<PAGE> 1
As filed with the Securities and Exchange Commission on March 31, 1997
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.
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Post-Effective Amendment No. 12 X
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and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 13 ---
(Check appropriate box or boxes.)
THE ACHIEVEMENT FUNDS TRUST
(Exact name of Registrant as Specified in Charter)
Oaks, Pennsylvania 19456
(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.
Ballard Spahr Andrews & Ingersoll SEI Corporation
1735 Market Street, 51st Floor Oaks, PA 19456
Philadelphia, PA 19103-7599
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)
immediately upon filing pursuant to paragraph (b)
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on (Date) pursuant to paragraph (b)
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X 60 days after filing pursuant to paragraph (a)(i) on
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(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
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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, 1997 on
March 31, 1997.
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THE ACHIEVEMENT FUNDS TRUST
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
NOTE: The Registrant currently offers shares of seven investment portfolios, the
Equity Fund, Balanced Fund, Intermediate Term Bond Fund, Short Term Bond Fund,
Municipal Bond Fund, Short Term Municipal Bond Fund and Idaho Municipal Bond
Fund. 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.
I. Institutional Shares
Part A - Prospectus
Item No. Location
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
Part B - Statement of Additional Information
Item No. Location
10. Cover Page Cover Page
11. Table of Contents Table of Contents
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Form N-1A
Item Number Location
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
II. Retail Class A Shares
Part A - Prospectus
Item No. Location
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;
2
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Form N-1A
Item Number Location
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
Part B - Statement of Additional Information
Item No. Location
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
Securities Being Offered Shares; Determination of Net
Asset Value
20. Tax Status Taxes
21. Underwriters Distribution
22. Calculation of Performance Data Performance
3
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Form N-1A
Item Number Location
23. Financial Statements Financial Statements
V. All Classes 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.
4
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THE ACHIEVEMENT FUNDS TRUST
- EQUITY FUND
- BALANCED FUND
- INTERMEDIATE TERM BOND FUND
- SHORT TERM BOND FUND
- MUNICIPAL 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 seven 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 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
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, 1997 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 Oaks, PA 19456 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, 1997
<PAGE> 7
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,
Municipal 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 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 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 will 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."
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<PAGE> 8
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."
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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
Intermediate Short Term Idaho
Equity Balanced Term Term Municipal Municipal Municipal
Fund Fund Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund
---- ---- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fees .57% .57% .40% .39% .28% .26% .26%
(after waivers)(1)
Other Expenses(2) .33% .33% .35% .36% .47% .49% .49%
---- ---- ---- ---- ---- ---- ---
Total Fund Operating .90% .90% .75% .75% .75% .75% .75%
==== ==== ==== ==== ==== ==== ====
Expenses (after waivers)(3)
</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 Municipal 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 - 1.07%; the Balanced Fund - 1.07%; the Intermediate Term Bond
Fund - .95%; the Short Term Bond Fund - 0.96%; the Municipal Bond Fund
- 1.07%; the Short Term Municipal Bond Fund - 1.26%; the Idaho
Municipal Bond Fund - 1.23%.
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.
3
<PAGE> 10
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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
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
Municipal 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.
FINANCIAL HIGHLIGHTS
Shown below are per share data, ratios and supplemental data for the Trust's
fiscal year ended January 31, 1997. The financial information, for a share
outstanding for the year ended January 31, 1997, 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. The Trust's financial statements for the year ended January
31, 1997, appear, along with the report of Deloitte & Touche LLP, in the Trust's
1997 Annual Report to shareholders. Additional performance information is set
forth in the 1997 Annual Report to shareholders and is available upon request
and without charge by calling 1-800-472-0577.
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FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR OR PERIOD
<TABLE>
<CAPTION>
Net Realized and Net
Asset Dividends Unrealized Net Assets,
Value, Net from Net Distributions Gains Asset End of
Beginning Investment Investment from (Losses) on Value, End Total Period
of Period Income Income Capital Gain Investment of Period Return (000)
--------- ------ ------ ------------ ---------- --------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EQUITY FUND
For the years ended
January 31, 1997 $12.64 0.11 (0.11) (0.94) 2.33 $14.03 20.00% $177,234
January 31, 1996 $10.24 0.17 (0.17) (0.72) 3.12 $12.64 32.55% $150,957
For the period ended
January 31, 1995(1)** $10.00 0.01 -- -- 0.23 $10.24 2.40%* $97,052
BALANCED FUND
For the years ended
January 31, 1997 $11.79 0.34 (0.35) (0.78) 1.01 $12.01 12.03% $156,315
January 31, 1996 $10.20 0.39 (0.39) (0.42) 2.01 $11.79 24.15% $147,357
For the period ended
January 31, 1995(1)** $10.00 0.04 -- -- 0.16 $10.20 2.00%* $112,896
INTERMEDIATE
TERM BOND FUND
For the years ended
January 31, 1997 $10.79 0.62 (0.62) -- (0.42) $10.37 2.06% $134,645
January 31, 1996 $10.09 0.71 (0.70) -- 0.69 $10.79 13.62% $115,307
For the period ended
January 31, 1995(1)** $10.00 0.05 (0.06) -- 0.10 $10.09 1.54%* $65,328
SHORT TERM
BOND FUND
For the years ended
January 31, 1997 $10.18 0.60 (0.60) -- (0.17) $10.01 4.40% $65,328
January 31, 1996 $10.02 0.67 (0.65) -- 0.14 $10.18 7.80% $75,632
For the period ended
January 31, 1995(1)** $10.00 0.04 (0.06) -- 0.04 $10.02 0.79%* $70,380
SHORT TERM
MUNICIPAL
BOND FUND
For the years ended
January 31, 1997 $10.23 0.39 (0.39) (0.07) (0.08) $10.08 3.03% $21,846
January 31, 1996 $10.01 0.43 (0.42) (0.05) 0.26 $10.23 6.71% $31,304
For the period ended
January 31, 1995(1)** $10.00 0.03 (0.03) -- 0.01 $10.01 0.43%* $33,,682
IDAHO MUNICIPAL
BOND FUND
For the years ended
January 31, 1997 $10.80 0.46 (0.46) (0.06) (0.33) $10.41 1.31% $27,487
January 31, 1996 $10.13 0.52 (0.51) (0.12) 0.78 $10.80 12.68% $25,873
For the period ended
January 31, 1995(1)** $10.00 0.04 (0.04) -- 0.13 $10.13 1.74%* $25,894
MUNICIPAL BOND
FUND
For the period ended
January 31, 1997(2) $10.00 0.12 (0.12) -- 0.02 $10.02 1.34%* $53,067
</TABLE>
<TABLE>
<CAPTION>
Expenses Expenses Net Income
to to Average Ratio of to Average
Average Net Assets Net Income Net Assets Portfolio Average
Net (Excluding to Average (excluding Turnover Commission
Assets Waivers) Net Asset Waivers) Rate Rate(3)
------ -------- --------- -------- ---- -------
<S> <C> <C> <C> <C> <C> <C>
EQUITY FUND
For the years ended
January 31, 1997 0.90% 1.07% 0.81% 0.64% 97.14% $0.0603
January 31, 1996 0.90% 1.14% 1.43% 1.19% 103.85% N/A
For the period ended
January 31, 1995(1)** 0.90% 1.26% 1.22% 0.86% 6.03% N/A
BALANCED FUND
For the years ended
January 31, 1997 0.90% 1.07% 2.90% 2.73% 68.11% $0.0601
January 31, 1996 0.90% 1.14% 3.48% 3.24% 59.74% N/A
For the period ended
January 31, 1995(1)** 0.90% 1.26% 3.61% 3.25% 1.70% N/A
INTERMEDIATE
TERM BOND FUND
For the years ended
January 31, 1997 0.75% 0.95% 6.02% 5.82% 21.23% N/A
January 31, 1996 0.75% 1.02% 6.14% 5.87% 85.16% N/A
For the period ended
January 31, 1995(1)** 0.75% 1.13% 5.60% 5.22% 10.57% N/A
SHORT TERM
BOND FUND
For the years ended
January 31, 1997 0.75% 0.96% 6.00% 5.79% 40.80% N/A
January 31, 1996 0.75% 0.99% 6.11% 5.87% 83.64% N/A
For the period ended
January 31, 1995(1)** 0.75% 1.13% 4.21% 3.83% 11.95% N/A
SHORT TERM
MUNICIPAL
BOND FUND
For the years ended
January 31, 1997 0.75% 1.26% 3.79% 3.28% 41.11% N/A
January 31, 1996 0.75% 1.30% 3.88% 3.33% 114.09% N/A
For the period ended
January 31, 1995(1)** 0.75% 1.26% 3.67% 3.16% 11.80% N/A
IDAHO MUNICIPAL
BOND FUND
For the years ended
January 31, 1997 0.75% 1.24% 4.40% 3.91% 29.13% N/A
January 31, 1996 0.75% 1.35% 4.52% 3.92% 58.94% N/A
For the period ended
January 31, 1995(1)** 0.75% 1.38% 4.21% 3.58% 5.66% N/A
MUNICIPAL BOND
FUND
For the period ended
January 31, 1997(2) 0.75% 1.07% 4.58% 4.26% 19.21% N/A
</TABLE>
* Returns are for the period indicated and have not been annualized.
