion as to the application or requirements of the
patent, trademark, copyright, antitrust and unfair competition, pension or
employee benefit or tax laws in respect of the transactions contemplated
by or referred to in the Credit Agreement.
(c) We express no opinion as to the validity or enforceability of any
provision of the Credit Agreement which (i) permits the Bank to increase
the rate of interest or to collect a late charge in the event of
delinquency or default; (ii) purports to be a waiver by the Fund or a
Borrower of any right or benefit except to the extent permitted by
applicable law; (iii) purports to require that waivers must be in writing
to the extent that an oral agreement or implied agreement by trade
practice or course of conduct modifying provisions of the Credit Agreement
has been made; (iv) purports to be a waiver of the right to a jury trial;
(v) purports to be a waiver of the obligations of good faith, fair
dealing, diligence, mitigation of damages or commercial reasonableness;
(vi) purports to exculpate any party from its own negligent acts or limit
any party from certain liabilities; or (vii) chooses the governing law of
New York where such choice of law would violate a public policy of the
State of Utah or the Commonwealth of Massachusetts or the Commonwealth of
Pennsylvania, although we are not aware of any such policy in the State of
Utah or the Commonwealth of Pennsylvania which is violated by any
provision of the Credit Agreement.
(d) We express no opinion as to the enforceability of forum selection
clauses upon the courts in the forum selected.
<PAGE> 45
Morgan Guaranty Trust Company of New York
October 11, 1995
Page 6
(e) As used in the opinion expressed in paragraph 5 above, the
qualifying phrase "to our knowledge" indicates that the opinion to which
it relates is based upon inquiry of each lawyer who is the current primary
contract for the Fund or who has devoted substantive attention to matters
on behalf of the Fund during the preceding twelve months and who is
currently employed by or a member of this firm.
We express no opinion as to the laws of any jurisdiction other than
the laws of the Commonwealth of Pennsylvania, Chapter 182 of the General Laws
of the Commonwealth of Massachusetts (without considering the effect of case
law or other statutory law on Chapter 182 of the General Laws of the
Commonwealth of Massachusetts), and the Federal laws of the United States of
America.
This opinion may be relied upon by you only in connection with the
consummation of the transactions described herein and may not be used or relied
upon by you or any other person for any other purpose, without in each instance
our prior written consent.
This opinion is limited to the matters expressly stated herein. No
implied opinion may be inferred to extend this opinion beyond the matters
expressly stated herein. We do not undertake to advise you or anyone else of
any changes in the opinions expressed herein resulting from changes in law,
changes in facts or any other matters that hereafter might occur or be brought
to our attention.
Very truly yours,
<PAGE> 46
SCHEDULE I
To Opinion of
Ballard Spahr Andrews & Ingersoll
BORROWERS
Equity Fund
Balanced Fund
Intermediate Term Bond Fund
Short Term Bond Fund
Short Term Municipal Bond Fund
Idaho Municipal Bond Fund
Schedule I - 1
<PAGE> 47
SCHEDULE II
To Opinion of
Ballard Spahr Andrews & Ingersoll
1. Investment Advisory Agreement dated February 1, 1989 between the Fund and
First Security Investment Management, Inc.
2. First Amendment to Investment Advisory Agreement dated December 27, 1994
between the Fund and First Security Investment Management, Inc.
3. Distribution Agreement dated December 27, 1994 between the Fund and SEI
Financial Services Company.
4. Custodian Agreement dated December 27, 1994 between the Fund and
CoreStates Bank, N.A.
5. Transfer Agency Agreement dated December 27, 1994 between the Fund and
Supervised Service Company.
6. Consent of the Registrant to the Assignment of the Transfer Agency
Agreement between the Fund and Supervised Service Company to DST Systems,
Inc.
7. Administration Agreement dated December 27, 1994 between the Fund and SEI
Financial Management Corporation.
Schedule II - 1
<PAGE> 1
EXHIBIT 10
[BALLARD, SPAHR, ANDREWS & INGERSOLL LETTERHEAD]
February 2, 1989
The FSB Funds
One Exchange Place
9th Floor
Boston, MA 02108
Gentlemen:
We have acted as counsel to The FSB Funds (the "Fund"),
a business trust organized under the laws of the Commonwealth of
Massachusetts, in connection with the preparation of a
Registration Statement on Form N-1A, File No. 33-26205 (the
"Registration Statement") covering the offer and sale of an
indefinite number of shares of beneficial interest of the Fund,
without par value (the "Shares").
We have examined copies Of the Master Trust Agreement
and By Laws of the Fund the Registration Statement, all votes adopted by the
Fund's Board of Trustees (the "Board") at the meeting held on January 27, 1989,
consents of the Board and other records and documents that we deemed necessary
for the purpose of this opinion. We have also examined such other documents,
papers, statutes and authorities as we have deemed necessary to form a basis
for the opinion expressed below.
In our examination of material, we have assumed the genuineness of all
signatures and the conformity to original statements and certificates of
officers and representatives of the Fund and others as to various questions of
fact material to our opinion. In addition, we have relied upon the opinion of
Stephen E. Cavan, Esq. that is attached to this opinion as to matters governed
by the laws of the Commonwealth of Massachusetts.
Based upon the foregoing, we are of the opinion that the Shares, when
duly sold, issued and paid for in accordance with the terms of the prospectus
and the Statement of Additional Information included as part of the
Registration Statement, will be validly and legally issued and will be fully
paid and non-assessable shares of beneficial interest.
<PAGE> 2
The FSB Funds
Febrary 2, 1989
Page 2
We consent to the filing of this opinion as an exhibit to the
Registration Statement, to the reference to us in the Statement of Additional
Information included as part of the Registration Statement and to the filing of
this opinion as an exhibit to any application made by or on behalf of the Fund
or any distributor or dealer in connection with the registration or
qualification of the Fund or its shares of beneficial interest under the
securities laws of any state or other jurisdiction.
The Fund is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Fund's Master Trust Agreement provides that if any shareholder of
the Fund is charged or held personally liable solely by reason of being or
having been a shareholder, the shareholder shall be entitled out of the assets
of the Fund to be held harmless from and indemnified against all loss and
expense arising from such liability. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Fund itself would be unable to meet its obligations.
Very truly yours,
/s/ BALLARD, SPAHR, ANDREWS & INGERSOLL
/ja
<PAGE> 1
Exhibit 11(a)
CONSENT
We hereby consent to the use of our name under the caption "Counsel and
Independent Accountants" in the Prospectuses and under the caption "Counsel to
the Trust" in the Statement of Additional Information of Post-Effective
Amendment No. 11 to the Registration Statement on Form N-1A of The Achievement
Funds Trust (Registration No. 33-26205) filed under the Securities Act of 1933
and Amendment No. 12 under the Investment Company Act of 1940.
/s/ Ballard Spahr Andrews & Ingersoll
--------------------------------------
Ballard Spahr Andrews & Ingersoll
May 30, 1996
<PAGE> 1
EXHIBIT 11(b)
CONSENT OF INDEPENDENT AUDITORS
The Achievement Funds Trust:
We consent to the incorporation by reference in Post-Effective Amendment No. 11
to Registration Statement No. 33-26205 of our report dated March 22, 1996
appearing in the Annual Report to Shareholders-January 31, 1996 and to the
reference to us under the caption "Financial Highlights" appearing in the
Prospectuses, which are a part of such Registration Statement.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
May 30, 1996
<PAGE> 1
EXHIBIT 13
SHARE PURCHASE AGREEMENT
The Achievement Funds Trust (the "Trust"), a Massachusetts
business trust, and SEI Financial Management Corporation ("SEI"), a
Delaware corporation, intending to be legally bound, hereby agree as
follows:
1. The Trust hereby offers for sale to SEI, and SEI accepts
such offer from the Trust and hereby purchases, shares (the "Shares") of
each of the classes of shares of the Trust's portfolios at a price per
Share listed below.
<TABLE>
<CAPTION>
Portfolio and Number of Purchase Price
Class of Shares Shares Purchased Per Share
--------------- ---------------- --------------
<S> <C> <C>
Equity Fund
Institutional 10 $ 10
Retail Class A 10 10
Balanced Fund
Institutional 10 10
Retail Class A 10 10
Short Term Bond Fund
Institutional 10 10
Retail Class A 10 10
Intermediate Term Bond
Institutional 10 10
Retail Class A 10 10
Short Term Municipal
Bond Fund
Institutional 10 10
Retail Class A 10 10
Idaho Municipal Bond
Fund
Institutional 10 10
Retail Class A 10 10
</TABLE>
The Trust hereby acknowledges receipt from SEI of funds in the amount of
$1,200.00 in full payment for the Shares.
2. SEI represents and warrants to the Trust that the Shares
are being acquired for investment purposes and not with a view to the
distribution thereof.
<PAGE> 2
3. SEI agrees that if it or any direct or indirect transferee
of any of the Shares redeems any of the Shares prior to the fifth
anniversary of the date the Trust begins its investment activities for the
above portfolios of the Trust, SEI will pay to the Trust an amount equal
to the number resulting from multiplying the Trust's total unamortized
organizational expenses by a fraction, the numerator of which is equal to
the number of Shares being redeemed by SEI or such transferee and the
denominator of which is equal to the number of Shares that are being
purchased hereby and continue to be outstanding as of the date of such
redemption, as long as the administrative position of the staff of the
Securities and Exchange Commission requires such reimbursement.
IN WITNESS WHEREOF, the parties hereto have executed this Share
Purchase Agreement as of the ____ day of December, 1994.
