RETAIL CLASSES
PROSPECTUS
FIRST AMERICAN MUTUAL FUNDS
EQUITY INCOME FUND
680 EAST SWEDESFORD ROAD, WAYNE, PENNSYLVANIA 19087
The Retail Class shares (Class A and Class B) of the Equity Income Fund (the
"Fund") offered by this prospectus represent interests in a professionally
managed, diversified portfolio of First American Mutual Funds (the "Trust"),
an open-end, management investment company (a mutual fund).
The investment objective of the Fund is to achieve long-term growth of
capital and income.
Class A shares are sold at net asset value plus a maximum sales charge of
4.50%, which is reduced on purchases of $50,000 or more. Purchases of $1
million or more of Class A shares are not subject to an initial sales charge,
but a contingent deferred sales charge of 1.00% will be imposed on such
purchases in the event of redemption within 24 months following such
purchase. Class A shares otherwise are redeemed at net asset value without
any additional charge. Class A shares are subject to a Rule 12b-1
distribution and service fee computed at an annual rate of 0.25% of the
average daily net assets of such class.
Class B shares are sold at net asset value without an initial sales charge.
Class B shares are subject to Rule 12b-1 distribution and service fees
computed at an annual rate totaling 1.00% of the average daily net assets of
such class. If Class B shares are redeemed within six years after purchase,
they are subject to a contingent deferred sales charge declining from 5.00%
in the first year to zero after six years. Class B shares automatically
convert into Class A shares approximately eight years after purchase. Class C
shares of the Fund (or "Institutional Class" shares) are not offered by this
prospectus.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, INCLUDING FIRST BANK NATIONAL ASSOCIATION AND ANY OF
ITS AFFILIATES, NOR ARE THEY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. AN INVESTMENT IN
THE FUND INVOLVES INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL,
DUE TO FLUCTUATIONS IN THE FUND'S NET ASSET VALUE.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated August 2,
1994 with the Securities and Exchange Commission. 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, obtain other information, or make inquiries about
the Fund by calling (800) 637-2548, or by writing SEI Financial Management
Corporation, 680 East Swedesford Road, Wayne, Pennsylvania 19087.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Prospectus dated August 16, 1994
TABLE OF CONTENTS
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Topic Page
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Fees and Expenses 3
Financial Highlights 7
General Information 8
Investment Information 8
First American Mutual Funds
Information 12
Administration of the Fund 14
Net Asset Value 15
Investing in the Fund 15
Exchange Privilege 21
Redeeming Shares 22
Shareholder Information 24
Effect of Banking Laws 25
Tax Information 25
Performance Information 26
</TABLE>
FEES AND EXPENSES
CLASS A
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SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases 4.50%
(as a percentage of offering price)(1)
Maximum Sales Load Imposed on Reinvested Dividends None
(as a percentage of offering price)
Deferred Sales Load (as a percentage of original None
purchase price or redemption proceeds, as applicable)
Redemption Fee (as a percentage of amount redeemed, if None
applicable)
Exchange Fee. None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of average net assets)
Management Fee (after waiver)(2) 0.40%
12b-1 Fees(3) 0.00%
Total Other Expenses (after waiver)(2) 0.35%
TOTAL FUND OPERATING EXPENSES (AFTER WAIVER)(4) 0.75%
</TABLE>
(1) Purchases of $1 million or more of Class A shares are not subject to an
initial sales charge, but a contingent deferred sales charge of 1.00% will be
imposed on such purchases in the event of redemption within 24 months
following such purchase. See "Investing in the Fund -- Alternative Sales
Charge Options -- Class A Shares -- What Class A Shares Cost."
(2) The estimated management fee and total other expenses have been reduced
to reflect the anticipated voluntary waivers by the investment adviser and
the administrator. The adviser and the administrator can terminate these
voluntary waivers at any time at their sole discretion. The maximum
management fee and administrative fee are 0.70% and 0.20%, respectively,
absent the anticipated voluntary waivers by the adviser and the
administrator. Total other expenses absent such waivers are estimated to be
0.40%.
(3) As of the date of this prospectus, the Fund is not paying or accruing
12b-1 fees. The Fund can pay up to 0.25% as a 12b-1 fee to the distributor.
(4) The Annual Fund Operating Expenses were 0.75% for the period ending
November 30, 1993. The Annual Fund Operating Expenses in the table above are
based on estimated annualized expenses expected during the fiscal period
ending September 30, 1994 (the Fund's new fiscal year end). Total Fund
Operating Expenses are estimated to be 1.35% absent the anticipated voluntary
waivers described above in note (2).
* Expenses in this table are estimated based on average annualized expenses
expected to be incurred during the fiscal period ending September 30, 1994.
During the course of this period, expenses may be more or less than the
average amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS
AND EXPENSES, SEE "FIRST AMERICAN MUTUAL FUNDS INFORMATION" AND "INVESTING IN
THE FUND."
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EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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You would pay the following expenses on a $1,000 $52 $68 $85 $134
investment assuming (1) 5% annual return; (2)
redemption at the end of each time period; and (3)
payment of the maximum sales load of 4.50%. The Fund
charges no redemption fees
</TABLE>
Absent fee waivers, the dollar amounts for the 1, 3, 5 and 10 year periods
above would be $58, $86, $116 and $200.
The information set forth in the foregoing table and example relates only to
Class A shares. The rules of the Securities and Exchange Commission require
that the maximum sales charge be reflected in the above table. However,
certain investors may qualify for reduced sales charges. See "Investing in
the Fund -- Alternative Sales Charge Options -- Class A Shares."
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED ANNUALIZED DATA FOR THE FISCAL PERIOD ENDING
SEPTEMBER 30, 1994.
FEES AND EXPENSES
CLASS B
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SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases None
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested Dividends None
(as a percentage of offering price)
Maximum Contingent Deferred Sales Charge 5.00%
(as a percentage of original purchase price
or redemption proceeds, as applicable)
Redemption Fee (as a percentage of amount redeemed, if None
applicable)
Exchange Fee. None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of average net assets)
Management Fee (after waiver)(1) 0.40%
12b-1 Fees 0.75%
Service Fee 0.25%
Total Other Expenses (after waiver)(1) 0.35%
TOTAL FUND OPERATING EXPENSES (AFTER WAIVER)(2) 1.75%
</TABLE>
(1) The estimated management fee and total other expenses have been reduced
to reflect the anticipated voluntary waivers by the investment adviser and
the administrator. The adviser and the administrator can terminate these
voluntary waivers at any time in their sole discretion. The maximum
management fee and administrative fee are 0.70% and 0.20%, respectively,
absent the anticipated voluntary waivers by the adviser and the
administrator. Total other expenses absent such waivers are estimated to be
0.40%.
