<PAGE> 1
As filed with the Securities and Exchange Commission on July 28, 2000
Registration Nos. 333-36796, 811-09941
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1 [X]
and
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. [ ]
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AMBASSADOR FUNDS
(Exact Name of Registrant as Specified in Charter)
211 West Fort Street, Suite 720
Detroit, Michigan 48226
(Address of Principal Executive Office)
(313) 961-3111
(Registrant's Telephone Number)
Brian T. Jeffries
211 West Fort Street, Suite 720
Detroit, Michigan 48226
(Name and Address of Agent for Service)
Copies to:
Paul R. Rentenbach, Esq. Melanie Mayo West, Esq.
Dykema Gossett PLLC Dykema Gossett PLLC
400 Renaissance Center 39577 Woodward Avenue, Suite 300
Detroit, Michigan 48226 Bloomfield Hills, Michigan 48304
Approximate Date of Proposed Public Offering: Immediately upon effectiveness and
continuously thereafter.
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It is proposed that this filing will become effective (check appropriate box):
|_| 60 days after filing pursuant to Rule 485(a)(1), or
|_| On , pursuant to Rule 485(a)(1), or
|_| 75 days after filing pursuant to Rule 485(a)(2), or
|_| On , 199 , pursuant to Rule 485(a)(2).
--
|_| Immediately upon filing pursuant to Rule 485(b), or
|_| On, , 199 , pursuant to Rule 485(b)
--
If appropriate, check this box:
|_| This post-effective amendment designates a new effective date
for a previously-filed post-effective amendment.
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Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
hereby elects to register an indefinite number of shares of beneficial interest.
No initial fee is being required.
Title of Securities Being Registered: Shares of Beneficial Interest.
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 2
PROSPECTUS
August 1, 2000
[Logo] AMBASSADOR FUNDS
MONEY MARKET FUND
SHORT-TERM GOVERNMENT FUND
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities, nor has it passed upon the adequacy or
accuracy of the information contained in this Prospectus. It is a criminal
offense to state otherwise.
Ambassador Funds are a series of mutual funds advised by professional portfolio
managers at Ambassador Capital Management, L.L.C., Detroit, Michigan.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
FUND SUMMARIES..................................................................................1
Money Market Fund......................................................................1
Short-Term Government Fund.............................................................2
RISK/RETURN INFORMATION.........................................................................3
FEES AND EXPENSES...............................................................................4
MORE ABOUT THE FUNDS............................................................................5
Principal Investment Strategies and Risks..............................................5
Other Investment Strategies And Risks..................................................6
ORGANIZATION OF THE FUNDS.......................................................................6
DISTRIBUTION OF THE FUNDS.......................................................................6
INVESTING IN THE FUNDS..........................................................................6
What Shares Cost.......................................................................6
About Purchases........................................................................7
HOW TO BUY SHARES...............................................................................8
REDEEMING FUND SHARES...........................................................................9
About Redemptions......................................................................9
Redemption of Accounts with Balances Under Account Minimums............................9
MANAGEMENT OF THE FUNDS........................................................................11
Ambassador Capital Management, L.L.C..................................................11
Portfolio Managers....................................................................11
DIVIDENDS AND DISTRIBUTIONS....................................................................12
TAX CONSEQUENCES...............................................................................12
</TABLE>
<PAGE> 4
FUND SUMMARIES
These Fund Summaries briefly describe the investment objectives and principal
investment strategies of the Ambassador Money Market Fund and the Ambassador
Short-Term Government Fund and the principal risks of investing in each Fund.
For further information on each Fund's principal and other investment strategies
and risks, please read the section entitled "More About The Funds."
MONEY MARKET FUND
INVESTMENT OBJECTIVE: The Money Market Fund's objective is to provide current
interest income, consistent with maintaining liquidity and stability of
principal.
PRINCIPAL INVESTMENT STRATEGIES: The Money Market Fund's investment adviser
strives to maintain a $1.00 per share net asset value by investing substantially
all of its assets in:
- obligations of the United States government, its agencies and
instrumentalities (including certain "mortgage-backed" securities);
- high quality commercial paper;
- money market instruments; and
- repurchase agreements collateralized by obligations of the United States
government, its agencies and instrumentalities.
The Fund invests solely in U.S. dollar-denominated debt securities with
remaining maturities of 397 days or less and maintains an average
dollar-weighted portfolio maturity of 90 days or less.
PRINCIPAL RISKS: Although the Money Market Fund seeks to preserve the value of
your investment at $1.00 per share, loss of principal is a risk of investing in
the Fund. The principal risks of investing in the Fund are:
- Credit (or Default) Risk. An issuer of a security may default on its
payment obligations. Also, an issuer may suffer adverse changes in its
financial condition that could lower the credit quality of a security,
leading to greater volatility in the price of the security. A change in the
quality rating of a security can affect the security's liquidity and make
it more difficult for the Fund to sell.
- Prepayment Risk - as interest rates fall, mortgage-backed securities tend
to mature earlier than expected as a result of an increase in mortgage
refinancing or prepayment, sometimes resulting in a loss on the investment.
Your investment in the Money Market Fund is not insured by the Federal Deposit
Insurance Corporation (FDIC) or any other government agency.
Further information about the Fund's principal investment strategies and risks
is provided below under "More About the Funds."
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SHORT-TERM GOVERNMENT FUND
INVESTMENT OBJECTIVE: The Short-Term Government Fund's objective is to provide
current income consistent with capital preservation by investing in securities
with remaining maturities of five years or less.
PRINCIPAL INVESTMENT STRATEGIES: The Short-Term Government Fund pursues its
investment objective by investing substantially all of its assets in:
- obligations of the United States government, its agencies and
instrumentalities (including certain "mortgage-backed" securities); and
- repurchase agreements collateralized by these securities.
As a matter of fundamental policy which may not be changed without vote of a
majority of the Fund's outstanding shares, the Short-Term Government Fund will
invest at least 65% of its total assets in short-term obligations of the U.S.
government, its agencies or instrumentalities.
The Fund's dollar-weighted average portfolio maturity will usually not exceed
three years. The Fund seeks to generate a total return which exceeds the return
of money market instruments, while minimizing the fluctuation of its net asset
value. The Fund, however, is not a money market fund and its net asset value
will fluctuate.
Certain securities, such as mortgage-backed securities in which the Fund
invests, are expected to be prepaid prior to their expected maturity dates. As a
result, the effective maturity of these securities is expected to be shorter
than the stated maturity. For purposes of compliance with stated maturity
objectives and policies and calculation of the Fund's weighted average maturity,
the effective maturity of such securities will be used.
PRINCIPAL RISKS: The share price of the Fund will change daily based on market
conditions and other factors. Therefore, loss of principal is a risk of
investing in the Fund. All investments carry some degree of risk which will
affect the value of the Fund's portfolio investments, its investment performance
and the price of its shares. The Fund is not a money market fund and although it
seeks to maintain minimum fluctuation of its net asset value, there can be no
guarantee that the Fund will do so.
The Fund's principal investment risks are:
- Interest Rate Risk. In general, prices of U.S. Treasury securities, like
other fixed income securities, fall when interest rates rise. Generally,
the longer the average maturity of the securities in the Fund, the more the
Fund's share price will fluctuate in response to interest rate changes.
- Credit (or Default) Risk. An issuer of a security may default on its
payment obligations. Also, an issuer may suffer adverse changes in its
financial
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condition that could lower the credit quality of a security, leading to
greater volatility in the price of the security. A change in the quality
rating of a security can affect the security's liquidity and make it more
difficult for the Fund to sell.
- Prepayment Risk - as interest rates fall, mortgage-backed securities tend
to mature earlier than expected as a result of an increase in mortgage
refinancing or prepayment, sometimes resulting in a loss on the investment.
In addition, the Short-Term Government Fund may engage in short-term trading. A
high rate of portfolio turnover could produce higher transaction costs and
taxable distributions, which could detract from the Fund's performance. The
Fund's portfolio turnover rate is expected to be 50%.
Further information about the Fund's principal investment strategies and risks
is provided below under "More About the Funds.
RISK/RETURN INFORMATION
As new Funds, there is no information available as of the date of this
Prospectus relating to the performance of the Ambassador Funds.
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FEES AND EXPENSES
The tables below describe the fees and expenses that you may pay if you buy and
hold shares of the Ambassador Funds. Please note that the following information
does not include fees that financial institutions offering shares of the Funds
may charge for services they provide to you.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases............................................ None
Maximum Deferred Sales Charge (Load)........................................................ None
Sales Charge (Load) Imposed on Reinvested Dividends......................................... None
Redemption Fee.............................................................................. None
Exchange Fee................................................................................ None
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS) AS A % OF NET
ASSETS
<TABLE>
<CAPTION>
Short-Term
Money Market Government
Fund Fund
---- ----
<S> <C> <C>
Management Fees............................................... 0.20% 0.25%
Other Expenses (1)............................................ 0.20% 0.20%
----- -----
Total Annual Fund Operating Expenses.......................... 0.40% 0.45%
------------------------------------
</TABLE>
(1) "Other Expenses" are based on estimated amounts for the current fiscal
year.
EXAMPLE
This example is intended to help you compare the cost of investing in each of
the Funds to the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in a Fund for the time periods indicated. The example
also assumes that your investment has a 5% return each year, that each Fund's
operating expenses remain the same and that all dividends and distributions are
reinvested. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C> <C>
Money Market Fund......................................................... $41 $128
Short-Term Government Fund................................................ $46 $144
</TABLE>
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<PAGE> 8
MORE ABOUT THE FUNDS
Each Fund's investment objective is fundamental and may be changed only by a
vote of a majority of that Fund's outstanding shares. Unless otherwise noted,
the investment policies of the Funds are not fundamental and our Board of
Trustees may change them without shareholder approval.
The following supplements the discussion of each Fund's principal investment
strategies and risks contained in the Fund Summaries. In addition to the
principal investment strategies and risks described in this Prospectus, each
Fund may use other strategies and is subject to further restrictions and risks
which are described in the Statement of Additional Information.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS
Obligations of the U.S. Government, its Agencies or Instrumentalities. U.S.
government obligations are direct obligations of the U.S. Treasury and are
guaranteed by the full faith and credit of the U.S. government. Obligations of
certain agencies and instrumentalities of the U.S. government are supported by
the full faith and credit of the U.S. Treasury; others are supported by the
right of the issuer to borrow from the U.S. Treasury; others are supported by
the discretionary authority of the U.S. government to purchase the agency's or
the instrumentality's obligations; and still others are supported only by the
credit of the agency or instrumentality. These include certain mortgage-backed
securities. There is no assurance that the U.S. government will provide
financial support to U.S. government-sponsored agencies or instrumentalities if
it is not obligated to do so.
Commercial Paper. Commercial paper is a form of short-term (no more than 270-day
maturity), usually fixed-rate, corporate debt represented by unsecured
promissory notes of the issuing company. The commercial paper in which the Funds
may invest will be rated at the time of investment within the two highest rating
categories assigned by at least two Nationally Recognized Statistical Rating
Organizations (e.g., Moody's Investors Service, Inc. and Standard and Poor's
Ratings Group)
Money Market Instruments. Money market instruments include, without limitation,
certificates of deposit, demand and time deposits and bankers' acceptances.
Although many of these instruments are issued by financial institutions such as
banks, they are not necessarily guaranteed by those organizations. The Funds may
also invest in money market mutual funds whose investments are permissible for
direct investment by the Funds. These funds will assess fees in addition to the
fees charged by the Ambassador Funds.
