As filed with the Securities and Exchange Commission on January 27, 2000
Securities Act Registration No. 333-39133
Investment Company Act Registration No. 811-8461
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 7 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 9 [X]
GRAND PRIX FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
Wilton Executive Campus
15 River Road, Suite 220
Wilton, Connecticut 06897
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (203) 761-9600
Robert Zuccaro
Target Investors, Inc.
Wilton Executive Campus
15 River Road, Suite 220
Wilton, Connecticut 06897
(Name and Address of Agent for Service)
Copies to:
Carol A. Gehl
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on January 31, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
<PAGE>
PROSPECTUS
January 31, 2000
[Logo]
Grand Prix Funds, Inc.
GRAND PRIX FUND
Wilton Executive Campus
15 River Road, Suite 220
Wilton, Connecticut 06897
1-800-307-4880 (Fund Information)
1-800-432-4741 (Account Information)
Website: www.grandprixfund.com
Fund Symbol: GPFFX
The investment objective of the Grand Prix Fund
(the "Fund") is capital appreciation. The Fund seeks
to achieve its investment objective by investing
primarily in common stocks of companies that exhibit
fast earnings growth and are rising in price. Target
Holdings Corporation, doing business as Target
Investors, Inc. (the "Advisor"), believes that the use
of this momentum strategy has the potential for higher
returns than other investment strategies.
This Prospectus contains information you should
consider before you invest in the Fund. Please read
this Prospectus carefully and keep it for future
reference.
____________________
The Securities and Exchange Commission (the "SEC")
has not approved or disapproved of these securities or
passed upon the adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
SUMMARY 3
PERFORMANCE 4
FUND FEES AND EXPENSES 5
INVESTMENT OBJECTIVE 6
IMPLEMENTATION OF INVESTMENT OBJECTIVE 7
FUND MANAGEMENT 8
OPENING AN ACCOUNT 9
FINANCIAL HIGHLIGHTS 15
VALUATION OF FUND SHARES 16
DISTRIBUTION AND SHAREHOLDER SERVICING PLANS 16
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX TREATMENT 17
ADDITIONAL INFORMATION 18
<PAGE>
SUMMARY
What is the goal of the Fund?
The Fund's goal is capital appreciation. This
goal is sometimes referred to as the investment
objective. The Fund attempts to achieve this goal by
choosing investments that the Advisor believes have the
potential for growth. The Fund will trade actively to
try to increase returns. The Advisor will not consider
dividend or interest income in the selection of
investments. See "Investment Objective."
What will the Fund invest in?
The Fund invests primarily in common stocks of
companies which the Advisor characterizes as "growth"
companies. The Advisor selects common stocks without
regard to a company's market capitalization, so the
Fund's investments may be in companies that have small,
medium or large market capitalizations. The Fund may
also invest a limited amount of assets in short-term
money market securities. For more information, see
"Implementation of Investment Objective."
Is the Fund an appropriate investment for me?
The Fund is suitable for long-term investors only.
The Fund is not a short-term investment vehicle. An
investment in the Fund may be appropriate for you if:
* your goal is capital appreciation;
* you want to allocate some portion of your long-
term investments to aggressive equity investing;
* you have no immediate financial requirements for
this investment;
* you are willing to accept a high degree of
volatility; and
* you have the financial ability to undertake
greater risk in exchange for the possibility to realize
greater financial gains in the future.
What are the main risks of investing in the Fund?
The main risks of investing in the Fund are:
* Stock Market Risk: Equity mutual funds like the
Fund are subject to stock market risks and significant
fluctuations in value. If the stock market declines in
value, the Fund is likely to decline in value. Stocks
are generally more volatile than bonds.
* Stock Selection Risk: The stocks selected by the
Advisor may decline in value or not increase in value
when the stock market in general is rising.
* Liquidity Risk: The Advisor may not be able to
sell stocks at an optimal time or price.
* Non-Diversification Risk: The Fund may invest a
relatively large amount of assets in a few companies
which may increase volatility.
* Leveraging Risk: The Fund may borrow money to
purchase investments. Leverage is a speculative
technique that provides the opportunity for greater
total return but also involves risks. If the Fund's
return on its investment from a borrowing is lower than
the interest rate on the borrowed funds, the Fund's
return will be lower than if the Fund had not borrowed
money.
<PAGE>
* Short-Term Trading Risk: The Fund trades actively
and frequently. You may realize taxable capital gains
as a result of such frequent trading of the Fund's
assets and the Fund will incur transaction costs in
connection with buying and selling securities. Tax and
transaction costs lower the Fund's effective return for
investors.
You should be aware that you may lose money by investing in the Fund.
PERFORMANCE
The performance information that follows gives you
some indication of the risks of an investment in the
Fund by showing changes in the Fund's performance from
year to year and by showing how the Fund's average
annual returns for one year and since inception compare
with those of a broad measure of market performance.
Please remember that the Fund's past performance does
not reflect how the Fund may perform in the future.
Class A Shares Calendar Year Total Returns
111.83% 147.76%
1998 1999
Class A Shares
Best and Worst Quarterly Returns
BEST WORST
90.18 % 2.25 %
(4th quarter, 1999) (2nd quarter, 1999)
Average Annual Total Returns as of December 31, 1999
Fund One Year Since Inception
Class A 134.78% 123.04% (12/31/97)
S&P 500 Index* 21.04% 24.75% (12/31/97)
Class C N/A 113.48% (8/05/99)**
S&P 500 Index* N/A 13.15% (8/05/99)**
* The S&P 500 Index is an unmanaged index generally representative
of the U.S. stock market.
** Not annualized.
<PAGE>
Please note that the returns presented in the
chart entitled "Class A Shares Calendar Year Total
Returns" and in the table entitled "Class A Shares Best
and Worst Quarterly Returns" do not reflect the 5.25%
maximum sales charge imposed on the Fund's Class A
shares. If this sales charge was reflected, the
returns would be less than those shown. The returns
presented in the "Average Annual Total Returns as of
December 31, 1999" table do, however, reflect this
sales charge.
FUND FEES AND EXPENSES
The following table describes the fees and
expenses that you may pay if you buy and hold shares of
the Fund:
Shareholder Fees (fees paid directly from your investment)(1)
Class A Class C
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 5.25%(2) 1.00%
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends (as a percentage of offering price) None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)(3)
Management Fees 1.00% 1.00%
Rule 12b-1 (Distribution and Service) Fees 0.25% 1.00%
Other Expenses 0.75%(4) 0.75%(5)
Total Annual Fund Expenses 2.00% 2.75%
Fee Waiver/Expense Reimbursement 0.25%(4) 0.25%(5)
Net Expenses 1.75% 2.50%
____________
(1) A $25 fee will be charged for returned checks
or electronic funds transfers. If you redeem shares
by wire, you will be charged a $12 fee. For
additional information, see "Opening an Account."
(2) Certain investors are exempt from paying some
or all of this sales load. For more information,
see "Opening an Account."
(3) Fund operating expenses are deducted from Fund
assets before computing the daily share price or
making distributions. As a result, they will not
appear on your account statement, but instead reduce
the amount of total return you receive.
(4) Pursuant to an expense cap agreement dated
February 26, 1999, as amended August 2, 1999,
between the Advisor and the Fund, the Advisor has
contractually agreed to limit the total operating
expenses of the Fund's Class A shares to an annual
rate of 1.72% of the Fund's average net assets
attributable to the Class A shares until February
29, 2000. From February 29, 2000 until February 28,
2002, the Advisor has contractually agreed to limit
the Class A total operating expenses to an annual
rate of 1.75%. After such date, the expense
limitation may be terminated or revised at any time.
"Other expenses" are presented before any waivers or
reimbursements.
(5) Pursuant to an expense cap agreement dated
August 2, 1999 between the Advisor and the Fund, the
Advisor has contractually agreed to limit the total
operating expenses of the Fund's Class C shares to
an annual rate of 2.47% of the Fund's average net
assets attributable to the Class C shares until
February 29, 2000. From February 29, 2000 until
February 28, 2002, the Advisor has contractually
agreed to limit the Class C total
<PAGE>
operating expenses
to an annual rate of 2.50%. After such date, the
expense cap may be terminated or revised at any
time. "Other expenses" are presented before any
waivers or reimbursements.
Example
The following Example is intended to help you
compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The Example
assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your
shares at the end of those periods. The Example also
assumes that you have a 5% return each year and that
each class's total annual operating expenses remain the
same each year. Please note that the one-year numbers
are based on each class's net expenses resulting from
the expense cap agreements described above. The three-
, five- and ten- year numbers are based on the Fund's
expenses before any waiver or reimbursements. Although
your actual costs may be higher or lower, based on
these assumptions your costs would be as follows:
Class A (1) Class C (2)
1 year $ 694 $ 351
3 years $1,072 $ 896
5 years $1,500 $1,492
10 years $2,686 $3,106
(1) The 5.25% maximum sales charge imposed on
purchases of Class A shares is reflected in the
Example.
(2) The 1.00% sales charge imposed on purchases of
Class C shares is reflected in the Example.
INVESTMENT OBJECTIVE
The Fund's investment objective is capital
appreciation. The Fund seeks to achieve its investment
objective by investing primarily in common stocks of
companies which the Advisor characterizes as "growth"
companies. The Fund may invest in companies of all
sizes.
The Advisor focuses on companies which exhibit
fast earnings growth and are rising in price.
Companies considered by the Advisor as "growth"
companies are often in the same or related market
sectors. One sector, however, like technology, may
include various industries, like networking,
telecommunications, software, semiconductors or
voice-processing. Thus, the Fund may be heavily
invested in one sector, while being diversified among
several industries and may take relatively large
positions in a single issuer. The Fund will be more
susceptible to adverse economic, political, regulatory
or market developments affecting a single sector,
industry or issuer. This may increase the Fund's
volatility.
In identifying securities for the Fund, the
Advisor uses a computer-driven model. In the research
process, the Advisor screens for certain fundamental
and quantitative attributes that it believes a security
should have for the Fund to invest in it, including:
* projected earnings growth of at least 20%;
* top 10% relative price strength; and
* projected positive earnings surprises of at least 5%.
The Advisor values securities by assigning scores to
them based on such factors and ranks the securities
accordingly. Pursuant to that ranking, the Advisor
constructs a list of securities for the Fund and
purchases the highest ranking securities for its
portfolio. The Advisor rescores stocks and rebalances
the portfolio weekly according to the highest ranked
scores.
<PAGE>
The Advisor will sell a stock when the price has
deteriorated significantly or other securities are a
better value. As a means to increase returns, the Fund
expects to trade actively and frequently. The annual
portfolio turnover rate could range from 300% to 600%,
but generally will not exceed 800%. The annual
portfolio turnover rate indicates changes in the Fund's
securities holdings; generally if all the securities in
the Fund at the beginning of an annual period are
replaced by the end of the period, the turnover rate
would be 100%. You may realize taxable capital gains
as a result of such frequent trading of the Fund's
assets and the Fund will incur transaction costs in
connection with buying and selling securities. Tax and
transaction costs lower the Fund's effective return for
investors.
Under normal market conditions, the Fund expects
to be fully invested with at least 95% of its assets in
equity securities. Pending investment or to pay
redemption requests and Fund expenses, the Fund may
hold a portion of its assets in short-term money market
securities and cash. The Fund may also invest a
limited amount of assets in American Depositary
Receipts.
IMPLEMENTATION OF INVESTMENT OBJECTIVE
In implementing its investment objective, the Fund
may invest in the following securities and use the
following investment techniques. Some of these
securities and investment techniques involve special
risks, which are described below and in the Fund's SAI.
Common Stocks and Other Equity Securities
The Fund will invest in common stocks and other
equity securities. Other equity securities may include
depositary receipts and warrants and other securities
convertible or exchangeable into common stock. Common
stocks are units of ownership of a corporation. Equity
mutual funds like the Fund are subject to stock market
risks and significant fluctuations in value. If the
stock market declines in value, the Fund is likely to
decline in value. Increases or decreases in the value
of stocks are generally greater than for bonds or other
debt instruments. In addition, the stocks selected by
the Advisor may decline in value or not increase in
value when the stock market in general is rising.
Unseasoned Companies
The Fund may invest up to 10% of its total assets
in securities of unseasoned companies. These are
companies that have been in operation less than three
years. The securities of such companies may have
limited liquidity and the prices of such securities may
be volatile.
Non-Diversification
As a "non-diversified" fund, the Fund invests in a
more limited number of companies than other mutual
funds. The Fund may invest up to 50% of its total
assets in the securities of as few as two companies, up
to 25% each, so long as the Fund does not control the
two companies or so long as the two companies are
engaged in different businesses. The Fund may also
invest the other 50% of its total assets in the
securities of as few as 10 companies, up to 5% each,
provided that the Fund does not own more than 10% of
any company's outstanding voting stock. Non-
diversification involves an increased risk of loss to
the Fund if the market value of a security declines.
The Fund may invest in fewer than 25 companies.
As a result, the volatility of investment performance
may increase and the Fund could incur greater losses
than mutual funds that invest in a greater number of
companies.
Temporary Strategies
Prior to investing the proceeds from sales of Fund
shares, to meet ordinary daily cash needs, and to
respond to adverse market, economic, political or other
conditions, the Advisor may hold cash and/or invest up
to 35% of the Fund's total assets in short-term fixed-
income securities issued by private and governmental
institutions. Short-term fixed income securities
include:
* Short-term U.S. government securities;
<PAGE>
* Certificates of deposit;
* Bank time deposits;
* Bankers' acceptances;
* Commercial paper and commercial paper master notes;
* Repurchase agreements; and
* Other short-term fixed-income securities.
If these temporary strategies are used for responding
to adverse market, economic, political or other
conditions, it is impossible to predict when or for how
long the Advisor may employ these strategies for the
Fund. To the extent the Fund engages in this temporary
strategy, the Fund may not achieve its investment
objective.
ADRs
The Fund may invest up to 20% of its net assets in
American Depositary Receipts ("ADRs") or other foreign
instruments denominated in U.S. dollars. ADRs are
receipts typically issued by a U.S. bank or trust
company evidencing ownership of the underlying foreign
security and denominated in U.S. dollars. Investments
in securities of foreign issuers involve risks which
are in addition to the usual risks inherent in domestic
investments. Foreign economies may differ favorably or
unfavorably from the U.S. economy in various respects,
and many foreign securities are less liquid and their
prices are more volatile than comparable U.S.
securities. 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,
are higher than those attributable to domestic
investing. Although the Fund's investments will be
denominated in U.S. currency, the underlying foreign
securities will be denominated in foreign currency.
Accordingly, the value of the Fund's assets will
increase or decrease in response to fluctuations in the
value of those foreign currencies.
