<PAGE>
As filed with the Securities and Exchange Commission on March 31, 1999
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
---
Pre-Effective Amendment No.
---- ---
Post-Effective Amendment No. 15 X
---- ---
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
---
Amendment No. 16
----
(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:
Thomas H. Duncan, Esq. Lynda J. Striegel, Esq.
Ballard Spahr Andrews & Ingersoll, LLP SEI Investments Company
1225 17th Street, Suite 2300 Oaks, PA 19456
Denver, CO 80202
Approximate Date of As soon as practicable after
Proposed Public Offering: 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)
---
on (Date) pursuant to paragraph (b)
---
X 60 days after filing pursuant to paragraph (a)(i)
---
on (Date) pursuant to paragraph (a)(i)
---
75 days after filing pursuant to paragraph (a)(ii)
---
on (Date) pursuant to paragraph (a)(ii) of Rule 485
---
The title of the securities being registered is Institutional Class and Retail
Class A shares of the Registrant's Equity Fund, Balanced Fund, Intermediate Term
Bond Fund, Short Term Bond Fund, Municipal Bond Fund, Short Term Municipal Bond
Fund, and Idaho Municipal Bond Fund and Retail Class B shares of the
Registrant's Equity Fund, Balanced Fund, Municipal Bond Fund and Idaho Municipal
Bond Fund.
<PAGE>
ACHIEVEMENT FUNDS TRUST
Retail Shares
Class A and Class B Shares
PROSPECTUS
JUNE 1, 1999
EQUITY FUND
BALANCED FUND
INTERMEDIATE TERM BOND FUND
SHORT TERM BOND FUND
MUNICIPAL BOND FUND
SHORT TERM MUNICIPAL BOND FUND
IDAHO MUNICIPAL BOND FUND
INVESTMENT ADVISER
FIRST SECURITY INVESTMENT MANAGEMENT, INC.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED ANY PORTFOLIO SHARES
OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE.
IT IS A CRIME FOR ANYONE TO TELL YOU OTHERWISE.
Page 1 of 48
<PAGE>
HOW TO READ THIS PROSPECTUS
The Achievement Funds Trust is a mutual fund that offers different classes of
shares in separate investment portfolios (Portfolios). The Portfolios have
individual investment goals and strategies. This prospectus gives you important
information about the Class A and Class B Shares of the Portfolios that you
should know before investing. Only the Equity, Balanced, Municipal Bond and
Idaho Municipal Bond Funds offer Class B Shares. Please read this prospectus
and keep it for future reference.
Class A and Class B Shares have different expenses and other characteristics,
allowing you to choose the class that best suits your needs. You should
consider the amount you want to invest, how long you plan to have it invested,
and whether you plan to make additional investments.
CLASS A SHARES
- Front-end sales charge
- 12b-1 fee
- $1,000 minimum initial investment
CLASS B SHARES
- Contingent deferred sales charge
- Higher 12b-1 fee
- $1,000 minimum initial investment
THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY
REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL
INFORMATION YOU SHOULD KNOW ABOUT THE PORTFOLIOS. FOR MORE DETAILED INFORMATION
ABOUT EACH PORTFOLIO, PLEASE SEE:
Page
EQUITY FUND XXX
BALANCED FUND XXX
INTERMEDIATE TERM BOND FUND XXX
SHORT TERM BOND FUND XXX
MUNICIPAL BOND FUND XXX
SHORT TERM MUNICIPAL BOND FUND XXX
IDAHO MUNICIPAL BOND FUND XXX
MORE INFORMATION ABOUT RISK XXX
EACH PORTFOLIO'S OTHER INVESTMENTS XXX
THE INVESTMENT ADVISER AND PORTFOLIO MANAGERS XXX
PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES XXX
DISTRIBUTION OF PORTFOLIO SHARES XXX
DIVIDENDS, DISTRIBUTIONS AND TAXES XXX
FINANCIAL HIGHLIGHTS XXX
HOW TO OBTAIN MORE INFORMATION ABOUT
THE ACHIEVEMENT FUNDS Back Cover
Page 2 of 48
<PAGE>
INTRODUCTION
Each Portfolio operates as a separate mutual fund. A mutual fund pools
shareholders' money and, using professional investment managers, invests it in
securities.
Each Portfolio has its own investment goal and strategies for reaching that
goal. The investment manager invests the assets of each Portfolio in a way that
it believes will help the Portfolio achieve its goal. Still, investing in a
Portfolio involves risk, as there is no guarantee that a Portfolio will achieve
its goal. An investment manager's judgments about the markets, the economy, or
companies may not anticipate actual market movements, economic conditions or
company performance, and these judgments may affect the return on your
investment. In fact, no matter how good a job an investment manager does, you
could lose money on your investment in a Portfolio, just as you could with other
investments. A Fund share is not a bank deposit and it is not insured or
guaranteed by the FDIC or any government agency.
The value of your investment in a Portfolio is based on the market value of the
securities the Portfolio holds. These prices can change daily due to economic
and other events that affect particular companies and other issuers. These
price movements, sometimes called volatility, may be greater or lesser depending
on the types of securities a Portfolio owns and the markets in which they trade.
The effect on a Portfolio of a change in the value of a single security will
depend on how widely the Portfolio diversifies its holdings.
Page 3 of 48
<PAGE>
EQUITY FUND
PORTFOLIO SUMMARY
Investment Goal Long-term capital appreciation with
current income as a secondary
consideration in selecting securities
Share Price Volatility High
Principal Investment Strategy Investing in a diversified portfolio of
U.S. equity securities
Investor Profile Investors seeking long-term capital
appreciation, who are willing to accept
the risk of share price volatility
INVESTMENT STRATEGY OF THE EQUITY FUND
The Equity Fund invests primarily in common stocks and other equity securities.
The Adviser applies an investment approach that is often referred to as "Growth
at a Price," which emphasizes investment in securities of companies that are
experiencing growth in earnings and whose securities appear attractively priced
based on proprietary valuation methods.
Generally, the Portfolio invests in exchange-traded securities of companies with
market capitalizations in excess of $500 million. The Portfolio is diversified
as to issuers and industries, and emphasizes investments in companies that have
medium and large market capitalization.
PRINCIPAL RISKS OF INVESTING IN THE EQUITY FUND
The Portfolio's investment approach is intended to provide long-term capital
appreciation, which carries with it the potential for price volatility
associated with owning equity securities. The performance of the Portfolio may
differ from the performance of funds that follow a different investment
approach. Examples of different investment approaches include indexing,
applying a different style-specific strategy (E.G., momentum investing), or
investing in different asset classes.
Since it purchases equity securities, the Portfolio is subject to the risk that
stock prices will fall over short or extended periods of time. Historically,
the equity markets have moved in cycles, and the value of the Portfolio's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response which could result in a decline in the value of the
Portfolio's shares. These factors contribute to price volatility, which is the
principal risk of investing in the Portfolio. In addition, during periods of
particularly volatile market conditions, the Portfolio may not be able to buy or
sell securities at favorable prices, and the Portfolio may experience losses.
Page 4 of 48
<PAGE>
The Portfolio is subject to the risk that its market segment, mid and large cap
equity securities, may underperform other market segments or the equity markets
as a whole. The Adviser also may not be able to match the performance of the
index which is compared to the Portfolio's total return below.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provides some indication of the risks of an investment
in the Portfolio. Of course, past performance does not necessarily indicate how
the Portfolio will perform in the future.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
This bar chart shows changes in the performance of the Portfolio's Class A
Shares from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below:
<TABLE>
<S> <C>
1996 16.14%
1997 27.39%
1998 18.06%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
23.04% -14.32%
(12/31/98) (9/30/98)
</TABLE>
The Portfolio's performance from 1/1/99 to 3/31/99 was 18.06%.
This table compares the Portfolio's average annual total returns for the periods
ending December 31, 1998 to those of the Composite Index.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE
INCEPTION
-------------------------------------------------------------
<S> <C> <C>
Equity Fund
Composite Index
</TABLE>
The Class B Shares opened to investors on May 8, 1998 and did not have a full
calendar year of performance information at the time this prospectus was
printed.
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. Unlike a mutual fund, an
index does not have an investment adviser and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower.
Page 5 of 48
<PAGE>
PORTFOLIO FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES THAT YOU MAY PAY IF YOU PURCHASE OR SELL PORTFOLIO
SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
PORTFOLIO.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) 4.50% None
Imposed on Purchases
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a None 5.00%
percentage of net asset value)
</TABLE>
MUTUAL FUNDS INCUR EXPENSES TO PAY FOR ADVISORY, SHAREHOLDER, DISTRIBUTION,
ADMINISTRATION AND CUSTODY SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS
TABLE DESCRIBES THE HIGHEST FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU
HOLD SHARES OF THE PORTFOLIO.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.74% 0.74%
Distribution and Service (12b-1) Fees 0.25% 1.00%
Other Expenses .XX% .XX%
----- -----
Total Annual Portfolio Operating Expenses X.XX% X.XX%
</TABLE>
THE PORTFOLIO'S TOTAL ACTUAL ANNUAL OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER IS WAIVING
A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME.
WITH THESE FEE WAIVERS, THE PORTFOLIO'S ACTUAL TOTAL OPERATING EXPENSES ARE AS
FOLLOWS:
<TABLE>
<CAPTION>
<S> <C>
EQUITY FUND - CLASS A 1.15%
EQUITY FUND - CLASS B 1.90%
</TABLE>
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER" AND
"DISTRIBUTION OF PORTFOLIO SHARES."
Page 6 of 48
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and
Portfolio expenses remain the same. Although your actual costs and returns
might be different, your approximate costs of investing $10,000 in the Portfolio
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $____ $____ $____ $____
Class B Shares $____ $____ $____ $____
</TABLE>
Page 7 of 48
<PAGE>
BALANCED FUND
PORTFOLIO SUMMARY
Investment Goal Total return consisting of capital
appreciation and current income
consistent with prudent investment
risk
Share Price Volatility Medium
Principal Investment Strategy Investing in a diversified
portfolio of U.S. equity securities
and investment grade fixed income
securities
Investor Profile Investors seeking total return who
are willing to accept moderate
level of share price volatility
INVESTMENT STRATEGY OF THE BALANCED FUND
The Balanced Fund invests in a combination of equity and fixed income
securities. The Adviser employs an investment strategy intended to provide long
term capital appreciation with some current income. The Portfolio's fixed
income security holdings should make the value of its shares less volatile than
those of the Equity Fund, but may produce a lower total return than if the
Portfolio were fully invested in equity securities.
Over time, the Portfolio ordinarily will invest approximately 60% of its assets
in equity securities, although the percentage of assets invested in such
securities may be as low as 25% or as high as 75%. When acquiring equity
securities for the Portfolio, the Adviser will focus on exchange-traded
securities of companies with market capitalizations in excess of $500 million.
The Adviser will apply an investment approach in selecting equity securities
that is often referred to as "Growth at a Price," which emphasizes investments
in securities of companies experiencing growth in earnings and whose securities
appear attractively priced based upon proprietary valuation methods.
Over time, the Portfolio will ordinarily invest approximately 40% of its assets
in investment grade fixed income securities, including mortgage-backed
securities, although the percentage of assets invested in such securities may be
as low as 25% or as high as 75%. In selecting fixed income securities for the
Portfolio, the Adviser focuses principally on intermediate maturity obligations
having a weighted average maturity at three to ten years. Investment grade
fixed income securities are those rated at the time of investment in one of the
four highest rating categories by a major rating agency, or determined by the
Adviser to be of equivalent quality. The Portfolio will not invest more than
20% of its assets allocated to fixed income securities in securities rated in
the lowest category of investment grade ratings.
Page 8 of 48
<PAGE>
The Portfolio will also invest in money market instruments for asset allocation
and cash management purposes. Money market instruments include short term
securities issued by the United States, commercial paper and certficates of
deposit.
PRINCIPAL RISKS OF INVESTING IN THE BALANCED FUND
The performance of the Portfolio will reflect the Adviser's success in selecting
particular equity, fixed income and money market securities, as well as the
Adviser's success in allocating Portfolio investments between these asset
classes. The performance of the Portfolio's equity investments may differ from
the performance of funds that follow a different investment approach. Examples
of different investment approaches include indexing and applying a different
style-specific strategy (E.G., momentum investing). The Portfolio's fixed
income approach, with its emphasis on fixed income securities of intermediate
maturity, may experience greater price volatility in response to interest rate
changes than Portfolios that own similar securities with shorter maturities.
Since it purchases equity securities, the Portfolio is subject to the risk that
stock prices will fall over short or extended periods of time. Historically,
the equity markets have moved in cycles, and the value of the Portfolio's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response which could result in a decline in the value of the
Portfolio's shares. These factors contribute to price volatility, which is the
principal risk of investing in the Portfolio.
The prices of the Portfolio's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Portfolio's fixed income securities will decrease in value if
interest rates rise and vice versa, and the volatility of lower rated securities
is often greater than that of higher rated securities. Longer-term securities
are generally more volatile, so the average maturity or duration of these
securities affects risk. During periods of particularly volatile market
conditions, the Portfolio may not be able to buy or sell securities at favorable
prices, and the Portfolio may experience losses.
There may be economic or industry changes that impact the ability of the bond
issuers to repay principal and make interest payments on their bonds. Changes
in the financial condition or credit ratings of individual issuers may also
adversely affect the value of the Portfolio's fixed-income securities.
The Portfolio is subject to the risk that its market segments, intermediate term
fixed income and mid and large cap equity securities, may underperform other
equity or fixed income market segments or the equity or fixed income markets as
a whole. The Adviser may also not be able to match the performance of the
index which is compared to the Portfolio's total return below.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provides some indication of the risks of an investment
in the Portfolio. Of course, past performance does not necessarily indicate how
the Portfolio will perform in the future.
Page 9 of 48
<PAGE>
The performance of Class A and Class B Shares will differ due to differences in
expenses.
This bar chart shows changes in the performance of the Portfolio's Class A
Shares from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
<TABLE>
<S> <C>
1996 9.90%
1997 19.59%
1998 13.27%
BEST QUARTER WORST QUARTER
14.19% -8.61%
(12/31/98) (9/30/98)
</TABLE>
The Portfolio's performance from 1/1/99 to 3/31/99 was 13.27%.
This table compares the Portfolio's average annual total returns for the periods
ending December 31, 1998 to those of the Composite Index.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Balanced Fund
Composite Index
</TABLE>
The Class B Shares opened to investors on May 8, 1998 and did not have a full
calendar year of performance information at the time this prospectus was
printed.
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. Unlike a mutual fund, an
index does not have an investment adviser and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower.
PORTFOLIO FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES THAT YOU MAY PAY IF YOU PURCHASE OR SELL PORTFOLIO
SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
PORTFOLIO.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 4.50% None
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a None 5.00%
percentage of net asset value)
</TABLE>
Page 10 of 48
<PAGE>
MUTUAL FUNDS INCUR EXPENSES TO PAY FOR ADVISORY, SHAREHOLDER, DISTRIBUTION,
ADMINISTRATION AND CUSTODY SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS
TABLE DESCRIBES THE HIGHEST FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU
HOLD SHARES OF THE PORTFOLIO.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.74% 0.74%
Distribution and Service (12b-1) Fees 0.25% 1.00%
Other Expenses .XX% .XX%
---- ----
Total Annual Portfolio Operating X.XX% X.XX%
Expenses
</TABLE>
THE PORTFOLIO'S TOTAL ACTUAL ANNUAL OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER IS WAIVING
A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME.
WITH THESE FEE WAIVERS, THE PORTFOLIO'S ACTUAL TOTAL OPERATING EXPENSES ARE AS
FOLLOWS:
<TABLE>
<S> <C>
BALANCED FUND - CLASS A 1.15%
BALANCED FUND - CLASS B 1.90%
</TABLE>
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER " AND
"DISTRIBUTION OF PORTFOLIO SHARES."
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and
Portfolio expenses remain the same. Although your actual costs and returns
might be different, your approximate costs of investing $10,000 in the Portfolio
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $____ $____ $____ $____
Class B Shares $____ $____ $____ $____
</TABLE>
Page 11 of 48
<PAGE>
INTERMEDIATE TERM BOND FUND
PORTFOLIO SUMMARY
Investment Goal Current income consistent with prudent
investment risk and liquidity
Share Price Volatility Medium
Principal Investment Strategy Investing in a portfolio of investment
grade fixed income securities, while
maintaining a dollar-weighted average
maturity of between three and ten
years
Investor Profile Investors seeking current income who
are willing to accept the risks of
investing in fixed income securities
INVESTMENT STRATEGY OF THE INTERMEDIATE TERM BOND FUND
The Intermediate Term Bond Fund invests primarily in investment grade fixed
income securities issued by the U.S. government, its agencies and
instrumentalities, and corporate issuers. The Portfolio may invest up to 40% of
its assets in a combination of U.S. dollar denominated bonds of foreign issuers,
mortgage-backed securities, asset-backed securities and floating or variable
rate corporate debt instruments. The Portfolio maintains an average maturity
between three and ten years; however, there is no limit on the maximum maturity
for a particular investment.
Investment grade fixed income securities are those rated at the time of
investment in one of the four highest rating categories by a major rating
agency, or determined by the Adviser to be of equivalent quality. The Portfolio
will not invest more than 20% of its assets in fixed income securities rated in
the lowest category of investment grade securities.
The Adviser's strategy for the Portfolio is intended to provide relatively
stable current income, a competitive current yield and reasonable principal
volatility. The fixed income securities held by the Portfolio may also have the
potential for moderate price appreciation.
PRINCIPAL RISKS OF INVESTING IN THE INTERMEDIATE TERM BOND FUND
The Portfolio's investment approach, with its emphasis on fixed income
securities of intermediate maturity, may experience greater price volatility
than funds that invest in similar quality securities with shorter maturities.
The prices of the Portfolio's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Portfolio's fixed income securities will
Page 12 of 48
<PAGE>
decrease in value if interest rates rise and vice versa, and the volatility of
lower rated securities is often greater than that of higher rated securities.
Longer-term securities are generally more volatile, so the average maturity or
duration of these securities affects risk. During periods of particularly
volatile market conditions, the Portfolio may not be able to buy or sell
securities at favorable prices, and the Portfolio may experience losses.
The Portfolio is subject to the risk that its market segment, intermediate term
fixed income securities, may underperform other fixed income market segments or
the fixed income markets as a whole. The Adviser also may not be able to match
the performance of the index which is compared to the Portfolio's total
return below.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provides some indication of the risks of an investment
in the Portfolio. Of course, past performance does not necessarily indicate how
the Portfolio will perform in the future.
This bar chart shows changes in the performance of the Portfolio's Class A
Shares from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
<TABLE>
<S> <C>
1996 2.27%
1997 7.28%
1998 7.96%
BEST QUARTER WORST QUARTER
4.60% -1.69%
(9/30/98) (3/31/96)
</TABLE>
The Portfolio's performance from 1/1/99 to 3/31/99 was 7.96%.
This table compares the Portfolio's average annual total returns for the periods
ending December 31, 1998 to those of the Lehman Intermediate Government
Corporate Bond Index.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Intermediate Term Bond Fund
Lehman Intermediate Government Corporate Bond Index
</TABLE>
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. Unlike a mutual fund, an
index does not have an investment adviser
Page 13 of 48
<PAGE>
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
PORTFOLIO FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES THAT YOU MAY PAY IF YOU PURCHASE OR SELL PORTFOLIO
SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
PORTFOLIO.
<TABLE>
<CAPTION>
CLASS A SHARES
- --------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases 3.50%
(as a percentage of offering price)
</TABLE>
MUTUAL FUNDS INCUR EXPENSES TO PAY FOR ADVISORY, SHAREHOLDER, DISTRIBUTION,
ADMINISTRATION AND CUSTODY SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS
TABLE DESCRIBES THE HIGHEST FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU
HOLD SHARES OF THE PORTFOLIO.
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------
<S> <C>
Investment Advisory Fees 0.60%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses .XX%
----
Total Annual Portfolio Operating Expenses X.XX%
</TABLE>
THE PORTFOLIO'S TOTAL ACTUAL ANNUAL OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER IS WAIVING
A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME.
WITH THESE FEE WAIVERS, THE PORTFOLIO'S ACTUAL TOTAL OPERATING EXPENSES ARE AS
FOLLOWS:
<TABLE>
<S> <C>
INTERMEDIATE TERM BOND FUND - CLASS A 1.00%
</TABLE>
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER" AND
"DISTRIBUTION OF PORTFOLIO SHARES."
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and
Portfolio expenses remain the same. Although your actual costs and returns
might be different, your approximate costs of investing $10,000 in the Portfolio
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $____ $____ $____ $____
</TABLE>
Page 14 of 48
<PAGE>
SHORT TERM BOND FUND
PORTFOLIO SUMMARY
Investment Goal Current income with preservation of
principal and liquidity
Share Price Volatility Low
Principal Investment Strategy Investing in a portfolio of high
quality, fixed income securities,
while maintaining a dollar-weighted
average maturity of less than two
years
Investor Profile Investors seeking to preserve
principal and earn current income
INVESTMENT STRATEGY OF THE SHORT TERM BOND FUND
The Short Term Bond Fund invests primarily in fixed income securities issued by
the U.S. government, its agencies and instrumentalities, and corporate issuers.
The Portfolio may invest up to 30% of its assets in a combination of U.S. dollar
denominated bonds of foreign issuers, mortgage-backed securities, asset-backed
securities, and floating or variable rate corporate debt instruments. The
Portfolio maintains an average maturity of less than two years and individual
Portfolio investments will have a maximum maturity of five years.
The Portfolio invests only in fixed income securities rated at the time of
investment in one of the three highest rating categories by a major rating
agency, or determined by the Adviser to be of equivalent quality.
PRINCIPAL RISKS OF INVESTING IN THE SHORT TERM BOND FUND
The Portfolio's investment approach, with its emphasis on short term, high
quality fixed income securities, is expected to preserve principal and produce
current income. The Portfolio's investments should experience less price
volatility in response to interest rate changes than funds that invest in
similar securities with longer maturities, but will have less potential for
greater income or capital gain.
The prices of the Portfolio's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Portfolio's fixed income securities will decrease in value if
interest rates rise and vice versa, and the volatility of lower rated securities
is
Page 15 of 48
<PAGE>
often greater than that of higher rated securities. Longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk. During periods of particularly volatile market conditions, the
Portfolio may not be able to buy or sell securities at favorable prices, and the
Portfolio may experience losses.
The Portfolio is subject to the risk that its market segment, short term fixed
income securities, may underperform other fixed income markets segments or the
fixed income markets as a whole. The Adviser also may not be able to match the
performance of the index which is compared to the Portfolio's total return
below.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provides some indication of the risks of an investment
in the Portfolio. Of course, past performance does not necessarily indicate how
the Portfolio will perform in the future.
This bar chart shows changes in the performance of the Portfolio's Class A
Shares from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
<TABLE>
<S> <C>
1996 4.36%
1997 5.55%
1998 5.47%
BEST QUARTER WORST QUARTER
2.13% 0.65%
(9/30/98) (3/31/96)
</TABLE>
The Portfolio's performance from 1/1/99 to 3/31/99 was 5.47%.
This table compares the Portfolio's average annual total returns for the periods
ending December 31, 1998 to those of the Salomon 1-3 Year Treasury/Government
Sponsored Corporate Index.
<TABLE>
<CAPTION>
SINCE
CLASS A SHARES 1 YEAR INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Short Term Bond Fund
Salomon 1-3 Year Treasury/Government Sponsored
Corporate Index
</TABLE>
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. Unlike a mutual fund, an
index does not have an investment adviser and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower.
Page 16 of 48
<PAGE>
PORTFOLIO FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES THAT YOU MAY PAY IF YOU PURCHASE OR SELL PORTFOLIO
SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
PORTFOLIO.
