- ----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
IBJ FUNDS TRUST
SERVICE CLASS PROSPECTUS
April 6, 1999
- ---------------------------------------------------------------------------
- ------------------------------------------------------------------------------
This Prospectus describes the following four funds (the "Funds") of the IBJ
Funds Trust:
RESERVE MONEY MARKET FUND
CORE FIXED INCOME FUND
CORE EQUITY FUND
BLENDED TOTAL RETURN FUND
This Prospectus contains important information about the Funds. Please read it
before investing and keep it on file for future reference.
- -----------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
Investment and Performance Summary....................... 3
Guide to Investing in the Funds.......................... 11
Additional Information on Strategies and Risks........... 12
Management of the Funds.................................. 15
Pricing of Fund Shares................................... 16
Purchase of Fund Shares.................................. 16
Minimum Purchase Requirements.............. 17
Exchange of Fund Shares.................... 17
Redemption of Fund Shares.................. 18
Dividends and Distributions................ 20
Tax Information............................ 20
Financial Highlights....................... 21
<PAGE>
investment and performance summary
investment objectives and strategies
Reserve Money Market Fund (the "Money Market Fund")
Investment Objectives:
To seek current income, liquidity and the maintenance of a
stable $1.00 net asset value.
Investment Strategies:
The Money Market Fund will invest in high quality, short-term
U.S. dollar-denominated obligations. Such obligations may include (1)
obligations issued or guaranteed by the U.S. government or its agencies
or instrumentalities; (2) commercial paper, loan participation
interests, medium-term notes, asset-backed securities and other
promissory notes, including floating or variable rate obligations; (3)
domestic, Yankee dollar and Eurodollar certificates of deposit, time
deposits, money market accounts, bankers' acceptances, commercial paper
and bearer deposit notes; and (4) related repurchase agreements.
The Money Market Fund may also invest in variable amount
master demand obligations, which permit both the amount of the
obligation and the interest rate to vary. In addition, the Fund may
purchase securities on a "when-issued" basis and purchase or sell
securities on a "forward commitment" basis. It may invest more than 25%
of its total assets in the securities issued by domestic banks.
The Money Market Fund will invest only in securities or
issuers of securities that at the time of purchase (1) have received
the highest short-term rating by at least two nationally recognized
statistical rating organizations ("NRSROs"), such as "A-1" by Standard
& Poor's Corporation ("S&P") and "P-1" by Moody's Investors Service,
Inc. ("Moody's"); (2) have only one rating, provided that rating is the
highest rating by an NRSRO, or (3) are unrated, but are of "top rating"
quality.
The Fund's investments generally mature within 397 days or
less. However, the average maturity of the Fund's investments is 90
days or less.
Core Fixed Income Fund
Investment Objective:
To seek a high total return (appreciation plus current
income).
Investment Strategies:
The Core Fixed Income Fund will invest at least 65% of its
total assets in fixed income bonds, such as U.S. Government securities,
corporate bonds, asset-backed securities (including mortgage-backed
securities), savings and loan and U.S. and foreign bank obligations,
commercial paper, and related repurchase agreements. The Fund may also
invest in convertible securities, preferred stocks, debt of foreign
governments or corporations, and, for hedging purposes, futures and
options contracts.
At least 65% of the Fund's portfolio will be invested in
securities rated "A" or better by an NRSRO, or, if unrated, determined
to be of like quality. However, the Fund may also invest in
below-investment grade (high yield) bonds. The Fund has no limitation
as to average maturity or maturity of individual securities. The Fund
may use interest rate futures and/or options and options on interest
rate futures to protect the portfolio against reinvestment and interest
rate risk. For example, when interest rates are increasing and
portfolio values are falling, the Fund may enter into a futures
contract whose value will increase when interest rates fall in an
attempt to offset a decline in the value of the Fund's current
portfolio securities. In addition, the Fund may hold cash reserves for
temporary defensive or emergency purposes.
Core Equity Fund
Investment Objective:
To seek long-term capital appreciation.
Investment Strategies:
The Fund intends to invest primarily in a diversified
portfolio of common stock (and securities convertible into common
stock) of publicly traded, U.S. companies. However, if in the
investment adviser's judgment market conditions change, the Fund may
also invest in the common stock, convertible securities, preferred
stocks and warrants of any U.S. companies, the equity securities of
foreign companies (if traded "over-the-counter"), and American
Depository Receipts ("ADRs"). At all times, at least 65% of the Fund's
total assets will consist of one or more of the types of securities
mentioned in this paragraph. In determining which securities to buy or
sell, the Adviser emphasizes both growth and value.
In addition, the Fund may hold debt obligations, cash or cash
equivalents, U.S. Government securities, or nonconvertible preferred
stock. The Fund currently intends to buy only those debt obligations
rated in the top three rating categories by Moody's or S&P (or
determined to be of like quality), although it has the ability to
invest up to 25% of its total assets in debt obligations in the top
four rating categories. Except for temporary defensive purposes, the
Fund will not hold more than 20% of its total assets in the form of
cash or cash equivalents at any given time.
Blended Total Return Fund
Investment Objective:
To seek long-term capital appreciation and current income for
high total return.
Investment Strategies:
The Blended Total Return Fund will invest in varying
proportions of equities and debt market securities depending on the
projected strength of the equity and debt markets at the time of
purchase. With respect to its equity portion, the Fund intends to
invest primarily in a diversified portfolio of common stock (and
securities convertible into common stock) of publicly traded, U.S.
companies. However, if in the investment adviser's judgment market
conditions change, the Fund may also invest in the common stock,
convertible securities, preferred stocks and warrants of any U.S.
companies, the equity securities of foreign companies (if traded
"over-the-counter"), and American Depository Receipts ("ADRs"). In
determining which securities to buy or sell, the Adviser emphasizes
both growth and value.
Among the debt market securities in which the Fund may invest
are U.S. Government securities, corporate bonds, asset-backed
securities (including mortgage-backed securities), savings and loan and
U.S. and foreign bank obligations, commercial paper, and related
repurchase agreements, convertible securities, preferred stocks and
debt of foreign governments or corporations. The debt portion of the
Fund may invest in below-investment grade (high yield) bonds. However,
the Fund will always maintain an average rating of investment grade on
the debt portion of the portfolio. The Fund also may enter into certain
futures and options contracts for hedging purposes. The Fund has no
limitation as to average maturity or maturity of individual securities.
The Blended Total Return Fund will generally invest 30-70% of
its total assets in equity securities and the remaining 30-70% in debt
securities. Except for temporary defensive purposes, the Fund will not
hold more than 20% of its total assets in the form of cash or cash
equivalents.
RISKS OF THE FUNDS
All Funds
An investment in any of the Funds is not a deposit of a bank nor is it
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. There can be no assurance that any Fund will achieve its
investment objective or be successful in preventing or minimizing the risk of
loss inherent in investing in certain types of securities. To the extent a Fund
invests in foreign issuers, special risks are involved not typically associated
with investing in U.S. issuers. These include fluctuations in the rates of
exchange between currencies of different nations, changes in investment or
exchange control regulation (which may prohibit the transfer of currency from a
country), and by economic and political developments within a specific foreign
country.
<PAGE>
Money Market Fund
The Money Market Fund may not achieve as high a level of current income
as other funds that do not limit their investments to the high quality
securities in which the Fund invests. Although the Money Market Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
All Non-Money Market Funds
Core Fixed Income Fund, Core Equity Fund and
Blended Total Return Fund
The price per share of the Core Fixed Income Fund, the Core Equity Fund
and the Blended Total Return Fund (the "Non-Money Market Funds") will fluctuate
with changes in the value of the investments held by each Fund. The risk of
these Funds includes a potential loss of money in the event that investments
held by a Fund decline in price.
Positions in options, futures and options on futures held by these
Funds involve the risks that such options and futures may fail as hedging
techniques, that the loss from investing in futures transactions is potentially
unlimited and that closing transactions may not be effected where a secondary
liquid market does not exist.
Core Fixed Income Fund and Blended Total Return Fund
(fixed income portion)
Bonds involve the risk that their price will decrease if interest rates
increase. An additional risk is that the issuers of bonds may default on their
obligations to pay principal and/or interest on the bonds or may have their
credit rating downgraded. With respect to mortgage-backed securities, risks
include a sensitivity to the rate of prepayments in that, although the value of
fixed-income securities generally increases during periods of falling interest
rates as a result of prepayments and other factors, this is not always the case
with respect to mortgage-backed securities. Asset-backed securities involve the
risk that such securities do not usually have the benefit of a complete security
interest in the related collateral. Below-investment grade, high yield
securities are considered to have speculative characteristics, and changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than in the case of higher
rated securities.
Core Equity Fund and Blended Total Return Fund (equity portion)
Changes in investors' expectations about the economy as well as about
corporate earnings and interest rates may cause shares of these Funds to
fluctuate in value.
<PAGE>
performance
The bar charts and tables shown below provide an indication of the
risks of investing in the Funds by showing changes in each Fund's performance
from year to year (since the Funds commenced operations), and by showing how
each Fund's average annual returns for one year and for the life of the Fund
compare to those of a broad-based securities market index (in the case of the
Non-Money Market Funds) or a Treasury bill index (in the case of the Money
Market Fund). Fee waivers and expense reimbursements are reflected in both the
chart and the table. Without these fee waivers and expense reimbursements, the
Funds' performance would have been lower. How a Fund has performed in the past
is not necessarily an indication of how it will perform in the future.
Reserve Money Market Fund
<TABLE>
<CAPTION>
<S><C> <C> <C>
- ---------------------------------- -------------------------------------- ------
- -----------------------------------
12/31/96 12/31/97
12/31/98
- ---------------------------------- -------------------------------------- ------
- -----------------------------------
- ---------------------------------- -------------------------------------- ------
- -----------------------------------
4.85% 5.00%
5.24%
- ---------------------------------- -------------------------------------- ------
- -----------------------------------
</TABLE>
During the period shown in the bar chart, the highest return for a
quarter was 1.32% (quarter ended September 30, 1998) and the lowest return for a
quarter was 1.16% (quarter ended March 31, 1997).
<PAGE>
<TABLE>
<CAPTION>
<S><C> <C>
<C>
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
Average Annual Total Returns
(for the periods ended December 31, 1998) Past One Year
Since February 1, 1995*
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
Money Market Fund 5.24%
5.13%
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
U.S. Treasury Bill (3 month) Index** 4.50%
5.09%
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
* The Fund began operations on February 1, 1995.
** This Index reflects the performance of interest rates for 3 month U.S.
Treasury bills.
</TABLE>
The Money Market Fund's seven-day yield for the period ended December
31, 1998 was 4.76%. You may call 1-800-99-IBJFD (1-800-994-2533) to obtain more
current yield information.
Core Fixed Income Fund
<TABLE>
<CAPTION>
<S><C> <C> <C>
- ------------------------------------- ------------------------------------- ----
- -------------------------------------
12/31/96 12/31/97
12/31/98
- ------------------------------------- ------------------------------------- ----
- -------------------------------------
- ------------------------------------- ------------------------------------- ----
- -------------------------------------
2.22% 8.91%
8.76%
- ------------------------------------- ------------------------------------- ----
- -------------------------------------
</TABLE>
During the period shown in the bar chart, the highest return for a
quarter was 4.72% (quarter ended September 30, 1998) and the lowest return for a
quarter was (1.99)% (quarter ended March 31, 1996).
<PAGE>
<TABLE>
<CAPTION>
<S><C> <C>
<C>
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
Average Annual Total Returns
(for the periods ended December 31, 1998) Past One Year
Since February 1, 1995*
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
Core Fixed Income Fund 8.76%
8.49%
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
Lehman Intermediate Government/ 8.44%
8.57%
Corporate Bond Index**
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
Lehman Government/Corporate Bond Index*** 9.47%
9.88%
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
* The Fund began operations on February 1, 1995.
** This Index reflects the performance of U.S. Treasury and Government issues
with maturities of 1 to 10 years, and investment grade corporate bonds with
maturities of 1 to 10 years. The duration of this Index (rather than the
Lehman Government/Corporate Bond Index) is more representative of the
Fund's recent duration strategy.
***This Index reflects the performance of U.S. Treasury and Government issues
with maturities of 1 to 30 years, and investment grade corporate bonds with
maturities of 1 to 30 years.
</TABLE>
Core Equity Fund
<TABLE>
<CAPTION>
<S><C> <C>
<C>
- ------------------------------------- --------------------------------------- --
- -----------------------------------
12/31/96 12/31/97
12/31/98
- ------------------------------------- --------------------------------------- --
- -----------------------------------
- ------------------------------------- --------------------------------------- --
- -----------------------------------
20.64% 29.91%
24.89%
- ------------------------------------- --------------------------------------- --
- -----------------------------------
</TABLE>
During the period shown in the bar chart, the highest return for a
quarter was 28.29% (quarter ended December 31, 1998) and the lowest return for a
quarter was (11.06)% (quarter ended September 30, 1998).
<TABLE>
<CAPTION>
<S><C> <C>
<C>
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
Average Annual Total Returns
(for the periods ended December 31, 1998) Past One Year
Since February 1, 1995*
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
Core Equity Fund 24.89%
27.30%
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
Standard & Poor's 500 Stock Index** 28.74%
30.42%
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
* The Fund began operations on February 1, 1995.
** This Index is a widely recognized index of 500 stocks designed to mimic
the overall equity market's industry
weightings.
</TABLE>
Blended Total Return Fund
<TABLE>
<CAPTION>
<S><C> <C>
<C>
- -------------------------------------- ------------------------------------- ---
- ------------------------------------
12/31/96 12/31/97
12/31/98
- -------------------------------------- ------------------------------------- ---
- ------------------------------------
- -------------------------------------- ------------------------------------- ---
- ------------------------------------
12.27% 16.96%
17.90%
- -------------------------------------- ------------------------------------- ---
- ------------------------------------
</TABLE>
During the period shown in the bar chart, the highest return for a
quarter was 12.06% (quarter ended December 31, 1998) and the lowest return for a
quarter was (1.77)% (quarter ended September 30, 1998).
<PAGE>
<TABLE>
<CAPTION>
<S><C> <C>
<C>
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
Average Annual Total Returns
(for the periods ended December 31, 1998) Past One Year
Since February 1, 1995*
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
Blended Total Return Fund 17.90%
17.70%
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
Lehman Intermediate Government/ 8.44%
8.57%
Corporate Bond Index**
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
Standard & Poor's 500 Stock Index*** 28.74%
30.42%
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
Lehman Government/Corporate Bond Index*** 9.47%
9.88%
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
* The Fund began operations on February 1, 1995.
** This Index reflects the performance of U.S. Treasury and Government issues
with maturities of 1 to 10 years, and investment grade corporate bonds with
maturities of 1 to 10 years. The duration of this Index (rather than the
Lehman Government/Corporate Bond Index) is more representative of the
Fund's recent duration strategy.
*** This Index is a widely recognized index of 500 stocks designed to mimic the
overall equity market's industry weightings.
****This Index reflects the performance of U.S. Treasury and Government issues
with maturities of 1 to 30 years, and investment grade corporate bonds with
maturities of 1 to 30 years.
</TABLE>
<PAGE>
FEE TABLE
This table describes the fees and expenses that you may pay if you buy
and hold shares of a Fund.
<TABLE>
<CAPTION>
Shareholder Fees (fees paid directly from your investment)
<S><C> <C>
<C> <C> <C>
Reserve
Core Blended
Money
Fixed Core Total
Market
Income Equity Return
Fund1
Fund1 Fund Fund
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)..................... None
None None None
Maximum Deferred Sales Charge (Load)
(as a percentage of redemption proceeds)................. None
None None None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends (as a percentage of offering price)........... None
None None None
Redemption Fee................................................ None
None None None
Exchange Fee.................................................. None
None None None
Annual Fund Operating Expenses
(expenses that are deducted from a Fund's assets)
Management Fees............................................... 0.35%
0.50% 0.60% 0.60%
Distribution (12b-1) Fees..................................... None
None None None
Other Expenses................................................ 0.84%
0.55% 0.44% 0.41%
-----
- ----- ----- -----
Total Annual Fund Operating Expenses.......................... 1.19%
1.05% 1.04% 1.01%
Management Fee Waiver......................................... 0.35%2
0.10%3 0.10%3 0.10%3
Reimbursement of Other Expenses............................... 0.20%2
0.00% 0.00% 0.00%
------
- ----- ----- -----
Net Expenses.................................................. 0.64%
0.95% 0.94% 0.91%
=====
===== ===== =====
- ---------------------------------
1. Certain numerical information has been restated to reflect expenses
estimated to be incurred by the Funds for the fiscal year ending November
30, 1999.
2. Through November 30, 1999, the Adviser has contractually agreed to waive
its management fee and to reimburse the Fund up to $35,000 for its other
expenses. These waivers and reimbursements at the current asset levels will
result in the net expenses described above. The Adviser may reimburse less
than $35,000 and charge up to its full management fee if in doing so the
Fund would not exceed the Net Expenses described above. The Fund shall bear
its operating expenses over 0.64%.
3. Through November 30, 1999, the Adviser has contractually agreed to waive a
portion of its management fee equal to 0.10%.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in a
Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in a Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same except for the expiration
of the contractual waivers and reimbursements. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
<S><C> <C> <C>
<C> <C>
Reserve Core
Blended
Money Fixed
Core Total Return
Market Income
Equity Fund
Fund Fund
Fund
1 year................................. $ 65 $ 97
$ 96 $ 93
3 years................................ $ 323 $ 324
$ 321 $ 312
5 years................................ $ 601 $ 570
$ 564 $ 548
10 years............................... $ 1,394 $ 1,274
$ 1,262 $ 1,227
</TABLE>
Guide to Investing in the Funds
Purchase orders for the Money Market Fund received by 12:00 noon
Eastern Standard Time will become effective that day. Purchase orders for the
Non-Money Market Funds received by your investment representative in "good
order" prior to 4:00 p.m., Eastern Standard Time, and transmitted to First Data
Distributors, Inc. ("FDDI"), the Funds' distributor, prior to 4:00 p.m. Eastern
Standard Time, will become effective that day.
Minimum Initial Investment $
1,000
Minimum Initial Investment for Individual Retirements Accounts ("IRAs")
or Roth Individual Retirements Accounts ("Roth IRAs").... $ 250
Minimum Subsequent Investment $
50
The Funds are purchased at net asset value.
Shareholders may exchange shares between the Funds by telephone or
mail. Exchanges may not be effected by facsimile.
Minimum initial exchange $
500
(No minimum for subsequent exchanges)
Shareholders may redeem shares by telephone, mail or wire. Shares may
not be redeemed by facsimile.
If a redemption request is received by 12:00 noon Eastern
Standard Time, proceeds for the Money Market Fund will be
transferred to a designated account that day.
The Funds reserve the right to redeem upon not less than 30
days' notice all shares in a Fund's account which have an
aggregate value of $500 or less.
(Redemption by telephone and wire is not available for IRAs, Roth
IRAs and trust relationships of the Funds' adviser.)
All dividends and distributions will be automatically paid in
additional shares at net asset value of the applicable Fund unless cash payment
is requested.
Distributions for the Core Equity Fund are paid at least once
annually, distributions for the Blended Total Return Fund are paid
quarterly and distributions for the other Funds are paid monthly.
ADDITIONAL INFORMATION ON STRATEGIES AND RISKS
INVESTMENT SECURITIES AND STRATEGIES OF THE FUNDS
This section of the Prospectus provides a more complete description of
the principal strategies, policies, and principal risks of the Funds. Additional
descriptions of the Funds' risks, strategies, and investments, as well as other
strategies and investments not described below, may be found in the Funds'
Statement of Additional Information.
IBJ Whitehall Bank & Trust Company ("IBJW" or the "Adviser"), as the
Funds' adviser, selects investments and makes investment decisions based on the
investment objective and policies of each Fund. The following is a description
of securities and investment practices.
U.S. Treasury Obligations (All Funds). The Funds may invest in U.S.
Treasury obligations, which are backed by the full faith and credit of the U.S.
Government as to the timely payment of principal and interest. U.S. Treasury
obligations consist of bills, notes, and bonds and separately traded interest
and principal component parts of such obligations known as STRIPS which
generally differ in their interest rates and maturities.
U.S. Government Securities (All Funds). U.S. Government securities are
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. U.S. Government securities include debt securities issued or
guaranteed by U.S. Government-sponsored enterprises and federal agencies and
instrumentalities. Some types of U.S. Government securities are supported by the
full faith and credit of the U.S. Government or U.S. Treasury guarantees, such
as mortgage-backed certificates guaranteed by Ginnie Mae ("GNMA") (formerly
known as the Government National Mortgage Association). Other types of U.S.
Government securities, such as obligations of the Student Loan Marketing
Association, provide recourse only to the credit of the agency or
instrumentality issuing the obligation.
Commercial Paper (All Funds). Commercial paper includes short-term
unsecured promissory notes, variable rate demand notes and variable rate master
demand notes issued by both domestic and foreign bank holding companies,
corporations and financial institutions and U.S. Government agencies and
instrumentalities (but only includes taxable securities).
Corporate Debt Securities (All Funds). The Funds may purchase corporate
debt securities, subject to the rating and quality requirements for each Fund
described in the "Investment and Performance Summary."
Mortgage-Related Securities (All Funds). The Funds are permitted to
invest in mortgage-related securities, subject to the rating and quality
requirements for each Fund described in the "Investment and Performance
Summary." One example of mortgage-related securities would be mortgage
pass-through securities, which are securities representing interests in "pools"
of mortgages. Payments of both interest and principal are made monthly on the
securities. These payments are a "pass through" of monthly payments made by the
individual borrowers on the mortgage loans which underlie the securities (minus
fees paid to the issuer or guarantor of the securities).
Another example of mortgage-related securities would be collateralized
mortgage obligations ("CMOs"). Interest and prepaid principal on a CMO are paid,
in most cases, semi-annually. CMOs may be collateralized by whole mortgage loans
but are usually collateralized by portfolios of mortgage pass-through securities
guaranteed by GNMA, Federal Home Loan Mortgage Corporation ("FHLMC") or Federal
National Mortgage Association ("FNMA"). CMOs are structured in multiple classes,
with each class bearing a different stated maturity or interest rate.
Asset-Backed Securities (All Funds). The Funds are permitted to invest
in asset-backed securities, subject to each Fund's rating and quality
requirements for debt securities. Through the use of trusts and special purpose
subsidiaries, various types of assets, primarily home equity loans and
automobile and credit card receivables, are being securitized in pass-through
structures similar to the mortgage pass-through structures described above. A
Fund may invest in these and other types of asset-backed securities which may be
developed in the future, provided they are consistent with the Fund's investment
objectives, policies and quality standards.
Common Stocks (Core Fixed Income Fund, Core Equity Fund and Blended
Total Return Fund). Common stock represents the ownership interest in the issuer
that remains after all of the issuer's obligations and preferred stocks are
satisfied. Common stock fluctuates in price in response to many factors,
including past and expected future earnings of the issuer, the value of the
issuer's assets, general economic conditions, interest rates, investor
perceptions and market swings.
Preferred Stocks (Core Fixed Income Fund, Core Equity Fund and Blended
Total Return Fund). Preferred stockholders have a greater right to receive
liquidation payments and usually dividends than do common stockholders. However,
preferred stock is subordinated to the liabilities of the issuer in all
respects.
Preferred stock may or may not be convertible into common stock.
American Depository Receipts (Core Fixed Income Fund, Core Equity Fund
and Blended Total Return Fund). ADRs are U.S. dollar-denominated receipts
generally issued by domestic banks. ADRs are evidence of a deposit with the bank
of a foreign issuer. They are publicly traded on exchanges or over-the-counter
in the United States.
Investment in Foreign Securities (All Funds). The Funds may each invest in
securities of foreign governmental and private issuers. These investments must
be U.S. dollar-denominated with respect to the Money Market Fund.
<PAGE>
Convertible and Exchangeable Securities (Core Fixed Income Fund, Core
Equity Fund and Blended Total Return Fund). These Funds are permitted to invest
in convertible and exchangeable securities, subject to the rating and quality
requirements specified with respect to equity securities for the Core Equity
Fund. Convertible securities generally offer fixed interest or dividend yields
and may be converted at a stated price or rate for common or preferred stock.
Exchangeable securities may be exchanged on specified terms for common or
preferred stock. The Funds may invest in convertible securities rated below
investment grade.
Domestic and Foreign Bank Obligations (All Funds). Examples of these
obligations are certificates of deposit, commercial paper, Yankee certificates
of deposit, bankers' acceptances, Eurodollar certificates of deposit and time
deposits, promissory notes and medium term deposit notes.
Zero Coupon Securities (All Funds). The Funds may invest in zero coupon
securities. A zero coupon security pays no interest to its holder during its
life and is sold at a discount to its face value at maturity.
Variable rate demand obligations (All Funds). Variable rate demand
obligations have a maturity of 397 days or less with respect to the Money Market
Fund or generally five to 20 years with respect to the Non-Money Market Funds.
However, these obligations carry with them the right of the holder to put the
securities to a remarketing agent or other entity on short notice, typically
seven days or less. Generally, the remarketing agent will adjust the interest
rate every seven days (or at other intervals corresponding to the notice period
for the put), in order to maintain the interest rate at the prevailing rate for
securities with a seven-day maturity. The remarketing agent is typically a
financial intermediary that has agreed to perform these services. Variable rate
master demand obligations permit a Fund to invest fluctuating amounts at varying
rates of interest pursuant to direct arrangements between the Fund, as lender,
and the borrower.
"When-Issued" and "Forward Commitment" Transactions (All Funds). The
Funds may purchase securities on a when-issued and delayed delivery basis and
may purchase or sell securities on a forward commitment basis. When-issued or
delayed delivery transactions arise when securities are purchased by a Fund with
payment and delivery taking place in the future. A Fund purchases these
securities in order to obtain an advantageous price and yield to the Fund at the
time of entering into the transaction. In a forward commitment transaction, a
Fund agrees to purchase or sell securities at a specified future date.
Loans of Portfolio Securities (All Funds). To increase current income,
each Fund may lend its portfolio securities in an amount up to 33-1/3% of its
total assets to brokers, dealers and financial institutions, provided certain
conditions are met.
Repurchase Agreements (All Funds). The Funds may enter into repurchase
agreements with any bank or broker-dealer which presents a minimum risk of
bankruptcy. Under a repurchase agreement, a Fund acquires securities and obtains
a simultaneous commitment from the seller to repurchase the securities at a
specified time and at an agreed upon price. The agreements will be fully
collateralized.
Illiquid Investments (All Funds). No Fund may invest more than 15% (10%
with respect to the Money Market Fund) of the aggregate value of its net assets
in investments which are illiquid, or not readily marketable.
Maturity of Fixed Income Securities. Neither the Core Fixed Income Fund
nor the debt portion of the Blended Total Return Fund has any limitation on
average maturity or the maturity of individual securities.
Selection of Securities. Each stock selected by the Core Equity Fund
and the equity portion of the Blended Total Return Fund will be selected based
on certain factors, including but not limited to: (1) the company's fundamental
business outlook and competitive position, (2) the valuation of the security
relative to its own historical norms, to the industry in which the company
competes, and to the market as a whole, and (3) the momentum of earnings growth
expected to be generated by the company.
Each fixed income security selected by the Core Fixed Income Fund and
the debt portion of the Blended Total Return Fund will be selected based on
certain factors, including but not limited to: (1) the impact of overall
duration risk of the total portfolio, (2) the attractiveness of the relevant
market sector versus benchmark allocation, (3) the creditworthiness of corporate
debt issuers and rating trends, and (4) the overall structure of the debt issue
being considered for purchase.
