<PAGE>
THE EXPEDITION MONEY MARKET FUND
(A PORTFOLIO OF THE EXPEDITION FUNDS)
INSTITUTIONAL SHARES
PROSPECTUS
The Institutional Shares ("the Shares") offered by this prospectus represent
interests in the portfolio known as The Expedition Money Market Fund (the
"Fund"). The Fund is one of a series of investment portfolios in The
Expedition Funds (the "Trust"), an open-end, management investment company (a
mutual fund).
THE FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE;
THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
The investment objective of the Fund is to provide current income consistent
with stability of principal. The Fund pursues this investment objective by
investing in a variety of high-quality money market instruments maturing in
thirteen months or less.
Shareholders can invest in or redeem Shares at any time without charge or
penalty imposed by the Fund.
Compass Bank, an Alabama state banking corporation, professionally manages the
Fund's portfolio.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
COMPASS BANK, COMPASS BANCSHARES, INC. OR ANY OF ITS AFFILIATES, OR OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY COMPASS BANK, COMPASS BANCSHARES, INC.
OR ANY OF ITS AFFILIATES, OR BY ANY BANK, AND ARE NOT OBLIGATIONS OF,
GUARANTEED BY OR INSURED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT
AGENCY.
Compass Bank, an Alabama banking corporation, serves as investment adviser and
custodian of the Fund, and Compass Bank and certain of its affiliates provide
or may provide certain other services to the Fund, for which services Compass
Bank and/or its affiliates will be compensated. SEI Investments Distribution
Co., which is not affiliated with Compass Bank, is the sponsor and serves as
distributor of the Fund.
This prospectus contains the information you should read and know before you
invest in Institutional Shares of the Fund. Keep this prospectus for future
reference.
The Trust has also filed a Statement of Additional Information dated February
1, 1998 with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information free of charge by calling 1-800-992-2085. To obtain
other information or make inquiries about the Fund, contact the Fund at the
address listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated February 1, 1998
<PAGE>
TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES 1
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FINANCIAL HIGHLIGHTS 4
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GENERAL INFORMATION 6
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INVESTMENT INFORMATION 6
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Investment Objective 6
Investment Policies 7
Investment Limitations 11
FUND INFORMATION 12
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Management of the Fund 12
Distribution of Institutional Shares 13
Administration of the Fund 13
NET ASSET VALUE 14
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INVESTING IN INSTITUTIONAL SHARES 14
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Share Purchases 14
What Shares Cost 15
Shareholder Accounts 15
Dividends 16
Capital Gains 16
EXCHANGE PRIVILEGE 16
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REDEEMING INSTITUTIONAL SHARES 17
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SHAREHOLDER INFORMATION 19
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Voting Rights 19
EFFECT OF BANKING LAWS 20
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TAX INFORMATION 20
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PERFORMANCE INFORMATION 21
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OTHER CLASSES OF SHARES 21
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ADDRESSES 23
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I
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SUMMARY OF FUND EXPENSES
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<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................................... None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price).................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable)........................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)....... None*
Exchange Fee............................................................. None
*Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C>
Management Fee (after waiver) (1) ....................................... 0.18%
Total Other Expenses (2)................................................. 0.25%
Total Operating Expenses (1),(3)..................................... 0.43%
</TABLE>
(1) The management fee has been reduced to reflect a voluntary waiver. Absent
this waiver, the maximum management fee is .40%. The Adviser has
voluntarily agreed to waive all or a portion of its fee to limit Total
Operating Expenses to not more than .43%. The Adviser reserves the right,
in its sole discretion, to terminate these voluntary fee waivers at any
time.
(2) The Administrator has agreed to waive, on a voluntary basis, a portion of
its fees. The Administrator reserves the right to terminate its waiver at
any time in its sole discretion. Absent such waiver, Total Other Expenses
for the Fund would be .30%. The Trust, either directly or through its
transfer agent, may enter into arrangements with recordkeepers and others
who provide services to shareholders, and may compensate such entities for
their services. Any such arrangements, if entered into, may increase the
Fund's "Total Other Expenses."
(3) Absent the voluntary waivers and reimbursements described above, Total
Operating Expenses for the Fund would be .70%.
1
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THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE INSTITUTIONAL SHARES OF
THE FUND WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE
DESCRIPTIONS OF THE VARIOUS COSTS AND EXPENSES, SEE "FUND INFORMATION" AND
"INVESTING IN INSTITUTIONAL SHARES."
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment assuming (1) a 5% annual
return and (2) redemption at the end of each
time period. The Fund charges no redemption
fee........................................... $ 4 $14 $24 $54
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
2
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[This Page Intentionally Left Blank]
3
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THE EXPEDITION MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
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The following information has been audited by Deloitte & Touche LLP, the
Trust's independent auditors, as indicated in their report dated December 5,
1997 on the Trust's financial statements as of October 31, 1997 which are
incorporated by reference into the Trust's Statement of Additional
Information. This table should be read in conjunction with the Trust's
financial statements and related notes thereto. Additional performance
information is set forth in the Trust's 1997 Annual Report to Shareholders and
is available upon request and without charge by calling 1-800-992-2085.
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
DISTRIBU-
NET ASSET TIONS NET ASSET
VALUE, NET FROM NET VALUE,
BEGINNING INVESTMENT INVESTMENT END TOTAL
OF PERIOD INCOME INCOME OF PERIOD RETURN
--------- ---------- ---------- --------- ------
<S> <C> <C> <C> <C> <C>
Institutional Shares
1997(/1/) $1.00 0.02 (0.02) $1.00 5.26%*
</TABLE>
- -----------
* Annualized.
(1) Commenced operations on June 9, 1997.
4
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<TABLE>
<CAPTION>
RATIO OF
NET
RATIO OF RATIO OF RATIO INVESTMENT
NET EXPENSES NET OF EXPENSES INCOME TO
ASSETS TO INVESTMENT TO AVERAGE AVERAGE
END OF AVERAGE INCOME NET ASSETS NET ASSETS
PERIOD NET TO AVERAGE (EXCLUDING (EXCLUDING
(000) ASSETS NET ASSETS WAIVERS) WAIVERS)
------- -------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
$48,006 0.43%* 5.22%* 0.70%* 4.95%*
</TABLE>
5
<PAGE>
GENERAL INFORMATION
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The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated August 7, 1989. The Declaration of Trust permits
the Trust to offer separate series of shares of beneficial interest
representing interests in separate portfolios of securities. The shares of
beneficial interest in any one portfolio may be offered in separate classes.
As of the date of this prospectus, the Board of Trustees (the "Trustees") has
established two classes of shares of the Fund, Investment Service Shares and
Institutional Shares. This prospectus relates only to Institutional Shares
("Shares") of the Expedition Money Market Fund. The Trust offers three other
portfolios: The Expedition Tax-Free Money Market Fund (which has not commenced
operations as of the date of this Prospectus), The Expedition Equity Fund and
The Expedition Bond Fund. Information regarding the Investment Service Shares
of the Fund and the Trust's other portfolios is contained in separate
prospectuses which may be obtained by calling 1-800-992-2085.
Institutional Shares of the Fund are primarily designed for individuals and
entities establishing certain fiduciary, trust, agency, private banking,
custody or similar relationships with the Asset Management Group of Compass
Bank or a trust division of a Compass Bancshares, Inc. banking affiliate or
trust company affiliate of Compass Bancshares, Inc. who desire a convenient
means of accumulating an interest in a professionally managed portfolio
limited to money market instruments maturing in thirteen months or less.
The Fund attempts to stabilize the value of a Share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income consistent
with stability of principal. The investment objective cannot be changed
without approval of shareholders. While there is no assurance that the Fund
will achieve its investment objective, it endeavors to do so by complying with
the diversification and other requirements of Rule 2a-7 under the Investment
Company Act of 1940 which regulates money market mutual funds and by following
the investment policies described in this prospectus.
6
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INVESTMENT POLICIES
The Fund pursues its investment objective by investing primarily in a
portfolio of money market instruments maturing in thirteen months or less. The
average maturity of money market instruments in the Fund's portfolio, computed
on a dollar-weighted basis, will be 90 days or less. Unless indicated
otherwise, the investment policies set forth below may be changed by the
Trustees without the approval of shareholders. Shareholders will be notified
before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests in high quality money market
instruments that are either rated in the highest short-term rating category by
one or more nationally recognized statistical rating organizations or of
comparable quality to securities having such ratings. Examples of these
instruments include, but are not limited to:
. debt obligations issued by U.S. and foreign corporations, including
variable rate demand notes;
. commercial paper (including Canadian Commercial Paper ("CCP") and
Europaper);
. certificates of deposit, demand and time deposits, bankers' acceptances
and other instruments of domestic and foreign banks and other deposit
institutions ("Bank Instruments");
. short-term credit facilities, such as demand notes;
. debt obligations issued by Canada and other foreign nations, as well as
by supranational entities such as the World Bank;
. asset-backed and mortgage-backed securities, including collateralized
mortgage obligations ("CMOs");
. obligations issued or guaranteed as to payment of principal and
interest by the U.S. Government or one of its agencies or
instrumentalities ("Government Securities"); and
. other money market instruments, including shares of other money market
funds.
The Fund invests only in instruments denominated and payable in U.S. dollars.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term corporate
debt instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at par.
The interest rate may float or be adjusted at regular intervals (ranging from
7
<PAGE>
daily to annually), and is normally based on a published interest rate or
interest rate index.
OBLIGATIONS OF SUPRANATIONAL ENTITIES. Supranational entities are entities
established through the joint participation of several governments, and
include the Asian Development Bank, Inter-American Development Bank,
International Bank for Reconstruction and Development (World Bank), African
Development Bank, European Economic Community, European Investment Bank and
Nordic Investment Bank. The governmental members, or "stockholders," usually
make initial capital contributions to the supranational entity and in many
cases are committed to make additional capital contributions if the
supranational entity is unable to repay its borrowings.
BANK INSTRUMENTS. The Fund only invests in Bank Instruments either issued by
an institution having capital, surplus and undivided profits over $100 million
or insured by the Bank Insurance Fund ("BIF") or the Savings Association
Insurance Fund ("SAIF"). Bank Instruments may include Canadian Time Deposits,
Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit
("Yankee CDs") and Eurodollar Time Deposits ("ETDs").
SHORT-TERM CREDIT FACILITIES. Demand notes are short-term borrowing
arrangements between a corporation and an institutional lender (such as the
Fund) payable upon demand by either party. The notice period for demand
typically ranges from one to seven days, and the party may demand full or
partial payment. The Fund may also enter into, or acquire participations in,
short-term revolving credit facilities with corporate borrowers. Demand notes
and other short-term credit arrangements usually provide for floating or
variable rates of interest.
ASSET-BACKED SECURITIES. Asset-backed securities are securities issued by
special purpose entities whose primary assets consist of a pool of loans or
accounts receivable. The securities may take the form of beneficial interests
in a special purpose trust, limited partnership interests or commercial paper
or other debt securities issued by a special purpose corporation. Although the
securities often have some form of credit or liquidity enhancement, payments
on the securities depend predominately upon collections of the loans and
receivables held by the issuer.
COMMERCIAL PAPER; SECTION 4(2) PAPER. Commercial paper is unsecured short-term
promissory notes issued by municipalities, corporations and other entities
with maturities up to nine months. The Fund may invest in commercial paper
issued in reliance on the exemption from registration afforded by Section 4(2)
of the Securities Act of 1933. Section 4(2) paper is
8
<PAGE>
restricted as to disposition under federal securities law and is generally
sold to institutional investors, such as the Fund, who agree that they are
purchasing the paper for investment purposes and not with a view to public
distribution. Section 4(2) paper is normally resold to other institutional
investors like the Fund, thus providing liquidity.
PARTICIPATION INTERESTS. The Fund may purchase participation interests from
financial institutions such as commercial banks, savings associations, and
insurance companies, or from single-purpose, stand-alone finance subsidiaries
or trusts of such institutions, or from other special-purpose entities.
Participation interests give the Fund an undivided fractional ownership
interest in debt obligations. The debt obligations may include corporate loans
or debt securities or other types of debt obligations.
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, balloon 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. Mortgage-related securities eligible for purchase by the
Fund may include collateralized mortgage obligations ("CMOs"). 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 series of a CMO in a variety of ways. Principal
payments on the underlying mortgage assets may cause CMOs to be retired
substantially earlier then their stated maturities or final distribution
dates, resulting in a loss of all or part of any premium paid.
U.S. GOVERNMENT OBLIGATIONS. 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 securities), others are supported by the right
of the issuer to
9
<PAGE>
borrow from the Treasury (e.g., Federal Farm Credit Bank securities), while
still others are supported only by the credit of the instrumentality (e.g.,
Fannie Mae securities). Guarantees of principal by agencies or
instrumentalities of the U.S. Government may be a guarantee of payment at the
maturity of the obligation, however, in the event of a default prior to
maturity there may not be a market and thus no means of realizing on the
obligation prior to maturity. Guarantees as to the timely payment of principal
and interest do not extend to the value or yield of these securities nor to
the value of the Fund's shares.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S.
Government securities or other securities to the Fund and agree at the time of
sale to repurchase them at a mutually agreed upon time and price within one
year from the date of acquisition. To the extent that the original seller does
not repurchase the securities from the Fund, the Fund could receive less than
the repurchase price on any sale of such securities.
DEMAND FEATURES. The Fund may acquire securities that are subject to demand
features to purchase the securities at their principal amount (usually with
accrued interest) within a fixed period following a demand by the Fund. The
demand feature may be issued by the issuer of the underlying securities, a
dealer in the securities or by another third party, and may not be transferred
separately from the underlying security. The bankruptcy, receivership or
default by the issuer of the demand feature, or a default on the underlying
security or other event that terminates the demand feature before its
exercise, will adversely affect the liquidity of the underlying security.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted and
illiquid securities. Restricted securities are any securities in which the
Fund may otherwise invest pursuant to its investment objective and policies
but which are subject to restriction on resale under federal securities law.
Illiquid securities are securities that may not be sold at approximately their
carrying value in seven days or less. The Fund will limit investments in
illiquid securities, including restricted securities not determined by the
Trustees to be liquid, non-negotiable time deposits, and repurchase agreements
providing for settlement in more than seven days after notice, to 10% of its
net assets.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term basis up to one-third
of the value of its total assets to institutional borrowers of securities. The
Fund will only enter into loan arrangements with broker/dealers, banks, or
other institutions which Compass Bank (the "Adviser") has
10
<PAGE>
determined are creditworthy under guidelines established by the Trustees.
There is the risk that when lending portfolio securities, the securities may
not be available to the Fund on a timely basis, and the Fund may, therefore,
lose the opportunity to sell the securities at a desirable price. In addition,
in the event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions are
arrangements in which the Fund purchases securities with payment and delivery
scheduled for a future time. The seller's failure to complete these
transactions may cause the Fund to miss a price or yield considered to be
advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may vary
from the purchase prices.
CONCENTRATION OF INVESTMENTS. The Fund will not invest 25% or more of its
total assets in any one industry except that the Fund may invest 25% or more
of its total assets in obligations issued by U.S. banks and by U.S. branches
of foreign banks.
FOREIGN SECURITIES RISK. ECDs, ETDs, Yankee CDs, CCPs, Canadian Time Deposits,
and Europaper are subject to somewhat different risks than domestic
obligations of domestic banks. Examples of these risks include international,
economic and political developments, foreign governmental restrictions that
may adversely affect the payment of principal or interest, foreign withholding
or other taxes on interest income, difficulties in obtaining or enforcing a
judgment against the issuing bank, and the possible impact of interruptions in
the flow of international currency transactions. Different risks may also
exist for Canadian Time Deposits, ECDs, ETDs and Yankee CDs because the banks
issuing these instruments, or their domestic or foreign branches, are not
necessarily subject to the same regulatory requirements that apply to domestic
banks, such as reserve requirements, loan limitations, examinations,
accounting, auditing, recordkeeping and the public availability of
information. These factors will be carefully considered by the Adviser in
selecting investments for the Fund.
INVESTMENT LIMITATIONS
The Fund will not:
. borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a
11
<PAGE>
set date) or pledge securities except, under certain circumstances,
the Fund may borrow up to one-third of the value of its total assets
and pledge up to 15% of the value of its total assets to secure such
borrowings; or
. with respect to 75% of the value of its total assets, invest more than
5% of the value of its total assets in the securities of any one
issuer, other than cash, cash items or securities issued or guaranteed
by the government of the United States or its agencies or
instrumentalities and repurchase agreements collateralized by such
securities. However, to the extent that the diversification
requirements imposed by Rule 2a-7 are more stringent, the Fund will
follow the dictates of Rule 2a-7.
The above investment limitations cannot be changed without shareholder
approval.
FUND INFORMATION
- -------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Board of Trustees is responsible for managing the
business affairs of the Trust and for exercising all of the powers of the
Trust except those reserved for the shareholders.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust
and subject to direction by the Trustees, investment decisions for the Fund
are made by Compass Bank, an Alabama state banking corporation that is a
Federal Reserve System member bank (the "Adviser"). The Adviser continually
conducts investment research and supervision for the Fund and is responsible
for the purchase or sale of portfolio instruments, for which it receives an
annual fee from the assets of the Fund.
ADVISORY FEES. The Adviser is entitled to receive an annual investment
advisory fee equal to .40% of the Fund's average daily net assets payable
from the assets of the Fund. The Adviser may choose to voluntarily waive
or reimburse a portion of its fee. The Adviser reserves the right, in its
sole discretion, to terminate these voluntary waivers at any time.
ADVISER'S BACKGROUND. The Adviser is a wholly-owned subsidiary of Compass
Bancshares, Inc. ("Bancshares"), a bank holding company organized under
the laws of Delaware. Through its subsidiaries and affiliates,
Bancshares, the 54th largest bank holding company in the United States in
terms of total assets as of June 30, 1997, offers a full range of
financial services to the public including commercial lending,
12
<PAGE>
depository services, cash management, brokerage services, retail banking,
credit card services, investment advisory services and trust services.
As of December 31, 1997, the Adviser offered a broad range of commercial
banking services. The Adviser has served as investment adviser to mutual
funds since February 5, 1990. Through the Compass Asset Management Group,
the Adviser and certain other affiliates of Bancshares provide investment
advisory and management services for the assets of individuals, pension
and profit sharing plans, endowments and foundations. As of December 31,
1997, the Compass Asset Management Group had approximately $7.7 billion
under administration ($5.08 billion of which was under administration by
the Adviser), of which the Compass Asset Management Group had discretion
over approximately $2.8 billion ($1.8 billion of which was comprised of
assets of accounts over which the Adviser exercised discretion).
As part of its regular banking operations, the Adviser may make loans to
public companies. Thus, it may be possible, from time to time, for the
Fund to hold or acquire the securities of issuers which are also lending
clients of the Adviser. The lending relationship will not be a factor in
the selection of securities.
DISTRIBUTION OF INSTITUTIONAL SHARES
SEI Investments Distribution Co. (the "Distributor") is the principal
distributor for Shares of the Fund. It is a wholly-owned subsidiary of SEI
Investments Company ("SEI Investments") and is the principal distributor for a
number of investment companies. In connection with the sale of Shares, the
Distributor may, from time to time, offer certain items of nominal value to
any shareholder or investor.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. SEI Fund Resources (the "Administrator"), a wholly-
owned subsidiary of SEI Investments, provides the Fund with certain
administrative personnel and services necessary to operate the Fund. Such
services include shareholder servicing and certain legal and accounting
services. For these services, the Administrator is entitled to a fee which is
calculated daily and paid monthly at an annual rate of .20% of the Fund's
average daily net assets payable from the assets of the Fund. The
Administrator may choose to voluntarily waive a portion of its fee. The
Administrator reserves the right, in its sole discretion, to terminate these
voluntary waivers at any time.
13
<PAGE>
TRANSFER AGENT/SERVICING AGENT. State Street Bank and Trust Company (the
"Transfer Agent") and Boston Financial Data Services, Inc. act as transfer
agent and servicing agent, respectively, for the Trust, and are entitled to
compensation for such services payable from the assets of the Fund.
CUSTODIAN. Compass Bank, an Alabama state banking corporation, which is also
Adviser, is custodian for the securities and cash of the Fund for which it
receives an annual fee of .02% of the Fund's daily net assets payable from the
assets of the Fund and is reimbursed for its out of pocket expenses.
NET ASSET VALUE
- -------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of its Shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net
asset value per Share is determined by adding the interest of the Shares in
the value of all securities and other assets of the Fund, subtracting the
interest of the Shares in the liabilities of the Fund and those attributable
to Shares, and dividing the remainder by the total number of Shares
outstanding. The Fund, of course, cannot guarantee that its net asset value
will always remain at $1.00 per Share.
The net asset value is determined at 12:00 noon (Central time), and as of the
close of regular trading on the New York Stock Exchange ("NYSE"), normally
3:00 p.m. (Central time), on days on which both the NYSE and the Federal
Reserve wire system are open for business (a "Business Day").
INVESTING IN INSTITUTIONAL SHARES
- -------------------------------------------------------------------------------
SHARE PURCHASES
Shares are available through the Asset Management Group of Compass Bank or
through the trust division of any banking affiliate of Bancshares or trust
company affiliate of Bancshares for qualifying customers establishing
fiduciary, trust, private banking, agency, custody, and similar relationships
with Compass Bank's Asset Management Group or such trust division or trust
company affiliate. Investors may purchase Institutional Shares of the Fund on
each Business Day. The Trust reserves the right to reject any purchase
request.
The Compass Bank Asset Management Group and other affiliates and divisions of
any affiliate of Bancshares through which Shares are available sometimes are
referred to below as "Compass."
14
<PAGE>
To purchase Shares, a customer may contact the Compass Asset Management Group
or other Compass trust division or trust company affiliate by telephoning
Compass Bank. Payment may be made either by check or wire transfer of federal
funds or by debiting a customer's account at a Bancshares banking affiliate.
To purchase by check, the check must be included with the order and made
payable to "The Expedition Money Market Fund--Institutional Shares." Purchase
orders received after the Fund's net asset value has been determined will be
priced at the next Business Day's net asset value. Orders are considered
received after payment by check is converted into federal funds. Third party
checks, credit cards, credit card checks and cash will not be accepted. When
purchases are made by check, redemptions will not be allowed until the
investment being redeemed has been in the account for 15 business days.
When payment is made through wire transfer of federal funds, the order is
considered received immediately upon receipt of the wire. Payment by wire must
be received before the Fund calculates its net asset value, normally 3:00 p.m.
(Central time), on the same day as the order. Prior to purchasing by wire,
investors should call their Compass representative prior to 1:00 p.m. (Central
time). Federal funds should be wired as follows: State Street Bank & Trust Co.
ABA # 011000028 for credit to DDA # 9905-303-5, Further credit to: The
Expedition Money Market Fund - Institutional Shares Re: (Shareholder name and
account number). Shares cannot be purchased by Federal Reserve wire on days
when either the NYSE or Federal Reserve is closed.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund.
SHAREHOLDER ACCOUNTS
Compass maintains a Share account for each shareholder of record. Share
certificates are not issued. Shares sold to Compass acting in a fiduciary,
advisory, custodial, agency, or similar capacity on behalf of customers may be
held of record by Compass. Beneficial ownership of the Shares are recorded by
Compass and reflected in the account statements provided by Compass to
customers, and reports of purchases and redemptions of Shares by Compass in a
fiduciary, advisory, custodial, agency or similar capacity on behalf of
customers are provided periodically by Compass to such customers.
15
<PAGE>
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional Shares unless cash payments are
requested by shareholders in writing to the Trust or Compass, as appropriate.
Share purchase orders received by the Fund before 1:00 p.m. (Central time)
earn dividends that day.
CAPITAL GAINS
Net capital gains realized by the Fund, if any, could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If, for
some extraordinary reason, the Fund realizes net long-term capital gains, it
will distribute them at least once every twelve months, and will be
automatically reinvested in additional Shares unless cash payments are
requested in writing to the Transfer Agent or Compass, as appropriate.
EXCHANGE PRIVILEGE
- -------------------------------------------------------------------------------
Shareholders may exchange Institutional Shares of the Fund for Institutional
Shares in The Expedition Tax-Free Money Market Fund (once it commences
operations), The Expedition Equity Fund and The Expedition Bond Fund. Neither
the Trust nor any of the Funds imposes any additional fees on exchanges.
Upon receipt of proper instructions and all necessary supporting documents,
shares submitted for exchange will be redeemed at the next-determined net
asset value. If the exchanging shareholder does not have an account in the
participating fund whose shares are being acquired, a new account will be
established with the same registration, dividend and capital gain options as
the account from which shares are exchanged, unless otherwise specified by the
shareholder. In the case where the new account registration is not identical
to that of the existing account, a signature guarantee is required. (See
"Redeeming Shares--By Mail.") Exercise of this privilege is treated as a
redemption and new purchase for federal income tax purposes and, depending on
the circumstances, a short or long-term capital gain or loss may be realized.
The Trust reserves the right to modify or terminate the exchange privilege at
any time. Shareholders would be notified prior to any modification or
termination. Shareholders may obtain further information on the exchange
privilege by calling Compass. Shareholders who exchange into Shares of the
Fund will not receive a dividend from the Fund on the date of the exchange.
Prior to any exchange, the shareholder must receive a copy of the current
prospectus of the participating Fund into which an exchange is being made.
16
<PAGE>
EXCHANGE BY TELEPHONE. Shareholders may provide instructions for exchanges
between participating funds by calling 1-800-992-2085. In addition, investors
may exchange Shares by calling their authorized representative directly.
An authorization form permitting the Trust to accept telephone exchange
requests must first be completed. It is recommended that investors request
this privilege at the time of their initial application. If not completed at
the time of initial application, authorization forms and information on this
service can be obtained through a Compass representative.
Shares may be exchanged by telephone only between fund accounts having
identical shareholder registrations. Exchange instructions given by telephone
may be electronically recorded. If reasonable procedures are not followed by
the Trust, it may be liable for losses due to unauthorized or fraudulent
telephone instructions.
Telephone exchange instructions must be received before 3:00 p.m. (Central
time) for Shares to be exchanged the same day.
WRITTEN EXCHANGE. A shareholder wishing to make an exchange by written request
may do so by sending it to: The Expedition Money Market Fund--Institutional
Shares, P.O. Box 8010, Boston, Massachusetts 02266-8010.