(2) The Annual Fund Operating Expenses in the table above are based on
estimated annualized expenses expected during the fiscal period ending
September 30, 1994 (the Fund's new fiscal year end). Total Annual Fund
Operating Expenses for Class B shares are estimated to be 2.10% absent the
anticipated voluntary waivers described above in note (1).
* Expenses in this table are estimated based on average annualized expenses
expected to be incurred by Class B shares during the fiscal period ending
September 30, 1994. During the course of this period, expenses may be more or
less than the average amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A CLASS B SHAREHOLDER OF THE FUND WILL BEAR,
EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS
COSTS AND EXPENSES, SEE "FIRST AMERICAN MUTUAL FUNDS INFORMATION" AND
"INVESTING IN THE FUND."
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EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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You would pay the following expenses on a $1,000 $69 $99 $118 $206
investment in class b shares, assuming (1) 5% annual
return, and (2) payment of the maximum contingent
deferred sales charge of 5.00% In year 1, 4.00% in
year 3, 2.00% in year 5 and 0.00% In year 10. The
Fund charges no redemption fees
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Absent fee waivers, the dollar amounts for the 1, 3, 5 and 10 year periods
above would be $73, $109, $136 and $243.
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED ANNUALIZED DATA FOR THE FISCAL PERIOD ENDING
SEPTEMBER 30, 1994.
The information set forth in the foregoing table and example relates only to
Class B shares.
Long-term shareholders may pay more than the equivalent of the maximum
front-end sales charges otherwise permitted by National Association of
Securities Dealers, Inc. rules.
EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following information relates only to the Class A shares of the Fund. No
Class B or Class C shares were outstanding during the year ended November 30,
1993.
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Year Ended
November 30,
1993*
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NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.57
Net realized and unrealized loss on investments (0.14)
Total from investment operations 0.43
LESS DISTRIBUTIONS
Dividends to shareholders from net investment (0.56)
income
NET ASSET VALUE, END OF PERIOD $ 9.87
TOTAL RETURN** 4.44%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.75%(a)
Net investment income 6.09%(a)
Expense waiver/reimbursement(b) 0.61%(a)
SUPPLEMENTAL DATA
Net assets end of period (000 omitted) $ 28,786
Portfolio turnover rate 68%
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* Reflects operations for the period from December 18, 1992 (date of initial
public investment) to November 30, 1993.
** Based on net asset value which does not reflect the sales load or
redemption fee, if applicable.
(a) Computed on an annualized basis.
(b) This expense decrease is reflected in both the expense and net investment
income ratios shown above.
Further information about the Fund's performance is contained in the Fund's
annual report dated November 30, 1993, which can be obtained free of charge.
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated August 3, 1992. 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.
The Fund is designed primarily for retail and trust customers of First Bank
National Association and its affiliates as a convenient means of
participating in a professionally managed, diversified portfolio investing
primarily in domestic and international equity securities. In most cases, a
minimum initial investment of $1,000 is required. See "Investing in the Fund
- -- Minimum Investment Required."
Fund shares are sold through three separate classes, Class A and Class B (the
"Retail Classes") and Class C (the "Institutional Class"), which provide for
variations in sales charges, distribution costs, voting rights and dividends,
and which may be available to different groups of investors. Except for these
differences among classes, each share of the Fund represents an undivided,
proportionate interest in the Fund. Only Class A and Class B shares are
offered by means of this prospectus.
INVESTMENT INFORMATION
Objective. The investment objective of the Fund is to achieve long-term growth
of capital and income. This investment objective cannot be changed without the
approval of the Fund's shareholders. While there is no assurance that the Fund
will achieve its investment objective, it endeavors to so by following the
investment policies described in this prospectus.
Investment Policies. Under normal market conditions, the Fund will invest at
least 80% of its total assets in equity securities (including common stocks and
securities convertible into or carrying warrants to purchase common stock) of
issuers believed by the Adviser to be characterized by sound management, the
ability to finance expected growth and the ability to pay above average
dividends.
The Fund intends to invest in equity securities that have relatively high
dividend yields, and which, in the Adviser's opinion, will result in a
relatively stable Fund dividend with a growth rate sufficient to maintain the
purchasing power of the income stream. Although the Adviser anticipates that
higher yielding equity securities will generally represent the core holdings of
the Fund, the Fund may invest in lower yielding but higher growth equity
securities to the extent that the Adviser believes such investments are
appropriate to achieve portfolio balance. All securities held by the Fund will
provide current income consistent with the Fund's investment objective of
long-term growth of capital and income.
The Fund may also invest up to 20% of its total assets in debt securities issued
or guaranteed by the U.S. government or any of its agencies or
instrumentalities, nonconvertible preferred stocks, corporate bonds, notes,
warrants and short-term obligations (with maturities of 12 months or less)
consisting of commercial paper (including variable amount master demand notes),
bankers' acceptances, certificates of deposit, repurchase agreements, and demand
and time deposits of banks and saving and loan associations. Investments in
corporate debt securities and nonconvertible preferred stocks will be limited to
securities which are rated at their time of purchase not less than Baa (or
equivalent short-term rating) by Moody's Investor Services, Inc. ("Moody's") or
BBB (or equivalent short-term rating) by Standard & Poor's Corporation
("Standard & Poor's") or another nationally recognized statistical rating
organization, or which are unrated but determined by the Adviser to be of
comparable quality. Securities rated Baa by Moody's or BBB by Standard & Poor's
have speculative characteristics and may have somewhat greater risk of default
than higher rated bonds. A description of Moody's and Standard & Poor's quality
ratings is set forth in the Statement of Additional Information. If any security
invested in by the Fund loses its rating or has its rating reduced after the
Fund has purchased it, the Fund is not required to sell or otherwise dispose of
the security, but may consider doing so. During temporary defensive periods as
determined by the Adviser, the Fund may hold up to 100% of its total assets in
short-term obligations of the types described above. However, to the extent that
the Fund is so invested, it will not be pursuing its investment objective during
that time.