Repurchase Agreements. The Funds may buy securities from financial institutions
with the understanding that the seller will buy them back with interest at a
later specified date. At the time a Fund enters into a repurchase agreement, the
seller must provide collateral of at least 102% of the
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<PAGE> 9
value of the securities sold. During the term of the repurchase agreement, the
seller is obligated to maintain collateral of at least 100% of such value. If
the seller is unable to honor its commitment to repurchase the securities, the
purchasing Fund could lose money.
OTHER INVESTMENT STRATEGIES AND RISKS
When-Issued Securities, Delayed Delivery Transactions and Forward Commitments. A
purchase of "when-issued" securities refers to a transaction made conditionally
because the securities, although authorized, have not yet been issued. A
"delayed delivery" or "forward commitment" transaction involves a contract to
purchase or sell securities for a fixed price at a future date beyond the
customary settlement period. Purchasing or selling securities on a when-issued,
delayed delivery or forward commitment basis involves the risk that the value of
the securities may change by the time they are actually issued or delivered.
These transactions also involve the risk that the seller may fail to deliver the
security or cash on the settlement date.
Securities Lending. In order to enhance return, each of the Funds may lend up to
one-third (based on total assets) of the securities held in its portfolio to
securities firms and financial institutions. All portfolio securities loans are
secured continuously by collateral in the form of cash, high quality money
market instruments or short-term U.S. government securities adjusted daily to
have a market value at least equal to the current market value of the securities
loaned. These transactions involve the risk of delay in recovery of the
securities or possible loss of rights in the collateral if the borrower fails
financially.
ORGANIZATION OF THE FUNDS
Each of the Ambassador Funds is a series of Ambassador Funds, a Delaware
business trust. As of the date of this Prospectus, we only offer one class of
shares of each Fund.
DISTRIBUTION OF THE FUNDS
BISYS Fund Services, whose address is 3435 Stelzer Road, Columbus, Ohio 43219,
serves as the distributor of the Ambassador Funds.
INVESTING IN THE FUNDS
You may purchase shares of any Ambassador Fund on any business day when both the
New York Stock Exchange and the Federal Reserve Bank of Chicago are open.
Please consult with your legal counsel to ensure that the Ambassador Funds are
permissible investments for your organization.
WHAT SHARES COST
The offering price of a share is its net asset value (determined after the order
is considered received). We calculate the net asset value per share for each
Fund as of the close of business of the New York Stock
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Exchange (generally 4:00 p.m. Eastern Time).
We attempt to stabilize the net asset value per share for the Money Market Fund
at $1.00 per share by valuing its portfolio securities using the amortized cost
method. We calculate net asset value for the Short-Term Government Fund by
valuing securities held based on market value. Securities for which market
prices are not available are valued in accordance with procedures adopted by our
Board of Trustees. These valuation methods are more fully described in our
Statement of Additional Information.
We do not impose any sales charges on the purchase of shares of the Ambassador
Funds.
ABOUT PURCHASES
In order to purchase shares of the Money Market Fund on a particular day, we
must receive your order before 12:00 p.m (Eastern Time) that day. You will begin
earning dividends on the day of your investment in the Money Market Fund if we
receive your order before that time. In order to purchase shares of the
Short-Term Government Fund on a particular day, we must receive your order
before 4:00 p.m (Eastern Time) that day.
We reserve the right to suspend the sale of shares of any Fund temporarily and
the right to refuse any order to purchase shares of any Fund.
If we receive insufficient payment for a purchase, we will cancel the purchase
and may charge you a fee. In addition, you will be liable for any losses
incurred by us in connection with the transaction.
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HOW TO BUY SHARES
1. VERIFY PERMISSIBILITY
- Consult with your legal counsel to ensure compliance with applicable
investment restrictions
2. MINIMUM INVESTMENT REQUIREMENTS:
- $1,000 for initial investments in the Money Market Fund
- $5,000 for initial investments in the Short-Term Government Fund
- No minimum for subsequent investments
3. CALL OUR TRANSFER AGENT
- 1-800-992-0444
(We will treat your order as having been received at the time your call is
complete)
4. MAKE PAYMENT
- By check payable to Ambassador Money Market Fund or Ambassador
Short-Term Government Fund (as applicable) and send to:
Ambassador Funds
P.O. Box 182419
Columbus, OH 43218-2419
OR
- By federal funds wire. Please call our Transfer Agent at
(800) 922-0444 for instructions.
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<PAGE> 12
REDEEMING FUND SHARES
You may redeem shares of any Ambassador Fund on any business day when both the
New York Stock Exchange and the Federal Reserve Bank of Chicago are open. The
price at which we will redeem a share will be its net asset value (determined
after the order is considered received). We calculate the net asset value per
share for each Fund as of the close of business of the New York Stock Exchange
(generally 4:00 p.m. Eastern Time).
ABOUT REDEMPTIONS
In order to redeem shares of an Ambassador Fund on a particular day, we must
receive your request before 12:00 p.m. (Eastern Time) that day for the Money
Market Fund, or 4:00 p.m. (Eastern Time) that day for the Short-Term Government
Fund. If you intend to reinvest the proceeds of a sale of shares of the
Short-Term Government Fund in shares of the Money Market Fund and have the
proceeds reinvested on the same day, we must receive your request before 12:00
p.m. (Eastern Time) that day. Otherwise proceeds will be reinvested the
following business day.
For redemption requests received prior to the applicable cut-off time, usually
the proceeds from the sale of Money Market Fund shares will be wired on the same
day, and proceeds from the sale of Short-Term Government Fund shares will be
wired on the following business day; checks for redemption proceeds are
generally mailed on the business day following the request. For redemption
requests received after the applicable cut-off time, proceeds will generally be
wired or a check will be mailed one business day later after net asset value is
next determined. Proceeds are wired to an account designated in writing by the
shareholder at any domestic commercial bank which is a member of the Federal
Reserve System. Proceeds to be paid by check are sent to the shareholder's
address of record.
To the extent permitted by federal securities laws, we reserve the right to
suspend the redemption of shares of the Ambassador Funds temporarily under
extraordinary market conditions such as market closures or restriction or
suspension of trading by the Securities and Exchange Commission or in the event
an emergency exists and a Fund cannot sell its assets or accurately determine
the value of its assets. Where payment for shares is made by check, we also
reserve the right to postpone redemptions for up to ten days.
We may terminate or modify the methods of redemption at any time. In such case,
you will be promptly notified.
REDEMPTION OF ACCOUNTS WITH BALANCES UNDER ACCOUNT MINIMUMS
Due to the high cost of maintaining accounts with low balances, if your account
balance for the Money Market Fund falls below $1,000 or if your account balance
for the the Short-Term Government Fund falls below $5,000, we may choose to
redeem those shares and close that account without your consent. We will not
close any account which is held through a retirement plan or any account whose
value falls below these minimums as a result of changes in the Fund's net asset
value. If we plan to close your account, we will notify you and provide you with
30 days to add to your account balance.
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HOW TO REDEEM SHARES
1. CALL OUR TRANSFER AGENT
- 1-800-992-0444
OR
WRITE
- Ambassador Funds
P.O. Box 182419
Columbus, OH 43218-02419
2. PROVIDE THE REQUIRED INFORMATION
- Specify the name of the Fund from which you wish to redeem shares
- Your account number
- The name and address on your account
- For wire transfers, your financial institution's wire transfer
information. (N.B. Your financial institution may charge you a fee for
handling this transaction.)
- The dollar amount or number of shares you wish to redeem
- Your signature (for written requests)
(If you request any redemption to be sent to an address other than the
address on record with the Funds or request any redemption to be paid to a
person or persons other than the shareholder(s) of record, you will need a
signature guarantee in order to redeem)
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<PAGE> 14
MANAGEMENT OF THE FUNDS
Our Board of Trustees is responsible for generally overseeing the conduct of
each Fund's business. Ambassador Capital Management, L.L.C. ("ACM"), whose
address is 211 West Fort Street, Suite 720, Detroit, Michigan 48226, serves as
investment adviser to the Funds pursuant to an investment advisory agreement.
According to the terms of the investment advisory agreement, the Money Market
Fund will pay to ACM an annual fee of 0.20% of its average daily net assets and
the Short-Term Government Fund will pay to ACM an annual fee of 0.25% of its
average daily net assets.
Subject to the supervision of our Board of Trustees, ACM provides a continuous
investment program for the Funds, including investment research and management
with respect to all securities, instruments, cash and cash equivalents in the
Funds.
AMBASSADOR CAPITAL MANAGEMENT, L.L.C.
ACM is an independent investment advisory firm registered with the Securities
and Exchange Commission. ACM was established in 1998 by President and Chief
Executive Officer Brian T. Jeffries, formerly a Partner and Portfolio Manager
with Munder Capital Management from 1994-1998, where he was responsible for the
management of fixed-income portfolios exceeding $1 billion in assets. Before
Munder, Mr. Jeffries was a Fixed Income Fund Manager with Woodbridge Capital
Management, the investment management subsidiary of Comerica Bank, where he
managed several fixed income mutual funds.
ACM specializes in the management of fixed income and cash portfolios for public
and private sector clients, including retirement plans, municipalities,
corporations, endowments and foundations. As of June 30, 2000, ACM had
approximately $301 million in assets under management.
PORTFOLIO MANAGERS
Gregory A. Prost, CFA, Chief Investment Officer of ACM, has been the portfolio
manager of the Short-Term Government Fund since its inception in 2000. As Chief
Investment Officer of ACM, Mr. Prost oversees ACM's fixed income research and
directs its fixed income strategy. He brings more than 10 years of investment
experience to ACM. Prior to joining ACM, Mr. Prost was a Partner and Senior
Portfolio Manager at Munder Capital Management from 1995-2000, where he was
responsible for managing fixed income portfolios. Mr. Prost is a Chartered
Financial Analyst. He also earned a B.A. from Kalamazoo College and an M.B.A.
from Western Michigan University.
Kathryn J. Nurre, Vice President and Senior Portfolio Manager of ACM, has been
the portfolio manager of the Money Market Fund since its inception in 2000. Ms.
Nurre has over 15 years experience in the capital markets. Prior to joining ACM,
Ms. Nurre was Director of Short Term Investments at Cranbrook Capital
Management, Inc. (the investment management subsidiary of First of Michigan
Corporation) from 1995-1998, where she was responsible for the management of
over $500 million in client assets. Ms. Nurre earned a B.A. from the University
of Cincinnati.
11
<PAGE> 15
DIVIDENDS AND DISTRIBUTIONS
As a shareholder, you are entitled to your share of a Fund's net income and
gains on its investments. Each of the Funds passes substantially all of its
earnings along to its shareholders as distributions. When a Fund earns dividends
from stocks and interest from debt securities and distributes these earnings to
shareholders, it is called a dividend distribution. A Fund realizes capital
gains when it sells securities for a higher price than it paid. When these gains
are distributed to shareholders, it is called a capital gain distribution. The
Money Market Fund declares dividends daily and pays them monthly. The Short-Term
Government Fund pays dividends, if any, monthly. Each Fund distributes its net
realized capital gains, if any, at least annually.
It is possible that a Fund may make a distribution in excess of its earnings and
profits. You will treat such a distribution as a return of capital which is
applied against and reduces your basis in your shares. You will treat the excess
of any such distribution over your basis in your shares as gain from a sale of
shares. Each of the Funds will pay distributions in additional shares of the
distributing Fund. If you wish to receive distributions in cash, either indicate
this request on your account application form or notify us by calling
1-800-992-0444.
