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Registration Nos. 33-82256
811-8680
As filed with the Securities and Exchange Commission on
October 18, 1996
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
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Post-Effective Amendment No. 2 /X/
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and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 3 /X/
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(Check appropriate box or boxes)
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AAHSA TRUST
(Exact Name of Registrant as Specified in Charter)
901 E Street, N.W., Suite 500, Washington, D.C. 20004-2037
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code:
(202) 508-9425
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Sheldon Goldberg
901 E Street, N.W.
Suite 500
Washington, D.C. 20004-2037
(Name and Address of Agent for Service)
Copies to:
Jane A. Kanter Cynthia Surprise
Katten Muchin & Zavis State Street Bank and Trust Company
1025 Thomas Jefferson Street, N.W. 1776 Heritage Drive, A4N
Suite 700 - East Lobby North Quincy, MA 02171
Washington, D.C. 20007
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: IT IS PROPOSED THAT THIS FILING
WILL BECOME EFFECTIVE:
ON ____________ PURSUANT TO PARAGRAPH (a) OF RULE 485
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X 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a) OF RULE 485
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IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b) OF RULE 485
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ON ____________ PURSUANT TO PARAGRAPH (b) OF RULE 485
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THE REGISTRANT HAS PREVIOUSLY ELECTED TO AND HEREBY CONTINUES ITS ELECTION TO
REGISTER AN INDEFINITE NUMBER OF SHARES PURSUANT TO RULE 24f-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940.
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AAHSA TRUST
CROSS-REFERENCE SHEET
Form N-1A Item No. Caption in Prospectus
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1. Cover Page Cover Page
2. Synopsis Cover Page; Introduction to the Funds
3. Condensed Financial
Information Not Applicable
4. General Description of Introduction; Money Market Fund;
Registrant Short-Term Bond Fund; Risk Factors,
Other Investment Practices, and
Policies of the Funds
5. Management of the Fund How the AAHSA Trust is Managed
6. Capital Stock and Other Organization of the AAHSA Trust; Dividends,
Securities Distributions, and Taxes; How to
Purchase Shares
7. Purchase of Securities How to Purchase Shares; Shareholder
Being Offered Service; How Each Fund's Net Asset
Value is Determined
8. Redemption or Repurchase Shareholder Services; How to
Redeem Shares
9. Pending Legal Proceedings Not Applicable
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and General Information and History
History
13. Investment Objectives and Investment Restrictions; Description
Policies of Certain Investments
14. Management of the Fund Management of the AAHSA Trust
15. Control Persons and Principal Holders of Securities
Principal Holders of
Securities
16. Investment Advisory and Investment Management and Other
Other Services Services
17. Brokerage Allocation and Brokerage Allocation and Other
Other Practices Practices
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Caption in Statement of
Form N-1A Item No. Additional Information
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18. Capital Stock and Other Organization of the Trust
Securities
19. Purchase, Redemption and Purchase and Redemption of Securities
Pricing of Securities Being Offered; Determination of Net
Being Offered Asset Value
20. Tax Status Taxes
21. Underwriters Distribution of Shares
22. Calculation of Performance Performance Information
Data About the Funds
23. Financial Statements Independent Auditors
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AAHSA TRUST
901 E Street, N.W.
Suite 500
Washington, D.C. 20004-2037
INVESTMENT OBJECTIVE OF EACH FUND
The MONEY MARKET FUND seeks to maximize current income, consistent with
stability of principal and preservation of capital, by investing in high-quality
money market securities. SHARES IN THE MONEY MARKET FUND ARE NEITHER INSURED
NOR GUARANTEED BY THE U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT THE MONEY
MARKET FUND WILL MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
The SHORT-TERM BOND FUND seeks to provide current income consistent with minimum
fluctuation of principal by investing in high-grade short-term debt securities.
There can be no assurance that the objectives of each Fund will be realized.
For general information about the AAHSA Trust please call toll-free
1-888-603-8400.
ABOUT THIS PROSPECTUS
This Prospectus sets forth concisely the information about each Fund that you
should know before investing. It should be retained for future reference. A
Statement of Additional Information, dated October 23, 1996, about each Fund has
been filed with the Securities and Exchange Commission and is incorporated
herein by reference. You may obtain a copy of the Statement of Additional
Information at no charge by calling 1-888-603-8400.
TABLE OF CONTENTS Page
Introduction to the Funds 2
Money Market Fund 3
Short-Term Bond Fund 4
Risk Factors, Other Investment Practices,
and Policies of the Funds 5
Dividends, Distributions, and Taxes 8
How to Purchase Shares 9
Shareholder Services 10
How Each Fund's Net Asset
Value is Determined 11
How to Redeem Shares 12
How the AAHSA Trust is Managed 13
Portfolio Transactions and Brokerage Practices 15
Organization of the AAHSA Trust 16
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
PROSPECTUS
October 23, 1996
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INTRODUCTION TO THE FUNDS
FEE SUMMARY. The Fee Table, including the Examples below, is included to assist
your understanding of the various costs and expenses to which an investment in
each Fund would be subject. Certain fees and expenses of each Fund stated below
are estimates for their first year of operations, based upon assumed average
daily net assets of $25,000,000. Actual fees and expenses for each Fund for the
current year may be more or less than those shown below. A more complete
description of all fees and expenses is included in this prospectus under the
section "How the AAHSA Trust is Managed."
Money Market Short-Term
Shareholder Transaction Expenses Fund Bond Fund
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Sales Load Imposed on Purchase None None
Sales Load Imposed on Reinvested Dividends None None
Deferred Sales Load Imposed on Redemptions None None
Redemption Fee None None
Exchange Fee None None
Annual Fund Operating Expenses
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(as a percentage of average net assets)
Investment Management Fee (after contingent
fee waiver)(1) 0% 0%
12b-1 Fees (after contingent fee waiver)(1) .03% .03%
Other Estimated Expenses (after contingent
fee waiver)(1) .42% .62%
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Total Fund Operating Expenses .45% .65%
EXAMPLES: An investor in each Fund would pay the following expenses on a $1,000
investment, assuming (1) a 5% annual return and (2) redemption at the end of
each future time period.**
1 Year 3 Years
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Money Market Fund $ 5 $ 14
Short-Term Bond Fund $ 7 $ 21
** There are no charges imposed upon redemption.
THESE EXAMPLES SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR FUTURE
FEES OR EXPENSES FOR EACH FUND. ACTUAL FEES AND EXPENSES MAY BE GREATER OR LESS
THAN THOSE SHOWN ABOVE. Similarly, the annual rate of return assumed in the
Example is not an estimate or guarantee of future investment performance, but is
included for illustrative purposes.
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(1) The Investment Manager, the Sub-Adviser and the Association have
agreed to waive or limit their fees and in the case of the Association to pay
certain operating expenses to the extent necessary to limit Total Fund
Operating Expenses to .45% for the Money Market Fund and .65% for the
Short-Term Bond Fund subject to possible reimbursement by the Funds in future
years if such reimbursement can be achieved within the foregoing expense
limits. Consequently, the Investment Management Fees, the Sub-Administrator
Fee and the 12b-1 Fees actually charged will in the future be higher than
reflected above, if consistent with the limits on Total Fund Operating
Expenses. Absent the waiver or limitation of fees, Investment Management
Fees, 12b-1 Fees, Other Estimated Expenses and Total Fund Operating Expenses
would be .22%, .10%, .51% and .83%, respectively, for the Money Market Fund
and .28%, .10%, .66% and 1.04%, respectively, for the Short-Term Bond Fund.
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OVERVIEW OF THE AAHSA TRUST. The AAHSA Trust is a Delaware business trust
registered with the Securities and Exchange Commission ("SEC") as a no-load,
open-end diversified management investment company, commonly known as a
"mutual fund." The AAHSA Trust currently consists of two funds: the Money
Market Fund and the Short-Term Bond Fund ("Fund" or "Funds"). Each Fund in
the AAHSA Trust is a separate investment portfolio with distinct investment
objectives, investment programs, policies, and restrictions. Each Fund is
managed by CRSA Investment Advisors, Inc. ("CRSA Advisors" or "Investment
Manager"), which directs the day-to-day operations of each Fund. Wainwright
Asset Management serves as the sub-adviser ("Sub-Adviser") to each Fund and
directs the investment of each Fund's assets. H.C. Wainwright & Co. Inc., an
affiliate of the Sub-Adviser, serves as the distributor for the AAHSA Trust
(the "Distributor"). State Street Bank and Trust Company ("State Street")
serves as the administrator, the custodian, the accounting services agent,
the transfer agent, and the dividend disbursing agent for the AAHSA Trust.
The American Association of Homes and Services for the Aging (the
"Association" or the "Sub-Administrator") serves as the sub-administrator for
the AAHSA Trust.
The Association, which provided the initial capitalization for the AAHSA Trust,
is the national association representing approximately [5,000] not-for-profit
organizations dedicated to providing high-quality health care, housing and
services to the nation's elderly. Shares of the Funds will be initially offered
principally to members of the Association. The AAHSA Trust is the only mutual
fund created specially to benefit the retirement housing and long term care
industries.
No initial sales charges or redemption fees or penalties are charged by the
AAHSA Trust with respect to an investment in the Funds. This means that all
of the money you invest will be credited to your account(s) in the Fund(s)
and immediately go to work for you.
MONEY MARKET FUND
INVESTMENT OBJECTIVE: The Money Market Fund seeks to maximize current income,
consistent with stability of principal and preservation of capital, by investing
in high-quality money market securities.
INVESTMENT PROGRAM: In seeking to achieve its objective, the Money Market
Fund will invest all of its assets in high-quality money market instruments
that present minimal credit risks and are, at the time of acquisition,
considered to be "first tier securities" for purposes of Rule 2a-7 under the
Investment Company Act of 1940 (the "1940 Act"). The instruments in which the
Fund may invest include:
- short-term obligations of the U.S. Government (such as United States
Treasury bills), its agencies (such as the Government National
Mortgage Association), and instrumentalities (such as the Federal
National Mortgage Association);
- variable or floating rate securities, including variable rate
securities issued or guaranteed by the U.S. Government or any agency
or instrumentality thereof; and
- repurchase agreements collateralized by short-term obligations of the
U.S. Government, its agencies and instrumentalities.
MATURITY: The Fund will invest in money market instruments having a maturity
of 397 days or less and will maintain a dollar-weighted average portfolio
maturity of 90 days or less. These practices are designed to minimize any
price fluctuation in the Fund's portfolio securities.
PRICE: The Fund seeks to maintain a constant net asset value of $1.00 per
share, although in certain circumstances this may not be possible. The Fund
will use the amortized cost method of valuing its portfolio securities.
PORTFOLIO MANAGEMENT: The Fund's Sub-Adviser actively manages the Fund,
adjusting the composition of investments and the average maturity of the
Fund's portfolio according to its outlook for short-term interest rates.
During periods of rising interest rates, a shorter average maturity may be
expected, while a longer maturity may be more appropriate when interest rates
are falling.
SUITABILITY: The Fund is designed to be a convenient and economical medium for
investing short-term funds, while seeking to provide maximum current income
consistent with safety of principal. In addition, the Fund is also useful as a
component of a long-term, balanced investment program for the conservative
investor. The Fund's investment performance will vary depending on changes in
short-term interest rates or in the creditworthiness of the issuers of its
portfolio securities. Both the financial and market risks of an investment in
the Fund may be expected to be less than for the Short-Term Bond Fund.
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SHORT-TERM BOND FUND
INVESTMENT OBJECTIVE: The Short-Term Bond Fund seeks to provide current income
consistent with minimum fluctuation of principal by investing in high-grade
short-term debt securities.
INVESTMENT PROGRAM: In seeking to achieve its objective, the Short-Term Bond
Fund will invest primarily (i.e., at least 65% of its total assets) in a
diversified portfolio of short-term U.S. Government securities. Such U.S.
Government securities are either issued or guaranteed as to the timely payment
of principal or interest by the U.S. Government or one of its agencies or
instrumentalities. These securities include but are not limited to:
- direct obligations of the U.S. Treasury such as U.S. Treasury
bills, notes and bonds;
- obligations of U.S. Government agencies, such as the Government
National Mortgage Association ("GNMA");
- obligations of U.S. Government instrumentalities such as the Federal
National Mortgage Association ("FNMA");
- variable or floating rate securities, including variable rate
securities issued or guaranteed by the U.S. Government or any agency
or instrumentality thereof; and
- repurchase agreements collateralized by short-term obligations of the
U.S. Government, its agencies or instrumentalities.
Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. Government, such as GNMA participation certificates, are backed by the
full faith and credit of the U.S. Treasury. No assurances can be given that
the U.S. Government will provide financial support to certain of its other
agencies or instrumentalities, since it is not obligated to do so. Such
agencies or instrumentalities are supported by:
- the issuer's right to borrow an amount limited to a specific
line of credit from the U.S. Treasury;
- discretionary authority of the U.S. Government to purchase
certain obligations of an agency or instrumentality; or
- the credit of the agency or instrumentality.
To the extent the Fund is not invested as described above, it may invest
in the money market instruments in which the Money Market Fund may invest.
For temporary defensive purposes, the Fund may invest in such money market
instruments without limitation.
The Fund may purchase its portfolio securities on a when-issued or delayed
delivery basis. Certain of these securities may have adjustable rates of
interest with periodic demand features.
MATURITY: The dollar weighted average maturity of the Fund's portfolio is not
expected to exceed three years. Within this limitation, the Fund may purchase
individual securities with final maturities greater than three years.
PORTFOLIO TURNOVER: The portfolio turnover rate for the Fund will vary and when
circumstances warrant, securities may be sold without regard to the length of
time held. Although the Fund cannot accurately predict its annual portfolio
turnover rate, it is not expected to exceed 100%.
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PORTFOLIO MANAGEMENT: To meet the Fund's objectives, the Fund's Sub-Adviser
actively manages the Fund, adjusting the composition of investments and the
average maturity of the Fund's portfolio based on general economic and financial
trends, such as the level of interest rates and inflation, and the supply and
demand of debt securities.
SUITABILITY: The Fund is designed for investors who seek a greater and more
stable level of income than normally provided by money market investments and
less principal fluctuation than that experienced by long-term bond funds. The
Short-Term Bond Fund is not a money market fund and its share price is expected
to fluctuate with changes in interest rates and bond market conditions (unlike a
money market fund which seeks to maintain a stable net asset value), although
this fluctuation should be more moderate than that of a fund with a longer
average maturity. Both the financial and market risks of an investment in the
Fund may be expected to be greater than those for the Money Market Fund.
RISK FACTORS, OTHER INVESTMENT PRACTICES, AND POLICIES OF THE FUNDS
REPURCHASE AGREEMENTS. Each Fund may utilize repurchase agreements through
which they may purchase a security (the "underlying security") from a well
established domestic securities dealer or bank that is a member of the Federal
Reserve System and the seller of the repurchase agreement (I.E., the securities
dealers or bank) agrees to repurchase the underlying security at a mutually
agreed upon time and price. In these repurchase transactions, the underlying
security is held by each Fund's custodian through the federal book entry system
as collateral and marked-to-market on a daily basis to ensure full
collateralization of the repurchase agreement. The underlying security must be
a high-quality security and must be determined to present minimal credit risks.
In the event of bankruptcy or default of certain sellers of repurchase
agreements, the Funds could experience costs and delays in liquidating the
underlying security held as collateral and might incur a loss if such collateral
declines in value during this period.
BONDS. As described above, the Short-Term Bond Fund invests in short-term debt
securities or bonds. A bond is a contractual debt obligation to repay a stated
debt amount (the principal) on a specified date (the maturity) plus a specified
rate of interest for the use of the money. Most bonds pay a fixed rate of
interest known as the coupon rate, which is fixed for the term of the bond. A
bond's yield reflects the fixed annual interest as a percent of its current
price. This price (the bond's market value) must increase or decrease in order
to adjust the bond's yield to current interest rate levels. Therefore, bond
prices generally move in the opposite direction of interest rates. Bonds have
varying degrees of quality and varying levels of sensitivity to changes in
interest rates. Longer-term bonds are generally more sensitive to interest rate
changes than short-term bonds.
VARIABLE OR FLOATING RATE SECURITIES. Both Funds may invest in securities
which offer a variable or floating rate of interest. Such securities
typically bear interest at a rate that is intended to cause such securities
to trade at their par value. Variable-rate securities provide for automatic
establishment of a new interest rate at fixed intervals (e.g., daily,
monthly, semi-annually, etc.). Floating rate securities provide for
automatic adjustment of the interest rate whenever some specified interest
rate changes. The interest rate on variable- or floating-rate securities is
ordinarily determined by reference to, or is a percentage of, a bank's prime
rate, the 90-day U.S. Treasury bill rate, the rate of return on commercial
paper on bank certificates of deposit, an index of short term interest rates,
or some other objective measure. Both Funds treat the variable rate notes as
maturing at the interest reset date.
MORTGAGE PASS-THROUGH SECURITIES. The Short-Term Bond Fund may invest in
mortgage pass-through securities, which are securities representing interests in
pools of mortgages issued or guaranteed by the U.S. government, its agencies or
instrumentalities. Principal and interest payments made on the mortgages in the
pools are passed through to the holder of such securities. Mortgage pass-
through securities may be classified into the following categories, according to
the issuer or guarantor:
- Governmental mortgage pass-through securities that are backed by the
full faith and credit of the U.S. Government. GNMA, the principal
U.S. Government guarantor of such securities, is a wholly-owned U.S.
Government corporation within the Department of Housing and Urban
Development. GNMA is authorized to guarantee, with the full faith and
credit of the United States, the timely payment of principal
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interest on securities issued by approved institutions and backed by
pools of Federal Housing Authority ("FHA") insured or Veterans
Administration ("VA") guaranteed mortgages.
- Government-related mortgage pass-through securities that are not
backed by the full faith and credit of the U.S. Government. Issuers
include FNMA and the Federal Home Loan Mortgage Corporation ("FHLMC").
FNMA is a U.S. Government-sponsored corporation owned entirely by
private stockholders. Pass-through securities issued by FNMA are
guaranteed as to timely payment of principal and interest by FNMA.
