<PAGE> 1
As filed with the Securities and Exchange Commission
on December 30, 1996
1933 Act Registration No. 2-78808
1940 Act Registration No. 811-3541
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 27 /X/
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 28 /X/
(Check appropriate box or boxes)
ASSET MANAGEMENT FUND, INC.
(Exact name of Registrant as specified in Charter)
111 E. Wacker Drive, Chicago, Illinois 60601
(Address of principal executive offices) (Zip code)
Registrant's Telephone Number, including Area Code: 312-644-3100
Edward E. Sammons, Jr.
Vice President and Treasurer with a copy to:
Asset Management Fund, Inc. Cathy G. O'Kelly, Esq.
111 E. Wacker Drive Vedder, Price, Kaufman & Kammholz
Chicago, Illinois 60601 222 North LaSalle Street
(Name and address of agent for service) Chicago, Illinois 60601
Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. The Rule 24f-2 Notice for Registrant's fiscal
year ended October 31, 1996 was filed on December 26, 1996.
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b); or
/ / on (date) pursuant to paragraph (b); or
/ / 60 days after filing pursuant to paragraph (a)(1); or
/X/ on March 1, 1997 pursuant to paragraph (a)(1); or
/ / 75 days after filing pursuant to paragraph (a)(2); or
/ / on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE> 2
CROSS-REFERENCE SHEET
(as required by Rule 495)
N-1A Item No. Caption
<PAGE> 3
<TABLE>
<CAPTION>
Part A Prospectus
------ ----------
<S> <C> <C>
Item 1. Cover Page ................................... Front Cover Page
Item 2. Synopsis ..................................... Fee Tables
Item 3. Condensed Financial Information .............. Financial Highlights
Item 4. General Description of Registrant ............ Overview; Summary; Calculation of Yield;
Investment Information
Item 5. Management of the Fund ....................... Fund and Portfolio Information; Expenses
Item 5A. Management's Discussion of Fund Performance .. Not Applicable
Item 6. Capital Stock and Other Securities ........... Fund and Portfolio Information; Investing
in the Fund -- Dividends;
Stockholder Information; Front Cover Page
Item 7. Purchase of Securities Being Offered ......... Fund and Portfolio Information --
Distributor; Net Asset Value; Investing
in the Fund -- Share Purchases
Item 8. Redemption or Repurchase ..................... Investing in the Fund -- Redeeming
Shares, Telephone Redemption & Written
Requests
Item 9. Pending Legal Proceedings .................... Not Applicable
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Part B Statement of Additional
------ Information
-----------------------
<S> <C> <C>
Item 10. Cover Page ................................... Front Cover Page
Item 11. Table of Contents ............................ Back Cover Page
Item 12. General Information and History .............. General Information
Item 13. Investment Objectives and Policies ........... The Fund's Objective, The Portfolios and
Their Management Policies; Investment
Restrictions
Item 14. Management of the Fund ....................... Management of the Fund
Item 15. Control Persons and Principal Holders of
Securities ................................... Not Applicable
Item 16. Investment Advisory and Other Services ....... Investment Adviser and Administrator;
Distributor
Item 17. Brokerage Allocation and Other Practices ..... Portfolio Transactions
Item 18. Capital Stock and Other Securities ........... Organization and Description of Fund
Shares
Item 19. Purchase, Redemption and Pricing of Purchase and Redemption of Shares;
Securities Being Offered ..................... Determination of Net Asset Value
Item 20. Tax Status ................................... Taxes
Item 21. Underwriters ................................. Not Applicable
Item 22. Calculation of Performance Data .............. Dividends, Distributions and Yield and/or
Total Return Quotations
Item 23. Financial Statements ......................... Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Amendment to Registration
Statement.
iii
<PAGE> 5
- --------------------------------------------------------------------------------
LOGO
- --------------------------------------------------------------------------------
Prospectus
- --------------------------------------------------------------------------------
Asset Management Fund, Inc. (the "Fund") is a diversified, open-end
investment company (a mutual fund) currently consisting of five
portfolios: the Adjustable Rate Mortgage (ARM) Portfolio, the
Intermediate Mortgage Securities Portfolio, the U.S. Government Mortgage
Securities Portfolio, the Money Market Portfolio, and the Short U.S.
Government Securities Portfolio (each a "Portfolio" and collectively
referred to as the "Portfolios"). Purchase of Shares in the Portfolios is
designed for institutions and other investors. The Fund's objective is to
achieve as high a level of current income as is consistent with the
preservation of capital, the maintenance of liquidity and the differing
average maturity of investments held by each of the Fund's portfolios.
This Prospectus contains information about the Fund and the Portfolios
that a prospective investor should know before investing. Please read it
carefully and retain it for future reference. A Statement of Additional
Information for the Adjustable Rate Mortgage (ARM) Portfolio, the
Intermediate Mortgage Securities Portfolio and the U.S. Government
Mortgage Securities Portfolio, dated March 1, 1997, and a Statement of
Additional Information for the Money Market Portfolio and the Short U.S.
Government Securities Portfolio, dated March 1, 1997, have been filed
with the Securities and Exchange Commission and are incorporated herein
by reference. The Statements of Additional Information are available upon
request and without charge from the Fund by writing to the Fund at the
address below or by telephoning (800) 527-3713.
SHARES OF THE PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY
INSTITUTION, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. AN
INVESTMENT IN A PORTFOLIO INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
THERE IS NO ASSURANCE THAT THE MONEY MARKET PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated March 1, 1997
Asset Management Fund, Inc.,
111 East Wacker Drive, Chicago, Illinois 60601
1
<PAGE> 6
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
OVERVIEW 1
- -------------------------------------------
SUMMARY 2
- -------------------------------------------
FEE TABLES 4
- -------------------------------------------
FINANCIAL HIGHLIGHTS 6
- -------------------------------------------
INVESTMENT INFORMATION 11
- -------------------------------------------
Investment Objective and Policies 11
Adjustable Rate Mortgage (ARM)
Portfolio, Intermediate
Mortgage Securities Portfolio
and U.S. Government Securities
Portfolio 11
Money Market Portfolio and Short
U.S. Government Securities
Portfolio 13
Description of Securities 14
Mortgage-Related Securities 14
Collateralized Mortgage
Obligations 17
When-Issued and Delayed Delivery
Securities 17
Repurchase Agreements 18
Portfolio Turnover 18
Investment Limitations 18
FUND AND PORTFOLIO INFORMATION 20
- -------------------------------------------
Management of the Fund 20
Board of Directors 20
Investment Adviser 20
Advisory Fee Expenses 20
Adviser's Background 21
Distributor 22
Distribution Expenses 22
Administrator and Transfer and
Dividend Agent 22
Custodian 23
Calculation of Yield and Total
Return 23
NET ASSET VALUE 24
- -------------------------------------------
INVESTING IN THE FUND 24
- -------------------------------------------
Share Purchases 24
Minimum Investment Required 25
What Shares Cost 25
Confirmations 26
Dividends 26
Capital Gains 26
REDEEMING SHARES 26
- -------------------------------------------
Telephone Redemption 26
Written Requests 27
Signatures 28
Receiving Payment 28
EXCHANGES 28
- -------------------------------------------
STOCKHOLDER INFORMATION 29
- -------------------------------------------
Voting Rights 29
Tax Information 29
</TABLE>
<PAGE> 7
SUMMARY
Investment Objective
- --------------------------------------------------------------------------------
The investment objective of the Fund is to achieve as high a level of
current income as is consistent with the preservation of capital, the
maintenance of liquidity and the differing average maturity of
investments held by each of the Fund's portfolios.
Adjustable Rate Mortgage (ARM) Portfolio
The Adjustable Rate Mortgage (ARM) Portfolio pursues its investment
objective by investing primarily in adjustable rate mortgage securities
and seeking lower volatility of principal than fixed rate securities of
similar quality.
Intermediate Mortgage Securities Portfolio
The Intermediate Mortgage Securities Portfolio pursues its investment
objective by investing primarily in intermediate-term mortgage related
securities paying fixed or adjustable rates of interest.
U.S. Government Mortgage Securities Portfolio
The U.S. Government Mortgage Securities Portfolio pursues its investment
objective by investing primarily in mortgage related securities
guaranteed directly by the United States or issued or guaranteed by U.S.
Government agencies or
instrumentalities.
Money Market Portfolio
The Money Market Portfolio pursues its investment objective by investing
in high quality short term money market instruments (including assets
subject to repurchase agreements) that qualify as "short-term" liquid
assets for savings associations under the regulations of the Office of
Thrift Supervision of the Department of the Treasury and that, if
included in the Portfolio, will qualify its shares as "short-term liquid
assets."
Short U.S. Government Securities Portfolio
The Short U.S. Government Securities Portfolio pursues its investment
objective by investing in high quality U.S. Government and other debt
securities with remaining maturities of 5 years or less that qualify as
"liquid assets" for savings associations under the regulations of the
Office of Thrift Supervision of the Department of Treasury and that, if
included, will qualify its shares as "liquid assets."
Each Portfolio's shares are eligible for purchase by Federal Savings
Associations, National Banks and Federal Credit Unions without limitation
under applicable Federal Law.
2
<PAGE> 8
Investment Adviser
- --------------------------------------------------------------------------------
Shay Assets Management Co. (the "Adviser") serves as the investment
adviser to each of the Portfolios. As of , 1996, Shay Assets
Management Co. acted as an investment adviser for assets [in excess of
$ .]
Principal Distributor
- --------------------------------------------------------------------------------
Shay Financial Services Co. (the "Distributor") acts as the principal
distributor of each Portfolio's shares.
Minimum Investment Required
- --------------------------------------------------------------------------------
The minimum initial investment in each Portfolio is $10,000. Subsequent
purchases may be made in any amount.
Purchase of Shares
- --------------------------------------------------------------------------------
Shares of the Portfolios may be purchased through the Distributor. Shares
are purchased at the current net asset value without any sales load. See
"Investing in the Portfolios."
Sale of Shares
- --------------------------------------------------------------------------------
Shares of the Portfolios may be redeemed upon request on any Business
Day, as set forth under "Redeeming Shares."
3
<PAGE> 9
FEE TABLES
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES NONE
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
Adjustable U.S.
Rate Intermediate Government Short U.S.
Mortgage Mortgage Mortgage Money Government
(ARM) Securities Securities Market Securities
Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
Advisory Fees 0.45% 0.35% 0.25% 0.15% 0.25%
12b-1 Fees 0.25% 0.15% 0.15% 0.15% 0.15%
Other Expenses 0.07% 0.08% 0.12% 0.09% 0.08%
----- ----- ----- ----- -----
Total Fund Operating
Expenses 0.77% 0.58% 0.52% 0.39% 0.48%
===== ===== ===== ===== =====
</TABLE>
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming (1)
a 5% annual return and (2) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Adjustable Rate Mortgage (ARM) Portfolio $8 $25 $43 $95
Intermediate Mortgage Securities Portfolio $6 $19 $32 $73
U.S. Government Mortgage Securities
Portfolio $5 $17 $29 $65
Money Market Portfolio $4 $13 $22 $49
Short U.S. Government Securities Portfolio $5 $15 $27 $60
</TABLE>
The purpose of the preceding table is to assist you in understanding the
various costs and expenses that you will bear directly or indirectly as
an investor in the Portfolios. The example is based on actual expenses
incurred in the last fiscal year excluding waivers of advisory fees and
12b-1 fees, where applicable. Although during the prior fiscal year ended
October 31, 1996, the Adviser waived approximately 44% and 40% of its
fees for the Adjustable Rate Mortgage (ARM) Portfolio and the
Intermediate Mortgage Securities Portfolio, respectively, and the
4
<PAGE> 10
Distributor waived approximately 40% of its 12b-1 fees for the Adjustable
Rate Mortgage (ARM) Portfolio (see "Financial Highlights," "Advisory Fee
Expenses" and "Distribution Expenses"), the fee table has been prepared
to illustrate annual fund operating expenses assuming no fee waivers.
As a result of the 12b-1 fee, long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charge of 8.50%
permitted by the National Association of Securities Dealers, Inc.
However, because of the low 12b-1 fee charged by the Fund, it would take
in excess of 50 years for this to occur, assuming that the value of the
investment remained constant and that no interest was credited to the
savings from the absence of a front-end sales charge.
The example should not be considered a representation of past or future
expenses or performance. Actual expenses in future years may be greater
or lesser than those shown.
5
<PAGE> 11
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following tables include selected data for a share outstanding throughout
each year and other performance information comprising part of the financial
statements that have been audited by Coopers & Lybrand L.L.P., independent
accountants, whose report thereon is incorporated by reference in the Statements
of Additional Information. More detailed information concerning the performance
of the Portfolios and the audited financial statements is available in the
Fund's Annual Report dated October 31, 1996 and may be obtained without charge
by writing or calling the Fund.
ADJUSTABLE RATE MORTGAGE (ARM) PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1996 1995 1994 1993 1992 1991*
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 9.94 $ 9.78 $ 10.02 $ 9.98 $ 10.01 $ 10.00
-------- -------- ---------- ---------- ---------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............. .5958 .6035 .4396 .4267 .5235 .0783
Net realized and unrealized gain
(loss) on investments............ .0100 .1600 (.2400) .0386 (.0295) .0118
-------- -------- ---------- ---------- ---------- --------
Total from investment
operations....................... .6058 .7635 .1996 .4653 .4940 .0901
-------- -------- ---------- ---------- ---------- --------
LESS DISTRIBUTIONS:
Dividends from net investment
income........................... (.5958) (.6035) (.4396) (.4253) (.5240) (.0801)
-------- -------- ---------- ---------- ---------- --------
Total distributions............... (.5958) (.6035) (.4396) (.4253) (.5240) (.0801)
-------- -------- ---------- ---------- ---------- --------
Net asset value, end of period..... $ 9.95 $ 9.94 $ 9.78 $ 10.02 $ 9.98 $ 10.01
======== ======== ========== ========== ========== ========
Total return....................... 6.27% 8.02% 2.04% 4.76% 5.05% 7.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's)........................... $796,016 $891,538 $1,045,914 $1,572,311 $1,189,309 $220,858
Ratio of expenses to average net
assets........................... 0.47%(1) 0.48%(1) 0.47%(1) 0.46%(1) 0.44%(1) 0.20%(1)(2)
Ratio of net investment income to
average net assets............... 6.01% 6.12% 4.40% 4.34% 5.14% 6.47%(2)
Portfolio turnover rate........... 60%..... 68% 65% 30% 43% -0-%
</TABLE>
- --------------------------------------------------------------------------------
* Reflects operations for the period from September 18, 1991 (commencement of
operations) through October 31, 1991.
(1) Without fee waivers for the years ended October 31, 1996, 1995, 1994, 1993
and 1992 and the period ended October 31, 1991, the ratios of expenses to
average net assets would have been .77%, .78%, .76%, .76%, .80% and .79%
(annualized), respectively.
(2) Annualized.
6
<PAGE> 12
INTERMEDIATE MORTGAGE SECURITIES PORTFOLIO*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1996 1995 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period..................... $ 9.68 $ 9.34 $ 10.00 $ 9.80 $ 9.61 $ 9.00 $ 9.56
------- -------- -------- -------- -------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income...... .6101 .6211 .5407 .5982 .7161 .8071 .8475
Net realized and unrealized
gain (loss) on
investments.............. (.1600) .3400 (.6600) .1987 .1909 .6100 (.5600)
------- -------- -------- -------- -------- ------- -------
Total from investment
operations............. .4501 .9611 (.1193) .7969 .9070 1.4171 .2875
------- -------- -------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net
investment income........ (.6101) (.6211) (.5407) (.5969) (.7170) (.8071) (.8475)
------- -------- -------- -------- -------- ------- -------
Total distributions...... (.6101) (.6211) (.5407) (.5969) (.7170) (.8071) (.8475)
------- -------- -------- -------- -------- ------- -------
Net asset value, end of
period..................... $ 9.52 $ 9.68 $ 9.34 $ 10.00 $ 9.80 $ 9.61 $ 9.00
======= ======== ======== ======== ======== ======= =======
Total return................. 4.82% 10.63% (1.18%) 8.33% 9.74% 16.41% 3.17%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's)............... $92,289 $187,087 $213,427 $218,032 $116,458 $59,298 $66,854
Ratio of expenses to
average net assets....... 0.44%(1) 0.38%(1) 0.39%(1) 0.37%(1) 0.43%(1) 0.63% 0.58%(1)
Ratio of net investment
income to average net
assets................... 6.38% 6.55% 5.61% 5.94% 7.14% 8.71% 9.18%
Portfolio turnover rate.... 133% 133% 358% 106% 226% 39% 30%
<CAPTION>
YEAR ENDED OCTOBER 31
1989 1988 1987**
- ----------------------------- -----------------------------
<S> <C> <C> <C>
Net asset value, beginning of
period..................... $ 9.47 $ 9.01 $ 10.00
------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income...... .8555 .8329 .7391
Net realized and unrealized
gain (loss) on
investments.............. .0900 .4600 (.9900)
------- -------- --------
Total from investment
operations............. .9455 1.2929 (.2509)
------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net
investment income........ (.8555) (.8329) (.7391)
------- -------- --------
Total distributions...... (.8555) (.8329) (.7391)
------- -------- --------
Net asset value, end of
period..................... $ 9.56 $ 9.47 $ 9.01
======= ======== ========
Total return................. 10.61% 14.92% (2.10%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's)............... $76,454 $106,310 $120,905
Ratio of expenses to
average net assets....... 0.55%(1) 0.55%(1) 0.55%(1)(2)
Ratio of net investment
income to average net
assets................... 9.20% 9.00% 8.57%(2)
Portfolio turnover rate.... 66% 63% 61%
</TABLE>
- --------------------------------------------------------------------------------
* Prior to June 2, 1992, the name of the Portfolio was the Corporate Bond
Portfolio and the Portfolio was invested primarily in investment grade corporate
bonds. The data and ratios shown below reflect the record as the Corporate Bond
Portfolio prior to June 2, 1992.
** Reflects operations for the period from December 1, 1986 to October 31, 1987.
(1) Without fee waivers for the years ended October 31, 1996, 1995, 1994, 1993,
1992, 1990, 1989 and 1988 and the period ended October 31, 1987, the ratios of
expenses to average net assets would have been .58%, .58%, .59%, .57%, .61%,
.59%, .60%, .58% and .62% (annualized), respectively.
(2) Annualized.
7
<PAGE> 13
U.S. GOVERNMENT MORTGAGE SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year.................. $ 10.68 $ 10.23 $ 11.28 $ 11.26 $ 11.29 $ 10.61 $ 10.78 $ 10.71 $ 10.35 $ 11.08
------- ------- ------- ------- ------- ------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.... .7479 .7703 .7296 .8306 .8924 .9504 .9534 .9705 .9461 .9238
Net realized and
unrealized gain (loss)
on investments.......... (.1700) .4500 (.9300) .0195 (.0297) .6800 (.1700) .0700 .3600 (.7300)
------- ------- ------- ------- ------- ------- -------- -------- -------- --------
Total from investment
operations.............. .5779 1.2203 (.2004) .8501 .8627 1.6304 .7834 1.0405 1.3061 .1938
------- ------- ------- ------- ------- ------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net
investment income....... (.7479) (.7703) (.7296) (.8301) (.8927) (.9504) (.9534) (.9705) (.9461) (.9238)
Dividends from net
realized gains.......... -0- -0- (.1200) -0- -0- -0- -0- -0- -0- -0-
------- ------- ------- ------- ------- ------- -------- -------- -------- --------
Total distributions...... (.7479) (.7703) (.8496) (.8301) (.8927) (.9504) (.9534) (.9705) (.9461) (.9238)
------- ------- ------- ------- ------- ------- -------- -------- -------- --------
Net asset value, end of
year..................... $ 10.00 $ 10.68 $ 10.23 $ 11.28 $ 11.26 $ 11.29 $ 10.61 $ 10.78 $ 10.71 $ 10.35
======= ======= ======= ======= ======= ======= ======== ======== ======== ========
Total return.............. 5.63% 12.37% (1.82%) 7.76% 7.91% 16.00% 7.63% 10.35% 13.15% 1.78%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(in 000's).............. $57,267 $62,258 $60,613 $92,994 $72,505 $82,849 $205,623 $222,688 $288,420 $328,333
Ratio of expenses to
average net assets...... 0.52% 0.53% 0.51% 0.51% 0.53% 0.54% 0.51% 0.51% 0.50% 0.51%
Ratio of net investment
income to average net
assets.................. 7.10% 7.39% 6.81% 7.32% 7.91% 8.75% 8.97% 9.25% 8.98% 8.63%
Portfolio turnover
rate.................... 165% 177% 376% 187% 64% 43% 12% 12% 67% 93%
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE> 14
MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------- -------- -------- ------- -------- ------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.... .0516 .0547 .0346 .0277 .0358 .0595 .0794 .0906 .0709 .0633
Net realized and
unrealized gain (loss)
on investments.......... -0- -0- -0- -0- -0- -0- -0- -0- -0- -0-
------- ------- ------- -------- -------- -------- ------- -------- ------- --------
Total from investment
operations............. .0516 .0547 .0346 .0277 .0358 .0595 .0794 .0906 .0709 .0633
------- ------- ------- -------- -------- -------- ------- -------- ------- --------
LESS DISTRIBUTIONS:
Dividends from net
investment income....... (.0516) (.0547) (.0346) (.0277) (.0358) (.0595) (.0794) (.0906) (.0709) (.0633)
------- ------- ------- -------- -------- -------- ------- -------- ------- --------
Net asset value, end of
year..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======== ======== ======== ======= ======== ======= ========
Total return.............. 5.29% 5.60% 3.51% 2.80% 3.64% 6.11% 8.24% 9.49% 7.33% 6.51%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(in 000's).............. $69,484 $36,869 $82,969 $107,924 $110,090 $131,291 $72,417 $102,230 $82,091 $108,713
Ratio of expenses to
average net assets...... 0.24%(1) 0.24%(1) 0.40%(1) 0.40% 0.41% 0.45% 0.36%(1) 0.30%(1) 0.30%(1) 0.30%(1)
Ratio of net investment
income to average net
assets.................. 5.15% 5.40% 3.34% 2.77% 3.54% 5.83% 7.98% 9.00% 6.97% 6.24%
</TABLE>
- --------------------------------------------------------------------------------
(1) Without fee waivers for the years ended October 31, 1996, 1995, 1994, 1990,
1989, 1988 and 1987, the ratios of expenses to average net assets would have
been .39%, .39%, .42%, .40%, .41%, .39% and .37%, respectively.
9
<PAGE> 15
SHORT U.S. GOVERNMENT SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1996 1995 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year.................... $ 10.68 $ 10.45 $ 10.89 $ 10.85 $ 10.71 $ 10.39 $ 10.42
-------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income...... .6370 .6746 .5396 .6155 .7652 .8308 .8445
Net realized and unrealized
gain (loss) on
investments............... (.1200) .2300 (.4400) .0400 .1400 .3200 (.0300)
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations................ .5170 .9046 .0996 .6555 .9052 1.1508 .8145
-------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net
investment income......... (.6370) (.6746) (.5396) (.6155) (.7652) (.8308) (.8445)
-------- -------- -------- -------- -------- -------- --------
Total distributions........ (.6370) (.6746) (.5396) (.6155) (.7652) (.8308) (.8445)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year....................... $ 10.56 $ 10.68 $ 10.45 $ 10.89 $ 10.85 $ 10.71 $ 10.39
======== ======== ======== ======== ======== ======== ========
Total return................ 4.99% 8.94% 0.95% 6.19% 8.72% 11.35% 8.18%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(in 000's)................ $176,892 $167,343 $179,740 $235,705 $213,995 $309,791 $521,920
Ratio of expenses to
average net assets........ 0.48% 0.49% 0.47% 0.48% 0.50% 0.51% 0.47%
Ratio of net investment
income to average net
assets.................... 6.02% 6.42% 5.04% 5.65% 7.15% 7.92% 8.19%
Portfolio turnover rate.... 69% 112% 195% 110% 43% 18% 40%
<CAPTION>
YEAR ENDED OCTOBER 31
1989 1988 1987
- ---------------------------- --------------------------------
<S> <C> <C> <C>
Net asset value, beginning
of year.................... $ 10.37 $ 10.45 $ 10.78
-------- -------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income...... .8744 .8528 .8101
Net realized and unrealized
gain (loss) on
investments............... .0500 (.0800) (.3300)
-------- -------- ----------
Total from investment
operations................ .9244 .7728 .4801
-------- -------- ----------
LESS DISTRIBUTIONS:
Dividends from net
investment income......... (.8744) (.8528) (.8101)
-------- -------- ----------
Total distributions........ (.8744) (.8528) (.8101)
-------- -------- ----------
Net asset value, end of
year....................... $ 10.42 $ 10.37 $ 10.45
======== ======== ==========
Total return................ 9.36% 7.66% 4.65%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(in 000's)................ $649,320 $845,269 $1,102,057
Ratio of expenses to
average net assets........ 0.45% 0.43% 0.39%
Ratio of net investment
income to average net
assets.................... 8.51% 8.16% 7.68%
Portfolio turnover rate.... 63% 38% 95%
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE> 16
INVESTMENT INFORMATION
Investment Objective and Policies
- --------------------------------------------------------------------------------
The investment objective of the Fund is to achieve as high a level of
current income as is consistent with the preservation of capital, the
maintenance of liquidity and the differing average maturity of
investments held by each of the Fund's portfolios. Each Portfolio pursues
this investment objective by investing in the securities described below.
The assets in which each Portfolio may invest are referred to as
"Eligible Investments" in this Prospectus. While there is no assurance
that a Portfolio will achieve its investment objective, each endeavors to
do so by following the investment policies and limitations described
below. The Fund's investment objective and these policies and limitations
cannot be changed as to a Portfolio without approval of that Portfolio's
stockholders.
Adjustable Rate Mortgage (ARM) Portfolio,
Intermediate Mortgage Securities Portfolio and
U.S. Government Mortgage Securities Portfolio
The Adjustable Rate Mortgage (ARM) Portfolio pursues its investment
objective by investing in the securities described below and seeking
lower volatility of principal. Because of the characteristics of
adjustable rate securities, the Adviser expects that a portfolio of these
types of securities will generally provide higher current yields than
money market securities or alternative investments of comparable quality
and market value volatility. While the Portfolio's net asset value will
be more volatile than prices of money market securities, it will be less
volatile than prices of fixed-rate securities of similar quality.
At least 65% of the Adjustable Rate Mortgage (ARM) Portfolio's Eligible
Investments will consist of Adjustable Rate Mortgage Securities, except
when the Portfolio assumes a temporary defensive position in other
Eligible Investments. The policy of investing at least 65% of the value
of the Portfolio's total assets in Adjustable Rate Mortgage Securities is
deemed fundamental and may not be changed without stockholder approval.
At least 65% of the Intermediate Mortgage Securities Portfolio's Eligible
Investments will consist of Mortgage-Related Securities paying fixed or
adjustable rates of interest, except when the Portfolio assumes a
temporary defensive position in other Eligible Investments. The policy of
investing at least 65% of the value of the Portfolio's total assets in
Mortgage-Related Securities is deemed fundamental and may not be changed
without stockholder approval. The Portfolio intends to invest in
Mortgage-Related Securities that will produce less price volatility than
would normally be associated with the ownership of 30-year, fixed-rate
mortgage-backed securities. Generally, the Portfolio will seek to acquire
Mortgage-Related Securities having an expected average life of 2 to 7
years at the time of purchase and would also seek to maintain a
dollar-weighted expected average life of between 2 to 7 years with
respect to such securities held by the Portfolio at any one time. These
11
<PAGE> 17
goals might be difficult to meet in certain environments when mortgage
prepayments are very high or very low, but in no case would the Portfolio
invest in a Mortgage-Related Security that had an expected average life
of greater than 10 years at the time of purchase.
At least 65% of the U.S. Government Mortgage Securities Portfolio's
Eligible Investments will consist of Mortgage-Related Securities
guaranteed directly by the United States or issued or guaranteed by U.S.
Government agencies or instrumentalities ("Government Mortgage-Related
Securities"), except where the Portfolio assumes a temporary defensive
position. The policy of investing at least 65% of the value of the
Portfolio's total assets in Government Mortgage-Related Securities is
deemed fundamental and may not be changed without stockholder approval.
Each of the three Portfolios discussed above invests primarily in
"securities backed by or representing an interest in mortgages on
domestic residential housing or manufactured housing" meeting the
definition of such assets for purposes of the qualified thrift lender
("QTL") test under the current regulations of the Office of Thrift
Supervision of the Department of the Treasury ("OTS Regulations").
Pending any revisions of the current OTS Regulations, each Portfolio
expects that, absent extraordinary market developments, at least 65% of
its assets will qualify for QTL purposes for savings associations,
although actual percentages may be higher. In addition, each Portfolio
will not purchase any Eligible Investments having a risk-based weighting
in excess of 20% under the current risk-based capital regulations
established by the Office of Thrift Supervision. Also, each Portfolio
will not purchase any Eligible Investments having a risk-based weighting
for banks in excess of 50% under current Federal regulations of the
appropriate regulatory agencies. The risk-based capital information and
QTL qualifying percentage will be communicated quarterly to the
stockholders. Furthermore, each Portfolio may not invest in "high risk"
securities that do not meet the tests contained in the "Supervisory
Policy Statement on Securities Activities" adopted by the Federal Deposit
Insurance Corporation, the Office of the Comptroller of the Currency, the
Office of Thrift Supervision and the National Credit Union
Administration, respectively, and each Portfolio limits its investments
to those permissible without limitation for Federal savings associations,
national banks and Federal credit unions under current applicable
regulations.
In addition to Mortgage-Related Securities, Eligible Investments for the
three Portfolios include: (1) certain U.S. Government or agency
securities, certain of which are not backed by the full faith and credit
of the U.S. Government (see the Statement of Additional Information for
the three Portfolios), (2) investments in certificates of deposit or
other time deposits or accounts of a commercial or savings bank or
savings association whose deposits are insured by the Federal Deposit
Insurance Corporation (an "FDIC Insured Institution"), including foreign
branches of FDIC insured banks, (3) repurchase agreements collateralized
by certain types of Eligible Investments of the Portfolio (see the
Statement of Additional Information for these three Portfolios), or (4)
bankers' acceptances of an FDIC insured bank if such acceptances have
remaining maturities of six months or less and the Portfolio's total
12
<PAGE> 18
investments in such acceptances of the same bank do not exceed 0.25% of
such bank's total deposits.
Also, Eligible Investments for the Adjustable Rate Mortgage (ARM)
Portfolio include Private Mortgage Related Securities with fixed rates of
interest rated in one of the two highest rating categories by at least
one nationally recognized statistical rating organization.
The Board of Directors has adopted operating policies to further restrict
certain investments (see the Statement of Additional Information for
these three Portfolios). When business or financial conditions warrant,
the Portfolios may take a temporary defensive position and invest without
limit in the foregoing investments.
Money Market Portfolio and
Short U.S. Government Securities Portfolio
The Money Market Portfolio invests only in high quality assets (including
assets subject to repurchase agreements) that qualify as "short-term
liquid assets" for savings associations under the regulations of the
Office of Thrift Supervision of the Department of the Treasury ("OTS
Regulations") and that, if included in the Portfolio, will qualify its
shares as "short-term liquid assets." As a result, the Fund believes
Portfolio shares qualify as "short-term liquid assets" under the OTS
Regulations. The Portfolio does not invest in securities with a remaining
maturity of greater than one year, and portfolio investments are limited
to securities that are determined to present minimal credit risks and
that meet the quality and diversification requirements of Rule 2a-7 under
the Investment Company Act of 1940. The Portfolio will maintain a
dollar-weighted average maturity of 90 days or less. It is the policy of
the Portfolio that it generally holds its investments to maturity. See
"Net Asset Value."
The Short U.S. Government Securities Portfolio invests only in high
quality assets (including assets subject to repurchase agreements) that
qualify as "liquid assets" for savings associations under the regulations
of the Office of Thrift Supervision of the Department of the Treasury
("OTS Regulations") and that, if included in the Portfolio, will qualify
its shares as "liquid assets." As a result, the Fund believes Portfolio
shares qualify as "liquid assets" under the OTS Regulations. As a
fundamental investment policy, the Portfolio invests, under normal market
conditions, at least 65% of its total assets in U.S. Government
obligations, which consist of obligations issued directly by the United
States and obligations issued by or fully guaranteed by U.S. Government
agencies or instrumentalities. The Portfolio does not invest in
securities with a remaining maturity of greater than five years. In
addition, under normal market conditions, the Portfolio will maintain a
dollar-weighted average maturity of three years or less as a
non-fundamental investment policy.
Eligible Investments for the Money Market Portfolio and the Short U.S.
Government Securities Portfolio include:
- obligations issued directly by the U.S. Government or issued by an
agency or instrumentality of the U.S. Government and fully guaranteed
as to principal
13
<PAGE> 19
and interest by the U.S. Government, although not as to market value.
These obligations include U.S. Treasury bonds, notes and bills and
obligations issued by the Federal Financing Bank and the Government
National Mortgage Association.
- obligations issued by or fully guaranteed as to principal and interest
by the following U.S. Government agencies or instrumentalities: the
Federal Home Loan Banks, the Federal Home Loan Mortgage Corporation,
the Federal National Mortgage Association, the Federal Farm Credit
Banks and the Student Loan Marketing Association. Since the obligations
issued or guaranteed by these U.S. Government agencies or
instrumentalities are not backed by the full faith and credit of the
U.S. Government, the Portfolio must look principally to the agencies or
instrumentalities for ultimate repayment, and may not be able to assert
claims against the U.S. Government itself if those agencies or
instrumentalities do not meet their commitments.
- certificates of deposit and other time deposits and savings accounts in
a commercial or saving bank or savings association whose accounts are
insured by the Federal Deposit Insurance Corporation ("FDIC Insured
Institution"), including certificates of deposit issued by and other
time deposits in foreign branches of FDIC insured banks, if they have
remaining maturities of 1 year or less (if negotiable) or 90 days or
less (if non-negotiable). Investments in certificates of deposit issued
by and other time deposits in foreign branches of FDIC insured banks
involve somewhat different investment risks from those affecting
deposits in United States branches of such banks, including the risk of
future political or economic developments, or government action, that
would adversely affect payments on deposits.
- bankers' acceptances of an FDIC Insured Institution if such acceptances
have remaining maturities of 6 months or less and the Portfolio's total
investment in such acceptances of the same institution does not exceed
0.25% of such institution's total deposits.
Each Portfolio's investments in repurchase agreements and certificates of
deposit and other time deposits of or in FDIC Insured Institutions will
generally not be insured by any government agency. The Board of Directors
has adopted operating policies to further restrict certain investments
(see Statement of Additional Information for the Money Market and Short
U.S. Government Securities Portfolios).
Description of Securities
- --------------------------------------------------------------------------------
Mortgage-Related Securities
"Mortgage-Related Securities" are high quality securities that directly
or indirectly provide funds principally for residential mortgage loans
made to home buyers in the United States and that represent interests in,
or are collateralized by, pools of mortgage loans originated by private
lenders that have been grouped by various
14
<PAGE> 20
governmental, government-related and private organizations. Most
Mortgage-Related Securities are pass-through securities, which means that
they provide investors with payments consisting of both principal and
interest as mortgages in the underlying mortgage pool are paid off by the
borrowers. The average maturity of pass-through Mortgage-Related
Securities varies with the maturities of the underlying mortgage
instruments and with the occurrence of unscheduled prepayments of those
mortgage instruments.