THE ACHIEVEMENT FUNDS TRUST
By: /s/ Kathryn L. Stanton
-----------------------------------
Title: Vice President
--------------------------------
SEI FINANCIAL MANAGEMENT
CORPORATION
By: /s/ Sandra K. Orlow
-----------------------------------
Title: Vice President
--------------------------------
2
<PAGE> 1
Exhibit 15
DISTRIBUTION PLAN
[RETAIL CLASS]
THE ACHIEVEMENT FUNDS TRUST
WHEREAS, THE ACHIEVEMENT FUNDS TRUST (the "Trust") is engaged in
business as an open-end investment company registered under the Investment
Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that the following Distribution Plan will benefit the
Trust and the owners of the Retail Class A shares of beneficial interest
("Shareholders") in its portfolios;
NOW, THEREFORE, the Trustees of the Trust hereby adopt this
Distribution Plan pursuant to Rule 12b-1 under the 1940 Act.
SECTION 1. The Trust has adopted this Retail Class A Distribution
Plan ("Plan") to enable the Trust to directly or indirectly bear expenses
relating to the distribution and shareholder servicing of the retail Class A
shares of the portfolios of the Trust (each a "Portfolio") of which the Trust
is the issuer.
SECTION 2. The retail class of each Portfolio is authorized to pay
the principal underwriter of the Trust's Retail Class A shares (the
"Distributor") a total fee in connection with the servicing of shareholder
accounts of such class and in connection with distribution- related services
provided in respect of such class, calculated and payable monthly, at the
annual rate of .25% of the value of the average daily net assets of such class.
All or any portion of such total fee may be payable as a Shareholder Servicing
Fee, and all or any portion of such total fee may be payable as a Distribution
Fee, as determined from time to time by the Trust's Board of Trustees. Until
further action by the Board of Trustees, all of such fee shall be designated
and payable as a Shareholder Servicing Fee.
SECTION 3.
(a) The Shareholder Servicing Fee may be used by the Distributor
to provide compensation for ongoing servicing and/or
maintenance of shareholder accounts with respect to the Retail
Class A of the applicable Portfolios of the Trust.
Compensation may be paid by the Distributor to persons,
including employees of the Distributor, and institutions who
respond to inquiries of holders of such Retail Class A shares
regarding their ownership of such shares or their accounts
with the Trust or who provide other administrative or
accounting services
1
<PAGE> 2
not otherwise required to be provided by the Trust's
investment adviser, transfer agent or other agent of the
Trust.
(b) The Distribution Fee may be used by the Distributor to
provide initial and ongoing sales compensation to its
investment executives and to other broker-dealers in respect
of sales of retail class shares of the applicable Portfolios
of the Trust and to pay for other advertising and promotional
expenses in connection with the distribution of the Retail
Class A shares. These advertising and promotional expenses
include, by way of example but not by way of limitation, costs
of printing and mailing prospectuses, statements of additional
information and shareholder reports to prospective investors;
preparation and distribution of sales literature; advertising
of any type; an allocation of overhead and other expenses of
the Distributor related to the distribution of such retail
class shares; and payments to, and expenses of, officers,
employees or representatives of the Distributor, of other
broker-dealers, banks or other financial institutions, and of
any other persons who provide support services in connection
with the distribution of such retail class shares, including
travel, entertainment, and telephone expenses.
(c) Payments under the Plan are not tied exclusively to the
expenses for shareholder servicing and distribution related
activities actually incurred by the Distributor, so that such
payments may exceed expenses actually incurred by the
Distributor. The Trust's Board of Trustees will evaluate the
appropriateness of the Plan and its payment terms on a
continuing basis and in doing so will consider all relevant
factors, including expenses borne by the Distributor and
amounts it receives under the plan.
(d) The Trust's investment adviser and the Distributor may, at
their option and in their sole discretion, make payments from
their own resources to cover costs of additional distribution
and shareholder servicing activities.
SECTION 4. This Plan shall not take effect with respect to a
Portfolio until it has been approved (a) by a vote of at least a majority of
the outstanding voting securities of the Retail Class A shares of such
Portfolio; and (b) together with any related agreements, by votes of the
majority of both (i) the Trustees of the Trust and (ii) the Qualified Trustees,
cast in person at a Board of Trustees meeting called for the purpose of voting
on this Plan or such agreement.
SECTION 5. This Plan shall continue in effect for a period of one
year after it takes effect and for successive one year periods thereafter for
so long as such
2
<PAGE> 3
continuance is specifically approved at least annually in the manner provided
in Part (b) of Section 4 herein for the approval of this Plan.
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Trust pursuant to this Plan or any related agreement
shall provide to the Trustees of the Trust, at least quarterly, a written
report of the amounts so expended and the purposes for which such expenditures
were made.
SECTION 7. This Plan may be terminated at any time with respect to
any Portfolio by the vote of a majority of the Qualified Trustees or by vote of
a majority of the Portfolio's outstanding retail class voting securities.
SECTION 8. All agreements with any person relating to implementation
of this Plan shall be in writing, and any agreement related to this Plan shall
provide (a) that such agreement may be terminated at any time with respect to
any Portfolio, without payment of any penalty, by the vote of a majority of the
Qualified Trustees or by the vote of Shareholders holding a majority of the
Portfolio's outstanding retail class voting securities, on not more than 60
days written notice to any other party to the agreement; and (b) that such
agreement shall terminate automatically in the event of its assignment.
SECTION 9. This Plan may not be amended to increase materially the
amount of distribution expenses permitted pursuant to Section 2 hereof without
the approval of Shareholders holding a majority of the outstanding Retail Class
A voting securities of the applicable Portfolio, and all material amendments to
this Plan shall be approved in the manner provided in Part (b) of Section 4
herein for the approval of this Plan.
SECTION 10. As used in this Plan, (a) the term "Qualified Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of
this Plan or any agreements related to it, and (b) the terms "assignment" and
"interested person" shall have the respective meanings specified in the 1940
Act and the rules and regulations thereunder, subject to such exemptions as may
be granted by the Securities and Exchange Commission.
SECTION 11. While this Plan is in effect, the selection and
nomination of those Trustees who are not interested persons of the Trust within
the meaning of Section 2(a) (19) of the 1940 Act shall be committed to the
discretion of the Trustees then in office who are not interested persons of the
Trust.
SECTION 12. This Plan shall not obligate the Trust or any other party
to enter into an agreement with any particular person.
3
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<PAGE> 1
Exhibit 18
THE ACHIEVEMENT FUNDS TRUST
RULE 18F-3
MULTIPLE CLASS PLAN
AUGUST 4, 1995
INTRODUCTION
The Achievement Funds Trust (the "Trust"), a registered investment
company that currently consists of six (6) separately managed portfolios (the
Equity Fund, Balanced Fund, Intermediate Term Bond Fund, Short Term Bond Fund,
Short Term Municipal Bond Fund and Idaho Municipal Bond Fund) and that may
consist of additional portfolios in the future as listed on Schedule A hereto
(each a "Fund" and, collectively, the "Funds"), have elected to rely on Rule
18f-3 under the Investment Company Act of 1940, as amended (the "1940 Act") in
offering multiple classes of units of beneficial interest ("shares") in each
Fund. The Plan sets forth the differences among classes, including shareholder
services, distribution arrangements, expense allocations, and conversion or
exchange options.
A. ATTRIBUTES OF SHARE CLASSES
The rights of each existing class of the Funds (i.e., Institutional
and Retail) shall be as set forth in the applicable prospectus, distribution
plan and related resolutions adopted by the Board of Trustees' of the Trust
pursuant to the order dated September 9, 1993, obtained by SEI Liquid Asset
Trust, et al. (Inv. Co. Act Release No. IC-19698), and attached hereto as
Exhibits A - C.
With respect to any class of shares of a Fund created after the date
hereof, each share of a Fund will represent an equal pro rata interest in the
Fund and will have identical terms and conditions, except that: (i) each new
class will have a different class name (or other designation) that identifies
the class as separate from any other class; (ii) each class will separately
bear any distribution expenses ("distribution fees") in connection with a plan
adopted pursuant to Rule 12b-1 under the 1940 Act (a "Rule 12b-1 Plan"), and
will separately bear any non-Rule 12b-1 Plan service payments ("service fees")
that are made under any servicing agreement entered into with respect to that
class; (iii) each class may bear, consistent with rulings and other published
statements of position by the Internal Revenue Service, the expenses of the
Fund's operations which are directly attributable to such class ("Class
Expenses"); and (iv) shareholders of the class will have exclusive voting
rights regarding the Rule 12b-1 Plan and the servicing agreements relating to
such class, and will have separate voting rights on any matter submitted to
shareholders in which the interests of that class differ from the interests of
any other class.
<PAGE> 2
B. EXPENSE ALLOCATIONS
Expenses of each existing class and of each class created after the
date hereof shall be allocated as follows: (i) distribution and shareholder
servicing payments associated with any Rule 12b-1 Plan or servicing agreement
relating to each class of shares are (or will be) borne exclusively by that
class; (ii) any incremental transfer agency fees relating to a particular class
are (or will be) borne exclusively by that class; and (iii) Class Expenses
relating to a particular class are (or will be) borne exclusively by that
class.
Until and unless changed by the Board, the methodology and procedures
for calculating the net asset value of the various classes of shares and the
proper allocation of income and expenses among the various classes of shares
shall be as set forth in the "Report" rendered by Arthur Anderson LLP (ATTACHED
HERETO AS EXHIBIT D).