<TABLE>
<CAPTION>
CLASS A
SHARES
- --------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a 1.50%
percentage of offering price)
</TABLE>
MUTUAL FUNDS INCUR EXPENSES TO PAY FOR ADVISORY, SHAREHOLDER, DISTRIBUTION,
ADMINISTRATION AND CUSTODY SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS
TABLE DESCRIBES THE HIGHEST FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU
HOLD SHARES OF THE PORTFOLIO.
<TABLE>
<CAPTION>
CLASS A SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.60%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses .XX%
-----
Total Annual Portfolio Operating Expenses X.XX%
</TABLE>
THE PORTFOLIO'S TOTAL ACTUAL ANNUAL OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER IS WAIVING
A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME.
WITH THESE FEE WAIVERS, THE PORTFOLIO'S ACTUAL TOTAL OPERATING EXPENSES ARE AS
FOLLOWS:
<TABLE>
<S> <C>
SHORT TERM BOND FUND - CLASS A 1.00%
</TABLE>
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER" AND
"DISTRIBUTION OF PORTFOLIO SHARES."
Page 17 of 48
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and
Portfolio expenses remain the same. Although your actual costs and returns
might be different, your approximate costs of investing $10,000 in the Portfolio
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $____ $____ $____ $____
</TABLE>
Page 18 of 48
<PAGE>
MUNICIPAL BOND FUND
PORTFOLIO SUMMARY
Investment Goal As high a level of current income
exempt from federal income taxes as is
consistent with preservation of
capital
Share Price Volatility Moderate
Principal Investment Strategy Investing in a diversified portfolio
of investment grade municipal
obligations
Investor Profile Investors seeking tax-exempt current
income who are willing to accept
moderate share price volatility
INVESTMENT STRATEGY OF THE MUNICIPAL BOND FUND
The Municipal Bond Fund invests primarily in municipal securities issued by U.S.
states, territories, possessions and political subdivisions, the interest from
which is exempt from federal income taxes. The Portfolio will not invest more
than 20% of its assets in securities which pay interest subject to the
alternative minimum tax.
The Portfolio invests only in municipal securities that are investment grade.
Investment grade municipal bonds are those rated at the time of investment in
one of the four highest rating categories by a major rating agency, or
determined by the Adviser to be of equivalent quality. The Portfolio will not
invest more than 20% of its assets in municipal bonds rated in the lowest
category of investment grade ratings. The Portfolio will not invest more than
15% of its assets in obligations of issuers located in any single state,
territory or possession. The Adviser's approach in selecting municipal
securities for the Portfolio is to obtain as high a level of income as is
consistent with moderate share price volatility. There is no restriction on the
Portfolio's average weighted maturity or on the maturity of any single security
held by the Portfolio.
PRINCIPAL RISKS OF INVESTING IN THE MUNICIPAL BOND FUND
The Portfolio's investment approach is expected to provide current tax-exempt
income with moderate price volatility. The Portfolio is not expected to perform
as well as a taxable bond portfolio, but return to shareholders may be as good
or better on an after-tax basis.
The prices of the Portfolio's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Portfolio's fixed income securities will decrease in value if
interest rates rise and vice versa, and the volatility of lower rated securities
is often greater than that of higher rated securities. Longer-term securities
are generally more
Page 19 of 48
<PAGE>
volatile, so the average maturity or duration of these securities affects risk.
During periods of particularly volatile market conditions, the Portfolio may not
be able to buy or sell securities at favorable prices, and the Portfolio may
experience losses.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Portfolio's securities.
The Portfolio is subject to the risk that its emphasis on current income and
moderate price volatility may cause it to underperform other fixed income funds
that pursue other objectives or the fixed income markets as a whole. The
Adviser also may not be able to match the performance of the index which is
compared to the Portolio's total return below.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provides some indication of the risks of an investment
in the Portfolio. Of course, past performance does not necessarily indicate how
the Portfolio will perform in the future.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
This bar chart shows changes in the performance of the Portfolio's Class A
Shares from year to year.
<TABLE>
<S> <C>
1997 8.74%
1998 5.58%
BEST QUARTER WORST QUARTER
3.47% -0.75%
(6/30/97) (3/31/97)
</TABLE>
The Portfolio's performance from 1/1/99 to 3/31/99 was 5.58%.
This table compares the Portfolio's average annual total returns for the periods
ending December 31, 1998 to those of the Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Municipal Bond Fund
Lehman Municipal Bond Index
</TABLE>
The Class B Shares opened to investors on May 8, 1998 and did not have a full
calendar year of performance information at the time this prospectus was
printed.
Page 20 of 48
<PAGE>
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. Unlike a mutual fund, an
index does not have an investment adviser and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower.
PORTFOLIO FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES THAT YOU MAY PAY IF YOU PURCHASE OR SELL PORTFOLIO
SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
PORTFOLIO.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on 4.00% None
Purchases (as a percentage of offering
price)
Maximum Deferred Sales Charge (Load) (as None 5.00%
a percentage of net asset value)
</TABLE>
MUTUAL FUNDS INCUR EXPENSES TO PAY FOR ADVISORY, SHAREHOLDER, DISTRIBUTION,
ADMINISTRATION AND CUSTODY SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS
TABLE DESCRIBES THE HIGHEST FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU
HOLD SHARES OF THE PORTFOLIO.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
----------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.60% 0.60%
Distribution and Service (12b-1) 0.25% 1.00%
Fees
Other Expenses X.XX% X.XX%
---- ----
Total Annual Portfolio Operating X.XX% X.XX%
Expenses
</TABLE>
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
Page 21 of 48
<PAGE>
THE PORTFOLIO'S TOTAL ACTUAL ANNUAL OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER AND
DISTRIBUTOR ARE WAIVING A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING
EXPENSES AT A SPECIFIED LEVEL. THE ADVISER AND DISTRIBUTOR MAY DISCONTINUE ALL
OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE FEE WAIVERS, THE PORTFOLIO'S
ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
<TABLE>
<S> <C>
MUNICIPAL BOND FUND - CLASS A 1.00%
MUNICIPAL BOND FUND - CLASS B 1.65%
</TABLE>
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER" AND
"DISTRIBUTION OF PORTFOLIO SHARES."
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and
Portfolio expenses remain the same. Although your actual costs and returns
might be different, your approximate costs of investing $10,000 in the Portfolio
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $____ $____ $____ $____
Class B Shares $____ $____ $____ $____
</TABLE>
Page 22 of 48
<PAGE>
SHORT TERM MUNICIPAL BOND FUND
PORTFOLIO SUMMARY
Investment Goal As high a level of current income
exempt from federal income taxes as is
consistent with preservation of
capital
Share Price Volatility Low
Principal Investment Strategy Investing in a portfolio of investment
grade municipal obligations with a
dollar weighted average maturity of
less than three years
Investor Profile Investors seeking tax-exempt current
income with limited share price
volatility
INVESTMENT STRATEGY OF THE SHORT TERM MUNICIPAL BOND FUND
The Short Term Municipal Bond Fund invests primarily in municipal securities
issued by U.S. States, territories and possessions and their political
subdivisions the interest from which is exempt from federal income taxes. The
Portfolio will not invest in securities which pay interest subject to the
alternative minimum tax. The Portfolio maintains an average maturity of less
than three years and individual Portfolio investments will have a maximum
maturity of seven years.
The Portfolio invests only in municipal securities that are investment grade.
Investment grade municipal bonds are those rated at the time of investment in
one of the four highest rating categories by a major rating agency, or
determined by the Adviser to be of equivalent quality. The Portfolio will not
invest more than 20% of its assets in municipal bonds rated in the lowest
category of investment grade securities.
PRINCIPAL RISKS OF INVESTING IN THE SHORT TERM MUNICIPAL BOND FUND
The Portfolio's investment approach, with its emphasis on short-term municipal
obligations, is expected to provide current tax-exempt income with less price
volatility in response to interest rate changes than funds that invest in
similar securities with longer maturities. The Portfolio is not expected to
perform as well as a taxable short-term bond Portfolio, but return to
shareholders may be as good or better on an after-tax basis.
The prices of the Portfolio's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Portfolio's fixed income securities will decrease in value if
interest rates rise and vice versa, and the volatility of lower rated securities
is often greater than that of higher rated securities. Longer-term securities
are generally more
Page 23 of 48
<PAGE>
volatile, so the average maturity or duration of these securities affects risk.
During periods of particularly volatile market conditions, the Portfolio may not
be able to buy or sell securities at favorable prices, and the Portfolio may
experience losses.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Portfolio's securities.
The Portfolio is subject to the risk that its market segment, short term
municipal securities may underperform other fixed income market segments or the
fixed income markets as a whole. The Adviser also may not be able to match the
performance of the index which is compared to the Portfolio's total return
below.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provides some indication of the risks of an investment
in the Portfolio. Of course, past performance does not necessarily indicate how
the Portfolio will perform in the future.
This bar chart shows changes in the performance of the Portfolio's Class A
Shares from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
<TABLE>
<S> <C>
1996 2.96%
1997 3.98%
1998 3.70%
BEST QUARTER WORST QUARTER
1.40% 0.18%
(9/30/98) (3/31/97)
</TABLE>
The Portfolio's performance from 1/1/99 to 3/31/99 was 3.70%.
This table compares the Portfolio's average annual total returns for the periods
ending December 31, 1998 to those of the Lehman 1 Year Municipal Bond Index.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Short Term Municipal Bond Fund
Lehman 1 Year Municipal Bond Index
</TABLE>
Page 24 of 48
<PAGE>
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. Unlike a mutual fund, an
index does not have an investment adviser and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower.
PORTFOLIO FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES THAT YOU MAY PAY IF YOU PURCHASE OR SELL PORTFOLIO
SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
PORTFOLIO.
<TABLE>
<CAPTION>
CLASS A SHARES
- --------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as 1.50%
a percentage of offering price)
</TABLE>
MUTUAL FUNDS INCUR EXPENSES TO PAY FOR ADVISORY, SHAREHOLDER, DISTRIBUTION,
ADMINISTRATION AND CUSTODY SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS
TABLE DESCRIBES THE HIGHEST FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU
HOLD SHARES OF THE PORTFOLIO.
<TABLE>
<CAPTION>
CLASS A SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.60%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses .XX%
-----
Total Annual Portfolio Operating Expenses X.XX%
</TABLE>
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
THE PORTFOLIO'S TOTAL ACTUAL ANNUAL OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER IS WAIVING
A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME.
WITH THESE FEE WAIVERS, THE PORTFOLIO'S ACTUAL TOTAL OPERATING EXPENSES ARE AS
FOLLOWS:
<TABLE>
<S> <C>
SHORT TERM MUNICIPAL BOND FUND -CLASS A 1.00%
</TABLE>
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER" AND
"DISTRIBUTION OF PORTFOLIO SHARES."
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and
Portfolio expenses remain the same. Although your actual costs and returns
might be different, your approximate costs of investing $10,000 in the Portfolio
would be:
Page 25 of 48
<PAGE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $____ $____ $____ $____
</TABLE>
Page 26 of 48
<PAGE>
IDAHO MUNICIPAL BOND FUND
PORTFOLIO SUMMARY
Investment Goal High current income exempt from federal
and Idaho income taxes
Share Price Volatility Moderate
Principal Investment Strategy Investing in a focused portfolio of
investment grade municipal bonds
Investor Profile Investors seeking tax-exempt current
income, who are willing to accept some
degree of share price volatility
INVESTMENT STRATEGY OF THE IDAHO MUNICIPAL BOND FUND
The Idaho Municipal Bond Fund invests primarily in municipal securities issued
by the State of Idaho and its cities, counties and political subdivisions, the
interest from which is exempt from federal and Idaho income taxes. The
Portfolio may also invest in the municipal bonds of other U.S. States,
territories and possessions and their political subdivisions. The Portfolio
will not invest more than 20% of its assets in securities which pay interest
subject to the alternative minimum tax.
The Portfolio invests only in municipal bonds that are investment grade.
Investment grade municipal bonds are those rated at the time of investment in
one of the four highest rating categories by a major rating agency, or
determined by the Adviser to be of equivalent quality. The Portfolio will not
invest more than 20% of its assets in municipal bonds rated in the lowest
category of investment grade ratings. There is no restriction on the
Portfolio's average weighted maturity or on the maturity of any single security
held by the Portfolio.
PRINCIPAL RISKS OF INVESTING IN THE IDAHO MUNICIPAL BOND FUND
The Portfolio's investment approach, with its emphasis on municipal bonds, is
expected to provide current tax-exempt income with moderate risk to principal.
The Portfolio is not expected to perform as well as a taxable bond Portfolio,
but return to shareholders may be as good or better on an after-tax basis.
The prices of the Portfolio's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Portfolio's fixed income securities will decrease in value if
interest rates rise and vice versa, and the volatility of lower rated securities
is often greater than that of higher rated securities. Longer-term securities
are generally more
Page 27 of 48
<PAGE>
volatile, so the average maturity or duration of these securities affects risk.
During periods of particularly volatile market conditions, the Portfolio may not
be able to buy or sell securities at favorable prices, and the Portfolio may
experience losses.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Portfolio's securities.
The Portfolio's concentration of investments in securities of issuers located in
a single state subjects the Portfolio to economic and government policies of
that state. In addition, the Portfolio is non-diversified, which means that it
may invest in the securities of relatively few issuers. As a result, the
Portfolio may be more susceptible to a single adverse economic, political or
regulatory occurrence affecting one or more of these issuers, and may experience
increased volatility due to its investments in those securities.
The Portfolio is subject to the risk that its market segment, Idaho municipal
securities, may underperform the municipal securities of issuers in other states
or the fixed income markets as a whole. The Adviser also may not be able to
match the performance of the index which is compared to the Portfolio's total
return below.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provides some indication of the risks of an investment
in the Portfolio. Of course, past performance does not necessarily indicate how
the Portfolio will perform in the future.
The performance of Class A and Class B Shares will differ due to differences in
expenses from year to year.
This bar chart shows changes in the performance of the Portfolio's Class A
Shares from year to year.
<TABLE>
<S> <C>
1996 1.79%
1997 7.93%
1998 5.16%
BEST QUARTER WORST QUARTER
3.44% -1.33%
(6/30/97) (3/31/96)
</TABLE>
The Portfolio's performance from 1/1/99 to 3/31/99 was 5.16%.
This table compares the Portfolio's average annual total returns for the periods
ending December 31, 1998 to those of the Lehman 10 Year Municipal Bond Index.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Idaho Municipal Bond Fund
Lehman 10 Year Municipal Bond Index
</TABLE>
Page 28 of 48
<PAGE>
The Class B Shares opened to investors on May 8, 1998 and did not have a full
calendar year of performance information at the time this prospectus was
printed.
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. Unlike a mutual fund, an
index does not have an investment adviser and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower.
PORTFOLIO FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES THAT YOU MAY PAY IF YOU PURCHASE OR SELL PORTFOLIO
SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
PORTFOLIO.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on 4.00% None
Purchases (as a percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a None 5.00%
percentage of net asset value)
</TABLE>
MUTUAL FUNDS INCUR EXPENSES TO PAY FOR ADVISORY, SHAREHOLDER, DISTRIBUTION,
ADMINISTRATION AND CUSTODY SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS
TABLE DESCRIBES THE HIGHEST FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU
HOLD SHARES OF THE PORTFOLIO.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.60% 0.60%
Distribution and Service (12b-1) 0.25% 1.00%
Fees
Other Expenses .XX% .XX%
---- ----
Total Annual Fund Operating X.XX% X.XX%
Expenses
</TABLE>
THE PORTFOLIO'S TOTAL ANNUAL OPERATING EXPENSES FOR THE MOST RECENT FISCAL YEAR
WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER AND DISTRIBUTOR ARE
EACH WAIVING A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT
A SPECIFIED LEVEL. THE ADVISER AND DISTRIBUTOR MAY DISCONTINUE ALL OR PART OF
THESE WAIVERS AT ANY TIME. WITH THESE FEE WAIVERS, THE PORTFOLIO'S ACTUAL TOTAL
OPERATING EXPENSES ARE AS FOLLOWS:
<TABLE>
<S> <C>
IDAHO MUNICIPAL BOND FUND -CLASS A 1.00%
IDAHO MUNICIPAL BOND FUND -CLASS B 1.65%
</TABLE>
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER" AND
"DISTRIBUTION OF PORTFOLIO SHARES."
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
Page 29 of 48
<PAGE>
The Example also assumes that each year your investment has a 5% return and
Portfolio expenses remain the same. Although your actual costs and returns
might be different, your approximate costs of investing $10,000 in the Portfolio
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $____ $____ $____ $____
Class B Shares $____ $____ $____ $____
</TABLE>
Page 30 of 48
<PAGE>
MORE INFORMATION ABOUT RISK
EQUITY RISK - Investments in equity securities Equity Fund
and equity derivatives in general are subject
to market risks that may cause their prices to Balanced Fund
fluctuate over time. The value of securities
of individual companies may fluctuate based
upon performance of the company and industry as
well as economic trends and developments.
Fluctuations in the value of equity securities
in which a mutual fund invests will cause a
Portfolio's net asset value to fluctuate. An
investment in a portfolio of equity securities
may be more suitable for long-term investors
who can bear the risk of these share price
fluctuations.
FIXED INCOME RISK - The market value of fixed Balanced Fund
income investments changes in response to
interest rate changes and other factors. Intermediate Term Bond Fund
During periods of falling interest rates, the
values of outstanding fixed income securities Short Term Bond Fund
generally rise and during periods of rising
interest rates, the value of those securities Municipal Bond Fund
falls. While securities with longer maturities
tend to produce higher yields, the prices of Short Term Municipal Bond Fund
longer maturity securities are also subject to
greater market fluctuations as a result of Idaho Municipal Bond Fund
changes in interest rates. In addition to
these fundamental risks, different types of
fixed income securities may be subject to the
following additional risks:
CALL RISK - During periods of falling
interest rates, certain debt
obligations with high interest rates
may be prepaid (or "called") by the
issuer prior to maturity. This may
cause a Portfolio's average weighted
maturity to fluctuate, and may
require a Portfolio to invest the
resulting proceeds at lower interest
rates.
CREDIT RISK - The possibility that an
issuer will be unable to make timely
payments of either principal or
interest.
EVENT RISK - Securities may suffer
declines in credit quality and market
value due to issuer restructurings or
other factors. This risk should be
reduced because of the Portfolio's
multiple holdings.
Page 31 of 48
<PAGE>
MUNICIPAL ISSUER RISK - There may be Municipal Bond Fund
economic or political changes that
impact the ability of municipal Short Term Municipal Bond Fund
issuers to repay principal and to
make interest payments on municipal Idaho Municipal Bond Fund
securities. Changes to the financial
condition or credit rating of
municipal issuers may also adversely
affect the value of the Portfolio's
municipal securities. Constitutional
or legislative limits on borrowing by
municipal issuers may result in
reduced supplies of municipal
securities. Moreover, certain
municipal securities are backed only
by a municipal issuer's ability to
levy and collect taxes.
In addition, concentration of Idaho Municipal Bond Fund
investments in issuers located in a
single state makes a Portfolio more
susceptible to adverse political or
economic developments affecting that
state.
MORTGAGE-BACKED SECURITIES - Mortgage-backed Balanced Fund
securities are fixed income securities
representing an interest in a pool of Intermediate Term Bond Fund
underlying mortgage loans. They are sensitive
to changes in interest rates, but may respond Short Term Bond Fund
to these changes differently from other fixed
income securities due to the possibility of
prepayment of the underlying mortgage loans. As
a result, it may not be possible to determine
in advance the actual maturity date or average
life of a mortgage-backed security. Rising
interest rates tend to discourage refinancings,
with the result that the average life and
volatility of the security will increase
exacerbating its decrease in market price. When
interest rates fall, however, mortgage-backed
securities may not gain as much in market value
because of the expectation of additional
mortgage prepayments that must be reinvested at
lower interest rates. Prepayment risk may make
it difficult to calculate the average maturity
of a portfolio of mortgage-backed securities
and, therefore, to assess the volatility risk
of that portfolio.
U.S. GOVERNMENT SECURITIES RISK - Although the Balanced Fund
Portfolio's U.S. government securities are
considered to be among the safest investments, Intermediate Term Bond Fund
they are not guaranteed against price movements
due to changing interest rates. Obligations Short Term Bond Fund
issued by some U.S. government agencies are
backed by the U.S. Treasury, while others are
backed solely by the ability of the agency to
borrow from the U.S
Page 32 of 48
<PAGE>
Treasury or by the agency's own resources.
YEAR 2000 RISK - The Portfolios depend on the All Portfolios
smooth functioning of computer systems in
almost every aspect of their business. Like
other mutual funds, businesses and individuals
around the world, the Portfolios could be
adversely affected if the computer systems used
by their service providers do not properly
process dates on and after January 1, 2000, and
distinguish between the year 2000 and the year
1900. The Portfolios have asked their service
providers whether they expect to have their
computer systems adjusted for the year 2000
transition, and have received assurances from
each service provider that they are devoting
significant resources to prevent material
adverse consequences to the Portfolios.
Nevertheless, the Portfolios and their
shareholders may experience losses if these
assurances prove to be incorrect or as a result
of year 2000 computer difficulties experienced
by issuers of portfolio securities or third
parties, such as custodians, banks,
broker-dealers or others with which the
Portfolios do business.
EACH PORTFOLIO'S OTHER INVESTMENTS
In addition to the investments and strategies described in this prospectus, each
Portfolio also may invest in other securities, use other strategies and engage
in other investment practices. These investments and strategies, as well as
those described in this prospectus, are described in detail in our Statement of
Additional Information. Of course, the Portfolio cannot guarantee that any
Portfolio will achieve its investment goal.
The investments and strategies described in this prospectus are those used under
normal conditions. During unusual economic or market conditions, or for
temporary defensive or liquidity purposes, each Portfolio may invest up to 100%
of its assets in fixed income securities, money market instruments and other
securities that would not ordinarily be consistent with the Portfolio's
objectives.
INVESTMENT ADVISER
The Investment Adviser makes investment decisions for the Portfolios and
continuously reviews, supervises and administers each Portfolio's investment
program. The Board of Trustees supervises the Adviser and establishes policies
that the Adviser must follow in its management activities.
First Security Investment Management, Inc. serves as the Adviser to the
Portfolios. As of January 31, 1999, the Adviser had approximately $____ in
assets under management. For the
Page 33 of 48
<PAGE>
fiscal year ended January 31, 1999, First Security Investment Management, Inc.
received advisory fees of:
EQUITY FUND [VAR:Advisor1.Portfolio1.Fees] %
BALANCED FUND [VAR:Advisor1.Portfolio2.Fees] %
INTERMEDIATE TERM BOND FUND [VAR:Advisor1.Portfolio3.Fees] %
SHORT TERM BOND FUND [VAR:Advisor1.Portfolio4.Fees] %
MUNICIPAL BOND FUND [VAR:Advisor1.Portfolio5.Fees] %
SHORT TERM MUNICIPAL BOND FUND [VAR:Advisor1.Portfolio6.Fees] %
IDAHO MUNICIPAL BOND FUND [VAR:Advisor1.Portfolio7.Fees] %
The Adviser may use its affiliates as brokers for Portfolio transactions.
PORTFOLIO MANAGERS
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 Senior Vice President and Senior
Portfolio Manager of the Adviser and has been responsible for the Balanced Fund
since inception. He joined the Adviser in 1991 serving as Assistant Vice
President and Portfolio Manager. Prior to joining the Adviser, Mr. Anderson
served as a Trust Investment Officer with West One Trust Company from 1989 to
1991.