Temporary Defensive Positions (Core Fixed Income Fund, Core Equity Fund
and Blended Total Return Fund). In order to meet liquidity needs or for
temporary defensive purposes, each Fund may invest up to 100% of its assets in
fixed income securities, money market securities, certificates of deposit,
bankers' acceptances, commercial paper or in equity securities which in the
Adviser's opinion are more conservative than the types of securities that the
Fund typically invests in. To the extent a Fund is engaged in temporary
defensive investments, it will not be pursuing its investment objective.
Portfolio Turnover. The Funds generally will not engage in the trading
of securities for short-term profits. However, under certain market conditions,
the Non-Money Market Funds may seek profits by short-term trading. In addition,
each Fund will adjust its portfolio in view of current or anticipated market
conditions or fluctuations in interest rates to accomplish its respective
investment objective. For example, each Fund may sell portfolio securities in
anticipation of a downturn in the market. Frequency of portfolio turnover (that
is, a change in the number of securities owned by a Fund) will not be a limiting
factor if a Fund considers it advantageous to purchase or sell securities. A
high rate of portfolio turnover involves correspondingly greater transaction
expenses than a lower rate. Each Fund and its shareholders must bear these
expenses. Further, portfolio turnover may result in the realization of taxable
gains, which would in turn lower a Fund's return to shareholders.
Additional Risks of Investing in the Funds
The Funds may not be able to prevent or lessen the risk of loss that is
involved in investing in particular types of securities. Any of the Funds may
invest in the securities of issuers in a foreign country, which involves special
risks and considerations not typically associated with investing in U.S.
issuers. There may be less publicly available information about a foreign issuer
than about a domestic issuer. Foreign issuers also are not generally subject to
uniform accounting, auditing and financial reporting standards comparable to
those applicable to domestic issuers. In addition, with respect to certain
foreign countries, interest may be withheld at the source under foreign income
tax laws, and there is a possibility of expropriation or confiscatory taxation,
political or social instability or diplomatic developments that could adversely
affect investments in securities of issuers located in those countries.
Investments in ADRs also present many of the same risks as foreign securities.
Below-investment grade (high-yield) bonds, which are also known as junk
bonds, may be purchased by the Core Fixed Income Fund and the Blended Total
Return Fund or may be issued to these Funds as a result of corporate
restructurings, such as leveraged buy-outs, mergers, acquisitions, debt
recapitalizations or similar events. These bonds are also often issued by
smaller, less creditworthy companies or by highly leveraged firms which are
generally less able than more financially stable firms to make scheduled
payments of interest and principal. The high yield bonds in which these Funds
may invest are rated "BB" and higher by S&P or "B" and higher by Moody's. The
risks posed by bonds issued under such circumstances are substantial. Also,
during an economic downturn or substantial period of rising interest rates,
highly leveraged issuers may experience financial stress which would adversely
affect their ability to service principal and interest payment obligations, to
meet projected business goals and to obtain additional financing. Changes by
recognized rating agencies in the rating of any security and in the ability of
an issuer to make payments of interest and principal will also ordinarily have a
more dramatic effect on the values of these investments than on the values of
high-rated securities. Such changes in value will not affect cash income derived
from these securities, unless the issuers fail to pay interest or dividends when
due. Such changes will, however, adversely affect a Fund's net asset value per
share.
Any of the Non-Money Market Funds may invest in smaller companies which
may involve greater risks than investments in large companies due to such
factors as limited product lines, markets and financial or managerial resources,
and less frequently traded securities that may be subject to more abrupt price
movements than securities of larger companies.
Year 2000. Like other funds and business organizations around the
world, the Funds could be adversely affected if the computer systems used by the
Adviser and the Funds' other service providers do not properly process and
calculate date-related information for the year 2000 and beyond. The Funds have
been informed that the Adviser, and the Funds' other service providers (i.e.,
administrator, transfer agent, fund accounting agent, distributor and custodian)
have developed and are implementing clearly defined and documented plans to
minimize the risk associated with the Year 2000 problem. These plans include the
following activities: inventorying of software systems, determining inventory
items that may not function properly after December 31, 1999, reprogramming or
replacing such systems and retesting for Year 2000 readiness. In addition, the
service providers are obtaining assurances from their vendors and suppliers in
the same manner. Non-compliant Year 2000 systems upon which the Fund is
dependent may result in errors and account maintenance failures. The Funds have
no reason to believe that (i) the Year 2000 plans of the Adviser and the Funds'
other service providers will not be completed by December 31, 1999, and (ii) the
costs currently associated with the implementation of their plans will have a
material adverse impact on the business, operations or financial condition of
the Funds or their service providers.
<PAGE>
In addition, the Year 2000 problem may adversely affect the companies
in which the Funds invest. For example, these companies may incur substantial
costs to correct the problem and may suffer losses caused by data processing
errors. Since the ultimate costs or consequences of incomplete or untimely
resolution of the Year 2000 problem by the Funds' service providers are unknown
to the Funds at this time, no assurance can be made that such costs or
consequences will not have a material adverse impact on the Funds or their
service providers.
The Funds and the Adviser will continue to monitor developments
relating to the Year 2000 problem, including the development of contingency
plans for providing back-up computer services in the event of systems failure.
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction
of the Board of Trustees.
The Adviser: IBJ WHITEHALL BANK & TRUST COMPANY
IBJW provides investment advisory services to the Funds.
For these services IBJW may receive fees based on average
daily net assets up to the following annualized rates for
the Funds: Reserve Money Market Fund, 0.35%; Core Fixed
Income Fund, 0.50%; Core Equity Fund, 0.60%; and Blended
Total Return Fund, 0.60%. After fee waivers, IBJW received
the following fees based on average daily net assets for
the year ended November 30, 1998: Reserve Money Market
Fund, 0.00%; Core Fixed Income Fund, 0.40%; Core Equity
Fund, 0.50%; and Blended Total Return Fund, 0.50%.
IBJW, formed in 1929, provides banking, trust and
investment services to individuals and institutions. It
acts as the investment adviser to a wide variety of
trusts, individuals, institutions and corporations. IBJW's
investment management responsibilities, as of December 31,
1998, included accounts with aggregate assets of
approximately $2.7 billion. The principal business address
of IBJW is One State Street, New York, New York 10004.
The Portfolio Mr. Paul Blaustein, Senior Vice President, has been
affiliated with IBJW since 1997 and is Managers: responsible for the day-to-day
management of the Core Equity Fund and the equity portion of the Blended Total
Return Fund. He has held these positions since August 1998 and January 1999,
respectively. Mr. Blaustein was a Vice President and portfolio manager at Desai
Capital Management from 1996 to 1997, was a Vice President of the Investment
Research Department at Legg Mason from 1994 to 1996 and was a Vice President and
investment analyst at Warburg Pincus Counselors from 1991 to 1994.
Mr. Martin Liebgott, Senior Vice President, has been
affiliated with IBJW since 1988 and is responsible for the
day-to-day management of the Reserve Money Market Fund and
the Core Fixed Income Fund. He has held these positions
since inception. He has also been responsible for the
day-to-day management of the fixed income portion of the
Blended Total Return Fund since April 1998. He was
previously responsible for the day-to-day management of
the fixed income portion of the Blended Total Return Fund
from inception to October 1997.
PRICING OF FUND SHARES
Each Fund's shares are priced at net asset value. The net asset value
per share of the Funds is calculated at 12:00 noon (Eastern Standard Time) for
the Money Market Fund and at 4:00 p.m. (Eastern Standard Time) for each of the
Non-Money Market Funds, Monday through Friday, on each day that the New York
Stock Exchange is open for trading. The net asset value is not calculated on the
following business holidays: New Year's Day, Martin Luther King, Jr.'s Birthday,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day; and the following additional business
holidays for the Money Market Fund: Columbus Day and Veterans Day. The net asset
value per share of each Fund is computed by dividing the value of each Fund's
net assets (i.e., the value of the assets less the liabilities) by the total
number of such Fund's outstanding shares. All expenses, including fees paid to
the Adviser and any affiliate of FDDI or First Data Investor Services Group,
Inc. ("FDISG"), the Funds' administrator, are accrued daily and taken into
account for the purpose of determining the net asset value.
Securities are valued using market quotations. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by or at the direction of the Board of Trustees. Bonds
and other fixed income securities may be valued on the basis of prices provided
by a pricing service approved by the Board of Trustees. All assets and
liabilities initially expressed in foreign currencies will be converted into
U.S. dollars.
The Money Market Fund uses the amortized cost method to value its
portfolio securities. It seeks to maintain a constant net asset value of $1.00
per share, although there may be circumstances under which this goal cannot be
achieved. The amortized cost method involves valuing a security at its cost and
amortizing any discount or premium over the period until maturity, regardless of
the impact of fluctuating interest rates on the market value of the security.
To the extent a Fund has portfolio securities that are primarily listed
on foreign exchanges that trade on weekends or other days when the Fund does not
price its shares, the net asset value of the Fund's shares may change on days
when shareholders will not be able to purchase or redeem the Fund's shares.
<PAGE>
PURCHASE OF FUND SHARES
The Service Class shares offered in this prospectus are sold at net
asset value without a sales load only to certain institutional investors who are
purchasers through a trust or investment account administered by IBJW, are
employees or ex-employees of IBJW or any of its affiliates, FDDI, FDISG or any
other service provider, or employees of any trust customer of IBJW or any of its
affiliates.
Orders for the purchase of shares will be executed at the net asset
value per share next determined after an order has been received in "good
order."
The following purchase procedures do not apply to certain fund or trust
accounts that are managed by IBJW. The customer should consult his or her trust
administrator for proper instructions.
All funds received are invested in full and fractional shares of the
appropriate Fund. Certificates for shares are not issued. The Funds reserve the
right to reject any purchase. The Funds will not accept any third party or
foreign checks.
An investment may be made using any of the following methods:
Through IBJW. Shares are available to new and existing shareholders
through IBJW or its affiliates or other authorized investment advisers. To make
an investment using this method, simply complete a Purchase Application and
contact your IBJW representative or investment adviser with instructions as to
the amount you wish to invest. They will then contact the Fund to place the
order on your behalf on that day.
Orders received by your IBJW representative for the Non-Money Market
Funds in "good order" prior to the determination of net asset value and
transmitted to the Fund prior to the close of its business day (which is
currently 4:00 p.m., Eastern Standard Time), will become effective that day.
Orders for the Money Market Fund received in "good order" prior to 12:00 noon
Eastern Standard Time will become effective that day. You should receive written
confirmation of your order within a few days of receipt of instructions from
your representative.
Other Purchase Information. Requests in "good order" must include the
following documents: (a) A letter of instruction, if required, signed by all
registered owners of the shares in the exact names in which they are registered;
(b) Any required signature guarantees (see "Signature Guarantees" below); and
(c) Other supporting legal documents, if required, in the case of estates,
trusts, guardianships, custodianships, corporations, pension and profit sharing
plans and other organizations.
Signature Guarantees. To protect shareholder accounts, the Funds, and
their transfer agent from fraud, signature guarantees are required to enable the
Funds to verify the identity of the person who has authorized a redemption from
an account. Signature guarantees are required for (1) redemptions where the
proceeds are to be sent to someone other than the registered shareowner(s) and
the registered address and (2) share transfer requests. Shareholders may contact
the Funds at 1-800-99-IBJFD (1-800-994-2533) for further details.
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the applicable Fund. Your bank may charge a fee for handling the
transaction. Please call 1-800-99-IBJFD (1-800-994-2533) for wiring
instructions. A completed application must be sent by overnight delivery to the
Fund in advance of the wire to IBJ Funds Trust, P.O. Box 5183, Westborough, MA
01581-5183. Notification must be given to the Fund at 1-800-99-IBJFD
(1-800-994-2533) prior to 12:00 p.m. Eastern Standard Time, of the wire date for
the Money Market Fund and prior to 4:00 p.m. Eastern Standard Time in the case
of the Non-Money Market Funds.
By Mail. Payments to open new accounts should be sent to IBJ Funds
Trust, P.O. Box 5183, Westborough, MA 01581-5183, together with a completed
application. If fund shares purchased by check are redeemed, payment of
redemption proceeds will be delayed until payment of the purchase has been
collected, which may take up to fifteen days after purchase. Checks should be
made payable to the order of IBJ Funds Trust.
Institutional Accounts. Bank trust departments and other institutional
accounts may place orders directly with the Funds by telephone at 1-800-99-IBJFD
(1-800-994-2533).
Additional Information. Through another prospectus, each Fund also
offers a Premium Class of shares. Shareholders in the Premium Class of shares
may be subject to an additional 12b-1 fee of up to 0.35% of average daily net
assets and an additional shareholder servicing charge of up to 0.50% of average
daily net assets.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in the Funds is $1,000 unless the
purchaser has at least $1,000 or more in any of the IBJ Funds, is a purchaser
through a trust or investment account administered by the Adviser, is an
employee or an ex-employee of IBJW or is an employee of any of its affiliates,
FDDI, FDISG, or any other service provider, or is an employee of any trust
customer of IBJW or any of its affiliates. Note that the minimum is $250 for an
IRA or Roth IRA, other than an IRA or Roth IRA for which IBJW or any of its
affiliates acts as trustee or custodian. Any subsequent investments must be at
least $50, including an IRA or Roth IRA investment. All initial investments
should be accompanied by a completed Purchase Application. A Purchase
Application accompanies this Prospectus. A separate application is required for
IRA or Roth IRA investments. (For more IRA or Roth IRA information, call
1-800-99-IBJFD (1-800-994-2533)). The Funds reserve the right to reject purchase
orders.
EXCHANGE OF FUND SHARES
Shareholders may exchange shares of one Fund for shares of another Fund
by either telephone or mail. A shareholder should first read carefully the
Prospectus describing the Fund into which the exchange will occur, which is
available without charge and can be obtained by writing to the Fund at P.O. Box
5183, Westborough, MA 01581-5183 or by calling 1-800-99-IBJFD (1-800-994-2533).
The minimum amount for an initial exchange is $500. No minimum is required in
subsequent exchanges. The Trust may terminate or amend the terms of the exchange
privilege at any time, upon 60 days' notice to shareholders.
A new account opened by exchange must be established with the same
name(s), address and social security number as the existing account. All
exchanges will be made based on the net asset value next determined following
receipt of the request by a Fund in "good order."
An exchange is taxable as a sale of a security on which a gain or loss
may be recognized. Shareholders should receive written confirmation of the
exchange within a few days of the completion of the transaction.
Exchange by Mail. A letter of instruction should be sent by mail to IBJ
Funds Trust, P.O. Box 5183, Westborough, MA 01581-5183. The letter of
instruction must include: (i) your account number; (ii) the Fund from and the
Fund into which you wish to exchange your investment; (iii) the dollar or share
amount you wish to exchange; and (iv) the signatures of all registered owners or
authorized parties. No signature guarantee is required. You must have held
shares used in the exchange for at least 10 days before you can exchange into
another Fund.
Exchange by Telephone. To exchange Fund shares by telephone or if you
have any questions, simply call the Funds at 1-800-99-IBJFD (1-800-994-2533).
You should be prepared to give the telephone representative the following
information: (i) your account number, social security or tax identification
number and account registration; (ii) the name of the Fund from and the Fund
into which you wish to transfer your investment; and (iii) the dollar or share
amount you wish to exchange. The conversation may be recorded to protect you and
the Funds. Telephone exchanges are available only if the shareholder so
indicates by checking the "yes" box on the Purchase Application. See "Redemption
of Fund Shares - By Telephone" in this Prospectus for a discussion of telephone
transactions generally.
Automatic Investment Program. An eligible shareholder may also
participate in the Automatic Investment Program, an investment plan that
automatically debits money from the shareholder's bank account and invests it in
one or more of the Funds in the Trust through the use of electronic funds
transfers or automatic bank drafts. Shareholders may elect to make subsequent
investments by transfers of a minimum of $500 on either the fifth or twentieth
day of each month into their established Fund account. Contact the Funds for
more information about the Automatic Investment Program.
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares on any business day. Shares will
be redeemed at the net asset value next determined after the applicable Fund
receives your redemption request in "good order." A redemption is a taxable
transaction on which gain or loss may be recognized. Generally, however, gain or
loss is not expected to be realized on a redemption of shares of the Money
Market Fund which seeks to maintain a net asset value per share of $1.00.
Where the shares to be redeemed have been purchased by check, the
payment of redemption proceeds may be delayed if the purchasing check has not
cleared, which may take up to 15 days. Shareholders may avoid this delay by
investing through wire transfers of Federal funds.
Once the shares are redeemed, a Fund will ordinarily send the proceeds
by check to the shareholder at the address of record on the next business day.
The Funds may, however, take up to seven days to make payment. If the New York
Stock Exchange is closed (or when trading is restricted) for any reason other
than the customary weekend or holiday closing or if an emergency condition as
determined by the Securities and Exchange Commission (the "SEC") merits such
action, the Funds may suspend redemptions or postpone payment dates.
Redemption Methods. You may redeem your shares using any of the methods set
forth below:
Through an IBJW Representative or Authorized Investment Adviser. You
may redeem your shares by contacting your IBJW representative or investment
adviser and instructing him or her to redeem your shares. He or she will then
contact the Fund and place a redemption trade on your behalf. He or she may
charge you a fee for this service.
By Mail. Requests should be addressed to IBJ Funds Trust, P.O. Box
5183, Westborough, MA 01581-5183. To protect shareholder accounts, the Funds,
and the transfer agent from fraud, a signature guarantee will be required when
redemption proceeds are to be sent to an address other than the registered
address, or if the redemption is greater than $50,000. To be accepted, a letter
requesting redemption must include: (i) the Fund name and account registration
from which you are redeeming shares; (ii) your account number; (iii) the amount
to be redeemed, (iv) the signatures of all registered owners; and (v) a
signature guarantee by any eligible guarantor institution including a member of
a national securities exchange or a commercial bank or trust company,
broker-dealers, credit unions and savings associations, if required (see
"Purchase of Fund Shares"). Corporations, partnerships, trusts or other legal
entities must submit additional documentation.
By Check. You may redeem your Money Market Fund shares by drawing
checks on your account. You must first complete the signature card provided with
the purchase application. Upon receiving the properly completed application and
signature card, First Data Investor Services Group Inc. ("FDISG") will provide
you with checks free of charge. These checks may be made payable to the order of
any person in the amount of $500 or more. When a check is presented for payment,
a sufficient number of full and fractional shares in the shareholder's account
will be redeemed to cover the amount of the check. You cannot use a check to
close out your account since additional shares accrue daily.
By Telephone. You may redeem your shares by calling the Funds at
1-800-99-IBJFD (1-800-994-2533). You should be prepared to give the telephone
representative the following information: (i) your account number, social
security number and account registration; (ii) the Fund name from which you are
redeeming shares; and (iii) the dollar or share amount to be redeemed. The
conversation may be recorded to protect you and the Funds. Telephone redemptions
are available only if the shareholder so indicates by checking the "yes" box on
the Purchase Application or on the Optional Services Form. The Funds employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. If the Funds fail to employ such reasonable procedures, they may be
liable for any loss, damage or expense arising out of any telephone transactions
purporting to be on a shareholder's behalf. In order to assure the accuracy of
instructions received by telephone, the Funds require some form of personal
identification prior to acting upon instructions received by telephone. They
also record telephone instructions and provide written confirmation to investors
of such transactions. Redemption requests transmitted via facsimile will not be
accepted. Although other redemption methods may be used, telephone redemption
and telephone exchanges will be suspended for a period of 10 days following an
address change made by telephone.
By Wire. You may redeem your shares by contacting the Funds by mail or
telephone and instructing them to send a wire transmission to your personal
bank. Proceeds of wire redemption for the Money Market Fund generally will be
transferred to the designated account on the day the request is received,
provided that it is received by 12:00 Noon (Eastern Standard Time).
Your instructions should include: (i) your account number, social
security or tax identification number and account registration; (ii) the Fund
name from which you are redeeming shares; and (iii) the dollar or share amount
to be redeemed. Wire redemptions can be made only if the "yes" box has been
checked on your Purchase Application, and you attach a copy of a void check from
the account where proceeds are to be wired. Your bank may charge you a fee for
receiving a wire payment on your behalf.
Other Redemption Information. Requests in "good order" must include the
documents listed in "Purchase of Fund Shares --- Other Purchase Information."
The above-mentioned services --- "By Telephone," "By Check," and "By
Wire" --- are not available for IRAs or Roth IRAs and trust relationships of
IBJW.
Systematic Withdrawal Plan. An owner of $10,000 or more of shares of a
Fund may elect to have periodic redemptions from his or her account to be paid
on a monthly, quarterly, semi annual or annual basis. The minimum periodic
payment is $100. A sufficient number of shares to make the scheduled redemption
will normally be redeemed on the date selected by the shareholder. Depending on
the size of the payment requested and fluctuation in the net asset value, if
any, of the shares redeemed, redemptions for the purpose of making such payments
may reduce or even exhaust the account. A shareholder may request that these
payments be sent to a predesignated bank or other designated party. Capital
gains and dividend distributions paid to the account will automatically be
reinvested at net asset value on the distribution payment date.
Redemption of Small Accounts. Due to the high cost of servicing small
accounts, each Fund may redeem, on 30 days' notice, an account in a Fund that
has been reduced by a shareholder to $500 or less. However, if during the 30-day
notice period the shareholder purchases sufficient shares to bring the value of
the account above $500, this restriction will not apply.
Redemption in Kind. All redemptions of Fund shares shall be made in
cash. However, this commitment applies only to redemption requests made by a
Fund shareholder during any 90-day period of up to the lesser of $250,000 or 1%
of the net asset value of that Fund at the beginning of such period. If a
redemption request exceeds these amounts, a Fund may make full or partial
payment in securities or other assets.
Account Services
All transactions in Fund shares will be reflected in a statement for
each shareholder. In those cases where a nominee is a shareholder of record for
shares purchased for its customer, the nominee decides whether the statement
will be sent to the customer.
DIVIDENDS AND DISTRIBUTIONS
Each Fund intends to distribute to its shareholders substantially all
of its net investment income. The Reserve Money Market Fund and the Core Fixed
Income Fund will declare distributions of such income daily and pay those
dividends monthly; the Core Equity Fund will declare and pay distributions
annually and the Blended Total Return Fund will declare and pay dividends at
least quarterly. Each Fund intends to distribute, at least annually,
substantially all realized net capital gain. It is expected that the
distributions of both the Reserve Money Market Fund and the Core Fixed Income
Fund will consist primarily of ordinary income.
Distributions will be paid in additional Fund shares based on the net
asset value at the close of business on the payment date of the distribution,
unless the shareholder elects in writing, at least five full business days
before the record date, to receive such distributions in cash. Dividends for a
given month will be paid within five business days after the end of such month.
In the case of the Money Market Fund, shares purchased will begin
earning dividends on the day the shares are bought and shares redeemed will earn
dividends through the day before redemption. Net investment income for a
Saturday, Sunday or a holiday will be declared as a dividend on the previous
business day. In the case of the other Funds that declare daily dividends,
shares purchased will begin earning dividends on the day after the shares are
bought, and shares redeemed will earn dividends through the day the redemption
is executed.
Dividends and distributions from a Fund are taxable to shareholders
whether received in additional shares or in cash.
If you elect to receive distributions in cash and checks (1) are
returned and marked as "undeliverable" or (2) remain uncashed for six months,
your cash election will be changed automatically. Your future dividend and
capital gains distribution will be reinvested in the Fund at the per share net
asset value determined as of the day the distribution is paid. In addition, any
undeliverable checks or checks that remain uncashed for six months will be
canceled and will be reinvested in the Fund at the per share net asset value
determined as of the date of cancellation.
TAX INFORMATION
Each Fund intends to distribute substantially all of its income. The
income dividends a shareholder receives from a Fund may be taxed as ordinary
income and capital gains (which may be taxable at different rates depending on
the length of time the Fund holds its assets), regardless of whether the
shareholder receives the dividends in cash or in additional shares.
A distribution will be treated as paid on December 31 of the calendar
year if it is declared by a Fund during October, November, or December of that
year and paid by a Fund during January of the following calendar year.
Those Funds that may invest in securities of foreign issuers may be
subject to withholding and other similar income taxes imposed by a foreign
country. Each of these Funds intends to elect, if it is eligible to do so under
the Internal Revenue Code, to "pass through" to its shareholders the amount of
such foreign taxes paid. Each shareholder will be notified within 60 days after
the close of a Fund's taxable year whether the foreign taxes paid by the Fund
will "pass through" for that year.
Shareholders will be notified annually as to the Federal tax status of
distributions made by the Fund(s) in which they invest. Depending on the
residence of the shareholder for tax purposes, distributions also may be subject
to state and local taxes, including withholding taxes. Shareholders should
consult their own tax advisers as to their Federal, state and local tax
liability.
<PAGE>
financial highlights
These financial highlights tables are intended to help you understand
each Fund's financial performance since it began operations on February 1, 1995.
The total returns in these tables represent the rate that an investor would have
earned on an investment in a Fund (assuming reinvestment of all dividends and
distributions). The information for the year ended November 30, 1998 has been
audited by Ernst & Young LLP, whose report, along with the Funds' financial
statements, is included in the annual report, which is available upon request.
The information for periods prior to the year ended November 30, 1998 were
audited by other independent auditors, whose reports thereon were unqualified.
<TABLE>
<CAPTION>
Reserve Money Market Fund
<S><C> <C> <C>
<C> <C>
For the Year For the Year
For the Year For the Period
ended ended
ended Feb. 1, 1995*
Nov. 30, Nov. 30,
Nov. 30, to Nov. 30,
1998 1997
1996 1995
------------ ------------
- ------------ --------
Net Asset Value, Beginning of Period... $1.00 $1.00
$1.00 $1.00
----- -----
- ----- -----
Income from Investment Operations:
Net investment income................ 0.05 0.05
0.05 0.04
Less Dividends from:
Net investment income................ (0.05) (0.05)
(0.05) (0.04)
Net Asset Value, End of Period......... $1.00 $1.00
$1.00 $1.00
===== =====
===== =====
Total Return(a)........................ 5.27% 4.96%
4.88% 4.55%
Ratios/Supplemental Data:
Net Assets, End of Period (in $18,585 $25,784
$34,269 $28,943
thousands).............................
Ratios to average net assets:
Expenses before 0.76% 0.99%
0.95% 0.92%**
waivers/reimbursements+................
Expenses net waivers/reimbursements.. 0.41% 0.64%
0.65% 0.64%**
Net investment income................ 5.16% 4.84%
4.82% 5.40%**
* Commencement of operations.
** Annualized.
+ During the period, certain fees were voluntarily reduced
and/or reimbursed. If such voluntary fee reductions and/or
reimbursements had not occurred, the ratios would have been as
indicated.
(a) Total return is based on the change in net asset value during
the period and assumes reinvestment of all dividends and
distributions.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Core Fixed Income Fund
<S><C> <C> <C>
<C> <C>
For the Year For the Year
For the Year For the
ended ended
ended Period
Nov. 30, Nov. 30,
Nov. 30, Feb. 1, 1995*
1998 1997
1996 to Nov. 30,
1995
Net Asset Value, Beginning of Period. $10.36 $10.22
$10.72 $10.00
------ ------
- ------ ------
Income from Investment Operations:
Net investment income.............. 0.59 0.57
0.54 0.48
Net realized and unrealized gains
(losses) 0.33 0.14
(0.12) 0.72
---- ----
- ------ ----
on investment transactions.........
Total income from investment 0.92 0.71
0.42 1.20
---- ----
- ---- ----
operations...........................
Less Dividends from: (0.59) (0.57)
(0.54) (0.48)
Net investment income..............
