- --------------------------------------------------------------------------------
X.COM FUNDS
X.COM PREMIER S&P 500 FUND
X.COM U.S.A. BOND FUND
X.COM U.S.A. MONEY MARKET FUND
- --------------------------------------------------------------------------------
PROSPECTUS
- ----------
November 18, 1999
(as supplemented December 15, 1999)
- --------------------------------------------------------------------------------
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this Prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
INTRODUCTION...................................................................3
ABOUT EACH OF THE FUNDS........................................................4
THE X.COM PREMIER S&P 500 FUND...........................................4
THE X.COM U.S.A. BOND FUND...............................................6
THE X.COM U.S.A. MONEY MARKET FUND.......................................7
PERFORMANCE INFORMATION........................................................9
FEES AND EXPENSES.............................................................11
MORE ABOUT THE FUND'S INVESTMENT STRATEGIES AND RISKS.........................13
FUND MANAGEMENT...............................................................15
THE FUNDS' STRUCTURE..........................................................16
PRICING OF FUND SHARES........................................................17
HOW TO BUY AND SELL SHARES OF THE X.COM FUNDS.................................18
DIVIDENDS AND OTHER DISTRIBUTIONS.............................................21
TAX CONSEQUENCES..............................................................22
<PAGE>
INTRODUCTION
Who Can Invest in the Fund?
The Funds are for on-line investors that are customers of X.com Corporation
("X.com") and First Western National Bank (the "Bank"), which is under contract
to provide X.com customers with various banking and financial services. The Bank
is a member of the Federal Deposit Insurance Corporation ("FDIC"). To purchase
shares of the Fund, you must open an account with the Bank. Simply follow the
instructions on the X.com website, www.X.com. You will also need to complete an
X.com Account Application and follow the instructions provided under "How to Buy
and Sell Shares" later in this Prospectus.
You are also required to consent to receive all information about the Fund
electronically, both to open an account and during the time you own shares of
the Fund. If you revoke your consent to receive this information electronically,
fail to maintain an e-mail account, or close your account, the Funds may, to the
extent permitted by the federal securities laws, redeem your shares, and will,
in any event, prohibit additional investments in the Funds, including the
reinvestment of dividends.(*)
What is a Master/Feeder Fund Structure?
The X.com Funds described in this Prospectus are feeder funds that invest all of
their assets in a corresponding master fund. A master/feeder fund structure is a
two-tier fund structure made up of a master portfolio that invests in
securities, and a feeder fund that invests in the master portfolio. Barclays
Global Fund Advisors ("BGFA") serves as the investment adviser to each of the
master funds. BGFA is a subsidiary of Barclays Global Investors, N.A., the
world's largest institutional investment adviser. As of August 31, 1999, BGFA
and its affiliates provided investment advisory services for over $681.4 billion
of assets.
By employing the master/feeder structure for the Funds, X.com is able to offer
investors not only leading-edge online products and services, but also the
economies of scale and experience of an established mutual fund adviser like
BGFA.
What are Index Funds?
Index funds are often described as "passively managed" in that they seek to
match the performance of a specific benchmark index by holding either all the
securities that make up this index or a highly representative sample. In the
case of the X.com Premier S&P 500 Fund that benchmark is the Standard & Poor's
500 Composite Stock Price Index (the "S&P 500 Index"). For the X.com U.S.A. Bond
Fund the benchmark is the Lehman Brothers Government/Corporate Bond Index (the
"LB Bond Index").
_______________
* The staff of the Securities and Exchange Commission (the "Staff") has
informally indicated its view that the Funds may not involuntarily redeem
your shares if you revoke your consent to receive shareholder documents
electronically or fail to maintain an e-mail account. However, should the
Staff's position on this issue change, the Funds intend to involuntarily
redeem your shares under such circumstances.
<PAGE>
ABOUT EACH OF THE FUNDS
This portion of the Prospectus provides a description of each Fund's investment
objective, principal investment strategies and risks. Of course, there can be no
assurance that any Fund will achieve its investment objective.
Because the investment characteristics and investment risks of the Funds match
those of each Funds' corresponding Master Portfolio, the discussion of each
Fund's investment objectives, strategies and risks also includes a description
of the investment characteristics and risks associated with the investments of
the corresponding Master Portfolios. Each Fund's performance will correspond
directly to the performance of the related Portfolio.
Please note that your investments in the Funds are not deposits of the Bank or
any other bank or financial institution, and are not insured by the Federal
Deposit Insurance Corporation ("FDIC") or any other government agency. Because
each Fund is subject to investment risks, you may lose money if you invest in
the Funds.
The X.com Premier S&P 500 Fund
Investment Objective
The X.com Premier S&P 500 Fund (the "Premier S&P 500 Fund")* seeks to
approximate as closely as practicable, before fees and expenses, the
capitalization-weighted total rate of return of the S&P 500 Index.(**) The S&P
500 Index, a widely recognized benchmark for U.S. stocks, currently represents
about 75% of the market capitalization of all publicly traded common stocks in
the United States. The S&P 500 Index includes 500 established companies
representing different sectors of the U.S. economy (including industrial,
utilities, financial, and transportation) selected by Standard & Poor's.
"Capitalization-weighted total rate of return" means that each stock in the
index contributes to the index in the same proportion as the value of its
shares. Thus, if the shares of Company A are worth twice as much as the shares
of Company B, Company A's return will count twice as much as Company B's in
calculating the index's overall return.
_______________
* The Premier S&P 500 Fund is a "premier" fund because, because it provides
low-cost access to the S&P 500 Index. Initially, X.com Asset Management,
Inc., the Fund's adviser, will not charge a fee for the services it
provides, and it will also reimburse the Premier S&P 500 Fund for all
operating expenses incurred at the master fund levels. In addition, X.com
Asset Management, Inc., will pay the Premier S&P 500 Fund one additional
basis point.
