Filed with the Securities and Exchange Commission on September 28, 2000
1933 Act Registration File No. 333-83499
1940 Act File No. 811-9493
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 1 |X|
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and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 2 |X|
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(Check appropriate box or boxes.)
IGAM GROUP FUNDS
(Exact Name of Registrant as Specified in Charter)
South Kingstown Office Park, Suite A5
24 Salt Pond Road, Wakefield, RI 02879
(Address and Zip Code of Principal Executive Offices)
(401) 788-0977
Registrant's Telephone Number, including Area Code
Eugene Y. W. Lee, Ph.D.
IGAM Group Funds
South Kingstown Office Park, Suite A5
24 Salt Pond Road, Wakefield, RI 02879
(Name and Address of Agent for Service)
WITH A COPY TO:
Michael P. O'Hare, Esq.
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
It is proposed that this filing will become effective
X immediately upon filing pursuant to paragraph (b)
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on ___________ pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(1)
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on ___________ pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on ___________ pursuant to paragraph (a)(2) of Rule 485.
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THE INTERNET INDEX FUND
TRACKING THE DOW JONES INTERNET INDEXSM
PROSPECTUS
SEPTEMBER 30, 2000
INVESTMENT MANAGER:
[LOGO]
INTEGRITY GLOBAL ASSET MANAGEMENT, INC.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE INTERNET INDEX FUND
PROSPECTUS DATED SEPTEMBER 30, 2000
TABLE OF CONTENTS
RISK/RETURN SUMMARY............................................................2
INTRODUCTION..........................................................2
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?..............................2
WHAT IS THE DOW JONES INTERNET INDEXSM?...............................2
WHAT ARE THE FUND'S PRINCIPAL INVESTMENT STRATEGIES?..................3
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?.....................4
WHO MAY WANT TO INVEST IN THE FUND?...................................5
WHAT IS THE FUND'S PAST PERFORMANCE?..................................5
WHAT ARE THE FUND'S FEES AND EXPENSES?................................6
MORE INFORMATION ABOUT THE DOW JONES INTERNET INDEXSM..........................7
MORE INFORMATION ABOUT THE FUND'S INVESTMENT STRATEGIES........................9
MANAGEMENT OF THE FUND.........................................................9
PRICING OF FUND SHARES........................................................10
MARKETING AND DISTRIBUTION....................................................13
HOW TO PURCHASE SHARES........................................................13
HOW TO REDEEM SHARES..........................................................15
DISTRIBUTIONS AND TAXATION....................................................17
RISK/RETURN SUMMARY
INTRODUCTION
The Internet Index Fund is an index mutual fund designed to track the
Dow Jones Internet IndexSM and to provide investors with a convenient
and cost-effective way to invest in the Internet and the Internet
industry.
The Internet is a world-wide network of computers that allows users to
easily and efficiently communicate and share data. Currently, the most
popular application on the Internet is the World Wide Web, a
graphic-user-interface that allows information sharing and data
transfer through "websites." Other Internet applications include
e-mail, Intranet, extranet and electronic commerce.
The Internet industry consists of various types of companies, including
Internet access providers, software developers, hardware manufacturers,
companies that provide materials or services to access the Internet,
companies that provide content for Internet sites and companies that
specialize in providing security for transactions over the Internet.
The Internet industry also includes companies that engage in electronic
commerce and retailing through Internet websites.
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The investment objective of the Fund is to provide investment results,
using statistical procedures, that parallel the investment return of
the Dow Jones Internet Index.SM
WHAT IS THE DOW JONES INTERNET INDEXSM?
The Dow Jones Internet IndexSM (Symbol: DJINETSM) is a diversified
index of common stocks designed to be an overall indicator of Internet
industry stock performance, and to provide a benchmark against which to
measure Internet investments. The Index includes stocks of companies
whose primary focus is Internet related. For a company to be eligible
for the Index, it must derive at least 50% of its revenue from Internet
commerce or services.
The Index is divided into the following two market sub-sectors to
provide a balanced representation of the Internet industry in the
future:
INTERNET COMMERCE COMPANIES (E*COMMERCE): Companies that
derive the majority of their revenues from providing goods or
services through an open network.
INTERNET SERVICE COMPANIES: Companies that derive the majority
of their revenues from providing access to the Internet or
providing services to people using the Internet.
The Index is market capitalization weighted by subsector and currently
includes 40 stocks. Market capitalization weighting means that the
percentage weighting of the stocks in each subsector of the Index is
determined based on their market capitalization relative to the other
stocks in the subsector. The Index is reviewed quarterly by Dow Jones
Company, Inc. ("Dow Jones") to add or remove stocks as needed in order
to consistently cover 80% of the total market capitalization of the
companies in each Internet industry subsector.
To prevent domination by a few large companies, a ceiling weight of 10%
is applied so that no single stock will represent more than 10% of any
Index subsector, regardless of market capitalization.
THE HISTORICAL PERFORMANCE OF THE INDEX AND A COMPLETE LISTING OF THE
STOCKS THAT ARE CURRENTLY INCLUDED IN THE INDEX ARE INCLUDED IN THIS
PROSPECTUS IN THE SECTION ENTITLED "MORE INFORMATION ABOUT THE DOW
JONES INTERNET INDEX.SM" The Fund is neither sponsored by nor
affiliated with Dow Jones.
WHAT ARE THE FUND'S PRINCIPAL INVESTMENT STRATEGIES?
The Fund's investment manager believes that the Internet is
revolutionizing the way individuals and companies around the world
obtain information and communicate, and that Internet and
Internet-related companies have substantial growth potential. Though
Internet stocks may be volatile, the manager believes that the Internet
industry as a whole could outperform the broader securities markets for
the foreseeable future.
In view of the rapid pace of development and change within the Internet
industry, it may be very difficult to forecast which companies or
industry sectors will be successful and outperform or outgrow other
companies or sectors. For these reasons, the Fund's investment manager
believes that an "indexing" investment management approach is a
particularly effective way for investors to participate in the
investment performance of the Internet industry over the long term.
An index fund seeks to match, as closely as possible, the performance
of an established securities index. An index fund does this by holding
all, or a representative sample, of the securities in the index. The
adviser to an index fund generally does not buy and sell securities
based on research and analysis in an attempt to outperform the
particular index. Instead, an index fund seeks to mirror what the
target index does, for better or worse. Index funds have operating
expenses and transaction costs, and generally keep a portion of their
assets in cash or cash equivalent investments, in order to be ready to
meet redemption requests. Therefore, while the performance for an index
fund is expected to track the target index closely, the performance of
an index fund will generally be less than that of the index itself.
In order to track the Dow Jones Internet IndexSM as closely as
possible, the Fund seeks to invest substantially all (more than 95%) of
its total assets in the stocks that make up the Index, in roughly the
same proportions as the stocks are represented in the Index. As the
Fund receives cash from new investors, or processes redemption requests
from shareholders, the Fund will purchase or sell securities in an
effort to attempt to approximate the return of the Index. Also, the
Fund's investments are reviewed and adjusted each quarter to reflect
any quarterly adjustments in the Index, in an effort to track the Index
as closely as possible.
Because the Fund is an index fund, it generally takes a buy-and-hold
approach to investing. The Fund normally sells portfolio securities
only to respond to redemption requests or to adjust the number of its
shares to track the weighting or composition of the Index. As a result,
the Fund's portfolio turnover rate is expected to be extremely low. A
low portfolio turnover rate usually results in low transaction costs
and provides tax efficiencies for shareholders.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
The Fund concentrates its investments in the Internet Industry and,
therefore, may involve significantly greater risks than a mutual fund
that diversifies its investments among many industries, or one that
does not invest in the Internet industry. The share price of the Fund
will go up and down and you could lose money.
Any investment in the Internet industry involves special risks because
the Internet industry is subject to rapid technological changes and
developments. Many Internet-related companies have incurred significant
losses since their inception and will continue to incur losses in the
hope of capturing market share and generating future revenues. It is
possible that some companies may never be profitable.
Companies in the industry are exposed to a high degree of risk that
their products or services may quickly become obsolete. Also,
increasing competition, rapidly changing markets, frequent mergers or
acquisitions of Internet companies and changes in strategic alliances
among various Internet businesses, all may have a significant effect on
the financial condition of companies in the Internet industry. Changes
in government policies, such as telephone and cable regulations and
antitrust enforcement and the need for regulatory approvals, can also
have a material effect on companies in the industry.
Many of the companies included in the Index have a smaller market
capitalization (less than $1 billion) and may be unseasoned companies
(those with less than a three year operating history). Investments in
smaller and unseasoned companies present greater risks than securities
of larger or more established companies. Small or unseasoned companies
may be developing or marketing new products or services for which
markets are not yet established and may never be established. They also
may lack depth or experience of management and may have difficulty
generating or obtaining funds necessary for growth and development of
their businesses. Due to these and other factors, small and unseasoned
companies may suffer significant losses, as well as realize substantial
growth. Historically, the prices of stocks of smaller companies have
been more volatile than stocks of larger companies and are, therefore,
more speculative than stocks of larger companies. You should expect
that the price of the Fund's shares will also fluctuate more than
shares of a mutual fund that invests primarily in larger stocks.
The Fund is classified as "non-diversified" under the Investment
Company Act of 1940, as amended (the "1940 Act"), which means that,
compared to other funds, it may invest a greater percentage of its
assets in a single issuer. A non-diversified fund may be more
susceptible to price volatility resulting from changes in the prices of
securities that it holds. The Fund will, however, always seek to match
the level of diversification of the Index and, in any event, intends to
meet the minimum diversification levels required to qualify as a
regulated investment company for purposes of the Internal Revenue Code.
The Fund is authorized to invest a portion of its assets in futures and
options contracts. Losses (or gains) involving these investments can be
substantial in relation to the amount of money deposited to enter into
the contract. For this reason, the Fund will not use these types of
investments as leveraged investments.
WHO MAY WANT TO INVEST IN THE FUND?
The Fund may be appropriate for investors who want to participate in
the investment performance of the Internet industry over the long term,
by following a simple, cost-efficient indexing approach.
The Fund is designed for long-term investors who want to allocate a
portion of their investments to aggressive equity investing and who
understand and are willing to accept the risk of loss associated with
investing in Internet stocks. Investors should be willing to accept the
above average price fluctuations that the Fund is expected to
experience.
The Fund is not a complete investment program.
WHAT IS THE FUND'S PAST PERFORMANCE?
Since the Fund has not had operations for a full calendar year, there
is no past performance history available at this time. The performance
of the Dow Jones Internet Index SM since its inception in 1997,
however, is set forth below under the heading "More Information about
the Dow Jones Internet Index.SM"
WHAT ARE THE FUND'S 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)
Maximum Sales Charge (Load) on Purchases
(as a percentage of offering price)1 3.00%
Maximum Deferred Sales Charge (Load)2 None
Maximum Sales Charge (Load) on Reinvested
Dividends and Other Distributions None
Redemption Fee (as a percentage of amount
redeemed, if shares are redeemed within 90 days of purchase)3 None
Maximum Account Fees4 None
1 The sales charge is waived for investments by shareholders of record
on October 1, 2000, as well as for certain other investors. See "Sales
Charges and Waivers" below.
2 A purchase of shares of $1 million or more may be made at net asset
value without any front-end sales charge. However, if you sell the
shares within 18 months of purchase, a contingent deferred sales charge
of 1.00% will apply to the sale of such shares. See "Sales Charges and
Waivers" below.
3 The Fund's custodian charges a $12.00 fee for outgoing wire
transfers.
4 IRA accounts are subject to an annual trustee fee of $12.50.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
Management Fees 0.65%
Distribution and/or Service (12b-1) Fees 0.25%
OTHER EXPENSES 12.90%
Total Annual Fund Operating Expenses (before fee
waiver/ reimbursement) 13.80%
LESS MANAGER'S FEE WAIVER/REIMBURSEMENT* -12.81%
ACTUAL TOTAL ANNUAL FUND OPERATING EXPENSES 0.99%
* Integrity Global Asset Management, Inc. has contractually agreed
through December 31, 2001 to waive its management fees and/or make
payments to limit expenses of the Fund, if necessary, to ensure that
actual Total Annual Fund Operating Expenses do not exceed 0.99%.
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 your investment has a 5%
return each year and that you reinvest all capital gains and dividend
distributions. Finally, the Example assumes that the Fund's operating
expenses remain the same. Please note that only the first year in each
example reflects the effect of the contractual fee waiver. Although
your actual costs may be higher or lower, based on these assumptions
your costs would be:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
$596 $3,057 $5,114 $8,893
MORE INFORMATION ABOUT THE DOW JONES INTERNET INDEXSM
The following table shows the performance of the Index since its inception in
June 1997. PLEASE NOTE THAT THE PERFORMANCE SHOWN IS NOT THE PERFORMANCE OF THE
FUND AND IS NOT INTENDED TO PREDICT OR SUGGEST THE RETURN THAT MIGHT BE
EXPERIENCED BY AN INVESTOR IN THE FUND. The Fund will attempt to track the Index
as closely as possible, but the performance of the Fund will be less than the
performance of the Index because the Fund is subject to operational and
transaction costs, while the Index is not.
PERIOD TOTAL RETURN
------ ------------
1997 (last six months) 34.07%
1998 168.41%
1999 167.30%
2000 (first six months) -28.28%
The average annual total return of the Index from its date of initial
calculation (July 1, 1997) through June 30, 2000 was 90.37% per year.
The following is a list of the names (and trading symbols) of the stocks that
compromised the Index after it was last adjusted in September 2000. The Index
can change quarterly, so this listing is only a "snapshot" of the Index at one
point in time.