FHLMC issues mortgage pass-through securities representing interests
in residential mortgage loans pooled by it. FHLMC is a U.S.
Government-sponsored corporation and guarantees the timely payment of
interest and timely or ultimate payment of principal.
Mortgage pass-through securities created by non-governmental issuers will not be
purchased by the Short-Term Bond Fund.
Unscheduled or early repayment of principal on mortgage pass-through securities
(arising from prepayments of principal due to the sale of the underlying
property, refinancing or foreclosure, net of fees and costs which may be
incurred) may expose the Short-Term Bond Fund to a lower rate of return upon
reinvestment of principal. Like other fixed income securities, when interest
rates rise, the value of a mortgage-related security generally will decline, and
may result in a loss of the holder's principal if such securities were purchased
at a premium; however, when interest rates are declining, the value of mortgage-
related securities with prepayment features may not increase as much as other
fixed-income securities.
ADJUSTABLE RATE MORTGAGE SECURITIES. The Short-Term Bond Fund may invest in
adjustable rate mortgage securities ("ARMS"). ARMS are pass-through mortgage
securities with adjustable rather than fixed interest rates. The ARMS in which
the Short Term Bond Fund may invest are issued by GNMA, FNMA, and FHLMC, and are
actively traded. The underlying mortgages which collateralize ARMS issued by
GNMA are fully guaranteed by the FHA or VA, while those collateralizing ARMS
issued by FHLMC or FNMA are typically conventional residential mortgages
conforming to strict underwriting size and maturity constraints.
Unlike conventional bonds, ARMS pay back principal over the life of the ARMS
rather than at maturity. Thus, a holder of the ARMS, such as the Short Term
Bond Fund, would receive monthly scheduled payments of principal and interest
and may receive unscheduled principal payments representing payments on the
underlying mortgages. At the time that a holder of the ARMS reinvests the
payments and any unscheduled prepayments of principal that it receives, the
holder may receive a rate of interest which is actually lower than the rate of
interest paid on the existing ARMS. As a consequence, ARMS may be less
effective means of "locking in" long-term interest rates than other types of
U.S. Government securities.
Not unlike other U.S. Government securities, the market value of ARMS will
generally vary inversely with changes in market interest rates. Thus, the
market value of ARMS generally declines when interest rates rise and generally
rises when interest rates decline.
While ARMS generally entail less risk of a decline during periods of rapidly
rising rates, ARMS may also have less potential for capital appreciation than
other similar investments (e.g., investments with comparable maturities)
because, as interest rates decline, the likelihood increases that mortgages will
be prepaid. Furthermore, if ARMS are purchased at a premium, mortgage
foreclosures and unscheduled principal payments may result in some loss of a
holder's principal investment to the extent of the premium paid. Conversely, if
ARMS are purchased at a discount, both a scheduled payment of principal and an
unscheduled prepayment of principal would increase current and total returns and
would accelerate the recognition of income, which would be taxed as ordinary
income when distributed to shareholders.
WHEN-ISSUED SECURITIES. Each Fund may purchase securities on a when-issued or
delayed delivery basis. When such transactions are negotiated, the price of
such securities is fixed at the time of the commitment, but delivery and payment
for the securities may take place up to 90 days after the date of the commitment
to purchase. The securities are subject
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to the market fluctuation and the market value of such securities may vary from
the purchase price. When-issued securities involve a risk of loss if the value
of the security to be purchased declines prior to the settlement date. In when-
issued and delayed delivery transactions, the Funds rely on the seller to
complete the transaction. The seller's failure to complete the transaction may
cause the Funds to miss a price or yield considered to be advantageous. The
Funds may dispose of a commitment prior to settlement if the Sub-Adviser deems
it appropriate to do so. In addition, the Funds may enter in transactions to
sell their purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Funds may realize short-term profits or losses upon the sale of such
commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate income, each Fund may
lend portfolio securities on a short-term or a long-term basis, up to one-third
of the value of its total assets to broker-dealers, banks, or other
institutional borrowers of securities. Since this technique may be considered a
form of leverage, each Fund will only enter into loan arrangements with broker-
dealers, banks, or other institutions which the Sub-Adviser for each Fund has
determined are creditworthy under guidelines established by the Trustees, and
will receive collateral in the form of cash (which may be invested in accordance
with each Fund's investment program) or U.S. Government securities, equal to at
least 100% of the value of the securities loaned at all times. A Fund will
continue to receive the equivalent of the interest or dividends paid by the
issuer of the securities lent. A Fund may also receive interest on the
investment of the collateral or a fee from the borrower as compensation for the
loan. A Fund will retain the right to call, upon notice, the securities lent.
While there may be delays in recovery, or even loss of rights in the collateral
should the borrower fail financially, the Sub-Adviser reviews the
creditworthiness of the entities to which loans are made to evaluate those
risks.
CONCENTRATION OF INVESTMENTS. Each Fund may invest more than 25% of the value
of its total assets in cash or cash items, securities issued or guaranteed by
the U.S. Government, its agencies, or instrumentalities, or instruments secured
by these securities, such as repurchase agreements.
OTHER INVESTMENT COMPANIES. Each Fund may invest in other investment companies.
The Money Market Fund's investment in other investment companies is limited in
amount so that no more than 5% of the Fund's total assets will be invested in
any one investment company or in all other investment companies in the
aggregate. The Short-Term Bond Fund may invest in other investment companies,
limited in amount so that no more than 5% of the Fund's total assets will be
invested in any one investment company or 10% of the Fund's total assets will be
invested in all other investment companies in the aggregate. Each Fund's
investment in such other investment companies will reflect the operating
expenses of these companies as well as its own expenses.
CERTAIN POLICIES TO REDUCE RISK. Each Fund has adopted certain fundamental
investment policies in managing its portfolio that are designed to maintain
the portfolio's diversity and reduce risk. Each Fund will not: (i) with
respect to 75% of each Fund's total assets, invest in more than 5% of its
total assets in the securities of a single issuer or purchase more than 10%
of the outstanding voting securities of any one issuer; and (ii) borrow more
than one-third of that Fund's total assets. As a matter of operating policy,
neither Fund will not purchase portfolio securities if its borrowings exceed
5% of its total assets. The Funds will not borrow in order to increase
income, but only to facilitate redemption requests that might otherwise
require untimely disposition of portfolio securities. If a Fund borrows
money, its share price may be subject to greater fluctuation until the
borrowing is paid off. If the Fund makes additional investments while
borrowings are outstanding, this may be considered a form of leverage.
Limitation (i) does not apply to obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. These investment policies are
fundamental and may be changed for a Fund only by approval of that Fund's
shareholders.
FURTHER INFORMATION. Each Fund's investment program is subject to further
restrictions as described in the Statement of Additional Information. Each
Fund's investment program, unless otherwise specified, is not fundamental and
may be changed without shareholder approval by the Trust's Board of Trustees.
Each Fund's investment objectives are fundamental and may be changed only
with approval of that Fund's shareholders.
INVESTMENT PERFORMANCE. Each Fund may illustrate in advertisements its average
annual total return, which is the rate of growth of the Fund that would be
necessary to achieve the ending value of an investment kept in the Fund for the
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period specified and is based on the following assumptions: (1) all dividends
and distributions by the Fund are reinvested in shares of the Fund at net asset
value, and (2) all recurring fees are included for applicable periods.
Each Fund may also illustrate in advertisements its cumulative total return for
several time periods throughout the Fund's life based on an assumed initial
investment of $1,000. Any such cumulative total return for each Fund will
assume the reinvestment of all income dividends and capital gains distributions
for the indicated periods and will include all recurring fees.
The Money Market Fund may illustrate in advertisements its yield and effective
yield. The Money Market Fund's yield refers to income generated by an
investment in the Fund over a seven (7) day period, expressed as an annual
percentage rate. The Money Market Fund's effective yield is calculated
similarly but assumes that income earned from the investment is reinvested. The
Fund's effective yield will be slightly higher than its yield because of the
compounding effect of this assumed reinvestment.
The Short-Term Bond Fund may illustrate in advertisements its yield based on a
recent thirty (30) day period, which reflects the income per share earned by the
Fund's portfolio investments. The yield is calculated by dividing the Fund's
net investment income per share during that period by the net asset value on the
last day of that period and annualizing the result. Further information on each
Fund's performance calculations is described in the Statement of Additional
Information.
DIVIDENDS, DISTRIBUTIONS, AND TAXES
Each Fund has elected to be treated and to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code") in which case it will not be subject to federal income tax on
any income and capital gains distributed to its shareholders.
As a result, it is the policy of each Fund to declare and distribute to its
shareholders as income dividends or capital gains distributions, at least
annually, substantially all of its ordinary income and capital gains realized
from the sale of its portfolio securities, if any.
Income dividends for each Fund will be declared daily and paid monthly. You
will receive monthly statements concerning all income dividends and other
distributions made to you by each Fund. All distributions of capital gains of
each Fund, if any, realized during the fiscal year, will be declared and
distributed no less frequently than annually. Income dividends are derived from
each Fund's net investment income, including any net short-term capital gains
and dividends received by a Fund, and are taxable to you as ordinary income.
Distributions of capital gains by each Fund are derived from each Fund's long-
term capital gains and are taxable to you as long-term capital gains, regardless
of how long you have held your shares. Income dividends and distributions of
capital gains income declared in October, November or December and paid in
January are taxable in the year they are declared. The AAHSA Trust will mail
you a Form 1099 by the end of January indicating the federal tax status of your
income dividends and capital gains distributions.
BACKUP WITHHOLDING. Each Fund is required by federal law to withhold 31% of
reportable payments (which may include income dividends, capital gains
distributions, and share redemption proceeds) paid to shareholders who have not
complied with IRS regulations. In order to avoid this back-up withholding
requirement, you must certify on your Purchase Application Form ("Application"),
or on a separate W-9 Form supplied by the AAHSA Trust's transfer agent, that
your Social Security or Taxpayer Identification Number is correct (or that you
have applied for such a number and are waiting for it to be issued) and that you
are not currently subject to backup withholding, or you are exempt from backup
withholding.
REINVESTMENT OF INCOME DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. Unless you
elect otherwise, as permitted on the Application, income dividends and
distributions of capital gains income with respect to a particular Fund will be
reinvested in additional shares of that Fund and will be credited to your
account with that Fund at the net asset value per share next determined as of
the ex-dividend date. Both income dividends and distributions of capital gains
income are
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paid by the Funds on a per share basis. As a result, at the time of such
payment, the net asset value per share of the Short-Term Bond Fund will be
reduced by the amount of such payment. Payment of dividends and distributions
by the Money Market Fund will not affect the Fund's net asset value, but will
reduce the Fund's yield. Payments from each Fund to shareholders of income
dividends and capital gains distributions are taxable to shareholders of each
Fund when such dividends and distributions are declared, regardless of whether
they are taken in cash or reinvested in shares of the Funds.
HOW TO PURCHASE SHARES
The initial minimum investment is $50,000 per Fund. Such minimum investment
amount may, in certain cases, be waived or lowered by the AAHSA Trust.
OPENING AN ACCOUNT. You may make an initial purchase of shares of each Fund
through the Distributor or by mail or wire. Shares of the Funds may be
purchased on any day the Funds are open for business.
A COMPLETED AND SIGNED APPLICATION IS REQUIRED FOR EACH NEW ACCOUNT YOU OPEN
WITH EACH FUND REGARDLESS OF HOW YOU CHOOSE TO MAKE YOUR INITIAL PURCHASE OF
SHARES.
BY MAIL. You may purchase shares of the Funds by mailing the completed
Application, with your check made payable to the AAHSA Trust, to: State
Street Bank and Trust Company, Attn: Transfer Agent Operations, P.O. Box
1978, Boston, MA 02105-1978.
BY WIRE. You may also purchase shares of each Fund by wiring funds to the
wire bank account for each Fund. Before wiring funds, please call the AAHSA
Trust toll free at 1-800-492-9063 to advise the AAHSA Trust of your intention
to invest in one or both of the Funds and to receive instructions as to how
and where to wire your investment. Please remember to return your completed
Application to the AAHSA Trust as described in the prior paragraph. Your
bank may charge you a fee for the wire.
SUBSEQUENT INVESTMENTS. Minimum $5,000 per Fund, except for reinvestment of
dividends and distributions. Subsequent purchases of shares of the Funds may be
made (i) through the Distributor by mail or by wire (see instructions above),
(ii) through Selling Group Members or (iii) through means of certain services
available to shareholders of the Funds, such as the Telephone Investment
Privilege and the Exchange Privilege described below under "Shareholder
Services."
SHARE PRICE. To make an initial purchase of Fund shares, except by wire
transfer, a completed and signed Application must first be received and
accepted. Your shares in each Fund will be priced at the net asset value per
share of that Fund next determined after your purchase order has been received
by the AAHSA Trust in "good order."
With respect to the Money Market Fund, if your purchase payment is transmitted
by federal funds wire or bank wire, the purchase order will be considered in
"good order" upon receipt of the wire payment by the AAHSA Trust. If your
purchase payment as transmitted to the AAHSA Trust is not in federal funds
(I.E., monies credited by a Federal Reserve Bank), your payment must first be
converted to federal funds before your purchase order will be considered in
"good order." If your purchase payment is by a check drawn on a member bank of
the Federal Reserve System, conversion to federal funds usually occurs within
two business days of receipt of the check by the AAHSA Trust. Checks drawn on
banks which are not members of the Federal Reserve System may take up to five
(5) business days to convert into
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federal funds. During the period prior to receipt of federal funds, your money
will not be invested in the Money Market Fund.
With respect to the Short-Term Bond Fund receipt of federal funds by the AAHSA
Trust is not necessary for a purchase order to be considered in "good order".
SHARE CERTIFICATES. Share certificates will not be issued to you for shares
that you purchase in the Funds.
CONDITIONS OF YOUR PURCHASE. The AAHSA Trust and the Distributor each reserve
the right to reject any purchase for any reason and to cancel any purchase due
to nonpayment. Purchases are not binding on the AAHSA Trust or the Distributor
or considered received until such purchase orders are received by the AAHSA
Trust in good order. All purchases must be made in United States dollars and,
to avoid fees and delays, all checks must be drawn only on United States banks.
No cash will be accepted. As a condition of this offering, if your purchase is
canceled due to nonpayment or because your check does not clear (and, therefore,
your account is required to be redeemed), you will be responsible for any loss
the Funds incur.
SHAREHOLDER SERVICES
SHAREHOLDER INQUIRIES AND SERVICES OFFERED. If you have any questions about
the AAHSA Trust or the following services, please call 1-888-603-8400 and ask
about the AAHSA Trust or write the AAHSA Trust, 6075 Poplar Avenue, Suite
600, Memphis, TN 38119. The AAHSA Trust reserves the right to amend the
shareholder services described below or to change their terms or conditions
upon sixty (60) days notice to shareholders.
SHAREHOLDER STATEMENTS AND REPORTS. Each time you buy or sell shares or
reinvest a dividend or distribution in any Fund, you will receive an account
statement with respect to that Fund confirming such transaction and listing your
current share balance with that Fund. Since the Funds make monthly
distributions of income dividends to shareholders, you will receive, at a
minimum, monthly account statements. The AAHSA Trust also will send you annual
and semi-annual shareholder reports that contain certain financial information
concerning the Funds. In addition, you will receive year-end tax information
about your accounts with each Fund.
TELEPHONE PRIVILEGES. For your convenience, the AAHSA Trust provides
telephone privileges that allow you by telephone authorization to (i)
purchase shares in each Fund; (ii) exchange shares from your account in one
Fund for shares in the other Fund; and (iii) redeem shares in each Fund. To
utilize these telephone privileges, you must select such services by checking
the appropriate boxes on the Application and supply us with the information
required. Procedures have been established by the AAHSA Trust and its
transfer agent that are considered to be reasonable and are designed to
confirm personal identification information prior to acting on telephone
instructions, including tape recording telephone communication and providing
written confirmation of instructions communicated by telephone. If the AAHSA
Trust or transfer agent does not employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, it may be liable for any
losses arising out of any action on its part or any failure or omission to
act as a result of its own negligence, lack of good faith, or willful
misconduct. In light of the procedures established, neither the AAHSA Trust
nor the transfer agent will be liable for following telephone instructions
that it believes to be genuine. During periods of extreme economic
conditions or market changes, requests by telephone may be difficult to make
due to heavy volume. During such times, please consider placing your order
by mail.
The telephone privileges are not available with respect to redemptions for
accounts requiring supporting legal documents.
TELEPHONE INVESTMENT PRIVILEGE. After your account with the AAHSA Trust has
been opened, you may make additional investments in your account of $5,000 or
more by telephoning the AAHSA Trust at 1-800-492-9063 between 8:30 a.m. and
4:00 p.m. Eastern time on any day the AAHSA Trust is open. Telephone
investment requests made after 4:00 p.m. Eastern time will be processed as of
the close of business on the next business day. In accordance with your
instructions, we will electronically transfer monies from your bank account
designated on the Application, to your account with the AAHSA Trust.
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TELEPHONE EXCHANGE PRIVILEGE. The Telephone Exchange Privilege permits you
to exchange shares from your account in one Fund for shares in the other Fund
(if the accounts in each Fund are identically registered) by telephoning the
AAHSA Trust at 1-800-492-9063 between 8:30 a.m. and 4:00 p.m. Eastern time on
any day the AAHSA Trust is open. In establishing a new account by exchange,
the shares being exchanged must have a value of at least $50,000. All
subsequent purchases by shares exchanged must have a value of $5,000 or more.
Shares exchanged will be valued at their respective net asset value next
determined after a telephone exchange request is received. Telephone
exchange requests made after 4:00 p.m. Eastern time will be processed as of
the close of business on the next business day. Please notify the AAHSA
Trust in writing of all shareholder service privileges you wish to continue
in any new account opened by a telephone exchange request. See "Exchange
Privilege" below for further information concerning exchanges.