** "Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500(R),"
and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been
licensed by X.com Asset Management, Inc. for use in connection with the
Premier S&P 500 Fund. The Premier S&P 500 Fund is not sponsored, endorsed,
sold, or promoted by Standard & Poor's and Standard & Poor's makes no
representation regarding the advisability of investing in the Premier S&P
500 Fund.
<PAGE>
Principal Strategies
The Premier S&P 500 Fund does not invest directly in a portfolio of securities.
Instead, it seeks to achieve its investment objective by investing all of its
assets in the S&P 500 Index Master Portfolio ("S&P 500 Portfolio"), a series of
Master Investment Portfolio ("MIP"), a registered open-end management investment
company issuing individual interests in multiple series (each a "Portfolio").
The S&P 500 Portfolio seeks to provide investment results that correspond,
before fees and expenses, to the total return of the publicly traded common
stocks, in the aggregate, as represented by the S&P 500 Index. To do so, the S&P
500 Portfolio invests substantially all of its assets in the same stocks and in
substantially the same percentages as the S&P 500 Index.
Under normal market conditions, the S&P 500 Portfolio will invest at least 90%
of its assets in the stocks making up the S&P 500 Index. Over time, the S&P 500
Portfolio attempts to achieve, in both rising and falling markets, a correlation
of at least 95% between the capitalization-weighted total return of its assets
and that of the S&P 500 Index. A correlation of 100% would mean the total return
of the S&P 500 Portfolio's assets would increase and decrease exactly the same
as the S&P 500 Index.
Principal Risks
Market Risk: The value of an investment in the Premier S&P 500 Fund depends to a
great extent upon changes in market conditions. Equity securities have greater
price volatility than fixed-income securities and the value of the equity
securities held by the Premier S&P 500 Fund (through its investments in the S&P
500 Portfolio) will fluctuate as the market price of those securities rise and
fall. The performance per share of the Premier S&P 500 Fund will change daily
based on many factors, including the volatility of the securities in the S&P 500
Index, national and international economic conditions, and general market
conditions.
Index-Fund Risk: The Premier S&P 500 Fund is not actively managed through
traditional methods of stock selection and invests (through its investments in
the S&P 500 Portfolio) in the stocks included in the S&P 500 Index regardless of
their investment merits. Except to a limited extent, the Premier S&P 500 Fund
cannot modify its investment strategies to respond to changes in the economy and
may be particularly susceptible to a general decline in the U.S. stock market
segment relating to the S&P 500 Index.
The Premier S&P 500 Fund's ability to track the performance of the S&P 500 Index
may also be affected by, among other things, transaction costs, the fees and
expenses of the Premier S&P 500 Fund and the S&P 500 Portfolio, changes in the
composition of the S&P 500 Index or the assets of the S&P 500 Portfolio, and the
timing, frequency and amount of investor purchases and redemptions of both the
Premier S&P 500 Fund and S&P 500 Portfolio. Because the S&P 500 Portfolio seeks
to track the performance of the S&P 500 Index, the S&P 500 Portfolio will not
attempt to judge the merits of any particular stock as an investment.
In addition, the S&P 500 Portfolio will need to maintain cash balances to pay
redemptions and expenses, which may affect the overall performance of the
Premier S&P 500 Fund.
<PAGE>
The X.com U.S.A. Bond Fund
Investment Objective
The X.com U.S.A. Bond Fund (the "U.S.A. Bond Fund") seeks to approximate as
closely as practicable, before fees and expenses, the total rate of return of
the U.S. market for issued and outstanding U.S. government and high-grade
corporate bonds as measured by the LB Bond Index. The LB Bond Index includes
approximately 6,500 fixed-income securities, including U.S. Government
securities and investment grade corporate bonds, each with an outstanding market
value of at least $25 million and remaining maturity of greater than one year.
Principal Strategies
The U.S.A. Bond Fund does not invest directly in a portfolio of securities.
Instead, it seeks to achieve its investment objective by investing all of its
assets in the Bond Index Master Portfolio ("Bond Portfolio"), a series of MIP.
The Bond Portfolio seeks to replicate the total return of the LB Bond Index. To
do so, the Bond Portfolio invests substantially all of its assets in a
representative sample of the securities that comprise the LB Bond Index, or
securities or other instruments that seek to approximate the performance and
investment characteristics of the LB Bond Index. Generally, at least 65% of the
Bond Portfolio's total assets will be invested in fixed-income securities.
Securities are selected for investment by the Bond Portfolio based on a number
of factors, including, among others, the relative proportion of such securities
in the LB Bond Index, credit quality, issuer sector, maturity structure, coupon
rates, and callability.
Under normal market conditions, the Bond Portfolio invests at least 90% of its
total assets in securities that are believed to represent the investment
characteristics of the LB Bond Index. The Bond Portfolio attempts to achieve, in
both rising and falling markets, a correlation of at least 95% between the total
return of its net assets and that of the LB Bond Index. A correlation of 100%
would mean the total return of the Bond Portfolio's assets would increase and
decrease exactly the same as the LB Bond Index.
Principal Risks
Index Fund Risk: The U.S.A. Bond Fund is not actively managed through
traditional methods of securities selection and invests (through its investment
in the Bond Portfolio) in the fixed-income securities included in the LB Bond
Index regardless of their investment merit. Except to a limited extent, the
U.S.A. Bond Fund cannot modify its investment strategies to respond to changes
in the economy and may be particularly susceptible to a general decline in the
U.S. fixed-income market segment relating to the LB Bond Index.
The investment adviser of the Bond Portfolio seeks to replicate the performance
of the LB Bond Index by investing in a representative sample of the securities
that comprise the LB Bond Index. This representative sample, however, may not
match the overall performance of the LB Bond Index.