** Ratios for the period have been annualized.
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<PAGE> 12
(1) Commenced operations on December 28, 1994.
(2) Commenced operations on November 1, 1996.
(3) Average commission rate paid per share for security purchases and sales
during the period. Presentation of the rate is only required for fiscal
years beginning after September 1, 1996.
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, Municipal Bond Fund, Short Term Municipal
Bond Fund and Idaho Municipal Bond Fund. Each of the Portfolios is diversified,
except for the Idaho Municipal Bond Fund which is a non-diversified portfolio.
Additional information pertaining to the Trust may be obtained by writing to SEI
Financial Services Company, Oaks, PA 19456 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.
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<PAGE> 13
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.
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. 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
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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. The Portfolio's investment in mortgage-backed securities, asset-backed
securities, floating or variable rate corporate notes and Yankee Bonds will not
exceed 40% of the fixed income portion of the Portfolio. The fixed income
securities held by the Balanced Fund will have an aggregate average weighted
maturity of three to ten years.
All of the fixed income securities and any convertible securities purchased by
the Balanced Fund will be rated BBB or higher by S&P or Baa by Moody's at the
time of purchase, or will be determined to be of comparable quality by the
Adviser at the time of purchase, provided, however, that not more than 20% of
the assets of the Balanced Fund that are invested in fixed income securities and
convertible securities may be invested in bonds or other securities that are
rated BBB by S&P or Baa by Moody's or are determined to be of comparable quality
by the Adviser. In the event the credit quality of bonds or other securities
purchased by the Balanced Fund declines below the applicable criteria, the
Adviser may consider selling such securities.
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.
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
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loans underlying the security. All of the foregoing investment securities are
considered by the Trust to be bonds and will be rated BBB or higher by S&P or
Baa by Moody's at the time of purchase, or will be determined to be of
comparable quality by the Adviser at the time of purchase, provided, however,
that the Intermediate Term Bond Fund may not invest more than 20% of its assets
in bonds that are rated BBB by S&P or Baa by Moody's or are determined to be of
comparable quality by the Adviser. 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
investment in mortgage-backed securities, asset-backed securities, floating or
variable rate corporate notes and Yankee Bonds will not exceed 40% 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 ten
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.
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
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<PAGE> 16
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."
MUNICIPAL BOND FUND
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
regular 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
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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. 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 securities discussed above. The 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
Municipal Bond Fund, see "RISK FACTORS" and "DESCRIPTION OF CERTAIN PERMITTED
INVESTMENTS."
SHORT TERM MUNICIPAL BOND FUND
Intestment 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 regular 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
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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 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 BBB or higher by S&P or Baa or higher by
Moody's, provided, however, that the Short Term Municipal Bond Fund may not
invest more than 20% of its assets in 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 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 BBB or higher by S&P or Baa or higher by Moody's, provided, however,
that the Idaho Municipal Bond Fund may not invest more than 20% of its assets in
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 or VMIG-1 by Moody's; and
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<PAGE> 19
(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 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 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 Municipal Bond Fund, 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, U.S. Treasury obligations and 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%.
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.
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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, MUNICIPAL 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 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.
RATED SECURITIES (BALANCED FUND, INTERMEDIATE TERM BOND FUND, MUNICIPAL BOND
FUND, SHORT TERM MUNICIPAL BOND FUND AND IDAHO MUNICIPAL BOND FUND) - The
Balanced Fund, the Intermediate Term Bond Fund, the Municipal Bond Fund, the
Short Term Municipal Bond Fund and the Idaho Municipal Bond Fund may invest in
securities rated as investment grade by either S&P or Moody's. Up to 20% of the
assets of the Balanced Fund that are invested in fixed income securities and
convertible securities, and up to 20% of the assets of the Intermediate Term
Bond Fund, the Short Term Municipal Bond Fund, the Idaho Municipal Bond Fund and
Municipal Bond Fund, may be invested in 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 the
issuer of such bonds to make principal and interest payments than is the case
with higher grade bonds. The Portfolios may retain a security which was rated as
investment grade at the time of purchase but whose rating is subsequently
downgraded below investment grade.
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.
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<PAGE> 21
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 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
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<PAGE> 22
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 Municipal 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 Municipal Bond Fund,
the Short Term Municipal Bond Fund and the 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, 1997, 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: .57% for the Equity Fund; .57% for
the Balanced Fund; .40% for the Intermediate Term Bond Fund; .39% for the Short
Term Bond Fund; .28% for the Municipal Bond fund; .26% for the Short Term
Municipal Bond Fund; and .26% 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
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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, 1996. 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 its inception in December, 1994. He
joined the Adviser in 1990 as a Vice President and Senior Portfolio Manager,
and managed the First Security Common Stock Fund and EB Common Stock Fund from
December, 1993 to December, 1994 when those funds were converted into the
Equity Fund.
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.
MUNICIPAL BOND FUND, 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, the
Idaho Municipal Bond Fund and the 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 Municipal Bond Fund, 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.
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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, Oaks, PA 19456, 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, the Short Term Bond Fund and the Municipal 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 average 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"), Oaks, Pennsylvania 19456, 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.
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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 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' prior 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.
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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, 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
Municipal Bond Fund, 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.
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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. The Municipal Bond Fund may advertise
performance that includes results from periods during which the initial assets
of the Municipal Bond Fund were held in a predecessor collective investment
trust managed by the Adviser. 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,
1997, 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 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.
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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 may qualify for the deduction for dividends received by
corporations to the extent of the dividends received by the Portfolio from
domestic corporations. See the Statement of Additional Information for further
details. 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 (MUNICIPAL BOND FUND, 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.
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
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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 Municipal Bond Fund, 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 seven separate
portfolios. 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
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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.
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 Oaks, PA 19456 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 Municipal 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.
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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.
COUNSEL
Ballard Spahr Andrews & Ingersoll serves as counsel to the Trust.
INDEPENDENT ACCOUNTANTS
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
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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," 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
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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 Municipal Bond Fund's, 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 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 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.
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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.
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.
28
<PAGE> 35
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.
29
<PAGE> 36
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).
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.
30
<PAGE> 37
TABLE OF CONTENTS
PAGE
SUMMARY .................................... 1
FINANCIAL HIGHLIGHTS ....................... 4
THE TRUST .................................. 6
INVESTMENT OBJECTIVES AND POLICIES ......... 6
RISK FACTORS ............................... 14
INVESTMENT LIMITATIONS ..................... 15
FUNDAMENTAL POLICIES ....................... 16
THE ADVISER ................................ 16
THE ADMINISTRATOR .......................... 18
THE DISTRIBUTOR ............................ 18
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES 18
PERFORMANCE ................................ 20
TAXES ...................................... 21
GENERAL INFORMATION ........................ 23
DESCRIPTION OF CERTAIN PERMITTED INVESTMENTS 25
APPENDIX ................................... 29
<PAGE> 38
THE ACHIEVEMENT FUNDS
THE ACHIEVEMENT FUNDS
THE ACHIEVEMENT FUNDS TRUST
INSTITUTIONAL
PROSPECTUS
EQUITY FUND
BALANCED FUND
INTERMEDIATE TERM BOND FUND
SHORT TERM BOND FUND
MUNICIPAL BOND FUND
SHORT TERM MUNICIPAL BOND FUND
IDAHO MUNICIPAL BOND FUND
JUNE 1, 1997
This fund is offered in conjunction with The Achievement Funds (portfolios of
certain mutual funds) to afford a convenient range of investment choices to
investors.