C. AMENDMENT OF PLAN; PERIODIC REVIEW
This Plan must be amended to properly describe (through additional
exhibits hereto or otherwise) each new class of shares approved by the Board
after the date hereof.
The Board of the Trust, including a majority of the independent
Trustees, must periodically review this Plan for its continued appropriateness,
and must approve any material amendment of the Plan as it relates to any class
of any Fund covered by the Plan.
- 2 -
<PAGE> 3
EXHIBIT 18
Exhibit A
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), 680 East Swedesford Road,
Wayne, PA 19087, a wholly-owned subsidiary of SEI, serves as the distributor for
the Portfolios pursuant to a distribution agreement (the "Distribution
Agreement") which applies to Institutional and Retail Class A shares of the
Portfolios. The Trust has adopted a distribution plan for the Retail Class A
shares (the "Retail Plan") of the Portfolios in accordance with the provisions
of Rule 12b-1 under the 1940 Act. The Trust may also execute brokerage or other
agency transactions through the Distributor for which the Distributor may
receive usual and customary compensation. The Trust intends to operate the
Retail Plan in accordance with its terms and with the National Association of
Securities Dealers, Inc. ("NASD") rules concerning sales charges.
The Distribution Agreement and Retail Plan provide for payment to the
Distributor of a total fee in connection with the servicing of shareholder
accounts of the Retail Class A shares, calculated and payable monthly, at the
annual rate of 0.25% of the value of the average daily net assets of such class.
All or any portion of such total fee may be payable as a Shareholder Servicing
Fee, and all or any portion of such total fee may be payable as a Distribution
Fee, as determined from time to time by the Trustees of the Trust. All such fees
are currently designated and payable as a Shareholder Servicing Fee.
The Shareholder Servicing Fee may be used by the Distributor to provide
compensation for ongoing servicing or maintenance of shareholder accounts with
respect to the Retail Class A class of the Portfolios of the Trust. Compensation
may be paid by the Distributor to persons, including employees of the
Distributor, and institutions who respond to inquiries of holders of Retail
Class A shares regarding their ownership of shares or their accounts with the
Trust or who provide other administrative or accounting services not otherwise
provided by the Adviser, transfer agent or other agent of the Trust.
Payments under the Retail Plan are not tied exclusively to the expenses for
shareholder servicing activities actually incurred by the Distributor, so that
such payments may exceed expenses actually incurred by the Distributor. The
Trust's Board of Trustees will evaluate the appropriateness of the Retail Plan
and its payment terms on a continuing basis and in doing so will consider all
relevant factors, including expenses borne by the Distributor and amounts it
receives under the plan.
The Trust's Adviser and the Distributor may, at their option and in their sole
discretion, make payments from their own resources to cover costs of additional
shareholder servicing activities.
<PAGE> 4
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
PARTICIPATING DEALERS
Shares of the Portfolios may be purchased, exchanged or redeemed through a
financial intermediary, such as a broker-dealer, bank or other financial
institution or organization, which has entered into an agreement with the
Distributor to sell shares (a "Participating Dealer"). Persons ("Customers")
wishing to purchase shares, or who wish to exchange or redeem shares already
purchased, should contact their Participating Dealer for information about the
services available to them and for specific instructions on how to purchase,
exchange or redeem shares.
The Distributor has entered into agreements with First Security Investor
Services, Inc. ("FSIS") and PFIC Securities Corp. ("PFIC") authorizing them to
sell Portfolio shares as Participating Dealers. FSIS representatives may be
contacted at:
First Security Investor Services First Security Investor Services
61 South Main Street 2400 Louisiana Blvd., N.E.
Salt Lake City, Utah 84111 Albuquerque, New Mexico
(800) 574-6609 87110
(800) 574-6625
First Security Investor Services
923 West Idaho
Boise, Idaho 83702
(800) 574-6629
and PFIC representatives may be contacted at:
PFIC Securities Corp.
2400 Louisiana Blvd., N.E.
Albuquerque, New Mexico 87110
(800) 574-6625
Participating Dealers may impose a cut-off time earlier than those described
below for receipt of purchase, exchange or redemption orders directed through
them to allow for processing and transmittal of those orders to the Transfer
Agent for effectiveness the same day. Shares purchased by Customers through
Participating Dealers may be held of record by the Participating Dealer.
Customers who desire to transfer the registration of shares beneficially owned
by them but held of record by a Participating Dealer should contact their
Participating Dealer to accomplish such change. Depending upon the terms of a
particular Customer account, a Participating Dealer may charge a Customer
account fees. Information concerning these services and any charges should be
obtained by the Customer from the Participating Dealer.
<PAGE> 5
GENERAL INFORMATION ON SHARE PURCHASES
Customers wishing to purchase shares of the Portfolios should contact a
Participating Dealer for information on the services available to them and for
specific instructions on how to purchase shares. The Participating Dealer may
indicate that the Customer may purchase shares by contacting the Transfer Agent
directly by mail or by wire as described below. Existing shareholders may
purchase additional shares through an automatic investment plan or exercise of a
distribution investment option.
The minimum initial investment in the shares is $1,000 (including investments
for Individual Retirement Accounts and other qualified retirement plans);
however, the minimum investment may be waived at the Distributor's discretion.
All subsequent purchases must be in amounts of at least $100 (including
purchases through payroll deductions authorized pursuant to pre-approved payroll
deduction plans). Shares may be purchased on days on which the New York Stock
Exchange is open for business ("Business Days"). Orders for the purchase of
shares must be received before 4:00 p.m. Eastern Time on any Business Day for
the order to be accepted on that Business Day. The Trust reserves the right to
reject a purchase order when the Distributor determines that it is not in the
best interest of the Trust or shareholders to accept such purchase order.
PURCHASE BY MAIL
A Customer may purchase shares of a Portfolio by completing and signing an
Account Application form and mailing it, along with a check (or other negotiable
bank instrument or money order) payable to "The Achievement Fund Trust," to a
Participating Dealer, or in some cases to the Transfer Agent at P.O. Box 419448,
Kansas City, Missouri 64141-6448. Orders placed by mail will be executed on
receipt of payment by the Transfer Agent. If a Customer's check does not clear,
the purchase will be canceled and the Customer could be liable for any losses or
fees incurred.
Account Application forms may be obtained by calling the Distributor at
1-800-472-0577.
PURCHASE BY WIRE
A Customer may purchase shares by wiring funds through the Federal Reserve wire
transfer system ("Fedwire"), provided that an Account Application has been
previously received. Customers purchasing shares by wire should instruct their
bank to transfer funds by wire to: United Missouri Bank of Kansas, N.A.; ABA
#10 10 00695; for Account #98-7060-046-3; further credit [Name of Portfolio].
The wire instructions must include the Customer's name and account number. An
order to purchase shares by wire will be deemed to have been received by the
Trust on the Business Day of the wire, provided that the Customer wires funds to
the
<PAGE> 6
Transfer Agent prior to 4:00 p.m. Eastern time. If the Transfer Agent does not
receive the wire by 4:00 p.m. Eastern time, the order will be executed the next
business day.
AUTOMATIC INVESTMENT PLAN
Shares of a Portfolio may be purchased systematically through transfers from
checking or savings accounts maintained by certain banks. Customers may purchase
shares on a fixed schedule (monthly, quarterly, semi-annually or annually) with
a minimum investment amount of $100. The Automatic Investment Plan is subject to
sales charges, minimum purchase amounts and minimum maintained balance
requirements disclosed in "General Information on Share Purchases", "Sales
Charges" and under "Other Information Regarding Redemptions".
DISTRIBUTION INVESTMENT OPTION: If directed by the Customer, distributions of
dividends and capital gains made by a Portfolio may be invested in shares of one
of the other Portfolios, if such shares are available for sale. Investments of
distributions in shares of other Portfolios must meet the applicable initial
investment minimum, or be made in an existing account and meet the applicable
additional purchase minimum. Such investments will not be subject to sales
charges. A Customer considering the Distribution Investment Option should
consider the differences in objectives and policies of another Portfolio before
making any investment in such Portfolio. The Trust reserves the right to
terminate this Distribution Investment Option without further notice to
shareholders.
SALES CHARGES
The purchase of shares of a Portfolio is subject to a sales charge which varies
depending on the size of the purchase and which of the Portfolios shares are
being purchased. The following tables show the regular sales charges on
Portfolio shares to a single purchaser, together with the reallowance paid to
dealers and the agency commission paid to brokers (collectively, the
"Commission").