<TABLE>
<CAPTION>
---------------------------------------------------------- ------------------------------------------------------------------
E* COMMERCE SECTOR INTERNET SERVICES SECTOR
---------------------------------------------------------- ------------------------------------------------------------------
<S> <C>
Amazon.com, Inc. AMZN Akamai Technologies AKAM
---------------------------------------------------------- ------------------------------------------------------------------
Ameritrade Holding Corporation (Class A) AMTD America Online, Inc. AOL
---------------------------------------------------------- ------------------------------------------------------------------
CNET, Inc. CNET Ariba Inc. ARBA
---------------------------------------------------------- ------------------------------------------------------------------
E*trade Group, Inc. EGRP BEA Systems Inc. AXNT
---------------------------------------------------------- ------------------------------------------------------------------
EBay Inc. EBAY BroadVision, Inc. BVSN
---------------------------------------------------------- ------------------------------------------------------------------
eToys, Inc. ETYS Check Point Software Technologies Ltd. * CHKP
---------------------------------------------------------- ------------------------------------------------------------------
Go2Net, Inc. GNET CheckFree Holdings Corporation CKFR
---------------------------------------------------------- ------------------------------------------------------------------
WebMD Corp. HLTH CMGI Inc. CMGI
---------------------------------------------------------- ------------------------------------------------------------------
Lycos Inc. LCOS Commerce One Inc. CMGI
---------------------------------------------------------- ------------------------------------------------------------------
MP3.com, Inc. MPPP Covad Communications Group, Inc. COVD
---------------------------------------------------------- ------------------------------------------------------------------
Priceline.com Inc. PCLN Digital Island, Inc. ISLD
---------------------------------------------------------- ------------------------------------------------------------------
Ticketmaster Online Citysearch Inc. TMCS Doubleclick Inc. DCLK
---------------------------------------------------------- ------------------------------------------------------------------
VerticalNet Inc. VERT Earthlink Network, Inc. ELNK
---------------------------------------------------------- ------------------------------------------------------------------
Webvan Group Inc. WBVN Excite@Home Corp. ATHM
---------------------------------------------------------- ------------------------------------------------------------------
Yahoo! Inc. YHOO Exodus Communications, Inc. EXDS
---------------------------------------------------------- ------------------------------------------------------------------
I2 Technologies Inc. ITOO
------------------------------------------------------------------
InfoSpace.com, Inc. INSP
------------------------------------------------------------------
Inktomi Corporation INKT
------------------------------------------------------------------
Internet Capital Group ICGE
------------------------------------------------------------------
Portal Software, Inc. PRSP
------------------------------------------------------------------
PSINet Inc. PSIX
------------------------------------------------------------------
RealNetworks, Inc. RNWK
------------------------------------------------------------------
Tibco Software Inc. TIBX
------------------------------------------------------------------
VeriSign, Inc. VRSN
------------------------------------------------------------------
Vignette Corp. VIGN
------------------------------------------------------------------
</TABLE>
*This security represents the common stock of a foreign company that trades
directly on a U.S. national securities exchange.
The Index is reviewed quarterly and any changes take effect on the third Friday
of March, June, September and December.
To be eligible for the Index, a company must generate 50% or more of annual
sales/revenues from the Internet. Stocks offered through an initial public
offering must have a minimum of three months' trading history (a spin-off
requires this trading history only if its former parent's stock was trading for
less than three months). To be eligible, a stock must also have a three month
average market capitalization of at least $100 million, a three month average
closing price of at least $10, and sufficient trading activity to ensure
liquidity.
Stocks are selected for the Index based on an equal combination of market
capitalization and trading volume (three month averages for each factor). To be
added to the Index, a new stock must rank in the top two-thirds of the existing
components of the Index at the time of the quarterly review. Once a stock is
included in the Index, it may not be removed for a period of six months, unless
the company is acquired.
"Dow Jones", "Dow Jones Internet IndexSM" and "DJINETSM" are service marks of
Dow Jones Company, Inc. and have been licensed for use by the Fund's manager,
Integrity Global Asset Management, Inc. The Fund is not sponsored, endorsed,
sold or promoted by Dow Jones, and Dow Jones makes no representation regarding
the advisability of investing in the Fund.
Dow Jones does not: sponsor, endorse, sell or promote the Fund; recommend that
any person invest in the Fund or any other securities; have any responsibility
or liability for or make any decisions about the purchase or redemption prices,
or fees of the Fund; have any responsibility or liability for the
administration, management or marketing of the Fund; consider the needs of the
Fund or Fund Shareholders in determining, composing or calculating the Index or
have any obligation to do so.
Dow Jones will not have any liability in connection with the Fund. Specifically,
Dow Jones does not make any warranty, express or implied, and Dow Jones
disclaims any warranty about: the results to be obtained by the Fund, Fund
shareholders or any other person in connection with the use of the Index and the
data included in the Index, the accuracy or completeness of the Index and its
data or the merchantability and fitness for a particular purpose or use of the
Index and its data. Dow Jones will have no liability for any errors, omissions
or interruptions in the Index or its data or for any information prepared by the
Fund that is derived from the Index. Under no circumstance will Dow Jones be
liable for any lost profits or indirect, punitive, special or consequential
damages or losses, even if Dow Jones knows that they might occur. The licensing
agreement between the Fund's manager and Dow Jones is solely for their benefit
and not for the benefit of the owners of the Fund or any other third parties.
MORE INFORMATION ABOUT THE FUND'S INVESTMENT STRATEGIES
As an alternative to holding all of the stocks in the Index at all times, the
Fund may select stocks to be purchased or sold using "statistical sampling"
techniques intended to be an effective means of substantially duplicating the
performance of the Index. Based on data derived from such techniques, as well as
on information about the issuer and its stock (such as size, projected earnings,
financial strength and debt), the investment manager will make judgments to
actively select which component stocks from the Index are purchased. The idea is
to select stocks that, together with the remaining stocks in the Fund's
portfolio, will most closely track the performance of the Index. The Fund will
use statistical sampling techniques when the Fund's net cash flow would make it
impractical or costly to attempt to track the Index by purchasing or selling
stocks in the exact quantities needed to cause the Fund's portfolio to exactly
match the weighting and composition of the Index.
In addition to investing directly in the stocks that make up the Index, the Fund
may enter into futures or options contracts, for the purpose of simulating full
investment in the stocks that make up the index and causing the same effect as
if the Fund held these stocks. These types of investments are used to quickly
and efficiently cause Fund assets to be invested pending actual purchases of
stocks in the Index and/or to keep cash on hand to meet redemption requests or
other needs. They are also used to reduce transaction costs and are used when
the Fund's investment manager determines that these investments are favorably
priced when compared to direct purchases of securities.
The Fund will limit its futures transactions to the extent that, immediately
after any transaction, no more than 5% of the Fund's assets are applied towards
the deposits required on futures contracts, and the value of all futures
contracts in which the Fund acquires an interest cannot exceed 20% of the Fund's
total assets.
In order to increase the Fund's income, the Fund may lend its portfolio
securities to qualified securities dealers or other institutional investors. The
lending of securities is a common practice in the securities industry.
The investment objective and policies of the Fund are not fundamental and
therefore may be changed by the Board of Trustees without shareholder approval.
However, shareholders would be notified prior to any material change
MANAGEMENT OF THE FUND
IGAM Group Funds was organized as a Delaware business trust on July 16, 1999 and
is operated under the supervision of a Board of Trustees. The Fund is the first
mutual fund within the IGAM Group Funds family.
INVESTMENT MANAGER. The Fund's investment manager is Integrity Global Asset
Management, Inc. ("IGAM"). IGAM is a federally registered investment advisory
firm founded in April 1997, that previously provided asset management services
for individuals and institutional clients. The firm no longer manages client
assets outside of the Fund. IGAM's principal office is located at South
Kingstown Office Park, Suite A5, 24 Salt Pond Road, Wakefield, Rhode Island
02879.
Eugene Y.W. Lee, Ph.D., CFA, is the President and founder of IGAM and the Chief
Portfolio Manager for the Fund. He is also the President, Treasurer and
Secretary of IGAM Group Funds, and serves on its Board of Trustees. Dr. Lee is a
Chartered Financial Analyst and received his Master of Arts degree in
Mathematics from the University of Texas at Austin in 1986 followed by his
doctoral degree in Finance in 1986. He joined the faculty of the University of
Rhode Island in 1992 and is currently an Associate Professor of Finance. Dr. Lee
previously was Assistant Professor of Finance at University of Missouri -
Columbia from 1986 to 1992.
IGAM has entered into an Investment Management Agreement with IGAM Group Funds
under which IGAM is responsible for managing the purchase and sale of securities
held by the Fund. IGAM also tracks the composition and weighting of the stocks
in the index, and rebalances the Fund's portfolio of investments in an effort to
track the performance of the index as closely as possible. This process also
involves the use of statistical sampling techniques by which IGAM actively
selects component stocks for purchase or sale to most effectively and
efficiently track the Index. IGAM is also responsible for selecting brokers,
dealers and/or trading systems to execute securities transactions for the Fund.
IGAM also provides business management and administrative services for the Fund
not provided by others, which includes the coordination and management of the
Fund's business activities and its relationship with service providers and
professionals, as well as the provision of office space, personnel and materials
necessary to act as investment and business manager.
For its services, IGAM receives annual fees from the Fund equal to 0.65% of the
Fund's average daily net assets. IGAM has, however, contractually agreed through
December 31, 2001 to waive all or a portion of the advisory fee, and to pay Fund
expenses to the extent necessary to limit the Fund's total annual operating
expenses to 0.99%. After that date, IGAM may determine to continue to control
Fund operating expenses under a contractual or voluntary arrangement, or it may
end the arrangement. When the Fund's assets grow to a point where fee waivers
are no longer necessary, IGAM may seek to recoup amounts waived or expenses
payments that it made. IGAM shall only be entitled to recoup such amounts for a
period of three years from the date the amount was waived or paid.
FUND ADMINISTRATOR, ACCOUNTING AND TRANSFER AGENT. Firstar Mutual Fund Services,
LLC, 615 East Michigan Street, 3rd Floor, Milwaukee, Wisconsin 53202 ("Firstar")
serves as the Fund's administrator, accounting agent and transfer agent.
PRICING OF FUND SHARES
The shares of the Fund are priced at the net asset value per share ("NAV"),
which is determined by the Fund as of the close of regular trading (generally
4:00 p.m. eastern time) on each day that the New York Stock Exchange is open for
unrestricted trading. Purchase and redemption requests are priced at the next
NAV calculated after receipt and acceptance of a completed purchase or
redemption request. The NAV is determined by dividing the value of the Fund's
securities, cash and other assets, minus all expenses and liabilities, by the
number of shares outstanding (assets - liabilities)/no. of shares = NAV. The
expenses and fees of the Fund, which are accrued daily, are reflected in the
calculation of the NAV.
The Fund's portfolio securities are valued each day at their market value, which
usually means the last quoted sale price on the security's principal exchange
that day. If market quotations are not readily available, securities will be
valued at their fair market value as determined in good faith, or under
procedures approved by, the Board of Trustees. The Fund may use independent
pricing services to assist in calculating NAV.
SALES CHARGES AND WAIVERS. The offering price for shares of the Fund is its NAV
plus any applicable front-end sales charge. The sales charge is as follows:
<TABLE>
<CAPTION>
As a % of Amount Dealer Commission as
As a % of Invested Percentage of Offering
Your Investment Offering Price Price
<S> <C> <C> <C>
Less than $50,000 3.00% 3.09% 2.50%
$ 50,000 - $99,999 2.50% 2.56% 2.00%
$100,000 - $249,999 2.00% 2.04% 1.50%
$250,000 - $499,999 1.50% 1.52% 1.00%
$500,000 - $999,999 1.00% 1.01% 0.50%
$ 1 million or more* None None None
</TABLE>
* Investments of $1 million or more may be made with no front-end sales charge.
However, such investments are subject to a contingent deferred sales charge
(CDSC) of 1.0% on any shares sold within 18 months of purchase. For purpose of
this CDSC, all purchases made during a calendar month are counted as having been
made on the first day of that month. The CDSC is based on the lesser of the
original purchase cost or the current market value of the shares being sold ,
and is not charged on shares you acquired by reinvesting your dividends and
distributions. To keep your CDSC as low as possible, each time you place a
request to sell shares we will first sell any shares in your account that are
not subject to a CDSC.
The Fund's distributor may pay up to the entire amount of the sales charge to
particular broker-dealers. On purchases over $1 million, the distributor may pay
dealers of record commissions in an amount of up to 1.0% of the first $4
million, plus 0.50% of the next $6 million, plus 0.25% of share purchases over
$10 million. This commission schedule is also effective for sales of shares made
to investors which qualify under any of the last category listed under "Waivers
for Certain Investors."
REDUCING YOUR SALES CHARGES. There are several ways you can combine multiple
purchases of shares of the Fund to take advantage of the breakpoints in the
sales charge schedule. The following ways can be combined in any manner.
|X| ACCUMULATION PRIVILEGE - lets you add the value of any shares of
the Fund you or members of your family already own to the amount
of your next investment for purposes of calculating the sales
charge. Participants in retirement plans receive breakpoints at
the plan level. You must notify your broker, and your broker must
notify the Fund, that you are eligible for this privilege each
time you make a purchase.
|X| LETTER OF INTENTION - lets you purchase shares of the Fund over a
13-month period and receive the same sales charge as if all shares
had been purchased at once.
CDSC WAIVERS. As long as the transfer agent is notified at the time you sell,
the CDSC will generally be waived in the following cases:
|X| to make Systematic Withdrawal Plan payments that are limited
annually to no more than 12% of the value of the account at the
time the plan is initiated;
|X| because of shareholder death or disability;
|X| because of the death or disability of the grantor of a living trust;
|X| under reorganization, liquidation, merger or acquisition transactions
involving other investment companies; and
|X| for retirement plans under the following circumstances;
1. to return excess contributions,
2. hardship withdrawals as defined in the plan,
3. under a Qualified Domestic Relations Order as defined in the
Internal Revenue Code,
4. to meet minimum distribution requirements under the Internal
Revenue Code,
5. to make "substantially equal payments" as described in Section
72(t) of the Internal Revenue Code, and
6. after separation from service.
REINSTATEMENT PRIVILEGE. If you sell shares of the Fund, you may reinvest some
or all of the proceeds within 180 days without a sales charge, as long as the
transfer agent is notified before you invest. If you paid a CDSC when you sold
your shares, you will be credited with the amount of the CDSC. All accounts
involved must have the same registration.