TELEPHONE REDEMPTION PRIVILEGE. The Telephone Redemption Privilege permits
you to authorize the redemption of some ($5,000 minimum) or all shares in
your account with the AAHSA Trust by telephoning the AAHSA Trust at
1-800-492-9063 between 8:30 a.m. and 4:00 p.m. Eastern time on any day the
AAHSA Trust is open. In accordance with your telephone instructions, we will
redeem your Fund shares at their net asset value next determined after your
telephone redemption request is received. Telephone redemption requests made
after 4:00 p.m. Eastern time will be processed as of the close of business on
the next business day. Redemption proceeds will, in accordance with your
prior election, be mailed to you at your current address or electronically
transmitted to your designated bank account.
EXCHANGE PRIVILEGE. The exchange privilege is a convenient way to buy shares in
each Fund in order to respond to changes in your investment goals or in market
conditions. In addition to the Telephone Exchange Privilege described above,
shareholders in each Fund may exchange their shares for shares in the other Fund
by a written request, in proper form, sent to the AAHSA Trust, as described
under "Purchase By Mail" above. Such shares exchanged will be valued at their
respective net asset values next determined after the receipt of the written
exchange request. When making a written exchange request, please provide your
current Fund's name, your account name(s) and number(s), the name of the Fund
into which you wish to exchange your investment, the amount you wish to
exchange, and specify all current shareholder service privileges you wish to
continue in your new account (E.G., Telephone Privileges). For written exchange
requests, the signatures of all registered owners are required. Signature
guarantees are also required if the accounts will not be identically registered.
(See "How to Redeem Shares" concerning requirements relating to signature
guarantees.) No INITIAL sales charge, redemption fee or penalty is imposed on
exchanges. The minimum initial investment in each Fund, whether by exchange or
purchase, is $50,000. All subsequent amounts exchanged must be $5,000 or more
per Fund. Please note that, for tax purposes, depending on your tax status, an
exchange may involve a taxable transaction. The exchange privilege is available
to shareholders in all states where it is legally permitted. Currently all
states permit such exchanges. The exchange privilege may be modified or
terminated upon 60 days written notice to shareholders.
CHECKWRITING SERVICE. Checkwriting is available only for shareholders of the
Money Market Fund. You may write an unlimited number of checks. The minimum
amount of each check must be $5,000 or more. Shares will be redeemed to cover
the amount of the check upon receipt of the check by the AAHSA Trust's transfer
agent. Checks written on amounts subject to the ten (10) day check clearing
period, described below under "How to Redeem Shares," will be returned, marked
"uncollected." This checkwriting service is subject to the AAHSA Trust's rules
and regulations and is governed by the Laws of Delaware. All notices with
respect to checks drawn on the Money Market Fund must be sent to the AAHSA Trust
c/o State Street Bank and Trust Company, Attn: Transfer Agent Operations,
P.O. Box 1978, Boston, MA 02105-1978. Any stop payment instructions must be
given to the AAHSA Trust by calling 1-800-492-9063.
HOW EACH FUND'S NET ASSET VALUE IS DETERMINED
The net asset value per share of the Short-Term Bond Fund is normally
calculated as of the close of regular trading on the Exchange, currently 4:00
p.m. Eastern time, every day the Exchange is open for trading. The net asset
value per share of the Money Market Fund is normally calculated as of 12:00
noon, Eastern time, and as of the close of regular trading on the Exchange,
currently 4:00 p.m. Eastern time, every day the Exchange is open for trading.
The per share net asset value, calculated as described below, is effective
for all orders received in "good order" (as previously described) prior to the
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determination of the net asset value. Orders received after the close of
trading on the Exchange or on a day when the Exchange is not open for
business will be priced at the per share net asset value next computed.
With respect to the Money Market Fund, if your purchase order is received in
"good order" by 12:00 noon, Eastern time, on a day that the AAHSA Trust is
open for business, it will be executed at the net asset value per share next
determined after such receipt and your shares will begin earning dividends on
that day. With respect to the Money Market Fund, if your purchase order is
received in "good order" after 12:00 noon, Eastern time, and prior to 4:00
p.m. Eastern time, it will be executed at the net asst value per share next
determined after such receipt and your shares will begin earning dividends
the next day that the AAHSA Trust is open for business. With respect to the
Short-Term Bond Fund, your shares will be executed at the net asset value per
share next determined after your purchase order is received in "good order"
and your shares will begin to earn dividends on the first day that the AAHSA
Trust is open for business following the day of your purchase.
The net asset value of each Fund's shares is determined by adding the value of
all securities, cash and other assets of the Fund, subtracting liabilities
(including accrued expenses and dividends payable) and dividing the result by
the total number of outstanding shares in the Fund.
For purposes of calculating the Money Market Fund's net asset value per
share, portfolio securities are valued on the basis of amortized cost. This
method of valuation does not take into account unrealized gains or losses on
the Fund's portfolio securities. Amortized cost valuation involves initially
valuing a security at its cost, and thereafter, assuming a constant
amortization to maturity of any discount or premium, regardless of the impact
of fluctuating interest rates on the market value of the portfolio security.
While this method provides certainty in valuation, it may result in periods
during which the value of the security, as determined by amortized cost, may
be higher or lower than the price the Money Market Fund would receive if it
sold the security.
For purposes of calculating the Short-Term Bond Fund's net asset value per
share, portfolio securities are valued primarily based on market quotations,
or if market quotations are not available, by a method that the Trust's Board
of Trustees believes accurately reflects fair value. State Street will
perform the above described valuation functions and the Sub-Adviser and Board
of Trustees will monitor the performance of those functions.
HOW TO REDEEM SHARES
Shareholders have the right to redeem (subject to the restrictions outlined
below) all or any part of their shares in the Funds at a price equal to the
net asset value of such shares next computed following receipt and acceptance
of the redemption request by the AAHSA Trust. Unless you have selected the
Telephone Redemption Privilege and provided the required information, in
order to redeem shares in the Funds, a written request in "proper form" (as
explained below) must be sent directly to the AAHSA Trust, State Street Bank
and Trust Company, Attn: Transfer Agent Operations, P.O. Box 1978, Boston, MA
02105-1978. You cannot redeem shares by telephone unless you are eligible to
use the Telephone Redemption Privilege. In addition, the AAHSA Trust cannot
accept requests which specify a particular date for redemption or which
specify any other special conditions.
PROPER FORM FOR ALL REDEMPTION REQUESTS. Your redemption request must be
in proper form. To be in proper form, your redemption request must include:
(1) for written redemption requests, a "letter of instruction," which is a
letter specifying the name of the Fund, the number of shares to be sold, the
name(s) in which the account is registered, and your account number. The
letter of instruction must be signed by all registered shareholders for the
account using the exact names in which the account is registered; (2) other
supporting legal documents, as may be necessary, for redemption requests by
corporations, trusts, and partnerships; and (3) any signature guarantees that
are required by the AAHSA Trust where the value of the shares being redeemed
is $50,000 or greater, or where the redemption proceeds are to be sent to an
address other than the address of record or to a person other than the
registered shareholder(s) for the account. Signature guarantees are required
if the amount being redeemed is $50,000 or more but are not required for
redemptions made using the Telephone Redemption Privilege, unless redemption
proceeds are to be sent to a person other than the registered shareholders
for the account or to an address or account other than that of record.
Signature guarantees, when required, can be obtained from any one of the
following institutions: (i) a bank; (ii) a securities broker or dealer,
including a Government or municipal securities broker or dealer, that is a
member of a clearing corporation or has net capital of at least $100,000; (iii)
a credit union having authority to issue signature guarantees; (iv) a savings
and loan association, a building and loan association, a cooperative bank, a
federal savings bank or association; or (v) a national securities exchange, a
registered securities exchange or a clearing agency. Notary publics are not
acceptable guarantors.
YOUR REQUEST FOR REDEMPTION WILL NOT BE PROCESSED AND WILL BE HELD UNTIL IT IS
IN PROPER FORM, AS DESCRIBED ABOVE.
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RECEIVING YOUR REDEMPTION PAYMENT. Except under certain emergency conditions,
your redemption payment will be sent to you within seven (7) days after receipt
of your telephone or written redemption request, in proper form, by the AAHSA
Trust. No charge of any kind is imposed on any redemption request.
If your redemption request is with respect to shares purchased by a personal,
corporate, or government check within ten (10) days of the purchase date, the
redemption payment will be held until the purchase check has cleared (which may
take up to ten (10) days from the purchase date), although the shares redeemed
will be priced for redemption upon receipt of your redemption request. You can
avoid the inconvenience of this ten (10) day check clearing period by purchasing
shares with a certified, treasurer's or cashier's check, or with a federal funds
or bank wire.
MINIMUM ACCOUNT SIZE. Due to the relatively high cost of maintaining accounts,
the AAHSA Trust reserves the right to redeem shares in any account if, as the
result of the redemptions, the value of that account drops below $50,000. You
will be allowed at least sixty (60) days, after written notice by the AAHSA
Trust, to make an additional investment to bring your account value up to at
least $50,000 before the redemption is processed.
HOW THE AAHSA TRUST IS MANAGED
BOARD OF TRUSTEES. The management of the AAHSA Trust's business and affairs is
the responsibility of its Board of Trustees (the "Board"). Although the Board
is not involved in the day-to-day operations of each Fund, the Board has the
responsibility for establishing broad operating policies and supervising the
overall performance of each Fund.
INVESTMENT MANAGER. The AAHSA Trust is managed by CRSA Advisors, 6075 Poplar
Avenue, Suite 600, Memphis, Tennessee 38119. CRSA Advisors was founded in
1996 and is registered with the SEC as an investment adviser. CRSA Advisors
has no prior experience in managing investment companies. CRSA Advisors is a
subsidiary of CRSA Holdings, Inc. which provides management marketing,
development and financial consulting services to the retirement housing
community. CRSA Holdings, Inc. and Messrs. Michael E. Wade, Martin R. Satava
and Edward P. Crouch are control persons of CRSA Advisors. Mr. Marshall,
President of the Sub-Adviser, is a member of the Investment Policy Committee
of CRSA Advisors.
Subject to the authority of the Board, CRSA Advisors supervises and directs the
day-to-day operation of the AAHSA Trust in accordance with each Fund's
investment objective, investment program, policies, and restrictions. In
addition, CRSA Advisors monitors the implementation of any continuing investment
programs formulated with the assistance of the Sub-Adviser for each Fund. CRSA
Advisors also supervises the overall administration of the AAHSA Trust. CRSA
Advisors employs staff necessary to provide these services to the AAHSA Trust
and also furnishes the AAHSA Trust with office facilities, furnishings, and
office equipment necessary for the performance of its duties under the
separate Investment Management Agreements between CRSA Advisors and the AAHSA
Trust on behalf of each Fund.
SUB-ADVISER. Wainwright Asset Management is responsible for the
selection and management of each Fund's portfolio investments in accordance
with each Fund's investment objective, investment program, policies, and
restrictions pursuant to Sub-Advisory Agreements by and among CRSA Advisors,
Wainwright Asset Management and the AAHSA Trust on the behalf of each Fund
(the "Sub-Advisory Agreements"). The principal business address of the
Sub-Adviser is 966 Hungerford Drive, #26B, Rockville, Maryland 20850. The
Sub-Adviser is a partnership organized in 1995, and is a registered
investment adviser under the Investment Advisers Act of 1940. The
Sub-Adviser serves as investment adviser to a number of private accounts and
as of the date of this prospectus had in excess of $200 million in assets
under management. An affiliate of the Distributor is a general partner of the
Sub-Adviser. The Sub-Adviser has experience as an investment adviser,
however, it has no experience as an adviser to a registered investment
company. R.W. Marshall & Associates, Inc. ("RWMA"), Queenstown Investments,
Inc. ("QII"), and H.C. Wainwright Asset Management Holding Co. ("AMHC"), the
general partners of the Sub-Adviser are control persons of the Sub-Adviser.
AMHC is a wholly-owned subsidiary of H.C. Wainwright Holding Corp. Mr. Roger
W. Marshall, President of RWMA and the Sub-Adviser; Mr. Kevin Quinn,
President of QII, Vice President of the Sub-Adviser and a Director of H.C.
Wainwright & Co., Inc.; Mr. Stephen D. Barrett, Chief Executive Officer and
Chairman of the Board of H.C. Wainwright & Co., Inc.; and Mr. Saro J.
Picciotto, Chief Financial Officer and Chief Operating Officer of H.C.
Wainwright & Co., Inc. and Principal of the Sub-Adviser are also control
persons of the Sub-Adviser. The Sub-Adviser has an agreement (independent of
the Sub-Advisory Agreements) with CRSA Advisors pursuant to which Mr.
Marshall provides
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portfolio management services for, and serves on the Investment Policy
Committee of, CRSA Advisors. The agreement further provides that CRSA
Advisors will pay the Sub-Adviser a fee equal to 50% of the advisory fees
CRSA Advisors receives from its clients.
The Sub-Adviser employs staff necessary to provide investment advisory
services to the AAHSA Trust and also furnishes the AAHSA Trust with all
office facilities, furnishings, and office equipment necessary for the
performance of its duties under its Sub-Advisory Agreements with the AAHSA
Trust.
Roger W. Marshall, President of the Sub-Adviser, serves as portfolio manager
of the Money Market Fund and the Short-Term Bond Fund. Prior to joining the
Sub-Adviser, Mr. Marshall was President and Managing Director of Riggs
Investment Management Corp. an investment adviser from 1988 to 1994. Mr.
Marshall received his B.A. and M.A. in Economics from S.U.N.Y. at Binghamton.
ADMINISTRATOR. State Street serves as the administrator of the AAHSA Trust.
State Street's principal business address is 225 Franklin Street, Boston,
Massachusetts 02110.
State Street provides each Fund with administrative services pursuant to
an Administration Agreement. The services under this Agreement are subject
to the supervision of the Board and the officers of the Trust, and include
the day-to-day administration of matters necessary to each Fund's operations,
maintenance of its records and the books of the AAHSA Trust, preparation of
reports, compliance monitoring of its activities, and preparation of its
registration statement.
THE SUB-ADMINISTRATOR. The Association serves as the Sub-Administrator for
the AAHSA Trust pursuant to a Sub-Administrative Agreement by and between the
Association and the AAHSA Trust. The principal business address of the
Association is 901 E Street, Suite 500, N.W., Washington, D.C. 20004-2037.
The Association will keep and maintain such records as are required from time
to time by the Trust and will provide such other ministerial and clerical
duties as are necessary to assist the Trust other service providers,
including the Investment Manager, Sub-Adviser, Administrator and Transfer
Agent. In addition, the Association will act as liaison among the Trust and
members of the Association that may wish to obtain information or materials
regarding the Trust. As necessary, the Association will also act as a liaison
with the Trust's independent public accountants and will provide, upon
request, account analyses, fiscal year summaries and other audit-related
schedules.
INVESTMENT MANAGEMENT, SUB-ADVISORY, ADMINISTRATIVE AND SUB-ADMINISTRATIVE FEES.
The AAHSA Trust pays CRSA Advisors, on a monthly basis, an investment
management fee based on each Fund's average daily net assets at the following
annualized rates: with respect to the Money Market Fund, 0.22% of the
average daily net assets; and, with respect to the Short-Term Bond Fund,
0.28% of the average daily net assets.
On a monthly basis, the Sub-Adviser receives a sub-advisory fee, paid by CRSA
Advisors, based on each Fund's average daily net assets at the following
annualized rates: with respect to the Money Market Fund 0.11%; and with
respect to the Short-Term Bond Fund 0.14%. The AAHSA Trust has no
responsibility to pay any fees to the Sub-Adviser.
For providing administrative services to the Funds, State Street will receive
from each Fund a monthly fee at the annual rate of: .08% of the first
$100 million of each Fund's average daily net assets, plus .06% of the next
$100 million of each Fund's average daily net assets, plus .04% of each
Fund's average daily net assets in excess of $200 million (with a minimum
annual fee of $95,000 for each Fund a portion of which will be waived for the
first year of operations).
The Association will receive a fee from the Trust at the annual rate of .07%
of each Fund's average net assets for providing sub-administrative services
to the Funds.
In the interest of limiting the expenses of the Funds, the Investment
Manager, the Sub-Adviser and the Association each have entered into expense
limitation agreements with the AAHSA Trust pursuant to which the Investment
Manager, the Sub-Adviser and the Association each agreed to waive or limit
their fees to the extent necessary to limit the total operating expenses
(expressed as a percentage of average net assets on an annual basis) of the
Money Market Fund and the Short-Term Bond Fund to 0.45% and 0.65%,
respectively (the "expense limitation").
Reimbursement by a Fund of the fees waived by the Investment Manager, the
Sub-Adviser or the Association or other expenses of the Trust paid by the
Association pursuant to the expense limitation agreements may be made at a
later date when the Fund has reached a sufficient asset size to permit
reimbursement to be made without causing the annual expense ratio of a Fund to
exceed the amount of the relevant expense limitation. Consequently, no
reimbursement by a Fund would be made unless a Fund's actual annual operating
expense ratio were less than .45% in the case of the Money Market Fund and
.65% in
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the case of the Short-Term Bond Fund and payment of such reimbursement was
approved by the Board on a quarterly basis. Under the expense limitation
agreements, the total amount of reimbursement to which any party may be
entitled in any year will be equal to the sum of all fees waived and/or
assumed by such party during any of the previous two fiscal years, less any
reimbursement amount previously paid to them.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT. State Street serves as
the Trust's custodian and holds all portfolio securities and cash assets of
the Trust. State Street is authorized to deposit securities in securities
depositories or to use the services of subcustodians. State Street also
provides accounting services including daily valuation of the shares of each
Fund. State Street also serves as the Trust's transfer agent and dividend
disbursing agent and maintains the Trust's shareholder records.
