<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 31, 2000
File No. 33-42484
File No. 811-6400
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 28 /X/
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 30 /X/
THE ARBOR FUND
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
2 OLIVER STREET
BOSTON, MASSACHUSETTS 02109
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (800) 932-7781
MARK E. NAGLE
C/O SEI CORPORATION
OAKS, PENNSYLVANIA 19456
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copies to:
RICHARD W. GRANT, ESQUIRE
MORGAN, LEWIS & BOCKIUS LLP
1701 MARKET STREET
PHILADELPHIA, PENNSYLVANIA 19103
--------------------------------------------------------------------------------
It is proposed that this filing become effective (check appropriate box)
/ X / immediately upon filing pursuant to paragraph (b)
/ / on pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / 75 days after filing pursuant to paragraph (a)
/ / on [date] pursuant to paragraph (a) of Rule 485.
<PAGE>
GOLDEN OAK FAMILY OF FUNDS
PROSPECTUS
MAY 31, 2000
GROWTH PORTFOLIO
VALUE PORTFOLIO
TAX-MANAGED EQUITY PORTFOLIO
SMALL CAP VALUE PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
INTERMEDIATE-TERM INCOME PORTFOLIO
MICHIGAN TAX FREE BOND PORTFOLIO
PRIME OBLIGATION MONEY MARKET PORTFOLIO
THE ARBOR FUND
INSTITUTIONAL SHARES, CLASS A SHARES AND CLASS B SHARES
ADVISED BY
CITIZENS BANK
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1 of 55
<PAGE>
ABOUT THIS PROSPECTUS
The Golden Oak Family of Funds is a mutual fund family that offers different
classes of shares in separate investment portfolios (Portfolios). The Portfolios
have individual investment goals and strategies. This prospectus gives you
important information about the Institutional Shares, Class A Shares and Class B
Shares of the Portfolios that you should know before investing. Please read this
prospectus and keep it for future reference.
Institutional, Class A and Class B Shares have different expenses and other
characteristics, allowing you to choose the class that best suits your needs.
You should consider the amount you want to invest, how long you plan to have it
invested, and whether you plan to make additional investments.
INSTITUTIONAL SHARES
- NO SALES CHARGE
- NO 12b-1 OR SHAREHOLDER FEES
- $1,000,000 MINIMUM INITIAL INVESTMENT
CLASS A SHARES
- FRONT-END SALES CHARGE
- 12b-1 FEES
- $1,000 MINIMUM INITIAL INVESTMENT
CLASS B SHARES
- CONTINGENT DEFERRED SALES CHARGE
- HIGHER 12b-1 FEES
- $1,000 MINIMUM INITIAL INVESTMENT
- CONVERT TO CLASS A SHARES AFTER 7 YEARS
Page 2 of 55
<PAGE>
THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY
REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL
INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN THAT IS COMMON TO EACH OF THE
PORTFOLIOS. FOR MORE DETAILED INFORMATION ABOUT EACH PORTFOLIO, PLEASE SEE:
<TABLE>
<CAPTION>
PAGE
<S> <C>
GOLDEN OAK GROWTH PORTFOLIO........................................XXX
GOLDEN OAK VALUE PORTFOLIO.........................................XXX
GOLDEN OAK TAX-MANAGED EQUITY PORTFOLIO............................XXX
GOLDEN OAK SMALL CAP VALUE PORTFOLIO...............................XXX
GOLDEN OAK INTERNATIONAL EQUITY PORTFOLIO..........................XXX
GOLDEN OAK INTERMEDIATE-TERM INCOME PORTFOLIO......................XXX
GOLDEN OAK MICHIGAN TAX FREE BOND PORTFOLIO........................XXX
GOLDEN OAK PRIME OBLIGATION MONEY MARKET PORTFOLIO.................XXX
MORE INFORMATION ABOUT RISK........................................XXX
MORE INFORMATION ABOUT PORTFOLIO INVESTMENTS.......................XXX
INVESTMENT ADVISER AND SUB-ADVISERS ...............................XXX
PORTFOLIO MANAGERS.................................................XXX
PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES................XXX
DISTRIBUTION OF PORTFOLIO SHARES...................................XXX
DIVIDENDS AND DISTRIBUTIONS .......................................XXX
TAXES..............................................................XXX
FINANCIAL HIGHLIGHTS...............................................XXX
HOW TO OBTAIN MORE INFORMATION ABOUT THE
GOLDEN OAK FAMILY OF FUNDS....................................Back Cover
</TABLE>
Page 3 of 55
<PAGE>
RISK/RETURN INFORMATION COMMON TO THE PORTFOLIOS
Each Portfolio is a mutual fund. A mutual fund pools shareholders' money and,
using professional investment managers, invests it in securities.
Each Portfolio has its own investment goal and strategies for reaching that
goal. The investment managers invest Portfolio assets in a way that they believe
will help each Portfolio achieve its goal. Still, investing in each Portfolio
involves risk and there is no guarantee that a Portfolio will achieve its goal.
An investment manager's judgments about the markets, the economy, or companies
may not anticipate actual market movements, economic conditions or company
performance, and these judgments may affect the return on your investment. In
fact, no matter how good a job an investment manager does, you could lose money
on your investment in the Portfolio, just as you could with other investments. A
PORTFOLIO SHARE IS NOT A BANK DEPOSIT AND IT IS NOT INSURED OR GUARANTEED BY THE
FDIC OR ANY GOVERNMENT AGENCY.
The value of your investment in a Portfolio (other than the Golden Oak Prime
Obligation Money Market Portfolio) is based on the market prices of the
securities the Portfolio holds. These prices change daily due to economic and
other events that affect particular companies and other issuers. These price
movements, sometimes called volatility, may be greater or lesser depending on
the types of securities a Portfolio owns and the markets in which they trade.
The effect on a Portfolio of a change in the value of a single security will
depend on how widely the Portfolio diversifies its holdings.
THE GOLDEN OAK PRIME OBLIGATION MONEY MARKET PORTFOLIO TRIES TO MAINTAIN A
CONSTANT PRICE PER SHARE OF $1.00, BUT THERE IS NO GUARANTEE THAT THE PORTFOLIO
WILL ACHIEVE THIS GOAL.
Page 4 of 55
<PAGE>
GROWTH PORTFOLIO
PORTFOLIO SUMMARY
INVESTMENT GOAL Total return
INVESTMENT FOCUS Large capitalization U.S. common stocks
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in common stocks of established U.S.
companies that demonstrate positive sustainable
earnings growth
INVESTOR PROFILE Investors who seek total return and are willing
to bear the risk of investing in equity
securities
INVESTMENT STRATEGY
The Portfolio invests primarily (at least 65% of its assets) in common stocks of
established U.S. companies with large market capitalizations (in the upper 90%
of the Frank Russell 1000 Growth Index). The Adviser has engaged
Nicholas-Applegate Capital Management as sub-adviser (Sub-Adviser) to manage the
Portfolio on a day-to-day basis. In choosing investments for the Portfolio, the
Sub-Adviser focuses on a "bottom-up" analysis that evaluates the financial
condition and competitiveness of individual companies. It uses a blend of
computer-intensive systematic disciplines and traditional fundamental research
to uncover signs of "change at the margin," positive business developments which
are not yet fully reflected in a company's stock price. The Sub-Adviser searches
for successful, improving companies that are managing change advantageously and
poised to exceed expectations.
The Sub-Adviser may sell a stock if the reason for its original purchase changes
(i.e., earnings deceleration, negative changes in expectations, decline in
fundamental quality) or a better stock is identified. Due to its investment
strategy, the Portfolio may buy and sell securities frequently. This may result
in higher transaction costs and additional capital gains tax liabilities.
PRINCIPAL RISKS OF INVESTING
Since it purchases equity securities, the Portfolio is subject to the risk that
stock prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Portfolio's securities
may fluctuate drastically from day to day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Portfolio.
The Portfolio is also subject to the risk that large capitalization growth
stocks may underperform other segments of the equity market or the equity
markets as a whole.
Page 5 of 55
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, the Portfolio's past
performance does not necessarily indicate how the Portfolio will perform in the
future.
This bar chart shows changes in the performance of the Portfolio's Institutional
Shares from year to year.*
<TABLE>
<S> <C> <C>
1994 (2.20)%
1995 14.90%
1996 22.48%
1997 28.88%
1998 42.51%
1999 53.38%
<CAPTION>
BEST QUARTER WORST QUARTER
36.96% (6.48)%
(12/31/99) (9/30/98)
</TABLE>
* The performance information shown above is based on a calendar year. The
Portfolio's performance from 1/1/00 to 3/31/00 was 3.76%.
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999 TO THOSE OF THE RUSSELL 1000 GROWTH INDEX.
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES 1 YEAR 5 YEARS SINCE INCEPTION
----------------------------------------------------------------------------
<S> <C> <C> <C>
GOLDEN OAK GROWTH PORTFOLIO 53.38% 31.72% 22.53%*
RUSSELL 1000 GROWTH INDEX 33.16% 32.41% 24.30%**
* Since 2/1/93
** Since 2/28/93
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------
<S> <C> <C> <C>
GOLDEN OAK GROWTH PORTFOLIO 44.05% 29.82% 23.25%*
RUSSELL 1000 GROWTH INDEX 33.16% 32.41% 25.62%**
</TABLE>
* Since 6/18/93
** Since 6/30/93
SIMPLY SPEAKING ...
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The Russell 1000 Growth Index is a
widely-recognized, capitalization-weighted (companies with larger market
capitalizations have more influence than those with smaller market
capitalization) index of the 1000 largest U.S. companies with higher growth
rates and price-to-book ratios.
Page 6 of 55
<PAGE>
PORTFOLIO FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
PORTFOLIO SHARES.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES CLASS A SHARES CLASS B SHARES
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)* None 5.75% None
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)** None None 5.00%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None None
Exchange Fee None None None
</TABLE>
* This sales charge varies depending upon how much you invest. See "How
to Purchase Portfolio Shares."
** This sales charge is imposed if you sell Class B Shares within 1 year
of your purchase and decreases over time depending on how long you own
your shares. See "How to Purchase Portfolio Shares."
ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES CLASS A SHARES CLASS B SHARES
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Advisory Fees 0.74% 0.74% 0.74%
Distribution and Service (12b-1) Fees None 0.25% 1.00%
Other Expenses 0.32% 0.32% 0.32%
----- ----- -----
Total Annual Portfolio Operating Expenses 1.06% 1.31% 2.06%
</TABLE>
For more information about these fees, see "Investment Adviser and Sub-Advisers"
and "Distribution of Portfolio Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Portfolio would be:
IF YOU SELL YOUR FUND SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES $108 $337 $585 $1,294
CLASS A SHARES $701 $966 $1,252 $2,063
CLASS B SHARES $709 $946 $1,308 $2,107
</TABLE>
IF YOU DO NOT SELL YOUR FUND SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES $108 $337 $585 $1,294
CLASS A SHARES $701 $966 $1,252 $2,063
CLASS B SHARES $209 $646 $1,108 $2,107
</TABLE>
Page 7 of 55
<PAGE>
VALUE PORTFOLIO
PORTFOLIO SUMMARY
INVESTMENT GOAL Long-term capital appreciation
INVESTMENT FOCUS Medium to large capitalization U.S. common
stocks
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in common stocks which are
undervalued relative to a company's earnings
INVESTOR PROFILE Investors who seek long term capital
appreciation and who are willing to bear the
risks of investing in equity securities
INVESTMENT STRATEGY
The Portfolio invests primarily (at least 65% of its assets) in common stocks of
established U.S. companies with medium to large market capitalizations (in
excess of $3 billion). The Adviser has engaged Systematic Financial Management,
LP, as sub-adviser (Sub-Adviser) to manage the Portfolio on a day-to-day basis.
In choosing investments for the Portfolio, the Sub-Adviser invests in companies
which it believes are undervalued relative to a company's historic and expected
earnings. The Sub-Adviser makes investments in these companies based on its
fundamental research and analysis of various characteristics, including
financial statements, sales and expense trends, earnings estimates, market
position of the company and industry outlook. The Sub-Adviser also looks for
"catalysts" which could positively or negatively affect prices of current and
potential Portfolio companies.
PRINCIPAL RISKS OF INVESTING
Since it purchases equity securities, the Portfolio is subject to the risk that
stock prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Portfolio's securities
may fluctuate drastically from day to day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Portfolio.
The medium capitalization companies the Portfolio invests in may be more
vulnerable to adverse business or economic events than larger, more established
companies. In particular, these medium sized companies may have limited product
lines, markets and financial resources, and may depend on a relatively small
management group. Therefore, medium capitalization stocks may be more volatile
than those of larger companies.
The Portfolio is also subject to the risk that medium to large capitalization
value stocks may underperform other segments of the equity market or the equity
markets as a whole.
Page 8 of 55
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, the Portfolio's past
performance does not necessarily indicate how the Portfolio will perform in the
future.
The Portfolio is a successor to a common trust fund managed by the Adviser until
June 23, 1997 and thereafter by the Sub-Adviser. The periods prior to June 23,
1997 represent the performance of the common trust fund while it was managed by
the Adviser. The Sub-Adviser uses substantially the same management strategies
to manage the Portfolio as the Adviser used to manage the common trust fund. The
past performance shown in the bar chart has been adjusted to reflect current
expenses for the Institutional Shares of the Portfolio. The Adviser's common
trust fund was not a registered mutual fund so it was not subject to the same
investment and tax restrictions as the Portfolio. If it had been, the common
trust fund's performance might have been lower.
This bar chart shows changes in the performance of the Portfolio's Institutional
Shares from year to year.*
<TABLE>
<S> <C> <C>
1990 (8.07)%
1991 25.11%
1992 7.82%
1993 8.96%
1994 (3.27)%
1995 33.12%
1996 22.21%
1997 30.38%
1998 6.18%
1999 19.04%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C> <C>
15.27% (17.06)%
(12/31/98) (9/30/98)
</TABLE>
* The performance information shown above is based on a calendar year. The
Portfolio's performance from 1/1/00 to 3/31/00 was 1.27%.
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999 TO THOSE OF THE RUSSELL 1000 VALUE INDEX.
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES 1 YEAR 5 YEARS 10 YEARS
------------------------------------------------------------------------
<S> <C> <C> <C>
GOLDEN OAK VALUE PORTFOLIO 19.04% 21.81% 13.36%
RUSSELL 1000 VALUE INDEX 7.34% 23.08% 15.62%
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
--------------------------------------------------------------
<S> <C> <C>
GOLDEN OAK VALUE PORTFOLIO 11.91% 10.90%*
RUSSELL 1000 VALUE INDEX 7.34% 15.62%**
</TABLE>
* Since 6/23/97
** Since 6/30/97
Page 9 of 55
<PAGE>
SIMPLY SPEAKING ...
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The Russell 1000 Value Index is a widely-recognized,
capitalization-weighted (companies with larger market capitalizations have more
influence than those with smaller market capitalization) index of the 1000
largest U.S. companies with lower growth rates and price-to-book ratios.
PORTFOLIO FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
PORTFOLIO SHARES.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES CLASS A SHARES CLASS B SHARES
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)* None 5.75% None
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)** None None 5.00%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None None
Exchange Fee None None None
</TABLE>
* This sales charge varies depending upon how much you invest. See "How to
Purchase Portfolio Shares."
** This sales charge is imposed if you sell Class B Shares within 1 year of
your purchase and decreases over time depending on how long you own your
shares. See "How to Purchase Portfolio Shares."
ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)*
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES CLASS A SHARES CLASS B SHARES
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Advisory Fees 0.74% 0.74% 0.74%
Distribution and Service (12b-1) Fees None 0.25% 1.00%
Other Expenses 0.35% 0.35% 0.35%
----- ----- -----
Total Annual Portfolio Operating Expenses 1.09% 1.34% 2.09%
</TABLE>
For more information about these fees, see "Investment Adviser and Sub-Advisers"
and "Distribution of Portfolio Shares."
Page 10 of 55
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Portfolio would be:
IF YOU SELL YOUR FUND SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES $111 $347 $601 $1,329
CLASS A SHARES $704 $975 $1,267 $2,095
CLASS B SHARES $712 $955 $1,324 $2,139
</TABLE>
IF YOU DO NOT SELL YOUR FUND SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES $111 $347 $601 $1,329
CLASS A SHARES $704 $975 $1,267 $2,095
CLASS B SHARES $212 $655 $1,124 $2,139
</TABLE>
Page 11 of 55
<PAGE>
TAX-MANAGED EQUITY PORTFOLIO
PORTFOLIO SUMMARY
INVESTMENT GOAL High long-term after-tax returns
INVESTMENT FOCUS Common stock of U.S. companies
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in large U.S. companies while
attempting to maximize after-tax returns
INVESTOR PROFILE Long-term investors who are looking for a blend
of performance and tax-efficiency and are
willing to accept the risks of equity investing
INVESTMENT STRATEGY
The Portfolio invests primarily in common stocks of well-established U.S.
companies with large market capitalizations (in excess of $5 billion). The
Adviser has engaged Nicholas-Applegate Capital Management as sub-adviser
(Sub-Adviser) to manage the Portfolio on a day-to-day basis. In choosing
investments for the Portfolio, the Sub-Adviser focuses on a "bottom-up" analysis
that evaluates the financial conditions and competitiveness of individual
companies and uses a blend of computer analysis and traditional fundamental
research to uncover positive business developments which are not reflected in a
company's stock price. The Sub-Adviser searches for successful, improving
companies that are managing change advantageously and poised to exceed
expectations and it purchases stocks of such companies after evaluating expected
risk and return. The Sub-Adviser attempts to build a portfolio that maximizes
after-tax returns by monitoring the following developments to help maximize
after-tax returns: all short-term and long-term capital gains; the amount and
frequency of dividend payments; and when dividends are declared and paid.
Conversely, stocks of the Portfolio are sold after tax consequences are
considered and weighed against the potential for enhanced returns from new
investment opportunities.
PRINCIPAL RISKS OF INVESTING
Since it purchases common stocks, the Portfolio is subject to the risk that
stock prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Portfolio's securities
may fluctuate drastically from day to day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Portfolio.
The Portfolio is non-diversified, which means that it may invest in the
securities of relatively few issuers. As a result, the Portfolio may be more
susceptible to a single adverse economic or regulatory occurrence affecting one
or more of these issuers, and may experience increased volatility due to its
investments in those securities.
Page 12 of 55
<PAGE>
Although the Portfolio seeks to maximize after-tax returns, the Portfolio's
investments in common stocks that appreciate in value may create unrealized
gains. These gains would become realized when those stocks are sold, and may
result in tax consequences for the Portfolio's shareholders. High levels of
unrealized gains, therefore, may limit the ability of the Portfolio to achieve
its goal of high after-tax returns if the Portfolio is required to sell
securities to meet shareholder redemption requests or for other reasons at a
time when doing so would have significant tax consequences for shareholders. As
of April 30, 2000, the Portfolio held securities with a market value of
approximately $37.4 million of which $22.8 million represented unrealized gains.
The Portfolio is also subject to the risk that large capitalization stocks may
underperform other segments of the equity market or the equity markets as a
whole.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, the Portfolio's past
performance does not necessarily indicate how the Portfolio will perform in the
future.
The Portfolio is a successor to a common trust fund managed by the Adviser until
April 30, 1999 and thereafter by the Sub-Adviser. The periods prior to April 30,
1999 represent the performance of the common trust fund while it was managed by
the Adviser. The Sub-Adviser uses substantially the same management strategies
to manage the Portfolio as the Adviser used to manage the common trust fund. The
past performance shown in the bar chart has been adjusted to reflect current
expenses for the Institutional Shares of the Portfolio. The Adviser's common
trust fund was not a registered mutual fund so it was not subject to the same
investment and tax restrictions as the Portfolio. If it had been, the common
trust fund's performance might have been lower.
This bar chart shows changes in the performance of the Portfolio's Institutional
Shares from year to year.*
<TABLE>
<S> <C> <C>
1990 (3.29)%
1991 27.63%
1992 11.28%
1993 6.31%
1994 (0.32)%
1995 34.77%
1996 22.92%
1997 25.30%
1998 26.72%
1999 14.16%
<CAPTION>
BEST QUARTER WORST QUARTER
24.39% (11.65)%
(12/31/98) (9/30/90)
</TABLE>
* The performance information shown above is based on a calendar year. The
Portfolio's performance from 1/1/00 to 3/31/00 was 5.25%.
Page 13 of 55
<PAGE>
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999 TO THOSE OF THE S&P 500 INDEX.
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES 1 YEAR 5 YEARS 10 YEARS
-----------------------------------------------------------------------------
<S> <C> <C> <C>
GOLDEN OAK TAX-MANAGED EQUITY PORTFOLIO 14.16% 24.60% 15.89%
S&P 500 INDEX 21.04% 28.55% 18.20%
</TABLE>
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS 10 YEARS
-----------------------------------------------------------------------------
<S> <C> <C> <C>
GOLDEN OAK TAX-MANAGED EQUITY PORTFOLIO 7.17% 22.74% 14.88%
S&P 500 INDEX 21.04% 28.55% 18.20%
</TABLE>
SIMPLY SPEAKING ...
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment advisor
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The S&P 500 Index is a widely-recognized, market
value-weighted (higher market value stocks have more influence than lower market
value stocks) index of 500 stocks designed to mimic the overall equity market's
industry weightings.
PORTFOLIO FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
PORTFOLIO SHARES.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES CLASS A SHARES CLASS B SHARES
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)* None 5.75% None
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)** None None 5.00%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None None
Exchange Fee None None None
</TABLE>
* This sales charge varies depending upon how much you invest.
See "Purchasing Portfolio Shares."
** This sales charge is imposed if you sell Class B Shares within 1 year
of your purchase and decreases over time depending on how long you own
your shares. See "How to Purchase Portfolio Shares."
Page 14 of 55
<PAGE>
ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES CLASS A SHARES CLASS B SHARES
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Advisory Fees 0.74% 0.74% 0.74%
Distribution and Service (12b-1) Fees None 0.25% 1.00%
Other Expenses 0.47% 0.47% 0.47%
----- ----- -----
Total Annual Portfolio Operating Expenses 1.21% 1.46% 2.21%
</TABLE>
-------------------------------------------------------------------------------
* The Portfolio's total actual annual Portfolio operating expenses for the
most recent fiscal year were less than the amount shown because the Adviser
waived a portion of the fees in order to keep total operating expenses at a
specified level. These fee waivers remain in place as of the date of this
Prospectus, but the Adviser may discontinue all or part of these waivers at
any time. With these fee waivers, the Portfolio's actual total operating
expenses should be as follows:
<TABLE>
<S> <C>
Golden Oak Tax-Managed Equity Portfolio - Institutional Shares 1.10%
Golden Oak Tax-Managed Equity Portfolio - Class A Shares 1.35%
Golden Oak Tax-Managed Equity Portfolio - Class B Shares 2.10%
</TABLE>
For more information about these fees, see "Investment Adviser and Sub-Advisers"
and "Distribution of Portfolio Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
estimated costs of investing $10,000 in the Portfolio would be:
IF YOU SELL YOUR FUND SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES $123 $384 $665 $1,466
CLASS A SHARES $715 $1,010 $1,327 $2,221
CLASS B SHARES $724 $991 $1,385 $2,266
</TABLE>
IF YOU DO NOT SELL YOUR FUND SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES $123 $384 $665 $1,466
CLASS A SHARES $715 $1,010 $1,327 $2,221
CLASS B SHARES $224 $691 $1,185 $2,266
</TABLE>
Page 15 of 55
<PAGE>
GOLDEN OAK SMALL CAP VALUE PORTFOLIO
PORTFOLIO SUMMARY
INVESTMENT GOAL Long-term capital appreciation
INVESTMENT FOCUS Small capitalization U.S. common stocks
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in common stocks of small companies
which are undervalued relative to a company's
cash flow
INVESTOR PROFILE Investors who seek long term capital
appreciation and who are willing to bear the
risks of investing in small cap stocks
INVESTMENT STRATEGY OF THE GOLDEN OAK SMALL CAP VALUE PORTFOLIO
The Portfolio invests primarily (at least 65% of its assets) in common stocks of
U.S. companies with small capitalizations (less than $2 billion). The Adviser
has engaged Systematic Financial Management, L.P., as sub-adviser (Sub-Adviser)
to manage the Portfolio on a day-to-day basis. In choosing investments for the
Portfolio, the Sub-Adviser invests in companies that are generating cash flow,
have low levels of debt and which it believes are undervalued relative to a
company's ability to generate cash flows. The Sub-Adviser makes investments in
these companies based on its fundamental research and analysis of various
characteristics, including financial statements, sales and expense trends,
earnings estimates, market position of the company and industry outlook. The
Sub-Adviser also looks for "catalysts" which could positively or negatively
affect prices of current and potential Portfolio companies.
PRINCIPAL RISKS OF INVESTING IN THE GOLDEN OAK SMALL CAP VALUE PORTFOLIO
Since it purchases common stocks, the Portfolio is subject to the risk that
stock prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Portfolio's securities
may fluctuate drastically from day to day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Portfolio.
The smaller capitalization companies the Portfolio invests in may be more
vulnerable to adverse business or economic events than larger, more established
companies. In particular, these small companies may have limited product lines,
markets and financial resources, and may depend upon a relatively small
management group. Therefore, small cap stocks may be more volatile than those of
larger companies. These securities may be traded over-the-counter or listed on
an exchange.
Page 16 of 55
<PAGE>
The Portfolio is also subject to the risk that small capitalization value stocks
may underperform other segments of the equity market or the equity markets as a
whole.
PERFORMANCE INFORMATION
The Portfolio opened to investors on September 1, 1999, and therefore, did
not have a full calendar year of performance information at the time this
prospectus was printed.
PORTFOLIO FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
PORTFOLIO SHARES.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES CLASS A SHARES CLASS B SHARES
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)* None 5.75% None
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)** None None 5.00%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None None
Exchange Fee None None None
</TABLE>
* This sales charge varies depending upon how much you invest. See
"How to Purchase Portfolio Shares."
** This sales charge is imposed if you sell Class B Shares within 1 year
of your purchase and decreases over time depending on how long you own
your shares. See "How to Purchase Portfolio Shares."
ANNUAL PORTFOLIO OPERATING EXPENSE (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES CLASS A SHARES CLASS B SHARES
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Advisory Fees 0.99% 0.99% 0.99%
Distribution and Service (12b-1) Fees None 0.25% 1.00%
Other Expenses 0.56% 0.56% 0.56%
----- ----- -----
Total Annual Portfolio Operating Expenses 1.55% 1.80% 2.55%
</TABLE>
-------------------------------------------------------------------------------
* The Portfolio's total actual annual Portfolio operating expenses for the
most recent fiscal year were less than the amount shown because the Adviser
waived a portion of the fees in order to keep total operating expenses at a
specified level. These fee waivers remain in place as of the date of this
Prospectus, but the Adviser may discontinue all or part of these waivers at
any time. With these fee waivers, the Portfolio's actual total operating
expenses should be as follows:
<TABLE>
<S> <C>
Golden Oak Small Cap Value Portfolio - Institutional Shares 1.35%
Golden Oak Small Cap Value Portfolio - Class A Shares 1.60%
Golden Oak Small Cap Value Portfolio - Class B Shares 2.35%
</TABLE>
For more information about these fees, see "Investment Adviser and Sub-Advisers"
and "Distribution of Portfolio Shares."
Page 17 of 55
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
estimated costs of investing $10,000 in the Portfolio would be:
IF YOU SELL YOUR FUND SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES $158 $490 $845 $1,845
CLASS A SHARES $747 $1,109 $1,494 $2,569
CLASS B SHARES $758 $1,093 $1,555 $2,616
</TABLE>
IF YOU DO NOT SELL YOUR FUND SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES $158 $490 $845 $1,845
CLASS A SHARES $747 $1,109 $1,494 $2,569
CLASS B SHARES $258 $793 $1,355 $2,616
</TABLE>
Page 18 of 55
<PAGE>
GOLDEN OAK INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO SUMMARY
INVESTMENT GOAL Long-term capital appreciation
INVESTMENT FOCUS Common stocks of companies operating in
Europe, Japan and the Pacific Basin
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in a broad selection of companies
operating in diverse markets outside of the
United States
INVESTOR PROFILE Investors who seek long-term capital
appreciation and want to diversify their
investments by investing overseas, and
who are willing to bear the risks of
international investing
INVESTMENT STRATEGY OF THE GOLDEN OAK INTERNATIONAL EQUITY PORTFOLIO
The Portfolio invests primarily (at least 65% of its assets) in common stocks of
foreign companies. The Portfolio will generally invest in companies that operate
in established markets, such as Europe, Japan and the Pacific Basin, but may
invest to a lesser extent in emerging market companies. The Adviser has engaged
BlackRock International, Ltd., as sub-adviser (Sub-Adviser) to manage the
portfolio on a day-to-day basis. In choosing investments for the Portfolio, the
Sub-Adviser begins with a "top-down" analysis of general global economic
conditions to determine how the Portfolio's investments will be allocated among
these foreign regions. It then conducts a "bottom-up" fundamental analysis that
evaluates key performers operating in industry sectors that the Sub-Adviser
believes have the best potential for long-term growth. The Sub-Adviser focuses
its analysis on individual companies' earnings growth potential and the quality
of corporate management. The Sub-Adviser generally does not base stock
selections on company size, but rather on a company's fundamental prospects for
growth and the current valuation of the security. As a result, the Portfolio may
own stocks of smaller capitalization companies. The Sub-Adviser monitors the
securities held by the Portfolio and may sell a security when it achieves a
designated price target, there is a fundamental change in a company's growth
prospects or a region's economic outlook, or better investment opportunities
become available. The Portfolio may use forward foreign currency exchange
contracts (obligations to buy or sell a currency at a set rate in the future)
to hedge against movements in the value of foreign currencies.
Page 19 of 55
<PAGE>
PRINCIPAL RISKS OF INVESTING IN THE GOLDEN OAK INTERNATIONAL EQUITY PORTFOLIO
Since it purchases common stocks, the Portfolio is subject to the risk that
stock prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Portfolio's securities
may fluctuate drastically from day to day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Portfolio.
The foreign small to medium capitalization companies the Portfolio invests in
may be more vulnerable to adverse business or economic events than larger, more
established companies. In particular, these small to medium sized companies may
have limited product lines, markets and financial resources, and may depend upon
a relatively small management group. Therefore, small to medium capitalization
stocks may be more volatile than those of larger companies. These securities may
be traded over the counter or listed on an exchange.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Portfolio's investments. These
currency movements may happen separately from and in response to events that do
not otherwise affect the value of the security in the issuer's home country.
Emerging market countries are countries that the World Bank or the United
Nations considers to be emerging or developing. Emerging markets may be more
likely to experience political turmoil or rapid changes in market or economic
conditions than more developed countries. In addition, the financial stability
of issuers (including governments) in emerging market countries may be more
precarious than in other countries. As a result, there will tend to be an
increased risk of price volatility associated with the Portfolio's investments
in emerging market countries, which may be magnified by currency fluctuations
relative to the U.S. dollar.
The Portfolio is also subject to the risk that international stocks may
underperform other segments of the equity market or the equity markets as a
whole.
PERFORMANCE INFORMATION
The Portfolio is new and, therefore, did not have performance information at
the time this prospectus was printed.
Page 20 of 55
<PAGE>
PORTFOLIO FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
PORTFOLIO SHARES.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES CLASS A SHARES CLASS B SHARES
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)* None 5.75% None
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)** None None 5.00%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None None
Exchange Fee None None None
</TABLE>
* The sales charge varies depending upon how much you invest. See
"How to Purchase Portfolio Shares."
** This sales charge is imposed if you sell Class B Shares within 1 year
of your purchase and decreases over time depending on how long you own
your shares. See "How to Purchase Portfolio Shares."
ANNUAL PORTFOLIO OPERATING EXPENSE (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES CLASS A SHARES CLASS B SHARES
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Advisory Fees 0.90% 0.90% 0.90%
Distribution and Service (12b-1) Fees None 0.25% 1.00%
Other Expenses 0.70% 0.70% 0.70%
----- ----- -----
Total Annual Portfolio Operating Expenses 1.60% 1.85% 2.60%
</TABLE>
-------------------------------------------------------------------------------
* The Portfolio's total actual annual Portfolio operating expenses may be
less than the amount shown because the Adviser intends to waive a portion of the
fees in order to keep total operating expenses at a specified level.
The Adviser may discontinue all or part of these waivers at any time. With
this fee waiver, the Portfolio's actual total operating expenses should be as
follows:
<TABLE>
<S> <C>
Golden Oak International Equity Portfolio - Institutional Shares 1.50%
Golden Oak International Equity Portfolio - Class A Shares 1.75%
Golden Oak International Equity Portfolio - Class B Shares 2.50%
</TABLE>
For more information about these fees, see "Investment Adviser and Sub-Advisers"
and "Distribution of Portfolio Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
estimated costs of investing $10,000 in the Portfolio would be:
Page 21 of 55
<PAGE>
IF YOU SELL YOUR FUND SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
INSTITUTIONAL SHARES $163 $505
CLASS A SHARES $752 $1,123
CLASS B SHARES $763 $1,108
</TABLE>
IF YOU DO NOT SELL YOUR FUND SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
INSTITUTIONAL SHARES $163 $505
CLASS A SHARES $752 $1,123
CLASS B SHARES $263 $808
</TABLE>
Page 22 of 55
<PAGE>
INTERMEDIATE-TERM INCOME PORTFOLIO
PORTFOLIO SUMMARY
INVESTMENT GOAL Current income consistent with limited price
volatility
INVESTMENT FOCUS Fixed income obligations of the U.S. Treasury,
U.S. government agencies and U.S. corporations
SHARE PRICE VOLATILITY Low
PRINCIPAL INVESTMENT STRATEGY Investing in a portfolio of U.S. government
and corporate fixed income securities to
attempt to maximize return while limiting risk
INVESTOR PROFILE Conservative investors who want to receive
income with limited risk of share price
volatility
INVESTMENT STRATEGY
The Portfolio primarily invests (at least 65% of its assets) in fixed income
obligations issued by the U.S. Treasury and U.S. government agencies, including
mortgage backed securities rated in one of the top two ratings categories, and
in U.S. corporate debt rated in one of the top three ratings categories. In
selecting investments for the Portfolio, the Adviser analyzes current market
conditions and anticipated changes in bond prices to attempt to provide the
highest level of income and capital appreciation, consistent with keeping a low
level of share price fluctuation. The Adviser actively manages the maturity of
the Portfolio and purchases securities which will, on average, mature in three
to ten years. Under normal circumstances, the Adviser anticipates that the
Portfolio's dollar-weighted average maturity will be approximately nine years;
however, the Adviser may vary this average maturity substantially in
anticipation of a change in the interest rate environment. Securities will be
considered for sale in the event of or in anticipation of a credit downgrade; in
order to change the duration or sector weighting of the Portfolio; or, to
realize an aberration in a security's market valuation.
PRINCIPAL RISKS OF INVESTING
The prices the Portfolio's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers. Generally, the Portfolio's
fixed income securities will decrease in value if interest rates rise and vice
versa, and the volatility of lower rated securities is even greater than that of
higher rated securities. Also, longer-term securities are generally more
volatile, so the average maturity or duration of these securities affects risk.
Although the Portfolio's U.S. government securities are considered to be among
the safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies are
backed by the U.S. Treasury, while others are backed solely by the ability of
the agency to borrow from the U.S. Treasury or by the agency's own resources.
Page 23 of 55
<PAGE>
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Portfolio may have to
reinvest prepaid amounts at lower interest rates. This risk of prepayment is an
additional risk of mortgage-backed securities.
The Portfolio is also subject to the risk that its investment strategy which
focuses on U.S. government and U.S. corporate fixed income securities with
intermediate maturities, may perform differently than other mutual funds which
focus on fixed income securities with longer maturities or invest in other asset
classes.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, the Portfolio's past
performance does not necessarily indicate how the Portfolio will perform in the
future.
This bar chart shows changes in the performance of the Portfolio's Institutional
Shares from year to year.*
<TABLE>
<S> <C> <C>
1994 (2.10)%
1995 13.64%
1996 2.80%
1997 7.20%
1998 9.17%
1999 (3.21)%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C> <C>
5.60% (1.92)%
(9/30/98) (6/30/99)
</TABLE>
* The performance information shown above is based on a calendar year. The
Portfolio's performance from 1/1/00 to 3/31/00 was 2.58%.
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999 TO THOSE OF THE LEHMAN BROTHERS GOVERNMENT/CORPORATE
BOND INDEX.
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES 1 YEAR 5 YEARS SINCE INCEPTION
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GOLDEN OAK INTERMEDIATE-TERM INCOME PORTFOLIO (3.21)% 5.76% 4.69%*
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX (2.15)% 7.60% 5.93%**
</TABLE>
* Since 2/1/93
** Since 2/28/93
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GOLDEN OAK INTERMEDIATE-TERM INCOME PORTFOLIO (7.93)% 4.51% 3.54%*
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX (2.15)% 7.60% 5.70%**
</TABLE>
* Since 6/18/93
** Since 6/30/93
Page 24 of 55
<PAGE>
SIMPLY SPEAKING ...
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The Lehman Brothers Government/Corporate Bond Index
is a widely-recognized, market value-weighted (higher market value bonds have
more influence than lower market value bonds) index of U.S. Treasury securities,
U.S. government agency obligations, corporate debt backed by the U. S.
government, fixed-rate nonconvertible corporate debt securities, Yankee bonds
and nonconvertible debt securities issued by or guaranteed by foreign
governments and agencies. All securities in the index are rated investment grade
(BBB) or higher, with maturities of 1 to 10 years.
PORTFOLIO FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
PORTFOLIO SHARES.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES CLASS A SHARES CLASS B SHARES
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)* None 4.50% None
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)** None None 5.00%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None None
Exchange Fee None None None
</TABLE>
* This sales charge varies depending upon how much you invest. See
"How to purchase Portfolio Shares."
** This sales charge is imposed if you sell Class B Shares within 1 year
of your purchase and decreases over time depending on how long you own
your shares. See "How to Purchase Portfolio Shares."
ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)*
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES CLASS A SHARES CLASS B SHARES
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Advisory Fees 0.50% 0.50% 0.50%
Distribution and Service (12b-1) Fees None 0.25% 1.00%
Other Expenses 0.30% 0.30% 0.30%
----- ----- -----
Total Annual Portfolio Operating Expenses 0.80% 1.05% 1.80%
</TABLE>
-------------------------------------------------------------------------------
* The Portfolio's total actual annual Portfolio operating expenses for the
most recent fiscal year were less than the amount shown because the Adviser
waived a portion of the fees in order to keep total operating expenses at a
specified level. These fee waivers remain in place as of the date of this
Prospectus, but the Adviser may discontinue all or part of these waivers at any
time. With these fee waivers, the Portfolio's actual total operating expenses
should be as follows:
<TABLE>
<S> <C>
Golden Oak Intermediate Term Income Portfolio - Institutional Shares 0.65%
Golden Oak Intermediate Term Income Portfolio - Class A Shares 0.90%
Golden Oak Intermediate Term Income Portfolio - Class B Shares 1.65%
</TABLE>
Page 25 of 55
<PAGE>
For more information about these fees, see "Investment Adviser and Sub-Advisers"
and "Distribution of Portfolio Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Portfolio would be:
IF YOU SELL YOUR FUND SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES $82 $255 $444 $990
CLASS A SHARES $552 $769 $1,003 $1,675
CLASS B SHARES $683 $866 $1,175 $1,826
</TABLE>
IF YOU DO NOT SELL YOUR FUND SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES $82 $255 $444 $990
CLASS A SHARES $552 $769 $1,003 $1,675
CLASS B SHARES $183 $566 $975 $1,826
</TABLE>
Page 26 of 55
<PAGE>
MICHIGAN TAX FREE BOND PORTFOLIO
PORTFOLIO SUMMARY
INVESTMENT GOAL Current income exempt from both federal
and Michigan state income taxes,
consistent with preservation of capital
INVESTMENT FOCUS Tax-free Michigan municipal securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Invests in municipal obligations which
pay interest that is exempt from both
federal and Michigan state income tax
INVESTOR PROFILE Conservative taxable investors who want
to receive current income exempt from
federal and Michigan state income tax
and are willing to bear the moderate
risk of investing in a portfolio of
intermediate-term securities affected by
changes in economic conditions and
governmental policies within Michigan
INVESTMENT STRATEGY
The Portfolio invests substantially all of its assets (at least 80%) in
municipal securities that generate income exempt from federal and Michigan state
income taxes. These securities include securities of municipal issuers located
in Michigan, the District of Columbia, Puerto Rico and other U.S. territories
and possessions. The Portfolio will invest most of its assets in securities that
are not subject to federal taxes, including the alternative minimum tax, but it
can purchase a limited amount of taxable securities. The Portfolio's Adviser
will purchase investment grade municipal securities and attempt to maintain an
average weighted portfolio maturity of three to ten years. The maximum maturity
for any individual security is thirty years. In selecting securities for the
Portfolio, the Adviser will consider each security's yield and total return
potential relative to other available municipal securities. Securities will be
considered for sale in the event of or in anticipation of a credit downgrade; in
order to change the duration or sector weighting of the Portfolio; or, to
realize an aberration in a security's market valuation.
PRINCIPAL RISKS OF INVESTING
The prices the Portfolio's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Portfolio's fixed income securities will decrease in value if
interest rates rise and vice versa, and the volatility of lower rated securities
is even greater than that of higher rated securities. Also, longer-term
securities are generally more volatile, so the average maturity or duration of
these securities affects risk.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial
Page 27 of 55
<PAGE>
condition or credit rating of municipal issuers also may adversely affect the
value of the Portfolio's securities.
The Portfolio is non-diversified, which means that it may invest in the
securities of relatively few issuers. As a result, the Portfolio may be more
susceptible to a single adverse economic or political occurrence affecting one
or more of these issuers, and may experience increased volatility due to its
investments in those securities.
The Portfolio's concentration of investments in securities of issuers located in
Michigan subjects the Portfolio to economic conditions and government policies
within that state. As a result, the Portfolio will be more susceptible to
factors that adversely affect issuers of Michigan obligations than a mutual fund
that does not have as great a concentration in Michigan municipal obligations.
The Portfolio is also subject to the risk that Michigan municipal debt
securities may underperform other segments of the fixed income market or the
fixed income markets as a whole.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, the Portfolio's past
performance does not necessarily indicate how the Portfolio will perform in the
future.
The periods prior to June 23, 1997, when the Portfolio began operating,
represent the performance of the Adviser's similarly managed predecessor common
trust fund. The past performance shown in the bar chart has been adjusted to
reflect current expenses for the Institutional Shares of the Portfolio. The
Adviser's common trust fund was not a registered mutual fund so it was not
subject to the same investment and tax restrictions as the Portfolio. If it had
been, the common trust fund's performance might have been lower.
This bar chart shows changes in the performance of the Portfolio's Institutional
Shares from year to year.*
<TABLE>
<S> <C> <C>
1990 6.39%
1991 10.23%
1992 6.58%
1993 9.71%
1994 (3.06)%
1995 12.09%
1996 3.24%
1997 6.20%
1998 5.10%
1999 (0.43)%
<CAPTION>
BEST QUARTER WORST QUARTER
4.56% (3.82)%
(3/31/95) (3/31/94)
</TABLE>
- The performance information shown above is based on a calendar year. The
Portfolio's performance from 1/1/00 to 3/31/00 was 1.24%.
Page 28 of 55
<PAGE>
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999 TO THOSE OF THE MERRILL LYNCH 1-12 YEAR MUNICIPAL BOND
INDEX.
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES 1 YEAR 5 YEARS 10 YEARS
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GOLDEN OAK MICHIGAN TAX FREE BOND PORTFOLIO (0.43)% 5.16% 5.51%
MERRILL LYNCH 1-12 YEAR MUNICIPAL BOND INDEX (0.01)% 6.31% 6.41%
</TABLE>
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
--------------------------------------------------------------------------------------
<S> <C> <C>
GOLDEN OAK MICHIGAN TAX FREE BOND PORTFOLIO (5.02)% 1.56%*
MERRILL LYNCH 1-12 YEAR MUNICIPAL BOND INDEX (0.01)% 4.39%**
</TABLE>
* Since 6/23/97
** Since 6/30/97
SIMPLY SPEAKING ...
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The Merrill Lynch 1-12 Year Municipal Bond Index is
a widely recognized broad-based measure of the performance of the U.S. tax
exempt bond market for securities with maturities of one to twelve years.
PORTFOLIO FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
PORTFOLIO SHARES.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES CLASS A SHARES CLASS B SHARES
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)* None 4.50% None
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)** None None 5.00%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None None
Exchange Fee None None None
</TABLE>
* This sales charge varies depending upon how much you invest. See "How to
Purchase Portfolio Shares."
** This sales charge is imposed if you sell Class B Shares within 1 year
of your purchase and decreases over time depending on how long you own
your shares. See "How to Purchase Portfolio Shares."
Page 29 of 55
<PAGE>
ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)*
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES CLASS A SHARES CLASS B SHARES
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Advisory Fees 0.50% 0.50% 0.50%
Distribution and Service (12b-1) Fees None 0.25% 1.00%
Other Expenses 0.32% 0.32% 0.32%
----- ----- ----
Total Annual Portfolio Operating Expenses 0.82% 1.07% 1.82%
</TABLE>
-------------------------------------------------------------------------------
* The Portfolio's total actual annual Portfolio operating expenses for the
most recent fiscal year were less than the amount shown because the Adviser
waived a portion of the fees in order to keep total operating expenses at a
specified level. These fee waivers remain in place as of the date of this
Prospectus, but the Adviser may discontinue all or part of these waivers at any
time. With these fee waivers, the Portfolio's actual total operating expenses
should be as follows:
<TABLE>
<S> <C>
Golden Oak Michigan Tax Free Bond Portfolio - Institutional Shares 0.65%
Golden Oak Michigan Tax Free Bond Portfolio - Class A Shares 0.90%
Golden Oak Michigan Tax Free Bond Portfolio - Class B Shares 1.65%
</TABLE>
For more information about these fees, see "Investment Adviser and Sub-Advisers"
and "Distribution of Portfolio Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Portfolio would be:
IF YOU SELL YOUR FUND SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES $84 $262 $455 $1,014
CLASS A SHARES $554 $775 $1,014 $1,697
CLASS B SHARES $685 $873 $1,185 $1,848
</TABLE>
IF YOU DO NOT SELL YOUR FUND SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES $84 $262 $455 $1,014
CLASS A SHARES $554 $775 $1,014 $1,697
CLASS B SHARES $185 $573 $985 $1,848
</TABLE>
Page 30 of 55
<PAGE>
PRIME OBLIGATION MONEY MARKET PORTFOLIO
PORTFOLIO SUMMARY
INVESTMENT GOAL Preserve principal value and maintain a
high degree of liquidity while providing
current income
INVESTMENT FOCUS Money market instruments
SHARE PRICE VOLATILITY Very low
PRINCIPAL INVESTMENT STRATEGY Investing in a broad range of short-term
high quality U.S. dollar-denominated
debt securities
INVESTOR PROFILE Conservative investors who want to
receive current income through a liquid
investment
INVESTMENT STRATEGY
The Portfolio invests in a broad range of short-term U.S. dollar-denominated
securities that are rated in one of the two highest rating categories by
nationally recognized rating organizations, or unrated securities that
Wellington Management Company, LLP (Sub-Adviser) determines are of comparable
quality. The Portfolio invests in short-term securities, including: (i)
commercial paper and other short-term corporate obligations of U.S. and foreign
issuers (including asset-backed securities); (ii) certificates of deposit, time
deposits, bankers' acceptances, bank notes and other obligations of U.S. and
foreign savings and loan institutions and commercial banks (including foreign
branches of such banks) that meet certain asset requirements; (iii) short-term
obligations issued by state and local governments; (iv) obligations of foreign
governments (including Canadian and Provincial Government and Crown Agency
obligations); and (v) U.S. Treasury obligations and obligations issued or
guaranteed as to principal and interest by agencies or instrumentalities of the
U.S. government. The Portfolio may also enter into fully-collateralized
repurchase agreements.
The Adviser has engaged Wellington Management Company, LLP as sub-adviser to
manage the Portfolio on a day-to-day basis. Using top-down strategy setting and
bottom-up security selection, the Sub-Adviser seeks securities with an
acceptable maturity, that are marketable and liquid, that offer competitive
yields, and that are issued by issuers that are on a sound financial footing.
The Sub-Adviser also considers factors such as the anticipated level of interest
rates and the maturity of individual securities relative to the maturity of the
Portfolio as a whole. The Portfolio follows strict SEC rules about credit
quality, maturity and diversification of its investments.
PRINCIPAL RISKS OF INVESTING
An investment in the Portfolio is subject to income risk, which is the
possibility that the Portfolio's yield will decline due to falling interest
rates. A Portfolio share is not a bank deposit and is not insured or guaranteed
by the FDIC or any government agency. In addition, although a
Page 31 of 55
<PAGE>
money market Portfolio seeks to keep a constant price per share of $1.00, you
may lose money by investing in the Portfolio.
Although the Portfolio's U.S. government securities are considered to be among
the safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies are
backed by the U.S. Treasury, while others are backed solely by the ability of
the agency to borrow from the U.S. Treasury or by the agency's own resources.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, the Portfolio's past
performance does not necessarily indicate how the Portfolio will perform in the
future.
This bar chart shows changes in the performance of the Portfolio's Institutional
Shares from year to year.*
<TABLE>
<S> <C> <C>
1994 3.97%
1995 5.77%
1996 5.23%
1997 5.38%
1998 5.34%
1999 4.98%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C> <C>
1.44% 0.74%
(6/30/95) (3/31/94)
</TABLE>
* The performance shown above is based on a calendar year. The Portfolio's
performance from 1/1/00 to 3/31/00 was 1.39%.
Call 1-800-545-6331 for the Portfolio's most current 7-day yield.
THIS TABLE SHOWS THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999.
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GOLDEN OAK PRIME OBLIGATION MONEY MARKET PORTFOLIO 4.98% 5.34% 4.81%*
</TABLE>
* Since 2/1/93
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GOLDEN OAK PRIME OBLIGATION MONEY MARKET PORTFOLIO 4.72% 5.08% 4.87%*
</TABLE>
* Since 1/20/94
Page 32 of 55
<PAGE>
PORTFOLIO FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
PORTFOLIO SHARES.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES CLASS A SHARES CLASS B SHARES
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None None None
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)* None None 5.00%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None None
Exchange Fee None None None
</TABLE>
* This sales charge is imposed if you sell Class B Shares within 1 year of
your purchase and decreases over time depending on how long you own your
shares. See "How to Purchase Portfolio Shares."
ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)*
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES CLASS A SHARES CLASS B SHARES
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Advisory Fees 0.30% 0.30% 0.30%
Distribution and Service (12b-1) Fees None 0.25% 1.00%
Other Expenses 0.30% 0.30% 0.30%
----- ----- -----
Total Annual Portfolio Operating Expenses 0.60% 0.85% 1.60%
</TABLE>
-------------------------------------------------------------------------------
* The Portfolio's total actual annual Portfolio operating expenses for the
most recent fiscal year were less than the amount shown because the Adviser
waived a portion of the fees in order to keep total operating expenses at a
specified level. These fee waivers remain in place as of the date of this
Prospectus, but the Adviser may discontinue all or part of these waivers at any
time. With these fee waivers, the Portfolio's actual total operating expenses
should be as follows:
<TABLE>
<S> <C>
Golden Oak Prime Obligation Money Market Portfolio - Institutional Shares 0.40%
Golden Oak Prime Obligation Money Market Portfolio - Class A Shares 0.65%
Golden Oak Prime Obligation Money Market Portfolio - Class B Shares 1.40%
</TABLE>
For more information about these fees, see "Investment Adviser and Sub-Advisers"
and "Distribution of Portfolio Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Portfolio would be:
Page 33 of 55
<PAGE>
IF YOU SELL YOUR FUND SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES $61 $192 $335 $750
CLASS A SHARES $87 $271 $471 $1,049
CLASS B SHARES $663 $805 $1,071 $1,605
</TABLE>
IF YOU DO NOT SELL YOUR FUND SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES $61 $192 $335 $750
CLASS A SHARES $87 $271 $471 $1,049
CLASS B SHARES $163 $505 $871 $1,605
</TABLE>
Page 34 of 55
<PAGE>
MORE INFORMATION ABOUT RISK
EQUITY RISK - Equity securities Golden Oak Growth Portfolio
include public and privately issued Golden Oak Value Portfolio
equity securities, common and Golden Oak Tax-Managed Equity Portfolio
preferred stocks, warrants, rights Golden Oak Small Cap Value Portfolio
to subscribe to common stock and Golden Oak International Equity Portfolio
convertible securities, as well as
instruments that attempt to track
the price movement of equity
indices. Investments in equity
securities and equity derivatives in
general are subject to market risks
that may cause their prices to
fluctuate over time. The value of
securities convertible into equity
securities, such as warrants or
convertible debt, is also affected
by prevailing interest rates, the
credit quality of the issuer and any
call provision. Fluctuations in the
value of equity securities in which
a mutual fund invests will cause a
Portfolio's net asset value to
fluctuate. An investment in a
portfolio of equity securities may
be more suitable for long-term
investors who can bear the risk of
these share price fluctuations.
FIXED INCOME RISK - The market value Golden Oak Intermediate-Term Income
of fixed income investments change Portfolio
in response to interest rate changes Golden Oak Michigan Tax Free Bond
and other factors. During periods of Portfolio
falling interest rates, the values Golden Oak Prime Obligations Portfolio
of outstanding fixed income
securities generally rise. Moreover,
while securities with longer
maturities tend to produce higher
yields, the prices of longer
maturity securities are also subject
to greater market fluctuations as a
result of changes in interest rates.
In addition to these fundamental
risks, different types of fixed
income securities may be subject to
the following additional risks:
CALL RISK - During periods of
falling interest rates, certain debt
obligations with high interest rates
may be prepaid (or "called") by the
issuer prior to maturity. This may
cause a Portfolio's average weighted
maturity to fluctuate, and may
require a Portfolio to invest the
resulting proceeds at lower interest
rates.
CREDIT RISK - The possibility that
an issuer will be unable to make
timely payments of either principal
or interest.
Page 35 of 55
<PAGE>
EVENT RISK - Securities may suffer
declines in credit quality and
market value due to issuer
restructurings or other factors.
This risk should be reduced because
of a Portfolio's multiple holdings.
MUNICIPAL ISSUER RISK - There may be Golden Oak Michigan Tax Free Bond
economic or political changes that Portfolio
impact the ability of municipal
issuers to repay principal and to
make interest payments on municipal
securities. Changes to the financial
condition or credit rating of
municipal issuers may also adversely
affect the value of the Portfolio's
municipal securities. Constitutional
or legislative limits on borrowing
by municipal issuers may result in
reduced supplies of municipal
securities. Moreover, certain
municipal securities are backed only
by a municipal issuer's ability to
levy and collect taxes. In addition,
the Portfolio's concentration of
investments in issuers located in a
single state makes the Portfolio
more susceptible to adverse
political or economic developments
affecting that state. The Portfolio
also may be riskier than mutual
funds that buy securities of issuers
in numerous states.
FOREIGN SECURITY RISKS-- Investments Golden Oak International Equity
in securities of foreign companies Portfolio
or governments can be more volatile
than investments in U.S. companies
or governments. Diplomatic,
political, or economic developments,
including nationalization or
appropriation, could affect
investments in foreign countries.
Foreign securities markets generally
have less trading volume and less
liquidity than U.S. markets. In
addition, the value of securities
denominated in foreign currencies,
and of dividends from such
securities, can change significantly
when foreign currencies strengthen
or weaken relative to the U.S.
dollar. Foreign companies or
governments generally are not
subject to uniform accounting,
auditing, and financial reporting
standards comparable to those
applicable to domestic U.S.
companies or governments.
Transaction costs are generally
higher than those in the U.S. and
expenses for custodial arrangements
of foreign securities may be
somewhat greater than typical
expenses for custodial arrangements
of similar U.S. securities. Some
foreign governments levy withholding
taxes against dividend and interest
income. Although in some countries a
portion of these taxes are
recoverable, the non-recovered
portion will reduce the income
received from the securities
comprising the portfolio.
Page 36 of 55
<PAGE>
In addition to these risks, certain
foreign securities may be subject to
the following additional risks
factors:
CURRENCY RISK -- Investments in Golden Oak International Equity
foreign securities denominated in Portfolio
foreign currencies involve
additional risks, including:
- The value of a Portfolio's assets
measured in U.S. dollars may be
affected by changes in currency
rates and in exchange control
regulations.
- A Portfolio may incur substantial
costs in connection with
conversions between various
currencies.
- A Portfolio may be unable to hedge
against possible variations in
foreign exchange rates or to
hedge a specific security
transaction or portfolio position.
- Only a limited market currently
exists for hedging transactions
relating to currencies in certain
emerging markets.
Page 37 of 55
<PAGE>
MORE INFORMATION ABOUT PORTFOLIO INVESTMENTS
This prospectus describes the Portfolios' primary strategies, and the Portfolios
will normally invest in the types of securities described in this prospectus.
However, in addition to the investments and strategies described in this
prospectus, each Portfolio also may invest in other securities, use other
strategies and engage in other investment practices. These investments and
strategies, as well as those described in this prospectus, are described in
detail in our Statement of Additional Information.
The investments and strategies described in this prospectus are those that we
use under normal conditions. During unusual economic or market conditions, or
for temporary defensive or liquidity purposes, each Portfolio may invest up to
100% of its assets in cash or money market instruments that would not ordinarily
be consistent with a Portfolio's objectives. A Portfolio will do so only if the
Adviser or Sub-Adviser believes that the risk of loss outweighs the opportunity
for capital gains or higher income. Of course, the Portfolio cannot guarantee
that any Portfolio will achieve its investment goal.
INVESTMENT ADVISER AND SUB-ADVISERS
The Investment Adviser makes investment decisions for each of the Portfolios,
other than the Portfolios which utilize a sub-adviser, and continuously reviews,
supervises and administers the Portfolios' respective investment programs. The
Investment Adviser oversees the Sub-Advisers to ensure compliance with the
sub-advised Portfolios' investment policies and guidelines, and monitors each
Sub-Adviser's adherence to its investment style. The Board of Trustees of The
Arbor Fund supervises the Adviser and Sub-Advisers and establishes policies that
the Adviser and Sub-Advisers must follow in their management activities.
Citizens Bank serves as the Adviser to the Portfolios. Citizens Bank has managed
bank common funds, pension plan assets and personal trust assets since 1927. As
of January 1, 2000, Citizens Bank had approximately $3.8 billion in assets under
management. For the fiscal year ended January 31, 2000, Citizens Bank received
advisory fees as a percentage of average daily net assets of:
<TABLE>
<S> <C>
GOLDEN OAK GROWTH PORTFOLIO 0.34%
GOLDEN OAK VALUE PORTFOLIO 0.30%
GOLDEN OAK TAX-MANAGED EQUITY PORTFOLIO 0.23%
GOLDEN OAK SMALL CAP VALUE PORTFOLIO 0.14%
GOLDEN OAK INTERMEDIATE-TERM INCOME PORTFOLIO 0.35%
GOLDEN OAK MICHIGAN TAX FREE BOND PORTFOLIO 0.33%
GOLDEN OAK PRIME OBLIGATION MONEY MARKET PORTFOLIO 0.02%
</TABLE>
Citizens Bank is entitled to receive 0.30% of the Golden Oak International
Equity Portfolio's average daily net assets for its investment advisory
services, but may receive less due to waivers.
Page 38 of 55
<PAGE>
Nicholas-Applegate Capital Management (Nicholas-Applegate) manages the Golden
Oak Growth Portfolio and the Golden Oak Tax-Managed Equity Portfolio on a
day-to-day basis. Nicholas-Applegate selects, buys and sells securities for the
Portfolios under the supervision of the Adviser and the Board of Trustees. For
the fiscal year ended January 31, 2000, Nicholas-Applegate received sub-advisory
fees as a percentage of average daily net assets of:
<TABLE>
<S> <C>
GOLDEN OAK GROWTH PORTFOLIO 0.40%
GOLDEN OAK TAX-MANAGED EQUITY PORTFOLIO 0.40%
</TABLE>
Systematic Financial Management, L.P. (Systematic) manages the Golden Oak Value
Portfolio and Small Cap Value Portfolio on a day-to-day basis. Systematic
selects, buys and sells securities for the Portfolio under the supervision of
the Adviser and the Board of Trustees. For the fiscal year ended January 31,
2000, Systematic received sub-advisory fees as a percentage of average daily net
assets of:
<TABLE>
<S> <C>
GOLDEN OAK VALUE PORTFOLIO 0.44%
GOLDEN OAK SMALL CAP VALUE PORTFOLIO 0.65%
</TABLE>
BlackRock International, Ltd. (BIL), 7 Castle Street, Edinburgh, Scotland,
manages the Golden Oak International Equity Portfolio on a day-to-day basis. BIL
selects, buys and sells securities for the Portfolio under the supervision of
the Adviser and the Board of Trustees. BIL is a wholly owned subsidiary of
BlackRock Inc. (BlackRock), one of the largest publicly traded investment
management firms in the United States with $172.6 billion of assets under
management as of March 31, 2000. BlackRock is a majority owned subsidiary of The
PNC Financial Services Group, Inc., one of the largest diversified financial
services companies in the United States. BIL is entitled to receive 0.60% of the
Portfolio's average daily net assets for its services, but may receive less due
to waivers.
Wellington Management Company, LLP (WMC) manages the Golden Oak Prime Obligation
Money Market Portfolio on a day-to-day basis. WMC selects, buys and sells
securities for the Portfolio under the supervision of the Adviser and the Board
of Trustees. WMC and its predecessor organizations have provided investment
advisory services to investment companies since 1928 and investment counseling
to clients since 1960. For the fiscal year ended January 31, 2000, WMC received
sub-advisory fees as a percentage of average daily net assets of:
<TABLE>
<S> <C>
GOLDEN OAK PRIME OBLIGATION MONEY MARKET PORTFOLIO 0.075%
</TABLE>
PORTFOLIO MANAGERS
James A. Nawrocki serves as Vice President and Trust Officer of Citizens Bank.
He has managed the Golden Oak Intermediate-Term Income Portfolio since October
1999. In addition, Mr. Nawrocki is part of the Golden Oak Michigan Tax Free Bond
Portfolio management team. He previously managed fixed income portfolios for 8
years for The Dow Chemical Company including defined benefit and defined
contribution pension plan portfolios as well as P&C insurance company assets. He
was a financial consultant at First of Michigan Corporation for nearly 2 years.
Page 39 of 55
<PAGE>
Richard C. Cross serves as Vice President and Trust Officer of Citizens Bank. He
has managed the Golden Oak Michigan Tax Free Bond Portfolio since October 1997.
In addition, Mr. Cross is part of the Golden Oak Intermediate-Term Income
Portfolio management team. He had 12 years of experience managing fixed income
portfolios for The Dow Chemical Company including defined benefit and defined
contribution pension plan portfolios as well as domestic and off-shore P&C
insurance company assets. He was a financial consultant to Chemical Financial
Corporation for over 2 years.
Larry Speidell, CFA and Partner, serves as the director of Nicholas-Applegate's
global/systematic portfolio management and research group. Portfolios are
managed by a team with lead portfolio managers having full discretion over final
buy and sell decisions. Mr. Speidell has over 26 years of investment experience.
Prior to joining Nicholas-Applegate in 1994, Mr. Speidell was with Batterymarch
Financial Management and Putnam Management Company.
John Kane is a Partner and a Portfolio Manager for Nicholas-Applegate's U.S.
Systematic Team. He is the lead portfolio manager for the Golden Oak Growth
Portfolio and the Golden Oak Tax-Managed Equity Portfolio. He has more than 31
years of investment experience. Before joining Nicholas-Applegate in 1994, Mr.
Kane had 25 years of experience with ARCO Investment Management Company and
General Electric Company.
Gyanendra Kumar Joshi serves as Senior Managing Director of Systematic. He has
managed the Golden Oak Value Portfolio since June 1997. He has more than 27
years of investment experience. Prior to joining Systematic, Mr. Joshi served as
Managing Director of Mitchell Hutchins Institutional Investors.
Kevin McCreesh, CFA serves as Managing Director and Senior Portfolio Manager of
Systematic Investment Management. Mr. McCreesh co-manages the Golden Oak Value
Portfolio with Mr. Joshi and has been part of the investment team with Mr. Joshi
since 1990 at Systematic and at Mitchell Hutchins Institutional Investors.
Ken Burgess serves as Assistant Portfolio Manager and Senior Small Cap Analyst
of Systematic Investment Management. He specializes in cash flow analysis and
devotes his efforts solely to the portfolio management and analysis of small cap
equities. Mr. Burgess has been a portfolio manager at Systematic since 1993.
Peter Tait manages the Golden Oak International Equity Portfolio and has served
as Managing Director and Global Strategist of BlackRock International, Ltd.
since 1996. Prior to joining BIL, Mr. Tait was the Director and Head of the
Continental European Desk at Dunedin Fund Managers, Ltd. from 1990-1996.
Page 40 of 55
<PAGE>
PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES
This section tells you how to purchase, sell (sometimes called "redeem") and
exchange Institutional Shares, Class A and Class B Shares of the Portfolios.
The classes have different expenses and other characteristics.
INSTITUTIONAL SHARES
- NO SALES CHARGE
- NO 12b-1 FEES OR SHAREHOLDER FEES
- $1,000,000 MINIMUM INITIAL INVESTMENT
CLASS A SHARES
- FRONT-END SALES CHARGE
- 12b-1 FEES
- $1,000 MINIMUM INITIAL INVESTMENT
CLASS B SHARES
- CONTINGENT DEFERRED SALES CHARGE
- HIGHER 12b-1 FEES
- $1,000 MINIMUM INITIAL INVESTMENT
- CONVERT TO CLASS A SHARES AFTER 7 YEARS
For some investors the minimum initial investment may be lower.
Institutional Shares are for financial institutions investing for their own or
their customers' accounts. For information on how to open an account and set up
procedures for placing transactions call 1-800-808-4920.
