<PAGE> 1
As filed with the Securities and Exchange Commission on February 28, 1996
Registration No. 2-79285
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ x ]
POST-EFFECTIVE AMENDMENT NO. 34
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ x ]
AMENDMENT NO. 35
THE ARCH FUND, INC.
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road
Columbus, Ohio 43219
(Address of Principal Executive Offices)
Registrant's Telephone Number: (800) 551-3731
W. BRUCE MCCONNEL, III, Esq.
Drinker Biddle & Reath
1100 Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
(Name and Address of Agent for Service)
Copy to:
Jon W. Bilstrom, Esq.
Mercantile Bank of St. Louis N.A.
One Mercantile Center
8th and Washington Streets
St. Louis, MO 63101
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ x ] 75 days after filing pursuant to paragraph (a)(2)
[ ] 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.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
registered an indefinite number of shares under the Securities Act of 1933.
Registrant filed a Rule 24f-2 Notice for the fiscal year ended November 30,
1995 on January 29, 1996. Registrant continues its election to register an
indefinite number of shares of beneficial interest pursuant to Rule 24f-2 under
the Investment Company Act of 1940, as amended.
<PAGE> 2
THIS POST-EFFECTIVE AMENDMENT IS BEING FILED SOLELY IN ORDER TO REGISTER
SHARES OF THREE NEW INVESTMENT PORTFOLIOS, I.E. THE EQUITY INCOME PORTFOLIO,
NATIONAL MUNICIPAL BOND PORTFOLIO AND SHORT-INTERMEDIATE CORPORATE BOND
PORTFOLIO. ACCORDINGLY, THE PROSPECTUSES AND STATEMENTS OF ADDITIONAL
INFORMATION FOR THE MONEY MARKET PORTFOLIO, TREASURY MONEY MARKET PORTFOLIO,
TAX-EXEMPT MONEY MARKET PORTFOLIO, GROWTH & INCOME EQUITY PORTFOLIO, GOVERNMENT
& CORPORATE BOND PORTFOLIO, EMERGING GROWTH PORTFOLIO, U.S. GOVERNMENT
SECURITIES PORTFOLIO, BALANCED PORTFOLIO, INTERNATIONAL EQUITY PORTFOLIO,
SHORT-INTERMEDIATE MUNICIPAL PORTFOLIO, MISSOURI TAX-EXEMPT BOND PORTFOLIO AND
KANSAS TAX-EXEMPT BOND PORTFOLIO ARE NOT INCLUDED IN THIS FILING.
<PAGE> 3
CROSS REFERENCE SHEET
---------------------
(Trust Shares)
The ARCH Equity Income Portfolio
The ARCH National Municipal Bond Portfolio
The ARCH Short-Intermediate Corporate Bond Portfolio
<TABLE>
<CAPTION>
Form N-1A Part A Item Prospectus Caption
- --------------------- ------------------
<S> <C> <C>
1. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . . . . . . . . . . . . . Expense Summary
for Trust Shares
3. Condensed Financial
Information . . . . . . . . . . . . . . . . . . . . . . Certain Financial
Information; Yields
and Total Returns
4. General Description
of Registrant . . . . . . . . . . . . . . . . . . . . . Highlights; Investment
Objectives, Policies
and Risk Considerations;
Investment Limitations;
Other Information Concerning
the Fund and Its Shares
5. Management of the Fund . . . . . . . . . . . . . . . . . . Management of the Fund
5A. Management's Discussion of
Fund Performance . . . . . . . . . . . . . . . . . . . . Inapplicable
6. Capital Stock and
Other Securities . . . . . . . . . . . . . . . . . . . . How to Purchase and
Redeem Shares; Dividends
and Distributions;
Taxes; Other Information
Concerning the Fund
and Its Shares
7. Purchase of Securities
Being Offered . . . . . . . . . . . . . . . . . . . . . How to Purchase and
Redeem Shares
8. Redemption or Repurchase . . . . . . . . . . . . . . . . . How to Purchase and
Redeem Shares
9. Pending Legal Proceedings . . . . . . . . . . . . . . . . Inapplicable
</TABLE>
<PAGE> 4
CROSS REFERENCE SHEET
---------------------
(Investor A and Investor B Shares)
The ARCH Equity Income Portfolio
The ARCH National Municipal Bond Portfolio
The ARCH Short-Intermediate Corporate Bond Portfolio
<TABLE>
<CAPTION>
Form N-1A Part A Item Prospectus Caption
- --------------------- ------------------
<S> <C> <C>
1. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . . . . . . . . . . . . . Expense Summary
for Investor A and Investor B Shares
3. Condensed Financial
Information . . . . . . . . . . . . . . . . . . . . . . Certain Financial
Information; Financial
Highlights; Yields and Total Returns
4. General Description
of Registrant . . . . . . . . . . . . . . . . . . . . . Highlights; Investment
Objectives, Policies and
Risk Considerations;
Other Information Concerning
the Fund and Its Shares
5. Management of the Fund . . . . . . . . . . . . . . . . . . Management of the Fund
5A. Management's Discussion of
Fund Performance . . . . . . . . . . . . . . . . . . . . Inapplicable
6. Capital Stock and
Other Securities . . . . . . . . . . . . . . . . . . . . How to Purchase and
Redeem Shares; Dividends
and Distributions;
Taxes; Other Information
Concerning the Fund
and Its Shares
7. Purchase of Securities
Being Offered . . . . . . . . . . . . . . . . . . . . . How to Purchase and
Redeem Shares
8. Redemption or Repurchase . . . . . . . . . . . . . . . . . How to Purchase and
Redeem Shares
9. Pending Legal Proceedings . . . . . . . . . . . . . . . . Inapplicable
</TABLE>
<PAGE> 5
CROSS REFERENCE SHEET
---------------------
(Institutional Shares)
The ARCH Equity Income Portfolio
The ARCH Short-Intermediate Corporate Bond Portfolio
<TABLE>
<CAPTION>
Form N-1A Part A Item Prospectus Caption
- --------------------- ------------------
<S> <C> <C>
1. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . . . . . . . . . . . . . Expense Summary
for Institutional Shares
3. Condensed Financial
Information . . . . . . . . . . . . . . . . . . . . . . Certain Financial
Information; Financial
Highlights; Yields and Total Returns
4. General Description
of Registrant . . . . . . . . . . . . . . . . . . . . . Highlights; Investment
Objectives, Policies and
Risk Considerations;
Other Information Concerning
the Fund and Its Shares
5. Management of the Fund . . . . . . . . . . . . . . . . . . Management of the Fund
5A. Management's Discussion of
Fund Performance . . . . . . . . . . . . . . . . . . . . Inapplicable
6. Capital Stock and
Other Securities . . . . . . . . . . . . . . . . . . . . How to Purchase and
Redeem Shares; Dividends
and Distributions;
Taxes; Other Information
Concerning the Fund
and Its Shares
7. Purchase of Securities
Being Offered . . . . . . . . . . . . . . . . . . . . . How to Purchase and
Redeem Shares
8. Redemption or Repurchase . . . . . . . . . . . . . . . . . How to Purchase and
Redeem Shares
9. Pending Legal Proceedings . . . . . . . . . . . . . . . . Inapplicable
</TABLE>
<PAGE> 6
THE ARCH FUND(R), INC.
THE ARCH EQUITY INCOME PORTFOLIO
THE ARCH NATIONAL MUNICIPAL BOND PORTFOLIO
THE ARCH SHORT-INTERMEDIATE CORPORATE BOND PORTFOLIO
TRUST SHARES
The ARCH Fund, Inc. is an open-end management investment company
authorized to issue Shares in fifteen investment portfolios. This Prospectus
describes the Trust Shares of THE ARCH EQUITY INCOME, NATIONAL MUNICIPAL BOND
AND SHORT-INTERMEDIATE CORPORATE BOND PORTFOLIOS. Trust Shares are offered to
financial institutions acting on their own behalf or on behalf of certain
qualified accounts.
THE ARCH EQUITY INCOME PORTFOLIO'S investment objective is to seek to
provide an above-average level of income consistent with long-term capital
appreciation. Under normal market and economic conditions, the Portfolio
intends to invest substantially all of its assets in common stock, preferred
stock, rights, warrants and securities convertible into common stock.
THE ARCH NATIONAL MUNICIPAL BOND PORTFOLIO'S investment objective is to
seek as high a level of current income exempt from regular federal income tax
as is consistent with conservation of capital. Under normal market and
economic conditions, the Portfolio intends to invest substantially all of its
assets in investment-grade debt obligations issued by or on behalf of states,
territories and possessions of the United States, the District of Columbia and
their respective political subdivisions, agencies, instrumentalities and
authorities the interest on which, in the opinion of bond counsel or counsel to
the issuer, is exempt from regular federal income tax.
THE ARCH SHORT-INTERMEDIATE CORPORATE BOND PORTFOLIO'S investment
objective is to seek as high a level of current income as is consistent with
preservation of capital. Under normal market and economic conditions, the
Portfolio intends to invest at least 65% of its assets in non- convertible
corporate debt obligations.
Mississippi Valley Advisors Inc. ("MVA" or the "Adviser"), a
wholly-owned subsidiary of Mercantile Bank of St. Louis National Association
("Mercantile") acts as investment adviser for the Portfolios; Mercantile serves
as custodian; BISYS Fund Services Ohio, Inc. (the "Administrator") serves as
administrator; and BISYS Fund Services (the "Distributor") serves as sponsor
and distributor.
<PAGE> 7
This Prospectus sets forth concisely certain information about the
Portfolios that prospective investors should know before investing. Investors
should read this Prospectus and retain it for future reference. Additional
information about the Portfolios, contained in a Statement of Additional
Information dated __________, 1996, has been filed with the Securities and
Exchange Commission and is incorporated by reference in its entirety into this
Prospectus. An investor may obtain the Statement of Additional Information
without charge by writing the Fund at P.O. Box 78069, St. Louis, Missouri 63178
or by calling 1-800-551-3731.
Portfolio Shares are not bank deposits, are not federally insured or
guaranteed by the U.S. Government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other governmental agency, and are not the
obligations of or guaranteed or otherwise supported by any bank. An investment
in the Portfolios involves investment risk, including possible loss of
principal.
______________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
________________, 1996
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<PAGE> 8
HIGHLIGHTS
The ARCH Fund, Inc. (the "Fund") is an open-end management investment
company (commonly known as a mutual fund) registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). The Fund offers investment
opportunities in fifteen investment portfolios. This Prospectus relates to
three of those portfolios: THE ARCH EQUITY INCOME, NATIONAL MUNICIPAL BOND AND
SHORT-INTERMEDIATE CORPORATE BOND PORTFOLIOS (the "Portfolios"). In addition,
the Fund offers investment opportunities in the ARCH Money Market, Treasury
Money Market, Growth & Income Equity, Emerging Growth, Government & Corporate
Bond, U.S. Government Securities, Balanced, International Equity,
Short-Intermediate Municipal, Tax-Exempt Money Market, Missouri Tax-Exempt Bond
and Kansas Tax-Exempt Bond Portfolios, which are described in separate
Prospectuses. Each Portfolio represents a separate pool of assets with
different investment objectives and policies (as described below under
"Investment Objectives, Policies and Risk Considerations"). MVA serves as
Adviser, Mercantile as Custodian, BISYS Fund Services Ohio, Inc. as
Administrator, and BISYS Fund Services as sponsor and Distributor. (For
information on expenses, fee waivers and services, see "Certain Financial
Information," and "Management of the Fund.")
The following information generally describes the Portfolios and their
investment objectives. There can be no assurance that the Portfolios will be
able to achieve their investment objectives.
The Equity Income Portfolio is designed for investors who seek an
above-average level of income consistent with long-term capital appreciation,
and who are prepared to accept the risks associated with an investment in
equity securities.
The National Municipal Bond Portfolio is designed for investors who
seek current income that is exempt from regular federal income tax and relative
stability of principal.
The Short-Intermediate Corporate Bond Portfolio is designed for
investors who seek higher current income than is typically offered by money
market funds with less principal volatility than is normally associated with a
long-term bond fund.
Investors should note that one or more of the Portfolios may, subject
to their investment policies and limitations, purchase variable and floating
rate instruments, enter into repurchase agreements and reverse repurchase
agreements, make securities loans, acquire the securities of foreign issuers,
invest in options and futures, and make limited investments in illiquid
securities and securities issued by other investment companies. These
investment practices involve investment risks of varying degrees. In addition,
each Portfolio may engage in
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<PAGE> 9
short-term trading, which may also involve greater risk and increase the
Portfolio's expenses. The National Municipal Bond Portfolio may also, under
certain unusual market or economic conditions, make limited investments in
securities the income on which may be subject to federal income tax. See
"Investment Objectives, Policies and Risk Considerations" below and the
Statement of Additional Information under "Investment Objectives and Policies".
The Fund offers investors the opportunity to invest in a variety of
professionally managed investments without having to become involved with
detailed management, accounting and safekeeping procedures normally related to
direct investments in securities. The Fund also offers the economic advantages
of block trading in securities and the availability of a family of fifteen
mutual funds should your investment goals change.
This Prospectus describes the Trust Shares of the Portfolios. For
information on purchasing, exchanging or redeeming Trust Shares of the
Portfolios, please see "How to Purchase and Redeem Shares" below.
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<PAGE> 10
CERTAIN FINANCIAL INFORMATION
Shares of the Equity Income Portfolio have been classified into four
classes of Shares -- Trust Shares, Institutional Shares, Investor A Shares and
Investor B Shares; Shares of the National Municipal Bond Portfolio have been
classified into three classes of Shares -- Trust Shares, Investor A Shares and
Investor B Shares; and Shares of the Short-Intermediate Corporate Bond
Portfolio have been classified into three classes of Shares -- Trust Shares,
Institutional Shares and Investor A Shares. Shares of each class in a
Portfolio represent equal, pro rata interests in the investments held by that
Portfolio and are identical in all respects, except that Shares of each class
bear separate distribution and/or shareholder administrative servicing fees and
certain other operating expenses, and enjoy certain exclusive voting rights on
matters relating to these fees. (See "Other Information Concerning the Fund
and Its Shares" and "Management of the Fund -- Administrative Services Plan"
below.) As a result of payments for distribution and/or shareholder
administrative servicing fees and certain other operating expenses that may be
made in differing amounts, the net investment income of Trust Shares,
Institutional Shares, Investor A Shares and/or Investor B Shares in a Portfolio
can be expected, at any given time, to be different.
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<PAGE> 11
EXPENSE SUMMARY FOR
TRUST SHARES
<TABLE>
<CAPTION>
NATIONAL SHORT-INTERMEDIATE
EQUITY INCOME MUNICIPAL BOND CORPORATE BOND
PORTFOLIO PORTFOLIO PORTFOLIO
------------- -------------- ------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price) 0.00% 0.00% 0.00%
ANNUAL PORTFOLIO OPERATING
EXPENSES
(as a percentage of average
net assets)
Investment Advisory Fees (net
of fee waivers)1 0.00% 0.00% 0.00%
12b-1 Fees 0.00% 0.00% 0.00%
Other Expenses (including
administration fees,
administrative services fees
and other expenses) (net
of fee waivers and expense
reimbursements)2,3 .20% .20% .21%
---- ---- ----
TOTAL PORTFOLIO OPERATING
EXPENSES (net of fee
waivers and expense
reimbursements)3 .20% .20% .21%
===== ===== =====
- --------------------
</TABLE>
1 Without fee waivers, advisory fees for the Equity Income, National
Municipal Bond and Short- Intermediate Corporate Bond Portfolios would
be .75%, .55% and .55%, respectively.
2 Without fee waivers, administration fees for each Portfolio would be
0.20%. Administrative services fees are payable at an annual rate not
to exceed 0.30%.
3 Without fee waivers and expense reimbursements, Other Expenses would
be .30%, .30% and .31% and Total Portfolio Operating Expenses would be
1.05%, .85% and .86% for the Equity Income, National Municipal Bond
and Short-Intermediate Corporate Bond Portfolios, respectively.
Example
You would pay the following
expenses on a $1,000 investment,
assuming (1) a 5% annual return
and (2) redemption at the end of
each period: 1 YEAR 3 YEARS
------ -------
Equity Income Portfolio . . . . . . . $2 $6
National Municipal Bond Portfolio . . $2 $6
Short-Intermediate Corporate
Bond Portfolio . . . . . . . . . . . $2 $7
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<PAGE> 12
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RATES OF RETURN. THE PORTFOLIOS ARE NEW AND ACTUAL
OPERATING EXPENSES AND INVESTMENT RETURN MAY BE MORE OR LESS THAN THOSE SHOWN.
Information about the actual performance of the Portfolios will be contained in
the Fund's future Annual Reports to Shareholders, which may be obtained without
charge when they become available by contacting the Fund at the address or
telephone number provided on the cover page of this Prospectus.
The purpose of the foregoing tables is to assist in understanding the
various costs and expenses that an investor in the Portfolios' Trust Shares
will bear directly or indirectly. The tables, which have not been audited by
the Fund's independent auditors, reflect the expenses which the Portfolios
expect to incur during the next twelve months on their Trust Shares. For more
complete descriptions of the various costs and expenses, see "Management of the
Fund" in this Prospectus and the Statement of Additional Information. The
Tables and Examples do not reflect any charges that may be imposed by financial
institutions on their customers.
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS
The investment objective of a Portfolio may not be changed without the
affirmative vote of a majority of the outstanding Shares of the Portfolio.
Although management will use its best efforts to achieve the investment
objective of each Portfolio, there can be no assurance that it will be able to
do so.
THE EQUITY INCOME PORTFOLIO
The Equity Income Portfolio's investment objective is to seek to
provide an above-average level of income consistent with long-term capital
appreciation. In pursuing its investment objective, the Portfolio intends to
invest, under normal market and economic conditions, substantially all of its
assets in common stock, preferred stock, rights, warrants, and securities
convertible into common stock. The Adviser will select stocks based on a
number of quantitative factors, including dividend yield, current and future
earnings potential compared to stock prices, total return potential and other
measures of value, such as cash flow, asset value or book value, if
appropriate. Stocks purchased for the Portfolio generally will be listed on a
national securities exchange or will be unlisted securities with an established
over-the-counter market. A convertible security may be purchased for the
Portfolio when, in the Adviser's opinion, the price and yield of the
convertible security is favorable as compared to the price and yield of the
common stock. The stocks or securities in which the Portfolio invests may be
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<PAGE> 13
expected to produce an above average level of income (as measured by the
Standard & Poor's 500 Index). In general, the Portfolio's stocks and other
securities will be diversified over a number of industry groups in an effort to
reduce the risks inherent in such investments.
The Portfolio may indirectly invest in foreign securities through the
purchase of American Depository Receipts ("ADRs") and European Depository
Receipts ("EDRs") but will not do so if, immediately after and as a result of
the purchase, the value of ADRs and EDRs would exceed 15% of the Portfolio's
total assets. (For further information, see "Other Applicable Policies --
Foreign Securities" below and the Statement of Additional Information under
"Investment Objectives and Policies -- ADRs and EDRs.")
The Portfolio reserves the right to hold as a temporary defensive
measure up to 100% of its total assets in cash and short-term obligations
(having remaining maturities of 13 months or less) at such times and in such
proportions as, in the opinion of the Adviser, prevailing market or economic
conditions warrant. Short-term obligations in which the Portfolio may invest
include money market instruments, such as commercial paper and bank
obligations, obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, and repurchase agreements.
THE NATIONAL MUNICIPAL BOND PORTFOLIO
The National Municipal Bond Portfolio's investment objective is to
seek as high a level of current income exempt from regular federal income tax
as is consistent with conservation of capital. In pursuing its investment
objective, the Portfolio intends to invest, under normal market and economic
conditions, substantially all of its assets in investment-grade debt
obligations issued by or on behalf of states, territories and possessions of
the United States, the District of Columbia and their respective political
subdivisions, agencies, instrumentalities and authorities the interest on
which, in the opinion of bond counsel or counsel to the issuer, is exempt from
regular federal income tax (collectively, "Municipal Obligations"). As a
matter of fundamental policy, under normal market and economic conditions at
least 80% of the Portfolio's total assets will be invested in Municipal
Obligations, primarily, bonds (at least 65% under normal market conditions).
The Portfolio may purchase Municipal Obligations that are rated at the
time of purchase in one of the four highest rating categories assigned by one
or more unaffiliated nationally recognized statistical rating organizations
("Rating Agencies") or in unrated Municipal Obligations deemed by the Adviser
to be of comparable quality. Under normal market and economic
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<PAGE> 14
conditions, however, the Portfolio intends to invest at least 65% of its assets
in Municipal Obligations rated at the time of purchase in one of the three
highest rating categories assigned by one or more Rating Agencies (or unrated
Municipal Obligations determined to be of comparable quality). Securities that
are rated in the lowest of the four highest rating categories are considered to
have speculative characteristics, even though they are of investment-grade
quality, and will be purchased (and retained) only if the Adviser believes that
the issuers have an adequate capacity to pay interest and repay principal.
Unrated obligations will be purchased only if they are considered by the
Adviser to be at least comparable in quality at the time of purchase to
instruments within the rating categories listed above. Municipal Obligations
purchased by the Portfolio whose ratings are subsequently downgraded below the
four highest rating categories of a Rating Agency will be disposed of in an
orderly manner, normally within 30 to 60 days. The applicable ratings issued
by the Rating Agencies are described in the Appendix to the Statement of
Additional Information.
In addition, the Portfolio may from time to time during temporary
defensive periods, invest in taxable obligations in such proportions as, in the
opinion of the Adviser, prevailing market or economic conditions warrant. Such
instruments may include obligations of the U.S. Government, its agencies or
instrumentalities and debt securities (including commercial paper) of issuers
having, at the time of purchase, a quality rating within the two highest rating
categories by a Rating Agency. The Portfolio does not intend to invest in
taxable obligations under normal market conditions.
During temporary defensive periods or if, in the opinion of the
Adviser, suitable tax-exempt obligations are unavailable, the Portfolio may
also hold uninvested cash reserves which do not earn income pending investment.
There is no percentage limitation on the amount of assets that may be held
uninvested during these temporary defensive periods. The Portfolio does not
intend to hold uninvested cash reserves under normal market conditions.
The Portfolio's average dollar-weighted maturity will vary in light of
current market and economic conditions, the comparative yields on instruments
with different maturities, and other factors.
THE SHORT-INTERMEDIATE CORPORATE BOND PORTFOLIO
The Short-Intermediate Corporate Bond Portfolio's investment objective
is to seek as high a level of current income as is consistent with preservation
of capital. In pursuing its investment objective, the Portfolio intends to
invest, under normal market and economic conditions, at least 65% of its assets
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<PAGE> 15
in non-convertible corporate debt obligations, which shall mean obligations of
(i) domestic or foreign business corporations, or (ii) agencies,
instrumentalities or authorities which are organized in corporate form by one
or more states or political subdivisions in the United States or one or more
foreign governments. The Portfolio may also invest in obligations issued or
guaranteed by the U.S. or foreign governments, their agencies or
instrumentalities, and asset-backed securities, including various
collateralized mortgage obligations and other mortgage-related securities. In
making investment decisions, the Adviser will consider a number of factors
including current yield, maturity, yield to maturity, anticipated changes in
interest rates, and the overall quality of the investment. The Portfolio seeks
to provide a current yield greater than that generally available from money
market instruments.
The Portfolio may purchase debt securities which are rated at the time
of purchase in one of the four highest rating categories assigned by one or
more Rating Agencies or in unrated debt securities deemed by the Adviser to be
of comparable quality. Under normal market and economic conditions, however,
the Portfolio intends to invest at least 65% of its assets in debt obligations
rated in one of the three highest rating categories assigned by one or more
Rating Agencies (or unrated debt obligations determined to be of comparable
quality). Securities that are rated in the lowest of the four highest rating
categories have speculative characteristics, even though they are of
investment-grade quality, and such securities will be purchased (and retained)
only if the Adviser believes that the issuers have an adequate capacity to pay
interest and repay principal. Unrated debt securities will be purchased only
if they are considered by the Adviser to be at least comparable in quality at
the time of purchase to instruments within the rating categories listed above.
Debt securities purchased by the Portfolio whose ratings are subsequently
downgraded below the four highest rating categories of a Rating Agency will be
disposed of in an orderly manner, normally within 30 to 60 days. The
applicable ratings issued by the Rating Agencies are described in the Appendix
to the Statement of Additional Information.
The Portfolio reserves the right to hold as a temporary defensive
measure up to 100% of its total assets in cash and short-term obligations
(having remaining maturities of 13 months or less) at such times and in such
proportions as, in the opinion of the Adviser, prevailing market or economic
conditions warrant. Short-term obligations in which the Portfolio may invest
include money market instruments, such as commercial paper and bank
obligations, obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, and repurchase agreements.
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<PAGE> 16
The Portfolio's average weighted maturity will be between two and five
years and will vary in light of current market and economic conditions, the
comparative yields on instruments with different maturities, and other factors.
OTHER APPLICABLE POLICIES
U.S. GOVERNMENT OBLIGATIONS. Securities issued or guaranteed by the
U.S. Government, its agencies and instrumentalities have historically involved
little risk of loss of principal if held to maturity. However, due to
fluctuations in interest rates, the market value of such securities may vary
during the period a shareholder owns Shares of a Portfolio. Examples of the
types of U.S. Government obligations that may be held by the Portfolios,
subject to their investment objectives and policies, include, in addition to
U.S. Treasury bonds, notes and bills, the obligations of Federal Home Loan
Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage Association
("GNMA"), Federal National Mortgage Association ("FNMA"), Federal Home Loan
Mortgage Corporation ("FHLMC"), General Services Administration, Student Loan
Marketing Association, Central Bank for Cooperatives, Federal Intermediate
Credit Banks, Resolution Trust Corporation, and Maritime Administration.
Obligations of certain agencies and instrumentalities of the U.S. Government,
such as those of GNMA, are supported by the full faith and credit of the U.S.
Treasury; others, such as the Export-Import Bank of the United States, are
supported by the right of the issuer to borrow from the Treasury; others, such
as those of FNMA, are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; still others such as those of
the Student Loan Marketing Association, are supported only by the credit of the
instrumentality. There is no assurance that the U.S. Government would provide
financial support to U.S. Government-sponsored instrumentalities if it is not
obligated to do so by law.
STRIPPED GOVERNMENT SECURITIES. To the extent consistent with their
respective investment policies, the Portfolios may invest in bills, notes and
bonds (including zero coupon bonds) issued by the U.S. Treasury, as well as
"stripped" U.S. Treasury obligations offered under the Separate Trading of
Registered Interest and Principal Securities ("STRIPS") program or Coupon Under
Bank-Entry Safekeeping ("CUBES") program or other stripped securities issued
directly by agencies or instrumentalities of the U.S. Government. STRIPS and
CUBES represent either future interest or principal payments and are direct
obligations of the U.S. Government that clear through the Federal Reserve
System. The Short-Intermediate Corporate Bond Portfolio may also purchase U.S.
Treasury and agency securities that are stripped by brokerage firms and
custodian banks and sold under proprietary
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names. These stripped securities are resold in custodial receipt programs with
a number of different names (such as TIGRs and CATS) and are not considered
government securities for purposes of the 1940 Act. Stripped securities are
issued at a discount to their "face value" and may exhibit greater price
volatility than ordinary debt securities because of the manner in which their
principal and interest are returned to investors. The Adviser will consider
the liquidity needs of a Portfolio when any investments in zero coupon
obligations or other principal-only obligations are made.
MONEY MARKET INVESTMENTS. Under certain circumstances described
above, each Portfolio may purchase "money market instruments," including
commercial paper and bank obligations.
Investment by the Portfolios in taxable or tax-exempt commercial paper
will consist of issues that are rated at the time of purchase in one of the two
highest rating categories assigned by a Rating Agency or, if unrated, deemed to
be of comparable quality by the Adviser at the time of purchase. Commercial
paper may include variable and floating rate instruments. See "Other
Applicable Policies -- Variable and Floating Rate Instruments" below.
Bank obligations include bankers' acceptances, negotiable certificates
of deposit and non-negotiable time deposits of U.S. or foreign banks, having
total assets at the time of purchase in excess of $1 billion. Although the
Portfolios will invest in obligations of foreign banks or foreign branches of
U.S. banks only when the Adviser determines that the instrument presents
minimal credit risks, such investments nevertheless entail risks that are
different from those of investments in domestic obligations of U.S. banks. See
"Other Applicable Policies - - Foreign Securities" below. Investments in the
obligations of foreign banks or foreign branches of U.S. banks will not exceed
25% of a particular Portfolio's total assets at the time of purchase.
REPURCHASE AGREEMENTS. Under certain circumstances described above
and subject to their respective investment policies, the Portfolios, other than
the National Municipal Bond Portfolio, may agree to purchase U.S. Government
securities from financial institutions such as banks and broker-dealers,
subject to the seller's agreement to repurchase them at a mutually agreed-upon
date and price ("repurchase agreements"). The Portfolio will enter into
repurchase agreements only with financial institutions such as banks and
broker-dealers that the Adviser believes to be creditworthy. During the term
of any repurchase agreement, the Adviser will continue to monitor the
creditworthiness of the seller and will require the seller to maintain the
value of the securities subject to the agreement at not less than 102% of the
repurchase price (including accrued
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interest). Default by a seller could expose the Portfolio to possible loss
because of adverse market action or possible delay in disposing of the
underlying obligations. Because of the seller's repurchase obligations, the
securities subject to repurchase agreements do not have maturity limitations.
Although the Portfolio presently does not intend to enter into repurchase
agreements providing for settlement in more than seven days, the Portfolio does
have the authority to do so subject to its limitation on the purchase of
illiquid securities described below. Repurchase agreements are considered to
be loans under the 1940 Act. The income on repurchase agreements may be
taxable to investors at the state or local level. (See "Taxes.")
REVERSE REPURCHASE AGREEMENTS. Subject to their respective investment
policies and limitations, the Portfolios, other than the National Municipal
Bond Portfolio, may borrow funds for temporary purposes by entering into
reverse repurchase agreements. Pursuant to such agreements, the Portfolio
would sell portfolio securities to financial institutions such as banks and
broker-dealers and agree to repurchase them at an agreed upon date and price.
Reverse repurchase agreements involve the risk that the market value of the
securities sold by the Portfolio may decline below the repurchase price which
the Portfolio is obligated to pay. Reverse repurchase agreements are
considered to be borrowings by the Portfolio under the 1940 Act.
SECURITIES LENDING. To increase return or offset expenses, each
Portfolio may, from time to time, lend portfolio securities to broker- dealers,
banks or institutional borrowers pursuant to agreements requiring that the
loans be continuously secured by collateral equal at all times in value to at
least the market value of the securities loaned. Collateral for such loans may
include cash, securities of the U.S. Government, or its agencies or
instrumentalities, or an irrevocable letter of credit issued by a bank that has
at least $1.5 billion in total assets, or any combination thereof. The
collateral must be valued daily, and, should the market value of the loaned
securities increase, the borrower must furnish additional collateral to the
lending Portfolio. By lending its securities, a Portfolio can increase its
income by continuing to receive interest on the loaned securities as well as by
either investing the cash collateral in short-term instruments or obtaining
yield in the form of interest paid by the borrower when U.S. Government
securities are used as collateral. In accordance with current Securities and
Exchange Commission ("SEC") policies, each Portfolio is currently limiting its
securities lending to 33-1/3% of its aggregate net assets. Loans are subject
to termination by a Portfolio or the borrower at any time.
OPTIONS. The Equity Income and Short-Intermediate Corporate Bond
Portfolios may purchase put and call options listed on a national securities
exchange and issued by the Options Clearing
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Corporation in an amount not exceeding 10% of their respective net assets.
Such options may relate to particular securities or to various stock or bond
indices. Purchasing options is a specialized investment technique which
entails a substantial risk of a complete loss of the amounts paid as premiums
to the option writer. Such transactions will be entered into only as a hedge
against fluctuations in the value of securities which a Portfolio holds or
intends to purchase.
These Portfolios may also write covered call options. A covered call
option is an option to acquire a security that a Portfolio owns or has the
right to acquire during the option period. Such options will be listed on a
national securities exchange and issued by the Options Clearing Corporation.
The aggregate value of the securities subject to covered call options
written by a Portfolio will not exceed 25% of the value of its net assets. In
order to close out an option position, a Portfolio may enter into a "closing
purchase transaction" -- the purchase of a covered call option on the same
security with the same exercise price and expiration date as the option which
the Portfolio previously wrote. By writing a covered call option, a Portfolio
forgoes the opportunity to profit from an increase in the market price of the
underlying security above the exercise price except insofar as the premium
represents such a profit and it is not able to sell the underlying security
until the option expires, is exercised, or the Portfolio effects a closing
purchase transaction by purchasing an option of the same series. The use of
covered call options will not be a primary investment technique of either
Portfolio. (For additional information relating to option trading practices,
including particular risks, see the Statement of Additional Information and
Appendix B thereof.)
FUTURES CONTRACTS AND RELATED OPTIONS. The Equity Income and
Short-Intermediate Corporate Bond Portfolios may invest in futures contracts
and options on futures contracts to the extent permitted by the Commodity
Futures Trading Commission ("CFTC") and the SEC. Such transactions, including
stock or bond index futures contracts, or options thereon, act as a hedge to
protect a Portfolio from fluctuations in the value of its securities caused by
anticipated changes in interest rate or market conditions without necessarily
buying or selling the securities. Hedging is a specialized investment
technique that entails skills different from other investment management. The
Adviser may also consider such transactions to be economically appropriate for
the reduction of risk inherent in the ongoing management of a Portfolio. A
stock or bond index futures contract is an agreement in which one party agrees
to take or make delivery of an amount of cash equal to a specified dollar
amount times the difference between the index value (which assigns relative
values to the common stock or bonds included in the index) at the close
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of the last trading day of the contract and the price at which the agreement is
originally made. No physical delivery of the underlying stock or bond in the
index is contemplated. Similarly, it may be in the best interest of a
Portfolio to purchase or sell interest rate futures contracts, or options
thereon, which provide for the future delivery of specified fixed income
securities.
The purchase and sale of futures contracts or related options will not
be a primary investment technique of any Portfolio. Neither the Equity Income
Portfolio nor Short-Intermediate Corporate Bond Portfolio will purchase or sell
futures contracts (or related options thereon) for hedging purposes if,
immediately after purchase, the aggregate initial margin deposits and premiums
paid by a Portfolio on its open futures and options positions exceeds 5% of the
liquidation value of the Portfolio, after taking into account any unrealized
profits and unrealized losses on any such futures or related options contracts
into which it has entered. (For a more detailed description of futures
contracts and related options, see the Statement of Additional Information and
Appendix B thereof.)
ASSET-BACKED SECURITIES. The Short-Intermediate Corporate Bond
Portfolio may purchase asset-backed securities (i.e., securities backed by
mortgages, installment sale contracts, corporate receivables, credit card
receivables or other assets) that are issued by entities such as the GNMA,
FNMA, FHLMC and private issuers such as commercial banks, financial companies,
finance subsidiaries of industrial companies, savings and loan associations,
mortgage banks, and investment banks. To the extent that the Portfolio invests
in asset-backed securities issued by companies that are investment companies
under the 1940 Act, such acquisitions will be subject to the percentage
limitations prescribed by the 1940 Act. (See "Other Applicable Policies --
Securities of Other Investment Companies" below.)
Presently there are several types of mortgage-backed securities,
including guaranteed mortgage pass-through certificates, which provide the
holder with a pro rata interest in the underlying mortgages, and collateralized
mortgage obligations ("CMOs"), which provide the holder with a specified
interest in the cash flow of a pool of underlying mortgages or other
mortgage-backed securities. CMOs are issued in multiple classes, each with a
specified fixed or floating interest rate and a final distribution date. The
relative payment rights of the various CMO classes may be subject to greater
volatility and interest-rate risk than other types of mortgage-backed
securities. The average life of asset-backed securities varies with the
underlying instruments or assets and market conditions, which in the case of
mortgages have maximum maturities of forty years. The average life of a
mortgage-backed instrument, in
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particular, is likely to be substantially less than the original maturity of
the mortgages underlying the securities as the result of unscheduled principal
payments and mortgage prepayments. The relationship between mortgage
prepayment and interest rates may give some high-yielding mortgage-backed
securities less potential for growth in value than conventional bonds with
comparable maturities. In addition, in periods of falling interest rates, the
rate of mortgage prepayments tends to increase. During such periods, the
reinvestment of prepayment proceeds by the Short-Intermediate Corporate Bond
Portfolio will generally be at lower rates than the rates that were carried by
the obligations that have been prepaid. When interest rates rise, the value of
an asset-backed security generally will decline; however, when interest rates
decline, the value of an asset-backed security with prepayment features may not
increase as much as that of other fixed income securities. Because of these
and other reasons, an asset-backed security's total return may be difficult to
predict precisely.
In general, the collateral supporting non-mortgage asset-backed
securities is of shorter maturity than mortgage loans and is less likely to
experience substantial prepayments. Non-mortgage asset-backed securities
involve certain risks that are not presented by mortgage-backed securities
arising primarily from the nature of the underlying assets (i.e., credit card
and automobile loan receivables as opposed to real estate mortgages). For
example, credit card receivables are generally unsecured and the repossession
of automobiles and other personal property upon the default of the debtor may
be difficult or impracticable in some cases.
TYPES OF MUNICIPAL OBLIGATIONS. The two principal classifications of
Municipal Obligations that may be held by the National Municipal Bond Portfolio
are "general obligation" securities and "revenue" securities. General
obligation securities are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue
securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. Revenue securities include private activity bonds
which are not payable from the unrestricted revenues of the issuer.
Consequently, the credit quality of private activity bonds is usually directly
related to the credit standing of the corporate user of the facility involved.
Municipal Obligations may also include "moral obligation" bonds, which are
normally issued by special purpose public authorities. If the issuer of a
moral obligation bond is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
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<PAGE> 22
Municipal Obligations include debt obligations issued by governmental
entities to obtain funds for various public purposes, including the
construction of a wide range of public facilities, the refunding of outstanding
obligations, the payment of general operating expenses and the extension of
loans to public institutions and facilities. Private activity bonds issued by
or on behalf of public authorities to finance various privately operated
facilities are considered Municipal Obligations. Interest on private activity
bonds, although free of regular federal income tax, may be an item of tax
preference for purposes of the federal alternative minimum tax.
The National Municipal Bond Portfolio may acquire zero coupon
obligations, which may have greater price volatility than coupon obligations
and which will not result in payment of interest until maturity. Also included
within the general category of Municipal Obligations are participation
certificates in leases, installment purchase contracts, or conditional sales
contracts ("lease obligations") entered into by state or political subdivisions
to finance the acquisition or construction of equipment, land, or facilities.
Although lease obligations do not constitute general obligations of the issuer
for which the lessee's unlimited taxing power is pledged, certain lease
obligations are backed by the lessee's covenant to appropriate money to make
the lease obligation payments. However, under certain lease obligations, the
lessee has no obligation to make these payments in future years unless money is
appropriated on a yearly basis. Although "non-appropriation" lease obligations
are secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult. These securities represent a relatively new
type of financing and may not be as marketable as more conventional securities.
To the extent these securities are illiquid, they are subject to the
Portfolio's applicable limitation on illiquid securities described below.
Municipal Obligations purchased by the National Municipal Bond
Portfolio may be backed by letters of credit or guarantees issued by domestic
or foreign banks and other financial institutions which are not subject to
federal deposit insurance. Adverse developments affecting the banking industry
generally or a particular bank or financial institution that has provided its
credit or a guarantee with respect to a Municipal Obligation held by the
Portfolio could have an adverse effect on the Portfolio's investment portfolio
and the value of its shares. Foreign letters of credit and guarantees involve
certain risks in addition to those of domestic obligations, including less
stringent reserve requirements and different accounting, auditing and
recordkeeping requirements.
Opinions relating to the validity of Municipal Obligations and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the
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time of issuance, and opinions relating to the validity and the tax-exempt
statue of payments received by the National Municipal Bond Portfolio from
tax-exempt derivative securities are rendered by counsel to the respective
sponsors of such securities. The National Municipal Bond Portfolio and its
Adviser will rely on such opinions and will not review independently the
underlying proceedings relating to the issuance of Municipal Obligations, the
creation of any tax-exempt derivative security, or the basis for such opinions.
VARIABLE AND FLOATING RATE INSTRUMENTS. Each Portfolio may purchase
rated or unrated variable and floating rate instruments. These instruments may
include variable rate master demand notes that permit the indebtedness
thereunder to vary in addition to providing for periodic adjustments in the
interest rate. Unrated instruments purchased by a Portfolio will be determined
by the Adviser to be of comparable quality at the time of purchase to rated
instruments that may be purchased. The absence of an active secondary market
for a particular variable or floating rate instrument, however, could make it
difficult for a Portfolio to dispose of an instrument if the issuer were to
default on its payment obligation. A Portfolio could, for these or other
reasons, suffer a loss with respect to such instruments.
SECURITIES OF OTHER INVESTMENT COMPANIES. Under certain circumstances
described above and subject to its investment policies, each Portfolio may
invest in securities issued by other investment companies which invest in
securities in which the Portfolio is permitted to invest and which determine
their net asset value per share based on the amortized cost or penny-rounding
method. Each Portfolio may invest in securities of other investment companies
within the limits prescribed by the 1940 Act, which include, subject to certain
exceptions, a prohibition on a Portfolio investing more than 10% of the value
of its total assets in such securities. Investment companies in which a
Portfolio may invest may impose a sales or distribution charge in connection
with the purchase or redemption of their Shares as well as other types of
commissions or charges. Such charges will be payable by the Portfolio and,
therefore, will be borne indirectly by its shareholders. To the extent that a
Portfolio may invest in securities of other investment companies, the Fund and
the Adviser will ensure that there will be no duplication of advisory fees. If
necessary to accomplish this, the Adviser will rebate its advisory fee to the
Fund. (See the Statement of Additional Information under "Investment
Objectives and Policies -- Securities of Other Investment Companies.")
WHEN-ISSUED PURCHASES, FORWARD COMMITMENTS AND DELAYED SETTLEMENTS.
Each Portfolio may purchase securities on a "when-issued" basis and may
purchase or sell securities on a "forward commitment" basis. Additionally, the
National Municipal Bond Portfolio may purchase or sell securities on a "delayed
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settlement" basis. When-issued and forwarded commitment transactions involve a
commitment by a Portfolio to purchase or sell securities at a stated price and
yield with settlement beyond the normal settlement date. Such transactions
permit a Portfolio to lock-in a price or yield on a security, regardless of
future changes in interest rates. Delayed settlement refers to a transaction
in the secondary market that will settle some time in the future. These
transactions involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, or if the value of the
security to be sold increases prior to the settlement date. Each Portfolio
expects that these transactions will not exceed 25% of the value of its total
assets (at the time of purchase) under normal market conditions. No Portfolio
intends to engage in such transactions for speculative purposes but only for
the purpose of acquiring portfolio securities.
STAND-BY COMMITMENTS. The National Municipal Bond Portfolio may
acquire "stand-by commitments" with respect to Municipal Obligations held by
it. Under a stand-by commitment, a dealer agrees to purchase, at the
Portfolio's option, specified Municipal Obligations at a specified price. The
National Municipal Bond Portfolio will acquire stand-by commitments solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes. The Portfolio expects that stand-by
commitments will generally be available without the payment of any direct or
indirect consideration. However, if necessary or advisable, the Portfolio may
pay for a stand-by commitment either separately in cash or by paying a higher
price for portfolio securities which are acquired subject to the commitment
(thus reducing the yield otherwise available for the same securities).
Stand-by commitments acquired by the Portfolio will be valued at zero in
determining the Portfolio's net asset value.
TAX-EXEMPT DERIVATIVES. The National Municipal Bond Portfolio may
hold tax-exempt derivatives which may be in the form of tender option bonds,
participations, beneficial interests in a trust, partnership interests or other
forms. The Adviser expects that less than 5% of the National Municipal Bond
Portfolio's assets will be invested in such securities during the current year.
(See the Statement of Additional Information under "Investment Objectives and
Policies -- Tax-Exempt Derivatives.")
ILLIQUID SECURITIES. A Portfolio will not knowingly invest more than
15% of the value of its net assets in illiquid securities. Repurchase
agreements that do not provide for settlement within seven days, time deposits
maturing in more than seven days, and securities that are not registered under
the Securities Act of 1933, as amended (the "1933 Act") but that may be
purchased by institutional buyers pursuant to SEC Rule 144A are subject to this
15% limit (unless the Adviser, pursuant to
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<PAGE> 25
guidelines established by the Fund's Board of Directors, determines that a
liquid market exists).
FOREIGN SECURITIES. Investments made in foreign securities, whether
made directly or indirectly, involve certain inherent risks, such as future
political and economic developments, the possible imposition of foreign
withholding tax on the interest income payable on such instruments, the
possible establishment of foreign controls, the possible seizure or
nationalization of foreign deposits or assets, or the adoption of other foreign
government restrictions that might adversely affect payment of interest or
principal. In the event of a default by the issuer of a foreign security, it
may be more difficult to obtain or enforce a judgment against such issuer than
it would against a domestic issuer. In addition, foreign banks and foreign
branches of U.S. banks are subject to less stringent reserve requirements and
to different accounting, auditing, reporting, and recordkeeping standards than
those applicable to domestic branches of U.S. banks.
ADDITIONAL RISKS AND OTHER CONSIDERATIONS. Generally, the market
value of fixed income securities, such as Municipal Obligations and other debt
securities, can be expected to vary inversely to changes in prevailing interest
rates. During periods of declining interest rates, the market value of
investment portfolios comprised primarily of fixed income securities, such as
the National Municipal Bond and Short-Intermediate Corporate Bond Portfolios,
will tend to increase, and during periods of rising interest rates, the market
value will tend to decrease. In addition, during periods of declining interest
rates, the yields of investment portfolios comprised primarily of fixed income
securities will tend to be higher than prevailing market rates and, in periods
of rising interest rates, yields will tend to be somewhat lower. Fixed income
securities with longer maturities, which tend to produce higher yields, are
subject to potentially greater capital appreciation and depreciation than
obligations with shorter maturities. Changes in the financial strength of an
issuer or changes in the ratings of any particular security may also offset the
value of these investments. Fluctuations in the market value of fixed income
securities subsequent to their acquisition will not offset cash income from
such securities but will be reflected in the Portfolio's net asset value.
Although the National Municipal Bond Portfolio may invest 25% or more
of its total assets in (i) Municipal Obligations whose issuers are in the same
state, and (ii) Municipal Obligations the interest on which is paid solely from
revenues of similar projects, it does not presently intend to do so unless, in
the opinion of the Adviser, the investment is warranted. The National
Municipal Bond Portfolio's ability to achieve its investment objective is
dependent upon the ability of issuers of
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Municipal Obligations to meet their continuing obligations for the payment of
principal and interest. To the extent that the Portfolio's assets are invested
in Municipal Obligations that are payable from the revenues of similar projects
or, the Portfolio will be subject to the particular risks (including legal and
economic conditions) relating to such securities to a greater extent than it
would be if its assets were not so concentrated. (See "Investment Objectives
and Policies -- Municipal Obligations" in the Statement of Additional
Information.)
PORTFOLIO TURNOVER AND TRANSACTIONS. Although the Portfolios will not
normally engage in short-term trading, each Portfolio reserves the right to do
so if the Adviser believes that selling a particular security is appropriate in
light of the Portfolio's investment objective. Investments may be sold for a
variety of reasons, such as a more favorable investment opportunity or other
circumstances bearing on the desirability of continuing to hold such
investments. A high rate of portfolio turnover involves correspondingly
greater brokerage commission expenses and other transaction costs, which must
be borne directly by the Portfolio and ultimately by its shareholders. High
portfolio turnover may result in the realization of substantial net capital
gains; distributions derived from such gains may be treated as ordinary income
for federal income tax purposes. (See "Taxes" in this Prospectus and the
Statement of Additional Information.") Although the Portfolios cannot
accurately predict their respective annual portfolio turnover rates, such rates
are not expected to exceed 100%.
All orders for transactions in securities or options on behalf of the
Portfolios are placed by the Adviser with broker-dealers that it selects. To
the extent permitted by the 1940 Act and guidelines adopted by the Fund's Board
of Directors, a Portfolio may utilize the Distributor or one or more of its
affiliates as a broker in connection with the purchase or sale of securities
when the Adviser believes the charge for the transaction does not exceed the
usual and customary broker's commission.
INVESTMENT LIMITATIONS
The investment limitations set forth below are fundamental policies
and may be changed only by a vote of a majority of the outstanding Shares of a
Portfolio. Other investment limitations that also cannot be changed without a
vote of shareholders are contained in the Statement of Additional Information
under "Investment Objectives and Policies."
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<PAGE> 27
A Portfolio may not:
1. Purchase securities of any one issuer (other than
obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities) if, immediately after and as a result of such
investments, more than 5% of the Portfolio's total assets would be
invested in the securities of such issuer, or more than 10% of the
issuer's outstanding voting securities would be owned by the Portfolio
or the Fund, except that up to 25% of the Portfolio's total assets may
be invested without regard to such limitations.
2. Purchase any securities which would cause 25% or more
of the Portfolio's total assets at the time of purchase to be invested
in the securities of one or more issuers conducting their principal
business activities in the same industry, provided, however, that (a)
with respect to the National Municipal Bond Portfolio, there is no
limitation with respect to obligations issued or guaranteed by the
U.S. Government, any state, territory or possession of the U.S.
Government, the District of Columbia, or any of their authorities,
agencies, instrumentalities or political subdivisions, and (b) with
respect to the Equity Income and Short-Intermediate Corporate Bond
Portfolios (i) there is no limitation with respect to obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, repurchase agreements secured by obligations of the
U.S. Government or its agencies or instrumentalities, and, with
respect to the Equity Income Portfolio only, securities issued by
domestic banks, thrifts or savings institutions; (ii) wholly-owned
finance companies will be considered to be in the industries of their
parents if their activities are primarily related to financing the
activities of their parents; and (iii) utilities will be divided
according to their services (for example, gas, gas transmission,
electric and gas, electric, and telephone will each be considered a
separate industry).
3. Borrow money or issue senior securities, except that
each Portfolio may borrow from banks and the Short-Intermediate
Corporate Bond Portfolio may enter into reverse repurchase agreements,
for temporary defensive purposes in amounts not in excess of 10% of
the Portfolio's total assets at the time of such borrowing; or
mortgage, pledge, or hypothecate any assets, except in connection with
any such borrowing and in amounts not in excess of the lesser of the
dollar amounts borrowed or 10% of the Portfolio's total assets at the
time of such borrowing; or purchase securities while its borrowings
exceed 5% of its total assets. A Portfolio's transactions in futures
and related options (including the margin posted by the Portfolio in
connection with such transactions), and securities held in escrow or
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separate accounts in connection with a Portfolio's investment
practices described in this Prospectus or the Statement of Additional
Information are not subject to this limitation.
4. Make loans, except that (a) each Portfolio may
purchase or hold debt instruments, lend portfolio securities and make
other investments in accordance with its investment objective and
policies and (b) the Short-Intermediate Corporate Bond Portfolio may
enter into repurchase agreements.
5. Purchase securities on margin, make short sales of
securities or maintain a short position, except that (a) this
investment limitation shall not apply to a Portfolio's transactions in
options, and futures contracts and related options, and (b) a
Portfolio may obtain short-term credits as may be necessary for the
clearance of purchases and sales of portfolio securities.
If a percentage limitation is satisfied at the time of investment, a
later increase or decrease in such percentage resulting solely from a change in
the value of a Portfolio's securities will not constitute a violation of such
limitation.
In order to permit the sale of a Portfolio's Shares in certain states,
the Portfolios may make commitments more restrictive than the investment
policies and limitations described above. Should the Adviser determine that
any such commitment is no longer in the best interests of a Portfolio, it will
revoke the commitment by terminating sales of its Shares in the state involved.
PRICING OF SHARES
The Portfolios' respective net asset values per Share are determined
by the Administrator as of the close of regular trading hours on the New York
Stock Exchange (currently 4:00 p.m. Eastern Time) on each weekday, with the
exception of those holidays on which the New York Stock Exchange or the Federal
Reserve Bank of St. Louis are closed (a "Business Day"). Currently, one or
both of these institutions are closed on the customary national business
holidays of New Year's Day, Martin Luther King, Jr. Day, Presidents' Day,
Good Friday, Memorial Day (observed), Independence Day (observed),
Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and
Christmas Day (observed).
Securities which are traded on a recognized stock exchange are valued
at the last sale price on the securities exchange on which such securities are
primarily traded or at the last sale price on the national securities market.
Securities traded on
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only over-the-counter markets are valued on the basis of market values when
available. Securities for which there are no transactions are valued at the
average of the current bid and asked prices. Other securities, including
restricted and other securities for which market quotations are not readily
available, and other assets are valued at fair value by the Adviser under the
supervision of the Board of Directors. Investments in debt securities with
remaining maturities of 60 days or less may be valued based upon the amortized
cost method. (For further information about valuation of investments, see "Net
Asset Value" in the Statement of Additional Information.)
The public offering price for each class of Shares is based upon net
asset value per Share plus, in the case of Investor A Shares, a front-end sales
charge. A class will calculate its net asset value per Share by adding the
value of a Portfolio's investments, cash and other assets attributable to the
class, subtracting the Portfolio's liabilities attributable to that class, and
then dividing the result by the total number of Shares in the class that are
outstanding. Because the operating expenses of Investor B Shares are higher
than those associated with other classes of Shares, the net asset value per
Share of Investor B Shares of a Portfolio which declares its net investment
income quarterly will generally be lower than the net asset value per Share of
Trust, Institutional or Investor A Shares of the same Portfolio.
HOW TO PURCHASE AND REDEEM SHARES
PURCHASE OF SHARES
Trust Shares are sold to financial institutions, such as banks, trust
companies, thrift institutions, mutual funds or other financial institutions
(collectively "financial institutions"), acting on their own behalf or on
behalf of their qualified fiduciary accounts, employee benefit, retirement plan
or other such qualified accounts. Trust Shares are sold to qualified
purchasers without a sales charge imposed by the Fund or the Distributor.
Generally, investors purchase Trust Shares through a financial institution,
which is responsible for transmitting purchase orders directly to the Fund.
Purchases may be effected on Business Days when the Adviser,
Distributor and Mercantile (the Custodian) are open for business. The Fund
reserves the right to reject any purchase order, including purchases made with
foreign and third party drafts or checks.
Financial institutions placing orders directly or on behalf of their
customers should contact the Fund at 1-800-551-3731.
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Investors may also call the Fund for information on how to purchase Shares.
All shareholders of record will receive confirmations of Share
purchases, exchanges and redemptions in the mail. If Shares are held in the
name of banks or other financial institutions, such institution is responsible
for transmitting purchase, exchange and redemption orders to the Fund on a
timely basis, recording all purchase, exchange and redemption transactions, and
providing regular account statements which confirm such transactions to
beneficial owners. Payment for orders which are not received or accepted will
be returned after prompt inquiry to the transmitting financial institution.
If purchase orders are received in good form and accepted by the Fund
prior to 4:00 p.m. (Eastern time) on any Business Day, Trust Shares will be
priced according to the net asset value per Share next determined on that day
after receipt of the order. Immediately available funds must be received by
the Custodian prior to 4:00 p.m. on the next Business Day following receipt of
such order. If funds are not received by such date, the order will be
cancelled, and notice thereof will be given to the financial institution
placing the order.
EXCHANGE PRIVILEGE
The exchange privilege enables shareholders to exchange Trust Shares of
the Portfolios for Trust Shares of another Portfolio offered by the Fund or,
under certain circumstances described below, for Investor A Shares of the same
Portfolio. Exchanges for Trust Shares in another Portfolio are effected without
payment of any exchange or sales charges. In addition, Trust Shares of a
Portfolio may be exchanged for Investor A Shares of the same Portfolio in
connection with the distribution of assets held in a qualified trust, agency or
custodian account with the trust department of Mercantile or any of its
affiliated or correspondent banks. The exchanges are made without a sales
charge at the net asset value of the respective share class.
The Fund reserves the right to reject any exchange request. The
exchange privilege may be modified or terminated at any time upon 60 days'
written notice to shareholders. An investor may telephone an exchange request
by calling his or her financial institution, which is responsible for
transmitting such request to the Distributor. (See "Other Exchange or
Redemption Information" below.) An investor should consult the financial
institution or the Distributor for further information regarding procedures for
exchanging Shares.
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<PAGE> 31
In addition to the Portfolios described in this Prospectus, the Fund
currently offers Trust Shares in the following Portfolios:
- The ARCH Money Market Portfolio
- The ARCH Treasury Money Market Portfolio
- The ARCH Growth & Income Equity Portfolio
- The ARCH Emerging Growth Portfolio
- The ARCH Government & Corporate Bond Portfolio
- The ARCH U.S. Government Securities Portfolio
- The ARCH Balanced Portfolio
- The ARCH International Equity Portfolio
- The ARCH Short-Intermediate Municipal Portfolio
- The ARCH Tax-Exempt Money Market Portfolio
- The ARCH Missouri Tax-Exempt Bond Portfolio
- The ARCH Kansas Tax-Exempt Bond Portfolio*
For information concerning these Portfolios, please call
1-800-551-3731. Shareholders exercising the exchange privilege with any of the
other Portfolios in the Fund should request and review the Portfolio's
Prospectus carefully prior to making an exchange.
REDEMPTION OF SHARES
Redemption orders should be placed, in writing or by phone, with or
through the same financial institution that placed the original purchase order.
Redemption orders are effected at a Portfolio's net asset value per Share next
determined after receipt of the order by the Fund. The financial institution
is responsible for transmitting redemption orders to the Fund on a timely
basis. Proceeds from redemptions of Trust Shares of the Portfolios with
respect to redemption orders received and accepted by the Fund before 4:00 p.m.
(Eastern time) on a Business Day normally are sent electronically to the
financial institution that placed the redemption order the next Business Day
after the Distributor's receipt of the order in good form. No charge for
sending redemption payments electronically is currently imposed by the Fund,
although a charge may be imposed in the future. The Fund reserves the right to
send redemption proceeds electronically within seven days after receiving a
redemption order if, in the judgment of the Adviser, an earlier payment could
adversely affect a Portfolio.
The Transfer Agent may require a signature guarantee by an eligible
guarantor institution. For purposes of this policy, the term "eligible
guarantor institution" shall include banks, brokers, dealers, credit unions,
securities exchanges and associations, clearing agencies and savings
associations as those
__________________________________
* Expected to commence operations in 1996.
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<PAGE> 32
terms are defined in Rule 17Ad-15 under the Securities Exchange Act of 1934.
The Transfer Agent reserves the right to reject any signature guarantee if (1)
it has reason to believe that the signature is not genuine, (2) it has reason
to believe that the transaction would otherwise be improper, or (3) the
guarantor institution is a broker or dealer that is neither a member of a
clearing corporation nor maintains net capital of at least $100,000. The
signature guarantee requirement will be waived if all of the following
conditions apply: (1) the redemption check is payable to the shareholder(s) of
record and (2) the redemption check is mailed to the shareholder(s) at the
address of record or the proceeds are either mailed or sent electronically to a
commercial bank account previously designated on the account application. An
investor with questions or needing assistance should contact the financial
institution servicing his or her account or the Distributor. Additional
documentation may be required if the redemption is requested by a corporation,
partnership, trust, fiduciary, executor, or administrator. If, due to
temporary adverse conditions, investors are unable to effect telephone
transactions, investors are encouraged to follow the procedures described in
"Other Exchange or Redemption Information" below.
Neither the Fund nor its service providers will be liable for any
loss, damage, expense or cost arising out of any telephone redemption effected
in accordance with the Fund's telephone redemption procedures, upon
instructions reasonably believed to be genuine. The Fund will employ
procedures designed to provide reasonable assurance that instructions by
telephone are genuine; if these procedures are not followed, the Fund or its
service providers may be liable for any losses due to unauthorized or
fraudulent instructions. If Share certificates are outstanding with respect to
an account, the telephone redemption and exchange privilege is not available.
OTHER EXCHANGE OR REDEMPTION INFORMATION
During periods of substantial economic or market change or activity,
telephone redemptions or exchanges may be difficult to complete. In such
event, Shares may be redeemed or exchanged by mailing the request directly to
the financial institution through which the original Shares were purchased or
directly to the Fund at P.O. Box 78069, St. Louis, Missouri 63178.
At various times, the Fund may be requested to redeem Shares for which
it has not yet received good payment. In such circumstances, the Fund may
delay the forwarding of proceeds until payment has been collected for the
purchase of such Shares which may take up to 15 days or more. To avoid delay
in payment upon redemption shortly after purchasing Shares, investors should
purchase Shares by certified or bank check or by electronic transfer. The Fund
intends to pay cash for all Shares redeemed,
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<PAGE> 33
but under abnormal conditions which make payment in cash unwise, the Fund may
make payment wholly or partly in portfolio securities at their then market
value equal to the redemption price. In such cases, an investor may incur
brokerage costs in converting such securities to cash.
A shareholder may be required to redeem Shares in a Portfolio upon 60
days' written notice if the balance in the shareholder's account drops below
$500. The Fund will not require a shareholder to redeem Portfolio Shares if
the value of the shareholder's account drops below $500 due to fluctuations in
net asset value. Share balances may also be redeemed pursuant to arrangements
between financial institutions and their investors.
YIELDS AND TOTAL RETURNS
Yield and total return quotations are computed separately for Trust
Shares, Institutional Shares, Investor A Shares and Investor B Shares of a
Portfolio. TOTAL RETURN AND YIELD FIGURES WILL FLUCTUATE, ARE BASED ON
HISTORICAL EARNINGS, AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The
methods used to compute each Portfolio's yields and total returns are described
below and in the Statement of Additional Information.
From time to time, performance information such as total return and
yield data for the Portfolios' Trust Shares may be quoted in advertisements or
in communications to shareholders. The yield of a Portfolio is computed based
on the net income of such Shares in the particular Portfolio during a 30-day
(or one-month) period identified in connection with the particular yield
quotation. More specifically, the yield is computed by dividing the
Portfolio's net income per Share during a 30-day (or one-month) period by the
net asset value per Share on the last day of the period and annualizing the
result. The National Municipal Bond Portfolio's "tax equivalent" yield, which
shows the level of taxable yield needed to produce an after-tax equivalent to
the Portfolio's tax-free yield, may also be quoted from time to time. This is
done by increasing the Portfolio's yield (calculated as above) by the amount
necessary to reflect the payment of federal income tax at a stated tax rate.
The Portfolios' total returns may be calculated on an average annual
total return basis, and may also be calculated on an aggregate total return
basis, for various periods. Average annual total returns with respect to such
Shares reflect the average annual percentage change in value of an investment
in such Shares of the particular Portfolio over the particular measuring
period. Aggregate total returns reflect the cumulative percentage change in
value over the measuring period. Both methods of calculating total returns
assume that dividends and
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<PAGE> 34
capital gain distributions made by the Portfolio during the period are
reinvested in the Portfolio's Trust Shares. When considering average annual
total return figures for periods longer than one year, it is important to note
that a Portfolio's annual total return for any one year in the period might
have been more or less than the average for the entire period.
Performance data of the Portfolios' Trust Shares may be compared to
the performance of other mutual funds with comparable investment objectives and
policies through various mutual fund or market indices and data such as that
provided by Lehman Brothers, Inc., or any of its affiliates, Ibbotson
Associates, Inc., Lipper Analytical Services, Inc. and Mutual Fund Forecaster.
References may also be made to indices or data published in Money Magazine,
Forbes, Barron's, The Wall Street Journal, The New York Times, Business Week,
American Banker, Institutional Investor, Pensions and Investments, U.S.A.
Today, Fortune, CDA/Weisenberger, Morningstar, Inc. and publications of a local
or regional nature. In addition to performance information, general
information about the Portfolios that appears in a publication such as those
mentioned above may be included in advertisements and in reports to
shareholders.
Performance quotations of a class of Shares in a Portfolio represent
that Portfolio's past performance and should not be considered as
representative of future results. Any account fees charged by a bank or other
financial institution (as described in "Management of The Fund - - Service
Organizations" below) or other institutions will not be included in the
calculations of a Portfolio's yields and total returns. Such fees, if any,
will reduce the investor's net return on an investment in a Portfolio.
Investors may call 1-800-452-401K to obtain current yield and total return
information.
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<PAGE> 35
DIVIDENDS AND DISTRIBUTIONS
THE EQUITY INCOME PORTFOLIO
Net investment income for the Equity Income Portfolio is declared and
paid quarterly as a dividend to shareholders of record. Dividends on each
Share of this Portfolio are determined in the same manner and are paid in the
same amount, irrespective of class, except that the Portfolio's Trust Shares
and Institutional Shares bear all expenses of the respective Administrative
Services Plans adopted for such Shares and the Portfolio's Investor A Shares
and Investor B Shares bear all expenses of the respective Distribution and
Services Plans adopted for such Shares. In addition, the Portfolio's
Institutional Shares bear the expense of certain sub-transfer agency fees.
(See "Management of the Fund" and "Other Information Concerning the Fund and
Its Shares.")
THE NATIONAL MUNICIPAL BOND AND SHORT-INTERMEDIATE CORPORATE BOND PORTFOLIOS
Dividends from net investment income of the National Municipal Bond
and Short-Intermediate Corporate Bond Portfolios are declared daily and paid
monthly not later than five Business Days after the end of each month. Trust
Shares of these Portfolios earn dividends from the day after the purchase order
is received by the Fund through the day the redemption order for such Shares is
received. Dividends on each Share of such Portfolios are determined in the
same manner and are paid in the same amounts irrespective of class, except that
a Portfolio's Trust Shares and Institutional Shares (other than the National
Municipal Bond Portfolio which does not offer Institutional Shares) bear all
expenses of the respective Administrative Services Plans adopted for such
Shares and a Portfolio's Investor A Shares and Investor B Shares (other than
the Short-Intermediate Corporate Bond Portfolio which does not offer Investor B
Shares) bear all expenses of the respective Distribution and Services Plans
adopted for such Shares. In addition, a Portfolio's Institutional Shares bear
the expense of certain sub-transfer agency fees. (See "Management of the Fund"
and "Other Information Concerning the Fund and Its Shares.")
OTHER DIVIDEND AND DISTRIBUTION INFORMATION
Net realized capital gains of a Portfolio, if any, are distributed at
least annually. All dividends and distributions paid on a Portfolio's Shares
are automatically reinvested in additional Shares of the same class unless the
investor has (i) otherwise indicated on the account application, or (ii)
redeemed all the Shares held in a Portfolio, in which case a distribution will
be paid in cash. Reinvested dividends and distributions will be taxed in the
same manner as those paid in cash.
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<PAGE> 36
TAXES
FEDERAL TAXES
Each Portfolio intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"), for the
taxable year ending November 30, 1996, and to continue to so qualify as long as
such qualification is in the best interests of shareholders. A regulated
investment company generally is exempt from federal income tax on amounts
distributed to shareholders.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that each Portfolio distribute to
its shareholders an amount equal to at least the sum of 90% of its investment
company taxable income and 90% of its exempt-interest income (if any) net of
certain deductions for such year. In general, a Portfolio's investment company
taxable income will be its taxable income, including dividends, interest and
short-term capital gains (the excess of net short-term capital gain over net
long-term capital loss), subject to certain adjustments and excluding the
excess of any net long-term capital gain for the taxable year over the net
short-term capital loss, if any, for such year. It is the policy of the Equity
Income and Short-Intermediate Corporate Bond Portfolios to distribute as
dividends substantially all of their respective investment company taxable
income and any net tax-exempt interest income each year. Such dividends will
be taxable as ordinary income to a Portfolio's shareholders who are not
currently exempt from federal income taxes, whether such income is received in
cash or reinvested in additional Shares. (Federal income taxes for
distributions to an IRA are deferred under the Code.) In the case of the
Equity Income Portfolio, such dividends will qualify for the dividends received
deduction for corporations to the extent of the total qualifying dividends
received by the Portfolio from domestic corporations for the taxable year.
It is the policy of the National Municipal Bond Portfolio to
distribute as dividends substantially all of its net tax-exempt interest income
and any investment company taxable income each year. Dividends derived from
interest on Municipal Obligations (known as exempt-interest dividends) may be
treated by shareholders as items of interest excludable from their gross income
under Section 103(a) of the Code, unless under the circumstances applicable to
the particular shareholder the exclusion would be disallowed. (See Statement
of Additional Information under "Additional Information Concerning Taxes.")
Distributions of net income may be taxable to investors under state or local
law as dividend income even though a substantial portion of such distributions
may be derived from interest on
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<PAGE> 37
tax-exempt obligations which, if realized directly, would be exempt from such
income tax.
If the National Municipal Bond Portfolio should hold certain private
activity bonds issued after August 7, 1986, shareholders must include, as an
item of tax preference, the portion of dividends paid by the Portfolio that is
attributable to interest on such bonds in their federal alternative minimum
taxable income for purposes of determining liability (if any) for the 26-28%
alternative minimum tax applicable to individuals and the 20% alternative
minimum tax and the environmental tax applicable to corporations. Corporate
shareholders also must take all exempt-interest dividends into account in
determining certain adjustments for federal alternative minimum and
environmental tax purposes. The environmental tax applicable to corporations
is imposed at the rate of .12% on the excess of the corporation's modified
federal alternative minimum taxable income over $2,000,000.
Substantially all of each Portfolio's net realized long-term capital
gains, if any, will be distributed at least annually to its shareholders. A
Portfolio will generally have no tax liability with respect to such gains and
the distributions will be taxable to shareholders who are not currently exempt
from federal income taxes as long-term capital gains, regardless of how long
the shareholders have held the Shares and whether such dividends are received
in cash or reinvested in additional Shares.
An investor considering purchasing Shares of a Portfolio on or just
before the record date of any capital gains distribution (or in the case of the
Equity Income Portfolio, the record date of any dividend or capital gains
distribution) should be aware that the amount of the forthcoming distribution,
although in effect a return of capital, will be taxable.
Dividends declared by a Portfolio in October, November, or December of
any year payable to shareholders of record on a specified date in such months
will be deemed to have been received by the shareholders and paid by the
Portfolio on December 31 of such year in the event such dividends are actually
paid during January of the following year.
Each Portfolio may be required in certain cases to withhold and remit
to the U.S. Treasury 31% of taxable dividends or gross sale proceeds paid to
shareholders who have failed to provide a correct tax identification number in
the manner required, who are subject to withholding by the Internal Revenue
Service for failure to properly include on their return payments of taxable
interest or dividends, or who have failed to certify to the Portfolio that they
are not subject to backup withholding when required to do so or that they are
"exempt recipients."
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<PAGE> 38
A taxable gain or loss may be realized by an investor upon redemption,
transfer or exchange of Shares, depending upon the cost of such Shares when
purchased and their price at the time of redemption, transfer or exchange. If
an investor holds Shares for six months or less and during that time receives
an exempt-interest dividend on those Shares, any loss realized on the sale or
exchange of those Shares will be disallowed to the extent of the
exempt-interest dividend.
STATE AND LOCAL TAXES
The application of state and local taxes may have different
consequences from those of the federal income tax law described above. In
particular, shareholders should note that dividends paid by a Portfolio may be
taxable to investors under state or local law as dividend income even though
all or a portion of such dividends may be derived from interest on obligations
that, if realized directly, would be exempt from such income taxes.
MISCELLANEOUS
The foregoing summarizes some of the important federal and state tax
considerations generally affecting the Portfolios and their shareholders and is
not intended as a substitute for careful tax planning. Accordingly, potential
investors in the Portfolios should consult their tax advisers with specific
reference to their own tax situation. Shareholders will be advised at least
annually as to the federal income tax consequences of distributions made each
year.
MANAGEMENT OF THE FUND
The Fund is managed under the direction of its Board of Directors.
The Statement of Additional Information contains the names of and general
background information concerning each director.
INVESTMENT ADVISER
Mississippi Valley Advisors Inc. ("MVA") serves as the investment
adviser to each Portfolio. MVA's principal office is located at One Mercantile
Center, Seventh & Washington Streets, St. Louis, Missouri 63101. MVA is a
wholly-owned subsidiary of Mercantile. As of December 31, 1995, MVA had
approximately $7.0 billion in assets under investment management, including the
Fund's assets, which were approximately $2.1 billion. MVA also serves as
investment adviser to each of the Fund's other Portfolios.
Subject to the general supervision of the Fund's Board of Directors
and in accordance with the Fund's investment policies,
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<PAGE> 39
MVA manages the Portfolios, makes investment decisions with respect to and
places orders for all purchases and sales of the Portfolios' securities and
other investments, and directs the maintenance of each Portfolio's records
relating to such purchases and sales.
For the services provided and expenses assumed pursuant to the
investment advisory agreement, MVA is entitled to receive fees, computed daily
and payable monthly, at the annual rates of .75%,.55% and .55% of the average
daily net assets of the Equity Income, National Municipal Bond and
Short-Intermediate Corporate Bond Portfolios, respectively.
MVA may from time to time voluntarily reduce all or a portion of its
advisory fee to increase the net income of one or more Portfolios available for
distributions as dividends. The voluntary fee reduction will cause the return
of any such Portfolio to be higher than it would otherwise be in the absence of
such reduction.
Gregory A. Glidden is the person primarily responsible for the
day-to-day management of the Equity Income Portfolio. Mr. Glidden, Senior
Associate, has been with MVA since 1983.
Peter Merzian is the person primarily responsible for the day-to-day
management of the National Municipal Bond Portfolio. Mr. Merzian, Senior
Associate joined MVA in 1993 and prior thereto was employed as a portfolio
manager by another financial institution.
David A. Bethke, is the person primarily responsible for the
day-to-day management of the Short-Intermediate Corporate Bond Portfolio. Mr.
Bethke, Senior Associate, joined MVA in 1987 and has six years of prior
investment experience.
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<PAGE> 40
Set forth below are certain performance data relating to those common
trust funds of the Adviser and its affiliates (the "Commingled Funds"), which
have been managed with full investment authority by the Adviser and/or its
affiliates. The Commingled Funds have been divided into three investment
portfolios, herein referred to as the "Equity Income Fund," the "National
Municipal Bond Fund," and the "Short-Intermediate Corporate Bond Fund." The
Commingled Funds have substantially similar investment objectives and use
similar investment strategies and techniques as are used by the Fund's Equity
Income Portfolio, National Municipal Bond Portfolio and Short-Intermediate
Corporate Bond Portfolio, respectively.
The performance information set forth below reflects past performance
and is not necessarily indicative of the future performance of the Fund's Equity
Income Portfolio, National Municipal Bond Portfolio and Short-Intermediate
Corporate Bond Portfolio, or any of the other investment portfolios of the Fund.
Performance will fluctuate so that in investor's shares, when redeemed, may be
worth more or less than their original cost. In addition, because each of the
Fund's Equity Income Portfolio, National Municipal Bond Portfolio and
Short-Intermediate Corporate Bond Portfolio will be actively managed, its
investments will vary from time to time and will not be identical to those
investments held by the Commingled Funds.
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<PAGE> 41
COMPOSITE PERFORMANCE FOR THE COMMINGLED FUNDS1 SHOWING AVERAGE ANNUAL TOTAL
RETURNS
<TABLE>
<CAPTION>
Equity Income National Municipal Bond Short-Intermediate
------------- ----------------------- Corporate Bond
--------------
<S> <C> <C> <C>
Trust Trust Trust
Shares Shares Shares
------ ------ ------
One Year
Five Years
Ten Years
</TABLE>
__________________________________
1. THE EQUITY INCOME COMMINGLED FUND CONSISTS OF THE MERCANTILE COMMON
TRUST FUND I, THE MERCANTILE EQUITY FUND FOR CHARITABLE TRUSTS, THE
MERCANTILE BANK OF JOPLIN COMMON TRUST FUND A, AND THE MERCANTILE BANK
OF ILLINOIS COMMON TRUST FUND S. THE NATIONAL MUNICIPAL BOND
COMMINGLED FUND CONSISTS OF THE MERCANTILE COMMON TRUST FUND M. THE
SHORT-INTERMEDIATE CORPORATE COMMINGLED FUND CONSISTS OF THE
MERCANTILE COMMON TRUST FUND B, THE MERCANTILE FIXED INCOME FUND FOR
CHARITABLE TRUSTS, THE MERCANTILE BANK OF JOPLIN COMMON TRUST FUND B
AND THE MERCANTILE BANK OF NORTHERN IOWA COMMON TRUST FUND #2.
THE COMMINGLED FUNDS HAVE BEEN ADVISED BY THE ADVISER OR ITS
AFFILIATES SINCE THEIR RESPECTIVE DATES OF INCEPTION.
2. THE ABOVE INFORMATION IS THE AVERAGE ANNUAL TOTAL RETURN (CALCULATED
IN CONFORMITY WITH SECURITIES AND EXCHANGE COMMISSION GUIDELINES) FOR
THE PERIODS INDICATED, ASSUMING REINVESTMENT OF ALL NET INVESTMENT
INCOME AND CAPITAL GAIN DISTRIBUTIONS AND TAKING INTO ACCOUNT
CURRENTLY PROJECTED EXPENSE RATIOS FOR THE INITIAL FISCAL YEAR
FOR THE TRUST SHARES OF THE FUND'S EQUITY INCOME, NATIONAL MUNICIPAL
BOND AND SHORT-INTERMEDIATE CORPORATE BOND PORTFOLIOS.
ADMINISTRATOR
BISYS Fund Services Ohio, Inc., located at 3435 Stelzer Road,
Columbus, Ohio 43219, acts as the Portfolios' Administrator. The Administrator
also serves as the administrator to each of the Fund's other Portfolios.
