<PAGE> 1
As filed with the Securities and Exchange Commission on December 28, 1999
1933 Act Registration No. 2-78808
1940 Act Registration No. 811-354
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 35
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 36
(Check appropriate box or boxes)
--------------
ASSET MANAGEMENT FUND
(Exact name of Registrant as specified in Charter)
230 WEST MONROE STREET, CHICAGO, ILLINOIS 60606
(Address of principal executive offices)(Zip code)
Registrant's Telephone Number, including Area Code: 312-644-3100
EDWARD E. SAMMONS, JR., PRESIDENT AND with a copy to:
ASSET MANAGEMENT FUND, INC. CATHY G. O'KELLY, ESQ.
230 WEST MONROE STREET VEDDER, PRICE, KAUFMAN & KAMMHOLZ
CHICAGO, ILLINOIS 60606 222 NORTH LASALLE STREET
(Name and address of agent for service) CHICAGO, ILLINOIS 60601
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, 2000 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.
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<PAGE> 2
PROVIDING INVESTMENT
OPPORTUNITIES COVERING
THE COMPLETE MATURITY
RANGE OF FIXED INCOME
SECURITIES
March 1, 2000
PROSPECTUS
[AMF LOGO]
ASSET MANAGEMENT FUND
MONEY MARKET PORTFOLIO, CLASS I SHARES*
SHORT U.S. GOVERNMENT SECURITIES PORTFOLIO
ADJUSTABLE RATE MORTGAGE (ARM) PORTFOLIO
INTERMEDIATE MORTGAGE SECURITIES PORTFOLIO
U.S. GOVERNMENT MORTGAGE SECURITIES PORTFOLIO
The Securities and Exchange Commission has not approved or disapproved these
securities or passed on the adequacy of this prospectus. It is a federal
offense to suggest otherwise.
* Class D shares of the Money Market Portfolio are offered in a separate
prospectus.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary...........................................................................................................1
Money Market Portfolio, Class I Shares
Short U.S. Government Securities Portfolio...................................................................1
Adjustable Rate Mortgage (ARM) Portfolio
Intermediate Mortgage Securities Portfolio
U.S. Government Mortgage Securities Portfolio................................................................5
Investment Information...........................................................................................11
Investment Objectives and Principal Investment Strategies...................................................11
Money Market Portfolio and Short U.S. Government Securities Portfolio...................................11
Adjustable Rate Mortgage (ARM) Portfolio, Intermediate Mortgage Securities Portfolio and
U.S. Government Mortgage Securities Portfolio......................................................12
Description of Securities and Related Risks.................................................................13
Mortgage-Related Securities.............................................................................13
Collateralized Mortgage Obligations.....................................................................15
When-Issued and Delayed-Delivery Securities.............................................................15
Variable and Floating Rate Securities...................................................................15
Repurchase Agreements...................................................................................15
Investment Limitations......................................................................................16
Fund and Portfolio Information...................................................................................16
Investment Adviser..........................................................................................16
Advisory Fee Expenses...................................................................................16
Portfolio Managers......................................................................................17
Distributor.................................................................................................17
Net Asset Value..................................................................................................17
Investing in the Fund............................................................................................18
Share Purchases.............................................................................................18
Minimum Investment Required.................................................................................18
What Shares Cost............................................................................................18
Dividends...................................................................................................19
Capital Gains...............................................................................................19
Redeeming Shares.................................................................................................19
Telephone Redemption........................................................................................19
Written Requests............................................................................................20
Signatures..............................................................................................20
Receiving Payment.......................................................................................20
Exchanges........................................................................................................20
Shareholder Information..........................................................................................21
Voting Rights...............................................................................................21
Tax Information.............................................................................................21
Financial Highlights.............................................................................................22
Money Market Portfolio......................................................................................22
Short U.S. Government Securities Portfolio..................................................................23
Adjustable Rate Mortgage (ARM) Portfolio....................................................................24
Intermediate Mortgage Securities Portfolio..................................................................25
U. S. Government Mortgage Securities Portfolio..............................................................26
New Account Application.....................................................................................27
</TABLE>
<PAGE> 4
MONEY MARKET PORTFOLIO, CLASS I SHARES
SHORT U.S. GOVERNMENT SECURITIES PORTFOLIO SUMMARY
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Both Portfolios seek 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.
Each Portfolio will limit its investments and investment techniques so
as to qualify for investment by national banks, federal savings
associations and federal credit unions.
PRINCIPAL INVESTMENT STRATEGIES
The MONEY MARKET PORTFOLIO invests in high quality short-term money
market instruments (including assets subject to repurchase agreements).
The Portfolio is managed to keep its share price stable at $1.00.
The SHORT U.S. GOVERNMENT SECURITIES PORTFOLIO invests in high-quality
assets, primarily in securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. To help minimize
fluctuations in principal, the Portfolio will maintain a
dollar-weighted average maturity of less than three years. The
Portfolio is not a money market fund.
MAIN RISKS OF INVESTING
Despite the MONEY MARKET PORTFOLIO'S policies of purchasing primarily
government securities and maintaining a short average portfolio
maturity, the Portfolio could experience principal losses and may lose
money in the rare event that portfolio holdings default or interest
rates rise sharply in an unusually short period. Therefore, there is no
assurance that the Portfolio will be able to maintain a stable net
asset value of $1.00 per share. Yields may vary with different interest
rates. In addition, neither the Federal Deposit Insurance Corporation
("FDIC") nor any other government agency insures or guarantees
investments in the Portfolio. The Portfolio is not federally insured,
has no bank or government guarantees, is not endorsed by any bank or
government agency, and may lose value.
For the SHORT U.S. GOVERNMENT SECURITIES PORTFOLIO, the primary risk
factor that may reduce the Portfolio's return is change in interest
rates. Prices of bonds tend to move inversely with changes in interest
rates. While a rise in rates may provide the opportunity to invest
available cash for higher yields, the most immediate effect is usually
a drop in bond prices and, therefore, the Portfolio's share price. A
security backed by the U.S. Treasury or the full faith and credit of
the United States is guaranteed only as to the timely payment of
interest and principal when held to maturity, but not the market value
of such security. Although the Portfolio should have little risk of
principal loss, it does not seek to maintain a constant share price.
Your principal value can fluctuate over time. You may lose money by
investing in the Portfolio.
PORTFOLIO PERFORMANCE HISTORY
The following bar charts and tables provide an illustration of how each
Portfolio's performance has varied over time. The bar charts depict the
change in each Portfolios' performance from year to year during the
period indicated. A Portfolio's past performance does not necessarily
indicate how it will perform in the future. Both the charts and tables
assume reinvestment of dividends and distributions.
1
<PAGE> 5
MONEY MARKET PORTFOLIO, CLASS I SHARES
- --------------------------------------------------------------------------------
Annual Returns for the Years Ended December 31
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
8.08% 5.62% 3.34% 2.78% 3.93% 5.69% 5.19% 5.32% 5.25%
</TABLE>
- -------------------
* The year-to-date return for the three-month period ended January 31, 2000
is _____%.
During the period shown in the bar chart, the highest return for a quarter was
[2.41% (quarter ended 6/30/89) and the lowest return for a quarter was 0.68%
(quarter ended 12/31/93)]. The 7-day yield of the Class I Shares of the Money
Market Portfolio ending on December 31, 1999 was ____%. To obtain the
Portfolio's current 7-day yield information, please call us toll-free at
1-800-527-3713.
AVERAGE ANNUAL TOTAL RETURNS.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
-------- -------- ---------
<S> <C> <C>
Money Market Portfolio........................... % % %
--------- ---------- ----------
</TABLE>
2
<PAGE> 6
SHORT U.S. GOVERNMENT SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
Annual Returns for the Years Ended December 31
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
9.40% 11.76% 6.51% 5.78% 0.40% 11.35% 3.61% 6.25% 6.60%
</TABLE>
- --------------
* The year-to-date return for the three-month period ended January 31, 2000
s ____%.
During the period shown in the bar chart, the highest return for a quarter was
[5.22% (quarter ended 6/30/89) and the lowest return for a quarter was -0.42%
(quarter ended 3/31/94)].
AVERAGE ANNUAL TOTAL RETURNS. The following table compares the Portfolio's
average annual returns for the periods ended December 31, 1999, to a broad-based
securities market index.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
------- ------- --------
<S> <C> <C> <C>
Short U.S. Government Securities Portfolio................ % % %
The Lehman Short Government 1-3 Years Index*.............. % % %
</TABLE>
* The Lehman Short Government 1-3 Years Index is an unmanaged index
comprised of the full range of 1-3 year U.S. Government and agency
securities.
3
<PAGE> 7
FEES AND EXPENSES: This section describes the fees and expenses you may pay if
you buy and hold shares of the Portfolios.
SHAREHOLDER FEES. Neither of the Portfolios impose shareholder fees. These are
the fees charged directly to an investor's account. Examples of shareholder fees
include sales loads, redemption fees or exchange fees.
ANNUAL PORTFOLIO OPERATING EXPENSES are paid out of a Portfolio's assets and
include fees for portfolio management, maintenance of shareholder accounts,
shareholder servicing, accounting and other services. You do not pay these fees
directly but, as the example shows, these costs are borne indirectly by
shareholders.
<TABLE>
<CAPTION>
MONEY MARKET SHORT U.S. GOVERNMENT
PORTFOLIO, CLASS I SHARES SECURITIES PORTFOLIO
<S> <C> <C>
SHAREHOLDER FEES
Maximum Sales Charge Imposed on Purchases.................. None None
Maximum Sales Charge Imposed on Reinvested
Dividends................................................. None None
Redemption Fees............................................ None None
Exchange Fees.............................................. None None
Maximum Account Fee........................................ None None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fee............................................... 0.15%* 0.25%
12b-1 Fees................................................. 0.15%* 0.15%
Other Expenses............................................. 0.10% 0.10%
----- ----
Total Fund Operating Expenses.............................. 0.40% 0.50%
</TABLE>
* This table and the following example have been prepared to illustrate
annual Fund Operating Expenses, assuming no fee waivers. The Adviser
voluntarily waived its advisory fees through September 30, 1999. Effective
October 1, 1999, the Adviser terminated its fee waiver of the entire
advisory fee, 0.15% of average daily net assets. Effective October 1,
1999, the Distributor instituted a waiver of its entire 12b-1 fee, 0.15%
of average daily net assets on the Class I Shares of the Money Market
Portfolio. Therefore, "Advisory Fee" and "Total Fund Operating Expenses"
for Class I Shares of the Money Market Portfolio were 0% and .25%,
respectively, for November 1, 1998 through October 31, 1999.
EXAMPLE: This example is intended to help you compare the cost of investing in a
Portfolio with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in either Portfolio for the time periods indicated,
reinvesting all dividends and distributions, and then redeem all of your shares
at the end of those periods. The example also assumes that your investment has a
5% return each year and that a Portfolio's operating expenses remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Portfolio, Class I Shares..................... $41 $128 $224 $505
Short U.S. Government Securities Portfolio................. $51 $160 $280 $628
</TABLE>
4
<PAGE> 8
ADJUSTABLE RATE MORTGAGE (ARM) PORTFOLIO
INTERMEDIATE MORTGAGE SECURITIES PORTFOLIO
U.S. GOVERNMENT MORTGAGE SECURITIES PORTFOLIO SUMMARY
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Portfolios seek 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.
Each Portfolio will limit its investments and investment techniques so
as to qualify for investment by national banks, federal savings
associations, and federal credit unions.
PRINCIPAL INVESTMENT STRATEGIES
The ADJUSTABLE RATE MORTGAGE (ARM) PORTFOLIO seeks lower volatility of
principal than would be provided by fixed rate securities by investing
primarily in high quality adjustable rate mortgage 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 rate
volatility.
The INTERMEDIATE MORTGAGE SECURITIES PORTFOLIO invests primarily in
intermediate-term mortgage-related securities guaranteed directly by
the United States or issued or guaranteed by U.S. Government agencies
or instrumentalities. The Portfolio seeks 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 and intends to maintain a dollar-weighted expected average
life of between 2 to 7 years.
The U.S. GOVERNMENT MORTGAGE SECURITIES PORTFOLIO invests primarily in
mortgage-related securities guaranteed directly by the United States or
issued or guaranteed by U.S. Government agencies or instrumentalities.
The Portfolio intends to maintain a dollar-weighted expected average
life of between 4 to 12 years.
MAIN RISKS OF INVESTING
Normally, the values of mortgage-related securities (and in particular,
fixed-rate ones) vary inversely with changes in prevailing interest
rates. However, the potential for appreciation in fixed-rate
mortgage-related securities in the event of a decline in interest rates
could be lessened by increased principal prepayments on those
securities (prepayment risk). Conversely, during periods of rising
interest rates, property owners may prepay their mortgages more slowly
than expected, resulting in slower prepayments of mortgage-backed
securities (extension risk) which reduces the value of the security and
increases its duration. In addition, investments in private issue
mortgage-related securities may expose a Portfolio to the risk that the
credit rating of the securities will be downgraded or the issuers
default. You may lose money by investing in the Portfolios.
For fixed rate mortgage-related securities (THE INTERMEDIATE MORTGAGE
SECURITIES PORTFOLIO AND THE U.S. GOVERNMENT MORTGAGE SECURITIES
PORTFOLIO) the potential for volatility in price increases as the
duration of the security increases. A security backed by the U.S.
Treasury or the full faith and credit of the United States is
guaranteed only as to the timely payment of interest and principal when
held to maturity and not as to market value.
While the ADJUSTABLE RATE MORTGAGE (ARM) PORTFOLIO seeks to maintain a
stable net asset value, its net asset value may be more volatile than a
money market fund and it might not be able to maintain a stable value.
In addition, interest rates payable under adjustable rate mortgage
securities are typically locked in only for short specified periods of
time. Consequently, an increase in interest rates may cause a decline
in
5
<PAGE> 9
the price of a security until such time as the security's interest
rate is adjusted upward and a decline in prevailing interest rates may
cause a decline in the yield on investments in such securities at the
next reset.
The Portfolios are designed for long-term investors. The Portfolios'
returns will vary. There is no assurance that any Portfolio will
achieve its investment objective. Your principal value can fluctuate
over time.
PORTFOLIO PERFORMANCE HISTORY
The following bar charts and tables provide an illustration of how each
Portfolio's performance has varied over time. The bar charts depict the
change in each Portfolios' performance from year-to-year during the
period indicated. A Portfolio's past performance does not necessarily
indicate how it will perform in the future. Both the charts and tables
assume reinvestment of dividends and distributions.
ADJUSTABLE RATE MORTGAGE (ARM) PORTFOLIO
Annual Returns for the Years Ended December 31
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1991** 1992 1993 1994 1995 1996 1997 1998 1999
- ------ ---- ---- ---- ---- ---- ---- ---- ----
1.95% 4.42% 4.70% 1.97% 9.13% 5.92% 6.51% 5.14%
</TABLE>
- -------------------
* The year-to-date return for the three-month period ended January 31, 2000
is ____%.
** From inception September 18, 1991.
During the period shown in the bar chart, the highest return for a quarter was
[2.95% (quarter ended 3/31/95) and the lowest return for a quarter was 0.07%
(quarter ended 6/30/94)].
AVERAGE ANNUAL TOTAL RETURNS. The following table compares the Portfolio's
average annual returns for the periods ended December 31, 1999, to a broad-based
securities market index.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR 5 YEARS (9/18/91)
<S> <C> <C> <C>
Adjustable Rate Mortgage (ARM) Portfolio.............. % % %
The Lehman Adjustable Rate Mortgage Index*............ % % %
</TABLE>
* The Lehman Adjustable Rate Mortgage Index is an unmanaged index of adjustable
rate mortgage-related securities. Comparative returns from 9/18/91 through
12/31/92 are from the Lehman Short 1-2 Year Index. The Lehman Adjustable Rate
Mortgage Index, which is a more relevant index, did not exist during this
period.
6
<PAGE> 10
INTERMEDIATE MORTGAGE SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
Annual Returns for the Years Ended December 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ---- ---- ---- ---- ---- ---- ---- ---- ---- -----
6.16% 16.18% 7.87% 6.86% (1.60%) 13.90% 2.85% 8.37% 6.90%
</TABLE>
- ---------------
* The year-to-date return for the three-month period ended January 31, 2000 is
- ----%.
During the period shown in the bar chart, the highest return for a quarter was
[8.57% (quarter ended 6/30/89) and the lowest return for a quarter was -1.63%
(quarter ended 3/31/94)].
AVERAGE ANNUAL TOTAL RETURNS. The following table compares the Portfolio's
average annual returns for the periods ended December 31, 1999, to a broad-based
securities market index.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
------- ------- --------
<S> <C> <C> <C>
Intermediate Mortgage Securities Portfolio....... % % %
The Lehman U.S. Mortgage Index*.................. % % %
</TABLE>
* The Lehman U.S. Mortgage Index is an unmanaged index of agency mortgage-
backed securities.