Class A Shares and Class B Shares are for individual and institutional
investors.
HOW TO PURCHASE PORTFOLIO SHARES
You may purchase shares directly by:
- Mail (Class A and Class B only)
- Telephone
- Wire
- Direct Deposit, or
- Automated Clearing House (ACH).
To purchase shares directly from us, please call 1-800-808-4920. Unless you
arrange to pay by wire or through direct deposit or ACH, write your check,
payable in U.S. dollars, to "Golden Oak Family of Funds" and include the name of
the appropriate Portfolio(s) on the check. You cannot purchase Institutional
Shares by check. A Portfolio cannot accept third-party checks, credit cards,
credit card checks or cash.
You may also buy shares through accounts with brokers and other institutions
that are authorized to place trades in Portfolio shares for their customers. If
you invest through an authorized institution, you will have to follow its
procedures, which may be different from the procedures for
Page 41 of 55
<PAGE>
investing directly. Your broker or institution may charge a fee for its
services, in addition to the fees charged by the Portfolio. You will also
generally have to address your correspondence or questions regarding a Portfolio
to your institution.
GENERAL INFORMATION
You may purchase shares on any day that the New York Stock Exchange and, for the
Golden Oak Prime Obligation Money Market Portfolio, the Federal Reserve are open
for business (a Business Day). Shares cannot be purchased by Federal Reserve
Wire on days when either the New York Stock Exchange or the Federal Reserve is
closed.
A Portfolio may reject any purchase order if it determines that accepting the
order would not be in the best interests of the Portfolio or its shareholders.
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after a Portfolio receives your purchase order plus, in
the case of Class A Shares, the applicable front-end sales charge.
Each Portfolio (except the Golden Oak Prime Obligation Money Market), calculates
its NAV once each Business Day at the regularly-scheduled close of normal
trading on the New York Stock Exchange (normally, 4:00 p.m., Eastern time). So,
for you to receive the current Business Day's NAV, generally a Portfolio must
receive your purchase order before 4:00 p.m. Eastern time.
The Golden Oak Prime Obligation Money Market Portfolio calculates its NAV once
each Business Day at 12:00 noon Eastern time. So, for you to be eligible to
receive dividends declared on the day you submit your purchase order, the
Portfolio generally must receive your order before 12:00 noon Eastern time and
federal funds (readily available funds) before 12:00 noon Eastern time.
The Golden Oak International Equity Portfolio holds securities that are listed
on foreign exchanges. These securities may trade on weekends or other days when
the Portfolio does not calculate NAV. As a result, the market value of the
Portfolio's investments may change on days when you cannot purchase or sell
Portfolio shares.
HOW WE CALCULATE NAV
NAV for one Portfolio share is the value of that share's portion of the net
assets of the Portfolio.
In calculating NAV, a Portfolio generally values its investment portfolio at
market price (except the Golden Oak Prime Obligation Money Market Portfolio). If
market prices are unavailable or a Portfolio thinks that they are unreliable,
fair value prices may be determined in good faith using methods approved by the
Board of Trustees.
In calculating NAV for the Golden Oak Prime Obligation Money Market Portfolio,
we generally value the Portfolio's investment portfolio using the amortized cost
valuation method, which is described in detail in our Statement of Additional
Information. If this method is determined to be unreliable during certain market
conditions or for other reasons, the Portfolio may value its securities at
market price or fair value prices may be determined in good faith using methods
approved by the Board of Trustees.
Page 42 of 55
<PAGE>
MINIMUM PURCHASES
To purchase shares for the first time, you must invest in any Portfolio at
least:
<TABLE>
<CAPTION>
CLASS DOLLAR AMOUNT
<S> <C>
Institutional Shares $1,000,000
Class A Shares $1,000 ($500 minimum for an IRA)
Class B Shares $1,000 ($500 minimum for an IRA)
</TABLE>
Your subsequent investments in Class A and Class B Shares of any Portfolio must
be made in amounts of at least $50. There is no minimum for subsequent
investments in Institutional Shares.
A Portfolio may accept investments of smaller amounts for any class of shares at
its discretion.
SYSTEMATIC INVESTMENT PLAN (CLASS A AND CLASS B ONLY)
If you have a checking or savings account, you may purchase Class A Shares and
Class B Shares automatically through regular deductions from your account. Once
your account has been opened, you may begin regularly scheduled investments of
at least $50 a month. Purchases of Class A Shares made through the Systematic
Investment Plan are subject to the applicable sales charge.
Page 43 of 55
<PAGE>
SALES CHARGES
FRONT-END SALES CHARGES - CLASS A SHARES
The offering price of Class A Shares is the NAV next calculated after a
Portfolio receives your request, plus the front-end sales load.
The amount of any front-end sales charge included in your offering price varies,
depending on the amount of your investment:
<TABLE>
<CAPTION>
YOUR SALES CHARGE AS YOUR SALES CHARGE AS
A PERCENTAGE OF A PERCENTAGE OF YOUR
IF YOUR INVESTMENT IS: OFFERING PRICE NET INVESTMENT
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GROWTH PORTFOLIO LESS THAN $50,000 5.75% 6.10%
VALUE PORTFOLIO $50,000 BUT LESS THAN $100,000 4.50% 4.71%
TAX-MANAGED EQUITY PORTFOLIO $100,000 BUT LESS THAN $250,000 3.50% 3.63%
SMALL CAP VALUE PORTFOLIO $250,000 BUT LESS THAN $500,000 2.60% 2.67%
INTERNATIONAL EQUITY PORTFOLIO $500,000 BUT LESS THAN $1,000,000 2.00% 2.04%
$1,000,000 AND OVER 0.00% 0.00%
------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE-TERM INCOME PORTFOLIO LESS THAN $100,000 4.50% 4.71%
MICHIGAN TAX FREE BOND PORTFOLIO $100,000 BUT LESS THAN $250,000 3.50% 3.63%
$250,000 BUT LESS THAN $500,000 2.60% 2.67%
$500,000 BUT LESS THAN $1,000,000 2.00% 2.04%
$1,000,000 AND OVER 0.00% 0.00%
</TABLE>
There is no sales charge imposed on Class A shares of the Golden Oak Prime
Obligation Money Market Portfolio.
WAIVER OF FRONT-END SALES CHARGE -CLASS A SHARES
No sales charge is imposed on shares of a Portfolio:
- issued in plans of reorganization, such as mergers involving the Portfolios;
- sold to dealers or brokers that have a sales agreement with the
Distributor, for their own account or for retirement plans for their
employees or sold to employees (and their spouses) of dealers or brokers
that certify to the Distributor at the time of purchase that such
purchase is for their own account (or for the benefit of such employees'
minor children);
- purchased in aggregate amounts of $1 million or more by tax exempt
organizations enumerated in Section 501(c) of the Code or employee
benefit plans created under Sections 401 or 457 of the Code;
- sold to Trustees and officers of The Arbor Fund and employees of the
Adviser and its affiliates;
- sold to agency, custody and fiduciary accounts of the Adviser and its
affiliates; or
- purchased in connection with any asset allocation plan established by the
Adviser.
REDUCED SALES CHARGES --CLASS A SHARES
RIGHTS OF ACCUMULATION. In calculating the appropriate sales charge rate, this
right allows you to add the value of the Class A Shares you already own to the
amount that you are currently purchasing. The Portfolio will combine the value
of your current purchases with the current
Page 44 of 55
<PAGE>
value of any Class A Shares you purchased previously for (i) your account, (ii)
your spouse's account, (iii) a joint account with your spouse, or (iv) your
minor children's trust or custodial accounts. A fiduciary purchasing shares for
the same fiduciary account, trust or estate may also use this right of
accumulation. The Portfolio will only consider the value of Class A Shares
purchased previously that were sold subject to a sales charge. TO BE ENTITLED TO
A REDUCED SALES CHARGE BASED ON SHARES ALREADY OWNED, YOU MUST ASK US FOR THE
REDUCTION AT THE TIME OF PURCHASE. You must provide the Portfolio with your
account number(s) and, if applicable, the account numbers for your spouse and/or
children (and provide the children's ages). The Portfolio may amend or terminate
this right of accumulation at any time.
LETTER OF INTENT. You may purchase Class A Shares at the sales charge rate
applicable to the total amount of the purchases you intend to make over a
13-month period. In other words, a Letter of Intent allows you to purchase Class
A Shares of a Portfolio over a 13-month period and receive the same sales charge
as if you had purchased all the shares at the same time. The Portfolio will only
consider the value of Class A Shares sold subject to a sales charge. As a
result, Class A Shares purchased with dividends or distributions will not be
included in the calculation. To be entitled to a reduced sales charge based on
shares you intend to purchase over the 13-month period, you must send the
Portfolio a Letter of Intent. In calculating the total amount of purchases you
may include in your letter purchases made up to 90 days before the date of the
Letter. The 13-month period begins on the date of the first purchase, including
those purchases made in the 90-day period before the date of the Letter. Please
note that the purchase price of these prior purchases will not be adjusted.
You are not legally bound by the terms of your Letter of Intent to purchase the
amount of your shares stated in the Letter. The Letter does, however, authorize
the Portfolio to hold in escrow 5.0% of the total amount you intend to purchase.
If you do not complete the total intended purchase at the end of the 13-month
period, the Portfolio's transfer agent will redeem the necessary portion of the
escrowed shares to make up the difference between the reduced rate sales charge
(based on the amount you intended to purchase) and the sales charge that would
normally apply (based on the actual amount you purchased).
COMBINED PURCHASE/QUANTITY DISCOUNT PRIVILEGE. When calculating the appropriate
sales charge rate, the Portfolio will combine same day purchases of Class A
Shares (that are subject to a sales charge) made by you, your spouse and your
minor children (under age 21). This combination also applies to Class A Shares
you purchase with a Letter of Intent.
CONTINGENT DEFERRED SALES CHARGES -- CLASS B SHARES
You do not pay a sales charge when you purchase Class B Shares. The offering
price of Class B Shares is simply the next calculated NAV. But if you sell your
shares within seven years after your purchase, you will pay contingent deferred
sales charges as described in the table below for either (1) the NAV of the
shares at the time of purchase, or (2) NAV of the shares next calculated after
the Portfolio receives your sale request, whichever is less. The sales charge
does not apply to shares you purchase through reinvestment of dividends or
distributions. So, you never pay a deferred sales charge on any increase in your
investment above the initial offering price. This sales charge does not apply to
exchanges of Class B Shares of one Portfolio for Class B Shares of another
Portfolio.
Page 45 of 55
<PAGE>
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE
YEAR SINCE PURCHASE OF DOLLAR AMOUNT SUBJECT TO CHARGE
---------------------------------------------------------------------------
<S> <C>
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh 0%
</TABLE>
The contingent deferred sales charge will be waived if you sell your Class B
Shares for the following reasons:
- to make certain withdrawals from a retirement plan; or
- because of death or disability.
GENERAL INFORMATION ABOUT SALES CHARGES
Your securities dealer is paid a commission when you buy your shares and is paid
a servicing fee as long as you hold your shares. Your securities dealer or
servicing agent may receive different levels of compensation depending on which
Class of shares you buy.
From time to time, some financial institutions, including brokerage firms
affiliated with the Adviser, may be reallowed up to the entire sales charge.
Firms that receive a reallowance of the entire sales charge may be considered
underwriters for the purpose of federal securities law.
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs for dealers, which will be paid for by the
Distributor from any sales charge it receives or from any other source available
to it. Under any such program, the Distributor may provide cash or non-cash
compensation as recognition for past sales or encouragement for future sales
that may include the following: merchandise, travel expenses, prizes, meals, and
lodgings, and gifts that do not exceed $100 per year, per individual.
HOW TO SELL YOUR PORTFOLIO SHARES
Holders of Institutional Shares may sell shares by following the procedures
established when they opened their account or accounts. If you have questions,
call 1-800-808-4920.
If you own your shares directly, you may sell your shares on any Business Day by
contacting the Portfolio directly by mail or telephone at 1-800-808-4920.
If you own your shares through an account with a broker or other institution,
contact that broker or institution to sell your shares. Your broker or
institution may charge a fee for its services, in addition to the fees charged
by the Portfolio.
If you would like to sell $50,000 or more of your shares, or would like the
proceeds sent to a third-party or an address other than your own, please notify
the Portfolio in writing and include a signature guarantee by a bank or other
financial institution (a notarized signature is not sufficient).
Page 46 of 55
<PAGE>
SYSTEMATIC WITHDRAWAL PLAN (CLASS A ONLY)
If you have at least $10,000 in your account, you may use the systematic
withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual
or annual automatic withdrawals of at least $50 from any Portfolio. The proceeds
of each withdrawal will be mailed to you by check or, if you have a checking or
savings account with a bank, electronically transferred to your account.
CHECK WRITING SERVICE (PRIME OBLIGATION MONEY MARKET PORTFOLIO - CLASS A SHARES
ONLY)
If you own Class A Shares of the Prime Obligation Money Market Portfolio you may
redeem shares by writing checks on your account for $500 or more. Once you have
signed and returned a signature card, you will receive a supply of checks. The
check may be made payable to any person, and your account will continue to earn
dividends until the check clears. These checks are free, but your account will
be charged a fee (currently $15) for stopping payment of a check upon your
request, or if the check cannot be honored because of insufficient funds or
other valid reasons.
Because of the difficulty of determining in advance the exact value of your
Portfolio account, you may not use a check to close your account.
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within 7 days after we receive your
request. Your proceeds can be wired to your bank account (subject to a $10 fee)
or sent to you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY CHECK OR
THROUGH ACH, REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS
CLEARED (WHICH MAY TAKE UP TO 15 DAYS FROM YOUR DATE OF PURCHASE).
REDEMPTIONS IN KIND
We generally pay sale (redemption) proceeds in cash. However, under unusual
conditions that make the payment of cash unwise (and for the protection of the
Portfolio's remaining shareholders) we might pay all or part of your redemption
proceeds in liquid securities with a market value equal to the redemption price
(redemption in kind). It is highly unlikely that your shares would ever be
redeemed in kind, but if they were you would probably have to pay transaction
costs to sell the securities distributed to you, as well as taxes on any capital
gains from the sale as with any redemption.
INVOLUNTARY REDEMPTIONS OF YOUR SHARES
If your account balance drops below the required minimum, the Portfolio may
redeem your shares. The account balance minimums are:
<TABLE>
<CAPTION>
CLASS DOLLAR AMOUNT
<S> <C>
Institutional Shares $1,000,000
Class A Shares $1,000
Class B Shares $1,000
</TABLE>
Page 47 of 55
<PAGE>
But, a Portfolio will always give you at least 60 days' written notice to give
you time to add to your account and avoid the involuntary redemption of your
shares.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
A Portfolio may suspend your right to sell your shares during times when
trading on the NYSE is restricted, halted, or otherwise as permitted by
the SEC. More information about this is in our Statement of Additional
Information.
HOW TO EXCHANGE YOUR SHARES
You may exchange your shares on any Business Day by contacting us directly by
mail or telephone.
You may also exchange shares through your financial institution by mail or
telephone.
IF YOU RECENTLY PURCHASED SHARES BY CHECK OR THROUGH ACH, YOU MAY NOT BE ABLE TO
EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 DAYS
FROM YOUR DATE OF PURCHASE). This exchange privilege may be changed or canceled
at any time upon 60 days' notice.
When you exchange shares, you are really selling your shares and buying other
Portfolio shares. So, your sale price and purchase price will be based on the
NAV next calculated after the Portfolio receives your exchange request.
CLASS A SHARES
You may exchange Class A Shares of any Portfolio for Class A Shares of any other
Portfolio. If you exchange shares that you purchased without a sales charge or
with a lower sales charge into a Portfolio with a sales charge or with a higher
sales charge, the exchange is subject to an incremental sales charge (e.g., the
difference between the lower and higher applicable sales charges). If you
exchange shares into a Portfolio with the same, lower or no sales charge there
is no incremental sales charge for the exchange.
CLASS B SHARES
You may exchange Class B Shares of any Portfolio for Class B Shares of any other
Portfolio. No contingent deferred sales charge is imposed on redemptions of
shares you acquire in an exchange, provided you hold your shares for at least
seven years from your initial purchase.
AUTOMATIC EXCHANGE OF YOUR SHARES
If your account balance for Institutional Shares drops below $1,000,000 because
of redemptions, your shares will be automatically exchanged for Class A Shares.
You will not be charged the applicable Class A sales charge for an automatic
exchange. But, a Portfolio will always give you at least 30 days' written notice
to give you time to add to your account and avoid the automatic exchange of your
shares.
TELEPHONE TRANSACTIONS
Page 48 of 55
<PAGE>
Purchasing, selling and exchanging Portfolio shares over the telephone is
extremely convenient, but not without risk. Although the Portfolio has certain
safeguards and procedures to confirm the identity of callers and the
authenticity of instructions, the Portfolio is not responsible for any losses or
costs incurred by following telephone instructions we reasonably believe to be
genuine. If you or your financial institution transact with the Portfolio over
the telephone, you will generally bear the risk of any loss.
DISTRIBUTION OF PORTFOLIO SHARES
Each Portfolio has adopted a distribution plan that allows the Portfolio to pay
distribution and service fees for the sale and distribution of Class A Shares
and Class B Shares, and for services provided to Class A and Class B
shareholders. Because these fees are paid out of a Portfolio's assets
continuously, over time these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges.
Distribution fees, as a percentage of average daily net assets are 0.25% for
Class A Shares and 1.00% for Class B Shares.
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio distributes its income as follows:
Golden Oak Growth Portfolio Quarterly
Golden Oak Value Portfolio Quarterly
Golden Oak Tax-Managed Equity Portfolio Quarterly
Golden Oak Small Cap Value Portfolio Quarterly
Golden Oak International Equity Portfolio Annually
Golden Oak Intermediate-Term Income Portfolio Monthly
Golden Oak Michigan Tax Free Bond Portfolio Monthly
Golden Oak Prime Obligation Money Market Portfolio Monthly
Each Portfolio makes distributions of capital gains, if any, at least annually.
If you own Portfolio shares on a Portfolio's record date, you will be entitled
to receive the distribution.
You will receive dividends and distributions in the form of additional Portfolio
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify the Portfolio in writing prior to the date of the distribution. Your
election will be effective for dividends and distributions paid after the
Portfolio receives your written notice. To cancel your election, simply send the
Portfolio written notice.
Page 49 of 55
<PAGE>
TAXES
PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT
FEDERAL, STATE AND LOCAL INCOME taxes. Below we have summarized some
important tax issues that affect the Portfolios and their shareholders. This
summary is based on current tax laws, which may change.
Each Portfolio will distribute substantially all of its income and capital
gains, if any. The dividends and distributions you receive may be subject to
federal, state and local taxation, depending upon your tax situation. Income
distributions are generally taxable at ordinary income tax rates. Capital gains
distributions are generally taxable at the rates applicable to long-term capital
gains. EACH SALE OR EXCHANGE OF PORTFOLIO SHARES IS A TAXABLE EVENT.
The Golden Oak Michigan Tax Free Bond Portfolio intends to distribute income
that is exempt from both federal taxes and Michigan state taxes. The Portfolio
may invest a portion of its assets in securities that generate taxable income
for federal or state income taxes. Any capital gains distributed by the
Portfolio may be taxable.
The Golden Oak International Equity Portfolio may be able to pass along a tax
credit for foreign income taxes it pays. The Portfolio will notify you if it
gives you the credit.
MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.
page 50 of 55
<PAGE>
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about Institutional
Shares and Class A Shares of each Portfolio. This information is intended to
help you understand each Portfolio's financial performance for the past five
years, or, if shorter, the period of the Portfolio's operations. Some of this
information reflects financial information for a single Portfolio share. The
total returns in the tables represent the rate that you would have earned (or
lost) on an investment in a Portfolio, assuming you reinvested all of your
dividends and distributions. This information has been audited by
PricewaterhouseCoopers LLP, independent public accountants. Their report, along
with each Portfolio's financial statements, appears in the annual report that
accompanies our Statement of Additional Information. You can obtain the annual
report, which contains more performance information, at no charge by calling
1-800-545-6331.
Page 51 of 55
<PAGE>
Financial Highlights
For a Share Outstanding Throughout the Period
For the Periods Ended January 31,
<TABLE>
<CAPTION>
NET REALIZED DISTRIBUTIONS DISTRIBUTIONS NET NET
ASSET AND FROM FROM ASSET ASSETS
VALUE NET UNREALIZED NET NET VALUE END
BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT REALIZED END TOTAL OF PERIOD
OF PERIOD INCOME ON INVESTMENTS INCOME GAIN OF PERIOD RETURN+ (000)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROWTH PORTFOLIO INSTITUTIONAL CLASS
2000 $16.16 $(0.03) $ 4.75 $ -- $(3.03) $17.85 30.67% $65,891
1999 12.66 0.02 5.88 (0.02) (2.38) 16.16 51.98 49,497
1998 12.66 -- 3.12 -- (3.12) 12.66 25.85 36,240
1997 10.26 -- 2.44 (0.01) (0.03) 12.66 23.79 32,973
1996 10.00 0.07 1.74 (0.07) (1.48) 10.26 18.81 24,775
GROWTH PORTFOLIO CLASS A
2000 $15.89 $(0.06) $ 4.63 $ -- $(3.03) $17.43 30.23% $ 9,835
1999 12.51 0.02 5.74 -- (2.38) 15.89 51.45 1,540
1998 12.57 (0.01) 3.07 -- (3.12) 12.51 25.56 307
1997 10.20 (0.03) 2.43 -- (0.03) 12.57 23.56 226
1996 9.96 0.04 1.72 (0.04) (1.48) 10.20 18.43 193
VALUE PORTFOLIO INSTITUTIONAL CLASS
2000 $ 9.17 $ 0.03 $ 0.78 $(0.03) $(0.50) $ 9.45 8.92% $59,091
1999 9.33 0.04 0.90 (0.04) (1.06) 9.17 12.63 46,484
1998(1) 10.00 0.04 0.86 (0.04) (1.53) 9.33 9.15 30,922
VALUE PORTFOLIO CLASS A
2000 $ 9.14 $ 0.01 $ 0.77 $(0.01) $(0.50) $ 9.41 8.61% $ 7,138
1999 9.32 0.03 0.87 (0.02) (1.06) 9.14 12.19 1,100
1998(1) 10.00 0.02 0.86 (0.03) (1.53) 9.32 8.97 51
TAX-MANAGED EQUITY PORTFOLIO INSTITUTIONAL CLASS
2000(2) $10.00 $ -- $ 0.30 $(0.01) $(0.03) $10.26 3.03% $40,305
TAX-MANAGED EQUITY PORTFOLIO CLASS A
2000(2) $10.00 $(0.01) $ 0.29 $(0.01) $(0.03) $10.24 2.77% $ 339
SMALL CAP VALUE PORTFOLIO INSTITUTIONAL CLASS
2000(3) $10.00 $ 0.03 $(0.46) $(0.03) $ -- $ 9.54 (4.33)% $40,554
SMALL CAP VALUE PORTFOLIO CLASS A
2000(3) $10.00 $ 0.03 $(0.47) $(0.02) $ -- $ 9.54 (4.42)% $ 3,305
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES INCOME TO
RATIO OF INVESTMENT TO AVERAGE AVERAGE
EXPENSES INCOME NET ASSETS NET ASSETS PORTFOLIO
TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GROWTH PORTFOLIO INSTITUTIONAL CLASS
2000 1.06% (0.19)% 1.06% (0.19)% 82.69%
1999 1.08 0.10 1.08 0.10 70.60
1998 1.07 0.03 1.07 0.03 131.54
1997 1.10 0.04 1.11 0.03 130.69
1996 1.10 0.62 1.17 0.55 189.48
GROWTH PORTFOLIO CLASS A
2000 1.31% (0.52)% 1.31% (0.52)% 82.69%
1999 1.33 (0.21) 1.33 (0.21) 70.60
1998 1.32 (0.21) 1.32 (0.21) 131.54
1997 1.35 (0.20) 1.36 (0.21) 130.69
1996 1.35 0.30 1.42 0.23 189.48
VALUE PORTFOLIO INSTITUTIONAL CLASS
2000 1.09% 0.36% 1.09% 0.36% 102.11%
1999 1.10 0.44 1.17 0.37 172.09
1998(1) 1.10* 0.72* 1.28* 0.54* 90.97
VALUE PORTFOLIO CLASS A
2000 1.34% 0.10% 1.34% 0.10% 102.11%
1999 1.35 0.20 1.42 0.13 172.09
1998(1) 1.35* 0.31* 1.53* 0.13* 90.97
TAX-MANAGED EQUITY PORTFOLIO INSTITUTIONAL CLASS
2000(2) 1.10%* 0.03%* 1.21%* (0.08)%* 32.30%
TAX-MANAGED EQUITY PORTFOLIO CLASS A
2000(2) 1.35%* (0.34)%* 1.49%* (0.48)%* 32.30%
SMALL CAP VALUE PORTFOLIO INSTITUTIONAL CLASS
2000(3) 1.35%* 0.76%* 1.55%* 0.56%* 10.86%
SMALL CAP VALUE PORTFOLIO CLASS A
2000(3) 1.60%* 0.72%* 1.83%* 0.49%* 10.86%
</TABLE>
Page 52 of 55
<PAGE>
<TABLE>
<CAPTION>
NET REALIZED DISTRIBUTIONS DISTRIBUTIONS NET NET
ASSET AND FROM FROM ASSET ASSETS
VALUE NET UNREALIZED NET NET VALUE END
BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT REALIZED END TOTAL OF PERIOD
OF PERIOD INCOME ON INVESTMENTS INCOME GAIN OF PERIOD RETURN+ (000)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTERMEDIATE-TERM INCOME PORTFOLIO INSTITUTIONAL CLASS
2000 $10.32 $0.55 $(0.97) $(0.55) $ -- $ 9.35 (4.07)% $147,549
1999 10.04 0.60 0.29 (0.60) (0.01) 10.32 8.60 148,165
1998 9.83 0.56 0.21 (0.56) -- 10.04 8.07 125,936
1997 10.15 0.54 (0.32) (0.54) -- 9.83 2.31 116,689
1996 9.52 0.56 0.63 (0.56) -- 10.15 12.83 104,270
INTERMEDIATE-TERM INCOME PORTFOLIO CLASS A
2000 $10.31 $0.53 $(0.96) $(0.53) $ -- $ 9.35 (4.22)% $ 6,224
1999 10.04 0.57 0.28 (0.57) (0.01) 10.31 8.23 2,175
1998 9.83 0.53 0.21 (0.53) -- 10.04 7.78 64
1997 10.15 0.52 (0.32) (0.52) -- 9.83 2.05 84
1996 9.52 0.54 0.63 (0.54) -- 10.15 12.54 210
MICHIGAN TAX FREE BOND PORTFOLIO INSTITUTIONAL CLASS
2000 $10.33 $0.43 $(0.61) $(0.43) $ -- $ 9.72 (1.79) $ 89,445
1999 10.24 0.48 0.10 (0.48) (0.01) 10.33 5.40 90,115
1998(1) 10.00 0.27 0.26 (0.27) (0.02) 10.24 5.35 85,556
MICHIGAN TAX FREE BOND PORTFOLIO CLASS A
2000 $10.33 $0.40 $(0.61) $(0.40) $ -- $ 9.72 (2.03)% $ 215
1999 10.24 0.46 0.10 (0.46) (0.01) 10.33 5.17 229
1998(1) 10.00 0.27 0.26 (0.27) (0.02) 10.24 5.31 10
PRIME OBLIGATION MONEY MARKET PORTFOLIO INSTITUTIONAL CLASS
2000 $ 1.00 $0.05 $ -- $(0.05) $ -- $ 1.00 5.04% $114,349
1999 1.00 0.06 -- (0.06) -- 1.00 5.30 153,649
1998 1.00 0.05 -- (0.05) -- 1.00 5.41 127,977
1997 1.00 0.05 -- (0.05) -- 1.00 5.21 94,508
1996 1.00 0.06 -- (0.06) -- 1.00 5.74 107,409
PRIME OBLIGATION MONEY MARKET PORTFOLIO CLASS A
2000 $ 1.00 $0.05 $ -- $(0.05) $ -- $ 1.00 4.77% $ 8,578
1999 1.00 0.05 -- (0.05) -- 1.00 5.03 6,525
1998 1.00 0.05 -- (0.05) -- 1.00 5.15 6,381
1997 1.00 0.05 -- (0.05) -- 1.00 4.95 71,686
1996 1.00 0.05 -- (0.05) -- 1.00 5.47 75,293
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES INCOME TO
RATIO OF INVESTMENT TO AVERAGE AVERAGE
EXPENSES INCOME NET ASSETS NET ASSETS PORTFOLIO
TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTERMEDIATE-TERM INCOME PORTFOLIO INSTITUTIONAL CLASS
2000 0.65% 5.70% 0.80% 5.55% 24.93%
1999 0.65 5.46 0.80 5.31 76.46
1998 0.65 5.66 0.80 5.51 60.78
1997 0.65 5.48 0.80 5.33 34.67
1996 0.65 5.68 0.84 5.49 121.47
INTERMEDIATE-TERM INCOME PORTFOLIO CLASS A
2000 0.90% 5.52% 1.05% 5.37% 24.93%
1999 0.90 5.15 1.05 5.00 76.46
1998 0.90 5.40 1.05 5.25 60.78
1997 0.90 5.20 1.05 5.05 34.67
1996 0.90 5.49 1.09 5.30 121.47
MICHIGAN TAX FREE BOND PORTFOLIO INSTITUTIONAL CLASS
2000 0.65% 4.30% 0.82% 4.13% 2.42%
1999 0.65 4.32 0.81 4.16 6.55
1998(1) 0.65* 4.41* 0.82* 4.24* 9.77
MICHIGAN TAX FREE BOND PORTFOLIO CLASS A
2000 0.90% 4.01% 1.07% 3.84% 2.42%
1999 0.90 4.07 1.06 3.91 6.55
1998(1) 0.90* 4.15* 1.07* 3.98* 9.77
PRIME OBLIGATION MONEY MARKET PORTFOLIO INSTITUTIONAL CLASS
2000 0.40% 4.91% 0.60% 4.71%
1999 0.40 5.17 0.60 4.97
1998 0.40 5.29 0.59 5.10
1997 0.40 5.08 0.68 4.80
1996 0.40 5.60 0.70 5.30
PRIME OBLIGATION MONEY MARKET PORTFOLIO CLASS A
2000 0.65% 4.74% 0.86% 4.53%
1999 0.65 4.92 0.85 4.72
1998 0.65 4.99 0.84 4.80
1997 0.65 4.83 0.93 4.55
1996 0.65 5.31 0.95 5.01
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0. *
* Annualized
+ Total return does not reflect the sales charge on Class A shares.
(1) Golden Oak Value & Michigan Tax Free Bond Portfolios commenced operations
June 23, 1997. Total returns are for the period indicated and have not been
annualized.
(2) Golden Oak Tax-Managed Equity Portfolio commenced operations on
April 30, 1999. Total return is for the period indicated and has not been
annualized.
(3) Golden Oak Small Cap Value Portfolio commenced operations on
September 1, 1999. Total return is for the period indicated and has not been
annualized.
Page 53 of 55
<PAGE>
THE GOLDEN OAK FAMILY OF FUNDS
INVESTMENT ADVISER
Citizens Bank
328 S. Saginaw Street
Flint, Michigan 48502
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
More information about the Golden Oak Family of Funds is available without
charge through the following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated May 31, 2000, includes detailed information about the Golden Oak
Family of Funds. The SAI is on file with the SEC and is incorporated by
reference into this prospectus. This means that the SAI, for legal purposes, is
a part of this prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
These reports list each Portfolio's holdings and contain information from the
Portfolio's managers about strategies, and recent market conditions and trends
and their impact on Portfolio performance. The reports also contain detailed
financial information about the Portfolios.
TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT, OR MORE INFORMATION:
BY TELEPHONE: Call 1-800-545-6331
BY MAIL: Write to us
Golden Oak Family of Funds
c/o The Arbor Fund
P.O. Box 219947
Kansas City, Missouri 64121-9749
Page 54 of 55
<PAGE>
FROM THE SEC: You can also obtain the SAI or the Annual and Semi-annual reports,
as well as other information about the Golden Oak Family of Funds or The Arbor
Fund, from the EDGAR Database on the SEC's website ("http://www.sec.gov"). You
may review and copy documents at the SEC Public Reference Room in Washington, DC
(for information on the operation of the Public Reference Room, call
1-202-942-8090). You may request documents by mail from the SEC, upon payment of
a duplicating fee, by writing to: Securities and Exchange Commission, Public
Reference Section, Washington, DC 20549-0102. You may also obtain this
information, upon payment of a duplicating fee, by e-mailing the SEC at the
following address: [email protected]. The Arbor Fund's Investment Company Act
registration number is 811-7102.
Page 55 of 55
<PAGE>
MAY 31, 2000
THE OVB FUNDS
THE ARBOR FUND
CLASS A SHARES AND CLASS B SHARES
PROSPECTUS
EQUITY INCOME PORTFOLIO
CAPITAL APPRECIATION PORTFOLIO
GOVERNMENT SECURITIES PORTFOLIO
WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO
PRIME OBLIGATIONS PORTFOLIO
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
ABOUT THIS PROSPECTUS
The OVB Family of Funds is a mutual fund family that offers different classes of
shares in separate investment portfolios (Portfolios). The Portfolios have
individual investment goals and strategies. This prospectus gives you important
information about the Class A Shares and Class B Shares of the Portfolios that
you should know before investing. Please read this prospectus and keep it for
future reference.
Class A Shares and Class B Shares have different expenses and other
characteristics, allowing you to choose the class that best suits your needs.
You should consider the amount you want to invest, how long you plan to have it
invested, and whether you plan to make additional investments.
CLASS A SHARES
- NO SALES CHARGES
- NO 12B-1 FEES OR SHAREHOLDER FEES
- $100,000 MINIMUM INITIAL INVESTMENT
CLASS B SHARES
- NO SALES CHARGES
- 12B-1 FEES
- $1,000 MINIMUM INITIAL INVESTMENT
THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY
REVIEW THIS IMPORTANT INFORMATION. IN THE NEXT SECTION, THERE IS SOME GENERAL
INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN WHICH IS COMMON TO EACH OF THE
PORTFOLIOS. FOR MORE DETAILED INFORMATION ABOUT EACH PORTFOLIO, PLEASE SEE:
<TABLE>
<CAPTION>
PAGE
<S> <C>
OVB EQUITY INCOME PORTFOLIO....................................XXX
OVB CAPITAL APPRECIATION PORTFOLIO.............................XXX
OVB GOVERNMENT SECURITIES PORTFOLIO............................XXX
OVB WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO..................XXX
OVB PRIME OBLIGATIONS PORTFOLIO................................XXX
MORE INFORMATION ABOUT RISK....................................XXX
MORE INFORMATION ABOUT PORTFOLIO INVESTMENTS...................XXX
INVESTMENT ADVISER AND SUB-ADVISER ............................XXX
PORTFOLIO MANAGERS.............................................XXX
PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES............XXX
DISTRIBUTION OF PORTFOLIO SHARES...............................XXX
DIVIDENDS AND DISTRIBUTIONS....................................XXX
TAXES..........................................................XXX
FINANCIAL HIGHLIGHTS...........................................XXX
HOW TO OBTAIN MORE INFORMATION ABOUT THE
OVB FAMILY OF FUNDS........................................Back Cover
</TABLE>
Page 2 of 39
<PAGE>
RISK/RETURN INFORMATION COMMON TO THE PORTFOLIOS
Each Portfolio is a mutual fund. A mutual fund pools shareholders' money and,
using professional investment managers, invests it in securities.
Each Portfolio has its own investment goal and strategies for reaching that
goal. The investment managers invest Portfolio assets in a way that they believe
will help a Portfolio achieve its goal. Still, investing in each Portfolio
involves risk and there is no guarantee that a Portfolio will achieve its goal.
An investment manager's judgments about the markets, the economy, or companies
may not anticipate actual market movements, economic conditions or company
performance, and these judgments may affect the return on your investment. In
fact, no matter how good a job an investment manager does, you could lose money
on your investment in the Portfolio, just as you could with other investments. A
PORTFOLIO SHARE IS NOT A BANK DEPOSIT AND IT IS NOT INSURED OR GUARANTEED BY THE
FDIC OR ANY GOVERNMENT AGENCY.
The value of your investment in a Portfolio (other than the OVB Prime
Obligations Portfolio) is based on the market prices of the securities the
Portfolio holds. These prices change daily due to economic and other events that
affect particular companies and other issuers. These price movements, sometimes
called volatility, may be greater or lesser depending on the types of securities
a Portfolio owns and the markets in which they trade. The effect on a Portfolio
of a change in the value of a single security will depend on how widely the
Portfolio diversifies its holdings.
THE OVB PRIME OBLIGATIONS PORTFOLIO TRIES TO MAINTAIN A CONSTANT PRICE PER SHARE
OF $1.00, BUT THERE IS NO GUARANTEE THAT THE PORTFOLIO WILL ACHIEVE THIS GOAL.
Page 3 of 39
<PAGE>
EQUITY INCOME PORTFOLIO
PORTFOLIO SUMMARY
INVESTMENT GOAL Current income, with a secondary goal of
moderate capital appreciation
INVESTMENT FOCUS Large capitalization U.S. common stocks
which pay dividends
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in a Portfolio which will
provide price movement similar to the
Standard & Poor's 500 Composite Index,
but with less volatility and a
significantly higher dividend stream
INVESTOR PROFILE Investors seeking current income and
moderate capital appreciation who are
willing to bear the risk of modest share
price volatility
INVESTMENT STRATEGY
The Portfolio invests primarily (at least 65% of its assets) in common stocks of
U.S. companies with large market capitalizations (in excess of $5 billion) that
regularly pay dividends. The Portfolio invests in established companies
operating in a broad range of industries based on their ability to grow both
earnings and dividends. In selecting investments for the Portfolio, the Adviser
attempts to choose stocks of companies that are positioned to benefit from
competitive advantages that arise from ownership of valuable business
franchises, trademarks and brand names, control of distribution networks,
significant market shares in key products, or other company specific attributes.
The Adviser also considers the quality of management as evidenced by an
established track record of enhancing shareholder value. The Adviser buys stocks
with a long-term view and attempts to hold its positions and keep portfolio
turnover low.
PRINCIPAL RISKS OF INVESTING
Since it purchases common stocks, the Portfolio is subject to the risk that
stock prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Portfolio's securities
may fluctuate drastically from day to day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Portfolio.
The Portfolio is also subject to the risk that large capitalization
dividend-paying common stocks may underperform other segments of the equity
market or the equity markets as a whole.
Page 4 of 39
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, the Portfolio's past
performance does not necessarily indicate how the Portfolio will perform in the
future.
This bar chart shows changes in the performance of the Portfolio's Class A
Shares from year to year.*
<TABLE>
<CAPTION>
<S> <C>
1997 23.02%
1998 13.77%
1999 12.51%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
12.52% (7.45)%
(12/31/98) (9/30/98)
</TABLE>
* The performance information shown above is based on a calendar year. The
Portfolio's performance from 1/1/00 to 3/31/00 was (0.50)%.
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999 TO THOSE OF THE S&P 500/BARRA VALUE INDEX AND THE LIPPER
EQUITY INCOME AVERAGE.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
--------------------------------------------------------------------------------------
<S> <C> <C>
OVB EQUITY INCOME PORTFOLIO 12.51% 17.67%*
S&P 500/BARRA VALUE INDEX 12.72% 21.58%**
LIPPER EQUITY INCOME AVERAGE 4.56% 16.24%**
</TABLE>
* Since 8/1/96
** Since 8/31/96
<TABLE>
<CAPTION>
CLASS B SHARES 1 YEAR SINCE INCEPTION
---------------------------------------------------------------------------------------
<S> <C> <C>
OVB EQUITY INCOME PORTFOLIO 12.21% 17.40%*
S&P 500/BARRA VALUE INDEX 12.72% 21.58%**
LIPPER EQUITY INCOME AVERAGE 4.56% 16.24%**
</TABLE>
* Since 8/1/96
** Since 8/31/96
SIMPLY SPEAKING...
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The S&P 500/Barra Value Index is a
widely-recognized, capitalization-weighted (companies with larger market
capitalizations have more influence than those with smaller market
capitalizations) index of the stocks in the S&P 500 Index. The index is
constructed by dividing the stocks in the S&P 500 Index by price-to-book ratios,
and includes securities of companies with lower price-to-book ratios.
Page 5 of 39
<PAGE>
WHAT IS AN AVERAGE?
An average is a composite of mutual funds with similar investment goals. The
Lipper Equity Income Average is a widely-recognized average of mutual funds that
seek relatively high current income and growth of income through investing in
dividend-paying equity securities.
PORTFOLIO FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE PORTFOLIO.
ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)*
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.74% 0.74%
Distribution and Service (12b-1) Fees None 0.25%
Other Expenses 0.33% 0.33%
----- -----
Total Annual Portfolio Operating Expenses 1.07% 1.32%
----------------------------------------------------------------------------------------------------
</TABLE>
* The Portfolio's total actual annual portfolio operating expenses for the
most recent fiscal year were less than the amount shown because the Adviser
waived a portion of the fees in order to keep total operating expenses at a
specified level. These fee waivers remain in place as of the date of this
Prospectus, but the Adviser may discontinue all or part of these waivers at any
time. With these fee waivers, the Portfolio's actual total operating expenses
should be as follows:
<TABLE>
<CAPTION>
<S> <C>
OVB Equity Income Portfolio - Class A 0.96%
OVB Equity Income Portfolio - Class B 1.21%
</TABLE>
For more information about these fees, see "Investment Adviser and Sub-Adviser"
and "Distribution of Portfolio Shares."
Page 6 of 39
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Portfolio would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $109 $340 $590 $1,306
CLASS B SHARES $134 $418 $723 $1,590
</TABLE>
Page 7 of 39
<PAGE>
CAPITAL APPRECIATION PORTFOLIO
PORTFOLIO SUMMARY
INVESTMENT GOAL Long-term growth of capital
INVESTMENT FOCUS Medium to large capitalization U.S. common
stocks
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in securities of medium to large
sized companies that have an established
record of growth and continue to present
significant growth potential
INVESTOR PROFILE Investors seeking long-term growth of capital
who are willing to accept the volatility that
comes with an actively managed portfolio of
medium to large sized growth companies
INVESTMENT STRATEGY
The Portfolio invests primarily (at least 65% of its assets) in common stocks of
U.S. companies with medium to large market capitalizations (in excess of $1
billion). In selecting investments for the Portfolio, the Adviser will consider
growth factors such as a company's new products, changes in management, and
business restructurings. The Adviser will also search for companies that have
established records of earnings and sales growth over a period of at least three
years that it believes are poised to meet or exceed these figures going forward.
These companies generally will have lower amounts of long-term debt
(representing less than 40% of the company's capitalization); have attractive
price/earnings ratios in relation to a company's 3 to 5-year earnings per share
growth rate; and have stock prices which have outperformed Standard & Poor's 500
Composite Index (S&P 500) over the previous six months. The Adviser will attempt
to avoid overweighting the Portfolio's position in any specific market sector
(such as technology, consumer staples, etc.) beyond 150% of the weighting that
sector has in the S&P 500.
The Adviser may sell a stock if a company fails to meet earnings or revenue
expectations or becomes overvalued (i.e., high price/earnings ratio relative to
its earnings growth). The Adviser may also sell a stock to change the
Portfolio's weighting in a particular company or industry sector, or if better
opportunities are available. Due to its investment strategy, the Portfolio may
buy and sell securities frequently. This may result in higher transaction costs
and additional capital gains tax liabilities.
PRINCIPAL RISKS OF INVESTING
Since it purchases common stocks, the Portfolio is subject to the risk that
stock prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Portfolio's securities
may fluctuate drastically from day to day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in
Page 8 of 39
<PAGE>
response. These factors contribute to price volatility, which is the principal
risk of investing in the Portfolio.
The medium capitalization companies the Portfolio invests in may be more
vulnerable to adverse business or economic events than larger, more established
companies. In particular, these medium sized companies may have limited product
lines, markets and financial resources, and may depend upon a relatively small
management group. Therefore, medium capitalization stocks may be more volatile
than those of larger companies.
The Portfolio is also subject to the risk that large and medium capitalization
growth stocks may underperform other segments of the equity market or the equity
markets as a whole.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, the Portfolio's past
performance does not necessarily indicate how the Portfolio will perform in the
future.
This bar chart shows changes in the performance of the Portfolio's Class A
Shares from year to year.*
<TABLE>
<CAPTION>
<S> <C>
1994 (5.45)%
1995 33.34%
1996 16.17%
1997 27.02%
1998 35.05%
1999 44.11%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
34.18% (13.74)%
(12/31/99) (9/30/98)
</TABLE>
* The performance information shown above is based on a calendar year. The
Portfolio's performance from 1/1/00 to 3/31/00 was 11.07%.
Page 9 of 39
<PAGE>
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999 TO THOSE OF THE S&P 500 INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OVB CAPITAL APPRECIATION PORTFOLIO 44.11% 30.80% 24.19%*
S&P 500 INDEX 21.04% 28.55% 23.55%**
* Since 12/1/93
** Since 12/31/93
<CAPTION>
CLASS B SHARES 1 YEAR 5 YEARS SINCE INCEPTION
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OVB CAPITAL APPRECIATION PORTFOLIO 43.65% 30.43% 23.54%*
S&P 500 INDEX 21.04% 28.55% 23.55%**
* Since 12/30/93
** Since 12/31/93
</TABLE>
SIMPLY SPEAKING ...
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The S&P 500 Index is a widely-recognized, market
value-weighted (higher market value stocks have more influence than lower market
value stocks) index of 500 stocks designed to mimic the overall equity market's
industry weightings.
PORTFOLIO FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE PORTFOLIO.
ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)*
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.95% 0.95%
Distribution and Service (12b-1) Fees None 0.25%
Other Expenses 0.35% 0.35%
----- -----
Total Annual Portfolio Operating Expenses 1.30% 1.55%
------------------------------------------------------------------------------------------------------------
</TABLE>
* The Portfolio's total actual annual portfolio operating expenses for the
most recent fiscal year were less than the amount shown because the Adviser
waived a portion of the fees in order to keep total operating expenses at a
specified level. These fee waivers remain in place as of the date of this
Prospectus, but the Adviser may discontinue all or part of these waivers at any
time. With these fee waivers, the Portfolio's actual total operating expenses
should be as follows:
<TABLE>
<CAPTION>
<S> <C>
OVB Capital Appreciation Portfolio - Class A 1.02%
OVB Capital Appreciation Portfolio - Class B 1.27%
</TABLE>
For more information about these fees, see "Investment Adviser and Sub-Adviser"
and "Distribution of Shares."
Page 10 of 39
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Portfolio would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $132 $412 $713 $1,568
CLASS B SHARES $158 $490 $845 $1,845
</TABLE>
Page 11 of 39
<PAGE>
GOVERNMENT SECURITIES PORTFOLIO
PORTFOLIO SUMMARY
INVESTMENT GOAL Current income consistent with the
preservation of capital
INVESTMENT FOCUS Fixed income obligations of the U.S.
Treasury and U.S. government agencies
SHARE PRICE VOLATILITY Low
PRINCIPAL INVESTMENT STRATEGY Investing in U.S. Treasury obligations
and U.S. government agency obligations
to attempt to maximize income
INVESTOR PROFILE Fixed income investors who want to
receive strong current income while not
sacrificing liquidity
INVESTMENT STRATEGY
The Portfolio invests principally (at least 65% of its assets) in fixed income
obligations issued by the U.S. Treasury and U.S. government agencies, including
mortgage backed securities. The Portfolio may also invest in taxable municipal
securities that are rated in one of the top two ratings categories. In selecting
investments for the Portfolio, the Adviser analyzes current market conditions
and anticipated changes in bond prices to attempt to obtain the highest possible
yield with minimal credit risk. The Adviser actively manages the maturity of the
Portfolio, which ranges between three and ten years. Under normal circumstances,
the Adviser anticipates that the Portfolio's dollar-weighted average maturity
will be approximately five years; however, the Adviser may vary this average
maturity substantially in anticipation of a change in the interest rate
environment.
PRINCIPAL RISKS OF INVESTING
The prices of the Portfolio's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers. Generally, the Portfolio's
fixed income securities will decrease in value if interest rates rise and vice
versa. Also, longer-term securities are generally more volatile, so the average
maturity or duration of these securities affects risk.
Although the Portfolio's U.S. government securities are considered to be among
the safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies are
backed by the U.S. Treasury, while others are backed solely by the ability of
the agency to borrow from the U.S. Treasury or by the agency's own resources.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to
Page 12 of 39
<PAGE>
changes in interest rates. The Portfolio may have to reinvest prepaid amounts at
lower interest rates. This risk of prepayment is an additional risk of
mortgage-backed securities.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Portfolio's securities.
The Portfolio is also subject to the risk that its investment strategy, which
focuses on fixed income obligations of the U.S. government, may perform
differently from other mutual funds which target other fixed income market
segments or invest in other asset classes.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, the Portfolio's past
performance does not necessarily indicate how the Portfolio will perform in the
future.
This bar chart shows changes in the performance of the Portfolio's Class A
Shares from year to year.*
<TABLE>
<CAPTION>
<S> <C>
1994 (5.06)%
1995 19.41%
1996 2.31%
1997 9.26%
1998 8.14%
1999 (2.65)%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
6.36% (3.64)%
(6/30/95) (3/31/94)
</TABLE>
* The performance information shown above is based on a calendar year. The
Portfolio's performance from 1/1/00 to 3/31/00 was 2.93%.
Page 13 of 39
<PAGE>
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999 TO THOSE OF THE LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OVB GOVERNMENT SECURITIES PORTFOLIO (2.65)% 7.04% 4.91%*
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE
BOND INDEX (2.15)% 7.60% 5.67%**
</TABLE>
* Since 12/1/93
** Since 12/31/93
<TABLE>
<CAPTION>
CLASS B SHARES 1 YEAR 5 YEARS SINCE INCEPTION
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OVB GOVERNMENT SECURITIES PORTFOLIO (2.99)% 6.75% 4.66%*
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE
BOND INDEX (2.15)% 7.60% 5.67%**
</TABLE>
* Since 12/30/93
** Since 12/31/93
SIMPLY SPEAKING ...
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The Lehman Brothers Intermediate
Government/Corporate Bond Index is a widely-recognized, market value-weighted
(higher market value bonds have more influence than lower market value bonds)
index of U.S. Treasury securities, U.S. government agency obligations, corporate
debt backed by the U.S. government, fixed-rate nonconvertible corporate debt
securities, Yankee bonds, and nonconvertible debt securities issued by or
guaranteed by foreign governments and agencies. All securities in the Index are
rated investment grade (BBB) or higher, with maturities from 1 to 10 years.
Page 14 of 39
<PAGE>
PORTFOLIO FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE PORTFOLIO.
ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)*
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.75% 0.75%
Distribution and Service (12b-1) Fees None 0.25%
Other Expenses 0.36% 0.36%
----- -----
Total Annual Portfolio Operating Expenses 1.11% 1.36%
</TABLE>
* The Portfolio's total actual annual portfolio operating expenses for the
most recent fiscal year were less than the amount shown because the Adviser
waived a portion of the fees in order to keep total operating expenses at a
specified level. These fee waivers remain in place as of the date of this
Prospectus, but the Adviser may discontinue all or part of these waivers at any
time. With these fee waivers, the Portfolio's actual total operating expenses
should be as follows:
<TABLE>
<CAPTION>
<S> <C>
OVB Government Securities Portfolio - Class A 0.83%
OVB Government Securities Portfolio - Class B 1.08%
</TABLE>
For more information about these fees, see "Investment Adviser and Sub-Adviser"
and "Distribution of Portfolio Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Portfolio would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $113 $353 $612 $1,352
CLASS B SHARES $138 $431 $745 $1,635
</TABLE>
Page 15 of 39
<PAGE>
WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO
PORTFOLIO SUMMARY
INVESTMENT GOAL Current income exempt from
federal and West Virginia income
taxes consistent with preservation
of capital
INVESTMENT FOCUS Tax-exempt West Virginia municipal
securities
SHARE PRICE VOLATILITY Low
PRINCIPAL INVESTMENT STRATEGY Invests in high quality municipal
obligations which produce interest
that is exempt from federal income
tax and West Virginia income tax
INVESTOR PROFILE Conservative taxable investors who
want to receive current income
exempt from federal and West
Virginia state income tax and are
willing to bear the risk of
investing in a portfolio of
securities affected by changes in
economic conditions and
governmental policies within West
Virginia
INVESTMENT STRATEGY
The Portfolio invests substantially all of its assets in high quality municipal
securities that generate income exempt from federal and West Virginia state
income taxes. These securities include securities of municipal issuers located
in West Virginia, the District of Columbia and other U.S. territories and
possessions. The Portfolio will invest most of its assets in securities that are
not subject to federal taxes, including the alternative minimum tax, but it can
purchase a limited amount of taxable securities. The Portfolio's Adviser will
generally purchase municipal securities rated in one of the two highest ratings
categories and attempt to maintain an average weighted portfolio maturity of 12
to 18 years. In selecting securities for the Portfolio, the Adviser will
consider each security's yield and total return potential relative to other
available municipal securities.
PRINCIPAL RISKS OF INVESTING
The prices of the Portfolio's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Portfolio's fixed income securities will decrease in value if
interest rates rise and vice versa. Also, longer-term securities are generally
more volatile, so the average maturity or duration of these securities affects
risk.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Portfolio's securities.
Page 16 of 39
<PAGE>
The Portfolio is non-diversified, which means that it may invest in the
securities of relatively few issuers. As a result, the Portfolio may be more
susceptible to a single adverse economic or political occurrence affecting one
or more of these issuers, and may experience increased volatility due to its
investments in those securities.
The Portfolio's concentration of investments in securities of issuers located in
West Virginia subjects the Portfolio to economic conditions and government
policies within that state. As a result, the Portfolio will be more susceptible
to factors which adversely affect issuers of West Virginia obligations than a
mutual fund which does not have as great a concentration in West Virginia
municipal obligations.
The Portfolio is also subject to the risk that West Virginia municipal debt
securities may underperform other segments of the fixed income market or the
fixed income markets as a whole.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, the Portfolio's past
performance does not necessarily indicate how the Portfolio will perform in the
future.
This bar chart shows changes in the performance of the Portfolio's Class A
Shares from year to year.*
<TABLE>
<CAPTION>
<S> <C>
1994 (4.97)%
1995 16.03%
1996 3.65%
1997 8.93%
1998 5.35%
1999 (3.27)%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
6.68% (4.83)%
(3/31/95) (3/31/94)
</TABLE>
* The performance information shown above is based on a calendar year. The
Portfolio's performance from 1/1/00 to 3/31/00 was 2.67%.
Page 17 of 39
<PAGE>
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999 TO THOSE OF THE LEHMAN BROTHERS MUNICIPAL BOND INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OVB WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO (3.27)% 5.95% 4.23%*
LEHMAN BROTHERS MUNICIPAL BOND INDEX (2.07)% 6.91% 4.80%**
</TABLE>
* Since 12/1/93
** Since 12/31/93
<TABLE>
CLASS B SHARES 1 YEAR 5 YEARS SINCE INCEPTION
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OVB WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO (3.42)% 5.71% 3.86%*
LEHMAN BROTHERS MUNICIPAL BOND INDEX (2.07)% 6.91% 4.80%**
</TABLE>
* Since 12/17/93
** Since 12/31/93
SIMPLY SPEAKING ...
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The Lehman Brothers Municipal Bond Index is a
widely-recognized index of municipal bonds with maturities of at least one year.
PORTFOLIO FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE PORTFOLIO.
ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)*
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.45% 0.45%
Distribution and Service (12b-1) Fees None 0.25%
Other Expenses 0.32% 0.32%
----- -----
Total Annual Portfolio Operating Expenses 0.77% 1.02%
----------------------------------------------------------------------------------------------------------
</TABLE>
* The Portfolio's total actual annual portfolio operating expenses for the
most recent fiscal year were less than the amount shown because the Adviser
waived a portion of the fees in order to keep total operating expenses at a
specified level. These fee waivers remain in place as of the date of this
Prospectus, but the Adviser may discontinue all or part of these waivers at any
time. With these fee waivers, the Portfolio's actual total operating expenses
should be as follows:
<TABLE>
<CAPTION>
<S> <C>
OVB West Virginia Tax-Exempt Income Portfolio - Class A 0.72%
OVB West Virginia Tax-Exempt Income Portfolio - Class B 0.97%
</TABLE>
For more information about these fees, see "Investment Adviser and Sub-Adviser"
and "Distribution of Portfolio Shares."
Page 18 of 39
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Portfolio would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $ 79 $246 $428 $ 954
CLASS B SHARES $ 104 $325 $563 $ 1,248
</TABLE>
Page 19 of 39
<PAGE>
PRIME OBLIGATIONS PORTFOLIO
PORTFOLIO SUMMARY
INVESTMENT GOAL Preserve principal value and
maintain a high degree of liquidity
while providing current income
INVESTMENT FOCUS Money market instruments
SHARE PRICE VOLATILITY Very low
PRINCIPAL INVESTMENT STRATEGY Investing in a broad range of
short-term high quality U.S.
dollar-denominated debt securities
INVESTOR PROFILE Conservative investors who want to
receive current income through a
liquid investment
INVESTMENT STRATEGY
The Portfolio invests in a broad range of short-term U.S. dollar-denominated
securities that are rated in one of the two highest rating categories by
nationally recognized rating organizations, or unrated securities that the
Sub-Adviser determines are of comparable quality. The Portfolio invests in
short-term securities, including: (i) commercial paper and other short-term
corporate obligations of U.S. and foreign issuers (including asset-backed
securities); (ii) certificates of deposit, time deposits, bankers' acceptances,
bank notes and other obligations of U.S. and foreign savings and loan
institutions and commercial banks (including foreign branches of such banks)
that meet certain asset requirements; (iii) short-term obligations issued by
state and local governments; (iv) obligations of foreign governments (including
Canadian and Provincial Government and Crown Agency obligations); and (v) U.S.
Treasury obligations and obligations issued or guaranteed as to principal and
interest by agencies or instrumentalities of the U.S. government. The Portfolio
may also enter into fully-collateralized repurchase agreements.
The Adviser has engaged Wellington Management Company, LLP as sub-adviser
(Sub-Adviser) to manage the Portfolio on a day-to-day basis. Using top-down
strategy setting and bottom-up security selection, the Sub-Adviser seeks
securities with an acceptable maturity, that are marketable and liquid, that
offer competitive yields, and that are issued by issuers that are on a sound
financial footing. The Sub-Adviser also considers factors such as the
anticipated level of interest rates and the maturity of individual securities
relative to the maturity of the Portfolio as a whole. The Portfolio follows
strict SEC rules about credit quality, maturity and diversification of its
investments.
PRINCIPAL RISKS OF INVESTING
An investment in the Portfolio is subject to income risk, which is the
possibility that the Portfolio's yield will decline due to falling interest
rates. A Portfolio share is not a bank deposit and is not insured or guaranteed
by the FDIC or any government agency. In addition, although a money market
portfolio seeks to keep a constant price per share of $1.00, you may lose money
by investing in the Portfolio.
Page 20 of 39
<PAGE>
Although the Portfolio's U.S. government securities are considered to be among
the safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies are
backed by the U.S. Treasury, while others are backed solely by the ability of
the agency to borrow from the U.S. Treasury or by the agency's own resources.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, the Portfolio's past
performance does not necessarily indicate how the Portfolio will perform in the
future.
This bar chart shows changes in the performance of the Portfolio's Class A
Shares from year to year.*
<TABLE>
<CAPTION>
<S> <C>
1994 3.91%
1995 5.69%
1996 5.13%
1997 5.30%
1998 5.25%
1999 4.90%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
1.42% 0.72%
(6/30/95) (3/31/94)
</TABLE>
* The performance information shown above is based on a calendar year. The
Portfolio's performance from 1/1/00 to 3/31/00 was 1.36%.
Call 1-800-808-4920 for the Portfolio's most current 7-day yield.
THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999 TO THOSE OF THE IBC/FINANCIAL DATA FIRST TIER AVERAGE.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OVB PRIME OBLIGATIONS PORTFOLIO 4.90% 5.25% 5.00%*
IBC/FINANCIAL DATA FIRST TIER AVERAGE 4.57% 4.97% 4.75%**
</TABLE>
* Since 12/1/93
** Since 12/31/93
<TABLE>
<CAPTION>
CLASS B SHARES 1 YEAR 5 YEARS SINCE INCEPTION
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OVB PRIME OBLIGATIONS PORTFOLIO 4.64% 4.99% 4.80%*
IBC/FINANCIAL DATA FIRST TIER AVERAGE 4.57% 4.97% 4.81%**
</TABLE>
* Since 2/8/94
** Since 2/28/94
Page 21 of 39
<PAGE>
SIMPLY SPEAKING ...
WHAT IS AN AVERAGE?
An average is a composite of mutual funds with similar investment goals. The
IBC/Financial Data First Tier Average is a widely-recognized average of money
market funds that invest solely in securities rated Prime-1 by Moody's or A-1 by
S&P.
PORTFOLIO FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE PORTFOLIO.
ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)*
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.25% 0.25%
Distribution and Service (12b-1) Fees None 0.25%
Other Expenses 0.39% 0.39%
----- -----
Total Annual Portfolio Operating Expenses 0.64% 0.89%
----------------------------------------------------------------------------------------------------
</TABLE>
* The Portfolio's total actual annual portfolio operating expenses for the
most recent fiscal year were less than the amount shown because the Adviser
waived a portion of the fees in order to keep total operating expenses at a
specified level. These fee waivers remain in place as of the date of this
Prospectus, but the Adviser may discontinue all or part of these waivers at any
time. With these fee waivers, the Portfolio's actual total operating expenses
should be as follows:
<TABLE>
<CAPTION>
<S> <C>
OVB Prime Obligations Portfolio - Class A 0.49%
OVB Prime Obligations Portfolio - Class B 0.74%
</TABLE>
For more information about these fees, see "Investment Adviser and Sub-Adviser"
and "Distribution of Portfolio Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Portfolio would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $65 $205 $357 $798
CLASS B SHARES $91 $284 $493 $1,096
</TABLE>
Page 22 of 39
<PAGE>
MORE INFORMATION ABOUT RISK
EQUITY RISK - Equity securities include OVB Equity Income Portfolio
public and privately issued equity OVB Capital Appreciation Portfolio
securities, common and preferred stocks,
warrants, rights to subscribe to common
stock and convertible securities, as
well as instruments that attempt to
track the price movement of equity
indices. Investments in equity
securities and equity derivatives in
general are subject to market risks that
may cause their prices to fluctuate over
time. The value of securities
convertible into equity securities, such
as warrants or convertible debt, is also
affected by prevailing interest rates,
the credit quality of the issuer and any
call provision. Fluctuations in the
value of equity securities in which a
mutual fund invests will cause a
Portfolio's net asset value to
fluctuate. An investment in a portfolio
of equity securities may be more
suitable for long-term investors who can
bear the risk of these share price
fluctuations.
FIXED INCOME RISK - The market value of OVB Government Securities Portfolio
fixed income investments change in OVB West Virginia Tax-Exempt Income
response to interest rate changes and Portfolio
other factors. During periods of falling OVB Prime Obligations Portfolio
interest rates, the values of
outstanding fixed income securities
generally rise. Moreover, while
securities with longer maturities tend
to produce higher yields, the prices of
longer maturity securities are also
subject to greater market fluctuations
as a result of changes in interest
rates. In addition to these fundamental
risks, different types of fixed income
securities may be subject to the
following additional risks:
CALL RISK - During periods of
falling interest rates, certain
debt obligations with high interest
rates may be prepaid (or "called")
by the issuer prior to maturity.
This may cause a Portfolio's
average weighted maturity to
fluctuate, and may require a
Portfolio to invest the resulting
proceeds at lower interest rates.
CREDIT RISK - The possibility that
an issuer will be unable to make
timely payments of either principal
or interest.
Page 23 of 39
<PAGE>
EVENT RISK - Securities may suffer
declines in credit quality and
market value due to issuer
restructurings or other factors.
This risk should be reduced because
of the Portfolio's multiple
holdings.
MUNICIPAL ISSUER RISK - There may OVB West Virginia Tax-Exempt Income
be economic or political changes Portfolio
that impact the ability of
municipal issuers to repay
principal and to make interest
payments on municipal securities.
Changes to the financial condition
or credit rating of municipal
issuers may also adversely affect
the value of the Portfolio's
municipal securities.
Constitutional or legislative
limits on borrowing by municipal
issuers may result in reduced
supplies of municipal securities.
Moreover, certain municipal
securities are backed only by a
municipal issuer's ability to levy
and collect taxes.
In addition, the Portfolio's
concentration of investments in
issuers located in a single state
makes the Portfolio more
susceptible to adverse political or
economic developments affecting
that state. The Portfolio also may
be riskier than mutual funds that
buy securities of issuers in
numerous states.
Page 24 of 39
<PAGE>
MORE INFORMATION ABOUT PORTFOLIO INVESTMENTS
This prospectus describes the Portfolios' primary strategies, and the Portfolios
will normally invest in the types of securities described in this prospectus.
However, in addition to the investments and strategies described in this
prospectus, each Portfolio also may invest in other securities, use other
strategies and engage in other investment practices. These investments and
strategies, as well as those described in this prospectus, are described in
detail in our Statement of Additional Information.
The investments and strategies described in this prospectus are those that we
use under normal conditions. During unusual economic or market conditions, or
for temporary defensive or liquidity purposes, each Portfolio may invest up to
100% of its assets in cash or money market instruments that would not ordinarily
be consistent with a Portfolio's objectives. A Portfolio will do so only if the
Adviser or Sub-Adviser believes that the risk of loss outweighs the opportunity
for capital gains or higher income. Of course, we cannot guarantee that any
Portfolio will achieve its investment goal.
INVESTMENT ADVISER AND SUB-ADVISER
The Investment Adviser makes investment decisions for each of the Portfolios,
other than the OVB Prime Obligations Portfolio, and continuously reviews,
supervises and administers the Portfolios' respective investment programs. The
Investment Adviser oversees the Sub-Adviser for the OVB Prime Obligations
Portfolio to ensure compliance with the Portfolio's investment policies and
guidelines, and monitors the Sub-Adviser's adherence to its investment style.