REDEEMING INSTITUTIONAL SHARES
- -------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value next determined after Compass
receives the redemption request. Redemptions will be made on each Business
Day. A redemption request received after the Fund's net asset value has been
determined will be priced at the next Business Day's net asset value.
Telephone or written requests for redemptions must be received in proper form
and can be made through Compass.
BY TELEPHONE. Shareholders may redeem Shares of the Fund by telephoning
Compass. Shareholders may call toll-free 1-800-992-2085. An authorization form
permitting the Fund to accept telephone redemption requests must first be
completed. Redemption requests through Compass must be received before 1:00
p.m. (Central time). If at any time, the Fund shall determine it necessary to
terminate or modify this method of redemption, shareholders would be promptly
notified.
Redemption requests must be received by and transmitted to Compass before 1:00
p.m. (Central time) in order for the proceeds to be wired that same day.
Compass is responsible for promptly submitting redemption
17
<PAGE>
requests and providing proper written redemption instructions to the Transfer
Agent.
For calls received by Compass before 1:00 p.m. (Central time) proceeds will
normally be wired the same day. For calls received after 1:00 p.m. (Central
time) proceeds will normally be wired the following business day. In no event
will proceeds be wired more than seven days after a proper request for
redemption has been received.
Redemption requests received before 1:00 p.m. (Central time) will normally be
paid the same day but will not be entitled to that day's dividend.
None of Compass, the Transfer Agent nor the Trust will be responsible for any
loss, liability, cost or expense for acting upon wire or telephone
instructions that it reasonably believes to be genuine. The Trust and Transfer
Agent will each employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, including requiring a form of personal
identification prior to acting upon instructions received by telephone and
recording telephone instructions. Such procedures may include taping of
telephone conversations.
If market conditions are extraordinarily active or other extraordinary
circumstance exist, and you experience difficulties placing redemption orders
by telephone, you may consider placing your order by mail.
BY MAIL. Shareholders may redeem Shares of the Fund by sending a written
request to the Fund through Compass. The written request should include the
shareholder's name, the Fund name, the class name, the account number, and the
Share or dollar amount requested. Investors redeeming through Compass should
mail written requests to: The Expedition Money Market Fund--Institutional
Shares, P.O. Box 8010, Boston, Massachusetts 02266-8010.
SIGNATURES. Shareholders requesting a redemption of any amount to be sent to
an address other than that on record with the Fund or a redemption payable
other than to the shareholder of record must have their signatures guaranteed
by:
. a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund ("BIF"), which is administered by the FDIC;
. a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
. a savings bank or savings association whose deposits are insured by the
Savings Association Insurance Fund ("SAIF") which is administered by
the FDIC; or
18
<PAGE>
. any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934.
The Trust does not accept signatures guaranteed by a notary public.
The Trust and the Transfer Agent have adopted standards for accepting
signature guarantees from the above institutions. The Trust may elect in the
future to limit eligible signature guarantors to institutions that are members
of a signature guarantee program. Redemptions of $40,000 or greater for the
Fund must be in writing and a signature guarantee must accompany the written
request. The Trust and its transfer agent reserve the right to amend these
standards at any time without notice.
Normally, a check for the proceeds is mailed to the shareholder within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
SHAREHOLDER INFORMATION
- -------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights, except that in matters affecting only a
particular portfolio or class, only shares of that portfolio or class are
entitled to vote.
As used in this Prospectus, a "vote of a majority of the outstanding shares"
of the Fund means, with respect to the approval of an investment advisory
agreement, sub-advisory agreement, or a change in a fundamental investment
limitation, the lesser of (a) more than 50% of the outstanding shares of the
Fund, or (b) at least 67% of the shares of the Fund present at a meeting at
which the holders of more than 50% of the outstanding shares of the Fund are
represented in person or by proxy.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust or the Fund's operation and for the election of Trustees
under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting. A special meeting of the shareholders shall be called by the Trustees
upon the written request of shareholders owning at least 10% of the Trust's
outstanding shares.
19
<PAGE>
As of January 16, 1998, Compass Bank owned 100% of the Money Market Fund's
Institutional Shares, which is considered a controlling interest as defined by
the Investment Company Act of 1940.
EFFECT OF BANKING LAWS
- -------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently
prohibit a bank holding company registered under the Bank Holding Company Act
of 1956 or any affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company continuously engaged in the issuance
of its shares, and from issuing, underwriting, selling or distributing
securities in general. Such laws and regulations do not prohibit such a
holding company or affiliate from acting as investment adviser, transfer
agent, or custodian to such an investment company or from purchasing shares of
such a company as agent for and upon the order of their customers.
The Adviser, Bancshares and certain of Bancshares' affiliates are subject to
such banking laws and regulations. They believe, based on the advice of their
counsel, that they may perform those services for the Fund contemplated by any
existing agreement entered into with the Trust without violating those laws or
regulations. Changes in either federal or state statutes and regulations
relating to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of present or future statutes and regulations, could prevent
these entities from continuing to perform all or a part of the above services.
If this happens, the Trustees would consider alternative means of continuing
available investment services. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these
occurrences.
TAX INFORMATION
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund intends to pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
20
<PAGE>
Unless otherwise exempt, shareholders are required to pay federal income tax
on any dividends and other distributions received. This applies whether
dividends and distributions are received in cash or as additional Shares.
STATE AND LOCAL TAXES. Shareholders are urged to consult their own tax
advisers regarding the status of their accounts under state and local tax
laws.
PERFORMANCE INFORMATION
- -------------------------------------------------------------------------------
From time to time, the Fund advertises its yield, effective yield and total
return.
The yield of Shares represents the annualized rate of income earned on an
investment in Shares over a seven-day period. It is the annualized dividends
earned during the period on the investment, shown as a percentage of the
investment. The effective yield is calculated similarly to the yield, but,
when annualized, the income earned by an investment in Shares is assumed to be
reinvested daily. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
Total return represents the change, over a specified period of time, in the
value of an investment in Shares after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
Yield, effective yield and total return will be calculated separately for
Institutional Shares and Investment Service Shares. Because Investment Service
Shares have a shareholder servicing plan, the yield, effective yield and total
return for Institutional Shares, for the same period, ordinarily will exceed
that of Investment Service Shares.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
OTHER CLASSES OF SHARES
- -------------------------------------------------------------------------------
The Fund also offers another class of shares called Investment Service Shares.
Investment Service Shares are sold at net asset value. Except as otherwise
noted in the prospectus for the Fund's Investment Service Shares, investments
in Investment Service Shares are subject to a minimum initial investment of
$1,000.
21
<PAGE>
The stated advisory fee is the same for both classes of shares.
To obtain more information and a prospectus for Investment Service Shares,
investors may call 1-800-992-2085.
22
<PAGE>
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The Expedition Money Market Fund One Freedom Valley Road
Oaks, Pennsylvania 19456
- --------------------------------------------------------------------------
Distributor
SEI Investments Distribution Co. One Freedom Valley Road
Oaks, Pennsylvania 19456
- --------------------------------------------------------------------------
Investment Adviser and Custodian
Compass Bank 15 S. 20th Street
Birmingham, Alabama 35233
- --------------------------------------------------------------------------
Transfer Agent and Servicing Agent
Transfer Agent Servicing Agent
State Street Bank and Trust Company Boston Financial Data Services, Inc.
225 Franklin Street Two Heritage Drive
Boston, Massachusetts 02110 Quincy, Massachusetts 02171
- --------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
- --------------------------------------------------------------------------
Counsel
Morgan, Lewis & Bockius LLP 1800 M Street, N.W.
Washington, D.C. 20036
- --------------------------------------------------------------------------
</TABLE>
23
<PAGE>
THE EXPEDITION
MONEY MARKET FUND
INSTITUTIONAL SHARES
PROSPECTUS
A PORTFOLIO OF
THE EXPEDITION FUNDS,
AN OPEN-END, MANAGEMENT
INVESTMENT COMPANY
FEBRUARY 1, 1998
-----------
SEI Investments Distribution Co.
- ------------------------------
Distributor
COMPASS BANK
- ------------------------------
Investment Adviser
[LOGO OF RECYCLED APPEARS HERE]
<PAGE>
THE EXPEDITION FUNDS
THE EXPEDITION BOND FUND
THE EXPEDITION EQUITY FUND
PROSPECTUS
The shares offered by this prospectus represent interests in two diversified
portfolios known as The Expedition Bond Fund (the "Bond Fund") and the
Expedition Equity Fund (the "Equity Fund") (each a "Fund" and collectively the
"Funds"). Each Fund is one of a series of investment portfolios in The
Expedition Funds (the "Trust"), an open-end, management investment company (a
mutual fund).
The investment objective of the Bond Fund is to provide current income. The
Fund pursues this investment objective by investing in a professionally
managed, diversified portfolio consisting primarily of bonds, as well as other
fixed income securities.
The investment objective of the Equity Fund is to provide growth of capital,
with a secondary objective of income. The Fund pursues this investment
objective by investing in a professionally managed, diversified portfolio
consisting primarily of common stocks issued by mid- and large-capitalization
companies.
Compass Bank, an Alabama state banking corporation, professionally manages
each Fund's portfolio.
This prospectus offers both Institutional Shares and Investment Shares of each
Fund.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
COMPASS BANK, COMPASS BANCSHARES, INC. OR ANY OF ITS AFFILIATES, OR OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY COMPASS BANK, COMPASS BANCSHARES, INC.
OR ANY OF ITS AFFILIATES, OR BY ANY BANK, AND ARE NOT OBLIGATIONS OF,
GUARANTEED BY OR INSURED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
Compass Bank, an Alabama banking corporation, serves as investment adviser and
custodian of the Funds, and Compass Bank and certain of its affiliates provide
or may provide certain other services to the Funds, for which services Compass
Bank and/or its affiliates will be compensated. SEI Investments Distribution
Co., which is not affiliated with Compass Bank, is the sponsor and serves as
distributor of the Funds.
This prospectus contains the information you should read and know before you
invest in a Fund. Keep this prospectus for future reference.
The Trust has also filed a Statement of Additional Information dated February
1, 1998, with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information free of charge by calling 1-800-992-2085. To obtain
other information or make inquiries about a Fund, contact the Trust at the
address listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated February 1, 1998
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 4
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION FOR EQUITY FUND, INCLUDING PREDECESSOR COMMON TRUST
FUND 6
- --------------------------------------------------------------------------------
GENERAL INFORMATION 7
- --------------------------------------------------------------------------------
INVESTMENT INFORMATION 8
- --------------------------------------------------------------------------------
Investment Objectives 8
Investment Policies 8
General Investment Policies 13
Investment Limitations 17
FUND INFORMATION 18
- --------------------------------------------------------------------------------
Management of the Funds 18
Distribution of Fund Shares 19
Administration of the Funds 20
NET ASSET VALUE 21
- --------------------------------------------------------------------------------
INVESTING IN SHARES 21
- --------------------------------------------------------------------------------
Share Purchases 21
What Shares Cost 22
Shareholder Accounts 22
Sales Charges--Investment Shares 23
Reducing the Sales Charge 24
Systematic Investment Program 25
Dividends 26
Capital Gains 26
EXCHANGE PRIVILEGE 26
- --------------------------------------------------------------------------------
REDEEMING SHARES 28
- --------------------------------------------------------------------------------
Systematic Withdrawal Program 29
Accounts with Low Balances 30
SHAREHOLDER INFORMATION 30
- --------------------------------------------------------------------------------
Voting Rights 30
EFFECT OF BANKING LAWS 31
- --------------------------------------------------------------------------------
TAX INFORMATION 32
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION 32
- --------------------------------------------------------------------------------
ADDRESSES 33
- --------------------------------------------------------------------------------
I
<PAGE>
SUMMARY OF FUND EXPENSES
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................................... None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price).................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, if applicable)........................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)....... None*
Exchange Fee............................................................. None
</TABLE>
*Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Bond Equity
Fund Fund
---- ------
<S> <C> <C>
Management Fee (after waivers) (1)................................. .50% .75%
Total Other Expenses (2)........................................... .36% .34%
Total Operating Expenses (1),(3)............................... .86% 1.09%
</TABLE>
(1) The Adviser has agreed, on a voluntary basis, to waive or reimburse its
management fee for the Institutional Shares of the Bond Fund and the
Equity Fund to the extent necessary to keep the Total Operating Expenses
for the current fiscal year from exceeding 1.10% and 1.25%, respectively.
Commencing February 9, 1998, the Adviser will further, on a voluntary
basis, waive its management fees for the Bond Fund a total of .25%. The
management fees in the table above reflect this .25% fee waiver. Absent
the management fee waivers, the management fees for the Bond Fund would be
.75%. The Adviser reserves the right, at its sole discretion, to terminate
these waivers or reimbursements at any time.
(2) The Trust, either directly or through its transfer agent, may enter into
arrangements with recordkeepers and others who provide services to
shareholders, and may compensate such entities for their services. Any
such arrangements, if entered into, may increase a Fund's "Total Other
Expenses."
(3) Absent the Adviser's voluntary fee waivers, Total Operating Expenses for
the Bond Fund would be 1.11%.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF INSTITUTIONAL SHARES OF EACH
FUND WILL BEAR EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS
OF THE VARIOUS COSTS AND EXPENSES, SEE "FUND INFORMATION" AND "INVESTING IN
SHARES."
1
<PAGE>
SUMMARY OF FUND EXPENSES
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXAMPLE 1 Year 3 Years 5 Years 10 Years
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment assuming (1) a 5% annual
return and (2) redemption at the end of each
time period.
Bond Fund..................................... $ 9 $27 $48 $106
Equity Fund................................... $11 $35 N/A N/A
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
BECAUSE THE EQUITY FUND HAS JUST RECENTLY BECOME OPERATIONAL AS OF THE DATE OF
THIS PROSPECTUS, THE FUND HAS NOT PROJECTED EXPENSES BEYOND THE THREE-YEAR
PERIOD SHOWN.
<TABLE>
<CAPTION>
INVESTMENT SHARES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................................... 4.00%
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, if applicable).......................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)...... None*
Exchange Fee............................................................ None
</TABLE>
*Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Bond Equity
Fund Fund
----- ------
<S> <C> <C>
Management Fee (after waivers) (1)................................ .50% .75%
12b-1 Fee (2)..................................................... .25% .25%
Total Other Expenses (3).......................................... .36% .34%
Total Operating Expenses (1),(4) .............................. 1.11% 1.34%
</TABLE>
(1) The Adviser has agreed, on a voluntary basis, to waive or reimburse its
management fee for the Investment Shares of the Bond Fund and Equity Fund
to the extent necessary to keep the Total Operating Expenses for the
current fiscal year from exceeding 1.35% and 1.50%, respectively.
Commencing February 9, 1998, the Adviser will further, on a voluntary
basis, waive its management fees for the Bond Fund a total of .25%. The
management fees in the table above reflect this .25% fee waiver. Absent
the management fee waivers, the management fees for the Bond Fund would be
.75%. The Adviser reserves the right, at its sole discretion, to terminate
these waivers or reimbursements at any time.
2
<PAGE>
(2) The Distributor reserves the right to waive Rule 12b-1 fees, from time to
time, at its sole discretion.
(3) The Trust, either directly or through its transfer agent, may enter into
arrangements with recordkeepers and others who provide services to
shareholders, and may compensate such entities for their services. Any such
arrangements, if entered into, may increase a Fund's "Total Other
Expenses."
(4) Absent the Adviser's and the Distributor's voluntary fee waivers, if any,
Total Operating Expenses for the Bond Fund would be 1.36%.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF INVESTMENT SHARES OF EACH FUND
WILL BEAR EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE
VARIOUS COSTS AND EXPENSES, SEE "FUND INFORMATION" AND "INVESTING IN SHARES."
<TABLE>
<CAPTION>
EXAMPLE 1 Year 3 Years 5 Years 10 Years
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment assuming (1) a 5% annual
return and (2) redemption at the end of each
time period. The Fund charges no contingent
deferred sales charge.
Bond Fund..................................... $51 $74 $99 $170
Equity Fund................................... $53 $81 N/A N/A
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. BECAUSE THE
EQUITY FUND HAS JUST RECENTLY BECOME OPERATIONAL AS OF THE DATE OF THIS
PROSPECTUS, THE FUND HAS NOT PROJECTED EXPENSES BEYOND THE THREE-YEAR PERIOD
SHOWN. LONG-TERM HOLDERS OF INVESTMENT SHARES MAY EVENTUALLY PAY MORE THAN THE
ECONOMIC EQUIVALENT OF THE MAXIMUM FRONT-END SALES CHARGES OTHERWISE PERMITTED
BY THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.'S CONDUCT RULES.
3
<PAGE>
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The following information has been audited by Deloitte & Touche LLP, the
Trust's independent auditors, as indicated in their report dated December 5,
1997 on the Trust's financial statements as of October 31, 1997 which are
incorporated by reference into the Trust's Statement of Additional
Information. This table should be read in conjunction with the Trust's
financial statements and related notes thereto. The Expedition Equity Fund did
not offer Investment Shares as of October 31, 1997 and therefore no financial
highlights are presented for such shares. Additional performance information
is set forth in the Trust's 1997 Annual Report to Shareholders and is
available upon request and without charge by calling 1-800-992-2085.
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
REALIZED
AND
UNREALIZED DISTRIBU- DISTRIBU-
NET ASSET GAINS OR TIONS TIONS NET ASSET
VALUE, NET (LOSSES) FROM NET FROM VALUE,
BEGINNING INVESTMENT ON INVESTMENT CAPITAL END TOTAL
OF PERIOD INCOME INVESTMENTS INCOME GAINS OF PERIOD RETURN
--------- ---------- ----------- ---------- --------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
EQUITY FUND
- -----------
Institutional Shares
1997(/1/) $10.00 0.02 0.25 (0.02) (0.86) $9.39 2.96%
BOND FUND
- ---------
Institutional Shares
1997(/1/) $9.69 0.19 0.16 (0.19) -- $9.85 3.49%
Investment Shares
1997 $ 9.77 0.53 0.08 (0.53) -- $9.85 6.41%(/3/)
1996 9.92 0.58 (0.15) (0.58) -- 9.77 4.44%(/3/)
1995 9.54 0.63 0.38 (0.63) -- 9.92 10.94%(/3/)
1994 10.40 0.54 (0.86) (0.54) -- 9.54 (3.12%)(/3/)
1993 10.25 0.63 0.21 (0.63) (0.06) 10.40 8.42%(/3/)
1992(/2/) 10.00 0.36 0.25 (0.36) -- 10.25 6.24%(/3/)
</TABLE>
- -----------
* Annualized.
(1) Commenced operations on June 13, 1997.
(2) Commenced operations on April 20, 1992.
(3) Based on net asset value, which does not reflect the sales charge, if
applicable.
4
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
NET
RATIO OF RATIO OF RATIO INVESTMENT
NET EXPENSES NET OF EXPENSES INCOME TO
ASSETS TO INVESTMENT TO AVERAGE AVERAGE AVERAGE
END OF AVERAGE INCOME NET ASSETS NET ASSETS PORTFOLIO COMMIS-
PERIOD NET TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER SION
(000) ASSETS NET ASSETS WAIVERS) WAIVERS) RATE RATE
-------- -------- ---------- ----------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
$237,567 1.09%* 0.53%* 1.09%* 0.53%* 64.68% $0.0519
$101,224 1.10%* 5.05%* 1.11%* 5.04%* 69.09% --
$ 23,630 1.13% 5.46% 1.56% 5.03% 69.09% --
44,552 1.08% 5.90% 1.58% 5.40% 77.00% --
63,521 1.04% 6.51% 1.51% 6.04% 79.00% --
58,827 1.20% 5.44% 1.50% 5.14% 91.00% --
97,246 1.11% 6.11% 1.40% 5.82% 69.00% --
65,984 0.79%* 6.79%* 1.39%* 6.19% 88.00% --
</TABLE>
5
<PAGE>
PERFORMANCE INFORMATION FOR EQUITY FUND, INCLUDING PREDECESSOR COMMON TRUST
FUND
- -------------------------------------------------------------------------------
The Equity Fund is the successor to a common trust fund (the Equity Model
Trust Fund) previously managed by an affiliate of the Equity Fund's investment
adviser. A substantial portion of the assets of that common trust fund was
transferred to the Equity Fund in connection with the Equity Fund's
commencement of operations on June 13, 1997. Set forth below is certain
performance data for the Equity Fund that includes periods during which it was
operated as a common trust fund. The performance for the periods during which
the Equity Fund existed as a common trust fund is deemed relevant because the
common trust fund was managed using virtually the same investment objective,
policies and restrictions as those used by the Equity Fund. The common trust
fund was not registered under the Investment Company Act of 1940 and the
performance data is not necessarily indicative of the future performance of
the Equity Fund. Further, the predecessor common trust fund was not subject to
certain investment limitations imposed on mutual funds which, if they had been
imposed, may have adversely affected the common trust fund's performance.
The predecessor common trust fund did not incur expenses that correspond to
the advisory, administrative, and other fees to which the Equity Fund is
subject. Accordingly, the following performance information has been adjusted
by applying the total expense ratios for the Institutional Shares of the
Equity Fund, as disclosed in the Prospectus at the time the Equity Fund
commenced operations, which reduced the actual performance of the common trust
fund.
The average annual total returns (adjusted to reflect Fund expenses net of
voluntary waivers and reimbursements but not the sales load or 12b-1 fees
charged to Investment Shares) are set forth in the following table for the
periods indicated therein:
TOTAL RETURNS FOR THE EQUITY FUND (INCLUDING PREDECESSOR COMMON TRUST FUND
PERFORMANCE)
AND
STANDARD BENCHMARK INDICES
FOR PERIODS ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
SINCE
INCEPTION
ONE YEAR THREE YEARS FROM 10/13/93
TO 10/31/97 TO 10/31/97 TO 10/31/97
----------- ----------- -------------
<S> <C> <C> <C>
Equity Fund............................... 27.15% 21.98% 15.98%
Lipper Growth and Income Fund Index....... 28.12% 23.39% 17.81%
S&P 500 Index............................. 32.11% 27.49% 21.12%
S&P 400 Mid Cap Index..................... 32.65% 23.57% 17.89%
</TABLE>
6
<PAGE>
The Lipper Growth & Income Fund Index is a net asset value weighted index of
the 30 largest funds with a growth & income investment objective. It is
calculated daily with adjustments for income dividends and capital gains
distributions as of the ex-dividend dates. The S&P 500 Index (the Standard &
Poor's 500 Composite Index) is a market capitalization weighted index composed
of widely held common stocks listed on the New York Stock Exchange, American
Stock Exchange, and over-the-counter market. The S&P 400 Mid Cap Index is a
market-value weighted index of 400 domestic mid cap stocks chosen for market
size, liquidity and industry group representation. These indices are
unmanaged. It is not possible to invest in an index, including the indices
listed above.
GENERAL INFORMATION
- -------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated August 7, 1989. The Declaration of Trust permits
the Trust to offer separate series of shares of beneficial interest
representing interests in separate portfolios of securities. The shares in any
one portfolio may be offered in separate classes. As of the date of this
prospectus, the Board of Trustees (the "Trustees") has established two classes
of shares of each Fund, Investment Shares and Institutional Shares.
Institutional Shares of each Fund are primarily designed for individuals and
entities establishing fiduciary, trust, agency, private banking, custody or
similar relationships with the Asset Management Group of Compass Bank or a
trust division of any banking affiliate of Compass Bancshares, Inc. or a trust
company affiliate of Compass Bancshares, Inc. who desire a convenient means of
accumulating an interest in a professionally managed, diversified portfolio of
securities.
Investment Shares of each Fund are primarily designed for customers of Compass
Bank and its correspondents and affiliates (including customers obtaining
brokerage and related services from Compass Brokerage, Inc.), other than
individuals and entities establishing fiduciary, trust, agency, private
banking, custody or similar relationships with the Asset Management Group of
Compass Bank or a trust division of a banking affiliate of Compass Bancshares,
Inc. or trust company affiliate of Compass Bancshares, Inc., who desire a
convenient means of accumulating an interest in a professionally managed,
diversified portfolio of securities. Except as noted herein, a minimum initial
investment of $1,000 is required and subsequent investments must be in amounts
of at least $100.
The Trust also offers two other portfolios: The Expedition Money Market Fund;
and The Expedition Tax-Free Money Market Fund (which has not commenced
operations as of the date of this prospectus). Information
7
<PAGE>
regarding the Trust's other portfolios is contained in separate prospectuses
that may be obtained by calling 1-800-992-2085.
INVESTMENT INFORMATION
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
BOND FUND
The investment objective of the Bond Fund is to provide current income.
EQUITY FUND
The investment objective of the Equity Fund is to provide growth of capital,
with a secondary objective of income.
The investment objective of a Fund cannot be changed without approval of
shareholders. While there is no assurance that a Fund will achieve its
investment objective, it endeavors to do so by following the investment
policies described in this prospectus.
INVESTMENT POLICIES
The investment policies described below may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.
BOND FUND
ACCEPTABLE INVESTMENTS. The Fund invests primarily in bonds as well as other
fixed income securities. Under normal circumstances, the Fund will invest at
least 65% of the value of its total assets in bonds, which may include
debentures and notes, issued by U.S. and foreign companies as well as by U.S.
and foreign governments and supranational entities. All such instruments must
be denominated in U.S. dollars and must be rated "A" or better by one or more
nationally recognized statistical rating organization ("NRSRO") at the time of
purchase. Under normal circumstances, the Fund's average weighted maturity
will be maintained at from 3 to 5 years. In the event that a security owned by
the Fund is downgraded below the stated rating categories, Compass Bank (the
"Adviser") will review and take appropriate action with regard to the
security. The Fund may invest any remaining assets in a variety of fixed
income securities, as further described below.
TEMPORARY INVESTMENTS. The Fund may invest up to 100% of its assets in cash
and short-term obligations during times of unusual market
8
<PAGE>
conditions for temporary defensive purposes. Short-term obligations include:
. obligations of the U.S. Government or its agencies or
instrumentalities;
. high quality commercial paper;
. shares of money market mutual funds;
. short-term obligations issued by domestic banks and U.S. branches of
foreign banks; and
. repurchase agreements.
U.S. GOVERNMENT OBLIGATIONS. The Fund may invest in U.S. Government
securities. U.S. Government securities in which the Fund invests include:
. direct obligations of the U.S. Treasury, including STRIPs and zero
coupon securities; and
. obligations of U.S. Government agencies or instrumentalities, which may
include but are not limited to Federal Home Loan Banks, Government
National Mortgage Association, Fannie Mae, and the Federal Home Loan
Mortgage Corporation.