Subject to the foregoing policies, the Fund may also invest up to 25% of its
total assets in foreign debt and equity securities, either directly or through
the purchase of American Depositary Receipts ("ADRs") or European Depositary
Receipts ("EDRs"). The Fund may invest in foreign debt securities that meet the
foregoing quality criteria and may be issued by foreign governments, their
agencies or instrumentalities, supranational entities or by foreign
corporations. The Fund may also invest in securities issued by foreign branches
of U.S. banks and foreign banks, in Canadian commercial paper and in Europaper
(U.S. dollar denominated commercial paper of a foreign issuer). Bank instruments
may include 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, 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. For a discussion of the risks associated with investments in foreign
securities, see "Investment Techniques and Risk Factors -- About Investing in
Foreign Securities."
INVESTMENT TECHNIQUES AND RISK FACTORS
About Repurchase Agreements. A repurchase agreement involves the purchase by the
Fund of securities with the condition that after a stated period of time
(normally only one or two days) the original seller will buy back the same
securities ("collateral") at a predetermined price or yield. Repurchase
agreements involve certain risks not associated with direct investments in
securities. In the event the original seller defaults on its obligation to
repurchase, as a result of its bankruptcy or otherwise, the Fund will seek to
sell the collateral, which action could involve costs or delays. In such case,
the Fund's ability to dispose of the collateral to recover such investment may
be restricted or delayed. While collateral (which may consist of any fixed
income security which is an eligible investment for the Fund executing the
repurchase agreement) will at all times be maintained in an amount equal to the
repurchase price under the agreement (including accrued interest due
thereunder), to the extent proceeds from the sale of collateral were less than
the repurchase price, the Fund would suffer a loss. In no event may the Fund
invest in repurchase agreements maturing more than seven days from the date of
acquisition. The Adviser will monitor creditworthiness of the firms with which
the Fund enters into repurchase agreements.
About Portfolio Transactions. Portfolio transactions in the over-the-counter
market will be effected with market makers or issuers, unless better overall
price and execution are available through a brokerage transaction. It is
anticipated that most of the portfolio transactions involving debt securities
will be executed on a principal basis. Also, with respect to the placement of
portfolio transactions with securities firms, subject to the overall policy to
seek to place portfolio transactions as efficiently as possible and at the best
price, research services and placement of orders by securities firms for the
Fund's shares may be taken into account as a factor in placing portfolio
transactions for the Fund. Additional information relating to portfolio
transactions and brokerage is set forth in the Statement of Additional
Information.
About Lending of Portfolio Securities. In order to generate additional income,
the Fund may lend portfolio securities on a short-term or long-term basis, or
both, representing up to one-third of the value of its total assets to
broker/dealers, banks, or other institutional borrowers of securities. The Fund
will only enter into loan arrangements with broker/dealers, banks, or other
institutions which the Adviser has determined are creditworthy under guidelines
established by the Trustees. In these loan arrangements, the Fund will receive
collateral in the form of cash or United States Government securities equal to
at least 100% of the value of the securities loaned. There may be risks of delay
in recovery of the securities or even loss of rights in the collateral should
the borrower of the securities fail financially. The Fund will pay a portion of
the income earned on the lending transaction to the placing broker and may pay
administrative and custodial fees in connection with these loans.
About 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. In when-issued and delayed delivery transactions,
the Fund relies on the seller to complete the transaction. The seller's failure
to deliver the securities may cause the Fund to miss a price or yield considered
to be advantageous.
About Investing in Foreign Securities. The Fund may invest in foreign
securities. There may be certain risks connected with investing in foreign
securities. These include risks of adverse political and economic developments
(including possible governmental seizure or nationalization of assets), the
possible imposition of exchange controls or other governmental restrictions,
less uniformity in accounting and reporting requirements, the possibility that
there will be less information on such securities and their issuers available to
the public, the difficulty of obtaining or enforcing court judgments abroad,
restrictions on foreign investments in other jurisdictions, difficulties in
effecting the repatriation of capital invested abroad, and difficulties in
transaction settlements and the effect of delay on shareholder equity. Foreign
securities may be subject to foreign taxes, which reduce yield, and may be less
marketable than comparable United States securities. Different risks may also
exist for Eurodollar Certificates of Deposit, Eurodollar Time Deposits and
Yankee Certificates of Deposit 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. The value of the
Fund's investments denominated in foreign currencies will depend on the relative
strengths of those currencies and the United States dollar, and the Fund may be
affected favorably or unfavorably by changes in the exchange rates or exchange
control regulations between foreign currencies and the United States dollar.
Changes in foreign currency exchange rates also may affect the value of
dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed to
shareholders by 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 money and
engage in reverse repurchase agreements in amounts up to one-third of the
value of its total assets and pledge up to 10% of its total assets to secure
such borrowings;
* lend any of its assets except portfolio securities up to one-third of its
total assets; or
* with respect to 75% of its total assets, invest more than 5% in securities
of any one issuer other than cash, cash items, or securities issued and/or
guaranteed by the U.S. government, its agencies or instrumentalities, and
repurchase agreements collateralized by such securities.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
The Fund will not:
* invest more than 10% of its total assets in securities subject to
restrictions on resale under the Securities Act of 1933, except for
commercial paper issued under Section 4(2) of the Securities Act of 1933 and
certain other restricted securities which meet the criteria for liquidity as
established by the Trustees;
* invest more than 15% of its net assets in illiquid securities, including
repurchase agreements providing for settlement more than seven days after
notice, over-the-counter options, and certain restricted securities not
determined by the Trustees to be liquid; or
* invest more than 10% of its total assets in securities of other investment
companies.
FIRST AMERICAN MUTUAL FUNDS INFORMATION
MANAGEMENT OF THE TRUST
Board of Trustees. The Trust is managed by a Board of Trustees. The Trustees are
responsible for managing the Trust's business affairs and for exercising all of
the powers of the Trust except those reserved for the shareholders.
Investment Adviser. Investment decisions for the Fund are made by First Bank
National Association, the Fund's investment adviser (the "Adviser" or "FBNA"),
subject to direction by the Trustees. The Adviser continually conducts
investment research and supervision for the Fund and is responsible for the
selection, purchase, and sale of portfolio instruments, for which it receives an
annual fee from the Fund.