The Adviser pays the Sub-Adviser out of the Investment Advisory fees it receives
(described below). The Board of Trustees of The Arbor Fund supervises the
Adviser and Sub-Adviser and establishes policies that the Adviser and
Sub-Adviser must follow in their management activities.
One Valley Bank, serves as the Adviser to the Portfolios. One Valley Bank,
together with its predecessor institutions, has provided trust and asset
management services since the early 1920s and has managed common and collective
investment funds since 1968. As of January 31, 2000, One Valley Bank had
approximately $3.1 billion in assets under management. For the fiscal year ended
January 31, 2000, One Valley Bank received advisory fees (after waivers) as a
percentage of average daily net assets of:
<TABLE>
<CAPTION>
<S> <C>
OVB EQUITY INCOME PORTFOLIO 0.63%
OVB CAPITAL APPRECIATION PORTFOLIO 0.67%
OVB GOVERNMENT SECURITIES PORTFOLIO 0.46%
OVB WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO 0.40%
OVB PRIME OBLIGATIONS PORTFOLIO 0.10%
</TABLE>
Wellington Management Company, LLP (WMC) manages the OVB Prime Obligations
Portfolio on a day-to-day basis. WMC selects, buys and sells securities for the
Portfolio under the supervision of the Adviser and the Board of Trustees. WMC
and its predecessor organizations have provided investment advisory services to
investment companies since 1928 and investment counseling to clients since 1960.
Page 25 of 39
<PAGE>
PORTFOLIO MANAGERS
J. Randy Valentine, Senior Vice President of the Adviser, has oversight
responsibilities of the portfolio managers of the Equity Income, Capital
Appreciation, Government and West Virginia Portfolios. Mr. Valentine has managed
various common trust and collective investment funds since 1976 prior to
assuming his supervisory duties. He has extensive investment management
experience.
Buel S. Sears, CFA serves as a Vice President of One Valley Bank. He has managed
the Equity Income Portfolio since June, 1997. He has more than 16 years of
investment experience. Prior to joining One Valley Bank in 1996, Mr. Sears
managed Huntington Banks West Virginia Trust Investment Group for 12 years.
David P. Nolan serves as a Vice President of One Valley Bank. He has managed the
OVB Capital Appreciation Portfolio since December, 1993. He has more than 19
years of investment experience. Prior to joining One Valley Bank in 1984, Mr.
Nolan served as an account executive with Alex. Brown & Sons incorporated.
James R. Thomas, III, CPA serves as a Vice President of One Valley Bank. He has
managed the OVB Government Securities Portfolio and OVB West Virginia Tax-Exempt
Income Portfolio since December, 1993. He has more than 15 years of investment
experience. Prior to joining One Valley Bank in 1988, Mr. Thomas served as a
financial analyst for Republic Bank, Dallas, Texas.
PURCHASING, SELLING AND EXCHANGING PORTFOLIO SHARES
This section tells you how to purchase, sell (sometimes called "redeem") and
exchange Class A Shares and Class B Shares of the Portfolios.
The classes have different expenses and other characteristics.
CLASS A SHARES
- NO SALES CHARGES
- NO 12B-1 FEES OR SHAREHOLDER FEES
- $100,000 MINIMUM INITIAL INVESTMENT
CLASS B SHARES
- NO SALES CHARGE
- 12B-1 FEES
- $1,000 MINIMUM INITIAL INVESTMENT
For some investors the minimum initial investment for Class A Shares and Class B
Shares may be lower.
Class A and Class B Shares are for individual and institutional investors.
Page 26 of 39
<PAGE>
HOW TO PURCHASE PORTFOLIO SHARES
Class A Shares may be purchased only by wire transfer. You may purchase Class B
Shares directly by:
- Mail
- Telephone
- Wire
- Direct Deposit, or
- Automated Clearing House (ACH).
To purchase shares directly from us, complete and send in the enclosed
application. If you need an application or have questions, please call
1-800-808-4920. Unless you arrange to pay by wire or through direct deposit or
ACH, write your check, payable in U.S. dollars, to "Arbor Fund - OVB
______________" and include the name of the appropriate Portfolio(s) on the
check. A Portfolio cannot accept third-party checks, credit cards, credit card
checks or cash.
You may also buy shares through accounts with brokers and other institutions
that are authorized to place trades in Portfolio shares for their customers. If
you invest through an authorized institution, you will have to follow its
procedures, which may be different from the procedures for investing directly.
Your broker or institution may charge a fee for its services, in addition to the
fees charged by the Portfolio. You will also generally have to address your
correspondence or questions regarding a Portfolio to your institution.
GENERAL INFORMATION
You may purchase shares on any day that the New York Stock Exchange and, for the
OVB Prime Obligations Portfolio, the Federal Reserve are open for business (a
Business Day). Shares cannot be purchased by Federal Reserve Wire on days when
either the New York Stock Exchange or the Federal Reserve is closed.
A Portfolio may reject any purchase order if it determines that accepting the
order would not be in the best interests of the Portfolio or its shareholders.
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after a Portfolio receives your purchase order.
Each Portfolio (except the OVB Prime Obligations Portfolio) calculates its NAV
once each Business Day at the regularly-scheduled close of normal trading on the
New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, for you to
receive the current Business Day's NAV, generally a Portfolio must receive your
purchase order before 4:00 p.m. Eastern time.
The OVB Prime Obligations Portfolio calculates its NAV once each Business Day at
12:00 noon Eastern time. So, for you to be eligible to receive dividends
declared on the day you submit your purchase order, the Portfolio generally must
receive your order before 12:00 noon Eastern time.
HOW WE CALCULATE NAV
NAV for one Portfolio share is the value of that share's portion of the net
assets of the Portfolio.
Page 27 of 39
<PAGE>
In calculating NAV, a Portfolio generally values its investment portfolio at
market price (except the OVB Prime Obligations Portfolio). If market prices are
unavailable or a Portfolio thinks that they are unreliable, fair value prices
may be determined in good faith using methods approved by the Board of Trustees.
In calculating NAV for the OVB Prime Obligations Portfolio, we generally value
the Portfolio's investment portfolio using the amortized cost valuation method,
which is described in detail in our Statement of Additional Information. If this
method is determined to be unreliable during certain market conditions or for
other reasons, the Portfolio may value its securities at market price or fair
value prices may be determined in good faith using methods approved by the Board
of Trustees.
MINIMUM PURCHASES
To purchase shares for the first time, you must invest in any Portfolio at
least:
<TABLE>
<CAPTION>
CLASS DOLLAR AMOUNT
<S> <C>
Class A Shares $100,000
Class B Shares $1,000
</TABLE>
Your subsequent investments in any Portfolio must be made in amounts of at least
$50, except purchases through the automatic investment plan which must be made
in amounts of at least $100.
A Portfolio may accept investments of smaller amounts for either class of shares
at our discretion.
AUTOMATIC INVESTMENT PLAN (CLASS B ONLY)
If you have a checking or savings account with a bank, you may purchase Class B
Shares automatically through regular deductions from your account in amounts of
at least $100 per month.
HOW TO SELL YOUR PORTFOLIO SHARES
If you own your shares directly, you may sell your shares on any Business Day by
contacting a Portfolio directly by mail or telephone at 1-800-808-4920.
If you own your shares through an account with a broker or other institution,
contact that broker or institution to sell your shares. Your broker or
institution may charge a fee for its services, in addition to the fees charged
by the Portfolio.
If you would like to sell $50,000 or more of your shares, or have your sale
proceeds sent to a third party or an address other than your own, please notify
the Portfolio in writing and include a signature guarantee by a bank or other
financial institution (a notarized signature is not sufficient).
The sale price of each share will be the next NAV determined after the Portfolio
receives your request.
Page 28 of 39
<PAGE>
SYSTEMATIC WITHDRAWAL PLAN
If you have at least $10,000 in your account, you may use the systematic
withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual
or annual automatic withdrawals of at least $50 from any Portfolio. The proceeds
of each withdrawal will be mailed to you by check or, if you have a checking or
savings account with a bank, electronically transferred to your account.
CHECK WRITING SERVICE
(PRIME OBLIGATIONS PORTFOLIO - CLASS B ONLY)
If you own Class B Shares of the Prime Obligation Portfolio you may redeem
shares by writing checks on your account for $500 or more. Once you have signed
and returned a signature card, you will receive a supply of checks. The check
may be made payable to any person, and your account will continue to earn
dividends until the check clears. These checks are free, but your account will
be charged a fee (currently $15) for stopping payment of a check upon your
request, or if the check cannot be honored because of insufficient funds or
other valid reasons.
Because of the difficulty of determining in advance the exact value of your
Portfolio account, you may not use a check to close your account.
You may obtain signature cards by calling the Transfer Agent at 1-800-808-4920.
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within seven days after we receive
your request. Your proceeds can be wired to your bank account (subject to a $10
fee) or sent to you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY CHECK OR
THROUGH ACH, REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS
CLEARED (WHICH MAY TAKE UP TO 15 DAYS FROM YOUR DATE OF PURCHASE).
REDEMPTIONS IN KIND
We generally pay sale (redemption) proceeds in cash. However, under unusual
conditions that make the payment of cash unwise (and for the protection of the
Portfolio's remaining shareholders) we might pay all or part of your redemption
proceeds in liquid securities with a market value equal to the redemption price
(redemption in kind). It is highly unlikely that your shares would ever be
redeemed in kind, but if they were you would probably have to pay transaction
costs to sell the securities distributed to you, as well as taxes on any capital
gains from the sale as with any redemption.
INVOLUNTARY REDEMPTION OF YOUR SHARES
If your account balance drops below the required minimum, the Portfolio may
redeem your shares. The account balance minimums are:
<TABLE>
<CAPTION>
CLASS DOLLAR AMOUNT
<S> <C>
Class A Shares $100,000
Class B Shares $1,000
</TABLE>
Page 29 of 39
<PAGE>
But, the Portfolio will always give you at least 60 days' written notice to give
you time to add to your account and avoid the involuntary redemption of your
shares.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
A Portfolio may suspend your right to sell your shares during times when trading
on the NYSE is restricted or halted, or otherwise as permitted by the SEC. More
information about this is in our Statement of Additional Information.
HOW TO EXCHANGE YOUR SHARES
You may exchange your shares on any Business Day by contacting us directly by
mail or telephone.
You may also exchange shares through your financial institution by mail or
telephone.
IF YOU RECENTLY PURCHASED SHARES BY CHECK OR THROUGH ACH, YOU MAY NOT BE ABLE TO
EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 DAYS
FROM YOUR DATE OF PURCHASE). This exchange privilege may be changed or canceled
at any time upon 60 days' notice.
When you exchange shares, you are really selling your shares and buying other
Portfolio shares. So, your sale price and purchase price will be based on the
NAV next calculated after the Portfolio receives your exchange request.
TELEPHONE TRANSACTIONS
Purchasing, selling and exchanging Portfolio shares over the telephone is
extremely convenient, but not without risk. Although the Portfolio has certain
safeguards and procedures to confirm the identity of callers and the
authenticity of instructions, the Portfolio is not responsible for any losses or
costs incurred by following telephone instructions we reasonably believe to be
genuine. If you or your financial institution transact with the Portfolio over
the telephone, you will generally bear the risk of any loss.
DISTRIBUTION OF PORTFOLIO SHARES
Each Portfolio has adopted a distribution plan that allows the Portfolio to pay
distribution and service fees for the sale and distribution of Class B Shares,
and for services provided to Class B shareholders. Because these fees are paid
out of a Portfolio's assets continuously, over time these fees will increase the
cost of your investment and may cost you more than paying other types of sales
charges.
Distribution fees, as a percentage of average daily net assets are .25% for
Class B Shares.
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs for dealers, which will be paid for by the
Distributor from any sales charge it receives or from any other source available
to it. Under any such program, the Distributor may provide cash or non-cash
compensation as recognition for past sales or encouragement for future sales
that may include the following: merchandise, travel expenses, prizes, meals, and
lodgings, and gifts that do not exceed $100 per year, per individual.
Page 30 of 39
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio distributes its income as follows:
OVB Equity Income Portfolio Quarterly
OVB Capital Appreciation Portfolio Quarterly
OVB Government Securities Portfolio Monthly
OVB West Virginia Tax-Exempt Income Portfolio Monthly
OVB Prime Obligations Portfolio Monthly
Each Portfolio makes distributions of capital gains, if any, at least annually.
If you own Portfolio shares on a Portfolio's record date, you will be entitled
to receive the distribution.
You will receive dividends and distributions in the form of additional Portfolio
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify the Portfolio in writing prior to the date of the distribution. Your
election will be effective for dividends and distributions paid after the
Portfolio receives your written notice. To cancel your election, simply send the
Portfolio written notice.
TAXES
PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Portfolios and their shareholders. This summary is based on
current tax laws, which may change.
Each Portfolio will distribute substantially all of its income and capital
gains, if any. The dividends and distributions you receive may be subject to
federal, state and local taxation, depending upon your tax situation. Income
distributions are generally taxable at ordinary income tax rates. Capital gains
distributions are generally taxable at the rates applicable to long-term capital
gains. EACH SALE OR EXCHANGE OF PORTFOLIO SHARES IS A TAXABLE EVENT.
The OVB West Virginia Tax-Exempt Income Portfolio intends to distribute income
that is exempt from both federal taxes and West Virginia state taxes. The
Portfolio may invest a portion of its assets in securities that generate taxable
income for federal or state income taxes. Any capital gains distributed by the
Portfolio may be taxable.
MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.
Page 31 of 39
<PAGE>
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about Class A Shares and
Class B Shares of each Portfolio. This information is intended to help you
understand each Portfolio's financial performance for the past five years, or,
if shorter, the period of the Portfolio's operations. Some of this information
reflects financial information for a single Portfolio share. The total returns
in the tables represent the rate that you would have earned (or lost) on an
investment in a Portfolio, assuming you reinvested all of your dividends and
distributions. This information has been audited by PricewaterhouseCoopers LLP,
independent public accountants. Their report, along with each Portfolio's
financial statements, appears in the annual report that accompanies our
Statement of Additional Information. You can obtain the annual report, which
contains more performance information, at no charge by calling 1-800-545-6331.
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JANUARY 31,
<TABLE>
<CAPTION>
NET
REALIZED
AND
UNREALIZED
NET ASSET GAINS DISTRIBUTIONS DISTRIBUTION NET ASSET
VALUE, NET (LOSSES) FROM NET FROM VALUE,
BEGINNING INVESTME ON INVESTMENT REALIZED END OF TOTAL
OF PERIOD INCOME INVESTMENTS INCOME GAINS PERIOD RETURN
---------------------------------------------------------------------------------------------------------
PRIME OBLIGATIONS PORTFOLIO
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C>
2000 $1.00 $0.05 $ 0.00 $(0.05) $0.00 $ 1.00 4.96%
1999 1.00 0.05 0.00 (0.05) 0.00 1.00 5.20
1998 1.00 0.05 0.00 (0.05) 0.00 1.00 5.33
1997 1.00 0.05 0.00 (0.05) 0.00 1.00 5.11
1996 1.00 0.06 0.00 (0.06) 0.00 1.00 5.65
CLASS B
2000 $ 1.00 $0.05 $ 0.00 $(0.05) $ 0.00 $ 1.00 4.70%
1999 1.00 0.05 0.00 (0.05) 0.00 1.00 4.94
1998 1.00 0.05 0.00 (0.05) 0.00 1.00 5.07
1997 1.00 0.05 0.00 (0.05) 0.00 1.00 4.85
1996 1.00 0.05 0.00 (0.05) 0.00 1.00 5.39
<CAPTION>
RATIO OF
NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES INCOME
RATIO OF INVESTMENT TO TO
NET EXPENSES INCOME AVERAGE AVERAGE
ASSETS, TO TO NET NET
END OF AVERAGE AVERAGE ASSETS ASSETS PORTFOLIO
PERIOD NET NET (EXCLUDING (EXCLUDING TURNOVER
(000) ASSETS ASSETS WAIVERS) WAIVERS) RATE
---------------------------------------------------------------------------------
PRIME OBLIGATIONS PORTFOLIO
CLASS A
<S> <C> <C> <C> <C> <C> <C>
2000 $67,724 0.49% 4.83% 0.64% 4.68% N/A
1999 61,465 0.49 5.06 0.66 4.89 N/A
1998 52,177 0.49 5.21 0.65 5.05 N/A
1997 90,301 0.49 5.00 0.66 4.83 N/A
1996 84,660 0.49 5.50 0.64 5.35 N/A
CLASS B
2000 $13,809 0.74% 4.62% 0.89% 4.47% N/A
1999 4,137 0.74 4.82 0.91 4.65 N/A
1998 6,550 0.74 4.96 0.90 4.80 N/A
1997 7,501 0.74 4.75 0.91 4.58 N/A
1996 6,154 0.74 5.15 0.89 5.00 N/A
</TABLE>
Page 33 of 39
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JANUARY 31,
<TABLE>
<CAPTION>
WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 $10.27 $0.48 $(0.98) $(0.52) $(0.05) $9.20 (5.04)% $74,709 0.72% 4.90% 0.77% 4.85% 10%
1999 10.32 0.49 0.06 (0.49) (0.11) 10.27 5.47 90,228 0.72 4.77 0.79 4.70 14
1998 9.95 0.50 0.42 (0.50) (0.05) 10.32 9.55 85,043 0.75 5.00 0.80 4.96 17
1997 10.12 0.49 (0.17) (0.49) 0.00 9.95 3.35 92,619 0.75 5.01 0.85 4.91 26
1996 9.36 0.49 0.76 (0.49) 0.00 10.12 13.66 36,611 0.75 5.02 0.89 4.88 43
CLASS B
2000 $10.26 $0.44 $(0.98) $(0.49) $(0.05) $9.18 (5.39)% $8,790 0.97% 4.65% 1.02% 4.60% 10%
1999 10.32 0.47 0.05 (0.47) (0.11) 10.26 5.11 9,477 0.97 4.52 1.04 4.45 14
1998 9.95 0.48 0.42 (0.48) (0.05) 10.32 9.28 7,658 1.00 4.74 1.05 4.70 17
1997 10.11 0.47 (0.16) (0.47) 0.00 9.95 3.19 6,191 1.00 4.76 1.10 4.66 26
1996 9.36 0.47 0.75 (0.47) 0.00 10.11 13.26 4,312 1.00 4.78 1.14 4.64 43
<CAPTION>
GOVERNMENT SECURITIES PORTFOLIO
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 $10.18 $0.57 $(0.88) $(0.57) $(0.04) $9.26 (3.11)% $43,315 0.83% 5.89% 1.11% 5.61% 10%
1999 10.17 0.56 0.17 (0.56) (0.16) 10.18 7.39 51,614 0.83 5.54 1.11 5.26 11
1998 9.76 0.57 0.42 (0.57) (0.01) 10.17 10.44 50,100 0.83 5.77 1.05 5.55 21
1997 10.15 0.56 (0.39) (0.56) 0.00 9.76 1.83 59,014 0.83 5.75 1.16 5.42 46
1996 9.09 0.55 1.06 (0.55) 0.00 10.15 18.14 60,228 0.83 5.68 1.11 5.40 28
CLASS B
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 $10.19 $0.54 $(0.89) $(0.54) $(0.04) $9.26 (3.45)% $1,732 1.08% 5.64% 1.36% 5.36% 10%
1999 10.18 0.54 0.17 (0.54) (0.16) 10.19 7.12 2,063 1.08 5.28 1.36 5.00 11
1998 9.77 0.54 0.42 (0.54) (0.01) 10.18 10.16 1,519 1.08 5.52 1.30 5.30 21
Page 34 of 39
<PAGE>
1997 10.15 0.53 (0.38) (0.53) 0.00 9.77 1.69 1,830 1.08 5.50 1.41 5.17 46
1996 9.10 0.53 1.05 (0.53) 0.00 10.15 17.72 1,167 1.08 5.39 1.36 5.11 28
</TABLE>
Page 35 of 39
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JANUARY 31,
<TABLE>
<CAPTION>
Net
Realized
and
Unrealized
Net Asset Gains Distributions Distribution Net Asset
Value, Net (Losses) from Net from Value,
Beginning Investme on Investment Realized End of Total
of Period Income Investments Income Gains Period Return
------------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION PORTFOLIO
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C>
2000 $17.89 $(0.06) $5.04 $0.00 $(2.09) $20.78 28.81%
1999 14.05 (0.02) 5.52 0.00 (1.66) 17.89 42.72
1998 15.38 0.03 2.52 (0.01) (3.87) 14.05 17.12
1997 13.31 0.00 2.86 (0.01) (0.78) 15.38 22.06
1996 9.57 0.01 3.93 (0.01) (0.19) 13.31 41.31
CLASS B
2000 $17.61 $(0.17) $5.01 $0.00 $(2.09) $20.36 28.47%
1999 13.89 (0.01) 5.39 0.00 (1.66) $17.61 42.34
1998 15.28 0.02 2.46 0.00 (3.87) 13.89 16.76
1997 13.25 (0.03) 2.84 0.00 (0.78) 15.28 21.81
1996 9.55 (0.01) 3.90 0.00 (0.19) 13.25 40.88
<CAPTION>
RATIO OF
Net
Ratio of Ratio of Investment
Net Expenses Income
Ratio of Investment to to
Net Expenses Income Average Average
Assets, to to Net Net
End of Average Average Assets Assets Portfolio
Period Net Net (Excluding (Excluding Turnover
(000) Assets Assets Waivers) Waivers) Rate
-----------------------------------------------------------------------------------
CAPITAL APPRECIATION PORTFOLIO
CLASS A
<S> <C> <C> <C> <C> <C> <C>
2000 $154,385 1.02% (0.34)% 1.30% (0.62)% 54%
1999 138,624 1.02 (0.05) 1.28 (0.31) 74
1998 113,048 1.02 0.09 1.28 (0.17) 118
1997 118,873 1.02 (0.01) 1.28 (0.27) 90
1996 99,612 1.02 0.08 1.27 (0.17) 119
CLASS B
2000 $23,668 1.27% (0.59)% 1.55% (0.87)% 54%
1999 17,872 1.27 (0.28) 1.53 (0.54) 74
1998 6,021 1.27 (0.16) 1.53 (0.42) 118
1997 4,482 1.27 (0.27) 1.53 (0.53) 90
1996 2,233 1.27 (0.16) 1.52 (0.41) 119
</TABLE>
Page 36 of 39
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JANUARY 31,
EQUITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 $13.44 $0.23 $0.93 $(0.22) $(0.28) $14.10 8.49% $62,863 0.96% 1.63% 1.07% 1.52% 15%
1999 12.62 0.27 1.52 (0.27) (0.70) 13.44 14.69 52,095 0.96 1.97% 1.09 1.84 47
1998 11.23 0.27 1.78 (0.27) (0.39) 12.62 18.44 48,076 1.11 2.26 1.15 2.22 68
1997 (1) 10.00 0.16 1.23 (0.16) 0.00 11.23 13.98 41,580 1.20 3.27 1.25 3.22 10
CLASS B
2000 $13.44 $0.24 $0.89 $(0.19) $(0.28) $14.10 8.23% $5,965 1.21% 1.39% 1.32% 1.28% 15%
1999 12.62 0.22 1.54 (0.24) (0.70) 13.44 14.43 6,206 1.21 1.72 1.34 1.59 47%
1998 11.24 0.23 1.79 (0.25) (0.39) 12.62 18.07 3,678 1.36 2.01 1.40 1.97 68
1997 (1) 10.00 0.15 1.24 (0.15) 0.00 11.24 13.98 1,504 1.45 3.02 1.50 2.97 10
</TABLE>
(1) COMMENCED OPERATIONS ON AUGUST 2, 1996. ALL RATIOS FOR THE PERIOD HAVE BEEN
ANNUALIZED.
Page 37 of 39
<PAGE>
THE ARBOR FUND
OVB FAMILY OF FUNDS
INVESTMENT ADVISER
One Valley Bank
One Valley Square
P.O. Box 1793
Charleston, West Virginia 25326
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
More information about the OVB Family of Funds is available without charge
through the following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated May 31, 2000, includes detailed information about the OVB Family
of Funds. The SAI is on file with the SEC and is incorporated by reference into
this prospectus. This means that the SAI, for legal purposes, is a part of this
prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
These reports list each Portfolio's holdings and contain information from the
Portfolio's managers about strategies, and recent market conditions and trends
and their impact on Portfolio performance. The reports also contain detailed
financial information about the Portfolios.
TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT, OR MORE INFORMATION:
BY TELEPHONE: Call 1-800-545-6331
BY MAIL: Write to us
The OVB Family of Funds
c/o The Arbor Fund
P.O. Box 219947
Kansas City, Missouri 64121-9947
Page 38 of 39
<PAGE>
FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports,
as well as other information about The Arbor Fund, from the EDGAR Database on
the SEC's website ("http://www.sec.gov"). You may review and copy documents at
the SEC Public Reference Room in Washington, DC (for information on the
operation of the Public Reference Room, call 202-942-8090). You may request
documents by mail from the SEC, upon payment of a duplicating fee, by writing
to: Securities and Exchange Commission, Public Reference Section, Washington, DC
20549-0102. You may also obtain this information, upon payment of a duplicating
fee, by e-mailing the SEC at the following address: [email protected]. The
Arbor Fund's Investment Company Act registration number is 811-7102.
Page 39 of 39
<PAGE>
GOLDEN OAK FAMILY OF FUNDS
TRUST:
THE ARBOR FUND
PORTFOLIOS:
GOLDEN OAK GROWTH PORTFOLIO
GOLDEN OAK VALUE PORTFOLIO
GOLDEN OAK TAX-MANAGED EQUITY PORTFOLIO
GOLDEN OAK SMALL CAP VALUE PORTFOLIO
GOLDEN OAK INTERNATIONAL EQUITY PORTFOLIO
GOLDEN OAK INTERMEDIATE-TERM INCOME PORTFOLIO
GOLDEN OAK MICHIGAN TAX FREE BOND PORTFOLIO
GOLDEN OAK PRIME OBLIGATION MONEY MARKET PORTFOLIO
INVESTMENT ADVISER:
CITIZENS BANK
This STATEMENT OF ADDITIONAL INFORMATION is not a prospectus. It is intended to
provide additional information regarding the activities and operations of the
following Portfolios of the Trust: Golden Oak Growth, Golden Oak Value, Golden
Oak Tax-Managed Equity, Golden Oak Small Cap Value Portfolio, Golden Oak
International Equity Portfolio, Golden Oak Intermediate-Term Income, Golden Oak
Michigan Tax Free Bond and Golden Oak Prime Obligation Money Market Portfolio.
This Statement of Additional Information should be read in conjunction with the
Prospectus dated May 31, 2000. A Prospectus may be obtained by calling
1-800-545-6331.
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE PORTFOLIOS AND THE TRUST.............................................S-1
INVESTMENT OBJECTIVES AND POLICIES.......................................S-1
DESCRIPTION OF PERMITTED INVESTMENTS....................................S-10
INVESTMENT LIMITATIONS..................................................S-31
THE ADVISER.............................................................S-35
THE SUB-ADVISERS........................................................S-37
THE ADMINISTRATOR.......................................................S-41
THE DISTRIBUTOR.........................................................S-42
THE TRANSFER AGENT......................................................S-45
THE CUSTODIAN...........................................................S-45
LEGAL COUNSEL...........................................................S-45
INDEPENDENT ACCOUNTANTS.................................................S-45
TRUSTEES AND OFFICERS OF THE TRUST......................................S-46
COMPUTATION OF YIELD....................................................S-49
CALCULATION OF TOTAL RETURN.............................................S-51
PURCHASE AND REDEMPTION OF SHARES.......................................S-52
LETTER OF INTENT........................................................S-53
<PAGE>
DETERMINATION OF NET ASSET VALUE........................................S-53
TAXES...................................................................S-54
TRADING PRACTICES AND BROKERAGE.........................................S-59
DESCRIPTION OF SHARES...................................................S-63
SHAREHOLDER LIABILITY...................................................S-63
LIMITATION OF TRUSTEES' LIABILITY.......................................S-64
5% AND 25% SHAREHOLDERS.................................................S-64
EXPERTS.................................................................S-65
FINANCIAL STATEMENTS....................................................S-65
DESCRIPTION OF RATINGS...................................................A-1
</TABLE>
May 31, 2000
GOK-F-013-04
<PAGE>
THE PORTFOLIOS AND THE TRUST
The "Golden Oak Family of Funds" is a name under which a number of mutual fund
investment portfolios with differing objectives and policies are offered to
investors. Eight of these portfolios were established by The Arbor Fund (the
"Trust"), an open-end management investment company established under
Massachusetts law as a Massachusetts business trust under a Declaration of Trust
dated July 24, 1992. The Declaration of Trust permits the Trust to offer
separate series of shares of beneficial interest ("shares") and different
classes of shares of each portfolio. Shareholders may purchase shares through
three separate classes (Institutional, Class A and Class B) which provide for
variations in distribution costs, voting rights and dividends. Except for
differences between Institutional, Class A and Class B Shares pertaining to
distribution fees, each share of each portfolio represents an equal
proportionate interest in that portfolio. See "Description of Shares." This
Statement of Additional Information relates to the Institutional, Class A and
Class B shares of the Golden Oak Growth (formerly, the Golden Oak Diversified
Growth Portfolio) (the "Growth Portfolio"), Golden Oak Value (the "Value
Portfolio"), Golden Oak Tax-Managed Equity (the "Tax-Managed Portfolio"), Golden
Oak Small Cap Value Portfolio (the "Small Cap Portfolio"), Golden Oak
International Equity Portfolio (the "International Equity Portfolio"), Golden
Oak Intermediate-Term Income (the "Intermediate-Term Income Portfolio"), Golden
Oak Michigan Tax Free Bond (the "Michigan Portfolio") and Golden Oak Prime
Obligation Money Market (the "Prime Obligation Portfolio") Portfolios (each a
"Portfolio" and collectively, the "Portfolios") of the Trust.
The Trust pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to shareholders, costs of custodial services and registering the
shares under federal and state securities laws, pricing, insurance expenses,
litigation and other extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives are fundamental policies of the Portfolios. There is
no assurance that the Portfolio will achieve its investment objective. A
fundamental policy cannot be changed with respect to a Portfolio without the
consent of the holders of a majority of the Portfolio's outstanding shares.
THE GROWTH PORTFOLIO -- The investment objective of the Growth Portfolio is to
provide total return. There is no assurance that the Portfolio will achieve its
investment objective.
Under normal conditions, the Portfolio expects to be fully invested in common
stocks (and will be at least 65% invested in common stocks) listed on registered
exchanges in the United States or actively traded in the over-the-counter market
as further described below. In addition to investing in common stocks, the
Portfolio may invest in warrants and rights to purchase common stocks, United
States Dollar denominated securities of foreign issuers traded in the United
States (including sponsored American Depositary Receipts traded on registered
exchanges or listed on NASDAQ), repurchase agreements,
S-1
<PAGE>
covered call options and money market instruments of the type described below.
The Portfolio may invest up to 10% of its net assets in American Depositary
Receipts, including American Depositary Shares and New York Shares. The
Portfolio may also write covered call options and engage in related closing
purchase transactions provided that the aggregate value of such options does not
exceed 10% of the Portfolio's net assets as of the time such options are entered
into by the Portfolio. Nicholas-Applegate Capital Management (the "Sub-Adviser")
will engage in such transactions only as hedging transactions and not for
speculative purposes.
The common stocks and other equity securities purchased by the Portfolio will be
those of companies which, in the Sub-Adviser's opinion, have accelerating
earnings growth, rising analyst estimates of earnings growth, strong fundamental
quality and positive price behavior. However, there is no assurance that the
Sub-Adviser will be able to accurately predict the stages of a business cycle.
In addition, the Portfolio invests primarily in equity securities that fluctuate
in value; therefore, the Portfolio's shares will fluctuate in value.
The Portfolio may invest up to 15% of its net assets in illiquid securities,
including restricted securities other than Section 4(2) commercial paper
("Illiquid Securities"). Restricted securities, including Rule 144A securities
and Section 4(2) commercial paper, that meet the criteria established by the
Board of Trustees of the Trust will be considered liquid.
For temporary defensive purposes during periods when the Portfolio's Sub-Adviser
determines that market conditions warrant, the Portfolio may invest up to 100%
of its assets in money market instruments (consisting of securities issued or
guaranteed as to principal and interest by the United States government, its
agencies or instrumentalities, repurchase agreements collateralized by United
States government securities and entered into with financial institutions the
Sub-Adviser deems creditworthy, certificates of deposit, time deposits and
bankers' acceptances issued by banks or savings and loan associations having net
assets of at least $1.0 billion as shown on their most recent public financial
statements, and deemed by the Adviser or Sub-Adviser to present minimal credit
risk, and commercial paper rated in the two highest short-term rating categories
(collectively, "Money Market Instruments"), and may hold a portion of its assets
in cash. To the extent the Portfolio is engaged in defensive investing, the
Portfolio will not be pursuing its investment objective.
For the fiscal year ended January 31, 2000, the Portfolio's annual turnover rate
was 82.69%.
THE VALUE PORTFOLIO -- The investment objective of the Value Portfolio is to
seek long-term capital appreciation. There is no assurance that the Portfolio
will achieve its investment objective.
The Portfolio attempts to achieve its investment objective by investing
primarily in common stocks, warrants, rights to purchase common stocks,
preferred stocks and securities convertible into common stocks (together,
"equity securities"). The Portfolio
S-2
<PAGE>
will be as fully invested as practicable (and in no event less than 65%) in
equity securities and will focus on equity securities, which are undervalued
relative to a company's earnings. Systematic Financial Management, L.P. (the
"Sub-Adviser") will invest in equity securities of companies based on an
analysis of various fundamental characteristics, including balance sheet items,
underlying sales and expense trends, earnings estimates, market position of the
company and industry outlook. The Portfolio may also invest in American
Depositary Receipts and enter into repurchase agreements. Although it has no
present intention to do so, the Portfolio reserves the ability to write and
purchase options for hedging purposes. Although the Portfolio intends to be as
fully invested as practicable in equity securities, the Portfolio may invest in
up to 15% of its assets in the money market instruments described below.
The Portfolio may invest up to 15% of its net assets in Illiquid Securities.
For the fiscal year ended January 31, 2000, the Portfolio's annual turnover rate
was 102.11%. Such a turnover rate may result in higher transaction costs and may
result in additional taxes.
THE TAX-MANAGED PORTFOLIO -- The Tax-Managed Portfolio has an investment
objective of maximizing long term capital appreciation on an after-tax basis.
The Tax-Managed Portfolio is best suited for the long-term equity investor who
has a moderate risk orientation. The Tax-Managed Portfolio seeks to minimize
taxes and is targeted to long term investors seeking the optimum blend of
performance and tax efficiency. There is no assurance that the Tax-Managed
Portfolio will achieve its investment objective.
The Tax-Managed Portfolio primarily invests in common stocks and is designed to
have risk characteristics similar to those of the S&P 500 Index. As with any
equity fund, the value of the Tax-Managed Portfolio's investments varies from
day to day in response to the activities of the individual companies and general
market and economic conditions. To the extent the Tax-Managed Portfolio invests
in non-US securities, the risks and volatility are magnified since the
performance of non-US stocks depends upon changes in international currency
values, different political and regulatory environments, and the overall
political and economic conditions in countries where the Tax-Managed Portfolio
invests.
Under normal conditions, the Tax-Managed Portfolio expects to be fully invested
in common stocks (and will be at least 65% invested in common stocks) listed on
registered exchanges in the United States or actively traded in the
over-the-counter market as further described below. In addition to investing in
common stocks, the Tax-Managed Portfolio may invest in warrants and rights to
purchase common stocks, United States Dollar denominated securities of foreign
issuers traded in the United States (including sponsored American Depositary
Receipts traded on registered exchanges or listed on NASDAQ), repurchase
agreements, covered call options and money market instruments of the type
described below. The Tax-Managed Portfolio may invest up to 10% of its net
assets in American Depositary Receipts, including American Depositary Shares and
New York Shares. The Tax-Managed Portfolio may also write covered call options
and engage in related closing purchase transactions provided that the aggregate
value of such
S-3
<PAGE>
options does not exceed 10% of the Tax-Managed Portfolio's net assets as of the
time such options are entered into by the Tax-Managed Portfolio.
Nicholas-Applegate Capital Management (the "Sub-Adviser") will engage in such
transactions only as hedging transactions and not for speculative purposes.
The Tax-Managed Portfolio may invest up to 15% of its net assets in illiquid
securities, including restricted securities other than Section 4(2) commercial
paper ("Illiquid Securities"). Restricted securities, including Rule 144A
Securities and Section 4(2) commercial paper, that meet the criteria established
by the Board of Trustees or the Trust will be considered illiquid.
For temporary defensive purposes during periods when the Tax-Managed Portfolio's
Sub-Adviser determines that market conditions warrant, the Tax-Managed Portfolio
may invest up to 100% of its assets in money market instruments (consisting of
securities issued or guaranteed as to principal and interest by the United
States government, its agencies or instrumentalities, repurchase agreements
collateralized by United States government securities and entered into with
financial institutions the Sub-Adviser deems creditworthy, certificates of
deposit, time deposits and bankers' acceptances issued by banks or savings and
loan associations having net assets of at least $1.0 billion as shown on their
most recent public financial statements, and deemed by the Adviser or
Sub-Adviser to present minimal credit risk, and commercial paper rated in the
two highest short-term rating categories (collectively, "Money Market
Instruments"), and may hold a portion of its assets in cash. To the extent the
Tax-Managed Portfolio is engaged in temporary defensive investment, the
Tax-Managed Portfolio will not be pursuing its investment objective.
The Tax-Managed Portfolio reserves the right to engage in securities lending but
has no present intention to do so.
The Tax-Managed Portfolio's portfolio turnover will be generally moderate and
most likely below 50%, however turnover may be influenced by specific company
fundamentals, market environments and investment opportunities. For the fiscal
year ended January 31, 2000, the Portfolio's annual turnover rate was 32.30%.
THE SMALL CAP VALUE PORTFOLIO - The investment objective of the Portfolio is to
seek long-term capital appreciation.
The Portfolio attempts to achieve its investment objective by investing
primarily in small capitalization U.S. common stocks, warrants, rights to
purchase common stocks, preferred stocks and securities convertible into common
stocks (together, "equity securities"). The Portfolio will be as fully invested
as practicable (and in no event less than 65%) in equity securities and will
focus on equity securities, which are believed to be undervalued relative to a
company's ability to generate cash flows. Systematic Financial Management, L.P.
(the "Sub-Adviser") will invest in equity securities of U.S. companies based on
an analysis of various fundamental characteristics, including balance sheet
items, underlying sales and expense trends, earnings estimates, market position
of the company and industry outlook. The Portfolio may also invest in American
Depositary
S-4
<PAGE>
Receipts and enter into repurchase agreements. Although it has no present
intention to do so, the Portfolio reserves the ability to write and purchase
options for hedging purposes. Although the Portfolio intends to be as fully
invested as practicable in equity securities, the Portfolio may invest in up to
15% of its assets in money market instruments consisting of securities issued or
guaranteed as to principal and interest by the United States government, its
agencies or instrumentalities, repurchase agreements collateralized by United
States government securities and entered into with financial institutions the
Sub-Adviser deems creditworthy, certificates of deposit, time deposits and
bankers' acceptances issued by banks or savings and loan associations having net
assets of at least $1.0 billion as shown on their most recent public financial
statements, and deemed by the Adviser or Sub-Adviser to present minimal credit
risk, and commercial paper rated in the two highest short-term rating categories
(collectively, "Money Market Instruments").
The Portfolio may invest up to 15% of its net assets in illiquid securities,
including restricted securities other than Section 4(2) commercial paper
("Illiquid Securities"). Restricted securities, including Rule 144A Securities
and Section 4(2) commercial paper, that meet the criteria established by the
Board of Trustees or the Trust will be considered illiquid.
For temporary defensive purposes during periods when the Portfolio's Sub-Adviser
determines that market conditions warrant, the Portfolio may invest up to 100%
of its assets in money market instruments (consisting of securities issued or
guaranteed as to principal and interest by the United States government, its
agencies or instrumentalities, repurchase agreements collateralized by United
States government securities and entered into with financial institutions the
Sub-Adviser deems creditworthy, certificates of deposit, time deposits and
bankers' acceptances issued by banks or savings and loan associations having net
assets of at least $1.0 billion as shown on their most recent public financial
statements, and deemed by the Adviser or Sub-Adviser to present minimal credit
risk, and commercial paper rated in the two highest short-term rating categories
(collectively, "Money Market Instruments"), and may hold a portion of its assets
in cash. To the extent the Portfolio is engaged in temporary defensive
investment, the Portfolio will not be pursuing its investment objective.
The Portfolio reserves the right to engage in securities lending but has no
present intention to do so.
The Portfolio's portfolio turnover will be generally moderate and most likely
below 50%, however turnover may be influenced by specific company fundamentals,
market environments and investment opportunities. For the fiscal year ended
January 31, 2000, the Portfolio's annual turnover rate was 10.86%.
THE INTERNATIONAL EQUITY PORTFOLIO -- The investment objective of the Portfolio
is to seek long-term capital appreciation.
The Portfolio invests primarily in stocks of foreign issuers located in
countries included in the Morgan Stanley Capital International Europe, Australia
and Far East Index (EAFE). The EAFE Index is an unmanaged index comprised of a
sample of companies
S-5
<PAGE>
representative of the market structure of the following European and Pacific
Basin countries: Australia, Austria, Belgium, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland and the U.K. The Portfolio
normally invests at least 65% of its total assets in the equity securities
issued by these companies and normally invests at least 80% of its total
assets in equity securities. To a lesser degree, the Portfolio may also
invest in equity securities of issuers operating in emerging market
economies. The Portfolio primarily buys common stock but also can invest in
other equity securities. Equity securities include common stock and preferred
stock (including convertible preferred stock); bonds, notes and debentures
convertible into common or preferred stock; stock purchase warrants and
rights; equity interests in trusts and partnerships; and depositary receipts.
In making investment decisions for the Fund, the Advisor evaluates the risks
associated with investing Fund assets in a particular country, including
risks stemming from a country's financial infrastructure and settlement
practices; the likelihood of expropriation, nationalization or confiscation
of invested assets; prevailing or developing custodial practices in the
country; the country's laws and regulations regarding the safekeeping,
maintenance and recovery of invested assets, the likelihood of
government-imposed exchange control restrictions which could impair the
liquidity of Fund assets maintained with custodians in that country, as well
as risks from political acts of foreign governments ("country risks"). Of
course, the Advisor cannot assure that the Fund will not suffer losses
resulting from investing in foreign countries.
BlackRock International, Ltd. (the "Sub-Adviser"), in an attempt to reduce
portfolio risk, will diversify investments across countries, industry groups and
companies with investment at all times in at least three foreign countries. The
Portfolio may, from time to time, invest more than 25% of its assets in
securities whose issuers are located in Japan. From time to time the Portfolio
may invest in the securities of issuers located in emerging market countries.
Although the Portfolio intends to be as fully invested as practicable in equity
securities of foreign issuers, the Portfolio may invest in up to 15% of its
assets in money market instruments consisting of securities issued or guaranteed
as to principal and interest by the United States Government, its agencies or
instrumentalities, repurchase agreements collateralized by United States
Government securities and entered into with financial institutions the
Sub-Adviser deems creditworthy, certificates of deposit, time deposits and
bankers' acceptances issued by banks or savings and loan associations having net
assets of at least $1.0 billion as shown on their most recent public financial
statements, and deemed by the Adviser or Sub-Adviser to present minimal credit
risk, and commercial paper rated in the two highest short-term rating categories
(collectively, "Money Market Instruments"). The Portfolio may also enter into
repurchase agreements.
The Portfolio may invest up to 15% of its net assets in illiquid securities,
including restricted securities other than Section 4(2) commercial paper
("Illiquid Securities"). Restricted securities, including Rule 144A Securities
and Section 4(2) commercial paper, that meet the criteria established by the
Board of Trustees or the Trust will be considered illiquid.
For temporary defensive purposes during periods when the Portfolio's Sub-Adviser
determines that market conditions warrant, the Portfolio may invest up to 100%
of its assets in Money Market Instruments and may hold a portion of its assets
in cash. To the extent the Portfolio is engaged in temporary defensive
investing, the Portfolio will not be pursuing its investment objective.
The Portfolio may use options or futures when consistent with its investment
objective. The primary purpose of using derivatives is to attempt to reduce risk
to the Portfolio as a whole (hedge) but they may also be used to maintain
liquidity, commit cash pending investment or to increase returns. The Portfolio
may also use forward currency exchange
S-6
<PAGE>
contracts (obligations to buy or sell a currency at a set rate in the future) to
hedge against movements in the value of foreign currencies.
The Portfolio may lend securities (up to 33 1/3% of the value of its total
assets) on a short-term basis in order to earn extra income. The Portfolio will
receive collateral in cash or high quality securities equal to the current value
of the loaned securities.
The Portfolio may engage in active and frequent trading of portfolio securities
to achieve its principal investment strategies. The Portfolio's turnover may be
influenced by specific company fundamentals, market environments and investment
opportunities.
THE INTERMEDIATE-TERM INCOME PORTFOLIO -- The investment objective of the
Intermediate-Term Income Portfolio is current income consistent with limited
price volatility. The Portfolio will seek to limit price volatility by
maintaining an average weighted maturity of three to ten years. There is no
assurance that the Portfolio will achieve its investment objective.
Under normal circumstances, at least 80% of the Portfolio's assets will be
invested in the following United States Dollar denominated obligations: (i)
bills, notes receipts and bonds issued by United States Treasury and STRIPs of
such obligations that are transferable through the Federal Book -Entry System
("US Treasury Obligations"); (ii) obligations issued or guaranteed as to
principal and interest by the United States government, its agencies or
instrumentalities; (iii) corporate bonds and debentures rated A or better by
Standard & Poor's Corporation ("S&P") or A or better by Moody's Investors
Service ("Moody's") or of comparable quality at the time of purchase as
determined by the Adviser; (iv) commercial paper rated A-1 or better by Moody's
or P-1 or better by S&P or of comparable quality at the time of purchase as
determined by the Adviser; (v) short-term bank obligations consisting of
certificates of deposit, time deposits, and bankers' acceptances of U.S.
commercial banks or savings and loan institutions with assets of at least $1.0
billion as shown on their most recent public financial statements, that the
Adviser deems to be comparable in quality to corporate obligations in which the
Portfolio may invest; and (vi) repurchase agreements involving any of the above
securities.
The remaining 20% of the Portfolio's assets may be invested in: (i) debt
securities issued or guaranteed by the government of Canada or its provincial or
local governments; (ii) debt securities issued or guaranteed by foreign
governments, their political subdivisions, agencies or instrumentalities and
debt securities of supranational entities; (iii) mortgage-backed securities and
asset-backed securities rated in one of the top two categories by S&P or
Moody's; (iv) receipts evidencing separately traded interest and principal
component parts of United States government obligations ("STRIPS"); (v) taxable
municipal securities rated A or better by S&P or Moody's or of comparable
quality at the time of purchase as determined by the Adviser; (vi) corporate
bonds and debentures rated BBB by S&P or Moody's or of comparable quality at the
time of purchase as determined by the Adviser; and (vii) repurchase agreements
involving such securities. The Portfolio will limit its purchase of corporate
securities rated BBB by S&P or Moody's (or of comparable quality) to 10% of its
total assets. The Portfolio may
S-7
<PAGE>
invest in futures and options for hedging purposes, and will limit the
outstanding obligations to purchase securities under futures contracts to not
more than 20% of the Portfolio's total assets.
In the event a security owned by the Portfolio is downgraded below these ratings
categories, the Adviser will review the quality and credit-worthiness of such
security and take action, if any, that it deems appropriate.
The Portfolio expects to maintain an average weighted remaining maturity of
three to ten years, although there are no restrictions on the maturity of any
single instrument.
The Portfolio may invest up to 15% of its net assets in Illiquid Securities (as
defined in the "Description of Permitted Investments" section).
The Portfolio may enter into forward commitments or purchase securities on a
when-issued basis where such purchases are for investment and not for
speculative purposes. In addition , the Portfolio reserves the right to engage
in securities lending but has no present intention to do so. For the fiscal year
ended January 31, 2000, the Portfolio's annual turnover rate was approximately
24.93%.
THE MICHIGAN PORTFOLIO -- The investment objective of the Michigan Portfolio is
current income exempt from federal and Michigan income taxes consistent with
preservation of capital. There is no assurance that the Portfolio will achieve
its investment objective.
The Portfolio will invest primarily in obligations issued by or on behalf of the
states, territories or possessions of the United States or the District of
Columbia or their political subdivisions, agencies or instrumentalities, the
interest of which, in the opinion of counsel for the issuer, is exempt from
federal income tax (collectively, "Municipal Securities"). It is a fundamental
policy of the Portfolio that at least 80% of its net assets will be invested in
municipal securities the interest on which is exempt from federal income tax and
not subject to taxation as a preference item for purposes of the alternative
minimum tax. Under normal circumstances, at least 65% of the Portfolio will be
invested in municipal bonds and, except where acceptable securities are
unavailable as determined by the Adviser, at least 80% of the Portfolio's assets
will be invested in Municipal Securities, the interest of which, in the opinion
of bond counsel to the issuer, is exempt from Michigan income tax ("Michigan
Municipal Securities"). The Adviser expects to be fully invested in Municipal
Securities. The Portfolio will purchase Municipal Securities that meet the
following criteria: (i) municipal bonds rated in one of the four highest rating
categories ("investment grade"); (ii) municipal notes rated in one of the two
highest rating categories; (iii) commercial paper rated in one of the two
highest short term rating categories; or (iv) any of the foregoing that are not
rated but are determined by the Adviser to be of comparable quality at the time
of investment. The Portfolio may also invest up to 5% of its net assets in
securities of closed-end investment companies traded on a national securities
exchange.
Debt rated in the fourth highest category by an NRSRO is regarded as having an
adequate capacity to pay interest and repay principal. Whereas it normally
exhibits adequate
S-8
<PAGE>
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories. Such debt lacks
outstanding investment characteristics and in fact has speculative
characteristics as well.
The Portfolio expects to maintain an average weighted remaining maturity of
three to ten years. The maximum maturity for any individual security is thirty
years.
The Portfolio may invest up to 15% of its net assets in Illiquid Securities.
The Michigan Portfolio currently contemplates that it will not invest more than
25% of its total assets (at market value at the time of purchase) in Municipal
Securities, the interest of which is paid from venues or projects with similar
characteristics. See also "Description of Permitted Investments -- Special
Factors Relating to Michigan Municipal Securities."
The Portfolio is a non-diversified investment company which means that more than
5% of its assets may be invested in one or more issuers, although the Adviser
does not intend to invest more than 10% of the Portfolio's assets in any one
issuer. Since a relatively high percentage of assets of the Portfolio may be
invested in the obligations of a limited number of issuers, the value of shares
of the Portfolio may be more susceptible to any single economic, political or
regulatory occurrence than the shares of a diversified investment company would
be. The Portfolio intends to satisfy the diversification requirements necessary
to qualify as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code").
The Portfolio may enter into forward commitments or purchase securities on a
when-issued basis where such purchases are for investment and not for
speculative purposes. In addition, the Portfolio may also engage in securities
lending.
The Portfolio's portfolio turnover will be generally moderate and most likely
below 50%, however turnover may be influenced by specific company fundamentals,
market environments and investment opportunities. For the fiscal year ended
January 31, 2000, the Portfolio's annual turnover rate was 2.42%.
THE PRIME OBLIGATION PORTFOLIO -- The investment objective of the Prime
Obligation Portfolio is to preserve principal value and maintain a high degree
of liquidity while providing current income. It is also a fundamental policy of
the Portfolio to use its best efforts to maintain a constant net asset value of
$1.00 per share. There is no assurance that the Portfolio will achieve its
investment objective or that it will be able to maintain a constant net asset
value of $1.00 per share on a continuous basis.
The Portfolio intends to comply with regulations of the Securities and Exchange
Commission applicable to money market funds using the amortized cost method for
calculating net asset value. These regulations impose certain quality, maturity
and diversification restraints on Portfolio investments. Under these
regulations, the Portfolio will invest in only U.S. Dollar denominated
securities, will maintain an average maturity
S-9
<PAGE>
on a dollar-weighted basis of 90 days or less, and will acquire only "eligible
securities" that present minimal credit risks and have a maturity of 397 days or
less, as defined by Rule 2a-7 under the Investment Company Act of 1940 ("Rule
2a-7"). For a further discussion of these rules, see "Description of Permitted
Investments."
The Portfolio intends to invest exclusively in: (i) bills, notes, receipts and
bonds issued by the United States Treasury and STRIPs of such obligations that
are transferable through the Federal Book-Entry System ("U.S. Treasury
Obligations"); (ii) obligations issued or guaranteed as to principal and
interest by the agencies or instrumentalities of the United States government;
(iii) commercial paper of United States or foreign issuers, including
asset-backed securities rated in the two highest short-term rating categories at
the time of investment or, if not rated, as determined by Wellington Management
Company, LLP (the "Sub-Adviser") to be of comparable quality; (iv) obligations
of U.S. and foreign savings and loan institutions and commercial banks
(including foreign branches of such banks) that have total assets of $1 billion
or more as shown on their most recently published financial statements; (v) U.S.
Dollar denominated obligations of foreign governments including Canadian and
Provincial government and Crown Agency obligations; (vi) short-term corporate
obligations, including asset-backed securities, of United States and foreign
issuers with commercial paper that meet the above ratings or, if not rated,
determined by the Sub-Adviser to be of comparable quality; (vii) repurchase
agreements involving any of the foregoing obligations; (viii) short-term
obligations issued by state and local governmental issuers, which are rated, at
the time of investment, by at least two nationally recognized statistical
ratings organizations ("NRSROs") in one of the two highest municipal bond rating
categories, and carry yields that are competitive with those of other types of
money market instruments of comparable quality and security that meet the above
ratings or, if not rated, determined by the Sub-Adviser to be of comparable
quality; (ix) obligations of supranational entities satisfying the credit
standards described above or, if not rated, determined by the Portfolio's
Sub-Adviser to be of comparable quality; and (x) to the extent permitted by
applicable law, shares of other investment companies.
The Portfolio may invest up to 10% of its net assets in Illiquid Securities.
The Portfolio reserves the right to engage in securities lending but has no
present intention to do so. The Portfolio may also engage in forward commitments
or purchase securities on a when-issued basis.
DESCRIPTION OF PERMITTED INVESTMENTS
AMERICAN DEPOSITARY RECEIPTS ("ADRS"); EUROPEAN DEPOSITARY RECEIPTS ("EDRS"),
CONTINENTAL DEPOSITARY RECEIPTS ("CDRS") AND GLOBAL DEPOSITARY RECEIPTS
("GDRS").
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. EDRs, which are
sometimes referred to as Continental Depositary Receipts, are securities,
typically issued by a non-U.S. financial institution, that evidence ownership
interests in a security or a pool of securities issued by either a U.S. or
foreign issuer. GDRs are issued globally and evidence a similar ownership
arrangement. Generally, ADRs are designed for trading in the U.S. securities
markets, EDRs are designed for trading in European securities markets and
GDRs are designed for trading in non-U.S. markets. ADRs, EDRs, and GDRs 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. Holders of an unsponsored depositary receipt
generally bear all the costs of the
S-10
<PAGE>
unsponsored facility. The depositary of an unsponsored facility frequently is
under no obligation to distribute shareholder communications received from the
issuer of the deposited security or to pass through to the holders of the
receipts voting rights with respect to the deposited securities.
ASSET-BACKED SECURITIES
Asset-backed securities are secured by non-mortgage assets such as company
receivables, truck and auto loans, leases and credit card receivables. Such
securities are generally issued as pass-through certificates, which represent
undivided fractional ownership interests in the underlying pools of assets. Such
securities also may be debt instruments, which are also known as collateralized
obligations and are generally issued as the debt of a special purpose entity,
such as a trust, organized solely for the purpose of owning such assets and
issuing such debt.
Asset-backed securities are not issued or guaranteed by the United States
government or its agencies or instrumentalities; however, the payment of
principal and interest on such obligations may be guaranteed up to certain
amounts and for a certain period by a letter of credit issued by a financial
institution (such as a bank or insurance company) unaffiliated with the issuers
of such securities. The purchase of asset-backed securities raises risk
considerations peculiar to the financing of the instruments underlying such
securities. For example, there is a risk that another party could acquire an
interest in the obligations superior to that of the holders of the asset-backed
securities. There also is the possibility that recoveries on repossessed
collateral may not, in some cases, be available to support payments on those
securities. Asset-backed securities entail prepayment risk, which may vary
depending on the type of asset, but is generally less than the prepayment risk
associated with mortgage-backed securities. In addition, credit card receivables
are unsecured obligations of the cardholder.
The market for asset-backed securities is at a relatively early stage of
development. Accordingly, there may be a limited secondary market for such
securities.
BANKERS' ACCEPTANCES
Bankers' acceptances are bills of exchange or time drafts drawn on and accepted
by a commercial bank. Bankers' acceptances are used by corporations to finance
the shipment and storage of goods. Maturities are generally six months or less.
BANK OBLIGATIONS
The Trust is not prohibited from investing in obligations of banks that are
clients of SEI Investments Company ("SEI"). However, the purchase of shares of
the Trust by them or by their customers will not be a consideration in
determining which bank obligations the Trust will purchase. The Trust will not
purchase obligations of the Adviser or Sub-Adviser.
S-11
<PAGE>
CERTIFICATES OF DEPOSIT
Certificates of deposit are interest bearing instruments with a specific
maturity. They are issued by banks and savings and loan institutions in exchange
for the deposit of funds and normally can be traded in the secondary market
prior to maturity. Certificates of deposit with penalties for early withdrawal
will be considered illiquid.
COMMERCIAL PAPER
Commercial paper is a term used to describe unsecured short-term promissory
notes issued by banks, municipalities, corporations and other entities.
Maturities on these issues vary from a few to 270 days.
CONVERTIBLE SECURITIES
While convertible securities generally offer lower yields than nonconvertible
debt securities of similar quality, their prices may reflect changes in the
value of the underlying common stock. Convertible securities entail less credit
risk than the issuer's common stock.
CURRENCY TRANSACTIONS
The International Equity Portfolio may engage in currency transactions in order
to hedge the value of portfolio holdings denominated in particular currencies
against fluctuations in relative value. Currency transactions include forward
currency contracts, exchange listed currency futures and options thereon,
exchange listed and OTC options on currencies, and currency swaps. A forward
currency contract involves a privately negotiated obligation to purchase or sell
(with delivery generally required) a specific currency at a future date, which
may be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are traded
in the interbank market conducted directly between currency traders (usually
large, commercial banks) and their customers. A forward foreign currency
contract generally has no deposit requirement, and no commissions are charged at
any stage for trades. A currency swap is an agreement to exchange cash flows
based on the notional difference among two or more currencies and operates
similarly to an interest rate swap, which is described below. The Portfolio may
enter into currency transactions with counterparties which have received (or the
guarantors of the obligations of which have received) a credit rating of A-1 or
P-1 by S&P or Moody's, respectively, or that have an equivalent rating from an
NRSRO or (except for OTC currency options) are determined to be of equivalent
credit quality by the Advisor.
The Portfolio's dealings in forward currency contracts and other currency
transactions such as futures, options on futures, options on currencies and
swaps will be limited to hedging involving either specific transactions
("Transaction Hedging") or portfolio positions ("Position Hedging").
S-12
<PAGE>
Transaction Hedging is entering into a currency transaction with respect to
specific assets or liabilities of the Portfolio, which will generally arise in
connection with the purchase or sale of its portfolio securities or the receipt
of income therefrom. The Portfolio may enter into Transaction Hedging out of a
desire to preserve the U.S. Dollar price of a security when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency. The Portfolio will be able to protect itself against possible losses
resulting from changes in the relationship between the U.S. Dollar and foreign
currencies during the period between the date the security is purchased or sold
and the date on which payment is made or received by entering into a forward
contract for the purchase or sale, for a fixed amount of dollars, of the amount
of the foreign currency involved in the underlying security transactions.
Position Hedging is entering into a currency transaction with respect to
portfolio security positions denominated or generally quoted in that currency.
The Portfolio may use Position Hedging when the Advisor, believes that the
currency of a particular foreign country may suffer a substantial decline
against the U.S. Dollar. The Portfolio may enter into a forward foreign currency
contract to sell, for a fixed amount of dollars, the amount of foreign currency
approximating the value of some or all of its portfolio securities denominated
in such foreign currency. The precise matching of the forward foreign currency
contract amount and the value of the portfolio securities involved may not have
a perfect correlation since the future value of the securities hedged will
change as a consequence of market between the date the forward contract is
entered into and the date its matures. The projection of short-term currency
market movement is difficult, and the successful execution of this short-term
hedging strategy is uncertain.
The Portfolio will not enter into a transaction to hedge currency exposure to an
extent greater, after netting all transactions intended wholly or partially to
offset other transactions, than the aggregate market value (at the time of
entering into the transaction) of the securities held in its portfolio that are
denominated or generally quoted in or currently convertible into such currency,
other than with respect to proxy hedging as described below.
The Portfolio may also cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which that Fund has or in which that Fund
expects to have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, the Portfolio may also engage in
proxy hedging. Proxy hedging is often used when the currency to which the
Portfolio's portfolio is exposed is difficult to hedge or to hedge against the
dollar. Proxy hedging entails entering into a forward contract to sell a
currency whose changes in value are generally considered to be linked to a
currency or currencies in which some or all of the Portfolio's portfolio
securities are or are expected to be denominated, and to buy U.S. Dollars. The
amount of the contract would not exceed the value of the Portfolio's securities
denominated in linked currencies. For example, if the Sub-Adviser considers that
the Swedish krone is linked to the Euro, the Fund holds securities dominated in
krone and the Advisor believes
S-13
<PAGE>
that the value of the krone will decline against the U.S. Dollar, the Advisor
may enter into a contract to sell Euros and buy dollars.
Currency Hedging involves some of the same risks and considerations as other
transactions with similar instruments. Currency transactions can result in
losses to the Portfolio if the currency being hedged fluctuates in value to a
degree in a direction that is not anticipated. Furthermore, there is risk that
the perceived linkage between various currencies may not by present or may not
be present during the particular time that the Portfolio is engaging in proxy
hedging. If the Portfolio enters into a currency hedging transaction, the
Portfolio will "cover" its position so as not to create a "senior security" as
defined in Section 18 of the 1940 Act.
Currency transactions are subject to risks different from those of other
portfolio transactions. Because currency control is of great importance to the
issuing governments and influences economic planning and policy, purchases and
sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to the Portfolio
if it is unable to deliver or receive currency or funds in settlement of
obligations and could also cause hedges it has entered into to be rendered
useless, resulting in full currency exposure as well as incurring transaction
costs. Buyers and sellers of currency futures are subject to the same risks that
apply to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy. Although forward foreign currency contracts and currency futures tend
to minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time they tend to limit any potential gain which might
result should the value of such currency increase.
EQUITY SECURITIES
Investments in common stocks are subject to market risks which may cause their
prices to fluctuate over time. Changes in the value of portfolio securities will
not necessarily affect cash income derived from these securities but will affect
a Portfolio's net asset value.
FIXED INCOME SECURITIES
Fixed income securities are debt obligations issued by corporations,
municipalities and other borrowers. The market value of fixed income investments
will change in response to interest rate changes and other factors. During
periods of falling interest rates, the values of outstanding fixed income
securities generally rise. Conversely, during periods of rising interest rates,
the values of such securities generally decline. Moreover, while securities with
longer maturities tend to produce higher yields, the prices of longer maturity
securities are also subject to greater market fluctuations as a result of
changes in
S-14
<PAGE>
interest rates. Changes by recognized agencies in the rating of any fixed income
security and in the ability of an issuer to make payments of interest and
principal will also affect the value of these investments. Changes in the value
of portfolio securities will not affect cash income derived from these
securities but will affect a Portfolio's net asset value. Bonds rated BBB by S&P
or Moody's are to be considered as investment medium grade obligations. Such
debt rated BBB has an adequate capacity to pay interest and repay principal
although it is more vulnerable to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories. Such
securities are considered to have speculative characteristics.
FOREIGN ISSUERS
The International Equity Portfolio will invest and other Portfolios may invest
in issuers located outside the United States. The Portfolios may purchase ADRs,
"ordinary shares," or "New York shares" in the United States. Ordinary shares
are shares of foreign issuers that are traded abroad and on a United States
exchange. New York shares are shares that a foreign issuer has allocated for
trading in the United States. ADRs, ordinary shares, and New York shares all may
be purchased with and sold for U.S. Dollars, which protect the Portfolios from
the foreign settlement risks described below.
Investing in foreign companies may involve risks not typically associated with
investing in United States companies. The value of securities denominated in
foreign currencies, and of dividends from such securities, can change
significantly when foreign currencies strengthen or weaken relative to the U.S.
Dollar. Foreign securities markets generally have less trading volume and less
liquidity than United States markets, and prices in some foreign markets can be
very volatile. Many foreign countries lack uniform accounting and disclosure
standards comparable to those that apply to United States companies, and it may
be more difficult to obtain reliable information regarding a foreign issuer's
financial condition and operations. In addition, the costs of foreign investing,
including withholding taxes, brokerage commissions, and custodial fees,
generally are higher than for United States investments.
Investing in companies located abroad carries political and economic risks
distinct from those associated with investing in the United States. Foreign
investment may be affected by actions of foreign governments adverse to the
interests of United States investors, including the possibility of expropriation
or nationalization of assets, confiscatory taxation, restrictions on United
States investment, or on the ability to repatriate assets or to convert currency
into U.S. Dollars. There may be a greater possibility of default by foreign
governments or foreign-government sponsored enterprises. Investments in foreign
countries also involve a risk of local political, economic, or social
instability, military action or unrest, or adverse diplomatic developments.