INTERMEDIATE TERM BOND FUND AND SHORT TERM BOND FUND-Mark L. Anderson is a
Senior Vice President of the Adviser and has been responsible for the
Intermediate Term Bond Fund and Short Term Bond since inception and has been
portfolio manager for the past six years. Mr. Anderson joined the Adviser in
1985 and has managed bond, balanced, equity and money market portfolios since
that time.
MUNICIPAL BOND FUND, SHORT TERM MUNICIPAL BOND FUND AND IDAHO MUNICIPAL BOND
FUND-John B. Tousley is a Vice President and Senior Portfolio Manager of the
Adviser and has been responsible for the Idaho Municipal Bond Fund since 1998
and has been responsible for the Municipal Bond Fund and Short Term Municipal
Bond Fund since March of 1999. He joined the Adviser in 1996. From 1993 to
1996, Mr. Tousley served as both a portfolio manager and analyst for U.S.
Bank, managing fixed-income equity and balanced portfolios.
Page 34 of 48
<PAGE>
PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES
This section tells you how to buy, sell (sometimes called "redeem") or exchange
Class A and Class B Shares of the Portfolios.
The classes have different expenses and other characteristics.
CLASS A SHARES
- Front-end sales charge
- 12b-1 fee
- $1,000 minimum initial investment
CLASS B SHARES
- Contingent deferred sales charge
- Higher 12b-1 fee
- $1,000 minimum initial investment
- Convert automatically to Class A Shares after 8 years
For some investors the minimum initial investment for Class A and Class B Shares
may be lower.
The amount of purchase and the length of time the investor expects to hold the
shares will be factors in determining the best class of shares to be purchased.
Investors should consider, over the time they expect to maintain their
investment, whether the accumulated distribution and service fees and contingent
deferred sales charges on Class B shares prior to conversion would be less than
the initial sales charge on Class A shares, and to what extent such differential
would be offset by the expected higher yield of Class A shares. Class A shares
will normally be more beneficial if the investor qualifies for reduced sales
charges as described below.
HOW TO PURCHASE PORTFOLIO SHARES
You may purchase shares directly by:
- - Mail
- - Telephone
- - Wire, or
- - Direct Deposit.
To purchase shares directly from us, please call 1-800-472-0577, or complete and
send in an application. Unless you arrange to pay by wire, write your check,
payable in U.S. dollars, to "Achievement Funds" and include the name of the
appropriate Portfolio(s) on the check. A Portfolio cannot accept third-party
checks, credit cards, credit card checks or cash.
You may also buy shares through accounts with brokers and other institutions
that are authorized to place trades in Portfolio shares for their customers. If
you invest through an authorized institution, you will have to follow its
procedures which may be different from the procedures for investing directly.
Your institution may charge a fee for its services, in addition to the fees
charged by the Portfolio. You will also generally have to address your
correspondence or questions regarding a Portfolio to your institution.
Page 35 of 48
<PAGE>
GENERAL INFORMATION
A Portfolio may reject any purchase order if it is determined that accepting the
order would not be in the best interests of the Portfolio or its shareholders.
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after a Portfolio receives your purchase order plus, in
the case of Class A Shares, the applicable front-end sales charge.
Each Portfolio calculates its NAV once each Business Day at the
regularly-scheduled close of normal trading on the New York Stock Exchange
(normally, 4:00 p.m. Eastern time). So, for you to receive the current Business
Day's NAV, generally a Portfolio must receive your purchase order before 4:00
p.m. Eastern time.
HOW WE CALCULATE NAV
NAV for one Portfolio share is the value of that share's portion of all of the
assets in the Portfolio.
In calculating NAV, a Portfolio generally values its investment portfolio at
market price. If market prices are unavailable or a Portfolio thinks that they
are unreliable, fair value prices may be determined in good faith using methods
approved by the Board of Trustees.
MINIMUM PURCHASES
To purchase Class A Shares or Class B Shares for the first time, you must invest
at least $1,000 in any Portfolio.
Your subsequent investments in any Portfolio must be made in amounts of at least
$100.
SYSTEMATIC INVESTMENT PLAN
If you have a checking or savings account with certain banks, you may purchase
Class A or Class B Shares automatically through regular deductions from your
account in amounts of at least $100.
SALES CHARGES
FRONT-END SALES CHARGES - CLASS A SHARES
The offering price of Class A Shares is the NAV next calculated after a
Portfolio receives your request, plus the front-end sales load.
The amount of any front-end sales charge included in your offering price varies,
depending on the amount of your investment:
Page 36 of 48
<PAGE>
<TABLE>
<CAPTION>
EQUITY FUND AND BALANCED FUND
- ----------------------------------------------------------------------------------------------------------
SALES CHARGE AS A SALES CHARGE AS A
PERCENTAGE OF OFFERING PERCENTAGE OF NET AMOUNT
AMOUNT OF PURCHASE PRICE INVESTED
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
less than $25,000 4.50% 4.71%
$25,000 but less than $50,000 4.00% 4.17%
$50,000 but less than $100,000 3.50% 3.63%
$100,000 but less than $250,000 3.00% 3.09%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $1,000,000 2.00% 2.04%
$1,000,000 and over (1) --- ---
---------------------------------------------------------------------------------------------------------
<CAPTION>
INTERMEDIATE BOND FUND
---------------------------------------------------------------------------------------------------------
SALES CHARGE AS A SALES CHARGE AS A
PERCENTAGE OF OFFERING PERCENTAGE OF NET AMOUNT
AMOUNT OF PURCHASE PRICE INVESTED
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
less than $50,000 3.50% 3.63%
$50,000 but less than $100,000 3.00% 3.09%
$100,000 but less than $250,000 2.50% 2.56%
$250,000 but less than $500,000 2.00% 2.04%
$500,000 but less than $1,000,000 1.50% 1.52%
$1,000,000 and over (1) --- ---
</TABLE>
Page 37 of 48
<PAGE>
<TABLE>
<CAPTION>
SHORT TERM BOND FUND AND SHORT TERM MUNICIPAL BOND FUND
---------------------------------------------------------------------------------------------------------
SALES CHARGE AS A SALES CHARGE AS A
PERCENTAGE OF OFFERING PERCENTAGE OF NET AMOUNT
AMOUNT OF PURCHASE PRICE INVESTED
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
less than $100,000 1.50% 1.52%
$100,000 but less than $250,000 1.00% 1.01%
$250,000 but less than $500,000 0.75% 0.76%
$500,000 but less than $1,000,000 0.50% 0.50%
$1,000,000 and over (1) --- ---
---------------------------------------------------------------------------------------------------------
<CAPTION>
MUNICIPAL BOND FUND AND IDAHO MUNICIPAL BOND FUND
---------------------------------------------------------------------------------------------------------
SALES CHARGE AS A SALES CHARGE AS A
PERCENTAGE OF OFFERING PERCENTAGE OF NET AMOUNT
AMOUNT OF PURCHASE PRICE INVESTED
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
less than $50,000 4.00% 4.17%
$50,000 but less than $100,000 3.50% 3.63%
$100,000 but less than $250,000 3.00% 3.09%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than 2.00% 2.04%
$1,000,000
$1,000,000 and over (1) --- ---
---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Although no sales charge is paid by a Customer investing amounts over
$1,000,000, a brokerage commission may be paid in connection with such
transactions.
Page 38 of 48
<PAGE>
WAIVER OF FRONT-END SALES CHARGE --CLASS A SHARES
The front-end sales charge will be waived on Class A Shares purchased:
- - through reinvestment of dividends and distributions;
- - through certain programs offered by bank affiliates of First Security
Corporation;
- - by persons repurchasing shares they redeemed within the last 30 days (see
Repurchase of Class A Shares);
- - by investors who purchase shares with redemption proceeds (but only to the
extent of such redemption proceeds) from another investment company within
30 days of such redemption, provided that the investors paid either a
front-end or contingent deferred sales charge on the original shares
redeemed;
- - by employees, and members of their immediate family, of First Security
Corporation and its affiliates;
- - by employees and retirees of the Administrator or Distributor;
- - by Trustees and officers of The Achievement Funds Trust;
- - by persons investing an amount less than or equal to the value of an
account distribution when an account for which a bank affiliated with First
Security Corporation acted in a fiduciary, administrative, custodial or
investment advisory capacity is closed; or
- - through dealers, retirement plans, asset allocation programs and financial
institutions that, under their dealer agreements with the Distributor or
otherwise, do not receive any portion of the front-end sales charge.
REPURCHASE OF CLASS A SHARES
You may repurchase any amount of Class A Shares of any Portfolio at NAV (without
the normal front-end sales charge), up to the limit of the value of any amount
of Class A Shares (other than those which were purchased with reinvested
dividends and distributions) that you redeemed within the past 30 days. In
effect, this allows you to reacquire shares that you may have had to redeem,
without re-paying the front-end sales charge. To exercise this privilege, the
Portfolio must receive your purchase order within 30 days of your redemption.
IN ADDITION, YOU MUST NOTIFY THE PORTFOLIO WHEN YOU SEND IN YOUR PURCHASE ORDER
THAT YOU ARE REPURCHASING SHARES.
REDUCED SALES CHARGES --CLASS A SHARES
RIGHTS OF ACCUMULATION. In calculating the appropriate sales charge rate, this
right allows you to add the value of the Class A Shares you already own to the
amount that you are currently purchasing. The Portfolio will combine the value
of your current purchases with the current value of any Class A Shares you
purchased previously for your account. A fiduciary purchasing shares for the
same fiduciary account, trust or estate may also use this right of accumulation.
The Portfolio will only consider the value of Class A Shares purchased
previously that were sold subject to a sales charge. TO BE ENTITLED TO A
REDUCED SALES CHARGE BASED ON SHARES ALREADY OWNED, YOU MUST ASK US FOR THE
REDUCTION AT THE TIME OF PURCHASE. You must provide the Portfolio with your
account number(s). The Portfolio may amend or terminate this right of
accumulation at any time.
Page 39 of 48
<PAGE>
LETTER OF INTENT. You may purchase Class A Shares at the sales charge rate
applicable to the total amount of the purchases you intend to make over a
13-month period. Class A Shares purchased with dividends or distributions will
not be included in the calculation. To be entitled to a reduced sales charge
based on shares you intend to purchase over the 13-month period, you must send
the Portfolio a Letter of Intent. In calculating the total amount of purchases
you may include in your letter purchases made up to 90 days before the date of
the Letter. The 13-month period begins on the date of the first purchase,
including those purchases made in the 90-day period before the date of the
Letter.
You are not legally bound by the terms of your Letter of Intent to purchase the
amount of your shares stated in the Letter. The Letter does, however, authorize
the Portfolio to hold in escrow 5% of the total amount you intend to purchase.
If you do not complete the total intended purchase at the end of the 13-month
period, the Portfolio's transfer agent will redeem the necessary portion of the
escrowed shares to make up the difference between the reduced rate sales charge
(based on the amount you intended to purchase) and the sales charge that would
normally apply (based on the actual amount you purchased).
COMBINED PURCHASE/QUANTITY DISCOUNT PRIVILEGE. When calculating the appropriate
sales charge rate, the Portfolio will combine same day purchases of Class A
Shares (that are subject to a sales charge) made by you, your spouse and your
minor children (under age 21). This combination also applies to Class A Shares
you purchase with a Letter of Intent.
CONTINGENT DEFERRED SALES CHARGES - CLASS B SHARES
You do not pay a sales charge when you purchase Class B Shares. The offering
price of Class B Shares is simply the next calculated NAV. But if you sell your
shares within 6 years after your purchase, you will pay a contingent deferred
sales charge as described in the table below for either (1) the NAV of the
shares at the time of purchase, or (2) NAV of the shares next calculated after
the Portfolio receives your sale request, whichever is less. The sales charge
does not apply to shares you purchase through reinvestment of dividends or
distributions. So, you never pay a deferred sales charge on any increase in
your investment above the initial offering price. This sales charge does not
apply to exchanges of Class B Shares of one Portfolio for Class B Shares of
another Portfolio.
<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>
Page 40 of 48
<PAGE>
The contingent deferred sales charge will be waived if you sell your Class B
Shares for the following reasons:
- - to make certain withdrawals from a retirement plan (not including IRAs); or
- - because of death or disability.
From time to time, some financial institutions, including brokerage firms
affiliated with the Adviser, may be reallowed up to the entire sales charge.
Firms that receive a reallowance of the entire sales charge may be considered
underwriters for the purpose of federal securities law.
HOW TO SELL YOUR PORTFOLIO SHARES
Holders of Class A and Class B Shares may sell shares by following procedures
established when they opened their account or accounts. If you have questions,
call 1-800-472-0577. If you own your shares through an account with a broker or
other institution, contact that broker or institution to sell your shares.
If you own your shares directly, you may sell (sometimes called "redeem") your
shares on any Business Day by contacting a Portfolio directly by mail or
telephone at 1-800-472-0577.
If you would like to sell $5,000 or more of your shares, please notify the
Portfolio in writing and include a signature guarantee by a bank or other
financial institution (a notarized signature is not sufficient).
The sale price of each share will be the next NAV determined after the Portfolio
receives your request less, in the case of Class B Shares, any applicable
deferred sales charge.
SYSTEMATIC WITHDRAWAL PLAN
If you have at least $10,000 in your account, you may use the systematic
withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual
or annual automatic withdrawals of at least $100 from any Portfolio. The
proceeds of each withdrawal will be mailed to you by check or, if you have a
checking or savings account with a bank, electronically transferred to your
account.
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within seven Business Days after we
receive your request. Your proceeds can be wired to your bank account (subject
to a $15 fee) or sent to you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY
CHECK, REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED
(WHICH MAY TAKE UP TO 15 BUSINESS DAYS).
REDEMPTIONS IN KIND
We generally pay sale (redemption) proceeds in cash. However, under unusual
conditions that make the payment of cash unwise (and for the protection of the
Portfolio's remaining shareholders) we might pay all or part of your redemption
proceeds in liquid securities with a market value equal to the redemption price
(redemption in kind). It is highly unlikely that your shares would ever be
redeemed in kind, but if they were you would probably have to pay
Page 41 of 48
<PAGE>
transaction costs to sell the securities distributed to you, as well as taxes on
any capital gains from the sale as with any redemption.
INVOLUNTARY SALES OF YOUR SHARES
If your account balance drops below $1,000 because of redemptions you may be
required to sell your shares. But, we will always give you at least 60 days'
written notice to give you time to add to your account and avoid the sale of
your shares.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
A Portfolio may suspend your right to sell your shares if the NYSE restricts
trading, the SEC declares an emergency or for other reasons. More information
about this is in our Statement of Additional Information.
HOW TO EXCHANGE YOUR SHARES
You may exchange your shares on any Business Day by contacting us directly by
mail or telephone.
You may exchange shares through your financial institution by mail or telephone.
Exchange requests must be for an amount of at least $[VAR:Exchange.General.Min].
When you exchange shares, you are really selling your shares and buying other
Portfolio shares which may produce a gain or loss for tax purposes. Your sale
price and purchase price will be based on the NAV next calculated after the
Portfolio receives your exchange request.
Page 42 of 48
<PAGE>
CLASS A SHARES
You may exchange Class A Shares of any Portfolio for Class A Shares of any other
Portfolio. If you exchange shares that you purchased without a sales charge or
with a lower sales charge into a Portfolio with a sales charge or with a higher
sales charge, the exchange is subject to an incremental sales charge (e.g., the
difference between the lower and higher applicable sales charges). If you
exchange shares into a Portfolio with the same, lower or no sales charge there
is no incremental sales charge for the exchange.
CLASS B SHARES
You may exchange Class B Shares of any Portfolio for Class B Shares of any other
Portfolio. No contingent deferred sales charge is imposed on redemptions of
shares you acquire in an exchange, provided you hold your shares for at least 6
years from your initial purchase.
TELEPHONE TRANSACTIONS
Purchasing, Selling and Exchanging Fund shares over the telephone is extremely
convenient, but not without risk. Although the Fund has certain safeguards and
procedures to confirm the identity of callers and the authenticity of
instructions, the Portfolio is not responsible for any losses or costs incurred
by following telephone instructions we reasonably believe to be genuine. If you
or your financial institution transact with the Portfolio over the telephone,
you will generally bear the risk of any loss.
DISTRIBUTION OF PORTFOLIO SHARES
Each Portfolio has adopted a distribution plan that allows the Portfolio to pay
distribution and service fees for the sale and distribution of its shares, and
for services provided to shareholders. Because these fees are paid out of a
Portfolio's assets continuously, over time these fees will increase the cost of
your investment and may cost you more than paying other types of sales charges.
Distribution and service fees, as a percentage of average daily net assets are
as follows:
<TABLE>
<S> <C>
FOR CLASS A SHARES
Equity Fund 0.25%
Balanced Fund 0.25%
Intermediate Term Bond Fund 0.25%
Short Term Bond Fund 0.25%
Municipal Bond Fund 0.25%
Short Term Municipal Bond Fund 0.25%
Idaho Municipal Bond Fund 0.25%
</TABLE>
Page 43 of 48
<PAGE>
<TABLE>
<S> <C>
FOR CLASS B SHARES
Equity Fund 1.00%
Balanced Fund 1.00%
Municipal Bond Fund* 0.90%
Idaho Municipal Bond Fund* 0.90%
</TABLE>
*The Distributor has voluntarily agreed to waive a portion of the distribution
fee payable to it from this Portfolio. Absent this waiver, the distribution fee
would be 0.75%. The Distributor may terminate its waiver from time to time.
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs for dealers, which will be paid for by the
Distributor from any sales charge it receives or from any other source available
to it. Under any such program, the Distributor may provide incentives, in the
form of cash or other compensation, including merchandise, airline vouchers,
trips and vacation packages, to dealers selling shares of the Portfolios.
Page 44 of 48
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Portfolio distributes its income as follows:
Equity Fund Declared and paid quarterly
Balanced Fund Declared and paid monthly
Intermediate Term Bond Fund Declared daily and paid monthly
Short Term Bond Fund Declared daily and paid monthly
Municipal Bond Fund Declared daily and paid monthly
Short Term Municipal Bond Fund Declared daily and paid monthly
Idaho Municipal Bond Fund Declared daily and paid monthly
Each Portfolio makes distributions of capital gains, if any, at least annually.
If you own Portfolio shares on the last day of the month or quarter, you will be
entitled to receive the distribution.
You will receive dividends and distributions in the form of additional Portfolio
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify the Portfolio in writing prior to the date of the distribution.
Your election will be effective for dividends and distributions paid after the
Portfolio receives your written notice. To cancel your election, simply send
the Portfolio written notice.
TAXES
The dividends and distributions you receive from a Portfolio may be subject to
federal, state and local taxation, depending on your tax situation. The tax
treatment of dividends and distributions is the same whether or not you reinvest
them. Dividends are taxed as ordinary income, long-term capital gains are taxed
at a maximum rate of 20% and short-term capital gains are currently taxed at
ordinary income tax rates. Each Portfolio will tell you annually how to treat
dividends and distributions.
If you redeem a Portfolio's shares, you will be subject to tax on any gain. The
character of such gain will generally be based on your holding period for the
shares. An exchange of one Portfolio's shares for shares of another Portfolio
is a sale for tax purposes.
More information about taxes is in the Statement of Additional Information. In
addition, because each investor's tax circumstances are unique and because the
tax laws are subject to change, you should consult your tax advisor about your
investment.
Page 45 of 48
<PAGE>
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about Class A and Class B
Shares of each Portfolio. This information is intended to help you understand
each Portfolio's financial performance for the past five years, or, if shorter,
the period of the Portfolio's operations. Some of this information reflects
financial information for a single Portfolio share. The total returns in the
table represent the rate that you would have earned (or lost) on an investment
in a Portfolio, assuming you reinvested all of your dividends and distributions.
This information has been audited by Deloitte & Touche, LLP, independent
accountants. Their report, along with each Portfolio's financial statements,
appears in the annual report that accompanies the Statement of Additional
Information. You can obtain the annual report, which contains more performance
information, at no charge by calling 1-800-472-0577.
Page 46 of 48
<PAGE>
THE ACHIEVEMENT PORTFOLIOS TRUST
INVESTMENT ADVISER
First Security Investment Management, Inc.
61 South Main Street
Salt Lake City, Utah 84111
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456
LEGAL COUNSEL
Ballard Spahr Andrews & Ingersoll
1735 Market Street
51st Floor
Philadelphia, Pennsylvania 19103-7599
More information about each Portfolio is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated June 1, 1999, includes detailed information about The Achievement
Funds Trust Portfolios. The SAI is on file with the SEC and is incorporated by
reference into this prospectus. This means that the SAI, for legal purposes, is
a part of this prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
These reports list each Portfolio's holdings and contain information from the
Portfolio's managers about strategies, and recent market conditions and trends.
The reports also contain detailed financial information about the Portfolios.
TO OBTAIN MORE INFORMATION:
BY TELEPHONE: Call 1-800-472-0577
BY MAIL: Write to the Fund
[VAR:Portfolio.Address]
BY E-MAIL: [VAR:PORTFOLIO.EMAILADDRESS]]
BY INTERNET: [VAR:PORTFOLIO.INTERNETADDRESS]
FROM THE SEC: You can also obtain the SAI or the Annual and Semi-annual
reports, as well as other information about The Achievement Funds Trust, from
the SEC's website
Page 47 of 48
<PAGE>
("http://www.sec.gov"). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call 1-800-SEC-0330). You may
request documents by mail from the SEC, upon payment of a duplicating fee, by
writing to: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-6009. The Achievement Funds Trust Portfolios' Investment
Company Act registration number is 811-[VAR:SEC-Number].
Page 48 of 48
<PAGE>
ACHIEVEMENT FUNDS TRUST
Institutional Class Shares
PROSPECTUS
JUNE 1, 1999
EQUITY FUND
BALANCED FUND
INTERMEDIATE TERM BOND FUND
SHORT TERM BOND FUND
MUNICIPAL BOND FUND
SHORT TERM MUNICIPAL BOND FUND
IDAHO MUNICIPAL BOND FUND
INVESTMENT ADVISER
FIRST SECURITY INVESTMENT MANAGEMENT, INC.
The Securities and Exchange Commission has not approved any Portfolio shares or
determined whether this prospectus is accurate or complete.
It is a crime for anyone to tell you otherwise.
Page 1 of 36
<PAGE>
HOW TO READ THIS PROSPECTUS
The Achievement Funds Trust is a mutual fund that offers different classes of
shares in separate investment portfolios (Portfolios). The Portfolios have
individual investment goals and strategies. This prospectus gives you important
information about the Institutional Class Shares of the Portfolios that you
should know before investing. Please read this prospectus and keep it for
future reference.
THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY
REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL
INFORMATION YOU SHOULD KNOW ABOUT THE PORTFOLIOS. FOR MORE DETAILED INFORMATION
ABOUT EACH PORTFOLIO, PLEASE SEE:
Page
EQUITY FUND XXX
BALANCED FUND XXX
INTERMEDIATE TERM BOND FUND XXX
SHORT TERM BOND FUND XXX
MUNICIPAL BOND FUND XXX
SHORT TERM MUNICIPAL BOND FUND XXX
IDAHO MUNICIPAL BOND FUND XXX
MORE INFORMATION ABOUT RISK XXX
EACH PORTFOLIO'S OTHER INVESTMENTS XXX
THE INVESTMENT ADVISER AND PORTFOLIO MANAGERS XXX
PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES XXX
DISTRIBUTION OF PORTFOLIO SHARES XXX
DIVIDENDS, DISTRIBUTIONS AND TAXES XXX
FINANCIAL HIGHLIGHTS XXX
HOW TO OBTAIN MORE INFORMATION ABOUT
THE ACHIEVEMENT FUNDS Back Cover
Page 2 of 36
<PAGE>
INTRODUCTION
Each Portfolio operates as a separate mutual fund. A mutual fund pools
shareholders' money and, using professional investment managers, invests it in
securities.