DISTRIBUTED BY
SEI Financial Services Company
Oaks, Pennsylvania 19456
800-472-0577
ACH-F-003-03
<PAGE> 39
THE ACHIEVEMENT FUNDS TRUST
- EQUITY FUND
- BALANCED FUND
- INTERMEDIATE TERM BOND FUND
- SHORT TERM BOND FUND
- MUNICIPAL 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 seven 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, 1997 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 Oaks, PA 19456 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, 1997
<PAGE> 40
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, Municipal 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 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 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, will 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."
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<PAGE> 41
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 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."
2
<PAGE> 42
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
Intermediate Short Term Idaho
Equity Balanced Term Term Municipal Municipal Municipal
Fund Fund Bond Fund Bond Fund Bond Fund Second Fund Bond Fund
---- ---- --------- --------- --------- ----------- ---------
<S> <C> <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% 4.00% 1.50% 4.00%
ANNUAL OPERATING
EXPENSES (AS A % OF NET
ASSETS)
Management Fees........... .57% .57% .40% .39% .28% .26% .26%
(after waivers)(2)
12b-1 Fees................ .25% .25% .25% .25% .25% .25% .25%
Other Expenses(3)......... .33% .33% .35% .36% .47% .49% .49%
---- ---- ---- ---- ---- ---- ----
Total Fund Operating
Expenses.................. 1.15% 1.15% 1.00% 1.00% 1.00% 1.00% 1.00%
(after waivers)(4) ==== ==== ==== ==== ==== ==== ====
</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 Municipal 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 - 1.32%; the
3
<PAGE> 43
Balanced Fund - 1.32%; the Intermediate Term Bond Fund - 1.20%; the Short
Term Bond Fund - 1.21%; the Municipal Bond Fund - 1.32%; the Short Term
Municipal Bond Fund - 1.51%; the Idaho Municipal Bond Fund - 1.48%.
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.
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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
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
Municipal Bond Fund 50 71 93 158
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.
FINANCIAL HIGHLIGHTS
Shown below are per share data, ratios and supplemental data for the Trust's
fiscal year ended January 31, 1997. The financial information, for a share
outstanding for the year ended January 31, 1997, 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. The Trust's financial statements for the year ended January
31, 1997, appear, along with the report of Deloitte & Touche LLP, in the Trust's
1997 Annual Report to shareholders. Additional performance information is set
forth in the 1997 Annual Report to shareholders and is available upon request
and without charge by calling 1-800-472-0577.
4
<PAGE> 44
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Year or Period
<TABLE>
<CAPTION>
Net Realized and
Asset Dividends Unrealized Net
Value, Net from Net Distributions Gains Asset
Beginning Investment Investment from (Losses) on Value, End Total
of Period Income Income Capital Gains Investments of Period Return+
--------- ------ ------ ------------- ----------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
EQUITY FUND
For the year ended
January 31, 1997 $12.65 0.08 (0.08) (0.94) 2.33 $14.04 19.72%
For the period ended
January 31, 1996(1)** $10.52 0.14 (0.15) (0.72) 2.86 $12.65 32.34%
BALANCED FUND
For the year ended
January 31, 1997 $11.78 0.31 (0.32) (0.78) 1.01 $12.00 11.81%
For the period ended
January 31, 1996(1)** $10.34 0.32 (0.31) (0.42) 1.85 $11.78 23.88%
INTERMEDIATE TERM BOND FUND
For the year ended
January 31, 1997 $10.82 0.60 (0.60) -- (0.42) $10.40 1.80%
For the period ended
January 31, 1996(1)** $10.16 0.56 (0.55) -- 0.65 $10.82 13.49%
SHORT TERM
BOND FUND
For the year ended
January 31, 1997 $10.18 0.57 (0.58) -- (0.17) $10.00 4.04%
For the period ended
January 31, 1996(1)** $10.03 0.53 (0.52) -- 0.14 $10.18 7.55%
SHORT TERM
MUNICIPAL
BOND FUND
For the year ended
January 31, 1997 $10.25 0.36 (0.36) (0.07) (0.08) $10.10 2.76%
For the period ended
January 31, 1996(1)** $10.01 0.33 (0.33) (0.05) 0.29 $10.25 6.99%
IDAHO MUNICIPAL
BOND FUND
For the year ended
January 31, 1997 $10.83 0.44 (0.44) (0.06) (0.33) $10.44 1.05%
For the period ended
January 31, 1996(1)** $10.21 0.41 (0.40) (0.12) 0.73 $10.83 12.60%
MUNICIPAL
BOND FUND
For the period ended
January 31, 1997(2) $10.01 0.15 (0.15) -- -- $10.01 1.48%*
</TABLE>
<TABLE>
<CAPTION>
Ratio of Ratio of Net
Expenses to Ratio of Income to
Net Assets, Ratio of Average Net Net Average Net Average
End of Expenses to Assets Income to Assets Portfolio Commis-
Period Average Net (Excluding Average (excluding Turnover sion
(000) Assets Waivers) Net Assets Waivers) Rate Rate(3)
----- ------ -------- ---------- -------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
EQUITY FUND
For the year ended
January 31, 1997 $4,099 1.15% 1.31% 0.52% 0.36% 97.14% $0.0603
For the period ended
January 31, 1996(1)** $1,769 1.15% 1.37% 0.99% 0.77% 103.85% N/A
BALANCED FUND
For the year ended
January 31, 1997 $2,875 1.15% 1.32% 2.64% 2.47% 68.11% $0.060(1)
For the period ended
January 31, 1996(1)** $1,664 1.15% 1.38% 3.06% 2.83% 59.74% N/A
INTERMEDIATE TERM BOND FUND
For the year ended
January 31, 1997 $2,730 1.00% 1.18% 5.76% 5.58% 21.23% N/A
For the period ended
January 31, 1996(1)** $ 963 1.00% 1.26% 5.74% 5.48% 85.16% N/A
SHORT TERM
BOND FUND
For the year ended
January 31, 1997 $ 443 1.00% 1.20% 5.74% 5.54% 40.80% N/A
For the period ended
January 31, 1996(1)** $ 39 1.00% 1.23% 5.75% 5.52% 83.64% N/A
SHORT TERM
MUNICIPAL
BOND FUND
For the year ended
January 31, 1997 $ 228 1.00% 1.51% 3.56% 3.05% 41.11% N/A
For the period ended
January 31, 1996(1)** $ 212 1.00% 1.54% 3.49% 2.95% 114.09% N/A
IDAHO MUNICIPAL
BOND FUND
For the year ended
January 31, 1997 $5,475 1.00% 1.47% 4.15% 3.68% 29.13% N/A
For the period ended
January 31, 1996(1)** $3,109 1.00% 1.58% 4.18% 3.60% 58.94% N/A
MUNICIPAL
BOND FUND
For the period ended
January 31, 1997(2) $4,895 1.00% 1.29% 4.35% 4.06% 19.21% N/A
</TABLE>
* 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 March 6, 1995.
(2) Commenced operations on November 4, 1996.
5
<PAGE> 45
(3) Average commission rate paid per share for security purchases and sales
during the period. Presentation of the rate is only required for fiscal
years beginning after September 1, 1996.
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, Municipal 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. Additional information pertaining to the
Trust may be obtained by writing to SEI Financial Services Company, Oaks, PA
19456 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.
6
<PAGE> 46
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.
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. 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
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from a pool of mortgage loans underlying the security. The Portfolio's
investment in mortgage-backed securities, asset-backed securities, floating or
variable rate corporate notes and Yankee Bonds will not exceed 40% of the fixed
income portion of the Portfolio. The fixed income securities held by the
Balanced Fund will have an aggregate average weighted maturity of three to ten
years.
All of the fixed income securities and any convertible securities purchased by
the Balanced Fund will be rated BBB or higher by S&P or Baa by Moody's at the
time of purchase, or will be determined to be of comparable quality by the
Adviser at the time of purchase, provided, however, that not more than 20% of
the assets of the Balanced Fund that are invested in fixed income securities and
convertible securities may be invested in bonds or other securities that are
rated BBB by S&P or Baa by Moody's or are determined to be of comparable quality
by the Adviser. In the event the credit quality of bonds or other securities
purchased by the Balanced Fund declines below the applicable criteria, the
Adviser may consider selling such securities.
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 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 are
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considered by the Trust to be bonds and will be rated BBB or higher by S&P or
Baa by Moody's at the time of purchase, or will be determined to be of
comparable quality by the Adviser at the time of purchase, provided, however,
that the Intermediate Term Bond Fund may not invest more than 20% of its assets
in bonds that are rated BBB by S&P or Baa by Moody's or are determined to be of
comparable quality by the Adviser. 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
investment in mortgage-backed securities, asset-backed securities, floating or
variable rate corporate notes and Yankee Bonds will not exceed 40% 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 ten
years. By so limiting the average weighted 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 average
weighted 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.