WAIVERS FOR CERTAIN INVESTORS. Shares may be offered without front-end sales
charges to the following individuals and institutions:
|X| Selling brokers and their employees and/or sales representatives,
|X| Any bank, trust company, charitable organization, or other institution
acting on behalf of a fiduciary client,
|X| Registered investment advisors, fee-based financial planners, wrap
accounts or other investment programs not receiving a portion of
the Fund's sales charges but in which a fee is paid to an
investment professional,
|X| Pension, profit sharing or other qualified retirement plans including
employer-sponsored 401(k) and 403(b) plans,
|X| Any individual with an investment account or advisory relationship with
IGAM or the Distributor,
|X| The Fund's shareholders of record as of October 1, 2000,
|X| Present or former officers, directors, and employees (or their
families) of the Fund, IGAM or the Distributor,
|X| One or more members of a group (including spouses and dependent
children) of at least 100 persons engaged, or previously engaged,
in a common business, profession, civic or charitable endeavor or
other activity (CDSC applies if redeemed within 18 months).
MARKETING AND DISTRIBUTION
T.O. Richardson Securities, Inc. (the "Distributor") is the principal
underwriter and national distributor for the Fund's shares. The Distributor is
a broker-dealer firm, registered with the SEC and in all 50 states. The
Distributor is a member in good standing with the National Association of
Securities Dealers, Inc.
SHAREHOLDER SERVICING AND DISTRIBUTION PLAN. Under a plan adopted by the Fund's
Board of Trustees pursuant to Rule 12b-1 under the 1940 Act (the "Plan"), the
Fund is authorized to pay the Distributor, the manager or others, shareholder
servicing and/or distribution fees at an annual rate not to exceed 0.25% of the
average daily net assets of the Fund. Such fees will be used to reimburse
persons who provide, or make payments for, administration, shareholder servicing
and distribution assistance for the Fund, including paying for the preparation
of advertising and sales literature and the printing and distribution of such
materials to prospective investors. Because these fees are paid out of the
Fund's assets on an on-going basis, over time these fees will increase the cost
of your investment and may cost you more than paying other types of sales
charges.
Certain broker-dealers, investment advisers, agents and other third parties are
authorized to accept orders on the Fund's behalf. These third parties may charge
transaction fees in connection with Fund transactions. These fees would be in
addition to any amounts paid by the Fund under the Plan.
HOW TO PURCHASE SHARES
GENERAL INFORMATION. You may purchase shares of the Fund at their net asset
value plus the applicable front-end sales charge. For an application or other
information, please call (800) 234-0849 or visit the Fund's web-site at
www.internetindexfund.net.
IRAS AND RETIREMENT
REGULAR ACCOUNT ACCOUNTS
MINIMUM INITIAL PURCHASES $1,000 $250
MINIMUM ADDITIONAL PURCHASES $50 $50
The Fund reserves the right to vary or waive the initial and additional
investment minimum requirements at any time. PURCHASES BY MAIL. You may purchase
shares by sending a completed and signed application, together with a check or
money order payable to the Internet Index Fund to:
REGULAR MAIL: OVERNIGHT OR EXPRESS MAIL:
------------- --------------------------
The Internet Index Fund The Internet Index Fund
c/o Firstar Mutual Fund Services, LLC c/o Firstar Mutual Fund Services, LLC
P.O. Box 701 615 East Michigan Street, 3rd Floor
Milwaukee, WI 53201-0701 Milwaukee, WI 53202
TRANSACTIONS USING THE INTERNET. You may obtain a prospectus, an account
application and other information regarding the Fund using the Internet by
visiting www.internetindexfund.net. If you elect the online transactions option
on the account application form (or fill out a separate online transaction
request form) you may also use the Internet to purchase (or redeem) shares,
check your account balance or check your transaction history.
PAYMENTS BY WIRE. You may also purchase shares of the Fund by wiring federal
funds from your bank. Your bank may charge you a fee for this service. If money
is to be wired, you must call the Fund at (800) 234-0849 to set up your account
and obtain an account number. You should be prepared to provide the information
on the Fund's application form to the telephone representative. Then, you should
provide your bank with the following information for purposes of wiring your
investment.
Firstar Mutual Fund Services, LLC Account Name ___________________
ABA # 042000013 (Write in account registration
name)
Attn: IGAM Group - The Internet Index Fund For the Account # _______________
D.D.A. # 112-952-137 (Write in account # assigned by
the Fund)
When making initial purchases by wire, you must send a signed application to the
Fund by regular or overnight mail at the addresses shown above in order to
complete your initial wire purchase. Wire orders will be accepted only on a day
on which the Fund is open for business. A wire purchase will not be considered
made until the wired money is received and the purchase is accepted by the Fund.
Any delays that may occur in wiring money, including delays that may occur in
processing by the banks, are not the responsibility of the Fund or its agents.
There is presently no fee for the receipt of wired funds, but the right to
charge shareholders for this service is reserved by the Fund.
PURCHASING THROUGH PROCESSING ORGANIZATIONS. You may also purchase shares of the
Fund through a "Processing Organization," which is a broker-dealer, bank or
other financial institution that purchases shares for its customers. When you
purchase shares this way, the Processing Organization may be listed as the
shareholder of record of the shares. Such shares may be transferred into your
name following procedures established by the Processing Organization and the
Fund. The minimum initial and subsequent investment amount for purchases through
a Processing Organization generally will be set by the Processing Organization.
Processing Organizations may also impose other charges and restrictions in
addition to or different from those applicable to investors who remain the
shareholder of record of their shares. Certain Processing Organizations may
receive payments from the Fund under its Distribution and Shareholder Servicing
Plan or payments from the Fund's investment manager.
TAX SHELTERED RETIREMENT PLANS. Shares of the Fund may be used as investments in
retirement plans such as: individual retirement plans (IRAs); simplified
employee pensions (SEPs); 401(k) plans; qualified corporate pension and profit
sharing plans (for employees); tax deferred investment plans (for employees of
public school systems and certain types of charitable organizations); and other
qualified retirement plans. You should contact the Fund for the procedure to
open an IRA or SEP plan, as well as more specific information regarding these
retirement plan options. Consultation with an attorney or tax advisor regarding
these plans is advisable. Custodial fees and other processing fees for an IRA
will be paid by the shareholder by redemption of sufficient shares of the Fund
from the IRA unless the fees are paid directly to the IRA custodian. You can
obtain information about IRA fees by calling the Fund at (800) 234-0849.
AUTOMATIC INVESTMENT PLAN. The Automatic Investment Plan permits you to purchase
shares of the Fund (minimum initial and subsequent investments of $50 per
transaction) at regular intervals. Provided your bank or other financial
institution allows automatic withdrawals, you may purchase shares by
transferring funds from the account you designate. At your option, the account
designated will be debited in the specific amount, and shares will be purchased
once a month, on the twentieth day. Only an account maintained at a domestic
financial institution which is an Automated Clearing House member may be so
designated. If you desire to participate in the Automatic Investment Plan, you
should call the Fund at (800) 234-0849 to obtain the appropriate forms. The
Automatic Investment Plan does not assure a profit and does not protect against
loss in declining markets. The Fund may modify or terminate the Automatic
Investment Plan at any time or charge a service fee. No such fee is currently
contemplated.
ADDITIONAL INFORMATION. The Fund reserves the right to limit or reject any
purchase request if, in its opinion, it is in the best interests of the Fund to
do so. Federal regulations require that investors provide a certified Taxpayer
Identification Number upon opening or reopening an account.
Dividends begin to accrue after you become a shareholder. The Fund does not
issue share certificates. All shares are held in non-certificate form registered
on the books of the Fund's transfer agent. If your check or wire does not clear,
a service fee of $25 will be deducted from your account and you will be
responsible for any loss incurred. If you are already a shareholder, the Fund
can redeem shares from any identically registered account in the Fund as
reimbursement for any loss incurred. You may be prohibited or restricted from
making future purchases in the Fund.
HOW TO REDEEM SHARES
GENERAL. You may request redemption of your Fund shares at any time. When a
request is received in proper form, the Fund will redeem the shares at the next
determined NAV.
The Fund will normally send you your redemption proceeds on the next business
day (and no later than seven calendar days) after receipt of a redemption
request in proper form. However, if you purchase Fund shares by check and
subsequently submit a redemption request, the redemption proceeds will not be
transmitted until your check has cleared, which may take up to 15 days. If you
have any questions about redemptions or need further information, please call
(800) 234-0849 or visit the Fund's website at www.internetindexfund.net.
REDEMPTIONS BY MAIL. Redemption requests by mail must include your signed letter
of instruction (including Fund name, account number(s), account names(s),
address and the dollar amount or number of shares you wish to redeem) and should
be addressed as follows:
REGULAR MAIL: OVERNIGHT OR EXPRESS MAIL:
------------- --------------------------
The Internet Index Fund The Internet Index Fund
c/o Firstar Mutual Fund Services, LLC c/o Firstar Mutual Fund Services, LLC
P.O. Box 701 615 East Michigan Street, 3rd Floor
Milwaukee, WI 53201-0701 Milwaukee, WI 53202
REDEMPTIONS BY TELEPHONE. If you elect the telephone redemption option on the
shareholder application form, you may make a telephone redemption request by
calling (800) 234-0849. The Fund or its agents may act on telephone instructions
from any person representing himself or herself to be a shareholder and
reasonably believed by the Fund or its agents to be genuine. The Fund and its
agents will employ reasonable procedures, such as requiring a form of personal
identification, to confirm that instructions are genuine and, if such procedures
are followed, neither the Fund nor its agents will be liable for following
telephone instructions reasonably believed to be genuine. IRA account holders
can not redeem by telephone.
During times of drastic economic or market conditions, you may experience
difficulty in contacting the Fund by telephone to request a redemption of Fund
shares. In such cases, you should consider using the other redemption procedures
described herein. Use of these other redemption procedures may result in the
redemption request being processed at a later time than it would have been if
telephone redemption had been used. During the delay, the Fund's net asset value
may fluctuate.
TRANSACTIONS USING THE INTERNET. You may obtain a prospectus, an account
application and other information regarding the Fund using the Internet by
visiting www.internetindexfund.net. If you elect the online transactions option
on the account application form (or fill out a separate online transaction
request form) you may also use the Internet to redeem (or purchase) shares,
check your account, balance or check your transaction history.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS. You may have redemption proceeds wired
to your brokerage account or a bank account that you designate. A transaction
fee of $12.00 will be charged for payments by wire. Questions about this option
or redemption requirements generally should be directed to the Fund at (800)
234-0849.
A signature guarantee is required for requests to redeem a large amount of
shares ($25,000 or more), if your address of record has been changed within the
past 30 days, or if you ask for proceeds to be sent to a different address. A
signature guarantee is used to help protect you and the Fund from fraud. You can
obtain a signature guarantee from most banks or securities dealers, BUT NOT FROM
A NOTARY PUBLIC. Please call the Fund to learn if a signature guarantee is
needed or to make sure that it is completed appropriately in order to avoid
processing delays.
If your account falls below $1,000 ($250 for qualified retirement accounts) for
other than market reasons, the Fund may request that you increase your balance.
If the account is still below the minimum after 60 days, the Fund may
automatically close your account and send you the proceeds. The Fund also
reserves the right to make a "redemption-in-kind" if the amount you are
redeeming is large enough to affect Fund operations or otherwise disrupt the
Fund. When the Fund redeems-in-kind, it pays the shareholder in portfolio
securities rather than cash, and the shareholder may experience additional
expenses such as brokerage commissions in order to sell the securities.
SYSTEMATIC WITHDRAWAL PLAN. If you own shares with a value of $10,000 or more,
you may participate in the Systematic Withdrawal Plan. The Systematic Withdrawal
Plan allows you to make automatic withdrawals of $100 or more from your account
at regular intervals. Amounts will be transferred from your Fund account to the
bank account you choose at the interval you select on the New Account
Application form. If you expect to purchase additional shares, it may not be to
your advantage to participate in the Systematic Withdrawal Plan because of the
possible adverse tax consequences of making purchases and redemptions during the
same or similar time periods.
If you are an IRA shareholder, you must indicate on your redemption request
whether or not to withhold federal income tax. Requests that do not indicate a
preference will be subject to withholding. IRA shareholders may not redeem
shares by telephone or Internet. Redemption requests must be in writing.
DISTRIBUTIONS AND TAXATION
The Fund distributes substantially all of the net investment income and net
capital gains that it realizes in the sale of securities. These income and gains
distributions are generally paid once each year, on or before December 31.
Distributions are automatically reinvested in additional shares of the Fund,
unless you elect to have the distributions paid to you in cash. There are no
sales charges or transaction fees for reinvested distributions and all shares
will be purchased at NAV.
In general, Fund distributions are taxable to you as either ordinary income or
capital gain. This is true whether you reinvest your distributions in additional
Fund shares or receive them in cash. Capital gain dividends paid by the Fund are
taxable to you as long-term capital gain no matter how long you have owned your
shares.
By law, the Fund must withhold 31% of your taxable distributions and redemption
proceeds if you do not provide your correct certified social security or
taxpayer identification number and certify that you are not subject to backup
withholding, or if the IRS instructs the Fund to do so.
Every January, you will receive a statement that shows the tax status of
distributions you received for the previous year. Distributions declared in
December but paid in January are taxable as if they were paid in December.
When you sell your shares of the Fund, you may have a capital gain or loss.
Fund distributions and gain from the sale or exchange of your shares generally
will be subject to state and local taxes. Non-U.S. investors may be subject to
U.S. withholding and estate tax. You should consult your tax advisor about the
federal, state, local or foreign tax consequences of your investment in the
Fund.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past fiscal year. 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 or lost on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Arthur Andersen LLP, whose report, along with
the Fund's financial statements, are included in the annual report, which is
available upon request.
November 4, 1999(1)
to
PER SHARE DATA: June 30, 2000
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
Income from investment operations:
Net investment income 0.12
Net realized and unrealized gains on investments 1.17
----
Total income from investment operations 1.29
----
Net asset value, end of period $11.29
TOTAL RETURN 12.90%(2)
------
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period $3,189,188 Ratios of expenses to average net
assets:
Before expense reimbursement 13.60%(3)
After expense reimbursement 1.40%(3)
Ratio of net investment income (loss) to average net
assets:
Before expense reimbursement (13.53)%(3)
After expense reimbursement (1.33)%(3)
Portfolio turnover rate 46.88%(2)
(1) Commencement of Operations
(2) Not annualized
(3) Annualized
BOARD OF TRUSTEES
Edward M. Mazze, Ph.D., Chairman
Eugene Y.W. Lee, Ph.D., CFA, President
Andrew C. Laviano, J.D.