DISTRIBUTOR. The Distributor serves as the distributor of the shares of each
Fund pursuant to a Distribution Agreement between the Distributor and the
AAHSA Trust. The Distributor's principal business address is One Boston
Place, Boston, Massachusetts 02108. The AAHSA Trust's shares are sold on a
no-load basis and, therefore, the Distributor receives no front-end or
contingent deferred sales commission or sales load for providing such
services to the AAHSA Trust under the Distribution Agreement. However,
pursuant to a Distribution Plan adopted pursuant to Rule 12b-1 ("Distribution
Plan") under the 1940 Act and a Rule 12b-1 Agreement, the Funds are
authorized to use a portion of their assets to finance certain activities
relating to the distribution of their shares to investors. The Distribution
Plan permits payments to be made by each Fund to the Distributor to
compensate the Distributor for its activities in connection with the
distribution of shares to investors. No payments may be made under the
Distribution Plan in contemplation of activities for future fiscal years.
Under the Distribution Plan and Rule 12b-1 Agreement, each Fund will
compensate the Distributor and other recipients for their activities in
promoting the sale of each Fund's shares and for other distribution costs and
expenses, including, among other things, those necessary to compensate and/or
reimburse certain persons for (i) preparing, printing and distributing
advertisements, sales materials, prospectuses and annual and semi-annual
reports for potential investors and (ii) providing distribution assistance
and administrative support services for the Funds. The Distribution Plan
provides for payment at an annualized rate not to exceed 0.03% of each Fund's
average daily net assets in those instances in which no other recipient
receives compensation pursuant to the Distribution Plan, and at an annualized
rate not to exceed 0.20% of each Fund's average daily net assets in those
instances in which other recipients receive compensation and/or reimbursement
pursuant to the Distribution Plan. The Distribution Plan will continue in
effect, if not sooner terminated in accordance with its terms, for successive
one-year periods, provided that its continuance is specifically approved by
the vote of the Board, including a majority of the Trustees who are not
interested persons of the AAHSA Trust and do not have a direct or indirect
financial interest in the Distribution Plan. For further information
regarding the Distribution Plan and Rule 12b-1 Agreement, see the Statement
of Additional Information.
PORTFOLIO TRANSACTIONS AND BROKERAGE PRACTICES
Although it is expected that transactions in the debt securities utilized by
the Funds will generally be conducted with dealers acting as principals,
purchase and sale orders for portfolio securities of the Funds may be
effected through brokers. Portfolio transactions for the Funds will not be
effected through the Distributor or any of its affiliates.
Allocations of portfolio transactions for the Funds, including their frequency,
to various brokers is determined by the Sub-Adviser in its best judgment and in
a manner deemed fair and reasonable to shareholders. The primary consideration
is prompt and efficient execution of orders in an effective manner at the most
favorable price. The Sub-Adviser may also consider sales of the Funds' shares
as a factor in the selection of broker-dealers, subject to the policy of
obtaining best price and execution. For further information regarding the
allocation of portfolio transactions and brokerage, see the Statement of
Additional Information.
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ORGANIZATION OF THE AAHSA TRUST
The AAHSA Trust, a Delaware business trust, organized in July 1994, currently
consists of two portfolios (i.e. the Funds), each of which represents a
separate series of beneficial interests in the AAHSA Trust having different
investment objectives, investment programs, policies and restrictions.
Neither Fund commenced operations until the date of this Prospectus. Each
share of each Fund represents an equal proportionate interest in that Fund
with each other share, and each share is entitled to such dividends and
distributions of income belonging to that Fund as are declared by the Board.
In the event of the liquidation of a Fund, each share of that Fund is
entitled to a pro rata share of the net assets of that Fund.
Shareholders having at least two-thirds of the outstanding shares of the
AAHSA Trust may remove a Trustee from office by a vote cast in person or by
proxy at a meeting of shareholders called for that purpose at the request of
holders of 10% or more of the outstanding shares of the AAHSA Trust. The
AAHSA Trust has an obligation to assist in such shareholder communications.
The AAHSA Trust does not routinely hold annual meetings of shareholders.
Each share of the AAHSA Trust is entitled to one vote on all matters
submitted to a vote of all shareholders of the AAHSA Trust. Fractional
shares, when issued, have the same rights, proportionately, as full shares.
Shares of a particular Fund will be voted separately from shares of the other
Fund on matters affecting only that Fund, including approval of the
Investment Management Agreement, Sub-Advisory Agreement, Distribution Plan
and Rule 12b-1 Agreement for that Fund and changes in the fundamental
objective, policies or restrictions of that Fund. All shares are fully paid
and nonassessable when issued and have no preemptive, conversion or
cumulative voting rights.
As of the date of this Prospectus, the Association provided the initial seed
capital for the AAHSA Trust and owned 100% of the outstanding voting shares of
the Money Market Fund and the Short-Term Bond Fund. Furthermore, as ownership
of more than 25% of the outstanding voting securities of a fund may result in a
person being deemed a controlling entity of that fund, the Association may be
deemed a control person of the Money Market Fund and the Short-Term Bond Fund.
Such control by the Association will dilute the effect of the votes of other
shareholders.
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AAHSA TRUST
901 E Street, N.W.
Suite 500
Washington, D.C. 20004-2307
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a Prospectus, but should be
read in conjunction with the Prospectus about the AAHSA Trust dated
October 23, 1996, which may be obtained by telephoning 1-888-603-8400 and
asking about the AAHSA Trust.
The date of this Statement of Additional Information is October 23, 1996.
TABLE OF CONTENTS
ITEM PAGE
- ---- ----
General Information and History 2
Investment Restrictions 2
Description of Certain Investments 5
Management of the AAHSA Trust 8
Committees of the Board of Trustees 9
Principal Holders of Securities 9
Investment Management and Other Services 9
Administrator 10
Sub-Administrator 11
Custodian 11
Transfer Agent Services 11
Distribution of Shares 11
Brokerage Allocation and Other Practices 13
Purchase and Redemption of Securities Being Offered 14
Determination of Net Asset Value 14
Taxes 15
Organization of the Trust 16
Performance Information About the Funds 16
Independent Auditors 19
Legal Matters 19
<PAGE>
GENERAL INFORMATION AND HISTORY
The AAHSA Trust is a Delaware business trust registered with the Securities
and Exchange Commission ("SEC") under the Investment Company Act of 1940 (the
"1940 Act") as a no-load, open-end diversified management investment company,
commonly known as a "mutual fund."
The AAHSA Trust currently consists of two portfolios, the Money Market Fund and
the Short-Term Bond Fund, each of which represents a separate series of
beneficial interest in the AAHSA Trust having different investment objectives,
investment programs, policies and restrictions. The Money Market Fund and the
Short-Term Bond Fund are sometimes referred to individually as the "Fund" and
collectively as the "Funds."
Each Fund is managed by CRSA Investment Advisors, Inc. ("CRSA Advisors" or
"Investment Manager"), which directs the day-to-day operations of each Fund.
Wainwright Asset Management (the "Sub-Adviser") serves as the sub-adviser
("Sub-Adviser") to each Fund and directs the investment of each Fund's
assets. State Street Bank and Trust Company ("State Street") is the
administrator, custodian, accounting pricing agent, transfer agent and
dividend disbursing agent for the AAHSA Trust. The American Association of
Homes and Services for the Aging (the "Association" or "Sub-Administrator")
serves as the sub-administrator for the AAHSA Trust. H.C. Wainwright & Co.,
Inc. (the "Distributor") is the distributor for the AAHSA Trust.
INVESTMENT RESTRICTIONS
In addition to the restrictions set forth in the Prospectus with respect to each
Fund, which are described as fundamental investment policies, investment
restrictions (1), (2), (3), (5), (7), (11), (14), (16) and (17) described below,
have been adopted as fundamental investment policies of each Fund. Such
fundamental investment policies may be changed only with the consent of a
"majority of the outstanding voting securities" of the particular Fund. As used
in the Prospectus and in this Statement of Additional Information, the term
"majority of the outstanding voting shares" means the lesser of (1) 67% of the
shares of a Fund present at a meeting where the holders if more than 50% of the
outstanding shares of a Fund are present in person or by proxy, or (2) more than
50% of the outstanding shares of a Fund. Shares of each Fund will be voted
separately on matters affecting only that Fund, including approval of changes in
the fundamental objectives, policies, or restrictions of that Fund.
The following investment restrictions apply to each Fund except as indicated to
the contrary. Except with respect to borrowing money, as described in (2)
below, if a percentage limitation is adhered to at the time of investment, a
later increase or decrease in that percentage amount resulting from any change
in value of the portfolio securities or each Fund's net assets will not result
in a violation of such investment restriction.
A Fund will not:
(1) MARGIN AND SHORT SALES: Purchase securities on margin or sell
securities short, except the Short-Term Bond Fund may make margin deposits in
connection with permissible options and futures transactions subject to (5) and
(8) below, may make short sales against the box and may obtain short-term
credits as may be necessary for clearance of transactions. As a matter of
operating policy, the Short-Term Bond Fund has no current intention, in the
foreseeable future (i.e., the next year), of utilizing options or futures
contracts or of making short sales against the box;
(2) SENIOR SECURITIES AND BORROWING: Issue any class of securities
senior to any other class of securities, although each Fund may borrow from a
bank for temporary, extraordinary or emergency purposes or through the use of
reverse repurchase agreements. Each Fund may borrow up to one-third of the
value of its total assets, including any amount borrowed, in order to meet
redemption requests. No securities will be purchased for any Fund when
borrowed money exceeds one-third of the value of the Fund's total assets. As
a matter of operating policy, neither Fund will purchase portfolio
securities if its borrowings exceed 5% of its total assets. The Short-Term
Bond Fund may enter into futures contracts subject to (5) below;
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(3) REAL ESTATE: Purchase or sell real estate, or invest in real estate
limited partnerships, except each Fund may, as appropriate and consistent with
its respective investment objective, investment program, policies and other
investment restrictions, buy securities of issuers that engage in real estate
operations and securities that are secured by interests in real estate
(including shares of real estate mortgage investment conduits, mortgage pass-
through securities, mortgage-backed securities and collateralized mortgage
obligations) and may hold and sell real estate acquired as a result of ownership
of such securities;
(4) CONTROL OF PORTFOLIO COMPANIES: Invest in portfolio companies for the
purpose of acquiring or exercising control of such companies;
(5) COMMODITIES: Purchase or sell commodities and invest in commodities
futures contracts, except that the Short-Term Bond Fund may enter into futures
contracts and options thereon that are listed on a national securities or
commodities exchange where, as a result thereof, no more than 5% of the total
assets for that Fund (taken at market value at the time of entering into the
futures contracts) would be committed to margin deposits on such futures
contracts and premiums paid for unexpired options on such futures contracts;
provided that, in the case of an option that is "in-the-money" at the time of
purchase, the "in-the-money" amount, as defined under Commodity Futures Trading
Commission regulations, may be excluded in computing such 5% limit. The Short-
Term Bond Fund will utilize only listed futures contracts and options thereon.
As a matter of operating policy, Short-Term Bond Fund has no current intention,
in the foreseeable future (i.e. the next year), of entering into futures
contracts or options thereon;
(6) INVESTMENT COMPANIES: Invest in the securities of other open-end
investment companies, except that each Fund may purchase securities of other
open-end investment companies provided that such investment is in connection
with a merger, consolidation, reorganization, or acquisition or by purchase in
the open market of such securities where no sponsor or dealer commission or
profit, other than a customary brokerage commission, is involved and only if
immediately thereafter each such Fund (i) owns no more than 3% of the total
outstanding voting securities of any one investment company and (ii) invests no
more than 5% of its total assets (taken at market value) in the securities of
any one investment company or 10% of its total assets (taken at market value) in
the securities of all other investment companies in the aggregate. Further, as
a matter of operating policy, the Money Market Fund will limit its investments
in other investment companies in accordance with the diversification
requirements for money market funds specified in (16) below;
(7) UNDERWRITING: Underwrite securities issued by other persons, except
to the extent that a Fund may be deemed to be an underwriter, within the meaning
of the Securities Act of 1933, in connection with the purchase of securities
directly from an issuer in accordance with each Fund's investment objectives,
investment program, policies, and restrictions;
(8) OPTIONS, STRADDLES AND SPREADS: Invest in puts, calls, straddles,
spreads or any combination thereof, except that the Short-Term Bond Fund may
invest in and commit its assets to writing and purchasing only put and call
options that are listed on a national securities exchange and issued by the
Options Clearing Corporation to the extent permitted by the Prospectus and this
Statement of Additional Information. In order to comply with the securities
laws of several states, the Short-Term Bond Fund (as a matter of operating
policy) will not write a covered call option if, as a result, the aggregate
market value of all portfolio securities covering call options or subject to put
options for that Fund exceeds 25% of the market value of that Fund's net assets.
In addition, the Short-Term Bond Fund will utilize only listed options issued by
the Options Clearing Corporation. The Short-Term Bond Fund has no current
intention, in the foreseeable future (I.E., the next year), of investing in
options, straddles and spreads;
(9) OIL AND GAS PROGRAMS: Invest in interests in oil, gas, or other
mineral exploration or development programs or oil, gas and mineral leases,
although investments may be made in the securities of issuers engaged in any
such businesses;
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(10) OWNERSHIP OF PORTFOLIO SECURITIES BY OFFICERS AND TRUSTEES: Purchase
or retain the securities of any issuer if those officers and Trustees of the
AAHSA Trust, CRSA Advisors or the Sub-Adviser who individually own more than
1/2 of 1% of the securities of such issuer collectively own more than 5% of
the securities of such issuer;
(11) LOANS: Make loans, except that each Fund in accordance with that Fund's
investment objectives, investment program, policies, and restrictions may: (i)
invest in a portion of an issue of publicly issued or privately placed bonds,
debentures, notes, and other debt securities for investment purposes; (ii)
purchase money market securities and enter into repurchase agreements, provided
such repurchase agreements are fully collateralized and marked to market daily;
and (iii) lend its portfolio securities in an amount not exceeding one-third the
value of that Fund's total assets.
(12) UNSEASONED ISSUERS: Invest more than 5% of its total assets in securities
of issuers, including their predecessors and unconditional guarantors, which, at
the time of purchase, have been in operation for less than three years, other
than obligations issued or guaranteed by the United States Government, its
agencies, and instrumentalities;
(13) RESTRICTED SECURITIES, ILLIQUID SECURITIES AND SECURITIES NOT
READILY MARKETABLE: Knowingly purchase or otherwise acquire any security or
invest in a repurchase agreement if, as a result, more than 15% of the net
assets of the Short-Term Bond Fund and 10% of the net assets of the Money
Market Fund would be invested in securities that are illiquid or not readily
marketable, including repurchase agreements maturing in more than seven days
and non-negotiable fixed time deposits with maturities over seven days. Each
Fund may invest without limitation in restricted securities provided such
securities are considered to be liquid.
(14) MORTGAGING: Mortgage, pledge, or hypothecate in any other manner, or
transfer as security for indebtedness any security owned by a Fund, except (i)
as may be necessary in connection with permissible borrowings (in which event
such mortgaging, pledging, and hypothecating may not exceed 15% of each Fund's
total assets in order to secure such borrowings) and (ii) with respect to the
Short-Term Bond Fund as may be necessary, in connection with the use of options
and futures contracts;
(15) WARRANTS: The Money Market Fund and the Short-Term Bond Fund will not
invest in warrants;
(16) DIVERSIFICATION: Make an investment unless 75% of the value of that
Fund's total assets is represented by cash, cash items, U.S. Government
securities, securities of other investment companies and other securities. For
purposes of this restriction, the purchase of "other securities" is limited so
that the Fund will invest no more than 5% of the value of its total assets in
any one issuer or purchase more than 10% of the outstanding voting securities of
any one issuer. As a matter of operating policy, each Fund will not consider
repurchase agreements to be subject to the above-stated 5% limitation if all the
collateral underlying the repurchase agreements are U.S. Government securities
and such repurchase agreements are fully collateralized. Further, as a matter
of operating policy, the Money Market Fund will invest no more than 5% of the
value of that Fund's total assets in securities of any one issuer, other than
U.S. Government securities, except that the Money Market Fund may invest up to
25% of its total assets in First Tier Securities (as defined in Rule 2a-7 under
the 1940 Act) of a single issuer for a period of up to three business days after
the purchase of such security. Further, as a matter of operating policy, the
Money Market Fund will not invest more than (i) the greater of 1% of its total
assets or $1,000,000 in Second Tier Securities (as defined in Rule 2a-7 under
the 1940 Act) of a single issuer and (ii) 5% of the Money Market Fund's total
assets, when acquired, in Second Tier Securities (as defined in Rule 2a-7 under
the 1940 Act); and
(17) CONCENTRATION: Invest 25% or more of the value of its total assets in any
one industry, except that each Fund may invest 25% or more of the value of its
total assets in cash or cash items, securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or instruments secured by these
money market instruments, such as repurchase agreements.
DESCRIPTION OF CERTAIN INVESTMENTS
The following is a description of certain types of investments which may be made
by the Funds.
UNITED STATES GOVERNMENT OBLIGATIONS: These consist of various types of
marketable securities issued by the United States Treasury, i.e., bills, notes
and bonds. Such securities are direct obligations of the United States
Government and differ mainly in the length of their maturity. Treasury bills,
the most frequently issued marketable Government security, have a maturity of up
to one year and are issued on a discount basis.
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UNITED STATES GOVERNMENT AGENCY SECURITIES: These consist of debt securities
issued by agencies and instrumentalities of the United States Government,
including the various types of instruments currently outstanding or which may
be offered in the future. Agencies include, among others, the Federal
Housing Administration, Government National Mortgage Association ("GNMA"),
Farmer's Home Administration, Export-Import Bank of the United States,
Maritime Administration, and General Services Administration.
Instrumentalities include, for example, each of the Federal Home Loan Banks,
the National Bank for Cooperatives, the Federal Home Loan Mortgage
Corporation ("FHLMC"), the Farm Credit Banks, the Federal National Mortgage
Association ("FNMA"), and the United States Postal Service. These securities
are either; (i) backed by the full faith and credit of the United States
Government (e.g., United States Treasury Bills); (ii) guaranteed by the United
States Treasury (e.g., GNMA mortgage-backed securities); (iii) supported by the
issuing agency's or instrumentality's right to borrow from the United States
Treasury (e.g., FNMA Discount Notes); or (iv) supported only by the issuing
agency's or instrumentality's own credit (e.g., Tennessee Valley Association).