Each Portfolio has its own investment goal and strategies for reaching that
goal. The investment manager invests the assets of each Portfolio in a way that
it believes will help the Portfolio achieve its goal. Still, investing in a
Portfolio involves risk, as there is no guarantee that a Portfolio will achieve
its goal. An investment manager's judgments about the markets, the economy, or
companies may not anticipate actual market movements, economic conditions or
company performance, and these judgments may affect the return on your
investment. In fact, no matter how good a job an investment manager does, you
could lose money on your investment in a Portfolio, just as you could with other
investments. A Fund share is not a bank deposit and it is not insured or
guaranteed by the FDIC or any government agency.
The value of your investment in a Portfolio is based on the market value of the
securities the Portfolio holds. These prices can change daily due to economic
and other events that affect particular companies and other issuers. These
price movements, sometimes called volatility, may be greater or lesser depending
on the types of securities a Portfolio owns and the markets in which they trade.
The effect on a Portfolio of a change in the value of a single security will
depend on how widely the Portfolio diversifies its holdings.
Page 3 of 36
<PAGE>
EQUITY FUND
PORTFOLIO SUMMARY
Investment Goal Long-term capital appreciation with current
income as a secondary consideration in
selecting securities
Share Price Volatility High
Principal Investment Strategy Investing in a diversified portfolio of U.S.
equity securities
Investor Profile Investors seeking long-term capital
appreciation, who are willing to accept the
risk of share price volatility
INVESTMENT STRATEGY OF THE EQUITY FUND
The Equity Fund invests primarily in common stocks and other equity securities.
The Adviser applies an investment approach that is often referred to as "Growth
at a Price," which emphasizes investment in securities of companies that are
experiencing growth in earnings and whose securities appear attractively priced
based on proprietary valuation methods.
Generally, the Portfolio invests in exchange-traded securities of companies with
market capitalizations in excess of $500 million. The Portfolio is diversified
as to issuers and industries, and emphasizes investments in companies that have
medium and large market capitalization.
PRINCIPAL RISKS OF INVESTING IN THE EQUITY FUND
The Portfolio's investment approach is intended to provide long-term capital
appreciation, which carries with it the potential for price volatility
associated with owning equity securities. The performance of the Portfolio may
differ from the performance of funds that follow a different investment
approach. Examples of different investment approaches include indexing,
applying a different style-specific strategy (E.G., momentum investing), or
investing in different asset classes.
Since it purchases equity securities, the Portfolio is subject to the risk that
stock prices will fall over short or extended periods of time. Historically,
the equity markets have moved in cycles, and the value of the Portfolio's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response which could result in a decline in the value of the
Portfolio's shares. These factors contribute to price volatility, which is the
principal risk of investing in the Portfolio. In addition, during periods of
particularly volatile market conditions, the Portfolio may not be able to buy or
sell securities at favorable prices, and the Portfolio may experience losses.
Page 4 of 36
<PAGE>
The Portfolio is subject to the risk that its market segment, mid and large cap
equity securities, may underperform other market segments or the equity markets
as a whole. The Adviser also may not be able to match the performance of the
index which is compared to the Portfolio's total return below.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provides some indication of the risks of an investment
in the Portfolio. Of course, past performance does not necessarily indicate how
the Portfolio will perform in the future.
This bar chart shows changes in the performance of the Portfolio's Institutional
Class Shares from year to year.
<TABLE>
<S> <C>
1995 32.75%
1996 16.48%
1997 27.77%
1998 18.46%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
23.25% -14.21%
(12/31/98) (9/30/98)
</TABLE>
The Portfolio's performance from 1/1/99 to 3/31/99 was 18.46%.
This table compares the Portfolio's average annual total returns for the periods
ending December 31, 1998 to those of the Composite Index.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Equity Fund
Composite Index
</TABLE>
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. Unlike a mutual fund, an
index does not have an investment adviser and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower.
PORTFOLIO FEES AND EXPENSES
MUTUAL FUNDS INCUR EXPENSES TO PAY FOR ADVISORY, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE
PORTFOLIO.
Page 5 of 36
<PAGE>
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.74%
Other Expenses .XX%
----
Total Annual Portfolio Operating Expenses X.XX%
</TABLE>
THE PORTFOLIO'S TOTAL ACTUAL ANNUAL OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER IS WAIVING
A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME.
WITH THESE FEE WAIVERS, THE PORTFOLIO'S ACTUAL TOTAL OPERATING EXPENSES ARE AS
FOLLOWS:
EQUITY FUND - INSTITUTIONAL CLASS SHARES 0.90%
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER" AND
"DISTRIBUTION OF PORTFOLIO SHARES."
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and
Portfolio expenses remain the same. Although your actual costs and returns
might be different, your approximate costs of investing $10,000 in the Portfolio
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Institutional Class Shares $____ $____ $____ $____
</TABLE>
Page 6 of 36
<PAGE>
BALANCED FUND
PORTFOLIO SUMMARY
Investment Goal Total return consisting of capital
appreciation and current income consistent
with prudent investment risk
Share Price Volatility Medium
Principal Investment Strategy Investing in a diversified portfolio of U.S.
equity securities and investment grade fixed
income securities
Investor Profile Investors seeking total return who are
willing to accept moderate level of share
price volatility
INVESTMENT STRATEGY OF THE BALANCED FUND
The Balanced Fund invests in a combination of equity and fixed income
securities. The Adviser employs an investment strategy intended to provide long
term capital appreciation with some current income. The Portfolio's fixed
income security holdings should make the value of its shares less volatile than
those of the Equity Fund, but may produce a lower total return than if the
Portfolio were fully invested in equity securities.
Over time, the Portfolio ordinarily will invest approximately 60% of its assets
in equity securities, although the percentage of assets invested in such
securities may be as low as 25% or as high as 75%. When acquiring equity
securities for the Portfolio, the Adviser will focus on exchange-traded
securities of companies with market capitalizations in excess of $500 million.
The Adviser will apply an investment approach in selecting equity securities
that is often referred to as "Growth at a Price," which emphasizes investments
in securities of companies experiencing growth in earning and whose securities
appear attractively priced based upon proprietary valuation methods.
Over time, the Portfolio will ordinarily invest approximately 40% of its assets
in investment grade fixed income securities, including mortgage-backed
securities, although the percentage of assets invested in such securities may be
as low as 25% or as high as 75%. In selecting fixed income securities for the
Portfolio, the Adviser focuses principally on intermediate maturity obligations
having a weighted average maturity at three to ten years. Investment grade
fixed income securities are those rated at the time of investment in one of the
four highest rating categories by a major rating agency, or determined by the
Adviser to be of equivalent quality. The Portfolio will not invest more than
20% of its assets allocated to fixed income securities in securities rated in
the lowest category of investment grade ratings.
The Portfolio will also invest in money market instruments for asset allocation
and cash management purposes. Money market instruments include short term
securities issued by the United States, commercial paper and certificates of
deposit.
Page 7 of 36
<PAGE>
PRINCIPAL RISKS OF INVESTING IN THE BALANCED FUND
The performance of the Portfolio will reflect the Adviser's success in selecting
particular equity, fixed income and money market securities, as well as the
Adviser's success in allocating Portfolio investments between these asset
classes. The performance of the Portfolio's equity investments may differ from
the performance of funds that follow a different investment approach. Examples
of different investment approaches include indexing and applying a different
style-specific strategy (E.G., momentum investing). The Portfolio's fixed
income approach, with its emphasis on fixed income securities of intermediate
maturity, may experience greater price volatility in response to interest rate
changes than Portfolios that own similar securities with shorter maturities.
Since it purchases equity securities, the Portfolio is subject to the risk that
stock prices will fall over short or extended periods of time. Historically,
the equity markets have moved in cycles, and the value of the Portfolio's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response which could result in a decline in the value of the
Portfolio's shares. These factors contribute to price volatility, which is the
principal risk of investing in the Portfolio.
The prices of the Portfolio's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Portfolio's fixed income securities will decrease in value if
interest rates rise and vice versa, and the volatility of lower rated securities
is often greater than that of higher rated securities. Longer-term securities
are generally more volatile, so the average maturity or duration of these
securities affects risk. During periods of particularly volatile market
conditions, the Portfolio may not be able to buy or sell securities at favorable
prices, and the Portfolio may experience losses.
There may be economic or industry changes that impact the ability of the bond
issuers to repay principal and make interest payments on their bonds. Changes
in the financial condition or credit ratings of individual issuers may also
adversely affect the value of the Portfolio's fixed-income securities.
The Portfolio is subject to the risk that its market segments, intermediate term
fixed income and mid and large cap equity securities, may underperform other
equity or fixed income market segments or the equity or fixed income markets as
a whole. The Adviser may also not be able to match the performance of the
index which is compared to the Portfolio's total return below.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provides some indication of the risks of an investment
in the Portfolio. Of course, past performance does not necessarily indicate how
the Portfolio will perform in the future.
This bar chart shows changes in the performance of the Portfolio's Institutional
Class Shares from year to year.
Page 8 of 36
<PAGE>
<TABLE>
<S> <C>
1995 24.63%
1996 10.11%
1997 19.98%
1998 13.51%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
14.24% -8.48%
(12/31/98) (9/30/98)
</TABLE>
The Portfolio's performance from 1/1/99 to 3/31/99 was 13.51%.
This table compares the Portfolio's average annual total returns for the periods
ending December 31, 1998 to those of the Composite Index.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Balanced Fund
Composite Index
</TABLE>
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. Unlike a mutual fund, an
index does not have an investment adviser and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower.
PORTFOLIO FEES AND EXPENSES
MUTUAL FUNDS INCUR EXPENSES TO PAY FOR ADVISORY, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE
PORTFOLIO.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT ADVISORY FEES 0.74%
OTHER EXPENSES .XX%
----
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES X.XX%
</TABLE>
THE PORTFOLIO'S TOTAL ACTUAL ANNUAL OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER IS WAIVING
A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME.
WITH THESE FEE WAIVERS, THE PORTFOLIO'S ACTUAL TOTAL OPERATING EXPENSES ARE AS
FOLLOWS:
BALANCED FUND - INSTITUTIONAL CLASS SHARES 0.90%
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER" AND
"DISTRIBUTION OF PORTFOLIO SHARES."
Page 9 of 36
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and
Portfolio expenses remain the same. Although your actual costs and returns
might be different, your approximate costs of investing $10,000 in the Portfolio
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Institutional Class Shares $____ $____ $____ $____
</TABLE>
Page 10 of 36
<PAGE>
INTERMEDIATE TERM BOND FUND
PORTFOLIO SUMMARY
Investment Goal Current income consistent with prudent
investment risk and liquidity
Share Price Volatility Medium
Principal Investment Strategy Investing in a portfolio of investment
grade fixed income securities, while
maintaining a dollar-weighted average
maturity of between three and ten years
Investor Profile Investors seeking current income who are
willing to accept the risks of investing
in fixed income securities
INVESTMENT STRATEGY OF THE INTERMEDIATE TERM BOND FUND
The Intermediate Term Bond Fund invests primarily in investment grade fixed
income securities issued by the U.S. government, its agencies and
instrumentalities, and corporate issuers. The Portfolio may invest up to 40% of
its assets in a combination of U.S. dollar denominated bonds of foreign issuers,
mortgage-backed securities, asset-backed securities and floating or variable
rate corporate debt instruments. The Portfolio maintains an average maturity
between three and ten years; however, there is no limit on the maximum maturity
for a particular investment.
Investment grade fixed income securities are those rated at the time of
investment in one of the four highest rating categories by a major rating
agency, or determined by the Adviser to be of equivalent quality. The Portfolio
will not invest more than 20% of its assets in fixed income securities rated in
the lowest category of investment grade securities.
The Adviser's strategy for the Portfolio is intended to provide relatively
stable current income, a competitive current yield and reasonable principal
volatility. The fixed income securities held by the Portfolio may also have the
potential for moderate price appreciation.
PRINCIPAL RISKS OF INVESTING IN THE INTERMEDIATE TERM BOND FUND
The Portfolio's investment approach, with its emphasis on fixed income
securities of intermediate maturity, may experience greater price volatility
than funds that invest in similar quality securities with shorter maturities.
The prices of the Portfolio's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Portfolio's fixed income securities will decrease in value if
interest rates rise and vice versa, and the volatility of lower rated securities
is often greater than that of higher rated securities. Longer-term securities
are generally more
Page 11 of 36
<PAGE>
volatile, so the average maturity or duration of these securities affects risk.
During periods of particularly volatile market conditions, the Portfolio may not
be able to buy or sell securities at favorable prices, and the Portfolio may
experience losses.
The Portfolio is subject to the risk that its market segment, intermediate term
fixed income securities, may underperform other fixed income market segments or
the fixed income markets as a whole. The Adviser also may not be able to match
the index which is compared to the Portfolio's total return below.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provides some indication of the risks of an investment
in the Portfolio. Of course, past performance does not necessarily indicate how
the Portfolio will perform in the future.
This bar chart shows changes in the performance of the Portfolio's Institutional
Class Shares from year to year.
<TABLE>
<S> <C>
1995 14.50%
1996 2.43%
1997 7.61%
1998 8.30%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
4.78% -1.63%
(6/30/95) (3/31/96)
</TABLE>
The Portfolio's performance from 1/1/99 to 3/31/99 was 8.30%.
This table compares the Portfolio's average annual total returns for the periods
ending December 31, 1998 to those of the Lehman Government/Corporate Bond Index.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES 1 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C>
Intermediate Term Bond Fund
Lehman Government/Corporate Bond Index
</TABLE>
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. Unlike a mutual fund, an
index does not have an investment adviser and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower.
Page 12 of 36
<PAGE>
PORTFOLIO FEES AND EXPENSES
MUTUAL FUNDS INCUR EXPENSES TO PAY FOR ADVISORY, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE
PORTFOLIO.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.60%
Other Expenses .XX%
-----
Total Annual Portfolio Operating Expenses X.XX%
</TABLE>
THE PORTFOLIO'S TOTAL ACTUAL ANNUAL OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER IS WAIVING
A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME.
WITH THESE FEE WAIVERS, THE PORTFOLIO'S ACTUAL TOTAL OPERATING EXPENSES ARE AS
FOLLOWS:
INTERMEDIATE TERM BOND FUND - INSTITUTIONAL CLASS SHARES - 0.75%
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER" AND
"DISTRIBUTION OF PORTFOLIO SHARES."
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and
Portfolio expenses remain the same. Although your actual costs and returns
might be different, your approximate costs of investing $10,000 in the Portfolio
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Institutional Class Shares $____ $____ $____ $____
</TABLE>
Page 13 of 36
<PAGE>
SHORT TERM BOND FUND
PORTFOLIO SUMMARY
Investment Goal Current income with preservation of
principal and liquidity
Share Price Volatility Low
Principal Investment Strategy Investing in a portfolio of high
quality, fixed income securities, while
maintaining a dollar-weighted average
maturity of less than two years
Investor Profile Investors seeking to preserve principal
and earn current income
INVESTMENT STRATEGY OF THE SHORT TERM BOND FUND
The Short Term Bond Fund invests primarily in fixed income securities issued by
the U.S. government, its agencies and instrumentalities, and corporate issuers.
The Portfolio may invest up to 30% of its assets in a combination of U.S. dollar
denominated bonds of foreign issuers, mortgage-backed securities, asset-backed
securities, and floating or variable rate corporate debt instruments. The
Portfolio maintains an average maturity of less than two years and individual
Portfolio investments will have a maximum maturity of five years.
The Portfolio invests only in fixed income securities rated at the time of
investment in one of the three highest rating categories by a major rating
agency, or determined by the Adviser to be of equivalent quality.
PRINCIPAL RISKS OF INVESTING IN THE SHORT TERM BOND FUND
The Portfolio's investment approach, with its emphasis on short term, high
quality fixed income securities, is expected to preserve principal and produce
current income. The Portfolio's investments should experience less price
volatility in response to interest rate changes than funds that invest in
similar securities with longer maturities, but will have less potential for
greater income or capital gain.
The prices of the Portfolio's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Portfolio's fixed income securities will decrease in value if
interest rates rise and vice versa, and the volatility of lower rated securities
is often greater than that of higher rated securities. Longer-term securities
are generally more volatile, so the average maturity or duration of these
securities affects risk. During periods of particularly volatile market
conditions, the Portfolio may not be able to buy or sell securities at favorable
prices, and the Portfolio may experience losses.
Page 14 of 36
<PAGE>
The Portfolio is subject to the risk that its market segment, short term fixed
income securities, may underperform other fixed income markets segments or the
fixed income markets as a whole. The Adviser also may not be able to match the
performance of the index which is compared to the Portfolio's total return
below.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provides some indication of the risks of an investment
in the Portfolio. Of course, past performance does not necessarily indicate how
the Portfolio will perform in the future.
This bar chart shows changes in the performance of the Portfolio's Institutional
Class Shares from year to year.
<TABLE>
<S> <C>
1995 7.82%
1996 4.51%
1997 5.86%
1998 5.75%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
2.42% 0.61%
(6/30/95) (3/31/96)
</TABLE>
The Portfolio's performance from 1/1/99 to 3/31/99 was 5.75%.
This table compares the Portfolio's average annual total returns for the periods
ending December 31, 1998 to those of the Salomon 1-3 Year Treasury/Government
Sponsored/Corporate Index.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Short Term Bond Fund
Salomon 1-3 Year Treasury/
Government Sponsored/Corporate Index
</TABLE>
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. Unlike a mutual fund, an
index does not have an investment adviser and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower.
PORTFOLIO FEES AND EXPENSES
MUTUAL FUNDS INCUR EXPENSES TO PAY FOR ADVISORY, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE
PORTFOLIO.
Page 15 of 36
<PAGE>
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.60%
Other Expenses .XX%
-----
Total Annual Portfolio Operating Expenses X.XX%
</TABLE>
THE PORTFOLIO'S TOTAL ACTUAL ANNUAL OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER IS
WAIVING A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A
SPECIFIED LEVEL. THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT
ANY TIME. WITH THESE FEE WAIVERS, THE PORTFOLIO'S ACTUAL TOTAL OPERATING
EXPENSES ARE AS FOLLOWS:
SHORT TERM BOND FUND - INSTITUTIONAL CLASS SHARES 0.75%
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER" AND
"DISTRIBUTION OF PORTFOLIO SHARES."
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and
Portfolio expenses remain the same. Although your actual costs and returns
might be different, your approximate costs of investing $10,000 in the Portfolio
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Institutional Class Shares $____ $____ $____ $____
</TABLE>
Page 16 of 36
<PAGE>
MUNICIPAL BOND FUND
PORTFOLIO SUMMARY
Investment Goal As high a level of current income exempt
from federal income taxes as is
consistent with preservation of capital
Share Price Volatility Moderate
Principal Investment Strategy Investing in a diversified portfolio of
investment grade municipal obligations
Investor Profile Investors seeking tax-exempt current
income who are willing to accept
moderate share price volatility
INVESTMENT STRATEGY OF THE MUNICIPAL BOND FUND
The Municipal Bond Fund invests primarily in municipal securities issued by U.S.
states, territories, possessions and political subdivisions, the interest from
which is exempt from federal income taxes. The Portfolio will not invest more
than 20% of its assets in securities which pay interest subject to the
alternative minimum tax.
The Portfolio invests only in municipal securities that are investment grade.
Investment grade municipal bonds are those rated at the time of investment in
one of the four highest rating categories by a major rating agency, or
determined by the Adviser to be of equivalent quality. The Portfolio will not
invest more than 20% of its assets in municipal bonds rated in the lowest
category of investment grade ratings. The Portfolio will not invest more than
15% of its assets in obligations of issuers located in any single state,
territory or possession. The Adviser's approach in selecting municipal
securities for the Portfolio is to obtain as high a level of income as is
consistent with moderate share price volatility. There is no restriction on the
Portfolio's average weighted maturity or on the maturity of any single security
held by the Portfolio.
PRINCIPAL RISKS OF INVESTING IN THE MUNICIPAL BOND FUND
The Portfolio's investment approach is expected to provide current tax-exempt
income with moderate price volatility. The Portfolio is not expected to perform
as well as a taxable bond portfolio, but return to shareholders may be as good
or better on an after-tax basis.
The prices of the Portfolio's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Portfolio's fixed income securities will decrease in value if
interest rates rise and vice versa, and the volatility of lower rated securities
is often greater than that of higher rated securities. Longer-term securities
are generally more volatile, so the average maturity or duration of these
securities affects risk. During periods of
Page 17 of 36
<PAGE>
particularly volatile market conditions, the Portfolio may not be able to buy or
sell securities at favorable prices, and the Portfolio may experience losses.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Portfolio's securities.
The Portfolio is subject to the risk that its emphasis on current income and
moderate price volatility may cause it to underperform other fixed income funds
that pursue other objectives or the fixed income markets as a whole. The
Adviser also may not be able to match the performance of the index which is
compared to the Portfolio's total return below.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provides some indication of the risks of an investment
in the Portfolio. Of course, past performance does not necessarily indicate how
the Portfolio will perform in the future.
This bar chart shows changes in the performance of the Portfolio's Institutional
Class Shares from year to year.
<TABLE>
<S> <C>
1997 8.82%
1998 5.98%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
3.64% -0.86%
(6/30/97) (3/31/97)
</TABLE>
The Portfolio's performance from 1/1/99 to 3/31/99 was 5.98%.
This table compares the Portfolio's average annual total returns for the periods
ending December 31, 1998 to those of the Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Municipal Bond Fund
Lehman Municipal Bond Index
</TABLE>
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. Unlike a mutual fund, an
index does not have an investment adviser and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower.
Page 18 of 36
<PAGE>
PORTFOLIO FEES AND EXPENSES
MUTUAL FUNDS INCUR EXPENSES TO PAY FOR ADVISORY, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE
PORTFOLIO.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES
- -------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.60%
Other Expenses X.XX%
-----
Total Annual Portfolio Operating Expenses X.XX%
</TABLE>
THE PORTFOLIO'S TOTAL ACTUAL ANNUAL OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER IS WAIVING
A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME.
WITH THESE FEE WAIVERS, THE PORTFOLIO'S ACTUAL TOTAL OPERATING EXPENSES ARE AS
FOLLOWS:
MUNICIPAL BOND FUND - INSTITUTIONAL CLASS SHARES 0.75%
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER" AND
"DISTRIBUTION OF PORTFOLIO SHARES."
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and
Portfolio expenses remain the same. Although your actual costs and returns
might be different, your approximate costs of investing $10,000 in the Portfolio
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Institutional Class Shares $____ $____ $____ $____
</TABLE>
Page 19 of 36
<PAGE>
SHORT TERM MUNICIPAL BOND FUND
PORTFOLIO SUMMARY
Investment Goal As high a level of current income exempt
from federal income taxes as is
consistent with preservation of capital
Share Price Volatility Low
Principal Investment Strategy Investing in a portfolio of investment
grade municipal obligations with a
dollar weighted average maturity of less
than three years
Investor Profile Investors seeking tax-exempt current
income with limited share price
volatility
INVESTMENT STRATEGY OF THE SHORT TERM MUNICIPAL BOND FUND
The Short Term Municipal Bond Fund invests primarily in municipal securities
issued by U.S. States, territories, possessions and their political
subdivisions, the interest from which is exempt from federal income taxes. The
Portfolio will not invest in securities which pay interest subject to the
alternative minimum tax. The Portfolio maintains an average maturity of less
than three years and individual Portfolio investments will have a maximum
maturity of seven years.
The Portfolio invests only in municipal securities that are investment grade.
Investment grade municipal bonds are those rated at the time of investment in
one of the four highest rating categories by a major rating agency, or
determined by the Adviser to be of equivalent quality. The Portfolio will not
invest more than 20% of its assets in municipal bonds rated in the lowest
category of investment grade securities.