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
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<PAGE> 49
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."
MUNICIPAL BOND FUND
Investment Objectives
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
regular 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
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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); and (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. 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 additional information regarding risks and permitted investments of the
Municipal Bond Fund, see "RISK FACTORS" and "DESCRIPTION OF CERTAIN PERMITTED
INVESTMENTS."
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 regular 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
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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 BBB or higher by S&P or Baa or higher by
Moody's, provided, however, that the Short Term Municipal Bond Fund may not
invest more than 20% of its assets in 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 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 BBB or higher by
S&P or Baa or higher by Moody's, provided, however, that the Idaho Municipal
Bond Fund may not invest more than 20% of its assets in 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 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.
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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 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 Municipal Bond Fund, the Short Term
Municipal Bond Fund, and the 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%.
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.
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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, MUNICIPAL 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 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.
RATED SECURITIES (BALANCED FUND, INTERMEDIATE TERM BOND FUND, MUNICIPAL BOND
FUND, SHORT TERM MUNICIPAL BOND FUND AND IDAHO BOND FUND) - The Balanced Fund,
the Intermediate Term Bond Fund, the Municipal Bond Fund, the Short Term
Municipal Bond Fund and the Idaho Municipal Bond Fund may invest in securities
rated as investment grade by either S&P or Moody's. Up to 20% of the assets of
the Balanced Fund that are invested in fixed income securities and convertible
securities, and up to 20% of the assets of the Intermediate Term Bond Fund, the
Municipal Bond Fund, the Short Term Municipal Bond Fund, and the Idaho Municipal
Bond Fund, may be invested in 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 the issuer of such bonds to
make principal and interest payments than is the case with higher grade bonds.
The Portfolios may retain a security which was rated as investment grade at the
time of purchase but whose rating is subsequently downgraded below investment
grade.
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
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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 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.
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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 Municipal 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 Municipal Bond Fund,
the Short Term Bond Fund, the Short Term Municipal Bond Fund and the 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,
1997, 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: 0.57% for the Equity Fund; 0.57% for the Balanced Fund;
0.40% for the Intermediate Term Bond Fund; 0.39% for the Short Term Bond Fund;
.28% for the Municipal Bond Fund; 0.26% for the Short Term Municipal Bond Fund;
and 0.26% 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-Hartley organizations,
municipal and state retirement funds, charitable foundations, endowments and
individual
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investors throughout the United States. FSIM had approximately $4.3 billion
under management at December 31, 1997. 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 its inception in December, 1994. He
joined the Adviser in 1990 as a Vice President and Senior Portfolio Manager,
and managed the First Security Common Stock Fund and EB Common Stock Fund from
December, 1993 to December, 1994 when those funds were converted into the
Equity Fund.
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.
MUNICIPAL BOND FUND, 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, the
Idaho Municipal Bond Fund, and 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 Municipal Bond Fund, Short Term Municipal Bond Fund, and 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.
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<PAGE> 57
THE ADMINISTRATOR
SEI Fund Resources, Oaks, PA 19456, 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, the Short Term Bond Fund and the Municipal 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 average 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"), Oaks, PA 19456, 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
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<PAGE> 58
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 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 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
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<PAGE> 59
(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 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
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<PAGE> 60
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").
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 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>
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<PAGE> 61
SHORT TERM BOND FUND AND
SHORT TERM MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
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>
MUNICIPAL BOND FUND AND IDAHO MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
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. 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.
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<PAGE> 62
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 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.
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<PAGE> 63
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 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 (the "SEI Money Market Fund"), 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
Fund").
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 the 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 circumstances, as described in this Prospectus. The Trust reserves the
right to change the terms and
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<PAGE> 64
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' prior 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.
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<PAGE> 65
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 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
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<PAGE> 66
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.
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
Municipal Bond Fund, 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.
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The Municipal Bond Fund may advertise performance that includes results from
periods during which the initial assets of the Municipal Bond Fund were held in
a predecessor collective investment trust managed by the Adviser. 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,
1997, 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 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 may qualify for the deduction for dividends received by
corporations to the extent of the dividends received by the Portfolio from
domestic
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<PAGE> 68
corporations. See the Statement of Additional Information for further details.
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 MUNICIPAL BOND FUND, SHORT TERM MUNICIPAL
BOND FUND AND THE 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 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 Municipal Bond Fund, 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
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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 seven separate
portfolios. 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 Retail Class A class are offered by this
prospectus. Shares of the Institutional 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 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 Oaks, PA 19456 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 Municipal 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 for
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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
Ballard Spahr Andrews & Ingersoll serves as counsel to the Trust.
INDEPENDENT ACCOUNTANTS
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.
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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," 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.
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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
Municipal Bond Fund's 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 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 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 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
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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 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.
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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.
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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).
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.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SUMMARY ................................................................ 1
FINANCIAL HIGHLIGHTS........................................................ 4
THE TRUST ................................................................ 6
INVESTMENT OBJECTIVES AND POLICIES.......................................... 6
RISK FACTORS................................................................ 14
INVESTMENT LIMITATIONS...................................................... 15
FUNDAMENTAL POLICIES........................................................ 16
THE ADVISER ................................................................ 16
THE ADMINISTRATOR........................................................... 18
THE DISTRIBUTOR............................................................. 18
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES................................. 19
PERFORMANCE ................................................................ 27
TAXES ................................................................ 28
GENERAL INFORMATION......................................................... 30
DESCRIPTION OF CERTAIN PERMITTED INVESTMENTS................................ 32
APPENDIX ................................................................ 36
</TABLE>
<PAGE> 78
This fund is offered
in conjunction with
The Achievement Funds
(portfolios of certain
mutual funds) to afford
a convenient range of
investment choices
to investors.
DISTRIBUTED BY
SEI Financial Services Company
Oaks, Pennsylvania 19456
800-472-0577
ACH-F-009-03
THE
ACHIEVEMENT
FUNDS
THE ACHIEVEMENT FUNDS
THE ACHIEVEMENT FUNDS TRUST
RETAIL
PROSPECTUS
EQUITY FUND
BALANCED FUND
INTERMEDIATE TERM BOND FUND
SHORT TERM BOND FUND
MUNICIPAL BOND FUND
SHORT TERM MUNICIPAL BOND FUND
IDAHO MUNICIPAL BOND FUND
JUNE 1, 1997
<PAGE> 79
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, 1997 for the Trust's Equity Fund,
Balanced Fund, Intermediate Bond Fund, Short Term Bond Fund, Municipal Bond
Fund, Short Term Municipal Bond Fund and Idaho Municipal Bond Fund (collectively
the "Portfolios," and each a "Portfolio"). The Prospectuses may be obtained
through SEI Financial Services Company, Oaks, PA 19456.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<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......................................... 21
DETERMINATION OF NET ASSET VALUE.......................................... 21
TAXES .............................................................. 22
PORTFOLIO TRANSACTIONS.................................................... 28
LIMITATION OF TRUSTEE'S LIABILITY......................................... 29
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES....................... 29
COUNSEL TO THE TRUST...................................................... 30
FINANCIAL STATEMENTS...................................................... 30
</TABLE>
June 1, 1997
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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 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 original Trustees of the Trust were elected at the first meeting of
shareholders following the commencement of the Trust's operations. Additional
Trustees were elected at a shareholders meeting held on November 7, 1996.
The Trustees 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
"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
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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, the Portfolio 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. OTC options are available for a greater variety of securities and for a
wider range of expiration dates and
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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 current interest rates, current conditions in
the relevant housing markets and other factors. The
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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 BONDS -- Yankee Bonds are U.S. dollar-denominated instruments
of foreign issuers who either register with the Securities and Exchange
Commission or issue securities under Rule 144A. 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 Bonds 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 fixed as of the
purchase date and no interest accrues to a Portfolio before settlement. These
securities are
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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 3.3% and 7.6%,
respectively, in 1995. 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 2.7% 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 $59,035,000.
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 $19 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 securities on margin, except that a Portfolio may obtain
such short term credits as are necessary for the clearance of
transactions.
5. Engage in securities repurchase transactions or make loans, but this
limitation does not apply to the purchase of debt securities.
6. 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.
7. 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.
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8. Invest in interests in oil, gas or other mineral exploration or
development programs or oil, gas or mineral leases.