TAX CONSEQUENCES
There are many important tax consequences associated with investment in the
Ambassador Funds. Please read the summary below and consult your tax advisor
regarding specific federal, state and local tax consequences applicable to your
investment.
Each of the Ambassador Funds intends to distribute to shareholders dividends of
its net investment income and distributions of capital gains. Distributions of
income, whether or not they are reinvested in Fund shares, may be subject to
federal income tax. In addition, sales of Fund shares and capital gains
distributions may be subject to federal taxation. The rate at which you may be
taxed on the sale of Fund shares varies depending on the length of time you hold
the Fund being sold. The rate at which you may be taxed on capital gains
distributions depends on the length of time the Fund holds the security.
Governmental entities which are shareholders of the Funds will not be subject to
federal income tax on distributions from a Fund or on sales of a Fund's shares.
12
<PAGE> 16
For copies of Annual or Semi-Annual Reports, the Statement of Additional
Information or for any other inquiries:
CALL
1-800-992-0444
WRITE
Ambassador Funds
P.O. Box 182419
Columbus, OH 43218-2419
LOG ON TO THE INTERNET
The Securities and Exchange Commission's website http://www.sec.gov contains
text-only versions of Ambassador Funds documents.
CONTACT THE SEC
Call (202) 942-8090 about visiting the SEC's Public Reference Room in
Washington, D.C. or send your request with a duplicating fee to the SEC by
e-mail at [email protected] or by mail to the Securities and Exchange
Commission, Public Reference Section, 450 Fifth Street, NW, Washington, DC
20549-0102.
More information about the Ambassador Funds is available free upon request,
including the following:
ANNUAL AND SEMI-ANNUAL REPORTS
The Semi-Annual Report includes unaudited information about the performance of
the Funds, portfolio holdings and other financial information. The Annual Report
includes similar audited information as well as a letter from the Ambassador
Funds portfolio managers discussing recent market conditions, economic trends
and investment strategies that significantly affected performance during the
last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information provides more detailed information about
the Funds and its policies. A current Statement of Additional Information is on
file with the Securities and Exchange Commission and is incorporated by
reference into (legally considered part of) this Prospectus.
SEC File No. 811-09941
<PAGE> 17
STATEMENT OF ADDITIONAL INFORMATION
AMBASSADOR FUNDS
MONEY MARKET FUND
SHORT-TERM GOVERNMENT FUND
This Statement of Additional Information, also known as an SAI, should be read
with the Prospectus for the Funds dated August 1, 2000. This SAI is not a
prospectus itself. To receive a copy of the Prospectus, please write us or call
1-800-992-0444.
AMBASSADOR FUNDS
211 WEST FORT STREET, SUITE 720
DETROIT, MI 48226
August 1, 2000
<PAGE> 18
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
GENERAL INFORMATION...............................................................................................1
INVESTMENT STRATEGIES AND RISKS...................................................................................1
Money Market Instruments.....................................................................................1
U.S. Government Obligations..................................................................................1
Mortgage-Backed Securities...................................................................................2
Zero Coupon Securities.......................................................................................2
Variable and Floating Rate U.S. Government Securities........................................................2
Repurchase Agreements........................................................................................3
Restricted and Illiquid Securities...........................................................................3
When-Issued and Delayed Delivery Transactions................................................................3
Securities Lending...........................................................................................4
INVESTMENT LIMITATIONS............................................................................................4
Selling Short and Buying on Margin...........................................................................4
Issuing Senior Securities and Borrowing Money................................................................4
Underwriting.................................................................................................5
Investing in Commodities, Commodity Contracts, or Real Estate................................................5
Lending Cash or Securities...................................................................................5
Concentration of Investments.................................................................................5
Investing in Securities of Other Investment Companies........................................................5
Investing in Illiquid Securities.............................................................................5
Investing in Restricted Securities...........................................................................5
MANAGEMENT OF THE FUNDS...........................................................................................5
Trustees and Officers........................................................................................5
Trustee Compensation.........................................................................................6
Investment Adviser...........................................................................................6
Brokerage Transactions.......................................................................................7
Distributor..................................................................................................7
Administrator, Transfer Agent and Fund Accountant............................................................7
Custodian....................................................................................................8
Independent Auditors.........................................................................................8
Legal Counsel................................................................................................8
SHAREHOLDERS......................................................................................................9
ADDITIONAL INFORMATION ON PURCHASES AND REDEMPTIONS...............................................................9
DETERMINATION OF NET ASSET VALUE..................................................................................9
Use of the Amortized Cost Method.............................................................................9
Valuation of Securities.....................................................................................11
TAXATION.........................................................................................................12
Tax Status of the Funds.....................................................................................12
Tax Status of Shareholders..................................................................................12
DIVIDENDS AND DISTRIBUTIONS......................................................................................13
Money Market Fund...........................................................................................13
Short-Term Government Fund..................................................................................13
PERFORMANCE INFORMATION..........................................................................................13
Money Market Fund Yield.....................................................................................13
Money Market Fund Effective Yield...........................................................................14
Short-Term Government Fund Total Return.....................................................................14
Short-Term Government Fund Yield............................................................................14
FINANCIAL STATEMENTS.............................................................................................14
APPENDIX--DESCRIPTION OF BOND RATINGS...........................................................................A-1
</TABLE>
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<PAGE> 19
GENERAL INFORMATION
Ambassador Funds was established as a Delaware business trust under a
Declaration of Trust dated March 22, 2000. Ambassador Funds is an open-end,
diversified, management investment company consisting of two series, the Money
Market Fund and the Short-Term Government Fund, each offering one class of
shares.
As of the date of this SAI, shares of the Funds are only being offered for sale
in Michigan and Ohio.
INVESTMENT STRATEGIES AND RISKS
The Prospectus for the Funds describes the principal investment strategies
employed to achieve each Fund's investment objectives and the principal risks
associated with investment in the Funds. Below you will find more detail about
the types of investment strategies and risks associated with each Fund,
including those which are not considered principal strategies or risks.
MORE ABOUT PRINCIPAL INVESTMENT STRATEGIES AND RISKS
MONEY MARKET INSTRUMENTS. Money market
instruments mature in 13 months or less, and include
without limitation:
- U.S. Treasury bills;
- bankers' acceptances - bills of exchange or time drafts drawn on and
accepted by a commercial bank. Bankers' acceptances are used by
corporations to finance the shipment and storage of goods and to furnish
dollar exchange. Maturities are generally six months or less.
- certificates of deposit - negotiable and non-negotiable, interest-bearing
instruments with specific maturities. Certificates of deposit are issued by
banks and savings and loan institutions in exchange for the deposit of
funds, and normally can be traded in the secondary market, prior to
maturity;
- demand and time deposits - non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like certificates of deposit, demand and
time deposits earn specified rates of interest over a definite period of
time; however, these securities cannot be traded in the secondary market
and are considered to be illiquid if they have maturities of more than
seven days;
- high quality commercial paper (see Prospectus);
- federal agency discount paper - these securities are issued by U.S.
government agencies at a discount and redeemed at maturity at face value;
- repurchase agreements (see "Repurchase Agreements" below); and
- money market mutual funds (see "Investment Limitations-Investing in
Securities of Other Investment Companies" below).
The instruments of banks and savings and loans whose deposits are insured by the
FDIC, such as certificates of deposit, demand and time deposits, and bankers'
acceptances, are not necessarily guaranteed by the FDIC.
The Funds will limit their investments in certificates of deposit, demand and
time deposits and similar instruments to those issued by financial institutions
which are eligible to serve as depositories for political subdivisions of the
state of Michigan.
U.S. GOVERNMENT OBLIGATIONS. U.S. government obligations include direct
obligations of the U.S. Treasury, such as U.S. Treasury bills, notes, and bonds,
and obligations issued or guaranteed by U.S. government agencies or
instrumentalities, and include certain mortgage-backed securities and zero
coupon securities described more fully below.
Some of the various agencies of the U.S. government which issue obligations
include the Export Import Bank of the United States, Farmers Home
Administration, Federal Farm Credit Bank, Federal Housing Administration (FHA),
Government National Mortgage Association (GNMA or Ginnie Mae), Maritime
Administration, Small Business Administration (SBA), and The Tennessee Valley
Authority (TVA). Some of the instrumentalities of the U.S. government which
issue securities include Federal Home Loan Banks (FHLB), Federal Home Loan
Mortgage Corporation (FHLMC or Freddie Mac), Student Loan Marketing Association
(SLMA or Sallie Mae), Federal Intermediate Credit Banks, Federal Land Banks,
Federal National Mortgage Association (FNMA or Fannie Mae) and the U.S. Postal
Service.
U.S. government obligations are backed by:
- the full faith and credit of the U.S. Treasury, such as GNMA obligations;
- the issuer's right to borrow from the U.S. Treasury, such as FNMA
obligations;
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<PAGE> 20
- the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities, such as SLMA obligations; or
- the credit of the agency or instrumentality issuing the obligations, such
as FHLMC obligations.
The above examples are not intended to be an exhaustive list of permissible
issuing agencies or instrumentalities.
Securities which are not backed by the full faith and credit of the U.S.
Treasury may not always receive financial support from the U.S. government.
Investment in U.S. government obligations is part of the principal investment
strategy for the Short-Term Government Fund. The Money Market Fund may invest in
U.S. government obligations to a lesser extent.
REPURCHASE AGREEMENTS. Under a repurchase agreement, also known as a "repo," a
Fund will buy securities from a financial institution which commits to buy them
back at a specified time and price. During the term of the repurchase agreement,
a Fund will take actual or constructive possession of collateral securities
backing such repurchase agreements and these securities will be marked to market
daily. To the extent that the original seller does not repurchase the securities
from a Fund, the Fund could receive less than the repurchase price on any sale
of such securities. In the event that such a defaulting seller filed for
bankruptcy or became insolvent, disposition of such securities by a Fund might
be delayed pending court action. The Funds believe that under the regular
procedures normally in effect for custody of a Fund's portfolio securities
subject to repurchase agreements, a court of competent jurisdiction would rule
in favor of the Fund and allow retention or disposition of such securities. The
Funds will only enter into repurchase agreements with banks and other recognized
financial institutions such as broker-dealers, which are deemed by the
investment adviser, Ambassador Capital Management, L.L.C. ("ACM"), to be
creditworthy, pursuant to guidelines established by the Board of Trustees.
MORE ABOUT OTHER INVESTMENT STRATEGIES AND RISKS
MORTGAGE-BACKED SECURITIES. Mortgage-backed securities are securities that,
directly or indirectly, represent participations in, or are secured by and
payable from, loans secured by real property. Mortgage-backed securities in
which the Funds may invest include mortgage pass-through securities, and
adjustable rate mortgage securities. Mortgage- backed securities in which the
Funds can invest are issued or guaranteed by the U.S. government or one of its
agencies or instrumentalities, such as GNMA, FNMA and FHLMC.
Although certain mortgage-backed securities are guaranteed by a third party or
otherwise similarly secured, the market value of the security, which may
fluctuate, is not so secured. If a Fund purchases a mortgage-backed security at
a premium, that portion may be lost if there is a decline in the market value of
the security whether resulting from changes in interest rates or prepayments in
the underlying mortgage collateral. As with other interest-bearing securities,
the prices of mortgage-backed securities are inversely affected by changes in
interest rates. However, though the value of a mortgage-backed security may
decline when interest rates rise, the converse is not necessarily true, since in
periods of declining interest rates the mortgages underlying the security are
prone to prepayment. For this and other reasons, a mortgage-backed security's
effective maturity may be shortened by unscheduled prepayments on the underlying
mortgages and, therefore, it is not possible to predict accurately the
security's return to the Fund. In addition, regular payments received in respect
of mortgage-backed securities include both interest and principal. No assurance
can be given as to the return a Fund will receive when these amounts are
reinvested.