7
<PAGE> 11
U.S. GOVERNMENT MORTGAGE SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
Annual Returns for the Years Ended December 31
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
10.05% 14.77% 6.44% 6.82% (2.33%) 16.15% 2.82% 9.67% 7.05%
</TABLE>
- -----------------
* The year-to-date return for the three-month period ended January 31, 2000 is
- ----%.
During the period shown in the bar chart, the highest return for a quarter was
[7.99% (quarter ended 6/30/89) and the lowest return for a quarter was -2.37%
(quarter ended 3/31/94)].
AVERAGE ANNUAL TOTAL RETURNS. The following table compares the Portfolio's
average annual returns for the periods ended December 31, 1999, to a broad-based
securities market index.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
------- ------- --------
<S> <C> <C> <C>
U.S. Government Mortgage Securities Portfolio...... % % %
The Lehman U.S. Mortgage Index*.................. % % %
</TABLE>
* The Lehman U.S. Mortgage Index is an unmanaged index of agency mortgage-
backed securities.
8
<PAGE> 12
FEES AND EXPENSES: This section describes the fees and expenses you may pay if
you buy and hold shares of the Portfolios.
SHAREHOLDER FEES. None of the Portfolios impose shareholder fees. These are the
fees charged directly to an investor's account. Examples of shareholder fees
include sales loads, redemption fees or exchange fees.
ANNUAL PORTFOLIO OPERATING EXPENSES are paid out of a Portfolio's assets and
include fees for portfolio management, maintenance of shareholder accounts,
shareholder servicing, accounting and other services. You do not pay these fees
directly but, as the example shows, these costs are borne indirectly by
shareholders.
<TABLE>
<CAPTION>
ADJUSTABLE RATE INTERMEDIATE U.S. GOVERNMENT
MORTGAGE (ARM) MORTGAGE MORTGAGE
PORTFOLIO SECURITIES PORTFOLIO SECURITIES PORTFOLIO
<S> <C> <C> <C>
SHAREHOLDER FEES
Maximum Sales Charge Imposed on
Purchases....................................... None None None
Maximum Sales Charge Imposed on
Reinvested Dividends............................ None None None
Redemption Fees.................................. None None None
Exchange Fees.................................... None None None
Maximum Account Fee.............................. None None None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fee..................................... 0.45%(1) 0.35%(2) 0.25%
12b-1 Fees....................................... 0.25%(1) 0.15% 0.15%
Other Expenses................................... 0.09% 0.09% 0.13%
-------- ----- -----
Total Fund Operating Expenses.................... 0.79% 0.59% 0.53%
</TABLE>
(1) The fee table and the following example have been prepared to illustrate
annual Fund Operating Expenses assuming no fee waivers. The Adviser and
the Distributor voluntarily waived a portion of the their fees during
the 1999 fiscal year. Therefore, the "Advisory Fee," "12b-1 Fees" and
"Total Fund Operating Expenses" for the Adjustable Rate Mortgage (ARM)
Portfolio were _____%, _____% and _____%, respectively, for 1999.
(2) The fee table and the following example have been prepared to illustrate
annual Fund Operating Expenses assuming no fee waivers. The Adviser
voluntarily waived a portion of its advisory fee during the 1999 fiscal
year. Therefore, the "Advisory Fee" and "Total Fund Operating Expenses"
for the Intermediate Mortgage Securities Portfolio were _____% and
_____%, respectively, for 1999.
9
<PAGE> 13
EXAMPLE: This example is intended to help you compare the cost of investing in
the Adjustable Rate Mortgage (ARM) Portfolio, Intermediate Mortgage Securities
Portfolio or U.S. Government Mortgage Securities Portfolio with the cost of
investing in other mutual funds. The example assumes that you invest $10,000 in
a Portfolio for the time periods indicated, reinvesting all dividends and
distributions, and then redeem all of your shares at the end of those periods.
The example also assumes that your investment has a 5% return each year and that
a Portfolio's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Adjustable Rate Mortgage (ARM) Portfolio.................... $81 $252 $439 $978
Intermediate Mortgage Securities Portfolio.................. $60 $189 $329 $738
U.S. Government Mortgage Securities Portfolio............... $54 $170 $296 $665
</TABLE>
10
<PAGE> 14
INVESTMENT INFORMATION
INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
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. 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. Each Portfolio
will limit its investments and investment techniques so as to qualify
for investment by national banks, federal savings associations and
federal credit unions. The Fund's investment objective and these
policies and limitations cannot be changed as to a Portfolio without
approval of that Portfolio's shareholders.
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
"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.
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 current
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. In addition, under normal market
conditions, the Portfolio will maintain a dollar-weighted average
maturity of less than three years as a non-fundamental investment
policy.
Permissible 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 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. These obligations may also include variable and
floating rate securities.
11
<PAGE> 15
- 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, Freddie Mac,
Fannie Mae, 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 savings 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 397
days 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
Trustees has adopted operating policies to further restrict certain
investments (see Statement of Additional Information for these two
Portfolios).
Adjustable Rate Mortgage (ARM) Portfolio,
Intermediate Mortgage Securities Portfolio and
U.S. Government Mortgage Securities Portfolio
The Adjustable Rate Mortgage (ARM) Portfolio, the Intermediate Mortgage
Securities Portfolio, and the U.S. Government Mortgage Securities
Portfolio (collectively referred to as the "Mortgage Securities
Portfolios") invest 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
Office of Thrift Supervision ("OTS") Regulations. Pending any revisions
of the current OTS Regulations, each Mortgage Securities 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 Mortgage
Securities Portfolio will not purchase any investments having a
risk-based weighting in excess of 20% under the current risk-based
capital regulations established by the OTS. Also, each Mortgage
Securities Portfolio will not purchase any investments having a
risk-based weighting for banks in excess of 50% under current federal
regulations of the appropriate regulatory agencies. Furthermore, each
Mortgage Securities Portfolio will 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 OTS and the National Credit Union Administration, respectively, and
each Mortgage Securities Portfolio limits its investments to those
permissible without limitation for federal savings associations,
national banks and federal credit unions under current applicable
regulations.
The Adjustable Rate Mortgage (ARM) Portfolio will invest at least 65%
of its assets in adjustable rate mortgage securities, except when the
Portfolio assumes a temporary defensive position. This investment
policy is deemed fundamental and may not be changed without shareholder
approval. Because of the characteristics of adjustable rate mortgage
securities, the Adviser expects that a portfolio of these types of
securities will generally provide higher current yields than money
market securities or
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<PAGE> 16
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.
The Intermediate Mortgage Securities Portfolio will invest at least 65%
of its assets in mortgage-related securities paying fixed or adjustable
rates of interest, except when the Portfolio assumes a temporary
defensive position. This investment policy is deemed fundamental and
may not be changed without shareholder approval. 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 will
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 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.
The U.S. Government Mortgage Securities Portfolio will invest at least
65% of its assets in 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
when the Portfolio assumes a temporary defensive position. This
investment policy is deemed fundamental and may not be changed without
shareholder approval.
In addition to mortgage-related securities, the Mortgage Securities
Portfolios may invest in: (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 Mortgage Securities Portfolios), (2) investments in
certificates of deposit or other time deposits or accounts of an FDIC
Insured Institution, including foreign branches of FDIC insured banks,
(3) repurchase agreements collateralized by securities in which the
Portfolios may invest, 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 investments in such acceptances of the
same bank do not exceed 0.25% of such bank's total deposits.
The risk-based capital information and QTL qualifying percentages for
each Mortgage Securities Portfolio will be communicated quarterly to
the shareholders. The Board of Trustees has adopted operating policies
to further restrict certain investments (see the Statement of
Additional Information for the Mortgage Securities Portfolios). When
business or financial conditions warrant, the Portfolios may take a
temporary defensive position and invest without limit in the foregoing
investments.
DESCRIPTION OF SECURITIES AND RELATED RISKS
- --------------------------------------------------------------------------------
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 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. The text that follows is applicable to the
Mortgage Securities Portfolios.
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.
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<PAGE> 17
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 Fannie Mae ("FNMA") and Freddie Mac
("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 Mortgage Securities
Portfolios 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-rate 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 Mortgage Securities Portfolios invest generally will
help to reduce sharp changes in each Portfolio's net asset value in
response to normal interest rate fluctuations to the extent that each
Portfolio is invested in ARMS. As the interest rates on the mortgages
underlying a 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 a 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 Portfolios 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
Mortgage Securities Portfolios 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
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<PAGE> 18
levels could cause such mortgage securities to behave more like
long-term, fixed-rate debt securities. Moreover, a 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 were 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 Mortgage Securities Portfolios. 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.
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
Mortgage Securities Portfolios will not invest in any class with
residual characteristics. In addition, each 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 Mortgage Securities Portfolios 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. Each Portfolio will make commitments for
such transactions only when it has the intention of actually acquiring
the securities. If a 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 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. Each 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.
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<PAGE> 19
Variable and Floating Rate Securities
The Portfolios may purchase U.S. Government securities that have
variable or floating rates of interest ("Variable Rate Securities").
These securities pay interest at rates that are adjusted periodically
according to a specified formula, usually with reference to some
interest rate index or market interest rate. The interest paid on
Variable Rate Securities is a function primarily of the index or
market rate upon which the interest rate adjustments are based.
Similar to fixed rate debt instruments, variable and floating rate
instruments are subject to changes in value based on changes in market
interest rates, but because of the interest reset provision, the
potential for capital appreciation or depreciation is generally less
than for fixed rate obligations. Each Portfolio determines the
maturity of Variable Rate Securities in accordance with Securities and
Exchange Commission rules which allow the Portfolio to consider
certain of such instruments as having maturities shorter than the
maturity date on the face of the instrument.
Repurchase Agreements
The Portfolios may enter into repurchase agreements under which
each may acquire securities in which the particular Portfolio may
invest 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. 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. No Portfolio will enter into any repurchase
agreements maturing in more than 60 days.
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 Money Market Portfolio and the Short U.S. Government Securities
Portfolio may not invest more than 10% (in the case of the Money Market
Portfolio) or more than 15% (in the case of the Short U.S. Government
Securities Portfolio) of its net assets in illiquid securities,
including repurchase agreements maturing in more than seven days.
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
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<PAGE> 20
its agencies or instrumentalities, or time deposits (including
certificates of deposit), savings deposits and bankers' acceptances of
United States branches of United States banks.
The Mortgage Securities Portfolios may not invest more than 15%
of their respective net assets in illiquid securities, including
repurchase agreements maturing in more than seven days.
The Mortgage Securities Portfolios 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 each 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.
FUND AND PORTFOLIO INFORMATION
INVESTMENT ADVISER
- --------------------------------------------------------------------------------
Investment decisions for the Portfolios are made by Shay Assets
Management, Inc. ("Adviser"), a company controlled by Roger D. Shay.
The Adviser, which is located at 230 West Monroe Street, Chicago,
Illinois 60606, is registered under the Investment Advisers Act of 1940
and manages approximately $1.5 billion in assets. The Adviser is
responsible for placing purchase and sale orders for portfolio
instruments.
Advisory Fee Expenses
The Portfolios pay an annual advisory fee based upon a percentage of
average daily net assets. During the period from November 1, 1998
through October 31, 1999, the advisory fee was paid to the Adviser as
follows:
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<PAGE> 21
<TABLE>
<S> <C>
Money Market Portfolio, Class I Shares...................... 0.00%*
Short U.S. Government Securities Portfolio.................. 0.25%
Adjustable Rate Mortgage (ARM) Portfolio.................... 0.25%*
Intermediate Mortgage Securities Portfolio.................. 0.25%*
U.S. Government Mortgage Securities Portfolio............... 0.25%
</TABLE>
- -----------------------------
* The investment adviser voluntarily waived all advisory fees through
September 30, 1999, with respect to the Money Market Portfolio. Without
such waivers, the fee would have been 0.15%. The investment advisers
voluntarily waived a portion of the advisory fees with respect to the
Adjustable Rate Mortgage (ARM) Portfolio and the Intermediate Mortgage
Securities Portfolio. Without such waivers, the fees would have been 0.45%
and 0.35%, respectively.
Each voluntary waiver may be terminated at any time by the Adviser.
Portfolio Managers
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., President
of the Adviser. Mr. Sammons has served as President of the Fund since 1998
and was Vice President of the Fund from 1985 through 1997. Mr. Sammons
assumed primary responsibility for the Fund's investments in 1985.
DISTRIBUTOR
Pursuant to the Distribution Agreement, Shay Financial Services, Inc.
(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").
Because these fees are paid out of a Portfolio's assets on an on-going
basis over time, these fees will increase the cost of your investment. This
charge could cost you more over time than you would pay through some other
types of sales charges; however, the Fund's Rule 12b-1 fees are so low that
the Fund is classified as a "no-load" fund.
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. Portfolio assets are valued at market
value using market quotations or prices obtained from an independent
pricing service based upon prices provided by market makers or
estimates of market values obtained from yield data relating to
instruments or securities with similar characteristics. For certain
mortgage related securities, the Board of Trustees has approved the use
of a matrix developed by the Adviser that the Board believes reflects
the fair value of such securities. Short-term instruments maturing
within 60 days may be valued at amortized cost, provided that the Board
of Trustees 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 Trustees 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.
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<PAGE> 22
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.
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 The Bank
of New York are both open for business.) Payment must be in the form of
federal funds. Wire transfer instructions for federal funds should be
as follows: Bank of New York, New York, NY, ABA#021 000 018, Ref:
Account Number 8900403195. 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 The Bank of New
York 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 The Bank of New York 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 The Bank of New York 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 to the
Fund, the Adviser or The Bank of New York. 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 each Portfolio is $10,000. There is
no minimum balance. Subsequent purchases may be made in any amount.
WHAT SHARES COST
- --------------------------------------------------------------------------------
Shares of the Portfolios 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 imposed by the Portfolios.
For all Portfolios other than the Money Market Portfolio, the net asset
value is determined each Business Day at 4:00 P.M., New York City time.
For the Money Market Portfolio, net asset value is determined twice on
each Business Day, at 1:00 P.M. and at 4:00 P.M., New York City time.
Net asset value for purposes of pricing redemption orders is
19
<PAGE> 23
determined at 4:00 P.M., New York City time, on any day redemptions are
permitted and a proper redemption request is received (see "Redeeming
Shares").
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 shareholder requests cash payments by contacting
the Distributor.
For all Portfolios other than the Money Market Portfolio, 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. For the Money Market Portfolio, an
investor will receive the dividend declared on the day its purchase
order is settled but will not receive the dividend declared on the day
its redemption order is effected.
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 shareholder's
option, paid in cash.
REDEEMING SHARES
The Portfolios redeem shares at their respective net asset values 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:
Shareholders 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, 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 shareholder's bank or other
account shown on the Fund's records the next Business Day, but
in no case later than seven days. A shareholder 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
shareholder 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.
20
<PAGE> 24
- For the Money Market Portfolio:
Shareholders 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
shareholder'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 shareholder 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, 230 W. Monroe Street, Chicago, Illinois 60606;
Attention: Asset Management Fund. If share certificates have been
issued, in order to redeem such shares, the properly endorsed and
guaranteed certificates must be received by BISYS 3435 Stelzer Road,
Columbus, Ohio 43219 before the redemption will be effected.
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. Shareholders with questions concerning documentation
should call the Distributor at (800) 527-3713.
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
Shareholders 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. Shareholders 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.
21
<PAGE> 25
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 shareholders.
SHAREHOLDER INFORMATION
VOTING RIGHTS
- --------------------------------------------------------------------------------
The Fund has five 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. Shares of each Portfolio
represent interests only in the corresponding Portfolio and have equal
voting rights within each Portfolio. The Money Market Portfolio is the
only Portfolio of the Fund that has two classes of shares: the Class I
shares and Class D shares. Shares of each class have equal voting
rights within each class and within the Money Market Portfolio. The
Class D shares of the Money Market Portfolio are offered in a separate
prospectus. The Fund's Declaration of Trust provides that on any matter
submitted to a vote of shareholders, all shares, irrespective of
portfolio or class, shall be voted in the aggregate and not by
portfolio or class, except that (i) as to any matter with respect to
which a separate vote of any portfolio or class is required by the
Investment Company Act of 1940, such requirements as to a separate vote
by that portfolio or 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 portfolio or class, only shareholders of the
affected portfolio or class shall be entitled to vote thereon. The
Bylaws of the Fund require that a special meeting of shareholders be
held upon the written request of shareholders holding not less than 10%
of the issued and outstanding shares of the Fund (or the portfolio or
classes thereof).