Realized gains..................... (0.08) -----
(0.38) -----
-----
- ------ -----
Net change in net asset value per 0.25 0.14
(0.50) 0.72
----
- ------ ----
share................................
Net Asset Value, End of Period....... $10.61 $10.36
$10.22 $10.72
====== ======
====== ======
Total Return(a)...................... 9.27% 7.20%
4.25% 12.28%
Ratios/Supplemental Data:
Net Assets, End of Period (in $38,803 $31,628
$27,768 $26,849
thousands)...........................
Ratios to average net assets:
Expenses before 0.90% 1.17%
1.22% 1.22%**
waivers/reimbursements+..............
Expenses net waivers/reimbursements 0.80% 1.07%
1.12% 1.12%**
Net investment income.............. 5.63% 5.61%
5.07% 5.59%**
Portfolio Turnover Rate(b)........... 93% 210%
160% 297%
* Commencement of operations.
** Annualized.
+ During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred,
the ratios would have been as indicated.
(a) Total return is based on the change in net asset value during the period
and assumes reinvestment of all dividends and distributions.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Core
Equity Fund
<S><C> <C> <C>
<C> <C>
For the Year For the Year
For the Year For the
Ended Ended
Ended Period
Nov. 30, Nov. 30,
Nov. 30, Feb. 1, 1995*
1998 1997
1996 to Nov. 30,
------------ ------------
- ------------
1995
Net Asset Value, Beginning of Period. $16.67 $15.37
$12.97 $10.00
------ ------
- ------ ------
Income from Investment Operations:
Net investment income.............. 0.07 0.35
0.14 0.13
Net realized and unrealized gains
on 2.37 3.03
2.90 2.84
---- ----
- ---- ----
investment transactions.......
Total income from investment 2.44 3.38
3.04 2.97
---- ----
- ---- ----
operations...........................
Less Distributions from: (0.05) (0.31)
(0.19) ----
Net investment income.............. ---- (0.24)
- ---- ----
In excess of net investment income.
Realized gains..................... (2.55) (1.53)
(0.45) ----
------ ------
- ------ ----
Net change in net asset value per (0.16) 1.30
2.40 2.97
share................................
Net Asset Value, End of Period....... $16.51 $16.67
$15.37 $12.97
====== ======
====== ======
Total Return(a)...................... 17.87% 24.68%
24.61% 29.70%
Ratios/Supplemental Data:
Net Assets, End of Period (in $124,485 $105,386
$93,640 $86,596
thousands)...........................
Ratios to average net assets:
Expenses before 1.04% 0.99%
0.99% 1.09%**
waivers/reimbursements+..............
Expenses net waivers/reimbursements 0.94% 0.89%
0.89% 0.89%**
Net investment income.............. 0.32% 0.74%
0.93% 1.29%**
Portfolio Turnover Rate(b)........... 92% 44%
27% 37%
* Commencement of operations.
** Annualized.
+ During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred,
the ratios would have been as indicated.
(a) Total return is based on the change in net asset value during the period
and assumes reinvestment of all dividends and distributions.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Blended Total Return Fund
<S><C> <C> <C>
<C> <C>
For the Year For the Year
For the Year For the
Ended Ended
Ended Period
Nov. 30, Nov. 30,
Nov. 30, Feb. 1, 1995*
1998 1997
1996 to Nov. 30,
------------ ------------
- ------------
1995
Net Asset Value, Beginning of Period. $13.51 $12.76
$11.79 $10.00
------ ------
- ------ ------
Income from Investment Operations:
Net investment income.............. 0.38 0.50
0.34 0.31
Net realized and unrealized gains
on 1.41 1.27
1.26 1.79
---- ----
- ---- ----
investment transactions.......
Total income from investment 1.79 1.77
1.60 2.10
---- ----
- ---- ----
operations...........................
Less Distributions from: (0.38) (0.50)
(0.36) (0.31)
Net investment income..............
Realized gains..................... (2.02) (0.52)
(0.27) ----
------ ------
- ------ ----
Net change in net asset value per (0.61) 0.75
0.97 1.79
share................................
Net Asset Value, End of Period....... $12.90 $13.51
$12.76 $11.79
====== ======
====== ======
Total Return(a)...................... 15.98% 14.69%
14.08% 20.82%
Ratios/Supplemental Data:
Net Assets, End of Period (in $66,262 $61,867
$64,232 $50,583
thousands)...........................
Ratios to average net assets:
Expenses before 1.01% 1.07%
1.09% 1.15%**
waivers/reimbursements+..............
Expenses net waivers/reimbursements 0.91% 0.97%
0.99% 1.05%**
Net investment income.............. 2.95% 2.91%
2.98% 3.04%**
Portfolio Turnover Rate(b)........... 76% 138%
77% 78%
* Commencement of operations.
** Annualized.
+ During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred,
the ratios would have been as indicated.
(a) Total return is based on the change in net asset value during the period
and assumes reinvestment of all dividends and distributions.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
</TABLE>
<PAGE>
73
ibj funds trust
Reserve Money Market Fund
Core Fixed Income Fund
Core Equity Fund
Blended Total Return Fund
Additional information about the Funds is included in a
Statement of Additional Information dated April 6, 1999 (the
"SAI"). The SAI is incorporated by reference into this
Prospectus and, therefore, is legally a part of this Prospectus.
Information about each Fund's investments is available in the
Funds' annual and semi-annual reports to shareholders. In the
Funds' annual report, you will find a discussion of the market
conditions and investment strategies that significantly affected
each Fund's performance during its last fiscal year.
You may make inquiries about the Funds or obtain a copy of the
SAI, or of the annual or semi-annual reports, without charge by
calling 1-800-99-IBJFD (1-800-994-2533).
Information about the Funds (including the SAI) can be reviewed
and copied at the SEC Public Reference Room in Washington, DC
(for information call 1-800-SEC-0330). Such information is also
available on the SEC's Internet site at http://www.sec.gov. You
may request documents by mail from the SEC, upon payment of a
duplicating fee, by writing to the Securities and Exchange
Commission, Public Reference Section, Washington, DC 20549-6009.
To aid you in obtaining this information, the Funds' 1940 Act
registration number is 811-8738.
<PAGE>
- ----------------------------------------------------------------------------
- ------------------------------------------------------------------------------
IBJ FUNDS TRUST
PREMIUM CLASS PROSPECTUS
April 6, 1999
- ------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
This Prospectus describes the following four funds (the "Funds") of the IBJ
Funds Trust:
RESERVE MONEY MARKET FUND
CORE FIXED INCOME FUND
CORE EQUITY FUND
BLENDED TOTAL RETURN FUND
This Prospectus contains important information about the Funds. Please read it
before investing and keep it on file for future reference.
- ----------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
- -----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
Investment and Performance Summary...........................3
Guide to Investing in the Funds.............................12
Additional Information on Strategies and Risks..............13
Management of the Funds.....................................18
Pricing of Fund Shares......................................19
Purchase of Fund Shares.....................................20
Minimum Purchase Requirements...................21
Exchange of Fund Shares.........................21
Redemption of Fund Shares.......................22
Dividends and Distributions.....................24
Tax Information.................................25
Distribution Arrangements.......................26
Financial Highlights............................26
<PAGE>
investment and performance summary
investment objectives and strategies
Reserve Money Market Fund (the "Money Market Fund")
Investment Objectives:
To seek current income, liquidity and the maintenance of a
stable $1.00 net asset value.
Investment Strategies:
The Money Market Fund will invest in high quality, short-term
U.S. dollar-denominated obligations. Such obligations may include (1)
obligations issued or guaranteed by the U.S. government or its agencies
or instrumentalities; (2) commercial paper, loan participation
interests, medium-term notes, asset-backed securities and other
promissory notes, including floating or variable rate obligations; (3)
domestic, Yankee dollar and Eurodollar certificates of deposit, time
deposits, money market accounts, bankers' acceptances, commercial paper
and bearer deposit notes; and (4) related repurchase agreements.
The Money Market Fund may also invest in variable amount
master demand obligations, which permit both the amount of the
obligation and the interest rate to vary. In addition, the Fund may
purchase securities on a "when-issued" basis and purchase or sell
securities on a "forward commitment" basis. It may invest more than 25%
of its total assets in the securities issued by domestic banks.
The Money Market Fund will invest only in securities or
issuers of securities that at the time of purchase (1) have received
the highest short-term rating by at least two nationally recognized
statistical rating organizations ("NRSROs"), such as "A-1" by Standard
& Poor's Corporation ("S&P") and "P-1" by Moody's Investors Service,
Inc. ("Moody's"); (2) have only one rating, provided that rating is the
highest rating by an NRSRO, or (3) are unrated, but are of "top rating"
quality.
The Fund's investments generally mature within 397 days or
less. However, the average maturity of the Fund's investments is 90
days or less.
Core Fixed Income Fund
Investment Objective:
To seek a high total return (appreciation plus current
income).
Investment Strategies:
The Core Fixed Income Fund will invest at least 65% of its
total assets in fixed income bonds, such as U.S. Government securities,
corporate bonds, asset-backed securities (including mortgage-backed
securities), savings and loan and U.S. and foreign bank obligations,
commercial paper, and related repurchase agreements. The Fund may also
invest in convertible securities, preferred stocks, debt of foreign
governments or corporations, and, for hedging purposes, futures and
options contracts.
At least 65% of the Fund's portfolio will be invested in
securities rated "A" or better by an NRSRO, or, if unrated, determined
to be of like quality. However, the Fund may also invest in
below-investment grade (high yield) bonds. The Fund has no limitation
as to average maturity or maturity of individual securities. The Fund
may use interest rate futures and/or options and options on interest
rate futures to protect the portfolio against reinvestment and interest
rate risk. For example, when interest rates are increasing and
portfolio values are falling, the Fund may enter into a futures
contract whose value will increase when interest rates fall in an
attempt to offset a decline in the value of the Fund's current
portfolio securities. In addition, the Fund may hold cash reserves for
temporary defensive or emergency purposes.
Core Equity Fund
Investment Objective:
To seek long-term capital appreciation.
Investment Strategies:
The Fund intends to invest primarily in a diversified
portfolio of common stock (and securities convertible into common
stock) of publicly traded U.S. companies. However, if in the investment
adviser's judgment, market conditions change, the Fund may also invest
in the common stock, convertible securities, preferred stocks and
warrants of any U.S. companies, the equity securities of foreign
companies (if traded "over-the-counter") and American Depository
Receipts ("ADRs"). At all times, at least 65% of the Fund's total
assets will consist of one or more of the types of securities mentioned
in this paragraph. In determining which securities to buy or sell, the
Adviser emphasizes both growth and value.
In addition, the Fund may hold debt obligations, cash or cash
equivalents, U.S. Government securities, or nonconvertible preferred
stock. The Fund currently intends to buy only those debt obligations
rated in the top three rating categories by Moody's or S&P (or
determined to be of like quality), although it has the ability to
invest up to 25% of its total assets in debt obligations in the top
four rating categories. Except for temporary defensive purposes, the
Fund will not hold more than 20% of its total assets in the form of
cash or cash equivalents at any given time.
Blended Total Return Fund
Investment Objective:
To seek long-term capital appreciation and current income for
high total return.
Investment Strategies:
The Blended Total Return Fund will invest in varying
proportions of equities and debt market securities depending on the
projected strength of the equity and debt markets at the time of
purchase. With respect to its equity portion, the Fund intends to
invest primarily in a diversified portfolio of common stock (and
securities convertible into common stock) of publicly traded U.S.
companies. However, if in the investment adviser's judgment, market
conditions change, the Fund may also invest in the common stock,
convertible securities, preferred stocks and warrants of any U.S.
companies, the equity securities of foreign companies (if traded
"over-the-counter") and American Depository Receipts ("ADRs"). In
determining which securities to buy or sell, the Adviser emphasizes
both growth and value.
Among the debt market securities in which the Fund may invest
are U.S. Government securities, corporate bonds, asset-backed
securities (including mortgage-backed securities), savings and loan and
U.S. and foreign bank obligations, commercial paper, and related
repurchase agreements, convertible securities, preferred stocks and
debt of foreign governments or corporations. The debt portion of the
Fund may invest in below-investment grade (high yield) bonds. However,
the Fund will always maintain an average rating of investment grade on
the debt portion of the portfolio. The Fund also may enter into certain
futures and options contracts for hedging purposes. The Fund has no
limitation as to average maturity or maturity of individual securities.
The Blended Total Return Fund will generally invest 30-70% of
its total assets in equity securities and the remaining 30-70% in debt
securities. Except for temporary defensive purposes, the Fund will not
hold more than 20% of its total assets in the form of cash or cash
equivalents.
RISKS OF THE FUNDS
All Funds
An investment in any of the Funds is not a deposit of a bank nor is it
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. There can be no assurance that any Fund will achieve its
investment objective or be successful in preventing or minimizing the risk of
loss inherent in investing in certain types of securities. To the extent a Fund
invests in foreign issuers, special risks are involved not typically associated
with investing in U.S. issuers. These include fluctuations in the rates of
exchange between currencies of different nations, changes in investment or
exchange control regulation (which may prohibit the transfer of currency from a
country), and by economic and political developments within a specific foreign
country.
Money Market Fund
The Money Market Fund may not achieve as high a level of current income
as other funds that do not limit their investments to the high quality
securities in which the Fund invests. Although the Money Market Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
All Non-Money Market Funds
Core Fixed Income Fund, Core Equity Fund and Blended Total Return Fund
The price per share of the Core Fixed Income Fund, the Core Equity Fund
and the Blended Total Return Fund (the "Non-Money Market Funds") will fluctuate
with changes in the value of the investments held by each Fund. The risks of
these Funds includes a potential loss of money in the event that investments
held by a Fund decline in price.
Positions in options, futures and options on futures held by these
Funds involve the risks that such options and futures may fail as hedging
techniques, that the loss from investing in futures transactions is potentially
unlimited and that closing transactions may not be effected where a secondary
liquid market does not exist.
Core Fixed Income Fund and Blended Total Return Fund (fixed income portion)
Bonds involve the risk that their price will decrease if interest rates
increase. An additional risk is that the issuers of bonds may default on their
obligations to pay principal and/or interest on the bonds or may have their
credit rating downgraded. With respect to mortgage-backed securities, risks
include a sensitivity to the rate of prepayments in that, although the value of
fixed-income securities generally increases during periods of falling interest
rates as a result of prepayments and other factors, this is not always the case
with respect to mortgage-backed securities. Asset-backed securities involve the
risk that such securities do not usually have the benefit of a complete security
interest in the related collateral. Below-investment grade, high yield
securities are considered to have speculative characteristics, and changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than in the case of higher
rated securities.
Core Equity Fund and Blended Total Return Fund (equity portion)
Changes in investors' expectations about the economy as well as about
corporate earnings and interest rates may cause shares of these Funds to
fluctuate in value.
performance
The bar charts and tables shown below provide an indication of the
risks of investing in the Funds by showing changes in each Fund's performance
from year to year (since the Funds commenced operations), and by showing how
each Fund's average annual returns for one year and for the life of the Fund
compare to those of a broad-based securities market index (in the case of the
Non-Money Market Funds) or a Treasury bond index (in the case of the Money
Market Fund). Fee waivers and expense reimbursements are reflected in both the
chart and the table. Without these fee waivers and expense reimbursements, the
Funds' performance would have been lower. How a Fund has performed in the past
is not necessarily an indication of how it will perform in the future.
<PAGE>
Reserve Money Market Fund
<TABLE>
<CAPTION>
<S><C> <C> <C>
- ------------------------------------- ------------------------------------- ----
- ------------------------------------
12/31/96 12/31/97
12/31/98
- ------------------------------------- ------------------------------------- ----
- ------------------------------------
- ------------------------------------- ------------------------------------- ----
- ------------------------------------
4.85% 5.00%
5.24%
- ------------------------------------- ------------------------------------- ----
- ------------------------------------
</TABLE>
During the period shown in the bar chart, the highest return for a
quarter was 1.32% (quarter ended September 30, 1998) and the lowest return for a
quarter was 1.16% (quarter ended March 31, 1997).
<TABLE>
<CAPTION>
<S><C> <C>
<C>
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
Average Annual Total Returns
(for the periods ended December 31, 1998) Past One Year
Since February 1, 1995*
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
Money Market Fund 5.24%
5.13%
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
U.S. Treasury Bill (3 month) Index** 4.50%
5.09%
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
* The Fund began operations on February 1, 1995.
** This Index reflects the performance of interest rates for 3 month U.S.
Treasury bills.
</TABLE>
The Money Market Fund's seven-day yield for the period ended December
31, 1998 was 4.76%. You may call 1-800-99-IBJFD (1-800-994-2533) to obtain more
current yield information.
<PAGE>
Core Fixed Income Fund
<TABLE>
<CAPTION>
<S><C> <C> <C>
- ------------------------------------- -------------------------------------- ---
- ------------------------------------
12/31/96 12/31/97
12/31/98
- ------------------------------------- -------------------------------------- ---
- ------------------------------------
- ------------------------------------- -------------------------------------- ---
- ------------------------------------
2.22% 8.91%
8.76%
- ------------------------------------- -------------------------------------- ---
- ------------------------------------
</TABLE>
During the period shown in the bar chart, the highest return for a
quarter was 4.72% (quarter ended September 30, 1998) and the lowest return for a
quarter was (1.99)% (quarter ended March 31, 1996).
<TABLE>
<CAPTION>
<S><C> <C>
<C>
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
Average Annual Total Returns
(for the periods ended December 31, 1998) Past One Year
Since February 1, 1995*
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
Core Fixed Income Fund 8.76%
8.49%
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
Lehman Intermediate Government/ 8.44%
8.57%
Corporate Bond Index**
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
Lehman Government/Corporate Bond Index*** 9.47%
9.88%
- --------------------------------------------------------------- ----------------
- ---- -------------------------------
* The Fund began operations on February 1, 1995.
** This Index reflects the performance of U.S. Treasury and Government
issues with maturities of 1 to 10 years, and investment grade corporate
bonds with maturities of 1 to 10 years. The duration of this Index
(rather than the Lehman Government/Corporate Bond Index) is more
representative of the Fund's recent duration strategy.
*** This Index reflects the performance of U.S. Treasury and Government
issues with maturities of 1 to 30 years, and investment grade corporate
bonds with maturities of 1 to 30 years.
</TABLE>
Core Equity Fund
<TABLE>
<CAPTION>
<S><C> <C> <C>
- ------------------------------------ ------------------------------------ ------
- -------------------------------------
12/31/96 12/31/97
12/31/98
- ------------------------------------ ------------------------------------ ------
- -------------------------------------
- ------------------------------------ ------------------------------------ ------
- -------------------------------------
20.64% 29.91%
24.89%
- ------------------------------------ ------------------------------------ ------
- -------------------------------------
</TABLE>
During the period shown in the bar chart, the highest return for a
quarter was 28.29% (quarter ended December 31, 1998) and the lowest return for a
quarter was (11.06)% (quarter ended September 30, 1998).
<TABLE>
<CAPTION>
<S><C> <C>
<C>
- ------------------------------------------------------------- ------------------
- -- ---------------------------------
Average Annual Total Returns
(for the periods ended December 31, 1998) Past One Year
Since February 1, 1995*
- ------------------------------------------------------------- ------------------
- -- ---------------------------------
- ------------------------------------------------------------- ------------------
- -- ---------------------------------
Core Equity Fund 24.89%
27.30%
- ------------------------------------------------------------- ------------------
- -- ---------------------------------
- ------------------------------------------------------------- ------------------
- -- ---------------------------------
Standard & Poor's 500 Stock Index** 28.74%
30.42%
- ------------------------------------------------------------- ------------------
- -- ---------------------------------
The Fund began operations on February 1, 1995.
** This Index is a widely recognized index of 500 stocks designed to mimic
the overall equity market's industry
weightings.
</TABLE>
<PAGE>
Blended Total Return Fund
<TABLE>
<CAPTION>
<S><C> <C>
<C>
- ---------------------------------------- --------------------------------------
- -------------------------------------
12/31/96 12/31/97
12/31/98
- ---------------------------------------- --------------------------------------
- -------------------------------------
- ---------------------------------------- --------------------------------------
- -------------------------------------
12.27% 16.96%
17.90%
- ---------------------------------------- --------------------------------------
- -------------------------------------
</TABLE>
During the period shown in the bar chart, the highest return for a
quarter was 12.06% (quarter ended December 31, 1998) and the lowest return for a
quarter was (1.77)% (quarter ended September 30, 1998).
<TABLE>
<CAPTION>
<S><C> <C>
<C>
- --------------------------------------------------------------- ----------------
- --- --------------------------------
Average Annual Total Returns
(for the periods ended December 31, 1998) Past One Year
Since February 1, 1995*
- --------------------------------------------------------------- ----------------
- --- --------------------------------
- --------------------------------------------------------------- ----------------
- --- --------------------------------
Blended Total Return Fund 17.90%
17.70%
- --------------------------------------------------------------- ----------------
- --- --------------------------------
- --------------------------------------------------------------- ----------------
- --- --------------------------------
Lehman Intermediate Government/ 8.44%
8.57%
Corporate Bond Index**
- --------------------------------------------------------------- ----------------
- --- --------------------------------
- --------------------------------------------------------------- ----------------
- --- --------------------------------
Standard & Poor's 500 Stock Index*** 28.74%
30.42%
- --------------------------------------------------------------- ----------------
- --- --------------------------------
- --------------------------------------------------------------- ----------------
- --- --------------------------------
Lehman Government/Corporate Bond Index**** 9.47%
9.88%
- --------------------------------------------------------------- ----------------
- --- --------------------------------
* The Fund began operations on February 1, 1995.
** This Index reflects the performance of U.S. Treasury and Government
issues with maturities of 1 to 10 years, and investment grade corporate
bonds with maturities of 1 to 10 years. The duration of this Index
(rather than the Lehman Government/Corporate Bond Index) is more
representative of the Fund's recent duration strategy.
*** This Index is a widely recognized index of 500 stocks designed to mimic
the overall equity market's industry weightings.
**** This Index reflects the performance of U.S. Treasury and Government
issues with maturities of 1 to 30 years, and investment grade corporate
bonds with maturities of 1 to 30 years.
</TABLE>
<PAGE>
FEE TABLE
This table describes the fees and expenses that you may pay if you buy
and hold shares of a Fund.
<TABLE>
<CAPTION>
Shareholder Fees (fees paid directly from your investment)
<S><C> <C> <C>
<C> <C>
Reserve
Core Blended
Money
Fixed Core Total
Market
Income Equity Return
Fund1
Fund1 Fund Fund
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of None
None None None
offering price).........................
Maximum Deferred Sales Charge (Load)
(as a percentage of redemption proceeds) None
None None None
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends None
None None None
(as a percentage of offering price).....
Redemption Fee.......................... None
None None None
Exchange Fee............................ None
None None None
Annual Fund Operating Expenses
(expenses that are deducted from a Fund's assets)
Management Fees......................... 0.35%
0.50% 0.60% 0.60%
Distribution (12b-1) Fees............... 0.35%
0.35% 0.35% 0.35%
Other Expenses.......................... 1.34%
1.05% 0.94% 0.91%
----- ---
- -- ----- -----
Shareholder Servicing Fee.......... 0.50% 0.50%
0.50% 0.50%
All Other Expenses................. 0.84% 0.55%
0.44% 0.41%
----- -----
- ----- -----
Total Annual Fund Operating Expenses.... 2.04%
1.90% 1.89% 1.86%
----- ---
- -- ----- -----
Management Fee Waiver................... 0.35%2
0.10%3 0.10%3 0.10%3
Reimbursement of Other Expenses......... 0.20%2
0.00% 0.00% 0.00%
------ ---
- -- ----- -----
Net Expenses............................ 1.49%
1.80% 1.79% 1.76%
=====
===== ===== =====
- ---------------------------------
1........Certain numerical information has been restated to reflect expenses
estimated to be incurred by the Funds for the fiscal year ending November 30,
1999.
2........Through November 30, 1999, the Adviser has contractually agreed to
waive its management fee and to reimburse the Fund up to $35,000 for its other
expenses. These waivers and reimbursements at the current asset levels will
result in the net expenses described above. The Adviser may reimburse less than
$35,000 and charge up to its full management fee if in doing so the Fund would
not exceed the Net Expenses described above. The Fund shall bear its own
expenses over 1.49%.
3........Through November 30, 1999, the Adviser has contractually agreed to
waive a portion of its management fee equal to
0.10%.
</TABLE>
<PAGE>
Example
This Example is intended to help you compare the cost of investing in a
Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in a Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same except for the expiration
of the contractual waivers and reimbursements. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
<S><C> <C> <C>
<C> <C>
Reserve Core
Blended
Money Fixed
Core Total
Market Income
Equity Return
Fund Fund
Fund Fund
1 year.................................... $ 152 $ 183
$ 182 $ 179
3 years................................... $ 587 $ 587
$ 584 $ 575
5 years................................... $ 1,048 $1,017
$ 1,012 $ 997
10 years.................................. $ 2,325 $2,214
$ 2,203 $ 2,172
</TABLE>
GUIDE TO INVESTING IN THE FUNDS
Purchase orders for the Money Market Fund received by 12:00 noon
Eastern Standard Time will become effective that day. Purchase orders for the
Non-Money Market Funds received by your investment representative in "good
order" prior to 4:00 p.m., Eastern Standard Time, and transmitted to First Data
Distributors, Inc. ("FDDI"), the Funds' distributor, prior to 4:00 p.m. Eastern
Standard Time, will become effective that day.
Minimum Initial Investment $
1,000
Minimum Initial Investment for Individual Retirement Accounts ("IRAs")
or Roth Individual Retirement Accounts
("Roth IRAs")............................... $ 250
Minimum Subsequent Investment $
50
The Funds are purchased at net asset value.
Shareholders may exchange shares between the Funds by telephone or
mail. Exchanges may not be effected by facsimile.
Minimum initial exchange.............................. $ 500
(No minimum for subsequent exchanges)
Shareholders may redeem shares by telephone, mail or wire. Shares may
not be redeemed by facsimile.
If a redemption request is received by 12:00 noon Eastern
Standard Time, proceeds for the Money Market Fund will be
transferred to a designated account that day.
The Funds reserve the right to redeem upon not less than 30
days' notice all shares in a Fund's account which have an
aggregate value of $500 or less.
(Redemption by telephone and wire is not available for IRAs, Roth
IRAs and trust relationships of the Funds' adviser.)
All dividends and distributions will be automatically paid in
additional shares at net asset value of the applicable Fund unless cash payment
is requested.
Distributions for the Core Equity Fund are paid at least once
annually, distributions for the Blended Total Return Fund are paid
quarterly and distributions for the other Funds are paid monthly.
ADDITIONAL INFORMATION ON STRATEGIES AND RISKS
INVESTMENT SECURITIES AND STRATEGIES OF THE FUNDS
This section of the Prospectus provides a more complete description of
the principal strategies, policies, and principal risks of the Funds. Additional
descriptions of the Funds' risks, strategies, and investments, as well as other
strategies and investments not described below, may be found in the Funds'
Statement of Additional Information.
IBJ Whitehall Bank & Trust Company ("IBJW" or the "Adviser"), as the Funds'
adviser, selects investments and makes investment decisions based on the
investment objective and policies of each Fund. The
following is a description of securities and investment practices.
U.S. Treasury Obligations (All Funds). The Funds may invest in U.S.
Treasury obligations, which are backed by the full faith and credit of the U.S.
Government as to the timely payment of principal and interest. U.S. Treasury
obligations consist of bills, notes, and bonds and separately traded interest
and principal component parts of such obligations known as STRIPS which
generally differ in their interest rates and maturities.