Obligations of U.S. Government agencies or instrumentalities are backed in a
variety of ways by the U.S. Government, or its agencies or instrumentalities.
Some of these obligations, such as Government National Mortgage Association
mortgage-backed securities, are backed by the full faith and credit of the
U.S. Treasury. Obligations of Federal Home Loan Banks are backed by the
discretionary authority of the U.S. government to purchase certain obligations
of agencies or instrumentalities. Obligations of the Federal Home Loan
Mortgage Corporation are backed by the credit of the agency issuing the
obligations.
MORTGAGE-RELATED SECURITIES. The Fund may invest in mortgage-related
securities which are issued by private entities. The mortgage-related
securities in which the Fund may invest may be: (i) privately issued
securities which are collateralized by pools of mortgages in which each
mortgage is guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. Government; (ii) privately issued securities which
are collateralized by pools of mortgages in which payment of principal and
interest are guaranteed by the issuer and such guarantee is collateralized by
U.S. Government securities; or (iii) other privately issued securities in
which the proceeds of the issuance are invested in mortgage-backed securities
and payment of the principal and interest are supported by the credit of any
agency or instrumentality of the U.S. Government. The underlying mortgage
pools may consist of both fixed and adjustable rate
9
<PAGE>
mortgages. Other mortgage-related securities that may be purchased by the Fund
include "CMOs" and "REMICs" (discussed below).
ASSET-BACKED SECURITIES (NON-MORTGAGE). Asset-backed securities consist of
securities secured by 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
purposes of owning such assets and issuing such debt. A Fund may invest in
other asset-backed securities that may be created in the future if the Advisor
determines they are suitable.
STRIPPED MORTGAGE-BACKED SECURITIES ("SMBS"). SMBs are usually structured with
two classes that receive specified proportions of the monthly interest and
principal payments from a pool of mortgage securities. One class may receive
all of the interest payments and is thus termed an interest-only class ("IO"),
while the other class may receive all of the principal payments and is thus
termed the principal-only class ("PO"). The value of IOs tends to increase as
interest rates rise and decrease as rates fall; the opposite is true of POs.
SMBs are extremely sensitive to changes in interest rates because of the
impact thereon of prepayment of principal on the underlying mortgage
securities.
ZERO COUPON OBLIGATIONS. Zero coupon obligations are debt securities that do
not bear any interest, but instead are issued at a deep discount from par. The
value of a zero coupon obligation increases over time to reflect the interest
accreted. Such obligations will not result in the payment of interest until
maturity, and will have greater price volatility than similar securities that
are issued at par and pay interest periodically. Zero coupon obligations may
include interest only and principal only components of fixed income
securities, as well as interests in trusts that issue interests in fixed
income securities, such as "CATs" and "TIGRs."
LOAN PARTICIPATIONS. Loan participations are interests in loans to U.S.
corporations which are administered by the lending bank or agent for a
syndicate of lending banks, and sold by the lending bank or syndicate member
("intermediary bank"). In a loan participation, the borrower corporation will
be deemed to be the issuer of the participation interest except to the extent
the Fund derives its rights from the intermediary bank. Because the
intermediary bank does not guarantee a loan participation in any way, a loan
participation is subject to the credit risks generally associated with the
underlying corporate borrower. In the event of the bankruptcy or insolvency of
the corporate borrower, a loan participation
10
<PAGE>
may be subject to certain defenses that can be asserted by such borrower as a
result of improper conduct by the intermediary bank. In addition, in the event
the underlying corporate borrower fails to pay principal and interest when
due, the Fund may be subject to delays, expenses and risks that are greater
than those that would have been involved if the Fund had purchased a direct
obligation of such borrower. Under the terms of a loan participation, the Fund
may be regarded as a creditor of the intermediary bank (rather than of the
underlying corporate borrower), so that the Fund may also be subject to the
risk that the intermediary bank may become insolvent.
CMOS/REMICS. Collateralized mortgage obligations ("CMOs") and real estate
mortgage investment conduits ("REMICs") are mortgage-backed securities issued
by a non-governmental entity, such as a trust or corporation. While they are
generally structured with one or more types of credit enhancement, private
pass-through securities typically lack a guarantee by an entity having the
credit status of a governmental agency or instrumentality.
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 series of a CMO in a variety of ways.
Principal payments on the underlying mortgage assets may cause CMOs to be
retired substantially earlier than their stated maturity or final distribution
dates, resulting in a loss of all or part of any premium paid. A REMIC is a
CMO that qualifies for special tax treatment under the Internal Revenue Code
and invests in certain mortgages principally secured by interests in real
property.
CONVERTIBLE SECURITIES. Convertible securities are corporate securities that
are exchangeable for a set number of shares of another security at a prestated
price. Convertible securities have characteristics similar to both fixed
income and equity securities. Because of the conversion feature, the market
value of convertible securities tends to move together with the market value
of the underlying stock. The value of convertible securities is also affected
by prevailing interest rates, the credit quality of the issuer, and any call
provisions.
DOLLAR ROLLS. Dollar roll transactions consist of the sale of mortgage-backed
securities to a bank or broker-dealer, together with a commitment to purchase
similar, but not necessarily identical, securities at a future date. Any
difference between the sale price and the purchase price is netted against the
interest income foregone on the securities to arrive at an implied borrowing
(reverse repurchase) rate. Alternatively, the sale and purchase transactions
which constitute the dollar roll can be executed at the same
11
<PAGE>
price, with the Fund being paid a fee as consideration for entering into the
commitment to purchase. Dollar rolls may be renewed after cash settlement and
initially may involve only a firm commitment agreement by the Fund to buy a
security. If the broker-dealer to whom the Fund sells the security becomes
insolvent, the Fund's right to purchase or repurchase the security may be
restricted. Also, the value of the security may change adversely over the term
of the dollar roll, such that the security that the Fund is required to
repurchase may be worth less than the security that the Fund originally held.
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements. In a reverse repurchase agreement the Fund transfers possession of
a portfolio instrument to another person, such as a financial institution,
broker, or dealer, in return for a percentage of the instrument's market value
in cash, and agrees that on a stipulated date in the future the Fund will
repurchase the portfolio instrument by remitting the original consideration
plus interest at an agreed upon rate. When effecting reverse repurchase
agreements, assets of the Fund in a dollar amount sufficient to make payment
for the obligations to be purchased, are earmarked or otherwise segregated
until the transaction is settled.
GUARANTEED INVESTMENT CONTRACTS ("GICS"). GICs are contracts issued by U.S.
insurance companies. Pursuant to such contracts, the Fund makes cash
contributions to a deposit fund of the insurance company's general account.
The insurance company then credits to the Fund on a monthly basis guaranteed
interest at either a fixed, variable or floating rate. Generally, GICs are not
assignable or transferable without the permission of the issuing insurance
companies and therefore may be considered illiquid.
BANK INVESTMENT CONTRACTS ("BICS"). BICs are contracts issued by U.S. banks
and savings and loan institutions. Pursuant to such contracts, a Fund makes
cash contributions to a deposit fund of the general account of the bank or
savings and loan institution. The bank or savings and loan institution then
credits to the Fund on a monthly basis guaranteed interest at either a fixed,
variable or floating rate. Generally, BICs are not assignable or transferable
without the permission of the issuing bank or savings and loan institution and
therefore may be considered illiquid.
EQUITY FUND
ACCEPTABLE INVESTMENTS. The Fund invests primarily (at least 80% of the value
of its total assets) in common stocks issued by mid- and large-capitalization
companies. The Fund may invest any remaining assets in warrants and rights to
purchase common stocks, preferred stocks
12
<PAGE>
convertible into common stock, non-convertible preferred stocks, U.S. dollar
denominated equity securities of foreign issuers listed on national securities
exchanges or actively traded in the over-the-counter market, and American
Depositary Receipts ("ADRs"). The Fund also may purchase and sell ("write")
put and call options (including options on indices) and may purchase financial
futures contracts and options thereon. The Fund also may purchase bonds
convertible into common stock and Standard & Poor's Depositary Receipts
("SPDRs").
TEMPORARY INVESTMENTS. The Fund may invest a portion of its assets in cash,
shares of money market mutual funds and repurchase agreements for liquidity
reasons. For temporary defensive purposes during times of unusual market
conditions, as determined by the Adviser, the Fund may invest up to 100% of
its assets in these securities.
EQUITY SECURITIES. Equity securities consist primarily of common stocks and
instruments exchangeable or convertible into common stocks. Common stock
represents units of ownership in a corporation or other company. Investments
in equity securities are subject to market risks which may cause their prices
to fluctuate over time. Changes in the value of these securities will not
necessarily affect cash income derived from these securities but will affect
the Fund's net asset value.
GENERAL INVESTMENT POLICIES
The following investment policies and strategies apply to both the Bond Fund
and the Equity Fund.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which
financial institutions sell U.S. Government securities or other securities to
a Fund and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. To the extent that the original seller does not
repurchase the securities from a Fund, the Fund could receive less than the
repurchase price on any sale of such securities. A Fund will only enter into
repurchase agreements with banks and other recognized financial institutions
deemed by the adviser to be creditworthy pursuant to guidelines established by
the Trustees.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. Each Fund may invest in
the securities of other investment companies including, pending approval from
the Securities and Exchange Commission, affiliated money market funds. A Fund
will invest in other investment companies primarily for the purpose of
investing short-term cash which has not yet been invested in other portfolio
instruments. A Fund's purchase of investment company securities may result in
a layering of expenses.
13
<PAGE>
RESTRICTED SECURITIES. Each Fund may invest in restricted securities.
Restricted securities are any securities in which a Fund may otherwise invest
pursuant to its investment objective and policies but which are subject to
restrictions on resale under federal securities laws. Restricted securities
may be illiquid.
VARIABLE AND FLOATING RATE INSTRUMENTS. Certain obligations may carry variable
or floating rates of interest, and may involve conditional or unconditional
demand features. 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.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. Each Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions are
arrangements in which a Fund purchases securities with payment and delivery
scheduled for a future time. The seller's failure to complete these
transactions may cause the Fund to miss a price or yield considered to be
advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may vary
from the purchase prices.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, each
Fund may lend portfolio securities on a short-term basis to broker/dealers,
banks, or other institutional borrowers of securities. The Funds will receive
collateral in the form of cash or U.S. Government securities equal to at least
100% of the value of the securities loaned. There is the risk that when
lending portfolio securities, the securities may not be available to the Fund
on a timely basis, and the Fund may, therefore, lose the opportunity to sell
the securities at a desirable price. In addition, in the event that a borrower
of securities filed for bankruptcy or became insolvent, disposition of the
securities may be delayed.
PUT AND CALL OPTIONS. Each Fund may purchase put and call options on its
portfolio securities. The Funds may also write (sell) put and call options on
all or any portion of its portfolio to generate income for the Funds. A Fund
only will write call options on securities either held in its portfolio or
which it has the right to obtain without payment of further consideration or
for which it has segregated cash in the amount of any additional
consideration. In the case of put options, the Funds will segregate liquid
assets with a value equal to or greater than the exercise price of the
underlying securities.
A Fund can purchase or write options that are either traded over-the-counter
or on an exchange. A Fund will generally purchase and write over-
14
<PAGE>
the-counter options on portfolio securities in negotiated transactions with
the buyers or writers of the options since options on the portfolio securities
held by the Fund are not traded on an exchange. Over-the-counter options are
two-party contracts with price and terms negotiated between buyer and seller.
A Fund purchases and writes options only with investment dealers and other
financial institutions (such as commercial banks or savings associations)
deemed creditworthy by the Adviser.
SWAPS, CAPS, FLOORS AND COLLARS. Interest rate swaps, mortgage swaps, currency
swaps and other types of swap agreements such as caps, floors and collars are
designed to permit the purchaser to preserve a return or spread on a
particular investment or portion of its portfolio, and to protect against any
increase in the price of securities a Fund anticipates purchasing at a later
date. In a typical interest rate swap, one party agrees to make regular
payments equal to a floating interest rate times a "notional principal
amount," in return for payments equal to a fixed rate times the same amount,
for a specific period of time. Swaps may also depend on other prices or rates,
such as the value of an index or mortgage prepayment rates. In a typical cap
or floor agreement, one party agrees to make payments only under specified
circumstances, usually in return for payment of a fee by the other party.
FINANCIAL FUTURES AND OPTIONS ON FUTURES. Each Fund may purchase and sell
financial futures contracts. Financial futures contracts call for the delivery
of particular debt instruments at a certain time in the future. The seller of
the contract agrees to make delivery of the type of instrument called for in
the contract and the buyer agrees to take delivery of the instrument at the
specified future time.
Each Fund also may write put and call options and purchase put and call
options on financial futures contracts. When a Fund writes a call option on a
futures contract, it is undertaking the obligation of selling the futures
contract at a fixed price at any time during a specified period if the option
is exercised. Conversely, as purchaser of a put option on a futures contract,
the Fund is entitled (but not obligated) to sell a futures contract at the
fixed price during the life of the option. When a Fund writes a put option on
a futures contract, it is undertaking to buy a particular futures contract at
a fixed price at any time during a specified period if the option is
exercised. As a purchaser of a call option on a futures contract, a Fund is
entitled (but not obligated) to purchase a futures contract at a fixed price
at any time during the life of the option. When a Fund purchases futures
contracts, it will collateralize its position by depositing amount of cash and
cash equivalents equal to the market value of the futures positions held, less
margin deposits, in a segregated account with the Trust's custodian.
15
<PAGE>
A Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing non-hedging futures positions and premiums paid for related options
would exceed 5% of the market value of the Fund's total assets.
INVESTMENT RISKS. The value of a Fund's shares will fluctuate. With regard to
the Bond Fund, the amount of this fluctuation is dependent upon the quality
and maturity of the securities in the Fund's portfolio, as well as on market
conditions. Prices of securities eligible for purchase by the Bond Fund are
interest rate sensitive, which means that their value varies inversely with
market interest rates. Thus, if market interest rates have increased from the
time a security was purchased, the security, if sold, might be sold at a price
less than its cost. Similarly, if market interest rates have declined from the
time a security was purchased, the security, if sold, might be sold at a price
greater than its cost. Equity securities in which the Equity Fund invests are
subject to market risks which may cause their prices to fluctuate. Changes in
the value of these securities will not necessarily affect cash income derived
from these securities but will affect the Equity Fund's net asset value.
The Bond Fund may invest in mortgage-related securities which may have less
potential for capital appreciation than other similar investments (e.g.,
investments with comparable maturities) because as interest rates decline, the
likelihood increases that mortgages will be prepaid. Furthermore, if mortgage-
related securities are purchased at a premium, mortgage foreclosures and
unscheduled principal payments may result in some loss of a holder's principal
investment to the extent of the premium paid. Conversely, if mortgage-related
securities are purchased at a discount, both a scheduled payment of principal
and an unscheduled prepayment of principal would increase current and total
returns and would accelerate the recognition of income, which would be taxed
as ordinary income when distributed to shareholders.
Securities of foreign issuers are subject to certain risks not typically
associated with domestic securities, including, among other risks, changes in
currency rates and in exchange control regulations, costs in connection with
conversions between various currencies, limited publicly available information
regarding foreign issuers, lack of uniformity in accounting, auditing and
financial statements and requirements, greater securities market volatility,
less liquidity of securities, less government supervision and regulations of
securities markets, withholding taxes and changes in taxes on income on
securities, and possible seizure, nationalization or expropriation of the
foreign issuer or foreign deposits.
16
<PAGE>
SPECIAL RISKS ASSOCIATED WITH FINANCIAL FUTURES AND OPTIONS ON FINANCIAL
FUTURES. When a Fund uses financial futures and options on financial futures
there is a risk that the prices of the securities subject to the futures
contracts may not correlate with the prices of the securities in the Fund's
portfolio. This may cause the futures contract and any related options to
react differently than the portfolio securities to market changes. In
addition, the Adviser could be incorrect in its expectations about the
direction or extent of market factors such as interest rate movements. In
these events, a Fund may lose money on the futures contract or option. It is
not certain that a secondary market for positions in futures contracts or for
options will exist at all times. Although the Adviser will consider liquidity
before entering into options transactions, there is no assurance that a liquid
secondary market on an exchange will exist for any particular futures contract
or option at any particular time. A Fund's ability to establish and close out
futures and options positions depends on this secondary market.
INVESTMENT LIMITATIONS
The Bond Fund will not:
. borrow money directly or through reverse repurchase agreements or
pledge securities except, under certain circumstances, the Fund may
borrow up to one-third of the value of its net assets and pledge up to
10% of the value of its total assets to secure such borrowings; or
. with respect to securities comprising 75% of its assets, invest more
than 5% of its total assets in securities of one issuer (except cash
and cash items, and securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities).
The Equity Fund will not:
. borrow money or pledge securities except, under certain circumstances,
the Fund may borrow up to one-third of the value of its net assets and
pledge up to 10% of the value of its total assets to secure such
borrowings; or
. with respect to securities comprising 75% of its assets, invest more
than 5% of its total assets in securities of one issuer (except
securities issued or guaranteed by the U.S. Government or its agencies
or instrumentalities).
The above investment limitations cannot be changed without shareholder
approval. The following limitation, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in this limitation becomes effective.
17
<PAGE>
Each Fund will not:
. invest more than 15% of its net assets in securities which are not
readily marketable or which are otherwise considered illiquid,
including over-the-counter options and repurchase agreements providing
for settlement in more than seven days after notice.
FUND INFORMATION
- -------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
BOARD OF TRUSTEES. The Board of Trustees is responsible for managing the
business affairs of the Trust and for exercising all of the powers of the
Trust except those reserved for the shareholders.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust
and subject to direction by the Trustees, investment decisions for the Funds
are made by Compass Bank, an Alabama state banking corporation that is a
Federal Reserve System member bank, as each Fund's investment adviser (the
"Adviser"). The Adviser continually conducts investment research and
supervision for the Funds and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the assets of
each Fund.
ADVISORY FEES. The Adviser is entitled to receive an annual investment
advisory fee equal to .75% of each Fund's average daily net assets
payable from the assets of a Fund. The Adviser may choose to voluntarily
waive or reimburse a portion of its fee. The Adviser reserves the right,
in its sole discretion, to terminate these voluntary waivers or
reimbursements at any time.
ADVISER'S BACKGROUND. The Adviser is a wholly-owned subsidiary of Compass
Bancshares, Inc. ("Bancshares"), a bank holding company organized under
the laws of Delaware. Through its subsidiaries and affiliates,
Bancshares, the 54th largest bank holding company in the United States in
terms of total assets as of June 30, 1997, offers a full range of
financial services to the public including commercial lending, depository
services, cash management, brokerage services, retail banking, credit
card services, investment advisory services, and trust services.
As of December 31, 1997, the Adviser offered a broad range of commercial
banking services. The Adviser has served as investment adviser to mutual
funds since February 5, 1990. Through the Compass Asset Management Group,
the Adviser and certain other affiliates of Bancshares provide investment
advisory and management services
18
<PAGE>
for the assets of individuals, pension and profit sharing plans,
endowments and foundations. As of December 31, 1997, the Compass Asset
Management Group had approximately $7.7 billion under administration
($5.08 billion of which was under administration by the Adviser), of
which the Compass Asset Management Group had discretion over
approximately $2.8 billion ($1.8 billion of which was comprised of assets
of accounts over which the Adviser exercised discretion).
As part of its regular banking operations, the Adviser may make loans to
public companies. Thus, it may be possible, from time to time, for a Fund
to hold or acquire the securities of issuers which are also lending
clients of the Adviser. The lending relationship will not be a factor in
the selection of securities.
Each Fund is managed by members of the Expedition Portfolio Management
Team and no one person is responsible for making investment decisions for
a Fund.
DISTRIBUTION OF FUND SHARES
SEI Investments Distribution Co. (the "Distributor") is the principal
distributor for shares of each Fund. It is a wholly-owned subsidiary of SEI
Investments Company ("SEI Investments") and is the principal distributor for a
number of investment companies. In connection with the sale of Shares, the
Distributor may, from time to time, offer certain items of nominal value to
any shareholder or investor.
DISTRIBUTION PLAN. Pursuant to the provisions of a distribution plan adopted
in accordance with the Investment Company Act Rule 12b-1 (the "Plan"), each
Fund may pay the Distributor an amount computed at an annual rate of .25% of
the average daily net asset value of the Investment Shares of each Fund to
finance any activity which is principally intended to result in the sale of
shares subject to the Plan.
The Distributor may, from time to time and for such periods as it deems
appropriate, voluntarily reduce or completely waive compensation payable under
the Plan.
The Distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers,
including the Adviser and various other affiliates of Bancshares, to provide
sales and/or administrative services as agents for their clients or customers
who beneficially own Investment Shares of a Fund. Administrative services may
include, but are not limited to, the following functions: providing office
space, equipment, telephone facilities; and various personnel
19
<PAGE>
including clerical, supervisory, and computer personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding a
Fund; assisting clients in changing dividend options, account designations,
and addresses; and providing such other services as the Funds reasonably
request. The Plan is a compensation type plan. As such, a Fund makes no
payments to the Distributor except as described above. Therefore, a Fund does
not pay for unreimbursed expenses of the Distributor except as described
above.
SHAREHOLDER SERVICING ARRANGEMENTS. In addition to the fees paid by the
Distributor to financial institutions under the Plan as described above, the
Distributor may also pay financial institutions, including the Adviser,
Compass Brokerage, Inc. and various other affiliates of Bancshares, a fee with
respect to the average daily net asset value of shares held by their customers
for providing administrative services. This fee is in addition to the amounts
paid under the Plan.
The Adviser, Compass Brokerage, Inc. and the other affiliates of Bancshares
which provide shareholder and administrative services to the Funds sometimes
are referred to herein as "Compass."
ADMINISTRATION OF THE FUNDS
ADMINISTRATIVE SERVICES. SEI Fund Resources (the "Administrator"), a wholly-
owned subsidiary of SEI Investments provides each Fund with certain
administrative personnel and services necessary to operate each Fund. Such
services include shareholder servicing and certain legal and accounting
services. For these services the Administrator is entitled to a fee which is
calculated daily and paid monthly at an annual rate of .20% of each Fund's
average daily net assets payable from the assets of a Fund. The Administrator
may choose to voluntarily waive a portion of its fee. The Administrator
reserves the right, in its sole discretion, to terminate these voluntary
waivers at any time.
TRANSFER AGENT/SERVICING AGENT. State Street Bank and Trust Company (the
"Transfer Agent") and Boston Financial Data Services, Inc. act as transfer
agent and servicing agent, respectively for the Trust, and are entitled to
compensation payable from the assets of a Fund.
CUSTODIAN. Compass Bank, an Alabama state banking corporation, which is also
the Adviser, is custodian for the securities and cash of each Fund for which
it receives an annual fee of 0.02% of each Fund's daily net assets payable
from the assets of a Fund and is reimbursed for its out-of-pocket expenses.
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<PAGE>
NET ASSET VALUE
- -------------------------------------------------------------------------------
Each Fund's net asset value per share fluctuates. Net asset value for a class
of shares of a Fund is determined by dividing the sum of the market value of
all securities and other assets attributable to the class, less liabilities
attributable to the class, by the number of shares of the class outstanding.
Net asset values are determined as of the close of regular trading of the New
York Stock Exchange ("NYSE"), normally 3:00 p.m. (Central time) on days on
which the NYSE is open for business (a "Business Day").
INVESTING IN SHARES
- -------------------------------------------------------------------------------
SHARE PURCHASES
Institutional Shares are available through the Asset Management Group of
Compass Bank or through the trust division of a Bancshares banking affiliate
or a Bancshares trust company affiliate for qualifying customers establishing
fiduciary, trust, private banking, agency, custody or similar relationships
with the Asset Management Group or such trust division or trust company
affiliate. The Compass Bank Asset Management Group and other affiliates and
divisions of any affiliates of Bancshares through which Institutional Shares
are available sometimes are referred to below as "Compass Asset Management."
Investment Shares are available through a Compass Brokerage, Inc. personal
investment officer or other authorized registered representative or through
the Transfer Agent at 1-800-992-2085.
Investment Shares and Institutional Shares of each Fund may be purchased by
investors on each Business Day. The Trust reserves the right to reject any
purchase request.
To purchase Investment Shares, an investor may call their Compass Brokerage,
Inc. personal investment officer or other authorized registered representative
or the Transfer Agent at 1-800-992-2085 to place an order. The minimum initial
investment for Investment Shares of each Fund is $1,000, except for an IRA
account, which requires a minimum initial investment of $500, and except that
the minimum initial investment is $25 in the case of directors, officers and
employees of Bancshares and its affiliates (and their spouses and children
under 21 years of age) participating in the Systematic Investment Program
discussed below. Subsequent investments must be in amounts of at least $100
($25 in case of directors, officers and employees of Bancshares and its
affiliates (or their spouses or children under 21 years of age) participating
in the Systemic Investment Program discussed below). Payment may be made
either by
21
<PAGE>
check or wire transfer of federal funds or by debiting a customer's account at
a Bancshares banking affiliate.
To purchase by check, the check must be included with the order and made
payable to "The Expedition Funds Fund--Investment Shares." Purchase
orders received after the Fund's net asset value has been determined will be
priced at the next Business Day's net asset value. Orders are considered
received after payment by check is converted into federal funds. Third party
checks, credit cards, credit card checks and cash will not be accepted. When
purchases are made by check, redemptions will not be allowed until the
investment being redeemed has been in the account for 15 business days.
To purchase Investment Shares by wire, investors should call the Transfer
Agent at 1-800-992-2085 prior to purchase. Federal funds should be wired as
follows: State Street Bank & Trust Co., ABA # 011000028 for credit to DDA #
9905-303-5. Further credit to: The Expedition Funds Fund--Investment
Shares; Re: (Shareholder name and account number). Payment by wire must be
received before the Funds calculate their net asset value, normally 3:00 p.m.
(Central time). Payment for all orders must be received within three days of
placing the order. Shares can not be purchased by Federal Reserve wire on days
when either the NYSE or Federal Reserve is closed.
Under limited circumstances, arrangements may be made with Compass for same
day receipt of purchase orders, to earn dividends of the Bond Fund that day.
Investors interested in establishing such arrangements are requested to call
their trade in by 1:00 p.m. (Central time), and are reminded that the Fund
does reserve the right to refuse any purchase request.
To purchase Institutional Shares, eligible customers should contact Compass
Asset Management by telephoning Compass Bank.