The Administrator generally assists in all aspects of each Portfolio's
administration and operation and also monitors and performs other services
pertaining to the Fund's arrangements under the Administrative Services Plan
described below. For its services, the Administrator is entitled to receive a
fee, computed daily and payable monthly, at the annual rate of .20% of each
Portfolio's average daily net assets.
DISTRIBUTOR
Trust Shares of the Portfolios are sold continuously by the
Distributor, BISYS Fund Services, an affiliate of the Administrator. The
Distributor is a registered broker-dealer with principal offices at 3435
Stelzer Road, Columbus, Ohio 43219. The Distributor also acts as distributor
to each of the Fund's other Portfolios.
ADMINISTRATIVE SERVICES PLAN
The Fund has adopted an Administrative Services Plan with respect to
the Trust Shares of the Portfolios. Pursuant to the Administrative Services
Plan, Trust Shares are sold to banks and other financial institutions (which
may include Mercantile or its affiliated or correspondent banks) acting on
behalf of their qualified accounts (such financial institutions collectively,
the "Service Organizations") which agree to provide certain shareholder
administrative services for their clients or account holders (collectively, the
"customers") who are the beneficial owners of such Shares. The holders of
Trust Shares bear their pro rata portion of the fees which may be paid to
Service
-36-
<PAGE> 42
Organizations for such services at an annual rate of up to .30% of the average
daily net assets of a Portfolio's Trust Shares owned beneficially by a Service
Organization's customers.
SERVICE ORGANIZATIONS
The servicing agreements adopted under the Administrative Services
Plan (the "Servicing Agreements") require the Service Organizations receiving
such compensation (which may include Mercantile and its affiliates) to perform
certain services, including providing administrative services with respect to
the beneficial owners of Trust Shares of a Portfolio, such as establishing and
maintaining accounts and records for their customers who invest in such Shares,
assisting customers in processing purchase, exchange and redemption requests,
and responding to customer inquiries concerning their investments.
The Fund understands that Service Organizations providing such
administrative services may also charge fees to their customers beneficially
owning such Shares. These fees would be in addition to any amounts which may
be received by such Service Organization under its Servicing Agreement with the
Fund. The Fund's Servicing Agreements require a Service Organization to
disclose to its customers any compensation payable to the Service Organization
by a Portfolio and any other compensation payable by its customers in
connection with their investment in such Shares. Customers of such Service
Organizations receiving servicing fees should read this Prospectus in light of
the terms governing their accounts with their Service Organization.
CUSTODIAN AND TRANSFER AGENT
Mercantile Bank of St. Louis National Association, an affiliate of the
Fund and a wholly-owned subsidiary of Mercantile Bancorporation, Inc., with
principal offices located at One Mercantile Center, 8th and Locust Streets, St.
Louis, Missouri 63101, serves as Custodian of each Portfolio's assets. BISYS
Fund Services Ohio, Inc. also serves as the Fund's transfer agent and dividend
disbursing agent. Its address is 3435 Stelzer Road, Columbus, Ohio 43219.
REGULATORY MATTERS
Banking laws and regulations currently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any affiliate
thereof from sponsoring, organizing, or controlling the shares of a registered,
open-end investment company continuously engaged in the issuance of its shares,
and prohibit banks generally from issuing, underwriting, selling, or
distributing securities such as Shares of the Portfolios. Such banking laws
and regulations do not prohibit such a holding company or affiliate, or banks,
from acting as investment
-37-
<PAGE> 43
adviser, transfer agent, or custodian to such an investment company, or from
purchasing shares of such a company as agent for and upon the order of
customers. Mercantile, MVA, Service Organizations that are banks or bank
affiliates, and broker-dealers that are bank affiliates are subject to such
laws and regulations, but believe they may perform the services for the
Portfolios contemplated by their respective agreements, this Prospectus and the
Statement of Additional Information without violating applicable banking laws
and regulations. In addition, state securities laws on this issue may differ
from the interpretation of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
Should future legislative, judicial or administrative action prohibit
or restrict the activities of such companies in connection with the provision
of services on behalf of the Portfolios and their shareholders, the Fund might
be required to alter materially or discontinue its arrangements with such
companies and change its method of operation. It is not expected that
investors would suffer any adverse financial consequences as a result of any of
these occurrences.
If current restrictions preventing a bank from legally sponsoring,
organizing, controlling or distributing Shares of an investment company were
relaxed, Mercantile or an affiliate of Mercantile, would consider the
possibility of offering to perform additional services for the Portfolios. It
is not possible, of course, to predict whether or in what form such legislation
might be enacted or the terms upon which Mercantile, or such an affiliate,
might offer to provide such services.
Conflict of interest restrictions may apply to the receipt of
compensation paid pursuant to a Servicing Agreement by a Portfolio to a
financial intermediary in connection with the investment of fiduciary funds in
a Portfolio's Shares. Institutions, including banks regulated by the
Comptroller of the Currency and investment advisers and other money managers
subject to the jurisdiction of the SEC, the Department of Labor or state
securities commissions, should consult legal counsel before entering into
Servicing Agreements.
EXPENSES
Except as noted above and in the Statement of Additional Information
under "Investment Advisory and Administrative Contracts" and "Custodian and
Transfer Agent," the Fund's service contractors bear all expenses in connection
with the performance of their services, except that the Distributor is
compensated pursuant to the Distribution and Services Plans (as described below
under "Other Information Concerning the Fund and Its Shares"). Expenses are
deducted from the total income of each
-38-
<PAGE> 44
Portfolio before dividends and distributions are paid. These expenses include,
but are not limited to, fees paid to the Adviser and Administrator, transfer
agency fees, fees and expenses of officers and directors who are not affiliated
with the Adviser or the Distributor, taxes, interest, legal fees, custodian
fees, auditing fees, 12b-1 fees, servicing fees, certain fees and expenses in
registering and qualifying a Portfolio and its Shares for distribution under
Federal and state securities laws, costs of preparing and printing prospectuses
and statements of additional information for regulatory purposes and for
distribution to existing shareholders, the expense of reports to shareholders,
shareholders' meetings and proxy solicitations, fidelity bond and directors and
officers liability insurance premiums, the expense of using independent pricing
services and other expenses which are not expressly assumed by the Adviser,
Distributor or Administrator under their respective agreements with the Fund.
The Fund also pays for brokerage fees, commissions and other transaction
charges, if any, in connection with the purchase and sale of portfolio
securities. Any general expenses of the Fund that are not readily identifiable
as belonging to a particular Portfolio will be allocated among all the Fund's
Portfolios by or under the direction of the Board of Directors in a manner the
Board determines to be fair and equitable. Any expenses relating only to a
particular class of Shares within a Portfolio will be borne solely by such
class. (See "Certain Financial Information" and "Management of the Fund" above
for additional information regarding expenses of each Portfolio.)
OTHER INFORMATION CONCERNING
THE FUND AND ITS SHARES
DESCRIPTION OF SHARES
The Fund was organized on September 9, 1982 as a Maryland corporation,
and is a mutual fund of the type known as an "open-end management investment
company." The Fund's principal office is located at 3435 Stelzer Road,
Columbus, Ohio 43219.
The Fund's Charter authorizes the Board of Directors to issue up to
seven billion full and fractional shares of common stock, and to classify and
reclassify any unauthorized and unissued shares into one or more classes of
shares. The Board of Directors may similarly classify or reclassify any class
of shares into one or more series.
Pursuant to such authority, the Board of Directors has authorized the
issuance of the following series of shares representing interests in the
Portfolios, each of which is classified as a diversified company under the 1940
Act: 25 million Trust Shares, 25 million Institutional Shares, 25 million
-39-
<PAGE> 45
Investor A Shares and 25 million Investor B Shares, representing interests in
the Equity Income Portfolio; 25 million Trust Shares, 25 million Investor A
Shares and 25 million Investor B Shares, representing interests in the National
Municipal Bond Portfolio; and 25 million Trust Shares, 25 million Institutional
Shares and 25 million Investor A Shares, representing interest in the
Short-Intermediate Corporate Bond Portfolio. Institutional, Investor A and/or
Investor B Shares of these Portfolios are described in separate prospectuses
which are available from the Distributor at the telephone number on the cover
of this Prospectus. The Board of Directors has also authorized the issuance of
additional classes of shares representing interest in other investment
portfolios of the Fund, which are likewise described in separate prospectuses
available from the Distributor. Shares in the Fund's Portfolios will be issued
without Share certificates.
The Trust Shares of the Portfolios are described in this Prospectus.
The Portfolios also offer Investor A Shares and, in addition, the Equity Income
and National Municipal Bond Portfolios offer Investor B Shares and the Equity
Income and Short-Intermediate Corporate Bond Portfolios offer Institutional
Shares. Institutional Shares, which are offered to financial institutions
acting on behalf of accounts for which they do not exercise investment
decision, are sold without a sales charge. Investor A Shares of the Portfolios
are sold with a maximum 4.5% front-end sales charge, and Investor B Shares are
sold with a maximum 5.0% contingent deferred sales charge. Investor A Shares
and Investor B Shares are sold through selected broker/dealers and other
financial intermediaries to individual or institutional customers. Trust
Shares, Institutional Shares, Investor A Shares and/or Investor B Shares bear
their pro rata portion of all operating expenses paid by a Portfolio, except
that Trust Shares and Institutional Shares bear all payments under a
Portfolio's respective Administrative Services Plans adopted for such Shares
and Investor A Shares and Investor B Shares bear all payments under a
Portfolio's respective Distribution and Services Plans adopted for such Shares.
In addition, Institutional Shares of a Portfolio bear the expense of certain
sub-transfer agency fees.
Payments under the Administrative Services Plan for Institutional
Shares are made to Service Organizations for administrative services provided
to the Service Organizations' clients or account holders who are the beneficial
owners of Institutional Shares. Payments under the Administrative Services
Plan may not exceed .30% (on an annual basis) of the average daily net asset
value of a Portfolio's outstanding Institutional Shares.
Payments under the Distribution and Services Plans for Investor A
Shares and Investor B Shares are made to (i) the Distributor or another person
for providing distribution
-40-
<PAGE> 46
assistance and assuming certain related expenses, and (ii) Service
Organizations for administrative services provided to the Service
Organizations' clients or account holders who are the beneficial owners of
Investor A Shares or Investor B Shares. Payments under the Distribution and
Services Plans for Investor A Shares and Investor B Shares may not exceed .30%
and 1.00%, respectively, (on an annual basis) of the average daily net asset
value of Investor A Shares and Investor B Shares of a Portfolio. Distribution
payments made under the Distribution and Services Plans are subject to the
requirements of Rule 12b-1 under the 1940 Act.
The Fund offers various services and privileges in connection with
Investor A Shares and Investor B Shares of a Portfolio that are not offered in
connection with the Portfolio's Trust Shares or Institutional Shares, including
an automatic investment program and an automatic withdrawal plan. In addition,
each class of Shares offers different exchange privileges.
Shareholders are entitled to one vote for each full Share held and
proportionate fractional votes for fractional Shares held. Shares of all
Portfolios will vote together and not by class unless otherwise required by law
or permitted by the Board of Directors. All shareholders of a particular
Portfolio will vote together as a single class on matters relating to the
Portfolio's investment advisory agreement and investment objective and
fundamental policies. Only holders of Trust Shares, however, will vote on
matters relating to the Administrative Services Plan for Trust Shares and only
holders of Institutional Shares will vote on matters pertaining to the
Administrative Services Plan for Institutional Shares. Similarly, only holders
of Investor A Shares will vote on matters pertaining to the Distribution and
Services Plan for Investor A Shares and only holders of Investor B Shares will
vote on matters pertaining to the Distribution and Services Plan for Investor B
Shares.
The Fund is not required, and currently does not intend, to hold
annual meetings except as required by the 1940 Act or other applicable law.
Upon the written request of the holders of 10% or more of the outstanding
Shares, the Fund will call a special meeting to vote on the question of removal
of a director.
-41-
<PAGE> 47
Shares of the Fund's Portfolios have noncumulative voting rights and,
accordingly, the holders of more than 50% of the Fund's outstanding Shares
(irrespective of Portfolio or class) may elect all of the Directors. Shares
have no preemptive rights and only such conversion and exchange rights as the
Board may grant in its discretion. When issued for payment as described in
this Prospectus, Shares will be fully paid and nonassessable.
MISCELLANEOUS
As used in this Prospectus, a "vote of a majority of the outstanding
Shares" of a Portfolio means, with respect to the approval of an investment
advisory agreement or a change in an investment objective or fundamental
investment policy, the affirmative vote of the lesser of (a) more than 50% of
the outstanding Shares of such Portfolio (irrespective of class), or (b) 67% or
more of the Shares of such Portfolio (irrespective of class) present at a
meeting if more than 50% of the outstanding Shares of such Portfolio are
represented at the meeting in person or by proxy.
As of ___________, 1996, Mercantile and its affiliates possessed, of
record on behalf of their underlying customer accounts, voting or investment
power with respect to more than 25% of the Fund's outstanding Shares.
Therefore, Mercantile may be deemed to be a controlling person of the Fund
within the meaning of the 1940 Act.
Inquiries regarding the Portfolios may be directed to the Fund at
1-800-551-3731.
For information with respect to Trust Shares of the Fund's Money
Market, Treasury Money Market, Growth & Income Equity, Emerging Growth,
Government & Corporate Bond, U.S. Government Securities, Balanced,
International Equity, Short-Intermediate Municipal, Tax-Exempt Money Market,
Missouri Tax-Exempt Bond or Kansas Tax-Exempt Bond Portfolios, call the Fund at
1-800-551-3731.
-42-
<PAGE> 48
<TABLE>
<S> <C>
No person has been authorized THE ARCH
to give any information or to make FUND(R), INC.
any representations not contained
in this Prospectus, or in the
Portfolios' Statement of Additional
Information incorporated herein by
reference, in connection with the Equity Income
offering made by this Prospectus and, Portfolio
if given or made, such information
or representations must not be relied National Municipal
upon as having been authorized by the Bond Portfolio
Portfolios, the Fund, or the
Distributor. This Prospectus does Short-Intermediate
not constitute an offering by the Corporate Bond
Portfolios, the Fund or the Distributor Portfolio
in any jurisdiction in which such
offering may not lawfully be made.
</TABLE>
___________________
<TABLE>
<CAPTION>
TRUST SHARES
TABLE OF CONTENTS
Page
----
<S> <C>
Highlights . . . . . . . . . . . . . . . . . . . . .
Certain Financial
Information . . . . . . . . . . . . . . . . . . . .
Expense Summary for
Trust Shares . . . . . . . . . . . . . . . . . . .
Investment Objectives, Policies
and Risk Considerations . . . . . . . . . . . . .
Investment Limitations . . . . . . . . . . . . . .
Pricing of Shares . . . . . . . . . . . . . . . . . [OLD LOGO]
How to Purchase and
Redeem Shares . . . . . . . . . . . . . . . . . .
Purchase of Shares . . . . . . . . . . . .
Exchange Privilege . . . . . . . . . . . .
Redemption of Shares . . . . . . . . . . .
Other Exchange or
Redemption Information . . . . . . . . .
Yields and Total Returns . . . . . . . . . . . . . PROSPECTUS
Dividends and
Distributions . . . . . . . . . . . . . . . . . . , 1996
Taxes . . . . . . . . . . . . . . . . . . . . . . .
Management of the
Fund. . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . .
</TABLE>
-43-
<PAGE> 49
Page
----
Concerning the Fund
and its Shares . . . . . . . . . . . . . . . . .
Miscellaneous . . . . . . . . . . . . . .
Investment Adviser:
Mississippi Valley Advisors Inc.
a wholly-owned subsidiary of
Mercantile Bank of
St. Louis National Association
Distributor: BISYS Fund Services
-44-
<PAGE> 50
THE ARCH FUND(R), INC.
THE ARCH EQUITY INCOME PORTFOLIO
THE ARCH NATIONAL MUNICIPAL BOND PORTFOLIO
THE ARCH SHORT-INTERMEDIATE CORPORATE BOND PORTFOLIO
INVESTOR A SHARES AND INVESTOR B SHARES
For information, write: Or call your investment
P.O. Box 78069 representative or
St. Louis, Missouri 63178 the ARCH Funds' Service Center
at 1-800-551-3731
The ARCH Fund, Inc. is an open-end management investment company
authorized to issue Shares in fifteen investment portfolios. This Prospectus
describes the Investor A Shares of THE ARCH EQUITY INCOME, NATIONAL MUNICIPAL
BOND AND SHORT-INTERMEDIATE CORPORATE BOND PORTFOLIOS and the Investor B Shares
of the EQUITY INCOME AND NATIONAL MUNICIPAL BOND PORTFOLIOS. Investor A Shares
and Investor B Shares are sold through selected broker/dealers and other
financial intermediaries to individual or institutional customers. Investor A
Shares are sold with a front-end sales charge. Investor B Shares are sold with
a contingent deferred sales charge.
THE ARCH EQUITY INCOME PORTFOLIO'S investment objective is to seek to
provide an above-average level of income consistent with long-term capital
appreciation. Features of the Portfolio include:
- OBJECTIVE OF ABOVE AVERAGE INCOME AND LONG-TERM CAPITAL APPRECIATION
- EMPHASIS ON EQUITY INVESTMENTS PROVIDING DIVIDEND INCOME
THE ARCH NATIONAL MUNICIPAL BOND PORTFOLIO'S investment objective is to
seek as high a level of current income exempt from regular federal income tax
as is consistent with conservation of capital. Features of the Portfolio
include:
- OBJECTIVE OF INCOME EXEMPT FROM REGULAR FEDERAL INCOME TAX
- POTENTIAL YIELD THAT IS HIGHER THAN A SHORT-TERM MUNICIPAL FUND WITH
GREATER PRICE VOLATILITY
THE ARCH SHORT-INTERMEDIATE CORPORATE BOND PORTFOLIO'S investment
objective is to seek as high a level of current income as is consistent with
preservation of capital. Features of the Portfolio include:
- POTENTIAL YIELD THAT IS HIGHER THAN A MONEY MARKET FUND BUT A LOWER
POTENTIAL YIELD WITH LESS PRICE VOLATILITY THAN A LONG-TERM CORPORATE
BOND FUND
<PAGE> 51
- AVERAGE WEIGHTED MATURITY BETWEEN TWO AND FIVE YEARS
Mississippi Valley Advisors Inc. ("MVA" or the "Adviser"), a wholly-owned
subsidiary of Mercantile Bank of St. Louis National Association ("Mercantile")
acts as investment adviser for the Portfolios; Mercantile serves as custodian;
BISYS Fund Services Ohio, Inc. (the "Administrator") serves as administrator;
and BISYS Fund Services (the "Distributor") serves as sponsor and distributor.
This Prospectus sets forth concisely certain information about the
Portfolios that prospective investors should know before investing. Investors
should read this Prospectus and retain it for future reference. Additional
information about the Portfolios, contained in a Statement of Additional
Information dated __________, 1996, has been filed with the Securities and
Exchange Commission and is incorporated by reference in its entirety into this
Prospectus. An investor may obtain the Statement of Additional Information
without charge by writing the Fund at P.O. Box 78069, St. Louis, Missouri 63178
or by calling 1-800-551-3731.
Portfolio Shares are not bank deposits, are not federally insured or
guaranteed by the U.S. Government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other governmental agency, and are not the
obligations of or guaranteed or otherwise supported by any bank. An investment
in the Portfolios involves investment risk, including possible loss of
principal.
______________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
______________, 1996
-2-
<PAGE> 52
HIGHLIGHTS
The ARCH Fund, Inc. (the "Fund") is an open-end management investment
company (commonly known as a mutual fund) registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). The Fund offers investment
opportunities in fifteen investment portfolios. This Prospectus relates to
three of those portfolios: THE ARCH EQUITY INCOME, NATIONAL MUNICIPAL BOND AND
SHORT-INTERMEDIATE CORPORATE BOND PORTFOLIOS (the "Portfolios"). In addition,
the Fund offers investment opportunities in the ARCH Money Market, Treasury
Money Market, Growth & Income Equity, Emerging Growth, Government & Corporate
Bond, U.S. Government Securities, Balanced, International Equity,
Short-Intermediate Municipal, Tax-Exempt Money Market, Missouri Tax-Exempt Bond
and Kansas Tax-Exempt Bond Portfolios, which are described in separate
Prospectuses. Each Portfolio represents a separate pool of assets with
different investment objectives and policies (as described below under
"Investment Objectives, Policies and Risk Considerations"). MVA serves as
Adviser, Mercantile as Custodian, BISYS Fund Services Ohio, Inc. as
Administrator, and BISYS Fund Services as sponsor and Distributor. (For
information on expenses, fee waivers and services, see "Certain Financial
Information," Financial Highlights" and "Management of the Fund.")
The following information generally describes the Portfolios and their
investment objectives. There can be no assurance that the Portfolios will be
able to achieve their investment objectives.
The Equity Income Portfolio is designed for investors who seek an
above-average level of income consistent with long-term capital appreciation,
and who are willing to accept the risks associated with an investment in equity
securities.
The National Municipal Bond Portfolio is designed for investors who seek
current income that is exempt from regular federal income tax and relative
stability of principal.
The Short-Intermediate Corporate Bond Portfolio is designed for investors
who seek higher current income than is typically offered by money market funds
with less principal volatility than is normally associated with a long-term
bond fund.
Investors should note that one or more of the Portfolios may, subject to
their investment policies and limitations, purchase variable and floating rate
instruments, enter into repurchase agreements and reverse repurchase
agreements, make securities loans, acquire the securities of foreign issuers,
invest in options and futures, and make limited investments in illiquid
securities and securities issued by other investment companies. These
investment practices involve investment risks of varying
-3-
<PAGE> 53
degrees. In addition, each Portfolio may engage in short-term trading, which
may also involve greater risk and increase the Portfolio's expenses. The
National Municipal Bond Portfolio may also, under certain unusual market or
economic conditions, make limited investments in securities the income on which
may be subject to federal income tax. See "Investment Objectives, Policies and
Risk Considerations" below and the Statement of Additional Information under
"Investment Objectives and Policies".
The Fund offers investors the opportunity to invest in a variety of
professionally managed investments without having to become involved with
detailed management, accounting and safekeeping procedures normally related to
direct investments in securities. The Fund also offers the economic advantages
of block trading in securities and the availability of a family of fifteen
mutual funds should your investment goals change.
This Prospectus describes the Investor A Shares and/or Investor B Shares
of the Portfolios. Investor A Shares are sold with a front-end sales charge.
Investor B Shares are sold with a contingent deferred sales charge. For
information on purchasing, exchanging or redeeming Investor A and Investor B
Shares of these Portfolios, please see "How to Purchase and Redeem Shares"
below. For a discussion comparing Investor A Shares and Investor B Shares,
please see "Characteristics of Investor A Shares and Investor B Shares," and
"Factors to Consider When Selecting Investor A Shares or Investor B Shares" on
pages ________ and ____, respectively.
-4-
<PAGE> 54
CERTAIN FINANCIAL INFORMATION
Shares of the Equity Income Portfolio have been classified into four
classes of Shares -- Trust Shares, Institutional Shares, Investor A Shares and
Investor B Shares; Shares of the National Municipal Bond Portfolio have been
classified into three classes of Shares -- Trust Shares, Investor A Shares and
Investor B Shares; and Shares of the Short-Intermediate Corporate Bond
Portfolio have been classified into three classes of Shares -- Trust Shares,
Institutional Shares and Investor A Shares. Shares of each class in a
Portfolio represent equal, pro rata interests in the investments held by that
Portfolio and are identical in all respects, except that Shares of each class
bear separate distribution and/or shareholder administrative servicing fees and
certain other operating expenses, and enjoy certain exclusive voting rights on
matters relating to these fees. (See "Other Information Concerning the Fund
and Its Shares," "Management of the Fund -- Distribution and Services Plans"
and "Management of the Fund -- Custodian and Transfer Agent" below.) As a
result of payments for distribution and/or shareholder administrative servicing
fees and certain other operating expenses that may be made in differing
amounts, the net investment income of Trust Shares, Institutional Shares,
Investor A Shares and/or Investor B Shares in a Portfolio can be expected, at
any given time, to be different.
-5-
<PAGE> 55
EXPENSE SUMMARY FOR
INVESTOR A AND INVESTOR B SHARES
<TABLE>
<CAPTION>
NATIONAL SHORT-INTERMEDIATE
EQUITY MUNICIPAL CORPORATE
INCOME BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------- ------------------------- ----------------------
Investor A Investor B Investor A Investor B Investor A
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Front-End Sales Load Imposed on
Purchases (as a percentage of
offering price)1 . . . . . . . 4.5% NONE 4.5% NONE 2.5%
DEFERRED SALES CHARGE2
(as a percentage of original
purchase price or redemption
proceeds, whichever is lower). NONE 5.0% NONE 5.0% NONE
ANNUAL PORTFOLIO OPERATING
EXPENSES
(as a percentage of average
net assets)
Investment Advisory Fees (net
of fee waivers)3 . . . . . . . .00% .00% .00% .00% .00%
12b-1 Fees, including
distribution and services
fees . . . . . . . . . . . . .30% 1.00% .20%(4) 1.00% .30%
Other Expenses (including
administration fees
and other expenses) (net
of fee waivers and expense
reimbursements)5,6 . . . . . . .20% .20% .20% .20% .21%
----- ----- ----- ----- -----
TOTAL PORTFOLIO OPERATING
EXPENSES (after fee waivers
and expense reimbursements)6 . .50% 1.20% .40% 1.20% .51%
===== ====== ===== ====== =====
- --------------------
<FN>
1 Reduced sales charges may be available. See "How to Purchase and
Redeem Shares".
2 This amount applies to redemptions during the first year. The
deferred sales charge decreases to 4.0%, 3.0%, 3.0%, 2.0% and 1.0% for
redemptions made during the second through sixth years, respectively.
No deferred sales charge is charged after the sixth year. See "How to
Purchase and Redeem Shares."
3 Without fee waivers, advisory fees for the Equity Income, National
Municipal Bond and Short-Intermediate Corporate Bond Portfolios would
be .75%, .55%, and .55%, respectively.
4 Without fee waivers 12b-1 Fees (including distribution and service
fees) would be .30%.
5 Without fee waivers, administration fees for each Portfolio would be
.20%.
6 Without fee waivers and expense reimbursements, Other Expenses would
be .30%, .30% and .31% for Investor A Shares of the Equity Income,
National Municipal Bond and Short-Intermediate Corporate Bond
Portfolios, respectively, and .30% and .30% for Investor B Shares of
the Equity Income and National Municipal Bond Portfolios,
respectively, and Total Portfolio Operating Expenses would be 1.35%,
1.15% and 1.16% for Investor A Shares of the Equity Income, National
Municipal Bond and Short-Intermediate Corporate Bond Portfolios,
respectively, and 2.05% and 1.85% for Investor B Shares of the Equity
Income and National Municipal Bond Portfolios, respectively.
</TABLE>
-6-
<PAGE> 56
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
------ -------
<S> <C> <C>
You would pay the following
expenses on a $1,000 investment,
assuming (1) a 5% annual return
and (2) redemption at the end of
each period:
Equity Income Portfolio
Investor A Shares1 . . . . . . . . . . . . . $50 $60
Investor B Shares
Assuming complete redemption at
end of period2 . . . . . . . . . . . . . . $62 $68
Assuming no redemption . . . . . . . . . . $12 $38
National Municipal Bond Portfolio
Investor A Shares1 . . . . . . . . . . . . . $49 $57
Investor B Shares
Assuming complete redemption at
end of period2 . . . . . . . . . . . . . . $62 $68
Assuming no redemption . . . . . . . . . . $12 $38
Short-Intermediate Corporate Bond
Portfolio
Investor A Shares1 . . . . . . . . . . . . . $30 $41
<FN>
____________________
1 Assumes deduction at time of purchase of maximum applicable front-end
sales charge.
2 Assumes the deduction of maximum applicable deferred sales charge.
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RATES OF RETURN. THE PORTFOLIOS ARE NEW AND ACTUAL
OPERATING EXPENSES AND INVESTMENT RETURN MAY BE MORE OR LESS THAN THOSE SHOWN.
Information about the actual performance of the Portfolios will be contained in
the Fund's future Annual Reports to Shareholders, which may be obtained without
charge when they become available by contacting the Fund at the address or
telephone number provided on the cover page of this Prospectus.
The purpose of the foregoing tables is to assist in understanding the
various costs and expenses that an investor in a Portfolio's Investor A Shares
or Investor B Shares will bear directly or indirectly. The tables, which have
not been audited by the Fund's independent auditors, reflect the expenses which
the Portfolios expect to incur during the next twelve months on their Investor
A Shares and/or Investor B Shares. For more complete descriptions of the
various costs and expenses, see "Management of the Fund" in this Prospectus and
the Statement of Additional Information. The Tables and Examples do not
reflect any charges that may be imposed by financial institutions on their
customers.
-7-
<PAGE> 57
Because of the payments for distribution services (12b-1 fees) under
the Distribution and Services Plans as shown in the above table, long-term
shareholders of Investor A Shares and Investor B Shares may pay more than the
economic equivalent of the maximum front-end sales load permitted by the
National Association of Securities Dealers, Inc.
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS
The investment objective of a Portfolio may not be changed without the
affirmative vote of a majority of the outstanding Shares of the Portfolio.
Although management will use its best efforts to achieve the investment
objective of each Portfolio, there can be no assurance that it will be able to
do so.
THE EQUITY INCOME PORTFOLIO
The Equity Income Portfolio's investment objective is to seek to
provide an above-average level of income consistent with long-term capital
appreciation. In pursuing its investment objective, the Portfolio intends to
invest, under normal market and economic conditions, substantially all of its
assets in common stock, preferred stock, rights, warrants, and securities
convertible into common stock. The Adviser will select stocks based on a
number of quantitative factors, including dividend yield, current and future
earnings potential compared to stock prices, total return potential and other
measures of value, such as cash flow, asset value or book value, if
appropriate. Stocks purchased for the Portfolio generally will be listed on a
national securities exchange or will be unlisted securities with an established
over-the-counter market. A convertible security may be purchased for the
Portfolio when, in the Adviser's opinion, the price and yield of the
convertible security is favorable as compared to the price and yield of the
common stock. The stocks or securities in which the Portfolio invests may be
expected to produce an above average level of income (as measured by the
Standard & Poor's 500 Index). In general, the Portfolio's stocks and other
securities will be diversified over a number of industry groups in an effort to
reduce the risks inherent in such investments.
The Portfolio may indirectly invest in foreign securities through the
purchase of American Depository Receipts ("ADRs") and European Depository
Receipts ("EDRs") but will not do so if, immediately after and as a result of
the purchase, the value of ADRs and EDRs would exceed 15% of the Portfolio's
total assets. (For further information, see "Other Applicable Policies --
Foreign Securities" below and the Statement of Additional Information under
"Investment Objectives and Policies -- ADRs and EDRs.")
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The Portfolio reserves the right to hold as a temporary defensive
measure up to 100% of its total assets in cash and short-term obligations
(having remaining maturities of 13 months or less) at such times and in such
proportions as, in the opinion of the Adviser, prevailing market or economic
conditions warrant. Short-term obligations in which the Portfolio may invest
include money market instruments, such as commercial paper and bank
obligations, obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, and repurchase agreements.
THE NATIONAL MUNICIPAL BOND PORTFOLIO
The National Municipal Bond Portfolio's investment objective is to
seek as high a level of current income exempt from regular federal income tax
as is consistent with conservation of capital. In pursuing its investment
objective, the Portfolio intends to invest, under normal market and economic
conditions, substantially all of its assets in investment-grade debt
obligations issued by or on behalf of states, territories and possessions of
the United States, the District of Columbia and their respective political
subdivisions, agencies, instrumentalities and authorities the interest on
which, in the opinion of bond counsel or counsel to the issuer, is exempt from
regular federal income tax (collectively, "Municipal Obligations"). As a
matter of fundamental policy, under normal market and economic conditions at
least 80% of the Portfolio's total assets will be invested in Municipal
Obligations, primarily, bonds (at least 65% under normal market conditions).
The Portfolio may purchase Municipal Obligations that are rated at the
time of purchase in one of the four highest rating categories assigned by one
or more unaffiliated nationally recognized statistical rating organizations
("Rating Agencies") or in unrated Municipal Obligations deemed by the Adviser
to be of comparable quality. Under normal market and economic conditions,
however, the Portfolio intends to invest at least 65% of its assets in
Municipal Obligations rated at the time of purchase in one of the three highest
rating categories assigned by one or more Rating Agencies (or unrated Municipal
Obligations determined to be of comparable quality). Securities that are rated
in the lowest of the four highest rating categories are considered to have
speculative characteristics, even though they are of investment-grade quality,
and will be purchased (and retained) only if the Adviser believes that the
issuers have an adequate capacity to pay interest and repay principal. Unrated
obligations will be purchased only if they are considered by the Adviser to be
at least comparable in quality at the time of purchase to instruments within
the rating categories listed above. Municipal Obligations purchased by the
Portfolio whose ratings are subsequently downgraded below the four highest
rating categories of a Rating Agency will be disposed of in an orderly
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manner, normally within 30 to 60 days. The applicable ratings issued by the
Rating Agencies are described in the Appendix to the Statement of Additional
Information.
In addition, the Portfolio may from time to time during temporary
defensive periods, invest in taxable obligations in such proportions as, in the
opinion of the Adviser, prevailing market or economic conditions warrant. Such
instruments may include obligations of the U.S. Government, its agencies or
instrumentalities and debt securities (including commercial paper) of issuers
having, at the time of purchase, a quality rating within the two highest rating
categories by a Rating Agency. The Portfolio does not intend to invest in
taxable obligations under normal market conditions.
During temporary defensive periods or if, in the opinion of the
Adviser, suitable tax-exempt obligations are unavailable, the Portfolio may
also hold uninvested cash reserves which do not earn income pending investment.
There is no percentage limitation on the amount of assets that may be held
uninvested during these temporary defensive periods. The Portfolio does not
intend to hold uninvested cash reserves under normal market conditions.
The Portfolio's average dollar-weighted maturity will vary in light of
current market and economic conditions, the comparative yields on instruments
with different maturities, and other factors.
THE SHORT-INTERMEDIATE CORPORATE BOND PORTFOLIO
The Short-Intermediate Corporate Bond Portfolio's investment objective
is to seek as high a level of current income as is consistent with preservation
of capital. In pursuing its investment objective, the Portfolio intends to
invest, under normal market and economic conditions, at least 65% of its assets
in non-convertible corporate debt obligations, which shall mean obligations of
(i) domestic or foreign business corporations, or (ii) agencies,
instrumentalities or authorities which are organized in corporate form by one
or more states or political subdivisions in the United States or one or more
foreign governments. The Portfolio may also invest in obligations issued or
guaranteed by the U.S. or foreign governments, their agencies or
instrumentalities, and asset-backed securities, including various
collateralized mortgage obligations and other mortgage-related securities. In
making investment decisions, the Adviser will consider a number of factors
including current yield, maturity, yield to maturity, anticipated changes in
interest rates, and the overall quality of the investment. The Portfolio seeks
to provide a current yield greater than that generally available from money
market instruments.
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The Portfolio may purchase debt securities which are rated at the time
of purchase in one of the four highest rating categories assigned by one or
more Rating Agencies or in unrated debt securities deemed by the Adviser to be
of comparable quality. Under normal market and economic conditions, however,
the Portfolio intends to invest at least 65% of its assets in debt obligations
rated in one of the three highest rating categories assigned by one or more
Rating Agencies (or unrated debt obligations determined to be of comparable
quality). Securities that are rated in the lowest of the four highest rating
categories have speculative characteristics, even though they are of
investment-grade quality, and such securities will be purchased (and retained)
only if the Adviser believes that the issuers have an adequate capacity to pay
interest and repay principal. Unrated debt securities will be purchased only
if they are considered by the Adviser to be at least comparable in quality at
the time of purchase to instruments within the rating categories listed above.
Debt securities purchased by the Portfolio whose ratings are subsequently
downgraded below the four highest rating categories of a Rating Agency will be
disposed of in an orderly manner, normally within 30 to 60 days. The
applicable ratings issued by the Rating Agencies are described in the Appendix
to the Statement of Additional Information.
The Portfolio reserves the right to hold as a temporary defensive
measure up to 100% of its total assets in cash and short-term obligations
(having remaining maturities of 13 months or less) at such times and in such
proportions as, in the opinion of the Adviser, prevailing market or economic
conditions warrant. Short-term obligations in which the Portfolio may invest
include money market instruments, such as commercial paper and bank
obligations, obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, and repurchase agreements.
The Portfolio's average weighted maturity will be between two and five
years and will vary in light of current market and economic conditions, the
comparative yields on instruments with different maturities, and other factors.
OTHER APPLICABLE POLICIES
U.S. GOVERNMENT OBLIGATIONS. Securities issued or guaranteed by the
U.S. Government, its agencies and instrumentalities have historically involved
little risk of loss of principal if held to maturity. However, due to
fluctuations in interest rates, the market value of such securities may vary
during the period a shareholder owns Shares of a Portfolio. Examples of the
types of U.S. Government obligations that may be held by the Portfolios,
subject to their investment objectives and policies, include, in addition to
U.S. Treasury bonds, notes
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and bills, the obligations of Federal Home Loan Banks, Federal Farm Credit
Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association ("GNMA"), Federal
National Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation
("FHLMC"), General Services Administration, Student Loan Marketing Association,
Central Bank for Cooperatives, Federal Intermediate Credit Banks, Resolution
Trust Corporation, and Maritime Administration. Obligations of certain
agencies and instrumentalities of the U.S. Government, such as those of GNMA,
are supported by the full faith and credit of the U.S. Treasury; others, such
as the Export-Import Bank of the United States, are supported by the right of
the issuer to borrow from the Treasury; others, such as those of FNMA, are
supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; still others such as those of the Student Loan Marketing
Association, are supported only by the credit of the instrumentality. There is
no assurance that the U.S. Government would provide financial support to U.S.
Government-sponsored instrumentalities if it is not obligated to do so by law.
STRIPPED GOVERNMENT SECURITIES. To the extent consistent with their
respective investment policies, the Portfolios may invest in bills, notes and
bonds (including zero coupon bonds) issued by the U.S. Treasury, as well as
"stripped" U.S. Treasury obligations offered under the Separate Trading of
Registered Interest and Principal Securities ("STRIPS") program or Coupon Under
Bank-Entry Safekeeping ("CUBES") program or other stripped securities issued
directly by agencies or instrumentalities of the U.S. Government. STRIPS and
CUBES represent either future interest or principal payments and are direct
obligations of the U.S. Government that clear through the Federal Reserve
System. The Short-Intermediate Corporate Bond Portfolio may also purchase U.S.
Treasury and agency securities that are stripped by brokerage firms and
custodian banks and sold under proprietary names. These stripped securities
are resold in custodial receipt programs with a number of different names (such
as TIGRs and CATS) and are not considered government securities for purposes of
the 1940 Act. Stripped securities are issued at a discount to their "face
value" and may exhibit greater price volatility than ordinary debt securities
because of the manner in which their principal and interest are returned to
investors. The Adviser will consider the liquidity needs of a Portfolio when
any investments in zero coupon obligations or other principal-only obligations
are made.
MONEY MARKET INVESTMENTS. Under certain circumstances described
above, each Portfolio may purchase "money market instruments," including
commercial paper and bank obligations.
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Investment by the Portfolios in taxable or tax-exempt commercial paper
will consist of issues that are rated at the time of purchase in one of the two
highest rating categories assigned by a Rating Agency or, if unrated, deemed to
be of comparable quality by the Adviser at the time of purchase. Commercial
paper may include variable and floating rate instruments. See "Other
Applicable Policies -- Variable and Floating Rate Instruments" below.
Bank obligations include bankers' acceptances, negotiable certificates
of deposit and non-negotiable time deposits of U.S. or foreign banks, having
total assets at the time of purchase in excess of $1 billion. Although the
Portfolios will invest in obligations of foreign banks or foreign branches of
U.S. banks only when the Adviser determines that the instrument presents
minimal credit risks, such investments nevertheless entail risks that are
different from those of investments in domestic obligations of U.S. banks. See
"Other Applicable Policies - - Foreign Securities" below. Investments in the
obligations of foreign banks or foreign branches of U.S. banks will not exceed
25% of a particular Portfolio's total assets at the time of purchase.
REPURCHASE AGREEMENTS. Under certain circumstances described above
and subject to their respective investment policies, the Portfolios, other than
the National Municipal Bond Portfolio, may agree to purchase U.S. Government
securities from financial institutions such as banks and broker-dealers,
subject to the seller's agreement to repurchase them at a mutually agreed-upon
date and price ("repurchase agreements"). The Portfolio will enter into
repurchase agreements only with financial institutions such as banks and
broker-dealers that the Adviser believes to be creditworthy. During the term
of any repurchase agreement, the Adviser will continue to monitor the
creditworthiness of the seller and will require the seller to maintain the
value of the securities subject to the agreement at not less than 102% of the
repurchase price (including accrued interest). Default by a seller could
expose the Portfolio to possible loss because of adverse market action or
possible delay in disposing of the underlying obligations. Because of the
seller's repurchase obligations, the securities subject to repurchase
agreements do not have maturity limitations. Although the Portfolio presently
does not intend to enter into repurchase agreements providing for settlement in
more than seven days, the Portfolio does have the authority to do so subject to
its limitation on the purchase of illiquid securities described below.
Repurchase agreements are considered to be loans under the 1940 Act. The
income on repurchase agreements may be taxable to investors at the state or
local level. (See "Taxes.")
REVERSE REPURCHASE AGREEMENTS. Subject to their respective investment
policies and limitations, the Portfolios, other than
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the National Municipal Bond Portfolio, may borrow funds for temporary purposes
by entering into reverse repurchase agreements. Pursuant to such agreements,
the Portfolio would sell portfolio securities to financial institutions such as
banks and broker-dealers and agree to repurchase them at an agreed upon date
and price. Reverse repurchase agreements involve the risk that the market
value of the securities sold by the Portfolio may decline below the repurchase
price which the Portfolio is obligated to pay. Reverse repurchase agreements
are considered to be borrowings by the Portfolio under the 1940 Act.
SECURITIES LENDING. To increase return or offset expenses, each
Portfolio may, from time to time, lend portfolio securities to broker-dealers,
banks or institutional borrowers pursuant to agreements requiring that the
loans be continuously secured by collateral equal at all times in value to at
least the market value of the securities loaned. Collateral for such loans may
include cash, securities of the U.S. Government, or its agencies or
instrumentalities, or an irrevocable letter of credit issued by a bank that has
at least $1.5 billion in total assets, or any combination thereof. The
collateral must be valued daily, and, should the market value of the loaned
securities increase, the borrower must furnish additional collateral to the
lending Portfolio. By lending its securities, a Portfolio can increase its
income by continuing to receive interest on the loaned securities as well as by
either investing the cash collateral in short-term instruments or obtaining
yield in the form of interest paid by the borrower when U.S. Government
securities are used as collateral. In accordance with current Securities and
Exchange Commission ("SEC") policies, each Portfolio is currently limiting its
securities lending to 33-1/3% of its aggregate net assets. Loans are subject
to termination by a Portfolio or the borrower at any time.
OPTIONS. The Equity Income and Short-Intermediate Corporate Bond
Portfolios may purchase put and call options listed on a national securities
exchange and issued by the Options Clearing Corporation in an amount not
exceeding 10% of their respective net assets. Such options may relate to
particular securities or to various stock or bond indices. Purchasing options
is a specialized investment technique which entails a substantial risk of a
complete loss of the amounts paid as premiums to the option writer. Such
transactions will be entered into only as a hedge against fluctuations in the
value of securities which a Portfolio holds or intends to purchase.
These Portfolios may also write covered call options. A covered call
option is an option to acquire a security that a Portfolio owns or has the
right to acquire during the option period. Such options will be listed on a
national securities exchange and issued by the Options Clearing Corporation.
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The aggregate value of the securities subject to covered call options
written by a Portfolio will not exceed 25% of the value of its net assets. In
order to close out an option position, a Portfolio may enter into a "closing
purchase transaction" -- the purchase of a covered call option on the same
security with the same exercise price and expiration date as the option which
the Portfolio previously wrote. By writing a covered call option, a Portfolio
forgoes the opportunity to profit from an increase in the market price of the
underlying security above the exercise price except insofar as the premium
represents such a profit and it is not able to sell the underlying security
until the option expires, is exercised, or the Portfolio effects a closing
purchase transaction by purchasing an option of the same series. The use of
covered call options will not be a primary investment technique of either
Portfolio. (For additional information relating to option trading practices,
including particular risks, see the Statement of Additional Information and
Appendix B thereof.)
FUTURES CONTRACTS AND RELATED OPTIONS. The Equity Income and
Short-Intermediate Corporate Bond Portfolios may invest in futures contracts
and options on futures contracts to the extent permitted by the Commodity
Futures Trading Commission ("CFTC") and the SEC. Such transactions, including
stock or bond index futures contracts, or options thereon, act as a hedge to
protect a Portfolio from fluctuations in the value of its securities caused by
anticipated changes in interest rate or market conditions without necessarily
buying or selling the securities. Hedging is a specialized investment
technique that entails skills different from other investment management. The
Adviser may also consider such transactions to be economically appropriate for
the reduction of risk inherent in the ongoing management of a Portfolio. A
stock or bond index futures contract is an agreement in which one party agrees
to take or make delivery of an amount of cash equal to a specified dollar
amount times the difference between the index value (which assigns relative
values to the common stock or bonds included in the index) at the close of the
last trading day of the contract and the price at which the agreement is
originally made. No physical delivery of the underlying stock or bond in the
index is contemplated. Similarly, it may be in the best interest of a
Portfolio to purchase or sell interest rate futures contracts, or options
thereon, which provide for the future delivery of specified fixed income
securities.
The purchase and sale of futures contracts or related options will not
be a primary investment technique of any Portfolio. Neither the Equity Income
Portfolio nor Short-Intermediate Corporate Bond Portfolio will purchase or sell
futures contracts (or related options thereon) for hedging purposes if,
immediately after purchase, the aggregate initial margin deposits and premiums
paid by a Portfolio on its open
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futures and options positions exceeds 5% of the liquidation value of the
Portfolio, after taking into account any unrealized profits and unrealized
losses on any such futures or related options contracts into which it has
entered. (For a more detailed description of futures contracts and related
options, see the Statement of Additional Information and Appendix B thereof.)
ASSET-BACKED SECURITIES. The Short-Intermediate Corporate Bond
Portfolio may purchase asset-backed securities (i.e., securities backed by
mortgages, installment sale contracts, corporate receivables, credit card
receivables or other assets) that are issued by entities such as the GNMA,
FNMA, FHLMC and private issuers such as commercial banks, financial companies,
finance subsidiaries of industrial companies, savings and loan associations,
mortgage banks, and investment banks. To the extent that the Portfolio invests
in asset-backed securities issued by companies that are investment companies
under the 1940 Act, such acquisitions will be subject to the percentage
limitations prescribed by the 1940 Act. (See "Other Applicable Policies --
Securities of Other Investment Companies" below.)
Presently there are several types of mortgage-backed securities,
including guaranteed mortgage pass-through certificates, which provide the
holder with a pro rata interest in the underlying mortgages, and collateralized
mortgage obligations ("CMOs"), which provide the holder with a specified
interest in the cash flow of a pool of underlying mortgages or other
mortgage-backed securities. CMOs are issued in multiple classes, each with a
specified fixed or floating interest rate and a final distribution date. The
relative payment rights of the various CMO classes may be subject to greater
volatility and interest-rate risk than other types of mortgage-backed
securities. The average life of asset-backed securities varies with the
underlying instruments or assets and market conditions, which in the case of
mortgages have maximum maturities of forty years. The average life of a
mortgage-backed instrument, in particular, is likely to be substantially less
than the original maturity of the mortgages underlying the securities as the
result of unscheduled principal payments and mortgage prepayments. The
relationship between mortgage prepayment and interest rates may give some
high-yielding mortgage-backed securities less potential for growth in value
than conventional bonds with comparable maturities. In addition, in periods of
falling interest rates, the rate of mortgage prepayments tends to increase.
During such periods, the reinvestment of prepayment proceeds by the
Short-Intermediate Corporate Bond Portfolio will generally be at lower rates
than the rates that were carried by the obligations that have been prepaid.
When interest rates rise, the value of an asset-backed security generally will
decline; however, when interest rates decline, the value of an asset-backed
security with prepayment features may not increase as much as that of
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other fixed income securities. Because of these and other reasons, an
asset-backed security's total return may be difficult to predict precisely.
In general, the collateral supporting non-mortgage asset-backed
securities is of shorter maturity than mortgage loans and is less likely to
experience substantial prepayments. Non-mortgage asset-backed securities
involve certain risks that are not presented by mortgage-backed securities
arising primarily from the nature of the underlying assets (i.e., credit card
and automobile loan receivables as opposed to real estate mortgages). For
example, credit card receivables are generally unsecured and the repossession
of automobiles and other personal property upon the default of the debtor may
be difficult or impracticable in some cases.
TYPES OF MUNICIPAL OBLIGATIONS. The two principal classifications of
Municipal Obligations that may be held by the National Municipal Bond Portfolio
are "general obligation" securities and "revenue" securities. General
obligation securities are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue
securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. Revenue securities include private activity bonds
which are not payable from the unrestricted revenues of the issuer.
Consequently, the credit quality of private activity bonds is usually directly
related to the credit standing of the corporate user of the facility involved.
Municipal Obligations may also include "moral obligation" bonds, which are
normally issued by special purpose public authorities. If the issuer of a
moral obligation bond is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
Municipal Obligations include debt obligations issued by governmental
entities to obtain funds for various public purposes, including the
construction of a wide range of public facilities, the refunding of outstanding
obligations, the payment of general operating expenses and the extension of
loans to public institutions and facilities. Private activity bonds issued by
or on behalf of public authorities to finance various privately operated
facilities are considered Municipal Obligations. Interest on private activity
bonds, although free of regular federal income tax, may be an item of tax
preference for purposes of the federal alternative minimum tax.
The National Municipal Bond Portfolio may acquire zero coupon
obligations, which may have greater price volatility than
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coupon obligations and which will not result in payment of interest until
maturity. Also included within the general category of Municipal Obligations
are participation certificates in leases, installment purchase contracts, or
conditional sales contracts ("lease obligations") entered into by state or
political subdivisions to finance the acquisition or construction of equipment,
land, or facilities. Although lease obligations do not constitute general
obligations of the issuer for which the lessee's unlimited taxing power is
pledged, certain lease obligations are backed by the lessee's covenant to
appropriate money to make the lease obligation payments. However, under
certain lease obligations, the lessee has no obligation to make these payments
in future years unless money is appropriated on a yearly basis. Although
"non-appropriation" lease obligations are secured by the leased property,
disposition of the property in the event of foreclosure might prove difficult.
These securities represent a relatively new type of financing and may not be as
marketable as more conventional securities. To the extent these securities are
illiquid, they are subject to the Portfolio's applicable limitation on illiquid
securities described below.
Municipal Obligations purchased by the National Municipal Bond
Portfolio may be backed by letters of credit or guarantees issued by domestic
or foreign banks and other financial institutions which are not subject to
federal deposit insurance. Adverse developments affecting the banking industry
generally or a particular bank or financial institution that has provided its
credit or a guarantee with respect to a Municipal Obligation held by the
Portfolio could have an adverse effect on the Portfolio's investment portfolio
and the value of its shares. Foreign letters of credit and guarantees involve
certain risks in addition to those of domestic obligations, including less
stringent reserve requirements and different accounting, auditing and
recordkeeping requirements.
Opinions relating to the validity of Municipal Obligations and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance, and opinions
relating to the validity and the tax-exempt status of payments received by the
National Municipal Bond Portfolio from tax-exempt derivative securities are
rendered by counsel to the respective sponsors of such securities. The
National Municipal Bond Portfolio and its Adviser will rely on such opinions
and will not review independently the underlying proceedings relating to the
issuance of Municipal Obligations, the creation of any tax-exempt derivative
security, or the basis for such opinions.
VARIABLE AND FLOATING RATE INSTRUMENTS. Each Portfolio may purchase
rated or unrated variable and floating rate instruments. These instruments may
include variable rate master demand notes that permit the indebtedness
thereunder to vary in addition to
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providing for periodic adjustments in the interest rate. Unrated instruments
purchased by a Portfolio will be determined by the Adviser to be of comparable
quality at the time of purchase to rated instruments that may be purchased.
The absence of an active secondary market for a particular variable or floating
rate instrument, however, could make it difficult for a Portfolio to dispose of
an instrument if the issuer were to default on its payment obligation. A
Portfolio could, for these or other reasons, suffer a loss with respect to such
instruments.
SECURITIES OF OTHER INVESTMENT COMPANIES. Under certain circumstances
described above and subject to its investment policies, each Portfolio may
invest in securities issued by other investment companies which invest in
securities in which the Portfolio is permitted to invest and which determine
their net asset value per share based on the amortized cost or penny-rounding
method. Each Portfolio may invest in securities of other investment companies
within the limits prescribed by the 1940 Act, which include, subject to certain
exceptions, a prohibition on a Portfolio investing more than 10% of the value
of its total assets in such securities. Investment companies in which a
Portfolio may invest may impose a sales or distribution charge in connection
with the purchase or redemption of their Shares as well as other types of
commissions or charges. Such charges will be payable by the Portfolio and,
therefore, will be borne indirectly by its shareholders. To the extent that a
Portfolio may invest in securities of other investment companies, the Fund and
the Adviser will ensure that there will be no duplication of advisory fees. If
necessary to accomplish this, the Adviser will rebate its advisory fee to the
Fund. (See the Statement of Additional Information under "Investment
Objectives and Policies -- Securities of Other Investment Companies.")
WHEN-ISSUED PURCHASES, FORWARD COMMITMENTS AND DELAYED SETTLEMENTS.
Each Portfolio may purchase securities on a "when-issued" basis and may
purchase or sell securities on a "forward commitment" basis. Additionally, the
National Municipal Bond Portfolio may purchase or sell securities on a "delayed
settlement" basis. When-issued and forwarded commitment transactions involve a
commitment by a Portfolio to purchase or sell securities at a stated price and
yield with settlement beyond the normal settlement date. Such transactions
permit a Portfolio to lock-in a price or yield on a security, regardless of
future changes in interest rates. Delayed settlement refers to a transaction
in the secondary market that will settle sometime in the future. These
transactions involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, or if the value of the
security to be sold increases prior to the settlement date. Each Portfolio
expects that these transactions will not exceed 25% of the value of its total
assets (at the time of purchase) under normal market conditions. No Portfolio
intends to engage in such transactions
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for speculative purposes but only for the purpose of acquiring portfolio
securities.
STAND-BY COMMITMENTS. The National Municipal Bond Portfolio may
acquire "stand-by commitments" with respect to Municipal Obligations held by
it. Under a stand-by commitment, a dealer agrees to purchase, at the
Portfolio's option, specified Municipal Obligations at a specified price. The
National Municipal Bond Portfolio will acquire stand-by commitments solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes. The Portfolio expects that stand-by
commitments will generally be available without the payment of any direct or
indirect consideration. However, if necessary or advisable, the Portfolio may
pay for a stand-by commitment either separately in cash or by paying a higher
price for portfolio securities which are acquired subject to the commitment
(thus reducing the yield otherwise available for the same securities).
Stand-by commitments acquired by the Portfolio will be valued at zero in
determining the Portfolio's net asset value.
TAX-EXEMPT DERIVATIVES. The National Municipal Bond Portfolio may
hold tax-exempt derivatives which may be in the form of tender option bonds,
participations, beneficial interests in a trust, partnership interests or other
forms. The Adviser expects that less than 5% of the National Municipal Bond
Portfolio's assets will be invested in such securities during the current year.
(See the Statement of Additional Information under "Investment Objectives and
Policies -- Tax-Exempt Derivatives.")
ILLIQUID SECURITIES. A Portfolio will not knowingly invest more than
15% of the value of its net assets in illiquid securities. Repurchase
agreements that do not provide for settlement within seven days, time deposits
maturing in more than seven days, and securities that are not registered under
the Securities Act of 1933, as amended (the "1933 Act") but that may be
purchased by institutional buyers pursuant to SEC Rule 144A are subject to this
15% limit (unless the Adviser, pursuant to guidelines established by the Fund's
Board of Directors, determines that a liquid market exists).
FOREIGN SECURITIES. Investments made in foreign securities, whether
made directly or indirectly, involve certain inherent risks, such as future
political and economic developments, the possible imposition of foreign
withholding tax on the interest income payable on such instruments, the
possible establishment of foreign controls, the possible seizure or
nationalization of foreign deposits or assets, or the adoption of other foreign
government restrictions that might adversely affect payment of interest or
principal. In the event of a default by the issuer of a foreign security, it
may be more difficult to obtain or enforce a judgment against such issuer than
it would against a
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domestic issuer. In addition, foreign banks and foreign branches of U.S. banks
are subject to less stringent reserve requirements and to different accounting,
auditing, reporting, and recordkeeping standards than those applicable to
domestic branches of U.S. banks.
ADDITIONAL RISKS AND OTHER CONSIDERATIONS. Generally, the market
value of fixed income securities, such as Municipal Obligations and other debt
securities, can be expected to vary inversely to changes in prevailing interest
rates. During periods of declining interest rates, the market value of
investment portfolios comprised primarily of fixed income securities, such as
the National Municipal Bond and Short-Intermediate Corporate Bond Portfolios,
will tend to increase, and during periods of rising interest rates, the market
value will tend to decrease. In addition, during periods of declining interest
rates, the yields of investment portfolios comprised primarily of fixed income
securities will tend to be higher than prevailing market rates and, in periods
of rising interest rates, yields will tend to be somewhat lower. Fixed income
securities with longer maturities, which tend to produce higher yields, are
subject to potentially greater capital appreciation and depreciation than
obligations with shorter maturities. Changes in the financial strength of an
issuer or changes in the ratings of any particular security may also offset the
value of these investments. Fluctuations in the market value of fixed income
securities subsequent to their acquisition will not offset cash income from
such securities but will be reflected in the Portfolio's net asset value.
Although the National Municipal Bond Portfolio may invest 25% or more
of its total assets in (i) Municipal Obligations whose issuers are in the same
state, and (ii) Municipal Obligations the interest on which is paid solely from
revenues of similar projects, it does not presently intend to do so unless, in
the opinion of the Adviser, the investment is warranted. The National
Municipal Bond Portfolio's ability to achieve its investment objective is
dependent upon the ability of issuers of Municipal Obligations to meet their
continuing obligations for the payment of principal and interest. To the
extent that the Portfolio's assets are invested in Municipal Obligations that
are payable from the revenues of similar projects or, the Portfolio will be
subject to the particular risks (including legal and economic conditions)
relating to such securities to a greater extent than it would be if its assets
were not so concentrated. (See "Investment Objectives and Policies -- Municipal
Obligations" in the Statement of Additional Information.)
PORTFOLIO TURNOVER AND TRANSACTIONS. Although the Portfolios will not
normally engage in short-term trading, each Portfolio reserves the right to do
so if the Adviser believes that selling a particular security is appropriate in
light of the
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Portfolio's investment objective. Investments may be sold for a variety of
reasons, such as a more favorable investment opportunity or other circumstances
bearing on the desirability of continuing to hold such investments. A high
rate of portfolio turnover involves correspondingly greater brokerage
commission expenses and other transaction costs, which must be borne directly
by the Portfolio and ultimately by its shareholders. High portfolio turnover
may result in the realization of substantial net capital gains; distributions
derived from such gains may be treated as ordinary income for federal income
tax purposes. (See "Taxes" in this Prospectus and the Statement of Additional
Information.") Although the Portfolios cannot accurately predict their
respective annual portfolio turnover rates, such rates are not expected to
exceed 100%.
All orders for transactions in securities or options on behalf of the
Portfolios are placed by the Adviser with broker-dealers that it selects. To
the extent permitted by the 1940 Act and guidelines adopted by the Fund's Board
of Directors, a Portfolio may utilize the Distributor or one or more of its
affiliates as a broker in connection with the purchase or sale of securities
when the Adviser believes the charge for the transaction does not exceed the
usual and customary broker's commission.
INVESTMENT LIMITATIONS
The investment limitations set forth below are fundamental policies
and may be changed only by a vote of a majority of the outstanding Shares of a
Portfolio. Other investment limitations that also cannot be changed without a
vote of shareholders are contained in the Statement of Additional Information
under "Investment Objectives and Policies."
A Portfolio may not:
1. Purchase securities of any one issuer (other than
obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities) if, immediately after and as a result of such
investments, more than 5% of the Portfolio's total assets would be
invested in the securities of such issuer, or more than 10% of the
issuer's outstanding voting securities would be owned by the Portfolio
or the Fund, except that up to 25% of the Portfolio's total assets may
be invested without regard to such limitations.
2. Purchase any securities which would cause 25% or more
of the Portfolio's total assets at the time of purchase to be invested
in the securities of one or more issuers conducting their principal
business activities in the same industry, provided, however, that (a)
with respect to the National Municipal Bond Portfolio, there is no
limitation
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with respect to obligations issued or guaranteed by the U.S.
Government, any state, territory or possession of the U.S. Government,
the District of Columbia, or any of their authorities, agencies,
instrumentalities or political subdivisions, and (b) with respect to
the Equity Income and Short-Intermediate Corporate Bond Portfolios (i)
there is no limitation with respect to obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities, repurchase
agreements secured by obligations of the U.S. Government or its
agencies or instrumentalities, and, with respect to the Equity Income
Portfolio only, securities issued by domestic banks, thrifts or savings
institutions; (ii) wholly-owned finance companies will be considered to
be in the industries of their parents if their activities are primarily
related to financing the activities of their parents; and (iii)
utilities will be divided according to their services (for example,
gas, gas transmission, electric and gas, electric, and telephone will
each be considered a separate industry).
3. Borrow money or issue senior securities, except that
each Portfolio may borrow from banks and the Short-Intermediate
Corporate Bond Portfolio may enter into reverse repurchase agreements,
for temporary defensive purposes in amounts not in excess of 10% of
the Portfolio's total assets at the time of such borrowing; or
mortgage, pledge, or hypothecate any assets, except in connection with
any such borrowing and in amounts not in excess of the lesser of the
dollar amounts borrowed or 10% of the Portfolio's total assets at the
time of such borrowing; or purchase securities while its borrowings
exceed 5% of its total assets. A Portfolio's transactions in futures
and related options (including the margin posted by the Portfolio in
connection with such transactions), and securities held in escrow or
separate accounts in connection with a Portfolio's investment
practices described in this Prospectus or the Statement of Additional
Information are not subject to this limitation.
4. Make loans, except that (a) each Portfolio may
purchase or hold debt instruments, lend portfolio securities and make
other investments in accordance with its investment objective and
policies and (b) the Short-Intermediate Corporate Bond Portfolio may
enter into repurchase agreements.
5. Purchase securities on margin, make short sales of
securities or maintain a short position, except that (a) this
investment limitation shall not apply to a Portfolio's transactions in
options, and futures contracts and related options, and (b) a
Portfolio may obtain short-term credits
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as may be necessary for the clearance of purchases and sales of
portfolio securities.
If a percentage limitation is satisfied at the time of investment, a
later increase or decrease in such percentage resulting solely from a change in
the value of a Portfolio's securities will not constitute a violation of such
limitation.
In order to permit the sale of a Portfolio's Shares in certain states,
the Portfolios may make commitments more restrictive than the investment
policies and limitations described above. Should the Adviser determine that
any such commitment is no longer in the best interests of a Portfolio, it will
revoke the commitment by terminating sales of its Shares in the state involved.
PRICING OF SHARES
The Portfolios' respective net asset values per Share are determined
by the Administrator as of the close of regular trading hours on the New York
Stock Exchange (currently 4:00 p.m. Eastern Time) on each weekday, with the
exception of those holidays on which the New York Stock Exchange or the Federal
Reserve Bank of St. Louis are closed (a "Business Day"). Currently, one or
both of these institutions are closed on the customary national business
holidays of New Year's Day, Martin Luther King, Jr. Day, Presidents' Day,
Good Friday, Memorial Day (observed), Independence Day (observed),
Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and
Christmas Day (observed).
Securities which are traded on a recognized stock exchange are valued
at the last sale price on the securities exchange on which such securities are
primarily traded or at the last sale price on the national securities market.
Securities traded on only over-the-counter markets are valued on the basis of
market values when available. Securities for which there are no transactions
are valued at the average of the current bid and asked prices. Other
securities, including restricted and other securities for which market
quotations are not readily available, and other assets are valued at fair value
by the Adviser under the supervision of the Board of Directors. Investments in
debt securities with remaining maturities of 60 days or less may be valued
based upon the amortized cost method. (For further information about valuation
of investments, see "Net Asset Value" in the Statement of Additional
Information.)
The public offering price for each class of Shares is based upon net
asset value per Share plus, in the case of Investor A Shares, a front-end sales
charge. A class will calculate its net asset value per Share by adding the
value of a Portfolio's
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investments, cash and other assets attributable to the class, subtracting the
Portfolio's liabilities attributable to that class, and then dividing the
result by the total number of Shares in the class that are outstanding.
Because the operating expenses of Investor B Shares are higher than those
associated with other classes of Shares, the net asset value per Share of
Investor B Shares of a Portfolio will generally be lower than the net asset
value per Share of Trust, Institutional or Investor A Shares of the same
Portfolio.
HOW TO PURCHASE AND REDEEM SHARES
PURCHASE OF SHARES
Investments in Investor A Shares of the Portfolios are subject to a
front-end sales charge. Investments in Investor B Shares of the Equity Income
and National Municipal Bond Portfolios are subject to a back-end sales charge.
This back-end sales charge declines over time and is known as a "contingent
deferred sales charge". Investors should read "Characteristics of Investor A
Shares and Investor B Shares" and "Factors to Consider When Selecting Investor
A Shares or Investor B Shares" below before deciding between the two classes of
Shares.
Investor A Shares and Investor B Shares are sold through
broker-dealers or other organizations acting on behalf of their customers.
Generally, investors purchase Investor A Shares or Investor B Shares through a
broker-dealer organization which has a sales agreement with the Distributor or
through an organization which has entered into a servicing agreement with the
Fund with respect to Investor A Shares and/or Investor B Shares. The
organization is responsible for transmitting purchase orders directly to the
Fund. Investors purchasing Shares of the Equity Income and/or National
Municipal Bond Portfolios must specify at the time of investment whether they
are purchasing Investor A Shares or Investor B Shares.
The minimum initial investment in each Portfolio is $1,000 and the
minimum subsequent investment is $100, except for investments made through (a)
the Automatic Investment Program, whereby a shareholder on a monthly basis may
add a minimum amount of $50 to his or her investment, (b) a sweep program
available through an investor's financial institution, in which case there is
no minimum, (c) a payroll deduction program at a minimum of $25 per month, or
(d) a wrap fee program. (See "How to Purchase and Redeem Shares -- Automatic
Investment Program" below for the investment requirements.)
Purchases may be effected on Business Days when the Adviser,
Distributor and Mercantile (the Custodian) are open for business. The Fund
reserves the right to reject any purchase order,
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<PAGE> 75
including purchases made with foreign and third party drafts or checks. All
orders for new IRAs or other retirement plan accounts placed through the
transfer agent must be accompanied by an account application. Account
applications may be obtained from your investment representative or the Fund at
1-800-551-3731.
Organizations placing orders directly or on behalf of their customers
should contact the Fund at 1-800-551-3731. Investors may also call the Fund
for information on how to purchase Shares.
If purchase orders are received in good form and accepted by the Fund
prior to 4:00 p.m. (Eastern time) on any Business Day, Shares will be priced
according to the net asset value per Share next determined on that day after
receipt of the order. Immediately available funds must be received by the
Custodian prior to 4:00 p.m. within five Business Days following the receipt of
such order. If funds are not received by such date, the order will be
cancelled, and notice thereof will be given to the person or organization
placing the order. In the case of an order for the purchase of Shares placed
through a broker-dealer, it is the responsibility of the broker-dealer to
promptly transmit the order to the Distributor. If the broker-dealer fails to
do so, the investor's right to that day's closing price must be settled between
the investor and the broker-dealer. Payment for orders which are not received
or accepted will be returned after prompt inquiry to the transmitting
organization.
PURCHASES BY MAIL. To purchase Shares of a Portfolio by mail,
complete an account application and send it to the Fund along with a check (or
other negotiable bank draft or money order) in at least the minimum initial
purchase amount, made payable to the appropriate Portfolio. Investors
purchasing Shares of the Equity Income and/or National Municipal Bond
Portfolios by mail must indicate whether they wish to buy Investor A Shares or
Investor B Shares. Subsequent purchases of Shares of a Portfolio may be made
at any time in at least the subsequent minimum purchase amount by mailing a
check payable to the Portfolio.
All shareholders of record will receive confirmations of Share
purchases, exchanges, and redemptions in the mail. If Shares are held in the
name of an organization, such organization is responsible for transmitting
purchase, exchange, and redemption orders to the Fund on a timely basis,
recording all purchase, exchange, and redemption transactions, and providing
regular account statements which confirm such transactions to beneficial owners
(or arranging for such services).
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<PAGE> 76
AUTOMATIC INVESTMENT PROGRAM (AIP)
Shareholders may open an account or add to their investment on a
monthly basis in a minimum amount of $50, on the 20th day (or the next Business
Day after the 20th day) of each month. Under the AIP, funds may be
automatically withdrawn from the shareholder's checking account (as long as the
shareholder's bank is a member of the Automated Clearing House). Such funds
are invested in Investor A Shares or Investor B Shares, as appropriate, at the
net asset value plus any applicable front-end sales charge next determined on
the day an order is effected by the transfer agent, BISYS Fund Services Ohio,
Inc. (the "Transfer Agent"). An investor may apply for participation in the
AIP through the organization servicing his or her Fund account and by
completing the supplementary AIP authorization form. The AIP may be modified
or terminated by a shareholder on 30 days' written notice to his or her
investment representative or to the Fund, or by the Fund at any time.
APPLICABLE SALES CHARGES - INVESTOR A SHARES
The public offering price for Investor A Shares of the Portfolios is
the sum of the net asset value of the Shares being purchased plus any
applicable sales charge. No sales charge is assessed on the reinvestment of
distributions. The sales charges are assessed as follows:
EQUITY INCOME AND NATIONAL MUNICIPAL BOND PORTFOLIOS
<TABLE>
<CAPTION>
DEALERS'
AS A % OF AS A % OF REALLOWANCE
OFFERING NET ASSET AS A % OF
AMOUNT OF PRICE VALUE OFFERING
TRANSACTION PER SHARE PER SHARE PRICE
- ----------- --------- --------- -----------
<S> <C> <C> <C>
Less than $50,000. . . . . . . . . . 4.50% 4.70% 4.00%
$ 50,000 but less than $100,000. . . 3.50 3.60 3.00
$100,000 but less than $250,000. . . 2.50 2.60 2.00
$250,000 but less than $500,000. . . 1.50 1.50 1.00
$500,000 but less than $1,000,000. . 1.00 1.00 0.50
$1,000,000 and over. . . . . . . . . .50 .50 .40
</TABLE>
<TABLE>
<CAPTION>
SHORT-INTERMEDIATE CORPORATE BOND PORTFOLIO
DEALERS'
AS A % OF AS A % OF REALLOWANCE
OFFERING NET ASSET AS A % OF
AMOUNT OF PRICE VALUE OFFERING
TRANSACTION PER SHARE PER SHARE PRICE
- ----------- --------- --------- -----------
<S> <C> <C> <C>
Less than $250,000. . . . . . . . . . 2.50% 2.56% 2.00%
$250,000 but less than $500,000. . . 1.50 1.52 1.30
$500,000 but less than $1,000,000. . 1.00 1.01 .85
$1,000,000 and over. . . . . . . . . .50 .50 .40
</TABLE>
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<PAGE> 77
The Distributor will pay the appropriate Dealers' Reallowance to broker-dealer
organizations which have entered into an agreement with the Distributor. The
Dealers' Reallowance may be changed from time to time. Upon notice to the
Fund's shareholders, the Distributor, at its sole discretion, may reallow up to
the full applicable sales charge as shown on the above schedule during periods
specified in such notice. Dealers who receive 90% or more of a sales load may
be deemed to be "underwriters" under the Securities Act of 1933, as amended.
No sales charge is assessed on purchases of Investor A Shares by: (a)
directors and officers of the Fund and the immediate family members of such
individuals; (b) directors, current and retired employees and participants in
employee benefit/retirement plans (future and current annuitants) of Mercantile
Bancorporation Inc. or any of its affiliates or the Distributor or its
affiliates and the immediate family members of such individuals; (c) brokers,
dealers, and agents who have a sales agreement with the Distributor, and their
employees (and the immediate family members of such individuals); (d) customers
who purchase pursuant to a wrap fee program offered by any broker-dealer or
other financial institution or financial planning organization; (e) individuals
who purchase Investor A Shares with the proceeds of Trust Shares or
Institutional Shares redeemed in connection with a rollover of benefits paid by
a qualified retirement or employee benefit plan or distribution on behalf of any
other qualified account administered by Mercantile or its affiliates or
correspondent banks, within 60 days of receipt of such payment; (f) individuals
who purchase shares through a payroll deduction program; (g) employees of any
sub-adviser to the Fund; (h) holders of Southwestern Bell Visa cards issued by
Mercantile Bank of Illinois, N.A. (credit cards may not be used for the purchase
of Fund shares); (i) investors exchanging Trust Shares or Institutional Shares
of a Portfolio received from the distribution of assets held in a qualified
trust, agency or custodian account with the trust department of Mercantile or
any of its affiliated or correspondent banks; or (j) other investment
companies distributed by the Distributor or its affiliates.
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<PAGE> 78
REDUCED SALES CHARGES - INVESTOR A SHARES
The sales charge on Investor A Shares of the Portfolios may be reduced
or eliminated for beneficiaries of insurance company claims and the employees
of the insurance company who refer the beneficiaries. To qualify for the sales
load reduction as a beneficiary, an insurance company must initially refer the
beneficiary directly to the Fund. To qualify for the sales load reduction as
an employee of the insurance company, the insurance company must participate in
a referral program with the Distributor. At the time of purchase the investor
must furnish the Transfer Agent with information sufficient to permit
verification that the purchase qualifies for a reduced sales charge. The sales
charge for these investors is assessed as follows:
<TABLE>
<CAPTION>
DEALERS'
AS A % OF AS A % OF REALLOWANCE
OFFERING NET ASSET AS A % OF
AMOUNT OF PRICE VALUE OFFERING
TRANSACTION PER SHARE PER SHARE PRICE
- ----------- --------- --------- -----------
<S> <C> <C> <C>
Less than $250,000 1.75% 1.78% 1.50%
$250,000 but less than $500,000 1.25% 1.27% 1.00%
$500,000 but less than $1,000,000 0.75% 0.76% 0.50%
$1,000,000 and over 0.00% 0.00% 0.00%
</TABLE>
The sales charge on purchases of Investor A Shares of the Portfolios
may also be reduced through:
- rights of accumulation
- quantity discounts
- letter of intent
- reinvestment privilege
To qualify for a reduced sales load, an investor must so notify his or her
investment representative, who in turn will notify the Distributor at the time
of purchase.
RIGHTS OF ACCUMULATION - INVESTOR A SHARES. An investor who has
previously purchased Investor A Shares of the Portfolio and has paid a sales
charge ("load") may be eligible for reduced sales charges when purchasing
additional Investor A Shares of a Portfolio with a sales charge. An investor's
aggregate investment in Shares of such load Portfolios is the total value
(based on the higher of current net asset value or the public offering price
originally paid) of: (a) current purchases, and (b) Shares that are already
beneficially owned by the investor on which a sales charge has already been
paid. If, for example, an investor beneficially owns Investor A Shares of a
load Portfolio with an aggregate current value of $240,000 and subsequently
purchases additional Investor A Shares of a load Portfolio having
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<PAGE> 79
a current value of $10,000, the sales charge applicable to the subsequent
purchase would be reduced to 1.50% of the offering price.
QUANTITY DISCOUNTS - INVESTOR A SHARES. As shown in the table under
"Applicable Sales Charges - Investor A Shares," larger purchases reduce the
sales charge paid. The Fund will combine purchases made in a load Portfolio on
the same day by the investor and immediate family members when calculating the
applicable sales charge.
LETTER OF INTENT - INVESTOR A SHARES. By checking the Letter of
Intent box on the account application, a shareholder becomes eligible for
reduced sales charges applicable to the total amount invested in Investor A
Shares in a load Portfolio over a 13-month period (beginning up to 90 days
prior to the date indicated on the account application). The Transfer Agent
will hold in escrow 5% of the amount indicated for payment of a higher sales
load if a shareholder does not purchase the full amount indicated on the
account application. Upon completion of the total minimum investment specified
on the account application, the escrow will be released, and an adjustment will
be made to reflect any reduced sales charge applicable to Shares purchased
during the 90-day period prior to submission of the account application.
Additionally, if total purchases within the 13-month period exceed the amount
specified, an adjustment will be made to reflect further reduced sales charges
applicable to such purchases. All such adjustments will be made at the
conclusion of the 13-month period and in the form of additional Shares credited
to the shareholder's account at the then current public offering price
applicable to a single purchase of the total amount of the total purchases. If
total purchases are less than the amount specified, escrowed Shares may be
involuntarily redeemed to pay the additional sales charge. Checking a Letter
of Intent box does not bind an investor to purchase, or the Fund to sell, the
full amount indicated at the sales load in effect at the time of signing, but
an investor must complete the intended purchase to obtain the reduced sales
load.
