<PAGE> 1
SEAFIRST RETIREMENT FUNDS
SUPPLEMENT DATED MARCH 8, 1996 TO
PROSPECTUS DATED JULY 1, 1995
The third paragraph under the heading "THE MASTER TRUST -- THE
INVESTMENT ADVISORY AGREEMENT" in the prospectus is replaced with the
following:
Effective March 8, 1996, portfolio management services for the Bond
Portfolio are conducted by the Fixed Income Division of the Investment
Management Services Group of Bank of America.
<PAGE> 2
RETIREMENT FUNDS
PROSPECTUSES
----------------------------------------------------------------------------
9068 REV 7/95
COPSEAF95P
Seafirst Retirement Funds
Prospectus Dated
July 1, 1995
- Bond Fund
- Blue Chip Fund
- Asset Allocation Fund
Pacific Horizon Funds, Inc.
Prospectus Dated
July 1, 1995
- Prime Fund
Call 1-800-323-9919
Speech or hearing impaired TTY/TDD
users may call 1-800-232-6299
<PAGE> 3
PROSPECTUS
- ------------------
SEAFIRST RETIREMENT FUNDS
Seafirst Retirement Funds (the "Trust") is a diversified, open-end
management investment company that offers Funds for investment by Eligible
Retirement Accounts. The Trust currently offers three Funds, each with a
different investment objective, for the investment of retirement funds held in
Eligible Retirement Accounts. "Eligible Retirement Accounts" include (a)
individual retirement accounts for which Seattle-First National Bank
("Seafirst") or one of its affiliates serves as trustee or custodian, and (b)
qualified pension or profit sharing trusts, including corporate pension or
profit sharing trusts and pension or profit sharing trusts benefiting one or
more self-employed individuals. See "How to Invest in the Trust," page 15.
The Bond Fund seeks to obtain interest income and capital appreciation
through investment in investment grade intermediate and longer-term bonds,
including corporate and government fixed-income obligations and mortgage-backed
securities.
The Blue Chip Fund seeks to obtain long-term capital appreciation through
investment in about 100 stocks which are included in either the Dow Jones
Industrial Average or the Standard & Poor's 500 Index.
The Asset Allocation Fund seeks to obtain long-term growth from capital
appreciation and dividend and interest income through a balanced approach to
investment using bonds, equity securities and cash equivalents.
UNLIKE MOST OTHER INVESTMENT COMPANIES WHICH INVEST DIRECTLY IN PORTFOLIO
SECURITIES, EACH FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING ALL
OF ITS INVESTABLE ASSETS IN A CORRESPONDING PORTFOLIO OF AN OPEN-END, MANAGEMENT
INVESTMENT COMPANY (THE "MASTER TRUST") HAVING THE SAME INVESTMENT OBJECTIVE AS
THAT OF THE FUND. EACH FUND WILL PURCHASE SHARES OF THE MASTER TRUST'S
CORRESPONDING PORTFOLIO AT NET ASSET VALUE. THE NET ASSET VALUE OF EACH FUND
WILL RESPOND TO INCREASES AND DECREASES IN THE VALUE OF THE CORRESPONDING
PORTFOLIO'S SECURITIES. INVESTORS SHOULD CAREFULLY CONSIDER THIS INVESTMENT
APPROACH. SEE "INVESTMENT OBJECTIVES AND POLICIES--SPECIAL CONSIDERATIONS" ON
PAGE 7 FOR ADDITIONAL INFORMATION REGARDING THIS STRUCTURE.
Bank of America National Trust and Savings Association ("Bank of America"
or "investment adviser"), San Francisco, California, acts as investment adviser
to the Master Trust.
This Prospectus briefly sets forth certain information about the Trust
described herein that you should know before investing. It should be read and
retained for future reference. A Statement of Additional Information dated July
1, 1995 discusses further certain subjects in this Prospectus as well as other
matters which may be of interest to investors. A free copy of the Statement of
Additional Information, as it may from time to time be revised, is incorporated
herein by reference and may be obtained by calling 800-323-9919.
SHARES OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY, BANK OF AMERICA OR ANY OF ITS AFFILIATES AND
ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE
SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT IN THE TRUST
INVOLVES INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
Shares of the Trust are sold without a sales charge and are available only
to Eligible Retirement Accounts.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
JULY 1, 1995
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
FUND EXPENSES......................................................... 1
FINANCIAL HIGHLIGHTS.................................................. 3
THE TRUST............................................................. 7
INVESTMENT OBJECTIVES AND POLICIES.................................... 7
The Bond Fund....................................................... 7
The Blue Chip Fund.................................................. 8
The Asset Allocation Fund........................................... 9
Special Considerations.............................................. 9
Foreign Securities.................................................. 14
INVESTMENT RESTRICTIONS............................................... 14
HOW TO INVEST IN THE TRUST............................................ 15
Eligibility for Admission........................................... 15
Establishing an IRA, SEP or Eligible Pension or Profit Sharing
Trust............................................................ 15
Investing in the Trust.............................................. 15
Reinvestment of Distributions....................................... 16
REDEMPTIONS........................................................... 16
EXCHANGES............................................................. 16
VALUATION OF SHARES................................................... 17
PERFORMANCE........................................................... 17
ADMINISTRATION OF THE TRUST........................................... 18
The Board of Trustees............................................... 18
Administration Services............................................. 18
Shareholder Service Plan............................................ 19
Expenses of the Trust............................................... 19
THE MASTER TRUST...................................................... 20
The Investment Advisory Agreement................................... 20
The Master Trust Administration Agreement........................... 21
Custodian........................................................... 21
Expenses of the Master Trust........................................ 22
TAX INFORMATION....................................................... 22
OTHER INFORMATION..................................................... 22
Description of Shares and Voting Rights............................. 22
Relationship to the Master Trust.................................... 23
</TABLE>
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION, AND,
IF GIVEN OR MADE, SUCH REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES, OR AN OFFER TO OR A SOLICITATION OF ANY PERSON IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
<PAGE> 5
FUND EXPENSES
The following is a table of shareholder transaction expenses and operating
expenses (including the operating expenses of the Master Trust which are
allocable to the Funds) expected to be incurred during the current fiscal year.
This information has been restated to assume that current fees had been in
effect during the previous fiscal year. Actual expenses may vary. This
information is provided to assist investors in understanding the various costs
and expenses that an investor in the Funds will bear directly or indirectly. For
more complete descriptions of these costs and expenses, see "Administration of
the Trust" in this Prospectus and the financial statements incorporated by
reference in the Statement of Additional Information.
<TABLE>
<CAPTION>
BLUE ASSET
BOND CHIP ALLOCATION
FUND FUND FUND
----- ----- -----
<S> <C> <C> <C>
Shareholder transaction expenses(a):
Sales load imposed on purchases........................ None None None
Sales load imposed on reinvested dividends............. None None None
Deferred sales load.................................... None None None
Redemption fees........................................ None None None
Exchange fee........................................... None None None
Annual fund operating expenses (as a percentage of
average net assets):
Investment advisory fees(b) (after fee waivers)........ None .14% .08%
12b-l fees............................................. None None None
Other expenses (after reimbursement)(b)(c)............. 0.95% .81% .87%
----- ----- -----
Total fund operating expenses (after reimbursement).... 0.95% .95% .95%
===== ===== =====
Example
You would pay the following expenses in each of the Funds
on $1,000 investment, assuming (1) a 5% annual return,
and (2) redemption at the end of each time period:
1 year................................................ $ 10 $ 10 $ 10
3 years............................................... $ 30 $ 30 $ 30
5 years............................................... $ 53 $ 53 $ 53
10 years............................................... $ 117 $ 117 $ 117
</TABLE>
(a) Individual Retirement Accounts including those that do not invest in
the Funds, are charged certain fees: each pays a $15 annual maintenance
fee; and there is currently a $7 annual maintenance fee for a spousal
retirement account. Other Eligible Retirement Accounts may be charged
fees which vary according to the plan's sponsor.
(b) Bank of America is entitled to investment advisory fees from each of
the Bond, Blue Chip and Asset Allocation Portfolios at respective
annual rates of .45%, .75% and .55% of the net assets of such
Portfolios. Other expenses include administration fees at the Master
Trust level, which Concord is entitled to receive at the annual rate of
0.05% of each Portfolio's average daily net assets, and an
administration and transfer agent fee payable to Seafirst at the Fund
level at an annual rate of 0.29% of the average daily net assets.
(c) Seafirst has agreed to reimburse each Fund in such amounts as are
necessary to limit the expenses of the Fund in any year, including its
pro rata share of the expenses incurred by the Portfolio in which it
invests (but excluding interest, brokerage commissions, litigation
expenses and certain other items), to .95% of the average daily net
assets of the Fund at the current level of assets of the Portfolio in
which it invests. For the current fiscal year, other expenses absent
such reimbursements would be estimated at 1.59%, 1.64% and 1.46% for
the Bond, Blue Chip and Asset Allocation Funds, respectively. See
"Administration of the Trust--Expenses of the Trust."