WHAT SHARES COST
Institutional Shares are sold at their net asset value next determined after
an order is received. Investment Shares are sold at their net asset value next
determined after an order is received, plus a sales charge (See "Sales
Charges--Investment Shares").
SHAREHOLDER ACCOUNTS
Compass Asset Management or the Transfer Agent maintains an account for each
Institutional Share shareholder of record. Share certificates are not issued.
Institutional Shares sold to a Compass Asset Management division or affiliate
acting in a fiduciary, advisory, custodial, agency, or similar
22
<PAGE>
capacity on behalf of customers may be held of record by such Compass Asset
Management division or affiliate. Beneficial ownership of Institutional Shares
will be recorded by the Compass Asset Management division or affiliate and
reflected in the account statements provided by Compass Asset Management to
customers, and reports of purchases and redemptions of Institutional Shares
held by Compass Asset Management in a fiduciary, advisory, custodial, agency
or similar capacity on behalf of customers will be provided periodically by
Compass Asset Management to such customers.
SALES CHARGES--INVESTMENT SHARES
<TABLE>
<CAPTION>
SALES CHARGE AS A SALES CHARGE AS A
PERCENTAGE OF PERCENTAGE OF
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE NET AMOUNT INVESTED
- --------------------- --------------------- -------------------
<S> <C> <C>
Less than $100,000 4.00% 4.17%
$100,000 but less than $250,000 3.50% 3.63%
$250,000 but less than $500,000 2.75% 2.83%
$500,000 but less than $1,000,000 1.00% 1.01%
$1 million or more 0.00% 0.00%
</TABLE>
The sales charge shown in the table is the maximum sales charge that applies
to sales of Investment Shares. The Trust currently reallows the entire amount
of the sales charge to Compass Brokerage, Inc., who may be deemed to be an
"underwriter" under the Securities Act of 1933.
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 the sales charge it receives or from any other source
available to it. Under any such program, the Distributor may provide
incentives, in the form of cash or other compensation, including merchandise,
airline vouchers, trips and vacation packages, to dealers selling shares of
the funds.
The sales charge for Investment Shares sold other than through Compass
Brokerage, Inc. or registered broker/dealers will be retained by the
Distributor. The Distributor may pay fees to banks out of the sales charge in
exchange for sales and/or administrative services performed on behalf of the
bank's customers in connection with the initiation of customer accounts and
purchases of shares of a Fund.
PURCHASES AT NET ASSET VALUE. Investment Shares of a Fund may be purchased at
net asset value, without a sales charge: (1) by directors, officers and
employees of the Trust, Bancshares or its affiliates, and their spouses and
children under 21; (2) by directors, officers and employees
23
<PAGE>
(and their spouses and children under the age of 21) of any broker-dealer with
which the Distributor enters into a dealer agreement to sell shares of the
Funds; (3) by investors who purchase Shares of a Fund through certain broker-
dealers, investment advisers and other financial institutions (including any
affiliate or subsidiary of Bancshares or Compass Bank or a division thereof)
that have entered into an agreement with the Distributor providing that such
Shares shall be purchased for the benefit of clients of such broker-dealer,
investment adviser or other financial institution participating in a wrap
account, asset allocation or similar program under which the client pays a fee
to such broker-dealer, investment adviser or other financial institution; (4)
by persons purchasing Shares of a Fund through a payroll deduction plan, a
401(k) plan, or a 403(b) plan which, by its terms, permits purchases of Shares
of such Fund; and (5) by investors who purchase shares with redemption
proceeds (but only to the extent of such redemption proceeds) from another
investment company within 90 days of such redemption, provided that, the
investors paid either a front-end or contingent deferred sales charge on the
original shares redeemed. In addition, any shareholder of Investment Shares of
the Bond Fund who purchased any or all of their shares prior to June 9, 1997
may also purchase additional Investment Shares of the Bond Fund at net asset
value, without a sales charge. Customers in a wrap account, asset allocation
or similar program may incur separate fees in addition to those charged by the
Funds.
REDUCING THE SALES CHARGE
The sales charge can be reduced on the purchase of Investment Shares through:
.quantity discounts and accumulated purchases;
.signing a 13-month letter of intent; or
.using the reinvestment privilege.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the foregoing table,
larger purchases reduce the sales charge paid. The Trust will combine
purchases made on the same day by the investor, his spouse, and his children
under age 21 when it calculates the sales charge.
If an additional purchase of Fund shares is made, the Trust will consider the
previous purchases still invested in the Fund. For example, if a shareholder
already owns shares having a current value at the public offering price of
$490,000 and purchases $15,000 more at the public offering price, the sales
charge on the additional purchase according to the schedule now in effect
would be 1.00%, not 2.75%.
To receive the sales charge reduction, Compass Brokerage, Inc. or the
Distributor must be notified by the shareholder in writing at the time the
24
<PAGE>
purchase is made that Investment Shares are already owned or that purchases
are being combined. The Trust will reduce the sales charge after it confirms
the purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $100,000 of
Investment Shares over the next 13 months, the sales charge may be reduced by
signing a letter of intent to that effect. This letter of intent includes a
provision for a sales charge adjustment depending on the amount actually
purchased within the 13-month period and a provision for the Trust's custodian
to hold 4.0% of the total amount intended to be purchased in escrow (in shares
of a Fund) until such purchase is completed.
The amount held in escrow will be applied to the shareholder's account at the
end of the 13-month period unless the amount specified in the letter of intent
is not purchased. In this event, an appropriate number of escrowed shares may
be redeemed in order to realize the difference in the sales charge.
A letter of intent will not obligate the shareholder to purchase shares, but
if the shareholder does, each purchase during the period will be at the sales
charge applicable to the total amount intended to be purchased. This letter
may be dated as of a prior date to include any purchases made within the past
90 days.
REINVESTMENT PRIVILEGE. If Investment Shares in a Fund have been redeemed, the
shareholder has a one-time right, within 30 days, to reinvest the redemption
proceeds at the next-determined net asset value without any sales charge. The
Transfer Agent must be notified by the shareholder in writing or by his
financial institution of the reinvestment, in order to eliminate a sales
charge. If the shareholder redeems his shares in a Fund, there may be tax
consequences.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment
of Investment Shares on a regular basis in a minimum amount of $100 for each
Fund ($25 for directors, officers and employees of Bancshares or any of its
affiliates and their spouses and children under 21 years of age participating
in the Systematic Investment Program). Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account
at a Bancshares banking affiliate and invested in Fund shares at the net asset
value next determined after an order is received by the Transfer Agent, plus
the applicable sales charge. A shareholder may apply for participation in this
program by calling their Compass Brokerage, Inc. personal investment officer
or other authorized registered representative or the Transfer Agent.
25
<PAGE>
DIVIDENDS
Dividends for the Bond Fund are declared daily and paid monthly and for the
Equity Fund declared and paid monthly to shareholders of record. Dividends
will be reinvested automatically in additional shares on payment dates without
a sales charge unless cash payments are requested by writing to Compass, the
Trust or the Transfer Agent as appropriate.
CAPITAL GAINS
Net capital gains realized by a Fund, if any, will be distributed at least
once every twelve months and will be reinvested automatically in additional
shares on payment dates without a sales charge unless cash payments are
requested by writing to Compass, the Trust or the Transfer Agent as
appropriate.
EXCHANGE PRIVILEGE
- -------------------------------------------------------------------------------
INVESTMENT SHARES
Shareholders may exchange Investment Shares of a Fund for Investment Shares of
any other Expedition Fund (or Investment Service Shares of a money market
fund). Investment Shares of Funds with a sales charge may be exchanged at net
asset value for shares of other Funds with an equal sales charge or no sales
charge. Investment Shares of Funds with no sales charge acquired by direct
purchase or reinvestment of dividends on such shares may be exchanged for
shares of funds sold with a sales charge at net asset value, plus the
applicable sales charge imposed by the fund whose shares are being purchased.
Neither the Trust nor either of the Funds imposes any additional fees on
exchanges.
When an exchange is made from a Fund with a sales charge to a Fund with no
sales charge, the shares exchanged and additional shares which have been
purchased by reinvesting dividends on such shares retain the character of the
exchanged shares for purposes of exercising further exchange privileges; thus,
an exchange of such shares for shares of a fund with a sales charge would be
at net asset value.
Shareholders of Investment Shares who exercise this exchange privilege must
exchange shares having a net asset value of at least $1,000 ($25 for
directors, officers and employees of Bancshares or any of its affiliates and
their spouses and children under 21 years of age participating in the
Systematic Investment Program described above). Prior to any exchange, the
shareholder must receive a copy of the current prospectus of the participating
fund into which an exchange is to be made.
26
<PAGE>
Upon receipt of proper instructions and all necessary supporting documents,
Investment Shares submitted for exchange will be redeemed at the next-
determined net asset value. If the exchanging shareholder does not have an
account in the participating Fund whose shares are being acquired, a new
account will be established with the same registration, dividend and capital
gain options as the account from which shares are exchanged, unless otherwise
specified by the shareholder. In the case where the new account registration
is not identical to that of the existing account, a signature guarantee is
required. (See "Redeeming Shares--By Mail.") Exercise of this privilege is
treated as a redemption and new purchase for federal income tax purposes and,
depending on the circumstances, a short or long-term capital gain or loss may
be realized. The Trust reserves the right to modify or terminate the exchange
privilege at any time. Shareholders would be notified within 60 days prior to
any modification or termination.
EXCHANGE BY TELEPHONE. Shareholders may provide instructions for exchanges
between participating Funds by calling the Transfer Agent at 1-800-992-2085.
In addition, investors may exchange shares by calling their Compass Brokerage,
Inc. personal investment officer or authorized registered representative
directly.
An authorization form permitting the Trust to accept telephone exchange
requests must first be completed. It is recommended that investors request
this privilege at the time of their initial application. If not completed at
the time of initial application, authorization forms and information on this
service can be obtained through the Transfer Agent, Compass Brokerage, Inc. or
a Compass Brokerage, Inc. personal investment officer or other authorized
registered representative.
Shares may be exchanged by telephone only between fund accounts having
identical shareholder registrations. Exchange instructions given by telephone
may be electronically recorded. If reasonable procedures are not followed by
the Trust, it may be liable for losses due to unauthorized or fraudulent
telephone instructions.
Telephone exchange instructions must be received before 3:00 p.m. (Central
time) for shares to be exchanged the same day.
WRITTEN EXCHANGE. A shareholder wishing to make an exchange of Investment
Shares by written request may do so by sending it to: The Expedition Funds,
P.O. Box 8010, Boston, Massachusetts 02266-8010. In addition, an investor may
exchange shares by sending a written request to their Compass Brokerage, Inc.
personal investment officer or authorized registered representative directly.
27
<PAGE>
INSTITUTIONAL SHARES
Shareholders of Institutional Shares interested in exchanging their shares
should contact their Compass Asset Management division or affiliate.
REDEEMING SHARES
- -------------------------------------------------------------------------------
INVESTMENT SHARES
Each Fund redeems shares at their net asset value next determined after
receipt of the redemption request. Redemptions will be made on days on which
the Funds compute their net asset values. A redemption request received after
a Fund's net asset value has been determined will be priced at the next
Business Day's net asset value. Telephone or written requests for redemptions
of Investment Shares must be received in proper form and can be made through a
Compass Brokerage, Inc. personal investment officer or authorized registered
representative or through the Transfer Agent.
BY TELEPHONE. Shareholders may redeem Investment Shares of the Funds by
telephoning 1-800-992-2085. An authorization form permitting telephone
redemption requests must be completed. For calls received before 3:00 p.m.
(Central time), proceeds will normally be deposited into the shareholder's
account, if any, at a Bancshares banking affiliate or a check will be mailed
to the address of record on the next business day. In no event will it take
more than seven days for proceeds to be wired or a check to be mailed after a
proper request for redemption has been received. If, at any time, the Trust
shall determine it necessary to terminate or modify this method of redemption,
shareholders would be promptly notified.
None of Compass Asset Management, Compass Brokerage, Inc., the Transfer Agent
nor the Trust will be responsible for any loss, liability, cost or expense for
acting upon wire or telephone instructions that it reasonably believes to be
genuine. The Trust, Compass Asset Management, Compass Brokerage, Inc., and the
Transfer Agent will each employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, including requiring a form
of personal identification prior to acting upon instructions received by
telephone and recording telephone instructions. Such procedures may include
taping of telephone conversations.
If market conditions are extraordinarily active or other extraordinary
circumstances exist, and you experience difficulties placing redemption orders
by telephone, you may consider placing your order by mail.
28
<PAGE>
BY MAIL. Shareholders may redeem Investment Shares of a Fund by sending a
written request. The written request should include the shareholder's name,
the Fund name, the account number, and the share or dollar amount requested.
Investors redeeming Investment Shares through the Transfer Agent should mail
written requests to: The Expedition Funds--Investment Shares, P.O. Box 8010,
Boston, Massachusetts 02266-8010.
SIGNATURES. Shareholders requesting a redemption of any amount to be sent to
an address other than that on record or a redemption payable other than to the
shareholder of record must have their signatures guaranteed by:
. a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund ("BIF"), which is administered by the FDIC;
. a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
. a savings bank or savings association whose deposits are insured by the
Savings Association Insurance Fund ("SAIF"), which is administered by
the FDIC; or
. any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934.
The Trust does not accept signatures guaranteed by a notary public.
The Trust and the Transfer Agent adopted standards for accepting signature
guarantees from the above institutions. The Trust may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. Redemptions of $40,000 or greater for a Fund must
be in writing and a signature guarantee must accompany the request. The Trust
and the Transfer Agent reserve the right to amend these standards at any time
without notice.
Normally, a check for the proceeds is mailed to the shareholder within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
INSTITUTIONAL SHARES
To redeem Institutional Shares a customer may contact their Compass Asset
Management division or affiliate.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders of Investment Shares who desire to receive monthly or quarterly
payments of a predetermined amount may take advantage of the Systematic
Withdrawal Program. Under this program, Investment Shares are redeemed to
provide for periodic withdrawal payments in an amount
29
<PAGE>
directed by the shareholder. Depending upon the amount of the withdrawal
payments, the amount of dividends paid and capital gains distributions, and
the fluctuation of the net asset value of shares redeemed under this program,
redemptions may reduce, and eventually deplete, the shareholder's investment
in a Fund. For this reason, payments under this program should not be
considered as yield or income on the shareholder's investment in a Fund. To be
eligible to participate in this program, a shareholder must have invested at
least $10,000 in a Fund (at current offering price).
A shareholder may apply for participation in this program through Compass
Brokerage, Inc. or the Transfer Agent. Due to the fact that shares are sold
with a sales charge, it is not advisable for shareholders to purchase shares
while participating in this program.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Trust may
redeem shares in any Investment Shares account and pay the proceeds to the
shareholder if the account balance falls below the required minimum value of
$1,000 ($25 for directors, officers and employees of Bancshares or any of its
affiliates (and their spouses and children under 21 years of age)
participating in the Systematic Investment Program described above). Before
Investment Shares are redeemed to close an account, the shareholder is
notified in writing and allowed 30 days to purchase additional shares to meet
the minimum requirement. These requirements do not apply, however, if the
balance falls below the above-stated minimum because of changes in a Fund's
net asset value.
SHAREHOLDER INFORMATION
- -------------------------------------------------------------------------------
VOTING RIGHTS
Each share of a Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights, except that in matters affecting only a
particular portfolio or class, only shares of that portfolio or class are
entitled to vote.
As used in this Prospectus, a "vote of a majority of the outstanding shares"
of a Fund means, with respect to the approval of an investment advisory
agreement, sub-advisory agreement, a change in a fundamental investment
limitation or with respect to a material increase in 12b-1 distribution costs,
the lesser of (a) more than 50% of the outstanding shares of a Fund, or (b) at
least 67% of the shares of a Fund present at a meeting at which the
30
<PAGE>
holders of more than 50% of the outstanding shares of such Fund are
represented in person or by proxy.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust or a Fund's operation and for the election of Trustees
under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting. A special meeting of the shareholders shall be called by the Trustees
upon the written request of shareholders owning at least 10% of the Trust's
outstanding shares.
As of January 16, 1998, Compass Bank owned 80.18% of the Bond Fund's shares;
and Compass Bank owned 97.61% of the Equity Fund's shares. Each of the
foregoing interests is considered a controlling interest as defined by the
Investment Company Act of 1940.
EFFECT OF BANKING LAWS
- -------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently
prohibit a bank holding company registered under the Bank Holding Company Act
of 1956 or any affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company continuously engaged in the issuance
of its shares, and from issuing, underwriting, selling or distributing
securities in general. Such laws and regulations do not prohibit such a
holding company or affiliate from acting as investment adviser, transfer
agent, or custodian to such an investment company or from purchasing shares of
such a company as agent for and upon the order of their customers.
The Adviser, Bancshares and certain of Bancshares' affiliates are subject to
certain such banking laws and regulations. They believe, based on the advice
of their counsel, that they may perform those services for the Funds
contemplated by any existing agreement entered into with the Trust without
violating those laws or regulations. Changes in either federal or state
statutes and regulations relating to the permissible activities of banks and
their subsidiaries or affiliates, as well as further judicial or
administrative decisions or interpretations of present or future statutes and
regulations, could prevent these entities from continuing to perform all or a
part of the above services. If this happens, the Trustees would consider
alternative means of continuing available services. It is not expected that
shareholders would suffer any adverse financial consequences as a result of
any of these occurrences.
31
<PAGE>
TAX INFORMATION
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX
A Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and
to receive the special tax treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal income tax
on any dividends and other distributions. This applies whether dividends and
distributions are received in cash or as additional shares.
STATE AND LOCAL TAXES. Shareholders are urged to consult their own tax
advisers regarding the status of their accounts under state and local tax
laws.
PERFORMANCE INFORMATION
- -------------------------------------------------------------------------------
From time to time, each Fund advertises its total return and the Bond Fund
advertises its yield.
Total return represents the change, over a specified period of time, in the
value of an investment in a Fund after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Bond Fund is calculated by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by the
Fund over a thirty-day period by the maximum offering price per share of the
Fund on the last day of the period. This number is then annualized using semi-
annual compounding. The yield does not necessarily reflect income actually
earned by the Fund and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
Total return and yield will be calculated separately for Investment Shares and
Institutional Shares. Because Investment Shares are subject to sales charges
and differing expense levels, the total return and yield for Institutional
Shares, for the same period, ordinarily will exceed that of Investment Shares.
From time to time, advertisements for the Funds may refer to ratings,
rankings, and other information in certain financial publications and/or
compare the Funds' performance to certain indices.
32
<PAGE>
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
The Expedition Funds One Freedom Valley Road
Oaks, Pennsylvania 19456
- ------------------------------------------------------------------------------------------------------------
Distributor
SEI Investments Distribution Co. One Freedom Valley Road
Oaks, Pennsylvania 19456
- ------------------------------------------------------------------------------------------------------------
Investment Adviser and Custodian
Compass Bank 15 S. 20th Street
Birmingham, Alabama 35233
- ------------------------------------------------------------------------------------------------------------
Transfer Agent and Servicing Agent
Transfer Agent Servicing Agent
State Street Bank and Trust Company Boston Financial Data Services, Inc.
225 Franklin Street Two Heritage Drive
Boston, Massachusetts 02110 Quincy, Massachusetts 02171
- ------------------------------------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
- ------------------------------------------------------------------------------------------------------------
Counsel
Morgan, Lewis & Bockius LLP 1800 M Street, N.W.
Washington, D.C. 20036
- ------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
THE EXPEDITION
EQUITY FUND
THE EXPEDITION
BOND FUND
PROSPECTUS
BOTH PORTFOLIOS OF THE EXPEDITION FUNDS,
AN OPEN-END, MANAGEMENT
INVESTMENT COMPANY
FEBRUARY 1, 1998
---------------
SEI Investments Distribution Co.
- -----------------------------------------
Distributor
COMPASS BANK
- -------------------------------------
Investment Adviser
[LOGO OF PRINTED ON RECYCLED PAPER APPEARS HERE]
<PAGE>
THE EXPEDITION MONEY MARKET FUND
(A PORTFOLIO OF THE EXPEDITION FUNDS)
INVESTMENT SERVICE SHARES
PROSPECTUS
The Investment Service Shares ("the Shares") offered by this prospectus
represent interests in the portfolio known as The Expedition Money Market Fund
(the "Fund"). The Fund is one of a series of investment portfolios in The
Expedition Funds (the "Trust"), an open-end, management investment company (a
mutual fund).
THE FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE;
THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
The investment objective of the Fund is to provide current income consistent
with stability of principal. The Fund pursues this investment objective by
investing in a variety of high-quality money market instruments maturing in
thirteen months or less.
Shareholders can invest in or redeem Shares at any time without charge or
penalty imposed by the Fund.
Compass Bank, an Alabama state banking corporation, professionally manages the
Fund's portfolio.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
COMPASS BANK, COMPASS BANCSHARES, INC. OR ANY OF ITS AFFILIATES, OR OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY COMPASS BANK, COMPASS BANCSHARES, INC.
OR ANY OF ITS AFFILIATES, OR BY ANY BANK, AND ARE NOT OBLIGATIONS OF,
GUARANTEED BY OR INSURED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT
AGENCY.
Compass Bank, an Alabama banking corporation, serves as investment adviser and
custodian of the Fund, and Compass Bank and certain of its affiliates provide
certain other services to the Fund, for which services Compass Bank and/or its
affiliates will be compensated. SEI Investments Distribution Co., which is not
affiliated with Compass Bank, is the sponsor and serves as distributor of the
Fund.
This prospectus contains the information you should read and know before you
invest in Shares of the Fund. Keep this prospectus for future reference.
The Trust has also filed a Statement of Additional Information dated February
1, 1998 with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information free of charge by calling 1-800-992-2085. To obtain
other information or make inquiries about the Fund, contact the Fund at the
address listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated February 1, 1998
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 4
- --------------------------------------------------------------------------------
GENERAL INFORMATION 6
- --------------------------------------------------------------------------------
INVESTMENT INFORMATION 6
- --------------------------------------------------------------------------------
Investment Objective 6
Investment Policies 6
Investment Limitations 11
FUND INFORMATION 12
- --------------------------------------------------------------------------------
Management of the Fund 12
Distribution of Investment Service Shares 13
Administration of the Fund 14
NET ASSET VALUE 14
- --------------------------------------------------------------------------------
INVESTING IN INVESTMENT SERVICE SHARES 15
- --------------------------------------------------------------------------------
Share Purchases 15
What Shares Cost 16
Shareholder Accounts 16
Dividends 16
Capital Gains 17
Systematic Investment Program 17
Retirement Plans 17
EXCHANGE PRIVILEGE 17
- --------------------------------------------------------------------------------
REDEEMING INVESTMENT SERVICE SHARES 19
- --------------------------------------------------------------------------------
Systematic Withdrawal Program 21
Accounts with Low Balances 21
SHAREHOLDER INFORMATION 22
- --------------------------------------------------------------------------------
Voting Rights 22
EFFECT OF BANKING LAWs 22
- --------------------------------------------------------------------------------
TAX INFORMATION 23
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION 24
- --------------------------------------------------------------------------------
OTHER CLASSES OF SHARES 24
- --------------------------------------------------------------------------------
ADDRESSES 25
- --------------------------------------------------------------------------------
I
<PAGE>
SUMMARY OF FUND EXPENSES
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................................... None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price).................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable)........................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)....... None*
Exchange Fee............................................................. None
*Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C>
Management Fee (after waiver) (1) ....................................... 0.18%
Shareholder Servicing Fee ............................................... 0.25%
Total Other Expenses (2)................................................. 0.25%
Total Operating Expenses (1),(3)..................................... 0.68%
</TABLE>
(1) The management fee has been reduced to reflect a voluntary waiver. Absent
this waiver, the maximum management fee is .40%. The Adviser has
voluntarily agreed to waive all or a portion of its fee to limit Total
Operating Expenses to not more than .68%. The Adviser reserves the right,
in its sole discretion, to terminate these voluntary fee waivers at any
time.
(2) The Administrator has agreed to waive, on a voluntary basis, a portion of
its fees. The Administrator reserves the right to terminate its waiver at
any time in its sole discretion. Absent such waiver, Total Other Expenses
for the Fund would be .30%. The Trust, either directly or through its
transfer agent, may enter into arrangements with recordkeepers and others
who provide services to shareholders, and may compensate such entities for
their services. Any such arrangements, if entered into, may increase the
Fund's "Total Other Expenses."
(3) Absent the voluntary waivers and reimbursements described above, Total
Operating Expenses for the Fund would be .95%.
1
<PAGE>
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE INVESTMENT SERVICE SHARES
OF THE FUND WILL BEAR, EITHER DIRECTLY OR INDIRECTY. FOR MORE COMPLETE
DESCRIPTIONS OF THE VARIOUS COSTS AND EXPENSES, SEE "FUND INFORMATION" AND
"INVESTING IN INVESTMENT SERVICE SHARES."
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment assuming (1) a 5% annual
return and (2) redemption at the end of each
time period. The Fund charges no redemption
fee........................................... $ 7 $22 $38 $85
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
2
<PAGE>
[This Page Intentionally Left Blank]
3
<PAGE>
THE EXPEDITION MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--
INVESTMENT SERVICE SHARES
- -------------------------------------------------------------------------------
The following information has been audited by Deloitte & Touche LLP, the
Trust's independent auditors, as indicated in their report dated December 5,
1997 on the Trust's financial statements as of October 31, 1997 which are
incorporated by reference into the Trust's Statement of Additional
Information. This table should be read in conjunction with the Trust's
financial statements and related notes thereto. Additional performance
information is set forth in the Trust's 1997 Annual Report to Shareholders and
is available upon request and without charge by calling 1-800-992-2085.
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
DISTRIBU-
NET ASSET TIONS NET ASSET
VALUE, NET FROM NET VALUE,
BEGINNING INVESTMENT INVESTMENT END TOTAL
OF PERIOD INCOME INCOME OF PERIOD RETURN
--------- ---------- ---------- --------- ------
<S> <C> <C> <C> <C> <C>
Investment Service Shares(/1/)
1997(/2/) $1.00 0.08 (0.08) $1.00 4.97%
1996 1.00 0.04 (0.04) 1.00 4.95%
1995 1.00 0.05 (0.05) 1.00 5.51%
1994 1.00 0.03 (0.03) 1.00 3.29%
1993 1.00 0.03 (0.03) 1.00 2.84%
1992 1.00 0.04 (0.04) 1.00 4.07%
1991 1.00 0.06 (0.06) 1.00 6.44%
1990(/3/) 1.00 0.06 (0.06) 1.00 5.89%
</TABLE>
- -----------
* Annualized.