REPURCHASE AGREEMENTS: The Funds may invest in repurchase agreements. A
repurchase agreement is an instrument under which the investor (such as the
Fund) acquires ownership of a security (known as the "underlying security") and
the seller (i.e., a bank or primary dealer) agrees, at the time of the sale, to
repurchase the underlying security at a mutually agreed upon time and price,
thereby determining the yield during the term of the agreement. This results in
a fixed rate of return insulated from market fluctuations during such period,
unless the seller defaults on its repurchase obligations. The underlying
securities will consist of high-quality securities and must be determined to
present minimal credit risks. Repurchase agreements are, in effect,
collateralized by such underlying securities, and, during the term of a
repurchase agreement, the seller will be required to mark to market such
securities every business day and to provide such additional collateral as is
necessary to maintain the value of all collateral at a level at least equal to
the repurchase price. Repurchase agreements usually are for short periods,
often under one week, and will not be entered into by a Fund for a duration of
more than seven days if, as a result, more than 15% of the net asset value of
the Short-Term Bond Fund or 10% of the net asset value of the Money Market Fund
would be invested in such agreements or other securities which are not readily
marketable.
The Funds will assure that the amount of collateral with respect to any
repurchase agreement is adequate. As with a true extension of credit, however,
these is risk of delay in recovery or the possibility of inadequacy of the
collateral should the seller of the repurchase agreement fail financially. In
addition, a Fund could incur costs in connection with the disposition of the
collateral if the seller were to default. The Funds will enter into repurchase
agreements only with sellers deemed to be creditworthy by the AAHSA Trust's
Board of Trustees and only when the economic benefit to the Funds is believed to
justify the attendant risks. The Funds have adopted standards for the sellers
with whom they will enter into repurchase agreements. The Board of Trustees
believe these standards are designed to reasonably assure that such sellers
present no serious risk of becoming involved in bankruptcy proceedings within
the time frame contemplated by the repurchase agreement. The Funds may enter
into repurchase agreements only with member banks of the Federal Reserve System
or primary dealers in U.S. Government securities.
ADJUSTABLE RATE SECURITIES: Adjustable rate securities (i.e., variable rate and
floating rate instruments) are securities that have interest rates that are
adjusted periodically, according to a set formula. The maturity of some
adjustable rate securities may be shortened under certain special conditions
described more fully below.
Variable rate instruments are obligations that provide for the adjustment of
their interest rates on predetermined dates or whenever a specific interest
rate changes. A variable rate instrument whose principal amount is scheduled
to be paid in 397 days or less is considered to have a maturity equal to the
period remaining until the next readjustment of the interest rate. Many
variable rate instruments are subject to demand features which entitle the
purchaser to resell such securities to the issuer or another designated
party, either (1) at any time upon notice of usually 397 days or less, or (2)
at specified intervals, not exceeding 397 days, and upon 30 days notice. A
variable rate instrument subject to a demand feature is considered to have a
maturity equal to the longer of the period remaining until the next
readjustment of the interest rate or the period remaining until the principal
amount can be recovered through demand, if final maturity exceeds 397 days or
the shorter of the period remaining until the next readjustment of the
interest rate or the period remaining until the principal amount can be
recovered through demand if final maturity is within 397 days.
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Floating rate instruments have interest rate reset provisions similar to those
for variable rate instruments and may be subject to demand features like those
for variable rate instruments. The interest rate is adjusted, periodically
(e.g., daily, monthly, semi-annually), to the prevailing interest rate in the
marketplace. The interest rate on floating rate securities is ordinarily
determined by reference to the 90-day U.S. Treasury bill rate, the rate of
return on commercial paper or bank certificates of deposit or an index of short-
term interest rates. The maturity of a floating rate instrument is considered
to be the period remaining until the principal amount can be recovered through
demand.
DEBT SECURITIES. As noted in the Prospectus, the Short-Term Bond Fund invests
primarily in a managed portfolio of U.S. Government and agency notes and
bonds (described above), including certain mortgage pass through securities
(described below).
MORTGAGE PASS-THROUGH SECURITIES. Interests in pools of mortgage pass-through
securities differ from other forms of debt securities (which normally provide
periodic payments of interest in fixed amounts and the payment of principal in a
lump sum at maturity or on specified call dates). Instead, mortgage pass-
through securities provide monthly payments consisting of both interest and
principal payments. In effect, these payments are a "pass-through" of the
monthly payments made by the individual borrowers on the underlying residential
mortgage loans, net of any fees paid to the issuer or guarantor of such
securities. Unscheduled payments of principal may be made if the underlying
mortgage loans are repaid, refinanced or the underlying properties are
foreclosed, thereby shortening the securities' weighted average life. Some
mortgage pass-through securities (such as securities guaranteed by GNMA) are
described as "modified pass-through securities." These securities entitle the
holder to receive all interest and principal payments owed on the mortgage pool,
net of certain fees, on the scheduled payment dates regardless of whether the
mortgagor actually makes the payment.
The principal governmental guarantor of mortgage pass-through securities is
GNMA. GNMA is authorized to guarantee, with the full faith and credit of the
U.S. Treasury, the timely payment of principal and interest on securities issued
by lending institutions approved by GNMA (such as savings and loan institutions,
commercial banks and mortgage bankers) and backed by pools of mortgage loans.
These mortgage loans are either insured by the Federal Housing Administration or
guaranteed by the Veterans Administration. A "pool" or group of such mortgage
loans is assembled and after being approved by GNMA, is offered to investors
through securities dealers.
Government-related guarantors of mortgage pass-through securities (i.e., not
backed by the full faith and credit of the U.S. Treasury) include FNMA and
FHLMC. FNMA is a Government-sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the Secretary of Housing
and Urban Development. FNMA purchases conventional (i.e., not insured or
guaranteed by any Government agency) residential mortgages from a list of
approved seller/services which include state and federally chartered savings and
loan associations, mutual savings banks, commercial banks and credit unions and
mortgage bankers. Mortgage pass-through securities issued by FNMA are
guaranteed as to timely payment of principal and interest by FNMA but are not
backed by the full faith and credit of the U.S. Treasury.
FHLMC was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. It is a U.S.
Government-sponsored corporation formerly owned by the twelve Federal Home Loan
Banks and now owned entirely by private stockholders. FHLMC issues
Participation Certificates ("PCs") which represent interests in conventional
mortgages from FHLMC's national portfolio. FHLMC guarantees the timely payment
of interest and ultimate collection of principal, but PCs are not backed by the
full faith and credit of the U.S. Treasury.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create pass-
through pools of conventional residential mortgage loans. Such issuers may, in
addition, be the originators and/or servicers of the underlying mortgage loans
as well as the guarantors of the mortgage pass-through securities. The Short-
Term Bond Fund does not purchase interests in pools created by such non-
governmental issuers.
RESETS. The interest rates paid on the Adjustable Rate Mortgage Securities
("ARMs") in which the Short-Term Bond Fund invests generally are readjusted or
reset at intervals of one year or less to an increment over some predetermined
interest rate index. There are two main categories of indices: those based on
U.S. Treasury securities and those derived from a calculated measure, such as a
cost of funds index or a moving average of mortgage rates. Commonly utilized
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indices include the one-year and five-year constant maturity Treasury Note
rates, the three-month Treasury Bill rate, the 180-day Treasury Bill rate, rates
on longer-term Treasury securities, the National Median Cost of Funds, the one-
month or three-month London Interbank Offered Rate (LIBOR), the prime rate of a
specific bank, or commercial paper rates. Some indices, such as the one-year
constant maturity Treasury Note rate, closely mirror changes in market interest
rate levels. Others tend to lag changes in market rate levels and tend to be
somewhat less volatile.
CAPS AND FLOORS. The underlying mortgages which collateralize the ARMs in which
the Short-Term Bond Fund invests will frequently have caps and floors which
limit the maximum amount by which the loan rate to the residential borrower may
change up or down: (1) per reset or adjustment interval and (2) over the life
of the loan. Some residential mortgage loans restrict periodic adjustments by
limiting changes in the borrower's monthly principal and interest payments
rather than limiting interest rate changes. These payment caps may result in
negative amortization.
The value of mortgage securities in which the Short-Term Bond Fund invests may
be affected if market interest rates rise or fall faster and farther than the
allowable caps or floors on the underlying residential mortgage loans.
Additionally, even though the interest rates on the underlying residential
mortgages are adjustable, amortization and prepayments may occur, thereby
causing the effective maturities of the mortgage securities in which the Short-
Term Bond Fund invests to be shorter than the maturities stated in the
underlying mortgages.
MATURITY OF DEBT SECURITIES
The maturity of debt securities may be considered long (10 or more years),
intermediate (3 to 10 years), or short-term (1 to 3 years). In general, the
principal values of longer-term securities fluctuate more widely in response to
changes in interest rates than those of shorter-term securities, providing
greater opportunity for capital gain or risk of capital loss. A decline in
interest rates usually produces an increase in the value of debt securities,
while an increase in interest rates generally reduces their value.
WHEN-ISSUED SECURITIES
Each Fund may, from time to time, purchase securities on a "when-issued" or
delayed delivery basis. The price for such securities, which may be expressed
in yield terms, is fixed at the time the commitment to purchase is made, but
delivery and payment for the when-issued securities take place at a later date.
Normally, the settlement date occurs within one month of the purchase, but may
take up to three months. During the period between purchases and settlement, no
payment is made by a Fund to the issuer and no interest accrues to a Fund. At
the time a Fund makes the commitment to purchase a security on a when-issued
basis, it will record the transaction and reflect the value of the security in
determining its net asset value. Each Fund will maintain, in a segregated
account with the custodian, cash and liquid high-quality debt securities equal
in value to commitments for when-issued securities.
MANAGEMENT OF THE AAHSA TRUST
TRUSTEES AND OFFICERS
Trustees and officers of the AAHSA Trust, together with information as to their
principal business occupations during the last five years, are shown below.
Each AAHSA Trustee who is considered an "interested person" of the AAHSA Trust
(as defined in Section 2(a)(19) of the 1940 Act) is indicated by an asterisk
next to his name. The address for all interested persons, unless otherwise
indicated, is 901 E Street, N.W., Suite 500, Washington, D.C. 20004-2037.
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Name, Position with the AAHSA Trust and
Business Address Principal Occupation within
and Age the Past Five Years
---------------- ---------------------------
Carol A. Berster (47) TRUSTEE. President and Chief Executive
1010 North Broom Street Officer, Ingleside Homes Inc., 1995 -
Wilmington, Delaware 19806 present; Vice President and Chief Financial
Officer, Peninsula United Methodist Homes,
Inc. 1992 - 1995; Director, American
Association of Homes and Services for the
Aging, 1994 - 1996.
*Sheldon L. Goldberg (49) TRUSTEE AND TREASURER. President, American
901 E Street, N.W. Association of Homes and Services for the
Suite 500 Aging, AAHSA Development Corporation,
Washington, D.C. 20004 International Association of Homes and
Services for the Aging, AAHSA Assurances,
Ltd., and AAHSA Services Corporation.
James I. Melhorn (57) TRUSTEE. President and Chief Executive
7200 Third Avenue Officer of Episcopal Ministries to the
Sykesville, Maryland 21784 Aging, Inc; Secretary, American Association
of Homes and Services for the Aging,
1990-1993; and Director, American Association
of Homes and Services for the Aging,
1992 - 1994.
*Roger Marshall (42) ASSISTANT VICE PRESIDENT. President,
966 Hungerford Drive, #26B Wainwright Asset Management, 1995 - present;
Rockville, MD 20850 President, R.W. Marshall & Associates, Inc.,
(holding company), 1995 - present; Senior
Vice President, A. Webster Dougherty & Co.,
Inc. (investment banking firm), 1994;
President and Managing Director, Riggs
Investment Management Corp., (investment
adviser) 1988 - 1994.
*Edward Crouch (36) SECRETARY. President and Director, CRSA
6075 Poplar Avenue, Suite Advisors Investment Advisors, Inc.; Senior
600 Vice President, CRSA Advisors, Inc.,
Memphis, TN 38119 (management, marketing and financial
consulting firm) 1995 - present; Executive
Vice President, A. Webster Dougherty & Co.
(investment banking firm)1994; Principal,
Alex. Brown & Sons, Inc. (investment
banking firm) 1990 - 1994.
Mark Richman (41) ASSISTANT TREASURER. Director of Marketing,
901 E Street, N.W. American Association of Home and Services for
Suite 500 the Aging, 1989 to present.
Washington, D.C. 20004
Jane A. Kanter (47) ASSISTANT SECRETARY. Senior Partner,
1025 Thomas Jefferson Katten, Muchin & Zavis (law firm),
St., N.W. 1994 - present.
Washington, D.C. 20007
Ms. Berster and Mr. Melhorn are each Directors of the Association, the
sub-administrator for the AAHSA Trust. Mr. Goldberg is the President of the
Association. Ms. Berster and Mr. Melhorn do not receive any compensation,
direct or indirect, for their services to the Association. In addition, the
Trustees do not receive any compensation as Trustees of the AAHSA Trust.
However, the AAHSA Trust will reimburse the Trustees for travel and other
expenses incurred in attending meetings of the Board of Trustees (the
"Board").
COMMITTEES OF THE BOARD OF TRUSTEES
The AAHSA Trust has an Audit Committee and an Executive Committee. The duties
of these two committees and their present membership are as follows:
AUDIT COMMITTEE: The members of the Audit Committee will consult with the AAHSA
Trust's independent public accountants if the accountants deem it desirable, and
will meet with the AAHSA Trust's independent public accountants at least once
annually to discuss the scope and results of the annual audit of the Funds and
such other matters as the
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Audit Committee members may deem appropriate or desirable. Carol A. Berster
and James I. Melhorn are members of the Audit Committee.
EXECUTIVE COMMITTEE: During intervals between Board Meetings, the Executive
Committee possesses and may exercise all of the powers of the Board in the
management of the AAHSA Trust except as to matters where action of the full
Board is specifically required. Included within the scope of such powers are
matters relating to valuation of securities held in each Fund's portfolio and
the pricing of each Fund's shares for purchase and redemption. Sheldon L.
Goldberg and James I. Melhorn are members of the Executive Committee.
PRINCIPAL HOLDERS OF SECURITIES
Trustees and officers of the AAHSA Trust, as a group, owned less than 1% of each
Funds outstanding voting securities as of the date of the Statement of
Additional Information.
INVESTMENT MANAGEMENT AND OTHER SERVICES
CRSA ADVISORS
CRSA Advisors, 6075 Poplar Avenue, Suite 600, Memphis, Tennessee
38119, serves as Investment Manager of the Money Market Fund and the
Short-Term Bond Fund pursuant to separate Investment Management Agreements
that have been approved by the Board of the AAHSA Trust, including a majority
of independent Trustees. The initial term of each Investment Management
Agreement is one year. However, the Investment Management Agreements for each
Fund may continue in effect from year to year if approved at least annually
by a vote of a majority of the Board (including a majority of the Trustees
who are not parties to the Investment Management Agreement or interested
persons of any such parties) cast in person at a meeting called for the
purpose of voting on such renewal, or by the vote of a majority of the
outstanding shares of the particular Fund.
The directors and the principal executive officers of CRSA Advisors are: Edward
P. Crouch, President and Director; Martin R. Satava, Director; and Michael E.
Wade, Director. CRSA Advisors is a subsidiary of CRSA Holdings, Inc.
In addition to the duties set forth in the Prospectus under "How the AAHSA Trust
is Managed - Investment Manager", CRSA Advisors, in furtherance of such duties
and responsibilities, is authorized in its discretion to engage in the following
activities or to cause or permit the Sub-Adviser to engage in the following
activities: (i) develop a continuing program for the management of the assets
of each Fund; (ii) buy, sell, exchange, convert, lend, or otherwise trade in
portfolio securities and other assets; (iii) place orders and negotiate the
commissions (if any) for the execution of transactions in securities with or
through broker-dealers, underwriters, or issuers; (iv) prepare and supervise
the preparation of shareholder reports and other shareholder communications; and
(v) obtain and evaluate business and financial information in connection with
the exercise of its duties.
In its administration of the AAHSA Trust, CRSA Advisors is responsible for
(i) assisting the Trust in selecting, coordinating and overseeing the
activities of, supervising, and acting as liaison with, the other agents to
the Trust, including any sub-advisor, the transfer agent, the custodian, any
distributors, and any administrators; (ii) assisting with the registration of
the shares of the Trust under applicable federal and state securities laws;
(iii) responding to inquiries from shareholders and overseeing responses to
shareholders by other agents to the Trust; and (iv) coordinating, assisting
in the preparation for, and attending all meetings of the Board and
shareholders of the Trust.
CRSA Advisors will also furnish to or place at the disposal of the Funds such
information and reports as requested by or as CRSA Advisors believes would be
helpful to the Funds. CRSA Advisors has agreed to permit individuals who are
among its officers or employees to serve as Trustees, officers, and members of
any committee or advisory board of the AAHSA Trust without cost to the AAHSA
Trust. CRSA Advisors has agreed to pay all salaries, expenses, and fees of any
Trustees or officers of the AAHSA Trust who are affiliated with CRSA Advisors.