1
<PAGE> 6
THE EXAMPLE SHOWN ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE INVESTMENT RETURN AND OPERATING EXPENSES. ACTUAL INVESTMENT RETURN AND
OPERATING EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
The Board of Trustees believes that the aggregate per share expenses of
each Fund and the corresponding portfolio of the Master Trust in which the
Fund's assets are invested will be less than or approximately equal to the
expenses which the Fund would incur if the Trust retained the services of an
investment adviser for the Fund and the assets of the Fund were invested
directly in the type of securities held by the corresponding portfolio. Further,
the Board believes that the shareholders of the Trust will participate in the
ownership of a larger portfolio of securities than could be achieved directly by
the Trust.
2
<PAGE> 7
FINANCIAL HIGHLIGHTS
The Funds commenced operations in March 1988 as separate investment
portfolios (the "Predecessor Funds") of Collective Investment Trust for Seafirst
Retirement Accounts, a collective investment trust established under the laws of
the State of Washington. On December 6, 1993, the Predecessor Funds were
reorganized as Funds of the Trust.
The tables below show certain information concerning the investment results
for the Funds for the periods indicated. The information for the periods ended
February 28, 1995 and 1994 have been audited by Price Waterhouse LLP, the
Trust's independent accountants, whose unqualified report on the financial
statements containing such information is incorporated by reference in the
Statement of Additional Information.
The financial statements for the period January 1, 1993 through December 5,
1993, for the years ended December 31, 1992, 1991, 1990 and 1989, and for the
period from March 9, 1988 (commencement of operations) to December 31, 1988,
were audited by other independent accountants whose report dated December 30,
1993 expressed an unqualified opinion on such financial statements.
The financial highlights should be read in conjunction with the financial
statements and notes thereto and the unqualified report of the independent
accountants which are incorporated by reference in the Statement of Additional
Information. Further information about the performance of the Funds is available
in the Annual Report to Shareholders. Both the Statement of Additional
Information and the Annual Report to Shareholders may be obtained from the Trust
free of charge by calling Retirement Services at 1-800-323-9919.
3
<PAGE> 8
BOND FUND
<TABLE>
<CAPTION>
FOR THE
PERIOD FOR THE
FOR THE DEC. 6, PERIOD
YEAR 1993 JAN. 1,
ENDED THROUGH 1993
FEB. FEB. THROUGH
28, 28, DEC. 5,
1995 1994 1993(1)
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period...... $ 11.00 $ 11.14 $ 10.99
------- ------- -------
Income from investment operations:
Net investment income..................... 0.61 0.12 0.58
Net realized and unrealized gain (loss) on
securities............................... (0.46) (0.14) 0.15
------- ------- -------
Total income from investment operations... 0.15 (0.02) 0.73
------- ------- -------
Less dividends and distributions:
Dividends from net investment income..... (0.61) (0.12) (0.58)
------- ------- -------
Distributions from net realized gains.... (0.06) -- --
------- ------- -------
Total dividends and distributions........ (0.67) (0.12) (0.58)
------- ------- -------
Net asset value per share, end of
period................................... $ 10.48 $ 11.00 $ 11.14
======== ======== ========
Total Return.............................. 1.57% (0.23)%(3) 6.80%(3)
Ratios/supplemental data:
Net assets, end of period (000)........... $55,790 $76,773 $82,970
Ratio of expenses to average net assets... 0.83%(5) 0.95%(4,5) 0.95%(4)
Ratio of net investment income to average
net assets............................... 5.64%(5) 4.38%(4,5) 5.60%(4)
Portfolio turnover rate................... N/A N/A 95%
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1992(1) 1991(1) 1990(1) 1989(1) 1988(1,2)
------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 11.01 $ 10.40 $10.30 $ 9.98 $10.00
------- ------- ------ ------ ------
Income from investment operations:
Net investment income..................... 0.67 0.72 0.82 0.86 0.55
Net realized and unrealized gain (loss) on
securities............................... (0.02) 0.61 0.10 0.32 (0.02)
------- ------- ------ ------ ------
Total income from investment operations... 0.65 1.33 0.92 1.18 0.53
------- ------- ------ ------ ------
Less dividends and distributions:
Dividends from net investment income..... (0.67) (0.72) (0.82) (0.86) (0.55)
------- ------- ------ ------ ------
Distributions from net realized gains.... -- -- -- -- --
------- ------- ------ ------ ------
Total dividends and distributions........ (0.67) (0.72) (0.82) (0.86) (0.55)
------- ------- ------ ------ ------
Net asset value per share, end of
period................................... $ 10.99 $ 11.01 $10.40 $10.30 $ 9.98
======== ======== ======= ======= =======
Total Return.............................. 6.04% 13.28% 9.43% 12.23% 6.49%(3)
Ratios/supplemental data:
Net assets, end of period (000)........... $73,826 $53,469 $9,445 $2,653 $1,318
Ratio of expenses to average net assets... 0.95% 0.66% 0.00% 0.00% 0.00%
Ratio of net investment income to average
net assets............................... 6.15% 7.13% 8.31% 8.61% 7.06%(4)
Portfolio turnover rate................... 154% 197% 113% 96% 205%(4)
</TABLE>
- ------------
(1) Represents activity of the Fund prior to the reorganization. Since the
operation and organization of the Fund was changed upon reorganization, this
activity may not be reflective of activity after the reorganization.
(2) From March 9, 1988 (commencement of operations) to December 31, 1988.
(3) For the period indicated, not annualized.
(4) Annualized.
(5) Reflects the Fund's proportionate share of the Portfolio's expenses and fee
waivers and expense reimbursements by the Portfolio's Investment Adviser and
Administrator and the Fund's Administrator and Distributor. Such fee waivers
and expense reimbursements had the effect of reducing the ratio of expenses
to average net assets and increasing the ratio of net investment income to
average net assets by 0.58% and 0.84% (annualized) for the periods ended
February 28, 1995 and February 28, 1994, respectively.
N/A--Not applicable.
4
<PAGE> 9
BLUE CHIP FUND
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD PERIOD
FOR THE DEC. 6, JAN. 1,
YEAR 1993 1993
ENDED THROUGH THROUGH
FEB. 28, FEB. 28, DEC. 5,
1995 1994 1993(1)
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of
period........................... $ 17.75 $17.34 $ 15.65
-------- -------- --------
Income from investment operations:
Net investment income.............. 0.28 0.05 0.29
Net realized and unrealized gain on
securities....................... 0.88 0.37 1.69
-------- -------- --------
Total income from investment
operations....................... 1.16 0.42 1.98
-------- -------- --------
Less dividends and distributions:
Dividends from net investment
income......................... (0.26) (0.01) (0.29)
-------- -------- --------
Distributions from net realized
gains.......................... (1.30) -- --
-------- -------- --------
Total dividends and
distributions.................. (1.56) (0.01) (0.29)
-------- -------- --------
Net asset value per share, end of
period........................... $ 17.35 $17.75 $ 17.34
======== ======== ========
Total Return....................... 6.95% 2.42%(3) 12.74%(3)
Ratios/supplemental data:
Net assets, end of period (000).... $151,267 $132,916 $123,257
Ratio of expenses to average net
assets........................... 0.82%(5) 0.95%(4,5) 0.95%(4)
Ratio of net investment income to
average net assets............... 1.64%(5) 1.28%(4,5) 1.91%(4)
Portfolio turnover rate............ N/A N/A 4%
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1992(1) 1991(1) 1990(1) 1989(1) 1988(1,2)
------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 15.17 $ 12.68 $ 13.35 $10.68 $10.00
------- ------- ------- ------ ------
Income from investment operations:
Net investment income.............. 0.30 0.33 0.44 0.51 0.36
Net realized and unrealized gain on
securities....................... 0.48 2.49 (0.67) 2.67 0.68
------- ------- ------- ------ ------
Total income from investment
operations....................... 0.78 2.82 (0.23) 3.18 1.04
------- ------- ------- ------ ------
Less dividends and distributions:
Dividends from net investment
income......................... (0.30) (0.33) (0.44) (0.51) (0.36)
------- ------- ------- ------ ------
Distributions from net realized
gains.......................... -- -- -- -- --
------- ------- ------- ------ ------
Total dividends and
distributions.................. (0.30) (0.33) (0.44) (0.51) (0.36)
------- ------- ------- ------ ------
Net asset value per share, end of
period........................... $ 15.65 $ 15.17 $ 12.68 $13.35 $10.68
======= ======= ======= ====== ======
Total Return....................... 5.16% 22.52% (1.79%) 30.25% 10.61%(3)
Ratios/supplemental data:
Net assets, end of period (000).... $96,206 $49,838 $24,727 $8,782 $ 663
Ratio of expenses to average net
assets........................... 0.95% 0.95% 0.57% 0.00% 0.00%
Ratio of net investment income to
average net assets............... 2.08% 2.37% 3.40% 4.29% 4.70%(4)
Portfolio turnover rate............ 27% 16% 22% 38% 41%(4)
</TABLE>
- ------------
(1) Represents activity of the Fund prior to the reorganization. Since the
operation and organization of the Fund was changed upon reorganization, this
activity may not be reflective of activity after the reorganization.
(2) From March 9, 1988 (commencement of operations) to December 31, 1988.
(3) For the period indicated, not annualized.
(4) Annualized.
