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As filed with the Securities and Exchange Commission on March 2, 1998
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. 13 X
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and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 14 ---
(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) 676-1000
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 Investments Company
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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The title of the securities being registered is Retail Class B shares of the
Registrant's Equity Fund, Balanced Fund, Municipal Bond Fund and Idaho Municipal
Bond Fund.
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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. This Registration Statement contains the prospectus for the Retail Class B
shares of the Equity Fund, Balanced Fund, Municipal Bond Fund and Idaho
Municipal Bond Fund and a combined Statement of Additional Information for the
Institutional Class, Retail Class A and Retail Class B shares of the portfolios.
Part A - Prospectus
Item No. Location
1. Cover Page Cover Page
2. Synopsis Summary; Expense Summary
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Cover Page; The Trust;
Investment 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
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Form N-1A
Item Number Location
V. All Classes and Series of Registrant
Part C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
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THE ACHIEVEMENT FUNDS TRUST
RETAIL CLASS B SHARES
O EQUITY FUND
O BALANCED FUND
O MUNICIPAL BOND FUND
O IDAHO MUNICIPAL BOND FUND
THE ACHIEVEMENT FUNDS TRUST (the "Trust") is a mutual fund that offers separate
classes of shares of beneficial interest in seven investment portfolios. This
Prospectus relates to the Retail Class B shares (the "Class B shares") of the
Equity Fund, Balanced Fund, Municipal Bond Fund and Idaho Municipal Bond Fund
(the "Portfolios"). The Class B shares are 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 Class B shares with
respect to distribution costs, sales charges and dividends and Retail Class A
shares (the "Class A shares") that differ from the Class B shares with respect
to the distribution costs and sales charges.
- --------------------------------------------------------------------------------
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 April __, 1998 has been
filed with the Securities and Exchange Commission (the "SEC") and is available
without charge through the Distributor, SEI Investments Distribution Co., by
written request addressed to the Distributor at Oaks, PA 19456 or by calling
1-800-472-0577. The SEC maintains a Web site (http://www.sec.gov) that contains
the Statement of Additional Information, material incorporated by reference and
other information regarding registrants that file electronically with the SEC.
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.
APRIL __, 1998
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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
Class B shares of the Trust's Equity Fund, Balanced Fund, 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 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 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."
THE TRANSFER AGENT
DST Systems, Inc. serves as transfer agent and dividend disbursing agent for the
Trust. See "GENERAL INFORMATION -- Transfer Agent."
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THE DISTRIBUTOR
SEI Investments Distribution Co. 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
General
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. Net asset value is determined as of the
close of regular trading on the New York Stock Exchange (normally 4:00 p.m.
Eastern time) on any Business Day. Purchase or redemption orders received after
the net asset value has been determined will be priced at the next Business
Day's net asset value. 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. Class B shares may be exchanged for shares of the
same class of another Portfolio. See "PURCHASE, EXCHANGE AND REDEMPTION OF
SHARES."
Class B shares are sold without an initial sales charge, but are subject to a
contingent deferred sales charge of up to 5% if redeemed within 6 years of
purchase. Class B shares are subject to a 12b-1 Plan fee calculated at an annual
rate of 1.00% of the average net assets of the Equity Fund and Balanced Fund
attributable to the Class B shares of those Portfolios and at an annual rate of
0.90% of the average net assets of the Municipal Bond Fund and Idaho Municipal
Bond Fund attributable to the Class B shares of those Portfolios. Class B shares
automatically convert to Class A shares, based upon relative net asset value,
approximately 8 years after purchase.
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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 Class B shares of the Portfolio making such distributions, unless the
shareholder elects to take payment in another form. See "GENERAL INFORMATION --
Dividends."
EXPENSES
The following table summarizes the expenses that are expected to be incurred by
the Class B shares of the Portfolios. No Class B shares had been issued as of
the date of this Prospectus and the estimated expenses presented below are based
in part on the expenses incurred by the Class A shares during Trust's most
recent fiscal year.
<TABLE>
<CAPTION>
Idaho
Equity Balanced Municipal Municipal
Fund Fund Bond Fund Bond Fund
------ -------- --------- ---------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Deferred Sales Load (as a percentage of
original purchase price or redemption
proceeds, as applicable)..................... 5.00% 5.00% 5.00% 5.00%
ANNUAL OPERATING EXPENSES (AS A % OF NET
ASSETS)
Management Fees.............................. .57% .57% .28% .26%
(after waivers)(2)
12b-1 Fees (after waivers)................... 1.00% 1.00% .90%(2) .90%(2)
Other Expenses(3)............................ .33% .33% .47% .49%
----- ----- ----- -----
Total Fund Operating Expenses................
(after waivers)(4) 1.90% 1.90% 1.65% 1.65%
===== ===== ===== =====
</TABLE>
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(1) A $15 fee will be charged in connection with a wire transfer of redemption
proceeds.
(2) 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 Municipal Bond Fund and the
Idaho Municipal Bond Fund. Under the terms of the Distribution Plan for the
Class B shares, the Distributor is entitled to receive a distribution fee
of up to 0.75% per annum of average daily net assets of the Class B shares
and a shareholder servicing fee of up to 0.25% per annum of average daily
net assets of the Class B shares. The Distributor will collect an
administrative fee of 0.65% per annum of the average daily net assets of
the Municipal Bond Fund and the Idaho Municipal Bond Fund. The Distributor
may elect to collect the full distribution fee to which it is entitled
under the
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Distribution Plan for the Class B shares at any time. If the Distributor
were to collect the full asset based sales to which it is entitled, the
total operating expenses for the Class B shares of the Municipal Bond Fund
and the Idaho Municipal Bond Fund would be 1.75% per annum.
(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 Idaho Municipal Bond
Fund, and the administration fee shown for that Portfolio 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 Idaho
Municipal Bond Fund.
(4) Absent the voluntary fee waivers described above, total estimated operating
expenses for the Class B shares of the Portfolios would be as follows: the
Equity Fund -- 2.07%; the Balanced Fund -- 2.07%; the Municipal Bond Fund --
1.97%; the Idaho Municipal Bond Fund -- 2.13%.
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 includes the contingent
deferred sales charges) on a $1,000 investment in Class B shares, assuming a 5%
annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years
------ ------- -------
<S> <C> <C> <C>
Equity Fund $69 $100 $123
Balanced Fund $69 $100 $123
Municipal Bond Fund $67 $92 $110
Idaho Municipal Bond Fund $67 $92 $110
</TABLE>
You would pay the following expenses on the same investment, assuming no
redemption.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years
------ ------- -------
<S> <C> <C> <C>
Equity Fund $19 $60 $103
Balanced Fund $19 $60 $103
Municipal Bond Fund $17 $52 $90
Idaho Municipal Bond Fund $17 $52 $90
</TABLE>
The tables 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
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of the various costs and expenses, see "THE ADVISER" and "THE DISTRIBUTOR" in
this Prospectus. The information set forth in the tables above relates only to
the Class B shares. Each Portfolio also offers Institutional and Class A shares
which are subject to the same expenses except that Institutional shares do not
bear distribution costs and Class A shares are subject to initial sales charges
and bear different distribution costs.
THE TRUST
The Achievement Funds Trust (the "Trust") is an open-end series management
investment company that offers shares of beneficial interest in the following
investment portfolios: 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 Equity Fund, Balanced Fund, Municipal
Bond Fund and Idaho Municipal Bond Fund are divided into three classes of
shares, Institutional, Retail Class A and Retail Class B. The Trust's
Intermediate Term Bond Fund, Short Term Bond Fund and Short Term Municipal Bond
Fund are divided into two classes of shares, Institutional and Retail Class A.
This Prospectus offers the Class B shares. Institutional shares of the
Portfolios differ from the Class B shares with respect to distribution costs,
sales charges and dividends, and 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. Retail Class A shares differ from the
Class B shares with respect to the distribution costs and sales charges. Each of
the Portfolios is diversified, except for the Idaho Municipal Bond Fund which is
a non-diversified portfolio. Investors may obtain additional information
pertaining to the Trust and the other classes of shares of the Portfolios
offered by writing to SEI Investments Distribution Co., Oaks, PA 19456 or by
calling 1-800-472-0577 or through their sales representatives.
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
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securities convertible into or exchangeable for common stock. The Equity Fund
may invest only in convertible debentures that have received a rating of A or
higher by Standard & Poor's Corporation ("S&P") or A or higher by Moody's
Investors Service ("Moody's") or are determined to be of comparable quality by
the Adviser at time of purchase.
The Equity Fund may purchase securities on a "when-issued" basis, may engage in
securities repurchase transactions and may borrow money in aggregate amounts not
in excess of 5% of its total assets. The Equity Fund may also write (sell)
covered call options.
In addition, under normal market conditions, the Equity Fund may invest up to
10% of its total assets in money market and U.S. equity index mutual funds.
For additional information regarding risks and permitted investments of the
Equity Fund, see "RISK FACTORS" and "DESCRIPTION OF CERTAIN PERMITTED
INVESTMENTS." For a description of ratings, see the "APPENDIX."
BALANCED FUND
Investment Objective
The Balanced Fund seeks to provide total return (both income and capital
appreciation) consistent with prudent investment risk.
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
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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. 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 or higher 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."
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
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Fund. The issuers of these securities can be located in all fifty states, the
District of Columbia, Puerto Rico and other U.S. territories and possessions.
The Municipal Bond Fund will not invest more than 10% of its assets in municipal
securities of issuers located in any single state, territory or possession.
Under normal market conditions, the Municipal Bond Fund will invest at least 80%
of its total assets in securities the interest on which is not a preference item
for purposes of the alternative minimum tax. Although the Adviser intends to
invest solely in municipal securities, up to 20% of all of the assets of the
Municipal Bond Fund can be invested in U.S. Treasury obligations or when
suitable municipal securities are not available.
The Municipal Bond Fund may purchase the following types of municipal
securities, but only if such securities, at the time of purchase, have the
requisite ratings set forth below or are of comparable quality as determined by
the Adviser (i) Municipal bonds rated BBB or better by S&P or Baa or better by
Moody's. Municipal bonds held by the Municipal Bond Fund will, on a
dollar-weighted basis, have a rating of A or better. The Municipal Bond Fund may
not invest more than 20% of its assets in municipal bonds rated BBB by S&P or
Baa by Moody's; (ii) Municipal notes rated at least SP-1 by S&P or MIG-1 by
Moody's; (iii) Tax-exempt commercial paper rated at least A-1 by S&P or Prime-1
by Moody's; (iv) Municipal lease obligations that have the ratings specified in
(i) above or that are of comparable quality as determined by the Adviser upon
consideration of relevant factors specified by the board of trustees of the
Trust (the "Trustees"), including the likelihood that the lease related to the
obligation will be cancelled or that funds will not be appropriated for payment
thereof. Municipal lease obligations that are subject to an annual appropriation
by the issuer may be purchased by the Municipal Bond Fund only if the security
in question is insured by an approved municipal insurance company (e.g. AMBAC
Indemnity Corporation, Municipal Bond Investors Assurance Corporation, Financial
Guaranty Insurance Company); 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."
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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.
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 and the Balanced 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
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<PAGE> 15
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 and the
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 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.
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, 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, MUNICIPAL BOND FUND, AND IDAHO MUNICIPAL BOND
FUND) -- The Balanced Fund, the 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
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
10
<PAGE> 16
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 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.
11
<PAGE> 17
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.
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
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<PAGE> 18
Fund and the Balanced Fund, and at an annual rate of 0.60% of the average daily
net assets of the 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 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.
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 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 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.
MUNICIPAL BOND FUND -- Richard K. Baird, CFA, is a Vice President and Senior
Portfolio Manager of the Adviser and has been responsible for the Municipal Bond
Fund, since June, 1997. Mr. Baird was a Senior Portfolio Manager with Seafirst
Bank (BankAmerica) from 1987 to 1996 and The First National Bank of Colorado
Springs, Colorado from 1982 to 1986.
IDAHO MUNICIPAL BOND FUND -- Bruce R. Mohr has been a Vice President and Senior
Portfolio Manager of the Adviser since 1992 and has been responsible for the
Idaho Municipal Bond Fund since June, 1997. Prior to joining the Adviser, Mr.
Mohr served in various investment management positions and has managed
fixed-income, equity and balanced portfolios for the past 15 years.
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,
13
<PAGE> 19
but do not prohibit such a bank holding company or affiliate from acting as
investment adviser, transfer agent, or custodian to such an investment company,
or from purchasing shares of such a company as agent for and upon the order of a
customer, or from performing any combination of such services. FSIM and the
Trust believe that FSIM may perform the advisory services for the Trust
described in this Prospectus. However, future changes in legal requirements
relating to the permissible activities of banks and their affiliates, as well as
future interpretations of present requirements, could prevent FSIM from
continuing to perform investment advisory services for the Trust.
