<PAGE>
As filed with the Securities and Exchange Commission on May 30, 2000
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. 17 X
---- ---
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 18 ---
----
(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. James R. Foggo, Esq.
Ballard Spahr Andrews & Ingersoll, LLP SEI Investments Company
1225 17th Street, Suite 2300 Oaks, PA 19456
Denver, CO 80202
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this
Registration Statement
It is proposed that this filing will become effective (check appropriate box)
X immediately upon filing pursuant to paragraph (b)
----
on (Date) pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
on (Date) pursuant to paragraph (a)(i)
----
<PAGE>
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>
THE ACHIEVEMENT FUNDS
RETAIL SHARES
CLASS A AND CLASS B SHARES
PROSPECTUS
JUNE 1, 2000
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 OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
ABOUT THIS PROSPECTUS
The Achievement Funds Trust (the "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
- CONVERT AUTOMATICALLY TO CLASS A SHARES AFTER 8 YEARS
THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY
REVIEW THIS IMPORTANT INFORMATION. ON THIS PAGE THERE IS SOME GENERAL
INFORMATION ABOUT RISK AND RETURN THAT IS COMMON TO EACH OF THE PORTFOLIOS. FOR
MORE DETAILED INFORMATION ABOUT EACH PORTFOLIO, PLEASE SEE:
<TABLE>
<CAPTION>
PAGE
<S> <C>
EQUITY FUND.............................................................XX
BALANCED FUND...........................................................XX
INTERMEDIATE TERM BOND FUND.............................................XX
SHORT TERM BOND FUND....................................................XX
MUNICIPAL BOND FUND.....................................................XX
SHORT TERM MUNICIPAL BOND FUND..........................................XX
IDAHO MUNICIPAL BOND FUND...............................................XX
MORE INFORMATION ABOUT RISK.............................................XX
MORE INFORMATION ABOUT PORTFOLIO INVESTMENTS............................XX
THE INVESTMENT ADVISER AND PORTFOLIO MANAGERS...........................XX
PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES.....................XX
DISTRIBUTION OF PORTFOLIO SHARES........................................XX
DIVIDENDS AND DISTRIBUTIONS.............................................XX
TAXES...................................................................XX
FINANCIAL HIGHLIGHTS....................................................XX
HOW TO OBTAIN MORE INFORMATION ABOUT
THE ACHIEVEMENT FUNDS...............................................Back Cover
</TABLE>
Page 2 of 48
<PAGE>
RISK/RETURN INFORMATION COMMON TO THE PORTFOLIOS
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 PORTFOLIO 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 prices 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
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 capitalizations.
PRINCIPAL RISKS OF INVESTING
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 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.
The Portfolio is subject to the risk that mid and large cap equity securities
may underperform other segments of the equity market 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.
Page 4 of 48
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provide 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>
<CAPTION>
ANNUAL TOTAL RETURNS
<S> <C>
1996 16.14%
1997 27.39%
1998 18.06%
1999 23.45%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C> <C>
23.04% -14.32%
(12/31/1998) (09/30/1998)
</TABLE>
The Portfolio's performance from 1/1/2000 to 3/31/2000 was 5.11%.
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR CLASS A
SHARES AND CLASS B SHARES, WHICH REFLECTS PAYMENT OF MAXIMUM SALES CHARGES, FOR
THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 500 COMPOSITE INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
----------------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITY FUND 17.90% 21.74%*
S&P 500 COMPOSITE INDEX(1) 21.04% 27.74%**
* Since 3/6/95
** Since 3/31/95
<CAPTION>
CLASS B SHARES 1 YEAR SINCE INCEPTION
----------------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITY FUND 17.41% 14.08%*
S&P 500 COMPOSITE INDEX(1) 21.04% 22.34%**
* Since 5/8/98
** Since 5/31/98
</TABLE>
(1) The S&P 500 Composite Index is a widely recognized, market
capitalization-weighted index (number of shares outstanding multiplied by
stock price) of 500 stocks that are traded on the New York Stock Exchange,
American Stock Exchange and Nasdaq National Market. The index is designed
to measure performance of the broad domestic economy through changes in the
aggregate market value of 500 stocks representing all major industries.
Page 5 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.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 4.50% None
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value) None 5.00%
</TABLE>
This table describes the fees and expenses that you may pay if you buy and hold
Portfolio shares.
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
(EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)* 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 0.29% 0.29%
Total Annual Portfolio Operating Expenses 1.28% 2.03%
----------------------------------------------------------------------------------------------------------------
</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 its 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>
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."
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,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Portfolio would be:
Page 6 of 48
<PAGE>
If you sell your shares at the end of the period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $575 $838 $1,121 $1,926
CLASS B SHARES $706 $1,037 $1,293 $2,169
</TABLE>
If you do not sell you shares at the end of the period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS B SHARES $206 $637 $1,093 $2,169
</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 a moderate level of
share price volatility
INVESTMENT STRATEGY
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 between three and 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 8 of 48
<PAGE>
PRINCIPAL RISKS OF INVESTING
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 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 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 intermediate term fixed income and mid
and large cap equity securities may underperform other segments of the equity or
fixed income market 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.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provide 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.
Page 9 of 48
<PAGE>
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>
<CAPTION>
ANNUAL TOTAL RETURNS
<S> <C>
1996 9.90%
1997 19.59%
1998 13.27%
1999 15.61%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C> <C>
14.19% -8.61%
(12/31/1998) (09/30/1998)
</TABLE>
The Portfolio's performance from 1/1/2000 to 3/31/2000 was 3.89%.
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR CLASS A
SHARES AND CLASS B SHARES, WHICH REFLECTS PAYMENT OF MAXIMUM SALES CHARGES, FOR
THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 500 COMPOSITE INDEX,
THE LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX, AND A COMPOSITE OF
THESE TWO INDICES.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BALANCED FUND 10.43% 14.95%*
COMPOSITE INDEX(1) 12.54% 19.10%**
S&P 500 COMPOSITE INDEX(2) 21.04% 27.74%**
LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX(3) 0.39% 6.51%**
* Since 3/6/95
** Since 3/31/95
<CAPTION>
CLASS B SHARES 1 YEAR SINCE INCEPTION
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BALANCED FUND 9.80% 8.84%*
COMPOSITE INDEX(1) 12.54% 15.03%**
S&P 500 COMPOSITE INDEX(2) 21.04% 22.34%**
LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX(3) 0.39% 3.67%**
* Since 5/8/98
** Since 5/31/98
</TABLE>
(1) Composite Index is comprised of 60% S&P 500 Composite Index and 40% Lehman
Intermediate Government/Corporate Bond Index.
(2) The S&P 500 Composite Index is a widely recognized, market
capitalization-weighted index (number of shares outstanding multiplied by
stock price) of 500 stocks that are traded on the New York Stock Exchange,
American Stock Exchange and Nasdaq National Market. The index is designed
to measure performance of the broad domestic economy through changes in the
aggregate market value of 500 stocks representing all major industries.
(3) The Lehman Intermediate Government/Corporate Bond Index is a widely
recognized, market value-weighted (higher market value securities have
more influence than lower market value securities) index of government
and corporate fixed-rate debt securities rated investment grade (BBB or
higher), with maturities between one and 10 years.
Page 10 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.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price) 4.50% None
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value) None 5.00%
</TABLE>
This table describes the fees and expenses that you may pay if you buy and hold
Portfolio shares.
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
(EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)* 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 0.31% 0.31%
---- ----
Total Annual Portfolio Operating Expenses 1.30% 2.05%
-------------------------------------------------------------------------------------------------------------
</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 its 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,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Portfolio would be:
Page 11 of 48
<PAGE>
If you sell your shares at the end of the period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $576 $884 $1,131 $1,947
CLASS B SHARES $708 $1,043 $1,303 $2,190
</TABLE>
If you do not sell your shares at the end of the period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS B SHARES $208 $643 $1,103 $2,190
</TABLE>
Page 12 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
The Intermediate Term Bond Fund invests primarily in investment grade fixed
income securities issued or guaranteed 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 a dollar-weighted
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.
Page 13 of 48
<PAGE>
PRINCIPAL RISKS OF INVESTING
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 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 intermediate-term fixed income
securities may underperform other segments of the fixed income market 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.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provide 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>
<CAPTION>
ANNUAL TOTAL RETURNS
<S> <C> <C>
1996 2.27%
1997 7.28%
1998 7.96%
1999 -1.94%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C> <C>
4.60% -1.69%
(09/30/1998) (03/31/1996)
</TABLE>
The Portfolio's performance from 1/1/2000 to 3/31/2000 was 1.63%.
Page 14 of 48
<PAGE>
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR CLASS A
SHARES, WHICH REFLECTS PAYMENT OF MAXIMUM SALES CHARGES, FOR THE PERIODS ENDED
DECEMBER 31, 1999, 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 -5.36% 4.71%*
LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX(1) 0.39% 6.51%**
</TABLE>
* Since 3/6/95
** Since 3/31/95
(1) The Lehman Intermediate Government/Corporate Bond Index is a widely
recognized, market value-weighted (higher market value securities have
more influence than lower market value securities) index of government
and corporate fixed-rate debt securities rated investment grade (BBB or
higher), with maturities between one and 10 years.
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.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES
---------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 3.50%
</TABLE>
This table describes the fees and expenses that you may pay if you buy and hold
Portfolio shares.
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
(EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)* CLASS A SHARES
---------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.60%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses 0.33%
-----
Total Annual Portfolio Operating Expenses 1.18%
---------------------------------------------------------------------------------------
</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 its 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 were
1.00%.
For more information about these fees, see "Investment Adviser" and
"Distribution of Portfolio Shares."
Page 15 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,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. 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 $466 $712 $976 $1,732
</TABLE>
Page 16 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
The Short Term Bond Fund invests primarily in fixed income securities issued or
guaranteed 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 a dollar-weighted 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
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 price appreciation.
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.
The Portfolio is subject to the risk that short term fixed income securities may
underperform other segments of the fixed income markets or the fixed income
markets as a whole. The Adviser also
Page 17 of 48
<PAGE>
may not be able to match the performance of the index which is compared to the
Portfolio's total return.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provide 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>
<CAPTION>
ANNUAL TOTAL RETURNS
<S> <C>
1996 4.36%
1997 5.55%
1998 5.47%
1999 3.18%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C> <C>
2.13% 0.58%
(09/30/1998) (06/30/1999)
</TABLE>
The Portfolio's performance from 1/1/2000 to 3/31/2000 was 1.11%.
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR CLASS A
SHARES, WHICH REFLECTS PAYMENT OF MAXIMUM SALES CHARGES, FOR THE PERIODS ENDED
DECEMBER 31, 1999, TO THOSE OF THE SALOMON 1 YEAR TREASURY BENCHMARK-ON-THE-RUN
INDEX AND TO THOSE OF THE SALOMON 1-3 YEAR TREASURY/GOVERNMENT
SPONSORED/CORPORATE INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM BOND FUND 1.66% 4.79%*
SALOMON 1 YEAR TREASURY BENCHMARK-ON-THE-RUN INDEX (1) 4.04% 5.72%**
SALOMON 1-3 YEAR TREASURY/GOVERNMENT SPONSORED INDEX/CORPORATE INDEX(2) 3.29% 6.18%**
</TABLE>
* Since 3/6/95
** Since 3/31/95
1 The Salomon 1 Year Treasury Benchmark-on-the-Run Index is an unmanaged
index generally representative of the average yield of one-year treasury
bills.
2 The Salomon 1-3 Year Treasury/Government Sponsored/Corporate Index is a
widely recognized index of U.S. Treasury, government agency and investment
grade corporate securities with maturities greater than 1 year and less
than 3 years.
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 48
<PAGE>
PORTFOLIO FEES AND EXPENSES
This table describes the fees that you may pay if you purchase or sell Portfolio
shares.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES
----------------------------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 1.50%
</TABLE>
This table describes the fees and expenses that you may pay if you buy and hold
Portfolio shares.
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
(EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)* CLASS A SHARES
----------------------------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.60%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses 0.47%
Total Annual Portfolio Operating Expenses 1.32%
----------------------------------------------------------------------------------------------------------
</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 its 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 were
1.00%.
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,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. 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 $282 $562 $863 $1,716
</TABLE>
Page 19 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
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
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 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 20 of 48
<PAGE>
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.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provide 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 REFLECTD, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS
<S> <C>
1997 8.74%
1998 5.58%
1999 -4.25%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C> <C>
3.47% -2.25%
(06/30/1997) (12/31/1999)
</TABLE>
The Portfolio's performance from 1/1/2000 to 3/31/2000 was 2.78%.
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR CLASS A
SHARES AND CLASS B SHARES, WHICH REFLECTS PAYMENT OF MAXIMUM SALES CHARGES, FOR
THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN MUNICIPAL BOND
INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BOND FUND -8.11% 2.18%*
LEHMAN MUNICIPAL BOND INDEX(1) -2.07% 4.16%**
* Since 11/4/96
** Since 11/30/96
<CAPTION>
CLASS B SHARES 1 YEAR SINCE INCEPTION
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BOND FUND -9.46% -2.94%*
LEHMAN MUNICIPAL BOND INDEX(1) -2.07% 1.23%**
* Since 5/8/98
** Since 5/31/98
</TABLE>
1 The Lehman Municipal Bond Index is a widely recognized, broad based total
return index comprised of investment grade, fixed rate municipal bonds with
maturities of at least one year. The bonds are selected from issues larger
than $50 million since January 1984.
Page 21 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.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 4.00% None
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value) None 5.00%
</TABLE>
This table describes the fees and expenses that you may pay if you buy and hold
Portfolio shares.
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
(EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)* CLASS A SHARES CLASS B SHARES
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.60% 0.60%
Distribution and Service (12b-1) Fees 0.25% 1.00%
Other Expenses 0.33% 0.33%
---- ----
Total Annual Portfolio Operating Expenses 1.18% 1.93%
--------------------------------------------------------------------------------------------------------------
</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 its 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>
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."
Page 22 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,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Portfolio would be:
If you sell your shares at the end of the period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $515 $760 $1,023 $1,775
CLASS B SHARES $696 $1,006 $1,242 $2,062
</TABLE>
If you do not sell your shares at the end of the period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS B SHARES $196 $606 $1,042 $2,062
</TABLE>
Page 23 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
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
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
conditions, the Portfolio may not be able to buy or sell securities at favorable
prices, and the Portfolio may experience losses.
Page 24 of 48
<PAGE>
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.
As of February 5, 1999 the Portfolio was closed to new shareholders. It was
liquidated April 30, 1999.
Page 25 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
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
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 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 26 of 48
<PAGE>
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.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provide 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. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES
CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS
<S> <C>
1996 1.79%
1997 7.93%
1998 5.16%
1999 -3.62%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
3.44% -2.14%
(06/30/1997) (06/30/1999)
</TABLE>
The Portfolio's performance from 1/1/2000 to 3/31/2000 was 3.15%.
Page 27 of 48
<PAGE>
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR CLASS A
SHARES AND CLASS B SHARES, WHICH REFLECTS PAYMENT OF MAXIMUM SALES CHARGES,
FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN 10 YEAR
MUNICIPAL BOND INDEX, TO THOSE OF THE LEHMAN 5 YEAR MUNICIPAL BOND INDEX AND
TO THOSE OF THE LEHMAN MUNICIPAL BOND INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
IDAHO MUNICIPAL BOND FUND -7.47% 3.49%*
LEHMAN 10 YEAR MUNICIPAL BOND INDEX(1) -1.24% 6.01%**
LEHMAN 5 YEAR MUNICIPAL BOND INDEX(2) 0.74% 5.14%**
LEHMAN MUNICIPAL BOND INDEX(3) -2.07% 5.91%**
</TABLE>
* Since 3/6/95
** Since 3/31/95
<TABLE>
<CAPTION>
CLASS B SHARES 1 YEAR SINCE INCEPTION
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
IDAHO MUNICIPAL BOND FUND -8.86% -2.42%*
LEHMAN 10 YEAR MUNICIPAL BOND INDEX(1) -1.24% 2.00%**
LEHMAN 5 YEAR MUNICIPAL BOND INDEX(2) 0.74% 2.88%**
LEHMAN MUNICIPAL BOND INDEX(3) -2.07% 2.12%**
</TABLE>
* Since 5/8/98
** Since 5/31/98
(1) The Lehman 10 Year Municipal Bond Index is a widely-recognized broad
based total return index of long-term intermediate investment grade
tax-exempt bonds. The index includes general obligation bonds,
revenue bonds, insured bonds, and pre-funded bonds with maturities
between 9 and 12 years and are selected from issues larger than $50
million since January 1984.