<PAGE>
The U.S.A. Bond Fund's ability to track the performance of the LB Bond Index may
be affected by, among other things, transaction costs, the fees and expenses of
the U.S.A. Bond Fund and the Bond Portfolio, the manner in which the total
return of the LB Bond Index is calculated, the size of the Bond Portfolio, and
the timing, frequency and amount of investor purchases and redemptions of both
the U.S.A. Bond Fund and the Bond Portfolio. Because the Bond Portfolio seeks to
track the performance of the LB Bond Index, the Bond Portfolio will not attempt
to judge the merits of any particular fixed income security included in the LB
Bond Index as an investment.
Interest Rate Risk: The debt instruments in which the U.S.A. Bond Fund (through
its investments in the Bond Portfolio) invests are subject to interest rate
risk. Interest rate risk is the risk that when interest rates rise the value of
the debt instruments in which the Bond Portfolio invests will go down. When
interest rates fall, the value of the Bond Portfolio's investments may rise.
Credit Risk: Credit risk is the risk that issuers of the debt instruments in
which the U.S.A. Bond Fund (through its investments in the Bond Portfolio) may
invest may default on the payment of principal and/or interest. The U.S.A. Bond
Fund could lose money if the issuer of a fixed-income security owned by the Bond
Portfolio is unable or unwilling to meet its financial obligations by making
timely principal and/or interest payments. Investment-grade securities that are
rated BBB by S&P or an equivalent rating by any other nationally recognized
statistical rating organization ("NRSRO") are somewhat riskier than higher rated
obligations because they are regarded as having only an adequate capacity to pay
principal and interest, are considered to lack outstanding investment
characteristics, and may be speculative.
Market Risk: The market prices of securities held by the Bond Portfolio may fall
in response to national and international economic or general market conditions.
In addition, the Bond Portfolio will need to maintain cash balances to pay
redemptions and expenses, which may affect the overall performance of the U.S.A.
Bond Fund.
<PAGE>
The X.com U.S.A. Money Market Fund
Investment Objectives/Goals
The X.com U.S.A. Money Market Fund (the "U.S.A. Money Market Fund") seeks to
provide shareholders of the Fund with a high level of current income, while
preserving capital and liquidity, by investing in high-quality short-term
investments.
Principal Strategies
The U.S.A. Money Market Fund seeks to achieve this investment objective by
investing all of its assets in the Money Market Portfolio ("Money Market
Portfolio"), a series of MIP, which, in turn, invests its assets in U.S.
dollar-denominated, high-quality money market instruments with maturities of 397
days or less, and a dollar-weighted average portfolio maturity of 90 days or
less. The Money Market Portfolio investments include obligations of the U.S.
Government, its agencies and instrumentalities (including government-sponsored
enterprises), and high quality debt obligations such as obligations of domestic
and foreign banks, commercial paper, corporate notes and repurchase agreements
that represent minimal credit risk.
"High quality" investments are investments rated in the top two rating
categories by the requisite NRSRO or, if unrated, determined to be of comparable
quality to such rated securities by BGFA, the investment adviser of the Money
Market Portfolio, under guidelines adopted by the Fund's Board of Trustees and
the Money Market Portfolio's Board of Trustees.
Principal Risks
Although the U.S.A. Money Market Fund seeks to preserve the value of your
investment at $1 per share, the Fund can offer no guarantee that it will be able
to do so. It is possible to lose money by investing in the Fund.
Interest Rate Risk: The debt instruments in which the U.S.A. Money Market Fund
invests (through its investments in the Money Market Portfolio) are subject to
interest rate risk. Interest rate risk is the risk that when interest rates rise
the value of the debt instruments in which the Money Market Portfolio invests
will go down. Conversely, if interest rates fall, the value of the Money Market
Portfolio's investments may rise.
Credit Risk: Credit risk is the risk that issuers of the debt instruments in
which the U.S.A. Money Market Fund (through its investments in the Money Market
Portfolio) invests may default on the payment of principal and/or interest. The
U.S.A. Money Market Fund could be unable to maintain a stable net asset value of
$1.00 per share and the Fund could lose money if the issuer of a fixed-income
security owned by the Money Market Portfolio is unable or unwilling to meet its
financial obligations.
<PAGE>
PERFORMANCE INFORMATION
The bar charts on this page show the annual returns of each of the Funds and how
their performance has varied from year to year.(*) The average annual return
tables compare each Fund's average annual return with the return of a
corresponding index for one and five years and since inception. How the Funds
have performed in the past is not necessarily an indication of how the Funds
will perform in the future.
Premier S&P 500 Fund
Premier S&P 500 Fund Average Annual Total Returns (As of December 31, 1998)
- --------------------- ------------- ------------------- ------------------------
One Year Five Years Since July 2, 1993
- --------------------- ------------- ------------------- ------------------------
Premier S&P 500 Fund 28.56% 23.84% 22.71%
S&P 500 Index 28.58% 24.06% 22.95%
- ------------------------------------- --------------------- --------------------
________________
* The Funds did not offer shares to the public prior to November 18, 1999.
Each Fund's annual returns are based on the annual returns of each
corresponding Master Portfolio, but have not been adjusted to account for
expenses payable at the Fund level. As a result, the annual returns for the
U.S.A. Bond Fund and U.S.A. Money Market Fund would have been lower than
those shown above because the U.S.A. Bond Fund and U.S.A. Money Market Fund
have higher expenses than their corresponding portfolios. In contrast,
because the Adviser does not charge a fee for its services, reimburses the
Premier S&P 500 Fund for all fees incurred at the Master Portfolio level,
and pays to the Premier S&P 500 Fund an additional 0.01% of the Premier S&P
500 Fund's average daily net assets, the annual returns for the Premier S&P
500 Fund would have been higher than those shown above because it has lower
expenses than the S&P 500 Portfolio.