PRINCIPAL RISKS OF INVESTING IN THE SHORT TERM MUNICIPAL BOND FUND
The Portfolio's investment approach, with its emphasis on short-term municipal
obligations, is expected to provide current tax-exempt income with less price
volatility in response to interest rate changes than funds that invest in
similar securities with longer maturities. The Portfolio is not expected to
perform as well as a taxable short-term bond Portfolio, but return to
shareholders may be as good or better on an after-tax basis.
The prices of the Portfolio's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Portfolio's fixed income securities will decrease in value if
interest rates rise and vice versa, and the volatility of lower rated
securities is often greater than that of higher rated securities.
Longer-term securities are generally more volatile, so the average maturity
or duration of these securities affects risk. During periods of particularly
volatile market
Page 20 of 36
<PAGE>
conditions, the Portfolio may not be able to buy or sell securities at favorable
prices, and the Portfolio may experience losses.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Portfolio's securities.
The Portfolio is subject to the risk that its market segment, short term
municipal securities may underperform other fixed income market segments or the
fixed income markets as a whole. The Adviser also may not be able to match the
performance of the index which is compared to the Portfolio's total return
below.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provides some indication of the risks of an investment
in the Portfolio. Of course, past performance does not necessarily indicate how
the Portfolio will perform in the future.
This bar chart shows changes in the performance of the Portfolio's Institutional
Class Shares from year to year.
<TABLE>
<S> <C>
1995 6.37%
1996 3.23%
1997 4.28%
1998 3.79%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
1.85% 0.24%
(9/30/95) (3/31/97)
</TABLE>
The Portfolio's performance from 1/1/99 to 3/31/99 was 3.79%.
This table compares the Portfolio's average annual total returns for the periods
ending December 31, 1998 to those of the Lehman 1 Year Municipal Bond Index.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES 1 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C>
Short Term Municipal Bond Fund
Lehman 1 Year Municipal Bond Index
</TABLE>
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. Unlike a mutual fund, an
index does not have an investment adviser and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower.
Page 21 of 36
<PAGE>
PORTFOLIO FEES AND EXPENSES
MUTUAL FUNDS INCUR EXPENSES TO PAY FOR ADVISORY, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE
PORTFOLIO.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.60%
Other Expenses .XX%
-----
Total Annual Portfolio Operating Expenses X.XX%
</TABLE>
THE PORTFOLIO'S TOTAL ACTUAL ANNUAL OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER IS WAIVING
A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME.
WITH THESE FEE WAIVERS, THE PORTFOLIO'S ACTUAL TOTAL OPERATING EXPENSES ARE AS
FOLLOWS:
SHORT TERM MUNICIPAL BOND FUND - INSTITUTIONAL CLASS SHARES 0.75%
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER" AND
"DISTRIBUTION OF PORTFOLIO SHARES."
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and
Portfolio expenses remain the same. Although your actual costs and returns
might be different, your approximate costs of investing $10,000 in the Portfolio
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Institutional Class Shares $____ $____ $____ $____
</TABLE>
Page 22 of 36
<PAGE>
IDAHO MUNICIPAL BOND FUND
PORTFOLIO SUMMARY
Investment Goal High current income exempt from federal
and Idaho income taxes
Share Price Volatility Moderate
Principal Investment Strategy Investing in a focused portfolio of
investment grade municipal bonds
Investor Profile Investors seeking tax-exempt current
income, who are willing to accept some
degree of share price volatility
INVESTMENT STRATEGY OF THE IDAHO MUNICIPAL BOND FUND
The Idaho Municipal Bond Fund invests primarily in municipal securities issued
by the State of Idaho and its cities, counties and political subdivisions, the
interest from which is exempt from federal and Idaho income taxes. The
Portfolio may also invest in the municipal bonds of other U.S. States,
territories and possessions and their political subdivisions. The Portfolio
will not invest more than 20% of its assets in securities which pay interest
subject to the alternative minimum tax.
The Portfolio invests only in municipal bonds that are investment grade.
Investment grade municipal bonds are those rated at the time of investment in
one of the four highest rating categories by a major rating agency, or
determined by the Adviser to be of equivalent quality. The Portfolio will not
invest more than 20% of its assets in municipal bonds rated in the lowest
category of investment grade ratings. There is no restriction on the
Portfolio's average weighted maturity or on the maturity of any single security
held by the Portfolio.
PRINCIPAL RISKS OF INVESTING IN THE IDAHO MUNICIPAL BOND FUND
The Portfolio's investment approach, with its emphasis on municipal bonds, is
expected to provide current tax-exempt income with moderate risk to principal.
The Portfolio is not expected to perform as well as a taxable bond Portfolio,
but return to shareholders may be as good or better on an after-tax basis.
The prices of the Portfolio's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Portfolio's fixed income securities will decrease in value if
interest rates rise and vice versa, and the volatility of lower rated securities
is often greater than that of higher rated securities. Longer-term securities
are generally more volatile, so the average maturity or duration of these
securities affects risk. During periods of
Page 23 of 36
<PAGE>
particularly volatile market conditions, the Portfolio may not be able to buy or
sell securities at favorable prices, and the Portfolio may experience losses.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Portfolio's securities.
The Portfolio's concentration of investments in securities of issuers located in
a single state subjects the Portfolio to economic and government policies of
that state. In addition, the Portfolio is non-diversified, which means that it
may invest in the securities of relatively few issuers. As a result, the
Portfolio may be more susceptible to a single adverse economic, political or
regulatory occurrence affecting one or more of these issuers, and may experience
increased volatility due to its investments in those securities.
The Portfolio is subject to the risk that its market segment, Idaho municipal
securities, may underperform the municipal securities of issuers in other states
or the fixed income markets as a whole. The Adviser also may not be able to
match the performance of the index which is compared to the Portfolio's total
return below.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provides some indication of the risks of an investment
in the Portfolio. Of course Portfolio, past performance does not necessarily
indicate how the Portfolio will perform in the future.
This bar chart shows changes in the performance of the Portfolio's Institutional
Class Shares from year to year.
<TABLE>
<S> <C>
1995 13.86%
1996 1.96%
1997 8.16%
1998 5.47%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
4.55% -1.36%
(9/30/95) (3/31/96)
</TABLE>
The Portfolio's performance from 1/1/99 to 3/31/99 was 5.47%.
This table compares the Portfolio's average annual total returns for the periods
ending December 31, 1998 to those of the Lehman 10 Year Municipal Bond Index.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Idaho Municipal Bond Fund
Lehman 10 Year Municipal Bond Index
</TABLE>
Page 24 of 36
<PAGE>
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. Unlike a mutual fund, an
index does not have an investment adviser and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower.
PORTFOLIO FEES AND EXPENSES
MUTUAL FUNDS INCUR EXPENSES TO PAY FOR ADVISORY, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE
PORTFOLIO.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.60%
Other Expenses .XX%
-----
Total Annual Fund Operating Expenses X.XX%
</TABLE>
THE PORTFOLIO'S TOTAL ANNUAL OPERATING EXPENSES FOR THE MOST RECENT FISCAL YEAR
WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER IS WAIVING A PORTION
OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED LEVEL. THE
ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE PORTFOLIO'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
IDAHO MUNICIPAL BOND FUND - INSTITUTIONAL CLASS SHARES 0.75%
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISER" AND
"DISTRIBUTION OF PORTFOLIO SHARES."
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and
Portfolio expenses remain the same. Although your actual costs and returns
might be different, your approximate costs of investing $10,000 in the Portfolio
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Institutional Class Shares $____ $____ $____ $____
</TABLE>
Page 25 of 36
<PAGE>
MORE INFORMATION ABOUT RISK
EQUITY RISK - Investments in equity securities Equity Fund
and equity derivatives in general are subject
to market risks that may cause their prices to Balanced Fund
fluctuate over time. The value of securities
of individual companies may fluctuate based
upon performance of the company and industry as
well as economic trends and developments.
Fluctuations in the value of equity securities
in which a mutual fund invests will cause a
Portfolio's net asset value to fluctuate. An
investment in a portfolio of equity securities
may be more suitable for long-term investors
who can bear the risk of these share price
fluctuations.
FIXED INCOME RISK - The market value of fixed Balanced Fund
income investments changes in response to
interest rate changes and other factors. Intermediate Term Bond Fund
During periods of falling interest rates, the
values of outstanding fixed income securities Short Term Bond Fund
generally rise and during periods of rising
interest rates, the value of those securities Municipal Bond Fund
falls. While securities with longer maturities
tend to produce higher yields, the prices of Short Term Municipal Bond
longer maturity securities are also subject to Fund
greater market fluctuations as a result of
changes in interest rates. In addition to Idaho Municipal Bond Fund
these fundamental risks, different types of
fixed income securities may be subject to the
following additional risks:
CALL RISK - During periods of falling
interest rates, certain debt obligations
with high interest rates may be prepaid
(or "called") by the issuer prior to
maturity. This may cause a Portfolio's
average weighted maturity to fluctuate,
and may require a Portfolio to invest the
resulting proceeds at lower interest
rates.
CREDIT RISK - The possibility that an
issuer will be unable to make timely
payments of either principal or interest.
EVENT RISK - Securities may suffer
declines in credit quality and market
value due to issuer restructurings or
other factors. This risk should be
reduced because of the Portfolio's
multiple holdings.
Page 26 of 36
<PAGE>
MUNICIPAL ISSUER RISK - There may be economic Municipal Bond Fund
or political changes that impact the ability of
municipal issuers to repay principal and to Short Term Municipal Bond
make interest payments on municipal securities. Fund
Changes to the financial condition or credit
rating of municipal issuers may also adversely Idaho Municipal Bond Fund
affect the value of the Portfolio's municipal
securities. Constitutional or legislative
limits on borrowing by municipal issuers may
result in reduced supplies of municipal
securities. Moreover, certain municipal
securities are backed only by a municipal
issuer's ability to levy and collect taxes.
In addition, concentration of investments in Idaho Municipal Bond Fund
issuers located in a single state makes a
Portfolio more susceptible to adverse
political or economic developments affecting
that state.
MORTGAGE-BACKED SECURITIES -Mortgage-backed Balanced Fund
securities are fixed income securities
representing an interest in a pool of Intermediate Term Bond Fund
underlying mortgage loans. They are sensitive
to changes in interest rates, but may respond Short Term Bond Fund
to these changes differently from other fixed
income securities due to the possibility of
prepayment of the underlying mortgage loans.
As a result, it may not be possible to
determine in advance the actual maturity date
or average life of a mortgage-backed security.
Rising interest rates tend to discourage
refinancings, with the result that the average
life and volatility of the security will
increase exacerbating its decrease in market
price. When interest rates fall, however,
mortgage-backed securities may not gain as much
in market value because of the expectation of
additional mortgage prepayments that must be
reinvested at lower interest rates. Prepayment
risk may make it difficult to calculate the
average maturity of a portfolio of mortgage-
backed securities and, therefore, to assess the
volatility risk of that portfolio.
U.S. GOVERNMENT SECURITIES RISK - Although the Balanced Fund
Portfolio's U.S. government securities are
considered to be among the safest investments, Intermediate Term Bond Fund
they are not guaranteed against price movements
due to changing interest rates. Obligations Short Term Bond Fund
issued by some U.S. government agencies are
backed by the U.S. Treasury, while others are
backed solely by the ability of the agency to
borrow from the U.S. Treasury or by the
agency's own resources.
Page 27 of 36
<PAGE>
YEAR 2000 RISK - The Portfolios depend on the All Portfolios
smooth functioning of computer systems in
almost every aspect of their business. Like
other mutual funds, businesses and individuals
around the world, the Portfolios could be
adversely affected if the computer systems used
by their service providers do not properly
process dates on and after January 1, 2000, and
distinguish between the year 2000 and the year
1900. The Portfolios have asked their service
providers whether they expect to have their
computer systems adjusted for the year 2000
transition, and have received assurances from
each service provider that they are devoting
significant resources to prevent material
adverse consequences to the Portfolios.
Nevertheless, the Portfolios and their
shareholders may experience losses if these
assurances prove to be incorrect or as a result
of year 2000 computer difficulties experienced
by issuers of portfolio securities or third
parties, such as custodians, banks, broker-
dealers or others with which the Portfolios do
business.
EACH PORTFOLIO'S OTHER INVESTMENTS
In addition to the investments and strategies described in this prospectus, each
Portfolio also may invest in other securities, use other strategies and engage
in other investment practices. These investments and strategies, as well as
those described in this prospectus, are described in detail in our Statement of
Additional Information. Of course, the Portfolio cannot guarantee that any
Portfolio will achieve its investment goal.
The investments and strategies described in this prospectus are those used under
normal conditions. During unusual economic or market conditions, or for
temporary defensive or liquidity purposes, each Portfolio may invest up to 100%
of its assets in fixed income securities, money market instruments and other
securities that would not ordinarily be consistent with the Portfolio's
objectives.
Page 28 of 36
<PAGE>
INVESTMENT ADVISER
The Investment Adviser makes investment decisions for the Portfolios and
continuously reviews, supervises and administers each Portfolio's investment
program. The Board of Trustees supervises the Adviser and establishes policies
that the Adviser must follow in its management activities.
First Security Investment Management, Inc. serves as the Adviser to the
Portfolios. As of January 31, 1999, the Adviser had approximately $____ in
assets under management. For the fiscal year ended January 31, 1999, First
Security Investment Management, Inc. received advisory fees of:
EQUITY FUND [VAR:Advisor1.Portfolio1.Fees] %
BALANCED FUND [VAR:Advisor1.Portfolio2.Fees] %
INTERMEDIATE TERM BOND FUND [VAR:Advisor1.Portfolio3.Fees] %
SHORT TERM BOND FUND [VAR:Advisor1.Portfolio4.Fees] %
MUNICIPAL BOND FUND [VAR:Advisor1.Portfolio5.Fees] %
SHORT TERM MUNICIPAL BOND FUND [VAR:Advisor1.Portfolio6.Fees] %
IDAHO MUNICIPAL BOND FUND [VAR:Advisor1.Portfolio7.Fees] %
The Adviser may use its affiliates as brokers for Portfolio transactions.
PORTFOLIO MANAGERS
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 Senior Vice President and
Senior Portfolio Manager of the Adviser and has been responsible for the
Balanced Fund since inception. He joined the Adviser in 1991 serving as
Assistant Vice President and Portfolio Manager. Prior to joining the
Adviser, Mr. Anderson served as a Trust Investment Officer with West One
Trust Company from 1989 to 1991.
INTERMEDIATE TERM BOND FUND AND SHORT TERM BOND FUND - Mark L. Anderson is a
Senior Vice President of the Adviser and has been responsible for the
Intermediate Term Bond Fund and Short Term Bond since inception and has been
portfolio manager for the past six years. Mr. Anderson joined the Adviser in
1985 and has managed bond, balanced, equity and money market portfolios since
that time.
MUNICIPAL BOND FUND, SHORT TERM MUNICIPAL BOND FUND AND IDAHO MUNICIPAL BOND
FUND - John B. Tousley is a Vice President and Senior Portfolio Manager of
the Adviser and has been responsible for the Idaho Municipal Bond Fund since
1998 and has been responsible for the Municipal Bond Fund and Short Term
Municipal Bond Fund since March of 1999. He joined the Adviser in 1996.
From 1993 to 1996, Mr. Tousley served as both a portfolio manager and analyst
for U.S. Bank, managing fixed-income equity and balanced portfolios.
Page 29 of 36
<PAGE>
PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES
This section tells you how to buy, sell (sometimes called "redeem") or exchange
Institutional Class Shares of the Portfolios.
HOW TO PURCHASE PORTFOLIO SHARES
You may purchase shares directly by:
- - Mail
- - Telephone, or
- - Wire
To purchase shares directly from us, please call 1-800-472-0577, or complete and
send in an application. Unless you arrange to pay by wire, write your check,
payable in U.S. dollars, to "Achievement Funds" and include the name of the
appropriate Portfolio(s) on the check. A Portfolio cannot accept third-party
checks, credit cards, credit card checks or cash.
GENERAL INFORMATION
A Portfolio may reject any purchase order if it is determined that accepting the
order would not be in the best interests of the Portfolio or its shareholders.
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after a Portfolio receives your purchase order.
Each Portfolio calculates its NAV once each Business Day at the
regularly-scheduled close of normal trading on the New York Stock Exchange
(normally, 4:00 p.m. Eastern time). So, for you to receive the current Business
Day's NAV, generally a Portfolio must receive your purchase order before 4:00
p.m. Eastern time.
HOW WE CALCULATE NAV
NAV for one Portfolio share is the value of that share's portion of all of the
assets in the Portfolio.
In calculating NAV, a Portfolio generally values its investment portfolio at
market price. If market prices are unavailable or a Portfolio thinks that they
are unreliable, fair value prices may be determined in good faith using methods
approved by the Board of Trustees.
MINIMUM PURCHASES
To purchase Institutional Class Shares for the first time, you must invest at
least $500,000 in any Portfolio; however, the minimum investment may be waived
at the Distributor's discretion.
No minimum amount is required for subsequent investments in any Portfolio.
Page 30 of 36
<PAGE>
HOW TO SELL YOUR PORTFOLIO SHARES
Holders of Institutional Class Shares may sell shares by following procedures
established when they opened their account or accounts. If you have questions,
call 1-800-472-0577. If you own your shares through an account with a broker or
other institution, contact that broker or institution to sell your shares.
If you own your shares directly, you may sell (sometimes called "redeem") your
shares on any Business Day by contacting a Portfolio directly by mail or
telephone at 1-800-472-0577.
[If you would like to sell $5,000 or more of your shares, please notify the
Portfolio in writing.]
The sale price of each share will be the next NAV determined after the Portfolio
receives your request.
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within seven Business Days after we
receive your request. Your proceeds can be wired to your bank account (subject
to a $15 fee) or sent to you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY
CHECK, REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED
(WHICH MAY TAKE UP TO 15 BUSINESS DAYS).
REDEMPTIONS IN KIND
We generally pay sale (redemption) proceeds in cash. However, under unusual
conditions that make the payment of cash unwise (and for the protection of the
Portfolio's remaining shareholders) we might pay all or part of your redemption
proceeds in liquid securities with a market value equal to the redemption price
(redemption in kind). It is highly unlikely that your shares would ever be
redeemed in kind, but if they were you would probably have to pay transaction
costs to sell the securities distributed to you, as well as taxes on any capital
gains from the sale as with any redemption.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
A Portfolio may suspend your right to sell your shares if the NYSE restricts
trading, the SEC declares an emergency or for other reasons. More information
about this is in our Statement of Additional Information.
HOW TO EXCHANGE YOUR SHARES
You may exchange your shares on any Business Day by contacting us directly by
mail or telephone.
You may exchange shares through your financial institution by mail or telephone.
Exchange requests must be for an amount of at least $[VAR:Exchange.General.Min].
Page 31 of 36
<PAGE>
When you exchange shares, you are really selling your shares and buying other
Portfolio shares which may produce a gain or loss for tax purposes. Your sale
price and purchase price will be based on the NAV next calculated after the
Portfolio receives your exchange request.
You may not exchange between Institutional Class shares and the Retail Class
A shares or Retail Class B shares of any Portfolio. However, Institutional
Class shares will be converted to Retail Class A shares automatically should
an investor in the Institutional Class become ineligible to purchase
additional Institutional Class shares. For example, an automatic conversion
would occur if an Institutional Class investor receives a distribution from a
trust, and such investor would be investing individually (and becomes a
shareholder of record) rather than through a qualified account. A conversion
from the Institutional Class shares to the Retail Class A shares of a
Portfolio will occur automatically when an Institutional Class shareholder's
account falls below the $500,000 minimum balance. The Trust will provide
thirty days' notice of any such conversion. The conversion will take place
at net asset value, without the imposition of a sales load, fee or other
charge. After the conversion, the converted shares will be subject to all
fees applicable to Retail Class A Shares. In the event that a shareholder
declines to accept an automatic conversion, and if the shareholder does not
meet the requirements for investing in Institutional Class shares, the Trust
reserves the right to redeem the shares upon expiration of the thirty-day
period. The Trust reserves the right to require shareholders to complete an
application or other documentation in connection with the conversion.
Retail Class A shares of a Portfolio may be exchanged for Institutional Class
shares of the same Portfolio should the shareholder establish a trust, custodial
or money management relationship with a qualified institution.
TELEPHONE TRANSACTIONS
Purchasing, selling and exchanging Fund shares over the telephone is extremely
convenient, but not without risk. Although the Fund has certain safeguards and
procedures to confirm the identity of callers and the authenticity of
instructions, the Portfolio is not responsible for any losses or costs incurred
by following telephone instructions we reasonably believe to be genuine. If you
or your financial institution transact with the Portfolio over the telephone,
you will generally bear the risk of any loss.
Page 32 of 36
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Portfolio distributes its income as follows:
Equity Fund Declared and paid quarterly
Balanced Fund Declared and paid monthly
Intermediate Term Bond Fund Declared daily and paid monthly
Short Term Bond Fund Declared daily and paid monthly
Municipal Bond Fund Declared daily and paid monthly
Short Term Municipal Bond Fund Declared daily and paid monthly
Idaho Municipal Bond Fund Declared daily and paid monthly
Each Portfolio makes distributions of capital gains, if any, at least annually.
If you own Portfolio shares on the last day of the month or quarter, you will be
entitled to receive the distribution.
You will receive dividends and distributions in the form of additional Portfolio
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify the Portfolio in writing prior to the date of the distribution.
Your election will be effective for dividends and distributions paid after the
Portfolio receives your written notice. To cancel your election, simply send
the Portfolio written notice.
TAXES
The dividends and distributions you receive from a Portfolio may be subject to
federal, state and local taxation, depending on your tax situation. The tax
treatment of dividends and distributions is the same whether or not you reinvest
them. Dividends are taxed as ordinary income, long-term capital gains are taxed
at a maximum rate of 20% and short-term capital gains are currently taxed at
ordinary income tax rates. Each Portfolio will tell you annually how to treat
dividends and distributions.
If you redeem a Portfolio's Shares, you will be subject to tax on any gain. The
character of such gain will generally be based on your holding period for the
shares. An exchange of one Portfolio's shares for shares of another Portfolio
is a sale for tax purposes.
More information about taxes is in the Statement of Additional Information. In
addition, because each investor's tax circumstances are unique and because the
tax laws are subject to change, you should consult your tax advisor about your
investment.
Page 33 of 36
<PAGE>
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about Institutional Class
Shares of each Portfolio. This information is intended to help you understand
each Portfolio's financial performance for the past five years, or, if shorter,
the period of the Portfolio's operations. Some of this information reflects
financial information for a single Portfolio share. The total returns in the
table represent the rate that you would have earned (or lost) on an investment
in a Portfolio, assuming you reinvested all of your dividends and distributions.
This information has been audited by Deloitte & Touche, LLP, independent
accountants. Their report, along with each Portfolio's financial statements,
appears in the annual report that accompanies the Statement of Additional
Information. You can obtain the annual report, which contains more performance
information, at no charge by calling 1-800-472-0577.
Page 34 of 36
<PAGE>
THE ACHIEVEMENT FUNDS TRUST
INVESTMENT ADVISER
First Security Investment Management, Inc.
61 South Main Street
Salt Lake City, Utah 84111
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456
LEGAL COUNSEL
Ballard Spahr Andrews & Ingersoll
1735 Market Street
51st Floor
Philadelphia, Pennsylvania 19103-7599
More information about each Portfolio is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated June 1, 1999, includes detailed information about The Achievement
Funds Trust Portfolios. The SAI is on file with the SEC and is incorporated by
reference into this prospectus. This means that the SAI, for legal purposes, is
a part of this prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
These reports list each Portfolio's holdings and contain information from the
Portfolio's managers about strategies, and recent market conditions and trends.