FOREIGN SECURITIES
The Growth, Value, Tax-Managed, Intermediate-Term Income, International Equity
and Prime Obligation Portfolios may invest in U.S. Dollar denominated
obligations or securities of foreign issuers. Permissible investments may
consist of obligations of
S-15
<PAGE>
foreign branches of U.S. banks and of foreign banks, including European
Certificates of Deposit, European Time Deposits, Canadian Time Deposits and
Yankee Certificates of Deposits, and investments in Canadian Commercial Paper
and other short-term corporate obligations, foreign securities and Europaper.
In addition, the Growth, Intermediate-Term Income, Value and International
Equity Portfolios may invest in American Depositary Receipts. These
instruments may subject the Portfolio to investment risks that differ in some
respects from those related to investments in obligations of U.S. domestic
issuers. Investments in securities of foreign issuers may subject a Portfolio
to different risks than those attendant to investments in securities of
United States issuers, such as differences in accounting, auditing and
financial reporting standards, the possibility of expropriation or
confiscatory taxation, and political instability. There may be less publicly
available information with regard to foreign issuers, than domestic issuers.
In addition, 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.
Investments in foreign securities usually will involve currencies of foreign
countries. Moreover, a Portfolio may temporarily hold funds in bank deposits in
foreign currencies during the completion of investment programs and the value of
these assets for the Portfolio as measured in U.S. Dollars may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations and the Portfolio may incur costs in connection
with conversions between various currencies. Although a Portfolio values its
assets daily in terms of U.S. Dollars, it does not intend to convert its
holdings of foreign currencies, if any, into U.S. Dollars on a daily basis. It
may do so from time to time and investors should be aware of the costs of
currency conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to a Portfolio at one rate
while offering a lesser rate of exchange should the Portfolio desire to resell
that currency to the dealer. Each Portfolio will conduct its foreign currency
exchange transactions, if any, either on a spot (I.E., cash) basis at the spot
rate prevailing in the foreign currency exchange market or through forward
foreign currency exchange contracts.
Each of the risks associated with investing in foreign securities may be
magnified for securities issued by companies operating in emerging market
countries. Emerging market countries are all countries that are considered to
be developing or emerging countries by the World Bank or the International
Finance Corporation, as well as countries classified by the United Nations or
otherwise regarded by the international financial community as developing.
Currently, the countries excluded from this category are Australia, Austria,
Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore,
Spain, Sweden, Switzerland, the United Kingdom, and the United States.
By investing in foreign securities, the Funds attempt to take advantage of
differences between both economic trends and the performance of securities
markets in the various countries, regions and geographic areas as prescribed
by each Fund's investment objective and policies. During certain periods the
investment return on securities in some or all countries may exceed the
return on similar investments in the United States, while at other times the
investment return may be less than that on similar U.S. securities.
FUTURES CONTRACTS AND OPTIONS
The Tax-Managed, Intermediate-Term Income, International Equity, and Michigan
Portfolios may invest in futures contracts and options. Although futures
contracts by their terms call for actual delivery or acceptance of the
underlying securities, in most cases, the contracts are closed out before the
settlement date without the making or taking of delivery. Closing out an open
futures position is done by taking an opposite position ("buying a contract
which has previously been "sold" or "selling" a contract previously
"purchased") in an identical contract to terminate the position. Brokerage
commissions are incurred when a futures contract is bought or sold.
S-16
<PAGE>
Futures traders are required to make a good faith margin deposit in cash or
government securities with or for the account of a broker or custodian to
initiate and maintain open positions in futures contracts. A margin deposit is
intended to assure completion of the contract (delivery or acceptance of the
underlying security) if it is not terminated prior to the specified delivery
date. Minimal initial margin requirements are established by the futures
exchange and may be changed. Brokers may establish deposit requirements which
are higher than the exchange minimums. Deposit requirements on futures contracts
customarily range upward from less than 5% of the value of the contract being
traded.
After a futures contract position is opened, the value of the contract is marked
to market daily. If the futures contract price changes to the extent that the
margin on deposit does not satisfy the required margin, payment of additional
"variation" margin will be required. Conversely, change in the contract value
may reduce the required margin, resulting in a repayment of excess margin to the
contract holder. Variation margin payments are made to and from the futures
broker for as long as the contract remains open. The Portfolios expect to earn
interest income on their margin deposits.
Traders in futures contracts and related options may be broadly classified as
either "hedgers" or "speculators." Hedgers use the futures markets primarily to
offset unfavorable changes in the value of securities otherwise held or expected
to be acquired for investment purposes. Speculators are less inclined to own the
securities underlying the futures contracts which they trade, and use futures
contracts with the expectation of realizing profits from fluctuations in the
prices of underlying securities. The Portfolios intend to use futures contracts
and related options only for BONA FIDE hedging purposes.
A Portfolio may enter into futures contracts and options on futures contracts
traded on an exchange regulated by the Commodities Futures Trading Commission
("CFTC"), so long as, to the extent that such transactions are not for "BONA
FIDE hedging purposes," the aggregate initial margin and premiums on such
positions (excluding the amount by which such options are in the money) do not
exceed 5% of a Portfolio's net assets. A Portfolio will only sell futures
contracts to protect securities it owns against price declines or purchase
contracts to protect against an increase in the price of securities it intends
to purchase. As evidence of this hedging interest, the Portfolios expect that
approximately 75% of their futures contract purchases will be "completed," that
is, equivalent amounts of related securities will have been purchased or are
being purchased by the Portfolios upon sale of open futures contracts.
Although techniques other than the sale and purchase of futures contracts and
options on futures contracts could be used to control the Portfolios' exposure
to market fluctuations, the use of futures contracts may be a more effective
means of hedging this exposure. While the Portfolios will incur commission
expenses in both opening and closing out futures positions, these costs are
lower than transaction costs incurred in the purchase and sale of the underlying
securities. A Portfolio's obligations under any futures contract or related
option will be "covered" by high quality, liquid securities or cash held in a
segregated account or by holding, or having the right to acquire without
additional cost, the underlying asset.
S-17
<PAGE>
RISK FACTORS IN FUTURES TRANSACTIONS -- Positions in futures contracts may be
closed out only on an exchange that provides a secondary market for such
futures. However, there can be no assurance that a liquid secondary market will
exist for any particular futures contract at any specific time. Thus, it may not
be possible to close a futures position. In the event of adverse price
movements, the Portfolios would continue to be required to make daily cash
payments to maintain the required margin. In such situations, if the Portfolio
has insufficient cash, it may have to sell portfolio securities to meet daily
margin requirements at a time when it may be disadvantageous to do so. In
addition, the Portfolio may be required to make delivery of the instruments
underlying futures contracts it holds. The inability to close options and
futures positions also could have an adverse impact on the ability to
effectively hedge it.
The Portfolios will minimize the risk that they will be unable to close out a
futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to a Portfolio. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the contract. However, because the futures
strategies of the Portfolio are engaged in only for hedging purposes, the
Adviser or Sub-Adviser does not believe that the Portfolios would be subject to
the risks of loss frequently associated with futures transactions. The
Portfolios presumably would have sustained comparable losses if, instead of the
futures contract, it had invested in the underlying financial instrument and
sold it after the decline. The risk of loss from the purchase of options is less
as compared with the purchase or sale of futures contracts because the maximum
amount at risk is the premium paid for the option.
Utilization of futures transactions by the Portfolios does involve the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the securities being hedged. It is also possible
that a Portfolio could both lose money on futures contracts and experience a
decline in value of its securities. There is also the risk of loss by the
Portfolio of margin deposits in the event of the bankruptcy of a broker with
whom the Portfolio has an open position in a futures contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that
S-18
<PAGE>
limit. The daily limit governs only price movement during a particular trading
day and therefore does not limit potential losses because the limit may prevent
the liquidation of unfavorable positions. Futures contract prices have
occasionally moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of future positions
and subjecting some futures traders to substantial losses.
ILLIQUID SECURITIES
Illiquid securities are securities that cannot be disposed of within seven
business days at approximately the value at which they are being carried on a
Portfolio's books. An illiquid security includes a demand instrument with a
demand notice period exceeding seven days, where there is no secondary market
for such security, and repurchase agreements with durations over seven days in
length.
INVESTMENT COMPANIES
The Portfolios may invest in securities of other investment companies as
permitted by the Investment Company Act of 1940, as amended (the "1940 Act"),
and the rules and regulations thereunder. These investment companies typically
incur fees that are separate from those fees incurred directly by the
Portfolios. A Portfolio's purchase of such investment company securities results
in a layering of expenses, such that shareholders would indirectly bear a
proportionate share of the operating expenses of such investment companies,
including advisory fees.
MORTGAGE-BACKED SECURITIES
The Prime Obligation and Intermediate-Term Income Portfolios may invest in
securities issued by U.S. government agencies or instrumentalities such as the
Government National Mortgage Association ("GNMA"), a wholly-owned U.S.
government corporation which guarantees the timely payment of principal and
interest. Other governmental issuers of mortgage-backed securities include the
Federal National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). Obligations of FNMA and FHLMC are not backed by
the full faith and credit of the U. S. government. The market value and interest
yield of these instruments can vary due to market interest rate fluctuations and
early prepayments of underlying mortgages. These securities represent ownership
in a pool of federally insured mortgage loans. Mortgage-backed certificates
consist of underlying mortgages with a maximum maturity of 30 years. However,
due to scheduled and unscheduled principal payments, mortgage-backed
certificates have a shorter average maturity and, therefore, less principal
volatility than a comparable 30-year bond. Since prepayment rates vary widely,
it is not possible to accurately predict the average maturity of a particular
mortgage-backed security. The scheduled monthly interest and principal payments
relating to mortgages in the pool will be "passed through" to investors.
Mortgage-backed securities differ from conventional bonds in that principal is
paid back to the certificate holders over the life of the loan rather than at
maturity. As a result, there will be monthly scheduled payments of principal and
interest. In addition, there may be unscheduled principal payments representing
prepayments on the underlying mortgages. Although
S-19
<PAGE>
mortgage-backed certificates may offer yields higher than those available from
other types of U.S. government securities, mortgage-backed certificates may be
less effective than other types of securities as a means of "locking in"
attractive long-term rates because of the prepayment feature. For instance, when
interest rates decline, the value of a mortgage-backed certificate likely will
not rise as much as comparable debt securities due to the prepayment feature. In
addition, these prepayments can cause the price of a mortgage-backed certificate
originally purchased at a premium to decline in price to its par value, which
may result in a loss.
The Intermediate-Term Income Portfolio may invest in mortgage-backed securities
and asset-backed securities. The principal types of mortgage-backed securities
are collateralized mortgage obligations ("CMOs"), real estate mortgage
investment conduits ("REMICs"), and interest only and principal only stripped
securities ("IOs" and "POs") which are rated in one of the two top categories by
S&P or Moody's. The mortgages backing these securities include conventional
30-year fixed rate mortgages, graduated payment mortgages and adjustable rate
mortgages. These mortgages may be supported by various types of insurance, may
be backed by GNMA certificates or other mortgage pass-throughs issued or
guaranteed by the U.S. government, its agencies or instrumentalities. However,
the guarantees do not extend to the mortgage-backed securities' yield or value,
which are likely to vary inversely with fluctuations in interest rates. These
certificates are in most cases "pass through" instruments, through which, except
for IOs and POs, the holder receives a share of all interest and principal
payments from the mortgages underlying the certificate; in the case of IOs, the
holder receives a share only of interest payments, and for POs, a share only of
principal payments. Because the prepayment characteristics of the underlying
mortgages vary, it is not possible to predict accurately the average life or
realized yield of a particular issue of pass-through certificates. When the
mortgage obligations are prepaid, the Portfolio reinvests the prepaid amounts in
securities, the yield of which reflect interest rates prevailing at the time.
Moreover, prepayments that underlie securities purchased at a premium could
result in capital losses. During periods of declining interest rates, prepayment
of mortgages underlying mortgage-backed securities can be expected to
accelerate. Such acceleration can be expected to reduce the final yield realized
by holders of IO securities, perhaps to a negative value. Deceleration of
prepayments will reduce somewhat the final yield realized by holders of PO
securities.
Investors purchasing such CMOs in the shortest maturities receive or are
credited with their pro rata portion of the scheduled payments of interest and
principal on the underlying mortgages plus all unscheduled prepayments of
principal up to a predetermined portion of the total CMO obligation. Until that
portion of such CMO obligation is repaid, investors in the longer maturities
receive interest only. Accordingly, the CMOs in the longer maturity series are
less likely than other mortgage pass-throughs to be prepaid prior to their
stated maturity. Although some of the mortgages underlying CMOs may be supported
by various types of insurance, and some CMOs may be backed by GNMA certificates
or other mortgage pass-throughs issued or guaranteed by the U.S. government, its
agencies or instrumentalities, the CMOs themselves are not generally guaranteed.
S-20
<PAGE>
REMICs, which were authorized under the Tax Reform Act of 1986, are private
entities formed for the purpose of holding a fixed pool of mortgages secured by
an interest in real property. REMICs are similar to CMOs in that they issue
multiple classes of securities.
In addition to mortgage-backed securities, the Intermediate-Term Income
Portfolio may invest in securities secured by asset backed securities including
company receivables, truck and auto loans, leases, and credit card receivables.
These issues may be traded over-the-counter and typically have a
short-intermediate maturity structure depending on the paydown characteristics
of the underlying financial assets which are passed through to the security
holder.
MUNICIPAL SECURITIES
Municipal notes in which the Michigan Portfolio may invest, include, but are not
limited to, general obligation notes, tax anticipation notes (notes sold to
finance working capital needs of the issuer in anticipation of receiving taxes
on a future date), revenue anticipation notes (notes sold to provide needed cash
prior to receipt of expected non-tax revenues from a specific source), bond
anticipation notes, certificates of indebtedness, demand notes and construction
loan notes.
The Adviser may purchase industrial development and pollution control bonds if
the interest paid is exempt from federal income tax. These bonds are issued by
or on behalf of public authorities to raise money to finance various
privately-operated facilities for business and manufacturing, housing, sports,
and pollution control. These bonds are also used to finance public facilities
such as airports, mass transit systems, ports, and parking. The payment of the
principal and interest on such bonds is dependent solely on the ability of the
facility's user to meet its financial obligations and the pledge, if any, of
real and personal property so financed as security for such payment.
Tax-exempt commercial paper in which the Michigan Portfolio may invest will be
limited to investments in obligations which are rated at least A-2 by S&P or
Prime-2 by Moody's at the time of investment or which are of equivalent quality
as determined by the Adviser.
Other types of tax-exempt instruments that are permissible investments for the
Michigan Portfolio include floating rate notes. Investments in such floating
rate instruments will normally involve industrial development or revenue bonds
which provide that the rate of interest is set as a specific percentage of a
designated base rate (such as the prime rate) at a major commercial bank, and
that the Portfolio can demand payment of the obligation at all times or at
stipulated dates on short notice (not to exceed 30 days) at par plus accrued
interest. The Portfolio may use the longer of the period required before the
Portfolio is entitled to prepayment under such obligations or the period
remaining until the next interest rate adjustment date for purposes of
determining the maturity. Such obligations are frequently secured by letters of
credit or other credit support arrangements provided by banks. The quality of
the underlying credit or of the bank, as the case may be, must in the Adviser's
opinion be equivalent to the long-term bond or commercial paper ratings stated
above. The Adviser will monitor the earning power, cash flow and liquidity
ratios
S-21
<PAGE>
of the issuers of such instruments and the ability of an issuer of a demand
instrument to pay principal and interest on demand. The Adviser may purchase
other types of tax-exempt instruments as long as they are of a quality
equivalent to the bond or commercial paper ratings stated above.
The Adviser has the authority to purchase securities at a price which would
result in a yield to maturity lower than that generally offered by the seller at
the time of purchase when they can simultaneously acquire the right to sell the
securities back to the seller, the issuer, or a third party (the "writer") at an
agreed-upon price at any time during a stated period or on a certain date. Such
a right is generally denoted as a "standby commitment" or a "put." The purpose
of engaging in transactions involving puts is to maintain flexibility and
liquidity to permit the Michigan Portfolio to meet redemptions and remain as
fully invested as possible in municipal securities. The Portfolio reserves the
right to engage in put transactions. The right to put the securities depends on
the writer's ability to pay for the securities at the time the put is exercised.
The Portfolio would limit its put transactions to institutions which the Adviser
believes present minimum credit risks, and the Adviser would use its best
efforts to initially determine and continue to monitor the financial strength of
the sellers of the options by evaluating their financial statements and such
other information as is available in the marketplace. It may, however be
difficult to monitor the financial strength of the writers because adequate
current financial information may not be available. In the event that any writer
is unable to honor a put for financial reasons, the Portfolio would be general
creditor (I.E., on a parity with all other unsecured creditors) of the writer.
Furthermore, particular provisions of the contract between the Portfolio and the
writer may excuse the writer from repurchasing the securities; for example, a
change in the published rating of the underlying municipal securities or any
similar event that has an adverse effect on the issuer's credit or a provision
in the contract that the put will not be exercised except in certain special
cases, for example, to maintain portfolio liquidity. The Portfolio could,
however, at any time sell the underlying portfolio security in the open market
or wait until the portfolio security matures; at which time it should realize
the full par value of the security.
The municipal securities purchased subject to a put, may be sold to third
persons at any time, even though the put is outstanding, but the put itself,
unless it is an integral part of the security as originally issued, may not be
marketable or otherwise assignable. Therefore, the put would have value only to
the Portfolio. Sale of the securities to third parties or lapse of time with the
put unexercised may terminate the right to put the securities. Prior to the
expiration of any put option, the Portfolio could seek to negotiate terms for
the extension of such an option. If such a renewal cannot be negotiated on terms
satisfactory to the Portfolio, the Portfolio could, of course, sell the
portfolio security. The maturity of the underlying security will generally be
different from that of the put. There will be no limit to the percentage of
portfolio securities that the Portfolio may purchase subject to a put but the
amount paid directly or indirectly for puts which are not integral parts of the
security as originally issued held in the Portfolio will not exceed 1/2 of 1% of
the value of the total assets of such Portfolio calculated immediately after any
such put is acquired. For the purpose of determining the "maturity" of
securities purchased subject to an option to put, and for the purpose of
determining the
S-22
<PAGE>
dollar-weighted average maturity of the Portfolio including such securities the
Trust will consider "maturity" to be the first date on which it has the right to
demand payment from the writer of the put although the final maturity of the
security is later than such date.
SPECIAL FACTORS RELATING TO MICHIGAN MUNICIPAL SECURITIES -- Because the
Michigan Portfolio invests primarily in Michigan Municipal Securities, the
Portfolio is more susceptible to factors adversely affecting issuers of Michigan
Municipal Securities than a mutual fund that does not invest as heavily in such
securities. Investors should consider carefully the special risks inherent in
the Portfolio's investment in Michigan Municipal Securities.
Investors should be aware that the economy of the State of Michigan has, in the
past, proven to be cyclical, due primarily to the fact that the leading sector
of the State's economy is the manufacturing of durable goods.
The State's economy could be affected adversely by changes in the auto industry,
notably consolidation and plant closings resulting from competitive pressures
and over-capacity. Such actions could adversely affect State revenues and the
financial impact on the local units of government in the areas in which plants
are closed could be more severe.
The principal revenues sources for the State's General Fund are taxes from
sales, personal income, single business, and excise taxes. Under the State
Constitution, expenditures from the General Fund are not permitted to exceed
available revenues. The principal expenditures from the General Fund are
directed towards education, public protection, mental and public health, and
social services.
The Michigan Constitution of 1963 limits the amount of total revenues of the
State raised from taxes and certain other sources to a level for each fiscal
year equal to a percentage of the State's personal income for the prior calendar
year or average of the prior three calendar years, whichever is greater, and
this fixed percentage equals the percentage of the 1978-79 fiscal year state
government revenues to total calendar 1977 State personal income (which was
9.49%). In the event that the State's total revenues exceed the limit by one
percent or more, the Michigan Constitution of 1963 requires that the excess be
refunded to taxpayers. Any excess of less than 1% may be transferred to the
Budget Stabilization Fund.
There can be no assurance that any financial difficulties the State may
experience will not adversely affect the market value or marketability of the
Michigan Municipal Securities in the Portfolio or the ability of the respective
obligors to pay interest on or principal of the Michigan Municipal Securities in
the Portfolio, particularly in view of the dependency of local governments and
other authorities upon State aid and reimbursement programs and, in the case of
bonds issued by the State Building Authority, the dependency of the State
Building Authority on the receipt of rental payments from the State to meet debt
service requirements upon such bonds.
The Michigan Portfolio may contain general obligation bonds of local units of
government pledging the full faith and credit of the local unit which are
payable from the
S-23
<PAGE>
levy of AD VALOREM taxes on taxable property within the jurisdiction of the
local unit. Challenges to the ability of local units to levy such taxes could
have an adverse impact on the AD VALOREM tax bases of such units that could
adversely affect their ability to raise funds for operation and debt service
requirements.
SHORT-TERM OBLIGATIONS OF STATE AND LOCAL GOVERNMENTAL ISSUERS -- The Prime
Obligation Portfolio may, when deemed appropriate by its Sub-Adviser in light of
the Portfolio's investment objective, invest in high quality, short-term
obligations issued by state and local governmental issuers which, as a result of
the Tax Reform Act of 1986, carry yields that are competitive with those of
other types of money market instruments of comparable quality.
OPTIONS
The Growth, Michigan, International Equity, and Intermediate-Term Income
Portfolios may write call options on a covered basis only. The Michigan and
the Intermediate-Term Income Portfolios may also enter into bond futures
contracts and options on such contracts. Neither Portfolio will engage in
option writing strategies for speculative purposes. The Tax-Managed and Value
Portfolios may write and sell both call options and put options, provided
that the aggregate value of such options does not exceed 15% of the
Portfolio's net assets as of the time such options are entered into by the
Portfolio.
A put option gives the purchaser of the option, upon payment of a premium, the
right to sell, and the writer the obligation to buy, the underlying security,
commodity, index, currency or other instrument at the exercise price. For
instance, a Portfolio's purchase of a put option on a security might be designed
to protect its holdings in the underlying instrument (or, in some cases, a
similar instrument) against a substantial decline in the market value by giving
the Portfolio the right to sell such instrument at the option exercise price. A
call option, upon payment of a premium, gives the purchaser of the option the
right to buy, and the seller the obligation to sell, the underlying instrument
at the exercise price. A Portfolio's purchase of a call option on a security,
financial future, index, currency or other instrument might be intended to
protect the Portfolio against an increase in the price of the underlying
instrument that it intends to purchase in the future by fixing the price at
which it may purchase such instrument. An American style put or call option may
be exercised at any time during the option period while a European style put or
call option may be exercised only upon expiration or during a fixed period prior
thereto. A Portfolio is authorized to purchase and sell exchange listed options
and over-the-counter options ("OTC options"). Exchange listed options are issued
by a regulated intermediary such as the Options Clearing Corporation ("OCC"),
which guarantees the performance of the obligations of the parties to such
options. The discussion below uses the OCC as an example, but is also applicable
to other financial intermediaries.
With certain exceptions, OCC issued and exchange listed options generally settle
by physical delivery of the underlying security or currency, although in the
future cash settlement may become available. Index options and Eurodollar
instruments are cash settled for the net amount, if any, by which the option is
"in-the-money" (I.E., where the
S-24
<PAGE>
value of the underlying instrument exceeds, in the case of a call option, or is
less than, in the case of a put option, the exercise price of the option) at the
time the option is exercised. Frequently, rather than taking or making delivery
of the underlying instrument through the process of exercising the option,
listed options are closed by entering into offsetting purchase or sale
transactions that do not result in ownership of the new option.
A Portfolio's ability to close out its position as a purchaser or seller of an
OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours during
which the underlying financial instruments are traded. To the extent that the
option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. A
Portfolio will only sell OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting the Portfolio to require the
Counterparty to sell the option back to the Portfolio at a formula price within
seven days. Each Portfolio expects generally to enter into OTC options that have
cash settlement provisions, although it is not required to do so.
Unless the parties provide for it, there is no central clearing or guaranty
function in an OTC option. As a result, if the Counterparty fails to make or
take delivery of the security, currency or other instrument underlying an OTC
option it has entered into with a Portfolio or fails to make a cash settlement
payment due in accordance with the terms of that option, a Portfolio will lose
any premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Adviser or Sub-Adviser must assess the
creditworthiness of each such Counterparty or any guarantor or credit
enhancement of the Counterparty's credit to determine the likelihood that the
terms of the OTC option will be satisfied.
S-25
<PAGE>
COVERED CALL WRITING -- The Growth, International Equity and the Tax-Managed
Portfolios may write covered call options on its securities provided the
aggregate value of such options does not exceed 10% of the Portfolios' net
assets as of the time such options are entered into by the Portfolios. The
advantage to a Portfolio of writing covered calls is that the Portfolio
receives a premium which is additional income. However, if the security rises
in value, the Portfolios may not fully participate in the market appreciation.
In covered call options written by a Portfolio, the Portfolio will own the
underlying security subject to a call option at all times during the option
period. Unless a closing purchase transaction is effected, the Portfolio would
be required to continue to hold a security, which it might otherwise wish to
sell, or deliver a security it would want to hold. Options written by the
Portfolio will normally have expiration dates between one and nine months from
the date written. The exercise price of a call option may be below, equal to or
above the current market value of the underlying security at the time the option
is written.
RECEIPTS
Receipts are sold as zero coupon securities which means that they are sold at a
substantial discount and redeemed at face value at their maturity date without
interim cash payments of interest or principal. This discount is accreted over
the life of the security, and such accretion will constitute the income earned
on the security for both accounting and tax purposes. Because of these features,
such securities may be subject to greater interest rate volatility than interest
paying investments.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements by which a Portfolio obtains a security
and simultaneously commits to return the security to the seller at an agreed
upon price on an agreed upon date within a number of days from the date of
purchase. A Portfolio will have actual or constructive possession of the
security as collateral for the repurchase agreement. Collateral must be
maintained at a value at least equal to 102% of the purchase price. A Portfolio
bears a risk of loss in the event the other party defaults on its obligations
and a Portfolio is delayed or prevented from exercising its right to dispose of
the collateral securities or if a Portfolio realizes a loss on the sale of the
collateral. A Portfolio will enter into repurchase agreements on behalf of a
Portfolio only with financial institutions deemed to present minimal risk of
bankruptcy during the term of the agreement based on established guidelines.
Repurchase agreements are considered loans under the 1940 Act.
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS
Investments by a money market fund are subject to limitations imposed under
regulations adopted by the SEC. Under these regulations, money market funds may
only acquire obligations that present minimal credit risk and that are "eligible
securities," as defined by Rule 2a-7, which means they are (i) rated, at the
time of investment, by at least two NRSROs (one if it is the only organization
rating such obligation) in the highest short-
S-26
<PAGE>
term rating category or, if unrated, determined to be of comparable quality (a
"first tier security"); or (ii) rated according to the foregoing criteria in the
second highest short-term rating category or, if unrated, determined to be of
comparable quality ("second tier security"). A security is not considered to be
unrated if its issuer has outstanding obligations of comparable priority and
security that have a short-term rating. A money market fund may invest up to 25%
of its assets in "first tier" securities of a single issuer for a period of up
to three business days. The securities that money market funds may acquire may
be supported by credit enhancements, such as demand features or guarantees. The
SEC regulations limit the percentage of securities that a money market fund may
hold for which a single issuer provides credit enhancements.
RESTRICTED SECURITIES
The Value Portfolio, Tax-Managed Portfolio and Prime Obligation Portfolio may
invest in restricted securities that are securities in which the Trust may
otherwise invest as provided in the Prospectus and this Statement of Additional
Information. Restricted securities are securities that may not be sold freely to
the public absent registration under the Securities Act of 1933, as amended (the
"Act"), or an exemption from registration. The Portfolios may invest up to 15%
(10% for the Prime Obligation Portfolio) of their net assets in illiquid
securities, including restricted securities. Each Portfolio may invest in
Section 4(2) commercial paper. Section 4(2) commercial paper is issued in
reliance on an exemption from registration under Section 4(2) of the Act and is
generally sold to institutional investors who purchase for investment. Any
resale of such commercial paper must be in an exempt transaction, usually to an
institutional investor through the issuer or investment dealers who make a
market in such commercial paper. The Trust believes that Section 4(2) commercial
paper is liquid to the extent it meets the criteria established by the Board of
Trustees of the Trust. The Trust intends to treat such commercial paper as
liquid and not subject to the investment limitations applicable to illiquid
securities or restricted securities.
SECURITIES LENDING
The Portfolios may lend securities pursuant to agreements requiring that the
loans be continuously secured by cash, securities of the United States
government or its agencies, or any combination of cash and such securities, as
collateral equal to 102% of the market value at all times of the securities
lent. Such loans will not be made if, as a result, the aggregate amount of all
outstanding securities loans for the Portfolio exceed one-third of the value of
a Portfolio's total assets taken at fair market value (including any collateral
received in connection with such loans). A Portfolio will continue to receive
interest on the securities lent while simultaneously earning interest on the
investment of the cash collateral in U.S. government securities. However, a
Portfolio will normally pay lending fees to such broker-dealers and related
expenses from the interest earned on invested collateral. There may be risks of
delay in receiving additional collateral or risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of the
securities fail financially. However, loans are made only to borrowers deemed by
the Adviser or Sub-Adviser to be of good standing and when, in the judgment of
the Adviser or Sub-Adviser, the consideration which can be earned currently from
such securities
S-27
<PAGE>
loans justifies the attendant risk. Any loan may be terminated by either party
upon reasonable notice to the other party. The Portfolios may use the
Distributor or a broker/dealer affiliate of the Adviser or Sub-Adviser as a
broker in these transactions.
SECURITIES OF FOREIGN ISSUERS
There are 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
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, and may be less marketable than comparable U.S.
securities. The value of a Portfolio's investments denominated in foreign
currencies will depend on the relative strengths of those currencies and the
U.S. Dollar, and a Portfolio may be affected favorably or unfavorably by changes
in the exchange rates or exchange control regulations between foreign currencies
and the U.S. 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 a Portfolio.
SEPARATELY TRADED INTEREST AND PRINCIPAL SECURITIES ("STRIPS")
The Prime Obligation, Intermediate-Term Income and Value Portfolios may invest
in STRIPS, which are component parts of U.S. Treasury Securities traded through
the Federal Book-Entry System. The Adviser will only purchase STRIPS that it
determines are liquid or, if illiquid, do not violate a Portfolio's investment
policy concerning investments in illiquid securities. Consistent with Rule 2a-7
adopted under the 1940 Act, the Adviser or Sub-Adviser will only purchase STRIPS
for the Prime Obligation Portfolio that have a remaining maturity of 397 days or
less; therefore, the Portfolio currently may only purchase interest component
parts of U.S. Treasury Securities. The Adviser or Sub-Adviser of a Portfolio
will monitor the level of such holdings to avoid the risk of impairing
shareholders' redemption rights and of deviations in the value of shares of the
Prime Obligation Portfolio.
TIME DEPOSITS
Time deposits are non-negotiable receipts issued by a bank in exchange for the
deposit of funds. Like a certificate of deposit, they earn a specified rate of
interest over a definite period of time; however, they cannot be traded in the
secondary market. Time deposits with a withdrawal penalty or that mature in more
than seven days are considered to be illiquid securities.
S-28
<PAGE>
U.S. GOVERNMENT AGENCY SECURITIES
Certain of the investments of all of the Portfolios may include U.S. Government
Agency Securities. Agencies of the United States government which issue
obligations consist of, among others, the Export Import Bank of the United
States, Farmers Home Administration, Federal Farm Credit Bank, Federal Housing
Administration, Government National Mortgage Association, Maritime
Administration, Small Business Administration, and the Tennessee Valley
Authority. Obligations of instrumentalities of the United States government
include securities issued by, among others, Federal Home Loan Banks, Federal
Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land
Banks, Fannie Mae and the United States Postal Service. Some of these securities
are supported by the full faith and credit of the United States Treasury. Others
are supported by the right of the issuer to borrow from the Treasury and still
others are supported only by the credit of the instrumentality.
Guarantees of principal by agencies or instrumentalities of the United States
government may be a guarantee of payment at the maturity of the obligation so
that in the event of a default prior to maturity there might not be a market and
thus no means of realizing the value of the obligation prior to maturity.
U.S. TREASURY OBLIGATIONS
U.S. Treasury obligations consist of bills, notes and bonds issued by the U.S.
Treasury and separately traded interest and principal component parts of such
obligations that are transferable through the Federal book-entry system known as
STRIPS.
VARIABLE AMOUNT MASTER DEMAND NOTES
The Prime Obligation, Intermediate-Term Income and Michigan Portfolios may
invest in variable amount master demand notes that may or may not be backed by
bank letters of credit. These notes permit the investment of fluctuating amounts
at varying market rates of interest pursuant to direct arrangements between the
Trust, as lender, and the borrower. Such notes provide that the interest rate on
the amount outstanding varies on a daily, weekly or monthly basis depending upon
a stated short-term interest rate index. Both the lender and the borrower have
the right to reduce the amount of outstanding indebtedness at any time. There is
no secondary market for the notes. It is not generally contemplated that such
instruments will be traded. The Adviser or Sub-Adviser will monitor on an
ongoing basis the earning power, cash flow and liquidity ratio of the issuers of
such instruments and will similarly monitor the ability of an issuer of a demand
instrument to pay principal and interest on demand.
VARIABLE AND FLOATING RATE INSTRUMENTS
Certain obligations may carry variable or floating rates of interest, and may
involve a conditional or unconditional demand feature. Such instruments bear
interest at rates which are not fixed, but which vary with changes in specified
market rates or indices. The interest rates on these securities may be reset
daily, weekly, quarterly or some other
S-29
<PAGE>
reset period, and may have a floor or ceiling on interest rate changes. There is
a risk that the current interest rate on such obligations may not accurately
reflect existing market interest rates. A demand instrument with a demand notice
exceeding seven days may be considered illiquid if there is no secondary market
for such security.
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
specified period.
WHEN-ISSUED SECURITIES
The Prime Obligation, Intermediate-Term Income and Michigan Portfolios may
invest in when-issued securities.
These securities involve the purchase of debt obligations on a when-issued
basis, in which case delivery and payment normally take place within 45 days
after the date of commitment to purchase. The Portfolios will only make
commitments to purchase obligations on a when-issued basis with the intention of
actually acquiring the securities, but may sell them before the settlement date.
The when-issued securities are subject to market fluctuation, and no interest
accrues on the security to the purchaser during this period. The payment
obligation and the interest rate that will be received on the securities are
each fixed at the time the purchaser enters into the commitment. Purchasing
obligations on a when-issued basis is a form of leveraging and can involve a
risk that the yields available in the market when the delivery takes place may
actually be higher than those obtained in the transaction itself. In that case
there could be an unrealized loss at the time of delivery.
Segregated accounts will be established with the Custodian, and the Portfolios
will maintain liquid assets in an amount at least equal in value to the
Portfolios' commitments to purchase when-issued securities. If the value of
these assets declines, the Portfolios will place additional liquid assets in the
account on a daily basis so that the value of the assets in the account is equal
to the amount of such commitments.
ZERO COUPON, PAY-IN-KIND AND DEFERRED PAYMENT SECURITIES
Zero coupon securities are securities that are sold at a discount to par value
and securities on which interest payments are not made during the life of the
security. Upon maturity, the holder is entitled to receive the par value of the
security. While interest payments are not made on such securities, holders of
such securities are deemed to have received "phantom income" annually. Because a
Portfolio will distribute its "phantom income" to shareholders, to the extent
that shareholders elect to receive dividends in cash rather than reinvesting
such dividends in additional shares, a Portfolio will have fewer assets with
which to purchase income producing securities. Alternatively, shareholders may
have to redeem shares to pay tax on this "phantom income." In either case, a
Portfolio may have to dispose of its fund securities under disadvantageous
circumstances to generate cash, or may have to leverage itself by borrowing cash
to satisfy distribution requirements. A
S-30
<PAGE>
Portfolio accrues income with respect to the securities prior to the receipt of
cash payments. Pay-in-kind securities are securities that have interest payable
by delivery of additional securities. Upon maturity, the holder is entitled to
receive the aggregate par value of the securities. Deferred payment securities
are securities that remain zero coupon securities until a predetermined date, at
which time the stated coupon rate becomes effective and interest becomes payable
at regular intervals. Zero coupon, pay-in-kind and deferred payment securities
may be subject to greater fluctuation in value and lesser liquidity in the event
of adverse market conditions than comparably rated securities paying cash
interest at regular interest payment periods.
INVESTMENT LIMITATIONS
FUNDAMENTAL POLICIES (ALL PORTFOLIOS EXCEPT INTERNATIONAL EQUITY)
The following policies are fundamental and may not be changed without the
consent of a majority of a Portfolio's outstanding shares, except for the
limitations provided in paragraphs 9 and 11 below, which are non-fundamental
policies only for the Value Portfolio. The term "a majority of a Portfolio's
outstanding shares" means the vote of (i) 67% or more of the Portfolio's shares
present at a meeting if more than 50% of the outstanding shares of the Portfolio
are present or represented by proxy, or (ii) more than 50% of the Portfolio's
shares, whichever is less.
A Portfolio may not:
1. Purchase securities of any issuer (except securities issued or guaranteed
by the United States government, its agencies or instrumentalities and
repurchase agreements involving such securities) if, as a result, more than
5% of the total assets of the Portfolio would be invested in the securities
of such issuer. This restriction applies to 75% of a Portfolio's assets.
This limitation does not apply to the Michigan Portfolio or the Tax-Managed
Portfolio. As a money market fund, the Prime Obligation Portfolio is
subject to additional diversification requirements.
2. Purchase any securities which would cause more than 25% of the total assets
of the Portfolio to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry,
provided that this limitation does not apply to (a) investments in the
obligations issued or guaranteed by the United States government, its
agencies or instrumentalities and repurchase agreements involving such
securities, (b) investments in tax-exempt securities issued by governments
or political subdivisions of government or (c) obligations issued by
domestic branches of United States banks or United States branches of
foreign banks subject to the same regulations as United States banks. For
purposes of this limitation (i) utility companies will be divided according
to their services, for example, gas, gas transmission, electric and
telephone will each be considered a separate industry; (ii) financial
service companies will be classified according to the end users of their
services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate
S-31
<PAGE>
industry; (iii) supranational entities will be considered to be a separate
industry; and (iv) loan participations are considered to be issued by both
the issuing bank and the underlying corporate borrower.
3. Make loans, except that a Portfolio may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii)
enter into repurchase agreements; and (iii) engage in securities lending.
4. Acquire more than 10% of the voting securities of any one issuer.
5. Invest in companies for the purpose of exercising control.
6. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding one-third of the value of total assets. Any borrowing
will be done from a bank and to the extent that such borrowing exceeds 5%
of the value of the Portfolio's assets, asset coverage of at least 300% is
required. In the event that such asset coverage shall at any time fall
below 300%, the Portfolio shall, within three days thereafter or such
longer period as the Securities and Exchange Commission (the "SEC") may
prescribe by rules and regulations, reduce the amount of its borrowings to
such an extent that the asset coverage of such borrowings shall be at least
300%. This borrowing provision is included solely to facilitate the orderly
sale of portfolio securities to accommodate heavy redemption requests if
they should occur and is not for investment purposes. All borrowings in
excess of 5% of a Portfolio's total assets will be repaid before making
additional investments and any interest paid on such borrowings will reduce
income.
7. Pledge, mortgage or hypothecate assets except to secure temporary
borrowings permitted by (3) above in aggregate amounts not to exceed 10% of
total assets taken at current value at the time of the incurrence of such
loan, except as permitted with respect to securities lending.
8. Purchase or sell real estate, real estate limited partnership interests,
commodities or commodities contracts. However, subject to their permitted
investments, any Portfolio may invest in companies that invest in real
estate commodities or commodities contracts and may invest in financial
futures contracts and related options.
9. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Trust may obtain short-term credits
as necessary for the clearance of security transactions.
10. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter under federal securities laws in selling a portfolio
security.
11. Purchase securities of other investment companies except as permitted by
the 1940 Act and the rules and regulations thereunder. The Prime Obligation
S-32
<PAGE>
Portfolio will invest in the shares of another money market fund only if
(i) such other money market fund is subject to Rule 2a-7 under the 1940
Act; (ii) such other money market fund has investment criteria equal to or
higher than those of such Portfolio; and (iii) the Trust's Board of
Trustees monitors the activities of such other money market fund. The
Portfolios are prohibited from acquiring the securities of other investment
companies if, as a result of such acquisition, any such Portfolio owns more
than 3% of the total voting stock of the company; securities issued by any
one investment company represent more than 5% of the total Portfolios
assets; or securities (other than treasury stock) issued by all investment
companies represent more than 10% of the total assets of the Portfolios.
12. Issue senior securities (as defined in the 1940 Act), except in connection
with permitted borrowings as described above or as permitted by rule,
regulation or order of the SEC.
NON-FUNDAMENTAL POLICIES (ALL PORTFOLIOS EXCEPT INTERNATIONAL EQUITY)
The following investment limitations of the Portfolios are non-fundamental and
may be changed by the Trust's Board of Trustees without shareholder approval.
No Portfolio may invest in illiquid securities in an amount exceeding, in the
aggregate, 15% of a portfolio's net assets (10% for the Prime Obligation
Portfolio).
No Portfolio may invest in interests in oil, gas or other mineral exploration or
development programs and oil, gas or mineral leases.
The foregoing percentages, except with respect to borrowings and illiquid
securities, will apply at the time of the purchase of a security and shall not
be considered violated unless an excess occurs or exists immediately after and
as a result of a purchase of such security.
FUNDAMENTAL POLICIES (INTERNATIONAL EQUITY PORTFOLIO)
The following investment limitations are fundamental policies of the
International Equity Portfolio. Fundamental policies cannot be changed without
the consent of the holders of a majority of the Portfolio's outstanding shares.
The term "majority of the outstanding shares" means the vote of (i) 67% or more
of the Portfolio's shares present at a meeting, if more than 50% of the
outstanding shares of the Portfolio are present or represented by proxy, or (ii)
more than 50% of the Portfolio's outstanding shares, whichever is less.
The International Equity Portfolio may not:
1. Purchase securities of any issuer (except securities issued or guaranteed
by the United States, its agencies or instrumentalities and repurchase
agreements involving such securities) if, as a result, more than 5% of the
total assets of the Portfolio would be invested in the securities of such
issuer or more than 10% of
S-33
<PAGE>
the outstanding voting securities of such issuer would be owned by the
Portfolio. This restriction applies to 75% of the Portfolio's assets.
2. Purchase any securities that would cause more than 25% of the total assets
of the Portfolio to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry. This
limitation does not apply to (i) investments in the obligations issued or
guaranteed by the U.S. government or its agencies and instrumentalities,
and (ii) repurchase agreements involving such securities.
For purposes of this limitation (i) utility companies will be divided
according to their services, for example, gas, gas transmission, electric
and telephone will each be considered a separate industry; (ii) financial
service companies will be classified according to the end users of their
services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; (iii) supranational
entities will be considered to be a separate industry; and (iv)
asset-backed securities secured by distinct types of assets, such as truck
and auto loan leases, credit card receivables and home equity loans, will
each be considered a separate industry.
3. Borrow money in an amount exceeding 33 1/3% of the value of its total
assets, provided that, for purposes of this limitation, investment
strategies that either obligate a Portfolio to purchase securities or
require a Portfolio to segregate assets are not considered to be borrowing.
Asset coverage of at least 300% is required for all borrowing, except where
the Portfolio has borrowed money for temporary purposes in an amount not
exceeding 5% of its total assets. The Portfolio will not purchase
securities while its borrowing exceeds 5% of its total assets.
4. Make loans if, as a result, more than 33 1/3% of its total assets would be
lent to other parties, except that a Portfolio may (i) purchase or hold
debt instruments in accordance with its investment objectives and policies;
(ii) enter into repurchase agreements; and (iii) lend its securities.
5. Purchase or sell real estate, real estate limited partnership interests,
physical commodities or commodities contracts except that the Portfolio may
purchase commodities contracts relating to financial instruments, such as
financial futures contracts and options on such contracts.
6. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.
7. Issue senior securities (as defined in the 1940 Act) except as permitted by
rule, regulation or order of the SEC.
S-34
<PAGE>
NON-FUNDAMENTAL POLICIES (INTERNATIONAL EQUITY PORTFOLIO)
The following investment policies are non-fundamental policies of the
International Equity Portfolio and may be changed with respect to the Portfolio
by the Board of Trustees.
The Portfolio may not:
1. Invest in illiquid securities in an amount exceeding, in the aggregate, 15%
of the Portfolio's net assets.
2. Purchase securities on margin or effect short sales, except that the
Portfolio may (i) obtain short-term credits as necessary for the clearance
of security transactions; (ii) provide initial and variation margin
payments in connection with transactions involving futures contracts and
options on such contracts; and (iii) make short sales "against the box" or
in compliance with the SEC's position regarding the asset segregation
requirements imposed by Section 18 of the 1940 Act.
3. Purchase securities of other investment companies except as permitted by
the 1940 Act, the rules and regulations thereunder or pursuant to an
exemption therefrom.
4. Pledge, mortgage or hypothecate assets except to secure borrowing permitted
by the Portfolio's fundamental limitation on borrowing.
5. Invest in companies for the purpose of exercising control.
6. Invest in real estate limited partnerships.
7. Invest in interests in oil, gas or other mineral exploration or development
programs and oil, gas or mineral leases.
The foregoing percentages are: (i) based on total assets (except for the
limitation on illiquid securities which is based on net assets); (ii) will apply
at the time of purchase of a security; and (iii) shall not be considered
violated unless an excess or deficiency occurs or exists immediately after as a
result of a purchase of a security.
THE ADVISER
Citizens Bank (the "Adviser") serves as investment adviser to the Portfolios
pursuant to an investment advisory agreement (the "Advisory Agreement") with the
Trust. Under the Advisory Agreement, the Adviser is responsible for the
investment decisions for each Portfolio, and continuously reviews, supervises
and administers each Portfolio's investment program. The Advisory Agreement also
provides that the Adviser shall not be protected against any liability to the
Trust or its shareholders by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard of its obligations or duties thereunder.
S-35
<PAGE>
The Trust and the Adviser have employed Wellington Management Company, LLP as
the investment sub-adviser to the Prime Obligation Portfolio, Systematic
Financial Management, L.P. as the investment sub-adviser to the Value and Small
Cap Value Portfolios, Nicholas-Applegate Capital Management as the investment
sub-adviser to the Growth Portfolio and the Tax-Managed Portfolio and BlackRock
International, Ltd., as the investment sub-adviser to the International Equity
Portfolio, to manage the Portfolios on a day-to-day basis, in each case subject
to the supervision of the Adviser and the Trustees. In conjunction with the
Adviser, each investment sub-adviser makes the investment decisions for the
assets of the Portfolio and continuously reviews, supervises and administers the
Portfolio's investment program. See "The Sub-Advisers."
The Adviser, 328 S. Saginaw Street, Flint, Michigan 48502, was incorporated in
1871 in the State of Michigan. Citizens Bank is a wholly-owned subsidiary of
Citizens Banking Corporation. Citizens Banking Corporation is an interstate bank
holding company with over $7.6 billion in assets and 229 banking offices in
Michigan and Illinois. As of January 31, 2000, the Adviser's total assets under
management were $3.8 billion. The Adviser has managed bank common funds, pension
plan assets and personal trust assets since 1927. The Adviser's sole experience
as an investment adviser to investment companies is as investment adviser to the
Trust.
For its services, the Adviser is entitled to a fee, which is calculated daily
and paid monthly, at an annual rate based on the average daily net assets of
each Portfolio as follows: Growth Portfolio, 0.34%; Value Portfolio, 0.29% on
the first $50 million, 0.39% on the next $50 million, and 0.34% on any amount
above $100 million; Tax-Managed Portfolio, 0.34%; Small Cap Value Portfolio;
0.34%, International Equity Portfolio; 0.30%; Intermediate-Term Income
Portfolio, 0.50%; Michigan Portfolio, 0.50%; and Prime Obligation Portfolio,
0.25% on the first $500 million, and 0.80% in excess of $500 million. The
Adviser has voluntarily agreed to waive a portion of its fees in order to limit
the total operating expenses of Institutional, Class A and Class B shares of the
Portfolios, as follows:
<TABLE>
<CAPTION>
Portfolio Institutional Class Class A Class B
--------- ------------------- ------- -------
<S> <C> <C> <C>
Value Portfolio 1.10% 1.35% 2.10%
Growth Portfolio 1.10% 1.35% 2.10%
Tax-Managed Equity Portfolio 1.10% 1.35% 2.10%
Small Cap Value Portfolio 1.35% 1.60% 2.35%
International Equity Portfolio 1.50% 1.75% 2.50%
Intermediate-Term Income Portfolio 0.65% 0.90% 1.65%
Michigan Tax Free Bond Portfolio 0.65% 0.90% 1.65%
Prime Obligation Portfolio 0.40% 0.65% 1.40%
</TABLE>
The Adviser reserves the right, in its sole discretion, to terminate all or part
of its voluntary fee waiver at any time.
The Adviser will not be required to bear expenses of any Portfolio of the Trust
to an extent which would result in a Portfolio's inability to qualify as a
"regulated investment company" (a "RIC") under provisions of the Internal
Revenue Code of 1986, as amended (the "Code").
S-36
<PAGE>
The continuance of the Advisory Agreement, after the first two years, must be
specifically approved at least annually (i) by the vote of the Trustees, and
(ii) by the vote of a majority of the Trustees who are not parties to the
Agreement or "interested persons" of any party thereto, cast in person at a
meeting called for the purpose of voting on such approval. The Advisory
Agreement will terminate automatically in the event of its assignment, and is
terminable at any time without penalty by the Trustees of the Trust or, with
respect to the Portfolios by a majority of the outstanding shares of the
Portfolios, on not less than 30 days' nor more than 60 days' written notice to
the Adviser, or by the Adviser on 90 days' written notice to the Trust.
For the fiscal years ended January 31, 1998, 1999 and 2000, the Portfolios paid
the following advisory fees to Citizens Bank:
<TABLE>
<CAPTION>
Fees Paid (000) Fees Waived (000)
--------------- -----------------
Portfolio 1998 1999 2000 1998 1999 2000
--------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Golden Oak Growth Portfolio $121 $141 204 $1 $0 $0
Golden Oak Value Portfolio $45 $107 173 $5 $2 $0
Golden Oak Tax-Managed Equity Portfolio * * $74 * * $37
Golden Oak Small Cap Value Portfolio * * $20 * * $29
Golden Oak International Equity Portfolio * * * * * *
Golden Oak Intermediate-Term Income Portfolio $425 $467 $542 $189 $194 $238
Golden Oak Michigan Tax Free Bond Portfolio $168 $301 $307 $84 $141 $154
Golden Oak Prime Obligation Money Market Portfolio $34 $38 $24 $277 $273 $260
</TABLE>
* Not in operation during such period.
THE SUB-ADVISERS
Wellington Management Company, LLP (a "Sub-Adviser" or "WMC") serves as the
investment sub-adviser for the Prime Obligation Portfolio, Systematic Financial
Management, L.P. (a "Sub-Adviser" or "Systematic Financial") serves as
investment sub-adviser for the Value Portfolio and Small Cap Value Portfolio,
Nicholas-Applegate Capital Management (a "Sub-Adviser" or "Nicholas-Applegate")
serves as investment sub-adviser for the Growth Portfolio and Tax-Managed
Portfolio and BlackRock International, Ltd., (a "Sub-Adviser" or "BIL") serves
as investment sub-adviser for the International Equity Portfolio pursuant to
sub-advisory agreements (each, a "Sub-Advisory Agreement") with the Trust and/or
the Adviser. Under each Sub-Advisory Agreement, the Sub-Adviser manages the
investments of the appropriate Portfolio, selects investments, and places all
orders for purchases and sales of the Portfolio's securities, subject to the
general supervision of the Trustees of the Trust and the Adviser.
S-37
<PAGE>
WELLINGTON MANAGEMENT COMPANY, LLP
WMC is a professional investment counseling firm that provides investment
services to investment companies, employee benefit plans, endowments,
foundations, and other institutions. As of April 30, 2000, WMC had discretionary
management authority with respect to approximately $245 billion of assets. WMC
and its predecessor organizations have provided investment advisory services to
investment companies since 1928 and to investment counseling clients since 1960.
Wellington Management Company, LLP, 75 State Street, Boston, MA 02109, is a
Massachusetts limited liability partnership, of which the following persons are
managing partners: Laurie A Gabriel, Duncan M. McFarland and John R. Ryan.
For the services provided and expenses incurred pursuant to the Sub-Advisory
Agreement, WMC is entitled to receive a fee, computed daily and paid monthly, at
the annual rate of .075% of the first $500 million of "managed assets" (defined
below) and .02% of "managed assets" in excess of $500 million. "Managed assets"
are all of the money market fund assets that WMC manages for the Trust including
assets of funds other than the Prime Obligation Portfolio. The fee paid by the
Portfolio is based on its proportionate share of "managed assets".
For the fiscal years ended January 31, 1998, January 31, 1999 and January 31,
2000, Wellington Management received the following sub-advisory fees from the
Portfolio:
<TABLE>
<CAPTION>
Fees Paid (000) Fees Waived (000)
--------------- -----------------
Portfolio 1998 1999 2000 1998 1999 2000
--------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Golden Oak Prime Obligation Money Market Portfolio $104 $104 $95 $0 $0 $0
</TABLE>
NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
Nicholas-Applegate serves as the investment sub-adviser for the Growth Portfolio
and the Tax-Managed Portfolio. Nicholas-Applegate has operated as a registered
investment adviser providing investment advisory services for a wide variety of
clients including employee benefit plans, university endowments, foundations,
public retirement systems and unions, other institutional investors and
individuals since 1984 and, since April 1987, investment companies. As of
January 31, 2000, Nicholas-Applegate had discretionary management authority with
respect to approximately $38.9 billion of assets. Nicholas-Applegate is
controlled by its general partner, Nicholas-Applegate Capital Management
Holdings, L.P., a California limited partnership, which is controlled by a
corporation which, in turn, is controlled by a corporation controlled by Arthur
E. Nicholas. The principal business address of Nicholas-Applegate is 600 West
Broadway, 29th Floor, San Diego, California 92101.
For the services provided and the expenses incurred pursuant to the Sub-Advisory
Agreement, Nicholas-Applegate is entitled to receive from the Portfolios a fee,
calculated daily and paid monthly, at an annual rate of 0.40% of the average
daily net assets of each Portfolio.
S-38
<PAGE>
For the fiscal years ended January 31, 1998, January 31, 1999 and January 31,
2000, Nicholas-Applegate received the following sub-advisory fees from the
Growth and Tax-Managed Portfolios:*
<TABLE>
<CAPTION>
Fees Paid (000) Fees Waived (000)
--------------- -----------------
Portfolio 1998 1999 2000 1998 1999 2000
--------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Golden Oak Growth Portfolio $144 $167 $241 $0 $0 $0
Golden Oak Tax-Managed Portfolio ** ** $130 ** ** $0
</TABLE>
* Prior to August 1997, the Adviser paid sub-advisory fees to
Nicholas-Applegate.
** Not in operation during such period.
SYSTEMATIC FINANCIAL MANAGEMENT, L.P.
Systematic Financial serves as the investment sub-adviser for the Value and
Small Cap Value Portfolios. Systematic Financial was established in 1982 and has
managed portfolios on a discretionary basis since inception. Systematic
Financial's clients include foundations, pension funds, public retirement
systems and Taft-Hartley plans as well as other institutional investors and
individuals. Systematic Financial's value strategy, which was originally
developed by its Chief Investment Officer, has been employed since the early
1980's. Systematic Financial is a Delaware limited partnership. The principal
business address of Systematic Financial Management, L.P. is 300 Frank W. Burr
Blvd. Glenpointe East, 7th Floor Teaneck, NJ 07666.
For the services provided and the expenses incurred pursuant to the Sub-Advisory
Agreement, Systematic Financial is entitled to receive from the Value Portfolio
a fee, calculated daily and paid monthly, at an annual rate of 0.45% of the
first $50 million, 0.35% of the next $50 million and 0.40% of any amount above
$100 million of the average daily net assets of the Value Portfolio and 0.65% of
the average daily net assets of the Small Cap Value Portfolio.
For the fiscal years ended January 31, 1998, January 31, 1999 and
January 31, 2000 Systematic Financial received the following sub-advisory fees
from the Portfolio:
<TABLE>
<CAPTION>
Fees Paid (000) Fees Waived (000)
--------------- -----------------
Portfolio 1998 1999 2000 1998 1999 2000
--------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Golden Oak Value Portfolio $78 $169 $249 $0 $0 $0
Golden Oak Small Cap Portfolio * * $93 $0 $0 $0
</TABLE>
* Not in operation during such period.
BLACKROCK INTERNATIONAL, LTD.
BlackRock International, Ltd. (BIL) serves as the investment sub-adviser for the
International Equity Portfolio. The principal address of BIL is 7 Castle Street,
Edinburgh, Scotland EH2 3AH. BIL selects, buys and sells securities for the
Portfolio
S-39
<PAGE>
under the supervision of the Adviser and the Board of Trustees. BIL is a wholly
owned subsidiary of BlackRock, Inc. (BlackRock), one of the largest publicly
traded investment management firms in the United States. BlackRock is a majority
owned subsidiary of The PNC Financial Services Group, Inc., one of the largest
diversified financial services companies in the United States.
BlackRock is a global money management firm with expertise in domestic and
international equities, domestic and global fixed income, cash management and
risk management services. As of March 31, 2000, BlackRock has $172.6 billion in
assets under management and manages assets on behalf of more than 3,000
institutions and 160,000 individuals through a variety of equity, fixed income,
liquidity and alternative investment separate accounts and mutual funds.
For the services provided and the expenses incurred pursuant to the Sub-Advisory
Agreement, BIL is entitled to receive from the Portfolio a fee, calculated daily
and paid monthly, at an annual rate of 0.60% up to $35 million; 0.50% on assets
$35 million to $100 million; 0.40% on assets above $100 million of the average
daily net assets of the Portfolio.
The International Equity Portfolio had not commenced operations as of the
Prospectus date, and had not paid any fees or had any type of return as of the
fiscal year ended January 31, 2000.
THE ADMINISTRATOR
SEI Investments Mutual Funds Services (the "Administrator") serves as
administrator to the Portfolios pursuant to an administration agreement (the
"Administration Agreement") with the Trust. The Administration Agreement
provides that the Administrator shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust in connection with the
matters to which the Administration Agreement relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of the
Administrator in the performance of its duties or from reckless disregard by it
of its duties and obligations thereunder.
For its services, the Administrator is entitled to a fee, which is calculated
daily and paid monthly, at an annual rate of .20% of the average daily net
assets of the Growth, Value, Tax-Managed, Small Cap Value, International Equity,
Intermediate-Term Income, Michigan and Prime Obligation Portfolios. The Value,
Tax-Managed, and the Michigan Portfolios are also subject to a minimum fee of
$50,000.
The Administration Agreement shall remain in effect with respect to the Golden
Oak Family of Funds until May 19, 2002, and thereafter shall continue in effect
for successive two-year periods subject to annual review by the Trustees.
The Administrator, a Delaware business trust, has its principal business offices
at Oaks, Pennsylvania19456. SEI Investments Management Corporation ("SIMC"), a
wholly-owned subsidiary of SEI Investments Company ("SEI Investments"), is the
owner of all
S-40
<PAGE>
beneficial interest 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, Alpha Select Funds, Amerindo Funds,
Inc., The Arbor Fund, ARK Funds, Armada Funds, Armada Advantage Fund, Bishop
Street Funds, Boston 1784 Funds , CNI Charter Funds, CUFUND, The Expedition
Funds, First American Funds, Inc., First American Investment Funds, Inc., First
American Strategy Funds, Inc., Friends Ivory Funds, HighMark Funds, Huntington
Funds, Huntington VA Fund, The Nevis Fund, Inc., Oak Associates Funds, The
Parkstone Group of Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund,
Inc., The Pillar Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI
Index Funds, SEI Institutional Inter-national Trust, SEI Institutional
Investments Trust, SEI Institutional Managed Trust, SEI Insurance Products
Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic Funds, STI
Classic Variable Trust, TIP Funds, UAM Funds Trust, UAM Funds, Inc. and UAM
Funds, Inc. II.
For the fiscal years ended January 31, 1998, 1999 and 2000, the Administrator
received the following fees:
<TABLE>
<CAPTION>
Fees Paid (000) Fees Waived (000)
--------------- -----------------
Portfolio 1998 1999 2000 1998 1999 2000
--------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Golden Oak Growth Portfolio $72 $84 $120 $0 $0 $0
Golden Oak Value Portfolio $35 $78 $114 $26 $0 $0
Golden Oak Tax-Managed Equity Portfolio * * $65 * * $0
Golden Oak Small Cap Value Portfolio * * $30 * * $0
Golden Oak International Equity Portfolio * * * * * *
Golden Oak Intermediate-Term Income Portfolio $246 $264 $312 $0 $0 $0
Golden Oak Michigan Tax Free Bond Portfolio $101 $177 $184 $0 $0 $0
Golden Oak Prime Obligation Money Market Portfolio. $270 $277 $253 $7 $0 $0
</TABLE>
* Not in operation during such period.
THE 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 Institutional, Class A and Class B
shares of the Portfolio. The Distribution Agreement shall be reviewed and
ratified at least annually (i) by the Trust's Trustees or by the vote of a
majority of the outstanding shares of the Trust, and (ii) by the vote of a
majority of the Trustees of the Trust who are not parties to the Distribution
Agreement or interested persons (as defined in the 1940 Act) of any party to the
Distribution Agreement, cast in person at a meeting called for the purpose of
voting
S-41
<PAGE>
on such approval. The Distribution Agreement will terminate in the event of any
assignment, as defined in the 1940 Act, and is terminable with respect to a
particular Portfolio on not less than 60 days' notice by the Trust's Trustees,
by vote of a majority of the outstanding shares of the Portfolio or by the
Distributor. The Distributor will receive no compensation for distribution of
Institutional shares. Class A has a distribution plan (the "Class A Distribution
Plan") and Class B has a distribution and service plan (the "Class B
Distribution and Service Plan," collectively, the "Plans").
The Distribution Agreement is renewable annually and may be terminated by the
Distributor, the Qualified Trustees (defined below), or by a majority vote of
the outstanding securities of the Trust upon not more than 60 days' written
notice by either party.
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs for dealers, which will be paid for by the
Distributor from any sales charge it receives or from any other source available
to it. Under any such program, the Distributor may provide cash or non-cash
compensation as recognition for past sales or encouragement for future sales
that may include the following: merchandise, travel expenses, prizes, meals, and
lodgings, and gifts that do not exceed $100 per year, per individual.
The Trust has adopted the Class A Distribution Plan and Class B Distribution and
Service Plan in accordance with the provisions of Rule 12b-1 under the 1940 Act
which regulates circumstances under which an investment company may directly or
indirectly bear expenses relating to the distribution of its shares. Continuance
of the Plans must be approved annually by a majority of the Trustees of the
Trust and by a majority of the Trustees who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of
such Plans or any agreements related to them ("Qualified Trustees"). The Plans
require that quarterly written reports of amounts spent under each Plan and the
purposes of such expenditures be furnished to and reviewed by the Trustees. The
Plans may not be amended to increase materially the amount which may be spent
thereunder without approval by a majority of the outstanding shares of the
Trust. All material amendments of the Plans will require approval by a majority
of the Trustees of the Trust and of the Qualified Trustees.
CLASS A DISTRIBUTION PLAN
The Distribution Agreement and the Class A Distribution Plan adopted by the
Class A shareholders provides that the Class A shares of the Portfolio will pay
the Distributor a fee of 0.25% of the average daily net assets which the
Distributor can use to compensate/broker dealers and service providers,
including the Adviser and its affiliates which provide administrative and/or
distribution services to the Class A shareholders or their customers who
beneficially own Class A shares. The Class A Plan is characterized as a
compensation plan since the distribution fee will be paid to the Distributor
without regard to the distribution or shareholder service expenses incurred by
the Distributor or the amount or payments made to financial institutions and
intermediaries. The Trust
S-42
<PAGE>
intends to operate the Class A Plan in accordance with its terms and with the
NASD rules concerning sales charges.
For the fiscal years ended January 31, 1998, January 31, 1999 and January 31,
2000, the Portfolios paid the following distribution fees:
<TABLE>
<CAPTION>
Distribution Fees Paid
----------------------
Portfolio 1998 1999 2000
--------- ---- ---- ----
<S> <C> <C> <C>
Golden Oak Growth Portfolio $669 $1,632 $13,564
Golden Oak Value Portfolio $38 $909 $11,463
Golden Oak Tax-Managed Equity Portfolio * * $386
Golden Oak Small Cap Value Portfolio * * $3,717
Golden Oak International Equity Portfolio * * *
Golden Oak Intermediate-Term Income Portfolio $183 $1,716 $15,488
Golden Oak Michigan Tax Free Bond Portfolio $57 $309 $1,082
Golden Oak Prime Obligation Money Market Portfolio $101,244 $16,636 $17,486
</TABLE>
* Not in operation during such period.
The following Portfolios imposed a front-end sales charge upon their Class A
Shares in the amounts shown for the fiscal years ended January 31, 1998, 1999
and 2000:
<TABLE>
<CAPTION>
Dollar Amount of Loads
Retained by the
Dollar Amount of Loads Administrator
---------------------- ----------------------
Portfolio 1998 1999 2000 1998 1999 2000
--------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Golden Oak Growth Portfolio - Class A $363 $1,073 $8,900 $0 $0 $0
Golden Oak Value Portfolio - Class A $4,885 $644 $5,400 $0 $0 $0
Golden Oak Tax-Managed Equity Portfolio - Class A * * $6,100 * * $0
Golden Oak Small Cap Value Portfolio-Class A * * $0 * * $0
Golden Oak International Equity Portfolio- Class A * * * * * *
Golden Oak Intermediate-Term Income Portfolio - $6,800 $390 $0 $0 $0 $0
Class A
Golden Oak Michigan Tax Free Bond $16,945 $1,036 $8,100 $0 $0 $0
Portfolio - Class A
Golden Oak Prime Obligation Money Market Portfolio - N/A N/A N/A N/A N/A N/A
Class A
</TABLE>
* Not in operation during such period.