9. 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 amendments
to the advisory agreement dated as of December 27, 1994 and November 1, 1996
(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.
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For the fiscal year ended January 31, 1997, the Portfolios paid the Adviser the
following fees:
<TABLE>
<CAPTION>
Fee Fee
Paid Waived
---- ------
<S> <C> <C>
Equity Fund $933,172 $280,554
Balanced Fund 853,068 262,295
Intermediate Term Bond Fund 499,628 244,008
Short Term Bond Fund 276,620 150,021
Municipal Bond Fund 38,264 43,574
Short Term Municipal Bond Fund 69,894 93,882
Idaho Municipal Bond Fund 76,325 102,410
</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 ADMINISTRATOR
The Trust and SEI Financial Management Corporation entered into an
administration agreement (the "Administration Agreement") dated December 27,
1994. On June 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, 1997:
Equity Fund - $327,892; Balanced Fund - $301,415; Intermediate Term Bond Fund -
$247,817; Short Term Bond Fund - $142,218; Municipal Bond Fund - $27,259; Short
Term Municipal Bond Fund - $54,612; Idaho Municipal Bond Fund - $59,567. For the
fiscal year ended January 31, 1997, 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 $45,388 and $40,433, respectively.
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 Oaks, PA 19456. 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; 1784 Funds; Turner Funds, SEI Institutional
Investments Trust; Santa Barbara Group of Mutual Funds, Inc.; First American
Strategy Funds, Inc.; and HighMark 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, 1997, the Retail Class A classes of the Portfolios paid the
Distributor the following amounts: Equity Fund - $7,951; Balanced Fund - $6,009;
Intermediate Term Bond Fund - $4,447; Short Term Bond Fund - $1,165; Municipal
Bond Fund - $1,129; Short Term Municipal Bond Fund - $561; Idaho Municipal Bond
Fund - $7,221. The Distributor used those funds to make payments to third
parties for distribution-related services.
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<PAGE> 92
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 and the amount retained by the
Distributor for the fiscal year ended January 31, 1997.
<TABLE>
<CAPTION>
Sales Amount
Charges Retained
------- --------
<S> <C> <C>
Equity Fund $75,739 $7,653
Balanced Fund 62,405 6,313
Intermediate Term Bond Fund 15,681 1,601
Short Term Bond Fund 1,950 163
Municipal Bond Fund 1,509 120
Short Term Municipal Bond Fund 266 23
Idaho Municipal Bond Fund 24,988 2,482
</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 Retired
4458 Camille Street
Salt Lake City, UT 84124
</TABLE>
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<PAGE> 93
<TABLE>
<CAPTION>
Position Principal
Held With Occupation(s)
Name and Address Registrant During Past 5 Years
---------------- ---------- -------------------
<S> <C> <C>
Carl S. Minden Trustee Retired
314 Federal Height Circle
Salt Lake City, UT 84103
George L. Denton, Jr.* Trustee Retired
2915 Sherwood Drive
Salt Lake City, UT 84108
James H. Gardner Trustee Professor, University of Utah.
1616 Arlington Drive
Salt Lake City, UT 84103
Blaine Huntsman Trustee Private investor 1995-present. Chairman
115 South Main Street, 5th Floor & CEO, Olympus Capital Corp. 1988-
Salt Lake City, UT 84111 1995. Director, Zions Cooperative
Mercantile Institution.
Kent H. Murdock Trustee President, O.C. Tanner Company 1991-
3015 E. Craig Drive present.
Salt Lake City, UT 84109
David G. Lee President Senior Vice President of SEI since 1993.
SEI Financial Management Vice President of SEI since 1991.
Corporation
Oaks, PA 19456
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,
Oaks, PA 19456 Morgan, Lewis & Bockius (law firm)
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.
Oaks, PA 19456
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
Oaks, PA 19456 President of SEI, the Administrator and
the Distributor 1992-1994. Associate,
Morgan, Lewis & Bockius (law firm)
prior to 1992.
</TABLE>
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<PAGE> 94
<TABLE>
<CAPTION>
Position Principal
Held With Occupation(s)
Name and Address Registrant During Past 5 Years
---------------- ---------- -------------------
<S> <C> <C>
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,
Oaks, PA 19456 Drinker, Biddle & Reath (law firm)
1994-1996. Delaware Service
Company, Inc. prior to 1994.
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,
Oaks, PA 19456 Dewey Ballantine (law firm) 1994-1995.
Associate,
Winston
&
Strawn
(law
firm)
1991-1994.
Joseph M. Lydon Vice President and Director of Business Administration of
SEI Financial Management Assistant Secretary Fund Resources, SEI Corporation since
Corporation since 1995 1995. Vice President of Fund Group
Oaks, PA 19456 and Vice President of Dreman Value
Management and President of Dreman
Financial Services, Inc. prior to 1995.
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
Oaks, PA 19456 Management - SEI Corporation - 1992
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 March 15, 1997.
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, 1997, 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
</TABLE>
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<PAGE> 95
<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>
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
James H. Gardner 1,000 0 0 1,000
Blaine Huntsman 1,000 0 0 1,000
Kent H. Murdock 1,000 0 0 1,000
</TABLE>
(1) Mitchell Melich served as a Trustee of the Trust until his resignation on
May 17, 1996. He received $2,000 in aggregate compensation from the Trust
during its fiscal year ended January 31, 1997. He is not entitled to
receive any pension or retirement benefits from the Trust.
(2) The Trust is not part of a Fund Complex.
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
waivers/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, 1997, the yield for the Institutional
class of shares of each Portfolio was: Equity Fund - .85%; Balanced Fund -
2.48%; Intermediate Term Bond Fund - 5.80%; Short Term Bond Fund - 5.52%;
Municipal Bond Fund - 4.69%; Short Term Municipal Bond Fund - 3.54%; Idaho
Municipal Bond Fund - 4.52%.
For the 30 day period ended January 31, 1997, the yield for the Retail Class A
shares of each Portfolio was: Equity Fund - .58%; Balanced Fund - 2.16%;
Intermediate Term Bond Fund - 5.35%; Short Term Bond Fund - 5.19%; Municipal
Bond Fund - 4.27%; Short Term Municipal Bond Fund - 3.24%; Idaho
Municipal Bond Fund - 4.10%.
The Municipal Bond Fund, Short Term Municipal Bond Fund and the 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
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<PAGE> 96
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, 1997, the
taxable equivalent yield for Institutional class of shares of the Municipal Bond
Fund, Short Term Municipal Bond Fund, and the Idaho Municipal Bond Fund, was
7.76%, 5.86%, and 8.66%, respectively, and for the Retail Class A shares of the
Municipal Bond Fund, Short Term Bond Fund, and the Idaho Municipal Bond Fund was
7.07%, 5.36%, and 7.85%, respectively.
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, 1997, the Institutional class of shares of
the Equity Fund had an annual total return of 20.0%. For the period from
December 28, 1994 (commencement of operations) through January 31, 1997, the
Institutional class of shares of the Equity Fund had an average annual total
return of 26.25%.
For the fiscal year ended January 31, 1997, the Retail Class A shares of the
Equity Fund had an annual total return of 14.3%. For the period from March 6,
1995 (commencement of operations) to January 31, 1997, the Retail Class A shares
of the Equity Fund had an average annual total return of 22.54%
Balanced Fund
For the fiscal year ended January 31, 1997, the Institutional class of shares of
the Balanced Fund had an annual return of 12.03%. For the period from December
28, 1994 (commencement of operations) to January 31, 1997, the Institutional
class of shares of the Balanced Fund had an average annual total return of
18.18%.
For the fiscal year ended January 31, 1997, the Retail Class A shares of the
Balanced Fund had an annual total return of 6.74%. For the period from March 6,
1995 (commencement of operations) to January 31, 1997, the Retail Class A shares
of the Balanced Fund had an average annual total return of 14.58%.
Intermediate Term Bond Fund
For the fiscal year ended January 31, 1997, the Institutional class of shares of
the Intermediate Term Bond Fund had an annual return of 2.06%. For the period
from December 28, 1994 (commencement of operations) to January 31, 1997, the
Institutional class of shares of the Intermediate Term Bond Fund had an average
annual total return of 8.12%.
For the fiscal year ended January 31, 1997, the Retail Class A shares of the
Intermediate Bond Fund had an annual total return of (1.74%). For the period
from March 6, 1995 (commencement of operations) to January 31, 1997, the Retail
Class A shares of the Intermediate Term Bond Fund had an average annual total
return of 5.21%.