The reports also contain detailed financial information about the Portfolios.
TO OBTAIN MORE INFORMATION:
BY TELEPHONE: Call 1-800-472-0577
BY MAIL: Write to the Fund
[VAR:Fund.Address]
BY E-MAIL: [VAR:Fund.EmailAddress]]
BY INTERNET: [VAR:Fund.InternetAddress]
Page 35 of 36
<PAGE>
FROM THE SEC: You can also obtain the SAI or the Annual and Semi-annual
reports, as well as other information about The Achievement Funds Trust , from
the SEC's website ("http://www.sec.gov"). You may review and copy documents at
the SEC Public Reference Room in Washington, DC (for information call
1-800-SEC-0330). You may request documents by mail from the SEC, upon payment
of a duplicating fee, by writing to: Securities and Exchange Commission, Public
Reference Section, Washington, DC 20549-6009. The Achievement Funds Trust
Portfolios' Investment Company Act registration number is 811-[VAR:SEC-Number].
Page 36 of 36
<PAGE>
THE ACHIEVEMENT FUNDS TRUST
- EQUITY FUND - MUNICIPAL BOND FUND
- BALANCED FUND - SHORT TERM MUNICIPAL BOND FUND
- INTERMEDIATE TERM BOND FUND - IDAHO MUNICIPAL BOND FUND
- SHORT TERM BOND FUND
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 1,1999, for the Institutional and Retail
Classes of shares of the Trust's investment portfolios described above
(collectively the "Portfolios," and each a "Portfolio"). The Trust's Annual
Report to Shareholders for fiscal year ended January 31, 1999, is incorporated
into this Statement of Additional Information by reference. The Prospectuses
and Annual Report may be obtained, without charge, by written request to SEI
Investments Distribution Co., Oaks, PA 19456 or by calling 1-800-472-0577.
TABLE OF CONTENTS
INVESTMENT STRATEGIES AND RISKS. . . . . . . . . . . . . . . . . . . . . .S-5
INVESTMENT POLICIES AND LIMITATIONS. . . . . . . . . . . . . . . . . . . .S-14
THE ADVISER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-17
THE ADMINISTRATOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-19
DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-21
TRUSTEES AND OFFICERS OF THE TRUST . . . . . . . . . . . . . . . . . . . .S-25
PERFORMANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-28
PURCHASE, AND REDEMPTION OF SHARES . . . . . . . . . . . . . . . . . . . .S-31
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . .S-33
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-34
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . .S-43
S-1
<PAGE>
LIMITATION OF TRUSTEE'S LIABILITY. . . . . . . . . . . . . . . . . . . . .S-45
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES. . . . . . . . . . . .S-45
THE TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-45
COUNSEL TO THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . .S-45
INDEPENDENT ACCOUNTANTS. . . . . . . . . . . . . . . . . . . . . . . . . .S-45
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .S-46
APPENDIX A - PERMITTED INVESTMENTS DESCRIPTIONS. . . . . . . . . . . . . .S-47
APPENDIX B RATINGS DESCRIPTIONS. . . . . . . . . . . . . . . . . . . . . .S-53
June 1, 1999
S-2
<PAGE>
THE TRUST AND DESCRIPTION OF SHARES
The Achievement Funds Trust is an open-end management, series, investment
company. Each of the Portfolios is diversified, except for the Idaho Municipal
Bond Fund, which is a non-diversified portfolio of securities. 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. 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 with the Institutional and Retail Class A Shares, the "shares").
All classes of shares of a Portfolio have a common investment objective and
investment limitations and policies.
The Trust may issue an unlimited number of shares of each of its Portfolios.
Each share is entitled to dividends and distributions out of income earned on
the assets of Portfolio as may be 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 Board of Trustees can divide any shares of the Trust to
create one or more other Portfolios and to create classes in such Portfolios.
At the end of an eight-year period beginning on the first day of the month in
which the shares were purchased, 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.
All shares of the Trust have equal voting rights and will be voted in the
aggregate, and not by Portfolio or class, except where voting by Portfolio or
class is required by law or where the matter involved affects only one Portfolio
or class. Class B shareholders of any Portfolio must approve any material
increase in fees payable with respect to the Portfolio's Class A shares 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 Investment Company
Act of 1940 (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.
S-3
<PAGE>
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.
The Trust may be terminated at any time by a majority of the Trustees subject to
a favorable vote of a majority of the outstanding voting securities, as defined
in the 1940 Act, of each Portfolio or any class thereof voting separately by
Portfolio or class. The liquidation of any particular Portfolio or any class
thereof may be authorized by vote of a majority of the Trustees subject to the
approval of a majority of the outstanding voting shares of that Portfolio or
such class, as defined in the 1940 Act. 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 or classes shares present at a meeting, if the holders
of more than 50% of the outstanding shares of the Portfolio or class are present
or represented by proxy, or (ii) more than 50% of the Portfolio's or classes
outstanding shares, whichever is less.
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 other entities provide essential
management services to the Trust.
Some of the Trustees of the Trust were elected when the Trust was first formed.
Other Trustees were elected at a special meeting of shareholders held on
November 7, 1996. The Trustees serve during the lifetime of the Trust, or until
they die, resign or are removed. The Trustees may elect their own successors.
Under the Trust Agreement, shareholders of record 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.
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 the disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Trust. 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.
INVESTMENT STRATEGIES AND RISKS
S-4
<PAGE>
STRATEGIES
EQUITY FUND - 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 The NASDAQ Stock
Market). Under normal conditions, the Equity Fund will invest at least 80% of
its total assets in common stocks. The Equity Fund will not invest more than
20% of its total assets in securities convertible into or exchangeable for
common stock. The Equity Fund may invest only in convertible debentures that
have received a rating of A or higher by Standard & Poor's Corporation ("S&P")
or A or higher by Moody's Investors Service ("Moody's") or are determined to be
of comparable quality by the Adviser at time of purchase.
The Equity Fund may purchase securities on a "when-issued" basis and may engage
in securities repurchase transactions. 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.
BALANCED FUND - 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 25-75% 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 The NASDAQ Stock Market).
The Balanced Fund will, under normal market conditions, invest a minimum of 25%
of its total assets in fixed income securities, including obligations issued by
the U.S. Government and its agencies and instrumentalities, zero coupon receipts
involving U.S. Treasury obligations and corporate bonds and debentures,
asset-backed securities, floating or variable rate corporate notes and U.S.
dollar denominated debt securities of foreign issuers. 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 U.S. dollar denominated debt securities of foreign issuers
will not exceed 40% of the fixed income portion of the Portfolio.
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. However, not more than 20% of the assets
of the Balanced Fund that are invested in fixed income securities
S-5
<PAGE>
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.
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 and may
engage in securities repurchase transactions. The Balanced Fund may also
write (sell) covered call options.
INTERMEDIATE TERM BOND FUND - The Intermediate Term Bond Fund may invest in the
following debt securities:
- fixed income securities,
- obligations issued by the U.S. Government and its agencies and
instrumentalities,
- zero coupon receipts involving U.S. Treasury obligations and corporate
bonds and debentures,
- asset-backed securities, floating or variable rate corporate notes,
and
- U.S. dollar denominated debt securities of foreign issuers.
The Portfolio may also invest in mortgage-backed securities (including
collateralized mortgage obligations), which are securities issued by government
sponsored entities, such as the Government National Mortgage Association, or by
private issuers that entitle the holder to a share of all interest and principal
payments from a pool of mortgage loans underlying the security. All of the
foregoing investment securities are considered by the Trust to be bonds and 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. However, the Intermediate Term Bond Fund may not invest
more than 20% of its assets in bonds that are rated BBB by S&P or Baa by Moody's
or are determined to be of comparable quality by the Adviser. In the event the
credit quality of bonds purchased by the Intermediate Term Bond Fund declines
below the applicable criteria, the Adviser may consider selling such securities.
The Portfolio's investment in mortgage-backed securities, asset-backed
securities, floating or variable rate corporate notes and U.S. dollar
denominated debt securities of foreign issuers will not exceed 40% of its total
assets.
S-6
<PAGE>
The Intermediate Term Bond Fund may invest in money market instruments,
including:
- securities issued or guaranteed by the United States Government and
its agencies or instrumentalities,
- repurchase agreements,
- certificates of deposit or bankers' acceptances issued by domestic
banks or savings institutions with assets exceeding $2.5 billion at
the end of their most recent fiscal year, and
- commercial paper rated, at the time of purchase, in the top two
categories by a national rating agency or determined to be of
comparable quality by the Adviser at time of purchase.
The Intermediate Term Bond Fund may also invest up to 10% of its total assets in
money market mutual funds.
The Intermediate Term Bond Fund may purchase securities on a "when-issued" basis
and reserves the right to engage in transactions involving standby commitments.
SHORT TERM BOND FUND - The Short Term Bond Fund's permitted investments consist
of the following debt securities:
- fixed income securities,
- obligations issued by the U.S. Government and its agencies and
instrumentalities,
- zero coupon receipts involving U.S. Treasury obligations and corporate
bonds and debentures,
- asset-backed securities,
- floating or variable rate corporate notes, and
- U.S. dollar denominated debt securities of foreign issuers.
The Portfolio may also invest in mortgage-backed securities (including
collateralized mortgage obligations), which are securities issued by government
sponsored entities, such as the Government National Mortgage Association, or by
private issuers that entitle the holder to a share of all principal and interest
payments from a pool of mortgage loans underlying the security. All of the
foregoing investment securities will be rated A or higher by S&P or by Moody's
at the time of purchase or determined to be of comparable quality by the Adviser
at the time of purchase, and are considered by the Trust to be bonds. In the
event the credit quality of the bonds purchased by the Short Term Bond Fund
declines below the applicable criteria, the Adviser will consider selling such
securities.
The Short Term Bond Fund may invest in money market instruments, including:
S-7
<PAGE>
- securities issued or guaranteed by the United States Government and
its agencies or instrumentalities,
- repurchase agreements,
- certificates of deposit or bankers' acceptances issued by domestic
banks or savings institutions with assets exceeding $2.5 billion at
the end of their most recent fiscal year, and
- commercial paper rated, at the time of purchase, in the top two
categories by a national rating agency or determined to be of
comparable quality by the Adviser at the time of purchase.
The Short Term Bond Fund may also invest up to 10% of its total assets in money
market mutual funds.
The Short Term Bond Fund may purchase securities on a "when-issued" basis and
reserves the right to engage in transactions involving standby commitments.
MUNICIPAL BOND FUND - The issuers of municipal securities purchased by the
Municipal Bond Fund 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 15% of its assets in municipal securities of
issuers located in any single state, territory or possession. Although the
Adviser intends to invest solely in municipal securities, up to 20% of all of
the assets of the Municipal Bond Fund can be invested in U.S. Treasury
obligations when suitable municipal securities are not available.
The Municipal Bond Fund may purchase the following types of municipal
securities, but only if such securities, at the time of purchase, have the
requisite ratings set forth below or are of comparable quality as determined by
the Adviser:
- Municipal bonds rated BBB or better by S&P or Baa or better by
Moody's, provided, that municipal bonds held by the Municipal Bond
Fund will, on a dollar-weighted basis, have a rating of A or better,
and 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;
- Municipal notes rated at least SP-1 by S&P or MIG-1 by Moody's;
- Tax-exempt commercial paper rated at least A-1 by S&P or Prime-1 by
Moody's;
- Municipal lease obligations that have the ratings specified 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
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<PAGE>
the likelihood that the lease related to the obligation will be
canceled 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
- 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.
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.
SHORT TERM MUNICIPAL BOND FUND - The issuers of municipal securities be
purchased by the Short Term Municipal Bond Fund can be located in all fifty
states, the District of Columbia, Puerto Rico and other U.S. territories and
possessions.
The Short Term Municipal Bond Fund 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:
- municipal bonds rated BBB or higher by S&P or Baa or higher by
Moody's, provided, however, that the Short Term Municipal Bond Fund
may not invest more than 20% of its assets in bonds rated BBB by S&P
or Baa by Moody's;
- municipal notes rated at least SP-1 by S&P or MIG-1 or VMIG-1 by
Moody's; and
- tax-exempt commercial paper rated at least A-1 by S&P or Prime-1 by
Moody's. In the event the credit quality of municipal securities
owned by the Portfolio declines below the applicable criteria outlined
above the Adviser may consider selling such securities.
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<PAGE>
The Short Term Municipal Bond Fund may also purchase other types of tax exempt
instruments as long as they are of a quality equivalent to the bond, note or
commercial paper ratings stated above, and may invest up to 10% of its total
assets in tax-exempt money market mutual funds.
The Short Term Municipal Bond Fund may invest in variable and floating rate
obligations, may purchase securities on a "when-issued" basis, and reserves the
right to engage in transactions involving standby commitments.
IDAHO MUNICIPAL BOND FUND - The Idaho Municipal Bond Fund may purchase the
following types of municipal securities of issuers located in Idaho, but only if
such securities, at the time of purchase, have the requisite ratings set forth
below or are of comparable quality as determined by the Adviser at the time of
purchase:
- 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;
- municipal notes rated at least SP-1 by S&P or MIG-1 or VMIG-1 by
Moody's; and
- 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 if
their credit quality declines below the applicable criteria outlined above.
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.
GENERAL INVESTMENT POLICIES - For temporary defensive purposes, when the Adviser
determines that market conditions warrant, the Equity Fund, the Balanced Fund,
the Intermediate Term Bond Fund and the Short Term Bond Fund each may invest up
to 100% of its assets in:
- money market instruments consisting of securities issued or
guaranteed by the United States Government, its agencies or
instrumentalities, repurchase agreements,
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<PAGE>
- certificates of deposit and bankers' acceptances issued by
domestic banks or savings and loan associations having net assets
of at least $2.5 billion as of the end of their most recent
fiscal year, and
- commercial paper rated, at the time of purchase, in the top two
categories by a national rating agency or determined to be of
comparable quality by the Adviser at the time of purchase, and
- other long- and short-term debt instruments which are rated A or
higher by S&P or Moody's at the time of purchase, and may hold a
portion of its assets in cash reserves; and
For temporary defensive purposes, when the Adviser determines that
market conditions warrant, the Municipal Bond Fund, the Short Term
Municipal Bond Fund and the Idaho Municipal Bond Fund may each invest up to
100% of its assets in:
- tax-exempt money market mutual funds,
- 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 Equity Fund and Balanced Fund may write (sell) 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 a Portfolio
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.
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
S-11
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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.
For additional information regarding permitted investments see APPENDIX A -
PERMITTED INVESTMENTS DESCRIPTION. For a description of ratings, see APPENDIX B
- - RATINGS DESCRIPTIONS.
RISK FACTORS
ASSET-BACKED SECURITIES - 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 (EQUITY FUND AND BALANCED FUND) - Risks associated with
covered call option transactions include:
- 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;
- there may be an imperfect correlation between the movement in prices
of options and the securities underlying them;
- there may not be a liquid secondary market for options; and
- 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.
MORTGAGE-BACKED SECURITIES - 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
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<PAGE>
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 assumption is necessarily subjective, and thus different
market participants can produce different average life estimates with regard to
the same security. Thus, the estimated average life may be different than a
security's actual average life.
MUNICIPAL SECURITIES - Economic, business or political developments might affect
all municipal securities of a similar type. To the extent that a significant
portion of the assets of the Municipal Bond Fund, Short Term Municipal Bond Fund
or Idaho Municipal Bond Fund are invested in municipal securities payable from
revenue on similar projects, those Portfolios will be subject to the peculiar
risks presented by such projects to a greater extent than they would be if its
assets were not so invested. For example, certain municipal securities may be
obligations of issuers who rely in whole or in part on ad valorem real property
taxes as a source of revenue and legislation may have the effect of limiting ad
valorem taxes on real property or restricting the ability of taxing entities to
increase real property tax revenues. Municipal securities that are payable only
from the revenues derived from a particular facility, such as a utility or
housing project, may be adversely affected by laws or regulations that make it
more difficult for the particular facility to generate revenues sufficient to
pay such interest and principal, including laws and regulations that limit the
amount of fees, rates or other charges that may be imposed for use of the
facility or that increase competition among facilities of that type or that
limit or otherwise have the effect of reducing the use of such facilities
generally, thereby reducing the revenues generated by the particular facility.
If the payment of interest and principal on municipal securities are insured in
whole or in part by a government created fund, the municipal securities may be
adversely affected by laws or regulations that restrict the aggregate insurance
proceeds available for payment of principal and interest in the event of a
default on such securities. State and local tax revenues generally mirror
economic conditions and may be adversely affected by regional or national
recessions.
RATED SECURITIES (BALANCED FUND, INTERMEDIATE TERM BOND FUND, MUNICIPAL BOND
FUND, SHORT TERM MUNICIPAL BOND FUND AND IDAHO BOND FUND) - The Balanced Fund,
the Intermediate Term Bond Fund, the Municipal Bond Fund, the Short Term
Municipal Bond Fund and the Idaho Municipal Bond Fund may invest in securities
rated as investment grade by either S&P or Moody's. Up to 20% of the assets of
the Balanced Fund that are invested in fixed income securities and convertible
securities, and up to 20% of the assets of the Intermediate Term Bond Fund, the
Municipal Bond Fund, the Short Term Municipal Bond Fund, and the Idaho Municipal
Bond Fund, may be invested in bonds in the lowest investment grade debt category
(i.e., bonds rated BBB by S&P or Baa by Moody's), which have speculative
characteristics. Changes in economic conditions or other circumstances are more
likely to lead to a weakened capacity on the part of the issuer of such bonds to
make principal and interest payments than is the case with higher grade bonds.
The Portfolios may retain a security which was rated as investment grade at the
time of purchase but whose rating is subsequently downgraded below investment
grade.
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<PAGE>
YANKEE-BONDS - U.S. dollar denominated debt securities of foreign issuers are
referred to as "Yankee Bonds." 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.
SPECIAL CONSIDERATIONS RELATING TO IDAHO MUNICIPAL SECURITIES
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.
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. A Portfolio's investment goal is a fundamental investment
policy. Fundamental investment
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<PAGE>
policies and limitations cannot be changed without approval by a majority of
the outstanding voting securities (as defined in the1940 Act) of a Portfolio.
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 a
Portfolio may purchase or hold debt instruments, and a Portfolio may enter
into repurchase agreements as described in the Prospectus or Statement of
Additional Information.
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.
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").
S-15
<PAGE>
8. 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 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 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 as permitted and described in its Prospectus or Statement of
Additional Information.
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 or Statement of Additional
Information.
4. Purchase securities on margin, except that a Portfolio may obtain such
short term credits as are necessary for the clearance of transactions.
5. 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.
6. Invest in interests in oil, gas or other mineral exploration or development
programs or oil, gas or mineral leases.
7. 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.
8. Invest in illiquid securities, except that the Municipal Bond Fund, Short
Term Municipal Bond Fund and Idaho Municipal Bond may invest up to 15% of
their total assets in illiquid securities.
THE ADVISER
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<PAGE>
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.
For the fiscal years ended January 31, 1999, January 31, 1998, and January 31,
1997 the Portfolios paid the Adviser the following fees:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Equity Fund $1,240,547 $933,172
Balanced Fund 1,039,727 853,068
Intermediate Term Bond Fund 708,954 499,628
Short Term Bond Fund 227,276 276,620
Municipal Bond Fund 201,286 38,264
Short Term Municipal Bond Fund 118,607 69,894
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<PAGE>
Idaho Municipal Bond Fund 198,004 76,325
</TABLE>
The advisory fees paid by the Portfolios for periods indicated were allocated
between the Institutional, Class A and Class B classes of shares based upon the
total assets of the respective classes.
Under the Advisory Agreement, the Advisor is entitled to receive a fee for the
services it provides, which is calculated daily and paid monthly, at an annual
rate of 0.74% of the average daily net assets of the Equity Fund and the
Balanced Fund, and at an annual rate of 0.60% of the average daily net assets of
the Intermediate Term Bond fund, the Short Term Bond Fund, the Municipal Bond
Fund, the Short Term Municipal Bond Fund and the Idaho Municipal Bond Fund. The
Advisor has voluntarily waived a portion of its fee for the Trust's current
fiscal year so that total operating expenses for the Equity Fund and the
Balanced Fund (excluding 12b-1 fees) will not exceed 0.90%, and the total
operating expenses for the Intermediate Term bond Fund, the Municipal Bond Fund,
the Short Term Bond Fund, the Short Term Municipal Bond Fund and the Idaho
Municipal Bond Fund (excluding 12b-1 fees) will not exceed 0.75%. The Advisor
may revoke its fee waivers at any time at its sole discretion without notice to
any current or prospective shareholder. For the fiscal year ended January 31,
1999, the Adviser received advisory fees in amounts equal to the following
annual percentage rates applied to the average daily net assets of the
Portfolios indicated:
- ___% for the Equity Fund;
- ___% for the Balanced Fund;
- ___% for the Intermediate Term Bond Fund;
- ___% for the Short Term Bond Fund;
- ___% for the Municipal Bond Fund;
- ___% for the Short Term Municipal Bond Fund; and
- ___% for the Idaho Municipal Bond Fund.
For the fiscal years ended January 31, 1999, January 31, 1998 and January 31,
1997, the Adviser waived advisory fees for each Portfolio as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Equity Fund $198,551 $280,554
Balanced Fund 212,761 262,295
Intermediate Term Bond Fund 179,395 244,008
Short Term Bond Fund 115,375 150,021
Municipal Bond Fund 204,756 43,574
Short Term Municipal Bond Fund 13 93,882
Idaho Municipal Bond Fund 8,674 102,410
</TABLE>
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<PAGE>
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 Investments Mutual Fund Services (formerly 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
will 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 fiscal years ended January 31, 1999, January
31, 1998 and January 31, 1997.
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Equity Fund $__________ $389,080 $327,892
Balanced Fund $__________ $338,610 $301,415
Intermediate Term Bond Fund $__________ $296,141 -0-
Short Term Bond Fund $__________ $114,208 $142,218
Municipal Bond Fund $__________ $135,369 $27,259
Short Term Municipal Bond Fund $__________ $39,536 $54,612
Idaho Municipal Bond Fund $__________ $68,903 $59,567
</TABLE>
For the fiscal years ended January 31,1999, January 31, 1998 and January 31,
1997, the Administrator waived fees for the following Portfolios:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Short Term Municipal Bond Fund $__________ $60,464 $45,388
Idaho Municipal Bond Fund $__________ $31,097 $40,433
</TABLE>
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.
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<PAGE>
The Administrator also serves as administrator or sub-administrator to the
following other mutual funds:
SEI Institutional International Trust PBHG Insurance Series Fund, Inc.
SEI Liquid Asset Trust PBHG Advisor Funds, Inc.
SEI Tax Exempt Trust The Arbor Fund
SEI Asset Allocation Trust Armada Funds
SEI Index Funds STI Classic Variable Trust
SEI Institutional Managed Trust CrestFunds, Inc.
SEI Daily Income Trust ARK Funds
SEI International Trust Huntington Funds
The Advisor's Inner Circle Fund HighMark Funds
The Pillar Funds Bishop Street Funds
CUFUND Boston 1784 Funds-Registered Trademark-
STI Classic Funds TIP Funds
STI Classic Variable Trust SEI Institutional Investments Trust
First American Funds, Inc. Alpha Select Funds
First American Strategy Funds, Inc. The PBHG Funds, Inc.
First American Investment Funds, Inc. Oak Associates' Funds
The Expedition Funds
The Nevis Fund, Inc.
DISTRIBUTION
SEI Investments Distribution Co., Oaks, PA 19456 (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 for 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 are 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.