Advisory Fees. The Fund's Adviser receives an annual investment advisory
fee equal to 0.70% of the Fund's average daily net assets. The investment
advisory fee is accrued and paid daily. Prior to March 31, 1994, Boulevard
Bank National Association served as adviser to the Fund, and received an
annual investment advisory fee equal to 0.75% of the Fund's average daily
net assets. The Adviser has undertaken to reimburse the Fund for operating
expenses in excess of limitations established by certain states. The
Adviser may voluntarily choose to waive a portion of its fee or reimburse
other expenses of the Fund. The Adviser can terminate such waiver or
reimbursement policy at any time at its sole discretion.
Adviser's Background. FBNA, 601 Second Avenue South, Minneapolis, Minnesota
55480, has served as investment adviser to the funds that comprise the
First American Family of Funds since 1982. As of December 31, 1993, FBNA
was managing accounts with an aggregate value of over $6 billion.
Gerald C. Bren is the portfolio co-manager for the Equity Income Fund.
Gerald has more than 20 years of investment experience and has been FBNA's
Manager of Equity Investments since 1986. Gerald earned an MBA from the
University of Chicago in 1972 and received his Chartered Financial Analyst
certification in 1977.
Albin S. Dubiak is the portfolio co-manager of the Equity Income Fund. Al
began his investment career as a security trader with The First National
Bank of Chicago in 1963 before joining FBNA as an investment analyst in
1969. Since 1988, he has been the Director of Investment Research and Fund
Management. Al earned his bachelor's degree from Indiana University in
1962 and an MBA from the University of Arizona in 1969.
DISTRIBUTION OF FUND SHARES
SEI Financial Services Company ("SFS") is the principal distributor for
shares of the Fund. It is a Pennsylvania corporation organized on July 20,
1981, and is the principal distributor for a number of investment companies.
SFS is a wholly-owned subsidiary of SEI Corporation ("SEI").
Distribution and Service Plans. Under a distribution plan (the "Class A
Plan") adopted in accordance with Rule 12b-1 promulgated under the Investment
Company Act of 1940 (the "1940 Act"), the Fund may pay to the distributor an
amount computed at an annual rate of 0.25% of average daily net assets of the
Fund's Class A shares to finance any activity which is principally intended to
result in the sale of shares subject to the Class A Plan.
Under another distribution plan (the "Class B Plan") adopted in accordance
with Rule 12b-1 promulgated under the 1940 Act, the Fund may pay to the
distributor a sales support fee at an annual rate of up to 0.75% of the average
daily net assets of the Class B shares of the Fund which fee may be used by the
distributor to provide compensation for sales support and distribution
activities with respect to the Class B shares of the Fund. This fee will be
calculated and paid each month based on the average daily net assets for that
month. In addition to this fee, the distributor may be paid a shareholder
servicing fee of 0.25% of the average daily net assets of the Class B shares
pursuant to a service plan (the "Class B Service Plan"), which fee may be used
by the distributor to provide compensation for personal, ongoing servicing
and/or maintenance of shareholder accounts with respect to the Class B shares of
the Fund. Although Class B shares are sold without an initial sales charge, the
distributor pays a total of 4.25% of the amount invested (including a prepaid
service fee of .25% of the amount invested) to dealers who sell Class B shares
(excluding exchanges from other Class B shares in the First American family).
The servicing fee payable under the Class B Service Plan is prepaid as described
above.
The distributor may, from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Class A Plan to the
extent the expenses attributable to the shares exceed an expense limitation that
the distributor may, by notice to the Trust, voluntarily declare to be
effective.
The distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers to provide
distribution and/or administrative services as agents for their clients or
customers. Administrative services may include, but are not limited to, the
following functions: providing office space, equipment, telephone facilities,
and various clerical, supervisory, computer, and other 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; assisting
clients in changing dividend options, account designations, and addresses; and
providing such other services as may reasonably be requested.
The distributor will pay such financial institutions a fee based upon shares
subject to the Plans and owned by their clients or customers. The schedules of
such fees and the basis upon which such fees will be paid will be determined,
from time to time, by the distributor.
The Fund's Plans are compensation type plans. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by the Fund
under the Plans.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the administrative capacities described
above or should Congress relax current restrictions on depository institutions,
the Trustees will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state laws.
Administrative Arrangements. The distributor may select brokers and dealers to
provide distribution and administrative services. The distributor may also
select administrators (including depository institutions such as commercial
banks and savings and loan associations) to provide administrative services.
These administrative services include distributing prospectuses and other
information, providing accounting assistance, and communicating or facilitating
purchases and redemptions of the Fund's shares.
Brokers, dealers, and administrators will receive fees from the distributor
based upon shares of the Fund owned by their clients or customers. The fees are
calculated as a percentage of the average aggregate net assets in shareholder
accounts of such clients or customers during the period for which the brokers,
dealers, and administrators provide services. Any fees paid for these services
by the distributor will be reimbursed by the Adviser and not the Fund. Payments
made here would be in addition to any payments that may be made under the Plan.
ADMINISTRATION OF THE FUND
Administrative Services. SEI Financial Management Corporation ("SFM"), which is
a wholly-owned subsidiary of SEI, provides the Trust with the administrative
personnel and services necessary to operate the Fund. Such services include
shareholder servicing and certain legal and accounting services. SFM provides
these services at an annual rate of .20% of each Fund's average daily net
assets.
The administrative fee received during any fiscal year shall aggregate at least
$50,000 with respect to the Fund. SFM may choose voluntarily to reimburse a
portion of its fee at any time.
Prior to May 1, 1994, Federated Administrative Services ("Federated") served as
administrator to the Trust. For the period from December 18, 1992 (date of
initial public investment) to November 30, 1993, Federated earned administrative
fees of $47,123, of which $26,186 was voluntarily waived. For the period from
December 1, 1993 to April 30, 1994, Federated earned $20,982.
Custodian. First Trust National Association (the "Custodian") St. Paul,
Minnesota, is custodian for the securities and cash of the Fund. The Custodian
is a subsidiary of First Bank System, Inc., which also controls the Adviser.
Transfer Agent. Supervised Service Company, Kansas City, Missouri, is transfer
agent for the shares of the Fund and dividend disbursing agent for the Fund.
Legal Counsel. Legal counsel for the Fund is provided by Dorsey & Whitney,
Minneapolis, Minnesota.
Independent Accountants. The independent accountants for the Fund are KPMG Peat
Marwick, Minneapolis, Minnesota.