FUND MANAGEMENT
Management
The Fund has entered into an Investment Advisory
Agreement with the Advisor under which the Advisor
manages the Fund's investments and business affairs,
subject to the supervision of the Fund's Board of
Directors.
Advisor
Target Investors, Inc. (the "Advisor"), 15 River
Road, Suite 220, Wilton, Connecticut 06897, is a
Florida corporation. The Advisor has been serving
clients since 1983. As of December 31, 1999, the
Advisor managed approximately $700 million for
individual and institutional clients. Under the
Investment Advisory Agreement, the Fund pays the
Advisor an annual management fee of 1.00% of the Fund's
average daily net assets. The advisory fee is accrued
daily and paid monthly. Pursuant to an expense cap
agreement, the Advisor agreed to limit the Fund's
operating expenses to an annual rate of 1.72% of the
Fund's average daily net assets attributable to the
Class A shares and 2.47% of the Fund's average daily
net assets attributable to the Class C shares until
February 29, 2000. From February 29, 2000 to February
28, 2002, the Advisor has contractually agreed to limit
the Class A total operating expenses to an annual rate
of 1.75% and the Class C total operating expenses to an
annual rate of 2.50%. After such date, the Advisor may
voluntarily waive all or a portion of its management
fee and/or reimburse certain Fund expenses without
further notification of the commencement or termination
of such waiver or reimbursement. Any waivers or
reimbursements will have the effect of temporarily
lowering the Fund's overall expense ratio and
increasing the Fund's overall return to investors.
Under the Investment Advisory Agreement, not only is
the Advisor responsible for management of the Fund's
assets, but also for portfolio and brokerage
transactions.
<PAGE>
Portfolio Manager
President of the Advisor since 1983, Robert
Zuccaro received a Bachelor's Degree from the
University of Bridgeport in 1965 and a Master's in
Business Administration from Pace University in 1968.
Mr. Zuccaro entered the investment management business
in 1967 as an analyst with the Value Line Survey.
Prior to founding the Advisor in 1983, Mr. Zuccaro
spent six years with Axe-Houghton, where he was
President and a Director of Axe-Houghton Stock Fund and
Vice President and Director of Portfolio Management of
E.W. Axe & Co. Mr. Zuccaro is a Chartered Financial
Analyst and has more than 30 years of experience in the
investment business.
Custodian
Firstar Bank, N.A. ("Firstar Bank"), 425 Walnut
Street, Cincinnati, Ohio 45202, acts as custodian of
the Fund's assets.
Transfer Agent and Administrator
Firstar Mutual Fund Services, LLC ("Firstar"), 615
East Michigan Street, Milwaukee, Wisconsin 53202,
serves as transfer agent for the Fund (the "Transfer
Agent") and as the Fund's administrator.
Distributor
T. O. Richardson Securities, Inc., 2 Bridgewater
Road, Farmington, Connecticut 06032-2256, a registered
broker-dealer and member of the National Association of
Securities Dealers, Inc. (the "NASD"), acts as
distributor of the Fund's shares (the "Distributor").
As compensation for its services, the Distributor may
retain a portion of (i) the initial sales charge from
purchases of Fund shares and (ii) the Rule 12b-1 fees.
The Distributor may pay all or a portion of its fee to
registered dealers who sell Fund shares, pursuant to a
written dealer agreement. The Distributor may pay Rule
12b-1 fees to persons entering into 12b-1 related
agreements. Such persons may include the Advisor. The
Distributor and the Advisor, at their own expense, may
also periodically sponsor programs that offer
additional compensation in connection with the sale of
Fund shares. In some circumstances, this compensation
may be made available only to certain dealers whose
representatives have sold or are expected to sell
significant amounts of Fund shares.
OPENING AN ACCOUNT
Choosing a Class
The Fund offers two classes of shares: Class A
and Class C. Each Class has its own cost structure.
Class A Class C
* Maximum front-end * Maximum front-end sales
sales charge of 5.25% charge of 1.00%.
with break points and
certain exceptions.
* Distribution and * Distribution and
service fees equal to service fees equal to 1.00%
0.25% of average net of average net assets.
assets.
Purchasing Shares
In General. Fund shares may be purchased through
any dealer that has entered into a sales agreement with
the Distributor, or through the Distributor directly.
The Transfer Agent may also accept purchase
applications.
<PAGE>
Class A Shares. Class A shares are offered and
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 a purchase request in good order by a dealer, the
Distributor or the Transfer Agent, as the case may be)
and the sales charge as set forth below. See
"Valuation of Fund Shares." No sales charge is imposed
on the reinvestment of dividends or capital gains. The
sales charge imposed on purchases of Class A shares is
as follows:
Total Sales Charge
As a Percentage As a Percentage
of Offering of Your
Your Investment Price Investment
Less than $50,000 5.25% 5.54%
$50,000 but less than $100,000 4.50% 4.71%
$100,000 but less than $250,000 3.50% 3.63%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $1,000,000 2.00% 2.04%
$1,000,000 or more 1.00% 1.01%
Class A shares are also subject to Rule 12b-1 fees
in an aggregate amount of 0.25% of the average daily
net assets of the Fund attributable to the Class A
shares. See "Distribution and Shareholder Servicing
Plans."
Class C Shares. Class C shares are offered and
sold on a continual basis at the next Offering Price,
which is the sum of the net asset value per share (next
computed following receipt of a purchase request in
good order by a dealer, the Distributor or the Transfer
Agent, as the case may be) and the 1.00% initial sales
charge. See "Valuation of Fund Shares." No sales
charge is imposed on the reinvestment of dividends or
capital gains. Class C shares are also subject to Rule
12b-1 fees in an aggregate amount of 1.00% of the
average daily net assets of the Fund attributable to
the Class C shares. See "Distribution and Shareholder
Servicing Plans."
Sales Charge Waivers
The following investors may purchase Class A
shares at net asset value without the imposition of any
sales charge:
* certain retirement plans, such as profit-sharing,
pension, 401(k) and simplified employee pension plans
(SEPs and SIMPLEs), subject to minimum requirements
with respect to the amount of purchase (minimum of at
least $250,000);
* beneficial owners of wrap accounts who are clients
of registered broker-dealers having a selling or
service agreement with the Distributor;
* clients of fee-only financial planners or fee-only
registered investment advisors and financial planners
or investment advisors who have entered into an
agreement with the Distributor or Advisor for clients
participating in comprehensive fee programs;
* owners of private accounts managed by the Advisor;
* persons who owned Fund shares on November 30, 1998;
* persons who sell Fund shares, invest the proceeds
in the Firstar Money Market Funds and subsequently
reinvest in the Fund;
* directors, officers and full-time employees of the
Fund, the Distributor, Firstar and affiliates of such
companies (including the Advisor) and spouses and
family members of such persons; and
<PAGE>
* registered broker-dealers who have entered into a
selling or service agreement with the Distributor for
their investment account only, and registered personnel
and employees of such broker-dealers.
Certain investors may purchase Class A shares at a
reduced sales charge. For additional information on
sales charge reductions for Class A shares, please see
the SAI or call the Fund at 1-800-307-4880.
Minimum Investment. Required minimum investments are as follows:
INITIAL ADDITIONAL
MINIMUM MINIMUM
TYPE OF ACCOUNT INVESTMENT INVESTMENT
Regular $5,000 $1,000
Automatic Investment Plan $5,000 $ 250
Gift to Minors $5,000 $1,000
IRAs $5,000 $1,000
The Fund reserves the right to reject any order
for the purchase of its shares or to limit or suspend,
without prior notice, the offering of its shares. The
required minimum investments may be waived by the Fund
at any time.
Opening an Account by Mail. Please complete the
Purchase Application. You may duplicate any
application or you can obtain additional copies of the
Purchase Application from the Fund by calling
1-800-307-4880.
Your completed Purchase Application should be
mailed to:
Grand Prix Funds, Inc.
P.O. Box 701
Milwaukee, WI 53201-0701
To purchase shares by overnight or express mail,
please use the following street address:
Grand Prix Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
Third Floor
615 East Michigan Street
Milwaukee, WI 53202
All applications must be accompanied by payment in
the form of a check made payable to "Grand Prix Funds."
All purchases must be made in U.S. dollars and checks
must be drawn on U.S. banks. No cash, credit cards or
third party checks will be accepted. Payment may be
delayed for up to 12 calendar days on redemption
requests for recent purchases made by check in order to
ensure that the check has cleared. If you contemplate
redeeming your investment shortly after purchase, you
should purchase the shares by wire as discussed below.
Opening an Account by Wire. You may make
purchases by direct wire transfers. To ensure proper
credit to your account, please call the Fund at
1-800-432-4741 for instructions. A Purchase
Application must be submitted prior to or at the time
of wiring funds. Funds should be wired through the
Federal Reserve System as follows:
<PAGE>
Firstar Bank, N.A.
A.B.A. Number: 075000022
For credit to: Firstar Mutual Fund Services, LLC
Account Number: 112-952-137
For further credit to: Grand Prix Funds, Inc.
(investor account number)
(name or account registration)
(Social Security or Taxpayer Identification Number)
A Purchase Application must be received by the
Fund to establish privileges and to verify your account
information. Payment of redemption proceeds may be
delayed and taxes may be withheld unless the Fund
receives a properly completed and executed purchase
application. The Fund reserves the right to refuse a
telephone transaction if it believes it advisable to do
so. If you have any questions, please call the Fund at
1-800-432-4741.
Adding to an Account by Mail. When adding to an
account by mail, you should send your check to the
Fund, together with a subsequent investment slip from a
recent statement. If an investment slip is
unavailable, you should send a signed note giving the
full name of the account and the account number. See
"Additional Purchase Information" for more information
regarding purchases made by check or electronic funds
transfer.
Adding to an Account by Electronic Funds Transfer.
You may also make additional investments by telephone
or in writing through electronic funds transfers if you
have previously selected this service. By selecting
this service, you authorize the Fund to draw on your
preauthorized bank account as shown on the records of
the Fund and receive the proceeds by electronic funds
transfer. Electronic funds transfers may be made
commencing 13 business days after receipt by the Fund
of your request to adopt this service. This time
period allows the Fund to verify your bank information.
Investments made by electronic funds transfer in any
one account must be in an amount of at least $1,000 and
will be effective at the Offering Price next computed
after receipt by the Fund of the proceeds from your
bank account, which is typically the same day. See
"Additional Purchase Information" for more information.
Changes to bank information must be made in writing and
signed by all registered holders of the account with
the signatures guaranteed by a commercial bank or trust
company in the United States, a member firm of the NASD
or other eligible guarantor institution. A Notary
Public is not an acceptable guarantor. To select this
service, please call the Fund at 1-800-307-4880 for the
necessary form and instructions.
Adding to an Account by Wire. For additional
investments made by wire transfer, you should use the
wiring instructions listed previously. Be sure to
include your account number. Wired funds are
considered received in good order on the day they reach
the Fund's bank account by the Fund's cut-off time for
purchases and all required information is provided in
the wire instructions. The wire instructions will
determine the terms of the purchase transaction.
Automatic Investment Plan. You may make purchases
of shares of the Fund automatically on a regular basis
($250 minimum per transaction). You must meet the
Fund's minimum initial investment of $5,000 before the
Automatic Investment Plan ("AIP") may be established.
You may adopt the AIP at the time an account is opened
by completing the appropriate section of the Purchase
Application. The sales charge for Class A shares will
be reduced to 1% for those persons who adopt the AIP.
You may obtain an application to establish the AIP
after an account is opened by calling the Fund at
1-800-307-4880. For additional information on the AIP,
please see the SAI.
Individual Retirement Accounts. You may invest in
the Fund by establishing a tax-sheltered individual
retirement account ("IRA"). The Fund offers the
Traditional IRA, Roth IRA, SEP-IRA and SIMPLE IRA. For
additional information on IRA options, please see the
SAI.
Purchasing Shares through Other Broker-Dealers.
If you choose to purchase Fund shares through a
securities dealer that has not entered into a sales
agreement with the Distributor, you may also pay a
transaction fee, as determined by the dealer. That fee
will be in addition to the sales charge payable by you
upon purchase of such shares.
<PAGE>
Additional Purchase Information. Payment may be
delayed for up to 12 calendar days on redemption
requests for recent purchases made by check in order to
ensure that the check has cleared. This delay allows
the Fund to verify that proceeds used to purchase Fund
shares will not be returned due to insufficient funds
and is intended to protect the remaining investors from
loss. The Fund will charge a $25 service fee against
your account for any check or electronic funds transfer
that is returned for any reason and your purchase will
be canceled. You may also be responsible for any
losses suffered by the Fund as a result.
When you open an account, you are automatically
provided with the privilege to initiate telephone
redemptions. If you have any questions as to how to
waive this privilege, or how to add or delete a
privilege after an account is established, please call
the Fund at 1-800-432-4741. Generally, after the
account has been established, a request to authorize,
waive, add or delete a privilege must be in writing and
signed by each registered holder of the account with
signatures guaranteed by a commercial bank or trust
company in the United States, a member of the NASD or
other eligible guarantor institution. A Notary Public
is not an acceptable guarantor. For a more detailed
discussion of the rights, responsibilities and risks of
telephone transactions, please refer to "Redeeming by
Telephone."
In order to relieve you of responsibility for the
safekeeping and delivery of stock certificates, the
Fund does not issue certificates.
Money Market Exchange
The Fund has established a program through which
you can exchange shares of the Fund for shares of the
Firstar Money Market Funds (the "Firstar Funds").
Exchange requests are available for exchanges of $1,000
or more. The Firstar Funds are no-load money market
funds managed by an affiliate of Firstar. The Firstar
Funds are unrelated to the Fund. However, the Advisor
may be compensated by the Firstar Funds for servicing
and related services. This exchange privilege is a
convenient way to buy shares in money market funds. To
use the exchange privilege you must first invest in the
Fund. Before exchanging into the Firstar Funds, please
read the applicable prospectus, which may be obtained
by calling 1-800-307-4880. Firstar will charge a $5.00
fee for each exchange transaction that is executed via
the telephone.
Redeeming Shares
In General. You may redeem shares of either class
at any time; provided, however, that the Fund reserves
the right to refuse any purchase following a redemption
and may limit the amount involved. The price at which
the shares will be redeemed is the net asset value per
share next determined after proper redemption
instructions are received by the Fund. See "Valuation
of Fund Shares." There are no sales charges for the
redemption of shares except that a fee of $12 is
charged for each wire redemption. Depending upon the
redemption price you receive, you may realize a capital
gain or loss for federal income tax purposes.
Redeeming by Mail. To redeem shares by mail,
simply send an unconditional written request to the
Fund specifying the number of shares or dollar amount
to be redeemed, the name(s) on the account registration
and the account number. If the dollar amount requested
to be redeemed is greater than the current account
value, the entire account balance will be redeemed. A
request for redemption must be signed exactly as the
shares are registered. Each signature must be
guaranteed by a commercial bank or trust company in the
United States, a member firm of the NASD or other
eligible guarantor institution if:
* the proceeds are to be sent to a person other than
the shareholder(s) of record;
* the proceeds are to be sent to a location other
than the address of record;
* the redemption request is made within 30 days of
an address change; or
* the redemption request is for $50,000 or more.