DISTRIBUTION PLANS
The Trust has adopted a Distribution Plan for the Retail Class A shares of each
Portfolio (the "
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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 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 Plans require that
quarterly written reports of amounts spent under the Plans and the purposes of
such expenditures be furnished to and reviewed by the Trustees. The Plans 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 Plans will
require approval by a majority of the Trustees of the Trust and of the Qualified
Trustees. 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.
THE CLASS A PLAN
The Distribution Agreement and Class A Plan provide for payment to the
Distributor of a total fee in connection with the servicing of shareholder
accounts of the Class A shares, calculated and payable monthly, at the annual
rate of 0.25% of the value of the average daily net assets of such class. All
or any portion of such total fee may be payable as a Shareholder Servicing Fee,
and all or any portion of such total fee may be payable as a Distribution Fee,
as determined from time to time by the Trustees of the Trust. All such fees are
currently designated and payable as a Shareholder Servicing Fee.
The Shareholder Servicing Fee may be used by the Distributor to provide
compensation for ongoing servicing or maintenance of shareholder accounts with
respect to the Class A shares of the Portfolios of the Trust. Compensation may
be paid by the Distributor to persons, including employees of the Distributor,
and institutions who respond to inquiries of holders of Class A shares regarding
their ownership of shares or their accounts with the Trust or who provide other
administrative or accounting services not otherwise provided by the Advisor,
transfer agent or other agent of the Trust.
Payments under the Class A Plan are not tied exclusively to the expenses for
shareholder servicing activities actually incurred by the Distributor, so that
such payments may exceed
S-21
<PAGE>
expenses actually incurred by the Distributor. The Trust's Board of Trustees
will evaluate the appropriateness of the Class A Plan and its payment terms on a
continuing basis and in doing so will consider all relevant factors, including
expenses borne by the Distributor and amounts it receives under the plan.
The Trust's Adviser and the Distributor may, at their option and in their sole
discretion, make payments from their own resources to cover costs of additional
shareholder servicing activities.
For the fiscal years ended January 31, 1999, January 31, 1998 and January 31,
1997, the Class A share classes of the Portfolios paid the Distributor the
following amounts.
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Equity Fund $_________ $15,416 $7,951
Balanced Fund $_________ $8,122 $6,009
Intermediate Term Bond Fund $_________ $6,289 $4,447
Short Term Bond Fund $_________ $627 $1,165
Municipal Bond Fund $_________ $23,004 $1,129
Short Term Municipal Bond Fund $_________ $569 $561
Idaho Municipal Bond Fund $_________ $22,554 $7,221
</TABLE>
THE CLASS B PLAN
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 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.
S-22
<PAGE>
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.
For the period from May 1, 1998 through January 31, 1998 the Class B share
classes of the Portfolios paid the Distributors the following amounts.
<TABLE>
<CAPTION>
Period Ended
January 31,1999
---------------
<S> <C>
Equity Fund $_________
Balanced Fund $_________
Municipal Bond Fund $_________
Idaho Municipal Bond Fund $_________
</TABLE>
SALES CHARGE AND CONTINGENT DEFERRED SALES CHARGE
Class A shares of the Portfolios are offered for sale to the public at net asset
value of each 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 years ended January 31, 1999, January 31, 1998 and January 31, 1997.
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
S-23
<PAGE>
Sales Amount Sales Amount Sales Amount
Charge Retained Charge Retained Charges Retained
------ -------- ------ -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Equity Fund $189,578 $19,045 $75,739 $ 7,653
Balanced Fund 34,610 3,413 62,405 6,313
Intermediate Term Bond Fund 25,164 2,427 15,681 1,601
Short Term Bond Fund 367 32 1,950 163
Municipal Bond Fund 19,198 1,926 1,509 120
Short Term Municipal Bond Fund 593 46 266 23
Idaho Municipal Bond Fund 12,766 1,310 24,988 2,482
</TABLE>
The Distributor may reallow to dealers selling Portfolio shares a portion of the
sales charge collected by the Distributor in connection with those sales. The
table below shows the maximum amounts of such reallowances expressed as a
percentage of the offering price of each Portfolio's Class A shares. The amount
of the reallowance is reduced as the front-end sales charge is reduced on large
purchases of Class A Shares.
<TABLE>
Reallowance as a
Percentage of
Portfolio Offering Price
--------- --------------
<S> <C>
Equity Fund 4.05%
Balanced Fund 4.05%
Intermediate Term Bond Fund 3.15%
Short Term Bond Fund 1.35%
Municipal Bond Fund 3.60%
Short Term Municipal Bond Fund 1.35%
Idaho Municipal Bond Fund 3.50%
</TABLE>
Class B shares of the Equity Fund, Balanced Fund, Municipal Bond Fund and Idaho
Municipal Bond Fund are offered for sale at net asset value of each Class B
share. Class B shares are redeemed at a price equal to the net asset value of
such shares less the applicable contingent deferred sales charge. The following
chart reflects the contingent deferred sales charges paid by Class B
shareholders for the period from May 5, 1998 through January 31, 1999:
<TABLE>
<CAPTION>
<S> <C>
Equity Fund $
Balanced Fund
Municipal Bond Fund
Idaho Municipal Bond Fund
</TABLE>
TRUSTEES AND OFFICERS OF THE TRUST
S-24
<PAGE>
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.
Position Principal
Held With Occupation(s)
Name and Address Registrant During Past 5 Years
---------------- ---------- -------------------
Frederick A. Moreton, Jr.* Trustee and Vice President,
170 South Main, Suite 625 Chairman PaineWebber, Incorporated
Salt Lake City, UT 84145-0170
Age: 59
Robert G. Love Trustee Consultant, Harris & Love
2275 Dallin Street Advertising
Salt Lake City, UT 84109 (retired 1998)
Age: 75
August Glissmeyer, Jr. Trustee Retired
4458 Camille Street
Salt Lake City, UT 84124
Age: 73
Carl S. Minden Trustee Retired
314 Federal Height Circle
Salt Lake City, UT 84103
Age: 76
George L. Denton, Jr.* Trustee Retired
2915 Sherwood Drive
Salt Lake City, UT 84108
Age: 79
James H. Gardner Trustee Professor, University of
1616 Arlington Drive Utah, (retired 1996).
Salt Lake City, UT 84103 Director, Steiner Corp.
Age: 75 (industrial services).
Adviser, American Stores
(retail).
Blaine Huntsman Trustee Principal, Teton Creek
136 South Main Street, Suite 421 Management Co.
Salt Lake City, UT 84102 (consulting)
Age: 63 1995-present. Chairman &
CEO, Olympus Capital
Corp. (bankholding
company) 1988-1995.
Director, Zions
Cooperative Mercantile
Institution (retail
stores).
Kent H. Murdock Trustee President and CEO, O.C.
3015 E. Craig Drive Tanner Company 1991-present
Salt Lake City, UT 84109 (corporate recognition
Age: 52 awards).
S-25
<PAGE>
John L. Rudisill* Trustee; Senior Vice President and
First Security Corporation Executive Vice Manager, First Security
61 South main, 6th Floor President Corporation (bank holding
Salt Lake City, UT 84111 company) 1994 - present.
Age: 43 Director, First Security
Investor Services
(broker-dealer).
Executive Vice President,
First National Bank in
Albuquerque - 1990 to
1994.
Robert Nesher President President and Chief
1 Freedom Valley Drive Executive Officer of SEI,
Oaks, PA 19456 the Administrator and
Age 52 Distributor since 1995.
Director and Executive
Vice President of SEI
1986 - 1994. Chairman,
SEI Mutual Funds since
1989.
Lynda J. Striegel Vice President Vice President and
SEI Investments Management and Secretary Assistant Secretary of SEI
Corporation Investments Company since
Oak, PA 19456 1998. Senior Assets
Age: [to be provided] Management Counsel. Barnett
Banks, Inc. from 1997 to
1998; Partner, Groom and
Nordberg, Chartered from
1996-1997; Associate,
General Counsel, Riggs
Bank, N.A. from 1991 to
1995.
Kevin P. Robins Vice President Senior Vice President and
SEI Investments Management and Assistant General Counsel of SEI,
Corporation Secretary the Administrator and the
Oaks, PA 19456 Distributor since 1994.
Age: 38 Vice President of SEI,
the Administrator and the
Distributor 1992-1994.
Associate, Morgan, Lewis
& Bockius (law firm)
prior to 1992.
Todd Cipperman Vice President Vice President and
SEI Investments Management and Assistant Assistant Secretary of
Corporation Secretary SEI, the Administrator
Oaks, PA 19456 and the Distributor since
Age: 34 1995. Associate, Dewey
Ballantine (law firm)
1994-1995. Associate,
Winston & Strawn (law
firm) 1991-1994.
S-26
<PAGE>
Joseph M. O'Donnell Vice President Vice President and
SEI Investments Management and Assistant Assistant Secretary of
Corporation Secretary since SEI, the Administrator
Oaks, PA 19456 1998 and Distributor since
Age: 44 1998. Vice President and
General Counsel, FPS
Services, Inc.,
1995-1998. Staff Counsel
and Secretary, and
Compliance Administrator,
ProvidentMutual Family of
Funds, 1989-1993.
Kathy Heilig Vice President Treasurer of SEI
SEI Investments Management and Assistant Investments Company since
Corporation Secretary 1997. Assistant Controller
Oak, PA 19456 of SEI Investments since
Age: [to be provided] 1995; Vice President of SEI
Investments since 1991;
Director of Taxes of SEI
Investments Company from
1987 to 1991; Tax Manager -
Arthur Andersen LLP prior
to 1987.
James R. Foggo Vice President Vice President and
SEI Investments Management and Assistant Assistant Secretary of the
Corporation Secretary Administrator and
Oak, PA 19456 Distributor since 1998.
Age: 38 Associate, Paul, Weiss,
Rifkind, Wharton & Garrison
(1998). Associate, Baker &
McKenzie (1995-1998).
Associate, Battle Fowler
L.L.P. (1993-1995).
Operations Manager, The
Shareholder Services Group,
Inc. (1986-1990).
Jeffrey Fries Treasurer and Director, Fund Accounting
SEI Investments Management Principal and Administration - SEI
Corporation Financial Fund Resources since
Oaks, PA 19456 Officer 1997. Vice President -
Age: 38 Smith Barney Corporate
Trust Company, Trust
Operations Unit -
1991-1997.
Trustees and officers of the Trust owned less than 1% of the outstanding shares
of the Trust as of January 31, 1999.
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, 1999, 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
Retirement Compensation
Aggregate Benefits Accrued Estimated from Trust
Compensation from as Part of Annual Benefits and Fund
Trustee the Trust Trust Expenses upon Retirement Complex(1)
------- --------- -------------- --------------- ----------
<S> <C> <C> <C> <C>
Frederick A. Moreton, Jr. $ $0 $0 $
Robert G. Love 0 0
August Glissmeyer, Jr. 0 0
Carl S. Minden 0 0
George L. Denton, Jr. 0 0
S-27
<PAGE>
James H. Gardner 0 0
Blaine Huntsman 0 0
Kent H. Murdock 0 0
John Rudisill
</TABLE>
(1) 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.
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.
Because the Class A and Class B shares of a Portfolio have different sales
charge structures and differing distribution and shareholder servicing fees, the
performance of each class will differ.
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)to the power of 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
S-28
<PAGE>
dividends; and d = maximum offering price per share on the last day of period.
For the 30 day period ended January 31, 1999, the yield of shares of each
Portfolio was:
<TABLE>
<CAPTION>
Institutional Class Retail Class A Retail Class B
Shares Shares Shares
<S> <C> <C> <C>
Equity Fund ___% ___% ___%
Balanced Fund ___% ___% ___%
Intermediate Term Bond Fund ___% ___% N/A
Short Term Bond Fund ___% ___% N/A
Municipal Bond Fund ___% ___% ___%
Short Term Municipal Bond Fund ___% ___% N/A
Idaho Municipal Bond Fund ___% ___% ___%
</TABLE>
The Municipal Bond Fund, Short Term Municipal Bond Fund and Idaho Municipal Bond
Fund may from time to time advertise a taxable equivalent yield. The taxable
equivalent yield for those Portfolios is the rate an investor would have to earn
from a fully taxable investment in order to equal it's yield after taxes.
Taxable equivalent yields are calculated by dividing the Portfolio's yield by
one minus the stated federal tax rate and one minus the stated federal tax rate
plus the state tax rate for state specific funds (if only a portion of the
Portfolio's yield was tax-exempt, only that portion is adjusted in the
calculation).
For the 30 day period ended January 31, 1999, the tax equivalent for shares of
each Portfolio was:
<TABLE>
<CAPTION>
Institutional Retail Class A Retail Class
Class Share Shares B Shares
<S> <C> <C> <C>
Municipal Bond Fund ___% ___% ___%
Short Term Municipal Bond Fund ___% ___% N/A
Idaho Municipal Bond Fund ___% ___% ___%
</TABLE>
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)to the power of 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.
Shown below for each of the Portfolios is the annual total return for the fiscal
year ended January 31, 1999 and the average annual total return for the life of
each Portfolio.
S-29
<PAGE>
<TABLE>
<CAPTION>
Annual Total Return for Fiscal Average Annual Total Return
Year Ended for From Commencement of
January 31, 1999 Operations Through
January 31, 1999
Institutional Retail Retail Institutional Retail Retail
Class(1) Class A(2) Class B(3) Class(1) Class A(2) Class B(3)
<S> <C> <C> <C> <C> <C> <C>
Equity Fund ___% ___% ___% ___% ___% ___%
Balanced Fund ___% ___% ___% ___% ___% ___%
Intermediate Term Bond Fund ___% ___% N/A ___% ___% N/A
Short Term Bond Fund ___% ___% N/A ___% ___% N/A
Municipal Bond Fund ___% ___% ___% ___% ___% ___%
Short Term Municipal Bond Fund ___% ___% N/A ___% ___% N/A
Idaho Municipal Bond Fund ___% ___% ___% ___% ___% ___%
</TABLE>
1. The Institutional Class of shares of all Portfolios commenced operations on
December 28, 1994, except for the Municipal Bond Fund which commenced operations
on November 1, 1996.
2. The Retail Class A class of shares of all Portfolios commenced operations
on March 6, 1995, except for the Municipal Bond Fund which commenced operations
on November 1, 1996.
3. Class B shares were first offered for sale to the public on May 5, 1998.
- ----------------------
PURCHASE, AND REDEMPTION OF SHARES
PARTICIPATING DEALERS
Retail Class A and Class B Shares ("Retail 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 Retail Shares (a
"Participating Dealer"). 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. Retail
Shares purchased by Customers through Participating Dealers may be held of
record by the Participating Dealer. Customers who desire to transfer the
registration of Retail 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
S-30
<PAGE>
fees. Information concerning these services and any charges should be obtained
by the Customer from the Participating Dealer.
GENERAL INFORMATION ON PURCHASES
The purchase price of Institutional shares is the net asset value next
determined after receipt of the purchase order by the Distributor. Purchase
Orders for Class A shares will be executed at a price per share equal to the net
asset value next determined after the receipt of the purchase order by the
Distributor plus any applicable sales charge. 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 as
described in the Prospectus.
The minimum initial investment in Institutional Shares is $500,000. The minimum
initial investment in Retail Shares is $1,000. However, the minimum investment
may be waived at the Distributor's discretion. All subsequent purchases of
Retail Shares must be in amounts of at least $100 (including purchases through
payroll deductions authorized pursuant to pre-approved payroll deduction plans);
however, the subsequent purchase amount may be waived at the Distributor's
discretion. Purchase orders for Class B shares may not exceed $500,000. Shares
may be purchased on days on which the New York Stock Exchange is open for
business ("Business Days"). Orders for the purchase of Shares must be received
before 4:00 p.m. Eastern Time on any Business Day for the order to be accepted
on that Business Day. 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.
DISTRIBUTION INVESTMENT OPTION
If directed by the Customer, distributions of dividends and capital gains made
by a Portfolio may be invested in shares of the same class of one of the other
Portfolios, if such shares are available for sale. Investments of distributions
in shares of one of the 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.
ALTERNATIVE SALES CHARGE OPTIONS
Investors may purchase Retail Shares of the Portfolios at a price equal to their
net asset value per
S-31
<PAGE>
share plus a sales charge which, at the investor's election, may be imposed
either (i) at the time of the purchase (the Class A "initial sales charge
alternative"), or (ii) on a contingent deferred basis (the Class B "deferred
sales charge alternative"). Each class represents a Portfolio's interest in a
portfolio of investments. The classes have the same rights and are identical in
all respects except that (i) Class B shares bear the expenses of the deferred
sales charge arrangement and distribution and service fees resulting from such
sales arrangement, (ii) each class has exclusive voting rights with respect to
approvals of any Rule 12b-1 distribution plan related to that specific class
(although Class B shareholders must approve any material increase in
distribution fees imposed on Class A shares so long as Class B shares convert
into Class A shares), (iii) only Class B shares carry a conversion feature and
(iv) each class has different exchange privileges. Sales personnel of
broker-dealers distributing the Trust's shares, and other persons entitled to
receive compensation for selling such shares, may receive differing compensation
for selling Class A or Class B shares. The alternative purchase arrangement
permits investors to choose the method of purchasing shares that is more
beneficial to them. The amount of purchase and the length of time the investor
expects to hold the shares will be factors in determining the best sales charge
option, Investors should consider, over the time they expect to maintain their
investment, whether the accumulated distribution and service fees and contingent
deferred sales charges on Class B shares prior to conversion would be less than
the initial sales charge on Class A shares, and to what extent such differential
would be offset by the expected higher yield of Class A shares. Class A shares
will normally be more beneficial if the investor qualifies for reduced sales
charges as described in the Prospectus.
REDEMPTIONS
The redemption price of the Institutional shares is the net asset value of each
Institutional share. 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 Class A shares at net asset value without charge. 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 redemption will be determined by
the net asset value of the applicable Portfolio's shares next determined
following the receipt of 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.
S-32
<PAGE>
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 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 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.
S-33
<PAGE>
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
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.
In order to qualify for treatment as an RIC under Subchapter M of the 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
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requirements described in clauses (ii) and (iii) will collectively be referred
to in the following discussion as the "Asset Diversification Requirement".)
Income derived by a RIC from a partnership or trust will satisfy the Income
Requirement only to the extent such income is attributable to items of income of
the partnership or trust that would satisfy the Income Requirement if they were
realized by a RIC in the same manner as realized by the partnership or trust.
FEDERAL INCOME TAX CONSEQUENCES OF PORTFOLIO DISTRIBUTIONS
Although the Portfolios are not required by the Distribution Requirement to
distribute long-term capital gains, the Portfolios intend to distribute any net
realized long-term capital gains annually. The aggregate amount of
distributions designated by a Portfolio as capital gain dividends may not exceed
the net capital gain of such Portfolio for any taxable year, determined by
excluding any net capital loss or net long-term loss attributable to
transactions occurring after October 31 of such year and by treating any such
loss as if it arose on the first day of the following taxable year. Such
distributions will be designated as a capital gains dividend in a written notice
mailed by the Trust to shareholders not later than 60 days after the close of
each Portfolio's respective taxable year.
In the case of corporate shareholders (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
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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 one year. Long-term capital gains of non-corporate taxpayers
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 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
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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
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.
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.
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
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in accordance with the rules described in the Prospectus with respect to the
other Portfolios of the Trust.
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 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%.
The Portfolios will report annually to shareholders the percentages of their net
investment income which are exempt from the regular federal income tax, which
constitute items of tax preference for purposes of the federal alternative
minimum tax, and which are fully taxable. In addition, the Idaho Municipal Bond
Fund will report annually to shareholders the percentages of its net investment
income which are exempt from Idaho corporate and personal income tax (discussed
below). The Portfolios will apply such percentages uniformly to all
distributions declared from net investment income during each report year.
These percentages may differ significantly from the actual percentages for any
particular day.
An investment in the Municipal Bond Fund, the Short Term Municipal Bond Fund or
the Idaho Municipal Bond Fund is not intended to constitute a balanced
investment program. Shares of those Portfolios would not be suitable for
tax-exempt institutions and may not be suitable for retirement plans qualified
under 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.
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"
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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 and received by the shareholders on December 31 of that year if paid by the
Portfolio at any time during the following January.
SPECIAL CONSIDERATIONS RELATING TO THE EQUITY FUND, BALANCED FUND, INTERMEDIATE
TERM BOND FUND AND SHORT TERM BOND FUND
Each Portfolio intends to distribute substantially all of its net investment
income (including net short-term capital gains and realized market discounts)
and net capital gains to shareholders. Dividends from a Portfolio's investment
company taxable income are taxable to its shareholders as ordinary income
(whether received in cash or in additional shares) to the extent of the
Portfolio's earnings and profits. Dividends paid by a Portfolio to corporate
shareholders may qualify for the deduction for dividends received by
corporations to the extent of the dividends received by the Portfolio from
domestic corporations. However, the full amount of such dividends will be taken
into account in determining liability (if any) for corporate alternative minimum
tax. Distributions of net capital gains do not qualify for the corporate
dividends received deduction and are taxable to shareholders as long-term
capital gains, regardless of how long shareholders have held their shares and
regardless of whether the distributions are received in cash or in additional
shares. Except to the extent otherwise provided in future Treasury regulations,
any long-term capital gain recognized by a non-corporate shareholder will be
subject to tax at a maximum rate of 20%. The Portfolios provide annual reports
to shareholders of the federal income tax status of all distributions.
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The sale, exchange or redemption of Portfolio shares is a taxable transaction to
the shareholder.
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.
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
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security. The Internal Revenue Service has informally ruled, however, that a
call option that is written by a fund need not be counted for purposes of the
Asset Diversification Requirement where the fund holds the underlying security.
Under the Code, a fund may not rely on informal rulings of the Internal Revenue
Service issued to other taxpayers. Consequently, the Equity Fund and Balanced
Fund may find it necessary to seek a ruling from the Internal Revenue Service on
this issue or to curtail their writing of covered call options in order to stay
within the limits of the Asset Diversification Requirement.
ADDITIONAL FEDERAL TAX CONSIDERATIONS
The Code imposes a non-deductible 4% excise tax on RICs that do not distribute
with respect to each calendar year an amount equal to 98 percent of their
ordinary income for the calendar year plus 98 percent of their capital gain net
income for the one-year period ending on October 31 of such calendar year. The
balance of such income must be distributed during the next calendar year. For
the foregoing purposes, a company is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year. Because each Portfolio intends to distribute all of its taxable income
currently, none of the Portfolios anticipates incurring any liability for this
excise tax.
Investors should be aware that any loss realized on a sale of shares of a
Portfolio will be disallowed to the extent an investor repurchases shares of the
same Portfolio within a period of 61 days (beginning 30 days before and ending
30 days after the day of disposition of the shares). Dividends paid by a
Portfolio in the form of shares within the 61-day period would be treated as a
purchase for this purpose.
A shareholder will recognize gain or loss upon an exchange of shares of a
Portfolio for shares of another Portfolio upon exercise of an exchange
privilege. Shareholders may not include the initial sales charge in the tax
basis of shares exchanged for shares of another Portfolio for the purpose of
determining gain or loss on the exchange, where the shares exchanged have been
held 90 days or less. The sales charge that was imposed on the exchanged shares
will instead increase the basis of the shares acquired through exercise of the
exchange 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.
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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
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.
Although each Portfolio expects to qualify as a RIC and to be relieved of all or
substantially all Federal income taxes, depending upon the extent of its
activities in states and localities in which its offices are maintained, in
which its agents or independent contractors are located or in which it is
otherwise deemed to be conducting business, each Portfolio may be subject to the
tax laws of such states or localities.