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 shareholders.
The Fund intends to distribute all of the net income and any gains of
the Portfolios to shareholders. Unless otherwise exempt, shareholders
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
shareholders 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.
22
<PAGE> 26
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the
Fund's financial performance for the past 5 years. Certain information
reflects financial results for a single Portfolio share outstanding
throughout each year. The total returns in the tables represent the
rate that an investor would have earned on an investment in a
particular portfolio (assuming reinvestment of all dividends and
distributions). This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with each Portfolio's
financial statements, are included the Statement of Additional
Information, which is available upon request.
MONEY MARKET PORTFOLIO, CLASS I SHARES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<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.................... .0523 .0513 .0516 .0547
Net realized and unrealized gain (loss)
on investments........................ -0- -0- -0- -0- -0-
--------- --------- --------- --------- ---------
Total from investment operations......... .0523 .0513 .0516 .0547
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Dividends paid to shareholders from
net investment income................. (______) (.0523) (.0513) (.0516) (.0547)
--------- --------- --------- ---------
Net asset value, end of year.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total return.............................. % 5.35% 5.25% 5.29% 5.60%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's)....... $ $ 58,445 $ 48,104 $ 69,484 $ 36,869
Ratio of expenses to average net assets.. %(1) 0.25%(1) 0.26%(1) 0.24%(1) 0.24%(1)
Ratio of net investment income to
average net assets.................... % 5.22% 5.14% 5.15% 5.40%
</TABLE>
- --------------------------------------------------------------------------------
(1) Without fees waivers for the years ended October 31, 1999, 1998, 1997, 1996,
and 1995, the ratios of expenses to average net assets would have been
_____%, .40%, .41%, .39%, and .39%, respectively.
23
<PAGE> 27
- --------------------------------------------------------------------------------
SHORT U.S. GOVERNMENT SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........ $ $ 10.55 $ 10.56 $ 10.68 $ 10.45
--------- --------- --------- --------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................... .6144 .6273 .6370 .6746
Net realized and unrealized gain (loss) .1100 (.0100) (.1200) .2300
on investments........................ --------- --------- --------- --------- ----------
Total from investment operations......... .7244 .6173 .5170 .9046
--------- --------- --------- --------- ----------
LESS DISTRIBUTIONS:
Dividends paid to shareholders from (.6144) (.6273) (.6370) (.6746)
net investment income.................
Net asset value, end of year............. $ 10.66 $ 10.55 $ 10.56 $ 10.68
========= ========= ========= ========= ==========
Total return.............................. % 7.08% 6.04% 4.99% 8.94%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's)....... $ $ 114,240 $ 112,304 $ 176,892 $ 167,343
Ratio of expenses to average net assets.. % 0.50% 0.50% 0.48% 0.49%
Ratio of net investment income to
average net assets.................... % 5.83% 5.97% 6.02% 6.42%
Portfolio turnover rate.................. % 84% 75% 69% 112%
</TABLE>
24
<PAGE> 28
<TABLE>
<CAPTION>
ADJUSTABLE RATE MORTGAGE (ARM) PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........ $ $ 9.99 $ 9.95 $ 9.94 $ 9.78
-------- -------- --------- -------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................... .5676 .6036 .5958 .6035
Net realized and unrealized gain (loss)
on investments........................ (.0800) .0400 .0100 .1600
-------- -------- --------- -------- ---------
Total from investment operations......... .4876 .6436 .6058 .7635
-------- -------- --------- -------- ---------
LESS DISTRIBUTIONS:
Dividends paid to shareholders from
net investment income................. (.5676) (.6036) (.5958) (.6035)
Net asset value, end of year............. $ $ 9.91 $ 9.99 $ 9.95 $ 9.94
======== ======== ========= ======== ========
Total return............................. % 5.00% 6.65% 6.27% 8.02%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's)....... $ $895,550 $ 751,334 $796,016 $891,538
Ratio of expenses to average net assets.. %(1) 0.49%(1) 0.49%(1) 0.47%(1) 0.48%(1)
Ratio of net investment income to
average net assets.................... % 5.70% 6.07% 6.01% 6.12%
Portfolio turnover rate.................. % 53% 74% 60% 68%
</TABLE>
- --------------------------------------------------------------------------------
(1) Without fee waivers for the years ended October 31, 1999, 1998, 1997, 1996
and 1995, the ratios of expenses to average net assets would have been
____%, .79%, .79%, .77% and .78%, respectively.
25
<PAGE> 29
<TABLE>
<CAPTION>
INTERMEDIATE MORTGAGE SECURITIES PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........ $ $ 9.62 $ 9.52 $ 9.68 $ 9.34
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................... .5932 .6245 .6101 .6211
Net realized and unrealized gain (loss)
on investments........................ .0761 .1000 (.1600) .3400
--------- --------- --------- --------- ---------
Total from investment operations......... .6693 .7245 .4501 .9611
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Dividends paid to shareholders:
From net investment income............... (.5932) (.6245) (.6101) (.6211)
In excess of net investment income....... (.0361) -0- -0- -0-
--------- --------- --------- --------- ---------
Total distributions to shareholders...... (.6293) (.6245) (.6101) (.6211)
--------- --------- --------- --------- ---------
Net asset value, end of year.............. $ $ 9.66 $ 9.62 $ 9.52 $ 9.68
========= ========= ========= ========= =========
Total return.............................. % 7.18% 7.90% 4.82% 10.63%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's)....... $ $ 99,438 $ 77,982 $ 92,289 $ 187,087
Ratio of expenses to average net assets.. %(1) 0.49%(1) 0.49%(1) 0.44%(1) 0.38%(1)
Ratio of net investment income to
average net assets.................... % 6.17% 6.58% 6.38% 6.55%
Portfolio turnover rate.................. % 69% 120% 133% 133%
</TABLE>
- --------------------------------------------------------------------------------
(1) Without fee waivers for the years ended October 31, 1999, 1998, 1997,
1996 and 1995, the ratios of expenses to average net assets would have
been .____%, .59%, .59%, .58% and .58%, respectively.
26
<PAGE> 30
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
U. S. GOVERNMENT MORTGAGE SECURITIES PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........ $ $ 10.67 $ 10.51 $ 10.68 $ 10.23
--------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................... .6947 .7344 .7479 .7703
Net realized and unrealized gain (loss)
on investments........................ 0.877 .1600 (.1700) .4500
--------- -------- -------- -------- --------
Total from investment operations......... .7824 .8944 .5779 1.2203
--------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends paid to shareholders
From net investment income............... (.6947) (.7344) (.7479) (.7703)
In excess of net investment income....... (.0277) -0- -0- -0-
From net realized gains.................. -0- -0- -0- -0- -0-
--------- -------- -------- -------- --------
Total distributions to shareholders...... (.7224) (.7344) (.7479) (.7703)
-------- -------- -------- --------
Net asset value, end of year............. $ $ 10.73 $ 10.67 $ 10.51 $ 10.68
========= ======== ======== ======== ========
Total return............................. % 7.58% 8.87% 5.63% 12.37%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's)....... $ $ 80,174 $ 53,572 $ 57,267 $ 62,258
Ratio of expenses to average net assets.. % 0.53% 0.53% 0.52% 0.53%
Ratio of net investment income to
average net assets.................... % 6.48% 7.01% 7.10% 7.39%
Portfolio turnover rate.................. % 93% 135% 165% 177%
</TABLE>
27
<PAGE> 31
[AMF LOGO]
ASSET MANAGEMENT FUND, (AMF)
NEW ACCOUNT APPLICATION
HOW TO OPEN YOUR AMF ACCOUNT AND PURCHASE SHARES
1. Complete the New Account Application. Call toll free to open a
temporary account, 1-800-527-3713. Fax your completed application to (312)
214-1424 or mail the completed application to the Fund's sponsor, Shay Financial
Services, Inc., 230 W. Monroe Street, Suite 2810, Chicago, IL 60606.
2. Your account number will be assigned.
TO PLACE YOUR ORDER
1. Call toll free 1-800-527-3713 to place your order and confirm wire
instructions.
2. Wire funds to:
Bank of New York, New York, NY
ABA #021 000 018
Ref: Account Number 8900403195
For purchase of: (AMF Money Market, Short U.S. Government;
ARM, Intermediate Mortgage or U.S. Government Mortgage
Portfolio)
Amount: $(amount to be invested)
3. Written confirmations and monthly statements of your AMF
transactions will be mailed.
<PAGE> 32
TO OPEN A NEW ACCOUNT
Complete the application below in full (print or type). Mail completed
application to: Shay Financial Services, Inc., 230 West Monroe, Suite 2810,
Chicago, IL 60606.
A. ACCOUNT REGISTRATION
Name of Institution
---------------------------------------------------
Attention
-------------------------------------------------------------
Mailing Address
-------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Phone Number
----------------------------------------------------------
Fax Number
------------------------------------------------------------
Tax Identification Number
---------------------------------------------
Dividend Option [ ] Cash [ ] Reinvest
B. REDEMPTIONS
Please provide complete instructions for wiring of redemption proceeds
in Federal funds to your account with a bank or trust company.
Name of Bank
or Trust Company
------------------------------------------------------
Street Address
--------------------------------------------------------
City, State, Zip
------------------------------------------------------
ABA Number
------------------------------------------------------------
Account Name
----------------------------------------------------------
Account Number
--------------------------------------------------------
<PAGE> 33
C. PHONE ORDER AUTHORIZATIONS
Please list individuals (up to four) who are authorized to make
purchases and redemptions by phone:
Name
------------------------------------------------------------------
Phone
-----------------------------------------------------------------
E-mail Address
--------------------------------------------------------
Name
------------------------------------------------------------------
Phone
-----------------------------------------------------------------
E-mail Address
--------------------------------------------------------
Name
------------------------------------------------------------------
Phone
-----------------------------------------------------------------
E-mail Address
--------------------------------------------------------
Name
------------------------------------------------------------------
Phone
-----------------------------------------------------------------
E-mail Address
--------------------------------------------------------
AUTHORIZED SIGNATURE Date
----------------------------------- -----------------
Name (print or type)
-----------------------------------------------------------
Title
--------------------------------------------------------------------------
Phone Number
-------------------------------------------------------------------
<PAGE> 34
SHAREHOLDER REFERENCE INFORMATION:
DISTRIBUTOR
Shay Financial Services, Inc.
230 West Monroe Street
Chicago, Illinois 60606
INVESTMENT ADVISER
Shay Assets Management, Inc.
230 West Monroe Street
Chicago, Illinois 60606
ADMINISTRATOR AND TRANSFER
AND DIVIDEND AGENT
BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
LEGAL COUNSEL
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601
CUSTODIAN
The Bank of New York
100 Church Street, 10th Floor
New York, New York 10286
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania 19103
TRUSTEES AND OFFICERS
Richard M. Amis
Trustee
Arthur G. De Russo
Trustee
David F. Holland
Trustee
Gerald J. Levy
Trustee and Vice Chairman
Rodger D. Shay
Trustee and Chairman
Edward E. Sammons, Jr.
President
Robert T. Podraza
Vice President and Assistant Treasurer
Steve Pierce
Treasurer
Daniel K. Ellenwood
Secretary
Additional information about the Portfolios may be found in the Statement of
Additional Information. The Statement of Additional Information contains more
detailed information on fund investments and operations. The semiannual and
annual shareholder reports contain a discussion of the market conditions and the
investment strategies that significantly affected the Portfolios' performance
during the last fiscal year, as well as a listing of portfolio holdings and
financial statements. These documents may be obtained without charge from the
following sources:
By Phone:
1-800-527-3713
By Mail:
Shay Financial Services, Inc.
Attn: Asset Management Fund
230 West Monroe Street
Chicago, IL 60606
Public Reference Section
Securities and Exchange Commission
Washington, D.C. 20549-6009
(a duplication fee is charged)
In Person:
Public Reference Room
Securities and Exchange Commission,
Washington, D.C.
(Call 1-800-SEC-0330 for more information)
By Internet:
http://www.amffunds.com
http://www.sec.gov
The Statement of Additional Information is incorporated by reference into this
prospectus (is legally a part of this prospectus).
Investment Company Act file number: Asset Management Fund 811-3541
<PAGE> 35
[AMF LOGO] ASSET MANAGEMENT FUND
MONEY MARKET PORTFOLIO
D SHARES
MARCH 1, 2000
<PAGE> 36
PROVIDING INVESTMENT
OPPORTUNITIES COVERING THE
COMPLETE MATURITY RANGE
OF FIXED INCOME SECURITIES
March 1, 2000
- --------------------------------------------------------------------------------
PROSPECTUS
[AMF LOGO]
ASSET MANAGEMENT FUND
MONEY MARKET PORTFOLIO
D SHARES
The Securities and Exchange Commission has not approved or
disapproved these securities or passed on the adequacy
of this prospectus.
It is a federal offense to suggest otherwise.
<PAGE> 37
<TABLE>
<CAPTION>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<S> <C>
SUMMARY........................................................................1
MONEY MARKET PORTFOLIO SUMMARY.................................................1
INVESTMENT INFORMATION.........................................................4
Investment Objectives and Principal Investment
Strategies............................................................4
Description of Securities and Related Risks...............................5
Variable and Floating Rate Securities.................................5
Repurchase Agreements.................................................5
FUND AND PORTFOLIO INFORMATION.................................................6
Investment Adviser........................................................6
Advisory Fee Expenses.................................................6
Portfolio Managers....................................................6
Distributor...............................................................7
NET ASSET VALUE................................................................7
INVESTING IN THE FUND..........................................................7
Purchases and Redemptions.................................................7
Purchases.............................................................8
Redemptions...........................................................8
ADDITIONAL INFORMATION.........................................................8
Statements and Reports....................................................8
What Shares Cost..........................................................9
Dividends.................................................................9
Capital Gains.............................................................9
REDEEMING SHARES...............................................................9
SHAREHOLDER INFORMATION........................................................9
Voting Rights.............................................................9
Tax Information..........................................................10
</TABLE>
<PAGE> 38
MONEY MARKET PORTFOLIO SUMMARY
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Money Market Portfolio (the "Portfolio"), a portfolio of the Asset
Management Fund (the "Fund"), seeks to achieve as high a level of
current income as is consistent with the preservation of capital, the
maintenance of liquidity and the average maturity of investments held
by the Portfolio.
PRINCIPAL INVESTMENT STRATEGIES
The Portfolio invests in high quality short-term money market
instruments (including assets subject to repurchase agreements). The
Portfolio is managed to keep its share price stable at $1.00.
MAIN RISKS OF INVESTING
Despite the Portfolio's policies of purchasing primarily government
securities and maintaining a short average portfolio maturity, the
Portfolio could experience principal losses and may lose money in the
rare event that portfolio holdings default or interest rates rise
sharply in an unusually short period. Therefore, there is no assurance
that the Portfolio will be able to maintain a stable net asset value of
$1.00 per share. Yields may vary with different interest rates. In
addition, neither the Federal Deposit Insurance Corporation ("FDIC")
nor any other government agency insures or guarantees investments in
the Portfolio. The Portfolio is not federally insured, has no bank or
government guarantees, is not endorsed by any bank or government
agency, and may lose value.
<PAGE> 39
PORTFOLIO PERFORMANCE HISTORY
The following bar chart and table provides an illustration of how the
performance of the Portfolio has varied over time and it depicts the
change in the Portfolio's performance from year to year during the
period indicated. A Portfolio's past performance does not necessarily
indicate how it will perform in the future. Both the chart and the
table assume reinvestment of dividends and distributions.
Annual Returns for the Years Ended December 31(1)
<TABLE>
<S> <C>
1990 8.08%
1991 5.62%
1992 3.34%
1993 2.78%
1994 3.93%
1995 5.69%
1996 5.19%
1997 5.32%
1998 5.25%
1999 %
-----
- ----------------
</TABLE>
* The year-to-date return for the three-month period ended January 31, 2000 is
_____%.
(1) The information below reflects the actual performance of the Class I Shares
of the Portfolio. The Class D Shares of the Portfolio is a new Class for
the Fund for which performance is not yet available. The Class I Shares of
the Fund are offered in a separate Prospectus. The returns for the Class D
Shares will be substantially similar to those of the Class I Shares shown
in the chart below because all shares of the Fund are invested in the same
portfolio of securities. The annual returns of the different Classes of
shares will differ only to the extent that the expenses of the Classes
differ.
During the period shown in the bar chart, the highest return for a
quarter was [2.41% (quarter ended 6/30/89) and the lowest return for a
quarter was 0.68% (quarter ended 12/31/93). The Money Market
Portfolio's 7-day yield ending on December 31, 1999 was _____%.] To
obtain the Portfolio's current 7-day yield information, please call us
toll-free at 1-800-527-3713.