If FSIM or any other service providers were prohibited from performing services
for the Trust, it is expected that the Board of Trustees of the Trust would
recommend to the Trust's shareholders that they approve new agreements with
another entity or entities qualified to perform such services and selected by
the Board.
THE ADMINISTRATOR
SEI Fund Resources, Oaks, PA 19456, a wholly-owned subsidiary of SEI Investments
Management Corporation, a wholly-owned subsidiary of SEI Investments Company
("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
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 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 Idaho Municipal
Bond Fund. The Administrator reserves the right to terminate its fee waiver for
the Idaho Municipal Bond Fund at any time at its sole discretion and without
notice to any current or prospective shareholder.
THE DISTRIBUTOR
SEI Investments Distribution Co. (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 Class B shares of the Portfolios. The Trust has adopted a
distribution plan for the Class B shares of the Portfolios (the "Class B Plan")
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 Class B Plan in accordance with its terms and with
the National Association of Securities Dealers, Inc. ("NASD") rules concerning
sales charges.
The Distribution Agreement and Class B Plan provide for payment to the
Distributor of a distribution fee, calculated and payable monthly, at an annual
rate of up to and including 0.75% of the value of the average daily net assets
of the Class B Shares, or such lesser amount as may be determined from time to
time by the Trustees of the Trust, and a shareholder servicing fee, calculated
and payable monthly, at an annual rate of up to and including 0.25% of the value
of the average daily net assets of the Class B shares, or such lesser amount as
may be established from time to time by the Trustees of the Trust. The
Distributor
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<PAGE> 20
has elected to collect a distribution fee for the Class B shares of the
Municipal Bond Fund and Idaho Municipal Bond Fund of 0.65% per annum, but
reserves the right to collect the full distribution fee payable under the Class
B Plan at any time.
The shareholder servicing fee may be used by the Distributor to provide
compensation for ongoing servicing and maintenance of shareholder accounts with
respect to Class B shares. Compensation may be paid by the Distributor to
persons, including employees of the Distributor, and institutions that respond
to inquiries of holders of Class B shares regarding their ownership of such
shares or their accounts with the Trust or who provide administrative or
accounting services not otherwise required to be provided by the Trust's
investment adviser, transfer agent or other agent of the Trust.
The distribution fee may be used by the Distributor to provide initial and
ongoing sales compensation to its employees and to other broker-dealers in
respect of sales of Class B shares of the applicable Portfolios of the Trust and
to pay for other advertising and promotional expenses in connection with the
distribution of the Class B shares. These advertising and promotional expenses
include, by way of example but not by way of limitation, costs of printing and
mailing prospectuses, statements of additional information and shareholder
reports to prospective investors; preparation and distribution of sales
literature; advertising of any type; an allocation of overhead and other
expenses of the Distributor related to the distribution of such shares; and
payments to, and expenses of, officers, employees or representatives of the
Distributor, of other broker-dealers, banks or other financial institutions, and
of any other person who provides support service in connection with the
distribution of such shares, including travel, entertainment and telephone
expenses.
Payments under the Class B Plan are not tied exclusively to the expenses for
shareholder servicing and distribution related activities actually incurred by
the Distributor, so that such payments may exceed expenses actually incurred by
the Distributor. The Trust's Board of Trustees will evaluate the appropriateness
of the Plan and its payment terms on a continuing basis and in doing so will
consider all relevant factors, including expenses borne by the Distributor and
amounts it receives under the plan.
The Trust's investment adviser and the Distributor may, at their option and in
their sole discretion, make payments from their own resources to cover costs of
additional distribution and shareholder servicing activities.
PURCHASE, EXCHANGE AND REDEMPTION
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 shares as a Participating
Dealer. FSIS representatives may be contacted at:
15
<PAGE> 21
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 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.
Purchase orders for Class B shares will be executed at a price per share equal
to the net asset value next determined after receipt of the purchase order by
the Distributor, without an initial sales charge, but Class B shares will be
subject to a contingent deferred sales charge if they are redeemed within six
years after purchase.
The minimum initial investment in Class B shares is $1,000; however, the minimum
investment may be waived at the Distributor's discretion. All subsequent
purchases must be in amounts of at least $100 (including purchases through
payroll deductions authorized pursuant to pre-approved payroll deduction plans).
Purchase orders for Class B shares may not exceed $500,000. Class B shares may
be purchased on days on which the New York Stock Exchange is open for business
("Business Days"). Orders for the purchase of Class B 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. Purchase or redemption orders received after the net asset
value has been determined will be priced at the next Business Day's net asset
value. 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
16
<PAGE> 22
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 Purchases" 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 or in
the Trust's Intermediate Bond Fund, Short Term Bond Fund or Short Term Municipal
Bond Fund investment portfolios, if such shares are available for sale.
Investments of distributions in shares of other Portfolios must meet the
applicable initial investment minimum, or be made in an existing account and
meet the applicable additional purchase minimum. Such investments will not be
subject to sales charges. A Customer considering the Distribution Investment
Option should consider the differences in objectives and policies of another
Portfolio before making any investment in such Portfolio. The Trust reserves the
right to terminate this Distribution Investment Option without further notice to
shareholders.
Contingent Deferred Sales Charge
If a shareholder redeems Class B shares within six years of purchase, the
shareholder will pay the applicable contingent deferred sales charge shown on
the table below. No contingent deferred sales charge will be imposed (i) on
redemptions of Class B shares made 6 years after the date such shares were
purchased, (ii) on Class B shares acquired through the reinvestments of
dividends and distributions attributable to Class B shares, (iii) on Class B
shares acquired in an exchange (see "Exchange Privileges" below), (iv) on
amounts that represent capital appreciation in the shareholders account above
the purchase price of Class B shares, (v) following the registered shareholder's
(or in the case of joint accounts, all registered joint owners') death or
disability, as defined in Section 72(m)(7) of the Code (provided the
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<PAGE> 23
Distributor is notified of such death or disability at the time of the
redemption request and is provided with satisfactory evidence of such death or
disability) and (vi) in connection with certain required distributions from
individual retirement accounts, custodial accounts maintained pursuant to Code
Section 403(b), deferred compensation plans qualified under Code Section 457 and
plans qualified under Code Section 401 (collectively, "Retirement Plans").
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge as a
Year Since Purchase Made Percentage of Dollar Amount
- ------------------------ ---------------------------
<S> <C>
First 5%
Second 4%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and Following None
</TABLE>
In determining whether a contingent deferred sales charge is applicable, the
Trust will assume that a redemption is made first, of any shares held in the
shareholder's account that are not subject to a contingent deferred sales
charge; second, of shares derived from reinvestment of dividends and
distributions; third, of shares held for more than 6 years; and fourth, of
shares held for less than 6 years from date of purchase. The applicable
contingent deferred sales charge will be applied against the lesser of the
current market value of the shares redeemed or their original cost.
The Distributor may pay sales commissions to dealers and institutions who sell
Class B shares of the Portfolios at the time of such sales. Sales commissions
paid with respect to Class B shares of the Equity Fund and Balanced Fund will
equal 4.25% of the purchase price of those Class B shares sold by the dealer or
institution. Sales commissions paid with respect to Class B shares of the
Municipal Bond Fund and Idaho Municipal Bond Fund will equal 4.00% of the
purchase price of such Class B shares sold by the dealer or institution.
Beginning in the 13th month following a sale of Class B shares, the dealer or
institution will receive a servicing fee with respect to shares sold in an
amount equal to 0.25% of the purchase price annually for shareholder services
provided to the Trust. The portion of the payments to the Distributor under the
Class B Plan which constitutes an asset based sales charge (0.75% for the Equity
Fund and Balanced Fund, and 0.65% for the Municipal Bond Fund and Idaho
Municipal Bond Fund, after waivers) is intended in part to permit the
Distributor to recoup a portion of such commissions plus financing costs.
Other Information Regarding Purchases
Shares of the Portfolio are sold on a continuous basis and are offered only to
residents of states in which shares are eligible for purchase. No certificates
representing shares will be issued. The net asset value
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<PAGE> 24
per share of a Portfolio used in determining the purchase price of shares is
calculated 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 regular trading on the New York Stock Exchange
(normally 4:00 p.m. Eastern time) on any 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
Class B 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.
Once payment for Class B shares has been received (i.e., an account has been
established), a shareholder may exchange some or all of such shares for Class B
shares offered by another Portfolio at net asset value. An exchange between
Class B shares and Class A shares is not permitted. The exchange transaction
will not be subject to a contingent deferred sales charge. However, when shares
acquired through an exchange are redeemed, the redemption may be subject to a
contingent deferred sales charge, depending upon when shares were originally
purchased. For purposes of computing the contingent deferred sales charge, the
length of time of ownership of Class B shares will be measured from the date
that Class B shares were first purchased and will not be affected by any
exchange.
Shareholders should contact a Participating Dealer for instructions on how to
exchange Class B 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 into which the exchange is being made before the
exchange will be effected.
An exchange between the Class B shares and the Institutional class shares of any
Portfolio is generally not permitted, except that exchanges between the classes
will be permitted should a holder of Class B shares become eligible to purchase
Institutional class shares. For example, a Class B 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 Class B 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.
Each exchange of shares of the Portfolios 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.
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REDEMPTION OF SHARES
Shareholders may redeem their Class B shares 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, less any applicable contingent deferred sale charge, will be sent by
check by the Federal Reserve System's automated clearance house ("ACH") or by
Fedwire to or for the account of the record owner of the shares redeemed. A wire
redemption charge (presently $15.00) will be deducted from the amount of
proceeds of a redemption that are transferred by ACH or Fedwire.
Redemptions By Mail
A written request for redemption must be received by the Transfer Agent, P.O.
Box 419448, Kansas City, Missouri 64141-6448 in order to constitute a valid
redemption request.
If the redemption request exceeds $5,000, or if the request directs the proceeds
to be sent to an address different from that of record, the Transfer Agent may
require that the signature on the written redemption request be guaranteed.
Customers should be able to obtain a signature guarantee from a bank,
broker-dealer, credit union, securities exchange or association, clearing agency
or savings association. Notaries public cannot guarantee signatures. The
signature guarantee requirement will be waived if all of the following
conditions apply: (1) the redemption is for not more than $5,000 worth of
shares, (2) the redemption check is payable to the shareholder of record and (3)
the redemption check is mailed to the shareholder at his or her address of
record.
Redemptions By Telephone
If authorized by a Shareholder in the account application, shares may be
redeemed upon request made by the Shareholder by telephone to the Transfer Agent
at 1-800-472-0577, or by contacting a Participating Dealer. Shareholders may not
close their accounts by telephone.
Neither the Trust, the Distributor nor the Transfer Agent will be responsible
for any loss, liability, cost or expense for acting upon wire instructions or
upon telephone instructions that it reasonably believes to be genuine. The
Trust, the Distributor and the Transfer Agent will each employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
including requiring a form of personal identification prior to acting upon
instructions received by telephone and recording telephone instructions. The
Trust, the Distributor or Transfer Agent may be liable for losses resulting from
fraudulent or unauthorized instructions if it does not employ these procedures.
If market conditions are extraordinarily active, or other extraordinary
circumstances exist, and a shareholder experiences difficulties placing
redemption orders by telephone, the shareholder may wish to consider placing an
order by mail.
Systematic Withdrawal Plan
A systematic withdrawal plan can be established for 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.
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Other Information Regarding Redemptions
All redemption orders are effected at the net asset value per share next
determined after receipt and effectiveness of a valid request for redemption,
less the contingent deferred sales charge applicable to Class B shares as
described above. A redemption order will be effective on the same Business Day
it is received if it is received by the Transfer Agent before 4:00 p.m. Eastern
time; otherwise, the redemption order will be effective on the following
Business Day. Net asset value per share is determined as of the close of trading
on the New York Stock Exchange (currently 4:00 p.m. Eastern time) on each
Business Day. Payment to shareholders for shares redeemed will be made within
seven days after receipt by the Transfer Agent of the redemption request in good
order. Participating Dealers may impose an earlier cut-off time for receipt of
redemption orders directed through them to allow for processing and transmittal
of these orders to the Distributor for effectiveness the same day.
At various times, a Portfolio may be requested to redeem shares for which it has
not yet received good payment. In such circumstances, redemption proceeds will
be forwarded upon collection of payment for the shares; collection of payment
may take 10 or more days. The Portfolios intend to pay cash for all shares
redeemed, but under abnormal conditions which make payment in cash unwise,
payment may be made wholly or partly in portfolio securities with a market value
equal to the redemption price. In such cases, an investor may incur brokerage
costs in converting such securities to cash.
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 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.
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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. 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.