U.S. Government Securities (All Funds). U.S. Government securities are
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. U.S. Government securities include debt securities issued or
guaranteed by U.S. Government-sponsored enterprises and federal agencies and
instrumentalities. Some types of U.S. Government securities are supported by the
full faith and credit of the U.S. Government or U.S. Treasury guarantees, such
as mortgage-backed certificates guaranteed by Ginnie Mae ("GNMA") (formerly
known as the Government National Mortgage Association). Other types of U.S.
Government securities, such as obligations of the Student Loan Marketing
Association, provide recourse only to the credit of the agency or
instrumentality issuing the obligation.
<PAGE>
Commercial Paper (All Funds). Commercial paper includes short-term
unsecured promissory notes, variable rate demand notes and variable rate master
demand notes issued by both domestic and foreign bank holding companies,
corporations and financial institutions and U.S. Government agencies and
instrumentalities (but only includes taxable securities).
Corporate Debt Securities (All Funds). The Funds may purchase corporate
debt securities, subject to the rating and quality requirements for each Fund
described in the "Investment and Performance Summary."
Mortgage-Related Securities (All Funds). The Funds are permitted to
invest in mortgage-related securities, subject to the rating and quality
requirements for each Fund described in the "Investment and Performance
Summary." One example of mortgage-related securities would be mortgage
pass-through securities, which are securities representing interests in "pools"
of mortgages. Payments of both interest and principal are made monthly on the
securities. These payments are a "pass through" of monthly payments made by the
individual borrowers on the mortgage loans which underlie the securities (minus
fees paid to the issuer or guarantor of the securities).
Another example of mortgage-related securities would be collateralized
mortgage obligations ("CMOs"). Interest and prepaid principal on a CMO are paid,
in most cases, semi-annually. CMOs may be collateralized by whole mortgage loans
but are usually collateralized by portfolios of mortgage pass-through securities
guaranteed by GNMA, Federal Home Loan Mortgage Corporation ("FHLMC") or Federal
National Mortgage Association ("FNMA"). CMOs are structured in multiple classes,
with each class bearing a different stated maturity or interest rate.
Asset-Backed Securities (All Funds). The Funds are permitted to invest
in asset-backed securities, subject to each Fund's rating and quality
requirements for debt securities. Through the use of trusts and special purpose
subsidiaries, various types of assets, primarily home equity loans and
automobile and credit card receivables, are being securitized in pass-through
structures similar to the mortgage pass-through structures described above. A
Fund may invest in these and other types of asset-backed securities which may be
developed in the future, provided they are consistent with the Fund's investment
objectives, policies and quality standards.
Common Stocks (Core Fixed Income Fund, Core Equity Fund and Blended
Total Return Fund). Common stock represents the ownership interest in the issuer
that remains after all of the issuer's obligations and preferred stocks are
satisfied. Common stock fluctuates in price in response to many factors,
including past and expected future earnings of the issuer, the value of the
issuer's assets, general economic conditions, interest rates, investor
perceptions and market swings.
Preferred Stocks (Core Fixed Income Fund, Core Equity Fund and Blended
Total Return Fund). Preferred stockholders have a greater right to receive
liquidation payments and usually dividends than do common stockholders. However,
preferred stock is subordinated to the liabilities of the issuer in all
respects.
Preferred stock may or may not be convertible into common stock.
American Depository Receipts (Core Fixed Income Fund, Core Equity Fund
and Blended Total Return Fund). ADRs are U.S. dollar-denominated receipts
generally issued by domestic banks. ADRs are evidence of a deposit with the bank
of a foreign issuer. They are publicly traded on exchanges or over-the-counter
in the United States.
Investment in Foreign Securities (All Funds). The Funds may each invest in
securities of foreign governmental and private issuers. These investments must
be U.S. dollar-denominated with respect to the Money Market Fund.
Convertible and Exchangeable Securities (Core Fixed Income Fund, Core
Equity Fund and Blended Total Return Fund). These Funds are permitted to invest
in convertible and exchangeable securities, subject to the rating and quality
requirements specified with respect to equity securities for the Core Equity
Fund. Convertible securities generally offer fixed interest or dividend yields
and may be converted at a stated price or rate for common or preferred stock.
Exchangeable securities may be exchanged on specified terms for common or
preferred stock. The Funds may invest in convertible securities rated below
investment grade.
Domestic and Foreign Bank Obligations (All Funds). Examples of these
obligations are certificates of deposit, commercial paper, Yankee certificates
of deposit, bankers' acceptances, Eurodollar certificates of deposit and time
deposits, promissory notes and medium term deposit notes.
Zero Coupon Securities (All Funds). The Funds may invest in zero coupon
securities. A zero coupon security pays no interest to its holder during its
life and is sold at a discount to its face value at maturity.
Variable rate demand obligations (All Funds). Variable rate demand
obligations have a maturity of 397 days or less with respect to the Money Market
Fund or generally five to 20 years with respect to the Non-Money Market Funds.
However, these obligations carry with them the right of the holder to put the
securities to a remarketing agent or other entity on short notice, typically
seven days or less. Generally, the remarketing agent will adjust the interest
rate every seven days (or at other intervals corresponding to the notice period
for the put), in order to maintain the interest rate at the prevailing rate for
securities with a seven-day maturity. The remarketing agent is typically a
financial intermediary that has agreed to perform these services. Variable rate
master demand obligations permit a Fund to invest fluctuating amounts at varying
rates of interest pursuant to direct arrangements between the Fund, as lender,
and the borrower.
"When-Issued" and "Forward Commitment" Transactions (All Funds). The
Funds may purchase securities on a when-issued and delayed delivery basis and
may purchase or sell securities on a forward commitment basis. When-issued or
delayed delivery transactions arise when securities are purchased by a Fund with
payment and delivery taking place in the future. A Fund purchases these
securities in order to obtain an advantageous price and yield to the Fund at the
time of entering into the transaction. In a forward commitment transaction, a
Fund agrees to purchase or sell securities at a specified future date.
Loans of Portfolio Securities (All Funds). To increase current income,
each Fund may lend its portfolio securities in an amount up to 33-1/3% of its
total assets to brokers, dealers and financial institutions, provided certain
conditions are met.
Repurchase Agreements (All Funds). The Funds may enter into repurchase
agreements with any bank or broker-dealer which presents a minimum risk of
bankruptcy. Under a repurchase agreement, a Fund acquires securities and obtains
a simultaneous commitment from the seller to repurchase the securities at a
specified time and at an agreed upon price. The agreements will be fully
collateralized.
Illiquid Investments (All Funds). No Fund may invest more than 15% (10%
with respect to the Money Market Fund) of the aggregate value of its net assets
in investments which are illiquid, or not readily marketable.
Maturity of Fixed Income Securities. Neither the Core Fixed Income Fund
nor the debt portion of the Blended Total Return Fund has any limitation on
average maturity or the maturity of individual securities.
Selection of Securities. Each stock selected by the Core Equity Fund
and the equity portion of the Blended Total Return Fund will be selected based
on certain factors, including but not limited to: (1) the company's fundamental
business outlook and competitive position, (2) the valuation of the security
relative to its own historical norms, to the industry in which the company
competes, and to the market as a whole, and (3) the momentum of earnings growth
expected to be generated by the company.
Each fixed income security selected by the Core Fixed Income Fund and
the debt portion of the Blended Total Return Fund will be selected based on
certain factors, including but not limited to: (1) the impact of overall
duration risk of the total portfolio, (2) the attractiveness of the relevant
market sector versus benchmark allocation, (3) the creditworthiness of corporate
debt issuers and rating trends, and (4) the overall structure of the debt issue
being considered for purchase.
Temporary Defensive Positions (Core Fixed Income Fund, Core Equity Fund
and Blended Total Return Fund). In order to meet liquidity needs or for
temporary defensive purposes, each Fund may invest up to 100% of its assets in
fixed income securities, money market securities, certificates of deposit,
bankers' acceptances, commercial paper or in equity securities which in the
Adviser's opinion are more conservative than the types of securities that the
Fund typically invests in. To the extent a Fund is engaged in temporary
defensive investments, it will not be pursuing its investment objective.
Portfolio Turnover. The Funds generally will not engage in the trading
of securities for short-term profits. However, under certain market conditions,
the Non-Money Market Funds may seek profits by short-term trading. In addition,
each Fund will adjust its portfolio in view of current or anticipated market
conditions or fluctuations in interest rates to accomplish its respective
investment objective. For example, each Fund may sell portfolio securities in
anticipation of a downturn in the market. Frequency of portfolio turnover (that
is, a change in the number of securities owned by a Fund) will not be a limiting
factor if a Fund considers it
advantageous to purchase or sell securities. A high rate of portfolio turnover
involves correspondingly greater transaction expenses than a lower rate. Each
Fund and its shareholders must bear these expenses. Further, portfolio turnover
may result in the realization of taxable gains, which would in turn lower a
Fund's return to shareholders.
Additional Risks of Investing in the Funds
The Funds may not be able to prevent or lessen the risk of loss that is
involved in investing in particular types of securities. Any of the Funds may
invest in the securities of issuers in a foreign country, which involves special
risks and considerations not typically associated with investing in U.S.
issuers. There may be less publicly available information about a foreign issuer
than about a domestic issuer. Foreign issuers also are not generally subject to
uniform accounting, auditing and financial reporting standards comparable to
those applicable to domestic issuers. In addition, with respect to certain
foreign countries, interest may be withheld at the source under foreign income
tax laws, and there is a possibility of expropriation or confiscatory taxation,
political or social instability or diplomatic developments that could adversely
affect investments in securities of issuers located in those countries.
Investments in ADRs also present many of the same risks as foreign securities.
Below-investment grade (high-yield) bonds, which are also known as junk
bonds, may be purchased by the Core Fixed Income Fund and the Blended Total
Return Fund or may be issued to these Funds as a result of corporate
restructurings, such as leveraged buy-outs, mergers, acquisitions, debt
recapitalizations or similar events. These bonds are also often issued by
smaller, less creditworthy companies or by highly leveraged firms which are
generally less able than more financially stable firms to make scheduled
payments of interest and principal. The high yield bonds in which these Funds
may invest are rated "BB" and higher by S&P or "B" and higher by Moody's. The
risks posed by bonds issued under such circumstances are substantial. Also,
during an economic downturn or substantial period of rising interest rates,
highly leveraged issuers may experience financial stress which would adversely
affect their ability to service principal and interest payment obligations, to
meet projected business goals and to obtain additional financing. Changes by
recognized rating agencies in the rating of any security and in the ability of
an issuer to make payments of interest and principal will also ordinarily have a
more dramatic effect on the values of these investments than on the values of
high-rated securities. Such changes in value will not affect cash income derived
from these securities, unless the issuers fail to pay interest or dividends when
due. Such changes will, however, adversely affect a Fund's net asset value per
share.
Any of the Non-Money Market Funds may invest in smaller companies which
may involve greater risks than investments in large companies due to such
factors as limited product lines, markets and financial or managerial resources,
and less frequently traded securities that may be subject to more abrupt price
movements than securities of larger companies.
Year 2000. Like other funds and business organizations around the
world, the Funds could be adversely affected if the computer systems used by the
Adviser and the Funds' other service providers do not properly process and
calculate date-related information for the year 2000 and beyond. The Funds have
been informed that the Adviser, and the Funds' other service providers (i.e.,
administrator, transfer agent, fund accounting agent, distributor and custodian)
have developed and are implementing clearly defined and documented plans to
minimize the risk associated with the Year 2000 problem. These plans include the
following activities: inventorying of software systems, determining inventory
items that may not function properly after December 31, 1999, reprogramming or
replacing such systems and retesting for Year 2000 readiness. In addition, the
service providers are obtaining assurances from their vendors and suppliers in
the same manner. Non-compliant Year 2000 systems upon which the Fund is
dependent may result in errors and account maintenance failures. The Funds have
no reason to believe that (i) the Year 2000 plans of the Adviser and the Funds'
other service providers will not be completed by December 31, 1999, and (ii) the
costs currently associated with the implementation of their plans will have a
material adverse impact on the business, operations or financial condition of
the Funds or their service providers.
In addition, the Year 2000 problem may adversely affect the companies
in which the Funds invest. For example, these companies may incur substantial
costs to correct the problem and may suffer losses caused by data processing
errors. Since the ultimate costs or consequences of incomplete or untimely
resolution of the Year 2000 problem by the Funds' service providers are unknown
to the Funds at this time, no assurance can be made that such costs or
consequences will not have a material adverse impact on the Funds or their
service providers.
The Funds and the Adviser will continue to monitor developments
relating to the Year 2000 problem, including the development of contingency
plans for providing back-up computer services in the event of systems failure.
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction
of the Board of Trustees.
The Adviser: IBJ WHITEHALL BANK & TRUST COMPANY
IBJW provides investment advisory services to the Funds.
For these services IBJW may receive fees based on average
daily net assets up to the following annualized rates for
the Funds: Reserve Money Market Fund, 0.35%; Core Fixed
Income Fund, 0.50%; Core Equity Fund, 0.60%; and Blended
Total Return Fund, 0.60%. After fee waivers, IBJW received
the following fees based on average daily net assets for
the year ended November 30, 1998: Reserve Money Market
Fund, 0.00%; Core Fixed Income Fund, 0.40%; Core Equity
Fund, 0.05%; and Blended Total Return Fund, 0.50%.
IBJW, formed in 1929, provides banking, trust and
investment services to individuals and institutions. It
acts as the investment adviser to a wide variety of
trusts, individuals, institutions and corporations. IBJW's
investment management responsibilities, as of December 31,
1998, included accounts with aggregate assets of
approximately $2.7 billion. The principal business address
of IBJW is One State Street, New York, New York 10004.
The Portfolio Mr. Paul Blaustein, Senior Vice President, has been
affiliated with IBJW since 1997 and is Managers: responsible for the day-to-day
management of the Core Equity Fund and the equity portion of the Blended Total
Return Fund. He has held these positions since August 1998 and January 1999,
respectively. Mr. Blaustein was a Vice President and portfolio manager at Desai
Capital Management from 1996 to 1997, was a Vice President of the Investment
Research Department at Legg Mason from 1994 to 1996 and was a Vice President and
investment analyst at Warburg Pincus Counselors from 1991 to 1994.
Mr. Martin Liebgott, Senior Vice President, has been
affiliated with IBJW since 1988 and is responsible for the
day-to-day management of the Reserve Money Market Fund and
the Core Fixed Income Fund. He has held these positions
since inception. He has also been responsible for the
day-to-day management of the fixed income portion of the
Blended Total Return Fund since April 1998. He was
previously responsible for the day-to-day management of
the fixed income portion of the Blended Total Return Fund
from inception to October 1997.
PRICING OF FUND SHARES
Each Fund's shares are priced at net asset value. The net asset value
per share of the Funds is calculated at 12:00 noon (Eastern Standard Time) for
the Money Market Fund and at 4:00 p.m. (Eastern Standard Time) for each of the
Non-Money Market Funds, Monday through Friday, on each day that the New York
Stock Exchange is open for trading. The net asset value is not calculated on the
following business holidays: New Year's Day, Martin Luther King, Jr.'s Birthday,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day; and the following additional business
holidays for the Money Market Fund: Columbus Day and Veterans Day. The net asset
value per share of each Fund is computed by dividing the value of each Fund's
net assets (i.e., the value of the assets less the liabilities) by the total
number of such Fund's outstanding shares. All expenses, including fees paid to
the Adviser and any affiliate of FDDI or First Data Investor Services Group,
Inc. ("FDISG"), the Funds' administrator, are accrued daily and taken into
account for the purpose of determining the net asset value.
Securities are valued using market quotations. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by or at the direction of the Board of Trustees. Bonds
and other fixed income securities may be valued on the basis of prices provided
by a pricing service approved by the Board of Trustees. All assets and
liabilities initially expressed in foreign currencies will be converted into
U.S. dollars.
The Money Market Fund uses the amortized cost method to value its
portfolio securities. It seeks to maintain a constant net asset value of $1.00
per share, although there may be circumstances under which this goal cannot be
achieved. The amortized cost method involves valuing a security at its cost and
amortizing any discount or premium over the period until maturity, regardless of
the impact of fluctuating interest rates on the market value of the security.
To the extent a Fund has portfolio securities that are primarily listed
on foreign exchanges that trade on weekends or other days when the Fund does not
price its shares, the net asset value of the Fund's shares may change on days
when shareholders will not be able to purchase or redeem the Fund's shares.
PURCHASE OF FUND SHARES
The Premium Class shares offered in this prospectus are sold at net
asset value without a sales load only. Shareholders in the Premium Class of
shares may be subject to an additional 12b-1 fee of up to 0.35% of average daily
net assets and an additional shareholder servicing charge of up to 0.50% of
average daily net assets. In no event will a Fund pay greater than 0.25% of
average daily net assets to entities for providing customers with personal
services (as defined by the NASD), such as responding to shareholder inquiries.
Orders for the purchase of shares will be executed at the net asset
value per share next determined after an order has been received in "good
order."
The following purchase procedures do not apply to certain fund or trust
accounts that are managed by IBJW. The customer should consult his or her trust
administrator for proper instructions.
All funds received are invested in full and fractional shares of the
appropriate Fund. Certificates for shares are not issued. The Funds reserve the
right to reject any purchase. The Funds will not accept any third party or
foreign checks.
An investment may be made using any of the following methods:
Through IBJW. Shares are available to new and existing shareholders
through IBJW or its affiliates or other authorized investment advisers. To make
an investment using this method, simply complete a Purchase Application and
contact your IBJW representative or investment adviser with instructions as to
the amount you wish to invest. They will then contact the Fund to place the
order on your behalf on that day.
Orders received by your IBJW representative for the Non-Money Market
Funds in "good order" prior to the determination of net asset value and
transmitted to the Fund prior to the close of its business day (which is
currently 4:00 p.m., Eastern Standard Time), will become effective that day.
Orders for the Money Market Fund received in "good order" prior to 12:00 noon
Eastern Standard Time will become effective that day. You should receive written
confirmation of your order within a few days of receipt of instructions from
your representative.
Other Purchase Information. Requests in "good order" must include the
following documents: (a) A letter of instruction, if required, signed by all
registered owners of the shares in the exact names in which they are registered;
(b) Any required signature guarantees (see "Signature Guarantees" below); and
(c) Other supporting legal documents, if required, in the case of estates,
trusts, guardianships, custodianships, corporations, pension and profit sharing
plans and other organizations.
Signature Guarantees. To protect shareholder accounts, the Funds, and
their transfer agent from fraud, signature guarantees are required to enable the
Funds to verify the identity of the person who has authorized a redemption from
an account. Signature guarantees are required for (1) redemptions where the
proceeds are to be sent to someone other than the registered shareowner(s) and
the registered address and (2) share transfer requests. Shareholders may contact
the Funds at 1-800-99-IBJFD (1-800-994-2533) for further details.
By Wire. Investments may be made directly through the use of wire
transfers of Federal funds. Contact your bank and request it to wire Federal
funds to the applicable Fund. Your bank may charge a fee for handling the
transaction. Please call 1-800-99-IBJFD (1-800-994-2533) for wiring
instructions. A completed application must be sent by overnight delivery to the
Fund in advance of the wire to IBJ Funds Trust, P.O. Box 5183, Westborough, MA
01581-5183. Notification must be given to the Fund at 1-800-99-IBJFD
(1-800-994-2533) prior to 12:00 p.m. Eastern Standard Time, of the wire date for
the Money Market Fund and prior to 4:00 p.m. Eastern Standard Time in the case
of the Non-Money Market Funds.
By Mail. Payments to open new accounts should be sent to IBJ Funds
Trust, P.O. Box 5183, Westborough, MA 01581-5183, together with a completed
application. If fund shares purchased by check are redeemed, payment of
redemption proceeds will be delayed until payment of the purchase has been
collected, which may take up to 15 days after purchase. Checks should be made
payable to the order of IBJ Funds Trust.
Institutional Accounts. Bank trust departments and other institutional
accounts may place orders directly with the Funds by telephone at 1-800-99-IBJFD
(1-800-994-2533).
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in the Funds is $1,000 unless the
purchaser has at least $1,000 or more in any of the IBJ Funds, is a purchaser
through a trust or investment account administered by the Adviser, is an
employee or an ex-employee of IBJW or is an employee of any of its affiliates,
FDDI, FDISG, or any other service provider, or is an employee of any trust
customer of IBJW or any of its affiliates. Note that the minimum is $250 for an
IRA or Roth IRA, other than an IRA or Roth IRA for which IBJW or any of its
affiliates acts as trustee or custodian. Any subsequent investments must be at
least $50, including an IRA or Roth IRA investment. All initial investments
should be accompanied by a completed Purchase Application. A Purchase
Application accompanies this Prospectus. A separate application is required for
IRA or Roth IRA investments. (For more IRA or Roth IRA information, call
1-800-99-IBJFD (1-800-994-2533)). The Funds reserve the right to reject purchase
orders.
EXCHANGE OF FUND SHARES
Shareholders may exchange shares of one Fund for shares of another Fund
by either telephone or mail. A shareholder should first read carefully the
Prospectus describing the Fund into which the exchange will occur, which is
available without charge and can be obtained by writing to the Fund at P.O. Box
5183, Westborough, MA 01581-5183 or by calling 1-800-99-IBJFD (1-800-994-2533).
The minimum amount for an initial exchange is $500. No minimum is required in
subsequent exchanges. The Trust may terminate or amend the terms of the exchange
privilege at any time, upon 60 days' notice to shareholders.
A new account opened by exchange must be established with the same
name(s), address and social security number as the existing account. All
exchanges will be made based on the net asset value next determined following
receipt of the request by a Fund in "good order."
An exchange is taxable as a sale of a security on which a gain or loss
may be recognized. Shareholders should receive written confirmation of the
exchange within a few days of the completion of the transaction.
Exchange by Mail. A letter of instruction should be sent by mail to IBJ
Funds Trust, P.O. Box 5183, Westborough, MA 01581-5183. The letter of
instruction must include: (i) your account number; (ii) the Fund from and the
Fund into which you wish to exchange your investment; (iii) the dollar or share
amount you wish to exchange; and (iv) the signatures of all registered owners or
authorized parties. No signature guarantee is required. You must have held
shares used in the exchange for at least 10 days before you can exchange into
another Fund.
Exchange by Telephone. To exchange Fund shares by telephone or if you
have any questions, simply call the Funds at 1-800-99-IBJFD (1-800-994-2533).
You should be prepared to give the telephone representative the following
information: (i) your account number, social security or tax identification
number and account registration; (ii) the name of the Fund from and the Fund
into which you wish to transfer your investment; and (iii) the dollar or share
amount you wish to exchange. The conversation may be recorded to protect you and
the Funds. Telephone exchanges are available only if the shareholder so
indicates by checking the "yes" box on the Purchase Application. See "Redemption
of Fund Shares - By Telephone" in this Prospectus for a discussion of telephone
transactions generally.
Automatic Investment Program. An eligible shareholder may also
participate in the Automatic Investment Program, an investment plan that
automatically debits money from the shareholder's bank account and invests it in
one or more of the Funds in the Trust through the use of electronic funds
transfers or automatic bank drafts. Shareholders may elect to make subsequent
investments by transfers of a minimum of $500 on either the fifth or twentieth
day of each month into their established Fund account. Contact the Funds for
more information about the Automatic Investment Program.
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares on any business day. Shares will
be redeemed at the net asset value next determined after the applicable Fund
receives your redemption request in "good order." A redemption is a taxable
transaction on which gain or loss may be recognized. Generally, however, gain or
loss is not expected to be realized on a redemption of shares of the Money
Market Fund which seeks to maintain a net asset value per share of $1.00.
Where the shares to be redeemed have been purchased by check, the
payment of redemption proceeds may be delayed if the purchasing check has not
cleared, which may take up to 15 days. Shareholders may avoid this delay by
investing through wire transfers of Federal funds.
Once the shares are redeemed, a Fund will ordinarily send the proceeds
by check to the shareholder at the address of record on the next business day.
The Funds may, however, take up to seven days to make payment. If the New York
Stock Exchange is closed (or when trading is restricted) for any reason other
than the customary weekend or holiday closing or if an emergency condition as
determined by the Securities and Exchange Commission (the "SEC") merits such
action, the Funds may suspend redemptions or postpone payment dates.
Redemption Methods. You may redeem your shares using any of the methods set
forth below:
Through an IBJW Representative or Authorized Investment Adviser. You
may redeem your shares by contacting your IBJW representative or investment
adviser and instructing him or her to redeem your shares. He or she will then
contact the Fund and place a redemption trade on your behalf. He or she may
charge you a fee for this service.
By Mail. Requests should be addressed to IBJ Funds Trust, P.O. Box
5183, Westborough, MA 01581-5183. To protect shareholder accounts, the Funds,
and the transfer agent from fraud, a signature guarantee will be required when
redemption proceeds are to be sent to an address other than the registered
address, or if the redemption is greater than $50,000. To be accepted, a letter
requesting redemption must include: (i) the Fund name and account registration
from which you are redeeming shares; (ii) your account number; (iii) the amount
to be redeemed; (iv) the signatures of all registered owners; and (v) a
signature guarantee by any eligible guarantor institution including a member of
a national securities exchange or a commercial bank or trust company,
broker-dealers, credit unions and savings associations, if required (see
"Purchase of Fund Shares"). Corporations, partnerships, trusts or other legal
entities must submit additional documentation.
By Check. You may redeem your Money Market Fund shares by drawing
checks on your account. You must first complete the signature card provided with
the purchase application. Upon receiving the properly completed application and
signature card, First Data Investor Services Group Inc. ("FDISG"), the Funds'
transfer agent, will provide you with checks free of charge. These checks may be
made payable to the order of any person in the amount of $500 or more. When a
check is presented for payment, a sufficient number of full and fractional
shares in the shareholder's account will be redeemed to cover the amount of the
check. You cannot use a check to close out your account since additional shares
accrue daily.
By Telephone. You may redeem your shares by calling the Funds at
1-800-99-IBJFD (1-800-994-2533). You should be prepared to give the telephone
representative the following information: (i) your account number, social
security number and account registration; (ii) the Fund name from which you are
redeeming shares; and (iii) the dollar or share amount to be redeemed. The
conversation may be recorded to protect you and the Funds. Telephone redemptions
are available only if the shareholder so indicates by checking the "yes" box on
the Purchase Application or on the Optional Services Form. The Funds employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. If the Funds fail to employ such reasonable procedures, they may be
liable for any loss, damage or expense arising out of any telephone transactions
purporting to be on a shareholder's behalf. In order to assure the accuracy of
instructions received by telephone, the Funds require some form of personal
identification prior to acting upon instructions received by telephone. They
also record telephone instructions and provide written confirmation to investors
of such transactions. Redemption requests transmitted via facsimile will not be
accepted. Although other redemption methods may be used, telephone redemption
and telephone exchanges will be suspended for a period of 10 days following an
address change made by telephone.
<PAGE>
By Wire. You may redeem your shares by contacting the Funds by mail or
telephone and instructing them to send a wire transmission to your personal
bank. Proceeds of wire redemption for the Money Market Fund generally will be
transferred to the designated account on the day the request is received,
provided that it is received by 12:00 Noon (Eastern Standard Time).
Your instructions should include: (i) your account number, social
security or tax identification number and account registration; (ii) the Fund
name from which you are redeeming shares; and (iii) the dollar or share amount
to be redeemed. Wire redemptions can be made only if the "yes" box has been
checked on your Purchase Application, and you attach a copy of a void check from
the account where proceeds are to be wired. Your bank may charge you a fee for
receiving a wire payment on your behalf.
Other Redemption Information. Requests in "good order" must include the
documents listed in "Purchase of Fund Shares --- Other Purchase Information."