(1) During 1997, the Starburst Money Market Trust Shares were renamed the
Expedition Money Market Investment Service Shares.
(2) Prior to June 9, 1997, the Investment Service Shares were not charged 12b-
1 fees or shareholder servicing fees.
(3) Commenced operations on February 5, 1990.
4
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
NET
RATIO OF RATIO OF RATIO INVESTMENT
NET EXPENSES NET OF EXPENSES INCOME TO
ASSETS TO INVESTMENT TO AVERAGE AVERAGE
END OF AVERAGE INCOME NET ASSETS NET ASSETS
PERIOD NET TO AVERAGE (EXCLUDING (EXCLUDING
(000) ASSETS NET ASSETS WAIVERS) WAIVERS)
-------- -------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
$147,651 0.73% 4.84% 0.85% 4.72%
136,666 0.71% 4.85% 0.71% 4.85%
141,434 0.56% 5.38% 0.66% 5.28%
158,367 0.75% 3.26% 0.79% 3.22%
131,508 0.70% 2.83% 0.70% 2.83%
187,394 0.64% 4.01% 0.65% 4.00%
212,997 0.62% 6.13% 0.67% 6.08%
117,716 0.58%* 7.80%* 0.68%* 7.70%*
</TABLE>
5
<PAGE>
GENERAL INFORMATION
- -------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated August 7, 1989. The Declaration of Trust permits
the Trust to offer separate series of shares of beneficial interest
representing interests in separate portfolios of securities. The shares of
beneficial interest in any one portfolio may be offered in separate classes.
As of the date of this prospectus, the Board of Trustees (the "Trustees") has
established two classes of shares of the Fund, Institutional Shares and
Investment Service Shares. This prospectus relates only to Investment Service
Shares ("Shares") of the Expedition Money Market Fund. The Trust offers three
other portfolios: The Expedition Tax-Free Money Market Fund (which has not
commenced operations as of the date of this Prospectus), The Expedition Equity
Fund and The Expedition Bond Fund. Information regarding the Institutional
Shares of the Fund and the Trust's other portfolios is contained in separate
prospectuses which may be obtained by calling 1-800-992-2085.
Shares of the Fund are primarily designed for investors who desire a
convenient means of accumulating an interest in a professionally managed
portfolio limited to money market instruments maturing in thirteen months or
less.
The Fund attempts to stabilize the value of a Share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income consistent
with stability of principal. The investment objective cannot be changed
without approval of shareholders. While there is no assurance that the Fund
will achieve its investment objective, it endeavors to do so by complying with
the diversification and other requirements of Rule 2a-7 under the Investment
Company Act of 1940 which regulates money market mutual funds and by following
the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing primarily in a
portfolio of money market instruments maturing in thirteen months or less. The
average maturity of money market instruments in the Fund's portfolio,
6
<PAGE>
computed on a dollar-weighted basis, will be 90 days or less. Unless indicated
otherwise, the investment policies set forth below may be changed by the
Trustees without the approval of shareholders. Shareholders will be notified
before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests in high quality money market
instruments that are either rated in the highest short-term rating category by
one or more nationally recognized statistical rating organizations or of
comparable quality to securities having such ratings. Examples of these
instruments include, but are not limited to:
. debt obligations issued by U.S. and foreign corporations, including
variable rate demand notes;
. commercial paper (including Canadian Commercial Paper ("CCP") and
Europaper);
. certificates of deposit, demand and time deposits, bankers' acceptances
and other instruments of domestic and foreign banks and other deposit
institutions ("Bank Instruments");
. short-term credit facilities, such as demand notes;
. debt obligations issued by Canada and other foreign nations, as well as
by supranational entities such as the World Bank;
. asset-backed and mortgage-backed securities, including collateralized
mortgage obligations ("CMOs");
. obligations issued or guaranteed as to payment of principal and
interest by the U.S. Government or one of its agencies or
instrumentalities ("Government Securities"); and
. other money market instruments, including shares of other money market
funds.
The Fund invests only in instruments denominated and payable in U.S. dollars.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term corporate
debt instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at par.
The interest rate may float or be adjusted at regular intervals (ranging from
daily to annually), and is normally based on a published interest rate or
interest rate index.
OBLIGATIONS OF SUPRANATIONAL ENTITIES. Supranational entities are entities
established through the joint participation of several governments,
7
<PAGE>
and include the Asian Development Bank, Inter-American Development Bank,
International Bank for Reconstruction and Development (World Bank), African
Development Bank, European Economic Community, European Investment Bank and
Nordic Investment Bank. The governmental members, or "stockholders," usually
make initial capital contributions to the supranational entity and in many
cases are committed to make additional capital contributions if the
supranational entity is unable to repay its borrowings.
BANK INSTRUMENTS. The Fund only invests in Bank Instruments either issued by
an institution having capital, surplus and undivided profits over $100 million
or insured by the Bank Insurance Fund ("BIF") or the Savings Association
Insurance Fund ("SAIF"). Bank Instruments may include Canadian Time Deposits,
Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit
("Yankee CDs") and Eurodollar Time Deposits ("ETDs").
SHORT-TERM CREDIT FACILITIES. Demand notes are short-term borrowing
arrangements between a corporation and an institutional lender (such as the
Fund) payable upon demand by either party. The notice period for demand
typically ranges from one to seven days, and the party may demand full or
partial payment. The Fund may also enter into, or acquire participations in,
short-term revolving credit facilities with corporate borrowers. Demand notes
and other short-term credit arrangements usually provide for floating or
variable rates of interest.
ASSET-BACKED SECURITIES. Asset-backed securities are securities issued by
special purpose entities whose primary assets consist of a pool of loans or
accounts receivable. The securities may take the form of beneficial interests
in a special purpose trust, limited partnership interests or commercial paper
or other debt securities issued by a special purpose corporation. Although the
securities often have some form of credit or liquidity enhancement, payments
on the securities depend predominately upon collections of the loans and
receivables held by the issuer.
COMMERCIAL PAPER; SECTION 4(2) PAPER. Commercial paper is unsecured short-term
promissory notes issued by municipalities, corporations and other entities
with maturities up to nine months. The Fund may invest in commercial paper
issued in reliance on the exemption from registration afforded by Section 4(2)
of the Securities Act of 1933. Section 4(2) paper is restricted as to
disposition under federal securities law and is generally sold to
institutional investors, such as the Fund, who agree that they are purchasing
the paper for investment purposes and not with a view to public distribution.
Section 4(2) paper is normally resold to other institutional investors like
the Fund, thus providing liquidity.
8
<PAGE>
PARTICIPATION INTERESTS. The Fund may purchase participation interests from
financial institutions such as commercial banks, savings associations, and
insurance companies, or from single-purpose, stand-alone finance subsidiaries
or trusts of such institutions, or from other special-purpose entities.
Participation interests give the Fund an undivided fractional ownership
interest in debt obligations. The debt obligations may include corporate loans
or debt securities or other types of debt obligations.
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, balloon 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. Mortgage-related securities eligible for purchase by the
Fund may include collateralized mortgage obligations ("CMOs"). 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 series of a CMO in a variety of ways. Principal
payments on the underlying mortgage assets may cause CMOs to be retired
substantially earlier then their stated maturities or final distribution
dates, resulting in a loss of all or part of any premium paid.
U.S. GOVERNMENT OBLIGATIONS. 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 securities), others are supported by the right
of the issuer to borrow from the Treasury (e.g., Federal Farm Credit Bank
securities), while still others are supported only by the credit of the
instrumentality (e.g., Fannie Mae securities). Guarantees of principal by
agencies or instrumentalities of the U.S. Government may be a guarantee of
payment at the maturity of the obligation, however, in the event of a default
prior to maturity there may not be a market and thus no means of realizing on
the
9
<PAGE>
obligation prior to maturity. Guarantees as to the timely payment of principal
and interest do not extend to the value or yield of these securities nor to
the value of the Fund's shares.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S.
Government securities or other securities to the Fund and agree at the time of
sale to repurchase them at a mutually agreed upon time and price within one
year from the date of acquisition. To the extent that the original seller does
not repurchase the securities from the Fund, the Fund could receive less than
the repurchase price on any sale of such securities.
DEMAND FEATURES. The Fund may acquire securities that are subject to demand
features to purchase the securities at their principal amount (usually with
accrued interest) within a fixed period following a demand by the Fund. The
demand feature may be issued by the issuer of the underlying securities, a
dealer in the securities or by another third party, and may not be transferred
separately from the underlying security. The bankruptcy, receivership or
default by the issuer of the demand feature, or a default on the underlying
security or other event that terminates the demand feature before its
exercise, will adversely affect the liquidity of the underlying security.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted and
illiquid securities. Restricted securities are any securities in which the
Fund may otherwise invest pursuant to its investment objective and policies
but which are subject to restriction on resale under federal securities law.
Illiquid securities are securities that may not be sold at approximately their
carrying value in seven days or less. The Fund will limit investments in
illiquid securities, including restricted securities not determined by the
Trustees to be liquid, non-negotiable time deposits, and repurchase agreements
providing for settlement in more than seven days after notice, to 10% of its
net assets.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term basis up to one-third
of the value of its total assets to institutional borrowers of securities. The
Fund will only enter into loan arrangements with broker/dealers, banks, or
other institutions which Compass Bank (the "Adviser") has determined are
creditworthy under guidelines established by the Trustees. There is the risk
that when lending portfolio securities, the securities may not be available to
the Fund on a timely basis, and the Fund may, therefore, lose the opportunity
to sell the securities at a desirable price. In addition, in the event that a
borrower of securities would file for bankruptcy or become
10
<PAGE>
insolvent, disposition of the securities may be delayed pending court action.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions are
arrangements in which the Fund purchases securities with payment and delivery
scheduled for a future time. The seller's failure to complete these
transactions may cause the Fund to miss a price or yield considered to be
advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may vary
from the purchase prices.
CONCENTRATION OF INVESTMENTS. The Fund will not invest 25% or more of its
total assets in any one industry except that the Fund may invest 25% or more
of its total assets in obligations issued by U.S. banks and by U.S. branches
of foreign banks.
FOREIGN SECURITIES RISK. ECDs, ETDs, Yankee CDs, CCPs, Canadian Time Deposits,
and Europaper are subject to somewhat different risks than domestic
obligations of domestic banks. Examples of these risks include international,
economic and political developments, foreign governmental restrictions that
may adversely affect the payment of principal or interest, foreign withholding
or other taxes on interest income, difficulties in obtaining or enforcing a
judgment against the issuing bank, and the possible impact of interruptions in
the flow of international currency transactions. Different risks may also
exist for Canadian Time Deposits, ECDs, ETDs and Yankee CDs because the banks
issuing these instruments, or their domestic or foreign branches, are not
necessarily subject to the same regulatory requirements that apply to domestic
banks, such as reserve requirements, loan limitations, examinations,
accounting, auditing, recordkeeping and the public availability of
information. These factors will be carefully considered by the Adviser in
selecting investments for the Fund.
INVESTMENT LIMITATIONS
The Fund will not:
. borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the
Fund may borrow up to one-third of the value of its total assets and
pledge up to 15% of the value of its total assets to secure such
borrowings; or
11
<PAGE>
. with respect to 75% of the value of its total assets, invest more than
5% of the value of its total assets in the securities of any one
issuer, other than cash, cash items or securities issued or guaranteed
by the government of the United States or its agencies or
instrumentalities and repurchase agreements collateralized by such
securities. However, to the extent that the diversification
requirements imposed by Rule 2a-7 are more stringent, the Fund will
follow the dictates of Rule 2a-7.
The above investment limitations cannot be changed without shareholder
approval.
FUND INFORMATION
- -------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Board of Trustees is responsible for managing the
business affairs of the Trust and for exercising all of the powers of the
Trust except those reserved for the shareholders.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust
and subject to direction by the Trustees, investment decisions for the Fund
are made by Compass Bank, an Alabama state banking corporation that is a
Federal Reserve System member bank (the "Adviser"). The Adviser continually
conducts investment research and supervision for the Fund and is responsible
for the purchase or sale of portfolio instruments, for which it receives an
annual fee from the assets of the Fund.
ADVISORY FEES. The Adviser is entitled to receive an annual investment
advisory fee equal to .40% of the Fund's average daily net assets payable
from the assets of the Fund. The Adviser may choose to voluntarily waive
or reimburse a portion of its fee. The Adviser reserves the right, in its
sole discretion, to terminate these voluntary waivers at any time.
ADVISER'S BACKGROUND. The Adviser is a wholly-owned subsidiary of Compass
Bancshares, Inc. ("Bancshares"), a bank holding company organized under
the laws of Delaware. Through its subsidiaries and affiliates,
Bancshares, the 54th largest bank holding company in the United States in
terms of total assets as of June 30, 1997, offers a full range of
financial services to the public including commercial lending, depository
services, cash management, brokerage services, retail banking, credit
card services, investment advisory services and trust services.
12
<PAGE>
As of December 31, 1997, the Adviser offered a broad range of commercial
banking services. The Adviser has served as investment adviser to mutual
funds since February 5, 1990. Through the Compass Asset Management Group,
the Adviser and certain other affiliates of Bancshares provide investment
advisory and management services for the assets of individuals, pension
and profit sharing plans, endowments and foundations. As of December 31,
1997, the Compass Asset Management Group had approximately $7.7 billion
under administration ($5.08 billion of which was under administration by
the Adviser), of which the Compass Asset Management Group had discretion
over approximately $2.8 billion ($1.8 billion of which was comprised of
assets of accounts over which the Adviser exercised discretion).
As part of its regular banking operations, the Adviser may make loans to
public companies. Thus, it may be possible, from time to time, for the
Fund to hold or acquire the securities of issuers which are also lending
clients of the Adviser. The lending relationship will not be a factor in
the selection of securities.
DISTRIBUTION OF INVESTMENT SERVICE SHARES
SEI Investments Distribution Co. (the "Distributor") is the principal
distributor for Shares of the Fund. It is a wholly-owned subsidiary of SEI
Investments Company ("SEI Investments") and is the principal distributor for a
number of investment companies. In connection with the sale of Shares, the
Distributor may, from time to time, offer certain items of nominal value to
any shareholder or investor. The Fund reserves the right to reject any
purchase request.
SHAREHOLDER SERVICE PLAN. Pursuant to the provisions of a shareholder service
plan (the "Plan"), the Fund will pay to the Distributor an amount computed at
an annual rate of .25% of the average daily net asset value of the Fund's
Investment Service Shares.
The Distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers and broker/dealers, including
the Adviser and various other affiliates of Bancshares, to provide shareholder
and/or administrative services as agents for their clients or customers who
beneficially own shares of the Fund. Administrative services may include, but
are not limited to, the following functions: providing office space,
equipment, telephone facilities, and various personnel including clerical,
supervisory, and computer personnel as necessary or beneficial to establish
and maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic
13
<PAGE>
investments of client account cash balances; answering routine client
inquiries regarding the Fund; assisting clients with changing dividend
options, account designations and addresses; and providing such other services
as the Fund reasonably requests. The schedules of fees and the basis upon
which fees will be paid will be determined, from time to time, by the
Distributor.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. SEI Fund Resources (the "Administrator"), a wholly-
owned subsidiary of SEI Investments, provides the Fund with certain
administrative personnel and services necessary to operate the Fund. Such
services include shareholder servicing and certain legal and accounting
services. For these services, the Administrator is entitled to a fee which is
calculated daily and paid monthly at an annual rate of .20% of the Fund's
average daily net assets payable from the assets of the Fund. The
Administrator may choose to voluntarily waive a portion of its fee. The
Administrator reserves the right, in its sole discretion, to terminate these
voluntary waivers at any time.
TRANSFER AGENT/SERVICING AGENT. State Street Bank and Trust Company (the
"Transfer Agent") and Boston Financial Data Services, Inc. act as transfer
agent and servicing agent, respectively, for the Trust, and are entitled to
compensation for such services payable from the assets of the Fund.
CUSTODIAN. Compass Bank, an Alabama state banking corporation, which is also
the Adviser, is custodian for the securities and cash of the Fund for which it
receives an annual fee of .02% of the Fund's daily net assets payable from the
assets of the Fund and is reimbursed for its out of pocket expenses.
NET ASSET VALUE
- -------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of its Shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net
asset value per Share is determined by adding the interest of the Shares in
the value of all securities and other assets of the Fund, subtracting the
interest of the Shares in the liabilities of the Fund and those attributable
to Shares, and dividing the remainder by the total number of Shares
outstanding. The Fund, of course, cannot guarantee that its net asset value
will always remain at $1.00 per Share.
The net asset value is determined at 12:00 noon (Central time) and as of the
close of regular trading on the New York Stock Exchange ("NYSE"),
14
<PAGE>
normally, 3:00 p.m. (Central time), on days on which both the NYSE and the
Federal Reserve wire system are open for business.
INVESTING IN INVESTMENT SERVICE SHARES
- -------------------------------------------------------------------------------
SHARE PURCHASES
Shares are available through the Asset Management Group of Compass Bank, or
through other affiliates of Bancshares or divisions of affiliates of
Bancshares providing fiduciary, trust, private banking, agency, custody and
similar services. Investment Service Shares also may be purchased through
divisions and affiliates of Compass Bank and other affiliates of Bancshares
providing brokerage and investment services, including Compass Brokerage,
Inc., or through the Transfer Agent. Investors may purchase Shares of the Fund
on each Business Day. The minimum initial investment is $1,000, except for an
IRA account, which requires a minimum initial investment of $500, and except
that the minimum initial investment is $25 in the case of directors, officers
and employees of Bancshares and its affiliates (and their spouses and children
under 21 years of age) participating in the Systematic Investment Program
discussed below. Subsequent investments must be in amounts of at least $100
($25 in the case of directors, officers and employees of Bancshares and its
affiliates (or their spouses or children under 21 years of age) participating
in the Systematic Investment Program discussed below). The Trust reserves the
right to reject any purchase request.
Compass Bank, Compass Brokerage Inc. and other affiliates of Bancshares and
divisions of any affiliate of Bancshares through which Shares are available
sometimes are referred to below as "Compass."
To purchase Shares, customers of the Compass Asset Management Group or of the
trust division of a Bancshares banking affiliate or of a Bancshares trust
company affiliate (hereinafter sometimes referred to as "Compass Asset
Management") should contact the Asset Management Group or such trust division
or trust company by telephoning Compass Bank.
Other customers may contact a Compass Brokerage, Inc. personal investment
officer or other authorized registered representative or the Transfer Agent by
telephoning 1-800-992-2085. Payment may be made either by check or wire
transfer of federal funds or by debiting a customer's account at a Bancshares
banking affiliate.
To purchase by check, the check must be included with the order and made
payable to "The Expedition Money Market Fund--Investment Service Shares."
Purchase orders received after the Fund's net asset value has been
15
<PAGE>
determined will be priced at the next Business Day's net asset value. Orders
are considered received after payment by check is converted into federal
funds. Third party checks, credit cards, credit card checks and cash will not
be accepted. When purchases are made by check, redemptions will not be allowed
until the investment being redeemed has been in the account 15 business days.
When payment is made through wire transfer of federal funds, the order is
considered received immediately upon receipt of the wire. Payment by wire must
be received before the Fund calculates its net asset value, normally 3:00 p.m.
(Central time). Prior to purchasing by wire, bank customers should call a
Compass Brokerage, Inc. personal investment officer or other authorized
registered representative or the Transfer Agent prior to 1:00 p.m. (Central
time). Federal funds should be wired as follows: State Street Bank & Trust Co.
ABA #011000028 for credit to DDA #9905-303-5, Further credit to: The
Expedition Money Market Fund--Investment Service Shares; Re: (Shareholder name
and account number). Shares cannot be purchased by Federal Reserve wire on
days when the NYSE or the Federal Reserve is closed.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund.
SHAREHOLDER ACCOUNTS
Share certificates are not issued. Shares sold to a Compass Asset Management
division or affiliate acting in a fiduciary, advisory, custodial, agency, or
similar capacity on behalf of customers may be held of record by such Compass
Asset Management division or affiliate. Beneficial ownership of Shares are
recorded by the Compass Asset Management division or affiliate and reflected
in the account statements provided by such division or affiliate to customers,
and reports of purchases and redemptions of Shares by Compass Asset Management
divisions or affiliates on behalf of customers will be provided periodically
by such division or affiliate to such customers.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional Shares unless cash payments are
requested by shareholders in writing to the Transfer Agent or Compass as
appropriate. Share purchase orders received by the Fund before 1:00 p.m
(Central time) earn dividends that day.
16
<PAGE>
CAPITAL GAINS
Net capital gains, realized by the Fund if any, could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If, for
some extraordinary reason, the Fund realizes net long-term capital gains, it
will distribute them at least once every twelve months and will be reinvested
automatically in additional shares unless cash payments are requested in
writing to the Transfer Agent or Compass as appropriate.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment
of Investment Service Shares on a regular basis in a minimum amount of $100
($25 for directors, officers and employees of Bancshares or its affiliates
(and their spouses and children under 21 years of age) participating in the
Systematic Investment Program). Under this program, funds may be automatically
withdrawn periodically from the shareholder's checking account at a Bancshares
banking affiliate and invested in Fund shares at the net asset value next
determined after an order is received. A shareholder may apply for
participation in this program by calling Compass Brokerage, Inc. or the
Transfer Agent at 1-800-992-2085.
RETIREMENT PLANS
Shares of the Fund can be purchased as an investment for retirement plans or
for IRA accounts. For further details, contact the Fund and consult a tax
adviser.
EXCHANGE PRIVILEGE
- -------------------------------------------------------------------------------
Shareholders may exchange Investment Service Shares of the Fund for Investment
Service Shares of The Expedition Tax-Free Money Market Fund (once it commences
operations) or for Investment Shares in The Expedition Equity Fund or The
Expedition Bond Fund. Shares of Funds with a sales charge may be exchanged at
net asset value for shares of other Funds with an equal sales charge or no
sales charge. Shares of Funds with no sales charge acquired by direct purchase
or reinvestment of dividends on such shares may be exchanged for shares of
Funds with a sales charge at net asset value, plus the applicable sales charge
imposed by the fund shares being purchased. Neither the Trust nor any of the
Funds imposes any additional fees on exchanges.
When an exchange is made from a fund with a sales charge to a fund with no
sales charge, the shares are exchanged and additional shares which have been
purchased by reinvesting dividends on such shares retain the
17
<PAGE>
character of the exchanged shares for purposes of exercising further exchange
privileges; thus, an exchange of such shares for shares of a fund with a sales
charge would be at net asset value.
Compass Asset Management customers wishing to exercise exchange privileges
should contact their Compass Asset Management division or affiliate. Other
Shareholders should contact Compass Brokerage, Inc. or other authorized
registered representative or the Transfer Agent as described below.
Shareholders who exercise this privilege must exchange shares having a net
asset value of at least $1,000 ($25 for directors, officers and employees of
Bancshares or its affiliates and their spouses and children under 21 years of
age participating in the Systematic Investment Program). Prior to any
exchange, the shareholder must receive a copy of the current prospectus of the
participating Fund into which an exchange is being made.
Upon receipt by Compass Brokerage, Inc. or the Transfer Agent of proper
instructions and all necessary supporting documents, shares submitted for
exchange will be redeemed at the next-determined net asset value. If the
exchanging shareholder does not have an account in the participating fund
whose shares are being acquired, a new account will be established with the
same registration, dividend and capital gain options as the account from which
shares are exchanged, unless otherwise specified by the shareholder. In the
case where the new account registration is not identical to that of the
existing account, a signature guarantee is required. (See "Redeeming Shares--
By Mail.") Exercise of this privilege is treated as a redemption and new
purchase for federal income tax purposes and, depending on the circumstances,
a short or long-term capital gain or loss may be realized. The Trust reserves
the right to modify or terminate the exchange privilege at any time.
Shareholders would be notified prior to any modification or termination.
Shareholders may obtain further information on the exchange privilege by
calling Compass Brokerage, Inc. or the Transfer Agent at 1-800-992-2085.
Shareholders who exchange into Shares of the Fund will not receive a dividend
from the Fund on the date of the exchange.
EXCHANGE BY TELEPHONE. Shareholders may provide instructions for exchanges
between participating funds by calling their Compass representative or the
Transfer Agent at 1-800-992-2085. In addition, investors may exchange Shares
by calling their Compass Brokerage, Inc. personal investment officer or
authorized registered representative directly.
An authorization form permitting the Trust to accept telephone exchange
requests must first be completed. It is recommended that investors request
18
<PAGE>
this privilege at the time of their initial application. If not completed at
the time of initial application, authorization forms and information on this
service can be obtained through Compass Brokerage, Inc. or the Transfer Agent.
Shares may be exchanged by telephone only between fund accounts having
identical shareholder registrations. Exchange instructions given by telephone
may be electronically recorded. If reasonable procedures are not followed by
the Trust, it may be liable for losses due to unauthorized or fraudulent
telephone instructions.
Telephone exchange instructions must be received before 3:00 p.m. (Central
time) for Shares to be exchanged the same day.
WRITTEN EXCHANGE. A shareholder wishing to make an exchange by written request
may do so by sending it to: The Expedition Money Market Fund--Investment
Service Shares, P.O. Box 8010, Boston, Massachusetts 02266-8010.
REDEEMING INVESTMENT SERVICE SHARES
- -------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value next determined after Compass
or the Transfer Agent receives the redemption request. A redemption request
received after the Fund's net asset value has been determined will be priced
at the next Business Day's net asset value. Redemptions will be made on each
Business Day. Telephone or written requests for redemptions must be received
in proper form and can be made through Compass or the Transfer Agent.
Compass Asset Management customers wishing to redeem should contact their
Compass Asset Management division or affiliate. Other Shareholders should
contact Compass Brokerage, Inc. or another authorized registered
representative or the Transfer Agent as described below.
BY TELEPHONE. Shareholders may redeem Shares of the Fund by telephoning
Compass Brokerage, Inc. or the Transfer Agent. An authorization form
permitting the Fund to accept telephone redemption requests must first be
completed. Shareholders may call toll-free 1-800-992-2085. Redemption requests
through Compass Brokerage, Inc. or the Transfer Agent must be received before
1:00 p.m. (Central time). It is the responsibility of Compass Brokerage, Inc.
or the Transfer Agent to transmit orders to the Fund by 1:00 p.m. (Central
time). If at any time, the Fund shall determine it necessary to terminate or
modify this method of redemption, shareholders would be promptly notified.