Mortgage-Related Securities may be classified into the following
principal categories, according to the issuer or guarantor:
- Government Mortgage-Related Securities consist of both governmental and
government-related securities. Governmental securities are backed by
the full faith and credit of the U.S. Government. The Government
National Mortgage Association ("GNMA"), the principal U.S. Government
guarantor of such securities, is a wholly-owned U.S. Government
corporation within the Department of Housing and Urban Development.
GNMA is authorized to guarantee, with the full faith and credit of the
U.S. Government, the timely payment of principal and interest, but not
of market value, on securities issued by approved institutions and
backed by pools of FHA-insured or VA-guaranteed mortgages. Government-
related securities are issued by U.S. Government-sponsored corporations
and are not backed by the full faith and credit of the U.S. Government.
Issuers include the Federal National Mortgage Association ("FNMA") and
the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is a U.S.
Government-sponsored corporation owned entirely by private
stockholders. Pass-through securities issued by FNMA are guaranteed as
to timely payment of principal and interest by FNMA. FHLMC issues
Mortgage-Related Securities representing interests in mortgage loans
pooled by it. FHLMC is a U.S. Government-sponsored corporation that
guarantees the timely payment of interest and ultimate collection of
principal, and its stock is publicly traded.
- Private Mortgage-Related Securities represent interests in, or are
collateralized by, pools consisting principally of residential mortgage
loans created by non-governmental issuers. These securities generally
offer a higher rate of interest than governmental and
government-related Mortgage-Related Securities because there are no
direct or indirect government guarantees of payment as in the former
securities, although certain credit enhancements may exist. Securities
issued by private organizations may not have the same degree of
liquidity as those with direct or indirect government guarantees.
Private Mortgage-Related Securities purchased by the Portfolio must be
rated in one of the two highest rating categories by at least one
nationally recognized statistical rating organization.
Mortgage-Related Securities include both fixed and adjustable rate
mortgage securities ("ARMS"). Unlike fixed-rate mortgage securities, ARMS
have periodic adjustments in the coupons on the underlying mortgages. The
adjustable rate feature of the mortgages underlying the ARMS in which the
Portfolio invests generally will help to reduce sharp changes in the
Portfolio's net asset value in response
15
<PAGE> 21
to normal interest rate fluctuations to the extent that the Portfolio is
invested in ARMS. As the interest rates on the mortgages underlying the
Portfolio's investments in ARMS are reset periodically (generally one to
twelve months but as long as five years), the yields of such Portfolio
securities will gradually align themselves to reflect changes in market
rates so that the market value of such securities will remain relatively
constant as compared to fixed-rate instruments. This in turn should cause
the net asset value of the Portfolio to fluctuate less than it would if
the Portfolio invested entirely in more traditional longer-term,
fixed-rate debt securities.
In contrast to fixed-rate mortgages, which generally decline in value
during periods of rising interest rates, ARMS permit the Portfolio to
participate in increases in interest rates through periodic adjustments
in the coupons of the underlying mortgages. This should produce both
higher current yields and lower price fluctuations during such periods to
the extent the Portfolio has invested in ARMS. Furthermore, if
prepayments of principal are made on the underlying mortgages during
periods of rising interest rates, the Portfolio generally will be able to
reinvest such amounts in securities with a higher yield. For certain
types of ARMS, the rate of amortization of principal, as well as interest
payments, can and does change in accordance with movements in a
particular, pre-specified, published interest rate index. The amount of
interest due to an ARMS holder is calculated by adding a specified
additional amount, the "margin," to the index, subject to limitations or
"caps" on the maximum or minimum interest that is charged to the
mortgagor during the life of the mortgage or to maximum and minimum
changes in the interest rate during a given period. As a result, the
Portfolio will not benefit from increases in interest rates to the extent
that interest rates rise to the point where they cause the current coupon
of adjustable rate mortgages held as investments to exceed the maximum
allowable annual (usually 100 to 200 basis points) or lifetime reset
limits (or "cap rates") for a particular mortgage. Fluctuations in
interest rates above these levels could cause such mortgage securities to
behave more like long-term, fixed-rate debt securities. Moreover, the
Portfolio's net asset value could vary to the extent that current yields
on mortgage-backed securities are different than market yields during
interim periods between coupon reset dates. Thus, investors could suffer
some principal loss if they sold their shares of the Portfolio before the
interest rates on the underlying mortgages are adjusted to reflect
current market rates.
All mortgage-backed securities carry the risk that interest rate declines
may result in accelerated prepayment of mortgages and the proceeds from
such prepayment of mortgages may be reinvested at lower prevailing
interest rates. During periods of declining interest rates, the coupon
rates for ARMS may readjust downward, resulting in lower yields to the
Portfolio. Further, because of this feature, ARMS may have less potential
for capital appreciation than fixed-rate instruments of comparable
maturities during periods of declining interest rates. Therefore, ARMS
may be less effective than fixed-rate securities as a means of "locking
in" long-term interest rates.
16
<PAGE> 22
If mortgage securities are purchased at a premium, mortgage foreclosures
and unscheduled principal prepayments may result in some loss of the
holders' principal investment to the extent of the premium paid. On the
other hand, if mortgage securities are purchased at a discount, both a
scheduled payment of principal and an unscheduled repayment of principal
will increase current and total returns.
Collateralized Mortgage Obligations
Mortgage-Related Securities also include debt obligations collateralized
by the cash flows from mortgage loans, pools of mortgage loans or
mortgage pass-through securities (often referred to as collateralized
mortgage obligations or "CMOs"). CMOs may be issued or guaranteed by
GNMA, FNMA or FHLMC, or they may be issued by private entities such as
financial institutions, investment bankers, mortgage bankers and
single-purpose stand-alone finance subsidiaries or trusts of such
institutions. The CMOs and a form of them known as a real estate mortgage
investment conduit ("REMIC") typically have a multi-class structure
("Multi-Class Mortgage-Related Securities"). Multi-Class Mortgage-Related
Securities issued by private issuers may be collateralized by
pass-through securities guaranteed by GNMA or issued by FNMA or FHLMC, or
they may be collateralized by whole loans or pass-through
mortgage-related securities of private issuers. Each class has a
specified maturity or final distribution date. In one structure, payments
of principal, including any principal prepayments, on the collateral are
applied to the classes in the order of their respective stated maturities
or final distribution dates, so that no payment of principal will be made
on any class until all classes having an earlier stated maturity or final
distribution date have been paid in full. In other structures, certain
classes may pay concurrently, or one or more classes may have a priority
with respect to payments on the underlying collateral up to a specified
amount. The Portfolio will not invest in any class with residual
characteristics. In addition, the Portfolio limits its purchase of CMOs
and REMICs issued by private entities to those that are rated in one of
the two highest rating categories by at least one nationally recognized
statistical ratings organization, and all CMOs and REMICs must pass the
"high risk" tests applicable to the investments of Federal savings
associations, national banks and Federal credit unions.
When-Issued and Delayed Delivery Securities
The Adjustable Rate Mortgage (ARM) Portfolio, the Intermediate Mortgage
Securities Portfolio, and the U.S. Government Mortgage Securities
Portfolio may purchase securities on a when-issued or delayed delivery
basis, i.e., for delivery and payment at a future date. The purchase
price and the interest rate payable on the securities are fixed on the
transaction date. At the time of its delivery, a when-issued or delayed
delivery security may be valued at less than the purchase price. The
Portfolio will make commitments for such transactions only when it has
the intention of actually acquiring the securities. If the Portfolio
chooses to dispose of the right to acquire a when-issued or delayed
delivery security prior to its acquisition, it could, as with the
disposition of any other portfolio investment, incur a gain or loss due
to market fluctuation. When securities are purchased on a when-issued or
delayed
17
<PAGE> 23
delivery basis, the Portfolio must set aside funds in a segregated
account to pay for the purchase; and until acquisition, the Portfolio
will not earn any interest on the security. The Portfolio may not enter
into when-issued commitments exceeding in the aggregate 15% of the value
of the Portfolio's total assets, less liabilities other than the
obligations created by when-issued commitments.
Repurchase Agreements
The Money Market Portfolio and the Short U.S. Government Securities
Portfolio may enter into repurchase agreements under which each may
acquire certain types of Eligible Investments for a relatively short
period (usually not more than 30 days) subject to an obligation of the
seller to repurchase and the Portfolio to resell the instrument at a
fixed price and time, thereby determining the yield during the
Portfolio's holding period. If the seller defaults in its obligation to
repurchase from the Portfolio the underlying collateral, the Portfolio
may incur a loss. The Portfolio will make payment for such instruments
only upon their physical delivery to or evidence of their book entry
transfer to the account of the Portfolio's custodian. The Portfolio will
not enter into any repurchase agreements maturing in more than 60 days.
Portfolio Turnover
- --------------------------------------------------------------------------------
The Adjustable Rate Mortgage (ARM) Portfolio, the Intermediate Mortgage
Securities Portfolio, the U.S. Government Mortgage Securities Portfolio,
and the Short U.S. Government Securities Portfolio may engage in trading
of the portfolio securities to take advantage of market variations and to
enhance liquidity. The portfolio turnovers are set forth for certain
periods in the tables under "Financial Highlights."
Investment Limitations
- --------------------------------------------------------------------------------
Each Portfolio may not borrow except that it may borrow from banks for
temporary or emergency purposes in an aggregate amount not exceeding 10%
of the value of its net assets and may pledge up to 20% of its net assets
to secure such borrowings. All borrowings of the Intermediate Mortgage
Securities Portfolio may not exceed in the aggregate one-third of the
value of that Portfolio's total assets, less liabilities other than such
borrowings. To the extent that borrowings exceed 5% of a Portfolio's net
assets, such borrowings will be repaid before any investments are made.
The Adjustable Rate Mortgage (ARM) Portfolio will not purchase any
Eligible Investments maturing in more than seven days for which market
quotations are not readily available, or purchase Interest Rate Caps and
Floors, or enter into any repurchase agreements maturing in more than
seven days if, as a result, more than 10% of the market value of its
total assets would be invested in such illiquid Eligible Investments.
18
<PAGE> 24
The Intermediate Mortgage Securities Portfolio will not purchase any
Eligible Investments maturing in more than seven days for which market
quotations are not readily available and will not enter into any
repurchase agreements maturing in more than seven days if, as a result,
more than 15% of the market value of its total assets would be invested
in such illiquid Eligible Investments together with repurchase agreements
maturing in more than seven days. To the extent Rule 144A securities are
deemed by the investment adviser, subject to the supervision of the Board
of Directors, to be illiquid, they will be subject to the foregoing 15%
limitation on illiquid investments.
The U.S. Government Mortgage Securities Portfolio will not purchase any
Mortgage-Related Securities or other Eligible Investments maturing in
more than seven days for which market quotations are not readily
available and will not enter into any repurchase agreements maturing in
more than seven days if, as a result, more than 10% of the market value
of its total assets would be invested in such illiquid Eligible
Investments together with such repurchase agreements maturing in more
than seven days.
The Money Market Portfolio and the Short U.S. Government Securities
Portfolio will not purchase any Eligible Investments maturing in more
than seven days for which market quotations are not readily available and
will not enter into any repurchase agreements maturing in more than seven
days if, as a result, more than 10% of the market value of its total
assets would be invested in such illiquid Eligible Investments together
with such repurchase agreements maturing in more than seven days.
The Adjustable Rate Mortgage (ARM) Portfolio, the Intermediate Mortgage
Securities Portfolio, and the U.S. Government Mortgage Securities
Portfolio will not invest more than 25% of their respective total assets
in the securities of issuers in any single industry, provided that there
shall be no limitation on investments in the mortgage and mortgage
finance industry (in which more than 25% of the value of the Portfolio's
total assets will, except for temporary defensive purposes, be invested)
or on obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities.
The Money Market Portfolio and the Short U.S. Government Securities
Portfolio will not invest more than 25% of their respective total assets
in the securities of issuers in any single industry, provided that there
shall be no such limitation on the purchase of obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities,
or time deposits (including certificates of deposit), savings deposits
and bankers' acceptances of United States branches of United States
banks.
19
<PAGE> 25
FUND AND PORTFOLIO INFORMATION
Management of the Fund
- --------------------------------------------------------------------------------
Board of Directors
The Fund is managed by a Board of Directors. The Directors are
responsible for managing the Fund's business affairs and for exercising
all the Fund's powers except those reserved for the stockholders. The
Directors' responsibilities include reviewing the actions of the Fund's
investment adviser, distributor and administrator.
Investment Adviser
- --------------------------------------------------------------------------------
Investment decisions for the Portfolios are made by the Fund's investment
adviser, Shay Assets Management Co. The Adviser is responsible for
placing purchase and sale orders for portfolio instruments. For its
investment management services, the Adviser receives an annual fee from
the Fund.
Advisory Fee Expenses
For the Fund's fiscal year ended October 31, 1996, the Fund paid the
Adviser fees as follows:
- Adjustable Rate Mortgage (ARM) Portfolio -- The Fund paid the Adviser
aggregate fees of 0.25% of the Portfolio's average daily net assets
(net of fee waivers totalling approximately 0.20%). The Adviser may
voluntarily elect to waive its advisory fees in an amount up to but not
to exceed 0.45% of the average daily net assets of the Portfolio. For
the fiscal year ended October 31, 1996, total expenses of the Portfolio
were 0.47% of its average net assets (net of fee waivers).
- Intermediate Mortgage Securities Portfolio -- The Fund paid the Adviser
aggregate fees of 0.21% of the Portfolio's average net assets (net of
fee waivers totalling approximately 0.14%). The Adviser has agreed to
waive or reduce (but not below zero) its advisory fees allocated to the
Portfolio to the extent that the daily ratio of operating expenses to
average daily net assets of the Portfolio exceeds 0.75%. The Adviser
may supplementally waive advisory fees in an amount up to but not to
exceed 0.35% of the average daily net assets of the Portfolio. For the
Fund's fiscal year ended October 31, 1996, total expenses of the
Portfolio were 0.44% of its average net assets (net of fee waivers).
- U.S. Government Mortgage Securities Portfolio -- The Fund paid the
Adviser aggregate fees of 0.25% of the Portfolio's average net assets.
The Adviser has agreed to reduce or waive (but not below zero) its
advisory fees allocated to the Portfolio to the extent that the daily
ratio of operating expenses to average daily net assets of the
Portfolio exceeds 0.75%. The Adviser may supplementally
20
<PAGE> 26
waive advisory fees in an amount up to but not to exceed 0.25% of the
average daily net assets of the Portfolio. For the Fund's fiscal year
ended October 31, 1996, total expenses of the Portfolio were 0.52% of
its average net assets, and no fees were waived.
- Money Market Portfolio -- The Adviser voluntarily waived its entire
advisory fees with respect to the Portfolio, amounting to 0.15% of the
Portfolio's average daily net assets. The Adviser has agreed to reduce
or waive (but not below zero) its advisory fees allocated to the
Portfolio to the extent that the daily ratio of operating expenses to
average daily net assets of the Portfolio exceeds 0.75%. The Adviser
may supplementally waive advisory fees in an amount up to but not to
exceed 0.15% of the average daily net assets of the Portfolio. For the
Fund's fiscal year ended October 31, 1996, total expenses of the
Portfolio were 0.24% of its average net assets (net of fee waivers).
See "Financial Highlights."
- Short U.S. Government Securities Portfolio -- The Fund paid the Adviser
aggregate fees of 0.25% of the Portfolio's average net assets. The
Adviser has agreed to reduce or waive (but not below zero) its advisory
fees allocated to the Portfolio to the extent that the daily ratio of
operating expenses to average daily net assets of the Portfolio exceeds
0.75%. The Adviser may supplementally waive its fees in an amount up to
but not to exceed 0.25% of the average daily net assets of the
Portfolio. For the Fund's fiscal year ended October 31, 1996, total
expenses of the Portfolio were 0.48% of its average net assets, and no
fees were waived.
The voluntary supplemental waiver agreement may be terminated at any time
by the Adviser.
Adviser's Background
The Adviser is a general partnership that consists of two general
partners, Shay Assets Management, Inc. and ACB Assets Management, Inc.,
each of which holds a fifty-percent interest in the partnership. Shay
Assets Management, Inc. is controlled by Rodger D. Shay, the President of
the Fund. ACB Assets Management, Inc. is an indirect wholly-owned
subsidiary of America's Community Bankers ("ACB").
The Portfolio Managers of the Adviser manage the Fund's investments as a
team under the day-to-day direction of Edward E. Sammons, Jr., Executive
Vice President of the Adviser since 1990 and Vice President of the Fund
since 1985. Mr. Sammons assumed primary responsibility for the Fund's
investments in 1985.
The Adviser, with its principal office located at 111 East Wacker Drive,
Chicago, Illinois 60601, is a registered investment adviser under the
Investment Advisers Act of 1940.
21
<PAGE> 27
Distributor
- --------------------------------------------------------------------------------
The Fund's distributor, Shay Financial Services Co. (the "Distributor"),
is a general partnership that consists of two general partners, Shay
Financial Services, Inc. and ACB Securities, Inc., each of which holds a
fifty-percent interest in the partnership. Shay Financial Services, Inc.
is controlled by Rodger D. Shay, the President of the Fund. ACB
Securities, Inc. is an indirect wholly-owned subsidiary of ACB.
Effective September 18, 1996, the Distributor became the Fund's principal
distributor. Prior to that date, the Distributor had acted as the Fund's
sponsor in the distribution of the Fund's shares. Pursuant to the
Distribution Agreement, the Distributor, as the principal distributor of
the Fund's shares, directly [and through other firms] advertises and
promotes the Fund. For its distribution services, the Distributor
receives an annual fee from the Fund in accordance with the distribution
plan adopted by the Fund pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "12b-1 Plan").
Distribution Expenses
For the Fund's fiscal year ended October 31, 1996, the Fund paid the
Distributor in its role as sponsor a fee of 0.15% of each Portfolio's
average net assets (net of fee waivers, totalling approximately 0.10% for
the Adjustable Rate Mortgage (ARM) Portfolio). The Distributor may
voluntarily elect to waive its 12b-1 fees in an amount up to but not to
exceed 0.25% of the average daily net assets of the Adjustable Rate
Mortgage (ARM) Portfolio and in an amount up to but not to exceed 0.15%
of the average daily net assets of each of the other four Portfolios.
This voluntary waiver agreement may be terminated at any time by the
Distributor. Although the Distributor's fee is calculable separately with
respect to each portfolio of the Fund and the Distributor reports expense
information to the Fund on a portfolio-by-portfolio basis, any 12b-1 fee
received by the Distributor in excess of expenses for a given portfolio
may be used for any purpose, including payment of otherwise unreimbursed
expenses incurred in distributing shares of another portfolio or to
compensate another dealer for distribution assistance. The 12b-1 Plan
does not permit a portfolio to be charged for interest, carrying, or
other financing charges on any such unreimbursed carryover amounts, but
it does provide for reimbursement for a portion of the Distributor's
overhead expenses.
Administrator and Transfer and Dividend Agent
- --------------------------------------------------------------------------------
PFPC Inc. ("PFPC"), 103 Bellevue Parkway, Wilmington, Delaware 19809,
performs various administrative services for the Fund with respect to the
Portfolios. These services include maintenance of books and records,
preparation of governmental filings and stockholder reports, and
computation of net asset values and daily dividends. For the Fund's
fiscal year ended October 31, 1996, the Fund paid PFPC a
22
<PAGE> 28
fee of 0.03% of each Portfolio's average net assets for the above
administrative services. PFPC is also the transfer and dividend agent for
the Portfolio's shares.
Custodian
- --------------------------------------------------------------------------------
PNC Bank, Philadelphia, Pennsylvania, is the custodian of each
Portfolio's investments. PNC Bank and PFPC are affiliates of PNC Bank
Corp.
Calculation of Yield and Total Return
- --------------------------------------------------------------------------------
From time to time all Portfolios other than the Money Market Portfolio
advertise their "yield" and "total return." These figures are based on
historical earnings and are not intended to indicate future performance.
The "yield" of a Portfolio refers to the income generated by an
investment in the Portfolio over a 30-day period (which period will be
stated in the advertisement). This income is then "annualized." That is,
the amount of income generated by the investment during that 30-day
period is assumed to be generated each 30-day period for twelve periods
and is shown as a percentage of the investment. The income earned on the
investment is also assumed to be reinvested at the end of the sixth
30-day period.
The "total return" of a Portfolio shows what an investment in the
Portfolio would have earned over a specified period of time (one, five
and ten years; for the Adjustable Rate Mortgage (ARM) Portfolio, one and
five years and any longer period of time measured from September 18,
1991, the date the Portfolio's shares were first offered publicly)
assuming that all distributions and dividends by the Portfolio were
reinvested on the reinvestment dates during the period and less all
recurring fees. Any agreement by the Adviser and Distributor to reduce or
waive their fees under certain circumstances may cause the Portfolio's
yield and total return to be higher than they otherwise would be. See
"Advisory Fee Expenses" and "Distribution Expenses."
From time to time the Money Market Portfolio advertises its "yield" and
"effective yield." Both yield figures are based on historical earnings
and are not intended to indicate future performance. The "yield" of the
Portfolio refers to the income generated by an investment in the
Portfolio over a seven-day period (which period will be stated in the
advertisement). This income is then "annualized." That is, the amount of
income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of
the investment. The "effective yield" is calculated similarly but, when
annualized, the income earned by an investment in the Portfolio is
assumed to be reinvested. The "effective yield" will be slightly higher
than the "yield" because of the compounding effect of this assumed
reinvestment. Any agreement by the Adviser and Distributor to reduce or
waive their fees under certain circumstances may cause the Portfolio's
yields to be higher than they otherwise would be. See "Advisory Fee
Expenses" and "Distribution Expenses."
23
<PAGE> 29
NET ASSET VALUE
For all Portfolios other than the Money Market Portfolio, the net asset
value per share fluctuates daily. It is determined by dividing the value
of all securities and all other assets, less liabilities, by the number
of shares outstanding. The Portfolio's investments are valued at market
value or, if market quotations are not readily available, at fair value
determined by the Board of Directors. Short-term instruments maturing
within 60 days may be valued at amortized cost, provided that the Board
of Directors determines that amortized cost represents fair value.
The Money Market Portfolio's net asset value per share is determined by
dividing the value of all securities and all other assets, less
liabilities, by the number of shares outstanding. The Portfolio's
investments are valued in accordance with Rule 2a-7 under the Investment
Company Act of 1940 based on their amortized cost, which does not take
into account unrealized appreciation or depreciation. The Fund's Board of
Directors has established procedures reasonably designed to stabilize the
net asset value per share at $1.00, although there is no assurance that
the Portfolio will be able to do so.
Under the quality requirements of Rule 2a-7, the Money Market Portfolio
may only purchase Eligible Investments that at the time of acquisition
are "Eligible Securities" as that term is defined in Rule 2a-7. "Eligible
Securities" include only securities that are rated in the top two rating
categories by the required number of nationally recognized statistical
rating organizations (at least two or, if only one such organization has
rated the security, that one organization) or, if unrated, are deemed
comparable in quality. The diversification requirements of Rule 2a-7
provide generally that the Portfolio may not at the time of acquisition
invest more than 5% of its assets in securities of any one issuer or
invest more than 5% of its assets in securities that are Eligible
Securities that have not been rated in the highest category by the
required number of rating organizations or, if unrated, have not been
deemed comparable, except U.S. Government securities and repurchase
agreements collateralized by such securities.
INVESTING IN THE FUND
Share Purchases
- --------------------------------------------------------------------------------
To purchase shares of the Portfolios, investors may open an account by
calling the Distributor at (800) 527-3713 and obtaining an application
form. After a completed application form has been received and processed,
orders to purchase shares of the Portfolios may be made by telephoning
the Distributor.
24
<PAGE> 30
Purchase orders are accepted on each Business Day and become effective
upon receipt and acceptance by the Fund. (As used in this Prospectus, the
term "Business Day" means any day on which the Adviser and PNC Bank are
both open for business.) Payment must be in the form of Federal funds.
Wire transfer instructions for Federal funds should be as follows: PNC
Bank, Philadelphia, PA, ABA-0310-0005-3; BNF Mutual Funds Services /
8529992181; For purchase of Asset Management Fund, (Name of Portfolio);
From: (Name of Investor); Account Number (Investor's account number with
the Fund); Amount to be invested.
For an investor's purchase to be eligible for same day settlement, the
purchase order must be received on a Business Day before 12:00 Noon, New
York City time (or 1:00 P.M., New York City time, for Pacific time zone
investors as determined by their addresses in the Fund's records), and
payment for the purchase order must be received by PNC Bank by 4:00 P.M.,
New York City time, of that day. For investors seeking next day
settlement, the purchase order must be received on a Business Day before
4:00 P.M., New York City time, and payment must be received by PNC Bank
by 4:00 P.M., New York City time, on the next Business Day after the
purchase order was received. An investor must indicate to the Fund at the
time the order is placed whether same day or next day settlement is
sought. Payment must be received by PNC Bank by 4:00 P.M., New York City
time, on the Business Day designated for settlement or the order will be
cancelled.
A purchase order is considered binding upon the investor. Should it be
necessary to cancel an order because payment was not timely received, the
Fund will hold the investor responsible for the difference between the
price of the shares when ordered and the price of the shares when the
order was cancelled. If the investor is already a shareholder of the
Fund, the Fund may redeem shares from the investor's account in an amount
equal to such difference. In addition, the Fund may prohibit or restrict
the investor from making future purchases of the Fund's shares.
Any Federal funds received in respect of a cancelled order will be
returned upon instructions from the sender without any liability of the
Fund, the Adviser or PNC Bank. If it is not possible to return such
Federal funds the same day, the sender will not have the use of such
funds until the next day on which it is possible to effect such return.
The Fund reserves the right to reject any purchase order.
Minimum Investment Required
- --------------------------------------------------------------------------------
The minimum initial investment in the Portfolio is $10,000. There is no
minimum balance. Subsequent purchases may be made in any amount.
What Shares Cost
- --------------------------------------------------------------------------------
Portfolio shares are sold at their net asset value next determined after
the purchase order becomes effective. The Money Market Portfolio seeks to
maintain a net asset value of $1.00 per share. (See "Net Asset Value.")
There is no sales charge
25
<PAGE> 31
imposed by the Portfolios. The net asset value is determined at 4:00
P.M., New York City time, on each Business Day. Net asset value for
purposes of pricing redemption orders is also determined at 4:00 P.M.,
New York City time, on any other day redemptions are permitted and a
proper redemption request is received (see "Redeeming Shares").
Confirmations
- --------------------------------------------------------------------------------
As transfer and dividend agent for the Fund, PFPC maintains a share
account for each stockholder. Detailed confirmations of each purchase or
redemption are sent to each stockholder. Monthly confirmations are sent
to report dividends paid during the month.
Dividends
- --------------------------------------------------------------------------------
Dividends are declared daily and paid monthly. Such dividends are
declared immediately prior to 4:00 P.M., New York City time, and are
automatically reinvested in additional shares of the respective
Portfolios unless the stockholder requests cash payments by contacting
the Distributor.
An investor will receive the dividend declared on both the day its
purchase order is settled and the day its redemption order is effected,
including any next succeeding non-Business Day or Days, since proceeds
are normally wired the next Business Day.
Capital Gains
- --------------------------------------------------------------------------------
Net capital gains, if any, realized by a Portfolio are declared and paid
once each year and reinvested in shares or, at the stockholder's option,
paid in cash.
REDEEMING SHARES
The Portfolios redeem shares at their net asset value next determined
after the Distributor receives the redemption request. Redemptions may be
made on Business Days when the U.S. Government and agency securities
market is open. Redemption requests must be received in proper form and
can be made by telephone or in writing.
Telephone Redemption
- --------------------------------------------------------------------------------
-
For all Portfolios other than the Money Market Portfolio:
Stockholders may redeem their shares by telephoning the Distributor on
a Business Day. [Call (800) 527-3713.] The time the redemption request
is received determines when proceeds are sent and the accrual of
dividends. Redemptions received prior to 12:00 Noon, New York City time
(1:00 P.M., New York City time,
26
<PAGE> 32
for investors in the Pacific time zone), on a Business Day or other day
redemptions are permitted, are effected on the same day, immediately
after 4:00 P.M., New York City time. This means that proceeds will
normally be wired in Federal funds to the stockholder's bank or other
account shown on the Fund's records the next Business Day, but in no
case later than seven days. A stockholder will receive dividends
declared only through the day its redemption is effected and any next
succeeding non-Business Day or Days. All redemptions received between
12:00 Noon and 4:00 P.M., New York City time, on a Business Day or
other day redemptions are permitted, are effected on the same day,
immediately after 4:00 P.M., New York City time; however, the proceeds
will normally be sent the second following Business Day. The
stockholder will receive dividends declared only through the day its
redemption is effected, including any next succeeding non-Business Day
or Days, but will not be entitled to dividends for the following
Business Day. The Fund recommends that all redemption requests be
placed so as to be received prior to 12:00 Noon, New York City time,
because of the advantage in having proceeds sent the next Business Day.
-
Money Market Portfolio:
Stockholders may redeem their shares by telephoning the Distributor on
a Business Day. [Call (800) 527-3713.] If the request is received
before 12:00 Noon, New York City time (1:00 P.M., New York City time,
for investors in the Pacific time zone), on a Business Day, the
redemption will be effected as of 1:00 P.M., New York City time, and
the proceeds will normally be wired the same day in Federal funds to
the stockholder's bank or other account shown on the Fund's records,
but in no case later than seven days. If the request is received before
4:00 P.M., New York City time, on a Business Day or other day
redemptions are permitted, the redemption will be effected as of 4:00
P.M., New York City time, and the proceeds will normally be wired the
next Business Day.
Since a stockholder will not receive any dividend declared on the day
its redemption request is effected, the Fund recommends that all
redemption requests be placed so as to be received prior to 12:00 Noon,
New York City time.
Written Requests
- --------------------------------------------------------------------------------
Portfolio shares may also be redeemed by sending a written request to the
Distributor, 111 East Wacker Drive, Chicago, Illinois 60601; Attention:
Asset Management Fund, Inc. If share certificates have been issued, they
must be properly endorsed and guaranteed and be received by PFPC before
the redemption will be effected.
27
<PAGE> 33
Signatures
Signatures on written redemption requests and share certificates must be
guaranteed by:
- a Federal Home Loan Bank; or
- a savings association or a savings bank; or
- a trust company or a commercial bank; or
- a member firm of a domestic securities exchange or a registered
securities association; or
- a credit union or other eligible guarantor institution.
In certain instances, the transfer and dividend agent may request
additional documentation believed necessary to insure proper
authorization. Stockholders with questions concerning documentation
should contact the transfer and dividend agent.
Receiving Payment
Proceeds of written redemption requests are sent at the same time and in
the same manner as for telephone redemptions, based on the time of the
receipt in proper form.
EXCHANGES
Stockholders may exchange shares of a Portfolio with shares in another
Portfolio of the Fund by telephoning the Distributor on a Business Day.
[Call (800) 527-3713.] Exchanges may also be made by written request as
previously described under "Written Requests." Exchanges will be effected
at the relative net asset values next determined after receipt of an
exchange request in proper form. Stockholders will receive dividends in
the Portfolio through the date the exchange is effected and will begin
receiving dividends in the other Portfolio the next Business Day.
An exchange between Portfolios will normally involve realization of a
capital gain or loss, since for Federal income tax purposes an exchange
is treated as a sale of the shares from which the exchange is made and a
purchase of the shares into which the exchange is made.
The Fund reserves the right to amend or terminate this privilege with
notice to stockholders.
28
<PAGE> 34
STOCKHOLDER INFORMATION
Voting Rights
- --------------------------------------------------------------------------------
The Fund has five Portfolios: the Adjustable Rate Mortgage (ARM)
Portfolio, the Intermediate Mortgage Securities Portfolio, the U. S.
Government Mortgage Securities Portfolio, the Money Market Portfolio, and
the Short U.S. Government Securities Portfolio, and five classes of
shares, representing interests only in the corresponding Portfolio and
having equal voting rights within each class. The Fund's charter provides
that on any matter submitted to a vote of stockholders, all shares,
irrespective of class, shall be voted in the aggregate and not by class
except that (i) as to any matter with respect to which a separate vote of
any class is required by the Investment Company Act of 1940 or the
Maryland General Corporation Law, such requirements as to a separate vote
by that class shall apply in lieu of the aggregate voting as described
above, and (ii) as to any matter which does not affect the interest of a
particular class, only stockholders of the affected class shall be
entitled to vote thereon. The Bylaws of the Fund require that a special
meeting of stockholders be held upon the written request of stockholders
holding not less than 10% of the issued and outstanding shares of the
Fund.
Tax Information
- --------------------------------------------------------------------------------
Each of the Portfolios has not been required to pay Federal income taxes
because it has taken all necessary action to qualify as a regulated
investment company under the Internal Revenue Code. Each Portfolio
intends to remain so qualified for its future taxable years so long as
such qualification is in the best interests of stockholders.
The Fund intends to distribute all of the net income and any gains of the
Portfolios to stockholders. Unless otherwise exempt, stockholders are
required to pay Federal income tax on any dividends and other
distributions received. This applies whether dividends are received in
cash or as additional shares. Dividends declared in December to
stockholders of record as of a date in that month and paid during the
following January are treated as if received on December 31 of the
calendar year declared.
Information on the tax status of dividends and distributions is provided
annually.
29
<PAGE> 35
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
DISTRIBUTOR DIRECTORS AND OFFICERS
Shay Financial Services Co. Arthur G. De Russo
111 East Wacker Drive Director
Chicago, Illinois 60601 David F. Holland
INVESTMENT ADVISER Director
Shay Assets Management Co. Leon T. Kendall
111 East Wacker Drive Director and Chairman
Chicago, Illinois 60601 Gerald J. Levy
ADMINISTRATOR AND TRANSFER Director
AND DIVIDEND AGENT Rodger D. Shay
PFPC Inc. President and Director
103 Bellevue Parkway Edward E. Sammons, Jr.
Wilmington, Delaware 19809 Vice President, Treasurer
LEGAL COUNSEL and Secretary
Vedder, Price, Kaufman & Kammholz Doris J. Pavel
222 North LaSalle Street Assistant Secretary
Chicago, Illinois 60601
CUSTODIAN
PNC Bank
17th & Chestnut Streets
Philadelphia, Pennsylvania 19101
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania 19103
</TABLE>
<PAGE> 36
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
ADJUSTABLE RATE MORTGAGE (ARM) PORTFOLIO,
INTERMEDIATE MORTGAGE SECURITIES PORTFOLIO
and
U.S. GOVERNMENT MORTGAGE SECURITIES PORTFOLIO
(previously named the Mortgage Securities Performance Portfolio)
ASSET MANAGEMENT FUND, INC.
111 East Wacker Drive, Chicago, Illinois 60601
The Adjustable Rate Mortgage (ARM) Portfolio (the "ARM Portfolio"), the
Intermediate Mortgage Securities Portfolio (the "Intermediate Mortgage
Portfolio") and the U.S. Government Mortgage Securities Portfolio (the "U.S.
Government Mortgage Portfolio") (each, a "Portfolio" and collectively, the
"Portfolios") are each a portfolio of Asset Management Fund, Inc. (the "Fund"),
a professionally managed, diversified, open-end investment company. Each
Portfolio is represented by a class of shares separate from those of the Fund's
other portfolios.
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Fund's Prospectus, dated March 1, 1997 (the
"Prospectus"), a copy of which may be obtained from the Fund at the address
noted above.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The date of this Statement of Additional Information
is March 1, 1997.
<PAGE> 37
Capitalized terms not defined in this Statement of Additional Information
and defined in the Prospectus shall have the meanings defined in the
Prospectus.