<PAGE>
A Notary Public is not an acceptable guarantor.
Additional documentation may be required for the
redemption of shares held in corporate, partnership or
fiduciary accounts. Additional documentation is
required for the redemption of shares held by persons
acting pursuant to a Power of Attorney.
The Fund will mail payment for redemption proceeds
within seven days after it receives proper instructions
for redemption. However, the Fund may delay payment on
redemptions of recent purchases made by check until the
Fund verifies that the check used to purchase Fund
shares will not be returned due to insufficient funds.
This is intended to protect the remaining investors
from loss.
Redeeming by Telephone. You may redeem shares in
an amount of $1,000 to $50,000, by calling the Fund at
1-800-432-4741. Proceeds redeemed by telephone will be
mailed to your address, or wired or transmitted by
electronic funds transfer to your preauthorized bank
account as shown on the records of the Fund. A
redemption request in excess of $50,000 must be made in
writing and signed by each registered holder. If you
make a redemption request within 30 calendar days after
changing your address, the request must be in writing
and signed by each registered holder of the account
with signatures guaranteed. A Notary Public is not an
acceptable guarantor.
A wire payment of redemption proceeds will
normally be made in federal funds on the next business
day. There is currently a $12 fee for each wire
redemption. It will be deducted from your redemption
proceeds. Electronically transferred funds will
ordinarily arrive at your bank within two to three
banking days after transmission. To change the
designated account, send a written request with the
signature(s) guaranteed to the Fund. Once the funds
are transmitted, the time of receipt and the
availability of the funds are not within the Fund's
control. The Fund reserves the right to delay payment
for a period of up to seven days after receipt of the
redemption request.
The Fund reserves the right to refuse a telephone
redemption request if it believes it is advisable to do
so. Procedures for redeeming shares of the Fund by
telephone may be modified or terminated by the Fund at
any time. In an effort to prevent unauthorized or
fraudulent redemption requests by telephone, the Fund
has implemented procedures designed to reasonably
assure that telephone instructions are genuine. These
procedures include: requesting verification of certain
personal information; recording telephone transactions;
confirming transactions in writing; and restricting
transmittal of redemption proceeds to preauthorized
designations. Other procedures may be implemented from
time to time. If reasonable procedures are not
implemented, the Fund may be liable for any loss due to
unauthorized or fraudulent transactions. In all other
cases, you are liable for any loss for unauthorized
transactions.
You should be aware that during periods of
substantial economic or market change, telephone or
wire redemptions may be difficult to implement. If you
are unable to contact the Fund by telephone, you may
also redeem shares by mailing the redemption request
to: Grand Prix Funds, Inc., P.O. Box 701, Milwaukee, WI
53201-0701. If you wish to send the information via
overnight delivery, you may send it to: Grand Prix
Funds, Inc., c/o Firstar Mutual Fund Services, LLC,
Third Floor, 615 East Michigan Street, Milwaukee, WI
53202. Redemption requests made via fax will not be
accepted by the Fund.
Redeeming Shares through Broker-Dealers. You may
be charged a fee if you redeem Fund shares through a
broker-dealer.
Systematic Withdrawal Plan. The Systematic
Withdrawal Plan ("SWP") allows you to make automatic
withdrawals from your account at regular intervals.
Redemptions for the purpose of satisfying such
withdrawals may reduce or even exhaust your account.
If the amount remaining in your account is not
sufficient to make a SWP payment, the remaining amount
will be redeemed and the SWP will be terminated.
Please see the SAI for more information.
Additional Redemption Information. The Fund
reserves the right to suspend or postpone redemptions
during any period when: trading on the New York Stock
Exchange (the "Exchange") is restricted, as determined
by the SEC, or the Exchange is closed for other than
customary weekend and holiday closing; the SEC has by order
<PAGE>
permitted such suspension; or an emergency, as
determined by the SEC, exists, making disposal of
portfolio securities or valuation of net assets of the
Fund not reasonably practicable.
Due to the relatively high cost of maintaining
small accounts, if your account balance falls below the
$5,000 minimum as a result of a redemption, you may be
given a 60-day notice to reestablish the minimum
balance. If this requirement is not met, your account
may be closed and the proceeds sent to you.
For redemption requests for corporate accounts,
please see the SAI for more information.
Redemption in Kind
The Fund has reserved the right to redeem in kind
(i.e., in securities) any redemption request during any
90-day period in excess of the lesser of: (i) $250,000
or (ii) 1% of the net asset value of the class of
shares being redeemed. Please see the SAI for more
information.
Shareholder Reports and Information
The Fund will provide the following statements and
reports:
Confirmation Statements. Except for AIP
transactions, after each transaction that affects your
account balance or account registration, you will
receive a confirmation statement. Participants in the
AIP will receive quarterly confirmations of all
automatic transactions.
Account Statements. All shareholders will receive
quarterly account statements. If you need additional
copies of previous statements, you may order statements
for the current and preceding year at no charge. Call
1-800-432-4741 to order past statements.
Financial Reports. Financial reports are provided
to shareholders semi-annually. Annual reports will
include audited financial statements. To reduce Fund
expenses, one copy of each report will be mailed to
each Taxpayer Identification Number even though you may
have more than one account in the Fund.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help
you understand the Fund's financial results for the
period from December 31, 1997 (commencement of
operations) to October 31, 1999. Certain information
reflects financial results for a single Fund share.
The total returns in the table represent the rate that
an investor would have earned on an investment in the
Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by
Ernst & Young LLP, whose report, along with the Fund's
financial statements, is included in the Fund's annual
report, which is available upon request.
Class C Shares Class A Shares
Class A Shares August 5, 1999(1) December 31, 1997(1)
Year Ended through through
October 31, 1999 October 31, 1999 October 31, 1998
Net asset value,
beginning of period $14.42 $20.55 $10.00
Income from investment
operations:
Net investment loss (0.32)(2) (0.13)(2) (0.10)
Net realized and
unrealized gains
on investments 16.74 7.75 4.52
Total from investment
operations 16.42 7.62 4.42
<PAGE>
Less distributions
from net realized gains (2.63) ---- ----
Net asset value,
end of period $28.21 $28.17 $14.42
Total return (3)(4) 131.51% 37.08% 44.20%
Supplemental data and ratios:
Net assets,
end of period (000's) $92,500 $9,730 $1,595
Ratio of operating
expenses to average
net assets (5) 1.72% 2.47% 1.65%
Ratio of interest expense
to average net assets (5) 0.04% 0.19% ----
Ratio of net investment
loss to average
net assets (5) (1.45)% (2.41)% (1.03)%
Portfolio turnover
rate (6) 764.3% 764.3% 521.6%
______________________
(1) Commencement of operations.
(2) Net investment loss per share represents
net investment loss divided by the monthly
average shares of beneficial interest
outstanding.
(3) Not annualized.
(4) The total return does not reflect the 5.25%
and 1.00% front-end sales charge for the Class
A and Class C Shares, respectively.
(5) Net of reimbursements and waivers. Without
reimbursements and waivers, the ratio of
operating expenses to average net assets for
the Class A Shares for the periods ended
October 31, 1999 and October 31, 1998 would
have been 2.24% and 15.93%, respectively, and
for the Class C Shares for the period ended
October 31, 1999 would have been 3.14%. The
ratio of net investment loss to average net
assets for the Class A Shares for the periods
ended October 31, 1999 and October 31, 1998
would have been (1.97)% and (15.31)%,
respectively, and for the Class C Shares for
the period ended October 31, 1999 would have
been (3.08)%.
(6) Portfolio turnover is calculated on the
basis of the Fund as a whole without
distinguishing between the classes of shares
issued.
VALUATION OF FUND SHARES
Net asset value is calculated using the fair value
of the Fund's total assets, including interest or
dividends accrued, 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. The net asset value per share is determined as
of the close of regular trading (generally 4:00 p.m.
Eastern Time) on each day the Exchange is open for
business. Net asset value is not determined on days
the Exchange is closed for trading. The price at which
a purchase order or redemption request is effected is
based on the next calculation of net asset value after
the order is placed or the request is received. In
determining net asset value, expenses are accrued and
applied daily and investments for which market
quotations are readily available are valued at market
value. Any investments 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 Fund.
DISTRIBUTION AND SHAREHOLDER SERVICING PLANS
The Fund has adopted a plan pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended
(the "12b-1 Plan") with respect to each class of
shares, which authorizes it to pay the Distributor
certain distribution and shareholder servicing fees.
Under the Class A 12b-1 Plan, the Class A shares may be
required to pay the Distributor a distribution and
shareholder servicing fee of up to 0.25% of the Fund's
average daily net assets attributable to the Class A
shares. The Class C Plan provides that the Class C
shares will be required to pay the Distributor (i) a
distribution fee of 0.75% of the Fund's average daily
net assets attributable to the Class C shares and (ii)
a shareholder servicing fee of 0.25% of the Fund's
average daily net assets attributable to the Class C
shares. The 12b-1 Plan has the effect of
<PAGE>
increasing
each class's expenses from what they would otherwise
be. Because Rule 12b-1 fees are paid out of the Fund's
net assets on an ongoing basis, over time these fees
will increase the cost of your investment and could
cost long-term investors of the Fund more than paying
other types of sales charges. For additional
information on the 12b-1 Plans, please see the SAI.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX TREATMENT
For federal income tax purposes, all dividends and
distributions of net realized short-term capital gains
you receive from the Fund are taxable as ordinary
income, whether reinvested in additional shares or
received in cash, unless you are exempt from taxation
or entitled to a tax deferral. Distributions of net
realized long-term capital gains you receive from the
Fund, whether reinvested in additional shares or
received in cash, 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. The
Fund expects that, because of its investment objective,
its distributions will consist primarily of long- and
short-term capital gains. You will be 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.
The Fund intends to pay dividends from net
investment income annually and to distribute all net
realized capital gains at least annually. In addition,
the Fund may make additional distributions if necessary
to avoid imposition of a 4% excise tax or other tax on
undistributed income and gains. Please note, however,
that the objective of the Fund is capital appreciation,
not the production of distributions. You should
measure the success of your investment by the value of
your investment at any given time and not by the
distributions you receive.
When a dividend or capital gain is distributed,
the 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
you specifically request 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 Grand Prix Funds, Inc., P.O. Box
701, Milwaukee, WI 53201-0701. The election is
effective for distributions with a dividend record date
on or after the date on which the Fund receives notice
of the election.
If you do not furnish the Fund with your correct
social security number or taxpayer identification
number, the Fund is required by current federal law to
withhold federal income tax from your distributions
(including applicable Fund share reinvestments) and
redemption proceeds at a rate of 31%.
An exchange of Fund shares for shares of the
Firstar Funds pursuant to the Fund's exchange privilege
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.
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>
ADDITIONAL INFORMATION
DIRECTORS
Robert Zuccaro
Mary Jane Boyle
Edward F. Ronan, Jr.
Dennis K. Waldman
OFFICERS
Robert Zuccaro, President
Mary Jane Boyle, Vice-President and Treasurer
Andrea Romstad, Vice-President and Secretary
INVESTMENT ADVISOR
Target Holdings Corporation, d.b.a. Target
Investors, Inc.
15 River Road, Suite 220
Wilton, Connecticut 06897
CUSTODIAN
Firstar Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
ADMINISTRATOR AND TRANSFER AGENT
Firstar Mutual Fund Services, LLC
For overnight deliveries, use: For regular mail deliveries, use:
Grand Prix Funds, Inc. Grand Prix Funds, Inc.
c/o Firstar Mutual Fund Services, LLC P.O. Box 701
Third Floor Milwaukee, WI 53201-0701
615 East Michigan Street
Milwaukee, Wisconsin 53202
INDEPENDENT AUDITORS
Ernst & Young LLP
111 East Kilbourn Avenue
Milwaukee, Wisconsin 53202
DISTRIBUTOR
T. O. Richardson Securities, Inc.
2 Bridgewater Road
Farmington, Connecticut 06032-2256
<PAGE>
LEGAL COUNSEL
Godfrey & Kahn, S.C.
780 N. Water Street
Milwaukee, Wisconsin 53202
<PAGE>
The SAI contains additional information about the
Fund. Additional information about the Fund's
investments is contained in the Fund's annual and semi-
annual reports to shareholders. The Fund's annual
report provides a discussion of the market conditions
and investment strategies that significantly affected
the Fund's performance during its last fiscal year.
The Fund's SAI, which is incorporated by reference into
this Prospectus, annual reports and semi-annual reports
are available without charge upon request to the
address or toll-free telephone number noted in this
Prospectus. These documents may also be obtained from
certain financial intermediaries, including the
Distributor, who purchase and sell Fund shares.
Shareholder inquiries and requests for other
information about the Fund can be directed to the Fund
at the address and toll-free telephone numbers in this
Prospectus.
Information about the Fund (including the SAI) can
be reviewed and copied at the SEC's Public Reference
Room in Washington, D.C. Please call the SEC at 1-202-
942-8090 for information relating to the operation of
the Public Reference Room. Reports and other
information about the Fund are available on the EDGAR
Database on the SEC's Internet Website located at
http://www.sec.gov. Alternatively, copies of this
information may be obtained, upon payment of a
duplicating fee, by emailing or writing the Public
Reference Section of the SEC at [email protected] or
Washington, D.C. 20549-0102.
The Fund's 1940 Act File Number is 811-8461.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
GRAND PRIX FUNDS, INC.
GRAND PRIX FUND
Wilton Executive Campus
15 River Road, Suite 220
Wilton, Connecticut 06897
1-800-307-4880 (Fund Information)
1-800-432-4741 (Account Information)
Website: www.grandprixfund.com
Fund Symbol: GPFFX
This Statement of Additional Information is not a
prospectus and should be read in conjunction with the
Prospectus of the Grand Prix Fund ("Fund"), dated
January 31, 2000. The Fund is a series of Grand Prix
Funds, Inc. (the "Corporation").
The Fund's audited financial statements for the
year ended October 31, 1999, are incorporated herein by
reference to the Fund's Annual Report.
A copy of the Prospectus is available without
charge upon request to the above-noted address, toll-
free telephone number or website.
This Statement of Additional Information is dated January 31, 2000.