Harris N. Rosen
Bruce Whyte
INVESTMENT MANAGER
INTEGRITY GLOBAL ASSET MANAGEMENT, INC.
Wakefield, Rhode Island
LEGAL COUNSEL
STRADLEY, RONON, STEVENS & YOUNG, LLP
Philadelphia, Pennsylvania
INDEPENDENT AUDITORS
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
TRANSFER AGENT, FUND ACCOUNTING AGENT
AND FUND ADMINISTRATOR
FIRSTAR MUTUAL FUND SERVICES, LLC
Milwaukee, Wisconsin
CUSTODIAN
FIRSTAR BANK, N.A.
Cincinnati, Ohio
The Statement of Additional Information (SAI) for the Fund contains more
information about the Fund's policies and management and is incorporated by
reference into this prospectus. The Fund's annual and semi-annual reports to
shareholders contain additional information about the Fund's investments and a
discussion of the market conditions that significantly affected the Fund and the
Index during each fiscal year. You may obtain free copies of these documents and
additional information about the Fund by:
Telephone: 1-800-234-0849
Internet: WWW.INTERNETINDEXFUND.NET
Mail:
REGULAR MAIL: OVERNIGHT OR EXPRESS MAIL:
------------- --------------------------
Internet Index Fund Internet Index Fund
c/o Firstar Mutual Fund Services, LLC c/o Firstar Mutual Fund Services, LLC
P.O. Box 701 615 East Michigan Street, 3rd Floor
Milwaukee, WI 53201-0701 Milwaukee, WI 53202
You may review and obtain copies of the SAI and other information about the Fund
by visiting the Securities and Exchange Commission's Public Reference Room in
Washington, DC. Please call 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 site at
http://www.sec.gov. Copies of the information may also be obtained for a fee by
writing the Public Reference Section, Securities and Exchange Commission,
Washington, DC 20549-0102 or by sending an electronic request to the SEC at the
following e-mail address: [email protected].
1940 Act File No. 811-9493
STATEMENT OF ADDITIONAL INFORMATION
FOR THE INTERNET INDEX FUND
Dated September 30, 2000
IGAM Group Funds
South Kingstown Office Park, Suite A5
24 Salt Pond Road
Wakefield, RI 02879
(401) 788-0977
Website: www.internetindexfund.net
This Statement of Additional Information relates to the Internet Index Fund (the
"Fund"), which is the first mutual fund within the IGAM Group Funds family. The
SAI is not a prospectus but should be read in conjunction with the Fund's
current Prospectus dated September 30, 2000. To obtain the Prospectus and other
information about the Fund, please visit the Fund's web-site, call
1-800-234-0849 or write to the Fund as shown below:
REGULAR MAIL: OVERNIGHT OR EXPRESS MAIL:
------------- --------------------------
Internet Index Fund Internet Index Fund
c/o Firstar Mutual Fund Services, LLC c/o Firstar Mutual Fund Services, LLC
P.O. Box 701 615 East Michigan Street, 3rd Floor
Milwaukee, WI 53201-0701 Milwaukee, WI 53202
The Fund's audited financial statements for the period November 4, 1999 through
June 30, 2000 contained in its annual report to shareholders are incorporated
herein by reference.
TABLE OF CONTENTS
THE FUND.......................................................................3
INVESTMENT OBJECTIVE AND STRATEGIES............................................3
INVESTMENT RESTRICTIONS........................................................7
MANAGEMENT OF THE FUND.........................................................9
MANAGEMENT OWNERSHIP..........................................................12
INVESTMENT MANAGER............................................................12
CODE OF ETHICS................................................................13
ADMINISTRATIVE SERVICES.......................................................14
CUSTODIAN.....................................................................14
DISTRIBUTOR...................................................................14
PRICING OF SHARES.............................................................15
SHARES OF BENEFICIAL INTEREST.................................................16
PURCHASING SHARES.............................................................17
REDEMPTION OF SHARES..........................................................18
PORTFOLIO TRANSACTIONS AND TURNOVER...........................................19
ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES.............................20
PERFORMANCE INFORMATION.......................................................22
AUDITORS......................................................................24
FINANCIAL STATEMENTS..........................................................24
THE FUND
IGAM Group Funds (the "Trust") is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended (the "1940 Act")
which is currently comprised of a single fund called the Internet Index Fund
(the "Fund"). The Trust was organized as a business trust under the Delaware
Business Trust Act on July 16, 1999. The Fund's registered office in Delaware is
The Corporation Trust Company, 1209 Orange Street, Wilmington, DE 19801 and its
principal office is at South Kingstown Office Park, Suite A5, 24 Salt Pond Road,
Wakefield, RI 02879.
INVESTMENT OBJECTIVE AND STRATEGIES
The Fund is a non-diversified series of the Trust. The Fund's investment
objective is to provide investment results, using statistical procedures, that
parallel the Dow Jones Internet IndexSM, a diversified index which is comprised
of approximately 40 stocks of companies whose primary focus is Internet related.
The following discussion of investment techniques and instruments supplements
and should be read in conjunction with the investment information set forth in
the Fund's Prospectus. The investment practices described below, except for the
discussion of certain specified investment policies and restrictions, are not
fundamental and may be changed by the Board of Trustees without the approval of
the shareholders. In seeking to meet its investment objective, the Fund may
invest in any type of security whose characteristics are consistent with the
Fund's investment program. The securities in which the Fund may invest include
those described below.
COMMON AND PREFERRED STOCK. Common stocks are units of ownership of a
corporation. Preferred stocks are stocks that often pay dividends at a specific
rate and have a preference over common stocks in dividend payments and
liquidation of assets. Some preferred stocks may be convertible into common
stock. Convertible securities are securities that may be converted into or
exchanged for a specific amount of common stock of the same or different issuer
within a particular period of time at a specified price or formula.
FUTURES. The Fund may enter into contracts for the purchase or sale for future
delivery of securities including contracts for the purchase or sale for future
delivery of the stocks within an index. The Fund will not use futures contacts
as leveraged investments that magnify the gains and losses of an investment. A
purchase of a futures contract means the acquisition of a contractual right to
obtain delivery to the Fund of the securities or foreign currency called for by
the contract at a specified price and future date. When the Fund enters into a
futures transaction, it must deliver to the futures commission merchant selected
by the Fund an amount referred to as "initial margin." This amount is maintained
by the futures commission merchant in a segregated account at the custodian
bank. Thereafter, a "variation margin" may be paid by the Fund to, or drawn by
the Fund from, such account in accordance with controls set for such accounts,
depending upon changes in the price of the underlying securities subject to the
futures contract.
The Fund may enter into futures contracts and engage in options on futures to
the extent that no more than 5% of the Fund's assets are required as futures
contract margin deposits and premiums on options, and may engage in such
transactions to the extent that obligations relating to such futures and related
options on futures transactions represent not more than 20% of the Fund's
assets.
Although futures contracts by their terms call for actual delivery or acceptance
of the underlying securities, in most cases the contracts are closed out before
the settlement date without the making or taking of delivery. Closing out an
open futures position is done by taking an opposite position ("buying" a
contract which has previously been "sold," or "selling" a contract previously
purchased) in an identical contract to terminate the position. Unlike other
futures contracts, a stock index futures contract specifies that no delivery of
the actual stocks making up the index will take place. Instead, settlement in
cash must occur upon the termination of the contract. Brokerage commissions are
incurred when a futures contract is bought or sold.
The Fund will enter into futures transactions on domestic exchanges and, to the
extent such transactions have been approved by the Commodity Futures Trading
Commission for sale to customers in the United States, on foreign exchanges.
INDEX OPTIONS. The Fund may purchase exchange-listed put and call options on
stock indices and sell such options in closing sale transactions. The Fund may
purchase call options on indices to temporarily achieve market exposure when the
Fund is not fully invested. The Fund may also purchase exchange-listed call
options on particular market segment indices to achieve temporary exposure to a
specific industry. While the option is open, the Fund will maintain a segregated
account with its custodian in an amount equal to the market value of the option.
Options on indices are similar to regular options except that an option on an
index gives the holder the right, upon exercise, to receive an amount of cash if
the closing level of the index upon which the option is based is greater than
(in the case of a call) or lesser than (in the case of a put) the exercise price
of the option. This amount of cash is equal to the difference between the
closing price of the index and the exercise price of the option expressed in
dollars times a specified multiple (the "multiplier").
The Fund's purchases of options on indices will subject it to the following
risks described below. First, because the value of an index option depends upon
movements in the level of the index rather than the price of a particular
security, whether the Fund will realize gain or loss on the purchase of an
option on an index depends upon movements in the level of prices in the market
generally or in an industry or market segment rather than movements in the price
of a particular security.
Second, index prices may be distorted if trading of a substantial number of
securities included in the index is interrupted causing the trading of options
on that index to be halted. If a trading halt occurred, the Fund would not be
able to close put options which it had purchased and the Fund may incur losses
if the underlying index moved adversely before trading resumed. If a trading
halt occurred and restrictions prohibiting the exercise of options were imposed
through the close of trading on the last day before expiration, exercises on
that day would be settled on the basis of a closing index value that may not
reflect current price information for securities representing a substantial
portion of the value of the index.
Third, if the Fund holds an index option and exercises it before final
determination of the closing index value for that day, it runs the risk that the
level of the underlying index may change before closing. If such a change causes
the exercised option to fall "out-of-the-money," the Fund will be required to
pay the difference between the closing index value and the exercise price of the
option (times the applicable multiplier) to the assigned writer. Although the
Fund may be able to minimize this risk by withholding exercise instructions
until just before the daily cutoff time or by selling rather than exercising the
option when the index level is close to the exercise price, it may not be
possible to eliminate this risk entirely because the cutoff times for index
options may be earlier than those fixed for other types of options and may occur
before definitive closing index values are announced.
U.S. GOVERNMENT SECURITIES. U.S. Government securities are obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities. The U.S.
Government does not guarantee the net asset value of the Funds' shares. Some
U.S. Government securities, such as Treasury bills, notes and bonds, and
securities guaranteed by the Government National Mortgage Association ("GNMA"),
are supported by the full faith and credit of the United States; others, such as
those of the Federal Home Loan Banks, are supported by the right of the issuer
to borrow from the U.S. Treasury; others, such as those of the Federal National
Mortgage Association ("FNMA"), are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations; and still others, such
as those of the Student Loan Marketing Association, are supported only by the
credit of the instrumentality. U.S. Government securities include securities
that have no coupons, or have been stripped of their unmatured interest coupons,
individual interest coupons from such securities that trade separately, and
evidences of receipt of such securities. Such securities may pay no cash income,
and are purchased at a deep discount from their value at maturity. Because
interest on zero coupon securities is not distributed on a current basis but is,
in effect, compounded, zero coupon securities tend to be subject to greater
market risk than interest-payment securities, such as CATs and TIGRs, which are
not issued by the U.S. Treasury, and are therefore not U.S. Government
securities, although the underlying bond represented by such receipt is a debt
obligation of the U.S. Treasury. Other zero coupon Treasury securities (STRIPs
and CUBEs) are direct obligations of the U.S. Government.
BANK OBLIGATIONS. Certificates of deposit are short-term obligations of
commercial banks. A bankers' acceptance is a time draft drawn on a commercial
bank by a borrower, usually in connection with international commercial
transactions. Certificates of deposit may have fixed or variable rates.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend its investment securities to
approved borrowers who need to borrow securities in order to complete certain
transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations, provided that such loans do not
exceed 33 1/3% of the Fund's total assets at the time of the most recent loan.
By lending its investment securities, the Fund attempts to increase its income
through the receipt of interest on the loan. Any gain or loss in the market
price of the securities loaned that might occur during the term of the loan
would be for the account of the Fund. The Fund may lend its investment
securities to qualified brokers, dealers, domestic and foreign banks or other
financial institutions, so long as the terms, the structure and the aggregate
amount of such loans are not inconsistent with the 1940 Act or the rules and
regulations or interpretations of the Securities and Exchange Commission (the
"SEC") thereunder, which currently require that: (a) the borrower pledge and
maintain with a Fund collateral consisting of cash, an irrevocable letter of
credit issued by a bank or securities issued or guaranteed by the United States
Government having a value at all times not less than 100% of the value of the
securities loaned; (b) the borrower add to such collateral whenever the price of
the securities loaned rises (i.e., the borrower "marks to the market" on a daily
basis); (c) the loan be made subject to termination by a Fund at any time; and
(d) the Fund receives reasonable interest on the loan (which may include the
Fund investing any cash collateral in interest bearing short-term investments).
All relevant facts and circumstances, including the creditworthiness of the
broker, dealer or institution, will be considered in making decisions with
respect to the lending of securities, subject to review by the Board of
Trustees.
At the present time, the staff of the SEC does not object if an investment
company pays reasonable negotiated fees in connection with loaned securities so
long as such fees are set forth in a written contract and approved by the
investment company's Board of Trustees. In addition, voting rights may pass with
the loaned securities, but if a material event occurs affecting an investment on
a loan, the loan must be called and the securities voted.
REPURCHASE AGREEMENTS. When the Fund enters into a repurchase agreement, it
purchases securities from a bank or broker-dealer which simultaneously agrees to
repurchase the securities at a mutually agreed upon time and price, thereby
determining the yield during the term of the agreement. As a result, a
repurchase agreement provides a fixed rate of return insulated from market
fluctuations during the term of the agreement. The term of a repurchase
agreement generally is short, possibly overnight or for a few days, although it
may extend over a number of months (up to one year) from the date of delivery.
Repurchase agreements will be fully collateralized and the collateral will be
marked-to-market daily. The Fund may not enter into a repurchase agreement
having more than seven days remaining to maturity if, as a result, such
agreement, together with any other illiquid securities held by the Fund, would
exceed 15% of the value of the net assets of the Fund.
In the event of bankruptcy or other default by the seller of the security under
a repurchase agreement, the Fund may suffer time delays and incur costs or
possible losses in connection with the disposition of the collateral. In such
event, instead of the contractual fixed rate of return, the rate of return to
the Fund would be dependent upon intervening fluctuations of the market value of
the underlying security and the accrued interest on the security. Although the
Fund would have rights against the seller for breach of contract with respect to
any losses arising from market fluctuations following the failure of the seller
to perform, the ability of the Fund to recover damages from a seller in
bankruptcy or otherwise in default would be reduced.
