Information contained herein is subject to completion
or amendment. A registration statement relating to
these securities has been filed with the Securities and
Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This
prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any
sale of these securities in any State in which such
offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws
of any such State.
<PAGE>
Subject to completion, dated April 7, 1997
Dated February __, 1997
AMquest MATRIX FUNDS, INC.
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
1-800-908-9979
AMquest MATRIX FUNDS, INC. (the "Corporation") is
an open-end, diversified, management investment
company, commonly referred to as a mutual fund. The
Corporation is currently comprised of three diversified
series or portfolios, including the AMquest Matrix
Income Fund (the "Income Fund"), the AMquest Matrix
Total Return Fund (the "Total Return Fund"), and the
AMquest Matrix Growth Fund (the "Growth Fund")
(hereinafter collectively referred to as the "Funds").
The Income Fund's investment objective is to seek
current income. The Income Fund seeks to achieve its
investment objective by investing primarily in a
diversified portfolio of investment grade fixed income
securities. The Total Return Fund's investment
objective is to seek long-term capital growth and
income. The Total Return Fund seeks to achieve its
investment objective primarily through investments in
equity securities and through investments in investment
grade fixed income securities. The Growth Fund's
investment objective is to seek long-term capital
growth. The Growth Fund seeks to achieve its
investment objective by investing in a diversified
portfolio of equity securities consisting primarily of
common stocks.
This Prospectus contains information you should
consider before you invest in one or more of the Funds.
Please read it carefully and keep it for future
reference. A Statement of Additional Information (the
"SAI") for the Funds, dated February __, 1997, contains
further information, is incorporated by reference into
this Prospectus, and has been filed with the Securities
and Exchange Commission (the "SEC"). The SAI, which
may be revised from time to time, is available without
charge upon request to the above-noted address or
telephone number.
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page No.
EXPENSES 3
HIGHLIGHTS 4
INVESTMENT OBJECTIVES AND POLICIES 5
IMPLEMENTATION OF POLICIES AND RISKS 6
FUNDAMENTAL INVESTMENT RESTRICTIONS 12
FUND ORGANIZATION AND MANAGEMENT 13
DETERMINATION OF NET ASSET VALUE 15
HOW TO PURCHASE SHARES 16
HOW TO REDEEM SHARES 19
EXCHANGE PRIVILEGE 20
DISTRIBUTION PLAN 21
INDIVIDUAL RETIREMENT ACCOUNTS 22
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX
TREATMENT 22
FUND PERFORMANCE 23
APPENDIX - RATINGS A-1
No person has been authorized to give any
information or to make any representations other than
those contained in this Prospectus and the SAI, and if
given or made, such information or representations may
not be relied upon as having been authorized by the
Funds. This Prospectus does not constitute an offer to
sell securities in any state or jurisdiction in which
such offering may not lawfully be made.
<PAGE>
EXPENSES
The following information is provided in order to
help you understand the various costs and expenses that
you, as an investor in one or more of the Funds, will
bear directly or indirectly.
Shareholder Transaction Expenses(1)
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.50%(2)
Maximum Sales Load Imposed on Reinvested Dividends NONE
Deferred Sales Load Imposed on Redemptions NONE
Redemption Fees NONE
Exchange Fees NONE(1)
Annual Fund Operating Expenses
(after waivers or reimbursements)
(as a percentage of average net assets)
Fund
Income Total Return Growth
Management Fees 0.75% 1.00% 1.00%
Rule 12b-1 Fees(3),(4) 0.25 0.25 0.25
Other Expenses(5) 1.75 1.50 1.50
Total Operating Expenses(5) 2.75 2.75 2.75
____________
(1)In addition to the shareholder transaction expenses
listed below, shareholders who choose to purchase
and/or redeem shares by wire may be charged a $10
service fee. See "How to Purchase Shares - Initial
Investment - Minimum $1,000," and "How to Redeem
Shares - Written Redemption." With respect to
exchange requests received via telephone, a $5
service fee per request will be charged.
(2)The sales load illustrated is the maximum rate
applicable to purchases of Fund shares. Certain
investors are exempt from having to pay this sales
load, and reduced sales loads are available under
certain plans, as described more fully under "How
to Purchase Shares - Purchases at Net Asset Value"
and "- Reduced Sales Charge Plans."
(3)See "Distribution Plan" for detailed information
relating to the Rule 12b-1 distribution plan (the
"Plan").
(4)Consistent with the National Association of
Securities Dealers, Inc.'s (the "NASD") rules, it
is possible that the Rule 12b-1 fees could cause
long-term investors of a Fund to pay more than the
economic equivalent of the maximum front-end sales
charges permitted under those same rules.
(5)Until the earlier of the end of the first 12 months
of operations or the date upon which the Funds'
aggregate average net assets exceed $30 million,
the Funds' investment adviser, AMquest Advisers,
Inc. (the "Adviser"), has agreed to waive its
management fee and/or reimburse each Fund's
respective operating expenses to the extent
necessary to ensure that no Fund's Total Operating
Expenses exceed 2.75% of its average daily net
assets. "Other Expenses" have been estimated for
the current fiscal year since the Funds did not
begin operations until February __, 1997, and are
presented net of reimbursements. Absent these
reimbursements, Other Expenses and Total Operating
Expenses for the Income, Total Return, and Growth
Funds are estimated to be 1.76% and 2.76%; 1.68%
and 2.93%; and 1.68% and 2.93%, respectively. For
additional information concerning fees and
expenses, see "Fund Organization and Management -
Management."
<PAGE>
Example
You would pay the following expenses on a $1,000
investment, assuming (i) a 5% annual return and (ii)
redemption at the end of each time period.
Fund 1 Year 3 Years
Income $72 $126
Total Return $72 $126
Growth $72 $126
The Example is based on each Fund's "Total
Operating Expenses" described in the table above. In
addition, the 4.50% maximum sales load imposed on
purchases is reflected in the Example. The amounts in
the Example may increase absent the waivers or
reimbursements. PLEASE REMEMBER THAT THE EXAMPLE
SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF PAST OR
FUTURE EXPENSES AND THAT ACTUAL EXPENSES MAY BE HIGHER
OR LOWER THAN THOSE SHOWN. The assumption in the
Example of a 5% annual return is required by
regulations of the SEC applicable to all mutual funds.
The assumed 5% annual return is not a prediction of,
and does not represent, the projected or actual
performance of a Fund's shares.
HIGHLIGHTS
What are the investment objectives and policies of each
of the Funds?
Each Fund has different investment objectives and
policies. The Income Fund seeks to provide current
income consistent with its quality and other standards.
The Total Return Fund seeks to provide long-term
capital growth and income (i.e., total return). The
Growth Fund seeks to provide long-term capital growth.
The investment policies of each Fund are described
under "Investment Objectives and Policies."
What types of securities and investment techniques may
be used by the Funds?
Each Fund invests in equity and fixed income
securities and, subject to certain limitations, may
invest in foreign securities and engage in derivative
transactions, including options, futures and options on
futures transactions. Each Fund may invest in reverse
repurchase agreements, when-issued securities and
illiquid securities. In addition, each Fund may invest
in small to medium-sized companies, some of which may
be unseasoned. These investment practices and
techniques involve risks that are different in some
respects from those associated with similar funds that
do not use them. See "Implementation of Policies and
Risks."
What are the potential risks of investing in the Funds?
The Funds are suitable for long-term investors
only and are not designed as a short-term investment.
The share price of each Fund is expected to fluctuate
and may, at redemption, be worth more or less than the
initial purchase price. Investors in any one of the
Funds may be exposed, to a greater or lesser extent
depending on the Fund and the allocation of Fund assets
among investments, to market risks associated with
investments in equity and fixed income securities.
Market risks associated with equity investments include
the possibility that stock prices in general will
decline over short or even extended periods. This risk
is in addition to the risks inherent in individual
stock selections. Market risks associated with fixed
income investments include the possibility that bond
prices in general will decline when interest rates
increase. While fixed income securities normally
fluctuate less in price than stocks, there have been
extended periods of increases in interest rates that
have caused significant declines in fixed income
securities prices. In addition to market risks
associated with fixed income investments, individual
issues of fixed income securities may be subject to
credit risk of the issuer. See "Implementation of
Policies and Risks," for more information.
<PAGE>
Who will be managing my investment?
The Funds are managed by AMquest Advisers, Inc.
(the "Adviser"), which supervises the management of
each Fund's portfolio by the subadviser, Tocqueville
Asset Management L.P. (the "Subadviser"), and
administers the Corporation's business affairs. See
"Fund Organization and Management - Management."
What are the procedures for purchasing and redeeming
shares?