<PAGE>
TABLE OF CONTENTS
FUND ORGANIZATION 4
INVESTMENT RESTRICTIONS 4
IMPLEMENTATION OF INVESTMENT OBJECTIVE 5
Depositary Receipts 5
Convertible Securities 6
Non-Diversification and Sector Concentration 6
Leveraging Strategies 7
Temporary Strategies 7
Illiquid Securities 7
DIRECTORS AND OFFICERS 8
PRINCIPAL SHAREHOLDERS 9
INVESTMENT ADVISOR 10
FUND TRANSACTIONS AND BROKERAGE 10
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT 11
ADMINISTRATOR 12
DISTRIBUTOR 12
PLAN OF DISTRIBUTION 13
Distribution and Shareholder Servicing Plans 13
Interests of Certain Persons 14
Anticipated Benefits to the Fund 14
Amounts Expensed Under the Plans 15
PURCHASE, REDEMPTION AND PRICING OF SHARES 15
Financial Intermediaries 15
Sales Charge Reductions for Class A Shares 15
Letter of Intent for Class A Shares 15
Right of Accumulation for Class A Shares 16
<PAGE>
Automatic Investment Plan 16
Individual Retirement Accounts 17
Redemptions for Corporate Accounts 18
Systematic Withdrawal Plan 18
Pricing of Shares 18
REDEMPTION IN KIND 19
TAXATION OF THE FUND 19
PERFORMANCE INFORMATION 19
Total Return 20
Comparisons 20
INDEPENDENT AUDITORS 21
FINANCIAL STATEMENTS 21
In deciding whether to invest in the Fund, you
should rely on information in this Statement of
Additional Information ("SAI") and related Prospectus.
The Fund has not authorized others to provide
additional information. The Fund has not authorized
the use of this SAI in any state or jurisdiction in
which such offering may not lawfully be made.
<PAGE>
FUND ORGANIZATION
The Corporation is an open-end management
investment company, commonly referred to as a mutual
fund. The Fund is a series of common stock of the
Corporation, a Maryland corporation incorporated on
October 30, 1997. The Corporation is authorized to
issue shares of common stock in series and classes.
The Corporation currently offers one series of shares:
the Grand Prix Fund. The shares of common stock of the
Fund are further divided into two classes: Class A and
Class C. Each share of common stock of each class is
entitled to one vote, and each share is entitled to
participate equally in dividends and capital gains
distributions by the respective class of shares and in
the residual assets of the respective class in the
event of liquidation. However, each class of shares
bears its own expenses, is subject to its own sales
charges and has exclusive voting rights on matters
pertaining to the Rule 12b-1 distribution and
shareholder servicing plan as it relates to that class.
No certificates will be issued for shares held in
your account. You will, however, have full shareholder
rights. Generally, the Fund will not hold annual
shareholders' meetings unless required by the
Investment Company Act of 1940, as amended (the "1940
Act") or Maryland law.
INVESTMENT RESTRICTIONS
The Fund's investment objective is capital
appreciation. The following are the Fund's fundamental
investment restrictions which cannot be changed without
the approval of a majority of the Fund's outstanding
voting securities. A "majority of the Fund's
outstanding voting securities" means the lesser of (i)
67% of the shares of common stock of the Fund
represented at a meeting at which more than 50% of the
outstanding shares are present, or (ii) more than 50%
of the outstanding shares of common stock of the Fund.
The Fund:
1. May not issue senior securities, except as
permitted under the 1940 Act;
2. May not act as an underwriter of another company's
securities, except to the extent that the Fund may
be deemed to be an underwriter within the meaning
of the Securities Act of 1933, as amended (the
"1933 Act"), in connection with the purchase and
sale of portfolio securities;
3. May not purchase or sell physical commodities
unless acquired as a result of ownership of
securities or other instruments (but this shall
not prevent the Fund from purchasing or selling
options, futures contracts, or other derivative
instruments, or from investing in securities or
other instruments backed by physical commodities);
4. May not make loans if, as a result, more than 33
1/3% of the Fund's total assets would be lent to
other persons, except through purchases of debt
securities or other debt instruments or engaging
in repurchase agreements;
5. May not invest more than 25% of its total assets
in securities of companies in any one industry;
6. May not purchase or sell real estate unless
acquired as a result of ownership of securities or
other instruments (but this shall not prohibit the
Fund from purchasing or selling securities or
other instruments backed by real estate or of
issuers engaged in real estate activities);
7. May (i) borrow money from banks, and (ii) make
other investments or engage in other transactions
permissible under the 1940 Act, which may involve
a borrowing, provided that the combination of (i)
and (ii) shall not exceed 33 1/3% of the value of
the Fund's total assets (including the amount
borrowed), less the Fund's liabilities (other than
borrowings). The Fund may also borrow money from
other persons to the extent permitted by
applicable law;
<PAGE>
8. Notwithstanding any other fundamental investment
policy or restriction, may invest all of its
assets in the securities of a single open-end
management investment company with substantially
the same fundamental investment objective,
policies, and restrictions.
The following non-fundamental operating policies
may be changed by the Board of Directors without
shareholder approval.
The Fund may not:
1. Sell securities short, unless the Fund owns or has
the right to obtain securities equivalent in kind
and amount to the securities sold short, or unless
it covers such short sale as required by the
current rules and positions of the Securities and
Exchange Commission ("SEC") or its staff, and
provided that transactions in options, futures
contracts, options on futures contracts, or other
derivative instruments are not deemed to
constitute selling securities short.
2. Purchase securities on margin, except that the
Fund may obtain such short-term credits as are
necessary for the clearance of transactions; and
provided that margin deposits in connection with
futures contracts, options on futures contracts,
or other derivative instruments shall not
constitute purchasing securities on margin.
3. Invest in illiquid securities if, as a result of
such investment, more than 5% of its net assets
would be invested in illiquid securities.
4. Purchase securities of other investment companies
except in compliance with the 1940 Act.
5. Engage in futures or options on futures
transactions which are impermissible pursuant to
Rule 4.5 under the Commodity Exchange Act ("CEA")
and, in accordance with Rule 4.5, will use futures
or options on futures transactions solely for bona
fide hedging transactions (within the meaning of
the CEA); provided, however, that the Fund may,
in addition to bona fide hedging transactions, use
futures and options on futures transactions if the
aggregate initial margin and premiums required to
establish such positions, less the amount by which
any such options positions are in the money
(within the meaning of the CEA), do not exceed 5%
of the Fund's net assets.
6. Make any loans other than loans of portfolio
securities, except through purchases of debt
securities or other debt instruments or engaging
in repurchase agreements with respect to portfolio
securities.
Except for the fundamental investment restrictions
listed above and the Fund's investment objective, the
Fund's other investment policies are not fundamental
and may be changed with approval of the Corporation's
Board of Directors. Unless noted otherwise, if a
percentage restriction is adhered to at the time of
investment, a later increase or decrease in percentage
resulting from a change in the Fund's assets (i.e., due
to cash inflows or redemptions) or in market value of
the investment or the Fund's assets will not constitute
a violation of that restriction.
IMPLEMENTATION OF INVESTMENT OBJECTIVE
The following information supplements the
discussion of the Fund's investment objective and
strategy described in the Prospectus under the captions
"Investment Objective," and "Implementation of
Investment Objective."
Depositary Receipts
The Fund may invest in foreign securities by
purchasing depositary receipts, including American
Depositary Receipts ("ADRs") and European Depositary
Receipts ("EDRs") or other securities convertible into
securities of companies based in foreign countries.
These securities may not necessarily be denominated in
the same currency as the securities into which they may
be converted. Generally, ADRs, in registered form, are
denominated in U.S. dollars and are designed for use in
the U.S. securities markets, while EDRs, in bearer
form, may be denominated in other currencies
<PAGE>
and are designed for use in European securities markets. ADRs
are receipts typically issued by a U.S. bank or trust
company evidencing ownership of the underlying
securities. EDRs are European receipts evidencing a
similar arrangement. For purposes of the Fund's
investment policies, ADRs and EDRs are deemed to have
the same classification as the underlying securities
they represent. Thus, an ADR or EDR representing
ownership of common stock will be treated as common
stock.
ADR facilities may be established as either
"unsponsored" or "sponsored." While ADRs issued under
these two types of facilities are in some respects
similar, there are distinctions between them relating
to the rights and obligations of ADR holders and the
practices of market participants. For example, a non-
sponsored depositary may not provide the same
shareholder information that a sponsored depositary is
required to provide under its contractual arrangements
with the issuer, including reliable financial
statements. Under the terms of most sponsored
arrangements, depositaries agree to distribute notices
of shareholder meetings and voting instructions, and to
provide shareholder communications and other
information to the ADR holders at the request of the
issuer of the deposited securities.
Convertible Securities
The Fund may invest in convertible securities,
which are bonds, debentures, notes, preferred stocks,
or other securities that may be converted into or
exchanged for a specified amount of common stock or
warrants of the same or a different company within a
particular period of time at a specified price or
formula. A convertible security entitles the holder to
receive interest normally paid or accrued on debt or
the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted,
or exchanged. Convertible securities have unique
investment characteristics in that they generally (i)
have higher yields than common stocks, but lower yields
than comparable non-convertible securities, (ii) are
less subject to fluctuation in value than the
underlying stock (or warrant) since they have fixed
income characteristics, and (iii) provide the potential
for capital appreciation if the market price of the
underlying common stock (or warrant) increases. A
convertible security may be subject to redemption at
the option of the issuer at a price established in the
convertible security's governing instrument. If a
convertible security held by the Fund is called for
redemption, the Fund will be required to permit the
issuer to redeem the security, convert it into the
underlying common stock (or warrant), or sell it to a
third party.
Non-Diversification and Sector Concentration
While the Fund is "non-diversified," which means
that it is permitted to invest its assets in a more
limited number of issuers than other investment
companies, the Fund intends to diversify its assets to
the extent necessary to qualify for tax treatment as a
regulated investment company under the Internal Revenue
Code of 1986, as amended ("Code"). To so qualify (i)
not more than 25% of the total value of the Fund's
assets may be invested in securities of any one issuer
(other than U.S. Government securities and the
securities of other regulated investment companies) or
of any two or more issuers controlled by the Fund,
which, pursuant to the regulations under the Code, may
be deemed to be engaged in the same, similar, or
related trades or businesses, and (ii) with respect to
50% of the total value of the Fund's assets (a) not
more than 5% of its total assets may be invested in the
securities of any one issuer (other than U.S.
Government securities and the securities of other
regulated investment companies) and (b) the Fund may
not own more than 10% of the outstanding voting
securities of any one issuer (other than U.S.
Government securities and the securities of other
regulated investment companies).
In addition, the Fund has adopted a fundamental
investment restriction which prohibits the Fund from
investing more than 25% of its total assets in
securities of companies in any one industry. An
industry is defined as a business-line subsector of a
stock-market sector. While the Fund may be heavily
invested in one single market sector like technology or
health care, for example, it will not invest more than
25% of its total assets in securities of companies in
any one industry. To the extent that a relatively high
percentage of the Fund's assets may be invested in the
securities of a limited number of companies, the Fund's
portfolio securities may be more susceptible to any
single economic, political, or regulatory occurrence
than the portfolio securities of a diversified
investment company.
<PAGE>
Leveraging Strategies
The Fund may borrow up to 33 1/3% of the value of
its total assets for any purpose including to leverage
its portfolio. Borrowing may exaggerate changes in the
net asset value of the Fund's shares and in the return
on the Fund's portfolio. Although the principal of any
borrowing will be fixed, the Fund's assets may change
in value during the time the borrowing is outstanding.
The Fund may be required to liquidate securities at a
time when it would be disadvantageous to do so in order
to make payments with respect to an outstanding
borrowing. In addition, the Fund may be required to
segregate liquid assets in an amount sufficient to meet
its obligations in connection with such borrowings.
Temporary Strategies
Prior to investing proceeds from sales of Fund
shares, to meet ordinary daily cash needs, and to
retain the flexibility to respond promptly to adverse
changes in market, economic, political and other
conditions, the Fund may hold cash and/or invest up to
35% of its total assets in money market instruments.
The money market instruments which the Fund may
purchase include U.S. Government securities, bank
obligations, obligations of savings institutions, fully
insured certificates of deposit, commercial paper, and
securities issued by registered investment companies
holding themselves out as money market funds. Such
securities include:
U.S. Government Securities. Obligations issued or
guaranteed as to principal and interest by the United
States or its agencies (such as the Export-Import Bank
of the United States, Federal Housing Administration
and Government National Mortgage Association) or its
instrumentalities (such as the Federal Home Loan Bank),
including Treasury bills, notes, and bonds;
Bank Obligations. Obligations (including
certificates of deposit, bankers' acceptances,
commercial paper (see below) and other debt
obligations) of banks subject to regulation by the U.S.
Government and having total assets of $1 billion or
more, and instruments secured by such obligations, not
including obligations of foreign branches of domestic
banks;
Obligations of Savings Institutions. Certificates
of deposit of savings banks and savings and loan
associations, having total assets of $1 billion or
more;
Fully Insured Certificates of Deposit.
Certificates of deposit of banks and savings
institutions, having total assets of less than $1
billion, if the principal amount of the obligation is
insured by the Bank Insurance Fund or the Savings
Association Insurance Fund (each of which is
administered by the Federal Deposit Insurance
Corporation), limited to $100,000 principal amount per
certificate and to 5% or less of the Fund's total
assets in all such obligations and in all illiquid
assets, in the aggregate;
Commercial Paper. Commercial paper rated Prime-1
or better by Moody's Investors Service, Inc.
("Moody's"), A-1 or better by Standard & Poor's
Corporation ("S&P"), Duff 2 or higher by Duff & Phelps,
Inc. ("D&P"), or Fitch 2 or higher by Fitch Investor
Services, Inc. ("Fitch");
Money Market Funds. Securities issued by
registered investment companies holding themselves out
as money market funds which attempt to maintain a
stable net asset value of $1.00 per share; and
Repurchase Agreements. Repurchase agreements with
respect to obligations of the U.S. government, its
agencies or instrumentalities.
Illiquid Securities
The Fund may invest up to 5% of its net assets in
illiquid securities (i.e., securities that are not
readily marketable). For purposes of this restriction,
illiquid securities include, but are not limited to,
restricted securities (securities the disposition of
which is restricted under the federal securities laws),
repurchase agreements with maturities in excess of
seven days and other securities that are not readily
marketable. The Board of Directors of the
<PAGE>
Corporation, or its delegate, has the ultimate authority
to determine, to the extent permissible under the federal
securities laws, which securities are liquid or
illiquid for purposes of this 5% limitation. Certain
securities exempt from registration or issued in
transactions exempt from registration under the 1933
Act, such as securities that may be resold to
institutional investors under Rule 144A under the 1933
Act, may be considered liquid under guidelines adopted
by the Board of Directors.