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
utilize those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. In selecting among firms believed to meet these criteria, the
Adviser may give consideration to those firms which have sold or are selling
shares of the Fund and other funds distributed by the Distributor. The
Adviser may effect individual securities transactions at commission rates in
excess of the minimum commission rates available, if the Adviser determines
in good faith that such amount of commission is reasonable in relation to the
value of the brokerage or research services provided by such broker or
dealer, viewed in terms of either that particular transaction or the
Adviser's overall responsibilities with respect to the Fund. The Adviser
makes decisions on portfolio transactions and selects brokers and dealers
subject to review by the Trustees.
EXPENSES OF THE FUND
The Fund pays all of its own expenses and its allocable share of Trust
expenses. The expenses borne by the Fund include, but are not limited to, the
cost of: organizing the Trust and continuing its existence; Trustees' fees;
investment advisory and administrative services; printing prospectuses and
other Fund documents for shareholders; registering the Trust, the Fund, and
shares of the Fund with federal and state securities authorities; taxes and
commissions; issuing, purchasing, repurchasing, and redeeming shares; fees
for custodians, transfer agents, dividend disbursing agents, shareholder
servicing agents, and registrars; printing, mailing, auditing, accounting,
and legal expenses; reports to shareholders and governmental agencies;
meetings of Trustees and shareholders and proxy solicitations therefor;
insurance premiums; and such non-recurring and extraordinary items as may
arise. However, the Adviser may voluntarily assume some expenses and has, in
addition, undertaken to reimburse the Fund, up to the amount of the advisory
fee, the amount by which operating expenses exceed limitations imposed by
certain states.
NET ASSET VALUE
The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of the value of all securities and other assets of the Fund, less
liabilities of the Fund, by the number of Fund shares outstanding.
INVESTING IN THE FUND
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open for
business. Shares of the Fund may be purchased through a financial institution
which has a sales agreement with the Distributor, or directly from the
Distributor. The Fund reserves the right to reject any purchase request.
Through a Financial Institution. An investor may call their financial
institution (such as FBS Investment Services, Inc.) to place an order. Orders
placed through a financial institution are considered received when the Fund is
notified of the purchase order. Purchase orders must be received by the
financial institution by 2:00 p.m. (Central time) or as otherwise specified by
the institution to be assured same day processing and purchase orders must be
transmitted to and received by the Fund by 3:00 P.M. (Central time) in order for
shares to be purchased at that day's price. It is the financial institution's
responsibility to transmit orders promptly.
Directly From the Transfer Agent. An investor may place an order to purchase
shares of the Fund directly from the Transfer Agent. To do so:
* complete and sign the new account form;
* enclose a check made payable to (Fund name); and
* mail both to Supervised Service Company, P.O. Box 419382, Kansas City,
Missouri 64141-6382.
Texas residents must purchase shares of the Fund through the Distributor at
1-800-637-2548.
Orders by mail are considered received after payment by check is converted by
First Bank National Association into federal funds. This is generally the next
business day after First Bank National Association receives the check.
To purchase shares of the Fund by wire, call (800) 637-2548. All information
needed will be taken over the telephone, and the order is considered received
when First Bank National Association receives payment by wire. Federal funds
should be wired as follows: First Bank National Association, Minneapolis,
Minnesota; ABA Number 091000022; For Credit to: Supervised Service Company;
Account Number 6023458026; For Further Credit To: (Investor Name and Fund Name).
Shares cannot be purchased by Federal Reserve wire on days on which the New York
Stock Exchange is closed and on federal holidays restricting wire transfers.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $1,000, unless the investment
is in a retirement plan, in which case the minimum initial investment is
$250. Subsequent investments may be in any amounts of $100 or more. The Fund
reserves the right to waive the initial minimum investment for employees of
FBNA and its affiliates from time to time.
ALTERNATIVE SALES CHARGE OPTIONS
The Two Alternatives: Overview
You may purchase shares of the Fund at a price equal to its net asset value
per share plus a sales charge which, at your election, may be imposed either
(i) at the time of the purchase (the Class A "initial sales charge
alternative"), or (ii) on a contingent deferred basis (the Class B "deferred
sales charge alternative"). Each class represents the Fund's interest in the
portfolio of investments. The classes have the same rights and are identical
in all respects except that (i) Class B shares bear the expenses of the
deferred sales charge arrangement and distribution and service fees resulting
from such sales arrangement, (ii) each class has exclusive voting rights with
respect to approvals of any Rule 12b-1 distribution plan related to that
specific class (although Class B shareholders may vote on any distribution
fees imposed on Class A shares so long as Class B shares convert into Class A
shares), and (iii) only Class B shares carry a conversion feature. Each class
also has different exchange privileges. Sales personnel of broker-dealers
distributing the Fund's shares, and other persons entitled to receive
compensation for selling such shares, may receive differing compensation for
selling Class A or Class B shares.
The alternative purchase arrangement permits you to choose the method of
purchasing shares that is more beneficial to you. The amount of your
purchase, the length of time you expect to hold the shares, and whether you
wish to receive dividends in cash or additional shares will all be factors in
determining which sales charge option is best for you. You should consider
whether, over the time you expect to maintain your investment, the
accumulated sales charges on Class B shares prior to conversion would be less
than the initial sales charge on Class A shares, and to what extent such
differential would be offset by the expected higher yield of Class A shares.
Class A shares will normally be more beneficial to you if you qualify for
reduced sales charges as described below. Accordingly, orders for Class B
shares for $250,000 or more will be treated as orders for Class A shares or
declined.
The Trustees of the Fund have determined that currently no conflict of
interest exists between the Class A and Class B shares. On an ongoing basis,
the Trustees of the Fund, pursuant to their fiduciary duties under the 1940
Act and state laws, will seek to ensure that no such conflict arises.