(2) The Lehman 5 Year Municipal Bond Index is a widely-recognized index
of intermediate-term investment grade tax-exempt bonds. The index
includes general obligation bonds, revenue bonds, insured bonds and
pre-funded bonds with maturities between 4 and 6 years.
(3) The Lehman Municipal Bond Index is a widely recognized, broad based
total return index comprised of investment grade fixed rate
municipal bonds with maturities of at least one year. The bonds are
selected from issues larger than $50 million since January 1984.
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.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 4.00% None
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value) None 5.00%
</TABLE>
Page 28 of 48
<PAGE>
This table describes the fees and expenses that you may pay if you buy and hold
Portfolio shares.
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
(EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)* CLASS A SHARES CLASS B SHARES
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.60% 0.60%
Distribution and Service (12b-1) Fees 0.25% 1.00%
Other Expenses 0.45% 0.45%
---- ----
Total Annual Portfolio Operating Expenses 1.30% 2.05%
-----------------------------------------------------------------------------------------------------------
</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 its 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>
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.
The Example also assumes that each year your investment has a 5% return,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Portfolio would be:
If you sell your shares at the end of the period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $527 $796 $1,084 $1,905
CLASS B SHARES $708 $1,043 $1,303 $2,190
</TABLE>
If you do not sell your shares at the end of the period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS B SHARES $208 $643 $1,103 $2,190
</TABLE>
Page 29 of 48
<PAGE>
MORE INFORMATION ABOUT RISK
<TABLE>
<S><C>
EQUITY RISK - Investments in equity securities and equity Equity Fund
derivatives in general are subject to market risks that may cause Balanced Fund
their prices to 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 income investments Balanced Fund
changes in response to interest rate changes and other factors. Intermediate Term Bond Fund
During periods of falling interest rates, the values of Short Term Bond Fund
outstanding fixed income securities generally rise and during Municipal Bond Fund
periods of rising interest rates, the value of those securities Short Term Municipal Bond Fund
falls. While securities with longer maturities tend to produce Idaho Municipal Bond Fund
higher yields, the prices of longer maturity securities are also
subject to greater market fluctuations as a result of 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 30 of 48
<PAGE>
MUNICIPAL ISSUER RISK - There may be economic or political changes Municipal Bond Fund
that impact the ability of municipal issuers to repay principal Short Term Municipal Bond Fund
and to make interest payments on municipal securities. Changes to Idaho Municipal Bond Fund
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, for the Idaho Municipal Bond Fund, concentration of
investments in issuers located in a single state makes the
Portfolio more susceptible to adverse political or economic
developments affecting that state.
MORTGAGE-BACKED SECURITIES -Mortgage-backed securities are fixed Balanced Fund
income securities representing an interest in a pool of underlying Intermediate Term Bond Fund
mortgage loans. They are sensitive to changes in interest rates, Short Term Bond Fund
but may respond 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 a Portfolio's U.S. Balanced Fund
government securities are considered to be among the safest Intermediate Term Bond Fund
investments, they are not guaranteed against price movements due Short Term Bond Fund
to changing interest rates. Obligations issued or guaranteed 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 31 of 48
<PAGE>
ASSET-BACKED SECURITIES RISK - Asset-backed securities are fixed Intermediate Term Bond Fund
income securities representing an interest in a pool of Short Term Bond Fund
shorter-term loans such as automobile loans, home equity loans,
equipment or computer leases or credit card receivables. The
payments from the loans are passed through to the security
holder. The loans underlying asset-backed securities tend to have
prepayment rates that do not vary with interest rates. In
addition, the short-term nature of the loans reduces the impact of
any change in prepayment level. However, it is possible that
prepayments will alter the cash flow on asset-backed securities
and it is not possible to determine in advance the actual final
maturity date or average life. Faster prepayment will shorten the
average life and slower prepayment will lengthen it, affecting the
price volatility of the security. However, it is possible to
determine what the range of that movement could be and to
calculate the effect that it will have on the price of the
security.
</TABLE>
Page 32 of 48
<PAGE>
MORE INFORMATION ABOUT PORTFOLIO 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.
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. Of course, the Trust cannot guarantee that any Portfolio will
achieve its investment goal.
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, 2000, the Adviser had approximately $7.3 billion
in assets under management. For the fiscal year ended January 31, 2000, First
Security Investment Management, Inc. received advisory fees, expressed as a
percentage of assets under management, of:
<TABLE>
<S> <C>
EQUITY FUND 0.61%
BALANCED FUND 0.59%
INTERMEDIATE TERM BOND FUND 0.42%
SHORT TERM BOND FUND 0.28%
MUNICIPAL BOND FUND 0.42%
SHORT TERM MUNICIPAL BOND FUND N/A
IDAHO MUNICIPAL BOND FUND 0.36%
</TABLE>
The Adviser may use its affiliates as brokers for Portfolio transactions.
PORTFOLIO MANAGERS
EQUITY FUND AND BALANCED FUND - Sterling K. Jenson, CFA, is President of the
Adviser and has been responsible for the Equity Fund since its inception in
December of 1994 and he assumed responsibility for the Balanced Fund in January
2000. Before joining the Adviser in 1990 as a Vice President and Senior
Portfolio Manager, Mr. Jenson held investment positions with First Interstate
Bank of Nevada, Moore Trust Company, and Smoot, Miller, Cheney & Co. His
combined experience in the investment business spans nearly 25 years. He was
designated a Chartered Financial Analyst (CFA) and Chartered Investment
Counselor (CIC) in 1984 and earned a Bachelor of Science, Economics in 1975 and
a Master of Business Administration (MBA) in 1977, both from Brigham Young
University.
INTERMEDIATE TERM BOND FUND AND SHORT TERM BOND FUND - Mark L. Anderson brings
15 years of financial experience to his management of the Intermediate Term Bond
Fund and Short
Page 33 of 48
<PAGE>
Term Bond Fund. Currently a Senior Vice President, Mr. Anderson has been
responsible for the portfolios since their inception in 1995. Since joining the
Adviser in 1985, Mr. Anderson has managed bond, balanced, equity and money
market accounts and held positions of increasing responsibility and leadership.
Mr. Anderson attended Brigham Young University earning a Bachelor of Science in
Finance in 1981 and a Master of Public Administration in 1984.
MUNICIPAL BOND FUND, SHORT TERM MUNICIPAL BOND FUND AND IDAHO MUNICIPAL BOND
FUND - John B. Tousley, CFA, is Vice President and Senior Portfolio Manager of
the Adviser and has been responsible for the Idaho Municipal Bond Fund since
1997, the Municipal Bond Fund and the Short Term Municipal Bond Fund since 1999.
With nine years experience in the financial industry, Mr. Tousley has held
investment-related positions at Dean Witter and West One Trust. Mr. Tousley
earned a Bachelor of Arts in Economics in 1991 from Brigham Young University and
became a Chartered Financial Analyst (CFA) in 1998.
PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES
This section tells you how to purchase, sell (sometimes called "redeem") and
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.
Page 34 of 48
<PAGE>
HOW TO PURCHASE PORTFOLIO SHARES
You may purchase shares directly by:
- Mail
- Telephone
- Wire, or
- Direct Deposit
To purchase shares directly from us, complete and send in an application. If you
need an application or have questions, please refer to our website at
www.achievementfunds.com or call 1-800-472-0577. 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 broker or 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.
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
(NYSE) (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 the net
assets of 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.
Page 35 of 48
<PAGE>
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:
EQUITY FUND AND BALANCED FUND
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
SALES CHARGE AS A PERCENTAGE OF SALES CHARGE AS A PERCENTAGE OF
OFFERING PRICE NET AMOUNT
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AMOUNT OF PURCHASE INVESTED
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) --- ---
</TABLE>
INTERMEDIATE TERM BOND FUND
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
SALES CHARGE AS A PERCENTAGE OF SALES CHARGE AS A PERCENTAGE OF
OFFERING PRICE NET AMOUNT
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AMOUNT OF PURCHASE INVESTED
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>
<TABLE>
SHORT TERM BOND FUND AND SHORT TERM MUNICIPAL BOND FUND
------------------------------------------------------------------------------------------------------------------
SALES CHARGE AS A PERCENTAGE OF SALES CHARGE AS A PERCENTAGE OF NET
AMOUNT OF PURCHASE INVESTED OFFERING PRICE AMOUNT
------------------------------------------------------------------------------------------------------------------
<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) --- ---
</TABLE>
Page 36 of 48
<PAGE>
<TABLE>
<CAPTION>
MUNICIPAL BOND FUND AND IDAHO MUNICIPAL BOND FUND
------------------------------------------------------------------------------------------------------------------
SALES CHARGE AS A PERCENTAGE OF SALES CHARGE AS A PERCENTAGE OF
AMOUNT OF PURCHASE INVESTED OFFERING PRICE NET AMOUNT
------------------------------------------------------------------------------------------------------------------
<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 $1,000,000 2.00% 2.04%
$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.
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 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
Page 37 of 48
<PAGE>
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.
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
YEAR SINCE PURCHASE MADE AS A PERCENTAGE OF DOLLAR AMOUNT
----------------------------------------------------------------------
<S> <C>
First 5%
Second 4%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and following None
</TABLE>
Page 38 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 the
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 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 days from your date of purchase).
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.
Page 39 of 48
<PAGE>
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 Securities and Exchange Commission (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.
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.
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 without incurring a contingent deferred sales charge. 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 Portfolio shares over the telephone is
extremely convenient, but not without risk. Although the Trust has certain
safeguards and procedures to confirm the identity of callers and the
authenticity of instructions, the Trust 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 Trust 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
Page 40 of 48
<PAGE>
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>
<CAPTION>
FOR CLASS A SHARES
<S> <C>
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%
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 and servicing fee would be 1.00%. The Distributor may
terminate its waiver at any 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 cash or non-cash
compensation as recognition for past sales or encouragement for future sales
that may include the following: merchandise, travel expenses, prizes, meals and
lodgings, and gifts that do not exceed $100 per year, per individual.
DIVIDENDS AND DISTRIBUTIONS
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 Trust in writing prior to the date of the distribution. Your
election will be effective for dividends and distributions paid after the Trust
receives your written notice. To cancel your election, simply send the Trust
written notice.
Page 41 of 48
<PAGE>
TAXES
PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Portfolios and their shareholders. This summary is based on
current tax laws, which may change.
Each Portfolio will distribute substantially all of its income and capital
gains, if any. The dividends and distributions you receive may be subject to
Federal, state and local taxation, depending upon your tax situation.
Distributions you receive from a Portfolio may be taxable whether or not you
reinvest them. Income distributions are generally taxable at ordinary income tax
rates. Capital gains distributions are generally taxable at the rates applicable
to long-term capital gains. EACH SALE OR EXCHANGE OF SHARES IS A TAXABLE EVENT.
The Municipal Bond Fund, the Short Term Municipal Bond Fund and the Idaho
Municipal Bond Fund intend to distribute Federally tax-exempt income. The Idaho
Municipal Bond Fund also intends to distribute state tax-exempt income. Each
Portfolio may invest a portion of its assets in securities that generate taxable
income for Federal or state income taxes. Income exempt from Federal tax may be
subject to state and local taxes. Any capital gains distributed by these
Portfolios are taxable.
MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.
Page 42 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 accessing our website at www.achievementfunds.com
or by calling 1-800-472-0577.