THE FUND'S OBJECTIVE, THE PORTFOLIOS
AND THEIR MANAGEMENT POLICIES
Mortgage-Related Securities
Most Mortgage-Related Securities provide a monthly payment that consists
of both interest and principal payments. In effect, these payments are a
"pass-through" of the monthly payments made by individual borrowers on their
residential mortgage loans, net of any fees paid to the issuer or guarantor of
such securities. Additional payments are caused by unscheduled payments
resulting from the sale of the underlying residential property, refinancing or
foreclosure net of fees or costs which may be incurred. Some Mortgage-Related
Securities have additional features that entitle the holder to receive all
interest and principal payments owed on the mortgage pool, net of certain fees,
regardless of whether or not the mortgagor actually makes the payment. Any
guarantees of interest and principal payments may be either as to timely or
ultimate payment.
The average maturity of pass-through pools varies with the maturities of
the underlying mortgage instruments. In addition, a pool's average maturity
may be shortened by unscheduled or early payments of principal and interest on
the underlying mortgages. Factors affecting mortgage prepayments include the
level of interest rates, general economic and social conditions, and the
location and age of the mortgage. Since prepayment rates of individual pools
vary widely, it is not possible to predict accurately the average life of a
particular pool or group of pools. However, the average life will be
substantially less than the stated maturity.
The Prospectus indicates that U.S. Mortgage-Related Securities may be
classified into two principal categories, based on whether the issuer or
guarantor of the security or the underlying collateral is a governmental
entity, such as GNMA, or a government-related entity, such as FNMA and FHLMC.
In addition, private Mortgage Related-Securities represent interests in, or are
collateralized by, pools consisting principally of residential mortgage loans
created by non-governmental issuers. The following information supplements
that in each Prospectus concerning certain of these issuers:
FNMA is subject to general regulation by the Secretary of Housing and
Urban Development. Its common stock is publicly traded on the New York Stock
Exchange. FNMA purchases residential mortgages from a list of approved seller
services, which include Federal and state savings associations, savings banks,
commercial banks, credit unions and mortgage bankers.
FHLMC was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. Its common and
preferred stock is publicly traded
2
<PAGE> 38
on the New York Stock Exchange. FHLMC issues Participation Certificates
("PC's") which represent interests in mortgages from FHLMC's national
portfolio.
With respect to private Mortgage-Related Securities, timely payment of
interest and principal may be supported by various forms of credit
enhancements, including individual loan, title, pool and hazard insurance.
These credit enhancements may offer two types of protection: (i) liquidity
protection, and (ii) protection against losses resulting from ultimate default
by an obligor and the underlying assets. Liquidity protection refers to the
provision of advances, generally by the entity administering the pool of
assets, to ensure that the receipt of payments on the underlying pool occurs in
a timely fashion. Protection against losses resulting from ultimate default
ensures ultimate payment of the obligations on at least a portion of the assets
in the pool. Such protection may be provided through guarantees, insurance
policies or letters of credit obtained by the issuer or sponsor from third
parties or through various means of structuring the transaction as well as a
combination of such approaches. The Portfolios will not pay any additional
fees for such credit support, although the existence of credit support may
increase the price of a security.
Credit enhancements can come from external providers such as banks or
financial insurance companies. Alternatively, they may come from the structure
of a transaction itself. Examples of credit support arising out of the
structure of the transaction include "senior-subordinated securities" (multiple
class securities with one or more classes subordinate to other classes as to
the payment of principal thereof and interest thereon, with the result that
defaults on the underlying assets are borne first by the holders of the
subordinated class), creation of "reserve funds" (where cash or investments,
sometimes funded from a portion of the payments on the underlying assets, are
held in reserve against future losses) and "overcollateralization" (where the
scheduled payments on, or the principal amount of, the underlying assets
exceeds that required to make payment of the securities and pay any servicing
or other fees). The degree of credit support provided for each issue is
generally based on historical information respecting the level of credit risk
associated with the underlying assets. Delinquencies or losses in excess of
those anticipated could adversely affect the return on an investment in such
issue. There can be no assurance that the private insurers can meet their
obligations under the policies.
Each Portfolio may only invest in private Mortgage-Related Securities to
the extent it observes the investment restrictions and limitations required for
such investments to be Eligible Investments for Federal savings associations
under the Home Owners' Loan Act of 1933, as amended, and the OTS Regulations
thereunder. Eligible Investments include "mortgage-related securities" as that
term is defined in Section 3(a)(41) of the Securities Exchange Act of 1934,
subject to any OTS Regulations, and securities offered and sold pursuant to
Section 4(5) of the Securities Act of 1933. Section 3(a)(41) of the Securities
Exchange Act of 1934, as amended, defines a "mortgage-related security" as one
that is rated in one of the two highest rating categories by at least one
nationally recognized statistical rating organization, and that either (A)
represents ownership of one or more promissory notes or other instruments that
are secured
3
<PAGE> 39
by a first lien on property on which is located a residential or mixed
residential and commercial structure, on a residential manufactured home or one
or more commercial structures, and that were originated by a savings
association, savings bank, commercial bank, credit union, insurance company or
similar institution which is supervised and examined by a Federal or state
authority or by a mortgage lender approved by the Secretary of Housing and
Urban Development, or (B) is secured by one or more promissory notes or other
instruments meeting the requirements set forth above that by its terms provides
for payments of principal in relation to payments or reasonable projections of
payments. Section 4(5) of the Securities Act of 1933 exempts from registration
thereunder offers or sales of one or more promissory notes or other instruments
that are secured by a first lien on property on which is located a residential
or mixed residential and commercial structure and that were originated by a
savings association, savings bank, commercial bank or similar banking
institution which is supervised or examined by Federal or state authorities, or
mortgage lenders approved by the Department of Housing and Urban Development
that sell to such institutions, provided that they are sold in minimum amounts
of $250,000 and payment is made within 60 days.
Adjustable Rate Mortgage Securities
The interest rates paid on the mortgages underlying the ARMS in which the
Portfolios invest generally are readjusted at intervals of one year or less to
an increment over some predetermined interest rate index. There are three main
categories of indices: those based on U.S. Treasury securities and those
derived from a calculated measure such as a cost of funds index or a moving
average of mortgage rates. Commonly utilized indices include the one-year,
three-year and five-year constant maturity Treasury rates, the three-month
Treasury Bill rate, the 180-day Treasury Bill rate, rates on longer-term
Treasury securities, the 11th District Federal Home Loan Bank Cost of Funds,
the National Median Cost of Funds, the one-month, three-month, six-month or
one-year London Interbank Offered Rate (LIBOR), rates on six month certificates
of deposit, the prime rate of a specific bank, or commercial paper rates. Some
indices, such as the one-year constant maturity Treasury rate, closely mirror
changes in market interest rate levels. Others, such as the 11th District Home
Loan Bank Cost of Funds index, tend to lag behind changes in market rate levels
and tend to be somewhat less volatile.
The underlying mortgages that collateralize the ARMS in which the
Portfolios invest will frequently have caps and floors which limit the maximum
amount by which the loan rate to the residential borrower may change up or down
per reset or adjustment interval and over the life of the loan. Some
residential mortgage loans restrict periodic adjustments by limiting changes in
the borrower's monthly principal and interest payments rather than limiting
interest rate changes. These payment caps may result in negative amortization.
Collateralized Mortgage Obligations
CMOs and REMICs that are Multi-Class Mortgage-Related Securities represent
a beneficial interest in a pool of mortgage loans or mortgage-backed securities
typically held by a trust. The beneficial interests are evidenced by
certificates issued pursuant to a pooling and
4
<PAGE> 40
servicing agreement. The certificates are usually issued in multiple classes
with the specific rights of each class set forth in the pooling and servicing
agreement and the offering documents for the security. The pooling and
servicing agreement is entered into by a trustee and a party that is
responsible for pooling and conveying the mortgage assets to the trust,
sometimes referred to as the depositor. Various administrative services
related to the underlying mortgage loans, such as collection and remittance of
principal and interest payments, administration of mortgage escrow accounts and
collection of insurance claims are provided by services. A master servicer,
which may be the depositor or an affiliate of the depositor, is generally
responsible for supervising and enforcing the performance by the services of
their duties and maintaining the insurance coverages required by the terms of
the certificates. In some cases, the master servicer acts as a servicer of all
or a portion of the mortgage loans.
Other Eligible Investments
The following information supplements the discussion in each Prospectus
concerning other Eligible Investments:
5
<PAGE> 41
U.S. Government or Agency Securities. Each Portfolio may invest in
obligations issued or guaranteed by the United States or certain agencies or
instrumentalities thereof or a U.S. Government-sponsored agency. These include
obligations issued by the United States or by a Federal Home Loan Bank, the
Federal Home Loan Mortgage Corporation, the Federal National Mortgage
Association, the Government National Mortgage Association, the Student Loan
Marketing Association and the Federal Farm Credit Banks. Since certain of
these U.S. Government securities are not backed by the "full faith and credit"
of the United States, the Portfolio must look principally to the agency or
instrumentality issuing or guaranteeing such obligation for ultimate repayment
and may not be able to assert a claim against the United States itself in the
event the agency or instrumentality does not meet its commitment.
Certificates of Deposit. Each Portfolio may invest in certificates of
deposit issued by, and other time deposits in foreign branches of, FDIC insured
banks. Investment in such deposits involves somewhat different investment
risks from those affecting deposits in United States branches of, such banks.
These risks, which might adversely affect the payment of principal and interest
on such deposits, include future political and economic developments, the
possibility that a foreign jurisdiction might impose withholding taxes on
interest income payable on such deposits, the possible seizure or
nationalization of foreign deposits, or the possible adoption of foreign
governmental restrictions, such as exchange controls.
Repurchase Agreements. Each Portfolio may enter into repurchase
agreements, under which it may acquire an Eligible Investment for a relatively
short period (usually not more than 30 days) subject to an obligation of the
seller to repurchase and the Portfolio to resell the instrument at a fixed
price and time, thereby determining the yield during the Portfolio's holding
period. If the seller defaults in its obligation to repurchase from the
Portfolio the underlying instrument, which in effect constitutes collateral for
the seller's obligation, at the price and time fixed in the repurchase
agreement, the Portfolio might incur a loss if the value of the collateral
declines and might incur disposition costs in connection with liquidating the
collateral. In addition, if bankruptcy proceedings are commenced with respect
to the seller, realization upon the collateral by the Portfolio may be delayed
or limited. Each Portfolio will always receive as collateral instruments whose
market value, including accrued interest, will be at least equal to 100% of the
dollar amount invested by the Portfolio in each agreement, and each Portfolio
will make payment for such instruments only upon their physical delivery to, or
evidence of their book entry transfer to the account of, the Portfolio's
custodian. Each Portfolio will not enter into any repurchase agreements
maturing in more than 60 days. Each Portfolio enters into repurchase
agreements with primary government securities dealers.
FDIC Insured Institutions. Although each Portfolio's investment in
savings accounts and in certificates of deposit and other time deposits in an
FDIC Insured Institution is insured to the extent of $100,000 by the Federal
Deposit Insurance Corporation, the Portfolio may invest more than $100,000 with
a single Institution, and any such excess and any interest on the investment
would not be so insured. In addition,
6
<PAGE> 42
deposits in foreign branches of FDIC insured banks, are not insured by the
Federal Deposit Insurance Corporation.
Each Portfolio will invest in Eligible Investments issued by an FDIC Insured
Institution only if such Institution or a security issued by such institution
(i) has a short-term debt obligation rating in the highest category by one
nationally recognized statistical rating organization, or (ii) if no such
ratings are available, has comparable quality in the opinion of the Portfolio's
investment adviser under the general supervision of the Board of Directors of
the Fund.
When-Issued and Delayed Delivery Securities. Securities purchased on a
when-issued or delayed delivery basis are subject to market fluctuation, and no
interest accrues to the Portfolios until delivery and payment take place. At
the time each Portfolio makes the commitment to purchase securities on a
when-issued or delayed delivery basis, it will record the transaction and
thereafter reflect the value each day of such securities in determining its net
asset value. To facilitate acquisitions of securities purchased on a
when-issued or delayed delivery basis, each Portfolio will maintain with its
custodian a separate account with marketable portfolio securities in an amount
at least equal to such commitments. On delivery dates for such transactions,
the Portfolio will meet its obligations from maturities or sales of the
securities held in the separate account and/or from available cash.
Other Current Policies. Under current policies of the Board of Directors,
the Fund has adopted certain voluntary restrictions with respect to the
Portfolios' Eligible Investments. These restrictions apply to all three
Portfolios unless specified below:
(1) prohibit the purchase of obligations of Federal Land Banks, Federal
Intermediate Credit Banks, the Export-Import Bank of the United States, the
Commodity Credit Corporation, the National Credit Union Administration and the
Tennessee Valley Authority;
(2) limit the use of repurchase agreements to repurchase agreements
involving obligations of the U.S. Government, including zero coupon Treasury
securities that have been stripped of either principal or interest by the U.S.
Government so long as the maturity of these securities does not exceed ten
years, and obligations of the Federal Home Loan Banks, the Federal National
Mortgage Association, the Government National Mortgage Association, the Federal
Farm Credit Banks, the Federal Financing Bank, the Student Loan Marketing
Association and the Federal Home Loan Mortgage Corporation;
(3) for the Adjustable Rate Mortgage (ARM) Portfolio and Intermediate
Mortgage Securities Portfolio, limit the maturities of bankers' acceptances to
six months and prohibit investments in bankers' acceptances of Edge Act
corporations guaranteed by their FDIC-insured parent banks until such time as
the appropriateness of these investments for Federal credit unions is
clarified;
7
<PAGE> 43
(4) for the ARM Portfolio, to prohibit investments in interest rate caps
and floors until such time as the appropriateness of these investments for
Federal credit unions is clarified;
(5) for the U.S. Government Mortgage Securities Portfolio, to prohibit
investments in reverse repurchase agreements, interest rate futures contracts,
options and options on interest rate futures contracts, in each case until such
time as Federal credit unions may invest in them without limitation; and
(6) for the U.S. Government Mortgage Securities Portfolio, prohibit loans
of Federal funds.
Although these restrictions are not fundamental policies of the Fund and
may be changed without stockholder vote, the Fund will not alter these
restrictions without notice to stockholders.
PURCHASE AND REDEMPTION OF SHARES
The Fund believes that shares of each Portfolio qualify as investments not
subject to percentage of assets limitations under Section 5(c)(1)(Q) of the
Home Owners' Loan Act of 1933, as amended, and the OTS Regulations thereunder
governing investments by "Federal savings associations," as defined in such
Act, which includes Federal savings banks chartered under such Act. In
addition, shares of each Portfolio are eligible for purchase by national banks
and Federal credit unions without limitation under applicable Federal law.
The Fund reserves the right to suspend the right of redemption and to
postpone the date of payment upon redemption (1) for any period during which
the New York Stock Exchange (the "Exchange") is closed, other than customary
weekend and holiday closings, or during which trading on the Exchange is
restricted, (2) for any period during which an emergency, as defined by the
rules of the Securities and Exchange Commission, exists as a result of which
(i) disposal by the Fund of securities held by each Portfolio is not reasonably
practicable, or (ii) is not reasonably practicable for the Fund to determine
the value of the Portfolio's net assets, or (3) for such other periods as the
Securities and Exchange Commission, or any successor governmental authority,
may by order permit for the protection of stockholders of each Portfolio.
DIVIDENDS, DISTRIBUTIONS, YIELD
AND TOTAL RETURN QUOTATIONS
Dividends on shares of each Portfolio are paid monthly on the first
Business Day of each month.
Net investment income of each Portfolio for dividend purposes (from the
time of the immediately preceding determination thereof) will consist of (i)
interest accrued and discount earned (including both original issue and market
discount) less amortization of any premium, (ii) less accrued expenses
attributable to the Portfolio and the general expenses of the Fund
8
<PAGE> 44
prorated on the basis of relative net asset value of the Portfolio in relation
to the net asset value of the Fund's other portfolios applicable to that
period.
For the 30-day period ended October 31, 1996, the ARM Portfolio's
annualized yield was 5.84%. The average annual total rates of return for the
one-year and five-year periods ended October 31, 1996 and for the period from
September 18, 1991, the date the shares were first publicly offered, were 6.2%,
5.21% and 5.26%, respectively. Without fee waivers, the 30-day annualized
yield would have been 5.53% and the average annual total rates of return for
the one-year and five-year periods and the period since the initial public
offering date would have been 5.97%, 4.90% and 4.78%, respectively.
For the 30-day period ended October 31, 1996, the Intermediate Mortgage
Portfolio's annualized yield was 6.45%. The average annual total rates of
return for the one-year period and five-year periods ended October 31, 1996,
and for the period from November 7, 1986 (the initial effective date of the
Portfolio's registration statement) to October 31, 1996, were 4.82%, 6.38% and
7.38%, respectively. Without fee waivers, the 30-day annualized yield would
have been 6.34% and the average annual total rates of return for the one-year
and five-year periods and the period since inception would have been 4.68%,
6.19% and 7.27%, respectively. The total return figures for the five-year
period and the period since inception contained herein reflect the performance
of the Portfolio as the Corporate Bond Portfolio, which was invested primarily
in investment grade corporate bonds prior to June 2, 1992.
For the 30-day period ended October 31, 1996, the U. S. Government
Mortgage Portfolio's annualized yield was 7.02%. The average annual total
rates of return for the one-year, five-year and ten-year periods ended October
31, 1996, were 5.63%, 6.27% and 7.96%, respectively.
For each Portfolio, the annualized yield shown above was computed by
dividing the aggregate net income per share for dividend purposes for the
30-day period by the Portfolio's net asset value on October 31, 1996. The
30-day yield was then annualized on a bond-equivalent basis assuming
semi-annual reinvestment and compounding of net income per share for dividend
purposes.
For each Portfolio, the total return for each period shown above was
computed by assuming a hypothetical initial investment of $1,000 on the first
day of such period. It was then assumed that all dividends and distributions
over the period were reinvested and that, at the end of such period, the entire
amount was redeemed. The average annual total rate of return was then
determined by calculating the annual rate required for the initial payment to
grow to the amount which would have been received upon redemption (i.e., the
average annual compound rate of return).
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<PAGE> 45
From time to time, each Portfolio may quote a "dividend distribution rate"
in sales literature. The "dividend distribution rate" represents the
aggregation of actual distributions made, representing dividends, realized
short-term capital gains and certain realized long-term capital gains. It does
not reflect unrealized gains or losses. The "dividend distribution rate"
differs from yield in that certain non-recurring components may be included.
Any quoted "dividend distribution rate," therefore, should be considered along
with, and not as a substitute for, the yield and total rate of return of the
Portfolio.
From time to time each Portfolio's performance may be compared to the
rates of return and volatility on U.S. Treasury bills, notes and bonds, on
GNMA, FNMA and FHLMC mortgage-backed securities, Federal funds, certificates of
deposit, repurchase agreements, commercial paper, bankers' acceptances, advance
rates quoted by a Federal Home Loan Bank, to the prime and LIBOR rates and to
the 11th District Cost of Funds Index, the National Median Cost of Funds; to
the Lehman Adjustable Rate Mortgage Index, the Lehman Short (1-2 years, 1-3
years and 1-5 years) U.S. Government and Intermediate (5-10 years) U.S.
Government/ Indices; to the Merrill Lynch U.S. Treasury Indices (all
maturities) and U.S. Treasury, Intermediate - Term (7-9.99 years, 1-9.99 years
and 10-14.99 years) Indices and Long-Term Index, to the Merrill Lynch U.S.
Mortgage Indices, including all mortgages, all GNMA's, all FNMA MBS, all FHLMC
PC, GNMA I, GNMA I Single Family (15 year and 30 year) and GNMA I GPM, to the
Merrill Lynch Asset-Backed and Mortgage Indices, including GNMA II Single
Family (15 year and 30 year), FNMA MBS CL 30 Year and FNMA MBS CI 15 year,
FHLMC 30 Year Cash, FHLMC 30 Year Guarantor, FHLMC Gnomes and Guarantor 15
Year; to the Salomon Mortgage Indices, including Mortgage, 30 Year and 30 Year
GNMA, FNMA and FHLMC and 15 Year and 15 Year GNMA, FHLMC and FNMA and Balloons
Indices; and to the Salomon Government-Sponsored Indices including the
Government Sponsored 7-10 Years, 1-10 Years and 10 Plus Years; and to other
applicable indices compiled by Lehman, Merrill or Salomon. Each Portfolio's
performance also may be compared to that of other funds through ratings or
rankings or appropriate averages based on specified factors over specified
periods of time reported or published by such entities as AMG Data, Barron's,
Business Week, Chicago Tribune, CDA Investment Technologies, Inc., Changing
Times, Consumer Reports, Crain's Chicago Business, the Donoghue Organization,
The Economist, Financial Times, Forbes, Fortune, Futures, Income Opportunities,
Investment Advisor, Investment Company Data, Inc., Kiplinger's Personal
Finance, Lipper Analytical Services, Inc., Media General Financial Services,
Money, Morningstar, Inc., Mutual Fund Market News, Newsweek, The New York
Times, No-Load Fund Investor, Smart Money, Standard & Poor's, Strategic Data,
Success, Time, U.S. News and World Report, USA Today, Value Line, The Wall
Street Journal, and Worth magazine.
10
<PAGE> 46
MANAGEMENT OF THE FUND
Directors and Officers
Directors and Officers of the Fund, together with information as to their
principal business occupations during the past five years, are shown below.
Each director who is an "interested person" of the Fund, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), is indicated by an
asterisk.
Name and Address Position with Fund
ARTHUR G. DE RUSSO (Age 76) Director
5397 S.E. Major Way
Stuart, FL 34997
Principal Occupations During Past Five Years and Prior Relevant Experience:
Chief Executive Officer, Eastern Financial Federal Credit Union from 1974 to
1992; Chairman and Director, First Credit Union Trust Co., Inc. from 1988 to
1992; President of the Airline Credit Union Conference in 1991; Director, Honor
ATM Network, Florida from 1985 to 1990.
DAVID F. HOLLAND* (Age 55) Director
17 New England Executive Park
Burlington, MA 01803
Principal Occupations During Past Five Years and Prior Relevant Experience:
Chairman of the Board since 1989 and since 1986 President and Chief Executive
Officer, Boston Federal Savings Bank; previously Director of the Fund from 1988
to 1989; Chairman of America's Community Banking Partners, Inc., Director of
ACB
11
<PAGE> 47
Investment Services, Inc.; President of Thrift Industry Advisory Council.
LEON T. KENDALL (Age 68) Director and Chairman
250 East Kilbourn of the Board
Milwaukee, WI 53202
Principal Occupations During Past Five Years and Prior Relevant Experience:
Professor of Finance and Real Estate, Kellogg School of Management,
Northwestern University since 1988; Director and Chairman of the Board,
Mortgage Guaranty Insurance Corp. and Director and Vice Chairman of MGIC
Investment Corporation until 1989. Public Director, Chicago Board Options
Exchange since 1992; Director of Universal Foods since 1985; Director of the
Federal Reserve Bank of Chicago from 1981 to 1986; and Director of Avatar
Corporation since 1982.
GERALD J. LEVY (Age 65) Director
4000 W. Brown Deer Road
Milwaukee, WI 53209
Principal Occupations During Past Five Years and Prior Relevant Experience:
Chairman and Chief Executive Officer, Guaranty Bank, S.S.B. since 1984 (from
1959 to 1984, he held a series of officer's positions, including President).
Chairman, 1986, United States League of Savings Institutions; Director of
FIserv, Inc. since 1986; Director since 1995 of the Republic Mortgage Insurance
Company; Director of the Federal Asset Disposition Association from 1986 to
1989; and, previously Director and Vice Chairman, Federal Home Loan Bank of
Chicago and member of Advisory Committee of the Federal Home Loan Mortgage
Corporation and Federal National Mortgage Corporation.
RODGER D. SHAY* (Age 60) Director and President
888 Brickell Avenue
Miami, FL 33131
Principal Occupations During Past Five Years and Prior Relevant Experience:
President, Chief Executive Officer and member of the Managing Board of Shay
Assets Management Co. since 1990 and President and Director of the managing
partner of the Adviser, Shay Assets Management, Inc., since 1990. President,
Chief Executive Officer and member of the Managing Board of Shay Financial
Services Co. since 1990 and President and Director of the managing partner of
the Distributor, Shay Financial Services, Inc. since 1990. Director from 1986
to 1991 and President from 1986 to 1992, U.S. League Securities, Inc.; Director
from 1985 to 1991, and Executive Vice President from 1989 to
12
<PAGE> 48
1992, USL Assets Management, Inc., (previously Vice Chairman from 1986 to 1989
and President, including of a predecessor, from 1981 to 1986). Vice President
since 1995 of Institutional Investors Capital Appreciation Fund, Inc.,
Institutional Investors Tax-Advantaged Income Fund, Inc. and M.S.B. Fund, Inc.
Director, First Home Savings Bank, S.L.A. since 1990; previously Director,
Asset Management Fund, Inc., from 1985 to 1990; President of Bolton Shay and
Company and Director and officer of its affiliates from 1981 to 1985.
Previously, employed by certain subsidiaries of Merrill Lynch & Co. from 1955
to 1981, where he served in various executive positions including Chairman of
the Board of Merrill Lynch Government Securities, Inc., Chairman of the Board
of Merrill Lynch Money Market Securities, Inc. and Managing Director of the
Debt Trading Division of Merrill Lynch, Pierce, Fenner & Smith Inc.
EDWARD E. SAMMONS, JR. (Age 57) Vice President, Treasurer
111 East Wacker Drive and Secretary
Chicago, IL 60601
Principal Occupations During Past Five Years and Prior Relevant Experience:
Executive Vice President and member of the Managing Board of Shay Assets
Management Co. since 1990 and Executive Vice President of the managing partner
of the Adviser, Shay Assets Management, Inc., since 1990. Executive Vice
President and member of the Managing Board of Shay Financial Services Co.
since 1990 and Executive Vice President of the managing partner of the
Distributor, Shay Financial Services, Inc., since 1990. President, USL Assets
Management, Inc., the Fund's prior investment adviser, from 1986 to 1992
(previously Senior Vice President, including of a predecessor, from 1983 to
1986) and a Director from 1989 to 1991. Executive Vice President from 1990 to
1992 and a Director from 1990 to 1991 of U.S. League Securities, Inc., Vice
President and Secretary since 1995 of Institutional Investors Capital
Appreciation Fund, Inc., Institutional Investors Tax-Advantaged Income Fund,
Inc. and M.S.B. Fund, Inc. Vice President, from 1987 to 1990, Advance America
Funds, Inc. Previously, Senior Vice President and Manager of Fixed Income
Securities, Republic National Bank in Dallas from 1962 to 1983.
DORIS J. PAVEL (Age 42) Assistant Secretary
111 East Wacker Drive
Chicago, IL 60601
Principal Occupations During Past Five Years and Prior Relevant Experience:
Assistant Secretary, Asset Management Fund, Inc. since 1993. Administrative
Manager, ACB Investment Services Co. since 1993 and previously administrative
assistant for several affiliated firms since 1987.
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<PAGE> 49
Officers or interested directors of the Fund also may hold positions as
directors or officers of other affiliated entities of the Adviser, Distributor
or America's Community Bankers.
The Fund will pay $7,500 per annum in compensation to directors who are
not officers or employees of the Distributor or the Adviser. In addition, each
director who is not such an officer or employee will receive $1,500 for each
meeting of the Board of Directors and $1,000 for each meeting of any committee
thereof attended and will be reimbursed for out-of-pocket expenses incurred in
attending such meetings. Directors who are officers or employees of the
Sponsor or the Adviser receive no compensation for their services as directors
of the Fund, but will be reimbursed by the Fund for out-of-pocket expenses
incurred in attending meetings of the Board of Directors or committees thereof.
The following table sets forth the compensation earned by directors from
the Fund for the fiscal year ended October 31, 1996:
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT BENEFITS ESTIMATED
AGGREGATE ACCRUED AS PART OF ANNUAL
COMPENSATION FUND BENEFITS TOTAL
DIRECTOR FROM THE FUND EXPENSES UPON RETIREMENT COMPENSATION
- -------------------------------- ------------- -------------------- --------------- ------------------
<S> <C> <C> <C> <C>
Arthur G. DeRusso............... $14,500 0 0 $14,500
David F. Holland................ 14,500 0 0 14,500
Leon T. Kendall................. 14,500 0 0 14,500
Gerald J. Levy.................. 14,500 0 0 14,500
Wendell L. Evans, Jr. (resigned) 7,750 0 0 7,750
</TABLE>
The following table provides certain information at November 30, 1996 with
respect to persons known to the Fund to be beneficial (and record) owners
(having sole voting and dispositive power) of 5% or more of the shares of
common stock of the Intermediate Mortgage Portfolio and the U.S. Government
Mortgage Portfolio:
Percent of
Name and Portfolio's
Address of Outstanding
Beneficial Owner Number of Shares Common Stock
- ---------------- ---------------- ------------
Intermediate Mortgage Portfolio:
14
<PAGE> 50
First Federal Savings & Loan 936,722 10.12%
25 West Church Street
Martinsville, VA 24112
First Financial Investments 541,817 5.85%
3800 Howard Hughes Parkway
Las Vegas, NV 89109
Fox Valley Savings & Loan Association 556,447 6.01%
51 E. First Street
Fond DuLac, WI 54935
Fullerton Savings & Loan 1,415,258 15.28%
Association
200 West Commonwealth Avenue
Fullerton, CA 92632
Main Line Federal Savings Bank 1,288,682 13.92%
Lancaster Avenue and Route 320
Villanova, PA 19085
Peoples First Community Bank 547,114 5.91%
2305 Highway 77
Panama City, FL 32402
Staten Island Savings Bank 802,820 8.67%
15 Beach Street
Staten Island, NY 10304
U.S. Government Mortgage Portfolio:
Crown Bank F.S.B. 297,630 5.51%
105 Live Oaks Garden
Casselberry, FL 32707
First Federal Bank, F.S.B. 932,148 17.26%
109 East Depot Street
Colchester, IL 62326
15
<PAGE> 51
First Federal Savings Bank 935,162 17.31%
46 West Brundage Street
Sheridan, WY 82801
St. Casimirs Savings Bank 489,176 9.06%
2703 Foster Avenue
Baltimore, MD 21224
Tri-County Federal Savings 807,012 14.94%
Bank
2201 Main Street
Torrington, WY 82240
As of November 30, 1996, none of the Directors had, through the financial
institution for which they serve as officers, voting and investment power over
any shares of the ARM Portfolio, the Intermediate Mortgage Portfolio or the
U.S. Government Mortgage Portfolio.
INVESTMENT ADVISER AND ADMINISTRATOR
The investment adviser of the Fund is Shay Assets Management Co. (the
"Adviser"), an Illinois general partnership. The Adviser, with its principal
office at 111 East Wacker Drive, Chicago, Illinois 60601, is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended. The
Adviser consists of two general partners, Shay Assets Management, Inc. and ACB
Assets Management, Inc., each of which holds a fifty-percent interest in the
partnership. Shay Assets Management, Inc. is controlled by Rodger D. Shay, the
President of the Fund and a Director. ACB Assets Management, Inc. is a
wholly-owned subsidiary of ACB Investment Services, Inc., which is a
wholly-owned subsidiary of Community Bankers Service Corp., which in turn is a
wholly-owned subsidiary of America's Community Bankers ("ACB").
The Investment Advisory Agreement, as amended, between the Fund and the
Adviser (the "Advisory Agreement"), will remain in effect as to each Portfolio
until March 1, 1998, and shall continue from year to year thereafter, subject
to termination by the Fund or the Adviser as hereinafter provided, if such
continuance is approved at least annually by a majority of the outstanding
shares (as defined under "General Information" in this Statement of Additional
Information) of each Portfolio or by the Fund's Board of Directors. The
Advisory Agreement must also be approved annually by the vote of a majority of
the directors of the Fund who are not parties to the Agreement or "interested
persons" of any party thereto. All directors' votes must be cast in person at
a meeting called for the purpose of voting on such approval.
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<PAGE> 52
As compensation for the services rendered by the Adviser under the
Advisory Agreement, the Fund pays the Adviser a fee, payable monthly, with
respect to the ARM Portfolio based on an annual percentage of the average daily
net assets of the Portfolio as follows: 0.45% on the first $3 billion; 0.35%
of the next $2 billion and 0.25% in excess of $5 billion. The Adviser may
voluntarily elect to waive its advisory fees in an amount up to but not to
exceed 0.45% of the average daily net assets of the Portfolio. This voluntary
waiver agreement may be terminated at any time by the Adviser. For the Fund's
fiscal years ended October 31, 1996, 1995 and 1994, the Fund paid the Adviser
fees with respect to the ARM Portfolio of $2,290,307 (net of fee waivers of
$1,832,247), $2,168,262 (net of fee waivers of $1,734,611) and $3,095,619 (net
of fee waivers of $3,028,028), respectively.
As compensation for the services rendered by the Adviser under the
Advisory Agreement, the Fund pays the Adviser a fee, payable monthly, with
respect to the Intermediate Mortgage Portfolio, at the rate of 0.35% per annum
of the average daily net assets of the Portfolio up to and including $500
million; plus 0.275% per annum of the next $500 million of such net assets;
plus 0.20% per annum of the next $500 million of such net assets; plus 0.10%
per annum of such net assets over $1.5 billion. The Adviser may voluntarily
elect to waive its fees in an amount up to but not to exceed 0.35% of the
average daily net assets of the Portfolio but may terminate the voluntary
waiver at any time. For the Fund's fiscal years ended October 31, 1996, 1995
and 1994, the Fund paid the Adviser fees for the Intermediate Mortgage
Portfolio of $359,317 (net of fee waivers of $239,669), $288,477 (net of fee
waivers of $384,634) and $340,973 (net of fee waivers of $454,630),
respectively.
As compensation for the services rendered by the Adviser under the
Advisory Agreement, the Fund pays the Adviser a fee, payable monthly, with
respect to the U. S. Government Mortgage Portfolio, at the rate of 0.25% per
annum of the average daily net assets of the Portfolio up to and including $500
million; plus 0.175% per annum of the next $500 million of such net assets;
plus 0.125% per annum of the next $500 million of such net assets; plus 0.10%
per annum of such net assets over $1.5 billion. For the Fund's fiscal years
ended October 31, 1996, 1995 and 1994, the Fund paid the Adviser fees of
$146,347, $151,437 and $184,369, respectively, with respect to the U.S.
Government Mortgage Portfolio.
The Advisory Agreement provides that the Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered by any
portfolio of the Fund in connection with the matters to which the Advisory
Agreement relates, except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services (in which case any award of
damages shall be limited to the period and the amount set forth in Section
36(b)(3) of the 1940 Act) or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under the Advisory
Agreement.
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<PAGE> 53
The Advisory Agreement will terminate automatically upon its assignment
and is terminable with respect to each Portfolio at any time without penalty by
the Board of Directors of the Fund or by a vote of a majority of the
outstanding shares (as defined under "General Information" in this Statement of
Additional Information) of the Portfolio on 60 days' written notice to the
Adviser, or by the Adviser on 90 days' written notice to the Fund.
The Portfolio Managers of the Adviser responsible for making investment
decisions concerning the Fund's investments are Edward E. Sammons, Jr., Rodger
D. Shay, Richard Blackburn, Rodger D. Shay, Jr., and Gregory J. Wisniewski.
For information as to the principal occupations during the past five years of
Messrs. Sammons and Shay, who are also officers of the Fund, see "Management of
the Fund" in this Statement of Additional Information. The principal business
occupations during the past five years and professional backgrounds of the
Portfolio Managers who are not also officers of the Fund are shown below
following each of their names and business addresses.