Shares of each Fund are offered at net asset value
per share plus a maximum initial sales charge of 4.50%
of the offering price. Certain exceptions apply to the
payment of the initial sales load and reduced sales
charge plans are available. See "How to Purchase
Shares" for more details. In addition, the Funds have
adopted a distribution plan under Rule 12b-1 of the
Investment Company Act of 1940, as amended (the "1940
Act"), which authorizes each Fund to pay a distribution
fee of up to 0.25% per annum of its average daily net
assets. The actual dollar amount of distribution fees
paid in current and future years will depend on the
amount of a Fund's assets that become subject to such
fees. See "Distribution Plan."
The minimum initial investment required by each
Fund is $1,000. The minimum subsequent investment is
$500. The minimum initial investment for investors
using the Automatic Investment Plan is $50. These
minimums may be changed or waived at any time by the
Funds. See "How to Purchase Shares."
Shares may be redeemed using either written or
telephone redemption procedures at net asset value per
share without the payment of any redemption charges.
See "How to Redeem Shares."
What is the policy regarding dividends and other
distributions?
The policy of each Fund is to distribute
substantially all net realized capital gains annually.
Also, it is the policy of the Income Fund to pay
monthly dividends, the Total Return Fund to pay
quarterly dividends and the Growth Fund to pay annual
dividends from net investment income. See "Dividends,
Capital Gains Distributions and Tax Treatment."
Who should I contact if I have questions?
Questions regarding the Funds may be directed to
the address and telephone number on the front page of
this Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The descriptions that follow are designed to help
you choose the Fund that best fits your investment
objective. You may want to pursue more than one
objective by investing in more than one of the Funds.
The investment objective of each Fund is discussed
below in connection with the Fund's investment
policies. Because of the risks inherent in investments
in equity and fixed income securities, there can be no
assurance that a Fund will meet its investment
objective or that shares in a Fund will be worth more
than the original purchase price. The investment
objectives presented below may not be changed without
shareholder approval. Other investment restrictions
which may not be changed without shareholder approval
are discussed below under "Fundamental Investment
Restrictions" and in the SAI.
Income Fund
The Income Fund's investment objective is to seek
current income. The Income Fund seeks to achieve its
investment objective by investing primarily in a
diversified portfolio of investment grade fixed income
securities.
<PAGE>
The Income Fund is designed for investors who want
to pursue higher income than short-term securities
generally provide and who are willing to accept the
fluctuation in principal associated with intermediate
to longer-term fixed income securities. While the
Income Fund has no specific limitations on the maturity
of its fixed income securities investments, it will
generally focus on intermediate to longer-term
investments. Under normal market conditions, the
Income Fund will invest at least 65% of its total
assets in investment grade fixed income securities. The
balance of the Fund, up to 35% of its total assets, may
be invested in a diversified portfolio of common stock
and other equity securities.
Total Return Fund
The Total Return Fund's investment objective is to
seek long-term capital growth and income. The Total
Return Fund seeks to achieve its investment objective
primarily through investments in equity securities and
through investments in investment grade fixed income
securities.
The Total Return Fund is designed for investors
seeking long-term capital appreciation with a moderate
level of current income, who can tolerate the
fluctuations in portfolio value and other risks that
accompany equity investments. The level of current
income generated by the Total Return Fund is expected
to vary from time to time based on the composition of
the Fund's assets. Under normal market conditions, the
Total Return Fund will invest at least 55% of its total
assets in common stocks and other equity securities.
While the Total Return Fund will focus on dividend
paying common stocks and other equity securities, the
Fund may invest in non-dividend paying stocks that
offer the potential for capital growth. In addition to
equity securities, the Total Return Fund may invest in
investment grade fixed income securities.
Growth Fund
The Growth Fund's investment objective is to seek
long-term capital growth. The Growth Fund seeks to
achieve its investment objective by investing in a
diversified portfolio of equity securities consisting
primarily of common stocks.
The Growth Fund is designed for investors seeking
long-term capital appreciation, who can tolerate the
fluctuations in portfolio value and other risks that
accompany investments in common stocks and other equity-
type securities. The Growth Fund will invest at least
70% of its total assets, and under normal market
conditions expects to be fully invested, in equity
securities consisting primarily of common stocks. The
Growth Fund will seek to invest in equity securities
that demonstrate or are expected to demonstrate
accelerating earnings momentum. Such securities
provide the best opportunity to achieve the Fund's
objective of long-term capital growth. In addition,
the Growth Fund may invest up to 30% of its total
assets in investment grade fixed income securities.
IMPLEMENTATION OF POLICIES AND RISKS
In addition to the general investment policies
described above concerning each Fund, the securities
and investment techniques which may be used by the
Funds are described below. Some of these securities
and investment techniques involve special risks, which
are described below and in the Funds' SAI.
Common Stocks and Other Equity Securities
Each Fund may invest a portion of its assets in
common stocks and other equity securities, including
securities convertible or exchangeable into common
stock and warrants. Common stocks and other equity
securities generally increase or decrease in value
based on the earnings of a company and on general
industry and market conditions. A Fund that invests a
significant amount of its assets in common stocks and
other equity securities is likely to have more
fluctuations in share price than a Fund that invests a
significant portion of its assets in fixed income
securities.
<PAGE>
Fixed Income Securities
Fixed Income Securities in General. Each Fund may
invest a portion of its assets in a wide variety of
fixed income securities, including debt securities and
non-convertible preferred stocks. Debt securities are
obligations of the issuer to pay interest and repay
principal. Preferred stocks have rights senior to a
company's common stock, but junior to a company's
creditors and, if held by a Fund as a fixed income
security, will generally pay a dividend.
The value of fixed income securities is affected
by changes in market interest rates. If interest rates
increase, the value of fixed income securities
generally decrease. Similarly, if interest rates
decrease, the value of fixed income securities
generally increase. Shares in a Fund with significant
investments in fixed income securities are likely to
fluctuate in a similar manner. In general, the longer
the remaining maturity of a fixed income security, the
greater its fluctuations in value based on interest
rate changes. Longer-term fixed income securities
generally pay a higher interest rate. The Funds invest
in fixed income securities of varying maturities.
The value of fixed income securities may also be
affected by changes in the credit quality of the
issuer. Lower-rated fixed income securities generally
pay a higher interest rate. Although the Funds only
invest in investment grade debt securities, the value
of these securities may decrease due to changes in
ratings over time. However, the Subadviser will
monitor each Fund's investments in debt securities to
ensure that no Fund will at any time have 5% or more of
its net assets invested in non-investment grade debt
securities (also referred to as "junk bonds").
Types of Fixed Income Securities. The fixed
income securities in which the Funds may invest
include:
Corporate debt securities, including
bonds, debentures and notes;
U.S. government securities;
Mortgage and asset-backed securities;
Foreign debt obligations (either
directly or through depository receipts);
Preferred stocks;
Convertible securities;
Commercial paper (including variable
amount master demand notes);
Bank obligations, such as certificates
of deposit, banker's acceptances and time
deposits of domestic and foreign banks,
domestic savings association and their
subsidiaries and branches (in amounts in
excess of the current $100,000 per account
insurance coverage provided by the Federal
Deposit Insurance Corporation); and
Repurchase agreements.
Ratings. The Funds will limit investments in
fixed income securities to those that are rated at the
time of purchase as investment grade by a national
rating organization, such as S&P or Moody's, or, if
unrated, are determined to be of equivalent quality by
the Subadviser. Investment grade fixed income
securities include:
U.S. government securities;
Bonds or bank obligations rated in one
of the four highest categories (BBB or higher
by S&P);
Short-term notes rated in one of the two
highest categories (SP-2 or higher by S&P);
<PAGE>
Commercial paper or short-term bank
obligations rated in one of the three highest
categories (A-3 or higher by S&P); and
Repurchase agreements involving
investment grade fixed income securities.
Investment grade fixed income securities are generally
believed to have a lower degree of credit risk.
However, certain investment grade securities with lower
ratings are considered medium quality and may be
subject to greater credit risk than the highest rated
securities. If a security's rating falls below
investment grade, the Subadviser will determine what
action, if any, should be taken to ensure compliance
with a Fund's investment objective and to ensure that
no Fund will at any time have 5% or more of its net
assets invested in non-investment grade debt
securities. Additional information concerning
securities ratings is contained in the Appendix to the
Prospectus and in the SAI.
Government Securities. U.S. government securities
are issued or guaranteed by the U.S. government or its
agencies or instrumentalities. These securities may
have different levels of government backing. U.S.
Treasury obligations, such as Treasury bills, notes,
and bonds are backed by the full faith and credit of
the U.S. Treasury. Some U.S. government agency
securities are also backed by the full faith and credit
of the U.S. Treasury, such as securities issued by the
Government National Mortgage Association (GNMA). Other
U.S. government securities may be backed by the right
of the agency to borrow from the U.S. Treasury, such as
securities issued by the Federal Home Loan Bank, or may
be backed only by the credit of the agency. The U.S.
government and its agencies and instrumentalities only
guarantee the payment of principal and interest and not
the market value of the securities. The market value
of U.S. government securities will fluctuate based on
interest rate changes and other market factors.