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<PAGE> 97
Short Term Bond Fund
For the fiscal year ended January 31, 1997, the Institutional class of shares of
the Short Term Bond Fund had an annual total return of 4.40%. For the period
from December 28, 1994 (commencement of operations) to January 31, 1997, the
Institutional class of shares of the Short Term Bond Fund had an average annual
total return of 6.21%.
For the fiscal year ended January 31, 1997, the Retail Class A shares of the
Short Term Bond Fund had an annual total return of 2.43%. For the period from
March 6, 1995 (commencement of operations) to January 31, 1997, the Retail Class
A shares of the Short Term Bond Fund had an average annual total return of
4.88%.
Municipal Bond Fund
For the period from November 1, 1996 (commencement of operations) to January 31,
1997, the Institutional class of shares of the Municipal Bond Fund had an
annualized total return of 5.44%.
For the period from November 1, 1996 (commencement of operations) to January 31,
1997, the Retail Class A shares of the Municipal Bond fund had an annualized
total return of (10.38%).
Short Term Municipal Bond Fund
For the fiscal year ended January 31, 1997, the Institutional class of shares of
the Short Term Municipal Bond Fund had an annual return of 3.03%. For the period
from December 28, 1994 (commencement of operations) to January 31, 1997, the
Institutional class of shares of the Short Term Municipal Bond Fund had an
average annual total return of 4.85%.
For the fiscal year ended January 31, 1997, the Retail Class A shares of the
Short Term Municipal Bond Fund had an annual total return of 1.19%. For the
period from March 6, 1995 (commencement of operations) to January 31, 1997, the
Retail Class A shares of the Short Term Municipal Bond Fund had an average
annual total return of 3.94%.
Idaho Municipal Bond Fund
For the fiscal year ended January 31, 1997, the Institutional class of shares of
the Idaho Municipal Bond Fund had an annual return of 1.31%. For the period from
December 28, 1994 (commencement of operations) to January 31, 1997, the
Institutional class of shares of the Idaho Municipal Bond Fund had an average
annual total return of 7.41%.
For the fiscal year ended January 31, 1997, the Retail Class A shares of the
Idaho Municipal Bond Fund had an annual total return of (2.98)%. For the period
from March 6, 1995 (commencement of operations) to January 31, 1997, the Retail
Class A shares of the Idaho Municipal Bond Fund had an average annual total
return of 4.11%
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.
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<PAGE> 98
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 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 is valued at the
last sales price on valuation date. If no sale is made on the
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<PAGE> 99
valuation date, then the security is priced at the last bid price. 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 the
excess of net short-term capital gain over net long-term capital loss)
("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, gains from the sale or other
disposition of stock or securities or foreign currencies (to the extent such
currency gains are directly related to the RIC's principal business of investing
in stock or securities), and other income derived with respect to its business
of investing in such stock, securities or currencies (the "Income Requirement");
(ii) less than 30% of a Portfolio's gross income (exclusive of certain gains on
designated hedging transactions that are offset by realized or unrealized issues
on offsetting positions) each taxable year may be derived from the sale or other
disposition of stock, securities or foreign currencies or options, futures or
forward contracts thereon) held for less than three months (the "Short-Term
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".)
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<PAGE> 100
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 (other than corporations, such as "S"
corporations, which are not eligible for the deduction because of their special
characteristics), 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 (other than for purposes of special taxes such as the accumulated
earnings tax and personal holding company tax). 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 (i) 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; and (ii) any period during which the Portfolio has an option to
sell, is under a contractual obligation to sell, has made and not closed a short
sale of, has granted certain options to buy or has otherwise diminished its risk
of loss by holding other positions with respect to, such (or substantially
identical) stock); (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; or (3) to the extent the
stock on which the dividend is paid is treated as debt-financed under the rules
of Code Section 246A. Moreover, the dividends-received deduction for a corporate
shareholder may be disallowed or reduced (1) if the corporate shareholder fails
to satisfy the foregoing requirements with respect to its shares of the
Portfolio, or (2) by application of Code Section 246(b), which in general limits
the dividends-received deduction to 70% of the shareholder's taxable income
(determined without regard to the dividends-received deduction and certain other
items). 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
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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 as well as non-corporate taxpayers may be liable for alternative
minimum tax, which is imposed at the maximum rate of 28% in the case of
non-corporate taxpayers and 20% in the case of corporate taxpayers of
"alternative minimum taxable income" (less an applicable "exemption amount") in
lieu of the regular corporate or non-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 corporate "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.
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)."
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
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alternative minimum tax liability. The Municipal Bond Fund and the 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 RICs under the Code, in particular the Distribution
Requirement, the Short-Term Gains Test and the Asset Diversification
Requirement.
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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.
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 in 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.
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.
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
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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.
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
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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.
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
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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, 1997, the Equity Fund paid brokerage
commissions of $317,201. 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 $222,365,626 and the related brokerage commissions were $314,616.
For the fiscal year ended January 31, 1997, the Balanced Fund paid brokerage
commissions of $173,054. 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
$122,085,241 and the related brokerage commissions were $172,315.
The portfolio turnover rate for each of the Portfolios for the fiscal year ended
January 31, 1997, was as follows: Equity Fund - 97.14%; Balanced Fund - 68.11%;
Intermediate Term Bond Fund - 21.23%; Short Term Bond Fund - 40.80%; Municipal
Bond Fund - 19.21%; Short Term Municipal Bond Fund - 41.11%; Idaho Municipal
Bond Fund - 29.13%. 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, 1997, 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 $1,999,980, $1,000,050 and
$1,000,050, respectively, the Short Term Bond Fund held bonds issued by Morgan
Stanley having a value of $1,000,000 and the Intermediate Term Bond Fund held
bonds issued by J. P. Morgan Securities, Inc. having a value of $1,025,000 and
by Donaldson, Lufkin and Jenrette having a value of $3,036,630.
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.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 24, 1997, 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 (100%); 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,
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<PAGE> 107
Salt Lake City, Utah 84125 (100%); Municipal Bond Fund: First Security Bank of
Utah, N.A., P.O. Box 25297, Salt Lake City, Utah 84125 (99.9%); Short Term
Municipal Bond Fund: First Security Bank of Utah, N.A., P.O. Box 25297, Salt
Lake City, Utah 84125 (98.9%); Idaho Municipal Bond Fund: First Security Bank of
Utah, N.A., P.O. Box 25297, Salt Lake City, Utah 84125 (97.4%).
As of March 24, 1997, 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 (62.1%); Balanced
Fund: BHC Securities, Inc., One Commerce Square, 2005 Market St., Philadelphia,
PA 19103 (80.3%); Intermediate Term Bond Fund: BHC Securities, Inc., One
Commerce Square, 2005 Market St., Philadelphia, PA 19103 (87.0%); Short Term
Bond Fund: BHC Securities, Inc., One Commerce Square, 2005 Market Street,
Philadelphia, PA 19103 (32.8%); Zions First National Bank, Trustee, Gretchen
Van Dine Trust, P.O. Box 30880, Salt Lake City, UT 84130 (23.8%); Zions First
National Bank, Trustee, Venice Benson Trust, P.O. Box 30880, Salt Lake City, UT
84130 (22.7%); Zions First National Bank, Trustee, Cecil & Elizabeth H. Buck
Living Trust, P.O. Box 30880, Salt Lake City, UT 84130 (10.5%); Municipal Bond
Fund; BHC Securities, Inc., One Commerce Square, 2005 Market St., Philadelphia,
PA 19103 (99.0%); Short Term Municipal Bond Fund: BHC Securities, Inc., One
Commerce Square, 2005 Market St., Philadelphia, PA 19103 (99.9%); Idaho
Municipal Bond Fund: BHC Securities, Inc., One Commerce Square, 2005 Market
St., Philadelphia, PA 19103 (80.6%); James H. Neyman & Elizabeth Neyman, 109 E.
Pine, Haley ID 83333 (8.7%)
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,
1997 and the Independent Auditors' Report of Deloitte & Touche LLP dated March
21, 1997 are contained in the Trust's Annual Report to Shareholders for its
fiscal year ended January 31, 1997 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 Oaks, PA 19456 or by calling 1-800-472-0577.
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<PAGE> 108
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, Municipal 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, 1997
(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, Municipal 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, 1997
(audited), with Independent Auditors' Report
incorporated by reference to Annual Report
to Shareholders.