S-43
<PAGE>
The Prime Obligation Portfolio offers Class A Shares without a sales charge, and
therefore, no information is provided with respect to that Portfolio.
CLASS B DISTRIBUTION PLAN
The Distribution Agreement and the Class B Distribution and Service Plan (the
"Plan") adopted by the Class B shareholders provides that the Class B shares of
the Portfolio will pay the Distributor a fee of 1.00% of the average daily net
assets. The Distributor can use .75% of the fee to compensate broker/dealers and
service providers, including the Adviser and its affiliates which provide
administrative and/or distribution services to the Class B shareholders or their
customers who beneficially own Class B shares. The Distributor can also use .25%
of the fee in connection with its provision of shareholder or account
maintenance services, or to compensate service providers for providing ongoing
account maintenance and other services to Class B Shareholders (including, where
applicable, any underlying beneficial owners) identified in the Plan. The Class
B Plan is characterized as a compensation plan since the distribution fee will
be paid to the Distributor without regard to the distribution or shareholder
service expenses incurred by the Distributor or the amount or payments made to
financial institutions and intermediaries. The Trust intends to operate the
Class B Plan in accordance with its terms and with the NASD rules concerning
sales charges.
The Class B Shares of the Fund had not commenced operations as of the date the
Prospectus was printed, and had not incurred distribution expenses.
THE TRANSFER AGENT
DST Systems, Inc., 1004 Baltimore Street, Kansas City, Missouri 64105 (the
"Transfer Agent"), serves as the transfer agent and dividend disbursing agent
for the Portfolio under a transfer agency agreement with the Trust.
THE CUSTODIAN
First Union National Bank, 123 S. Broad Street, Philadelphia, Pennsylvania
19109 (the "Custodian") acts as custodian of the Trust. The Custodian holds
cash, securities and other assets of the Trust as required by the 1940 Act.
In addition, with respect to the International Equity Portfolio, State Street
Bank (the "Sub-Custodian") serves as sub-custodian for the Portfolio's assets
maintained in foreign countries.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP serves as counsel to the Trust. Miller, Canfield,
Paddock and Stone, P.L.C. serves as counsel to the Trust with respect to
Michigan State issues.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP serves as the independent accountants of the Trust.
S-44
<PAGE>
TRUSTEES AND OFFICERS OF THE TRUST
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 each
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, Alpha Select
Funds, The Arbor Fund, ARK Funds, Armada Funds, Armada Advantage Fund, Bishop
Street Funds, Boston 1784 Funds, CNI Charter Funds, CUFUND, The Expedition
Funds, First American Funds, Inc., First American Investment Funds, Inc., First
American Strategy Funds, Inc., Friends Ivory Funds, HighMark Funds, Huntington
Funds, Huntington VA Fund, The Nevis Fund, Inc., Oak Associates Funds, The
Parkstone Group of Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund,
Inc., The Pillar Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI
Index Funds, SEI Institutional International Trust, SEI Institutional
Investments Trust, SEI Institutional Managed Trust, SEI Insurance Products
Trust, SEI Insurance Products Trust, SEI Liquid Asset Trust, SEI Tax Exempt
Trust, STI Classic Funds, STI Classic Variable Trust, TIP Funds, UAM Funds
Trust, UAM Funds, Inc. and UAM Funds, Inc. II, each of which is an open-end
management investment company managed by SEI Investments Mutual Funds Services
or its affiliates and 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, Bishop Street Funds, Boston 1784 Funds-Registered Trademark-,The
Expedition Funds, Oak Associates Funds, Pillar Funds, SEI Asset Allocation
Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional
International Trust, SEI Institutional Investments Trust, SEI Institutional
Managed Trust, SEI Insurance Products Trust, SEI Liquid Asset Trust and SEI
Tax Exempt Trust.
JOHN T. COONEY (DOB 01/20/27) -- Trustee** -- Vice Chairman of Ameritrust Texas
N.A., 1989-1992, and MTrust Corp., 1985-1989. Trustee of The Advisors' Inner
Circle Fund, The Arbor Fund, The Expedition Funds and Oak Associates Funds.
WILLIAM M. DORAN (DOB 05/26/40) -- Trustee* -- 1701 Market Street, Philadelphia,
PA 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), counsel to the Trust,
SEI Investments, the Administrator and the Distributor. Director of SEI
Investments since 1974; Secretary of SEI Investments since 1978. Trustee of The
Advisors' Inner Circle Fund, The Arbor Fund, The Expedition Funds, Oak
Associates Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index
Funds, SEI Institutional International Trust, SEI Institutional Investments
Trust, SEI Institutional Managed Trust, SEI Insurance Products Trust, SEI Liquid
Asset Trust and SEI Tax Exempt Trust.
S-45
<PAGE>
ROBERT A. PATTERSON (DOB 11/05/27) -- Trustee** -- Pennsylvania State
University, Senior Vice President, Treasurer (Emeritus); Financial and
Investment Consultant, Professor of Transportation since 1984; 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 Oak Associates Funds.
EUGENE B. PETERS (DOB 06/03/29) -- Trustee** -- 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 Oak Associates Funds.
JAMES M. STOREY (DOB 04/12/31) -- Trustee** -- Partner, Dechert Price & Rhoads,
September 1987 - December 1993; Trustee of The Advisors' Inner Circle Fund, The
Arbor Fund, The Expedition Funds, Oak Associates Funds, SEI Asset Allocation
Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional International
Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI
Insurance Products Trust, SEI Liquid Asset Trust and SEI Tax Exempt Trust.
GEORGE J. SULLIVAN, JR. (DOB 11/13/42) -- Trustee**-- Chief Executive Officer,
Newfound Consultants Inc. since April 1997. General Partner, Teton Partners,
L.P., June 1991- December 1996; Chief Financial Officer, Noble Partners, L.P.,
March 1991-December 1996; Treasurer and Clerk, Peak Asset Management, Inc.,
since 1991; Trustee, Navigator Securities Lending Trust, since 1995. Trustee of
The Advisors' Inner Circle Fund, The Arbor Fund, The Expedition Funds, Oak
Associates Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index
Funds, SEI Institutional International Trust, SEI Institutional Investments
Trust, SEI Institutional Managed Trust, SEI Insurance Products Trust, SEI Liquid
Asset Trust and SEI Tax Exempt Trust.
MARK E. NAGLE (DOB 10/20/59) -- President, Controller and Chief Financial
OfficeR -- President of the Administrator and Senior Vice President of SEI
Investments Mutual Funds Services Operations Group since 1998. Vice President of
the Administrator and Vice President of Fund Accounting and Administration of
SEI Investments Mutual Funds Services, 1996-1998. Vice President of the
Distributor since December 1997. Senior Vice President, Fund Administration,
BISYS Fund Services, September 1995 - November 1996. Senior Vice President and
Site Manager, Fidelity Investments 1981- September 1995.
TIMOTHY D. BARTO (DOB 03/28/68) -- Vice President and Assistant Secretary
--Employed by SEI Investments since October 1999. Vice President and Assistant
Secretary of the Administrator and Distributor since December 1999. Associate at
Dechert Price & Rhoads, 1997-1999. Associate, at Richter, Miller & Finn,
1994-1997.
S-46
<PAGE>
TODD B. CIPPERMAN (DOB 02/14/66) -- Vice President and Assistant Secretary --
Senior Vice President and General Counsel of SEI Investments; Senior Vice
President, General Counsel and Secretary of the Administrator and the
Distributor since 2000. Vice President and Assistant Secretary of SEI
Investments, the Administrator and the Distributor, 1995-2000. Associate, Dewey
Ballantine (law firm), 1994-1995. Associate, Winston & Strawn (law firm),
1991-1994.
JAMES R. FOGGO (DOB 06/30/64) -- Vice President and Assistant Secretary -- Vice
President and Assistant Secretary of SEI Investments since 1998. Vice President
and Assistant Secretary of the Administrator and the Distributor since May 1999.
Associate, Paul Weiss, Rifkind, Wharton & Garrison (law firm), 1998. Associate,
Baker & McKenzie (law firm), 1995-1998. Associate, Battle Fowler L.L.P. (law
firm), 1993-1995. Operations Manager, The Shareholder Services Group, Inc.,
1986-1990.
LYDIA A. GAVALIS (DOB 06/05/64) -- Vice President and Assistant Secretary --
Vice President and Assistant Secretary of SEI Investments, t he Administrator
and the Distributor since 1998. Assistant General Counsel and Director of
Arbitration, Philadelphia Stock Exchange, 1989-1998.
KATHY HEILIG (DOB 12/21/58) -- Vice President and Assistant Secretary --
Treasurer of SEI Investments since 1997; Vice President of SEI Investments since
1991. Vice President and Treasurer of the Administrator since 1997. Assistant
Controller of SEI Investments and Vice President of the Distributor since 1995;
Director of Taxes of SEI Investments, 1987 to 1991. Tax Manager, Arthur Andersen
LLP prior to 1987.
CHRISTINE M. MCCULLOUGH (DOB 12/02/60) -- Vice President and Assistant Secretary
-- Employed by SEI Investments since November 1, 1999. Vice President and
Assistant Secretary of the Administrator and the Distributor since December
1999. Associate at White and Williams LLP, 1991-1999. Associate at Montgomery,
McCracken, Walker & Rhoads, 1990-1991.
JOHN H. GRADY, JR. (DOB 06/01/61) -- Secretary -- 1701 Market Street,
Philadelphia, PA 19103, Partner since 1995, Morgan, Lewis & Bockius LLP (law
firm), counsel to the Trust, SEI Investments, the Administrator and the
Distributor.
--------------------
* 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, Patterson, Peters and Storey serve as members of the Audit
Committee of the Fund.
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.
S-47
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
Total Compensation
Pension or From Registrant and
Retirement Fund Complex Paid
Aggregate Benefits Accrued Estimated Annual to Trustees for the
Compensation from as Part of Benefits Upon Fiscal Year Ended
Name of Person, Position Registrant Fund Expenses Retirement January 31, 2000 (1)
------------------------ ---------- ------------- ---------- --------------------
<S> <C> <C> <C> <C>
John T. Cooney, Trustee $6,079 N/A N/A $26,375
George C. Sullivan, Jr., Trustee $7,443 N/A N/A $33,125
Robert Patterson, Trustee $6,079 N/A N/A $26,375
Eugene B. Peters, Trustee $6,079 N/A N/A $26,375
James M. Storey, Trustee $6,079 N/A N/A $26,375
William M. Doran, Trustee* $0 N/A N/A $0
Robert A. Nesher, Trustee* $0 N/A N/A $0
</TABLE>
(1) Total Compensation for service on one board.
* A Trustee who is an "interested person" as defined by the 1940 Act.
COMPUTATION OF YIELD
From time to time, each Portfolio may advertise yield and/or total return. These
figures will be based on historical earnings and are not intended to indicate
future performance.
The "yield" of the Portfolios refers to the income generated by an investment in
a Portfolio over a seven-day or 30-day period (which period will be stated in
the advertisement). This income is then "annualized." That is, the amount of
income generated by the investment during that seven-day or 30-day period is
assumed to be generated each seven-day or 30-day period over a year and is shown
as a percentage of the investment. The "effective yield" is calculated similarly
but, when annualized, the income earned by an investment in a Portfolio is
assumed to be reinvested. The "effective yield" will be slightly higher than the
"yield" because of the compounding effect of this assumed reinvestment.
The current yield of the Prime Obligation Portfolio will be calculated daily
based upon the seven days ending on the date of calculation ("base period"). The
yield is computed by determining the net change (exclusive of capital changes)
in the value of a hypothetical pre-existing shareholder account having a balance
of one share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing such net change by
the value of the account at the beginning of the same period to obtain the base
period return and multiplying the result by (365/7). Realized and unrealized
gains and losses are not included in the calculation of the yield. The effective
compound yield of the Portfolio is determined by computing the net change,
exclusive of capital changes, in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing the
S-48
<PAGE>
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then compounding the base period return by
adding 1, raising the sum to a power equal to 365 divided by 7, and
subtracting 1 from the result, according to the following formula: Effective
Yield = (Base Period Return + 1) TO THE POWER OF 365/7) - 1. The current and
the effective yields reflect the reinvestment of net income earned daily on
portfolio assets.
The yield of the Portfolio fluctuates, and the annualization of a week's
dividend is not a representation by the Trust as to what an investment in the
Portfolio will actually yield in the future. Actual yields will depend on such
variables as asset quality, average asset maturity, the type of instruments the
Portfolio invests in, changes in interest rates on money market instruments,
changes in the expenses of the Portfolio and other factors.
For the 7-day period ended January 31, 2000, the Prime Obligation Portfolio's
yield was 5.46% for Institutional and 5.21% for Class A and the effective yield
was 5.61% for Institutional and 5.34% for Class A. Class B Shares of the
Portfolio had not begun operations as of the date of the Prospectus.
The yield of a non-Money Market Portfolio refers to the annualized income
generated by an investment in the Portfolio over a specified 30-day period.
The yield is calculated by assuming that the income generated by the
investment during that period generated each period over one year and is
shown as a percentage of the investment. In particular, yield will be
calculated according to the following formula: Yield = 2([(a-b)/(cd) + 1]TO
THE POWER OF 6 - 1), where a = dividends and interest earned during the
period; b = expenses accrued for the period (net of reimbursement); c = the
current daily number of shares outstanding during the period that were
entitled to receive dividends; and d = the maximum offering price per share
on the last day of the period.
The Michigan Portfolio may also advertise a "tax-equivalent yield," which is a
calculated by determining the rate of return that would have to be achieved on a
fully taxable instrument to produce the after-tax equivalent of the Portfolio's
yield, assuming certain tax brackets for a shareholder. The tax-equivalent yield
of the Portfolio will be calculated by adding (a) the portion of the Portfolio's
yield that is non-tax-exempt and (b) the result obtained by dividing the portion
of the Portfolio's yield that is tax-exempt by the difference of one minus a
stated income tax rate.
For the 30-day period ended January 31, 2000, the Portfolios' yields and
tax-equivalent yields were as follows:
<TABLE>
<CAPTION>
YIELDS TAX-EQUIVALENT YIELDS
------ ---------------------
PORTFOLIO INSTITUTIONAL CLASS A INSTITUTIONAL CLASS A
--------- ------------- ------- ------------- -------
<S> <C> <C> <C> <C>
Golden Oak Growth Portfolio (0.33%) (0.56%) N/A N/A
Golden Oak Value Portfolio 0.65% 0.38% N/A N/A
Golden Oak Tax-Managed Equity Portfolio (0.27%) (0.50%) N/A N/A
Golden Oak Small Cap Value Portfolio 1.12% 0.81% N/A N/A
</TABLE>
S-49
<PAGE>
<TABLE>
<CAPTION>
YIELDS TAX-EQUIVALENT YIELDS
------ ---------------------
PORTFOLIO INSTITUTIONAL CLASS A INSTITUTIONAL CLASS A
--------- ------------- ------- ------------- -------
<S> <C> <C> <C> <C>
Golden Oak International Equity Portfolio * * * *
Golden Oak Intermediate Term Income Portfolio 6.50% 5.96% N/A N/A
Golden Oak Michigan Tax-Free Bond Portfolio 4.39% 3.95% 7.84% 7.05%
</TABLE>
* Golden Oak International Equity Portfolio had not begun operations as of
the date of the Prospectus.
The Portfolios had not commenced offering Class B Shares as of the date of the
Prospectus and did not have performance data for the indicated periods.
The Portfolios may, from time to time, compare their performance to other mutual
funds tracked by mutual fund rating services, to broad groups of comparable
mutual funds or to unmanaged indices which may assume investment of dividends
but generally do not reflect deductions for administrative and management costs.
CALCULATION OF TOTAL RETURN
From time to time, each Portfolio, other than the Prime Obligation Portfolio,
may advertise total return. The total return of a Portfolio refers to the
average compounded rate of return to a hypothetical investment for designated
time periods (including but not limited to, the period from which the
Portfolio commenced operations through the specified date), assuming that the
entire investment is redeemed at the end of each period. In particular, total
return will be calculated according to the following formula: P (1 + T)TO THE
POWER OF n = ERV, where P = a hypothetical initial payment of $1,000; T =
average annual total return; n = number of years; and ERV = ending redeemable
value of a hypothetical $1,000 payment made at the beginning of the
designated time period as of the end of such period.
Based on the foregoing, the average annual total return for the Portfolios from
inception through January 31, 2000 and for the one, five and ten year periods
ended January 31, 2000 were as follows:
<TABLE>
<CAPTION>
Average Annual Total Return
---------------------------
Portfolio Class One Year Five Year Ten Year Since Inception**
--------- ----- -------- --------- -------- -----------------
<S> <C> <C> <C> <C> <C>
Golden Oak Growth Portfolio Institutional 30.67% 29.74% N/A 21.00%
Class A (without load) 30.23% 29.37% N/A 22.70%
Class A (with load) 22.74% 27.84% N/A 21.61%
Golden Oak Value Portfolio Institutional 8.92% 20.39% 13.72% 13.39%
Class A (without load) 8.61% 19.98% 13.36% 13.06%
Class A (with load) 2.34% 18.56% 12.69% 12.61%
</TABLE>
S-50
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return
---------------------------
Portfolio Class One Year Five Year Ten Year Since Inception**
--------- ----- -------- --------- -------- -----------------
<S> <C> <C> <C> <C> <C>
Golden Oak Tax-Managed Equity Institutional N/A N/A N/A 3.03%
Portfolio
Class A (without load) N/A N/A N/A 2.77%
Class A (with load) N/A N/A N/A (3.14)%
Golden Oak Small Cap Value Institutional N/A N/A N/A (4.33)%
Portfolio
Class A (without load) N/A N/A N/A (4.42)%
Class A (with load) N/A N/A N/A (9.91)%
Golden Oak International Equity Institutional * * * *
Portfolio
Class A (without load) * * * *
Class A (with load) * * * *
Golden Oak Intermediate-Term Institutional (4.07)% 5.38% N/A 4.58%
Income Portfolio
Class A (without load) (4.22)% 5.11% N/A 4.18%
Class A (with load) (8.56)% 4.15% N/A 3.45%
Golden Oak Michigan Tax Free Bond Institutional (1.79)% 4.86% 5.55% 5.25%
Portfolio
Class A (without load) (2.03)% 4.61% 5.28% 4.97%
Class A (with load) (6.47)% 3.64% 4.79% 4.59%
</TABLE>
* Not in operation during such period.
** Intermediate-Term Income and Growth Portfolios Institutional Shares
commenced operations February 1, 1993. Golden Oak Prime Obligations Money
Market Portfolio Class A Shares commenced operations January 20, 1994.
Golden Oak Intermediate-Term Income and Growth Portfolios Class A Shares
commenced operations June 18, 1993. Golden Oak Michigan Tax Free Bond and
Golden Oak Value Portfolios Class A and Institutional Shares commenced
operations June 23, 1997. Golden Oak Tax-Managed Equity Value Portfolio
commenced operations on April 30, 1999. Golden Oak Small Cap Value
Portfolio commenced operations on September 1, 1999. Golden Oak
International Equity Portfolio had not commenced operations as of the date
printed on the Prospectus.
The Portfolios had not commenced offering Class B Shares as of the date of the
Prospectus and did not have performance data for the indicated periods.
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions may be made through the Distributor on a day on which
the New York Stock Exchange is open for business. Shares of the Portfolios are
offered on a continuous basis. Currently, the holidays observed by the Trust and
the New York Stock Exchange are as follows: New Year's Day, Presidents' Day,
Martin Luther King Jr. Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas.
It is currently the Trust's policy to pay for the redemptions in cash. The Trust
retains the right, however, to alter this policy to provide for redemptions in
whole or in part by a
S-51
<PAGE>
distribution in-kind of securities held by the Portfolios in lieu of cash.
Shareholders may incur brokerage charges on the sale of any such securities so
received in payment of redemptions. However, a shareholder will at all times be
entitled to aggregate cash redemptions from all Portfolios of the Trust during
any 90-day period of up to the lesser of $250,000 or 1% of the Trust's net
assets.
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of
disposal or valuation of a Portfolio's securities is not reasonably practicable,
or for such other periods as the SEC has by order permitted. The Trust also
reserves the right to suspend sales of shares of a Portfolio for any period
during which the New York Stock Exchange, the Adviser, the applicable
Sub-Adviser, the Administrator and/or the Custodian are not open for business.
LETTER OF INTENT
Reduced sales charges are also applicable to the aggregate amount of purchases
made by any such purchaser previously enumerated within a 13-month period
pursuant to a written Letter of Intent provided to the Trust's transfer agent,
that does not legally bind the signer to purchase any set number of shares and
provides for the holding in escrow by the Administrator of 5% of the amount
purchased until such purchase is completed within the 13-month period. A Letter
of Intent may be dated to include shares purchased up to 90 days prior to the
date the Letter of Intent is signed. The 13-month period begins on the date of
the earliest purchase. If the intended investment is not completed, the
Administrator will surrender an appropriate number of the escrowed shares for
redemption in order to recover the difference between the sales charge on the
shares purchased at the reduced rate and the sales charge otherwise applicable
to the total shares purchased.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Prime Obligation Portfolio is calculated
separately for each class of the Portfolio by adding the value of securities and
other assets, subtracting liabilities attributable to that class and dividing by
the number of outstanding shares of that class. Securities will be valued by the
amortized cost method, which involves valuing a security at its cost on the date
of purchase and thereafter (absent unusual circumstances) assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuations in general market rates of interest on the value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which a security's value, as determined by this method, is higher or
lower than the price the Portfolio would receive if it sold the instrument.
During periods of declining interest rates, the daily yield of the Portfolio may
tend to be higher than a like computation made by a company with identical
investments utilizing a method of valuation based upon market prices and
estimates of market prices for all of its portfolio securities. Thus, if the use
of amortized cost by the Portfolio resulted in a lower aggregate portfolio value
on a particular day, a prospective investor in the Portfolio
S-52
<PAGE>
would be able to obtain a somewhat higher yield than would result from
investment in a company utilizing solely market values, and existing investors
in the Portfolio would experience a lower yield. The converse would apply in a
period of rising interest rates.
The Portfolio's use of amortized cost and the maintenance of the Portfolio's net
asset value at $1.00 are permitted by Rule 2a-7 promulgated under the 1940 Act,
provided that certain conditions are met. The regulations also require the
Trustees to establish procedures that are reasonably designed to stabilize the
net asset value per share at $1.00 for the Portfolio. Such procedures include
the determination of the extent of deviation, if any, of the Portfolio's current
net asset value per share calculated using available market quotations from the
Portfolio's amortized cost price per share at such intervals as the Trustees
deem appropriate and reasonable in light of market conditions and periodic
reviews of the amount of the deviation and the methods used to calculate such
deviation. In the event that such deviation exceeds 1/2 of 1%, the Trustees are
required to consider promptly what action, if any, should be initiated, and, if
the Trustees believe that the extent of any deviation may result in material
dilution or other unfair results to shareholders, the Trustees are required to
take such corrective action as they deem appropriate to eliminate or reduce such
dilution or unfair results to the extent reasonably practicable. Such actions
may include the sale of portfolio instruments prior to maturity to realize
capital gains or losses or to shorten average portfolio maturity; withholding
dividends; redeeming shares in kind; or establishing a net asset value per share
by using available market quotations. In addition, if the Portfolio incurs a
significant loss or liability, the Trustees have the authority to reduce pro
rata the number of shares of the Portfolio in each shareholder's account and to
offset each shareholder's pro rata portion of such loss or liability from the
shareholder's accrued but unpaid dividends or from future dividends while each
other Portfolio must annually distribute at least 90% of its investment company
taxable income.
The securities of the Growth, Value, Tax-Managed Equity, Small Cap,
International Equity, Intermediate-Term Income and Michigan Portfolios are
valued by the Administrator pursuant to valuations provided by an independent
pricing service. The pricing service relies primarily on prices of actual market
transactions as well as trader quotations. However, the service may also use a
matrix system to determine valuations of fixed income securities, which system
considers such factors as security prices, yields, maturities, call features,
ratings and developments relating to specific securities in arriving at
valuations. The procedures of the pricing service and its valuations are
reviewed by the officers of the Trust under the general supervision of the
Trustees.
TAXES
The following is only a summary of certain additional federal income tax
considerations generally affecting the Portfolios and their shareholders that
are not described in the Portfolios' prospectus. No attempt is made to present a
detailed explanation of the tax treatment of the Portfolios or their
shareholders, and the discussion here and in the Portfolios' prospectus is not
intended as a substitute for careful tax planning. Shareholders are urged to
consult with their tax advisors with specific reference to their own tax
situation, including their state and local tax liabilities.
S-53
<PAGE>
FEDERAL INCOME TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following general discussion of certain federal income tax consequences is
based on the Internal Revenue Code of 1986, as amended, (the "Code") and the
regulations issued thereunder as in effect on the date of this Statement of
Additional Information. New legislation, as well as administrative changes or
court decisions, may significantly change the conclusions expressed herein, and
may have a retroactive effect with respect to the transactions contemplated
herein.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
Each Portfolio intends to qualify and elect to be treated as a Regulated
Investment Company ("RIC") as defined under Subchapter M of the Code. By
following such a policy, each Portfolio expects to eliminate or reduce to a
nominal amount the federal taxes to which it may be subject.
In order to qualify as a RIC, a Portfolio must distribute at least 90% of its
investment company taxable income (that generally includes dividends, taxable
interest, and the excess of net short-term capital gains over net long-term
capital losses, less operating expenses) and at least 90% of its net tax exempt
interest income, for each tax year, if any, to its shareholders, (the
"Distribution Requirement") and also must meet several additional requirements.
Included among these requirements are the following: (i) at least 90% of the
Portfolio's gross income each taxable year must be derived from dividends,
interest, payments with respect to securities loans, and gains from the sale or
other disposition of stock or securities, or certain other income; (ii) at the
close of each quarter of the Portfolio's taxable year, at least 50% of the value
of its total assets must be represented by cash and cash items, U.S. government
securities, securities of other RICs and other securities, with such other
securities limited, in respect to any one issuer, to an amount that does not
exceed 5% of the value of the Portfolio's assets and that does not represent
more than 10% of the outstanding voting securities of such issuer; and (iii) at
the close of each quarter of the Portfolio's taxable year, not more than 25% of
the value of its assets may be invested in securities (other than U.S.
government securities or the securities of other RICs) of any one issuer or of
two or more issuers which the Portfolio controls and which are engaged in the
same, similar or related trades or businesses.
The Prime Obligation, Intermediate-Term Income and Value Portfolios may make
investments in securities (such as STRIPS) that bear "original issue discount"
or "acquisition discount" (collectively, "OID Securities"). The holder of such
securities is deemed to have received interest income even though no cash
payments have been received. Accordingly, OID Securities may not produce
sufficient current cash receipts to match the amount of distributable net
investment income the Portfolios must distribute to satisfy the Distribution
Requirement. In some cases, the Portfolios may have to borrow money or dispose
of other investments in order to make sufficient cash distributions to satisfy
the Distribution Requirement.
Although each Portfolio intends to distribute substantially all of its
investment company taxable income and may distribute its capital gains for any
taxable year, each Portfolio
S-54
<PAGE>
will be subject to federal income taxation to the extent any such income or
gains are not distributed.
If the Portfolios fail to qualify for any taxable year as a RIC, all of their
taxable income will be subject to tax at regular corporate income tax rates
without any deduction for distributions to shareholders and such distributions
generally will be taxable to shareholders as ordinary dividends to the extent of
a Portfolio's current and accumulated earnings and profits. In this event,
distributions generally will be eligible for the dividends-received deduction
for corporate shareholders.
PORTFOLIO DISTRIBUTIONS
Distributions of investment company taxable income will be taxable to
shareholders as ordinary income, regardless of whether such distributions are
paid in cash or are reinvested in additional Shares, to the extent of a
Portfolio's earnings and profits. Each Portfolio anticipates that it will
distribute substantially all of its investment company taxable income for each
taxable year.
Each Portfolio intends to distribute to shareholders its excess of net long-term
capital gains over net short-term capital losses ("net capital gains"). Such
distributions are taxable to shareholders who are individuals at a maximum rate
of 20%, regardless of the length of time the shareholders have held their
Portfolio Shares. If any such gains are retained, however, a Portfolio will pay
federal income tax thereon.
In the case of corporate shareholders, distributions (other than capital gains
distributions) from a RIC generally qualify for the dividends-received deduction
to the extent of the gross amount of qualifying dividends received by a
Portfolio for the year. Generally, and subject to certain limitations, a
dividend will be treated as a qualifying dividend if it has been received from a
domestic corporation. Accordingly, it is not expected that any Intermediate-Term
Income Portfolio, Michigan Portfolio or Prime Obligation Portfolio distribution
will qualify for the corporate dividends-received deduction. Conversely,
distributions from the Growth Portfolio and the Value Portfolio generally will
qualify for the corporate dividends-received deduction.
Ordinarily, investors should include all dividends as income in the year of
payment. However, dividends declared payable to shareholders of record in
October, November, or December of one year, but paid in January of the following
year, will be deemed for tax purposes to have been received by the shareholder
and paid by the Portfolio in the year in which the dividends were declared.
In certain cases, a Portfolio will be required to withhold, and remit to the
United States Treasury, 31% of any distributions paid to a shareholder who (1)
has failed to provide a correct taxpayer identification number, (2) is subject
to backup withholding by the Internal Revenue Service, or (3) has failed to
certify to the Portfolio that such shareholder is not subject to backup
withholding.
Each Portfolio will provide a statement annually to shareholders as to the
federal tax status of distributions paid (or deemed to be paid) by the Portfolio
during the year,
S-55
<PAGE>
including the amount of dividends eligible for the corporate dividends-received
deduction.
SALE OR EXCHANGE OF PORTFOLIO SHARES
Generally, gain or loss on the sale or exchange of a Portfolio Share will be
capital gain or loss that will be long-term if the Share has been held for more
than twelve months and otherwise will be short-term. For individuals, long-term
capital gains are currently taxed at a maximum rate of 20% and short-term
capital gains are currently taxed at ordinary income tax rates. However, if a
shareholder realizes a loss on the sale, exchange or redemption of a Share held
for six months or less and has previously received a capital gains distribution
with respect to the Share (or any undistributed net capital gains of a Portfolio
with respect to such Share are included in determining the shareholder's
long-term capital gains), the shareholder must treat the loss as a long-term
capital loss to the extent of the amount of the prior capital gains distribution
(or any undistributed net capital gains of a Portfolio that have been included
in determining such shareholder's long-term capital gains). In addition, any
loss realized on a sale or other disposition of Shares will be disallowed to the
extent an investor repurchases (or enters into a contract or option to
repurchase) Shares within a period of 61 days (beginning 30 days before and
ending 30 days after the disposition of the Shares). This loss disallowance rule
will apply to Shares received through the reinvestment of dividends during the
61-day period.
FEDERAL EXCISE TAX
If a Portfolio fails to distribute in a calendar year at least 98% of its
ordinary income for the year and 98% of its capital gain net income (the excess
of short and long term capital gains over short and long term capital losses)
for the one-year period ending October 31 of that year (and any retained amount
from the prior calendar year), the Portfolio will be subject to a nondeductible
4% Federal excise tax on the undistributed amounts. Each Portfolio intends to
make sufficient distributions to avoid imposition of this tax, or to retain, at
most its net capital gains and pay tax thereon.
STATE AND LOCAL TAXES
A Portfolio is not liable for any income or franchise tax in Massachusetts if it
qualifies as a RIC for federal income tax purposes. Depending upon state and
local law, distributions by the Portfolios to shareholders and the ownership of
Shares may be subject to state and local taxes. Shareholders are urged to
consult their tax advisors as to the consequences of these and other state and
local tax rules affecting an investment in the Portfolios.
ADDITIONAL TAX INFORMATION CONCERNING THE MICHIGAN PORTFOLIO
The Portfolio intends to qualify to pay "exempt interest dividends" to its
shareholders by satisfying the Code's requirement that at the close of each
quarter of its taxable year at least 50% of the value of its total assets
consist of obligations the interest on which is exempt from federal income tax.
As long as this and certain other requirements are met, dividends derived from
the Portfolio's net tax-exempt interest income will be "exempt interest
dividends" that are excluded from your gross income for federal income tax
S-56
<PAGE>
purposes. Exempt interest dividends may, however, have collateral federal income
tax consequences, including alternative minimum tax consequences, as discussed
below.
The percentage of income that constitutes "exempt-interest dividends" will be
determined for each year for the Portfolio and will be applied uniformly to all
dividends declared with respect to the Portfolio during that year. This
percentage may differ from the actual percentage for any particular day.
Exempt-interest dividends may be subject to the alternative minimum tax imposed
by Section 55 of the Code (the "Alternative Minimum Tax"). The Alternative
Minimum Tax is imposed at a rate of up to 28% in the case of non-corporate
taxpayers and at the rate of 20% in the case of corporate taxpayers, to the
extent it exceeds the taxpayer's regular tax liability. The Alternative Minimum
Tax may be affected by the receipt of exempt-interest dividends in two
circumstances. First, exempt-interest dividends derived from certain "private
activity bonds" issued after August 7, 1986, will generally be an item of tax
preference and therefore potentially subject to the Alternative Minimum Tax. The
Portfolio intends, when possible, to avoid investing in private activity bonds.
Second, in the case of exempt-interest dividends received by corporate
shareholders, all exempt-interest dividends, regardless of when the bonds from
which they are derived were issued or whether they are derived from private
activity bonds, will be included in the corporation's "adjusted current
earnings," as defined in Section 56(g) of the Code, in calculating the
corporation's alternative minimum taxable income for purposes of determining the
Alternative Minimum Tax.
Interest on indebtedness incurred or continued by shareholders to purchase or
carry Shares of the Portfolio will not be deductible for federal income tax
purposes. The deduction otherwise allowable to property and casualty insurance
companies for "losses incurred" will be reduced by an amount equal to a portion
of exempt-interest dividends received or accrued during any taxable year.
Foreign corporations engaged in a trade or business in the United States will be
subject to a "branch profits tax" on their "dividend equivalent amount" for the
taxable year, which will include exempt-interest dividends. Certain Subchapter S
corporations may also be subject to taxes on their "passive investment income,"
which could include exempt-interest dividends. Up to 85% of the Social Security
benefits or railroad retirement benefits received by an individual during any
taxable year will be included in the gross income of such individual if the
individual's "modified adjusted gross income" (which includes exempt-interest
dividends) plus one-half of the Social Security benefits or railroad retirement
benefits received by such individual during that taxable year exceeds the base
amount described in Section 86 of the Code.
Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by industrial development bonds or
private activity bonds should consult their tax advisors before purchasing
Shares. "Substantial user" is defined generally as including a "non-exempt
person" who regularly uses in trade or business a part of such a facility.
Current federal law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect on the
ability of the Portfolio
S-57
<PAGE>
to purchase sufficient amounts of tax-exempt securities to satisfy the Code's
requirements for the payment of exempt interest dividends.
Issuers of bonds purchased by the Portfolio (or the beneficiary of such bonds)
may have made certain representations or covenants in connection with the
issuance of such bonds to satisfy certain requirements of the Code that must be
satisfied subsequent to the issuance of such bonds. Investors should be aware
that exempt-interest dividends derived from such bonds may become subject to
federal income taxation retroactively to the date thereof if such
representations are determined to have been inaccurate or if the issuer of such
bonds (or the beneficiary of such bonds) fails to comply with such covenants.
The Portfolio may not be a suitable investment for tax-exempt shareholders and
plans because such shareholders and plans would not gain any additional benefit
from the receipt of exempt-interest dividends.
TRADING PRACTICES AND BROKERAGE
The Trust has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to policies
established by the Trustees, the Adviser and/or Sub-Adviser(s) is responsible
for placing the orders to execute transactions for the Portfolios. In placing
orders, it is the policy of the Trust to seek to obtain the best net results
taking into account such factors as price (including the applicable dealer
spread), the size, type and difficulty of the transaction involved, the firm's
general execution and operational facilities, and the firm's risk in positioning
the securities involved. While the Adviser and/or Sub-Adviser(s) generally seek
reasonably competitive spreads or commissions, the Trust will not necessarily be
paying the lowest spread or commission available if the difference is reasonably
justified by other aspects of the portfolio execution securities offered.
The money market securities in which the Portfolios invest are traded primarily
in the over-the-counter market. Bonds and debentures are usually traded
over-the-counter, but may be traded on an exchange. Where possible, the Adviser
and/or Sub-Adviser(s) will deal directly with the dealers who make a market in
the securities involved except in those circumstances where better prices and
execution are available elsewhere. Such dealers usually are acting as principal
for their own account. On occasion, securities may be purchased directly from
the issuer. Money market securities are generally traded on a net basis and do
not normally involve either brokerage commissions or transfer taxes. The cost of
executing portfolio securities transactions of the Trust will primarily consist
of dealer spreads and underwriting commissions.
The Adviser and/or Sub-Adviser(s) select brokers or dealers to execute
transactions for the purchase or sale of portfolio securities on the basis of
its judgment of their professional capability to provide the service. The
primary consideration is to have brokers or dealers execute transactions at best
price and execution. Best price and execution refers to many factors, including
the price paid or received for a security, the commission charged, the
promptness and reliability of execution, the confidentiality and placement
accorded the order and other factors affecting the overall benefit obtained by
S-58
<PAGE>
the account on the transaction. The Adviser's and/or a Sub-Adviser's
determination of what are reasonably competitive rates is based upon the
professional knowledge of its trading department as to rates paid and charged
for similar transactions throughout the securities industry. In some instances,
the Adviser and/or a Sub-Adviser pays a minimal share transaction cost when the
transaction presents no difficulty. Some trades are made on a net basis where
the Adviser and/or a Sub-Adviser either buys securities directly from the dealer
or sells them to the dealer. In these instances, there is no direct commission
charged but there is a spread (the difference between the buy and sell price)
which is the equivalent of a commission.
The Adviser and/or Sub-Adviser(s) may allocate out of all commission business
generated by all of the funds and accounts under management by the Adviser
and/or Sub-Adviser(s), brokerage business to brokers or dealers who provide
brokerage and research services. These research services include advice, either
directly or through publications or writings, as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; furnishing of
analyses and reports concerning issuers, securities or industries; providing
information on economic factors and trends, assisting in determining portfolio
strategy, providing computer software used in security analyses, and providing
portfolio performance evaluation and technical market analyses. Such services
are used by the Adviser and/or Sub-Adviser(s) in connection with its investment
decision-making process with respect to one or more funds and accounts managed
by it, and may not be used exclusively with respect to the fund or account
generating the brokerage.
As provided in the Securities Exchange Act of 1934, as amended (the "1934 Act"),
higher commissions may be paid to broker/dealers who provide brokerage and
research services than to broker/dealers who do not provide such services if
such higher commissions are deemed reasonable in relation to the value of the
brokerage and research services provided. Although transactions are directed to
broker/dealers who provide such brokerage and research services, the Adviser
and/or Sub-Adviser(s) believes that the commissions paid to such broker/dealers
are not, in general, higher than commissions that would be paid to
broker/dealers not providing such services and that such commissions are
reasonable in relation to the value of the brokerage and research services
provided. In addition, portfolio transactions, which generate commissions or
their equivalent, are directed to broker/dealers who provide daily portfolio
pricing services to the Adviser and/or Sub-Adviser(s). Subject to best price and
execution, commissions used for pricing may or may not be generated by the funds
receiving the pricing service.
S-59
<PAGE>
For the fiscal years ended January 31, 1998, 1999 and 2000 the Portfolios paid
the following brokerage commissions with respect to portfolio transactions:
<TABLE>
<CAPTION>
% of Total Brokerage % of Total Brokerage
Total $ Amount of Brokerage Total $ Amount of Commissions Paid to Transactions Effected
Commissions Paid Brokerage Commission Affiliated Brokers Through Affiliated Brokers
Paid to Affiliates
Portfolio 1998 1999 2000 1998 1999 2000 1998 1999 2000 1998 1999 2000
--------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth $98,901 $52,495 $72,252 $0 $20,430 $24,060 0% 39.91% 33.30% 0% 41.77% 11.18%
Portfolio
Value Portfolio $39,007 $141,248 $129,247 $0 $62,129 $37,074 0% 44.12% 28.68% 0% 37.34% 36.36%
Tax-Managed * * $23,741 * * $0 * * 0% * * 0%
Equity
Portfolio
Small Cap Value * * $47,180 * * $506 * * 1.07% * * 0.45%
International * * * * * * * * * * * *
Equity
Portfolio
Intermediate-Term * $3,410 $4,998 $0 $3,410 $4,998 0% 0% 100% 0% 0% 1.35%
Income
Portfolio
Michigan Tax * $0 $0 $0 $0 $0 0% 0% 0% 0% 0% 0%
Free Bond
Portfolio
Prime * $0 $0 $0 $0 $0 0% 0% 0% 0% 0% 0%
Obligation
Money Market
Portfolio
</TABLE>
* Had not commenced operations as of the end of the fiscal year.
<TABLE>
<CAPTION>
Total Brokerage Commissions Paid to
SIDC in Connection With Repurchase Total $ Amount of Brokerage
Agreement Transactions Commissions Paid for Research
Portfolio 1998 1999 2000 1998 1999 2000
--------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Growth Portfolio $985 $1,308 $888 $17,844 $39,308 $10,390
Value Portfolio N/A $438 $1,346 $46,715 $66,900 $27,202
Tax-Managed Equity Portfolio * * $0 * * $4,208
Small Cap Value * * $506 * * $9,966
International Equity Portfolio * * * * * *
Intermediate-Term Income Portfolio $2,854 $3,410 $4,998 $0 $0 $0
Michigan Tax Free Bond Portfolio N/A $0 $0 $0 $0 $0
Prime Obligation Money Market N/A $0 $0 $0 $0 $0
Portfolio
</TABLE>
S-60
<PAGE>
The Adviser and/or Sub-Adviser(s) may place a combined order for two or more
accounts or funds engaged in the purchase or sale of the same security if, in
its judgment, joint execution is in the best interest of each participant and
will result in best price and execution. Transactions involving commingled
orders are allocated in a manner deemed equitable to each account or fund. It is
believed that the ability of the accounts to participate in volume transactions
will generally be beneficial to the accounts and funds. Although it is
recognized that, in some cases, the joint execution of orders could adversely
affect the price or volume of the security that a particular account or trust
may obtain, it is the opinion of the Adviser and/ or Sub-Adviser(s) and the
Trust's Board of Directors that the advantages of combined orders outweigh the
possible disadvantages of separate transactions.
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, the Adviser
and/or Sub-Adviser(s) may give consideration to sales of shares of the Adviser
and/or Sub-Adviser(s) as a factor in the selection of brokers and dealers to
execute portfolio transactions for such Portfolio.
It is expected that the Adviser and/or Sub-Adviser(s) may execute brokerage or
other agency transactions through the Distributor or an affiliate of the
Adviser, both of which are registered broker-dealers, for a commission in
conformity with the 1940 Act, the 1934 Act and the rules promulgated thereunder
by the SEC. Under these provisions, the Distributor or an affiliate of the
Adviser is permitted to receive and retain compensation for effecting portfolio
transactions for a Portfolio on an exchange if a written contract is in effect
between the Distributor and the Trust expressly permitting the Distributor or an
affiliate of the Adviser to receive and retain such compensation. These rules
further require that commissions paid to the Distributor by a Portfolio for
exchange transactions not exceed "usual and customary" brokerage commissions.
The rules define "usual and customary" commissions to include amounts which are
"reasonable and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time." In addition, the
Adviser and/or Sub-Adviser(s) may direct commission business to one or more
designated broker/dealers in connection with such broker/dealer's provision of
services to a Portfolio or payment of certain Portfolio expenses (E.G., custody,
pricing and professional fees). The Trustees, including those who are not
"interested persons" of the Trust, have adopted procedures for evaluating the
reasonableness of commissions paid to the Distributor and will review these
procedures periodically.
The Trust is required to identify any securities of its "regular brokers or
dealers" (as such term is defined in the 1940 Act) which the Trust has acquired
during its most recent fiscal year. As of January 31, 2000, the following
Portfolios held securities of the Trust's "regular brokers or dealers" as
follows:
S-61
<PAGE>
<TABLE>
<CAPTION>
Name of Dollar Amount
Portfolio Broker/Dealer Type of Security Held at FYE
--------- ------------- --------------------- -------------
<S> <C> <C> <C>
Golden Oak Growth Portfolio Morgan Stanley Repurchase Agreement $1,594,002
Golden Oak Value Portfolio J.P. Morgan Equity $736,875
Morgan Stanley Dean Equity $1,258,750
Witter
Discover
Morgan Stanley Repurchase Agreement $2,829,788
Golden Oak Tax-Managed Equity Portfolio N/A N/A N/A
Golden Oak Small Cap Value Portfolio Morgan Stanley Repurchase Agreement $4,686,432
Golden Oak International Equity Portfolio * * *
Golden Oak Intermediate-Term Income Portfolio Merrill Lynch Debt $3,545,000
Morgan Stanley Dean Debt $2,999,610
Witter, Discover
Morgan Stanley Repurchase Agreement $5,849,383
Golden Oak Michigan Tax Free Bond Portfolio N/A N/A N/A
Golden Oak Prime Obligation Money Market Portfolio Goldman Sachs Gp Commercial Paper $2,999,529
J.P. Morgan Debt $999,623
Lehman Brothers Repurchase Agreement $6,200,000
</TABLE>
* Portfolio had not commenced operations as of the date of the Prospectus.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of the Portfolios each of which represents an equal proportionate
interest in that Portfolio with each other share. Shares are entitled upon
liquidation to a pro rata share in the net assets of the Portfolios.
Shareholders have no preemptive rights. The Declaration of Trust provides that
the Trustees of the Trust may create additional series of shares. All
consideration received by the Trust for shares of any additional series and all
assets in which such consideration is invested would belong to that series and
would be subject to the liabilities related thereto.
Share certificates representing shares will not be issued.
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust could, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. Even
S-62
<PAGE>
if, however, the Trust were held to be a partnership, the possibility of its
shareholders incurring financial loss for that reason appears remote because the
Trust's Declaration of Trust contains an express disclaimer of shareholder
liability for obligations of the Trust and requires that notice of such
disclaimer be given in each agreement, obligation or instrument entered into or
executed by or on behalf of the Trust or the Trustees, and because the
Declaration of Trust provides for indemnification out of the Trust property for
any shareholder held personally liable for the obligations of the Trust.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his or
her own willful defaults and, if reasonable care has been exercised in the
selection of officers, agents, employees or investment advisers, shall not be
liable for any neglect or wrongdoing of any such person. The Declaration of
Trust also provides that the Trust will indemnify its Trustees and officers
against liabilities and expenses incurred in connection with actual or
threatened litigation in which they may be involved because of their offices
with the Trust unless it is determined in the manner provided in the Declaration
of Trust that they have not acted in good faith in the reasonable belief that
their actions were in the best interests of the Trust. However, nothing in the
Declaration of Trust shall protect or indemnify a Trustee against any liability
for his willful misfeasance, bad faith, gross negligence or reckless disregard
of his duties.
5% AND 25% SHAREHOLDERS
As of May 5, 2000, the following persons were the only persons who were record
owners (or to the knowledge of the Trust, beneficial owners) of 5% and 25% or
more of the shares of the Portfolios. Persons who owned of record or
beneficially more than 25% of a Fund's outstanding shares may be deemed to
control the Fund within the meaning of the Act. The Trust believes that most of
the shares referred to below were held by the below persons in account for their
fiduciary, agency or custodial customers.
GOLDEN OAK PRIME OBLIGATION MONEY MARKET PORTFOLIO--INSTITUTIONAL:
Citizens Bank, c/o Trust Operations 332021, 101 N. Washington Ave., Saginaw, MI
48607-1206, 98.00%.
GOLDEN OAK PRIME OBLIGATION MONEY MARKET PORTFOLIO--CLASS A:
Bruce B. Mackey Tr., Bruce B. Mackey Trust, 3181 Tri Park Drive, Grand Blanc, MI
48439-7088, 5.89%;
Robert B. Mackey Tr., Robert B Mackey Revoc Trust, 6166 Eastknoll Dr., Grand
Blanc, MI 48439-5001, 8.65%
Invesco Trust Co., The Citizens Banking Corporation, Preferred Savings Plan,
P.O. Box 77405, Atlanta, GA 30357-1405, 29.88%.
GOLDEN OAK MICHIGAN TAX FREE BOND PORTFOLIO--INSTITUTIONAL:
Citizens Bank, c/o Trust Operations 332021, 101 N. Washington Ave., Saginaw, MI
48607-1206, 98.96%.
S-63
<PAGE>
GOLDEN OAK MICHIGAN TAX FREE BOND PORTFOLIO--CLASS A:
Dana A. Czmer, FBO The Dana A. Czmer Trust, 532 Ashwood, Flushing, MI
48433-1329, 12.04%;
John W. Ennest, The John W. Ennest Trust, 5412 Pepper Mill, Grand Blanc, MI
48439-1947, 7.08%;
Donaldson Lufkin Jenrette, Securities Corporation Inc., P.O. Box 2052, Jersey
City, NJ 07303-2052, 39.80%.
GOLDEN OAK INTERMEDIATE-TERM INCOME PORTFOLIO--INSTITUTIONAL:
Citizens Bank, c/o Trust Operations 332021, 101 N. Washington Ave., Saginaw, MI
48607-1206, 96.77%.
GOLDEN OAK INTERMEDIATE-TERM INCOME PORTFOLIO--CLASS A:
SEI Trust Corporation, FBO Citizens Bank, attn: Mutual Fund Administrator, One
Freedom Valley Dr., Oaks, PA 19456, 8.56%.
Invesco Trust Co., The Citizens Banking Corporation, Preferred Savings Plan,
P.O. Box 77405, Atlanta, GA 30357-1405, 88.66%.
GOLDEN OAK GROWTH PORTFOLIO--INSTITUTIONAL:
Citizens Bank, c/o Trust Operations 332021, 101 N. Washington Ave., Saginaw, MI
48607-1206, 95.89%.
GOLDEN OAK GROWTH PORTFOLIO--CLASS A:
Invesco Trust Co., The Citizens Banking Corporation, Preferred Savings Plan,
P.O. Box 77405, Atlanta, GA 30357-1405, 89.70%.
GOLDEN OAK VALUE PORTFOLIO--INSTITUTIONAL:
Citizens Bank, c/o Trust Operations 332021, 101 N. Washington Ave., Saginaw, MI
48607-1206, 95.95%.
GOLDEN OAK VALUE PORTFOLIO--CLASS A:
Invesco Trust Co., The Citizens Banking Corporation, Preferred Savings Plan,
P.O. Box 77405, Atlanta, GA 30357-1405, 92.84%.
EXPERTS
The financial statements incorporated by reference into this Statement of
Additional Information have been incorporated by reference in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
FINANCIAL STATEMENTS
The audited financial statements of the Portfolios for the fiscal year ended
January 31, 2000, and the Report of Independent Accountants of
PricewaterhouseCoopers LLP dated March 15, 2000 relating to the financial
statements, including the financial highlights of the Portfolios are
incorporated herein by reference.
S-64
<PAGE>
APPENDIX
DESCRIPTION OF RATINGS
The following descriptions are summaries of published ratings.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
A-1 This is the highest category and indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation.
A-2 Capacity for timely payment on issues with this designation is satisfactory
and the obligation is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rating categories.
PRIME-1 Issues rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance on
debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of
assurance for timely payment. The rating Fitch-2 (Very Good Grade) is the second
highest commercial paper rating assigned by Fitch which reflects an assurance of
timely payment only slightly less in degree than the strongest issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff and
Phelps, Inc. ("Duff"). Paper rated Duff-1 is regarded as having very high
certainty of timely payment with excellent liquidity factors which are supported
by ample asset protection. Risk factors are minor. Paper rated Duff-2 is
regarded as having good certainty of timely payment, good access to capital
markets and sound liquidity factors and company fundamentals. Risk factors are
small.
A-1
<PAGE>
The designation A1 by IBCA Limited ("IBCA") indicates that the obligation is
supported by a very strong capacity for timely repayment. Those obligations
rated A1+ are supported by the highest capacity for timely repayment are
supported by a strong capacity for timely repayment, although such capacity may
be susceptible to adverse changes in business, economic or financial conditions.
The rating TBW-1 by Thomson BankWatch ("Thomson") indicates a very high
likelihood that principal and interest will be paid on a timely basis.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
Moody's highest rating for state and municipal and other short-term notes is
MIG-1 and VMIG-1. Short-term municipal securities rated MIG-1 or VMIG-1 are of
the best quality. They have strong protection from established cash flows of
funds for their servicing or from established and broad-based access to the
market for refinancing or both. Short-term municipal securities rated MIG-2 or
VMIG-2 are of high quality. Margins of protection are ample although not so
large as in the preceding group.
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in 3 years or less will likely receive a note rating.
Notes maturing beyond 3 years will most likely receive a long-term debt rating.
The following criteria will be used in making that assessment:
- Amortization schedule (the larger the final maturity relative to other
maturities, the more likely it will be treated as a note).
- Source of Payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).
S&P note rating symbols are as follows:
SP-1 Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
DESCRIPTION OF CORPORATE BOND RATINGS
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree. Debt rated A has a strong capacity
to pay interest and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions than
debt in higher rated categories. Debt rated BBB is regarded as having an
adequate capacity to pay interest and repay principal. Whereas it normally
A-2
<PAGE>
exhibits adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher rated categories. Debt
rated BB and B is regarded as having predominantly speculative characteristics
with respect to capacity to pay interest and repay principal. BB indicates the
least degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
Debt rated BB has less near-term vulnerability to default than other speculative
grade debt. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions that could lead to inadequate
capacity to meet timely interest and principal payments. The BB rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied BBB- rating. Debt rate B has greater vulnerability to default but
presently has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions would likely impair capacity
or willingness to pay interest and repay principal. The B rating category also
is used for debt subordinated to senior debt that is assigned an actual or
implied BB or BB- rating.
Bonds which are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. Bonds rated Aa by
Moody's are judged by Moody's to be of high quality by all standards. Together
with bonds rated Aaa, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities. Bonds which
are rated A possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Bonds which are rated Baa are considered as medium-grade obligations (I.E., they
are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Bonds which are rated Ba are
judged to have speculative elements; their future cannot be considered as
well-assured. Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in this class.
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
A-3
<PAGE>
Moody's bond ratings, where specified, are applied to senior bank obligations
and insurance company senior policyholder and claims obligations with an
original maturity in excess of one year. Obligations relying upon support
mechanisms such as letters-of-credit and bonds of indemnity are excluded unless
explicitly rated.
Obligations of a branch of a bank are considered to be domiciled in the country
in which the branch is located. Unless noted as an exception, Moody's rating on
a bank's ability to repay senior obligations extends only to branches located in
countries which carry a Moody's sovereign rating. Such branch obligations are
rated at the lower of the bank's rating or Moody's sovereign rating for the bank
deposits for the country in which the branch is located.
When the currency in which an obligation is denominated is not the same as the
currency of the country in which the obligation is domiciled, Moody's ratings do
not incorporate an opinion as to whether payment of the obligation will be
affected by the actions of the government controlling the currency of
denomination. In addition, risk associated with bilateral conflicts between an
investor's home country and either the issuer's home country or the country
where an issuer branch is located are not incorporated into Moody's ratings.
Moody's makes no representation that rated bank obligations or insurance company
obligations are exempt from registration under the U.S. Securities Act of 1933
or issued in conformity with any other applicable law or regulation. Nor does
Moody's represent that any specific bank or insurance company obligation is
legally enforceable or is a valid senior obligation of a rated issuer.
Moody's ratings are opinions, not recommendations to buy or sell, and their
accuracy is not guaranteed. A rating should be weighed solely as one factor in
an investment decision and you should make your own study and evaluation of any
issuer whose securities or debt obligations you consider buying or selling.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade, broadly
marketable, suitable for investment by trustees and fiduciary institutions
liable to but slight market fluctuation other than through changes in the money
rate. The prime feature of an AAA bond is a showing of earnings several times or
many times interest requirements, with such stability of applicable earnings
that safety is beyond reasonable question whatever changes occur in conditions.
Bonds rated AA by Fitch are judged by Fitch to be of safety virtually beyond
question and are readily salable, whose merits are not unlike those of the AAA
class, but whose margin of safety is less strikingly broad. The issue may be the
obligation of a small company, strongly secured but influenced as to rating by
the lesser financial power of the enterprise and more local type market.
Bonds rated A are considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
A-4
<PAGE>
Bonds rated BBB are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings. Bonds rated
BB are considered speculative. The obligor's ability to pay interest and repay
principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements. Bonds rated B are
considered highly speculative. While bonds in this class are currently meeting
debt service requirements, the probability of continued timely payment of
principal and interest reflects the obligor's limited margin of safety and the
need for reasonable business and economic activity throughout the life of the
issue.
Bonds rated Duff-1 are judged by Duff to be of the highest credit qualify with
negligible risk factors; only slightly more than U.S. Treasury debt. Bonds rated
Duff-2, 3 and 4 are judged by Duff to be of high credit quality with strong
protection factors. Risk is modest but may vary slightly from time to time
because of economic conditions.
Bonds rated BBB+, BBB, or BBB- are considered below average protection factors
but still considered sufficient for prudent investment. Considerable BBB
variability in risk during economic cycles. Bonds rated BB+, BB or BB- are
considered below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category.
Bonds rated B+, B or B- are considered below investment grade and possessing
risk that obligations will not be met when due. Financial protection factors
will fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the rating within
this category or into a higher or lower rating grade.
Obligations rated AAA by IBCA have the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial conditions are unlikely
to increase investment risk significantly. Obligations for which there is a very
low expectation of investment risk are rated AA by IBCA. Capacity for timely
repayment of principal and interest is substantial. Adverse changes in business,
economic or financial conditions may increase investment risk albeit not very
significantly. Bonds rated A are obligations for which there is a low
expectation of investment risk. Capacity for timely repayment of principal and
interest is strong, although adverse changes in business, economic or financial
conditions may lead to increased investment risk.
Bonds rated BBB are obligations for which there is currently a low expectation
of investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in business, economic or financial conditions
are more likely to lead to increased investment risk than for obligations in
other categories. Bonds rated BB
A-5
<PAGE>
are obligations for which there is a possibility of investment risk developing.
Capacity for timely repayment of principal and interest exists, but is
susceptible over time to adverse changes in business, economic or financial
conditions. Bonds rated B are obligations for which investment risk exists.
Timely repayment of principal and interest is not sufficiently protected against
adverse changes in business, economic or financial conditions.
Bonds rated AAA by Thomson BankWatch indicate that the ability to repay
principal and interest on a timely basis is very high. Bonds rated AA indicate a
superior ability to repay principal and interest on a timely basis, with limited
incremental risk compared to issues rated in the highest category. Bonds rated A
indicate the ability to repay principal and interest is strong. Issues rated A
could be more vulnerable to adverse developments (both internal and external)
than obligations with higher ratings.
Bonds rated BBB indicate an acceptable capacity to repay principal and interest.
Issues rated "BBB" are, however, more vulnerable to adverse developments (both
internal and external) than obligations with higher ratings.
While not investment grade, the BB rating suggests that the likelihood of
default is considerably less than for lower-rated issues. However, there are
significant uncertainties that could affect the ability to adequately service
debt obligations. Issues rated B show a higher degree of uncertainty and
therefore greater likelihood of default than higher-rated issues. Adverse
developments could well negatively affect the payment of interest and principal
on a timely basis.
A-6
<PAGE>
OVB FAMILY OF FUNDS
Trust: THE ARBOR FUND
Portfolios: OVB EQUITY INCOME PORTFOLIO
OVB CAPITAL APPRECIATION PORTFOLIO
OVB GOVERNMENT SECURITIES PORTFOLIO
OVB WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO
OVB PRIME OBLIGATIONS PORTFOLIO
Investment Adviser: ONE VALLEY BANK, NATIONAL ASSOCIATION
STATEMENT OF ADDITIONAL INFORMATION
This STATEMENT OF ADDITIONAL INFORMATION is not a prospectus; it provides
information about the activities and operations of the OVB Family of Funds (the
"Funds"), a group of mutual funds consisting of separate series of The Arbor
Fund (the "Trust"). This Statement of Additional Information should be read in
conjunction with the Funds' Prospectus dated May 31, 2000. A Prospectus may be
obtained by calling 1-800-545-6331.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
THE FUNDS AND THE TRUST................................................S-3
INVESTMENT OBJECTIVES..................................................S-3
INVESTMENT POLICIES AND INFORMATION....................................S-4
GENERAL INVESTMENT POLICIES AND RISK FACTORS...........................S-8
DESCRIPTION OF PERMITTED INVESTMENTS..................................S-11
INVESTMENT LIMITATIONS................................................S-25
THE ADVISER...........................................................S-28
THE SUB-ADVISER.......................................................S-29
THE ADMINISTRATOR.....................................................S-30
THE DISTRIBUTOR.......................................................S-31
THE TRANSFER AGENT....................................................S-33
THE CUSTODIAN.........................................................S-33
INDEPENDENT ACCOUNTANTS...............................................S-33
LEGAL COUNSEL.........................................................S-33
TRUSTEES AND OFFICERS OF THE TRUST....................................S-33
PERFORMANCE INFORMATION...............................................S-36
COMPUTATION OF YIELD..................................................S-37
CALCULATION OF TOTAL RETURN...........................................S-39
PURCHASE AND REDEMPTION OF SHARES.....................................S-39
DETERMINATION OF NET ASSET VALUE......................................S-40
TAXES.................................................................S-41
PORTFOLIO TRANSACTIONS................................................S-45
TRADING PRACTICES AND BROKERAGE.......................................S-46
</TABLE>
<PAGE>
DESCRIPTION OF SHARES.................................................S-49
SHAREHOLDER LIABILITY.................................................S-50
LIMITATION OF TRUSTEES' LIABILITY.....................................S-50
5% AND 25% SHAREHOLDERS...............................................S-50
EXPERTS...............................................................S-51
FINANCIAL STATEMENTS..................................................S-51
DESCRIPTION OF RATINGS.................................................A-1
May 31, 2000
OVB-F-003-08
S-2
<PAGE>
THE FUNDS AND THE TRUST
This Statement of Additional Information relates to the OVB Family of Funds (the
"Funds"), a group of mutual funds. The Funds consist of: the OVB Equity Income
Portfolio, the OVB Capital Appreciation Portfolio, the OVB Government Securities
Portfolio (the "Government Portfolio"), the OVB West Virginia Tax-Exempt Income
Portfolio (the "West Virginia Portfolio") and the OVB Prime Obligations
Portfolio (the "Prime Obligations Portfolio") (each, a "Portfolio," and
collectively the "Portfolios"). The Portfolios may also be referred to as
follows: the Equity Income and Capital Appreciation Portfolios as the "Equity
Portfolios," the Government and West Virginia Portfolios as the "Fixed Income
Portfolios" and the Prime Obligations Portfolio as the "Money Market Portfolio."
For ease of reference, the letters "OVB" have been omitted from the Portfolios'
names throughout this Statement of Additional Information. Each Portfolio is a
separate series of The Arbor Fund (the "Trust"). The Trust is an open-end
management investment company established under Massachusetts law as a
"Massachusetts business trust" under an Agreement and Declaration of Trust dated
as of July 24, 1992 (the "Declaration of Trust"). The Declaration of Trust
permits the Trust to offer separate series of units of beneficial interest
("shares") and different classes of shares of each series. Each series is a
separate mutual fund. Except for differences between the Class A and Class B
shares of the Portfolios pertaining to dividends, voting rights and distribution
plans, each share of each Portfolio represents an equal proportionate interest
in that Portfolio. See "Description of Shares." Capitalized terms not defined
herein are defined in the Prospectus. No investment in shares of a Portfolio
should be made without first reading the Prospectus.
Each Portfolio pays its operating expenses, including fees of its service
providers, audit and legal expenses, expenses of preparing prospectuses, proxy
solicitation material and reports to shareholders, costs of custodial services
and registering the shares under federal and state securities laws, pricing and
insurance expenses, and pays additional expenses including litigation and other
extraordinary expenses, brokerage costs, interest charges, taxes and
organization expenses.
INVESTMENT OBJECTIVES
The EQUITY INCOME PORTFOLIO -- The investment objective of the Equity Income
Portfolio is current income, with the secondary goal of moderate capital
appreciation.
The CAPITAL APPRECIATION PORTFOLIO -- The investment objective of each of the
Capital Appreciation Portfolio is long-term growth of capital.
The GOVERNMENT PORTFOLIO -- The investment objective of the Government Portfolio
is current income consistent with the preservation of capital.
The WEST VIRGINIA PORTFOLIO -- The investment objective of the West Virginia
Portfolio is current income, exempt from both federal income taxes and West
Virginia personal income taxes, consistent with the preservation of capital.
S-3
<PAGE>
The PRIME OBLIGATIONS PORTFOLIO -- The investment objective of the Prime
Obligations Portfolio is to preserve principal value and maintain a high degree
of liquidity while providing current income. The Portfolio also expects to
maintain a constant net asset value of $1.00 per share on a continuous basis.
Each Portfolio's investment objective is a fundamental policy of that Portfolio,
and it is a fundamental policy of the West Virginia Portfolio to invest at least
80% of its net assets in Municipal Securities the interest on which is not an
alternative minimum tax preference item. Fundamental policies of a Portfolio
cannot be changed with respect to that Portfolio without the consent of the
holders of a majority of the Portfolio's outstanding shares. There can be no
assurance that any Portfolio will be able to achieve its investment objective.
INVESTMENT POLICIES AND INFORMATION
OVB EQUITY INCOME PORTFOLIO
The EQUITY INCOME PORTFOLIO will, under normal market conditions, invest at
least 65% of its total assets in dividend-paying common stocks, preferred
stocks, and preferred stocks and debt securities convertible into common stock
of U.S. and foreign issuers. These equity securities may include American
Depositary Receipts ("ADRs") and interests of investment trusts, such as
"Diamonds" and "SPDRs."