Page 43 of 48
<PAGE>
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD OR YEAR
<TABLE>
<CAPTION>
NET
ASSET DISTRIBUTIONS DISTRIBUTIONS REALIZED AND NET
VALUE, NET FROM NET FROM UNREALIZED ASSET VALUE,
BEGINNING INVESTMENT INVESTMENT CAPITAL GAINS (LOSSES) END TOTAL
OF PERIOD INCOME INCOME GAINS ON INVESTMENTS OF PERIOD RETURN+
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
EQUITY FUND
Retail Class A:
For the years ended
January 31, 2000*** $18.01 (0.05) -- (1.51) 1.81 $18.26 9.73%
January 31, 1999 $15.34 0.02 (0.03) (0.72) 3.40 $18.01 23.64%
January 31, 1998 $14.04 0.06 (0.06) (1.68) 2.98 $15.34 21.78%
January 31, 1997 $12.65 0.08 (0.08) (0.94) 2.33 $14.04 19.72%
For the period ended
January 31, 1996(1)** $10.52 0.14 (0.15) (0.72) 2.86 $12.65 32.34%*
Retail Class B:
For the period ended
January 31, 2000*** $17.93 (0.18) -- (1.51) 1.77 $18.01 8.82%
January 31, 1999(2)** $17.26 (0.07) (0.01) (0.72) 1.47 $17.93 10.97%
BALANCED FUND
Retail Class A:
For the years ended
January 31, 2000*** $13.97 0.22 (0.22) (0.74) 0.61 $13.84 5.91%
January 31, 1999 $13.08 0.25 (0.26) (0.86) 1.76 $13.97 16.50%
January 31, 1998 $12.00 0.28 (0.27) (0.64) 1.71 $13.08 16.92%
January 31, 1997 $11.78 0.31 (0.32) (0.78) 1.01 $12.00 11.81%
For the period ended
January 31, 1996(1)** $10.34 0.32 (0.31) (0.42) 1.85 $11.78 23.88%*
Retail Class B:
For the period ended
January 31, 2000*** $13.95 0.12 (0.12) (0.74) 0.60 $13.81 5.07%
January 31, 1999(2)** $14.09 0.11 (0.12) (0.87) 0.74 $13.95 7.99%*
INTERMEDIATE TERM BOND FUND
Retail Class A:
For the years ended
January 31, 2000*** $10.79 0.56 (0.57) -- (0.85) $9.93 (2.78)%
January 31, 1999 $10.66 0.58 (0.59) -- 0.14 $10.79 6.91%
January 31, 1998 $10.40 0.60 (0.60) -- 0.26 $10.66 8.60%
January 31, 1997 $10.82 0.60 (0.60) -- (0.42) $10.40 1.80%
For the period ended
January 31, 1996(1)** $10.16 0.56 (0.55) -- 0.65 $10.82 13.49%*
<CAPTION>
RATIO RATIO OF
OF EXPENSES NET INCOME
NET RATIO TO AVERAGE RATIO OF TO AVERAGE
ASSETS, END OF EXPENSES NET ASSETS NET INCOME NET ASSETS PORTFOLIO
OF PERIOD TO AVERAGE (EXCLUDING TO AVERAGE (EXCLUDING TURNOVER
(000) NET ASSETS WAIVERS) NET ASSETS WAIVERS) RATE
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EQUITY FUND
Retail Class A:
For the years ended
January 31, 2000*** $12,959 1.15% 1.28% (0.25)% (0.38)% 40.22%
January 31, 1999 $12,064 1.15% 1.31% 0.12% (0.04)% 74.99%
January 31, 1998 $9,756 1.15% 1.28% 0.33% 0.20% 36.68%
January 31, 1997 $4,099 1.15% 1.31% 0.52% 0.36% 97.14%
For the period ended
January 31, 1996(1)** $1,769 1.15% 1.37% 0.99% 0.77% 103.85%
Retail Class B:
For the period ended
January 31, 2000*** $2,958 1.90% 2.03% (1.00)% (1.13)% 40.22%
January 31, 1999(2)** $2,185 1.90% 2.10% (0.85)% (1.05)% 74.99%
BALANCED FUND
Retail Class A:
For the years ended
January 31, 2000*** $4,047 1.15% 1.30% 1.59% 1.44% 33.27%
January 31, 1999 $4,339 1.15% 1.30% 1.90% 1.75% 54.88%
January 31, 1998 $3,869 1.15% 1.27% 2.23% 2.11% 30.91%
January 31, 1997 $2,875 1.15% 1.32% 2.64% 2.47% 68.11%
For the period ended
January 31, 1996(1)** $1,664 1.15% 1.38% 3.06% 2.83% 59.74%
Retail Class B:
For the period ended
January 31, 2000*** $2,049 1.90% 2.05% 0.84% 0.69% 33.27%
January 31, 1999(2)** $1,481 1.90% 2.07% 1.00% 0.83% 54.88%
INTERMEDIATE TERM BOND FUND
Retail Class A:
For the years ended
January 31, 2000*** $1,198 1.00% 1.18% 5.49% 5.31% 21.46%
January 31, 1999 $1,743 1.00% 1.15% 5.48% 5.34% 28.03%
January 31, 1998 $2,776 1.00% 1.11% 5.75% 5.64% 20.91%
January 31, 1997 $2,730 1.00% 1.18% 5.76% 5.58% 21.23%
For the period ended
January 31, 1996(1)** $963 1.00% 1.26% 5.74% 5.48% 85.16%
</TABLE>
Page 44 of 48
<PAGE>
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD OR YEAR
<TABLE>
<CAPTION>
NET
ASSET DISTRIBUTIONS DISTRIBUTIONS REALIZED AND NET
VALUE, NET FROM NET FROM UNREALIZED ASSET VALUE,
BEGINNING INVESTMENT INVESTMENT CAPITAL GAINS (LOSSES) END TOTAL
OF PERIOD INCOME INCOME GAINS ON INVESTMENTS OF PERIOD RETURN+
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SHORT TERM BOND FUND
Retail Class A:
For the years ended
January 31, 2000*** $10.00 0.51 (0.51) -- (0.23) $9.77 2.87%
January 31, 1999 $10.04 0.52 (0.52) -- (0.04) $10.00 4.94%
January 31, 1998 $10.00 0.55 (0.55) -- 0.04 $10.04 6.04%
January 31, 1997 $10.18 0.57 (0.58) -- (0.17) $10.00 4.04%
For the period ended
January 31, 1996(1)** $10.03 0.53 (0.52) -- 0.14 $10.18 7.55%*
MUNICIPAL BOND FUND
Retail Class A:
For the years ended
January 31, 2000*** $10.29 0.46 (0.47) (0.02) (1.06) $9.20 (6.10)%
January 31, 1999 $10.38 0.47 (0.47) (0.18) 0.09 $10.29 5.48%
January 31, 1998 $10.01 0.46 (0.46) (0.12) 0.49 $10.38 9.78%
For the period ended
January 31, 1997(3)** $10.01 0.15 (0.15) -- -- $10.01 1.48%*
Retail Class B:
For the period ended
January 31, 2000*** $10.30 0.40 (0.40) (0.02) (1.08) $9.20 (6.81)%
January 31, 1999(2)** $10.27 0.30 (0.30) (0.18) 0.21 $10.30 4.87%*
IDAHO MUNICIPAL BOND FUND
Retail Class A:
For the years ended
January 31, 2000*** $10.93 0.44 (0.45) (0.08) (0.99) $9.85 (5.24)%
January 31, 1999 $10.85 0.45 (0.45) (0.05) 0.13 $10.93 5.43%
January 31, 1998 $10.44 0.45 (0.45) (0.04) 0.45 $10.85 8.84%
January 31, 1997 $10.83 0.44 (0.44) (0.06) (0.33) $10.44 1.05%
For the period ended
January 31, 1996(1)** $10.21 0.41 (0.40) (0.12) 0.73 $10.83 12.60%*
<CAPTION>
RATIO RATIO OF
OF EXPENSES NET INCOME
NET RATIO TO AVERAGE RATIO OF TO AVERAGE
ASSETS, END OF EXPENSES NET ASSETS NET INCOME NET ASSETS PORTFOLIO
OF PERIOD TO AVERAGE (EXCLUDING TO AVERAGE (EXCLUDING TURNOVER
(000) NET ASSETS WAIVERS) NET ASSETS WAIVERS) RATE
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SHORT TERM BOND FUND
Retail Class A:
For the years ended
January 31, 2000*** $159 1.00% 1.32% 5.16% 4.84% 57.49%
January 31, 1999 $148 1.00% 1.25% 5.25% 5.00% 26.51%
January 31, 1998 $204 1.00% 1.18% 5.43% 5.25% 48.90%
January 31, 1997 $443 1.00% 1.20% 5.74% 5.54% 40.80%
For the period ended
January 31, 1996(1)** $39 1.00% 1.23% 5.75% 5.52% 83.64%
MUNICIPAL BOND FUND
Retail Class A:
For the years ended
January 31, 2000*** $4,814 1.00% 1.18% 4.69% 4.51% 15.96%
January 31, 1999 $7,226 1.00% 1.19% 4.53% 4.34% 46.00%
January 31, 1998 $9,943 1.00% 1.32% 4.48% 4.16% 93.18%
For the period ended
January 31, 1997(3)** $4,895 1.00% 1.29% 4.35% 4.06% 19.21%
Retail Class B:
For the period ended
January 31, 2000*** $2,759 1.65% 1.93% 4.08% 3.80% 15.96%
January 31, 1999(2)** $2,235 1.75% 1.98% 3.84% 3.61% 46.00%
IDAHO MUNICIPAL BOND FUND
Retail Class A:
For the years ended
January 31, 2000*** $8,790 1.00% 1.30% 4.26% 3.96% 16.35%
January 31, 1999 $11,695 1.00% 1.32% 4.10% 3.78% 12.90%
January 31, 1998 $9,281 1.00% 1.37% 4.22% 3.85% 17.64%
January 31, 1997 $5,475 1.00% 1.47% 4.15% 3.68% 29.13%
For the period ended
January 31, 1996(1)** $3,109 1.00% 1.58% 4.18% 3.60% 58.94%
</TABLE>
Page 45 of 48
<PAGE>
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD OR YEAR
<TABLE>
<CAPTION>
NET
ASSET DISTRIBUTIONS DISTRIBUTIONS REALIZED AND NET
VALUE, NET FROM NET FROM UNREALIZED ASSET VALUE,
BEGINNING INVESTMENT INVESTMENT CAPITAL GAINS (LOSSES) END TOTAL
OF PERIOD INCOME INCOME GAINS ON INVESTMENTS OF PERIOD RETURN+
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Retail Class B:
For the period ended
January 31, 2000*** $10.94 0.37 (0.37) (0.08) (1.00) $9.86 (5.87)%
January 31, 1999(2)** $10.69 0.27 (0.27) (0.05) 0.30 $10.94 5.37%*
<CAPTION>
RATIO RATIO OF
OF EXPENSES NET INCOME
NET RATIO TO AVERAGE RATIO OF TO AVERAGE
ASSETS, END OF EXPENSES NET ASSETS NET INCOME NET ASSETS PORTFOLIO
OF PERIOD TO AVERAGE (EXCLUDING TO AVERAGE (EXCLUDING TURNOVER
(000) NET ASSETS WAIVERS) NET ASSETS WAIVERS) RATE
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Retail Class B:
For the period ended
January 31, 2000*** $1,903 1.65% 2.05% 3.64% 3.24% 16.35%
January 31, 1999(2)** $1,346 1.75% 2.07% 3.32% 3.00% 12.90%
</TABLE>
* Returns are for the period indicated and have not been annualized.
** Ratios for the period have been annualized.
*** Per share amounts for the period are based on average outstanding shares.
+ Returns do not reflect any sales load that may be applicable.
(1) Commenced operations on March 6, 1995.
(2) Commenced operations on May 8, 1998.
(3) Commenced operations on November 4, 1996.
Amounts designated as "--" are either $0 or have been rounded to $0.
Page 46 of 48
<PAGE>
THE ACHIEVEMENT FUNDS
RETAIL SHARES
CLASS A AND CLASS B SHARES
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, LLP
1225 17th Street
Suite 2300
Denver, Colorado 80202
More information about each Portfolio is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated June 1, 2000, includes detailed information about the Trust. 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
and their impact on Portfolio performance. The reports also contain detailed
financial information about the Portfolios.
TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT, OR MORE INFORMATION:
BY TELEPHONE: Call 1-800-472-0577
BY MAIL:
The Achievement Funds
One Freedom Valley Drive
Oaks, Pennsylvania 19456
BY INTERNET: www.achievementfunds.com
Page 47 of 48
<PAGE>
FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports,
as well as other information about the Trust, from the EDGAR Database on 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 on the operation of
the Public Reference Room, call 202-942-8090). 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 20549-0102. You
may also obtain this information, upon payment of a duplicating fee, by
e-mailing the SEC at the following address: [email protected]. The Trust's
Investment Company Act registration number is 811-5712.
Page 48 of 48
<PAGE>
THE ACHIEVEMENT FUNDS
INSTITUTIONAL CLASS SHARES
PROSPECTUS
JUNE 1, 2000
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 OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1 of 38
<PAGE>
ABOUT THIS PROSPECTUS
The Achievement Funds Trust (the "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 THIS PAGE THERE IS SOME GENERAL
INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN THAT IS COMMON TO EACH OF THE
PORTFOLIOS. FOR MORE DETAILED INFORMATION ABOUT EACH PORTFOLIO, PLEASE SEE:
PAGE
EQUITY FUND......................................................XX
BALANCED FUND....................................................XX
INTERMEDIATE TERM BOND FUND......................................XX
SHORT TERM BOND FUND.............................................XX
MUNICIPAL BOND FUND..............................................XX
SHORT TERM MUNICIPAL BOND FUND...................................XX
IDAHO MUNICIPAL BOND FUND........................................XX
MORE INFORMATION ABOUT RISK......................................XX
MORE INFORMATION ABOUT PORTFOLIO INVESTMENTS.....................XX
THE INVESTMENT ADVISER AND PORTFOLIO MANAGERS....................XX
PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES..............XX
DIVIDENDS AND DISTRIBUTIONS .....................................XX
TAXES............................................................XX
FINANCIAL HIGHLIGHTS.............................................XX
HOW TO OBTAIN MORE INFORMATION ABOUT
THE ACHIEVEMENT FUNDS........................................Back Cover
Page 2 of 38
<PAGE>
RISK/RETURN INFORMATION COMMON TO THE PORTFOLIOS
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 PORTFOLIO 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 prices 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 38
<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
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 capitalizations.
PRINCIPAL RISKS OF INVESTING
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 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.
The Portfolio is subject to the risk that mid and large cap equity securities
may underperform other segments of the equity market 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.
Page 4 of 38
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provide 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>
<CAPTION>
ANNUAL TOTAL RETURNS
<S> <C>
1995 32.75%
1996 16.48%
1997 27.77%
1998 18.46%
1999 23.70%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
23.25% -14.21%
(12/31/1998) (09/30/1998)
</TABLE>
The Portfolio's performance from 1/1/2000 to 3/31/2000 was 5.19%.
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 500 COMPOSITE INDEX.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES 1 YEAR 5 YEARS SINCE INCEPTION
------------------------------------ ----------------------- ---------------------- ----------------------
<S> <C> <C> <C>
EQUITY FUND 23.70% 23.69% 23.51%*
S&P 500 COMPOSITE INDEX(1) 21.04% 28.55% 28.55%**
</TABLE>
* Since 12/28/94
** Since 12/31/94
(1) The S&P 500 Composite Index is a widely recognized, market
capitalization-weighted index (number of shares outstanding multiplied by
stock price) of 500 stocks that are traded on the New York Stock Exchange,
American Stock Exchange and Nasdaq National Market. The index is designed
to measure performance of the broad domestic economy through changes in the
aggregate market value of 500 stocks representing all major industries.
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 38
<PAGE>
PORTFOLIO FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Portfolio shares.
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
(EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)* INSTITUTIONAL CLASS SHARES
---------------------------------------------------------- --------------------------------
<S> <C>
Investment Advisory Fees 0.74%
Other Expenses 0.29%
-----
Total Annual Portfolio Operating Expenses 1.03%
-------------------------------------------------------------------------------------------
</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 its 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 were
0.90%.
For more information about these fees, see "Investment Adviser."
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,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. 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 $105 $328 $569 $1,259
</TABLE>
Page 6 of 38
<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 a moderate level
of share price volatility
INVESTMENT STRATEGY
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 between three and 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 38
<PAGE>
PRINCIPAL RISKS OF INVESTING
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 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 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 intermediate term fixed income and mid
and large cap equity securities may underperform other segments of the equity or
fixed income market 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.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provide 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 8 of 38
<PAGE>
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE PORTFOLIO'S INSTITUTIONAL
CLASS SHARES FROM YEAR TO YEAR.
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS
<S> <C>
1995 24.63%
1996 10.11%
1997 19.98%
1998 13.51%
1999 15.87%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
14.24% -8.48%
(12/31/1998) (09/30/1998)
</TABLE>
The Portfolio's performance from 1/1/2000 to 3/31/2000 was 3.95%.
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 500 COMPOSITE INDEX, THE LEHMAN
INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX AND A COMPOSITE OF THESE TWO
INDICES.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------- ---------------- ----------------- -------------------
<S> <C> <C> <C>
BALANCED FUND 15.87% 16.71% 16.60%*
COMPOSITE INDEX(1) 12.54% 19.80% 19.80%**
S&P 500 COMPOSITE INDEX(2) 21.04% 28.55% 28.55%**
LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX(3) 0.39% 7.09% 7.09%**
</TABLE>
* Since 12/28/94
** Since 12/31/94
(1) Composite Index is comprised of 60% S&P 500 Composite Index and 40% Lehman
Intermediate Government/Corporate Bond Index.
(2) The S&P 500 Composite Index is a widely recognized, capitalization-weighted
index (number of shares outstanding multiplied by stock price) of 500
stocks that are traded on the New York Stock Exchange, American Stock
Exchange and Nasdaq National Market. The index is designed to measure
performance of the broad domestic economy through changes in the aggregate
market value of 500 stocks representing all major industries.
(3) The Lehman Intermediate Government/Corporate Bond Index is a widely
recognized, market value-weighted (higher market value securities have
more influence than lower market value securities) index of government
and corporate fixed-rate debt securities rated investment grade (BBB or
higher), with maturities between one and 10 years.
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 9 of 38
<PAGE>
PORTFOLIO FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Portfolio shares.
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
(EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)* INSTITUTIONAL CLASS SHARES
---------------------------------------------------- ---------------------------------
<S> <C>
Investment Advisory Fees 0.74%
Other Expenses 0.31%
-----
Total Annual Portfolio Operating Expenses 1.05%
--------------------------------------------------------------------------------------
</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 its 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 were
0.90%.
For more information about these fees, see "Investment Adviser."
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,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. 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 $107 $334 $579 $1,283
</TABLE>
Page 10 of 38
<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
The Intermediate Term Bond Fund invests primarily in investment grade fixed
income securities issued or guaranteed 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 a dollar-weighted
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.
Page 11 of 38
<PAGE>
PRINCIPAL RISKS OF INVESTING
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 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 intermediate-term fixed income
securities may underperform other segments of the fixed income market 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.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provide 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>
<CAPTION>
ANNUAL TOTAL RETURNS
<S> <C>
1995 14.50%
1996 2.43%
1997 7.61%
1998 8.30%
1999 -1.69%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
4.78% -1.63%
(06/30/1995) (03/31/1996)
</TABLE>
The Portfolio's performance from 1/1/2000 to 3/31/2000 was 1.69%.