(b) Exhibits:
Exhibit
Number Description*
------ ------------
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 was filed
- --------
* 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> 109
electronically as an Exhibit to
Post-Effective Amendment No. 11 on
May 30, 1996, and is hereby
incorporated by reference.
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
was filed electronically as an
Exhibit to Post-Effective Amendment
No. 11 on May 30, 1996, and is
hereby incorporated by reference.
2 - By-Laws were filed as Exhibit No. 2
to Registration Statement on
December 19, 1988, and were filed
electronically as an Exhibit to
Post-Effective Amendment No. 11 on
May 30, 1996, and is hereby
incorporated by reference.
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 was filed electronically as an
Exhibit to Post-Effective Amendment
No. 11 on May 30, 1996, and is
hereby incorporated by reference.
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
was filed electronically as an
Exhibit to Post-Effective Amendment
No. 11 on May 30, 1996, and is
hereby incorporated by reference.
5(c) - 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 was filed herewith
electronically as an Exhibit to
Post-Effective Amendment No. 11 on
May 30, 1996, and is hereby
incorporated by reference.
2
<PAGE> 110
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
was filed electronically as an
Exhibit to Post-Effective Amendment
No. 11 on May 30, 1996, and is
hereby incorporated by reference.
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 was filed
electronically as an Exhibit to
Post-Effective Amendment No. 11 on
May 30, 1996, and is hereby
incorporated by reference.
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 was filed
electronically as an Exhibit to
Post-Effective Amendment No. 11 on
May 30, 1996, and is hereby
incorporated by reference.
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 was filed
electronically as an Exhibit to
Post-Effective Amendment No. 11 on
May 30, 1996, and is hereby
incorporated by reference.
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 was filed
electronically as an Exhibit to
Post-Effective Amendment No. 11 on
May 30, 1996, and is hereby
incorporated by reference.
9(e) - Amendment to Agreement dated as
of October 10, 1996 between
Registrant and Morgan Guaranty Trust
Company 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 was filed electronically as an
Exhibit to Post-Effective Amendment
3
<PAGE> 111
No. 11 on May 30, 1996, and is
hereby incorporated by reference.
11(a) - Consent of Ballard Spahr Andrews &
Ingersoll.
11(b) - Consent of Deloitte & Touche LLP
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 was filed
electronically as an Exhibit to
Post-Effective Amendment No. 11 on
May 30, 1996, and is hereby
incorporated by reference.
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
was filed electronically as an
Exhibit to Post- Effective Amendment
No. 11 on May 30, 1996, and is
hereby incorporated by reference.
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 was
filed electronically as an Exhibit
to Post-Effective Amendment No. 11
on May 30, 1996, and is hereby
incorporated by reference.
Item 25. Persons Controlled by or under Common Control with Registrant.
Not Applicable.
4
<PAGE> 112
Item 26. Number of Holders of Securities.
<TABLE>
<CAPTION>
Number of Record
Institutional Class Holders at March 24, 1997
------------------- -------------------------
<S> <C>
Equity Fund 9
Balanced Fund 8
Intermediate Term Bond Fund 8
Short Term Bond Fund 9
Municipal Bond Fund 7
Short Term Municipal Bond Fund 8
Idaho Municipal Bond Fund 8
</TABLE>
<TABLE>
<CAPTION>
Number of Record
Retail Class A Holders at March 24, 1997
-------------- -------------------------
<S> <C>
Equity Fund 243
Balanced Fund 127
Intermediate Term Bond Fund 24
Short Term Bond Fund 17
Municipal Bond Fund 7
Short Term Municipal Bond Fund 5
Idaho Municipal Bond Fund 39
</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
5
<PAGE> 113
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.
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.
</TABLE>
6
<PAGE> 114
<TABLE>
<CAPTION>
Principal Occupation or
Other Employment of a
Position with Substantial Nature During
Name Adviser The Past Two Years
- ---- ------- ------------------
<S> <C> <C>
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>
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, Bishop Street Funds, CrestFunds, Inc., STI Classic Variable Trust, ARK
Funds, Monitor Funds, FMB Funds, Inc., SEI Asset Allocation Trust, Turner Funds,
SEI Institutional Investments Trust, First American Strategy Funds, Inc.,
HighMark Funds and Armada Funds 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, April
28, 1996, June 14, 1996, October 1, 1996, February 18, 1997 and March 8, 1997.
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
Oaks, PA 19456.
7
<PAGE> 115
<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 and Chief
Financial Officer
Carmen V. Romeo Director, Executive Vice President --
& Treasurer
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President, --
President - Investment Systems &
Services Division
Kenneth Zimmer Senior Vice President --
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Jerome Hickey Senior Vice President --
Larry Hutchinson Senior Vice President --
David G. Lee Senior Vice President President
William Madden Senior Vice President --
Jack May Senior Vice President --
A. Keith McDowell Senior Vice President --
Dennis J. McGonigle Senior Vice President --
Hartland J. McKeown Senior Vice President --
</TABLE>
8
<PAGE> 116
<TABLE>
<CAPTION>
Position and Positions and
Offices with Offices with
Name Underwriter Registrant
- ---- ----------- ----------
<S> <C> <C>
Barbara J. Moore 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, General Vice President & Assistant
Counsel & Secretary Secretary
Robert Crudup Vice President & Managing Director --
Jeff Drennen Vice President --
Victor Galef Vice President & Managing Director --
Kim Kirk Vice President & Managing Director --
Carolyn McLaurin Vice President & Managing Director --
John Krzeminski Vice President & Managing Director --
Donald Pepin Vice President & Managing Director --
Mark Samuels Vice President & Managing Director --
Wayne M. Withrow Vice President & Managing Director --
Robert Ludwig Vice President & Team Leader --
Vicki Malloy Vice President & Team Leader --
</TABLE>
9
<PAGE> 117
<TABLE>
<CAPTION>
Position and Positions and
Offices with Offices with
Name Underwriter Registrant
- ---- ----------- ----------
<S> <C> <C>
Mick Duncan Vice President & Team Leader --
Sandra K. Orlow Vice President & Assistant Vice President & Assistant
Secretary Secretary
Robert Aller Vice President --
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Vice President & Assistant
Secretary Secretary
Kathy Heilig Vice President --
Michael Kantor Vice President --
Samuel King Vice President --
Donald H. Korytowski Vice President --
Marc H. Cahn Vice President & Assistant --
Secretary
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
Paul Sachs Vice President --
Daniel Spaventa Vice President --
William Zawaski Vice President --
James Dougherty Director, Brokerage Services --
</TABLE>
<PAGE> 118
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
Oaks, PA 19456
(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.
11
<PAGE> 119
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the Registrant has
duly caused this Post-Effective Amendment No. 12 to its Registration Statement
to be signed on its behalf by the undersigned, thereto duly authorized, in the
City of Oaks, Commonwealth of Pennsylvania, on the 31st day of March, 1997.
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. 12 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>
/s/ * Chairman of the Board March 31, 1997
- ------------------------------ and Trustee
Frederick A. Moreton, Jr.
/s/ * Trustee March 31, 1997
- ------------------------------
Robert G. Love
/s/ * Trustee March 31, 1997
- ------------------------------
Carl S. Minden
/s/ * Trustee March 31, 1997
- ------------------------------
August Glissmeyer, Jr.
/s/ * Trustee March 31, 1997
- ------------------------------
George L. Denton
/s/ * Trustee March 31, 1997
- ------------------------------
James H. Gardner
Trustee March 31, 1997
- ------------------------------
Blaine Huntsman
</TABLE>
<PAGE> 120
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ * Trustee March 31, 1997
- ---------------------------------
Kent H. Murdock
/s/ Stephen Meyer Treasurer and Principal March 31, 1997
- --------------------------------
Stephen Meyer Financial Officer
</TABLE>
* By: /s/ David G. Lee
----------------------------
David G. Lee
Attorney In Fact
2
<PAGE> 121
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description*
------ ------------
<S> <C> <C>
5(c) - Second Amendment to Investment Advisory Agreement
between Registrant and First Security Investment
Management is filed electronically.
9(e) - Amendment to Agreement dated as of October 10, 1996
between Registrant and Morgan Guaranty Trust
Company is filed herewith electronically.
11(a)- Consent of Ballard Spahr Andrews & Ingersoll.
11(b)- Consent of Deloitte & Touche LLP
17 - Financial Data Schedules.
</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> 1
SECOND AMENDMENT TO
INVESTMENT ADVISORY AGREEMENT
The Amendment to Investment Advisory Agreement is made as of the 1st
day of November, 1996 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.