Mortgage- and Asset-Backed Securities. Mortgage-
backed securities represent mortgage loans or interests
in such loans secured by real property, and include
single- and multi-class pass-through securities and
collateralized mortgage obligations. Mortgage-backed
securities are characterized by monthly payments to the
holder of the security, reflecting the monthly payments
made by the borrowers who received the underlying
mortgage loans. The payments to the holders of these
securities (such as a Fund), like the payments on the
underlying loans, represent both principal and
interest. Although the underlying mortgage loans are
for specified periods of time, such as 15 or 30 years,
the borrowers can and may pay them off sooner. Thus,
the holders of these securities frequently receive
prepayments of principal, in addition to the principal
which is part of the regular monthly payment. A
borrower is more likely to prepay a mortgage which
bears a relatively high interest rate. This means that
in times of declining interest rates, some of a Fund's
higher yielding securities might be converted to cash,
and the Fund will be forced to accept lower interest
rates when that cash is used to purchase additional
securities. The increased likelihood of prepayment
when interest rates decline also limits market price
appreciation of mortgage-backed securities. If a Fund
buys mortgage-related securities at a premium, mortgage
foreclosures or mortgage prepayments may result in a
loss to the Fund of up to the amount of the premium
paid since only timely payment of principal and
interest is guaranteed.
Asset-backed securities have characteristics
similar to mortgage-backed securities. However, the
underlying assets are not first-lien mortgage loans or
interests in these loans, but are assets such as motor
vehicle installment sales contracts, other installment
loan contracts, home equity loans, leases of various
types of property and receivables from credit card or
other revolving credit arrangements. Similar to
mortgage-backed securities, asset-backed securities are
subject to prepayment, which may reduce the overall
return to holders (such as a Fund) of the security.
Asset-backed securities may also be subject to the
risks relating to the underlying assets, which may be
subject to the risk of non-payment, depreciation or
damage to the underlying collateral (such as
automobiles) or certain other factors. Asset-backed
securities may be supported by non-governmental credit
enhancements.
The Funds may invest in stripped mortgage- or
asset-backed securities, which receive differing
proportions of the interest and principal payments from
the underlying assets. The market value of such
securities generally is more sensitive to changes in
prepayment and interest rates than is the case with
traditional mortgage- and asset-backed securities, and
in some cases the market value may be extremely
volatile. With respect to certain stripped securities,
such as interest only ("IO") and principal only ("PO")
classes, a rate of prepayment that is faster or slower
than anticipated may result in a Fund failing to
recover all or a portion of its investment, even though
the securities are investment grade.
<PAGE>
Variable and Floating Rate Securities. Each Fund
may invest in variable, floating and inverse floating
rate debt obligations. Variable and floating rate
securities provide for a periodic adjustment of the
interest rate paid on the obligations. These
obligations must provide that interest rates are
adjusted periodically based on a specified interest
rate adjustment index. The adjustment intervals may be
regular (ranging from daily to annually) or may be
based on certain events (such as a change in the prime
rate). The interest rate on a floating rate security is
a variable rate which is tied to another interest rate,
such as a money-market index or U.S. Treasury bill rate
and resets periodically, typically every six months.
While floating rate securities provide a Fund with a
certain degree of protection against rises in interest
rates because of the interest rate reset feature, the
Fund will be subject to any decline in interest rates
as well. The interest rate on an inverse floater
resets in the opposite direction from the market rate
of interest to which the inverse floater is indexed.
An inverse floating rate security may exhibit greater
price volatility than a fixed rate obligation of
similar credit quality. See "Implementation of
Policies and Risks - Mortgage- and Asset-Backed
Securities" for a discussion of interest only and
principal only securities.
Repurchase Agreements. Each Fund may enter into
repurchase agreements with certain banks and non-bank
dealers. In a repurchase agreement, a Fund buys a
security at one price and at the time of sale, the
seller agrees to repurchase the obligation at a
mutually agreed upon time and price (usually within
seven days). The repurchase agreement determines the
yield during the purchaser's holding period, while the
seller's obligation to repurchase is secured by the
value of the underlying security. A Fund may enter
into repurchase agreements with respect to any security
in which it may invest. Repurchase agreements could
involve certain risks in the event of a default or
insolvency of the other party to the agreement,
including possible delays or restrictions upon a Fund's
ability to dispose of the underlying securities.
Temporary Defensive Positions. When the
Subadviser (or Adviser) determines that market
conditions warrant a temporary defensive position, each
Fund may invest without limitation in cash and money
market instruments.
Foreign Securities and Currencies
Each Fund may invest up to 10% of its total
assets, directly or indirectly, in foreign securities.
Foreign investments involve special risks, including:
Expropriation, confiscatory taxation,
and withholding taxes on dividends or
interest;
Less extensive regulation of foreign
brokers, securities markets, and issuers;
Less publicly available information and
different accounting standards;
Costs incurred in conversions between
currencies, possible delays in settlement in
foreign securities markets, limitations on
the use or transfer of assets (including
suspension of the ability to transfer
currency from a given country), and
difficulty of enforcing obligations in other
countries; and
Diplomatic developments and political or
social instability.
Foreign economies may differ favorably or
unfavorably from the U.S. economy in various respects,
including growth of gross domestic product, inflation
rate, currency depreciation, capital reinvestment,
resource self-sufficiency and balance of payments
positions. Many foreign securities may be less liquid
and their prices more volatile than comparable U.S.
securities. Although the Funds generally invest only
in securities that are regularly traded on recognized
exchanges or in over-the-counter markets, from time to
time foreign securities may be difficult to liquidate
rapidly without adverse price effects. Certain costs
attributable to foreign investing, such as custody
charges and brokerage costs, may be higher than those
attributable to domestic investment. The value of a
Fund's assets denominated in foreign currencies will
increase or decrease in response to fluctuations in the
value of those foreign
<PAGE>
currencies relative to the U.S.
dollar. Currency exchange rates can be volatile at
times in response to supply and demand in the currency
exchange markets, international balances of payments,
governmental intervention, speculation, and other
political and economic conditions.
Each Fund may purchase and sell foreign currency
on a spot basis and may engage in forward currency
contracts, currency options, and futures transactions.
See "Implementation of Policies and Risks - Derivative
Instruments."
Small and Medium Capitalization Companies
The Funds may invest in common stocks and other
equity securities, including equity securities of small
and medium capitalization companies. While small and
medium capitalization companies have potential for
significant capital appreciation, the equity securities
of these companies also involves greater risks than
larger, more established companies. Small and medium
capitalization companies may lack the management
experience, financial resources, product
diversification and competitive strength of larger
companies and the market for their securities may be
smaller and subject to greater price volatility. To
the extent a Fund has significant investments in the
equity securities of these companies, a Fund's share
price may be subject to greater fluctuations than a
Fund that invests in larger, more established
companies.
Derivative Instruments
Derivative instruments may be used in connection
with the management of the Funds' investments.
Derivative instruments are securities or agreements
whose value is derived from the value of some
underlying asset, for example, securities, currencies,
reference indexes, or commodities. Options, futures,
and options on futures transactions are considered
derivative transactions.
Derivatives generally have investment
characteristics that are based upon either forward
contracts (under which one party is obligated to buy
and the other party is obligated to sell an underlying
asset at a specific price on a specified date) or
option contracts (under which the holder of the option
has the right but not the obligation to buy or sell an
underlying asset at a specified price on or before a
specified date). Consequently, the change in value of
a forward-based derivative generally is roughly
proportional to the change in value of the underlying
asset. In contrast, the buyer of an option-based
derivative generally will benefit from favorable
movements in the price of the underlying asset but is
not exposed to corresponding losses due to adverse
movements in the value of the underlying asset. The
seller of an option-based derivative generally will
receive fees or premiums but generally is exposed to
losses due to changes in the value of the underlying
asset. Derivative transactions may include elements of
leverage and, accordingly, the fluctuation of the value
of the derivative transaction in relation to the
underlying asset may be magnified. In addition to
options, futures, and options on futures transactions,
derivative transactions may include swaps, in which the
two parties agree to exchange a series of cash flows in
the future, such as interest-rate payments; interest-
rate caps, under which, in return for a premium, one
party agrees to make payments to the other to the
extent that interest rates exceed a specified rate, or
"cap"; and interest-rate floors, under which, in return
for a premium, one party agrees to make payments to the
other to the extent that interest rates fall below a
specified level, or "floor." Derivative transactions
may also include forward currency contracts and foreign
currency exchange-related securities.