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TAX STATUS OF DISTRIBUTIONS BY THE EQUITY FUND AND THE BALANCED 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
Taxpayer Relief Act of 1997 authorizes the Internal Revenue Service to issue
regulations that will enable shareholders to determine the tax rates applicable
to such capital gain distributions. 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 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
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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 or the Idaho Municipal Bond Fund is not
intended to constitute a balanced investment program. Shares of those Portfolios
would not be suitable for tax-exempt institutions and may not be suitable for
retirement plans qualified under Section 401 of the Code, H.R. 10 plans and
individual retirement accounts since such plans and accounts generally qualify
for deferral of taxes on income or gains and, therefore, not only would not gain
any additional benefit from the dividends of those Portfolios being tax-exempt,
but also such dividends would be taxable when distributed to the beneficiary.
ADDITIONAL FEDERAL TAX INFORMATION
Dividends declared by each Portfolio in October, November or December of any
year and payable to shareholders of record on a date in any such month will be
deemed to have been paid by the Portfolio and received by the shareholders on
December 31 of that year if paid by the Portfolio at any time during the
following January.
Each Portfolio intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax.
Shareholders should consult their tax advisers concerning the state and local
tax consequences of investment in a Portfolio, which may differ from federal
income tax consequences described above.
IDAHO TAXES
Exempt-interest dividends that are paid by the Idaho Municipal Bond Fund will
not be subject to Idaho corporate and personal income taxes to the extent that
they are attributable to interest earned on municipal securities that is exempt
from Idaho state income taxes in the opinion of bond counsel for their issuers.
GENERAL INFORMATION
THE TRUST
The Trust was organized as an unincorporated business trust under the laws of
Massachusetts on December 16, 1988 pursuant to a Master Trust Agreement of that
date, which agreement was amended and restated on October 7, 1994 and was
further amended on December 1, 1994 (as further amended from time to time, the
"Trust Agreement").
The Trust currently offers shares of beneficial interest in 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 are 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
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and to create classes in such portfolio. The Equity Fund, Balanced Fund,
Municipal Bond Fund and Idaho Municipal Bond Fund are divided into three classes
of shares, Institutional, Retail Class A and Retail Class B shares. The
Intermediate Term Bond Fund, Short Term Bond Fund and Short Term Municipal Bond
Fund are divided into two classes of shares, Institutional and Retail Class A
shares. All classes of a Portfolio have a common investment objective and
investment limitations and policies. Class B shares are offered by this
prospectus. Shares of the Retail Class A shares and the Institutional class are
each offered through a separate prospectus.
At the end of the period ending eight years after the beginning of the month in
which the shares were issued, Class B shares will automatically convert to Class
A shares and will no longer be subject to Class B share distribution and service
fees. Such conversion will be on the basis of the relative net asset value of
the two classes.
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.
Class B shareholders of any Portfolio must approve any material increase in fees
payable with respect to such Portfolio's Class A shares under the Class Plan so
long as Class B shares are convertible into Class A shares. 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 Investments Distribution Co. 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
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monthly by the Balanced Fund and declared daily and paid monthly by the
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 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
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normally can be traded in the secondary market prior to maturity. Certificates
of deposit with penalties for early withdrawal will be considered illiquid.
COMMERCIAL PAPER -- Commercial paper is a term used to describe unsecured
short-term promissory notes issued by banks, municipalities, corporations and
other entities. Maturities on these issues vary from a few to 270 days.
CONVERTIBLE SECURITIES - Convertible securities are corporate securities that
are exchangeable for a set number of another security at a prestated price.
Convertible securities typically have characteristics similar to both fixed
income and equity securities. Because of the conversion feature, the market
value of a convertible security tends to move with the market value of the
underlying stock. The value of a convertible security is also affected by
prevailing interest rates, the credit quality of the issuer, and any call
provisions.
COVERED CALL OPTIONS -- A call option gives the purchaser of the option the
right to buy, and the writer of the option the obligation to sell, a specified
underlying security at any time during the option period. In a covered call
option, the writer of the option owns a sufficient amount of the underlying
securities to "cover" the option through delivery of the optioned securities
upon exercise of the option. The Equity Fund and Balanced Fund may write covered
call options as a means of increasing the yield of these portfolios and as a
means of providing limited protection against decreases in the market value of
portfolio securities.
EQUITY INDEX MUTUAL FUNDS -- Equity index mutual funds are open-end investment
companies that structure their securities investments so that the performance of
the portfolio approximates the performance of a target equity securities index.
EQUITY SECURITIES -- Equity securities include common stock, preferred stock and
other securities that are convertible to or grant the right to acquire common
stock or preferred stock.
FIXED INCOME SECURITIES -- Fixed income securities are debt obligations bearing
a specified rate of interest during their term that are issued by the United
States government and its agencies and instrumentalities, corporations,
municipalities and other borrowers.
MONEY MARKET FUNDS -- Money market funds are open-end investment companies that
are continuously engaged in the issuance of shares. In connection with
management of their daily cash positions, a Portfolio may invest in money market
fund shares having investment objectives and policies consistent with those of
the Portfolio. Investments by a money market fund are subject to limitations
imposed under regulations adopted by the Securities and Exchange Commission.
Under these regulations, money market funds may only acquire obligations that
present minimal credit risk and that are "eligible securities," 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
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in securities of any one such issuer is limited to the greater of 1% of the
Fund's total assets or $1 million. A taxable money market fund may also hold
more than 5% of its assets in first tier securities of a single issuer for three
"business days" (that is, any day other than a Saturday, Sunday or customary
business holiday).
MUNICIPAL SECURITIES -- Municipal securities consist of (i) debt obligations
issued by or on behalf of public authorities for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, mass transportation, schools, streets and
water and sewer works, the refunding of outstanding obligations, for general
operating expenses, and for lending such funds to other public institutions and
facilities, and (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated facilities.
Municipal securities include both municipal notes and municipal bonds. Municipal
notes include general obligation notes, tax anticipation notes, revenue
anticipation notes, bond anticipation notes, certificates of indebtedness,
demand notes and construction loan notes and participation interests in
municipal notes. Municipal bonds include general obligation bonds, revenue or
special obligation bonds, private activity and industrial development bonds and
participation interests in municipal bonds.
General obligation bonds are backed by the taxing power of the issuing
municipality. Revenue bonds are backed by the revenues of a project or facility
(tolls from a bridge, for example). Certificates of participation represent an
interest in an underlying obligation or commitment, such as an obligation issued
in connection with a leasing arrangement. Private activity bonds are bonds that
are issued by municipalities, the proceeds of which are used in an activity
considered a nonessential government function under the Internal Revenue Code,
which may include activities such as construction and operation of airports,
convention centers, auditoriums, hospitals and mass commuting facilities. The
payment of principal and interest on private activity and industrial development
bonds generally is dependent solely on the ability of a facility's user to meet
its financial obligations and the pledge, if any, of real and personal property
as security for such payment.
Economic, business or political developments might affect all municipal
securities of a similar type. To the extent that a significant portion of the
Short Term Municipal Bond Fund's or Idaho Municipal Bond Fund's assets are
invested in municipal securities payable from revenue on similar projects, those
Portfolios will be subject to the peculiar risks 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
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tax revenues generally mirror economic conditions and may be adversely affected
by regional or national recessions.
RECEIPTS -- Receipts are sold as zero coupon securities which means that they
are sold at a substantial discount and redeemed at face value at their maturity
date without interim cash payments of interest or principal. The amount of this
discount accretes over the life of the security, and such accretion will
constitute the income earned on the security for both accounting and tax
purposes. Because of these features, such securities may be subject to greater
interest rate volatility than interest paying investments.
REPURCHASE AGREEMENTS -- Repurchase agreements are agreements by which a
Portfolio obtains a security and simultaneously commits to return the security
to the seller at an agreed upon price on an agreed upon date within a number of
days from the date of purchase. The custodian will hold the security as
collateral for the repurchase agreement. A Portfolio bears a risk of loss in the
event the other party defaults on its obligations and the Portfolio is delayed
or prevented from exercising its right to dispose of the collateral or if the
Portfolio realizes a loss on the sale of the collateral. A Portfolio will enter
into repurchase agreements only with financial institutions deemed to present
minimal risk of bankruptcy during the term of the agreement based on established
guidelines. Repurchase agreements are considered loans under the 1940 Act.
STANDBY COMMITMENTS -- Securities subject to standby commitments permit the
holder thereof to sell the securities at a fixed price prior to maturity.
Securities subject to a standby commitment may be sold at any time at the
current market price. However, unless the standby commitment was an integral
part of the security as originally issued, it may not be marketable or
assignable; therefore, the standby commitment would only have value to the
Portfolio owning the security to which it relates. In certain cases, a premium
may be paid for a standby commitment, which premium will have the effect of
reducing the yield otherwise payable on the underlying security. The Portfolios
will limit standby commitment transactions to institutions believed to present
minimal credit risk.
U.S. GOVERNMENT AGENCIES -- U.S. Government agency obligations are obligations
issued or guaranteed by agencies of the U.S. Government, including, among
others, the Federal Farm Credit Bank, the Federal Housing Administration and the
Small Business Administration, and obligations issued or guaranteed by
instrumentalities of the U.S. Government, including, among others, the Federal
Home Loan Mortgage Corporation, the Federal Land Banks and the U.S. Postal
Service. Some of these securities are supported by the full faith and credit of
the U.S. Treasury (e.g., Government National Mortgage Association), others are
supported by the right of the issuer to borrow from the Treasury (e.g., Federal
Farm Credit Bank), while still others are supported only by the credit of the
instrumentality (e.g., Federal National Mortgage Association). Guarantees of
principal by agencies or instrumentalities of the U.S. Government may be a
guarantee of payment at the maturity of the obligation so that in the event of a
default prior to maturity there might not be a market and thus no means of
realizing on the obligation prior to maturity. Guarantees as to the timely
payment of principal and interest do not extend to the value or yield of these
securities nor to the value of 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").
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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
THE TRUST.................................................................... 5
INVESTMENT OBJECTIVES AND POLICIES........................................... 5
RISK FACTORS................................................................. 10
INVESTMENT LIMITATIONS....................................................... 12
FUNDAMENTAL POLICIES......................................................... 12
THE ADVISER.................................................................. 12
THE ADMINISTRATOR............................................................ 14
THE DISTRIBUTOR.............................................................. 14
PURCHASE, EXCHANGE AND REDEMPTION............................................ 15
PERFORMANCE.................................................................. 21
TAXES ..................................................................... 22
GENERAL INFORMATION.......................................................... 24
DESCRIPTION OF CERTAIN PERMITTED INVESTMENTS................................. 26
APPENDIX..................................................................... 31
</TABLE>
33
<PAGE> 39
================================================================================
THE
ACHIEVEMENT
FUNDS
THE ACHIEVEMENT FUNDS
THE ACHIEVEMENT FUNDS TRUST
PROSPECTUS
RETAIL CLASS B SHARES
EQUITY FUND
BALANCED FUND
MUNICIPAL BOND FUND
IDAHO MUNICIPAL BOND FUND
APRIL __, 1998
DISTRIBUTED BY
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
800-472-0577
ACH-F-009-03
================================================================================
<PAGE> 40
THE ACHIEVEMENT FUNDS TRUST
INVESTMENT ADVISER:
FIRST SECURITY INVESTMENT MANAGEMENT, INC.
ADMINISTRATOR:
SEI FUND RESOURCES
DISTRIBUTOR:
SEI INVESTMENTS DISTRIBUTION CO.
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 Institutional and Retail
Class A shares of 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") - and the Trust's Prospectus dated April __, 1998 for the Retail
Class B shares of the Equity Fund, Balanced Fund, Municipal Bond Fund and Idaho
Municipal Bond Fund. The Prospectuses may be obtained through SEI Investments
Distribution Co., Oaks, PA 19456.
<TABLE>
<CAPTION>
<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>
April __, 1998
<PAGE> 41
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 and the shares of the Trust's Equity Fund, Balanced Fund, Municipal
Bond Fund and Idaho Municipal Bond Fund have been further divided into Retail
Class B shares (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.
Certain of the Trustees of the Trust were elected when the Trust was first
formed. Additional Trustees of the Trust were elected at a special meeting of
shareholders on November 7, 1996. 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 relating to state government and quasi-governmental
issues of debt securities in 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.
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. The State Treasurer
serves as an advisory Board member.
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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 $80.6 million and $88.9 million at
December 31, 1996 and 1995, respectively.
As of December 31, 1996, 92.84% of the total bond debt has been used
to purchase single family mortgages, 7.16% has provided the construction and
permanent financing for multifamily developments.
As of December 31, 1996, the Agency's outstanding bond indebtedness
was $1,113.4 million. Funds balances, including reserves, were $104.6 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. The Authority is comprised of
seven members appointed by the Governor, to 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 in Idaho to (a) finance and refinance
outstanding indebtedness for health facilities and (b) provide additional
facilities for the development and maintenance of public health, healthcare,
hospitals and related facilities.