Class A Shares
WHAT CLASS A SHARES COST. Class A shares are sold at their net asset value
next determined after an order is received, plus a sales charge as follows:
<TABLE>
<CAPTION>
Sales Charge as Sales Charge as Maximum Amount of
Percentage of Percentage of Sales Charge Reallowed
Offering Price Net Asset Value to Participating Institutions
<S> <C> <C> <C>
Less than $50,000 4.50% 4.71% 4.05%
$50,000 but less than $100,000 4.00% 4.17% 3.60%
$100,000 but less than $250,000 3.50% 3.63% 3.15%
$250,000 but less than $500,000 2.75% 2.83% 2.47%
$500,000 but less than $1,000,000 2.00% 2.04% 1.80%
$1,000,000 and over 0.00% 0.00% 0.00%
</TABLE>
There is no initial sales charge on purchases of Class A shares of $1
million or more. However, broker/dealers selling Fund shares will receive a
commission of 1% on such sales. Redemptions of Class A shares purchased at net
asset value within 24 months of purchase will be subject to contingent deferred
sales charge of 1.00%. Class A shares that are redeemed will not be subject to
the contingent deferred sales charge to the extent that the value of such shares
represents (1) capital appreciation of Fund assets, (2) reinvestment of
dividends or capital gain distributions or (3) Class A shares redeemed more than
two years after their purchase.
The net asset value is determined at the close of trading on the New York Stock
Exchange (currently 3:00 p.m. Central time), Monday through Friday, except on:
(i) days on which there are not sufficient changes in the value of the Fund's
portfolio securities that its net asset value might be materially affected; (ii)
days during which no shares are tendered for redemption and no orders to
purchase shares are received; or (iii) the following holidays: New Year's Day,
Presidents' Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. In addition, the net asset value will not be calculated on Good
Friday.
Sales of Class a Shares at Net Asset Value. Purchases of the Fund's Class A
shares by the Adviser or any of its affiliates, or any of their or the Trust's
officers, directors, employees, retirees, sales representatives, and members of
their immediate (parent, child, spouse, sibling, step or adopted relationships,
as well as UTMA accounts naming qualifying persons) families, may be made at net
asset value without a sales charge.
In addition, purchases of Class A shares of the Fund that are funded by the
proceeds from the redemption (within 60 days of the purchase of Fund shares) of
shares of any unrelated open-end investment company that charges a sales load
may be made at net asset value, provided such redemption was not subject to any
deferred sales or redemption charges. To make such a purchase at net asset
value, the investor or the investor's broker must, at the time of purchase,
submit a written request to the Transfer Agent that the purchase be processed at
net asset value pursuant to this privilege, accompanied by a photocopy of the
confirmation (or similar evidence) showing the redemption from the unrelated
fund. The redemption of the shares of the non-related fund is, for federal
income tax purposes, a sale upon which a gain or loss may be realized.
Sales Charge Reallowance. For sales of Class A shares of the Fund, any
authorized broker/dealer will normally receive up to 90% of the applicable sales
charge. Any portion of the sales charge which is not paid to broker/dealers will
be retained by the distributor. However, the distributor, in its sole
discretion, may uniformly offer to pay to all dealers selling shares of the Fund
additional amounts, all or a portion of which may be paid from the sales charge
it normally retains or from any other source available to it. Such additional
payments, if accepted by the dealer, may be in the form of cash or promotional
incentives and will be predicated upon the amount of shares of the Fund or other
funds of the Trust sold by the dealer. Whenever more than 90% of a sales charge
is paid to a dealer, that dealer may be deemed to be an underwriter as defined
in the Securities Act of 1933.
The sales charge for shares sold other than through 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 banks' customers in connection with the initiation of
customer accounts and purchases of Fund shares.
Reducing the Class A Sales Charge. The sales charge can be reduced on the
purchase of Fund shares through:
* quantity discounts and accumulated purchases;
* signing a 13-month letter of intent;
* using the reinvestment privilege; or
* concurrent purchases.
Quality Discounts and Accumulated Purchases. As shown in the table above,
larger purchases of Class A shares reduce the sales charge paid. The Fund 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. In addition, the
sales charge, if applicable, is reduced for purchases made at one time by a
trustee or fiduciary for a single trust estate or a single fiduciary account.
If an additional purchase of Class A shares is made, the Fund will
consider the previous purchase still invested in the Fund. For example, if a
shareholder already owns shares having a current value at the public offering
price of $49,000 and he purchases $1,000 more at the current public offering
price, the sales charge on the additional purchase according to the schedule now
in effect would be 4.00%, not 4.50%.
The sales charge discount applies to the total current market value of the Fund,
plus the current market value of any other mutual funds having a sales charge
and distributed as part of the First American Family of Funds. An investor who
is considering purchasing shares in another such mutual fund should obtain a
prospectus of the fund to be acquired and should read such prospectus carefully.
To receive the sales charge reduction, the Transfer Agent must be notified by
the shareholder in writing or by his financial institution at the time the
purchase is made that Fund shares are already owned or that purchases are being
combined. The Fund will reduce the sales charge after it confirms the purchases.
Letter of Intent. If a shareholder intends to purchase at least $50,000 of
Class A shares in the funds in the Trust or in the First American Family that
have a sales charge over the next 13 months, the sales charge may be reduced by
signing a letter of intent to that effect. This letter includes a provision for
a sales charge adjustment depending on the amount actually purchased within the
13-month period and a provision for the custodian to hold up to 4.5% (or any
such lower applicable amount) of the total amount intended to be purchased in
escrow (in shares) 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 at the then-current redemption price (which could be less than the
purchase price for such shares) in order to realize the difference in the sales
charge.
This letter of intent will not obligate the shareholder to purchase shares, but
if he 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 Class A shares in the Fund have been redeemed,
the shareholder has a one-time right, within 30 days, to reinvest all or a part
of 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 the Fund, there may be
tax consequences. Shareholders contemplating such transactions should consult
their own tax adviser.
Concurrent Purchases. For puposes of qualifying for a sales charge reduction, a
shareholder has the privilege of combining concurrent purchases of two or more
funds in the Trust or in the First American Family, the purchase price of which
includes a sales charge. For example, if a shareholder concurrently invested
$30,000 in one of the other funds in the Trust or in the First American Family
with a sales charge and $20,000 in this Fund, the sales charge would be reduced.
To receive this sales charge reduction, The Transfer Agent must be notified by
the shareholder in writing or by his financial institution at the time the
concurrent purchases are made. The Fund will reduce the sales charge after it
confirms the purchases.
Class B Shares
Contingent Deferred Sales Charge. Class B shares are sold at net asset value
without any initial sales charge. If you redeem your Class B shares within eight
years of purchase, you will pay a contingent deferred sales charge at the rates
set forth below. The charge is assessed on an amount equal to the lesser of the
then-current market value or the cost of the shares being redeemed. Accordingly,
no sales charge is imposed on increases in net asset value above the initial
purchase price. In addition, no charge is assessed on shares derived from
reinvestment of dividends or capital gain distributions.