PORTFOLIO TRANSACTIONS
The Portfolios have no obligation to deal with any dealer or group of dealers in
the execution of transactions in securities. Subject to policies established by
the Trustees, the Adviser is responsible for placing orders to execute portfolio
transactions. In placing orders, it is the policy of each Portfolio to seek to
obtain the best net results taking into account such factors as price (including
the applicable dealer spread), size, type and difficulty of the transaction
involved, the firm's general execution and operational facilities, and the
firm's risk in positioning the securities involved. While the Adviser generally
seeks reasonably competitive spreads or commissions, the Portfolios will not
necessarily be paying the lowest spread or commissions available. A Portfolio
will not purchase securities from any affiliated person acting as principal
except in conformity with the regulations of the SEC.
The Portfolios may execute brokerage or other agency transactions through the
Distributor, a registered broker-dealer, for a commission, in conformity with
the 1940 Act, the Securities Exchange Act of 1934, as amended, and rules of the
SEC. Under these provisions, the Distributor is permitted to receive and retain
compensation for effecting portfolio transactions for a Portfolio on an exchange
if a written contract is in effect between the Distributor and the Trust
expressly permitting the Distributor to receive and retain such compensation.
The Portfolios may also execute brokerage or other agency transactions with
affiliates of the Adviser in compliance with those provisions.
Commissions paid to the Distributor by the Trust for exchange transactions may
not exceed "usual and customary" brokerage commissions. The rules define "usual
and customary" commissions to
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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." 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.
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 brokers or dealers.
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 Adviser may, consistent with the interests of the Portfolios, select brokers
on the basis of the research services they provide to the Adviser. Such
services may include analysis of the business or prospects of a company,
industry or economic sector or statistical and pricing services. Information so
received by the Adviser will be in addition to and not in lieu of the services
required to be performed by the Adviser under the Advisory Agreement. Research
services furnished by brokers through whom the Trust effects securities
transactions may be used by the Adviser in the servicing of its other accounts
and not all such services may be used by the Adviser in connection with the
Portfolios. If in the judgment of the Adviser the Portfolios, or other accounts
managed by the Adviser, will be benefitted by supplemental research services,
the Adviser is authorized to pay brokerage commissions to a broker furnishing
such services which are in excess of commissions which another broker may have
charged for effecting the same transaction. The expenses of an Adviser will not
necessarily be reduced as a result of the receipt of such supplemental
information.
For the fiscal years ended January 31, 1999, January 31, 1998 and January 31,
1997, the following Portfolios paid brokerage commissions in the following
amounts.
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Equity Fund $_________ $152,647 $________
Balanced Fund $_________ $ 88,559 $________
</TABLE>
The Adviser allocated certain of the Equity Fund's and the Balanced Fund's
brokerage transactions to certain broker-dealers that provided the Adviser with
certain research, statistical and other information. For the fiscal year ended
January 31, 1999, such transactions amounts and related brokerage commissions
were:
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<TABLE>
<CAPTION>
Related Brokerage
Transactions Amounts Commissions
-------------------- -----------
<S> <C> <C>
Equity Fund $_________ $_________
Balanced Fund $_________ $_________
</TABLE>
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, 1999, the [describe Fund]
held [described security] issued by ____________________ having a value of
$_____.
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 May ___, 1999, the following entities owned 5% or more of the outstanding
Institutional shares:
As of May ___, 1999, the following entities owned 5% or more of the outstanding
Retail Class A shares:
As of May ___, 1999, the following entities owned 5% or more of the outstanding
Retail Class B shares:
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 TO THE TRUST
Ballard Spahr Andrews & Ingersoll, L.L.P. serves as counsel to the Trust.
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INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP serves as independent accountants of the Trust.
CUSTODIAN
First Union Corporation, 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.
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APPENDIX A - PERMITTED INVESTMENTS DESCRIPTIONS
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 or this Statement of Additional Information.
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 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.
BANKERS' ACCEPTANCES - Bankers' acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank. Bankers' acceptances are used by
corporations to finance the shipment and storage of goods. Maturities are
generally six months or less.
CERTIFICATES OF DEPOSIT - Certificates of deposit are interest bearing
instruments with a specific maturity. They are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market prior to maturity. Certificates of deposit with
penalties for early withdrawal will be considered illiquid.
COMMERCIAL PAPER - Commercial paper is a term used to describe unsecured
short-term promissory notes issued by banks, municipalities, corporations and
other entities. Maturities on these issues vary from a few to 270 days.
CONVERTIBLE SECURITIES - Convertible securities are corporate securities that
are exchangeable for a set number of another security at a prestated price.
Convertible securities typically have characteristics similar to both fixed
income and equity securities. Because of the conversion
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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, 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.
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 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.
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.
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. The Municipal Bond Fund, Short Term
Municipal Bond Fund and Idaho Municipal Bond Fund are permitted to invest in
illiquid securities. Under the supervision of the Trustees, 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
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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.
MONEY MARKET FUNDS - Money market funds are open-end investment companies that
are continuously engaged in the issuance of shares. In connection with
management of their daily cash positions, a Portfolio may invest in money market
fund shares having investment objectives and policies consistent with those of
the Portfolio. Investments by a money market fund are subject to limitations
imposed under regulations adopted by the Securities and Exchange Commission.
Under these regulations, money market funds may only acquire obligations that
present minimal credit risk and that are "eligible securities," which means they
are (i) rated, at the time of investment, by at least two nationally recognized
security rating organizations (one if it is the only organization rating such
obligation) in the highest rating category or, if unrated, determined to be of
comparable quality (a "first tier security"), or (ii) rated according to the
foregoing criteria in the second highest rating category or, if unrated,
determined to be of comparable quality ("second tier security"). A security is
not considered to be unrated if the issuer has outstanding obligations of
comparable priority and security that have a short-term rating. In the case of
taxable money market funds, investments in second tier securities are subject to
the further constraints in that (i) no more than 5% of a Fund's assets may be
invested in second tier securities and (ii) any investment in securities of any
one such issuer is limited to the greater of 1% of the Fund's total assets or $1
million. A taxable money market fund may also hold up to 25% 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,
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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.
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
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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").
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.
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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.
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 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.
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APPENDIX B RATINGS DESCRIPTIONS
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
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payment. Issues rated A are further refined by use of the numbers 1+, 1, 2 and
3 to indicate the relative degree of safety. Issues rated A-1+ are those with
an "overwhelming degree" of credit protection. Those rated A-1 reflect a "very
strong" degree of safety regarding timely payment. Those rated A-2 reflect a
safety regarding timely payment but not as high as A-1.
Commercial paper issuers rated Prime-1 and Prime-2 by Moody's are judged by
Moody's to be of the two highest quality ratings on the basis of relative
repayment capacity.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating. The following criteria will be used in making that assessment:
Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
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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PART C. OTHER INFORMATION
Item 23. Exhibits
Exhibit
Number Description (*)
------- -----------
a(1) - 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,
was filed electronically as an Exhibit to
Post-Effective Amendment No. 11 on May 30, 1996,
and is hereby incorporated by reference.
a(2) - 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, was filed electronically as an Exhibit to
Post-Effective Amendment No. 11 on May 30, 1996, and is
hereby incorporated by reference.
a(3) - Certificate of Designation of Shares dated
February 6, 1998, was filed electronically as Exhibit
1(c) to Post Effective Amendment No. 14 on May 29,
1998, and is hereby incorporated by reference.
b - By-Laws were filed as Exhibit No. 2 to
Registration Statement on December 19, 1988, were
filed electronically as an Exhibit to
Post-Effective Amendment No. 11 on May 30, 1996,
and are hereby incorporated by reference.
c - Not Applicable.
d(1) - 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, was
filed electronically as an Exhibit to Post-Effective
Amendment No. 11 on May 30, 1996, and is hereby
incorporated by reference.
d(2) - 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
- --------------------
* 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>
Post-Effective Amendment No. 8 on May 31, 1995, was
filed electronically as an Exhibit to Post-Effective
Amendment No. 11 on May 30, 1996, and is hereby
incorporated by reference.
d(3) - Second Amendment to Investment Advisory Agreement
between Registrant and First Security Investment
Management was filed electronically as an Exhibit to
Post-Effective Amendment No. 12 on March 31, 1997, and
is hereby incorporated by reference.
e(1) - Distribution Agreement dated December 27, 1994
between Registrant and SEI Investments
Distribution Co. was filed as Exhibit 6 to
Post-Effective Amendment No. 8 on May 31, 1995,
was filed electronically as an Exhibit to
Post-Effective Amendment No. 11 on May 30, 1996,
and is hereby incorporated by reference.
e(2) - Distribution and Services Agreement dated February
6, 1998 between Registrant and SEI Investments
Distribution Co. relating to Class B Shares was
filed electronically as an Exhibit to
Post-Effective Amendment No. 13 on March 2, 1998,
and is hereby incorporated by reference.
f - Not Applicable.
g - 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, was filed electronically as an
Exhibit to Post-Effective Amendment No. 11 on May
30, 1996, and is hereby incorporated by reference.
h(1) - 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, was filed
electronically as an Exhibit to Post-Effective
Amendment No. 11 on May 30, 1996, and is hereby
incorporated by reference.
h(2) - 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, was filed
electronically as an Exhibit to Post-Effective
Amendment No. 11 on May 30, 1996, and is hereby
incorporated by reference.
h(3) - Administration Agreement dated December 27, 1994
between
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<PAGE>
Registrant and SEI Financial Management
Corporation was filed as Exhibit 9(c) to
Post-Effective Amendment No. 8 on May 31, 1995,
was filed electronically as an Exhibit to
Post-Effective Amendment No. 11 on May 30, 1996,
and is hereby incorporated by reference.
h(4) - 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.
h(5) - 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.
h(6) - Amendment Agreement dated as of October 9, 1997
between Registrant and Morgan Guaranty Trust Company
was filed electronically as an Exhibit to
Post-Effective Amendment No. 13 on March 2, 1998, and
is hereby incorporated by reference.
h(7) - Amendment Agreement dated as of March 30, 1998
between Registrant and Morgan Guaranty Trust Company
was filed electronically as Exhibit 9(g) to
Post-Effective Amendment No. 14 on May 29, 1998, and is
hereby incorporated by reference.
h(8) - Amendment Agreement dated as of October 7, 1998
between Registrant and Morgan Guaranty Trust
Company is filed herewith electronically.
i(1) - Opinion of Counsel was filed as Exhibit No. 10 to
Pre-Effective Amendment No. 1 on February 6, 1989,
was filed electronically as an Exhibit to
Post-Effective Amendment No. 11 on May 30, 1996,
and is hereby incorporated by reference.
i(2) - Opinion of Ballard Spahr Andrews & Ingersoll, LLP
dated March 2, 1998 was filed electronically as
Exhibit 10(b) to Post-Effective Amendment No. 13
on March 2, 1998, and is hereby incorporated by
reference.
j(1) - Consent of Ballard Spahr Andrews & Ingersoll, LLP
is filed
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<PAGE>
herewith electronically.
j(2) - Powers of Attorney are filed herewith
electronically.
(k) - Not Applicable.
(l) - 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,
was filed electronically as an Exhibit to
Post-Effective Amendment No. 11 on May 30, 1996,
and is hereby incorporated by reference.
m(1) - Rule 12b-1 Plan with respect to Retail Class A
Shares between Registrant and SEI Investments
Distribution Co. was filed as Exhibit 15 to
Post-Effective Amendment No. 8 on May 31, 1995,
was filed electronically as an Exhibit to
Post-Effective Amendment No. 11 on May 30, 1996,
and is hereby incorporated by reference.
m(2) - Distribution Plan with respect to Retail Class B
Shares between Registrant and SEI Investments
Distribution Co. was filed electronically as an
Exhibit to Post-Effective Amendment No. 13 on
March 2, 1998, and is hereby incorporated by
reference.
o - Rule 18f-3 Multiple Class Plan dated August 4,
1995, as amended February 6, 1998, was filed electronically
as an Exhibit to Post-Effective Amendment No. 13 on March 2,
1998, and is hereby incorporated by reference.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not Applicable.
Item 25. 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
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<PAGE>
shareholder, creditor or otherwise (hereinafter referred to as a "Covered
Person")) is indemnified to the fullest extent permitted by law against
liability and all expenses reasonably incurred by him in connection with any
action, suit or proceeding to which he may be a party or otherwise involved by
reason of his being or having been a Covered Person. This provision does not
authorize indemnification when it is determined, in the manner specified in the
Amended and Restated Master Trust Agreement, that a Covered Person has not acted
in good faith in the reasonable belief that his actions were in or not opposed
to the best interests of Registrant. Moreover, this provision does not
authorize indemnification when it is determined, in the manner specified in the
Amended and Restated Master Trust Agreement, that the Covered Person would
otherwise be liable to Registrant or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of his duties.
Expenses may be paid by Registrant in advance of the final disposition of any
action, suit or proceeding upon receipt of an undertaking by a Covered Person to
repay those expenses to Registrant in the event that it is ultimately determined
that indemnification of the expenses is not authorized under the Amended and
Restated Master Trust Agreement and the Covered Person either provides security
for such undertaking or insures Registrant against losses from such advances or
the disinterested Trustees or independent legal counsel determines, in the
manner specified in the Amended and Restated Master Trust Agreement, that there
is reason to believe the Covered Person will be found to be entitled to
indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "1933 Act"), may be permitted to Trustees, officers
and controlling persons of Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that, in the opinion of the Commission,
such indemnification is against public policy as expressed in the 1933 Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by 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 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Principal Occupation or
Principal Occupation or
Other Employment of a
Position with Substantial
Nature During
Name Adviser The Past Two Years
- ---- ------- -------------------------
Sterling K. Jenson President and President and Senior
CEO Portfolio Manager.
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<PAGE>
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)
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<PAGE>
Principal Occupation or
Principal Occupation or
Other Employment of a
Position with Substantial
Nature During
Name Adviser The Past Two Years
- ---- ------- -------------------------
General Partner, Ken
Rey Associates, Ltd. (private
investment partnership); Secretary
and Trustee, East High School
Foundation; Director, Toma
Corporation (Real Property
Development); Director, Utah
Medical Association Financial
Insurance Services, Inc.
(non-profit services company).
Curtis J. Anderson Senior Vice Senior Portfolio Manager.
President
Mark L. Anderson Senior Vice Senior Portfolio Manager.
President
John B. Tousley Vice President Senior Portfolio Manager.
Item 27. PRINCIPAL UNDERWRITER.
(a) The Registrant's distributor, SEI Investments Distribution Co.
("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
Funds, 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, Armada
Funds, 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, 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 SIDC. Unless
otherwise noted, the business address of each director or officer is Oaks, PA
19456.
7
<PAGE>
Position and Positions and
Offices with Offices with
Name Underwriter Registrant
- ----- ----------- -------------
Alfred P. West, Jr. Director, Chairman of the --
Board of Directors
Henry H. Greer Director --
Carmen V. Romeo Director --
Mark J. Held President & Chief Operating
Officer
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President --
Dennis J. McGonigle Executive Vice President --
Robert H. Silvestri Chief Financial Officer &
Treasurer
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Larry Hutchinson Senior Vice President --
Jack May Senior Vice President --
Hartland J. McKeown Senior Vice President --
Barbara J. Moore Senior Vice President --
Patrick K. Walsh Senior Vice President --
Kevin P. Robins Senior Vice President & Vice President & Assistant
General Counsel Secretary
Robert Crudup Vice President & Managing --
Director
Barbara Doyne Vice President --
Jeff Drennen Vice President --
8
<PAGE>
Victor Galef Vice President & Managing --
Director
Kim Kirk Vice President & Managing --
Director
Carolyn McLaurin Vice President & Managing --
Director
John Krzeminski Vice President & Managing --
Director
Jeff Jacobs Vice President --
Mark Samuels Vice President & Managing --
Director
Wayne M. Withrow Vice President & Managing --
Director
Sandra K. Orlow Vice President & Secretary Vice President & Assistant
Secretary
Robert Aller Vice President --
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Vice President & Assistant
Secretary Secretary
Kathy Heilig Vice President Vice President & Assistant
Secretary
Samuel King Vice President --
Mark Nagle Vice President --
Joanne Nelson Vice President --
W. Kelso Morrill Vice President --
Joseph M. O'Donnell Vice President & Assistant Vice President & Assistant
Secretary Secretary
Cynthia M. Parrish Vice President & Assistant
Secretary --
9
<PAGE>
Kim Rainey Vice President --
Rob Redican Vice President --
Maria Rinehart Vice President --
Steve Smith Vice President --
Kathryn L. Stanton Vice President & Assistant --
Secretary
Lori L. White Vice President & Assistant --
Secretary
Daniel Spaventa Vice President --
S. Courtney E. Collier Vice President & Assistant --
Secretary
Lydia A. Gavalis Vice President & Assistant Vice President & Assistant
Secretary Secretary
Greg Gettinger Vice President & Assistant --
Secretary
Lynda J. Striegel Vice President & Assistant Vice President & Assistant
Secretary Secretary
Item 28. 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:
First Union National Bank
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 Mutual Fund Services
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:
10
<PAGE>
First Security Investment Management, Inc.
61 South Main Street
Salt Lake City, Utah 84111
Item 29. MANAGEMENT SERVICES.
Not Applicable.
Item 30. UNDERTAKINGS.
Not Applicable.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Post-Effective Amendment No. 15 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 30th day of March, 1999.
THE ACHIEVEMENT FUNDS TRUST
By:/s/ Robert Nesher
---------------------------
Robert Nesher
President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 15 to the Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ * Chairman of the Board March 30, 1999
- ------------------------------ and Trustee
Frederick A. Moreton, Jr.
/s/ * Trustee March 30, 1999
- ------------------------------
Robert G. Love
/s/ * Trustee March 30, 1999
- ------------------------------
Carl S. Minden
/s/ * Trustee March 30, 1999
- ------------------------------
August Glissmeyer, Jr.
/s/ * Trustee March 30, 1999
- ------------------------------
George L. Denton
/s/ * Trustee March 30, 1999
- ------------------------------
James H. Gardner
/s/* Trustee March 30, 1999
- ------------------------------
Blaine Huntsman
/s/ * Trustee March 30, 1999
- ------------------------------
John Rudisill
/s/ Jeffrey Fries Treasurer and Principal March 30, 1999
- ------------------------------ Financial Officer
Jeffrey Fries
* By:/s/
-------------------------
Attorney In Fact
<PAGE>
THE ACHIEVEMENT FUNDS TRUST
Post-Effective Amendment No. 15
Exhibit List
h(8) Amendment Agreement dated October 7, 1998
j(1) Consent of Ballard Spahr Andrews & Ingersoll, LLP
j(2) Powers of Attorney
<PAGE>
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT dated as of October 7, 1998 (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 further amended by
Amendment Agreement dated as of October 9, 1997, and as further amended by
Amendment dated March 30, 1998 (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.
Pursuant to the terms of an Amendment Agreement dated as of October 9,
1997, the Bank provided a new credit facility to the Original Borrowers by
changing the Original Termination Date to October 7, 1998.
Pursuant to the terms of an Amendment Agreement dated as of March 30, 1998,
the Bank provided a new credit facility to the Borrowers by providing for an
increase in the Bank's Commitment by changing the Commitment from $10,000,000 to
$20,000,000.
The Fund on behalf of the Borrowers has requested the Bank to amend the
Original Credit Agreement (as amended, the "AMENDED AGREEMENT") to provide for a
new 364-day facility by changing the Original Termination Date to October 6,
1999 (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
the Amendment Agreement upon the terms and conditions set forth herein,
including an increase of
<PAGE>
the CD Margin from 0.375% to 0.40% and the Euro-Dollar Margin from 0.25% to
0.275% and an increase of the Facility Fee from 0.10% to 0.125%.
NOW THEREFORE, the parties hereto hereby agree as follows:
Section 1. DEFINED TERMS. Except as otherwise defined herein, terms
defined in the Original Credit Agreement and used herein shall have the meanings
given to them in the Original Credit Agreement (except the term "Borrowers"
shall include MBF).
Section 2. AMENDMENT. 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) The term "CD Margin" shall mean a rate per annum equal to
0.40%.
(c) The term "Euro-Dollar Margin" shall mean a rate per annum
equal to 0.275%.
(d) The first sentence of Section 2.6 shall be read as
follows: "The Fund shall pay to the Bank a facility fee from the assets of
the Borrowers as provided below computed at the rate of 0.125% per annum."
(e) 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 7, 1998 to this Agreement)
shall have occurred on or prior to November 14, 1998;"
(f) 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.
<PAGE>
(d) The Bank shall have received the signed opinion,
addressed to it and dated the Effective Date, of Ballard Spahr Andrews and
Ingersoll, LLP, counsel for the Fund and the Borrowers substantially to the
matters set forth in the opinion delivered pursuant to Section 3.1(b) of the
Original Agreement.
(e) All amounts due under the Note (as defined in the
Original Agreement) shall have been repaid in full (including through
borrowings under the Amended Agreement).
(f) The Bank shall have received all other documents as it
may reasonably request relating to the existence of the Fund and the
Borrowers, the trust authority for and the validity of this Amendment
Agreement and the Notes, and any other matters relevant hereto, all in form
and substance satisfactory to the Bank.
The Bank shall promptly notify the Fund of the Effective Date, and
such notice shall be conclusive and binding on the parties hereto.
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. 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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment Agreement
to be duly executed by their respective authorized officers on this 7th day of
October, 1998, effective as of the day and year first above written.
THE ACHIEVEMENT FUNDS TRUST FUND on
behalf of the Portfolios listed below
By: Lynda J. Striegel
---------------------------
/s/ Lynda J. Striegel
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/ John M. Mikolay
---------------------------
John M. Mikolay
Vice President
<PAGE>
Exhibit J(1)
CONSENT
We hereby consent to the use of our name on the back cover page of the
Prospectus and under the caption "Counsel to the Trust" in the Statement of
Additional Information contained in Post-Effective Amendment No. 15 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. 16 under
the Investment Company Act of 1940.
/s/ Ballard Spahr Andrews & Ingersoll
March 31, 1999
<PAGE>
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 Lynda J. Striegel, Robert A. Nesher, and Kevin P.
Robins, 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/ Jeffrey W. Fries Date: February 2, 1999
- ----------------------------------- -----------------------------------
Jeffrey W. Fries
<PAGE>
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 Jeffrey W. Fries, Lynda J. Striegel, Robert A. Nesher,
and Kevin P. Robins, 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: February 5, 1999
- ----------------------------------- -----------------------------------
Blaine Huntsman
<PAGE>
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 Jeffrey W. Fries, Lynda J. Striegel, Robert A. Nesher,
and Kevin P. Robins, 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: February 5, 1999
- ----------------------------------- ---------------------------------
Robert G. Love
<PAGE>
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 Jeffrey W. Fries, Lynda J. Striegel, Robert A. Nesher,
and Kevin P. Robins, 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: February 5, 1999
- ----------------------------------- --------------------------------
August Glissmeyer, Jr.
<PAGE>
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 Jeffrey W. Fries, Lynda J. Striegel, Robert A. Nesher,
and Kevin P. Robins, 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: February 5, 1999
- ----------------------------------- ---------------------------------
George L. Denton, Jr.
<PAGE>
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 Jeffrey W. Fries, Lynda J. Striegel, Robert A. Nesher,
and Kevin P. Robins, 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: February 5, 1999
- ----------------------------------- -----------------------------------
Carl S. Minden
<PAGE>
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 Jeffrey W. Fries, Lynda J. Striegel, Robert A. Nesher,
and Kevin P. Robins, 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/ John Rudisill Date: February 5, 1999
- ----------------------------------- -----------------------------------
John Rudisill
<PAGE>
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 Jeffrey W. Fries, Lynda J. Striegel, Robert A. Nesher,
and Kevin P. Robins, 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 Date: February 5, 1999
- ----------------------------------- -----------------------------------
Frederick A. Moreton
<PAGE>
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 Jeffrey W. Fries, Lynda J. Striegel, Robert A. Nesher,
and Kevin P. Robins, 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 H. Gardner Date: February 5, 1999
- ----------------------------------- -----------------------------------
James H. Gardner