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WAINWRIGHT ASSET MANAGEMENT
The Sub-Adviser serves as sub-adviser of each Fund pursuant to separate
Sub-Advisory Agreements by and among the AAHSA Trust, CRSA Advisors and
the Sub-Adviser. The principal business address of the Sub-Adviser is
966 Hungerford Drive #26B, Rockville, MD 20850.
In addition to the duties set forth in the Prospectus, the Sub-Adviser, in
furtherance of such duties and responsibilities, is authorized and has agreed
to provide or perform the following functions: (1) formulate and implement a
continuing investment program for use in managing the assets and resources of
each Fund in a manner consistent with each Fund's investment objectives,
investment program, policies, and restrictions, which program may be amended
and updated from time to time to reflect changes in financial and economic
conditions; (2) make all determinations with respect to the investment of
each Fund's assets in accordance with (a) applicable law, (b) each Fund's
investment objectives, investment program, policies, and restrictions as
provided in the AAHSA Trust's Prospectus and Statement of Additional
Information, as amended from time to time, (c) provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), relating to regulated
investment companies, and (d) such other limitations as the Board may impose
by written notice; (3) make all determinations as to the purchase or sale of
portfolio securities, including advising the Board as to certain matters
involving each Fund's portfolio securities that are not in the nature of
investment decisions; (4) buy, sell, exchange, convert for each Fund's use,
and otherwise trade in portfolio securities and other assets; (5) furnish to
the Board periodic reports concerning the Sub-Adviser's economic
outlook and investment strategy, as well as information concerning each
Fund's portfolio activity and investment performance; (6) place orders for
the execution of portfolio transactions with such broker-dealers,
underwriters or issuers, and negotiate the commissions (if any) for the
execution of transactions in securities with or through such broker-dealers,
underwriters or issuers selected by the Sub-Adviser; (7) obtain and evaluate
business and financial information in connection with the exercise of its
duties; (8) determine the credit quality of the Money Market Fund's portfolio
securities; (9) determine the creditworthiness of the issuers, obligors, or
guarantors of portfolio securities; and (10) evaluate the creditworthiness of
any entities with which the Funds propose to engage in repurchase
transactions.
ADMINISTRATOR
State Street is the administrator of the AAHSA Trust. State Street is a
Massachusetts trust company with a principal office at 225 Franklin Street,
Boston, Massachusetts 02111. State Street serves as administrator of other
mutual funds.
Pursuant to the Administration Agreement with the AAHSA Trust, State Street
provides all administrative services reasonably necessary for the AAHSA Trust,
other than those provided by CRSA Advisors or the Association, subject to the
supervision of the Board.
Under the Administration Agreement with the AAHSA Trust, State Street
provides administrative services including, without limitation: (i) services
of personnel competent to perform such administrative and clerical functions
as are necessary to provide effective administration of the Trust; (ii)
maintaining the AAHSA Trust's books and records (other than financial and
accounting books and records and records maintained by the AAHSA Trust's
custodian or transfer agent); (iii) overseeing the AAHSA Trust's insurance
relationships; (iv) preparing or assisting in the preparation of all required
tax returns, proxy statements and reports to the AAHSA Trust's shareholders
and Trustees and reports to and filings with the SEC and any other
governmental agency; (v) preparing or assisting in the preparation of such
applications and reports as may be necessary to register or maintain the
registration of the AAHSA Trust's shares under applicable state securities
laws; (vi) preparing or assisting in the preparation of, and coordinating the
distribution of all materials for meetings of the Board;(vii) monitoring
daily and periodic compliance with respect to all requirements and
restrictions of the 1940 Act, the Internal Revenue Code and the Prospectus;
(viii) monitoring the Trust's accounting services agent's calculation of all
income and expense accruals, sales and redemptions of capital shares
outstanding; (ix) evaluating expenses, projecting futures expenses, and
processing payments of expenses; and (x) monitoring and evaluating
performance of bookkeeping and related services by the bookkeeping agent for
the Trust.
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<PAGE>
The Administration Agreement has an initial term which extends to November 1997.
Thereafter the Agreement is terminable at any time, without the payment of any
penalty, by the Fund or State Street on sixty days' written notice.
SUB-ADMINISTRATOR
The Association serves as the sub-administrator for the AAHSA Trust pursuant
to a Sub-Administrative Services Agreement between the Association and the
AAHSA Trust. The Association is the national association of not-for-profit
organizations dedicated to providing high-quality health care, housing and
community services primarily to the elderly. The principal business address
of the Association is 901 E Street, N.W., Suite 500, Washington, D.C.
20004-2037. The Association will keep and maintain such records as are
required from time to time by the Trust and will provide such other
ministerial and clerical duties as are necessary to assist the Trust other
service providers, including the Investment Manager, Sub-Adviser,
Administrator and Transfer Agent. In addition, the Association will act as
liaison among the Trust and members of the Association that may wish to obtain
information or materials regarding the Trust. As necessary, the Association
will also act as a liaison with the Trust's independent public accountants
and will provide, upon request, account analyses, fiscal year summaries and
other audit-related schedules.
CUSTODIAN
State Street serves as the custodian of the Trust's assets pursuant to a
Custodian Contract by and between State Street and the AAHSA Trust. State
Street's responsibilities include safeguarding and controlling the Trust's cash
and securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Trust's investments. Pursuant to the Custodian
Contract, State Street also provides certain accounting and pricing services to
the AAHSA Trust, including calculating the daily net asset value per share for
each Fund; maintaining original entry documents and books of record and general
ledgers; posting cash receipts and disbursements; reconciling bank account
balances monthly; recording purchase and sales based upon communication from the
Sub-Adviser; and preparing monthly and annual summaries to assist in the
preparation of financial statements of, and regulatory reports for, the AAHSA
Trust.
TRANSFER AGENT SERVICES
State Street provides transfer agent and dividend disbursing services to each
Fund pursuant to the terms of a Transfer Agency and Service Agreement, by and
between State Street and the AAHSA Trust.
DISTRIBUTION OF SHARES
The Distributor serves as the distributor of the shares of each Fund pursuant
to a Distribution Agreement between the Distributor and the AAHSA Trust. The
Distributor's principal business address is One Boston Place, Boston,
Massachusetts 02108. The AAHSA Trust's shares are sold on a no-load basis
and, therefore, the Distributor receives no front-end or contingent deferred
sales commission or sales load for providing such services to the AAHSA Trust
under the Distribution Agreement. However, pursuant to a written Distribtuion
Plan adopted under Rule 12b-1 under the 1940 Act ("Distribution Plan") and
Rule 12b-1 Agreement, the Funds are authorized to use a portion of their
assets to finance certain activities relating to the distribution of their
shares to investors.
The Distribution Plan authorizes payments to the Distributor pursuant to a
Rule 12b-1 Agreement with the AAHSA Trust, as compensation for services,
costs and expenses in connection with the distribution of the AAHSA Trust's
shares. In addition, the Distribution Plan authorizes the Distributor to make
payments to certain securities dealers or brokers, administrators and others
("Recipients") that have rendered assistance either direct, administrative or
both, in the distribution of shares of the AAHSA Trust or has provided
support services in connection therewith. Further, the Distribution Plan
authorized the Distributor to compensate and/or reimburse certain Recipients
for preparing, printing and distributing advertisements, sales materials,
prospectuses and annual and semi-annual reports to potential investors or for
assuming other distribution expenses of the Trust.
The AAHSA Trust will pay the Distributor quarterly at the rates described in
the Prospectus. Each Fund will bear its own costs of distribution under the
Distribution Plan.
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No such payment will be made by the Distributor to any Recipient in any
quarter for distribution, assistance or administrative support services if
the aggregate net asset value of each Fund's shares held by the Recipient or
its customers at the end of such quarter, taken without regard to the minimum
holding period, does not exceed a minimum amount specified by the Board. The
minimum holding period and the minimum level of holdings, if any, will be
determined from time to time by a majority of the Trustees who are not
"interested persons" of the AAHSA Trust and do not have a direct or indirect
financial interest in the Distribution Plan ("Rule 12b-1 Trustees"). The
services to be provided by Recipients may include, but are not limited to,
the following: answering routine inquiries concerning a Fund; assisting in
the establishment and maintenance of accounts or sub-accounts in a Fund and
in processing purchase and redemption transactions; making a Fund's
investment plans and shareholder services available; and providing such other
information and services in connection with the distribution of shares of a
Fund as the Distributor or the AAHSA Trust, on behalf of a Fund, may
reasonably request.
In the event that either the Distributor or the Board has reason to believe
that a Recipient may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of shares of the
AAHSA Trust, then the Distributor, at the request of the Board, will require
the Recipient provide a written report or other information to verify that
said Recipient is providing appropriate distribution services to the Funds.
However, Recipients preparing, printing and distributing advertisements,
sales materials, prospectuses and annual and semi-annual reports to potential
investors or assuming other distribution-related expenses of the AAHSA Trust
need not have any minimum level of customer holdings or minimum holding
period for shares of the Funds in order to receive compensation and/or
reimbursement hereunder.
The Distributor is required to provide a written report, at least
quarterly to the Board, which the Trustees will review, specifying in
reasonable detail the amounts expended pursuant to the Distribution Plan and
the purposes for which such expenditures were made. Further, the Distributor
will inform the Board of any Rule 12b-1 fees to be paid by the Distributor to
Recipients and others.
The initial term of the Distribution Plan is one year and it will continue in
effect from year to year thereafter, provided such continuance is
specifically approved at least annually by a majority of the Board and a
majority of the Rule 12b-1 Trustees by votes cast in person at a meeting
called for the purpose of voting on the Distribution Plan. The Distribution
Plan may be terminated at any time by vote of a majority of the Rule 12b-1
Trustees or by vote of a majority of the outstanding voting securities of the
AAHSA Trust. The Distribution Plan will terminate automatically in the event
of its assignment (as defined in the 1940 Act).
The Distribution Plan may not be amended to increase materially the amount of
the Distributor's compensation, unless such amendment is approved by the vote
of a majority of the outstanding voting securities of the AAHSA Trust (as
defined in the 1940 Act). All material amendments must be approved by a
majority of the Board and a majority of the Rule 12b-1 Trustees by votes cast
in person at a meeting called for the purpose of voting on the Distribution
Plan. During the term of the Distribution Agreement, the selection and
nomination of non-interested Trustees of the AAHSA Trust will be committed to
the discretion of current non-interested Trustees. The Distributor will
preserve copies of the Distribution Plan, any related agreements, and all
reports, for a period of not less than six years from the date of such
document and for at least the first two years in an easily accessible place.
Any agreement related to the Distribution Plan will be in writing and provide
that: (a) it may be terminated at any time upon sixty (60) days' written
notice, without the payment of any penalty, by vote of a majority of the Rule
12b-1 Trustees, or by vote of a majority of the outstanding voting securities of
the AAHSA Trust; (b) it will automatically terminate in the event of its
assignment (as defined in the 1940 Act); and (c) it will continue in effect for
a period of
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more than one year from the date of its execution or adoption only so long
as such continuance is specifically approved at least annually by a majority
of the Board and a majority of the Rule 12b-1 Trustees by votes cast in
person at a meeting called for the purpose of voting on such agreement.
BROKERAGE ALLOCATION AND OTHER PRACTICES
Subject to the general supervision of the Board, the Sub-Adviser is
responsible for making decisions with respect to the purchase and sale of
portfolio securities on behalf of each Fund. The Sub-Adviser is also
responsible for the implementation of those decisions, including the selection
of broker-dealers to effect portfolio transactions, the negotiation of
commissions, and the allocation of principal business and portfolio brokerage.
The purchase of money market instruments and other debt securities traded in the
over-the-counter market usually will be on a principal basis directly from
issuers or dealers serving as primary market makers. The price of such money
market instruments and debt securities is usually negotiated, on a net basis,
and no brokerage commissions are paid. Although no stated commissions are paid
for securities traded in the over-the-counter market, transactions in such
securities with dealers usually include the dealer's "mark-up" or "mark-down."
Money market instruments and other debt securities may also be purchased in
underwritten offerings, which include a fixed amount of compensation to the
underwriter, generally referred to as the underwriting discount or concession.
In selecting brokers and dealers to execute transactions for each Fund, the
primary consideration is to seek to obtain the best execution of the
transactions, at the most favorable overall price, and in the most effective
manner possible, considering all the circumstances. Such circumstances include:
the price of the security; the rate of the commission or broker-dealer's
"spread;" the size and difficulty of the order; the reliability, integrity,
financial condition, general execution and operational capabilities of competing
broker-dealers; and the value of research and other services provided by the
broker-dealer. The Sub-Adviser may also rank broker-dealers based on the value
of their research services and may use this ranking as one factor in its
selection of broker-dealers. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. and subject to the policy of
seeking the best price and execution as stated above, sales of shares of the
Funds by a broker-dealer may be considered by the Sub-Adviser in the selection
of broker-dealers to execute portfolio transactions for the Funds.
Under no circumstances will the Funds deal with the Distributor or its
affiliates in any transaction in which the Distributor or its affiliates act as
a principal. Brokerage transactions will not be placed with the Sub-Adviser or
its affiliates, nor will the Funds deal with the Sub-Adviser or its affiliates
in any transaction in which the Sub-Adviser or its affiliates act as a
principal.
In placing orders for each Fund, the Sub-Adviser, subject to seeking best
execution, is authorized pursuant to the Sub-Advisory Agreements to cause each
Fund to pay broker-dealers that furnish brokerage and research services (as such
services are defined under Section 28(e) of the Securities Exchange Act of 1934,
as amended (the "1934 Act")) a higher commission than that which might be
charged by another broker-dealer that does not furnish such brokerage and
research services or who furnishes services of lesser value. However, such
higher commissions must be deemed by the Sub-Adviser as reasonable in relation
to the brokerage and research services provided by the broker-dealer, viewed in
terms of either that particular transaction or the overall decision-making
responsibilities of the Sub-Adviser with respect to the AAHSA Trust or other
accounts, as to which it exercises investment discretion (as such term is
defined under Section 3(a)(35) of the 1934 Act).
The Sub-Adviser currently provides investment advice to private advisory
accounts that have investment objectives and programs similar to the AAHSA
Trust. Accordingly, occasions may arise when the Sub-Adviser may engage in
simultaneous purchase and sale transactions of securities that are consistent
with the investment objectives and programs of the AAHSA Trust, and other
accounts.
On those occasions when such simultaneous investment decisions are made, the
Sub-Adviser will allocate purchase and sale transactions in an equitable manner
according to written procedures approved by the Board.
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Specifically, such written procedures provide that, in allocating purchase
and sale transactions made on a combined basis, the Sub-Adviser will seek to
achieve the same average unit price of securities for each entity and will
seek to allocate, as nearly as practicable, such transactions on a pro-rata
basis substantially in proportion to the amounts ordered to be purchased or
sold by each entity. Such procedures may, in certain instances, be either
advantageous or disadvantageous to the AAHSA Trust.
PURCHASE AND REDEMPTION OF SECURITIES BEING OFFERED
The shares of each Fund are offered to the public for purchase directly
through the Distributor, which serves as the principal underwriter and
distributor for the AAHSA Trust.
The offering and redemption price of the shares of each Fund is based upon that
Fund's net asset value per share next determined after a purchase order or
redemption request has been received in good order by the AAHSA Trust. See
"Determination of Net Asset Value" below. Each Fund intends to pay all
redemptions of its shares in cash. However, each Fund may make full or partial
payment of any redemption request by the payment to shareholders of portfolio
securities of the applicable Fund (i.e., by redemption-in-kind), at the value of
such securities used in determining the redemption price. The Funds,
nevertheless, pursuant to Rule 18f-1 under the 1940 Act, have filed a
notification of election under which each Fund is committed to pay in cash to
any shareholder of record, all such shareholder's requests for redemption made
during any 90-day period, up to the lesser of $250,000 or 1% of the applicable
Fund's net asset value at the beginning of such period. The securities to be
paid in-kind to any shareholders will be readily marketable securities selected
in such manner as the Board deems fair and equitable. If shareholders were
to receive redemptions-in-kind, they would incur brokerage costs should they
wish to liquidate the portfolio securities received in such payment of their
redemption request. The AAHSA Trust does not anticipate making
redemptions-in-kind.
The right to redeem shares or to receive payment with respect to any redemption
of shares of the Funds may only be suspended (1) for any period during which
trading on the New York Stock Exchange ("Exchange") is restricted or such
Exchange is closed, other than customary weekend and holiday closings, (2) for
any period during which an emergency exists as a result of which disposal of
securities or determination of the net asset value of the Fund is not reasonably
practicable, or (3) for such other periods as the SEC may by order permit for
protection of shareholders of the Funds.
DETERMINATION OF NET ASSET VALUE
The net asset value of shares of each Fund is normally calculated as of the
close of trading on the Exchange on every day the Exchange is open for trading,
except (1) on days where the degree of trading in the Fund's portfolio
securities would not materially affect the net asset value of the Fund's shares
and (2) on days during which no shares of the Fund were tendered for redemption
and no purchase orders were received. The Exchange is open Monday through
Friday except on the following national holidays: New Year's Day, Washington's
Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day.
The assets of each Fund are valued as follows:
With respect to the Money Market Fund, all money market instruments held by the
Fund are valued on an amortized cost basis. In addition, with respect to the
Short-Term Bond Fund, all money market instruments with a remaining maturity of
60 days or less are also valued on an amortized cost basis. Amortized cost
valuation involves initially valuing a security at its cost, and thereafter,
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Fund would receive if it sold the security. During
periods of declining interest rates, the quoted yield on shares of the Money
Market Fund may be higher than a like computation made by a fund 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 the amortized cost method of valuation by the Money Market Fund results in a
lower aggregate
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portfolio value on a particular day, (1) a prospective investor in the Money
Market Fund would be able to obtain a somewhat higher yield if he purchased
shares of the Money Market Fund on that day than would result from investment in
a fund utilizing solely market values, and (2) existing investors in the Money
Market Fund would receive less investment income. The converse would apply in a
period of rising interest rates.
Short-term debt instruments with a remaining maturity of more than 60 days,
intermediate and long-term bonds, convertible bonds, and other debt securities
are generally valued at prices obtained from an independent pricing service.
Where such prices are not available, valuations will be obtained from brokers
who are market makers for such securities. However, in circumstances where the
Sub-Adviser deems it appropriate to do so, the mean of the bid and asked prices
for over-the-counter securities or the last available sale price for exchange-
traded debt securities may be used. Where no last sale price for exchange
traded debt securities is available, the mean of the bid and asked prices may be
used.
Other securities and assets for which market quotations are not readily
available or for which valuation cannot be provided, as described above, are
valued in good faith by the Board using its best judgment.
TAXES
Each Fund intends to continue to qualify as a "regulated investment company"
("RIC") under Subchapter M of the Code. As such, each Fund must meet the
requirements of Subchapter M of the Code, including the requirements regarding
the character of investments in each Fund, investment diversification, and
distribution.