19
<PAGE>
Redemption requests must be received by and transmitted to Compass Brokerage,
Inc. or the Transfer Agent before 1:00 p.m. (Central time) in order for the
proceeds to be wired that same day. Compass Brokerage, Inc. is responsible for
promptly submitting redemption requests and providing proper written
redemption instructions to the Transfer Agent.
For calls received before 1:00 p.m. (Central time) proceeds will normally be
wired the same day. For calls received after 1:00 p.m. (Central time) proceeds
will normally be wired the following business day. In no event will proceeds
be wired more than seven days after a proper request for redemption has been
received.
Redemption requests received before 1:00 p.m. (Central time) will normally be
paid the same day but will not be entitled to that day's dividend.
None of Compass, the Transfer Agent nor the Trust will be responsible for any
loss, liability, cost or expense for acting upon wire or telephone
instructions that it reasonably believes to be genuine. The Trust, Compass and
Transfer Agent will each employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, including requiring a form
of personal identification prior to acting upon instructions received by
telephone and recording telephone instructions. Such procedures may include
taping of telephone conversations.
If market conditions are extraordinarily active or other extraordinary
circumstance exist, and you experience difficulties placing redemption orders
by telephone, you may consider placing your order by mail.
BY MAIL. Shareholders may redeem Shares of the Fund by sending a written
request to the Fund through Compass Brokerage, Inc. or the Transfer Agent. The
written request should include the shareholder's name, the Fund name, the
class name, the account number, and the Share or dollar amount requested.
Shareholders redeeming through the Transfer Agent should mail written requests
to: The Expedition Money Market Fund--Investment Service Shares, P.O. Box
8010, Boston, Massachusetts 02266-8010.
SIGNATURES. Shareholders requesting a redemption of any amount to be sent to
an address other than that on record with the Fund or a redemption payable
other than to the shareholder of record must have their signatures guaranteed
by:
. a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund ("BIF"), which is administered by the FDIC;
20
<PAGE>
. a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
. a savings bank or savings association whose deposits are insured by the
Savings Association Insurance Fund ("SAIF") which is administered by
the FDIC; or
. any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934.
The Trust does not accept signatures guaranteed by a notary public.
The Trust and the Transfer Agent have adopted standards for accepting
signature guarantees from the above institutions. The Trust may elect in the
future to limit eligible signature guarantors to institutions that are members
of a signature guarantee program. Redemptions of $40,000 or greater for the
Fund must be in writing and a signature guarantee must accompany the written
request. The Trust and the Transfer Agent reserve the right to amend these
standards at any time without notice.
Normally, a check for the proceeds is mailed to the shareholder within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
SYSTEMATIC WITHDRAWAL PROGRAMS
Shareholders of Investment Service Shares who desire to receive monthly or
quarterly payments of a predetermined amount may take advantage of the
Systematic Withdrawal Program. Under this program, Investment Service Shares
are redeemed to provide for periodic withdrawal payments in an amount directed
by the shareholder. Depending upon the amount of the withdrawal payments, the
amount of dividends paid and capital gains distributions, and the fluctuation
of the net asset value of shares redeemed under this program, redemptions may
reduce, and eventually deplete, the shareholder's investments in the Fund. For
this reason, payments under this program should not be considered as yield or
income on the shareholder's investment in the Fund. To be eligible to
participate in this program, a shareholder must have invested at least $10,000
in the Fund.
A shareholder may apply for participation in this program through Compass
Brokerage, Inc. or the Transfer Agent.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Trust may
redeem shares in any Investment Service Shares account and pay the proceeds to
the shareholder if the account balance falls below the required minimum value
of $1,000 ($25 in the case of directors, officers and
21
<PAGE>
employees of Bancshares and its affiliates (and their spouses and children
under 21 years of age) participating in the Systematic Investment Program
discussed below). Before Investment Service Shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to
purchase additional shares to meet the minimum requirement.
SHAREHOLDER INFORMATION
- -------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights, except that in matters affecting only a
particular portfolio or class, only shares of that portfolio or class are
entitled to vote.
As used in this Prospectus, a "vote of a majority of the outstanding shares"
of the Fund means, with respect to the approval of an investment advisory
agreement, sub-advisory agreement, or a change in a fundamental investment
limitation, the lesser of (a) more than 50% of the outstanding shares of the
Fund, or (b) at least 67% of the shares of the Fund present at a meeting at
which the holders of more than 50% of the outstanding shares of the Fund are
represented in person or by proxy.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust or the Fund's operation and for the election of Trustees
under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting. A special meeting of the shareholders shall be called by the Trustees
upon the written request of shareholders owning at least 10% of the Trust's
outstanding shares.
As of January 16, 1998, Compass Bank owned 78.29% of The Money Market Fund's
Investment Service Shares, which is considered a controlling interest as
defined by the Investment Company Act of 1940.
EFFECT OF BANKING LAWS
- -------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently
prohibit a bank holding company registered under the Bank Holding Company Act
of 1956 or any affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company continuously
22
<PAGE>
engaged in the issuance of its shares, and from issuing, underwriting, selling
or distributing securities in general. Such laws and regulations do not
prohibit such a holding company or affiliate from acting as investment
adviser, transfer agent, or custodian to such an investment company or from
purchasing shares of such a company as agent for and upon the order of their
customers.
The Adviser, Bancshares and certain of Bancshares' affiliates are subject to
such banking laws and regulations. They believe, based on the advice of their
counsel, that they may perform those services for the Fund contemplated by any
existing agreement entered into with the Trust without violating those laws or
regulations. Changes in either federal or state statutes and regulations
relating to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of present or future statutes and regulations, could prevent
these entities from continuing to perform all or a part of the above services.
If this happens, the Trustees would consider alternative means of continuing
available investment services. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these
occurrences.
TAX INFORMATION
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund intends to pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax
on any dividends and other distributions received. This applies whether
dividends and distributions are received in cash or as additional Shares.
STATE AND LOCAL TAXES. Shareholders are urged to consult their own tax
advisers regarding the status of their accounts under state and local tax
laws.
23
<PAGE>
THE EXPEDITION
MONEY MARKET FUND
INVESTMENT SERVICE SHARES
PROSPECTUS
A PORTFOLIO OF THE EXPEDITION FUNDS,
AN OPEN-END, MANAGEMENT
INVESTMENT COMPANY
FEBRUARY 1, 1998
-----------
SEI Investments Distribution Co.
- -----------------------------
Distributor
COMPASS BANK
- --------------------------
Investment Adviser
[LOGO RECYCLED PAPER APPEARS HERE]
<PAGE>
The Expedition Money Market Fund
The Expedition Bond Fund
The Expedition Equity Fund
(Portfolios of The Expedition Funds)
Statement of Additional Information
This Statement of Additional Information is not a prospectus. It provides
information about the activities and operations of The Expedition Funds (the
"Trust") in addition to the information provided in the Trust's prospectuses
dated February 1, 1998 (the "Prospectuses") and should be read in conjunction
with a Prospectus. Prospectuses may be obtained by writing to the Trust or
calling toll-free 1-800-992-2085.
Statement dated February 1, 1998
<PAGE>
Table of Contents
<TABLE>
<S> <C>
General Information About the Funds....................................................1
Investment Objectives and Policies.....................................................1
Investment Limitations................................................................12
The Expedition Funds Management.......................................................18
Investment Advisory Services..........................................................22
Brokerage Transactions................................................................23
Other Services .......................................................................24
Purchasing Shares.....................................................................26
Determining Net Asset Value...........................................................28
Redeeming Shares......................................................................31
Massachusetts Partnership Law.........................................................32
Tax Status............................................................................32
Fund Ownership........................................................................33
Total Return..........................................................................34
Yield.................................................................................35
Effective Yield.......................................................................36
Performance Comparisons...............................................................36
Financial Statements .................................................................39
</TABLE>
<PAGE>
General Information About the Funds
- --------------------------------------------------------------------------------
Each Fund is a portfolio in The Expedition Funds (the "Trust"). The Trust,
formerly The Starburst Funds, was established as a Massachusetts business trust
under a Declaration of Trust dated August 7, 1989.
Shares of The Expedition Money Market Fund (the "Money Market Fund") are offered
in two classes, known as Investment Service Shares and Institutional Shares.
Shares of The Expedition Bond Fund (the "Bond Fund") and The Expedition Equity
Fund (the "Equity Fund") are also offered in two classes, known as the
Investment Shares and Institutional Shares. Each of the Money Market, Bond and
Equity Funds are referred to herein as a "Fund" and collectively as the "Funds."
Capitalized terms not defined herein are defined in the Prospectuses. No
investment in shares of a Fund should be made without first reading the Fund's
prospectus carefully.
Investment Objectives and Policies
- --------------------------------------------------------------------------------
Investment Objectives
The Money Market Fund's investment objective is to provide current income
consistent with stability of principal. The Bond Fund's investment objective is
to provide current income. The Equity Fund's investment objective is to provide
growth of capital, with a secondary objective of income. A Fund's investment
objective cannot be changed without approval of shareholders.
Investment Policies
The investment policies described below may be changed by the Board of Trustees
(the "Trustees") without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
General Policies of the Money Market Fund
The Money Market Fund invests primarily in money market instruments which mature
in thirteen months or less and which include, but are not limited to, commercial
paper and variable amount demand master notes, bank instruments, U.S. Government
obligations and repurchase agreements.
The instruments of banks and savings associations whose deposits are insured by
the Bank Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC") or the Savings Association Insurance Fund
("SAIF"), which is administered by the FDIC, such as certificates of deposit,
demand and time deposits, savings shares, and bankers' acceptances, are not
necessarily guaranteed by those organizations.
1
<PAGE>
Bank Instruments
In addition to domestic bank obligations such as certificates of deposit, demand
and time deposits, savings shares, and bankers' acceptances, the Money Market
Fund may invest in:
. Eurodollar Certificates of Deposit issued by foreign branches of U.S.
or foreign banks;
. Eurodollar Time Deposits, which are U.S. dollar-denominated deposits in
foreign branches of U.S. or foreign banks;
. Canadian Time deposits, which are U.S. dollar-denominated deposits
issued by branches of major Canadian banks located in the United
States; and
. Yankee Certificates of Deposit, which are U.S. dollar-denominated
certificates of deposit issued by U.S. branches of foreign banks and
held in the United States.
Ratings
A nationally recognized statistical rating organizations' ("NRSROs") highest
rating category is determined without regard for subcategories and gradations.
For example, securities rated A-1 or A-1+ by Standard & Poor's Ratings Group
("S&P"), Prime-1 by Moody's Investors Service, Inc. ("Moody's"), or F-1 (+ or -)
by Fitch Investors Service, Inc. ("Fitch") are all considered rated in the
highest short-term rating category. The Money Market Fund will follow applicable
regulations in determining whether a security rated by more than one NRSRO can
be treated as being in the highest short-term rating category; currently, unless
a security is rated by only one NRSRO, such securities must be rated by two
NRSROs in their highest rating category. See "Regulatory Compliance."
U.S. Government Obligations
The types of U.S. Government obligations in which the Money Market and Bond
Funds may invest generally include direct obligations of the U.S. Treasury (such
as U.S. Treasury bills, notes, and bonds) and obligations issued or guaranteed
by U.S. Government agencies or instrumentalities. These securities are backed
by:
. the full faith and credit of the U.S. Treasury;
. the issuer's right to borrow from the U.S. Treasury;
. the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
. the credit of the agency or instrumentality issuing the obligations.
2
<PAGE>
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
. Farm Credit Banks;
. National Bank for Cooperatives;
. Federal Home Loan Banks;
. Farmers Home Administration; and
. Fannie Mae.
Privately Issued Mortgage-Related Securities
Privately issued mortgage-related securities generally represent an ownership
interest in federal agency mortgage pass through securities such as those issued
by Government National Mortgage Association. The terms and characteristics of
the mortgage instruments may vary among pass through mortgage loan pools.
When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an advantageous
price or yield for a Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the appropriate Fund
sufficient to make payment for the securities to be purchased are segregated on
the Fund's records at the trade date. These assets are marked to market daily
and are maintained until the transaction has been settled. Each Fund does not
intend to engage in when-issued and delayed delivery transactions to an extent
that would cause the segregation of more than 20% of the total value of its
assets.
Futures and Options Transactions
Each of the Bond and Equity Funds (together the "Non-Money Market Funds") may
attempt to hedge all or a portion of its portfolio by buying and selling
financial futures contracts and options on financial futures contracts.
Financial Futures Contracts
A futures contract is a firm commitment by two parties, the
seller who agrees to make delivery of the specific type of
security called for in the contract ("going short") and the
buyer who agrees to take delivery of the security ("going
long") at a certain time in the future.
In the fixed income securities market, price moves inversely
to interest rates. A rise in rates means a drop in price.
Conversely, a drop in rates means a rise in price. In order to
hedge its holdings of fixed income securities against a rise
in
3
<PAGE>
market interest rates, the Bond Fund could enter into
contracts to deliver securities at a predetermined price
(i.e., "go short") to protect itself against the possibility
that the prices of its fixed income securities may decline
during the Fund's anticipated holding period. The Bond Fund
would "go long" (agree to purchase securities in the future at
a predetermined price) to hedge against a decline in market
interest rates.
Purchasing Put Options on Financial Futures Contracts
Each Non-Money Market Fund may purchase listed put options on
financial futures contracts. Unlike entering directly into a
futures contract, which requires the purchaser to buy a
financial instrument on a set date at a specified price, the
purchase of a put option on a futures contract entitles (but
does not obligate) its purchaser to decide on or before a
future date whether to assume a short position at the
specified price.
A Non-Money Market Fund would purchase put options on futures
to protect portfolio securities against decreases in value
resulting from an anticipated increase in market interest
rates. Generally, if the hedged portfolio securities decrease
in value during the term of an option, the related futures
contracts will also decrease in value and the option will
increase in value. In such an event, a Fund will normally
close out its option by selling an identical option. If the
hedge is successful, the proceeds received by the Fund upon
the sale of the second option will be large enough to offset
both the premium paid by the Fund for the original option plus
the realized decrease in value of the hedged securities.
Alternatively, a Fund may exercise its put option. To do so,
it could simultaneously enter into a futures contract of the
type underlying the option (for a price less than the strike
price of the option) and exercise the option. The Fund would
then deliver the futures contract in return for payment of the
strike price. If the Fund neither closes out nor exercises an
option, the option will expire on the date provided in the
option contract, and the premium paid for the contract will be
lost.
Writing Call Options on Financial Futures Contracts
In addition to purchasing put options on futures, each
Non-Money Market Fund may write listed call options on futures
contracts to hedge its portfolio against an increase in market
interest rates. When a Fund writes a call option on a futures
contract, it is undertaking the obligation of assuming a short
futures position (selling a futures contract) at the fixed
strike price at any time during the life of the option if the
option is exercised. As market interest rates rise, causing
the prices of futures to go down, the Fund's obligation under
a call option on a future
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(to sell a futures contract) costs less to fulfill, causing
the value of the Fund's call option position to increase.
Prior to the expiration of a call written by the Fund, or
exercise of it by the buyer, the Fund may close out the option
by buying an identical option. If the hedge is successful, the
cost of the second option will be less than the premium
received by the Fund for the initial option. The net premium
income of the Fund will then offset the decrease in value of
the hedged securities.
Writing Put Options on Financial Futures Contracts
Each Non-Money Market Fund may write listed put options on
financial futures contracts. When a Fund writes a put option
on a futures contract, it receives a premium for undertaking
the obligation to assume a long futures position (buying a
futures contract) at a fixed price at any time during the life
of the option. As stock prices rise or interest rates
decrease, the market price of the underlying futures contract
normally increases. As the market value of the underlying
futures contract increases, the buyer of the put option has
less reason to exercise the put because the buyer can sell the
same futures contract at a higher price in the market. The
premium received by a Fund can then be used to offset the
higher prices of portfolio securities to be purchased in the
future due to the increase in market prices or decrease in
interest rates.
Prior to the expiration of the put option, or its exercise by
the buyer, a Fund may close out the option by buying an
identical option. If the hedge is successful, the cost of
buying the second option will be less than the premium
received by the Fund for the initial option.
Purchasing Call Options on Financial Futures Contracts
An additional way in which a Non-Money Market Fund may hedge
against decreases in market interest rates is to buy a listed
call option on a financial futures contract. When a Fund
purchases a call option on a futures contract, it is
purchasing the right (not the obligation) to assume a long
futures position (buy a futures contract) at a fixed price at
any time during the life of the option. As market interest
rates fall, the value of the underlying futures contract will
normally increase, resulting in an increase in value of a
Fund's option position. When the market price of the
underlying futures contract increases above the strike price
plus premium paid, the Fund could exercise its option and buy
the futures contract below market price.
Prior to the exercise or expiration of the call option, a Fund
could sell an identical call option and close out its
position. If the premium received upon selling the
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offsetting call is greater than the premium originally paid,
the Fund has completed a successful hedge.
Limitations on Open Futures Positions
A Non-Money Market Fund will not maintain open positions in
futures contracts it has sold or call options it has written
on futures contracts if, in the aggregate, the value of the
open positions (marked to market) exceeds the current market
value of its securities portfolio plus or minus the unrealized
gain or loss on those open positions, adjusted for the
correlation of volatility between the hedged securities and
the futures contracts. If this limitation is exceeded at any
time, the Fund will take prompt action to close out a
sufficient number of open contracts to bring its open futures
and options positions within this limitation.
"Margin" in Futures Transactions
Unlike the purchase or sale of a security, a Non-Money Market
Fund does not pay or receive money upon the purchase or sale
of a futures contract. Rather, a Fund is required to deposit
an amount of "initial margin" in cash or U.S. Treasury bills
with its custodian (or the broker, if legally permitted). The
nature of initial margin in futures transactions is different
from that of margin in securities transactions in that futures
contract initial margin does not involve the borrowing of
funds by the Fund to finance the transactions.
A futures contract held by a Fund is valued daily at the
official settlement price of the exchange on which it is
traded. Each day the Fund pays or receives cash, called
"variation margin," equal to the daily change in value of the
futures contract. This process is known as "marking to
market." Variation margin does not represent a borrowing or
loan by the Fund but is instead settlement between the Fund
and the broker of the amount one would owe the other if the
futures contract expired. In computing its daily net asset
value, the Fund will mark-to-market its open futures
positions.
Each Non-Money Market Fund is also required to deposit and
maintain margin when it writes call options on futures
contracts.
Purchasing Put and Call Options
Each Non-Money Market Fund may purchase put and call options.
A put option gives a Fund, in return for a premium, the right
to sell the underlying security to the writer (seller) at a
specified price during the term of the option. A call option
gives the Fund, in return for a premium, the right to buy the
underlying security from the seller.
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Writing Put and Call Options
Each Non-Money Market Fund may write covered put and call
options to generate income. As writer of a call option, a Fund
has the obligation upon exercise of the option during the
option period to deliver the underlying security upon payment
of the exercise price. As a writer of a put option, a Fund has
the obligation to purchase a security from the purchaser of
the option upon the exercise of the option.
A Fund may only write call options either on securities held
in its portfolio or on securities which it has the right to
obtain without payment of further consideration (or has
segregated cash in the amount of any additional
consideration). In the case of put options, a Fund will
segregate cash or liquid assets with a value equal to or
greater than the exercise price of the underlying securities.
Lending of Portfolio Securities
The collateral received when a Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Funds may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker.
Restricted Securities
Each Fund may invest in restricted securities. Restricted securities are any
securities in which a Fund may otherwise invest pursuant to its investment
objective and policies but which are subject to restriction on resale under
federal securities law. The ability of the Trustees to determine the liquidity
of certain restricted securities is permitted under an SEC Staff position set
forth in the adopting release for Rule 144A under the Securities Act of 1933
(the "Rule"). The Rule is a non-exclusive, safe-harbor for certain secondary
market transactions involving securities subject to restrictions on resale under
federal securities laws. The Rule provides an exemption from registration for
resale of otherwise restricted securities to qualified institutional buyers. The
Rule was expected to further enhance the liquidity of the secondary market for
securities eligible for resale under Rule 144A. The Trust believes that the
Staff of the SEC has left the question of determining the liquidity of all
restricted securities (eligible for resale under Rule 144A) for determination of
the Trust's Board of Trustees. The Board of Trustees considers the following
criteria in determining the liquidity of certain restricted securities:
. the frequency of trades and quotes for the security;
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. the number of dealers willing to purchase or sell the security and
the number of other potential buyers;
. dealer undertakings to make a market in the security; and
. the nature of the security and the nature of the marketplace
trades.
Repurchase Agreements
Each Fund requires the Fund's custodian to take possession of the securities
subject to repurchase agreements, and these securities are marked to market
daily. To the extent that the original seller does not repurchase the securities
from a Fund, the Fund could receive less than the repurchase price on any sale
of such securities. In the event that such a defaulting seller filed for
bankruptcy or became insolvent, disposition of such securities by a Fund might
be delayed pending court action. The Funds believe that under the regular
procedures normally in effect for custody of the Funds' portfolio securities
subject to repurchase agreements, a court of competent jurisdiction would rule
in favor of the Funds and allow retention or disposition of such securities. A
Fund will only enter into repurchase agreements with banks and other recognized
financial institutions such as broker/dealers which are deemed by the Adviser to
be creditworthy pursuant to guidelines established by the Trustees.
Asset Backed Securities
Asset Backed Securities in which the Money Market and Bond Funds may invest are
securities collateralized by shorter term loans such as automobile loans, home
equity loans, computer leases, or credit card receivables. The payments from the
collateral are passed through to the security holder. The collateral behind
asset-backed securities tends 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. Due to amortization, the average life
for these securities is also the conventional proxy for maturity.
Special Risks: Due to the possibility that prepayments (on automobile loans and
other collateral) will alter the cash flow on asset-backed securities, 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 prepayments will
lengthen it. 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. In selecting these securities, the Adviser will look for those
securities that offer higher yield to compensate for any variation in average
maturity.
Reverse Repurchase Agreements
The Money Market and Bond Funds may enter into reverse repurchase agreements.
These transactions are similar to borrowing cash. In a reverse repurchase
agreement a Fund transfers
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possession of a portfolio instrument to another person, such as a financial
institution, broker or dealer, in return for a percentage of the instrument's
market value in cash, and agrees that on a stipulated date in the future the
Fund will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate.
The use of reverse repurchase agreements may enable the Money Market and Bond
Funds to avoid selling portfolio instruments at a time when a sale may be deemed
to be disadvantageous, but the ability to enter into reverse repurchase
agreements does not ensure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of a Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These assets are marked to market daily and
maintained until the transaction is settled.
During the period any reverse repurchase agreements are outstanding, but only to
the extent necessary to assure completion of the reverse repurchase agreements,
the Money Market Fund will restrict the purchase of portfolio instruments to
money market instruments maturing on or before the expiration date of the
reverse repurchase agreement.
Credit Enhancement
The Money Market Fund typically evaluates the credit quality and ratings of
credit-enhanced securities based upon the financial condition and ratings of the
party providing the credit enhancement (the "credit enhancer"), rather than the
issuer. However, credit-enhanced securities will not be treated as having been
issued by the credit enhancer for diversification purposes, unless the Money
Market Fund has invested more than 10% of its assets in securities issued,
guaranteed or otherwise credit enhanced by the credit enhancer, in which case
the securities will be treated as having been issued by both the issuer and the
credit enhancer.
The Money Market Fund may have more than 25% of its total assets invested in
securities credit enhanced by banks.
Standard & Poor's Depositary Receipts ("SPDRs")
The Equity Fund may invest in SPDRS, which are securities that represent
ownership in a unit investment trust (a "UIT") that holds a portfolio of common
stocks designed to track the performance of the Standard & Poor's 500 Composite
Stock Price Index (the "S&P Index"). SPDRS may be obtained from the UIT directly
or purchased in the secondary market. SPDRs are generally listed on the American
Stock Exchange.
The UIT will issue SPDRs in aggregations of 50,000 known as "Creation Units" in
exchange for a "Portfolio Deposit" consisting of (a) a portfolio of securities
substantially similar to the component securities ("Index Securities") of the
S&P Index, (b) a cash payment equal to a pro
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rata portion of the dividends accrued on the UIT's portfolio securities since
the last dividend payment by the UIT, net of expenses and liabilities, and (c) a
cash payment or credit ("Balancing Amount") designed to equalize the net asset
value of the S&P Index and the net asset value of a Portfolio Deposit.
SPDRs are not individually redeemable, except upon termination of the UIT. To
redeem, the Fund must accumulate enough SPDRs to reconstitute a Creation Unit.
The liquidity of small holdings of SPDRs, therefore, will depend upon the
existence of a secondary market. Upon redemption of a Creation Unit, the Fund
will receive Index Securities and cash identical to the Portfolio Deposit
required of an investor wishing to purchase a Creation Unit that day.
The price of SPDRs is derived and based upon the securities held by the UIT.
Accordingly, the level of risk involved in the purchase or sale of a SPDR is
similar to the risk involved in the purchase or sale of traditional common
stock, with the exception that the pricing mechanism for SPDRs is based on a
basket of stocks. Disruptions in the markets for the securities underlying SPDRs
purchased or sold by the Fund could result in losses on SPDRs. Trading in SPDRs
involves risks similar to those risks, described above under "Options," involved
in the writing of options on securities.
American Depository 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
include American Depositary Shares and New York Shares. Generally, ADRs are
designed for trading in the U.S. securities market. ADRs may be available for
investment through "sponsored" or "unsponsored" facilities. A sponsored facility
is established jointly by the issuer of the security underlying the receipt and
a depositary, whereas an unsponsored facility may be established by a depositary
without participation by the issuer of the receipt's underlying security. The
Equity Fund may invest in ADRs traded on registered exchanges or on NASDAQ and
may also invest in ADRs not traded on an established exchange. While the Fund
typically invests in sponsored ADRs, joint arrangements between the issuer and
the depositary, some ADRs may be unsponsored. Unlike sponsored ADRs, the holders
of unsponsored ADRs bear all expenses and the depositary may not be obligated to
distribute shareholder communications or to pass through the voting rights on
the deposited securities.
Warrants
Warrants are instruments giving holders the right, but not the obligation, to
buy equity or fixed income securities of a company at a given price during a
specific period.