<PAGE> 7
<TABLE>
<CAPTION>
EQUITY FUND AND
BALANCED FUND
- ----------------------------------------------------------------------------------------------------------------
Reallowance and
Sales Charge as Sales Charge as Brokerage Commissions
a Percentage of a Percentage of as a Percentage
Amount of Purchase Offering Price Net Amount Invested of Offering Price
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
less than $25,000 4.50% 4.71% 4.05%
$25,000 but less than $50,000 4.00% 4.17% 3.60%
$50,000 but less than $100,000 3.50% 3.63% 3.15%
$100,000 but less than $250,000 3.00% 3.09% 2.70%
$250,000 but less than $500,000 2.50% 2.56% 2.25%
$500,000 but less than $1,000,000 2.00% 2.04% 1.80%
$1,000,000 and over(1) - - -
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND
- ----------------------------------------------------------------------------------------------------------------
Reallowance and
Sales Charge as Sales Charges as Brokerage Commissions
a Percentage of a Percentage of as a Percentage
Amount of Purchase Offering Price Net Amount Invested of Offering Price
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
less than $50,000 3.50% 3.63% 3.15%
$50,000 but less than $100,000 3.00% 3.09% 2.70%
$100,000 but less than $250,000 2.50% 2.56% 2.25%
$250,000 but less than $500,000 2.00% 2.04% 1.80%
$500,000 but less than $1,000,000 1.50% 1.52% 1.35%
$1,000,000 and over(1) - - -
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
SHORT TERM BOND FUND AND
SHORT TERM MUNICIPAL BOND FUND
- ----------------------------------------------------------------------------------------------------------------
Reallowance and
Sales Charge as Sales Charge as Broker Commission
a percent of a Percentage of as a Percentage
Amount of Purchase Offering Price Net Amount Invested of Offering Price
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
less than $100,000 1.50% 1.52% 1.35%
$100,000 but less than $250,000 1.00% 1.01% 0.90%
$250,000 but less than $500,000 0.75% 0.76% 0.68%
$500,000 but less then $1,000,000 0.50% 0.50% 0.45%
$1,000,000 and over(1) - - -
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
IDAHO MUNICIPAL BOND FUND
- ----------------------------------------------------------------------------------------------------------------
Reallowance and
Sales Charges as Sales Charges as Brokerage Commissions
a Percentage of a Percentage of as a Percentage
Amount of Purchase Offering Price Net Amount Invested of Offering Price
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
less than $50,000 4.00% 4.17% 3.60%
$50,000 but less than $100,000 3.50% 3.63% 3.15%
$100,000 but less than $250,000 3.00% 3.09% 2.70%
$250,000 but less than $500,000 2.50% 2.56% 2.25%
$500,000 but less than $1,000,000 2.00% 2.04% 1.80%
$1,000,000 and over(1) - - -
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Although no sales charge is paid by a Customer investing amounts over
$1,000,000, a brokerage commission may be paid in connection with such
transactions.
Under certain circumstances, commissions up to the amount of the entire sales
charge may be reallowed to certain investment professionals, who might then be
deemed to be "underwriters" under the Securities Act of 1933, as amended.
REDUCTION OF SALES CHARGE: RIGHT OF ACCUMULATION. A Customer qualifies for
cumulative quantity discounts when his new investment, together with the current
market value of all holdings of that shareholder in certain eligible Portfolios
reaches a discount level. See the tables above for the sales charge on quantity
purchases.
<PAGE> 9
REDUCTION OF SALES CHARGE: LETTER OF INTENT. Reduced sales charges are also
applicable to the aggregate amount of purchases made by any qualified Customer
within a 13-month period pursuant to a written Letter of Intent provided to the
Distributor that does not legally bind the signer to purchase any set number of
shares and provides for the holding in escrow by the Distributor of 5% of the
amount purchased until such purchase is completed within the 13-month period. A
Letter of Intent may be dated to include shares purchased up to 90 days prior to
the date the Letter of Intent is signed. The 13-month period begins on the date
of the earliest purchase. If the intended investment is not completed, the
Distributor will surrender an appropriate number of the escrowed shares for
redemption in order to recover the difference between the sales charge imposed
under the Letter of Intent and the sales charge that would have otherwise been
imposed.
REINSTATEMENT PRIVILEGE: A shareholder who has redeemed shares of any Portfolio
has a one-time right to reinvest the redemption proceeds in shares of that
Portfolio at net asset value as of the time of reinvestment. Such a reinvestment
must be made within 30 days of the redemption and is limited to the amount of
the redemption proceeds. Although redemptions and repurchases of shares are
taxable events, a reinvestment within such 30-day period in the same fund is
considered a "wash sale" and results in the inability to recognize currently all
or a portion of a loss realized on the original redemption for federal income
tax purposes. The shareholder or his or her Participating Dealer must notify the
Transfer Agent at the time the trade is placed that the transaction is a
reinvestment.
SALES CHARGE WAIVERS: No sales charge is imposed on shares of the Portfolios (i)
issued in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Trust is a party, (ii) sold to dealers or brokers
that have a sales agreement with the Distributor for their own account or for
retirement plans for employees or sold to present employees of dealers or
brokers that certify to the Distributor at the time of purchase that such
purchase is for their own account, (iii) sold to present employees of SEI or one
of its affiliates; (iv) sold to present employees of First Security Corporation
or one of its affiliates; (v) sold to tax exempt organizations enumerated in
Section 501(c) of the Internal Revenue Code or qualified employee benefit plans
created under Section 401, 403(b)(7) or 457 of the Internal Revenue Code (but
not IRAs or SEPs); (vi) sold to Trustees and officers of the Trust; (vii)
purchased with the proceeds from the recent redemption of shares of another
Portfolio as set forth above under Reinstatement Privilege; (viii) purchased
through the exercise of a Distribution Option described above; and (ix)
purchased with proceeds from the recent redemption of shares of a registered
open-end management investment company for which a front-end sales load was paid
(deferred sales charges paid upon redemption do not qualify for this waiver).
The waiver of the sales charge under clause (ix) applies only if the following
conditions are met: the purchase must be made within 30 days of the redemption;
the Distributor must be notified in writing by the investor, or his or her
agent, at the time the purchase is made; and a copy of the investor's account
statement showing such redemption must accompany such notice. The
<PAGE> 10
waiver policy with respect to the purchase of shares through the use of proceeds
from a recent redemption above may be discontinued at any time without notice.
Investors should contact the Distributor to confirm continued availability prior
to initiating the procedures described above.
OTHER INFORMATION REGARDING PURCHASES
Shares of the Portfolio are sold on a continuous basis and are offered only to
residents of states in which the shares are eligible for purchase. No
certificates representing shares will be issued. The purchase price of shares is
the net asset value next determined after a purchase order is received and
accepted plus the applicable sales charge. The net asset value per share of a
Portfolio is determined by dividing the total value of its investments and other
assets, less any liabilities, by the total outstanding shares of the Portfolio.
The Portfolio's investments will be valued at their last sales price as
described in the Statement of Additional Information. Net asset value per share
is determined daily as of the close of trading on the New York Stock Exchange
(currently 4:00 p.m. Eastern time) on each Business Day.
The Distributor may, from time to time and at its own expense, provide
promotional incentives in the form of cash or other compensation to certain
investment professionals or financial institutions whose registered
representatives have sold or are expected to sell significant amounts of the
shares of the Portfolios. Such other compensation may take the form of payments
for travel expenses, including lodging, incurred in connection with trips taken
by qualifying registered representatives to places within or outside of the
United States.
EXCHANGE PRIVILEGES
Once payment for shares has been received (i.e., an account has been
established), a shareholder may exchange some or all of such shares for Retail
Class A shares of other Portfolios of the Trust or for ProVantage class shares
of certain portfolios of the SEI Family of Funds currently offered as part of
The Achievement Funds, including the Treasury Securities Portfolio of the SEI
Liquid Asset Trust and the Tax Free Portfolio of the SEI Tax Exempt Trust (the
"SEI Money Market Funds"), the Small Cap Growth Portfolio of the SEI
Institutional Managed Trust and the Core International Equity Portfolio of the
SEI International Trust (together with the SEI Money Market Funds, the "SEI
Funds").
Exchanges are made at net asset value plus any applicable sales charge. If,
within 6 months of their acquisition, Portfolio shares are exchanged for shares
of another Portfolio or the SEI Funds with a higher sales charge, the customer
will pay the difference between the sales charges in connection with the
exchange. No refund of a sales charge will be made if shares of a Portfolio are
exchanged for shares of another Portfolio or an SEI Fund that imposes a lower
sales charge. No additional sales charge will be imposed in connection with an
exchange of shares of a Portfolio for shares of another Portfolio or an SEI Fund
if such exchange occurs more than 6 months after the Customer's purchase of the
Portfolio shares disposed of in the exchange.
<PAGE> 11
Shares of a Portfolio may be exchanged for shares of an SEI Money Market Fund
without imposition of a sales charge by the SEI Money Market Fund. Such SEI
Money Market Fund shares may subsequently be exchanged for shares of a
Portfolio, but such an exchange, if consummated within 30 days after the initial
exchange, will be subject to imposition of the full sales charge associated with
an acquisition of shares of that Portfolio.
If a shareholder buys shares of a Portfolio and receives a sales charge waiver,
the shareholder will be deemed to have paid the sales charge for purposes of
this exchange privilege. In calculating any sales charge payable on an exchange,
the Trust will assume that the first shares exchanged are those on which a sales
charge has already been paid. Sales charge waivers may also be available under
certain circumstances, as described in this Prospectus. The Trust reserves the
right to change the terms and conditions of the exchange privilege discussed
herein, or to terminate the exchange privilege, upon sixty days' notice.
Shareholders should contact a Participating Dealer for instructions on how to
exchange shares. Exchanges will be made only after receipt of proper
instructions in writing or by telephone (an "Exchange Request") for an
established account by the Transfer Agent. The liability of the Trust, the
Distributor or the Transfer Agent for unauthorized or fraudulent telephone
instructions may be limited as described under "PURCHASE, EXCHANGE AND
REDEMPTION OF SHARES - Redemption of Shares-By Telephone." If an Exchange
Request in good order is received by the Transfer Agent by 4:00 p.m. Eastern
time on any Business Day, the exchange will ordinarily be effective on that day.