(5) Reflects the Fund's proportionate share of the Portfolio's expenses and fee
waivers and expense reimbursements by the Portfolio's Investment Adviser and
Administrator and the Fund's Administrator and Distributor. Such fee waivers
and expense reimbursements had the effect of reducing the ratio of expenses
to average net assets and increasing the ratio of net investment income to
average net assets by 0.80% and 0.93% (annualized) for the periods ended
February 28, 1995 and February 28, 1994, respectively.
N/A--Not applicable.
5
<PAGE> 10
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD PERIOD
FOR THE DEC. 6, JAN. 1,
YEAR 1993 1993
ENDED THROUGH THROUGH
FEB. 28, FEB. 28, DEC. 5,
1995 1994 1993(1)
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of
period.......................... $ 13.94 $ 13.86 $ 12.99
-------- -------- --------
Income from investment operations:
Net investment income............. 0.46 0.05 0.43
Net realized and unrealized gain
on securities................... 0.12 0.08 0.87
-------- -------- --------
Total income from investment
operations...................... 0.58 0.13 1.30
-------- -------- --------
Less dividends and distributions:
Dividends from net investment
income........................ (0.46) (0.05) (0.43)
-------- -------- --------
Distributions from net realized
gains......................... (0.58) -- --
-------- -------- --------
Total dividends and
distributions................. (1.04) (0.05) (0.43)
-------- -------- --------
Net asset value per share, end of
period.......................... $ 13.48 $ 13.94 $ 13.86
======== ======== ========
Total Return...................... 4.49% 0.94%(3) 10.15%(3)
Ratios/supplemental data:
Net assets, end of period (000)... $145,132 $156,955 $149,719
Ratio of expenses to average net
assets.......................... 0.78%(5) 0.95%(4,5) 0.95%(4)
Ratio of net investment income to
average net assets.............. 3.40%(5) 2.64%(4,5) 3.47%(4)
Portfolio turnover rate........... N/A N/A 79%
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------
1992(1) 1991(1) 1990(1) 1989(1) 1988(1,2)
-------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.......................... $ 12.75 $ 11.30 $ 11.47 $10.31 $10.00
-------- ------- ------- ------ ------
Income from investment operations:
Net investment income............. 0.46 0.56 0.62 0.74 0.50
Net realized and unrealized gain
on securities................... 0.24 1.45 (0.17) 1.16 0.31
-------- ------- ------- ------ ------
Total income from investment
operations...................... 0.70 2.01 0.45 1.90 0.81
-------- ------- ------- ------ ------
Less dividends and distributions:
Dividends from net investment
income........................ (0.46) (0.56) (0.62) (0.74) (0.50)
-------- ------- ------- ------ ------
Distributions from net realized
gains......................... -- -- -- -- --
-------- ------- ------- ------ ------
Total dividends and
distributions................. (0.46) (0.56) (0.62) (0.74) (0.50)
-------- ------- ------- ------ ------
Net asset value per share, end of
period.......................... $ 12.99 $ 12.75 $ 11.30 $11.47 $10.31
======== ======= ======= ====== ======
Total Return...................... 5.62% 18.11% 4.21% 18.94% 8.23%(3)
Ratios/supplemental data:
Net assets, end of period (000)... $106,822 $47,825 $23,608 $8,013 $1,210
Ratio of expenses to average net
assets.......................... 0.95% 0.95% 0.58% 0.00% 0.00%
Ratio of net investment income to
average net assets.............. 3.68% 4.72% 5.58% 7.07% 6.94%(4)
Portfolio turnover rate........... 171% 124% 121% 71% 23%(4)
</TABLE>
- ------------
(1) Represents activity of the Fund prior to the reorganization. Since the
operation and organization of the Fund was changed upon reorganization, this
activity may not be reflective of activity after the reorganization.
(2) From March 9, 1988 (commencement of operations) to December 31, 1988.
(3) For the period indicated, not annualized.
(4) Annualized.
(5) Reflects the Fund's proportionate share of the Portfolio's expenses and fee
waivers and expense reimbursements by the Portfolio's Investment Adviser and
Administrator and the Fund's Administrator and Distributor. Such fee waivers
and expense reimbursements had the effect of reducing the ratio of expenses
to average net assets and increasing the ratio of net investment income to
average net assets by 0.60% and 0.69% (annualized) for the periods ended
February 28, 1995 and February 28, 1994, respectively.
N/A--Not applicable.
6
<PAGE> 11
THE TRUST
The Trust is a business trust established under the laws of the State of
Delaware under a Declaration of Trust dated January 28, 1993. It is a
diversified, open-end management investment company registered with the
Securities and Exchange Commission. Only Eligible Retirement Accounts can invest
in the Trust. An individual for whose benefit an Eligible Retirement Account is
maintained, or who may be entitled to receive benefits from an Eligible
Retirement Account, is referred to as a "Participant."
INVESTMENT OBJECTIVES AND POLICIES
The Trust offers three Funds, each with a different investment objective,
for investment of retirement funds held in Eligible Retirement Accounts. An
individual establishing an Eligible Retirement Account may select one or more
Funds and may transfer retirement funds among the Funds. Each Fund is
represented by a separate series of shares of beneficial interest in the Trust.
The Funds seek to achieve their respective investment objectives by
investing all of their assets in corresponding portfolios of Master Investment
Trust, Series I (the "Master Trust"), an open-end management investment company
for which Bank of America acts as investment adviser. The portfolios have the
same investment objectives as the Funds and invest their assets in the portfolio
securities described below. There can be no assurance that the investment
objective of any Fund can be attained. The net asset value per share of the
Funds will fluctuate.
THE BOND FUND
The investment objective of the Bond Fund is to obtain interest income and
capital appreciation through investment in investment grade intermediate and
longer-term bonds, which consist of corporate and government fixed-income
obligations, mortgage-backed securities, municipal securities and cash
equivalents. Assets of the Bond Fund are invested in the Investment Grade Bond
Portfolio of the Master Trust (the "Bond Portfolio"), which has the same
objective as the Bond Fund. Under normal circumstances, at least 65% of the Bond
Portfolio's net assets will be invested in bonds. Investment grade securities
are securities rated at least BBB by Standard & Poor's Ratings Group, Division
of McGraw Hill ("S&P"), Fitch Investors Service, Inc. ("Fitch") or Duff & Phelps
Credit Rating Co. ("Duff & Phelps") or Baa by Moody's Investors Service, Inc.
("Moody's"). (A description of applicable ratings is attached to the Statement
of Additional Information as Appendix A.) While bonds rated BBB or Baa are
regarded as having adequate capacity to pay interest and repay principal,
adverse economic conditions or changing circumstances could lead to a weakened
capacity to pay interest and repay principal; such bonds do not have outstanding
investment characteristics and may have speculative characteristics as well.
Unrated securities will be purchased only if Bank of America determines that
they are of comparable quality to the rated securities in which the Bond
Portfolio may invest.
The Bond Portfolio will be diversified by investment in bonds issued by
different companies in different industries. Mortgage-backed securities, such as
GNMA, FNMA and FHLMC securities, will be guaranteed as to principal and
interest, but not market value, by the U.S. Government or one of its agencies or
instrumentalities. The Bond Portfolio will not invest more than 35% of its net
assets in mortgage-backed securities. There is the risk that corporate bonds
might be called by the issuer if the bond interest rate is higher than currently
prevailing interest rates. Similarly, a risk associated with mortgage-backed
securities is early paydown resulting from refinancing of the underlying
mortgages. The rate of such prepayments, and hence the life of the security,
will primarily be a function of current market rates. In periods of falling
interest rates, the rate of prepayments tends to increase. During such periods,
the reinvestment of prepayment proceeds will
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<PAGE> 12
generally be at lower rates than the rates on the prepaid obligations. The Bond
Portfolio may also invest, from time to time, in obligations issued by state and
local governmental issuers ("Municipal Securities"). The purchase of such
securities may be advantageous when, as a result of prevailing economic,
regulatory or other circumstances, the performance of such securities, on a
pre-tax basis, is comparable to that of corporate or U.S. Government
obligations. Dividends received by shareholders which are attributable to
interest income received from Municipal Securities generally will be subject to
Federal income tax.
The two principal classifications of Municipal Securities which may be held
by the Bond Portfolio are "general obligation" securities and "revenue"
securities. General obligation securities are secured by the issuer's pledge of
its full faith, credit and taxing power for the payment of principal and
interest. Revenue securities are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source such as the user of the
facility being financed. Private activity bonds held by the Portfolio are in
most cases revenue securities and are not payable from the unrestricted revenues
of the issuer. Consequently, the credit quality of such private activity bonds
is usually directly related to the credit standing of the corporate user of the
facility involved.
The Bond Portfolio may also include "moral obligation" securities, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation securities is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
Interest income is expected to be the primary basis for growth in a
shareholder's investment in the Bond Fund and potential capital appreciation the
secondary basis for growth. The Bond Portfolio will attempt to achieve capital
appreciation by moderate market timing in response to anticipated interest rate
changes. The Bond Portfolio will also attempt to take advantage of undervalued
sectors while selling bonds in overvalued sectors. However, since investments
will normally consist of bonds and mortgage-backed securities, the ability to
achieve capital appreciation is limited.