Any remaining assets may be invested in the following securities, but only if,
at the time of purchase, the security either has the requisite rating from a
nationally recognized statistical rating organization (an "NRSRO") or is of
comparable quality as determined by the Adviser: (i) U.S. Government securities
(ii) mortgage-backed securities rated in one of the four highest rating
categories, (iii) asset-backed securities rated in one of the four highest
rating categories, (iv) corporate bonds and notes and bank obligations rated in
one of the four highest rating categories, (v) money market instruments, (vi)
warrants and rights to purchase common stocks and (vii) shares of other
investment companies.
The Portfolio may purchase securities that do not pay current dividends but
which offer prospects for growth of capital and future income. The Portfolio is
not subject to any maturity restrictions on its investment in non-money market
instruments.
The Adviser will generally select for the Portfolio, securities of companies
with market capitalizations in excess of $5 billion that provide a level of
income which is greater than the average income provided by the Standard &
Poor's 500 Composite Index (the "S&P 500 Index"). The Adviser also intends to
maintain for the Portfolio an aggregate beta (a measure of a stock's volatility
in relation to the S&P 500 Index) and price/earnings ratio less than the S&P 500
Index average.
All of the equity securities in which the Portfolio invests (including foreign
securities) are traded in the United States or Canada either on registered
exchanges or actively in the over-the-counter market.
S-4
<PAGE>
OVB CAPITAL APPRECIATION PORTFOLIO
The CAPITAL APPRECIATION PORTFOLIO will, under normal market conditions, invest
at least 65% of its total assets in common stocks, warrants to purchase common
stocks, debt securities convertible to common stocks, preferred stocks
convertible to common stocks and interests in investment trusts, such as
Diamonds and SPDRs (together, "Equity Securities") of U.S. and foreign issuers.
Equity Securities of foreign issuers may include ADRs. Any assets not invested
in Equity Securities may be invested in money market instruments.
The Adviser will generally select for the Capital Appreciation Portfolio
securities of large- and medium-sized companies that have exhibited an
established record of growth and that, in the Adviser's opinion, will continue
to present significant growth potential. Such companies generally have market
capitalizations in excess of $1 billion, and annual revenues in excess of $500
million. The Adviser may also seek to increase potential returns by identifying
"niche" companies in diverse industries and by identifying demographic,
economic, and political trends that will provide future investment
opportunities. The Adviser may consider factors such as an issuer's development
(or potential for development) of new products, any new management, or any
business restructuring, and may also consider the potential for increased
institutional ownership. The Adviser may, but will not necessarily, consider
dividend income when selecting Equity Securities for the Portfolio.
All of the Equity Securities in which the Capital Appreciation Portfolio invests
(including foreign securities) are traded in the United States or Canada either
on registered exchanges or actively in the over-the-counter market.
OVB GOVERNMENT SECURITIES PORTFOLIO
The GOVERNMENT PORTFOLIO will, under normal market conditions, invest at least
65% of its total assets in obligations issued or guaranteed as to principal and
interest by the United States Government, its agencies or instrumentalities
("U.S. Government securities"), including U.S. Treasury obligations, U.S.
Government agency obligations and repurchase agreements involving such
securities. For a more detailed description, see "Description of Permitted
Investments." The remainder of the Portfolio's assets may be invested in the
following securities but only if, at the time of purchase, the security either
has the requisite rating from an NRSRO or is of comparable quality as determined
by the Adviser: (i) corporate fixed income obligations rated in one of the four
highest rating categories by an NRSRO; (ii) privately issued mortgage-backed
securities rated in one of the two highest rating categories by an NRSRO; (iii)
asset-backed securities rated in one of the two highest rating categories by an
NRSRO; (iv) receipts evidencing separately traded interest and principal
component parts of U.S. Government securities, including STRIPs ("Receipts");
(v) repurchase agreements involving any of the foregoing securities; (vi)
investment quality guaranteed investment contracts; (vii) common stocks of
utility companies; (viii) preferred stocks; (ix) taxable municipal securities
rated in one of the two highest rating categories by an NRSRO; and (x) Money
Market Instruments.
S-5
<PAGE>
The Government Portfolio will not invest more than 20% of its total assets in
common and preferred stocks of utility companies. In addition the Government
Portfolio may invest up to 5% of its total assets in preferred stocks of issuers
in other industries.
Normally, the Portfolio will maintain a dollar-weighted average portfolio
maturity of three to ten years, and the Adviser generally expects this maturity
to range from five to ten years; however, under certain circumstances this
weighted average maturity may fall below three years or rise above ten years. In
determining the maturity of mortgage-backed securities, the Adviser will use the
estimated average life of such securities. There are no restrictions on the
maturity of any single instrument.
OVB WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO
The WEST VIRGINIA PORTFOLIO will, under normal market conditions, invest at
least 80% of its net assets in fixed income securities the interest on which, in
the opinion of bond counsel for the issuer, is exempt from federal income tax
and is not a preference item for purposes of the federal alternative minimum tax
("Municipal Securities"). Under normal conditions, the Portfolio will invest at
least 65% of its total assets in Municipal Securities the interest on which is
also exempt from West Virginia personal income tax ("West Virginia Municipal
Securities"). The Portfolio reserves the right to invest up to 20% of its net
assets in (i) Municipal Securities the interest on which is a preference item
for federal alternative minimum tax purposes and (ii) taxable investments
consisting of the types of securities in which the Government Portfolio may
invest. For temporary defensive purposes when, in the opinion of the Adviser,
West Virginia Municipal Securities are not readily available or of sufficient
quality, the Portfolio may invest up to 100% of its assets in securities the
interest on which is exempt only from federal income taxes; other permissible
temporary defensive investments, which are taxable, are discussed in
"Description of Permitted Investments -- Special Factors Relating to West
Virginia Municipal Securities" in this Statement of Additional Information.
The West Virginia Portfolio may purchase the following types of Municipal
Securities (including West Virginia Municipal Securities) only if such
securities, at the time of purchase, either have the requisite rating from an
NRSRO or are of comparable quality as determined by the Adviser: (i) municipal
bonds in one of the four highest rating categories; (ii) municipal notes and
certificates of participation in one of the two highest rating categories; and
(iii) tax-exempt commercial paper in one of the two highest rating categories.
The Portfolio may also purchase other types of tax-exempt instruments provided
that, at the time of their purchase, the Adviser determines that they are of
quality comparable to the ratings stated above.
The Portfolio reserves the right to engage in transactions involving "puts" or
standby commitments. There will be no limit to the percentage of portfolio
securities that the West Virginia Portfolio may purchase subject to a put but
the amount paid directly or indirectly for puts which are not integral parts of
the security as originally held in the Portfolio will not exceed 0.5% of the
value of the total assets of the Portfolio calculated immediately after such put
is acquired. When entering into standby commitments, the Portfolio will set
aside sufficient assets to pay for all standby commitments on their scheduled
delivery dates.
S-6
<PAGE>
NON-DIVERSIFICATION -- Investment in the West Virginia Portfolio, a
non-diversified investment company, may entail greater risk than would
investment in a diversified investment company because the concentration in
securities of relatively few issuers could result in greater fluctuation in the
total market value of the Portfolio's holdings. Any economic, political, or
regulatory developments affecting the value of the securities that the Portfolio
holds could have a greater impact on the total value of the Portfolio's holdings
than would be the case if the portfolio securities were diversified among more
issuers.
The Portfolio intends to comply with the diversification requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
OVB PRIME OBLIGATIONS PORTFOLIO
The PRIME OBLIGATIONS PORTFOLIO intends to comply with regulations of the
Securities and Exchange Commission applicable to money market funds. These
regulations impose certain quality, maturity and diversification restraints on
investments by the Portfolio. Under these regulations, the Portfolio will invest
in only United States dollar denominated securities, will maintain a
dollar-weighted average portfolio maturity of 90 days or less, and will acquire
only "eligible securities" having a maturity of 397 days or less, as defined by
Rule 2a-7 under the Investment Company Act of 1940 ("Rule 2a-7"). As a money
market fund, the Portfolio is subject to additional diversification
requirements. See "Description of Permitted Investments-- Restraints on
Investments by Money Market Funds."
The Prime Obligations Portfolio intends to invest exclusively in (i) bills,
notes, and bonds issued by the U.S. Treasury and separately traded interest and
principal component parts of such obligations that are transferable through the
Federal Book-Entry System ("U.S. Treasury Obligations"); (ii) obligations issued
or guaranteed as to principal and interest by the agencies or instrumentalities
of the United States Government; (iii) receipts evidencing separately traded
interest and principal component parts of the U.S. Government obligations; (iv)
commercial paper of United States or foreign issuers, including asset-backed
securities rated in the two highest short-term rating categories at the time of
investment or, if not rated, as determined by the sub-adviser to be of
comparable quality; (v) obligations (certificates of deposit, bank notes, time
deposits, bankers' acceptances, European certificates of deposit, European time
deposits, Canadian time deposits, Eurodollar obligations and Yankee Bank
obligations) of U.S. and foreign savings and loan institutions and commercial
banks (including foreign branches of such banks) that have total assets of $1
billion or more as shown on their most recently published financial statements;
(vi) U.S. dollar denominated obligations of foreign governments including
Canadian and Provincial Government and Crown Agency obligations; (vii)
short-term corporate obligations, including asset-backed securities, of United
States and foreign issuers with commercial paper of comparable quality and
security that meet the above ratings or, if not rated, determined by the
sub-adviser to be of comparable quality; (viii) repurchase agreements involving
any of the foregoing obligations; (ix) short-term obligations issued by state
and local governmental issuers, which are rated, at the time of investment, by
at least two NRSROs in one of the two highest municipal bond rating categories,
and carry yields that are competitive with those of other types of money market
instruments of comparable quality and security that meet the above ratings or,
if not rated, determined by the sub-adviser to be of comparable quality; (x)
S-7
<PAGE>
obligations of supranational entities satisfying the credit standards described
above or, if not rated, determined by the Adviser to be of comparable quality;
and (xi) shares of other investment companies. Under applicable law, the
Portfolio may not invest more than 10% of its total assets in shares of other
investment companies, and investment in such shares may result in layering of
expenses.
The Portfolio may invest up to 10% of its net assets in illiquid securities,
including restricted securities. Restricted securities, including Rule 144A
Securities and Section 4(2) commercial paper, that meet the criteria established
by the Board of Trustees of the Trust will be considered liquid.
The Portfolio may also engage in forward commitments or purchase securities on a
when-issued basis.
GENERAL INVESTMENT POLICIES AND RISK FACTORS
The Equity Income Portfolio and the Government and West Virginia Portfolios
("Fixed Income Portfolios") may purchase mortgage-backed securities ("MBSs").
These Portfolios may purchase MBSs that are U.S. Government securities, and the
Government Portfolio may also invest in privately issued collateralized mortgage
obligations ("CMOs"), a type of MBS, and real estate mortgage investment
conduits ("REMICs"), a type of CMO, that are rated by an NRSRO in one of its two
highest rating categories. The Equity Income Portfolio may also invest in
privately issued CMOs and REMICs that are rated by an NRSRO in one of the four
highest rating categories. The principal governmental issuers or guarantors of
MBSs are the Government National Mortgage Association ("GNMA"), Federal National
Mortgage Association ("FNMA"), and Federal Home Loan Mortgage Corporation
("FHLMC"). Obligations of GNMA are backed by the full faith and credit of the
United States Government while obligations of FNMA or FHLMC are supported by the
respective issuer only. The Portfolios may purchase MBSs that are backed or
collateralized by fixed, adjustable or floating rate mortgages. For a further
description of mortgage-backed securities and the risks associated with
investing in them, see "Description of Permitted Investments."
The Fixed Income Portfolios may, in acquiring fixed income securities, seek
opportunities for capital gain as well as income in light of such Portfolios'
investment objectives. Investors in the West Virginia Portfolio should note that
capital gains are taxable income. Appreciation in the value of these securities
could arise from a number of market and economic factors, such as changes in
interest rates generally or in the yield curve, improvement in an issuer's
financial situation or perceptions in the market about the impact of economic
developments on particular issuers or industries. There is no assurance that any
Portfolio will, in fact, realize capital gains.
The Equity Income, Fixed Income and Prime Obligations Portfolios may invest in
variable and floating rate obligations and may purchase securities on a
when-issued basis. The Equity Income Portfolio may also engage in forward
commitments. The Equity Portfolios and the Government Portfolio may engage in
options transactions, and the Equity Income and Government Portfolios may also
engage in futures transactions (including options on futures), in either case
for hedging purposes. The aggregate value of option positions may not exceed 10%
of a Portfolio's net assets
S-8
<PAGE>
as of the time the Portfolio enters into such options. Each Portfolio except the
Prime Obligations Portfolio may use short sales "against the box" for hedging
purposes.
Each Portfolio reserves the right to engage in securities lending, although no
Portfolio has the present intent of doing so.
Each Portfolio other than the Prime Obligations Portfolio may invest a portion
of its assets in the following money market instruments ("Money Market
Instruments"): short-term U.S. Government securities; Receipts; time deposits,
certificates of deposit and bankers' acceptances issued by U.S. commercial banks
or savings and loan institutions having assets of at least $500 million as shown
on their most recently available audited financial statements; commercial paper
that, at the time of purchase, is either rated in one of the two highest rating
categories by an NRSRO or of comparable quality as determined by the Adviser;
and repurchase agreements involving the foregoing securities. In addition, each
Portfolio may invest in shares of other investment companies. Under applicable
law, no Portfolio may invest more than 10% of its total assets in shares of
other investment companies, and investments in such shares may result in
layering of expenses. Further discussion of a Portfolio's ability to invest in
such shares is set out in this Statement of Additional Information. In addition,
for temporary defensive purposes when the Adviser and/or the Sub-Adviser
determines that market conditions warrant, each Portfolio may invest up to 100%
of its assets in Money Market Instruments and cash or cash equivalents. To the
extent a Portfolio is investing for temporary defensive purposes, the Portfolio
will not be pursuing its investment objective.
For a further description of these types of obligations or transactions, see
"Description of Permitted Investments" in this Statement of Additional
Information.
Debt rated in the fourth highest category by an NRSRO is regarded as having an
adequate capacity to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher rated categories. Such
debt lacks outstanding investment characteristics and in fact has speculative
characteristics as well.
In the event that a security owned by a Portfolio is downgraded below the rating
categories discussed above, the Adviser will review the circumstances and take
action it deems appropriate with respect to such security.
RISK FACTORS
EQUITY SECURITIES--Investments in equity securities in general are subject to
market risks that may cause their prices to fluctuate over time. The value of
convertible equity securities is also affected by prevailing interest rates, the
credit quality of the issuer and any call provision. Fluctuations in the value
of equity securities in which the Equity Portfolios invest will cause the net
asset value of these Portfolios to fluctuate. An investment in any of these
Portfolios may be more suitable for long-term investors who can bear the risk of
short-term principal fluctuations.
S-9
<PAGE>
The Capital Appreciation and Equity Income Portfolios will invest primarily in
securities of large- and medium-sized companies. While the Adviser intends to
invest each Portfolio's assets in companies that the Adviser's research
indicates should, over the long term, provide significant growth potential, any
investment in medium capitalization companies involves greater risk than that
customarily associated with investments in larger, more established companies.
This increased risk may be due to the greater business risks of smaller size,
limited markets and financial resources, narrow product lines and lack of depth
of management. The securities of medium-sized companies are often traded in the
over-the-counter market and if listed on a national securities exchange may not
be traded in volumes typical for that exchange. Thus, the securities of
medium-sized companies are likely to be less liquid, and subject to more abrupt
or erratic market movements, than securities of larger, more established
companies. As a result, the value of the shares of either of these Portfolios
can be expected to fluctuate more than the value of shares of an investment
company investing solely in larger, more established companies.
FIXED INCOME SECURITIES--The market value of the fixed income investments in
which the Fixed Income and Prime Obligations Portfolios invest will change in
response to interest rate changes and other factors. During periods of falling
interest rates, the values of outstanding fixed income securities generally
rise. Conversely, during periods of rising interest rates, the values of such
securities generally decline. Moreover, while securities with longer maturities
tend to produce higher yields, the prices of longer maturity securities are also
subject to greater market fluctuations as a result of changes in interest rates.
Changes by recognized agencies in the rating of any fixed income security and in
the ability of an issuer to make payments of interest and principal also affect
the value of these investments. Changes in the value of these securities will
not necessarily affect cash income derived from these securities but will affect
a Portfolio's net asset value. Each of the Fixed Income Portfolios may invest in
securities rated in the fourth highest category by an NRSRO; such securities,
while still investment grade, are considered to have speculative
characteristics. See the Appendix.
SECURITIES OF FOREIGN ISSUERS--Investments in the securities of foreign issuers
may subject an Equity Portfolio or the Money Market Portfolio to investment
risks that differ in some respects from those related to investments in
securities of U.S. issuers. Such risks include future adverse political and
economic developments, possible imposition of withholding taxes on income,
possible seizure, nationalization or expropriation of foreign deposits, possible
establishment of exchange controls or taxation at the source or greater
fluctuation in value due to changes in exchange rates. Foreign issuers of
securities often engage in business practices different from those of domestic
issuers of similar securities, and there may be less information publicly
available about foreign issuers. In addition, foreign issuers are, generally
speaking, subject to less government supervision and regulation and different
accounting treatment than are those in the United States. ADRs, typically issued
by a U.S. financial institution, evidence ownership of underlying securities of
a foreign issuer.
MORTGAGE-BACKED SECURITIES--The MBSs in which the Equity Income Portfolio and
the Fixed Income Portfolios may invest are subject to prepayment of the
underlying mortgages. During periods of declining interest rates, prepayment of
mortgages underlying MBSs can be expected to accelerate. When the MBSs held by a
Portfolio are prepaid, the Portfolio must reinvest the
S-10
<PAGE>
proceeds in securities, the yield of which reflects prevailing interest rates,
which may be lower than the yield on the prepaid MBSs.
GOVERNMENT SECURITIES--Any guarantee by the U.S. Government or its agencies or
instrumentalities of the securities in which any Portfolio invests guarantees
only the payment of principal and interest on the guaranteed security and does
not guarantee the yield or value of that security or the yield or value of
shares of that Portfolio.
DESCRIPTION OF PERMITTED INVESTMENTS
AMERICAN DEPOSITARY RECEIPTS ("ADRS")
ADRs are securities, typically issued by a U.S. financial institution (a
"depositary"), that evidence ownership interests in a security or a pool of
securities issued by a foreign issuer and deposited with the depositary. ADRs
may be available through "sponsored" or "unsponsored" facilities. A sponsored
facility is established jointly by the issuer of the security underlying the
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. Holders of an unsponsored depositary receipt generally bear all the
costs of the unsponsored facility. The depositary of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through, to the
holders of the receipts, voting rights with respect to the deposited securities.
ASSET-BACKED SECURITIES
Asset-backed securities are securities secured by non-mortgage assets such as
company receivables, truck and auto loans, leases and credit card receivables.
Such securities are generally issued as passthrough certificates, which
represent undivided fractional ownership interests in the underlying pools of
assets. Such securities also may be debt instruments, which are also known as
collateralized obligations and are generally issued as the debt of a special
purpose entity, such as a trust, organized solely for the purpose of owning such
assets and issuing such debt.
Asset-backed securities are not issued or guaranteed by the United States
Government or its agencies or instrumentalities; however, the payment of
principal and interest on such obligations may be guaranteed up to certain
amounts and for a certain period by a letter of credit issued by a financial
institution (such as a bank or insurance company) unaffiliated with the issuers
of such securities. The purchase of asset-backed securities raises risk
considerations peculiar to the financing of the instruments underlying such
securities. For example, there is a risk that another party could acquire an
interest in the obligations superior to that of the holders of the asset-backed
securities. There also is the possibility that recoveries on repossessed
collateral may not, in some cases, be available to support payments on those
securities. Asset-backed securities entail prepayment risk, which may vary
depending on the type of asset, but is generally less than the prepayment risk
associated with mortgage-backed securities. In addition, credit card receivables
are unsecured obligations of the card holder.
S-11
<PAGE>
The market for asset-backed securities is at a relatively early stage of
development. Accordingly, there may be a limited secondary market for such
securities.
BANK OBLIGATIONS
The Portfolios are not prohibited from investing in obligations of banks that
are clients of SEI Corporation ("SEI"). However, the purchase of shares of the
Portfolios by such banks or by their customers will not be a consideration in
determining which bank obligations the Portfolios will purchase. The Portfolios
will not purchase obligations of the Adviser.
BANKERS' ACCEPTANCE
Bankers' acceptances are bills of exchange or time drafts drawn on and accepted
by a commercial bank. Corporations finance the shipment and storage of goods and
to furnish dollar exchange through the use of bankers' acceptances. Maturities
are generally six months or less.
CERTIFICATE OF DEPOSIT
Certificates of deposit are interest-bearing instruments with a specific
maturity. They are issued by banks and savings and loan institutions in exchange
for the deposit of funds and normally can be traded in the secondary market
prior to maturity. Certificates of deposit with penalties for early withdrawal
will be considered illiquid.
COMMERCIAL PAPER
Commercial paper is a term used to describe unsecured short-term promissory
notes issued by corporations and other entities. Maturities on these issues vary
from a few to 270 days.
CONVERTIBLE SECURITIES
Convertible Securities are corporate securities that are exchangeable for a set
number of another security at a pre-stated price. Convertible securities
typically have characteristics of both fixed-income and equity securities.
Because of the conversion feature, the market value of convertible securities
tends to move with the market value of the underlying stock. The value of a
convertible security is also affected by prevailing interest rates, the credit
quality of the issuer, and any call provisions.
DERIVATIVES
Derivatives are securities that derive their value from other securities. The
following are considered derivative securities: options on futures, futures,
options (E.G., puts and calls), swap agreements, mortgage-backed securities
(CMOs, REMICs, IOs and POs), when-issued securities and forward commitments,
floating and variable rate securities, convertible securities, "stripped" U.S.
Treasury securities (E.G., Receipts and STRIPs), privately issued stripped
securities (E.G.,
S-12
<PAGE>
TGRs, TRs and CATS). See elsewhere in this "Description of Permitted
Investments" and "General Investment Policies and Risk Factors" for discussions
of these various instruments.
FUTURES AND OPTIONS ON FUTURES
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specific security at a specified future
time and at a specified price. An option on a futures contract gives the
purchaser the right, in exchange for a premium, to assume a position in a
futures contract at a specified exercise price during the term of the option. A
Portfolio may use futures contracts and related options for BONA FIDE hedging
purposes, to offset changes in the value of securities held or expected to be
acquired or be disposed of, to minimize fluctuations in foreign currencies, or
to gain exposure to a particular market or instrument. A Portfolio will minimize
the risk that it will be unable to close out a futures contract by only entering
into futures contracts that are traded on national futures exchanges.
Stock index futures are futures contracts for various stock indices that are
traded on registered securities exchanges. A stock index futures contract
obligates the seller to deliver (and the purchaser to take) an amount of cash
equal to a specific dollar amount times the difference between the value of a
specific stock index at the close of the last trading day of the contract and
the price at which the agreement is made.
There are risks associated with these activities, including the following: (1)
the success of a hedging strategy may depend on an ability to accurately predict
movements in the prices of individual securities, fluctuations in markets and
movements in interest rates, (2) there may be an imperfect or no correlation
between the changes in market value of the securities held by the Portfolio and
the prices of futures and options on futures, (3) there may not be a liquid
secondary market for a futures contract or option, (4) trading restrictions or
limitations may be imposed by an exchange, and (5) government regulations may
restrict trading in futures contracts and futures options.
A Portfolio may enter into futures contracts and options on futures contracts
traded on an exchange regulated by the Commodities Futures Trading Commission so
long as, to the extent that such transactions are not for "bona fide hedging
purposes," the aggregate initial margin and premiums on such positions
(excluding the amount by which such options are in the money) do not exceed 5%
of the Portfolio's net assets. A Portfolio may buy and sell futures contracts
and related options to manage its exposure to changing interest rates and
securities prices. Some strategies reduce a Portfolio's exposure to price
fluctuations, while others tend to increase its market exposure. Futures and
options on futures can be volatile instruments and involve certain risks that
could negatively impact a Portfolio's return.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
("GNMA") CERTIFICATES
All Portfolios may invest in securities issued by GNMA, a wholly-owned U.S.
Government corporation that guarantees the timely payment of principal and
interest. The market value and interest yield of these instruments can vary due
to market interest rate fluctuations and early
S-13
<PAGE>
prepayments of underlying mortgages. These securities represent ownership in a
pool of federally insured mortgage loans. GNMA certificates consist of
underlying mortgages with a maximum maturity of 30 years. However, due to
scheduled and unscheduled principal payments, GNMA certificates have a shorter
average maturity and, therefore, less principal volatility than a comparable
30-year bond. Since prepayment rates vary widely, it is not possible to predict
accurately the average maturity of a particular GNMA pool. The scheduled monthly
interest and principal payments relating to mortgages in the pool will be
"passed through" to investors. GNMA securities differ from conventional bonds in
that principal is paid back to the certificate holders over the life of the loan
rather than at maturity. As a result, there will be monthly scheduled payments
of principal and interest. In addition, there may be unscheduled principal
payments representing prepayments on the underlying mortgages. Although GNMA
certificates may offer yields higher than those available from other types of
U.S. Government securities, GNMA certificates may be less effective than other
types of securities as a means of "locking in" attractive long-term rates
because of the prepayment feature. For instance, when interest rates decline,
the value of a GNMA certificate likely will not rise as much as comparable debt
securities due to the prepayment feature. In addition, these prepayments can
cause the price of a GNMA certificate originally purchased at a premium to
decline in price to its par value, which may result in a loss.
GUARANTEED INVESTMENT CONTRACTS ("GICS")
GICs are contracts issued by U.S. insurance companies. Pursuant to such
contracts, a Portfolio makes cash contributions to a deposit fund of the
insurance company's general account. The insurance company then credits to the
Portfolio on a monthly basis guaranteed interest at either a fixed, variable or
floating rate. A GIC provides that this guaranteed interest will not be less
than a certain minimum rate. A GIC is a general obligation of the issuing
insurance company and not a separate account. The purchase price paid for a GIC
becomes part of the general assets of the issuer, and the contract is paid at
maturity from the general assets of the issuer.
Generally, GICs are not assignable or transferable without the permission of the
issuing insurance companies. For this reason, an active secondary market in GICs
does not currently exist and GICs are considered to be illiquid investments.
ILLIQUID SECURITIES
Illiquid securities are securities that a Portfolio cannot dispose of within 7
days at approximately the price at which they are being carried on the
Portfolio's books. An illiquid security includes a demand instrument with a
demand notice period exceeding seven days, where there is no secondary market
for such security, and repurchase agreements with maturities over seven days in
length.
INVESTMENT COMPANIES, INCLUDING DIAMONDS AND SPDRS
Because of restrictions on direct investment by U.S. entities in certain
countries, investment in other investment companies may be the most practical or
only manner in which a Portfolio can invest in the securities markets of those
countries. A Portfolio does not intend to invest in other
S-14
<PAGE>
investment companies unless, in the judgment of its advisers, the potential
benefits of such investments exceed the associated costs relative to the
benefits and costs associated with direct investments in the underlying
securities.
Investments in closed-end investment companies may involve the payment of
substantial premiums above the net asset value of such issuer's portfolio
securities, and are subject to limitations under the 1940 Act. As a shareholder
in an investment company, a Portfolio would bear its ratable share of that
investment company's expenses, including its advisory and administration fees. A
Portfolio may also incur tax liability to the extent it invests in the stock of
a foreign issuer that constitutes a "passive foreign investment company."
A Portfolio may purchase Dow Jones Industrial Average Model New Depositary
Shares ("Diamonds") and Standard & Poor's Depositary Receipts ("SPDRs").
Diamonds and SPDRs are securities that represent ownership in long-term unit
investment trusts ("UITs") that hold a portfolio of common stocks designed to
track the performance of the Dow Jones Industrial Average and Standard & Poor's
500 Composite Stock Price Index, respectively. The Portfolios' investments in
Diamonds and SPDRs are subject to limitations on investment in other investment
companies.
The prices of Diamonds and SPDRs are derived and based upon the securities held
by the particular UIT. Accordingly, the level of risk involved in the purchase
or sale of an SPDR is similar to the risk involved in the purchase or sale of
traditional common stock, with the exception that the pricing mechanism for
Diamonds and SPDRs is based on a basket of stocks. Disruptions in the markets
for the securities underlying Diamonds and SPDRs purchased or sold by a
Portfolio could result in losses. Trading in Diamonds and SPDRs involves risks
similar to those risks, described above under "Options," involved in the writing
of options on securities.
MORTGAGE-BACKED SECURITIES
Mortgage-backed securities are instruments that entitle the holder to a share of
all interest and principal payments from mortgages underlying the security. The
mortgages backing these securities include conventional thirty-year fixed-rate
mortgages, graduated payment mortgages and adjustable rate mortgages. During
periods of declining interest rates, prepayment of mortgages underlying
mortgage-backed securities can be expected to accelerate. Prepayment of
mortgages which underlie securities purchased at a premium often results in
capital losses, while prepayment of mortgages purchased at a discount often
results in capital gains. Because of these unpredictable prepayment
characteristics, it is often not possible to predict accurately the average life
or realized yield of a particular issue.
GOVERNMENT PASS-THROUGH SECURITIES -- These securities that are issued
or guaranteed by a U.S. Government agency represent an interest in a
pool of mortgage loans. The primary issuers or guarantors of these
mortgage-backed securities are GNMA, Fannie Mae and FHLMC. Fannie Mae
and FHLMC obligations are not backed by the full faith and credit of
the U.S. Government as GNMA certificates are, but Fannie Mae and FHLMC
securities are supported by the instrumentalities' right to borrow from
the U.S. Treasury. GNMA, Fannie Mae and FHLMC each guarantees timely
distributions of
S-15
<PAGE>
interest to certificate holders. GNMA and Fannie Mae also each
guarantees timely distributions of scheduled principal. FHLMC has in
the past guaranteed only the ultimate collection of principal of the
underlying mortgage loan; however, FHLMC now issues mortgage-backed
securities (FHLMC Gold PCs) which also guarantee timely payment of
monthly principal reductions. Government and private guarantees do not
extend to the securities' value, which is likely to vary inversely
with fluctuations in interest rates.
PRIVATE PASS-THROUGH SECURITIES -- These are mortgage-backed securities
issued by a nongovernmental entity, such as a trust. These securities
include collateralized mortgage obligations ("CMOs") and real estate
mortgage investment conduits ("REMICs"). 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.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOs") -- CMOs are debt
obligations or multiclass pass-through certificates issued by agencies
or instrumentalities of the U.S. Government or by private originators
or investors in mortgage loans. In a CMO, series of bonds or
certificates are usually issued in multiple classes. Principal and
interest paid on the underlying mortgage assets may be allocated among
the several classes of a series of a CMO in a variety of ways. Each
class of a CMO, often referred to as a "tranche," is issued with a
specific fixed or floating coupon rate and has a stated maturity or
final distribution date. Principal payments on the underlying mortgage
assets may cause CMOs to be retired substantially earlier than their
stated maturities or final distribution dates, resulting in a loss of
all or part of any premium paid.
REMICs -- 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. Investors may
purchase beneficial interests in REMICs, which are known as "regular"
interests, or "residual" interests. Guaranteed REMIC pass-through
certificates ("REMIC Certificates") issued by Fannie Mae, FHLMC or GNMA
represent beneficial ownership interests in a REMIC trust consisting
principally of mortgage loans or Fannie Mae, FHLMC or GNMA-guaranteed
mortgage pass-through certificates. For FHLMC REMIC Certificates, FHLMC
guarantees the timely payment of interest, and also guarantees the
payment of principal as payments are required to be made on the
underlying mortgage participation certificates. Fannie Mae REMIC
Certificates are issued and guaranteed as to timely distribution of
principal and interest by Fannie Mae. GNMA REMIC Certificates are
backed by the full faith and credit of the U.S. Government.
PARALLEL PAY SECURITIES; PAC BONDS -- Parallel pay CMOs and REMICs are
structured to provide payments of principal on each payment date to
more than one class. These simultaneous payments are taken into account
in calculating the stated maturity date or final distribution date of
each class, which must be retired by its stated maturity date or final
distribution date, but may be retired earlier. Planned Amortization
Class CMOs ("PAC Bonds") generally require payments of a specified
amount of principal on each payment date. PAC Bonds are always parallel
pay CMOs with the required principal payment on such securities having
the highest priority after interest has been paid to all
S-16
<PAGE>
classes.
REITs -- REITs are trusts that invest primarily in commercial real
estate or real estate-related loans. The value of interests in REITs
may be affected by the value of the property owned or the quality of
the mortgages held by the trust.
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
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 can experience wide swings in value in response to
changes in interest rates and associated mortgage prepayment rates.
During times when interest rates are experiencing fluctuations, such
securities can be difficult to price on a consistent basis. The market
for SMBs is not as fully developed as other markets; SMBs therefore may
be illiquid.
MUNICIPAL SECURITIES
Municipal securities consists of (i) debt obligations issued by or on behalf of
public authorities to obtain funds to be used for various public facilities, for
refunding outstanding obligations, for general operating expenses, and for
lending such funds to other public institutions and facilities, and (ii) certain
private activity and industrial development bonds issued by or on behalf of
public authorities to obtain funds to provide for the construction, equipment,
repair, or improvement of privately operated facilities.
General obligation bonds are backed by the taxing power of the issuing
municipality. Revenue bonds are backed by the revenues of a project or facility
(tolls from a toll bridge, for example). Certificates of participation represent
an interest in an underlying obligation or commitment such as an obligation
issued in connection with a leasing arrangement. The payment of principal and
interest on private activity and industrial development bonds generally is
dependent solely on the ability of the facility's user to meet its financial
obligations and the pledge, if any, of real and personal property so financed as
security for such payment.
Municipal securities include both municipal notes and municipal bonds. Municipal
notes include general obligation notes, tax anticipation notes, revenue
anticipation notes, bond anticipation notes, certificates of indebtedness,
demand notes and construction loan notes. Municipal bonds include general
obligation bonds, revenue or special obligation bonds, private activity and
industrial development bonds, and participation interests in municipal bonds.
SPECIAL FACTORS RELATING TO WEST-VIRGINIA MUNICIPAL SECURITIES -- Because the
West Virginia Portfolio invests primarily in West Virginia Municipal Securities,
the Portfolio is more susceptible to factors adversely affecting issuers of West
Virginia Municipal Securities than a mutual fund that does not invest as heavily
in such securities. Investors should consider carefully
S-17
<PAGE>
the special risks inherent in the Portfolio's investment in West Virginia
Municipal Securities including the risks of the West Virginia economy.
The West Virginia Constitution prohibits the issuance of debt, except as
authorized by constitutional amendment ratified by the voters. For general
obligation bonds, debt limits are established in the constitutional amendment
authorizing the debt. For special obligation bonds and mortgages, debt limits
are established at the individual issuer level, either by a ceiling on the
amount of bonds authorized or the amount of funding for debt service.
In 1994, the state established a rainy day reserve fund into which 50% of annual
surplus general fund revenues will be deposited until the reserve fund balance
reaches 5% of general fund appropriations. At September 30, 1999, the estimated
balance in the fund was $79 million. The state has upgraded its financial
management and reporting practices through its conversion to GAAP-based
accounting. The state also adopted policies to amortize large unfunded accrued
liabilities in its workers' compensation and teachers retirement funds over 40
years.
The Business and Occupation Tax, the Personal Income Tax, the Consumer Sales and
Service Tax, the Minerals Severance Tax, the Corporate Net Income Tax and the
Business Franchise Tax together provided nearly 90% of the revenue for the
General Revenue Fund in the 1998-1999 fiscal year. The amounts collected
pursuant to the business registration, cigarette, insurance, telecommunications,
inheritance, other taxes, liquor profits and racing fees constitute the
remainder of the General Revenue Fund.
The federal programs administered in West Virginia are a substantial part of the
operation of state government. Historically, federal grants have either been
part of an ongoing program, limited to a specific project or structured to
institute immediate state action. In all cases, they become due either
temporarily or permanently and are a significant feature of state services and
the budget process.
In the Year 2000 legislative session, the Legislature is expected to address
funding education reform, financial problems with the Public Employee Insurance
Agency and the potential loss of tax revenue resulting from a federal court
ruling limiting certain mining activities. The impact of these problems (or
attempts to resolve them) on the financial condition of West Virginia cannot be
determined at this time.
MUNICIPAL LEASES -- The West Virginia Portfolio may invest in instruments, or
participations in instruments, issued in connection with lease obligations or
installment purchase contract obligations of municipalities ("municipal lease
obligations"). Although municipal lease obligations do not constitute general
obligations of the issuing municipality, a lease obligation is ordinarily backed
by the municipality's covenant to budget for, appropriate funds for, and make
the payments due under the lease obligation. However, certain lease obligations
contain "non-appropriation" clauses, which provide that the municipality has no
obligation to make lease or installment purchase payments in future years unless
money is appropriated for such purpose in the relevant years. Municipal lease
obligations are a relatively new form of financing, and the market for such
obligations is still developing. Municipal leases will be treated as liquid only
if
S-18
<PAGE>
they satisfy criteria set forth in guidelines established by the Board of
Trustees, and there can be no assurance that a market will exist or continue to
exist for any municipal lease obligation.
PUT TRANSACTIONS (STANDBY COMMITMENTS) -- The West Virginia Portfolio reserves
the right to engage in put transactions. The Adviser has the authority to
purchase securities at a price that would result in a yield to maturity lower
than that generally offered by the seller at the time of purchase when the
Portfolio can simultaneously acquire the right to sell the securities back to
the seller, the issuer, or a third party (the "writer") at an agreed-upon price
at any time during a stated period or on a certain date. Such a right is
generally denoted as a "put" or "standby commitment." The purpose of engaging in
transactions involving puts is to maintain flexibility and liquidity so as to
permit the Portfolio to meet redemptions and remain as fully invested as
possible in Municipal Securities. The Portfolio's ability to put the securities
depends on the writer's ability to pay for the securities at the time the
Portfolio exercises the put. The Portfolio will engage in put transactions only
with institutions that the Adviser believes present minimal credit risks, and
the Adviser will use its best efforts to determine initially and continue to
monitor the financial strength of the sellers of the options in accordance with
credit guidelines adopted by the Trust's Board of Trustees. In the event that
any writer is unable to honor a put for financial reasons, the Portfolio would
be a general creditor (i.e., on a parity with all other unsecured creditors) of
the writer. Furthermore, particular provisions of the contract between the
Portfolio and the writer may excuse the writer from repurchasing the securities;
for example, a change in the published rating of the underlying securities or
any similar event that has an adverse effect on the issuer's credit or a
provision in the contract that the put will not be exercised except in certain
special cases, for example, to maintain portfolio liquidity. The Portfolio
could, however, at any time sell the underlying portfolio security in the open
market or wait until the portfolio security matures, at which time it should
realize the full par value of the security.
The securities purchased subject to a put may be sold to third persons at any
time, even though the put is outstanding, but the put itself, unless it is an
integral part of the security as originally issued, may not be marketable or
otherwise assignable. Therefore, the put would have value only to the Portfolio.
Sale of the securities to third parties or lapse of time with the put
unexercised may terminate the right to put the securities. Prior to the
expiration of any put option, the Portfolio could seek to negotiate terms for
the extension of such an option. If such a renewal cannot be negotiated on terms
satisfactory to the Portfolio, the Portfolio could, of course, sell the
security. The maturity of the underlying security will generally be different
from that of the put. There will be no limit to the percentage of portfolio
securities that the Portfolio may purchase subject to a put or a standby
commitment but the amount paid directly or indirectly for premiums on all puts
and standby commitments outstanding will not exceed 0.5% of the Portfolio's
total assets calculated immediately after any such put is acquired.
The Portfolio will consider the maturity of a security subject to a put to be
the first date on which the Portfolio has the right to demand payment from the
writer, even though the final maturity of the security will ordinarily be later
than such date.
S-19
<PAGE>
OPTIONS
A put option gives the purchaser of the option the right to sell, and the writer
the obligation to buy, the underlying security at the exercise price at any time
during the option period. A call option gives the purchaser of the option the
right to buy, and the writer of the option the obligation to sell, the
underlying security at the exercise price at any time during the option period.
The premium paid to the writer is the consideration for undertaking the
obligations under the option contract. The initial purchase (sale) of an option
contract is an "opening transaction." In order to close out an option position,
a Portfolio may enter into a "closing transaction"-- the sale (purchase) of an
option contract on the same security with the same exercise price and expiration
date as the option contract originally opened.
A Portfolio may purchase put and call options to protect against a decline in
the market value of the securities in its portfolio or to anticipate an increase
in the market value of securities that the Portfolio may seek to purchase in the
future. A Portfolio purchasing put and call options pays a premium therefor. If
price movements in the underlying securities are such that exercise of the
options would not be profitable for the Portfolio, loss of the premium paid may
be offset by an increase in the value of the Portfolio's securities or by a
decrease in the cost of acquisition of securities by the Portfolio.
A Portfolio may write covered call options as a means of increasing the yield on
its portfolio and as a means of providing limited protection against decreases
in its market value. When a Portfolio sells an option, if the underlying
securities do not increase or decrease to a price level that would make the
exercise of the option profitable to the holder thereof, the option generally
will expire without being exercised and the Portfolio will realize as profit the
premium received for such option. When a call option of which a Portfolio is the
writer is exercised, the Portfolio will be required to sell the underlying
securities to the option holder at the strike price, and will not participate in
any increase in the price of such securities above the strike price. When a put
option of which a Portfolio is the writer is exercised, the Portfolio will be
required to purchase the underlying securities at the strike price, which may be
in excess of the market value of such securities.
Options purchased by a Portfolio will be listed on a national securities
exchange. In order to close out an option position, the Portfolio may enter into
a "closing purchase transaction," which involves the purchase of an option on
the same security at the same exercise price and expiration date. If the
Portfolio is unable to effect a closing purchase transaction with respect to an
option it has written, it will not be able to sell the underlying security until
the option expires or the Portfolio delivers the security upon exercise.
A Portfolio may purchase and write options on an exchange or over-the-counter.
Over-the-counter options ("OTC options") differ from exchange-traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation, and therefore entail the risk of non-performance by the
dealer. OTC options are available for a greater variety of securities and for a
wider range of expiration dates and exercise prices than are available for
exchange-traded options. Because OTC options are not traded on an exchange,
pricing is done
S-20
<PAGE>
normally by reference to information from a market maker. It is the position of
the Securities and Exchange Commission that OTC options are generally illiquid.
A Portfolio may purchase and write put and call options on foreign currencies
(traded on U.S. and foreign exchanges or over-the-counter markets) to manage its
exposure to exchange rates. Call options on foreign currency written by a
Portfolio will be "covered," which means that the Portfolio will own an equal
amount of the underlying foreign currency. With respect to put options on
foreign currency written by a Portfolio, the Portfolio will establish a
segregated account with its custodian bank consisting of liquid assets in an
amount equal to the amount the Portfolio would be required to pay upon exercise
of the put.
A Portfolio may purchase and write put and call options on indices and enter
into related closing transactions. Put and call options on indices are similar
to options on securities except that options on an index give the holder the
right to receive, upon exercise of the option, an amount of cash if the closing
level of the underlying index is greater than (or less than, in the case of
puts) the exercise price of the option. This amount of cash is equal to the
difference between the closing price of the index and the exercise price of the
option, expressed in dollars multiplied by a specified number. Thus, unlike
options on individual securities, all settlements are in cash, and gain or loss
depends on price movements in the particular market represented by the index
generally, rather than the price movements in individual securities. A Portfolio
may choose to terminate an option position by entering into a closing
transaction. The ability of a Portfolio to enter into closing transactions
depends upon the existence of a liquid secondary market for such transactions.
All options written on indices must be covered. When a Portfolio writes an
option on an index, it will establish a segregated account containing liquid
assets with its Custodian in an amount at least equal to the market value of the
option and will maintain the account while the option is open or will otherwise
cover the transaction.
RECEIPTS
Receipts are sold as zero coupon securities which means that they are sold at a
substantial discount and redeemed at face value at their maturity date without
interim cash payments of interest or principal. This discount is accreted over
the life of the security, and such accretion will constitute the income earned
on the security for both accounting and tax purposes. Because of these features,
such securities may be subject to greater interest rate volatility than interest
paying investments.
REPURCHASE AGREEMENTS
Repurchase agreements are agreements by which a Portfolio obtains a security and
simultaneously commits to return the security to the seller at an agreed upon
price on an agreed upon date within a number of days from the date of purchase.
A Portfolio will have actual or constructive possession of the security as
collateral for the repurchase agreement. A Portfolio bears a risk of loss in the
event the other party defaults on its obligations and the Portfolio is delayed
or prevented from its right to dispose of the collateral securities or if the
Portfolio
S-21
<PAGE>
realizes a loss on the sale of the collateral securities. A Portfolio will enter
into repurchase agreements only with financial institutions deemed to present
minimal risk of bankruptcy during the term of the agreement based on established
guidelines. Repurchase agreements are considered loans under the 1940 Act.
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS
Investments by a money market fund are subject to limitations imposed under
regulations adopted by the SEC. Under these regulations, money market funds may
only acquire obligations that present minimal credit risk and that are "eligible
securities," as defined by Rule 2a-7, which means they are (i) rated, at the
time of investment, by at least two NRSROs (one if it is the only organization
rating such obligation) in the highest short-term rating category or, if
unrated, determined to be of comparable quality (a "first tier security"); or
(ii) rated according to the foregoing criteria in the second highest short-term
rating category or, if unrated, determined to be of comparable quality ("second
tier security"). A security is not considered to be unrated if its issuer has
outstanding obligations of comparable priority and security that have a
short-term rating. A money market fund may invest up to 25% of its assets in
"first tier" securities of a single issuer for a period of up to three business
days. The securities that money market funds may acquire may be supported by
credit enhancements, such as demand features or guarantees. The SEC regulations
limit the percentage of securities that a money market fund may hold for which a
single issuer provides credit enhancements.
RESTRICTED SECURITIES
The Prime Obligations Portfolio may invest in restricted securities. Restricted
securities are securities that may not be sold freely to the public absent
registration under the Securities Act of 1933, as amended (the "Act"), or an
exemption from registration. The Portfolio may invest up to 10% of its net
assets in illiquid securities, including restricted securities other than
Section 4(2) commercial paper. The Portfolio may invest in Section 4(2)
commercial paper. Section 4(2) commercial paper is issued in reliance on an
exemption from registration under Section 4(2) of the Act and is generally sold
to institutional investors who purchase for investment. Any resale of such
commercial paper must be in an exempt transaction, usually to an institutional
investor through the issuer or investment dealers who make a market in such
commercial paper. The Trust believes that Section 4(2) commercial paper is
liquid to the extent it meets the criteria established by the Board of Trustees
of the Trust. The Trust intends to treat such commercial paper as liquid and not
subject to the investment limitations applicable to illiquid securities or
restricted securities.
SECURITIES LENDING
In order to generate additional income, a Portfolio may lend the securities in
which it owns, pursuant to agreements requiring that the loan be continuously
secured by collateral consisting of cash, securities of the U.S. Government or
its agencies equal to at least 100% of the market value of the securities lent.
A Portfolio continues to receive interest on the securities lent while
simultaneously earning interest on the investment of cash collateral. Collateral
is marked to
S-22
<PAGE>
market daily. There may be risks of delay in recovery of the securities or even
loss of rights in the collateral should the borrower of the securities fail
financially or become insolvent.
SECURITIES OF FOREIGN ISSUERS
There are 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
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, and may be less marketable than comparable U.S.
securities. The value of a Portfolio's investments denominated in foreign
currencies will depend on the relative strengths of those currencies and the
U.S. dollar, and a Portfolio may be affected favorably or unfavorably by changes
in the exchange rates or exchange control regulations between foreign currencies
and the U.S. 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 a Portfolio.
SEPARATELY TRADED INTEREST AND PRINCIPAL SECURITIES ("STRIPS")
Each Portfolio may invest in STRIPS, which are component parts of U.S. Treasury
Securities traded through the Federal Book-Entry System. The Adviser or the
Sub-Adviser will purchase only STRIPS that it determines are liquid or, if
illiquid, do not violate the Portfolio's investment policy concerning
investments in illiquid securities. Consistent with Rule 2a-7, the Adviser or
the Sub-Adviser will purchase for the Prime Obligations Portfolio only those
STRIPS that have a remaining maturity of 397 days or less; therefore, the Prime
Obligations Portfolio currently may purchase only interest component parts of
U.S. Treasury Securities. While there is no limitation on the percentage of a
Portfolio's assets that may be comprised of STRIPS, the Adviser or the
Sub-Adviser will monitor the level of such holdings to avoid the risk of
impairing shareholders' redemption rights and of deviations in the value of
shares of the Prime Obligations Portfolio.
SHORT-TERM OBLIGATIONS OF STATE AND LOCAL GOVERNMENT ISSUERS
The Prime Obligations Portfolio may, when deemed appropriate by the Adviser or
the Sub-Adviser in light of the Portfolio's investment objective, invest in high
quality, short-term obligations issued by state and local governmental issuers
which, as a result of the Tax Reform Act of 1986, carry yields that are
competitive with those of other types of money market instruments of comparable
quality.
STANDBY COMMITMENTS AND PUTS
Securities subject to standby commitments or puts permit the holder thereof to
sell the securities at a fixed price prior to maturity. Securities subject to a
standby commitment or put may be sold
S-23
<PAGE>
at any time at the current market price. However, unless the standby commitment
or put was an integral part of the security as originally issued, it may not be
marketable or assignable; therefore, the standby commitment or put would only
have value to the Portfolio owning the security to which it relates. In certain
cases, a premium may be paid for a standby commitment or put, which premium will
have the effect of reducing the yield otherwise payable on the underlying
security. A Portfolio will limit standby commitment or put transactions to
institutions believed to present minimal credit risk.
TIME DEPOSITS
Time deposits are non-negotiable receipt issued by a bank in exchange for the
deposit of funds. Like a certificate of deposit, it earns a specified rate of
interest over a definite period of time; however, it cannot be traded in the
secondary market. Time deposits with a withdrawal penalty are considered to be
illiquid securities.
U.S. GOVERNMENT AGENCIES
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, FHLMC, 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, others are
supported by the right of the issuer to borrow from the Treasury, while still
others are supported only by the credit of the instrumentality. Guarantees of
principal by agencies or instrumentalities of the U.S. Government may be a
guarantee of payment at the maturity of the obligation so that in the event of a
default prior to maturity there might not be a market and thus no means of
realizing on the obligation prior to maturity.
Guarantees as to the timely payment of principal and interest do not extend to
the value or yield of these securities nor to the value of a Portfolio's shares.
U.S. TREASURY OBLIGATIONS
U.S. Treasury obligations consist of bills, notes and bonds issued by the U.S.
Treasury and separately traded interest and principal component parts of such
obligations that are transferable through the Federal book-entry system known as
Separately Traded Registered Interest and Principal Securities ("STRIPS").
VARIABLE AND FLOATING RATE INSTRUMENTS
Certain obligations may carry variable or floating rates of interest, and may
involve a conditional or unconditional demand feature. Such instruments bear
interest at rates which are not fixed, but which vary with changes in specified
market rates or indices. The interest rate on these securities may be reset
daily, weekly, quarterly or by 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 actually reflect existing market interest rates. A
demand instrument with a
S-24
<PAGE>
demand notice exceeding seven days may be considered illiquid if there is no
secondary market for such security.
WARRANTS
Warrants are instruments giving holders the right, but not the obligation, to
buy shares of a company at a given price during a specified period.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
When-issued or delayed delivery basis transactions involve the purchase of an
instrument with payment and delivery taking place in the future. Delivery of and
payment for these securities may occur a month or more after the date of the
purchase commitment. A Portfolio will maintain with the Custodian a separate
account with liquid assets in an amount at least equal to these commitments. The
interest rate realized on these securities is fixed as of the purchase date and
no interest accrues to a Portfolio before settlement. These securities are
subject to market fluctuation due to changes in market interest rates and it is
possible that the market value at the time of settlement could be higher or
lower than the purchase price if the general level of interest rates has
changed. Although a Portfolio generally purchases securities on a when-issued or
forward commitment basis with the intention of actually acquiring securities, a
Fund may dispose of a when-issued security or forward commitment prior to
settlement if it deems appropriate.
ZERO COUPON SECURITIES
STRIPS and Receipts (TRs, TIGRs and CATS) are sold as zero coupon securities,
that is, fixed income securities that have been stripped of their unmatured
interest coupons. Zero coupon securities are sold at a (usually substantial)
discount and redeemed at face value at their maturity date without interim cash
payments of interest or principal. The amount of this discount is accredited
over the life of the security, and the accretion constitutes the income earned
on the security for both accounting and tax purposes. Because of these features,
these market prices of zero coupon securities are generally more volatile than
the market prices of securities that have similar maturity but that pay interest
periodically. Zero coupon securities are likely to respond to a greater degree
to interest rate changes than are non-zero coupon securities with similar
maturity and credit qualities. See also "Taxes."
INVESTMENT LIMITATIONS
FUNDAMENTAL POLICIES
Each Portfolio is subject to a number of fundamental investment restrictions
that may be changed only by a vote of a majority of the outstanding shares of
that Portfolio. A "majority of the outstanding shares" of the Trust or a
particular Portfolio means the affirmative vote, at a meeting of shareholders
duly called, of the lesser of (a) 67% or more of the votes of shareholders of
the Trust or such Portfolio present at a meeting at which the holders of more
than 50% of the votes attributable to shareholders of record of the Trust or
such Portfolio are represented in person or
S-25
<PAGE>
by proxy, or (b) the holders of more than 50% of the outstanding votes of
shareholders of the Trust or such Portfolio.
No Portfolio may:
1. Purchase securities of any issuer (except securities issued or guaranteed
by the United States Government, its agencies or instrumentalities and
repurchase agreements involving such securities) if, as a result, more than
5% of the total assets of the Portfolio would be invested in the securities
of such issuer or the Portfolio would own more than 10% of the outstanding
voting securities of such issuer. This restriction applies to 75% of the
assets of the Equity Income, Capital Appreciation, Government and Prime
Obligations Portfolios, and does not apply to the West Virginia Portfolio.
For purposes of this limitation, a security is considered to be issued by
the government entity (or entities) whose assets and revenues back the
security; with respect to a private activity bond that is backed only by
the assets and revenues of a non-governmental user, a security is
considered to be issued by such non-governmental user. For purposes of this
limitation, all debt securities of an issuer are each considered as one
class.
2. Purchase any securities that would cause more than 25% of the total assets
of the Portfolio to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry,
provided that this limitation does not apply to investments in obligations
issued or guaranteed by the United States Government or its agencies and
instrumentalities, repurchase agreements involving such securities, and
obligations issued by domestic branches of U.S. banks or U.S. branches of
foreign banks subject to the same regulations as U.S. banks.
For purposes of this limitation, (a) utility companies will be divided
according to their services, for example, gas, gas transmission, electric
and telephone will each be considered a separate industry; (b) financial
service companies will be classified according to the end users of their
services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; (c) supranational
entities will be considered to be a separate industry; and (d) asset-backed
securities secured by distinct types of assets, such as truck and auto loan
leases, credit card receivables and home equity loans, will each be
considered a separate industry.
3. Make loans, except that each Portfolio may (a) purchase or hold debt
instruments to the extent in accordance with its investment objective and
policies; (b) enter into repurchase agreements, and (c) engage in
securities lending.
4. Invest in companies for the purpose of exercising control.
5. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding one-third of the value of total assets. Any borrowing
will be done from a bank and to the extent that such borrowing exceeds 5%
of the value of the Portfolio's assets, asset coverage of at least 300% is
required. In the event that such asset coverage shall at any time fall
below 300%, the Portfolio shall, within three days thereafter or such
longer period as the Securities and Exchange Commission ("SEC") may
prescribe by
S-26
<PAGE>
rules and regulations, reduce the amount of its borrowings to such an
extent that the asset coverage of such borrowings shall be at least 300%.
This borrowing provision is included solely to facilitate the orderly sale
of portfolio securities to accommodate heavy redemption requests if they
should occur and is not for investment purposes. All borrowings will be
repaid before making additional investments and any interest paid on such
borrowings will reduce income.
6. Pledge, mortgage or hypothecate assets except to secure temporary
borrowings permitted by (2) above in aggregate amounts not to exceed 10% of
total assets taken at current value at the time of the incurrence of such
loan, except as permitted with respect to securities lending.
7. Purchase or sell real estate, real estate limited partnership interests,
commodities or commodities contracts (except that the Fixed Income
Portfolios may invest in futures contracts and options on futures contracts
as disclosed in their Prospectus and this Statement of Additional
Information). However, subject to its permitted investments, any Portfolio
may invest in companies that invest in real estate, commodities or
commodities contracts.
8. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Trust may obtain short-term credits
as necessary for the clearance of security transactions; this limitation
shall not prohibit short sales "against the box."
9. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter under federal securities laws in selling a Portfolio
security.
10. Purchase securities of other investment companies except as permitted by
the 1940 Act, and the rules and regulations thereunder.
11. Issue senior securities (as defined in the 1940 Act) except in connection
with permitted borrowings as described above or as permitted by rule,
regulation or order of the SEC.
NON-FUNDAMENTAL POLICIES
The following investment limitations of the Portfolios are non-fundamental and
may be changed by the Trust's Board of Trustees without shareholder approval.
None of the Equity Income, Capital Appreciation, Government, or West Virginia
Portfolios may invest in illiquid securities in an amount exceeding, in the
aggregate, 15% of that Portfolio's net assets, and the Prime Obligations
Portfolio may not invest in illiquid securities in an amount exceeding, in the
aggregate, 10% of its net assets.
No Portfolio may invest in interests in oil, gas or other mineral exploration or
development programs and oil, gas or mineral leases.
S-27
<PAGE>
No Portfolio may invest its assets in securities of any investment company,
except as permitted by the 1940 Act or pursuant to an order of exemption
therefrom.
The foregoing percentages, except with respect to borrowings and illiquid
securities, will apply at the time of the purchase of a security and shall not
be considered violated unless an excess occurs or exists immediately after and
as a result of a purchase of such security.
THE ADVISER
One Valley Bank, National Association ("One Valley," or the "Adviser") serves as
investment adviser to each Portfolio pursuant to an investment advisory
agreement (the "Advisory Agreement") with the Trust. Also, under the Advisory
Agreement, the Adviser is responsible for the investment decisions for each
Portfolio, and the Adviser continuously reviews, supervises and administers each
Portfolio's investment program. The Advisory Agreement provides that the Adviser
shall not be protected against any liability to the Trust or its shareholders by
reason of willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard of its obligations or
duties thereunder. The Adviser is independent of SEI Investments Mutual Funds
Services (the "Administrator") and discharges its responsibilities subject to
the supervision of, and policies established by, the Trustees of the Trust. In
addition, the Trust has employed Wellington Management Company, LLP as an
investment sub-adviser to manage the Prime Obligations Portfolio on a day-to-day
basis, subject to the supervision of the Adviser and the Trustees. See "The
Sub-Adviser."
The Advisory Agreement provides that if, for any fiscal year, the ratio of
expenses of any Portfolio (including amounts payable to the Adviser but
excluding interest, taxes, brokerage, litigation, and other extraordinary
expenses) exceeds limitations established by any jurisdiction in which shares of
the Portfolios are qualified for offer and sale, the Adviser will bear the
amount of such excess.
The continuance of the Advisory Agreement, after the first two years, must be
specifically approved at least annually (i) by the vote of the Trustees, and
(ii) by the vote of a majority of the Trustees who are not parties to the
Agreement or "interested persons" of any party thereto, cast in person at a
meeting called for the purpose of voting on such approval. The Advisory
Agreement will terminate automatically in the event of its assignment, and is
terminable at any time without penalty by the Trustees of the Trust or, with
respect to the Portfolios by a majority of the outstanding shares of the
Portfolios, on not less than 30 days' nor more than 60 days' written notice to
the Adviser, or by the Adviser on 90 days' written notice to the Trust.
One Valley, a national banking association, is the successor to Kanawha Valley
Bank, N.A., organized in 1867. One Valley has its principal offices at One
Valley Square, Charleston, West Virginia 25301. One Valley is a wholly-owned
subsidiary of One Valley Bancorp, Inc., a multi-bank holding company. One Valley
is the largest holding company headquartered in West Virginia, and provides a
wide variety of financial services in multiple locations throughout West
Virginia and Virginia. The Adviser has provided investment advisory services to
investment companies since 1993.
S-28
<PAGE>
One Valley, together with its predecessor institutions, has provided trust and
asset management services since the early 1920s and has managed common and
collective investment funds since 1968. One Valley's portfolio managers serve
investment management accounts, employee benefit funds and personal trust
accounts, managing assets in money market, equity, and fixed income portfolios.
As of January 31, 2000, One Valley's Investment Asset Management Group had
assets under management of approximately $3.1 billion, and currently manages
$455.7 million of assets in mutual funds with diverse investment objectives
ranging from stability of capital to aggressive growth.
For its services, the Adviser is entitled to a fee, which is calculated daily
and paid monthly, at an annual rate based on the average daily net assets of
each Portfolio as follows: Equity Income Portfolio -- 0.74%; Capital
Appreciation Portfolio -- 0.95%; Government Portfolio -- 0.75%; West Virginia
Portfolio -- 0.45%; and Prime Obligations Portfolio -- 0.25%. The Adviser has
voluntarily agreed to waive a portion of its fees in order to limit the total
operating expenses of Class A and Class B shares of each Portfolio (exclusive of
distribution expenses charged to Class B shares) to not more than the following
(as a percentage of average daily net assets on an annualized basis): Equity
Income Portfolio -- 1.20%; Capital Appreciation Portfolio -- 1.02%; Government
Portfolio -- 0.83%; West Virginia Portfolio -- 0.75%; and Prime Obligations
Portfolio -- 0.49%. The Adviser reserves the right, in its sole discretion, to
terminate its voluntary fee waiver and reimbursement at any time. For the fiscal
year ended January 31, 2000, the Portfolio paid the Adviser an advisory fee as a
percentage of average daily net assets of each Portfolio as follows: Equity
Income Portfolio -- 0.74%; Capital Appreciation Portfolio -- 0.95%; Government
Portfolio -- 0.75%; West Virginia Portfolio -- 0.45% and Prime Obligations
Portfolio -- 0.25%.
For the fiscal years ended January 31, 1998, 1999 and 2000, the Portfolios paid
the following advisory fees:
<TABLE>
<CAPTION>
Fees Paid (000) Fees Waived (000)
--------------- -----------------
Portfolio 1998 1999 2000 1998 1999 2000
--------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Equity Income Portfolio $346 $405 $511 $18 $68 $73
Capital Appreciation Portfolio $806 $1,228 $1,457 $295 $326 $427
Government Portfolio $283 $394 $366 $119 $148 $140
West Virginia Portfolio $378 $441 $367 $43 $65 $48
Prime Obligations Portfolio $80 $157 $197 $142 $108 $119
</TABLE>
THE SUB-ADVISER
Wellington Management Company, LLP ("Wellington Management" or the
"Sub-Adviser") serves as the investment sub-adviser to the Prime Obligations
Portfolio pursuant to a sub-advisory agreement (the "Sub-Advisory Agreement")
with the Adviser and the Trust. Under the Sub-Advisory Agreement, the
Sub-Adviser manages the investments of the Portfolio, selects investments, and
places all orders for purchases and sales of the Portfolio's securities, subject
to the general supervision of the Trustees of the Trust and the Adviser.
Wellington Management is a professional investment counseling firm that provides
investment services to investment companies, employee benefit plans, endowments,
foundations, and other
S-29
<PAGE>
institutions. As of April 30, 2000, Wellington Management had discretionary
management authority with respect to approximately $245 billion of assets.
Wellington Management and its predecessor organizations have provided investment
advisory services to investment companies since 1928 and to investment
counseling clients since 1960. Wellington Management, 75 State Street, Boston,
MA 02109, is a Massachusetts limited liability partnership, of which the
following persons are managing partners: Laurie A Gabriel, Duncan M. McFarland
and John R. Ryan.
For the services provided and expenses incurred pursuant to the Sub-Advisory
Agreement, the Sub-Adviser is entitled to receive a fee, computed daily and paid
monthly by the Adviser, at the annual rate of .075% of the first $500 million of
"managed assets" (defined below) and .02% of "managed assets" in excess of $500
million. "Managed assets" are all of the money market fund assets that
Wellington Management manages for the Trust, including assets of funds other
than the Portfolio. The fee paid by the Adviser is based on its proportionate
share of "managed assets."
For the fiscal years ended January 31, 1998, January 31, 1999 and January 31,
2000, the Adviser paid the Sub-Adviser the following sub-advisory fees:
<TABLE>
<CAPTION>
Fees Paid (000) Fees Waived (000)
--------------- ------------------
Portfolio 1998 1999 2000 1998 1999 2000
--------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Prime Obligations Portfolio $ 66 $47 $59 $ 0 $ 0 $0
</TABLE>
THE ADMINISTRATOR
SEI Investments Mutual Funds Services (the "Administrator"), Oaks, Pennsylvania
19456, provides each Portfolio with administrative services, other than
investment advisory services, including all regulatory reporting, necessary
office space, equipment, personnel and facilities pursuant to an administration
agreement with the Trust (the "Administration Agreement"). The Administrator
also serves as the shareholder servicing agent of the Trust under the terms of
the Administration Agreement.
The Administration Agreement provides that the Administrator shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Trust in connection with the matters to which the Administration Agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Administrator in the performance of its duties or
from reckless disregard by it of its duties and obligations thereunder. For its
services, the Administrator is entitled to a fee, which is calculated daily and
paid monthly, at an annual rate of: (i) .20% of the average daily net assets of
the Portfolios' assets up to $500 million; (ii) .18% of the average daily net
assets of the Portfolios' assets from $500 million to $750 million; (iii) .16%
of the average daily net assets of the Portfolios' assets from $750 million to
$1 billion; and .15% of the average daily net assets of the Portfolios' assets
above $1 billion. There is a minimum annual fee of $75,000 payable to the
Administrator by each Portfolio.