Derivative instruments may be exchange-traded or
traded in over-the-counter transactions between private
parties. Over-the-counter transactions are subject to
the credit risk of the counterparty to the instrument
and are less liquid than exchange-traded derivatives
since they often can only be closed out with the other
party to the transaction. When required by SEC
guidelines, a Fund will set aside permissible liquid
assets or securities positions that substantially
correlate to the market movements of the derivative
transactions in a segregated account to secure its
obligations under derivative transactions. In order to
maintain its required cover for a derivative
transaction, a Fund may need to sell portfolio
securities at disadvantageous prices or times since it
may not be possible to liquidate a derivative position.
<PAGE>
The successful use of derivative transactions by a
Fund is dependent upon the Subadviser's ability to
correctly anticipate trends in the underlying asset.
To the extent that a Fund is engaging in derivative
transactions other than for traditional hedging
purposes, the Fund's successful use of such
transactions is more dependent upon the Subadviser's
ability to correctly anticipate such trends, since
losses in these transactions may not be offset by gains
in the Fund's portfolio or in lower purchase prices for
assets it intends to acquire. The Subadviser's
prediction of trends in underlying assets may prove to
be inaccurate, which could result in substantial losses
to a Fund. Hedging transactions are also subject to
risks. If the Subadviser incorrectly anticipates
trends in the underlying asset, a Fund may be in a
worse position than if no hedging had occurred. In
addition, there may be imperfect correlation between a
Fund's derivative transactions and the instruments
being hedged.
Illiquid Securities
Each Fund may invest up to 10% of its net assets
in illiquid securities. Illiquid securities may
include restricted securities (securities the
disposition of which is restricted under the federal
securities laws), securities which may only be resold
pursuant to Rule 144A under the Securities Act of 1933,
as amended (the "Securities Act"), repurchase
agreements with maturities in excess of seven days, and
other securities that are not readily marketable.
Risks associated with restricted securities include the
potential obligation to pay all or part of the
registration expenses in order to sell restricted
securities. A considerable period of time may elapse
between the time of the decision to sell a restricted
security and the time a Fund may be permitted to sell
under an effective registration statement or otherwise.
If, during such a period, adverse conditions were to
develop, a Fund might obtain a less favorable price
than that which prevailed when it decided to sell. The
Board of Directors, or its delegate, has the ultimate
authority to determine, to the extent permissible under
the federal securities laws, which securities are
liquid or illiquid. The Subadviser currently makes
liquidity determinations.
When-Issued Securities
Each Fund may invest without limitation in
securities purchased on a when-issued or delayed
delivery basis ("When-Issued Securities"). Although
the payment and terms of these securities are
established at the time the purchaser enters into the
commitment, these securities may be delivered and paid
for at a future date, generally within 45 days.
Purchasing When-Issued Securities allows a Fund to lock
in a fixed price on a security it intends to purchase.
A Fund will segregate and maintain cash, cash
equivalents, U.S. government securities, or other high
quality, liquid debt securities in an amount at least
equal to the amount of outstanding commitments for When-
Issued Securities at all times. Such securities
involve a risk of loss if the value of the security to
be purchased declines prior to the settlement date.
Reverse Repurchase Agreements
Each Fund may engage in reverse repurchase
agreements to facilitate portfolio liquidity (a
practice common in the mutual fund industry) or for
arbitrage transactions. In a reverse repurchase
agreement, a Fund would sell a security and enter into
an agreement to repurchase the security at a specified
future date and price. A Fund generally retains the
right to interest and principal payments on the
security. Since a Fund receives cash upon entering
into a reverse repurchase agreement, it may be
considered a borrowing. When required by SEC
guidelines, a Fund will set aside permissible liquid
assets in a segregated account to secure its obligation
to repurchase the security.
The reverse repurchase agreements entered into by
a Fund may be used as arbitrage transactions in which
the Fund will maintain an offsetting position in
investment grade debt obligations or repurchase
agreements that mature on or before the settlement date
of the related reverse repurchase agreement. Since the
Fund will receive interest on the securities or
repurchase agreements in which it invests the
transaction proceeds, the transactions may involve
leverage. However, since such securities or repurchase
agreements will be high quality and will mature on or
before the settlement date of the reverse repurchase
agreement, the Subadviser believes that such arbitrage
transactions do not present the risks to the Funds that
are associated with other types of leverage.
<PAGE>
The risks associated with entering into reverse
repurchase agreements include the risk that the buyer
of the securities sold by a Fund might be unable to
deliver them when the Fund seeks to repurchase. In the
event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes
insolvent, such buyer or its trustee or receiver may
receive an extension of time to determine whether to
enforce a Fund's obligation to repurchase the
securities and the Fund's use of the proceeds of the
reverse repurchase agreement may effectively be
restricted pending such decision. Such transactions
also involve the risk that the market value of the
securities a Fund is obligated to repurchase under the
reverse repurchase agreement may decline below the
repurchase price. Finally, such transactions involve
the risk that changes in the value of a Fund's
portfolio securities may amplify changes in the Fund's
net asset value per share and may also cause the Fund
to liquidate portfolio positions when it would not be
advantageous to do so.
Portfolio Turnover
Under normal market conditions, the anticipated
portfolio turnover rate for each Fund is expected to be
approximately 50% to 75%. A portfolio turnover rate of
100% would occur, for example, if all of the securities
held by a Fund were replaced within one year. In the
event a Fund has a portfolio turnover rate of 100% or
more in any year, it would result in the payment by the
Fund of increased brokerage costs and could result in
the payment by shareholders of increased taxes on
realized investment gains.
FUNDAMENTAL INVESTMENT RESTRICTIONS
Each Fund has adopted a number of fundamental
investment restrictions, which may not be changed
without approval by the Fund's shareholders. The
Funds' other investment policies may be changed by the
Board of Directors without shareholder approval. The
following is a summary of some of the Funds'
fundamental investment restrictions:
Diversification: Each Fund may not,
with respect to 75% of its total assets,
purchase the securities of any issuer (except
U.S. government securities) if more than 5%
of the Fund's total assets would be invested
in the securities of that issuer or the Fund
would own more than 10% of the outstanding
voting securities of that issuer.
Limitation on Borrowing: Each Fund may
not borrow money except from banks or through
permissible investment techniques or
transactions in an amount not to exceed 33
1/3% of the Fund's total assets. (The Funds
currently limit borrowings, through a non-
fundamental investment policy, to reverse
repurchase agreements.)
Limitation on Senior Securities: Each
Fund will not issue senior securities, except
as permitted under the 1940 Act.
Limitation on Industry Concentration:
Each Fund will not invest more than 25% of
its total assets in companies in the same
industry.
These fundamental investment restrictions,
together with all of the Funds' fundamental investment
restrictions and non-fundamental investment policies,
are described in greater detail in the Funds' SAI.
FUND ORGANIZATION AND MANAGEMENT
Management
Under the laws of the State of Maryland, the Board
of Directors of the Corporation is responsible for
managing its business and affairs. The Board of
Directors also oversees duties required by applicable
state and federal
<PAGE>
law. The Corporation, on behalf of
the Funds, has entered into an investment advisory
agreement with AMquest Advisers, Inc. (the "Adviser")
pursuant to which the Adviser supervises the management
of each of the Fund's investments and business affairs,
subject to the supervision of the Corporation's Board
of Directors (the "Investment Advisory Agreement").
The Adviser is a start-up entity with no previous
experience providing investment advisory services to a
mutual fund. The Adviser, however, has entered into a
subadvisory agreement (the "Subadvisory Agreement")
with Tocqueville Asset Management L.P. (the
"Subadviser") pursuant to which the Subadviser manages
each of the Fund's investments, subject to the
Adviser's supervision. The Subadviser has previously
acted as an investment adviser to mutual funds. The
Adviser provides office space for the Corporation and
pays the salaries, fees and expenses of all the
Corporation's officers and directors who are interested
persons of the Adviser.
Adviser. The Adviser, a Delaware corporation, was
founded in 1996 and is located at 4901 NW 17th Way,
Suite 407, Fort Lauderdale, Florida 33309. The Adviser
is a wholly-owned subsidiary of AMquest International
Ltd., a Nevada corporation, which is indirectly
controlled by David Morgenstern. Under the Investment
Advisory Agreement, the Corporation, on behalf of the
Funds, compensates the Adviser for its management
services at the annual rate of 0.75% of the Income
Fund's average daily net assets, and 1.00% of each of
the Total Return and Growth Fund's average daily net
assets. The advisory fee is accrued daily and paid
monthly. Until the earlier of the end of the first 12
months of operation or the date upon which the Funds'
aggregate average net assets exceed $30 million, the
Adviser has agreed to waive its management fee and/or
reimburse Fund operating expenses to the extent
necessary to ensure that no Fund's total operating
expenses exceed 2.75% of its average daily net assets.