<PAGE>
U.S.A. Bond Fund
U.S.A. Bond Fund Portfolio Average Annual Total Returns (As of December 31,
1998)
- ------------------- --------------- -------------------- -----------------------
One Year Five Years Since July 2, 1993
- ------------------- --------------- -------------------- -----------------------
U.S.A. Bond Fund 9.49% 7.03% 6.92%
- ------------------- --------------- -------------------- -----------------------
LB Bond Index 9.47% 7.30% 7.15%
- ------------------- --------------- -------------------- -----------------------
U.S.A. Money Market Fund
- --------------------------------------------------------------------------------
U.S.A. Money Market Fund Average Annual Total Returns (As of December 31, 1998)
- --------------------------------------------------------------------------------
One Year Five Years Since July 2, 1993
- --------------------------- ------------- ------------------- ------------------
U.S.A. Money Market Fund 5.61% 5.40% 5.19%
- --------------------------- ------------- ------------------- ------------------
U.S. Treasury Bills 5.31% 5.32% 4.93%
(3-month)
- --------------------------- ------------- ------------------- ------------------
<PAGE>
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Funds.
- --------------------------------------------------------------------------------
Premier U.S.A. Money
Shareholder Fees S&P 500 U.S.A. Bond Market
(fees paid directly from your investment) Fund Fund Fund
----- ---- ------
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed
on Purchases None None None
Maximum Deferred Sales Charge (Load) None None None
Maximum Sales Charge (Load) Imposed
in Reinvested Dividends and other
Distributions None None None
Redemption Fee
(within 90 days of purchase) None None None
Maximum Account Fee None None None
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses(1)
(expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
Management Fees 0.28%(2) 0.40%(2) 0.60%(2)
Distribution (12b-1) Fees None None None
Other Expenses 0.00% 0.00% 0.00%
Total Annual Fund Operating Expenses 0.28% 0.40% 0.60%
Fee Waiver and Expense Reimbursement(3) 0.28% 0.21% 0.10%
Net Operating Expenses 0.00%(4) 0.19% 0.50%
_____________
1 The cost reflects the expenses at both the Fund and the Portfolio levels.
2 Management fees include a fee equal to 0.05%, 0.08%, and 0.10% of the daily
net assets payable at the Portfolio level to the investment adviser for the
S&P 500 Portfolio, Bond Portfolio, and Money Market Portfolio,
respectively. Management fees also include a "unified" fee equal to 0.23%,
0.32% and 0.50% payable by the Premier S&P 500 Fund, U.S.A. Bond Fund, and
U.S.A. Money Market Fund, respectively, to X.com Asset Management, Inc.,
the Funds' investment adviser (the "Adviser"). Under the investment
advisory contract, the Adviser provides or arranges to be provided to the
Funds administration, transfer agency, pricing, custodial, auditing, and
legal services, and is responsible for payment of all of the operating
expenses of each Fund except the Portfolio management fees, brokerage fees,
taxes, interest and extraordinary expenses.
<PAGE>
3 The fee waiver for each Fund is made pursuant to a written expense
limitation and reimbursement agreement, which is in effect for an initial
term of one year and will be renewed thereafter automatically for a one
year term on an annual basis. The agreement can be changed, terminated or
not renewed by either party only by giving 90 days' prior notice.
---------------------------------------------------------------------------
4 In addition to the reimbursement of expenses at the Master Portfolio level,
the Adviser will contribute to the Premier S&P 500 Fund an additional 0.01%
of the Premier S&P 500 Fund's average daily net assets.
---------------------------------------------------------------------------
Example
This Example is intended to help you compare the cost of investing in the Funds
with the cost of investing in other mutual funds. The Example assumes that:
o you invest $10,000 in each Fund for the time periods indicated;
o your investment has a 5% return each year; and
o each Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
Example 1 Year(*) 3 Years(*)
------- --------
Premier S&P 500 Fund $0** $61+
U.S.A. Bond Fund $19 $107
U.S.A. Money Market Fund $51 $182
* Reflects costs at both the Fund and Portfolio levels.
** In addition to the waiver of fees and reimbursement of expenses,
pursuant to a written agreement, X.com Asset Management, Inc.,
will contribute to the Premier S&P 500 Fund an additional 0.01%
of the Premier S&P 500 Fund's average daily net assets.
------------------------------------------------------------------
+ X.com Asset Management, Inc. anticipates that the expense
limitation and reimbursement agreement will be renewed for each
of the second and third year of the Premier S&P 500 Fund's
operation. If the agreement is renewed, your actual cost will be
$0.
------------------------------------------------------------------
<PAGE>
MORE ABOUT THE FUND'S INVESTMENT STRATEGIES AND RISKS
Investment Strategies
As with all mutual funds, there can be no assurance that the Funds will achieve
their respective investment objectives. The investment strategies of the Funds
are not fundamental and may be changed without approval of Fund shareholders. A
Fund may withdraw its investment in a Portfolio only if the Trust's Board of
Trustees determines that such action is in the best interests of the Fund and
its shareholders. If there is a change in the investment objective and
strategies of a Fund, shareholders should consider whether the Fund remains an
appropriate investment in light of their then current financial position and
needs.
The Premier S&P Index Fund and U.S.A. Bond Fund (the "Index Funds"): The
investment adviser of the S&P 500 Portfolio and the Bond Portfolio
(collectively, the "Index Portfolios") does not actively manage the assets of
each Portfolio, but seeks to achieve returns corresponding to the S&P 500 Index
and LB Bond Index, respectively. Instead, the Index Portfolios are managed by
utilizing an "indexing" investment approach to determine which securities are to
be purchased or sold to replicate, to the extent feasible, the investment
characteristics of the S&P 500 Index and the LB Bond Index through computerized,
quantitative techniques. The Index Portfolios cannot, as a practical matter, own
all the securities that make up their respective market indexes in perfect
correlation to the indexes. The Index Portfolios seek to track their respective
market indexes during down markets as well as during up markets. Consequently,
the returns of the Index Portfolios will be directly affected by the volatility
of the securities making up their respective market indexes.
Each Index Portfolio may invest up to 10% of its total assets in high quality
money market instruments to provide liquidity to meet redemption requests or to
facilitate investment in the stocks in the S&P 500 Index.