DIRECTORS AND OFFICERS
Under the laws of the State of Maryland, the Board
of Directors of the Corporation is responsible for
managing its business and affairs. The directors and
officers of the Corporation, together with information
as to their principal business occupations during the
last five years, and other information, are shown
below. Each director who is deemed an "interested
person" as defined in the 1940 Act is indicated by an
asterisk. Mr. Zuccaro has served as a director and
officer of the Corporation since its inception on
October 30, 1997. The other directors and officers,
with the exception of Ms. Romstad, have served as such
since December 10, 1997. Ms. Romstad has served as an
officer of the Corporation since October 2, 1998.
*Robert Zuccaro, President and a Director of the Corporation.
Mr. Zuccaro, 57 years old, received a Bachelor's
Degree from the University of Bridgeport in 1965 and a
Master's Degree in Business Administration from Pace
University in 1968. Prior to founding what is now
Target Holdings Corporation, doing business as Target
Investors, Inc. ("Advisor") in 1983, Mr. Zuccaro spent
six years with Axe-Houghton, where he was President and
a Director of Axe-Houghton Stock Fund and Vice
President and Director of Portfolio Management of E.W.
Axe & Co. Mr. Zuccaro is the President of the Advisor
and is a Chartered Financial Analyst.
Mr. Zuccaro's address is 15 River Road, Suite 220,
Wilton, Connecticut 06897.
*Mary Jane Boyle, Vice-President, Treasurer and a
Director of the Corporation.
Ms. Boyle, 54 years old, earned a Master's Degree
from the University of Bridgeport in 1971. Prior to co-
founding Advisor in 1983, where she serves as Vice-
President, Client Service, Ms. Boyle was a Regional
Sales Director with Mondessa Enterprises, Inc.
Ms. Boyle's address is 15 River Road, Suite 220,
Wilton, Connecticut 06897.
Edward F. Ronan, Jr., a Director of the Corporation.
Mr. Ronan, 47 years old, earned a B.S. in
accounting from the University of Bridgeport in 1977.
Mr. Ronan is a C.P.A. and a member of Actis-Grande,
Ronan, Carbone & Company, LLC, a certified public
accounting firm and has been with the firm since 1984.
Mr. Ronan served as a director of Q.E.P. Co., Inc., a
flooring tool manufacturer and distributor, from 1993
to 1998.
Mr. Ronan's address is 30 Main Street, Danbury, Connecticut 06810.
Dennis K. Waldman, a Director of the Corporation.
Mr. Waldman, 44 years old, graduated from the
Massachusetts Institute of Technology in 1976 with a
Bachelor's of Science degree in aeronautical and
astronautical engineering and in electrical engineering
and in 1978 with a Master's of Science degree in
aeronautical and astronautical engineering. Since
1994, Mr. Waldman has served as Vice-President of Sales
for Strategic Information Associates, prior to which
time, Mr. Waldman worked at ITS as
<PAGE>
Vice-President of Sales. From 1992 to 1994, Mr. Waldman
was a sales representative at Tartan where he was
involved in engineering sales.
Mr. Waldman's address is 62 Windsor Road, Waban, Massachusetts 02168.
Andrea Romstad, Vice-President and Secretary of the Corporation.
Ms. Romstad, 37 years old, received a Bachelor's
of Business Administration in marketing management from
Bernard M. Baruch College of the City University of New
York in 1985. Prior to joining Advisor as an analyst
in 1993, Ms. Romstad was a credit assistant at
Skandinaviska Enskilda Banken Corporation and a
financial assistant at Finansskandic Corporation.
Ms. Romstad's address is 15 River Road, Suite 220,
Wilton, Connecticut 06897.
As of December 31, 1999, officers and directors of
the Corporation beneficially owned 244,412.249 shares
of common stock, or 4.89%, of the Fund's then
outstanding Class A shares (including 142,586.305
shares owned by the Advisor, which is controlled by
Mr. Zuccaro, and 99,347.598 shares owned by Marc
Zuccaro - UTMA for which Mr. Zuccaro is the custodian).
Directors and officers of the Corporation who are also
officers, directors, employees, or shareholders of
Advisor do not receive any remuneration from the Fund
for serving as directors or officers. Accordingly, Mr.
Zuccaro, Ms. Boyle and Ms. Romstad do not receive any
remuneration from the Fund for their services as
directors and officers. The following table provides
information relating to compensation paid to
disinterested directors of the Corporation for their
services as such for fiscal 1999:
Cash Other
Name Compensation Compensation Total
Edward F. Ronan, Jr. $500 $0 $500
Dennis K. Waldman $500 $0 $500
Each director who is not deemed an "interested
person" of the Fund, as defined in the 1940 Act,
received $125 per meeting attended and reimbursement of
reasonable expenses. The Board held four meetings
during fiscal 1999. For fiscal 2000, disinterested
directors will receive $300 per meeting attended.
Disinterested directors may elect to receive their
compensation in the form of cash, shares of the Fund,
or both.
PRINCIPAL SHAREHOLDERS
As of December 31, 1999, the following person
owned of record or was known by the Fund to own of
record or beneficially 5% or more of the outstanding
Class A shares of the Fund:
Name and Address No. Shares Percentage
Charles Schwab & Co., Inc. 573,220.032 11.48%
Special Custody Account for the
Exclusive Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
As of December 31, 1999 no person owned of record or
was known by the Fund to own of record or beneficially
5% or more of the outstanding Class C shares of the
Fund. Accordingly, as of December 31, 1999, no person
owned a controlling interest in the Fund.
<PAGE>
INVESTMENT ADVISOR
Target Holdings Corporation, d.b.a. Target
Investors, Inc. ("Advisor") is the investment advisor
to the Fund. The Advisor is controlled by Robert
Zuccaro.
The investment advisory agreement between the
Corporation and the Advisor dated as of December 31,
1997 ("Advisory Agreement") had an initial term of two
years and now is required to be approved annually by
the Board of Directors of the Corporation or by vote of
a majority of the Fund's outstanding voting securities.
Each annual renewal must also be approved by the vote
of a majority of the Corporation's directors who are
not parties to the Advisory Agreement or interested
persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval. The
Advisory Agreement was initially approved by the Board
of Directors, including a majority of the disinterested
directors on December 10, 1997, and by the initial
shareholder on December 23, 1997. Most recently, the
Advisory Agreement was approved by the Board of
Directors, including a majority of the disinterested
directors on December 9, 1999. The Advisory Agreement
is terminable without penalty on 60 days' written
notice by the Board of Directors, by vote of a majority
of the Fund's outstanding voting securities, or by the
Advisor, and will terminate automatically in the event
of its assignment.
Under the terms of the Advisory Agreement, the
Advisor manages the Fund's investments and business
affairs, subject to the supervision of the Board of
Directors. At its expense, the Advisor provides office
space and all necessary office facilities, equipment,
and personnel for managing the investments of the Fund.
As compensation for its services, the Corporation pays
the Advisor an annual management fee of 1.00% of the
Fund's average daily net assets. The advisory fee is
accrued daily and paid monthly. The organizational
expenses of the Fund were advanced by the Advisor and
will be reimbursed by the Fund over a period of not
more than 60 months. The organizational expenses were
approximately $79,558.
Pursuant to an expense cap agreement, the Advisor
agreed to limit the total operating expenses of the
Fund to an annual rate of 1.72% of the Fund's average
net assets attributable to the Class A shares and 2.47%
of the Fund's average net assets attributable to the
Class C shares until February 29, 2000. From February
29, 2000 until February 28, 2002, the Advisor has
contractually agreed to limit the Class A total
operating expenses to an annual rate of 1.75% and the
Class C total operating expenses to an annual rate of
2.50%. After such date, the Advisor may from time to
time voluntarily (but is not required or obligated to)
waive all or a portion of its fee and/or reimburse
certain Fund expenses. Any waiver of fees or
reimbursement of expenses will be made on a monthly
basis and, with respect to the latter, will be paid to
the Fund by reduction of the Advisor's fee. For the
fiscal period ended October 31, 1998, the Fund did not
pay an advisory fee to the Advisor because the Advisor
waived its entire advisory fee. If the Advisor had not
agreed to waive the advisory fee for the fiscal period
ended October 31, 1998, the Advisor would have received
$10,435 for its investment advisory services. For the
fiscal year ended October 31, 1999, the Fund paid the
Advisor $185,201 for its investment advisory services.
If the Advisor had not agreed to waive a portion of its
advisory fee during the same time period, the Advisor
would have received an additional $204,561 from the
Fund for its investment advisory services.
FUND TRANSACTIONS AND BROKERAGE
Under the Advisory Agreement, the Advisor, in its
capacity as portfolio manager, is responsible for
decisions to buy and sell securities for the Fund and
for the placement of the Fund's securities business,
the negotiation of the commissions to be paid on such
transactions, and the allocation of portfolio brokerage
business. Remuneration for trades may include
commissions, dealer spreads, mark-ups, and mark-downs.
The Fund has no obligation to deal with any particular
broker or dealer; in executing transactions, the
Advisor seeks to obtain the best execution at the best
security price available with respect to each
transaction. The best price to the Fund means the best
net price without regard to the mix between purchase or
sale price and commission, if any. While the Advisor
seeks reasonably
<PAGE>
competitive commission rates, the Fund
does not necessarily pay the lowest available
commission. Brokerage may be allocated based on the
sale of the Fund's shares.
Section 28(e) of the Securities Exchange Act of
1934, as amended ("Section 28(e)"), permits an
investment advisor, under certain circumstances, to
cause an account to pay a broker or dealer who supplies
brokerage and research services a commission for
effecting a transaction in excess of the amount of
commission another broker or dealer would have charged
for effecting the transaction. Brokerage and research
services include (a) furnishing advice as to the value
of securities, the advisability of investing,
purchasing, or selling securities, and the availability
of securities or purchasers or sellers of securities;
(b) furnishing analyses and reports concerning issuers,
industries, sectors, securities, economic factors and
trends, portfolio strategy, and the performance of
accounts; and (c) effecting securities transactions and
performing functions incidental thereto (such as
clearance, settlement, and custody).
In selecting brokers or dealers, the Advisor
considers investment and market information and other
research, such as economic, securities, and performance
measurement research provided by such brokers or
dealers and the quality and reliability of brokerage
services, including execution capability, performance,
and financial responsibility. Accordingly, the
commissions charged by any such broker or dealer may be
greater than the amount another firm might charge if
the Advisor determines in good faith that the amount of
such commissions is reasonable in relation to the value
of the research information and brokerage services
provided by such broker or dealer to the Fund. The
Advisor believes that the research information received
in this manner provides the Fund with benefits by
supplementing the research otherwise available to the
Fund. Such higher commissions will not be paid by the
Fund unless (a) the Advisor determines in good faith
that the amount is reasonable in relation to the
services in terms of the particular transaction or in
terms of the Advisor's overall responsibilities with
respect to the accounts, including the Fund, as to
which it exercises investment discretion; (b) such
payment is made in compliance with the provisions of
Section 28(e) and other applicable state and federal
laws; and (c) in the opinion of the Advisor, the total
commissions paid by the Fund will be reasonable in
relation to the benefits to the Fund over the long
term.
The aggregate amount of brokerage commissions paid
by the Fund for the fiscal year ended October 31, 1999
and the fiscal period ended October 31, 1998 was
$278,022 and $10,048, respectively. The aggregate
dollar amount of brokerage commissions paid by the Fund
in fiscal 1998 differed materially from the amount paid
during fiscal 1999 due to the vast increase in the
asset size of the Fund from fiscal 1998 to fiscal 1999.
For the fiscal year ended October 31, 1999, the Fund
paid $43,875 in brokerage commissions with respect to
$691,697,576 in transactions for which research
services were provided. During fiscal 1999, the Fund
did not acquire any stock of its regular brokers or
dealers.
The Advisor places portfolio transactions for
other advisory accounts in addition to the Fund.
Research services furnished by firms through which the
Fund effects its securities transactions may be used by
the Advisor in servicing all of its accounts; not all
of such services may be used by the Advisor in
connection with the Fund. The Advisor believes it is
not possible to measure separately the benefits from
research services to each of the accounts (including
the Fund) managed by it. Because the volume and nature
of the trading activities of the accounts are not
uniform, the amount of commissions in excess of those
charged by another broker or dealer paid by each
account for brokerage and research services will vary.
However, the Advisor believes such costs to the Fund
will not be disproportionate to the benefits received
by the Fund on a continuing basis. The Advisor seeks
to allocate portfolio transactions equitably whenever
concurrent decisions are made to purchase or sell
securities by the Fund and another advisory account.
In some cases, this procedure could have an adverse
effect on the price or the amount of securities
available to the Fund. There can be no assurance that
a particular purchase or sale opportunity will be
allocated to the Fund. In making such allocations
between the Fund and other advisory accounts, certain
factors considered by the Advisor are the respective
investment objectives, the relative size of portfolio
holdings of the same or comparable securities, the
availability of cash for investment, and the size of
investment commitments generally held.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
As custodian of the Fund's assets, Firstar Bank,
N.A., 425 Walnut Street, Cincinnati, Ohio 45202, has
custody of all securities and cash of the Fund,
delivers and receives payment for portfolio securities
sold, receives and pays for
<PAGE>
portfolio securities
purchased, collects income from investments, if any,
and performs other duties, all as directed by the
officers of the Corporation. Firstar Mutual Fund
Services, LLC ("Firstar"), Third Floor, 615 East
Michigan Street, Milwaukee, Wisconsin 53202, acts as
transfer agent and dividend-disbursing agent for the
Fund.
ADMINISTRATOR
Pursuant to a Fund Administration Servicing
Agreement and a Fund Accounting Servicing Agreement,
Firstar also performs certain administrative and tax
reporting functions for the Fund, including preparing
and filing federal and state tax returns, preparing and
filing securities registration compliance filings with
various states, compiling data for and preparing
notices to the SEC, preparing financial statements for
the annual and semi-annual reports to the SEC and
current investors, monitoring the Fund's expense
accruals and performing securities valuations and, from
time to time, monitoring the Fund's compliance with the
Fund's investment objective and restrictions. Pursuant
to the Fund Administration Servicing Agreement, Firstar
is entitled to receive from the Fund a fee, computed
daily and payable monthly, based on the Fund's average
net assets: at an annual rate of .07 of 1% on the first
$200 million, .06 of 1% on the next $500 million and
.04 of 1% on average net assets in excess of $700
million, subject to an annual minimum fee of $40,000,
plus out-of-pocket expenses. There is also a 20%
additional charge for each additional class. Pursuant
to the Fund Accounting Servicing Agreement, Firstar is
entitled to receive a fee of $22,000 for the first $40
million of average net assets, .01 of 1% on the next
$200 million on average net assets and .005 of 1% on
average net assets in excess of $240 million, plus out-
of-pocket expenses. There is a 25% charge for each
additional class. For the fiscal period ended October
31, 1998, Sunstone Financial Group, Inc. ("Sunstone"),
the Fund's prior administrator, received $54,139 under
an Administration and Fund Accounting Agreement between
the Fund and Sunstone. For fiscal 1999, Sunstone
received $52,819 from the Fund under the Administration
and Fund Accounting Agreement, and Firstar received
$15,071 from the Fund under the Fund Administration
Servicing Agreement and $10,201 from the Fund under the
Fund Accounting Servicing Agreement.