Mortgage pass-through securities provide for the pass-through to investors of
their pro-rata share of monthly payments (including any prepayments) made by the
individual borrowers on the pooled mortgage loans, net of any fees paid to the
guarantor of such securities and the servicer of the underlying mortgage loans.
Adjustable rate mortgage securities ("ARMS") are pass-through mortgage
securities collateralized by
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<PAGE> 21
mortgages with interest rates that are adjusted from time to time. While the
values of ARMS, like other debt securities, generally vary inversely with
changes in market interest rates (increasing in value during periods of
declining interest rates and decreasing in value during periods of increasing
interest rates), the values of ARMS should generally be more resistant to price
swings than other debt securities because the interest rates of ARMS move with
market interest rates. The adjustable rate feature of ARMS will not, however,
eliminate fluctuations in the prices of ARMS, particularly during periods of
extreme fluctuations in interest rates, and to the extent that changes in
prevailing interest rates are not immediately reflected in the interest rates
payable on the adjustable rate mortgages underlying the ARMS.
VARIABLE AND FLOATING RATE U.S. GOVERNMENT SECURITIES. Some of the short-term
U.S. government securities the Funds may purchase carry variable or floating
interest rates. Variable rate securities have a rate of interest subject to
adjustment on specified dates at least annually and will be deemed to have a
maturity equal to the period remaining until the next readjustment of the
interest rate. Floating rate securities have a rate of interest which adjusts
whenever a specified interest rate changes. Interest rate adjustments are
ordinarily tied to some objective standard, such as the 91-day U.S. Treasury
bill rate.
Variable interest rates will reduce the changes in the market value of such
securities from their original purchase prices. Accordingly, the potential for
capital appreciation or capital depreciation should not be greater than the
potential for capital appreciation or capital depreciation of fixed interest
rate U.S. government securities having maturities equal to the interest rate
adjustment dates of the variable rate U.S. government securities.
A variable rate security that is subject to a demand feature will be deemed to
have a maturity equal to the longer of the period remaining until the next
readjustment of the interest rate or the period remaining until the principal
amount can be recovered through demand. Floating rate securities that are
subject to a demand feature will be deemed to have a maturity equal to the
period remaining until the principal amount can be recovered through demand.
ZERO COUPON SECURITIES. These are U.S. Treasury obligations which have been
stripped of their unmatured interest coupons and receipts. These securities are
issued at a discount from their face value because interest payments are
typically postponed until maturity. The market prices of zero coupon U.S.
Treasury securities generally are more sensitive to changes in interest rates
than comparable maturity securities that make current distributions of interest.
RESTRICTED AND ILLIQUID SECURITIES. Each of the Funds may invest in securities
issued in reliance on the exemption from registration afforded by Section 4(2)
of the Securities Act of 1933. Section 4(2) securities are restricted as to
disposition under the federal securities laws and are generally sold to
institutional investors, such as the Funds, who agree that they are purchasing
such securities for investment purposes and not with a view to public
distributions. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) securities are normally resold to other institutional investors
like the Funds through or with the assistance of the issuer or investment
dealers who make a market in such securities, thus providing liquidity. The
Funds believe that Section 4(2) securities and possibly certain other restricted
securities which meet the criteria for liquidity established by the Trustees are
quite liquid. The Funds intend, therefore, to treat the restricted securities
which meet the criteria for liquidity established by the Trustees, including
Section 4(2) securities, as determined by ACM, as liquid and not subject to the
investment limitation applicable to illiquid securities.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under the Securities and Exchange commission ("SEC")
staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a non-exclusive safe harbor for
certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under Rule
144A. The Funds believe that the Staff of the SEC has left the question
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<PAGE> 22
of determining the liquidity of all restricted securities to the Trustees. The
Trustees consider the following criteria in determining the liquidity of certain
restricted securities:
- the frequency of trades and quotes for the
security;
- the number of dealers willing to purchase or sell the security and the
number of other potential buyers:
- dealer undertakings to make a market in the
security; and
- the nature of the security and the nature of the
marketplace trades.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. Each of the Funds may participate
in when-issued and delayed delivery transactions. These transactions are made to
secure what is considered to be an advantageous price or yield for a Fund. No
fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of a Fund sufficient to make payment for the securities
to be purchased are segregated on the Fund's records at the trade date. These
assets are marked to market daily and are maintained until the transaction has
been settled. None of the Funds intends to engage in when-issued and delayed
delivery transactions to an extent that would cause the segregation of more than
20% of the total value of its assets.
When-issued and delayed delivery transactions are subject to market fluctuation,
and no interest accrues to the purchaser during the period prior to settlement.
The payment obligation and the interest rate that a Fund will receive on the
securities are each fixed at the time the Fund enters into the commitment.
Purchasing obligations on a when-issued or delayed delivery basis is a form of
leveraging and can involve a risk that the yields available in the market when
delivery takes place may actually be higher than those obtained in the
transaction itself, in which case a Fund could experience an unrealized loss at
the time of delivery.
The Funds will purchase securities on a when-issued or delayed delivery basis
only with the intention of completing the transaction and actually purchasing
the securities. If ACM deems it advisable as a matter of investment strategy,
however, a Fund may dispose of or renegotiate a commitment after it is entered
into, and may sell securities it has committed to purchase before those
securities are delivered to the Fund on the settlement date. In these cases the
Fund may realize a taxable capital gain or loss.
When a Fund engages in when-issued and delayed delivery transactions, it relies
on the other party to consummate the trade. Failure of such party to do so may
result in the Fund's incurring a loss or missing an opportunity to obtain a
price considered to be advantageous. The market value of the securities
underlying a when-issued or delayed delivery transaction, and any subsequent
fluctuations in their market value, are taken into account when determining the
market value of a Fund starting on the day the Fund agrees to purchase the
securities. A Fund does not earn interest on securities it has committed to
purchase until they are paid for and delivered on the settlement date.
SECURITIES LENDING. In order to enhance return, each of the Funds may lend up to
one-third (based on total assets) of the securities held in its portfolio to
securities firms and financial institutions, provided that each loan is secured
continuously by collateral in the form of cash, high quality money market
instruments or short-term U.S. government securities adjusted daily to have a
market value at least equal to the current market value of the securities
loaned. These loans are terminable at any time, and the lending Fund will
receive any interest or dividends paid on the loaned securities. In addition, it
is anticipated that a Fund may share with the borrower some of the income
received on the collateral for the loan or the Fund will be paid a premium for
the loan.
The risk in lending portfolio securities, as with other extensions of credit,
consists of possible delay in recovery of the securities or possible loss of
rights in the collateral if the borrower fails financially. In determining
whether the Funds will lend securities, ACM will consider all relevant facts and
circumstances. The Funds will only enter into loan arrangements with
broker-dealers, banks or other institutions which ACM has determined are
creditworthy under guidelines established by the Board of Trustees.
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<PAGE> 23
INVESTMENT LIMITATIONS
The following investment limitations are fundamental and may not be changed
without shareholder approval.
SELLING SHORT AND BUYING ON MARGIN. None of the Funds described herein will sell
any securities short or purchase any securities on margin, but each may obtain
such short-term credit as may be necessary for clearance of purchases and sales.
ISSUING SENIOR SECURITIES AND BORROWING MONEY. None of the Ambassador Funds will
issue senior securities, except that a Fund may borrow money directly or through
reverse repurchase agreements as a temporary measure for extraordinary or
emergency purposes and then only in amounts not in excess of 5% of the value of
its total assets or in an amount up to one-third of the value of its total
assets, including the amount borrowed, in order to meet redemption requests
without immediately selling portfolio instruments. Any direct borrowings need
not be collateralized.
None of the Funds will purchase any securities while borrowings in excess of 5%
of its total assets are outstanding. None of the Funds has any present intention
to borrow money.
UNDERWRITING. None of the Funds will engage in underwriting of securities except
as a Fund may be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
INVESTING IN COMMODITIES, COMMODITY CONTRACTS, OR REAL ESTATE. None of the Funds
will invest in commodities, commodity contracts, or real estate, except that
they may purchase money market instruments issued by companies that invest in
real estate or sponsor such interests.
LENDING CASH OR SECURITIES. Each of Funds may lend portfolio securities in an
amount of up to one- third of its assets. In addition, each of the Funds may
purchase or hold money market instruments, including repurchase agreements, and
other debt securities permitted by its investment objective, policies and
limitations.
CONCENTRATION OF INVESTMENTS. None of the Funds will invest more than 25% of the
value of its total assets in any one industry, provided that there shall be no
limitation on investments in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. Each of the Funds may
acquire up to 3% of the total outstanding securities of other investment
companies. Each of these Funds will limit its investments in the securities of
other investment companies to those of money market funds having investment
objectives and policies similar to its own. Each of these Funds will purchase
securities of other investment companies only in open-market transactions
involving no more than customary broker's commissions. However, there is no
limitation applicable to securities of any investment company acquired in a
merger, consolidation, or acquisition of assets.
It should be noted that investment companies incur certain expenses such as
management fees, and, therefore, any investment by a Fund in such shares would
be subject to such customary expenses.
INVESTING IN ILLIQUID SECURITIES. None of the Funds described herein will invest
more than 10% of the value of its net assets in illiquid securities.
INVESTING IN RESTRICTED SECURITIES. None of the Funds will invest more than 10%
of the value of its net assets in securities which are subject to restrictions
on resale under federal securities laws.
MANAGEMENT OF THE FUNDS
The Ambassador Funds Trustees are responsible generally for overseeing the
conduct of each Fund's business. Trustees and officers of Ambassador Funds are
listed with their addresses, principal occupations and birth dates. Persons
identified with an asterisk (*) are "interested persons" (as that term is
defined in the Investment Company Act of 1940, as amended) of the Funds.
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<PAGE> 24
TRUSTEES AND OFFICERS
Nicholas J. DeGrazia, Trustee
3650 Shorewood Drive
North Lakeport, MI 48059
Born March 31, 1943
Principal of Modesitt Associates, Inc. (management
consulting firm) since 1997; Consultant of Lionel,
L.L.C. from 1995-1996; President and Chief
Operating Officer of Lionel Trains, Inc. from 1990-
1995.
Ronald E. Hall, Trustee
Bridgewater Interiors, LLC
4617 West Fort Street
Detroit, MI 48209
Born September 4, 1943
President, Chief Executive Officer and Chairman of
the Board of Bridgewater Interiors, LLC, an
automotive supplier joint venture with Johnson
Controls, Inc. since 1998; President and Chief
Executive Officer of the Michigan Minority Business
Development Council from 1992-1998.
Brian T. Jeffries,* Trustee and President
Ambassador Capital Management, L.L.C.
211 West Fort Street, Suite 720
Detroit, MI 48226
Born February 8, 1965
Founder and President of Ambassador Capital
Management, L.L.C. since 1998; Shareholder and
Portfolio Manager of Munder Capital Management
from 1994-1998.
Conrad W. Koski, Trustee and Chairman
206 Stephens Road
Grosse Pointe Farms, MI 48236
Born September 13, 1945
Retired 1997; President and Chief Executive Officer
of First of Michigan Corporation from 1996-1997
and Executive Vice President and Chief Financial
Officer from 1982-1996. Officer and Trustee
of Cranbrook Funds from 1984-1997.