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, 1996, the Authority's outstanding bond
indebtedness was $256,381,138.
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, 1996, the Authority's outstanding bond
indebtedness was $51,160,000.
4. The Idaho State Lottery
The Idaho State Lottery was established in 1989. Total sales for
1996 were $91.6 million. Net proceeds for that year totalled $20 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 1996 were approximately
$591,000.
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, 1996, PERSI had 56,802 active
members, 8,479 inactive (of whom 3,950 are entitled to vested benefits), and
19,903 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, 1996, PERSI had an unfunded actuarial liability
("UAL") of $700.3 million ($953.3 million pension benefit obligation (PBO)) of
which approximately $231.1 million UAL ($314.6 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
13.6 years.
The employer contribution rate in effect on July 1, 1997 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, 1996, the Fund had a surplus (fund balance) of
$150 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, 1996, the Trust Fund had fund balances of $31
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.
S-9
<PAGE> 49
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.
S-10
<PAGE> 50
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, 1995
(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.
S-11
<PAGE> 51
For the fiscal years ended January 31, 1997 and January 31, 1996 (the Trust's
first full fiscal year) the Portfolios paid the Adviser the following fees:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Equity Fund $933,172 $620,489
Balanced Fund 853,068 656,712
Intermediate Term Bond Fund 499,628 286,782
Short Term Bond Fund 276,620 273,536
Municipal Bond Fund 38,264 --*
Short Term Municipal Bond Fund 69,894 53,630
Idaho Municipal Bond Fund 76,325 46,342
</TABLE>
*Commenced operations October 1, 1996
The advisory fees paid by the Portfolios for periods indicated are
allocated between the Institutional and Class A classes of shares based upon the
total assets of the respective classes.
For the fiscal year ended January 31, 1997 and 1996, the Adviser waived advisory
fees for each Portfolio as follows:.
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Equity Fund $280,554 $297,531
Balanced Fund 262,295 315,940
Intermediate Term Bond Fund 244,008 233,801
Short Term Bond Fund 150,021 185,940
Municipal Bond Fund 43,574 --*
Short Term Municipal Bond Fund 93,882 135,172
Idaho Municipal Bond Fund 102,410 117,504
</TABLE>
*Commenced operations October 1, 1996
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 was in effect for an initial three year term 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
Portfolios paid the Administrator the following fees pursuant to the
Administration Agreement for the Trust's fiscal year ended January 31, 1996:
Equity fund - $248,113; Balanced Fund - $262,879; Intermediate Term Bond Fund -
$173,528; Short Term Bond Fund - $153,159; Short Term Municipal Bond Fund -
$62,934; Idaho Municipal Bond Fund - 54,615. For the fiscal year ended January
31, 1996, the Administrator waived fees due under the Administration Agreement
from the Short Term Municipal Bond Fund and the Idaho Municipal Bond Fund in the
amount of $37,066 and $45,385, respectively. The Municipal Bond Fund has not
commenced operations and paid no fees to the Administrator during the Trust's
fiscal year ended January 31, 1996.
The Administrator is a wholly owned subsidiary of SEI Investments Management
Corporation, which is a wholly-owned subsidiary of SEI Investments Company
("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 or sub-administrator to the following other
institutional
S-12
<PAGE> 52
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; The Advisor's Inner Circle Fund; The Pillar Funds;
CUFund; STI Classic Funds; First American Funds, Inc.; First American Investment
Funds, Inc.; Marquis Funds; The Expedition Funds; Morgan Grenfell Investment
Trust, The PBHG Funds, Inc.; The PBHG Insurance Series Fund, Inc.; The Arbor
Fund; CoreFunds, Inc.; STI Classic Variable Trust; CrestFunds, Inc.; ARK Funds;
Monitor Funds; FMB Funds, Inc.; Bishop Street Funds; Boston 1784 Funds; TIP
Funds; TIP Institutional Funds; SEI Institutional Investments Trust; Santa
Barbara Group of Mutual Funds, Inc.; First American Strategy Funds, Inc.; and
HighMark Funds.
DISTRIBUTION
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI, and the Trust are parties to a distribution agreement dated December 27,
1994 for the Institutional and Class A Shares and a distribution agreement dated
February 6, 1998 in the Class B shares (collectively, the "Distribution
Agreements"). The Distribution Agreements have an initial term of 1 year and
continue in force and effect from year to year 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 Agreements or interested persons
(as defined in the 1940 Act) of any party to the Distribution Agreements, cast
in person at a meeting called for the purpose of voting on such approval. The
Distribution Agreements 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 "Class A Plan") and for the Retail Class B shares of the Equity
Fund, Balanced Fund, Municipal Bond Fund and Idaho Municipal Bond Fund (the
"Class B Plan" and collectively with the Class A Plan, the "Plans") 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 Plans and the Distribution
Agreements are in the best interests of the Retail Class A and Retail Class B
shareholders. Continuance of the Plans 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 Plans require that quarterly written reports of amounts spent
under the Distribution Plans 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 Class A shares or the Class B shares of the
Portfolio affected. All material amendments of the Distribution Plans will
require approval by a majority of the Trustees of the Trust and of the
Qualified Trustees.
The Class A Plan 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 Investments Distribution Co. 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. For the period from March 5, 1995 to
January 31, 1996, the Class A share classes of the Portfolios paid the
Distributors the following amounts: Equity Fund - $1,637; Balanced Fund -
$1,486; Intermediate Term Bond Fund - $1,223; Short Term Bond Fund - $87; Short
Term Municipal Bond Fund - $93; Idaho Municipal Fund $4,141. The Distributor
used those funds to make payments to third parties for distribution-related
services.
S-13
<PAGE> 53
The Class B Plan provides that the Trust will pay the Distributor a
distribution fee, calculated and paid monthly, at the annual rate of up to and
including 0.75% of the value of the daily average net assets of the Class B
shares, or such lesser amount as may be established from time to time by the
Trustees, in connection with distribution related services provided in respect
of the Class B shares, and a shareholder servicing fee, calculated and paid
monthly, at the annual rate of up to and including 0.25% of the value of the
average daily net assets of the Class B shares, or such lesser amount as may be
established from time to time by the Trustees, in connection with the servicing
of accounts of Class B shareholders. As of the date of this Statement of
Additional Information, no fees have been paid to the Distributor under the
Class B Plan.
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.
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 Class A shares of each Portfolio and the amount retained by the
Distributor for the fiscal year ended January 31, 1997 and the period from March
5, 1995 to January 31, 1996.
<TABLE>
<CAPTION>
Fiscal Year ended January 31, 1997 Fiscal Year ended January 31, 1996
Sales Amount Sales Amount
Charges Retained Charges Retained
------- -------- ------- --------
<S> <C> <C> <C> <C>
Equity Fund $75,739 $7,653 $61,284 $6,149
Balanced Fund 62,405 6,313 60,565 6,087
Intermediate Term Bond Fund 15,681 1,601 26,161 2,529
Short Term Bond Fund 1,950 163 673 54
Municipal Bond Fund 1,509 120 --* --*
Short Term Municipal Bond Fund 266 23 1,917 228
Idaho Municipal Bond Fund 24,988 2,482 63,756 6,417
*Commenced operations October 1, 1996
</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, PaineWebber,
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>
S-14
<PAGE> 54
<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
Kathryn L. Stanton Vice President Vice President, Assistant Secretary of
SEI Investments 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 Investments 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 Investments 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>
S-15
<PAGE> 55
<TABLE>
<CAPTION>
Position Principal
Held With Occupation(s)
Name and Address Registrant During Past 5 Years
---------------- ---------- -------------------
<S> <C> <C>
Todd Cipperman Vice President and Vice President and Assistant Secretary of
SEI Investments 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. O'Donnell Vice President and Vice President and
SEI Investments Management Assistant Secretary Assistant Secretary of
Corporation Since 1998 SEI, the Administrator
Oaks, PA 19456 and Distributor since 1998
Vice President and
General Counsel, FPS
Services, Inc., 1993-1997.
Staff Counsel and Secretary,
ProvidentMutual Family of
Funds, 1990-1993.
Jeffrey Fries Treasurer and Principal Director, Fund Accounting
SEI Investments Management Financial Officer and Administration-SEI
Corporation Fund Resources since 1997.
Oaks, PA 19456 Vice President-Smith Barney
Corporate Trust Company,
Trust Operations Unit,
1991-1997.
</TABLE>
Trustees and officers of the Trust owned less than 1% of the outstanding shares
of the trust as of January 31, 1998.
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>
S-16
<PAGE> 56
<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 July 31, 1997, the yield for the Institutional
class of shares of each Portfolio was: Equity Fund - .51%; Balanced Fund -
2.11%; Intermediate Term Bond Fund - 5.64%; Short Term Bond Fund - 5.36%;
Municipal Bond Fund - 4.68%; Short Term Municipal Bond Fund - 3.55%; Idaho
Municipal Bond Fund - 4.38%.
For the 30 day period ended July 31, 1997, the yield for the Retail Class A
shares of each Portfolio was: Equity Fund - .27%; Balanced Fund - 1.79%;
Intermediate Term Bond Fund - 5.20%; Short Term Bond Fund - 5.04%; Municipal
Bond Fund - 4.25%; Short Term Municipal Bond Fund - 3.25%; Idaho
Municipal Bond Fund - 3.96%.
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
S-17
<PAGE> 57
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%.
S-18
<PAGE> 58
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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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 Class A shares is the
net asset value of each Class A share plus the applicable sales load, and Class
A shares will be redeemed at a price equal to the net asset value of such Class
A shares. Shareholders may at any time redeem all or a portion of their shares
at net asset value without charge. The purchase price of Class B shares is the
net asset value of each Class B share. Class B shares will be redeemed at a
price equal to the net asset value of such Class B shares less the applicable
contingent deferred sales charge, if any, described in the prospectus. 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
regular trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time)
on any business day for the Portfolios. The net asset values per share of the
Institutional, Class A and Class B classes of the Portfolios will differ
because of different expenses attributable to each class. The income or loss and
the expenses common to the 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 the 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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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) 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 (iii) 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 (ii) and (iii) will collectively be referred to in the
following discussion as the "Asset Diversification Requirement".)
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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 during the 90-day period beginning on the day which is
45 days before the date on which the stock becomes ex-dividend (during the
180-day period beginning on the date which is 90 days before such date, in the
case of certain preferred stock); 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 Taxpayer Relief Act
of 1997 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 20% if the property sold has been
held for more than 18 months. Long-term capital gains of non-corporate tax
payers are currently taxed at a maximum rate that in some cases may be 19.6%
lower than the maximum rate applicable to ordinary income. 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. For tax years beginning
after 1997, however, certain small corporations are wholly exempt from the
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 (other than certain small
corporations). 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 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.
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, 1996, the Equity Fund paid brokerage
commissions of $291,662. The Adviser allocated certain of the Equity Fund's
brokerage transactions to certain broker-dealers that provided the Adviser with
certain research, statistical and other information. Such transactions amounted
to $220,015,937 and the related brokerage commissions were $291,662.
For the fiscal year ended January 31, 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. For the fiscal
year ended January 31, 1996, the Balanced Fund paid brokerage commissions of
$165,537. The Adviser allocated certain of the Balance Fund's brokerage
transactions to certain broker-dealers that provided the Adviser with research,
statistical and other information. Such transactions amounted to $121,648,681
and the related brokerage commissions were $165,537.
The portfolio turnover rate for each of the Portfolios for the fiscal year ended
January 31, 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 February 6, 1998, the following entities owned 5% or more of the
outstanding Institutional shares: Equity Fund: First Security Corporation Trust
Groups, P.O. Box 25297, Salt Lake City, Utah 84125 (100%); Balanced Fund: First
Security Corporation Trust Groups, P.O. Box 25297, Salt Lake City, Utah 84125
(99.91%); Intermediate Term Bond Fund: First Security Corporation Trust Groups,
P.O. Box 25297, Salt Lake City, Utah 84125 (100%); Short Term Bond Fund: First
Security Corporation Trust Groups, P.O. Box 25297,
S-28
<PAGE> 68
Salt Lake City, Utah 84125 (100%); Municipal Bond Fund: First Security
Corporation Trust Group, P.O. Box 25297, Salt Lake City, Utah 84125 (99.73%);
Short Term Municipal Bond Fund: First Security Corporation Trust Group, P.O. Box
25297, Salt Lake City, Utah 84125 (99.83%); Idaho Municipal Bond Fund: First
Security Corporation Trust Group, P.O. Box 25297, Salt Lake City, Utah 84125
(98.93%).