In general, to qualify as a RIC, at least 90% of the gross income of each Fund
for the taxable year must be derived from dividends, interest, and gains from
the sale or other disposition of securities, and less than 30% of its gross
income for the taxable year can be attributable to gains (without deductions for
losses) from the sale or other disposition of securities held for less than
three months.
A RIC must distribute to its shareholders 90% of its ordinary income and net
short-term capital gains. Moreover, undistributed net income may be subject to
tax at the RIC level.
In addition, each Fund must declare and distribute dividends equal to at least
98% of its ordinary income (as of the twelve months ended December 31) and
distributions of at least 98% of its capital gains net income (as of the twelve
months ended October 31), in order to avoid a federal excise tax. Each Fund
intends to make the required distributions, but they cannot guarantee that they
will do so. Dividends attributable to a Fund's ordinary income are taxable as
such to shareholders in the year in which they are received.
A corporate shareholder may be entitled to take a deduction for income dividends
received by it that are attributable to dividends received from a domestic
corporation, provided that both the corporate shareholder retains its shares in
the applicable Fund for more than 45 days and the Fund retains its shares in the
issuer from whom it received the income dividends for more than 45 days. A
distribution of capital gains net income reflects a Fund's excess of net long-
term gains over its net short-term losses. Each Fund must designate income
dividends and distributions of capital gains net income and must notify
shareholders of these designations within sixty days after the close of the
AAHSA Trust's taxable year. A corporate shareholder of a Fund cannot use a
dividends-received deduction for distributions of capital gains net income.
If, in any taxable year, a Fund should not qualify as a RIC under the Code: (1)
that Fund would be taxed at normal corporate rates on the entire amount of its
taxable income without deduction for dividends or other distributions to its
shareholders, and (2) that Fund's distributions to the extent made out of that
Fund's current or accumulated earnings and profits would be taxable to its
shareholders (other than shareholders in tax deferred accounts) as ordinary
dividends (regardless of whether they would otherwise have been considered
capital gains dividends), and may qualify for the deduction for dividends
received by corporations.
B-15-
<PAGE>
ORGANIZATION OF THE TRUST
As a Delaware business trust entity, the AAHSA Trust need not hold regular
annual shareholder meetings and, in the normal course, does not expect to hold
such meetings. The AAHSA Trust, however, must hold shareholder meetings for
such purposes as, for example: (1) electing the initial Board of Trustees; (2)
approving certain agreements as required by the 1940 Act; (3) changing
fundamental investment objectives, policies, and restrictions of the Funds; and
(4) filling vacancies on the Board of Trustees in the event that less than a
majority of the Trustees were elected by shareholders. The AAHSA Trust expects
that there will be no meetings of shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders. At such time, the Trustees
then in office will call a shareholders meeting for the election of Trustees.
In addition, holders of record of not less than two-thirds of the outstanding
shares of the AAHSA Trust may remove a Trustee from office by a vote cast in
person or by proxy at a shareholder meeting called for that purpose at the
request of holders of 10% or more of the outstanding shares of the AAHSA Trust.
The Funds have the obligation to assist in such shareholder communications.
Except as set forth above, Trustees will continue in office and may appoint
successor Trustees.
PERFORMANCE INFORMATION ABOUT THE FUNDS
MONEY MARKET FUND YIELD CALCULATION
The Money Market Fund calculates a seven-day "current yield" based on a
hypothetical account containing one share at the beginning of the seven-day
period. Current yield is calculated for the seven-day period by determining the
net change in the hypothetical account's value for the period (excluding
realized gains and losses from the sale of securities and unrealized
appreciation and depreciation, and including all dividends accrued and dividends
reinvested in additional shares), and dividing the net change in the account
value by the value of the account at the beginning of the period in order to
obtain the base period return. This base period return is then multiplied by
365/7 to annualize the yield figure, which is carried to the nearest one-
hundredth of one percent. Realized capital gains or losses and unrealized
appreciation or depreciation of the assets of the Money Market Fund are included
in the hypothetical account for only the beginning of the period. Account
values also reflect all accrued expenses.
The Money Market Fund's compound effective yield for the period is computed by
compounding the unannualized base period return by adding one to the base period
return, raising the sum to a power equal to 365/7, and subtracting one from the
result. Current and compound yields will fluctuate daily. Accordingly, yields
for any given seven-day period do not necessarily represent future results.
TOTAL RETURN CALCULATIONS
Each Fund may provide average annual total return information calculated
according to a formula prescribed by the SEC. According to that formula,
average annual total return figures represent the average annual compounded rate
of return for the stated period. Average annual total return quotations reflect
the percentage change between the beginning value of a static account in the
Fund and the ending value of that account measured by then current net asset
value of that Fund assuming that all dividends and capital gains distributions
during the stated period were reinvested in shares
B-16-
<PAGE>
of the Fund when paid. Total return is calculated by finding the average annual
compounded rates of return of a hypothetical investment that would equate the
initial amount invested to the ending redeemable value of such investment,
according to the following formula:
T = (ERV/P)1/n - 1
where T equals average annual total return; where ERV, the ending redeemable
value, is the value at the end of the applicable period of a hypothetical $1,000
payment made at the beginning of the applicable period; where P equals a
hypothetical initial payment of $1,000; and where n equals the number of years.
Each Fund, from time to time, also may advertise its cumulative total return
figures. Cumulative total return is the compound rate of return on a
hypothetical initial investment of $1,000 for a specified period. Cumulative
total return quotations reflect changes in the price of a Fund's shares and
assume that all dividends and capital gains distributions during the period were
reinvested in shares of that Fund. Cumulative total return is calculated by
finding the compound rates of a hypothetical investment over such period,
according to the following formula (cumulative total return is then expressed as
a percentage):
C = (ERV/P) - 1
Where:
C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value; ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 investment made at
the beginning of the applicable period.
SHORT-TERM BOND FUND YIELD CALCULATION.
In addition to providing cumulative total return information, the Short-Term
Bond Fund may also illustrate its performance by providing information
concerning its yield.
The Short-Term Bond Fund's yield is based on a specified 30-day (or one month)
period and is computed by dividing the net investment income per share earned
during the specified period by the maximum offering price (I.E., net asset
value) per share on the last day of the specified period, and annualizing the
net results according to the following formula:
YIELD = 2[(a-b + 1)6 - 1]
--- cd
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average 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.
Yield fluctuations may reflect changes in the Short-Term Bond Fund's net income,
and portfolio changes resulting from net purchases or net redemptions of the
Fund's shares may affect its yield. Accordingly, the Short-Term Bond Fund's
yield may vary from day to day, and the yield stated for a particular past
period is not necessarily representative of the Fund's future yield. The Short-
Term Bond Fund's yield is not guaranteed, and its principal is not insured.
B-17-
<PAGE>
From time to time, in reports and promotional literature, each Fund's
performance may be compared to: (1) other groups of mutual funds tracked by: (A)
Lipper Analytical Services, a widely-used independent research firm which ranks
mutual funds by overall performance, investment objectives, and asset size; (B)
Forbes Magazine's Annual Mutual Funds Survey and Mutual Fund Honor Roll; or (C)
other financial or business publications, such as Business Week, Money Magazine,
and Barron's, which provide similar information; (2) the Consumer Price Index
(measure for inflation), which may be used to assess the real rate of return
from an investment in each Fund; (3) other Government statistics such as GNP,
and net import and export figures derived from Governmental publications, E.G.,
The Survey of Current Business, which may be used to illustrate investment
attributes of each Fund or the general economic, business, investment, or
financial environment in which each Fund operates; (4) Alexander Steele's Mutual
Fund Expert, a tracking service which ranks various mutual funds according to
their performance; and (5) Morningstar, Inc. which ranks mutual funds on the
basis of historical risk and total return. Morningstar's rankings are
calculated using the mutual fund's average annual returns for a certain period
and a risk factor that reflects the mutual fund's performance relative to three-
month Treasury bill monthly returns. Morningstar's rankings range from five
star (highest) to one star (lowest) and represent Morningstar's assessment of
the historical risk level and total return of a mutual fund as a weighted
average for 3, 5, and 10-year periods. In each category, Morningstar limits its
five star rankings to 10% of the funds it follows and its four star rankings to
22.5% of the funds it follows. Rankings are not absolute or necessarily
predictive of future performance.
In addition, the performance of the Money Market Fund may be compared to indices
of broad groups of similar but unmanaged securities or other benchmarks
considered to be representative of the Money Market Fund's holdings such as: (1)
Advertising News Service, Inc.'s "Bank Rate Monitor - The Weekly Financial Rate
Reporter," a weekly publication which lists the yield on various money market
instruments offered to the public by 100 leading banks and thrift institutions
in the United States, including loan rates offered by these banks; (2) Donoghue
Organization, Inc., "Donoghue's Money Fund Reports," a weekly publication which
tracks net assets, yield, maturity and portfolio holdings of approximately 380
money market mutual funds offered in the United States; and (3) indices prepared
by the research departments of such financial organizations as Merrill Lynch,
Pierce, Fenner and Smith, Inc. and Lipper Analytical Services, Inc.
The performance of the Short-Term Bond Fund may be compared to indices of broad
groups of similar but unmanaged securities or other benchmarks considered to be
representative of the Short-Term Bond Fund's holdings, including those listed
above for the Money Market Fund. Such benchmarks may also include: (1) bank
certificates of deposit ("CDs") which differ from an investment in a mutual fund
in several ways: (a) the interest rate established by the sponsoring bank is
fixed for the term of the CD, (b) there are penalties for early withdrawal from
CDs, and (c) the principal on a CD is insured by the FDIC; (2) Merrill Lynch,
Pierce, Fenner & Smith, Inc., "Taxable Bond Indices," including in particular
the 1-2.99 Years Treasury Note Index; (3) Salomon Brothers, Inc., "Bond Market
Round-Up," a weekly publication that tracks yields and yield prices in a large
group of money market instruments, public corporate debt obligations and U.S.
Government securities; and (4) other indices prepared by the research department
of such financial institutions as Merrill Lynch, Pierce, Fenner & Smith, Inc.
The performance of the indices that may be used as benchmarks for each Fund's
performance, unlike the returns of the Funds, do not include the effect of
paying brokerage costs (for equity securities) and other transaction costs that
investors normally incur when investing directly in the securities in those
indices.
The AAHSA Trust may also illustrate a particular Fund's investment returns or
returns in general by graphs and charts, that compare, at various points in
time, the return from an investment in the particular Fund (or returns in
general) on a tax-deferred basis (assuming reinvestment of capital gains and
dividends and assuming one or more tax rates) with the same return on a taxable
basis.
B-18-
<PAGE>
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP whose address is One Boston Place, Boston,
Massachusetts 02109 has been selected as the Independent Auditors for the
AAHSA Trust for the fiscal year ending September 30, 1997.
LEGAL MATTERS
Legal advice regarding certain matters relating to the AAHSA Trust and the
offer and sale of its shares has been provided by Katten Muchin & Zavis, 1025
Thomas Jefferson Street, N.W., Washington, DC 20007, which serves as Special
Counsel to the AAHSA Trust.
B-19-
<PAGE>
FINANCIAL STATEMENTS
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholder
AAHSA Trust:
We have audited the statements of assets and liabilities of Money Market Fund
and Short-Term Bond Fund (funds within AAHSA Trust) as of October 11, 1996.
These financial statements are the responsibility of the management of AAHSA
Trust. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of investments by correspondence with
the depository agent. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the statements of assets and liabilities referred to above
present fairly, in all material respects, the financial position of Money
Market Fund and Short-Term Bond Fund at October 11, 1996, in conformity with
generally accepted accounting principles.
_________________________
KPMG PEAT MARWICK LLP
Minneapolis, Minnesota
October 17, 1996
<PAGE>
AAHSA TRUST
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 11, 1996
MONEY SHORT-TERM
MARKET BOND
FUND FUND
- --------------------------------------------------------------------------------
ASSETS:
Investment in U.S. Treasury Bill
$55,000 Par, 11/7/96, 4.68% $ 54,817 $ 54,817
Cash 500 465
Deferred Organizational Costs (note 5) 10,000 10,000
-------- --------
TOTAL ASSETS 65,317 65,282
LIABILITIES:
Dividend Distribution Payable 78 78
Payable to Sub-administrator for
reimbursement of organizational costs (note 5) 10,000 10,000
-------- --------
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 55,239 $ 55,204
-------- --------
NET ASSETS CONSIST OF:
Paid in capital: issued and outstanding 55,239
shares for the Money Market Fund and 5,520
shares for the Short-Term Bond Fund; $0.01 par
value; unlimited number of shares authorized $ 55,239 $ 55,204
-------- --------
NET ASSET VALUE PER SHARE $1.00 $10.00
----- ------
SEE ACCOMPANYING NOTES TO STATEMENTS OF ASSETS AND LIABILITIES.
<PAGE>
AAHSA TRUST
NOTES TO THE STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 11, 1996
(1) ORGANIZATION
AAHSA Trust (the Trust) was organized as a Delaware business trust in
July, 1994 and registered with the Securities and Exchange Commission under
the Investment Company Act of 1940 (as amended) as an open-end diversified
management investment company. Subsequent to its registration and prior to
the commencement of operations, the Trust was put in inactive status. The
Trust consists of two portfolios, the Money Market Fund and the Short-Term
Bond Fund (collectively the Funds and individually the Fund), each of which
represents a separate series of beneficial interests in the Trust. The
Declaration of the Trust permits the Board of Trustees to create additional
series or classes of shares in the future.
Upon inception, the Trust executed an initial sale on October 11, 1994
of 50,000 shares of the Money Market Fund and 5,000 shares of the Short-Term
Bond Fund to The American Association of Homes and Services for the Aging
(AAHSA), the Trust's sponsor and Sub-administrator. The proceeds of the
initial sale were invested in short-term U.S. Government Treasury Bills with
any income earned from the U.S. Treasury Bills reinvested in the fund at the
current net asset value per share as calculated by the administrator at that
time, B.C. Ziegler and Company (Ziegler)(See Note 4). With the exception
of dividend reinvestments, no further capital share transactions have taken
place. There have been no sales of securities. The Trust accounts for the
assets, liabilities and operations of each Fund separately.
(2) ACCOUNTING POLICIES
Investment in short term securities are carried at amortized cost which
approximates market value.
(3) FEDERAL INCOME TAXES
The Trust treats each fund as a separate entity for Federal income tax
purposes. Each Fund intends to continue to qualify as a regulated investment
company by complying with the provisions applicable to investment companies
as defined in the Internal Revenue Code and to make distributions of net
investment income and net realized capital gains sufficient to relieve it
from all, or substantially all, federal income taxes.
(4) FEES AND EXPENSES
On October 8, 1996, the Trust entered into an investment management
agreement with CRSA Investment Advisors, Inc., (CRSA) under which CRSA
supervises and directs the day-to-day operations of the Funds and furnishes
related equipment, research and personnel. The agreement requires each Fund
to pay CRSA a monthly fee based upon average daily net assets. The fees for
the Money Market and Short-Term Bond funds will be equal to .22% and .28% of
each fund's net assets, respectively, upon commencement of operations. Prior
to October 8, 1996, Ziegler served as the Funds' investment manager. As the
Funds did not commence operations prior to the termination of this agreement,
no fees were paid to Ziegler under the Investment Management Agreement.
<PAGE>
AAHSA TRUST
NOTES TO THE STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 11, 1996
(4) FEES AND EXPENSES (CONTINUED)
On October 8, 1996, a sub-advisory agreement was entered into by and
among CRSA, the Trust and Wainwright Asset Management (WAM) under which WAM
is responsible for the selection and management of each Fund's portfolio
investments. Under this agreement, WAM receives a monthly fee based upon
average daily net assets payable by CRSA. The fees for the Money Market and
Short-Term Bond funds will be equal to .11% and .14% of each fund's net
assets, respectively, upon commencement of operations. Prior to October 8,
1996, Federated Investment Counseling (Federated) served as the Funds'
sub-advisor. As the Funds did not commence operations prior to the
termination of this agreement, no fees were paid to Federated under the
previous sub-advisory agreement.
On October 8, 1996, the Trust entered into a distribution agreement with
H.C. Wainwright & Co., Inc. (Wainwright), in accordance with a Distribution
Plan adopted pursuant to Rule 12b-1 of the Investment Company Act of 1940 (as
amended). Under this agreement, Wainwright will be compensated for expenses
incurred in connection with the distribution of fund shares at an annualized
rate based on average daily net assets. The fee for the Money Market and
Short-Term Bond funds will be equal to .03% of each fund's net assets, upon
commencement of operations. The distribution plan provides for payment at an
annualized rate of 0.03% of each Fund's average daily net assets in those
instances in which no other recipient receives compensation pursuant to the
Distribution Plan, and at a rate not to exceed 0.20% of each Fund's average
daily net assets in those instances in which other recipients receive
compensation and/or reimbursement pursuant to the Distribution Plan. Prior to
October 8, 1996, Ziegler served as the Funds' Distributor of the shares of
each Fund. As the Funds did not commence operations prior to the termination
of this agreement, no fees were paid to Ziegler under the distribution
agreement.
AAHSA provides certain administrative services to the Trust pursuant to
a sub-administrative agreement. For its services AAHSA will receive, from
each fund, a fee equal to an annual rate of .07% of each Funds' average daily
net assets.
On October 8, 1996, the Trust entered into Administrative, Transfer
Agent and Custodial Agreements with State Street Bank and Trust Company
(State Street). Under these agreements with the Trust, State Street receives
compensation for such services provided. Prior to October 8, 1996, Ziegler
served as the Funds' Accounting Pricing Agent, Transfer Agent and Dividend
Disbursing Agent. As the Funds did not commence operations prior to the
termination of these agreements, no fees were paid to Ziegler under these
agreements.
In addition to the investment management fee, distribution fee,
administration fee, sub-administration fee, custodial fee, and transfer agent
fee, each fund is responsible for paying all other operating expenses
including outside trustee fees and expenses, registration fees, printing and
shareholder reports, legal, auditing, organizational expenses, insurance and
other miscellaneous expenses. Expenses directly related to a fund are charged
directly to that fund, while expenses which are attributable to more than one
fund of the Trust are allocated among the respective funds.