Page 12 of 38
<PAGE>
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTERMEDIATE TERM BOND FUND -1.69% 6.09% 6.09%*
LEHMAN INTERMEDIATE 0.39% 7.09% 7.09%**
GOVERNMENT/CORPORATE BOND INDEX(1)
</TABLE>
* Since 12/28/94
** Since 12/31/94
(1) The Lehman Intermediate Government/Corporate Bond Index is a widely
recognized, market value-weighted (higher market value securities have
more influence than lower market value securities) index of government
and corporate fixed-rate debt securities rated investment grade (BBB or
higher), with maturities between one and 10 years.
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 and expenses that you may pay if you buy and hold
Portfolio shares.
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
(EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)* INSTITUTIONAL CLASS SHARES
-----------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.60%
Other Expenses 0.33%
-----
Total Annual Portfolio Operating Expenses 0.93%
-----------------------------------------------------------------------------------------
</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 its 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 were
0.75%.
For more information about these fees, see "Investment Adviser."
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,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. 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 $95 $296 $515 $1,143
</TABLE>
Page 13 of 38
<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
The Short Term Bond Fund invests primarily in fixed income securities issued or
guaranteed 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 a dollar-weighted 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
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 price appreciation.
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.
The Portfolio is subject to the risk that short term fixed income securities may
underperform other segments of the fixed income market or the fixed income
markets as a whole. The Adviser also
Page 14 of 38
<PAGE>
may not be able to match the performance of the index which is compared to the
Portfolio's total return.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provide 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>
<CAPTION>
ANNUAL TOTAL RETURNS
<S> <C>
1995 7.82%
1996 4.51%
1997 5.86%
1998 5.75%
1999 3.44%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
2.42% 0.61%
(06/30/1995) (03/31/1996)
</TABLE>
The Portfolio's performance from 1/1/2000 to 3/31/2000 was 1.17%.
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999, TO THOSE OF THE SALOMON 1 YEAR TREASURY BENCHMARK-
ON-THE-RUN INDEX AND TO THOSE OF THE SALOMON 1-3 YEAR TREASURY/GOVERNMENT
SPONSORED/CORPORATE INDEX.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES 1 YEAR 5 YEARS SINCE INCEPTION
------------------------------------------------------------------------------ ---------- ---------- ---------------
<S> <C> <C> <C>
SHORT TERM BOND FUND 3.44% 5.47% 5.49%*
SALOMON 1 YEAR TREASURY BENCHMARK-ON-THE-RUN INDEX(1) 4.04% 5.95% 5.95%**
SALOMON 1-3 YEAR TREASURY/GOVERNMENT SPONSORED/CORPORATE INDEX(2) 3.29% 6.56% 6.56%**
</TABLE>
* Since 12/28/94
** Since 12/31/94
(1) The Salomon 1 Year Treasury Benchmark-on-the-Run Index is an unmanaged
index generally representative of the average yield of one-year treasury
bills.
(2) The Salomon 1-3 Year Treasury/Government Sponsored/Corporate Index is a
widely recognized index of U.S. Treasury, government agency and investment
grade corporate securities with maturities greater than 1 year and less
than 3 years.
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 15 of 38
<PAGE>
PORTFOLIO FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Portfolio shares.
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
(EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)* INSTITUTIONAL CLASS SHARES
--------------------------------------------------- ------------------------------
<S> <C>
Investment Advisory Fees 0.60%
Other Expenses 0.47%
-----
Total Annual Portfolio Operating Expenses 1.07%
----------------------------------------------------------------------------------
</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 its 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 were
0.75%.
For more information about these fees, see "Investment Adviser."
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,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. 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 $109 $340 $590 $1,306
</TABLE>
Page 16 of 38
<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
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
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 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 17 of 38
<PAGE>
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.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of the
Portfolio's returns and provide 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>
<CAPTION>
ANNUAL TOTAL RETURNS
<S> <C>
1997 8.81%
1998 5.97%
1999 -4.09%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
3.64% -2.18%
(06/30/1997) (12/31/1999)
</TABLE>
The Portfolio's performance from 1/1/2000 to 3/31/2000 was 2.96%.
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN MUNICIPAL BOND INDEX.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES 1 YEAR SINCE INCEPTION
------------------------------------------------------------ ---------------------- ----------------------
<S> <C> <C>
MUNICIPAL BOND FUND -4.09% 3.67%*
LEHMAN MUNICIPAL BOND INDEX(1) -2.07% 4.65%*
</TABLE>
* Since 10/31/96
(1) The Lehman Municipal Bond Index is a widely recognized, broad based total
return index comprised of investment grade, fixed rate municipal bonds with
maturities of at least one year. The bonds are selected from issues larger
than $50 million since January 1984.
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 38
<PAGE>
PORTFOLIO FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Portfolio shares.
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
(EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)* INSTITUTIONAL CLASS SHARES
----------------------------------------------------- --------------------------------
<S> <C>
Investment Advisory Fees 0.60%
Other Expenses 0.33%
-----
Total Annual Portfolio Operating Expenses 0.93%
--------------------------------------------------------------------------------------
</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 its 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 were
0.75%.
For more information about these fees, see "Investment Adviser."
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,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. 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 $95 $296 $515 $1,143
</TABLE>
Page 19 of 38
<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
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
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
conditions, the Portfolio may not be able to buy or sell securities at favorable
prices, and the Portfolio may experience losses.
Page 20 of 38
<PAGE>
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.
As of February 5, 1999 the Portfolio was closed to new shareholders. It was
liquidated April 30, 1999.
Page 21 of 38
<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
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
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 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 22 of 38
<PAGE>
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.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the variability of
the Portfolio's returns and provide 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>
<CAPTION>
ANNUAL TOTAL RETURNS
<S> <C>
1995 13.86%
1996 1.96%
1997 8.16%
1998 5.47%
1999 -3.39%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
4.55% -2.09%
(09/30/1995) (06/30/1999)
</TABLE>
The Portfolio's performance from 1/1/2000 to 3/31/2000 was 3.23%.
Page 23 of 38
<PAGE>
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE
PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN 10 YEAR MUNICIPAL
BOND INDEX, TO THOSE OF THE LEHMAN 5 YEAR MUNICIPAL BOND INDEX AND TO THOSE
OF THE LEHMAN MUNICIPAL BOND INDEX.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES 1 YEAR 5 YEARS SINCE INCEPTION
-------------------------------------------------- ------------------ ------------------- -------------------
<S> <C> <C> <C>
IDAHO MUNICIPAL BOND FUND -3.39% 5.05% 5.03%*
LEHMAN 10 YEAR MUNICIPAL BOND INDEX(1) -1.24% 7.12% 7.12%**
LEHMAN 5 YEAR MUNICIPAL BOND INDEX(2) 0.74% 5.71% 5.71%**
LEHMAN MUNCIPAL BOND INDEX(3) -2.07% 6.91% 6.91%**
</TABLE>
* Since 12/28/94
** Since 12/31/94
(1) The Lehman 10 Year Municipal Bond Index is a widely-recognized broad based
total return index of long-term intermediate investment grade tax-exempt
bonds. The index includes general obligation bonds, revenue bonds, insured
bonds, and pre-funded bonds with maturities between 9 and 12 years and are
selected from issues larger than $50 million since January 1984.
(2) The Lehman 5 Year Municipal Bond Index is a widely-recognized index of
intermediate-term investment grade tax-exempt bonds. The index includes
general obligation bonds, revenue bonds, insured bonds and pre-funded bonds
with maturities between 4 and 6 years.
(3) The Lehman Muncipal Bond Index is a widely recognized, broad based total
return index comprosed of investment grade, fixed rate municipal bonds
with maturities of at least one year. The bonds are selected from issues
larger than $50 million since January 1984.
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 and expenses that you may pay if you buy and hold
Portfolio shares.
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
(EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)* INSTITUTIONAL CLASS SHARES
-----------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.60%
Other Expenses 0.45%
-----
Total Annual Portfolio Operating Expenses 1.05%
-----------------------------------------------------------------------------------
</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 its 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 were
0.75%.
For more information about these fees, see "Investment Adviser."
Page 24 of 38
<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,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. 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 $107 $334 $579 $1,283
</TABLE>
Page 25 of 38
<PAGE>
<TABLE>
<S><C>
MORE INFORMATION ABOUT RISK
EQUITY RISK - Investments in equity securities and equity Equity Fund
derivatives in general are subject to market risks that may cause Balanced Fund
their prices to 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 income investments Balanced Fund
changes in response to interest rate changes and other factors. Intermediate Term Bond Fund
During periods of falling interest rates, the values of Short Term Bond Fund
outstanding fixed income securities generally rise and during Municipal Bond Fund
periods of rising interest rates, the value of those securities Short Term Municipal Bond Fund
falls. While securities with longer maturities tend to produce Idaho Municipal Bond Fund
higher yields, the prices of longer maturity securities are also
subject to greater market fluctuations as a result of 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.
Page 26 of 38
<PAGE>
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.
MUNICIPAL ISSUER RISK - There may be economic or political changes Municipal Bond Fund
that impact the ability of municipal issuers to repay principal Short Term Municipal Bond Fund
and to make interest payments on municipal securities. Changes to Idaho Municipal Bond Fund
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, for the Idaho Municipal Bond Fund, concentration of
investments in issuers located in a single state makes the
Portfolio more susceptible to adverse political or economic
developments affecting that state.
MORTGAGE-BACKED SECURITIES -Mortgage-backed securities are fixed Balanced Fund
income securities representing an interest in a pool of underlying Intermediate Term Bond Fund
mortgage loans. They are sensitive to changes in interest rates, Short Term Bond Fund
but may respond 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.
Page 27 of 38
<PAGE>
U.S. GOVERNMENT SECURITIES RISK - Although a Portfolio's U.S. Balanced Fund
government securities are considered to be among the safest Intermediate Term Bond Fund
investments, they are not guaranteed against price movements due Short Term Bond Fund
to changing interest rates. Obligations issued or guaranteed 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.
ASSET-BACKED SECURITIES RISK - Asset-backed securities are fixed Intermediate Term Bond Fund
income securities representing an interest in a pool of Short Term Bond Fund
shorter-term loans such as automobile loans, home equity loans,
equipment or computer leases or credit card receivables. The
payments from the loans are passed through to the security
holder. The loans underlying asset-backed securities tend to have
prepayment rates that do not vary with interest rates. In
addition, the short-term nature of the loans reduces the impact of
any change in prepayment level. However, it is possible that
prepayments will alter the cash flow on asset-backed securities
and it is not possible to determine in advance the actual final
maturity date or average life. Faster prepayment will shorten the
average life and slower prepayment will lengthen it, affecting the
price volatility of the security. However, it is possible to
determine what the range of that movement could be and to
calculate the effect that it will have on the price of the
security.
</TABLE>
Page 28 of 38
<PAGE>
MORE INFORMATION ABOUT PORTFOLIO 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.
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. Of course, the Trust cannot guarantee that any Portfolio will
achieve its investment goal.
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, 2000, the Adviser had
approximately $7.3 billion in assets under management. For the
fiscal year ended January 31, 2000, First Security Investment
Management, Inc. received advisory fees, expressed as a
percentage of assets under management, of:
<TABLE>
<S> <C>
EQUITY FUND 0.61%
BALANCED FUND 0.59%
INTERMEDIATE TERM BOND FUND 0.42%
SHORT TERM BOND FUND 0.28%
MUNICIPAL BOND FUND 0.42%
SHORT TERM MUNICIPAL BOND FUND N/A
IDAHO MUNICIPAL BOND FUND 0.36%
</TABLE>
The Adviser may use its affiliates as brokers for Portfolio transactions.
PORTFOLIO MANAGERS
EQUITY FUND AND BALANCED FUND- Sterling K. Jenson, CFA, is President of the
Adviser and has been responsible for the Equity Fund since its inception in
December of 1994 and he assumed responsibility for the Balanced Fund in January
2000. Before joining the Adviser in 1990 as a Vice President and Senior
Portfolio Manager, Mr. Jenson held investment positions with First Interstate
Bank of Nevada, Moore Trust Company, and Smoot, Miller, Cheney & Co. His
combined experience in the investment business spans nearly 25 years. He was
designated a Chartered Financial Analyst (CFA) and Chartered Investment
Counselor (CIC) in 1984 and earned a Bachelor of Science, Economics in 1975 and
earned a Master of Business Administration (MBA) in 1977, both from Brigham
Young University.
Page 29 of 38
<PAGE>
INTERMEDIATE TERM BOND FUND AND SHORT TERM BOND FUND - Mark L. Anderson brings
15 years of financial experience to his management of the Intermediate Term Bond
Fund and Short Term Bond Fund. Currently a Senior Vice President, Mr. Anderson
has been responsible for the portfolios since their inception in 1995. Since
joining the Adviser in 1985, Mr. Anderson has managed bond, balanced, equity and
money market accounts and held positions of increasing responsibility and
leadership. Mr. Anderson attended Brigham Young University earning a Bachelor of
Science in Finance in 1981 and a Master of Public Administration in 1984.
MUNICIPAL BOND FUND, SHORT TERM MUNICIPAL BOND FUND AND IDAHO MUNICIPAL BOND
FUND - John B. Tousley, CFA, is Vice President and Senior Portfolio Manager of
the Adviser and has been responsible for the Idaho Municipal Bond Fund since
1997 and the Municipal Bond Fund and the Short Term Municipal Bond Fund since
1999. With nine years experience in the financial industry, Mr. Tousley has held
investment-related positions at Dean Witter and West One Trust. Mr. Tousley
earned a Bachelor of Arts in Economics in 1991 from Brigham Young University and
became a Chartered Financial Analyst (CFA) in 1998.
PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES
This section tells you how to purchase, sell (sometimes called "redeem") and
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, complete and send in an application. If you
need an application or have questions, please refer to our website at
www.achievementfunds.com or call 1-800-472-0577. 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
(NYSE) (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 the net
assets of the Portfolio.
Page 30 of 38
<PAGE>
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.
HOW TO SELL YOUR PORTFOLIO SHARES
Holders of Institutional Class Shares may sell shares by following the
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 your shares on any Business Day by
contacting a Portfolio directly by mail or telephone at 1-800-472-0577.
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 days from your date of purchase).
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.
Page 31 of 38
<PAGE>
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
A Portfolio may suspend your right to sell your shares if the NYSE restricts
trading, the Securities and Exchange Commission (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.
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 Portfolio shares over the telephone is
extremely convenient, but not without risk. Although the Trust has certain
safeguards and procedures to confirm the identity of callers and the
authenticity of instructions, the Trust 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 Trust over the
telephone, you will generally bear the risk of any loss.
Page 32 of 38
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
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 Trust in writing prior to the date of the distribution. Your
election will be effective for dividends and distributions paid after the Trust
receives your written notice. To cancel your election, simply send the Trust
written notice.
TAXES
PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT
FEDERAL, STATE AND LOCAL INCOME TAXES. Below we have summarized some
important tax issues that affect the Portfolios and their shareholders. This
summary is based on current tax laws, which may change.
Each Portfolio will distribute substantially all of its income and capital
gains, if any. The dividends and distributions you receive may be subject to
Federal, state and local taxation, depending on your tax situation.
Distributions you receive from a Portfolio may be taxable whether or not you
reinvest them. Income distributions are generally taxable at ordinary income tax
rates. Capital gains distributions are generally taxable at the rates applicable
to long-term capital gains. EACH SALE OR EXCHANGE OF FUND SHARES IS A TAXABLE
EVENT.