The value of the securities held in the Bond Portfolio will tend to vary
inversely with changes in prevailing interest rates. When, in the evaluation of
Bank of America, there is a high probability that there will be a decline in the
bond market, up to 75% of the net assets of the Bond Portfolio may be held in
cash equivalents as a temporary defensive strategy. To the extent that the Bond
Portfolio invests in cash equivalents, it will not be invested in accordance
with the investment policies designed for it to realize its investment
objective. Cash equivalents are the following short-term, interest bearing
instruments: obligations issued or guaranteed by the U.S. Government, its
agencies and instrumentalities, certificates of deposit, bankers' acceptances,
time deposits and other interest-bearing deposits issued by domestic and foreign
banks and foreign branches of U.S. banks, foreign government securities and
commercial paper issued by U.S. and foreign issuers which is rated at the time
of purchase at least Prime-2 by Moody's or A-2 by S&P.
THE BLUE CHIP FUND
The investment objective of the Blue Chip Fund is long-term capital
appreciation through investment in blue chip stocks. Assets of the Blue Chip
Fund are invested in the Blue Chip Portfolio of the Master Trust, which has the
same objective as the Blue Chip Fund. The Blue Chip Portfolio's investments will
be limited to stocks included in either the Dow Jones Industrial Average or the
Standard & Poor's 500 Index. The Portfolio will be diversified by holding
approximately 100 stocks chosen from these indices. The Master Trust expects
that under normal market conditions at least 80% of the Portfolio's assets will
be invested in blue chip stocks
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and the other 20% may be invested in cash equivalent securities of the type
permitted to be held by the Bond Portfolio (other than asset backed securities).
THE ASSET ALLOCATION FUND
The investment objective of the Asset Allocation Fund, which is a
diversified investment company, is to obtain long-term growth from capital
appreciation and dividend and interest income by actively allocating investments
among the three major asset categories: bonds, equity securities and cash
equivalents. Assets of the Asset Allocation Fund are invested in the Asset
Allocation Portfolio of the Master Trust, which has the same objective as the
Asset Allocation Fund. Cash equivalents are short-term, interest bearing
instruments of the type permitted to be held by the Bond Portfolio.
Investments in equity securities will generally be limited to common stocks
of the same type in which the Blue Chip Fund invests. Bonds acquired by the
Asset Allocation Portfolio will be the same type of investment grade bonds and
Municipal Securities acquired by the Bond Portfolio. Under normal market
conditions at least 25% of the Asset Allocation Portfolio's total assets will be
invested in fixed-income senior securities.
SPECIAL CONSIDERATIONS
As noted above, the Funds are a series of an open-end management investment
company that seek to achieve their respective investment objectives by investing
all of their assets in corresponding portfolios of the Master Trust, which have
the same objectives as the Funds (see "Investment Objectives and Policies"
above). The Portfolios in turn hold investment securities. Accordingly, the
investment experience of each Fund will correspond directly with the investment
experience of the related Portfolio. This structure is commonly known as a
"master/feeder" structure. There can be no assurance that any Portfolio or Fund
will achieve its investment objective. Each Portfolio's and Fund's investment
objective is a fundamental policy which may not be changed without the approval
of the holders of a majority of the outstanding shares or interests of the Fund
or Portfolio, respectively, as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"). Upon any such approval, each Fund will provide at
least 30 days' written notice to its shareholders before any change is made to
its or the corresponding Portfolio's investment objective.
There are certain risks to the Funds related to the use of the
master/feeder structure. Such risks include, but are not limited to, the
following: Any existing registered investment company that wishes to convert to
a master/feeder structure must first obtain the approval of its shareholders.
Large-scale redemptions by other investment companies of their interests in the
corresponding Portfolios could have adverse effects, such as lack of portfolio
diversity and decreased economies of scale, and could result in the shareholders
of a Fund, as the remaining investor in the Portfolio, bearing all the operating
costs of the Portfolio and thus experiencing higher pro rata operating expenses
and lower returns than would otherwise be the case. In addition, the total
withdrawal by another investment company as an investor in a Portfolio will
cause the Portfolio to terminate automatically in 120 days, unless the
corresponding Fund and any other investors in the Portfolio unanimously agree to
continue the business of the Portfolio. As the Fund is required to submit such
matters to a vote of its shareholders, it will be required to incur the expenses
of shareholder meetings in connection with such withdrawals. If unanimous
agreement is not reached to continue the Portfolio, the Board of Trustees of the
Trust would need to consider alternative arrangements for the Fund, including
investing all of the Fund's assets in another investment company with the same
investment objective as the Fund or hiring an investment adviser to manage the
Fund's assets in accordance with the investment policies described herein. The
absence of substantial experience with the master/feeder structure could result
in accounting or other difficulties. Failure by shareholders of a Fund to
approve a change in the investment objective and policies of a Fund
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<PAGE> 14
parallel to a change that has been approved by the shareholders of the
corresponding Portfolio would require the Fund to redeem its shares of the
Portfolio; this could result in a distribution in kind to the Fund of the
portfolio securities of the Portfolio (rather than a cash distribution), causing
the Fund to incur brokerage fees or other transaction costs in converting such
securities to cash, reducing the diversification of the Fund's investments and
adversely affecting its liquidity. Other shareholders in the Portfolios may have
a greater ownership interest in the Portfolios than the Funds' interest, and
could thus have effective voting control over the operation of the Portfolios.
The Trust's Board of Trustees believes that the Funds may achieve certain
efficiencies and economies of scale through the master/feeder structure, and
that the aggregate expenses of each Fund and the corresponding Portfolio will be
no greater than if the Fund invested directly in the securities held by the
Portfolio. However, other investment companies that offer their shares to the
public also may invest all or substantially all of their assets in the
Portfolios. Accordingly, there may be other investment companies through which
shareholders can invest indirectly in the Portfolios. The fees charged by such
other investment companies may be higher or lower than those charged by the
Funds, which may reflect, among other things, differences in the nature and
level of the services and features offered by such companies to their
shareholders (and as a result such other companies may have different
performance results than the Funds). Information about the availability of other
investment companies that invest in the Portfolios can be obtained by calling
1-800-323-9919.
A Fund may cease investing in a corresponding Portfolio only if the Board
of Trustees determines that such action is in the best interests of the Fund and
its shareholders, and only with the approval of such shareholders. In such
event, the Board of Trustees would consider alternative investments, including
investing all of the Fund's assets in another investment company with the same
investment objective as the Fund or hiring an investment adviser to manage the
Fund's assets in accordance with the investment policies described herein.
Monies invested in the Funds are not insured deposits and are subject to
certain risks. Since each of the Portfolios will invest in different types of
investments, the risks of participating in the Trust will vary depending on the
Fund or Funds chosen by a Participant. Before investing, a Participant should
assess the risks associated with the types of investments made by the Funds and
the corresponding Portfolios.
Although no commissions are paid on bond transactions, purchases and sales
are at net prices which reflect dealers' mark-ups and mark-downs, and a higher
portfolio turnover rate for bond investments will result in payment of more
dealer mark-ups and mark-downs than would otherwise be the case. Since all
shareholders are tax exempt, no significant tax consequences result from
portfolio turnover. The investment adviser will not consider portfolio turnover
a limiting factor in making investment decisions for the Portfolios consistent
with its investment objective and policies.
A Portfolio may not invest in instruments or securities issued by Bank of
America, Seafirst or any of their affiliates.
A Portfolio may purchase put and call options on listed securities and
stock indexes so long as the aggregate premiums paid for options does not exceed
2% of the net assets of the Portfolio (this restriction does not apply to
options on futures contracts). Put options may be purchased in order to protect
the Portfolio's securities in expectation of a declining market and call options
may be purchased to benefit from anticipated price increases in the underlying
securities or index. A Portfolio may not write put options but may write fully
covered call options as long as the Portfolio remains fully covered throughout
the life of the option, either by
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<PAGE> 15
owning the optioned securities or possessing a call issued by another writer
that is identical in all respects to the call written by the Portfolio.
The Asset Allocation Portfolio may purchase and sell both interest rate and
stock index futures contracts (as well as purchase related options) as a hedge
against changes resulting from market conditions in the values of the securities
held by the Portfolio or which it intends to purchase and where the transactions
are economically appropriate for the reduction of risks inherent in the ongoing
management of such Portfolio. Similarly, the Bond Portfolio may purchase and
sell interest rate futures contracts (as well as purchase related options) and
the Blue Chip Portfolio may purchase and sell stock index futures contracts (as
well as purchase related options). A futures contract is a bilateral agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the value
of a specified obligation or stock index (which assigns relative values to the
common stocks included in the index) at the close of the last trading day of the
contract and the price at which the futures contract is originally struck. No
physical delivery of the underlying securities is normally made. A Portfolio may
not purchase or sell futures contracts and purchase related options unless
immediately after any such transaction the aggregate initial margin that is
required to be posted by the Portfolio under the rules of the exchange on which
the futures contract (or futures option) is traded, plus any premiums paid by
such Portfolio on its open futures options positions, does not exceed 5% of the
Portfolio's total assets, after taking into account any unrealized profits and
losses on the Portfolio's open contracts and excluding the amount that a futures
option is "in-the-money" at the time of purchase. An option to buy a futures
contract is "in-the-money" if the then current purchase price of the contract
that is subject to the option is less than the exercise or strike price; an
option to sell a futures contract is "in-the-money" if the exercise or strike
price exceeds the then current purchase price of the contract that is the
subject of the option.