As of February 6, 1998, the following entities owned 5% or more of the
outstanding Retail Class A shares: Equity Fund: BHC Securities, Inc., One
Commerce Square, 2005 Market St., Philadelphia, PA 19103 (71.35%); Balanced
Fund: BHC Securities, Inc., One Commerce Square, 2005 Market St., Philadelphia,
PA 19103 (81.12%); Intermediate Term Bond Fund: BHC Securities, Inc., One
Commerce Square, 2005 Market St., Philadelphia, PA 19103 (96.39%); Short Term
Bond Fund: BHC Securities, Inc., One Commerce Square, 2005 Market Street,
Philadelphia, PA 19103 (49.37%); Keith W. Slater & Gwen S. Rhodes & Myrl L.
Slater, Jr., Nevada W. Slater Trust, 4554 S. 2350 W, Rov, UT. 84067 (13.91%);
Joseph Paul Moslander Jr., 3343 S. 3040 E, Salt Lake City, UT 84109 (6.28%);
Honey J. Larson, 1798 Millbrook Rd, Salt Lake City, Utah 84106 (16.51%); SEI
Trust Company Cust IRA, 1537 Homer Dr., Pocatello, ID 83201 (5.12%); Municipal
Bond Fund; BHC Securities, Inc., One Commerce Square, 2005 Market St.,
Philadelphia, PA 19103 (99.44%); Short Term Municipal Bond Fund: BHC Securities,
Inc., One Commerce Square, 2005 Market St., Philadelphia, PA 19103 (89.99%); Don
Milton Robinson, 4276 Brunswick Ave., Los Angeles, CA 90039 (9.96%); Idaho
Municipal Bond Fund: BHC Securities, Inc., One Commerce Square, 2005 Market St.,
Philadelphia, PA 19103 (87.51%); James H. Neyman & Elizabeth Neyman, 109 E.
Pine, Haley ID 83333 (7.55%)
COUNSEL TO THE TRUST
Ballard Spahr Andrews & Ingersoll serves as counsel to the Trust.
FINANCIAL STATEMENTS
Unaudited financial statements of the Trust for the six months ended July 31,
1997 are contained in the Trust's Semi-Annual Report to Shareholders dated July
31, 1997, and are incorporated in this Statement of Additional Information by
reference. 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
Semi-Annual Report to Shareholders and 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
Semi-Annual Report to Shareholders and Annual Report to Shareholders will be
furnished to such person without charge upon request made to SEI Investments
Distribution Co., by written request addressed to Oaks, PA 19456 or by calling
1-800-472-0577.
S-29
<PAGE> 69
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:
None
In Part B:
Financial Statements as of July 31, 1997
(unaudited) incorporated by reference to
Semiannual Report to Shareholders. 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:
None
In Part B:
Financial Statements as of July 31, 1997
(unaudited) incorporated by reference to
Semiannual Report to Shareholders. Financial
Statements as of January 31, 1997 (audited),
with Independent Auditors' Report
incorporated by reference to Annual Report
to Shareholders.
(3) Retail Class B of Equity Fund, Balanced
Fund, Municipal Bond Fund and Municipal
Bond Fund.
None.
(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> 70
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(a) - 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.
6(b) - Distribution and Services Agreement
dated February 6, 1998 between
Registrant and SEI Investments
Distributions Co. relating to
Class B Share is filed herewith
electronically.
2
<PAGE> 71
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 was filed electronically as
an Exhibit to Post-Effective
Amendment No. 12 on March 31, 1997,
and is hereby incorporated by
reference.
9(f) - Amendment Agreement dated as of
October 9, 1997 between Registrant
and Morgan Guaranty Trust Company
is filed herewith electronically.
10(a) - 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> 72
No. 11 on May 30, 1996, and is
hereby incorporated by reference.
10(b) - Opinion of Ballard Spahr Andrews &
Ingersoll dated March 2, 1998.
11(a) - Consent of Ballard Spahr Andrews &
Ingersoll.
11(b) - Consent of Deloitte & Touche LLP
11(c) - Powers of Attorney
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(a) - 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.
15(b) - Distribution Plan with respect to
Retail Class C shares between
Registrant and SEI Investments
Distribution Co. is filed herewith
electronically.
16 - Not Applicable.
17 - Financial Data Schedules.
18 - Rule 18f-3 Multiple Class Plan dated
August 4, 1995, as amended February
6, 1998, is filed herewith
electronically.
Item 25. Persons Controlled by or under Common Control with Registrant.
Not Applicable.
4
<PAGE> 73
Item 26. Number of Holders of Securities.
<TABLE>
<CAPTION>
Number of Record
Institutional Class Holders at February 9, 1998
------------------- ---------------------------
<S> <C>
Equity Fund 7
Balanced Fund 7
Intermediate Term Bond Fund 6
Short Term Bond Fund 6
Municipal Bond Fund 6
Short Term Municipal Bond Fund 6
Idaho Municipal Bond Fund 6
</TABLE>
<TABLE>
<CAPTION>
Number of Record
Retail Class A Holders at February 9, 1998
-------------- ---------------------------
<S> <C>
Equity Fund 262
Balanced Fund 142
Intermediate Term Bond Fund 24
Short Term Bond Fund 18
Municipal Bond Fund 6
Short Term Municipal Bond Fund 7
Idaho Municipal Bond Fund 31
</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> 74
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 Senior Vice President Senior Portfolio Manager.
</TABLE>
6
<PAGE> 75
<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.
Bruce R. Mohr Vice President Senior Portfolio Manager.
Richard Baird Vice President Senior Portfolio Manager.
</TABLE>
Item 29. Principal Underwriter.
(a) The Registrant's distributor, SEI Financial Services
Company ("SIDC") 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, 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, Boston 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, TIP Funds, SEI Institutional
Investments Trust, First American Strategy Funds, Inc., HighMark Funds and
Armada Funds, The PBHG Insurance Series Fund, Inc., The Expedition Funds and TIP
Institutional Funds pursuant to distribution agreements dated July 15, 1982,
November 29, 1982, December 3, 1982, July 10, 1985, January 22, 1987, August 30,
1988, 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, December 27, 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, April 1, 1997, June 9, 1997 and January 1, 1998.
SIDC provides numerous financial services to investment
managers, pension plan sponsors, and bank trust departments. These services
include portfolio evaluation, performance measurement, and consulting services
("Funds Evaluation") and automated execution, clearing and settlement of
securities transactions ("Market Link").
(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> 76
<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, --
President--Investment Advisory Group
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President, --
President - Investment Systems &
Services Division
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Larry Hutchinson 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> 77
<TABLE>
<CAPTION>
Position and Positions and
Offices with Offices with
Name Underwriter Registrant
- ---- ----------- ----------
<S> <C> <C>
Barbara J. Moore 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 --
</TABLE>
9
<PAGE> 78
<TABLE>
<CAPTION>
Position and Positions and
Offices with Offices with
Name Underwriter Registrant
- ---- ----------- ----------
<S> <C> <C>
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 & Treasurer --
Michael Kantor Vice President --
Samuel King Vice President --
Mark Nagle Vice President --
Joann Nelson Vice President --
W. Kelso Morrill Vice President --
Rob Redican Vice President --
Maria Rinehart Vice President --
Larry Pokora Vice President --
Kim Rainey Vice President --
Steve Smith Vice President --
Kathryn L. Stanton Vice President & Assistant Vice President & Secretary
Secretary
Daniel Spaventa Vice President --
James Dougherty Director, Brokerage Services --
</TABLE>
<PAGE> 79
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 Investments 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> 80
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. 13 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 27th day of February, 1998.
THE ACHIEVEMENT FUNDS TRUST
By: /s/
-------------------------------------
Kathryn L. Stanton
President and Principal
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Post-Effective Amendment No. 13 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 February 27, 1998
- ------------------------------ and Trustee
Frederick A. Moreton, Jr.
/s/ * Trustee February 27, 1998
- ------------------------------
Robert G. Love
/s/ * Trustee February 27, 1998
- ------------------------------
Carl S. Minden
/s/ * Trustee February 27, 1998
- ------------------------------
August Glissmeyer, Jr.
/s/ * Trustee February 27, 1998
- ------------------------------
George L. Denton
/s/ * Trustee February 27, 1998
- ------------------------------
James H. Gardner
/s/ * Trustee February 27, 1998
- ------------------------------
Blaine Huntsman
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ * Trustee February 27, 1998
- ---------------------------------
Kent H. Murdock
/s/ Jeffrey Fries Treasurer and Principal February 27, 1998
- --------------------------------
Jeffrey Fries Financial Officer
</TABLE>
* By: /s/ Kathryn L. Stanton
----------------------------
Kathryn L. Stanton
Attorney In Fact
2
<PAGE> 82
THE ACHIEVEMENT FUNDS TRUST
Post Effective Amendment No. 13
Exhibit List
<TABLE>
<S> <C>
6(b) Distribution and Services Agreement
9(f) Amendment Agreement
10(b) Opinion of Ballard Spahr Andrews & Ingersoll, LLP dated
February 25, 1998
11(a) Consent of Ballard Spahr Andrews & Ingersoll, LLP
11(b) Consent of Deloitte & Touche LLP
11(c) Powers of Attorney
15(b) Distribution Plan for Retail Class B Shares
17 Financial Data Schedules
18(b) Multiple Class Plan
</TABLE>
<PAGE> 1
Exhibit 6(b)
THE ACHIEVEMENT FUNDS TRUST
DISTRIBUTION AND SERVICE AGREEMENT
FOR
CLASS B SHARES (CONTINGENT DEFERRED SALES CHARGE CLASSES)
THIS AGREEMENT is made as of the 6th day of February, 1998 between THE
ACHIEVEMENT FUNDS TRUST, a Massachusetts business trust (the "Trust"), and SEI
Investments Distribution Co. (the "Distributor"), a Pennsylvania corporation.
WHEREAS, the Fund is registered as an investment company with the
Securities and Exchange Commission ("SEC") under the Investment Company Act of
1940, as amended ("1940 Act"), and its shares are registered with the SEC under
the Securities Act of 1933, as amended ("1933 Act"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended;
WHEREAS, the Trust desires to appoint the Distributor to act as
distributor and shareholder servicing agent for the Class B shares of the
Trust's portfolios, as now in existence or hereinafter created from time to
time (collectively, the "Shares"), in accordance with the terms and conditions
of this Agreement;
NOW, THEREFORE, in consideration of the manual covenants hereinafter
contained, the Trust and Distributor hereby agree as follows:
ARTICLE 1. Distribution Activities.
A. Sale of Shares. The Trust grants to the Distributor the exclusive
right to sell Shares of each portfolio of the Trust (each a "Portfolio"), at
net asset value in accordance with the current prospectus for the Shares, as
agent and on behalf of the Trust, during the term of this Agreement and subject
to the registration requirements of the 1933 Act, the rules and regulations of
the SEC and the laws governing the sale of securities in the various states
("Blue Sky Laws").
B. Solicitation of Sales. In consideration of these rights granted to
the Distributor, the Distributor agrees to use all reasonable efforts,
consistent with its other business, in connection with the distribution of
Shares; provided, however, that the Distributor shall not be prevented from
entering into like arrangements with other issuers. The provisions of this
paragraph do not obligate the Distributor to register as a broker or dealer
under the Blue Sky Laws of any jurisdiction when it determines it would be
uneconomical for it to do so or to
1
<PAGE> 2
maintain its registration in any jurisdiction in which it is now registered nor
obligate the Distributor to sell any particular number of Shares.
C. Authorized Representations. The Distributor is not authorized by
the Trust to give any information or to make any representations other than
those contained in the current registration statements and prospectuses of the
Trust with respect to the Shares filed with the SEC or contained in Shareholder
reports or other material that may be prepared by or on behalf of the Trust for
the Distributor's use. The Distributor may prepare and distribute sales
literature and other material as it may deem appropriate, provided that such
literature and materials have been approved by the Trust prior to their use.
D. Registration of Shares. The Trust agrees that it will take all
action necessary to register Shares under the federal and state securities laws
so that there will be available for sale the number of Shares the Distributor
may reasonably be expected to sell and to pay all fees associated with said
registration. The Trust shall make available to the Distributor such number of
copies of its currently effective prospectus and statement of additional
information as the Distributor may reasonably request. The Trust shall furnish
to the Distributor copies of all information, financial statements and other
papers which the Distributor may reasonably request for use in connection with
the distribution of Shares of the Trust.
ARTICLE 2. Shareholder Servicing Activities.
A. Appointment. The Trust hereby appoints the Distributor as
servicing agent for the Shares of each Portfolio, as agent and on behalf of the
Trust in accordance with and during the term of this Agreement, and the
Distributor hereby accepts such appointment.