<TABLE>
<CAPTION>
Contingent Deferred Sales Charge
Year Since as a Percentage of Dollar
Purchase Amount Subject to Charge
<S> <C>
First 5.00%
Second 5.00%
Third 4.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh None
Eighth None
</TABLE>
In determining whether a particular redemption is subject to a contingent
deferred sales charge, it is assumed that the redemption is first of any
Class A shares in the shareholder's Fund account, second of any Class B
shares held for over eight years or Class B shares acquired pursuant to
reinvestment of dividends or other distributions, and third of Class B shares
held longest during the eight-year period. This method should result in the
lowest possible sales charge.
The contingent deferred sales charge is waived on redemption of Class B
shares (i) within one year following the death or disability (as defined in
the Internal Revenue Code) of a shareholder, or (ii) to the extent that the
redemption represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who has attained
the age of 70-1/2. A shareholder or his or her representative must notify the
Transfer Agent prior to the time of redemption if such circumstances exist
and the shareholder is eligible for this waiver.
Conversion Feature. At the end of the period ending eight years after the
beginning of the month in which the shares were issued, Class B shares will
automatically convert to Class A shares and will no longer be subject to the
Class B distribution and service fees. Such conversion will be on the basis of
the relative net asset values of the two classes.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange certain securities or a combination of certain
securities and cash for Fund shares. The Fund reserves the right to determine
the acceptability of securities to be exchanged. On the day securities are
accepted by the Fund, they are valued in the same manner as the Fund values
its assets. Investors wishing to exchange securities should first contact the
Transfer Agent.
SYSTEMATIC INVESTMENT PROGRAM
Once an account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account
and invested in Fund shares at the net asset value next determined after an
order is received, plus the applicable sales charge. A shareholder may apply
for participation in this program through their financial institution or call
(800) 637-2548.
RETIREMENT PLANS
Shares of the Fund can be purchased as an investment for retirement plans or
for Individual Retirement Accounts. For further details, including prototype
retirement plans, contact your financial institution and consult a tax
adviser.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, the Transfer Agent maintains a share account
for each shareholder of record. Share certificates are not issued by the
Fund.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly statements are sent to report transactions and dividends
paid during the month.
DIVIDENDS AND CAPITAL GAINS
Dividends are declared and paid quarterly. Capital gains realized by the
Fund, if any, will be distributed at least once every 12 months. Dividends
and capital gains will be automatically reinvested in additional shares of
the Fund on payment dates at the ex-dividend date's net asset value without a
sales charge, unless cash payments are requested by writing to the Fund.
Dividends and capital gains can also be reinvested in shares of any other
fund in the Trust or in the First American Family.
The amount of dividends payable on Class A shares will be more than the
dividends payable on the Class B shares because of the distribution and
service fees paid by Class B shares.
EXCHANGE PRIVILEGE
Shareholders may exchange Class A or Class B shares of the Fund for currently
available Class A or Class B shares, respectively, of the other funds in the
Trust or in the First American Family. In no event may Class B shares be
exchanged for shares of a money market fund in the First American Family.
Class A shares of funds, whether acquired by direct purchase, reinvestment of
dividends on such shares, or otherwise, may be exchanged for Class A shares
of other funds without payment of any sales charge (i.e., at net asset
value).
For purposes of calculating the Class B shares' eight-year conversion period
or contingent deferred sales charge payable upon redemption, the holding
period of Class B shares of the "old" fund and the holding period for Class B
shares of the "new" fund are aggregated.
Prior to any exchange, the shareholder must receive a copy of the current
prospectus of the fund into which an exchange is to be effected.
The exchange privilege is available to shareholders residing in any state in
which the fund shares being acquired may legally be sold. Upon receipt of
proper instructions and all necessary supporting documents, shares submitted
for exchange will be redeemed at the next-determined net asset value for the
applicable fund. Written exchange instructions may require a signature
guarantee. Exercise of this privilege is treated as a sale for federal income
tax purposes and, depending on the circumstances, a short or long-term
capital gain or loss may be realized.
The exchange privilege may be terminated at any time. Shareholders will be
notified of the termination of the exchange privilege.
By Telephone. Instructions for exchanges between funds which are part of the
Trust or the First American Family may be given by telephone to the Transfer
Agent. Shares may be exchanged by telephone only between fund accounts having
identical shareholder registrations.
Any shares held in certificate form cannot be exchanged by telephone but must be
forwarded to the Transfer Agent and deposited to the shareholder's mutual fund
account before being exchanged. An authorization form permitting the Fund to
accept telephone exchanges must first be completed. Telephone exchange
instructions may be recorded.
Telephone exchange instructions must be received before 3:00 p.m. (Central time)
for shares to be exchanged the same day. The telephone exchange privilege may be
modified or terminated at any time. Shareholders will be notified of such
modification or termination. Shareholders may have difficulty in making
exchanges by telephone through brokers and other financial institutions during
times of drastic economic or market changes. If a shareholder cannot contact
brokers and other financial institutions by telephone, it is recommended that an
exchange request be made in writing and sent by overnight mail to Supervised
Service Company, 811 Main Street, Kansas City, Missouri, 64105.
REDEEMING SHARES
Shares are redeemed at their net asset value next determined after the
Transfer Agent receives the redemption request, reduced by any applicable
contingent deferred sales charge. Redemptions will be made on days on which
the Fund computes its net asset value. Redemption requests cannot be executed
on days on which the New York Stock Exchange or the Federal Reserve Wire
System is closed. Requests for redemption can be made by telephone or by
mail.
THROUGH A FINANCIAL INSTITUTION
A shareholder may redeem shares of the Fund by calling their financial
institution to request the redemption. Shares will be redeemed at the net
asset value next determined after the Fund receives the redemption request
from the financial institution. Redemption requests must be received by the
financial institution by 2:00 P.M. (Central time) or as otherwise specified
by the institution, in order for shares to be redeemed at that day's net
asset value and redemption requests must be transmitted to and received by
the Fund by 3:00 P.M. Central time in order for shares to be redeemed at that
day's net asset value.
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should occur,
another method of redemption should be considered.