18
<PAGE> 54
RICHARD BLACKBURN
111 East Wacker Drive
Chicago, IL 60601
Vice President, Shay Assets Management, Inc., managing partner of the Adviser,
and Portfolio Manager of the Adviser since 1991. From 1982 to 1991, he was
employed by the Fund's Distributor (see "Distributor" below), its predecessor,
and an affiliate, U.S. League Investment Services, Inc., primarily as an
account executive and financial consultant. From 1979 to 1982, he was employed
by Harris Trust & Savings Bank. With approximately twenty-five years of
experience in the securities industry, his previous employers also include
Merrill Lynch, Pierce, Fenner & Smith Inc. and the First National Bank of
Chicago. Mr. Blackburn's primary expertise is in the mortgage securities
markets, particularly in the area of floating and/or adjustable rate
securities.
RODGER D. SHAY, JR.
888 Brickell Avenue
Miami, FL 33131
Senior Vice President since 1994, Shay Assets Management, Inc., managing
partner of the Adviser, and Vice President from 1991 to 1993 and Portfolio
Manager of the Adviser since 1991. Senior Vice President of Shay Financial
Services, Inc., managing partner of the Fund's Distributor (see "Distributor"
below), since 1994 and previously Vice President from 1991 to 1993. President
of Shay Financial Group Inc. from 1988 to 1990. He was previously employed by
Merrill Lynch, Pierce, Fenner and Smith Inc. from 1981 to 1988, where he served
as a senior trader and manager of collateralized mortgage obligation trading.
Mr. Shay's primary expertise is in the mortgage securities market, particularly
in the area of collateralized mortgage obligations.
GREGORY J. WISNIEWSKI
111 East Wacker Drive
Chicago, IL 60601
Vice President, Shay Assets Management, Inc., managing partner of the Adviser,
and Portfolio Manager of the Adviser since 1994. From 1990 to 1994, Vice
President, managing partner of the Fund's Distributor (see "Distributor" below)
and of an affiliate, Shay Government Securities Co., and from 1985 to 1990, an
account executive of predecessors of these firms. His previous employers also
include The Chicago Corporation, where he served as an account executive and
financial futures trader, and Harris Trust and Savings Bank, where he served
variously as a manager of the portfolios of correspondent banks and as the
manager of the commercial paper portfolio of Harris Bankcorp. Mr. Wisniewski
received a Bachelor of Arts in Economics from the University of Michigan and a
Master of Business Administration from the University of Detroit.
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<PAGE> 55
The Fund's administrative agent (the "Administrator") with respect to each
Portfolio is PFPC Inc. ("PFPC"), a wholly-owned subsidiary of PNC Bank Corp.
Pursuant to the terms of the Restated Administration Agreement (the
"Administration Agreement") dated as of March 1, 1991, as amended, between the
Fund and the Administrator, the Administrator performs various administrative
services for the Fund, including (i) assisting in supervising all aspects of
the Portfolios' operations other than those assumed by the Adviser, the
Distributor, the Portfolios' custodian or transfer and dividend agent, (ii)
providing each Portfolio with the services of persons competent to perform such
administrative and clerical functions as are necessary in order to provide
effective administration of the Portfolios, (iii) maintenance of each
Portfolio's books and records, (iv) preparation of various filings, reports,
statements and returns filed with governmental authorities or distributed to
stockholders of each Portfolio, (v) computation of each Portfolio's net asset
value for purposes of the sale and redemption of its shares, and (vi)
computation of each Portfolio's daily dividend. Certain functions relating to
state "blue sky" qualification services in any of the states where the
Portfolios are registered are subject to additional charges by the
Administrator that are not included in the fee rates and minimum annual fee
described below.
As compensation for the services rendered by the Administrator under the
Administration Agreement, the Fund pays the Administrator a fee, computed daily
and payable monthly, with respect to each Portfolio at the rate of 0.03% per
annum of the Portfolio's net assets up to and including $1 billion; plus 0.02%
per annum of the next $1 billion of net assets; plus 0.01% per annum of each
Portfolio's net assets over $2 billion, with a minimum annual fee of $393,200
for each Portfolio and the Fund's four other portfolios taken together. If
applicable, the minimum fee is allocated among the Fund's five portfolios based
on relative average net asset values.
For the fiscal years ended October 31, 1996, 1995 and 1994, the Fund paid
the Administrator fees pursuant to the Administration Agreement with respect to
each Portfolio as follows: for the ARM Portfolio, the fees paid were $276,718,
$262,936 and $376,050, respectively. For the Intermediate Mortgage Portfolio,
the fees were $51,659, $58,231 and $69,071, respectively. For the U. S.
Government Mortgage Portfolio, the fees were $18,168, $18,556 and $22,289,
respectively.
The Fund is responsible for the payment of its expenses. Such expenses
include, without limitation, the fees payable to the Adviser, the Administrator
and the Distributor (see "Distributor" below) with respect to each Portfolio,
the fees and expenses of the Fund's custodian and transfer and dividend agent
with respect to each Portfolio, any brokerage fees and commissions of each
Portfolio, any portfolio losses of each Portfolio, filing fees for the
registration or qualification of each Portfolio's shares under Federal or state
securities laws, the Portfolio's pro rata share of taxes, interest, costs of
liability insurance, fidelity bonds or indemnification, any costs, expenses or
losses arising out of any liability of, or claim for damages or other relief
asserted against, the Fund with respect to the Portfolio for violation of any
law, legal and auditing fees and expenses, expenses of preparing and setting in
type prospectuses, proxy material, reports and notices and the printing and
distributing of the same
20
<PAGE> 56
to the Portfolio's stockholders and regulatory authorities, the Portfolio's pro
rata share of compensation and expenses of its directors and officers who are
not affiliated with the Adviser, the Administrator, the transfer and dividend
agent or the Distributor, and extraordinary expenses incurred by the Fund with
respect to each Portfolio.
DISTRIBUTOR
Effective September 18, 1996, Shay Financial Services Co. (the
"Distributor"), a registered broker-dealer, became the Fund's principal
distributor. Prior to that date, the Distributor had acted as the sponsor in
the distribution of the Fund's shares.
The Distributor, an Illinois general partnership, consists of two general
partners, Shay Financial Services, Inc. and ACB Securities, Inc., each of which
holds a fifty-percent interest in the partnership. Shay Financial Services,
Inc. is controlled by Rodger D. Shay, the President of the Fund and a Director.
ACB Securities, Inc. is a wholly-owned subsidiary of ACB Investment Services,
Inc., which is a wholly-owned subsidiary of Community Bankers Service Corp.,
which in turn is a wholly-owned subsidiary of ACB, the trade association
representing savings institutions in the United States.
As compensation for distribution services, the Fund pays the Distributor a
fee, payable monthly, with respect to the ARM Portfolio at the rate of 0.25%
per annum of the average daily net assets of the Portfolio. The Distributor
may voluntarily elect to waive its 12b-1 fees in an amount up to but not to
exceed 0.25% of the average daily net assets of the Portfolio. This
voluntary waiver agreement may be terminated at any time by the Distributor.
For the fiscal years ended October 31, 1996, 1995 and 1994, the Fund paid the
Distributor $1,374,184 (net of fee waivers of $916,124), $1,300,958 (net of fee
waivers of $867,305) and $2,347,623 (net of fee waivers of $1,054,403),
respectively, with respect to the ARM Portfolio.
As compensation for distribution services, the Fund pays the Distributor a
fee, payable monthly, with respect to each of the Intermediate Mortgage
Portfolio and the U.S. Government Mortgage Portfolio at the rate of 0.15% per
annum of the average daily net assets of the Portfolio up to and including $500
million; plus 0.125% per annum of the next $500 million of such net assets;
plus 0.10% per annum of the next $500 million of such net assets; plus 0.075%
per annum of such net assets over $1.5 billion. For the fiscal years ended
October 31, 1996, 1995 and 1994, the Fund paid the Distributor fees pursuant to
the Rule 12b-1 Agreement, as in effect, of $256,708, $288,476 and $340,973,
respectively, with respect to the Intermediate Mortgage Portfolio. For the
fiscal years ended October 31, 1996, 1995 and 1994 the Fund paid the
Distributor fees pursuant to the Rule 12b-1 Agreement, as in effect, of
$87,808, $90,862 and $110,622, respectively, with respect to the U.S.
Government Mortgage Portfolio.
21
<PAGE> 57
The Distributor is obligated under the Rule 12b-1 Agreement to bear the
costs and expenses of printing and distributing copies of prospectuses and
annual and interim reports of the Fund (after such items have been prepared and
set in type) that are used in connection with the offering of shares of the
Fund to investors, and the cost and expenses of preparing, printing and
distributing any other literature used by the Distributor in connection with
the offering of the shares of the Portfolio for sale to investors.
The Fund has been informed by the Distributor that during its fiscal year
ended October 31, 1996, of the $1,374,184 fee received by the Distributor from
the Fund with respect to the ARM Portfolio, the following expenditures were
made:
<TABLE>
<S> <C>
Advertising and promotion ................. $ 40,213
Printing of prospectus for other
than current stockholders and
printing of other sales materials ......... 14,540
Postage ................................... 12,065
Compensation to underwriters and dealers .. ----------
Employee compensation and costs ........... 1,644,309
Staff travel and expense .................. 89,075
Rent and office expense ................... 380,394
Professional fees ......................... 51,438
Miscellaneous ............................. 9,300
----------
Total ..................................... $2,241,334
==========
</TABLE>
The Fund has been informed by the Distributor that during its fiscal year
ended October 31, 1996, of the $256,708 fee received by the Distributor from
the Fund with respect to the Intermediate Mortgage Portfolio, the following
expenditures were made:
22
<PAGE> 58
<TABLE>
<S> <C>
Advertising and promotion ................. $ 7,190
Printing of prospectus for other
than current stockholders and
printing of other sales materials ......... 2,640
Postage ................................... 2,169
Compensation to underwriters and dealers .. --------
Employee compensation and costs ........... 303,098
Staff travel and expense .................. 16,397
Rent and office expense ................... 68,679
Professional fees ......................... 9,358
Miscellaneous ............................. 1,682
--------
Total ..................................... $411,213
========
</TABLE>
The Fund has been informed by the Distributor that during its fiscal year
ended October 31, 1996, of the $87,808 fee received by the Distributor from the
Fund with respect to the U.S. Government Mortgage Portfolio, the following
expenditures were made:
<TABLE>
<S> <C>
Advertising and promotion ................. $ 2,908
Printing of prospectus for other
than current stockholders and
printing of other sales materials ......... 988
Postage ................................... 799
Compensation to underwriters and dealers .. --------
Employee compensation and costs ........... 103,788
Staff travel and expense .................. 5,600
Rent and office expense ................... 24,922
Professional fees ......................... 3,543
Miscellaneous ............................. 578
--------
Total ..................................... $143,126
========
</TABLE>
No "interested person" of the Fund, other than any officer or director of
the Fund who is affiliated with the Distributor or its affiliates, or any
director of the Fund who is not an "interested person" of the Fund, has any
direct or indirect financial interest in the operation of the Fund's agreement
with the Distributor.
The Rule 12b-1 Agreement with the Distributor will continue in effect
until March 1, 1998, and from year to year thereafter, subject to termination
by the Fund or the Distributor as hereinafter provided, if approved at least
annually by the Fund's Board
23
<PAGE> 59
of Directors and by a majority of the directors who are not "interested
persons" of the Fund and have no direct or indirect financial interest in the
arrangements contemplated by the agreement. The Rule 12b-1 Agreement requires
the Fund's Board of Directors to make a quarterly review of the amount expended
under the Rule 12b-1 Agreement and the purposes for which such expenditures
were made. The Rule 12b-1 Agreement may not be amended to increase materially
the amount paid by the Fund thereunder without stockholder approval. All
material amendments to the Rule 12b-1 Agreement must be approved by the Fund's
Board of Directors and by the "disinterested" directors referred to above. The
Rule 12b-1 Agreement will terminate automatically upon its assignment and is
terminable at any time without penalty by a majority of the Fund's directors
who are "disinterested" as described above or by a vote of a majority of the
outstanding shares (as defined under "General Information" in this Statement of
Additional Information) of each Portfolio on 60 days' written notice to the
Distributor, or by the Distributor on 90 days' written notice to the Fund.
DETERMINATION OF NET ASSET VALUE
For purposes of determining the net asset value per share of each
Portfolio, investments for which market quotations are readily available will
be valued at the mean between the most recent bid and asked prices, which may
be furnished by a pricing service or directly by market makers for such
securities. Portfolio securities for which market quotations are not readily
available, and other assets, will be valued at fair value using methods
determined in good faith by the Board of Directors and may include matrix
pricing systems. Short-term instruments maturing within 60 days of the
valuation date may be valued based upon their amortized cost. The Board of
Directors will review valuation methods regularly, in order to determine their
appropriateness.
TAXES
Each of the Fund's portfolios, including these Portfolios, is treated as a
separate corporation for Federal income tax purposes, and thus the provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), applicable to
regulated investment companies are applied to each portfolio separately, rather
than to the Fund as a whole. In addition, net long-term and short-term capital
gains and losses, net investment income, and operating expenses will be
determined separately for each portfolio.
Each Portfolio intends to meet the requirements for qualifying as a
regulated investment company. In order to so qualify each Portfolio must,
among other things: (a) diversify its holdings so that, at the end of each
fiscal quarter, (i) at least 50% of the value of its total assets is
represented by cash, Government securities and other securities with such other
securities limited, in respect of any one issuer, to an amount not greater than
5% of the value of the Portfolio's assets or 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its total
assets is invested in the securities of any one issuer (other than
24
<PAGE> 60
Government securities); (b) derive at least 90% of its gross income from
dividends, interest, proceeds from loans of stock and securities, gains from
the sale or other disposition of stock or securities, and other income derived
with respect to its business of investing in stock or securities; and (c)
derive less than 30% of its gross income from the sale or other disposition of
stock or securities, held less than three months. If a Portfolio qualifies as
a regulated investment company, it will not be subject to Federal income tax on
its income and gains distributed to shareholders, provided at least 90% of its
investment company taxable income earned in the taxable year (computed without
regard to the deduction for dividends paid) is so distributed.
Dividends of each Portfolio's net investment income (which generally
includes income other than capital gains, net of operating expenses), and
distributions of net short-term capital gains (i.e., the excess of net
short-term capital gains over net long-term capital losses) are taxable to
stockholders as ordinary income whether reinvested in shares or paid in cash.
Distributions of net long-term capital gains (i.e., the excess of net long-term
capital gains over net short-term capital losses) are taxable to stockholders
as long-term capital gains, regardless of how long shares of the Portfolio have
been held, whether reinvested in shares or paid in cash. Under the Code, net
long-term capital gains received by corporate stockholders (including long-term
capital gain distributions by each Portfolio) are taxed at the same rates as
ordinary income. Net long-term capital gains received by individual
stockholders (including long-term capital gain distributions by each Portfolio)
are taxed at a maximum rate of 28%.
Because none of each Portfolio's income will consist of dividends from
domestic corporations, dividends of net investment income and distributions of
net long-term and short-term capital gains will not qualify for the dividends
received deduction available to corporations.
Gain or loss realized upon a sale or redemption of shares of each
Portfolio by a stockholder who is not a dealer in securities will be treated as
long-term capital gain or loss if the shares have been held for more than one
year and otherwise as short-term capital gain or loss. Any loss realized by a
stockholder upon the sale of shares in each Portfolio held six months or less
will be treated as a long-term capital loss, however, to the extent of any
long-term capital gain distributions received by the stockholder with respect
to such shares.
Any capital gains distribution received shortly after the purchase of
shares reduces the net asset value of the shares by the amount of the
distribution and, although in effect a return of capital, will be taxable to
the stockholder. If the net asset value of shares were reduced below the
stockholder's cost by distributions representing gains realized on sales of
securities, such distributions would be a return of investment though taxable
in the same manner as other dividends or distributions.
Each Portfolio generally will be subject to a 4% nondeductible excise tax
to the extent the Portfolio does not meet certain minimum distribution
requirements by the end of each calendar year. To avoid the imposition of the
4% excise tax, it may be necessary for a dividend
25
<PAGE> 61
to be declared in December and actually paid in January of the following year,
which will be treated as having been received by stockholders on December 31 of
the calendar year in which declared. Under this rule, therefore, a stockholder
may be taxed in one year on dividends or distributions actually received in
January of the following year.
Dividends and distributions may be subject to state and local taxes.
PORTFOLIO TRANSACTIONS
Purchases and sales of securities for each Portfolio usually are principal
transactions. Portfolio securities normally are purchased directly from the
issuer or from an underwriter or market maker for the securities. There
usually, but not always, are no brokerage commissions paid by the Fund for such
purchases, and during the fiscal year ended October 31, 1996, none of the
Portfolios paid any brokerage commissions. Purchases from dealers serving as
market makers may include the spread between the bid and asked prices. The
Adviser attempts to obtain the best price and execution for portfolio
transactions.
Each Portfolio will not purchase securities from, sell securities to, or
enter into repurchase agreements with, the Adviser or any of its affiliates.
Allocation of transactions, including their frequency, to various dealers
is determined by the Adviser in its best judgment under the general supervision
of the Board of Directors of the Fund and in a manner deemed fair and
reasonable to stockholders. The primary consideration is prompt execution of
orders in an effective manner at the best price. On occasion the Adviser on
behalf of each Portfolio may effect securities transactions on an agency basis
with broker-dealers providing research services and/or research-related
products for the Fund. Research services or research-related products may
include information in the form of written reports, reports accessed by
computers or terminals, statistical collations and appraisals and analysis
relating to companies or industries. However, in selecting such
broker-dealers, the Adviser adheres to the primary consideration of best price
and execution.
Investment decisions for each portfolio of the Fund are made separately
from those for the other portfolios or other clients advised by the Adviser.
It may happen, on occasion, that the same security is held in one portfolio of
the Fund and the other portfolios of one or more of such other clients.
Simultaneous transactions are likely when several portfolios and clients are
advised by the same investment adviser, particularly when a security is
suitable for the investment objectives of more than one of such portfolios or
clients. When two or more portfolios or other clients advised by the Adviser
are simultaneously engaged in the purchase or sale of the same security, the
transactions are allocated to the respective portfolios or clients, both as to
amount and price, in accordance with a method deemed equitable to each
portfolio or client. In some cases this system may adversely affect the price
paid or received by a portfolio of the Fund or the size of the security
position obtainable for such portfolio.
26
<PAGE> 62
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions for the ARM
Portfolio, none of which may be changed without the approval of a majority of
the outstanding shares of the Portfolio, as defined under "General Information"
in this Statement of Additional Information. Accordingly, the ARM Portfolio
may not:
(1) Purchase securities other than Eligible Investments. In the event
that the OTS Regulations (as defined in the Prospectus) applicable to Federal
savings associations are amended to remove assets from the list of assets which
qualify as Eligible Investments, the Fund will dispose of any nonqualifying
assets held by the Portfolio in such time and manner as may be permitted by
relevant OTS Regulations or, if none, in such time and manner as the Fund's
Board of Directors may determine. Conversely, if the list of qualifying assets
is expanded, such additional qualifying assets will also constitute Eligible
Investments and the Portfolio will be free to make investments therein, to the
extent consistent with the Fund's investment objective and the Portfolio's
management policies.
(2) Invest more than 5% of its total assets in the securities of any one
issuer, other than securities issued or guaranteed by the United States
Government or its agencies or Instrumentalities, except that up to 25% of the
value of the Portfolio's total assets may be invested without regard to this 5%
limitation.
(3) Enter into repurchase agreements or purchase any other investments for
which market quotations are not readily available, in each case maturing in
more than 7 days, or Interest Rate Caps and Floors if, as a result, more than
10% of the value of the Portfolio's total assets would be invested in such
repurchase agreements and such other illiquid investments.
(4) Borrow money except from banks (a) for temporary or emergency purposes
and in an amount not exceeding 10% of the value of the Portfolio's net assets,
or (b) to meet redemption requests without immediately selling any portfolio
securities and in an amount not exceeding in the aggregate one-third of the
value of the Portfolio's total assets, less liabilities other than borrowing;
or mortgage, pledge or hypothecate its assets except in connection with any
such borrowing and in amounts not in excess of 20% of the value of its net
assets. The borrowing provision of (b) above is not for investment leverage,
but solely to facilitate management of the Portfolio by enabling the Portfolio
to meet redemption requests when the liquidation of portfolio securities is
considered to be disadvantageous. The Portfolio's net income will be reduced
if the interest expense of borrowings incurred to meet redemption requests and
avoid liquidation of portfolio securities exceeds the interest income of those
securities. To the extent that borrowings exceed 5% of the value of the
Portfolio's net assets, such borrowings will be repaid before any investments
are made.
(5) Invest more than 25% of the value of the Portfolio's total assets in
the securities of issuers in any single industry; provided that there shall be
no such limitation on investments in the mortgage and mortgage finance industry
(in which more than 25% of the value of the
27
<PAGE> 63
Portfolio's total assets will, except for temporary defensive purposes, be
invested) or on the purchase of obligations issues or guaranteed by the United
States Government or its agencies or instrumentalities.
(6) Act as an underwriter of securities, except to the extent that the
Fund may be deemed to be an "underwriter" in connection with the purchase of
securities for the Portfolio directly from an issuer or an underwriter thereof.
(7) Make loans except that the Portfolio may purchase or hold debt
obligations, enter into repurchase agreements and loan Federal funds and other
day(s) funds to FDIC Insured Institutions (as defined in the Prospectus), in
each case to the extent permitted by the Fund's investment objective and the
Portfolio's management policies.
(8) Purchase securities on margin or make short sales of securities; write
or purchase put or call options or combinations thereof or purchase or sell
real estate, real estate mortgage loans (except that the Portfolio may purchase
and sell Mortgage Related Securities), real estate investment trust securities,
commodities or commodity contracts, or oil and gas interests.
The Fund has adopted the following investment restrictions for the
Intermediate Mortgage Portfolio and U.S. Government Mortgage Portfolio,
respectively, none of which may be changed without the approval of a majority
of the outstanding shares of the Portfolio, as defined under "General
Information" in this Statement of Additional Information. The restrictions are
the same for both Portfolios except as indicated. Accordingly, the
Intermediate Mortgage Portfolio and the U.S. Government Mortgage Portfolio may
not:
(1) Purchase securities other than Eligible Investments. In the event
that the OTS Regulations (as defined in the Prospectus) applicable to Federal
savings associations are amended to remove assets from the list of assets which
qualify as Eligible Investments, the Fund will dispose of any nonqualifying
assets held by the Portfolio in such time and manner as may be permitted by
relevant OTS Regulations or, if none, in such time and manner as the Fund's
Board of Directors may determine. Conversely, if the list of qualifying assets
is expanded, such additional qualifying assets will also constitute Eligible
Investments and the Portfolio will be free to make investments therein, to the
extent consistent with the Fund's investment objective and the Portfolio's
management policies.
(2) Invest more than 5% of its total assets in the securities of any one
issuer, other than securities issued or guaranteed by the United States
Government or its agencies or instrumentalities, except that up to 25% of the
value of the Portfolio's total assets may be invested without regard to this 5%
limitation.
(3) Enter into repurchase agreements or purchase any other investments for
which market quotations are not readily available, in each case maturing in
more than 7 days if, as a result, more than 15% of the value of the
Intermediate Mortgage Portfolio's total assets and
28
<PAGE> 64
more than 10% of the value of the U.S. Government Mortgage Portfolio's total
assets would be invested in such repurchase agreements and such other illiquid
investments.
(4) Enter into reverse repurchase agreements exceeding in the aggregate
one-third of the value of the U.S. Government Mortgage Portfolio's total
assets, less liabilities other than the obligations created by reverse
repurchase agreements.
(5) (Intermediate Mortgage Portfolio) Borrow money except from banks (a)
for temporary purposes and in an amount not exceeding 10% of the value of the
Portfolio's net assets, or (b) to meet redemption requests without immediately
selling any portfolio securities and in an amount not exceeding in the
aggregate one-third of the value of the Portfolio's total assets, less
liabilities other than such borrowing; or mortgage, pledge or hypothecate its
assets except in connection with any such borrowing and in amounts not in
excess of 20% of the value of its net assets provided that there shall be no
such limitation on deposits made in connection with the entering into and
holding of interest rate futures contracts and options thereon. The borrowing
provision of (b) above is not for investment leverage, but solely to facilitate
management of the Portfolio by enabling the Portfolio to meet redemption
requests when the liquidation of portfolio securities is considered to be
disadvantageous. To the extent that borrowings exceed 5% of the value of the
Portfolio's net assets, such borrowings will be repaid before any investments
are made. The Portfolio's ability to enter into reverse repurchase agreements
is not restricted by this paragraph (5) and collateral arrangements with
respect to margins for interest rate futures contracts and options thereon are
not deemed to be a pledge of assets for the purpose of this paragraph (5).
(6) (U.S. Government Mortgage Portfolio) Borrow money except from banks
(a) for temporary or emergency purposes and in an amount not exceeding 10% of
the value of the Portfolio's net assets, or (b) to meet redemption requests
without immediately selling any portfolio securities and in an amount not
exceeding in the aggregate one-third of the value of the Portfolio's total
assets, less liabilities other than borrowing; or mortgage, pledge or
hypothecate its assets except in connection with any such borrowing and in
amounts not in excess of 20% of the value of its net assets provided that there
shall be no such limitation on deposits made in connection with the entering
into and holding of interest rate futures contracts and options thereon. The
borrowing provision of (b) above is not for investment leverage, but solely to
facilitate management of the Portfolio by enabling the Portfolio to meet
redemption requests when the liquidation of portfolio securities is considered
to be disadvantageous. The Portfolio's net income will be reduced if the
interest expense of borrowings incurred to meet redemption requests and avoid
liquidation of portfolio securities exceeds the interest income of those
securities. To the extent that borrowings exceed 5% of the value of the
Portfolio's net assets, such borrowings will be repaid before any investments
are made. The Portfolio's ability to enter into reverse repurchase agreements
is not restricted by this paragraph (6) and collateral arrangements with
respect to margins for interest rate futures contracts and options thereon are
not deemed to be a pledge of assets for the purpose of this paragraph (6).
29
<PAGE> 65
(7) Invest more than 25% of the value of the Portfolio's total assets in
the securities of issuers in any single industry; provided that there shall be
no such limitation on investments in the mortgage and mortgage finance industry
(in which more than 25% of the value of the portfolio's total assets will,
except for temporary defensive purposes, be invested) or on the purchase of
obligations issued or guaranteed by the United States Government or its
agencies or instrumentalities.
(8) Act as an underwriter of securities, except to the extent that the
Fund may be deemed to be an "underwriter" in connection with the purchase of
securities for the Portfolio directly from an issuer or an underwriter thereof.
(9) Make loans except that the Portfolio may purchase or hold debt
obligations, enter into repurchase agreements and loan Federal funds and other
day(s) funds to FDIC Insured Institutions (as defined in the Prospectus), in
each case to the extent permitted by the Fund's investment objective and the
Portfolio's management policies.
(10) (Intermediate Mortgage Portfolio) Purchase securities on margin or
make short sales of securities; write or purchase put or call options or
combinations thereof except that the Portfolio may write covered call options
and purchase call or put options on investments eligible for purchase by the
Portfolio; or purchase or sell real estate, real estate mortgage loans (except
that the Portfolio may purchase and sell Mortgage-Related Securities), real
estate investment trust securities, commodities or commodity contracts, or oil
and gas interests; except that the Portfolio may enter into interest rate
futures contracts and may write call options and purchase call and put options
on interest rate futures contracts if (a) as to interest rate futures
contracts, each futures contract is (i) for the sale of a financial instrument
(a "short position") to hedge the value of securities held by the Portfolio or
(ii) for the purchase of a financial instrument of the same type and for the
same delivery month as the financial instrument underlying a short position
held by the Portfolio (a "long position offsetting a short position"), (b) the
sum of the aggregate futures market prices of financial instruments required to
be delivered under open futures contract sales and the aggregate purchase
prices under open futures contract purchases does not exceed 30% of the value
of the Portfolio's total assets, and (c) immediately thereafter, no more than
5% of the Portfolio's total assets would be committed to margin. This ability
to invest interest rate futures contracts and options thereon is not for
speculation, but solely to permit hedging against anticipated interest rate
changes.
(11) (U.S. Government Mortgage Portfolio) Purchase securities on margin
or make short sales of securities; write or purchase put or call options or
combinations thereof except that the Portfolio may write covered call options
and purchase call or put options on Eligible Investments; or purchase or sell
real estate, real estate mortgage loans (except that the Portfolio may purchase
and sell Mortgage-Related Securities), real estate investment trust securities,
commodities or commodity contracts, or oil and gas interests except that the
Portfolio may enter into interest rate futures contracts and may write call
options and purchase call and put options on interest rate futures contracts if
(a) as to interest rate futures contracts, each futures contract is (i) for the
sale of a financial instrument (a "short position") to hedge the value of
securities
30
<PAGE> 66
held by the Portfolio or (ii) for the purchase of a financial instrument of the
same type and for the same delivery month as the financial instrument
underlying a short position held by the Portfolio (a "long position offsetting
a short position"), (b) the sum of the aggregate futures market prices of
financial instruments required to be delivered under open futures contract
sales and the aggregate purchase prices under open futures contract purchases
does not exceed 30% of the value of the Portfolio's total assets, and (c)
immediately thereafter, no more than 5% of the Portfolio's total assets would
be committed to margin. This ability to invest in interest rate futures
contracts and options thereon is not for speculation, but solely to permit
hedging against anticipated interest rate changes.
ORGANIZATION AND DESCRIPTION OF FUND SHARES
The authorized capital stock of the Fund consists of five classes of
common stock, par value $.001 per share, as follows: (i) Money Market
Portfolio -- 4.0 billion shares, (ii) Short U.S. Government Securities
Portfolio -- 500 million shares, (iii) U.S. Government Mortgage Securities
Portfolio -- 500 million shares, (iv) Intermediate Mortgage Securities
Portfolio -- 500 million shares and (v) Adjustable Rate Mortgage (ARM)
Portfolio -- 500 million shares. The shares of each class represent interests
only in the corresponding portfolio. When issued and paid for in accordance
with the terms of offering, each share is fully paid and nonassessable. All
shares of common stock of the same class have equal dividend, distribution,
liquidation and voting rights and are redeemable at net asset value, at the
option of the stockholder. In addition, the shares have no preemptive,
subscription or conversion rights and are freely transferable.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted by the provisions of such Act or applicable state law, or otherwise,
to the holders of the outstanding voting securities of an investment company
such as the Fund shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares (as defined
under "General Information" below) of each class affected by such matter. Rule
18f-2 further provides that a class shall be deemed to be affected by a matter
unless it is clear that the interests of each class in the matter are identical
or that the matter does not affect any interest of such class. However, the
Rule exempts the selection of independent public accountants and the election
of directors from the separate voting requirements of the Rule.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Vedder, Price, Kaufman & Kammholz are legal counsel to the Fund and pass
upon the validity of the shares offered by the Prospectus.
Coopers & Lybrand L.L.P. are the Fund's independent accountants. The
financial statements of each Portfolio incorporated in this Statement of
Additional Information by reference to the Fund's Annual Report to Stockholders
for the year ended October 31, 1996 (see "Financial Statements" below), have
been so incorporated in reliance on the report of
31
<PAGE> 67
Coopers & Lybrand L.L.P. given on the authority of such firm as experts in
accounting and auditing.
GENERAL INFORMATION
The Fund sends to all of the stockholders of each Portfolio semi-annual
reports and annual reports, including a list of investment securities held by
each Portfolio, and, for annual reports, audited financial statements of each
Portfolio.
As used in each Prospectus and this Statement of Additional Information,
the term "majority," when referring to the approvals to be obtained from
stockholders, means the vote of the lesser of (1) 67% of the Fund's shares of
each class or of the class entitled to a separate vote present at a meeting if
the holders of more than 50% of the outstanding shares of all classes or of the
class entitled to a separate vote are present in person or by proxy, or (2)
more than 50% of the Fund's outstanding shares of all classes or of the class
entitled to a separate vote. The Bylaws of the Fund provide that an annual
meeting of stockholders is not required to be held in any year in which none of
the following is required to be acted on by stockholders pursuant to the 1940
Act: election of directors; approval of the investment advisory agreement;
ratification of the selection of independent public accountants; and approval
of a distribution agreement.
In January 1984, the Fund changed its name from Liquidity Fund for
Thrifts, Inc. to Asset Management Fund for Savings Institutions, Inc. In
February 1990, the Fund changed its name from Asset Management Fund for Savings
Institutions, Inc. to Asset Management Fund for Financial Institutions, Inc.
In September 1994, the Fund changed its name from Asset Management Fund for
Financial Institutions, Inc. to Asset Management Fund, Inc. In June 1992, the
Intermediate Mortgage Portfolio changed its name from the Corporate Bond
Portfolio to its present name. In September 1994, the U.S. Government Mortgage
Securities Portfolio changed its name from the Mortgage Securities Performance
Portfolio to its present name.
The Prospectus and this Statement of Additional Information do not contain
all the information included in the Registration Statement filed with the
Securities and Exchange Commission under the Securities Act of 1933 with
respect to the securities offered hereby, certain portions of which have been
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. The Registration Statement, including the exhibits filed
therewith, may be examined at the office of the Securities and Exchange
Commission in Washington, D.C.
Statements contained in each Prospectus and this Statement of Additional
Information as to the contents of any contract or other document referred to
are not necessarily complete, and, in each instance, reference is made to the
copy of such contract or other document filed as an exhibit to the Registration
Statement of which the Prospectus and Statement of Additional Information form
a part, each such statement being qualified in all respects by such reference.
32
<PAGE> 68
DESCRIPTION OF DEBT RATINGS
Bonds rated Aa by Moody's are judged to be of high quality by all
standards. Together with the Aaa Group they comprise what are 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 bonds. Moody's applies the numerical
modifiers 1, 2 and 3 to certain general rating classifications, including Aa.
The modifier 3 indicates that the issue ranks in the lower end of its generic
rating category. Debt rated AA by Standard & Poor's has a very strong capacity
to pay interest and repay principal and differs from the highest rated issues,
which are rated AAA, only in small degree. Ratings in certain categories,
including AA, may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories. Duff and Phelps, Inc.
and Fitch Investors Service, Inc. have comparable rating systems.
FINANCIAL STATEMENTS
The financial statements required to be included in this Statement of
Additional Information are incorporated herein by reference to the Fund's
Annual Report to Stockholders for the year ended October 31, 1996 (the "Annual
Report"). The Fund will provide the Annual Report without charge to each
person to whom this Statement of Additional Information is delivered.
33
<PAGE> 69
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE FUND'S OBJECTIVE, THE PORTFOLIOS
AND THEIR MANAGEMENT POLICIES 2
PURCHASE AND REDEMPTION OF SHARES 7
DIVIDENDS, DISTRIBUTIONS, YIELD
AND TOTAL RETURN QUOTATIONS 8
MANAGEMENT OF THE FUND 10
INVESTMENT ADVISER AND ADMINISTRATOR 15
DISTRIBUTOR 19
DETERMINATION OF NET ASSET VALUE 21
TAXES 22
PORTFOLIO TRANSACTIONS 23
INVESTMENT RESTRICTIONS 24
ORGANIZATION AND DESCRIPTION OF FUND SHARES 28
COUNSEL AND INDEPENDENT ACCOUNTANTS 29
GENERAL INFORMATION 29
DESCRIPTION OF DEBT RATINGS 30
FINANCIAL STATEMENTS 30
</TABLE>
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ADJUSTABLE RATE
MORTGAGE (ARM) PORTFOLIO,
INTERMEDIATE MORTGAGE
SECURITIES PORTFOLIO
AND
U.S. GOVERNMENT
MORTGAGE SECURITIES PORTFOLIO
Asset Management Fund, Inc.