Successful use of futures contracts by a Portfolio is subject to Bank of
America's ability to predict correctly movements in the direction of the stock
market or interest rates. There are several risks in connection with the use of
futures contracts by a Portfolio as a hedging device. One risk arises because of
the imperfect correlation between movements in the price of the futures contract
and movements in the price of the securities which are the subject of the hedge.
The price of the futures contract may move more than or less than the price of
the securities being hedged. If the price of the futures contract moves less
than the price of the securities which are the subject of the hedge, the hedge
will not be fully effective but, if the price of the securities being hedged has
moved in an unfavorable direction, the Portfolio would be in a better position
than if it had not hedged at all. If the price of the securities being hedged
has moved in a favorable direction, this advantage will be partially offset by
the loss on the futures contract. If the price of the futures contract moves
more than the price of the hedged securities, the Portfolio involved will
experience either a loss or gain on the futures contract which will not be
completely offset by movements in the price of the securities which are the
subject of the hedge. It is also possible that, where the Portfolio has sold
futures contracts to hedge its portfolio against a decline in the market, the
market may advance and the value of securities held in the Portfolio may
decline. If this occurred, the Portfolio would lose money on the futures
contract and also experience a decline in value in its portfolio securities.
In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between movements in the futures contract and the
securities being hedged, the price of futures contracts may not correlate
perfectly with movement in the cash market due to certain market distortions.
Due to the possibility of price distortion in the futures market, and because of
the imperfect correlation between the movements in the cash market and movements
in the price of futures contracts, a correct forecast of general market trends
or
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interest rate movements by Bank of America may still not result in a successful
hedging transaction over a short time frame.
Positions in futures contracts may be closed out only on an exchange or
board of trade which provides a secondary market for such futures contracts.
Although the Portfolios intend to purchase or sell futures contracts only on
exchanges or boards of trade where there appear to be active secondary markets,
there is no assurance that a liquid secondary market on any exchange or board of
trade will exist for any particular contract or at any particular time. In such
event, it may not be possible to close a futures investment position, and in the
event of adverse price movements, the Portfolio would continue to be required to
make daily cash payments of variation margin. The liquidity of a secondary
market in a futures contract may in addition be adversely affected by "daily
price fluctuation limits" established by commodity exchanges which limit the
amount of fluctuation in a futures contract price during a single trading day.
Once the daily limit has been reached in the contract, no trades may be entered
into at a price beyond the limit, thus preventing the liquidation of open
futures positions.
A Portfolio may invest in variable and floating rate instruments, including
master demand notes. These obligations may not be marketable, although they may
be payable on demand by the investing Portfolio. Consequently, the ability to
redeem such notes depends on the borrower's ability to pay, which will be
monitored by Bank of America. Such notes will be purchased only from domestic
corporations that either (a) are rated Aa or better by Moody's or AA or better
by S&P, (b) have commercial paper rated at least Prime-2 by Moody's or A-2 by
S&P, (c) are backed by a bank letter of credit or (d) are determined by Bank of
America to be of a quality comparable to securities described in either clause
(a) or (b).
In connection with the management of its daily cash position, the
Portfolios may invest in securities issued by other investment companies which
invest in short-term debt securities and which seek to maintain a $1.00 net
asset value per share (i.e., "money market funds"). No more than 10% of the
value of each Portfolio's total assets will be invested in securities of other
investment companies, with no more than 5% invested in the securities of any one
investment company. As a shareholder of another investment company, a Portfolio
would bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees.
A Portfolio may enter into repurchase agreements. Under these agreements,
the Portfolio will acquire securities from either a bank which has a commercial
paper rating of A-2 or better by S&P or Prime-2 or better by Moody's or a
registered broker-dealer, and the seller will agree to repurchase such
securities within a specified time at a fixed price (equal to the purchase price
plus interest). Repurchase agreements are considered loans. Repurchase
agreements maturing in more than seven days will not exceed 10% of the value of
the total assets of a Portfolio. Repurchase agreements will be entered into only
for debt obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities, certificates of deposit, or bankers' acceptances, and
either the Master Trust's custodian or its agent will have physical possession
of the securities or the securities will be transferred to the Master Trust's
custodian, by appropriate entry in the Federal Reserve Bank's records and, in
either case, will be maintained in a segregated account.
Bank of America will monitor the value of securities acquired under
repurchase agreements to ensure that the value of such securities will always
equal or exceed the repurchase price under the repurchase agreement (including
accrued interest). If the other party to a repurchase agreement defaults, a
Portfolio may incur a loss if the value of the securities securing the
repurchase agreement declines and might incur disposition costs in connection
with liquidating the securities. In addition, if bankruptcy proceedings are
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<PAGE> 17
commenced with respect to the seller, realization upon the securities
collateralizing the repurchase agreement by the Portfolio may be delayed or
denied.
A Portfolio may enter into reverse repurchase agreements. Under these
arrangements, the Portfolio will sell a security held by the Portfolio to either
a bank which has a commercial paper rating of A-2 or better by S&P or Prime-2 or
better by Moody's or a registered broker-dealer, with an agreement to repurchase
the security at an agreed date, price and interest payment. Reverse repurchase
agreements involve the possible risk that the value of portfolio securities a
Portfolio relinquishes may decline below the price the Portfolio must pay when
the transaction closes. Reverse repurchase agreements are considered to be
borrowings under the 1940 Act. Borrowings may magnify the potential for gain or
loss on amounts invested resulting in an increase in the speculative character
of a Portfolio's outstanding shares.
In order to earn additional income, a Portfolio may lend its portfolio
securities to broker-dealers that Bank of America considers to be of good
standing. Borrowers of portfolio securities may not be affiliated directly or
indirectly with the Trust or such Portfolio. If the broker-dealer should become
bankrupt, however, the Portfolio could experience delays in recovering its
securities. A securities loan will be made only when, in Bank of America's
judgment, the possible reward from the loan justifies the possible risks. In
addition, such loans will not be made if, as a result, the value of securities
loaned by the Portfolio exceeds 10% of its total assets. Securities loans will
be fully collateralized.
The Bond and Asset Allocation Portfolios may purchase asset-backed
securities. Asset-backed securities consist of undivided fractional interest in
pools of consumer loans (unrelated to mortgage loans) or receivables held in a
trust. Payments of principal and interest on the loans or receivables are passed
through to certificate holders. Payment is typically supported by some form of
credit enhancement, such as a letter of credit, surety bond, limited guaranty,
or subordination. The extent of credit enhancement varies, but usually amounts
to only a fraction of the asset-backed security's par value until exhausted.
Ultimately, asset-backed securities are dependent upon payment of consumer loans
or receivables by individuals, and the certificate holder generally has no
recourse to the entity that originated the loan or receivables. The underlying
loans or receivables may be prepaid with the result of shortening the
certificates' weighted average life. Prepayment rates vary widely and may be
affected by changes in market interest rates. It is not possible to accurately
predict the average life of a particular pool of loans or receivables. The
proceeds of prepayments received by a Portfolio must be reinvested in securities
whose yields reflect interest rates prevailing at the time. Thus, the
Portfolio's ability to maintain a portfolio which includes high-yielding
asset-backed securities will be adversely affected to the extent reinvestments
are in lower yielding securities. The actual maturity and realized yield will
therefore vary based upon the prepayment experience of the underlying pool of
loans or receivables and prevailing interest rates at the time of prepayment.
Asset-backed securities may be subject to greater risk of default during periods
of economic downturn than other money market instruments. Also, while the
secondary market for asset-backed securities is ordinarily quite liquid, in
times of financial stress the secondary market may not be as liquid as the
market for other types of securities, which could result in a Portfolio
experiencing difficulty in valuing or liquidating such securities.
The Asset Allocation and Bond Portfolios may purchase securities on a
"when-issued" basis and may purchase or sell securities on a "forward
commitment" basis. These transactions, which involve a commitment by a Portfolio
to purchase or sell particular securities with payment and delivery taking place
at a future date (perhaps one or two months later), permit the Portfolio to lock
in a price or yield on a security, regardless of future changes in interest
rates. When-issued and forward commitment transactions involve the risk that the
price or yield obtained may be less favorable than the price or yield available
when the delivery takes place. The Asset Allocation and Bond Portfolios will set
aside in a segregated account cash or liquid securities equal
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to the purchase price of any when-issued or forward commitment securities. A
portfolio's when-issued purchases and forward commitments will not exceed 25% of
the value of such Portfolio's total assets absent unusual market conditions. The
Asset Allocation and Bond Portfolios intend to engage in when-issued purchases
and forward commitments only in furtherance of their respective investment
objectives and not for speculative purposes.