REINVESTMENT PRIVILEGE - INVESTOR A SHARES. Upon redemption of
Investor A Shares on which a sales charge was paid, a shareholder has a
one-time right, to be exercised within 60 days, to reinvest the redemption
proceeds at the next determined net asset value without paying any additional
sales charge. The shareholder must notify his or her investment representative
or the Distributor in writing of the reinvestment and provide a receipt or
other evidence of the redemption in order to eliminate a sales charge.
MISCELLANEOUS - INVESTOR A SHARES. Reduced sales charges may be
modified or terminated at any time and are subject to confirmation of an
investor's holdings. For more information
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about reduced sales charges, an investor should contact his or her investment
representative or the Distributor.
APPLICABLE SALES CHARGES - INVESTOR B SHARES
The public offering price for Investor B Shares of the Equity Income
and National Municipal Bond Portfolios is the net asset value of the Investor B
Shares purchased. Although investors pay no front-end sales charge on
purchases of Investor B Shares, such Shares are subject to a deferred sales
charge at the rates set forth in the chart below if they are redeemed within
six years of purchase. Service Organizations will receive commissions from the
Distributor in connection with sales of Investor B Shares. These commissions
may be different than the reallowances or placement fees paid to dealers in
connection with sales of Investor A Shares. The deferred sales charge on
Investor B Shares is based on the lesser of the net asset value of the Shares
on the redemption date or the original cost of the Shares being redeemed. As a
result, no sales charge is charged on any increase in the principal value of an
investor's Shares. In addition, a contingent deferred sales charge will not be
assessed on Investor B Shares purchased through reinvestment of dividends or
capital gains distributions.
The amount of any contingent deferred sales charge an investor must
pay on Investor B Shares depends on the number of years that elapse between the
purchase date and the date such Investor B Shares are redeemed. Solely for
purposes of determining the number of years from the time of payment for an
investor's Share purchase, all payments during a month will be aggregated and
deemed to have been made on the first day of the month.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE (AS A
NUMBER OF YEARS PERCENTAGE OF DOLLAR AMOUNT
ELAPSED SINCE PURCHASE SUBJECT TO THE CHARGE)
---------------------- ---------------------------
<S> <C>
One or less................... 5.0%
More than one, but less
than two.................... 4.0%
Two, but less than three...... 3.0%
Three, but less than four..... 3.0%
Four, but less than five...... 2.0%
Five, and up to and
including six............... 1.0%
After six years............... None
</TABLE>
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<PAGE> 81
When an investor redeems his or her Investor B Shares, the redemption
order is processed to minimize the amount of the contingent deferred sales
charge that will be charged. Investor B Shares are redeemed first from those
Investor B Shares that are not subject to the deferred sales load (i.e.,
Investor B Shares that were acquired through reinvestment of dividends or
capital gain distributions) and after that from the Investor B Shares that have
been held the longest.
For example, assume an investor purchased 100 Investor B Shares at $10
a Share (for a total cost of $1,000), three years later the Shares have a net
asset value of $12 per share and during that time the investor acquired 10
additional Shares through dividend reinvestment. If the investor then makes
one redemption of 50 Shares (resulting in proceeds of $600, 50 Shares x $12 per
share), the first 10 Shares redeemed will not be subject to the contingent
deferred sales charge because they were acquired through reinvestment of
dividends. With respect to the remaining 40 Shares redeemed, the contingent
deferred sales charge is charged at $10 per Share (because the original
purchase price of $10 per Share is lower than the current net asset value of
$12 per share). Therefore, only $400 of the $600 such investor received from
selling his or her Shares will be subject to the contingent deferred sales
charge, at a rate of 3.0% (the applicable rate in the third year after
purchase). The proceeds from the contingent deferred sales charge that the
investor may pay upon redemption go to the Distributor, which may use such
amounts to defray the expenses associated with the distribution-related
services involved in selling Investor B Shares. The contingent deferred sales
charge, along with ongoing distribution fees paid with respect to Investor B
Shares, enables those Shares to be purchased without the imposition of a
front-end sales charge.
EXEMPTIONS FROM THE CONTINGENT DEFERRED SALES CHARGE. The following
types of redemptions qualify for an exemption from the contingent deferred
sales charge: (i) exchanges described under "Exchange Privileges" below; (ii)
redemptions in connection with required (or, in some cases, discretionary)
distributions to participants or beneficiaries of an employee pension,
profit-sharing or other trust or qualified retirement or Keogh plan, individual
retirement account or custodial account maintained pursuant to Section
403(b)(7) of the Internal Revenue Code due to death, disability or the
attainment of a specified age; (iii) redemptions effected pursuant to a
Portfolio's right to liquidate a shareholder's account if the aggregate net
asset value of Shares held in the account is less than the minimum account
size; (iv) redemptions in connection with the death or disability of a
shareholder; or (v) redemptions resulting from a tax-free return of an excess
contribution pursuant to Section 408(d)(4) or (5) of the Internal Revenue Code.
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CHARACTERISTICS OF INVESTOR A SHARES AND INVESTOR B SHARES
The primary difference between Investor A Shares and Investor B Shares
lies in their sales charge structures and distribution arrangements. An
investor should understand that the purpose and function of the sales charge
structures and distribution arrangements for both Investor A Shares and
Investor B Shares are the same.
Investor A Shares are sold at their net asset value plus a front-end
sales charge of up to 4.50%. (See "Pricing of Shares.") This front-end sales
charge may be reduced or waived in some cases. (See "Applicable Sales Charges
- - Investor A Shares.") Investor A Shares are subject to ongoing distribution
fees at an annual rate of up to 0.30% of a Fund's average daily net assets
attributable to its Investor A Shares.
Investor B Shares are sold at net asset value without an initial sales
charge. Normally, however, a deferred sales charge is paid if the Shares are
redeemed within six years of investment. (See "Applicable Sales Charges -
Investor B Shares.") Investor B Shares are subject to ongoing distribution
fees at an annual rate of up to 1.00% of a Fund's average daily net assets
attributable to its Investor B Shares. These ongoing fees, which are higher
than those charged on Investor A Shares, will cause Investor B Shares to have a
higher expense ratio and pay lower dividends than Investor A Shares.
Eight years after purchase, Investor B Shares will convert
automatically to Investor A Shares. The purpose of the conversion is to
relieve a holder of Investor B Shares of the higher ongoing expenses charged to
those Shares, after enough time has passed to allow the Distributor to recover
approximately the amount it would have received if a front-end sales charge had
been charged. The conversion from Investor B Shares to Investor A Shares takes
place at net asset value, as a result of which an investor receives
dollar-for-dollar the same value of Investor A Shares as he or she had of
Investor B Shares. The conversion occurs eight years after the beginning of
the calendar month in which the Shares are purchased. As a result of the
conversion, the converted Shares are relieved of the distribution fees borne by
Investor B Shares, although they are subject to the distribution fees borne by
Investor A Shares.
Investor B Shares acquired through a reinvestment of dividends or
distributions (as discussed under "Applicable Sales Charges -- Investor B
Shares") are also converted at the earlier of two dates - eight years after the
beginning of the calendar month in which the reinvestment occurred or the date
of conversion of the most recently purchased Investor B Shares that were not
acquired through reinvestment of dividends or distributions. For example, if
an investor makes a one-time
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purchase of Investor B Shares of a particular Portfolio, and subsequently
acquires additional Investor B Shares of that Portfolio only through
reinvestment of dividends and/or distributions, all of such investor's Investor
B Shares in that Portfolio, including those acquired through reinvestment, will
convert to Investor A Shares of that Portfolio on the same date.
FACTORS TO CONSIDER WHEN SELECTING INVESTOR A SHARES OR INVESTOR B SHARES
Before purchasing Investor A Shares of the Portfolios or Investor B
Shares of the Equity Income and National Municipal Bond Portfolios, investors
should consider whether, during the anticipated life of their investment in the
Portfolios, the accumulated distribution fees and potential contingent deferred
sales charges on Investor B Shares prior to conversion would be less than the
initial sales charge and accumulated distribution fees on Investor A Shares
purchased at the same time, and to what extent such differential would be
offset by the higher yield of Investor A Shares. In this regard, to the extent
that the sales charge for Investor A Shares is waived or reduced by one of the
methods described above, investments in Investor A Shares become more
desirable. The Fund will refuse all purchase orders for Investor B Shares of
over $100,000.
Although Investor A Shares are subject to a distribution fee, they are
not subject to the higher distribution fee applicable to Investor B Shares.
For this reason, Investor A Shares can be expected to pay correspondingly
higher dividends per Share. However, because initial sales charges are
deducted at the time of purchase, purchasers of Investor A Shares that do not
qualify for waivers of or reductions in the initial sales charge would have
less of their purchase price initially invested in a Portfolio than purchasers
of Investor B Shares.
As described above, purchasers of Investor B Shares will have more of
their initial purchase price invested. Any positive investment return on this
additional invested amount would partially or wholly offset the expected higher
annual expenses borne by Investor B Shares. Because the Portfolios' future
returns cannot be predicted, there can be no assurance that this will be the
case. Holders of Investor B Shares would, however, own Shares that are subject
to higher annual expenses and, for a six-year period, such Shares would be
subject to a contingent deferred sales charge of up to 5.00% upon redemption,
depending upon the year of redemption. Investors expecting to redeem during
this six-year period should compare the cost of the contingent deferred sales
charge plus the aggregate annual Investor B Shares' distribution fees to the
cost of the initial sales charge and distribution fees on the Investor A
Shares. Over time, the expense of the annual distribution fees on the Investor
B Shares may equal or exceed the initial sales charge
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and annual distribution fee applicable to Investor A Shares. For example, if
net asset value remains constant, the aggregate distribution fees with respect
to Investor B Shares on the Portfolios would equal or exceed the initial sales
charge and aggregate distribution fees of Investor A Shares approximately eight
years after the purchase. In order to reduce such fees of investors that hold
Investor B Shares for more than eight years, Investor B Shares will be
automatically converted to Investor A Shares as described above at the end of
such eight-year period.
EXCHANGE PRIVILEGES
The exchange privilege enables shareholders to exchange (i) Investor A
Shares of a Portfolio for Investor A Shares of another Portfolio offered by the
Fund or, under certain circumstances described below, for Trust Shares or
Institutional Shares of the same Portfolio, and (ii) Investor B Shares of the
Equity Income or National Municipal Bond Portfolios for Investor B Shares of
another Portfolio offered by the Fund.
EXCHANGES - INVESTOR A SHARES. Shareholders who have purchased
Investor A Shares of a Portfolio and who have paid any applicable sales charge
("load") (including Shares acquired through reinvestment of dividends or
distributions on such Shares) may exchange those Shares for Investor A Shares
of another load Portfolio without paying an additional sales load.
Shareholders may also exchange Investor A Shares of a no-load Portfolio for
Investor A Shares of another no-load Portfolio without paying a sales load.
When Investor A Shares of a no-load Portfolio are exchanged for Investor A
Shares of a load Portfolio, the applicable sales load (if any) will be
assessed. However, shareholders exchanging Investor A Shares of a no-load
Portfolio that were acquired through a previous exchange involving Shares on
which a load was paid will not be required to pay an additional sales load upon
the reinvestment of the equivalent investment into a load Portfolio within a
twelve month period. Under such circumstances, the shareholder must notify the
Distributor that a sales load was originally paid and provide the Distributor
with sufficient information to permit confirmation of the shareholder's right
not to pay a sales load.
In addition, shareholders who have a qualified trust, agency or
custodian account with the trust department of Mercantile or any of its
affiliated or correspondent banks, and whose shares are to be held in that
account, may also exchange Investor A Shares in a Portfolio for Trust Shares or
Institutional Shares in the same Portfolio.
EXCHANGE PRIVILEGE - INVESTOR B SHARES
Shareholders who have purchased Investor B Shares of a Portfolio
(including Shares acquired through reinvestment of dividends or distributions
on such Shares) may exchange those
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Shares for Investor B Shares of another Portfolio without the payment of any
contingent deferred sales charge at the time the exchange is made. In
determining the holding period for calculating the contingent deferred sales
charge payable on redemptions of Investor B Shares, the holding period of the
Investor B Shares originally held will be added to the holding period of the
Investor B Shares acquired through the exchange. No exchange fee is imposed by
the Fund.
The Shares exchanged must have a current value at least equal to the
minimum initial or subsequent investment required by the particular Portfolio
into which the exchange is being made. The Fund reserves the right to reject
any exchange request. The exchange privilege may be modified or terminated at
any time upon 60 days' written notice to shareholders. An investor may
telephone an exchange request by calling his or her investment representative,
which is responsible for transmitting such exchange request to the Fund. (See
"Other Exchange or Redemption Information" below.) Investors who want to
telephone an exchange request directly to the Fund, and, have elected this
privilege on the account application may follow the procedures described below
under "Redemption by Telephone." An investor should consult his or her
investment representative or the Fund for further information regarding
procedures for exchanging Shares.
In addition to the Portfolios described in this Prospectus, the Fund
currently offers Investor A Shares and/or Investor B Shares in the following
Portfolios:
<TABLE>
<S><C>
- The ARCH Money Market Portfolio
- The ARCH Treasury Money Market Portfoli1
- The ARCH Growth & Income Equity Portfolio
- The ARCH Emerging Growth Portfolio
- The ARCH Government & Corporate Bond Portfolio
- The ARCH U.S. Government Securities Portfolio
- The ARCH Balanced Portfolio
- The ARCH International Equity Portfolio
- The ARCH Short-Intermediate Municipal Portfolio1
- The ARCH Tax-Exempt Money Market Portfoli1
- The ARCH Missouri Tax-Exempt Bond Portfolio
- The ARCH Kansas Tax-Exempt Bond Portfolio2
</TABLE>
For information concerning these Portfolios, please call (800)
551-3731. Shareholders exercising the exchange privilege with any of the other
Portfolios in the Fund should request and review the Portfolio's Prospectus
carefully prior to making an exchange.
__________________________________
1. Does not offer Investor B Shares.
2. Expected to commence operations in 1996.
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REDEMPTION OF SHARES
Redemption orders should be placed with or through the same
broker-dealer organization that placed the original purchase order. Redemption
orders are effected at a Portfolio's net asset value per Share next determined
after receipt of the order by the Fund. Proceeds from the redemptions of
Investor B Shares will be reduced by the amount of any applicable contingent
deferred sales charge. The organization through which the investor placed the
order is responsible for transmitting redemption orders to the Fund on a timely
basis. Proceeds from redemptions of Investor A and Investor B Shares of the
Portfolios with respect to redemption orders received and accepted by the Fund
before 4:00 p.m. (Eastern time) on a Business Day normally are sent
electronically or mailed by check to the organization that placed the
redemption order within five Business Days after the Distributor's receipt of
the order in good form. No charge for sending redemption payments
electronically is currently imposed by the Fund, although a charge may be
imposed in the future. The Fund reserves the right to send redemption proceeds
electronically within seven days after receiving a redemption order if, in the
judgment of the Adviser, an earlier payment could adversely affect a Portfolio.
REDEMPTION BY MAIL
A written redemption request must be accompanied by any Share
certificates which are properly endorsed for transfer. The Transfer Agent may
require a signature guarantee by an eligible guarantor institution. For
purposes of this policy, the term "eligible guarantor institution" shall
include banks, brokers, dealers, credit unions, securities exchanges and
associations, clearing agencies and savings associations as those terms are
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. The
Transfer Agent reserves the right to reject any signature guarantee if (1) it
has reason to believe that the signature is not genuine, (2) it has reason to
believe that the transaction would otherwise be improper, or (3) the guarantor
institution is a broker or dealer that is neither a member of a clearing
corporation nor maintains net capital of at least $100,000. The signature
guarantee requirement will be waived if all of the following conditions apply:
(1) the redemption check is payable to the shareholder(s) of record and (2) the
redemption check is mailed to the shareholder(s) at the address of record or
the proceeds are either mailed or sent electronically to a commercial bank
account previously designated on the account application. An investor with
questions or needing assistance should contact his or her investment
representative or the Fund. Additional documentation may be required if the
redemption is requested by a corporation, partnership, trust, fiduciary,
executor, or administrator.
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REDEMPTION BY TELEPHONE
Shares may be redeemed by telephone if the shareholder selected that
option on the account application. The shareholder may have the proceeds
mailed to his or her address or mailed or sent electronically to a bank account
previously designated on the account application. It is not necessary for
shareholders to confirm telephone redemption requests in writing. If a
shareholder did not originally select the telephone redemption privilege, the
shareholder must provide written instructions to the Transfer Agent to add this
feature. Neither the Fund nor its service contractors will be liable for any
loss, damage, expense or cost arising out of any telephone redemption effected
in accordance with the Fund's telephone redemption procedures, upon
instructions reasonably believed to be genuine. The Fund will employ
procedures designed to provide reasonable assurance that instructions by
telephone are genuine; if these procedures are not followed the Fund or its
service contractors may be liable for any losses due to unauthorized or
fraudulent instructions. If Share certificates are outstanding with respect to
an account, the telephone redemption and exchange privilege is not available.
If, due to temporary adverse conditions, investors are unable to effect
telephone transactions, investors are encouraged to follow the procedures
described in "Other Exchange or Redemption Information" below.
AUTOMATIC WITHDRAWAL PLAN (AWP)
An Automatic Withdrawal Plan may be established by a new or existing
shareholder of any Portfolio if the value of his or her account (valued at the
net asset value at the time of the establishment of the AWP) equals $10,000 or
more. Shareholders who elect to establish an AWP may receive a monthly,
quarterly, semi-annual, or annual check in a stated amount of not less than $50
on or about the 25th day of the applicable month of withdrawal. Periodic
payments will be reduced by any applicable contingent deferred sales charge.
Portfolio Shares will be redeemed as necessary to meet withdrawal payments.
Withdrawals may reduce principal and eventually deplete the shareholder's
account. The maintenance of an AWP may be disadvantageous for holders of
Investor B Shares due to the effect of the contingent deferred sales charge. A
shareholder who desires to establish an AWP after opening an account should
complete the AWP form in the back of the Prospectus or contact his or her
investment representative or the Distributor for an AWP application. A
signature guarantee will be required. An AWP may be terminated by a
shareholder on 30 days' written notice to his or her investment representative
or to the Fund or by the Fund at any time.
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<PAGE> 88
PURCHASE OF SHARES AT NET ASSET VALUE
From time to time the Distributor may offer special concessions to
enable investors to purchase Investor A Shares of a Portfolio offered by the
Fund at net asset value without payment of a front-end sales charge. To
qualify for a net asset value purchase, the investor must pay for such purchase
with the proceeds from the redemption of Shares of a non-affiliated mutual fund
on which a front-end sales charge was paid. A qualifying purchase of Shares
must occur within 30 days of the prior redemption and must be evidenced by a
confirmation of the redemption transaction. At the time of purchase, the
investment representative must notify the Distributor that the purchase
qualifies for a purchase at net asset value. Proceeds from the redemption of
Shares on which no front-end sales charge was paid do not qualify for a
purchase at net asset value.
OTHER EXCHANGE OR REDEMPTION INFORMATION
During periods of substantial economic or market change or activity,
telephone redemptions or exchanges may be difficult to complete. In such
event, Shares may be redeemed or exchanged by mailing the request directly to
the organization through which the original Shares were purchased or directly
to the Fund at P.O. Box 78069, St. Louis, Missouri 63178.
At various times, the Fund may be requested to redeem Shares for which
it has not yet received good payment. In such circumstances, the Fund may
delay the forwarding of proceeds until payment has been collected for the
purchase of such Shares which may take up to 15 days or more. To avoid delay
in payment upon redemption shortly after purchasing Shares, investors should
purchase Shares by certified or bank check or by electronic transfer. The Fund
intends to pay cash for all Shares redeemed, but under abnormal conditions
which make payment in cash unwise, the Fund may make payment wholly or partly
in portfolio securities at their then market value equal to the redemption
price. In such cases, an investor may incur brokerage costs in converting such
securities to cash.
A shareholder may be required to redeem Shares in a Portfolio upon 60
days' written notice if the balance in the shareholder's account drops below
$500. The Fund will not require a shareholder to redeem Portfolio Shares if
the value of the shareholder's account drops below $500 due to fluctuations in
net asset value. Share balances may also be redeemed pursuant to arrangements
between broker-dealer organizations and their investors.
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YIELDS AND TOTAL RETURNS
Yield and total return quotations are computed separately for Trust
Shares, Institutional Shares, Investor A Shares and Investor B Shares of a
Portfolio. TOTAL RETURN AND YIELD FIGURES WILL FLUCTUATE, ARE BASED ON
HISTORICAL EARNINGS, AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The
methods used to compute each Portfolio's yields and total returns are described
below and in the Statement of Additional Information.
From time to time, performance information such as total return and
yield data for the Portfolios' Investor A and/or Investor B Shares may be
quoted in advertisements or in communications to shareholders. The yield of a
Portfolio is computed based on the net income of such Shares in the particular
Portfolio during a 30-day (or one-month) period identified in connection with
the particular yield quotation. More specifically, the yield is computed by
dividing the Portfolio's net income per Share during a 30-day (or one-month)
period by the maximum Public Offering Price per Share on the last day of the
period and annualizing the result. The National Municipal Bond Portfolio's
"tax equivalent" yield, which shows the level of taxable yield needed to
produce an after-tax equivalent to the Portfolio's tax-free yield, may also be
quoted from time to time. This is done by increasing the Portfolio's yield
(calculated as above) by the amount necessary to reflect the payment of federal
income tax at a stated tax rate.
The Portfolios' total returns may be calculated on an average annual
total return basis, and may also be calculated on an aggregate total return
basis, for various periods. Average annual total returns with respect to such
Shares reflect the average annual percentage change in value of an investment
in such Shares of the particular class of a Portfolio over the particular
measuring period. Aggregate total returns reflect the cumulative percentage
change in value over the measuring period. Both methods of calculating total
returns assume that dividends and capital gain distributions made by the
Portfolio during the period are reinvested in the same class of the Portfolio
and that the maximum sales load in effect during the period has been charged by
the Portfolio. The Portfolios' total return figures may also be calculated
without the deduction of the maximum sales charge in effect during the period.
The effect of not deducting the sales charge will be to increase the total
return reflected. When considering average annual total return figures for
periods longer than one year, it is important to note that a Portfolio's annual
total return for any one year in the period might have been more or less than
the average for the entire period.
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Performance data of the Portfolios' Investor A and Investor B Shares
may be compared to the performance of other mutual funds with comparable
investment objectives and policies through various mutual fund or market
indices and data such as that provided by Lehman Brothers, Inc. or any of its
affiliates, Ibbotson Associates, Inc., Lipper Analytical Services, Inc. and
Mutual Fund Forecaster. References may also be made to indices or data
published in Money Magazine, Forbes, Barron's, The Wall Street Journal, The New
York Times, Business Week, American Banker, Institutional Investor, Pensions
and Investments, U.S.A. Today, Fortune, CDA/Weisenberger, Morningstar, Inc. and
publications of a local or regional nature. In addition to performance
information, general information about the Portfolios that appears in a
publication such as those mentioned above may be included in advertisements and
in reports to shareholders.
Performance quotations of class of Shares in a Portfolio represent
that Portfolio's past performance and should not be considered as
representative of future results. Any account fees charged by an investment
representative will not be included in the calculations of a Portfolios' yields
and total returns. Such fees, if any, will reduce the investor's net return on
an investment in a Portfolio. Investors may call 1-800-452-ARCH to obtain
current yield and total return information.
DIVIDENDS AND DISTRIBUTIONS
THE EQUITY INCOME PORTFOLIO
Net investment income for the Equity Income Portfolio is declared and
paid quarterly as a dividend to shareholders of record. Dividends on each
Share of this Portfolio are determined in the same manner and are paid in the
same amount, irrespective of class, except that the Portfolio's Trust Shares
and Institutional Shares bear all expenses of the respective Administrative
Services Plans adopted for such Shares and the Portfolio's Investor A Shares
and Investor B Shares bear all expenses of the respective Distribution and
Services Plans adopted for such Shares. In addition, the Portfolio's
Institutional Shares bear the expense of certain sub-transfer agency fees. (See
"Management of the Fund" and "Other Information Concerning the Fund and Its
Shares".)
THE NATIONAL MUNICIPAL BOND AND SHORT-INTERMEDIATE CORPORATE BOND PORTFOLIOS
Dividends from net investment income of the National Municipal Bond
and Short-Intermediate Corporate Bond Portfolios are declared daily and paid
monthly not later than five Business Days after the end of each month.
Investor A Shares and/or Investor B Shares of these Portfolios earn dividends
from the day
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after the purchase order is received by the Fund through the day the redemption
order for such Shares is received. Dividends on each Share of such Portfolios
are determined in the same manner and are paid in the same amounts irrespective
of class, except that Trust Shares of each Portfolio and Institutional Shares
of the Short-Intermediate Corporate Bond Portfolio bear all expenses of the
respective Administrative Services Plans adopted for such Shares and Investor A
Shares of each Portfolio and Investor B Shares of the National Municipal Bond
Portfolio bear all expenses of the respective Distribution and Services Plans
adopted for such Shares. In addition, the Short-Intermediate Corporate Bond
Portfolio's Institutional Shares bear the expense of certain sub-transfer
agency fees. (See "Management of the Fund" and "Other Information Concerning
the Fund and Its Shares".)
OTHER DIVIDEND AND DISTRIBUTION INFORMATION
Net realized capital gains of a Portfolio, if any, are distributed at
least annually. All dividends and distributions paid on a Portfolio's Shares
are automatically reinvested (without a sales load) in additional Shares of the
same class unless the investor has (i) otherwise indicated on the account
application, or (ii) redeemed all the Shares held in a Portfolio, in which case
a distribution will be paid in cash. Reinvested dividends and distributions
will be taxed in the same manner as those paid in cash.
TAXES
FEDERAL TAXES
Each Portfolio intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"), for the
taxable year ending November 30, 1996, and to continue to so qualify as long as
such qualification is in the best interests of shareholders. A regulated
investment company generally is exempt from federal income tax on amounts
distributed to shareholders.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that each Portfolio distribute to
its shareholders an amount equal to at least the sum of 90% of its investment
company taxable income and 90% of its exempt-interest income (if any) net of
certain deductions for such year. In general, a Portfolio's investment company
taxable income will be its taxable income, including dividends, interest and
short-term capital gains (the excess of net short-term capital gain over net
long-term capital loss), subject to certain adjustments and excluding the
excess of any net long-term capital gain for the taxable year over the net
short-term capital loss, if any, for such year. It is the policy
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of the Equity Income and Short-Intermediate Corporate Bond Portfolios to
distribute as dividends substantially all of their respective investment
company taxable income and any net tax-exempt interest income each year. Such
dividends will be taxable as ordinary income to a Portfolio's shareholders who
are not currently exempt from federal income taxes, whether such income is
received in cash or reinvested in additional Shares. (Federal income taxes for
distributions to an IRA are deferred under the Code.) In the case of the
Equity Income Portfolio, such dividends will qualify for the dividends received
deduction for corporations to the extent of the total qualifying dividends
received by the Portfolio from domestic corporations for the taxable year.
It is the policy of the National Municipal Bond Portfolio to
distribute as dividends substantially all of its net tax-exempt interest income
and any investment company taxable income each year. Dividends derived from
interest on Municipal Obligations (known as exempt-interest dividends) may be
treated by shareholders as items of interest excludable from their gross income
under Section 103(a) of the Code, unless under the circumstances applicable to
the particular shareholder the exclusion would be disallowed. (See Statement
of Additional Information under "Additional Information Concerning Taxes.")
Distributions of net income may be taxable to investors under state or local
law as dividend income even though a substantial portion of such distributions
may be derived from interest on tax-exempt obligations which, if realized
directly, would be exempt from such income tax.
If the National Municipal Bond Portfolio should hold certain private
activity bonds issued after August 7, 1986, shareholders must include, as an
item of tax preference, the portion of dividends paid by the Portfolio that is
attributable to interest on such bonds in their federal alternative minimum
taxable income for purposes of determining liability (if any) for the 26-28%
alternative minimum tax applicable to individuals and the 20% alternative
minimum tax and the environmental tax applicable to corporations. Corporate
shareholders also must take all exempt-interest dividends into account in
determining certain adjustments for federal alternative minimum and
environmental tax purposes. The environmental tax applicable to corporations
is imposed at the rate of .12% on the excess of the corporation's modified
federal alternative minimum taxable income over $2,000,000.
Substantially all of each Portfolio's net realized long-term capital
gains, if any, will be distributed at least annually to its shareholders. A
Portfolio will generally have no tax liability with respect to such gains and
the distributions will be taxable to shareholders who are not currently exempt
from federal income taxes as long-term capital gains, regardless of
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how long the shareholders have held the Shares and whether such dividends are
received in cash or reinvested in additional Shares.
An investor considering purchasing Shares of a Portfolio on or just
before the record date of any capital gains distribution (or in the case of the
Equity Income Portfolio, the record date of any dividend or capital gains
distribution) should be aware that the amount of the forthcoming distribution,
although in effect a return of capital, will be taxable.
Dividends declared by a Portfolio in October, November, or December of
any year payable to shareholders of record on a specified date in such months
will be deemed to have been received by the shareholders and paid by the
Portfolio on December 31 of such year in the event such dividends are actually
paid during January of the following year.
Each Portfolio may be required in certain cases to withhold and remit
to the U.S. Treasury 31% of taxable dividends or gross sale proceeds paid to
shareholders who have failed to provide a correct tax identification number in
the manner required, who are subject to withholding by the Internal Revenue
Service for failure to properly include on their return payments of taxable
interest or dividends, or who have failed to certify to the Portfolio that they
are not subject to backup withholding when required to do so or that they are
"exempt recipients."
A taxable gain or loss may be realized by an investor upon redemption,
transfer or exchange of Shares, depending upon the cost of such Shares when
purchased and their price at the time of redemption, transfer or exchange. If
an investor holds Shares for six months or less and during that time receives
an exempt-interest dividend on those Shares, any loss realized on the sale or
exchange of those Shares will be disallowed to the extent of the
exempt-interest dividend.
STATE AND LOCAL TAXES
The application of state and local taxes may have different
consequences from those of the federal income tax law described above. In
particular, shareholders should note that dividends paid by a Portfolio may be
taxable to investors under state or local law as dividend income even though
all or a portion of such dividends may be derived from interest on obligations
that, if realized directly, would be exempt from such income taxes.
MISCELLANEOUS
The foregoing summarizes some of the important federal and state tax
considerations generally affecting the Portfolios and their shareholders and is
not intended as a substitute for
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careful tax planning. Accordingly, potential investors in the Portfolios
should consult their tax advisers with specific reference to their own tax
situation. Shareholders will be advised at least annually as to the federal
income tax consequences of distributions made each year.
MANAGEMENT OF THE FUND
The Fund is managed under the direction of its Board of Directors.
The Statement of Additional Information contains the names of and general
background information concerning each director.
INVESTMENT ADVISER
Mississippi Valley Advisors Inc. ("MVA") serves as the investment
adviser to each Portfolio. MVA's principal office is located at One Mercantile
Center, Seventh & Washington Streets, St. Louis, Missouri 63101. MVA is a
wholly-owned subsidiary of Mercantile. As of December 31, 1995, MVA had
approximately $7.0 billion in assets under investment management, including the
Fund's assets, which were approximately $2.1 billion. MVA also serves as
investment adviser to each of the Fund's other Portfolios.
Subject to the general supervision of the Fund's Board of Directors
and in accordance with the Fund's investment policies, MVA manages the
Portfolios, makes investment decisions with respect to and places orders for
all purchases and sales of the Portfolios' securities and other investments,
and directs the maintenance of each Portfolio's records relating to such
purchases and sales.
For the services provided and expenses assumed pursuant to the
investment advisory agreement, MVA is entitled to receive fees, computed daily
and payable monthly, at the annual rates of .75%, .55% and .55% of the average
daily net assets of the Equity Income, National Municipal Bond and
Short-Intermediate Corporate Bond Portfolios, respectively.
MVA may from time to time voluntarily reduce all or a portion of its
advisory fee to increase the net income of one or more Portfolios available for
distributions as dividends. The voluntary fee reduction will cause the return
of any such Portfolio to be higher than it would otherwise be in the absence of
such reduction.
Gregory A. Glidden, is the person primarily responsible for the
day-to-day management of the Equity Income Portfolio. Mr. Glidden, Senior
Associate, has been with MVA since 1983.
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<PAGE> 95
Peter Merzian is the person primarily responsible for the day-to-day
management of the National Municipal Bond Portfolio. Mr. Merzian, Senior
Associate joined MVA in 1993 and prior thereto was employed as a portfolio
manager by another financial institution.
David A. Bethke, is the person primarily responsible for the
day-to-day management of the Short-Intermediate Corporate Bond Portfolio. Mr.
Bethke, Senior Associate, joined MVA in 1987 and has six years of prior
investment experience.
Set forth below are certain performance data relating to those common
trust funds of the Adviser and its affiliates (the "Commingled Funds"), which
have been managed with full investment authority by the Adviser and/or its
affiliates. The Commingled Funds have been divided into three investment
portfolios, herein referred to as the "Equity Income Fund," the "National
Municipal Bond Fund," and the "Short-Intermediate Corporate Bond Fund,"
respectively. The Commingled Funds have substantially similar investment
objectives and use similar investment strategies and techniques as are used by
the Fund's Equity Income Portfolio, National Municipal Bond Portfolio and
Short-Intermediate Corporate Bond Portfolio, respectively.
The performance information set forth below reflects past performance
and is not necessarily indicative of the future performance of the Fund's Equity
Income Portfolio, National Municipal Bond Portfolio and Short-Intermediate
Corporate Bond Portfolio, or any of the other investment portfolios of the Fund.
Performance will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. In addition, because each of the
Fund's Equity Income Portfolio, National Municipal Bond Portfolio and
Short-Intermediate Corporate Bond Portfolio will be actively managed, its
investments will vary from time to time and will not be identical to those
investments held by the Commingled Funds.
-46-
<PAGE> 96
COMPOSITE PERFORMANCE FOR THE COMMINGLED FUNDS1 SHOWING AVERAGE ANNUAL TOTAL
RETURNS2
<TABLE>
<CAPTION>
Equity Income National Municipal Bond Short-Intermediate
------------- ----------------------- Corporate Bond
------------------
Investor A Investor B Investor A Investor B Investor A
Shares Shares Shares Shares Shares
------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
One Year
Five Years
Ten Years
</TABLE>
ADMINISTRATOR
BISYS Fund Services Ohio, Inc., located at 3435 Stelzer Road,
Columbus, Ohio 43219, acts as the Portfolios' Administrator. The Administrator
also serves as the administrator to each of the Fund's other Portfolios
__________________________________
1. The Equity Income Commingled Fund consists of the Mercantile Common
Trust Fund I, the Mercantile Equity Fund for Charitable Trusts, the
Mercantile Bank of Joplin Common Trust Fund A, and the Mercantile Bank
of Illinois Common Trust Fund S. The National Municipal Bond
Commingled Fund consists of the Mercantile Common Trust Fund M. The
Short-Intermediate Corporate Commingled Fund consists of the
Mercantile Common Trust Fund B, the Mercantile Fixed Income Fund for
Charitable Trusts, the Mercantile Bank of Joplin Common Trust Fund B
and the Mercantile Bank of Northern Iowa Common Trust Fund #2.
The Commingled Funds have been advised by the Adviser or its
affiliates since their respective dates of inception.
2. The above information is the average annual total return (calculated
in conformity with Securities and Exchange Commission guidelines) for
the periods indicated, assuming reinvestment of all net investment
income and capital gain distributions and taking into account
currently projected expense ratios for the initial fiscal year for the
Investor A Shares and/or Investor B Shares of the Fund's Equity
Income, National Municipal Bond and Short-Intermediate Corporate Bond
Portfolios as well as the maximum front-end sales charge of 4.50%
for Investor A Shares of such Portfolios (2.50% for the Short-
Intermediate Corporate Bond Portfolio) and any applicable contingent
deferred sales charge for Investor B Shares of the Equity Income and
National Municipal Bond Portfolios.
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<PAGE> 97
The Administrator generally assists in all aspects of each Portfolio's
administration and operation and also monitors and performs other services
pertaining to the Portfolios' arrangements with Service Organizations under the
Distribution and Services Plans described below. For its services, the
Administrator is entitled to receive a fee, computed daily and payable monthly,
at the annual rate of .20% of each Portfolio's average daily net assets.
DISTRIBUTOR
Investor A Shares of each Portfolio and Investor B Shares of the
Equity Income and National Municipal Bond Portfolios are sold continuously by
the Distributor, BISYS Fund Services ("BISYS"), an affiliate of the
Administrator. The Distributor also monitors the Fund's arrangements under the
Distribution and Services Plans described below. BISYS is a registered
broker-dealer with principal offices at 3435 Stelzer Road, Columbus, Ohio
43219. The Distributor also acts as distributor to each of the Fund's other
Portfolios.
The Distributor may, at its expense, provide compensation to dealers
in connection with sales of Shares of any of the Portfolios. Such compensation
may include financial assistance to dealers in connection with conferences,
sales or training programs for their employees, seminars for the public,
advertising campaigns regarding one or more of the Portfolios, and/or other
dealer-sponsored special events. In some instances, this compensation will be
made available only to certain dealers whose representatives have sold a
significant amount of such Shares. Compensation will include payment for
travel expenses, including lodging, incurred in connection with trips taken by
invited registered representatives and members of their families to locations
within or outside of the United States for meetings or seminars of a business
nature. Compensation will also include the following types of non-cash
compensation offered through sales contests: (1) business and vacation trips,
including the provision of travel arrangements and lodging at resorts, (2)
tickets for entertainment events (such as concerts, cruises and sporting
events) and (3) merchandise (such as clothing, trophies, clocks and pens).
Dealers may not use sales of a Portfolio's Shares to qualify for this
compensation to the extent such may be prohibited by the laws of any state or
any self-regulatory agency, such as the National Association of Securities
Dealers, Inc. None of the aforementioned compensation is paid for by the
Portfolios or shareholders.
DISTRIBUTION AND SERVICES PLANS
The Fund has adopted separate Distribution and Services Plans pursuant
to Rule 12b-1 under the 1940 Act with respect to Investor A Shares of the
Portfolios and Investor B Shares of the
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<PAGE> 98
Equity Income and National Municipal Bond Portfolios. Under the Distribution
and Services Plans, the Fund may pay (i) the Distributor or another person for
distribution services provided and expenses assumed and (ii) Service
Organizations for shareholder administrative services provided pursuant to
servicing agreements in connection with Investor A or Investor B Shares of a
Portfolio. Payments to the Distributor are to compensate it for distribution
assistance and expenses assumed and activities primarily intended to result in
the sale of Investor A Shares or Investor B Shares, including compensating
dealers and other sales personnel (which may include affiliates of the Fund's
Adviser), direct advertising and marketing expenses and expenses incurred in
connection with preparing, printing, mailing and distributing or publishing
advertisements and sales literature, for printing and mailing Prospectuses and
Statements of Additional Information (except those used for regulatory purposes
or for distribution to existing shareholders), and costs associated with
implementing and operating the Distribution and Services Plan. In addition,
payments under the Distribution and Services Plan for Investor B Shares will be
used to pay for or finance sales commissions and other fees payable to Service
Organizations and other broker-dealers who sell Investor B Shares. (See
"Management of the Fund -- Service Organizations" below for a description of
the servicing agreements and the services provided by Service Organizations.)
Under the Distribution and Services Plan for Investor A Shares,
payments by the Fund for distribution expenses may not exceed .10% (annualized)
of the average daily net asset value of each Portfolio's outstanding Investor A
Shares and payments for shareholder administrative servicing expenses may not
exceed .20% (annualized) of the average daily net asset value of each
Portfolio's outstanding Investor A Shares.
Under the Distribution and Services Plan for Investor B Shares,
payments by the Fund for distribution expenses may not exceed .75% (annualized)
of the average daily net asset value of each Portfolio's outstanding Investor B
Shares and payments for shareholder administrative servicing expenses may not
exceed .25% (annualized) of the average daily net asset value of each
Portfolio's outstanding Investor B Shares.
Actual distribution expenses paid by the Distributor with respect to
Investor B Shares for any given year may exceed the distribution fees and
contingent deferred sales charges received with respect to those Shares. These
excess expenses may be reimbursed by Investor B shareholders out of contingent
deferred sales charges and distribution payments in future years as long as the
Distribution Plan for Investor B Shares is in effect.
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<PAGE> 99
SERVICE ORGANIZATIONS
The servicing agreements adopted under the Distribution and Services
Plans (the "Servicing Agreements") require the Service Organizations receiving
such compensation (which may include Mercantile and its affiliates) to perform
certain services, including providing administrative services with respect to
the beneficial owners of Retail A Shares or Retail B Shares of a Portfolio,
such as establishing and maintaining accounts and records for their customers
who invest in such Shares, assisting customers in processing purchase, exchange
and redemption requests, and responding to customer inquiries concerning their
investments.
Under the Servicing Agreements and upon notice to the Fund, a Service
Organization may subcontract with one or more entities for the performance of
certain services provided under its Servicing Agreement with the Fund. Such
Service Organization shall be fully responsible to the Fund for the acts or
omissions of any subcontractor as it would be for its own acts or omissions.
The fees payable to any sub-contractor are paid by the Service Organization out
of the fees it receives from the Fund.
The Fund understands that Service Organizations providing such
administrative services may also charge fees to their customers beneficially
owning such Shares. These fees would be in addition to any amounts which may
be received by such a Service Organization under its Servicing Agreement with
the Fund. The Fund's Servicing Agreements require a Service Organization to
disclose to its customers any compensation payable to the Service Organization
by a Portfolio and any other compensation payable by its customers in
connection with their investment in such Shares. Customers of such Service
Organizations receiving servicing fees should read this Prospectus in light of
the terms governing their accounts with their Service Organization.
CUSTODIAN AND TRANSFER AGENT
Mercantile Bank of St. Louis National Association, an affiliate of the
Fund and a wholly-owned subsidiary of Mercantile Bancorporation, Inc., with
principal offices located at One Mercantile Center, 8th and Locust Streets, St.
Louis, Missouri 63101, serves as Custodian of each Portfolio's assets. BISYS
Fund Services Ohio, Inc. also serves as the Fund's transfer agent and dividend
disbursing agent. Its address is 3435 Stelzer Road, Columbus, Ohio 43219.
REGULATORY MATTERS
Banking laws and regulations currently prohibit a bank holding company
registered under the Federal Bank Holding Company
-50-
<PAGE> 100
Act of 1956 or any affiliate thereof from sponsoring, organizing, or
controlling the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks
generally from issuing, underwriting, selling, or distributing securities such
as Shares of the Portfolios. Such banking laws and regulations do not prohibit
such a holding company or affiliate, or banks, from acting as investment
adviser, transfer agent, or custodian to such an investment company, or from
purchasing shares of such a company as agent for and upon the order of
customers. Mercantile, MVA, Service Organizations that are banks or bank
affiliates, and broker-dealers that are bank affiliates are subject to such
laws and regulations, but believe they may perform the services for the
Portfolios contemplated by their respective agreements, this Prospectus and the
Statement of Additional Information without violating applicable banking laws
and regulations. In addition, State Securities laws on this issue may differ
from the interpretation of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
Should future legislative, judicial or administrative action prohibit
or restrict the activities of such companies in connection with the provision
of services on behalf of the Portfolios and their shareholders, the Fund might
be required to alter materially or discontinue its arrangements with such
companies and change its method of operation. It is not expected that
investors would suffer any adverse financial consequences as a result of any of
these occurrences.
If current restrictions preventing a bank from legally sponsoring,
organizing, controlling or distributing Shares of an investment company were
relaxed, Mercantile or an affiliate of Mercantile, would consider the
possibility of offering to perform additional services for the Portfolios. It
is not possible, of course, to predict whether or in what form such legislation
might be enacted or the terms upon which Mercantile, or such an affiliate,
might offer to provide such services.
Conflict of interest restrictions may apply to the receipt of
compensation paid pursuant to a Servicing Agreement by a Portfolio to a
financial intermediary in connection with the investment of fiduciary funds in
a Portfolio's Shares. Institutions, including banks regulated by the
Comptroller of the Currency and investment advisers and other money managers
subject to the jurisdiction of the SEC, the Department of Labor or state
securities commissions, should consult legal counsel before entering into
Servicing Agreements.
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<PAGE> 101
EXPENSES
Except as noted above and in the Statement of Additional Information
under "Investment Advisory and Administrative Contracts" and "Custodian and
Transfer Agent," the Fund's service contractors bear all expenses in connection
with the performance of their services, except that the Distributor is
compensated pursuant to the Distribution and Services Plans (as described under
"Distribution and Services Plans" above). Expenses are deducted from the total
income of each Portfolio before dividends and distributions are paid. These
expenses include, but are not limited to, fees paid to the Adviser and
Administrator, transfer agency fees, fees and expenses of officers and
directors who are not affiliated with the Adviser or the Distributor, taxes,
interest, legal fees, custodian fees, auditing fees, 12b-1 fees, servicing
fees, certain fees and expenses in registering and qualifying a Portfolio and
its Shares for distribution under Federal and state securities laws, costs of
preparing and printing prospectuses and statements of additional information
for regulatory purposes and for distribution to existing shareholders, the
expense of reports to shareholders, shareholders' meetings and proxy
solicitations, fidelity bond and directors and officers liability insurance
premiums, the expense of using independent pricing services and other expenses
which are not expressly assumed by the Adviser, Distributor or Administrator
under their respective agreements with the Fund. The Fund also pays for
brokerage fees, commissions and other transaction charges, if any, in
connection with the purchase and sale of portfolio securities. Any general
expenses of the Fund that are not readily identifiable as belonging to a
particular Portfolio will be allocated among all the Fund's Portfolios by or
under the direction of the Board of Directors in a manner the Board determines
to be fair and equitable. Any expenses relating only to a particular class of
Shares within a Portfolio will be borne solely by such class. (See "Certain
Financial Information" and "Management of the Fund" above for additional
information regarding expenses of each Portfolio.)
OTHER INFORMATION CONCERNING
THE FUND AND ITS SHARES
DESCRIPTION OF SHARES
The Fund was organized on September 9, 1992 as a Maryland corporation,
and is a mutual fund of the type known as an "open-end management investment
company." The Fund's principal office is located at 3435 Stelzer Road,
Columbus, Ohio 43219.
The Fund's Charter authorizes the Board of Directors to issue up to
seven billion full and fractional shares of common stock, and to classify and
reclassify any unauthorized and unissued shares into one or more classes of
shares. The Board of
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<PAGE> 102
Directors may similarly classify or reclassify any class of shares into one or
more series.
Pursuant to such authority, the Board of Directors has authorized the
issuance of the following series of shares representing interests in the
Portfolios, each of which is classified as a diversified company under the 1940
Act: 25 million Trust Shares, 25 million Institutional Shares, 25 million
Investor A Shares and 25 million Investor B Shares, representing interests in
the Equity Income Portfolio; 25 million Trust Shares, 25 million Investor A
Shares and 25 million Investor B Shares, representing interests in the National
Municipal Bond Portfolio; and 25 million Trust Shares, 25 million Institutional
Shares and 25 million Investor A Shares, representing interests in the
Short-Intermediate Corporate Bond Portfolio. Institutional and Trust Shares of
these Portfolios are described in separate prospectuses which are available
from the Distributor at the telephone number on the cover of this Prospectus.
The Board of Directors has also authorized the issuance of additional classes
of shares representing interest in other investment portfolios of the Fund,
which are likewise described in separate prospectuses available from the
Distributor. Shares in the Fund's Portfolios will be issued without Share
certificates.
The Investor A Shares and/or Investor B Shares of the Portfolios are
described in this Prospectus. The Portfolios also offer Trust Shares and the
Equity Income and Short-Intermediate Corporate Bond Portfolios offer
Institutional Shares. Institutional Shares, which are offered to financial
institutions acting on behalf of accounts for which they do not exercise
investment discretion, and Trust Shares, which are offered for financial
institutions acting on their own behalf or on behalf of certain qualified
accounts, are sold without a sales charge. Trust, Institutional, Investor A
Shares and/or Investor B Shares bear their pro rata portion of all operating
expenses paid by a Portfolio, except that Trust Shares and Institutional Shares
bear all payments under a Portfolio's respective Administrative Services Plans
adopted for such Shares and Investor A Shares and Investor B Shares bear all
payments under a Portfolio's respective Distribution and Services Plans adopted
for such Shares. In addition, Institutional Shares of a Portfolio bear the
expense of certain sub-transfer agency fees.
Payments under the Administrative Services Plans for Trust and
Institutional Shares are made to Service Organizations for administrative
services provided to the Service Organizations' clients or account holders who
are the beneficial owners of Trust or Institutional Shares. Payments under the
Administrative Services Plans may not exceed .30% (on an annual basis) of the
average daily net asset value of a Portfolio's outstanding Trust or
Institutional Shares.
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<PAGE> 103
The Fund offers various services and privileges in connection with
Investor A Shares and/or Investor B Shares of the Portfolios that are not
offered in connection with its Trust Shares or Institutional Shares, including
an automatic investment program and an automatic withdrawal plan. In addition,
each class of Shares offers different exchange privileges.
Shareholders are entitled to one vote for each full Share held and
proportionate fractional votes for fractional Shares held. Shares of all
Portfolios will vote together and not by class unless otherwise required by law
or permitted by the Board of Directors. All shareholders of a particular
Portfolio will vote together as a single class on matters relating to the
Portfolio's investment advisory agreement and investment objective and
fundamental policies. Only holders of Trust Shares, however, will vote on
matters relating to the Administrative Services Plan for Trust Shares and only
holders of Institutional Shares will vote on matters pertaining to the
Administrative Services Plan for Institutional Shares. Similarly, only holders
of Investor A Shares will vote on matters pertaining to the Distribution and
Services Plan for Investor A Shares and only holders of Investor B Shares will
vote on matters pertaining to the Distribution and Services Plan for Investor B
Shares.
The Fund is not required, and currently does not intend, to hold
annual meetings except as required by the 1940 Act or other applicable law.
Upon the written request of the holders of 10% or more of the outstanding
Shares, the Fund will call a special meeting to vote on the question of removal
of a director.
Shares of the Fund's Portfolios have noncumulative voting rights and,
accordingly, the holders of more than 50% of the Fund's outstanding Shares
(irrespective of Portfolio or class) may elect all of the Directors. Shares
have no preemptive rights and only such conversion and exchange rights as the
Board may grant in its discretion. When issued for payment as described in
this Prospectus, Shares will be fully paid and nonassessable.
MISCELLANEOUS
As used in this Prospectus, a "vote of a majority of the outstanding
Shares" of a Portfolio or class of shares means, with respect to the approval
of an investment advisory agreement or
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<PAGE> 104
Distribution and Services Plan or a change in an investment objective or
fundamental investment policy, the affirmative vote of the lesser of (a) more
than 50% of the outstanding Shares of such Portfolio or class of shares, or (b)
67% or more of the Shares of such Portfolio or class of shares present at a
meeting if more than 50% of the outstanding Shares of such Portfolio or class
of shares are represented at the meeting in person or by proxy.
As of __________, 1996, Mercantile and its affiliates possessed, of
record on behalf of their underlying customer accounts, voting or investment
power with respect to more than 25% of the Fund's outstanding Shares.
Therefore, Mercantile may be deemed to be a controlling person of the Fund
within the meaning of the 1940 Act.
Inquiries regarding the Portfolios may be directed to the Fund at
1-800-551-3731.
For information with respect to Investor A Shares of the Fund's Money
Market, Treasury Money Market, Tax-Exempt Money Market, Growth & Income Equity,
Emerging Growth, Government & Corporate Bond, U.S. Government Securities,
Balanced, International Equity, Short-Intermediate Municipal, Missouri
Tax-Exempt Bond and Kansas Tax-Exempt Bond Portfolios and Investor B Shares of
the Money Market, Growth & Income Equity, Emerging Growth, Government &
Corporate Bond, U.S. Government Securities, Balanced, International Equity,
Missouri Tax-Exempt Bond and Kansas Tax-Exempt Bond Portfolios, call the Fund
at 1-800-551-3731.
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<PAGE> 105
<TABLE>
<S> <C>
NO PERSON HAS BEEN AUTHORIZED THE ARCH
TO GIVE ANY INFORMATION OR TO MAKE FUND(R), INC.
ANY REPRESENTATIONS NOT CONTAINED
IN THIS PROSPECTUS, OR IN THE
PORTFOLIOS' STATEMENT OF ADDITIONAL
INFORMATION INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE EQUITY INCOME
PORTFOLIOS, THE FUND, OR THE PORTFOLIO
DISTRIBUTOR. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFERING BY THE NATIONAL MUNICIPAL
PORTFOLIOS, THE FUND OR THE DISTRIBUTOR BOND
IN ANY JURISDICTION IN WHICH SUCH PORTFOLIO
OFFERING MAY NOT LAWFULLY BE MADE.
SHORT-INTERMEDIATE
CORPORATE BOND
PORTFOLIO
-------------------
INVESTOR A SHARES
AND
INVESTOR B SHARES
</TABLE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Highlights . . . . . . . . . . . . . . . . . . . . . . a
Certain Financial
Information . . . . . . . . . . . . . . . . . . . . .
Expense Summary for
Investor Shares . . . . . . . . . . . . . . . . . . .
Financial Highlights . . . . . . . . . . . . . . . . .
Investment Objectives, Policies
and Risk Considerations . . . . . . . . . . . . . . .
Pricing of Shares . . . . . . . . . . . . . . . . . . . [OLD LOGO]
How to Purchase and
Redeem Shares . . . . . . . . . . . . . . . . . . . .
Purchase of Shares . . . . . . . . . . . . . .
Automatic Investment
Program (AIP). . . . . .
Applicable Sales Charges
-- Investor A Shares . . . . . . . . . . . .
Reduced Sales Charges
-- Investor A Shares . . . . . . . . . . . .
Applicable Sales Charges
-- Investor B Shares . . . . . . . . . . . .
Exchange Privileges . . . . . . . . . . . . .
Redemption of Shares . . . . . . . . . . . . .
</TABLE>
-56-
<PAGE> 106
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Redemption by Mail . . . . . . . . . . . . . .
Redemption by Telephone . . . . . . . . . . .
Automatic Withdrawal
Plan (AWP) . . . . . . . . . . . . . . . . .
Purchase of Shares at
Net Asset Value . . . . . . . . . . . . . .
Other Exchange or
Redemption
Information . . . . . . . . . . . . . . . .
Yields and Total Returns . . . . . . . . . . . . . . . PROSPECTUS
Dividends and Distributions . . . . . . . . . . . . . . ________, 1996
Taxes
Management of the Fund . . . . . . . . . . . . . . . .
Other Information
Concerning the Fund
and its Shares . . . . . . . . . . . . . . . . . . .
Miscellaneous . . . . . . . . . . . . . . . .
Investment Adviser:
Mississippi Valley Advisors Inc.
a wholly-owned subsidiary of
Mercantile Bank of
St. Louis National Association
</TABLE>
Distributor: BISYS Fund Services
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<PAGE> 107
THE ARCH FUND(R), INC.
THE ARCH EQUITY INCOME PORTFOLIO
THE ARCH SHORT-INTERMEDIATE CORPORATE BOND PORTFOLIO
INSTITUTIONAL SHARES
The ARCH Fund, Inc. is an open-end management investment company authorized
to issue Shares in fifteen investment portfolios. This Prospectus describes
the Institutional Shares of THE ARCH EQUITY INCOME AND SHORT-INTERMEDIATE
CORPORATE BOND PORTFOLIOS. Institutional Shares are offered to financial
institutions acting on behalf of accounts for which they do not exercise
investment discretion.
THE ARCH EQUITY INCOME PORTFOLIO'S investment objective is to seek to provide
an above-average level of income consistent with long-term capital
appreciation. Under normal market and economic conditions, the Portfolio
intends to invest substantially all of its assets in common stock, preferred
stock, rights, warrants and securities convertible into common stock.
THE ARCH SHORT-INTERMEDIATE CORPORATE BOND PORTFOLIO'S investment objective
is to seek as high a level of current income as is consistent with preservation
of capital. Under normal market and economic conditions, the Portfolio intends
to invest at least 65% of its assets in non-convertible corporate debt
obligations.
Mississippi Valley Advisors Inc. ("MVA" or the "Adviser"), a wholly-owned
subsidiary of Mercantile Bank of St. Louis National Association ("Mercantile")
acts as investment adviser for the Portfolios; Mercantile serves as custodian;
BISYS Fund Services Ohio, Inc. (the "Administrator") serves as administrator;
and BISYS Fund Services (the "Distributor") serves as sponsor and distributor.
This Prospectus sets forth concisely certain information about the Portfolios
that prospective investors should know before investing. Investors should read
this Prospectus and retain it for future reference. Additional information
about the Portfolios, contained in a Statement of Additional Information dated
_________, 1996, has been filed with the Securities and Exchange Commission and
is incorporated by reference in its entirety into this Prospectus. An investor
may obtain the Statement of Additional Information without charge by writing
the Fund at P.O. Box 78069, St. Louis, Missouri 63178 or by calling
1-800-551-3731.
<PAGE> 108
Portfolio Shares are not bank deposits, are not federally insured or
guaranteed by the U.S. Government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other governmental agency, and are not the
obligations of or guaranteed or otherwise supported by any bank. An investment
in the Portfolios involves investment risk, including possible loss of
principal.
______________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
________________, 1996
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<PAGE> 109
HIGHLIGHTS
The ARCH Fund, Inc. (the "Fund") is an open-end management investment company
(commonly known as a mutual fund) registered under the Investment Company Act
of 1940, as amended (the "1940 Act"). The Fund offers investment opportunities
in fifteen investment portfolios. This Prospectus relates to two of those
portfolios: THE ARCH EQUITY INCOME AND SHORT-INTERMEDIATE CORPORATE BOND
PORTFOLIOS (the "Portfolios"). In addition, the Fund offers investment
opportunities in the ARCH Money Market, Treasury Money Market, Growth & Income
Equity, Emerging Growth, Government & Corporate Bond, U.S. Government
Securities, Balanced, International Equity, Short-Intermediate Municipal,
Tax-Exempt Money Market, Missouri Tax-Exempt Bond, Kansas Tax-Exempt Bond and
Municipal Bond Portfolios, which are described in separate Prospectuses. Each
Portfolio represents a separate pool of assets with different investment
objectives and policies (as described below under "Investment Objectives,
Policies and Risk Considerations"). MVA serves as Adviser, Mercantile as
Custodian, BISYS Fund Services Ohio, Inc. as Administrator, and BISYS Fund
Services as sponsor and Distributor. (For information on expenses, fee
waivers, and services, see "Certain Financial Information" and "Management of
the Fund.")
The following information generally describes the Portfolios and their
investment objectives. There can be no assurance that the Portfolios will be
able to achieve their investment objectives.
The Equity Income Portfolio is designed for investors who seek an
above-average level of income consistent with long-term capital appreciation,
and who are prepared to accept the risks associated with an investment in
equity securities.
The Short-Intermediate Corporate Bond Portfolio is designed for investors who
seek higher current income than is typically offered by money market funds with
less principal volatility than is normally associated with a long-term bond
fund.
Investors should note that one or more of the Portfolios may, subject to
their investment policies and limitations, purchase variable and floating rate
instruments, enter into repurchase agreements and reverse repurchase
agreements, make securities loans, acquire the securities of foreign issuers,
invest in options and futures, and make limited investments in illiquid
securities and securities issued by other investment companies. These
investment practices involve investment risks of varying degrees. In addition,
each Portfolio may engage in short-term trading, which may also involve greater
risk and increase the Portfolio's expenses. See "Investment Objectives,
Policies and Risk Considerations" below and the Statement of
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Additional Information under "Investment Objectives and Policies".
The Fund offers investors the opportunity to invest in a variety of
professionally managed investments without having to become involved with
detailed management, accounting and safekeeping procedures normally related to
direct investments in securities. The Fund also offers the economic advantages
of block trading in securities and the availability of a family of fifteen
mutual funds should your investment goals change.
This Prospectus describes the Institutional Shares of the Portfolios. For
information on purchasing, exchanging or redeeming Institutional Shares of the
Portfolios, please see "How to Purchase and Redeem Shares" below.
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CERTAIN FINANCIAL INFORMATION
Shares of the Equity Income Portfolio have been classified into four classes
of Shares -- Trust Shares, Institutional Shares, Investor A Shares and Investor
B Shares; and Shares of the Short-Intermediate Corporate Bond Portfolio have
been classified into three classes of Shares - - Trust Shares, Institutional
Shares and Investor A Shares. Shares of each class in a Portfolio represent
equal, pro rata interests in the investments held by that Portfolio and are
identical in all respects, except that Shares of each class bear separate
distribution and/or shareholder administrative servicing fees and certain other
operating expenses, and enjoy certain exclusive voting rights on matters
relating to these fees. (See "Other Information Concerning the Fund and Its
Shares," "Management of the Fund -- Administrative Services Plan," and
"Management of the Fund -- Custodian, Transfer Agent and Sub-Transfer Agent"
below.) As a result of payments for distribution and/or shareholder
administrative servicing fees and certain other operating expenses that may be
made in differing amounts, the net investment income of Trust Shares,
Institutional Shares, Investor A Shares and/or Investor B Shares in a Portfolio
can be expected, at any given time, to be different.
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EXPENSE SUMMARY FOR INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
EQUITY SHORT-INTERMEDIATE
INCOME CORPORATE BOND
PORTFOLIO PORTFOLIO
--------- ----------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price) . . . . . . . . . . . . . .00% .00%
ANNUAL PORTFOLIO OPERATING
EXPENSES (as a percentage of
average net assets)
Investment Advisory Fees (net
of fee waivers)1 . . . . . . . . . . . . .00% .00%
12b-1 Fees . . . . . . . . . . . . . . . . .00% .00%
Other Expenses (including
administration fees,
administrative services
fees, sub-transfer agency fees
(if any), and other expenses)
(net of fee waivers and
expenses reimbursements)2,3 . . . . . . .20% .21%
---- ----
TOTAL PORTFOLIO OPERATING
EXPENSES (net of
fee waivers and expense
reimbursements)3 . . . . . . . . . . . . .20% .21%
---- ----
<FN>
____________________
1 Without fee waivers, investment advisory fees for the Equity Income
and Short-Intermediate Corporate Bond Portfolios would be .75% and
.55%, respectively.
2 Without fee waivers, administration fees for each Portfolio would be
0.20%. Administrative services fees are payable at an annual rate not
to exceed 0.30%.
3 Without fee waivers and expense reimbursements, Other Expenses would
be .30% and .31% and Total Portfolio Operating Expenses would be 1.05%
and .86% for the Equity Income and Short-Intermediate Corporate Bond
Portfolios, respectively.
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
- ------- ------ -------
<S> <C> <C>
You would pay the following
expenses on a $1,000 investment,
assuming (1) a 5% annual return
and (2) redemption at the end of
each period:
Equity Income Portfolio . . . . . . . $2 $6
Short-Intermediate Corporate
Bond Portfolio . . . . . . . . . . . $2 $7
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RATES OF RETURN. THE PORTFOLIOS ARE NEW AND ACTUAL
OPERATING EXPENSES AND INVESTMENT RETURN MAY BE MORE OR LESS THAN THOSE SHOWN.
Information about the actual performance of the Portfolios will be contained in
the Fund's
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future Annual Reports to Shareholders, which may be obtained without charge
when they become available by contacting the Fund at the address or telephone
number provided on the cover page of this Prospectus.
The purpose of the foregoing tables is to assist in understanding the
various costs and expenses that an investor in a Portfolio's Institutional
Shares will bear directly or indirectly. The tables, which have not been
audited by the Fund's independent auditors, reflect the expenses which the
Portfolios expect to incur during the next twelve months on their Institutional
Shares. For more complete descriptions of the various costs and expenses, see
"Management of the Fund" in this Prospectus and the Statement of Additional
Information. The Tables and Examples do not reflect any charges that may be
imposed by financial institutions on their customers.
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INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS
The investment objective of a Portfolio may not be changed without the
affirmative vote of a majority of the outstanding Shares of the Portfolio.
Although management will use its best efforts to achieve the investment
objective of each Portfolio, there can be no assurance that it will be able to
do so.
THE EQUITY INCOME PORTFOLIO
The Equity Income Portfolio's investment objective is to seek to
provide an above-average level of income consistent with long-term capital
appreciation. In pursuing its investment objective, the Portfolio intends to
invest, under normal market and economic conditions, substantially all of its
assets in common stock, preferred stock, rights, warrants, and securities
convertible into common stock. The Adviser will select stocks based on a
number of quantitative factors, including dividend yield, current and future
earnings potential compared to stock prices, total return potential and other
measures of value, such as cash flow, asset value or book value, if
appropriate. Stocks purchased for the Portfolio generally will be listed on a
national securities exchange or will be unlisted securities with an established
over-the-counter market. A convertible security may be purchased for the
Portfolio when, in the Adviser's opinion, the price and yield of the
convertible security is favorable as compared to the price and yield of the
common stock. The stocks or securities in which the Portfolio invests may be
expected to produce an above average level of income (as measured by the
Standard & Poor's 500 Index). In general, the Portfolio's stocks and other
securities will be diversified over a number of industry groups in an effort to
reduce the risks inherent in such investments.
The Portfolio may indirectly invest in foreign securities through the
purchase of American Depository Receipts ("ADRs") and European Depository
Receipts ("EDRs") but will not do so if, immediately after and as a result of
the purchase, the value of ADRs and EDRs would exceed 15% of the Portfolio's
total assets. (For further information, see "Other Applicable Policies --
Foreign Securities" below and the Statement of Additional Information under
"Investment Objectives and Policies -- ADRs and EDRs.")
The Portfolio reserves the right to hold as a temporary defensive
measure up to 100% of its total assets in cash and short-term obligations
(having remaining maturities of 13 months or less) at such times and in such
proportions as, in the opinion of the Adviser, prevailing market or economic
conditions warrant. Short-term obligations in which the Portfolio may invest
include money market instruments, such as commercial paper and bank
obligations, obligations issued or guaranteed by the U.S.
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<PAGE> 115
Government, its agencies or instrumentalities, and repurchase agreements.
THE SHORT-INTERMEDIATE CORPORATE BOND PORTFOLIO
The Short-Intermediate Corporate Bond Portfolio's investment objective
is to seek as high a level of current income as is consistent with preservation
of capital. In pursuing its investment objective, the Portfolio intends to
invest, under normal market and economic conditions, at least 65% of its assets
in non-convertible corporate debt obligations, which shall mean obligations of
(i) domestic or foreign business corporations, or (ii) agencies,
instrumentalities or authorities which are organized in corporate form by one
or more states or political subdivisions in the United States or one or more
foreign governments. The Portfolio may also invest in obligations issued or
guaranteed by the U.S. or foreign governments, their agencies or
instrumentalities, and asset-backed securities, including various
collateralized mortgage obligations and other mortgage-related securities. In
making investment decisions, the Adviser will consider a number of factors
including current yield, maturity, yield to maturity, anticipated changes in
interest rates, and the overall quality of the investment. The Portfolio seeks
to provide a current yield greater than that generally available from money
market instruments.
The Portfolio may purchase debt securities which are rated at the time
of purchase in one of the four highest rating categories assigned by one or
more unaffiliated nationally recognized statistical rating organizations
("Rating Agencies") or in unrated debt securities deemed by the Adviser to be
of comparable quality. Under normal market and economic conditions, however,
the Portfolio intends to invest at least 65% of its assets in debt obligations
rated in one of the three highest rating categories assigned by one or more
Rating Agencies (or unrated debt obligations determined to be of comparable
quality). Securities that are rated in the lowest of the four highest rating
categories have speculative characteristics, even though they are of
investment-grade quality, and such securities will be purchased (and retained)
only if the Adviser believes that the issuers have an adequate capacity to pay
interest and repay principal. Unrated debt securities will be purchased only
if they are considered by the Adviser to be at least comparable in quality at
the time of purchase to instruments within the rating categories listed above.
Debt securities purchased by the Portfolio whose ratings are subsequently
downgraded below the four highest rating categories of a Rating Agency will be
disposed of in an orderly manner, normally within 30 to 60 days. The
applicable ratings issued by the Rating Agencies are described in the Appendix
to the Statement of Additional Information.
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The Portfolio reserves the right to hold as a temporary defensive
measure up to 100% of its total assets in cash and short-term obligations
(having remaining maturities of 13 months or less) at such times and in such
proportions as, in the opinion of the Adviser, prevailing market or economic
conditions warrant. Short-term obligations in which the Portfolio may invest
include money market instruments, such as commercial paper and bank
obligations, obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, and repurchase agreements.
The Portfolio's average weighted maturity will be between two and five
years and will vary in light of current market and economic conditions, the
comparative yields on instruments with different maturities, and other factors.
OTHER APPLICABLE POLICIES
U.S. GOVERNMENT OBLIGATIONS. Securities issued or guaranteed by the
U.S. Government, its agencies and instrumentalities have historically involved
little risk of loss of principal if held to maturity. However, due to
fluctuations in interest rates, the market value of such securities may vary
during the period a shareholder owns Shares of a Portfolio. Examples of the
types of U.S. Government obligations that may be held by the Portfolios,
subject to their investment objectives and policies, include, in addition to
U.S. Treasury bonds, notes and bills, the obligations of Federal Home Loan
Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage Association
("GNMA"), Federal National Mortgage Association ("FNMA"), Federal Home Loan
Mortgage Corporation ("FHLMC"), General Services Administration, Student Loan
Marketing Association, Central Bank for Cooperatives, Federal Intermediate
Credit Banks, Resolution Trust Corporation, and Maritime Administration.
Obligations of certain agencies and instrumentalities of the U.S. Government,
such as those of GNMA, are supported by the full faith and credit of the U.S.
Treasury; others, such as the Export-Import Bank of the United States, are
supported by the right of the issuer to borrow from the Treasury; others, such
as those of FNMA, are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; still others such as those of
the Student Loan Marketing Association, are supported only by the credit of the
instrumentality. There is no assurance that the U.S. Government would provide
financial support to U.S. Government-sponsored instrumentalities if it is not
obligated to do so by law.
STRIPPED GOVERNMENT SECURITIES. To the extent consistent with their
respective investment policies, the Portfolios may invest in bills, notes and
bonds (including zero coupon bonds)
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issued by the U.S. Treasury, as well as "stripped" U.S. Treasury obligations
offered under the Separate Trading of Registered Interest and Principal
Securities ("STRIPS") program or Coupon Under Bank-Entry Safekeeping ("CUBES")
program or other stripped securities issued directly by agencies or
instrumentalities of the U.S. Government. STRIPS and CUBES represent either
future interest or principal payments and are direct obligations of the U.S.
Government that clear through the Federal Reserve System. The
Short-Intermediate Corporate Bond Portfolio may also purchase U.S. Treasury and
agency securities that are stripped by brokerage firms and custodian banks and
sold under proprietary names. These stripped securities are resold in
custodial receipt programs with a number of different names (such as TIGRs and
CATS) and are not considered government securities for purposes of the 1940
Act. Stripped securities are issued at a discount to their "face value" and
may exhibit greater price volatility than ordinary debt securities because of
the manner in which their principal and interest are returned to investors.
The Adviser will consider the liquidity needs of a Portfolio when any
investments in zero coupon obligations or other principal-only obligations are
made.
MONEY MARKET INVESTMENTS. Under certain circumstances described
above, each Portfolio may purchase "money market instruments," including
commercial paper and bank obligations.
Investment by the Portfolios in taxable or tax-exempt commercial paper
will consist of issues that are rated at the time of purchase in one of the two
highest rating categories assigned by a Rating Agency or, if unrated, deemed to
be of comparable quality by the Adviser at the time of purchase. Commercial
paper may include variable and floating rate instruments. See "Other
Applicable Policies -- Variable and Floating Rate Instruments" below.
Bank obligations include bankers' acceptances, negotiable certificates
of deposit and non-negotiable time deposits of U.S. or foreign banks, having
total assets at the time of purchase in excess of $1 billion. Although the
Portfolios will invest in obligations of foreign banks or foreign branches of
U.S. banks only when the Adviser determines that the instrument presents
minimal credit risks, such investments nevertheless entail risks that are
different from those of investments in domestic obligations of U.S. banks. See
"Other Applicable Policies - - Foreign Securities" below. Investments in the
obligations of foreign banks or foreign branches of U.S. banks will not exceed
25% of a particular Portfolio's total assets at the time of purchase.
REPURCHASE AGREEMENTS. Under certain circumstances described above
and subject to their respective investment policies, the Portfolios may agree
to purchase U.S. Government
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securities from financial institutions such as banks and broker-dealers,
subject to the seller's agreement to repurchase them at a mutually agreed-upon
date and price ("repurchase agreements"). The Portfolio will enter into
repurchase agreements only with financial institutions such as banks and
broker-dealers that the Adviser believes to be creditworthy. During the term
of any repurchase agreement, the Adviser will continue to monitor the
creditworthiness of the seller and will require the seller to maintain the
value of the securities subject to the agreement at not less than 102% of the
repurchase price (including accrued interest). Default by a seller could
expose the Portfolio to possible loss because of adverse market action or
possible delay in disposing of the underlying obligations. Because of the
seller's repurchase obligations, the securities subject to repurchase
agreements do not have maturity limitations. Although the Portfolio presently
does not intend to enter into repurchase agreements providing for settlement in
more than seven days, the Portfolio does have the authority to do so subject to
its limitation on the purchase of illiquid securities described below.
Repurchase agreements are considered to be loans under the 1940 Act. The
income on repurchase agreements may be taxable to investors at the state or
local level. (See "Taxes.")
REVERSE REPURCHASE AGREEMENTS. Subject to their respective investment
policies and limitations, the Portfolios may borrow funds for temporary
purposes by entering into reverse repurchase agreements. Pursuant to such
agreements, the Portfolio would sell portfolio securities to financial
institutions such as banks and broker-dealers and agree to repurchase them at
an agreed upon date and price. Reverse repurchase agreements involve the risk
that the market value of the securities sold by the Portfolio may decline below
the repurchase price which the Portfolio is obligated to pay. Reverse
repurchase agreements are considered to be borrowings by the Portfolio under
the 1940 Act.
SECURITIES LENDING. To increase return or offset expenses, each
Portfolio may, from time to time, lend portfolio securities to broker-dealers,
banks or institutional borrowers pursuant to agreements requiring that the
loans be continuously secured by collateral equal at all times in value to at
least the market value of the securities loaned. Collateral for such loans may
include cash, securities of the U.S. Government, or its agencies or
instrumentalities, or an irrevocable letter of credit issued by a bank that has
at least $1.5 billion in total assets, or any combination thereof. The
collateral must be valued daily, and, should the market value of the loaned
securities increase, the borrower must furnish additional collateral to the
lending Portfolio. By lending its securities, a Portfolio can increase its
income by continuing to receive interest on the loaned securities as well as by
either investing the cash collateral in short-term instruments or obtaining
yield in the form of interest paid by the borrower when U.S. Government
securities are used as
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collateral. In accordance with current Securities and Exchange Commission
("SEC") policies, each Portfolio is currently limiting its securities lending
to 33-1/3% of its aggregate net assets. Loans are subject to termination by a
Portfolio or the borrower at any time.
OPTIONS. Each Portfolio may purchase put and call options listed on a
national securities exchange and issued by the Options Clearing Corporation in
an amount not exceeding 10% of its net assets. Such options may relate to
particular securities or to various stock or bond indices. Purchasing options
is a specialized investment technique which entails a substantial risk of a
complete loss of the amounts paid as premiums to the option writer. Such
transactions will be entered into only as a hedge against fluctuations in the
value of securities which a Portfolio holds or intends to purchase.
Each Portfolio may also write covered call options. A covered call
option is an option to acquire a security that a Portfolio owns or has the
right to acquire during the option period. Such options will be listed on a
national securities exchange and issued by the Options Clearing Corporation.
The aggregate value of the securities subject to covered call options
written by a Portfolio will not exceed 25% of the value of its net assets. In
order to close out an option position, a Portfolio may enter into a "closing
purchase transaction" -- the purchase of a covered call option on the same
security with the same exercise price and expiration date as the option which
the Portfolio previously wrote. By writing a covered call option, a Portfolio
forgoes the opportunity to profit from an increase in the market price of the
underlying security above the exercise price except insofar as the premium
represents such a profit and it is not able to sell the underlying security
until the option expires, is exercised, or the Portfolio effects a closing
purchase transaction by purchasing an option of the same series. The use of
covered call options will not be a primary investment technique of either
Portfolio. (For additional information relating to option trading practices,
including particular risks, see the Statement of Additional Information and
Appendix B thereof.)
FUTURES CONTRACTS AND RELATED OPTIONS. Each Portfolio may invest in
futures contracts and options on futures contracts to the extent permitted by
the Commodity Futures Trading Commission ("CFTC") and the SEC. Such
transactions, including stock or bond index futures contracts, or options
thereon, act as a hedge to protect a Portfolio from fluctuations in the value
of its securities caused by anticipated changes in interest rate or market
conditions without necessarily buying or selling the securities. Hedging is a
specialized investment technique that entails skills different from other
investment management. The
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Adviser may also consider such transactions to be economically appropriate for
the reduction of risk inherent in the ongoing management of a Portfolio. A
stock or bond index futures contract is an agreement in which one party agrees
to take or make delivery of an amount of cash equal to a specified dollar
amount times the difference between the index value (which assigns relative
values to the common stock or bonds included in the index) at the close of the
last trading day of the contract and the price at which the agreement is
originally made. No physical delivery of the underlying stock or bond in the
index is contemplated. Similarly, it may be in the best interest of a
Portfolio to purchase or sell interest rate futures contracts, or options
thereon, which provide for the future delivery of specified fixed income
securities.