___________________________________
STATEMENT OF ADDITIONAL
INFORMATION
March 1, 1997
___________________________________
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<PAGE> 70
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STATEMENT OF ADDITIONAL INFORMATION
MONEY MARKET PORTFOLIO
(previously named the Short-Term Liquidity Portfolio)
and
SHORT U.S. GOVERNMENT SECURITIES PORTFOLIO
(previously named the Intermediate-Term Liquidity Portfolio)
ASSET MANAGEMENT FUND, INC.
111 East Wacker Drive, Chicago, Illinois 60601
The Money Market Portfolio and the Short U.S. Government Securities
Portfolio (each, a "Portfolio" and collectively, the "Portfolios") are each a
portfolio of Asset Management Fund, Inc. (the "Fund"), a professionally
managed, diversified, open-end investment company. Each Portfolio is
represented by a class of shares separate from those of the Fund's other
portfolios.
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Fund's Prospectus, dated March 1, 1997 (the
"Prospectus"), a copy of which may be obtained from the Fund at the address
noted above.
- --------------------------------------------------------------------------------
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The date of this Statement of Additional Information is
March 1, 1997.
<PAGE> 71
Capitalized terms not defined in this Statement of Additional Information
and defined in the Prospectus shall have the meanings defined in the
Prospectus.
THE FUND'S OBJECTIVE, THE PORTFOLIOS
AND THEIR INVESTMENT POLICIES
Under current OTS Regulations and the policies adopted by the Board of
Directors of the Fund, Eligible Investments for each Portfolio include those
described in the Prospectus, together with the following, as long as principal
and interest on such Eligible Investments are not in default:
Time deposits (negotiable and non-negotiable) in a Federal Home Loan Bank,
the Bank for Savings and Loan Associations, Chicago, Illinois or the Savings
Banks Trust Company, New York, New York.
Repurchase Agreements. If the seller defaults in its obligation to
repurchase from either Portfolio the underlying instrument, which in effect
constitutes collateral for the seller's obligation, at the price and time fixed
in the repurchase agreement, the Portfolio might incur a loss if the value of
the collateral declines and might incur disposition costs in connection with
liquidating the collateral. In addition, if bankruptcy proceedings are
commenced with respect to the seller, realization upon the collateral by the
Portfolio may be delayed or limited. Each Portfolio will always receive as
collateral instruments whose market value, including accrued interest, will be
at least equal to 100% of the dollar amount invested by the Portfolio in each
agreement. Each Portfolio enters into repurchase agreements with primary
government securities dealers.
Certificates of Deposit. Each Portfolio may invest in certificates of
deposit issued by and other time deposits in foreign branches of FDIC insured
banks. Investment in such deposits may involve somewhat different investment
risks from those affecting deposits in United States branches of such banks.
These risks, which might adversely affect the payment of principal and interest
on such deposits, include the possibility that a foreign jurisdiction might
impose withholding taxes on interest income payable on such deposits, the
possible seizure or nationalization of foreign deposits or the possible
adoption of foreign governmental restrictions, such as exchange controls.
FDIC Insured Institutions. Although each Portfolio's investment in
savings accounts and in certificates of deposit and other time deposits in an
FDIC Insured Institution is insured to the extent of $100,000 by the Federal
Deposit Insurance Corporation, the Portfolio may invest more than $100,000 with
a single Institution, and any such excess and any interest on the investment
would not be so insured. Deposits in foreign branches of FDIC insured banks
are not insured by the Federal Deposit Insurance Corporation.
2
<PAGE> 72
The Money Market Portfolio will invest in Eligible Investments issued by
an FDIC Insured Institution only if such Institution or a security issued by
such Institution (i) has a short-term debt obligation rating in the highest
category by at least two nationally recognized statistical rating organizations
("NRSROs"), or (ii) if rated by two NRSROs in the second-highest category for
short-term debt obligations, are purchased only in the amounts prescribed for
"Second Tier Securities" by Rule 2a-7 under the Investment Company Act of 1940,
as amended, or (iii) if rated only by one NRSRO (with such rating in the
highest category), the investment is submitted to the Board of Directors for
approval or ratification, or (iv) if no such ratings are available, is of
comparable quality in the opinion of the Adviser and, except in the case of a
Government security, the investment is submitted to the Board of Directors of
the Fund for approval or ratification.
The Short U.S. Government Securities Portfolio (the "Short Government
Portfolio") will invest in Eligible Investments issued by an FDIC Insured
Institution only if such Institution or a security issued by such Institution
(i) has a short-term debt obligation rating in the highest category by one
NRSRO, or (ii) if no such ratings are available, has comparable quality in the
opinion of the Portfolio's investment adviser under the general supervision of
the Board of Directors of the Fund.
Other Current Policies. Under current policies of the Board of Directors,
the Fund has adopted certain voluntary restrictions with respect to each
Portfolio's Eligible Investments. These restrictions:
(1) prohibit the purchase of obligations of Federal Land Banks, Federal
Intermediate Credit Banks, the Export-Import Bank of the United States, the
Commodity Credit Corporation, the National Credit Union Administration and the
Tennessee Valley Authority;
(2) limit the use of repurchase agreements to repurchase agreements
involving obligations of the U.S. Government, including zero coupon Treasury
securities that have been stripped of either principal or interest by the U.S.
Government so long as the maturity of these securities does not exceed ten
years, and obligations of the Federal Home Loan Banks, the Federal National
Mortgage Association, the Government National Mortgage Association, the
3
<PAGE> 73
Federal Farm Credit Banks, the Federal Financing Bank, the Student Loan
Marketing Association and the Federal Home Loan Mortgage Corporation;
(3) prohibit investments in reverse repurchase agreements until such
time as Federal credit unions may invest in them without limitation;
(4) limit the maturities of bankers' acceptances to six months and
prohibit investments in bankers' acceptances of Edge Act corporations guaranteed
by their FDIC-insured parent banks until such time as the appropriateness of
these latter investments for Federal credit unions is clarified; and
(5) prohibit loans of Federal funds until such time as investors are
limited to institutions meeting the requirements of Regulation D of the Board of
Governors of the Federal Reserve System.
Although these restrictions are not fundamental policies of the Fund and
may be changed without stockholder vote, the Fund will not alter these
restrictions without notice to stockholders.
See "Investment Restrictions" in this Statement of Additional Information
for a description of additional investment restrictions of the Portfolios.
PURCHASE AND REDEMPTION OF SHARES
The Fund believes that shares of the Money Market Portfolio qualify as
"short-term liquid assets" and that shares of both Portfolios qualify as
"liquid assets" under Sections 566.1(h) and 566.1(g), respectively, of the OTS
Regulations, and as investments not subject to percentage of assets limitations
under Section 5(c)(1)(Q) of the Home Owners' Loan Act of 1933, as amended, and
the OTS Regulations thereunder governing investments by "Federal savings
associations," as defined in such Act. Thus, investments in shares of the
Portfolios can be utilized to satisfy the liquidity requirements of the OTS
Regulations. In addition, the Portfolios' shares are eligible for purchase by
national banks and Federal credit unions without limitation under applicable
Federal law.
The Fund reserves the right to suspend the right of redemption and to
postpone the date of payment upon redemption (1) for any period during which
the New York Stock Exchange (the "Exchange") is closed, other than customary
weekend and holiday closings, or during which trading on the Exchange is
restricted, or (2) for any period during which an emergency, as defined by the
rules of the Securities and Exchange Commission, exists as a result of which
(i) disposal by the Fund of securities held by each Portfolio is not reasonably
practicable, or (ii) it is not reasonably practicable for the Fund to determine
the value of the Portfolio's net assets, or (3) for such other periods as the
Securities and Exchange Commission, or any successor governmental authority,
may by order permit for the protection of stockholders of each Portfolio.
4
<PAGE> 74
DIVIDENDS, DISTRIBUTIONS, YIELD
AND TOTAL RETURN QUOTATIONS
Dividends on shares of the Portfolios are paid monthly on the first
Business Day of each month.
The Fund seeks to maintain for the Money Market Portfolio a net asset
value of $1.00 per share for purchases and redemptions. In order to effectuate
this policy, the Fund may, under certain circumstances, withhold dividends or
make distributions from capital or capital gains.
Net income of the Money Market Portfolio for dividend purposes (from the
time of the immediately preceding determination thereof) will consist of (i)
interest accrued and discount earned (including both original issue and market
discount) less amortization of any premium, (ii) plus all realized net
short-term gains, if any, on portfolio securities, (iii) less the accrued
expenses attributable to the Portfolio (including the Portfolio's pro rata
share, based on its relative net asset value in relation to that of the Short
Government Portfolio for the applicable period, of the fees payable to the
Fund's sponsor) and the general expenses of the Fund prorated on the basis of
relative net asset value of the Portfolio in relation to the net asset value
of the Fund's other portfolios applicable to that period.
The Money Market Portfolio's seven-day yield and seven-day effective
yield for the period ended October 31, 1996, were 4.98% and 5.10%,
respectively. Without fee waivers, the seven-day yield would have been 4.83%,
and the seven-day effective yield would have been 4.95%. The seven-day yield
was calculated by dividing the aggregate net income per share for dividend
purposes (excluding, however, any realized gains or losses) for the seven-day
period by the average net asset value per share for such period and multiplying
this return by 365/7. The seven-day effective yield was calculated similarly,
but, when annualized, all income earned over the seven-day period was assumed
to be reinvested.
From time to time in sales literature, the Money Market Portfolio may
quote a yield for a period either less than or greater than seven days. Any
quotation of yield for a period of either less than or greater than seven days
will identify the length of and the date of the last day in the base period
used in computing that quotation. Any such quotation will also include the
seven-day yield and effective yields of the same day.
From time to time the Money Market Portfolio may also compare its
performance to the interest rates payable on U.S. Treasury bills and notes or
on appropriate short-term obligations of U.S. Government agencies and
instrumentalities, including those issued by the Federal National Mortgage
Association and the Federal Home Loan Bank, the advance rates quoted by a
Federal Home Loan Bank and the Student Loan Marketing Administration, to the
Federal funds rate, i.e. the interest rate payable on interbank overnight
loans, to appropriate averages as reported by Lipper Analytical Services, Inc.,
Investment Company Data, Inc., Morningstar Inc. and the Donoghue Organization,
Inc. and/or to other appropriate measures.
5
<PAGE> 75
Net income of the Short Government Portfolio for dividend purposes (from
the time of the immediately preceding determination thereof) will consist of
(i) interest accrued and discount earned (including both original issue and
market discount) less amortization of any premium, (ii) less the accrued
expenses attributable to the Portfolio (including the Portfolio's pro rata
share, based on its relative net asset value in relation to that of the Money
Market Portfolio for the applicable period, of the fees payable to the Fund's
sponsor) and the general expenses of the Fund prorated on the basis of relative
net asset value of the Portfolio in relation to the net asset value of the
Fund's other portfolios applicable to that period.
For the 30-day period ended October 31, 1996, the Short Government
Portfolio's annualized yield was 5.51%. The average annual total rates of
return for the periods ended October 31, 1996 were as follows:
<TABLE>
<S> <C>
One year .................................................... 4.99%
Five years ................................................... 5.92%
Ten years .................................................... 7.06%
</TABLE>
The annualized yield shown above was computed by dividing the aggregate
net income per share for dividend purposes for the 30-day period by the
Portfolio's net asset value on October 31, 1996. The 30-day yield was then
annualized on a bond-equivalent basis assuming semi-annual reinvestment and
compounding of net income per share for dividend purposes.
The total return for each period shown above was computed by assuming a
hypothetical initial investment of $1,000 on the first day of such period. It
was then assumed that all dividends and distributions over the period were
reinvested and that, at the end of such period, the entire amount was redeemed.
The average annual total rate of return was then determined by calculating the
annual rate required for the initial payment to grow to the amount which would
have been received upon redemption (i.e., the average annual compound rate of
return).
From time to time, the Short Government Portfolio may quote a "dividend
distribution rate" in sales literature. The "dividend distribution rate"
represents the aggregation of actual distributions made, representing
dividends, realized short-term capital gains and certain realized long-term
capital gains. It does not reflect unrealized gains or losses. The "dividend
distribution rate" differs from yield in that certain non-recurring components
may be included. Any quoted "divided distribution rate," therefore, should be
considered along with, and not as a substitute for, the yield and total rate of
return of the Portfolio.
From time to time, the Short Government Portfolio's performance may be
compared to the rates and returns payable on U.S. Treasury notes and on
obligations of U.S. agencies and instrumentalities, such as those issued by the
Federal National Mortgage Association and the Federal Home Loan Bank, to the
Federal funds rate, to the advance rates quoted by a Federal Home Loan Bank, to
the Lehman Brothers Short/Intermediate Term U.S.
6
<PAGE> 76
Treasury and Government Bond Indices, including the Lehman Mutual Fund Short
U.S. Treasury and Short U.S. Government Indices, also to the Lehman Mutual Fund
General U.S. Treasury Index, Lehman Mutual Fund General U.S. Government Index
and Lehman Mutual Fund Short (1 - 2 and 1 - 3 years) U.S. Government Indices;
to the Merrill Lynch U.S. Treasury Indices, including the U.S. Treasury (all
maturities), the U.S. Treasury Short-Term (1-2.99 years), the U.S. Treasury
Intermediate-Term (3-4.99 years and 5-6.99 years) Indices; to the Salomon
Brothers Treasury Indices, including the Treasury Index (all maturities) and
the Treasury (1-3 years, 1-5 years, and 3-7 years) Indices, to the Salomon
Government Sponsored Indices, including the Government Sponsored (all
maturities) and Government Sponsored (1-3 years and 3-7 years) and to the
Salomon Government (all maturities) and Salomon Government (1-10 years) Indices
and to other appropriate indices of Lehman, Merrill Lynch or Salomon. The
Short Government Portfolio's performance also may be compared to that of other
funds through ratings or rankings or appropriate averages based on specified
factors over specified periods of time reported or published by such entities
as AMG Data, Barron's, Business Week, Chicago Tribune, CDA Investment
Technologies, Inc., Changing Times, Consumer Reports, Crain's Chicago Business,
the Donoghue Organization, Inc., The Economist, Financial Times, Forbes,
Fortune, Futures, Income Opportunities, Investment Advisor, Investment Company
Data, Inc., Kiplinger's Personal Finance, Lipper Analytical Services, Inc.,
Media General Financial Services, Money, Morningstar, Inc., Mutual Fund Market
News, Newsweek, The New York Times, No-Load Fund Investor, Smart Money,
Standard & Poor's, Strategic Data, Success, Time, U.S. News and World Report,
USA Today, Value Line, The Wall Street Journal, and Worth magazine.
MANAGEMENT OF THE FUND
Directors and Officers
Directors and Officers of the Fund, together with information as to their
principal business occupations during the last five years, are shown below.
Each director who is an "interested person" of the Fund, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), is indicated by an
asterisk.
Name and Address Position with Fund
ARTHUR G. DE RUSSO (Age 76) Director
5397 S.E. Major Way
Stuart, FL 34997
Principal Occupations During Past Five Years and Prior Relevant Experience:
Chief Executive Officer, Eastern Financial Federal Credit Union from 1974 to
1992; Chairman and Director, First Credit Union Trust Co., Inc. from 1988 to
1992; President of the Airline Credit Union Conference in 1991; Director, Honor
ATM Network, Florida from 1985 to 1990.
7
<PAGE> 77
DAVID F. HOLLAND* (Age 55) Director
17 New England Executive Park
Burlington, MA 01803
Principal Occupations During Past Five Years and Prior Relevant Experience:
Chairman of the Board since 1989 and since 1986 President and Chief Executive
Officer, Boston Federal Savings Bank; previously Director of the Fund from 1988
to 1989; Chairman of America's Community Banking Partners, Inc., Director of
ACB Investment Services, Inc.; and President Thrift Industry Advisory Council.
LEON T. KENDALL (Age 68) Director and Chairman
of the Board
250 East Kilbourn
Milwaukee, WI 53202
Principal Occupations During Past Five Years and Prior Relevant Experience:
Professor of Finance and Real Estate, Kellogg School of Management,
Northwestern University since 1988; Director and Chairman of the Board,
Mortgage Guaranty Insurance Corp. and Director and Vice Chairman of MGIC
Investment Corporation until 1989. Public Director, Chicago Board Options
Exchange since 1992; Director of Universal Foods since 1985; Director of the
Federal Reserve Bank of Chicago from 1981 to 1986; and Director of Avatar
Corporation since 1982.
8
<PAGE> 78
GERALD J. LEVY (Age 65) Director
4000 W. Brown Deer Road
Milwaukee, WI 53209
Principal Occupations During Past Five Years and Prior Relevant Experience:
Chairman and Chief Executive Officer, Guaranty Bank, S.S.B. since 1984 (from
1959 to 1984, he held a series of officer's positions, including President).
Chairman, 1986, United States League of Savings Institutions; Director of
FIserv, Inc. since 1986; Director since 1995 of the Republic Mortgage Insurance
Company; Director of the Federal Asset Disposition Association from 1986 to
1989; and, previously Director and Vice Chairman, Federal Home Loan Bank of
Chicago and member of Advisory Committee of the Federal Home Loan Mortgage
Corporation and Federal National Mortgage Corporation.
RODGER D. SHAY* (Age 60) Director and President
888 Brickell Avenue
Miami, FL 33131
Principal Occupations During Past Five Years and Prior Relevant Experience:
President, Chief Executive Officer and member of the Managing Board of Shay
Assets Management Co. since 1990 and President and Director of the managing
partner of the Adviser, Shay Assets Management, Inc., since 1990. President,
Chief Executive Officer and member of the Managing Board of Shay Financial
Services Co. since 1990 and President and Director of the managing partner of
the Distributor, Shay Financial Services, Inc., since 1990. Director from 1986
to 1991 and President from 1986 to 1992, U.S. League Securities, Inc.; Director
from 1985 to 1991, and Executive Vice President from 1989 to 1992, USL Assets
Management, Inc., (previously Vice Chairman from 1986 to 1989 and President,
including of a predecessor, from 1981 to 1986). Vice President since 1995 of
Institutional Investors Capital Appreciation Fund, Inc., Institutional
Investors Tax-Advantaged Income Fund, Inc. and M.S.B. Fund, Inc. Director,
First Home Savings Bank, S.L.A. since 1990; previously Director, Asset
Management Fund, Inc., from 1985 to 1990; President of Bolton Shay and Company
and Director and officer of its affiliates from 1981 to 1985. Previously,
employed by certain subsidiaries of Merrill Lynch & Co. from 1955 to 1981,
where he served in various executive positions including Chairman of the Board
of Merrill Lynch Government Securities, Inc., Chairman of the Board of Merrill
Lynch Money Market Securities, Inc. and Managing Director of the Debt Trading
Division of Merrill Lynch, Pierce, Fenner & Smith Inc.
9
<PAGE> 79
EDWARD E. SAMMONS, JR. (Age 57) Vice President,
111 East Wacker Drive Treasurer and
Chicago, IL 60601 Secretary
Principal Occupations During Past Five Years and Prior Relevant Experience:
Executive Vice President and member of the Managing Board of Shay Assets
Management Co. since 1990 and Executive Vice President of the managing partner
of the Adviser, Shay Assets Management, Inc., since 1990. Executive Vice
President and member of the Managing Board of Shay Financial Services Co.
since 1990 and Executive Vice President of the managing partner of the
Distributor, Shay Financial Services, Inc., since 1990. President, USL Assets
Management, Inc., the Fund's prior investment adviser, from 1986 to 1992
(previously Senior Vice President, including of a predecessor, from 1983 to
1986) and a Director from 1989 to 1991. Executive Vice President from 1990 to
1992 and a Director from 1990 to 1991 of U.S. League Securities, Inc. Vice
President and Secretary since 1995 of Institutional Investors Capital
Appreciation Fund, Inc., Institutional Investors Tax-Advantaged Income Fund,
Inc. and M.S.B. Fund, Inc. Vice President, from 1987 to 1990, Advance America
Funds, Inc. Previously, Senior Vice President and Manager of Fixed Income
Securities, Republic National Bank in Dallas from 1962 to 1983.
DORIS J. PAVEL (42) Assistant Secretary
111 East Wacker Drive
Chicago, IL 60601
Principal Occupations During Past Five Years and Prior Relevant Experience:
Assistant Secretary, Asset Management Fund, Inc. since 1993. Administrative
Manager, ACB Investment Services Co. since 1993 and previously administrative
assistant for several affiliated firms since 1987.
Officers or interested directors of the Fund also may hold positions as
directors or officers of other affiliated entities of the Adviser, Distributor
or America's Community Bankers.
The Fund will pay $7,500 per annum in compensation to directors who are
not officers or employees of the Distributor or the Adviser. In addition, each
director who is not such an officer or employee will receive $1,500 for each
meeting of the Board of Directors and $1,000 for each meeting of any committee
thereof attended and will be reimbursed for out-of-pocket expenses incurred in
attending such meetings. Directors who are officers or employees of the
Distributor or the Adviser receive no compensation for their services as
directors of the Fund, but will be reimbursed by the Fund for out-of-pocket
expenses incurred in attending meetings of the Board of Directors or committees
thereof.
10
<PAGE> 80
The following table sets forth the compensation earned by directors from
the Fund for the fiscal year ended October 31, 1996:
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT BENEFITS ESTIMATED
AGGREGATE ACCRUED AS PART OF ANNUAL
COMPENSATION FUND BENEFITS
DIRECTOR FROM THE FUND EXPENSES UPON RETIREMENT TOTAL COMPENSATION
- -------------------------------- ------------- -------------------- --------------- ------------------
<S> <C> <C> <C> <C>
Arthur G. DeRusso............... $14,500 0 0 $14,500
David F. Holland................ 14,500 0 0 14,500
Leon T. Kendall................. 14,500 0 0 14,500
Gerald J. Levy.................. 14,500 0 0 14,500
Wendell L. Evans, Jr. (resigned) 7,750 0 0 7,750
</TABLE>
11
The following table provides certain information at November 30, 1996 as
to the Portfolio with respect to persons known to the Fund to be beneficial
(and record) owners (having sole voting and dispositive power) of 5% or more of
the shares of common stock of the Money Market Portfolio and the Short
Government Portfolio:
<PAGE> 81
<TABLE>
<CAPTION>
Percent of
Name and Portfolio's
address of outstanding
beneficial owner Number of Shares common stock
- -------------------------------- ---------------- ------------
<S> <C> <C>
Money Market Portfolio:
- --------------------------------
Cullman Savings Bank 3,071,399 6.14%
316 2nd Ave. SW
Cullman, AL 35055
First Federal Savings & Loan 3,060,000 6.12%
of East Hartford
1137 Main Street
East Hartford, CT 06108
First Savings Bank of New Jersey 7,704,795 15.40%
568 Broadway
Bayonne, NJ 07002
Shay Government Securities Co. 7,472,186 14.94%
111 East Wacker Drive
Chicago, IL 60601
Windsor Federal Savings Bank 3,060,000 6.12%
250 Broad Street
Windsor, CT 06095
</TABLE>
12
<PAGE> 82
<TABLE>
<CAPTION>
Short Government Portfolio:
- --------------------------------
<S> <C> <C>
Calumet Federal Savings & Loan 1,547,706 9.13%
Association
1350 East Sibley Blvd.
Dolton, IL 60419
First Federal Savings & 1,360,074 8.02%
Loan Association
320 East Main Street
Lincolnton, NC 28092
Intrust Bank, N.A.
Transco & Co. - Trust Division 3,958,837 22.36%
105 North Main Street
Wichita, KS 67201
Ridgewood Savings Bank 970,202 5.72%
71-02 Forest Ave.
Ridgewood, NY 11385
</TABLE>
As of November 30, 1996, one of the directors had, through the
institutions he serves as an officer, shared voting and investment power over
7,900,000 shares (15.84%) of the Money Market Portfolio. None of the Directors
had, as of November 30, 1996, through the financial institutions for which they
serve as officers, voting and investment power over any shares of the Short
Government Portfolio.
INVESTMENT ADVISER AND ADMINISTRATOR
The investment adviser of the Fund is Shay Assets Management Co. (the
"Adviser"), an Illinois general partnership. The Adviser, with its principal
office at 111 East Wacker Drive, Chicago, Illinois 60601, is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended.
The Adviser consists of two general partners, Shay Assets Management, Inc.
and ACB Assets Management, Inc., each of which holds a fifty-percent interest
in the partnership. Shay Assets Management, Inc. is controlled by Rodger D.
Shay, the President of the Fund and a Director. ACB Assets Management, Inc. is
a wholly-owned subsidiary of ACB Investment Services, Inc., which is a
wholly-owned subsidiary of Community Bankers Service Corp., which in turn is a
wholly-owned subsidiary of America's Community Bankers ("ACB").
The Investment Advisory Agreement between the Fund and the Adviser (the
"Advisory Agreement"), as amended, will remain in effect as to each Portfolio
until March 1, 1998 and shall continue from year to year thereafter, subject to
termination by the Fund or the
13
<PAGE> 83
Adviser as hereinafter provided, if such continuance is approved at least
annually by a majority of the outstanding shares (as defined under "General
Information" in this Statement of Additional Information) of the Portfolio or
by the Fund's Board of Directors. The Advisory Agreement must also be approved
annually by the vote of a majority of the directors of the Fund who are not
parties to the Advisory Agreement or "interested persons" of any party thereto.
All directors' votes must be cast in person at a meeting called for the purpose
of voting on such approval.
As compensation for the services rendered by the Adviser under the
Advisory Agreement, the Fund pays the Adviser a fee, payable monthly, computed
as follows with respect to the Money Market Portfolio: 0.15% per annum of the
average daily net assets of the Portfolio up to and including $500 million;
plus 0.125% per annum of the next $500 million of such net assets; plus 0.10%
per annum of such net assets over $1 billion. The Adviser may supplementally
waive advisory fees in an amount up to but not to exceed 0.15% of the average
daily net assets of the Portfolio. This supplemental waiver agreement may be
terminated at any time by the Adviser. For the Fund's fiscal years ended
October 31, 1996, 1995 and 1994, the Fund paid the Adviser fees of $0 (net of
fee waivers of $101,717), $0 (net of fee waivers of $62,352) and $81,334 (net
of fee waivers of $9,542), respectively, with respect to the Money Market
Portfolio.
As compensation for the services rendered by the Adviser under the
Advisory Agreement, the Fund pays the Adviser a fee, payable monthly, computed
as follows with respect to the Short Government Portfolio: 0.25% per annum of
the average daily net assets of the Portfolio up to and including $500 million;
plus 0.175% per annum of the next $500 million of such net assets; plus 0.125%
per annum of the next $500 million of such assets; plus 0.10% per annum of such
net assets over $1.5 billion. For the Fund's fiscal years ended October 31,
1996, 1995 and 1994, the Fund paid the Adviser fees of $446,257, $409,187 and
$533,229, respectively, with respect to the Short Government Portfolio.
The Advisory Agreement provides that the Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered by any
portfolio of the Fund in connection with the matters to which the Advisory
Agreement relates, except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services (in which case any award of
damages shall be limited to the period and the amount set forth in Section
36(b)(3) of the 1940 Act) or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties under
the Advisory Agreement.
The Advisory Agreement will terminate automatically upon its assignment
and is terminable with respect to each Portfolio at any time without penalty by
the Board of Directors of the Fund or by a vote of a majority of the
outstanding shares (as defined under "General Information" in this Statement of
Additional Information) of the Portfolio on 60 days' written notice to the
Adviser, or by the Adviser on 90 days' written notice to the Fund.
14
<PAGE> 84
The Portfolio Managers of the Adviser responsible for making investment
decisions concerning the Fund's investments are Edward E. Sammons, Jr., Rodger
D. Shay, Richard Blackburn, Rodger D. Shay, Jr. and Gregory J. Wisniewski. For
information as to the principal occupations during the past five years of
Messrs. Sammons and Shay, who are also officers of the Fund, see "Management of
the Fund" in this Statement of Additional Information. The principal business
occupations during the past five years and professional backgrounds of the
Portfolio Managers who are not also officers of the Fund are shown below
following each of their names and business addresses.
15
<PAGE> 85
RICHARD BLACKBURN
111 East Wacker Drive
Chicago, IL 60601
Vice President, Shay Assets Management, Inc., managing partner of the Adviser,
and Portfolio Manager of the Adviser since 1991. From 1982 to 1991, he was
employed by the Fund's Distributor (see "Distributor" below), its predecessor,
and an affiliate, U.S. League Investment Services, Inc., primarily as an
account executive and financial consultant. From 1979 to 1982, he was employed
by Harris Trust & Savings Bank. With approximately twenty-five years of
experience in the securities industry, his previous employers also include
Merrill Lynch, Pierce, Fenner & Smith Inc. and the First National Bank of
Chicago. Mr. Blackburn's primary expertise is in the mortgage securities
markets, particularly in the area of floating and/or adjustable rate
securities.
RODGER D. SHAY, JR.
888 Brickell Avenue
Miami, FL 33131
Senior Vice President since 1994, Shay Assets Management, Inc., managing
partner of the Adviser, and Vice President from 1991 to 1993, and Portfolio
Manager of the Adviser since 1991. Senior Vice President of Shay Financial
Services, Inc., managing partner of the Fund's Distributor (see "Distributor"
below), since 1994, previously Vice President from 1991 to 1993. President of
Shay Financial Group Inc. from 1988 to 1990. He was previously employed by
Merrill Lynch, Pierce, Fenner and Smith Inc. from 1981 to 1988, where he served
as a senior trader and manager of collateralized mortgage obligation trading.
Mr. Shay's primary expertise is in the mortgage securities market, particularly
in the area of collateralized mortgage obligations.
GREGORY J. WISNIEWSKI
111 East Wacker Drive
Chicago, Illinois 60601
Vice President, Shay Assets Management, Inc., managing partner of the Adviser,
and Portfolio Manager of the Adviser since 1994. From 1990 to 1994, Vice
President, managing partner of the Fund's Distributor (see "Distributor" below)
and of an affiliate, Shay Government Securities Co., and from 1985 to 1990, an
account executive of predecessors of these firms. His previous employers also
include The Chicago Corporation, where he served as an account executive and
financial futures trader, and Harris Trust and Savings Bank, where he served
variously as a manager of the portfolios of correspondent banks and as the
manager of the commercial paper portfolio of Harris Bankcorp. Mr. Wisniewski
received a Bachelor of
16
<PAGE> 86
Arts in Economics from the University of Michigan and a Master of Business
Administration from the University of Detroit.
The Fund's administrative agent (the "Administrator") with respect to each
Portfolio is PFPC Inc. ("PFPC"), a wholly-owned subsidiary of PNC Bank Corp.
Pursuant to the terms of the Restated Administration Agreement (the
"Administration Agreement") dated as of March 1, 1991, as amended, between the
Fund and the Administrator, the Administrator performs various administrative
services for the Fund, including (i) assisting in supervising all aspects of
the Portfolios' operations other than those assumed by the Adviser, the
Distributor, its custodian or its transfer and dividend agent, (ii) providing
the Portfolios with the services of persons competent to perform such
administrative and clerical functions as are necessary in order to provide
effective administration of the Portfolios, (iii) maintenance of each
Portfolio's books and records, (iv) preparation of various filings, reports,
statements and returns filed with governmental authorities or distributed to
stockholders of each Portfolio, (v) computation of each Portfolio's net asset
value for purposes of the sale and redemption of its shares, and (vi)
computation of each Portfolio's daily dividend. Certain functions relating to
state "blue sky" qualification services in any of the states where the
Portfolios are registered are subject to additional charges by the
Administrator that are not included in the fee rates and minimum annual fee
described below.
As compensation for the services rendered by the Administrator under the
Administration Agreement, the Fund pays the Administrator a fee, computed daily
and payable monthly, with respect to each of the Money Market Portfolio and the
Short Government Portfolio at the rate of 0.03% per annum of the Portfolio's
net assets up to and including $1 billion; plus 0.02% per annum of the next $1
billion of net assets; plus 0.01% per annum of the Portfolio's net assets over
$2 billion, with a minimum annual fee not to exceed $393,200 for all the Fund's
portfolios taken together. If applicable, the minimum fee is allocated among
the Fund's five portfolios based on relative average net asset values. For the
fiscal years ended October 31, 1996, 1995 and 1994, the Fund paid the
Administrator fees pursuant to the Administration Agreement of $20,328, $12,578
and $18,476, respectively, for the Money Market Portfolio. For the fiscal
years ended October 31, 1996, 1995 and 1994, the Fund paid the Administrator
fees pursuant to the Administration Agreement of $53,968, $49,639 and $64,677,
respectively, with respect to the Short Government Portfolio.
The Fund is responsible for the payment of its expenses. Such expenses
with respect to each Portfolio include, without limitation, the fees payable to
the Adviser, the Administrator and the Distributor (see "Distributor" below)
with respect to each Portfolio, the fees and expenses of the Fund's custodian
and transfer and dividend agent with respect to each Portfolio, any brokerage
fees and commissions of each Portfolio, any portfolio losses of the Portfolio,
filing fees for the registration or qualification of the shares in the
Portfolio under Federal or state securities laws, the Portfolio's pro rata
share of taxes, interest, costs of liability insurance, fidelity bonds or
indemnification, any costs, expenses or losses arising out of any liability of,
or claim for damages or other relief asserted against, the Fund with respect to
the Portfolio for violation of any law, each Portfolio's pro rata share of
legal and auditing fees and
17
<PAGE> 87
expenses, expenses of preparing and setting in type prospectuses, proxy
material, reports and notices and the printing and distributing of the same to
the stockholders of each Portfolio and regulatory authorities, the Portfolio's
pro rata share of compensation and expenses of the Fund's directors and
officers who are not affiliated with the Adviser, the Administrator, the
transfer and dividend agent or the Distributor, and extraordinary expenses
incurred by the Fund with respect to each Portfolio.
DISTRIBUTOR
Effective September 18, 1996, Shay Financial Services Co. (the
"Distributor"), a registered securities broker-dealer, became the Fund's
principal distributor. Prior to that date, the Distributor had acted as the
sponsor in the distribution of the Fund's shares.
The Distributor, an Illinois general partnership, consists of two general
partners, Shay Financial Services, Inc. and ACB Securities, Inc., each of which
holds a fifty-percent interest in the partnership. Shay Financial Services,
Inc. is controlled by Rodger D. Shay, the President of the Fund. ACB
Securities, Inc. is a wholly-owned subsidiary of ACB Investment Services, Inc.,
which is a wholly-owned subsidiary of Community Bankers Service Corp., which in
turn is a wholly-owned subsidiary of ACB, the trade association representing
savings institutions in the United States.
As compensation for distribution services, the Fund pays the Distributor a
fee, payable monthly, with respect to the Portfolios at the rate of 0.15% per
annum of the combined average daily net assets of both Portfolios up to and
including $500 million; plus 0.125% per annum of the next $500 million of such
combined net assets; plus 0.10% per annum of the next $1 billion of such
combined net assets; plus 0.075% per annum of such combined net assets over $2
billion. This fee is allocated between the two Portfolios based on relative
average net asset values.