After such time, the Adviser has agreed to waive its
management fee and/or reimburse Fund operating expenses
to the extent required by law and, if no such waiver
and/or reimbursement is required by law, the Adviser
may from time to time voluntarily (but is not required
or obligated to) waive all or a portion of its fee
and/or reimburse all or a portion of Fund operating
expenses. Any waivers or reimbursements will have the
effect of lowering the overall expense ratio for a Fund
and increasing its overall return to investors at the
time any such amounts were waived and/or reimbursed.
Subadviser and Portfolio Managers. The
Subadviser, a Delaware limited partnership, was founded
in 1990 and is located at 1675 Broadway, New York, New
York 10019. Francois D. Sicart controls the
Subadviser. Under the Subadvisory Agreement, the
Adviser compensates the Subadviser for its investment
advisory services at the annual rate of 0.40% of the
Income Fund's average daily net assets, and 0.50% of
each of the Total Return and Growth Fund's average
daily net assets. The subadvisory fee is accrued daily
and paid monthly. The Subadviser provides continuous
advice and recommendations concerning each Fund's
investments and is responsible for selecting broker-
dealers to execute the portfolio transactions. In
executing such transactions, the Subadviser seeks to
obtain the best net results for the Funds. The
Subadviser provides investment advice to other mutual
funds, as well as private accounts.
The following individuals serve as portfolio
managers for the Funds:
INCOME FUND
Christopher P. Culp. Mr. Culp has served as the
portfolio manager of the Income Fund since its
inception in 1997. In addition, Mr. Culp co-manages
the Tocqueville Government Fund, which is a mutual fund
advised by the Subadviser. Prior to joining the
Subadviser in 1995, Mr. Culp served as a Vice President
of Belle Haven Investments L.P., a registered broker-
dealer, from 1994 to 1995; an independent financial
consultant from 1993 to 1994; a bond trader with Swiss
Bank Corp. from 1991 to 1994; and a bond trader with
Carroll McIntee, which is a subsidiary of HSBC Corp.,
from 1990 to 1991. Mr. Culp earned his MBA in Finance
from Tulane University in 1974 and his BA in Philosophy
from the University of North Carolina-Chapel Hill in
1971.
TOTAL RETURN FUND
GROWTH FUND
Robert W. Kleinschmidt. Mr. Kleinschmidt has
served as the portfolio manager of the Total Return
Fund and the Growth Fund since inception of the Funds
in 1997. In addition, Mr. Kleinschmidt co-manages the
Tocqueville Fund and the Tocqueville Government Fund,
both of which are mutual funds advised by the
Subadviser. Since 1991, Mr. Kleinschmidt has served as
the President of Tocqueville Management Corporation,
the general partner of the
<PAGE>
Subadviser. From 1978 until
1991, Mr. Kleinschmidt held various executive positions
with David J. Greene & Co., an investment management
firm. Mr. Kleinschmidt earned his MA in Economics from
the University of Massachusetts-Amherst in 1973 and his
BBA in Accounting from the University of Wisconsin in
1971.
Custodian and Transfer Agent
Firstar Trust Company ("Firstar"), Mutual Fund
Services, Third Floor, 615 East Michigan Street,
Milwaukee, Wisconsin 53202 acts as custodian of each
Fund's assets (the "Custodian") and as dividend-
disbursing and transfer agent for the Funds (the
"Transfer Agent").
Administrator
Pursuant to an Administration Agreement and an
Accounting Servicing Agreement, Firstar also performs
accounting and certain compliance and tax reporting
functions for the Corporation. For these services,
Firstar receives from the Corporation out-of-pocket
expenses plus the following aggregate annual fees,
computed daily and payable monthly, based on the Funds'
aggregate average net assets:
Administrative Services Fees
First $200 million of average net assets 0.06%*
Next $300 million of average net assets 0.05%
Average net assets in excess of $500 million 0.03%
_____________________________
* Subject to a minimum fee of $30,000 per Fund.
Accounting Services Fees
Total Return
Income Fund &
Growth Funds
First $40 million of average net assets $25,000 $22,000 (per Fund)
Next $200 million of average net assets 0.02% 0.01%
Average net assets in excess of $240 million 0.01% 0.005%
Distributor
Sun Consolidated Securities, Inc., 4901 NW 17th
Way, Suite 405, Fort Lauderdale, Florida 33309, acts as
distributor of Fund shares (the "Distributor").
Portfolio Transactions
The Distributor and/or Tocqueville Securities
L.P., an affiliated broker-dealer of the Subadviser
("Tocqueville Securities"), may serve as brokers for
transactions executed on behalf of the Funds; however,
in order for the Distributor or Tocqueville Securities
to effect any portfolio transactions for the Funds on
an exchange, the commissions, fees or other
remuneration received by the Distributor or Tocqueville
Securities must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other
brokers in connection with comparable transactions
involving similar securities being purchased or sold on
any exchange during a comparable period of time. This
standard allows the Distributor and Tocqueville
Securities to receive no more than the remuneration
that would be expected to be received by an
unaffiliated broker in a commensurate arm's-length
transaction.
<PAGE>
Organization
Each Fund is a series of common stock of the
Corporation, a Maryland corporation incorporated on
July 19, 1996 that is authorized to issue shares of
common stock, and series and classes thereof. Each
share of common stock of each Fund is entitled to one
vote. In addition, each share of common stock of each
Fund is entitled to participate equally in dividends
and capital gains distributions by the respective Fund
and in the residual assets of the respective Fund in
the event of liquidation. Certificates will be issued
for shares held in your account only upon your written
request. You will, however, have full shareholder
rights whether or not you request certificates.
Generally, the Funds will not hold annual shareholders'
meetings unless required by the 1940 Act. As of
February __, 1997, AMquest International Ltd., of which
the Adviser is a wholly-owned subsidiary, owned a
controlling interest in each of the Funds.
Fund Expenses
Each Fund is responsible for its own expenses,
including: interest charges; taxes; brokerage
commissions; organizational expenses; expenses of
registering or qualifying shares for sale with the
states and the SEC; expenses of issue, sale, repurchase
or redemption of shares; expenses of printing and
distributing prospectuses to existing shareholders;
charges of custodians; expenses for accounting,
administrative, audit, and legal services; fees for
directors who are not interested persons of the
Adviser; expenses of fidelity bond coverage and other
insurance; expenses of indemnification; extraordinary
expenses; and costs of shareholder and director
meetings.
DETERMINATION OF NET ASSET VALUE
The net asset value per share is determined as of
the close of trading (currently 4:00 p.m. Eastern
Standard Time) on each day the New York Stock Exchange
("NYSE") is open for business. Purchase orders
received or shares tendered for redemption on a day the
NYSE is open for trading, prior to the close of trading
on that day, will be valued as of the close of trading
on that day. Applications for purchase of shares and
requests for redemption of shares received after the
close of trading on the NYSE will be valued as of the
close of trading on the next day the NYSE is open. A
Fund's net asset value may not be calculated on days
during which the Fund receives no orders to purchase
shares and no shares are tendered for redemption. Net
asset value is calculated by taking the fair value of a
Fund's total assets, including interest or dividends
accrued, but not yet collected, less all liabilities,
and dividing by the total number of shares outstanding.
The result, rounded to the nearest cent, is the net
asset value per share.
In determining net asset value, expenses are
accrued and applied daily and securities and other
assets for which market quotations are available are
valued at market value. Common stocks and other equity-
type securities are valued at the last sales price on
the national securities exchange or NASDAQ on which
such securities are primarily traded; however,
securities traded on a national securities exchange or
NASDAQ for which there were no transactions on a given
day, and securities not listed on a national securities
exchange or NASDAQ, are valued at the average of the
most recent bid and asked prices. Other exchange
traded securities (generally foreign securities) will
be valued based on market quotations. Securities
quoted in foreign currency will be valued in U.S.
dollars at the foreign currency exchange rates that are
prevailing at the time the daily net asset value per
share is determined. Fixed income securities are
valued by a pricing service that utilizes electronic
data processing techniques to determine values for
normal institutional-sized trading units of fixed
income securities without regard to sale or bid prices
when such values are believed to more accurately
reflect the fair market value of such securities;
otherwise, actual sale or bid prices are used. Any
securities or other assets for which market quotations
are not readily available are valued at fair value as
determined in good faith by the Board of Directors of
the Corporation. Fixed income securities having
remaining maturities of 60 days or less when purchased
are generally valued by the amortized cost method.
Under this method of valuation, a security is initially
valued at its acquisition cost and, thereafter,
amortization of any discount or premium is assumed each
day, regardless of the impact of fluctuating interest
rates on the market value of the security.
<PAGE>
HOW TO PURCHASE SHARES
Shares of the Funds may be purchased at the
Offering Price (as defined below) through any dealer
which has entered into a sales agreement with the
Distributor, in its capacity as principal underwriter
of shares of the Funds, or through the Distributor
directly. Firstar, the Funds' Transfer Agent, may also
accept purchase applications.