Each Index Portfolio may use derivative instruments in order to: (i) simulate
full investment in its corresponding index while retaining a cash balance for
portfolio management purposes; (ii) facilitate trading; (iii) reduce transaction
costs; or (iv) seek higher investment returns when such instruments are priced
more attractively than the stocks in its corresponding index. Such derivatives
include the purchase and sale of futures contracts and options on S&P 500 Index
futures contracts.
The U.S.A. Money Market Fund: The U.S.A. Money Market Fund and Money Market
Portfolio emphasize safety of principal and high credit quality. In particular,
the investment policies of the Fund and Portfolio prohibit the purchase of many
types of floating-rate instruments, commonly referred to as derivatives, that
are considered to be potentially volatile. The Money Market Portfolio, however,
may invest in high-quality asset-backed securities and variable and floating
rate obligations, which are considered to be derivative instruments. The U.S.A.
Money Market Fund (through its investments in the Money Market Portfolio) may
only invest in floating-rate securities that bear interest at a rate that resets
quarterly or more frequently, and that resets based on changes in standard money
market rate indices such as U.S. Government Treasury bills and London Interbank
Offered Rate, among others. Floating and variable rate instruments are subject
to interest rate and credit risks.
<PAGE>
Investment Risks
An investment in the Funds is subject to investment risks, including the loss of
the principal amount invested. The performance per share of the Funds and
Portfolios will change daily based on many factors, including, but not limited
to, the quality of the instruments held by each Portfolio, national and
international economic conditions and general market conditions.
Derivatives: Derivatives are financial instruments whose values are derived, at
least in part, from prices of other securities or specified assets, indices, or
rates. The use of derivative instruments is a highly specialized activity and
there can be no guarantee that their use will increase the return of the Funds,
or protect their assets from declining in value. The Funds' investments in
derivative instruments can significantly increase their exposure to market risk
or the credit risk of the counterparty. Derivative instruments can also involve
the risk of mispricing or improper valuation and the risk that changes in the
value of the derivative instruments may not correlate perfectly with the Funds'
corresponding indexes. In fact, the use of derivative instruments adversely
impact the value of the Funds' assets, which may reduce the return you receive
on your investment.
The Index Funds use of derivative instruments may affect the Funds' ability to
track their respective indexes less closely if the derivatives do not perform as
expected, or if the derivative instruments are timed incorrectly or are executed
under adverse market conditions.
The Money Market Portfolio may invest in high-quality asset-backed securities.
Asset-backed securities represent interests in "pools" of assets in which
payments of both interest and principal on the securities are made monthly, thus
in effect "passing through" monthly payments made by the individual borrowers on
the assets that underlie the securities. The value of these instruments are
particularly sensitive to changes in interest rate and general market
conditions. The value of asset-backed securities is also affected by the
creditworthiness of the individual borrowers.
Securities Lending: Each Portfolio in which the Funds invest may lend a portion
of their securities to certain financial institutions in order to earn income.
These loans are fully collateralized. However, if the institution defaults, the
Funds' performance could be reduced.
Year 2000: Like other mutual funds, financial and business organizations and
individuals around the world, the Funds could be adversely affected if the
computer systems used by their investment adviser, the Funds' other service
providers, or persons with whom they deal, do not properly process and calculate
date-related information and data on and after January 1, 2000. This possibility
is commonly known as the "Year 2000 Problem." Virtually all operations of the
Funds are computer reliant. The Funds' and the investment adviser are currently
Year 2000 compliant, and the service providers to the Funds and the Portfolios
have indicated that they are or expect to be Year 2000 compliant. There can, of
course, be no assurance that the Funds or the Portfolios will not experience any
problems as a result of the Year 2000 Problem. In addition, because the Year
2000 Problem affects virtually all organizations, the companies or entities in
which each of the Portfolios invest also could be adversely impacted by the Year
2000 Problem, especially foreign entities, which may be less prepared for the
Year 2000. The extent of such impact cannot be predicted.
<PAGE>
FUND MANAGEMENT
Investment Advisers. Under investment advisory agreements with the Funds, X.com
Asset Management, Inc. (the "Adviser"), a registered investment adviser,
provides investment advisory services to the Funds. The Adviser is a wholly
owned subsidiary of X.com and is located at 394 University Avenue, Palo Alto, CA
94301. The Adviser is newly formed and therefore has no prior experience as an
investment adviser.
X.com is the direct parent company of the Adviser. X.com is dedicated to
providing easy, low-cost financial services to on-line investors through its
continuous emphasis on technology. Through the world wide web, X.com offers
access to your X.com Funds account virtually anywhere, at any time.
Subject to general supervision of the X.com Funds' Board of Trustees and in
accordance with the investment objective, policies and restrictions of each of
the Funds, the Adviser provides the Funds with ongoing investment guidance,
policy direction and monitoring of each of the Portfolios in which each Fund
invests. The Adviser may in the future manage cash and money market instruments
for cash flow purposes. The Adviser also provides or arranges for
administration, transfer agency, custody and all other services necessary for
the Funds to operate. For its advisory services, each Fund pays the Adviser an
investment advisory fee at an annual rate, after fee waivers and expense
reimbursements, equal to the following percentage of each Fund's average daily
net assets:
- --------------------------------------------------------------------------------
After Fee Waiver and
Fund Contractual Rate Expense Reimbursement
---- ---------------- ---------------------
(expressed as a (expressed as a
percentage of average percentage of average
daily net assets) daily net assets)
Premier S&P 500 Fund 0.23% 0.00%*
U.S.A. Bond Fund 0.32% 0.11%*
U.S.A. Money Market Fund 0.50% 0.40%*
- --------------------------------------------------------------------------------
*The Adviser has entered into a written expense limitation and reimbursement
agreement with the Trust, under which it has agreed to waive a percentage of its
advisory fee received from the Funds. The expense limitation and reimbursement
agreement is in effect for an initial term of one year and will be renewed
thereafter automatically for one year terms on an annual basis. The agreement
can be changed, terminated or not renewed by either party only upon providing 90
days' prior notice.