FOREIGN SECURITIES
Subject to each Portfolio's investment objectives and policies, a Portfolio
may invest up to 25% of its net assets in securities of foreign issuers that may
or may not be publicly traded in the United States, including Yankee bonds
(dollar-denominated bonds sold in the United States by non-U.S. issuers) and
Eurobonds (bonds issued in a country and sometimes a currency other than the
country of the issuer). The Portfolios purchasing these securities may be
subjected to additional risks associated with the holding of property abroad
such as future political and economic developments, currency fluctuations,
possible withholding of tax payments, possible seizure or nationalization of
foreign assets, possible establishment of currency exchange control regulations
or the adoption of other foreign government restrictions that might adversely
affect the payment of principal or interest on foreign securities in a
Portfolio, less publicly available information about foreign companies, and the
fact that foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic companies. See "Foreign Investments"
in the Statement of Additional Information for a further discussion of foreign
securities.
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies and cannot be changed
for any Fund without the approval of shareholders holding a majority of the
outstanding shares of that Fund. Absent such approval, the Trust may not:
(a) Borrow money for any Fund except for temporary emergency purposes
and then only in an amount not exceeding 5% of the value of the total
assets of that Fund. Borrowing shall, for purposes of this paragraph (a),
include reverse repurchase agreements. Any borrowings, other than reverse
repurchase agreements, will be from banks. The Trust will repay all
borrowings in any Fund before making additional investments for that Fund
and interest paid on such borrowings will reduce income;
(b) Issue senior securities;
(c) Make loans to other persons, except that a Fund may make time or
demand deposits with banks, provided that time deposits shall not have an
aggregate value in excess of 10% of a Fund's net assets, and may purchase
bonds, debentures or similar obligations that are publicly distributed, may
loan portfolio securities not in excess of 10% of the value of the total
assets of such Fund, and may enter into repurchase agreements as long as
repurchase agreements maturing in more than seven days do not exceed 10% of
the value of the total assets of a Fund; or
(d) Purchase on margin or sell short.
A complete list of the investment restrictions is set forth in the
Statement of Additional Information.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values of
assets will not constitute a violation of that restriction. The other investment
policies of the Funds may be changed without the approval of shareholders.
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<PAGE> 19
The Portfolios are subject to the same investment restrictions as the
Funds, except that the Portfolios are not permitted to invest all of their
assets in other investment companies.
HOW TO INVEST IN THE TRUST
ELIGIBILITY FOR ADMISSION
Only Eligible Retirement Accounts are qualified to invest in the Trust.
Eligible Retirement Accounts include:
--Individual Retirement Accounts, including rollover accounts ("IRAs"), and
Simplified Employee Pension Plans ("SEPs") for which Seafirst or one of
its affiliates serves as a trustee or custodian that are exempt under
Section 408(e) and that are maintained in conformity with Section 408(a)
of the Internal Revenue Code ("Eligible IRAs"), and
--Qualified pension or profit sharing trusts, including corporate pension
or profit-sharing trusts and pension or profit sharing trusts benefiting
one or more self-employed individuals (generally referred to as H.R. 10 or
Keogh plans) that are exempt under Section 501(a) and that are maintained
in conformity with Section 401(a) of the Internal Revenue Code ("Eligible
Pension or Profit Sharing Trusts").
Maintenance of Eligible Retirement Account status is a prerequisite to all
transactions with the Trust described below.
ESTABLISHING AN IRA, SEP OR ELIGIBLE PENSION OR PROFIT SHARING TRUST
A set of documents for establishing an IRA, SEP or Eligible Pension or
Profit Sharing Trust can be obtained from any branch or by calling
1-800-323-9919 in Washington and Alaska, or 1-800-441-8379 in Idaho.
INVESTING IN THE TRUST
An Eligible Retirement Account can direct the investment of the Account
assets into a Fund or Funds of the Trust using a form included with materials
for establishing an Eligible Retirement Account. The form can also be obtained
from any branch or by calling 1-800-323-9919 in Washington and Alaska, or
1-800-441-8379 in Idaho. The completed form can be returned in person at any
branch or be mailed in Washington to Retirement Services, P.O. Box 84248,
Seattle, Washington 98124, in Idaho to Retirement Services, P.O. Box 6900, Coeur
d'Alene, Idaho, 83814-2002, or in Alaska to Retirement Services, P.O. Box
107007, Anchorage, Alaska, 99510-7007.
The minimum initial investment for admission to a Fund is $500. There is no
minimum requirement for subsequent investments. The Trust reserves the right to
increase or decrease the minimum investment amounts. All assets will be invested
in full and fractional shares at a purchase price equal to the net asset value
per share next determined following receipt by the Trust of a shareholder's
satisfactorily completed investment instructions and payment. See "Valuation of
Shares." Investments are subject to determination by the Trust that the
investment instruction form has been properly completed.
Because shares are not transferable, certificates representing shares will
not be issued. All shares purchased are confirmed by mail to the shareholder and
are credited to the account of the shareholder on the
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Trust's books. The Trust reserves the right in its sole discretion to (i)
suspend the availability of its shares and (ii) reject investment instructions
when, in the judgment of the Board of Trustees, such suspension or rejection is
in the best interest of the Trust.
Concord Financial Group, Inc. (the "Distributor"), 125 West 55th Street,
New York, New York 10019, acts as principal underwriter of the Trust's shares
under a best efforts underwriting arrangement. The Distributor is a wholly-owned
subsidiary of Concord Holding Corporation ("Concord"), a wholly-owned subsidiary
of The BISYS Group, Inc., and is a registered broker-dealer.
REINVESTMENT OF DISTRIBUTIONS
Any distributions made by the Asset Allocation Fund, the Blue Chip Fund, or
the Bond Fund will be made on the last business day of the month to shareholders
of record at the end of the prior business day. All distributions are
automatically reinvested in additional shares of the Fund making the
distribution. The Asset Allocation Fund and Bond Fund make monthly
distributions, and the Blue Chip Fund makes distributions at least annually, if
any.
REDEMPTIONS
All or a portion of the shares held in a Fund can be redeemed (sold) at any
time. Redemptions may be effected by writing in Washington to Retirement
Services, P.O. Box 84248, Seattle, Washington 98124, in Idaho to Retirement
Services, P.O. Box 6900, Coeur d'Alene, Idaho 83814-2002 or in Alaska to
Retirement Services, P.O. Box 107007, Anchorage, Alaska 99510-7007.
The redemption price will be the net asset value per share next determined
following receipt by the Trust of a shareholder's satisfactorily completed
instructions. See "Valuation of Shares." The value of a share upon redemption
may be more or less than the value when purchased, depending upon the net asset
value of the Fund at the time of the redemption. Redemptions are subject to
determination by the Trust that the investment instruction form or the
redemption request and other distribution documents, if any, are complete. While
payment for shares redeemed normally will be made in cash, if conditions exist
making payment in cash undesirable, the Trust may make payment for the shares
redeemed wholly or partly in securities or other property of the Fund, provided
that all distributions made as of any one valuation date shall be made pro rata
and on the same basis.
Payment for shares redeemed will normally be made to the trustee of the
shareholder within one business day of receipt by the Trust of redemption
instructions, but in no event will payment be made more than seven days after
receipt of redemption instructions except in the circumstances described below.
The payment may be delayed or the right of redemption suspended on bank holidays
or at a time when (a) trading on the New York Stock Exchange is restricted or
the Exchange is closed, for other than customary weekends and holidays, (b) an
emergency, as defined by rules of the Securities and Exchange Commission, exists
making disposal of portfolio securities or determination of the value of the net
assets of the Fund not reasonably practicable, or (c) the Securities and
Exchange Commission has by order permitted such suspension.
EXCHANGES
Shares in any Fund may be exchanged without cost for shares in any other
Fund, or for Pacific Horizon shares of the Pacific Horizon Prime Fund, a money
market fund for which Bank of America acts as investment adviser (collectively,
the "Exchange Funds"). Exchanges may be effected by phone or by writing
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in Washington to Retirement Services, P.O. Box 84248, Seattle, Washington 98124,
in Idaho to Retirement Services, P.O. Box 6900, Coeur d'Alene, Idaho 83814-2002,
or in Alaska to Retirement Services, P.O. Box 107007, Anchorage, Alaska
99510-7007. To make an exchange by phone, call 1-800-323-9919 in Washington and
Alaska, or 1-800-441-8379 in Idaho.
The Trust will act upon the instruction of any person by telephone, deemed
to be authorized, to exchange between Exchange Funds in an account. The Trust
will employ procedures designed to provide reasonable assurance that
instructions communicated by telephone are genuine and, if it does not do so, it
may be liable for any losses due to unauthorized or fraudulent instructions.
Calls may be recorded for the shareholder's protection. As a result of this
telephone exchange policy, the shareholder will bear the risk of loss, if any,
resulting from telephone instructions of a person reasonably believed to be a
shareholder. During times of severe market or economic changes, telephone
exchanges may be difficult to implement. Therefore, it is recommended that you
send your exchange requests in writing.
Any exchange will be based on the respective net asset values of the shares
involved next determined after receipt by the Trust of a shareholder's
instructions for an exchange.
VALUATION OF SHARES
Net asset value per share for each Fund is determined by dividing the total
value of the Fund's assets, less any liabilities, by the number of outstanding
shares of the Fund. The value of the assets held in each Fund is determined as
of 1:00 p.m., Seattle, Washington time (or at such other time as may be
determined by the Board of Trustees) each day on which such value must be
determined in accordance with the 1940 Act.