The purchase and sale of futures contracts or related options will not
be a primary investment technique of either Portfolio. Neither Portfolio will
purchase or sell futures contracts (or related options thereon) for hedging
purposes if, immediately after purchase, the aggregate initial margin deposits
and premiums paid by a Portfolio on its open futures and options positions
exceeds 5% of the liquidation value of the Portfolio, after taking into account
any unrealized profits and unrealized losses on any such futures or related
options contracts into which it has entered. (For a more detailed description
of futures contracts and related options, see the Statement of Additional
Information and Appendix B thereof.)
ASSET-BACKED SECURITIES. The Short-Intermediate Corporate Bond
Portfolio may purchase asset-backed securities (i.e., securities backed by
mortgages, installment sale contracts, corporate receivables, credit card
receivables or other assets) that are issued by entities such as the GNMA,
FNMA, FHLMC and private issuers such as commercial banks, financial companies,
finance subsidiaries of industrial companies, savings and loan associations,
mortgage banks, and investment banks. To the extent that the Portfolio invests
in asset-backed securities issued by companies that are investment companies
under the 1940 Act, such acquisitions will be subject to the percentage
limitations prescribed by the 1940 Act. (See "Other Applicable Policies --
Securities of Other Investment Companies" below.)
Presently there are several types of mortgage-backed securities,
including guaranteed mortgage pass-through certificates, which provide the
holder with a pro rata interest in the underlying mortgages, and collateralized
mortgage obligations ("CMOs"), which provide the holder with a specified
interest in the cash flow of a pool of underlying mortgages or other
mortgage-backed securities. CMOs are issued in multiple classes, each with a
specified fixed or floating interest rate and a final distribution date. The
relative payment rights of the various CMO classes may be subject to greater
volatility and
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interest-rate risk than other types of mortgage-backed securities. The average
life of asset-backed securities varies with the underlying instruments or
assets and market conditions, which in the case of mortgages have maximum
maturities of forty years. The average life of a mortgage-backed instrument,
in particular, is likely to be substantially less than the original maturity of
the mortgages underlying the securities as the result of unscheduled principal
payments and mortgage prepayments. The relationship between mortgage
prepayment and interest rates may give some high-yielding mortgage-backed
securities less potential for growth in value than conventional bonds with
comparable maturities. In addition, in periods of falling interest rates, the
rate of mortgage prepayments tends to increase. During such periods, the
reinvestment of prepayment proceeds by the Short-Intermediate Corporate Bond
Portfolio will generally be at lower rates than the rates that were carried by
the obligations that have been prepaid. When interest rates rise, the value of
an asset-backed security generally will decline; however, when interest rates
decline, the value of an asset-backed security with prepayment features may not
increase as much as that of other fixed income securities. Because of these
and other reasons, an asset-backed security's total return may be difficult to
predict precisely.
In general, the collateral supporting non-mortgage asset-backed
securities is of shorter maturity than mortgage loans and is less likely to
experience substantial prepayments. Non-mortgage asset-backed securities
involve certain risks that are not presented by mortgage-backed securities
arising primarily from the nature of the underlying assets (i.e., credit card
and automobile loan receivables as opposed to real estate mortgages). For
example, credit card receivables are generally unsecured and the repossession
of automobiles and other personal property upon the default of the debtor may
be difficult or impracticable in some cases.
VARIABLE AND FLOATING RATE INSTRUMENTS. Each Portfolio may purchase
rated or unrated variable and floating rate instruments. These instruments may
include variable rate master demand notes that permit the indebtedness
thereunder to vary in addition to providing for periodic adjustments in the
interest rate. Unrated instruments purchased by a Portfolio will be determined
by the Adviser to be of comparable quality at the time of purchase to rated
instruments that may be purchased. The absence of an active secondary market
for a particular variable or floating rate instrument, however, could make it
difficult for a Portfolio to dispose of an instrument if the issuer were to
default on its payment obligation. A Portfolio could, for these or other
reasons, suffer a loss with respect to such instruments.
SECURITIES OF OTHER INVESTMENT COMPANIES. Under certain circumstances
described above and subject to its investment
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<PAGE> 122
policies, each Portfolio may invest in securities issued by other investment
companies which invest in securities in which the Portfolio is permitted to
invest and which determine their net asset value per share based on the
amortized cost or penny-rounding method. Each Portfolio may invest in
securities of other investment companies within the limits prescribed by the
1940 Act, which include, subject to certain exceptions, a prohibition on a
Portfolio investing more than 10% of the value of its total assets in such
securities. Investment companies in which a Portfolio may invest may impose a
sales or distribution charge in connection with the purchase or redemption of
their Shares as well as other types of commissions or charges. Such charges
will be payable by the Portfolio and, therefore, will be borne indirectly by
its shareholders. To the extent that a Portfolio may invest in securities of
other investment companies, the Fund and the Adviser will ensure that there
will be no duplication of advisory fees. If necessary to accomplish this, the
Adviser will rebate its advisory fee to the Fund. (See the Statement of
Additional Information under "Investment Objectives and Policies -- Securities
of Other Investment Companies.")
WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS. Each Portfolio may
purchase securities on a "when-issued" basis and may purchase or sell
securities on a "forward commitment" basis. When-issued and forwarded
commitment transactions involve a commitment by a Portfolio to purchase or sell
securities at a stated price and yield with settlement beyond the normal
settlement date. Such transactions permit a Portfolio to lock-in a price or
yield on a security, regardless of future changes in interest rates. These
transactions involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, or if the value of the
security to be sold increases prior to the settlement date. Each Portfolio
expects that these transactions will not exceed 25% of the value of its total
assets (at the time of purchase) under normal market conditions. No Portfolio
intends to engage in such transactions for speculative purposes but only for
the purpose of acquiring portfolio securities.
ILLIQUID SECURITIES. A Portfolio will not knowingly invest more than
15% of the value of its net assets in illiquid securities. Repurchase
agreements that do not provide for settlement within seven days, time deposits
maturing in more than seven days, and securities that are not registered under
the Securities Act of 1933, as amended (the "1933 Act") but that may be
purchased by institutional buyers pursuant to SEC Rule 144A are subject to this
15% limit (unless the Adviser, pursuant to guidelines established by the Fund's
Board of Directors, determines that a liquid market exists).
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<PAGE> 123
FOREIGN SECURITIES. Investments made in foreign securities, whether
made directly or indirectly, involve certain inherent risks, such as future
political and economic developments, the possible imposition of foreign
withholding tax on the interest income payable on such instruments, the
possible establishment of foreign controls, the possible seizure or
nationalization of foreign deposits or assets, or the adoption of other foreign
government restrictions that might adversely affect payment of interest or
principal. In the event of a default by the issuer of a foreign security, it
may be more difficult to obtain or enforce a judgment against such issuer than
it would against a domestic issuer. In addition, foreign banks and foreign
branches of U.S. banks are subject to less stringent reserve requirements and
to different accounting, auditing, reporting, and recordkeeping standards than
those applicable to domestic branches of U.S. banks.
ADDITIONAL RISKS AND OTHER CONSIDERATIONS. Generally, the market
value of fixed income securities can be expected to vary inversely to changes
in prevailing interest rates. During periods of declining interest rates, the
market value of investment portfolios comprised primarily of fixed income
securities, such as the Short-Intermediate Corporate Bond Portfolio, will tend
to increase, and during periods of rising interest rates, the market value will
tend to decrease. In addition, during periods of declining interest rates, the
yields of investment portfolios comprised primarily of fixed income securities
will tend to be higher than prevailing market rates and, in periods of rising
interest rates, yields will tend to be somewhat lower. Fixed income securities
with longer maturities, which tend to produce higher yields, are subject to
potentially greater capital appreciation and depreciation than obligations with
shorter maturities. Changes in the financial strength of an issuer or changes
in the ratings of any particular security may also offset the value of these
investments. Fluctuations in the market value of fixed income securities
subsequent to their acquisition will not offset cash income from such
securities but will be reflected in the Portfolio's net asset value.
PORTFOLIO TURNOVER AND TRANSACTIONS. Although the Portfolios will not
normally engage in short-term trading, each Portfolio reserves the right to do
so if the Adviser believes that selling a particular security is appropriate in
light of the Portfolio's investment objective. Investments may be sold for a
variety of reasons, such as a more favorable investment opportunity or other
circumstances bearing on the desirability of continuing to hold such
investments. A high rate of portfolio turnover involves correspondingly
greater brokerage commission expenses and other transaction costs, which must
be borne directly by the Portfolio and ultimately by its shareholders. High
portfolio turnover may result in the realization of substantial net capital
gains; distributions derived from such
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gains may be treated as ordinary income for federal income tax purposes. (See
"Taxes" in this Prospectus and the Statement of Additional Information.")
Although the Portfolios cannot accurately predict their respective annual
portfolio turnover rates, such rates are not expected to exceed 100%.
All orders for transactions in securities or options on behalf of the
Portfolios are placed by the Adviser with broker-dealers that it selects. To
the extent permitted by the 1940 Act and guidelines adopted by the Fund's Board
of Directors, a Portfolio may utilize the Distributor or one or more of its
affiliates as a broker in connection with the purchase or sale of securities
when the Adviser believes the charge for the transaction does not exceed the
usual and customary broker's commission.
INVESTMENT LIMITATIONS
The investment limitations set forth below are fundamental policies
and may be changed only by a vote of a majority of the outstanding Shares of a
Portfolio. Other investment limitations that also cannot be changed without a
vote of shareholders are contained in the Statement of Additional Information
under "Investment Objectives and Policies."
A Portfolio may not:
1. Purchase securities of any one issuer (other than
obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities) if, immediately after and as a result of such
investments, more than 5% of the Portfolio's total assets would be
invested in the securities of such issuer, or more than 10% of the
issuer's outstanding voting securities would be owned by the Portfolio
or the Fund, except that up to 25% of the Portfolio's total assets may
be invested without regard to such limitations.
2. Purchase any securities which would cause 25% or more
of the Portfolio's total assets at the time of purchase to be invested
in the securities of one or more issuers conducting their principal
business activities in the same industry, provided, however, that (a)
there is no limitation with respect to obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities,
repurchase agreements secured by obligations of the U.S. Government or
its agencies or instrumentalities, and, with respect to the Equity
Income Portfolio only, securities issued by domestic banks, thrifts or
savings institutions; (b) wholly-owned finance companies will be
considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their
parents; and (c) utilities will be divided according to their services
(for
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example, gas, gas transmission, electric and gas, electric, and
telephone will each be considered a separate industry).
3. Borrow money or issue senior securities, except that
each Portfolio may borrow from banks and the Short-Intermediate
Corporate Bond Portfolio may enter into reverse repurchase agreements,
for temporary defensive purposes in amounts not in excess of 10% of
the Portfolio's total assets at the time of such borrowing; or
mortgage, pledge, or hypothecate any assets, except in connection with
any such borrowing and in amounts not in excess of the lesser of the
dollar amounts borrowed or 10% of the Portfolio's total assets at the
time of such borrowing; or purchase securities while its borrowings
exceed 5% of its total assets. A Portfolio's transactions in futures
and related options (including the margin posted by the Portfolio in
connection with such transactions), and securities held in escrow or
separate accounts in connection with a Portfolio's investment
practices described in this Prospectus or the Statement of Additional
Information are not subject to this limitation.
4. Make loans, except that (a) each Portfolio may
purchase or hold debt instruments, lend portfolio securities and make
other investments in accordance with its investment objective and
policies and (b) the Short-Intermediate Corporate Bond Portfolio may
enter into repurchase agreements.
5. Purchase securities on margin, make short sales of
securities or maintain a short position, except that (a) this
investment limitation shall not apply to a Portfolio's transactions in
options, and futures contracts and related options, and (b) a
Portfolio may obtain short-term credits as may be necessary for the
clearance of purchases and sales of portfolio securities.
If a percentage limitation is satisfied at the time of investment, a
later increase or decrease in such percentage resulting solely from a change in
the value of a Portfolio's securities will not constitute a violation of such
limitation.
In order to permit the sale of a Portfolio's Shares in certain states,
the Portfolios may make commitments more restrictive than the investment
policies and limitations described above. Should the Adviser determine that
any such commitment is no longer in the best interests of a Portfolio, it will
revoke the commitment by terminating sales of its Shares in the state involved.
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PRICING OF SHARES
The Portfolios' respective net asset values per Share are determined
by the Administrator as of the close of regular trading hours on the New York
Stock Exchange (currently 4:00 p.m. Eastern Time) on each weekday, with the
exception of those holidays on which the New York Stock Exchange or the Federal
Reserve Bank of St. Louis are closed (a "Business Day"). Currently one or both
of these institutions are closed on the customary national business holidays of
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day (observed), Independence Day (observed), Labor Day, Columbus Day,
Veterans' Day, Thanksgiving Day and Christmas Day (observed).
Securities which are traded on a recognized stock exchange are valued
at the last sale price on the securities exchange on which such securities are
primarily traded or at the last sale price on the national securities market.
Securities traded on only over-the-counter markets are valued on the basis of
market values when available. Securities for which there are no transactions
are valued at the average of the current bid and asked prices. Other
securities, including restricted and other securities for which market
quotations are not readily available, and other assets are valued at fair value
by the Adviser under the supervision of the Board of Directors. Investments in
debt securities with remaining maturities of 60 days or less may be valued
based upon the amortized cost method. (For further information about valuation
of investments, see "Net Asset Value" in the Statement of Additional
Information.)
The public offering price for each class of Shares is based upon net
asset value per Share plus, in the case of Investor A Shares, a front-end sales
charge. A class will calculate its net asset value per Share by adding the
value of a Portfolio's investments, cash and other assets attributable to the
class, subtracting the Portfolio's liabilities attributable to that class, and
then dividing the result by the total number of Shares in the class that are
outstanding. Because the operating expenses of Investor B Shares are higher
than those associated with other classes of Shares, the net asset value per
Share of Investor B Shares of a Portfolio which declares its net investment
income quarterly will generally be lower than the net asset value per Share of
Trust, Institutional or Investor A Shares of the same Portfolio.
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HOW TO PURCHASE AND REDEEM SHARES
PURCHASE OF SHARES
Institutional Shares are sold to financial institutions, such as
banks, trust companies, thrift institutions, mutual funds or other financial
institutions (collectively "financial institutions") acting on behalf of their
employee benefit, retirement plan or other such accounts for which they do not
have investment discretion. Institutional Shares are sold to qualified
purchasers without a sales charge imposed by the Fund or the Distributor.
Generally, investors purchase Institutional Shares through a financial
institution, which is responsible for transmitting purchase orders directly to
the Fund.
Purchases may be effected on Business Days when the Adviser,
Distributor and Mercantile (the Custodian) are open for business. The Fund
reserves the right to reject any purchase order, including purchases made with
foreign and third party drafts or checks.
Financial institutions placing orders directly or on behalf of their
clients should contact the Fund at 1-800-551-3731. Investors may also call the
Fund for information on how to purchase Shares.
All shareholders of record will receive confirmations of Share
purchases, exchanges and redemptions in the mail. An investor's Shares are
held in the name of the financial institution that has entered into a servicing
agreement with the Fund, and such financial institution is responsible for
transmitting purchase, exchange and redemption orders to the Fund on a timely
basis, recording all purchase, exchange and redemption transactions, and
providing regular account statements which confirm such transactions to
beneficial owners (or arranging for such services). Payment for orders which
are not received or accepted will be returned after prompt inquiry to the
transmitting financial institution.
If purchase orders are received in good form and accepted by the Fund
prior to 4:00 p.m. (Eastern time) on any Business Day, Institutional Shares
will be priced according to the net asset value per Share next determined on
that day after receipt of the order. Immediately available funds must be
received by the Custodian prior to 4:00 p.m. on the next Business Day following
receipt of such order. If funds are not received by such date, the order will
be cancelled, and notice thereof will be given to the financial institution
placing the order.
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EXCHANGE PRIVILEGE
The exchange privilege enables shareholders to exchange Institutional
Shares of a Portfolio for Institutional Shares of another Portfolio offered by
the Fund or, under certain circumstances described below, for Investor A Shares
of the same Portfolio. Exchanges for Institutional Shares in another Portfolio
are effected without payment of any exchange or sales charges. In addition,
Institutional Shares of a Portfolio may be exchanged for Investor A Shares of
the same Portfolio in connection with the distribution of assets held in a
qualified trust, agency or custodian account with the trust department of
mercantile or any of its affiliated or correspondent banks. The exchanges are
made without a sales charge at the net asset value of the respective share
class.
The Fund reserves the right to reject any exchange request. The
exchange privilege may be modified or terminated at any time upon 60 days'
written notice to shareholders. An investor may telephone an exchange request
by calling his or her financial institution, which is responsible for
transmitting such request to the Distributor. (See "Other Exchange or
Redemption Information" below.) An investor should consult the financial
institution or the Distributor for further information regarding procedures for
exchanging Shares.
In addition to the Portfolios described in this Prospectus, the Fund
currently offers Institutional Shares in the following Portfolios:
- The ARCH Money Market Portfolio
- The ARCH Treasury Money Market Portfolio
- The ARCH Growth & Income Equity Portfolio
- The ARCH Emerging Growth Portfolio
- The ARCH Government & Corporate Bond Portfolio
- The ARCH U.S. Government Securities Portfolio
- The ARCH Balanced Portfolio
- The ARCH International Equity Portfolio
For information concerning these Portfolios, please call
1-800-551-3731.
Shareholders exercising the exchange privilege with any of the other
Portfolios in the Fund should request and review the Portfolio's Prospectus
carefully prior to making an exchange.
REDEMPTION OF SHARES
Redemption orders should be placed with or through the same financial
institution that placed the original purchase order. Redemption orders are
effected at a Portfolio's net asset value per Share next determined after
receipt of the order by the Fund. The financial institution is responsible for
transmitting redemption orders to the Fund on a timely basis. Proceeds from
redemptions of Institutional Shares of the Portfolios with respect to
redemption orders received and accepted by the Fund before 4:00 p.m. (Eastern
time) on a Business Day normally are sent electronically to the financial
institution that placed the redemption order the next Business Day after the
Distributor's receipt of the order in good form. No charge for sending
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redemption payments electronically is currently imposed by the Fund, although a
charge may be imposed in the future. The Fund reserves the right to send
redemption proceeds electronically within seven days after receiving a
redemption order if, in the judgment of the Adviser, an earlier payment could
adversely affect a Portfolio.
A written request for redemption must be received by the Fund in order
to honor the request. The Transfer Agent may require a signature guarantee by
an eligible guarantor institution. For purposes of this policy, the term
"eligible guarantor institution" shall include banks, brokers, dealers, credit
unions, securities exchanges and associations, clearing agencies and savings
associations as those terms are defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934. The Transfer Agent reserves the right to reject any
signature guarantee if (1) it has reason to believe that the signature is not
genuine, (2) it has reason to believe that the transaction would otherwise be
improper, or (3) the guarantor institution is a broker or dealer that is
neither a member of a clearing corporation nor maintains net capital of at
least $100,000. The signature guarantee requirement will be waived if all of
the following conditions apply: (1) the redemption check is payable to the
shareholder(s) of record and (2) the redemption check is mailed to the
shareholder(s) at the address of record or the proceeds are either mailed or
sent electronically to a commercial bank account previously designated on the
account application. An investor with questions or needing assistance should
contact the financial institution servicing his or her account or the
Distributor. Additional documentation may be required if the redemption is
requested by a corporation, partnership, trust, fiduciary, executor, or
administrator. If, due to temporary adverse conditions, investors are unable
to effect telephone transactions, investors are encouraged to follow the
procedures described in "Other Exchange or Redemption Information" below.
Neither the Fund nor its service providers will be liable for any
loss, damage, expense or cost arising out of any telephone redemption effected
in accordance with the Fund's telephone redemption procedures, upon
instructions reasonably believed to be genuine. The Fund will employ
procedures designed to provide reasonable assurance that instructions by
telephone are genuine; if these procedures are not followed, the Fund or its
service providers may be liable for any losses due to unauthorized or
fraudulent instructions. If Share certificates are outstanding with respect to
an account, the telephone redemption and exchange privilege is not available.
OTHER EXCHANGE OR REDEMPTION INFORMATION
During periods of substantial economic or market change or activity,
telephone redemptions or exchanges may be difficult to
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complete. In such event, Shares may be redeemed or exchanged by mailing the
request directly to the financial institution through which the original Shares
were purchased or directly to the Fund at P.O. Box 78069, St. Louis, Missouri
63178.
At various times, the Fund may be requested to redeem Shares for which
it has not yet received good payment. In such circumstances, the Fund may
delay the forwarding of proceeds until payment has been collected for the
purchase of such Shares which may take up to 15 days or more. To avoid delay
in payment upon redemption shortly after purchasing Shares, investors should
purchase Shares by certified or bank check or by electronic transfer. The Fund
intends to pay cash for all Shares redeemed, but under abnormal conditions
which make payment in cash unwise, the Fund may make payment wholly or partly
in portfolio securities at their then market value equal to the redemption
price. In such cases, an investor may incur brokerage costs in converting such
securities to cash.
A shareholder may be required to redeem Shares in a Portfolio upon 60
days' written notice if the balance in the shareholder's account drops below
$500. The Fund will not require a shareholder to redeem Portfolio Shares if
the value of the shareholder's account drops below $500 due to fluctuations in
net asset value.
YIELDS AND TOTAL RETURNS
Yield and total return quotations are computed separately for Trust
Shares, Institutional Shares, Investor A Shares and Investor B Shares of a
Portfolio. TOTAL RETURN AND YIELD FIGURES WILL FLUCTUATE, ARE BASED ON
HISTORICAL EARNINGS, AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The
methods used to compute each Portfolio's yields and total returns are described
below and in the Statement of Additional Information.
From time to time, performance information such as total return and
yield data for the Portfolios' Institutional Shares may be quoted in
advertisements or in communications to shareholders. The yield is computed
based on the net income of such Shares in the particular Portfolio during a
30-day (or one-month) period identified in connection with the particular yield
quotation. More specifically, the yield is computed by dividing the
Portfolio's net income per Share during a 30-day (or one-month) period by the
net asset value per Share on the last day of the period and annualizing the
result.
The Portfolios' total returns may be calculated on an average annual
total return basis, and may also be calculated on an aggregate total return
basis, for various periods. Average annual total returns with respect to such
Shares reflect the
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average annual percentage change in value of an investment in such Shares of
the particular Portfolio over the particular measuring period. Aggregate total
returns reflect the cumulative percentage change in value over the measuring
period. Both methods of calculating total returns assume that dividends and
capital gain distributions made by the Portfolio during the period are
reinvested in the Portfolio's Institutional Shares. When considering average
annual total return figures for periods longer than one year, it is important
to note that a Portfolio's annual total return for any one year in the period
might have been more or less than the average for the entire period.
Performance data of the Portfolios' Institutional Shares may be
compared to the performance of other mutual funds with comparable investment
objectives and policies through various mutual fund or market indices and data
such as that provided by Lehman Brothers, Inc. or any of its affiliates,
Ibbotson Associates, Inc., Lipper Analytical Services, Inc. and Mutual Fund
Forecaster. References may also be made to indices or data published in Money
Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times,
Business Week, American Banker, Institutional Investor, Pensions and
Investments, U.S.A. Today, Fortune, CDA/Weisenberger, Morningstar, Inc. and
publications of a local or regional nature. In addition to performance
information, general information about the Portfolios that appears in a
publication such as those mentioned above may be included in advertisements and
in reports to shareholders.
Performance quotations of a class of Shares in a Portfolio represent
that Portfolio's past performance and should not be considered as
representative of future results. Any account fees charged by Service
Organizations (as described under "Management of The Fund -- Service
Organizations") or other institutions will not be included in the calculations
of a Portfolio's yields and total returns. Such fees, if any, will reduce the
investor's net return on an investment in a Portfolio. Investors may call
1-800-452-401K to obtain current yield and total return information.
DIVIDENDS AND DISTRIBUTIONS
THE EQUITY INCOME PORTFOLIO
Net investment income for the Equity Income Portfolio is declared and
paid quarterly as a dividend to shareholders of record. Dividends on each
Share of this Portfolio are determined in the same manner and paid in the same
amount, irrespective of class, except that the Portfolio's Trust Shares and
Institutional Shares bear all expenses of the respective Administrative
Services Plans adopted for such Shares and the Portfolio's Investor A Shares
and Investor B Shares bear all expenses of the
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respective Distribution and Services Plans adopted for such Shares. In
addition, the Portfolio's Institutional Shares bear the expense of certain
sub-transfer agency fees. (See "Management of the Fund" and "Other Information
Concerning the Fund and Its Shares" below.)
THE SHORT-INTERMEDIATE CORPORATE BOND PORTFOLIO
Dividends from net investment income of the Short-Intermediate
Corporate Bond Portfolio are declared daily and paid monthly not later than
five Business Days after the end of each month. Institutional Shares of the
Short-Intermediate Corporate Bond Portfolio earn dividends from the day after
the purchase order is received by the Transfer Agent through the day the
redemption order for such Shares is received. Dividends on each Share of the
Portfolio are determined in the same manner and are paid in the same amounts
irrespective of class, except that a Portfolio's Trust Shares and Institutional
Shares bear all expenses of the respective Administrative Services Plans
adopted for such Shares and the Portfolio's Investor A Shares bear all expenses
of the Distribution and Services Plan adopted for such Shares. In addition,
the Portfolio's Institutional Shares bear the expense of certain sub-transfer
agency fees. (See "Management of the Fund" and "Other Information Concerning
the Fund and Its Shares" below.)
OTHER DIVIDEND AND DISTRIBUTION INFORMATION
Net realized capital gains of a Portfolio, if any, are distributed at
least annually. All dividends and distributions paid on a Portfolio's Shares
are automatically reinvested in additional Shares of the same class unless the
investor has (i) otherwise indicated on the account application, or (ii)
redeemed all the Shares held in a Portfolio, in which case a distribution will
be paid in cash. Reinvested dividends and distributions will be taxed in the
same manner as those paid in cash.
TAXES
FEDERAL TAXES
Each Portfolio intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"), for the
taxable year ending November 30, 1996, and to continue to so qualify as long as
such qualification is in the best interests of shareholders. A regulated
investment company is generally exempt from federal income tax on amounts
distributed to shareholders.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that each
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Portfolio distribute to its shareholders an amount equal to at least the sum of
90% of its investment company taxable income and 90% of its net exempt-interest
income (if any). In general, a Portfolio's investment company taxable income
will be its taxable income, including dividends, interest and short-term
capital gains (the excess of net short-term capital gain over net long-term
capital loss), subject to certain adjustments and excluding the excess of any
net long-term capital gain over net short-term capital loss, if any, for such
taxable year. It is the policy of each Portfolio to distribute as dividends
substantially all of its investment company taxable income and any net
tax-exempt interest income each year. Such dividends will be taxable as
ordinary income to a Portfolio's shareholders who are not currently exempt from
federal income taxes, whether such income is received in cash or reinvested in
additional Shares. (Federal income taxes for distributions to an IRA are
deferred under the Code.) In the case of the Equity Income Portfolio, such
dividends will qualify for the dividends received deduction for corporations to
the extent of the total qualifying dividends received by the Portfolio from
domestic corporations for the taxable year.
Substantially all of each Portfolio's net realized long-term capital
gains, if any, will be distributed at least annually to its shareholders. A
Portfolio generally will have no tax liability with respect to such gains and
the distributions will be taxable to shareholders who are not currently exempt
from federal income taxes as long-term capital gains, regardless of how long
the shareholders have held the Shares and whether such gains are received in
cash or reinvested in additional Shares.
An investor considering purchasing Shares of a Portfolio on just
before the record date of any capital gains distribution (or in the case of the
Equity Income Portfolio, any dividend or capital gains distribution) should be
aware that the amount of the forthcoming distribution, although in effect a
return of capital, will be taxable.
Dividends declared by a Portfolio in October, November, or December of
any year payable to shareholders of record on a specified date in such months
will be deemed to have been received by shareholders and paid by the Portfolio
on December 31 of such year in the event such dividends are actually paid
during January of the following year.
Each Portfolio may be required in certain cases to withhold and remit
to the U.S. Treasury 31% of taxable dividends or gross sale proceeds paid to
shareholders who have failed to provide a correct tax identification number in
the manner required, who are subject to withholding by the Internal Revenue
Service for failure properly to include on their return payments of taxable
interest or dividends, or who have failed to certify to the
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Portfolio that they are not subject to backup withholding when required to do
so or that they are "exempt recipients."
A taxable gain or loss may be realized by an investor upon redemption,
transfer or exchange of Shares of the Portfolios, depending upon the tax basis
of such Shares and their price at the time of redemption, transfer or exchange.
STATE AND LOCAL
The application of state and local taxes may have different
consequences from those of the federal income tax law described above. In
particular, shareholders should note that dividends paid by a Portfolio may be
taxable to investors under state or local law as dividend income even though
all or a portion of such dividends may be derived from interest on obligations
that, if realized directly, would be exempt from such income taxes.
MISCELLANEOUS
The foregoing summarizes some of the important federal and state tax
considerations generally affecting the Portfolios and their shareholders and is
not intended as a substitute for careful tax planning. Accordingly, potential
investors in the Portfolios should consult their tax advisers with specific
reference to their own tax situation. Shareholders will be advised at least
annually as to the federal income tax consequences of distributions made each
year.
MANAGEMENT OF THE FUND
The Fund is managed under the direction of its Board of Directors.
The Statement of Additional Information contains the names of and general
background information concerning each director.
INVESTMENT ADVISER
Mississippi Valley Advisors Inc. serves as the investment adviser to
each Portfolio. MVA's principal office is located at One Mercantile Center,
Seventh & Washington Streets, St. Louis, Missouri 63101. MVA is a wholly-owned
subsidiary of Mercantile. As of December 31, 1995, MVA had approximately $7.0
billion in assets under investment management, including the Fund's assets,
which were approximately $2.1 billion. MVA also serves as investment adviser
to each of the Fund's other Portfolios.
Subject to the general supervision of the Fund's Board of Directors
and in accordance with the Fund's investment policies, MVA manages the
Portfolios, makes investment decisions with respect to and places orders for
all purchases and sales of the
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Portfolios' securities and other investments, and directs the maintenance of
each Portfolio's records relating to such purchases and sales.
For the services provided and expenses assumed pursuant to the
investment advisory agreement, MVA is entitled to receive fees, computed daily
and payable monthly, at the annual rates of .75% and .55% of the average daily
net assets of the Equity Income and Short-Intermediate Corporate Bond
Portfolios, respectively.
MVA may from time to time voluntarily reduce all or a portion of its
advisory fee to increase the net income of one or more Portfolios available for
distributions as dividends. The voluntary fee reduction will cause the return
of any such Portfolio to be higher than it would otherwise be in the absence of
such reduction.
Gregory A. Glidden is the person primarily responsible for the
day-to-day management of the Equity Income Portfolio. Mr. Glidden, Senior
Associate, has been with MVA since 1983.
David A. Bethke is the person primarily responsible for the day-to-day
management of the Short-Intermediate Corporate Bond Portfolio. Mr. Bethke,
Senior Associate, joined MVA in 1987 and has six years of prior investment
experience.
Set forth below are certain performance data relating to those common
trust funds of the Adviser and its affiliates (the "Commingled Funds"), which
have been managed with full investment authority by the Adviser and/or its
affiliates. The Commingled Funds have been divided into two investment
portfolios, herein referred to as the "Equity Income Fund" and the
"Short-Intermediate Corporate Bond Fund." The Commingled Funds have
substantially similar investment objectives and use similar investment
strategies and techniques as are used by the Fund's Equity Income Portfolio and
Short-Intermediate Corporate Bond Portfolio, respectively.
The performance information set forth below reflects past performance
and is not necessarily indicative of the future performance of the Fund's
Equity Income Portfolio and Short-Intermediate Corporate Bond Portfolio, or any
of the other investment portfolios of the Fund. Performance will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. In addition, because each of the Fund's Equity Income Portfolio
and Short-Intermediate Corporate Bond Portfolio will be actively managed, its
investments will vary from time to time and will not be identical to those
investments held by the Commingled Funds.
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COMPOSITE PERFORMANCE FOR THE COMMINGLED FUNDS1 SHOWING AVERAGE ANNUAL TOTAL
RETURNS(2)
<TABLE>
<CAPTION>
Equity Income Short-Intermediate Corporate Bond
------------- ---------------------------------
Institutional Institutional
Shares Shares
------ ------
<S> <C>
One Year
Five Years
Ten Years
</TABLE>
ADMINISTRATOR
BISYS Fund Services Ohio, Inc. located at 3435 Stelzer Road, Columbus,
Ohio 43219, acts as the Portfolios' Administrator. The Administrator also
serves as the administrator to each of the Fund's other Portfolios.
The Administrator generally assists in all aspects of each Portfolio's
administration and operation and also monitors and performs other services
pertaining to the Fund's arrangements under the Administrative Services Plan
described below. For its services, the Administrator is entitled to receive a
fee, computed daily and payable monthly, at the annual rate of .20% of each
Portfolio's average daily net assets.
__________________________________
1. The Equity Income Commingled Fund consists of the Mercantile Common
Trust Fund I, the Mercantile Equity Fund for Charitable Trusts, the
Mercantile Bank of Joplin Common Trust Fund A, and the Mercantile Bank
of Illinois Common Trust Fund S. The Short-Intermediate Corporate
Commingled Fund consists of the Mercantile Common Trust Fund B, the
Mercantile Fixed Income Fund for Charitable Trusts, the Mercantile
Bank of Joplin Common Trust Fund B and the Mercantile Bank of Northern
Iowa Common Trust Fund #2.
The Commingled Funds have been advised by the Adviser or its
affiliates since their respective dates of inception.
2. The above information is the average annual total return (calculated
in conformity with Securities and Exchange Commission guidelines) for
the periods indicated, assuming reinvestment of all net investment
income and capital gain distributions and taking into account
currently projected expense ratios for the initial fiscal year for
Institutional Shares of the Fund's Equity Income and Short-
Intermediate Corporate Bond Portfolios.
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DISTRIBUTOR
Institutional Shares of the Portfolios are sold continuously by the
Distributor, BISYS Fund Services, an affiliate of the Administrator. The
Distributor is a registered broker-dealer with principal offices at 3435
Stelzer Road, Columbus, Ohio 43219. The Distributor also acts as distributor
to each of the Fund's other Portfolios.
ADMINISTRATIVE SERVICES PLAN
The Fund has adopted an Administrative Services Plan with respect to
Institutional Shares of the Portfolios. Pursuant to the Administrative
Services Plan, Institutional Shares are sold to banks and other financial
institutions (which may include Mercantile or its affiliated or correspondent
banks) on behalf of their qualified accounts (such financial institutions
collectively, the "Service Organizations"), which agree to provide certain
shareholder administrative services for their clients or account holders
(collectively, the "customers") who are the beneficial owners of such Shares.
The holders of Institutional Shares bear separately their pro rata portion of
the fees which may be paid to Service Organizations for such services at an
annual rate of up to .30% of the average daily net assets of a Portfolio's
Institutional Shares owned beneficially by a Service Organization's customers.
SERVICE ORGANIZATIONS
The servicing agreements adopted under the Administrative Services
Plan (collectively, the "Servicing Agreements") require the Service
Organizations receiving such compensation (which may include Mercantile and its
affiliates) to perform certain services, including providing administrative
services with respect to the beneficial owners of Institutional Shares of a
Portfolio, such as establishing and maintaining accounts and records for their
customers who invest in such Shares, assisting customers in processing
purchase, exchange and redemption requests, and responding to customer
inquiries concerning their investments.
The Fund understands that Service Organizations providing such
administrative services may also charge fees to their customers beneficially
owning such Shares. These fees would be in addition to any amounts which may
be received by such a Service Organization under its Servicing Agreement with
the Fund. The Fund's Servicing Agreements require a Service Organization to
disclose to its customers any compensation payable to the Service Organization
by a Portfolio and any other compensation payable by its customers in
connection with their investment in such Shares. Customers of such Service
Organizations receiving servicing fees
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should read this Prospectus in light of the terms governing their accounts with
their Service Organization.
CUSTODIAN, TRANSFER AGENT AND SUB-TRANSFER AGENT
Mercantile Bank of St. Louis National Association, an affiliate of the
Fund and a wholly-owned subsidiary of Mercantile Bancorporation, Inc., with
principal offices located at One Mercantile Center, 8th and Locust Streets, St.
Louis, Missouri 63101, serves as Custodian of each Portfolio's assets. BISYS
Fund Services Ohio, Inc. also serves as the Fund's transfer agent and dividend
disbursing agent. Its address is 3435 Stelzer Road, Columbus, Ohio 43219.
Pursuant to an agreement with BISYS Fund Services Ohio, Inc. and in
connection with the Institutional Shares offered to its customers, a financial
institution (which may include Mercantile or its affiliated or correspondent
banks) serves as sub-transfer agent with respect to the underlying beneficial
owners of Institutional Shares. For the account maintenance services provided,
a sub-transfer agent is entitled to receive an annual fee of $30 with respect
to each beneficial owner's holdings in Institutional Shares (irrespective of
the number of Portfolios in which such Institutional Shares are held).
REGULATORY MATTERS
Banking laws and regulations currently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any affiliate
thereof from sponsoring, organizing, or controlling the shares of a registered,
open-end investment company continuously engaged in the issuance of its shares,
and prohibit banks generally from issuing, underwriting, selling, or
distributing securities such as Shares of the Portfolios. Such banking laws
and regulations do not prohibit such a holding company or affiliate, or banks,
from acting as investment adviser, transfer agent, or custodian to such an
investment company, or from purchasing shares of such a company as agent for
and upon the order of customers. Mercantile, MVA, Service Organizations that
are banks or bank affiliates, and broker-dealers that are bank affiliates are
subject to such laws and regulations, but believe they may perform the services
for the Portfolios contemplated by their respective agreements, this Prospectus
and the Statement of Additional Information without violating applicable
banking laws and regulations. In addition, state securities laws on this issue
may differ from the interpretation of federal law expressed herein and banks
and financial institutions may be required to register as dealers pursuant to
state law.
Should future legislative, judicial or administrative action prohibit
or restrict the activities of such companies in
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connection with the provision of services on behalf of the Portfolios and their
shareholders, the Fund might be required to alter materially or discontinue its
arrangements with such companies and change its method of operation. It is not
expected that investors would suffer any adverse financial consequences as a
result of any of these occurrences.
If current restrictions preventing a bank from legally sponsoring,
organizing, controlling or distributing Shares of an investment company were
relaxed, Mercantile or an affiliate of Mercantile, would consider the
possibility of offering to perform additional services for the Portfolios. It
is not possible, of course, to predict whether or in what form such legislation
might be enacted or the terms upon which Mercantile, or such an affiliate,
might offer to provide such services.
Conflict of interest restrictions may apply to the receipt of
compensation paid pursuant to a Servicing Agreement by a Portfolio to a
financial intermediary in connection with the investment of fiduciary funds in
a Portfolio's Shares. Institutions, including banks regulated by the
Comptroller of the Currency and investment advisers and other money managers
subject to the jurisdiction of the SEC, the Department of Labor or state
securities commissions, should consult legal counsel before entering into
Servicing Agreements.
EXPENSES
Except as noted above and in the Statement of Additional Information
under "Investment Advisory and Administrative Contracts" and "Custodian and
Transfer Agent," the Fund's service contractors bear all expenses in connection
with the performance of their services, except that the Distributor is
compensated pursuant to the Distribution and Services Plans (as described below
under "Other Information Concerning the Fund and Its Shares"). Expenses are
deducted from the total income of each Portfolio before dividends and
distributions are paid. These expenses include, but are not limited to, fees
paid to the Adviser and Administrator, transfer agency fees, fees and expenses
of officers and directors who are not affiliated with the Adviser or the
Distributor, taxes, interest, legal fees, custodian fees, auditing fees, 12b-1
fees, servicing fees, certain fees and expenses in registering and qualifying a
Portfolio and its Shares for distribution under Federal and state securities
laws, costs of preparing and printing prospectuses and statements of additional
information for regulatory purposes and for distribution to existing
shareholders, the expense of reports to shareholders, shareholders' meetings
and proxy solicitations, fidelity bond and directors and officers liability
insurance premiums, the expense of using independent pricing services and other
expenses which are not expressly assumed by the Adviser, Distributor or
Administrator under their respective agreements
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with the Fund. The Fund also pays for brokerage fees, commissions and other
transaction charges, if any, in connection with the purchase and sale of
portfolio securities. Any general expenses of the Fund that are not readily
identifiable as belonging to a particular Portfolio will be allocated among all
Portfolios by or under the direction of the Board of Directors in a manner the
Board determines to be fair and equitable. Any expenses relating only to a
particular class of Shares within a Portfolio will be borne solely by such
class. (See "Certain Financial Information" and "Management of the Fund" above
for additional information regarding expenses of each Portfolio.)
OTHER INFORMATION CONCERNING
THE FUND AND ITS SHARES
DESCRIPTION OF SHARES
The Fund was organized on September 9, 1982 as a Maryland corporation,
and is a mutual fund of the type known as an "open-end management investment
company". The Fund's principal office is located at 3435 Stelzer Road,
Columbus, Ohio 43219.
The Fund's Charter authorizes the Board of Directors to issue up to
seven billion full and fractional shares of common stock, and to classify and
reclassify any unauthorized and unissued shares into one or more classes of
shares. The Board of Directors may similarly classify or reclassify any class
of shares into one or more series.
Pursuant to such authority, the Board of Directors has authorized the
issuance of the following series of shares representing interests in the
Portfolios, each of which is classified as a diversified company under the 1940
Act: 25 million Trust Shares, 25 million Institutional Shares, 25 million
Investor A Shares and 25 million Investor B Shares, representing interests in
the Equity Income Portfolio; and 25 million Trust Shares, 25 million
Institutional Shares and 25 million Investor A Shares, representing interest in
the Short-Intermediate Corporate Bond Portfolio. Trust, Investor A and/or
Investor B Shares of these Portfolios are described in separate prospectuses
which are available from the Distributor at the telephone number on the cover
of this Prospectus. The Board of Directors has also authorized the issuance of
additional classes of shares representing interest in other investment
portfolios of the Fund, which are likewise described in separate prospectuses
available from the Distributor. Shares in the Fund's Portfolios will be issued
without Share certificates.
The Institutional Shares of the Portfolios are described in this
Prospectus. The Portfolios also offer Trust Shares and Investor A Shares and,
in addition, the Equity Income Portfolio
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offers Investor B Shares. Trust Shares, which are offered to financial
institutions acting on their own behalf or on behalf of certain qualified
accounts, are sold without a sales charge. Investor A Shares of the Portfolios
are sold with a maximum 4.5% front-end sales charge, and Investor B Shares of
the Equity Income Portfolio are sold with a maximum 5.0% contingent deferred
sales charge. Investor A Shares and/or Investor B Shares are sold through
selected broker/dealers and other financial intermediaries to individual or
institutional customers. Trust Shares, Institutional Shares, Investor A Shares
and/or Investor B Shares bear their pro rata portion of all operating expenses
paid by a Portfolio, except that Trust Shares and Institutional Shares bear all
payments under a Portfolio's respective Administrative Services Plans adopted
for such Shares and Investor A Shares and Investor B Shares bear all payments
under a Portfolio's respective Distribution and Services Plans adopted for such
Shares. In addition, Institutional Shares of the Portfolios bear the expense
of certain sub-transfer agency fees.
Payments under the Administrative Services Plan for Trust Shares are
made to Service Organizations for administrative services provided to the
Service Organizations' clients or account holders who are the beneficial owners
of Trust Shares. Payments under the Administrative Services Plan may not
exceed .30% (on an annual basis) of the average daily net asset value of a
Portfolio's outstanding Trust Shares.
Payments under the Distribution and Services Plans for Investor A
Shares and Investor B Shares are made to (i) the Distributor or another person
for providing distribution assistance and assuming certain related expenses,
and (ii) Service Organizations for administrative services provided to the
Service Organizations' clients or account holders who are the beneficial owners
of Investor A Shares or Investor B Shares. Payments under the Distribution and
Services Plans for Investor A Shares and Investor B Shares may not exceed .30%
and 1.00%, respectively, (on an annual basis) of the average daily net asset
value of the outstanding Investor A Shares and Investor B Shares of a
Portfolio. Distribution payments made under the Distribution and Services
Plans are subject to the requirements of Rule 12b-1 under the 1940 Act.
The Fund offers various services and privileges in connection with
Investor A Shares and Investor B Shares of a Portfolio that are not offered in
connection with the Portfolio's Trust or Institutional Shares, including an
automatic investment program and an automatic withdrawal plan. In addition,
each class of Shares offer different exchange privileges.
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Shareholders are entitled to one vote for each full Share held and
proportionate fractional votes for fractional Shares held. Shares of all
Portfolios will vote together and not by class unless otherwise required by law
or permitted by the Board of Directors. All shareholders of a particular
Portfolio will vote together as a single class on matters relating to the
Portfolio's investment advisory agreement and investment objective and
fundamental policies. Only holders of Trust Shares, however, will vote on
matters relating to the Administrative Services Plan for Trust Shares and only
holders of Institutional Shares will vote on matters pertaining to the
Administrative Services Plan for Institutional Shares. Similarly, only holders
of Investor A Shares will vote on matters pertaining to the Distribution and
Services Plan for Investor A Shares and only holders of Investor B Shares will
vote on matters pertaining to the Distribution and Services Plan for Investor B
Shares.
The Fund is not required, and currently does not intend, to hold
annual meetings except as required by the 1940 Act or other applicable law.
Upon the written request of the holders of 10% or more of the outstanding
Shares, the Fund will call a special meeting to vote on the questions of
removal of a director.
Shares of the Fund's Portfolios have noncumulative voting rights and,
accordingly, the holders of more than 50% of the Fund's outstanding Shares
(irrespective of Portfolio or class) may elect all of the Directors. Shares
have no preemptive rights and only such conversion and exchange rights as the
Board may grant in its discretion. When issued for payment as described in
this Prospectus, Shares will be fully paid and nonassessable.
MISCELLANEOUS
As used in this Prospectus, a "vote of a majority of the outstanding
Shares" of a Portfolio means, with respect to the approval of an investment
advisory agreement or a change in an investment objective or fundamental
investment policy, the affirmative vote of the lesser of (a) more than 50% of
the outstanding Shares of such Portfolio (irrespective of class), or (b) 67% or
more of the Shares of such Portfolio (irrespective of class) present at a
meeting if more than 50% of the outstanding Shares of such Portfolio are
represented at the meeting in person or by proxy.
As of ___________, 1996, Mercantile and its affiliates possessed, of
record on behalf of their underlying customer
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accounts, voting or investment power with respect to more than 25% of the
Fund's outstanding Shares. Therefore, Mercantile may be deemed to be a
controlling person of the Fund within the meaning of the 1940 Act.
Inquiries regarding the Portfolios may be directed to the Fund at
1-800-551-3731.
For information with respect to Institutional Shares of the Money
Market, Treasury Money Market, Growth & Income Equity, Emerging Growth,
Government & Corporate Bond, U.S. Government Securities, Balanced and
International Equity Portfolios, call the Fund at 1-800-551-3731.
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<PAGE> 144
<TABLE>
<CAPTION>
<S> <C>
NO PERSON HAS BEEN AUTHORIZED THE ARCH
TO GIVE ANY INFORMATION OR TO MAKE FUND(R), INC.
ANY REPRESENTATIONS NOT CONTAINED
IN THIS PROSPECTUS, OR IN THE
PORTFOLIOS' STATEMENT OF ADDITIONAL
INFORMATION INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE EQUITY INCOME
PORTFOLIOS, THE FUND, OR THE PORTFOLIO
DISTRIBUTOR. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFERING BY THE
PORTFOLIOS, THE FUND OR THE DISTRIBUTOR
IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE. SHORT-INTERMEDIATE
CORPORATE BOND
PORTFOLIO
</TABLE>
___________________
INSTITUTIONAL
TABLE OF CONTENTS SHARES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Highlights . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Financial Information . . . . . . . . . . . . . . . . .
Financial Highlights . . . . . . . . . . . . . . . . . . . . .
Expense Summary for
Institutional Shares . . . . . . . . . . . . . . . . . . . .
Investment Objectives, Policies and
Risk Considerations . . . . . . . . . . . . . . . . . . . . .
Pricing of Shares . . . . . . . . . . . . . . . . . . . . . . . [OLD LOGO]
How to Purchase and Redeem Shares . . . . . . . . . . . . . . .
Purchase of Shares . . . . . . . . . . . . . . . . .
Exchange Privilege . . . . . . . . . . . . . . . . . .
Redemption of Shares . . . . . . . . . . . . . . . . .
Other Exchange or
Redemption Information . . . . . . . . . . . . . . .
Yields and Total Returns . . . . . . . . . . . . . . . . . . . PROSPECTUS
</TABLE>
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<PAGE> 145
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Dividends and Distributions . . . . . . . . . . . . . . . . . . _______, 1996
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management of the Fund . . . . . . . . . . . . . . . . . . . .
Other Information Concerning
the Fund and its Shares . . . . . . . . . . . . . . . . . . .
Miscellaneous . . . . . . . . . . . . . . . . . . . .
Investment Adviser:
Mississippi Valley Advisors Inc.
a wholly-owned subsidiary of
Mercantile Bank of
St. Louis National Association
Distributor: BISYS Fund Services
</TABLE>
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<PAGE> 146
THE ARCH FUND(R), INC.
THE ARCH EQUITY INCOME PORTFOLIO
THE ARCH NATIONAL MUNICIPAL BOND PORTFOLIO
THE ARCH SHORT-INTERMEDIATE CORPORATE BOND PORTFOLIO
Statement of Additional Information
Part B
__________________, 1996
<PAGE> 147
THE ARCH FUND, INC.
Statement of Additional Information
for
The ARCH Equity Income Portfolio
The ARCH National Municipal Bond Portfolio
The ARCH Short-Intermediate Corporate Bond Portfolio
______________, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . 1
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . 23
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . 24
ADDITIONAL YIELD AND TOTAL RETURN INFORMATION . . . . . . . . 26
DESCRIPTION OF SHARES . . . . . . . . . . . . . . . . . . . . 32
ADDITIONAL INFORMATION CONCERNING TAXES . . . . . . . . . . . 35
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . 42
INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . 51
COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 51
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>
This Statement of Additional Information, which provides supplemental
information applicable to the Equity Income, National Municipal Bond and
Short-Intermediate Corporate Bond Portfolios is not a prospectus. It should be
read only in conjunction with the Portfolios' Prospectuses dated
_______________, 1996 and is incorporated by reference in its entirety into the
Prospectuses. No investment in shares of any Portfolio should be made without
reading the relevant Prospectus. A copy of the applicable Prospectus may be
obtained by writing the Fund at P.O. Box 78069, St. Louis Missouri 63178 or by
calling (800) 551-3731. Capitalized terms used but not defined herein have the
same meanings as in each Prospectus.
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<PAGE> 148
THE FUND
The ARCH Fund, Inc. (the "Fund") is an open-end investment
company currently offering fifty-one classes of shares in fifteen investment
portfolios.
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the description of the
investment objectives and policies of the Equity Income, National Municipal
Bond and Short-Intermediate Corporate Bond Portfolios (the "Portfolios")
described in the Prospectuses.
EQUITY INCOME PORTFOLIO
The Equity Income Portfolio will not normally invest in
securities of issuers having a record, together with predecessors, of less than
three years of continuous operations.
RIGHTS AND WARRANTS. As stated in the Prospectuses, the
Equity Income Portfolio may participate in rights offerings and purchase
warrants, which are privileges issued by corporations enabling the owners to
subscribe to and purchase a specified number of shares of the corporation at a
specified price during a specified period of time. Subscription rights
normally have a short life span to expiration. The purchase of rights or
warrants involves the risk that the Portfolio could lose the purchase value of
a right or warrant if the right to subscribe to additional shares is not
exercised prior to the rights' or warrants' expiration. Also, the purchase of
rights or warrants involves the risk that the effective price paid for the
right or warrant added to the subscription price of the related security may
exceed the value of the subscribed security's market price such as when there
is no movement in the level of the underlying security. The Portfolio will not
invest more than 5% of its total assets, taken at market value, in warrants, or
more than 2% of its total assets, taken at market value, in warrants not listed
on the New York, American or Canadian Stock Exchanges. Warrants acquired by
the Portfolio in units or attached to other securities are not subject to this
restriction.
NATIONAL MUNICIPAL BOND PORTFOLIO
As stated in the Prospectuses, the National Municipal Bond
Portfolio's investment objective is to seek as high a level of current income,
exempt from federal income tax, as is consistent with preservation of capital.
The Portfolio seeks to achieve its objective by investing substantially all of
its assets in investment-grade debt obligations issued by or on behalf of
states, territories and possessions of the United States, the District of
Columbia and their respective political subdivisions, agencies,
instrumentalities and authorities the
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interest on which, in the opinion of bond counsel or counsel to the issuer, is
exempt from regular federal income tax (collectively, "Municipal Obligations").
The value of the Portfolio's securities is generally sensitive to change in
interest rates. See "Short-Intermediate Corporate Bond Portfolio" below.
MUNICIPAL OBLIGATIONS. As described in its Prospectuses and
subject to its investment limitations, the National Municipal Bond Portfolio
may invest in Municipal Obligations. Municipal Obligations include debt
obligations issued by governmental entities which obtain funds for various
public purposes, including the construction of a wide range of public
facilities, the refunding of outstanding obligations, the payment of general
operating expenses and the extension of loans to public institutions and
facilities.
As described in the Prospectuses, the two principal
classifications of Municipal Obligations consist of "general obligation" and
"revenue" issues. In addition, the National Municipal Bond Portfolio may
purchase "moral obligation" issues, which are normally issued by special
purpose authorities. There are, of course, variations in the quality of
Municipal Obligations both within a particular classification and between
classifications, and the yields on Municipal Obligations depend upon a variety
of factors, including general conditions of the money market and/or the
municipal bond market, the financial condition of the issuer, the size of a
particular offering, the maturity of the obligation and the rating of the
issue. The ratings of Rating Agencies, such as Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's Ratings Group ("S&P"), represent their
opinions as to the quality of Municipal Obligations. It should be emphasized,
however, that ratings are general and are not absolute standards of quality,
and Municipal Obligations with the same maturity, interest rate and rating may
have different yields while Municipal Obligations of the same maturity and
interest rate with different ratings may have the same yield. Subsequent to
its purchase by the Portfolio, an issue of Municipal Obligations may cease to
be rated or its rating may be reduced below the minimum rating required for
purchase by the Portfolio. The Adviser will consider such an event in
determining whether the Portfolio involved should continue to hold the
obligation.
The National Municipal Bond Portfolio may also purchase
Municipal Obligations in the form of certificates of participation which
represent undivided interests in lease payments by a governmental or nonprofit
entity. A lease may provide that the certificate trustee cannot accelerate
lease obligations upon default. The trustee would only be able to enforce
lease payments as they become due. In the event of a
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default or failure of appropriation, it is unlikely that the trustee would be
able to obtain an acceptable substitute source of payment. In addition,
certificates of participation are less liquid than other bonds because there is
a limited secondary trading market for such obligations. To alleviate
potential liquidity problems with respect to these investments, the Portfolio
may enter into remarketing agreements which may provide that the seller or a
third party will repurchase the obligation within seven days after demand by
the Portfolio and upon certain conditions such as the Portfolio's payment of a
fee.
The payment of principal and interest on most securities
purchased by the National Municipal Bond Portfolio will depend upon the ability
of the issuers to meet their obligations. An issuer's obligations under its
Municipal Obligations are subject to the provisions of bankruptcy, insolvency
and other laws affecting the rights and remedies of creditors, such as the
federal bankruptcy code, and laws, if any, which may be enacted by federal or
state legislatures extending the time for payment of principal or interest, or
both, or imposing other constraints upon enforcement of such obligations or
upon the ability of municipalities to levy taxes. The power or ability of an
issuer to meet its obligations for the payment of interest on and principal of
its Municipal Obligations may be materially adversely affected by litigation or
other conditions. The District of Columbia, each state, each of their
political subdivisions, agencies, instrumentalities and authorities and each
multi-state agency of which a state is a member is a separate "issuer" as that
term is used in this Statement of Additional Information and the Prospectuses.
The non-governmental user of facilities financed by private activity bonds is
also considered to be an "issuer."
The National Municipal Bond Portfolio may also purchase
General Obligation Notes, Tax Anticipation Notes, Bond Anticipation Notes,
Revenue Anticipation Notes, Tax-Exempt Commercial Paper, Construction Loan
Notes and other tax-exempt loans. Such instruments are issued in anticipation
of the receipt of tax funds, the proceeds of bond placements, or other
revenues.
Certain types of Municipal Obligations (private activity
bonds) have been or are issued to obtain funds to provide, among other things,
privately operated housing facilities, pollution control facilities, convention
or trade show facilities, mass transit, airport, port or parking facilities and
certain local facilities for water supply, gas, electricity or sewage or solid
waste disposal. Private activity bonds are also issued to privately held or
publicly owned corporations in the financing of commercial or industrial
facilities. State and local governments are authorized in most
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<PAGE> 151
states to issue private activity bonds for such purposes in order to encourage
corporations to locate within their communities. The principal and interest on
these obligations may be payable from the general revenues of the users of such
facilities. Furthermore, payment of principal and interest on Municipal
Obligations of certain projects may be secured by mortgages or deeds of trust.
In the event of a default, enforcement of the mortgages or deeds of trust will
be subject to statutory enforcement procedures and limitations, including
rights of redemption and limitations on obtaining deficiency judgments. In the
event of a foreclosure, collection of the proceeds of the foreclosure may be
delayed, and the amount of proceeds from the foreclosure may not be sufficient
to pay the principal of and accrued interest on the defaulted Municipal
Obligations.
From time to time, proposals have been introduced before
Congress for the purpose of restricting or eliminating the federal income tax
exemption for interest on Municipal Obligations. For example, the Tax Reform
Act of 1986 (the "Act"), adopted in October 1986, substantially revised
provisions of prior law affecting the issuance and use of proceeds of certain
tax-exempt obligations. The Act made a new definition of private activity
bonds applicable to many types of bonds, including those which were industrial
development bonds under prior law. Interest on private activity bonds is
exempt from regular federal income tax only if the bonds fall within and meet
the requirements of certain defined categories of qualified private activity
bonds. The Act also extended to all Municipal Obligations issued after August
16, 1986 (August 31, 1986 in the case of certain bonds) certain rules formerly
applicable only to industrial development bonds. If the issuer fails to
observe such rules, the interest on the Municipal Obligations may become
taxable retroactive to the date of issue. In addition, interest on certain
private activity bonds must be included in an investor's federal alternative
minimum taxable income, and corporate investors must include all tax-exempt
interest in their federal alternative minimum taxable income. (See the
applicable Prospectus under "Taxes - Federal Taxes.")
SHORT-INTERMEDIATE CORPORATE BOND PORTFOLIO
An increase in interest rates will generally reduce the value
of the investments in the Short-Intermediate Corporate Bond Portfolio, and a
decline in interest rates will generally increase the value of those
investments. Depending upon the prevailing market conditions, the Adviser may
purchase debt securities at a discount from face value, which produces a yield
greater than the coupon rate. Conversely, if debt securities are purchased at
a premium over face value, the yield will be lower than the coupon rate. In
response to changing conditions in
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<PAGE> 152
fixed-income markets, the Portfolio may make modest shifts in terms of
anticipated interest rate and sector spread changes.
OTHER APPLICABLE INVESTMENT POLICIES
VARIABLE AND FLOATING RATE INSTRUMENTS. Subject to its
investment limitations, the Portfolios may purchase variable and floating rate
obligations as described in the Prospectuses. The Adviser will consider the
earning power, cash flows and other liquidity ratios of the issuers and
guarantors of such obligations and, for obligations subject to a demand
feature, will monitor their financial status to meet payment on demand. In
determining average weighted portfolio maturity, an instrument issued or
guaranteed by the U.S. Government or an agency or instrumentality thereof, or a
variable rate instrument scheduled on its face to be paid in 397 days or less,
will be deemed to have a maturity equal to the period remaining until the next
interest rate adjustment. Other variable and floating rate obligations will be
deemed to have a maturity equal to the longer of the period remaining to the
next interest rate adjustment or the time the Portfolio can recover payment of
principal as specified in the instrument.
The variable and floating rate demand instruments that the
National Municipal Bond Portfolio may purchase include participations in
Municipal Obligations purchased from and owned by financial institutions,
primarily banks. Participation interests provide the Portfolio with a
specified undivided interest (up to 100%) in the underlying obligation and the
right to demand payment of the unpaid principal balance plus accrued interest
on the participation interest from the institution upon a specified number of
days' notice, not to exceed thirty days. Each participation interest is backed
by an irrevocable letter of credit or guarantee of a bank that the Adviser has
determined meets the prescribed quality standards for the Portfolio. The bank
typically retains fees out of the interest paid on the obligation for servicing
the obligation, providing the letter of credit and issuing the repurchase
commitment.
RESTRICTED SECURITIES. The SEC has adopted Rule 144A which
allows for a broader institutional trading market for securities otherwise
subject to restrictions on resale to the general public. Rule 144A establishes
a "safe harbor" from the registration requirements of the Securities Act of
1933 for the resale of certain securities to qualified institutional buyers.
The purchase of securities which can be sold under Rule 144A could have the
effect of increasing the level of illiquidity in the Portfolios to the extent
that qualified institutional buyers become, for a time, uninterested in
purchasing these restricted securities.
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The Adviser monitors the liquidity of restricted securities in
the Portfolios under the supervision of the Board of Directors. In reaching
liquidity decisions, the Adviser may consider the following factors, although
such factors may not necessarily be determinative: (1) the unregistered nature
of a security; (2) the frequency of trades and quotes for the security; (3) the
number of dealers willing to purchase or sell the security and the number of
other potential purchasers; (4) the trading markets for the security; (5)
dealer undertakings to make a market in the security; and (6) the nature of the
security and the nature of the marketplace trades (including the time needed to
dispose of the security, methods of soliciting offers, and mechanics of
transfer).
STAND-BY COMMITMENTS. The National Municipal Bond Portfolio
may acquire "stand-by commitments" with respect to Municipal Obligations held
by the Portfolio. Under a stand-by commitment, a dealer or bank agrees to
purchase from the Portfolio, at the Portfolio's option, specified Municipal
Obligations at their amortized cost value to the Portfolio plus accrued
interest, if any. Standby commitments acquired by the Portfolio must meet the
quality standards described in the Prospectuses (be rated in the two highest
categories as determined by a Rating Agency, or, if not rated, must be of
comparable quality as determined by the Adviser pursuant to guidelines approved
by the Fund's Board of Directors). Stand-by commitments are exercisable by the
Portfolio at any time before the maturity of the underlying Municipal
Obligations and may be sold, transferred or assigned by the Portfolio only with
the underlying instruments.
The Fund expects that stand-by commitments will generally be
available without the payment of any direct or indirect consideration.
However, if necessary or advisable, the National Municipal Bond Portfolio may
pay for a stand-by commitment either separately in cash or by paying a higher
price for portfolio securities which are acquired subject to the commitment
(thus reducing the yield to maturity otherwise available for the same
securities).
The National Municipal Bond Portfolio intends to enter into
stand-by commitments only with dealers, banks and broker-dealers which, in the
Adviser's opinion, present minimal credit risks. The Portfolio's reliance upon
the credit of these dealers, banks and broker- dealers will be secured by the
value of the underlying Municipal Obligations that are subject to the
commitment. In evaluating the creditworthiness of the issuer of a stand-by
commitment, the Adviser will review periodically the issuer's assets,
liabilities, contingent claims and other relevant financial information.
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The National Municipal Bond Portfolio will acquire stand-by
commitments solely to facilitate portfolio liquidity and does not intend to
exercise its rights thereunder for trading purposes. Stand-by commitments
acquired by the Portfolio would be valued at zero in determining net asset
value. Where the Portfolio paid any consideration directly or indirectly for a
stand-by commitment, its cost would be reflected as unrealized depreciation for
the period during which the commitment was held by the Portfolio. If a
stand-by commitment is exercised, its cost will reduce the amount realized on
the sale of the Municipal Obligations for purposes of determining the amount of
gain or loss. If a stand-by commitment expires unexercised, its cost is added
to the basis of the security to which it relates in those instances where the
stand-by commitment was acquired on the same day as the bond, and in other
cases will be treated as a capital loss at the time of expiration. Stand-by
commitments would not affect the average weighted maturity of the Portfolio.
TAX-EXEMPT DERIVATIVES. The National Municipal Bond
Portfolio may hold tax-exempt derivatives which may be in the form of tender
option bonds, participations, beneficial interests in a trust, partnership
interests or other forms. A number of different structures have been used.
For example, interests in long-term fixed-rate Municipal Obligations, held by a
bank as trustee or custodian, are coupled with tender option, demand and other
features when the tax-exempt derivatives are created. Together, these features
entitle the holder of the interest to tender (or put), the underlying Municipal
Obligation to a third party at periodic intervals and to receive the principal
amount thereof. In some cases, Municipal Obligations are represented by
custodial receipts evidencing rights to receive specific future interest
payments, principal payments, or both, on the underlying municipal securities
held by the custodian. Under such arrangements, the holder of the custodial
receipt has the option to tender the underlying Municipal Obligation at its
face value to the sponsor (usually a bank or broker dealer or other financial
institution), which is paid periodic fees equal to the difference between the
bond's fixed coupon rate and the rate that would cause the bond, coupled with
the tender option, to trade at par on the date of a rate adjustment. The
Portfolio may hold tax-exempt derivatives, such as participation interests and
custodial receipts, for Municipal Obligations which give the holder the right
to receive payment of principal subject to the conditions described above. The
Internal Revenue Service has not ruled on whether the interest received on
tax-exempt derivatives in the form of participation interests or custodial
receipts is tax-exempt, and accordingly, purchases of any such interests or
receipts are based on the opinion of counsel to the sponsors of such derivative
securities. Neither the Fund nor its investment
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adviser will review the proceedings related to the creation of any tax-exempt
derivatives or the basis for such opinions.
U.S. GOVERNMENT OBLIGATIONS. Examples of the types of U.S.
Government obligations that may be held by the Portfolios, subject to their
respective investment policies, include, in addition to U.S. Treasury bills,
the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal
Land Banks, the Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small Business Administration,
Government National Mortgage Association, General Services Administration,
Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal
Intermediate Credit Banks, Maritime Administration, Resolution Trust
Corporation, and International Bank for Reconstruction and Development.
Obligations of certain agencies and instrumentalities of the
U.S. Government, such as the Government National Mortgage Association, are
supported by the full faith and credit of the U.S. Treasury; others, such as
those of the Export-Import Bank of the United States, are supported by the
right of the issuer to borrow from the Treasury; others, such as those of the
Federal National Mortgage Association, are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; still
others, such as those of the Student Loan Marketing Association, are supported
only by the credit of the instrumentality. No assurance can be given that the
U.S. Government would provide financial support to U.S. Government-sponsored
instrumentalities if it is not obligated to do so by law.
STRIPPED U.S. GOVERNMENT OBLIGATIONS. As described in the
Prospectuses and subject to their respective investment policies, the
Portfolios may hold stripped U.S. Treasury securities, including (1) coupons
that have been stripped from U.S. Treasury bonds, which are held through the
Federal Reserve Bank's book-entry system called "Separate Trading of Registered
Interest and Principal of Securities" ("STRIPS") or (2) through a program
entitled "Coupon Under Book-Entry Safekeeping" ("CUBES"). Each Portfolio may
also acquire U.S. Government obligations and their unmatured interest coupons
that have been stripped by a custodian bank or investment brokerage firm.
Having separated the interest coupons from the underlying principal of the U.S.
Government obligations, the holder will resell the stripped securities in
custodial receipt programs with a number of different names, including
"Treasury Income Growth Receipts" ("TIGRS") and "Certificates of Accrual on
Treasury Securities" ("CATS"). Such securities may not be as liquid as STRIPS
and CUBES and are not viewed by the staff of the SEC as U.S. Government
securities for purposes of the 1940 Act.
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The stripped coupons are sold separately from the underlying
principal, which is sold at a deep discount because the buyer receives only the
right to receive a future fixed payment on the security and does not receive
any rights to periodic interest (cash) payments. Purchasers of stripped
principal-only securities acquire, in effect, discount obligations that are
economically identical to the zero coupon securities that the Treasury
Department sells itself. In the case of bearer securities (i.e., unregistered
securities which are owned ostensibly by the bearer or holder, the underlying
U.S. Treasury bonds and notes themselves are held in trust on behalf of the
owners. Counsel to the underwriters of these certificates or other evidences
of ownership of the U.S. Treasury securities have stated that, in their
opinion, purchasers of the stripped securities, such as the Portfolios, most
likely will be deemed the beneficial holders of the underlying U.S. Government
obligations for federal tax and security purposes.
The U.S. Government does not issue stripped Treasury
securities directly. The STRIPS program, which is ongoing, is designed to
facilitate the secondary market in the stripping of selected U.S. Treasury
notes and bonds into separate interest and principal components. Under the
program, the U.S. Treasury continues to sell its notes and bonds through its
customary auction process. A purchaser of those specified notes and bonds who
has access to a book-entry account at a Federal Reserve bank, however, may
separate the Treasury notes and bonds into interest and principal components.
The selected Treasury securities thereafter may be maintained in the book-entry
system operated by the Federal Reserve in a manner that permits the separate
trading and ownership of the interest and principal payments.
For custodial receipts, by agreement the underlying debt
obligations are held separate from the general assets of the custodian and
nominal holder of such securities, and are not subject to any right, charge,
security interest, lien or claim of any kind in favor of or against the
custodian or any person claiming through the custodian. The custodian is also
responsible for applying all payments received on those underlying debt
obligations to the related receipts or certificates without making any
deductions other than applicable tax withholding. The custodian is required to
maintain insurance for the protection of holders of receipts or certificates in
customary amounts against losses resulting from the custody arrangement due to
dishonest or fraudulent action by the custodian's employees. The holders of
receipts or certificates, as the real parties in interest, are entitled to the
rights and privileges of the underlying debt obligations, including the right,
in the event of default in payment of principal or interest, to proceed
individually against the issuer without acting in concert with other holders of
those receipts or certificates or the custodian.
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SECURITIES LENDING. While the Portfolios would not have the
right to vote securities on loan, each Portfolio intends to terminate the loan
and regain the right to vote should this be considered important with respect
to the investment. When the Portfolios lend their securities, they continue to
receive interest or dividends on the securities loaned and may simultaneously
earn interest on the investment of the cash collateral which will be invested
in readily marketable, high quality, short-term obligations. Although voting
rights, or rights to consent, attendant to securities on loan pass to the
borrower, such loans may be called at any time and will be called so that the
securities may be voted by a Portfolio if a material event affecting the
investment is to occur.
Securities lending arrangements with broker/dealers require
that the loans be secured by the collateral equal in value to at least the
market value of the securities loaned. During the term of such arrangements,
the Portfolios will maintain such value by the daily marking-to-market of the
collateral.
SECURITIES OF OTHER INVESTMENT COMPANIES. As described in the
applicable Prospectuses, the Portfolios intend to limit investments in
securities issued by other investment companies within the limits prescribed by
the 1940 Act. Each Portfolio currently intends to limit its investments so
that, as determined immediately after a securities purchase is made: (a) not
more than 5% of the value of its total assets will be invested in the
securities of any one investment company; (b) not more than 10% of the value of
its total assets will be invested in the aggregate in securities of investment
companies as a group; (c) not more than 3% of the outstanding voting stock of
any one investment company will be owned by the Portfolio; and (d) not more
than 10% of the outstanding voting stock of any one investment company will be
owned in the aggregate by the Portfolios and other investment companies advised
by the Adviser.
ASSET-BACKED SECURITIES. The Short-Intermediate Corporate
Bond Portfolio may purchase asset-backed securities, as described in the
Prospectuses. Asset-backed securities represent interests in "pools" of assets
in which payments of both interest and principal on the securities are made
monthly, thus in effect "passing through" monthly payments made by the
individual borrowers on the assets that underlie the securities, net of any
fees paid to the issuer or guarantor of the securities. The average life of
asset-backed securities varies with the maturities of the underlying
instruments, and for this and other reasons, an asset-backed security's stated
maturity may be shortened, and the security's total return may be difficult to
predict precisely.
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There are a number of important differences among the agencies
and instrumentalities of the U.S. Government that issue mortgage-backed
securities and among the securities that they issue. Mortgage-backed
securities guaranteed by GNMA include GNMA Mortgage Pass- Through Certificates
(also known as "Ginnie Maes") which are guaranteed as to the timely payment of
principal and interest by GNMA and such guarantee is backed by the full faith
and credit of the United States. GNMA is a wholly-owned U.S. Government
corporation with the Department of Housing and Urban Development. GNMA
certificates also are supported by the authority of GNMA to borrow funds from
the U.S. Treasury to make payments under its guarantee. Mortgage-backed
securities issued by the FNMA include FNMA Guaranteed Mortgage Pass-through
Certificates (also known as "Fannie Maes") which are solely the obligations of
the FNMA and are not backed by or entitled to the full faith and credit of the
United States, but are supported by the right of the issuer to borrow from the
Treasury. FNMA is a government-sponsored organization owned entirely by
private stockholders. Fannie Maes are guaranteed as to timely payment of the
principal and interest by FNMA. Mortgage-backed securities issued by the FHLMC
include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs"
or "Pcs"). FHLMC is a corporate instrumentality of the United States, created
pursuant to an Act of Congress, which is owned entirely by Federal Home Loan
Banks. Freddie Macs are not guaranteed by the United States or by any Federal
Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest,
which is guaranteed by the FHLMC. FHLMC guarantees either ultimate collection
or timely payment of all principal payments on the underlying mortgage loans.
When FHLMC does not guarantee timely payment of principal, FHLMC may remit the
amount due on account of its guarantee of ultimate payment of principal at any
time after default on an underlying mortgage, but in no event later than one
year after it becomes payable.
Non-mortgage asset-backed securities involve certain risks
that are not presented by mortgage-backed securities. Primarily, these
securities do not have the benefit of the same security interest in the
underlying collateral. Credit card receivables are generally unsecured, and
the debtors are entitled to the protection of a number of state and federal
consumer credit laws, many of which have given debtors the right to set off
certain amounts owed on the credit cards, thereby reducing the balance due.
Most issuers of automobile receivables permit the servicers to retain
possession of the underlying obligations. If the servicer were to sell these
obligations to another party, there is a risk that the purchaser would acquire
an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in
a typical issuance and technical requirements under state laws, the trustee for
the holders of the
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automobile receivables may not have an effective security interest in all of
the obligations backing such receivables. Therefore, there is a possibility
that recoveries on repossessed collateral may not, in some cases, be able to
support payments on these securities.
WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS. When a
Portfolio agrees to purchase securities on a when-issued or forward commitment
basis, the Custodian (or sub-custodian) will maintain in a segregated account
cash, U.S. Government securities, liquid portfolio securities or other
high-grade debt obligations having a value (determined daily) at least equal to
the amount of the Portfolio's commitments. In the case of a forward commitment
to sell portfolio securities, the Custodian (or sub-custodian) will hold the
portfolio securities themselves in a segregated account while the commitment is
outstanding. These procedures are designed to ensure that a Portfolio will
maintain sufficient assets at all times to cover is obligations under
when-issued purchases and forward commitments.
A Portfolio will make commitments to purchase securities on a
when-issued basis or to purchase or sell securities on a forward commitment
basis only with the intention of completing the transaction and actually
purchasing or selling the securities. If deemed advisable as a matter of
investment strategy, however, a Portfolio may dispose of or renegotiate a
commitment after it is entered into and may sell securities it has committed to
purchase before those securities are delivered to the Portfolio on the
settlement date. In these cases, the Portfolio may realize a capital gain or
loss.
When a Portfolio engages in when-issued and forward commitment
transactions, it relies on the other party to consummate the trade. Failure of
such party to do so may result in the Portfolio's incurring a loss or missing
an opportunity to obtain a price considered to be advantageous.
The value of the securities underlying a when-issued purchase
or a forward commitment to purchase securities, and any subsequent fluctuations
in their value, is taken into account when determining a Portfolio's net asset
value starting on the day the Portfolio agrees to purchase the securities. The
Portfolio does not earn interest on the securities it has committed to purchase
until they are paid for and delivered on the settlement date. When a Portfolio
makes a forward commitment to sell securities it owns, the proceeds to be
received upon settlement are included in the Portfolio's assets, and
fluctuations in the value of the underlying securities are not reflected in the
Portfolio's net asset value as long as the commitment remains in effect.
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The National Municipal Bond Portfolio expects that commitments
to purchase when-issued securities will not exceed 5% of the value of its total
assets under normal market conditions.
OPTIONS TRADING. As described in the Prospectuses, the Equity
Income and Short-Intermediate Corporate Bond Portfolios may purchase put and
call options listed on a national securities exchange and issued by the Options
Clearing Corporation in an amount not exceeding 10% of a Portfolio's total net
assets. Options trading is a specialized activity which entails greater than
ordinary investment risks. Regardless of how much the market price of the
underlying security or index increases or decreases, the option buyer's risk is
limited to the amount of the original investment for the purchase of the
option. However, options may be more volatile than the underlying securities,
and therefore, on a percentage basis, an investment in options may be subject
to greater fluctuation than an investment in the underlying securities. A
listed call option gives the purchaser of the option the right to buy from a
clearing corporation, and a writer has the obligation to sell to the clearing
corporation, the underlying security at the stated exercise price at any time
prior to the expiration of the option, regardless of the market price of the
security. The premium paid to the writer is in consideration for undertaking
the obligations under the option contract. A listed put option gives the
purchaser the right to sell to a clearing corporation the underlying security
at the stated exercise price at any time prior to the expiration date of the
option, regardless of the market price of the security. In contrast to an
option on a particular security, an option on a stock or bond index provides
the holder with the right to make or receive a cash settlement upon the
exercise of the option. The amount of this settlement will be equal to the
difference between the closing price of the index at the time of exercise and
the exercise price of the option expressed in dollars, times a specified
multiple.