Gregory A. Prost,* Trustee and Vice President
Ambassador Capital Management, L.L.C.
211 West Fort Street, Suite 720
Detroit, MI 48226
Born September 3, 1966
Chief Investment Officer of Ambassador Capital
Management, L.L.C. since 2000; Shareholder and
Senior Portfolio Manager of Munder Capital
Management, Inc. from 1995-2000.
Kathryn J. Nurre,* Secretary
Ambassador Capital Management, L.L.C.
211 West Fort Street, Suite 720
Detroit, MI 48226
Born June 26, 1954
Vice President and Senior Portfolio Manager of
Ambassador Capital Management, L.L.C. since
1998; Director of Short Term Investments of
Cranbrook Capital Management from 1994-1998.
Alaina Metz, Assistant Secretary
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
Born April 7, 1967
Chief Administrative Officer, Blue Sky Compliance
of BISYS Fund Services since 1995; Supervisor,
Blue Sky Department, Alliance Capital Management
L.P. from 1989-1995
Nadeem Yousaf, Treasurer
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
Born January 26, 1969
Vice President, Financial Services of BISYS Fund
Services since 1999; Director of Canadian Operations
of Investors Bank and Trust responsible for oversight
of mutual fund complexes from 1997-1999;
Assistant Manager of PricewaterhouseCoopers from
1994-1997
TRUSTEE COMPENSATION
6
<PAGE> 25
Each of the Trustees who are are not interested persons of Ambassador Funds will
be compensated by the Funds for their service as such.
<TABLE>
<CAPTION>
Total
Compensation
Aggregate From Fund and
Compensation Fund Complex
Name, Position From Fund Paid to Directors
-------------- --------- -----------------
<S> <C> <C>
Nicholas J.
DeGrazia, $5,500 $5,500
Trustee
Ronald E. Hall,
Trustee $5,500 $5,500
Brian T.
Jeffries, Trustee $0 $0
Conrad W.
Koski, Trustee $5,500 $5,500
and Chairman
Gregory A.
Prost, Trustee $0 $0
</TABLE>
The above table is based on compensation estimates for the first fiscal year,
based on an annual retainer of $500 and meeting fees of $1,250 for each regular
meeting attended. None of the officers and none of the Trustees who are
interested persons of Ambassador Funds will receive any compensation from the
Funds for their service as such.
The Ambassador Funds Agreement and Declaration of Trust provides that Ambassador
Funds will, to the fullest extent permitted by law, indemnify our Trustees and
officers against all liabilities and against all expenses reasonably incurred in
connection with any claim, action, suit or proceeding in which they may be
involved because of their offices with us, except if it is determined in the
manner specified in the Agreement and Declaration of Trust that they have not
acted in good faith in the reasonable belief that their actions were in our best
interests or that such indemnification would relieve any officer or Trustee of
any liability to us or our shareholders by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of his or her duties. Ambassador
Funds, at our expense, may provide liability insurance for the benefit of our
Trustees and officers.
INVESTMENT ADVISER
Ambassador Capital Management, L.L.C., pursuant
to an Investment Advisory Agreement with
Ambassador Funds, receives an annual investment
advisory fee based on average daily net assets as
follows: 0.20% for the Money Market Fund and
0.25% for the Short-Term Government Fund.
Brian T. Jeffries, President and Chief Executive Officer of ACM and Trustee and
President of Ambassador Funds, is the President of ACM, and is deemed to control
ACM. Gregory A. Prost, Trustee and Vice President of Ambassador Funds and
Kathryn J. Nurre, Secretary of Ambassador Funds, are each also officers of ACM.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, ACM looks for prompt execution of the order at a favorable price.
In working with dealers, ACM will generally use those who are recognized dealers
in specific portfolio instruments, except when a better price and execution of
the order can be obtained elsewhere. ACM makes decisions on portfolio
transactions and selects brokers and dealers subject to review by the Trustees.
ACM may select brokers and dealers who offer brokerage and research services.
These services may be furnished directly to a Fund or Funds or to ACM and may
include:
- advice as to the advisability of investing in securities;
- security analysis and reports;
- economic studies;
- industry studies;
- receipt of quotations for portfolio evaluations; and
- similar services.
ACM exercises reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. ACM
determines in good faith that commissions charged
7
<PAGE> 26
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers and dealers may be used by ACM in advising
the Funds and other accounts. To the extent that receipt of these services may
supplant services for which ACM might otherwise have paid, it would tend to
reduce expenses.
Although investment decisions for the Funds described herein are made
independently from those of the other accounts managed by ACM, investments of
the type the Funds may make may also be made by those other accounts. When one
of the Funds described herein and one or more other accounts managed by ACM are
prepared to invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner believed by
ACM to be equitable to each. In some cases, this procedure may adversely affect
the price paid or received by a Fund or the size of the position obtained or
disposed of by a Fund. In other cases, however, it is believed that coordination
and the ability to participate in volume transactions will be to the benefit of
the Funds.
DISTRIBUTOR
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS"),
whose address is 3435 Stelzer Road, Columbus, Ohio 43219, serves as the
distributor of the Funds. Under a Distribution Agreement, BISYS sells and
distributes shares of each of the Funds on a continuous basis, but is not
obligated to sell any specific amount of shares of any Fund. BISYS receives no
compensation from the Funds under its Distribution Agreement.
The Distribution Agreement may be terminated at any time as to any Fund on not
more than 60 days' notice by vote of a majority of the Trustees who are not
parties to such agreement or "interested persons" of any such party or by the
vote of a majority of the outstanding voting securities of the Fund.
ADMINISTRATOR, TRANSFER AGENT AND FUND
ACCOUNTANT
BISYS and BISYS Fund Services Ohio, Inc. ("BISYS Ohio") are responsible for
providing to the Funds administration, transfer agency and fund accounting
services, and for arranging for custody services to be performed by a third
party for the Funds. Pursuant to a three-year term Omnibus Fee Agreement dated
August 1, 2000 between the Funds, BISYS and BISYS Ohio, the Funds will pay to
BISYS an annual fee for all of the described services based on the value of the
aggregate average daily net assets of the Funds as follows: 0.18% on the first
$200 million in aggregate assets; 0.15% on aggregate assets between $200 and
$500 million; 0.125% on aggregate assets between $500 and $750 million; and
0.10% on aggregate assets above $750 million. The Funds will also pay to BISYS
an annual fee of $25.00 per shareholder account and will reimburse BISYS for
out-of-pocket expenses associated with securities pricing, shareholder services
and communication services. A minimum annual fee of $110,000 per Fund applies.
BISYS's responsibilities as administrator are described in a separate
Administration Agreement with the Funds, and include administrative services,
such as calculating expenses and related disbursements, assisting with the
preparation regulatory filings (including prospectuses) and shareholder
communications, arranging for custodial services to be provided to the Funds and
providing all necessary office space, equipment, personnel, compensation and
facilities for handling the affairs of the Funds.
BISYS Ohio's responsibilities as transfer agent are described in a separate
Transfer Agency Agreement with the Funds, and include transfer agent services
such as setting up and processing shareholder transactions, generating certain
shareholder and transaction information, when needed, providing periodic Fund
and shareholder activity reports, issuing IRS and other required reports or
forms and maintaining shareholder accounts.
BISYS Ohio's responsibilities as fund accountant are described in a separate
Fund Accounting Agreement with the Funds, and include portfolio accounting
services such as maintaining Fund books and records,
8
<PAGE> 27
calculating net asset value, and obtaining security prices.
Each of the Administration Agreement, Transfer Agency Agreement and the Fund
Accounting Agreement became effective on August 1, 2000, and will continue in
effect for a period of three years, and thereafter will continue for successive
one-year periods, unless terminated by either party on not less than 60 days'
prior written notice. Notwithstanding the foregoing, each of these agreements
may be terminated without penalty for "cause." The term "cause," as more fully
described in the agreements which are filed with the Securities and Exchange
Commission as exhibits to the Funds' registration statement, includes (a) an
unremedied material breach of the agreement for more than 30 days following
notice; (b) a court or similar tribunal finding of criminal guilt or unethical
behavior of either party; (c) the commencement of Title 11 bankruptcy
proceedings and similar events; (d) the failure by the Funds to collect any
payments or reimbursements owed to the Funds by ACM for more than 60 days; and
(e) the failure by the Funds to pay any payments or reimbursements owed to BISYS
Ohio by the Funds for more than 60 days.
If for any reason other than nonrenewal, mutual agreement of the parties or
"cause," BISYS or BISYS Ohio is replaced as administrator, transfer agent or
fund accountant (as applicable), the Funds will be obligated to make a one-time
cash payment to BISYS equal to the balance due under all of the agreements for
the remainder of the then-current term.
Each of the Administration, Transfer Agency and Fund Accounting Agreements
provides that neither BISYS nor BISYS Ohio shall be liable for any error of
judgment or mistake of law or any loss suffered by the Funds in connection with
the matters to which the applicable agreement relates, except a loss resulting
from willful misfeasance, bad faith, or negligence in the performance of its
duties, or from the disregard by BISYS or BISYS Ohio of its obligations and
duties thereunder.
CUSTODIAN
BISYS has arranged for Fifth Third Bank, whose address is 38 Fountain Square
Plaza, Cincinnati, Ohio 45327, to serve as custodian for the Funds. Pursuant to
a Custody Agreement with the Funds dated August 1, 2000, Fifth Third Bank earns
an annual fee of 0.01% of each Fund's average daily net assets and is
responsible for the safekeeping of Fund assets, including the acceptance or
delivery of cash or securities where appropriate, registration of securities in
the appropriate Fund name or the name of a nominee and maintenance of bank
accounts on behalf of the Funds. The fee earned by Fifth Third Bank will be paid
by BISYS out of the fees it earns under the Omnibus Fee Agreement.
INDEPENDENT AUDITORS
Ernst & Young LLP, whose address is 500 Woodward Avenue, Suite 1700, Detroit,
Michigan 48226, serves as the independent auditors of the Funds.
LEGAL COUNSEL
Dykema Gossett PLLC, whose address is 400 Renaissance Center, Detroit, Michigan
48243, serves as legal counsel to the Funds.
SHAREHOLDERS
As of the date of this SAI, each of the Funds offers only one class of shares.
The Short-Term Government Fund had no shareholders and the Money Market Fund's
sole shareholder, by virtue of its investment of the statutorily required seed
capital, was Ambassador Capital Management, L.L.C.
Shares of the Funds, representing beneficial interests in the Funds, are fully
transferable. Each share is entitled to dividends declared by the Trustees, and
if the Funds were liquidated, shareholders would receive the net assets of the
Fund attributable to the shares held.
All shareholders are entitled to one vote for each share held on the record date
for any action requiring a shareholder vote, and a proportionate fractional vote
for each fractional share held. Ambassador Funds shareholders will vote in the
aggregate and not by Fund, except as otherwise required by law or when the
Trustees determine that the matter to be voted upon affects only the interests
of a particular Fund.
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The rights of shareholders cannot be modified without a majority vote.