AVERAGE ANNUAL TOTAL RETURNS (years ended December 31, 1999)
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
<S> <C> <C> <C>
Money Market Portfolio, Class I Shares.......................
</TABLE>
2
<PAGE> 40
FEES AND EXPENSES:
This table describes the fees and expenses you may pay if you buy and hold
shares of the Portfolio.
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
CLASS D SHARES
----------------------
<S> <C>
SHAREHOLDER FEES
Maximum Sales Charge Imposed on Purchases............. None
Maximum Sales Charge Imposed on Reinvested
Dividends.......................................... None
Redemption Fees....................................... None
Exchange Fees......................................... None
Maximum Account Fee................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A
PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fee.......................................... 0.15%
12b-1 Fees............................................ 0.60%*
Other Expenses........................................ 0.10%
----
Total Fund Operating Expenses......................... 0.85%
Fee Waivers........................................... 0.10%
Net Expenses.......................................... 0.75%
====
</TABLE>
- ----------------
* Under the Investment Advisory Agreement, the Advisor has agreed to limit
total operating expenses of the Money Market Portfolio to 0.75%. Although the
Distributor has the right to collect 12b-1 fees of 0.60%, it has agreed to
waive 0.10% of this fee in order to keep Total Fund Operating Expenses at or
below 0.75%.
EXAMPLE
This example is intended to help you compare the cost of investing in
Class D Shares of the Money Market Portfolio with the cost of investing
in other mutual funds. The example assumes that you invest $10,000 in
Class D Shares for the time periods indicated, reinvesting all
dividends and distributions, and then redeem all of your shares at the
end of those periods. The example also assumes that your investment has
a 5% return each year and that a Portfolio's operating expenses remain
the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Portfolio, Class D Shares............
</TABLE>
3
<PAGE> 41
INVESTMENT INFORMATION
INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
The investment objective of the Portfolio is to achieve as high a level
of current income as is consistent with the preservation of capital,
the maintenance of liquidity and the average maturity of investments
held by the Portfolio. The Portfolio pursues this investment objective
by investing in the securities described below. While there is no
assurance that the Portfolio will achieve its investment objective, it
endeavors to do so by following the investment policies and limitations
described below. The Portfolio will limit its investments and
investment techniques so as to qualify for investment by national
banks, federal savings associations, and federal credit unions. The
Portfolio's investment objective and this policy cannot be changed as
to the Portfolio without approval of the Portfolio's shareholders.
The Portfolio invests, directly or subject to repurchase agreements,
only in high quality short-term assets. The Portfolio will not invest
in securities which cannot be purchased by national banks, federal
savings and loan associations, or federal credit unions. The Portfolio
will maintain a stable net asset value of $1.00 per share and will use
the amortized cost method of valuation, pursuant to Rule 2a-7.
Permissible investments for the 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 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. These obligations may also include variable and
floating rate securities.
- 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, Freddie Mac,
Fannie Mae, 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 savings 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 397
days or less (if negotiable) or 90 days or less (if
non-negotiable). Investments in certificates of
4
<PAGE> 42
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.
The 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
Trustees has adopted operating policies to further restrict certain
investments (see the Statement of Additional Information for the
Portfolio).
DESCRIPTION OF SECURITIES AND RELATED RISKS
- --------------------------------------------------------------------------------
Variable and Floating Rate Securities
The Portfolio may purchase U.S. Government securities that have
variable or floating rates of interest ("Variable Rate Securities").
These securities pay interest at rates that are adjusted periodically
according to a specified formula, usually with reference to some
interest rate index or market interest rate. The interest paid on
Variable Rate Securities is a function primarily of the index or market
rate upon which the interest rate adjustments are based. Similar to
fixed rate debt instruments, variable and floating rate instruments are
subject to changes in value based on changes in market interest rates,
but because of the interest reset provision, the potential for capital
appreciation or depreciation is generally less than for fixed rate
obligations. The Portfolio determines the maturity of Variable Rate
Securities in accordance with Securities and Exchange Commission rules
which allow the Portfolio to consider certain of such instruments as
having maturities shorter than the maturity date on the face of the
instrument.
Repurchase Agreements
The Portfolio may enter into repurchase agreements under which it may
acquire securities in which the Portfolio may invest 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.
5
<PAGE> 43
FUND AND PORTFOLIO INFORMATION
INVESTMENT ADVISER
- --------------------------------------------------------------------------------
Investment decisions for the Portfolio are made by Shay Assets
Management, Inc. ("Adviser"), a company controlled by Rodger D. Shay.
The Adviser, which is located at 230 West Monroe Street, Chicago,
Illinois 60606, is registered under the Investment Advisers Act of 1940
and manages approximately $1.5 billion in assets. The Adviser is
responsible for placing purchase and sale orders for portfolio
instruments.
Advisory Fee Expenses
The Portfolio pays an annual advisory fee based upon a percentage of
average daily net assets. During the period from November 1, 1997
through December 7, 1997, the advisory fee was paid to Shay Assets
Management Co., the Fund's previous investment advisor, and from
December 8, 1997 through October 31, 1998, the advisory fee was paid to
the Adviser as follows:
Money Market Portfolio.................... 0.00%*
- ----------------
* The investment advisers voluntarily waived all advisory fees for the
Portfolio. Without such waivers, the fee would have been 0.15%.
Beginning October 19, 1999 the Adviser will no longer waive its
advisory fee.
Portfolio Managers
The Portfolio Managers of the Adviser manage the Portfolio's
investments as a team under the day-to-day direction of Edward E.
Sammons, Jr., President of the Adviser. Mr. Sammons has served as
President of the Fund since 1998 and was Vice
6
<PAGE> 44
President of the Fund from 1985 through 1997. Mr. Sammons assumed primary
responsibility for the Fund's investments in 1985.
DISTRIBUTOR
- --------------------------------------------------------------------------------
Pursuant to the Distribution Agreement, the Distributor, as the
principal distributor of the Class D Shares, directly and through other
firms advertises and promotes the Fund. In addition, the Distributor
retains BISYS Fund Services Ohio, Inc. and various financial
institutions to administer and operate, respectively, sweep programs
through which investors may invest in the Class D Shares. 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"). Because these fees are paid out of the Class's assets on
an ongoing basis over time, these fees will increase the cost of your
investment. This charge could cost you more over time than you would
pay through some other types of sales charges.
NET ASSET VALUE
The 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 Trustees
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.
INVESTING IN THE FUND
PURCHASES AND REDEMPTIONS
- --------------------------------------------------------------------------------
The following information pertains only to investors who establish
accounts and invest automatically through cash sweep arrangements
offered and operated by participating financial institutions. Clients
should also read, sign and retain the Sweep Agreement governing the
sweep arrangement at their financial institution, as this agreement
contains additional information.
Investors who wish to establish accounts and invest other than through
such sweep arrangements should call the Distributor 1-800-527-3713 to
receive a copy of the Retail Investors Purchase and Redemption
Instructions and Additional Information.
7
<PAGE> 45
Purchases
Shares of the Portfolio may be purchased only through cash sweep
transactions generated by the Investor's financial institution in their
role as operator of the cash sweep arrangement. Establishment of an
account requires that certain documents and applications be signed
before any cash sweep investments can be processed. Participating
financial institutions are responsible for prompt transmission of
orders relating to the program, and they may charge for their services.
The Portfolio reserves the right to reject any purchase order. Purchase
orders may be refused if, for example, they are of a size that could
disrupt management of the Portfolio.
Redemptions
Shares of the Portfolio may be redeemed only through cash sweep
transactions generated by the investor's financial institution in their
role as operator of the cash sweep arrangement.
If making immediate payment of redemption proceeds could adversely
affect the Portfolio, shareholders may be paid up to seven days after
receipt of the redemption request. Also, when the U.S. government and
agency securities market is closed (or when trading is restricted) for
any reason other than its respective customary weekend or holiday
closing, or under any emergency circumstances as determined by the
Securities and Exchange Commission ("SEC") to merit such action,
redemption or payment may be suspended or postponed.
ADDITIONAL INFORMATION
The following information pertains only to investors who establish
accounts and invest automatically through cash sweep arrangements
offered and administered by participating financial institutions.
Investors who wish to establish accounts and invest other than through
such sweep arrangements should call the Distributor 1-800-527-3713 to
receive a copy of the Retail Investors Purchase and Redemption
Instructions and Additional Information.
STATEMENTS AND REPORTS
- --------------------------------------------------------------------------------
Shareholders will receive a monthly statement listing each purchase and
redemption and any dividends paid during the month. Daily confirmations
will not be sent. A statement with tax information will be mailed by
January 31st following each tax year and also will be filed with the
Internal Revenue Service. At least twice a year shareholders will
receive the Portfolio's financial statements.
8
<PAGE> 46
WHAT SHARES COST
- --------------------------------------------------------------------------------
D Shares are sold at their net asset value next determined after the
purchase order becomes effective. The Portfolio seeks to maintain a net
asset value of $1.00 per share. (See "Net Asset Value.") There is no
sales charge imposed by the Portfolio. Net asset value is determined
twice on each Business Day, at 1:00 p.m. and at 4:00 p.m., New York
City time. For purposes of pricing redemption orders, net asset value
is determined at 4:00 p.m., New York City time, on any day redemptions
are permitted and a proper redemption request is received (see
"Redeeming Shares").
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 paid in cash and credited to the shareholder's account at
the participating financial institution.
An investor will receive the dividend declared on the day its purchase
order is settled but will not receive the dividend declared on the day
its redemption order is effected.
CAPITAL GAINS
- --------------------------------------------------------------------------------
Net capital gains, if any, realized by the Portfolio are declared and
paid once each year and reinvested in shares or, at the shareholder's
option, paid in cash.
REDEEMING SHARES
The Portfolio redeems shares at its 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.
SHAREHOLDER INFORMATION
VOTING RIGHTS
- --------------------------------------------------------------------------------
Besides the Money Market Portfolio, the Fund has four other portfolios:
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. Shares
of each Portfolio represent interests only in the corresponding
Portfolio and having equal voting rights within that Portfolio. The
Money Market Portfolio is the only portfolio of the Fund that has two
classes of shares: the
9
<PAGE> 47
D Shares and the I Shares. Shares of each class have equal voting rights within
each class and within the Money Market Portfolio. The Fund's Declaration of
Trust provides that on any matter submitted to a vote of shareholders, all
shares, irrespective of portfolio or class, shall be voted in the aggregate and
not by portfolio or class, except that (i) as to any matter with respect to
which a separate vote of any portfolio or class is required by the Investment
Company Act of 1940, such requirements as to a separate vote by that portfolio
or 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
portfolio or class, only shareholders of the affected portfolio or class shall
be entitled to vote thereon. The Bylaws of the Fund require that a special
meeting of shareholders be held upon the written request of shareholders holding
not less than 10% of the issued and outstanding shares of the Fund (or the
Portfolio or Classes thereof).
TAX INFORMATION
- --------------------------------------------------------------------------------
The Portfolio 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. The Portfolio intends to
remain so qualified for its future taxable years so long as such
qualification is in the best interests of shareholders.
The Fund intends to distribute all of the net income and any gains of
the Portfolio to shareholders. Unless otherwise exempt, shareholders
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
shareholders 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.
10
<PAGE> 48
SHAREHOLDER REFERENCE INFORMATION:
DISTRIBUTOR
Shay Financial Services, Inc.
230 West Monroe Street
Chicago, Illinois 60606
INVESTMENT ADVISER
Shay Assets Management, Inc.
230 West Monroe Street
Chicago, Illinois 60606
ADMINISTRATOR AND TRANSFER AND
DIVIDEND AGENT
BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
LEGAL COUNSEL
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601
CUSTODIAN
The Bank of New York
100 Church Street, 10th Floor
New York, New York 10286
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania 19103
TRUSTEES AND OFFICERS
Richard M. Amis
Trustee
Arthur G. De Russo
Trustee
David F. Holland
Trustee
Gerald J. Levy
Trustee and Vice Chairman
Rodger D. Shay
Trustee and Chairman
Edward E. Sammons, Jr.
President
Robert T. Podraza
Vice President and Assistant Treasurer
Steve Pierce
Treasurer
Daniel K. Ellenwood
Secretary
Additional information about the Portfolio may be found in the Statement of
Additional Information. The Statement of Additional Information contains more
detailed information on the Fund's investments and operations. The semiannual
and annual shareholder reports contain a discussion of the market conditions and
the investment strategies that significantly affected the Portfolio's
performance during the last fiscal year, as well as a listing of portfolio
holdings and financial statements. These documents may be obtained without
charge from the following sources:
By Phone:
1-800-527-3713
By Mail:
Shay Financial Services, Inc.
Attn: Asset Management Fund
230 West Monroe Street
Chicago, IL 60606
Public Reference Section
Securities and Exchange Commission
Washington, D.C. 20549-6009
(a duplication fee is charged)
In Person:
Public Reference Room
Securities and Exchange Commission,
Washington, D.C.
(Call 1-800-SEC-0330 for more information)
By Internet:
http://www.amffunds.com
http://www.sec.gov
The Statement of Additional Information is incorporated by reference into this
prospectus (is legally a part of this prospectus).
Investment Company Act file number: Asset Management Fund 811-3541
<PAGE> 49
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 2000
MONEY MARKET PORTFOLIO
AND
SHORT U.S. GOVERNMENT SECURITIES PORTFOLIO
ASSET MANAGEMENT FUND
230 WEST MONROE STREET, CHICAGO, ILLINOIS 60606
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 (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. It should
be read in conjunction with the Fund's Prospectus, dated March 1, 2000 (the
"Prospectus"), a copy of which may be obtained from the Fund at the address
noted above.
The financial statements pertaining to these portfolios which appear in
the Fund's 1999 Annual Report to Shareholders are incorporated herein by
reference.
<PAGE> 50
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Fund History....................................................................................................B-1
The Fund's Objective, the Portfolios and Their Investment Policies..............................................B-1
Portfolio Turnover..............................................................................................B-2
Purchase and Redemption of Shares...............................................................................B-2
Dividends, Distributions, Yield and Total Return Quotations.....................................................B-3
Management of the Fund..........................................................................................B-5
Investment Adviser and Administrator............................................................................B-8
Distributor....................................................................................................B-11
Transfer and Dividend Agent....................................................................................B-12
Custodian......................................................................................................B-12
Determination of Net Asset Value...............................................................................B-12
Taxes..........................................................................................................B-13
Portfolio Transactions.........................................................................................B-14
Investment Restrictions........................................................................................B-15
Organization and Description of Fund Shares....................................................................B-16
Counsel and Independent Accountants............................................................................B-16
General Information............................................................................................B-17
Financial Statements...........................................................................................B-17
</TABLE>
<PAGE> 51
Capitalized terms not defined in this Statement of Additional
Information and defined in the Prospectus shall have the meanings defined in the
Prospectus.
FUND HISTORY
Asset Management Fund (the "Fund") is a Delaware business trust
organized under a Declaration of Trust ("Declaration of Trust") dated July 22,
1999. The Fund was formerly a Maryland corporation, which commenced operations
on November 9, 1982. In September 1994, the Fund changed its name from Asset
Management Fund for Financial Institutions, Inc. to Asset Management Fund, Inc.
and on September 30, 1999, as part of the reorganization into a Delaware
business trust, changed its name to Asset Management Fund.
THE FUND'S OBJECTIVE, THE PORTFOLIOS
AND THEIR INVESTMENT POLICIES
Under the policies adopted by the Board of Trustees of the Fund,
permissible investments for each Portfolio include those described in the
Prospectus, together with the following, as long as principal and interest on
such 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.
The Money Market Portfolio will invest in securities 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 Trustees 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 Trustees of the Fund for approval or
ratification.
<PAGE> 52
The Money Market Portfolio does not invest in securities with a
remaining maturity of greater than 397 calendar days.
The Short U.S. Government Securities Portfolio (the "Short Government
Portfolio") will invest in securities 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
Trustees of the Fund.
Other Current Policies. Under current policies of the Board of
Trustees, the Fund has adopted certain voluntary restrictions with respect to
each Portfolio's 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, Fannie Mae, the Government National Mortgage
Association, the Federal Farm Credit Banks, the Federal
Financing Bank, the Student Loan Marketing Association and
Freddie Mac;
(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 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 shareholder vote, the Fund will not alter these
restrictions without notice to shareholders.
See "Investment Restrictions" in this Statement of Additional
Information for a description of additional investment restrictions of the
Portfolios.
PORTFOLIO TURNOVER
The Short Government 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."
PURCHASE AND REDEMPTION OF SHARES
The Fund believes that shares of both Portfolios are eligible for
purchase without limitation by federal thrifts, national banks and federal
credit unions.