Repurchase agreements are securities for purposes of the tax diversification
requirements that must be met for pass-through treatment under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, the
Fund will limit the value of its repurchase agreements on each of the quarterly
testing dates to ensure compliance with Subchapter M of the Code.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements involve sales of
portfolio securities of the Fund to member banks of the Federal Reserve System
or securities dealers believed creditworthy, concurrently with an agreement by
the Fund to repurchase the same securities at a later date at a fixed price
which is generally equal to the original sales price plus interest. The Fund
retains record ownership and the right to receive interest and principal
payments on the portfolio securities involved. In connection with each reverse
repurchase transaction, the Fund will direct its custodian bank to place cash,
U.S. government securities, equity securities and/or investment and
non-investment grade debt securities in a segregated account of the Fund in an
amount equal to the repurchase price. Any assets held in any segregated account
shall be liquid, unencumbered and marked-to-market daily.
A reverse repurchase agreement involves the risk that the market value of the
securities retained by the Fund may decline below the price of the securities
the Fund has sold but is obligated to repurchase under the agreement. In the
event the buyer of securities under a reverse repurchase agreement files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds of the agreement
may be restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the securities.
Reverse repurchase agreements are considered borrowings and as such, are subject
to the same investment limitations.
BORROWING. The Fund may borrow money as a temporary measure or for extraordinary
purposes or to facilitate redemptions subject to the fundamental investment
restriction described below under the heading "Investment Restrictions." The
Fund will not borrow money in excess of 33 1/3% of the value of its total
assets. Any borrowing above 5% of the Fund's total assets will be done from a
bank with the required asset coverage of at least 300%. In the event that such
asset coverage shall at any time fall below 300%, the Fund shall, within three
days thereafter (not including Sundays or holidays), or such longer period as
the SEC may prescribe by rules and regulations, reduce the amount of its
borrowings to such an extent that the asset coverage of such borrowings shall be
at least 300%.
OTHER INVESTMENTS. The Board of Trustees may, in the future, authorize the Fund
to invest in securities other than those listed in this SAI and in the
prospectus, provided such investment would be consistent with the Fund's
investment objective and that it would not violate any fundamental investment
policies or restrictions.
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS. The Fund has adopted the
following fundamental investment policies and restrictions which cannot be
changed without the approval of a "majority of the outstanding voting
securities" of the Fund. Under the 1940 Act, a "majority of the outstanding
voting securities" of a fund means the vote of: (i) more than 50% of the
outstanding voting securities of the fund; or (ii) 67% or more of the voting
securities of the fund present at a meeting, if the holders of more than 50% of
the outstanding voting securities are present or represented by proxy, whichever
is less.
CONCENTRATION. The Fund has adopted a policy of concentrating in securities
issued by companies within the Internet industry but will, otherwise, not make
investments that result in the concentration (as that term may be defined in the
1940 Act, any rule or order thereunder, or U.S. Securities and Exchange
Commission ("SEC") staff interpretation thereof) of its investments in the
securities of issuers primarily engaged in the same industry. This restriction,
however, does not limit the Fund from investing in obligations issued or
guaranteed by the U.S. government, or its agencies or instrumentalities. The SEC
staff currently takes the position that a fund concentrates its investments in a
particular industry if more than 25% of its net assets is invested in issuers
within the industry.
SENIOR SECURITIES & BORROWING. The Fund may not borrow money or issue senior
securities, except as the 1940 Act, any rule or order thereunder, or SEC staff
interpretation thereof, may permit.
UNDERWRITING. The Fund may not underwrite the securities of other issuers,
except that the Fund may engage in transactions involving the acquisition,
disposition or resale of its portfolio securities, under circumstances where it
may be considered to be an underwriter under the Securities Act of 1933.
REAL ESTATE. The Fund may not purchase or sell real estate, unless acquired as a
result of ownership of securities or other instruments and provided that this
restriction does not prevent the Fund from investing in issuers which invest,
deal or otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
COMMODITIES. The Fund may not purchase or sell physical commodities, unless
acquired as a result of ownership of securities or other instruments and
provided that this restriction does not prevent the Fund from engaging in
transactions involving futures contracts and options thereon or investing in
securities that are secured by physical commodities.
LENDING. The Fund may not make loans, provided that this restriction does not
prevent the Fund from purchasing debt obligations, entering into repurchase
agreements, loaning its assets to broker/dealers or institutional investors and
investing in loans, including assignments and participation interests.
NON-FUNDAMENTAL POLICIES AND RESTRICTIONS. In addition to the fundamental
policies and investment restrictions described above, and the various general
investment policies described in the Prospectus and this SAI, the Fund will be
subject to the following investment restrictions, which are considered
non-fundamental and may be changed by the Board of Trustees without shareholder
approval.
OTHER INVESTMENT COMPANIES. The Fund is permitted to invest in other investment
companies, including open-end, closed-end or unregistered investment companies,
either within the percentage limits set forth in the 1940 Act, any rule or order
thereunder, or SEC staff interpretation thereof, or without regard to percentage
limits in connection with a merger, reorganization, consolidation or other
similar transaction. However, the Fund may not operate as a "fund of funds"
which invests primarily in the shares of other investment companies as permitted
by Section 12(d)(1)(F) or (G) of the 1940 Act, if its own shares are utilized as
investments by such a "fund of funds."
ILLIQUID SECURITIES. The Fund may not invest more than 15% of its net assets in
securities which it can not sell or dispose of in the ordinary course of
business within seven days at approximately the value at which the Fund has
valued the investment.
NON-DIVERSIFIED FUND. The Fund is non-diversified under the 1940 Act, which
means that there is no restriction under the 1940 Act on how much the Fund may
invest in the securities of any one issuer. However, to qualify for tax
treatment as a regulated investment company under the Internal Revenue Code
("Code"), the Fund intends to comply, as of the end of each taxable quarter,
with certain diversification requirements imposed by the Code. Pursuant to these
requirements, the Fund will, among other things, limit its investments in the
securities of any one issuer (other than U. S. Government securities or
securities of other regulated investment companies) to no more than 25% of the
value of the Fund's total assets. In addition, the Fund, with respect to 50% of
its total assets, will limit its investments in the securities of any issuer to
5% of the Fund's total assets, and will not purchase more than 10% of the
outstanding voting securities of any one issuer.
In applying the Fund's fundamental policy concerning concentration that is
described above, it is a matter of non-fundamental policy that investments in
certain categories of companies will not be considered to be investments in a
particular industry. For example: (i) financial service companies will be
classified according to the end users of their services, for example, automobile
finance, bank finance and diversified finance will each be considered a separate
industry; (ii) technology companies will be divided according to their products
and services, for example, hardware, software, information services and
outsourcing, or telecommunications will each be a separate industry; (iii)
asset-backed securities will be classified according to the underlying assets
securing such securities; and (iv) utility companies will be divided according
to their services, for example, gas, gas transmission, electric and telephone
will each be considered a separate industry.
MANAGEMENT OF THE FUND
The Trust is governed by a Board of Trustees. The Board of Trustees consists of
five individuals, four of whom are not "interested persons" of the Trust as that
term is defined in Section 2(a)(19) of the 1940 Act. The Trustees are
experienced business persons who meet throughout the year to oversee the Trust's
activities, review contractual arrangements with companies that provide services
to the Fund, and review performance. The names and business addresses of the
Trustees and officers of the Trust, together with information as to their
principal occupations during the past five years, are listed below.
<TABLE>
<CAPTION>
--------------------------------------------- -------- ----------------- ----------------------------------------------------
Name and Address Age Position Principal Occupations during the Past Five Years
--------------------------------------------- -------- ----------------- ----------------------------------------------------
<S> <C> <C> <C>
Edward M. Mazze, Ph.D. 59 Chairman of the Presently, Dean, College of Business
The University of Rhode Island Board of Administration of the University of Rhode Island
College of Business Administration Trustees since 1998; Director, Technitrol Incorporated
7 Lippit Road since 1985; Director, McGettigan Partners,
301 Ballentine Hall 1989-1993, 1997 to present; Honorary Board Member,
Kingston, RI 02881-0802 Delaware Valley College of Science and
Agriculture, since 1997; Accreditation
Panel Member, Middle States Association of
Colleges and Secondary School Commission of
Higher Education, since 1981; Previously, Dr. Mazze
held the position of Dean at the University of
North Carolina at Charlotte's Belk College of
Business Administration (1993-1998), at the School
of Business and Management at Temple University
(1979-1986, professor from 1979-1993) and at
Seton Hall University's W. Paul Stillman School
of Business (1975-1979). From 1984 to 1997,
Dr.Mazze was a Bankruptcy Trustee for the United
States Bankruptcy Court in the Eastern District
of Pennsylvania, and from 1985 to 1987, he served
as the Chairman of the Board and Chief Executive
Officer of the William Penn Bank in Philadelphia
(now part of Mellon Bank). He also previously
served on the Boards of numerous public and
private businesses, educational organizations
and foundations and held numerous governmental,
professional and academic appointments.
--------------------------------------------- -------- ----------------- ----------------------------------------------------
Eugene Y.W. Lee, Ph.D.* 49 Trustee, President, Integrity Global Asset Management, Inc.
Integrity Global Asset Management, Inc. President, since 1997; Associate Professor of Finance,
South Kingstown Office Park Treasurer and University of Rhode Island (faculty member since
Suite A5 Secretary 1992).
24 Salt Pond Road
Wakefield, RI 02879
--------------------------------------------- -------- ----------------- ----------------------------------------------------
Andrew Laviano 58 Trustee and Professor, University of Rhode Island since 1976;
The University of Rhode Island Chairman of previously, attorney in private practice.
College of Business Administration Audit Committee
7 Lippit Road
349 Ballentine Hall
Kingston, RI 02881-0802
--------------------------------------------- -------- ----------------- ----------------------------------------------------
Harris N. Rosen 67 Trustee At the University of Rhode Island, presently
76 Sundance Trail serves as Special Assistant to the Dean of the
Wakefield, RI 02879 University, and in 1998, as Executive in
Residence, teaching courses in Supervision,
Management and Introduction to Business; previously,
President of School House Candy Company,
Pawtucket, RI 1969 through 1998; Mr.Rosen also
serves as the Director of the Jewish Federation
of Rhode Island and has served in various capacities
since 1970; Trustee of Women and Infants' Hospital,
Rhode Island, since 1978; Corporator of Rhode Island
Hospital since 1982; and has held numerous business
and community service positions in the Rhode Island
area over the years.
--------------------------------------------- -------- ----------------- ----------------------------------------------------
Bruce Whyte 59 Trustee Self-employed Marketing Consultant since 1992;
331 Stratfield Road Director of Business Development, First Alert
Fairfield, CT 06432 (disaster recovery emergency services), 1998-1999,
and Managing Consultant, EverColor Fine Art
(printing and fine art publishing company),
1998-1999; Executive Vice President and Director,
Sanctuary Inc. (product and service provider to
older adults and their families), 1996-1997;
President, Ulster Arts Alliance, Inc. (professional
service organization), 1992-1996; Chairman, Center
for Arts and Technology, 1992-1996; Treasurer
and Marketing Director, Entrepreneurial Catalyst
Forum, Inc., 1992-1996. Mr. Whyte has served as an
advisor and business consultant to both the United
States Congress and United States Treasury Department,
as well as to the New York Department of State, New
York Attorney General, New York State Senate and
Assembly, and New York State Council on the Arts.
--------------------------------------------- -------- ----------------- ----------------------------------------------------
</TABLE>
* Dr. Lee is deemed to be an "interested person" of the Trust as that term is
defined in Section 2(a)(19) of the 1940 Act.
TRUSTEE COMPENSATION. For their service as Trustees, the independent trustees
receive $1,000 per Trustee meeting, as well as reimbursement for expenses
incurred in connection with attendance at Board meetings. The Chairman of the
Board receives additional compensation of $500 per meeting for his services as
chairman, and the Chairman of the Audit Committee receives additional
compensation of $250 per meeting for his service as chairman. Dr. Lee is an
interested trustee and, therefore, is paid by the investment manager and does
not receive any compensation for his service as a Trustee. These compensation
amounts will remain in place until the Fund reaches $50 million in assets. When
the Fund reaches $50 million, the independent trustees will receive $2,000 per
Board meeting attended, as well as reimbursement for expenses incurred in
connection with attendance at Board meetings. The Chairman of the Board will
receive additional compensation of $2,000 per Board meeting attended for his
service as chairman, and the Chairman of the Audit Committee will receive
additional annual compensation of $2,000.
The following chart provides certain information about the Trustee fees of the
Trust for the period November 4, 1999 through June 30, 2000.*
<TABLE>
<CAPTION>
------------------------ --------------------- --------------------- ------------------ -----------------------
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FROM COMPANY AND FUND
NAME OF PERSON/POSITION COMPENSATION FROM ACCRUED AS PART OF BENEFITS UPON COMPLEX* PAID TO
THE TRUST FUND EXPENSES RETIREMENT TRUSTEES
------------------------ --------------------- --------------------- ------------------ -----------------------
<S> <C> <C> <C> <C>
EDWARD M. MAZZE, PH.D, $6,000 $0 $0 $6,000
CHAIRMAN OF THE BOARD
------------------------ --------------------- --------------------- ------------------ -----------------------
EUGENE Y.W. LEE, PH.D, $0 $0 $0 $0
CFA PRESIDENT
------------------------ --------------------- --------------------- ------------------ -----------------------
ANDREW C. LAVIANO, $5,000 $0 $0 $5,000
J.D. TRUSTEE AND
CHAIRMAN OF AUDIT
COMMITTEE
------------------------ --------------------- --------------------- ------------------ -----------------------
HARRIS N. ROSEN TRUSTEE $4,000 $0 $0 $4,000
------------------------ --------------------- --------------------- ------------------ -----------------------
BRUCE WHYTE TRUSTEE $4,000 $0 $0 $4,000
------------------------ --------------------- --------------------- ------------------ -----------------------
</TABLE>
*The "Fund Complex" includes only the Fund.