The Administrator, a Delaware business trust, has its principal business offices
at Oaks, Pennsylvania 19456. SEI Investments Management Corporation ("SIMC"), a
wholly-owned
S-30
<PAGE>
subsidiary of SEI Investments Company ("SEI Investments"), is the owner of all
beneficial interest 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, Alpha Select Funds, Amerindo Funds,
Inc., The Arbor Fund, ARK Funds, Armada Funds, Armada Advantage Fund, Bishop
Street Funds, Boston 1784 Funds, CNI Charter Funds, CUFUND, The Expedition
Funds, First American Funds, Inc., First American Investment Funds, Inc., First
American Strategy Funds, Inc., Friends Ivory Funds, HighMark Funds, Huntington
Funds, Huntington VA Fund, The Nevis Fund, Inc., Oak Associates Funds, The
Parkstone Group of Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund,
Inc., The Pillar Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI
Index Funds, SEI Institutional International Trust, SEI Institutional
Investments Trust, SEI Institutional Managed Trust, SEI Insurance Products
Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic Funds, STI
Classic Variable Trust, TIP Funds, UAM Funds Trust, UAM Funds, Inc. and UAM
Funds, Inc. II.
For the fiscal years ended January 31, 1998, 1999 and 2000, the Portfolios paid
the following administrative fees:
<TABLE>
<CAPTION>
Fees Paid (000) Fees Waived (000)
--------------- -----------------
Portfolio 1998 1999 2000 1998 1999 2000
--------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Equity Income Portfolio $119 $109 $138 $0 $0 $0
Capital Appreciation Portfolio $232 $258 $307 $0 $0 $0
Government Portfolio $107 $105 $98 $0 $0 $0
West Virginia Portfolio $187 $196 $184 $0 $0 $0
Prime Obligations Portfolio $177 $126 $158 $0 $0 $0
</TABLE>
THE DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor" OR "SIDC"), Oaks,
Pennsylvania 19456, a wholly-owned subsidiary of SEI Investments Company and an
affiliate of the Administrator, serves as the distributor of each Portfolio's
shares pursuant to a distribution agreement with the Trust (the "Distribution
Agreement"), which applies to Class A and Class B shares of the Portfolios.
The Distribution Agreement shall be reviewed and ratified at least annually (i)
by the Trust's Trustees or by the vote of a majority of the outstanding shares
of the Trust, and (ii) by the vote of a majority of the Trustees of the Trust
who are not parties to the Distribution Agreement or interested persons (as
defined in the 1940 Act) of any party to the Distribution Agreement, cast in
person at a meeting called for the purpose of voting on such approval. The
Distribution Agreement will terminate in the event of any assignment, as defined
in the 1940 Act, and is terminable with respect to a particular Portfolio on not
less than sixty days' notice by the Trust's Trustees, by vote of a majority of
the outstanding shares of such Portfolio or by the Distributor.
S-31
<PAGE>
The Trust has adopted a distribution plan for the Class B shares of each
Portfolio (the "Class B Plan") in accordance with the provisions of Rule 12b-1
under the 1940 Act, which regulates circumstances under which an investment
company may directly or indirectly bear expenses relating to the distribution of
its shares. Continuance of the Class B Plan must be approved annually by a
majority of the Trustees of the Trust and by a majority of the Trustees who are
not "interested persons" of the Trust or SEI Financial Services, as that term is
defined in the 1940 Act ("Disinterested Trustees"). The Class B Plan requires
that quarterly written reports of amounts spent under the Plan and the purposes
of such expenditures be furnished to and reviewed by the Trustees. In accordance
with Rule 12b-1 under the 1940 Act, the Class B Plan may be terminated with
respect to any Portfolio by a vote of a majority of the Disinterested Trustees,
or by a vote of a majority of the outstanding shares of that Portfolio. The
Class B Plan may be amended by vote of the Trust's Board of Trustees, including
a majority of the Disinterested Trustees, cast in person at a meeting called for
such purpose, except that any change that would effect a material increase in
any distribution fee with respect to a Portfolio requires the approval of that
Portfolio's shareholders.
The Class B Distribution Plan provides that the Class B shares of each Portfolio
will pay the Distributor a fee of .25% of its average daily net assets which the
Distributor can use to compensate broker/dealers and service providers,
including the Adviser and its affiliates which provide administrative and/or
distribution services to the Class B Shareholders or their customers who
beneficially own Class B Shares.
Each Portfolio may also execute brokerage or other agency transactions through
an affiliate of the Adviser or through the Distributor for which the affiliate
or the Distributor may receive "usual and customary" compensation.
The Class A shares of each Portfolio are offered without distribution fees to
institutional investors, including One Valley, its affiliates and correspondent
banks, for the investment of funds for which they act in a fiduciary, agency or
custodial capacity. It is possible that an institution may offer different
classes of shares to its customers and thus receive different compensation with
respect to different classes of shares. These financial institutions may also
charge separate fees to their customers.
Certain financial institutions offering shares to their customers may be
required to register as dealers pursuant to state laws.
The Distributor may, from time to time and at its own expense, provide
promotional incentives in the form of cash or other compensation to certain
financial institutions and intermediaries whose registered representatives have
sold or are expected to sell significant amounts of the shares of a Portfolio.
Such other compensation may take the form of payments for travel expenses,
including lodging, incurred in connection with trips taken by qualifying
registered representatives to places within or outside of the United States.
For the fiscal years ended January 31, 1998, 1999 and 2000, the Class B
Portfolios paid the Distributor the following distribution fees:
S-32
<PAGE>
<TABLE>
<CAPTION>
Distribution Fees Paid
----------------------
Portfolio 1998 1999 2000
--------- ---- ---- ----
<S> <C> <C> <C>
Equity Income Portfolio $6,995 $12,709 $15,242
Capital Appreciation Portfolio $12,894 $23,096 $41,041
Government Portfolio $3,838 $4,762 $4,814
West Virginia Portfolio $17,212 $22,060 $26,773
Prime Obligations Portfolio $16,933 $16,797 $20,112
</TABLE>
THE TRANSFER AGENT
DST Systems, Inc., 1004 Baltimore Street, Kansas City, Missouri 64105 (the
"Transfer Agent") serves as the transfer agent and dividend disbursing agent for
the Portfolios under a transfer agency agreement with the Trust.
CUSTODIAN
First Union National Bank, 125 Broad Street, Philadelphia, PA 19109 (the
"Custodian"), acts as custodian of the Trust. The Custodian holds cash,
securities and other assets of the Trust as required by the 1940 Act.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP serves as the independent public accountants for the
Trust.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP serves as legal counsel to the Trust.
TRUSTEES AND OFFICERS OF THE TRUST
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 each
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, Alpha Select
Funds, The Arbor Fund, ARK Funds, Armada Funds, Armada Advantage Fund, Bishop
Street Funds, Boston 1784 Funds, CNI Charter Funds, CUFUND, The Expedition
Funds, First American Funds, Inc., First American Investment Funds, Inc., First
American Strategy Funds, Inc., Friends Ivory Funds, HighMark Funds, Huntington
Funds, Huntington VA Fund, The Nevis Fund, Inc., Oak Associates Funds, The
Parkstone Group of Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund,
Inc., The Pillar Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI
Index Funds, SEI Institutional International Trust, SEI Institutional
Investments Trust, SEI Institutional Managed Trust, SEI Insurance Products
Trust, SEI Insurance Products Trust, SEI Liquid Asset Trust, SEI Tax Exempt
Trust, STI Classic Funds, STI Classic Variable Trust, TIP
S-33
<PAGE>
Funds, UAM Funds Trust, UAM Funds, Inc. and UAM Funds, Inc. II, each of which is
an open-end management investment company managed by SEI Investments Mutual
Funds Services or its affiliates and 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, Bishop Street Funds, Boston 1784 Funds-Registered Trademark-, The
Expedition Funds, Oak Associates Funds, Pillar Funds, SEI Asset Allocation
Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional
International Trust, SEI Institutional Investments Trust, SEI Institutional
Managed Trust, SEI Insurance Products Trust, SEI Liquid Asset Trust and SEI
Tax Exempt Trust.
JOHN T. COONEY (DOB 01/20/27) -- Trustee** -- Vice Chairman of Ameritrust Texas
N.A., 1989-1992, and MTrust Corp., 1985-1989. Trustee of The Advisors' Inner
Circle Fund, The Arbor Fund, The Expedition Funds and Oak Associates Funds.
WILLIAM M. DORAN (DOB 05/26/40) -- Trustee* -- 1701 Market Street, Philadelphia,
PA 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), counsel to the Trust,
SEI Investments, the Administrator and the Distributor. Director and Secretary
of SEI Investments and Secretary of the Administrator and the Distributor,
Trustee of SEI Investments since 1974; Secretary of SEI Investments since 1978.
Trustee of The Advisors' Inner Circle Fund, The Arbor Fund, The Expedition
Funds, Oak Associates Funds, SEI Asset Allocation Trust, SEI Daily Income Trust,
SEI Index Funds, SEI Institutional International Trust, SEI Institutional
Investments Trust, SEI Institutional Managed Trust, SEI Insurance Products
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 since 1984; 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 Oak Associates Funds.
EUGENE B. PETERS (DOB 06/03/29) -- Trustee** -- 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 Oak Associates Funds.
JAMES M. STOREY (DOB 04/12/31) -- Trustee** -- Partner, Dechert Price & Rhoads,
September 1987 - December 1993; Trustee of The Advisors' Inner Circle Fund, The
Arbor Fund, The Expedition Funds, Oak Associates Funds, SEI Asset Allocation
Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional International
Trust, SEI Institutional Investments
S-34
<PAGE>
Trust, SEI Institutional Managed Trust, SEI Insurance Products Trust, SEI Liquid
Asset Trust and SEI Tax Exempt Trust.
GEORGE J. SULLIVAN, JR. (DOB 11/13/42) -- Trustee**-- Chief Executive Officer,
Newfound Consultants Inc. since April 1997. General Partner, Teton Partners,
L.P., June 1991- December 1996; Chief Financial Officer, Noble Partners, L.P.,
March 1991-December 1996; Treasurer and Clerk, Peak Asset Management, Inc.,
since 1991; Trustee, Navigator Securities Lending Trust, since 1995. Trustee of
The Advisors' Inner Circle Fund, The Arbor Fund, The Expedition Funds, Oak
Associates Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index
Funds, SEI Institutional International Trust, SEI Institutional Investments
Trust, SEI Institutional Managed Trust, SEI Insurance Products Trust, SEI Liquid
Asset Trust and SEI Tax Exempt Trust.
MARK E. NAGLE (DOB 10/20/59) -- President, Controller and Chief Financial
Officer -- President of the Administrator and Senior Vice President of SEI
Investments Mutual Funds Services Operations Group since 1998. Vice President of
the Administrator and Vice President of Fund Accounting and Administration of
SEI Investments Mutual Funds Services, 1996-1998. Vice President of the
Distributor since December 1997. Senior Vice President, Fund Administration,
BISYS Fund Services, September 1995 - November 1996. Senior Vice President and
Site Manager, Fidelity Investments 1981- September 1995.
TIMOTHY D. BARTO (DOB 03/28/68) -- Vice President and Assistant Secretary
--Employed by SEI Investments since October 1999. Vice President and Assistant
Secretary of the Administrator and Distributor since December 1999. Associate at
Dechert Price & Rhoads, 1997-1999. Associate, at Richter, Miller & Finn,
1994-1997.
TODD B. CIPPERMAN (DOB 02/14/66) -- Vice President and Assistant Secretary --
Senior Vice President and General Counsel of SEI Investments; Senior Vice
President, General Counsel and Secretary of the Administrator and the
Distributor since 2000. Vice President and Assistant Secretary of SEI
Investments, the Administrator and the Distributor, 1995-2000. Associate, Dewey
Ballantine (law firm), 1994-1995. Associate, Winston & Strawn (law firm),
1991-1994.
JAMES R. FOGGO (DOB 06/30/64) -- Vice President and Assistant Secretary -- Vice
President and Assistant Secretary of SEI Investments since 1998. Vice President
and Assistant Secretary of the Administrator and the Distributor since May 1999.
Associate, Paul Weiss, Rifkind, Wharton & Garrison (law firm), 1998. Associate,
Baker & McKenzie (law firm), 1995-1998. Associate, Battle Fowler L.L.P. (law
firm), 1993-1995. Operations Manager, The Shareholder Services Group, Inc.,
1986-1990.
LYDIA A. GAVALIS (DOB 06/05/64) -- Vice President and Assistant Secretary --
Vice President and Assistant Secretary of SEI Investments, the Administrator and
the Distributor since 1998. Assistant General Counsel and Director of
Arbitration, Philadelphia Stock Exchange, 1989-1998.
S-35
<PAGE>
KATHY HEILIG (DOB 12/21/58) -- Vice President and Assistant Secretary --
Treasurer of SEI Investments since 1997; Vice President of SEI Investments since
1991. Vice President and Treasurer of the Administrator since 1997. Assistant
Controller of SEI Investments and Vice President of the Distributor since 1995;
Director of Taxes of SEI Investments, 1987 to 1991. Tax Manager, Arthur Andersen
LLP prior to 1987.
CHRISTINE M. MCCULLOUGH (DOB 12/02/60) -- Vice President and Assistant Secretary
-- Employed by SEI Investments since November 1, 1999. Vice President and
Assistant Secretary of the Administrator and the Distributor since December
1999. Associate at White and Williams LLP, 1991-1999. Associate at Montgomery,
McCracken, Walker & Rhoads, 1990-1991.
JOHN H. GRADY, JR. (DOB 06/01/61) -- Secretary -- 1701 Market Street,
Philadelphia, PA 19103, Partner since 1995, Morgan, Lewis & Bockius LLP (law
firm), counsel to the Trust, SEI Investments, the Administrator and the
Distributor.
*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, Patterson, Peters and Storey serve as members of the Audit
Committee of the Fund.
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.
<TABLE>
<CAPTION>
Total Compensation
Pension or From Registrant and
Retirement Estimated Fund Complex Paid to
Aggregate Benefits Accrued Annual Trustees for the Fiscal
Compensation as Part of Fund Benefits Upon Year Ended
Name of Person, Position From Registrant Expenses Retirement January 31, 1999(1)
------------------------ --------------- -------- ---------- ----------------
<S> <C> <C> <C> <C>
John T. Cooney, Trustee $4,234 N/A N/A $26,375
George C. Sullivan, Jr., Trustee $5,347 N/A N/A $33,125
Robert A. Patterson, Trustee $4,234 N/A N/A $26,375
Eugene B. Peters, Trustee $4,234 N/A N/A $26,375
James M. Storey, Trustee $4,234 N/A N/A $26,375
William M. Doran, Trustee* $0 N/A N/A $0
Robert A. Nesher, Trustee* $0 N/A N/A $0
</TABLE>
------------------------------
(1) Total Compensation for service on one board.
* A Trustee who is an "interested person" as defined by the 1940 Act.
PERFORMANCE INFORMATION
The Portfolios may periodically compare their performance to other mutual funds
tracked by mutual fund rating services, to broad groups of comparable mutual
funds, or to unmanaged
S-36
<PAGE>
indices. These comparisons may assume reinvestment of dividends but generally do
not reflect deductions for administrative and management costs.
COMPUTATION OF YIELD
PRIME OBLIGATIONS PORTFOLIO -- From time to time the Prime Obligations Portfolio
may advertise its "current yield" and "effective yield." Both yield figures are
based on historical earnings and are not intended to indicate future
performance. The "yield" of the Portfolio refers to the income generated by an
investment in the Portfolio over a stated seven-day period. This income is then
"annualized," that is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the
Portfolio is assumed to be reinvested. The "effective yield" will be slightly
higher than the "yield" because of the compounding effect of this assumed
reinvestment.
The current yield of the Prime Obligations Portfolio will be calculated daily
based upon the seven days ending on the date of calculation ("base period"). The
yield is computed by determining the net change (exclusive of capital changes)
in the value of a hypothetical pre-existing shareholder account having a balance
of one share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing such net change by
the value of the account at the beginning of the some period to obtain the base
period return and multiplying the result by (365/7). Realized and unrealized
gains and losses are not included in the calculation of the yield. The effective
compound yield of the Portfolio is determined by computing the net change,
exclusive of capital changes, in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return, according to the following formula:
Effective Yield = [(Base Period Return + 1)365/7] - 1.
The current and the effective yields reflect the reinvestment of net income
earned daily on portfolio assets.
The yield of the Prime Obligations Portfolio fluctuates, and the annualization
of a week's dividend is not a representation by the Trust as to what an
investment in the Portfolio will actually yield in the future. Actual yields
will depend on such variables as asset quality, average asset maturity, the type
of instruments the Portfolio invests in, changes in interest rates on money
market instruments, changes in the expenses of the Portfolio and other factors.
Yields are one basis upon which investors may compare the Prime Obligations
Portfolio with other money market funds; however, yields of other money market
funds and other investment
S-37
<PAGE>
vehicles may not be comparable because of the factors set forth above and
differences in the methods used in valuing portfolio instruments.
For the seven-day period ended January 31, 2000, the Prime Obligations Portfolio
had a current yield of 5.42% and an effective yield of 5.43% for Class A and a
current yield of 5.17% and an effective yield of 5.58% for Class B.
EQUITY INCOME, CAPITAL APPRECIATION, GOVERNMENT AND WEST VIRGINIA PORTFOLIOS --
These Portfolios may advertise a 30-day yield. These figures will be based on
historical earnings and are not intended to indicate future performance. The
yield of a Portfolio refers to the annualized income generated by an investment
in the Portfolio over a specified 30-day period. The yield is calculated by
assuming that the income generated by the investment during that 30-day period
is generated over one year and is shown as a percentage of the investment.
In particular, yield will be calculated according to the following formula:
Yield = 2([(a-b)/(cd) + 1]6 - 1)
Where a = dividends and interest earned during the period
b = expenses accrued for the period
(net of reimbursement)
c = the current daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the maximum offering price per share on the last day
of the period.
For the 30-day period ended January 31, 2000, the Class A Portfolios' yields
were 1.61% for the Equity Income Portfolio, 6.61% for the Government Portfolio
and 5.59% for the West Virginia Portfolio.
For the same 30-day period, the Class B Portfolios' yields were 1.36% for the
Equity Income Portfolio, 6.35% for the Government Portfolio and 5.34% for the
West Virginia Portfolio.
The West Virginia Portfolio may also advertise a "tax-equivalent yield," which
is calculated by determining the rate of return that would have to be achieved
on a fully taxable investment to produce the after-tax equivalent of the
Portfolio's yield, assuming certain tax brackets for a shareholder. The
tax-equivalent yield of the Portfolio will be calculated by adding (a) the
portion of the Portfolio's yield that is not tax-exempt and (b) the result
obtained by dividing the portion of the Portfolio's yield that is tax-exempt by
the difference of one minus a stated income tax rate.
For the 30-day period ended January 31, 2000, the West Virginia Portfolio's
tax-equivalent yield was 8.36% for Class A and 7.98% for Class B assuming a
combined West Virginia and federal income tax rate of 46.10%.
S-38
<PAGE>
CALCULATION OF TOTAL RETURN
From time to time, the Equity Income, Capital Appreciation, Government and West
Virginia Portfolios may advertise total return. The total return of a Portfolio
refers to the average compounded rate of return to a hypothetical investment for
designated time periods (including but not limited to, the period from which the
Portfolio commenced operations through the specified date), assuming that the
entire investment is redeemed at the end of each period. In particular, total
return will be calculated according to the following formula:
P (1 + T)n = ERV
Where P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the designated time
period as of the end of such period.
Based on the foregoing, the average annual total return for the Portfolios from
inception through January 31, 2000 and for the one, five and ten year periods
ended January 31, 2000 were as follows:
<TABLE>
<CAPTION>
Average Annual Total Return
---------------------------
One Five Ten Since
Portfolio Class Year Year Year Inception
--------- ----- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C>
Class A 8.49% N/A N/A 15.97%
Equity Income Portfolio
Class B 8.23% N/A N/A 15.71%
Class A 28.81% 30.01% N/A 22.89%
Capital Appreciation Portfolio
Class B 28.47% 29.66% N/A 22.25%
Class A (3.11)% 6.69% N/A 4.85%
Government Portfolio
Class B (3.45)% 6.40% N/A 4.59%
Class A (5.04)% 5.20% N/A 4.02%
West Virginia Portfolio
Class B (5.39)% 4.90% N/A 3.61%
</TABLE>
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions may be made through the Distributor on a day on which
the New York Stock Exchange is open for business. Shares of the Funds are
offered on a continuous basis. Currently, the holidays observed by the Trust and
the New York Stock Exchange are as follows: New Year's Day, Presidents' Day,
Martin Luther King Jr. Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas.
Each Portfolio intends to pay cash for all shares redeemed, but under abnormal
conditions that make payment in cash unwise, payment may be made wholly or
partly in portfolio securities with a market value equal to the redemption
price. In such cases, an investor may incur brokerage costs in converting such
securities to cash.
It is currently the Trust's policy to pay for all redemptions in cash. The Trust
retains the right, however, to alter this policy to provide for redemptions in
whole or in part by a distribution in-kind of securities held by the Portfolios
in lieu of cash. Shareholders may incur brokerage
S-39
<PAGE>
charges on the sale of any such securities so received in payment of
redemptions. However, a shareholder will at all times be entitled to aggregate
cash redemptions from all Portfolios of the Trust during any 90-day period of up
to the lesser of $250,000 or 1% of the Trust's net assets.
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of
disposal or valuation of the Portfolio's securities is not reasonably
practicable, or for such other periods as the SEC has by order permitted. The
Trust also reserves the right to suspend sales of shares of the Portfolio for
any period during which the New York Stock Exchange, the Adviser, the
Administrator and/or the Custodian are not open for business.
DETERMINATION OF NET ASSET VALUE
PRIME OBLIGATIONS PORTFOLIO -- The net asset value per share of the Prime
Obligations Portfolio is calculated by adding the value of securities and other
assets, subtracting liabilities and dividing by the number of outstanding
shares. Securities will be valued by the amortized cost method, which involves
valuing a security at its cost on the date of purchase and thereafter (absent
unusual circumstances) assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuations in general market
rates of interest on the value of the instrument. While this method provides
certainty in valuation, it may result in periods during which a security's
value, as determined by this method, is higher or lower than the price the
Portfolio would receive if it sold the instrument. During periods of declining
interest rates, the daily yield of the Portfolio may tend to be higher than a
like computation made by a company with identical investments utilizing a method
of valuation based upon market prices and estimates of market prices for all of
its portfolio securities. Thus, if the use of amortized cost by the Portfolio
resulted in a lower aggregate portfolio value on a particular day, a prospective
investor in the Portfolio would be able to obtain a somewhat higher yield than
would result from investment in a company utilizing solely market values, and
existing investors in the Portfolio would experience a lower yield. The converse
would apply in a period of rising interest rates.
The Prime Obligations Portfolio's use of amortized cost and the maintenance of
the Portfolio's net asset value at $1.00 are permitted by regulations
promulgated by Rule 2a-7 under the 1940 Act, provided that certain conditions
are met. The regulations also require the Trustees to establish procedures which
are reasonably designed to stabilize the net asset value per share at $1.00 for
the Portfolio. Such procedures include the determination of the extent of
deviation, if any, of the Portfolio's current net asset value per share
calculated using available market quotations from the Portfolio's amortized cost
price per share at such intervals as the Trustees deem appropriate and
reasonable in light of market conditions and periodic reviews of the amount of
the deviation and the methods used to calculate such deviation. In the event
that such deviation exceeds 0.5%, the Trustees are required to consider promptly
what action, if any, should be initiated, and, if the Trustees believe that the
extent of any deviation may result in material dilution or other unfair results
to shareholders, the Trustees are required to take such corrective action as
they deem appropriate to eliminate or reduce such dilution or unfair results to
the extent reasonably practicable. Such actions may include: the sale of
portfolio instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity;
S-40
<PAGE>
withholding dividends; redeeming shares in kind; or establishing a net asset
value per share by using available market quotations. In addition, if the
Portfolio incurs a significant loss or liability, the Trustees have the
authority to reduce pro rata the number of shares of the Portfolio in each
shareholder's account and to offset each shareholder's pro rata portion of such
loss or liability from the shareholder's accrued but unpaid dividends or from
future dividends while each other Portfolio must annually distribute at least
90% of its investment company taxable income.
EQUITY INCOME, CAPITAL APPRECIATION, GOVERNMENT AND WEST VIRGINIA PORTFOLIOS --
The securities of these Portfolios are valued by the Administrator pursuant to
valuations provided by independent pricing services. The pricing services rely
primarily on prices of actual market transactions as well as trader quotations.
However, a service may also use a matrix system to determine valuations of fixed
income securities, which system considers such factors as security prices,
yields, maturities, call features, ratings and developments relating to specific
securities in arriving at valuations. The procedures of a pricing service and
its valuations are reviewed by the officers of the Trust under the general
supervision of the Trustees.
TAXES
The following is only a summary of certain additional federal income tax
considerations generally affecting the Portfolios and their shareholders that
are not described in the Portfolios' prospectus. No attempt is made to present a
detailed explanation of the tax treatment of the Portfolios or their
shareholders, and the discussion here and in the Portfolios' prospectus is not
intended as a substitute for careful tax planning. Shareholders are urged to
consult with their tax advisors with specific reference to their own tax
situation, including their state and local tax liabilities.
FEDERAL INCOME TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following general discussion of certain federal income tax consequences is
based on the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations issued thereunder as in effect on the date of this Statement of
Additional Information. New legislation, as well as administrative changes or
court decisions, may significantly change the conclusions expressed herein, and
may have a retroactive effect with respect to the transactions contemplated
herein.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
Each Portfolio intends to qualify and elect to be treated as a "regulated
investment company" ("RIC") as defined under Subchapter M of the Code. By
following such a policy, each Portfolio expects to eliminate or reduce to a
nominal amount the federal taxes to which it may be subject.
In order to qualify as a RIC, a Portfolio must distribute at least 90% of its
investment company taxable income (that generally includes dividends, taxable
interest, and the excess of net short-term capital gains over net long-term
capital losses less operating expenses) and at least 90% of its net tax exempt
interest income, for each tax year, if any, to its shareholders (the
"Distribution Requirement") and also must meet several additional requirements.
Included among these requirements are the following: (i) at least 90% of the
Portfolio's gross income each taxable year
S-41
<PAGE>
must be derived from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of stock or securities, or
certain other income; (ii) at the close of each quarter of the Portfolio's
taxable year, at least 50% of the value of its total assets must be represented
by cash and cash items, U.S. Government securities, securities of other RICs and
other securities, with such other securities limited, in respect to any one
issuer, to an amount that does not exceed 5% of the value of the Portfolio's
assets and that does not represent more than 10% of the outstanding voting
securities of such issuer; and (iii) at the close of each quarter of the
Portfolio's taxable year, not more than 25% of the value of its assets may be
invested in securities (other than U.S. Government securities or the securities
of other RICs) of any one issuer or of two or more issuers which the Portfolio
controls and which are engaged in the same, similar or related trades or
businesses.
Each Portfolio may make investments in securities (such as STRIPS) that bear
"original issue discount" or "acquisition discount" (collectively, "OID
Securities"). The holder of such securities is deemed to have received interest
income even though no cash payments have been received. Accordingly, OID
Securities may not produce sufficient current cash receipts to match the amount
of distributable net investment income the Portfolios must distribute to satisfy
the Distribution Requirement. In some cases, the Portfolios may have to borrow
money or dispose of other investments in order to make sufficient cash
distributions to satisfy the Distribution Requirement.
Although each Portfolio intends to distribute substantially all of its
investment company taxable income and may distribute its capital gains for any
taxable year, each Portfolio will be subject to federal income taxation to the
extent any such income or gains are not distributed.
If the Portfolios fail to qualify for any taxable year as a RIC, all of their
taxable income will be subject to tax at regular corporate income tax rates
without any deduction for distributions to shareholders and such distributions
generally will be taxable to shareholders as ordinary dividends to the extent of
a Portfolio's current and accumulated earnings and profits. In this event,
distributions generally will be eligible for the dividends-received deduction
for corporate shareholders.
PORTFOLIO DISTRIBUTIONS
Distributions of investment company taxable income will be taxable to
shareholders as ordinary income, regardless of whether such distributions are
paid in cash or are reinvested in additional Shares, to the extent of a
Portfolio's earnings and profits. Each Portfolio anticipates that it will
distribute substantially all of its investment company taxable income for each
taxable year.
Each Portfolio intends to distribute to shareholders its excess of net long-term
capital gains over net short-term capital losses ("net capital gains"). Such
distributions are taxable to shareholders who are individuals at a maximum rate
of 20%, regardless of the length of time the shareholders have held their
Portfolio Shares. If any such gains are retained, however, a Portfolio will pay
federal income tax thereon.
S-42
<PAGE>
In the case of corporate shareholders, distributions (other than capital gains
distributions) from a RIC generally qualify for the dividends-received deduction
to the extent of the gross amount of qualifying dividends received by a
Portfolio for the year. Generally, and subject to certain limitations, a
dividend will be treated as a qualifying dividend if it has been received from a
domestic corporation. Accordingly, it is not expected that any OVB Government
Securities Portfolio, OVB West Virginia Tax-Exempt Income Portfolio or OVB Prime
Obligations Portfolio distribution will qualify for the corporate
dividends-received deduction. Conversely, distributions from the OVB Equity
Income Portfolio and the OVB Capital Appreciation Portfolio generally will
qualify for the corporate dividends-received deduction.
Ordinarily, investors should include all dividends as income in the year of
payment. However, dividends declared payable to shareholders of record in
October, November, or December of one year, but paid in January of the following
year, will be deemed for tax purposes to have been received by the shareholder
and paid by the Portfolio in the year in which the dividends were declared.
In certain cases, a Portfolio will be required to withhold, and remit to the
United States Treasury, 31% of any distributions paid to a shareholder who (1)
has failed to provide a correct taxpayer identification number, (2) is subject
to backup withholding by the Internal Revenue Service, or (3) has failed to
certify to the Portfolio that such shareholder is not subject to backup
withholding.
Each Portfolio will provide a statement annually to shareholders as to the
federal tax status of distributions paid (or deemed to be paid) by the Portfolio
during the year, including the amount of dividends eligible for the corporate
dividends-received deduction.
SALE OR EXCHANGE OF PORTFOLIO SHARES
Generally, gain or loss on the sale or exchange of a Portfolio Share will be
capital gain or loss that will be long-term if the Share has been held for more
than twelve months and otherwise will be short-term. For individuals, long-term
capital gains are currently taxed at a maximum rate of 20% and short-term
capital gains are currently taxed at ordinary income tax rates. However, if a
shareholder realizes a loss on the sale, exchange or redemption of a Share held
for six months or less and has previously received a capital gains distribution
with respect to the Share (or any undistributed net capital gains of a Portfolio
with respect to such Share are included in determining the shareholder's
long-term capital gains), the shareholder must treat the loss as a long-term
capital loss to the extent of the amount of the prior capital gains distribution
(or any undistributed net capital gains of a Portfolio that have been included
in determining such shareholder's long-term capital gains). In addition, any
loss realized on a sale or other disposition of Shares will be disallowed to the
extent an investor repurchases (or enters into a contract or option to
repurchase) Shares within a period of 61 days (beginning 30 days before and
ending 30 days after the disposition of the Shares). This loss disallowance rule
will apply to Shares received through the reinvestment of dividends during the
61-day period.
S-43
<PAGE>
FEDERAL EXCISE TAX
If a Portfolio fails to distribute in a calendar year at least 98% of its
ordinary income for the year and 98% of its capital gain net income (the excess
of short and long term capital gains over short and long term capital losses)
for the one-year period ending October 31 of that year (and any retained amount
from the prior calendar year), the Portfolio will be subject to a nondeductible
4% Federal excise tax on the undistributed amounts. Each Portfolio intends to
make sufficient distributions to avoid imposition of this tax, or to retain, at
most its net capital gains and pay tax thereon.
STATE AND LOCAL TAXES
A Portfolio is not liable for any income or franchise tax in Massachusetts if it
qualifies as a RIC for federal income tax purposes. Depending upon state and
local law, distributions by the Portfolios to shareholders and the ownership of
Shares may be subject to state and local taxes. Shareholders are urged to
consult their tax advisors as to the consequences of these and other state and
local tax rules affecting an investment in the Portfolios.
ADDITIONAL TAX INFORMATION CONCERNING THE WEST VIRGINIA TAX-EXEMPT INCOME
PORTFOLIO
The Portfolio intends to qualify to pay "exempt interest dividends" to its
shareholders by satisfying the Code's requirement that at the close of each
quarter of its taxable year at least 50% of the value of its total assets
consist of obligations the interest on which is exempt from federal income tax.
As long as this and certain other requirements are met, dividends derived from
the Portfolio's net tax-exempt interest income will be "exempt interest
dividends" that are excluded from your gross income for federal income tax
purposes. Exempt interest dividends may, however, have collateral federal income
tax consequences, including alternative minimum tax consequences, as discussed
below.
The percentage of income that constitutes "exempt-interest dividends" will be
determined for each year for the Portfolio and will be applied uniformly to all
dividends declared with respect to the Portfolio during that year. This
percentage may differ from the actual percentage for any particular day.
Exempt-interest dividends may be subject to the alternative minimum tax imposed
by Section 55 of the Code (the "Alternative Minimum Tax"). The Alternative
Minimum Tax is imposed at a rate of up to 28% in the case of non-corporate
taxpayers and at the rate of 20% in the case of corporate taxpayers, to the
extent it exceeds the taxpayer's regular tax liability. The Alternative Minimum
Tax may be affected by the receipt of exempt-interest dividends in two
circumstances. First, exempt-interest dividends derived from certain "private
activity bonds" issued after August 7, 1986, will generally be an item of tax
preference and therefore potentially subject to the Alternative Minimum Tax. The
Portfolio intends, when possible, to avoid investing in private activity bonds.
Second, in the case of exempt-interest dividends received by corporate
shareholders, all exempt-interest dividends, regardless of when the bonds from
which they are derived were issued or whether they are derived from private
activity bonds, will be included in the corporation's "adjusted current
earnings," as defined in Section 56(g) of the Code, in
S-44
<PAGE>
calculating the corporation's alternative minimum taxable income for purposes of
determining the Alternative Minimum Tax.
Interest on indebtedness incurred or continued by shareholders to purchase or
carry Shares of the Portfolio will not be deductible for federal income tax
purposes. The deduction otherwise allowable to property and casualty insurance
companies for "losses incurred" will be reduced by an amount equal to a portion
of exempt-interest dividends received or accrued during any taxable year.
Foreign corporations engaged in a trade or business in the United States will be
subject to a "branch profits tax" on their "dividend equivalent amount" for the
taxable year, which will include exempt-interest dividends. Certain Subchapter S
corporations may also be subject to taxes on their "passive investment income,"
which could include exempt-interest dividends. Up to 85% of the Social Security
benefits or railroad retirement benefits received by an individual during any
taxable year will be included in the gross income of such individual if the
individual's "modified adjusted gross income" (which includes exempt-interest
dividends) plus one-half of the Social Security benefits or railroad retirement
benefits received by such individual during that taxable year exceeds the base
amount described in Section 86 of the Code.
Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by industrial development bonds or
private activity bonds should consult their tax advisors before purchasing
Shares. "Substantial user" is defined generally as including a "non-exempt
person" who regularly uses in trade or business a part of such a facility.
Current federal law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect on the
ability of the Portfolio to purchase sufficient amounts of tax-exempt securities
to satisfy the Code's requirements for the payment of exempt interest dividends.
Issuers of bonds purchased by the Portfolio (or the beneficiary of such bonds)
may have made certain representations or covenants in connection with the
issuance of such bonds to satisfy certain requirements of the Code that must be
satisfied subsequent to the issuance of such bonds. Investors should be aware
that exempt-interest dividends derived from such bonds may become subject to
federal income taxation retroactively to the date thereof if such
representations are determined to have been inaccurate or if the issuer of such
bonds (or the beneficiary of such bonds) fails to comply with such covenants.
The Portfolio may not be a suitable investment for tax-exempt shareholders and
plans because such shareholders and plans would not gain any additional benefit
from the receipt of exempt-interest dividends.
PORTFOLIO TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to policies
established by the Trustees, the Adviser or Sub-Adviser is responsible for
placing the orders to execute transactions for a Portfolio. In placing orders,
it is the policy of the Trust to seek to obtain the best net results taking into
account such factors as price (including the applicable dealer spread), the
size, type and difficulty
S-45
<PAGE>
of the transaction involved, the firm's general execution and operational
facilities, and the firm's risk in positioning the securities involved. While
the Adviser generally seeks reasonably competitive spreads or commissions, the
Trust will not necessarily be paying the lowest spread or commission available.
The money market securities in which the Portfolios invest are traded primarily
in the over-the-counter market. Bonds and debentures are usually traded
over-the-counter, but may be traded on an exchange. Where possible, the Adviser
or Sub-Adviser will deal directly with the dealers who make a market in the
securities involved except in those circumstances where better prices and
execution are available elsewhere. Such dealers usually are acting as principal
for their own account. On occasion, securities may be purchased directly from
the issuer. Money market securities are generally traded on a net basis and do
not normally involve either brokerage commissions or transfer taxes. The cost of
executing portfolio securities transactions of the Trust will primarily consist
of dealer spreads and underwriting commissions.
TRADING PRACTICES AND BROKERAGE
The Adviser or Sub-Adviser selects brokers or dealers to execute transactions
for the purchase or sale of portfolio securities on the basis of its judgment of
their professional capability to provide the service. The primary consideration
is to have brokers or dealers execute transactions at best price and execution.
Best price and execution refers to many factors, including the price paid or
received for a security, the commission charged, the promptness and reliability
of execution, the confidentiality and placement accorded the order and other
factors affecting the overall benefit obtained by the account on the
transaction. The Trust's determination of what are reasonably competitive rates
is based upon the professional knowledge of its trading department as to rates
paid and charged for similar transactions throughout the securities industry. In
some instances, the Trust pays a minimal share transaction cost when the
transaction presents no difficulty. Some trades are made on a net basis where
the Trust either buys securities directly from the dealer or sells them to the
dealer. In these instances, there is no direct commission charged but there is a
spread (the difference between the buy and sell price), which is the equivalent
of a commission.
The Trust may allocate, out of all commission business generated by all of the
funds and accounts under management by the Adviser, brokerage business to
brokers or dealers who provide brokerage and research services. These research
services include: advice, either directly or through publications or writings,
as to the value of securities, the advisability of investing in, purchasing or
selling securities, and the availability of securities or purchasers or sellers
of securities; furnishing of analyses and reports concerning issuers, securities
or industries; providing information on economic factors and trends, assisting
in determining portfolio strategy, providing computer software used in security
analyses, and providing portfolio performance evaluation and technical market
analyses. Such services are used by the Adviser in connection with its
investment decision-making process with respect to one or more funds and
accounts managed by it, and may not be used exclusively with respect to the fund
or account generating the brokerage.
S-46
<PAGE>
As provided in the Securities Exchange Act of 1934, as amended, higher
commissions may be paid to broker/dealers who provide brokerage and research
services than to broker/dealers who do not provide such services if such higher
commissions are deemed reasonable in relation to the value of the brokerage and
research services provided. Although transactions are directed to broker/dealers
who provide such brokerage and research services, the Trust believes that the
commissions paid to such broker/dealers are not, in general, higher than
commissions that would be paid to broker/dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In addition, portfolio transactions which
generate commissions or their equivalent are directed to broker/dealers who
provide daily portfolio pricing services to the Trust. Subject to best price and
execution, commissions used for pricing may or may not be generated by the funds
receiving the pricing service.
The Adviser may place a combined order for two or more accounts or funds engaged
in the purchase or sale of the same security if, in its judgment, joint
execution is in the best interest of each participant and will result in best
price and execution. Transactions involving commingled orders are allocated in a
manner deemed equitable to each account or fund. It is believed that the ability
of the accounts to participate in volume transactions will generally be
beneficial to the accounts and funds. Although it is recognized that, in some
cases, the joint execution of orders could adversely affect the price or volume
of the security that a particular account or trust may obtain, it is the opinion
of the Adviser and the Trust's Board of Trustees that the advantages of combined
orders outweigh the possible disadvantages of separate transactions.
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, the Portfolio
may place orders with broker/dealers which have agreed to defray certain Trust
expenses such as custodian fees, and may, at the request of the Distributor,
give consideration to sales of shares of the Trust as a factor in the selection
of brokers and dealers to execute Trust portfolio transactions.
It is expected that the Trust may execute brokerage or other agency transactions
through the Distributor or a registered broker/dealer affiliate of the Adviser
for a commission in conformity with the 1940 Act, the Securities Exchange Act of
1934 and rules promulgated by the SEC. Under these provisions, the Distributor
or an affiliate of the Adviser is permitted to receive and retain compensation
for effecting portfolio transactions for the Trust on an exchange if a written
contract is in effect between the Distributor and the Trust expressly permitting
the Distributor or an affiliate of the Adviser to receive and retain such
compensation. These rules further require that commissions paid to the
Distributor or affiliate of the Adviser by the Trust for exchange transactions
not exceed "usual and customary" brokerage commissions. The rules define "usual
and customary" commissions to include amounts which are "reasonable and fair
compared to the commission, fee or other remuneration received or to be received
by other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a comparable
period of time." In addition, the Trust may direct commission business to one or
more designated broker/dealers in connection with such broker/dealer's provision
of services to the Trust or payment of certain Trust expenses (E.G., custody,
pricing and professional fees). The Trustees, including those who are not
"interested persons" of the Trust,
S-47
<PAGE>
have adopted procedures for evaluating the reasonableness of commissions paid to
the Distributor and will review these procedures periodically.
For the fiscal years ended January 31, 1998, 1999 and 2000, the Portfolios paid
the following brokerage commissions with respect to portfolio transactions:
<TABLE>
<CAPTION>
Total $ Amount of Brokerage Total $ Amount of % of Total Brokerage % of Total Brokerage
Commissions Paid Brokerage Transactions Transactions Paid to Commission Effective
Paid to Affiliates Affiliated Brokers Through Affiliated
Brokers
Portfolio 1998 1999 2000 1998 1999 2000 1998 1999 2000 1998 1999 2000
--------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity $95,883 $65,904 $55,662 N/A $3,480 $10,298 0% 5.28% 16% 0% 5.28% 5.70%
Income
Portfolio
Capital $395,913 $286,876 $164,809 $33,061 $197,235 $88,403 8.35% 68.75% 50% 10.47% 68.75% 21.87%
Appreciation
Portfolio
Government $1,936 $0 $666 N/A $0 $666 0% 0% 100% 0% 0% 1.42%
Portfolio
West N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Virginia
Portfolio
Prime N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Obligations
Portfolio
</TABLE>
<TABLE>
<CAPTION>
Total Brokerage Commissions Total $ Amount of Brokerage
Paid to SIDC in Connection Commission Paid for Research
with Repurchase Agreement
Transaction
PORTFOLIO 1998 1999 2000 1998 1999 2000
--------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Equity Income $645 $796 $1,230 $68,795 $265,086 0
Portfolio
Capital 1,658 2,433 4,197 198,300 221,941 0
Appreciation
Portfolio
Government N/A N/A 666 1,936 N/A N/A
Portfolio
West Virginia N/A N/A N/A N/A N/A N/A
Portfolio
Prime N/A N/A N/A N/A N/A N/A
Obligations
Portfolio
</TABLE>
S-48
<PAGE>
"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 amount of the Trust's shares. As of January 31,
2000, the following Portfolios held securities of the Trust's "regular brokers
or dealers" as follows:
<TABLE>
<CAPTION>
Portfolio Name of Broker/Dealer Type of Security Held Dollar Amount At FYE
--------- --------------------- --------------------- --------------------
<S> <C> <C> <C>
Government Portfolio Morgan Stanley Repurchase Agreement 2,678,481
Salomon Smith Barney Debt $932,500
West Virginia Portfolio N/A N/A N/A
Equity Income Portfolio Morgan Stanley Repurchase Agreement $2,112,321
Capital Appreciation Portfolio Goldman Sachs Equity $1,832,500
Morgan Stanley, Dean
Witter, Discover
Equity $3,312,500
J.P. Morgan
Repurchase Agreement $5,112,872
Prime Obligations Portfolio Lehman Brothers Repurchase Agreement $ 8,900,000
</TABLE>
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the Board of Trustees to issue an unlimited
number of shares of the Portfolios, and to divide or redivide any unissued
shares of the Trust into one or more additional series.
Shares have no subscription or preemptive rights and only such conversion or
exchange rights as the Board of Trustees may grant in its discretion. When
issued for payment as described in the Prospectus and this Statement of
Additional Information, the Trust's shares will be fully paid and
non-assessable, subject only to the possibility of shareholder liability
described in the following section. All consideration received by the Trust for
shares of any additional series and all assets in which such consideration is
invested would belong to that series and would be subject to the liabilities
related thereto. In the event of a liquidation or dissolution of the Trust,
shareholders of a Portfolio are entitled to receive the assets available for
distribution belonging to that Portfolio, and a proportionate distribution,
based upon the relative asset values of the respective Portfolios, of any
general assets not belonging to any particular Portfolio which are available for
distribution. Certificates representing shares will not be issued.
S-49
<PAGE>
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust could, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. Even if, however, the Trust were held to be a partnership, the
possibility of the shareholders' incurring financial loss for that reason
appears remote because the Declaration of Trust contains an express disclaimer
of shareholder liability for obligations of the Trust and requires that notice
of such disclaimer be given in each agreement, obligation or instrument entered
into or executed by or on behalf of the Trust or the Trustees, and because the
Declaration of Trust provides for indemnification out of the Trust property for
any shareholder held personally liable for the obligations of the Trust.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his
own willful defaults and, if reasonable care has been exercised in the selection
of officers, agents, employees or investment advisers, shall not be liable for
any neglect or wrongdoing of any such person. The Declaration of Trust also
provides that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with actual or threatened
litigation in which they may be involved because of their offices with the Trust
unless it is determined in the manner provided in the Declaration of Trust that
they have not acted in good faith in the reasonable belief that their actions
were in the best interests of the Trust. However, nothing in the Declaration of
Trust shall protect or indemnify a Trustee against any liability for his willful
misfeasance, bad faith, gross negligence or reckless disregard of his duties.
5% AND 25% SHAREHOLDERS
As of May 5, 2000, the following persons were the only persons who were record
owners (or to the knowledge of the Trust, beneficial owners) of 5% and 25% or
more of the shares of the Portfolios. Persons who owned of record or
beneficially more than 25% of a Portfolio's outstanding shares may be deemed to
control that Portfolio within the meaning of the Act. The Trust believes that
most of the shares referred to below were held by the below persons in account
for their fiduciary, agency or custodial customers.
Capital Appreciation Portfolio -- Class A: Kaw & Co., Attn: Securities Cage,
P.O. Box 1793, Charleston, WV 25326-1793, 99.97%
Capital Appreciation Portfolio -- Class B: Donaldson, Lufkin & Jenrette, Mutual
Fund, One Pershing Plaza, Jersey City, NJ 07399-0001, 22.28%.
Government Portfolio -- Class A: Kaw & Co., Attn: Securities Cage, P.O. Box
1793, Charleston, WV 25326-1793, 99.98%.
Government Portfolio--Class B: Donaldson Lufkin & Jenrette, Mutual Fund, One
Perishing Plaza, Jersey City, NJ 07399-0001, 16.29%;
S-50
<PAGE>
Charles Edwin Gerwig & Jeanice Alma Gerwig Jtwros, 304 Elk Street, Webster
Springs WV 26288-1216, 6.16%
West Virginia Portfolio -- Class A: Kaw & Co., Attn: Securities Cage, P.O. Box
1793, Charleston, WV 25326-1793, 100.00%.
West Virginia Portfolio -- Class B: Donaldson Lufkin & Jenrette, Mutual Fund,
One Perishing Plaza, Jersey City, NJ 07399-0001, 53.36%.
Equity Income Portfolio -- Class A: Kaw & Co., Attn: Securities Cage, P.O. Box
1793, Charleston, WV 25326-1793, 99.99%.
Equity Income Portfolio -- Class B: Donaldson Lufkin & Jenrette, Mutual Fund,
One Perishing Plaza, Jersey City, NJ 07399-0001, 28.47%;
Prime Obligations Portfolio -- Class A: Kaw & Co., Attn: Securities Cage, P.O.
Box 1793, Charleston, WV 25326-1793, 100.00%.
Prime Obligations Portfolio -- Class B: Agawam Fund Corporation, Windermere
House, P.O. Box 556639, Nassau, Bahamas, 70.65%.
EXPERTS
The financial statements incorporated by reference into this Statement of
Additional Information have been incorporated by reference in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
FINANCIAL STATEMENTS
The audited financial statements of the Portfolios for the fiscal year ended
January 31, 2000, and the Report of Independent Accountants of
PricewaterhouseCoopers LLP dated March 20, 2000, relating to the financial
statements, including the financial highlights of the Portfolios are
incorporated herein by reference.
S-51
<PAGE>
APPENDIX
DESCRIPTION OF RATINGS
The following descriptions are summaries of published ratings.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
A-1 This is the highest category and indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is satisfactory
and the obligation is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rating categories.
PRIME-1 Issues rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
PRIME-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch IBCA Investors Services, Inc. ("Fitch IBCA"). Paper rated Fitch-1 is
regarded as having the strongest degree of assurance for timely payment. The
rating Fitch-2 (Very Good Grade) is the second highest commercial paper rating
assigned by Fitch IBCA which reflects an assurance of timely payment only
slightly less in degree than the strongest issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff and
Phelps, Inc. ("Duff"). Paper rated Duff-1 is regarded as having very high
certainty of timely payment with excellent liquidity factors which are supported
by ample asset protection. Risk factors are minor.
A-1
<PAGE>
Paper rated Duff-2 is regarded as having good certainty of timely payment, good
access to capital markets and sound liquidity factors and company fundamentals.
Risk factors are small.
The designation A1 by IBCA Limited ("IBCA") indicates that the obligation is
supported by a very strong capacity for timely repayment. Those obligations
rated A1+ are supported by the highest capacity for timely repayment, although
such capacity may be susceptible to adverse changes in business, economic or
financial conditions.
The rating TBW-1 by Thomson BankWatch ("Thomson") indicates a very high
likelihood that principal and interest will be paid on a timely basis.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
Moody's highest rating for state and municipal and other short-term notes is
MIG-1 and VMIG-1. Short-term municipal securities rated MIG-1 or VMIG-1 are of
the best quality. They have strong protection form established cash flows of
funds for their servicing or from established and broad-based access to the
market for refinancing or both. Short-term municipal securities rated MIG-2 or
VMIG-2 are of high quality. Margins of protection are ample although not so
large as in the preceding group.
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in 3 years or less will likely receive a note rating.
Notes maturing beyond 3 years will most likely receive a long-term debt rating.
The following criteria will be used in making that assessment:
- Amortization schedule (the larger the final maturity relative to
other maturities, the more likely it will be treated as a note).
- Source of Payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).
S&P note rating symbols are as follows:
SP-1 Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a
plus(+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
DESCRIPTION OF CORPORATE BOND RATINGS
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree. Debt rated A has a strong capacity
to pay interest and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions than
debt in higher
A-2
<PAGE>
rated categories. Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories. Debt rated BB and B
is regarded as having predominantly speculative characteristics with respect to
capacity to pay interest and repay principal. BB indicates the least degree of
speculation and C the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions. Debt rated BB has
less near-term vulnerability to default than other speculative grade debt.
However, it faces major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions that could lead to inadequate capacity to meet
timely interest and principal payments. The BB rating category is also used for
debt subordinated to senior debt that is assigned an actual or implied BBB-
rating. Debt rate B has greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions would likely impair capacity or willingness to
pay interest and repay principal. The B rating category also is used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
Bonds which are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large, or an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. Bonds rated Aa by
Moody's are judged by Moody's to be of high quality by all standards. Together
with bonds rated Aaa, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities. Bonds which
are rated A possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Bonds which are rated Baa are considered as medium-grade obligations (i.e., they
are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Bonds which are rated Ba are
judged to have speculative elements; their future cannot be considered as
well-assured. Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in this class.
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
A-3
<PAGE>
Moody's bond ratings, where specified, are applied to senior bank obligations
and insurance company senior policyholder and claims obligations with an
original maturity in excess of one year. Obligations relying upon support
mechanisms such as letters-of-credit and bonds of indemnity are excluded unless
explicitly rated.
Obligations of a branch of a bank are considered to be domiciled in the country
in which the branch is located. Unless noted as an exception, Moody's rating on
a bank's ability to repay senior obligations extends only to branches located in
countries which carry a Moody's sovereign rating. Such branch obligations are
rated at the lower of the bank's rating or Moody's sovereign rating for the bank
deposits for the country in which the branch is located.
When the currency in which an obligation is denominated is not the same as the
currency of the country in which the obligation is domiciled, Moody's ratings do
not incorporate an opinion as to whether payment of the obligation will be
affected by the actions of the government controlling the currency of
denomination. In addition, risk associated with bilateral conflicts between an
investor's home country and either the issuer's home country or the country
where an issuer branch is located are not incorporated into Moody's ratings.
Moody's makes no representation that rated bank obligations or insurance company
obligations are exempt from registration under the U.S. Securities Act of 1933
or issued in conformity with any other applicable law or regulation. Nor does
Moody's represent that any specific bank or insurance company obligation is
legally enforceable or is a valid senior obligation of a rated issuer.
Moody's ratings are opinions, not recommendations to buy or sell, and their
accuracy is not guaranteed. A rating should be weighed solely as one factor in
an investment decision and you should make your own study and evaluation of any
issuer whose securities or debt obligations you consider buying or selling.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade, broadly
marketable, suitable for investment by trustees and fiduciary institutions,
sensitive to but slight market fluctuation other than through changes in the
money rate. The prime feature of an AAA bond is a showing of earnings several
times or many times interest requirements, with such stability of applicable
earnings that safety is beyond reasonable question, whatever changes occur in
conditions. Bonds rated AA by Fitch are judged by Fitch to be of safety
virtually beyond question and are readily salable. Their merits are not unlike
those of the AAA class, but their margin of safety is less strikingly broad. The
issue may be the obligation of a small company, strongly secured but influenced
as to rating by the lesser financial power of the enterprise and more local type
market.
Bonds rated A are considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
Bonds rated BBB are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse
A-4
<PAGE>
changes in economic conditions and circumstances, however, are more likely to
have adverse impact on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment grade is
higher than for bonds with higher ratings. Bonds rated BB are considered
speculative. The obligor's ability to pay interest and repay principal may be
affected over time by adverse economic changes. However, business and financial
alternatives can be identified which could assist the obligor in satisfying its
debt service requirements. Bonds rated B are considered highly speculative.
While bonds in this class are currently meeting debt service requirements, the
probability of continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable business and
economic activity throughout the life of the issue.
Bonds rated Duff-1 are judged by Duff to be of the highest credit qualify with
negligible risk factors; only slightly more than U.S. Treasury debt. Bonds rated
Duff-2, 3 and 4 are judged by Duff to be of high credit quality with strong
protection factors. Risk is modest but may vary slightly from time to time
because of economic conditions.
Bonds rated BBB+, BBB, or BBB- are considered below average protection factors
but still considered sufficient for prudent investment. Considerable BBB
variability in risk during economic cycles. Bonds rated BB+, BB or BB- are
considered below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category.
Bonds rated B+, B or B- are considered below investment grade and possessing
risk that obligations will not be met when due. Financial protection factors
will fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the rating within
this category or into a higher or lower rating grade.
Obligations rated AAA by IBCA have the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial conditions are unlikely
to increase investment risk significantly. Obligations for which there is a very
low expectation of investment risk are rated AA by IBCA. Capacity for timely
repayment of principal and interest is substantial. Adverse changes in business,
economic or financial conditions may increase investment risk albeit not very
significantly. Bonds rated A are obligations for which there is a low
expectation of investment risk. Capacity for timely repayment of principal and
interest is strong, although adverse changes in business, economic or financial
conditions may lead to increased investment risk.
Bonds rated BBB are obligations for which there is currently a low expectation
of investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in business, economic or financial conditions
are more likely to lead to increased investment risk than for obligations in
other categories. Bonds rated BB are obligations for which there is a
possibility of investment risk developing. Capacity for timely repayment of
principal and interest exists, but is susceptible over time to adverse changes
in business, economic or financial conditions. Bonds rated B are obligations for
which investment risk
A-5
<PAGE>
exists. Timely repayment of principal and interest is not sufficiently protected
against adverse changes in business, economic or financial conditions.
Bonds rated AAA by Thomson BankWatch indicate that the ability to repay
principal and interest on a timely basis is very high. Bonds rated AA indicate a
superior ability to repay principal and interest on a timely basis, with limited
incremental risk compared to issues rated in the highest category. Bonds rated A
indicate the ability to repay principal and interest is strong. Issues rated A
could be more vulnerable to adverse developments (both internal and external)
than obligations with higher ratings. Bonds rated BBB indicate an acceptable
capacity to repay principal and interest. Issues rated "BBB" are, however, more
vulnerable to adverse developments (both internal and external) than obligations
with higher ratings.
While not investment grade, the BB rating suggests that the likelihood of
default is considerably less than for lower-rated issues. However, there are
significant uncertainties that could affect the ability to adequately service
debt obligations. Issues rated B show a higher degree of uncertainty and
therefore greater likelihood of default than higher-rated issues. Adverse
developments could well negatively affect the payment of interest and principal
on a timely basis.
<PAGE>
PART C: OTHER INFORMATION
POST-EFFECTIVE AMENDMENT NO. 28
Item 23. Exhibits:
(a) Registrant's Agreement and Declaration of Trust, originally filed
with the Registrant's Registration Statement on Form N-1A (File No.
33-50718) with the Securities and Exchange Commission on August 11,
1992, is incorporated herein by reference to exhibit 1 of
Post-Effective Amendment No. 17 filed with the Securities and
Exchange Commission on April 2, 1997.
(b) Registrant's By-Laws are incorporated herein by reference to Exhibit
2 of Post-Effective Amendment No. 20 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718), filed with the
Securities and Exchange Commission on March 30, 1998.
(c) Not Applicable.
(d)(1) Investment Advisory Agreement between the Registrant and Citizens
Commercial and Savings Bank with respect to the Golden Oak
Diversified Growth Portfolio, the Golden Oak Intermediate-Term
Income Portfolio, Golden Oak Michigan Tax Free Bond Portfolio and
Golden Oak Prime Obligation Money Market Portfolio, originally filed
as exhibit 5(b) with Pre-Effective Amendment No. 2 to Registrant's
Registration Statement on Form N-1A (File No. 33-50718) with the
Securities and Exchange Commission on January 13, 1993, is
incorporated herein by reference to exhibit 5(a) of Post-Effective
Amendment No. 17 filed with the Securities and Exchange Commission
on April 2, 1997.
(d)(2) Investment Sub-Advisory Agreement by and among Registrant, Citizens
Commercial and Savings Bank and Wellington Management Company, LLP
with respect to the Golden Oak Prime Obligation Money Market
Portfolio, originally filed as exhibit 5(c), is incorporated herein
by reference to [Exhibit 5(c)] of Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A (File No. 33-50718)
filed with the Securities and Exchange Commission on January 13,
1993.
(d)(3) Investment Advisory Agreement between the Registrant and One Valley
Bank, National Association with respect to the OVB Portfolios,
originally filed as exhibit 5(h) with Post-Effective Amendment No. 6
to Registrant's Registration Statement on Form N-1A (File No.
33-50718) with the Securities and Exchange Commission on September
23, 1993, is incorporated herein by reference to exhibit 5(d) of
Post-Effective Amendment No. 17 filed with the Securities and
Exchange Commission on April 2, 1997.
(d)(4) Investment Sub-Advisory Agreement by and among the Registrant, One
Valley Bank, National Association, and Wellington Management
Company, LLP with respect to the OVB Prime Obligations Portfolio,
originally filed as exhibit 5(i) with Post-Effective Amendment No. 6
to Registrant's Registration Statement on Form N-1A (File No.
33-50718) with the Securities and Exchange Commission on September
23, 1993, is incorporated herein by reference to exhibit 5(e) of
Post-Effective Amendment No. 17 filed with the Securities and
Exchange Commission on April 2, 1997.
<PAGE>
(d)(5) Investment Advisory Agreement between the Registrant and Capitoline
Investment Services, Incorporated with respect to the U.S.
Government Securities Money Fund, originally filed as exhibit 5(j),
with Post-Effective Amendment No. 9 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718) with the Securities and
Exchange Commission on June 2, 1994, is incorporated herein by
reference to exhibit 5(f) of Post-Effective Amendment No. 17 filed
with the Securities and Exchange Commission on April 2, 1997.
(d)(6) Schedule B to Investment Advisory Agreement between the Registrant
and Citizens Commercial & Savings Bank with respect to Golden Oak
Growth and Income Portfolio, originally filed as exhibit 5(l) with
Post-Effective Amendment No. 10 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718) filed with the Securities
and Exchange Commission on September 30, 1994 is incorporated herein
by reference to exhibit 5(g) of Post-Effective Amendment No. 18
filed with the Securities and Exchange Commission on May 30, 1997.
(d)(7) Schedule to the Investment Advisory Agreement between Registrant and
Capitoline Investment Services Incorporated with respect to the
Prime Obligations Fund, originally filed as exhibit 5(q) with
Post-Effective Amendment No. 13 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718) with the Securities and
Exchange Commission on August 11, 1995, is incorporated herein by
reference to exhibit 5(h) of Post-Effective Amendment No. 17 filed
with the Securities and Exchange Commission on April 2, 1997.
(d)(8) Investment Sub-Advisory Agreement by and among the Registrant and
Citizens Bank and Nicholas-Applegate Capital Management with respect
to the Golden Oak Diversified Growth Portfolio, originally filed as
exhibit 5(u), is incorporated herein by reference to Post-Effective
Amendment No. 14 to Registrant's Registration Statement on Form N-1A
(File No. 33-50718) filed with the Securities and Exchange
Commission on March 29, 1996.
(d)(9) Investment Advisory Agreement between the Registrant and One Valley
Bank, National Association with respect to the OVB Equity Income
Portfolio, is incorporated herein by reference to exhibit 5(d) of
Post-Effective Amendment No. 16 to the Registrant's Registration
Statement on Form N-1A (File No. 33-50718) filed with the Securities
and Exchange Commission on February 28, 1997.
(d)(10) Investment Sub-Advisory Agreement by and among the Registrant,
Citizens Bank and Systematic Financial Management, L.P. with respect
to the Golden Oak Value Portfolio is incorporated herein by
reference to exhibit 5(j) of Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A (File No.
33-50718), filed with the Securities and Exchange Commission on
March 30, 1998.
(d)(11) Amendment to Investment Sub-Advisory Agreement between Citizens Bank
and Nicholas-Applegate Capital Management is incorporated herein by
reference to exhibit 5(h) of Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A (File No.
33-50718), filed with the Securities and Exchange Commission on
March 30, 1998.
<PAGE>
(d)(12) Schedule A to the Investment Advisory Agreement between Registrant
and Citizens Bank is incorporated herein by reference to Exhibit
D(12) of Post-Effective Amendment No. 23 to Registrant's
Registration Statement on Form N-1A (File No. 33-50718), filed with
The Securities and Exchange Commission on April 1, 1999.
(d)(13) Amendment to the Investment Sub-Advisory Agreement by and between
Citizens Bank and Systematic Financial Management, L.P. is
incorporated herein by reference to Exhibit D(13) of Post-Effective
Amendment No. 23 to Registrant's Registration Statement on Form N-1A
(File No. 33-50718), filed with The Securities and Exchange
Commission on April 1, 1999.
(d)(14) Amended Schedule A dated February 22, 1999 to the Investment
Advisory Agreement between Registrant and Citizens Bank is
incorporated herein by reference to Exhibit D(14) of Post-Effective
Amendment No. 23 to Registrant's Registration Statement on Form N-1A
(File No. 33-50718), filed with The Securities and Exchange
Commission on April 1, 1999.
(d)(15) Amendment No. 2 dated February 22, 1999 to the Investment
Sub-Advisory Agreement between Citizens Bank and Nicholas-Applegate
Capital Management is incorporated herein by reference to Exhibit
D15) of Post-Effective Amendment no. 24 filed with the Securities
and Exchange Commission on May 28, 1999.
(d)(16) Investment Advisory Agreement between the Registrant and Hancock
Bank and Trust with respect to the Hancock Bank Treasury Securities
Money Market Fund, Hancock Bank Tax Exempt Money Market Fund,
Hancock Bank Growth and Income Fund and Hancock Bank Strategic
Income Fund, is incorporated herein by reference to Exhibit D(16) of
Post-Effective Amendment no. 27 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718) filed with the Securities
and Exchange Commission on March 16, 2000.
(d)(17) Investment Sub-Advisory Agreement between and among Registrant,
Hancock Bank and Trust and Weiss, Peck & Greer L.L.C. with respect
to the Hancock Bank Tax Exempt Money Market Fund is incorporated
herein by reference to Exhibit D(17) of Post-Effective Amendment no.
27 to Registrant's Registration Statement on Form N-1A (File No.
33-50718) filed with the Securities and Exchange Commission on March
16, 2000.
(d)(18) Form of Investment Sub-Advisory Agreement between and among the
Registrant, Citizens Commercial and Savings Bank and BlackRock
International, Ltd., with respect to the Golden Oak International
Equity Portfolio is filed herewith.
(d)(19) Amendment to Investment Sub-Advisory Agreement between and among
Registrant, Hancock Bank and Weiss, Peck & Greer L.L.C. with respect
to the Hancock Horizon Tax Exempt Money Market Fund is filed
herewith.
(e)(1) Distribution Agreement between Registrant and SEI Financial Services
Company, originally filed with Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A (File No. 33-50718)
with the Securities and Exchange Commission on October 14, 1992, is
incorporated herein by reference to exhibit 6(a) of Post-Effective
Amendment No. 17 filed with the Securities and Exchange Commission
on April 2, 1997.
<PAGE>
(e)(2) Transfer Agent Agreement between Registrant and SEI Financial
Management Corporation is incorporated herein by reference to
exhibit 6(b) of Pre-Effective Amendment No. 2 to Registrant's
Registration Statement on Form N-1A (File No. 33-50718) filed with
the Securities and Exchange Commission on January 13, 1993.