Investors may be charged a fee if they effect transactions through a
broker or agent. Brokers and intermediaries are authorized to accept orders on
the Fund's behalf.
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
B-2
<PAGE> 53
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 shareholders of each Portfolio.
DIVIDENDS, DISTRIBUTIONS, YIELD AND TOTAL RETURN QUOTATIONS
Dividends on shares of each Portfolio are paid monthly on the last
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 investment income of each Class 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 and long-term gains, if any, on portfolio
securities, (iii) less accrued expenses attributable to the Portfolio and the
relevant Class (including the Portfolio's pro rata share, based on its relative
net assets in relation to that of the Short Government Portfolio for the
applicable period, of the fees payable to the Distributor) and the general
expenses of the Fund prorated on the basis of relative net assets of the
Portfolio and the Class in relation to the net assets of the Fund's other
portfolios applicable to that period.
From time to time each Class of 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
Money Market 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.
The Money Market Portfolio's seven-day yield and seven-day effective
yield of the Class I Shares for the period ended October 31, 1999, were _____%
and ______%, respectively. Without fee waivers, the seven-day yield would have
been ______%, and the seven-day effective yield would have been _____%. 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 with various indices and investments, other performance measures or
rankings, or other mutual funds, or indices or averages of other mutual funds.
Net investment 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 accrued
expenses attributable to the Portfolio (including the Portfolio's pro rata
share, based on its relative net assets in relation to that
B-3
<PAGE> 54
of the Money Market Portfolio for the applicable period, of the fees payable to
the Distributor) and the general expenses of the Fund prorated on the basis of
relative net assets of the Portfolio in relation to the net assets of the Fund's
other portfolios applicable to that period.
From time to time the Short Government Portfolio advertises its "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, 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 a Portfolio's yield and total return to be higher than
they otherwise would be.
For the 30-day period ended October 31, 1999, the Short Government
Portfolio's annualized yield was ______%. The average annual total rates of
return for the periods ended October 31, 1999 were:
One year %
Five years %
Ten years %
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, 1999. 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 "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, the Short Government Portfolio's performance may be
compared with various indices and investments, other performance measures or
rankings, or other mutual funds, or indices or averages of other mutual funds.
B-4
<PAGE> 55
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Fund's powers except those reserved for the shareholders. The Trustees'
responsibilities include reviewing the actions of the Fund's investment adviser,
distributor and administrator.
TRUSTEES AND OFFICERS
Trustees and Officers of the Fund, together with information as to
their principal business occupations during the past five years, are shown
below. Each trustee 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.
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME, BIRTHDATE AND ADDRESS HELD WITH FUND DURING PAST FIVE YEARS
<S> <C> <C>
Richard M. Amis (__/__/51) Trustee President, First Federal Savings & Loan
630 Clarksville Street Association since 1984; Director, First Financial
Paris, TX 75460 Trust Company; formerly Chairman, Texas
Savings and Community Bankers Association.
Arthur G. De Russo (__/__/21) Trustee Chief Executive Officer, Eastern Financial Federal
5397 S.E. Major Way Credit Union from 1974 to 1992; Chairman and
Stuart, FL 34997 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.
</TABLE>
B-5
<PAGE> 56
<TABLE>
<CAPTION>
NAME, BIRTHDATE AND ADDRESS POSITION(S) PRINCIPAL OCCUPATION(S)
HELD WITH FUND DURING PAST FIVE YEARS
<S> <C> <C>
David F. Holland(__/__/42) Trustee Chairman of the Board since 1989 and Chief
17 New England Executive Park Executive Officer since 1986 of Boston Federal
Burlington, MA 01803 Savings Bank; [DIRECTOR OF FUND FROM 1988 TO
1989 AND SINCE 1993]; Director of Federal Home
Loan Bank of Boston; until December 1997
Chairman of America's Community Banking
Partners, Inc. and Director of ACB Investment
Services, Inc.; Director of M.S.B. Fund,
Inc. since 1997; Director and Chairman since
December 1995 of Center for Financial Studies;
Director of NYCE Corporation since 1995;
[DIRECTOR FROM 1990 TO 1995 AND CHAIRMAN
1993-1994 OF AMERICA'S COMMUNITY BANKERS]; member
from 1995 to 1997 and President since 1997 of Thrift
Institutions Advisory Council.
Gerald J. Levy (__/__/32) Vice Chairman of the Chairman and Chief Executive Officer, Guaranty
4000 W. Brown Deer Road Board and Trustee Bank, S.S.B. since 1984 (from 1959 to 1984, he
Milwaukee, WI 53209 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.]
</TABLE>
B-6
<PAGE> 57
<TABLE>
<CAPTION>
Name, Birthdate and Address Position(s) Principal Occupation(s)
Held with Fund During Past Five Years
<S> <C> <C>
Rodger D. Shay (__/__/37) Chairman of the Chairman and Director of Shay Assets
1000 Brickell Avenue Board and Trustee Management, Inc. since August 1997 (previously
Miami, FL 33131 President and Director from 1990 to August 1997); Chairman and
Director of Shay Financial Services, Inc. since August 1997
(previously President and Director from 1990 to August 1997);
President, Chief Executive Officer and member of the Managing
Board of Shay Assets Management Co. from 1990 to December
1997; President, Chief Executive Officer and member of the
Managing Board of Shay Financial Services Co. from 1990 to
December 1997; [DIRECTOR FROM 1986 TO 1991 AND PRESIDENT FROM
1986 TO 1992, U.S. LEAGUE SECURITIES, INC.]; Vice President
since 1995 of Institutional Investors Capital Appreciation
Fund, Inc. and M.S.B. Fund, Inc.; Director, First Home Savings
Bank, S.L.A. since 1990; [PREVIOUSLY DIRECTOR, ASSET
MANAGEMENT FUND, 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. (__/__/40) President President of Shay Assets Management, Inc. since
230 West Monroe Street August 1997 (previously Executive Vice President
Chicago, IL 60606 from 1990 to August 1997); Executive Vice
President and member of the Managing Board of
Shay Assets Management Co. from 1990 to
December 1997. Executive Vice President and
member of the Managing Board of Shay Financial
Services Co. from 1990 to December 1997 and
Executive Vice President of Shay Financial
Services, Inc., from 1990 to August 1997; Vice
President and Secretary since 1995 of Institutional
Investors Capital Appreciation Fund, Inc. and
M.S.B. Fund, Inc.
</TABLE>
B-7
<PAGE> 58
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME, BIRTHDATE AND ADDRESS HELD WITH FUND DURING PAST FIVE YEARS
<S> <C> <C>
Robert T. Podraza (__/__/45) Vice President and Vice President of Shay Investment Services, Inc.
230 West Monroe Street Assistant Treasurer since 1990; Vice President since 1990 and Chief
Chicago, IL 60606 Compliance Officer since 1997 of Shay Financial
Services, Inc.; Vice President since 1990 and Chief
Compliance Officer since 1997 of Shay Assets
Management, Inc.; Chief Compliance Officer of
Shay Financial Services Co. and Shay Assets
Management Co. from 1989 to 1997; Director of
the National Society of Compliance Professionals
since 1996.
Steven D. Pierce (__/__/65) Treasurer Director of Financial Services of BISYS Fund
3435 Stelzer Road Services since 1998; Manager of Financial
Columbus, OH 43219 Operations at CNA Insurance from 1996-1998;
Trust Officer of First Chicago NBD Corporation
from 1994-1996; Senior Financial Accountant at
Kemper Financial Services from 1989-1994.
Daniel K. Ellenwood (__/__/70) Secretary Secretary of the Fund since April 1998; Operations
230 West Monroe Street Analyst, Shay Assets Management, Inc. since
Chicago, IL 60606 November 1997; Compliance Analyst, Shay
Financial Services, Inc. since October 1996; B.S. in
Finance, University of Illinois at Chicago, 1996.
</TABLE>
The following table sets forth the compensation earned by trustees from
the Fund for the fiscal year ended October 31, 1999:
<TABLE>
<CAPTION>
PENSION OR
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL
COMPENSATION ACCRUED AS PART BENEFITS TOTAL
TRUSTEE FROM THE FUND OF FUND EXPENSES UPON RETIREMENT COMPENSATION
- ------- ------------------- -------------------- ------------------- ---------------
<S> <C> <C> <C> <C>
Richard M. Amis $ 0 0 $
Arthur G. DeRusso 0 0
David F. Holland 0 0
</TABLE>
B-8
<PAGE> 59
<TABLE>
<S> <C> <C> <C> <C>
Gerald J. Levy 0 0
Rodger D. Shay 0 0 0 0
</TABLE>
The following table provides certain information at [___________, 2000]
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:
NUMBER PERCENT OF PORTFOLIO'S
NAME AND ADDRESS OF BENEFICIAL OWNER OF SHARES OUTSTANDING COMMON STOCK
MONEY MARKET PORTFOLIO:
SHORT U.S. GOVERNMENT PORTFOLIO:
As of November 30, 1999, one of the trustees had, through the
institutions he serves as an officer, shared voting and investment power over
[433,683 shares (0.67%)] of the Money Market Portfolio. None of the trustees
had, as of November 30, 1999, through [any/the financial] institutions for which
they serve as officers, voting and investment power over any shares of the Short
Government Portfolio.
B-9
<PAGE> 60
INVESTMENT ADVISER AND ADMINISTRATOR
The investment adviser of the Fund since December 8, 1997 is Shay
Assets Management, Inc. (the "Adviser"), a Florida corporation, with its
principal office at 230 West Monroe Street, Chicago, Illinois 60606. The Adviser
is registered as an investment adviser under the Investment Advisers Act of
1940, as amended, and is a wholly owned subsidiary of Shay Investment Services,
Inc., a closely held corporation controlled by Rodger D. Shay, the President of
the Fund.
The initial term of the Investment Advisory Agreement between the Fund
and the Adviser (the "Advisory Agreement"), was completed as to each Portfolio
on March 1, 1999, and now continues 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 Trustees. The Advisory
Agreement must also be approved annually by the vote of a majority of the
trustees of the Fund who are not parties to the Advisory Agreement or
"interested persons" of any party thereto. All trustees' 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;
0.125% per annum of the next $500 million of such net assets; and 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, 1999 and 1998 (for the period beginning December 8, 1997), the Adviser was
paid $_____ and $0 (net of fee waivers of $80,505) with respect to the Money
Market Portfolio. For the Fund's fiscal years ended October 31, 1998 (through
December 7, 1997), and 1997, the Fund paid Shay Assets Management Co. ("SAMC")
fees of $0 (net of fee waivers of $7,695), and $0 (net of fee waivers of
$83,068), 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;
0.175% per annum of the next $500 million of such net assets; 0.125% per annum
of the next $500 million of such assets; and 0.10% per annum of such net assets
over $1.5 billion. For the Fund's fiscal year ended October 31, 1999 and 1998
(for the period beginning December 8, 1997) the Fund paid the Adviser
$__________ and $245,016 with respect to the Short Government Portfolio. For the
Fund's fiscal years ended October 31, 1998 (through December 7, 1997), and 1997,
the Fund paid SAMC fees of $29,777 and $339,060, respectively, with respect to
the Short Government Portfolio.
The Adviser may from time to time enter into arrangements with entities
such as trade associations and affinity groups ("organizations") whereby the
Adviser agrees to pay such an organization a portion of the management fees
received by the Adviser with respect to assets invested in the Fund by members
of the organization for certain services or products (such as use of logos or
membership lists, bundling with or placement of articles in newsletters or other
organization publications, directory listings, and space at trade shows)
provided by the organization.
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
B-10
<PAGE> 61
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.
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 Trustees 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.
RICHARD BLACKBURN
230 West Monroe Street
Chicago, IL 60606
Portfolio Manager of the Adviser and SAMC, the Fund's former adviser,
since 1991. With approximately twenty-five years of experience in the securities
industry, his previous employers also include Harris Trust & Savings Bank,
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.
1000 Brickell Avenue
Miami, FL 33131
Portfolio Manager of the Adviser and SAMC, the Fund's former adviser,
since 1991. President of Shay Financial Services, Inc., since August, 1997,
previously Senior Vice President from 1994 to August, 1997, and Vice President
from 1991 to 1993. He was previously employed by Merrill Lynch, Pierce, Fenner
and Smith Inc. 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
230 West Monroe Street
Chicago, IL 60606
Portfolio Manager of the Adviser and SAMC, the Fund's former adviser,
since 1994. From 1990 to 1994, Vice President of Shay Financial Services, Inc.
and of an affiliate, Shay Government Securities, Inc., 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.
The Fund's current administrative agent (the "Administrator") with
respect to each Portfolio is BISYS Fund Services Ohio, Inc. ("BISYS"). Prior to
August 1, 1999, PFPC Inc. ("PFPC"), a wholly-owned subsidiary of PNC Bank Corp.,
was the Fund's administrative agent. Pursuant to the terms of the Administration
Agreement (the "Administration Agreement") dated as of August 1, 1999, between
the Fund and the Administrator, the Administrator performs various
administrative services for the Fund, including
B-11
<PAGE> 62
(i) assisting in supervising all aspects of the Portfolios' operations other
than those assumed by the Adviser, the Distributor, the custodian or the
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 shareholders 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 each Portfolio's net assets up to and including $1 billion; 0.02%
per annum of the next $1 billion of net assets; and 0.01% per annum of the
Portfolio's net assets over $2 billion, with a minimum annual fee of $393,200
for all the Fund's five portfolios taken together. If applicable, the minimum
fee is allocated among the Fund's five portfolios based on relative average net
assets. For the fiscal years ended October 31, 1999 (November 1, 1998 through
July 31, 1999), 1998 and 1997, the Fund paid PFPC, the former Administrator,
fees pursuant to the Administration Agreement of $__________, $20,308 and
$20,809, respectively, for the Money Market Portfolio. For the fiscal years
ended October 31, 1998, 1997 and 1996, the Fund paid PFPC, the former
Administrator, fees pursuant to the Administration Agreement of $__________,
$38,389 and $50,414, respectively, for the Short Government Portfolio. For the
period of August 1, 1999 through October 31, 1999, the Fund paid the current
Administrator, BISYS, $__________ for the Money Market Portfolio and $__________
for the Short Government Portfolio.
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, each Portfolio's pro rata share of 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 to the shareholders of
each Portfolio and regulatory authorities, the Portfolio's pro rata share of
compensation and expenses of the Fund's trustees and officers who are not
affiliated with the Adviser, the Administrator, the Distributor, or the transfer
and dividend agent, and extraordinary expenses incurred by the Fund with respect
to each Portfolio.
DISTRIBUTOR
Shay Financial Services, Inc. is a registered broker-dealer and the
Fund's principal distributor (the "Distributor"). The Distributor, a Florida
corporation, is a wholly-owned subsidiary of Shay Investment Services,
Inc., which is a closely held corporation controlled by Rodger D. Shay.
As compensation for distribution services with regard to the Class I
Shares of the Money Market Portfolio and the Short Government Portfolio, the
Fund pays the Distributor a fee, payable monthly, with respect
B-12
<PAGE> 63
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 their relative average net assets. As compensation for
distribution services with regard to the Class D Shares of the Money Market
Portfolio, the Fund pays the Distributor a fee, payable monthly, with respect to
the Class D Shares at the rate of 0.60% per annum of the daily net assets of the
Class D Shares.
For the fiscal years ended October 31, 1999 and 1998 (for the period
beginning December 8, 1997), the Fund paid the Distributor fees of $__________
and $85,505 with respect to the Money Market Portfolio. For the fiscal years
ended October 31, 1998 (through December 7, 1997) and 1997, the Fund paid Shay
Financial Services Co. ("SFSC") fees pursuant to the Rule 12b-1 plan, as in
effect, of $7,695 (through December 7, 1997) and $83,068, respectively, with
respect to the Money Market Portfolio. For the fiscal years ended October 31,
1999 and 1998 (for the period beginning December 8, 1997), the Fund paid the
Distributor fees of $__________ and $147,009 with respect to the Short
Government Portfolio. For the fiscal years ended October 31, 1998 (through
December 7, 1997) and 1997, the Fund paid SFSC fees pursuant to the Rule 12b-1
plan, as in effect, of $17,867 and $203,346, respectively, with respect to the
Short Government Portfolio.
The Distributor is obligated under the Distribution 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 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.
The Fund has been informed by the Distributor that during its fiscal
year ended October 31, 1999, of the $__________ fee received in the aggregate by
SFSC and the Distributor from the Fund with respect to the Portfolios, the
following expenditures were made:
<TABLE>
<S> <C>
Advertising...................................... $
Printing.........................................
Employee compensation and costs..................
Staff travel and expense.........................
Other administrative expense.....................