The Funds are not required to hold annual meetings of shareholders for the
purpose of electing Trustees except that (i) we are required to hold a
shareholders' meeting for the election of Trustees at such time as less than a
majority of the Trustees holding office have been elected by shareholders and
(ii) if, as a result of a vacancy on the Board of Trustees, less than two-thirds
of the Trustees holding office have been elected by the shareholders, that
vacancy may only be filled by a vote of the shareholders. In addition, Trustees
may be removed from office by a written consent signed by the holders of shares
representing two-thirds of the outstanding shares of the Funds at a meeting duly
called for the purpose, which meeting must be held upon written request of not
less than 10% of the outstanding shares of the Funds. Upon written request by
the holders of shares representing 1% of the outstanding shares of the Funds
stating that such shareholders wish to communicate with the other shareholders
for the purpose of obtaining the signatures necessary to demand a meeting to
consider removal of a Trustee, we will provide a list of shareholders or
disseminate appropriate materials (at the expense of the requesting
shareholders). Except as set forth above, the Trustees may continue to hold
office and may appoint successor Trustees.
Under Delaware law, shareholders could, under certain circumstances, beheld
personally liable for the obligations of the Funds. However, the Declaration of
Trust disclaims shareholder liability for acts or obligations of the Funds. The
Declaration of Trust provides for indemnification out of a Fund's property for
all loss and expense of any shareholder held personally liable for the
obligations of a Fund. Thus the risk of a shareholder's incurring financial loss
on account of shareholder liability is limited to circumstances in which the
Fund would be unable to meet its obligations.
Shareholder inquiries regarding shares of the Funds should be directed to
Ambassador Funds, (by mail) P.O. Box 182419, Columbus, OH 43218-2419; (by
telephone) 1-800-992-0444.
ADDITIONAL INFORMATION ON PURCHASES AND REDEMPTIONS
Shares of the Funds described herein are sold at their net asset value without a
sales charge on days the New York Stock Exchange and the Federal Reserve Bank of
Chicago are open for business. The procedures for purchasing and redeeming
shares are explained in the Prospectus under "Investing in the Funds" and
"Redeeming Fund Shares."
DETERMINATION OF NET ASSET VALUE
Net asset value is calculated as of the close of the New York Stock Exchange
every Monday through Friday except on (i) days on which there are not sufficient
changes in the value of a Fund's portfolio securities to affect materially its
net asset value; (ii) days during which no shares are tendered and no orders to
purchase shares are received; and (iii) the following holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, the observation of Veteran's Day, Christmas Day and
any other day on which the financial markets are closed.
The Money Market Fund attempts to stabilize the value of its shares at $1.00.
USE OF THE AMORTIZED COST METHOD
The Trustees have decided that the best method for determining the value of
portfolio instruments for the Money Market Fund is amortized cost. The amortized
cost method involves valuing an instrument at its cost initially and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. This method may result in periods during which value, as
determined by amortized cost, is higher or lower than the price a Fund would
receive if it sold the instrument.
The value of securities in a Fund can be expected to vary inversely with changes
in prevailing interest rates. The Board of Trustees has undertaken to establish
procedures reasonably designed, taking into account current market conditions
and the Money Market Fund's investment objective, to stabilize the net asset
value per share of that Fund for purposes of sales and redemptions of $1.00.
These procedures
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<PAGE> 29
include review by the Trustees, at such intervals as they deem appropriate, to
determine the extent, if any, to which the net asset value per share of the
Money Market Fund calculated by using available market quotations deviates from
$1.00 per share. In the event such deviation exceeds one-half of one percent,
Rule 2a-7 requires that the Board promptly consider what action, if any, should
be initiated.
If the Trustees believe that the extent of any deviation from the Money Market
Fund's $1.00 amortized cost price per share may result in material dilution or
other unfair results to new or existing investors, the Trustees will take such
steps as they consider appropriate to eliminate or reduce to the extent
reasonably practicable any such dilution or unfair results. These steps may
include selling portfolio instruments prior to maturity, shortening the average
portfolio maturity of the Money Market Fund, withholding or reducing dividends,
reducing the number of the Money Market Fund's outstanding shares without
monetary consideration, or utilizing a net asset value per share based on
available market quotations.
The Money Market Fund may invest only in obligations determined by ACM to
present minimal credit risks under guidelines adopted by the Board of Trustees.
The Money Market Fund's investments "First Tier Securities." First Tier
Securities include those that possess at least one rating in the highest
category and, if the securities do not possess a rating, those that are
determined to be of comparable quality by ACM pursuant to guidelines adopted by
the Board of Trustees.
A security subject to a tender or demand feature will be considered an Eligible
Security only if both the demand feature and the underlying security possess a
high quality rating or, if such do not possess a rating, are determined by ACM
to be of comparable quality; provided, however, that where the demand feature
would be readily exercisable in the event of a default in payment of principal
or interest on the underlying security, the obligation may be acquired based on
the rating possessed by the demand feature or, if the demand feature does not
possess a rating, a determination of comparable quality by ACM.
In applying the above-described investment policies, a security that has not
received a short-term rating will be deemed to possess the rating assigned to an
outstanding class of the issuer's short-term debt obligations if determined by
ACM to be comparable in priority and security to the obligation selected for
purchase by the Fund, or, if not available, the issuer's long-term obligations,
but only in accordance with the requirements of Rule 2a-7. A security that at
the time of issuance had a maturity exceeding 397 days but, at the time of
purchase, has a remaining maturity of 397 days or less, is considered an
Eligible Security if it possesses a long-term rating, within the two highest
rating categories.
Certain of the obligations in which the Funds may invest may be variable or
floating rate instruments, may involve a conditional or unconditional demand
feature, and may include variable amount master demand notes. Eligible
Securities include those obligations that, at the time of purchase, possess the
highest short-term rating from at least one National Recognized Statistical
Rating Organization ("NRSRO") (the Money Market Fund may also invest up to 5% of
its net assets in obligations that, at the time of purchase, possess one of the
two highest short-term ratings from at least one NRSRO, and in obligations that
did not possess a short-term rating (i.e., are unrated) but are determined by
ACM to be of comparable quality to the rated instruments eligible for purchase
by the Fund under guidelines adopted by the Board of Trustees).
The Money Market Fund will not invest more than 5% of its total assets in the
First Tier Securities of any one issuer, except that the Fund may invest up to
25% of its total assets in First Tier Securities of a single issuer for a period
of up to three business days.
If a percentage limitation is satisfied at the time of purchase, a later
increase in such percentage resulting from a change in the Money Market Fund's
net asset value or a subsequent change in a security's qualification as a First
Tier Security will not constitute a violation of the limitation. In addition,
there is no limit on the percentage of the Money Market Fund's assets that may
be invested in obligations issued or guaranteed by the U.S. government, its
agencies, or instrumentalities and repurchase agreements fully collateralized by
such obligations.
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Under the guidelines adopted by the Board of Trustees, in accordance with Rule
2a-7 under the Investment Company Act of 1940, when in the best interests of the
shareholders, ACM may be required to promptly take appropriate action with
respect to an obligation held in a Fund's portfolio in the event of certain
developments that indicate a reduction in the instrument's credit quality, such
as where an NRSRO downgrades an obligation below the second highest rating
category, or in the event of a default relating to the financial condition of
the issuer.
The Appendix to this Statement of Additional Information identifies each NRSRO
that may be utilized by ACM with regard to portfolio investments for the Funds
and provides a description of relevant ratings assigned by each such NRSRO. A
rating by a NRSRO may be utilized only where the NRSRO is neither controlling,
controlled by, or under common control with the issuer of, or any issuer,
guarantor, or provider of credit support for, the instrument.
VALUATION OF SECURITIES
The Short-Term Government Fund relies on one or more pricing services authorized
by the Board of Trustees ("Authorized Pricing Services") to value its securities
in calculating net asset value. Securities traded in the over-the-counter market
are valued at their last-reported sale price or, if there is no reported sale,
at a bid price estimated by an Authorized Pricing Service. For other debt
securities, including zero coupon securities, an Authorized Pricing Service will
be used.
Amortized cost is used to value the Short-Term Government Fund's investments
with remaining maturities of 60 days or less at the time of purchase.
Investments in other open-end investment companies are valued at net asset
value.
For securities which cannot be priced by an Authorized Pricing Service, the
Board of Trustees has authorized the fund accountant to seek a good faith fair
value determination from a broker-dealer or other financial intermediary. In
certain circumstances, in accordance with a Security Valuation Policy adopted by
the Board of Trustees, the fund accountant may seek a good faith fair value
determination where an Authorized Pricing Service has provided a price. The
Security Valuation Policy has also established a Pricing Committee which will
price a security in the event that no price can be obtained from an Authorized
Pricing Service, a broker-dealer or other financial intermediary.
If any securities held by a Fund are restricted as to resale, their fair value
is generally determined as the amount which the Fund could reasonably expect to
realize from an orderly disposition of such securities over a reasonable period
of time. The valuation procedures applied in any specific instance are likely to
vary from case to case. However, consideration is generally given to the
financial position of the issuer and other fundamental analytical data relating
to the investment and to the nature of the restrictions on disposition of the
securities (including any registration expenses that might be borne by the Fund
in connection with such disposition). In addition, specific factors are also
generally considered, such as the cost of the investment, the market value of
any unrestricted securities of the same class (both at the time of purchase and
at the time of valuation), the size of the holding, the prices of any recent
transactions or offers with respect to such securities, and any available
analysts' reports regarding the issuer.
Generally, trading in certain securities is substantially completed each day at
various times prior to the close of the New York Stock Exchange (the
"Exchange"). The values of these securities used in determining the net asset
value of the Fund's shares are computed as of such times. Also, because of the
amount of time required to collect and process trading information as to large
numbers of securities issues, the values of certain securities (such as U.S.
government securities) are determined based on market quotations collected
earlier in the day at the latest practicable time prior to the close of the
Exchange. Occasionally, events affecting the value of such securities may occur
between such times and the close of the Exchange which will not be reflected in
the computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at their fair value, in the manner described above.
The proceeds received by each Fund for each issue or sale of its shares, and all
income, earnings, profits, and proceeds thereof, subject only to the rights of
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<PAGE> 31
creditors, will be specifically allocated to such Fund, and constitute the
underlying assets of that Fund. The underlying assets of each Fund will be
segregated on the Ambassador Funds books of account, and will be charged with
the liabilities in respect of such Fund and with a share of the general
liabilities of the Ambassador Funds. Expenses with respect to any two or more
Funds are to be allocated in proportion to the net asset values of the
respective Funds except where allocations of direct expenses can otherwise be
fairly made.
TAXATION
TAX STATUS OF THE FUNDS
Each of the Funds described herein will pay no federal income tax because they
expect to meet the requirements of Subchapter M of the Internal Revenue Code
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, a Fund
must, among other requirements:
- derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
- invest in securities within certain statutory limits; and
- distribute to its shareholders at least 90% of its net income earned
during the year.
If a Fund qualifies as a regulated investment company that is accorded special
tax treatment, the Fund will not be subject to federal income tax on income paid
to its shareholders in the form of dividends (including capital gain dividends).
If a Fund fails to qualify as a regulated investment company accorded special
tax treatment in any taxable year, the Fund would be subject to tax on its
income at corporate rates, and could be required to recognize net unrealized
gains and make distributions of any accumulated earnings and profits before
requalifying as a regulated investment company that is accorded special tax
treatment. In addition, all distributions by the Fund would be taxed as if made
by a regular corporation thus a Fund could not pay exempt-interest or capital
gains dividends.
If a Fund fails to distribute in a calendar year substantially all of its
ordinary income for such year and substantially all of its net capital gains for
the year ending October 31 (or later if the Fund is permitted so to elect and so
elects), plus any retained amount from the prior year, the Fund will be subject
to a 4% excise tax on the undistributed amounts. Each Fund intends generally to
make distributions sufficient to avoid imposition of the 4% excise tax.