DISTRIBUTOR
Under a Distribution Agreement dated July 13,
1999, (the "Distribution Agreement"), T. O. Richardson
Securities, Inc., 2 Bridgewater Road, Farmington,
Connecticut 06032-2256, acts as the principal
distributor of the Fund's shares ("Distributor"). The
Distribution Agreement provides that the Distributor
will use its best efforts to distribute the Fund's
shares. The Fund's shares are offered for sale
continuously at (i) net asset value per share plus a
maximum initial sales charge of 5.25% of the offering
price, in the case of Class A shares, and (ii) net
asset value per share plus an initial sales charge of
1.00% of the offering price, in the case of Class C
shares. Existing Class A shareholders as of November
30, 1998, are not subject to the sales charge on
additional purchases of Class A shares. To encourage
ownership of Fund shares, directors, officers and full-
time employees of the Corporation and the Advisor and
spouses and family members of such persons are not
subject to the Class A sales charge. In addition, no
sales charge is imposed on the reinvestment of
dividends or capital gains with respect to Class A and
Class C shares. Certain other exceptions to the
imposition of the sales charge apply in the case of
Class A shares, as discussed more fully in the
Prospectus under the caption "Opening an Account." The
Distribution Agreement is subject to the same
termination and renewal provisions as are described
above with respect to the Advisory Agreement, except
that the Distribution Agreement need not be approved by
the Fund's shareholders.
With respect to Class A shares, the Distributor
may pay a portion of the applicable initial sales
charge due upon the purchase of such shares to the
broker, if any, involved in the trade, as follows:
Portion of Initial
Dollar Amount of Initial Sales Sales Charge Paid
Shares Purchased Charge (1) to Broker-Dealers (1)(2)
Less than $50,000 5.25% 5.00%
$50,000 but less than $100,000 4.50% 4.50%
$100,000 but less than $250,000 3.50% 3.50%
<PAGE>
$250,000 but less than $500,000 2.50% 2.50%
$500,000 but less than $1,000,000 2.00% 2.00%
$1,000,000 or more 1.00% 1.00%
(1) Reflected as a percentage of the offering
price of Class A shares. The offering price is
the sum of the net asset value per share plus
the initial sales charge indicated in the table
(the "Offering Price").
(2) All sales charges may at times be paid to
the broker-dealer involved in the trade, if
any. A broker-dealer paid all or substantially
all of the sales charge may be deemed an
"underwriter" under the 1933 Act.
With respect to Class C shares, the Distributor
may pay all of the initial sales charge due upon the
purchase of such shares to the broker, if any, involved
in the trade. A broker-dealer paid all or
substantially all of the sales charge may be deemed an
"underwriter" under the 1933 Act.
As compensation for its services under the
Distribution Agreement, the Distributor may retain all
or a portion of (i) the initial sales charge from
purchases of Fund shares and (ii) the Rule 12b-1 fees
payable with respect to Fund shares (as described under
"Distribution and Shareholder Servicing Plans," below).
For the fiscal year ended October 31, 1999, the
aggregate dollar amount of initial sales charges
imposed on purchases of Class A and Class C shares was
$823,416. The Distributor did not retain any amounts
from Class A and Class C sales charges. For the fiscal
year ended October 31, 1999, the aggregate dollar
amount of Rule 12b-1 fees payable with respect to Class
A and Class C shares was $95,437 and $8,019,
respectively. Of this $103,456, the Distributor
retained $6,450 from Class A and Class C Rule 12b-1
fees.
PLAN OF DISTRIBUTION
Distribution and Shareholder Servicing Plans
The Corporation, on behalf of each class of
shares, has adopted a plan pursuant to Rule 12b-1 under
the 1940 Act ("Plan") with respect to which certain
distribution and shareholder servicing fees may be paid
to registered securities dealers, financial
institutions, or other persons ("Recipients") who
render assistance in distributing or promoting the sale
of Fund shares, or who provide certain shareholder
services to Fund shareholders, pursuant to a written
agreement ("Rule 12b-1 Related Agreement"). Under the
terms of the Class A Plan, the Class A shares may be
required to pay the Recipients a fee of up to 0.25% of
the average daily net assets attributable to the Class
A shares to finance activities primarily intended to
result in the sale of Class A shares. The Class A Plan
is a "reimbursement" plan, which means that the fees
paid by the Fund under the Class A Plan are intended as
reimbursement for services rendered and commission fees
borne up to the maximum allowable distribution and
shareholder servicing fees. If more money for services
rendered and commission fees is due than is immediately
payable because of the expense limitation under the
Class A Plan, the unpaid amount is carried forward from
period to period while the Class A Plan is in effect
until such time as it may be paid. No interest,
carrying, or other finance charges will be borne by the
Fund with respect to unpaid amounts carried forward.
The Class C Plan provides that the Class C shares
are required to pay the Recipients (i) a distribution
fee of 0.75% of the average daily net assets
attributable to the Class C shares and (ii) a
shareholder servicing fee of 0.25% of the average daily
net assets attributable to the Class C shares.
Payments under the Class C Plan are based upon a
percentage of average daily net assets attributable to
the Class C shares regardless of amounts actually paid
or expenses actually incurred by the Recipients,
however, in no event, may such payments exceed the
maximum allowable fee. It is, therefore, possible that
the Recipients may realize a profit in a particular
year as a result of these payments. Each Plan has the
effect of increasing the applicable class's expenses
from what they would otherwise be. The Board of
Directors reviews each class's distribution and
shareholder servicing fee payments in connection with
its determination as to continuance of each Plan.
<PAGE>
From time to time, the Recipients may engage in
activities which jointly promote the sales of both
classes of shares, the cost of which may not be readily
identifiable or related to any one class. Generally,
the distribution expenses attributable to such joint
distribution activities will be allocated among each
class of shares on the basis of its respective net
assets, although the Board of Directors may allocate
such expenses in any other manner it deems fair and
equitable.
The Plans, including a form of the Rule 12b-1
Related Agreement, have been unanimously approved by
the Board of Directors of the Corporation, including
all 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 Plans or any Rule 12b-1 Related
Agreement ("Disinterested Directors") voting
separately.
The Plans, 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 their
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 Plans, or the Rule 12b-1 Related Agreements, as
applicable. In addition, a Plan, and any Rule 12b-1
Related Agreement, may be terminated without penalty,
by vote of a majority of the respective class's
outstanding voting securities, or by vote of a majority
of Disinterested Directors (on not more than 60 days'
written notice in the case of the Rule 12b-1 Related
Agreement only). Payment of the distribution and
shareholder servicing fees is to be made monthly,
within 30 days after the month for which the fee is
payable.
Interests of Certain Persons
With the exception of the Advisor and the
Distributor, no "interested person" of the Fund, as
defined in the 1940 Act, and no Disinterested Director
has or had a direct or indirect financial interest in
the Plans or any Rule 12b-1 Related Agreement.
Anticipated Benefits to the Fund
The Board of Directors of the Corporation
considered various factors in connection with its
decision to continue the Class A and Class C Plans,
including: (a) the nature and causes of the
circumstances which make continuation of the Plans
necessary and appropriate; (b) the way in which the
Plans address those circumstances, including the nature
and potential amount of expenditures; (c) the nature of
the anticipated benefits; (d) the merits of possible
alternative plans or pricing structures; and (e) the
possible benefits of the Plans to any other person
relative to those of the Fund.
Based upon its review of the foregoing factors and
the material presented to it, and in light of its
fiduciary duties under relevant state law and the 1940
Act, the Board of Directors determined, in the exercise
of its business judgment, that each Plan was reasonably
likely to benefit the respective class and its
shareholders in at least one or several potential ways.
Specifically, the Board concluded that any Recipients
operating under Rule 12b-1 Related Agreements would
have little or no incentive to incur promotional
expenses on behalf of the Fund if a Rule 12b-1 plan
were not in place to reimburse them, thus making the
adoption of the Plans important to the initial success
and thereafter, continued viability of the Fund. In
addition, the Board determined that the payment of Rule
12b-1 fees to these persons should motivate them to
provide an enhanced level of service to Fund
shareholders, which would, of course, benefit such
shareholders. Finally, the continuation of the Plans
would help to increase net assets under management in a
relatively short amount of time, given the marketing
efforts on the part of the Recipients to sell Fund
shares, which should result in certain economies of
scale.
While there is no assurance that the expenditure
of Fund assets to finance distribution of Fund shares
will have the anticipated results, the Board of
Directors believes there is a reasonable likelihood
that one or more of such benefits will result, and
since the Board will be in a position to monitor the
distribution and shareholder servicing expenses of the
Fund, it will be able to evaluate the benefit of such
expenditures in deciding whether to continue the Plans.
<PAGE>
Amounts Expensed Under the Plans
For the fiscal year ended October 31, 1999, the
Class A shares paid $95,437 under the Class A Plan and
the Class C shares paid $8,019 under the Class C Plan.
Of the $103,456 expensed under the Class A and Class C
Plans, $6,331 was spent on printing and mailing
prospectuses to other than current shareholders, $7,556
was spent on advertising and $73,352 was spent on
dealer compensation. The Distributor retained $6,450
of the amount expensed under the Class A and Class C
Plans.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Financial Intermediaries
Broker-dealers, financial institutions and other
financial intermediaries that have entered into
agreements with the Advisor and/or Distributor on
behalf of the Fund may enter purchase or redemption
orders on behalf of their customers. If you
purchase or redeem shares of the Fund through a
financial intermediary, certain features of the
Fund may not be available or may be modified in
accordance with the terms of the intermediaries'
agreement with the Advisor and/or Distributor. In
addition, certain operational policies of the Fund,
including those relating to settlement and dividend
accrual, may vary from those applicable to direct
shareholders of the Fund and may vary among
intermediaries. We urge you to consult your
financial intermediary for more information
regarding these matters. In addition, the Fund may
pay, directly or indirectly, amounts to financial
intermediaries that provide transfer agent and/or
other administrative services relating to their
customers provided, however, that the Fund will not
pay more for these services through intermediary
relationships than it would if the intermediaries'
customers were direct shareholders in the Fund.
Certain financial intermediaries may charge a
commission or other transaction fee for their services.
Sales Charge Reductions for Class A Shares
The sales charge for Class A shares will be
reduced to 1% for sponsored arrangements with
organizations that make recommendations to or permit
group solicitations of the organization's employees,
members or participants. The Fund may, at its
discretion, name a single registered representative as
servicing agent for the organization.
The sales charge for Class A shares will be
reduced to 1% for those persons who adopt the Automatic
Investment Plan ("AIP"). The sales charge for Class A
shares will also be reduced to 1% for those persons who
sell shares of a mutual fund, other than the Fund, and
use any amount of the proceeds to purchase Fund shares
within 90 days of such sale. A qualification form must
be completed and included with the required account
application(s) for initial purchases, and must
accompany or precede subsequent purchase orders,
including orders submitted electronically.
Letter of Intent for Class A Shares
The Fund's Letter of Intent ("LOI") allows for
reduction of the initial sales charge for Class A
shares when multiple purchases of Class A shares are
combined by taking advantage of the breakpoints in the
sales charge schedule. By completing the LOI
application, you express an intention to invest during
the next 10-month period a specified amount (minimum of
at least $50,000) which, if made at one time, would
qualify for a reduced sales charge.
Any Class A shares you own on the date you execute
the LOI may be used as a credit toward the completion
of the LOI. However, the reduced sales charge will
only be applied to new purchases. Any redemptions made
during the 10-month period will be subtracted from the
amount of the purchases for purposes of determining
whether the terms of the LOI have been satisfied. If,
at the end of the 10-month period covered by the LOI,
the total amount of purchases (less redemptions) does
not equal the amount indicated, you will be
<PAGE>
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 equal to 5% of the
amount specified in the LOI will be held in escrow
during the 10-month period and are subject to
involuntary redemption to assure any payment of a
higher applicable sales charge.
By signing the LOI application, you grant to the
Distributor a security interest in the reserved shares
and appoint the Distributor as attorney-in-fact to sell
any or all of the reserved shares to cover any
additional sales charges if you do not fulfill your
undertaking. Signing the LOI application does not bind
you to purchase the full amount indicated, but you must
complete the intended purchase in accordance with the
terms of the LOI to obtain the reduced sales charge.
For more information on the LOI, please contact your
investment professional, the Distributor or Firstar.
Right of Accumulation for Class A Shares
The Fund's Right of Accumulation ("ROA") program
also allows for reduction of the Fund's initial sales
charge for Class A shares when multiple purchases of
Class A shares are combined by taking advantage of the
breakpoints in the sales charge schedule. Using the
ROA, you may purchase Class A shares at the sales
charge applicable to the sum of (i) the dollar amount
then being purchased, plus (ii) the current market
value (calculated at the maximum Offering Price) of all
Class A shares already held by you, your spouse and
your minor children or you and members of a "qualified
group." A "qualified group" is one that was formed at
least one year prior to the ROA purchase, has a purpose
other than buying Class A shares at a discount, has
more than 10 members, can arrange meetings between the
Distributor and group members, agrees to include Fund
literature in mailings to its members, agrees to
arrange for payroll deductions or other bulk
transmissions of investment to the Fund and meets other
uniform criteria that allow the Distributor to achieve
cost savings in distributing Class A shares of the
Fund. To receive the ROA, at the time of purchase, you
must give your investment professional, the Distributor
or Firstar, the Fund's transfer agent, sufficient
information to determine whether the purchase will
qualify for a reduced sales charge.
Automatic Investment Plan
You may make purchases of shares of the Fund
automatically on a regular basis provided you invest at
least $250 per transaction. You must meet the Fund's
minimum initial investment of $5,000 before the AIP may
be established. Under the AIP, your designated bank or
other financial institution debits a preauthorized
amount from your account each designated period and
applies the amount to the purchase of Fund shares. The
Fund requires 13 business days after receipt of your
request to initiate the AIP to verify your account
information. Generally, the AIP will begin on the next
transaction date scheduled by the Fund for the AIP
following this 13 business day period. AIP
transactions may be scheduled for any day. If the
purchase date is a weekend or a holiday, the purchase
will be made on the next business day. The AIP can be
implemented with any financial institution that is a
member of the Automated Clearing House. No service fee
is currently charged by the Fund for participation in
the AIP. You will receive a statement on a quarterly
basis showing the purchases made under the AIP. A $25
fee will be imposed by the Fund if for any reason the
transaction cannot be completed. You may also be
responsible for any losses suffered by the Fund as a
result. If you make a purchase pursuant to the AIP,
and request a redemption of such shares shortly
thereafter, the Fund may delay payment of the
redemption proceeds until the Fund verifies that the
proceeds used to purchase the shares were properly
debited from your designated bank or other financial
institution. You may adopt the AIP when you open an
account by completing the appropriate section of the
Purchase Application. The sales charge will be reduced
to 1% for those persons who adopt the AIP. You may
obtain an application to establish the AIP after an
account is opened by calling the Fund at 1-800-307-
4880. A signature guarantee is required. Changes to
bank information must be made in writing and signed by
all registered holders of the account with the
signatures guaranteed by a commercial bank or trust
company in the United States, a member firm of the NASD
or other eligible guarantor institution. A Notary
Public is not an acceptable guarantor.