Any Customer who wishes to make an exchange must have received a current
prospectus of the Portfolio or SEI Fund into which the exchange is being made
before the exchange will be effected. Information contained in this Prospectus
concerning sales charges imposed by SEI Funds is subject to change by the SEI
Funds.
An exchange between the Retail Class A shares and the Institutional class shares
of any Portfolio is generally not permitted, except that exchanges between the
classes will be permitted should a Retail Class A shareholder become eligible to
purchase Institutional class shares. For example, a Retail Class A shareholder
may establish a trust account that is eligible to purchase shares of the
Institutional class. In this case, an exchange will be permitted between the
Retail Class A class of a Portfolio and the Institutional class of that same
Portfolio at net asset value, without the imposition of a sales charge, fee or
other charge. An exchange from the Institutional class of a Portfolio to the
Retail Class A class of that same Portfolio will occur automatically when an
Institutional class shareholder becomes ineligible to invest in the
Institutional class at net asset value, without the imposition of a sales load,
fee or other charge. The Trust will provide at least thirty days' notice of any
such exchange. After the exchange, the exchanged shares will be subject to all
fees applicable to the Retail Class A shares. The Trust reserves the right to
require shareholders to complete an application or other documentation in
connection with the exchange.
Each exchange between Portfolios or between a Portfolio and an SEI Fund actually
represents the sale of shares of one Portfolio and the purchase of shares in the
other, which may produce
<PAGE> 12
a gain or loss for tax purposes. In order to protect each Portfolio's
performance and its shareholders, the Trust discourages frequent exchange
activity in response to short-term market fluctuations. The Trust reserves the
right to modify or withdraw the exchange privilege or to suspend the offering of
shares in any class without notice to shareholders if, in the Adviser's
judgment, a Portfolio would be unable to invest effectively in accordance with
its investment objective and policies, or would otherwise potentially be
adversely affected. Each Portfolio also reserves the right to reject any
specific purchase order, including certain purchases by exchange.
REDEMPTION OF SHARES
Shareholders may redeem their shares without charge on any Business Day by mail,
by telephone or through a systematic withdrawal plan. Shareholders should
contact a Participating Dealer for information on how to redeem shares.
Redemption proceeds will be sent by check by the Federal Reserve System's
automated clearance house ("ACH") or by Fedwire to or for the account of the
record owner of the shares redeemed. A wire redemption charge (presently $15.00)
will be deducted from the amount of proceeds of a redemption that are
transferred by ACH or Fedwire.
REDEMPTIONS BY MAIL
A written request for redemption must be received by the Transfer Agent, P.O.
Box 419448, Kansas City, Missouri 64141-6448 in order to constitute a valid
redemption request.
If the redemption request exceeds $5,000, or if the request directs the proceeds
to be sent to an address different from that of record, the Transfer Agent may
require that the signature on the written redemption request be guaranteed.
Customers should be able to obtain a signature guarantee from a bank,
broker-dealer, credit union, securities exchange or association, clearing agency
or savings association. Notaries public cannot guarantee signatures. The
signature guarantee requirement will be waived if all of the following
conditions apply: (1) the redemption is for not more than $5,000 worth of
shares, (2) the redemption check is payable to the shareholder of record and (3)
the redemption check is mailed to the shareholder at his or her address of
record.
REDEMPTIONS BY TELEPHONE
If authorized by a Shareholder in the account application, shares may be
redeemed upon request made by the Shareholder by telephone to the Transfer Agent
at 1-800-472-0577, or by contacting a Participating Dealer. Under most
circumstances, payments of redemption proceeds will be transmitted on the next
Business Day following receipt of a valid telephone request for redemption.
Shareholders may not close their accounts by telephone.
<PAGE> 13
Neither the Trust, the Distributor nor the Transfer Agent will be responsible
for any loss, liability, cost or expense for acting upon wire instructions or
upon telephone instructions that it reasonably believes to be genuine. The
Trust, the Distributor and the Transfer Agent will each employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
including requiring a form of personal identification prior to acting upon
instructions received by telephone and recording telephone instructions. The
Trust, the Distributor or Transfer Agent may be liable for losses resulting from
fraudulent or unauthorized instructions if it does not employ these procedures.
If market conditions are extraordinarily active, or other extraordinary
circumstances exist, and a shareholder experiences difficulties placing
redemption orders by telephone, the shareholder may wish to consider placing an
order by mail.
SYSTEMATIC WITHDRAWAL PLAN
A systematic withdrawal plan can be established for a Portfolio account. Under
the plan, redemptions can be automatically processed from accounts (monthly,
quarterly, semi-annually or annually) by check or by ACH transfer with a minimum
redemption amount of $100. The Portfolio account must maintain a minimum balance
of $10,000 at all times while the systematic withdrawal plan is in effect.
OTHER INFORMATION REGARDING REDEMPTIONS
All redemption orders are effected at the net asset value per share next
determined after receipt and effectiveness of a valid request for redemption, as
described above. A redemption order will be effective on the same Business Day
it is received if it is received by the Transfer Agent before 4:00 p.m. Eastern
time; otherwise, the redemption order will be effective on the following
Business Day. Net asset value per share is determined as of the close of trading
on the New York Stock Exchange (currently 4:00 p.m. Eastern time) on each
Business Day. Payment to shareholders for shares redeemed will be made within
seven days after receipt by the Transfer Agent of the redemption request in good
order. Participating Dealers may impose an earlier cut-off time for receipt of
redemption orders directed through them to allow for processing and transmittal
of these orders to the Distributor for effectiveness the same day.
At various times, a Portfolio may be requested to redeem shares for which it has
not yet received good payment. In such circumstances, redemption proceeds will
be forwarded upon collection of payment for the shares; collection of payment
may take 10 or more days. The Portfolios intend to pay cash for all shares
redeemed, but under abnormal conditions which make payment in cash unwise,
payment may be made wholly or partly in portfolio securities with a market value
equal to the redemption price. In such cases, an investor may incur brokerage
costs in converting such securities to cash.
<PAGE> 14
Due to the relatively high cost of handling small investments, the Trust
reserves the right to redeem, at net asset value, the shares of any shareholder
if, because of redemptions of shares by or on behalf of the shareholder, the
account of such shareholder in a Portfolio has a value of less than $1,000.
Before the Trust exercises its right to redeem such shares and send the proceeds
to the shareholder, the shareholder will be given notice that the value of the
shares in his or her account is less than the minimum amount and will be allowed
60 days to make an additional investment in the Portfolio in an amount which
will increase the value of the account to at least $1,000.
See "Purchase and Redemption of Shares" in the Statement of Additional
Information for examples of when the right of redemption may be suspended.
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), 680 East Swedesford Road,
Wayne, Pennsylvania, 19087, a wholly-owned subsidiary of SEI, serves as the
distributor for the Portfolios pursuant to a distribution agreement
("Distribution Agreement") with the Trust. The Distributor receives no fee for
its services in connection with distribution of the Institutional shares.
Financial institutions that are the record owners of shares for the account of
their customers may impose separate fees for account services to their
customers.
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
Financial institutions may acquire shares of the Portfolios for their own
account or as record owner on behalf of fiduciary, agency or custody accounts by
placing orders with the Distributor. Institutions that use certain SEI
proprietary systems may place orders electronically through those systems. State
securities laws may require banks and financial institutions purchasing shares
for their customers to register as dealers pursuant to state laws. Shares of
each Portfolio are offered only to residents of states in which the shares are
eligible for purchase.
Shares of each Portfolio may be purchased or redeemed on days during which the
New York Stock Exchange is open for business ("Business Days"). The minimum
initial investment by financial institutions purchasing shares is $500,000;
however the minimum investment may be waived at the Distributor's discretion. No
minimum amount is required for subsequent investments.
Shareholders who desire to purchase shares for cash must place their orders with
the Distributor prior to 4:00 p.m. Eastern time on any Business Day for the
order to be accepted on that Business Day. Financial institutions may impose an
earlier cut-off time for receipt of purchase
<PAGE> 15
orders directed through them to allow for processing and transmittal of these
orders to the Distributor for effectiveness the same day. Cash payment for
investments must be transmitted or delivered in federal funds to the wire agent
on the next Business Day following the day the order is placed. The Trust
reserves the right to reject a purchase order when the Distributor determines
that it is not in the best interest of the Trust or its shareholders to accept
such purchase order. Purchases will be made in full and fractional shares of the
Portfolios calculated to three decimal places. The Trust will send shareholders
a statement of shares owned after each transaction.
The purchase price of shares is the net asset value next determined after a
purchase order is received and accepted by the Trust. The net asset value per
share of each Portfolio is determined by dividing the total market value of a
Portfolio's investments and other assets, less any liabilities, by the total
outstanding shares of that Portfolio. Net asset value per share is determined
daily as of the close of trading on the New York Stock Exchange (presently 4:00
p.m. Eastern time) on any Business Day in the manner described in the Statement
of Additional Information. Financial institutions which purchase shares for the
accounts of their customers may impose separate charges on these customers for
account services.
An exchange between the Institutional class and the Retail Class A shares of any
Portfolio is generally not permitted, except that exchanges between the classes
will occur automatically should an investor in the Institutional class become
ineligible to purchase additional Institutional class shares. For example, an
automatic exchange would occur if an Institutional class investor receives a
distribution from a trust, and such investor would be investing individually
(and becomes a shareholder of record) rather than through a qualified account.