(e)(3) Transfer Agent Agreement between Registrant and Crestar Bank is
incorporated herein by reference to exhibit 6(c) of Post-Effective
Amendment No. 12 to Registrant's Registration Statement on Form N-1A
(File No. 33-50718) filed with the Securities and Exchange
Commission on May 31, 1995.
(e)(4) Transfer Agent Agreement between Registrant and Supervised Service
Company is incorporated herein by reference to exhibit 6(d) of
Post-Effective Amendment No. 12 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718) filed with the Securities
and Exchange Commission on May 31, 1995.
(e)(5) Amendment to Transfer Agent Agreement between Registrant and Crestar
Bank dated August 1, 1994 is incorporated herein by reference to
exhibit 6(e) of Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form N-1A (File No. 33-50718), filed with
the Securities and Exchange Commission on March 30, 1998.
(e)(6) Amended and restated Schedule A, relating to The Golden Oak Family
of Funds, to the Distribution Plan is incorporated herein by
reference to Exhibit E(6) of Post-Effective Amendment No. 23 to
Registrant's Registration Statement on Form N-1A (File No.
33-50718), filed with The Securities and Exchange Commission on
April 1, 1999.
(e)(7) Form of Transfer Agency and Service Agreement between Registrant and
Hancock Bank and Trust is incorporated herein by reference to
Exhibit E(7) of Post-Effective Amendment no. 27 to Registrant's
Registration Statement on Form N-1A (File No. 33-50718) filed with
the Securities and Exchange Commission on March 16, 2000.
(f) Not Applicable.
(g)(1) Custodian Agreement between Registrant and CoreStates Bank N.A.,
originally filed with Pre-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A (File No. 33-50718) with the
Securities and Exchange Commission on October 14, 1992, is
incorporated herein by reference to exhibit 8(a) of Post-Effective
Amendment No. 17 filed with the Securities and Exchange Commission
on April 2, 1997.
(g)(2) Custodian Agreement between Registrant and Crestar Bank, originally
filed with Post-Effective Amendment No. 9 to Registrant's
Registration Statement on Form N-1A (File No. 33-50718) filed with
the Securities and Exchange Commission on June 2, 1994, is
incorporated herein by reference to exhibit 8(b) of Post-Effective
Amendment No. 18 filed with the Securities and Exchange Commission
on May 30, 1997.
(g)(3) Amendment to Custodian Agreement between Registrant and Crestar Bank
dated August 1, 1994 is incorporated herein by reference to
exhibit 8(c) of Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form N-1A (File No. 33-50718), filed with
the Securities and Exchange Commission on March 30, 1998.
<PAGE>
(g)(4) Form of Custody Agreement between Registrant and Hancock Bank and
Trust is incorporated herein by reference to exhibit G(4) of
Post-Effective Amendment no. 27 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718) filed with the Securities
and Exchange Commission on March 16, 2000.
(g)(5) Custodian Agreement between Registrant and State Street Bank will be
filed by later amendment.
(h)(1) Administration Agreement between Registrant and SEI Financial
Management Corporation with Schedule dated January 28, 1993 for the
Golden Oak Portfolios and forms of Schedule for the California Tax
Exempt Portfolio and Institutional Tax Free Portfolio is
incorporated herein by reference to exhibit 5(a) of Post-Effective
Amendment No. 4 to Registrant's Registration Statement on Form N-1A
(File No. 33-50718) filed with the Securities and Exchange
Commission on July 29, 1993.
(h)(2) Schedule, relating to the OVB Prime Obligations, OVB Capital
Appreciation, OVB Emerging Growth, OVB Government Securities and OVB
West Virginia Tax-Exempt Income Portfolios (the "OVB Portfolios"),
to Administration Agreement by and between the Registrant and SEI
Financial Management Corporation dated as of January 28, 1993 is
incorporated herein by reference to exhibit 9(b) of Post-Effective
Amendment No. 20 to Registrant's Registration Statement on Form N-1A
(File No. 33-50718), filed with the Securities and Exchange
Commission on March 30, 1998.
(h)(3) Schedule relating to U.S. Government Securities Money Fund, to
Administration Agreement by and between Registrant and SEI Financial
Management Corporation is incorporated herein by reference to
exhibit 9(c) of Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form N-1A (File No. 33-50718), filed with
the Securities and Exchange Commission on March 30, 1998.
(h)(4) Schedule dated May 19, 1997, relating to the Golden Oak Portfolios,
to Administration Agreement by and between Registrant and SEI Fund
Resources is incorporated herein by reference to exhibit 9(d) of
Post-Effective Amendment No. 20 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718), filed with the
Securities and Exchange Commission on March 30, 1998.
(h)(5) Administration Agreement between Registrant and SEI Financial
Corporation with Schedule dated January 28, 1993 as amended and
restated on May 17, 1994 for Golden Oak Portfolios, the Prudential
Portfolios and the OVB Portfolios, originally filed as exhibit 5(o)
with Post-Effective Amendment No. 12 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718) with the Securities and
Exchange Commission on May 31, 1995, is incorporated herein by
reference to exhibit 9(e) of Post-Effective Amendment No. 17 filed
with the Securities and Exchange Commission on April 2, 1997.
(h)(6) Administration Agreement between Registrant and SEI Financial
Management Corporation with Schedule dated August 1, 1994,
originally filed as exhibit 5(p) with Post-Effective Amendment No.
12 to Registrant's Registration Statement on Form N-1A (File No.
33-50718) with the Securities and Exchange Commission on May 31,
1995, is incorporated herein by reference to exhibit 9(f) of
Post-Effective Amendment No. 17 filed with the Securities and
Exchange Commission on April 2, 1997.
<PAGE>
(h)(7) Schedule relating to the Prime Obligations Fund, to Administration
Agreement by and between Registrant and SEI Financial Management
Corporation, originally filed as exhibit 5(p) with Post-Effective
Amendment No. 13 to Registrant's Registration Statement on Form N-1A
(File No. 33-50718) with the Securities and Exchange Commission on
August 11, 1995, is incorporated herein by reference to exhibit 9(g)
of Post-Effective Amendment No. 17 filed with the Securities and
Exchange Commission on April 2, 1997.
(h)(8) Consent to Assignment and Assumption of Administration Agreement
between the Registrant and SEI Financial Management Corporation,
dated January 28, 1993, to SEI Fund Resources is incorporated herein
by reference to exhibit 9(h) of Post-Effective Amendment No. 17
filed with the Securities and Exchange Commission on April 2, 1997.
(h)(9) Consent to Assignment and Assumption of Administration Agreement
between the Registrant and SEI Financial Management Corporation,
dated June 1, 1996, to SEI Fund Resources is incorporated herein by
reference to exhibit 9(i) of Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A (File No.
33-50718), filed with the Securities and Exchange Commission on
March 30, 1998.
(h)(10) Schedule dated November 23, 1998 to the Administration Agreement,
relating to the OVB Family of Funds, between the Registrant and SEI
Financial Management Corporation is incorporated herein by reference
to exhibit H(10) of Post-Effective Amendment No. 23 to Registrant's
Registration Statement on Form N-1A (File No. 33-50718), filed with
The Securities and Exchange Commission on April 1, 1999.
(h)(11) Schedule dated February 22, 1999 to the Administration Agreement,
relating to The Golden Oak Family of Funds, between the Registrant
and SEI Fund Resources is incorporated herein by reference to
exhibit H(11) of Post-Effective Amendment No. 23 to Registrant's
Registration Statement on Form N-1A (File No. 33-50718), filed with
The Securities and Exchange Commission on April 1, 1999.
(h)(12) Schedule relating to the Hancock Bank Treasury Securities Money
Market Fund, Hancock Bank Tax Exempt Money Market Fund, Hancock Bank
Strategic Income Fund and Hancock Bank Growth and Income Fund, to
the Administration Agreement by and between Registrant and SEI Fund
Resources is incorporated herein by reference to exhibit H(12) of
Post-Effective Amendment no. 27 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718) filed with the Securities
and Exchange Commission on March 16, 2000.
(h)(13) Revised Schedule relating to the Golden Oak International Equity
Portfolio, to the Administration Agreement is filed herewith.
(h)(14) Revised Schedule relating to the Hancock Horizon Funds, to the
Administration Agreement is filed herewith.
(h)(15) Form of Shareholder Services Plan relating to The Hancock Bank
Family of Funds is filed herewith.
<PAGE>
(i) Opinion and Consent of Counsel is filed herewith.
(j)(1) Consent of Independent Public Accountants (PricewaterhouseCoopers,
LLP) for the Golden Oak Funds is filed herewith.
(j)(2) Consent of Independent Public Accountants (PricewaterhouseCoopers,
LLP) for the One Valley Bank Funds is filed herewith.
(k) Not Applicable.
(l) Not Applicable.
(m)(1) Registrant's Distribution Plan with respect to the Class B shares of
the Golden Oak Portfolios (except Golden Oak Growth and Income
Portfolio), originally filed with Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A (File No. 33-50718)
with the Securities and Exchange Commission on October 14, 1992, is
incorporated herein by reference to exhibit 15(a) of Post-Effective
Amendment No. 17 filed with the Securities and Exchange Commission
on April 2, 1997.
(m)(2) Registrant's Distribution Plan with respect to the Class B shares of
the OVB Portfolios, originally filed with Post-Effective Amendment
No. 6 to Registrant's Registration Statement on Form N-1A (File No.
33-50718) with the Securities and Exchange Commission on September
23, 1993, is incorporated herein by reference to exhibit 15(b) of
Post-Effective Amendment No. 17 filed with the Securities and
Exchange Commission on April 2, 1997.
(m)(3) Registrant's Distribution Plan with respect to the Class B Shares of
the Golden Oak Growth and Income Portfolio is incorporated herein by
reference to exhibit M(3) of Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A (File No.
33-50718), filed with the Securities and Exchange Commission on
March 30, 1998.
(m)(4) Rule 18f-3 Multi-Class Plan, originally filed with Post-Effective
Amendment No. 12 to Registrant's Registration Statement on Form N-1A
(File No. 33-50718) with the Securities and Exchange Commission on
May 31, 1995, is incorporated herein by reference to exhibit 15(d)
of Post-Effective Amendment No. 17 filed with the Securities and
Exchange Commission on April 2, 1997.
(m)(5) Distribution and Service Plan relating to The Golden Oak Family of
Funds is filed herewith.
(m)(6) Amended and restated Schedule A, relating to The Golden Oak Family
of Funds to the Distribution Plan is filed herewith.
(m)(7) Revised Distribution Plan relating to The Hancock Bank Family of
Funds is filed herewith.
(n)(1) Amended and restated Rule 18f-3 Multi-Class Plan and Certificates of
Class Designation are incorporated herein by reference to exhibit
N(1) of Post-Effective Amendment no. 27 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718) filed with the Securities
and Exchange Commission on March 16, 2000.
(n)(2) Amended and restated Rule 18f-3 Multi-Class Plan is filed herewith.
(o) Not Applicable.
(p)(1) SEI Investments Company Code of Ethics and Insider Trading Policy is
incorporated herein by reference to Exhibit P1 of Post-Effective
Amendment no. 27 to Registrant's Registration Statement on Form N-1A
(File No. 33-50718) filed with the Securities and Exchange
Commission on March 16, 2000.
<PAGE>
(p)(2) Systematic Financial Management, L.P., Code of Ethics is
incorporated herein by reference to Exhibit P2 of Post-Effective
Amendment no. 27 to Registrant's Registration Statement on Form N-1A
(File No. 33-50718) filed with the Securities and Exchange
Commission on March 16, 2000.
(p)(3) Citizens Bank Code of Ethics is incorporated herein by reference to
Exhibit P3 of Post-Effective Amendment no. 27 to Registrant's
Registration Statement on Form N-1A (File No. 33-50718) filed with
the Securities and Exchange Commission on March 16, 2000.
(p)(4) Wellington Management Company, LLP, Code of Ethics is incorporated
herein by reference to Exhibit P4 of Post-Effective Amendment no. 27
to Registrant's Registration Statement on Form N-1A (File No.
33-50718) filed with the Securities and Exchange Commission on March
16, 2000.
(p)(5) Weiss, Peck & Greer, L.L.C., Code of Ethics is incorporated herein
by reference to Exhibit P5 of Post-Effective Amendment no. 27 to
Registrant's Registration Statement on Form N-1A (File No. 33-50718)
filed with the Securities and Exchange Commission on March 16, 2000.
(p)(6) One Valley Bank, N.A., Code of Ethics is incorporated herein by
reference to Exhibit P6 of Post-Effective Amendment no. 27 to
Registrant's Registration Statement on Form N-1A (File No. 33-50718)
filed with the Securities and Exchange Commission on March 16, 2000.
(p)(7) Hancock Bank and Trust Code of Ethics is incorporated herein by
reference to Exhibit P7 of Post-Effective Amendment no. 27 to
Registrant's Registration Statement on Form N-1A (File No. 33-50718)
filed with the Securities and Exchange Commission on March 16, 2000.
(p)(8) Nicholas-Applegate Capital Management, LP, Code of Ethics is
incorporated herein by reference to Exhibit P8 of Post-Effective
Amendment no. 27 to Registrant's Registration Statement on Form N-1A
(File No. 33-50718) filed with the Securities and Exchange
Commission on March 16, 2000.
(p)(9) BlackRock International, Ltd., Code of Ethics is filed herewith.
(p)(10) The Arbor Fund Code of Ethics is filed herewith.
(p)(11) Revised SEI Investments Company Code of Ethics and Insider Trading
Policy dated April 2000 is filed herewith.
(p)(12) Revised Systematic Financial Management, L.P., Code of Ethics is
filed herewith.
(p)(13) Revised One Valley Bank, N.A., Code of Ethics is filed herewith.
(q) Powers of Attorney for John T. Cooney, William M. Doran, Frank E.
Morris, Mark E. Nagle, Robert A. Nesher, Robert A. Patterson, Eugene
B. Peters, George J. Sullivan and James M. Storey are incorporated
herein by reference to Post-Effective Amendment no. 27 to
Registrant's Registration Statement on Form N-1A (File No. 33-50718)
filed with the Securities and Exchange Commission on March 16, 2000.
<PAGE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT:
See the Prospectuses and the Statement of Additional Information
regarding the Trust's control relationships. The Administrator is a subsidiary
of SEI Investments Company which also controls the distributor of the
Registrant, SEI Investments Distribution Co., and other corporations engaged in
providing various financial and record keeping services, primarily to bank trust
departments, pension plan sponsors, and investment managers.
ITEM 25. INDEMNIFICATION:
Article VIII of the Agreement and Declaration of Trust filed as Exhibit
1 to the Registration Statement is incorporated by reference. Insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended, may be permitted to trustees, directors, officers and controlling
persons of the Registrant by the Registrant pursuant to the Declaration of Trust
or otherwise, the Registrant is aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, directors, officers or
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such trustees, directors,
officers or controlling persons in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER:
Other business, profession, vocation or employment of a substantial
nature in which each director or principal officer of the Adviser is or has
been, at any time during the last two fiscal years, engaged for his or her own
account or in the capacity of director, officer, employee, partner or trustee
are as follows:
CITIZENS BANK
Citizens Bank ("Citizens Bank"), is an Investment Adviser for the
Registrant's Golden Oak Funds. The principal address of Citizens Bank is 328
South Saginaw, Flint, Michigan 48502. Citizens Bank is an investment adviser
registered under the Advisers Act.
<TABLE>
<CAPTION>
NAME AND POSITION
WITH INVESTMENT
ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
<S> <C> <C>
Robert J. Vitito
Chairman of the Board; President, CEO
John W. Ennest Citizens Banking Corporation
Vice Chairman of the Board
Director, CFO and Treasurer
<PAGE>
Edward P. Abbott Abbott's Meat, Inc. President & CEO
Director
Hugo E. Braun, Jr. Braun Kendrick Finkbeiner P.L.C. Attorney and Partner
Director
Victor E. George Victor George Oldsmobile, Inc Chairman of the Board
Director
Johnathan E. Burroughs, II JEB Enterprises President
Director
Charles R. Weeks Citizens Banking Corporation Chairman (retired)
Director
Joseph P. Day Banner Engineering & Sales, Inc. President
Director
James L. Wolohan Wolohan Lumber Co. Chairman, President & CEO
Director
William C. Shedd Winegarden, Shedd, Haley Attorney & Partner
Director Lindholm & Robertson
James E. Truesdell, Jr. The Austin Group President & Secretary
Director
Kendall B. Williams The Williams Firm, P.C. Attorney at Law
Director
Ada C. Washington Community Volunteer
Director
Gary P. Drainville
Executive Vice President
Wayne G. Schaeffer
Executive Vice President
Thomas W. Gallagher
Senior Vice President,
General Counsel, Secretary
Richard J. Mitsdarfer
Senior Vice President and
General Auditor
Edward H. Newman
Vice President
Assistant Secretary
Thomas C. Shafer
Executive Vice President
Richard T. Albee
Executive Vice President
<PAGE>
James M. VanTiflin
Executive Vice President
Nicholas J. Cilfone
Executive Vice President
Lawrence O. Erickson Four-Way Tool & Die CEO
Director Engineering, Inc.
Ronald E. Fenton BancSecurity Corporation Retired President & CEO
Director
William J. Hank Farnham Investment Group Chairman of the Board & CEO
Director
Gail E. Janssen F&M Bancorporation, Inc. Retired Chairman of the Board
Director
Stephen J. Lazaroff Diversified Precision Products, President
Director Inc.
William F. Nelson, Jr. Wm. F. Nelson Electric, Inc. President
Director
Robert C. Safford Realty Development Real Estate Developer
Director Corporation
Wayne G. Schaeffer
Executive Vice President
Jack S. Werner
Executive Vice President
Thomas W. Gallagher
Senior Vice President, General
Counsel & Secretary
</TABLE>
ONE VALLEY BANK, NATIONAL ASSOCIATION
One Valley Bank, National Association ("One Valley Bank"), is an
Investment Adviser for the Registrant's OVB Funds. The principal address of One
Valley Bank is One Valley Square, Charleston, West Virginia 25301.
<TABLE>
<CAPTION>
NAME AND POSITION
WITH INVESTMENT NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
ADVISER
<S> <C> <C>
J. Holmes Morrison One Valley Bancorp President & Chief Executive
Chairman of the Board Officer
Phyllis H. Arnold One Valley Bancorp Director
Director, President & Chief Executive
Officer
Charles M. Avampato Clay Foundation, Inc. President
Director One Valley Bancorp Director
Robert F. Baronner One Valley Bancorp Chairman of the Board of Directors
Director
<PAGE>
Herald R. Baughman
Senior Vice President
Gary L. Brown Parkerburg Region
Region President
James K. Brown Jackson & Kelly Attorney, Partner & Director
Director One Valley Bancorp
Lloyd P. Calvert
Senior Vice President
John T. Chambers Ravenswood Land Co. and President
Director Mt. Alpha Development Co. Director
One Valley Bancorp
Nelle Ratrie Chilton Dickinson Fuel Co. Director
Director Terra Co., Inc. Director
Terra Care, Inc. Director
Terra Salis, Inc. Director
TerraSod, Inc. Director
One Valley Bancorp Director
Anthony N. Ciliberti
General Auditor
Bernice J. Deem
Senior Vice President
Ray Marshall Evans, Jr. Chesapeake Mining Co. & President
Director Hubbard Properties Vice President
Geary Securities
Jane Fleming
Senior Vice President
Brian Fox
Senior Vice President
Robert F. Goldsmith Cascades Coal Sales, Inc. President
Director Sentry Resource Associates, Executive Vice President
Inc.
Phillip H. Goodwin CAMCARE President
Director One Valley Bancorp Director
O. Nelson Jones Madison Coal & Supply Co. President
Director Amherst Industries, Inc. Vice President
William M. Kidd
Senior Vice President
Carl E. Little Vice Chairman (retired)
Director
David E. Lowe Intelos President
William A. Rice, Jr. Airgas Direct Industrial President
Director
Steven M. Rubin
Director
<PAGE>
Edward H. Maier General Corporation President
Director One Valley Bancorp Director
Roger D. Mooney
Senior Vice President
John F. Mork President
Director
Harold E. Neely
Senior Vice President
Robert O. Orders, Sr. Orders Construction Company Chief Executive Officer
Director One Valley Bancorp Director
John L. D. Payne Payne-Gallatin Mining Co. President
Director One Valley Bancorp Director
Angus E. Peyton Brown & Peyton Attorney & Partner
Director One Valley Bancorp Director
Brent D. Robinson One Valley Bancorp President & CEO
One Valley Bank of Boston Senior Vice President
K. Richard C. Sinclair Jefferds Corporation President
Director
James C. Smith O.V. Smith & Sons of Big President
Director Chimney, Inc. Vice President
Michael W. Stajduhar
Senior Vice President
James R. Thomas II Chairman (retired)
Director
J. Randy Valentine
Senior Vice President
Dr. Edwin H. Welch University of Charleston President
Director One Valley Bank, N.A.
John Henry Wick III Dickinson Fuel Co., Inc. Vice President
Director
Thomas D. Williams Northwestern Mutual Life Senior Agent
Director Insurance Company
James D. Williams
Director
James A. Winter
Senior Vice President
Jack B. Young
Senior Vice President
John F. Ziebold
Senior Vice President
Robert K. Welty
Senior Vice President
John O'Donovan
Senior Vice President
John A. Derito
Senior Vice President
Michael H. Spangler
Senior Vice President
</TABLE>
<PAGE>
HANCOCK BANK
Hancock Bank is an Adviser for the Registrant's Funds. The principal
address of Hancock Bank is One Hancock Plaza, Post Office Box 4019, Gulfport,
Mississippi 39502-4019. Hancock Bank is an investment adviser registered under
the Advisers Act.
<TABLE>
<S> <C> <C>
Joseph F. Boardman, Jr. Hancock Holding Company Director
Chairman
A.F. Dantzler
Chairman, Executive Committee
George A. Schloegel Hancock Holding Company Director
Vice Chairman
Leo W. Seal, Jr. Hancock Holding Company Director
President & C.E.O.
Charles A. Webb, Jr.
E.V.P. & Secretary
James R. Ginn
E.V.P. & Mississippi Region Head
William T. Williams
E.V.P. & C.C.O.
John M. Hairston
Sr. V.P. & C.O.O.
Carl J. Chaney
Sr. V.P. & C.F.O.
A. Hartie Spense Hancock Bank of Louisiana President
Officer
Robert E. Easterly Hancock Bank of Louisiana E.V.P.
Barbara P. Atchley
V.P. & Director Human Resources
Clifton J. Saik
Sr. V.P. & Sr. Trust Officer
Robert G. Chatham
V.P. & Auditor
James B Estabrook, Jr Hancock Holding Company Director
Director
Charles H Johnson Hancock Holding Company Director
Director
L.A. Keonenn, Jr. Hancock Holding Company Director
Director
<PAGE>
Victor Mavar Hancock Holding Company Director
Director
H.C. Moody, Jr. Hancock Holding Company Director
Director
T.W. Milner, Jr. Hancock Holding Company Director
Director
Richard T. Hill Hancock Holding Company Louisiana Retail Manager
Officer
</TABLE>
NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
Nicholas-Applegate Capital Management ("Nicholas-Applegate"), is a
Sub-Adviser for the Registrant's Funds. The principal address of
Nicholas-Applegate is 600 West Broadway, 29th Floor, San Diego, California
92101. Nicholas-Applegate is an investment adviser registered under the
Advisers Act.
<TABLE>
<CAPTION>
NAME AND POSITION
WITH INVESTMENT NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
ADVISER
<S> <C> <C>
Thomas E. Bleakley -- --
Limited Partner of LP
William H. Chenoweth -- --
Limited Partner of LP
Laura Stanley DeMarco -- --
Limited Partner of LP
Andrew B. Gallagher Nicholas-Applegate Capital Partner, Portfolio Manager,
Limited Partner of LP Management Institutional Equity Management
Richard E. Graf -- --
Limited Partner of LP
Peter J. Johnson -- --
Limited Partner of LP
Jill B. Jordon Nicholas-Applegate Capital Head of Global Sales and
Limited Partner of LP Management Marketing
Nicholas-Applegate Securities Senior Vice President and Head of
Institutional Business
John J. Kane -- --
Limited Partner of LP
James E. Kellerman -- --
Limited Partner of LP
George C. Kenney -- --
Limited Partner of LP
Pedro V. Marcal -- --
Limited Partner of LP
<PAGE>
James T. McComsey -- --
Limited Partner of LP
John J.P. McDonnell Nicholas-Applegate Capital COO
Limited Partner of LP Management
Edward B. Moore, Jr. -- --
Limited Partner of LP
Loretta J. Morris -- --
Limited Partner of LP
Arthur E. Nicholas Nicholas-Applegate Securites President, Chairman
Managing Partner Nicholas-Applegate Capital Management Managing Partner, President of
General Partner, CIO
John R. Pipkin -- --
Limited Partner of LP
Frederick S. Robertson Nicholas-Applegate Capital CIO/Fixed Income
Limited Partner of LP Management
Catherine C. Somhegyi Nicholas-Applegate Capital CIO, Global Equity Management,
Limited Partner of LP Management Partner, and Portfolio Manager
Lawrence S. Speidell -- --
Limited Partner of LP
Todd L. Spillane -- --
Vice President, Director of Compliance
James W. Szabo Nicholas-Applegate Capital General Partner of Global Holding
Limited Partner of LP Management Holdings LP and Nicholas-Applegate Capital
Management
Nicholas-Applegate Capital General Partner of General Partner
Management Holdings Inc.
Nicholas-Applegate Capital Limited Partner of LP
Management Inc.
Nicholas-Applegate Global Holding Co. -- --
LP
Limited Partner
Nicholas-Applegate Capital Management, -- --
Inc.
Limited Partner of Limited Partner
</TABLE>
Systematic Financial Management, LP ("Systematic") is a Sub-Adviser for
the Registrant's Funds. The principal business address of it is 300 Frank W.
Burr Boulevard, Glenpoint East, Teaneck, New Jersey 07666. Systematic is an
investment adviser registered under the Adviser Act.
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION
WITH INVESTMENT NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
ADVISER
<S> <C> <C>
Gyanendra K. Joshi -- --
Senior Managing Director
Chief Investment Officer
Daniel K. McCreesh -- --
Managing Director
Francis T. McGee Frank McGee Associates President
Senior Managing Director/COO
Kenneth W. Burgess III
Director
</TABLE>
Wellington Management Company, LLP ("Wellington") is a Sub-Adviser for
the Registrant's Funds. The principal business address of it is 75 State Street,
Boston, Massachusetts 02109. Wellington is an investment adviser registered
under the Adviser Act.
<TABLE>
<CAPTION>
NAME AND POSITION
WITH INVESTMENT ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
<S> <C> <C>
Kenneth Lee Abrams
General Partner
Nicholas Charles Adams
General Partner
Rand Charles Alexander
General Partner
Deborah Louise Allison
General Partner
James Halsey Averill
General Partner
Karl E. Bandtel
General Partner
Marie-Claude Petit Bernal
General Partner
William Nicholas Booth
General Partner
Paul Braverman
General Partner
Robert A. Bruno
General Partner
Pamela Dippel
General Partner
Robert Wren Doran Wellington Trust Company, NA Director & Chairman of the
General Partner Charles Board and of the Executive
Committee
Townsend Freeman
General Partner
Laurie Allen Gabriel
General Partner
<PAGE>
Frank Joseph Gilday, III
General Partner
John Herrick Gooch Wellington Management International Partner
General Partner Wellington Trust Company, NA Director & Vice President
Nicholas Peter Greville Wellington Management International Partner
General Partner
Paul J. Hammel
General Partner
William Claude Sandifer Hicks
General Partner
Paul David Kaplan
General Partner
John Charles Keogh
General Partner
George Cabot Lodge, Jr.
General Partner
Nancy T. Lukitsh Wellington Trust Company, NA Director & Vice President
General Partner
Mark T. Lynch
General Partner
Christine Smith Manfredi
General Partner
Patrick John McCloskey
General Partner
Earl Edward McEvoy
General Partner
Duncan Mathieu McFarland Wellington Management International Partner
General Partner Wellington Trust Company, NA Director & Vice Chairman
Paul Mulford Mecray, III
General Partner
Matthew Edward Megargel
General Partner
James Nelson Mordy
General Partner
Diane Carol Nordin
General Partner
Stephen T. O'Brien
General Partner
Edward Paul Owens
General Partner
Saul Joseph Pannell
General Partner
Thomas Louis Pappas
General Partner
<PAGE>
David Minter Parker
General Partner
Jonathan Martin Payson Wellington Trust Company, NA Director & President
General Partner
Stephen Michael Pazuk Wellington Management International Partner
General Partner
Robert Douglas Rands
General Partner
Eugene Edward Record, Jr.
General Partner
James Albert Rullo
General Partner
John Robert Ryan
General Partner
Joseph Harold Schwartz
General Partner
Theodore Shasta
General Partner
Binkley Calhoun Shorts
General Partner
Trond Skramstad
General Partner
Catherine Anne Smith
General Partner
Stephen Albert Soderberg
General Partner
Brendan James Swords
General Partner
Harriett Tee Taggart
General Partner
Perry Marques Traquina
General Partner
Gene Roger Tremblay
General Partner
Mary Ann Tynan
General Partner
Clare Villari
General Partner
Ernst Hans von Metzsch
General Partner
James Leland Walters Wellington Trust Company, NA Director, Senior Trust Officer &
General Partner Trust Counsel
Kim Williams
General Partner
Francis Vincent Wisneski, Jr.
General Partner
</TABLE>
<PAGE>
Weiss, Peck and Greer ("WPG") is a sub-adviser for the Registrant's
Hancock Horizon Tax-Exempt Fund. The principal business address for WPG is One
New York Plaza, New York, NY 10004. WPG is an investment adviser registered
under the Advisers Act.
<TABLE>
<CAPTION>
NAME AND POSITION WITH INVESTMENT NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
ADVISER
<S> <C> <C>
Stephen Henry Weiss WPG Fund & Tudor Fund Sr. E.V.P. and Chairman
Chairman of the Executive Weiss, Peck & Greer Funds Trust Sr. E.V.P. and Chairman
Committee, Member WPG Growth Fund
Managing Board WPG International Fund Sr. E.V.P. and Chairman
Sr. E.V.P. and Chairman
Phillip Greer -- --
Senior Managing Principal,
Member Managing Board
Roger James Weiss WPG & Tudor Fund Chairman
Senior Managing Principal Weiss, Peck & Greer Funds Trust Chairman
Member Managing Board WPG Growth Fund Chairman
WPG International Fund Chairman
Mitchell E. Cantor -- --
Principal, Member Managing Board
Gill Rudy Cogan -- --
Principal, Member
Managing Board
Ronald Monroe Hoffner -- --
Principal, Chief Financial Officer
Cornelis T. L. Korthout -- --
Member, Executive
Committee
Wesley Warren Lang, Jr. -- --
Principal
Haakan Sub L.P. -- --
Mulco Sub L.P. -- --
Richard S. Pollack -- --
Principal/General Counsel
Daeninck, Gery A.M.J. -- --
Member, Managing Board
Korteweg, Pieter -- --
Member, Managing Board
Jacob J. Van Duijin -- --
Member, Managing Board
Willem P.M. van der Schoot -- --
Member, Managing Board
</TABLE>
<PAGE>
BlackRock International, Ltd., ("BIL"), is a Sub-Adviser for the
Registrant's Golden Oak International Equity Portfolio. The principal address of
BIL is 7 Castle Street, Edinburgh, Scotland. BIL is an investment adviser
registered under the Advisers Act.
<TABLE>
<CAPTION>
NAME AND POSITION WITH INVESTMENT
ADVISER NAME OF OTHER COMPANY CONNECTION WITH OTHER COMPANY
<S> <C> <C>
Laurence Douglas Fink BlackRock, Inc. Chairman & CEO
Chairman & CEO BlackRock Financial Management, Inc. Chairman & CEO
BlackRock Advisors, Inc. Chief Executive Officer
BlackRock Institutional Mangement Chief Executive Officer
Corporation
BlackRock Capital Management, Inc. Chief Executive Officer
BlackRock (Japan) Inc. Chairman & CEO
Provident Advisers, Inc. Chairman & CEO
Ralph Lewis Schlosstein BlackRock, Inc. President & Director
President & Director BlackRock Financial Management, Inc. President & Director
BlackRock Advisors, Inc. President & Director
BlackRock Institutional Management President & Director
Corporation
BlackRock Capital Management, Inc. President & Director
BlackRock (Japan) Inc. President & Director
Provident Advisers, Inc. Director
Robert Steven Kapito BlackRock, Inc. Vice Chairman
Vice Chairman & Director BlackRock Financial Management, Inc. Vice Chairman & Director
BlackRock Advisors, Inc. Vice Chairman & Director
BlackRock Institutional Management Vice Chairman & Director
Corporation
BlackRock Capital Management, Inc. Vice Chairman & Director
BlackRock (Japan) Inc. Vice Chairman & Director
Provident Advisers, Inc. Director
Robert Peter Connolly BlackRock, Inc. MD, General Counsel & Secretary
MD, General Counsel & Secretary BlackRock Financial Management, Inc. MD, General Counsel & Secretary
BlackRock Advisors, Inc. MD, General Counsel & Secretary
BlackRock Institutional Management MD, General Counsel & Secretary
Corporation
BlackRock Capital Management, Inc. MD, General Counsel & Secretary
BlackRock (Japan) Inc. MD, General Counsel & Secretary
Provident Advisers, Inc. General Counsel & Assistant Secretary
<PAGE>
Paul L. Audet BlackRock, Inc. Chief Financial Officer & Managing Director
Chief Financial Officer &
Managing Director BlackRock Financial Management, Inc. Chief Financial Officer & Managing
BlackRock Advisors, Inc. Director (2/00)
BlackRock Institutional Management Director (2/00)
Corporation
BlackRock Capital Management, Inc. Director
BlackRock (Japan) Inc. Chief Financial Officer & Managing Director
PNC Investment Holding, LLC Chief Financial Officer & Managing Director
PNC Asset Management, Inc. Chief Financial Officer & Managing Director (9/99)
PNC Investment Holdings, Inc Chief Financial Officer & Managing Director (9/99)
The PNC Financial Services Group, Finance (9/98)
Inc.
Henry Gabbay BlackRock, Inc. Managing Director
Managing Director, Portfolio BlackRock Financial Management, Inc. Managing Director, Portfolio Compliance
Compliance BlackRock Advisors, Inc. Managing Director, Portfolio Compliance
BlackRock Institutional Management Managing Director, Portfolio Compliance
Corporation
BlackRock Capital Management, Inc. Managing Director, Portfolio Compliance
BlackRock (Japan) Inc Managing Director, Portfolio Compliance
Provident Advisers, Inc. Chief Operating Officer (12/99)
Bartholomew Angelo Battista BlackRock Financial Management, Inc. Director, Regulatory Compliance
Director, Regulatory Compliance BlackRock Advisors, Inc. Director, Regulatory Compliance
(1/00) BlackRock Institutional Management Director, Regulatory Compliance
Corporation
BlackRock Capital Management, Inc. Director, Regulatory Compliance
BlackRock (Japan) Inc Director, Regulatory Compliance
Moore Capital Management, Inc. Compliance Officer
<PAGE>
Keith Thomas Anderson BlackRock, Inc. Managing Director
Managing Director BlackRock Financial Management, Inc. Managing Director
BlackRock Advisors, Inc. Managing Director
BlackRock Institutional Management Managing Director
Corporation
BlackRock Capital Management, Inc. Managing Director
BlackRock (Japan) Inc Managing Director
Provident Advisers, Inc. Managing Director (12/99)
Gordon Anderson BlackRock, Inc. Managing Director
Managing Director
Albert Morillo Scottish Widows Investment Management Investment Director (12/99)
Managing Director
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS:
(a) Furnish the name of each investment company (other than the
Registrant) for which each principal underwriter currently distributing the
securities of the Registrant also acts as a principal underwriter, distributor
or investment adviser.
Registrant's distributor, SEI Investments Distribution Co. (the
"Distributor"), acts as distributor for:
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI Institutional International Trust August 30, 1988
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
First American Funds, Inc November 1, 1992
First American Investment Funds, Inc November 1, 1992
Boston 1784 Funds-Registered Trademark- June 1, 1993
The PBHG Funds, Inc July 16, 1993
Morgan Grenfell Investment Trust January 3, 1994
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
STI Classic Variable Trust August 18, 1995
ARK Funds November 1, 1995
<PAGE>
Huntington Funds January 11, 1996
SEI Asset Allocation Trust April 1, 1996
TIP Funds April 28, 1996
SEI Institutional Investments Trust June 14, 1996
First American Strategy Funds, Inc October 1, 1996
HighMark Funds February 15, 1997
Armada Funds March 8, 1997
PBHG Insurance Series Funds, Inc April 1, 1997
The Expedition Funds June 9, 1997
Alpha Select Funds January 1, 1998
Oak Associates Funds February 27, 1998
The Nevis Fund, Inc June 29, 1998
The Parkstone Group of Funds September 14, 1998
CNI Charter Funds April 1, 1999
Armada Advantage Fund May 1, 1999
Amerindo Funds, Inc. July 1, 1999
Huntington VA Fund October 15, 1999
Friends Ivory Funds December 16, 1999
The Distributor provides numerous financial services to investment
managers, pension plan sponsors, and bank trust departments. These services
include portfolio evaluation, performance measurement and consulting services
("Funds Evaluation") and automated execution, clearing and settlement of
securities transactions ("MarketLink").
(b) Furnish the Information required by the following table with
respect to each director, officer or partner of each principal underwriter named
in the answer to Item 21 of Part B. Unless otherwise noted, the business address
of each director or officer is Oaks, PA 19456
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
---- ---------------- ---------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman of the Board of Directors --
Henry H. Greer Director --
Carmen V. Romeo Director --
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President --
Dennis J. McGonigle Executive Vice President --
Robert M. Silvestri Chief Financial Officer & Treasurer --
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Larry Hutchison Senior Vice President --
Jack May Senior Vice President --
Hartland J. McKeown Senior Vice President --
Barbara J. Moore Senior Vice President --
Kevin P. Robins Senior Vice President & General Counsel Vice President
Assistant Secretary
<PAGE>
Patrick K. Walsh Senior Vice President --
Robert Aller Vice President --
Gordon W. Carpenter Vice President --
Timothy D. Barto Vice President & Assistant Secretary Vice President,
Assistant Secretary
Todd Cipperman Vice President & General Counsel Vice President,
Assistant Secretary
S. Courtney E. Collier Vice President & Assistant Secretary --
Robert Crudup Vice President & Managing Director --
Barbara Doyne Vice President --
Jeff Drennen Vice President --
James Foggo Vice President & Assistant Secretary Vice President,
Assistant Secretary
Vic Galef Vice President & Managing Director --
Lydia A. Gavalis Vice President & Assistant Secretary Vice President,
Assistant Secretary
Greg Gettinger Vice President & Assistant Secretary --
Kathy Heilig Vice President --
Jeff Jacobs Vice President --
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
John Krzeminski Vice President & Managing Director --
Carolyn McLaurin Vice President & Managing Director --
W. Kelso Morrill Vice President --
Mark Nagle Vice President Controller & Chief
Financial Officer
Joanne Nelson Vice President --
Joseph M. O'Donnell Vice President & Assistant Secretary Vice President,
Assistant Secretary
Sandra K. Orlow Vice President & Assistant Secretary Vice President,
Assistant Secretary
Cynthia M. Parrish Vice President & Assistant Secretary --
Kim Rainey Vice President --
Rob Redican Vice President --
Maria Rinehart Vice President --
Mark Samuels Vice President & Managing Director --
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant Secretary --
Lydia J. Streigel Vice President & Assistant Secretary Vice President,
Assistant Secretary
Lori L. White Vice President & Assistant Secretary --
Wayne M. Withrow Vice President & Managing Director --
</TABLE>
<PAGE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS:
Books or other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940, and the rules promulgated
thereunder, are maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3);
(6); (8); (12); and 31a-1(d), the required books and records are
maintained at the offices of Registrant's Custodians:
First Union National Bank
123 Broad Street
Philadelphia, PA 19109
HANCOCK HORIZON FUNDS
Hancock Bank and Trust
One Hancock Plaza
P.O. Box 4019
Gulfport, MS 39502
(b)/(c) With respect to Rules 31a-1(a); 31a-1(b)(1),(4); (2)(C) and
(D); (4); (5); (6); (8); (9); (10); (11); and 31a-1(f), the required
books and records are maintained at the offices of Registrant's
Administrator:
SEI Investment Mutual Funds Services
Oaks, PA 19456
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f),
the required books and records are maintained at the principal offices
of the Registrant's Advisers:
GOLDEN OAK PORTFOLIOS
Citizens Bank
One Citizens Banking Plaza
Flint, MI 48502
Wellington Management Company, LLP
75 State Street
Boston, MA 02109
Systematic Financial Management, L.P.
300 Frank W. Burr Blvd.
Glenpointe East, 7th Floor
Teaneck, NJ 07666
Nicholas-Applegate Capital Management LP
600 West Broadway
29th Floor
San Diego, CA 92101
<PAGE>
BlackRock International Ltd.
7 Castle Street
Edinburgh, Scotland EH2 3AH
OVB PORTFOLIOS
One Valley Bank, National Association
One Valley Square
Charleston, WV 25301
Wellington Management Company, LLP
75 State Street
Boston, MA 02109
HANCOCK HORIZON FUNDS
Hancock Bank
One Hancock Plaza
P.O. Box 4019
Gulfport, MS 39502
Weiss, Peck & Greer, LLC
One New York Plaza
New York, NY 10004
ITEM 29. MANAGEMENT SERVICES:
None.
ITEM 30. UNDERTAKINGS:
NONE
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust for The Arbor Fund is
on file with the Secretary of State of The Commonwealth of Massachusetts and
notice is hereby given that this Registration Statement has been executed on
behalf of the Trust by an officer of the Trust as an officer and by its Trustees
as trustees and not individually and the obligations of or arising out of this
Registration Statement are not binding upon any of the Trustees, officers, or
Shareholders individually but are binding only upon the assets and property of
the Trust.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for the effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Post-Effective Amendment No. 28 to Registration Statement No.
33-42484 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Oaks, Commonwealth of Pennsylvania on the 30th day of
May, 2000.
THE ARBOR FUND
By: /s/ MARK E. NAGLE
----------------------------
Mark E. Nagle, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacity and on the dates indicated.
* Trustee May 30, 2000
---------------------------
John T. Cooney
* Trustee May 30, 2000
---------------------------
William M. Doran
* Trustee May 30, 2000
---------------------------
Robert A. Nesher
* Trustee May 30, 2000
---------------------------
Robert A. Patterson
* Trustee May 30, 2000
---------------------------
Eugene B. Peters
* Trustee May 30, 2000
---------------------------
James M. Storey
* Trustee May 30, 2000
---------------------------
George J. Sullivan, Jr.
/s/ Mark E. Nagle
--------------------------- President, Controller & May 30, 2000
Mark E. Nagle Chief Financial Officer
*By: /s/ MARK E. NAGLE
---------------------------
Mark E. Nagle
Attorney-in-fact
<PAGE>
EXHIBIT INDEX
EXHIBIT
EX-99.A Registrant's Agreement and Declaration of Trust, originally
filed with the Registrant's Registration Statement on Form
N-1A (File No. 33-50718) with the Securities and Exchange
Commission on August 11, 1992, is incorporated herein by
reference to exhibit 1 of Post-Effective Amendment No. 17
filed with the Securities and Exchange Commission on April 2,
1997.
EX-99.B Registrant's By-Laws are incorporated herein by reference to
Exhibit 2 of Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form N-1A (File No. 33-50718), filed
with the Securities and Exchange Commission on March 30, 1998.
EX-99.C Not Applicable.
EX-99.D1 Investment Advisory Agreement between the Registrant and
Citizens Commercial and Savings Bank with respect to the
Golden Oak Diversified Growth Portfolio, the Golden Oak
Intermediate-Term Income Portfolio, Golden Oak Michigan Tax
Free Bond Portfolio and Golden Oak Prime Obligation Money
Market Portfolio, originally filed as exhibit 5(b) with
Pre-Effective Amendment No. 2 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718) with the Securities
and Exchange Commission on January 13, 1993, is incorporated
herein by reference to exhibit 5(a) of Post-Effective
Amendment No. 17 filed with the Securities and Exchange
Commission on April 2, 1997.
EX-99.D2 Investment Sub-Advisory Agreement by and among Registrant,
Citizens Commercial and Savings Bank and Wellington Management
Company, LLP with respect to the Golden Oak Prime Obligation
Money Market Portfolio, originally filed as exhibit 5(c), is
incorporated herein by reference to Exhibit 5(c) of
Pre-Effective Amendment No. 2 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718) filed with the
Securities and Exchange Commission on January 13, 1993.
EX-99.D3 Investment Advisory Agreement between the Registrant and One
Valley Bank, National Association with respect to the OVB
Portfolios, originally filed as exhibit 5(h) with
Post-Effective Amendment No. 6 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718) with the Securities
and Exchange Commission on September 23, 1993, is incorporated
herein by reference to exhibit 5(d) of Post-Effective
Amendment No. 17 filed with the Securities and Exchange
Commission on April 2, 1997.
EX-99.D4 Investment Sub-Advisory Agreement by and among the Registrant,
One Valley Bank, National Association, and Wellington
Management Company, LLP with respect to the OVB Prime
Obligations Portfolio, originally filed as exhibit 5(i) with
Post-Effective Amendment No. 6 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718) with the Securities
and Exchange Commission on September 23, 1993, is incorporated
herein by reference to exhibit 5(e) of Post-Effective
Amendment No. 17 filed with the Securities and Exchange
Commission on April 2, 1997.
<PAGE>
EX-99.D5 Investment Advisory Agreement between the Registrant and
Capitoline Investment Services, Incorporated with respect to
the U.S. Government Securities Money Fund, originally filed as
exhibit 5(j), with Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-1A (File No.
33-50718) with the Securities and Exchange Commission on June
2, 1994, is incorporated herein by reference to exhibit 5(f)
of Post-Effective Amendment No. 17 filed with the Securities
and Exchange Commission on April 2, 1997.
EX-99.D6 Schedule B to Investment Advisory Agreement between the
Registrant and Citizens Commercial & Savings Bank with respect
to Golden Oak Growth and Income Portfolio, originally filed as
exhibit 5(l) with Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A (File No.
33-50718) filed with the Securities and Exchange Commission on
September 30, 1994 is incorporated herein by reference to
exhibit 5(g) of Post-Effective Amendment No. 18 filed with the
Securities and Exchange Commission on May 30, 1997.
EX-99.D7 Schedule to the Investment Advisory Agreement between
Registrant and Capitoline Investment Services Incorporated
with respect to the Prime Obligations Fund, originally filed
as exhibit 5(q) with Post-Effective Amendment No. 13 to
Registrant's Registration Statement on Form N-1A (File No.
33-50718) with the Securities and Exchange Commission on
August 11, 1995, is incorporated herein by reference to
exhibit 5(h) of Post-Effective Amendment No. 17 filed with the
Securities and Exchange Commission on April 2, 1997.
EX-99.D8 Investment Sub-Advisory Agreement by and among the Registrant
and Citizens Bank and Nicholas-Applegate Capital Management
with respect to the Golden Oak Diversified Growth Portfolio,
originally filed as exhibit 5(u), is incorporated herein by
reference to Post-Effective Amendment No. 14 to Registrant's
Registration Statement on Form N-1A (File No. 33-50718) filed
with the Securities and Exchange Commission on March 29, 1996.
EX-99.D9 Investment Advisory Agreement between the Registrant and One
Valley Bank, National Association with respect to the OVB
Equity Income Portfolio, is incorporated herein by reference
to exhibit 5(d) of Post-Effective Amendment No. 16 to the
Registrant's Registration Statement on Form N-1A (File No.
33-50718) filed with the Securities and Exchange Commission on
February 28, 1997.
EX-99.D10 Investment Sub-Advisory Agreement by and among the Registrant,
Citizens Bank and Systematic Financial Management, L.P. with
respect to the Golden Oak Value Portfolio is incorporated
herein by reference to exhibit 5(j) of Post-Effective
Amendment No. 20 to Registrant's Registration Statement on
Form N-1A (File No. 33-50718), filed with the Securities and
Exchange Commission on March 30, 1998.
EX-99.D11 Amendment to Investment Sub-Advisory Agreement between
Citizens Bank and Nicholas-Applegate Capital Management is
incorporated herein by reference to exhibit 5(h) of
Post-Effective Amendment No. 20 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718), filed with the
Securities and Exchange Commission on March 30, 1998.
EX-99.D12 Schedule A to the Investment Advisory Agreement between
Registrant and Citizens Bank is incorporated herein by
reference to Exhibit D(12) of Post-Effective Amendment No. 23
to Registrant's Registration Statement on Form N-1A (File No.
33-50718), filed with The Securities and Exchange Commission
on April 1, 1999.
<PAGE>
EX-99.D13 Amendment to the Investment Sub-Advisory Agreement by and
between Citizens Bank and Systematic Financial Management,
L.P. is incorporated herein by reference to Exhibit D(13) of
Post-Effective Amendment No. 23 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718), filed with The
Securities and Exchange Commission on April 1, 1999.
EX-99.D14 Amended Schedule A dated February 22, 1999 to the Investment
Advisory Agreement between Registrant and Citizens Bank is
incorporated herein by reference to Exhibit D(14) of
Post-Effective Amendment No. 23 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718), filed with The
Securities and Exchange Commission on April 1, 1999.
EX-99.D15 Amendment No. 2 dated February 22, 1999 to the Investment
Sub-Advisory Agreement between Citizens Bank and
Nicholas-Applegate Capital Management is incorporated herein
by reference to Exhibit D(5) of Post-Effective Amendment no.
24 filed with the Securities and Exchange Commission on May
28, 1999.
EX-99.D16 Investment Advisory Agreement between the Registrant and
Hancock Bank and Trust with respect to the Hancock Bank
Treasury Securities Money Market Fund, Hancock Bank Tax Exempt
Money Market Fund, Hancock Bank Growth and Income Fund and
Hancock Bank Strategic Income Fund, is incorporated herein by
reference to Exhibit D(16) of Post-Effective Amendment no. 27
to Registrant's Registration Statement on Form N-1A (File No.
33-50718) filed with the Securities and Exchange Commission on
March 16, 2000.
EX-99.D17 Investment Sub-Advisory Agreement between and among
Registrant, Hancock Bank and Trust and Weiss, Peck & Greer
L.L.C. with respect to the Hancock Bank Tax Exempt Money
Market Fund is incorporated herein by reference to Exhibit
D(17) of Post-Effective Amendment no. 27 to Registrant's
Registration Statement on Form N-1A (File No. 33-50718) filed
with the Securities and Exchange Commission on March 16, 2000.
EX-99.D18 Investment Sub-Advisory Agreement between and among the
Registrant, Citizens Commercial and Savings Bank and BlackRock
International, Ltd., with respect to the Golden Oak
International Equity Portfolio is filed herewith.
EX-99.D19 Form of Amendment to Investment Sub-Advisory Agreement
between and among Registrant, Hancock Bank and Weiss, Peck &
Greer L.L.C. with respect to the Hancock Horizon Tax Exempt
Money Market Fund is filed herewith.
EX-99.E1 Distribution Agreement between Registrant and SEI Financial
Services Company, originally filed with Pre-Effective
Amendment No. 1 to Registrant's Registration Statement on Form
N-1A (File No. 33-50718) with the Securities and Exchange
Commission on October 14, 1992, is incorporated herein by
reference to exhibit 6(a) of Post-Effective Amendment No. 17
filed with the Securities and Exchange Commission on April 2,
1997.
EX-99.E2 Transfer Agent Agreement between Registrant and SEI Financial
Management Corporation is incorporated herein by reference to
Exhibit 6(b) of Pre-Effective Amendment No. 2 to Registrant's
Registration Statement on Form N-1A (File No. 33-50718) filed
with the Securities and Exchange Commission on January 13,
1993.
<PAGE>
EX-99.E3 Transfer Agent Agreement between Registrant and Crestar Bank
is incorporated herein by reference to Exhibit 6(c) of
Post-Effective Amendment No. 12 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718) filed with the
Securities and Exchange Commission on May 31, 1995.
EX-99.E4 Transfer Agent Agreement between Registrant and Supervised
Service Company is incorporated herein by reference to
Exhibit 6(d) of Post-Effective Amendment No. 12 to
Registrant's Registration Statement on Form N-1A (File
No. 33-50718) filed with the Securities and Exchange
Commission on May 31, 1995.
EX-99.E5 Amendment to Transfer Agent Agreement between Registrant and
Crestar Bank dated August 1, 1994 is incorporated herein by
reference to exhibit 6(e) of Post-Effective Amendment No. 20
to Registrant's Registration Statement on Form N-1A (File No.
33-50718), filed with the Securities and Exchange Commission
on March 30, 1998.
EX-99.E6 Amended and restated Schedule A, relating to The Golden Oak
Family of Funds, to the Distribution Plan is incorporated
herein by reference to Exhibit E(6) of Post-Effective
Amendment No. 23 to Registrant's Registration Statement on
Form N-1A (File No. 33-50718), filed with The Securities and
Exchange Commission on April 1, 1999.
EX-99.E7 Form of Transfer Agency and Service Agreement between
Registrant and Hancock Bank and Trust is incorporated herein
by reference to Exhibit E(7) of Post-Effective Amendment no.
27 to Registrant's Registration Statement on Form N-1A (File
No. 33-50718) filed with the Securities and Exchange
Commission on March 16, 2000.
EX-99.F Not Applicable.
EX-99.G1 Custodian Agreement between Registrant and CoreStates Bank
N.A., originally filed with Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A (File No.
33-50718) with the Securities and Exchange Commission on
October 14, 1992, is incorporated herein by reference to
exhibit 8(a) of Post-Effective Amendment No. 17 filed with the
Securities and Exchange Commission on April 2, 1997.
EX-99.G2 Custodian Agreement between Registrant and Crestar Bank,
originally filed with Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-1A (File No.
33-50718) filed with the Securities and Exchange Commission on
June 2, 1994, is incorporated herein by reference to exhibit
8(b) of Post-Effective Amendment No. 18 filed with the
Securities and Exchange Commission on May 30, 1997.
EX-99.G3 Amendment to Custodian Agreement between Registrant and
Crestar Bank dated August 1, 1994 is incorporated herein by
reference to exhibit 8(c) of Post-Effective Amendment No. 20
to Registrant's Registration Statement on Form N-1A (File No.
33-50718), filed with the Securities and Exchange Commission
on March 30, 1998.
EX-99.G4 Form of Custody Agreement between Registrant and Hancock Bank
and Trust is incorporated herein by reference to exhibit G(4)
of Post-Effective Amendment no. 27 to Registrant's
Registration Statement on Form N-1A (File No. 33-50718) filed
with the Securities and Exchange Commission on March 16, 2000.
<PAGE>
EX-99.G5 Custodian Agreement between Registrant and State Street Bank
will be filed by later amendment.
EX-99.H1 Administration Agreement between Registrant and SEI Financial
Management Corporation with Schedule dated January 28, 1993
for the Golden Oak Portfolios and forms of Schedule for the
California Tax Exempt Portfolio and Institutional Tax Free
Portfolio is incorporated herein by reference to exhibit 5(a)
of Post-Effective Amendment No. 4 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718) filed with the
Securities and Exchange Commission on July 29, 1993.
EX-99.H2 Schedule, relating to the OVB Prime Obligations, OVB Capital
Appreciation, OVB Emerging Growth, OVB Government Securities
and OVB West Virginia Tax-Exempt Income Portfolios (the "OVB
Portfolios"), to Administration Agreement by and between the
Registrant and SEI Financial Management Corporation dated as
of January 28, 1993 is incorporated herein by reference to
exhibit 9(b) of Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A (File No.
33-50718), filed with the Securities and Exchange Commission
on March 30, 1998.
EX-99.H3 Schedule relating to U.S. Government Securities Money Fund, to
Administration Agreement by and between Registrant and SEI
Financial Management Corporation is incorporated herein by
reference to exhibit 9(c) of Post-Effective Amendment No. 20
to Registrant's Registration Statement on Form N-1A (File No.
33-50718), filed with the Securities and Exchange Commission
on March 30, 1998.
EX-99.H4 Schedule dated May 19, 1997, relating to the Golden Oak
Portfolios, to Administration Agreement by and between
Registrant and SEI Fund Resources is incorporated herein by
reference to exhibit 9(d) of Post-Effective Amendment No. 20
to Registrant's Registration Statement on Form N-1A (File No.
33-50718), filed with the Securities and Exchange Commission
on March 30, 1998.
EX-99.H5 Administration Agreement between Registrant and SEI Financial
Corporation with Schedule dated January 28, 1993 as amended
and restated on May 17, 1994 for Golden Oak Portfolios, the
Prudential Portfolios and the OVB Portfolios, originally filed
as exhibit 5(o) with Post-Effective Amendment No. 12 to
Registrant's Registration Statement on Form N-1A (File No.
33-50718) with the Securities and Exchange Commission on May
31, 1995, is incorporated herein by reference to exhibit 9(e)
of Post-Effective Amendment No. 17 filed with the Securities
and Exchange Commission on April 2, 1997.
EX-99.H6 Administration Agreement between Registrant and SEI Financial
Management Corporation with Schedule dated August 1, 1994,
originally filed as exhibit 5(p) with Post-Effective Amendment
No. 12 to Registrant's Registration Statement on Form N-1A
(File No. 33-50718) with the Securities and Exchange
Commission on May 31, 1995, is incorporated herein by
reference to exhibit 9(f) of Post-Effective Amendment No. 17
filed with the Securities and Exchange Commission on April 2,
1997.
<PAGE>
EX-99.H7 Schedule relating to the Prime Obligations Fund, to
Administration Agreement by and between Registrant and SEI
Financial Management Corporation, originally filed as exhibit
5(p) with Post-Effective Amendment No. 13 to Registrant's
Registration Statement on Form N-1A (File No. 33-50718) with
the Securities and Exchange Commission on August 11, 1995, is
incorporated herein by reference to exhibit 9(g) of
Post-Effective Amendment No. 17 filed with the Securities and
Exchange Commission on April 2, 1997.
EX-99.H8 Consent to Assignment and Assumption of Administration
Agreement between the Registrant and SEI Financial Management
Corporation, dated January 28, 1993, to SEI Fund Resources is
incorporated herein by reference to exhibit 9(h) of
Post-Effective Amendment No. 17 filed with the Securities and
Exchange Commission on April 2, 1997.
EX-99.H9 Consent to Assignment and Assumption of Administration
Agreement between the Registrant and SEI Financial Management
Corporation, dated June 1, 1996, to SEI Fund Resources is
incorporated herein by reference to exhibit 9(i) of
Post-Effective Amendment No. 20 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718), filed with the
Securities and Exchange Commission on March 30, 1998.
EX-99.H10 Schedule dated November 23, 1998 to the Administration
Agreement, relating to the OVB Family of Funds, between the
Registrant and SEI Financial Management Corporation is
incorporated herein by reference to exhibit H(10) of
Post-Effective Amendment No. 23 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718), filed with The
Securities and Exchange Commission on April 1, 1999.
EX-99.H11 Schedule dated February 22, 1999 to the Administration
Agreement, relating to The Golden Oak Family of Funds, between
the Registrant and SEI Fund Resources is incorporated herein
by reference to exhibit H(11) of Post-Effective Amendment No.
23 to Registrant's Registration Statement on Form N-1A (File
No. 33-50718), filed with The Securities and Exchange
Commission on April 1, 1999.
EX-99.H12 Schedule relating to the Hancock Bank Treasury Securities
Money Market Fund, Hancock Bank Tax Exempt Money Market Fund,
Hancock Bank Strategic Income Fund and Hancock Bank Growth and
Income Fund, to the Administration Agreement by and between
Registrant and SEI Fund Resources is incorporated herein by
reference to exhibit H(12) of Post-Effective Amendment no. 27
to Registrant's Registration Statement on Form N-1A (File No.
33-50718) filed with the Securities and Exchange Commission on
March 16, 2000.
EX-99.H13 Revised Schedule relating to the Golden Oak International
Equity Portfolio, to the Administration Agreement is filed
herewith.
EX-99.H14 Revised Schedule relating to the Hancock Horizon Funds, to the
Administration Agreement is filed herewith.
EX-99.H15 Form of Shareholder Services Plan relating to The Hancock Bank
Family of Funds is filed herewith.
EX-99.I Opinion and Consent of Counsel is filed herewith.
EX-99.J1 Consent of Independent Public Accountants
(PricewaterhouseCoopers, LLP) for the Golden Oak Funds is
filed herewith.
<PAGE>
EX-99.J2 Consent of Independent Public Accountants
(PricewaterhouseCoopers, LLP) for the One Valley Bank Funds is
filed herewith.
EX-99.K Not Applicable.
EX-99.L Not Applicable.
EX-99.M1 Registrant's Distribution Plan with respect to the Class B
shares of the Golden Oak Portfolios (except Golden Oak Growth
and Income Portfolio) originally filed with Pre-Effective
Amendment No. 1 to Registrant's Registration Statement on Form
N-1A (File No. 33-50718) with the Securities and Exchange
Commission on October 14, 1992 is incorporated herein by
reference to exhibit 15(a) of Post-Effective Amendment No. 17
filed with the Securities and Exchange Commission on April 2,
1997.
EX-99.M2 Registrant's Distribution Plan with respect to the Class B
shares of the OVB Portfolios originally filed with
Post-Effective Amendment No. 6 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718) with the Securities
and Exchange Commission on September 23, 1993 incorporated
herein by reference to exhibit 15(b) of Post-Effective
Amendment No. 17 filed with the Securities and Exchange
Commission on April 2, 1997.
EX-99.M3 Registrant's Distribution Plan with respect to the Class B
Shares of the Golden Oak Growth and Income Portfolio is
incorporated herein by reference to exhibit M(3) of
Post-Effective Amendment No. 20 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718), filed with the
Securities and Exchange Commission on March 30, 1998.
EX-99.M4 Rule 18f-3 Multi-Class Plan originally filed with
Post-Effective Amendment No. 12 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718) with the Securities
and Exchange Commission on May 31, 1995 is incorporated herein
by reference to exhibit 15(d) of Post-Effective Amendment No.
17 filed with the Securities and Exchange Commission on April
2, 1997.
EX-99.M5 Distribution and Service Plan relating to The Golden Oak
Family of Funds is filed herewith.
EX-99.M6 Amended and restated Schedule A, relating to The Golden Oak
Family of Funds to the Distribution Plan is filed herewith.
EX-99.M7 Revised Distribution Plan relating to The Hancock Bank Family
of Funds is filed herewith.
EX-99.N1 Amended and restated Rule 18f-3 Multi-Class Plan and
Certificates of Class Designation are incorporated herein by
reference to exhibit N(1) of Post-Effective Amendment no. 27
to Registrant's Registration Statement on Form N-1A (File No.
33-50718) filed with the Securities and Exchange Commission on
March 16, 2000.
EX-99.N2 Amended and restated Rule 18f-3 Multi-Class Plan is filed
herewith.
EX-99.O Not Applicable.
EX-99.P1 SEI Investments Company Code of Ethics and Insider Trading
Policy is incorporated herein by reference to Exhibit P1 of
Post-Effective Amendment no. 27 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718) filed with the
Securities and Exchange Commission on March 16, 2000.
EX-99.P2 Systematic Financial Management, L.P., Code of Ethics is
incorporated herein by reference to Exhibit P2 of
Post-Effective Amendment no. 27 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718) filed with the
Securities and Exchange Commission on March 16, 2000.
<PAGE>
EX-99.P3 Citizens Bank Code of Ethics is incorporated herein by
reference to Exhibit P3 of Post-Effective Amendment no. 27 to
Registrant's Registration Statement on Form N-1A (File No.
33-50718) filed with the Securities and Exchange Commission on
March 16, 2000.
EX-99.P4 Wellington Management Company, LLP, Code of Ethics is
incorporated herein by reference to Exhibit P4 of
Post-Effective Amendment no. 27 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718) filed with the
Securities and Exchange Commission on March 16, 2000.
EX-99.P5 Weiss, Peck & Greer, L.L.C., Code of Ethics is incorporated
herein by reference to Exhibit P5 of Post-Effective Amendment
no. 27 to Registrant's Registration Statement on Form N-1A
(File No. 33-50718) filed with the Securities and Exchange
Commission on March 16, 2000.
EX-99.P6 One Valley Bank, N.A., Code of Ethics is incorporated herein
by reference to Exhibit P6 of Post-Effective Amendment no. 27
to Registrant's Registration Statement on Form N-1A (File No.
33-50718) filed with the Securities and Exchange Commission on
March 16, 2000.
EX-99.P7 Hancock Bank and Trust Code of Ethics is incorporated herein
by reference to Exhibit P7 of Post-Effective Amendment no. 27
to Registrant's Registration Statement on Form N-1A (File No.
33-50718) filed with the Securities and Exchange Commission on
March 16, 2000.
EX-99.P8 Nicholas-Applegate Capital Management, LP, Code of Ethics is
incorporated herein by reference to Exhibit P8 of
Post-Effective Amendment no. 27 to Registrant's Registration
Statement on Form N-1A (File No. 33-50718) filed with the
Securities and Exchange Commission on March 16, 2000.
EX-99.P9 BlackRock International, Ltd., Code of Ethics is filed
herewith.
EX-99.P10 The Arbor Fund Code of Ethics is filed herewith.
EX-99.P11 Revised SEI Investments Company Code of Ethics and Insider
Trading Policy dated April 2000 is filed herewith.
EX-99.P12 Revised Systematic Financial Management, L.P., Code of Ethics
is filed herewith.
EX-99.P13 Revised One Valley Bank, N.A., Code of Ethics is filed
herewith.
EX-99.Q Powers of Attorney for John T. Cooney, William M. Doran,
Frank E. Morris, Mark E. Nagle, Robert A. Nesher, Robert A.
Patterson, Eugene B. Peters, George J. Sullivan and James M.
Storey are incorporated herein by reference to Post-Effective
Amendment no. 27 to Registrant's Registration Statement on
Form N-1A (File No. 33-50718) filed with the Securities and
Exchange Commission on March 16, 2000.