---------------
Total........................................... $
===============
</TABLE>
Shay Financial Services, Inc., the Fund's Distributor, and its
affiliated persons, including Rodger D. Shay, who is a Trustee and the Chairman
of the Board of the Fund, Edward E. Sammons Jr., who is President of the Fund,
Steven D. Pierce who is Treasurer of the Fund, Robert T. Podraza, who is Vice
President and Assistant Treasurer of the Fund, and Daniel K. Ellenwood, who is
the Secretary of the Fund, have a direct or indirect financial interest in the
operation of the Fund's Rule 12b-1 Plan and related Distribution Agreement. None
of the Trustees who are not interested persons of the Fund have any direct or
indirect financial interest in the operation of the Fund's Rule 12b-1 Plan and
related Distribution Agreement.
The Fund has appointed the Distributor to act as the principal
distributor of the Fund's shares pursuant to a Distribution Agreement dated
December 8, 1997 between the Fund and the Distributor (the "Distribution
Agreement"). The initial term of the Distribution Agreement with the Distributor
was completed as of March 1, 1999 and now continues in effect 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 Trustees and by a
majority of the trustees who are not "interested persons" of the Fund and have
no direct or indirect financial interest in the arrangements contemplated by the
agreement. The Fund's Rule 12b-1 Plan requires the Fund's Board of Trustees to
make a quarterly review of the amount expended under the Rule 12b-1 Plan and the
purposes for which such expenditures were made. The Rule 12b-1 Plan may not be
amended to increase materially the amount paid by the Fund thereunder without
shareholder approval. All material amendments to the Rule 12b-1 Plan must be
approved by the Fund's Board of Trustees and by the "disinterested" trustees
referred to above. The Rule 12b-1 Plan will terminate automatically upon its
assignment and is
B-13
<PAGE> 64
terminable at any time without penalty by a majority of the
Fund's trustees 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. 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.
TRANSFER AND DIVIDEND AGENT
BISYS Fund Services Ohio, Inc. ("BISYS"), 3435 Stelzer Road, Columbus,
Ohio 43219, an Ohio corporation, is the transfer and dividend agent for the
Portfolios' shares. For the Fund's fiscal year ended October 31, 1999 (November
1, 1998 through July 31, 1999), the Fund paid the former administrator, PFPC
Inc., a fee of 0.03% of each Portfolio's average net assets for administrative
services. For the period of August 1, 1999 through October 31, 1999, the Fund
paid its current transfer and dividend agent BISYS, a fee of _____% of each
Portfolio's average net assets for transfer and dividend agent services.
CUSTODIAN
As of July 30, 1999, The Bank of New York, 100 Church Street, 10th
Floor, New York, New York 10286, a Maryland corporation, became the custodian of
the Portfolio's investments. PFPC Trust Company, an affiliate of PNC Bank Corp,
served as the Fund's former custodian.
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 Trustees of the Fund has determined that, absent unusual
circumstances, the amortized cost method of valuation will fairly reflect the
value of each shareholder's interest in the Portfolio. 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 Trustees 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 Trustees 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 Trustees, 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
B-14
<PAGE> 65
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 Trustees.
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 Trustees. If such deviation exceeds 1/2 of 1%, the Board of Trustees
will promptly consider what action, if any, will be initiated. In the event the
Board of Trustees determines that a deviation exists that may result in material
dilution or other unfair results to investors or existing shareholders, 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 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, 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, at prices provided directly
by market makers, or using matrix pricing methods. 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
Trustees. Short-term instruments maturing within 60 days of the valuation date
may be valued based upon their amortized cost. The Board of Trustees will review
valuation methods regularly for the Short Government Portfolio in order to
determine their appropriateness.
TAXES
The following discussion is not intended to be a full discussion of
income tax laws and their effect on shareholders. Investors should consult their
own tax advisors as to the tax consequences of ownership of shares.
Each of the Fund's portfolios, including these Portfolios, is treated
as a separate entity for accounting and 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
long-term and short-term capital gains and losses, net investment income, and
operating expenses are determined separately for each Portfolio.
Each Portfolio qualifies as a regulated investment company under
Subchapter M of the Code. 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 or cash items, 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 total value of its total assets
is invested in the securities of any one issuer (other than government
securities) and (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. 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 shareholders as ordinary income whether
reinvested in shares or paid in cash.
B-15
<PAGE> 66
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 shareholders 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 shareholders 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 shareholders (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 shareholders
(including long-term capital gain distributions by the Portfolio) are generally
taxed at a maximum rate of 20%.
Because none of either Portfolio's income will consist of dividends
from domestic corporations, dividends of net investment income as well as
distributions of net long-term and short-term capital gains will not qualify for
the dividends received deduction available to corporate shareholders.
Gain or loss realized upon a sale or redemption of shares of the Short
Government Portfolio by a shareholder 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 shareholder upon the sale of shares in the Short Government
Portfolio held one year 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 shareholder 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 shareholder. If the net asset value of shares of
the Short Government Portfolio were reduced below the shareholder'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 shareholders on December 31 of the calendar year in which
declared. Under this rule, therefore, a shareholder 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, 1999, 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 [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 Trustees of the Fund and in a manner deemed fair and
reasonable to shareholders. The primary consideration is prompt execution of
orders
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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 shall:
(1) Limit its investments and investment techniques so as to
qualify for investment by national banks, federal savings
associations, and federal credit unions; and
may not:
(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 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.
(4) Borrow money except from banks for temporary or emergency
purposes and in an amount not exceeding 10% of the value of
the Portfolio's 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. The borrowing provision 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
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<PAGE> 68
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) 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 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.]
(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) Lend any of its assets, except portfolio securities. This
shall not prevent the Portfolio from purchasing or holding
debt obligations, entering into repurchase agreements and
loaning 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 Portfolio's investment objective
and management policies.
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<PAGE> 69
(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, real estate investment trust
securities, commodities or commodity contracts, or oil and gas
interests.
For purposes of investment restrictions (2) and (5) 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.
The Fund has also adopted certain investment restrictions which are
non-fundamental policies. Unlike fundamental policies, which may only be changed
with the approval of a majority of the outstanding shares of the Portfolio,
nonfundamental policies may be changed by the Fund's Trustees without
shareholder approval. However, in the event the Fund's Trustees agree to change
a nonfundamental policy, shareholders will be notified in advance of such
change. Accordingly, the Portfolios have adopted the following nonfundamental
policies:
(1) The Portfolios invest 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."
(2) Each Portfolio may not invest more than 10% (in the case of
the Money Market Portfolio) or 15% (in the case of the Short
Government Portfolio) of its net assets in illiquid
securities, including repurchase agreements maturing in more
than seven days.
ORGANIZATION AND DESCRIPTION OF FUND SHARES
The Fund consists of an unlimited number of shares of beneficial interest
divided into five 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. Shares of the Money Market Portfolio are issued in two
classes: D shares and I shares. The shares of each Portfolio 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
beneficial interest of the same class have equal dividend, liquidation and
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<PAGE> 70
voting rights and are redeemable at net asset value, at the option of the
shareholder. 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
trustees 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.
PricewaterhouseCoopers LLP 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 Shareholders
for the year ended October 31, 1999 (see "Financial Statements" below) have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP, given
on the authority of such firm as experts in accounting and auditing.
GENERAL INFORMATION
The Fund sends to all of the shareholders 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 shareholders, 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 shareholders is not required to be held in any year in which none of
the following is required to be acted on by shareholders pursuant to the 1940
Act: election of trustees; approval of the investment advisory agreement;
ratification of the selection of independent public accountants; and approval of
a distribution agreement.
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 this Statement of Additional
Information form a part, each such statement being qualified in all respects by
such reference.
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<PAGE> 71
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 Shareholders for the year ended October 31, 1999 (the "Annual
Report"). The Fund will provide the Annual Report without charge to each person
to whom this Statement of Additional Information is delivered.
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<PAGE> 72
STATEMENT OF ADDITIONAL INFORMATION
March 1, 2000
ADJUSTABLE RATE MORTGAGE (ARM) PORTFOLIO,
INTERMEDIATE MORTGAGE SECURITIES PORTFOLIO
and
U.S. GOVERNMENT MORTGAGE SECURITIES PORTFOLIO
ASSET MANAGEMENT FUND
230 West Monroe Street, Chicago, Illinois 60606
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 (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. It should
be read in conjunction with the Fund's Prospectus, dated March 1, 2000 (the
"Prospectus"), a copy of which may be obtained from the Fund at the address
noted above.
The financial statements pertaining to these portfolios which appear in
the Fund's 1999 Annual Report to Shareholders are incorporated herein by
reference.
<PAGE> 73
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Fund History....................................................................................................B-1
The Fund's Objective, the Portfolios and Their Investment Policies..............................................B-1
Portfolio Turnover..............................................................................................B-5
Purchase and Redemption of Shares...............................................................................B-5
Dividends, Distributions, Yield and Total Return Quotations.....................................................B-5
Management of the Fund..........................................................................................B-6
Investment Adviser and Administrator...........................................................................B-10
Distributor....................................................................................................B-13
Transfer and Dividend Agent....................................................................................B-15
Custodian......................................................................................................B-15
Determination of Net Asset Value...............................................................................B-15
Taxes ......................................................................................................B-15
Portfolio Transactions.........................................................................................B-16
Investment Restrictions........................................................................................B-17
Organization and Description of Fund Shares....................................................................B-20
Counsel and Independent Accountants............................................................................B-21
General Information............................................................................................B-21
Description of Debt Ratings....................................................................................B-21
Financial Statements...........................................................................................B-22
</TABLE>
<PAGE> 74
Capitalized terms not defined in this Statement of Additional
Information and defined in the Prospectus shall have the meanings defined in the
Prospectus.
FUND HISTORY
Asset Management Fund (the "Fund") is a Delaware business trust
organized under a Declaration of Trust ("Declaration of Trust") dated July 22,
1999. The Fund was formerly a Maryland corporation, which commenced operations
on November 9, 1982. In September 1994, the Fund changed its name from Asset
Management Fund for Financial Institutions, Inc. to Asset Management Fund, Inc.
and on September 30, 1999, as part of the reorganization into a Delaware
business trust, changed its name to Asset Management Fund.
THE FUND'S OBJECTIVE, THE PORTFOLIOS
AND THEIR INVESTMENT 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 which are
U.S. Government sponsored corporations. 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 on the New York Stock Exchange. FHLMC issues
Participation Certificates ("PCS") 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
<PAGE> 75
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 under OTS Regulations. These 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 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
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<PAGE> 76
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 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 PERMISSIBLE INVESTMENTS
The following information supplements the discussion in the Prospectus
concerning principal investment strategies:
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 corporation. These
include obligations issued by the United States or by a Federal Home Loan Bank,
Freddie Mac, Fannie Mae, the Government National Mortgage Association, the
Student Loan Marketing Association and the Federal Farm Credit Banks. Since many
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 or corporation 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 or corporation 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 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 [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 a security which it may invest in 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
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<PAGE> 77
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.
Each Portfolio will invest in securities 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 Trustees 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
Trustees, the Fund has adopted certain voluntary restrictions with respect to
the Portfolios' 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, Fannie Mae, the Government National Mortgage
Association, the Federal Farm Credit Banks, the Federal
Financing Bank, the Student Loan Marketing Association and
Freddie Mac;
(3) for the ARM Portfolio and Intermediate Mortgage 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;
(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 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 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 shareholder vote, the Fund will not alter these
restrictions without notice to shareholders.
See "Investment Restrictions" in this Statement of Additional
Information for a description of additional investment restrictions of the
Portfolios.
<PAGE> 78
PORTFOLIO TURNOVER
Each 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."
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 without limitation by
[federal thrifts?,] national banks and federal credit unions.
Investors may be charged a fee if they effect transactions through a
broker or agent. Brokers and intermediaries are authorized to accept orders on
the Fund's behalf.
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 shareholders of each Portfolio.
DIVIDENDS, DISTRIBUTIONS, YIELD
AND TOTAL RETURN QUOTATIONS
Dividends on shares of each Portfolio are paid monthly on the last
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 prorated on
the basis of relative net assets of the Portfolio in relation to the net assets
of the Fund's other portfolios applicable to that period.
From time to time the Portfolios 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.
For the 30-day period ended October 31, 1999, the ARM Portfolio's
annualized yield was _____%. The average annual total rates of return for the
one-year and five-year periods ended October 31, 1999, and for the period from
September 18, 1991, the date the shares were first publicly offered, were
[_____%], [_____%] and [_____%], respectively. Without fee waivers, the 30-day
annualized yield would have been [_____%] 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 [_____%], [_____%] [_____%], [_____%],
respectively.
For the 30-day period ended October 31, 1999, the Intermediate Mortgage
Portfolio's annualized yield was _____%. The average annual total rates of
return for the one-year, five-year and ten-year periods ended October 31, 1999,
were [_____%], [_____%] and [_____%], respectively. Without fee
B-5
<PAGE> 79
waivers, the 30-day annualized yield would have been [_____%] and the average
annual total rates of return for the one-year, five-year and ten-year periods
wouldhave been [_____%], [ _____%] and [_____%], respectively. The total return
figures for the ten-year period reflects 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, 1999, the U.S. Government
Mortgage Portfolio's annualized yield was [_____%]. The average annual total
rates of return for the one-year, five-year and ten-year periods ended October
31, 1999, were [_____%], [_____%] and [_____%], 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, 1999. 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" 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 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 a Portfolio's yield and
total return to be higher than they otherwise would be.
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).
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 with
various indices and investments, other performance measures or rankings, or
other mutual funds, or indices or averages of other mutual funds.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Fund's powers except those reserved for the shareholders. The Trustees'
responsibilities include reviewing the actions of the Fund's investment adviser,
distributor and administrator.
TRUSTEES AND OFFICERS
Trustees and Officers of the Fund, together with information as to
their principal business occupations during the past five years, are shown
below. Each trustee 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.
B-6
<PAGE> 80
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME, BIRTHDATE AND ADDRESS HELD WITH FUND DURING PAST FIVE YEARS
<S> <C> <C>
Richard M. Amis (__/__/51) Trustee President, First Federal Savings & Loan
630 Clarksville Street Association since 1984; Director, First Financial
Paris, TX 75460 Trust Company; formerly Chairman, Texas
Savings and Community Bankers Association.
Arthur G. De Russo (__/__/21) Trustee Chief Executive Officer, Eastern Financial Federal
5397 S.E. Major Way Credit Union from 1974 to 1992; Chairman and
Stuart, FL 34997 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 (__/__/42) Trustee Chairman of the Board since 1989 and Chief
17 New England Executive Park Executive Officer since 1986 of Boston Federal
Burlington, MA 01803 Savings Bank; [DIRECTOR OF FUND FROM 1988 TO
1989 AND SINCE 1993]; Director of Federal Home
Loan Bank of Boston; until December 1997
Chairman of America's Community Banking
Partners, Inc. and Director of ACB Investment
Services, Inc.; Director of M.S.B. Fund, Inc. since
1997; Director and Chairman since December 1995
of Center for Financial Studies; Director of NYCE
Corporation since 1995; [DIRECTOR FROM 1990
TO 1995 AND CHAIRMAN 1993-1994 OF AMERICA'S
COMMUNITY BANKERS]; member from 1995 to
1997 and President since 1997 of Thrift Institutions
Advisory Council.
Gerald J. Levy (__/__/32) Vice Chairman of the Chairman and Chief Executive Officer, Guaranty
4000 W. Brown Deer Road Board and Trustee Bank, S.S.B. since 1984 (from 1959 to 1984, he
Milwaukee, WI 53209 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.]
</TABLE>
B-7
<PAGE> 81
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME, BIRTHDATE AND ADDRESS HELD WITH FUND DURING PAST FIVE YEARS
<S> <C> <C>
Rodger D. Shay (__/__/37) Chairman of the Chairman and Director of Shay Assets
1000 Brickell Avenue Board and Trustee Management, Inc. since August 1997 (previously
Miami, FL 33131 President and Director from 1990 to August 1997);
Chairman and Director of Shay Financial Services,
Inc. since August 1997 (previously President and
Director from 1990 to August 1997); President,
Chief Executive Officer and member of the
Managing NBoard of Shay Assets Management Co.
from 1990 to December 1997; President, Chief
Executive Officer and member of the Managing
Board of Shay Financial Services Co. from 1990 to
December 1997; [DIRECTOR FROM 1986 TO 1991 AND
PRESIDENT FROM 1986 TO 1992, U.S. LEAGUE
SECURITIES, INC.]; Vice President since 1995 of
Institutional Investors Capital Appreciation 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. (__/__/40) President President of Shay Assets Management, Inc. since
230 West Monroe Street August 1997 (previously Executive Vice President
Chicago, IL 60606 from 1990 to August 1997); Executive Vice
President and member of the Managing Board of
Shay Assets Management Co. from 1990 to
December 1997. Executive Vice President and
member of the Managing Board of Shay Financial
Services Co. from 1990 to December 1997 and
Executive Vice President of Shay Financial
Services, Inc., from 1990 to August 1997; Vice
President and Secretary since 1995 of Institutional
Investors Capital Appreciation Fund, Inc. and
M.S.B. Fund, Inc.