Out of the fee received by the Adviser, the Adviser pays all expenses of
managing and operating the Funds except brokerage expenses, taxes, interest,
fees and expenses of the independent trustees (including legal counsel fees),
and extraordinary expenses. A portion of the advisory fee may be paid by the
Adviser to unaffiliated third parties who provide recordkeeping and
administrative services that would otherwise be performed by an affiliate of the
Adviser.
<PAGE>
Barclays Global Fund Advisors ("BGFA") is the investment adviser for each
Portfolio. BGFA is a direct subsidiary of Barclays Global Investors, N.A.
(which, in turn, is an indirect subsidiary of Barclays Bank PLC) and is located
at 45 Fremont Street, San Francisco, California 94105. BGFA has provided asset
management, administration and advisory services for over 25 years. As of June
30, 1999, BGFA and its affiliates provided investment advisory services for over
$687 billion of assets. BGFA receives a fee from each Portfolio at an annual
rate equal to the following percentage of each Portfolio's average daily net
assets:
- --------------------------------------------------------------------------------
Percentage of
Portfolio Average Daily Net Assets
--------- ------------------------
S&P 500 Portfolio 0.05%*
Bond Portfolio 0.08%
U.S.A. Money Market Portfolio 0.10%
- --------------------------------------------------------------------------------
*The Adviser has entered into a written expense limitation and reimbursement
agreement with the Trust, under which it has agreed to reimburse the Premier S&P
500 Fund for all fees incurred at the Portfolio level. The agreement can be
changed, terminated or not renewed by either party only upon providing 90 day's
prior notice.
Each Fund bears a pro rata portion of the investment advisory fees paid by its
corresponding Portfolio, as well as certain other fees paid by each Portfolio,
such as accounting, legal, and Securities and Exchange Commission ("SEC")
registration fees.
- --------------------------------------------------------------------------------
PREMIER. The Adviser has entered into a written expense limitation agreement,
under which it has agreed to (i) waive all management fees received from the
Premier S&P 500 Fund; (ii) reimburse the Premier S&P 500 Fund for all fees
incurred by the Premier S&P 500 Fund at the Portfolio level; and (iii) in
addition to this waiver and reimbursement, pay the Premier S&P 500 Fund an
additional 0.01% of the Premier S&P 500 Fund's average daily net assets.
The Adviser may extend, but may not during term of the expense limitation
agreement shorten, the duration of the expense waiver or reimbursement. The
expense limitation agreement is in effect for an initial term of one year, and
will be renewed thereafter automatically for one year terms on an annual basis.
The expense limitation agreement may be changed, terminated or not renewed by
either party only upon 90 days' prior written notice (by e-mail or other means),
to the other party at its principal place of business.
- --------------------------------------------------------------------------------
The Funds' Statement of Additional Information contains detailed information
about the Fund's investment adviser, administrator, and other service providers.
THE FUNDS' STRUCTURE
Each Fund is a separate series of X.com Funds. The Premier S&P 500 Fund, U.S.A.
Bond Fund, and U.S.A. Money Market Fund seek to achieve their investment
objectives by investing all of each Fund's assets in the S&P 500 Portfolio, the
Bond Portfolio, and the Money Market Portfolio, respectively. The Index
Portfolios and Money Market Portfolio are each a series of MIP, a separate
<PAGE>
open-end investment company with the same investment objective as the
corresponding Fund. This two-tier fund structure is commonly referred to as a
"master/feeder" structure because one fund (the "feeder" fund) invests all of
its assets in a second fund (the "master fund"). In addition to selling its
shares to the Fund, each corresponding Portfolio has sold and is expected to
continue to sell its shares to certain other mutual funds or other accredited
investors. The expenses paid by these mutual funds and accredited investors may
differ from the expenses paid by a Fund; consequently, the returns received by
shareholders of other mutual funds or other accredited investors may differ from
those received by shareholders of the Fund.
The X.com Funds' Board of Trustees (the "Board") believes that, as other
investors invest their assets in the Portfolios, certain economic efficiencies
may be realized with respect to each Portfolio. For example, fixed expenses that
otherwise would have been borne solely by a Fund (and the other existing
interest-holders in its corresponding Portfolio) would be spread across a larger
asset base as more funds or other accredited investors invest in the particular
Portfolio. However, if a mutual fund or other investor withdraws its investment
from a Portfolio, the economic efficiencies (e.g., spreading fixed expenses
across a larger asset base) that the Board believes should be available through
investment in a Portfolio may not be fully achieved or maintained.
Each Fund may be asked to vote on matters concerning the Portfolio. Except as
permitted by the SEC, whenever a Fund is requested to vote on a matter
pertaining to a Portfolio, that Fund will hold a meeting of its shareholders,
and, at the meeting of investors in the Portfolio, will cast all of its votes in
the same proportion as the votes of the Fund's shareholders.
Each Fund may withdraw its investments in its corresponding Portfolio if the
Board determines that it is in the best interests of the Fund and its
shareholders to do so. Upon any such withdrawal, the Board would consider what
action might be taken, including the investment of all the assets of the Fund in
another pooled investment entity having the same investment objective as the
Fund, direct management of the Fund or other pooled investment entity by the
Adviser or the hiring of a sub-adviser to manage the Fund's assets.
Investment of the Funds' assets in the Portfolios is not a fundamental policy of
the Funds and a shareholder vote is not required for a Fund to withdraw its
investment from a Portfolio.