The Municipal Bond Fund, Short Term Municipal Bond Fund and the Idaho Municipal
Bond Fund intend to distribute Federally tax-exempt income. The Idaho Municipal
Bond Fund also intends to distribute state tax-exempt income. Each Portfolio may
invest a portion of its assets in securities that generate taxable income for
Federal or state income taxes. Income exempt from Federal tax may be subject to
state and local taxes. Any capital gains distributed by these Portfolios are
taxable.
MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.
Page 33 of 38
<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 accessing our website at www.achievementfunds.com
or by calling 1-800-472-0577.
Page 34 of 38
<PAGE>
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD OR YEAR
<TABLE>
<CAPTION>
NET
ASSET DISTRIBUTIONS DISTRIBUTIONS REALIZED AND NET
VALUE, NET FROM NET FROM UNREALIZED ASSET VALUE,
BEGINNING INVESTMENT INVESTMENT CAPITAL GAINS (LOSSES) END
OF PERIOD INCOME INCOME GAINS ON INVESTMENTS OF PERIOD
-------------------------------- ------------ ----------- ------------------- ---------------- -------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
EQUITY FUND
Institutional Class:
For the years ended
January 31, 2000*** $18.03 -- -- (1.51) 1.82 $18.34
January 31, 1999 $15.34 0.06 (0.07) (0.72) 3.42 $18.03
January 31, 1998 $14.03 0.10 (0.10) (1.68) 2.99 $15.34
January 31, 1997 $12.64 0.11 (0.11) (0.94) 2.33 $14.03
January 31, 1996 $10.24 0.17 (0.17) (0.72) 3.12 $12.64
BALANCED FUND
Institutional Class:
For the years ended
January 31, 2000*** $13.99 0.26 (0.26) (0.74) 0.61 $13.86
January 31, 1999 $13.10 0.29 (0.29) (0.86) 1.75 $13.99
January 31, 1998 $12.01 0.32 (0.30) (0.64) 1.71 $13.10
January 31, 1997 $11.79 0.34 (0.35) (0.78) 1.01 $12.01
January 31, 1996 $10.20 0.39 (0.39) (0.42) 2.01 $11.79
INTERMEDIATE TERM BOND FUND
Institutional Class:
For the years ended
January 31, 2000*** $10.77 0.59 (0.59) -- (0.86) $9.91
January 31, 1999 $10.63 0.61 (0.61) -- 0.14 $10.77
January 31, 1998 $10.37 0.62 (0.62) -- 0.26 $10.63
January 31, 1997 $10.79 0.62 (0.62) -- (0.42) $10.37
January 31, 1996 $10.09 0.71 (0.70) -- 0.69 $10.79
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD OR YEAR
RATIO RATIO OF
OF EXPENSES NET INCOME
NET RATIO TO AVERAGE RATIO OF TO AVERAGE
ASSETS, END OF EXPENSES NET ASSETS NET INCOME NET ASSETS PORTFOLIO
TOTAL OF PERIOD TO AVERAGE (EXCLUDING TO AVERAGE (EXCLUDING TURNOVER
RETURN (000) NET ASSETS WAIVERS) NET ASSETS WAIVERS) RATE
-------------------------------- ---------- ----------------- ------------ ------------- ------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
EQUITY FUND
Institutional Class:
For the years ended
January 31, 2000*** 10.06% $282,407 0.90% 1.03% -- (0.13)% 40.22%
January 31, 1999 24.06% $270,397 0.90% 1.06% 0.36% 0.20% 74.99%
January 31, 1998 22.14% $195,500 0.90% 1.00% 0.63% 0.53% 36.68%
January 31, 1997 20.00% $177,234 0.90% 1.07% 0.81% 0.64% 97.14%
January 31, 1996 32.55% $150,957 0.90% 1.14% 1.43% 1.19% 103.85%
BALANCED FUND
Institutional Class:
For the years ended
January 31, 2000*** 6.15% $213,251 0.90% 1.05% 1.84% 1.69% 33.27%
January 31, 1999 16.75% $214,939 0.90% 1.05% 2.14% 1.99% 54.88%
January 31, 1998 17.28% $175,751 0.90% 1.02% 2.49% 2.37% 30.91%
January 31, 1997 12.03% $156,315 0.90% 1.07% 2.90% 2.73% 68.11%
January 31, 1996 24.15% $147,357 0.90% 1.14% 3.48% 3.24% 59.74%
INTERMEDIATE TERM BOND FUND
Institutional Class:
For the years ended
January 31, 2000*** (2.54)% $159,564 0.75% 0.93% 5.75% 5.57% 21.46%
January 31, 1999 7.25% $168,545 0.75% 0.91% 5.72% 5.55% 28.03%
January 31, 1998 8.82% $161,742 0.75% 0.87% 5.99% 5.87% 20.91%
January 31, 1997 2.06% $134,645 0.75% 0.95% 6.02% 5.82% 21.23%
January 31, 1996 13.62% $115,307 0.75% 1.02% 6.14% 5.87% 85.16%
</TABLE>
Page 35 of 38
<PAGE>
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD OR YEAR
<TABLE>
<CAPTION>
NET
ASSET DISTRIBUTIONS DISTRIBUTIONS REALIZED AND NET
VALUE, NET FROM NET FROM UNREALIZED ASSET VALUE,
BEGINNING INVESTMENT INVESTMENT CAPITAL GAINS (LOSSES) END TOTAL
OF PERIOD INCOME INCOME GAINS ON INVESTMENTS OF PERIOD RETURN
----------------------------- ------------- -------------- --------------- --------------- ---------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
SHORT TERM BOND FUND
Institutional Class:
For the years ended
January 31, 2000*** $10.02 0.54 (0.54) -- (0.24) $9.78 3.02%
January 31, 1999 $10.05 0.55 (0.55) -- (0.03) $10.02 5.33%
January 31, 1998 $10.01 0.57 (0.57) -- 0.04 $10.05 6.25%
January 31, 1997 $10.18 0.60 (0.60) -- (0.17) $10.01 4.40%
January 31, 1996 $10.02 0.67 (0.65) -- 0.14 $10.18 7.80%
MUNICIPAL BOND FUND
Institutional Class:
For the years ended
January 31, 2000*** $10.30 0.49 (0.49) (0.02) (1.08) $9.20 (5.94)%
January 31, 1999 $10.38 0.49 (0.49) (0.18) 0.10 $10.30 5.88%
January 31, 1998 $10.02 0.48 (0.48) (0.12) 0.48 $10.38 9.90%
For the period ended
January 31, 1997(1)** $10.00 0.12 (0.12) -- 0.02 $10.02 1.34%*
IDAHO MUNICIPAL BOND FUND
Institutional Class:
For the years ended
January 31, 2000*** $10.91 0.47 (0.47) (0.08) (1.01) $9.82 (5.11)%
January 31, 1999 $10.82 0.47 (0.47) (0.05) 0.14 $10.91 5.76%
January 31, 1998 $10.41 0.47 (0.47) (0.04) 0.45 $10.82 9.06%
January 31, 1997 $10.80 0.46 (0.46) (0.06) (0.33) $10.41 1.31%
January 31, 1996 $10.13 0.52 (0.51) (0.12) 0.78 $10.80 12.68%
<CAPTION>
RATIO RATIO OF
OF EXPENSES NET INCOME
NET RATIO TO AVERAGE RATIO OF TO AVERAGE
ASSETS, END OF EXPENSES NET ASSETS NET INCOME NET ASSETS PORTFOLIO
OF PERIOD TO AVERAGE (EXCLUDING TO AVERAGE (EXCLUDING TURNOVER
(000) NET ASSETS WAIVERS) NET ASSETS WAIVERS) RATE
------------ ------------- -------------- ---------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
SHORT TERM BOND FUND
Institutional Class:
For the years ended
January 31, 2000*** $31,879 0.75% 1.07% 5.41% 5.09% 57.49%
January 31, 1999 $37,951 0.75% 1.01% 5.50% 5.24% 26.51%
January 31, 1998 $50,853 0.75% 0.95% 5.68% 5.48% 48.90%
January 31, 1997 $65,328 0.75% 0.96% 6.00% 5.79% 40.80%
January 31, 1996 $75,632 0.75% 0.99% 6.11% 5.87% 83.64%
MUNICIPAL BOND FUND
Institutional Class:
For the years ended
January 31, 2000*** $63,982 0.75% 0.93% 4.97% 4.79% 15.96%
January 31, 1999 $68,239 0.75% 0.95% 4.79% 4.59% 46.00%
January 31, 1998 $63,028 0.75% 1.05% 4.72% 4.42% 93.18%
For the period ended
January 31, 1997(1)** $53,067 0.75% 1.07% 4.58% 4.26% 19.21%
IDAHO MUNICIPAL BOND FUND
Institutional Class:
For the years ended
January 31, 2000*** $21,396 0.75% 1.05% 4.51% 4.21% 16.35%
January 31, 1999 $26,961 0.75% 1.07% 4.35% 4.03% 12.90%
January 31, 1998 $26,093 0.75% 1.10% 4.47% 4.12% 17.64%
January 31, 1997 $27,487 0.75% 1.24% 4.40% 3.91% 29.13%
January 31, 1996 $25,873 0.75% 1.35% 4.52% 3.92% 58.94%
</TABLE>
* Returns are for the period indicated and have not been annualized.
** Ratios for the period have been annualized.
*** Per share amounts for the period are based on average outstanding shares.
+ Returns do not reflect any sales load that may be applicable.
(1) Commenced operations on October 31, 1996.
Amounts designated as "--" are either $0 or have been rounded to $0.
Page 36 of 38
<PAGE>
THE ACHIEVEMENT FUNDS
INSTITUTIONAL CLASS SHARES
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, LLP
1225 17th Street
Suite 2300
Denver, Colorado 80202
More information about each Portfolio is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated June 1, 2000, includes detailed information about the Trust. 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
and their impact on Portfolio performance. The reports also contain detailed
financial information about the Portfolios.
TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT, OR MORE INFORMATION:
BY TELEPHONE: Call 1-800-472-0577
BY MAIL:
The Achievement Funds
One Freedom Valley Drive
Oaks, Pennsylvania 19456
BY INTERNET: www.achievementfunds.com
Page 37 of 38
<PAGE>
FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports,
as well as other information about the Trust, from the EDGAR Database on 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 on the operation of
the Public Reference Room, call 202-942-8090). 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 20549-0102. You
may also obtain this information, upon payment of a duplicating fee, by
e-mailing the SEC at the following address: [email protected]. The Trust's
Investment Company Act registration number is 811-5712.
Page 38 of 38
<PAGE>
THE ACHIEVEMENT FUNDS TRUST
- EQUITY FUND
- BALANCED FUND
- INTERMEDIATE TERM BOND FUND
- SHORT TERM BOND FUND
- MUNICIPAL BOND FUND
- SHORT TERM MUNICIPAL BOND FUND
- IDAHO MUNICIPAL BOND FUND
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, 2000, 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, 2000, 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
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE TRUST AND DESCRIPTION OF SHARES S-2
INVESTMENT STRATEGIES AND RISKS S-4
INVESTMENT POLICIES AND LIMITATIONS S-13
THE ADVISER S-15
THE ADMINISTRATOR S-17
DISTRIBUTION S-19
TRUSTEES AND OFFICERS OF THE TRUST S-26
PERFORMANCE S-29
PURCHASE, AND REDEMPTION OF SHARES S-33
DETERMINATION OF NET ASSET VALUE S-35
TAXES S-36
PORTFOLIO TRANSACTIONS S-44
LIMITATION OF TRUSTEE'S LIABILITY S-47
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES S-47
THE TRANSFER AGENT S-56
COUNSEL TO THE TRUST S-56
INDEPENDENT ACCOUNTANTS S-56
CUSTODIAN S-56
FINANCIAL STATEMENTS S-57
<PAGE>
APPENDIX A - PERMITTED INVESTMENTS S-58
APPENDIX B - RATINGS S-64
</TABLE>
June 1, 2000
[ACH-F-018-04]
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 is not currently offering shares
of the Short Term Municipal Bond Fund for sale to the public.
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 its 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.
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 Statement of Additional Information 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.
The Trustees of the Trust were re-elected at a special meeting of
shareholders held on October 29, 1999. 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 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.
S-4
<PAGE>
INVESTMENT STRATEGIES AND RISKS
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 First Security Investment Management, Inc., the Trust's
investment adviser (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
S-5
<PAGE>
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 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
S-6
<PAGE>
corporate notes and U.S. dollar denominated debt securities of foreign
issuers will not exceed 40% of its total assets.
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.
S-7
<PAGE>
The Short Term Bond Fund may invest in money market instruments, including:
- securities issued or guaranteed by the United States
Government and its agencies or instrumentalities,
- repurchase agreements,
- certificates of deposit or bankers' acceptances issued by
domestic banks or savings institutions with assets exceeding
$2.5 billion at the end of their most recent fiscal year, and
- commercial paper rated, at the time of purchase, in the top
two categories by a national rating agency or determined to be
of comparable quality by the Adviser at the time of purchase.
The Short Term Bond Fund may also invest up to 10% of its total assets in money
market mutual funds.
The 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 Portfolio
will, on a dollar-weighted basis, have a rating of A or
better, and the Portfolio 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
S-8
<PAGE>
factors specified by the board of trustees of the Trust
(the "Trustees"), including 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 Portfolio 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 Portfolio 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
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 Portfolio 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.
S-9
<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 Portfolio 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,
- 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
- cash reserves.
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 at 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
simultaneously earning interest on the investment of cash collateral. Collateral
is marked to
S-11
<PAGE>
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. For a description of ratings, see APPENDIX B - RATINGS.
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 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
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<PAGE>
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 particular
risks presented by such projects. 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.
LOWER 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.
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
S-13
<PAGE>
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 policies and limitations cannot be changed
without approval by a majority of the outstanding voting securities of a
Portfolio as defined in the Investment Company Act.
S-14
<PAGE>
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 to 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 Investment Company 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").
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
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<PAGE>
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, the
Short Term Municipal Bond Fund and Idaho Municipal Bond may invest up
to 15% of their total assets in illiquid securities.
S-16
<PAGE>
THE ADVISER
The Trust and First Security Investment Management, Inc. (the "Adviser") have
entered into an advisory agreement dated as of February 1, 1989 and amendments
to the advisory agreement dated as of December 27, 1994 and November 1, 1995 (as
further amended from time to time, the "Advisory Agreement"). The Advisory
Agreement provides that the Adviser shall not be protected against any liability
to the Trust or its shareholders by reason of willful misfeasance, bad faith or
gross negligence on its part in the performance of its duties or from reckless
disregard of its obligations or duties thereunder.
The Advisory Agreement provides that if, for any fiscal year, the expenses of
any Portfolio (including amounts payable to the Adviser but excluding interest,
taxes, brokerage, litigation, and other extraordinary expenses) exceed
limitations established by any applicable statute or regulatory authority of any
jurisdiction in which the shares are qualified for offer and sale, the Adviser
will bear the amount of such excess. The Adviser will not be required to bear
expenses of the Trust to an extent which would result in a Portfolio's inability
to qualify as a regulated investment company under provisions of the Internal
Revenue Code.
The continuance of the Advisory Agreement must be specifically approved at least
annually (i) by the vote of the Trustees or by vote of a majority of the
outstanding voting securities of each Portfolio, and (ii) by the vote of a
majority of the Trustees who are not parties to the Agreement or "interested
persons" of any party thereto, cast in person at a meeting called for the
purpose of voting on such approval. The Advisory Agreement will terminate
automatically in the event of its assignment, and is terminable at any time
without penalty by the Trustees of the Trust or, with respect to a Portfolio by
a majority of the outstanding shares of that Portfolio, on not less than 30 days
nor more than 60 days written notice to the Adviser, or by the Adviser on 90
days written notice to the Trust.
The Adviser is an indirect wholly-owned subsidiary of First Security
Corporation, a financial services organization and registered financial holding
company with headquarters in Salt Lake City, Utah.