The investment manager, sub-advisor and the sub-administrator have
agreed to waive or limit their fees and, in the case of the
sub-administrator, pay certain operating expenses to the extent necessary to
limit total fund operating expenses to .45% of net assets and .65% of net
assets for the Money Market Fund and Short Term Bond Fund, respectively. Any
amounts waived or expenses paid are subject to possible reimbursement to the
investment manager, sub-advisor or the sub-administrator by the Funds in
future years, if such reimbursement can be achieved within the foregoing
expense limits and are approved by the Board of Trustees of the AAHSA Trust.
(5) DEFERRED ORGANIZATIONAL EXPENSES
The Trust incurred organizational expenses in connection with the
organization of the Funds. These costs will be amortized over 60 months on a
straight line basis beginning with the commencement of operations. If any or
all of the shares representing the initial capital of the Trust are redeemed
by any holder thereof prior to the end of the amortization period, the
redemption proceeds will be reduced by the unamortized organizational expense
balance in the same proportion as the number of shares redeemed bears to the
number of initial shares outstanding immediately prior to redemption.
<PAGE>
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
AAHSA Trust:
We consent to the use of our report dated October 11, 1996 included herein
and to the references to our Firm under the heading "INDEPENDENT AUDITORS" in
the Prospectus and in Part B of the Registration Statement.
_________________________
KPMG PEAT MARWICK LLP
Minneapolis, Minnesota
October 17, 1996
<PAGE>
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements included in Prospectus: None
Financial Statements included in the Statement
of Additional Information:
1. Report of Independent Auditor dated
October 11, 1996
2. Statement of Assets and Liabilities dated
October 11, 1996
3. Notes to Financial Statements dated
October 11, 1996
4. Consent of Independent Auditors dated
October 11, 1996
(b) Exhibits:
1. Declaration of Trust of the AAHSA Trust.*
2. By-Laws of the AAHSA Trust.*
3. Not applicable.
5(a). Form of Investment Management Agreement by and between the
AAHSA Trust on behalf of the Money Market Fund and CRSA
Investment Advisors, Inc.***
5(b). Form of Sub-Advisory Agreement among the AAHSA Trust, on
behalf of the Money Market Fund, CRSA Investment Advisors,
Inc. and Wainwright Asset Management.***
5(c). Form of Investment Management Agreement by and between
AAHSA Trust on behalf of the Short-Term Bond Fund and CRSA
Investment Advisors, Inc.***
5(d). Form of Sub-Advisory Agreement among the AAHSA Trust, on
behalf of the Short-Term Bond Fund, CRSA Investment
Advisors, Inc. and Wainwright Asset Management.***
6(a). Form of Distribution Agreement between the AAHSA Trust and
H.C. Wainwright & Co., Inc.***
6(b). Form of Selected Dealers Agreement.***
7. Not applicable.
8. Form of Custodian Contract by and between the AAHSA Trust
and State Street Bank and Trust Company.***
9(a). Form of Transfer Agency and Service Agent Agreement by and
between the AAHSA Trust and State Street Bank and Trust
Company.***
9(b). Form of Sub-Administrative Services Agreement by and
between the AAHSA Trust and the American Association of
Homes and Services for the Aging.***
9(c) Form of Administration Agreement by and between the AAHSA
Trust and State Street Bank and Trust Company.***
- --------------------------
*** Incorporated herein by reference to filing, September 4, 1996, of
Post-Effective Amendment No. 2 to Registrant's Registration Statement.
C-1-
<PAGE>
9(d) Form of Expense Limitation Agreement by and between the
AAHSA Trust, on behalf of the Money Market Fund, and
CRSA Investment Advisors, Inc.***
9(e) Form of Expense Limitation Agreement by and between the
AAHSA Trust, on behalf of the Money Market Fund, and
Wainwright Asset Management.***
9(f) Form of Expense Limitation Agreement by and between the
AAHSA Trust, on behalf of the Money Market Fund, and
the American Association of Homes and Services for the
Aging.***
9(g) Form of Expense Limitation Agreement by and between the
AAHSA Trust, on behalf of the Short-Term Bond Fund, and
CRSA Investment Advisors, Inc.***
9(h) Form of Expense Limitation Agreement by and between the
AAHSA Trust, on behalf of the Short-Term Bond Fund, and
Wainwright Asset Management.***
9(i) Form of Expense Limitation Agreement by and between the
AAHSA Trust, on behalf of the Short-Term Bond Fund, and
the American Association of Homes and Services for the
Aging.***
10. Opinion and Consent of Katten Muchin & Zavis regarding the
legality of the securities being registered.*
11. Consent of Independent Auditors.
12. Not applicable.
13. Share Subscription Agreement by and between the American
Association of Homes and Services for the Aging and the
AAHSA Trust on behalf of the Money Market Fund and the
Short-Term Bond Fund.*
14. Not applicable.
15(a). Form of Distribution Plan Pursuant to Rule 12b-1 under
the Investment Company Act of 1940 of the AAHSA Trust.***
15(b). Form of Agreement Pursuant to the Rule 12b-1
Distribution Plan.***
16. Not applicable.
17. Not applicable.
18. Not applicable.
19. Specimen Price Make-Up Sheet.** Incorporated by reference
to Exhibit No. 17 in Pre-Effective Amendment No. 1.
20. Powers of Attorney.* Incorporated by reference to
Exhibit No. 18 in Registration Statement.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Pursuant to a Share Subscription Agreement by and between the
American Association of Homes and Services for the Aging (the
"Association") and the AAHSA Trust, on behalf of the Money Market
Fund and the Short-Term Bond Fund, the Association has agreed to
provide the initial capitalization for the AAHSA Trust and will
initially own 100% of the shares of beneficial interest of the
Money Market Fund and the Short-Term Bond Fund. Shares of the
Money Market Fund and the Short-Term Bond Fund, registered
pursuant to this Registration Statement, will be offered and sold
to members of the Association. The Association represents not-
for-profit organizations dedicated to providing high-quality
health care, housing and services to the nation's elderly. The
Association is the national association of not-for-profit
organizations dedicated to providing high-quality health care,
housing and community services primarily to the elderly.
- --------------------------
* Incorporated herein by reference to initial filing, August 1, 1994, of
Registrant's Form N-1A Registration Statement (File No. 33-82256 and 811-8680).
** Incorporated herein by reference to filing, October 13, 1994, of
Pre-Effective Amendment No. 1 to Registrant's Statement.
*** Incorporated herein by reference to filing, September 4, 1996, of
Post-Effective Amendment No. 2 to Registrant's Registration Statement.
C-2-
<PAGE>
Item 26. NUMBER OF HOLDERS OF SECURITIES, AS OF THE EFFECTIVE DATE OF THIS
AMENDMENT.
Title of Class Number of Record Holders
-------------- ------------------------
Money Market Fund 1
Short-Term Bond Fund 1
Item 27. INDEMNIFICATION
Reference is made to the Registrant's By-Laws (Article VI) filed
herein as Exhibit 2 to this Registration Statement. The AAHSA
Trust's By-Laws provide that the Registrant will indemnify its
Trustees and officers to the extent permitted or required by
Delaware law. A resolution of the Board of Trustees specifically
approving payment or advancement of expenses to an officer is
required by the AAHSA Trust's By-Laws. Indemnification may not
be made if the Trustee or officer has incurred liability by
reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of duties in the conduct of his office
("Disabling Conduct"). The means of determining whether
indemnification shall be made are (1) a final decision by a court
or other body before whom the proceeding is brought that the
Trustee or officer was not liable by reason of Disabling Conduct,
or (2) in the absence of such a decision, a reasonable
determination, based on a review of the facts, that the Trustee
or officer was not liable by reason of Disabling Conduct. Such
latter determination may be made either by (a) vote of a majority
of Trustees who are neither interested persons (as defined in the
Investment Company Act of 1940) nor parties to the proceeding or
(b) independent legal counsel in a written opinion. The
advancement of legal expenses may not occur unless the Trustee or
officer agrees to repay the advance (if it is determined that he
is not entitled to the indemnification) and one of three other
conditions is satisfied: (1) he provides security for his
agreement to repay; (2) the Registrant is insured against loss by
reason of lawful advances; or (3) the Trustees who are not
interested persons and are not parties to the proceedings, or
independent counsel in a written opinion, determine that there is
reason to believe that the Trustee or officer will be found
entitled to indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933 (the "1933 Act") may be permitted to
Trustees, officers, controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public
policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer or
controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such Trustee,
officer or controlling person in connection with the securities
being registered, 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 1933 Act and will be governed by the final
adjudication of such issue.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT MANAGER AND THE SUB-
ADVISER.
(a) Certain information pertaining to business and other
connections of the Registrant's Investment Manager, CRSA
Investment Advisors, Inc., ("CRSA Advisors") is hereby
incorporated herein by reference to the section of the Prospectus
captioned "How the AAHSA Trust is Managed" and to the section of
the Statement of Additional Information captioned "Investment
Management
C-3-
<PAGE>
and Other Services." Set forth below is a list of each director
and officer of CRSA Advisors indicating each business,
profession, vocation, or employment of a substantial nature in
which each such person has been, at any time during the past two
fiscal years, engaged for his own account or in the capacity of
director, officer, partner, or Trustee. The principal business
address of each individual listed in the table below is 6075
Poplar Avenue, Suite 600, Memphis, Tennessee 38119.
Position with
Name CRSA Investment Advisors, Inc.
---- ------------------------------
Edward P. Crouch President and Director, CRSA Investment
Advisors, Inc.; Senior Vice President,
CRSA Inc. (management, marketing and
financial consulting firm), 1995 -
present; Executive Vice President, A.
Webster Dougherty & Co. (investment
banking firm), 1994 ; Alex. Brown &
Sons, Inc. (investment banking firm),
1990-1994.
Martin R. Satava Director, CRSA Investment Advisors,
Inc.; Executive Vice President, CRSA
Inc. (management, marketing and
financial consulting firm),
1989-present.
Michael E. Wade Director, CRSA Investment Advisors,
Inc.; President and Chief Executive
Officer, CRSA Inc. (management,
marketing and financial consulting
firm), 1989-present; Partner, Ernst &
Young (public accounting firm),
1975-1989.
(b) Certain information pertaining to business and other
connections of the Registrant's Sub-Adviser, Wainwright Asset
Management, is hereby incorporated herein by reference to the
section of the Prospectus captioned "How the AAHSA Trust is
Managed" and to the section of the Statement of Additional
Information captioned "Investment Management and Other Services."
Set forth below is a list of each general partner and officer of
Wainwright Asset Management indicating each business, profession,
vocation, or employment of a substantial nature in which each
such person has been, at any time during the past two fiscal
years, engaged for his own account or in the capacity of
director, officer, partner, or trustee. The principal business
address of each individual listed in the table below, unless
otherwise indicated, is 966 Hungerford Drive, #26B, Rockville,
Maryland 20850.
Position with
Name Wainwright Asset Management
---- ---------------------------
Roger W. Marshall President, Wainwright Asset Management,
1995 - present; President, R.W. Marshall
& Associates, Inc. (holding company),
1995-present; Senior Vice President,
A. Webster Dougherty & Co., Inc.
(investment banking firm), 1994;
President and Managing Director, Riggs
Investment Management Corp. (investment
adviser), 1988 - 1994.
Kevin G. Quinn Vice President, Wainwright Asset
Management, 1995-present; Vice
President, H.C. Wainwright & Co., Inc.,
1994-present; President, Quinn
Associates Corporation (holding
company), 1995-present; President, A.
Webster Dougherty & Co., Inc.
(investment banking firm), 1994;
Managing Director, Alex. Brown &
Sons, Inc. (investment banking firm),
1982-1994.
Saro J. Picciotto Principal, Wainwright Asset Management,
1995-present; Chief Financial Officer,
Chief Operating Officer and Director,
H.C. Wainwright & Co., Inc.,
1982-present.
C-4-
<PAGE>
Item 29. PRINCIPAL UNDERWRITERS.
(a) H.C. Wainwright and Co., Inc. acts as principal underwriter
of the Registrant's shares on a best-efforts basis and receives
no sales load or commission for its underwriting and distribution
services. Nevertheless, it receives compensation for certain
expenditures pursuant to a Service Plan adopted under Rule
12b-1 of the 1940 Act on an annual basis of up to [ ]% of the
Money Market Fund's net assets and [ ]% of the Short-Term Bond
Fund's net assets.
(b) Set forth below is information concerning each director,
officer, or partner of H.C. Wainwright, as of the date of this
filing.
Name and Principal Positions and Offices Offices with
Business Address* with Underwriter Registrant
---------------- ---------------- ----------
Stephen Barrett Chief Executive Officer None
and Co-Chairman of the
Board
Hugh Caperton Managing Director None
Robert Clark Co-Chairman of the Board None
and President
Russell Clark Director None
Elena Dasaro Chief Compliance Officer None
and Director
Lloyd Glazer Managing Director - None
Sales Manager
Saro Picciotto Chief Financial Officer, None
and Chief Operating
Officer, Director
Kevin Quinn Director None
Patrick Curran Senior Vice President None
Jonathan Hodson-Walker Senior Vice President None
Sam Ketterman Senior Vice President None
John (Chris) McCormick Senior Vice President None
Donald Ross Senior Vice President None
Richard Trull Senior Vice President None
Thomas Valeo Senior Vice President None
Atef Aziz Vice President None
Daphne Caperton Vice President None
Paul Cuomo Vice President None
Gary Ford Vice President None
L. Clarke Hill Vice President None
John Kuhn Vice President None
David Nankin Vice President None
C-5-
<PAGE>
Name and Principal Positions and Offices Offices with
Business Address* with Underwriter Registrant
---------------- ---------------- ----------
Peter Patterson Vice President None
Gregory Peterson Vice President None
James Queeney Vice President None
Edward Sanford Vice President None
David Schechter Vice President None
Rick Silver Vice President None
Marc Silk Vice President None
Joseph Sweeney Vice President None
Sidney Towle Vice President None
Frank Turgeon Vice President None
Christopher White Vice President None
Eric Bertonazzi Vice President None
Ken Flaherty Vice President None
Theodore O'Neill Vice President None
LeeAnne Smith Vice President None
Richard Zaccaro Vice President None
*The principal business address of each person listed in the
table is One Boston Place, Boston, Massachusetts 02108.
Item 30. LOCATION OF ACCOUNTS AND RECORDS.
The following entities prepare, maintain and preserve the records
required by Section 31(a) of the 1940 Act for the Registrant.
These services are provided to the Registrant through written
agreements between the parties to the effect that such
services will be provided to the Registrant for such periods
prescribed by the rules and regulations of the Securities and
Exchange Commission under the 1940 Act and such records are
the property of the entity required to maintain and preserve
such records and will be surrendered promptly on request.
State Street Bank and Trust Company ("State Street") provides
custodian and accounting services pursuant to a Custodian
Contract between State Street and the AAHSA Trust and provides
transfer agent and dividend disbursing services pursuant to a
Transfer Agency and Service Agreement between State Street and
the AAHSA Trust. In such capacities, State Street provides
pricing for each Fund's portfolio securities, keeps records
regarding securities and other assets in custody and in transfer,
bank statements, canceled checks, financial books and records,
and keeps records of each shareholder's account and all
disbursements made to shareholders. CRSA Advisors, pursuant to
its Investment Management Agreements with respect to each Fund,
maintains all
C-6-
<PAGE>
records required pursuant to such agreements. Wainwright Asset
Management, pursuant to its Sub-Advisory Agreements with CRSA
Advisors and the AAHSA Trust with regard to each Fund, maintains
all records required pursuant to such agreements. State
Street, pursuant to its Administration Agreement with the
AAHSA Trust, maintains all records required pursuant to such
agreement. H.C. Wainwright & Co., Inc., as principal
underwriter for the AAHSA Trust, maintains all records
required to be kept pursuant to the Distribution Agreement
with the AAHSA Trust, and such other records as must be
maintained pursuant to the AAHSA Trust's Distribution Plan and
Rule 12b-1 Agreement adopted pursuant to Rule 12b-1 under the
1940 Act.
Item 31. MANAGEMENT SERVICES.
State Street pursuant to its Administration Agreement with the
AAHSA Trust, will perform certain administrative services for the
AAHSA Trust. The American Association of Homes and Services for
the Aging, pursuant to its Sub-Administrative Services
Agreement with the AAHSA Trust, will perform certain
administrative services for the AAHSA Trust.
Item 32. UNDERTAKINGS.
Registrant undertakes to file a post-effective amendment, using
financial statements which need not by certified, within four to
six months after the commencement of operations of each Fund.
C-7-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Post-
Effective Amendment No. 3 to its Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized in Washington, D.C. on the
18th day of October, 1996.
AAHSA TRUST
By:
-----------------------------
Sheldon Goldberg
Trustee
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 2 to its Registration Statement has been signed below
by the following persons in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
Carol A. Berster * Trustee, Vice President October 18, 1996
- ------------------------
Carol A. Berster
Sheldon L. Goldberg * Trustee, President and October 18, 1996
- ------------------------ Treasurer
Sheldon L. Goldberg
James I. Melhorn * Trustee October 18, 1996
- ------------------------
James I. Melhorn
*By: /s/ Sheldon Goldberg
--------------------
Sheldon Goldberg
(Attorney-in-fact)
<PAGE>
EXHIBIT LIST
Exhibit Sequentially
Number Description Numbered Page*
------ ----------- --------------
11. Consent of Independent Auditors
<PAGE>
EXHIBIT 11
CONSENT OF INDEPENDENT AUDITORS
<PAGE>
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
AAHSA Trust:
We consent to the use of our report dated October 11, 1996 included herein
and to the references to our Firm under the heading "INDEPENDENT AUDITORS" in
the Prospectus and in Part B of the Registration Statement.
_________________________
KPMG PEAT MARWICK LLP
Minneapolis, Minnesota
October 17, 1996