The above mentioned services --- "By Telephone," "By Check," and "By
Wire" --- are not available for IRAs or Roth IRAs and trust relationships of
IBJW.
Systematic Withdrawal Plan. An owner of $10,000 or more of shares of a
Fund may elect to have periodic redemptions from his or her account to be paid
on a monthly, quarterly, semi annual or annual basis. The minimum periodic
payment is $100. A sufficient number of shares to make the scheduled redemption
will normally be redeemed on the date selected by the shareholder. Depending on
the size of the payment requested and fluctuation in the net asset value, if
any, of the shares redeemed, redemptions for the purpose of making such payments
may reduce or even exhaust the account. A shareholder may request that these
payments be sent to a predesignated bank or other designated party. Capital
gains and dividend distributions paid to the account will automatically be
reinvested at net asset value on the distribution payment date.
Redemption of Small Accounts. Due to the high cost of servicing small
accounts, each Fund may redeem, on 30-days' notice, an account in a Fund that
has been reduced by a shareholder to $500 or less. However, if during the 30 day
notice period the shareholder purchases sufficient shares to bring the value of
the account above $500, this restriction will not apply.
Redemption in Kind. All redemptions of Fund shares shall be made in
cash. However, this commitment applies only to redemption requests made by a
Fund shareholder during any 90-day period of up to the lesser of $250,000 or 1%
of the net asset value of that Fund at the beginning of such period. If a
redemption request exceeds these amounts, a Fund may make full or partial
payment in securities or other assets.
DIVIDENDS AND DISTRIBUTIONS
Each Fund intends to distribute to its shareholders substantially all
of its net investment income. The Reserve Money Market Fund and the Core Fixed
Income Fund will declare distributions of such income daily and pay those
dividends monthly; the Core Equity Fund will declare and pay distributions
annually and the Blended Total Return Fund will declare and pay dividends at
least quarterly. Each Fund intends to distribute, at least annually,
substantially all realized net capital gain. It is expected that the Reserve
Money Market Fund's distributions will consist primarily of ordinary income.
Distributions will be paid in additional Fund shares based on the net
asset value at the close of business on the payment date of the distribution,
unless the shareholder elects in writing, at least five full business days
before the record date, to receive such distributions in cash. Dividends for a
given month will be paid within five business days after the end of such month.
In the case of the Money Market Fund, shares purchased will begin
earning dividends on the day the shares are bought and shares redeemed will earn
dividends through the day before redemption. Net investment income for a
Saturday, Sunday or a holiday will be declared as a dividend on the previous
business day. In the case of the other Funds that declare daily dividends,
shares purchased will begin earning dividends on the day after the shares are
bought, and shares redeemed will earn dividends through the day the redemption
is executed.
Dividends and distributions from a Fund are taxable to shareholders
whether received in additional shares or in cash.
If you elect to receive distributions in cash and checks (1) are
returned and marked as "undeliverable" or (2) remain uncashed for six months,
your cash election will be changed automatically. Your future dividend and
capital gains distribution will be reinvested in the Fund at the per share net
asset value determined as of the day the distribution is paid. In addition, any
undeliverable checks or checks that remain uncashed for six months will be
canceled and will be reinvested in the Fund at the per share net asset value
determined as of the date of cancellation.
tax information
Each Fund intends to distribute substantially all of its income. The
income dividends a shareholder receives from a Fund may be taxed as ordinary
income and capital gains (which may be taxable at different rates depending on
the length of time the Fund holds its assets), regardless of whether the
shareholder receives the dividends in cash or in additional shares.
A distribution will be treated as paid on December 31 of the calendar
year if it is declared by a Fund during October, November, or December of that
year and paid by a Fund during January of the following calendar year.
Those Funds that may invest in securities of foreign issuers may be
subject to withholding and other similar income taxes imposed by a foreign
country. Each of these Funds intends to elect, if it is eligible to do so under
the Internal Revenue Code, to "pass through" to its shareholders the amount of
such foreign taxes paid. Each shareholder will be notified within 60 days after
the close of a Fund's taxable year whether the foreign taxes paid by the Fund
will "pass through" for that year.
Shareholders will be notified annually as to the Federal tax status of
distributions made by the Fund(s) in which they invest. Depending on the
residence of the shareholder for tax purposes, distributions also may be subject
to state and local taxes, including withholding taxes. Shareholders should
consult their own tax advisers as to their Federal, state and local tax
liability.
DISTRIBUTION ARRANGEMENTS
The Funds have adopted a plan under Rule 12b-1 that allows the Premium
Class of each Fund to pay distribution fees of up to 0.35% of average daily net
assets for the sale and distribution of its shares. Because these fees are paid
out of the assets of each Fund's Premium Class on an on-going basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
In addition, the Premium Class of each Fund may pay various financial
organizations ("Service Organizations"), such as banks, trust companies, and
broker-dealers, for providing administrative services for the Premium Class. An
example of these services would be maintaining shareholder accounts and records.
These fees would not exceed an annual rate of 0.50% of the daily net asset value
of the Funds' shares owned by shareholders with whom the Service Organization
has a servicing relationship.
Through another prospectus, each Fund also offers a Service Class of
shares. Only certain institutional and other investors are qualified to purchase
the Service Class. Shareholders in the Service Class are not subject to either a
12b-1 fee or a shareholder servicing fee.
Account Services
All transactions in Fund shares will be reflected in a statement for
each shareholder. In those cases where a Service Organization or its nominee is
a shareholder of record for shares purchased for its customer, the Service
Organization or its nominee decides whether the statement will be sent to the
customer.
financial highlights
These financial highlights tables are intended to help you understand
each Fund's financial performance since it began operations on February 1, 1995.
The total returns in these tables represent the rate that an investor would have
earned on an investment in a Fund (assuming reinvestment of all dividends and
distributions). The information for the year ended November 30, 1998 has been
audited by Ernst & Young LLP, whose report, along with the Funds' financial
statements, is included in the annual report, which is available upon request.
The information for periods prior to the year ended November 30, 1998 were
audited by other independent auditors, whose reports thereon were unqualified.
<PAGE>
<TABLE>
<CAPTION>
Reserve Money Market Fund
<S><C> <C> <C>
<C> <C>
For the Year For the Year
For the Year For the Period
ended ended
ended Feb. 1, 1995*
Nov. 30, Nov. 30,
Nov. 30, to Nov. 30,
1998 1997
1996 1995
------------ ------------
- ------------ --------
Net Asset Value, Beginning of Period... $1.00 $1.00
$1.00 $1.00
----- -----
- ----- -----
Income from Investment Operations:
Net investment income.............. 0.05 0.05
0.05 0.04
Less Dividends from:
Net investment income................ (0.05) (0.05)
(0.05) (0.04)
Net Asset Value, End of Period......... $1.00 $1.00
$1.00 $1.00
===== =====
===== =====
Total Return(a)........................ 5.27% 4.96%
4.88% 4.55%
Ratios/Supplemental Data:
Net Assets, End of Period (in $14 $13
$14 $13
thousands).............................
Ratios to average net assets:
Expenses before 0.76% 0.99%
0.95% 0.92%**
waivers/reimbursements+................
Expenses net waivers/reimbursements.. 0.41% 0.64%
0.65% 0.64%**
Net investment income................ 5.16% 4.84%
4.82% 5.40%**
-------------------------------------------
* Commencement of operations.
** Annualized.
+ During the period, certain fees were voluntarily reduced
and/or reimbursed. If such voluntary fee reductions and/or
reimbursements had not occurred, the ratios would have been as
indicated.
(b) Total return is based on the change in net asset value during
the period and assumes reinvestment of all dividends and
distributions.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Core Fixed Income Fund
<S><C> <C> <C>
<C> <C>
For the Year For the Year
For the Year For the
ended ended
ended Period
Nov. 30, Nov. 30,
Nov. 30, Feb. 1, 1995*
1998 1997
1996 to Nov. 30,
------------ ------------
- ------------
1995
Net Asset Value, Beginning of Period. $10.35 $10.22
$10.72 $10.00
------ ------
- ------ ------
Income from Investment Operations:
Net investment income.............. 0.59 0.57
0.54 0.48
Net realized and unrealized gains
(losses) 0.34 0.13
(0.12) 0.72
---- ----
- ------ ----
on investment transactions.........
Total income from investment 0.93 0.70
0.42 1.20
---- ----
- ---- ----
operations...........................
Less Dividends from: (0.59) (0.57)
(0.54) (0.48)
Net investment income..............
Realized gains..................... (0.08) 0.00
(0.38) 0.00
------ ----
- ------ ----
Net change in net asset value per 0.26 0.13
(0.50) 0.72
---- ----
- ------ ----
share................................
Net Asset Value, End of Period....... $10.61 $10.35
$10.22 $10.72
====== ======
====== ======
Total Return(a)...................... 9.27% 7.20%
4.25% 12.28%
Ratios/Supplemental Data:
Net Assets, End of Period (in $15 $13
$15 $14
thousands)...........................
Ratios to average net assets:
Expenses before 0.90% 1.17%
1.22% 1.22%**
waivers/reimbursements+..............
Expenses net waivers/reimbursements 0.80% 1.07%
1.12% 1.12%**
Net investment income.............. 5.63% 5.61%
5.07% 5.59%**
Portfolio Turnover Rate(b)........... 93% 210%
160% 297%
-----------------------------------------
* Commencement of operations.
** Annualized.
+ During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred,
the ratios would have been as indicated.
(a) Total return is based on the change in net asset value during the period
and assumes reinvestment of all dividends and distributions.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Core
Equity Fund
<S><C> <C> <C>
<C> <C>
For the Year For the Year
For the Year For the
Ended Ended
Ended Period
Nov. 30, Nov. 30,
Nov. 30, Feb. 1, 1995*
1998 1997
1996 to Nov. 30,
------------ ------------
- ------------
1995
Net Asset Value, Beginning of Period. $16.68 $15.37
$12.97 $10.00
------ ------
- ------ ------
Income from Investment Operations:
Net investment income.............. 0.07 0.35
0.14 0.13
Net realized and unrealized gains
on 2.37 3.04
2.90 2.84
---- ----
- ---- ----
investment transactions.......
Total income from investment 2.44 3.39
3.04 2.97
---- ----
- ---- ----
operations...........................
Less Distributions from: (0.05) (0.31)
(0.19) ----
Net investment income.............. ---- (0.24)
- ---- ----
In excess of net investment income.
Realized gains..................... (2.55) (1.53)
(0.45) ----
------ ------
- ------ ----
Net change in net asset value per (0.16) 1.31
2.40 2.97
------ ----
- ---- ----
share................................
Net Asset Value, End of Period....... $16.52 $16.68
$15.37 $12.97
====== ======
====== ======
Total Return(a)...................... 17.87% 24.68%
24.61% 29.70%
Ratios/Supplemental Data:
Net Assets, End of Period (in $17 $15
$20 $16
thousands)...........................
Ratios to average net assets:
Expenses before 1.04% 0.99%
0.99% 1.09%**
waivers/reimbursements+..............
Expenses net waivers/reimbursements 0.94% 0.89%
0.89% 0.89%**
Net investment income.............. 0.32% 0.74%
0.93% 1.30%**
Portfolio Turnover Rate(b)........... 92% 44%
27% 37%
--------------------------------
* Commencement of operations.
** Annualized.
+ During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred,
the ratios would have been as indicated.
(a) Total return is based on the change in net asset value during
the period and assumes reinvestment of all dividends and
distributions.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Blended Total Return Fund
<S><C> <C> <C>
<C> <C>
For the Year For the Year
For the Year For the
Ended Ended
Ended Period
Nov. 30, Nov. 30,
Nov. 30, Feb. 1, 1995*
1998 1997
1996 to Nov. 30,
------------ ------------
- ------------
1995
Net Asset Value, Beginning of Period. $13.51 $12.76
$11.78 $10.00
------ ------
- ------ ------
Income from Investment Operations:
Net investment income.............. 0.38 0.50
0.34 0.27
Net realized and unrealized gains
on 1.41 1.27
1.26 1.79
---- ----
- ---- ----
investment transactions.......
Total income from investment 1.79 1.77
1.60 2.06
---- ----
- ---- ----
operations...........................
Less Distributions from: (0.38) (0.50)
(0.35) (0.28)
Net investment income............
Realized gains..................... (2.02) (0.52)
(0.27) ----
------ ------
- ------ ----
Net change in net asset value per (0.61) 0.75
0.98 1.78
------ ----
- ---- ----
share................................
Net Asset Value, End of Period....... $12.90 $13.51
$12.76 $11.78
====== ======
====== ======
Total Return(a)...................... 15.98% 14.69%
14.08% 20.72%
Ratios/Supplemental Data:
Net Assets, End of Period (in $16 $14
$17 $15
thousands)...........................
Ratios to average net assets:
Expenses before 1.01% 1.07%
1.09% 1.14%**
waivers/reimbursements+..............
Expenses net waivers/reimbursements 0.91% 0.97%
0.99% 1.04%**
Net investment income.............. 2.95% 2.91%
2.98% 3.04%**
Portfolio Turnover Rate(b)........... 76% 138%
77% 78%
--------------------------------
* Commencement of operations.
** Annualized.
+ During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred,
the ratios would have been as indicated.
(a) Total return is based on the change in net asset value during
the period and assumes reinvestment of all dividends and
distributions.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
</TABLE>
<PAGE>
ibj funds trust
Reserve Money Market Fund
Core Fixed Income Fund
Core Equity Fund
Blended Total Return Fund
Additional information about the Funds is included in a
Statement of Additional Information dated April 6, 1999 (the
"SAI"). The SAI is incorporated by reference into this
Prospectus and, therefore, is legally a part of this Prospectus.
Information about each Fund's investments is available in the
Funds' annual and semi-annual reports to shareholders. In the
Funds' annual report, you will find a discussion of the market
conditions and investment strategies that significantly affected
each Fund's performance during its last fiscal year.
You may make inquiries about the Funds or obtain a copy of the
SAI, or of the annual or semi-annual reports, without charge by
calling 1-800-99-IBJFD (1-800-994-2533).
Information about the Funds (including the SAI) can be reviewed
and copied at the SEC Public Reference Room in Washington, DC
(for information call 1-800-SEC-0330). Such information is also
available on the SEC's Internet site at http://www.sec.gov. You
may request documents by mail from the SEC, upon payment of a
duplicating fee, by writing to the Securities and Exchange
Commission, Public Reference Section, Washington, DC 20549-6009.
To aid you in obtaining this information, the Funds' 1940 Act
registration number is 811-8738.
<PAGE>
- ----------------------------------------------------------------------------
IBJ FUNDS TRUST
SERVICE CLASS
PREMIUM CLASS
STATEMENT OF ADDITIONAL INFORMATION
April 6, 1999
- ------------------------------------------------------------------------------
This Statement of Additional Information (the "SAI"), which is not a
prospectus, describes the following four Funds of the IBJ Funds Trust (the
"Funds"):
.........o Reserve Money Market Fund
o Core Fixed Income Fund
o Core Equity Fund
o Blended Total Return Fund
This SAI should be read in conjunction with the Funds' Prospectuses for
Service Class and Premium Class shares, each dated April 6, 1999. The Financial
Statements included in the Funds' November 30, 1998 Annual Report are
incorporated by reference into this SAI. The Prospectuses and the Annual Report
may be obtained without charge by writing or calling the Funds at the address
and telephone number printed below.
4400 Computer Drive
Westborough, Massachusetts 01581-5120
General and Account Information: 1-800-99-IBJFD (1-800-994-2533)
<PAGE>
TABLE OF CONTENTS
Page
GENERAL INFORMATION................................................. 1
INVESTMENT STRATEGIES AND RISKS..................................... 1
INVESTMENT RESTRICTIONS............................................. 11
MANAGEMENT.......................................................... 12
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS.......................... 14
INVESTMENT ADVISORY AND OTHER SERVICES.............................. 15
DISTRIBUTION OF FUND SHARES......................................... 18
COMPUTATION OF NET ASSET VALUE...................................... 19
PORTFOLIO TRANSACTIONS.............................................. 20
TAXATION............................................................ 21
DESCRIPTION OF THE FUNDS' SHARES.................................... 25
CALCULATION OF PERFORMANCE DATA..................................... 26
FINANCIAL STATEMENTS................................................ 27
APPENDIX............................................................. A-1
<PAGE>
40
GENERAL INFORMATION
The Funds are separately managed, diversified portfolios of IBJ Funds
Trust (the "Trust"), an open-end, management investment company. The Trust was
organized as a Delaware business trust under a Declaration of Trust dated August
25, 1994. Each Fund offers two classes of shares, the "Service Class" and the
"Premium Class."
IBJ Whitehall Bank & Trust Company ("IBJW" and/or the "Adviser") serves as
the Funds' Investment Adviser. First Data Investor Services Group, Inc.
("FDISG"), 4400 Computer Drive, Westborough, Massachusetts 01581-5120, is the
Funds' Administrator, and First Data Distributors, Inc. ("FDDI"), located at the
same address, is the Distributor.
INVESTMENT STRATEGIES AND RISKS
The Prospectuses discuss the investment objectives of the Funds and the
principal strategies to be employed to achieve those objectives. This section
contains supplemental information concerning certain types of securities and
other instruments in which the Funds may invest, additional investment
strategies that the Funds may utilize, and certain risks associated with such
investments and strategies.
U.S. TREASURY OBLIGATIONS. (All Funds). U.S. Treasury bills, which have
maturities of up to one year, notes, which have original maturities ranging from
one year to 10 years, and bonds, which have original maturities of 10 to 30
years, are direct obligations of the U.S. Government. The Funds may invest in
privately placed U.S. Treasury obligations.
U.S. GOVERNMENT AGENCY OBLIGATIONS. (All Funds). The Funds may invest
in obligations of agencies of the United States Government. Such agencies
include, among others, Farmers Home Administration, Federal Farm Credit System,
Federal Housing Administration, Government National Mortgage Association,
Maritime Administration, Small Business Administration, and The Tennessee Valley
Authority. The Funds may purchase securities issued or guaranteed by Ginnie Mae
("GNMA") (formerly known as the Government National Mortgage Association) which
represent participation in Veterans Administration and Federal Housing
Administration backed mortgage pools. Obligations of instrumentalities of the
United States Government include securities issued by, among others, Federal
Home Loan Banks, Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Land
Banks, Federal National Mortgage Association ("FNMA") and the United States
Postal Service. Some of these securities are supported by the full faith and
credit of the United States Treasury (e.g., GNMA). Guarantees of principal by
agencies or instrumentalities of the U.S. Government may be a guarantee of
payment at the maturity of the obligation so that in the event of a default
prior to maturity there might not be a market and thus no means of realizing the
value of the obligation prior to maturity.
MORTGAGE-RELATED SECURITIES. (All Funds). The Funds are permitted to
invest in mortgage-related securities. Early repayment of principal on mortgage
pass-through securities (arising from prepayments of principal due to sale of
the underlying property, refinancing, or foreclosure, net of fees and costs
which may be incurred) may expose a Fund to a lower rate of return upon
reinvestment of principal. Also, if a security subject to prepayment has been
purchased at a premium, in the event of prepayment the value of the premium
would be lost. Like other fixed-income securities, when interest rates rise, the
value of mortgage-related securities generally will decline; however, when
interest rates decline, the value of mortgage-related securities with prepayment
features may not increase as much as other fixed-income securities.
<PAGE>
In recognition of this prepayment risk to investors, the Public
Securities Association (the "PSA") has standardized the method of measuring the
rate of mortgage loan principal prepayments. The PSA formula, the Constant
Prepayment Rate or other similar models that are standard in the industry will
be used by the Funds in calculating maturity for purposes of investment in
mortgage-related securities. A rise in interest rates will also likely increase
inherent volatility of these securities as lower than estimated prepayment rates
will alter the expected life of the securities to effectively convert short-term
investments into long-term investments.
Payment of principal and interest on some mortgage pass-through
securities (but not the market value of the securities themselves) may be
guaranteed by the full faith and credit of the U.S. Government (in the case of
securities guaranteed by GNMA) or guaranteed by agencies or instrumentalities of
the U.S. Government (in the case of securities guaranteed by the FNMA or the
FHLMC, which are supported only by the discretionary authority of the U.S.
Government to purchase the agency's obligations). Mortgage pass-through
securities created by non-governmental issuers (such as commercial banks,
savings and loan institutions, private mortgage insurance companies, mortgage
bankers and other secondary market issuers) may be supported in various forms of
insurance or guarantees issued by governmental entities.
ASSET-BACKED SECURITIES. (All Funds). The Funds are permitted to invest
in asset-backed securities. Asset-backed securities involve certain risks that
are not posed by mortgage-related securities, resulting mainly from the fact
that asset-backed securities do not usually contain the benefit of a complete
security interest in the related collateral. For example, credit card
receivables generally are unsecured and the debtors are entitled to the
protection of a number of state and Federal consumer credit laws, some of which
may reduce the ability of the Fund, as an investor, to obtain full payment in
the event of default insolvency. In the case of automobile receivables, due to
various legal and economic factors, proceeds from repossessed collateral may not
always be sufficient to support payments on these securities. The risks
associated with asset-backed securities are often reduced by the addition of
credit enhancements such as a letter of credit from a bank, excess collateral or
a third-party guarantee. With respect to an asset-backed security arising from
secured debt (such as automobile receivables), there is a risk that parties
other than the originator and servicer of the loan may acquire a security
interest superior to that of the security's holders.
COMMERCIAL PAPER. (All Funds). Commercial paper includes short-term,
unsecured promissory notes, variable rate demand notes and variable rate master
demand notes issued by domestic and foreign bank holding companies, corporations
and financial institutions and similar taxable instruments issued by government
agencies and instrumentalities. All commercial paper purchased by the Funds is,
at the time of investment, rated in one of the top two rating categories of at
least one Nationally Recognized Statistical Rating Organization ("NRSRO") or, if
not rated, is, in the opinion of the Adviser, of an investment quality
comparable to rated commercial paper in which the Funds may invest, or, with
respect to the Reserve Money Market Fund, (i) rated "P-1" by Moody's Investors
Service, Inc. ("Moody's") and "A-1" or better by Standard & Poor's Corporation
("S&P") or in a comparable rating category by any two NRSROs that have rated the
commercial paper or (ii) rated in a comparable category by only one such
organization if it is the only organization that has rated the commercial paper
(and provided the purchase is approved or ratified by the Board of Trustees).
CORPORATE DEBT SECURITIES. (All Funds). Fund investments in these
securities are limited to corporate debt securities (corporate bonds,
debentures, notes and similar corporate debt instruments) of domestic and
foreign issuers which meet the rating criteria established for each Fund.
After purchase by a Fund, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require a sale of such security by the Fund. However, the
Fund's Adviser will consider such event in its determination of whether the Fund
should continue to hold the security. To the extent the ratings given by a NRSRO
may change as a result of changes in such organizations or their rating systems,
the Fund will attempt to use comparable ratings as standards for investments in
accordance with the investment policies contained in the Prospectuses and in
this SAI.
CONVERTIBLE AND EXCHANGEABLE SECURITIES. (Core Fixed Income Fund, Core
Equity Fund and Blended Total Return Fund). Although to a lesser extent than
with fixed income securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of the conversion or
exchange feature, the market value of convertible or exchangeable securities
tends to vary with fluctuations in the market value of the underlying common or
preferred stock. Debt securities that are convertible into or exchangeable for
preferred or common stock are liabilities of the issuer but are generally
subordinated to senior debt of the issuer. The Core Fixed Income Fund and the
Blended Total Return Fund may invest in convertible securities rated below
investment grade, including convertible debt rated as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BANK OBLIGATIONS. (All Funds). The Funds may invest in bank obligations
which include, but are not limited to, domestic, Eurodollar and Yankeedollar
certificates of deposits, time deposits, bankers' acceptances, commercial paper,
bank deposit notes and other promissory notes including floating or variable
rate obligations issued by U.S. or foreign bank holding companies and their bank
subsidiaries, branches and agencies. Each Fund limits its investment in United
States bank obligations to obligations of United States banks (including foreign
branches). Each Fund limits its investment in foreign bank obligations to United
States dollar-denominated obligations of foreign banks (including United States
branches of foreign banks) which in the opinion of the Adviser, are of an
investment quality comparable to obligations of United States banks which may be
purchased by the Funds. There is no limitation on the amount of the Funds'
assets which may be invested in obligations of foreign banks which meet the
conditions set forth herein.
Certificates of deposit are issued against funds deposited in an
eligible bank (including its domestic and foreign branches, subsidiaries and
agencies), are for a definite period of time, earn a specified rate of return
and are normally negotiable. Fixed time deposits may be withdrawn on demand by
the investor, but may be subject to early withdrawal penalties which vary
depending upon market conditions and the remaining maturity of the obligations.
There are no contractual restrictions on the right to transfer a beneficial
interest in a fixed time deposit to a third party, although there is no market
for such deposits. Investments in fixed time deposits subject to withdrawal
penalties maturing from two days through seven days may not exceed 15% of the
value of the net assets of the Core Fixed Income, Core Equity and Blended Total
Return Funds and 10% of the value of the net assets of the Money Market Fund. A
bankers' acceptance is a short-term draft drawn on a commercial bank by a
borrower, usually in connection with a commercial transaction. The borrower is
liable for payment as is the bank, which unconditionally guarantees to pay the
draft at its face amount on the maturity date. Eurodollar obligations are U.S.
dollar obligations issued outside the United States by domestic or foreign
entities. Yankeedollar obligations are U.S. dollar obligations issued inside the
United States by foreign entities. Bearer deposit notes are obligations of a
bank, rather than a bank holding company. Similar to certificates of deposit,
deposit notes represent bank level investments and, therefore, are senior to all
holding company corporate debt.
Obligations of foreign banks involve somewhat different investment
risks than those affecting obligations of United States banks, including the
possibilities that their liquidity could be impaired because of future political
and economic developments, that the obligations may be less marketable than
comparable obligations of United States banks, that a foreign jurisdiction might
impose withholding taxes on interest income payable on those obligations, that
foreign deposits may be seized or nationalized, that foreign governmental
restrictions such as exchange controls may be adopted which might adversely
affect the payment of principal and interest on those obligations and that the
selection of those obligations may be more difficult because there may be less
publicly available information concerning foreign banks or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to United States
banks.
<PAGE>
Investments in Eurodollar and Yankeedollar obligations involve
additional risks. Most notably, there generally is less publicly available
information about foreign companies; there may be less governmental regulation
and supervision; they may use different accounting and financial standards; and
the adoption of foreign governmental restrictions may adversely affect the
payment of principal and interest on foreign investments. In addition, not all
foreign branches of United States banks are supervised or examined by regulatory
authorities as are United States banks, and such branches may not be subject to
reserve requirements.
ZERO COUPON SECURITIES. (All Funds). The market prices of zero coupon
securities in which the Funds may invest generally are more volatile than the
market prices of securities that pay interest periodically and are more
sensitive to changes in interest rates than non-zero coupon securities having
similar maturities and credit qualities. Although zero coupon securities do not
pay interest to holders prior to maturity, federal income tax law requires a
Fund to recognize as interest income a portion of the security's discount each
year and that this income must then be distributed to shareholders along with
other income earned by the Fund. To the extent that any shareholders in a Fund
elect to receive their dividends in cash rather than reinvest such dividends in
additional shares, cash to make these distributions will have to be provided
from the assets of the Fund or other sources such as proceeds of sales of Fund
shares and/or sales of portfolio securities. In such cases, the Fund will not be
able to purchase additional income producing securities with cash used to make
such distributions, and its current income may ultimately be reduced as a
result.