For the fiscal years ended October 31, 1996, 1995 and 1994, the Fund paid
the Distributor fees pursuant to the Rule 12b-1 plan, as in effect, of
$101,717, $62,352 and $90,876, respectively, with respect to the Money Market
Portfolio. For the fiscal years ended October 31, 1996, 1995 and 1994, the
Fund paid the Distributor fees pursuant to the Rule 12b-1 plan, as in effect,
of $267,754, $245,512 and $319,937, respectively, with respect to the Short
Government Portfolio. The Distributor is obligated under the Rule 12b-1
Agreement with the Fund to bear the costs and expenses of printing and
distributing copies of prospectuses and annual and interim reports of the Fund
(after such items have been prepared and set in type) that are used in
connection with the offering of shares of the Fund to investors, and the costs
and expenses of preparing, printing and distributing any other literature used
by the Distributor in connection with the offering of the shares of the
Portfolios for sale to investors.
18
<PAGE> 88
The Fund has been informed by the Distributor that during its fiscal year
ended October 31, 1996, of the $369,471 fee received by the Distributor from
the Fund with respect to the Portfolios, the following expenditures were made:
<TABLE>
<S> <C>
Advertising and promotion ........................ $10,829
Printing of prospectus for other
than current stockholders and
printing of other sales materials ................ 3,863
Postage .......................................... 3,248
Compensation to underwriters and dealers ......... ---
Employee compensation and costs .................. 440,181
Staff travel and expense ......................... 23,891
Rent and office expense .......................... 102,363
Professional fees ................................ 13,599
Miscellaneous .................................... 2,532
--------
Total .............. $600,506
========
</TABLE>
No "interested person" of the Fund, other than any officer or director of
the Fund who is affiliated with the Distributor or its affiliates, or any
director of the Fund who is not an "interested person" of the Fund, has any
direct or indirect financial interest in the operation of the Fund's agreement
with the Distributor.
The Fund's Rule 12b-1 Agreement with the Distributor, as amended, will
continue in effect until [March 1, 1997] and from year to year thereafter,
subject to termination by the Fund or the Distributor as hereinafter provided,
if approved at least annually by the Fund's Board of Directors and by a
majority of the directors who are not "interested persons" of the Fund and have
no direct or indirect financial interest in the arrangements contemplated by
the agreement. The Rule 12b-1 Agreement requires the Fund's Board of Directors
to make a quarterly review of the amount expended under the agreement and the
purposes for which such expenditures were made. The Rule 12b-1 Agreement may
not be amended to increase materially the amount paid by the Fund thereunder
without stockholder approval. All material amendments to the Rule 12b-1
Agreement must be approved by the Fund's Board of Directors and by the
"disinterested" directors referred to above. The Rule 12b-1 Agreement will
terminate automatically upon its assignment and is terminable at any time
without penalty by a majority of the Fund's directors who are "disinterested"
as described above or by a vote of a majority of the outstanding shares (as
defined under "General Information" in this Statement of Additional
Information) of each Portfolio affected thereby on 60 days' written notice to
the Distributor, or by the Distributor on 90 days' written notice to the Fund.
19
<PAGE> 89
DETERMINATION OF NET ASSET VALUE
With respect to the Money Market Portfolio, the Fund relies on an
exemptive rule (Rule 2a-7) promulgated by the Securities and Exchange
Commission permitting the Fund to use the amortized cost procedure in valuing
the Money Market Portfolio's investments. This involves valuing an instrument
at its cost 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. While this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price the Fund would receive if it
sold the instrument. The Board of Directors of the Fund has determined that,
absent unusual circumstances, the amortized cost method of valuation will
fairly reflect the value of each stockholder's interest in the Portfolio and
that the Portfolio will continue to use such method only so long as the Board
of Directors believes that it fairly reflects the value of each stockholder's
interest. As a condition to the use of the amortized cost method of valuation
pursuant to such exemptive rule, the Money Market Portfolio is required to
maintain a dollar-weighted average portfolio maturity of 90 days or less,
purchase instruments having remaining maturities of thirteen months or less
only, and invest only in securities determined by the Board of Directors to be
of eligible quality with minimal credit risks. (See rating requirements under
"FDIC Insured Institutions" in this Statement of Additional Information.) An
instrument which has a variable or floating rate of interest may be deemed
under certain circumstances 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.
The Board of Directors has established procedures reasonably designed,
taking into account current market conditions and the Portfolio's investment
objective, to stabilize the price per share of shares of the Money Market
Portfolio as computed for the purpose of distribution and redemption at $1.00.
Such procedures include review by the Board of Directors, as it may deem
appropriate and at such intervals as are reasonable in light of current market
conditions, of the deviation between the net asset value per share calculated
by using available indications of market value and the net asset value per
share using amortized cost values. The Money Market Portfolio's investment
adviser has been delegated the authority to determine the market values of the
securities held by the Portfolio through use of its matrix pricing system,
provided that any changes in the methods used to determine market values are
reported to and reviewed by the Board of Directors.
The extent of any deviation between the net asset value per share of the
Money Market Portfolio based upon available market quotations or market
equivalents and $1.00 per share based on amortized cost will be examined by the
Board of Directors. If such deviation exceeds 1/2 of 1%, the Board of
Directors will promptly consider what action, if any, will be initiated. In
the event the Board of Directors determines that a deviation exists that may
result in material dilution or other unfair results to investors or existing
stockholders, it shall take such corrective action as it deems appropriate to
eliminate or reduce to the extent reasonably practicable such dilution or
unfair results, including the sale of portfolio instruments prior to maturity
to realize
20
<PAGE> 90
capital gains or losses or to shorten average portfolio maturity, withholding
dividends or payment of distributions from capital or capital gains,
redemptions of shares in kind, or establishing a net asset value per share by
using available market quotations.
For purposes of determining the net asset value per share of the Short
Government Portfolio, its investments for which market quotations are readily
available will be valued at the mean between the most recent bid and asked
prices, which may be furnished by a pricing service or directly by market
makers for such securities. Portfolio securities for which market quotations
are not readily available, and other assets, will be valued at fair value using
methods determined in good faith by the Board of Directors and may include
matrix pricing systems. Short-term instruments maturing within 60 days of the
valuation date may be valued based upon their amortized cost. The Board of
Directors will review valuation methods regularly for the Short Government
Portfolio in order to determine their appropriateness.
TAXES
Each of the Fund's portfolios, including these Portfolios, is treated as a
separate corporation for Federal income tax purposes, and thus the provisions
of Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable to regulated investment companies are applied to each portfolio
separately, rather than to the Fund as a whole. In addition, net short-term
capital gains and losses, net investment income, and operating expenses are
determined separately for each portfolio.
Each Portfolio intends to meet the requirements for qualifying as a
regulated investment company. In order to so qualify the Portfolio must, among
other things: (a) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the value of its total assets is represented by
cash, Government securities and other securities, including loans of Federal
Funds for the Money Market Portfolio only, with such other securities limited,
in respect of any one issuer, to an amount not greater than 5% of the value of
the Portfolio's assets or 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its total assets is invested
in the securities of any one issuer (other than Government securities); (b)
derive at least 90% of its gross income from dividends, interest, proceeds from
loans of stock and securities, gains from the sale or other disposition of
stock or securities, and other income derived with respect to its business of
investing in stock or securities; and (c) derive less than 30% of its gross
income from the sale or other disposition of stock or securities held less than
three months. If each Portfolio qualifies as a regulated investment company,
it will not be subject to Federal income tax on its income and gains
distributed to shareholders, provided at least 90% of its investment company
taxable income earned in the taxable year (computed without regard to the
deduction for dividends paid) is so distributed.
Dividends of the Money Market Portfolio's net investment income (which
generally includes income net of operating expenses), and distributions of net
short-term capital gains are taxable to stockholders as ordinary income whether
reinvested in shares or paid in cash.
21
<PAGE> 91
Dividends of the Short Government Portfolio's net investment income (which
generally includes income other than capital gains, net of operating expenses),
and distributions of net short-term capital gains (i.e., the excess of net
short-term capital gains over net long-term capital losses) are taxable to
stockholders as ordinary income whether reinvested in shares or paid in cash.
Distributions of net long-term capital gains (i.e., the excess of net long-term
capital gains over net short-term capital losses) are taxable to stockholders
as long-term capital gains, regardless of how long shares of the Portfolio have
been held, whether reinvested in shares or paid in cash. Under the Code, net
long-term capital gains received by corporate stockholders (including long-term
capital gain distributions by the Portfolio) are taxed at the same rates as
ordinary income. Net long-term capital gains received by individual
stockholders (including long-term capital gain distributions by the Portfolio)
are taxed at a maximum rate of 28%.
Because none of either Portfolio's income will consist of dividends from
domestic corporations, dividends of net investment income and distributions of
net short-term capital gains will not qualify for the dividends received
deduction available to corporations.
Gain or loss realized upon a sale or redemption of shares of the Short
Government Portfolio by a stockholder who is not a dealer in securities will be
treated as long-term capital gain or loss if the shares have been held for more
than one year and otherwise as short-term capital gain or loss. Any loss
realized by a stockholder upon the sale of shares in the Short Government
Portfolio held six months or less will be treated as a long-term capital loss,
however, to the extent of any long-term capital gain distributions received by
the stockholder with respect to such shares.
Any capital gains distribution received shortly after the purchase of
shares of the Short Government Portfolio reduces the net asset value of the
shares by the amount of the distribution and, although in effect a return of
capital, will be taxable to the stockholder. If the net asset value of shares
of the Short Government Portfolio were reduced below the stockholder's cost by
distributions representing gains realized on sales of securities, such
distributions would be a return of investment though taxable in the same manner
as other dividends or distributions.
Each Portfolio generally will be subject to a 4% nondeductible excise tax
to the extent the Portfolio does not meet certain minimum distribution
requirements by the end of each calendar year. To avoid the imposition of the
4% excise tax, it may be necessary for a dividend to be declared in December
and actually paid in January of the following year, which will be treated as
having been received by stockholders on December 31 of the calendar year in
which declared. Under this rule, therefore, a stockholder may be taxed in one
year on dividends or distributions actually received in January of the
following year.
Dividends and distributions may be subject to state and local taxes.
22
<PAGE> 92
PORTFOLIO TRANSACTIONS
Purchases and sales of securities for each Portfolio usually are principal
transactions. Portfolio securities normally are purchased directly from the
issuer or from an underwriter or market maker for the securities. There
usually, but not always, are no brokerage commissions paid by the Fund for such
purchases, and during the fiscal year ended October 31, 1996, the Fund paid no
brokerage commissions for either Portfolio. Purchases from dealers serving as
market makers may include the spread between the bid and asked prices. The
Adviser attempts to obtain the best price and execution for portfolio
transactions.
Each Portfolio will not purchase securities from, sell securities to, or
enter into repurchase or reverse repurchase agreements with, the Adviser or any
of its affiliates.
Allocation of transactions, including their frequency, to various dealers
is determined by the Adviser in its best judgment under the general supervision
of the Board of Directors of the Fund and in a manner deemed fair and
reasonable to stockholders. The primary consideration is prompt execution of
orders in an effective manner at the best price. On occasion the Adviser on
behalf of each Portfolio may effect securities transactions on an agency basis
with broker-dealers providing research services and/or research-related
products for the Fund. Research services or research-related products may
include information in the form of written reports, reports accessed by
computers or terminals, statistical collations and appraisals and analysis
relating to companies or industries. However, in selecting such
broker-dealers, the Adviser adheres to the primary consideration of best price
and execution.
Investment decisions for each portfolio of the Fund are made independently
from those for the other portfolios or other clients advised by the Adviser.
It may happen, on occasion, that the same security is held in one portfolio of
the Fund and the other portfolios of one or more of such other clients.
Simultaneous transactions are likely when several portfolios and clients are
advised by the same investment adviser, particularly when a security is
suitable for the investment objectives of more than one of such portfolios or
clients. When two or more portfolios or other clients advised by the Adviser
are simultaneously engaged in the purchase or sale of the same security, the
transactions are allocated to the respective portfolios or clients, both as to
amount and price, in accordance with a method deemed equitable to each
portfolio or client. In some cases this system may adversely affect the price
paid or received by a portfolio of the Fund or the size of the security
position obtainable for such portfolio.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions for each
Portfolio, none of which may be changed without the approval of a majority of
the outstanding shares of the Portfolio, as defined under "General Information"
in this Statement of Additional Information. The restrictions are the same for
each Portfolio. Accordingly, each Portfolio may not:
23
<PAGE> 93
(1) Purchase securities other than Eligible Investments. In the event
that the OTS Regulations (as defined in the Prospectus) are amended to remove
assets from the list of assets which qualify as Eligible Investments, the Fund
will dispose of any nonqualifying assets held by the Portfolio in such time and
manner as may be permitted by relevant OTS Regulations or, if none, in such
time and manner as the Fund's Board of Directors may determine. Conversely, if
the list of qualifying assets is expanded, such additional qualifying assets
will also constitute Eligible Investments and the Portfolio will be free to
make investments therein.
(2) Invest more than 5% of its total assets in the securities of any one
issuer, other than securities issued or guaranteed by the United States
Government or its agencies or instrumentalities, except that up to 25% of the
value of the Portfolio's total assets may be invested without regard to this 5%
limitation.
(3) Enter into repurchase agreements or purchase any other investments for
which market quotations are not readily available, in each case maturing in
more than 7 days if, as a result, more than 10% of the market value of its
total assets would be invested in such repurchase agreements and such other
illiquid investments.
(4) Enter into reverse repurchase agreements exceeding in the aggregate
one-third of the market value of its total assets, less liabilities other than
the obligations created by reverse repurchase agreements.
(5) Borrow money except from banks for temporary or emergency purposes and
in an amount not exceeding 10% of the value of its net assets, or mortgage,
pledge or hypothecate its assets except in connection with any such borrowing
and in amounts not in excess of 20% of the value of its net assets. This
borrowing provision is not for investment leverage, but solely to facilitate
management of the Portfolio by enabling the Fund to meet redemption requests
when the liquidation of portfolio securities is considered to be
disadvantageous. The Portfolio's net income will be reduced if the interest
expense of borrowings incurred to meet redemption requests and avoid
liquidation of portfolio securities exceeds the interest income of those
securities. To the extent that borrowings exceed 5% of the value of the
Portfolio's net assets, such borrowings will be repaid before any investments
are made. The Portfolio's ability to enter into reverse repurchase agreements
is not restricted by this paragraph (5).
(6) Invest more than 25% of its total assets in the securities of issuers
in any single industry; provided that there shall be no such limitation on the
purchase of obligations issued or guaranteed by the United States Government or
its agencies or instrumentalities, or time deposits (including certificates of
deposit), savings deposits and bankers' acceptances of United States branches
of United States banks.
(7) Act as an underwriter of securities, except to the extent that the
Fund may be deemed to be an "underwriter" in connection with the purchase of
securities for the Portfolio directly from an issuer or an underwriter thereof.
24
<PAGE> 94
(8) Make loans except that the Portfolio may purchase or hold debt
obligations, enter into repurchase agreements and loan Federal funds and other
day(s) funds to FDIC Insured Institutions (as defined in the Prospectus), in
each case to the extent permitted by the Fund's investment objective and
management policies.
(9) Purchase securities on margin or make short sales of securities; write
or purchase put or call options or combinations thereof; or purchase or sell
real estate, real estate mortgage loans, real estate investment trust
securities, commodities or commodity contracts, or oil and gas interests.
For purposes of investment restrictions (2) and (6) above as applicable to
the Money Market Portfolio, the Fund considers loans of Federal funds to be
cash equivalents and not securities for purposes of diversification.
ORGANIZATION AND DESCRIPTION OF FUND SHARES
The authorized capital stock of the Fund consists of five classes of
common stock, par value $.001 per share, as follows: (i) Money Market
Portfolio -- 4.0 billion shares, (ii) Short Government Portfolio -- 500 million
shares, (iii) U.S. Government Mortgage Securities Portfolio -- 500 million
shares, (iv) Intermediate Mortgage Securities Portfolio -- 500 million shares,
and (v) Adjustable Rate Mortgage (ARM) Portfolio -- 500 million shares. The
shares of each class represent interests only in the corresponding portfolio.
When issued and paid for in accordance with the terms of offering, each share
is fully paid and nonassessable. All shares of common stock of the same class
have equal dividend, distribution, liquidation and voting rights and are
redeemable at net asset value, at the option of the stockholder. In addition,
the shares have no preemptive, subscription or conversion rights and are freely
transferable.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted by the provisions of such Act or applicable state law, or otherwise,
to the holders of the outstanding voting securities of an investment company
such as the Fund shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares (as defined
under "General Information" in this Statement of Additional Information) of
each class affected by such matter. Rule 18f-2 further provides that a class
shall be deemed to be affected by a matter unless it is clear that the
interests of each class in the matter are identical or that the matter does not
affect any interest of such class. However, the Rule exempts the selection of
independent accountants and the election of directors from the separate voting
requirements of the Rule.
25
<PAGE> 95
COUNSEL AND INDEPENDENT ACCOUNTANTS
Vedder, Price, Kaufman & Kammholz are legal counsel to the Fund and pass
upon the validity of the shares offered by the Prospectus.
Coopers & Lybrand L.L.P. have been selected as the Fund's independent
accountants. The financial statements of each Portfolio incorporated in this
Statement of Additional Information by reference to the Fund's Annual Report to
Stockholders for the year ended October 31, 1996 (see "Financial Statements"
below) have been so incorporated in reliance on the report of Coopers & Lybrand
L.L.P., given on the authority of such firm as experts in accounting and
auditing.
GENERAL INFORMATION
The Fund sends to all of the stockholders of each Portfolio semi-annual
reports and annual reports, including a list of investment securities held by
the Portfolio, and, for annual reports, audited financial statements of each
Portfolio.
As used in each Prospectus and this Statement of Additional Information,
the term "majority," when referring to the approvals to be obtained from
stockholders, means the vote of the lesser of (1) 67% of the Fund's shares of
each class or of the class entitled to a separate vote present at a meeting if
the holders of more than 50% of the outstanding shares of all classes or of the
class entitled to a separate vote are present in person or by proxy, or (2)
more than 50% of the Fund's outstanding shares of all classes or of the class
entitled to a separate vote. The Bylaws of the Fund provide that an annual
meeting of stockholders is not required to be held in any year in which none of
the following is required to be acted on by stockholders pursuant to the 1940
Act: election of directors; approval of the investment advisory agreement;
ratification of the selection of independent public accountants; and approval
of a distribution agreement.
In January 1984, the Fund changed its name from Liquidity Fund for
Thrifts, Inc. to Asset Management Fund for Savings Institutions, Inc. In
February 1990, the Fund changed its name from Asset Management Fund for Savings
Institutions, Inc. to Asset Management Fund for Financial Institutions, Inc.
In September 1994, the Fund changed its name from Asset Management Fund for
Financial Institutions, Inc. to Asset Management Fund, Inc. In September 1994,
the Money Market Portfolio changed its name from Short-Term Liquidity Portfolio
to its present name and the Short Government Portfolio changed its name from
Intermediate-Term Liquidity Portfolio to its present name.
The Prospectus and this Statement of Additional Information do not contain
all the information included in the Registration Statement filed with the
Securities and Exchange Commission under the Securities Act of 1933 with
respect to the securities offered hereby, certain portions of which have been
omitted pursuant to the rules and regulations of the
26
<PAGE> 96
Securities and Exchange Commission. The Registration Statement, including the
exhibits filed therewith, may be examined at the office of the Securities and
Exchange Commission in Washington, D.C.
Statements contained in the Prospectus and this Statement of Additional
Information as to the contents of any contract or other document referred to
are not necessarily complete, and, in each instance, reference is made to the
copy of such contract or other document filed as an exhibit to the Registration
Statement of which the Prospectus and this Statement of Additional Information
form a part, each such statement being qualified in all respects by such
reference.
FINANCIAL STATEMENTS
The financial statements required to be included in this Statement of
Additional Information are incorporated herein by reference to the Fund's
Annual Report to Stockholders for the year ended October 31, 1996 (the "Annual
Report"). The Fund will provide the Annual Report without charge to each
person to whom this Statement of Additional Information is delivered.
27
<PAGE> 97
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE FUND'S OBJECTIVE, THE PORTFOLIOS
AND THEIR INVESTMENT POLICIES 2
PURCHASE AND REDEMPTION OF SHARES 4
DIVIDENDS, DISTRIBUTIONS, YIELD
AND TOTAL RETURN QUOTATIONS 4
MANAGEMENT OF THE FUND 7
INVESTMENT ADVISER AND ADMINISTRATOR 11
SPONSOR 15
DETERMINATION OF NET ASSET VALUE 17
TAXES 18
PORTFOLIO TRANSACTIONS 20
INVESTMENT RESTRICTIONS 21
ORGANIZATION AND DESCRIPTION OF FUND SHARES 22
COUNSEL AND INDEPENDENT ACCOUNTANTS 23
GENERAL INFORMATION 23
FINANCIAL STATEMENTS 24
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
and
SHORT U.S. GOVERNMENT SECURITIES PORTFOLIO
Asset Management Fund, Inc.
________________________
STATEMENT OF ADDITIONAL
INFORMATION
March 1, 1997
________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 98
logo
ASSET MANAGEMENT FUND, INC.
ANNUAL REPORT
OCTOBER 31, 1996
logo
ASSET MANAGEMENT FUND, INC.
111 East Wacker Drive
Chicago, IL 60601
<PAGE> 99
- --------------------------------------------------------------------------------
December 10, 1996
Dear Shareholder:
The Directors and Officers of the Asset Management Fund, Inc. are pleased to
send the Annual Report to Shareholders for the twelve months ended October 31,
1996.
The Fund has completed 14 years of successfully serving the investment needs
of financial institutions. Since inception, the Fund's premise was quite unique;
one of professionally managed investment portfolios designed to address the
regulatory and accounting concerns of financial institutions. Over the last
decade the Fund's investment objective has remained the same, to achieve as high
a level of current income as is consistent with the preservation of capital and
the maintenance of liquidity. Investment decisions attempt to maximize total
return within these conditions.
During 1996, the AMF Portfolios continued to fulfill their stated objectives
and have consistently ranked high within various industry comparative reports
produced by mutual fund analytical services. In their July 19, 1996 analysis of
the ARM Portfolio, Morningstar stated that "the Asset Management Fund Adjustable
Rate Mortgage is one ARM portfolio that does it all." The analyst continued that
"investors really can't ask for more from an ARM fund than what this offering
has provided."
The AMF portfolio management team remains committed to providing professional
asset management services and will continue to manage the portfolios in a manner
consistent with the objectives of our shareholders. Thank you for investing with
the Asset Management Fund.
Sincerely,
Rodger D. Shay
Rodger D. Shay
<PAGE> 100
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC. REVIEW
The various portfolios of the AMF Fund are each designed to serve the needs of
investors who have an interest in certain sectors of the market.
The conservative investment policies utilized by AMF have well served the
interests of shareholders by producing solid and reliable returns over the
years. For example, the highly respected Morningstar Mutual Fund Service*
continued to give the Short Government and ARM Portfolios four star rankings
while the two mortgage portfolios, which operated in the battered longer end of
the yield curve, garnered less lofty, but respectable, three star ratings.
Looking forward, the fund managers anticipate that prepayments in Mortgage
Backed Securities are likely to be somewhat troublesome over the near
foreseeable time and have already taken steps to protect the various AMF
Mortgage Portfolios from such an eventuality.
A short review of the past year is presented below for each portfolio.
SHORT U.S. GOVERNMENT SECURITIES PORTFOLIO - The high degree of uncertainty
that prevailed throughout the year regarding the direction of the economy kept
the portfolio neutrally positioned at about the mid-point of its normal maturity
range. Since all sectors of the market beyond the one year sector gave ground
last year the portfolio's total return of 4.99% for the year ending October 31,
1996 was lower than its average annualized daily yield of 6.02% for the year.
ADJUSTABLE RATE MORTGAGE PORTFOLIO - The Adjustable Rate Mortgage Portfolio
had another fine year. Its total return for the year ending October 31, 1996 was
6.27%. This was somewhat higher than its average daily yield for the same period
due to the fact that securities in the very short end of the curve did
appreciate slightly in price during the course of the year. As always the
portfolio is largely committed to ARM Securities that reset quickly off of
market sensitive indexes. The management of this portfolio is aware that many of
its investors have exposure to higher rates and therefore constantly endeavors
to position the portfolio to compliment their balance sheet needs.
INTERMEDIATE MORTGAGE SECURITIES PORTFOLIO - The intermediate sector of the
market was a difficult place to be last year. It offered only marginal yield
advantage relative to shorter sectors of the curve, but with just about the same
level of downside price volatility as longer sectors of the curve. The
Intermediate Mortgage Portfolio produced a 4.82% annual total return for the
year ending October 31, 1996 versus its 6.38% average annualized daily yield,
clearly evidencing the poor price action in this sector of the curve.
Fiscal year end found this sector of the market improving and traditional
investors in the "body" of the curve have reason to hope that this will be a
better year.
U.S. GOVERNMENT MORTGAGE SECURITIES PORTFOLIO - This portfolio was also
situated in a difficult sector of the market throughout most of the year.
However, by virtue of its longer average life it responded favorably to the
rally that began to unfold in the middle of September 1996. Its total return for
the year ending October 31, 1996 was 5.63% while its average annualized daily
yield was 7.10%. Again a clear indication that prices moved lower on a
year-to-year basis despite the year end uptick.
- ---------------
* Morningstar ratings are calculated from a fund's 3-, 5-, and 10-year
average annual returns in excess of 90-day Treasury Bill returns, including
loads, if appropriate, and a risk factor that reflects fund performance below
3-month Treasury Bill monthly returns. 22.5% and 35% of the funds in a category
receive 4 stars and 3 stars, respectively. The number of funds within the
Taxable Fixed-Income category as of 10/31/96 is 1,091, 601 and 252 on a 3-, 5-,
and 10-year basis, respectively. Morningstar ratings are subject to change every
month. Past performance is no guarantee of future results. From time to time,
the Fund's adviser has waived its management fee, which has resulted in higher
returns.
<PAGE> 101
________________________________
INVESTMENT
COMPARISON
Comparison of change in value of
$10,000 investment for the years
ended October 31
- --------------------------------------------------------------------------------
SHORT U.S. GOVERNMENT SECURITIES PORTFOLIO
[LINE GRAPH]
<TABLE>
<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Short U.S. Government
Securities Portfolio $10,000 $10,518 $11,322 $12,286 $13,291 $14,800 $16,091 $17,087 $17,250 $18,792 $19,730
Lehman
Short Government
1-3 Year Index $10,000 $10,518 $11,321 $12,391 $13,487 $15,159 $16,393 $17,342 $17,544 $18,968 $20,102
</TABLE>
This graph compares the performance of the Short U.S. Government Securities
Portfolio to the Lehman Short Government 1-3 Year Index, showing returns for
U.S. government and agency securities.
- --------------------------------------------------------------------------------
SHORT U.S. GOVERNMENT SECURITIES PORTFOLIO
AVERAGE ANNUAL RETURN
One Five Ten
Year Year Year
------------------------
4.99% 5.92% 7.06%
- --------------------------------------------------------------------------------
ADJUSTABLE RATE MORTGAGE (ARM) PORTFOLIO
[LINE GRAPH]
<TABLE>
<CAPTION>
1990* 1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
Adjustable Rate Mortgage
(ARM) Portfolio $10,000 $10,090 $10,600 $11,104 $11,330 $12,239 $13,006
Lehman
Adjustable Rate
Mortgage Index $10,000 $10,090 $10,680 $11,264 $11,292 $12,444 $13,321
</TABLE>
This graph compares the performance of the Adjustable Rate Mortgage (ARM)
Portfolio to the Lehman Adjustable Rate Mortgage Index, showing all agency ARM
securities. The Lehman Short Government 1-2 year index has been eliminated as a
means of comparing the ARM Portfolio to a relevant market index. When such
comparisons were first initiated the Lehman ARM index was new and the 1-2 year
Government index was added for historical perspective. Now that the Lehman ARM
has "seasoned" it is the index that most appropriately mimics the ARM
market.
A $10,000 investment in the ARM portfolio at inception (Sept. 18, 1996) would
have grown to $12,239 at October 31, 1995, while a $10,000 investment in the
1-2 year Government Index would have been worth $12,927 at October 31, 1995.
- --------------------------------------------------------------------------------
ADJUSTABLE RATE MORTGAGE (ARM) PORTFOLIO
AVERAGE ANNUAL RETURN
One Five From
Year Year Inception*
------------------------
6.27% 5.21% 5.26%
*From September 18, 1991
- --------------------------------------------------------------------------------
Past performance is not predictive of future results. Lehman indices
represent unmanaged groups of bonds that differ from the composition of each AMF
portfolio. The Lehman indices do not include a reduction in return for expenses.
<PAGE> 102
________________________________
INVESTMENT
COMPARISON
Comparison of change in value of
$10,000 investment for the years
ended October 31
- --------------------------------------------------------------------------------
INTERMEDIATE MORTGAGE SECURITIES PORTFOLIO
[LINE GRAPH]
<TABLE>
<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Intermediate Mortgage
Securities Portfolio $10,000 $ 9,790 $11,251 $12,445 $12,839 $14,947 $16,402 $17,768 $17,558 $19,424 $20,361
Lehman U.S.
Mortgage Index $10,000 $10,410 $11,839 $13,165 $14,280 $16,694 $18,054 $19,479 $19,191 $21,995 $23,517
</TABLE>
This graph compares the performance of the Intermediate Mortgage Securities
Portfolio to the Lehman U.S. Mortgage Index, showing all agency
mortgage-backed securities.
- --------------------------------------------------------------------------------
INTERMEDIATE MORTGAGE SECURITIES PORTFOLIO
AVERAGE ANNUAL RETURN
One Five From
Year Year Inception*
----------------------------
4.82% 6.38% 7.38%
*From November 7, 1986
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE SECURITIES PORTFOLIO
[LINE GRAPH]
<TABLE>
<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government Mortgage
Securities Portfolio $10,000 $10,176 $11,517 $12,709 $13,679 $15,866 $17,122 $18,445 $18,109 $20,349 $21,495
Lehman U.S.
Mortgage Index $10,000 $10,410 $11,839 $13,165 $14,280 $16,694 $18,054 $19,479 $19,191 $21,995 $23,517
</TABLE>
This graph compares the performance of the U.S. Government Mortgage Securities
Portfolio to the Lehman U.S. Mortgage Index, showing all agency mortgage-backed
secuities.
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE SECURITIES PORTFOLIO
AVERAGE ANNUAL RETURN
One Five Ten
Year Year Year
------------------------
5.63% 6.27% 7.96%
- --------------------------------------------------------------------------------
Past performance is not predictive of future results. Lehman indices represent
unmanaged groups of bonds that differ from the composition of each AMF
portfolio. The Lehman indices do not include a reduction in return for
expenses.
<PAGE> 103
[This page is intentionally left blank.]
<PAGE> 104
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE
OF NET PAR
ASSETS MATURITY (000) VALUE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AGENCY OBLIGATIONS................................... 97.9%
Federal Home Loan Bank
5.45% 11/01/96 $ 38,000 $ 38,000,000
Student Loan Marketing Association* -- weekly reset
5.29% 11/05/96 10,000 10,000,000
5.32% 11/05/96 10,000 10,000,000
5.32% 11/05/96 10,000 10,000,000
------------
30,000,000
------------
TOTAL AGENCY OBLIGATIONS
(Cost $68,000,000) 68,000,000
REPURCHASE AGREEMENT................................. 1.9%
Daiwa Securities America, Inc.
5.52% (Agreement dated 10/31/96, to be
repurchased at $1,340,205 on 11/01/96;
collateralized by $1,214,000 U.S. Treasury
Bonds, 7.5%, due 11/15/24. The market value of
the collateral is $1,368,356.)
(Cost $1,340,000) 11/01/96 1,340 1,340,000
------------
TOTAL INVESTMENTS IN SECURITIES...................... 99.8%
(Cost $69,340,000)** 69,340,000
OTHER ASSETS IN EXCESS OF LIABILITIES................ 0.2% 143,722
------------
Net Assets applicable to 69,483,722 Shares of Common
Stock issued and outstanding....................... 100.0% $ 69,483,722
============
Net Asset Value, offering and redemption price per
share ($69,483,722 divided by 69,483,722) $1.00
=====
</TABLE>
- --------------------------------------------------------------------------------
*Variable Rate Obligations -- The interest rate shown is the rate at October
31, 1996 and the maturity date shown represents the next interest rate
readjustment.
**Aggregate cost for Federal income tax purposes is identical.
See accompanying notes to financial statements.
1
<PAGE> 105
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC.
SHORT U.S. GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF NET ASSETS
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE
OF NET PAR
ASSETS MATURITY (000) VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS.......................... 98.1%
U.S. Treasury Notes
7.250% 11/30/96 $ 10,000 $ 10,012,500
7.250% 02/15/98 20,000 20,393,750
5.875% 04/30/98 10,000 10,034,375
6.000% 05/31/98 24,000 24,120,000
6.250% 07/31/98 21,000 21,187,031
6.375% 05/15/99 24,000 24,292,500
6.000% 08/15/99 14,000 14,039,375
7.125% 09/30/99 15,000 15,487,500
7.750% 11/30/99 15,000 15,754,688
6.125% 07/31/00 10,000 10,040,625
6.500% 08/31/01 8,000 8,132,500
-------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $170,658,392) 173,494,844
REPURCHASE AGREEMENT............................... 0.6%
Daiwa Securities America, Inc.
5.52% (Agreement dated 10/31/96, to be
repurchased at $1,057,162 on 11/01/96;
collateralized by $993,000 U.S. Treasury
Bonds, 7.25%, due 05/15/16. The market value
of the collateral is $1,079,941.)
(Cost $1,057,000) 11/01/96 1,057 1,057,000
-------------
TOTAL INVESTMENTS IN SECURITIES.................... 98.7%
(Cost $171,715,392)* 174,551,844
OTHER ASSETS IN EXCESS OF LIABILITIES.............. 1.3% 2,339,770
-------------
Net Assets applicable to 16,758,153 Shares of
Common Stock issued and outstanding.............. 100.0% $ 176,891,614
=============
Net Asset Value, offering and redemption price per
share ($176,891,614 divided by 16,758,153) $10.56
======
</TABLE>
- --------------------------------------------------------------------------------
* Aggregate cost for Federal income tax purposes is $171,717,575. At October 31,
1996, the net and gross unrealized appreciation for all securities is
$2,834,269.
See accompanying notes to financial statements.
2
<PAGE> 106
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC.
ADJUSTABLE RATE MORTGAGE (ARM) PORTFOLIO
STATEMENT OF NET ASSETS
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE
OF NET PAR
ASSETS MATURITY (000) VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ADJUSTABLE RATE MORTGAGE-
RELATED SECURITIES*................................ 73.2%
Treasury Based ARMS.................................. 27.7%
Federal Home Loan Mortgage Corporation
7.55% 12/01/22 $ 9,481 $ 9,776,953
7.56% 05/01/23 13,844 14,276,985
7.97% 09/01/23 10,500 10,785,451
7.53% 04/01/24 16,161 16,630,675
Federal National Mortgage Association
7.80% 12/01/21 8,407 8,871,498
6.07% 06/01/26 18,174 18,571,952
Citicorp 1992-18 CL A-1
7.13% 10/25/22 31,026 31,656,529
Fund America 1993A CL A-1
7.46% 06/25/23 20,480 21,094,825
Housing Securities, Inc. 1992 SL-1 CL A-1
7.92% 05/25/16 21,441 22,231,827
Resolution Trust Corp. Series 1993-3 CL A-7
7.81% 11/25/22 18,927 19,352,600
Resolution Trust Corp. Series 1992-1 CL A-1
7.41% 05/25/28 13,234 13,428,289
Resolution Trust Corp. Series 1995-2 CL A-3
6.93% 05/25/29 26,899 27,235,370
Ryland Mortgage Securities Corp. 1991-10 CL A-2
7.64% 06/25/21 6,707 6,719,954
------------
(Cost $217,979,008) 220,632,908
11th District Federal Home Loan Bank Cost of Funds
(COFI) Based ARMS.................................. 7.9%
Federal Home Loan Mortgage Corporation
7.40% 03/01/25 20,742 21,189,048
6.07% 06/01/30 32,031 31,680,236
Federal National Mortgage Association
6.07% 11/01/27 10,268 10,220,307
------------
(Cost $62,424,585) 63,089,591
- -------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
3
<PAGE> 107
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC.