B. Shareholder Servicing Activities. As servicing agent for the
Shares of each Portfolio, and in consideration of the compensation payable
pursuant to Article 4 hereof, the Distributor shall provide personal,
continuing services to investors in the Shares of each Portfolio, including but
not limited to providing ongoing servicing and/or maintenance of shareholder
accounts with respect to the Shares of the Portfolios, responding to inquiries
of the holders of Shares regarding their ownership of Shares or their accounts
with the Trust, and providing administrative or accounting services with
respect to the Shares of the Portfolios not otherwise provided by other agents
of the Trust. Notwithstanding the foregoing, if the National Association of
Securities Dealers, Inc. ("NASD") adopts a definition of "service fee" for
purposes of Rule 2830 of the NASD Rules of Conduct that differs from the
definition of shareholder servicing activities in this paragraph, or if the
NASD adopts a related definition intended to define the same concept, the
definition of shareholder servicing activities in this paragraph shall be
automatically amended, without further action of the parties, to conform to
such NASD definition.
2
<PAGE> 3
ARTICLE 3. Compensation for Distribution Activities. (a) As compensation
for providing distribution services pursuant to Article 1 hereof, the
Distributor shall receive:
(1) in respect of the Shares of each Portfolio, pursuant to
the Trust's Plan of Distribution with respect to Class B Shares adopted by each
such class in accordance with Rule 12b-1 under the 1940 Act (the "Distribution
Plan"), a fee in connection with distribution-related services provided in
respect of such class, calculated and payable monthly as soon as practicable
after the end of the calendar month within which such fee accrues, but in any
event prior to the tenth day following the end of such calendar month, at the
annual rate of .75% of the value of the average daily net assets of such class.
(2) All contingent deferred sales charges applied on
redemptions of Shares of such Portfolio, payable at such time as the redemption
proceeds in respect of the redemption giving rise to the contingent deferred
sales charge is paid to the redeeming shareholder; provided that whether and at
what rate a contingent deferred sales charge will be imposed with respect to a
redemption shall be determined in accordance with, and in the manner set forth
in, the Registration Statement registering the Shares then in effect with the
SEC.
(b) Amounts payable to the Distributor under the Distribution Plan
may exceed or be less than the Distributor's actual costs incurred in
connection with the distribution of the Shares of each such class, as described
in Article 5 below. In the event such Distribution Expenses (as defined in
Article 5) exceed amounts payable to the Distributor under the Distribution
Plan, the Distributor shall not be entitled to reimbursement by the Trust.
(c) The Distributor may reallow any or all of the distribution fees
and contingent deferred sales charges which it is paid under this Agreement to
such dealers as the Distributor may from time to time determine.
(d) The Distributor may transfer its right to the payments described
in this Article 3 to third persons who provide funding to the Distributor,
provided that any such transfer shall not be deemed a transfer of the
Distributor's obligations under this Agreement. Upon receipt of direction from
the Distributor to pay such fees to a transferee, the Trust shall make payment
in accordance with such direction.
ARTICLE 4. Compensation for Shareholder Service Activities.
(a) As compensation for providing shareholder services pursuant to
Article 2 hereof, the Distributor shall receive in respect of the Shares of
each Portfolio, pursuant to the Trust's Service Plan with respect to Class B
Shares adopted by each such class in accordance with the Distributor's
multi-class exemptive order (the "Service Plan"), a fee in connection with
shareholder services provided in respect of such class, calculated and payable
monthly, at the annual rate of .25% of the value of the average daily net
assets of such class.
3
<PAGE> 4
(b) Amounts payable to the Distributor under the Service Plan may
exceed or be less than the Distributor's actual costs incurred in connection
with the provision of shareholder services for the Shares, as described in
Article 5 below. In the event such Shareholder Servicing Expenses (as defined
in Article 5) exceed amounts payable to the Distributor under the Service Plan,
the Distributor shall not be entitled to reimbursement by the Trust.
(c) The Distributor may reallow all or any part of, or pay
compensation from, the amounts payable to the Distributor under the Service
Plan to such persons, including employees of the Distributor, and institutions
who respond to inquiries of holders of the Shares of the Portfolios or provide
other administrative or accounting services for the Shares, as the Distributor
may from time to time determine.
ARTICLE 5. Expenses. During the period of this Agreement, the Trust
shall pay or cause to be paid all expenses, costs and fees incurred by the
Trust which are not assumed by the Distributor. The Distributor shall pay all
of its own costs incurred in connection with the distribution of the Shares of
each Portfolio pursuant to Article 1 hereof ("Distribution Expenses"). The
Distributor shall also pay all of its own costs incurred in connection with
providing the personal, continuing services to shareholders of the Shares of
each Portfolio pursuant to Article 3 hereof ("Shareholder Servicing Expenses").
Distribution Expenses include, but are not limited to, the following expenses
incurred by the Distributor: initial and ongoing sales compensation (in
addition to sales loads) paid to investment executives of the Distributor and
to other broker-dealers and participating financial institutions which the
Distributor has agreed to pay; expenses incurred in the printing of
prospectuses, statements of additional information and reports used for sales
purposes; expenses of preparation and distribution of sales literature;
expenses of advertising of any type; an allocation of the Distributor's
overhead; payments to and expenses of persons who provide support services in
connection with the distribution of Trust shares; and other
distribution-related expenses. Shareholder Servicing Expenses include all
expenses of the Distributor incurred in connection with providing
administrative or accounting services to shareholders of the Shares of each
Portfolio, including, but not limited to, an allocation of the Distributor's
overhead and payments made to persons, including employees of the Distributor,
who respond to inquiries of shareholders regarding their ownership of Shares,
or who provide other administrative or accounting services for the Shares class
not otherwise required to be provided by the applicable Portfolio's investment
adviser, transfer agent or other agent.
(b) In each year during which this Agreement remains in effect, the
Distributor will prepare and furnish to the Board of Trustees of the Trust, on
a quarterly basis, written reports complying with the requirements of Rule
12b-1 under the 1940 Act that set forth (i) the amounts expended under this
Agreement and the Distribution Agreement as Distribution Expenses for the
Shares of each Portfolio and the purposes for which those expenditures were
made, and (ii) the amounts expended under this Agreement and the Service
Agreement as Shareholder Servicing Expenses for the Shares of each Portfolio
and the purposes for which those expenditures were made.
4
<PAGE> 5
ARTICLE 6. Indemnification of Distributor. The Trust agrees to
indemnify and hold harmless the Distributor and each of its directors and
officers and each person, if any, who controls the Distributor within the
meaning of Section 15 of the 1933 Act against any loss, liability, claim,
damages or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damages, or expense and reasonable counsel
fees and disbursements incurred in connection therewith), arising, by reason of
any person acquiring any Shares, based upon the ground that the registration
statement, prospectus, Shareholder reports or other information filed or made
public by the Trust (as from time to time amended) included an untrue statement
of a material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements made not misleading. However, the
Trust does not agree to indemnify the Distributor or hold it harmless to the
extent that the statements or omission was made in reliance upon, and in
conformity with, information furnished to the Trust by or on behalf of the
Distributor.
In no case (i) is the indemnity of the Trust to be deemed to protect the
Distributor against any liability to the Trust or its Shareholders to which the
Distributor or such person otherwise would be subject by reason of willful
misfeasance, bad faith or negligence in the performance of its duties or by
reason of its reckless disregard of its obligations and duties under this
Agreement, or (ii) is the Trust to be liable to the Distributor under the
indemnity agreement contained in this paragraph with respect to any claim made
against the Distributor or any person indemnified unless the Distributor or
other person shall have notified the Trust in writing of the claim within a
reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon the
Distributor or such other person (or after the Distributor or the person shall
have received notice of service on any designated agent). However, failure to
notify the Trust of any claim shall not relieve the Trust from any liability
which it may have to the Distributor or any person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph.
The Trust shall be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any claims subject to this indemnity provision. If the Trust elects to
assume the defense of any such claim, the defense shall be conducted by counsel
chosen by the Trust and satisfactory to the indemnified defendants in the suit
whose approval shall not be unreasonably withheld. In the event that the Trust
elects to assume the defense of any suit and retain counsel, the indemnified
defendants shall bear the fees and expenses of any additional counsel retained
by them. If the Trust does not elect to assume the defense of a suit, it will
reimburse the indemnified defendants for the reasonable fees and expenses of
any counsel retained by the indemnified defendants.
The Trust agrees to notify the Distributor promptly of the commencement
of any litigation or proceedings against it or any of its officers or Trustees
in connection with the issuance or sale of any of its Shares.
5
<PAGE> 6
ARTICLE 7. Indemnification of Trust. The Distributor covenants and
agrees that it will indemnify and hold harmless the Trust and each of its
Trustees and officers and each person, if any, who controls the Trust within the
meaning of Section 15 of the 1933 Act, against any loss, liability, damages,
claim or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, damages, claim or expense and reasonable counsel
fees incurred in connection therewith) based upon the 1933 Act or any other
statute or common law and arising by reason of any person acquiring any Shares,
and alleging a wrongful act of the Distributor or any of its employees or
alleging that the registration statement, prospectus, Shareholder reports or
other information filed or made public by the Trust (as from time to time
amended) included an untrue statement of a material fact or omitted to state a
material fact required to be stated or necessary in order to make the statements
not misleading, insofar as the statement or omission was made in reliance upon
and in conformity with information furnished to the Trust by or on behalf of the
Distributor.
In no case (i) is the indemnity of the Distributor in favor of the
Trust or any other person indemnified to be deemed to protect the Trust or any
other person against any liability to which the Trust or such other person
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement, or (ii) is the
Distributor to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Trust or any person
indemnified unless the Trust or person, as the case may be, shall have notified
the Distributor in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the nature of
the claim shall have been served upon the Trust or upon any person (or after
the Trust or such person shall have received notice of service on any
designated agent). However, failure to notify the Distributor of any claim
shall not relieve the Distributor from any liability which it may have to the
Trust or any person against whom the action is brought otherwise than on
account of its indemnity agreement contained in this paragraph.
The Distributor shall be entitled to participate, at its own expense,
in the defense or, if it so elects, to assume the defense of any suit brought
to enforce the claim, but if the Distributor elects to assume the defense, the
defense shall be conducted by counsel chosen by the Distributor and
satisfactory to the indemnified defendants whose approval shall not be
unreasonably withheld. In the event that the Distributor elects to assume the
defense of any suit and retain counsel, the defendants in the suit shall bear
the fees and expenses of any additional counsel retained by them. If the
Distributor does not elect to assume the defense of any suit, it will reimburse
the indemnified defendants in the suit for the reasonable fees and expenses of
any counsel retained by them.
The Distributor agrees to notify the Trust promptly of the
commencement of any litigation or proceedings against it in connection with the
issue and sale of any of the Trust's Shares.
6
<PAGE> 7
ARTICLE 8. Effective Date. This Agreement shall be effective upon its
execution, and unless terminated as provided, shall continue in force for one
year from the effective date and thereafter from year to year, provided that
such annual continuance is approved by (i) either the vote of a majority of the
Trustees of the Trust, or the vote of a majority of the outstanding voting
securities of the Shares of each Portfolio, and (ii) the vote of a majority of
those Trustees of the Trust who are not parties to this Agreement or the
Trust's Distribution Plan or Service Plan or interested persons or any such
party ("Qualified Trustee"), cast in person at a meeting called for the purpose
of voting on the approval. This Agreement shall automatically terminate in the
event of its assignment. As used in this paragraph the terms "vote of a
majority of the outstanding voting securities", "assignment" and "interested
person" shall have the respective meanings specified in the 1940 Act. In
addition, this Agreement may at any time be terminated without penalty by the
Distributor, by a vote of a majority of qualified Trustees or by vote of a
majority of the outstanding voting securities of the Shares class of any
Portfolio upon not less than sixty days prior written notice to the other party.
ARTICLE 9. Notices. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, address by the party giving notice to the
other party at the last address furnished by the other party to the party
giving notice: if to the Trust, c/o Kathryn L. Stanton, Associate General
Counsel, SEI Investments Distribution Co., 1 Freedom Valley Drive, Oaks, PA
19456; and to its Counsel at the following address: William H. Rheiner, Esq.,
Ballard Spahr Andrews & Ingersoll, 1735 Market Street, 51st Floor, Philadelphia,
PA 19103-7599; and if to the Distributor, 1 Freedom Valley Drive, Oaks,
Pennsylvania 19456.
ARTICLE 10. Governing Law. This Agreement shall be construed in
accordance with the laws of the Commonwealth of Massachusetts and the
applicable provisions of the 1940 Act. To the extent that the applicable laws
of the Commonwealth of Massachusetts, or any of the provisions herein, conflict
with the applicable provisions of the 1940 Act, the latter shall control.
7
<PAGE> 8
ARTICLE 11. Multiple Originals. This Agreement may be executed in two or
more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
IN WITNESS, the Trust and Distributor have each duly executed this
Agreement, as of the day and year above written.
THE ACHIEVEMENT FUNDS TRUST
By: ___________________________________
Attest: _______________________________
SEI INVESTMENTS DISTRIBUTION CO.