Neither the Transfer Agent nor the Fund will be responsible for the
authenticity of redemption instructions received by telephone if it
reasonably believes those instructions to be genuine. The Fund and its
Transfer Agent will each employ reasonable procedures to confirm that
telephone instructions are genuine, and may be liable for losses resulting
from unauthorized or fraudulent telephone instructions if it does not employ
these procedures. Such procedures may include taping of telephone
conversations.
DIRECTLY FROM THE FUND
By Telephone. Shareholders who have not purchased shares through a financial
institution may redeem their shares of a Fund by telephoning (800) 637-2548. The
proceeds will be mailed to the shareholder's address of record or wire
transferred to the shareholder's account at a domestic commercial bank that is a
member of the Federal Reserve System, normally within one business day, but in
no event longer than seven days after the request. The minimum amount for a wire
transfer is $1,000. If at any time the Fund shall determine it necessary to
terminate or modify this method of redemption, shareholders would be promptly
notified.
By Mail. Any shareholder may redeem Fund shares by sending a written request to
the Transfer Agent, shareholder servicing agent, or financial institution. The
written request should include the shareholder's name, the Fund name, the
account number, and the share or dollar amount requested, and should be signed
exactly as the shares are registered. Shareholders should call the Fund,
shareholder servicing agent or financial institution for assistance in redeeming
by mail.
Receiving Payment. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
Signatures. Shareholders requesting a redemption of $5,000 or more, a redemption
of any amount to be sent to an address other than on record with the Fund, or a
redemption payable other than to the shareholder of record must have signatures
on written redemption requests guaranteed by:
* a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund, which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
* a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange or of the National Association of Securities Dealers;
* a savings bank or savings and loan association whose deposits are
insured by the Savings Association Insurance Fund, which is administered
by the FDIC; or
* any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and the Transfer Agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and the Transfer Agent reserve the right
to amend these standards at any time without notice.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
When shares of the Fund are purchased by check or through the Automated
Clearing House ("ACH"), the proceeds from the redemption of those shares are
not available, and the shares may not be exchanged, until the Transfer Agent
is reasonably certain that the purchase check has cleared, which could take
up to 10 calendar days.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may
take advantage of the Systematic Withdrawal Program. Under this program, Fund
shares are redeemed to provide for periodic withdrawal payments in an amount
directed by the shareholder. Depending upon the amount of the withdrawal
payments and the amount of dividends paid and capital gains distributions
with respect to Fund shares, and the fluctuation of the Fund's net asset
value, redemptions may reduce, and eventually deplete, the shareholder's
investment 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
an account value of at least $5,000. A shareholder may obtain more
information about this program by calling his financial institution.
It is generally not in your best interest to be participating in the
Systematic Withdrawal Program at the same time that you are purchasing
additional shares if you have to pay a sales charge in connection with such
purchases. Because automatic withdrawals of Class B shares will be subject to
the contingent deferred sales charge, it may not be in the best interest of
Class B shareholders to participate in the Systematic Withdrawal Program.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account, except retirement plans, and pay the proceeds,
less any applicable contingent deferred sales charge, to the shareholder if
the account balance falls below the required minimum value of $500 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is notified
in writing and allowed 60 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 of the Fund for vote. All shares
of each fund in the Trust have equal voting rights, except that in matters
affecting only a particular fund or class, only shareholders of that fund or
class are entitled to vote. 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's or Fund's operation and for
the election of Trustees under certain circumstances. As of January 6, 1994,
First National Bank of Des Plaines (a subsidiary of Boulevard Bancorp, Inc.),
acting in various capacities for numerous accounts, was the owner of record
of 2,231,957 Class A shares (77.32%) of the Fund (the only class then
outstanding), and therefore, may, for certain purposes, be deemed to control
the Fund and be able to affect the outcome of certain matters presented for a
vote of shareholders.
Trustees may be removed by a two-thirds vote of a number of the Trustees or
by a two-thirds vote of a number of the shareholders at a special meeting. A
special meeting of the shareholders for this purpose shall be called by the
Trustees upon the written request of shareholders owning at least 10% of all
shares of the Trust entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer
to be given in each agreement, obligation, or instrument 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 from its
assets.
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 bank or non-bank affiliate thereof from sponsoring,
organizing, controlling, or distributing the shares of a registered, open-end
investment company continuously engaged in the issuance of its shares, and
prohibit banks generally from issuing, underwriting, selling, or distributing
securities in general. However, such banking laws and regulations do not
prohibit such a holding company or bank or non-bank 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 customer. The Fund's Adviser, FBNA, is subject to such banking
laws and regulations.
FBNA believes, after consultation with counsel, that its performance of the
investment advisory services for the Fund, as contemplated by the advisory
agreement with the Trust, is not prohibited by the Glass-Steagall Act as it
has been interpreted by the courts and federal banking agencies or by other
banking laws and regulations applicable to national banks. 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 FBNA from continuing to perform all
or a part of the above services for its customers and/or the Fund. In such
event, changes in the operation of the Fund may occur, including the possible
alteration or termination of any automatic or other Fund share investment and
redemption services that are being provided by FBNA, and the Trustees would
consider alternative investment advisers and other means of continuing
available investment services. It is not expected that existing Fund
shareholders would suffer any adverse financial consequences (if another
adviser with equivalent abilities to FBNA is found) as a result of any of
these occurrences.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund expects to pay no federal income tax because it intends to meet
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.
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 funds, if any, 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.
Shareholders are urged to consult their own tax adviser regarding the status
of their accounts under federal, state, and local tax laws.
PERFORMANCE INFORMATION
From time to time, the Fund advertises its total return and yield.
The total return of the Fund refers to the average compounded rate of return
on a hypothetical investment, net of any sales charge imposed on Class A
shares or including the contingent deferred sales charge imposed on Class B
shares redeemed at the end of the specified period covered by the total
return figure, for designated time periods (including but not limited to the
period from which the Fund commenced operations through the specified date),
assuming that the entire investment is redeemed at the end of each period and
assuming the reinvestment of all dividend and capital gain distributions. The
total return on the Fund may also be quoted as a dollar amount or on an
aggregate basis, an actual basis, without inclusion of any front-end or
contingent deferred sales charges, or with a reduced sales charge in
advertisements distributed to investors entitled to a reduced sales charge.
The yield of the 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.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
The performance of Class A and Class B shares of the Fund will differ because
of the different sales charge structures of the classes and because of the
higher distribution fees charged to Class B shares.