A Portfolio's obligation to sell a security subject to a
covered call option written by it may be terminated prior to the expiration
date of the option by the Portfolio's executing a closing purchase transaction,
which is effected by purchasing on an exchange an option of the same series
(i.e., same underlying security, exercise price and expiration date) as the
option previously written. Such a purchase does not result in the ownership of
an option. A closing purchase transaction will ordinarily be effected to
realize a profit on an outstanding option, to prevent an underlying security
from being called, to permit the sale of the underlying security or to permit
the writing of a new option containing different terms on such underlying
security. The cost of such a liquidation purchase plus transaction costs may
be greater than the premium received upon the original option, in which event
the Portfolio will have
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incurred a loss in the transaction. An option position may be closed out only
on an exchange which provides a secondary market for an option of the same
series. There is no assurance that a liquid secondary market on an exchange
will exist for any particular option. A covered call option writer, unable to
effect a closing purchase transaction, would not be able to sell the underlying
security until the option expires or the underlying security is delivered upon
exercise with the result that the writer in such circumstances will be subject
to the risk of market decline in the underlying security during such period. A
Portfolio will write an option on a particular security only if the Adviser
believes that a liquid secondary market will exist on an exchange for options
of the same series which will permit the Portfolio to make a closing purchase
transaction in order to close out its position.
When a Portfolio writes a covered call option, an amount equal
to the net premium (the premium less the commission) received by the Portfolio
is included in the liability section of the Portfolio's statement of assets and
liabilities as a deferred credit. The amount of the deferred credit is
subsequently marked-to-market to reflect the current value of the option
written. The current value of the traded option is the last sale price or, in
the absence of a sale, the average of the closing bid and asked prices. If an
option expires on the stipulated expiration date or if the Portfolio enters
into a closing purchase transaction, it will realize a gain (or loss if the
cost of a closing purchase transaction exceeds the net premium received when
the option is sold) and the deferred credit related to such option will be
eliminated. Any gain on a covered call option may be offset by a decline in
the market price of the underlying security during the option period. If a
covered call option is exercised, the Portfolio may deliver the underlying
security held by it or purchase the underlying security in the open market. In
either event, the proceeds of the sale will be increased by the net premium
originally received, and the Portfolio will realize a gain or loss. Premiums
from expired options written by a Portfolio and net gains from closing purchase
transactions are treated as short-term capital gains for federal income tax
purposes, and losses on closing purchase transactions are short-term capital
losses.
As noted previously, there are several risks associated with
transactions in options on securities and indices. For example, there are
significant differences between the securities and options markets that could
result in an imperfect correlation between these markets, causing a given
transaction not to achieve its objectives. In addition, a liquid secondary
market for particular options, even when traded on a national securities
exchange ("Exchange"), may be absent for reasons which include the following:
there may be insufficient trading interest in
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certain options; restrictions may be imposed by an Exchange on opening
transactions or closing transactions or both; trading halts, suspensions or
other restrictions may be imposed with respect to particular classes or series
of options or underlying securities; unusual or unforeseen circumstances may
interrupt normal operations on an Exchange; the facilities of an Exchange or
the Options Clearing Corporation may not at all times be adequate to handle
current trading volume; or one or more Exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of options (or a particular class or series of options), in which event the
secondary market on that Exchange (or in that class or series of options) would
cease to exist, although outstanding options that had been issued by the
Options Clearing Corporation as a result of trades on that Exchange would
continue to be exercisable in accordance with their terms.
A decision as to whether, when and how to use options involves
the exercise of skill and judgment, and even a well-conceived transaction may
be unsuccessful to some degree because of market behavior or unexpected events.
FUTURES CONTRACTS. As discussed in the Prospectuses, the
Equity Income and Short-Intermediate Corporate Bond Portfolios may invest in
futures contracts and options thereon (stock or bond index futures contracts or
interest rate futures or options) to hedge or manage risks associated with a
Portfolio's securities investments.
To enter into a futures contract, an amount of cash and cash
equivalents, equal to the market value of the futures contracts, is deposited
in a segregated account with the Fund's Custodian and/or in a margin account
with a broker to collateralize the position and thereby insure that the use of
such futures is unleveraged. Positions in futures contracts may be closed out
only on an exchange which provides a secondary market for such futures.
However, there can be no assurance that a liquid secondary market will exist
for any particular futures contract at any specific time. Thus, it may not be
possible to close a futures position. In the event of adverse price movements,
a Portfolio would continue to be required to make daily cash payments to
maintain its required margin. In such situations, if a Portfolio had
insufficient cash, it might have to sell portfolio securities to meet daily
margin requirements at a time when it would be disadvantageous to do so. In
addition, a Portfolio might be required to make delivery of the instruments
underlying futures contracts that it holds. The inability to close options and
futures positions also could have an adverse impact on a Portfolio's ability to
hedge effectively.
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Successful use of futures by a Portfolio is also subject to
the Adviser's ability to predict movements correctly in the direction of the
market. There is an imperfect correlation between movements in the price of
futures and movements in the price of the securities which are the subject of
the hedge. In addition, the price of futures may not correlate perfectly with
movement in the cash market due to certain market distortions. Due to the
possibility of price distortion in the futures market and because of the
imperfect correlation between the movements in the cash market and movements in
the price of futures, a correct forecast of general market trends or interest
rate movements by the Adviser may still not result in a successful hedging
transaction over a short time frame.
The risk of loss in trading futures contracts in some
strategies can be substantial, due both to the low margin deposits required,
and the extremely high degree of leverage involved in futures pricing. As a
result, a relatively small price movement in a futures contract may result in
immediate and substantial loss (as well as gain) to the investor. For example,
if at the time of purchase, 10% of the value of the futures contract is
deposited as margin, a subsequent 10% decrease in the value of the futures
contract would result in a total loss of the margin deposit, before any
deduction for the transaction costs, if the account were then closed out. A
15% decrease would result in a loss equal to 150% of the original margin
deposit, before any deduction for the transaction costs, if the contract were
closed out. Thus, a purchase or sale of a futures contract may result in
losses in excess of the amount invested in the contract.
Utilization of futures transactions by a Portfolio involves
the risk of loss by the Portfolio of margin deposits in the event of bankruptcy
of a broker with whom the Fund has an open position in a futures contract or
related option.
Most futures exchanges limit the amount of fluctuation
permitted in futures contract prices during a single trading day. The daily
limit establishes the maximum amount that the price of a futures contract may
vary either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
contract, no trades may be made on that day at a price beyond the limit. The
daily limit governs only price movement during a particular trading day and
therefore does not limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures contract prices have
occasionally moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures
positions and subjecting some futures traders to substantial losses.
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The trading of futures contracts is also subject to the risk
of trading halts, suspensions, exchange or clearing house equipment failures,
government intervention, insolvency of a brokerage firm or clearing house or
other disruptions of normal trading activity, which could at times make it
difficult or impossible to liquidate existing positions or to recover excess
variation margin payments.
ADRS AND EDRS. The Equity Income and Short-Intermediate
Corporate Bond Portfolios may invest their assets in securities such as ADRs
and EDRs, which are receipts issued by a U.S. bank or trust company evidencing
ownership of underlying securities issued by a foreign issuer. ADRs and EDRs
may be listed on a national securities exchange or may trade in the
over-the-counter market. ADR and EDR prices are denominated in U.S. dollars,
even though the underlying security may be denominated in a foreign currency.
The underlying security may be subject to foreign government taxes which would
reduce the yield on such securities. Investments in such instruments involve
risks similar to those of investing directly in foreign securities. Such risks
include political or economic instability of the issuer or the country of
issue, the difficulty of predicting international trade patterns and the
possibility of imposition of exchange controls. Such securities may also be
subject to greater fluctuations in price than securities of domestic
corporations. In addition, there may be less publicly available information
about a foreign company than about a domestic company. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic companies. With
respect to certain foreign countries, there is a possibility of expropriation
or confiscatory taxation, or diplomatic developments which could affect
investment in those countries.
MONEY MARKET INVESTMENTS. As stated in the
Prospectuses and subject to their respective investment policies, the
Portfolios may invest in the following money market instruments for temporary
defensive or other purposes: commercial paper, bankers' acceptances,
certificates of deposit and time deposits, floating rate notes.
Commercial paper represents short-term unsecured promissory
notes issued in bearer form by banks or bank holding companies, corporations
and finance companies. Certificates of deposit are negotiable certificates
issued against funds deposited in a commercial bank for a definite period of
time and earning a specified return. Bankers' acceptances are negotiable
drafts or bills of exchange, normally drawn by an importer or exporter to pay
for specific merchandise, which are "accepted" by a bank, meaning, in effect,
that the bank unconditionally agrees to pay the face value of the instrument on
maturity. Fixed time
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<PAGE> 165
deposits are bank obligations payable at a stated maturity date and bearing
interest at a fixed rate. Fixed time deposits may be withdrawn on demand by
the investor but may be subject to early withdrawal penalties that vary
depending upon market conditions and the remaining maturity of the obligation.
There are no contractual restrictions on the right to transfer a beneficial
interest in a fixed time deposit to a third party, although there is no market
for such deposits.
REPURCHASE AGREEMENTS. The Short-Intermediate Corporate Bond
Portfolio may enter into repurchase agreements with respect to portfolio
securities. Under the terms of a repurchase agreement, a Portfolio purchases
securities from financial institutions such as banks and broker-dealers that
are deemed to be creditworthy by the Adviser under guidelines approved by the
Board of Directors, subject to the seller's agreement to repurchase them at a
mutually agreed-upon date and price. Securities subject to repurchase
agreements are held by the Portfolios' Custodian or in the Federal
Reserve/Treasury book-entry system. During the term of any repurchase
agreement, the Adviser will continue to monitor the creditworthiness of the
seller. The repurchase price generally equals 102% of the price paid by the
Portfolio plus interest negotiated on the basis of current short-term rates
(which may be more or less than the rate on the underlying portfolio
securities). Under a repurchase agreement, the seller is required to maintain
the value of the securities subject to the agreement at not less than the
repurchase price, and securities subject to repurchase agreements are
maintained by the Portfolios' Custodian in segregated accounts in accordance
with the 1940 Act. Default by the seller could, however, expose the Portfolio
to possible loss because of adverse market action or delay in connection with
the disposition of the underlying securities. Repurchase agreements are
considered to be loans by the Portfolio under the 1940 Act.
REVERSE REPURCHASE AGREEMENTS. As described in the
Prospectuses, the Short-Intermediate Corporate Bond Portfolio may enter into
reverse repurchase agreements (agreements under which a Portfolio sells
portfolio securities and agrees to repurchase them at an agreed- upon date and
price). At the time a Portfolio enters into such an arrangement, it will
place, in a segregated custodial account, liquid assets having a value at least
equal to the repurchase price (including accrued interest) and will
subsequently monitor the account to ensure that such equivalent value is
maintained.
Reverse repurchase agreements involve the risk that the market
value of the securities sold by the Portfolio may decline below the price of
the securities that it is obligated to repurchase. Reverse repurchase
agreements are considered to be borrowings under the 1940 Act. Each Portfolio
intends to limit
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<PAGE> 166
its borrowings (including reverse repurchase agreements) during the current
fiscal year to not more than 5% of its net assets.
PORTFOLIO TURNOVER AND TRANSACTIONS
Subject to the general control of the Fund's Board of
Directors, the Adviser is responsible for, makes decisions with respect to, and
places orders for all purchases and sales of portfolio securities for the
Portfolios.
The Portfolios' rate of portfolio turnover may vary greatly
from year to year as well as within a particular year. Portfolio turnover may
also be affected by cash requirements for redemptions of shares and by
requirements which enable a Portfolio to receive certain favorable tax
treatment. Portfolio turnover will not be a limiting factor in making
investment decisions.
Transactions on United States stock exchanges involve the
payment of negotiated brokerage commissions. On the exchanges on which
commissions are negotiated, the cost of transactions may vary among different
brokers. There is generally no stated commission in the case of securities
traded in the over-the-counter markets, but the price of those securities
includes an undisclosed commission or mark-up. The cost of securities
purchased from underwriters includes an underwriter's commission or concession,
and the prices at which securities are purchased from and sold to dealers
include a dealer's mark-up or mark-down.
The Portfolios may participate, if and when practicable, in
bidding for the purchase of portfolio securities directly from an issuer in
order to take advantage of the lower purchase price available to members of a
bidding group. The Portfolios will engage in this practice, however, only when
the Adviser, in its sole discretion, believes such practice to be otherwise in
a Portfolio's interests.
While the Adviser generally seeks competitive spreads or
commissions, it may not necessarily allocate each transaction to the
underwriter or dealer charging the lowest spread or commission available on the
transaction. Allocation of transactions, including their frequency, to various
dealers is determined by the Adviser in its best judgment and in a manner
deemed fair and reasonable to shareholders. The primary consideration is
prompt execution of orders in an effective manner at the most favorable price.
Subject to this consideration, dealers who provide
supplemental investment research to the Adviser may receive orders for
transactions by a Portfolio. Information so received
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<PAGE> 167
is in addition to and not in lieu of services required to be performed by the
Adviser and does not reduce the advisory fees payable to it by a Portfolio.
Such information may be useful to the Adviser in serving both the Portfolios
and other clients, and conversely, supplemental information obtained by the
placement of business of other clients may be useful to the Adviser in carrying
out its obligations to the Portfolios. Portfolio securities will not be
purchased from or sold to the Adviser, the Distributor, the Administrator or
any "affiliated person" (as such term is defined under the 1940 Act) or any of
them acting as principal, except to the extent permitted by the SEC. In
addition, the Portfolios will not give preference to the Adviser's
correspondents with respect to such transactions, securities, savings deposits,
repurchase agreements and reverse repurchase agreements.
Investment decisions for the Portfolios are made independently
from those for other investment companies and accounts advised or managed by
the Adviser. Such other investment companies and accounts may also invest in
the same securities as the Portfolios. When a purchase or sale of the same
security is made at substantially the same time on behalf of a Portfolio and
another investment company or account, the transaction will be averaged as to
price, and available investments allocated as to amount, in a manner which the
Adviser believes to be equitable to the Portfolio and such other investment
company or account. In some instances, this investment procedure may adversely
affect the price paid or received by the Portfolio or the size of the position
obtained by the Portfolio. To the extent permitted by law, the Adviser may
aggregate the securities to be sold or purchased for the Portfolios with those
to be sold or purchased for other investment companies or accounts in order to
obtain best execution.
INVESTMENT LIMITATIONS
The following investment limitations may be changed with
respect to a particular Portfolio only by an affirmative vote of a majority of
the outstanding shares of that Portfolio (as defined under "Other Information
Concerning the Fund and Its Shares -- Miscellaneous" in the Portfolios'
Prospectuses). These investment limitations supplement those that appear in
the Prospectuses.
THE PORTFOLIOS MAY NOT:
1. Make investments for the purpose of exercising control or
management.
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<PAGE> 168
2. Purchase or sell real estate, provided that each Portfolio
may invest in securities secured by real estate or interests therein or issued
by companies or investment trusts which invest in real estate or interests
therein, provided further that, as described in the Prospectuses, the
Short-Intermediate Corporate Bond Portfolio may invest in first mortgage loans,
income participation loans and participation certificates in pools of
mortgages, including mortgages issued or guaranteed by the U.S. Government, its
agencies or its instrumentalities, mortgage-backed securities and CMOs.
3. Act as an underwriter of securities within the meaning of
the Securities Act of 1933 except insofar as a Portfolio might be deemed to be
an underwriter upon disposition of portfolio securities acquired within the
limitation on purchases of restricted securities and except to the extent that
the purchase of obligations directly from the issuer thereof in accordance with
a Portfolio's investment objective, policies and limitations may be deemed to
be underwriting.
4. Purchase or sell commodity contracts, or invest in oil,
gas or mineral exploration or development programs, except that each Portfolio
may, to the extent appropriate to its investment objective, purchase publicly
traded securities of companies engaging in whole or in part in such activities.
5. Purchase securities on margin, make short sales of
securities or maintain a short position, except that (a) this investment
limitation shall not apply to transactions by either the Equity Income or
Short-Intermediate Corporate Bond Portfolios in options, and futures contracts
and related options, and (b) a Portfolio may obtain short-term credits as may
be necessary for the clearance of purchases and sales of portfolio securities.
NET ASSET VALUE
As stated in the applicable Prospectuses, the net asset value
per share of each class of a Portfolio is calculated by adding the value of all
of the portfolio securities and other assets belonging to a Portfolio,
subtracting the liabilities charged to such class, and dividing the result by
the number of outstanding shares of such class. "Assets belonging to" each
class of a Portfolio consist of the consideration received upon the issuance of
shares of each class of the Portfolio together with all income, earnings,
profits, and proceeds derived from the investment thereof, including any
proceeds from the sale, exchange, or liquidation of such investments, any funds
or payments derived from any reinvestment of such proceeds, and a portion of
any general assets of the Fund not belonging to a particular Portfolio. Assets
belonging to each class of a
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<PAGE> 169
Portfolio are charged with the direct liabilities of each class of that
Portfolio and with a share of the general liabilities of the Fund allocated in
proportion to the relative net assets of that Portfolio and the Fund's other
Portfolios. The determinations by the Board of Directors as to the direct and
allocable liabilities, and the allocable portion of general assets, with
respect to a particular class of a Portfolio are conclusive.
Securities which are traded on a recognized stock exchange are
valued at the last sale price on the securities exchange on which such
securities are primarily traded or at the last sale price on the national
securities market. Securities traded on only over-the-counter markets are
valued on the basis of closing over-the-counter bid prices. Securities for
which there were no transactions are valued at the average of the current bid
and asked prices. Restricted securities and other assets for which market
quotations are not readily available are valued at fair value as determined in
accordance with guidelines approved by the Fund's Board of Directors. In
computing net asset value, the current value of a Portfolio's open futures
contracts and related options will be "marked-to-market."
Among the factors that ordinarily will be considered in
valuing portfolio securities are the existence of restrictions upon the sale of
the security by a Portfolio, the existence and extent of a market for the
security, the extent of any discount in acquiring the security, the estimated
time during which the security will not be freely marketable, the expenses of
registering or otherwise qualifying the security for public sale, underwriting
commissions if underwriting would be required to effect a sale, the current
yields on comparable securities for debt obligations traded independently of
any equity equivalent, changes in the financial condition and prospects of the
issuer, and any other factors affecting fair value. In making valuations,
opinions of counsel to the issuer may be relied upon as to whether or not
securities are restricted securities and as to the legal requirements for
public sale.
Additionally, the Administrator may use a pricing service to
value certain portfolio securities where the prices provided are believed to
reflect the fair market value of such securities. The methods of valuation
used by the pricing service will be reviewed by the Administrator under the
general supervision of the Fund's Board of Directors. Several pricing services
are available, one or more of which may be used by the Administrator from time
to time. In valuing a Portfolio's securities, the pricing service would
normally take into consideration such factors as yield, risk, quality,
maturity, type of issue, trading characteristics, special circumstances, and
other factors which are deemed relevant in determining
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<PAGE> 170
valuations for normal institutionalized trading units of debt securities and
would not rely exclusively on quoted prices.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares in each Portfolio are sold on a continuous basis by the
Distributor. As described in the applicable Prospectuses, Trust shares and
Institutional shares of each Portfolio (other than the National Municipal Bond
Portfolio which does not offer Institutional Shares) are sold to certain
qualified customers at their net asset value without a sales charge. Investor
A shares of each Portfolio are sold to retail customers at the public offering
price based on a Portfolio's net asset value plus a front-end load or sales
charge as described in the applicable Prospectuses. Investor B shares of each
Portfolio (other than the Short-Intermediate Corporate Bond Portfolio which
does not offer Investor B shares) are sold to retail customers at the net asset
value next determined after a purchase order is received, but are subject to a
contingent deferred sales charge which is payable on redemption of such shares
as described in the applicable Prospectuses.
The Fund may redeem shares involuntarily if the net income
with respect to a Portfolio's shares is negative or such redemption otherwise
appears appropriate in light of the Fund's responsibilities under the 1940 Act.
A hypothetical illustration of the computation of the public
offering price per share of Investor A shares of the Portfolios, based on the
projected value of each Portfolio's estimated net assets and projected number
of outstanding shares on the date its shares are first offered for sale to
public investors and the maximum front-end 4.5% (2.5% with respect to the
Short-Intermediate Corporate Bond Portfolio) sales charge currently applicable,
is as follows:
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<PAGE> 171
TABLE
<TABLE>
<CAPTION>
Equity Income National Municipal
Portfolio Bond Portfolio
------------- ------------------
<S> <C> <C>
Net Assets $ 10.00 $ 10.00
----- -----
Outstanding Shares 1 1
- -
Net Asset Value Per Share $ 10.00 $ 10.00
----- -----
Sales Charge, 4.50% of offering
price (4.70% of net asset value per
share) $ 0.47 $ 0.47
Offering to Public $ 10.47 $ 10.47
===== =====
</TABLE>
TABLE
<TABLE>
<CAPTION>
Short-Intermediate
Corporate Bond
Portfolio
------------------
<S> <C>
Net Assets $ 10.00
-----
Outstanding Shares 1
-
Net Asset Value Per Share $ 10.00
-----
Sales Charge, 2.50% of
offering price (2.56%
of net asset value
per share) $ 0.26
Offering to Public $ 10.26
=====
</TABLE>
Under the 1940 Act, a Portfolio may suspend the right of
redemption or postpone the date of payment for shares during any period when
(a) trading on the Exchange is restricted by applicable rules and regulations
of the SEC; (b) the Exchange is closed for other than customary weekend and
holiday closing; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC. The Portfolio may also suspend or
postpone the recordation of the transfer of its shares upon the occurrence of
any of the foregoing conditions.
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<PAGE> 172
In addition to the situations described in the Prospectuses
under "How to Purchase and Redeem Shares," the Portfolios may redeem shares
involuntarily to reimburse the Portfolios for any loss sustained by reason of
the failure of a shareholder to make full payment for shares purchased by the
shareholder or to collect any charge relating to a transaction effected for the
benefit of a shareholder which is applicable to Portfolio shares as provided in
the applicable Prospectuses from time to time.
EXCHANGE PRIVILEGE
Shareholders may exchange all or part of their shares in the
Portfolios as so described in the applicable Prospectus. Any rights an
investor may have to reduce (or have waived) the sales load applicable to an
exchange, as may be provided in a Prospectus, will apply in connection with any
such exchange.
By use of the exchange privilege, the investor authorizes his
or her Selected Dealer, Service Organization or the Distributor to act on
telephonic instructions from any person representing himself or herself to be
the investor and believed by the Selected Dealer, Service Organization or the
Distributor to be genuine. The investor, Selected Dealer, Service Organization
or the Distributor must notify the transfer agent of the investor's prior
ownership of Portfolio shares and account number. The transfer agent's records
of such instructions are binding. The exchange privilege may be modified or
terminated at any time upon 60 days' written notice to shareholders.
ADDITIONAL YIELD AND TOTAL RETURN INFORMATION
From time to time yields and total returns of Trust Shares,
Institutional Shares, Investor A Shares and Investor B Shares (computed
separately) of a Portfolio may be quoted in advertisements, shareholder reports
of other communications to Shareholders.
YIELD CALCULATIONS. A Portfolio's 30 day "yield" described in
the Prospectuses is calculated separately for Trust shares, Institutional
shares, Investor A shares and/or Investor B shares of a Portfolio by dividing
the Portfolio's net investment income per share earned during a 30-day period
by the maximum offering price per share (the "maximum offering price") with
respect to Investor A shares and the net asset value per share with respect to
Trust shares, Institutional shares and Investor B shares on the last day of the
period and annualizing the result on a semi-annual basis by adding one to the
quotient, raising the sum to the power of six, subtracting one from the result
and then doubling the difference. A Portfolio's net investment income per
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<PAGE> 173
share (irrespective of series) earned during the period is based on the average
daily number of shares outstanding during the period entitled to receive
dividends and includes income dividends and interest earned during the period
minus expenses accrued for the period, net of reimbursements. This calculation
can be expressed as follows:
a-b
Yield = 2 [(------- + 1)(6) - 1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding
that were entitled to receive dividends.
d = maximum offering price per share on the last day
of the period.
For the purpose of determining interest earned during the
period (variable "a" in the formula), dividend income on equity securities held
by a Portfolio is recognized by accruing 1/360 of the stated dividend rate of
the security each day that the security is in that Portfolio. A Portfolio
calculates interest earned on any debt obligation held in its portfolio by
computing the yield to maturity of each obligation held by it based on the
market value of the obligation (including actual accrued interest) at the close
of business on the last business day of each 30 day period, or, with respect to
obligations purchased during the 30 day period, the purchase price (plus actual
accrued interest) and dividing the result by 360 and multiplying the quotient
by the market value of the obligation (including actual accrued interest) in
order to determine the interest income on the obligation for each day of the
subsequent 30 day period that the obligation is in the portfolio. The maturity
of an obligation with a call provision is the next call date on which the
obligation reasonably may be expected to be called or, if none, the maturity
date. With respect to debt obligations purchased at a discount or premium, the
formula generally calls for amortization of the discount or premium. The
amortization schedule will be adjusted monthly to reflect changes in the market
values of such debt obligations.
Interest earned on tax-exempt obligations of the National
Municipal Bond Portfolio that are issued without original issue discount and
have a current market discount is
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<PAGE> 174
calculated by using the coupon rate of interest instead of the yield to
maturity. In the case of tax-exempt obligations that are issued with original
issue discount but which have discounts based on current market value that
exceed the then-remaining portion of the original issue discount (market
discount), the yield to maturity is the imputed rate based on the original
issue discount calculation. On the other hand, in the case of tax-exempt
obligations that are issued with original issue discount but which have
discounts based on current market value that are less than the then-remaining
portion of the original issue discount (market premium), the yield to maturity
is based on the market value.
Expenses accrued for the period (variable "b" in the formula)
include all recurring fees charged by a Portfolio to all shareholder accounts
in proportion to the length of the base period and the Portfolio's mean (or
median) account size. Investor A Shares, Investor B Shares, Institutional
Shares and Trust Shares each bear separate fees applicable to each series of
Shares. Undeclared earned income will not be subtracted from the maximum
offering price per share (variable "d" in the formula). Undeclared earned
income is net investment income which, at the end of the base period, has not
been declared and paid as a dividend, but is reasonably expected to be and is
declared and paid as a dividend shortly thereafter.
The National Municipal Bond Portfolio's "tax-equivalent" yield
for each class of shares is computed by dividing the portion of the Portfolios'
yield (calculated as above) that is exempt from federal income tax by one minus
a stated federal income tax rate and adding that figure to that portion, if
any, of the Portfolios' yield that is not exempt from federal income tax.
The Fund currently calculates 30 day yield for its fixed
income non-money market Portfolios but not for its equity Portfolios.
TOTAL RETURN CALCULATIONS. A Portfolio computes its "average
annual total return" for each series of that Portfolio by determining the
average annual compounded rate of return during specified periods that would
equate the initial amount invested in a particular series to the ending
redeemable value of such investment in the series by dividing the ending
redeemable value of a hypothetical $1,000 payment by $1,000 (representing a
hypothetical initial payment) and raising the quotient to a power equal to one
divided by the number of years (or fractional portion thereof) covered by the
computation and subtracting one from the result. This calculation can be
expressed as follows:
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<PAGE> 175
ERV 1/n
T = [(-------) - 1]
P
Where: T = average annual total return
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10 year
(or other) periods at the end of the 1, 5 or 10 year
(or other) periods (or a fractional portion
thereof)
P = hypothetical initial payment of $1,000
n = period covered by the computation, expressed in terms
of years
A Portfolio computes its aggregate total returns separately
for each series by determining the aggregate compounded rates of return during
specified periods that likewise equate the initial amount invested in a
particular series to the ending redeemable value of such investment in the
series. The formula for calculating aggregate total return is as follows:
ERV
Aggregate Total Return = [(------)- 1]
P
The calculations of average annual total return and aggregate
total return assume reinvestment of all income dividends and capital gain
distributions on the reinvestment dates during the period and include all
recurring fees charged to all shareholder accounts, assuming an account size
equal to a Portfolio's mean or median account size for any fees that vary with
the size of the account. The ending redeemable value (variable "ERV" in each
quotation) is determined by assuming complete redemption of the hypothetical
investment and the deduction of all non-recurring charges at the end of the
period covered by the computation. In addition, a Portfolio's average annual
total return and aggregate total return quotations reflect the deduction of the
maximum front-end sales charge in connection with the purchase of Investor A
shares and the deduction of any applicable contingent deferred sales charge
with respect to Investor B shares.
As stated in the Prospectuses relating to Investor A shares
and Investor B shares, a Portfolio may also calculate total return figures for
that Portfolio without deducting the maximum sales charge imposed on purchases
or redemptions. The
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<PAGE> 176
effect of not deducting the sales charge will be to increase the total return
reflected.
IN GENERAL
Investors may judge the performance of the Portfolios by
comparing them to the performance of other mutual funds or mutual fund
portfolios with comparable investment objectives and policies. Such
comparisons may be made by referring to market indices such as those prepared
by Dow Jones & Co., Inc., Russell, Salomon Brothers, Inc., Lehman or Standard &
Poor's Ratings Group or any of their affiliates, the Consumer Price Index, the
EAFE Index, the NASDAQ Composite, or to rankings prepared by independent
services or other financial or industry publications that monitor the
performance of mutual funds. Such comparisons may also be made by referring to
data prepared by Lipper Analytical Services, Inc., (a widely recognized
independent service which monitors the performance of mutual funds) Indata,
Frank Russell, CDA, and the Bank Rate Monitor (which reports average yields for
money market accounts offered by the 50 leading banks and thrift institutions
in the top five standard metropolitan statistical areas). Other similar yield
data, including comparisons to the performance of Mercantile repurchase
agreements, or the average yield data for similar asset classes including but
not limited to Treasury bills, notes and bonds, may also be used for comparison
purposes. Comparisons may also be made to indices or data published in the
following national financial publications: IBC/Donoghue's MONEY FUND REPORT(R)
published by IBC/Donoghue, MorningStar, CDA/Wiesenberger, Money Magazine,
Forbes, Fortune, Barron's, The Wall Street Journal, The New York Times,
Business Week, American Banker, Fortune, Institutional Investor, U.S.A. Today
and publications of Ibbotson Associates, Inc. and other publications of a local
or regional nature. In addition to performance information, general
information about the Portfolios that appears in a publication such as those
mentioned above may be included in advertisements and in reports to
Shareholders.
From time to time, the Fund may include the following types of
information in advertisements, supplemental sales literature and reports to
Shareholders: (1) discussions of general economic or financial principles
(such as the effects of inflation, the power of compounding and the benefits of
dollar-cost averaging); (2) discussions of general economic trends; (3)
presentations of statistical data to supplement such discussions; (4)
descriptions of past or anticipated portfolio holdings for one or more of the
Portfolios within the Fund; (5) descriptions of investment strategies for one
or more of such Portfolios; (6) descriptions or comparisons of various
investment products, which may or may not include the Portfolios; (7)
comparisons of investment products (including the Portfolios) with relevant
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<PAGE> 177
market or industry indices or other appropriate benchmarks; and (8) discussions
of rankings or ratings by recognized rating organizations.
In addition, with respect to the National Municipal Bond
Portfolio, the benefits of tax-free investments may be communicated in
advertisements or communications to shareholders. For example, the tables
below present the approximate yield that a taxable investment must earn at
various income brackets to produce after-tax yields equivalent to those of
tax-exempt investments yielding from 4.50% to 7.00%. The yields below are for
illustration purposes only and are not intended to represent current or future
yields for the Portfolio, which may be higher or lower than those shown. The
tax brackets shown below will be indexed for inflation for years after 1996.
Investors should consult their tax advisor with specific reference to their own
tax situation.
APPROXIMATE YIELD TABLE: NATIONAL MUNICIPAL BOND PORTFOLIO
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
SINGLE RETURN
--------Tax-Exempt Yields---------
Sample Taxable Federal
Income Marginal
(1996) Tax Rate 4.50% 5.00% 5.50% 6.50% 7.00%
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM
$0 TO
$24,000 15.00% 5.29% 5.88% 6.47% 7.65% 8.24%
FROM
$24,000 TO
$58,150 28.00% 6.25% 6.64% 7.64% 9.03% 9.72%
FROM
$58,150 TO
$121,300 31.00% 6.52% 7.25% 7.97% 9.42 10.41%
FROM
$121,300 TO
$263,750 36.00% 7.03% 7.81% 8.59% 10.16% 10.94%
OVER
$263,750 39.60% 7.45% 8.28% 9.11% 10.76% 11.59%
- ------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 178
APPROXIMATE YIELD TABLE: NATIONAL MUNICIPAL BOND PORTFOLIO
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
MARRIED FILING
JOINTLY
--------Tax-Exempt Yields---------
Sample Taxable Federal
Income Marginal
(1996) Tax Rate 4.50% 5.00% 5.50% 6.50% 7.00%
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM
$0 TO
$40,100 15.00% 5.29% 5.88% 6.47% 7.65% 8.24%
FROM
$40,100 TO
$96,900 28.00% 6.25% 6.94% 7.64% 9.03% 9.72%
FROM
$96,900 TO
$147,700 31.00% 6.52% 7.25% 7.97% 9.42% 10.14%
FROM
$147,700 TO
$263,750 36.00% 7.03% 7.81% 8.59% 10.16% 10.94%
OVER
$263,750 39.60% 7.45% 8.28% 9.11% 10.76% 11.59%
- ------------------------------------------------------------------------------------------
</TABLE>
Such data are for illustrative purposes only and are not intended to indicate
past or future performance results of a Portfolio. Actual performance of the
Portfolios' may be more or less than that noted in the hypothetical
illustrations.
Since performance will fluctuate, performance data for the Portfolios
cannot necessarily be used to compare an investment in the Portfolios' shares
with bank deposits, savings accounts, and similar investment alternatives which
often provide an agreed or guaranteed fixed yield for a stated period of time.
Shareholders should remember that performance is generally a function of the
kind and quality of the instruments held in a portfolio, portfolio maturity,
operating expenses, and market conditions. The current yield and performance
of the Portfolios may be obtained by calling the Fund at: INVESTOR A OR
INVESTOR B SHARES - (800) 452-ARCH; OR TRUST OR INSTITUTIONAL SHARES - (800)
452-4015.
DESCRIPTION OF SHARES
The Fund's Articles of Incorporation authorize the Board of
Directors to issue up to seven billion full and fractional shares of capital
stock, and to classify or reclassify any unissued shares of the Fund into one
or more additional classes or by setting or changing in any one or more
respects, their respective preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications
-31-
<PAGE> 179
and terms and conditions of redemption. Pursuant to such authority the Fund's
Board of Directors has authorized the issuance of fifty-one classes of shares
representing interests in one of fifteen investment Portfolios: the Money
Market, Treasury Money Market, Tax-Exempt Money Market, Growth & Equity Income,
Emerging Growth, Government & Corporate Bond, U.S. Government Securities,
Balanced, International Equity, Short-Intermediate Municipal, Missouri
Tax-Exempt Bond, Kansas Tax-Exempt Bond, Equity Income, National Municipal Bond
and Short-Intermediate Corporate Bond Portfolios. Trust shares, Institutional
shares, Investor A shares and/or Investor B shares in each Portfolio are
offered through separate prospectuses to different categories of investors.
Portfolio shares have no preemptive rights and only such conversion or exchange
rights as the Board may grant in its discretion. When issued for payment as
described in the Prospectuses, the shares will be fully paid and nonassessable.
Except as noted in the Prospectuses with respect to certain
sub-transfer agency expenses borne by Institutional shares and below with
respect to the Administrative Services Plans for Trust shares and Institutional
shares and the Distribution and Services Plans for Investor A shares and
Investor B shares, shares of the Portfolios bear the same types of ongoing
expenses with respect to the Portfolio to which they belong. In addition,
Investor A shares are subject to a front-end sales charge and Investor B shares
are subject to a contingent deferred sales charge as described in the
Prospectuses. The series also have different exchange privileges, and Investor
B shares are subject to conversion as described in the Prospectus for those
shares.
In the event of a liquidation or dissolution of the Fund,
shares of a Portfolio are entitled to receive the assets available for
distribution belonging to that Portfolio, and a proportionate distribution,
based upon the relative asset values of the respective Portfolios, of any
general assets not belonging to any particular Portfolio which are available
for distribution. Shareholders of a Portfolio are entitled to participate
equally in the net distributable assets of the particular Portfolio involved on
liquidation, except that Trust shares of a particular Portfolio will be solely
responsible for that Portfolio's payments pursuant to the Administrative
Services Plan for those shares, Institutional shares of a particular Portfolio
will be solely responsible for that Portfolio's payments pursuant to the
Administrative Service Plan for those shares, Investor A shares of a particular
Portfolio will be solely responsible for that Portfolio's payments pursuant to
the Distribution and Services Plan for those shares and Investor B shares of a
particular Portfolio will be solely responsible for that Portfolio's payments
pursuant to the Distribution and Services Plan for those shares. In addition,
Institutional shares will be solely
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responsible for the payment of certain sub-transfer agency fees attributable to
those shares.
Holders of all outstanding shares of a particular Portfolio
will vote together in the aggregate and not by class, except that only Trust
shares of a Portfolio will be entitled to vote on matters submitted to a vote
of shareholders pertaining to a Portfolio's Administrative Services Plan for
Trust shares, only Institutional shares of a Portfolio's will be entitled to
vote on matters submitted to a vote of shareholders pertaining to such
Portfolio's Administrative Services Plan for Institutional shares, only
Investor A shares of a Portfolio will be entitled to vote on matters submitted
to a vote of shareholders pertaining to such Portfolio's Distribution and
Services Plan for Investor A shares and only Investor B shares of a Portfolio
will be entitled to vote on matters submitted to a vote of shareholders
pertaining to such Portfolio's Distribution and Services Plan for Investor B
shares. Further, shareholders of all of the Portfolios, irrespective of class,
will vote in the aggregate and not separately on a Portfolio-by-Portfolio
basis, except as otherwise required by law or when the Board of Directors
determines that the matter to be voted upon affects only the interests of the
shareholders of a particular Portfolio or class of shares. Rule 18f-2 under
the 1940 Act provides that any matter required to be submitted to the holders
of the outstanding voting securities of a "series" 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 of each series
(Portfolio) affected by the matter. A Portfolio is considered to be affected
by a matter unless it is clear that the interests of each Portfolio in the
matter are identical or that the matter does not affect any interest of the
Portfolio. Under the Rule, the approval of an investment advisory agreement or
any change in investment policy would be effectively acted upon with respect to
a Portfolio only if approved by a majority of the outstanding shares of that
Portfolio. However, the Rule also provides that the ratification of the
appointment of independent auditors, the approval of principal underwriting
contracts, and the election of directors may be effectively acted upon by
shareholders of the Fund's Portfolios voting without regard to class or
Portfolio.
Shares in the Fund's Portfolios will be issued without
certificates.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations
generally affecting the Portfolios and their shareholders that are not
described in the Prospectuses. No attempt is made to present a detailed
explanation of the tax
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treatment of the Portfolios or their shareholders, and the discussion here and
in the Prospectuses are not intended as a substitute for careful tax planning.
Potential investors should consult their tax advisors with specific reference
to their own tax situations.
Each Portfolio of the Fund is treated as a separate corporate
entity under the Internal Revenue Code of 1986, as amended, (the "Code"). Each
Portfolio intends to qualify each year as a regulated investment company. In
order to so qualify for a taxable year under the Code, each Portfolio must
satisfy, in addition to the distribution requirement described in the
Prospectuses, certain other requirements set forth below.
At least 90% of the gross income for a taxable year of each
Portfolio must be derived from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock, securities
or foreign currencies, and other income (including, but not limited to, gains
from options, futures, or forward contracts) derived with respect to the
Portfolio's business of investing in such stock, securities or currencies (the
"90% gross income test").
A Portfolio also must derive less than 30% of its gross income
for a taxable year from gains realized on the sale or other disposition of
securities and certain other investments held for less than three months (the
"30% test"). Interest (including original issue discount and accrued market
discount) received by a Portfolio upon maturity or disposition of a security
held for less than three months will not be treated as gross income derived
from the sale or other disposition of such security within the meaning of this
requirement. However, any income that is attributable to real red market
appreciation will be treated as gross income from the sale or other disposition
of securities for this purpose. With respect to covered call options, if the
call is exercised by the holder, the premium and the price received on exercise
constitute the proceeds of sale, and the difference between the proceeds and
the cost of the securities subject to the call is capital gain or loss.
Premiums from expired call options written by a Portfolio and net gains from
closing purchase transactions are treated as short-term capital gains for
federal income tax purposes, and losses on closing purchase transactions are
short-term capital losses. With respect to forward contracts, futures
contracts, options on futures contracts, and other financial instruments
subject to the mark-to-market rules described below under "Taxation of Certain
Financial Instruments," the Internal Revenue Service has ruled in private
letter rulings that a gain realized from such a contract, option or financial
instrument will be treated as being derived from a security held for three
months or more (regardless of the actual period for which the contract, option
or instrument is
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held) if the gain arises as a result of a constructive sale under the
mark-to-market rules, and will be treated as being derived from a security held
for less than three months only if the contract, option or instrument is
terminated (or transferred) during the taxable year (other than by reason of
mark-to-market) and less than three months have elapsed between the date the
contract, option or instrument is acquired and the termination date. Increases
and decreases in the value of a Portfolio's forward contracts, futures
contracts, options on futures contracts and other investments that qualify as
part of a "designated hedge," as defined in Section 851(g) of the Code, may be
netted for purposes of determining whether the 30% test is met.
Finally, at the close of each quarter of its taxable year, at
least 50% of the value of a Portfolio's assets must consist of cash and cash
items, U.S. government securities, securities of other regulated investment
companies, and securities of other issuers (as to which a Portfolio has not
invested more than 5% of the value of its total assets in securities of such
issuer and as to which that Portfolio does not hold more than 10% of the
outstanding voting securities of such issuer) and no more than 25% of the value
of such Portfolio's total assets may be invested in the securities of any one
issuer (other than U.S. government securities and securities of other regulated
investment companies), or in two or more issuers which the Portfolio controls
and which are engaged in the same or similar trades or businesses.
Each Portfolio will designate any distribution of the excess
of net long-term capital gain over net short-term capital loss as a capital
gain dividend in a written notice mailed to shareholders within 60 days after
the close of the Portfolio's taxable year. Such distributions, if any, will be
taxable to shareholders who are not currently exempt from federal income tax as
long-term capital gains, no matter how long the shareholder has held these
shares. Shareholders should note that, upon the sale or exchange of Portfolio
shares, if the shareholder has not held such shares for more than six months,
any loss on the sale or exchange of those shares will be treated as long-term
capital loss to the extent of the capital gain dividends received with respect
to the shares. Interest on indebtedness incurred by a shareholder to purchase
or carry the National Municipal Bond Portfolio's Shares, generally is not
deductible for federal income tax purposes. In addition, if a shareholder
holds Portfolio Shares for six months or less, any loss on the sale or exchange
of those Shares will be disallowed to the extent of the amount of
exempt-interest dividends received with respect to the Shares. The Treasury
Department, however, is authorized to issue regulations reducing the six months
holding requirement to a period of not less than the greater of 31 days or the
period
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between regular dividend distributions where the investment company regularly
distributes at least 90% of its net tax-exempt interest. No such regulations
had been issued as of the date of this Statement of Additional Information.
Ordinary income of individuals is taxable at a maximum nominal
rate of 39.6%, but because of limitations on itemized deductions otherwise
allowable and the phase-out of personal exemptions, the maximum effective
marginal rate of tax for some taxpayers may be higher. An individual's
long-term capital gains are taxable at a maximum rate of 28%. For
corporations, long-term capital gains and ordinary income are both taxable at a
maximum nominal rate of 35% (or at a maximum marginal rate of 39% in the case
of corporations having taxable income between $100,000 and $335,000).
A 4% nondeductible excise tax is imposed on regulated
investment companies that fail to currently distribute specified percentages of
their ordinary taxable income and capital gain net income (excess of capital
gains over capital losses). Each Portfolio intends to make sufficient
distributions or deemed distributions of its ordinary taxable income and any
capital gain net income each year to avoid liability for this excise tax.
If for any taxable year a Portfolio does not qualify for the
special federal income tax treatment afforded regulated investment companies,
all of its taxable income will be subject to federal income tax at regular
corporate rates (without any deduction for distributions to its shareholders).
In such event, dividend distributions would be taxable as ordinary income to
shareholders, to the extent of the Portfolio's current and accumulated earnings
and profits, and would be eligible for the dividends received deduction allowed
to corporations.
The policy of the National Municipal Bond Portfolio is to pay
to its shareholders each year as exempt-interest dividends substantially all of
its Municipal Obligation interest income net of certain deductions. In order
for the National Municipal Bond Portfolio to pay exempt-interest dividends for
any taxable year, at the close of each quarter of its taxable year at least 50%
of the aggregate value of the Portfolio's assets must consist of
exempt-interest obligations. Exempt-interest dividends may be treated by the
shareholders as items of interest excludable from their gross income under
Section 103(a) of the Code. An exempt-interest dividend is any dividend or
part thereof (other than a capital gain dividend) paid by the National
Municipal Bond Portfolio and designated as an exempt-interest dividend in a
written notice mailed to shareholders not later than sixty days (with respect
to federal income tax) after the close of the Portfolio's taxable year.
However, the aggregate amount of dividends so designated by the Portfolio
cannot exceed the excess
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of the amount of interest exempt from tax under Section 103 of the Code
received by the Portfolio during the taxable year over any amounts disallowed
as deductions under Sections 265 and 171(a)(2) of the Code. The percentage of
total dividends paid for any taxable year which qualifies as exempt-interest
dividends will be the same for all shareholders receiving dividends from the
Portfolio during such year, regardless of the period for which the Shares were
held.
Shareholders who might be treated as a "substantial user" or a
"related person" to such user with respect to facilities financed through any
of the tax-exempt obligations held by the National Municipal Bond Portfolio,
are advised to consult their tax advisors with respect to whether
exempt-interest dividends retain the exclusion under Section 103(a). A
"substantial user" is defined under U.S. Treasury Regulations to include a
non-exempt person (i) who regularly uses a part of such facilities in his trade
or business and whose gross revenues derived with respect to the facilities
financed by the issuance of bonds are more than 5% of the total revenues
derived by all users of such facilities, (ii) who occupies more than 5% of the
usable area of such facilities or (iii) for whom such facilities or a part
thereof were specifically constructed, reconstructed or acquired. "Related
persons" include certain related natural persons, affiliated corporations,
partnerships and its partners, and S corporations and their shareholders.
While the National Municipal Bond Portfolio does not expect to
realize long-term capital gains, any net realized long-term capital gains will
be distributed at least annually. The National Municipal Bond Portfolio
generally will have no tax liability with respect to such gains and
distributions derived from such gains will be taxable to the National Municipal
Bond Portfolio's shareholders as long-term capital gains, regardless of how
long a shareholder has held the Portfolio Shares. Such distributions will be
designated as capital gain dividends in a written notice mailed by the
Portfolio to shareholders after the close of the Portfolio's taxable year.
Similarly, while the National Municipal Bond Portfolio does
not expect to earn any investment company taxable income, any taxable income
earned by the National Municipal Bond Portfolio will be distributed to
shareholders. In general, the National Municipal Bond Portfolio's investment
company taxable income will be its taxable income subject to certain
adjustments and excluding the excess of any net long-term capital gain for the
taxable year over any net short-term capital loss for such year. The National
Municipal Bond Portfolio would be taxed on any undistributed investment company
taxable income. To the extent such income is distributed by the Portfolio, it
will be
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taxable to shareholders as ordinary income (whether paid in cash or additional
Shares).
Each Portfolio will be required in certain cases to withhold
and remit to the United States Treasury 31% of taxable dividends or 31% of
gross sale proceeds paid to shareholders who have failed to provide a correct
tax identification number in the manner required, or who are subject to
withholding by the Internal Revenue Service for failure to properly include on
his return payments of taxable interest or dividends.
In those states and localities which have income tax laws, the
treatment of a Portfolio and its shareholders under such laws may differ from
their treatment under federal income tax laws. Under state or local law,
distributions of net income may be taxable to shareholders as dividend income
even though such distributions are derived from interest on Municipal
Obligations which, if realized directly, would be exempt from such income
taxes. Shareholders are advised to consult their tax advisors concerning the
application of state and local taxes.
TAXATION OF CERTAIN FINANCIAL INSTRUMENTS
Special rules govern the federal income tax treatment of
financial instruments that may be held by the Equity Income and
Short-Intermediate Corporate Bond Portfolios. These rules may have a
particular impact on the amount of income or gain that a Portfolio must
distribute to shareholders to comply with the distribution requirement, on the
income or gain qualifying under the 90% gross income test, and on a Portfolio's
ability to comply with the 30% test described above.
Generally, futures contracts and options on futures contracts
held by a Portfolio at the close of its taxable year are treated for federal
income tax purposes as sold for their fair market value on the last business
day of such year, a process known as "mark-to-market." Forty percent of any
gain or loss resulting from such constructive sales are treated as short-term
capital gain or loss and 60% of such gain or loss are treated as long-term
capital gain or loss without regard to the period the Portfolio holds the
futures contract or related option (the "40%-60% rule"). The amount of any
capital gain or loss actually realized by a Portfolio in a subsequent sale or
other disposition of those futures contracts and related options is adjusted to
reflect any capital gain or loss taken into account by a Portfolio in a prior
year as a result of the constructive sale of the contracts and options. Losses
with respect to futures contracts to sell and related options, which are
regarded as parts of a "mixed straddle" because their values fluctuate
inversely to the values of specific securities held by a Portfolio, are subject
to certain loss deferral rules which limit
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the amount of loss currently deductible on either part of the straddle to the
amount thereof which exceeds the unrecognized gain (if any) with respect to the
other part of the straddle, and to certain wash sales regulations. Under short
sales rules, which are also applicable, the holding period of the securities
forming part of the straddle will (if they have not been held for the long-term
holding period) be deemed not to begin prior to termination of the straddle.
With respect to certain futures contracts and related options, deductions for
interest and carrying charges may not be allowed. Notwithstanding the rules
described above, with respect to futures contracts to sell and related options
which are properly identified as such, a Portfolio may make an election which
will exempt (in whole or in part) those identified futures contracts and
options from being treated for federal income tax purposes as sold on the last
business day of the Portfolio's taxable year, but gains and losses will be
subject to such short sales, wash sales and loss deferral rules and the
requirement to capitalize interest and carrying charges. Under Temporary
Regulations, a Portfolio would be allowed (in lieu of the foregoing) to elect
either (1) to offset gains or losses from positions which are part of a mixed
straddle by separately identifying each mixed straddle to which such treatment
applies, or (2) to establish a mixed straddle account for which gains and
losses would be recognized and offset on a periodic basis during the taxable
year. Under either election, the 40%-60% rule will apply to the net gain or
loss attributable to the futures contracts and options, but in the case of a
mixed straddle account election, not more than 50% of any net gain may be
treated as long-term and no more than 40% of any net loss may be treated as
short-term.
Certain foreign currency contracts (including forward foreign
currency exchange contracts) entered into by the Equity Income and
Short-Intermediate Corporate Bond Portfolios may be subject to the
mark-to-market rules described above. To receive such treatment, a foreign
currency contract must meet the following conditions: (1) the contract must
require delivery of a foreign currency of a type in which regulated futures
contracts are traded or upon which the settlement value of the contract
depends; (2) the contract must be entered into at arm's length at a price
determined by reference to the price in the interbank market; and (3) the
contract must be traded in the interbank market. The Treasury Department has
broad authority to issue regulations under these provisions. As of the date of
this Statement of Additional Information, the Treasury Department had not
issued any such regulations. Other foreign currency contracts entered into by
a Portfolio may result in the creation of one or more straddles for federal
income tax purposes, in which case certain loss deferral, short sales, and wash
sales rules and the requirement to capitalize interest and carrying charges may
apply.
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Some of the non-U.S. dollar denominated investments that the
Equity Income and Short-Intermediate Corporate Bond Portfolios may make, such
as non-U.S. dollar-denominated debt securities and obligations and preferred
stock, as well as some of the foreign currency contracts a Portfolio may enter
into, may be subject to the provisions of Subpart J of the Code, which govern
the federal income tax treatment of certain transactions denominated in terms
of a currency other than the U.S. dollar or determined by reference to the
value of one or more currencies other than the U.S dollar. The types of
transactions covered by these provisions include the following: (1) the
acquisition of, or becoming the obligor under, a bond or other debt instrument
(including, to the extent provided in Treasury regulations, preferred stock);
(2) the accruing of certain trade receivables and payables; and (3) the
entering into or acquisition of any forward contract, futures contract, option
and similar financial instrument. The disposition of a currency other than the
U.S. dollar by a U.S. taxpayer also is treated as a transaction subject to the
special currency rules. However, foreign currency-related regulated futures
contracts and nonequity options generally are not subject to the special
currency rules if they are or would be treated as sold for their fair market
value at year-end under the mark-to-market rules, unless an election is made to
have such currency rules apply. With respect to transactions covered by the
special rules, foreign currency gain or loss is calculated separately from any
gain or loss on the underlying transaction and normally is taxable as ordinary
gain or loss. A Portfolio may elect to treat as capital gain or loss foreign
currency gain or loss arising from certain identified forward contracts,
futures contracts and options that are capital assets in the hands of the
Portfolio and which are not part of a straddle. In accordance with Treasury
Regulations, certain transactions subject to the special currency rules that
are part of a "Section 988 hedging transaction" (as defined in the Code and
Treasury regulations) will be integrated and treated as a single transaction or
otherwise treated consistently for purposes of the Code. "Section 988 hedging
transactions" are not subject to the mark-to-market or loss deferral rules
under the Code. Gain or loss attributable to the foreign currency component of
transactions engaged in by a Portfolio which are not subject to the special
currency rules (such as foreign equity investments other than certain preferred
stocks) is treated as capital gain or loss and is not segregated from the gain
or loss on the underlying transaction.
CONCLUSIONS
The foregoing discussion is based on federal tax laws and
regulations which are in effect on the date of this Statement of Additional
Information; such laws and regulations may be changed by legislative or
administrative action. Shareholders
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<PAGE> 188
are advised to consult their tax advisors concerning the application of state
and local taxes.
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
The directors and executive officers(1) of the Fund, their
addresses, ages, principal occupations during the past five years, and other
affiliations are as follows:
<TABLE>
<CAPTION>
Principal Occupations
Position with During Past 5 years
Name and Address the Fund and other affiliations
- ---------------- ------------- ----------------------
<S> <C> <C>
Jerry V. Woodham(2) Chairman of Former Treasurer, Washington
745 Stump Road The Board; and University, 1981 to 1995.
St. Louis, MO 63131 President and
Age: 52 Director
Robert M. Cox, Jr. Director Senior Vice President and
Emerson Electric Co. Advisory Director, Emerson
8000 W. Florissant Ave. Electric Co. since November
P.O. Box 4100 1990; President and Chief
St. Louis, MO 63136-8506 Administrative Officer,
Age: 50 Rosemont, Inc. (a wholly-
owned subsidiary of Emerson
Electric Co.), October 1987
to November 1990; Vice
President & Treasurer,
Emerson Electric Co.,
June 1985 to September, 1987.
Joseph J. Hunt Director General Vice-President
Iron Workers District International Association of
Council Bridge, Structural and Orna-
3544 Watson Road mental Iron Workers (Interna-
St. Louis, MO 63139 tional Labor Union), January 1994
Age: 53 to present; General Organizer,
International Association of Bridge,
Structural and Ornamental Iron
Workers, September 1983 to
December 1993.
James C. Jacobsen Director Director, Kellwood Company,
Kellwood Company since 1975; Vice Chairman,
600 Kellwood Parkway Kellwood Company since May
<FN>
____________________
1. Directors and officers of the Fund owned less than 1% of the
outstanding shares of the Fund as of November 30, 1995.
2. Mr. Woodham is an "interested person" of the Fund as defined in
the 1940 Act.
</TABLE>
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<PAGE> 189
<TABLE>
<S> <C> <C>
Chesterfield, MO 63017 1989.
Age: 60
Donald E. Kiernan Director Senior Vice President -
Southwestern Bell Finance and Treasurer,
Corporation Southwestern Bell
175 E. Houston St. Corporation since
P.O. Box 2933 December 1990; Vice
Room 7-A-50 President-Finance,
San Antonio, TX 78299 Southwestern Bell Corporation
Age: 55 May 1990 to December 1990; Partner,
Ernst & Young (predecessor firm,
Arthur Young & Company), prior
thereto.
</TABLE>
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<PAGE> 190
<TABLE>
<CAPTION>
Principal Occupations
Position with During Past 5 years
Name and Address the Fund and other affiliations
- ---------------- ------------- ----------------------
<S> <C> <C>
Lyle L. Meyer Director Vice President, The Jefferson
Jefferson Smurfit Smurfit Corporation, April
Corporation 1989 to present; President,
8182 Maryland Avenue Smurfit Pension & Insurance
St. Louis, MO 63105 Services Company, November
Age: 59 1982 to December 1992.
Ronald D. Winney* Director and Treasurer, Ralston
Ralston Purina Company Treasurer Purina Company
Checkerboard Square Since 1985
St. Louis, MO 63164
Age: 53
W. Bruce McConnel, III Secretary Partner of the law
Suite 1100 firm of Drinker Biddle
1345 Chestnut Street & Reath, Philadelphia,
Philadelphia, PA 19107 Pennsylvania
Age: 53
Walter B. Grimm* Assistant From June, 1992 to present,
1900 E. Dublin- Secretary employee of BISYS Fund Services;
Granville Road From 1981 to
Columbus, Ohio 43229 present, President of Leigh
Age: 50 Investments Consulting/
Investments (investment
firm); from May, 1989 to
November, 1990, President
of Security Bank.
Stephen G. Mintos* Vice President From April, 1987 to present,
1900 E. Dublin- and Assistant employee of BISYS Fund Services.
Granville Road Treasurer
Columbus, OH 43229
Age: 42
<FN>
_________________________
* Messrs. Grimm, Winney and Mintos are "interested persons" of the Fund as
defined in the 1940 Act.
</TABLE>
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<PAGE> 191
For the fiscal year ended November 30, 1995, the Directors received the
following compensation:
<TABLE>
<CAPTION>
==============================================================================================
PENSION OR TOTAL COMPENSATION
RETIREMENT FROM THE FUND AND
AGGREGATE BENEFITS ACCRUED FUND COMPLEX(1)
COMPENSATION AS PART OF FUND
NAME OF DIRECTOR FROM THE FUND EXPENSE
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jerry V. Woodham $13,459.70 $0 $15,000.00
----------------------------------------------------------------------------------------------
Robert M. Cox, Jr. $8,973.13 $0 $10,000.00
----------------------------------------------------------------------------------------------
Joseph J. Hunt $8,793.13 $0 $10,000.00
----------------------------------------------------------------------------------------------
James C. Jacobsen $8,793.13 $0 $10,000.00
----------------------------------------------------------------------------------------------
Donald E. Kiernan $8,793.13 $0 $10,000.00
----------------------------------------------------------------------------------------------
Lyle L. Meyer $8,793.13 $0 $10,000.00
----------------------------------------------------------------------------------------------
Ronald D. Winney $8,793.13 $0 $10,000.00
==============================================================================================
<FN>
(1) The "Fund Complex" includes The ARCH Fund, Inc. and, prior to its
reorganization into The ARCH Fund, Inc., The ARCH Tax-Exempt Trust.
</TABLE>
Drinker Biddle & Reath, of which Mr. McConnel is a partner,
receives legal fees as counsel to the Fund.
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS
MVA serves as investment adviser to each Portfolio. Pursuant
to the advisory agreement, MVA has agreed to provide investment advisory
services as described in the Portfolios' Prospectuses. MVA has agreed to pay
all expenses incurred by it in connection with its activities under the
agreement other than the cost of securities, including brokerage commissions,
if any, purchased for the Portfolios.
The investment advisory agreement provides that MVA shall not
be liable for any error of judgment or mistake of law or for any loss suffered
in connection with the performance of its agreement, except a loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence in the performance of their duties or from reckless disregard by it
of its duties and obligations thereunder.
Under its administration agreement with the Fund, BISYS Fund
Services Ohio, Inc. (the "Administrator") serves as
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<PAGE> 192
administrator. The Administrator has agreed to maintain office facilities for
the Portfolios, furnish the Portfolios with statistical and research data,
clerical, accounting, and certain bookkeeping services, stationery and office
supplies, and certain other services required by the Portfolios, and to compute
the net asset value and net income of the Portfolios. The Administrator
prepares annual and semi-annual reports to the SEC on Form N-SAR, compiles data
for and prepares federal and state tax returns and required tax filings other
than those required to be made by the Fund's custodian and transfer agent,
prepares the Fund's compliance filings with state securities commissions,
maintains the registration or qualification of shares for sale under the
securities laws of any state in which the Fund's shares shall be registered,
assists in the preparation of annual and semi-annual reports to shareholders of
record, participates in the periodic updating of the Fund's Registration
Statement, prepares and assists in the timely filing of notices to the SEC
required pursuant to Rule 24f-2 under the 1940 Act, arranges for and bears the
cost of processing share purchase, exchange and redemption orders, keeps and
maintains the Portfolios' financial accounts and records including calculation
of daily expense accruals, monitors compliance procedures for each of the
classes of the Fund's Portfolios with each Portfolio's investment objective,
policies and limitations, tax matters, and applicable laws and regulations, and
generally assists in all aspects of the Portfolios' operations. The
Administrator bears all expenses in connection with the performance of its
services, except that a Portfolio bears any expenses incurred in connection
with any use of a pricing service to value portfolio securities. (See "Net
Asset Value" above).
From time to time, MVA and the Administrator may voluntarily
waive a portion or all of their respective fees otherwise payable to them with
respect to the Fund's Portfolios in order to increase the net income available
for distribution to shareholders.
In addition, the Portfolios' advisory and administration
agreements provide that if expenses borne by any Portfolio in any fiscal year
exceed expense limitations imposed by applicable state securities regulations,
(i) MVA will reimburse the Fund for 60% of such excess expenses and (ii) the
Administrator will reimburse the Fund for a portion of any such excess expenses
in an amount equal to the proportion that the administration fees otherwise
payable by the Portfolio to the Administrator bears to the total amount of the
investment advisory and administration fees otherwise payable by the Portfolio,
in each case to the extent required by such regulations. To the Fund's
knowledge, it is not presently subject to any expense limitation. The fees
that financial institutions, Service Organizations, and Selected Dealers may
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charge to customers for services provided in connection with their investments
in the Portfolios are not covered by the state securities expense limitations
described above.
CUSTODIAN AND TRANSFER AGENT
Mercantile is Custodian of the Portfolios' assets pursuant to a
Custodian Agreement. Under the Custodian Agreement, Mercantile has agreed to
(i) maintain a separate account or accounts in the name of each Portfolio; (ii)
receive and disburse money on behalf of each Portfolio; (iii) collect and
receive all income and other payments and distributions on account of each
Portfolio's portfolio securities; (iv) respond to correspondence relating to
its duties; and (v) make periodic reports to the Fund's Board of Directors
concerning the operations of each Portfolio. Mercantile may, at its own
expense, open and maintain a custody account or accounts on behalf of each
Portfolio with other banks or trust companies, provided that Mercantile shall
remain liable for the performance of all of its custodial duties under the
Custodian Agreement, notwithstanding any delegation. Mercantile is authorized
to select one or more banks or trust companies to serve as sub-custodian on
behalf of the Portfolios, provided that Mercantile shall remain responsible for
the performance of all of its duties under the Custodian Agreement and shall
hold the Fund harmless from the acts and omissions of any bank or trust company
servicing as sub-custodian.
In the opinion of the staff of the SEC, since the Custodian is
an affiliate of the investment adviser, the Fund and the Custodian are subject
to the requirements of Rule 17f-2 under the 1940 Act. Accordingly the Fund and
the Custodian intend to comply with the requirements of such rule.
Pursuant to the Custodian Agreement with the Fund, each
Portfolio pays Mercantile an annual fee. This fee, which is paid monthly, is
calculated as the greater of $6,000 or $.30 for each $1,000 of such Portfolio's
average daily net assets, plus $15.00 for each purchase, sale or delivery of a
security upon its maturity date, $50.00 for each interest collection or claim
item, $20.00 for each transaction involving GNMA, tax-free or other
non-depository registered items with monthly dividends or interest, $30.00 for
each purchase, sale or expiration of an option contract, $50.00 for each
purchase, sale or expiration of a futures contract, and $15.00 for each
repurchase trade with an institution other than Mercantile. In addition, each
Portfolio pays Mercantile's incremental costs in providing foreign custody
services for any foreign-denominated and foreign-held securities and reimburses
Mercantile for out-of-pocket expenses related to such services.
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BISYS Fund Services Ohio, Inc. also serves as the Fund's
transfer agent and dividend disbursing agent (in those capacities, the
"Transfer Agent") pursuant to a Transfer Agency Agreement. Under the
Agreement, the Transfer Agent has agreed to (i) process shareholder purchase
and redemption orders; (ii) maintain shareholder records for each of the
Portfolios' shareholders; (iii) process transfers and exchanges of shares of
the Portfolios; (iv) issue periodic statements for each of the Portfolios'
shareholders; (v) process dividend payments and reinvestments; (vi) assist in
the mailing of shareholder reports and proxy solicitation materials; and (vii)
make periodic reports to the Fund's Board of Directors concerning the
operations of each Portfolio.
DISTRIBUTION AND SERVICE ORGANIZATIONS
BISYS Fund Services (the "Distributor"), an affiliate of the
Administrator, serves as the Distributor of the Portfolios' shares pursuant to
a Distribution Agreement. Under the Distribution Agreement, the Distributor,
as agent, sells shares of the Portfolios on a continuous basis. The
Distributor has agreed to use appropriate efforts to solicit orders for the
sale of shares. With respect to a Portfolio's Trust shares and Institutional
shares, no compensation is payable by the Fund to the Distributor for
distribution services. With respect to a Portfolio's Investor A shares and
Investor B shares, the Distributor is entitled to receive a portion of the
front-end sales charge or contingent deferred sales charge imposed on such
shares. In addition, under the Distribution and Services Plans for Investor A
shares and Investor B shares described below, the Distributor is entitled to a
distribution fee at the annual rate of .10% (for Investor A shares) and .75%
(for Investor B shares) for distribution services. (For information regarding
the distribution services provided and distribution fees payable thereunder,
see "Distribution and Services Plan(s)" under "Management of the Fund" in the
Prospectuses and "The Plans" below).
THE PLANS
DISTRIBUTION AND SERVICES PLANS. As described in the
Prospectuses, the Fund has adopted separate Distribution and Services Plans
with respect to Investor A and Investor B shares of the Portfolios pursuant to
the 1940 Act and Rule 12b-1 thereunder. Any material amendment to either of
these Plans or arrangements with the Distributor or Service Organizations
(which may include Selected Dealers and affiliates of the Fund's Adviser) must
be approved by a majority of the Board of Directors, including a majority of
the directors who are not "interested persons" of the Fund as defined in the
1940 Act and have no direct or indirect financial interest in such
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arrangements (the "Disinterested Directors") and by a majority of the Investor
A shares or Investor B shares, respectively, of the Portfolio. Pursuant to the
Plans, the Fund may enter into Servicing Agreements with broker-dealers and
other organizations ("Servicing Agreements") that purchase Investor A or
Investor B shares of a Portfolio. The Servicing Agreements provide that the
Servicing Organizations will render certain shareholder administrative support
services to their customers who are the record or beneficial owners of Investor
A or Investor B shares. Services provided pursuant to the Servicing Agreements
may include such services as providing information periodically to customers
showing their positions in Investor A or Investor B shares and monitoring
services for their customers who have invested in Investor A or Investor B
shares, including the operation of telephone lines for daily quotations of
return information.
Service Organizations and other broker/dealers receive
commissions from the Distributor for selling Investor B Shares, which are paid
at the time of the sale. These commissions approximate the commissions payable
with respect to sales of Investor A Shares. The distribution fees payable
under the Distribution and Services Plan for Investor B Shares (at an annual
rate of .75%) are intended to cover the expense to the Distributor of paying
such up-front commissions, and the contingent deferred sales charge is
calculated to charge the investor with any shortfall that would occur if
Investor B Shares are redeemed prior to the expiration of the eight year
period, after which Investor B Shares automatically convert to Investor A
Shares. To provide funds for the payment of up-front sales commissions, the
Distributor has entered into an agreement with MVA, which provides funds for
the payment of commissions and other fees payable to Service Organizations and
broker/dealers who sell Investor B Shares. Under the terms of that agreement,
the Distributor sells and assigns to MVA the fees which may be payable from
time to time to the Distributor under the Distribution and Services Plan for
Investor B Shares and the contingent deferred sales charges payable to the
Distributor with respect to Investor B Shares.
ADMINISTRATIVE SERVICES PLANS. As stated in the applicable
Prospectuses, separate Administrative Services Plans have been adopted with
respect to Trust shares and Institutional shares of the Portfolios. Pursuant
to each Plan and the Distribution and Services Plans described above, the Fund
may enter into Servicing Agreements with banks, trust departments, and other
financial institutions ("Trust Servicing Agreements") and with broker-dealers
and other organizations ("Servicing Agreements") that purchase Trust shares,
Institutional shares, Investor A shares or Investor B shares of a Portfolio,
respectively. The Servicing Agreements provide that the Service
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Organizations will render certain shareholder administrative support services
to their customers who are the record or beneficial owners of Trust Shares,
Institutional shares, Investor A shares or Investor B shares, respectively.
Services provided pursuant to the Servicing Agreements may include some or all
of the following services: (i) processing dividend and distribution payments
from the Portfolios on behalf of customers; (ii) providing information
periodically to customers showing their positions in Trust, Institutional,
Investor A shares or Investor B shares; (iii) arranging for bank wires; (iv)
responding to routine customer inquiries relating to services performed by the
particular Service Organization; (v) providing sub-accounting with respect to
shares owned of record or beneficially by customers or the information
necessary for sub-accounting; (vi) as required by law, forwarding shareholder
communications (such as proxies, shareholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices) to customers;
(vii) forwarding to customers proxy statements and proxies containing any
proposals regarding Servicing Agreements or the related Plan; (viii)
aggregating and processing purchase, redemption, and exchange requests from
customers and placing net purchase and redemption orders with the Fund's
Distributor; (ix) providing customers with a service that invests the assets of
their accounts in shares pursuant to specific or pre-authorized instructions;
(x) maintaining records relating to each customer's share transactions; or (xi)
other similar services if requested by the Fund and permitted by law. In
addition, Service Organizations may also provide dedicated facilities and
equipment in various local locations to serve the needs of investors, including
walk-in facilities, 800 numbers, and communication systems to handle
shareholder inquiries, and in connection with such facilities, provide on-site
management personnel and monitoring services for their customers who have
invested in Investor A or Investor B shares, including the operation of
telephone lines for daily quotations of return information.
OTHER PLAN INFORMATION. The Board of Directors has approved
each Plan and its respective arrangements with the Distributor, Service
Organizations and broker-dealer based on information provided by the Fund's
service contractors that there is a reasonable likelihood that these Plans and
arrangements will benefit the Portfolios and their shareholders. Pursuant to
each Plan, the Board of Directors reviews, at least quarterly, a written report
of the amounts of distribution fees and servicing fees expended pursuant to
each Plan and the Service Organizations and the purposes for which the
expenditures were made. So long as the Fund has one or more of the above
described Plans in effect, the selection and nomination of the members of the
Board of Directors who are not "interested persons" (as defined in the 1940
Act) of the Fund will be committed to the discretion of such Disinterested
Directors.
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Depending upon the terms governing the particular customer
accounts, Service Organizations, Selected Dealers, and other institutions may
also charge their customers directly for cash management and other services
provided in connection with the accounts, including, for example, account
maintenance fees, compensating balance requirements, or fees based upon account
transactions, assets, or income. An investor should therefore read the
Prospectuses and this Statement of Additional Information in light of the terms
of his or her account with a Service Organization, Selected Dealer, or other
institution before purchasing Trust or Investor shares of a Portfolio.
FUND EXPENSES. As discussed previously, the Portfolios'
service contractors bear all expenses in connection with the performance of
their services, except that the Portfolios bear certain expenses incurred
pursuant to the their Distribution and Services Plans, their Administration
Services Plans and certain sub-transfer agency fees (with respect to
Institutional shares). The Portfolios bear the expenses incurred in their
operations. Fund expenses include taxes, interest, fees and salaries of its
directors and officers, Securities and Exchange Commission fees, state
securities qualification fees, costs of preparing and printing prospectuses for
regulatory purposes and for distribution to shareholders, advisory and
administration fees, distribution fees for distribution services provided to
and expenses assumed in connection with marketing Investor A shares and
Investor B shares, charges of the Custodian, transfer agent, and dividend
disbursing agent, Service Organization fees, certain insurance premiums,
outside auditing and legal expenses, costs of any independent pricing service,
costs of shareholder reports and meetings and any extraordinary expenses. The
Portfolios also pay for brokerage fees, commission and other transaction
charges (if any) incurred in connection with the purchase and sale of portfolio
securities.
INDEPENDENT AUDITORS
For the fiscal year ended November 30, 1995, KPMG Peat Marwick
LLP, certified public accountants, with offices at Two Nationwide Plaza,
Columbus, Ohio 43215, served as independent auditors for the Fund. KPMG Peat
Marwick LLP performs an annual audit of the Fund's financial statements.
Reports of its activities are provided to the Fund's Board of Directors.
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COUNSEL
Drinker Biddle & Reath (of which Mr. McConnel, Secretary of the
Fund, is a partner), Suite 1100, 1345 Chestnut Street, Philadelphia,
Pennsylvania 19107-3496, is counsel to the Fund and will pass upon certain
legal matters on its behalf.
MISCELLANEOUS
As of February 7, 1996, Mercantile held of record 99.999% and
41.313% of the outstanding Institutional and Trust shares, respectively, in the
Money Market Portfolio; 95.085% and 59.403% of the outstanding Institutional
and Trust shares, respectively, in the Treasury Money Market Portfolio; 72.909%
of the outstanding Trust shares in the Tax-Exempt Money Market Portfolio;
98.086% and 96.937% of the outstanding Institutional and Trust shares,
respectively, in the Growth & Income Equity Portfolio; 98.977% and 64.349% of
the outstanding Institutional and Trust shares, respectively, in the Emerging
Growth Portfolio; 99.708% and 96.824% of the outstanding Institutional and
Trust shares, respectively, in the Government & Corporate Bond Portfolio;
99.998% and 93.210% of the outstanding Institutional and Trust shares,
respectively, in the U.S. Government Securities Portfolio; 99.884% and 96.111%
of the outstanding Institutional and Trust shares, respectively, in the
Balanced Portfolio; 97.261% and 94.363% of the outstanding Institutional and
Trust shares, respectively, in the International Equity Portfolio; 99.833% of
the outstanding Trust shares in the Short-Intermediate Municipal Portfolio;
and 99.999% of the outstanding Trust shares in the Missouri Tax-Exempt Bond
Portfolio, as fiduciary or agent on behalf of its customers. Mercantile is a
wholly owned subsidiary of Mercantile Bancorporation Inc., a Missouri
corporation. Under the 1940 Act, Mercantile may be deemed to be a controlling
person of the Fund.
As of the same date, the following institutions also owned of
record 5% or more of the Money Market Portfolio's outstanding shares as
fiduciary or agent on behalf of their customers: Trust Shares - First Fidelity
Bank NA, Broad & Walnut Streets, Philadelphia, PA 19109 (13.671)%; Mercantile
Bank NA Trust, Trust Securities Unit 17-1, Attn: Dede Clark, P.O. Box 387 Main
Post Office, St. Louis, MO 63166- 0000 (41.313%); Hawaiian Trust Company Ltd.,
783 Funds Accounting, P.O. Box 3170, Honolulu, HI 96802-3170 (10.633%);
American Trust Co. of Hawaii Inc., Trust Short-Term Investment Fund, P.O. Box
3170, Honolulu, HI 96802-3170 (5.354%); Investor A Shares - BHC Securities
Inc., Attn: Cash Balance Sweep Dept., One Commerce Square, 11th Floor, 2005
Market Street, Philadelphia, PA 19103 (90.072%); Mercantile Investment
Services, Inc., Firm Capital Account, Attn: Judy Horbelt, P.O. Box 790121, St.
Louis, MO 63179-0121 (6.104%);
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Institutional Shares - Mercantile Bank St. Louis NA, Attn: Trust Securities
Unit 17-1, P.O. Box 387, St. Louis, MO 63166 (99.999%).
As of the same date, the following institutions also owned of
record 5% or more of the Treasury Money Market Portfolio's outstanding shares
as fiduciary or agent on behalf of their customers: Trust Shares - American
Trust Co. of Hawaii Inc., Trust Short-Term Investment Fund, P.O. Box 3170,
Honolulu, HI 96802-3170 (7.029%); Hawaiian Trust Company Ltd., 783 Funds
Accounting, P.O. Box 3170, Honolulu, HI 96802-3170 (9.249%); Express Scripts,
Inc., Attn: Joe Plum, 14000 Riverport Drive, Maryland Heights, MO 63043
(7.012%); City of St. Louis, Airport Revenue Fund, Attn: Kenneth L. Below,
Room 2200 City Hall, 101 S. Tucker, St. Louis, MO 63103 (8.837%); Mercantile
Bank NA Trust, Trust Securities Unit 17-1, Attn: Dede Clark, P.O. Box 387 Main
Post Office, St. Louis, MO 63166-0000 (59.403%); Investor A Shares - BHC
Securities Inc., Attn: Cash Balance Sweep Dept., 1 Commerce Square, 11th
Floor, 2005 Market Street, Philadelphia, PA 19103 (79.254%); Mercantile Bank
of St. Louis NA, Custodian Richard E. Crippa Rollover IRA, 2948 Castelford
Drive, Florissant, MO 63033 (16.622%); Institutional Shares - Mercantile Bank
St. Louis NA, Attn: Trust Securities Unit 17-1, P.O. Box 387, St. Louis, MO
63166 (95.085%).