The information presented in the table above is for the period November
4, 1999 through June 30, 2000.
Trustees of the IGAM Group Fund family, employees, retirees and their families
of IGAM and T.O. Richardson, individuals holding an account or other advisory
relationship with IGAM or T.O. Richardson, and employees and/or representatives
of registered broker-dealers with a selling agreement with T.O. Richardson do
not have to pay front-end sales charges (provided the status of the investment
is explained at the time of investment) on purchases of Fund shares. These
exemptions of sales charges are due to the nature of the investors and/or the
reduced sales efforts that will be needed in obtaining such investments.
CONTROL PERSONS, PRINCIPAL HOLDERS OF SECURITIES AND MANAGEMENT OWNERSHIP. The
following table provides the name and address of any person who owns of record
or beneficially 5% or more of the outstanding shares of the Fund as of August
31, 2000 (a "principal shareholder"). A control person is one who owns
beneficially or through controlled companies more than 25% of the voting
securities of a company or acknowledges the existence of control. There are no
control persons of the Fund. Principal holders are persons that beneficially own
5% or more of a Fund's outstanding shares.
PRINCIPAL SHAREHOLDERS OF THE FUND
<TABLE>
<CAPTION>
------------------------------------------- --------------------- ------------------- -----------------------------------
Name and Address Shares % Ownership Type of Ownership
------------------------------------------- --------------------- ------------------- -----------------------------------
<S> <C> <C> <C>
Charles Schwab & Co., Inc.
101 Montgomery Street 113,813.673 42.09% Record
San Francisco, CA 94104
National Financial Services Corporation
One World Financial Ctr 28,097.375 10.39% Record
200 Liberty St
New York, NY 1091-1003
Deno Melchiorre 16,254.876 6.01% Record
Deno Melchiorre Trust
PO Box 74
Deerfield, IL 60015-0074
------------------------------------------- --------------------- ------------------- -----------------------------------
</TABLE>
MANAGEMENT OWNERSHIP
As of August 31, 2000, the Trustees and Officers of the Trust, as a group, owned
2.74% of the outstanding shares of the Fund. Eugene Y.W. Lee, Ph.D, President of
the Fund, owns 2.54% and the Chairman of the Board, Edward M. Mazze, Ph.D, owns
0.20% of Fund shares.
INVESTMENT MANAGER
Integrity Global Asset Management, Inc. ("IGAM"), is a Delaware corporation that
serves as an investment manager to the Fund pursuant to an Investment Management
Agreement dated as of September 13, 1999. Eugene Y.W. Lee, Ph.D., CFA, is the
President and founder of IGAM and the Chief Portfolio Manager for the Fund. He
is also the President, Treasurer and Secretary of IGAM Group Funds, and serves
on its Board of Trustees. Dr. Lee is a Chartered Financial Analyst and received
his Master of Arts degree in Mathematics from the University of Texas at Austin
in 1986 followed by his doctoral degree in Finance in 1986. He joined the
faculty of the University of Rhode Island in 1992 and is currently an Associate
Professor of Finance. Dr. Lee previously was Assistant Professor of Finance at
University of Missouri - Columbia from 1986 to 1992.
This Investment Management Agreement is effective for an initial term of two
years and will continue on a year-to-year basis thereafter, provided that
specific approval is voted at least annually by the Board of Trustees of the
Trust or by the vote of the holders of a majority of the outstanding voting
securities of the Fund. In either event, it must also be approved by a majority
of the trustees of the Trust who are neither parties to the Agreement nor
interested persons of any such party as defined in the 1940 Act at a meeting
called for the purpose of voting on such approval. The Investment Manager's
decisions are made subject to direction of the Board of Trustees. The Agreement
may be terminated at any time, without the payment of any penalty, by vote of a
majority of the outstanding voting securities of the Fund.
For the services provided by the investment manager under the Agreement, the
Trust, on behalf of the Fund, has agreed to pay to IGAM an annual fee of 0.65%
of the Fund's average daily net assets. All fees are computed on the average
daily closing net asset value of the Fund and are payable monthly. The fee is
higher than the fee paid by most other index mutual funds.
IGAM has contractually agreed through December 31, 2001 to waive all or a
portion of the advisory fee, and to pay Fund expenses, to the extent necessary
to limit the Fund's total annual operating expenses to 0.99%. After that date,
IGAM may determine to continue to control Fund operating expenses under a
contractual or voluntary arrangement, or it may end the arrangement. When the
Fund's assets grow to a point where fee waivers are no longer necessary, IGAM
may seek to recoup amounts waived or expenses payments that it made. IGAM shall
only be entitled to recoup such amounts for a period of three years from the
date the amount was waived or paid. For the period November 4, 1999 through June
30, 2000, the total amount payable to IGAM for investment management services,
all of which was waived, was $10,578.
CODE OF ETHICS
Both the Trust and the Investment Manager have adopted Codes of Ethics that
govern the conduct of employees of the Trust and Investment Manager who may have
access to information about the Fund's securities transactions. The Codes
recognize that such persons owe a fiduciary duty to the Fund's shareholders and
must place the interests of shareholders ahead of their own interests. Among
other things, the Codes require preclearance of personal securities
transactions; certain blackout periods for personal trading of securities which
may be considered for purchase or sale by the Fund or other clients of the
Investment Manager; annual and quarterly reporting of personal securities
holdings; and limitations on personal trading of initial public offerings.
Violations of the Codes are subject to review by the Trustees and could result
in severe penalties.
ADMINISTRATIVE SERVICES
Firstar Mutual Fund Services, LLC, 615 East Michigan Street, Milwaukee, WI
53202, a subsidiary of Firstar Corporation, provides administrative personnel
and services (including blue-sky services) to the Fund. Administrative services
include, but are not limited to, providing office space, equipment, telephone
facilities, various personnel, including clerical and supervisory, and
computers, as is necessary or beneficial to provide compliance services to the
Fund. Firstar Mutual Fund Services, LLC also serves as fund accountant and
transfer agent under separate agreements. For the period November 4, 1999
through June 30, 2000, the total amount the Fund paid to Firstar Mutual Fund
Services, LLC was $25,329.
CUSTODIAN
Firstar Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202, a subsidiary
of Firstar Corporation, is custodian for the securities and cash of the Fund.
Under the Custodian Agreement, Firstar Bank, N.A. holds the Fund's portfolio
securities in safekeeping and keeps all necessary records and documents
relating to its duties.
DISTRIBUTOR
T.O. Richardson Securities, Inc. serves as the principal underwriter and
national distributor for the shares of the Fund pursuant to a Distribution
Agreement with the Trust dated as of September 13, 1999 (the "Distribution
Agreement"). T.O. Richardson Securities, Inc. is registered as a broker-dealer
under the Securities Exchange Act of 1934 and each state's securities laws and
is a member of the NASD. The offering of the Fund's shares is continuous. The
Distribution Agreement provides that the Distributor, as agent in connection
with the distribution of Fund shares, will use its best efforts to distribute
the Fund's shares. For the period November 4, 1999 through June 30, 2000, the
Distributor was entitled to receive $4,069 for its services.
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN. The Board of Trustees has adopted a
Distribution and Shareholder Servicing Plan on behalf of the Fund, in accordance
with Rule 12b-1 (the "Plan") under the 1940 Act. The Fund is authorized under
the Plan to use the assets of the Fund to reimburse the Investment Manager, the
Distributor or others for their actual expenses associated with certain
activities relating to the distribution and promotion of shares of the Fund to
investors and for providing other shareholder services. The maximum amount
payable under the Plan is 0.25% of the Fund's average net assets on an annual
basis. For the period November 4, 1999 through June 30, 2000, the Fund paid the
following 12b-1 fees under the plan:
--------------------------------------------------------------------- ----------
FUND EXPENDITURES UNDER 12B-1 PLAN (11/4/99 TO 6/30/00)
--------------------------------------------------------------------- ----------
Advertising None
--------------------------------------------------------------------- ----------
Printing and/or mailing of prospectuses to the other
current shareholders $466
--------------------------------------------------------------------- ----------
Compensation to the Distributor None
--------------------------------------------------------------------- ----------
Compensation to sales None
--------------------------------------------------------------------- ----------
Interest carrying or other financing charges None
--------------------------------------------------------------------- ----------
Other None
--------------------------------------------------------------------- ----------
The NASD's maximum sales charge rule relating to mutual fund shares establishes
limits on all types of sales charges, whether front-end, deferred or
asset-based. This rule may operate to limit the aggregate distribution fees to
which shareholders may be subject under the terms of the Plan.
The Plan authorizes the use of Fund assets to reimburse expenses incurred by,
banks, broker/dealers and other institutions which provide distribution
assistance and/or shareholder services including, but not limited to, printing
and distributing prospectuses to persons other than Fund shareholders, printing
and distributing advertising and sales literature and reports to shareholders
used in connection with selling shares of the Fund, furnishing personnel and
communications equipment to service shareholder accounts and prospective
shareholder inquiries.
The Plan requires that any person authorized to direct the disposition of monies
paid or payable by the Fund pursuant to the Plan or any related agreement
prepare and furnish to the Trustees for their review, at least quarterly,
written reports complying with the requirements of the Rule and setting out the
amounts expended under the Plan and the purposes for which those expenditures
were made. The Plan provides that so long as it is in effect the selection and
nomination of Trustees who are not interested persons of the Trust will be
committed to the discretion of the Trustees then in office who are not
interested persons of the Trust.
Neither the Plan nor any related agreements can take effect until approved by a
majority vote of both all the Trustees and those Trustees who are not interested
persons of the Trust and who have no direct or indirect financial interest in
the operation of the Plan or in any agreements related to the Plan, cast in
person at a meeting called for the purpose of voting on the Plan and the related
agreements. The Trustees approved the Plan on September 13, 1999.
The Plan will continue in effect only so long as its continuance is specifically
approved at least annually by the Trustees in the manner described above for
Trustee approval of the Plan. The Plan for the Fund may be terminated at any
time by a majority vote of the Trustees who are not interested persons of the
Trust and who have no direct or indirect financial interest in the operations of
the Plan or in any agreement related to the Plan or by vote of a majority of the
outstanding voting securities of the Fund.
The Plan may not be amended so as to materially increase the amount of the
distribution fees for the Fund unless the amendment is approved by a vote of at
least a majority of the outstanding voting securities of the Fund. In addition,
no material amendment may be made unless approved by the Trustees in the manner
described above for Trustee approval of the Plan.
PRICING OF SHARES
Shares of the Fund are sold on a continual basis at the offering price. As
described in the Fund's prospectus under "How to Purchase Shares," the offering
price is the net asset value per share plus any applicable sales charge. The net
asset value of Fund shares is determined on each day on which the New York Stock
Exchange is open, provided that the net asset value need not be determined on
days when no shares of the Fund are tendered for redemption and no order for
Fund shares is received. The New York Stock Exchange is not open for business on
the following holidays (or on the nearest Monday or Friday if the holiday falls
on a weekend): New Year's Day, Presidents' Day, Good Friday, Memorial Day, July
4th, Labor Day, Thanksgiving and Christmas Day. The portfolio securities in
which the Fund invests fluctuate in value, and hence the net asset value per
share of the Fund will fluctuate.
An example of how the Fund calculated its total offering price per shares as of
June 30, 2000 is as follows:
NET ASSETS = Net Asset Value per share
--------------
Shares Outstanding
$3,189,188 = $11.29
----------
282,435
Securities listed on a U.S. securities exchange or Nasdaq for which market
quotations are readily available at the last quoted sale price on the day the
valuation is made. Price information on listed securities is taken from the
exchange where the security is primarily traded. Options, futures, unlisted U.S.
securities and listed U.S. securities not traded on the valuation date for
which market quotations are readily available are valued at the most recent
quoted bid price.
Fixed-income securities (other than obligations having a maturity of 60 days or
less) are normally valued on the basis of quotes obtained from pricing services,
which take into account appropriate factors such as institutional sized trading
in similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics and other market data. Fixed-income securities
purchased with remaining maturities of 60 days or less are valued at amortized
cost if it reflects fair value. In the event that amortized cost does not
reflect market, market prices as determined above will be used. Other assets and
securities for which no quotations are readily available (including restricted
securities) will be valued in good faith at fair value using methods determined
by the Board of Trustees of the Fund. Shares of Beneficial Interest
SHARES OF BENEFICIAL INTEREST
The Trust is a series business trust that currently offers one series of shares.
The beneficial interest of the Trust is divided into an unlimited number of
shares, with no par value. Each share has equal dividend, voting, liquidation
and redemption rights. There are no conversion or preemptive rights. Shares,
when issued, will be fully paid and nonassessable. Fractional shares have
proportional voting rights. Shares of the Fund do not have cumulative voting
rights, which means that the holders of more than 50% of the shares voting for
the election of trustees can elect all of the trustees if they choose to do so
and, in such event, the holders of the remaining shares will not be able to
elect any person to the Board of Trustees. Shares will be maintained in open
accounts on the books of the Transfer Agent, and certificates for shares will
generally not be issued.
If they deem it advisable and in the best interests of shareholders, the
Trustees may create additional series of shares, each of which represents
interests in a separate portfolio of investments and is subject to separate
liabilities, and may create multiple classes of shares of such series, which may
differ from each other as to expenses and dividends. If additional series or
classes of shares are created, shares of each series or class are entitled to
vote as a series or class only to the extent required by the 1940 Act or as
permitted by the Trustees. Upon the Trust's liquidation, all shareholders of a
series would share pro-rata in the net assets of such series available for
distribution to shareholders of the series, but, as shareholders of such series,
would not be entitled to share in the distribution of assets belonging to any
other series.
PURCHASING SHARES
Shares of the Fund are sold in a continuous offering and may be purchased on any
business day through authorized investment dealers or directly from the Fund.
Stock Certificates and Confirmations
The Fund does not intend to issue stock certificates representing shares
purchased. Confirmations of the opening of an account and of all subsequent
transactions in the account are forwarded by the Fund to the stockholder's
address of record.