VARIABLE AND FLOATING RATE DEMAND AND MASTER DEMAND OBLIGATIONS. (All
Funds). The Funds may, from time to time, buy variable rate demand obligations
issued by corporations, bank holding companies and financial institutions and
similar taxable and tax-exempt instruments issued by government agencies and
instrumentalities. These securities will typically have a maturity of 397 days
or less with respect to the Money Market Fund or generally five to 20 years with
respect to the Non-Money Market Funds, but carry with them the right of the
holder to put the securities to a remarketing agent or other entity on short
notice, typically seven days or less. The obligation of the issuer of the put to
repurchase the securities may or may not be backed by a letter of credit or
other obligation issued by a financial institution. The purchase price is
ordinarily par plus accrued and unpaid interest.
The Funds may also buy variable rate master demand obligations. The
terms of these obligations permit the investment of fluctuating amounts by the
Funds at varying rates of interest pursuant to direct arrangements between a
Fund, as lender, and the borrower. They permit weekly, and in some instances,
daily, changes in the amounts borrowed. The Funds have the right to increase the
amount under the obligation at any time up to the full amount provided by the
note agreement, or to decrease the amount, and the borrower may prepay up to the
full amount of the obligation without penalty. The obligations may or may not be
backed by bank letters of credit. Because the obligations are direct lending
arrangements between the lender and the borrower, it is not generally
contemplated that they will be traded, and there is no secondary market for
them, although they are redeemable (and thus, immediately repayable by the
borrower) at principal amount, plus accrued interest, upon demand. The Funds
have no limitations on the type of issuer from whom the obligations will be
purchased. The Funds will invest in variable rate master demand obligations only
when such obligations are determined by the Adviser, pursuant to guidelines
established by the Board of Trustees, to be of comparable quality to rated
issuers or instruments eligible for investment by the Funds.
VARIABLE AMOUNT MASTER DEMAND OBLIGATIONS. (Money Market Fund). The
Money Market Fund may invest in variable amount master demand obligations which
are unsecured demand notes that permit the indebtedness thereunder to vary, and
provide for periodic adjustments in the interest rate. Because master demand
obligations are direct lending arrangements between the Money Market Fund and
the issuer, they are not normally traded. There is no secondary market for the
notes; however, the period of time remaining until payment of principal and
accrued interest can be recovered under a variable amount master demand
obligation generally shall not exceed seven days. To the extent this period is
exceeded, the obligation in question would be considered illiquid. Issuers of
variable amount master demand obligations must satisfy the same criteria as set
forth for other promissory notes (e.g., commercial paper). The Money Market Fund
will invest in variable amount master demand obligations only when such
obligations are determined by the Adviser, pursuant to guidelines established by
the Board of Trustees, to be of comparable quality to rated issuers or
instruments eligible for investment by the Money Market Fund. In determining
weighted average dollar portfolio maturity, a variable amount master demand
obligation will be deemed to have a maturity equal to the longer of the period
of time remaining until the next readjustment of the interest rate or the period
of time remaining until the principal amount can be recovered from the issuer on
demand.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS. (All Funds). The Funds
may purchase securities on a when-issued or delayed-delivery basis. For example,
delivery of and payment for these securities can take place a month or more
after the date of the transaction. The securities so purchased are subject to
market fluctuation during this period and no income accrues to the Fund until
settlement takes place. To facilitate such acquisitions, the Funds will maintain
with the custodian a separate account with a segregated portfolio of cash or
liquid securities in an amount at least equal to the value of such commitments.
On the delivery dates for such transactions, each Fund will meet obligations
from maturities or sales of the securities held in the separate account and/or
from cash flow. While the Funds normally enter into these transactions with the
intention of actually receiving or delivering the securities, they may sell
these securities before the settlement date or enter into new commitments to
extend the delivery date into the future, if the Adviser considers such action
advisable as a matter of investment strategy. Such securities have the effect of
leveraging a Fund's assets and may contribute to volatility of the Fund's net
asset value. When a Fund engages in a forward commitment transaction, the Fund
relies on the buyer or the seller, as the case may be, to consummate the sale.
Failure to do so may result in the Fund missing the opportunity to obtain a
price or yield considered to be advantageous.
OTHER MUTUAL FUNDS. (All Funds). Each Fund may invest in shares of
other open-end, management investment companies, subject to the limitations of
the Investment Company Act of 1940, as amended (the "1940 Act") and subject to
such investments being consistent with the overall objective and policies of the
Fund making such investment, provided that any such purchases will be limited to
shares of unaffiliated investment companies. The purchase of securities of other
mutual funds results in duplication of expenses such that investors indirectly
bear a proportionate share of the expenses of such mutual funds including
operating costs, and investment advisory and administrative fees.
LOANS OF PORTFOLIO SECURITIES. (All Funds). The Funds may lend their
portfolio securities to brokers, dealers and financial institutions, provided:
(1) the loan is secured continuously by collateral consisting of U.S. Government
securities or cash or approved bank letters of credit maintained on a daily
mark-to-market basis in an amount at least equal to the current market value of
the securities loaned; (2) the Funds may at any time call the loan and obtain
the return of the securities loaned within five business days; (3) the Funds
will receive any interest or dividends paid on the loaned securities; and (4)
the aggregate market value of securities loaned will not at any time exceed 33
1/3% of the total assets (including the market value of the collateral received)
of a particular Fund.
The Funds will earn income for lending their securities because cash
collateral pursuant to these loans will be invested in short-term money market
instruments. In connection with lending securities, the Funds may pay reasonable
finders, administrative and custodial fees. Loans of securities involve a risk
that the borrower may fail to return the securities or may fail to provide
additional collateral.
REPURCHASE AGREEMENTS. (All Funds). The Funds may invest in securities
subject to repurchase agreements with any bank or registered broker-dealer who,
in the opinion of the Trustees, present a minimum risk of bankruptcy. Such
agreements may be considered to be loans by the Funds for purposes of the 1940
Act. A repurchase agreement is a transaction in which the seller of a security
commits itself at the time of the sale to repurchase that security from the
buyer at a mutually agreed-upon time and price. The repurchase price exceeds the
sale price, reflecting an agreed-upon interest rate effective for the period the
buyer owns the security subject to repurchase. The agreed-upon rate is unrelated
to the interest rate on that security. IBJW will monitor the value of the
underlying security at the time the transaction is entered into and at all times
during the term of the repurchase agreement to insure that the value of the
security always equals or exceeds the repurchase price. If the seller should
default on its obligation to repurchase the securities, a Fund may experience a
loss of income from the loaned securities and a decrease in the value of any
collateral, problems in exercising its rights to the underlying securities and
costs and time delays in connection with the disposition of securities. The
Money Market Fund may not invest more than 10%, and each of the Core Fixed
Income, Core Equity and Blended Total Return Funds may not invest more than 15%,
of its net assets in repurchase agreements maturing in more than seven business
days and in securities for which market quotations are not readily available.
REVERSE REPURCHASE AGREEMENTS. (All Funds). The Funds may also enter
into reverse repurchase agreements to avoid selling securities during
unfavorable market conditions to meet redemptions. Pursuant to a reverse
repurchase agreement, a Fund will sell portfolio securities and agree to
repurchase them from the buyer at a particular date and price. Whenever a Fund
enters into a reverse repurchase agreement, it will establish a segregated
account in which it will maintain liquid assets in an amount at least equal to
the repurchase price marked to market daily (including accrued interest), and
will subsequently monitor the account to ensure that such equivalent value is
maintained. The Fund pays interest on amounts obtained pursuant to reverse
repurchase agreements. Reverse repurchase agreements are considered to be
borrowings by a Fund under the 1940 Act.
FOREIGN SECURITIES. (All Funds). Investing in the securities of issuers
in any foreign country, including American Depository Receipts ("ADRs"),
involves special risks and considerations not typically associated with
investing in U.S. companies. These include differences in accounting, auditing
and financial reporting standards; generally higher commission rates on foreign
portfolio transactions; the possibility of nationalization, expropriation or
confiscatory taxation; adverse changes in investment or exchange control
regulations (which may include suspension of the ability to transfer currency
from a country); and political instability which could affect U.S. investments
in foreign countries. Additionally, foreign securities and dividends and
interest payable on those securities may be subject to foreign taxes, including
taxes withheld from payments on those securities. Foreign securities often trade
with less frequency and volume than domestic securities and, therefore, may
exhibit greater price volatility. Additional costs associated with an investment
in foreign securities may include higher custodial fees than apply to domestic
custodial arrangements and transaction costs of foreign currency conversions.
Changes in foreign exchange rates also will affect the value of securities
denominated or quoted in currencies other than the U.S. dollar and, with respect
to the Money Market Fund, may affect the ability to maintain net asset value. A
Fund's objectives may be affected either unfavorably or favorably by
fluctuations in the relative rates of exchange between the currencies of
different nations, by exchange control regulations and by indigenous economic
and political developments. Through a Fund's policies, management endeavors to
avoid unfavorable consequences and to take advantage of favorable developments
in particular nations where, from time to time, it places a Fund's investments.
ILLIQUID SECURITIES. (All Funds). Each Fund has adopted a fundamental
policy with respect to investments in illiquid securities. See "Investment
Restrictions." Historically, illiquid securities have included securities
subject to contractual or legal restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended ("Securities Act"),
securities that are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven calendar days. Securities that have not
been registered under the Securities Act are referred to as private placements
or restricted securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant amount of
these restricted or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. A mutual fund might also have to register such
restricted securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.
A large institutional market exists for certain securities that are not
registered under the Securities Act, including repurchase agreements, commercial
paper, foreign securities, municipal securities and corporate bonds and notes.
Institutional investors depend on either an efficient institutional market in
which the unregistered security can be readily resold or on the issuer's ability
to honor a demand for repayment. The fact that there are contractual or legal
restrictions on resale to the general public or to certain institutions may not
be indicative of the liquidity of such investments.
Each Fund may also invest in restricted securities issued under Section
4(2) of the Securities Act, which exempts from registration "transactions by an
issuer not involving any public offering." Section 4(2) instruments are
restricted in the sense that they can only be resold through the issuing dealer
and only to institutional investors; they cannot be resold to the general public
without registration.
The Commission has adopted Rule 144A, which allows a broader
institutional trading market for securities otherwise subject to restrictions on
resale to the general public. Rule 144A establishes a "safe harbor" from the
registration requirements of the Securities Act applicable to resales of certain
securities to qualified institutional buyers. Pursuant to procedures established
by the Board of Trustees and subject to applicable investment restrictions, the
Funds intend to invest in securities eligible for resale under Rule 144A which
are determined to be liquid because trading markets exist for the securities.
Pursuant to guidelines set forth by and under the supervision of the
Board of Trustees, the Adviser will monitor the liquidity of restricted
securities in a Fund's portfolio. In reaching liquidity decisions, the Adviser
will consider, among others, the following factors: (1) the frequency of trades
and quotes for the security over the course of six months or as determined in
the discretion of the Adviser; (2) the number of dealers wishing to purchase or
sell the security and the number of other potential purchasers over the course
of six months or as determined in the discretion of the Adviser; (3) dealer
undertakings to make a market in the security; (4) the nature of the security
and the marketplace in which it trades (e.g., the time needed to dispose of the
security, the method of soliciting offers and the mechanics of the transfer);
and (5) other factors, if any, which the Adviser deems relevant. Rule 144A
securities and Section 4(2) instruments which are determined to be liquid based
upon their trading markets will not, however, be required to be included among
the securities considered to be illiquid for purposes of Investment Restriction
No. 1. Investments in Rule 144A securities and Section 4(2) instruments could
have the effect of increasing Fund illiquidity.
MUNICIPAL COMMERCIAL PAPER. (All Funds). Municipal commercial paper is
a debt obligation with a stated maturity of one year or less which is issued to
finance seasonal working capital needs or as short-term financing in
anticipation of longer-term debt. Investments in municipal commercial paper are
limited to commercial paper which is rated at the date of purchase: (i) "P-1" by
Moody's and "A-1" or "A-1+" by S&P "P-2" (Prime-2) or better by Moody's and
"A-2" or better by S&P or (ii) in a comparable rating category by any two of the
NRSROs that have rated commercial paper or (iii) in a comparable rating category
by only one such organization if it is the only organization that has rated the
commercial paper or (iv) if not rated, is, in the opinion of IBJW, of comparable
investment quality and within the credit quality policies and guidelines
established by the Board of Trustees.
Issuers of municipal commercial paper rated "P-1" have a "superior
capacity for repayment of short-term promissory obligations". The "A-1" rating
for commercial paper under the S&P classification indicates that the "degree of
safety regarding timely payment is either overwhelming or very strong."
Commercial paper with "overwhelming safety characteristics" will be rated
"A-1+". Commercial paper receiving a "P-2" rating has a strong capacity for
repayment of short-term promissory obligations. Commercial paper rated "A-2" has
the capacity for timely payment although the relative degree of safety is not as
overwhelming as for issues designated "A-1".
MUNICIPAL NOTES. (All Funds). Municipal notes are generally sold as
interim financing in anticipation of the collection of taxes, a bond sale or
receipt of other revenue. Municipal notes generally have maturities at the time
of issuance of one year or less. Investments in municipal notes are limited to
notes which are rated at the date of purchase: (i) MIG 1 or MIG 2 by Moody's and
in a comparable rating category by at least one other nationally recognized
statistical rating organization that has rated the notes, or (ii) in a
comparable rating category by only one such organization, including Moody's, if
it is the only organization that has rated the notes, or (iii) if not rated,
are, in the opinion of IBJW, of comparable investment quality and within the
credit quality policies and guidelines established by the Board of Trustees.
Notes rated "MIG 1" are judged to be of the "best quality" and carry
the smallest amount of investment risk. Notes rated "MIG 2" are judged to be of
"high quality, with margins of protection ample although not as large as in the
preceding group." See the Appendix for a more complete description of securities
ratings.
MUNICIPAL BONDS. (All Funds). Municipal bonds generally have a maturity
at the time of issuance of more than one year. Municipal bonds may be issued to
raise money for various public purposes -- such as constructing public
facilities and making loans to public institutions. There are generally two
types of municipal bonds: general obligation bonds and revenue bonds. General
obligation bonds are backed by the taxing power of the issuing municipality and
are considered the safest type of municipal bond. Revenue bonds are backed by
the revenues of a project or facility -- tolls from a toll road, for example.
Certain types of municipal bonds are issued to obtain funding for privately
operated facilities. Industrial development revenue bonds (which are private
activity bonds) are a specific type of revenue bond backed by the credit and
security of a private user, and therefore investments in these bonds have more
potential risk. Investments in municipal bonds are limited to bonds which are
rated at the date of purchase "A" or better by a NRSRO. Municipal bonds
generally have a maturity at the time of issuance of more than one year.
PREFERRED STOCKS. (Core Fixed Income Fund, Core Equity Fund and Blended
Total Return Fund.) As a general rule, the market value of preferred stock with
a fixed dividend rate and no conversion element will decline as interest rates
and perceived credit risk rises. Because preferred stock is junior to debt
securities and other obligations of the issuer, deterioration in the credit
quality of the issuer will cause greater changes in the value of a preferred
stock than in a more senior debt security with similar stated yield
characteristics.
AMERICAN DEPOSITORY RECEIPTS. (Core Fixed Income Fund, Core Equity Fund
and Blended Total Return Fund). These Funds each may invest in both sponsored
and unsponsored ADR programs. There are certain risks associated with
investments in unsponsored ADR programs. Because the non-U.S. securities issuer
does not actively participate in the creation of the ADR program, the underlying
agreement for service and payment will be between the depository and the
shareholder. The company issuing the stock underlying the ADR pays nothing to
establish the unsponsored facility because fees for ADR issuance and
cancellation are paid by brokers. Investors directly bear the expenses
associated with certificate transfer, custody and dividend payment.
In an unsponsored ADR program, there also may be several depositories
with no defined legal obligations to the non-U.S. company. The duplicate
depositories may lead to marketplace confusion because there would be no central
source of information for buyers, sellers and intermediaries. The efficiency of
centralization gained in a sponsored program can greatly reduce the delays in
delivery of dividends and annual reports. In addition, with respect to all ADRs
there is always the risk of loss due to currency fluctuations.
Investments in ADRs involve certain risks not typically involved in
purely domestic investments. These risks are set forth under "Foreign
Securities" in this SAI.
OPTIONS ON SECURITIES. (Core Fixed Income Fund, Core Equity Fund and
Blended Total Return Fund). The Funds may purchase put and call options and
write covered put and call options on securities in which each Fund may invest
directly and that are traded on registered domestic securities exchanges or that
result from separate, privately negotiated transactions (i.e., over-the-counter
(OTC) options). The writer of a call option, who receives a premium, has the
obligation, upon exercise, to deliver the underlying security against payment of
the exercise price during the option period. The writer of a put, who receives a
premium, has the obligation to buy the underlying security, upon exercise, at
the exercise price during the option period.
The Funds may write put and call options on securities only if they are
covered, and such options must remain covered as long as the Fund is obligated
as a writer. A call option is covered if a Fund owns the underlying security
covered by the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional cash
consideration if the underlying security is held in a segregated account by its
custodian) upon conversion or exchange of other securities held in its
portfolio. A put option is covered if a Fund maintains cash, U.S. Treasury bills
or other liquid securities with a value equal to the exercise price in a
segregated account with its custodian.
The principal reason for writing put and call options is to attempt to
realize, through the receipt of premiums, a greater current return than would be
realized on the underlying securities alone. In return for the premium received
for a call option, the Funds forego the opportunity for profit from a price
increase in the underlying security above the exercise price so long as the
option remains open, but retain the risk of loss should the price of the
security decline. In return for the premium received for a put option, the Funds
assume the risk that the price of the underlying security will decline below the
exercise price, in which case the put would be exercised and the Fund would
suffer a loss. The Funds may purchase put options in an effort to protect the
value of a security it owns against a possible decline in market value.
Writing of options involves the risk that there will be no market in
which to effect a closing transaction. An exchange-traded option may be closed
out only on an exchange that provides a secondary market for an option of the
same series. OTC options are not generally terminable at the option of the
writer and may be closed out only by negotiation with the holder. There is also
no assurance that a liquid secondary market on an exchange will exist. In
addition, because OTC options are issued in privately negotiated transactions
exempt from registration under the Securities Act of 1933, there is no assurance
that the Funds will succeed in negotiating a closing out of a particular OTC
option at any particular time. If a Fund, as covered call option writer, is
unable to effect a closing purchase transaction in the secondary market or
otherwise, it will not be able to sell the underlying security until the option
expires or it delivers the underlying security upon exercise.
The staff of the Securities and Exchange Commission (the "SEC") has
taken the position that purchased options not traded on registered domestic
securities exchanges and the assets used as cover for written options not traded
on such exchanges are generally illiquid securities. However, the staff has also
opined that, to the extent a mutual fund sells an OTC option to a primary dealer
that it considers creditworthy and contracts with such primary dealer to
establish a formula price at which the fund would have the absolute right to
repurchase the option, the fund would only be required to treat as illiquid the
portion of the assets used to cover such option equal to the formula price minus
the amount by which the option is in-the-money. Pending resolution of the issue,
the Funds will treat such options and, except to the extent permitted through
the procedure described in the preceding sentence, assets as subject to each
such Fund's limitation on investments in securities that are not readily
marketable.
FUTURES, RELATED OPTIONS AND OPTIONS ON STOCK INDICES. (Core Fixed
Income Fund, Core Equity Fund and Blended Total Return Fund). Each Fund may
attempt to reduce the risk of investment in securities by hedging a portion of
its portfolio through the use of certain futures transactions, options on
futures traded on a board of trade and options on stock indices traded on
national securities exchanges. In addition, each Fund may hedge a portion of its
portfolio by purchasing such instruments during a market advance or when IBJW
anticipates an advance. In attempting to hedge a portfolio, a Fund may enter
into contracts for the future delivery of securities and futures contracts based
on a specific security, class of securities or an index, purchase or sell
options on any such futures contracts, and engage in related closing
transactions. Each Fund will use these instruments primarily as a hedge against
changes resulting from market conditions in the values of securities held in its
portfolio or which it intends to purchase.
A stock index assigns relative weighting to the common stocks in the
index, and the index generally fluctuates with changes in the market values of
these stocks. A stock index futures contract is an agreement in which one party
agrees to deliver to the other an amount of cash equal to a specific dollar
amount times the difference between the value of a specific stock index at the
close of the last trading day of the contract and the price at which the
agreement is made.
When a futures contract is executed, each party deposits with a broker
or in a segregated custodial account up to 5% or more (in foreign markets) of
the contract amount, called the "initial margin," and during the term of the
contract, the amount of the deposit is adjusted based on the current value of
the futures contract by payments of variation margin to or from the broker or
segregated account.
In the case of options on stock index futures, the holder of the option
pays a premium and receives the right, upon exercise of the option at a
specified price during the option period, to assume the option writer's position
in a stock index futures contract. If the option is exercised by the holder
before the last trading day during the option period, the option writer delivers
the futures position, as well as any balance in the writer's futures margin
account. If it is exercised on the last trading day, the option writer delivers
to the option holder cash in an amount equal to the difference between the
option exercise price and the closing level of the relevant index on the date
the option expires. In the case of options on stock indexes, the holder of the
option pays a premium and receives the right, upon exercise of the option at a
specified price during the option period, to receive cash equal to the dollar
amount of the difference between the closing price of the relevant index and the
option exercise price times a specified multiple, called the "multiplier."
During a market decline or when IBJW anticipates a decline, each Fund
may hedge a portion of its portfolio by selling futures contracts or purchasing
puts on such contracts or on a stock index in order to limit exposure to the
decline. This provides an alternative to liquidation of securities positions and
the corresponding costs of such liquidation. Conversely, during a market advance
or when IBJW anticipates an advance, each Fund may hedge a portion of its
portfolio by purchasing futures, options on these futures or options on stock
indices. This affords a hedge against a Fund not participating in a market
advance at a time when it is not fully invested and serves as a temporary
substitute for the purchase of individual securities which may later be
purchased in a more advantageous manner. Each Fund will sell options on futures
and on stock indices only to close out existing positions.
INTEREST RATE FUTURES CONTRACTS. (Core Fixed Income Fund, Core Equity
Fund and Blended Total Return Fund). These Funds may, to a limited extent, enter
into interest rate futures contracts--i.e., contracts for the future delivery of
securities or index-based futures contracts--that are, in the opinion of IBJW,
sufficiently correlated with the Fund's portfolio. These investments will be
made primarily in an attempt to protect a Fund against the effects of adverse
changes in interest rates (i.e., "hedging"). When interest rates are increasing
and portfolio values are falling, the sale of futures contracts can offset a
decline in the value of a Fund's current portfolio securities. The Funds will
engage in such transactions primarily for bona fide hedging purposes.
OPTIONS ON INTEREST RATE FUTURES CONTRACTS. (Core Fixed Income Fund,
Core Equity Fund and Blended Total Return Fund). These Funds may purchase put
and call options on interest rate futures contracts, which give a Fund the right
to sell or purchase the underlying futures contract for a specified price upon
exercise of the option at any time during the option period. Each Fund may also
write (sell) put and call options on such futures contracts. For options on
interest rate futures that a Fund writes, such Fund will receive a premium in
return for granting to the buyer the right to sell to the Fund or to buy from
the Fund the underlying futures contract for a specified price at any time
during the option period. As with futures contracts, each Fund will purchase or
sell options on interest rate futures contracts primarily for bona fide hedging
purposes.
RISKS OF OPTIONS AND FUTURES CONTRACTS. One risk involved in the
purchase and sale of futures and options is that a Fund may not be able to
effect closing transactions at a time when it wishes to do so. Positions in
futures contracts and options on futures contracts may be closed out only on an
exchange or board of trade that provides an active market for them, and there
can be no assurance that a liquid market will exist for the contract or the
option at any particular time. To mitigate this risk, each Fund will ordinarily
purchase and write options only if a secondary market for the options exists on
a national securities exchange or in the over-the-counter market. Another risk
is that during the option period, if a Fund has written a covered call option,
it will have given up the opportunity to profit from a price increase in the
underlying securities above the exercise price in return for the premium on the
option (although the premium can be used to offset any losses or add to a Fund's
income) but, as long as its obligation as a writer continues, such Fund will
have retained the risk of loss should the price of the underlying security
decline. Investors should note that because of the volatility of the market
value of the underlying security, the loss from investing in futures
transactions is potentially unlimited. In addition, a Fund has no control over
the time when it may be required to fulfill its obligation as a writer of the
option. Once a Fund has received an exercise notice, it cannot effect a closing
transaction in order to terminate its obligation under the option and must
deliver the underlying securities at the exercise price.
The Funds' successful use of stock index futures contracts, options on
such contracts and options on indices depends upon the ability of IBJW to
predict the direction of the market and is subject to various additional risks.
The correlation between movements in the price of the futures contract and the
price of the securities being hedged is imperfect and the risk from imperfect
correlation increases in the case of stock index futures as the composition of
the Funds' portfolios diverge from the composition of the relevant index. Such
imperfect correlation may prevent the Funds from achieving the intended hedge or
may expose the Funds to risk of loss. In addition, if the Funds purchase futures
to hedge against market advances before they can invest in common stock in an
advantageous manner and the market declines, the Funds might create a loss on
the futures contract. Particularly in the case of options on stock index futures
and on stock indices, the Funds' ability to establish and maintain positions
will depend on market liquidity. The successful utilization of options and
futures transactions requires skills different from those needed in the
selection of the Funds' portfolio securities. The Funds believe that IBJW
possesses the skills necessary for the successful utilization of such
transactions.
The Funds are permitted to engage in bona fide hedging transactions (as
defined in the rules and regulations of the Commodity Futures Trading
Commission) without any quantitative limitations. Futures and related option
transactions which are not for bona fide hedging purposes may be used provided
the total amount of the initial margin and any option premiums attributable to
such positions does not exceed 5% of each Fund's liquidating value after taking
into account unrealized profits and unrealized losses, and excluding any
in-the-money option premiums paid. The Funds will not market, and are not
marketing, themselves as commodity pools or otherwise as vehicles for trading in
futures and related options. The Funds will segregate liquid assets such as
cash, U.S. Government securities or other liquid securities to cover the futures
and options.
PORTFOLIO TURNOVER. The portfolio turnover rate for the Core Fixed
Income Fund was 93% and 210% for the fiscal years ended November 30, 1998 and
November 30, 1997, respectively. The decrease in portfolio turnover during the
last fiscal year occurred because the Fund reached an optimal risk position due
to evolving financial events (for example, declining interest and widening
credit spreads).
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies of each Fund, which
may not be changed without the approval of the holders of a majority of the
applicable Fund's outstanding voting shares as described under "Description of
the Funds' Shares - Voting Rights."