As of the same date, the following institutions also owned of
record 5% or more of the Tax-Exempt Money Market Portfolio's outstanding shares
as fiduciary or agent on behalf of their customers: Trust Shares - Hawaiian
Trust Company Ltd., 783 Funds Accounting, P.O. Box 3170, Honolulu, HI
96802-3170 (13.281%); Mercantile Bank NA Trust, Trust Securities Unit 17-1,
Attn: Dede Clark, P.O. Box 387 Main Post Office, St. Louis, MO 63166 (72.909%);
Investor A Shares - BHC Securities Inc., Attn: Cash Balance Sweep Dept., 1
Commerce Square, 11th Floor, 2005 Market Street, Philadelphia, PA 19103
(86.456%); Charles H. Weiss, Trustee Charles H. Weiss Trust, UA Dated
08/15/72, 1209 Washington Avenue, St. Louis, MO 63103-1934 (11.760%).
As of the same date, the following institutions also owned of
record 5% or more of the International Equity Portfolio's outstanding shares as
fiduciary or agent on behalf of their customers: Trust Shares - Olive &
Company, Attn: Trust Securities Unit 17-1, P.O. Box 387, St. Louis, MO
63166-0387 (40.299%); Locust and Company, Attn: Trust Securities Unit 17-1,
P.O. Box 387, St. Louis, MO 63166 (54.064%); Boat & Co., P.O. Box 14737, St.
Louis, MO 63178-4737 (5.451%); Investor A Shares - BHC Securities Inc., Trade
House Acct., 2005 Market Street, Philadelphia, PA 19103 (49.707%); Frances
Dakers, 200 E. 89th St., 28D, New York, NY 10128 (17.252%); Investor B Shares
- - BHC Securities, Inc., FAO 24252597, Attn: Mutual Funds Dept., One Commerce
Square, 2005 Market Street, Suite 1200, Philadelphia, PA
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19103 (6.877%); BHC Securities, Inc., FAO 24126127, Attn: Mutual Funds Dept.,
One Commerce Square, 2005 Market Street, Suite 1200, Philadelphia, PA 19103
(6.013%); BHC Securities Inc., FAO 24104352, Attn: Mutual Funds Dept., One
Commerce Square, 2005 Market Street, Suite 1200, Philadelphia, PA 19103
(6.884%); BHC Securities Inc., FAO 24283805, Attn: Mutual Funds Dept., One
Commerce Square, 2005 Market Street, Suite 1200, Philadelphia, PA 19103
(6.470%); Institutional Shares - Locust and Company, Attn: Trust Securities
Unit 17-1, P.O. Box 387, St. Louis, MO 63166 (97.261%).
As of the same date, the following institutions also owned of
record 5% or more of the Growth & Income Equity Portfolio's outstanding shares
as fiduciary or agent on behalf of their customers: Trust Shares - Locust and
Company, Mercantile Bank St. Louis NA, Trust Securities Unit 17-1, P.O. Box
387, St. Louis MO 63166-0387 (77.809%) Olive & Company, Mercantile Bank St.
Louis NA, Trust Securities Unit 17- 1, P.O. Box 387, St. Louis, MO 63166-0387
(19.128%); Investor A Shares - BHC Securities Inc., Trade House Account, Attn:
Mutual Fund Dept., One Commerce Square, 2005 Market Street, Philadelphia, PA
19103 (29.419%); Investor B Shares - BHC Securities Inc., FAO 24282580, Attn:
Mutual Funds Dept., One Commerce Square, 2005 Market Street, Suite 1200,
Philadelphia, PA 19103 (8.035%); Institutional Shares - Locust & Company,
Mercantile Bank St. Louis NA, Attn: Trust Securities Unit 17-1, P.O. Box 387,
St. Louis, MO 63166 (98.086%).
As of the same date, the following institutions also owned of
record 5% or more of the Emerging Growth Portfolio's outstanding shares as
fiduciary or agent on behalf of their customers: Trust Shares - State Street
Bank & Trust Co., Trustee Pioneer Hi-Bred International Savings Plan Trust, One
Enterprise Drive, Mail Stop D13, North Quincy, MA 02171 (12.750%); Olive &
Company, Mercantile Bank St. Louis NA, Trust Securities Unit 17-1, P.O. Box
387, St. Louis, MO 63166-0387 (14.189%); American Bar Endowment, 750 North Lake
Shore Drive, Chicago, IL 60611 (6.538%); Locust & Company, Mercantile Bank St.
Louis NA, Trust Securities Unit 17-1, P.O. Box 387, St. Louis, MO 63166-0387
(50.160%); Investor A Shares - BHC Securities Inc., Trade House Account, Attn:
Mutual Funds Dept., One Commerce Square, 2005 Market Street, Philadelphia, PA
19103 (38.990%); Institutional Shares - Locust & Company, Mercantile Bank St.
Louis NA, Attn: Trust Securities Unit 17-1, P.O. Box 387, St. Louis, MO 63166
(98.977%).
As of the same date, the following institutions also owned of
record 5% or more of the U.S. Government Securities Portfolio's outstanding
shares as fiduciary or agent on behalf of their customers: Trust Shares -
First American Bank of Louisiana, Attn: Gerald Ferrar, P.O. Box 7232, Monroe,
LA 71211
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(6.459%); Locust & Company, Mercantile Bank St. Louis NA, Trust Securities Unit
17-1, P.O. Box 387, St. Louis, MO 63166-0387 (60.517%); Olive & Company,
Mercantile Bank St. Louis NA, Trust Securities Unit 17-1, P.O. Box 387, St.
Louis, MO 63166-0387 (32.693%); Investor A Shares - BHC Securities Inc., Trade
House Account, Attn: Mutual Funds Dept., One Commerce Square, 2005 Market
Street, Philadelphia, PA 19103 (13.613%); Mercantile Bank of St. Louis NA,
Custodian Edmund C. Albrecht, Jr. IRA, 17 Outer Ladue Dr., St. Louis, MO 63131
(5.358%); Mercantile Bank of St. Louis NA, Custodian Robert W. Davis Rollover
IRA, 818 Broadway, Elsberry, MO 63343-1109 (5.912%); Investor B Shares - BHC
Securities Inc., FAO 24297242, Attn: Mutual Funds Dept., One Commerce Square,
2005 Market Street, Suite 1200, Philadelphia, PA 19103 (11.693%); BHC
Securities Inc., FAO 24296577, Attn: Mutual Funds Dept., One Commerce Square,
2005 Market Street, Suite 1200, Philadelphia, PA 19103 (7.073%); BHC
Securities Inc., FAO 24296172, Attn: Mutual Funds Dept., One Commerce Square,
2005 Market Street, Suite 1200, Philadelphia, PA 19103 (7.394%); Mercantile
Bank of St. Louis NA, Custodian Richard Dell Woods, SEP IRA, 3114 Picket Road,
St. Joseph, MO 64503 (9.376%); BHC Securities Inc., FAO 24297609, Attn: Mutual
Funds Dept., One Commerce Square, 2005 Market Street, Suite 1200, Philadelphia,
PA 19103 (10.384%); BHC Securities Inc., FAO 24296474, Attn: Mutual Funds
Dept., One Commerce Square, 2005 Market Street, Suite 1200, Philadelphia, PA
19103 (8.168%); BHC Securities Inc., FAO 24286253, Attn: Mutual Funds Dept.,
One Commerce Square, 2005 Market Street, Suite 1200, Philadelphia, PA 19103
(7.293%); Institutional Shares - Locust & Company, Mercantile Bank St. Louis
NA, Attn: Trust Securities Unit 17-1, P.O. Box 387, St. Louis, MO 63166
(99.998%).
As of the same date, the following institutions also owned of
record 5% or more of the Balanced Portfolio's outstanding share as fiduciary or
agent on behalf of their customers: Trust Shares - Locust & Company,
Mercantile Bank St. Louis NA, Trust Securities Unit 17-1, P.O. Box 387, St.
Louis, MO 63166-0387 (96.111%); Investor A Shares - Mercantile Bank of St.
Louis NA, Custodian Edmund J. Markevicius Rollover IRA, 17 Agate Avenue,
Worcester, MA 01604 (6.574%); BHC Securities Inc., Trade House Account, Attn:
Mutual Funds Dept., One Commerce Square, 2005 Market Street, Philadelphia, PA
19103 (18.809%); Investor B Shares - Mercantile Bank of St. Louis NA, Custodian
William J. Sipe IRA, 4606 Zebra Lane, St. Joseph, MO 64506 (6.560%); BHC
Securities Inc., FAO 24123548, Attn: Mutual Funds Dept., One Commerce Square,
2005 Market Street, Suite 1200, Philadelphia, PA 19103 (20.154%); BHC
Securities Inc., FAO 24318923, Attn: Mutual Funds Dept., One Commerce Square,
2005 Market Street, Suite 1200, Philadelphia, PA 19103 (5.376%); Mercantile
Bank of St. Louis NA, Custodian Brian A. Bundy IRA, 1807 Hilltop Dr., St.
Joseph, MO 64505 (7.009%); BHC Securities Inc., FAO 24130105, Attn: Mutual
Funds Dept., One Commerce Square, 2005 Market Street,
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Suite 1200, Philadelphia, PA 19103 (6.299%); Mercantile Bank of St. Louis NA,
Custodian Richard Dell Woods, SEP IRA, 3114 Picket Road, St. Joseph, MO 64503
(25.766%); Institutional Shares - Locust & Company, Mercantile Bank St. Louis
NA, Attn: Trust Securities Unit 17-1, P.O. Box 387, St. Louis, MO 63166
(99.884%).
As of the same date, the following institutions also owned of
record 5% or more of the Government & Corporate Bond Portfolio's outstanding
shares as fiduciary or agent on behalf of their customers: Trust Shares -
Locust & Company, Mercantile Bank St. Louis NA, Trust Securities Unit 17-1,
P.O. Box 387, St. Louis, MO 63166-0387 (58.023%); Olive & Company, Mercantile
Bank St. Louis NA, Trust Securities Unit 17-1, P.O. Box 387, St. Louis, MO
63166-0387 (38.801); Investor A Shares - BHC Securities Inc., Attn: Mutual
Funds Dept., One Commerce Square, 2005 Market Street, Philadelphia, PA 19103
(13.346%); Investor B Shares - Mercantile Bank of St. Louis NA, Custodian Edwin
C. Hogrebe, IRA, 5537 Goethe, St. Louis, MO 63109 (6.901%); BHC Securities
Inc., FAO 24284744, Attn: Mutual Funds Dept., One Commerce Square, 2005 Market
Street, Suite 1200, Philadelphia, PA 19103 (6.905%); BHC Securities Inc., FAO
24294267, Attn: Mutual Funds Dept., One Commerce Square, 2005 Market Street,
Suite 1200, Philadelphia, PA 19103 (14.434%); BHC Securities Inc., FAO
24297770, Attn: Mutual Funds Dept., One Commerce Square, 2005 Market Street,
Suite 1200, Philadelphia, PA 19103 (30.566%); Institutional Shares - Locust &
Company, Mercantile Bank St. Louis NA, Attn: Trust Securities Unit 17-1, P.O.
Box 387, St. Louis, MO 63166 (99.708%).
As of the same date, the following institutions also owned of
record 5% or more of the Short - Intermediate Municipal Portfolio's outstanding
shares as fiduciary or agent on behalf of their customers: Trust Shares -
Locust & Company, Attn: Trust Securities Unit 17-1, P.O. Box 387, St. Louis, MO
63166 (8.309%); Olive & Company, Attn: Trust Securities Unit 17-1, P.O. Box
387, St. Louis, MO 63166- 0387 (91.524%); Investor A Shares - James Sutton,
P.O. Box 2465, Inverness, FL 34451-2465 (96.744%).
As of the same date, the following institutions also owned of
record 5% or more of the Missouri Tax-Exempt Bond Portfolio's outstanding
shares as fiduciary or agent on behalf of their customers: Trust Shares -
Locust & Company, Mercantile Bank St. Louis NA, Trust Securities Unit 17-1,
P.O. Box 387, St. Louis, MO 63166-0387 (20.648%); Olive & Company, Mercantile
Bank St. Louis NA, Trust Securities Unit 17-1, P.O. Box 387, St. Louis, MO
63166-0387 (79.351%); Investor A Shares - BHC Securities Inc., Trade House
Account, Attn: Mutual Funds Dept., One Commerce Square, 2005 Market Street,
Philadelphia, PA 19103 (27.763%); Investor B Shares - BHC Securities Inc., FAO
24126820, Attn: Mutual Funds Dept., One Commerce Square, 2005 Market
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Street, Suite 1200, Philadelphia, PA 19103 (14.032%); BHC Securities Inc., FAO
24131119, Attn: Mutual Funds Dept., One Commerce Square, 2005 Market Street,
Suite 1200, Philadelphia, PA 19103 (7.561%); BHC Securities Inc., FBO
24282580, Attn: Mutual Funds Dept., 100 N. 20th Street, Philadelphia, PA
19103 (5.782%); BHC Securities Inc. FAO 24286677, Attn: Mutual Funds Dept.,
One Commerce Square, 2005 Market Street, Suite 1200, Philadelphia, PA 19103
(11.519%); BHC Securities Inc., FAO 24290504, Attn: Mutual Funds Dept., One
Commerce Square, 2005 Market Street, Suite 1200, Philadelphia, PA 19103
(19.149%).
On the basis of information received from these institutions,
the Fund believes that substantially all of the shares owned of record were
also beneficially owned by these institutions because they possessed or shared
voting or investment power with respect to such shares on behalf of their
underlying accounts.
As used in the Statement of Additional Information and in the
Prospectuses of the same date, "assets belonging to a Portfolio" means the
consideration received by the Fund upon the issuance or sale of shares in that
Portfolio, together with all income, earnings, profits and proceeds derived
from the investment thereof, including any proceeds from the sale, exchange or
liquidation of such investments, any funds or payments derived from any
reinvestments of such proceeds, and a portion of any general assets of the Fund
not belonging to a particular Portfolio. Assets belonging to a particular
Portfolio are charged with the direct liabilities in respect of that Portfolio
and with a share of the general liabilities of the Fund which are normally
allocated in proportion to the relative net asset levels of the respective
Portfolios. Determinations by the Board of Directors as to the direct and
allocable liabilities, and allocable portion of any general assets, with
respect to a particular Portfolio are conclusive.
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APPENDIX A
----------
COMMERCIAL PAPER RATINGS
- ------------------------
A Standard & Poor's commercial paper rating is a current
assessment of the likelihood of timely payment of debt considered short-term in
the relevant market. The following summarizes the rating categories used by
Standard and Poor's for commercial paper:
"A-1" - Issue's degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics are denoted "A-1+."
"A-2" - Issue's capacity for timely payment is satisfactory.
However, the relative degree of safety is not as high as for issues designated
"A-1."
"A-3" - Issue has an adequate capacity for timely payment. It
is, however, somewhat more vulnerable to the adverse effects of changes and
circumstances than an obligation carrying a higher designation.
"B" - Issue has only a speculative capacity for timely
payment.
"C" - Issue has a doubtful capacity for payment.
"D" - Issue is in payment default.
Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of 9 months. The following summarizes the rating categories
used by Moody's for commercial paper:
"Prime-1" - Issuer or related supporting institutions are
considered to have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics: leading market positions in well established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset
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protection; broad margins in earning coverage of fixed financial charges and
high internal cash generation; and well established access to a range of
financial markets and assured sources of alternate liquidity.
"Prime-2" - Issuer or related supporting institutions are
considered to have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external conditions. Ample
alternative liquidity is maintained.
"Prime-3" - Issuer or related supporting institutions have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
"Not Prime" - Issuer does not fall within any of the Prime
rating categories.
The three rating categories of Duff & Phelps for investment
grade commercial paper and short-term debt are "D-1," "D-2" and "D- 3." Duff &
Phelps employs three designations, "D-1+," "D-1" and "D-1-," within the highest
rating category. The following summarizes the rating categories used by Duff &
Phelps for commercial paper:
"D-1+" - Debt possesses highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
"D-2" - Debt possesses good certainty of timely payment.
Liquidity factors and company fundamentals are sound. Although ongoing funding
needs may enlarge total financing
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requirements, access to capital markets is good. Risk factors are small.
"D-3" - Debt possesses satisfactory liquidity, and other
protection factors qualify issue as investment grade. Risk factors are larger
and subject to more variation. Nevertheless, timely payment is expected.
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or
interest payments.
Fitch short-term ratings apply to debt obligations that are
payable on demand or have original maturities of up to three years. The
following summarizes the rating categories used by Fitch for short-term
obligations:
"F-1+" - Securities possess exceptionally strong credit
quality. Issues assigned this rating are regarded as having the strongest
degree of assurance for timely payment.
"F-1" - Securities possess very strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only slightly less
in degree than issues rated "F-1+."
"F-2" - Securities possess good credit quality. Issues
assigned this rating have a satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as the "F-1+" and "F-1"
categories.
"F-3" - Securities possess fair credit quality. Issues
assigned this rating have characteristics suggesting that the degree of
assurance for timely payment is adequate; however, near-term adverse changes
could cause these securities to be rated below investment grade.
"F-S" - Securities possess weak credit quality. Issues
assigned this rating have characteristics suggesting a minimal degree of
assurance for timely payment and are vulnerable to near-term adverse changes in
financial and economic conditions.
"D" - Securities are in actual or imminent payment default.
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Fitch may also use the symbol "LOC" with its short-term ratings
to indicate that the rating is based upon a letter of credit issued by a
commercial bank.
Thomson BankWatch short-term ratings assess the likelihood of
an untimely or incomplete payment of principal or interest of unsubordinated
instruments having a maturity of one year or less which is issued by United
States commercial banks, thrifts and non-bank banks; non-United States banks;
and broker-dealers. The following summarizes the ratings used by Thomson
BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's
highest rating category and indicates a very high degree of likelihood that
principal and interest will be paid on a timely basis.
"TBW-2" - This designation indicates that while the degree of
safety regarding timely payment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents the lowest investment
grade category and indicates that while the debt is more susceptible to adverse
developments (both internal and external) than obligations with higher ratings,
capacity to service principal and interest in a timely fashion is considered
adequate.
"TBW-4" - This designation indicates that the debt is regarded
as non-investment grade and therefore speculative.
IBCA assesses the investment quality of unsecured debt with an
original maturity of less than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for short-term debt ratings:
"A1+" - Obligations supported by the highest capacity for
timely repayment.
"A1" - Obligations are supported by a strong capacity for
timely repayment.
"A2" - Obligations are supported by a satisfactory capacity for
timely repayment, although such capacity may be susceptible to adverse changes
in business, economic or financial conditions.
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"A3" - Obligations are supported by a satisfactory capacity for
timely repayment. Such capacity is more susceptible to adverse changes in
business, economic or financial conditions than for obligations in higher
categories.
"B" - Obligations for which the capacity for timely repayment
is susceptible to adverse changes in business, economic or financial
conditions.
"C" - Obligations for which there is an inadequate capacity to
ensure timely repayment.
"D" - Obligations which have a high risk of default or which
are currently in default.
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
- ----------------------------------------------
The following summarizes the ratings used by Standard & Poor's
for corporate and municipal debt:
"AAA" - This designation represents the highest rating assigned
by Standard & Poor's to a debt obligation and indicates an extremely strong
capacity to pay interest and repay principal.
"AA" - Debt is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in small degree.
"A" - Debt is considered to have a strong capacity to pay
interest and repay principal although such issues are somewhat more susceptible
to the adverse effects of changes in circumstances and economic conditions than
debt in higher-rated categories.
"BBB" - Debt is regarded as having an adequate capacity to pay
interest and repay principal. Whereas such issues normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher-rated categories.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
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"BB" - Debt has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The
"BB" rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB- " rating.
"B" - Debt has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
"CCC" - Debt has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business, financial or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The "CCC"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "B" or "B-" rating.
"CC" - This rating is typically applied to debt subordinated to
senior debt that is assigned an actual or implied "CCC" rating.
"C" - This rating is typically applied to debt subordinated to
senior debt which is assigned an actual or implied "CCC-" debt rating. The "C"
rating may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
"CI" - This rating is reserved for income bonds on which no
interest is being paid.
"D" - Debt is in payment default. This rating is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S & P believes such
payments will be made during such grace period. "D" rating is also used upon
the filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may
be modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid,
and certain other obligations that S & P believes may
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experience high volatility or high variability in expected returns due to
non-credit risks. Examples of such obligations are: securities whose principal
or interest return is indexed to equities, commodities, or currencies; certain
swaps and options; and interest only and principal only mortgage securities.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in "Aaa"
securities.
"A" - Bonds possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds considered medium-grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of
these ratings provide questionable protection of interest and principal ("Ba"
indicates some speculative elements; "B" indicates a general lack of
characteristics of desirable investment; "Caa" represents a poor standing; "Ca"
represents obligations which are speculative in a high degree; and "C"
represents the lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be
in default.
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Con. (---) - Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes probable
credit stature upon completion of construction or elimination of basis of
condition.
Moody's applies numerical modifiers 1, 2 and 3 in each generic
classification from "Aa" to "B" in its bond rating system. The modifier 1
indicates that the issuer ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issuer ranks at the lower end of its generic rating
category.
The following summarizes the long-term debt ratings used by
Duff & Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality.
The risk factors are negligible, being only slightly more than for risk-free
U.S. Treasury debt.
"AA" - Debt is considered of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
"BBB" - Debt possesses below average protection factors but
such protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of
these ratings is considered to be below investment grade. Although below
investment grade, debt rated "BB" is deemed likely to meet obligations when
due. Debt rated "B" possesses the risk that obligations will not be met when
due. Debt rated "CCC" is well below investment grade and has considerable
uncertainty as to timely payment of principal, interest or preferred dividends.
Debt rated "DD" is a defaulted debt obligation, and the rating "DP" represents
preferred stock with dividend arrearages.
To provide more detailed indications of credit quality, the
"AA," "A," "BBB," "BB" and "B" ratings may be modified by the
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addition of a plus (+) or minus (-) sign to show relative standing within these
major categories.
The following summarizes the highest four ratings used by Fitch
for corporate and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
"AA" - Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated "F-1+."
"A" - Bonds considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds with
higher ratings.
"BB," "B," "CCC," "CC," "C," "DDD," "DD," and "D" - Bonds that
possess one of these ratings are considered by Fitch to be speculative
investments. The ratings "BB" to "C" represent Fitch's assessment of the
likelihood of timely payment of principal and interest in accordance with the
terms of obligation for bond issues not in default. For defaulted bonds, the
rating "DDD" to "D" is an assessment of the ultimate recovery value through
reorganization or liquidation.
To provide more detailed indications of credit quality, the
Fitch ratings from and including "AA" to "C" may be modified by the addition of
a plus (+) or minus (-) sign to show relative standing within these major
rating categories.
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IBCA assesses the investment quality of unsecured debt with an
original maturity of more than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for long-term debt ratings:
"AAA" - Obligations for which there is the lowest expectation
of investment risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk substantially.
"AA" - Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions may
increase investment risk albeit not very significantly.
"A" - Obligations for which there is a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
strong, although adverse changes in business, economic or financial conditions
may lead to increased investment risk.
"BBB" - Obligations for which there is currently a low
expectation of investment risk. Capacity for timely repayment of principal and
interest is adequate, although adverse changes in business, economic or
financial conditions are more likely to lead to increased investment risk than
for obligations in higher categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one
of these ratings where it is considered that speculative characteristics are
present. "BB" represents the lowest degree of speculation and indicates a
possibility of investment risk developing. "C" represents the highest degree
of speculation and indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating
to denote relative status within major rating categories.
Thomson BankWatch assesses the likelihood of an untimely
repayment of principal or interest over the term to maturity of long term debt
and preferred stock which are issued by United States commercial banks, thrifts
and non-bank banks; non-United States banks; and broker-dealers. The following
summarizes the rating categories used by Thomson BankWatch for long-term debt
ratings:
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"AAA" - This designation represents the highest category
assigned by Thomson BankWatch to long-term debt and indicates that the ability
to repay principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to
repay principal and interest on a timely basis with limited incremental risk
compared to issues rated in the highest category.
"A" - This designation indicates that the ability to repay
principal and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC," and "CC," - These designations are assigned
by Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in
default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may
include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
MUNICIPAL NOTE RATINGS
- ----------------------
A Standard and Poor's rating reflects the liquidity concerns
and market access risks unique to notes due in three years or less. The
following summarizes the ratings used by Standard & Poor's Ratings Group for
municipal notes:
"SP-1" - The issuers of these municipal notes exhibit very
strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics are given a plus (+)
designation.
"SP-2" - The issuers of these municipal notes exhibit
satisfactory capacity to pay principal and interest.
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"SP-3" - The issuers of these municipal notes exhibit
speculative capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other
short-term loans are designated Moody's Investment Grade ("MIG") and variable
rate demand obligations are designated Variable Moody's Investment Grade
("VMIG"). Such ratings recognize the differences between short-term credit
risk and long-term risk. The following summarizes the ratings by Moody's
Investors Service, Inc. for short-term notes:
"MIG-1"/"VMIG-1" - Loans bearing this designation are of the
best quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
"MIG-2"/"VMIG-2" - Loans bearing this designation are of high
quality, with margins of protection ample although not so large as in the
preceding group.
"MIG-3"/"VMIG-3" - Loans bearing this designation are of
favorable quality, with all security elements accounted for but lacking the
undeniable strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is likely to be less
well established.
"MIG-4"/"VMIG-4" - Loans bearing this designation are of
adequate quality, carrying specific risk but having protection commonly
regarded as required of an investment security and not distinctly or
predominantly speculative.
"SG" - Loans bearing this designation are of speculative
quality and lack margins of protection.
Fitch and Duff & Phelps use the short-term ratings described
under Commercial Paper Ratings for municipal notes.
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<PAGE> 216
FORM N-1A
---------
PART C. OTHER INFORMATION
--------------------------
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
(a) Financial Statements:
---------------------
(1) Not Applicable.
(b) Exhibits:
(1) (a) Articles of Incorporation dated September 9,
1982.
(b) Articles Supplementary to
Registrant's Articles of Incorporation dated
October 28, 1982.
(c) Articles Supplementary to
Registrant's Articles of Incorporation dated
December 22, 1987.
(d) Articles Supplementary to
Registrant's Articles of Incorporation dated
as of October 30, 1990.
(e) Articles Supplementary to
Registrant's Articles of Incorporation dated
as of November 9, 1990.
(f) Articles Supplementary to
Registrant's Articles of Incorporation dated
as of March 19, 1991.
(g) Certificate of Correction dated April 30,
1991 to Articles Supplementary dated as of
March 19, 1991.
(h) Articles Supplementary to Registrant's
Articles of Incorporation dated as of June 25
1991.
(i) Articles Supplementary to Registrant's
Articles of Incorporation dated as of
November 15, 1991.
(j) Articles Supplementary to Registrant's
Articles of Incorporation dated as of
January 26, 1993.
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<PAGE> 217
(k) Articles Supplementary to Registrant's
Articles of Incorporation dated as of March
23, 1993.
(l) Articles Supplementary to Registrant's
Articles of Incorporation dated as of March
7, 1994.
(m) Certificate of Correction dated October 17,
1994 to Articles Supplementary dated as of
March 8, 1994 to Registrant's Articles of
Incorporation.
(n) Articles Supplementary to Registrant's
Articles of Incorporation dated as of
February 22, 1995.
(o) Articles Supplementary to Registrant's
Articles of Incorporation dated as of April
17, 1995.
(p) Articles Supplementary to Registrant's
Articles of Incorporation dated July 7,
1995.
(q) Articles Supplementary to Registrant's
Articles of Incorporation dated September 20,
1995.
(r) Form of Articles Supplementary to
Registrant's Articles of Incorporation.
(2) (a) By-Laws as approved and adopted by
Registrant's Board of Directors are
incorporated herein by reference to Exhibit
(2) of Registrant's Registration Statement on
Form N-1, filed on September 10, 1982.
(b) Amendment No. 1 to Registrant's By-Laws
adopted June 28, 1983 is incorporated herein
by reference to Exhibit (2)(b) of
Post-Effective Amendment No. 2 to
Registrant's Registration Statement on Form
N-1A, filed on January 20, 1984.
(c) Amendment No. 2 to Registrant's By-Laws
adopted November 23, 1987 is incorporated
herein by reference to Exhibit (2)(c) of
Post-Effective Amendment No. 7 to
Registrant's Registration Statement on Form
N-1A, filed on March 31, 1988.
(3) None.
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<PAGE> 218
(4) None.
(5) (a) Amended and Restated Advisory Agreement
between Registrant and Mississippi Valley
Advisors Inc. dated April 1, 1991.
(b) Addendum No. 1 to Amended and Restated
Advisory Agreement between Registrant and
Mississippi Valley Advisors Inc. with respect
to the ARCH Treasury Money Market Portfolio,
dated as of September 27, 1991.
(c) Addendum No. 2 to Amended and Restated
Advisory Agreement between the Registrant and
Mississippi Valley Advisors, Inc. with
respect to the ARCH Emerging Growth
Portfolio, dated as of April 1, 1992.
(d) Addendum No. 3 to Amended and Restated
Advisory Agreement between the Registrant and
Mississippi Valley Advisors Inc. with respect
to the ARCH Balanced Portfolio dated April 1,
1993.
(e) Addendum No. 4 to Amended and Restated
Advisory Agreement between Registrant and
Mississippi Valley Advisors Inc. dated March
15, 1994.
(f) Addendum No. 5 to Amended and Restated
Advisory Agreement between Registrant and
Mississippi Valley Advisors Inc. with respect
to the Short-Intermediate Municipal Portfolio
dated July 10, 1995.
(g) Addendum No. 6 to Amended and Restated
Advisory Agreement between Registrant and
Mississippi Valley Advisors Inc. with respect
to the Tax-Exempt Money Market, Missouri
Tax-Exempt Bond and Kansas Tax-Exempt Bond
Portfolios dated September 29, 1995.
(h) Form of Addendum No. 7 to Amended and
Restated Advisory Agreement between
Registrant and Mississippi Valley Advisors
Inc. with respect to the Equity Income,
National Municipal Bond and
Short-Intermediate Corporate Bond Portfolios.
(i) Sub-Advisory Agreement between Mississippi
Valley Advisors Inc. and Clay Finlay, Inc.
dated January 25, 1994.
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(6) (a) Distribution Agreement between Registrant and
The Winsbury Company Limited Partnership
dated October 1, 1993 is incorporated herein
by reference to Exhibit (6)(a) of
Post-Effective Amendment No. 25 to
Registrant's Registration Statement on Form
N-1A, filed November 8, 1994.
(b) Addendum No. 1 to Distribution Agreement
between the Registrant and The Winsbury
Company Limited Partnership with respect to
the ARCH International Equity Portfolio dated
March 15, 1994 is incorporated herein by
reference to Exhibit (6)(b) of Post-Effective
Amendment No. 25 to Registrant's Registration
Statement on Form N-1A, filed November 8,
1994.
(c) Addendum No. 2 to Distribution Agreement
between the Registrant and The Winsbury
Company Limited Partnership with respect to
Investor B Shares of the non-money market
Portfolios dated March 1, 1995 is
incorporated herein by reference to Exhibit
(6)(c) of Post-Effective Amendment No. 29 to
Registrant's Registration Statement on Form
N-1A, filed April 14, 1995.
(d) Addendum No. 3 to Distribution Agreement
between the Registrant and The Winsbury
Company Limited Partnership with respect to
the Short-Intermediate Municipal Portfolio
and Investor B Shares of the Money Market
Portfolio is incorporated herein by reference
to Exhibit (6)(d) of Post-Effective Amendment
No. 31 to Registrant's Registration Statement
on Form N-1A, filed September 20, 1995.
(e) Addendum No. 4 to Distribution Agreement
between the Registrant and The Winsbury
Company Limited Partnership with respect to
the Tax-Exempt Money Market, Missouri
Tax-Exempt Bond and Kansas Tax-Exempt Bond
Portfolios dated September 29, 1995.
(f) Form of Addendum No. 5 to Distribution
Agreement between the Registrant and BISYS
Fund Services with respect to the Equity
Income, National Municipal Bond and
Short-Intermediate Corporate Bond Portfolios.
-4-
<PAGE> 220
(g) Amendment No. 1 to Distribution Agreement
between the Registrant and The Winsbury
Company Limited Partnership dated as of
September 29, 1995.(1)
(7) None.
(8) (a) Custodian Agreement between Registrant and
Mercantile Bank of St. Louis, National
Association dated as of April 1, 1992 is
incorporated herein by reference to Exhibit
(8)(a) of Post-Effective Amendment No. 17 to
Registrant's Registration Statement on Form
N-1A, filed March 31, 1992.
(b) Custody Fee Agreement between Registrant and
Mercantile Bank of St. Louis, National
Association dated April 1, 1995 is
incorporated herein by reference to Exhibit
(8)(b) of Post-Effective Amendment No. 29 to
Registrant's Registration Statement on Form
N-1A, filed April 14, 1995.
(c) Custody Fee Agreement between Registrant and
Mercantile Bank of St. Louis, National
Association is incorporated herein by
reference to Exhibit (8)(c) of Post-Effective
Amendment No. 31 to Registrant's Registration
Statement on Form N-1A, filed September 20,
1995.
(d) Custody Fee Agreement between Registrant and
Mercantile Bank of St. Louis, National
Association dated September 29, 1995.
(e) Form of Custody Fee Agreement between
Registrant and Mercantile Bank of St. Louis,
National Association.
(f) Global Sub-Custodian Agreement among Bankers
Trust Company of New York, Registrant and
Mercantile Bank of St. Louis, National
Association dated as of April 1, 1994 is
incorporated herein by reference to Exhibit
(8)(j) of Post-Effective Amendment No. 25 to
Registrant's Registration Statement on Form
N-1A, filed November 8, 1994.
__________________________________
1. Filed electronically as an Exhibit and incorporated herein by
reference to Post-Effective Amendment No. 33 to Registration Statement
on Form N-1A (File No. 2-79285) on January 2, 1996.
-5-
<PAGE> 221
(g) Securities Lending Amendment dated August 4,
1994 to Custodian Agreement dated April 1,
1992 between Registrant and Mercantile Bank
of St. Louis, National Association is
incorporated herein by reference to Exhibit
(8)(k) of Post-Effective Amendment No. 25 to
Registrant's Registration Statement on Form
N-1A, filed November 8, 1994.
(9) (a) Administration Agreement between Registrant
and The Winsbury Service Corporation dated
October 1, 1993 is incorporated herein by
reference to Exhibit (9)(a) of Post-Effective
Amendment No. 25 to Registrant's Registration
Statement on Form N-1A, filed November 8,
1994.
(b) Addendum No. 1 to Administration Agreement
between Registrant and The Winsbury Service
Corporation with respect to the ARCH
International Equity Portfolio dated March
15, 1994 is incorporated herein by reference
to Exhibit (9)(b) of Post-Effective Amendment
No. 25 to Registrant's Registration Statement
on Form N-1A, filed November 8, 1994.
(c) Addendum No. 2 to Administration Agreement
between Registrant and BISYS Fund Services
Ohio, Inc. (formerly known as The Winsbury
Service Corporation) with respect to Investor
B Shares of the non-money market Portfolios
dated as of March 1, 1995 is incorporated
herein by reference to Exhibit (9)(c) of
Post-Effective Amendment No. 29 to
Registrant's Registration Statement on Form
N-1A, filed April 14, 1995.
(d) Addendum No. 3 to Administration Agreement
between Registrant and BISYS Fund Services
Ohio, Inc. with respect to the
Short-Intermediate Municipal Portfolio and
Investor B Shares of the Money Market
Portfolio is incorporated herein by reference
to Exhibit (9)(d) of Post-Effective Amendment
No. 31 to Registrant's Registration Statement
on Form N-1A, filed September 20, 1995.
(e) Addendum No. 4 to Administration Agreement
between Registrant and BISYS Fund Services
Ohio, Inc. with respect to the Tax-Exempt
Money Market, Missouri Tax-Exempt Bond and
-6-
<PAGE> 222
Kansas Tax-Exempt Bond Portfolios dated
September 29, 1995.
(f) Form of Addendum No. 5 to Administration
Agreement between Registrant and BISYS Fund
Services Ohio, Inc. with respect to the
Equity Income, National Municipal Bond and
Short-Intermediate Corporate Bond Portfolios.
(g) Transfer Agency Agreement between Registrant
and The Winsbury Service Corporation dated
October 1, 1993 is incorporated herein by
reference to Exhibit (9)(c) of Post-Effective
Amendment No. 25 to Registrant's Registration
Statement on Form N-1A, filed November 8,
1994.
(h) Addendum No. 1 to Transfer Agency Agreement
between Registrant and The Winsbury Service
Corporation with respect to the ARCH
International Equity Portfolio dated March
15, 1994 is incorporated herein by reference
to Exhibit (9)(d) of Post-Effective Amendment
No. 25 to Registrant's Registration Statement
on Form N-1A, filed November 8, 1994.
(i) Addendum No. 2 to Transfer Agency Agreement
between Registrant and BISYS Fund Services
Ohio, Inc. (formerly known as The Winsbury
Service Corporation) with respect to Investor
B Shares of the non-money market Portfolios
dated as of March 1, 1995 is incorporated
herein by reference to Exhibit (9)(g) of
Post-Effective Amendment No. 29 to
Registrant's Registration Statement on Form
N-1A, filed April 14, 1995.
(j) Addendum No. 3 to Transfer Agency Agreement
between Registrant and BISYS Fund Services
Ohio, Inc. with respect to the
Short-Intermediate Municipal Portfolio and
Investor B Shares of the Money Market
Portfolio is incorporated herein by reference
to Exhibit (9)(i) of Post-Effective Amendment
No. 31 to Registrant's Registration Statement
on Form N-1A, filed September 20, 1995.
(k) Addendum No. 4 to Transfer Agency Agreement
between Registrant and BISYS Fund Services
Ohio, Inc. with respect to the Tax-Exempt
Money Market, Missouri Tax-Exempt Bond and
-7-
<PAGE> 223
Kansas Tax-Exempt Bond Portfolios dated
September 29, 1995.
(l) Form of Addendum No. 5 to Transfer Agency
Agreement between Registrant and BISYS Fund
Services Ohio, Inc. with respect to the
Equity Income, National Municipal Bond and
Short-Intermediate Corporate Bond Portfolios.
(m) Amendment No. 1 to Transfer Agency Agreement
between Registrant and BISYS Fund Services
Ohio, Inc. dated as of September 29, 1995.(2)
(n) Form of Amendment No. 2 to Transfer Agency
Agreement between Registrant and BISYS Fund
Services Ohio, Inc. dated October 1, 1995.
(o) (1) Distribution and Services Plan
(Investor A Shares) under Rule 12b-1
and Form of Agreement is
incorporated herein by reference to
Exhibit (9)(k)(1) of Post-Effective
Amendment No. 30 to Registrant's
Registration Statement on Form N-1A,
filed July 7, 1995.
(2) Distribution and Services Plan
(Investor B Shares) under Rule 12b-1
and Form of Agreement is
incorporated herein by reference to
Exhibit (9)(k)(2) of Post-Effective
Amendment No. 30 to Registrant's
Registration Statement on Form N-1A,
filed July 7, 1995.
(3) Administrative Services Plan (Trust
Shares) and Form of Agreement is
incorporated herein by reference to
Exhibit (9)(k)(3) of Post-Effective
Amendment No. 30 to Registrant's
Registration Statement on Form N-1A,
filed July 7, 1995.
(4) Administrative Services Plan
(Institutional Shares) and Form of
Agreement is incorporated herein by
reference to Exhibit (9)(k)(4) of
Post-Effective Amendment No. 30 to
__________________________________
2. Filed electronically as an Exhibit and incorporated herein by
reference to Post-Effective Amendment No. 33 to Registration Statement
on Form N-1A (File No. 2-79285) on January 2, 1996.
-8-
<PAGE> 224
Registrant's Registration Statement on Form
N-1A, filed July 7, 1995.
(10) Opinion and consent of counsel.(3)
(11) (a) Consent of Drinker Biddle & Reath.
(b) Consent of KPMG Peat Marwick.
(12) None.
(13) (a) Purchase Agreement between Registrant and
Shearson/American Express Inc. dated November
23, 1982, is incorporated herein by reference
to Exhibit (13) of Pre-Effective Amendment
No. 1 to Registrant's Registration Statement
on Form N-1, filed on November 24, 1982.
(b) Purchase Agreement between Registrant and The
Winsbury Service Corporation dated April 1,
1994 is incorporated herein by reference to
Exhibit (13)(b) of Post-Effective Amendment
No. 25 to Registrant's Registration Statement
on Form N-1A, filed November 8, 1994.
(c) Purchase Agreements between Registrant and
BISYS Fund Services Ohio, Inc. dated as of
February 28, 1995 are incorporated herein by
reference to Exhibit (13)(c) of
Post-Effective Amendment No. 29 to
Registrant's Registration Statement on Form
N-1A, filed April 14, 1995.
(d) Purchase Agreements between Registrant and
BISYS Fund Services Ohio, Inc. dated as of
July 7, 1995 are incorporated herein by
reference to Exhibit (13)(d) of
Post-Effective Amendment No. 31 to
Registrant's Registration Statement on Form
N-1A, filed September 20, 1995.
(e) Purchase Agreements between Registrant and
BISYS Fund Services Ohio, Inc. dated
September 29, 1995.
__________________________________
3 Filed under Rule 24f-2 as part of Registrant's Rule 24f-2 Notice on
January 29, 1996.
-9-
<PAGE> 225
(f) Form of Purchase Agreements between
Registrant and BISYS Fund Services Ohio, Inc.
(14) None.
(15) None.
(16) (a) Schedule of Computation of Performance
Calculations for Investor A (formerly
Investor) Shares and Trust Shares of the
Money Market, Treasury Money Market,
Government & Corporate Bond, Growth & Income
Equity, U.S. Government Securities, Emerging
Growth and Balanced Portfolio are
incorporated herein by reference to Exhibit
(16) of Post-Effective Amendment No. 24 to
Registrant's Registration Statement on Form
N-1A, filed on March 31, 1994.
(b) Schedule of Computation of Performance
Calculations for Investor A (formerly
Investor), Trust and Institutional Shares of
the International Equity Portfolio is
incorporated herein by reference to Exhibit
(16)(b) of Post-Effective Amendment No. 25 to
Registrant's Registration Statement on Form
N-1A, filed November 8, 1994.
(c) Schedule of Computation of Performance
Calculations for Institutional Shares of the
Money Market, Treasury Money Market,
Government & Corporate Bond, Growth & Income
Equity, U.S. Government Securities, Emerging
Growth, Balanced and International Equity
Portfolios is incorporated herein by
reference to Exhibit (16)(c) of
Post-Effective Amendment No. 29 to
Registrant's Registration Statement on Form
N-1A, filed April 14, 1995.
(d) Schedule of Computation of Performance
Calculations for Investor B Shares of the
Government & Corporate Bond, Growth & Income
Equity, U.S. Government Securities, Emerging
Growth, Balanced and International Equity
Portfolios is incorporated herein by
reference to Exhibit (16)(c) of
Post-Effective Amendment No. 29 to
Registrant's Registration Statement on Form
N-1A, filed April 14, 1995.
-10-
<PAGE> 226
(e) Schedule of Computation of Performance
Calculations for Trust Shares and Investor A
Shares of the Short- Intermediate Municipal
Portfolio.(4)
(f) Schedule of Computation of Performance
Calculations for Trust and Investor A Shares
of the Tax-Exempt Money Market, Missouri
Tax-Exempt Bond and Kansas Tax- Exempt Bond
Portfolios and for Investor B Shares of the
Missouri Tax-Exempt Bond and Kansas
Tax-Exempt Bond Portfolios.
(18) Plan Pursuant to Rule 18f-3 for Operation of
a Multi-Class System is incorporated herein
by reference to Exhibit (18) of
Post-Effective Amendment No. 32 to
Registrant's Registration Statement on
Form N-1A, filed October 5, 1995.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
-------------------------------------------------------------
REGISTRANT IS CONTROLLED BY ITS BOARD OF DIRECTORS.
Item 26. NUMBER OF HOLDERS OF SECURITIES
-------------------------------
As of February 1, 1996:
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
Class A Common Stock (The ARCH
Money Market Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Class A - Special Series 1 Common Stock
(The ARCH Money Market
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244
Class A - Special Series 2 Common Stock
(The ARCH Money Market Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . 2
Class A - Special Series 3 Common Stock
(The ARCH Money Market
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Class B Common Stock (The ARCH
(Treasury Money Market
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Class B - Special Series 1 Common Stock
(The ARCH Treasury Money Market
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Class B - Special Series 2 Common Stock
</TABLE>
__________________________________
4. Filed electronically as an Exhibit and incorporated herein by
reference to Post-Effective Amendment No. 33 to Registration Statement
on Form N-1A (File No. 2-79285) on January 2, 1996.
-11-
<PAGE> 227
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
(The ARCH Treasury Money Market
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Class C Common Stock (The ARCH
Growth & Income Equity
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 957
Class C -Special Series 1 Common Stock
(The ARCH Growth & Income Equity
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Class C -Special Series 2 Common Stock
(The ARCH Growth & Income Equity
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class C -Special Series 3 Common Stock
(The ARCH Growth & Income Equity
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
Class D Common Stock (The ARCH
Government & Corporate Bond
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208
Class D - Special Series 1 Common Stock
(The ARCH Government & Corporate Bond
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Class D - Special Series 2 Common Stock
(The ARCH Government & Corporate Bond
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Class D - Special Series 3 Common Stock
(The ARCH Government & Corporate Bond
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Class E Common Stock (The ARCH
U.S. Government Securities
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239
Class E - Special Series 1 Common Stock
(The ARCH U.S. Government Securities
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class E - Special Series 2 Common Stock
(The ARCH U.S. Government Securities
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Class E - Special Series 3 Common Stock
(The ARCH U.S. Government Securities
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Class F Common Stock (The ARCH Emerging
Growth Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 779
Class F - Special Series 1 Common Stock
(The ARCH Emerging Growth
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Class F - Special Series 2 Common Stock
(The ARCH Emerging Growth
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Class F - Special Series 3 Common Stock
(The ARCH Emerging Growth
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
Class G Common Stock (The ARCH Balanced
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
Class G - Special Series 1 Common Stock
Common Stock (The ARCH Balanced
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Class G - Special Series 2 Common Stock
Stock (The ARCH Balanced
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Class G Common Stock - Special Series 3
</TABLE>
-12-
<PAGE> 228
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
Common Stock (The ARCH Balanced
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Class H Common Stock (The ARCH
International Equity
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Class H - Special Series 1 Common
Stock - (The ARCH International Equity
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class H - Special Series 2 Common Stock
(The ARCH International Equity
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Class H - Special Series 3 Common Stock
(The ARCH International Equity
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Class I Common Stock (The ARCH
Short-Intermediate Municipal
Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Class I - Special Series 1 Common Stock
(The ARCH Short-Intermediate
Municipal Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class J Common Stock (The ARCH Tax-Exempt
Money Market Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Class J - Special Series 1
Common Stock (The ARCH Tax-Exempt Money
Market Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Class K Common Stock (The ARCH Missouri
Tax-Exempt Bond Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . 533
Class K - Special Series 1
Common Stock (The ARCH Missouri
Tax-Exempt Bond Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Class K - Special Series 2
Common Stock (The ARCH Missouri
Tax-Exempt Bond Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Class L Common Stock (The ARCH Kansas
Tax-Exempt Bond Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Class L - Special Series 1
Common Stock (The ARCH Kansas
Tax-Exempt Bond Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Class L - Special Series 2
Common Stock (The ARCH Kansas
Tax-Exempt Bond Portfolio) . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
</TABLE>
Item 27. INDEMNIFICATION
---------------
Indemnification of Registrant's principal underwriter, custodian and
transfer agent against certain losses is provided for, respectively, in
Sections 1.11 and 1.12 of the Distribution Agreement, incorporated herein by
reference as Exhibit (6)(a), and Sections 24 and 18, respectively, of the
Custody Agreement, incorporated herein by reference as Exhibit (8)(a) and the
Transfer Agency Agreement incorporated herein by reference as Exhibit (9)(c).
The Registrant has obtained from a major insurance carrier a directors' and
officers' liability policy covering certain types of errors and omissions. In
no event will the Registrant indemnify any of its directors, officers,
-13-
<PAGE> 229
employees or agents against any liability to which such person would otherwise
be subject by reason of his willful misfeasance, bad faith or gross negligence
in the performance of his duties, or by reason of his reckless disregard of the
duties involved in the conduct of his office or under his agreement with the
Registrant. Registrant will comply with Rule 484 under the Securities Act of
1933 and Release 11330 under the Investment Company Act of 1940 in connection
with any indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, 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 Registrant of expenses
incurred or paid by a director, officer or controlling person of Registrant in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, 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.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
----------------------------------------------------
A. Mercantile Bank of St. Louis National Association
("Mercantile") is a full-service national bank located in St. Louis, Missouri.
Mississippi Valley Advisors Inc. is a wholly-owned subsidiary of Mercantile and
is responsible for providing advisory services to The ARCH Money Market,
Treasury Money Market, Tax-Exempt Money Market, Growth & Income Equity,
Emerging Growth, Government & Corporate Bond, U.S. Government Securities,
Balanced, International Equity, Short-Intermediate Municipal, Missouri
Tax-Exempt Bond and Kansas Tax-Exempt Bond Portfolios of the Registrant.
B. The information required by this Item 28 with respect to each
Director and Officer of Mercantile and Mississippi Valley Advisors Inc. is
incorporated by reference to Form ADV and Schedules A and D filed by
Mississippi Valley Advisors Inc. with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934 (File No. 801-28897).
C. Clay Finlay, Inc. is registered as an investment adviser with
the Securities and Exchange Commission and provides sub-investment advisory
services to the Registrant's International Equity Portfolio.
-14-
<PAGE> 230
D. The information required by this Item 28 with respect to each
Director and Officer of Clay Finlay, Inc. is included in Form ADV and Schedules
A and D filed by Clay Finlay, Inc. with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934 (File No. 801-17316).
Item 29. PRINCIPAL UNDERWRITER
---------------------
A. BISYS Fund Services Limited Partnership d/b/a BISYS Fund
Services (formerly The Winsbury Company Limited Partnership) acts as
distributor and its affiliate, BISYS Funds Services Ohio, Inc., acts
as administrator for the Registrant. BISYS Fund Services also
distributes the securities of the American Performance Funds, The
Highmark Group, The Parkstone Group of Funds, The Sessions Group, the
AmSouth Mutual Funds, The Coventry Group, the BB&T Mutual Funds Group,
the MarketWatch Funds, The M.S.D & T Funds, Inc., The Riverfront
Funds, Inc., the Pacific Capital Funds, the MMA Praxis Mutual Funds,
the Summit Investment Trust, the Qualivest Funds and The Victory
Portfolios, each of which is a management investment company.
B. To the best of Registrant's knowledge, the partners of BISYS
Fund Services are as follows:
<TABLE>
<CAPTION>
Name and
Principal Positions and Positions and
Business Offices with Offices with
Address BISYS Fund Services Registrant
- -------- ------------------- -------------
<S> <C> <C>
BISYS Fund Services, Inc. Sole General Partner None
150 Clove Road
Little Falls, NJ 07424
WC Subsidiary Corporation Limited Partner None
150 Clove Road
Little Falls, NJ 07424
</TABLE>
C. None.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
--------------------------------
(1) Mercantile Bank of St. Louis National Association, One Mercantile
Center, 8th and Locust Streets, St. Louis, MO 63101 (records relating
to its functions as custodian).
(2) BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219 (records
relating to its functions as distributor).
(3) Mississippi Valley Advisors Inc., 7th and Washington Streets, 21st
Floor, St. Louis, MO 63101 (records relating to its functions as
investment adviser for The ARCH Money Market, Treasury Money Market,
Growth & Income Equity, Emerging Growth, Government & Corporate Bond,
U.S.
-15-
<PAGE> 231
Government Securities, Balanced, International Equity and
Short-Intermediate Municipal, Tax-Exempt Money Market, Missouri
Tax-Exempt Bond and Kansas Tax-Exempt Bond Portfolios).
(4) BISYS Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus, Ohio
43219 (records relating to its function as administrator).
(5) BISYS Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus, Ohio
43219 (records relating to its function as transfer agent and dividend
disbursing agent).
(6) Drinker Biddle & Reath, Philadelphia National Bank Building, 1345
Chestnut Street, Philadelphia, PA 19107-3496 (Registrant's Articles of
Incorporation, By-Laws and Minute Books).
(7) Clay Finlay, Inc. 200 Park Avenue, 56th Floor, New York, New York
10166 (records relating to its function as sub-investment advisor to
the International Equity Portfolio).
(8) Bankers Trust Company, 16 Wall Street, New York, New York 10005
(records relating to its function as sub-custodian for the
International Equity Portfolio).
Item 31. MANAGEMENT SERVICES
-------------------
Inapplicable.
Item 32. UNDERTAKINGS
------------
(a) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
-16-
<PAGE> 232
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly
caused this Post-Effective Amendment No. 34 to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of St. Louis and the State of Missouri, on the 28th day of February, 1996.
THE ARCH FUND, INC.
(Registrant)
/s/ Jerry V. Woodham
---------------------
Jerry V. Woodham
President
Pursuant to the requirements of the Securities Act of 1933, this
Registrant's Post-Effective Amendment No. 34 to its Registration Statement has
been signed below by the following persons in the capacities and on the dates
indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Jerry V. Woodham Chairman of the February 28, 1996
- -------------------- Board and President
Jerry V. Woodham
/s/* James C. Jacobsen Director February 28, 1996
- ----------------------
James C. Jacobsen
/s/* Joseph J. Hunt Director February 28, 1996
- -------------------
Joseph J. Hunt
/s/* Donald E. Kiernan Director February 28, 1996
- ----------------------
Donald E. Kiernan
/s/* Robert M. Cox, Jr. Director February 28, 1996
- -----------------------
Robert M. Cox, Jr.
/s/* Lyle L. Meyer Director February 28, 1996
- ------------------
Lyle L. Meyer
/s/* Ronald D. Winney Director & Treasurer February 28, 1996
- ---------------------
Ronald D. Winney
<FN>
*By: /s/ Jerry V. Woodham
---------------------
Jerry V. Woodham
Attorney-in-fact
</TABLE>
<PAGE> 233
THE ARCH FUND, INC.
Power of Attorney
-----------------
Jerry V. Woodham, whose signature appears below, does hereby constitute and
appoint W. Bruce McConnel, III his true and lawful attorney and agent, with
full power of substitution and resubstitution, to do any and all acts and
things and execute any and all instruments which said attorney and agent may
deem necessary or advisable or which may be required to enable The ARCH Fund,
Inc. (the "Fund") to comply with the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended, and any rules,
regulations, or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of the Fund's
Registration Statement and of any and all amendments (including post-effective
amendments) to the Fund's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned on behalf of the Fund and/or as a director and/or officer of the
Fund any and all amendments filed with the Securities and Exchange Commission
under said Acts, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorney and agent
shall do or cause to be done by virtue hereof.
/s/ Jerry V. Woodham
--------------------
Jerry V. Woodham
Date: March 31, 1992
<PAGE> 234
THE ARCH FUND, INC.
Power of Attorney
-----------------
Joseph J. Hunt, whose signature appears below, does hereby constitute and
appoint Jerry V. Woodham and W. Bruce McConnel, III, and either of them, his
true and lawful attorneys and agents, with full power of substitution and
resubstitution, to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable The ARCH Fund, Inc.
(the "Fund") to comply with the Investment Company Act of 1940, as amended, and
the Securities Act of 1933, as amended, and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of the Fund's Registration
Statement and of any and all amendments (including post-effective amendments)
to the Fund's Registration Statement on Form N-1A pursuant to said Acts,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned on
behalf of the Fund and/or as a director and/or officer of the Fund any and all
amendments filed with the Securities and Exchange Commission under said Acts,
and any other instruments or documents related thereto, and the undersigned
does hereby ratify and confirm all that said attorneys and agents, or either of
them, shall do or cause to be done by virtue hereof.
/s/ Joseph J. Hunt
------------------
Joseph J. Hunt
Date: October 25, 1994
<PAGE> 235
THE ARCH FUND, INC.
Power of Attorney
-----------------
James C. Jacobsen, whose signature appears below, does hereby constitute and
appoint Jerry V. Woodham and W. Bruce McConnel, III, and either of them, his
true and lawful attorneys and agents, with full power of substitution and
resubstitution, to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable The ARCH Fund, Inc.
(the "Fund") to comply with the Investment Company Act of 1940, as amended, and
the Securities Act of 1933, as amended, and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of the Fund's Registration
Statement and of any and all amendments (including post-effective amendments)
to the Fund's Registration Statement on Form N-1A pursuant to said Acts,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned on
behalf of the Fund and/or as a director and/or officer of the Fund any and all
amendments filed with the Securities and Exchange Commission under said Acts,
and any other instruments or documents related thereto, and the undersigned
does hereby ratify and confirm all that said attorneys and agents, or either of
them, shall do or cause to be done by virtue hereof.
/s/ James C. Jacobsen
---------------------
James C. Jacobsen
Date: October 25, 1994
<PAGE> 236
THE ARCH FUND, INC.
Power of Attorney
-----------------
Donald E. Kiernan, whose signature appears below, does hereby constitute and
appoint Jerry V. Woodham and W. Bruce McConnel, III, and either of them, his
true and lawful attorneys and agents, with full power of substitution and
resubstitution, to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable The ARCH Fund, Inc.
(the "Fund") to comply with the Investment Company Act of 1940, as amended, and
the Securities Act of 1933, as amended, and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of the Fund's Registration
Statement and of any and all amendments (including post-effective amendments)
to the Fund's Registration Statement on Form N-1A pursuant to said Acts,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned on
behalf of the Fund and/or as a director and/or officer of the Fund any and all
amendments filed with the Securities and Exchange Commission under said Acts,
and any other instruments or documents related thereto, and the undersigned
does hereby ratify and confirm all that said attorneys and agents, or either of
them, shall do or cause to be done by virtue hereof.
/s/ Donald E. Kiernan
---------------------
Donald E. Kiernan
Date: March 31, 1992
<PAGE> 237
THE ARCH FUND, INC.
Power of Attorney
-----------------
Robert M. Cox, Jr., whose signature appears below, does hereby constitute
and appoint Jerry V. Woodham and W. Bruce McConnel, III, and either of them,
his true and lawful attorneys and agents, with full power of substitution and
resubstitution, to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable The ARCH Fund, Inc.
(the "Fund") to comply with the Investment Company Act of 1940, as amended, and
the Securities Act of 1933, as amended, and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of the Fund's Registration
Statement and of any and all amendments (including post-effective amendments)
to the Fund's Registration Statement on Form N-1A pursuant to said Acts,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned on
behalf of the Fund and/or as a director and/or officer of the Fund any and all
amendments filed with the Securities and Exchange Commission under said Acts,
and any other instruments or documents related thereto, and the undersigned
does hereby ratify and confirm all that said attorneys and agents, or either of
them, shall do or cause to be done by virtue hereof.
/s/ Robert M. Cox, Jr.
----------------------
Robert M. Cox, Jr.
Date: March 31, 1992
<PAGE> 238
THE ARCH FUND, INC.
Power of Attorney
-----------------
Lyle L. Meyer, whose signature appears below, does hereby constitute and
appoint Jerry V. Woodham and W. Bruce McConnel, III, and either of them, his
true and lawful attorneys and agents, with full power of substitution and
resubstitution, to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable The ARCH Fund, Inc.
(the "Fund") to comply with the Investment Company Act of 1940, as amended, and
the Securities Act of 1933, as amended, and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of the Fund's Registration
Statement and of any and all amendments (including post-effective amendments)
to the Fund's Registration Statement on Form N-1A pursuant to said Acts,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned on
behalf of the Fund and/or as a director and/or officer of the Fund any and all
amendments filed with the Securities and Exchange Commission under said Acts,
and any other instruments or documents related thereto, and the undersigned
does hereby ratify and confirm all that said attorneys and agents, or either of
them, shall do or cause to be done by virtue hereof.
/s/ Lyle L. Meyer
-----------------
Lyle L. Meyer
Date: March 31, 1992
<PAGE> 239
THE ARCH FUND, INC.
Power of Attorney
-----------------
Ronald D. Winney, whose signature appears below, does hereby constitute and
appoint Jerry V. Woodham and W. Bruce McConnel, III, and either of them, his
true and lawful attorneys and agents, with full power of substitution and
resubstitution, to do any and all acts and things and execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable The ARCH Fund, Inc.
(the "Fund") to comply with the Investment Company Act of 1940, as amended, and
the Securities Act of 1933, as amended, and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of the Fund's Registration
Statement and of any and all amendments (including post-effective amendments)
to the Fund's Registration Statement on Form N-1A pursuant to said Acts,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned on
behalf of the Fund and/or as a director and/or officer of the Fund any and all
amendments filed with the Securities and Exchange Commission under said Acts,
and any other instruments or documents related thereto, and the undersigned
does hereby ratify and confirm all that said attorneys and agents, or either of
them, shall do or cause to be done by virtue hereof.
/s/ Ronald D. Winney
--------------------
Ronald D. Winney
Date: December 1, 1994
<PAGE> 240
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C>
1(a) Articles of Incorporation dated
September 9, 1982.
1(b) Articles Supplementary to
Registrant's Articles of
Incorporation dated October 28,
1982.
1(c) Articles Supplementary to
Registrant's Articles of
Incorporation dated December 22,
1987.
1(d) Articles Supplementary to
Registrant's Articles of
Incorporation dated October 30,
1990.
1(e) Articles Supplementary to
Registrant's Articles of
Incorporation dated November 9,
1990.
1(f) Articles Supplementary to
Registrant's Articles of
Incorporation dated March 19,
1991.
1(g) Certificate of Correction dated
April 30, 1991 to Articles
Supplementary dated as of March
19, 1991.
1(h) Articles Supplementary to
Registrant's Articles of
Incorporation dated June 25,
1991.
1(i) Articles Supplementary to
Registrant's Articles of
Incorporation dated November 15,
1991.
1(j) Articles Supplementary to
Registrant's Articles of
Incorporation dated January 26,
1993.
</TABLE>
<PAGE> 241
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C>
1(k) Articles Supplementary to
Registrant's Articles of
Incorporation dated March 23,
1993.
1(l) Articles Supplementary to
Registrant's Articles of
Incorporation dated March 7,
1994.
1(m) Certificate of Correction dated
October 17, 1994 to Articles
Supplementary dated March 8,
1994 to Registrant's Articles
of Incorporation.
1(n) Articles Supplementary to
Registrant's Articles of
Incorporation dated February
22, 1995.
1(o) Articles Supplementary to
Registrant's Articles of
Incorporation dated April 17,
1995.
1(p) Articles Supplementary to
Registrant's Articles of
Incorporation dated June 27, 1995.
1(q) Articles Supplementary to
Registrant's Articles of
Incorporation dated September 18,
1995.
1(r) Form of Articles Supplementary to
Registrant's Articles of
Incorporation.
5(a) Amended and Restated Advisory
Agreement between Registrant and
Mississippi Valley Advisors Inc.
dated April 1, 1991.
</TABLE>
<PAGE> 242
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C>
5(b) Addendum No. 1 to Amended and
Restated Advisory Agreement between
Registrant and Mississippi Valley
Advisors Inc. with respect to the
ARCH Treasury Money Market Portfolio,
dated as of September 27, 1991.
5(c) Addendum No. 2 to Amended and
Restated Advisory Agreement between
Registrant and Mississippi Valley
Advisors Inc. with respect to the
ARCH Emerging Growth Portfolio, dated
as of April 1, 1992.
5(d) Addendum No. 3 to Amended and
Restated Advisory Agreement between
Registrant and Mississippi Valley
Advisors Inc. with respect to the
ARCH Balanced Portfolio dated April
1, 1993.
5(e) Addendum No. 4 to Amended and
Restated Advisory Agreement between
Registrant and Mississippi Valley
Advisors Inc. dated March 15, 1994.
5(f) Addendum No. 5 to Amended and
Restated Advisory Agreement between
Registrant and Mississippi Valley
Advisors Inc. with respect to the
Short-Intermediate Municipal
Portfolio dated July 10, 1995.
5(g) Addendum No. 6 to Amended and
Restated Advisory Agreement between
Registrant and Mississippi Valley
Advisors Inc. with respect to the
Tax-Exempt Money Market, Missouri
Tax-Exempt Bond and Kansas Tax-Exempt
Bond Portfolios dated September 29,
1995.
5(h) Form of Addendum No. 7 to Amended and
Restated Advisory Agreement between
Registrant and Mississippi Valley
Advisors Inc. with respect to the
Equity Income, National Municipal Bond
and Short-Intermediate Corporate Bond
Portfolios.
</TABLE>
<PAGE> 243
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C>
5(i) Sub-Advisory Agreement between
Mississippi Valley Advisors Inc.
and Clay Finlay, Inc. dated
January 25, 1994.
6(e) Addendum No. 4 to Distribution
Agreement between the Registrant and
The Winsbury Company Limited
Partnership with respect to the
Tax-Exempt Money Market, Missouri
Tax-Exempt Bond and Kansas Tax-Exempt
Bond Portfolios dated September 29,
1995.
6(f) Form of Addendum No. 5 to Distribution
Agreement between the Registrant and
BISYS Fund Services with respect to
the Equity Income, National Municipal
Bond and Short-Intermediate Corporate
Bond Portfolios.
8(d) Custody Fee Agreement between
Registrant and Mercantile Bank of St.
Louis, National Association dated
September 29, 1995.
8(e) Form of Custody Fee Agreement between
Registrant and Mercantile Bank of St.
Louis, N.A.
9(e) Addendum No. 4 to Administration
Agreement between Registrant and
BISYS Fund Services Ohio, Inc. with
respect to the Tax-Exempt Money
Market, Missouri Tax-Exempt Bond
and Kansas Tax-Exempt Bond
Portfolios dated September 29, 1995.
9(f) Form of Addendum No. 5 to Administration
Agreement between Registrant and
BISYS Fund Services Ohio, Inc. with
respect to the Equity Income, National
Municipal Bond and Short-Intermediate
Corporate Bond Portfolios.
</TABLE>
<PAGE> 244
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C>
9(k) Addendum No. 4 to Transfer Agency
Agreement between Registrant and
BISYS Fund Services Ohio, Inc. with
respect to the Tax-Exempt Money
Market, Missouri Tax-Exempt Bond
and Kansas Tax-Exempt Bond
Portfolios dated September 29, 1995.
9(l) Form of Addendum No. 5 to Transfer
Agency Agreement between Registrant
and BISYS Fund Services Ohio, Inc.with
respect to the Equity Income, National
Municipal Bond and Short-Intermediate
Corporate Bond Portfolios.
9(n) Form of Amendment No. 2 to Transfer
Agency Agreement between Registrant
and BISYS Fund Services Ohio, Inc.
dated October 1, 1995.
11(a) Consent of Drinker Biddle & Reath.
11(b) Consent of KPMG Peat Marwick.
13(e) Purchase Agreements between
Registrant and BISYS Fund Services
Ohio, Inc. dated September 29, 1995.
13(f) Form of Purchase Agreements between
Registrant and BISYS Fund Services
Ohio, Inc.
16(f) Schedule of Computation of Performance
Calculations for Trust and Investor
A Shares of the Tax-Exempt Money
Market, Missouri Tax-Exempt Bond and
Kansas Tax-Exempt Bond Portfolios and
for Investor B Shares of the Missouri
Tax-Exempt Bond and Kansas Tax-Exempt
Bond Portfolios.
</TABLE>
<PAGE> 1
Exhibit (1)(a)
STATE DEPARTMENT OF ASSESSMENTS & TAXATION
301 WEST PRESTON STREET, BALTIMORE, MARYLAND 21201
NOTICE
As a Maryland corporation you are responsible for filing an annual business tax
report with this office on or before April 15 of each year, after the year of
incorporation. This report is due annually whether or not the corporation has
been organized for business and whether or not the corporation owns any
property. If your charter authorizes the issuance of capital stock, the report
must be accompanied by a filing fee in amount of $40.00 and this fee must be
paid whether or not any stock has been issued. Non-stock corporations must
file the report but are exempt from payment of the filing fee.
Failure to timely file this report by April 15 of each year will result in the
imposition of penalties in accordance with Maryland law and continued failure
to file will result in the forfeiture of your corporate charter.
While the Department makes an annual mailing of appropriate forms to the latest
available address of each corporation, it is the responsibility of the
corporation to obtain proper forms if such are not received by mail. In this
regard the Department suggests that if forms have not been received by April 1
of any year, the taxpayer should make request of the Department and forms will
then be mailed.
The filing of this return does not relieve the corporation of the
responsibility of filing reports due other State agencies.
383-2530/31
<PAGE> 2
ARTICLES OF INCORPORATION
OF
THE ARCH FUND, INC.
* * * *
ARTICLE I
THE UNDERSIGNED, Jeffrey A. Dalke, whose post office address is 1100
Philadelphia National Bank Building, Philadelphia, Pennsylvania 19107, being at
least eighteen years of age, does hereby act as an incorporator, under and by
virtue of the General Laws of the State of Maryland authorizing the formation
of corporations and with the intention of forming a corporation.
ARTICLE II
The name of the Corporation is:
THE ARCH FUND, INC.
ARTICLE III
The purpose for which the Corporation is formed is to act as an open-end
diversified management investment company under the Investment Company Act of
1940.
ARTICLE IV
The Corporation is expressly empowered as follows:
(1) To hold, invest and reinvest its assets in securities and other
investments or to hold part or all of its assets in cash.
(2) To issue and sell shares of its capital stock in such amounts and on
such terms and conditions and for such purposes and for such amount or kind of
consideration as may now or hereafter be permitted by law.
(3) To redeem, purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the
stockholders of the Corporation) shares of its capital stock, in any manner and
to
<PAGE> 3
the extent now or hereafter permitted by law and by the Charter of the
Corporation.
(4) To enter into a written contract or contracts with any person or
persons providing for a delegation of the management of all or part of this
Corporation's securities portfolio(s) and also for the delegation of the
performance of various administrative or corporate functions, subject to the
direction of the Board of Directors. Any such contract or contracts may be
made with any person even though such person may be an officer, other employee,
director or stockholder of this Corporation or a corporation, partnership,
trust or association in which any such officer, other employee, director or
stockholder may be interested.
(5) To enter into a written contract or contracts appointing one or more
distributors or agents or both for the sale of the shares of the Corporation on
such terms and conditions as the Board of Directors of this Corporation may
deem reasonable and proper, and to allow such person or persons a commission on
the sale of such shares. Any such contract or contracts may be made with any
person even though such person may be an officer, other employee, director or
stockholder of this Corporation or a corporation, partnership, trust or
association in which any such officer, other employee, director or stockholder
may be interested.
(6) To enter into a written contract or contracts employing such
custodian or custodians for the safekeeping of the property of the Corporation
and of its shares, such dividend disbursing agent or agents, and such transfer
agent or agents and registrar or registrars for its shares, on such terms and
conditions as the Board of Directors of this Corporation may deem reasonable
and proper for the conduct of the affairs of the Corporation, and to pay the
fees and disbursements of such custodians, dividend disbursing agents, transfer
agents, and registrars out of the income and/or any other property of the
Corporation. Notwithstanding any other provisions of these Articles of
Incorporation or the By-Laws of the Corporation, the Board of Directors may
cause any or all of the property of the Corporation to be transferred to, or to
be acquired and held in the name of, a custodian so appointed or any nominee or
nominees of this Corporation or nominee or nominees of such custodian
satisfactory to the Board of Directors.
(7) To employ the same person, partnership (general or limited),
association, trust or corporation in any multiple capacity under Sections (4),
(5) and (6) of this Article IV who may receive compensation from the
Corporation in as many capacities in which such person, partnership (general or
limited), association, trust or corporation shall serve the Corporation.
-2-
<PAGE> 4
(8) To do any and all such further acts or things and to exercise any and
all such further powers or rights as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of the purposes stated in Article III hereof.
The Corporation shall be authorized to exercise and enjoy all of the powers,
rights and privileges granted to, or conferred upon, corporations by the
General Laws of the State of Maryland now or hereafter in force, and the
enumeration of the foregoing shall not be deemed to exclude any powers, rights
or privileges so granted or conferred.
ARTICLE V
The post office address of the principal office of the Corporation in the
State of Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. The name of the resident agent of the Corporation
in this State is The Corporation Trust Incorporated, a corporation of this
State, and the post office address of the resident agent is 32 South Street,
Baltimore, Maryland 21202.
ARTICLE VI
(1) The total number of shares of capital stock which the Corporation
shall have authority to issue is Two Billion (2,000,000,000) shares, of the par
value of One Mill ($0.001) per share and of the aggregate par value of Two
Million Dollars ($2,000,000).
(2) Any fractional share shall carry proportionately all the rights of a
whole share, excepting any right to receive a certificate evidencing such
fractional share, but including, without limitation, the right to vote and the
right to receive dividends.
(3) All persons who shall acquire stock in the Corporation shall acquire
the same subject to the provisions of the Charter and the By-laws of the
Corporation.
(4) Except to the extent otherwise provided by applicable law, the Board
of Directors shall have authority by resolution to classify and reclassify any
authorized but unissued shares of capital stock from time to time by setting or
changing in any one or more respects the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption of the capital stock. The
power of the Board of Directors to classify or reclassify any of the shares of
capital stock shall include,
-3-
<PAGE> 5
without limitation, authority to classify or reclassify any such stock into a
class or classes of capital stock and to divide and classify shares of any
class into one or more series of such class.
(5) Subject to the power of the Board of Directors to classify and
reclassify any authorized but unissued shares of capital stock pursuant to
Section 4 of this Article VI, shares of capital stock of the Corporation shall
have the following preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption:
(A) ASSETS BELONGING TO A CLASS. All consideration received by the
Corporation for the issue or sale of stock of any class of capital stock,
together with all income, earnings, profits and proceeds thereof, including
any proceeds derived from the sale, exchange or liquidation thereof, and any
funds or payments derived from any reinvestment of such proceeds in whatever
form the same may be, shall irrevocably belong to the class of shares of
capital stock with respect to which such assets, payments or funds were
received by the Corporation for all purposes, subject only to the rights of
creditors, and shall be so handled upon the books of account of the
Corporation. Such assets, income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation
thereof, and any assets derived from any reinvestment of such proceeds in
whatever form, are herein referred to as "assets belonging to" such class.
(B) LIABILITIES BELONGING TO A CLASS. The assets belonging to any class
of capital stock shall be charged with the liabilities in respect to such
class, and shall also be charged with such class's share of the general
liabilities of the Corporation, in proportion to the asset value of the
respective classes of capital stock determined as hereinafter provided. The
determination of the Board of Directors shall be conclusive as to the amount
of such liabilities, including the amount of accrued expenses and reserves;
as to any allocation of the same to a given class; and as to whether the
same, or general assets of the Corporation, are allocable to one or more
classes. The liabilities so allocated to a class are herein referred to as
"liabilities belonging to" such class.
(C) DIVIDENDS AND DISTRIBUTIONS. Shares of each class of capital stock
shall be entitled to such dividends and distributions, in stock or in cash
or
-4-
<PAGE> 6
both, as may be declared from time to time by the Board of Directors, acting
in its sole discretion, with respect to such class; provided, however, that
dividends and distributions on shares of a class of capital stock shall be
paid only out of the lawfully available "assets belonging to such class" as
such phrase is defined in Section 5(A) of this Article VI.
(D) LIQUIDATING DIVIDENDS AND DISTRIBUTIONS. In the event of the
liquidation or dissolution of the Corporation, stockholders of each class of
capital stock shall be entitled to receive, as a class, out of the assets of
the Corporation available for distribution to stockholders, but other than
general assets not belonging to any particular class of stock, the assets
belonging to such class; and the assets so distributable to the stockholders
of any class of capital stock shall be distributed among such stockholders
in proportion to the number of shares of such class held by them and
recorded on the books of the Corporation. In the event that there are any
general assets not belonging to any particular class of stock and available
for distribution, such distribution shall be made to the holders of stock of
all classes of capital stock in proportion to the asset value of the
respective classes of capital stock determined as hereinafter provided.
(E) VOTING. Each stockholder of each class of capital stock shall be
entitled to one vote for each share of capital stock, irrespective of the
class, then standing in his name on the books of the Corporation, and on any
matter submitted to a vote of stockholders, all shares of capital stock then
issued and outstanding and entitled to vote shall be voted in the aggregate
and not by class except that: (i) when expressly required by law, shares of
capital stock shall be voted by individual class and (ii) only shares of
capital stock of the respective class or classes affected by a matter shall
be entitled to vote on such matter.