An exchange from the Institutional class to the Retail Class A shares of a
Portfolio will occur automatically when an Institutional class shareholder's
account falls below the $500,000 minimum balance. The Trust will provide thirty
days' notice of any such exchange. The exchange will take place at net asset
value, without the imposition of a sales load, fee or other charge. After the
exchange, the exchanged shares will be subject to all fees applicable to Retail
Class A shares. In the event that a shareholder declines to accept an automatic
exchange, and if the shareholder does not meet the requirements for investing in
Institutional class shares, the Trust reserves the right to redeem the shares
upon expiration of the thirty-day period. Each Portfolio reserves the right to
require shareholders to complete an application or other documentation in
connection with the exchange.
Retail Class A shares of a Portfolio may be exchanged for Institutional Class
shares of the same Portfolio should the shareholder establish a trust, custodial
or money management relationship with a qualified institution.
To exchange shares held of record by a financial institution but beneficially
owned by a customer, the customer should contact the financial institution,
which will contact the Distributor and effect the exchange on behalf of the
customer. If an exchange request in good order is received by the Distributor by
4:00 p.m. Eastern time on any Business Day, the exchange will
<PAGE> 16
ordinarily be effective on that day. Any shareholder or customer of a
shareholder who wishes to make an exchange must have received a current
prospectus of the Portfolio or SEI Fund into which the exchange is being made
before the exchange will be effected.
Each Portfolio anticipates earning income on its portfolio securities and other
investments in the form of interest income, dividends and capital gains. That
income, after payment of expenses, will be passed along to shareholders as
dividends or capital gain distributions. See "GENERAL INFORMATION - Dividends"
for a discussion of the dividend policy of each Portfolio. Such distributions to
shareholders will automatically be paid in cash, unless the shareholder makes a
different election with respect to such distributions.
Distributions of dividends and capital gains made by the Portfolios may be
invested in shares of one of the other Portfolios if shares of the other
Portfolio are available for sale. Such investments will be subject to initial
investment minimums, as well as additional purchase minimums. A shareholder
considering this distribution investment option should consider the differences
in investment objectives and policies of another Portfolio before making any
investment in such Portfolio. The Trust reserves the right to terminate this
distribution investment option without further notice to shareholders.
Shareholders who desire to redeem shares of a Portfolio must place their
redemption orders with the Distributor prior to 4:00 p.m. Eastern time on any
Business Day. The redemption price is the net asset value per share of the
Portfolio next determined after receipt by the Distributor of the redemption
order. Payment on redemption will be made as promptly as possible and, in any
event, within seven days after the redemption order is received.
Purchase, redemption and exchange orders may be placed by telephone. Neither the
Trust nor the Trust's transfer agent will be responsible for any loss,
liability, cost or expense for acting upon telephone instructions that it
reasonably believes to be genuine. The Trust and the Trust's transfer agent will
each employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of personal identification
prior to acting upon instructions received by telephone and recording telephone
instructions. The Trust or the Trust's transfer agent may be liable for losses
resulting from fraudulent or unauthorized instructions if it does not employ
these procedures. If market conditions are extraordinarily active, or other
extraordinary circumstances exist, and a Shareholder experiences difficulties
placing redemption orders by telephone, it may wish to consider placing its
order by other means.
<PAGE> 17
EXHIBIT B
DISTRIBUTION PLAN
[RETAIL CLASS]
THE ACHIEVEMENT FUNDS TRUST
WHEREAS, THE ACHIEVEMENT FUNDS TRUST (the "Trust") is engaged in
business as an open-end investment company registered under the Investment
Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that the following Distribution Plan will benefit the
Trust and the owners of the Retail Class A shares of beneficial interest
("Shareholders") in its portfolios;
NOW, THEREFORE, the Trustees of the Trust hereby adopt this
Distribution Plan pursuant to Rule 12b-1 under the 1940 Act.
SECTION 1. The Trust has adopted this Retail Class A Distribution Plan
("Plan") to enable the Trust to directly or indirectly bear expenses relating
to the distribution and shareholder servicing of the retail Class A shares of
the portfolios of the Trust (each a "Portfolio") of which the Trust is the
issuer.
SECTION 2. The retail class of each Portfolio is authorized to pay the
principal underwriter of the Trust's Retail Class A shares (the "Distributor")
a total fee in connection with the servicing of shareholder accounts of such
class and in connection with distribution-related services provided in respect
of such class, calculated and payable monthly, at the annual rate of .25% of
the value of the average daily net assets of such class. All or any portion of
such total fee may be payable as a Shareholder Servicing Fee, and all or any
portion of such total fee may be payable as a Distribution Fee, as determined
from time to time by the Trust's Board of Trustees. Until further action by the
Board of Trustees, all of such fee shall be designated and payable as a
Shareholder Servicing Fee.
SECTION 3.
(a) The Shareholder Servicing Fee may be used by the
Distributor to provide compensation for ongoing
servicing and/or maintenance of shareholder accounts
with respect to the Retail Class A of the applicable
Portfolios of the Trust. Compensation may be paid by
the Distributor to persons, including employees of
the Distributor, and institutions who respond to
inquiries of holders of such Retail Class A shares
regarding their ownership of such shares or their
accounts with the Trust or who provide other
administrative or accounting services not otherwise
required to be provided by the Trust's investment
adviser, transfer agent or other agent of the Trust.
1
<PAGE> 18
(b) The Distribution Fee may be used by the Distributor to provide
initial and ongoing sales compensation to its investment
executives and to other broker-dealers in respect of sales of
retail class shares of the applicable Portfolios of the Trust
and to pay for other advertising and promotional expenses in
connection with the distribution of the Retail Class A shares.
These advertising and promotional expenses include, by way of
example but not by way of limitation, costs of printing and
mailing prospectuses, statements of additional information and
shareholder reports to prospective investors; preparation and
distribution of sales literature; advertising of any type; an
allocation of overhead and other expenses of the Distributor
related to the distribution of such retail class shares; and
payments to, and expenses of, officers, employees or
representatives of the Distributor, of other broker-dealers,
banks or other financial institutions, and of any other persons
who provide support services in connection with the distribution
of such retail class shares, including travel, entertainment,
and telephone expenses.
(c) Payments under the Plan are not tied exclusively to the expenses
for shareholder servicing and distribution related activities
actually incurred by the Distributor, so that such payments may
exceed expenses actually incurred by the Distributor. The
Trust's Board of Trustees will evaluate the appropriateness of
the Plan and its payment terms on a continuing basis and in
doing so will consider all relevant factors, including expenses
borne by the Distributor and amounts it receives under the plan.
(d) The Trust's investment adviser and the Distributor may, at their
option and in their sole discretion, make payments from their
own resources to cover costs of additional distribution and
shareholder servicing activities.
SECTION 4. This Plan shall not take effect with respect to a Portfolio
until it has been approved (a) by a vote of at least a majority of the
outstanding voting securities of the Retail Class A shares of such Portfolio;
and (b) together with any related agreements, by votes of the majority of both
(i) the Trustees of the Trust and (ii) the Qualified Trustees, cast in person at
a Board of Trustees meeting called for the purpose of voting on this Plan or
such agreement.
SECTION 5. This Plan shall continue in effect for a period of one year
after it takes effect and for successive one year periods thereafter for so
long as such continuance is specifically approved at least annually in the
manner provided in Part (b) of Section 4 herein for the approval of this Plan.
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Trust pursuant to this Plan or any related agreement
shall provide to the Trustees of the Trust, at least quarterly, a written
report of the amounts so expended and the purposes for which such expenditures
were made.
2
<PAGE> 19
SECTION 7. This Plan may be terminated at any time with respect to any
Portfolio by the vote of a majority of the Qualified Trustees or by vote of a
majority of the Portfolio's outstanding retail class voting securities.
SECTION 8. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide (a) that such agreement may be terminated at any time with respect to
any Portfolio, without payment of any penalty, by the vote of a majority of the
Qualified Trustees or by the vote of Shareholders holding a majority of the
Portfolio's outstanding retail class voting securities, on not more than 60
days written notice to any other party to the agreement; and (b) that such
agreement shall terminate automatically in the event of its assignment.
SECTION 9. This Plan may not be amended to increase materially the
amount of distribution expenses permitted pursuant to Section 2 hereof without
the approval of Shareholders holding a majority of the outstanding Retail Class
A voting securities of the applicable Portfolio, and all material amendments to
this Plan shall be approved in the manner provided in Part (b) of Section 4
herein for the approval of this Plan.
SECTION 10. As used in this Plan, (a) the term "Qualified Trustees"
shall mean those Trustees of the Trust who are not interested persons of
the Trust, and have no direct or indirect financial interest in the operation of
this Plan or any agreements related to it, and (b) the terms "assignment" and
"interested person" shall have the respective meanings specified in the 1940
Act and the rules and regulations thereunder, subject to such exemptions as may
be granted by the Securities and Exchange Commission.
SECTION 11. While this Plan is in effect, the selection and nomination
of those Trustees who are not interested persons of the Trust within the meaning
of Section 2(a) (19) of the 1940 Act shall be committed to the discretion of the
Trustees then in office who are not interested persons of the Trust.
SECTION 12. This Plan shall not obligate the Trust or any other party
to enter into an agreement with any particular person.