As the assets of each Fund include its proportionate share of the assets
and liabilities of the corresponding Portfolio of the Master Trust, the value of
the Fund's assets depends on the net asset value per share of such Portfolio.
The net asset value per share of each Portfolio is determined in the same manner
as described above for the Funds. Except for debt securities held by a Portfolio
with remaining maturities of 60 days or less, assets for which market quotations
are available are valued at their market values based upon such market
quotations. Debt securities held by the Portfolios with remaining maturities of
60 days or less are valued on the basis of amortized cost. Amortized cost
valuation, which may be used as long as it approximates market value, involves
valuing a security at its cost and adding or subtracting, ratably to maturity,
any discount or premium, regardless of the impact of fluctuating interest rates
on the market value of the security. When approved by the Board of Trustees of
the Master Trust, certain securities may be valued on the basis of valuations
provided by an independent pricing service when such prices are believed to
reflect the fair market values of such securities. In the absence of an
ascertainable market value, assets are valued at the fair value using methods
and procedures reviewed and approved by the Board of Trustees of the Master
Trust.
PERFORMANCE
From time to time the Funds may advertise their yield or total return. Both
types of performance are based on historical earnings and are not intended to
indicate future performance. These yield and return figures are determined
according to a formula prescribed by the Securities and Exchange Commission.
To calculate yield, the Funds take the interest income (and dividend
income, if any) they earn from their portfolio investments for a 30-day period
(net of expenses). The Funds then divide such income by the number of Fund
shares entitled to receive distributions and express the result as an annualized
percentage rate based on each Fund's share price at the end of the 30-day
period. The effective yield is calculated similarly,
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but, when annualized, the income earned by an investment in a Fund is assumed to
be reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment. Also, because
yield accounting differs from methods used for other accounting purposes, a
Fund's yield may not equal the income reported on its financial statements.
Return is the change in value, including reinvested earnings, after
deductions of expenses, of a hypothetical $1,000 investment, and includes the
changes in share price. A cumulative total return reflects a Fund's performance
over a stated period of time. The Funds may also include in advertisements
performance rankings compiled by independent organizations (e.g., Lipper
Analytical Services, Inc.) which monitor mutual fund performance, and
performance comparisons with other types of investments. Rankings of companies
are historical and not intended to indicate future performance.
ADMINISTRATION OF THE TRUST
THE BOARD OF TRUSTEES
The business and affairs of the Trust are managed under the direction of
its Board of Trustees. See "Management of the Trust" in the Statement of
Additional Information for information regarding the Trustees and officers of
the Trust. The Board of Trustees will perform duties and undertake
responsibilities similar to those of a board of directors.
ADMINISTRATION SERVICES
Under an Administration and Transfer Agency Agreement dated December 6,
1993 (the "Administration Agreement") between Seafirst and the Trust, Seafirst
is responsible for certain accounting, administrative, transfer agency, and
dividend disbursing services to the Trust. Pursuant to the Administration
Agreement, Seafirst is, subject to the authority of the Board of Trustees,
responsible for providing overall management of the Trust's business and affairs
(other than investment management services, which are performed by Bank of
America on behalf of the Portfolios of the Master Trust). For its services,
Seafirst is entitled to receive a fee from the Funds at an annual rate of .29%
of the average daily net asset value of the Funds, subject to the expense
limitation discussed below. Individual Retirement Accounts, including those that
do not invest in the Funds, are charged certain fees: each pays a $15 annual
maintenance fee; and there is currently a $7 annual maintenance fee for a
spousal retirement account. Other Eligible Retirement Accounts may be charged
fees which vary according to the plan's sponsor.
Seafirst is a national banking association which provides commercial
banking and trust services throughout the State of Washington. The offices of
Seafirst are located at 701 Fifth Avenue, Seattle, Washington 98104. Seafirst is
a wholly-owned subsidiary of Seafirst Corporation, which is controlled by
BankAmerica Corporation, both of which are bank holding companies.
Concord provides officers and certain administrative and compliance
monitoring services to the Funds on behalf of Seafirst pursuant to a
Sub-Administration Agreement with Seafirst. Concord, located at 125 West 55th
Street, New York, New York 10019, was organized in 1987 to administer mutual
funds. For its services, Concord is paid by Seafirst, not by the Trust. Concord
also provides certain administrative services to the Master Trust. See "The
Master Trust--The Master Trust Administration Agreement."
PFPC, Inc. ("PFPC") provides certain accounting services to the Funds on
behalf of Seafirst pursuant to a Sub-Accounting Services Agreement with
Seafirst. PFPC's principal offices are located at 103 Bellevue
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Parkway, Wilmington, Delaware 19809. It is an indirect wholly-owned subsidiary
of PNC Bank Corp., a multi-bank holding company, and is engaged in providing
administrative and accounting services to investment companies. For its
services, PFPC is paid by Seafirst, not by the Trust. PFPC also provides certain
accounting services to the Master Trust. See "The Master Trust--The Master Trust
Administration Agreement."
Seafirst is responsible for providing custodial services to the Trust.
Seafirst has entered into a Sub-Custodian Services Agreement with PNC BANK,
NATIONAL ASSOCIATION, Airport Business Center, International Court 2, 200
Stevens Drive, Lester, Pennsylvania, 19113, which provides these services to the
Trust on behalf of Seafirst.
SHAREHOLDER SERVICE PLAN
Under the Trust's Shareholder Service Plan, the Trust pays Seafirst for
non-distribution shareholder support services provided by Seafirst to Fund
shareholders. Seafirst is entitled to receive payments for expenses on a monthly
basis, at an annual rate not exceeding .25% of the average daily net asset value
of Fund shares beneficially owned by shareholders during such month for
shareholder servicing expenses. In connection with providing such services,
Seafirst has represented that it will not engage in activities which constitute
acting as a broker or dealer under state law unless it has obtained any
necessary licenses to do so.
EXPENSES OF THE TRUST
Bank of America has paid all costs and expenses arising in connection with
the organization of the Trust, including the initial registration and
qualification of the Trust and the shares under federal and state law. Seafirst
pays expenses of all employees, office space and facilities necessary to carry
out its duties under the Administration Agreement. All other costs and expenses
of operation of the Trust, other than those assumed by Seafirst under its
custodian and transfer agent agreements with the Trust, are paid by the Trust.
The Funds also bear their pro rata shares of expenses of the Portfolios (see
"The Master Trust--Expenses of the Master Trust").
Seafirst has agreed that if a Fund's expenses (excluding interest,
brokerage commissions, litigation expenses and certain other items), including
its pro rata share of the expenses incurred by the corresponding Portfolio, were
to exceed any limitations on expenses imposed by applicable state securities
laws, Seafirst will bear the amount of the excess, to the extent required by the
state limitations. Bank of America has agreed to reimburse Seafirst for any such
amounts. Currently, the only applicable state expense limitation is an annual
limitation equal to the sum of 2.5% of the first $30 million of a Fund's average
net assets, 2% of the next $70 million of average net assets, and 1.5% of the
remaining average net assets.
In addition, Seafirst has agreed to reimburse the Funds in such amounts as
are necessary to limit the expenses of the Funds, including their pro rata
shares of the expenses incurred by the corresponding Portfolios (but excluding
interest, brokerage commissions, litigation expenses and certain other items),
to specified levels, depending on the levels of assets of the Portfolios in
which the Funds invest their assets. In any given fiscal year, Seafirst's
reimbursement will be in an amount sufficient to limit such expenses of each
Fund to .95%, .85% or .75% of the Fund's average daily net assets if the average
daily net assets of the Portfolio in which the Fund invests in such year is less
than $250 million, $250 million through $500 million, or more than $500 million,
respectively. Bank of America has agreed to reimburse Seafirst for any such
amounts. These reimbursement agreements by their terms will remain in effect
with respect to each Fund until such time as
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the Fund no longer invests substantially all its assets in the corresponding
Master Fund, or Seafirst or Bank of America no longer provides services to the
Fund or Master Fund, respectively, whichever is earlier.
Except for the expenses described above that have been assumed by Seafirst,
all expenses incurred in administration of the Trust are charged to the Trust.
THE MASTER TRUST
Prior to December 6, 1993, Seafirst, as trustee of the Trust's predecessor,
Collective Investment Trust for Seafirst Retirement Accounts, provided
investment management services as well as administrative services. Since the
reorganization of the Collective Investment Trust on that date, the assets of
the Funds have been invested in the corresponding Portfolios of the Master
Trust, and the Trust has not employed an investment manager.
The Master Trust is a business trust which was established under the laws
of the State of Delaware in October 1992. The business and affairs of the Master
Trust are managed under the direction of its Board of Trustees. See "Management
of the Master Trust" in the Statement of Additional Information for information
regarding the Trustees and officers of the Master Trust. The offices of the
Master Trust are located in the Cayman Islands.