Each Fund, except as indicated, may not:
(1) Invest more than 15% (10% with respect to the Money Market
Fund) of the value of its net assets in investments which are
illiquid (including repurchase agreements having maturities of
more than seven calendar days, variable and floating rate
demand and master demand notes not requiring receipt of
principal note amount within seven days notice and securities
of foreign issuers which are not listed on a recognized
domestic or foreign securities exchange);
(2) Borrow money or pledge, mortgage or hypothecate its assets,
except that a Fund may enter into reverse repurchase
agreements or borrow from banks up to 10% of the current value
of its net assets for temporary or emergency purposes and
those borrowings may be secured by the pledge of not more than
15% of the current value of its total net assets (but
investments may not be purchased by the Fund while any such
borrowings exist);
(3) Issue senior securities, except insofar as a Fund may be
deemed to have issued a senior security in connection with any
repurchase agreement or any permitted borrowing;
(4) Make loans, except loans of portfolio securities and except
that a Fund may enter into repurchase agreements with respect
to its portfolio securities and may purchase the types of debt
instruments described in its Prospectus or the SAI;
(5) Invest in companies for the purpose of exercising control or
management;
(6) Invest more than 10% of its net assets in shares of other
investment companies;
(7) Invest in real property (including limited partnership
interests but excluding real estate investment trusts and
master limited partnerships), commodities, commodity
contracts, or oil, gas and other mineral resource,
exploration, development, lease or arbitrage transactions;
(8) Engage in the business of underwriting securities of other
issuers, except to the extent that the disposal of an
investment position may technically cause it to be considered
an underwriter as that term is defined under the Securities
Act of 1933;
(9) Sell securities short, except to the extent that a Fund
contemporaneously owns or has the right to acquire at no
additional cost securities identical to those sold short;
(10) Purchase securities on margin, except that a Fund may obtain
such short-term credits as may be necessary for the clearance
of purchases and sales of securities;
(11) Purchase or retain the securities of any issuer, if those
individual officers and Trustees of the Trust, IBJW, or the
Distributor, each owning beneficially more than 1/2 of 1% of
the securities of such issuer, together own more than 5% of
the securities of such issuer;
(12) Purchase a security if, as a result, more than 25% of the
value of its total assets would be invested in securities of
one or more issuers conducting their principal business
activities in the same industry, provided that (a) this
limitation shall not apply to obligations issued or guaranteed
by the U.S. Government or its agencies and instrumentalities
or, for the Money Market Fund, securities issued by domestic
banks; (b) wholly-owned finance companies will be considered
to be in the industries of their parents; and (c) utilities
will be divided according to their services. For example, gas,
gas transmission, electric and gas, electric, and telephone
will each be considered a separate industry;
(13) Invest more than 5% of its net assets in warrants which are
unattached to securities, included within that amount, no more
than 2% of the value of the Fund's net assets, may be warrants
which are not listed on the New York or American Stock
Exchanges;
(14) Write, purchase or sell puts, calls or combinations thereof,
except that the Core Fixed Income, Core Equity and Blended
Total Return Funds may purchase or sell puts and calls as
otherwise described in the Prospectus or SAI; however, no Fund
will invest more than 5% of its total assets in these classes
of securities for purposes other than bona fide hedging; or
(15) Invest more than 5% of the current value of its total assets
in the securities of companies which, including predecessors,
have a record of less than three years' continuous operation.
Additionally, each Fund is a diversified fund and is therefore subject
to the following limitations which are non-fundamental policies. With respect to
75% of its total assets, a Fund will not invest more than 5% of its total assets
in the securities of any one issuer (except for U.S. Government securities) or
purchase more than 10% of the outstanding voting securities of any such issuer.
The Money Market Fund is subject to further diversification requirements. It
will not invest more than 5% of its total assets in the securities (including
securities collateralizing a repurchase agreement) of a single issuer except
that the Fund may invest in U.S. Government securities or repurchase agreements
that are collateralized by U.S. Government securities without any such
limitation.
If a percentage restriction on the investment or use of assets set
forth in the Prospectuses or this SAI is adhered to at the time a transaction is
effected, later changes in percentage resulting from changing asset values will
not be considered a violation.
The Money Market Fund's diversification tests are measured at the time
of initial purchases, and are calculated as specified in Rule 2a-7 of the 1940
Act which may allow the Fund to exceed limits specified in the Prospectuses and
SAI for certain securities subject to guarantees or demand features. The Fund
will be deemed to satisfy the maturity requirements described in the
Prospectuses and SAI to the extent the Fund satisfies Rule 2a-7 maturity
requirements.
It is the intention of the Funds, unless otherwise indicated, that with
respect to the Funds' policies that are a result of application of law, the
Funds will take advantage of the flexibility provided by rules or
interpretations of the SEC currently in existence or promulgated in the future,
or changes to such laws.
MANAGEMENT
TRUSTEES AND OFFICERS
Under Delaware law, the Trust's Board of Trustees is responsible for
establishing the Funds' policies and for overseeing the management of the Funds.
The Board also elects the Trust's officers who conduct the daily business of the
Funds. The principal occupations of the Trustees and executive officers of the
Trust for the past five years as well as their ages are listed below. The
address of each, unless otherwise indicated, is 4400 Computer Drive,
Westborough, Massachusetts 01581-5120. Currently, no Trustee is deemed to be an
"interested person" of the Trust for purposes of the 1940 Act.
ROBERT H. DUNKER, Trustee, Chairman of Nominating Committee and Member of
Audit Committee; (Retired); Director, E.J. Brooks Co. (a manufacturing company);
410 NE Plantation Road #322, Stuart, Florida 34996; Age: 68.
STEPHEN V.R. GOODHUE, Trustee, Chairman of Audit Committee and Member of
Nominating Committee; (Retired); Director and Member of Executive Committee,
Visiting Nurse Service of New York; 237 Mount Holly Road, Katonah, New York
10536; Age: 70.
EDWARD F. RYAN, Trustee, Member of Nominating Committee, Audit Committee
and Pricing Committee; (Retired); Member, Advisory Board, MBW Venture Capital
Partners Limited Partnership (5/84 - Present); 177 Highland Avenue, Short Hills,
New Jersey 07078; Age: 77.
GEORGE H. STEWART, Trustee, Chairman of the Board of Trustees, Member of
Nominating Committee and Audit Committee; (Retired); formerly, Vice President
and Treasurer, Ciba-Geigy Corporation; 4425 SE Waterford Drive, Stuart, Florida
34997; Age: 67.
JYLANNE M. DUNNE, President; Senior Vice President and General
Manager of Distribution Services at FDISG since 1992; Age: 39.
BRIAN R. CURRAN, Treasurer; Director of Fund Administration at FDISG (10/97
- - Present); Assistant Secretary of Fund Administration, State Street Bank and
Trust Company (2/97 - 10/97); Senior Auditor, PricewaterhouseCoopers, LLP (2/94
- - 2/97); Age: 31.
WILLIAM J. GREILICH, Vice President; Vice President and Division Manager of
Client Services at FDISG since 1990;
Age: 45.
LINDA J. HOARD, Secretary; Counsel of FDISG (6/98 - Present); Attorney
Consultant (7/94 - 6/98); Vice President and Assistant General Counsel,
Massachusetts Financial Services Company (9/86 - 7/94); Age: 51.
Trustees of the Trust not affiliated with the Investment Adviser
receive from the Trust an annual retainer of $5,000 ($7,000 for the Chairman), a
fee of $500 for each Board of Trustees meeting, and $500 for each Board
committee meeting of the Trust attended ($500 additional for the Audit Committee
Chairman). They also are reimbursed for all out-of-pocket expenses relating to
attendance at such meetings. Trustees who are affiliated with the Investment
Adviser do not receive compensation from the Trust.
<TABLE>
<CAPTION>
COMPENSATION TABLE*
<S><C> <C> <C>
<C> <C>
Pension or
Total Compensation
Retirement Benefits
Annual From the
Aggregate Accrued as Part of
Benefits Upon Retirement
Compensation Trust Expenses
Expenses Fund Complex
Name of Person, Position from the Trust
Robert H. Dunker, Trustee $8,000 0
N/A $8,000
Stephen V.R. Goodhue, Trustee 7,500 0
N/A 7,500
Edward F. Ryan, Trustee 8,000 0
N/A 8,000
George Stewart, Trustee 10,500 0
N/A 10,500
* Represents the total compensation paid to such persons for the fiscal year
ended November 30, 1998.
</TABLE>
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS
As of March 23, 1999, the following persons owned of record or
beneficially 5% or more of the voting securities of a particular Fund. Any
person owning more than 25% of the voting securities of a Fund may be deemed to
have effective voting control over the operation of that Fund, which would
diminish the voting rights of other shareholders:
<TABLE>
<CAPTION>
<S><C> <C>
IBJ Whitehall Bank & Trust Company
Reserve Money Market Fund
One State Street
Service Class Shares
New York, NY 10004
93.75%
Fifth Third Bank Trust
Reserve Money Market Fund
Weastec Inc.
Service Class Shares
P.O. Box 630074
5.02%
Cincinnati, OH 45263
BISYS Fund Services
Reserve Money Market Fund
3435 Stelzer Road
Premium Class Shares
Columbus, OH 43219
100%
IBJ Whitehall Bank & Trust Company
Core Fixed Income Fund
One State Street
Service Class Shares
New York, NY 10004
99.42%
<PAGE>
BISYS Fund Services
Core Fixed Income Fund
3435 Stelzer Road
Premium Class Shares
Columbus, OH 43219
100%
IBJ Whitehall Bank & Trust Company
Core Equity Fund
One State Street
Service Class Shares
New York, NY 10004
98.30%
BISYS Fund Services
Core Equity Fund
3435 Stelzer Road
Premium Class Shares
Columbus, OH 43219
100%
IBJ Whitehall Bank & Trust Company
Blended Total Return Fund
One State Street
Service Class Shares
New York, NY 10004
99.54%
BISYS Fund Services
Blended Total Return Fund
3435 Stelzer Road
Premium Class Shares
Columbus, OH 43219
100%
</TABLE>
As of March 23, 1999, Officers and Trustees of the Trust, as a group, owned
less than 1% of the outstanding shares of the Funds.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
IBJW provides investment advisory services to the Funds pursuant to an
Advisory Agreement with the Trust (the "Advisory Agreement"). Subject to such
policies as the Trust's Board of Trustees may determine, IBJW makes investment
decisions for the Funds. The Advisory Agreement provides that, as compensation
for services thereunder, IBJW is entitled to receive from each Fund it manages a
monthly fee at an annual rate based upon average daily net assets of the Fund as
set forth in the Fee Table in the Prospectus. For the fiscal year ended November
30, 1998, IBJW earned investment advisory fees of $77,459, $182,051, $670,551,
and $378,308, for the Reserve Money Market Fund, Core Fixed Income Fund, Core
Equity Fund and Blended Total Return Fund, respectively. For the same period,
IBJW voluntarily waived investment advisory fees of $77,459, $38,173, $112,286,
and $62,992, respectively. For the fiscal year ended November 30, 1997, IBJW
earned investment advisory fees of $101,221, $141,947, $588,328, and $381,947
for the Reserve Money Market Fund, Core Fixed Income Fund, Core Equity Fund and
Blended Total Return Fund, respectively. For the same period, IBJW voluntarily
waived investment advisory fees of $101,221, $28,390, $98,055, and $63,658,
respectively. For the fiscal year ended November 30, 1996, IBJW earned
investment advisory fees of $106,107, $132,005, $533,300, and $341,198 for the
Reserve Money Market Fund, Core Fixed Income Fund, Core Equity Fund and Blended
Total Return Fund, respectively. For the same period, IBJW voluntarily waived
investment advisory fees of $106,107, $26,400, $88,874, and $56,745,
respectively.
IBJW, formed in 1929, provides banking, trust and investment services
to individuals and institutions. It is a wholly-owned subsidiary of The
Industrial Bank of Japan, Limited, a commercial bank. IBJW acts as the
investment adviser to a wide variety of trusts, individuals, institutions and
corporations. Its investment management responsibilities, as of December 31,
1998, included accounts with aggregate assets of approximately $2.7 billion. The
principal business address of IBJW is One State Street, New York, New York
10004. The name of the bank was changed from IBJ Schroder Bank & Trust Company
to IBJ Whitehall Bank & Trust Company, effective January 1, 1999. The Industrial
Bank of Japan does not perform services for the Trust or any of the Funds.
Based upon the advice of counsel, IBJW believes that its performance of
investment advisory services for the Funds will not violate the Glass Steagall
Act or other applicable banking laws or regulations. However, future statutory
or regulatory changes, as well as future judicial or administrative decisions
and interpretations of present and future statutes and regulations, could
prevent IBJW from continuing to perform such services for the Funds. If IBJW
were prohibited from acting as investment adviser to the Funds, it is expected
that the Board of Trustees would recommend to shareholders approval of a new
investment advisory agreement with another qualified investment advisor selected
by the Board or that the Board would recommend other appropriate action.
The Advisory Agreement for the Funds will continue in effect for a
period beyond two years from the date of its execution only as long as such
continuance is approved annually (i) by the holders of a majority of the
outstanding voting securities of the Funds or by the Board of Trustees and (ii)
by a majority of the Trustees who are not parties to such Advisory Agreement or
"interested persons" (as defined in the 1940 Act) of any such party. The
Advisory Agreement may be terminated without penalty by vote of the Trustees or
the shareholders of the Funds, or by IBJW, on 60 days written notice by either
party to the Advisory Agreement and will terminate automatically if assigned.
The Advisory Agreement was last approved by the Board of Trustees, including a
majority of Trustees who are not "interested persons," on September 17, 1998.
DISTRIBUTOR
FDDI is the principal underwriter of the Funds pursuant to a
Distribution Agreement dated March 1, 1998. FDDI is an indirect, wholly-owned
subsidiary of First Data Corporation ("FDC"). Prior to March 1, 1998, IBJ Funds
Distributor, Inc. served as the Funds' Distributor. FDDI offers the Funds'
shares to the public on a continuous basis.
ADMINISTRATIVE SERVICES
As of March 1, 1998, the Trust entered into an Administration Agreement
(the "Administration Agreement") with FDISG. FDISG is a wholly-owned subsidiary
of FDC and an affiliate of FDDI, the Funds' principal underwriter. FDISG
provides management and administrative services necessary for the operation of
the Funds, including among other things, (i) preparation of shareholder reports
and communications, (ii) regulatory compliance, such as reports to and filings
with the SEC and state securities commissions and (iii) general supervision of
the operation of the Funds, including coordination of the services performed by
IBJW, FDDI, transfer agent, custodians, independent accountants, legal counsel
and others. In addition, FDISG furnishes office space and facilities required
for conducting the business of the Funds and pays the compensation of the Funds'
officers, employees and Trustees affiliated with FDISG. For these services,
FDISG receives a fee from each Fund computed daily and payable monthly, at the
annual rate of: 0.15% of average daily net assets of each Fund up to $500
million; 0.10% of average daily net assets of each Fund in excess of $500
million up to $1 billion; 0.075% of average daily net assets of each Fund in
excess of $1 billion. Pursuant to the Administration Agreement between the Trust
and FDISG, FDISG assists the Trust in calculating net asset values and provides
certain other accounting services for each Fund described therein, for an annual
fee of $35,000 per Fund plus out of pocket expenses. For the fiscal year ended
November 30, 1998, the following fees were paid to FDISG for its services under
the Administration Agreement: Reserve Money Market Fund - $32,886; Core Fixed
Income Fund - $55,759; Blended Total Return Fund - $95,244; and Core Equity Fund
- - $167,087.
The Administration Agreement was approved by the Board of Trustees at a
meeting held on December 18, 1997 and shall remain in effect for a period of
five years from its effective date. Thereafter, the Administration Agreement
will continue subject to termination without penalty upon sixty days prior
notice.
Additionally, in September 1998, IBJW entered into a Co-Administration
Services Contract with the Trust. Under this contract, IBJW performs
supplemental administrative services, including (i) supervising the activities
of FDISG and the Funds' other service providers, (ii) serving as liaison with
the Trustees and (iii) providing general product management and oversight to the
extent not provided by FDISG. In consideration of IBJW's services under this
contract, the Trust pays IBJW a monthly fee with respect to each Fund at an
annual rate of 0.03% of the average daily value of the net assets of the Fund
during the preceding month. For the fiscal year ended November 30, 1998, IBJW
waived the co-administration fees for each Fund.
Prior to March 1, 1998, BISYS Fund Services, Inc. ("BISYS") acted as
the Fund's administrator and performed substantially identical services for the
Funds as FDISG now performs. For these services, BISYS received from each Fund a
fee, payable monthly, at the annual rate of 0.15% of each Fund's average daily
net assets. For the period from December 1, 1997 to February 28, 1998, BISYS
earned Administrative Services fees of $12,118, $16,331, $52,551, and $30,673,
for the Reserve Money Market Fund, Core Fixed Income Fund, Core Equity Fund and
Blended Total Return Fund, respectively. For the fiscal year ended November 30,
1997, BISYS earned Administrative Services fees of $43,380, $42,584, $147,082,
and $95,487 for the Reserve Money Market Fund, Core Fixed Income Fund, Core
Equity Fund and Blended Total Return Fund, respectively. For the fiscal year
ended November 30, 1996, Furman Selz LLC, the previous administrator, earned
Administrative Services fees of $52,601, $39,602, $133,328, and $85,315 for the
Reserve Money Market Fund, Core Fixed Income Fund, Core Equity Fund and Blended
Total Return Fund, respectively.
Prior to March 1, 1998, pursuant to a Fund Accounting Agreement between
the Trust and BISYS, BISYS assisted the Trust in calculating net asset values
and provided certain other accounting services for each Fund, for an annual fee
of $30,000 per Fund plus out of pocket expenses. For the period from December 1,
1997 to February 28, 1998, BISYS earned Fund Accounting fees of $9,886, $14,413,
$11,767, and $13,488 for the Reserve Money Market Fund, Core Fixed Income Fund,
Core Equity Fund and Blended Total Return Fund, respectively. For the fiscal
year ended November 30, 1997, BISYS Fund Services earned Fund Accounting fees of
$35,000, $29,999, $30,000, and $35,000 for the Reserve Money Market Fund, Core
Fixed Income Fund, Core Equity Fund and Blended Total Return Fund, respectively.
For the fiscal year ended November 30, 1996, Furman Selz LLC, the previous
accounting agent, earned Fund Accounting fees and expenses of $30,668, $41,721,
$33,836, and $43,504 for the Reserve Money Market Fund, Core Fixed Income Fund,
Core Equity Fund and Blended Total Return Fund, respectively. Pursuant to a
Transfer Agency Agreement between the Trust and BISYS, BISYS assisted the Trust
with certain transfer and dividend disbursing agent functions and received a fee
of $15 per account per year per Fund plus out of pocket expenses.
SERVICE ORGANIZATIONS
For Premium Class shareholders, the Trust also contracts with banks
(including IBJW), trust companies, broker-dealers or other financial
organizations ("Service Organizations") to provide certain administrative
services for the Funds. Services provided by Service Organizations may include
among other things: providing necessary personnel and facilities to establish
and maintain certain shareholder accounts and records; assisting in processing
purchase and redemption transactions; arranging for the wiring of funds;
transmitting and receiving funds in connection with shareholders orders to
purchase or redeem shares; verifying and guaranteeing client signatures in
connection with redemption orders, transfers among and changes in shareholders
designating accounts; providing periodic statements showing a shareholder's
account balance and, to the extent practicable, integrating such information
with other client transactions; furnishing periodic and annual statements and
confirmations of all purchases and redemptions of shares in a shareholder's
account; transmitting proxy statements, annual reports, and updating
prospectuses and other communications from the Funds to shareholders; and
providing such other services as the Funds or a shareholder reasonably may
request, to the extent permitted by applicable statute, rule or regulation. The
payments will not exceed on an annualized basis an amount equal to 0.50% of the
average daily value during the month of Fund shares owned by customers in
subaccounts of which the Service Organization is record owner as nominee for its
customers. Neither FDISG nor FDDI will be a Service Organization or receive fees
for servicing. As of November 30, 1998, no Service Organization fees have been
paid.
The Glass-Steagall Act and other applicable laws, among other things,
prohibit banks from engaging in the business of underwriting, selling or
distributing securities. There currently is no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state statutes or
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, could prevent a bank from continuing to perform all
or a part of its servicing activities. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed herein
and banks and financial institutions may be required to register as dealers
pursuant to state law.
If a bank were prohibited from so acting, its shareholder clients would
be permitted to remain shareholders of the Trust and alternative means for
continuing the servicing of such shareholders would be sought. In that event,
changes in the operation of the Trust might occur and a shareholder serviced by
such a bank might no longer be able to avail itself of any services then being
provided by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these occurrences.
FUND EXPENSES
Each Fund bears all costs of its operations other than expenses
specifically assumed by FDDI, FDISG or IBJW. The costs borne by the Funds
include legal and accounting expenses; Trustees' fees and expenses; insurance
premiums; custodian and transfer agent fees and expenses; expenses incurred in
acquiring or disposing of the Funds' portfolio securities; expenses of
registering or qualifying the Funds' shares for sale with the SEC and with
various state securities commissions; expenses of obtaining quotations on the
Funds' portfolio securities and pricing of the Funds' shares; expenses of
maintaining the Funds' legal existence and of shareholders' meetings; and
expenses of preparation and distribution to existing shareholders of reports,
proxies and prospectuses. Each Fund bears its own expenses associated with its
establishment as a series of the Trust; these expenses are amortized over a five
year period from the commencement of the Fund's operations. Trust expenses
directly attributable to a Fund are charged to that Fund; other expenses are
allocated proportionately among all of the Funds in the Trust in relation to the
net assets of each Fund.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
IBJW acts as Custodian of the Trust's assets. The Custodian maintains
separate accounts for the Funds; receives, holds and releases portfolio
securities on account of the Funds, receives and disburses money on behalf of
the Funds and collects and receives income and other payments on account of the
Funds' portfolio securities. For its services, the Custodian received total
compensation of $64,759 from the Funds for the fiscal year ended November 30,
1998.
FDISG (the "Transfer Agent") acts as transfer agent for the Funds. The
Trust compensates the Transfer Agent for providing personnel and facilities to
perform transfer agency related services for the Trust at a rate intended to
represent the cost of providing such services.
INDEPENDENT AUDITORS
Ernst & Young LLP serves as the independent auditors for the Trust.
Ernst & Young LLP provides audit services, tax return review and assistance and
consultation in connection with review of certain SEC filings.
Ernst & Young LLP's address is 787 7th Avenue, New York, New York 10019.
COUNSEL
Paul, Weiss, Rifkind, Wharton & Garrison serves as counsel to the Trust
and also provides advice to IBJW in its capacity as Investment Adviser to the
Trust.
DISTRIBUTION OF FUND SHARES
The Distribution Agreement between the Trust and FDDI provides that
FDDI will use its best efforts to maintain a broad distribution of the Funds'
shares among bona fide investors and may enter into selling group agreements
with responsible dealers and dealer managers as well as sell the Funds' shares
to individual investors. FDDI is not obligated to sell any specific amount of
shares.
DISTRIBUTION PLAN
The Trustees have voted to adopt a Master Distribution Plan (the
"Plan") pursuant to Rule 12b-1 of the 1940 Act for the Premium Class shares of
each Fund after having concluded that there is a reasonable likelihood that the
Plan will benefit the Funds and the Premium Class shareholders. Pursuant to the
Plan, the Premium Class of each Fund may pay FDDI on a monthly basis for certain
costs and expenses incurred under the Plan, subject to periodic Board approval,
provided that each such payment is based on the average daily value of the
Fund's net assets during the preceding month and is calculated at an annual rate
not to exceed 0.35%. These costs and expenses include (i) advertising by radio,
television, newspapers, magazines, brochures, sales literature, direct mail or
any other form of advertising, (ii) expenses of sales employees or agents of
FDDI, including salary, commissions, travel and related expenses, (iii) payments
to broker-dealers and financial institutions for services in connection with the
distribution of shares, including promotional incentives and fees calculated
with reference to the average daily net asset value of shares held by
shareholders who have a brokerage or other service relationship with the
broker-dealer or other institution receiving such fees, (iv) costs of printing
prospectuses, statements of additional information and other materials to be
given or sent to prospective investors, (v) such other similar services as the
Trustees determine to be reasonably calculated to result in the sale of shares
of the Funds, (vi) costs of shareholder servicing which may be incurred by
broker-dealers, banks or other financial institutions, and (vii) other direct
and indirect distribution-related expenses, including the provision of services
with respect to maintaining the assets of the Funds.
FDDI will use all amounts received under the Plan for payments to
broker-dealers or financial institutions for their assistance in distributing
the Premium Class shares of each Fund and otherwise promoting the sale of such
shares, including payments in amounts based on the average daily value of Fund
shares owned by shareholders in respect of which the broker-dealer or financial
institution has a distributing relationship.
The Plan provides for FDDI to prepare and submit to the Board of
Trustees on a quarterly basis written reports of all amounts expended pursuant
to the Plan and the purpose for which such expenditures were made. The Plan
provides that it may not be amended to increase materially the costs which the
Premium Class shares of the Funds may bear pursuant to the Plan without
shareholder approval. Any other material amendments of the Plan must be approved
by the Board of Trustees, and by the Trustees who neither are "interested
persons" (as defined in the 1940 Act) of the Trust nor have any direct or
indirect financial interest in the operation of the Plan or in any related
agreement, by vote cast in person at a meeting called for the purpose of
considering such amendments. The selection and nomination of the Trustees of the
Trust has been committed to the discretion of the Trustees who are not
"interested persons" of the Trust.
The Plan is subject to annual approval, by the Board of Trustees and by
the Trustees who neither are "interested persons" nor have any direct or
indirect financial interest in the operation of the Plan, by vote cast in person
at a meeting called for the purpose of voting on the Plan. The Board of Trustees
of the Trust last approved the Plan at a meeting held on September 17, 1998. The
Plan is terminable with respect to the Funds at any time by a vote of a majority
of the Trustees who are not "interested persons" of the Trust and who have no
direct or indirect financial interest in the operation of the Plan or in the
Administration Agreement or by vote of the holders of a majority of the shares
of the Funds. No payments were made pursuant to the Plan on behalf of any of the
Funds for the fiscal years ended November 30, 1996, 1997 and 1998.
COMPUTATION OF NET ASSET VALUE
The Funds value their portfolio securities and compute their net asset
values per share in accordance with the procedures discussed in the
Prospectuses. This section provides a more detailed description of the Funds'
methods for valuing their portfolio securities.
The Core Fixed Income, Core Equity and Blended Total Return Funds each
value portfolio securities listed on an exchange on the basis of the last sale
prior to the time the valuation is made. If there has been no sale since the
immediately previous valuation, then the current bid price is used. Quotations
are taken from the exchange where the security is primarily traded. Portfolio
securities which are primarily traded on foreign exchanges may be valued with
the assistance of a pricing service and are generally valued at the preceding
closing values of such securities on their respective exchanges, except that
when an occurrence subsequent to the time a foreign security is valued is likely
to have changed such value, then the fair value of those securities will be
determined by consideration of other factors by or under the direction of the
Board of Trustees. Over-the-counter securities are valued on the basis of the
bid price at the close of business on each business day. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by or at the direction of the Board of Trustees.
Notwithstanding the above, bonds and other fixed income securities are valued by
using market quotations and may be valued on the basis of prices provided by a
pricing service approved by the Board of Trustees. All assets and liabilities
initially expressed in foreign currencies will be converted into U.S. dollars at
the mean between the bid and asked prices of such currencies against U.S.
dollars as last quoted by any major bank.
The Money Market Fund uses the amortized cost method to determine the
value of its portfolio securities pursuant to Rule 2a-7 under the 1940 Act. The
amortized cost method involves valuing a security at its cost and amortizing any
discount or premium over the period until maturity 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
the value, as determined by amortized cost, is higher or lower than the price
which the Fund would receive if the security were sold. During these periods,
the yield to a shareholder may differ somewhat from that which could be obtained
from a similar fund which utilizes a method of valuation based upon market
prices. Thus, during periods of declining interest rates, if the use of the
amortized cost method resulted in a lower value of the Fund's portfolio on a
particular day, a prospective investor in the Fund would be able to obtain a
somewhat higher yield than would result from an investment in a fund utilizing
solely market values and existing Fund shareholders would receive
correspondingly less income. The converse would apply during periods of rising
interest rates.