</TABLE>
B-8
<PAGE> 82
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME, BIRTHDATE AND ADDRESS HELD WITH FUND DURING PAST FIVE YEARS
<S> <C> <C>
Robert T. Podraza (__/__/45) Vice President and Vice President of Shay Investment Services, Inc.
230 West Monroe Street Assistant Treasurer since 1990; Vice President since 1990 and Chief
Chicago, IL 60606 Compliance Officer since 1997 of Shay Financial
Services, Inc.; Vice President since 1990 and Chief
Compliance Officer since 1997 of Shay Assets
Management, Inc.; Chief Compliance Officer of
Shay Financial Services Co. and Shay Assets
Management Co. from 1989 to 1997; Director of
the National Society of Compliance Professionals
since 1996.
Steven D. Pierce (__/__/65) Treasurer Director of Financial Services of BISYS Fund
3435 Stelzer Road Services since 1998; Manager of Financial
Columbus, OH 43219 Operations at CNA Insurance from 1996-1998;
Trust Officer of
First Chicago NBD
Corporation from 1994-1996; Senior Financial
Accountant at Kemper Financial Services from
1989-1994.
Daniel K. Ellenwood (__/__/70) Secretary Secretary of the Fund since April 1998; Operations
230 West Monroe Street Analyst, Shay Assets Management, Inc. since
Chicago, IL 60606 November 1997; Compliance Analyst, Shay
Financial Services, Inc. since October 1996; B.S. in
Finance, University of Illinois at Chicago, 1996.
</TABLE>
B-9
<PAGE> 83
The following table sets forth the compensation earned by trustees from
the Fund for the fiscal year ended October 31, 1999:
<TABLE>
<CAPTION>
AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL
COMPENSATION BENEFITS ACCRUED AS PART BENEFITS UPON TOTAL
TRUSTEE FROM THE FUND OF FUND EXPENSES RETIREMENT COMPENSATION
<S> <C> <C> <C> <C>
Richard M. Amis $ 0 0 $
Arthur G. DeRusso 0 0
David F. Holland 0 0
Gerald J. Levy 0 0
Rodger D. Shay 0 0 0 0
</TABLE>
The following table provides certain information at [____________,
2000] 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 ARM Portfolio, the Intermediate Mortgage Portfolio and the
U.S. Government Mortgage Portfolio:
<TABLE>
<CAPTION>
PERCENT OF PORTFOLIO'S OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES COMMON STOCK
<S> <C> <C>
</TABLE>
ARM PORTFOLIO:
INTERMEDIATE MORTGAGE PORTFOLIO:
B-10
<PAGE> 84
<TABLE>
<CAPTION>
PERCENT OF PORTFOLIO'S OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES COMMON STOCK
<S> <C> <C>
</TABLE>
U.S. GOVERNMENT MORTGAGE PORTFOLIO:
B-11
<PAGE> 85
As of November 30, 1999, none of the trustees had, through the
institutions 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 since December 8, 1997 is Shay
Assets Management, Inc. (the "Adviser"), a Florida corporation, with its
principal office at 230 West Monroe Street, Chicago, Illinois 60606. The Adviser
is registered as an investment adviser under the Investment Advisers Act of
1940, as amended, and is a wholly owned subsidiary of Shay Investment Services,
Inc., a closely held corporation controlled by Rodger D. Shay, the President of
the Fund.
The initial term of the Investment Advisory Agreement between the Fund
and the Adviser (the "Advisory Agreement"), was completed as to each Portfolio
on March 1, 1999, and now continues 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 Trustees. The Advisory
Agreement must also be approved annually by the vote of a majority of the
trustees of the Fund who are not parties to the Advisory Agreement or
"interested persons" of any party thereto. All trustees' 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, 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, 1999 and 1998 (for the period beginning December
8, 1997), the Adviser was paid fees of $__________ and $1,904,871 (net of fee
waivers of $1,523,896) with respect to the ARM Portfolio. For the Fund's fiscal
years ended October 31, 1998 (through December 7, 1997) and 1997, the Fund paid
Shay Assets Management Co. ("SAMC") fees with respect to the ARM Portfolio of
$206,507 (net of fee waivers of $165,206) and $1,800,992 (net of fee waivers of
$1,440,794), 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; 0.275% per annum of the next $500 million of such net assets; 0.20% per
annum of the next $500 million of such net assets; and 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. This voluntary waiver agreement may be terminated at any time
by the Adviser. For the Fund's fiscal years ended October 31, 1999 and 1998 (for
the period beginning
B-12
<PAGE> 86
December 8, 1997), the Adviser was paid fees of $______ and $206,032 (net of fee
waivers of $82,413) with respect to the Intermediate Mortgage Portfolio. For the
Fund's fiscal years ended October 31, 1998 (through December 7, 1997) and 1997,
the Fund paid SAMC fees of $20,439 (net of fee waivers of $8,176) and $212,156
(net of fee waivers of $84,863), respectively, with respect to the Intermediate
Mortgage Portfolio.
As compensation for the services rendered by the Adviser under the
Advisory Agreement, the Fund pays the Adviser a free, payable monthly, with
respect to the U.S. Government Mortgage Portfolio, at the rete of 0.25% per
annum of the average daily net assets of the Portfolio up to and including $500
million; 0.175% per annum of the next $500 million of such net assets; 0.125%
per annum of the next $500 million of such net assets; and 0.10% per annum of
such nets assets over $1.5 billion. For the Fund's fiscal years ended October
31, 1999 and 1998 (for the period beginning December 8, 1997), the Adviser was
paid fees of $____________ and $158,794 with respect to the U.S. Government
Mortgage Portfolio. For the Fund's fiscal years ended October 31, 1998 (through
December 7, 1997) and 1997, the Fund paid fees of $13,968 and
$137,123, respectively, for the U.S. Government Mortgage Portfolio.
The Adviser may from time to time enter into arrangements with entities
such as trade associations and affinity groups ("organizations") whereby the
Adviser agrees to pay such an organization a portion of the management fees
received by the Adviser with respect to assets invested in the Fund by members
of the organization for certain services or products (such as use of logos or
membership lists, bundling with or placement of articles in newsletters or other
organization publications, directory listings, and space at trade shows)
provided by the organization.
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.
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 Trustees 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.
RICHARD BLACKBURN
230 West Monroe Street
Chicago, IL 60606
Portfolio Manager of the Adviser and SAMC, the Fund's former adviser,
since 1991. With approximately twenty-five years of experience in the securities
industry, his previous employers also include Harris Trust & Savings Bank,
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.
B-13
<PAGE> 87
RODGER D. SHAY, JR.
1000 Brickell Avenue
Miami, FL 33131
Portfolio Manager of the Adviser and SAMC, the Fund's former adviser,
since 1991. President of Shay Financial Services, Inc., since August, 1997,
previously Senior Vice President from 1994 to August 1997, and Vice President
from 1991 to 1993. He was previously employed by Merrill Lynch, Pierce, Fenner
and Smith Inc., 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
230 West Monroe Street
Chicago, IL 60606
Portfolio Manager of the Adviser and SAMC, the Fund's former adviser,
since 1994. From 1990 to 1994, Vice President of Shay Financial Services, Inc.
and of an affiliate, Shay Government Securities, Inc., 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.
The Fund's current administrative agent (the "Administrator") with
respect to each Portfolio is BISYS Fund Services Ohio, Inc. ("BISYS"). Prior to
August 1, 1999, PFPC Inc. ("PFPC"), a wholly-owned subsidiary of PNC Bank Corp.,
was the Fund's administrative agent. Pursuant to the terms of the Administration
Agreement (the "Administration Agreement") dated as of August 1, 1999, 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 custodian or the 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
shareholders 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; 0.02%
per annum of the next $1 billion of net assets; and 0.01% per annum of each
Portfolio's net assets over $2 billion, with a minimum annual fee of $393,200
for all the Fund's five portfolios taken together. If applicable, the minimum
fee is allocated among the Fund's five portfolios based on relative average net
assets. For the fiscal years ended October 31, 1999 (November 1, 1998 through
July 31, 1999), 1998 and 1997, the Fund paid PFPC, the former Administrator,
fees pursuant to the Administration Agreement with respect to each Portfolio as
follows: for the ARM Portfolio, the fees paid were $__________, $293,520 and
$269,671, respectively. For the Intermediate Mortgage Portfolio, the fees were
$__________, $31,313 and $31,793, respectively. For the U.S. Government Mortgage
Portfolio, the fees were $___________, $24,145 and $21,188, respectively. For
the period of August 1, 1999, through October 31, 1999, the Fund paid the
current Administrator, BISYS, $__________ for the ARM Portfolio, $__________
for the Intermediate Mortgage Portfolio and $_________ for the U.S. Government
Mortgage Portfolio.
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,
B-14
<PAGE> 88
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 expenses, expenses of preparing and setting in type prospectuses, proxy
material, reports and notices and the printing and distributing of the same to
the shareholders of each Portfolio and regulatory authorities, the Portfolio's
pro rata share of compensation and expenses of the Fund's trustees and officers
who are not affiliated with the Adviser, the Administrator, the Distributor or
the transfer and dividend agent, and extraordinary expenses incurred by the Fund
with respect to each Portfolio.
DISTRIBUTOR
Shay Financial Services, Inc. is a registered broker-dealer and the
Fund's principal distributor (the "Distributor"). The Distributor, a Florida
corporation, is a wholly owned subsidiary of Shay Investment Services, Inc.,
which is a closely held corporation controlled by Rodger D. Shay.
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, 1999 and 1998 (for the period beginning
December 8, 1997), the Distributor was paid fees of $___________ and $1,142,923
(net of fee waivers of $761,948) for the ARM Portfolio. For the fiscal years
ended October 31, 1998 (through December 7, 1997), 1997 and 1996, the Fund paid
Shay Financial Services Co. ("SFSC") $123,904 (net of fee waivers of $82,603)
and $1,080,595 (net of fee waivers of $720,397), respectively, for 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; 0.125% per annum of the next $500 million of such net
assets; 0.10% per annum of the next $500 million of such net assets; and 0.075%
per annum of such net assets over $1.5 billion. For the fiscal years ended
October 31, 1999 and 1998 (for the period beginning December 8, 1997), the
Distributor was paid fees of $__________ and $123,619 for the Intermediate
Mortgage Portfolio. For the fiscal years ended October 31, 1998 (through
December 7, 1997) and 1997, the Fund paid SFSC fees pursuant to the Rule 12b-1
Agreement, as in effect, of $12,264 and $127,294, respectively, for the
Intermediate Mortgage Portfolio. For the fiscal years ended October 31, 1999 and
1998 (for the period beginning December 8, 1997), the Distributor was paid fees
of $__________ and $95,277 for the U.S. Government Mortgage Portfolio. For the
fiscal years ended October 31, 1998 (through December 7, 1997), and 1997 the
Fund paid the Distributor fees pursuant to the Rule 12b-1 Agreement, as in
effect, of $8,380 and $82,274, respectively, for the U.S. Government Mortgage
Portfolio.
The Distributor is obligated under the Distribution 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 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.
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The Fund has been informed by the Distributor that during its fiscal
year ended October 31, 1999, of the $__________ fee received in the aggregate by
SFSC and the Distributor from the Fund with respect to the ARM Portfolio, the
following expenditures were made:
<TABLE>
<CAPTION>
<S> <C>
Advertising.................................. $
Printing.....................................
Employee compensation and costs..............
Staff travel and expense.....................
Other administrative expense.................
Total........................................ $
============
</TABLE>
The Fund has been informed by the Distributor that during its fiscal
year ended October 31, 1999, of the $__________ fee received in the aggregate by
SFSC and the Distributor from the Fund with respect to the Intermediate Mortgage
Portfolio, the following expenditures were made:
<TABLE>
<CAPTION>
<S> <C>
Advertising.................................. $
Printing.....................................
Employee compensation and costs..............
Staff travel and expense.....................
Other administrative expense.................
Total........................................ $
============
</TABLE>
The Fund has been informed by the Distributor that during its fiscal
year ended October 31, 1999, of the $__________ fee received in the aggregate by
SFSC and the Distributor from the Fund with respect to the U.S.
Government Mortgage Portfolio, the following expenditures were made:
<TABLE>
<CAPTION>
<S> <C>
Advertising.................................. $
Printing.....................................
Employee compensation and costs..............
Staff travel and expense.....................
Other administrative expense.................
Total $
</TABLE>
Shay Financial Services, Inc., the Fund's Distributor, and its
affiliated persons, including Rodger D. Shay, who is a Trustee and the Chairman
of the Board of the Fund, Edward E. Sammons Jr., who is President of the Fund,
Steve Pierce, who is Treasurer of the Fund, Robert T. Podraza, who is Vice
President and Assistant Treasurer of the Fund, and Daniel K. Ellenwood, who is
the Secretary of the Fund, have a direct or indirect financial interest in the
operation of the Fund's Rule 12b-1 Plan and related Distribution Agreement. None
of the Trustees who are not interested persons of the Fund have any direct or
indirect financial interest in the operation of the Fund's Rule 12b-1 Plan and
related Distribution Agreement.
The Fund has appointed the Distributor to act as the principal
distributor of the Fund's shares pursuant to a Distribution Agreement dated
December 8, 1997 between the Fund and the Distributor (the "Distribution
Agreement"). The initial term of the Distribution Agreement with the Distributor
was completed as of March 1, 1999, and now continues in effect 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 Trustees and by a
majority of the trustees who are not "interested persons" of the Fund and have
no direct or indirect financial interest in the arrangements contemplated by the
agreement. The Fund's Rule 12b-1 Plan requires the Fund's Board of Trustees to
make a quarterly review of the amount expended under the Rule 12b-1 Plan and the
purposes for which such expenditures were made. The Rule 12b-1 Plan
B-16
<PAGE> 90
may not be amended to increase materially the amount paid by the Fund thereunder
without shareholder approval. All material amendments to the Rule 12b-1 Plan
must be approved by the Fund's Board of Trustees and by the "disinterested"
trustees referred to above. The Rule 12b-1 Plan will terminate automatically
upon its assignment and is terminable at any time without penalty by a majority
of the Fund's trustees who are "disinterested" as described aboveor 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. 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.
TRANSFER AND DIVIDEND AGENT
BISYS Fund Services Ohio, Inc. ("BISYS"), 3435 Stelzer Road, Columbus,
Ohio 43219, an Ohio corporation, is the transfer and dividend agent for the
Portfolios' shares. For the Fund's fiscal year ended October 31, 1999 (November
1, 1998 through July 31, 1999), the Fund paid the former administrator, PFPC
Inc., a fee of 0.03% of each Portfolio's average net assets for administrative
services. For the period of August 1, 1999 through October 31, 1999 the Fund
paid its current transfer and dividend agent, BISYS, a fee of _____% of each
Portfolio's average net assets for transfer and dividend agent services.
CUSTODIAN
As of July 30, 1999, The Bank of New York, 100 Church Street, 10th
Floor, New York, New York 10286, a Maryland corporation, became the custodian of
the Portfolio's investments. PFPC Trust Company, an affiliate of PNC Bank Corp,
served as the Fund's former custodian.
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, at prices provided directly by market makers, or
using matrix pricing methods. 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 Trustees. Short-term
instruments maturing within 60 days of the valuation date may be valued based
upon their amortized cost. The Board of Trustees will review valuation methods
regularly in order to determine their appropriateness.
TAXES
The following discussion is not intended to be a full discussion of
income tax laws and their effect on shareholders. Investors should consult their
own tax advisors as to the tax consequences of ownership of shares.
Each of the Fund's portfolios, including these Portfolios, is treated
as a separate entity for accounting and 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
long-term and short-term capital gains and losses, net investment income, and
operating expenses are determined separately for each Portfolio.
B-17
<PAGE> 91
Each Portfolio qualifies as a regulated investment company under
Subchapter M of the Code. 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, or cash items, 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 total value of its
total assets is invested in the securities of any one issuer (other than
Government securities) and (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. 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 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
shareholders 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 shareholders 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 shareholders (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 shareholders
(including long-term capital gain distributions by each Portfolio) are generally
taxed at a maximum rate of 20%.
Because none of each Portfolio's income will consist of dividends from
domestic corporations, dividends of net investment income as well as
distributions of net long-term and short-term capital gains will not qualify for
the dividends received deduction available to corporate shareholders.