<PAGE> 2
PORTFOLIO MAXIMUM FEE (AS PERCENTAGE OF NET ASSETS)
- --------- -----------------------------------------
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%
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
MANAGEMENTS, INC.
BY: /S/ Sterling K. Jenson
--------------
Title; President & CEO
<PAGE> 1
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT dated as of October 10, 1996 (this "Amendment
Agreement") to the Credit Agreement dated as of October 11, 1995 (the "Original
Credit Agreement") 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 thereto (each
an "Original Borrower" and collectively the "Original Borrowers"), and MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, a New York State banking corporation (the
"Bank").
The Fund on behalf of the Original Borrowers has requested and the Bank
has provided on the terms and conditions set forth in the Original Agreement
revolving credit loans to the Fund for the respective benefit of and payable
from the respective assets of the Original Borrowers from time to time prior to
October 10, 1996 (the "Original Termination Date") in an aggregate principal
amount not to exceed $10,000,000 at any time outstanding to all Original
Borrowers.
The Fund on behalf of Municipal Bond Fund, a portfolio of the Fund
("MBF"), and the Original Borrowers (each (including MBF), a "Borrower" and
collectively the "Borrowers") has requested the Bank to amend the Original
Agreement (as amended, the "Amended Agreement") provide for a new 364-day
facility by changing the Original Termination Date to October 9, 1997 (the "New
Termination Date") and, in addition, to add MBF as a Borrower under the terms
of the Amended Agreement for all purposes. All loans and other amounts
outstanding under the Original Agreement will be repaid on the Effective Date,
and the Fund on behalf of the Borrowers will reborrow such amounts under the
Amended Agreement.
The Bank is willing to amend the Original Agreement as set forth in
this Amendment Agreement upon the terms and conditions set forth herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
Section 1. Defined Terms. Except as otherwise defined herein, terms
defined in the Original Credit Agreement and used herein shall have the
meanings given to them in the Original Credit Agreement (except the term
"Borrowers" shall include MBF).
Section 2. Amendments. From and after the Effective Date, but
retroactive to October 10, 1996:
(a) The term "Termination Date" shall be amended and extended so
as to mean October 9, 1997.
<PAGE> 2
-2-
(b) Section 3.2(a) shall be amended and restated in its entirety to
read as follows: " the fact that the Effective Date (as defined in the
Amendment Agreement dated as of October 10, 1996 to this Agreement) shall have
occurred on or prior to February 1, 1997;".
(c) Schedule 1 to the Original Agreement shall be amended and restated
in its entirety to read as set forth on Exhibit A hereto.
(d) Exhibits A, B and C to the Original Agreement shall be amended and
restated in their entirety to read as set forth on Exhibits B, C and D hereto,
respectively.
Section 3. EFFECTIVE DATE. This Amendment Agreement shall become
effective on the date (the "Effective Date") all of the following conditions
have been satisfied:
(a) The Bank shall have received a counterpart of this Amendment and
Extension Agreement executed by the Fund on behalf of the Borrowers.
(b) The Bank shall have received the Note executed by the Fund on
behalf of the Borrowers (as amended by this Amendment Agreement).
(c) All accrued fees and expenses payable under the Original Credit
Agreement to the Effective Date shall have been paid.
(d) The Bank shall have received the signed opinion, addressed to it and
dated the Effective Date, of Ballard Spahr Andrews & Ingersoll, counsel for the
Fund and the Borrowers substantially to the matters set forth in the opinion
delivered pursuant to Section 3.1(b) of the Original Agreement.
(e) All amounts due under the Note (as defined in the Original
Agreement) shall have been repaid in full (including through borrowings under
the Amended Agreement).
(f) The Bank shall have received all other documents as it may
reasonably request relating to the existence of the Fund and the Borrowers, the
trust authority for and the validity of this Amendment 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 Effective Date, and such
notice shall be conclusive and binding on the parties hereto.
<PAGE> 3
-3-
Section 4. General
(a) REPRESENTATION AND WARRANTIES. To induce the Bank to enter into
this Amendment Agreement, the Fund as to itself, and each Borrower as to itself
and as to the Fund, represents and warrants that the representations and
warranties set forth in Section 5 of the Original Credit Agreement are true on
and as of the date hereof, PROVIDED that any reference therein to the Original
Credit Agreement shall be deemed a reference to the Original Credit Agreement
as amended by this Amendment Agreement.
(b) PAYMENT OF EXPENSES. Without limiting any amount payable by any
Borrower under Section 8.3 of the Original Credit Agreement or Section 8.3 of
the Amended Agreement, each Borrower shall pay or reimburse the Bank 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 the preparation and
administration of this Amendment Agreement and the Original Credit Agreement.
(c) NO OTHER AMENDMENTS; CONFIRMATION. Except as expressly amended,
modified and supplemented hereby, the provisions of the Original Credit
Agreement are and shall remain in full force and effect.
(d) GOVERNING LAW; COUNTERPARTS. (a) This Amendment Agreement and the
rights and obligations of the parties hereto shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New
York.
(e) COUNTERPARTS. This Amendment Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts,
and all of said counterparts taken together shall be deemed to constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Agreement to be duly executed by their respective authorized officers on this 31
day of December, 1996 as of the day and year first above written.
THE ACHIEVEMENT FUNDS TRUST
FUND on behalf of the
Portfolios listed below
By:/s/ Kathryn L. Stanton
-----------------------
Kathryn L. Stanton, Vice President
<PAGE> 4
-4-
Portfolios:
Equity Fund
Balanced Fund
Intermediate Bond Fund
Short Term Bond Fund
Short Term Municipal Bond
Fund
Idaho Municipal Bond Fund
Municipal Bond Fund
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/Seija K. Hurskainen
----------------------
Seija K. Hurskainen
Vice President
<PAGE> 5
-5-
EXHIBIT TO AMENDMENT AGREEMENT
Schedule 1
----------
Portfolios
----------
Equity Fund
Balance Fund
Intermediate Bond Fund
Short Term Bond Fund
Short Term Municipal Bond Fund
Idaho Municipal Bond Fund
Municipal Bond Fund
<PAGE> 6
-6-
EXHIBIT B TO AMENDMENT AGREEMENT
EXHIBIT A
PROMISSORY NOTE
$10,000,000.00 Due: October 9, 1997
Dated: October 10, 1996 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 9, 1997, 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
<PAGE> 7
-7-
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 Agrement dated as of October 11, 1995 (as amended by
the Amendment Agreement dated as of October 10, 1996 and as it may be amended,
modified or supplemented from time to time, called the "Credit Agreement") 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 replaces the Note, dated October 11, 1995, issued by the
Borrower to the Bank.
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> 8
EXHIBIT C TO AMENDMENT AGREEMENT
EXHIBIT B
BORROWING BASE CERTIFICATE
Reference is made to that certain Credit Agreement dated as of October
11, 1995 (as amended by the Amendment Agreement dated as of October 10, 1996 and
as it may be further modified, amended or supplemented from time to time, 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
<PAGE> 9
-2-
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> 10
EXHIBIT D TO AMENDMENT AGREEMENT
EXHIBIT C
NOTICE OF BORROWING
Reference is made to that certain Credit Agreement dated as of October
11, 1995 (as amended by the Amendment Agreement dated as of October 10, 1996
and as it may be further modified, amended or supplemented from time to time,
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] [Euro-Dollar 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 Banks 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
of 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.
<PAGE> 11
Date: ____________________ THE ACHIEVEMENT FUNDS
TRUST on behalf of
[insert name of Borrower]
By: _____________________
Name:
Title:
<PAGE> 1
Exhibit (11) (a)
CONSENT
We hereby consent to the use of our name under the caption "Counsel" in
the Prospectuses and under the caption "Counsel to the Trust" in the Statement
of Additional Information of Post-Effective Amendment No. 12 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. 13 under the Investment Company Act of 1940.
/s/ Ballard Spahr Andrews & Ingersoll
-------------------------------------
Ballard Spahr Andrews & Ingersoll
March 31, 1997
<PAGE> 1
EXHIBIT 11(b)
CONSENT OF INDEPENDENT AUDITORS
The Achievement Funds Trust:
We consent to the incorporation by by reference in Post-Effective
Amendment No. 12 to Registration Statement No. 33-26205 of our report dated
March 21, 1997 appearing in the Annual Report to Shareholders-January 31, 1997
and to the reference to us under the caption "financial Highlights" appearing
in the Prospectuses, which are a part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Princeton, New Jersey
March 28, 1997
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