(F) REDEMPTION. To the extent the Corporation has funds or other
property legally available therefor, each holder of shares of capital stock
of the Corporation shall be entitled to require the Corporation to redeem
all or any part of the shares of capital stock of the Corporation standing
in the name of such holder on the books of the Corporation, and all shares
of capital stock issued by the Corporation shall be subject to redemption by
the Corporation, at the redemption price of such shares as in effect from
time to time as may be determined by the Board of Directors
-5-
<PAGE> 7
of the Corporation in accordance with the provisions hereof, subject to the
right of the Board of Directors of the Corporation to suspend the right of
redemption of shares of capital stock of the Corporation or postpone the date
of payment of such redemption price in accordance with provisions of
applicable law. Without limiting the generality of the foregoing, the
Corporation shall, to the extent permitted by applicable law, have the right
at any time to redeem the shares owned by any holder of capital stock of the
Corporation (i) if such redemption is, in the opinion of the Board of
Directors of the Corporation, desirable in order to prevent the Corporation
from being deemed a "personal holding company" within the meaning of the
Internal Revenue Code of 1954, as amended, (ii) if the value of such shares
in the account maintained by the Corporation or its transfer agent for any
class of capital stock is less than $500.00 (Five Hundred Dollars); provided,
however, that each stockholder shall be notified that the value of his
account is less than $500.00 and allowed sixty (60) days to make additional
purchases of shares before such redemption is processed by the Corporation,
or (iii) if the net income with respect to any particular class of capital
stock should be negative or it should otherwise be appropriate to carry out
the Corporation's responsibilities under the Investment Company Act of 1940,
as amended, in each case subject to such further terms and conditions as the
Board of Directors of the Corporation may from time to time adopt. The
redemption price of shares of any class of capital stock of the Corporation
shall, except as otherwise provided in this Section 5(F), be the net asset
value thereof as determined by the Board of Directors of the Corporation from
time to time in accordance with the provisions of applicable law, less such
redemption fee or other charge, if any, as may be fixed by resolution of the
Board of Directors of the Corporation. Payment of the redemption price shall
be made in cash by the Corporation at such time and in such manner as may be
determined from time to time by the Board of Directors of the Corporation
unless, in the opinion of the Board of Directors, which shall be conclusive,
conditions exist which make payment wholly in cash unwise or undesirable; in
such event the Corporation may make payment wholly or partly by securities or
other property included in the assets belonging or allocable to the class of
the shares redemption of which is being sought, the value of which shall be
determined as provided herein. When the net income with respect to any
particular class of capital stock is negative or whenever deemed appropriate
by the Board of Directors
-6-
<PAGE> 8
in order to carry out the Corporation's responsibilities under the Investment
Company Act of 1940, as amended, the Corporation may, without payment of
monetary compensation but in consideration of the interest of the Corporation
and the stockholders in maintaining a constant net asset value per share of
such class, redeem pro rata from each stockholder of record on such day, such
number of full and fractional shares of the Corporation's capital stock of such
class, as may be necessary to reduce the aggregate number of outstanding shares
in order to permit the net asset value thereof to remain constant.
(G) CONVERSION. Each holder of any class of capital stock of the
Corporation, who surrenders his share certificate in good delivery form to
the Corporation or, if the shares in question are not represented by
certificates, who delivers to the Corporation a written request in good
order signed by the stockholder, shall, to the extent permitted by the
By-Laws or by resolution of the Board of Directors, be entitled to convert
the shares in question on the basis hereinafter set forth, into shares of
stock of any other class of the Corporation. The Corporation shall
determine the net asset value, as provided herein, of the shares to be
converted and may deduct therefrom a conversion cost, in an amount
determined within the discretion of the Board of Directors. Within five (5)
business days after such surrender and payment of any conversion cost, the
Corporation shall issue to the stockholder such number of shares of stock of
the class desired as, taken at the net asset value thereof determined as
provided herein in the same manner and at the same time as that of the
shares surrendered, shall equal the net asset value of the shares
surrendered, less any conversion cost as aforesaid. Any amount representing
a fraction of a share may be paid in cash at the option of the Corporation.
Any conversion cost may be paid and/or assigned by the Corporation to the
underwriter and/or to any other agency, as it may elect.
(H) RESTRICTIONS ON TRANSFERABILITY. If, in the opinion of the Board of
Directors of the Corporation, concentration in the ownership of shares of
capital stock might cause the Corporation to be deemed a personal holding
company within the meaning of the Internal Revenue Code, as now or hereafter
in force, the Corporation may at any time and from time to time refuse to
give effect on the books of the Corporation to any transfer or transfers of
any share or shares of
-7-
<PAGE> 9
capital stock in an effort to prevent such personal holding company status.
ARTICLE VII
(1) The number of directors of the Corporation shall be five (5), which
number may be increased or decreased pursuant to the By-laws of the Corporation
but shall never be less than three (3). The names of the directors who shall
act until the first annual meeting of stockholders or until their successors
are duly elected and qualify are:
Jay D. Proops
Albert J. Rose
Arthur J. Seewoester
Eugene F. Smith
Jerry V. Woodham
(2) No holder of stock of the Corporation shall, as such holder, have any
right to purchase or subscribe for any shares of the capital stock of the
Corporation or any other security of the Corporation which it may issue or sell
(whether out of the number of shares authorized by the Charter, or out of any
shares of the capital stock of the Corporation acquired by it after the issue
thereof, or otherwise) other than such right, if any, as the Board of
Directors, in its discretion, may determine.
(3) Each director and each officer of the Corporation shall be indemnified
by the Corporation to the full extent permitted by the General Laws of the
State of Maryland and the Investment Company Act of 1940, now or hereafter in
force, including advance of related expenses.
ARTICLE VIII
Any determination made in good faith and, so
far as accounting matters are involved, in accordance with generally accepted
accounting principles by or pursuant to the direction of the Board of
Directors, as to the amount of assets, obligations or liabilities of the
Corporation, as to the amount of net income of the Corporation from dividends
and interest for any period or amounts at any time legally available for the
payment of dividends, as to the amount of any reserves or charges set up and
the propriety thereof, as to the time of or purpose for creating reserves or as
to the use, alteration or cancellation of any reserves or charges (whether or
not any obligation or liability for which such reserves or charges shall have
been created shall have been paid or discharged or shall be then or thereafter
required to be paid or discharged), as to the value of any security owned by
the Corporation, as to the
-8-
<PAGE> 10
allocation of any assets or liabilities to a class of capital stock, as to the
times at which shares of any class of capital stock shall be deemed to be
outstanding or no longer outstanding, or as to any other matters relating to
the issuance, sale, redemption or other acquisition or disposition of
securities or shares of capital stock of the Corporation, and any reasonable
determination made in good faith by the Board of Directors as to whether any
transaction constitutes a purchase of securities on "margin," a sale of
securities "short," or an underwriting of the sale of, or a participation in
any underwriting or selling group in connection with the public distribution
of, any securities, shall be final and conclusive, and shall be binding upon
the Corporation and all holders of its capital stock, past, present and future,
and shares of the capital stock of the Corporation are issued and sold on the
condition and understanding, evidenced by the purchase of shares of capital
stock or acceptance of share certificates, that any and all such determinations
shall be binding as aforesaid. No provision of the Charter of the Corporation
shall be effective to (i) require a waiver of compliance with any provision of
the Securities Act of 1933, as amended, or the Investment Company Act of 1940,
as amended, or of any valid rule, regulation or order of the Securities and
Exchange Commission thereunder or (ii) protect or purport to protect any
director or officer of the Corporation against any liability to the Corporation
or its security holders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
ARTICLE IX
The duration of the Corporation shall be perpetual.
ARTICLE X
(1) The Corporation reserves the right from time to time to make any
amendments to its Charter which may now or hereafter be authorized by law,
including any amendments changing the terms or contract rights, as expressly
set forth in its Charter, of any of its outstanding stock by classification,
reclassification or otherwise, but no such amendment which changes such terms
or contract rights of any of its outstanding stock shall be valid unless such
amendment shall have been authorized by not less than a majority of the
aggregate number of the votes entitled to be cast thereon by a vote at a
meeting.
(2) Notwithstanding any provision of the General Laws of the State of
Maryland requiring any action to be taken or authorized by the affirmative vote
of the holders of a designated proportion of the votes of all classes or of any
class of stock
-9-
<PAGE> 11
of the Corporation, such action shall be effective and valid if taken or
authorized by the affirmative vote of the holders of a majority of the total
number of shares outstanding and entitled to vote thereon, except as otherwise
provided herein.
(3) So long as permitted by Maryland law, the books of the Corporation may
be kept outside of the State of Maryland at such place or places as may be
designated from time to time by the Board of Directors or in the By-Laws of the
Corporation.
(4) In furtherance, and not in limitation, of the powers conferred by the
laws of the State of Maryland, the Board of Directors is expressly authorized:
(A) To make, alter or repeal the By-Laws of the Corporation, except where
such power is reserved by the By-Laws to the stockholders, and except as
otherwise required by the Investment Company Act of 1940, as amended.
(B) From time to time to determine whether and to what extent and at what
times and places and under what conditions and regulations the books and
accounts of the Corporation, or any of them other than the stock ledger,
shall be open to the inspection of the stockholders, and no stockholder
shall have any right to inspect any account or book or document of the
Corporation, except as conferred by law or authorized by resolution of the
Board of Directors or of the stockholders.
(C) Without the assent or vote of the stockholders, to authorize the
issuance from time to time of shares of the stock of any class of the
Corporation, whether now or hereafter authorized, and securities convertible
into shares of its stock of any class or classes, whether now or hereafter
authorized, for such consideration as the Board of Directors may deem
advisable.
(D) Without the assent or vote of the stockholders, to authorize and
issue obligations of the Corporation, secured and unsecured, as the Board of
Directors may determine, and to authorize and cause to be executed mortgages
and liens upon the property of the Corporation, real or personal.
(E) Notwithstanding anything in these Articles of Incorporation to the
contrary, to establish in its absolute discretion the basis or method for
determining the value of the assets belonging to any class, the value of the
liabilities belonging to any class, the
-10-
<PAGE> 12
allocation of any assets or liabilities to any class, the times at which
shares of any class shall be deemed to be outstanding or no longer
outstanding and the net asset value of each share of any class of capital
stock of the Corporation for purposes of sales, redemptions, repurchases of
shares or otherwise.
(F) To determine in accordance with generally accepted accounting
principles and practices what constitutes net profits, earnings, surplus or
net assets in excess of capital, and to determine what accounting periods
shall be used by the Corporation for any purpose, whether annual or any
other period, including daily; to set apart out of any funds of the
Corporation such reserves for such purposes as it shall determine and to
abolish the same; to declare and pay any dividends and distributions in
cash, securities or other property from surplus or any funds legally
available therefor, at such intervals (which may be as frequently as daily)
or on such other periodic basis, as it shall determine; to declare such
dividends or distributions by means of a formula or other method of
determination, at meetings held less frequently than the frequency of the
effectiveness of such declarations; to establish payment dates for dividends
or any other distributions on any basis, including dates occurring less
frequently than the effectiveness of declarations thereof; and to provide
for the payment of declared dividends on a date earlier or later than the
specified payment date in the case of stockholders of the Corporation
redeeming their entire ownership of shares of any class of the Corporation.
(G) In addition to the powers and authorities granted herein and by
statute expressly conferred upon it, the Board of Directors is authorized to
exercise all such powers and do all such acts and things as may be exercised
or done by the Corporation, subject, nevertheless, to the provisions of
Maryland law, this Charter and the By-Laws of the Corporation.
IN WITNESS WHEREOF, the undersigned incorporator of THE ARCH FUND, INC.
hereby executes the foregoing Articles of Incorporation and acknowledges the
same to be his act.
Dated the 9th day of September, 1982.
/s/ Jeffrey A. Dalke
--------------------
Jeffrey A. Dalke
-11-
<PAGE> 1
Exhibit (1)(b)
STATE OF MARYLAND
No. 3673
STATE DEPARTMENT OF
ASSESSMENTS AND TAXATION
301 West Preston Street, Baltimore, Maryland 21201
THIS IS TO CERTIFY THAT the within instrument is a true copy of the
ARTICLES OF SUPPLEMENTARY
OF
THE ARCH FUND, INC.
as approved and received for record by the State Department of Assessments and
Taxation of Maryland, November 4, 1982 at 12:12 o'clock p.m.
AS WITNESS my hand and official seal of
the said Department at Baltimore this fourth
day of November, 1982
/s/ Paul B. Anderson
--------------------
Paul B. Anderson
Charter Specialist
<PAGE> 2
MARYLAND
STATE DEPARTMENT OF ASSESSMENTS AND TAXATION
THE ARTICLES OF SUPPLEMENTARY
OF
THE ARCH FUND, INC.
HAVE BEEN RECEIVED AND APPROVED BY THE STATE DEPARTMENT OF ASSESSMENTS AND
TAXATION THIS 4TH DAY OF NOVEMBER, 1982 AT 12:12 P.M. AND WILL BE RECORDED.
BY:/s/ [signature illegible]
301 WEST PRESTON STREET, BALTIMORE, MARYLAND 21201/PHONE: 383-3720
<PAGE> 3
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
THE ARCH FUND, INC.
THE ARCH FUND, INC., a Maryland corporation having its principal office
in the City of Baltimore, Maryland (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of
Maryland that:
FIRST: Pursuant to Section 2-208 of the Maryland General Corporation
Law, the Board of Directors of the Corporation has classified One Billion
(1,000,000,000) of the Two Billion (2,000,000,000) shares of authorized,
unissued and unclassified capital stock of the Corporation (par value One Mill
($.001) per share) as Class A Common Stock and One Billion (1,000,000,000) of
said shares of authorized, unissued and unclassified capital stock of the
Corporation, (par value One Mill ($.001) per share) as Class B Common Stock,
pursuant to the following resolutions adopted by the directors of the
Corporation by written unanimous consent dated September 10, 1982:
RESOLVED, that pursuant to Article VI of the Articles of Incorporation
of the Corporation, One Billion (1,000,000,000) of the Two Billion
(2,000,000,000) shares of authorized, unissued and unclassified capital
stock of the Corporation (of the par value of One Mill ($.001) per share
and of the aggregate par value of One Million Dollars ($1,000,000)) be, and
hereby are, classified and designated as Class A Common Stock evidencing
interests in the Corporation's Non-Discretionary Portfolio;
<PAGE> 4
FURTHER RESOLVED, that pursuant to Article VI of the Articles of
Incorporation of the Corporation, One Billion (1,000,000,000) of the Two
Billion (2,000,000,000) shares of authorized, unissued and unclassified
capital stock of the Corporation (of the par value of One Mill ($.001) per
share and of the aggregate par value of One Million Dollars ($1,000,000))
be, and hereby are, classified and designated as Class B Common Stock
evidencing interests in the Corporation's Discretionary Portfolio;
FURTHER RESOLVED, that each share of Class A Common Stock and each
share of Class B Common Stock shall have all of the preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption that are set forth in
the Articles of Incorporation of the Corporation with respect to its shares
of capital stock.
SECOND: The shares of Class A Common Stock and shares of Class B
Common Stock of the Corporation classified pursuant to the resolutions set
forth in Article FIRST of these Articles Supplementary have been classified by
the Corporation's Board of Directors under the authority contained in the
charter of the Corporation.
IN WITNESS WHEREOF, THE ARCH FUND, INC., has caused these presents to
be signed in its name and on its behalf by its
-2-
<PAGE> 5
President and its corporate seal to be hereunto affixed and attested by its
Secretary on this 28th day of October, 1982.
THE ARCH FUND, INC.
By:/s/ A.J. Seewoester
-----------------------------
A.J. Seewoester, President
ATTEST:
/s/ W. Bruce McConnel, III
- --------------------------
W. Bruce McConnel, III,
Secretary
-3-
<PAGE> 6
CERTIFICATE
THE UNDERSIGNED, President of THE ARCH FUND, INC., who executed on
behalf of said Corporation the attached Articles Supplementary to Articles of
Incorporation of said Corporation, of which this certificate is made a part,
hereby acknowledges, in the name and on behalf of said Corporation, the
attached Articles Supplementary to be the corporate act of said Corporation,
and certifies that to the best of his knowledge, information and belief the
matters and facts set forth in the attached Articles Supplementary with respect
to authorization and approval are true in all material respects, under the
penalties for perjury.
/s/ A.J. Seewoester
--------------------------
Date: October 28, 1982 A.J. Seewoester, President
<PAGE> 7
ARTICLES OF SUPPLEMENTARY
OF
THE ARCH FUND, INC.
approved and received for record by the State Department of Assessments and
Taxation of Maryland, November 4, 1982 at 12:12 o'clock P.M. as in conformity
with law and order recorded.
5
-------------------
Recorded in Liber 2562, folio 1241, one of the Charter Records of the
State Department of Assessments and Taxation of Maryland.
Bonus tax paid $_________ Recording fee paid $ 20.00 Special Fee paid
$______
-------------------
To the clerk of the Superior Court of Baltimore City
IT IS HEREBY CERTIFIED, that the within instrument, together with all
indorsements thereon, has been received, approved and recorded by the State
Department of Assessments and Taxation of Maryland.
AS WITNESS my hand and seal of the said Department at Baltimore.
-------------------
[SEAL OF STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND]
A 133454
RECEIVED FOR RECORD 8304237
MAR 16 1983 AT 9 O'CLOCK,
A.M. SAME DAY RECORDED IN LIBER
S.E.B. NO. 173 FOLIO, 1285 &c,
ONE OF THE CHARTER RECORDS OF
BALTIMORE CITY AND EXAMINED.
PER SAUNDRA E. BANKS,
CLERK
<PAGE> 1
Exhibit (1)(c)
ARTICLES SUPPLEMENTARY
OF
THE ARCH FUND, INC.
THE ARCH FUND, INC., a Maryland corporation having its principal office in
the City of Baltimore, Maryland (hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to Section 2-208 of the Maryland General Corporation Law,
the Board of Directors of the Corporation has reclassified 40,000,000 shares of
Class A Common Stock (par value One Mill ($.001) per share) as Class C Common
Stock, 40,000,000 shares of Class B Common Stock (par value One Mill ($.001)
per share) as Class D Common Stock, and 40,000,000 shares of Class B Common
Stock (par value One Mill ($.001) per share) as Class E Common Stock, pursuant
to the following resolutions adopted at regular meetings of the Board of
Directors of the Corporation held on June 16, 1987 and September 15, 1987:
RESOLVED, that pursuant to Article VI of the Articles of Incorporation
of the Corporation (the "Charter"), 40,000,000 shares currently classified
as Class A Common Stock (of the par value of One Mill ($.001) per share and
of the aggregate par value of Forty Thousand Dollars ($40,000)), be, and
hereby are reclassified into a third class of shares of capital stock and
designated as Class C Common Stock;
FURTHER RESOLVED, that pursuant to Article VI of the Charter,
40,000,000 shares currently classified as Class B Common Stock (of the par
value of One Mill ($.001) per share and of the aggregate par value of Forty
Thousand Dollars ($40,000)) be, and hereby are reclassified into a fourth
class of shares of capital stock and designated as Class D Common Stock;
FURTHER RESOLVED, that pursuant to Article VI of the Charter,
40,000,000 shares currently classified as Class B Common Stock (of the par
value of One Mill ($.001) per share and of the aggregate par value of Forty
Thousand Dollars ($40,000)) be, and hereby are, reclassified into a fifth
class of shares of capital stock and designated as Class E Common Stock;
FURTHER RESOLVED, that each share of Class C Common Stock, each share
of Class D Common Stock, and each share of
<PAGE> 2
Class E common Stock shall have all of the preferences, conversion and
other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption that are
set forth in the Charter with respect to its shares of capital stock; and
FURTHER RESOLVED, that the officers of the Corporation be, and each of
them hereby is, authorized and empowered to execute, seal, and deliver any
and all documents, instruments, papers, and writings, including but not
limited to Articles Supplementary to be filed with the State Department of
Assessments and Taxation of Maryland, and to do any and all other acts, in
the name of the Corporation and on its behalf, as may be necessary or
desirable in connection with or in furtherance of the foregoing
resolutions.
SECOND: The shares of Class C Common Stock, Class D Common Stock and
Class E Common Stock of the Corporation classified pursuant to the resolutions
set forth in Article FIRST of these Articles Supplementary have been classified
by the Corporation's Board of Directors under the authority contained in the
Charter of the Corporation.
IN WITNESS WHEREOF, THE ARCH FUND, INC., has caused these presents to
be signed in its name and on behalf by its President and its corporate seal
to be hereunto affixed and attested by its Secretary on this 22nd day of
December, 1987.
THE ARCH FUND, INC.
[SEAL] By: /s/ Jerry V. Woodham
Jerry V. Woodham
Chairman of the Board
and President
ATTEST:
/s/ W. Bruce McConnel, III
W. Bruce McConnel, III
Secretary
<PAGE> 3
CERTIFICATE
-----------
THE UNDERSIGNED, Chairman of the Board and President of THE ARCH FUND, INC.,
who executed on behalf of said Corporation the attached Articles Supplementary
of said Corporation, of which this certificate is made a part, hereby
acknowledges, in the name and on behalf of said Corporation, the attached
Articles Supplementary to be the corporate act of said Corporation, and
certifies that to the best of his knowledge, information and belief the matters
and facts set forth in the attached Articles Supplementary with respect to
authorization and approval are true in all material respects, under the
penalties for perjury.
Date: December 22, 1987 /s/ Jerry V. Woodham
----------------------
Jerry V. Woodham
Chairman of the Board
and President
<PAGE> 1
Exhibit (1)(d)
THE ARCH FUND, INC.
ARTICLES SUPPLEMENTARY
The Arch Fund, Inc., a Maryland corporation having its
principal office in the City of Baltimore, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The total number of shares of capital stock which the
Corporation was heretofore authorized to issue was Two Billion (2,000,000,000)
shares of Common Stock, of which Nine Hundred Sixty Million (960,000,000)
shares of the par value of One Mill ($.001) each were Class A Common Stock,
Nine Hundred Twenty Million (920,000,000) shares of the par value of One Mill
($.001) each were Class B Common Stock, Forty Million (40,000,000) shares of
the par value of One Mill ($.001) each were Class C Common Stock, Forty Million
(40,000,000) shares of the par value of One Mill ($.001) each were Class D
Common Stock, and Forty Million (40,000,000) shares of the par value of One
Mill ($.001) each were Class E Common Stock. The aggregate par value of all
Common Stock having par value was Two Million Dollars ($2,000,000).
SECOND: Pursuant to Article VI of the Corporation's Articles
of Incorporation, the Board of Directors of the Corporation has reclassified
Nine Hundred and Twenty Million (920,000,000) shares (of the par value of One
Mill ($.001)) of authorized and unissued Class B Common Stock, Thirty Five
Million
<PAGE> 2
(35,000,000) shares (of the par value of One Mill ($.001)) of authorized and
unissued Class C Common Stock, Thirty Five Million (35,000,000) shares (of the
par value of One Mill ($.001)) of authorized and unissued Class D Common Stock,
and Thirty Five Million (35,000,000) shares (of the par value of One Mill
($.001)) of authorized and unissued Class E Common Stock of the Corporation's
capital stock pursuant to the following resolutions adopted at a regular
meeting of the Board of Directors of the Corporation held on June 19, 1990:
RESOLVED, that pursuant to Article VI of the
Corporation's Articles of Incorporation (the "Charter"), (1)
Nine Hundred Twenty Million (920,000,000) authorized and
unissued shares currently classified as Class B Common Stock
(of the par value of One Mill ($.001) per share and of the
aggregate par value of Nine Hundred Twenty Thousand Dollars
($920,000)), be, and hereby are, reclassified as Class A
Common Stock; (2) Five Million (5,000,000) authorized and
unissued shares currently classified as Class C Common Stock
(of the par value of One Mill ($.001) per share and of the
aggregate par value of Five Thousand Dollars ($5,000)), be,
and hereby are, reclassified as Class C - Special Series 1
Common Stock; (3) Thirty Million (30,000,000) authorized and
unissued shares currently classified as Class C Common Stock
(of the par value of One Mill ($.001) per share and of the
aggregate par value of Thirty Thousand Dollars ($30,000)), be,
and hereby are, reclassified as Class A - Special Series 1
Common Stock; (4) Five Million (5,000,000) authorized and
unissued shares currently classified as Class D Common Stock
(of the par value of One Mill ($.001) per share and of the
aggregate par value of Five Thousand Dollars ($5,000)), be,
and hereby are, reclassified as Class D - Special Series 1
Common Stock; (5) Thirty Million (30,000,000) authorized and
unissued shares currently classified as Class D Common Stock
(of the par value of One Mill ($.001) per share and of the
aggregate par value of Thirty Thousand Dollars ($30,000)), be,
and hereby are, reclassified as Class A - Special Series 1
Common Stock; (6) Five Million (5,000,000) authorized and
unissued shares currently classified as Class E Common Stock
(of the par value of One Mill ($.001) per share
-2-
<PAGE> 3
and of the aggregate par value of Five Thousand Dollars
($5,000)), be, and hereby are, reclassified as Class E -
Special Series 1 Common Stock; and (7) Thirty Million
(30,000,000) authorized and unissued shares currently
classified as Class E Common Stock (of the par value of One
Mill ($.001) per share and of the aggregate par value of
Thirty Thousand Dollars ($30,000)), be, and hereby are,
reclassified as Class A - Special Series 1 Common Stock.
Class A Common Stock
--------------------
FURTHER RESOLVED, that all consideration received by
the Corporation for the issue or sale of shares of Class A -
Special Series 1 Common Stock shall be invested and reinvested
with the consideration received by the Corporation for the
issue and sale of all other shares now or hereafter designated
as Class A Common Stock (irrespective of whether said shares
have been designated as a part of a series of said Class and,
if so designated as a part of a series, irrespective of the
particular series designation), together with all income,
earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange, or liquidation
thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may
be, and any general assets of the Corporation allocated to
Class A - Special Series 1 shares or such other shares of
Class A Common Stock by the Board of Directors in accordance
with the Corporation's Charter;
FURTHER RESOLVED, that all income, earnings, profits,
and proceeds, including any proceeds derived from the sale,
exchange or liquidation of such shares, and any assets derived
from any reinvestment of such proceeds in whatever form shall
be allocated among shares of Class A - Special Series 1 Common
Stock and shares of Class A Common Stock, respectively
(irrespective of whether said shares have been designated as a
part of a series of said Class and, if so designated as a part
of a series, irrespective of the particular series
designation) in proportion to their respective net asset
values;
FURTHER RESOLVED, that all the liabilities (including
expenses) of the Corporation in respect of shares of Class A -
Special Series 1 or shares of Class A Common Stock and in
respect of any general liabilities (including expenses) of the
Corporation allocated to shares of Class A - Special Series 1
or shares of Class A Common Stock by the Board of
-3-
<PAGE> 4
Directors in accordance with the Corporation's Charter shall
be allocated among shares of Class A - Special Series 1 Common
Stock and shares of Class A Common Stock, respectively
(irrespective of whether said shares have been designated as a
part of a series of said Class and, if so designated as a part
of a series, irrespective of the particular series
designation) in proportion to their respective net asset
values except that to the extent permitted by rule or order of
the Securities and Exchange Commission and as may be from time
to time determined by the Board of Directors:
(a) only the shares of Class A Common
Stock shall bear: (i) the expenses and liabilities
of payments to institutions under any agreements
entered into by or on behalf of the Corporation which
provide for services by the institutions exclusively
for their customers who own of record or beneficially
such shares, and (ii) such other expenses and
liabilities as the Board of Directors may from time
to time determine are directly attributable to such
shares and which therefore should be borne solely by
shares of Class A Common Stock;
(b) only the shares of Class A - Special
Series 1 Common Stock shall bear: (i) the expenses
and liabilities of payments to institutions under any
agreements entered into by or on behalf of the
Corporation which provide for services by the
institutions exclusively for their customers who own
of record or beneficially such shares; and (ii) such
other expenses and liabilities as the Board of
Directors may from time to time determine are
directly attributable to such shares and which
therefore should be borne solely by shares of Class A
- Special Series 1 Common Stock;
(c) No shares of Class A Common Stock
shall bear the expenses and liabilities described in
subparagraph (b) above; and
(d) No shares of Class A - Special
Series 1 Common Stock shall bear the expenses and
liabilities described in subparagraph (a) above.
FURTHER RESOLVED, that except as provided by these
resolutions each share of Class A - Special Series 1 Common
Stock shall have the same preferences, conversion, and other
rights, voting powers, restrictions, limitations,
qualifications, and terms
-4-
<PAGE> 5
and conditions of redemption as each other share now or
hereafter designated as a share of Class A Common Stock
(irrespective of whether said share has been designated as a
part of a series of said Class and, if so designated as a part
of a series, irrespective of the particular series
designation), except that to the extent permitted by rule or
order of the Securities and Exchange Commission:
(a) on any matter that pertains to the
agreements or expenses and liabilities described in
clause (a) of the immediately preceding resolution
(or to any plan or other document adopted by the
Corporation relating to said agreements, expenses or
liabilities) and is submitted to a vote of
shareholders of the Corporation, only shares of Class
A Common Stock (excluding shares designated as a
series of such Class) shall be entitled to vote,
except that: (i) if said matter affects shares of
capital stock of the Corporation other than shares of
Class A Common Stock, such other affected shares of
capital stock of the Corporation shall also be
entitled to vote, and in such case shares of Class A
Common Stock shall be voted in the aggregate together
with such other affected shares and not by class or
series except where otherwise required by law or
permitted by the Board of Directors of the
Corporation; and (ii) if said matter does not affect
shares of Class A Common Stock, said shares shall not
be entitled to vote (except where required by law or
permitted by the Board of Directors) even though the
matter is submitted to a vote of holders of shares of
capital stock of the Corporation other than said
shares of Class A Common Stock; and
(b) on any matter that pertains to the
agreements or expenses and liabilities described in
clause (b) of the immediately preceding resolution
(or any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of
shareholders of the Company, only shares of Class A -
Special Series 1 Common Stock shall be entitled to
vote, except that: (i) if said matter affects shares
of capital stock in the Corporation other than shares
of Class A - Special Series 1, such other affected
shares of capital stock in the Corporation shall also
be entitled to vote, and in such case, shares of
Class A -
-5-
<PAGE> 6
Special Series 1 Common Stock shall be voted in the
aggregate together with such other affected shares
and not by class or series except where otherwise
required by law or permitted by the Board of
Directors of the Corporation; and (ii) if said matter
does not affect shares of Class A Special Series 1
Common Stock, such shares shall not be entitled to
vote (except where required by law or permitted by
the Board of Directors) even though the matter is
submitted to a vote of the holders of shares of
capital stock in the corporation other than said
shares of Class A - Special Series 1 Common Stock.
Class C Common Stock
--------------------
FURTHER RESOLVED, that all consideration received by
the Corporation for the issue or sale of shares of Class C -
Special Series 1 Common Stock shall be invested and reinvested
with the consideration received by the Corporation for the
issue and sale of all other shares now or hereafter designated
as Class C Common Stock (irrespective of whether said shares
have been designated as a part of a series of said Class and,
if so designated as a part of a series, irrespective of the
particular series designation), together with all income,
earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange, or liquidation
thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may
be, and any general assets of the Corporation allocated to
Class C - Special Series 1 shares or such other shares of
Class C Common Stock by the Board of Directors in accordance
with the Corporation's Charter;
FURTHER RESOLVED, that all income, earnings,
profits, and proceeds, including any proceeds derived from the
sale, exchange or liquidation of such shares, and any assets
derived from any reinvestment of such proceeds in whatever
form shall be allocated among shares of Class C - Special
Series 1 Common Stock and shares of Class C Common Stock,
respectively (irrespective of whether said shares have been
designated as a part of a series of said Class and, if so
designated as a part of a series, irrespective of the
particular series designation) in proportion to their
respective net asset values;
FURTHER RESOLVED, that all the liabilities (including
expenses) of the Corporation in respect of shares of Class C -
Special Series 1 or shares of Class
-6-
<PAGE> 7
C Common Stock and in respect of any general liabilities
(including expenses) of the Corporation allocated to shares of
Class C - Special Series 1 or shares of Class C Common Stock
by the Board of Directors in accordance with the Corporation's
Charter shall be allocated among shares of Class C - Special
Series 1 Common Stock and shares of Class C Common Stock,
respectively (irrespective of whether said shares have been
designated as a part of a series of said Class and, if so
designated as a part of a series, irrespective of the
particular series designation) in proportion to their
respective net asset values except that to the extent
permitted by rule or order of the Securities and Exchange
Commission and as may be from time to time determined by the
Board of Directors:
(a) only the shares of Class C Common
Stock shall bear: (i) the expenses and liabilities of
payments to institutions under any agreements entered
into by or on behalf of the Corporation which
provide for services by the institutions exclusively
for their customers who own of record or
beneficially such shares, and (ii) such other
expenses and liabilities as the Board of Directors
may from time to time determine are directly
attributable to such shares and which therefore
should be borne solely by shares of Class C Common
Stock;
(b) only the shares of Class C -
Special Series 1 Common Stock shall bear: (i) the
expenses and liabilities of payments to institutions
under any agreements entered into by or on behalf of
the Corporation which provide for services by the
institutions exclusively for their customers who own
of record or beneficially such shares; and (ii) such
other expenses and liabilities as the Board of
Directors may from time to time determine are
directly attributable to such shares and which
therefore should be borne solely by shares of Class C
- Special Series 1 Common Stock;
(c) No shares of Class C Common Stock
shall bear the expenses and liabilities described in
subparagraph (b) above; and
(d) No shares of Class C - Special
Series 1 Common Stock shall bear the expenses and
liabilities described in subparagraph (a) above.
FURTHER RESOLVED, that except as provided by these
-7-
<PAGE> 8
resolutions each share of Class C - Special Series 1 Common
Stock shall have the same preferences, conversion, and other
rights, voting powers, restrictions, limitations,
qualifications, and terms and conditions of redemption as each
other share now or hereafter designated as a share of Class C
Common Stock (irrespective of whether said share has been
designated as a part of a series of said Class and, if so
designated as a part of a series, irrespective of the
particular series designation), except that to the extent
permitted by rule or order of the Securities and Exchange
Commission:
(a) on any matter that pertains to the
agreements or expenses and liabilities described in
clause (a) of the immediately preceding resolution
(or to any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of
shareholders of the Corporation, only shares of Class
C Common Stock (excluding shares designated as a
series of such Class) shall be entitled to vote,
except that: (i) if said matter affects shares of
capital stock of the Corporation other than shares of
Class C Common Stock, such other affected shares of
capital stock of the Corporation shall also be
entitled to vote, and in such case shares of Class C
Common Stock shall be voted in the aggregate together
with such other affected shares and not by class or
series except where otherwise required by law or
permitted by the Board of Directors of the
Corporation; and (ii) if said matter does not affect
shares of Class C Common Stock, said shares shall not
be entitled to vote (except where required by law or
permitted by the Board of Directors) even though the
matter is submitted to a vote of holders of shares of
capital stock of the Corporation other than said
shares of Class C Common Stock; and
(b) on any matter that pertains to the
agreements or expenses and liabilities described in
clause (b) of the immediately preceding resolution
(or any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of
shareholders of the Company, only shares of Class C -
Special Series 1 Common Stock shall be entitled to
vote, except that: (i) if said matter affects shares
of capital stock in the
-8-
<PAGE> 9
Corporation other than shares of Class C - Special
Series 1, such other affected shares of capital stock
in the Corporation shall also be entitled to vote,
and in such case, shares of Class C - Special Series
1 Common Stock shall be voted in the aggregate
together with such other affected shares and not by
class or series except where otherwise required by
law or permitted by the Board of Directors of the
Corporation; and (ii) if said matter does not affect
shares of Class C Special Series 1 Common Stock, such
shares shall not be entitled to vote (except where
required by law or permitted by the Board of
Directors) even though the matter is submitted to a
vote of the holders of shares of capital stock in the
corporation other than said shares of Class C -
Special Series 1 Common Stock.
Class D Common Stock
--------------------
FURTHER RESOLVED, that all consideration received by
the Corporation for the issue or sale of shares of Class D -
Special Series 1 Common Stock shall be invested and reinvested
with the consideration received by the Corporation for the
issue and sale of all other shares now or hereafter designated
as Class D Common Stock (irrespective of whether said shares
have been designated as a part of a series of said Class and,
if so designated as a part of a series, irrespective of the
particular series designation), together with all income,
earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange, or liquidation
thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may
be, and any general assets of the Corporation allocated to
Class D - Special Series 1 shares or such other shares of
Class D Common Stock by the Board of Directors in accordance
with the Corporation's Charter;
FURTHER RESOLVED, that all income, earnings, profits,
and proceeds, including any proceeds derived from the sale,
exchange or liquidation of such shares, and any assets derived
from any reinvestment of such proceeds in whatever form shall
be allocated among shares of Class D - Special Series 1 Common
Stock and shares of Class D Common Stock, respectively
(irrespective of whether said shares have been designated as a
part of a series of said Class and, if so designated as a part
of a series, irrespective of the particular series
designation) in proportion to their respective net asset
values;
-9-
<PAGE> 10
FURTHER RESOLVED, that all the liabilities (including
expenses) of the Corporation in respect of shares of Class D -
Special Series 1 or shares of Class D Common Stock and in
respect of any general liabilities (including expenses) of the
Corporation allocated to shares of Class D - Special Series 1
or shares of Class D Common Stock by the Board of Directors in
accordance with the Corporation's Charter shall be allocated
among shares of Class D - Special Series 1 Common Stock and
shares of Class D Common Stock, respectively (irrespective of
whether said shares have been designated as a part of a series
of said Class and, if so designated as a part of a series,
irrespective of the particular series designation) in
proportion to their respective net asset values except that to
the extent permitted by rule or order of the Securities and
Exchange Commission and as may be from time to time determined
by the Board of Directors:
(a) only the shares of Class D Common
Stock shall bear: (i) the expenses and liabilities of
payments to institutions under any agreements entered
into by or on behalf of the Corporation which provide
for services by the institutions exclusively for
their customers who own of record or beneficially
such shares, and (ii) such other expenses and
liabilities as the Board of Directors may from time
to time determine are directly attributable to such
shares and which therefore should be borne solely by
shares of Class D Common Stock;
(b) only the shares of Class D - Special
Series 1 Common Stock shall bear: (i) the expenses
and liabilities of payments to institutions under any
agreements entered into by or on behalf of the
Corporation which provide for services by the
institutions exclusively for their customers who own
of record or beneficially such shares; and (ii) such
other expenses and liabilities as the Board of
Directors may from time to time determine are
directly attributable to such shares and which
therefore should be borne solely by shares of Class D
- Special Series 1 Common Stock;
(c) No shares of Class D Common Stock
shall bear the expenses and liabilities described in
subparagraph (b) above; and
(d) No shares of Class D - Special
Series 1 Common Stock shall bear the expenses and
-10-
<PAGE> 11
liabilities described in subparagraph (a) above.
FURTHER RESOLVED, that except as provided by these
resolutions each share of Class D - Special Series 1 Common
Stock shall have the same preferences, conversion, and other
rights, voting powers, restrictions, limitations,
qualifications, and terms and conditions of redemption as each
other share now or hereafter designated as a share of Class D
Common Stock (irrespective of whether said share has been
designated as a part of a series of said Class and, if so
designated as a part of a series, irrespective of the
particular series designation), except that to the extent
permitted by rule or order of the Securities and Exchange
Commission:
(a) on any matter that pertains to the
agreements or expenses and liabilities described in
clause (a) of the immediately preceding resolution
(or to any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of
shareholders of the Corporation, only shares of Class
D Common Stock (excluding shares designated as a
series of such Class) shall be entitled to vote,
except that: (i) if said matter affects shares of
capital stock of the Corporation other than shares of
Class D Common Stock, such other affected shares of
capital stock of the Corporation shall also be
entitled to vote, and in such case shares of Class D
Common Stock shall be voted in the aggregate together
with such other affected shares and not by class or
series except where otherwise required by law or
permitted by the Board of Directors of the
Corporation; and (ii) if said matter does not affect
shares of Class D Common Stock, said shares shall not
be entitled to vote (except where required by law or
permitted by the Board of Directors) even though the
matter is submitted to a vote of holders of shares of
capital stock of the Corporation other than said
shares of Class D Common Stock; and
(b) on any matter that pertains to the
agreements or expenses and liabilities described in
clause (b) of the immediately preceding resolution
(or any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of
shareholders of the Company, only shares of Class D -
Special Series 1 Common Stock shall
-11-
<PAGE> 12
be entitled to vote, except that: (i) if said matter
affects shares of capital stock in the Corporation
other than shares of Class D - Special Series 1, such
other affected shares of capital stock in the
Corporation shall also be entitled to vote, and in
such case, shares of Class D - Special Series 1
Common Stock shall be voted in the aggregate together
with such other affected shares and not by class or
series except where otherwise required by law or
permitted by the Board of Directors of the
Corporation; and (ii) if said matter does not affect
shares of Class D Special Series 1 Common Stock, such
shares shall not be entitled to vote (except where
required by law or permitted by the Board of
Directors) even though the matter is submitted to a
vote of the holders of shares of capital stock in the
Corporation other than said shares of Class D -
Special Series 1 Common Stock.
Class E Common Stock
--------------------
FURTHER RESOLVED, that all consideration received by
the Corporation for the issue or sale of shares of Class E -
Special Series 1 Common Stock shall be invested and reinvested
with the consideration received by the Corporation for the
issue and sale of all other shares now or hereafter designated
as Class E Common Stock (irrespective of whether said shares
have been designated as a part of a series of said Class and,
if so designated as a part of a series, irrespective of the
particular series designation), together with all income,
earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange, or liquidation
thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may
be, and any general assets of the Corporation allocated to
Class E - Special Series 1 shares or such other shares of
Class E Common Stock by the Board of Directors in accordance
with the Corporation's Charter;
FURTHER RESOLVED, that all income, earnings, profits,
and proceeds, including any proceeds derived from the sale,
exchange or liquidation of such shares, and any assets derived
from any reinvestment of such proceeds in whatever form shall
be allocated among shares of Class E - Special Series 1 Common
Stock and shares of Class E Common Stock, respectively
(irrespective of whether said shares have been designated as a
part of a series of said Class and, if so designated as a part
of a series, irrespective of
-12-
<PAGE> 13
the particular series designation) in proportion to their
respective net asset values;
FURTHER RESOLVED, that all the liabilities (including
expenses) of the Corporation in respect of shares of Class E -
Special Series 1 or shares of Class E Common Stock and in
respect of any general liabilities (including expenses) of the
Corporation allocated to shares of Class E - Special Series 1
or shares of Class E Common Stock by the Board of Directors in
accordance with the Corporation's Charter shall be allocated
equally among shares of Class E - Special Series 1 Common
Stock and shares of Class E Common Stock, respectively
(irrespective of whether said shares have been designated as a
part of a series of said Class and, if so designated as a part
of a series, irrespective of the particular series
designation) in proportion to their respective net asset
values except that to the extent permitted by rule or order of
the Securities and Exchange Commission and as may be from time
to time determined by the Board of Directors:
(a) only the shares of Class E Common
Stock shall bear: (i) the expenses and liabilities of
payments to institutions under any agreements entered
into by or on behalf of the Corporation which provide
for services by the institutions exclusively for
their customers who own of record or beneficially
such shares, and (ii) such other expenses and
liabilities as the Board of Directors may from time
to time determine are directly attributable to such
shares and which therefore should be borne solely by
shares of Class E Common Stock;
(b) only the shares of Class E - Special
Series 1 Common Stock shall bear: (i) the expenses
and liabilities of payments to institutions under any
agreements entered into by or on behalf of the
Corporation which provide for services by the
institutions exclusively for their customers who own
of record or beneficially such shares; and (ii) such
other expenses and liabilities as the Board of
Directors may from time to time determine are
directly attributable to such shares and which
therefore should be borne solely by shares of Class E
- Special Series 1 Common Stock;
(c) No shares of Class E Common Stock
shall bear the expenses and liabilities described in
subparagraph (b) above; and
-13-
<PAGE> 14
(d) No shares of Class E - Special
Series 1 Common Stock shall bear the expenses and
liabilities described in subparagraph (a) above.
FURTHER RESOLVED, that except as provided by these
resolutions each share of Class E - Special Series 1 Common
Stock shall have the same preferences, conversion, and other
rights, voting powers, restrictions, limitations,
qualifications, and terms and conditions of redemption as each
other share now or hereafter designated as a share of Class E
Common Stock (irrespective of whether said share has been
designated as a part of a series of said Class and, if so
designated as a part of a series, irrespective of the
particular series designation), except that to the extent
permitted by rule or order of the Securities and Exchange
Commission:
(a) on any matter that pertains to the
agreements or expenses and liabilities described in
clause (a) of the immediately preceding resolution
(or to any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of
shareholders of the Corporation, only shares of Class
E Common Stock (excluding shares designated as a
series of such Class) shall be entitled to vote,
except that: (i) if said matter affects shares of
capital stock of the Corporation other than shares of
Class E Common Stock, such other affected shares of
capital stock of the Corporation shall also be
entitled to vote, and in such case shares of Class E
Common Stock shall be voted in the aggregate together
with such other affected shares and not by class or
series except where otherwise required by law or
permitted by the Board of Directors of the
Corporation; and (ii) if said matter does not affect
shares of Class E Common Stock, said shares shall not
be entitled to vote (except where required by law or
permitted by the Board of Directors) even though the
matter is submitted to a vote of holders of shares of
capital stock of the Corporation other than said
shares of Class E Common Stock; and
(b) on any matter that pertains to the
agreements or expenses and liabilities described in
clause (b) of the immediately preceding resolution
(or any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a
-14-
<PAGE> 15
vote of shareholders of the Company, only shares of Class
E - Special Series 1 Common Stock shall be entitled to
vote, except that: (i) if said matter affects shares of
capital stock in the Corporation other than shares of
Class E - Special Series 1, such other affected shares of
capital stock in the Corporation shall also be entitled
to vote, and in such case, shares of Class E - Special
Series 1 Common Stock shall be voted in the aggregate
together with such other affected shares and not by class
or series except where otherwise required by law or
permitted by the Board of Directors of the Corporation;
and (ii) if said matter does not affect shares of Class E
- Special Series 1 Common Stock, such shares shall not be
entitled to vote (except where required by law or
permitted by the Board of Directors) even though the
matter is submitted to a vote of the holders of shares of
capital stock in the Corporation other than said shares
of Class E - Special Series 1 Common Stock.
THIRD: The total number of shares of capital stock which the
Corporation is presently authorized to issue is Two Billion (2,000,000,000)
shares of Common Stock, of which One Billion Eight Hundred and Eighty Million
(1,880,000,000) shares of the par value of One Mill ($.001) each are Class A
Common Stock, Ninety Million (90,000,000) shares of the par value of One Mill
($.001) each are Class A - Special Series 1 Common Stock, Five Million
(5,000,000) shares of the par value of One Mill ($.001) each are Class C Common
Stock, Five Million (5,000,000) shares of the par value of One Mill ($.001)
each are Class C - Special Series 1 Common Stock, Five Million (5,000,000)
shares of the par value of One Mill ($.001) each are Class D Common Stock, Five
Million (5,000,000) shares of the par value of One Mill ($.001) each are Class
D - Special Series 1 Common Stock, Five Million (5,000,000) shares of the par
value of One Mill ($.001)
-15-
<PAGE> 16
each are Class E Common Stock, and Five Million (5,000,000) shares of the par
value of One Mill ($.001) each are Class E Special Series 1 Common Stock. The
total number of shares the Corporation is authorized to issue and the aggregate
par value of all shares having par value remains unchanged.
FOURTH: The shares of Class B, Class C, Class D, and Class E
Common Stock of the Corporation reclassified pursuant to the resolutions set
forth in Article SECOND of these Articles Supplementary have been reclassified
by the Corporation's Board of Directors under the authority contained in the
Charter of the Corporation.
IN WITNESS WHEREOF, The Arch Fund, Inc. has caused these
presents to be signed in its name and on its behalf by its President and its
corporate seal to be hereunto affixed and attested to by its Secretary as of
October 30, 1990.
[SEAL] THE ARCH FUND, INC.
Attest:
By: /s/ Jerry V. Woodham
--------------------------
Jerry V. Woodham, President
/s/ W. Bruce McConnel, III
- ---------------------------
W. Bruce McConnel, III
Secretary
-16-
<PAGE> 17
CERTIFICATE
THE UNDERSIGNED, President of THE ARCH FUND, INC., who
executed on behalf of said Corporation the attached Articles Supplementary of
said Corporation, of which this Certificate is made a part, hereby
acknowledges, in the name and on behalf of said Corporation, the attached
Articles Supplementary to be the corporate act of said Corporation, and
certifies that to the best of his knowledge, information and belief the matters
and facts set forth in the attached Articles Supplementary with respect to
authorization and approval are true in all material respects, under the
penalties for perjury.
/s/ Jerry V. Woodham
----------------------------
Jerry V. Woodham, President
Dated as of:
October 30, 1990
<PAGE> 1
Exhibit (1)(e)
THE ARCH FUND, INC.
ARTICLES SUPPLEMENTARY
The Arch Fund, Inc., a Maryland corporation registered as an open-end
investment company under the Investment Company Act of 1940, having its
principal office in the City of Baltimore, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The total number of shares of capital stock which the Corporation
was heretofore authorized to issue was Two Billion (2,000,000,000) shares of
Common Stock, of which One Billion, Eight Hundred and Eighty Million
(1,880,000,000) shares of the par value of One Mill ($.001) each were Class A
Common Stock, Ninety Million (90,000,000) shares of the par value of One Mill
($.001) each were Class A - Special Series 1 Common Stock, Five Million
(5,000,000) shares of the par value of One Mill ($.001) each were Class C
Common Stock, Five Million (5,000,000) shares of the par value of One Mill
($.001) each were Class C - Special Series 1 Common Stock, Five Million
(5,000,000) shares of the par value of One Mill ($.001) each were Class D
Common Stock, Five Million (5,000,000) shares of the par value of One Mill
($.001) each were Class D - Special Series 1 Common Stock, Five Million
(5,000,000) shares of the par value of One Mill ($.001) each were Class E
Common Stock, and Five Million (5,000,000)
<PAGE> 2
shares of the par value of One Mill ($.001) each were Class E Special Series 1
Common Stock. The aggregate par value of all Common Stock having par value was
Two Million Dollars ($2,000,000).
SECOND: Pursuant to Article VI of the Corporation's Articles of
Incorporation, the Board of Directors of the Corporation has increased the
total number of authorized shares of capital stock of the Corporation to Five
Billion (5,000,000,000) shares of the par value of One Mill ($.001) per share
and of the aggregate par value of Five Million Dollars ($5,000,000) and has
classified One Hundred and Twenty Million (120,000,000) shares (of the par
value of One Mill ($.001)) of the Corporation's newly authorized, unclassified,
and unissued shares of capital stock as Class A Common Stock, One Billion, Nine
Hundred and Ten Million (1,910,000,000) shares (of the par value of One Mill
($.001)) of newly authorized, unclassified, and unissued shares of capital
stock as Class A - Special Series 1 Common Stock pursuant to the following
resolutions adopted by unanimous consent of the Board of Directors of the
Corporation on November , 1990:
RESOLVED, that pursuant to Article VI of the Corporation's Articles of
Incorporation (the "Charter"), the total number of authorized shares of
capital stock of the Corporation be, and hereby is, increased to Five
Billion (5,000,000,000) shares of the par value of One Mill ($.001) per
share and of the aggregate value of Five Million Dollars ($5,000,000);
FURTHER RESOLVED, that One Hundred Twenty Million (120,000,000) newly
authorized, unclassified, and unissued shares of capital stock (of the par
value
-2-
<PAGE> 3
of One Mill ($.001) per share and of the aggregate par value of One Hundred
Twenty Thousand Dollars ($120,000)), be, and hereby are, classified as Class
A Common Stock with all of the preferences, conversion, and other rights,
voting powers, restrictions, limitations, qualifications, and terms and
conditions of redemption set forth in the Charter of the Corporation with
respect to Class A Common Stock;
FURTHER RESOLVED, that One Billion, Nine Hundred and Ten Million
(1,910,000,000) newly authorized, unclassified, and unissued shares of
capital stock (of the par value of One Mill ($.001) per share and of the
aggregate par value of One Million, Nine Hundred and Ten Thousand Dollars
($1,910,000)), be, and hereby are, classified as Class A - Special Series 1
Common Stock with all of the preferences, conversion, and other rights,
voting powers, restrictions, limitations, qualifications, and terms and
conditions of redemption set forth in the Charter of the Corporation with
respect to Class A - Special Series 1 Common Stock.
THIRD: The total number of shares of capital stock which the Corporation is
presently authorized to issue is Five Billion (5,000,000,000) shares of Common
Stock, of which Two Billion (2,000,000,000) shares of the par value of One Mill
($.001) each are Class A Common Stock, Two Billion (2,000,000,000) shares of
the par value of One Mill ($.001) each are Class A - Special Series 1 Common
Stock, Five Million (5,000,000) shares of the par value of One Mill ($.001)
each are Class C Common Stock, Five Million (5,000,000) shares of the par value
of One Mill ($.001) each are Class C - Special Series 1 Common Stock, Five
Million (5,000,000) shares of the par value of One Mill ($.001) each are Class
D Common Stock, Five Million (5,000,000) shares of the par value of One Mill
($.001) each are Class D - Special Series 1 Common Stock, Five Million
(5,000,000) shares of the par value of One Mill ($.001) each are Class E
-3-
<PAGE> 4
Common Stock, Five Million (5,000,000) shares of the par value of One Mill
($.001) each are Class E - Special Series 1 Common Stock, and Nine Hundred and
Seventy Million (970,000,000) shares of the par value of One Mill ($.001) are
unclassified. The total aggregate value of shares of capital stock having par
value is Five Million Dollars ($5,000,000).
FOURTH: The increase in the total number of authorized shares of capital
stock of the Corporation and the shares of Class A and Class A - Special Series
1 Common Stock of the Corporation classified pursuant to the resolutions set
forth in Article SECOND of these Articles Supplementary have been reclassified
by the Corporation's Board of Directors under the authority contained in the
Charter of the Corporation.
IN WITNESS WHEREOF, The Arch Fund, Inc. has caused these presents to be
signed in its name and on its behalf by its President and its corporate seal to
be hereunto affixed and attested to by its Secretary as of November 9, 1990.
THE ARCH FUND, INC.
[SEAL]
Attest: By:/s/ Jerry V. Woodham
---------------------------
Jerry V. Woodham, President
/s/ W. Bruce McConnel, III
- --------------------------
W. Bruce McConnel, III
Secretary
-4-
<PAGE> 5
CERTIFICATE
THE UNDERSIGNED, President of THE ARCH FUND, INC., who executed on behalf of
said Corporation the attached Articles Supplementary of said Corporation, of
which this Certificate is made a part, hereby acknowledges, in the name and on
behalf of said Corporation, the attached Articles Supplementary to be the
corporate act of said Corporation, and certifies that to the best of his
knowledge, information and belief the matters and facts set forth in the
attached Articles Supplementary with respect to authorization and approval are
true in all material respects, under the penalties for perjury.
/s/ Jerry V. Woodham
---------------------------
Jerry V. Woodham, President
Dated as of: November 9, 1990
-5-
<PAGE> 1
Exhibit (1)(f)
THE ARCH FUND, INC.
ARTICLES SUPPLEMENTARY
The Arch Fund, Inc., a Maryland corporation having its principal
office in the City of Baltimore, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The total number of shares of capital stock which the
Corporation was heretofore authorized to issue was Five Billion (5,000,000,000)
shares of Common Stock, of which Two Billion (2,000,000,000) shares of the par
value of One Mill ($.001) each were Class A Common Stock, Two Billion
(2,000,000,000) shares of the par value of One Mill ($.001) each were Class A -
Special Series 1 Common Stock, Five Million (5,000,000) shares of the par value
of One Mill ($.001) each were Class C Common Stock, Five Million (5,000,000)
shares of the par value of One Mill ($.001) each were Class C - Special Series
1 Common Stock, Five Million (5,000,000) shares of the par value of One Mill
($.001) each were Class D Common Stock, Five Million (5,000,000) shares of the
par value of One Mill ($.001) each were Class D - Special Series 1 Common
Stock, Five Million (5,000,000) shares of the par value of One Mill ($.001)
each were Class E Common Stock, and Five Million (5,000,000) shares of the par
value of One Mill ($.001) each were Class E - Special Series 1
<PAGE> 2
Common Stock. The aggregate par value of all Common Stock having par value was
Five Million Dollars ($5,000,000).
SECOND: Pursuant to Article VI of the Corporation's Articles of
Incorporation, the Board of Directors of the Corporation has reclassified One
Billion One Hundred Million (1,100,000,000) shares (of the par value of One
Mill ($.001)) of authorized and unissued Class A Common Stock of the
Corporation's capital stock and redesignated certain expense allocations and
certain voting powers of Class C Common Stock and Class C - Special Series 1
Common Stock as previously set forth in the Charter pursuant to the following
resolutions adopted at a regular meeting of the Board of Directors of the
Corporation held on March 19, 1991:
RESOLVED, that pursuant to Article VI of the
Corporation's Articles of Incorporation (the "Charter"), One Billion
(1,000,000,000) authorized and unissued shares currently classified as
Class A Common Stock (of the par value of One Mill ($.001) per share
and of the aggregate par value of One Million Dollars ($1,000,000)),
be, and hereby are, reclassified as Class A - Special Series 1 Common
Stock with all of the preferences, conversion, and other rights,
voting powers, restrictions, limitations, qualifications, and terms
and conditions of redemption set forth in the Charter of the
Corporation with respect to Class A - Special Series 1 Common Stock;
FURTHER RESOLVED, that Forty Five Million
(45,000,000) authorized and unissued shares currently classified as
Class A Common Stock (of the par value of One Mill ($.001) per share
and of the aggregate par value of Forty Five Thousand Dollars
($45,000)), be, and hereby are, reclassified as Class C - Special
Series 1 Common Stock;
FURTHER RESOLVED, that all consideration received by
the Corporation for the issue or sale of shares of Class C - Special
Series 1 Common Stock shall be invested and reinvested with the
consideration received by the Corporation for the issue and sale of
all other shares now or hereafter designated as Class C Common Stock
-2-
<PAGE> 3
(irrespective of whether said shares have been designated as a
part of a series of said Class and, if so designated as a part of a
series, irrespective of the particular series designation), together
with all income, earnings, profits, and proceeds thereof, including
any proceeds derived from the sale, exchange, or liquidation thereof,
and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, and any general assets of
the Corporation allocated to Class C - Special Series 1 shares or such
other shares of Class C Common Stock by the Board of Directors in
accordance with the Corporation's Charter;
FURTHER RESOLVED, that all income, earnings, profits,
and proceeds, including any proceeds derived from the sale, exchange
or liquidation of such shares, and any assets derived from any
reinvestment of such proceeds in whatever form shall be allocated
among shares of Class C - Special Series 1 Common Stock and shares of
Class C Common Stock, respectively (irrespective of whether said
shares have been designated as a part of a series of said Class and,
if so designated as a part of a series, irrespective of the particular
series designation) in proportion to their respective net asset
values;
FURTHER RESOLVED, that all the liabilities (including
expenses) of the Corporation in respect of shares of Class C - Special
Series 1 or shares of Class C Common Stock and in respect of any
general liabilities (including expenses) of the Corporation allocated
to shares of Class C - Special Series 1 or shares of Class C Common
Stock by the Board of Directors in accordance with the Corporation's
Charter shall be allocated among shares of Class C - Special Series 1
Common Stock and shares of Class C Common Stock, respectively
(irrespective of whether said shares have been designated as a part of
a series of said Class and, if so designated as a part of a series,
irrespective of the particular series designation) in proportion to
their respective net asset values;
FURTHER RESOLVED, that if in the future the Board of
Directors determines to enter into agreements which provide for
services only for shares of Class C or for shares of Class C - Special
Series 1 (or any other series of Class C shares) to the extent
permitted by rule or order of the Securities and Exchange Commission
and as the Board of Directors may from time to time determine:
(a) only the shares of Class C Common Stock shall
bear: (i) the expenses and liabilities of payments to
institutions under any agreements entered into by or on behalf
of the Corporation which provide for services by the
institutions exclusively for their customers who
-3-
<PAGE> 4
own of record or beneficially such shares, and (ii) such other
expenses and liabilities as the Board of Directors may from
time to time determine are directly attributable to such
shares and which therefore should be borne solely by shares of
Class C Common Stock;
(b) only the shares of Class C - Special Series 1
Common Stock shall bear: (i) the expenses and liabilities of
payments to institutions under any agreements entered into by
or on behalf of the Corporation which provide for services by
the institutions exclusively for their customers who own of
record or beneficially such shares; and (ii) such other
expenses and liabilities as the Board of Directors may from
time to time determine are directly attributable to such
shares and which therefore should be borne solely by shares of
Class C - Special Series 1 Common Stock;
(c) No shares of Class C Common Stock shall bear
the expenses and liabilities described in subparagraph (b)
above; and
(d) No shares of Class C - Special Series 1
Common Stock shall bear the expenses and liabilities described
in subparagraph (a) above.
FURTHER RESOLVED, that each share of Class C - Special
Series 1 Common Stock shall have the same preferences, conversion, and
other rights, voting powers, restrictions, limitations,
qualifications, and terms and conditions of redemption as each other
share now or hereafter designated as a share of Class C Common Stock
(irrespective of whether said share has been designated as a part of a
series of said Class and, if so designated as a part of a series,
irrespective of the particular series designation), including on any
matter that pertains to the agreements or expenses and liabilities
described in the immediately preceding resolution (or to any plan or
other document adopted by the Corporation relating to said agreements,
expenses, or liabilities) and is submitted to a vote of shareholders
of the Corporation, and only shares of Class C Common Stock (including
shares designated as a special series of such Class) shall be entitled
to vote, except that:
(a) if said matter affects shares of capital
stock of the Corporation other than shares of Class C Common
Stock, such other affected shares of capital stock of the
Corporation shall also be entitled to vote, and in such case
shares of Class C Common Stock (irrespective of whether said
shares have been
-4-
<PAGE> 5
designated as a part of a series of said Class and, if so
designated as a part of a series, irrespective of the
particular series designation) shall be voted in the aggregate
together with such other affected shares and not by class or
series except where otherwise required by law or permitted by
the Board of Directors of the Corporation; and
(b) if said matter does not affect shares of
Class C Common Stock, said Class C shares (irrespective of
whether said shares have been designated as a part of a series
of said Class and, if so designated as a part of a series,
irrespective of the particular series designation) shall not
be entitled to vote (except where required by law or permitted
by the Board of Directors) even though the matter is submitted
to a vote of holders of shares of capital stock of the
Corporation other than said shares of Class C Common Stock;
FURTHER RESOLVED, that Forty Five Million
(45,000,000) authorized and unissued shares currently classified as
Class A Common Stock (of the par value of One Mill ($.001) per share
and of the aggregate par value of Forty Five Thousand Dollars
($45,000)), be, and hereby are, reclassified as Class D - Special
Series 1 Common Stock with all of the preferences, conversion, and
other rights, voting powers, restrictions, limitations,
qualifications, and terms and conditions of redemption set forth in
the Charter of the Corporation with respect to Class D - Special
Series 1 Common Stock; and
FURTHER RESOLVED, that Ten Million (10,000,000)
authorized and unissued shares currently classified as Class A Common
Stock (of the par value of One Mill ($.001) per share and of the
aggregate par value of Ten Thousand Dollars ($10,000)), be, and hereby
are, reclassified as Class E - Special Series 1 Common Stock with all
of the preferences, conversion, and other rights, voting powers,
restrictions, limitations, qualifications, and terms and conditions of
redemption set forth in the Charter of the Corporation with respect to
Class E - Special Series 1 Common Stock.
THIRD: The total number of shares of capital stock which the
Corporation is presently authorized to issue is Five Billion (5,000,000,000)
shares of Common Stock, of which Nine Hundred Million (900,000,000) shares of
the par value of One Mill ($.001) each are Class A Common Stock, Three Billion
(3,000,000,000)
-5-
<PAGE> 6
shares of the par value of One Mill ($.001) each are Class A - Special Series 1
Common Stock, Five Million (5,000,000) shares of the par value of One Mill
($.001) each are Class C Common Stock, Fifty Million (50,000,000) shares of the
par value of One Mill ($.001) each are Class C - Special Series 1 Common Stock,
Five Million (5,000,000) shares of the par value of One Mill ($.001) each are
Class D Common Stock, Fifty Million (50,000,000) shares of the par value of One
Mill ($.001) each are Class D - Special Series 1 Common Stock, Five Million
(5,000,000) shares of the par value of One Mill ($.001) each are Class E Common
Stock, and Fifteen Million (15,000,000) shares of the par value of One Mill
($.001) each are Class E - Special Series 1 Common Stock. The total number of
shares the Corporation is authorized to issue and the aggregate par value of
all shares having par value remains unchanged.
FOURTH: The shares of the Corporation reclassified pursuant to the
resolutions set forth in Article SECOND of these Articles Supplementary have
been reclassified by the Corporation's Board of Directors under the authority
contained in the Charter of the Corporation.
IN WITNESS WHEREOF, The Arch Fund, Inc. has caused these presents to
be signed in its name and on its behalf by its
-6-
<PAGE> 7
President and its corporate seal to be hereunto affixed and attested to by its
Secretary as of March 19, 1991.
THE ARCH FUND, INC.
[SEAL]
Attest: By: /s/ Jerry V. Woodham
-------------------------------
Jerry V. Woodham, President
/s/ W. Bruce McConnel, III
- --------------------------
W. Bruce McConnel, III
Secretary
-7-
<PAGE> 8
CERTIFICATE
THE UNDERSIGNED, President of THE ARCH FUND, INC., who
executed on behalf of said Corporation the attached Articles Supplementary of
said Corporation, of which this Certificate is made a part, hereby
acknowledges, in the name and on behalf of said Corporation, the attached
Articles Supplementary to be the corporate act of said Corporation, and
certifies that to the best of his knowledge, information and belief the matters
and facts set forth in the attached Articles Supplementary with respect to
authorization and approval are true in all material respects, under the
penalties for perjury.
/s/ Jerry V. Woodham
---------------------------
Jerry V. Woodham, President
Dated as of: March 19, 1991
<PAGE> 1
Exhibit (1)(g)
THE ARCH FUND, INC.
CERTIFICATE OF CORRECTION
The Arch Fund, Inc., a Maryland corporation having its principal
office in the city of Baltimore, Maryland (hereinafter the "Corporation"),
certifies that:
FIRST: This Certificate of Correction corrects the Articles
Supplementary filed March 21, 1991.
SECOND: Paragraph THIRD of the Articles Supplementary as filed, in
describing the total number and classification of shares of capital stock
which the Corporation is presently authorized to issue, inadvertently listed
the number of Class A - Special Series 1 shares as "Three Billion
(3,000,000,000)"; such paragraph THIRD should read as follows:
THIRD: The total number of shares of capital stock which the
Corporation is presently authorized to issue is Five Billion
(5,000,000,000) shares of Common Stock, of which Nine Hundred Million
(900,000,000) shares of the par value of One Mill ($.001) each are
Class A Common Stock, Three Billion (3,000,000,000) shares of the par
value of One Mill ($.001) each are Class A - Special Series 1 Common
Stock, Five Million (5,000,000) shares of the par value of One Mill
($.001) each are Class C Common Stock, Fifty Million (50,000,000)
shares of the par value of One Mill ($.001) each are Class C -
<PAGE> 2
Special Series 1 Common Stock, Five Million (5,000,000) shares of the
par value of One Mill ($.001) each are Class D Common Stock, Fifty
Million (50,000,000) shares of the par value of One Mill ($.001) each
are Class D - Special Series 1 Common Stock, Five Million (5,000,000)
shares of the par value of One Mill ($.001) each are Class E Common
Stock, Fifteen Million (15,000,000) shares of the par value of One
Mill ($.001) each are Class E - Special Series 1 Common Stock, and
Nine Hundred and Seventy Million (970,000,000) shares of the par value
of One Mill ($.001) each are unclassified. The total number of
shares the Corporation is authorized to issue and the aggregate par
value of all shares having par value remains unchanged.
IN WITNESS WHEREOF, this Certificate of Correction has been executed
on behalf of the Corporation by its President and attested by its Secretary.
The President acknowledges this Certificate of Correction to be the corporate
act of the Corporation and certifies that to the best of his knowledge,
information and belief, the matters and facts set forth herein are true in all
material respects, under the penalties for perjury.
Date : April 30, 1991 THE ARCH FUND, INC.
Attest: By: /s/ Jerry V. Woodham
--------------------------------
Jerry V. Woodham, President
/s/ W. Bruce McConnel, III
- ---------------------------------
W. Bruce McConnel, III, Secretary
-2-
<PAGE> 1
Exhibit (1)(h)
THE ARCH FUND, INC.
ARTICLES SUPPLEMENTARY
The Arch Fund, Inc., a Maryland corporation having its
principal office in the City of Baltimore, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The total number of shares of capital stock which the
Corporation was heretofore authorized to issue was Five Billion (5,000,000,000)
shares of Common Stock, of which Nine Hundred Million (900,000,000) shares of
the par value of One Mill ($.001) each are Class A Common Stock, Three Billion
(3,000,000,000) shares of the par value of One Mill ($.001) each are Class A -
Special Series 1 Common Stock, Five Million (5,000,000) shares of the par value
of One Mill ($.001) each are Class C Common Stock, Fifty Million (50,000,000)
shares of the par value of One Mill ($.001) each are Class C - Special Series 1
Common Stock, Five Million (5,000,000) shares of the par value of One Mill
($.001) each are Class D Common Stock, Fifty Million (50,000,000) shares of the
par value of One Mill ($.001) each are Class D - Special Series 1 Common Stock,
Five Million (5,000,000) shares of the par value of One Mill ($.001) each are
Class E Common Stock, Fifteen Million (15,000,000) shares of the par value of
One Mill ($.001) each are Class E - Special Series 1 Common Stock, and Nine
Hundred and Seventy Million (970,000,000) shares of the par value of One Mill
($.001) each are unclassified
<PAGE> 2
shares of Common Stock. The aggregate par value of all shares having par value
was Five Million Dollars ($5,000,000).
SECOND: Pursuant to Article VI of the Corporation's Articles of
Incorporation (the "Charter"), the Board of Directors of the Corporation has
classified One Hundred Million (100,000,000) shares (of the par value of One
Mill ($.001)) of authorized and unclassified Common Stock of the Corporation's
capital stock as Class B Common Stock, Four Hundred Million (400,000,000)
shares (of the par value of One Mill ($.001)) of authorized and unclassified
Common Stock as Class B - Special Series 1 Common Stock, Five Million
(5,000,000) shares (of the par value of One Mill ($.001)) of authorized and
unclassified Common Stock as Class F Common Stock, and Fifteen Million
(15,000,000) shares (of the par value of One Mill ($.001)) of authorized and
unclassified Common Stock as Class F - Special Series 1 Common Stock, pursuant
to the following resolutions adopted at a regular meeting of the Board of
Directors of the Corporation held on June 25, 1991:
Creation of Class B and Class B - Special Series 1 Shares
---------------------------------------------------------
RESOLVED, that pursuant to Article VI of the
Corporation's Articles of Incorporation (the "Charter"), Five Hundred
Million (500,000,000) authorized and unclassified shares of Common
Stock (of the par value of One Mill ($.001) per share and of the
aggregate par value of Five Hundred Thousand Dollars ($500,000)), be,
and hereby are, classified into a separate class of shares of capital
stock and designated as Class B Common Stock;
FURTHER RESOLVED, that pursuant to Article VI of the
Corporation's Charter, Four Hundred Million (400,000,000) authorized
and newly classified shares of Class B Common Stock (of the par value
of One Mill ($.001) per share and of the aggregate par value of Four
Hundred
-2-
<PAGE> 3
Thousand Dollars ($400,000)), be, and hereby are, designated as a
separate series of Class B shares of capital stock and known as Class
B - Special Series 1 Common Stock;
FURTHER RESOLVED, that all consideration received by
the Corporation for the issue or sale of shares of Class B and Class B
- Special Series 1 Common Stock shall be invested and reinvested with
the consideration received by the Corporation for the issue and sale
of all other shares now or hereafter designated as Class B Common
Stock (irrespective of whether said shares have been designated as a
part of a series of said Class and, if so designated as a part of a
series, irrespective of the particular series designation), together
with all income, earnings, profits, and proceeds thereof, including
any proceeds derived from the sale, exchange, or liquidation thereof,
and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, and any general assets of
the Corporation allocated to Class B shares, Class B - Special Series
1 shares, or such other shares by the Board of Directors in accordance
with the Corporation's Charter;
FURTHER RESOLVED, that all income, earnings, profits,
and proceeds, including any proceeds derived from the sale, exchange
or liquidation of such shares, and any assets derived from any
reinvestment of such proceeds in whatever form shall be allocated
among shares of Class B and Class B - Special Series 1 Common Stock
and all other shares now or hereafter designated as Class B Common
Stock, respectively (irrespective of whether said shares have been
designated as a part of a series of said Class and, if so designated
as a part of a series, irrespective of the particular series
designation) in proportion to their respective net asset values;
FURTHER RESOLVED, that all the liabilities (including
expenses) of the Corporation in respect of shares of Class B and Class
B - Special Series 1 or all other shares now or hereafter designated
as Class B Common Stock and in respect of any general liabilities
(including expenses) of the Corporation allocated to shares of Class
B, shares of Class B - Special Series 1, or such other shares by the
Board of Directors in accordance with the Corporation's Charter shall
be allocated among shares of Class B and Class B - Special Series 1
Common Stock and such other shares, respectively (irrespective of
whether said shares have been designated as a part of a series of said
Class and, if so designated as a part of a series, irrespective of the
particular series designation) in proportion to their respective net
asset values except to the extent that may be from time to time
determined by the Board of Directors:
-3-
<PAGE> 4
(a) only the shares of Class B Common
Stock shall bear: (1) the expenses and liabilities of
payments to institutions under any agreements entered into by
or on behalf of the Corporation which provide for services by
the institutions exclusively for their customers who own of
record or beneficially such shares, and (ii) such other
expenses and liabilities as the Board of Directors may from
time to time determine are directly attributable to such
shares and which therefore should be borne solely by shares of
Class B Common Stock;
(b) only the shares of Class B - Special
Series 1 Common Stock shall bear: (i) the expenses and
liabilities of payments to institutions under any agreements
entered into by or on behalf of the Corporation which provide
for services by the institutions exclusively for their
customers who own of record or beneficially such shares; and
(ii) such other expenses and liabilities as the Board of
Directors may from time to time determine are directly
attributable to such shares and which therefore should be
borne solely by shares of Class B - Special Series 1 Common
Stock;
(c) No shares of Class B Common Stock
shall bear the expenses and liabilities described in
subparagraph (b) above; and
(d) No shares of Class B - Special
Series 1 Common Stock shall bear the expenses and liabilities
described in subparagraph (a) above; and
FURTHER RESOLVED, that except as provided by these
resolutions each share of Class B and Class B - Special Series 1
Common Stock shall have the same preferences, conversion, and other
rights, voting powers, restrictions, limitations, qualifications, and
terms and conditions of redemption as set forth in the Charter and
shall also have the same preferences, conversion, and other rights,
voting powers, restrictions, limitations, qualifications, and terms
and conditions of redemption as each other share now or hereafter
designated as a share of Class B Common Stock (irrespective of whether
said share has been designated as a part of a series of said Class
and, if so designated as a part of a series, irrespective of the
particular series designation), except that:
(a) on any matter that pertains to the
agreements or expenses and liabilities described in clause (a)
of the immediately preceding resolution (or to any plan or
other document adopted by the
-4-
<PAGE> 5
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only shares of Class B Common Stock (excluding
shares designated as a series of such Class) shall be entitled
to vote, except that: (i) if said matter affects shares of
capital stock of the Corporation other than shares of Class B
Common Stock, such other affected shares of capital stock of
the Corporation shall also be entitled to vote, and in such
case shares of Class B Common Stock shall be voted in the
aggregate together with such other affected shares and not by
class or series except where otherwise required by law or
permitted by the Board of Directors of the Corporation; and
(ii) if said matter does not affect shares of Class B Common
Stock, said shares shall not be entitled to vote (except where
required by law or permitted by the Board of Directors) even
though the matter is submitted to a vote of holders of shares
of capital stock of the Corporation other than said shares of
Class B Common Stock; and
(b) on any matter that pertains to the
agreements or expenses and liabilities described in clause (b)
of the immediately preceding resolution (or any plan or other
document adopted by the Corporation relating to said
agreements, expenses, or liabilities) and is submitted to a
vote of shareholders of the Company, only shares of Class B -
Special Series 1 Common Stock shall be entitled to vote,
except that: (i) if said matter affects shares of capital
stock in the Corporation other than shares of Class B -
Special Series 1, such other affected shares of capital stock
in the Corporation shall also be entitled to vote, and in such
case, shares of Class B - Special Series 1 Common Stock shall
be voted in the aggregate together with such other affected
shares and not by class or series except where otherwise
required by law or permitted by the Board of Directors of the
Corporation; and (ii) if said matter does not affect shares of
Class B - Special Series 1 Common Stock, such shares shall not
be entitled to vote (except where required by law or permitted
by the Board of Directors) even though the matter is submitted
to a vote of the holders of shares of capital stock in the
Corporation other than said shares of Class B - Special Series
1 Common Stock; and
Creation of Class F and Class F - Special Series 1 Shares
---------------------------------------------------------
FURTHER RESOLVED, that pursuant to Article VI of the
Corporation's Charter, Twenty Million (20,000,000)
-5-
<PAGE> 6
authorized and unclassified shares of Common Stock (of the par value
of One Mill ($.001) per share and of the aggregate par value of Twenty
Thousand Dollars ($20,000)), be, and hereby are, classified into a
separate class of shares of capital stock and designated as Class F
Common Stock;
FURTHER RESOLVED, that pursuant to Article VI of the
Corporation's Charter, Fifteen Million (15,000,000) authorized and
newly classified shares of Class F Common Stock (of the par value of
One Mill ($.001) per share and of the aggregate par value of Fifteen
Thousand Dollars ($15,000)), be, and hereby are, designated as a
separate series of Class F shares of capital stock and known as Class
F - Special Series 1 Common Stock;
FURTHER RESOLVED, that all consideration received by
the Corporation for the issue or sale of shares of Class F and Class F
- Special Series 1 Common Stock shall be invested and reinvested with
the consideration received by the Corporation for the issue and sale
of all other shares now or hereafter designated as Class F Common
Stock (irrespective of whether said shares have been designated as a
part of a series of said Class and, if so designated as a part of a
series, irrespective of the particular series designation), together
with all income, earnings, profits, and proceeds thereof, including
any proceeds derived from the sale, exchange, or liquidation thereof,
and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, and any general assets of
the Corporation allocated to Class F shares, Class F - Special Series
1 shares, or such other shares by the Board of Directors in accordance
with the Corporation's Charter;
FURTHER RESOLVED, that all income, earnings, profits,
and proceeds, including any proceeds derived from the sale, exchange
or liquidation of such shares, and any assets derived from any
reinvestment of such proceeds in whatever form shall be allocated
among shares of Class F and Class F - Special Series 1 Common Stock
and all other shares now or hereafter designated as Class F Common
Stock, respectively (irrespective of whether said shares have been
designated as a part of a series of said Class and, if so designated
as a part of a series, irrespective of the particular series
designation) in proportion to their respective net asset values;
FURTHER RESOLVED, that all the liabilities (including
expenses) of the Corporation in respect of shares of Class F and Class
F - Special Series 1 and all other shares now or hereafter designated
as Class F Common Stock and in respect of any general liabilities
(including expenses) of the Corporation allocated to shares of Class F
-6-
<PAGE> 7
and Class F - Special Series 1 or such other shares by the Board of
Directors in accordance with the Corporation's Charter shall be
allocated among shares of Class F and Class F - Special Series 1
Common Stock and such other shares, respectively (irrespective of
whether said shares have been designated as a part of a series of said
Class and, if so designated as a part of a series, irrespective of the
particular series designation) in proportion to their respective net
asset values;
FURTHER RESOLVED, that if in the future the Board of
Directors determines to enter into agreements which provide for
services only for shares of Class F or for shares of Class F - Special
Series 1 (or any other series of Class F shares) to the extent that
may be from time to time determined by the Board of Directors:
(a) only the shares of Class F Common
Stock shall bear: (i) the expenses and liabilities of
payments to institutions under any agreements entered into by
or on behalf of the Corporation which provide for services by
the institutions exclusively for their customers who own of
record or beneficially such shares, and (ii) such other
expenses and liabilities as the Board of Directors may from
time to time determined are directly attributable to such
shares and which therefore should be borne solely by shares of
Class F Common Stock;
(b) only the shares of Class F - Special
Series 1 Common Stock shall bear: (i) the expenses and
liabilities of payments to institutions under any agreements
entered into by or on behalf of the Corporation which provide
for services by the institutions exclusively for their
customers who own of record or beneficially such shares; and
(ii) such other expenses and liabilities as the Board of
Directors may from time to time determine are directly
attributable to such shares and which therefore should be
borne solely by shares of Class F - Special Series 1 Common
Stock;
(c) No shares of Class F Common Stock
shall bear the expenses and liabilities described in
subparagraph (b) above; and
(d) No shares of Class F - Special
Series 1 Common Stock shall bear the expenses and liabilities
described in subparagraph (a) above; and
FURTHER RESOLVED, that except as provided by
these resolutions each share of Class F and Class F - Special
-7-
<PAGE> 8
Series 1 Common Stock shall have the same preferences, conversion, and
other rights, voting powers, restrictions, limitations,
qualifications, and terms and conditions of redemption as set forth in
the Charter and shall also have the same preferences, conversion, and
other rights, voting powers, restrictions, limitations,
qualifications, and terms and conditions of redemption as each other
share now or hereafter designated as a share of Class F Common Stock
(irrespective of whether said share has been designated as a part of a
series of said Class and, if so designated as a part of a series,
irrespective of the particular series designation) except that:
(a) on any matter that pertains to the
agreements or expenses and liabilities described in clause (a)
of the immediately preceding resolution (or to any plan or
other document adopted by the Corporation relating to said
agreements, expenses, or liabilities) and is submitted to a
vote of shareholders of the Corporation, only shares of Class
F Common Stock (excluding shares designated as a series of
such Class) shall be entitled to vote, except that: (i) if
said matter affects shares of capital stock of the Corporation
other than shares of Class F Common Stock, such other affected
shares of capital stock of the Corporation shall also be
entitled to vote, and in such case shares of Class F Common
Stock shall be voted in the aggregate together with such other
affected shares and not by class or series except where
otherwise required by law or permitted by the Board of
Directors of the Corporation; and (ii) if said matter does not
affect shares of Class F Common Stock, said shares shall not
be entitled to vote (except where required by law or permitted
by the Board of Directors) even though the matter is submitted
to a vote of holders of shares of capital stock of the
Corporation other than said shares of Class F Common Stock;
and
(b) on any matter that pertains to the
agreements or expenses and liabilities described in clause (b)
of the immediately preceding resolution (or any plan or other
document adopted by the Corporation relating to said
agreements, expenses, or liabilities) and is submitted to a
vote of shareholders of the Company, only shares of Class F -
Special Series 1 Common Stock shall be entitled to vote,
except that: (i) if said matter affects shares of capital
stock in the Corporation other than shares of Class F -
Special Series 1, such other affected shares of capital stock
in the Corporation shall also be entitled to vote, and in such
case, shares of Class F - Special Series 1 Common Stock shall
be voted in the aggregate together
-8-
<PAGE> 9
with such other affected shares and not by class or series except
where otherwise required by law or permitted by the Board of Directors
of the Corporation; and (ii) if said matter does not affect shares of
Class F - Special Series 1 Common Stock, such shares shall not be
entitled to vote (except where required by law or permitted by the
Board of Directors) even though the matter is submitted to a vote of
the holders of shares of capital stock in the Corporation other than
said shares of Class F - Special Series 1 Common Stock.