3
<PAGE> 20
EXHIBIT C
APPROVAL OF MULTIPLE CLASS STRUCTURE FOR FSB FUNDS
WHEREAS: The Board of Trustees has been presented with information
supporting the establishment of a multiple class structure
("Multi-Class Structure") for FSB Funds ("FSB") whereby each
Fund of FSB would be offered through two separate classes of
shares, consisting of: (a) Institutional Class shares which
would be offered to institutional investors without the
imposition of a Rules 12b-1 fee or sales charge; (b) Retail
Class A shares which would be offered to investors subject to a
front-end sales charge on purchases of less than $1 million and
subject to Rule 12b-1 distribution fees of up to .25% (25 basis
points); and
WHEREAS: The Board of Trustees has determined, based upon the information
presented, that the implementation of the Multi-Class Structure
is in the best interests of FSB and its future shareholders
because it will (i) enable investors to choose the purchase
option best suited to their individual needs, thereby attracting
investors and assets to FSB to the benefit of FSB and its
shareholders; (ii) facilitate distribution of FSB's shares; and
(iii) place FSB in a competitive position in relation to other
mutual funds that have implemented or are seeking to implement
similar distribution arrangements.
NOW, THEREFORE, be it
RESOLVED: That based upon the information presented to this Board of
Trustees, the Trustees, including a majority of the
non-interested Trustees, have determined that the establishment
of the Multi-Class Structure for distributions of shares of FSB
is in the best interests of FSB and its shareholders;
<PAGE> 21
FURTHER
RESOLVED: That the Board of Trustees hereby establishes, effective
upon the Effective Date, an unlimited number of shares of
beneficial interest of the Funds as Institutional Class shares;
FURTHER
RESOLVED: That the Board of Trustees hereby establishes, effective
upon the Effective Date, an unlimited number of shares of
beneficial interest of the Funds as Retail Class A shares;
FURTHER
RESOLVED: That Institutional Class shares and Retail Class A
shares shall have the same preferences, conversion and other
rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption
of shares, except as provided in FSB's Master Trust Agreement,
as amended.
FURTHER
RESOLVED: That each class of each Fund shall vote separately with
respect to the adoption or amendment of any distribution plan as
to such class.
<PAGE> 22
EXHIBIT D
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To SEI Financial Management Corporation:
We have examined the accompanying Exhibit entitled, "SEI Financial Management
Methodology for Controlling Multi-Class Funds." This Exhibit, which is the
responsibility of the management of SEI Financial Management Corporation, sets
forth the methodology and procedures for calculating net asset value, expense
allocations and dividend distributions between the classes of shares. Our
examination included procedures to obtain reasonable assurance about whether (1)
the accompanying Exhibit presents fairly, in all material respects, the aspects
of SEI Financial Management Corporation's methodology and procedures for
calculating net asset value, expense allocations and dividend distributions
between classes of shares, (2) the control structure methodology and procedures
included in the Exhibit were suitably designed to achieve the control objectives
specified in the Exhibit, if the methodology and procedures were complied with
satisfactorily, and (3) such methodology and procedures had been placed in
operation as of December 31, 1994. The control objectives were specified by SEI
Financial Management Corporation. Our examination was performed in accordance
with standards established by the American Institute of Certified Public
Accountants and included those procedures we considered necessary in the
circumstances to obtain a reasonable basis for rendering our opinion.
We did not perform procedures to determine the operating effectiveness of the
methodology and procedures for any period. Accordingly, we express no opinion
on the operating effectiveness of any aspects of SEI Financial Management
Corporation's methodology and procedures, individually or in the aggregate.
In our opinion, the accompanying Exhibit of methodology and procedures presents
fairly, in all material respects, the relevant aspects of SEI Financial
Management Corporation's methodology and procedures for calculating net asset
value, expense allocations and dividend distributions between classes of shares
that had been placed in operation as of December 31, 1994. Also, in our opinion,
the methodology and procedures, as described, are suitably designed to provide
reasonable assurance that the specified control objectives would be achieved if
the described methodology and procedures were complied with satisfactorily.
The description of methodology and procedures at SEI Financial Management
Corporation is as of December 31, 1994 and any projections of such information
to the future is subject to the risk that, because of change, the description
may no longer portray the system in existence. The potential effectiveness of
the specific methodology and procedures at SEI Financial Management Corporation
is subject to inherent limitations and, accordingly, errors or irregularities
may occur and not be detected. Furthermore, the projections of any conclusions,
based on our findings, to future periods is subject to the risk that changes
may alter the validity of such conclusions.
This report is intended solely for use by the management of SEI Financial
Management Corporation and the Securities and Exchange Commission and should
not be used for any other purpose.
/s/ Arthur Andersen LLP
---------------------------------
Philadelphia, Pa.
February 10, 1995
<PAGE> 23
SEI FINANCIAL MANAGEMENT
METHODOLOGY FOR CONTROLLING
MULTI-CLASS FUNDS
Control Objectives
The following represents the internal accounting control objectives and policies
and procedures for the allocation of income and expenses and the computation of
the net asset value and, if applicable, the dividend/distribution for each class
of shares. It does not cover the internal accounting control procedures
surrounding the processing of information into the primary accounting system of
SEI Financial Management.
Following are the specific control objectives:
1. Capital share activity as reported by the Fund's transfer agent is
recorded for each class in an accurate and timely manner.
2. Net investment income before class specific expenses and realized
gains/losses is properly allocated between the various classes of shares
within each fund.
3. Class specific expenses, (i.e. 12b-1 fees) are properly calculated and
allocated between the various classes of shares, within each fund.
4. Dividends and distributions are correctly calculated for each class of
shares of each fund.
5. Net asset value per share of each class of shares of each fund includes
the appropriate amount of expenses, including those expenses allocated
between each class of shares.
<PAGE> 24
SEI FINANCIAL MANAGEMENT
METHODOLOGY FOR CONTROLLING
MULTI-CLASS FUNDS
Procedures - Money Market Funds
1. Separate paid in capital accounts will be maintained for each class.
Both the transfer agent and the fund accountant will track and record
paid in capital/share activity separately for each class.
2. On a daily basis, net investment income before class specific expenses
and realized gains/losses will be allocated to each class on the basis
of only the net daily activity will be allocated.
3. Net investment income allocated to each class will be reduced by class
specific expenses (i.e. 12b-1)
4. Total and per unit NAV will be calculated for each class.
5. Distributions from net investment income will be calculated as follows.
a. Undistributed net investment income before class specific expenses
will be allocated to the respective classes on the basis of
outstanding shares on the declaration date.
b. The allocated amount will be reduced by class specific expenses.
c. The per share distribution will be calculated by class.
6. Capital gain distributions will be calculated as follows:
a. The amount of capital gains available for distribution will be
allocated to the respective classes on the basis of outstanding
shares on the declaration date.
b. The per share distribution will be calculated by class.
Procedures - Non Dollar Funds
1. Separate paid in capital accounts will be maintained for each class.
Both the transfer agent and the fund accountant will track and record
paid in capital/share activity separately for each class.
2. On a daily basis, net investment income before class specific expenses
(e.g. distribution costs) will be allocated to the various classes on
the basis of prior day's net assets adjusted for current day's
shareholder activity.
3. On a daily basis, the net daily realized gain/loss and unrealized
gain/loss activity will be allocated the various classes on the basis of
prior day's net assets adjusted for current day's shareholder activity.
Only the net daily activity will be allocated. Cumulative balances will
be tracked by class.
4. Net investment income allocated to each class will be reduced by class
specific expenses.
5. Total net assets will be calculated for each class.
6. Per unit NAV, POP, and/or redemption price will be calculated for each
class as required.
<PAGE> 25
7. Distributions from net investment income will be calculated
as follows:
a. Undistributed net investment income before the respective
classes on the basis of outstanding shares on the
declaration date.
b. The allocated amount will be reduced by class specific
expenses.
c. The per share distributions will be calculated by class.
Cumulative distributions will be tracked by class.
8. Capital gain distributions will be calculated as follows:
a. The amount of net capital gains available for distribution
will be allocated to the various classes on the basis of
outstanding shares on the record date.
b. The per share distribution will be calculated by class.
Cumulative distributions will be tracked by class.
<PAGE> 26
DAILY NET INCOME DISTRIBUTION WORKSHEET
MONEY MARKET PORTFOLIOS
ASSUMPTIONS
1. The various classes differ as follows:
Class A No 12(b)-1 plan.
Class B A 12(b)-1 plan which causes the class to
incur 25 basis points of distribution costs.
2. Net investment income before class specific expenses is
allocated to the various classes on the basis of prior day's
net assets adjusted for current day share activity. The
example assumes that net investment income of $25,000 is
earned before class specific expenses are charged. The
respective calculation is as follows
Class A $25,000.00 X 9091 = $22,727.50
Class B $25,000.00 x 0909 = $ 2,272.50
3. Class specific expenses are levied prior to calculating
the per share distribution.
Class B Incremental 12(b)-1 fees equal to
25 basis points of net assets are
incurred. The example assumes a net
asset value of $1.00 per share.
$10,000,000.00 x .0025 / 366 = $68.31
4. After calculating class specific expenses, the net amount
of investment income available for distribution is
calculated. It is then divided by the number of
outstanding shares to calculate the daily distribution
per share.