By: ___________________________________
Attest: _______________________________
8
<PAGE> 1
Exhibit 9(f)
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT dated as of October 9, 1997 (this "AMENDMENT
AGREEMENT") to the Credit Agreement dated as of October 11, 1995, as amended by
Amendment Agreement dated as of October 10, 1996 (as amended, 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 Credit
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 9, 1996 (the "ORIGINAL TERMINATION DATE") in an aggregate
principal amount not to exceed $10,000,000 at any time outstanding to all
Original Borrowers.
Pursuant to the terms of an Amendment Agreement dated as of October 10,
1996, the Bank provided a new credit facility to the Original Borrowers by
changing the Original Termination Date to October 9, 1997, and added the
Municipal Bond Fund ("MBF"), a portfolio of the Fund, as a Borrower under the
terms of the Original Credit Agreement, as so amended, for all purposes.
The Fund on behalf of the Original Borrowers and MBF (each (including
BMF), a "BORROWER" and collectively the "BORROWERS") has requested the Bank to
amend the Original Credit Agreement (as amended, the "AMENDED AGREEMENT")
provide for a new 364-day facility by changing the Original Termination Date to
October 7, 1998 (the "NEW TERMINATION DATE"). All loans and other amounts
outstanding under the Original Credit 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 Credit 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:
<PAGE> 2
-2-
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
"Borrower") shall include MBF).
Section 2. Amendments. From and after the Effective Date, but retroactive
to October 9, 1996:
(a) The term "Termination Date" shall be amended and extended so as
to mean October 7, 1998.
(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 9, 1997 to this Agreement) shall have occurred on
or prior to November 14, 1997".
(c) Exhibits A, B and C to the Original Agreement shall be amended
and restated in their entirety to read as set forth on Exhibits A, B and C
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
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 each 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.
<PAGE> 3
-3-
The Bank shall promptly notify the Fund of the Effective Date, and such
notice shall be conclusive and binding on the parties hereto.
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
12th day of November, 1997, effective 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> 1
Ballard Spahr Andrews & Ingersoll
1225 17th Street, Suite 2300
Denver, Colorado 80202
(303) 292-2400
February 25, 1998
The Achievement Funds Trust
Oaks, Pennsylvania 19456
Re: Retail Class B Shares
Gentlemen:
We have acted as counsel to The Achievement Funds Trust (the "Trust"),
a Massachusetts Business Trust, in connection with the proposed authorization
and issuance (the "Issuance") of Retail Class B Shares (the "Shares") of each
of the following Sub-Trusts of the Trust: Equity Fund, Balanced Fund, Municipal
Bond Fund and Idaho Municipal Bond Fund.
In connection with our giving this opinion, we have examined the
Amended and Restated Master Trust Agreement of the Trust, the Designation of
Class B Shares adopted by the Trustees of the Trust, and originals or copies,
certified or otherwise identified to our satisfaction, of such other documents,
records and other instruments as we have deemed necessary or advisable for
purposes of this opinion. As to various questions of fact material to our
opinion, we have relied upon information provided by officers of the Trust.
The opinion expressed below is based on the assumption that (i) a
Registration Statement on Form N-1A (the "Registration Statement") with
respect to the Shares will have been filed by the Trust with the Securities
and Exchange Commission and will have become effective before the Issuance
occurs, and (ii) the consideration described in the prospectus contained in
the Registration Statement for the Shares shall have been paid.
<PAGE> 2
The Achievement Funds Trust
February 25, 1998
Page 2
Based on the foregoing, we are of the opinion that the Shares when
issued by the Trust will be legally issued, fully paid and nonassessable.
The Amended and Restated Master Trust Agreement provides that
shareholders of the Trust shall not be personally liable for the debts and
obligations of the Trust. There is a remote possibility, however, that, under
certain circumstances, shareholders of a Massachusetts business trust may be
held personally liable for that trust's obligations to the extent that the
courts of a state which does not recognize such limited liability were to apply
the laws of such state to a controversy involving such obligations. The Trust
Agreement also requires that notice of such disclaimer of shareholder liability
be given in each note, bond, contract or other undertaking made or issued by the
Trustees or Officers of the Trust. Such disclaimer is contained in the
Agreement. The Trust Agreement also provides for indemnification out of Trust
property for all loss and expense of any shareholder held personally liable for
the obligations of the Trust. Therefore, the risk of any shareholder incurring
financial loss beyond his investment due to shareholder liability is limited to
circumstances in which the Trust is unable to meet its obligations and the
express disclaimer of shareholder liabilities is determined not to be effective.
We consent to the filing of this opinion as Exhibit 10(b) to the
Registration Statement and to the references to this firm in the Registration
Statement.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll
-------------------------------------
Ballard Spahr Andrews & Ingersoll
<PAGE> 1
Exhibit (11)(a)
CONSENT
We hereby consent to the use of our name under the caption "Counsel" in the
Prospectus and under the caption "Counsel to the Trust" in the Statement of
Additional Information of Post-Effective Amendment No. 13 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. 14 under the
Investment Company Act of 1940.
/s/ Ballard Spahr Andrews & Ingersoll, LLP
------------------------------------------
Ballard Spahr Andrews & Ingersoll, LLP
February 25, 1998
<PAGE> 1
EXHIBIT 11(b)
CONSENT OF INDEPENDENT AUDITORS
The Achievement Funds Trust:
We consent to the incorporation by reference in Post-Effective Amendment No. 13
to Registration Statement No. 33-26205 of our report dated March 21, 1997
appearing in the Annual Report to Shareholders-January 31, 1997.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
February 25, 1998
<PAGE> 1
EXHIBIT 11(c)
THE ACHIEVEMENT FUNDS TRUST
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of The Achievement Funds Trust (the "Trust"), a business trust
organized under the laws of The Commonwealth of Massachusetts, hereby
constitutes and appoints David G. Lee, Kathryn L. Stanton, and Stephen Meyer,
and each of them singly, his true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, to sign for him and in his name,
place and stead, and in the capacity indicated below, to sign any or all
amendments (including post-effective amendments) to the Trust's Registration
Statement on Form N-1A under the provisions of the Investment Company Act of
1940 and the Securities Act of 1933, each such Act as amended, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, acting alone, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ FREDERICK A. MORETON, JR. Date: 8/4/95
- ------------------------------------- ---------------------------
Frederick A. Moreton, Jr.
<PAGE> 2
THE ACHIEVEMENT FUNDS TRUST
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of The Achievement Funds Trust (the "Trust"), a business trust
organized under the laws of The Commonwealth of Massachusetts, hereby
constitutes and appoints David G. Lee, Kathryn L. Stanton, and Stephen Meyer,
and each of them singly, his true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, to sign for him and in his name,
place and stead, and in the capacity indicated below, to sign any or all
amendments (including post-effective amendments) to the Trust's Registration
Statement on Form N-1A under the provisions of the Investment Company Act of
1940 and the Securities Act of 1933, each such Act as amended, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, acting alone, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ GEORGE L. DENTON, JR. Date: August 4, 1995
- --------------------------------- ---------------------------
George L. Denton, Jr.
<PAGE> 3
THE ACHIEVEMENT FUNDS TRUST
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of The Achievement Funds Trust (the "Trust"), a business trust organized
under the laws of The Commonwealth of Massachusetts, hereby constitutes and
appoints David G. Lee, Kathryn L. Stanton, and Stephen Meyer, and each of them
singly, his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, to sign for him and in his name, place and
stead, and in the capacity indicated below, to sign any or all amendments
(including post-effective amendments) to the Trust's Registration Statement on
Form N-1A under the provisions of the Investment Company Act of 1940 and the
Securities Act of 1933, each such Act as amended, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, acting alone, full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.
/s/ ROBERT G. LOVE Date: August 4, 1995
- ------------------ --------------
Robert G. Love
<PAGE> 4
THE ACHIEVEMENT FUNDS TRUST
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of The Achievement Funds Trust (the "Trust"), a business trust organized
under the laws of The Commonwealth of Massachusetts, hereby constitutes and
appoints David G. Lee, Kathryn L. Stanton, and Stephen Meyer, and each of them
singly, his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, to sign for him and in his name, place and
stead, and in the capacity indicated below, to sign any or all amendments
(including post-effective amendments) to the Trust's Registration Statement on
Form N-1A under the provisions of the Investment Company Act of 1940 and the
Securities Act of 1933, each such Act as amended, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, acting alone, full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.
/s/ MITCHELL MELICH Date: August 4, 1995
- ------------------- --------------
Mitchell Melich
<PAGE> 5
THE ACHIEVEMENT FUNDS TRUST
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of The Achievement Funds Trust (the "Trust"), a business trust organized
under the laws of The Commonwealth of Massachusetts, hereby constitutes and
appoints David G. Lee, Kathryn L. Stanton, and Stephen Meyer, and each of them
singly, his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, to sign for him and in his name, place and
stead, and in the capacity indicated below, to sign any or all amendments
(including post-effective amendments) to the Trust's Registration Statement on
Form N-1A under the provisions of the Investment Company Act of 1940 and the
Securities Act of 1933, each such Act as amended, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, acting alone, full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.
/s/ CARL S. MINDEN Date: August 4, 1995
- ------------------ --------------
Carl S. Minden
<PAGE> 6
THE ACHIEVEMENT FUNDS TRUST
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of The Achievement Funds Trust (the "Trust"), a business trust organized
under the laws of The Commonwealth of Massachusetts, hereby constitutes and
appoints David G. Lee, Kathryn L. Stanton, and Stephen Meyer, and each of them
singly, his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, to sign for him and in his name, place and
stead, and in the capacity indicated below, to sign any or all amendments
(including post-effective amendments) to the Trust's Registration Statement on
Form N-1A under the provisions of the Investment Company Act of 1940 and the
Securities Act of 1933, each such Act as amended, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, acting alone, full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.
/s/ AUGUST GLISSMEYER, JR. Date: 8/4/95
- -------------------------- ------
August Glissmeyer, Jr.
<PAGE> 7
THE ACHIEVEMENT FUNDS TRUST
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of The Achievement Funds Trust (the "Trust"), a business trust organized
under the laws of The Commonwealth of Massachusetts, hereby constitutes and
appoints David G. Lee, Kathryn L. Stanton, and Stephen Meyer, and each of them
singly, his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, to sign for him and in his name, place and
stead, and in the capacity indicated below, to sign any or all amendments
(including post-effective amendments) to the Trust's Registration Statement on
Form N-1A under the provisions of the Investment Company Act of 1940 and the
Securities Act of 1933, each such Act as amended, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, acting alone, full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.
/s/ BLAINE HUNTSMAN Date: 4/2/97
- ------------------- ------
Blaine Huntsman
<PAGE> 8
THE ACHIEVEMENT FUNDS TRUST
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of The Achievement Funds Trust (the "Trust"), a business trust organized
under the laws of The Commonwealth of Massachusetts, hereby constitutes and
appoints David G. Lee, Kathryn L. Stanton, and Stephen Meyer, and each of them
singly, his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, to sign for him and in his name, place and
stead, and in the capacity indicated below, to sign any or all amendments
(including post-effective amendments) to the Trust's Registration Statement on
Form N-1A under the provisions of the Investment Company Act of 1940 and the
Securities Act of 1933, each such Act as amended, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, acting alone, full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.
/s/ KENT MURDOCH Date: 3/14/97
- ---------------- -------
Kent Murdoch
<PAGE> 9
THE ACHIEVEMENT FUNDS TRUST
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of The Achievement Funds Trust (the "Trust"), a business trust organized
under the laws of The Commonwealth of Massachusetts, hereby constitutes and
appoints David G. Lee, Kathryn L. Stanton, and Stephen Meyer, and each of them
singly, his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, to sign for him and in his name, place and
stead, and in the capacity indicated below, to sign any or all amendments
(including post-effective amendments) to the Trust's Registration Statement on
Form N-1A under the provisions of the Investment Company Act of 1940 and the
Securities Act of 1933, each such Act as amended, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, acting alone, full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.
/s/ JAMES GARDNER Date: March 17, 1997
- ----------------- --------------
James Gardner
<PAGE> 1
EXHIBIT 15(b)
DISTRIBUTION PLAN
[RETAIL B CLASS]
THE ACHIEVEMENT FUNDS TRUST
WHEREAS, THE ACHIEVEMENT FUNDS TRUST (the "Trust") is engaged in
business as an open-end investment company registered under the Investment
Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that the following Distribution Plan will benefit the
Trust and the owners of the Retail Class B shares of beneficial interest
("Shareholders") in its portfolios;
NOW, THEREFORE, the Trustees of the Trust hereby adopt this
Distribution Plan pursuant to Rule 12b-1 under the 1940 Act.
SECTION 1. The Trust has adopted this Retail Class B Distribution Plan
("Plan") to enable the Trust to directly or indirectly bear expenses relating
to the distribution and shareholder servicing of the Retail Class B shares of
the Equity Fund, Balanced Fund, Municipal Bond Fund and Idaho Municipal Bond
Fund of the Trust (each a "Portfolio") of which the Trust is the issuer.