<PAGE>
Individual Retirement Accounts
In addition to purchasing Fund shares as described
in the Prospectus under "Opening an Account,"
individuals may establish their own tax-sheltered
individual retirement accounts ("IRAs"). The Fund
offers two types of IRAs, a Traditional IRA and a Roth
IRA.
Traditional IRA. In a Traditional IRA, amounts
contributed to the IRA may be tax deductible at the
time of contribution depending on whether the investor
is an "active participant" in an employer-sponsored
retirement plan and the investor's income.
Distributions from a Traditional IRA will be taxed at
distribution except to the extent that the distribution
represents a return of the investor's own contributions
for which the investor did not claim (or was not
eligible to claim) a deduction. Distributions prior to
age 59-1/2 may be subject to an additional 10% tax
applicable to certain premature distributions.
Distributions must commence by April 1 following the
calendar year in which the investor attains age 70-1/2.
Failure to begin distributions by this date (or
distributions that do not equal certain minimum
thresholds) may result in adverse tax consequences.
Roth IRA. In a Roth IRA, amounts contributed to
the IRA are taxed at the time of contribution, but
distributions from the IRA are not subject to tax if
you have held the IRA for at least five years and the
distributions are on account of one of four specified
events, i.e., attainment of age 59-1/2, disability, the
purchase of a first home or death. Investors whose
income exceeds certain limits are ineligible to
contribute to a Roth IRA. Distributions that do not
satisfy the requirements for tax-free withdrawal are
subject to income taxes (and possibly penalty taxes) to
the extent that the distribution exceeds your
contributions to the IRA. The minimum distribution
rules applicable to Traditional IRAs do not apply
during the lifetime of the investor. Following the
death of the investor, certain minimum distribution
rules apply.
Simplified Employee Pension Plan. A Traditional
IRA may also be used in conjunction with a Simplified
Employee Pension Plan ("SEP-IRA"). A SEP-IRA is
established through execution of Form 5305-SEP together
with a Traditional IRA established for each eligible
employee. Generally, a SEP-IRA allows an employer
(including a self-employed individual) to purchase
shares with tax deductible contributions not exceeding
annually for any one participant 15% of compensation
(disregarding for this purpose compensation in excess
of $170,000 per year). The $170,000 compensation limit
is adjusted periodically for cost of living increases.
A number of special rules apply to SEP Plans, including
a requirement that contributions generally be made on
behalf of all employees of the employer (including for
this purpose a sole proprietorship or partnership) who
satisfy certain minimum participation requirements.
SIMPLE IRA. An IRA may also be used in connection
with a SIMPLE Plan established by the investor's
employer (or by a self-employed individual). When this
is done, the IRA is known as a SIMPLE IRA, although it
is similar to a Traditional IRA with the exceptions
described below. Under a SIMPLE Plan, the investor may
elect to have his or her employer make salary reduction
contributions of up to $6,000 per year to the SIMPLE
IRA. The $6,000 limit is adjusted periodically for
cost of living increases. In addition, the employer
will contribute certain amounts to the investor's
SIMPLE IRA, either as a matching contribution to those
participants who make salary reduction contributions or
as a non-elective contribution to all eligible
participants whether or not making salary reduction
contributions. A number of special rules apply to
SIMPLE Plans, including (1) a SIMPLE Plan generally is
available only to employers with fewer than 100
employees; (2) contributions must be made on behalf of
all employees of the employer (other than bargaining
unit employees) who satisfy certain minimum
participation requirements; (3) contributions are made
to a special SIMPLE IRA that is separate and apart from
the other IRAs of employees; (4) the distribution
excise tax (if otherwise applicable) is increased to
25% on withdrawals during the first two years of
participation in a SIMPLE IRA; and (5) amounts
withdrawn during the first two years of participation
may be rolled over tax-free only into another SIMPLE
IRA (and not to a Traditional IRA or to a Roth IRA). A
SIMPLE IRA is established by executing Form 5304-SIMPLE
together with an IRA established for each eligible
employee.
For Traditional and Roth IRAs, the maximum annual
contribution generally is equal to the lesser of $2,000
or 100% of your compensation (earned income). You may
also contribute to a Traditional IRA or Roth IRA on
behalf of your spouse provided that the individual has
sufficient compensation (earned income). Contributions
to a Traditional
<PAGE>
IRA reduce the allowable contributions
under a Roth IRA, and contributions to a Roth IRA
reduce the allowable contribution to a Traditional IRA.
Under current IRS regulations, all IRA applicants
must be furnished a disclosure statement containing
information specified by the IRS. Applicants generally
have the right to revoke their account within seven
days after receiving the disclosure statement and
obtain a full refund of their contributions. The
custodian may, in its discretion, hold the initial
contributions uninvested until the expiration of the
seven-day revocation period. The custodian does not
anticipate that it will exercise its discretion but
reserves the right to do so.
Redemptions for Corporate Accounts
Any redemption or transfer of ownership request
for corporate accounts will require the following
written documentation:
1. A written letter of instruction signed by the
required number of authorized officers, along with
their respective positions.
2. A certified Corporate Resolution that states the
date the Resolution was adopted and who is empowered to
act, transfer or sell assets on behalf of the
corporation.
3. If the Corporate Resolution is dated more than 60
days prior to the date of the transaction request, a
Certificate of Incumbency from the Corporate Secretary
which specifically states that the officer or officers
named in the resolutions have the authority to act on
the account. The Certificate of Incumbency must be
dated within 60 days of the requested transaction. If
the Corporate Resolution confers authority on officers
by title and not by name, the Certificate of Incumbency
must name the officer(s) and their title(s).
Systematic Withdrawal Plan
You may set up automatic withdrawals from your
Fund account at regular intervals. To begin
distributions, your account must have an initial
balance of $25,000 and at least $250 per payment must
be withdrawn. To establish the systematic withdrawal
plan ("SWP"), the appropriate section in your Purchase
Application must be completed. Redemptions will take
place on a monthly, quarterly, semi-annual or annual
basis (or the following business day) as indicated on
your Purchase Application. The amount or frequency of
withdrawal payments may be varied or temporarily
discontinued by calling 1-800-432-4741. Depending upon
the size of the account and the withdrawals requested
(and fluctuations in the net asset value of the shares
redeemed), redemptions for the purpose of satisfying
such withdrawals may reduce or even exhaust your
account. If the amount remaining in your account is
not sufficient to meet a plan payment, the remaining
amount will be redeemed and the SWP will be terminated.
Pricing of Shares
Shares of the Fund are offered and sold on a
continuous basis at the Offering Price, which is the
sum of the net asset value per share (next computed
following receipt of a purchase request in good order
by a dealer, the Distributor or Firstar, the Fund's
transfer agent, as the case may be) and the applicable
sales charge. The Class A sales charge may be waived
for certain investors. For more information, please
see "Opening an Account" in the Prospectus.
The net asset value per share for each class is
determined as of the close of regular trading
(generally 4:00 p.m. Eastern Time) on each day the New
York Stock Exchange (the "Exchange") is open for
business. Purchase orders and redemption requests
received in good order on a day the Exchange 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 Exchange will be valued as of the close
of trading on the next day the Exchange is open. The
Fund is not required to calculate its net asset value
on days during which the Fund receives no orders to
purchase or redeem shares. Net asset value per share
for each class is calculated by taking the fair value
of the total assets per class, including interest or
dividends accrued, but not yet collected, less all
<PAGE>
liabilities, and dividing by the total number of shares
outstanding in that class. 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. 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. 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 or its delegate. The Board of
Directors has approved the use of pricing services to
assist the Fund in the determination of net asset
value. All money market instruments with maturities
less than 60 days will be valued on an amortized cost
basis.
REDEMPTION IN KIND
The Fund has filed a Notification under Rule 18f-1
under the 1940 Act, pursuant to which it has undertaken
to pay in cash all requests for redemption by any
shareholder of record, limited in amount with respect
to each shareholder during any 90-day period to the
lesser amount of (i) $250,000, or (ii) 1% of the net
asset value of the class of shares of the Fund being
redeemed, valued at the beginning of such election
period. The Fund intends to pay redemption proceeds in
excess of such lesser amount in cash, but reserves the
right to pay such excess amount in kind, if it is
deemed to be in the best interest of the Fund to do so.
If you receive an in kind distribution you will likely
incur a brokerage charge on the disposition of such
securities through a securities dealer.
TAXATION OF THE FUND
The Fund intends to qualify annually as a
"regulated investment company" under Subchapter M of
the Code, and, if so qualified will not be liable for
federal income taxes to the extent earnings are
distributed to shareholders on a timely basis. In the
event the Fund fails to qualify as a "regulated
investment company," it will be treated as a regular
corporation for federal income tax purposes.
Accordingly, the Fund would be subject to federal
income taxes and any distributions that it makes would
be taxable and non-deductible by the Fund. This would
increase the cost of investing in the Fund for
shareholders and would make it more economical for
shareholders to invest directly in securities held by
the Fund instead of investing indirectly in such
securities through the Fund. The Fund's active trading
approach may increase the amount of capital gains tax
paid by Fund shareholders.
PERFORMANCE INFORMATION
The Fund's historical performance or return may be
shown in the form of various performance figures,
including average annual total return, total return,
and cumulative total return. The Fund's performance
figures are based upon historical results and are not
necessarily representative of future performance.
Factors affecting the Fund's performance include
general market conditions, operating expenses,
investment management and the imposition of sales
charges. Any additional fees charged by a broker-
dealer or other financial intermediary would reduce the
returns described in this section.
<PAGE>
Total Return
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 class of shares 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
therefore represent the aggregate percentage or dollar
value change over the period.
The average annual total return of each class of
shares is computed by finding the average annual
compounded rates of return over the periods that would
equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1+T)n = ERV
P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a
hypothetical $1,000 payment made at
the beginning of the stated periods at
the end of the stated periods.
Performance for a specific period is calculated by
first taking an investment (assumed to be $1,000)
("initial investment") in a class of shares on the
first day of the period and computing the "ending
value" of that investment at the end of the period.
The total return percentage is then determined by
subtracting the initial investment from the ending
value and dividing the remainder by the initial
investment and expressing the result as a percentage.
This calculation reflects the deduction of the maximum
5.25% initial sales charge applicable to Class A shares
and the 1.00% initial sales charge applicable to Class
C shares. In addition, this calculation assumes that
all income and capital gains dividends paid by the Fund
have been reinvested at the Fund's net asset value on
the reinvestment dates during the period. Total return
may also be shown as the increased dollar value of the
hypothetical investment over the period.
Cumulative total return represents the simple
change in value of an investment over a stated period
and may be quoted as a percentage or as a dollar
amount. Total returns may be broken down into their
components of income and capital (including capital
gains and changes in share price) in order to
illustrate the relationship between these factors and
their contributions to total return.
The average annual total returns for the Class A
shares of the Fund for the fiscal year ended October
31, 1999 and since inception (December 31, 1997) were
131.51% and 93.04%, respectively. The total return for
the Class C shares of the Fund for the period from
August 5, 1999 to October 31, 1999 was 37.08%.
Comparisons
From time to time, in marketing and other Fund
literature, the Fund's performance may be compared to
the performance of other mutual funds in general or to
the performance of particular types of mutual funds
with similar investment goals, as tracked by
independent organizations. Among these organizations,
Lipper Analytical Services, Inc. ("Lipper"), a widely
used independent research firm which ranks mutual funds
by overall performance, investment objectives, and
assets, may be cited. Lipper performance figures are
based on changes in net asset value, with all income
and capital gains dividends reinvested. The Fund will
be compared to Lipper's appropriate fund category, that
is, by fund objective and portfolio holdings.
The Fund's performance may also be compared to the
performance of other mutual funds by Morningstar, Inc.
("Morningstar"), which ranks funds on the basis of
historical risk and total return. Morningstar's
rankings range from five stars (highest) to one star
(lowest) and represent Morningstar's assessment of the
historical risk level and total
<PAGE>
return of a fund as a weighted average for 3, 5, and 10
year periods. Rankings are not absolute or necessarily
predictive of future performance.
Evaluations of the Fund's performance made by
independent sources may also be used in advertisements
concerning the Fund, including reprints of or
selections from, editorials or articles about the Fund.
Sources for Fund performance and articles about the
Fund may include publications such as Money, Forbes,
Kiplinger's, Financial World, Business Week, U.S. News
and World Report, the Wall Street Journal, Barron's,
and a variety of investment newsletters.
The Fund may compare its performance to a wide
variety of indices and measures of inflation. There
are differences and similarities between the
investments that the Fund may purchase and the
investments measured by these indices.
The Fund's performance may also be discussed
during television interviews of Advisor personnel
conducted by news organizations to be broadcast in the
United States and elsewhere.
Investors may want to compare the Fund's
performance to that of certificates of deposit offered
by banks and other depository institutions.
Certificates of deposit may offer fixed or variable
interest rates and principal is guaranteed and may be
insured. Withdrawal of the deposits prior to maturity
normally will be subject to a penalty. Rates offered
by banks and other depository institutions are subject
to change at any time specified by the issuing
institution.
Investors may also want to compare the Fund's
performance to that of money market funds. Money
market fund yields will fluctuate and shares are not
insured, but share values usually remain stable.
INDEPENDENT AUDITORS
Ernst & Young LLP, 111 East Kilbourn Avenue,
Milwaukee, Wisconsin 53202, independent auditors for
the Fund, audit and report on the Fund's financial
statements.
FINANCIAL STATEMENTS
The following audited financial statements of the
Fund are incorporated herein by reference to the Fund's
Annual Report for the year ended October 31, 1999, as
filed with the Securities and Exchange Commission on
January 3, 2000:
(a) Statement of Assets and Liabilities as
of October 31, 1999.
(b) Statement of Operations for the year
ended October 31, 1999.
(c) Statement of Cash Flows for the year
ended October 31, 1999.
(d) Statement of Changes in Net Assets for
the year ended October 31, 1999 and the
period December 31, 1997 to October 31, 1998.
(e) Financial Highlights for the year ended
October 31, 1999 and the period December
31, 1997 to October 31, 1998 for Class A,
and for the period August 5, 1999 to
October 31, 1999 for Class C.