THE INVESTMENT ADVISORY AGREEMENT
Subject to the direction of the Board of Trustees, Bank of America acts as
the investment adviser to the Master Trust pursuant to an Investment Advisory
Agreement (the "Advisory Agreement") with the Master Trust. Bank of America is
responsible for managing the investment of the assets of the Master Trust in
conformity with the stated objectives and policies of the Master Trust. As
compensation for its services under the Advisory Agreement, Bank of America is
paid a monthly management fee for its services, at an annual rate of .45% of the
average daily net assets of the Bond Portfolio, .55% of the average daily net
assets of the Asset Allocation Portfolio, and .75% of the average daily net
assets of the Blue Chip Portfolio. The fee paid by the Blue Chip Portfolio is
higher than that paid by most other investment companies. Bank of America may
waive fees from time to time to assist the Portfolios in maintaining competitive
yields; any such waiver will be voluntary and, to the extent a fee waiver is
reduced with respect to a particular Portfolio, the Portfolio's expense ratio
would rise.
Bank of America is a wholly-owned subsidiary of BankAmerica Corporation, a
registered bank holding company. The principal executive offices of Bank of
America and BankAmerica Corporation are located at 555 California Street, San
Francisco, California 94104. Formed in 1904, Bank of America is a national
banking association that provides commercial banking and trust business through
an extensive system of branches across the western United States. Bank of
America's principal banking affiliates operate branches in ten U.S. states as
well as corporate banking and business credit offices in major U.S. cities and
branches, corporate offices and representative offices in 37 countries. The
advisory agreement provides that Bank of America may, in its discretion, provide
advisory services through its own employees or employees of one or more of its
affiliates that are under the common control of Bank of America's parent,
BankAmerica Corporation, provided such employees are under the management of
Bank of America. Bank of America may also employ a sub-adviser provided Bank of
America remains fully responsible to the Master Trust for the acts and omissions
of the sub-adviser.
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Since April 1994, Steven L. Vielhaber has been primarily responsible for
the day-to-day management of the investment assets of the Bond Portfolio. Mr.
Vielhaber has been employed by Bank of America since 1993. Prior thereto, Mr.
Vielhaber had been Director of Fixed Income Marketing at Dimensional Fund
Advisors since 1990 and Vice President and Manager of Investments at Gibraltar
Savings from 1986 to 1990.
The Asset Allocation Committee of Bank of America's Global Investment
Management Division establishes general parameters for the selection of
securities. Since November 1994, Robert Pyles, Director of Research and Senior
Portfolio Manager of BofA Capital Management, Inc. (a wholly-owned subsidiary of
Bank of America), and since April 1994, Steven L. Vielhaber have been primarily
responsible for the selection of particular securities for the equity and
fixed-income portions, respectively, of the Asset Allocation Portfolio. Mr.
Pyles, a Chartered Financial Analyst, has been associated with Seattle-First
National Bank, a wholly-owned subsidiary of Seafirst Corporation, which is
controlled by BankAmerica Corporation (both of which are bank holding
companies), since 1976. Mr. Pyles currently manages various common trust,
employee benefit and individual accounts for Bank of America.
Bank of America Illinois' equity management team will be responsible for
the day-to-day investment activities of the Blue Chip Portfolio. The team is
headed by James Miller, Executive Vice President and Chief Investment Officer of
BofA Illinois Investment Management (a wholly-owned subsidiary of Bank of
America). Mr. Miller has been manager of the Portfolio since May 1, 1995 and has
been associated with BofA Illinois Investment Management (and its predecessor
Continental Bank) since 1988. Mr. Miller is a Chartered Financial Analyst, a
member of the Association of Investment Management and Research, and a former
director of the Investment Analysts Society of Chicago.
Bank of America will pay expenses of all employees, office space and
facilities necessary to carry out its duties under the Advisory Agreement, and
all expenses incurred by it in connection with acting as investment adviser,
other than costs (including taxes and brokerage commissions) of securities
purchased for the Portfolios. All other expenses incurred in the investment
operations of the Master Trust are charged to the Portfolios. See
"Administration of the Trust--Expenses" above for a discussion of Bank of
America's agreement to reimburse Seafirst for certain amounts that Seafirst
reimburses to the Funds.
THE MASTER TRUST ADMINISTRATION AGREEMENT
Subject to the direction of the Board of Trustees of the Master Trust,
Concord is responsible for providing administrative services to the Master Trust
pursuant to an Administration Agreement with the Master Trust, through its
offshore subsidiaries.
For its services as administrator, Concord is entitled to receive an
administration fee from the Master Trust at the annual rate of .05% of each
Portfolio's average daily net assets.
Pursuant to an agreement with Concord, PFPC provides certain accounting,
bookkeeping, pricing and distribution calculation services to the Portfolios,
through its offshore affiliates, on behalf of Concord. The Trust bears the fees
and expenses charged by PFPC for its services. Concord (Cayman Island) Limited
provides the principal office of the Master Trust in the Cayman Islands and
maintains certain books and records of the Master Trust at the expense of the
Master Trust.
CUSTODIAN
PNC Bank, National Association, acts as custodian of the assets of the
Master Trust.
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EXPENSES OF THE MASTER TRUST
Each Portfolio of the Master Trust is responsible for its operating
expenses, other than expenses assumed by Bank of America under the Advisory
Agreement and by Concord under the Master Trust Administration Agreement. The
expenses paid by the Master Trust include but are not limited to advisory fees;
brokerage fees and commissions in connection with the purchase of portfolio
securities; administration fees; taxes, if any; custodian, legal and auditing
fees; fees and expenses of trustees who are not interested persons of Bank of
America; printing and other expenses relating to the Portfolios' operations; and
any extraordinary fees and expenses.
TAX INFORMATION
The Trust intends to qualify each Fund as a regulated investment company
under the Internal Revenue Code (the "Code"). Accordingly, so long as a Fund so
qualifies, it will not be subject to federal income taxes on its net investment
income and capital gains, if any, that it distributes to its shareholders in
accordance with the Code.
For federal income tax purposes, income earned by each Fund will not be
taxable to the Eligible Retirement Accounts that are its shareholders or to
Participants until a Participant receives, or is deemed under federal tax law to
have received, a distribution from the Participant's Eligible Retirement
Account. A distribution from the Participant's Eligible Retirement Account is a
payment or a deemed payment from the Eligible Retirement Account to the
Participant. A withdrawal by an Eligible Retirement Account from a Fund is a
payment by the Fund to a shareholder in redemption of shares of the Trust.
Therefore, withdrawals from a Fund can be made at any time by an Eligible
Retirement Account without penalty and without the amount withdrawn being
subject to federal income tax.
The Portfolios are not required to pay federal income taxes on their net
investment income and capital gains, because they are treated as partnerships
for tax purposes. Any interest, dividends and gains or losses of a Portfolio
will be deemed to have been "passed through" to the corresponding Fund and other
investors in the Portfolio, regardless of whether such interest, dividends or
gains have been distributed by the Portfolio or losses have been realized by the
Fund and such other investors.
The foregoing describes only the federal income tax status of the Funds and
the Portfolios. It does not describe the taxation of distributions from Seafirst
Retirement Accounts to Participants, nor applicable limitations on the
deductibility of contributions to such Accounts. Participants should consult
their tax advisors.
OTHER INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
A shareholder exercises the voting rights of the shares and is entitled to
one vote for each full share (and a fractional vote for each fractional share)
outstanding on the books of the Trust in the name of such shareholder or its
nominee. The shares have noncumulative voting rights, which means that the
holders of more than 50% of the shares voting in the election for members of the
Board of Trustees can elect 100% of the members if they choose to do so. On any
matter submitted to a vote of shareholders, all shares of the Trust then issued,
outstanding and entitled to vote will be voted in the aggregate and not by Fund,
except (i) when required by the 1940 Act, shares shall be voted by Fund, and
(ii) when the matter affects an interest of less
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than all of the Funds, then only shareholders that own shares of the affected
Fund or Funds will be entitled to vote. Shares vote in the aggregate on such
matters as election of members of the Board of Trustees and by Funds on such
matters as the approval of investment advisory arrangements and changing certain
investment restrictions.
The Trust's Declaration of Trust requires the calling of a meeting of the
shareholders of the Trust when ordered by the Board of Trustees of the Trust or
when requested in writing by shareholders holding 10% of the shares entitled to
vote at the meeting. The Board of Trustees of the Trust has also undertaken to
call a meeting of the shareholders for the purpose of voting on the question of
removal of members of the Board of Trustees of the Trust upon the written
request of shareholders holding 10% of the shares entitled to vote at such a
meeting, and in connection with such a meeting to assist in communications among
such shareholders as required by the 1940 Act. Shareholder inquiries should be
in writing addressed to Retirement Services, Seafirst Bank, P.O. Box 84248,
Seattle, Washington 98124.
RELATIONSHIP TO THE MASTER TRUST
Whenever a Fund is requested to vote on matters pertaining to the Master
Trust or a corresponding Portfolio of the Master Trust, in the Fund's capacity
as an investor in such Portfolio, the Trust will hold a meeting of its
shareholders (or in the case of a matter pertaining only to a Portfolio, a
meeting of the shareholders of the corresponding Fund) and cast its vote in the
same proportions as the votes cast by such shareholders. The Trust will vote any
shares for which it receives no voting instructions in the same proportion as
the shares for which it does receive voting instructions.
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END OF PROSPECTUS FOR SEAFIRST RETIREMENT FUNDS
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