ADJUSTABLE RATE MORTGAGE (ARM) PORTFOLIO (CONTINUED)
STATEMENT OF NET ASSETS
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE
OF NET PAR
ASSETS MATURITY (000) VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six Month Certificates of Deposit Based ARMS......... 9.4%
Federal National Mortgage Association
6.77% 01/01/22 $11,419 $ 11,618,547
6.89% 10/01/22 12,067 12,263,526
6.86% 12/01/22 16,593 16,868,101
7.15% 02/01/23 8,071 8,290,656
Salomon Brothers 1992-4
7.40% 09/25/22 9,918 10,101,147
Sears Mortgage 1992-16
7.22% 10/25/22 15,425 15,714,571
------------
(Cost $74,026,091) 74,856,548
London Interbank Offering Rate (LIBOR)
Based ARMS......................................... 28.2%
Federal Home Loan Mortgage Corporation
7.73% 09/01/24 12,982 13,384,144
7.21% 02/01/26 37,498 38,493,621
7.09% 05/01/26 19,227 19,737,726
Capstead 1992-14
7.23% 10/25/22 37,964 38,391,406
Donaldson, Lufkin, Jenrette Acceptance Corp. 1992-6
6.86% 07/25/22 49,721 50,342,147
Donaldson, Lufkin, Jenrette Acceptance Corp. 1992-9
7.14% 10/25/22 24,745 24,999,866
Ryland Mortgage Securities Corp. 1991-16 CL A-1
6.95% 09/25/21 7,367 7,380,402
Ryland Mortgage Securities Corp. 1991-15 CL A-1
6.75% 09/25/22 7,546 7,555,359
Saxon Mortgage 1993-1 CL A-1
7.60% 02/25/23 24,217 24,405,884
------------
(Cost $223,413,836) 224,690,555
------------
TOTAL ADJUSTABLE RATE
MORTGAGE-RELATED SECURITIES
(Cost $577,843,520) 583,269,602
- -------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
4
<PAGE> 108
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC.
ADJUSTABLE RATE MORTGAGE (ARM) PORTFOLIO (CONTINUED)
STATEMENT OF NET ASSETS
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE
OF NET PAR
ASSETS MATURITY (000) VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIXED RATE MORTGAGE-RELATED
SECURITIES......................................... 15.5%
Collateralized Mortgage Obligations.................. 13.5%
Federal Home Loan Mortgage Corporation
8.00% 06/01/14 $ 7,891 $ 8,080,649
5.25% 01/15/16 10,000 9,881,250
10.50% 12/01/20 4,777 5,279,844
Federal National Mortgage Association 1993-131 B
5.75% 06/25/06 15,906 15,761,336
General Electric Capital Mortgage Services 1993-18
6.00% 05/25/07 19,472 19,392,895
Prudential Home Mortgage Services 1991-15
8.24% 11/25/21 23,160 23,710,497
Prudential Home Mortgage Services 1996-6
6.00% 05/25/26 14,334 14,217,280
Residential Funding Mortgage Securities 1994-S9
6.50% 03/25/24 11,178 11,170,874
------------
(Cost $106,666,356) 107,494,625
Pass Through......................................... 2.0%
Federal Home Loan Mortgage Corporation Gold
7.50%
(Cost $15,856,486) 06/01/10 15,756 16,021,748
------------
TOTAL FIXED RATE
MORTGAGE-RELATED SECURITIES
(Cost $122,522,842) 123,516,373
U.S. TREASURY OBLIGATIONS............................ 4.4%
U.S. Treasury Notes
7.375% 11/15/97 10,000 10,181,250
6.000% 08/15/99 25,000 25,070,312
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $34,909,141) 35,251,562
- -------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
5
<PAGE> 109
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC.
ADJUSTABLE RATE MORTGAGE (ARM) PORTFOLIO (CONTINUED)
STATEMENT OF NET ASSETS
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE
OF NET PAR
ASSETS MATURITY (000) VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AGENCY OBLIGATION.................................... 1.3%
Federal Home Loan Bank
5.45%
(Cost $10,000,000) 11/01/96 $10,000 $ 10,000,000
REPURCHASE AGREEMENT................................. 5.5%
Daiwa Securities America, Inc.
5.52% (Agreement dated 10/31/96, to be
repurchased at $43,520,669 on 11/01/96;
collateralized by $34,440,000 U.S. Treasury
Bonds, 10.375%, due 11/15/09. The market value
of the collateral is $44,410,051.)
(Cost $43,514,000) 11/01/96 43,514 43,514,000
------------
TOTAL INVESTMENTS IN SECURITIES...................... 99.9%
(Cost $788,789,503)** 795,551,537
OTHER ASSETS IN EXCESS OF LIABILITIES................ 0.1% 464,633
------------
Net Assets applicable to 80,011,172 Shares of Common
Stock issued and outstanding....................... 100.0% $796,016,170
============
Net Asset Value, offering and redemption price per
share ($796,016,170 divided by 80,011,172) $9.95
=====
</TABLE>
- --------------------------------------------------------------------------------
* The interest rates shown are the rates at October 31, 1996.
** Aggregate cost for Federal income tax purposes is identical. At October 31,
1996, the net unrealized appreciation for all securities of $6,762,034
consists of gross unrealized appreciation of $6,763,899 and gross unrealized
depreciation of ($1,865).
See accompanying notes to financial statements.
6
<PAGE> 110
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC.
INTERMEDIATE MORTGAGE SECURITIES PORTFOLIO
STATEMENT OF NET ASSETS
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE
OF NET PAR
ASSETS MATURITY (000) VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIXED RATE MORTGAGE-RELATED SECURITIES.............. 78.3%
Pass Throughs
Federal Home Loan Mortgage Corporation Gold
7.00%, due 07/01/03 to 06/01/11 $21,953 $ 22,072,523
7.50%, due 01/01/10 to 07/01/11 30,456 30,969,749
------------
53,042,272
Federal National Mortgage Association
6.50% 03/01/01 9,041 8,978,367
6.50% 05/01/08 10,416 10,243,387
------------
19,221,754
------------
TOTAL FIXED RATE MORTGAGE-
RELATED SECURITIES
(Cost $70,712,380) 72,264,026
U.S. TREASURY OBLIGATIONS........................... 18.7%
U.S. Treasury Notes
6.500% 05/31/01 5,000 5,082,813
6.625% 07/31/01 5,000 5,107,812
6.250% 10/31/01 7,000 7,047,031
------------
TOTAL U.S. TREASURY OBLIGATIONS 17,237,656
(Cost $17,004,318)
- -------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
7
<PAGE> 111
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC.
INTERMEDIATE MORTGAGE SECURITIES PORTFOLIO (CONTINUED)
STATEMENT OF NET ASSETS
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE
OF NET PAR
ASSETS MATURITY (000) VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENT................................ 2.9%
Daiwa Securities America, Inc.
5.52% (Agreement dated 10/31/96, to be
repurchased at $2,688,412 on 11/01/96;
collateralized by $2,334,000 U.S. Treasury
Bonds, 8.125%, due 08/15/21. The market value of the
collateral is $2,743,988.)
(Cost $2,688,000)......................... 11/01/96 $ 2,688 $ 2,688,000
------------
TOTAL INVESTMENTS IN SECURITIES..................... 99.9%
(Cost $90,404,698)* 92,189,682
OTHER ASSETS IN EXCESS OF LIABILITIES............... 0.1% 99,494
------------
Net Assets applicable to 9,691,696 Shares of
Common Stock issued and outstanding............... 100.0% $ 92,289,176
============
Net Asset Value, offering and redemption
price per share ($92,289,176 divided by 9,691,696) $9.52
============
</TABLE>
- --------------------------------------------------------------------------------
* Aggregate cost for Federal income tax purposes is $90,412,198. At October 31,
1996, the net and gross unrealized appreciation for all securities is
$1,777,484.
See accompanying notes to financial statements.
8
<PAGE> 112
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC.
U.S. GOVERNMENT MORTGAGE SECURITIES PORTFOLIO
STATEMENT OF NET ASSETS
OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
PERCENTAGE
OF NET PAR
ASSETS MATURITY (000) VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIXED RATE MORTGAGE-RELATED SECURITIES.............. 73.5%
Government National Mortgage Association
Obligations
10.00%, due 03/15/19 $ 993 $ 1,089,178
9.00%, due 09/15/08 to 10/15/21 6,120 6,512,016
8.50%, due 06/15/24 3,987 4,141,562
7.50%, due 02/15/24 14,590 14,635,823
7.00%, due 08/15/23 to 09/15/24 15,990 15,684,790
------------
(Cost $40,388,751) 42,063,369
U.S. TREASURY OBLIGATIONS........................... 21.3%
U.S. Treasury Notes
6.625% 07/31/01 8,000 8,172,500
6.500% 10/15/06 4,000 4,040,000
------------
(Cost $12,115,109) 12,212,500
AGENCY OBLIGATION................................... 1.7%
Federal Home Loan Bank
5.45% 11/01/96 1,000 1,000,000
(Cost $1,000,000)
REPURCHASE AGREEMENT................................ 3.4%
Daiwa Securities America, Inc.
5.52% (Agreement dated 10/31/96, to be
repurchased at $1,929,296 on 11/01/96;
collateralized by $1,647,000 U.S. Treasury
Bonds, 8.125%, due 05/15/21. The market value
of the collateral is $1,969,250.)
(Cost $1,929,000) 11/01/96 1,929 1,929,000
------------
TOTAL INVESTMENTS IN SECURITIES..................... 99.9%
(Cost $55,432,860)* 57,204,869
OTHER ASSETS IN EXCESS OF LIABILITIES............... 0.1% 61,918
------------
Net Assets applicable to 5,449,313 Shares of Common
Stock issued and outstanding...................... 100.0% $ 57,266,787
============
Net Asset Value, offering and redemption price per
share ($57,266,787 divided by 5,449,313) $10.51
=======
</TABLE>
- --------------------------------------------------------------------------------
* Aggregate cost for Federal income tax purposes is identical. At October 31,
1996, the net unrealized appreciation for all securities of $1,772,009
consists of gross unrealized appreciation of $1,836,829 and gross unrealized
depreciation of ($64,820).
See accompanying notes to financial statements.
9
<PAGE> 113
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
U.S.
SHORT U.S. ADJUSTABLE INTERMEDIATE GOVERNMENT
MONEY GOVERNMENT RATE MORTGAGE MORTGAGE MORTGAGE
MARKET SECURITIES (ARM) SECURITIES SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income.............. $3,653,233 $11,604,331 $59,377,126 $ 11,675,292 $4,464,387
---------- ----------- ------------- ------------ ----------
Operating expenses:
Investment advisory fee.... 101,717 446,257 4,122,554 598,986 146,347
Distribution fee........... 101,717 267,754 2,290,308 256,708 87,808
Administration fee......... 20,328 53,968 276,718 51,659 18,168
Custodian fee.............. 16,902 40,890 175,289 40,418 30,150
Directors' fees............ 3,388 8,735 45,765 9,718 2,979
Transfer agent fee......... 10,826 9,402 30,305 3,496 2,301
Legal...................... 2,320 4,123 20,849 3,590 1,026
Audit...................... 3,178 10,314 54,766 11,074 3,817
Other...................... 3,145 15,193 68,611 15,855 13,207
---------- ----------- ------------- ------------ ----------
263,521 856,636 7,085,165 991,504 305,803
Fee waivers................ (101,717) -0- (2,748,371) (239,669) -0-
---------- ----------- ------------- ------------ ----------
Total expenses.......... 161,804 856,636 4,336,794 751,835 305,803
---------- ----------- ------------- ------------ ----------
Net investment income... 3,491,429 10,747,695 55,040,332 10,923,457 4,158,584
---------- ----------- ------------- ------------ ----------
REALIZED AND UNREALIZED GAINS
(LOSSES) FROM INVESTMENT
ACTIVITIES:
Net realized gain (loss)..... -0- (1,958,578) (1,403,530) (2,019,227) 91,257
Net change in unrealized
appreciation/depreciation
of investments............. -0- (575,999) 1,311,713 (1,796,942) (778,435)
---------- ----------- ------------- ------------ ----------
Net loss on
investments........... -0- (2,534,577) (91,817) (3,816,169) (687,178)
---------- ----------- ------------- ------------ ----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....... $3,491,429 $ 8,213,118 $54,948,515 $ 7,107,288 $3,471,406
========== ============ ============ ============ ==========
- --------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
10
<PAGE> 114
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED OCTOBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
MONEY MARKET SHORT U.S. GOVERNMENT
PORTFOLIO SECURITIES PORTFOLIO
------------------------------------------------------------
1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income............. $ 3,491,429 $ 2,246,026 $ 10,747,695 $ 10,501,665
Net gain (loss) on investments.... -0- -0- (2,534,577) 3,361,847
------------- ------------- ------------ ------------
Net increase in net assets
resulting from operations.... 3,491,429 2,246,026 8,213,118 13,863,512
------------- ------------- ------------ ------------
Dividends paid to stockholders:
From net investment income........ (3,491,429) (2,243,632) (10,747,695) (10,501,665)
From net realized capital gains... -0- -0- -0- -0-
------------- ------------- ------------ ------------
Total dividends paid to
stockholders................. (3,491,429) (2,243,632) (10,747,695) (10,501,665)
------------- ------------- ------------ ------------
Capital share transactions:
Proceeds from sale of shares...... 756,322,916 389,839,779 44,293,835 31,763,091
Shares issued to stockholders in
reinvestment of dividends....... 2,389,475 1,752,434 5,584,686 5,466,387
Cost of shares repurchased........ (726,098,039) (437,694,716) (37,795,386) (52,987,943)
------------- ------------- ------------ ------------
Net increase (decrease) in net
assets from capital share
transactions................. 32,614,352 (46,102,503) 12,083,135 (15,758,465)
------------- ------------- ------------ ------------
Total increase (decrease) in net
assets....................... 32,614,352 (46,100,109) 9,548,558 (12,396,618)
Net Assets:
Beginning of year.................... 36,869,370 82,969,479 167,343,056 179,739,674
------------- ------------- ------------ ------------
End of year.......................... $ 69,483,722 $ 36,869,370 $176,891,614 $167,343,056
============== ============== ============= =============
- -----------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
11
<PAGE> 115
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
INTERMEDIATE
ADJUSTABLE RATE MORTGAGE SECURITIES U.S. GOVERNMENT
MORTGAGE (ARM) PORTFOLIO PORTFOLIO MORTGAGE SECURITIES PORTFOLIO
- ----------------------------------------------------------------------------------------------------------
1996 1995 1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 55,040,332 $ 53,047,738 $ 10,923,457 $ 12,598,793 $ 4,158,584 $ 4,477,858
(91,817) 12,433,567 (3,816,169) 6,554,384 (687,178) 2,619,170
------------- -------------- ------------- ------------ ------------ -----------
54,948,515 65,481,305 7,107,288 19,153,177 3,471,406 7,097,028
------------- -------------- ------------- ------------ ------------ -----------
(55,040,332) (53,047,738) (10,923,457) (12,598,793) (4,158,584) (4,477,858)
-0- -0- -0- -0- -0- -0-
------------- -------------- ------------- ------------ ------------ -----------
(55,040,332) (53,047,738) (10,923,457) (12,598,793) (4,158,584) (4,477,858)
------------- -------------- ------------- ------------ ------------ -----------
547,849,221 314,389,247 11,947,721 2,232,516 10,233,212 2,562,981
27,868,817 26,963,939 7,021,954 7,468,823 1,891,769 1,875,444
(671,148,248) (508,162,846) (109,951,609) (42,595,593) (16,429,514) (5,411,804)
------------- -------------- ------------- ------------ ------------ -----------
(95,430,210) (166,809,660) (90,981,934) (32,894,254) (4,304,533) (973,379)
------------- -------------- ------------- ------------ ------------ -----------
(95,522,027) (154,376,093) (94,798,103) (26,339,870) (4,991,711) 1,645,791
891,538,197 1,045,914,290 187,087,279 213,427,149 62,258,498 60,612,707
------------- -------------- ------------- ------------ ------------ -----------
$ 796,016,170 $ 891,538,197 $ 92,289,176 $187,087,279 $ 57,266,787 $62,258,498
============= ============== ============= ============ ============ ===========
- --------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
12
<PAGE> 116
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC.
MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Net asset value, beginning of year... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- -------- -------- --------
Income from investment operations:
- -------------------------------------
Net investment income.............. .0516 .0547 .0346 .0277 .0358
Net realized and unrealized gain
(loss) on investments........... -0- -0- -0- -0- -0-
------- ------- -------- -------- --------
Total from investment
operations................. .0516 .0547 .0346 .0277 .0358
------- ------- -------- -------- --------
Less distributions:
- -------------------------------------
Dividends paid to stockholders:
From net investment income........ (.0516) (.0547) (.0346) (.0277) (.0358)
From net realized gains........... -0- -0- -0- -0- -0-
------- ------- -------- -------- --------
Total distributions to
stockholders............... (.0516) (.0547) (.0346) (.0277) (.0358)
------- ------- -------- -------- --------
Net asset value, end of year......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======== ======== ========
Total return......................... 5.29% 5.60% 3.51% 2.80% 3.64%
Ratios/Supplemental data:
- -------------------------------------
Net assets, end of year (in
000's).......................... $69,484 $36,869 $ 82,969 $107,924 $110,090
Ratio of expenses to average net
assets.......................... 0.24%(1) 0.24%(1) 0.40%(1) 0.40% 0.41%
Ratio of net investment income to
average net assets.............. 5.15% 5.40% 3.34% 2.77% 3.54%
</TABLE>
- --------------------------------------------------------------------------------
(1) Without fee waivers for the Money Market Portfolio for the years ended
October 31, 1996, 1995, and 1994, the ratios of expenses to average net
assets would have been .39%, .39%, and .42%, respectively.
See accompanying notes to financial statements.
13
<PAGE> 117
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC.
SHORT U.S. GOVERNMENT SECURITIES PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......... $ 10.68 $ 10.45 $ 10.89 $ 10.85 $ 10.71
-------- -------- -------- -------- --------
Income from investment operations:
- ------------------------------------------
Net investment income..................... .6370 .6746 .5396 .6155 .7652
Net realized and unrealized gain (loss) on
investments.............................. (.1200) .2300 (.4400) .0400 .1400
-------- -------- -------- -------- --------
Total from investment operations..... .5170 .9046 .0996 .6555 .9052
-------- -------- -------- -------- --------
Less distributions:
- --------------------
Dividends paid to stockholders:
From net investment income............. (.6370) (.6746) (.5396) (.6155) (.7652)
From net realized gains................ -0- -0- -0- -0- -0-
-------- -------- -------- -------- --------
Total distributions to
stockholders...................... (.6370) (.6746) (.5396) (.6155) (.7652)
-------- -------- -------- -------- --------
Net assets, end of year..................... $ 10.56 $ 10.68 $ 10.45 $ 10.89 $ 10.85
======== ======== ======== ======== ========
Total return................................ 4.99% 8.94% 0.95% 6.19% 8.72%
Ratios/Supplemental data:
- ------------------------------
Net assets, end of year (in 000's)........ $176,892 $167,343 $179,740 $235,705 $213,995
Ratio of expenses to average net assets... 0.48% 0.49% 0.47% 0.48% 0.50%
Ratio of net investment income to average
net assets............................... 6.02% 6.42% 5.04% 5.65% 7.15%
Portfolio turnover rate................... 69% 112% 195% 110% 43%
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
14
<PAGE> 118
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC.
ADJUSTABLE RATE MORTGAGE (ARM) PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Net asset value, beginning of year...... $ 9.94 $ 9.78 $ 10.02 $ 9.98 $ 10.01
-------- -------- ---------- ---------- ----------
Income from investment operations:
- ----------------------------------------
Net investment income................. .5958 .6035 .4396 .4267 .5235
Net realized and unrealized gain
(loss) on investments................ .0100 .1600 (.2400) .0386 (.0295)
-------- -------- ---------- ---------- ----------
Total from investment operations... .6058 .7635 .1996 .4653 .4940
-------- -------- ---------- ---------- ----------
Less distributions:
- --------------------
Dividends paid to stockholders:
From net investment income........... (.5958) (.6035) (.4396) (.4253) (.5240)
From net realized gains.............. -0- -0- -0- -0- -0-
-------- -------- ---------- ---------- ----------
Total distributions to
stockholders..................... (.5958) (.6035) (.4396) (.4253) (.5240)
-------- -------- ---------- ---------- ----------
Net asset value, end of year............ $ 9.95 $ 9.94 $ 9.78 $ 10.02 $ 9.98
========= ========= ========== ========== ==========
Total return............................ 6.27% 8.02% 2.04% 4.76% 5.05%
Ratios/Supplemental data:
- ------------------------------
Net assets, end of year (in 000's).... $796,016 $891,538 $1,045,914 $1,572,311 $1,189,309
Ratio of expenses to average net
assets............................... .47%(1) 0.48%(1) 0.47%(1) 0.46%(1) 0.44%(1)
Ratio of net investment income to
average net assets................... 6.01% 6.12% 4.40% 4.34% 5.14%
Portfolio turnover rate............... 60% 68% 65% 30% 43%
</TABLE>
- --------------------------------------------------------------------------------
(1) Without fee waivers for the Adjustable Rate Mortgage (ARM) Portfolio for the
years ended October 31, 1996, 1995, 1994, 1993, and 1992, the ratios of
expenses to average net assets would have been .77%, .78%, .76%, .76%, and
.80%, respectively.
See accompanying notes to financial statements.
15
<PAGE> 119
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC.
INTERMEDIATE MORTGAGE SECURITIES PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........... $ 9.68 $ 9.34 $ 10.00 $ 9.80 $ 9.61
------- -------- -------- -------- --------
Income from investment operations:
- ------------------------------------------
Net investment income...................... .6101 .6211 .5407 .5982 .7161
Net realized and unrealized gain
(loss) on investments..................... (.1600) .3400 (.6600) .1987 .1909
------- -------- -------- -------- --------
Total from investment operations........ .4501 .9611 (.1193) .7969 .9070
------- -------- -------- -------- --------
Less distributions:
- --------------------
Dividends paid to stockholders:
From net investment income................ (.6101) (.6211) (.5407) (.5969) (.7170)
From net realized gains................... -0- -0- -0- -0- -0-
------- -------- -------- -------- --------
Total distributions to stockholders..... (.6101) (.6211) (.5407) (.5969) (.7170)
------- -------- -------- -------- --------
Net asset value, end of year................. $ 9.52 $ 9.68 $ 9.34 $ 10.00 $ 9.80
======= ======== ======== ======== ========
Total return................................. 4.82% 10.63% (1.18%) 8.33% 9.74%
Ratios/Supplemental data:
- ------------------------------
Net assets, end of year (in 000's)......... $92,289 $187,087 $213,427 $218,032 $116,458
Ratio of expenses to average net assets.... .44%(1) 0.38%(1) 0.39%(1) 0.37%(1) 0.43%(1)
Ratio of net investment income to average
net assets................................ 6.38% 6.55% 5.61% 5.94% 7.14%
Portfolio turnover rate.................... 133% 133% 358% 106% 226%
</TABLE>
- --------------------------------------------------------------------------------
(1) Without fee waivers for the Intermediate Mortgage Securities Portfolio for
the years ended October 31, 1996, 1995, 1994, 1993, and 1992, the ratios of
expenses to average net assets would have been .58%, .58%, .59%, .57%, and
.61%, respectively.
See accompanying notes to financial statements.
16
<PAGE> 120
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC.
U.S. GOVERNMENT MORTGAGE SECURITIES PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------
1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year................. $ 10.68 $ 10.23 $ 11.28 $ 11.26 $ 11.29
-------- ------- ------- ------- -------
Income from investment operations:
- ------------------------------------------
Net investment income............................ .7479 .7703 .7296 .8306 .8924
Net realized and unrealized gain (loss) on
investments..................................... (.1700) .4500 (.9300) .0195 (.0297)
-------- ------- ------- ------- -------
Total from investment operations.............. .5779 1.2203 (.2004) .8501 .8627
-------- ------- ------- ------- -------
Less distributions:
- --------------------
Dividends paid to stockholders:
From net investment income...................... (.7479) (.7703) (.7296) (.8301) (.8927)
From net realized gains......................... -0- -0- (.1200) -0- -0-
-------- ------- ------- ------- -------
Total distributions to stockholders........... (.7479) (.7703) (.8496) (.8301) (.8927)
-------- ------- ------- ------- -------
Net asset value, end of year....................... $ 10.51 $ 10.68 $ 10.23 $ 11.28 $ 11.26
======== ======= ======= ======= =======
Total return....................................... 5.63% 12.37% (1.82%) 7.76% 7.91%
Ratios/Supplemental data:
- ------------------------------
Net assets, end of year (in 000's)............... $57,267 $62,258 $60,613 $92,994 $72,505
Ratio of expenses to average net assets.......... 0.52% 0.53% 0.51% 0.51% 0.53%
Ratio of net investment income to average net
assets.......................................... 7.10% 7.39% 6.81% 7.32% 7.91%
Portfolio turnover rate.......................... 165% 177% 376% 187% 64%
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
17
<PAGE> 121
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Asset Management Fund, Inc. (the "Fund") consists of five separate portfolios,
the Money Market Portfolio, the Short U.S. Government Securities Portfolio, the
Adjustable Rate Mortgage (ARM) Portfolio, the Intermediate Mortgage Securities
Portfolio and the U.S. Government Mortgage Securities Portfolio.
A. The Fund is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management company. Significant accounting policies
are as follows:
SECURITY VALUATION
Money Market Portfolio:
Portfolio securities are valued under the amortized cost method, which
approximates current market value. Under this method, securities are valued at
cost when purchased and thereafter a constant proportionate amortization of any
discount or premium is recorded until maturity of the security. The Portfolio
seeks to maintain net asset value per share at $1.00.
Short U.S. Government Securities Portfolio, Adjustable Rate Mortgage (ARM)
Portfolio, Intermediate Mortgage Securities Portfolio, and U.S. Government
Mortgage Securities Portfolio:
Portfolio securities are valued at the mean between the most recent bid and
asked prices, which may be furnished by a pricing service, at prices provided
directly by market makers, or using matrix pricing methods. Portfolio securities
for which market quotations are not readily available are valued at fair value
using methods determined in good faith by the Board of Directors. Short-term
instruments maturing within 60 days of the valuation date are valued based upon
their amortized cost.
REPURCHASE AGREEMENTS
Eligible portfolio investments may be purchased from financial institutions,
such as banks and non-bank dealers, subject to the seller's agreement to
repurchase them at an agreed upon date and price. The seller will be required on
a daily basis to maintain the value of the securities subject to the agreements
at not less than the repurchase price. Repurchase agreements are conditioned
upon the collateral being deposited under the Federal Reserve book-entry system
or with the Fund's custodian.
DIVIDENDS TO STOCKHOLDERS
Dividends from net investment income are declared daily and paid monthly. Net
short-term and long-term capital gains, if any, are declared and paid annually.
FEDERAL TAXES
No provision is made for Federal taxes as it is each Portfolio's intention to
continue to qualify as a regulated investment company and to make the requisite
distributions to the stockholders, which will be sufficient to relieve each
portfolio from all or substantially all Federal income and excise taxes.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these estimates.
OTHER
Investment transactions are accounted for on the trade date and the cost of
investments sold is determined by use of the specific identification method for
both financial reporting and income tax purposes.
18
<PAGE> 122
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
B. Shay Assets Management Co. (Adviser), which is equally owned by two general
partners, Shay Assets Management, Inc. and ACB Assets Management, Inc., serves
as the Fund's investment adviser. Shay Assets Management, Inc. is controlled by
Rodger D. Shay, the President of the Fund. The other half interest in the
Adviser is held by ACB Assets Management, Inc., an indirect wholly-owned
subsidiary of America's Community Bankers (ACB).
As compensation for the Adviser's services, the Fund pays an investment
advisory fee monthly based upon an annual percentage of the average daily net
assets of each Portfolio as follows:
The fee rate for the Money Market Portfolio is .15% of the first $500 million,
.125% of the next $500 million, and .10% of such net assets in excess of $1
billion. The Adviser voluntarily waived 100% of its fee for the year ended
October 31, 1996. The waiver amounted to $101,717.
The fee rate for each of the Short U.S. Government Securities Portfolio and
the U.S. Government Mortgage Securities Portfolio, computed separately, is .25%
of the first $500 million, .175% of the next $500 million, .125% of the next
$500 million, and .10% of such net assets in excess of $1.5 billion.
The fee rate for the Adjustable Rate Mortgage (ARM) Portfolio is .45% of the
first $3 billion, .35% of the next $2 billion, and .25% of such net assets in
excess of $5 billion. The Adviser voluntarily waived approximately 44% of its
fee for the year ended October 31, 1996. The waiver amounted to $1,832,247.
The fee rate for the Intermediate Mortgage Securities Portfolio is .35% of the
first $500 million, .275% of the next $500 million, .20% of the next $500
million, and .10% of such net assets in excess of $1.5 billion. The Adviser
voluntarily waived approximately 40% of its fee for the year ended October 31,
1996. The waiver amounted to $239,669.
The Adviser has agreed to reduce or waive (but not below zero) its advisory
fees charged to each Portfolio, except the Adjustable Rate Mortgage (ARM)
Portfolio, to the extent that the daily ratio of operating expenses to average
daily net assets of each Portfolio exceeds .75%.
Shay Financial Services Co. (Distributor), which is equally owned by two
general partners, Shay Financial Services, Inc. and ACB Securities, Inc., serves
as the Fund's distributor. Shay Financial Services, Inc. is controlled by Rodger
D. Shay, the President of the Fund. The other half interest in the Distributor
is held by ACB Securities, Inc., an indirect wholly-owned subsidiary of ACB.
As compensation for the Distributor's services, the Fund pays the Distributor
a fee monthly based upon an annual percentage of the average daily net assets of
each portfolio as follows:
The fee rate for each of the Money Market Portfolio and Short U.S. Government
Securities Portfolio is based upon an annual percentage of the combined average
daily net assets of both portfolios and is as follows: .15% of the first $500
million, .125% of the next $500 million, .10% of the next $1 billion, and .075%
of such combined net assets in excess of $2 billion.
The fee rate for the Adjustable Rate Mortgage (ARM) Portfolio is .25% of
average daily net assets. The Distributor voluntarily waived approximately 40%
of its fee for the year ended October 31, 1996. The waiver amounted to $916,124.
The fee rate for each of the Intermediate Mortgage Securities Portfolio and
the U.S. Government Mortgage Securities Portfolio, computed separately, is as
follows: .15% of the first $500 million, .125% of the next $500 million, .10% of
the next $500 million, and .075% of such net assets in excess of $1.5 billion.
19
<PAGE> 123
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
C. The Fund is authorized to issue 6 billion shares of common stock, par value
$.001 per share, of which 4 billion shares are of the Money Market Portfolio and
500 million shares are of each of the other four Portfolios.
Transactions in shares of the Fund for the years ended October 31, 1996 and 1995
were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
MONEY MARKET SHORT U.S. GOVERNMENT
PORTFOLIO SECURITIES PORTFOLIO
--------------------------------------------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Sale of shares............................ 756,322,916 389,839,779 4,141,919 2,982,085
Shares issued to stockholders in
reinvestment of dividends............... 2,389,475 1,752,434 527,302 520,236
Shares repurchased........................ (726,098,039) (437,694,716) (3,577,207) (5,044,075)
------------ ------------ ---------- ----------
Net increase (decrease)................... 32,614,352 (46,102,503) 1,092,014 (1,541,754)
Shares outstanding:
Beginning of year....................... 36,869,370 82,971,873 15,666,139 17,207,893
------------ ------------ ---------- ----------
End of year............................. 69,483,722 36,869,370 16,758,153 15,666,139
============ ============ ========== ==========
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
ADJUSTABLE RATE MORTGAGE INTERMEDIATE MORTGAGE
(ARM) PORTFOLIO SECURITIES PORTFOLIO
--------------------------------------------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Sale of shares............................ 54,984,099 31,767,897 1,221,454 235,385
Shares issued to stockholders in
reinvestment of dividends............... 2,803,118 2,735,804 734,670 789,781
Shares repurchased........................ (67,489,479) (51,689,731) (11,588,476) (4,541,737)
----------- ------------ ----------- ----------
Net increase (decrease)................... (9,702,262) (17,186,030) (9,632,352) (3,516,571)
Shares outstanding:
Beginning of year....................... 89,713,434 106,899,464 19,324,048 22,840,619
----------- ----------- ----------- ----------
End of year............................. 80,011,172 89,713,434 9,691,696 19,324,048
=========== =========== =========== ==========
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT MORTGAGE
SECURITIES PORTFOLIO
------------------------
1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Sale of shares.......................................................... 950,852 243,512
Shares issued to stockholders in reinvestment of dividends.............. 179,409 180,463
Shares repurchased...................................................... (1,509,780) (520,356)
--------- ----------
Net increase (decrease)................................................. (379,519) (96,381)
Shares outstanding:
Beginning of year..................................................... 5,828,832 5,925,213
--------- ---------
End of year........................................................... 5,449,313 5,828,832
========= =========
</TABLE>
- --------------------------------------------------------------------------------
20
<PAGE> 124
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
D. At October 31, 1996, NET ASSETS consisted of the following:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
SHORT U.S. INTERMEDIATE U.S. GOVERNMENT
GOVERNMENT ADJUSTABLE RATE MORTGAGE MORTGAGE
MONEY MARKET SECURITIES MORTGAGE SECURITIES SECURITIES
PORTFOLIO PORTFOLIO (ARM) PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital paid-in........ $ 69,483,722 $193,857,203 $ 815,150,018 $108,418,371 $59,451,285
Accumulated net
realized losses...... -0- (19,802,041) (25,895,882) (17,914,179) (3,956,507)
Net unrealized
appreciation
(depreciation) of
investments.......... -0- 2,836,452 6,762,034 1,784,984 1,772,009
----------- ------------ ----------- ---------- -----------
$ 69,483,722 $176,891,614 $ 796,016,170 $ 92,289,176 $57,266,787
=========== ============ =========== ========== ===========
- ---------------------------------------------------------------------------------------------------------
</TABLE>
E. For tax purposes at October 31, 1996, the Short U.S. Government Securities
Portfolio had a capital loss carryforward of $19,799,858, of which $8,161,004
expires in 1997, $4,590,496 expires in 1998, $4,615,249 expires in 2002,
$474,531 expires in 2003, and $1,958,578 expires in 2004. The Adjustable Rate
Mortgage (ARM) Portfolio had a capital loss carryforward of $23,440,369, of
which $18,518 expires in 2000, $6,982,183 expires in 2001, $10,944,856 expires
in 2002, $4,674,894 expires in 2003, and $819,918 expires in 2004.