(f) Schedule of Investments as of October 31, 1999.
<PAGE>
(g) Notes to the Financial Statements.
(h) Report of Independent Auditors dated November 19, 1999.
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
(a.1) Registrant's Articles of Incorporation (1)
(a.2) Amendment to Registrant's Articles of Incorporation (2)
(a.3) Amendment to Registrant's Articles of
Incorporation (to create Class C shares)(3)
(b) Registrant's By-Laws (1)
(c) None
(d.1) Investment Advisory Agreement (2)
(d.2) Expense Cap/Reimbursement Agreement (4)
(d.3) Expense Cap/Reimbursement Agreement (to add Class C shares)(3)
(d.4) Amended Expense Cap/Reimbursement Agreement
(for Class A shares)(3)
(e.1) Distribution Agreement(3)
(e.2) Form of Dealer Agreement(3)
(f) None
(g) Custodian Servicing Agreement(3)
(h.1) Transfer Agent Servicing Agreement(3)
(h.2) Fund Administration Servicing Agreement(3)
(h.3) Fund Accounting Servicing Agreement(3)
(i) Opinion and Consent of Godfrey & Kahn, S.C. (5)
(j) Consent of Ernst & Young LLP
(k) None
(l) Subscription Agreement (5)
(m.1) Rule 12b-1 Distribution and Shareholder Servicing Plan (2)
(m.2) Form of 12b-1 Related Agreement (2)
(m.3) Rule 12b-1 Distribution and Shareholder
Servicing Plan, as amended November 30, 1998 (6)
<PAGE>
(m.4) Rule 12b-1 Distribution and Shareholder
Servicing Plan, as amended July 13, 1999 (for
Class A shares)(3)
(m.5) Form of Rule 12b-1 Related Agreement, as
amended (for Class A shares) (6)
(m.6) Form of Rule 12b-1 Related Agreement, as
amended (for Class A shares)(3)
(m.7) Rule 12b-1 Distribution and Shareholder
Servicing Plan (for Class C shares)(3)
(m.8) Form of 12b-1 Related Agreement (for
Class C shares)(3)
(n) Rule 18f-3 Multi-Class Plan(3)
(o) Reserved
(p) Code of Ethics(7)
(q) Powers of Attorney for Directors and Officers
(see signature page)
__________________
(1) Incorporated by reference to Registrant's Form
N-1A as filed with the Commission on October 31, 1997.
(2) Incorporated by reference to Registrant's Pre-
Effective Amendment No. 1 as filed with the
Commission on December 23, 1997.
(3) Incorporated by reference to Registrant's Post-
Effective Amendment No. 6 as filed with the
Commission on July 29, 2000.
(4) Incorporated by reference to Registrant's Post-
Effective Amendment No. 4 as filed with the
Commission on February 25, 1999.
(5) Incorporated by reference to Registrant's Pre-
Effective Amendment No. 2 as filed with the
Commission on December 30, 1997.
(6) Incorporated by reference to Registrant's Post-
Effective Amendment No. 2 as filed with the
Commission on November 30, 1998.
(7) To be filed in the next post-effective
amendment filed by Registrant after March 1, 2000.
Item 24. Persons Controlled by or under Common Control with Registrant
Registrant neither controls any person nor is
under common control with any other person.
Item 25. Indemnification
Article 6.4 of Registrant's Articles of
Incorporation provides as follows:
The Corporation shall indemnify (a) its Directors
and officers, whether serving the Corporation or at its
request any other entity, to the full extent required
by (i) Maryland law now or hereafter in force,
including the advance of expenses under the procedures
and to the full extent permitted by law, and (ii) the
Investment Company Act of 1940, as amended, and (b)
other employees and agents to such extent as shall be
authorized by the Board of Directors and be permitted
by law. The foregoing rights of indemnification shall
not be exclusive of any other rights to which those
seeking indemnification may be entitled. The Board of
Directors may take such action as is necessary to carry
out these indemnification provisions and is expressly
empowered to adopt, approve and amend from time to time
such
<PAGE>
resolutions or contracts implementing such
provisions or such further indemnification arrangements
as may be permitted by law.
Item 26. Business and Other Connections of Investment Advisor
Besides serving as investment advisor to private
accounts, the Advisor is not currently and has not
during the past two fiscal years engaged in any other
business, profession, vocation, or employment of a
substantial nature. Information regarding the
business, profession, vocation, or employment of a
substantial nature of Advisor's directors and officers
is hereby incorporated by reference from the
information contained under "Directors and Officers" in
the SAI.
Item 27. Principal Underwriters
(a) The Distributor also acts as distributor for
T. O. Richardson Trust, Kinetics Mutual
Funds, The Barrett Funds, The Simms Funds and
the Internet Index Fund.
(b) The principal business address of T. O.
Richardson Securities, Inc., the Registrant's
principal underwriter, is 2 Bridgewater Road,
Farmington, Connecticut 06032-2256. The
following information relates to each officer
and director of the Distributor:
Positions and Offices Position and Offices
with with
Name Underwriter Registrant
Samuel Bailey,Jr. President and a None
Director
Loyd Austine Crowe, Jr. Vice President and a
Director
Lloyd P. Griffiths Vice President and a
Director
(c)
Net
Underwriting Compensation
Name of Principal Discounts and on Redemption Brokerage Other
Underwriter Commissions and Repurchases Commissions Compensation
T. O. Richardson
Securities, Inc. $6,450* None None None
* Represents the amount retained by the
Distributor under the Corporation's Rule 12b-1
Plans.
Item 28. Location of Accounts and Records
All accounts, books or other documents required to
be maintained by Section 31(a) of the Investment
Company Act of 1940, as amended, and the rules
promulgated thereunder are in the possession of Target
Holdings Corporation, doing business as Target
Investors, Inc., Registrant's investment advisor, at
Registrant's corporate offices, except (1) records held
and maintained by Firstar Bank, N.A., 425 Walnut
Street, Cincinnati, Ohio 45202, relating to its
function as custodian and (2) records held and
maintained by Firstar Mutual Fund Services, LLC, Third
Floor, 615 East Michigan Street, Milwaukee, Wisconsin
53202, relating to its function as transfer agent,
administrator and fund accountant.
Item 29. Management Services
All management-related service contracts entered
into by Registrant are discussed in Parts A and B of
this Registration Statement.
<PAGE>
Item 30. Undertakings.
Registrant undertakes to call a meeting of
shareholders, if requested to do so by the holders of
at least 10% of the Registrant's outstanding shares,
for the purpose of voting upon the question of removal
of a director or directors. Registrant also undertakes
to assist in communications with other shareholders as
required by Section 16(c) of the 1940 Act.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act
of 1933 and the Investment Company Act of 1940, the
Registrant certifies that it meets all of the
requirements for effectiveness under Rule 485(b) under
the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 7 to the Registration
Statement on Form N-1A to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City
of Wilton and State of Connecticut on the 26th day of
January, 2000.
GRAND PRIX FUNDS, INC. (Registrant)
By: /s/ Robert Zuccaro
----------------------------------
Robert Zuccaro
President
Each person whose signature appears below
constitutes and appoints Robert Zuccaro, his true and
lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to
sign any and all post-effective amendments to this
Registration Statement and to file the same, with all
exhibits thereto, and any other documents in connection
therewith, with the Securities and Exchange Commission
and any other regulatory body, granting unto said
attorney-in-fact and agent, full power and authority to
do and perform each and every act and thing requisite
and necessary to be done, as fully to all intents and
purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact
and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act
of 1933, this Post-Effective Amendment No. 7 to the
Registration Statement on Form N-1A has been signed
below by the following persons in the capacities and on
the date(s) indicated.
Name Title Date
/s/ Robert Zuccaro President and a Director January 26, 2000
- -------------------
Robert Zuccaro
/s/ Mary Jane Boyle Vice President, Treasurer January 26, 2000
- ------------------- and a Director
Mary Jane Boyle
/s/ Edward F. Ronan, Jr. Director January 26, 2000
- ------------------------
Edward F. Ronan, Jr.
/s/ Dennis K. Waldman Director January 26, 2000
- ---------------------
Dennis K. Waldman
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
(a.1) Registrant's Articles of
Incorporation (previously filed as Exhibit 1
to Registrant's Form N-1A, File Nos. 333-39133 and 811-8461)
(a.2) Amendment to Registrant's Articles
of Incorporation (previously filed as Exhibit
1.2 to Registrant's Pre-Effective Amendment
No. 1 to Registrant's Form N-1A, File Nos.
333-39133 and 811-8461)
(a.3) Amendment to Registrant's Articles
of Incorporation (to create Class C shares)
(previously filed as Exhibit a.3 to
Registrant's Post-Effective Amendment No. 6
to Registrant's Form N-1A, File Nos. 333-39133 and 811-8461)
(b) Registrant's By-Laws (previously filed
as Exhibit 2 to Registrant's Form N-1A, File
Nos. 333-39133 and 811-8461)
(c) None
(d.1) Investment Advisory Agreement
(previously filed as Exhibit 5 to
Registrant's Pre-Effective Amendment No. 1 to
Registrant's Form N-1A, File Nos. 333-39133
and 811-8461)
(d.2) Expense Cap/Reimbursement Agreement
(previously filed as Exhibit d.2 to
Registrant's Post-Effective Amendment No. 4
to Registrant's Form N-1A, File Nos. 333-39133 and 811-8461)
(d.3) Expense Cap/Reimbursement Agreement
(to add Class C shares) (previously filed as
Exhibit d.3 to Registrant's Post-Effective
Amendment No. 6 to Registrant's Form N-1A,
File Nos. 333-39133 and 811-8461)
(d.4) Amended Expense Cap/Reimbursement
Agreement (for Class A shares) (previously
filed as Exhibit d.4 to Registrant's Post-
Effective Amendment No. 6 to Registrant's
Form N-1A, File Nos. 333-39133 and 811-8461)
(e.1) Distribution Agreement (previously
filed as Exhibit e.1 to Registrant's Post-
Effective Amendment No. 6 to Registrant's
Form N-1A, File Nos. 333-39133 and 811-8461)
(e.2) Form of Dealer Agreement
(previously filed as Exhibit e.2 to
Registrant's Post-Effective Amendment No. 6
to Registrant's Form N-1A, File Nos. 333-39133 and 811-8461)
(f) None
(g) Custodian Servicing Agreement
(previously filed as Exhibit g to
Registrant's Post-Effective Amendment No. 6
to Registrant's Form N-1A, File Nos. 333-39133 and 811-8461)
(h.1) Transfer Agent Servicing Agreement
(previously filed as Exhibit h.1 to
Registrant's Post-Effective Amendment No. 6
to Registrant's Form N-1A, File Nos. 333- 39133 and 811-8461)
(h.2) Fund Administration Servicing
Agreement (previously filed as Exhibit h.2 to
Registrant's Post-Effective Amendment No. 6
to Registrant's Form N-1A, File Nos. 333-39133 and 811-8461)
(h.3) Fund Accounting Servicing Agreement
(previously filed as Exhibit h.3 to
Registrant's Post-Effective Amendment No. 6
to Registrant's Form N-1A, File Nos. 333-39133 and 811-8461)
<PAGE>
(i) Opinion and Consent of Godfrey & Kahn, S.C.
(previously filed as Exhibit 10 to
Registrant's Pre-Effective Amendment No. 1 to
Registrant's Form N-1A, File Nos. 333-39133 and 811-8461)
(j) Consent of Ernst & Young LLP
(k) None
(l) Subscription Agreement (previously filed
as Exhibit 13 to Registrant's Pre-Effective
Amendment No. 2 to Registrant's Form N-1A,
File Nos. 333-39133 and 811-8461)
(m.1) Rule 12b-1 Distribution and
Shareholder Servicing Plan (previously filed
as Exhibit 15.1 to Registrant's Pre-Effective
Amendment No. 1 to Registrant's Form N-1A,
File Nos. 333-39133 and 811-8461)
(m.2) Form of 12b-1 Related Agreement
(previously filed as Exhibit 15.2 to
Registrant's Pre-Effective Amendment No. 1 to
Registrant's Form N-1A, File Nos. 333-39133
and 811-8461)
(m.3) Rule 12b-1 Distribution and
Shareholder Servicing Plan, as amended
November 30, 1998 (previously filed as
Exhibit m.3 to Registrant's Post-Effective
Amendment No. 2 to Registrant's Form N-1A,
File Nos. 333-39133 and 811-8461)
(m.4) Rule 12b-1 Distribution and
Shareholder Servicing Plan, as amended July
13, 1999 (for Class A shares) (previously
filed as Exhibit m.4 to Registrant's Post-
Effective Amendment No. 6 to Registrant's
Form N-1A, File Nos. 333-39133 and 811-8461)
(m.5) Form of Rule 12b-1 Related
Agreement, as amended (for Class A shares)
(previously filed as Exhibit m.4 to
Registrant's Post-Effective Amendment No. 2
to Registrant's Form N-1A, File Nos. 333-39133 and 811-8461)
(m.6) Form of Rule 12b-1 Related
Agreement, as amended (for Class A shares)
(previously filed as Exhibit m.6 to
Registrant's Post-Effective Amendment No. 6
to Registrant's Form N-1A, File Nos. 333-39133 and 811-8461)
(m.7) Rule 12b-1 Distribution and
Shareholder Servicing Plan (for Class C
shares) (previously filed as Exhibit m.7 to
Registrant's Post-Effective Amendment No. 6
to Registrant's Form N-1A, File Nos. 333-39133 and 811-8461)
(m.8) Form of 12b-1 Related Agreement
(for Class C shares) (previously filed as
Exhibit m.8 to Registrant's Post-Effective
Amendment No. 6 to Registrant's Form N-1A,
File Nos. 333-39133 and 811-8461)
(n) Rule 18f-3 Multi-Class Plan (previously
filed as Exhibit o to Registrant's Post-
Effective Amendment No. 6 to Registrant's
Form N-1A, File Nos. 333-39133 and 811-8461)
(o) Reserved
(p) Code of Ethics (to be filed in the next
post-effective amendment filed by Registrant
after March 1, 2000)
(q) Powers of Attorney for Directors and Officers
(see signature page)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the
captions `Financial Highlights," "Independent Auditors"
and "Financial Statements" and to the use of our report
dated November 19, 1999 in the Registration Statement
(Form N-1A) of the Grand Prix Fund and its
incorporation by reference in the related Prospectus
and Statement of Additional Information filed with the
Securities and Exchange commission in this Post-
Effective Amendment No. 7 to the Registration Statement
under the Securities Act of 1933 (File No. 333-39133)
and in this Amendment No. 9 to the Registration
Statement under the Investment Company Act of 1940
(File No. 811-8461).
/s/ Ernst & Young LLP
Milwaukee, Wisconsin
January 26, 2000