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<PAGE>
For the fiscal years ended January 31, 2000, January 31, 1999 and January 31,
1998, the Portfolios paid the Adviser the following fees:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Equity Fund $1,759,983 $1,371,071 $1,240,547
Balanced Fund 1,293,111 1,103,136 1,039,727
Intermediate Term Bond Fund 703,658 725,043 708,954
Short Term Bond Fund 98,414 158,011 227,276
Municipal Bond Fund 316,174 291,720 201,286
Short Term Municipal Bond Fund 0 6,250 62,414
Idaho Municipal Bond Fund 138,665 127,298 106,646
</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 Adviser is entitled to receive a fee for the
services it provides, which is calculated daily and paid monthly, at an annual
rate of 0.74% of the average daily net assets of the Equity Fund and the
Balanced Fund, and at an annual rate of 0.60% of the average daily net assets of
the Intermediate Term Bond Fund, the Short Term Bond Fund, the Municipal Bond
Fund, the Short Term Municipal Bond Fund and the Idaho Municipal Bond Fund. The
Adviser has voluntarily waived a portion of its fee for the Trust's current
fiscal year so that total operating expenses for the Equity Fund and the
Balanced Fund (excluding 12b-1 fees) will not exceed 0.90%, and the total
operating expenses for the Intermediate Term bond Fund, the Short Term Bond
Fund, the Municipal Bond Fund, the Short Term Municipal Bond Fund and the Idaho
Municipal Bond Fund (excluding 12b-1 fees) will not exceed 0.75%. The Adviser
may revoke its fee waivers at any time at its sole discretion without notice to
any current or prospective shareholder. For the fiscal year ended January 31,
2000, the Adviser received advisory fees in amounts equal to the following
annual percentage rates applied to the average daily net assets of the
Portfolios indicated:
- 0.61% for the Equity Fund;
- 0.59% for the Balanced Fund;
- 0.42% for the Intermediate Term Bond Fund;
- 0.28% for the Short Term Bond Fund;
- 0.42% for the Municipal Bond Fund;
- 0.00% for the Short Term Municipal Bond Fund;
- 0.36% for the Idaho Municipal Bond Fund.
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<PAGE>
For the fiscal years ended January 31, 2000, January 31, 1999 and January 31,
1998, the Adviser waived advisory fees for each Portfolio as follows:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Equity Fund $386,420 $371,735 $198,551
Balanced Fund 337,389 282,755 212,761
Intermediate Term Bond Fund 295,235 272,430 179,395
Short Term Bond Fund 111,102 117,254 115,375
Municipal Bond Fund 138,826 141,103 204,756
Short Term Municipal Bond Fund 0 74,425 56,193
Idaho Municipal Bond Fund 91,972 95,170 100,062
</TABLE>
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 Funds 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, 2000, January
31, 1999 and January 31, 1998.
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<PAGE>
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Equity Fund $580,113 $471,030 $389,080
Balanced Fund 440,679 374,566 338,610
Intermediate Term Bond Fund 332,967 332,492 296,141
Short Term Bond Fund 69,839 93,548 114,208
Municipal Bond Fund 151,668 144,275 135,369
Short Term Municipal Bond Fund 0 26,982 39,536
Idaho Municipal Bond Fund 76,880 74,156 68,903
</TABLE>
For the fiscal years ended January 31, 2000, January 31,1999 and January 31,
1998, the Administrator waived fees for the following Portfolios:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Short Term Municipal Bond Fund 0 73,018 60,464
Idaho Municipal Bond Fund 23,121 25,844 31,097
</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
SEI Liquid Asset Trust
SEI Tax Exempt Trust
SEI Asset Allocation Trust
SEI Index Funds
SEI Institutional Managed Trust
SEI Daily Income Trust
The Advisor's Inner Circle Fund
The Pillar Funds
CUFUND
STI Classic Funds
First American Funds, Inc.
First American Strategy Funds, Inc.
First American Investment Funds, Inc.
The Expedition Funds
Amerindo Funds, Inc.
CNI Charter Funds
Friends Ivory Funds
Huntington VA Funds
The Nexis Fund, Inc.
The PBHG Funds, Inc.
PBHG Advisor Funds, Inc.
The Arbor Fund
Armada Funds
STI Classic Variable Trust
ARK Funds
Huntington Funds
HighMark Funds
Bishop Street Funds
TIP Funds
SEI Institutional Investments Trust
Alpha Select Funds
Oak Associates Funds
The Armada Advantage Fund
The Parkstone Group of Funds
UAM Funds Trust
UAM Funds Inc.
UAM Funds Inc., II
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 Investment Company 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 Investment Company
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
------------------
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<PAGE>
The Trust has adopted a Distribution Plan for the Retail Class A shares of each
Portfolio (the "Class A Plan") and for the Retail Class B shares of the Equity
Fund, Balanced Fund, Municipal Bond Fund and Idaho Municipal Bond Fund (the
"Class B Plan" and collectively with the Class A Plan, the "Plans") in
accordance with the provisions of Rule 12b-1 under the Investment Company 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 Investment
Company 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 Plans 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 Adviser,
transfer agent or other agent of the Trust.
S-22
<PAGE>
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 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, 2000, January 31, 1999 and January 31,
1998, the Class A share classes of the Portfolios paid the Distributor the
following amounts.
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Equity Fund $31,288 $27,258 $15,416
Balanced Fund $10,447 $10,370 $8,122
Intermediate Term Bond Fund $3,616 $5,823 $6,289
Short Term Bond Fund $ 396 $ 362 $627
Municipal Bond Fund $16,315 $21,582 $23,004
Short Term Municipal Bond Fund 0 1,032 569
Idaho Municipal Bond Fund $26,750 $25,622 $22,554
</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,
S-23
<PAGE>
and institutions that respond to inquiries of holders of Class B shares
regarding their ownership of such shares or their accounts with the Trust or
who provide administrative or accounting services not otherwise required to
be provided by the Trust's investment adviser, transfer agent or other agent
of the Trust.
The distribution fee may be used by the Distributor to provide initial and
ongoing sales compensation to its employees and to other broker-dealers in
respect of sales of Class B shares of the applicable Portfolios of the Trust and
to pay for other advertising and promotional expenses in connection with the
distribution of the Class B shares. These advertising and promotional expenses
include, by way of example but not by way of limitation, costs of printing and
mailing prospectuses, statements of additional information and shareholder
reports to prospective investors; preparation and distribution of sales
literature; advertising of any type; an allocation of overhead and other
expenses of the Distributor related to the distribution of such shares; and
payments to, and expenses of, officers, employees or representatives of the
Distributor, of other broker-dealers, banks or other financial institutions, and
of any other person who provides support service in connection with the
distribution of such shares, including travel, entertainment and telephone
expenses.
Payments under the Class B Plan are not tied exclusively to the expenses for
shareholder servicing and distribution related activities actually incurred by
the Distributor, so that such payments may exceed expenses actually incurred by
the Distributor. The Trust's Board of Trustees will evaluate the appropriateness
of the Class B 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 Class B 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 fiscal year ended January 31, 2000 and the period from May 8, 1998
through January 31, 1999 the Class B share classes of the Portfolios paid the
Distributors the following amounts.
<TABLE>
<CAPTION>
Fiscal Year Ended Period Ended
January 31, 2000 January 31, 1999
---------------- ----------------
<S> <C> <C>
Equity Fund $26,394 $10,900
Balanced Fund 17,988 4,955
Municipal Bond Fund 22,808 8,853
Idaho Municipal Bond Fund 19,590 6,275
</TABLE>
S-24
<PAGE>
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, 2000, January 31, 1999,
and January 31, 1998.
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
Sales Amount Sales Amount Sales Amount
Charge Retained Charge Retained Charge Retained
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Equity Fund 44,465 4,930 $82,076 $6,221 $189,578 $19,045
Balanced Fund 9,053 1,017 24,842 2,505 34,610 3,413
Intermediate Term Bond Fund 1,099 133 18,999 1,649 25,164 2,427
Short Term Bond Fund 47 5 133 12 367 32
Municipal Bond Fund 10,558 1,210 24,063 2,341 19,198 1,926
Short Term Municipal Bond Fund 3,159 439 593 46
Idaho Municipal Bond Fund 7,875 936 21,908 2,213 12,766 1,310
</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 sales charge and the amounts of such reallowances
expressed as a percentage of the offering price of each Portfolio's Class A
shares.
EQUITY FUND AND
BALANCED FUND
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Amount of Purchase Sales Charge as Reallowance and
a Percentage of Brokerage Commissions
Offering Price as a Percentage
of Offering Price
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
less than $25,000 4.50% 4.05%
$25,000 but less than $50,000 4.00% 3.60%
$50,000 but less than $100,000 3.50% 3.15%
$100,000 but less than $250,000 3.00% 2.70%
$250,000 but less than $500,000 2.50% 2.25%
S-25
<PAGE>
$500,000 but less than $1,000,000 2.00% 1.80%
$1,000,000 and over(1) - -
--------------------------------------------------------------------------------------------------------------------
<CAPTION>
INTERMEDIATE BOND FUND
--------------------------------------------------------------------------------------------------------------------
Amount of Purchase Sales Charge as Reallowance and
a Percentage of Brokerage Commissions
Offering Price as a Percentage
of Offering Price
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
less than $50,000 3.50% 3.15%
$50,000 but less than $100,000 3.00% 2.70%
$100,000 but less than $250,000 2.50% 2.25%
$250,000 but less than $500,000 2.00% 1.80%
$500,000 but less than $1,000,000 1.50% 1.35%
$1,000,000 and over(1) - -
--------------------------------------------------------------------------------------------------------------------
<CAPTION>
SHORT TERM BOND FUND
--------------------------------------------------------------------------------------------------------------------
Amount of Purchase Sales Charge as Reallowance and
a Percentage of Brokerage Commissions
Offering Price as a Percentage
of Offering Price
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
less than $100,000 1.50% 1.35%
$100,000 but less than $250,000 1.00% 0.90%
$250,000 but less than $500,000 0.75% 0.68%
$500,000 but less than $1,000,000 0.50% 0.45%
$1,000,000 and over(1) - -
S-26
<PAGE>
--------------------------------------------------------------------------------------------------------------------
<CAPTION>
MUNICIPAL BOND FUND AND IDAHO MUNICIPAL BOND FUND
--------------------------------------------------------------------------------------------------------------------
Amount of Purchase Sales Charge as Reallowance and
a Percentage of Brokerage Commissions
Offering Price as a Percentage
of Offering Price
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
less than $50,000 4.00% 3.60%
$50,000 but less than $100,000 3.50% 3.15%
$100,000 but less than $250,000 3.00% 2.70%
$250,000 but less than $500,000 2.50% 2.25%
$500,000 but less than $1,000,000 2.00% 1.80%
$1,000,000 and over(1) - -
--------------------------------------------------------------------------------------------------------------------
</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 fiscal year ended January 31, 2000 and the
period from May 8, 1998 through January 31, 1999:
<TABLE>
<CAPTION>
Fiscal Year
Ended Period Ended
January 31, 2000 January 31, 1999
---------------- ----------------
<S> <C> <C>
Equity Fund 18,939 $660
Balanced Fund 7,308 839
Municipal Bond Fund 11,305 755
Idaho Municipal Bond Fund 16,099 5,000
</TABLE>
S-27
<PAGE>
S-28
<PAGE>
TRUSTEES AND OFFICERS OF THE TRUST
The principal occupations of the Trustees and officers of the Trust for the past
five years are listed below. Trustees deemed to be "interested persons" of the
Trust for purposes of the Investment Company Act are indicated by an asterisk.
<TABLE>
<CAPTION>
Position Principal
Held With Occupation(s)
Name and Address Registrant During Past 5 Years
---------------- ---------- -------------------
<S> <C> <C>
Frederick A. Moreton, Jr.* Trustee and Chairman Senior Vice President, PaineWebber,
170 South Main, Suite 625 Incorporated
Salt Lake City, UT 84145-0170
Age: 60
Robert G. Love Trustee Consultant, Harris & Love
2275 Dallin Street Advertising, Inc.
Salt Lake City, UT 84109 (retired 1998)
Age: 76
August Glissmeyer, Jr. Trustee Retired
4458 Camille Street
Salt Lake City, UT 84124
Age: 74
Carl S. Minden Trustee Retired
314 Federal Height Circle
Salt Lake City, UT 84103
Age: 77
George L. Denton, Jr.* Trustee Retired
2915 Sherwood Drive
Salt Lake City, UT 84108
Age: 79
James H. Gardner Trustee Professor, University of Utah,
1616 Arlington Drive retired 1996; Director, Steiner
Salt Lake City, UT 84103 Corp. (industrial services);
Age: 76 Adviser, American Stores (retail)
1995-1999; Director, Marion
Laboratories (and successors)
(pharmaceuticals) 1976-1996.
S-29
<PAGE>
Blaine Huntsman Trustee Principal, Teton Creek Management
136 South Main Street, Suite 421 Co. (consulting) 1995-present.
Salt Lake City, UT 84111 Chairman & CEO, Director, Jore
Age: 64 Corporation Director, J.P.
Realty, Inc.
Kent H. Murdock Trustee President and CEO, O.C. Tanner
3015 E. Craig Drive Company (corporate recognition
Salt Lake City, UT 84109 awards) 1991-present.
Age: 53
John L. Rudisill* Trustee; Executive Vice Senior Vice President and Manager,
First Security Corporation President First Security Corporation (bank
61 South Main, 6th Floor holding company) 1994 - present.
Salt Lake City, UT 84111 Director, First Security Investor
Age: 44 Services (broker-dealer) 1997-1999.
Robert Nesher President President and Chief Executive
SEI Investments Management Corporation Officer of SEI, the Administrator
Oaks, PA 19456 and Distributor since 1995.
Age 52 Director and Executive Vice
President of SEI 1986 - 1994.
Chairman, SEI Mutual Funds since 1989.
Lydia A. Gavalis Vice President and Vice President and Assistant
SEI Investments Management Assistant Secretary Secretary of SEI, the Administrator
Corporation and Distributor since 1998.
Oaks, PA 19456 Assistant General Counsel and
Age: 35 Director of Arbitration,
Philadelphia Stock Exchange 1989-1998.
S-30
<PAGE>
Todd Cipperman Vice President and Vice President and Assistant
SEI Investments Management Assistant Secretary Secretary of SEI, the Administrator
Corporation and the Distributor since 1995.
Oaks, PA 19456 Associate, Dewey Ballantine (law
Age: 34 firm) 1994-1995. Associate, Winston
& Strawn (law firm) 1991-1994.
Timothy D. Barto Vice President and Vice President and Assistant
SEI Investments Management Corporation Assistant Secretary Secretary of SEI, the Administrator
Oak, PA 19456 and Distributor since November
Age: 32 1999. Associate at Dechert Price &
Rhoads 1997-1999. Associate at
Richter, Miller & Finn 1994-1997.
Christine M. McCullough Vice President and Vice President and Assistant
SEI Investments Management Assistant Secretary Secretary of SEI, the Administrator
Corporation and Distributor since November
Oak, PA 19456 1999. Associate at White and
Age: 39 Williams LLP 1991-1999. Associate
at Montgomery, McCracken, Walker &
Rhoads 1990-1991.
S-31
<PAGE>
James R. Foggo Vice President and Vice President and Assistant
SEI Investments Management Corporation Secretary Secretary of SEI, the Administrator
Oak, PA 19456 and 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 Principal Director, Fund Accounting and
SEI Investments Management Financial Officer Administration - SEI Fund Resources
Corporation since 1997. Vice President - Smith
Oaks, PA 19456 Barney Corporate Trust Company,
Age: 38 Trust Operations Unit - 1991-1997.
</TABLE>
Trustees and officers of the Trust owned less than 1% of the outstanding shares
of the Trust as of January 31, 2000.
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, 2000, 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.