PRICING OF FUND SHARES
The Funds are true no-load funds, which means you may buy or sell shares
directly at the net asset value ("NAV") determined after the Fund receives your
request in proper form. A request is received in proper form if it is placed
electronically through the X.com website and specifies the number of shares or
dollar amount of shares to be purchased or redeemed. If the Fund receives such
request prior to the close of the New York Stock Exchange, Inc. ("NYSE") on a
day on which the NYSE is open, your share price will be the NAV determined that
day. Shares will not be priced on the days on which the NYSE is closed for
trading.
<PAGE>
Each Fund's investment in its corresponding Portfolio is valued based on the
Fund's ownership interest in the net assets of the Master Portfolio. A Fund's
NAV per share is calculated by taking the value of each Fund's net assets and
dividing by the number of shares outstanding. Expenses are accrued daily and
applied when determining the Fund's NAV. The NAV for each Fund is determined as
of the close of trading on the floor of the NYSE (generally 4:00 p.m., Eastern
Time), each day the NYSE is open. Each Fund reserves the right to change the
time at which purchases and redemptions are priced if the NYSE closes at a time
other than 4:00 p.m. Eastern Time or if an emergency exists. The NYSE is closed
on national holidays and on Good Friday.
Each Portfolio calculates its NAV on the same day and at the same time as its
corresponding Fund. Each Portfolio's investments are valued each day the NYSE is
open for business. Each Index Portfolio's assets are valued generally by using
available market quotations or at fair value as determined in good faith by the
Board of Directors of MIP. Bonds and notes with remaining maturities of 60 days
or less are valued at amortized cost. The Money Market Portfolio values its
securities at amortized cost to account for any premiums or discounts above or
below the face value of the securities it buys. The amortized cost method does
not reflect daily fluctuations in market value.
HOW TO BUY AND SELL SHARES OF THE X.COM FUNDS
The Funds are available only to on-line investors that have established a
customer relationship with X.com and opened an account with the Bank, which is
under contract to provide X.com customers with various banking and financial
services.
On-Line Investor Requirements
The Funds are designed and built specifically for on-line investors. Each Fund
requires its shareholders to consent to receive all shareholder information
about the Fund electronically. Shareholder information includes, but is not
limited to, prospectuses, financial reports, confirmations, proxy solicitations,
and financial statements. Shareholders may also receive other correspondence
from X.com Funds or the Bank through their e-mail account. By purchasing shares
of the Fund, you certify that you have access to the Internet and a current
e-mail account, and you acknowledge that you have the sole responsibility for
providing a correct and operational e-mail address. You may incur costs for
on-line access to shareholder documents and maintaining an e-mail account.
If you rescind your consent to receive shareholder information electronically,
fail to maintain an e-mail account, or close your account, the Funds may, to the
extent permitted by the federal securities laws, redeem your position in the
Funds and, in any event, will prohibit additional investments in the Funds,
including the reinvestment of dividends.(*) Prior to revoking your consent, you
will be reminded of the Fund's involuntary redemption policy. If the Funds
involuntarily redeem your shares, you may experience adverse tax consequences.
If your shares are involuntarily redeemed, you will receive paper copies of all
shareholder information until all of your shares have been redeemed and the
proceeds have been credited to your account, or you have otherwise received the
redemption proceeds. The Fund reserves the right to deliver paper-based
documents in certain circumstances, at no cost to the investor.
_________________
* The Staff has informally indicated its view that the Funds may not
involuntarily redeem your shares if you revoke your consent to receive
shareholder documents electronically or fail to maintain an e-mail account.
However, should the Staff's position on this issue change, the Funds intend
to involuntarily redeem your shares under such circumstances.
<PAGE>
Account Requirements
To register as a customer of X.com and open an account with the Bank, you must
complete and submit an X.com Account Application (the "Application"). The
Application is available on the X.com website at www.X.com. While you may submit
the Application electronically, you must also complete, sign and deliver a
signature card. The signature card will be sent to your address of record and
must be returned promptly per the enclosed instructions.
For more detailed information on how to open an account with the Bank, visit the
X.com website (www.X.com).
Once you open your account, you will be subject to general account requirements
as described in the Application, and will have access to all the electronic
financial services made available over the Internet by X.com, including the
opportunity to invest in X.com Funds.
Placing an Order
You can begin purchasing shares of the Funds as soon as you open and fund your
account. Because a Fund's net asset value changes daily, your purchase price
will be the next NAV determined after a Fund receives and accepts your purchase
order.
You can place orders to purchase or redeem Fund shares by accessing the X.com
website at www.X.com. At the time you log-on to the website, you will be
prompted to enter your personal identification password so that we can be sure
each transaction is secure. By clicking on the appropriate mutual fund order
buttons, you can quickly and easily place an order to purchase or redeem shares
in a Fund. When you purchase shares in a Fund, you will be asked: (1) to confirm
your consent to receive all Fund documentation electronically; and (2) to affirm
that you have read the prospectus. The prospectus is readily available for
viewing and printing on the X.com website. If you do not consent to receive all
Fund documentation electronically you will not be able to purchase shares of the
Fund. To complete a purchase transaction, you must transfer sufficient funds
from your Bank account to your mutual fund account. Notice of trade
confirmations will be sent electronically to the e-mail address you provided
when you opened your account.
Minimum Investment Requirements
For your initial investment in a Fund $0
To buy additional shares of a Fund $0
Continuing minimum investment $0
<PAGE>
Maximum Investment Limitations (For the Premier S&P 500 Fund Only)
Your investment in the Premier S&P 500 Fund will be limited to a total amount of
$15,000. For investors that also have established a direct deposit account with
the Bank, the maximum investment will be $50,000. The Premier S&P 500 Fund will
inform you when your investment reaches or exceeds the aggregate limit. The
Premier S&P 500 Fund will promptly credit any excess money received from you to
your U.S.A. Money Market Fund account.
After your account is established you may use any of the methods described below
to buy or sell shares. You can only sell shares of the Funds that you own; that
means you cannot "short" shares of the Fund.
Accessing Account Information
For information on how to access account information and/or applications
electronically, please refer to the online assistant at www.X.com available 24
hours a day.