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Foreign Securities
Foreign securities may subject a Fund to investment risks that differ in some
respects from those related to investments in obligations of U.S. domestic
issuers. Such risks include future adverse political and economic developments,
the possible imposition of withholding taxes on interest or other income,
possible seizure, nationalization, or expropriation of foreign deposits, the
possible establishment of exchange controls or taxation at the source, greater
fluctuations in value due to changes in exchange rates, or the adoption of other
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. Such investments may also entail
higher custodial fees and sales commissions than domestic investments. Foreign
issuers of securities or obligations are often subject to accounting treatment
and engage in business practices different from those respecting domestic
issuers of similar securities or obligations. Foreign branches of U.S. banks and
foreign banks may be subject to less stringent reserve requirements than those
applicable to domestic branches of U.S.
banks.
Portfolio Turnover
The Equity Fund will not attempt to set or meet a portfolio turnover rate since
any turnover would be incidental to transactions undertaken in an attempt to
achieve the Fund's investment objective. The estimated annual rate of portfolio
turnover will not exceed 100%. For the fiscal year ended October 31, 1997, the
Equity Fund's portfolio turnover rate was 64.68%. For the fiscal years ended
October 31, 1997 and 1996, the Bond Fund's portfolio turnover rates were 69.09%
and 77% respectively.
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Investment Limitations
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MONEY MARKET FUND
Fundamental Limitations
The following are fundamental investment limitations of the Money Market Fund.
Fundamental investment limitations cannot be changed without shareholder
approval.
Selling Short and Buying on Margin
The Money Market Fund will not sell any securities short or purchase any
securities on margin but may obtain such short-term credits as may be necessary
for clearance of transactions.
Issuing Senior Securities and Borrowing Money
The Money Market Fund will not issue senior securities except that the Fund may
borrow money directly or through reverse repurchase agreements in amounts up to
one-third of the value of its total assets including the amounts borrowed. The
Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure or to facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio securities is deemed
to be inconvenient or disadvantageous. The Fund will not purchase any securities
while borrowings in excess of 5% of the value of its total assets are
outstanding. During the period any reverse repurchase agreements are
outstanding, the Fund will restrict the purchase of portfolio instruments to
money market instruments maturing on or before the expiration date of the
reverse repurchase agreements, but only to the extent necessary to assure
completion of the reverse repurchase agreements.
Pledging Assets
The Money Market Fund will not mortgage, pledge, or hypothecate any assets
except to secure permitted borrowings. In those cases, it may pledge assets
having a value not exceeding the lesser of the dollar amounts borrowed or 15% of
the value of total assets of the Fund at the time of the pledge.
Concentration of Investments
The Money Market Fund will not invest 25% or more of the value of its total
assets in any one industry except that the Fund will invest 25% of the value of
its total assets in the commercial paper issued by finance companies.
The Fund may invest more than 25% of the value of its total assets in cash or
cash items,
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securities issued or guaranteed by the U.S. Government, its agencies, or
instrumentalities, or instruments secured by these money market instruments,
such as repurchase agreements.
Investing in Commodities and Real Estate
The Money Market Fund will not purchase or sell commodities, commodity
contracts, or commodity futures contracts. The Fund will not purchase or sell
real estate, although it may invest in securities of issuers whose business
involves the purchase or sale of real estate or in securities which are secured
by real estate or interests in real estate.
Investing in Restricted Securities
The Money Market Fund will not invest more than 10% of the value of its net
assets in securities which are subject to legal or contractual restrictions on
resale, except for commercial paper issued under Section 4(2) of the Securities
Act of 1933.
Underwriting
The Money Market Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
Lending Cash or Securities
The Money Market Fund will not lend any of its assets, except portfolio
securities. This shall not prevent the Fund from purchasing or holding bonds,
debentures, notes, certificates of indebtedness, or other debt securities,
entering into repurchase agreements or engaging in other transactions where
permitted by the Fund's investment objective, policies, limitations or
Declaration of Trust.
Diversification of Investments
With respect to 75% of the value of its total assets, the Money Market Fund will
not purchase securities issued by any one issuer (other than cash, cash items or
securities issued or guaranteed by the government of the United States or its
agencies or instrumentalities and repurchase agreements collateralized by such
securities) if as a result more than 5% of the value of its total assets would
be invested in the securities of that issuer.
Non-Fundamental Limitations
The following limitations may be changed by the Trustees without shareholder
approval. Shareholders will be notified before any material change in these
limitations becomes effective.
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Investing in Securities of Other Investment Companies
The Money Market Fund will not purchase securities of other investment companies
except as part of a merger, consolidation, reorganization, or other acquisition.
Investing in Illiquid Securities
The Money Market Fund will not invest more than 10% of the value of its net
assets in illiquid securities, including repurchase agreements providing for
settlement in more than seven days after notice, non-negotiable time deposits
with maturities over seven days, and certain restricted securities not
determined by the Trustees to be liquid.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
The Money Market Fund does not expect to borrow money, pledge securities, invest
in illiquid securities, restricted securities or engage in when-issued and
delayed delivery transactions, or reverse repurchase agreements in excess of 5%
of the value of its net assets during the coming fiscal year.
For purposes of its policies and limitations, the Money Market Fund considers
certificates of deposit and demand and time deposits issued by a U.S. branch of
a domestic bank or savings and loan having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment to be "cash items."
For purposes of the Money Market Fund's limitation on industry concentration,
"finance companies" are limited to U.S. banks and U.S. branches of foreign
banks.
THE NON-MONEY MARKET FUNDS
Fundamental Limitations
The following are fundamental limitations of the Equity and Bond Funds.
Fundamental investment limitations cannot be changed without shareholder
approval.
Diversification of Investments
With respect to 75% of the value of each Fund's total assets, the Fund will not
purchase securities of any one issuer (other than cash, cash items and
securities issued or guaranteed by the government of the United States or its
agencies or instrumentalities) if as a result more than 5% of the value of its
total assets would be invested in the securities of that issuer.
Under this limitation, as it relates to the Bond Fund, each governmental
subdivision, including states and the District of Columbia, territories,
possessions of the United States, or their political subdivisions, agencies,
authorities, instrumentalities, or similar entities, will be considered a
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separate issuer if its assets and revenues are separate from those of the
governmental body creating it and the security is backed only by its own assets
and revenues.
Buying on Margin
A Fund will not purchase any securities on margin, but may obtain such
short-term credits as are necessary for clearance of transactions. The deposit
or payment by a Fund of initial or variation margin in connection with financial
futures contracts or related options transactions is not considered the purchase
of a security on margin.
Issuing Senior Securities and Borrowing Money
A Fund will not issue senior securities except that the Fund may borrow money
and the Bond Fund may engage in reverse repurchase agreements in amounts up to
one-third of the value of its net assets, including the amounts borrowed.
A Fund will not borrow money or, with respect to the Bond Fund, engage in
reverse repurchase agreements for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate management of
the portfolio by enabling a Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while borrowings in
excess of 5% of its total assets are outstanding. During the period any reverse
repurchase agreements are outstanding, but only to the extent necessary to
assure completion of the reverse repurchase agreements, the Bond Fund will
restrict the purchase of portfolio instruments to money market instruments
maturing on or before the expiration date of the reverse repurchase agreements.
Pledging Assets
A Fund will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In these cases, it may pledge assets having a market value
not exceeding the lesser of the dollar amounts borrowed or 10% of the value of
total assets at the time of the borrowing. Neither the deposit of underlying
securities and other assets in escrow in connection with the writing of put or
call options on securities nor margin deposits for the purchase and sale of
financial futures contracts and related options are deemed to be a pledge.
Investing in Real Estate
A Fund will not buy or sell real estate including limited partnership interests,
although it may invest in securities of companies whose business involves the
purchase or sale of real estate or in securities which are secured by real
estate or interests in real estate.
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Investing in Commodities
A Fund will not purchase or sell commodities, except that the Fund may purchase
and sell financial futures contracts and related options.
Underwriting
A Fund will not underwrite any issue of securities, except as it may be deemed
to be an underwriter under the Securities Act of 1933, as amended, in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.
Lending Cash or Securities
A Fund will not lend any of its assets except portfolio securities up to
one-third of the value of its total assets. (This shall not prevent the purchase
or holding of U.S. Government securities, repurchase agreements covering U.S.
Government securities, or other transactions which are permitted by the Fund's
investment objective and policies.)
Selling Short
A Fund will not sell securities short.
Non-Fundamental Limitations
The following limitations may be changed by the Trustees without shareholder
approval. Shareholders will be notified before any material change in these
limitations becomes effective.
Investing in Illiquid Securities
A Fund will not invest more than 15% of the value of its net assets in
securities which are not readily marketable or which are otherwise considered
illiquid, including over-the-counter options and also including repurchase
agreements providing for settlement in more than seven days after notice.
Investing in Securities of Other Investment Companies
A Fund will limit its respective investment in other investment companies to no
more than 3% of the total outstanding voting stock of any investment company,
invest no more than 5% of total assets in any one investment company, or invest
more than 10% of total assets in investment companies in general. The Fund will
purchase securities of closed-end investment companies only in open market
transactions involving only customary broker's commissions. However, these
limitations are not applicable if the securities are acquired in a merger,
consolidation, reorganization, or acquisition of assets. It should be noted that
investment companies incur
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certain expenses such as management fees, and therefore any investment by a Fund
in shares of another investment company would be subject to such customary
expenses.
As of the date of this Statement of Additional Information, an exemptive
application is pending with the Securities and Exchange Commission, which, if
approved, would allow the Non-Money Market Funds to invest in shares of the
Trust's money market funds, including the Money Market Fund. Should the
Non-Money Market Funds invest in shares of the Trust's money market funds, the
Trust's Board of Trustees will determine to what extent, if any, that the
Adviser's advisory fees should be adjusted to reflect the impact of such
investments.
Writing Covered Put and Call Options and Purchasing Put Options
A Fund will not write call options on securities unless the securities are held
in the Fund's portfolio or unless the Fund is entitled to them in deliverable
form without further payment or after segregating cash in the amount of any
further payment. When writing put options, the Fund will segregate cash or U.S.
Treasury obligations with a value equal to or greater than the exercise price of
the underlying securities. The Fund will not write put or call options or
purchase put or call options in excess of 5% of the value of its total assets.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
For purposes of its policies and limitations, the Bond Fund considers
certificates of deposit and demand and time deposits issued by a U.S. branch of
a domestic bank or savings association having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment to be "cash items."
Regulatory Compliance
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The Money Market Fund may follow non-fundamental operational policies that are
more restrictive than its fundamental investment limitations, as set forth in
the prospectus and this Statement of Additional Information, in order to comply
with applicable laws and regulations, including the provisions of and
regulations under the Investment Company Act of 1940. In particular, the Fund
will comply with the various requirements of Rule 2a-7, which regulates money
market mutual funds. For example, with limited exceptions, Rule 2a-7 prohibits
the investment of more than 5% of the Fund's total assets in the securities of
any one issuer, although the Fund's investment limitation only requires such 5%
diversification with respect to 75% of its assets. The Fund will invest more
than 5% of its assets in any one issuer only under the circumstances permitted
by Rule 2a-7. The Fund will also determine the effective maturity of its
investments, as well as its ability to consider a security as having received
the requisite
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short-term ratings by NRSROs according to Rule 2a-7. The Fund may change these
operational policies to reflect changes in the laws and regulations without the
approval of its shareholders.
The Expedition Funds Management
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Trustees and Officers of the Trust
The management and affairs of the Fund are supervised by the Trustees under the
laws of the Commonwealth of Massachusetts. The Trust pays the fees for
unaffiliated Trustees.
The Trustees and executive officers of the Trust, their respective dates of
birth, and their principal occupations for the last five years are set forth
below. Each may have held other positions with the named companies during that
period. Unless otherwise noted, the business address of each Trustee and
executive officer is SEI Investments Company, Oaks, Pennsylvania 19456. Certain
officers of the Trust also serve as officers of some or all of the following:
The Achievement Funds Trust, The Advisors Inner Circle Fund, The Arbor Fund, ARK
Funds, Bishop Street Funds, Boston 1784 Funds(R), CoreFunds, Inc., CrestFunds,
Inc., CUFUND, FMB Funds, Inc., First American Funds, Inc., First American
Investment Funds, Inc., First American Strategy Funds, Inc., HighMark Funds,
Marquis Funds(R), Monitor Funds, Morgan Grenfell Investment Trust, The PBHG
Funds, Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds, Rembrandt
Funds(R), Santa Barbara Group of Mutual Funds, Inc., SEI Asset Allocation Trust,
SEI Daily Income Trust, SEI Index Funds, SEI Institutional Investments Trust,
SEI Institutional Managed Trust, SEI International Trust, SEI Liquid Asset
Trust, SEI Tax Exempt Trust, STI Classic Funds, STI Classic Variable Trust and
TIP Funds, each of which is an open-end management investment company managed by
SEI Fund Resources or its affiliates and, except for Rembrandt Funds(R) and
Santa Barbara Group of Mutual Funds, Inc., are distributed by SEI Investments
Distribution Co.
ROBERT A. NESHER (DOB 08/17/46) -- Chairman of the Board of Trustees* --
Currently performs various services on behalf of SEI Investments for which
Mr. Nesher is compensated. Executive Vice President of SEI Investments,
1986-1994. Director and Executive Vice President of the Administrator and
the Distributor, 1981-1994. Trustee of The Advisors' Inner Circle Fund, The
Arbor Fund, Boston 1784 Funds(R), The Expedition Funds, Marquis Funds(R),
Pillar Funds, Rembrandt Funds(R), SEI Asset Allocation Trust, SEI Daily
Income Trust, SEI Index Funds, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI International Trust, SEI Liquid Asset
Trust and SEI Tax Exempt Trust.
JOHN T. COONEY (DOB 01/20/27) -- Trustee** -- Retired since 1992. Formerly
Vice Chairman of Ameritrust Texas N.A.,
18
<PAGE>
1989-1992, and MTrust Corp., 1985-1989. Trustee of The Advisors' Inner
Circle Fund, The Arbor Fund, The Expedition Funds and Marquis Funds(R).
WILLIAM M. DORAN (DOB 05/26/40) -- Trustee* -- 2000 One Logan Square,
Philadelphia, PA 19103. Partner, Morgan, Lewis & Bockius LLP (law firm),
counsel to the Trust, Administrator and Distributor, Director and Secretary
of SEI Investments. Trustee of The Advisors' Inner Circle Fund, The Arbor
Fund, The Expedition Funds, Marquis Funds(R), SEI Asset Allocation Trust,
SEI Daily Income Trust, SEI Index Funds, SEI Institutional Investments
Trust, SEI Institutional Managed Trust, SEI International Trust, SEI Liquid
Asset Trust and SEI Tax Exempt Trust.
FRANK E. MORRIS (DOB 12/30/23) -- Trustee** -- 105 Walpole Street, Dover,
MA 02030. Retired since 1990. Peter Drucker Professor of Management, Boston
College, 1989-1990. President, Federal Reserve Bank of Boston, 1968-1988.
Trustee of The Advisors' Inner Circle Fund, The Arbor Fund, The Expedition
Funds, Marquis Funds(R), SEI Asset Allocation Trust, SEI Daily Income
Trust, SEI Index Funds, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI International Trust, SEI Liquid Asset
Trust and SEI Tax Exempt Trust.
ROBERT A. PATTERSON (DOB 11/05/27) -- Trustee** -- Pennsylvania State
University, Senior Vice President, Treasurer (Emeritus). Financial and
Investment Consultant, Professor of Transportation (1984-present). Vice
President-Investments, Treasurer, Senior Vice President (Emeritus) (1982-
1984). Director, Pennsylvania Research Corp.; Member and Treasurer, Board
of Trustees of Grove City College. Trustee of The Advisors' Inner Circle
Fund, The Arbor Fund, The Expedition Funds, and Marquis Funds(R).
GENE PETERS (DOB 06/03/29)--Trustee** -- 943 Oblong Road, Williamstown, MA
01267. Private investor from 1987 to present. Vice President and Chief
Financial Officer, Western Company of North America (petroleum service
company) (1980-1986). President of Gene Peters and Associates (import
company) (1978-1980). President and Chief Executive Officer of Jos. Schlitz
Brewing Company before 1978. Trustee of The Advisors' Inner Circle Fund,
The Arbor Fund, The Expedition Funds and Marquis Funds(R).
JAMES M. STOREY (DOB 04/12/31) -- Trustee** -- Partner, Dechert Price &
Rhoads, from September 1987 - December 1993; Trustee of The Advisors' Inner
Circle Fund, The Arbor Fund, The Expedition Funds, Marquis Funds(R), SEI
Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI
Institutional Investments Trust, SEI Institutional Managed Trust, SEI
International Trust, SEI Liquid Asset Trust and SEI Tax Exempt Trust.
19
<PAGE>
DAVID G. LEE (DOB 04/16/52) -- President and Chief Executive Officer --
Senior Vice President of the Administrator and Distributor since 1993. Vice
President of the Administrator and Distributor, 1991-1993. President, GW
Sierra Trust Funds before 1991.
SANDRA K. ORLOW (DOB 10/18/53) -- Vice President and Assistant Secretary --
Vice President and Assistant Secretary of the Administrator and Distributor
since 1988.
KEVIN P. ROBINS (DOB 04/15/61) -- Vice President and Assistant Secretary --
Senior Vice President, General Counsel and Assistant Secretary of SEI
Investments, Senior Vice President, General Counsel and Secretary of the
Administrator and Distributor since 1994. Vice President and Assistant
Secretary of SEI Investments, the Administrator and Distributor, 1992-1994.
Associate, Morgan, Lewis & Bockius LLP (law firm), 1988-1992.
RICHARD W. GRANT (DOB 10/25/45)--Secretary-- 2000 One Logan Square,
Philadelphia, PA 19103, Partner, Morgan, Lewis & Bockius LLP (law firm),
counsel to the Trust, Administrator and Distributor.
KATHRYN L. STANTON (DOB 11/19/58) -- Vice President and Assistant
Secretary--Deputy General Counsel of SEI Investments, Vice President and
Assistant Secretary of the Administrator and Distributor since 1994.
Associate, Morgan, Lewis & Bockius LLP (law firm), 1989-1994.
ROBERT DELLACROCE (DOB 12/17/63) --Controller and Chief Financial Officer
--Director, Funds Administration and Accounting of SEI Investments since
1994. Senior Audit Manager, Arthur Andersen LLP, 1986-1994.
TODD B. CIPPERMAN (DOB 02/14/66) -- Vice President and Assistant
Secretary --Vice President and Assistant Secretary of SEI Investments, the
Administrator and the Distributor since 1995. Associate, Dewey Ballantine
(law firm) (1994-1995). Associate, Winston & Strawn (law firm) (1991-1994).
JOSEPH M. O'DONNELL (DOB 11/13/54)-- Vice President and Assistant
Secretary--Vice President & Assistant Secretary of the Administrator &
Distributor since 1998. Vice President & General Counsel, FPS Services,
Inc., 1993-1997. Staff Counsel and Secretary, Provident Mutual Family of
Funds, 1990-1993.
----------------------------
*Messrs. Nesher and Doran are Trustees who may be deemed to be "interested"
persons of the Fund as that term is defined in the 1940 Act.
**Messrs. Cooney, Morris, Patterson, Peters and Storey serve as members of
the Audit Committee of the Fund.
20
<PAGE>
The Trustees and officers of the Trust own less than 1% of the outstanding
shares of the Trust. The Trust pays the fees for unaffiliated Trustees.
The Board of Trustees was elected at a Shareholder meeting on May 16, 1997
and therefore have not received compensation from the Trust for a full
fiscal year.
<TABLE>
<CAPTION>
==================================================================================================================================
Total
Compensation
From
Registrant
and Fund
Aggregate Pension or Complex*
Compensation From Retirement Estimated Paid to
Registrant for the Benefits Annual Trustees for
Name of Person, Fiscal Period from Accrued as Part Benefits the Fiscal
Position May 16, 1997 to of Fund Upon Period from
October 31, 1997 Expenses Retirement May 16, 1997
to
October 31,
1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John T. Cooney $1426 N/A N/A $1426 for
services on 1
board
- ----------------------------------------------------------------------------------------------------------------------------------
Frank E. Morris $1426 N/A N/A $1426 for
services on 1
board
- ----------------------------------------------------------------------------------------------------------------------------------
Robert Patterson $1426 N/A N/A $1426 for
services on 1
board
- ----------------------------------------------------------------------------------------------------------------------------------
Eugene B. Peters $1426 N/A N/A $1426 for
services on 1
board
- ----------------------------------------------------------------------------------------------------------------------------------
James M. Storey, Esq. $1426 N/A N/A $1426 for
services on 1
board
- ----------------------------------------------------------------------------------------------------------------------------------
William M. Doran, Esq. N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Robert A. Nesher N/A N/A N/A N/A
==================================================================================================================================
</TABLE>
*The Trust is the only investment company in the "Fund Complex."
Officers and Trustees own less than 1% of the Trust's outstanding shares.
Trustee Liability
The Trust's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, they are
not protected against any
21
<PAGE>
liability to which they would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
Investment Advisory Services
---------------------------------------------------------------------------
Adviser to the Funds
The Funds' investment adviser is Compass Bank, an Alabama state banking
corporation (the "Adviser"). The Adviser is a wholly-owned subsidiary of
Compass Bancshares, Inc. ("Bancshares"), a bank holding company organized
under the laws of Delaware.
The Adviser shall not be liable to the Trust, a Fund, or any shareholder of
a Fund for any losses that may be sustained in the purchase, holding, or
sale of any security, or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Trust.
Because of the internal controls maintained by the Adviser to restrict the
flow of non-public information, Fund investments are typically made without
any knowledge of the Adviser's or its affiliates' lending relationships
with an issuer.
Advisory Fees
For its advisory services, Compass Bank receives an annual investment
advisory fee as described in the prospectuses.
For the fiscal years ended October 31, 1995, 1996 and 1997, the Funds paid
the following advisory fees:
<TABLE>
<CAPTION>
==================================================================================================================================
Fund Fees Paid Fee Waivers
---------------------------------------------------------------------------------------------------------
1995 1996 1997 1995 1996 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Money Market $779,414 $646,650 $490,590 $188,477 $0 $166,107
Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Bond Fund $434,754 $411,493 $478,461 $179,019 $137,165 $68,168
- ---------------------------------------------------------------------------------------------------------------------------------
Equity Fund * * $691,952 * * $0
==================================================================================================================================
</TABLE>
* An asterisk indicates that the Fund had not commenced operations as of
the period indicated.
22
<PAGE>
Brokerage Transactions
---------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the Adviser will generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Trustees. The Adviser may select brokers and dealers who offer brokerage
and research services. These services may be furnished directly to the
Funds or to the Adviser and may include: advice as to the advisability of
investing in securities; security analysis and reports; economic studies;
industry studies; receipt of quotations for portfolio evaluations; and
similar services. Research services provided by brokers and dealers may be
used by the Adviser or its affiliates in advising the Funds and other
accounts. To the extent that receipt of these services may supplant
services for which the Adviser or its affiliates might otherwise have paid,
it would tend to reduce their expenses. The Adviser and its affiliates
exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided. Although investment decisions for the Funds are made
independently from those of the other accounts managed by the Adviser,
investments of the type the Funds may make may also be made by those other
accounts. When a Fund and one or more other accounts managed by the Adviser
are prepared to invest in, or desire to dispose of, the same security,
available investments or opportunities for sales will be allocated in a
manner believed by the Adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by a Fund or the
size of the position obtained or disposed of by the Fund. In other cases,
however, it is believed that coordination and the ability to participate in
volume transactions will be to the benefit of the Fund.
For the fiscal year ended October 31, 1997, the following commissions were
paid on brokerage transactions, pursuant to an agreement or understanding,
to brokers because of research services provided by the brokers:
<TABLE>
<CAPTION>
==================================================================================================================================
Fund Total Dollar Amount of Total Dollar Amount of Transactions
Brokerage Commissions Involving Directed Brokerage
for Research Services Commissions for Research Services
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Money Market Fund $0 $0
- ----------------------------------------------------------------------------------------------------------------------------------
Bond Fund $0 $0
- ----------------------------------------------------------------------------------------------------------------------------------
Equity Fund $259,247 $245,107,815
==================================================================================================================================
</TABLE>
23
<PAGE>
For the fiscal years indicated, the Funds paid the following brokerage
commissions:
<TABLE>
<CAPTION>
====================================================================================================================================
% of Total % of Total
Total $ Amount of Brokerage Brokerage Brokerage
Fund Total $ Amount of Brokerage Commissions Paid to Affiliated Commissions Paid Transactions
Commissions Paid Brokers to the Affiliated Effected Through
Brokers Affiliated Brokers
------------------------------------------------------------------------------------------------------
1995 1996 1997 1995 1996 1997 1997 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market Fund N/A N/A N/A N/A N/A N/A N/A 0
- ------------------------------------------------------------------------------------------------------------------------------------
Bond Fund N/A N/A N/A N/A N/A N/A N/A 0
- ------------------------------------------------------------------------------------------------------------------------------------
Equity Fund * * $332,823 * * $0 0 0
====================================================================================================================================
</TABLE>
* An asterisk indicates that the Fund had not commenced operations as of
the period indicated.
"Regular brokers or dealers" of the Trust are the ten brokers or dealers
that, during the most recent fiscal year, (i) received the greatest dollar
amounts of brokerage commissions from the Trust's portfolio transactions,
(ii) engaged as principal in the largest dollar amounts of portfolio
transactions of the Trust, or (iii) sold the largest dollar amounts of the
Trust's shares. At October 31, 1997, the following Funds held securities of
the Trust's "regular brokers or dealers" as follows: the Bond Fund held
repurchase agreements valued at $1,159,000 at the fiscal year end with
Merrill Lynch; the Equity Fund held repurchase agreements valued at
$3,146,000 with Merrill Lynch at the fiscal year end; and the Money Market
Fund held repurchase agreements valued at $16,918,000 with Merrill Lynch at
the fiscal year end.
Other Services
---------------------------------------------------------------------------
Fund Administration
The Trust and SEI Fund Resources (the "Administrator") have entered into an
administration agreement (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 a Fund in connection with the matters to which the Administration
Agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Administrator in the
performance of its duties or from reckless disregard by it of its duties
and obligations thereunder. The Administration Agreement shall remain in
effect with respect to the Trust for three years.