S-32
<PAGE>
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Aggregate Benefits Accrued Estimated from Trust
Compensation from as Part of Annual Benefits and Fund
Trustee(1) the Trust Trust Expenses upon Retirement Complex(2)
----------- --------- -------------- --------------- ----------
<S> <C> <C> <C> <C>
Frederick A. Moreton, Jr. $8,500 $0 $0 $8,500
Robert G. Love 8,500 0 0 8,500
August Glissmeyer, Jr. 9,000 0 0 9,000
Carl S. Minden 8,500 0 0 8,500
George L. Denton, Jr. 9,000 0 0 9,000
James H. Gardner 9,000 0 0 9,000
Blaine Huntsman 9,000 0 0 9,000
Kent H. Murdock 8,500 0 0 8,500
</TABLE>
(1) One of the Trustees, John Rudisill receives no compensation from the Trust.
(2) The Trust is not part of a Fund Complex.
PERFORMANCE
From time to time, each Portfolio may advertise yield or total return. These
figures will be based on historical earnings and are not intended to indicate
future performance.
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
S-33
<PAGE>
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 dividends; and
d= maximum offering price per share on the last day of period.
For the 30 day period ended January 31, 2000, 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 0.01% (0.23)% (1.03)%
Balanced Fund 1.87 1.54 0.84
Intermediate Term Bond Fund 6.44 5.97 N/A
Short Term Bond Fund 6.18 5.84 N/A
Municipal Bond Fund 5.64 5.17 4.73
Short Term Municipal Bond Fund N/A N/A N/A
Idaho Municipal Bond Fund 4.97 4.53 4.06
</TABLE>
The Municipal Bond Fund, the 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).
S-34
<PAGE>
For the 30 day period ended January 31, 2000, the tax equivalent yield for
shares of each Portfolio was:
<TABLE>
<CAPTION>
Institutional Class Retail Class A Retail Class B
Share Shares Shares
<S> <C> <C> <C>
Municipal Bond Fund 8.17% 7.49% 6.86%
Short Term Municipal Bond Fund N/A N/A N/A
Idaho Municipal Bond Fund 8.17% 7.43% 6.68%
</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.
S-35
<PAGE>
Shown below for each of the Portfolios is the annual total return, after
payment of the maximum sales charge, for the one year and five year periods
year ended January 31, 2000 and the average annual total return for the life
of each Portfolio.
Institutional Class Shares
<TABLE>
<CAPTION>
One Five Since
Year Years Inception(1)
---- ----- ------------
<S> <C> <C> <C>
Equity Fund 10.06% 21.54% 21.66%
Balanced Fund 6.15 15.12 15.26
Intermediate Term Bond Fund (2.54) 5.69 5.90
Short Term Bond Fund 3.02 5.35 5.41
Municipal Bond Fund (5.94) N/A 3.24
Short Term Municipal Bond Fund N/A N/A N/A
Idaho Municipal Bond Fund (5.11) 4.55 4.82
</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.
---------------------
S-36
<PAGE>
<TABLE>
<CAPTION>
Retail Class A Shares
One Five Since
Year Years Inception(1)
---- ----- ------------
<S> <C> <C> <C>
Equity Fund 4.78% N/A 19.87%
Balanced Fund 1.13 N/A 13.60
Intermediate Term Bond Fund (6.17) N/A 4.54
Short Term Bond Fund 1.35 N/A 4.71
Municipal Bond Fund (9.86) N/A 1.79
Short Term Municipal Bond Fund N/A N/A N/A
Idaho Municipal Bond Fund (9.07) N/A 3.32
</TABLE>
1. The Retail Class A shares of all Portfolios commenced operations on March 6,
1995, except for the Municipal Bond Fund, which commenced operations on November
1, 1996.
---------------------
<TABLE>
<CAPTION>
Retail Class B Shares
One Five Since
Year Years Inception(1)
---- ----- ------------
<S> <C> <C> <C>
Equity Fund 3.82% N/A 9.34%
Balanced Fund 0.12 N/A 5.37
Municipal Bond Fund (11.28) N/A (3.42)
Idaho Municipal Bond Fund (10.38) N/A (2.63)
</TABLE>
1. Class B shares were first offered for sale to the public on May 8, 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
S-37
<PAGE>
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 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
S-38
<PAGE>
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 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
S-39
<PAGE>
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.
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. Securities listed on a securities
exchange or an automated quotation system for which quotations are readily
available, including securities traded over the counter,
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are valued at the last quoted 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. Debt and fixed income
investments may be priced by independent, third-party pricing agents. Those
third-party pricing agents may use a matrix system to determine valuations.
This system considers such factors as security prices, yields, maturities,
call features, ratings and developments relating to specific securities in
arriving at valuations. The procedures of the pricing service and its
valuations are reviewed by the officers of the Trust under the general
supervision of the Trustees. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the supervision of the Trust's officers in a manner specifically
authorized by the Trustees of the Trust. Short-term obligations having 60
days or less to maturity are valued at amortized cost, which approximates
fair market value.
Because net asset value per share of each Portfolio is determined only on
business days of the Portfolio, the net asset value per share of a Portfolio may
be significantly affected on days when an investor can not exchange or redeem
shares of the Portfolio.
TAXES
The following is only a summary of certain additional tax considerations
generally affecting the Portfolios and their shareholders that are not described
in the Prospectus. No attempt is made to present a detailed explanation of the
tax treatment of the Portfolios or their shareholders, and the discussion here
and in the Prospectus is not intended as a substitute for careful tax planning.
Investors are urged to consult their tax advisers with specific reference to
their own tax situation.
QUALIFICATION AS A RIC
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
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of investing in stock or securities), and other income derived with respect
to its business of investing in such stock, securities or currencies (the
"Income Requirement"); (ii) at the close of each quarter of a Portfolio's
taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. Government securities, securities of
other RICs and other securities, with such other securities limited, in
respect of any one issuer, to an amount that does not exceed 5% of the value
of a Portfolio's assets and that does not represent more than 10% of the
outstanding voting securities of such issuer; and (iii) at the close of each
quarter of a Portfolio's taxable year, not more than 25% of the value of its
assets may be invested in securities (other than U.S. Government securities
or the securities of other RICs) of any one issuer or of two or more issuers
which the Portfolio controls and which are engaged in the same, similar or
related trades or businesses. (The requirements described in clauses (ii) and
(iii) will collectively be referred to in the following discussion as the
"Asset Diversification Requirement".)
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
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beginning on the date which is 90 days before such date, in the case of
certain preferred stock); provided, however, that such holding period shall
be reduced for any period during which the Portfolio has an option to sell,
is under a contractual obligation to sell, has made and not closed a short
sale of, has granted certain options to buy or has otherwise diminished its
risk of loss by holding other positions with respect to, such (or substantially
identical) stock; (2) to the extent that the taxpayer is under an obligation
(pursuant to a short sale or otherwise) to make related payments with respect
to positions in substantially similar or related property; or (3) to the
extent the stock on which the dividend is paid is treated as debt-financed
under the rules of Code Section 246A. Moreover, the dividends-received
deduction for a corporate shareholder may be disallowed or reduced (1) if the
corporate shareholder fails to satisfy the foregoing requirements with
respect to its shares of the Portfolio, or (2) by application of Code Section
246(b), which in general limits the dividends-received deduction to 70% of
the shareholder's taxable income (determined without regard to the
dividends-received deduction and certain other items). The Trust will
designate the portion, if any, of the distribution made by a Portfolio that
qualifies for the dividends-received deduction in a written notice mailed by
the Portfolio to shareholders not later than 60 days after the close of the
Portfolio's taxable year. Only the Equity Fund and the Balanced Fund are
expected to have any portion of their dividends so designated.
Investors should note that changes made to the Code by the Taxpayer Relief
Act of 1997 have increased the tax rate distinctions between capital gain and
ordinary income distributions. The nominal maximum marginal rate on ordinary
income for individuals, trusts and estates is now 39.6%, but for individual
taxpayers whose adjusted gross income exceeds certain threshold amounts (that
differ depending on the taxpayer's filing status), provisions phasing out
personal exemptions and limiting itemized deductions may cause the actual
marginal rate to exceed 39.6%. The maximum rate on the net capital gain of
individuals, trusts and estates, however, is 20% if the property sold has
been held for more than one year. Accordingly, 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
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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. However, certain small
corporations are wholly exempt from the alternative minimum tax.
If for any taxable year any Portfolio does not qualify as a RIC, all of its
taxable income will be subject to tax at regular corporate rates without any
deduction for distributions to shareholders, and all distributions will be
taxable as ordinary dividends (including amounts derived from interest on
municipal securities in the case of the Municipal Bond Fund, the 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 described below.
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.
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, 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
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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.
Although the Portfolios generally do not expect to receive net investment
income other than interest on municipal securities, up to 20% of the net
assets of each Portfolio may be invested in securities that do not pay
tax-exempt interest. Any taxable income recognized by the Portfolios will be
distributed and taxed to their shareholders in accordance with the rules
described in the Prospectus with respect to the other Portfolios of the Trust.
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 exempt from the alternative minimum tax). 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
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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" 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. Any dividends that were declared in October,
November or December and payable to shareholders of record on a specified
date in any of these three months could be treated as 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.
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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.
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.
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
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straddle rules may substantially increase or decrease the amount which must
be distributed to shareholders in satisfaction of the Distribution
Requirement (or to avoid Federal excise tax liability) for any taxable year
in comparison to a fund that did not engage in options transactions.
The writer of a covered call option generally does not recognize income upon
receipt of the option premium. If the option expires unexercised or is closed
on an exchange, the writer generally recognizes short-term capital gain. If
the option is exercised, the premium is included in the consideration
received by the writer in determining the capital gain or loss recognized in
the resultant sale.
For purposes of the Asset Diversification Requirement, the issuer of a call
option on a security (including an option written on an exchange) will be deemed
to be the issuer of the underlying security. The Internal 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
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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. 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
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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 Investment Company 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 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
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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, 2000, January 31, 1999, January 31, 1998,
the following Portfolios paid brokerage commissions in the following amounts.
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Equity Fund $179,214 $451,932 $152,647
Balanced Fund 65,041 242,130 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, 2000, such transactions amounts and related brokerage commissions
were:
<TABLE>
<CAPTION>
Transactions Amounts Related Brokerage Commissions
-------------------- -----------------------------
<S> <C> <C>
Equity Fund $96,303,947 $99,776
-------------------- -----------------------------
Balanced Fund 38,327,683 37,254
-------------------- -----------------------------
</TABLE>
The following Portfolios paid brokerage commissions directed by SEI Investments
to Pershing, a broker affiliated with the Administrator and Distributor, during
the Trust's fiscal years ended January 31, 2000 and January 31, 1999.
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Equity Fund $14,003 $29,296
Balanced Fund 6,459 14,107
</TABLE>
For the fiscal year ended January 31, 2000, 7.8% of the brokerage commissions
paid by the Equity Fund, and 9.9% of the brokerage commissions paid by the
Balanced Fund, were paid to the affiliated broker. During that same period 7.3%
of the Equity Fund's transactions and 8.4% of the Balanced Fund's transactions
were effected through the affiliated broker.
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<PAGE>
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, 2000, the following
Portfolios held the securities described below.
<TABLE>
<CAPTION>
Value
-----
<S> <C> <C>
Intermediate Term Bond Fund Lehman Bros. Debt $5,052,000
Short-Term Bond Fund Morgan Stanley Debt $1,006,000
</TABLE>
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
PRINCIPAL HOLDERS OF SECURITIES
EQUITY FUND
To the best of the knowledge of the Company, the names and addresses of
the holders of 5% or more of the outstanding Institutional, Class A and Class B
shares of the Equity Fund as of May 4, 2000, and the amount of the outstanding
shares held of record by such holders are set forth below. The Company has no
knowledge of whether all or any portion of the shares owned are also owned
beneficially.
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY BENEFICIALLY
--------------- ----------- ------------
<S> <C> <C>
INSTITUTIONAL CLASS SHARES
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<PAGE>
First Security Corporation 69.69% 0%
Trust Groups - Cash Account
First Security Bank of Utah N.A.
Trust Securities Admin. Dept.
P.O. Box 25297
Salt Lake City, UT 84125-0297
First Security Corporation 16.79% 0%
Trust Groups - Reinvest Account
First Security Bank of Utah N.A.
Trust Securities Admin. Dept.
P.O. Box 25297
Salt Lake City, UT 84125-0297
First Security Bank N.A. TR 11.75% 0%
For the First Security Incentive
Savings Plan
Trust Securities Admin. Dept.
P.O. Box 25297
Salt Lake City, UT 84125-0297
RETAIL CLASS A SHARES
BHC Securities Inc. 76.39% 0%
Trade House Acct.
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
RETAIL CLASS B SHARES
Fiserv Securities Inc. 7.32% 0%
FAO 18915437
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19105-7084
</TABLE>
BALANCED FUND
To the best of the knowledge of the Company, the names and addresses of
the holders of 5% or more of the outstanding Institutional, Class A and Class B
shares of the Balanced Fund as
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<PAGE>
of May 4, 2000, and the amount of the outstanding shares held of record and
beneficially owned by such holders are set forth below. The Company has no
knowledge of whether all or any portion of the shares owned of record are
also owned beneficially.
S-54
<PAGE>
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY BENEFICIALLY
--------------- ----------- ------------
<S> <C> <C>
INSTITUTIONAL CLASS SHARES
First Security Corporation 69.64% 0%
Trust Groups-Reinvest Account
First Security Bank of Utah N.A.
Trust Securities Admin. Dept.
P.O. Box 25297
Salt Lake City, UT 84125-0297
First Security Bank N.A. TR 28.28% 0%
For the First Security Incentive
Savings Plan
Trust Securities Admin. Dept.
P.O. Box 25297
Salt Lake City, UT 84125-0297
RETAIL CLASS A SHARES
BHC Securities Inc. 79.74% 0%
Trade House Acct.
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
RETAIL CLASS B SHARES
Fiserv Securities Inc. 5.16% 0%
FAO 18939711
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
</TABLE>
INTERMEDIATE TERM BOND FUND
To the best of the knowledge of the Company, the names and addresses of
the holders of 5% or more of the outstanding Institutional and Class A shares of
the Intermediate Term Bond Fund as of May 4, 2000, and the amount of the
outstanding shares held of record by such holders are set forth below. The
Company has no knowledge of whether all or any portion of the shares owned of
record are also owned beneficially.
S-55
<PAGE>
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY BENEFICIALLY
--------------- ----------- ------------
<S> <C> <C>
INSTITUTIONAL CLASS SHARES
First Security Corporation 84.05% 0%
Trust Groups-Cash Account
First Security Bank of Utah N.A.
Trust Securities Admin. Dept.
P.O. Box 25297
Salt Lake City, UT 84125-0297
First Security Corporation 15.52% 0%
Trust Groups - Reinvest Account
Trust Securities Admin. Dept.
P.O. Box 25297
Salt Lake City, UT 84125-0297
RETAIL CLASS A SHARES
BHC Securities Inc. 75.12% 0%
Trade House Acct.
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Marcella Dupler Henkels 9.72% 0%
7540 NE Pettibone Drive
Corvallis, OR 97330-9641
Keith W. Slater & Gwen S. Rhodes & Myrl L. 6.19% 0%
Slater TR
U/A 01/12/1981
Nevada W. Slater Trust
4554 S. 2350 W.
Roy, UT 84067-1964
</TABLE>
SHORT TERM BOND FUND
To the best of the knowledge of the Company, the names and addresses of
the holders of 5% or more of the outstanding Institutional and Class A shares of
Short Term as of May 4, 2000,
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<PAGE>
and the amount of the outstanding shares held of record by such holders are
set forth below. The Company has no knowledge of whether all or any portion
of the shares owned of record are also owned beneficially.