TAX STATUS OF SHAREHOLDERS
Shareholders are subject to federal income tax on dividends received as cash or
additional shares. No portion of any income dividend paid by a Fund is eligible
for the dividends received deduction available to corporations. These dividends
and any short-term capital gains are taxable as ordinary income.
Capital gains experienced by a Fund could result in an increase in dividends.
Capital losses could result in a decrease in dividends. If, for some
extraordinary reason, a Fund realizes net long-term capital gains, it will
distribute them at least once every 12 months.
If a Fund makes a distribution in excess of its current and accumulated
"earnings and profits" in any taxable year, the excess distribution will be
treated as a non-taxable return of capital to the extent of a shareholder's tax
basis in his shares. If the shareholder's basis has been reduced to zero, any
additional return of capital distributions will be taxable as capital gain.
In general, a Fund is required to withhold 31% of the taxable dividends and
other distributions paid to any shareholder who fails to furnish the Fund with a
correct taxpayer identification number, who has under reported dividends or
interest income, or who fails to certify to the Fund that he or she is not
subject to such withholding.
The foregoing is only a summary of some of the important federal income tax
considerations generally affecting purchases of shares of a Fund. No attempt is
made to present a detailed explanation of the federal income tax treatment of
each Fund or its shareholders, and this discussion is not intended as a
substitute for careful tax planning. Accordingly,
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investors are urged to consult their tax advisors with specific reference to
their own tax situation.
DIVIDENDS AND DISTRIBUTIONS
MONEY MARKET FUND
The net investment income shares of the Money Market Fund is determined as of
4:00 p.m. (Eastern Time) each day on which the Fund offers shares (a "Business
Day"). All of the net investment income so determined normally will be declared
as a dividend daily to shareholders of record of each class as of the close of
business and prior to the determination of net asset value. Unless the Business
Day before a weekend or holiday is the last day of an accounting period, the
dividend declared on that day will include an amount in respect of the Fund's
income for the subsequent non-business day or days. No daily dividend will
include any amount of net income in respect of a subsequent semiannual
accounting period. Dividends declared during any month will be invested as of
the close of business on the last calendar day of that month (or the next
Business Day after the last calendar day of the month if the last calendar day
of the month is a non-business day) in additional shares of the same class of
the Fund at the net asset value per share, normally $1.00, determined as of the
close of business on that day, unless payment of the dividend in cash has been
requested.
Net income of the Money Market Fund consists of all interest income accrued on
portfolio assets less all expenses of the Fund and amortized market premium.
Amortized market discount is included in interest income. The Money Market Fund
does not anticipate that it will normally realize any long-term capital gains
with respect to its portfolio securities.
Normally the Money Market Fund will have a positive net income at the time of
each determination of net income. Net income may be negative if an unexpected
liability must be accrued or a loss realized. If the net income of the Money
Market Fund determined at any time is a negative amount, the net asset value per
share will be reduced below $1.00 unless one or more of the following steps, for
which the Trustees have authority, are taken: (1) reduce the number of shares in
each shareholder's account of the applicable class or classes, (2) offset each
shareholder's pro rata portion of negative net income against the shareholder's
accrued dividend account or against future dividends with regard to the
applicable class or classes, or (3) combine these methods in order to seek to
obtain the net asset value per share of the applicable class or classes at
$1.00. The Trustees may endeavor to restore a Fund's net asset value per share
to $1.00 by not declaring dividends from net income on subsequent days until
restoration, with the result that the net asset value per share will increase to
the extent of positive net income which is not declared as a dividend.
If the Money Market Fund incurs or anticipates, with respect to its portfolio,
any unusual or unexpected significant expense or loss which would affect
disproportionately the Fund's income for a particular period, the Trustees would
at that time consider whether to adhere to the dividend policy described above
or to revise it in light of the then prevailing circumstances in order to
ameliorate, to the extent possible, the disproportionate effect of such expense
or loss on then existing shareholders. Such expenses or losses may nevertheless
result in a shareholder receiving no dividends for the period during which the
shares are held and receiving upon redemption a price per share lower than that
which was paid.
SHORT-TERM GOVERNMENT FUND
The Short-Term Government Fund will declare and distribute dividends from net
investment income, if any, and will distribute its net realized capital gains,
if any, at least annually.
PERFORMANCE INFORMATION
From time to time, the Funds may advertise performance, including yields,
effective yields and total returns as described below.
MONEY MARKET FUND YIELD
The Money Market Fund calculates yield daily, based upon the seven days ending
on the day of the calculation, called the "base period." This yield is computed
by determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net change
excluding capital changes but including the value of any additional shares
purchased with
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dividends earned from the original one share and all dividends declared on the
original and any purchased shares; dividing the net change in the account's
value by the value of the account at the beginning of the base period to
determine the base period return; and multiplying the base period return by
(365/7).
To the extent that financial institutions and broker- dealers charge fees in
connection with services provided in conjunction with an investment in the Fund,
the performance will be reduced for those shareholders paying those fees.
MONEY MARKET FUND EFFECTIVE YIELD
The effective yield of the Money Market Fund is computed by compounding the
unannualized base period return by: (1) adding 1 to the base period return, (2)
raising the sum to the 365/7th power; and (3) subtracting 1 from the result.
SHORT-TERM GOVERNMENT FUND TOTAL RETURN
The Short-Term Government Fund will calculate average annual total returns for
performance since inception and one-year, five-year and ten-year periods.
Average annual total return is the average compounded rate of return for a given
period that would equate an initial investment of $1,000 with the ending
redeemable value of that investment. The ending redeemable value is computed by
multiplying the number of shares owned at the end of the period by the offering
price per share at that time. The number of shares owned at the end of the
period is based on the number of shares purchased at the beginning of the period
with $1,000, plus any additional shares earned assuming reinvestment of all
dividends and distributions.
SHORT-TERM GOVERNMENT FUND YIELD
The yield for the Short-Term Government Fund is determined by: dividing the net
investment income per share earned over a thirty-day period by the maximum
offering price per share of the Fund at the end of the period; and annualizing
the result using semi-annual compounding.
FINANCIAL STATEMENTS
As of the date of this SAI, there were no audited financial statements of the
Funds, as they had not yet commenced operations.
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APPENDIX--DESCRIPTION OF BOND RATINGS
STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATING DEFINITIONS
AAA - Debt rated "AAA" has the highest rating assigned by Standard & Poor's
Ratings Group. Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A - Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes in
circumstances and economic conditions than debt in higher rated categories.
S&P may apply a plus (+) or minus (-) to the above rating classifications to
show relative standing within the classifications.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATING DEFINITIONS
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
DUFF & PHELPS, INC. CORPORATE BOND RATING DEFINITIONS
AAA - Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA- - High credit quality protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A+, A, A- - Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.
FITCH IBCA LONG-TERM RATING DEFINITIONS
AAA - Obligations for which there is the lowest expectation of credit risk.
Assigned only in case of exceptionally strong capacity for timely payment of
financial commitments. This capacity is highly unlikely to be adversely affected
by foreseeable events.
A-1
<PAGE> 35
AA - Obligations for which there is a very low expectation of credit risk. They
indicated very strong capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to unforeseeable events.
A - Obligations for which there is a low expectation of credit risk. The
capacity for timely repayment of financial commitments is considered strong.
This capacity may, nevertheless, be more vulnerable to change in circumstances
or economic conditions.
STANDARD AND POOR'S RATINGS GROUP COMMERCIAL PAPER RATING DEFINITIONS
A-1 - This designation indicates that the degree of safety regarding timely
payment strong. Those issues determined to have extremely strong safety
characteristics are denoted with a plus (+) sign.
A-2 - Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATING DEFINITIONS
Prime 1 - Issuers (or supporting institutions) rated Prime-1 (P-1) have a
superior ability for repayment of senior short-term promissory obligations. P-1
repayment capacity will often be evidenced by many of the following
characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Prime 2 - Issuers (or supporting institutions) rated Prime-2 (P-2) have a strong
ability for repayment of senior short- term debt obligations. This normally will
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
NR indicates the bonds are not currently rated by Moody's or S&P. However,
management considers them to be of good quality.
DUFF & PHELPS, INC. COMMERCIAL PAPER RATING DEFINITIONS
Duff 1+ - Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations.
Duff 1 - Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
Duff 1-High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
A-2
<PAGE> 36
Duff 2-Good certainty of timely payment Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
FITCH IBCA COMMERCIAL PAPER RATING DEFINITIONS
F-1 - Issues assigned this rating are regarded as having the highest capacity
for timely payment.
F-2 - Issues assigned this rating reflect a strong capacity for timely payment.
However, the relative degree of risk is slightly higher than for issues
classified as "A1" and capacity for repayment may be susceptible to adverse
changes in business, economics, or financial conditions.
F-3 - Issues assigned this rating have an adequate capacity for timely payment.
Such capacity is more susceptible to adverse changes in business, economic or
financial conditions.
A-3
<PAGE> 37
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS
(All documents incorporated by reference relate to File No. 811-09941 unless
otherwise indicated)
(a) Declaration of Trust of the Registrant (previously filed as Exhibit (a)
to Initial Registration Statement)
(b) By-Laws of the Registrant (previously filed as Exhibit (b) to Initial
Registration Statement)
(c) See Declaration of Trust and By-Laws
(d) Investment Advisory Agreement between the Registrant and Ambassador
Capital Management, LLC, relating to the Money Market Fund and the
Short-Term Government Fund*
(e) Distribution Agreement between the Registrant and BISYS Fund Services
Limited Partnership d/b/a BISYS Fund Services*
(f) Not applicable
(g) Custody Agreement between the Registrant and Fifth Third Bank*
(h) (1) Administration Agreement between the Registrant and BISYS Fund
Services Limited Partnership*
(2) Transfer Agency Agreement between the Registrant and BISYS Fund
Services Ohio, Inc.*
(3) Fund Accounting Agreement between the Registrant and BISYS Fund
Services Ohio, Inc.*
(4) Omnibus Fee Agreement between the Registrant, BISYS Fund Services
Limited Partnership and BISYS Fund Services Ohio, Inc.*
(i) Opinion and Consent of Dykema Gossett PLLC as to legality of shares
being registered*
(j) Consent of Ernst & Young LLP*
(k) Not applicable
(l) Subscription Agreement*
(m) Not applicable
(n) Not applicable
(o) Not applicable
(p) Not applicable because the Registrant does not invest in Covered
Securities, as defined in Rule 17j-1.
(z) (1) Power of Attorney for Nicholas J. DeGrazia (previously filed as
Exhibit (z)(1) to Initial Registration Statement)
(2) Power of Attorney for Ronald E. Hall (previously filed as Exhibit
(z)(2) to Initial Registration Statement)
(3) Power of Attorney for Conrad W. Koski (previously filed as Exhibit
(z)(3) to Initial Registration Statement)
*Filed herewith
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 25. INDEMNIFICATION
The Declaration of Trust of The Ambassador Funds (the "Trust") provides
that a trustee, when acting in such capacity, shall not be personally liable to
any person, other than the Trust or a shareholder to the extent provided in the
Declaration of Trust (as described below), for any act, omission or obligation
of the Trust, of such Trustee or of any other Trustee. The Trustees shall not be
responsible or liable in any event for any neglect or wrongdoing of any officer,
agent, employee, investment adviser or principal pnderwriter of the Trust. The
Trust shall indemnify each person who is, or has been, a Trustee, officer,
employee or agent of the Trust and any person who is serving or has served at
the Trust's request as a director, officer, trustee, employee or agent of
another organization in which the Trust has any interest as a shareholder,
creditor or otherwise to the extent and in the manner provided in the Bylaws.