The Administrator, a Delaware business trust, has its principal business
offices at Oaks, Pennsylvania 19456. SEI Investments Management Corporation
("SIMC"), a wholly-owned subsidiary of SEI Investments, is the owner of
all
24
<PAGE>
beneficial interests in the Administrator. SEI Investments and its
subsidiaries and affiliates, including the Administrator, are leading
providers of funds evaluation services, trust accounting systems, and
brokerage and information services to financial institutions, institutional
investors, and money managers. The Administrator and its affiliates also
serve as administrator or sub-administrator to the following other mutual
funds: The Achievement Funds Trust, The Advisors' Inner Circle Fund, The
Arbor Fund, ARK Funds, Bishop Street Funds, Boston 1784 Funds(R),
CoreFunds, Inc., CrestFunds, Inc., CUFUND, FMB Funds, Inc., First American
Funds, Inc., First American Investment Funds, Inc., First American Strategy
Funds, Inc., HighMark Funds, Marquis Funds(R), Monitor Funds, Morgan
Grenfell Investment Trust, PBHG Funds, Inc., The PBHG Insurance Series
Fund, Inc., The Pillar Funds, Santa Barbara Group of Mutual Funds, Inc.,
SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI
Institutional Investments Trust, SEI Institutional Managed Trust, SEI
International Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI
Classic Funds, STI Classic Variable Trust, and TIP Funds.
For the fiscal year ended October 31, 1997, the Administrator (since June
9, 1997) earned $149,922, $96,779 and $186,608 for the Money Market, Bond
Fund and the Equity Fund, respectively, of which $37,808, $0 and $0 were
voluntarily waived. Federated Administrative Services, a subsidiary of
Federated Investors, previously provided administrative personnel and
services to the Money Market and Bond Funds. For the fiscal years ended
October 31, 1997 (until June 9, 1997), 1996 and 1995, the Money Market Fund
incurred $162,059, $230,264 and $271,773, respectively, for administrative
services, on which there were no voluntary fee waivers. For the fiscal
years ended October 31, 1997 (until June 9, 1997), 1996 and 1995, the Bond
Fund incurred $62, 443, $78,143 and $80,898, respectively, for
administrative services, on which there were no voluntary fee waivers.
Distributor
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned
subsidiary of SEI Investments, and the Trust are parties to a distribution
agreement (the "Distribution Agreement") which applies to each Fund's
classes of shares.
The Non-Money Market Funds imposed a front-end sales charge upon their
Investment Shares in the amounts shown for the fiscal years ended October
31, 1995, 1996 and 1997:
25
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
Fund Dollar Amount of Loads Dollar Amount of Loads
Retained by SEI Investments
------------------------------------------------------------------------------------------------------
1995 1996 1997 1995 1996 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bond Fund N/A N/A **$1,431 N/A N/A $0
- ----------------------------------------------------------------------------------------------------------------------------------
Equity Fund * * $0 * * $0
==================================================================================================================================
</TABLE>
* An asterisk indicates that the Fund had not commenced operations as of
the periods indicated.
** Since 6/9/97
Custodian
Compass Bank, Birmingham, Alabama, which is also the Adviser, is custodian
for the securities and cash of the Funds for which it receives an annual
fee of 0.02% of each Fund's average aggregate daily net assets and is
reimbursed for its out-of-pocket expenses.
Transfer Agent and Servicing Agent
State Street Bank and Trust Company (the "Transfer Agent") serves as
transfer agent for the Trust and Boston Financial Data Services, Inc. (the
"Servicing Agent") serves as the Trust's servicing agent. The fee paid to
the Transfer Agent is based upon the size, type and number of accounts and
transactions made by shareholders. The Transfer Agent pays the Servicing
Agent's compensation.
Independent Auditors
The independent auditors for the Trust are Deloitte & Touche LLP,
Pittsburgh, Pennsylvania.
Purchasing Shares
--------------------------------------------------------------------------
Shares are sold at their net asset value with any applicable sales charge
on days when the New York Stock Exchange (the "NYSE") is open for business
and, with respect to the Money Market Fund, days when both the NYSE and the
Federal Reserve are open for business, except for federal or state holidays
restricting wire transfers. The procedures for purchasing shares of the
Funds is explained in the appropriate prospectus under (i) "Investing in
Shares" for the Non-Money Market Funds; "Investing in Investment Shares"
for the Investment Shares of the Money Market Fund; and "Investing in
Institutional Shares" for the Institutional Shares of the Money Market
Fund.
The Adviser, Compass Brokerage, Inc. and the other affiliates of Bancshares
which provide shareholder and administrative services to the Fund sometimes
are referred herein as "Compass."
26
<PAGE>
Distribution and Shareholder Services Plans
The Trust has adopted a Plan for the Investment Shares of the Non-Money
Market Funds pursuant to Rule 12b-1 (the "12b-1 Plan") which was
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940. The 12b-1 Plan provides for payment of fees to finance
any activity which is principally intended to result in the sale of a
Fund's shares subject to the 12b-1 Plan. Such activities may include the
advertising and marketing of shares; preparing, printing and distributing
prospectuses and sales literature to prospective shareholders, brokers or
administrators; and implementing and operating the 12b-1 Plan. Pursuant to
the 12b-1 Plan, the Distributor may pay fees to brokers for distribution
and administrative services and to administrators for administrative
services as to shares.
With respect to the Investment Service Shares of the Money Market Fund, the
Trust has adopted a Shareholder Service Plan (the "Service Plan"). Pursuant
to the Service Plan, the Distributor may pay fees to administrators for
administrative services as to Shares.
The administrative services are provided by a representative who has
knowledge of the shareholder's particular circumstances and goals, and
include, but are not limited to: communicating account openings;
communicating account closings; entering purchase transactions; entering
redemption transactions; providing or arranging to provide accounting
support for all transactions; wiring funds and receiving funds for Share
purchases and redemptions; confirming and reconciling all transactions;
reviewing the activity in Fund accounts; and providing training and
supervision of broker personnel; posting and reinvesting dividends to Fund
accounts or arranging for this service to be performed by the Trust's
transfer agent; and maintaining and distributing current copies of
prospectuses and shareholder reports to the beneficial owners of Shares and
prospective shareholders.
The Trustees expect that the adoption of the 12b-1 Plan will result in the
sale of a sufficient number of shares so as to allow the Non-Money Market
Funds to achieve economic viability. It is also anticipated that an
increase in the size of a Fund will facilitate more efficient portfolio
management and assist the Fund in seeking to achieve its investment
objective.
For the fiscal year ended October 31, 1997, brokers and administrators
(financial institutions) were entitled to receive fees from the Bond Fund
in the amount of $89,000, of which $89,000 were voluntarily waived,
pursuant to the 12b-1 Plan. For the fiscal year ended October 31, 1997, the
Investment Shares of the Non-Money Market Funds incurred the following
distribution expenses:
27
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
Total Total
Distribution Distribution Sales Printing Other
Fund Expenses Expenses Expenses Costs Costs
(as a % of
net assets)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Bond Fund N/A .00%* N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Equity Fund** N/A .25% N/A N/A N/A
==================================================================================================================================
</TABLE>
* Reflects voluntary fee waiver in effect for the period indicated.
** Investment Shares of the Fund had not commenced operations as of the
period indicated.
Prior to June 9, 1997, the Money Market Fund's Investment Shares had a Rule
12b-1 plan. For the period November 1, 1996 through June 9, 1997, brokers
and administrators (financial institutions) were entitled to receive fees
from the Money Market Fund's in the amount of $44,000 of which $14,000 were
voluntarily waived, pursuant to the prior 12b- 1 plan. For the fiscal year
ended October 31, 1997, the Investment Service Shares of the Money Market
Fund were subject to shareholder servicing fees for which the Money Market
Fund paid under its Service Plan of $143,000, of which $0 was voluntarily
waived.
Conversion to Federal Funds
It is each Fund's policy to be as fully invested as possible so that
maximum interest may be earned. To this end, all payments from shareholders
must be in federal funds or be converted into federal funds.
Determining Net Asset Value
--------------------------------------------------------------------------
MONEY MARKET FUND
The Money Market Fund attempts to stabilize the value of a Share at $1.00.
Net asset value is calculated on days on which both the New York Stock
Exchange and the Federal Reserve wire system are open for business.
Currently, the Fund is closed for business when the following holidays are
observed: New Year's Day, Martin Luther King Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans'
Day, Thanksgiving and Christmas.
Use of the Amortized Cost Method
The Trustees have decided that the best method for determining the value of
portfolio instruments for the Money Market Fund is amortized cost. Under
this method, portfolio instruments are valued at the acquisition cost as
adjusted for amortization of premium or accumulation of discount rather
than at current market value.
28
<PAGE>
The Money Market Fund's use of the amortized cost method of valuing
portfolio instruments depends on its compliance with certain conditions in
Rule 2a-7 (the "Rule") promulgated by the SEC under the Investment Company
Act of 1940. Under the Rule, the Trustees must establish procedures
reasonably designed to stabilize the net asset value per Share, as computed
for purposes of distribution and redemption, at $1.00 per Share, taking
into account current market conditions and the Fund's investment objective.
Under the Rule, the Money Market Fund is permitted to purchase instruments
which are subject to demand features or standby commitments. As defined by
the Rule, a demand feature entitles the Fund to receive the principal
amount of the instrument from the issuer or a third party on (1) no more
than 30 days' notice or (2) at specified intervals not exceeding one year
on no more than 30 days' notice. A standby commitment entitles the Fund to
achieve same day settlement and to receive an exercise price equal to the
amortized cost of the underlying instrument plus accrued interest at the
time of exercise.
Monitoring Procedures
The Trustees' procedures include monitoring the relationship between
the amortized cost value per Share and the net asset value per Share
based upon available indications of market value. The Trustees will
decide what, if any, steps should be taken if there is a difference
of more than 0.5% between the two values. The Trustees will take any
steps they consider appropriate (such as redemption in kind or
shortening the average portfolio maturity) to minimize any material
dilution or other unfair results arising from differences between the
two methods of determining net asset value.
Investment Restrictions
The Rule requires that the Money Market Fund limit its investments to
instruments that, in the opinion of the Trustees, present minimal
credit risks and have received the requisite rating from one or more
NRSRO. If the instruments are not rated, the Trustees must determine
that they are of comparable quality. The Rule also requires the Fund
to maintain a dollar-weighted average portfolio maturity (not more
than 90 days) appropriate to the objective of maintaining a stable
net asset value of $1.00 per Share. Except as allowed under the Rule,
no instrument with a remaining maturity of more than thirteen months
can be purchased by the Fund.
Should the disposition of a portfolio security result in a dollar-
weighted average portfolio maturity of more than 90 days, the Money
Market Fund will invest its available cash to reduce the average
maturity to 90 days or less as soon as possible.
The Money Market Fund may attempt to increase yield by trading portfolio
securities to take advantage of short-term market variations. Under the
amortized cost method of
29
<PAGE>
valuation, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio.
In periods of declining interest rates, the indicated daily yield on Shares
of the Money Market Fund, computed by dividing the annualized daily income
on the Fund's portfolio by the net asset value computed as above, may tend
to be higher than a similar computation made by using a method of valuation
based upon market prices and estimates.
In periods of rising interest rates, the indicated daily yield on Shares of
the Money Market Fund computed the same way may tend to be lower than a
similar computation made by using a method of calculation based upon market
prices and estimates.
NON-MONEY MARKET FUNDS
Net asset value generally changes each day for each Non-Money Market Fund.
Net asset value is calculated on days on which the New York Stock Exchange
is open for business. Currently the Funds are closed when the following
holidays are observed: New Year's Day, Martin Luther King Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
Determining Market Value of Securities
Market values of a Non-Money Market Fund's portfolio securities are
determined as follows:
. as provided by an independent pricing service;
. for short-term obligations, according to the mean between bid and
asked prices, as furnished by an independent pricing service, or
for short-term obligations with remaining maturities of less than
60 days at the time of purchase, at amortized cost unless the
Trustees determine this is not fair value; or
. at fair value as determined in good faith by the Trustees.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices. Pricing services may consider:
. yield;
. quality;
30
<PAGE>
. coupon rate;
. maturity;
. type of issue;
. trading characteristics; and
. other market data.
Over-the-counter put options will be valued at the mean between the bid and
the asked prices. Covered call options will be valued at the last sale
price on the national exchange on which such option is traded. Unlisted
call options will be valued at the latest bid price as provided by brokers.
Redeeming Shares
---------------------------------------------------------------------------
Each Fund redeems shares at the next computed net asset value after the
Transfer Agent receives the redemption request. Redemption procedures are
explained in the Money Market Fund's prospectuses under "Redeeming
Investment Service Shares" and "Redeeming Institutional Shares," as
appropriate, and in the Non-Money Market Fund's prospectus under "Redeeming
Shares." Although the Transfer Agent does not charge for telephone
redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.
Redemption in Kind
Although the Trust intends to redeem shares in cash, it reserves the right
under certain circumstances to pay the redemption price in whole or in part
by a distribution of securities from each respective Fund's portfolio.
Redemption in kind will be made in conformity with applicable Securities
and Exchange Commission rules, taking such securities at the same value
employed in determining net asset value and selecting the securities in a
manner the Trustees determine to be fair and equitable.
The Trust has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940 under which the Trust is obligated to redeem shares for
any one shareholder in cash only up to the lesser of $250,000 or 1% of a
Fund's net asset value during any 90-day period.
31
<PAGE>
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them
before their maturity could receive less than the redemption value of their
securities and could incur certain transaction costs.
Massachusetts Partnership Law
---------------------------------------------------------------------------
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or
obligations of the Trust. These documents require notice of this disclaimer
to be given in each agreement, obligation or instrument that the Trust or
its Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the
Trust's obligations, the Trust is required by the Declaration of Trust to
use its property to protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a shareholder
for any act or obligation of the Trust. Therefore, financial loss resulting
from liability as a shareholder will occur only if the Trust cannot meet
its obligations to indemnify shareholders and pay judgments against them.
Tax Status
---------------------------------------------------------------------------
Each Fund intends to pay no federal income tax because it expects to meet
the requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, a Fund must,
among other requirements:
. derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
. invest in securities within certain statutory limits; and
. distribute to its shareholders at least 90% of its net income earned
during the year.
Shareholders are subject to federal income tax on dividends and capital
gains, if any, received as cash or additional shares.
No portion of any income dividend paid by a Fund is eligible for the
dividends received deduction available to corporations. These dividends,
and any short-term capital gains, are taxable as ordinary income.
32
<PAGE>
Capital Gains
Shareholders will pay federal tax at capital gains rates on long-term
capital gains, if any, distributed to them regardless of how long they
have held the Fund shares. The Money Market Fund generally does not
expect to realize net long-term capital gains. Capital gains, if any,
will be distributed at least once every 12 months.
Fund Ownership
---------------------------------------------------------------------------
As of January 16, 1998, the following persons were the only persons who
were record holders of 5% or more of the shares of the Money Market Fund:
Compass Bank, Attn: Trust Oper. 3rd Level S, P.O. Box 10566, Birmingham, AL
35296-0001, 78.29% (Investment Service Shares) Compass Bank, Attn: Trust
Oper. 3rd Level S, P.O. Box 10566, Birmingham, AL 35296-0001, 100%
(Institutional Shares);
As of January 16, 1998, the following persons were the only persons who
were record holders of 5% or more of the shares of the Bond Fund: Blue
Cross Blue Shield of Alabama, P.O. Box 995, Birmingham, Alabama, 35.67%
(Investment Shares); Compass Bank, Attn: Trust Oper. 3rd Level S, P.O. Box
10566, Birmingham, AL 35296-0001, 100% (Institutional Shares).
As of January 16, 1998, the following persons were the only persons who
were record holders of 5% or more of the shares of the Equity Fund: BSC as
Service Agent for DXP Enterprises Inc., 1375 PeachTree St. STE 300,
Atlanta, GA 30309-3112, 52.60% and BSC as Service Agent for TEE Jay
Manufacturing Co., 1375 Peachtree St. STE 300, Atlanta, GA 30309-3112,
47.27% (Investment Shares); Compass Bank, Attn: Trust Oper. 3rd Level S,
P.O. Box 10566, Birmingham, AL 35296-0001, 99.56% (Institutional Shares).
33
<PAGE>
Total Return
---------------------------------------------------------------------------
The average total returns for the Funds from inception through October 31,
1997 were as follows:
<TABLE>
<CAPTION>
====================================================================================================================
Fund Class/(1)/ Average Annual Total Return
====================================================
One Year Five Ten Since
Years Years Inception*
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market Institutional Shares N/A N/A N/A **5.26
Fund ----------------------------------------------------------------------------------------
Investment Service Shares 4.97 4.30 N/A 4.90
- --------------------------------------------------------------------------------------------------------------------
Bond Fund Institutional Shares N/A N/A N/A **9.58
----------------------------------------------------------------------------------------
Investment Shares (no load) 6.41 5.31 N/A 5.94
----------------------------------------------------------------------------------------
Investment Shares (load) 2.13 4.45 N/A 5.15
- --------------------------------------------------------------------------------------------------------------------
Institutional Shares N/A N/A N/A **7.89
Equity Fund ----------------------------------------------------------------------------------------
Investment Shares (no load) N/A N/A N/A N/A
----------------------------------------------------------------------------------------
Investment Shares (load) N/A N/A N/A N/A
====================================================================================================================
</TABLE>
* Institutional Shares of the Money Market Fund were initially offered to
the public on June 9, 1997. Investment Service Shares (formerly, Trust
Shares) of the Money Market Fund were initially offered to the public on
February 5, 1990. Prior to June 9, 1997, Investment Service Shares (Trust
Shares) of the Money Market Fund were not subject to Rule 12b-1 or
shareholder servicing fees. Investment Shares of the Bond Fund were
initially offered to the public on April 20, 1992. Institutional Shares of
the Bond Fund and Institutional Shares of the Equity Fund were initially
offered to the public on June 13, 1997. Investment Shares of the Equity
Fund were not offered to the public during the fiscal year ended October
31, 1997.
** Annualized.
The average annual total return for a Fund is the average compounded rate
of return for a given period that would equate a $1,000 initial investment
to the ending redeemable value of that investment. The ending redeemable
value is computed by multiplying the number of shares owned at the end of
the period by the offering price per share at the end of the period. The
number of shares owned at the end of the period is based on the number of
shares purchased at the beginning of the period with $1,000, less any
applicable sales charge, adjusted over the period by any additional shares,
assuming the monthly reinvestment of all dividends and distributions. Total
return may also be shown without giving effect to any sales charge.
34
<PAGE>
Yield
---------------------------------------------------------------------------
MONEY MARKET FUND
The yield for the Institutional Shares of the Money Market Fund for the
seven-day period ended October 31, 1997 was 5.25%. The yield for the
Investment Services Shares for the same period was 5.00%.
The Money Market Fund calculates the yield for both classes of shares
daily, based upon the seven days ending on the day of the calculation,
called the "base period." This yield is computed by:
. determining the net change in the value of a hypothetical account with
a balance of one Share at the beginning of the base period, with the
net change excluding capital changes but including the value of any
additional Shares purchased with dividends earned from the original one
Share and all dividends declared on the original and any purchased
Shares;
. dividing the net change in the account's value by the value of the
account at the beginning of the base period to determine the base
period return; and
. multiplying the base period return by (365/7).
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the
Fund, the performance will be reduced for those shareholders paying those
fees.
THE BOND FUND
The Bond Fund's yield for the thirty-day period ended October 31, 1997 was
as follows: Institutional Shares 5.04% and Investment Shares 4.83%.
The yield for the Bond Fund is determined by dividing the net investment
income per share (as defined by the Securities and Exchange Commission)
earned by the Fund over a thirty-day period by the maximum offering price
per share of the Fund on the last day of the period. This value is then
annualized using semi-annual compounding. This means that the amount of
income generated during the thirty-day period is assumed to be generated
each month over a twelve-month period and is reinvested every six months.
The yield does not necessarily reflect income actually earned by the Fund
because of certain adjustments required by the Securities and Exchange
Commission and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
35
<PAGE>
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the
Fund, performance will be reduced for those shareholders paying those fees.
Effective Yield
---------------------------------------------------------------------------
The effective yield for Investment Service Shares of the Money Market Fund
for the seven-day period ended October 31, 1997 was 5.12%. The effective
yield for the Institutional Shares of the Money Market Fund for the same
period was 5.38%.
The Money Market Fund's effective yield for both classes of shares is
computed by compounding the unannualized base period return by:
. adding 1 to the base period return;
. raising the sum to the 365/7th power; and
. subtracting 1 from the result.
Performance Comparisons
---------------------------------------------------------------------------
A Fund's performance of both classes of shares depends upon such variables
as:
. portfolio quality;
. average portfolio maturity;
. type of instruments in which the portfolio is invested;
. changes in interest rates and market value of portfolio securities;
. changes in the Fund's (or class's) expenses;
. the relative amount of Fund cash flow; and
. various other factors.
A Fund's performance fluctuates on a daily basis largely because net
earnings and, with respect to the Non-Money Market Funds, because their
offering price per share fluctuate
36
<PAGE>
daily. Both net earnings and offering price per share are factors in the
computation of yield and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of a Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Funds
use in advertising may include:
. Lipper Analytical Services, Inc. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any change
in offering price over a specific period of time. From time to time,
the Funds will quote their Lipper rankings in advertising and sales
literature. The Money Market Fund will use the Lipper "Money Market
Instrument Funds" category; the Bond Fund will use the "Short-
Intermediate Government Funds" and/or "Short-Intermediate Corporate
Funds" categories; and the Equity Fund will use the "Growth and
Income Funds" category.
. The Salomon Brothers Total Rate-of-Return Index for mortgage pass
through securities reflects the entire mortgage pass through market
and reflects their special characteristics. The index represents
data aggregated by mortgage pool and coupon within a given sector. A
market weighted portfolio is constructed considering all newly
created pools and coupons.
. The Merrill Lynch Taxable Bond Indices include U.S. Treasury and
agency issues and were designed to keep pace with structural changes
in the fixed income market. The performance indicators capture all
rating changes, new issues, and any structural changes of the entire
market.
. Morningstar, Inc., an independent rating service, is the publisher
of the bi-weekly Mutual Fund Values. Mutual Fund Values rates more
than 1,000 NASDAQ-listed mutual funds of all types, according to
their risk-adjusted returns. The maximum rating is five stars, and
ratings are effective for two weeks.
. Lehman Brothers Intermediate Government/Corporate Bond Index is an
unmanaged index comprised of all approximately 5,000 issues which
include: non-convertible bonds publicly issued by the U.S.
Government or its agencies; corporate bonds guaranteed by the U.S.
Government and quasi-federal corporations; and publicly issued,
fixed-rate, non-convertible domestic bonds of companies in industry,
public utilities, and finance with maturities between 1 and
37
<PAGE>
9.99 years. Total return is based on price appreciation/depreciation
and income as a percentage of the original investment. Indices are
rebalanced monthly by market capitalization.
. Lipper Growth & Income Fund Index is a net asset value weighted
index of the 30 largest funds with a growth and income investment
objective. It is calculated daily with adjustments for income
dividends and capital gains distribution as of the ex-dividend
dates.
. Lipper Money Market Instrument Fund Index is a net asset value
weighted index of the 10 largest funds with a money market
investment objective. It is calculated daily with adjustments for
income dividends and capital gains distribution as of the ex-
dividend dates.
. Lipper Short-Intermediate Government Fund Index is a net asset value
weighted index of the 10 largest funds with a short-intermediate
government investment objective. It is calculated daily with
adjustments for income dividends and capital gains distribution as
of the ex-dividend dates.
. Lipper Short-Intermediate Corporate Fund Index is a net asset value
weighted index of the 10 largest funds with a short-intermediate
corporate investment objective. It is calculated daily with
adjustments for income dividends and capital gains distribution as
of the ex-dividend dates.
. S & P Small Cap 600 Index -- a capitalization-weighted index of 600
domestic stocks having market capitalizations which reside within
the 50th and the 83rd percentiles of the market capitalization of
the entire stock market, chosen for certain liquidity
characteristics and for industry representation.
. S&P 500 Index is a portfolio of 500 stocks designed to mimic the
overall equity market's industry weightings. Most, but not all,
large capitalization stocks are in the index. There are also some
small capitalization names in the index. The list is maintained by
Standard & Poor's Corporation. It is market capitalization weighted.
Unlike the Russell indices, there are always 500 names in the S&P
500. Changes are made by Standard & Poor's as needed.
. S&P Mid Cap 400 Index consists of 400 domestic stocks chosen for
market size, liquidity, and industry group representation. It is
also a market-value weighted index and was the first benchmark of
mid cap stock price movement.
. Wilshire 5000 Equity Index measures performance of all US
headquartered equity securities with readily available price data.
Approximately 6,000 capitalization weighted security returns are
used to calculate the index.
. S&P 1500 Index is a combination of the S&P 500, the S&P Mid Cap 400
Index, and the S&P Small Cap 600 Index, it calculates a composite
index based on those 1500 issues.
. Consumer Price Index ("CPI" or "Cost of Living index"), published by
the U.S. Bureau of Labor Statistics -- a statistical measure of
change, over time, in the price of goods and services in major
expenditure groups.
Advertisements and other sales literature for a Fund may quote total
returns which are calculated on non-standardized base periods. These total
returns represent the historic change in the value of an investment in a
Fund based on monthly reinvestment of dividends over a specified period of
time.
38
<PAGE>
Advertisements may quote performance information which does not reflect the
effect of the sales charge.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, a Fund can
compare its performance, or performance for the types of securities in
which it invests, to a variety of other investments, such as bank savings
accounts, certificates of deposit, and Treasury bills.
Economic and Market Information
Advertising and sales literature for a Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on
these developments by Fund portfolio managers and their views and analysis
on how such developments could affect the Fund. In addition, advertising
and sales literature may quote statistics and give general information
about the mutual fund industry, including the growth of the industry, from
sources such as the Investment Company Institute ("ICI"). For example,
according to the ICI, more than 63 million individuals are pursuing their
financial goals through mutual funds. These investors, as well as
businesses and institutions, have entrusted over $3.5 trillion to the 6,368
mutual funds available.
Financial Statements
---------------------------------------------------------------------------
The financial statements of the Funds for the fiscal year ended October 31,
1997, including notes thereto and the report of Deloitte & Touche LLP
thereon are herein incorporated by reference. A copy of the 1997 Annual
Report to Shareholders must accompany the delivery of this Statement of
Additional Information.
39