The Intermediate Mortgage Securities Portfolio had a capital loss carryforward
of $17,584,613, of which $2,760,938 expires in 1997, $1,415,174 expires in 1998,
$9,464,083 expires in 2002, $1,932,690 expires in 2003, and $2,011,728 expires
in 2004. The U.S. Government Mortgage Securities Portfolio had a capital loss
carryforward of $4,097,131, of which $3,336,057 expires in 2002, $731,254
expires in 2003 and $29,820 expires in 2004. All losses are available to offset
future realized capital gains, if any.
- --------------------------------------------------------------------------------
21
<PAGE> 125
- --------------------------------------------------------------------------------
ASSET MANAGEMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
F. For the year ended October 31, 1996, purchases and proceeds from
sales/maturities of securities, other than short-term investments, were as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
U.S.
SHORT U.S. ADJUSTABLE INTERMEDIATE GOVERNMENT
GOVERNMENT RATE MORTGAGE MORTGAGE MORTGAGE
SECURITIES (ARM) SECURITIES SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases:
U.S. Government obligations.......... $133,638,438 $472,951,744 $219,042,640 $100,867,578
Other securities..................... -0- 113,360,275 -0- -0-
------------ ------------ ------------ ------------
Total purchases................... $133,638,438 $586,312,019 $219,042,640 $100,867,578
============ ============ ============ ============
Sales and maturities:
U.S. Government obligations.......... $117,498,516 $574,567,195 $282,803,860 $100,879,903
Other securities..................... -0- 119,657,797 8,266,341 -0-
------------ ------------ ------------ ------------
Total sales and maturities........ $117,498,516 $694,224,992 $291,070,201 $100,879,903
============ ============ ============ ============
- ------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 126
- --------------------------------------------------------------------------------
To the Stockholders and Directors
of Asset Management Fund, Inc.
We have audited the accompanying statements of net assets of Asset Management
Fund, Inc. (comprising, respectively, the Money Market, Short U.S. Government
Securities, Adjustable Rate Mortgage (ARM), Intermediate Mortgage Securities,
and U.S. Government Mortgage Securities Portfolios) as of October 31, 1996, and
the related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1996, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios comprising Asset Management Fund, Inc. as of
October 31, 1996, and the results of their operations for the year then ended,
the changes in their net assets for each of the two years in the period then
ended, and their financial highlights for each of the five years in the period
then ended, in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
- ------------------------------
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
December 3, 1996
1 of 1
<PAGE> 127
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
For general information about any of the Portfolios offered by Asset Management
Fund, Inc., including fees and expenses, please send for a prospectus and read
it carefully before you invest.
SHAY FINANCIAL SERVICES CO.
111 East Wacker Drive/Chicago, IL 60601
800-527-3713
888 Brickell Avenue/Miami, FL 33131
800-327-6190
315 Post Road West/Westport, CT 06880
800-456-8232
5605 North MacArthur Blvd./Irving, TX 75038
800-442-9825
101 Bradford Road/Wexford, PA 15090
800-224-5177
350 Springfield Avenue/Summit, NJ 07091
800-553-6159
- --------------------------------------------------------------------------------
ACCOUNT INFORMATION
- --------------------------------------------------------------------------------
To obtain performance data and place purchase orders, call toll free
800-527-3713.
<PAGE> 128
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DISTRIBUTOR
Shay Financial Services Co.
111 East Wacker Drive
Chicago, IL 60601
INVESTMENT ADVISER
Shay Assets Management Co.
111 East Wacker Drive
Chicago, IL 60601
ADMINISTRATOR, TRANSFER AGENT
AND SHAREHOLDER SERVICE AGENT
PFPC Inc.
103 Bellevue Parkway
Wilmington, DE 19809
LEGAL COUNSEL
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, IL 60601
CUSTODIAN
PNC Bank
17th & Chestnut Streets
Philadelphia, PA 19101
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103
DIRECTORS AND OFFICERS
Arthur G. De Russo
Director
David F. Holland
Director
Leon T. Kendall
Director and Chairman
Gerald J. Levy
Director
Rodger D. Shay
President and Director
Edward E. Sammons, Jr.
Vice President, Treasurer and Secretary
Doris J. Pavel
Assistant Secretary
<PAGE> 129
ASSET MANAGEMENT FUND, INC.
PART C
OTHER INFORMATION
Note: Items 24-33 have been answered with respect to all
Portfolios of the Fund.
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
(1) Included in the Fund's Prospectuses:
Financial Highlights
(2) The following information, contained in the
Registrant's Annual Report for the year ended October
31, 1996 and filed as part of Post-Effective Amendment
No. 27, is incorporated by reference into the Fund's
Statements of Additional Information:
Statements of Net Assets
Statements of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
All other financial statements, schedules and historical
financial information have been omitted as the subject matter is not required,
not present, or not present in amounts sufficient to require submission.
<PAGE> 130
<TABLE>
<CAPTION>
(b) Exhibits:
Exhibit
Number Description
------- -----------
<S> <C>
1.(a) Articles of Amendment and Restatement of Articles of
Incorporation of Registrant dated November 9, 1982 (1)
(b) Articles Supplementary to Articles of Amendment and
Restatement of Articles of Incorporation of Registrant
dated November 1, 1983 (1)
(c) Form of Articles of Amendment of Articles of
Incorporation of Registrant (1)
(d) Articles Supplementary to Articles of Amendment and
Restatement of Articles of Incorporation of Registrant
dated August 16, 1986 (1)
(e) Articles of Amendment of Articles of Incorporation dated
May 4, 1989 (1)
(f) Articles of Amendment of Articles of Incorporation
February 23, 1990 (1)
(g) Articles Supplementary to Articles of Amendment and
Restatement of Articles of Incorporation of Registrant
dated June 28, 1991 (1)
(h) Form of Articles of Amendment of Articles of
Incorporation (1)
(i) Articles of Amendment of Articles of Incorporation dated
September 26, 1994 (1)
</TABLE>
C-2
<PAGE> 131
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
2.(a) Bylaws as restated as of September 20, 1991 (1)
3. Not Applicable
4.(a) Specimen certificate for the Short-Term Liquidity
Portfolio Shares of Registrant (1)
(b) Specimen certificate for the Intermediate-Term Liquidity
Portfolio Shares of Registrant (1)
(c) Specimen certificate for the Mortgage Securities
Performance Portfolio Shares of Registrant (1)
(d) Specimen Certificate for the Intermediate Mortgage
Securities Portfolio Shares of Registrant
</TABLE>
C-3
<PAGE> 132
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
(1)
(e) Specimen Certificate for the Adjustable Rate Mortgage
(ARM) Portfolio Shares of Registrant (1)
5.(a) Investment Advisory Agreement, dated September 1, 1990,
between Registrant and Shay Assets Management Co. with
respect to the Short-Term Liquidity Portfolio, the
Intermediate-Term Liquidity Portfolio, the Mortgage
Securities Performance Portfolio and the Corporate Bond
Portfolio (1)
(b) Form of Amendment to the Investment Advisory Agreement
with respect to the Adjustable Rate Mortgage (ARM)
Portfolio (1)
(c)
</TABLE>
C-4
<PAGE> 133
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
Amendment to the Investment Advisory Agreement, dated
November 30, 1992, with respect to the Adjustable Rate
Mortgage (ARM) Portfolio (1)
6. *Distribution Agreement
7. Not Applicable
8.(a)(1)(i) Restated Administration Agreement between Registrant
and Provident
</TABLE>
C-5
<PAGE> 134
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
</TABLE>
C-6
<PAGE> 135
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
</TABLE>
C-7
<PAGE> 136
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
Financial Processing Corporation dated March 1,
1991 (1)
(1)(ii) Amendment No. 1 to Restated Administration Agreement
dated June 28, 1991 (1)
(1)(iii) Amendment No. 2 to Restated Administration Agreement
dated September 20, 1991 (1)
(2)(i) Restated Custodian Agreement between Registrant and
Provident National Bank dated March 1, 1991 (1)
(2)(ii) Amendment No. 1 to Restated Custodian Agreement dated
June 28, 1991 (1)
(2)(iii) Amendment No. 2 to Restated Custodian Agreement dated
June 29, 1991 (1)
(3)(i) Restated Transfer Agency Agreement between Registrant and
Provident Financial Processing Corporation dated March 1,
1991 (1)
(3)(ii) Amendment No. 1 to Restated Transfer Agency Agreement
dated June 28, 1991 (1)
9. Not Applicable
10.(a) Opinion and Consent of Vedder, Price, Kaufman & Kammholz
with respect to the Short-Term Liquidity Portfolio, the
Intermediate-Term Liquidity Portfolio, the Mortgage
Securities Performance Portfolio and the Corporate Bond
Portfolio dated December 28, 1990 (1)
</TABLE>
C-8
<PAGE> 137
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
(b) Opinion and Consent of Vedder, Price, Kaufman & Kammholz
with respect to the Adjustable Rate Mortgage (ARM)
Portfolio dated July 2, 1991 (1)
11.(a) * Consent of Vedder, Price, Kaufman & Kammholz
(b) * Consent of Coopers & Lybrand L.L.P.
12. Not Applicable
13.(a) Form of Purchase Agreement between Registrant and initial
investors with respect to the Short-Term Liquidity
Portfolio and the Intermediate-Term Liquidity Portfolio
(1)
(b) Form of Purchase Agreement between Registrant and initial
investors with respect to the Mortgage Securities
Performance Portfolio dated November 2, 1983 (1)
14. Not Applicable
15.(a) Plan and Agreement Pursuant to Rule 12b-1, dated
September 1, 1990, between Registrant and
</TABLE>
C-9
<PAGE> 138
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
Shay Financial Services Co. dated September 1, 1990 (1)
(b) Form of Amendment to Plan and Agreement Pursuant to Rule
12b-1 with respect to the Adjustable Rate Mortgage (ARM)
Portfolio (1)
(c)
</TABLE>
C-10
<PAGE> 139
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
Amendment to Plan and Agreement Pursuant to Rule 12b-1
with respect to the Adjustable Rate Mortgage (ARM)
Portfolio dated June 28, 1991 (1)
(d) *Amendment to Plan and Agreement Pursuant to Rule
12b-1 dated September 18, 1996
16. Schedules for Calculation of Yield and Total Return
(1)
27. * Financial Data Schedules
</TABLE>
- -----------------
*Filed with this Post-Effective Amendment.
1/ Previously filed with Post-Effective Amendment No. 26 (Amendment No. 27)
dated February 29, 1996 and incorporated herein by reference.
C-11
<PAGE> 140
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
Item 25. Persons Controlled by or Under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities.
</TABLE>
<TABLE>
<CAPTION>
Number of Record
Holders as of
Title of Class November 30, 1996
-------------- -----------------
<S> <C>
Money-Market Portfolio Shares ..................................... 108
Short U.S. Government Securities Portfolio Shares ................. 86
U.S. Government Mortgage Securities Portfolio Shares .............. 30
Intermediate Mortgage Securities Portfolio Shares ................. 38
Adjustable Rate Mortgage (ARM) Portfolio .......................... 312
</TABLE>
Item 27. Indemnification.
Section 6 of the Registrant's Articles of Incorporation (as
amended by the Articles of Amendment filed as Exhibit 1(e)) provides that a
director or officer of the Registrant shall not be liable to the Registrant or
its stockholders for monetary damages for breach of fiduciary duty as a
director or officer, except to the extent such exemption from liability or
limitation thereof is not permitted by law (including the Investment Company
Act of 1940) as currently in effect or as the same may hereafter be amended.
Article VII as of the Registrant's Bylaws (as amended by the
Resolution filed as Exhibit 2(f)) provides that the Registrant shall indemnify
to the fullest extent permitted by law (including the Investment Company Act of
1940) as currently in effect or as the same may hereafter be amended, any
person made or threatened to be made a party to any action, suit or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that such person or such person's testator or intestate is or was a director,
officer, employee or agent. To the fullest extent permitted by law (including
the Investment Company Act of 1940) as currently in effect or as the same may
hereafter be amended, expenses incurred by any such person in defending any
such action, suit or proceeding shall be paid or reimbursed by the Registrant
C-12
<PAGE> 141
promptly upon receipt by it of an undertaking of such person to repay such
expenses if it shall ultimately be determined that such person is not entitled
to be indemnified by the Registrant.
Paragraph 6 of the Plan and Agreement Pursuant to Rule 12b-1
between the Registrant and Shay Financial Services Co. (filed as Exhibit 15(f))
provides for indemnification of Shay Financial Services Co. by the Registrant
under certain circumstances.
The foregoing indemnification arrangements are subject to the
provisions of Sections 17(h) and (i) of the Investment Company Act of 1940.
Insofar as indemnification by the Registrant for liabilities
arising under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The Registrant maintains an insurance policy which insures its
directors and officers against certain civil liabilities.
Item 28. Business and Other Connections of Investment Adviser.
Incorporated herein by reference from the Statements of
Additional Information relating to the Portfolios are the following: the
description of the business of Shay Assets Management Co. (the "Adviser")
contained in the section entitled "Investment Adviser and Administrator"; the
information concerning the organization and general partners of Shay Financial
Services Co. (the "Distributor") contained in the section entitled
"Distributor" and the biographical information pertaining to Messrs. Shay and
Sammons contained in the section entitled "Management of the Fund."
Effective May 19, 1995, the Adviser was appointed the
investment adviser to three registered investment companies:
C-13
<PAGE> 142
Institutional Investors Capital Appreciation Fund, Inc., Institutional
Investors Tax-Advantaged Income Fund, Inc. and M.S.B. Fund, Inc. In addition
in late 1995, the Adviser was selected as the investment adviser to several
savings banks located in New York on a non-discretionary basis. To service the
foregoing funds and accounts, the Adviser established an office in New York
City. In 1995, prior to these appointments, the Adviser was engaged in
business only in connection with rendering services to the Fund.
In 1994, the general partner of the Adviser, ACB Assets
Management, Inc. ("ACBAM") changed its name to its present form from SCBA
Assets Management, Inc., which in 1993 had changed its name from USL Assets
Management, Inc. ACBAM has its principal place of business at 111 East Wacker
Drive, Chicago, IL 60601. Brian Patrick Smith and James F. McKenna,
affiliates of ACBAM, are members of the Managing Board of the Adviser and the
Managing Board of the sponsor Mr. Smith is the President and a Director of
Community Bankers Service Corp. and holds other executive positions with
America's Community Bankers ("ACB"). Mr. McKenna is a member of the Board of
Directors of ACB, Community Bankers Service corp. and other ACB affiliates.
His principal occupation is Chief Executive Officer of a federal savings bank,
North Shore Bank, F.S.B. Community Bankers Service Corp. owns a majority of the
outstanding shares of First Financial Trust Company ("Trust Company"), formerly
Savings & Community Bankers Trust Company.
Shay Assets Management, Inc. ("S.A.M."), the managing partner
of the Adviser, is located at 111 E. Wacker Drive, Chicago, Illinois 60601 and
at 888 Brickell Avenue, Miami, FL 33131 and also has an office in New York
City. In addition to the ownership interest of Rodger D. Shay, Arthur M.
Berardelli, Barbara M. Quesep and Rodger D. Shay, Jr. are the other
shareholders of S.A.M. Each such person is also a shareholder and a Vice
President of Shay Financial Services, Inc. ("S.F.S.") and of Shay Government
Securities, Inc. ("S.G.S."). Rodger D. Shay, Jr. is also a Senior Vice
President of S.A.M. Roy R. Hingston and Robert T. Podraza are also Vice
Presidents of S.A.M., S.F.S. and S.G.S.
S.G.S. is the managing partner of Shay Government Securities
Co. ("Shay Government"), a registered government securities dealer with its
principal place of business at 5605 North MacArthur Blvd., Irving, Texas that
is under common control with the Adviser and Distributor by virtue of the
substantially identical ownership of the general partners. Rodger D. Shay is
President, Chief Executive Officer and a member of the Managing Board of Shay
Government and the controlling shareholder of S.G.S. Edward E. Sammons, Jr. is
Executive Vice President of Shay Government and a member of its Managing Board
and is Executive Vice President of S.G.S.
C-14
<PAGE> 143
Rodger D. Shay is a shareholder of First Home Savings Bank,
S.L.A., 48 West Main Street, Pennsville, New Jersey 08070 and has been a member
of its Board of Directors since December 1990. Additionally, Mr. Shay
indirectly owns 24 percent of the outstanding shares of the Trust Company by
virtue of his status as controlling shareholder of Shay Investment Services,
Inc.
Item 29. Principal Underwriters.
(a) The Distributor serves as the principal distributor for
Institutional Investors Capital Appreciation Fund, Inc.,
Institutional Investors Tax-Advantaged Income Fund, Inc.,
and M.S.B. Fund, Inc.
(b) Certain information required by this Item 29 is
incorporated herein by reference to Item 28. Set forth
below are the names of the officers of the Distributor.
(Other than those officers who are also officers of the
Registrant)
Robert T. Podraza
Vice President, Chief Financial Officer,
Chief Operating Officer
111 East Wacker Drive
Chicago, Illinois 60601
Item 30. Location of Accounts and Records.
Books and other documents required to be maintained pursuant
to Rule 31a-1(b)(4) and (b)(10) are in the physical possession of the Fund's
Secretary, 111 East Wacker Drive, Chicago, Illinois 60601; accounts, books and
other documents required by Rule 31a-1(b)(5) through (7) and (b)(11) and Rule
31a-1(f) are in the physical possession of Shay Assets Management Co., 111 East
Wacker Drive, Chicago, Illinois 60601; all other books, accounts and other
documents required to be maintained under Section 31(a) of the Investment
Company Act of 1940 and the Rules promulgated thereunder are in the physical
possession of Provident Financial Processing Corporation, 103 Bellevue Parkway,
Wilmington, Delaware 19809.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish each person to whom a
prospectus is delivered a copy of Registrant's latest annual
report to shareholders upon request and without charge.
[ADD'L TEXT TO COME]
C-15
<PAGE> 144
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Chicago, and the State of Illinois, on this
27th day of December, 1996.
ASSET MANAGEMENT FUND, INC.
By: /s/ Rodger D. Shay
-------------------------
Rodger D. Shay, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on December 27, 1996.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ Rodger D. Shay President (principal executive officer)
- ------------------------------- and Director
Rodger D. Shay
/s/ Edward E. Sammons, Jr. Vice President, Treasurer and Secretary
- ------------------------------- (principal financial and principal
Edward E. Sammons, Jr. accounting officer)
/s/ Leon T. Kendall Director and Chairman of the Board
- -------------------------------
Leon T. Kendall
/s/ Arthur G. De Russo Director
- -------------------------------
Arthur G. De Russo
/s/ David F. Holland Director
- -------------------------------
David F. Holland
/s/ Gerald J. Levy Director
- -------------------------------
Gerald J. Levy
</TABLE>
<PAGE> 145
Exhibit Index
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
1.(a) Articles of Amendment and Restatement of Articles of
Incorporation of Registrant dated November 9, 1982 (1)
(b) Articles Supplementary to Articles of Amendment and
Restatement of Articles of Incorporation of Registrant
dated November 1, 1983 (1)
(c) Form of Articles of Amendment of Articles of
Incorporation of Registrant (1)
(d) Articles Supplementary to Articles of Amendment and
Restatement of Articles of Incorporation of Registrant
dated August 16, 1986 (1)
(e) Articles of Amendment of Articles of Incorporation dated
May 4, 1989 (1)
(f) Articles of Amendment of Articles of Incorporation
February 23, 1990 (1)
(g) Articles Supplementary to Articles of Amendment and
Restatement of Articles of Incorporation of Registrant
dated June 28, 1991 (1)
(h) Form of Articles of Amendment of Articles of
Incorporation (1)
(i) Articles of Amendment of Articles of Incorporation dated
September 26, 1994 (1)
</TABLE>
1
<PAGE> 146
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
2.(a) Bylaws as restated as of September 20, 1991 (1)
3. Not Applicable
4.(a) Specimen certificate for the Short-Term Liquidity
Portfolio Shares of Registrant (1)
(b) Specimen certificate for the Intermediate-Term Liquidity
Portfolio Shares of Registrant (1)
(c) Specimen certificate for the Mortgage Securities
Performance Portfolio Shares of Registrant (1)
(d) Specimen Certificate for the
</TABLE>
2
<PAGE> 147
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
Intermediate Mortgage
Securities Portfolio Shares of Registrant (1)
(e) Specimen Certificate for the Adjustable Rate Mortgage
(ARM) Portfolio Shares of Registrant (1)
5.(a) Investment Advisory Agreement, dated September 1, 1990,
between Registrant and Shay Assets Management Co. with
respect to the Short-Term Liquidity Portfolio, the
Intermediate-Term Liquidity Portfolio, the Mortgage
Securities Performance Portfolio and the Corporate Bond
Portfolio (1)
(b) Form of Amendment to the Investment Advisory Agreement
with respect to the Adjustable Rate Mortgage (ARM)
Portfolio (1)
(c)
</TABLE>
3
<PAGE> 148
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
Amendment to the Investment Advisory Agreement, dated
November 30, 1992, with respect to the Adjustable Rate
Mortgage (ARM) Portfolio (1)
6. *Distribution Agreement
7. Not Applicable
8.(a)(1)(i) Restated Administration Agreement between Registrant and
Provident
</TABLE>
4
<PAGE> 149
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
</TABLE>
5
<PAGE> 150
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
</TABLE>
6
<PAGE> 151
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
Financial Processing Corporation dated March 1,
1991 (1)
(1)(ii) Amendment No. 1 to Restated Administration Agreement
dated June 28, 1991 (1)
(1)(iii) Amendment No. 2 to Restated Administration Agreement
dated September 20, 1991 (1)
(2)(i) Restated Custodian Agreement between Registrant and
Provident National Bank dated March 1, 1991 (1)
(2)(ii) Amendment No. 1 to Restated Custodian Agreement dated
June 28, 1991 (1)
(2)(iii) Amendment No. 2 to Restated Custodian Agreement dated
June 29, 1991 (1)
(3)(i) Restated Transfer Agency Agreement between Registrant and
Provident Financial Processing Corporation dated March 1,
1991 (1)
(3)(ii) Amendment No. 1 to Restated Transfer Agency Agreement
dated June 28, 1991 (1)
9. Not Applicable
10.(a) Opinion and Consent of Vedder, Price, Kaufman & Kammholz
with respect to the Short-Term Liquidity Portfolio, the
Intermediate-Term
</TABLE>
7
<PAGE> 152
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
Liquidity Portfolio, the Mortgage
Securities Performance Portfolio and the Corporate Bond
Portfolio dated December 28, 1990 (1)
(b) Opinion and Consent of Vedder, Price, Kaufman & Kammholz
with respect to the Adjustable Rate Mortgage (ARM)
Portfolio dated July 2, 1991 (1)
11.(a) * Consent of Vedder, Price, Kaufman & Kammholz
(b) * Consent of Coopers & Lybrand L.L.P.
12. Not Applicable
13.(a) Form of Purchase Agreement between Registrant and initial
investors with respect to the Short-Term Liquidity
Portfolio and the Intermediate-Term Liquidity Portfolio
(1)
(b) Form of Purchase Agreement between Registrant and initial
investors with respect to the Mortgage Securities
Performance Portfolio dated November 2, 1983 (1)
</TABLE>
8
<PAGE> 153
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
14. Not Applicable
15.(a) Plan and Agreement Pursuant to Rule 12b-1, dated
September 1, 1990, between Registrant and Shay Financial
Services Co. dated September 1, 1990 (1)
(b) Form of Amendment to Plan and Agreement Pursuant to Rule
12b-1 with respect to the Adjustable Rate Mortgage (ARM)
Portfolio (1)
(c)
</TABLE>
9
<PAGE> 154
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
Amendment to Plan and Agreement Pursuant to Rule 12b-1
with respect to the Adjustable Rate Mortgage (ARM)
Portfolio dated June 28, 1991 (1)
(d) *Amendment to Plan and Agreement Pursuant to Rule
12b-1 dated September 18, 1996
16. Schedules for Calculation of Yield and Total Return (1)
27. * Financial Data Schedules
</TABLE>
- -------------
*Filed with this Post-Effective Amendment.
(1) Previously filed with Post-Effective Amendment No. 26 (Amendment No. 27)
dated February 29, 1996 and incorporated herein by reference.
10
<PAGE> 1
EXHIBIT 6
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 18th day of September, 1996, between ASSET
MANAGEMENT FUND, INC., a Maryland corporation (hereinafter called the "Fund"),
and SHAY FINANCIAL SERVICES CO., an Illinois general partnership (hereinafter
called the "Distributor");
W I T N E S S E T H:
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints the Distributor as its agent for the
distribution of shares of common stock (hereinafter called "shares") of any of
the Fund's authorized Portfolios in jurisdictions wherein shares of the Fund
may legally be offered for sale; provided, however, that the Fund in its
absolute discretion may issue or sell shares directly to holders of shares of
the Fund upon such terms and conditions and for such consideration, if any, as
it may determine, whether in connection with the distribution of subscription
or purchase rights, the payment or reinvestment of dividends or distributions,
or otherwise.
2. The Distributor hereby accepts appointment as agent for the
distribution of the shares of the Fund and agrees that it will use its best
efforts with reasonable promptness to sell such part of the authorized shares
of the Fund remaining unissued as from time to time be effectively registered
under the Securities Act of 1933 ("Securities Act"), at prices determined as
hereinafter provided and on terms hereinafter set forth, all subject to
applicable federal and state laws and regulations and to the Articles of
Incorporation and the By-Laws of the Fund and in accordance with the then
effective registration statement ("Registration Statement") of the Fund under
the Securities Act (and related prospectus).
3. The Fund agrees that it will use its best efforts to keep
effectively registered under the Securities Act for sale as herein contemplated
such shares as the Distributor shall reasonably request and as the Securities
and Exchange Commission shall permit to be so registered.
4. Notwithstanding any other provision hereof, the Fund may
terminate, suspend or withdraw the offering of shares whenever, in its sole
discretion, it deems such action to be desirable.
11
<PAGE> 2
5. The Distributor will act only on its own behalf as principal
in making agreements with selected dealers or others for the sale and
redemption of shares. The Distributor shall have authority to receive and
accept or reject, or arrange for the receipt and acceptance of, such orders in
accordance with the provisions hereof and the then effective Registration
Statement of the Fund.
6. Shares of the Fund offered for sale or sold by the Distributor
shall be so offered or sold at a price per share determined in accordance with
the Fund's then current prospectus relating to the sale of such shares except
as departure from such prices shall be permitted by the rules and regulations
of the Securities and Exchange Commission; provided, however, that any public
offering price for shares of the Fund shall be the net asset value per share.
The net asset value per share shall be determined in the manner and at the
times set forth in the then effective Registration Statement (and related
prospectus) relating to such shares.
7. The price the Fund shall receive for all shares purchased from
the Fund shall be the net asset value used in determining the public offering
price applicable to the sale of such shares.
8. The Distributor shall issue and deliver on behalf of the Fund
(or shall arrange for the issue and delivery of) such confirmations of sales
made by it as agent pursuant to this agreement as may be required. At or prior
to the time of issuance of shares, the Distributor will pay or cause to be paid
to the Fund the amount due the Fund for the sale of such shares. Shares shall
be registered on the transfer books of the Fund in such names and denominations
as the Distributor may specify.
9. The Fund will execute any and all documents and furnish any
and all information which may be reasonably necessary in connection with the
qualification of its shares for sale in such states as the Distributor may
reasonably request (it being understood that the Fund shall not be required
without its consent to comply with any requirement which in its opinion is
unduly burdensome).
10. The Fund will furnish to the Distributor from time to time
such information with respect to the Fund and its shares as the Distributor may
reasonably request for use in connection with the sale of shares of the Fund.
The Distributor agrees that it will not use or distribute or authorize the use,
distribution or dissemination by others in connection with the sale of such
shares any statements, other than those contained in the Fund's current
prospectus or statement of additional information, except such supplemental
literature or advertising as shall be lawful under federal and state securities
laws and regulations.
12
<PAGE> 3
11. The Distributor shall order shares of the Fund from the Fund
only to the extent that it shall have received purchase orders therefor. The
Distributor will not make, or authorize any others to make, any short sales of
shares of the Fund.
12. The Distributor, as agent of and for the account of the Fund,
may repurchase the shares of the Fund at such prices and upon such terms and
conditions as shall be specified in the current prospectus or statement of
additional information of the Fund.
13. The Distributor shall receive such compensation for its
distribution of Fund shares as set forth in the Plan and Agreement Pursuant to
Rule 12b-1, dated as of September 1, 1990 as amended from time to time.
14. In selling or reacquiring shares of the Fund for the account
of the Fund, the Distributor will in all respects conform to the requirements
of all state and Federal laws and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., relating to such sale or
reacquisition, as the case may be. The Distributor will observe and be bound
by all the provisions of the Articles of Incorporation of the Fund (and of any
fundamental policies adopted by the Fund pursuant to the Investment Company Act
of 1940 and set forth in the Registration Statement, or as to which notice
shall otherwise have been given to the Distributor) which at any time in any
way require, limit, restrict or prohibit or otherwise regulate any action on
the part of the Distributor. Distributor shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund or any
Portfolio in connection with the matters to which this Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless disregard by it
of its obligations and duties under this Agreement.
15. The Fund shall assume and pay all charges and expenses of its
operations not specifically assumed or otherwise to be provided by the
Distributor under this Agreement or the Plan and Agreement Pursuant to Rule
12b-1. The Fund will pay or cause to be paid expenses (including the fees and
disbursements of its own counsel) and all taxes and fees payable to the
federal, state or other governmental agencies on account of the registration or
qualification of securities issued by the Fund or otherwise. The Fund will
also pay or cause to be paid expenses incident to the issuance of shares or
beneficial interest, such as the cost of share certificates, if any, issue
taxes, and fees of the transfer agent. The Distributor will pay all expenses
(other than expenses which one or more dealers may bear pursuant to any
agreement with the Distributor) incident to the sale and distribution of the
shares issued or sold hereunder, including, without limiting the generality of
the foregoing, all expenses of printing and distributing any prospectus and of
preparing, printing and distributing or disseminating any other literature,
13
<PAGE> 4
advertising and selling aids in connection with the offering of the shares for
sale (except that such expenses will not include expenses incurred by the Fund
in connection with the preparation, type-setting, printing and distribution of
any registration statement or report or other communication to shareholders in
their capacity as such) and expenses of advertising in connection with such
offering.
16. This agreement shall become effective on the date hereof and
shall continue in effect until March 1, 1998 and from year to year thereafter,
but only so long as such continuance is approved in the manner required by the
Investment Company Act of 1940. Either party hereto may terminate this
agreement on any date by giving the other party at least sixty days' prior
written notice of such termination specifying the date fixed therefor. Without
prejudice to any other remedies of the Fund in any such event the Fund may
terminate this agreement at any time immediately upon any failure of
fulfillment of any of the obligations of the Distributor hereunder.
17. This agreement shall automatically terminate in the event of
its assignment.
18. Any notice under this agreement shall be in writing, addressed
and delivered or mailed, postage postpaid, to the other party at such address
as such other party may designate for the receipt of such notice.
19. If any provision of this Agreement is held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
will not be affected thereby. This Agreement will be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
20. This Agreement shall be construed in accordance with
applicable federal law and the laws of the State of Illinois (without regard to
principals of conflicts of law).
IN WITNESS WHEREOF, the Fund and the Distributor have each caused this
agreement to be executed on its behalf by an officer thereunto duly authorized
and its seal to be affixed as of the day and year first above written.
<TABLE>
<S> <C>
ASSET MANAGEMENT FUND, INC.
ATTEST:
By:
- --------------------------------------------------- ------------------------------------------------
SHAY FINANCIAL SERVICES CO.
ATTEST:
By:
- --------------------------------------------------- ------------------------------------------------
</TABLE>
14
<PAGE> 1
EXHIBIT 11(a)
[Letterhead of Vedder, Price]
December 27, 1996
Asset Management Fund, Inc.
111 East Wacker Drive
Chicago, Illinois 60601
Ladies and Gentlemen:
We hereby consent to the reference to our name under the heading "Counsel and
Independent Accountants" in the Statements of Additional Information contained
in Post-Effective Amendment No. 27 to the registration statement of Form N-1A
under the Securities Act of 1933 for Asset Management Fund, Inc. (File No.
2-78808) and to the filing of this consent as an exhibit to the registration
statement.
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
By: /s/ Cathy G. O'Kelly
-------------------------------------------
Cathy G. O'Kelly
<PAGE> 1
EXHIBIT 11(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the following with respect to Post-Effective Amendment No.
27 to the Registration Statement (File No. 2-78808) on form N-1A under the
Securities Act of 1933, as amended, of Asset Management Fund, Inc.:
- The Incorporation by reference of our report dated December 3, 1996 on
our audit of the financial statements and financial highlights of the
Asset Management Fund, Inc. in the Statement of Additional
Information.
_ The reference to our Firm under the heading "Financial Highlights" in
the Prospectus and under the heading "Counsel and Independent
Accountants" in the Statement of Additional Information.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P
2400 Eleven Penn Center
Philadelphia, Pennsylvania
December 27, 1996
<PAGE> 1
Exhibit 15(d)
AMENDMENT TO PLAN AND AGREEMENT
PURSUANT TO RULE 12b-1
This Amendment, made and entered into as of September 18, 1996, amends
the Plan and Agreement Pursuant to Rule 12b-1 dated September 1, 1990, as
amended June 28, 1991 (the "Plan and Agreement") by and between Asset
Management Fund, Inc. (formerly, Asset Management Fund for Financial
Institutions, Inc.), a Maryland corporation (the "Fund"), and Shay Financial
Services Co., an Illinois general partnership ("Shay").
WITNESSETH:
WHEREAS, Shay has entered into a Distribution Agreement as of this same
date to serve as distributor of the shares of the Fund; and
WHEREAS, upon entering into the Distribution Agreement with Shay the
Fund desires to retain Shay to continue to provide the same services for the
same compensation as set forth in the Plan and Agreement, and Shay desires to be
so retained;
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree to amend the Plan and Agreement as follows:
1. Distribution. Shay is responsible for the distribution,
promotion and marketing of the Fund's Shares.
2. It is understood and agreed that Shay will act as a "principal
underwriter" of the Fund pursuant to the Distribution Agreement.
3. Terms used herein shall have the same meaning as set forth in
the Plan and Agreement.
<PAGE> 2
IN WITHESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of September 18, 1996.
ASSET MANAGEMENT FUND, INC.
ATTEST:
/s/ Rodger D. Shay By: /s/ Edward E. Sammons, Jr.
- --------------------- ------------------------------
Rodger D. Shay Edward E. Sammons, Jr.
SHAY FINANCIAL SERVICES CO.
ATTEST:
/s/ Edward E. Sammons, Jr. By: /s/ Rodger D. Shay
- ---------------------------- -----------------------------
Edward E. Sammons, Jr. Rodger D. Shay
2
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> U.S. GOVERNMENT MORTGAGE SECURITIES PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 57,204,869
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 413,256
<ASSETS-OTHER> 793
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 57,618,918
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 352,131
<TOTAL-LIABILITIES> 352,131
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 59,451,285
<SHARES-COMMON-STOCK> 5,449,313
<SHARES-COMMON-PRIOR> 5,828,832
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,956,507)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,772,009
<NET-ASSETS> 57,266,787
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> SHORT U.S. GOVERNMENT SECURITIES PORTFOLIO
<S> <C>
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<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> ADJUSTABLE RATE MORTGAGE (ARM) PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> INTERMEDIATE MORTGAGE SECURITIES PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> MONEY MARKET PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
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<PER-SHARE-NAV-END> 1.00
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</TABLE>