Payment for Fund shares should be made by check or
money order in U.S. dollars drawn on a U.S. bank,
savings and loan, or credit union. The minimum initial
investment in a Fund is $1,000. Subsequent investments
of at least $500 may be made by mail or by wire. For
investors using the Automatic Investment Plan, as
described below, the minimum investment is $50. These
minimums can be changed by the Corporation at any time.
Shareholders will be given at least 30 days' notice of
any increase in the minimum dollar amount of subsequent
investments.
If you purchase shares of a Fund by check or the
Automatic Investment Plan and request the redemption of
such shares within fifteen days of the initial
purchase, the redemption will not be effective, and the
redemption proceeds will not be forwarded to you, until
the Corporation is reasonably satisfied that your check
or purchase order has cleared. This is a security
precaution only and does not affect your investment.
Offering Price
Shares of the Funds are sold on a continual basis
at the next offering price (the "Offering Price"),
which is the sum of the net asset value per share (next
computed following receipt of an order in proper form
by a dealer, the Distributor or the Transfer Agent, as
the case may be) and the sales charge as set forth
below. Net asset value per share is calculated once
daily as of the close of trading (currently 4:00 p.m.,
Eastern Standard Time) on each day the NYSE is open.
See "Determination of Net Asset Value." The sales
charge imposed on purchases of Fund shares is as
follows:
<TABLE>
(CAPTION>
Total Sales Charge
--------------------------------------
Amount of Sale at Offering Price As a Percentage As a Percentage
of Offering Price of Net Asset Value Portion of Total
of the Shares of the Shares Offering Price
Purchased Purchased Retained by Dealers
<S> <C> <C> <C>
Less than $50,000 4.50% 4.71% 4.00%
$50,000 but less than $100,000 4.00% 4.17% 3.50%
$100,000 but less than $250,000 3.25% 3.36% 3.00%
$250,000 but less than $500,000 2.50% 2.56% 2.25%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more 0.00% 0.00% N/A
____________
</TABLE>
*At the discretion of the Distributor, all sales
charges may at times be paid to the securities dealer,
if any, involved in the trade. A securities dealer
which is paid all or substantially all of the sales
charges may be deemed an "underwriter" under the
Securities Act.
Investors described under "Purchases at Net Asset
Value," below, may purchase shares of the Funds without
the imposition of a sales charge. In addition, no
sales charge is imposed on the reinvestment of
dividends or capital gains, or on exchanges between
Funds. See also "Reduced Sales Charge Plans," below,
for information on how to reduce the sales charge
payable upon the purchase of Fund shares. A
confirmation indicating the details of each purchase
transaction will be sent to you promptly following such
transaction. If a purchase order is placed through a
dealer, the dealer must promptly forward the order and
payment to the Transfer Agent.
<PAGE>
Purchases at Net Asset Value
Fund shares may be purchased at net asset value
without the imposition of a sales charge by any of the
following:
certain retirement plans, including
profit-sharing, pension, 401(k) and
simplified employee pension plans, subject to
minimum requirements with respect to the
number of employees or amount of purchase,
which may be established by the Distributor
(currently, those criteria require that the
employer establishing the plan have 25 or
more eligible employees or that the amount
invested total at least $1 million);
directors, officers, and full-time
employees of the Corporation, the Adviser,
the Subadviser, the Distributor, and
affiliates of such companies, and by spouses
and minor children of such persons;
registered securities brokers and
dealers which have entered into sales
agreements with the Distributor, for their
investment accounts only, and registered
personnel and employees of such securities
brokers and dealers, and their spouses and
minor children, in accordance with the
internal policies and procedures of the
employing securities dealer;
members of a "qualified investment
program" (a qualified investment program is
one which (i) has been in existence for more
than 6 months, (ii) has a purpose other than
acquiring shares of a Fund at a discount,
(iii) has an agreement with the Distributor
pursuant to which investments will be
submitted in single bulk orders, (iv)
reinvests all dividends and other
distributions by the Funds in additional
shares, (v) makes its members available for
group meetings with representatives of the
Distributor, and (vi) agrees to include sales
and other material related to the Funds in
its mailings to members at reduced or no cost
to the Distributor).
Please call 1-800-908-9979 for more information on
purchases at net asset value.
Reduced Sales Charge Plans
Rights of Accumulation. Pursuant to the Right of
Accumulation offered by the Funds (the "ROA"),
investors are permitted to purchase shares of one or
more of the Funds at the sales charge applicable to the
sum of (a) the dollar amount then being purchased and
(b) the higher of (i) the current value (calculated at
the applicable Offering Price) or (ii) the actual
purchase price, of all Fund shares already held by the
investor, his or her spouse, and their minor children.
To receive the ROA, at the time of purchase, you must
give your securities dealer, the Distributor, or the
Transfer Agent, as applicable, sufficient information
to determine whether the purchase will qualify for the
reduced sales charge.
Letters of Intent. An investor may also
immediately qualify for a reduced sales charge on the
purchase of shares of one or more of the Funds by
completing the Letter of Intent section of the
shareholder application (the "LOI"). By completing the
LOI, an investor expresses an intention to invest
during the next 13-month period a specified amount
(minimum of at least $50,000) which, if made at one
time, would qualify for a reduced sales charge. The
sales charge applicable to that aggregate amount then
becomes the applicable sales charge on all purchases
made concurrently with the execution of the LOI and in
the 13 months following the execution. Sales charge
reductions based on purchases in more than one Fund
will be effective only after notification to the
Distributor or Transfer Agent that the investment
qualifies for a discount. Any redemptions made by the
investor during the 13-month period will be subtracted
from the amount of the purchases for purposes of
determining whether the terms of the LOI have been
completed. If, at the end of the 13-month period
covered by the LOI, the total amount of purchases (less
redemptions) does not equal the amount indicated, the
investor will be required to pay the difference between
the sales charge paid at the reduced rate and the sales
charge applicable to the purchases actually made.
Shares having a value equal to 5% of the amount
specified in the LOI will be held in escrow during the
13-month period and are subject to involuntary
redemption to assure any necessary payment of a higher
applicable sales charge. For more information on the
LOI, please call 1-800-908-9979.
<PAGE>
Initial Investment - Minimum $1,000
You may purchase Fund shares by completing the
enclosed shareholder application and mailing it and a
check or money order payable to "AMquest Matrix Funds,
Inc." to your securities dealer, the Distributor or the
Transfer Agent, as the case may be. The minimum
initial investment is $1,000. If mailing to the
Distributor or Transfer Agent, please send to the
following address: Firstar Trust Company, P.O. Box
701, Milwaukee, Wisconsin 53201-0701. In addition,
overnight mail should be sent to the following address:
AMquest Matrix Funds, Inc., Firstar Trust Company,
Mutual Fund Services, Third Floor, 615 East Michigan
Street, Milwaukee, Wisconsin 53202.
If the securities dealer you have chosen to
purchase Fund shares through has not entered into a
sales agreement with the Distributor, such dealer may,
nevertheless, offer to place your order for the
purchase of Fund shares. Purchases made through such
dealers will be effected at the Offering Price. Such
dealers may also charge a transaction fee, as
determined by the dealer. That fee will be in addition
to the sales charge payable by you upon purchase, and
may be avoided if shares are purchased through a dealer
who has entered into a sales agreement with the
Distributor or through the Transfer Agent.
If your check does not clear, you will be charged
a $20 service fee. You will also be responsible for
any losses suffered by the Corporation as a result.
Neither cash nor third-party checks will be accepted.
All applications to purchase Fund shares are subject to
acceptance by the Corporation and are not binding until
so accepted. The Corporation reserves the right to
decline or accept a purchase order application in whole
or in part.
You may also purchase Fund shares by wire. The
following instructions should be followed when wiring
funds to the Transfer Agent for the purchase of Fund
shares:
Wire to: Firstar Bank
ABA Number 075000022
Credit: Firstar Trust Company
Account 112-952-137
Further Credit: AMquest Matrix Funds,
Inc.
(shareholder account number)
(shareholder name/account
registration)
Please call 1-800-908-9979 prior to wiring any
funds to notify the Transfer Agent that the wire is
coming and to verify the proper wire instructions so
that the wire is properly applied when received. A $10
service fee will be charged for purchases by wire. The
Corporation is not responsible for the consequences of
delays resulting from the banking or Federal Reserve
wire system.
Automatic Investment Plan - Minimum $50
The Automatic Investment Plan ("AIP") allows you
to make regular, systematic investments in one or more
of the Funds from your bank checking or NOW account.