SECTION 2. The Retail Class B shares of each Portfolio are authorized
to pay the principal underwriter of the Trust's Retail Class B shares (the
"Distributor") a distribution fee, calculated and payable monthly, at the
annual rate of up to and including .75% of the value of the average daily net
assets of such class, or such lesser amount as may be established from time to
time by the Trustees of the Trust, in connection with distribution-related
services provided in respect of such class and a shareholder services fee,
calculated and payable monthly, at the annual rate of up to and including .25%
of the value of the average daily net assets of such class, or such lesser
amount as may be established from time to time by the Trustees of the Trust, in
connection with the servicing of shareholder accounts of such class.
SECTION 3.
(a) The Shareholder Servicing fee may be used by the Distributor to
provide compensation for ongoing servicing and/or maintenance
of shareholder accounts with respect to the Retail Class B
shares of the applicable Portfolios of the Trust. Compensation
may be paid by the Distributor to persons, including employees
of the Distributor, and
1
<PAGE> 2
institutions who respond to inquiries of holders of such Retail
Class B shares regarding their ownership of such shares or their
accounts with the Trust or who provide other administrative or
accounting services not otherwise required to be provided by the
Trust's investment adviser, transfer agent or other agent of the
Trust.
(b) The Distribution Fee may be used by the Distributor to provide
initial and ongoing sales compensation to its investment
executives and to other broker-dealers in respect of sales of
Retail Class B shares of the applicable Portfolios of the Trust
and to pay for other advertising and promotional expenses in
connection with the distribution of the Retail Class B shares.
These advertising and promotional expenses include, by way of
example but not by way of limitation, costs of printing and
mailing prospectuses, statements of additional information and
shareholder reports to prospective investors; preparation and
distribution of sales literature; advertising of any type; an
allocation of overhead and other expenses of the Distributor
related to the distribution of such retail class shares; and
payments to, and expenses of, officers, employees or
representatives of the Distributor, of other broker-dealers,
banks or other financial institutions, and of any other persons
who provide support services in connection with the distribution
of such retail class shares, including travel, entertainment,
and telephone expenses.
(c) Payments under the Plan are not tied exclusively to the expenses
for shareholder servicing and distribution related activities
actually incurred by the Distributor, so that such payments may
exceed expenses actually incurred by the Distributor. The
Trust's Board of Trustees will evaluate the appropriateness of
the Plan and its payment terms on a continuing basis and in
doing so will consider all relevant factors, including expenses
borne by the Distributor and amounts it receives under the plan.
(d) The Trust's investment adviser and the Distributor may, at their
option and in their sole discretion, make payments from their
own resources to cover costs of additional distribution and
shareholder servicing activities.
SECTION 4. This Plan shall not take effect with respect to a Portfolio
until it has been approved, together with any related agreements, by votes of
the majority of both (i) the Trustee of the Trust and (ii) the Qualified
Trustees, cast in person at
2
<PAGE> 3
a Board of Trustees meeting called for the purpose of voting on this Plan or
such agreement.
SECTION 5. This Plan shall continue in effect for a period of one year
after it takes effect and for successive one year periods thereafter for so
long as such continuance is specifically approved at least annually in the
manner provided in Section 4 herein for the approval of this Plan.
SECTION 6. Any person authorized to direct the disposition of monies paid
or payable by the Trust pursuant to this Plan or any related agreement shall
provide to the Trustees of the Trust, at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures were made.
SECTION 7. This Plan may be terminated at any time with respect to any
Portfolio by the vote of a majority of the Qualified Trustees or by vote of a
majority of the Portfolio's outstanding retail class voting securities.
SECTION 8. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide (a) that such agreement may be terminated at any time with respect to
any Portfolio, without payment of any penalty, by the vote of a majority of the
Qualified Trustees or by the vote of Shareholders holding a majority of the
Portfolio's outstanding retail class voting securities, on not more than 60
days written notice to any other party to the agreement; and (b) that such
agreement shall terminate automatically in the event of its assignment.
SECTION 9. This Plan may not be amended to increase materially the amount
of distribution expenses permitted pursuant to Section 2 hereof without the
approval of Shareholders holding a majority of the outstanding Retail Class B
voting securities of the applicable Portfolio, and all material amendments to
this Plan shall be approved in the manner provided in Section 4 herein for the
approval of this Plan.
SECTION 10. As used in this Plan, (a) the term "Qualified Trustees" shall
mean those Trustees of the Trust who are not interested persons of the Trust,
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it, and (b) the terms "assignment" and "interested
person" shall have the respective meanings specified in the 1940 Act and the
rules and regulations thereunder, subject to such exemptions as may be granted
by the Securities and Exchange Commission.
3
<PAGE> 4
SECTION 11. While this Plan is in effect, the selection and
nomination of those Trustees who are not interested persons of the Trust within
the meaning of Section 2(a)(19) of the 1940 Act shall be committed to the
discretion of the Trustees then in office who are not interested persons of the
Trust.
SECTION 12. This Plan shall not obligate the Trust or any other party
to enter into an agreement with any particular person.
4
<PAGE> 1
EXHIBIT 18(b)
THE ACHIEVEMENT FUNDS TRUST
RULE 18f-3
MULTIPLE CLASS PLAN
AUGUST 4, 1995
(AS AMENDED FEBRUARY 6, 1998)
INTRODUCTION
The Achievement Funds Trust (the "Trust"), a registered investment
company that currently consists of seven (7) separately managed portfolios (the
Equity Fund, Balanced Fund, Intermediate Term Bond Fund, Short Term Bond Fund,
Short Term Municipal Bond Fund, Idaho Municipal Bond Fund and Municipal Bond
Fund) and that may consist of additional portfolios in the future as listed on
Schedule A hereto (each a "Fund" and, collectively, the "Funds"), have elected
to rely on Rule 18f-3 under the Investment Company Act of 1940, as amended
(the "1940 Act") in offering multiple classes of units of beneficial interest
("shares") in each Fund. This Plan sets forth the differences among classes,
including the differences with respect to shareholder services, distribution
arrangements, expense allocations, and conversion or exchange options.
A. ATTRIBUTES OF SHARE CLASSES
The rights of each existing class of the Funds (i.e., Institutional,
Retail A and Retail B) shall be as set forth in the applicable prospectus,
distribution plan and related resolutions adopted by the Board of Trustees of
the Trust, and incorporated herein by reference.
With respect to any class of shares of a Fund created after the date
hereof, each share of a Fund will represent an equal pro rata interest in the
Fund and will have identical terms and conditions, except that: (i) each new
class will have a different class name (or other designation) that identifies
the class as separate from any other class; (ii) each class will separately
bear any distribution expenses ("distribution fees") in connection with a plan
adopted pursuant to Rule 12b-1 under the 1940 Act (a "Rule 12b-1 Plan"), and
will separately bear any non-Rule 12b-1 Plan service payments ("service fees")
that are made under any servicing agreement entered into with respect to that
class; (iii) each class may bear, consistent with rulings and other published
statements of position by the Internal Revenue Service, the expenses of the
Fund's operations which are directly attributable to such class ("Class
Expenses"); and (iv) shareholders of the class will have exclusive voting
rights regarding the Rule 12b-1 Plan and the servicing agreements relating to
such class, and will have separate voting rights on any matter submitted to
shareholders in which the interests of that class differ from the interests of
any other class.
<PAGE> 2
B. EXPENSE ALLOCATIONS
Expense of each existing class and of each class created after the date
hereof shall be allocated as follows: (i) distribution and shareholder
servicing payments associated with any Rule 12b-1 Plan or servicing agreement
relating to each class of shares are (or will be) borne exclusively by that
class; (ii) any incremental transfer agency fees relating to a particular class
are (or will be) borne exclusively by that class; and (iii) Class Expenses
relating to a particular class are (or will be) borne exclusively by that class.
Until and unless changed by the Board, the methodology and procedures for
calculating the net asset value of the various classes of shares and the proper
allocation of income and expenses among the various classes of shares shall be
as set forth in the "Report" rendered by Arthur Anderson LLP incorporated
herein by reference.
C. AMENDMENT OF PLAN; PERIODIC REVIEW
This Plan must be amended to properly describe (through additional
exhibits hereto or otherwise) each new class of shares approved by the Board
after the date hereof.
The Board of the Trust, including a majority of the independent Trustees,
must periodically review this Plan for its continued appropriateness, and must
approve any material amendment of the Plan as it relates to any class of any
Fund covered by the Plan.
-2-
<PAGE> 3
SCHEDULE A
MULTIPLE CLASS PLAN OF
THE ACHIEVEMENT FUNDS TRUST
Name of Fund
- ------------
Equity Fund (Institutional, Retail A and Retail B Shares)
Balanced Fund (Institutional, Retail and Retail B Shares)
Intermediate Term Bond Fund (Institutional and Retail A Shares)
Short Term Bond Fund (Institutional and Retail A Shares)
Short Term Municipal Bond Fund (Institutional and Retail A Shares)
Idaho Municipal Bond Fund (Institutional, Retail A and Retail B Shares)
Municipal Bond Fund (Institutional, Retail A and Retail B Shares)
THE ACHIEVEMENT FUNDS TRUST
Signature: _____________________________
Name: _____________________________
Title: _____________________________
Date:__________________, 1998
-3-
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<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> JUL-31-1997
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<INVESTMENTS-AT-VALUE> 209705
<RECEIVABLES> 0
<ASSETS-OTHER> 333
<OTHER-ITEMS-ASSETS> 0
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<ACCUMULATED-NET-GAINS> 18346
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 63741
<NET-ASSETS> 210038
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<INTEREST-INCOME> 136
<OTHER-INCOME> 0
<EXPENSES-NET> 843
<NET-INVESTMENT-INCOME> 709
<REALIZED-GAINS-CURRENT> 8550
<APPREC-INCREASE-CURRENT> 28634
<NET-CHANGE-FROM-OPS> 37893
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 636
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<SHARES-REINVESTED> 178
<NET-CHANGE-IN-ASSETS> 28705
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 9796
<OVERDISTRIB-NII-PRIOR> 14
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 686
<INTEREST-EXPENSE> 3
<GROSS-EXPENSE> 962
<AVERAGE-NET-ASSETS> 182261
<PER-SHARE-NAV-BEGIN> 14.03
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 2.96
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
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<EXPENSE-RATIO> .90
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> JUL-31-1997
<INVESTMENTS-AT-COST> 145964
<INVESTMENTS-AT-VALUE> 209705
<RECEIVABLES> 0
<ASSETS-OTHER> 333
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 210038
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
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<PAID-IN-CAPITAL-COMMON> 4305
<SHARES-COMMON-STOCK> 336
<SHARES-COMMON-PRIOR> 292
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<OVERDISTRIBUTION-GAINS> 0
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<NET-CHANGE-FROM-OPS> 37893
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2150
<NUMBER-OF-SHARES-REDEEMED> 1487
<SHARES-REINVESTED> 10
<NET-CHANGE-IN-ASSETS> 28705
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 9796
<OVERDISTRIB-NII-PRIOR> 14
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 686
<INTEREST-EXPENSE> 3
<GROSS-EXPENSE> 962
<AVERAGE-NET-ASSETS> 4658
<PER-SHARE-NAV-BEGIN> 14.04
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> 2.97
<PER-SHARE-DIVIDEND> .04
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.01
<EXPENSE-RATIO> 1.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> JUL-31-1997
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<INVESTMENTS-AT-VALUE> 177713
<RECEIVABLES> 0
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 178922
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
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<SHARES-COMMON-STOCK> 12863
<SHARES-COMMON-PRIOR> 13013
<ACCUMULATED-NII-CURRENT> 143
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6482
<OVERDISTRIBUTION-GAINS> 0
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<INTEREST-INCOME> 2005
<OTHER-INCOME> 0
<EXPENSES-NET> 726
<NET-INVESTMENT-INCOME> 2107
<REALIZED-GAINS-CURRENT> 5239
<APPREC-INCREASE-CURRENT> 16199
<NET-CHANGE-FROM-OPS> 23545
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<DISTRIBUTIONS-OF-INCOME> 1972
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
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<NUMBER-OF-SHARES-REDEEMED> 10607
<SHARES-REINVESTED> 1971
<NET-CHANGE-IN-ASSETS> 19732
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<PER-SHARE-NII> .16
<PER-SHARE-GAIN-APPREC> 1.63
<PER-SHARE-DIVIDEND> .15
<PER-SHARE-DISTRIBUTIONS> 0
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<PER-SHARE-NAV-END> 13.65
<EXPENSE-RATIO> .90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
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<PERIOD-START> FEB-01-1997
<PERIOD-END> JUL-31-1997
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<OTHER-ITEMS-ASSETS> 0
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