Rule 2a-7 provides that in order to value its portfolio using the
amortized cost method, the Money Market Fund must maintain a dollar-weighted
average portfolio maturity of 90 days or less, purchase securities having
remaining maturities of 397 days or less and invest only in U.S. dollar
denominated eligible securities determined by the Trust's Board of Trustees to
be of minimal credit risks and which (1) have received the highest short-term
rating by at least two NRSROs, such as "A-1" by Standard & Poor's and "P-1" by
Moody's; (2) are single rated and have received the highest short-term rating by
a NRSRO; or (3) are unrated, but are determined to be of comparable quality by
the Adviser pursuant to guidelines approved by the Board. Investments in rated
securities not rated in the highest category by at least two rating
organizations (or one rating organization if the instrument was rated by only
one such organization), and unrated securities not determined by the Board of
Trustees or IBJW to be comparable to those rated in the highest rating category,
will be limited.
Pursuant to Rule 2a-7, the Board of Trustees is also required to
establish procedures designed to stabilize, to the extent reasonably possible,
the price per share of the Money Market Fund, as computed for the purpose of
sales and redemptions, at $1.00. Such procedures include review of the Fund's
portfolio holdings by the Board of Trustees, at such intervals as it may deem
appropriate, to determine whether the net asset value of the Fund calculated by
using available market quotations deviates from $l.00 per share based on
amortized cost. The extent of any deviation will be examined by the Board of
Trustees. If such deviation exceeds 1/2 of 1%, the Board of Trustees will
promptly consider what action, if any, will be initiated. In the event the Board
of Trustees determines that a deviation exists which may result in material
dilution or other unfair results to investors or existing shareholders, the
Board of Trustees will take such corrective action as it regards as necessary
and appropriate, which may include selling portfolio instruments prior to
maturity to realize capital gains or losses or to shorten average portfolio
maturity, withholding dividends or establishing a net asset value per share by
using available market quotations.
PORTFOLIO TRANSACTIONS
Investment decisions for the Funds and for the other investment
advisory clients of IBJW are made with a view to achieving their respective
investment objectives. Investment decisions are the product of many factors in
addition to basic suitability for the particular client involved. Thus, a
particular security may be bought or sold for certain clients even though it
could have been bought or sold for other clients at the same time. Likewise, a
particular security may be bought for one or more clients when one or more
clients are selling the security. In some instances, one client may sell a
particular security to another client. It also sometimes happens that two or
more clients simultaneously purchase or sell the same security, in which event
each day's transactions in such security are, insofar as possible, averaged as
to price and allocated between such clients in a manner which in the opinion of
IBJW is equitable to each and in accordance with the amount being purchased or
sold by each. There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on other clients.
Pursuant to the Advisory Agreement, IBJW places orders for the purchase
and sale of portfolio investments for the Funds' accounts with brokers or
dealers selected by it in its discretion. In effecting purchases and sales of
portfolio securities for the account of the Funds, IBJW will seek the best
available price and most favorable execution of the Funds' orders. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter. Purchases and sales of securities are generally placed by IBJW
with broker-dealers which, in the Adviser's judgment, provide prompt and
reliable execution at favorable security prices and reasonable commission rates.
IBJW selects broker-dealers on the basis of a variety of factors such as
reputation, capital strength, size and difficulty of order, sale of Fund shares
and research provided to IBJW.
The cost of executing portfolio securities transactions for the Money
Market Fund primarily consists of dealer spreads and underwriting commissions.
Under the 1940 Act, persons affiliated with the Funds or FDISG are prohibited
from dealing with the Funds as a principal in the purchase and sale of
securities unless a permissive order allowing such transactions is obtained from
the SEC.
IBJW may, in circumstances in which two or more broker-dealers are in a
position to offer comparable results, give preference to a dealer which has
provided statistical or other research services to IBJW. By allocating
transactions in this manner, IBJW is able to supplement its research and
analysis with the views and information of securities firms. These items, which
in some cases may also be purchased for cash, include such matters as general
economic and securities market reviews, industry and company reviews,
evaluations of securities and recommendations as to the purchase and sale of
securities. Some of these services are of value to IBJW in advising various of
their clients (including the Funds), although not all of these services are
necessarily useful and of value in managing the Funds. The management fee paid
by the Funds is not reduced because IBJW or its affiliates receive such
services.
<PAGE>
As permitted by Section 28(e) of the Securities Exchange Act of 1934
(the "Act"), IBJW may cause the Funds to pay a broker-dealer which provides
"brokerage and research services" (as defined in the Act) to IBJW a higher
commission for effecting a securities transaction for the Funds than another
broker-dealer would have charged for effecting that transaction. Such higher
commission would be paid only if IBJW believes that the commission is reasonable
in relation to the value of the brokerage and research services received.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Trustees may determine, IBJW
may consider sales of shares of the Funds as a factor in the selection of
broker-dealers to execute portfolio transactions for the Funds.
The following table depicts total brokerage commissions paid by the
Funds during the fiscal years ended November 30, 1996, 1997 and 1998.
<TABLE>
<CAPTION>
Brokerage
Commissions
<S><C> <C> <C>
<C>
1996 1997
1998
---- ----
- ----
Reserve Money Market Fund $0 $0
$0
Core Fixed Income Fund $0 $0
$0
Core Equity Fund $88,696 $137,378
$276,174
Blended Total Return Fund $30,396 $129,698
$76,099
</TABLE>
TAXATION
Each Fund has elected to be treated as a regulated investment company
and qualifies as such for the fiscal year ended November 30, 1998. The Funds
intend to continue to qualify by complying with the provisions of Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code"). To qualify as a
regulated investment company, a Fund must (a) distribute to shareholders at
least 90% of its investment company taxable income (which includes, among other
items, dividends, taxable interest and the excess of net short-term capital
gains over net long-term capital losses); (b) derive in each taxable year at
least 90% of its gross income from dividends, interest, payments with respect to
securities loans and gains from the sale or other disposition of stock,
securities or foreign currencies or other income derived with respect to its
business of investing in such stock, securities or currencies; and (c) diversify
its holdings so that, at the end of each quarter of the taxable year, (i) at
least 50% of the market value of the Fund's assets is represented by cash and
cash items (including receivables), U.S. Government securities, the securities
of other regulated investment companies and other securities, with such other
securities of any one issuer limited for the purposes of this calculation to an
amount not greater than 5% of the value of the Fund's total assets and not
greater than 10% of the outstanding voting securities of such issuer, and (ii)
not more than 25% of the value of its total assets is invested in the securities
of any one issuer (other than U.S. Government securities or the securities of
other regulated investment companies). By meeting these requirements, the Funds
generally will not be subject to Federal income tax on their investment company
taxable income and net capital gains which are distributed to shareholders. If a
Fund does not meet all of these Code requirements, it will be taxed as an
ordinary corporation and its distributions will be taxed to shareholders as
ordinary income.
Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax. To
prevent imposition of the excise tax, each Fund must distribute for each
calendar year an amount equal to the sum of (1) at least 98% of its ordinary
income (excluding any capital gains or losses) for the calendar year, (2) at
least 98% of the excess of its capital gains over capital losses (adjusted for
certain ordinary losses) for the one-year period ending October 31 of such year,
and (3) all ordinary income and capital gains net income (adjusted for certain
ordinary losses) for previous years that were not distributed during such years.
A distribution, including an "exempt-interest dividend," will be treated as paid
on December 31 of a calendar year if it is declared by a Fund during October,
November or December of that year to shareholders of record on a date in such a
month and paid by the Fund during January of the following year. Such
distributions will be taxable to shareholders in the calendar year in which the
distributions are declared, rather than the calendar year in which the
distributions are received.
Some Funds may invest in stocks of foreign companies that are
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign company is classified as a PFIC under the Code if at least
one-half of its assets constitutes investment-type assets or 75% or more of its
gross income is investment-type income. Under the PFIC rules, an "excess
distribution" received with respect to PFIC stock is treated as having been
realized ratably over the period during which the Fund held the PFIC stock. A
Fund itself will be subject to tax on the portion, if any, of the excess
distribution that is allocated to the Fund's holding period in prior taxable
years (and an interest factor will be added to the tax, as if the tax actually
had been payable in such prior taxable years) even though the Fund distributes
the corresponding income to shareholders. Excess distributions include any gain
from the sale of PFIC stock as well as certain distributions from a PFIC.
All excess distributions are taxable as ordinary income.
A Fund may be able to elect alternative tax treatment with respect to
PFIC stock. Under an election that currently may be available, a Fund generally
would be required to include in its gross income its share of the earnings of a
PFIC on a current basis, regardless of whether any distributions are received
from the PFIC. If this election is made, the special rules, discussed above,
relating to the taxation of excess distributions, would not apply. In addition,
other elections may become available that would affect the tax treatment of PFIC
stock held by a Fund. Each Fund's intention to qualify annually as a regulated
investment company may limit its elections with respect to PFIC stock.
Because the application of the PFIC rules may affect, among other
things, the character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC stock, as well as subject a Fund
itself to tax on certain income from PFIC stock, the amount that must be
distributed to shareholders, and which will be taxed to shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not invest in PFIC stock.
Distributions of investment company taxable income generally are
taxable to shareholders as ordinary income. Distributions from certain of the
Funds may be eligible for the dividends-received deduction available to
corporations. Distributions of net long-term capital gains, if any, designated
by the Funds as long term capital gain dividends are taxable to shareholders as
long-term capital gain, regardless of the length of time the Funds' shares have
been held by a shareholder. All distributions are taxable to the shareholder in
the same manner whether reinvested in additional shares or received in cash.
Shareholders will be notified annually as to the Federal tax status of
distributions.
Distributions by a Fund reduce the net asset value of the Fund's
shares. Should a distribution reduce the net asset value below a shareholder's
cost basis, such distribution, nevertheless, would be taxable to the shareholder
as ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a distribution by the Funds. The price of shares
purchased at that time includes the amount of the forthcoming distribution.
Those purchasing just prior to a distribution will receive a distribution which
will nevertheless generally be taxable to them.
Upon the taxable disposition (including a sale or redemption) of shares
of a Fund, a shareholder may realize a gain or loss depending upon his basis in
his shares. Such gain or loss generally will be treated as capital gain or loss
if the shares are capital assets in the shareholder's hands. Such gain or loss
will be long-term or short-term, generally depending upon the shareholder's
holding period for the shares. However, a loss realized by a shareholder on the
disposition of Fund shares with respect to which capital gain dividends have
been paid will, to the extent of such capital gain dividends, be treated as long
term capital loss if such shares have been held by the shareholder for six
months or less. A loss realized on the redemption, sale or exchange of Fund
shares will be disallowed to the extent an exempt-interest dividend was received
with respect to those shares if the shares have been held by the shareholder for
six months or less. Further, a loss realized on a disposition will be disallowed
to the extent the shares disposed of are replaced (whether by reinvestment of
distributions or otherwise) within a period of 61 days beginning 30 days before
and ending 30 days after the shares are disposed of. In such a case, the basis
of the shares acquired will be adjusted to reflect the disallowed loss.
Shareholders receiving distributions in the form of additional shares will have
a cost basis for Federal income tax purposes in each share received equal to the
net asset value of a share of the Funds on the reinvestment date.
Under certain circumstances, the sales charge incurred in acquiring
shares of a Fund may not be taken into account in determining the gain or loss
on the disposition of those shares. This rule applies where shares of a Fund are
exchanged within 90 days after the date they were purchased and new shares of a
Fund are acquired without a sales charge or at a reduced sales charge. In that
case, the gain or loss recognized on the exchange will be determined by
excluding from the tax basis of the shares exchanged all or a portion of the
sales charge incurred in acquiring those shares. This exclusion applies to the
extent that the otherwise applicable sales charge with respect to the newly
acquired shares is reduced as a result of having incurred the sales charge
initially. Instead, the portion of the sales charge affected by this rule will
be treated as a sales charge paid for the new shares.
The taxation of equity options is governed by Code section 1234.
Pursuant to Code section 1234, the premium received by a Fund for selling a put
or call option is not included in income at the time of receipt. If the option
expires, the premium is short-term capital gain to the Fund. If the Fund enters
into a closing transaction, the difference between the amount paid to close out
its position and the premium received is short-term capital gain or loss. If a
call option written by a Fund is exercised, thereby requiring the Fund to sell
the underlying security, the premium will increase the amount realized upon the
sale of such security and any resulting gain or loss will be a capital gain or
loss, and will be long-term or short-term depending upon the holding period of
the security. With respect to a put or call option that is purchased by a Fund,
if the option is sold, any resulting gain or loss will be a capital gain or
loss, and will be long-term or short-term, depending upon the holding period of
the option. If the option expires, the resulting loss is a capital loss and is
long-term or short-term, depending upon the holding period of the option. If the
option is exercised, the cost of the option, in the case of a call option, is
added to the basis of the purchased security and, in the case of a put option,
reduces the amount realized on the underlying security in determining gain or
loss.
Certain of the options, futures contracts, and forward foreign currency
exchange contracts that several of the Funds may invest in are so-called
"section 1256 contracts." With certain exceptions, gains or losses on section
1256 contracts generally are considered 60% long-term and 40% short-term capital
gains or losses ("60/40"). Also, section 1256 contracts held by a Fund at the
end of each taxable year (and, generally, for purposes of the 4% excise tax, on
October 31 of each year) are "marked-to-market" with the result that unrealized
gains or losses are treated as though they were realized and the resulting gain
or loss is treated as 60/40 gain or loss.
Generally, the hedging transactions undertaken by a Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
character of gains (or losses) realized by a Fund. In addition, losses realized
by a Fund on a position that are part of a straddle may be deferred under the
straddle rules, rather than being taken into account in calculating the taxable
income for the taxable year in which such losses are realized. Because only a
few regulations implementing the straddle rules have been promulgated, the tax
consequences to a Fund of hedging transactions are not entirely clear. Hedging
transactions may increase the amount of short-term capital gain realized by a
Fund, which is taxed as ordinary income when distributed to stockholders.
A Fund may make one or more of the elections available under the Code,
which are applicable to straddles. If a Fund makes any of the elections, the
amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of
gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to shareholders, and which will be taxed to shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not engage in such hedging transactions.
Certain requirements that must be met under the Code in order for a
Fund to qualify as a regulated investment company may limit the extent to which
a Fund will be able to engage in transactions in options, futures, and forward
contracts.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time a Fund accrues interest, dividends
or other receivables, or accrues expenses or other liabilities denominated in a
foreign currency, and the time the Fund actually collects such receivables, or
pays such liabilities, generally are treated as ordinary income or ordinary
loss. Similarly, on disposition of debt securities denominated in a foreign
currency and on disposition of certain options and forward and futures
contracts, gains or losses attributable to fluctuations in the value of foreign
currency between the date of acquisition of the security or contract and the
date of disposition also are treated as ordinary gain or loss. These gains or
losses, referred to under the Code as "section 988" gains or losses, may
increase, decrease, or eliminate the amount of a Fund's investment company
taxable income to be distributed to its shareholders as ordinary income.
Income received by a Fund from sources within foreign countries may be
subject to withholding and other similar income taxes imposed by the foreign
country. If more than 50% of the value of a Fund's total assets at the close of
its taxable year consists of securities of foreign governments and corporations,
the Fund will be eligible and intends to elect to "pass-through" to its
shareholders the amount of such foreign taxes paid by the Fund. Pursuant to this
election, a shareholder would be required to include in gross income (in
addition to taxable dividends actually received) his pro rata share of the
foreign taxes paid by a Fund, and would be entitled either to deduct his pro
rata share of foreign taxes in computing his taxable income or to use it as a
foreign tax credit against his U.S. Federal income tax liability, subject to
limitations. No deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions, but such a shareholder may be eligible to claim the
foreign tax credit (see below). Each shareholder will be notified within 60 days
after the close of a Fund's taxable year whether the foreign taxes paid by a
Fund will "pass-through" for that year and, if so, such notification will
designate (a) the shareholder's portion of the foreign taxes paid to each such
country and (b) the portion of the dividend which represents income derived from
foreign sources.
Generally, a credit for foreign taxes is subject to the limitation that
it may not exceed the shareholder's U.S. tax attributable to his total foreign
source taxable income. For this purpose, if a Fund makes the election described
in the preceding paragraph, the source of the Fund's income flows through to its
shareholders. With respect to a Fund, gains from the sale of securities will be
treated as derived from U.S. sources and certain currency fluctuations gains,
including fluctuation gains from foreign currency-denominated debt securities,
receivables and payables, will be treated as ordinary income derived from U.S.
sources. The limitation on the foreign tax credit is applied separately to
foreign source passive income (as defined for purposes of the foreign tax
credit) including foreign source passive income of a Fund. The foreign tax
credit may offset only 90% of the alternative minimum tax imposed on
corporations and individuals, and foreign taxes generally may not be deducted in
computing alternative minimum taxable income.
The Funds are required to report to the Internal Revenue Service
("IRS") all distributions except in the case of certain exempt shareholders. All
such distributions generally are subject to withholding of Federal income tax at
a rate of 31% ("backup withholding") in the case of non-exempt shareholders if
(1) the shareholder fails to furnish the Funds with and to certify the
shareholder's correct taxpayer identification number or social security number,
(2) the IRS notifies the Funds or a shareholder that the shareholder has failed
to report properly certain interest and dividend income to the IRS and to
respond to notices to that effect, or (3) when required to do so, the
shareholder fails to certify that he is not subject to backup withholding. If
the withholding provisions are applicable, any such distributions, whether
reinvested in additional shares or taken in cash, will be reduced by the amounts
required to be withheld. Backup withholding is not an additional tax. Any amount
withheld may be credited against the shareholder's U.S. Federal income tax
liability. Investors may wish to consult their tax advisors about the
applicability of the backup withholding provisions.
The foregoing discussion relates only to Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S.
corporations, partnerships, trusts and estates). Distributions by the Funds also
may be subject to state and local taxes and their treatment under state and
local income tax laws may differ from the Federal income tax treatment.
Distributions of a Fund which are derived from interest on obligations of the
U.S. Government and certain of its agencies and instrumentalities may be exempt
from state and local taxes in certain states. Shareholders should consult their
tax advisors with respect to particular questions of Federal, state and local
taxation. Shareholders who are not U.S. persons should consult their tax
advisers regarding U.S. and foreign tax consequences of ownership of shares of
the Funds, including the likelihood that distributions to them would be subject
to withholding of U.S. tax at a rate of 30% (or at a lower rate under a tax
treaty).
DESCRIPTION OF THE FUNDS' SHARES
CAPITALIZATION
The capitalization of the Trust consists solely of an unlimited number
of shares of beneficial interest with a par value of $0.001 each. The Board of
Trustees may establish additional Funds (with different investment objectives
and fundamental policies) or additional classes at any time in the future.
Establishment and offering of additional Funds will not alter the rights of the
Trust's shareholders. When issued, shares are fully paid, non-assessable,
redeemable and freely transferable. Shares do not have preemptive rights or
subscription rights. In any liquidation of a Fund, each shareholder is entitled
to receive his pro rata share of the net assets of that Fund.
Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust and requires that notice of the
disclaimer be given in each contract or obligation entered into or executed by
the Trust or the Trustees. The Declaration of Trust provides for indemnification
out of Trust property for all loss and expense of any shareholder held
personally liable for the obligations of the Trust. The risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its obligations
and should be considered remote.
VOTING RIGHTS
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in the SAI, the phrase "vote of a
majority of the outstanding shares" of a Fund (or the Trust) means the vote of
the lesser of: (1) 67% of the shares of a Fund (or the Trust) present at a
meeting if the holders of more than 50% of the outstanding shares are present in
person or by proxy; or (2) more than 50% of the outstanding shares of a Fund (or
the Trust).
Shareholders have the right to vote in the election of Trustees and on
any and all matters on which by law or under the provisions of the Declaration
of Trust, they may be entitled to vote. Under the Declaration of Trust, the
Trust is not required to hold annual meetings of each Fund's shareholders to
elect Trustees or for other purposes. When certain matters affect only one class
of shares but not another, the shareholders would vote as a class regarding such
matters. It is not anticipated that the Trust will hold shareholders' meetings
unless required by law or the Declaration of Trust. In this regard, the Trust
will be required to hold a meeting to elect Trustees to fill any existing
vacancies on the Board if, at any time, fewer than a majority of the Trustees
have been elected by the shareholders of the Trust. In addition, the Declaration
of Trust provides that the holders of not less than two-thirds of the
outstanding shares of the Trust may remove persons serving as Trustee either by
declaration in writing or at a meeting called for such purpose. The Trustees are
required to call a meeting for the purpose of considering the removal of persons
serving as Trustee if requested in writing to do so by the holders of not less
than 10% of the outstanding shares of the Trust. To the extent required by
applicable law, the Trustees shall assist shareholders who seek to remove any
person serving as Trustee.
The Trust's shares do not have cumulative voting rights, so that the
holders of more than 50% of the outstanding shares may elect the entire Board of
Trustees, in which case the holders of the remaining shares would not be able to
elect any Trustees.
CALCULATION OF PERFORMANCE DATA
The Funds may, from time to time, include their yield, effective yield,
tax equivalent yield and average annual total return in advertisements or
reports to shareholders or prospective investors.
Current yield for the Money Market Fund will be based on the change in
the value of a hypothetical investment (exclusive of capital changes such as
gains or losses from the sale of securities and unrealized appreciation and
depreciation) over a particular seven-day period, less a pro-rata share of each
Fund's expenses accrued over that period (the "base period"), and stated as a
percentage of the investment at the start of the base period (the "base period
return"). The base period return is then annualized by multiplying by 365/7,
with the resulting yield figure carried to at least the nearest hundredth of one
percent. "Effective yield" for the Money Market Fund assumes that all dividends
received during the base period have been reinvested. Calculation of "effective
yield" begins with the same "base period return" used in the calculation of
yield, which is then annualized to reflect weekly compounding pursuant to the
following formula:
Effective Yield = [(Base Period Return + 1)365/7] - 1.
For the period ended November 30, 1998, the seven-day yield and
seven-day effective yield of the Service Class Shares of the Reserve Money
Market Fund was 4.83% and 4.95%, respectively.
Quotations of yield for the Core Fixed Income, Core Equity and Blended
Total Return Funds will be based on the investment income per share earned
during a particular 30-day (or one month) period, less expenses accrued during a
period ("net investment income") and will be computed by dividing net investment
income by the maximum offering price per share on the last day of the period,
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 any reimbursements), c = the average daily number of
shares outstanding during the period that were entitled to receive dividends,
and d = the maximum offering price per share on the last day of the period.
For the period ended November 30, 1998, the 30-day (or one month) yield
for Service Class shares of the Core Fixed Income Fund, Core Equity Fund and
Blended Total Return Fund was 5.06%, (0.19)% and 2.43%, respectively.
Quotations of average annual total return will be expressed in terms of
the average annual compounded rate of return of a hypothetical investment in a
Fund over periods of 1, 5 and 10 years and since inception (up to the life of
the Fund), calculated pursuant to the following formula:
P (1 + T)n = ERV
(where P = a hypothetical initial payment of $l,000, T = the average annual
total return, n = the number of years, and ERV = the ending redeemable value of
a hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of the maximum sales charge and a
proportional share of Fund expenses (net of certain reimbursed expenses) on an
annual basis, and will assume that all dividends and distributions are
reinvested when paid.
The average annual total return for the Service Class shares of the
Core Fixed Income Fund, Core Equity Fund and Blended Total Return Fund for the
fiscal year ended November 30, 1998 was 9.27%, 17.87% and 15.98%, respectively,
and for the period February 1, 1995 (commencement of operations) to November 30,
1998 was 8.60%, 25.36% and 17.16%. The average annual total returns for the
Premium Class shares of the Core Fixed Income Fund, Core Equity Fund and Blended
Total Return Fund for the fiscal year ended November 30, 1998 were identical to
those for the Service Class of shares.
Quotations of yield and total return will reflect only the performance
of a hypothetical investment in the Funds during the particular time period
shown. Yield and total return for the Funds will vary based on changes in the
market conditions and the level of the Fund's expenses, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
In connection with communicating its yields or total return to current
or prospective unit holders, the Funds also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
other unmanaged indices which may assume reinvestment of dividends but generally
do not reflect deductions for administrative and management costs.
Performance information for the Funds may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index, Dow Jones
Industrial Average, or other unmanaged indices so that investors may compare the
Funds' results with those of a group of unmanaged securities widely regarded by
investors as representative of the securities markets in general; (ii) other
groups of mutual funds tracked by Lipper Analytical Services, a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives, and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment of dividends but generally do not
reflect deductions for administrative and management costs and expenses.
Investors who purchase and redeem shares of the Funds through a
customer account maintained at a Service Organization may be charged one or more
of the following types of fees as agreed upon by the Service Organization and
the investor, with respect to the customer services provided by the Service
Organization: account fees (a fixed amount per month or per year); transaction
fees (a fixed amount per transaction processed); compensating balance
requirements (a minimum dollar amount a customer must maintain in order to
obtain the services offered); or account maintenance fees (a periodic charge
based upon a percentage of the assets in the account or of the dividends paid on
those assets). Such fees will have the effect of reducing the yield and average
annual total return of the Funds for those investors. Investors who maintain
accounts with the Trust as transfer agent will not pay these fees.
FINANCIAL STATEMENTS
The Funds' financial statements and financial highlights for the fiscal
year ended November 30, 1998, and the report of Ernst & Young LLP, independent
auditors, are included in the Funds' Annual Report. The Funds' financial
statements, including the financial highlights and report of the independent
auditors are incorporated herein by reference. For a free copy of the Annual
Report, please contact the Funds at 1-800-99-IBJFD (1-800-994-2533).
<PAGE>
APPENDIX
Description of Moody's bond ratings:
Excerpts from Moody's description of its four highest bond ratings are
listed as follows: Aaa - judged to be the best quality and they carry the
smallest degree of investment risk; Aa - judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds; A possess many favorable investment attributes and are to
be considered as "upper medium grade obligations"; Baa considered to be medium
grade obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Other Moody's bond, descriptions
include: Ba - judged to be below-investment grade and have speculative elements,
their future cannot be considered as well assured; B - generally lack
characteristics of the desirable investment; Caa - are of poor standing. Such
issues may be in default or there may be present elements of danger with respect
to principal or interest; Ca speculative in a high degree, often in default; C -
lowest rated class of bonds, regarded as having extremely poor prospects.
Moody's also supplies numerical indicators 1, 2 and 3 to rating
categories. The modifier 1 indicates that the security is in the higher end of
its rating category; the modifier 2 indicates a mid-range ranking; and modifier
3 indicates a ranking toward the lower end of the category.
Description of S&P bond ratings:
Excerpts from S&P's description of its four highest bond ratings are
listed as follows: AAA - highest grade obligations, in which capacity to pay
interest and repay principal is extremely strong; AA - also qualify as high
grade obligations, having a very strong capacity to pay interest and repay
principal, and differs from AAA issues only in a small degree; A - regarded as
upper medium grade, having a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories; BBB - regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories. BB, B, CCC, CC - below-investment
grade (high yield), predominately speculative with respect to capacity to pay
interest and repay principal in accordance with terms of the obligations-, BB
indicates the highest grade and CC the lowest within the speculative rating
categories.
S&P applies indicators "+, -," no character, and relative standing
within the major rating categories.
Description of Moody's ratings of notes and variable rate demand instruments:
Moody's ratings for state and municipal short term obligations will be
designated Moody's Investment Grade or MIG. Such ratings recognize the
differences between short term credit and long-term risk. Short term ratings on
issues with demand features (variable rate demand obligations) are
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payments
relying on external liquidity.
MIG 1/VMIG 1: This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG 2/VMIG 2: This denotes high quality. Margins of protection are
ample although not as large as in the preceding group.
<PAGE>