<PAGE> 27
DAILY NET INCOME DISTRIBUTION WORKSHEET
MONEY MARKET PORTFOLIO
Fund: _________________________________
Date: _________________________________
<TABLE>
<CAPTION>
Class A Class B Total
-------------- -------------- ---------------
<S> <C> <C> <C>
Ending Net Assets
from prio day (confirmed
daily with Transfer Agent) 100,000,000.00 10,000,000.00 110,000,000.00
-------------- ------------- --------------
Today's Capital Activity 0.00 0.00 0.00
---- ---- ----
Adjusted Net Assets 100,000,000.00 10,000,000.00 110,000,000.00
-------------- ------------- --------------
Allocation Percentage 90.91% 9.09% 100.00%
----- ---- ------
Net Investment Income before
Class Specific Expenses: 22,727.50 2,272.50 25,000.00
--------- -------- ---------
Class Specific Expenses:
12(b)-1 Plan 0.00 68.31 68.31
---- ----- -----
Net Investment Income
Available for Distribution 22,727.50 2,204.19 24,931,69
--------- -------- ---------
Distribution Per Share 0.000227275 0.000220419
----------- -----------
</TABLE>
Prepared By: __________________________
Reviewed: __________________________
<PAGE> 28
DAILY NET ASSET VALUE CALCULATION
NON-DOLLAR FUNDS
ASSUMPTIONS
1. The various classes differ as follows:
Class A No 12(b)-1 plan or load.
Class B 12(b)-1 plan which causes the class to incur
25 basis points of distribution expense.
In addition, a front end load of 4% is in
place.
Class C 12(b)-1 plan which causes the class to incur
25 basis points of distribution expense.
In addition, a CDSC of 4% is in place.
2. Paid in capital is tracked separately by class. That is,
activity within a specific class is recorded in the paid
in capital account of that specific class.
3. Unrealized gains losses, realized gains/losses, and
undistributed income before class specific expenses are
allocated to the respective classes on the basis of prior
day's net assets, adjusted for current day activity, on
a daily basis. Separate accounts are maintained for each
class and the allocated amounts are recorded in the
respective accounts.
4. Class specific expenses are levied prior to calculating
the net asset value per share.
5. After calculating class specific expenses, net asset value for
each class is calculated. Net assets are then divided by
outstanding shares to calculate the net asset value per share.
6. Two days' activity is presented. The daily activity was
assumed to be as follows:
DAY 1
-----
Opening Net Assets Shares
Class A $1,000,000 100,000
Class B $1,000,000 100,000
Class C $1,000,000 100,000
Paid in Capital Activity
Class A 100 Shares purchased
Class B 100 Shares purchased
Class C 100 Shares purchased
Unrealized Gains/Losses
Net unrealized gain activity of $10,000 was incurred for
the day.
Realized gains/losses.
Net realized gain activity of $5,000 was incurred for the day.
Net Investment Income
Net investment income of $20,000 was incurred for the day.
<PAGE> 29
DAY 2
-----
Paid in Capital Activity
Class A 50 shares redeemed
Class B 100 shares purchased
Class C 50 shares purchased
Unrealized Gains/Losses
Net unrealized gain activity of $10,000 was incurred for the day.
Realized Gains/Losses
Net realized gain activity of $5,000 was incurred for the day.
Net Investment Income
Net investment income of $20,000 was incurred for the day.
<PAGE> 30
Daily Net Asset Value Calculation
Day 1
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C TOTAL
------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Shares, Prior Day 100,000.00 100,000.00 100,000.00 300,000.00
------------------------------------------------------------
2. Share Activity 100.00 100.00 100.00 300.00
3. Adjusted Shares 100,100.00 100,100.00 100,100.00 300,300.00
------------------------------------------------------------
4. Prior Day Net Assets 1,000,000.00 1,000,000.00 1,000,000.00 3,000,000.00
5. Today's Capital Activity 1,000.00 1,000.00 1,000.00 3,000.00
6. Adjusted Net Assets 1,001,000.00 1,001,000.00 1,001,000.00 3,003,000.00
7. Net Asset Percentage 33.34% 33.33% 33.33% 100.00%
------------------------------------------------------------
8. Net Investment Income
Before class specific
expenses 6,668.00 6,666.00 6,666.00 20,000.00
9. Class specific expense
12(b)-1 fees 0.00 6.84 6.84 13.??
10. Net Investment Income 6,668.00 6,659.16 6,659.16 19,98?.??
------------------------------------------------------------
11. Realized Gains/Losses
Short Term 0.00 0.00 0.00
Long Term 1,667.00 1,666.50 1,666.50 5,00?.??
12. Unrealized Gains/Losses 3,334.00 3,333.00 3,333.00 10,00?.??
13. Net Change in Net Assets
(5+10+11+12) 12,669.00 12,658.66 12,658.66 37,98?.??
------------------------------------------------------------
</TABLE>
<PAGE> 31
Daily Net Asset Value Calcuation
Day 1
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C TOTAL
------------------------------------------------------------
<S> <C> <C> <C> <C>
14. Prior Day's Net Assets 1,000,000.00 1,000,000.00 1,000,000.00 3,000,000.00
15. Total Net Assets 1,012,669.00 1,012,658.67 1,012,658.67 3,037,9??.??
(13 + 14)
16. Outstanding Shares 100,100.00 100,100.00 100,100.00 300,3??.??
17. Net Asset Value - Raw 10.11657343 10.11647023 10.11647023
Net Asset Value - Rounded 10.12 10.12 10.12
POP 10.12 10.54 10.12
Redemption Price 10.12 10.12 9.72
</TABLE>
Prepared By: _____________________________________
Reviewed By: _____________________________________
<PAGE> 32
Daily Net Asset Value Calculation
Day 2
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C TOTAL
------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Shares, Prior Day 100,100.00 100,100.00 100,100.00 300,300.00
------------------------------------------------------------
2. Share Activity 50.00 100.00 50.00 100.00
3. Adjusted Shares 100,050.00 100,200.00 100,150.00 300,40?.??
------------------------------------------------------------
4. Prior Day Net Assets 1,012,669.00 1,012,658.67 1,012,658.67 3,037,98?.??
5. Today's Capital Activity 506.00 1,012.00 506.00 1,01?.??
6. Adjusted Net Assets 1,012,163.00 1,013,670.67 1,013,164.67 3,038,99?.??
7. Net Asset Percentage 33.31% 33.35% 33.34% 10????%
------------------------------------------------------------
8. Net Investment Income
Before class specific
expenses 6,662.00 6,670.00 6,668.00 20,00?.??
9. Class specific expense
12(b)-1 fees 0.00 6.92 6.92 1?.??
10. Net Investment Income 6,662.00 6,663.08 6,661.08 19,98?.??
------------------------------------------------------------
11. Realized Gains/Losses
Short Term 0.00 0.00 0.00
Long Term 1,665.50 1,667.50 1,667.00 5,00?.??
12. Unrealized Gains Losses 3,331.00 3,335.00 3,334.00 10,00?.??
13. Net Change in Net Assets
(5+10+11+12) 11,152.50 12,677.58 12,168.08 35,99?.??
------------------------------------------------------------
</TABLE>
<PAGE> 33
Daily Net Asset Value Calcuation
Day 2
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C TOTAL
------------------------------------------------------------
<S> <C> <C> <C> <C>
14. Prior Day's Net Assets 1,012,669.00 1,012,658.67 1,012,658.67 3,037,98?.??
15. Total Net Assets (13+14) 1,023,821.50 1,025,336.25 1,024,826.75 3,073,98?.??
16. Outstanding Shares 100,050.00 100,200.00 100,150.00 300,4??.??
17. Net Asset Value - Raw 10.23309845 10.23289671 10.23291812
Net Asset Value - Rounded 10.23 10.23 10.23
POP 10.23 10.66 10.23
Redemption Price 10.23 10.23 9.82
</TABLE>
<PAGE> 34
SEI FINANCIAL MANAGEMENT
METHODOLOGY FOR CONTROLLING
MULTI-CLASS FUNDS
ADDENDUM
The Attached procedural methodology was in effect for the Multi-class funds
administered by SEI Financial Management as of June 1, 1993. As of May 31,
1993 for these funds and specifically the STI Classic Funds, the methodology
followed, allocated net investment income before class specific expenses,
realized capital gains/losses and allocable portfolio expenses based upon
prior days net assets. This differs from the current methodology of using
prior days net assets adjusted for current day share activity. This change was
affected based upon additional guidance received from the S.E.C. on this matter.
A summary of the impact of maintaining multiple classes of shares of a
portfolio on the financial statements of the portfolio, is as follows:
* In the Statement of Net Assets/Statement of Assets and Liabilities
of the portfolio, the net assets section will reflect separate line
items for the net asset value, offering price and redemption price
per share, for each separate class of shares. Also, to the extent
the maximum offering price or redemption price per share of
classes of shares differ, because of sales loads or contingent
deferred sales charges, separate line items reflecting the
calculations and amount of each will be presented.
* Under the Statement of Operations, the footnotes in the Financial
Statements with respect to the separate classes will include
explicit disclosure regarding the expenses relating to each class
(e.g., distribution costs).
* The Statement of Changes in Net Assets will reflect separate line
items for each class of shares for distribution of net investment
income and for distribution of capital gains. Also, separate line
items for each class of shares will be presented for share
transactions (in dollars) and for shares issued and redeemed
(in shares).
* The Financial Highlights will present separate columns for each
separate class, reflecting all of the information required (e.g.,
net asset value, beginning of period; income from investment
operations; distribution; net asset value, end of period; total
return and ratios and supplemental data).
* In addition, the notes to the Financial Statements will present
a description of the capital structure of the trust, as well as the
<PAGE> 35
calcuation of the net asset value of each portfolio and the
maximum offering price/redemption price per share for each
class, as applicable. The notes will also describe the treatment
of class specific expenses, as well as methodology for allocation
of other operating expenses to the individual classes. Finally,
the notes will describe the distribution agreement(s) entered
into by the separate classes of shares.