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY BENEFICIALLY
--------------- ----------- ------------
<S> <C> <C>
INSTITUTIONAL CLASS SHARES
First Security Corporation 34.22% 0%
Trust Groups-Cash Account
First Security Bank of Utah N.A.
Trust Securities Admin. Dept.
P.O. Box 25297
Salt Lake City, UT 84125-0297
First Security Corporation 31.46% 0%
Trust Groups-Reinvest Account
First Security Bank of Utah N.A.
Trust Securities Admin. Dept.
P.O. Box 25297
Salt Lake City, UT 84125-0297
First Security Bank N.A. TR 31.60% 0%
For the First Security Incentive
Savings Plan
Trust Securities Admin. Dept.
P.O. Box 25297
Salt Lake City, UT 84125-0297
RETAIL CLASS A SHARES
BHC Securities Inc. 29.43% 0%
Trade House Acct.
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
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<PAGE>
Keith W. Slater & Gwen S. Rhodes & Myrl L. 22.17% 0%
Slater TR
U/A 01/12/1981
Nevada W. Slater Trust
4554 S. 2350 W.
Roy, UT 84067-1964
S-58
<PAGE>
Honey J. Larson 23.95% 0%
1798 Millbrook Road
Salt Lake City, UT 84106-3227
Marilee A. Kohtz 20.15% 0%
3614 Wilson Lane
Nampa, ID 83686-8665
</TABLE>
MUNICIPAL BOND FUND
To the best of the knowledge of the Company, the names and addresses of
the holders of 5% or more of the outstanding Institutional, Class A and Class B
shares of the Municipal Bond Fund as of May 4, 2000, and the amount of the
outstanding shares held of record by such holders are set forth below. The
Company has no knowledge of whether all or any portion of the shares owned of
record are also owned beneficially.
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY BENEFICIALLY
--------------- ----------- ------------
<S> <C> <C>
INSTITUTIONAL CLASS SHARES
First Security Corporation 94.55% 0%
Trust Groups-Cash Account
First Security Bank of Utah N.A.
Trust Securities Admin. Dept.
P.O. Box 25297
Salt Lake City, UT 84125-0297
First Security Corporation 5.45% 0%
Trust Groups-Reinvest Account
First Security Bank of Utah N.A.
Trust Securities Admin. Dept.
P.O. Box 25297
Salt Lake City, UT 84125-0297
RETAIL CLASS A SHARES
BHC Securities Inc. 99.96% 0%
Trade House Acct.
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
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<PAGE>
RETAIL CLASS B SHARES
Fiserv Securities, Inc. 7.23% 0%
FAO 18279705
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
Fiserv Securities, Inc. 7.83% 0%
FAO 18279885
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
Fiserv Securities, Inc. 11.29% 0%
FAO 18117949
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
Fiserv Securities, Inc. 6.98% 0%
FAO 18360866
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
Fiserv Securities, Inc. 9.09% 0%
FAO 18050840
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
Fiserv Securities, Inc. 18.21% 0%
FAO 18477687
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
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<PAGE>
Fiserv Securities, Inc. 7.68% 0%
FAO 18486470
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
</TABLE>
IDAHO MUNICIPAL BOND FUND
To the best of the knowledge of the Company, the names and addresses
of the holders of 5% or more of the outstanding Institutional, Class A and
Class B shares of the Idaho Municipal Bond Fund as of May 4, 2000, and the
amount of the outstanding shares held of record by such holders are set forth
below. The Company has no knowledge of whether all or any portion of the
shares owed of record are also owned beneficially.
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY BENEFICIALLY
--------------- ----------- ------------
<S> <C> <C>
INSTITUTIONAL CLASS SHARES
First Security Corporation 98.97% 0%
Trust Groups-Cash Account
First Security Bank of Utah N.A.
Trust Securities Admin. Dept.
P.O. Box 25297
Salt Lake City, UT 84125-0297
RETAIL CLASS A SHARES
BHC Securities Inc. 93.75% 0%
Trade House Acct.
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
RETAIL CLASS B SHARES
Fiserv Securities, Inc. 20.68% 0%
FAO 18432161
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
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<PAGE>
Fiserv Securities, Inc. 6.35% 0%
FAO 18042685
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
Fiserv Securities, Inc. 11.29% 0%
FAO 18209519
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
Fiserv Securities, Inc. 10.70% 0%
FAO 18513647
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
Fiserv Securities, Inc. 5.34% 0%
FAO 18316251
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
</TABLE>
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.
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP serves as independent accountants of the Trust.
S-62
<PAGE>
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.
FINANCIAL STATEMENTS
Audited financial statements of the Trust for the fiscal year ended January
31, 2000 and the Independent Auditors' Report of Deloitte & Touche LLP dated
March 5, 2000 are contained in the Trust's Annual Report to Shareholders for
its fiscal year ended January 31, 2000 and are incorporated in this Statement
of Additional Information by reference. A copy of the Trust's Annual Report
to Shareholders shall be provided along with this Statement of Additional
Information to each person to whom the Statement of Additional Information is
sent, unless such person then holds securities issued by the Trust, in which
case a copy of the Trust's Annual Report to Shareholders will be furnished to
such person without charge upon request made to SEI Investments Distribution
Co., by written request addressed to Oaks, PA 19456 or by calling
1-800-472-0577.
S-63
<PAGE>
APPENDIX A - PERMITTED INVESTMENTS
A Portfolio may make the following investments if, and to the extent, such
investments are covered by the Portfolio's investment policies described in the
Prospectus 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 feature, the market
value of a convertible security tends to move with the market value of the
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<PAGE>
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
illiquid include repurchase
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<PAGE>
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
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<PAGE>
notes, certificates of indebtedness, demand notes and construction loan notes
and participation interests in municipal notes. Municipal bonds include
general obligation bonds, revenue or special obligation bonds, private
activity and industrial development bonds and participation interests in
municipal bonds.
General obligation bonds are backed by the taxing power of the issuing
municipality. Revenue bonds are backed by the revenues of a project or facility
(tolls from a bridge, for example). Certificates of participation represent an
interest in an underlying obligation or commitment, such as an obligation issued
in connection with a leasing arrangement. Private activity bonds are bonds that
are issued by municipalities, the proceeds of which are used in an activity
considered a nonessential government function under the Internal Revenue Code,
which may include activities such as construction and operation of airports,
convention centers, auditoriums, hospitals and mass commuting facilities. The
payment of principal and interest on private activity and industrial development
bonds generally is dependent solely on the ability of a facility's user to meet
its financial obligations and the pledge, if any, of real and personal property
as security for such payment.
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
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<PAGE>
underlying security. The Portfolios will limit standby commitment
transactions to institutions believed to present minimal credit risk.
U.S. GOVERNMENT AGENCIES - U.S. Government agency obligations are obligations
issued or guaranteed by agencies of the U.S. Government, including, among
others, the Federal Farm Credit Bank, the Federal Housing Administration and the
Small Business Administration, and obligations issued or guaranteed by
instrumentalities of the U.S. Government, including, among others, the Federal
Home Loan Mortgage Corporation, the Federal Land Banks and the U.S. Postal
Service. Some of these securities are supported by the full faith and credit of
the U.S. Treasury (e.g., Government National Mortgage Association), others are
supported by the right of the issuer to borrow from the Treasury (e.g., Federal
Farm Credit Bank), while still others are supported only by the credit of the
instrumentality (e.g., Federal National Mortgage Association). Guarantees of
principal by agencies or instrumentalities of the U.S. Government may be a
guarantee of payment at the maturity of the obligation so that in the event of a
default prior to maturity there might not be a market and thus no means of
realizing on the obligation prior to maturity. Guarantees as to the timely
payment of principal and interest do not extend to the value or yield of these
securities nor to the value of a Portfolio's shares.
U.S. TREASURY OBLIGATIONS - U.S. Treasury obligations consist of bills, notes
and bonds issued by the U.S. Treasury and separately traded interest and
principal component parts of such obligations that are transferable through the
Federal book-entry system known as Separately Traded Registered Interest and
Principal Securities ("STRIPS").
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
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<PAGE>
then their stated maturities or final distribution dates, resulting in a loss of
all or part of any premium paid.
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.
S-69
<PAGE>
APPENDIX B - RATINGS
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.
S-70
<PAGE>
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1+, 1, 2 and 3 to indicate the relative degree of safety. Issues
rated A-1+ are those with an "overwhelming degree" of credit protection.
Those rated A-1 reflect a "very strong" degree of safety regarding timely
payment. Those rated A-2 reflect a safety regarding timely payment but not as
high as A-1.
Commercial paper issuers rated Prime-1 and Prime-2 by Moody's are judged by
Moody's to be of the two highest quality ratings on the basis of relative
repayment capacity.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating. The following criteria will be used in making that assessment:
Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
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.
S-71
<PAGE>
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
-------------------------
* 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.
1
<PAGE>
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 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
2
<PAGE>
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 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.
3
<PAGE>
h(8) - Amendment Agreement dated as of October 7, 1998
between Registrant and Morgan Guaranty Trust
Company was filed electronically as an Exhibit
to Post-Effective Amendment No. 15 on March 31,
1999, and is hereby incorporated by reference.
h(9) - Amendment Agreement dated as of April 6, 2000
between Registrant and Morgan Guaranty Trust
Company is filed electronically herewith.
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 herewith electronically.
j(2) - Consent of Deloitte & Touche LLP is filed
herewith electronically.
j(3) - Powers of Attorney were filed
electronically as Exhibit j(3) to Post-Effective
Amendment No. 16 on May 28, 1999, and are hereby
incorporated by reference.
(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
4
<PAGE>
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.
p(1) - Code of Ethics for the Registrant dated
February 3, 2000 is filed herewith.
p(2) - Code of Ethics for First Security Investment
Management, Inc. dated August 9, 1999 is filed
herewith.
p(3) - Code of Ethics for SEI Investments Distribution
Co. dated April, 2000 is filed herewith.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not Applicable.
5
<PAGE>
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 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
Other Employment of a
Position with Substantial Nature During
Name Adviser The Past Two Years
---- ------------- -------------------------
Sterling K. Jenson President and President, First Security
CEO Investment Management, Inc.
6
<PAGE>
Principal Occupation or
Other Employment of a
Position with Substantial Nature During
Name Adviser The Past Two Years
---- ------------- -------------------------
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); General
Partner, Ken Rey Associates,
Ltd., (private investment
partnership); Secretary and
Trustee, East High School
Foundation; Vice President and
Director, Toma Corporation
(real property development);
Director, Utah Medical
Association Financial Insurance
Services, Inc. (non-profit
service company).
Mark L. Anderson Senior Vice President Senior Vice President and
Senior Portfolio Manager,
First Security Management, Inc.
John B. Tousley Vice President Vice President and Senior
Portfolio Manager, First
Security Investment
Management, Inc.
Item 27. PRINCIPAL UNDERWRITER.
(a) The Registrant's distributor, SEI Investments Distribution
Co. ("SIDCO") acts as distributor for the following funds pursuant to
distribution agreements dated as of the date shown:
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI Institutional International Trust August 30, 1988
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
7
<PAGE>
The Arbor Fund January 28, 1993
Boston 1784 Funds June 1, 1993
The PBHG Funds, Inc. July 16, 1993
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
STI Classic Variable Trust August 18, 1995
ARK Funds November 1, 1995
Huntington Funds January 11, 1996
SEI Asset Allocation Trust April 1, 1996
TIP Funds April 28, 1996
SEI Institutional Investments Trust June 14, 1996
First American Strategy Funds, Inc. October 1, 1996
HighMark Funds February 18, 1997
Armada Funds March 8, 1997
PBHG Insurance Series Fund, Inc. April 1, 1997
The Expedition Funds June 9, 1997
Alpha Select Funds January 1, 1998
Oak Associates Funds February 27, 1998
The Nevis Fund, Inc. June 29, 1998
The Parkstone Group of Funds September 14, 1998
CNI Charter Funds April 1, 1999
The Armada Advantage Fund May 1, 1999
Amerindo Funds, Inc. July 13, 1999
Huntington VA Funds October 15, 1999
Friends Ivory Funds December 16, 1999
SEI Insurance Products Trust March 29, 2000
SIDCO 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 SIDCO.
Unless otherwise noted, the business address of each director or officer is
Oaks, PA 19456.
Position and Positions and
Offices with Offices with
Name Underwriter Registrant
---- ----------- ----------
Alfred P. West, Jr. Director, Chairman of the --
Board of Directors
8
<PAGE>
Richard B. Lieb Director, --
Executive Vice President
Carmen V. Romeo Director --
Mark J. Held President & Chief Operating --
Officer
Gilbert L. Beebower Executive Vice President --
Dennis J. McGonigle Executive Vice President --
Robert M. Silvestri Chief Financial Officer & --
Treasurer
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Jack May Senior Vice President --
Hartland J. McKeown Senior Vice President --
Kevin P. Robins Senior Vice President & --
General Counsel
Patrick K. Walsh Senior Vice President --
Timothy D. Barto Vice President & Vice President &
Assistant Secretary Assistant Secretary
Robert Crudup Vice President & Managing --
Director
Richard A. Deak Vice President & --
Assistant Secretary
Barbara Doyne Vice President --
Jeff Drennen Vice President --
9
<PAGE>
Position and Positions and
Offices with Offices with
Name Underwriter Registrant
---- ----------- ----------
James R. Foggo Vice President & Vice President &
Secretary
Victor Galef Vice President & Managing --
Director
Kim Kirk Vice President & Managing --
Director
Christine M. McCollough Vice President & Vice President &
Assistant Secretary Assistant Secretary
Carolyn McLaurin Vice President & Managing --
Director
John Krzeminski Vice President & Managing --
Director
Jeff Jacobs Vice President --
Wayne M. Withrow Vice President & Managing --
Director
Robert Aller Vice President --
Todd Cipperman Vice President & General Vice President &
Counsel Assistant Secretary
Kathy Heilig Vice President --
Samuel King Vice President --
Mark Nagle Vice President --
Joanne Nelson Vice President --
Cynthia M. Parrish Vice President & Assistant --
Secretary
10
<PAGE>
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 &
Secretary Assistant Secretary
Greg Gettinger Vice President & Assistant --
Secretary
Lynda J. Striegel Vice President & Assistant --
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:
<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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act, the
Registrant certifies that it meets all of the requirements for effectiveness
of this Post-Effective Amendment No. 17 to its Registration Statement under
Rule 485(b) under the Securities Act and has duly caused it to be signed on
its behalf by the undersigned, duly authorized, in the City of Oaks,
Commonwealth of Pennsylvania, on the 30th day of May, 2000.
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. 17 to the Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
* Chairman of the Board May 30, 2000
---------------------------- and Trustee
Frederick A. Moreton, Jr.
* Trustee May 30, 2000
----------------------------
Robert G. Love
* Trustee May 30, 2000
----------------------------
Carl S. Minden
* Trustee May 30, 2000
----------------------------
August Glissmeyer, Jr.
* Trustee May 30, 2000
----------------------------
George L. Denton
* Trustee May 30, 2000
----------------------------
James H. Gardner
* Trustee May 30, 2000
----------------------------
Blaine Huntsman
* Trustee May 30, 2000
----------------------------
Kent H. Murdock
* Trustee May 30, 2000
----------------------------
John Rudisill
/s/ Jeffrey Fries Treasurer and Principal May 30, 2000
---------------------------- Financial Officer
Jeffrey Fries
* By: /s/ Robert Nesher
-----------------------
Attorney In Fact
<PAGE>
THE ACHIEVEMENT FUNDS TRUST
Post-Effective Amendment No. 17
Exhibit List
h(9) Amendment Agreement
j(1) Consent of Ballard Spahr Andrews & Ingersoll, LLP
j(2) Consent of Deloitte & Touche LLP
p(1) Code of Ethics for the Registrant
p(2) Code of Ethics for First Security Investment Management, Inc.
p(3) Code of Ethics for SEI Investments Distribution Co.