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<PAGE> 38
The exercise by the Trustees of their powers and discretions under the
Declaration of Trust shall be binding upon everyone interested. A Trustee shall
be liable to the Trust and to any shareholder solely for his or her own willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and shall not be liable for
errors of judgment or mistakes of fact or law. The Trustees may take advice of
counsel or other experts with respect to the meaning and operation of this
Declaration of Trust, and shall be under no liability for any act or omission in
accordance with such advice nor for failing to follow such advice.
The Trust's by-laws provide that, subject to the exceptions and
limitation described below, every person who is or was a Trustee, officer,
employee or other agent of the Trust or is or was serving at the request of the
Trust as a trustee, director, officer, employee or agent of another organization
in which the Trust has any interest as a shareholder, creditor or otherwise
(collectively, an "agent") shall be indemnified by the Trust to the fullest
extent permitted by law against all liabilities and against all expenses
reasonably incurred or paid by him or her in connection with any proceeding in
which he or she becomes involved as a party or otherwise by virtue of his or her
being or having been an agent.
No indemnification shall be provided under the Trust's by-laws to an
agent:
(a) who shall have been adjudicated by the court or other body
before which the proceeding was brought to be liable to the Trust or
its Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his or her office (collectively, "disabling conduct"); or
(b) with respect to any proceeding disposed of (whether by
settlement, pursuant to a consent decree or otherwise) without an
adjudication by the court or other body before which the proceeding was
brought that such agent was liable to the Trust or its Shareholders by
reason of disabling conduct, unless there has been a determination that
such agent did not engage in disabling conduct:
(i) by the court or other body before which the
proceeding was brought;
(ii) by at least a majority of those Trustees who
are neither Interested Persons of the Trust nor are
parties to the proceeding based upon a review of
readily available facts (as opposed to a full
trial-type inquiry); or
(iii) by written opinion of independent legal
counsel based upon a review of readily available
facts (as opposed to a full trial-type inquiry);
provided, however, that indemnification shall be
provided hereunder to an agent with respect to any
proceeding in the event of (1) a final decision on
the merits by the court or other body before which
the proceeding was brought that the agent was not
liable by reason of disabling conduct, or (2) the
dismissal of the proceeding by the court or other
body before which it was brought for insufficiency of
evidence of any disabling conduct with which such
agent has been charged.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
THE ADVISER. Ambassador Capital Management, LLC ("ACM") serves as
investment adviser to the Registrant. ACM is registered as an investment adviser
with the Securities and Exchange Commission. ACM specializes in the management
of fixed income and cash portfolios for public and private sector retirement
plans, municipalities, corporations, endowments and foundations. Set forth below
are the names and principal businesses of the directors and executive officers
of ACM.
C-2
<PAGE> 39
<TABLE>
<CAPTION>
NAME OF PRINCIPAL BUSINESS(ES) DURING
OFFICERS AND DIRECTORS OF ACM AT LEAST THE LAST TWO FISCAL YEARS
----------------------------- ----------------------------------
<S> <C>
Brian T. Jeffries................................... President since 1/98; Previously, Portfolio Manager and
Partner, Munder Capital Management
Gregory A. Prost.................................... Chief Investment Officer since 1/00; Previously, Senior
Portfolio Manager and Partner, Munder Capital
Management
Kathryn J. Nurre.................................... Vice President and Portfolio Manager since 1/99;
Previously, Portfolio Manager, First of Michigan Corp.
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS
(a) BISYS Fund Services Limited Partnership ("BISYS") acts as distributor and
administrator for the Registrant. BISYS also distributes the securities of
Alpine Equity Trust, American Independence Funds Trust, American Performance
Funds, AmSouth Mutual Funds, The BB&T Mutual Funds Group, The Coventry Group,
The Eureka Funds, Governor Funds, Fifth Third Funds, Hirtle Callaghan Trust,
HSBC Funds Trust and HSBC Mutual Funds Trust, The Infinity Mutual Funds, Inc.,
Magna Funds, Mercantile Mutual Funds, Inc., Metamarkets.com, Meyers Investment
Trust, MMA Praxis Mutual Funds, M.S.D.&T. Funds, Pacific Capital Funds, The
Republic Advisors Funds Trust, The Republic Funds Trust, Summit Investment
Trust, USAlliance Funds, USAlliance Funds Variable Insurance Products Trust,
Variable Insurance Funds, The Victory Portfolios, The Victory Variable Insurance
Funds, Vintage Funds, Inc., and WHATIFI Funds each of which is an investment
management company.
(b) Directors, officers and partners of BISYS Fund Services Limited Partnership
("BISYS"), as of May 30, 2000 were as follows:
<TABLE>
<CAPTION>
Name and Principal
Business Address Positions and Offices with BISYS Positions and Offices with Registrant
---------------- -------------------------------- -------------------------------------
<S> <C> <C>
BISYS Fund Services, Inc. Sole General Partner None
3435 Stelzer Road
Columbus, Ohio 43219
WC Subsidiary Corporation Sole Limited Partner None
150 Clove Road
Little Falls, NJ 07424
</TABLE>
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<PAGE> 40
In addition to the following officers of BISYS Fund Services Limited Partnership
("BISYS") each distributor has additional officers and/or alternative positions
held by BISYS officers (business addresses for each person and distributor
unless noted otherwise is 3435 Stelzer Road, Columbus, OH 43219 and unless noted
otherwise each person holds no position with the Fund):
Dennis Sheehan Executive Officer
William Tomko Supervising Principal
Gregory A. Trichtinger Vice President
Andrew Corbin Vice President
Robert Tuch Assistant Secretary
Olu T. Lawal Fin-Op
<TABLE>
<S><C>
*Barr Rosenberg Funds Distributor, Inc. Irimga McKay- President
Barr Rosenberg Funds Greg Maddox -Vice President(1)
Lynn Mangum - Chairman
Dennis Sheehan - EVP/Director
William Tomko - Senior Vice President
Kevin Dell - Vice President/Secretary
Greg Maddox - Supervising Principal/VP
BNY Hamilton Distributors, Inc. William Tomko- Senior Vice President
BNY Hamilton Funds, Inc. Richard Baxt - President
Lynn Mangum - Chairman
Dennis Sheehan - EVP/Director
Kevin Dell - Vice President/Secretary
*Centura Funds Distributor, Inc. Walter B. Grimm- President
Centura Funds William Tomko- Senior Vice President
Lynn Mangum - Chairman
Dennis Sheehan - EVP/Director
Kevin Dell - Vice President/Secretary
CFD Fund Distributors, Inc. Richard Baxt- President
Chase Funds William Tomko- Senior Vice President
Lynn Mangum - Chairman
Dennis Sheehan - EVP/Director
Kevin Dell - Vice President/Secretary
Concord Financial Group, Inc. Walter B. Grimm- President
ProFunds- William Tomko- Senior Vice President
Lynn Mangum - Chairman
Dennis Sheehan - EVP/Director
Kevin Dell - Vice President/Secretary
Irimga McKay- Supervising Principal
*Evergreen Distributor, Inc. D'Ray Moore- President
</TABLE>
C-4
<PAGE> 41
<TABLE>
<S><C>
Evergreen Funds William Tomko- Senior Vice President
Lynn Mangum - Chairman
Dennis Sheehan - EVP/Director
Kevin Dell - Vice President/Secretary
*Performance Funds Distributor, Inc. Walter B. Grimm-President
Performance Funds William Tomko- Senior Vice President
Lynn Mangum - Chairman
Dennis Sheehan - EVP/Director
Kevin Dell - Vice President/Secretary
The One Group Services Company Mark Redman- President
The One Group of Funds William Tomko- Senior Vice President
Lynn Mangum - Chairman
Dennis Sheehan - EVP/Director
Kevin Dell - Vice President/Secretary
Vista Funds Distributors, Inc. Richard Baxt- President
Chase Vista Funds Mathew H. Lobas - Supervisory Principal
William Tomko- Senior Vice President
Lynn Mangum - Chairman
Dennis Sheehan - EVP/Director
Kevin Dell - Vice President/Secretary
Kent Funds Distributors, Inc. R. Jeffrey Young - Supervisory Prinicipal
Kent Funds William Tomko- Senior Vice President
Lynn Mangum - Chairman
Kevin Dell - Vice President/Secretary
Mentor Distributors, LLC D'Ray Moore, President
William Tomko- Senior Vice President
Lynn Mangum - Chairman
Dennis Sheehan - EVP/Director
Kevin Dell - Vice President/Secretary
*IBJ Funds Distributor, Inc. Walter B. Grimm, SVP
William Tomko- Senior Vice President
Lynn Mangum - Chairman
Dennis Sheehan - EVP/Director
Kevin Dell - Vice President/Secretary
J. David Huber - President
Georgette Prengel - Supervisory Principal
</TABLE>
* address is 90 Park Avenue, New York, NY
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All accounts and records required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
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<PAGE> 42
Ambassador Capital Management, L.L.C. 211 West Fort Street, Suite 720
(Investment Adviser) Detroit, MI 48226
BISYS Fund Services Limited Partnership 3435 Stelzer Road
and BISYS Fund Services Ohio, Inc. Columbus, Ohio 43219
(Administrator, Distributor, Transfer Agent
and Fund Accountant)
Fifth Third Bank 38 Fountain Square Plaza
(Custodian) Cincinnati, Ohio 45263
ITEM 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. UNDERTAKINGS
The Registrant undertakes to file an amendment to the Registration
Statement with certified financial statements showing the initial capital
received before accepting subcriptions from more than 25 persons.
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<PAGE> 43
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
and the Investment Company Act of 1940, as amended, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Detroit, State of Michigan,
on the 28th day of July, 2000.
AMBASSADOR FUNDS
By:/s/ Brian T. Jeffries
---------------------------------
Brian T. Jeffries, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following person in the
capacity and on the date indicated:
<TABLE>
<CAPTION>
NAME TITLE DATE
<S> <C> <C>
/s/ Brian T. Jeffries Trustee and President July 28, 2000
---------------------------------------
Brian T. Jeffries (Chief Executive Officer)
/s/ Nadeem Yousaf Treasurer July 28, 2000
---------------------------------------
Nadeem Yousaf (Chief Financial and
Accounting Officer)
* Trustee July 28, 2000
---------------------------------------
Nicholas J. DeGrazia
* Trustee July 28, 2000
---------------------------------------
Ronald E. Hall
* Trustee and Chairman July 28, 2000
---------------------------------------
Conrad W. Koski
/s/ Gregory A. Prost Trustee July 28, 2000
---------------------------------------
Gregory A. Prost
*Executed on behalf of the indicated person by the undersigned, pursuant to
power of attorney filed herewith.
July 28, 2000
-----------
</TABLE>
By: /s/ Brian T. Jeffries
----------------------------
Brian T. Jeffries
Attorney-In-Fact
<PAGE> 44
EXHIBIT INDEX
(d) Investment Advisory Agreement
(e) Distribution Agreement
(g) Custody Agreement
(h) (1) Administration Agreement
(2) Transfer Agency Agreement
(3) Fund Accounting Agreement
(4) Omnibus Fee Agreement
(i) Opinion and Consent of Dykema Gossett PLLC
(j) Consent of Ernst & Young LLP
(l) Subscription Agreement