Redemptions
You can access the money you have invested in a Fund at any time by selling some
or all of your shares back to the Fund. As soon as a Fund receives your
redemption request, your shares will be redeemed and the proceeds will be
credited to your account with the Bank. This usually occurs the business day
following the transaction. All redemption proceeds will be credited to your Bank
account.
Redemption Delays. You will have to wait to receive payment on redeemed shares
until the funds you used to buy the shares have cleared (e.g., if you opened
your Bank account with a check, until your check has cleared). The delay may
take up to fifteen (15) days from the date of purchase.
The right of redemption may be suspended during any period in which (i) trading
on the NYSE is restricted, as determined by the SEC, or the NYSE is closed for
other than weekends and holidays; (ii) the SEC has permitted such suspension by
order; or (iii) an emergency as determined by the SEC exists, making disposal of
portfolio securities or valuation of net assets of the Fund not reasonably
practicable.
Redemption Fee. The Funds do not impose a redemption fee. The Index Funds can
experience substantial price fluctuations and are intended for long-term
investors. Short-term "market timers" who engage in frequent purchases and
redemptions can disrupt a Fund's investment program and create additional
transaction costs that are borne by all shareholders. For these reasons, in the
future the Index Funds may assess a 2.0% fee on redemptions of shares held for
less than 90 days.
<PAGE>
Amending Your Application
For your protection, you will be required to submit an amended Application if
you desire to change certain information provided on your initial Application.
The amended Application is designed to protect you and the Funds against
fraudulent transactions by unauthorized persons. Specifically, the Funds will
require you to amend your Application in the following instances:
1. If you transfer the ownership of your account to another individual or
organization.
2. If you add or change your name or add or remove an owner on your account.
3. If you add or change the beneficiary on your transfer-on-death account.
Closing your account
If you close your account with the Bank, the Fund may, to the extent permitted
by the federal securities laws, redeem all of your shares in your Fund account.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Premier S&P 500 Fund intends to pay dividends from net investment income
quarterly and distribute capital gains, if any, annually. The U.S.A. Bond Fund
and U.S.A. Money Market Fund intend to declare dividends daily and distribute
them monthly. The U.S.A. Bond Fund and U.S.A. Money Market Fund will distribute
capital gains, if any, at least annually. The Funds may make additional
distributions if necessary.
Unless you choose otherwise, all your dividends and capital gain distributions
will be automatically reinvested in additional Fund shares. Shares are purchased
at the net asset value determined on the reinvestment date. If you revoke your
consent to receive shareholder information electronically, fail to maintain an
e-mail account, or close your account, you will not be permitted to reinvest
your dividends in additional Fund shares.
TAX CONSEQUENCES
The following information is meant as a general summary for U.S. taxpayers.
Please see the Funds' Statement of Additional Information for more information.
You should rely on your own tax advisor for advice about the particular federal,
state and local tax consequences to you of investing in the Funds.
Each Fund generally will not have to pay income tax on amounts it distributes to
shareholders, although shareholders will be taxed on distributions they receive.
The Premier S&P 500 Fund will distribute substantially all of its income and
gains to its shareholders every year. The U.S.A. Bond Fund and U.S.A. Money
Market Fund will distribute dividends monthly. If a Fund declares a dividend in
October, November or December but pays it in January, you may be taxed on the
dividend as if you received it in the previous year.
You will generally be taxed on dividends you receive from a Fund, regardless of
whether they are paid to you in cash or are reinvested in additional Fund
shares. If a Fund designates a dividend as a capital gain distribution, you will
pay tax on that dividend at the long-term capital gains tax rate, no matter how
long you have held your Fund shares.
<PAGE>
If you invest through a tax-deferred retirement account, such as an IRA, you
generally will not have to pay tax on dividends until they are distributed from
the account. These accounts are subject to complex tax rules, and you should
consult your tax advisor about investment through a tax-deferred account.
There may be tax consequences to you if you dispose of your Fund shares, for
example, through redemption, exchange or sale. You will generally have a capital
gain or loss from a disposition. The amount of the gain or loss and the rate of
tax will depend mainly upon how much you paid for the shares, how much you sold
them for, and how long you held them.
Each Fund will send you a tax report each year that will tell you which
dividends must be treated as ordinary income and which (if any) are long-term
capital gain.
As with all mutual funds, a Fund may be required to withhold U.S. federal income
tax at the rate of 31% of all taxable distributions payable to you if you fail
to provide the Fund with your correct taxpayer identification number or to make
required certifications, or if you have been notified by the IRS that you are
subject to backup withholding. Backup withholding is not an additional tax, but
is a method in which the IRS ensures that it will collect taxes otherwise due.
Any amounts withheld may be credited against your U.S. federal income tax
liability.
<PAGE>
[Outside back cover page.]
The Statement of Additional Information for the Funds ("SAI"), contains further
information about each Fund. The SAI is incorporated into this Prospectus by
reference (that means it is legally considered part of this Prospectus).
Additional information about the Funds' investments will be available in the
Funds' annual and semi-annual reports to shareholders. In a Fund's annual
report, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during its fiscal
year.
Additional information including the SAI and the most recent annual and
semi-annual reports (when available), may be obtained without charge at our
website (www.X.com). Shareholders will be alerted by e-mail when a prospectus
amendment, annual or semi-annual report is available. Shareholders may also call
the toll-free number listed below for additional information or with any
inquiries.
Further information about the Funds (including the SAI) can also be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. You may call
1-800-SEC-0330 for information about the operations of the public reference
room. Reports and other information about the Funds are also available on the
SEC's website (http://www.sec.gov) or copies can be obtained, upon payment of a
duplicating fee, by writing the Public Reference Section of the SEC, Washington,
D.C. 20549-6009.
X.com Corp.
394 University Avenue
Palo Alto, CA 94301
Toll-Free: (888) 447-8999
http://www.X.com
Investment Company Act file No.: 811-09381