Special Incentive Programs
At various times the Fund may implement programs under which a dealer's sales
force may be eligible to win nominal awards for certain sales efforts or
recognition program conforming to criteria established by the Fund, or
participate in sales programs sponsored by the Fund. In addition, the investment
manager or distributor, in their discretion may from time to time, pursuant to
objective criteria, sponsor programs designed to reward selected dealers for
certain services or activities that are primarily intended to result in the sale
of shares of the Fund. These programs will not change the price you pay for your
shares or the amount that the Fund will receive from the sale.
Sales Charges and Waivers
The Fund's sales charges are described in the Prospectus under the heading
"Sales Charges and Waivers." Also, as stated in the Prospectus, you may purchase
shares of the Fund without a sales charge if you are a shareholder of the Fund
of record as of October 1, 2000, a bank, trust company, charitable organization,
or other institution acting on behalf of a fiduciary client, you are a
registered investment advisor, fee-based financial planner, part of a wrap
account or other investment program not receiving a portion of the sales charges
of the Fund but in which a fee is paid directly to an investment professional;
you are part of a pension, profit sharing or other qualified retirement plan,
including employer-sponsored 401(k) and 403(b) plans, you are a registered
representative and/or employee of a broker-dealer that has a selling agreement
with the Distributor,you are any individual with an investment account and/or
advisory relationship with IGAM or the Distributor, you are, or are a family
member of, a past or present officer, director, or employee of the Fund, IGAM or
the Distributor, or you are a member of a group (including spouses and dependent
children) comprised of at least 100 persons engaged, or previously engaged, in a
common business, profession, civic or charitable endeavor and/or other activity.
These exemptions of sales charges are due to the nature of the investors and/or
the reduced sales efforts that will be needed in obtaining such investments.
REDEMPTION OF SHARES
To redeem shares, shareholders may send a written request to:
REGULAR MAIL: OVERNIGHT OR EXPRESS MAIL:
------------- --------------------------
The Internet Index Fund The Internet Index Fund
c/o Firstar Mutual Fund Services, LLC c/o Firstar Mutual Fund Services, LLC
P.O. Box 701 615 East Michigan Street, 3rd Floor
Milwaukee, WI 53201-0701 Milwaukee, WI 53202
The written letter of instructions must include
o the investor's social security number or tax identification number,
o the fund name,
o the account number,
o the share or dollar amount to be redeemed, and
o signature by all shareholders on the account.
The proceeds will be wired to the bank account of record or sent to the address
of record within seven days.
If a shareholder requests that redemption proceeds be sent to an address other
than that on record with the Fund or proceeds be made payable to someone other
than to the shareholder(s) of record, the written request must have signatures
guaranteed by:
o a trust company or commercial bank whose deposits are insured by the BIF,
which is administered by the FDIC;
o a member of the New York, Boston, American, Midwest, or Pacific Stock
Exchange;
o a savings bank or savings association whose deposits are insured by the SAIF,
which is administered by the FDIC; or
o any other "eligible guarantor institution" as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantor program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
PORTFOLIO TRANSACTIONS AND TURNOVER
The Fund's portfolio securities transactions are placed by the Investment
Manager. The objective of the Fund is to obtain the best available execution in
its portfolio transactions, taking into account the costs, promptness of
executions and other qualitative considerations. There is no pre-existing
commitment to place orders with any broker, dealer or member of an exchange. The
Investment Manager may, however, place orders with brokers or dealers who sell
shares of the Fund, in recognition of such sales, consistent with NASD rules.
The Investment Manager evaluates a wide range of criteria in seeking the most
favorable price and market for the execution of transactions, including the
broker's commission rate, execution capability, positioning and distribution
capabilities, information in regard to the availability of securities, trading
patterns, statistical or factual information, opinions pertaining to trading
strategy, back office efficiency, ability to handle difficult trades, financial
stability, and prior performance in servicing the Investment Manager and its
clients. In transactions on equity securities and U.S. Government securities
executed in the over-the-counter market, purchases and sales are transacted
directly with principal market-makers except in those circumstances where, in
the opinion of the Investment Manager, better prices and executions are
available elsewhere.
The Investment Manager, when effecting purchases and sales of portfolio
securities for the account of the Fund, will seek execution of trades either (i)
at the most favorable and competitive rate of commission charged by any broker,
dealer or member of an exchange, or (ii) at a higher rate of commission charges,
if reasonable, in relation to brokerage and research services provided to the
Fund or the Investment Manager by such member, broker, or dealer. Such services
may include, but are not limited to, any one or more of the following;
information as to the availability of securities for purchase or sale,
statistical or factual information, or opinions pertaining to investments. The
Investment Manager may use research and services provided by brokers and dealers
in servicing all its clients, including the Fund, and not all such services will
be used by the Investment Manager in connection with the Fund. In accordance
with the provisions of Section 28(e) of the 1934 Act, the Manager may from
time-to-time receive services and products which serve both research and
non-research functions. In such event, the Manager makes a good faith
determination of the anticipated research and non-research use of the product or
service and allocates brokerage only with respect to the research component.
Brokerage may also be allocated to dealers in consideration of the Fund's share
distribution but only when execution and price are comparable to that offered by
other brokers.
If the investment manager provides investment advisory services to individuals
and other institutional clients, there may be occasions on which other
investment advisory clients advised by the investment manager may also invest in
the same securities as the Fund. When these clients buy or sell the same
securities at substantially the same time, the investment manager may average
the transactions as to price and allocate the amount of available investments in
a manner which is believes to be equitable to each client, including the Fund.
On the other hand, to the extent permitted by law, the investment manager may
aggregate the securities to be sold or purchased for the Fund with those to be
sold or purchased for other clients managed by it in order to obtain lower
brokerage commissions, if any.
Because of the Fund's indexing investment strategy, it generally only sells
securities to generate cash to satisfy redemption requests, or to rebalance its
portfolio to track the target index. As a result, the Fund's portfolio turnover
rate is expected to be extremely low. However, the Fund is not managed in a
manner designed to maximize tax efficiencies or reduce transaction costs, and
securities will be purchased and sold without regard to such factors as the
investment manager deems appropriate. Of course, when selling portfolio
securities, the manager will attempt to minimize taxable gains. The portfolio
turnover rate is calculated by dividing the lesser of the Fund's annual sales or
purchases of portfolio securities (exclusive of purchases or sales of securities
whose maturities at the time of acquisition were one year or less) by the
monthly average value of the securities in the portfolio during the year.
For the period November 4, 1999 through June 30, 2000 the Fund paid the
following brokerage commissions:
<TABLE>
<CAPTION>
--------------------------------------- -------------------------------- ---------------------------------
Broker Total Commissions Paid % of Total Commissions
--------------------------------------- -------------------------------- ---------------------------------
<S> <C> <C>
Bear Stearns $1,930 63.9%
Morgan Stanley & Company $1,090 36.1%
Total: $3,020 100.0%
--------------------------------------- -------------------------------- ---------------------------------
</TABLE>
ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
A shareholder will automatically receive all income dividends and capital gain
distributions in additional full and fractional shares of the Fund at their net
asset value as of the date of payment unless the shareholder elects to receive
such dividends or distributions in cash. The reinvestment date normally precedes
the payment date by about seven days although the exact timing is subject to
change. Shareholders will receive a confirmation of each new transaction in
their account. The Trust will confirm all account activity, including the
payment of dividend and capital gain distributions and transactions made as a
result of an Automatic Withdrawal Plan or an Automatic Investment Plan.
Shareholders may rely on these statements in lieu of stock certificates. Stock
certificates representing shares of the Fund will not be issued.
TAXES
DISTRIBUTIONS OF NET INVESTMENT INCOME. The Fund receives income generally in
the form of dividends and interest on its investments. This income, less
expenses incurred in the operation of the Fund, constitutes the Fund's net
investment income from which dividends may be paid to you. Any distributions by
the Fund from such income will be taxable to you as ordinary income, whether you
receive them in cash or in additional shares.
DISTRIBUTIONS OF CAPITAL GAIN. The Fund may derive capital gain or loss in
connection with sales or other dispositions of its portfolio securities.
Distributions from net short-term capital gain will be taxable to you as
ordinary income. Distributions from net long-term capital gain will be taxable
to you as long-term capital gain, regardless of how long you have held your
shares in the Fund. Any net capital gain realized by the Fund generally will be
distributed once each year, and may be distributed more frequently, if
necessary, to reduce or eliminate excise or income taxes on the Fund.
Beginning in the year 2001 for shareholders in the 15% federal income tax
bracket (or in the year 2006 for shareholders in the 28% or higher bracket),
capital gain dividends from the Fund's sale of securities held for more than
five years may be subject to a reduced rate of tax.
INFORMATION ON THE TAX CHARACTER OF DISTRIBUTIONS. The Fund will inform you of
the amount of your ordinary income and capital gain dividends at the time they
are paid, and will advise you of their tax status for federal income tax
purposes shortly after the close of each calendar year. If you have not held
Fund shares for a full year, the Fund may designate and distribute to you, as
ordinary income or capital gain, a percentage of income that is not equal to the
actual amount of such income earned during the period of your investment in the
Fund.
ELECTION TO BE TAXED AS A REGULATED INVESTMENT COMPANY. The Fund has elected to
be treated as a regulated investment company under Subchapter M of the Code. The
Fund has qualified as a regulated investment company for its most recent fiscal
year, and intends to continue to qualify during the current fiscal year. As a
regulated investment company, the Fund generally pays no federal income tax on
the income and gain it distributes to you. The Board of Trustees reserves the
right not to maintain the qualification of the Fund as a regulated investment
company if it determines such course of action to be beneficial to shareholders.
In such case, the Fund will be subject to federal, and possibly state, corporate
taxes on its taxable income and gain, and distributions to you will be taxed as
ordinary dividend income to the extent of the Fund's earnings and profits.
EXCISE TAX DISTRIBUTION REQUIREMENTS. To avoid federal excise taxes, the Code
requires the Fund to distribute to you by December 31 of each year, at a
minimum, the following amounts: 98% of its taxable ordinary income earned during
the calendar year; 98% of its capital gain net income earned during the
twelve-month period ending October 31; and 100% of any undistributed amounts
from the prior year. The Fund intends to declare and pay these distributions in
December (or to pay them in January, in which case you must treat them as
received in December) but can give no assurances that its distributions will be
sufficient to eliminate all taxes.
REDEMPTION OF FUND SHARES. Redemptions (including redemptions in kind) of Fund
shares are taxable transactions for federal and state income tax purposes. If
you redeem your Fund shares, the IRS will require that you report any gain or
loss on your redemption. If you hold your shares as a capital asset, the gain or
loss that you realize will be capital gain or loss and will be long-term or
short-term, generally depending on how long you hold your shares.
Beginning in the year 2001 for shareholders in the 15% federal income tax
bracket (or in the year 2006 for shareholders in the 28% or higher bracket),
gain from the sale of Fund shares held for more than five years may be subject
to a reduced rate of tax.
Any loss incurred on the redemption of shares held for six months or less will
be treated as long-term capital loss to the extent of any long-term capital gain
distributed to you by the Fund on those shares. All or a portion of any loss
that you realize upon the redemption of your Fund shares will be disallowed to
the extent that you buy other shares in the Fund (through reinvestment of
dividends or otherwise) within 30 days before or after your share redemption.
Any loss disallowed under these rules will be added to your tax basis in the new
shares you buy.
DEFERRAL OF BASIS. If you redeem some or all of your shares in the Fund, and
then reinvest the sales proceeds in the Fund within 90 days of buying the
original shares, the sales charge that would otherwise apply to your
reinvestment may be reduced or eliminated. The IRS will require you to report
any gain or loss on the redemption of your original shares in the Fund. In doing
so, all or a portion of the sales charge that you paid for your original shares
in the Fund will be excluded from your tax basis in the shares sold (for the
purpose of determining gain or loss upon the sale of such shares). The portion
of the sales charge excluded will equal the amount that the sales charge is
reduced on your reinvestment. Any portion of the sales charge excluded from your
tax basis in the shares sold will be added to the tax basis of the shares you
acquire from your reinvestment.
U.S. GOVERNMENT SECURITIES. States grant tax-free status to dividends paid to
you from interest earned on certain U.S. government securities, subject in some
states to minimum investment or reporting requirements that must be met by the
Fund. Investments in Government National Mortgage Association or Federal
National Mortgage Association securities, bankers' acceptances, commercial paper
and repurchase agreements collateralized by U.S. government securities generally
do not qualify for tax-free treatment. The rules on exclusion of this income are
different for corporations.
DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS. You may be allowed to deduct any
these qualified dividends, thereby reducing the tax that you would otherwise be
required to pay on these dividends. The dividends-received deduction will be
available only with respect to dividends designated by the Fund as eligible for
such treatment. All dividends (including the deducted portion) must be included
in your alternative minimum taxable income calculation.
INVESTMENT IN COMPLEX SECURITIES. The Fund may invest in complex securities that
may be subject to numerous special and complex tax rules. These rules could
affect whether gain or loss recognized by the Fund is treated as ordinary or
capital, or as interest or dividend income. These rules could also accelerate
the recognition of income to the Fund (possibly causing the Fund to sell
securities to raise the cash for necessary distributions) and/or defer the
Fund's ability to recognize a loss. These rules could therefore affect the
amount, timing or character of the income distributed to you by the Fund.
PERFORMANCE INFORMATION
TOTAL RETURN. Average annual total return quotations used in the Fund's
advertising and promotional materials are calculated according to the following
formula:
P(1 + T)n = ERV
where P equals a hypothetical initial payment of $1,000; T equals average annual
total return; n equals the number of years; and ERV equals the ending redeemable
value at the end of the period of a hypothetical $1,000 payment made at the
beginning of the period.
Under the foregoing formula, the time periods used in advertising will be based
on rolling calendar quarters, updated to the last day of the most recent quarter
prior to submission of the advertising for publication. Average annual total
return, or "T" in the above formula, is computed by finding the average annual
compounded rates of return over the period that would equate the initial amount
invested to the ending redeemable value. Average annual total return assumes the
reinvestment of all dividends and distributions.
CUMULATIVE TOTAL RETURN. 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 or
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. Sales loads (if any) are reflected in the return that follows:
November 4, 1999 (inception date) to August 31, 2000 27.80%*
*This is not an annualized number. This percentage is reflected as of the
inception date.
OTHER INFORMATION. The Fund's performance data quoted in advertising and other
promotional materials represents past performance and is not intended to predict
or indicate future results. The return and principal value of an investment in a
Fund will fluctuate, and an investor's redemption proceeds may be more or less
than the original investment amount.