Gain or loss realized upon a sale or redemption of shares of each
Portfolio by a shareholder 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
shareholder upon the sale of shares in each Portfolio held one year 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 shareholder 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
shareholder. If the net asset value of shares were reduced below the
shareholder'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 shareholders on December 31 of the calendar year in which
declared. Under this rule, therefore, a shareholder 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.
B-18
<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, 1999, 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 [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 Trustees of the Fund and in a manner deemed fair and
reasonable to shareholders. 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 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
shall:
(1) Limit its investments and investment techniques so as to
qualify for investment by national banks, federal savings
associations, and federal credit unions; and
B-19
<PAGE> 93
may not:
(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) 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.
(4) 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.
(5) 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.
(6) Lend any of its assets, except portfolio securities. This
shall not prevent the Portfolio from purchasing or holding
debt obligations, entering into repurchase agreements and
loaning 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
B-20
<PAGE> 94
Portfolio's investment objective and management policies.
(7) 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 shall:
(1) Limit its investments and investment techniques so as to
qualify for investment by national banks, federal savings
associations, and federal credit unions; and
may not:
(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 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.
(4) (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
B-21
<PAGE> 95
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 (4) 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 (4).
(5) (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 (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) 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.
(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.
(8) Lend any of its assets, except portfolio securities. This
shall not prevent the Portfolio from purchasing or holding
debt obligations, entering into repurchase agreements and
loaning federal funds and other day(s) funds to
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<PAGE> 96
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.
(9) (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.
(10) (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 securities in which the Portfolio may invest;
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 in interest rate
futures contracts and options thereon is not for speculation,
but solely to permit hedging against anticipated interest rate
changes.
The Fund has also adopted certain investment restrictions which are
non-fundamental policies. Unlike fundamental policies, which may only be changed
with the approval of a majority of the outstanding shares of the Portfolio,
non-fundamental policies may be changed by the Fund's Trustees without
shareholder approval. However, in the event the Fund's Trustees agree to
change a non-fundamental policy, shareholders will be notified in advance of
such change. Accordingly, the Portfolios have adopted the following
non-fundamental policies:
B-23
<PAGE> 97
(1) The Adjustable Rate Mortgage (ARM) Portfolio, the Intermediate
Mortgage Securities Portfolio, and the U.S. Government
Mortgage Securities Portfolio (collectively referred to as the
"Mortgage Securities Portfolios") invest 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 Office
of Thrift Supervision ("OTS") Regulations. Pending any
revisions of the current OTS Regulations, each Mortgage
Securities 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 Mortgage Securities Portfolio
will not purchase any investments having a risk-based
weighting in excess of 20% under the current risk-based
capital regulations established by the OTS. Also, each
Mortgage Securities Portfolio will not purchase any
investments having a risk-based weighting for banks in excess
of 50% under current federal regulations of the appropriate
regulatory agencies. Furthermore, each Mortgage Securities
Portfolio will 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 OTS and the National Credit Union
Administration, respectively, and each Mortgage Securities
Portfolio limits its investments to those permissible without
limitation for federal savings associations, national banks
and federal credit unions under current applicable
regulations.
(2) Each Portfolio may not invest more than 15% of its net assets
in illiquid securities, including repurchase agreements
maturing in more than seven days.
ORGANIZATION AND DESCRIPTION OF FUND SHARES
The Fund consists of an unlimited number of shares of beneficial
interest divided into five 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. Shares of the Money Market Portfolio
are issued in two classes: D shares and I shares. The shares of each Portfolio
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 beneficial interest of the same class have equal
dividend, distribution, liquidation and voting rights and are redeemable at net
asset value, at the option of the shareholder. 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
trustees 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.
PricewaterhouseCoopers LLP 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 Shareholders
for the year ended October 31, 1999 (see "Financial Statements" below), have
been so incorporated in reliance on the report of PricewaterhouseCoopers LLP
given on the authority of such firm as experts in accounting and auditing.
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<PAGE> 98
GENERAL INFORMATION
The Fund sends to all of the shareholders 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 shareholders, 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 shareholders is not required to be held in any year in which none of
the following is required to be acted on by shareholders pursuant to the 1940
Act: election of trustees; approval of the investment advisory agreement;
ratification of the selection of independent public accountants; and approval of
a distribution agreement.
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.
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 Shareholders for the year ended October 31, 1999 (the "Annual
Report"). The Fund will provide the Annual Report without charge to each person
to whom this Statement of Additional Information is delivered.
B-25
<PAGE> 99
ASSET MANAGEMENT FUND, INC
PART C
OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23. Exhibits
<S> <C> <C> <C>
(a) (1) Articles of Amendment and Restatement of Articles of Incorporation of Registrant dated
November 9, 1982. (1)/
(2) Articles Supplementary to Articles of Amendment and Restatement of Articles of
Incorporation of Registrant dated November 1, 1983. (1)/
(3) Form of Articles of Amendment of Articles of Incorporation of Registrant. (1)/
(4) Articles Supplementary to Articles of Amendment and Restatement of Articles of
Incorporation of Registrant dated August 16, 1986. (1)/
(5) Articles of Amendment of Articles of Incorporation dated May 4,1989. (1)/
(6) Articles of Amendment of Articles of Incorporation dated February 23, 1990. (1)/
(7) Articles Supplementary to Articles of Amendment and Restatement of Articles of
Incorporation of Registrant dated June 28, 1991. (1)/
(8) Form of Articles of Amendment of Articles of Incorporation. (1)/
(9) Articles of Amendment of Articles of Incorporation dated September 26, 1994. (1)/
(10) Declaration of Trust dated July 22, 1999.(4)/
(11) Certificate of Trust dated July 22, 1999.(4)/
(b) (1) By-Laws as restated as of September 20, 1991. (1)/
(2) By-Laws as adopted as of July 22, 1999.(4)/
(c) Not applicable.
(d) (1) 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)/
(2) Form of Amendment to the Investment Advisory Agreement with respect to the Adjustable
Rate Mortgage (ARM) Portfolio. (1)/
(3) Amendment to the Investment Advisory Agreement, dated November 30, 1992, with respect
to the Adjustable Rate Mortgage (ARM) Portfolio. (1)/
(4) Investment Advisory Agreement dated December 8, 1997 between Registrant and Shay
Assets Management, Inc. (3)/
</TABLE>
C-1
<PAGE> 100
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(e) (1) Distribution Agreement. (2)/
(2) Distribution Agreement dated December 8, 1997 between Registrant and Shay Financial
Services, Inc. (3)/
(f) Not applicable.
(g) (1) Restated Custodian Agreement between Registrant and Provident National Bank dated
March 1, 1991. (1)/
(2) Amendment No. 1 to Restated Custodian Agreement dated June 28, 1991. (1)/
(3) Amendment No. 2 to Restated Custodian Agreement dated June 29, 1991. (1)/
(4) Custody Agreement dated July 30, 1999.(4)/
(5) Form of Cash Management and Related Services Agreement between Registrant and the
Bank of New York.(4)/
(h) (1) (A) Restated Transfer Agency Agreement between Registrant and Provident Financial
Processing Corporation dated March 1, 1991. (1)/
(1) (B) Amendment No. 1 to Restated Transfer Agency Agreement dated June 28,
1991. (1)/
(1) (C) Transfer Agency Agreement between Registrant and BISYS dated September 13,
1999.(4)/
(2) (A) Restated Administration Agreement between Registrant and Provident Financial
Processing Corporation dated March 1, 1991. (1)/
(2) (B) Amendment No. 1 to Restated Administration Agreement dated June 28, 1991. (1)/
(2) (C) Amendment No. 2 to Restated Administration Agreement dated September 20,
1991. (1)/
(3) Administration Agreement between Registrant and BISYS dated August 1, 1999.(4)/
(4) Fund Accounting Agreement between Registrant and BISYS dated August 1, 1999.(4)/
(5) OMNIBUS Fee Agreement between Registrant and BISYS dated August 1, 1999.(4)/
(i) (1) 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)/
(2) Opinion and Consent of Vedder, Price, Kaufman & Kammholz with respect to the Adjustable Rate
Mortgage (ARM) Portfolio dated July 2, 1991. (1)/
(3) Opinion and Consent of Vedder, Price, Kaufman & Kammholz with respect to Class D shares of
the Ready Reserves Fund dated October 19, 1999.(4)/
(j) Consent of Pricewaterhouse Cooper, LLP.
</TABLE>
C-2
<PAGE> 101
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(k) None.
(l) (1) Form of Purchase Agreement between Registrant and initial investors with respect to the
Short-Term Liquidity Portfolio. (1)/
(2) Form of Purchase Agreement between Registrant and initial investors with respect to the
Mortgage Securities Performance Portfolio dated November 2, 1983. (1)/
(m) (1) Plan and Agreement Pursuant to Rule 12b-1 between Registrant and Shay Financial
Services Co. dated September 1, 1990. (1)/
(2) Form of Amendment to Plan and Agreement Pursuant to Rule 12b-1 with respect to the
Adjustable Rate Mortgage (ARM) Portfolio. (1)/
(3) Amendment to Plan and Agreement Pursuant to Rule 12b-1 with respect to the Adjustable
Rate Mortgage (ARM) Portfolio dated June 28, 1991. (1)/
(4) Amendment to Plan and Agreement Pursuant to Rule 12b-1 dated September 18, 1996. (2)/
(5) Amended and Restated Rule 12b-1 Plan. (3)/
(6) Rule 12b-1 Plan dated July 22, 1999. (4)/*
(n) Multi-Class Plan dated July 22, 1999. (4)/
(o) Not applicable.
(p) (i) power of attorney for Richard M. Amis.*
(ii) power of attorney for Arthur G. DeRusso.*
(iii) power of attorney for David F. Holland.*
(iv) power of attorney for Gerald J. Levy.*
(v) power of attorney for Rodger D. Shay.*
(1)/ Previously filed with Post-Effective Amendment No. 26 on or about February 29, 1996 and incorporated
herein by reference.
(2)/ Previously filed with Post-Effective Amendment No. 27 on or about December 30, 1996 and incorporated
herein by reference.
(3)/ Previously filed with Post-Effective Amendment No. 28 on or about December 21, 1997.
(4)/ Previously filed with Post-Effective Amendment No. 34 on or about October 22, 1999.
* Filed herewith.
Item 24. Persons Controlled By or Under Common Control with Registrant
None.
Item 25. Indemnification.
</TABLE>
C-3
<PAGE> 102
Section 5.2 of the Registrant's Declaration of Trust provides that the
Trust shall indemnify each of its Trustees, officers, employees, and agents
against all liabilities and expenses reasonably incurred by him or her in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which he or she may be involved or
with which he or she may be threatened, while in office or thereafter, by reason
of his or her being or having been such a Trustee, officer, employee or agent,
except with respect to any matter as to which he or she shall have been
adjudicated to have acted in bad faith, willful misfeasance, gross negligence or
reckless disregard of his or her duties.
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 26. 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, Inc. (the "Adviser") contained in the
Section entitled "Investment Adviser and Administrator"; the information
concerning the organization of Shay Financial Services, Inc. (the "Distributor")
contained in the Section entitled "Distributor"; and the biographical
information pertaining to Messrs. Shay, Sammons, Podraza and Ellenwood contained
in the Section entitled "Investment Adviser and Administrator."
Effective December 8, 1997, the Adviser was appointed the investment
adviser to three registered investment companies:
Institutional Investors Capital Appreciation Fund, Inc., Asset
Management Fund and M.S.B. Fund, Inc. In addition, the Adviser serves 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
maintains an office in New York City.
The Adviser is located at 230 West Monroe Street, Chicago, Illinois
60606 and at 1000 Brickell Avenue, Miami, Florida 33131 and also has an office
in New York City. The Adviser is a wholly owned subsidiary of Shay Investment
Services, Inc. ("SISI"), which is a closely held corporation controlled by
Rodger D. Shay. Shay Financial Services, Inc., the Distributor of the Fund, is
also a closely held corporation of SISI.
C-4
<PAGE> 103
BUSINESS AND OTHER CONNECTIONS OF
NAME BOARD OF TRUSTEES AND OFFICERS
- ---- ---------------------------------
Rodger D. Shay Chairman and
Director of the
Adviser and
Distributor;
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.
Rodger D. Shay, Jr. President of the Distributor.
Edward E. Sammons, Jr. President of the Adviser.
Robert T. Podraza Vice President, Secretary and Treasurer of both the
Adviser and the Distributor.
Item 27. Principal Underwriters.
(a) The Distributor serves as the principal distributor for
Institutional Investors Capital Appreciation Fund, Inc., Asset
Management Fund and M.S.B. Fund, Inc.
(b) Certain information required by this Item 27 is incorporated
herein by reference to Item 26. Set forth below are the names
of the officers of the Distributor. (Other than those officers
who are also officers of the Registrant)
Item 28. 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,
230 West Monroe Street, Chicago, Illinois 60606; 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, Inc., 230 West Monroe
Street, Chicago, Illinois 60606; 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
BISYS Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus, Ohio 43219.
Item 29. Management Services
Not Applicable.
Item 30. 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.
C-5
<PAGE> 104
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant has duly caused this amendment to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Chicago and State of Illinois on the
28 day of December, 1999.
ASSET MANAGEMENT FUND
By: /s/ Edward E. Sammons, Jr.
------------------------------------
Edward E. Sammons, Jr., President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the registration statement has been signed below on December 28,
1999 by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
/s/ Rodger D. Shay* Trustee and Chairman of the Board
- ------------------------------------
Rodger D. Shay
/s/ Edward E. Sammons, Jr. President (principal executive officer) and Treasurer
- ------------------------------------
Edward E. Sammons, Jr. (principal financial and accounting officer)
/s/ Richard M. Amis* Trustee
- ------------------------------------
Richard M. Amis
/s/ Arthur G. De Russo* Trustee
- ------------------------------------
Arthur G. De Russo
/s/ David F. Holland* Trustee
- ------------------------------------
David F. Holland
/s/ Gerald J. Levy* Trustee
- ------------------------------------
Gerald J. Levy
</TABLE>
* Edward E. Sammons, Jr. signs this document pursuant to powers of
attorney as filed herewith.
C-6
<PAGE> 105
Exhibit Index
(p) (i) power of attorney for Richard M. Amis.
(ii) power of attorney for Arthur G. DeRusso.
(iii) power of attorney for David F. Holland.
(iv) power of attorney for Gerald J. Levy.
(v) power of attorney for Rodger D. Shay.
C-7
<PAGE> 1
EXHIBIT (p)(i)
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Rodger D. Shay, Edward E. Sammons, Jr., and Daniel K. Ellenwood, or any
of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign the Registration Statement of Asset Management
Fund, a Delaware business trust, on Form N-1A under the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended, and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully as all intents and purposes as he might or could do
in person, hereby ratifying and confirming all said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
DATED: October 22, 1999
/s/ RICHARD M. AMIS
----------------------------
Richard M. Amis
<PAGE> 1
EXHIBIT (p)(ii)
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Rodger D. Shay, Edward E. Sammons, Jr., and Daniel K. Ellenwood or any
of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign the Registration Statement of Asset Management
Fund, a Delaware business trust, on Form N-1A under the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended, and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully as all intents and purposes as he might or could do
in person, hereby ratifying and confirming all said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
DATED: October 22, 1999
/s/ ARTHUR G. DE RUSSO
-------------------------------
Arthur G. De Russo
<PAGE> 1
EXHIBIT (p)(iii)
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Rodger D. Shay, Edward E. Sammons, Jr., and Daniel K. Ellenwood or any
of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign the Registration Statement of Asset Management
Fund, a Delaware business trust, on Form N-1A under the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended, and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully as all intents and purposes as he might or could do
in person, hereby ratifying and confirming all said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
DATED: October 22, 1999
/s/ DAVID F. HOLLAND
---------------------------
David F. Holland
<PAGE> 1
EXHIBIT (p)(iv)
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Rodger D. Shay, Edward E. Sammons, Jr., and Daniel K. Ellenwood or any
of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign the Registration Statement of Asset Management
Fund, a Delaware business trust, on Form N-1A under the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended, and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully as all intents and purposes as he might or could do
in person, hereby ratifying and confirming all said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
DATED: October 22, 1999
/s/ GERALD J. LEVY
------------------------------
Gerald J. Levy
<PAGE> 1
EXHIBIT (p)(v)
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Rodger D. Shay, Edward E. Sammons, Jr., and Daniel K. Ellenwood or any
of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign the Registration Statement of Asset Management
Fund, a Delaware business trust, on Form N-1A under the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended, and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully as all intents and purposes as he might or could do
in person, hereby ratifying and confirming all said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
DATED: October 22, 1999
/s/ RODGER D. SHAY
------------------------------
Rodger D. Shay