The minimum initial investment for investors using the
AIP is $50. To establish the AIP, complete the
appropriate section in the shareholder application
attached to this Prospectus. Under certain
circumstances (such as discontinuation of the AIP
before a Fund's minimum initial investment is reached),
the Corporation reserves the right to close the
investor's account. Prior to closing any account for
failure to reach the minimum initial investment, the
Corporation will give the investor written notice and
60 days in which to reinstate the AIP or otherwise
reach the minimum initial investment. You should
consider your financial ability to continue in the AIP
until the minimum initial investment amount is met
because the Corporation has the right to close an
investor's account for failure to reach the minimum
initial investment. Such closing may occur in periods
of declining share prices.
<PAGE>
Under the AIP, you may choose to make investments
on certain days of each month (at least seven days
apart) from your financial institution in amounts of
$50 or more. There is no service fee for participating
in the AIP. However, a service fee of $20 will be
deducted from your Fund account for any AIP purchase
that does not clear due to insufficient funds or, if
prior to notifying the Corporation in writing or by
telephone of your intention to terminate the plan, you
close your bank account or in any manner prevent
withdrawal of funds from the designated checking or NOW
account. You can set up the AIP with any financial
institution that is a member of the Automated Clearing
House.
The AIP is a method of using dollar cost averaging
which is an investment strategy that involves investing
a fixed amount of money at a regular time interval.
However, a program of regular investment cannot ensure
a profit or protect against a loss from declining
markets. By always investing the same amount, you will
be purchasing more shares when the price is low and
fewer shares when the price is high. Since such a
program involves continuous investment regardless of
fluctuating share values, you should consider your
financial ability to continue the program through
periods of low share price levels.
Subsequent Investments - Minimum $500
Additions to your account may be made by mail or
by wire. Any subsequent investment must be for at
least $500. When making an additional purchase by
mail, enclose a check payable to "AMquest Matrix Funds,
Inc." and the Additional Investment Form provided on
the lower portion of your account statement. To make
an additional purchase by wire, please call 1-800-908-
9979 for complete wiring instructions. You may also
make additional purchases by telephone. Information
regarding this option can be obtained by calling 1-800-
908-9979.
HOW TO REDEEM SHARES
In General
Investors may request redemption of part or all of
their Fund shares at any time at the next determined
net asset value. See "Determination of Net Asset
Value." The Corporation normally will mail your
redemption proceeds the next business day and, in any
event, no later than seven business days after receipt
of a redemption request in good order. However, the
Corporation may hold payment until investments which
were made by check or telephone or pursuant to the
Automatic Investment Plan have been collected.
Redemptions may also be made through brokers or
dealers. Such redemptions will be effected at the net
asset value next determined after receipt by the
Corporation of the broker or dealer's instruction to
redeem shares. Some brokers or dealers may charge a
fee in connection with such redemptions.
Written Redemption
For most redemption requests, an investor need
only furnish a written, unconditional request to redeem
his or her shares at net asset value to the Transfer
Agent: Firstar Trust Company, P. O. Box 701,
Milwaukee, Wisconsin 53201-0701. Overnight mail should
be sent to AMquest Matrix Funds, Inc., Firstar Trust
Company, Mutual Fund Services, Third Floor, 615 East
Michigan Street, Milwaukee, Wisconsin 53202. Requests
for redemption must (i) be signed exactly as the shares
are registered, including the signature of each owner,
and (ii) specify the number of shares or dollar amount
to be redeemed. Redemption proceeds made by written
redemption request may also be wired to a commercial
bank that you have authorized on your account
application. The Transfer Agent will charge a $10.00
service fee for wire transactions.
Telephone Redemption
You may redeem shares by telephone if you have
checked the appropriate box and supplied the necessary
information on the shareholder application. Proceeds
redeemed by telephone will be mailed or wired only to
an
<PAGE>
investor's address or bank of record as shown on the
records of the Transfer Agent. To effect a telephone
redemption, you may call 1-800-908-9979. The
Corporation reserves the right to refuse any request
made by telephone and may limit the amount involved or
the number of telephone redemptions. Once you place a
telephone redemption request, it cannot be cancelled or
modified. Neither the Corporation nor its Transfer
Agent will be responsible for the authenticity of
redemption instructions received by telephone.
Accordingly, the investor bears the risk of loss.
However, the Corporation will use reasonable procedures
to ensure that instructions received by telephone are
genuine. These procedures may include recording
telephonic transactions and sending written
confirmation of such transactions to investors. If the
Corporation or its Transfer Agent fails to employ such
procedures, the Corporation may be liable for any
losses due to unauthorized or fraudulent instructions.
Shareholders may experience difficulty in implementing
a telephone redemption during periods of drastic
economic or market changes. If an investor is unable
to contact the Transfer Agent by telephone, shares may
also be redeemed by delivering the redemption request
to the Transfer Agent in person or by mail. If in
person or by overnight mail, deliver such request to
AMquest Matrix Funds, Inc., Firstar Trust Company,
Mutual Fund Services, Third Floor, 615 East Michigan
Street, Milwaukee, Wisconsin 53202; if by regular mail,
such request may be sent to Firstar Trust Company, P.
O. Box 701, Milwaukee, Wisconsin 53201-0701.
Special Situations
If you are acting as an attorney-in-fact for
another person, or as a trustee or on behalf of a
corporation, additional documentation may be required
in order to effect a redemption. Questions regarding
such circumstances may be directed to the Transfer
Agent by calling 1-800-908-9979. In addition, the
Corporation requires a signature guarantee for all
authorized owners of an account: (i) when you submit a
written redemption request for more than $25,000; (ii)
when you add the telephone redemption option to your
existing account; (iii) if you transfer ownership of
your account to another individual or entity; and (iv)
if you request redemption proceeds to be sent to an
address other than the address that appears on your
account. A signature guarantee may be obtained from
any eligible guarantor institution, as defined by the
SEC. These institutions include banks, saving
associations, credit unions, brokerage firms, and
others. Please note that a notary public stamp or seal
is not acceptable.
Your account may be terminated by the Corporation
on not less than 30 days' notice if, at the time of any
redemption of shares in your account, the value of the
remaining shares in the account falls below $1,000.
Upon any such termination, a check for the proceeds of
redemption will be sent to you within seven days of the
redemption.
EXCHANGE PRIVILEGE
Fund to Fund Exchange
You may exchange your shares in a Fund for shares
in any other Fund of the Corporation at any time by
written request or by telephone exchange if you have
authorized this privilege in the shareholder
application. The value of the shares to be exchanged
and the price of the shares being purchased will be the
net asset value next determined after receipt of
instructions for exchange. No sales charge is imposed
on exchanges between Funds; however, a $5 service fee
will be charged for each telephone exchange request (no
charge is imposed with respect to written exchange
requests). Exchange requests should be directed to:
Firstar Trust Company, P.O. Box 701, Milwaukee,
Wisconsin 53201-0701. For exchange requests delivered
in person or by overnight mail, please deliver to
AMquest Matrix Funds, Inc., Firstar Trust Company,
Mutual Fund Services, Third Floor, 615 East Michigan
Street, Milwaukee, Wisconsin 53202. To effect a
telephone exchange, you may call 1-800-908-9979.
Exchange requests may be subject to limitations,
including those relating to frequency, that may be
established from time to time to ensure that such
exchanges are not disadvantageous to the Funds or their
investors. The Corporation reserves the right to
modify or terminate the exchange privilege upon 60
days' written notice to each shareholder prior to the
modification or termination taking effect. The
exchange privilege is only available in states where
the securities are registered.
<PAGE>
Money Market Exchange
As a service to our shareholders, the Corporation
has established a program whereby our shareholders can
exchange shares of any one of the Funds for shares of
the Portico Money Market Fund (the "Portico Fund").
The Portico Fund is a no-load money market fund managed
by an affiliate of Firstar. The Portico Fund is
unrelated to the Corporation or any of the Funds.
However, the Distributor, which is an affiliate of the
Corporation, may be compensated by the Portico Fund for
servicing and related services provided in connection
with exchanges made by shareholders of the Funds. This
exchange privilege is a convenient way to buy shares in
a money market fund in order to respond to changes in
your goals or in market conditions. Before exchanging
into the Portico Fund, please read the applicable
prospectus, which may be obtained by calling 1-800-908-
9979. As noted above, there is no charge for written
exchange requests. Firstar will, however, charge a
$5.00 fee for each exchange transaction that is
executed via the telephone.
An exchange from one Fund to another, including
the Portico Fund, is treated the same as an ordinary
sale and purchase for federal income tax purposes and
you will realize a capital gain or loss. An exchange
is not a tax-free transaction.