If permitted by applicable law, the Fund may be compared to data prepared by
Lipper Analytical Services, Inc., CDA Investment Technologies, Inc.,
Morningstar, Inc., the Donoghue Organization, Inc. or other independent services
which monitor the performance of investment companies, and may be quoted in
advertising in terms of its ranking in each applicable universe. In addition,
the Fund may use performance data reported in financial and industry
publications, including Barron's, Business Week, Forbes, Fortune, Investor's
Daily, IBC/Donoghue's Money Fund Report, Money Magazine, The Wall Street Journal
and USA Today.
In addition to the Index, the Fund may from time to time use the following
unmanaged indices for performance comparison purposes:
o S&P 500 - The S&P 500 is an index of 500 stocks designed to track the
overall equity market's industry weightings. Most, but not all, large
capitalization stocks are in the index. There are also some small
capitalization names in the index. The list is maintained by Standard &
Poor's Corporation. It is market capitalization weighted. There are
always 500 issuers in the S&P 500. Changes are made by Standard &
Poor's as needed.
o Russell 2000 - The Russell 2000 is composed of the 2,000 smallest stocks in
the Russell 3000, a market value weighted index of the 3,000 largest U. S.
publicly-traded companies.
o The Nasdaq Composite Index - The Nasdaq Composite Index is a
broad-based market capitalization-weighted index of all Nasdaq stocks.
AUDITORS
Arthur Andersen LLP, 100 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
serves as the Fund's independent auditor, whose services include examination of
the Fund's financial statements and the performance of other related audit and
tax services.
FINANCIAL STATEMENTS
The financial statements for the period November 4, 1999 through June 30, 2000
are incorporated herein by reference from the Fund's Annual Report, as filed
with the Securities and Exchange Commission on September 8, 2000. A copy of the
Annual Report for the Fund may be obtained without charge by contacting the Fund
at the address located on the front of this SAI or by calling 1-800-234-0849.
IGAM GROUP FUNDS
PART C
OTHER INFORMATION
Item 23. EXHIBITS.
(a) OrganizationaL Documents
(i) Certificate of Trust(1)
(ii) Agreement and Declaration of Trust(2)
(iii) Secretary's Certificate(1)
(b) By-Laws(1)
(c) Instruments Defining Rights of Security Holders -- The rights of
security holders are set forth in the Organizational Documents (See
Item 23(a)).
(d) Advisory Agreement(2)
(e) Underwriting Agreement(2)
(f) Bonus or Profit Sharing Contracts - Not applicable.
(g) Custody Agreement(1)
(h) Other Material Contracts
(i) Administration Agreement(1)
(ii) Transfer Agent Servicing Agreement(1)
(iii) Fund Accounting Servicing Agreement(1)
(i) Opinion and Consent of Counsel(2)
(j) Other Opinions and Consents
(i) Consent of Independent Public Accountants--Filed Herewith.
(ii) Power of Attorney(2)
(iii) 485(b) Certification from Counsel--Filed Herewith.
(k) Omitted Financial Statements-- Not applicable.
(l) Agreement Relating to Initial Capital-- Not applicable.
(m) Rule 12b-1 Plan(2)
(n) Rule 18f-3 Plan-- Not applicable.
(o) Reserved.
(p) Code of Ethics
(i) Adviser - Filed Herewith.
(ii) Registrant - Filed Herewith.
1. Incorporated by reference to the Initial Registration Statement on Form
N-1A filed July 22, 1999.
2. Incorporated by reference to the Pre-Effective Amendment No. 1 to the
Registration Statement filed on October 8, 1999.
Item 24. Persons Controlled by or Under Common Control with Registrant.
No person is directly or indirectly controlled by or under common
control with the Registrant.
Item 25. Indemnification.
Under the terms of the Delaware Business Trust Act (the "Delaware Act")
and the Registrant's Agreement and Declaration of Trust and By-laws, no officer
or trustees of the Registrant shall have any liability to the Registrant or its
shareholders for damages, except to the extent such liability is precluded by
the Delaware Act, the Agreement and Declaration of Trust, or the By-Laws.
Subject to the standards and restrictions set forth in the Registrant's
Agreement and Declaration of Trust, Section 3817 of the Delaware Act permits a
business trust to indemnify any trustee, beneficial owner, or other person from
and against any claims and demands whatsoever. Section 3803 of the Delaware Act
protects a trustee, when acting in such capacity, from liability to any person
other than the business trust or beneficial owner for any act, omission, or
obligation of the business trust or any trustee thereof, except as otherwise
provided in the Agreement and Declaration of Trust.
The Agreement and Declaration of Trust provides that the officers and
trustees shall not be liable for any act or omission of any agent or employee of
the Registrant, any investment adviser or principal underwriter of the
Registrant, or with respect to each trustee or officer, the act or omission of
any other trustee or officer. Subject to the provisions of the By-laws, the
Registrant, out of its assets, shall indemnify and hold harmless each and every
officer and trustee from and against any and all claims and demands whatsoever
arising out of or related to such officer's or trustee's performance of his or
her duties as an officer or trustee of the Registrant. This limitation on
liability applies to events occurring at the time a person serves as a trustee
or officer of the Registrant whether or not such person is a trustee or officer
at the time of any proceeding in which liability is asserted. Nothing herein
contained shall indemnify, hold harmless or protect any officer or trustee from
or against any liability to the Registrant or any shareholder to which such
person would other wise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
such person's office.
The By-laws provide that in actions by others that the Registrant, the
Registrant shall indemnify any person who was or is a party or is threatened to
be made a party to any proceeding (other than an action by or in the right of
the Registrant) by reason of the fact that such person is or was an agent of the
Registrant, against expenses, judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with such proceeding if such
person acted in good faith and in a manner that such person reasonably believed
to be in the best interests of the Registrant and in the case of a criminal
proceeding, had no reasonable cause to believe the conduct of such person was
unlawful. The termination of any proceeding by judgment, order, settlement,
conviction or plea of nolo contendere or its equivalent shall not of itself
create a presumption that the person did not act in good faith or in a manner
which the person reasonably believed to be in the best interests of the
Registrant or that the person had reasonable cause to believe that the person's
conduct was unlawful. The By-laws provide that in actions by the Registrant, the
Registrant shall indemnify any person who was or is a party to any threatened,
pending or completed action by or in the right of the Registrant to procure a
judgment in its favor by reason of the fact that the person is or was an agent
of the Registrant, against expenses actually and reasonably incurred by that
person in connection with the defense or settlement of that action if that
person acted in good faith, in a manner that person believed to be in the best
interests of the Registrant and with such care, including reasonable inquiry, as
an ordinarily prudent person in a like position would use under similar
circumstances.
Notwithstanding any provision to the contrary contained in the By-laws,
there shall be no right to indemnification for any liability arising by reason
of willful misfeasance, bad faith, gross negligence, or the reckless disregard
of the duties involved in the conduct of the agent's office with the Registrant.
No indemnification shall be made under the provisions of the By-laws:
(a) In respect of any claim, issue or matter as to which that
person shall have been adjudged to be liable in the
performance of that person's duty to the Trust, unless and
only to the extent that the court in which that action was
brought shall determine upon application that in view of
all the circumstances of the case, that person was not
liable by reason of the disabling conduct set forth in the
preceding paragraph and is fairly and reasonably entitled
to indemnity for the expenses which the court shall
determine; or
(b) In respect of any claim, issue, or matter as to which that
person shall have been adjudged to be liable on the basis
that personal benefit was improperly received by him,
whether or not the benefit resulted from an action taken
in the person's official capacity; or
(c) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court
approval, or of expenses incurred in defending a
threatened or pending action which is settled or otherwise
disposed of without court approval, unless the required
approval set forth in section 6 of this Article is
obtained.
To the extent that an agent of the Registrant has been successful on
the merits in defense of any proceeding referred to in the above paragraphs or
in defense of any claim, issue or matter therein, before the court or other body
before whom the proceeding was brought, the agent shall be indemnified against
expenses actually and reasonably incurred by the agent in connection therewith,
provided that the Board of Trustees, including a majority who are disinterested,
non-party trustees, also determines that based upon a review of the facts, the
agent was not liable by reason of the disabling conduct referred to above and as
set forth in the By-laws.
Except as provided in the above paragraph concerning a successful
defense, any indemnification under the provisions of the By-laws shall be made
by the Registrant only if authorized in the specific case on a determination
that indemnification of the agent is proper in the circumstances because the
agent has met the applicable standard of conduct set forth in the By-laws and is
not prohibited from indemnification because of the disabling conduct referred to
above and as set forth in the By-laws:
(a) A majority vote of a quorum consisting of trustees who are not parties
to the proceeding and are not "interested persons" of the Trust (as defined in
the 1940 Act); or
(b) A written opinion by an independent legal counsel.
To the fullest extent permitted by applicable law, the officers and
trustees shall be entitled and have the authority to purchase with the assets of
the Registrant, insurance for liability and for all expenses reasonably incurred
or paid or expected to be paid by a trustee or officer in connection with any
claim, action, suit or proceeding in which such person becomes involved by
virtue of such person's capacity or former capacity with the Registrant, whether
or not the Registrant would have the power to indemnify such person against such
liability under the provisions of Article VII of its Agreement and Declaration
of Trust.
Item 26. Business and Other Connections of the Investment Adviser.
In addition to acting as the investment manager of the Registrant,
Integrity Global Asset Management, Inc. is an SEC-registered investment adviser
and may, in the future, provide investment advisory services to institutional
and individual investors.
Eugene Y.W. Lee, Ph.D., the President of the Integrity Global Asset
Management, Inc. is an Associate Professor of Finance at the College of Business
of the University of Rhode Island, in Kingston, Rhode Island. Though still a
faculty member, Dr. Lee has taken an indefinite sabbatical leave from the
University in order to devote his full attention to the operation of Integrity
Global Asset Management, Inc.
Item 27. Principal Underwriter.
(a) T.O. Richardson Securities, Inc., the principal underwriter of the
Registrant, acts as principal underwriter, depositor or investment
advisor for the following other investment companies:
The Grand Prix Fund
T.O. Richardson Trust
The Barrett Funds
The Simms Funds
(b) Herewith is the information required by the following table with
respect to each director, officer or partner of the only underwriter
named in answer to Item 20 of Part B:
<TABLE>
<CAPTION>
Name and Principal Position and Offices with Positions and Offices with
Business Address Underwriter Registrant
------------------------------- ------------------------------------------ ------------------------------
<S> <C> <C>
Samuel Bailey, Jr. President and Chief Executive Officer None
Two Bridgewater Road
Farmington, CT 06032-2256
------------------------------- ------------------------------------------ ------------------------------
L. Austine Crowe Vice President None
Two Bridgewater Road
Farmington, CT 06032-2256
------------------------------- ------------------------------------------ ------------------------------
Kathleen M. Russo Vice President None
Two Bridgewater Road
Farmington, CT 06032-2256
------------------------------- ------------------------------------------ ------------------------------
</TABLE>
(c) Not Applicable.
Item 28. Location of Accounts and Records.
The books and records required to be maintained by Section 31(a) of
the Investment Company Act of 1940, as amended, and the Rules promulgated
thereunder, are maintained by the Registrant's investment manager, Integrity
Global Asset Management, Inc., South Kingston Office Park, Suit A5, 24 Salt Pond
Road, Wakefield, RI 02879, except for those maintained by the Registrant's
custodian, Firstar Bank, N.A., 425 Walnut Street, Cincinnati 45202, and the
Registrant's Administrator, Transfer, Redemption, Dividend Disbursing and
Accounting Agent, Firstar Mutual Fund Services, LLC, 615 East Michigan Street,
Milwaukee, Wisconsin 53202.
Item 29. Management Services not Discussed in Parts A and B.
Not applicable.
Item 30. Undertakings.
None.
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 of this registration statement under Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed below on its behalf by the undersigned, duly authorized,
in the City of Wakefield and the State of Rhode Island, on the 28th day of
September, 2000.
IGAM GROUP FUNDS
BY: /S/ Eugene Y.W. Lee, Ph.D.
------------------------------------
Eugene Y.W. Lee, Ph.D.
Trustee, President, Treasurer and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on September 28, 2000 by the
following persons in the capacities indicated.
SIGNATURE TITLE
/S/ EDWARD M. MAZZE, PH.D. Chairman of the Board of Trustees
--------------------------
Edward M. Mazze, Ph.D.*
/S/ ANDREW LAVIANO Trustee
-------------------
Andrew Laviano*
/S/ EUGENE Y.W. LEE, PH.D. Trustee, President, Treasurer and
-------------------------- Secretary
Eugene Y.W. Lee, Ph.D.
/S/ HARRIS N. ROSEN Trustee
-------------------
Harris N. Rosen*
/S/ BRUCE WHYTE Trustee
---------------
Bruce Whyte*
*By Eugene Y.W. Lee, Ph.D., pursuant to Power of Attorney filed October 8, 1999.
EXHIBIT INDEX
Exhibit Status
Registrant's Certificate of Trust filed in Delaware on July 16, 1999 *
Registrant's Agreement and Declaration of Trust *
Secretary's Certificate dated September 30, 1999 *
Investment Management Agreement between Integrity Global Asset *
Management, Inc.and the Registrant on behalf of the Internet Index Fund
Distribution Agreement between T.O. Richardson Securities, Inc. and the *
Registrant on behalf of the Internet Index Fund
Custodian Agreement between Registrant and Firstar Bank, N.A. *
Fund Administration Servicing Agreement between Registrant and *
Firstar Mutual Fund Services, LLC
Fund Transfer Agent Servicing Agreement between Registrant and *
Firstar Mutual Fund Services, LLC
Fund Accounting Servicing Agreement between Registrant and *
Firstar Mutual Fund Services, LLC
Opinion and Consent of Counsel *
Consent of Arthur Andersen LLP Filed Herewith
Power of Attorney *
Rule 485(b) Certification from Counsel Filed Herewith
Distribution and Shareholder Servicing Plan *
Code of Ethics for IGAM Group Funds Filed Herewith
Code of Ethics for Integrity Global Asset Management, Inc. Filed Herewith
*Previously filed and incorporated by reference.