DISTRIBUTION PLAN
The Corporation, on behalf of each of the Funds,
has adopted a plan pursuant to Rule 12b-1 under the
1940 Act (the "Plan"), which allows it to pay the
Distributor a distribution fee of up to 0.25% of each
Fund's average daily net assets computed on an annual
basis. Under the terms of the Plan, the Distributor is
authorized to, in turn, pay all or a portion of this
fee to any securities dealer, financial institution or
any other person (the "Recipient") who renders
assistance in distributing or promoting the sale of
Fund shares pursuant to a written agreement (the "Rule
12b-1 Related Agreement"). To the extent such fee is
not paid to such persons, the Distributor may use the
fee for its own distribution expenses incurred in
connection with the sale of Fund shares, although it is
the Distributor's current intention to pay out all or
most of the fee. A form of the 12b-1 Related Agreement
referred to above has been approved by a majority of
the Board of Directors of the Corporation, and of the
members of the Board who are not "interested persons"
of the Corporation as defined in the 1940 Act and who
have no direct or indirect financial interest in the
operation of the Plan or any related agreements (the
"Disinterested Directors") voting separately.
Accordingly, the Distributor may enter into 12b-1
Related Agreements with securities dealers, financial
institutions or other persons without further Board
approval.
Payment of the distribution fee is to be made
quarterly, within 30 days after the close of the
quarter for which the fee is payable, upon the
Distributor forwarding to the Board of Directors of the
Corporation a written report of all amounts expensed
pursuant to the Plan; provided, however, that the
aggregate payments by a Fund under the Plan to the
Distributor and all Recipients may not exceed 0.25% (on
an annualized basis) of the Fund's average net assets
for that quarter; and provided further that no fee may
be paid in excess of the distribution expenses as set
forth in the quarterly written report. Thus, the Plan
does not provide for the payment of distribution fees
in subsequent quarters that relate to expenses incurred
in prior quarters.
From time to time, the Distributor may engage in
activities which jointly promote the sale of shares of
one or more of the Funds, the costs of which may not be
readily identifiable as related to any one Fund.
Generally, the expenses attributable to joint
distribution activities will be allocated among each
Fund on the basis of its respective net assets,
although the Board of Directors may allocate expenses
in any other manner it deems fair and equitable.
The Plan, and any Rule 12b-1 Related Agreement
which is entered into, will continue in effect for a
period of more than one year only so long as its
continuance is specifically approved at least annually
by a vote of a majority of the Corporation's Board of
Directors, and of the Disinterested Directors, cast in
person at a meeting called for the purpose of voting on
the Plan, or the Rule 12b-1 Related Agreement, as
applicable. In addition, the Plan, and any Rule 12b-1
Related Agreement, may be terminated with respect to
any Fund at any time, without penalty, by vote of a
<PAGE>
majority of the outstanding voting securities of such
Fund, or by vote of a majority of Disinterested
Directors (on not more than sixty (60) days' written
notice in the case of the Rule 12b-1 Related Agreement
only).
INDIVIDUAL RETIREMENT ACCOUNTS
The Funds offer through Firstar Trust Company, in
its capacity as Custodian, an Individual Retirement
Account ("IRA") for adoption by individuals.
Individuals under age 70 1/2 who receive compensation
or earned income may contribute money to an IRA. You
are allowed to contribute up to the lesser of $2,000 or
100% of your earned income each year to an IRA.
Individuals who are covered by existing retirement
plans, or have spouses covered by such plans, and whose
income exceed certain amounts, are not permitted to
deduct their IRA contributions for income tax purposes.
However, whether or not an individual's contributions
are deductible, the earnings in his or her IRA are not
taxed until the account is distributed.
A complete description of the IRA, as well as a
description of the applicable service fees, may be
obtained by calling 1-800-908-9979 or writing to the
Corporation at P.O. Box 701, Milwaukee, Wisconsin 53201-
0701. Please note that early withdrawals from a
retirement plan may result in adverse tax consequences.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX
TREATMENT
The Corporation intends to qualify for treatment
as a "Regulated Investment Company" under Subchapter M
of the Internal Revenue Code of 1986, as amended (the
"IRC"), and, if so qualified, will not be liable for
federal income taxes to the extent earnings are
distributed on a timely basis.
For federal income tax purposes, all dividends
paid by the Funds and distributions of net realized
short-term capital gains are taxable as ordinary income
whether reinvested or received in cash unless you are
exempt from taxation or entitled to a tax deferral.
Distributions paid by a Fund from net realized long-
term capital gains, whether received in cash or
reinvested in additional shares, are taxable as a
capital gain. The capital gain holding period is
determined by the length of time the Fund has held the
security and not the length of time you have held
shares in the Fund. Investors are informed annually as
to the amount and nature of all dividends and capital
gains paid during the prior year. Such capital gains
and dividends may also be subject to state or local
taxes. If you are not required to pay taxes on your
income, you are generally not required to pay federal
income taxes on the amounts distributed to you.
Dividends for the Income, Total Return and Growth
Funds are usually distributed monthly, quarterly and
annually in December, respectively, and capital gains,
if any, are usually distributed at least annually in
December. When a dividend or capital gain is
distributed, a Fund's net asset value decreases by the
amount of the payment. If you purchase shares shortly
before a distribution, you will be subject to income
taxes on the distribution, even though the value of
your investment (plus cash received, if any) remains
the same. All dividends and capital gains
distributions will automatically be reinvested in
additional Fund shares at the then prevailing net asset
value unless an investor specifically requests that
either dividends or capital gains or both be paid in
cash. The election to receive dividends or reinvest
them may be changed by writing to the Fund at P.O. Box
701, Milwaukee, Wisconsin 53201-0701. Such notice must
be received at least 10 days prior to the record date
of any dividend or capital gain distribution.
If you do not furnish the Corporation with your
correct social security number or employer
identification number, the Corporation is required by
federal law to withhold federal income tax from your
distributions and redemption proceeds at a rate of 31%.
This section is not intended to be a full
discussion of federal income tax laws and the effect of
such laws on you. There may be other federal, state,
or local tax considerations applicable to a particular
investor. You are urged to consult your own tax
advisor.
<PAGE>
FUND PERFORMANCE
The Funds may from time to time compare their
respective investment results to various passive
indices or other mutual funds and cite such comparisons
in reports to shareholders, sales literature, and
advertisements. The results may be calculated on
several bases, including yield, average annual total
return, total return, and cumulative total return.
Each of these figures, which reflect the deduction of
the 4.50% maximum initial sales charge, is based upon
historical results and does not represent the future
performance of a Fund.
Yield is an annualized figure, which means that it
is assumed that a Fund generates the same level of net
investment income over a one-year period. A Fund's
yield is a measure of the net investment incurred per
share earned by the Fund over a specific one-month
period and is shown as a percentage of the net asset
value of the Fund's shares at the end of the period.
Average annual total return and total return
figures measure both the net investment income
generated by, and the effect of any realized and
unrealized appreciation or depreciation of, the
underlying investments in a Fund over a specified
period of time, assuming the reinvestment of all
dividends and distributions. Average annual total
return figures are annualized and therefore represent
the average annual percentage change over the specified
period. Total return figures are not annualized and
represent the aggregate percentage or dollar value
change over the period. Cumulative total return simply
reflects a Fund's performance over a stated period of
time.
<PAGE>
DIRECTORS
Richard D. Brace
Donald A. Taylor, Jr.
James R. Harrison
John F. Newsholme
Robert A. DeFruscio
OFFICERS
Richard D. Brace, President
Donald A. Taylor, Jr., Treasurer and Secretary
INVESTMENT ADVISER
AMquest Advisers, Inc.
4901 NW 17th Way, Suite 407
Fort Lauderdale, Florida 33309
SUBADVISER
Tocqueville Asset Management L.P.
1675 Broadway
New York, New York 10019
CUSTODIAN, ADMINISTRATOR,
TRANSFER AGENT AND DIVIDEND-
DISBURSING AGENT
Firstar Trust Company
Mutual Fund Services
Third Floor
615 E. Michigan Street
Milwaukee, WI 53202
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
100 E. Wisconsin Avenue
Milwaukee, WI 53202
LEGAL COUNSEL
Godfrey & Kahn, S.C.
780 N. Water Street
Milwaukee, WI 53202
<PAGE>
APPENDIX - RATINGS
Ratings of Fixed Income Securities:
Moody's Standard &
Investors Poor's
Service, Inc. Corporation Definition
Long-Term Aaa AAA Highest quality
Aa AA High quality
A A Upper medium grade
Baa BBB Medium grade
Ba BB Low grade
B B Speculative
Caa, Ca, C CCC, CC, C Submarginal
D D Probably in default
Moody's S&P
Short-Term MIG1/VMIG1 Best quality SP-1+ Very strong quality
MIG2/VMIG2 High quality SP-1 Strong quality
MIG3/VMIG3 Favorable grade SP-2 Satisfactory grade
MIG4/VMIG4 Adequate quality
SG Speculative grade SP-3 Speculative grade
Commercial Paper P-1 Superior quality A-1+ Extremely strong quality
A-1 Strong quality
P-2 Strong quality A-2 Satisfactory quality
P-3 Acceptable quality A-3 Adequate quality
B Speculative quality
Not Prime C Doubtful quality
Additional descriptions of ratings are included in the SAI.