THIRD: The total number of shares of capital stock which the
Corporation is presently authorized to issue is Five Billion (5,000,000,000)
shares of Common Stock, of which Nine Hundred Million (900,000,000) shares of
the par value of One Mill ($.001) each are Class A Common Stock, Three Billion
(3,000,000,000) shares of the par value of One Mill ($.001) each are Class A -
Special Series 1 Common Stock, One Hundred Million (100,000,000) shares of the
par value of One Mill ($.001) each are Class B shares of Common Stock, Four
Hundred Million (400,000,000) shares of the par value of one Mill ($.001) each
are Class B - Special Series 1 shares of Common Stock, Five Million (5,000,000)
shares of the par value of One Mill ($.001) each are Class C Common Stock,
Fifty Million (50,000,000) shares of the par value of One Mill ($.001) each are
Class C - Special Series 1 Common Stock, Five Million (5,000,000) shares of the
par value of One Mill ($.001) each are Class D Common Stock, Fifty Million
(50,000,000) shares of the par value of One Mill ($.001) each are Class D -
Special Series 1 Common Stock, Five Million (5,000,000) shares of the par value
of One Mill ($.001) each are Class E Common Stock, Fifteen Million (15,000,000)
shares of the par value of One Mill ($.001) each are Class E - Special Series 1
-9-
<PAGE> 10
Common Stock, Five Million (5,000,000) shares of the par value of One Mill
($.001) each are Class F shares of Common Stock, Fifteen Million (15,000,000)
shares of the par value of One Mill ($.001) each are Class F - Special Series 1
shares of Common Stock, and Four Hundred and Fifty Million (450,000,000) shares
of the par value of One Mill ($.001) each are unclassified shares of Common
Stock. The aggregate par value of all shares having par value remains Five
Million Dollars ($5,000,000). The total number of shares the Corporation is
authorized to issue and the aggregate par value of all shares having par value
remains unchanged.
FOURTH: The shares of the Corporation classified pursuant to
the resolutions set forth in Article SECOND of these Articles Supplementary
have been classified by the Corporation's Board of Directors under the
authority contained in the Charter of the Corporation.
IN WITNESS WHEREOF, The Arch Fund, Inc. has caused these
presents to be signed in its name and on its behalf by its President and its
corporate seal to be hereunto affixed and attested to by its Secretary as of
June 25, 1991.
THE ARCH FUND, INC.
[SEAL]
Attest: By: /s/ Jerry V. Woodham
---------------------------
Jerry V. Woodham, President
/s/ W. Bruce McConnel, III
- --------------------------
W. Bruce McConnel, III
Secretary
-10-
<PAGE> 11
CERTIFICATE
THE UNDERSIGNED, Chairman of the Board and President of THE ARCH FUND,
INC., who executed on behalf of said Corporation the attached Articles
Supplementary of said Corporation, of which this Certificate is made a part,
hereby acknowledges, in the name and on behalf of said Corporation, the
attached Articles Supplementary to be the corporate act of said Corporation,
and certifies that to the best of his knowledge, information and belief the
matters and facts set forth in the attached Articles Supplementary with respect
to authorization and approval are true in all material respects, under the
penalties for perjury.
/s/ Jerry V. Woodham
---------------------------
Jerry V. Woodham, President
Dated as of: June 25, 1991
-11-
<PAGE> 1
Exhibit (1)(i)
THE ARCH FUND, INC.
ARTICLES SUPPLEMENTARY
The Arch Fund, Inc., a Maryland corporation having its
principal office in the City of Baltimore, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The total number of shares of capital stock which the
Corporation was heretofore authorized to issue was Five Billion (5,000,000,000)
shares of Common Stock, of which Nine Hundred Million (900,000,000) shares of
the par value of One Mill ($.001) each are Class A Common Stock, Three Billion
(3,000,000,000) shares of the par value of One Mill ($.001) each are Class A -
Special Series 1 Common Stock, One Hundred Million (100,000,000) shares of the
par value of One Mill ($.001) each are Class B shares of Common Stock, Four
Hundred Million (400,000,000) shares of the par value of One Mill ($.001) each
are Class B - Special Series 1 shares of Common Stock, Five Million (5,000,000)
shares of the par value of One Mill ($.001) each are Class C Common Stock,
Fifty Million (50,000,000) shares of the par value of One Mill ($.001) each are
Class C - Special Series 1 Common Stock, Five Million (5,000,000) shares of the
par value of One Mill ($.001) each are Class D Common Stock, Fifty Million
(50,000,000) shares of the par value of One Mill ($.001) each are Class D -
Special Series 1 Common Stock, Five Million (5,000,000) shares of the par value
of One Mill ($.001) each are Class E Common Stock, Fifteen Million (15,000,000)
shares of the par value of One Mill ($.001) each are Class E - Special Series 1
Common Stock, Five Million (5,000,000) shares of the par value of One Mill
($.001) each are Class F shares of Common Stock, Fifteen Million (15,000,000)
shares of the par value of One Mill ($.001) each are Class F - Special Series 1
shares of Common Stock and Four Hundred and Fifty Million (450,000,000) shares
of the par value of One Mill ($.001) each are unclassified shares of Common
Stock. The aggregate
<PAGE> 2
par value of all shares having par value was Five Million Dollars ($5,000,000).
SECOND: Pursuant to Article VI of the Corporation's Articles
of Incorporation, the Board of Directors of the Corporation has reclassified
Five Hundred Million (500,000,000) shares (of the par value of One Mill
($.001)) of authorized and unissued Class A - Special Series 1 Common Stock of
the Corporation's capital stock as Class B - Special Series 1 and classified
One Hundred Million (100,000,000) shares (of the par value of One Mill ($.001))
of authorized and unclassified Common Stock as Class B - Special Series 1
pursuant to the following resolutions unanimously adopted by the Board of
Directors of the Corporation as of November 15, 1991:
RESOLVED, that pursuant to Article VI of the
Corporation's Articles of Incorporation (the "Charter"), Five Hundred
Million (500,000,000) authorized and unissued shares currently
classified as Class A - Special Series 1 Common Stock (of the par
value of One Mill ($.001) per share and of the aggregate par value of
Five Hundred Thousand Dollars ($500,000)), be, and hereby are,
reclassified as Class B - Special Series 1 Common Stock with all of
the preferences, conversion, and other rights, voting powers,
restrictions, limitations, qualifications, and terms and conditions of
redemption set forth in the Charter of the Corporation with respect to
Class B - Special Series 1 Common Stock; and
FURTHER RESOLVED, that One Hundred Million
(100,000,000) authorized and unclassified shares (of the par value of
One Mill ($.001) per share and of the aggregate par value of One
Hundred Thousand Dollars ($100,000)), be, and hereby are, classified
as Class B - Special Series 1 Common Stock with all of the
preferences, conversion, and other rights, voting powers,
restrictions, limitations, qualifications, and terms and conditions of
redemption set forth in the Charter of the Corporation with respect to
Class B - Special Series 1 Common Stock.
THIRD: The total number of shares of capital stock which the
Corporation is presently authorized to issue remains Five Billion
(5,000,000,000) shares of Common Stock, of which Nine Hundred Million
(900,000,000) shares of the par value of One Mill ($.001) each are Class A
Common Stock, Two Billion and Five Hundred Million (2,500,000,000) shares of
the par value of One Mill ($.001) each are Class A - Special Series 1 Common
Stock, One Hundred Million (100,000,000) shares of the par value of One Mill
($.001) each are Class B shares of Common Stock, One Billion (1,000,000,000)
shares of the par value of One Mill ($.001) each are Class B - Special Series 1
shares of Common Stock, Five Million (5,000,000) shares of the par
-2-
<PAGE> 3
value of One Mill ($.001) each are Class C Common Stock, Fifty Million
(50,000,000) shares of the par value of One Mill ($.001) each are Class C -
Special Series 1 Common Stock, Five Million (5,000,000) shares of the par value
of One Mill ($.001) each are Class D Common Stock, Fifty Million (50,000,000)
shares of the par value of One Mill ($.001) each are Class D - Special Series 1
Common Stock, Five Million (5,000,000) shares of the par value of One Mill
($.001) each are Class E Common Stock, Fifteen Million (15,000,000) shares of
the par value of One Mill ($.001) each are Class E - Special Series 1 Common
Stock, Five Million (5,000,000) shares of the par value of One Mill ($.001)
each are Class F shares of Common Stock, Fifteen Million (15,000,000) shares of
the par value of One Mill ($.001) each are Class F - Special Series 1 shares of
Common Stock, and Three Hundred and Fifty Million (350,000,000) shares of the
par value of One Mill ($.001) each are unclassified shares of Common Stock.
The aggregate par value of all shares having par value remains Five Million
Dollars ($5,000,000). The total number of shares the Corporation is authorized
to issue and the aggregate par value of all shares having par value remains
unchanged.
FOURTH: The shares of the Corporation classified pursuant to
the resolutions set forth in Article SECOND of these Articles Supplementary
have been classified by the Corporation's Board of Directors under the
authority contained in the Charter of the Corporation.
-3-
<PAGE> 4
IN WITNESS WHEREOF, The Arch Fund, Inc. has caused these presents to
be signed in its name and on its behalf by its President and its corporate seal
to be hereunto affixed and attested to by its Secretary as of November 15,
1991.
THE ARCH FUND, INC.
[SEAL]
Attest: By:/s/ Jerry V. Woodham
---------------------------
Jerry V. Woodham, President
/s/ W. Bruce McConnel, III
- --------------------------
W. Bruce McConnel, III
Secretary
-4-
<PAGE> 5
CERTIFICATE
THE UNDERSIGNED, Chairman of the Board and President of THE
ARCH FUND, INC., who executed on behalf of said Corporation the attached
Articles Supplementary of said Corporation, of which this Certificate is made a
part, hereby acknowledges, in the name and on behalf of said Corporation, the
attached Articles Supplementary to be the corporate act of said Corporation,
and certifies that to the best of his knowledge, information and belief the
matters and facts set forth in the attached Articles Supplementary with respect
to authorization and approval are true in all material respects, under the
penalties for perjury.
/s/ Jerry V. Woodham
----------------------------
Jerry V. Woodham, President
Dated as of: November 15, 1991
-5-
<PAGE> 1
Exhibit (1)(j)
STATE OF MARYLAND
DEPARTMENT OF
ASSESSMENTS AND TAXATION
301 West Preston Street Baltimore, Maryland 21201
DATE: MARCH 03, 1993
THIS IS TO ADVISE YOU THAT THE ARTICLES SUPPLEMENTARY FOR THE ARCH
FUND, INC. WERE RECEIVED AND APPROVED FOR RECORD ON MARCH 3, 1993 AT 1:20 PM.
FEE PAID: 115.00
JOSEPH V. STEWART
CHARTER SPECIALIST
<PAGE> 2
THE ARCH FUND, INC.
ARTICLES SUPPLEMENTARY
The Arch Fund, Inc., a Maryland corporation having its
principal office in Maryland in the City of Baltimore, Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The total number of shares of capital stock which the
Corporation was heretofore authorized to issue was Five Billion (5,000,000,000)
shares of Common Stock, of which Nine Hundred Million (900,000,000) shares of
the par value of One Mill ($.001) each were Class A Common Stock, Two Billion
and Five Hundred Million (2,500,000,000) shares of the par value of One Mill
($.001) each were Class A - Special Series 1 Common Stock, One Hundred Million
(100,000,000) shares of the par value of One Mill ($.001) each were Class B
Common Stock, One Billion (1,000,000,000) shares of the par value of One Mill
($.001) each were Class B - Special Series 1 Common Stock, Five Million
(5,000,000) shares of the par value of One Mill ($.001) each were Class C
Common Stock, Fifty Million (50,000,000) shares of the par value of One Mill
($.001) each were Class C - Special Series 1 Common Stock, Five Million
(5,000,000) shares of the par value of One Mill ($.001) each were Class D
Common Stock, Fifty Million (50,000,000) shares of the par value of One Mill
($.001) each were Class D - Special Series 1 Common Stock, Five Million
(5,000,000) shares of the par value of One Mill ($.001) each were Class E
Common Stock, Fifteen Million (15,000,000) shares of the par value of One Mill
($.001) each were Class E - Special Series 1 Common Stock, Five Million
(5,000,000) shares of the par value of One Mill ($.001) each were Class F
Common Stock, Fifteen Million (15,000,000) shares of the par value of One Mill
($.001) each were Class F - Special Series 1 Common Stock and Three Hundred and
Fifty Million (350,000,000) shares of the par value of One Mill ($.001) each
were unclassified shares of Common Stock. The aggregate par value of all
shares having par value was Five Million Dollars ($5,000,000).
<PAGE> 3
SECOND: Pursuant to Article VI of the Corporation's Articles
of Incorporation, the Board of Directors of the Corporation has classified
Twenty Million (20,000,000) shares (of the par value of One Mill ($.001)) of
authorized and unclassified shares of Common Stock of the Corporation's capital
stock as Class G Common Stock and has classified Fifteen Million (15,000,000)
shares (of the par value of One Mill ($.001)) of such shares as Class G -
Special Series 1 Common Stock pursuant to the following resolutions unanimously
adopted by the Board of Directors of the Corporation as of January 26, 1993:
Creation of Class G and Class G - Special Series 1 Shares
---------------------------------------------------------
RESOLVED, that pursuant to Article VI of the Corporation's
Articles of Incorporation (the "Charter"), Twenty Million (20,000,000)
authorized and unclassified shares of Common Stock (of the par value
of One Mill ($.001) per share and of the aggregate par value of Twenty
Thousand Dollars ($20,000)) be, and hereby are, classified into a
separate class of shares of capital stock and designated as Class G
Common Stock;
FURTHER RESOLVED, that pursuant to Article VI of the
Corporation's Charter, 15 Million (15,000,000) authorized and newly
classified shares of Class G Common stock (of the par value of One
Mill ($.001) per share and of the aggregate par value of Fifteen
Thousand Dollars ($15,000) be, and hereby are, designated as a
separate series of Class G shares of capital stock and known as Class
G - Special Series 1 Common Stock;
FURTHER RESOLVED, that all consideration received by
the Corporation for the issue or sale of shares of Class G and Class G
- Special Series 1 Common Stock shall be invested and reinvested with
the consideration received by the Corporation for the issue and sale
of all other shares now or hereafter designated as Class G Common
Stock (irrespective of whether said shares have been designated as a
part of a series of said Class and, if so designated as a part of a
series, irrespective of the particular series designation), together
with all income, earnings, profits, and proceeds thereof, including
any proceeds derived from the sale, exchange, or liquidation thereof,
and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, and any general assets of
the Corporation allocated to Class G shares, Class G - Special Series
1 shares, or such other shares by the Board of Directors in accordance
with the Corporation's Charter;
FURTHER RESOLVED, that all income, earnings, profits,
and proceeds, including any proceeds derived from the sale, exchange
or liquidation of such shares, and any assets derived from any
reinvestment of such proceeds in whatever form shall be allocated
among shares of Class G and Class G - Special Series 1 Common Stock
and all other shares now or hereafter designated as Class G Common
Stock, respectively (irrespective of whether said shares have been
designated as a part of a series of said Class and, if so designated
as a part of a series, irrespective of the particular series
designation), in proportion to their respective net asset values;
-2-
<PAGE> 4
FURTHER RESOLVED, that all the liabilities (including
expenses) of the Corporation in respect of shares of Class G and Class
G - Special Series 1 and all other shares now or hereafter designated
as Class G Common Stock and in respect of any general liabilities
(including expenses) of the Corporation allocated to shares of Class G
and Class G - Special Series 1 or such other shares by the Board of
Directors in accordance with the Corporation's Charter shall be
allocated among shares of Class G and Class G - Special Series 1
Common Stock and such other shares, respectively (irrespective of
whether said shares have been designated as a part of a series of said
Class and, if so designated as a part of a series, irrespective of the
particular series designation), in proportion to their respective net
asset values;
FURTHER RESOLVED, that if in the future the Board of
Directors determines to enter into agreements which provide for
services only for shares of Class G or for shares of Class G - Special
Series 1 (or any other series of Class G shares) and to allocate any
related expenses to the extent that may be from time to time
determined by the Board of Directors:
(a) only the shares of Class G Common
Stock shall bear: (i) the expenses and liabilities of
payments to institutions under any agreements entered into by
or on behalf of the Corporation which provide for services by
the institutions exclusively for their customers who own of
record or beneficially such shares, and (ii) such other
expenses and liabilities as the Board of Directors may from
time to time determine are directly attributable to such
shares and which therefore should be borne solely by shares of
Class G Common Stock;
(b) only the shares of Class G - Special
Series 1 Common Stock shall bear: (i) the expenses and
liabilities of payments to institutions under any agreements
entered into by or on behalf of the Corporation which provide
for services by the institutions exclusively for their
customers who own of record or beneficially such shares; and
(ii) such other expenses and liabilities as the Board of
Directors may from time to time determine are directly
attributable to such shares and which therefore should be
borne solely by shares of Class G - Special Series 1 Common
Stock;
(c) No shares of Class G Common Stock
shall bear the expenses and liabilities described in
subparagraph (b) above; and
(d) No shares of Class G - Special
Series 1 Common Stock shall bear the expenses and liabilities
described in subparagraph (a) above; and
FURTHER RESOLVED, that except as provided by these
resolutions each share of Class G and Class G - Special Series 1
Common Stock shall have the same preferences, conversion, and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption as set forth in
the Charter and shall also have the same preferences, conversion, and
other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption as
each other share now or hereafter designated as a share of Class G
Common Stock (irrespective of whether said share has been designated
as a part of a series of said Class and, if so designated as a part of
a series, irrespective of the particular series designation) except
that:
-3-
<PAGE> 5
(a) on any matter that pertains to the
agreements or expenses and liabilities described in clause (a)
of the immediately preceding resolution (or to any plan or
other document adopted by the Corporation relating to said
agreements, expenses, or liabilities) and is submitted to a
vote of shareholders of the Corporation, only shares of Class
G Common Stock (excluding shares designated as a series of
such Class) shall be entitled to vote, except that: (i) if
said matter affects shares of capital stock of the Corporation
other than shares of Class G Common Stock, such other affected
shares of capital stock of the Corporation shall also be
entitled to vote, and in such case shares of Class G Common
Stock shall be voted in the aggregate together with such other
affected shares and not by class or series except where
otherwise required by law or permitted by the Board of
Directors of the Corporation; and (ii) if said matter does not
affect shares of Class G Common Stock, said shares shall not
be entitled to vote (except where required by law or permitted
by the Board of Directors) even though the matter is submitted
to a vote of holders of shares of capital stock of the
Corporation other than said shares of Class G Common Stock;
and
(b) on any matter that pertains to the
agreements or expenses and liabilities described in clause (b)
of the immediately preceding resolution (or any plan or other
document adopted by the Corporation relating to said
agreements, expenses, or liabilities) and is submitted to a
vote of shareholders of the Company, only shares of Class G -
Special Series 1 Common Stock shall be entitled to vote,
except that: (i) if said matter affects shares of capital
stock in the Corporation other than shares of Class G -
Special Series 1, such other affected shares of capital stock
in the Corporation shall also be entitled to vote, and in such
case, shares of Class G - Special Series 1 Common Stock shall
be voted in the aggregate together with such other affected
shares and not by class or series except where otherwise
required by law or permitted by the Board of Directors of the
Corporation; and (ii) if said matter does not affect shares of
Class G - Special Series 1 Common Stock, such shares shall not
be entitled to vote (except where required by law or permitted
by the Board of Directors) even though the matter is submitted
to a vote of the holders of shares of capital stock in the
Corporation other than said shares of Class G - Special Series
1 Common Stock.
THIRD: The total number of shares of capital stock which the
Corporation is presently authorized to issue remains Five Billion
(5,000,000,000) shares of Common Stock, of which Nine Hundred Million
(900,000,000) shares of the par value of One Mill ($.001) each are Class A
Common Stock, Two Billion and Five Hundred Million (2,500,000,000) shares of
the par value of One Mill ($.001) each are Class A - Special Series 1 Common
Stock, One Hundred Million (100,000,000) shares of the par value of One Mill
($.001) each are Class B Common Stock, One Billion (1,000,000,000) shares of
the par value of One Mill ($.001) each are Class B - Special Series 1 Common
Stock, Five Million (5,000,000) shares of the par value of One Mill ($.001)
-4-
<PAGE> 6
each are Class C Common Stock, Fifty Million (50,000,000) shares of the par
value of One Mill ($.001) each are Class C - Special Series 1 Common Stock,
Five Million (5,000,000) shares of the par value of One Mill ($.001) each are
Class D Common Stock, Fifty Million (50,000,000) shares of the par value of One
Mill ($.001) each are Class D - Special Series 1 Common Stock, Five Million
(5,000,000) shares of the par value of One Mill ($.001) each are Class E Common
Stock, Fifteen Million (15,000,000) shares of the par value of One Mill ($.001)
each are Class E - Special Series 1 Common Stock, Five Million (5,000,000)
shares of the par value of One Mill ($.001) each are Class F Common Stock,
Fifteen Million (15,000,000) shares of the par value of One Mill ($.001) each
are Class F - Special Series 1 Common Stock, Five Million (5,000,000) shares of
the par value of One Mill ($.001) each are Class G Common Stock, Fifteen
Million (15,000,000) shares of the par value of One Mill ($.001) each are Class
G - Special Series 1 shares of Common Stock, and Three Hundred and Thirty
Million (330,000,000) shares of the par value of One Mill ($.001) each are
unclassified shares of Common Stock. The aggregate par value of all shares
having par value remains Five Million Dollars ($5,000,000). The total number
of shares the Corporation is authorized to issue and the aggregate par value of
all shares having par value remains unchanged.
FOURTH: The shares of the Corporation classified pursuant to
the resolutions set forth in Article SECOND of these Articles Supplementary
have been classified by the Corporation's Board of Directors under the
authority contained in the Charter of the Corporation.
-5-
<PAGE> 7
IN WITNESS WHEREOF, The Arch Fund, Inc. has caused these presents to
be signed in its name and on its behalf by its President and its corporate seal
to be hereunto affixed and attested to by its Secretary as of January 26, 1993.
THE ARCH FUND, INC.
Attest: By: /s/ Jerry V. Woodham
---------------------------
Jerry V. Woodham, President
/s/ W. Bruce McConnel, III
- --------------------------
W. Bruce McConnel, III
Secretary
-6-
<PAGE> 8
CERTIFICATE
THE UNDERSIGNED, Chairman of the Board and President of THE
ARCH FUND, INC., who executed on behalf of said Corporation the attached
Articles Supplementary of said Corporation, of which this Certificate is made a
part, hereby acknowledges, in the name and on behalf of said Corporation, the
attached Articles Supplementary to be the corporate act of said Corporation,
and certifies that to the best of his knowledge, information and belief the
matters and facts set forth in the attached Articles Supplementary with respect
to authorization and approval are true in all material respects, under the
penalties for perjury.
/s/ Jerry V. Woodham
--------------------------------
Jerry V. Woodham, President
Dated as of: January 26, 1993
-7-
<PAGE> 1
Exhibit (1)(k)
THE ARCH FUND, INC.
ARTICLES SUPPLEMENTARY
THE ARCH FUND, INC., a Maryland corporation having its
principal office in Maryland in the City of Baltimore, Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The total number of shares of capital stock
which the Corporation was heretofore authorized to issue was Five
Billion (5,000,000,000) shares (of the par value of One Mill ($.001)
each) of Common Stock classified as follows:
<TABLE>
<CAPTION>
Number of Shares
Classification Authorized
-------------- ----------------
<S> <C>
Class A 900,000,000
Class A-Special Series 1 2,500,000,000
Class B 100,000,000
Class B-Special Series 1 1,000,000,000
Class C 5,000,000
Class C-Special Series 1 50,000,000
Class D 5,000,000
Class D-Special Series 1 50,000,000
Class E 5,000,000
Class E-Special Series 1 15,000,000
Class F 5,000,000
Class F-Special Series 15,000,000
Class G 5,000,000
Class G-Special Series 1 15,000,000
Unclassified 330,000,000
</TABLE>
SECOND: Pursuant to its powers under Section 4 of
Article VI of the Corporation's Articles of Incorporation (the
"Charter"), the Board of Directors of the Corporation has reclassified
Seven Hundred Million (700,000,000) authorized and unissued Class A -
Special Series 1 shares of Common Stock as follows:
<TABLE>
<CAPTION>
Number of Shares
Classification Reclassified
-------------- ----------------
<S> <C>
Class A-Special Series 2 300,000,000
Class B-Special Series 2 300,000,000
Class C-Special Series 2 20,000,000
Class D-Special Series 2 20,000,000
Class E-Special Series 2 20,000,000
Class F-Special Series 2 20,000,000
Class G-Special Series 2 20,000,000
</TABLE>
pursuant to resolutions unanimously adopted by the Board of Directors
of the Corporation on March 23, 1993.
<PAGE> 2
THIRD: Pursuant to Article IV, Section (5) of the
Charter, the shares of Common Stock newly reclassified hereby shall
have the following preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption:
1. ASSETS BELONGING TO A CLASS. All consideration received by
the Corporation for the issue and sale of shares of such Class A - Special
Series 2, Class B - Special Series 2, Class C - Special Series 2, Class D -
Special Series 2, Class E - Special Series 2, Class F - Special Series 2, or
Class G - Special Series 2 shares (collectively, the "Special Series 2" shares
with respect to the initial Class A, Class B, Class C, Class D, Class E, Class
F, or Class G shares; such Class A, Class B, Class C, Class D, Class E, Class
F, or Class G shares formerly classified referred to herein collectively, as
the "Initial Class" shares of Common Stock and such Classes collectively, the
"Initial Classes") shall be invested and reinvested with the consideration
received by the Corporation for the issue and sale of all other shares now or
hereafter classified as shares of Initial Class A (including Class A - Special
Series 1 shares), Initial Class B (including Class B - Special Series 1
shares), Initial Class C (including Class C - Special Series 1 shares), Initial
Class D (including Class D - Special Series 1 shares), Initial Class E
(including Class E - Special Series 1 shares), Initial Class F (including Class
F - Special Series 1 shares), and Initial Class G (including Class G - Special
Series 1 shares) (such Class A - Special Series 1, Class B - Special Series 1,
Class C - Special Series 1, Class D - Special Series 1, Class E - Special
Series 1, Class F - Special Series 1, and Class G - Special Series 1 shares
formerly classified collectively, the "Special Series 1" shares with respect to
such Initial Class shares), respectively, of Common Stock (irrespective of
whether said shares have been classified as a part of a series of said Class
and, if so classified as a part of a series, irrespective of the particular
series classification), together with all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange, or
liquidation thereof, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, and any general assets of the
Corporation allocated to an Initial Class (including the respective Initial
Class shares and Special Series 1 shares formerly classified, Special Series 2
shares herein classified or such other shares with respect to such Class) by
the Board of Directors in accordance with the Corporation's Charter. All
income, earnings, profits, and proceeds, including any proceeds derived from
the sale, exchange or liquidation of such shares of an Initial Class, and any
assets derived from any reinvestment of such proceeds in whatever form shall be
allocated to the Special Series 2 shares in the proportion that the net asset
value of such Special Series 2 shares of such Initial Class bears to the
-2-
<PAGE> 3
total net asset value of all shares of such Initial Class, respectively
(irrespective of whether said shares have been classified as a part of a series
of said Class and, if so classified as a part of a series, irrespective of the
particular series classification).
2. LIABILITIES BELONGING TO A CLASS. All the liabilities
(including expenses) of the Corporation in respect of an Initial Class shall be
allocated to Special Series 2 shares of such Initial Class hereby classified in
the proportion that the net asset value of such Special Series 2 shares of such
Initial Class bears to the total net asset value of all shares of such Initial
Class (irrespective of whether said shares have been classified as a part of a
series of said Class and, if so classified as a part of a series, irrespective
of the particular series classification), except that to the extent that the
Board of Directors may determine from time to time for such respective Special
Series 2 shares (or any other series of shares of such Class):
a. With respect to Initial Class A, Initial Class B, Initial
Class D, and Initial Class E, to the extent that may be from time to
time determined by the Board of Directors to allocate the following
expenses to such respective Special Series 2 shares:
(1) only the Special Series 2 shares of an
Initial Class of Common Stock shall bear: (i) the expenses
and liabilities of payments to institutions under any
agreements entered into by or on behalf of the Corporation
which provide for services by the institutions exclusively for
their customers who own of record or beneficially such Special
Series 2 shares; and (ii) such other expenses and liabilities
as the Board of Directors may from time to time determine are
directly attributable to such shares and which therefore
should be borne solely by the Special Series 2 shares of an
Initial Class of Common Stock; and
(2) no Special Series 2 shares of an Initial
Class of Common Stock shall bear (i) the expenses and
liabilities of payments to institutions under any agreements
entered into by or on behalf of the Corporation which provide
for services by the institutions exclusively for their
customers who own of record or beneficially shares of an
Initial Class other than Special Series 2 shares of such
Class; and (ii) such other expenses and liabilities as the
Board of Directors may from time to time determine are
directly attributable to shares of an Initial Class other than
Special Series 2 shares of such Class and which therefore
should be borne solely by such other shares
-3-
<PAGE> 4
of an Initial Class and not the Special Series 2 shares of
such Class of Common Stock.
b. With respect to the shares of Initial Class C, Initial Class
F, and Initial Class G, to the extent that in the future may be
determined by the Board of Directors from time to time to allocate the
following expenses to such respective Special Series 2 shares:
(1) only the Special Series 2 shares of an
Initial Class of Common Stock shall bear: (i) the expenses
and liabilities of payments to institutions under any
agreements entered into by or on behalf of the Corporation
which provide for services by the institutions exclusively for
their customers who own of record or beneficially such Special
Series 2 shares; and (ii) such other expenses and liabilities
as the Board of Directors may from time to time determine are
directly attributable to such shares and which therefore
should be borne solely by the Special Series 2 shares of an
Initial Class of Common Stock; and
(2) no Special Series 2 shares of an Initial
Class of Common Stock shall bear (i) the expenses and
liabilities of payments to institutions under any agreements
entered into by or on behalf of the Corporation which provide
for services by the institutions exclusively for their
customers who own of record or beneficially shares of an
Initial Class other than Special Series 2 shares of such
Class; and (ii) such other expenses and liabilities as the
Board of Directors may from time to time determine are
directly attributable to shares of an Initial Class other than
Special Series 2 shares of such Class and which therefore
should be borne solely by such other shares of an Initial
Class and not the Special Series 2 shares of such Class of
Common Stock.
3. PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS,
RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS, QUALIFICATIONS, AND TERMS AND
CONDITIONS OF REDEMPTION. Except as provided hereby, each Special Series 2
share of an Initial Class of shares of Common Stock shall have the same
preferences, conversion, and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption applicable to all other shares of Common Stock as set forth in the
Charter and shall also have the same preferences, conversion, and other rights,
voting powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption as each other share formerly, now or
hereafter classified as a share of an Initial Class of Common Stock
(irrespective of whether said share has been
-4-
<PAGE> 5
classified as a part of a series of said Class and, if so classified as a part
of a series, irrespective of the particular series classification) except that
on any matter that pertains to the agreements or expenses and liabilities
described under Section 2, clause a (1) or clause b (1) above (or to any plan
or other document adopted by the Corporation relating to said agreements,
expenses, or liabilities) and is submitted to a vote of shareholders of the
Corporation, only the Special Series 2 shares of an Initial Class of Common
Stock (excluding the other shares classified as a series of such Class other
than Special Series 2) shall be entitled to vote, except that:
(a) if said matter affects shares of capital stock in the
Corporation other than the Special Series 2 shares of an Initial
Class, such other affected shares of capital stock in the Corporation
shall also be entitled to vote, and in such case, such Special Series
2 shares of such Class of Common Stock shall be voted in the aggregate
together with such other affected shares and not by class or series
except where otherwise required by law or permitted by the Board of
Directors of the Corporation; and
(b) if said matter does not affect the Special Series 2 shares of
an Initial Class of Common Stock, such shares shall not be entitled to
vote (except where required by law or permitted by the Board of
Directors) even though the matter is submitted to a vote of the
holders of shares of capital stock in the Corporation other than said
Special Series 2 shares of such Class of Common Stock.
FOURTH: The total number of shares of capital stock
which the Corporation is presently authorized to issue remains Five
Billion (5,000,000,000) shares (of the par value of One Mill ($.001)
each) of Common Stock classified as follows:
<TABLE>
<CAPTION>
Number of Shares
Classification Authorized
-------------- ----------------
<S> <C>
Class A 900,000,000
Class A-Special Series 1 1,800,000,000
Class A-Special Series 2 300,000,000
Class B 100,000,000
Class B-Special Series 1 1,000,000,000
Class B-Special Series 2 300,000,000
Class C 5,000,000
Class C-Special Series 1 50,000,000
Class C-Special Series 2 20,000,000
Class D 5,000,000
Class D-Special Series 1 50,000,000
Class D-Special Series 2 20,000,000
Class E 5,000,000
Class E-Special Series 1 15,000,000
Class E-Special Series 2 20,000,000
Class F 5,000,000
</TABLE>
-5-
<PAGE> 6
<TABLE>
<S> <C>
Class F-Special Series 1 15,000,000
Class F-Special Series 2 20,000,000
Class G 5,000,000
Class G-Special Series 1 15,000,000
Class G-Special Series 2 20,000,000
Unclassified 330,000,000
</TABLE>
The aggregate par value of all shares having par value remains Five
Million Dollars ($5,000,000). The total number of shares the
Corporation is authorized to issue and the aggregate par value of all
shares having par value remains unchanged.
IN WITNESS WHEREOF, The ARCH Fund, Inc. has caused these presents to
be signed in its name and on its behalf by its President and its corporate seal
to be hereunto affixed and attested to by its Secretary as of March 23, 1993.
THE ARCH FUND, INC.
Attest:
By: /s/ Jerry V. Woodham
----------------------------
Jerry V. Woodham, President
/s/ W. Bruce McConnel, III
- ---------------------------
W. Bruce McConnel, III
Secretary
-6-
<PAGE> 7
CERTIFICATE
THE UNDERSIGNED, Chairman of the Board and President of THE ARCH FUND,
INC., who executed on behalf of said Corporation the attached Articles
Supplementary of said Corporation, of which this Certificate is made a part,
hereby acknowledges, in the name and on behalf of said Corporation, the
attached Articles Supplementary to be the corporate act of said Corporation,
and certifies that to the best of his knowledge, information and belief the
matters and facts set forth in the attached Articles Supplementary with respect
to authorization and approval are true in all material respects, under the
penalties for perjury.
/s/ Jerry V. Woodham
---------------------------
Jerry V. Woodham, President
Dated: May 24, 1993
<PAGE> 1
Exhibit (1)(l)
THE ARCH FUND, INC.
ARTICLES SUPPLEMENTARY
THE ARCH FUND, INC., a Maryland corporation having its
principal office in Maryland in the City of Baltimore, Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The total number of shares of capital stock
which the Corporation was heretofore authorized to issue was Five
Billion (5,000,000,000) shares (of the par value of One Mill ($.001)
each) of Common Stock classified as follows:
<TABLE>
<CAPTION>
Number of Shares
Classification Authorized
-------------- ----------------
<S> <C>
Class A 900,000,000
Class A-Special Series 1 1,800,000,000
Class A-Special Series 2 300,000,000
Class B 100,000,000
Class B-Special Series 1 1,000,000,000
Class B-Special Series 2 300,000,000
Class C 5,000,000
Class C-Special Series 1 50,000,000
Class C-Special Series 2 20,000,000
Class D 5,000,000
Class D-Special Series 1 50,000,000
Class D-Special Series 2 20,000,000
Class E 5,000,000
Class E-Special Series 1 15,000,000
Class E-Special Series 2 20,000,000
Class F 5,000,000
Class F-Special Series 1 15,000,000
Class F-Special Series 2 20,000,000
Class G 5,000,000
Class G-Special Series 1 15,000,000
Class G-Special Series 2 20,000,000
Unclassified 330,000,000
</TABLE>
SECOND: Pursuant to its powers under Section 4 of
Article VI of the Corporation's Articles of Incorporation (the
"Charter"), the Board of Directors of the Corporation has reclassified
Thirty Million (30,000,000) authorized and unissued Class H Common
Stock as follows:
<TABLE>
<CAPTION>
Number of Shares
Classification Reclassified
-------------- ----------------
<S> <C>
Class H 10,000,000
Class H-Special Series 1 10,000,000
Class H-Special Series 2 10,000,000
</TABLE>
<PAGE> 2
pursuant to resolutions unanimously adopted by the Board of Directors
of the Corporation on September 28, 1993.
THIRD: Pursuant to Article IV, Section (5) of the
Charter, the shares of Common Stock newly reclassified hereby shall
have the following preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption:
1. ASSETS BELONGING TO A CLASS. All consideration
received by the Corporation for the issue and sale of shares of such
Class H Common Stock, Class H Common Stock - Special Series 1 and
Class H - Common Stock Special Series 2 shall be invested and
reinvested with the consideration received by the Corporation for the
issue and sale of all other shares now or hereafter classified as
shares of Class H, Common Stock (irrespective of whether said shares
have been classified as a part of a series of said Class and, if so
classified as a part of a series, irrespective of the particular
series classification), together with all income, earnings, profits,
and proceeds thereof, including any proceeds derived from the sale,
exchange, or liquidation thereof, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may
be, and any general assets of the Corporation allocated to Class H
shares, Class H - Special Series 1 shares and Class H - Special Series
2 shares or such other shares by the Board of Directors in accordance
with the Corporation's Charter. All income, earnings, profits, and
proceeds, including any proceeds derived from the sale, exchange or
liquidation of such shares, and any assets derived from any
reinvestment of such proceeds in whatever form shall be allocated
among shares of Class H shares, Class H-Special Series 1 and Class
H-Special Series 2 and all other shares now or hereafter designated as
Class H Common Stock, respectively (irrespective of whether said
shares have been classified as a part of a series of said Class and,
if so classified as a part of a series, irrespective of the particular
series classification), in proportion to their respective net asset
values.
2. LIABILITIES BELONGING TO A CLASS. All the
liabilities (including expenses) of the Corporation in respect of
shares of Class H, Class H-Special Series 1 and Class H-Special Series
2 and all other shares now or hereafter designated as Class H Common
Stock and in respect of any general liabilities (including expenses)
of the Corporation allocated to shares of Class H, Class H-Special
Series 1 and Class H-Special Series 2 or such other shares by the
Board of Directors in accordance with the Corporation's Charter shall
be allocated among shares of
-2-
<PAGE> 3
Class H, Class H-Special Series 1 and Class H-Special Series 2 and
such other shares, respectively (irrespective of whether said shares
have been classified as a part of a series of said Class and, if so
classified as a part of a series, irrespective of the particular
series classification), in proportion to their respective net asset
values:
a. If in the future the Board of Directors
determines to enter into agreements which provide for services
only for shares of: Class H shares, Class H-Special Series 1
shares, or Class H-Special Series 2 and to allocate any
related expenses to the extent that may be from time to time
determined by the Board of Directors:
(1) only the shares of Class H Common
Stock shall bear: (i) the expenses and liabilities
of payments to institutions under any agreements
entered into by or on behalf of the Corporation which
provide for services by the institutions exclusively
for their customers who own of record or beneficially
such shares, and (ii) such other expenses and
liabilities as the Board of Directors may from time
to time determine are directly attributable to such
shares and which therefore should be borne solely by
shares of Class H Common Stock;
(2) only the shares of Class H - Special
Series 1 Common Stock shall bear: (i) the expenses
and liabilities of payments to institutions under any
agreements entered into by or on behalf of the
Corporation which provide for services by the
institutions exclusively for their customers who own
of record or beneficially such shares; and (ii) such
other expenses and liabilities as the Board of
Directors may from time to time determine are
directly attributable to such shares and which
therefore should be borne solely by shares of Class H
- Special Series 1 Common Stock;
(3) only the shares of Class H-Special
Series 2 Common Stock shares shall bear: (i) the
expenses and liabilities of payments to institutions
under any agreements entered into by or on behalf of
the Corporation which provide for services by the
institutions exclusively for their customers who own
of record or beneficially such Special Series 2
shares; and (ii) such other expenses and liabilities
as the Board of Directors
-3-
<PAGE> 4
may from time to time determine are directly
attributable to such shares and which therefore
should be borne solely by the Special Series 2 shares
Common Stock; and
(4) No shares of Class H Common Stock
shall bear the expenses and liabilities described in
subparagraphs (2) or (3) above;
(5) No shares of Class H-Special Series
1 Common Stock shall bear the expenses and
liabilities described in subparagraphs (1) or (3)
above; and
(6) No shares of Class H-Special Series
2 Common Stock shall bear the expenses and
liabilities described in subparagraphs (1) or (2)
above.
3. PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING
POWERS, RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS, QUALIFICATIONS AND
TERMS AND CONDITIONS OF REDEMPTION. Except as provided hereby, each
share of Class H, Class H-Special Series 1 and Class H-Special Series
2 shall have the same preferences, conversion, and other rights,
voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption applicable to
all other shares of Common Stock as set forth in the Charter and shall
also have the same preferences, conversion, and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption as each other share formerly, now
or hereafter classified as a share of Class H Common Stock
(irrespective of whether said share has been classified as a part of a
series of said Class and, if so classified as a part of a series,
irrespective of the particular series classification) except that:
a. on any matter that pertains to the agreements
or expenses and liabilities described under Section 2, clause
a (1) above (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only the shares of Class H Common Stock
(excluding the other shares classified as a series of such
Class other than Class H Common Stock) shall be entitled to
vote, except that: (i) if said matter affects shares of
capital stock in the Corporation other than shares of Class H
Common Stock, such other affected shares of capital stock in
the Corporation shall also be entitled to vote, and in such
case, shares of Class H Common Stock shall be
-4-
<PAGE> 5
voted in the aggregate together with such other affected
shares and not by class or series except where otherwise
required by law or permitted by the Board of Directors of the
Corporation; and (ii) if said matter does not affect the
shares of Class H Common Stock, such shares shall not be
entitled to vote (except where required by law or permitted by
the Board of Directors) even though the matter is submitted to
a vote of the holders of shares of capital stock in the
Corporation other than said shares of Class H Common Stock;
and
b. on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause a
(2) above (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only shares of Class H Common Stock-Special
Series 1 (excluding shares designated as a series of such
Class other than Class H Common Stock-Special Series 1) shall
be entitled to vote, except that: (i) if said matter affects
shares of capital stock of the Corporation other than shares
of Class H Common Stock-Special Series 1, such other affected
shares of capital stock of the Corporation shall also be
entitled to vote, and in such case shares of Class H Common
Stock-Special Series 1 shall be voted in the aggregate
together with such other affected shares and not by class or
series except where otherwise required by law or permitted by
the Board of Directors of the Corporation; and (ii) if said
matter does not affect shares of Class H Common Stock-Special
Series 1, said shares shall not be entitled to vote (except
where required by law or permitted by the Board of Directors)
even though the matter is submitted to a vote of holders of
shares of capital stock of the Corporation other than said
shares of Class H Common Stock-Special Series 1; and
c. on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause a
(3) above (or any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only shares of Class H - Special Series 2 Common
Stock shall be entitled to vote, except that: (i) if said
matter affects shares of capital stock in the Corporation
other than shares of Class H - Special Series 2, such other
affected shares of capital stock in the Corporation shall also
be entitled to vote, and in such case, shares of Class H -
Special Series 2 Common Stock shall be voted in the aggregate
together with such other affected
-5-
<PAGE> 6
shares and not by class or series except where otherwise required by
law or permitted by the Board of Directors of the Corporation; and
(ii) if said matter does not affect shares of Class H - Special Series
2 Common Stock, such shares shall not be entitled to vote (except
where required by law or permitted by the Board of Directors) even
though the matter is submitted to a vote of the holders of shares of
capital stock in the Corporation other than said shares of Class H -
Special Series 2 Common Stock.
FOURTH: The total number of shares of capital stock
which the Corporation is presently authorized to issue remains Five Billion
(5,000,000,000) shares (of the par value of One Mill ($.001) each) of Common
Stock classified as follows:
<TABLE>
<CAPTION>
Number of Shares
Classification Authorized
-------------- ----------------
<S> <C>
Class A 900,000,000
Class A-Special Series 1 1,800,000,000
Class A-Special Series 2 300,000,000
Class B 100,000,000
Class B-Special Series 1 1,000,000,000
Class B-Special Series 2 300,000,000
Class C 5,000,000
Class C-Special Series 1 50,000,000
Class C-Special Series 2 20,000,000
Class D 5,000,000
Class D-Special Series 1 50,000,000
Class D-Special Series 2 20,000,000
Class E 5,000,000
Class E-Special Series 1 15,000,000
Class E-Special Series 2 20,000,000
Class F 5,000,000
Class F-Special Series 1 15,000,000
Class F-Special Series 2 20,000,000
Class G 5,000,000
Class G-Special Series 1 15,000,000
Class G-Special Series 2 20,000,000
Class H 10,000,000
Class H-Special Series 1 10,000,000
Class H-Special Series 2 10,000,000
Unclassified 300,000,000
</TABLE>
The aggregate par value of all shares having par value remains Five
Million Dollars ($5,000,000). The total number
-6-
<PAGE> 7
of shares the Corporation is authorized to issue and the aggregate par
value of all shares having par value remains unchanged.
IN WITNESS WHEREOF, The ARCH Fund, Inc. has caused these presents to
be signed in its name and on its behalf by its President and its corporate seal
to be hereunto affixed and attested to by its Secretary as of March 7, 1994.
THE ARCH FUND, INC.
Attest:
By: /s/ Jerry V. Woodham
---------------------------
Jerry V. Woodham, President
/s/ W. Bruce McConnel, III
- --------------------------
W. Bruce McConnel, III
Secretary
-7-
<PAGE> 8
CERTIFICATE
THE UNDERSIGNED, Chairman of the Board and President of THE ARCH FUND,
INC., who executed on behalf of said Corporation the attached Articles
Supplementary of said Corporation, of which this Certificate is made a part,
hereby acknowledges, in the name and on behalf of said Corporation, the
attached Articles Supplementary to be the corporate act of said Corporation,
and certifies that to the best of his knowledge, information and belief the
matters and facts set forth in the attached Articles Supplementary with respect
to authorization and approval are true in all material respects, under the
penalties for perjury.
/s/ Jerry V. Woodham
---------------------------
Jerry V. Woodham, President
Dated: March 7 , 1994
<PAGE> 9
ARTICLES SUPPLEMENTARY
OF
THE ARCH FUND, INC.
APPROVED AND RECEIVED FOR RECORD BY THE STATE DEPARTMENT OF
ASSESSMENTS AND TAXATION OF MARYLAND MARCH 8, 1994 AT 3:04 O'CLOCK P.M. AS IN
CONFORMITY WITH LAW AND ORDERED RECORDED.
____________________
<TABLE>
<CAPTION>
ORGANIZATION AND RECORDING SPECIAL
CAPITALIZATION FEE PAID: FEE PAID: FEE PAID:
<S> <C> <C>
$ $ 20.00 $
---------------------- ---------------- ------------------
</TABLE>
_________________________
D1457225
IT IS HEREBY CERTIFIED, THAT THE WITHIN INSTRUMENT, TOGETHER WITH ALL
INDORSEMENTS THEREON, HAS BEEN RECEIVED, APPROVED AND RECORDED BY THE STATE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND.
VENABLE, BAETJER & HOWARD
ATTN: PAT GILMORE
2 HOPKINS PLAZA
1800 MERCANTILE BANK & TRUST BLDG.
BALTIMORE, MD 21201
175C3074873
A447467
RECORDED IN THE RECORDS OF THE
STATE DEPARTMENT OF ASSESSMENTS
AND TAXATION OF MARYLAND IN LIBER, FOLIO.
<PAGE> 1
Exhibit (1)(m)
STATE OF MARYLAND
DEPARTMENT OF
ASSESSMENTS AND TAXATION
301 West Preston Street, Baltimore, Maryland 21201
DATE: OCTOBER 18, 1994
THIS IS TO ADVISE YOU THAT THE CERTIFICATE OF CORRECTION FOR THE ARCH
FUND, INC. WAS RECEIVED AND APPROVED FOR RECORD ON OCTOBER 18, 1994 AT 3:03 PM.
FEE PAID: 101.00
PAUL B. ANDERSON
CORPORATE ADMINISTRATOR
<PAGE> 2
THE ARCH FUND, INC.
CERTIFICATE OF CORRECTION
The ARCH Fund, Inc., a Maryland corporation having its
principal office in the City of Baltimore, Maryland (hereinafter the
"Corporation"), certifies to the State Department of Assessments and Taxation
of Maryland that:
FIRST: The title of the document being corrected is THE
ARCH FUND, INC. ARTICLES SUPPLEMENTARY.
SECOND: The only party to the document being corrected is The
Arch Fund, Inc.
THIRD: The document being corrected was filed with the State
Department of Assessments and Taxation of Maryland on March 8, 1994.
FOURTH: The provision in the document as previously filed
reads as follows:
"SECOND: Pursuant to its powers under Section 4 of
Article VI of the Corporation's Articles of Incorporation
(the "Charter"), the Board of Directors of the Corporation has
reclassified Thirty Million (30,000,000) authorized and
unissued Class H Common Stock as follows:
<TABLE>
<CAPTION>
Number of Shares
Classification Reclassified
-------------- ------------
<S> <C>
Class H 10,000,000
Class H - Special Series 1 10,000,000
Class H - Special Series 2 10,000,000
</TABLE>
pursuant to resolutions unanimously adopted by the Board
of Directors of the Corporation on September 28, 1993."
The provision in the document as corrected reads as follows:
"SECOND: Pursuant to its powers under Section 4
of Article VI of the Corporation's Articles of Incorporation
(the "Charter"), the Board of Directors of the Corporation has
classified Thirty Million (30,000,000) authorized and unissued
shares of previously unclassified Common Stock as follows:
-2-
<PAGE> 3
<TABLE>
<CAPTION>
Number of Shares
Classification Classified
-------------- ----------
<S> <C>
Class H 10,000,000
Class H - Special Series 1 10,000,000
Class H - Special Series 2 10,000,000
</TABLE>
pursuant to resolutions unanimously adopted by the Board of
Directors of the Corporation on September 28, 1993."
IN WITNESS WHEREOF, this Certificate of Correction has been
executed on behalf of the Corporation by its President and attested by its
Secretary. The President acknowledges this Certificate of Correction to be the
corporate act of the Corporation and certifies that to the best of his
knowledge, information and belief, the matters and facts set forth herein are
true in all material respects, under the penalties for perjury.
Date: October 17, 1994 THE ARCH FUND, INC.
Attest: By:/s/ Jerry V. Woodham
--------------------------
Jerry V. Woodham, President
/s/ W. Bruce McConnel, III
- ---------------------------------
W. Bruce McConnel, III, Secretary
-3-
<PAGE> 1
Exhibit (1)(n)
STATE OF MARYLAND
DEPARTMENT OF ASSESSMENTS AND TAXATION
301 West Preston Street, Baltimore, Maryland 21201
DATE: FEBRUARY 23, 1995
THIS IS TO ADVISE YOU THAT THE ARTICLES SUPPLEMENTARY FOR THE ARCH
FUND, INC. WERE RECEIVED AND APPROVED FOR RECORD ON FEBRUARY 23, 1995 AT 2:34
PM.
FEE PAID $111.00
WILLIAM B. MARKER
CHARTER SPECIALIST
<PAGE> 2
THE ARCH FUND, INC.
ARTICLES SUPPLEMENTARY
THE ARCH FUND, INC., a Maryland corporation having its
principal office in Maryland in the City of Baltimore, Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The total number of shares of capital stock
which the Corporation was heretofore authorized to issue was Five
Billion (5,000,000,000) shares (of the par value of One Mill ($.001)
each) of Common Stock classified as follows:
<TABLE>
<CAPTION>
Number of Shares
Classification Authorized
-------------- ----------------
<S> <C>
Class A 900,000,000
Class A-Special Series 1 1,800,000,000
Class A-Special Series 2 300,000,000
Class B 100,000,000
Class B-Special Series 1 1,000,000,000
Class B-Special Series 2 300,000,000
Class C 5,000,000
Class C-Special Series 1 50,000,000
Class C-Special Series 2 20,000,000
Class D 5,000,000
Class D-Special Series 1 50,000,000
Class D-Special Series 2 20,000,000
Class E 5,000,000
Class E-Special Series 1 15,000,000
Class E-Special Series 2 20,000,000
Class F 5,000,000
Class F-Special Series 1 15,000,000
Class F-Special Series 2 20,000,000
Class G 5,000,000
Class G-Special Series 1 15,000,000
Class G-Special Series 2 20,000,000
Class H 10,000,000
Class H-Special Series 1 10,000,000
Class H-Special Series 2 10,000,000
Unclassified 300,000,000
</TABLE>
SECOND: Pursuant to its powers under Section (4) of Article
VI of the Corporation's Articles of Incorporation (the "Charter"), the Board of
Directors of the Corporation has reclassified Three Hundred Million
(300,000,000) shares of previously classified, authorized and unissued Class A
Common Stock as follows:
<PAGE> 3
<TABLE>
<CAPTION>
Number of Shares
Classification Authorized
-------------- ----------------
<S> <C>
Class C - Special Series 3 50,000,000
Class D - Special Series 3 50,000,000
Class E - Special Series 3 50,000,000
Class F - Special Series 3 50,000,000
Class G - Special Series 3 50,000,000
Class H - Special Series 3 50,000,000
</TABLE>
pursuant to resolutions unanimously adopted by the Board of Directors of the
Corporation on September 27, 1994.
THIRD: Pursuant to Article VI, Section (5) of the Charter,
the shares of Common Stock newly reclassified hereby shall have the following
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption:
1. ASSETS BELONGING TO A CLASS. All consideration received by
the Corporation for the issue and sale of such Class C - Special Series 3,
Class D - Special Series 3, Class E - Special Series 3, Class F - Special
Series 3, Class G - Special Series 3 and Class H - Special Series 3 shares
(collectively, the "Special Series 3" shares with respect to the initial Class
C, Class D, Class E, Class F, Class G or Class H shares; such Class C, Class D,
Class E, Class F, Class G and Class H shares formerly classified referred to
herein collectively, as the "Initial Class" shares of Common Stock and such
Classes collectively, the "Initial Classes") shall be invested and reinvested
with the consideration received by the Corporation for the issue and sale of
all other shares now or hereafter classified as shares of Initial Class C
(including Class C - Special Series 1 shares and Class C - Special Series 2
shares), Initial Class D (including Class D - Special Series 1 shares and Class
D - Special Series 2 shares), Initial Class E (including Class E - Special
Series 1 shares and Class E - Special Series 2 shares), Initial Class F
(including Class F - Special Series 1 shares and Class F - Special Series 2
shares), Initial Class G (including Class G - Special Series 1 shares and Class
G - Special Series 2 shares), Initial Class H (including Class H - Special
Series 1 shares and Class H - Special Series 2 shares) (such Class C - Special
Series 1, Class D - Special Series 1, Class E - Special Series 1, Class F -
Special Series 1, Class G - Special Series 1 and Class H - Special Series 1
shares formerly classified collectively, the "Special Series 1" shares with
respect to such Initial Class shares and such Class C - Special Series 2, Class
D - Special Series 2, Class E - Special Series 2, Class F - Special Series 2,
Class G - Special Series 2, Class H - Special Series 2 shares formerly
classified collectively, the "Special Series 2" shares with respect to such
Initial Class shares), respectively, of Common Stock (irrespective of whether
said shares have been
-2-
<PAGE> 4
classified as a part of a series of said Class and, if so classified as a part
of a series, irrespective of the particular series classification), together
with all income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange, or liquidation thereof, and any funds
or payments derived from any reinvestment of such proceeds in whatever form the
same may be, and any general assets of the Corporation allocated to an Initial
Class (including the respective Initial Class shares, Special Series 1 shares
and Special Series 2 shares formerly classified, Special Series 3 shares herein
classified or such other shares with respect to such class) by the Board of
Directors in accordance with the Corporation's Charter. All income, earnings,
profits, and proceeds, including any proceeds derived from the sale, exchange
or liquidation of such shares of an Initial Class, and any assets derived from
any reinvestment of such proceeds in whatever form shall be allocated to the
Special Series 3 shares in the proportion that the net asset value of such
Special Series 3 shares of such Initial Class bears to the total net asset
value of all shares of such Initial Class, respectively (irrespective of
whether said shares have been classified as a part of a series of said Class
and, if so classified as a part of a series, irrespective of the particular
series classification).
2. LIABILITIES BELONGING TO A CLASS. All the liabilities
(including expenses) of the Corporation in respect of an Initial Class shall be
allocated to Special Series 3 shares of such Initial Class hereby classified in
the proportion that the net asset value of such Special Series 3 shares of such
Initial Class bears to the total net asset value of all shares of such Initial
Class (irrespective of whether said shares have been classified as a part of a
series of said Class and, if so classified as a part of a series, irrespective
of the particular series classification), except that to the extent that the
Board of Directors may determine from time to time for such respective Special
Series 3 shares (or any other series of shares of such Class):
a. With respect to Initial Class C, Initial Class D, Initial
Class E, Initial Class F, Initial Class G and Initial Class H to the
extent that may be from time to time determined by the Board of
Directors to allocate the following expenses to such respective
Special Series 3 shares:
(1) only the Special Series 3 shares of an
Initial Class of Common Stock shall bear: (i) the expenses and
liabilities of payments to institutions under any agreements
entered into by or on behalf of the Corporation which provide
for services by the institutions exclusively for their
customers who own of record or beneficially such Special
Series 3 shares;
-3-
<PAGE> 5
and (ii) such other expenses and liabilities as the Board of
Directors may from time to time determine are directly
attributable to such shares and which therefore should be
borne solely by the Special Series 3 shares of an Initial
Class of Common Stock; and
(2) No Special Series 3 shares of an Initial
Class of Common Stock shall bear (i) the expenses and
liabilities of payments to institutions under any agreements
entered into by or on behalf of the Corporation which provide
for services by the institutions exclusively for their
customers who own of record or beneficially shares of an
Initial Class other than Special Series 3 shares of such
Class; and (ii) such other expenses and liabilities as the
Board of Directors may from time to time determine are
directly attributable to shares of an Initial Class other than
Special Series 3 shares of such Class and which therefore
should be borne solely by such other shares of an Initial
Class and not the Special Series 3 shares of such Class of
Common Stock.
3. PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS,
RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS, QUALIFICATIONS, AND TERMS AND
CONDITIONS OF REDEMPTION. Except as provided hereby, each Special Series 3
share of an Initial Class of shares of Common Stock shall have the same
preferences, conversion, and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption applicable to all other shares of Common Stock as set forth in the
Charter and shall also have the same preferences, conversion, and other rights,
voting powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption as each other share formerly, now or
hereafter classified as a share of an Initial Class of Common Stock
(irrespective of whether said share has been classified as a part of a series
of said Class and, if so classified as a part of a series, irrespective of the
particular series classification) except that: on any matter that pertains to
the agreements or expenses and liabilities described in Section 2, clause a (1)
(or to any plan or other document adopted by the Corporation relating to said
agreements, expenses, or liabilities) and is submitted to a vote of
shareholders of the Corporation, only the Special Series 3 shares of an Initial
Class of Common Stock (excluding the other shares classified as a series of
such Class other than Special Series 3) shall be entitled to vote, except that:
a. if said matter affects shares of capital stock in the
Corporation other than the Special Series 3 shares of an Initial
Class, such other affected shares of capital stock in the Corporation
shall also be entitled to vote, and in
-4-
<PAGE> 6
such case, such Special Series 3 shares of such Class of Common Stock
shall be voted in the aggregate together with such other affected
shares and not by class or series except where otherwise required by
law or permitted by the Board of Directors of the Corporation; and
b. if said matter does not affect the Special Series 3 shares of
an Initial Class of Common Stock, such shares shall not be entitled to
vote (except where required by law or permitted by the Board of
Directors) even though the matter is submitted to a vote of the
holders of shares of capital stock in the Corporation other than said
Special Series 3 shares of such Class of Common Stock.
FOURTH: The total number of shares of capital stock which the
Corporation is presently authorized to issue remains Five Billion
(5,000,000,000) shares (of the par value of One Mill ($.001) each) of Common
Stock classified as follows:
<TABLE>
<CAPTION>
Number of Shares
Classification Authorized
-------------- ----------------
<S> <C>
Class A 600,000,000
Class A-Special Series 1 1,800,000,000
Class A-Special Series 2 300,000,000
Class B 100,000,000
Class B-Special Series 1 1,000,000,000
Class B-Special Series 2 300,000,000
Class C 5,000,000
Class C-Special Series 1 50,000,000
Class C-Special Series 2 20,000,000
Class C-Special Series 3 50,000,000
Class D 5,000,000
Class D-Special Series 1 50,000,000
Class D-Special Series 2 20,000,000
Class D-Special Series 3 50,000,000
Class E 5,000,000
Class E-Special Series 1 15,000,000
Class E-Special Series 2 20,000,000
Class E-Special Series 3 50,000,000
Class F 5,000,000
Class F-Special Series 1 15,000,000
Class F-Special Series 2 20,000,000
Class F-Special Series 3 50,000,000
Class G 5,000,000
Class G-Special Series 1 15,000,000
Class G-Special Series 2 20,000,000
Class G-Special Series 3 50,000,000
Class H 10,000,000
Class H-Special Series 1 10,000,000
</TABLE>
-5-
<PAGE> 7
<TABLE>
<CAPTION>
Number of Shares
Classification Authorized
-------------- ----------------
<S> <C>
Class H-Special Series 2 10,000,000
Class H-Special Series 3 50,000,000
Unclassified 300,000,000
</TABLE>
The aggregate par value of all shares having par value remains Five
Million Dollars ($5,000,000). The total number of shares the
Corporation is authorized to issue and the aggregate par value of all
shares having par value remains unchanged.
IN WITNESS WHEREOF, The ARCH Fund, Inc. has caused these presents to
be signed in its name and on its behalf by its President and its corporate seal
to be hereunto affixed and attested to by its Assistant Secretary as of
February 22, 1995.
THE ARCH FUND, INC.
Attest:
By:/s/ Jerry V. Woodham
----------------------------
Jerry V. Woodham, President
/s/ Walter B. Grimm
- --------------------
Walter B. Grimm
Assistant Secretary
-6-
<PAGE> 8
CERTIFICATE
THE UNDERSIGNED, Chairman of the Board and President of THE
ARCH FUND, INC., who executed on behalf of said Corporation the attached
Articles Supplementary of said Corporation, of which this Certificate is made a
part, hereby acknowledges, in the name and on behalf of said Corporation, the
attached Articles Supplementary to be the corporate act of said Corporation,
and certifies that to the best of his knowledge, information and belief the
matters and facts set forth in the attached Articles Supplementary with respect
to authorization and approval are true in all material respects, under the
penalties for perjury.
/s/ Jerry V. Woodham
---------------------------
Jerry V. Woodham, President
Dated: February 22, 1995
<PAGE> 1
Exhibit (1)(o)
STATE OF MARYLAND
356039
DEPARTMENT OF
ASSESSMENTS AND TAXATION
301 West Preston Street Baltimore, Maryland 21201
DATE: APRIL 26, 1995
THIS IS TO ADVISE YOU THAT THE ARTICLES SUPPLEMENTARY FOR THE ARCH
FUND, INC. WERE RECEIVED AND APPROVED FOR RECORD ON APRIL 26, 1995 AT 1:49 PM.
FEE PAID: 111.00
(SEAL)
HARRY J. NOONAN
CHARTER SPECIALIST
<PAGE> 2
THE ARCH FUND, INC.
ARTICLES SUPPLEMENTARY
THE ARCH FUND, INC., a Maryland corporation having its
principal office in Maryland in the City of Baltimore, Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The total number of shares of capital stock
which the Corporation was heretofore authorized to issue was Five
Billion (5,000,000,000) shares (of the par value of One Mill ($.001)
each) of Common Stock classified as follows:
<TABLE>
<CAPTION>
Number of Shares
Classification Authorized
-------------- ----------------
<S> <C>
Class A 600,000,000
Class A-Special Series 1 1,800,000,000
Class A-Special Series 2 300,000,000
Class B 100,000,000
Class B-Special Series 1 1,000,000,000
Class B-Special Series 2 300,000,000
Class C 5,000,000
Class C-Special Series 1 50,000,000
Class C-Special Series 2 20,000,000
Class C-Special Series 3 50,000,000
Class D 5,000,000
Class D-Special Series 1 50,000,000
Class D-Special Series 2 20,000,000
Class D-Special Series 3 50,000,000
Class E 5,000,000
Class E-Special Series 1 15,000,000
Class E-Special Series 2 20,000,000
Class E-Special Series 3 50,000,000
Class F 5,000,000
Class F-Special Series 1 15,000,000
Class F-Special Series 2 20,000,000
Class F-Special Series 3 50,000,000
Class G 5,000,000
Class G-Special Series 1 15,000,000
Class G-Special Series 2 20,000,000
Class G-Special Series 3 50,000,000
Class H 10,000,000
Class H-Special Series 1 10,000,000
Class H-Special Series 2 10,000,000
Class H-Special Series 3 50,000,000
Unclassified 300,000,000
</TABLE>
SECOND: Pursuant to its powers under Section (4) of
Article VI of the Corporation's Articles of Incorporation (the
"Charter"), the Board of Directors of the Corporation has reclassified
Fifty Million (50,000,000) shares of previously classified, authorized
and unissued Class A Common Stock as follows:
-2-
<PAGE> 3
<TABLE>
<CAPTION>
Number of Shares
Classification Reclassified
-------------- ----------------
<S> <C>
Class A - Special Series 3 50,000,000
</TABLE>
pursuant to resolutions unanimously adopted by the Board of Directors
of the Corporation on March 21, 1995.
THIRD: Pursuant to Article VI, Section (5) of the
Charter, the shares of Common Stock newly reclassified hereby shall
have the following preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption:
1. ASSETS BELONGING TO A CLASS. All consideration received
by the Corporation for the issue and sale of such Class A - Special
Series 3 shares (the "Special Series 3" shares with respect to the
initial Class A shares; such Class A shares formerly classified
referred to herein as the "Initial Class" shares of Common Stock)
shall be invested and reinvested with the consideration received by
the Corporation for the issue and sale of all other shares now or
hereafter classified as shares of the Initial Class (including Class A
- Special Series 1 shares and Class A - Special Series 2 shares) (such
Class A - Special Series 1 shares formerly classified, the "Special
Series 1" shares with respect to such Initial Class shares and such
Class A - Special Series 2 shares formerly classified, the "Special
Series 2" shares with respect to such Initial Class shares) of Common
Stock (irrespective of whether said shares have been classified as a
part of a series of said Class and, if so classified as a part of a
series, irrespective of the particular series classification),
together with all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange, or liquidation
thereof, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, and any general assets
of the Corporation allocated to the Initial Class (including the
Initial Class shares, Special Series 1 shares and Special Series 2
shares formerly classified, Special Series 3 shares herein classified
or such other shares with respect to such class) by the Board of
Directors in accordance with the Corporation's Charter. All income,
earnings, profits, and proceeds, including any proceeds derived from
the sale, exchange or liquidation of such shares of the Initial Class,
and any assets derived from any reinvestment of such proceeds in
whatever form shall be allocated to the Special Series 3 shares in the
proportion that the net asset value of such Special Series 3 shares of
the Initial Class bears to the total net asset value of all shares of
the Initial Class (irrespective of
-3-
<PAGE> 4
whether said shares have been classified as a part of a series of said
Class and, if so classified as a part of a series, irrespective of the
particular series classification).
2. LIABILITIES BELONGING TO A CLASS. All the
liabilities (including expenses) of the Corporation in respect of the
Initial Class shall be allocated to Special Series 3 shares of the
Initial Class hereby classified in the proportion that the net asset
value of such Special Series 3 shares of the Initial Class bears to
the total net asset value of all shares of the Initial Class
(irrespective of whether said shares have been classified as a part of
a series of said Class and, if so classified as a part of a series,
irrespective of the particular series classification), except that to
the extent that the Board of Directors may determine from time to time
for such respective Special Series 3 shares (or any other series of
shares of such Class):
a. With respect to the Initial Class to the extent that
may be from time to time determined by the Board of Directors
to allocate the following expenses to such Special Series 3
shares:
(1) only the Special Series 3 shares of the
Initial Class of Common Stock shall bear: (i) the
expenses and liabilities of payments to institutions
under any agreements entered into by or on behalf of
the Corporation which provide for services by the
institutions exclusively for their customers who own
of record or beneficially such Special Series 3
shares; and (ii) such other expenses and liabilities
as the Board of Directors may from time to time
determine are directly attributable to such shares
and which therefore should be borne solely by the
Special Series 3 shares of the Initial Class of
Common Stock; and
(2) No Special Series 3 shares of the
Initial Class of Common Stock shall bear (i) the
expenses and liabilities of payments to institutions
under any agreements entered into by or on behalf of
the Corporation which provide for services by the
institutions exclusively for their customers who own
of record or beneficially shares of the Initial Class
other than Special Series 3 shares of such Class; and
(ii) such other expenses and liabilities as the Board
of Directors may from time to time determine are
directly attributable to shares of the Initial Class
other than Special Series 3 shares of such Class and
which therefore
-4-
<PAGE> 5
should be borne solely by such other shares of the
Initial Class and not the Special Series 3 shares of
such Class of Common Stock.
3. PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS,
RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS, QUALIFICATIONS, AND TERMS
AND CONDITIONS OF REDEMPTION. Except as provided hereby, the Special
Series 3 share of the Initial Class of shares of Common Stock shall
have the same preferences, conversion, and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption applicable to all other shares of
Common Stock as set forth in the Charter and shall also have the same
preferences, conversion, and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms
and conditions of redemption as each other share formerly, now or
hereafter classified as a share of the Initial Class of Common Stock
(irrespective of whether said share has been classified as a part of a
series of said Class and, if so classified as a part of a series,
irrespective of the particular series classification) except that: on
any matter that pertains to the agreements or expenses and liabilities
described in Section 2, clause a (1) (or to any plan or other document
adopted by the Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only the Special Series 3 shares of the Initial Class of
Common Stock (excluding the other shares classified as a series of
such Class other than Special Series 3) shall be entitled to vote,
except that:
(a) if said matter affects shares of capital stock in the
Corporation other than the Special Series 3 shares of the
Initial Class, such other affected shares of capital stock in
the Corporation shall also be entitled to vote, and in such
case, such Special Series 3 shares of such Class of Common
Stock shall be voted in the aggregate together with such other
affected shares and not by class or series except where
otherwise required by law or permitted by the Board of
Directors of the Corporation; and
(b) if said matter does not affect the Special Series 3 shares
of the Initial Class of Common Stock, such shares shall not be
entitled to vote (except where required by law or permitted by
the Board of Directors) even though the matter is submitted to
a vote of the holders of shares of capital stock in the
Corporation other than said Special Series 3 shares of such
Class of Common Stock.
-5-
<PAGE> 6
FOURTH: The total number of shares of capital stock
which the Corporation is presently authorized to issue remains Five
Billion (5,000,000,000) shares (of the par value of One Mill ($.001)
each) of Common Stock classified as follows:
<TABLE>
<CAPTION>
Number of Shares
Classification Authorized
-------------- ----------------
<S> <C>
Class A 550,000,000
Class A-Special Series 1 1,800,000,000
Class A-Special Series 2 300,000,000
Class A-Special Series 3 50,000,000
Class B 100,000,000
Class B-Special Series 1 1,000,000,000
Class B-Special Series 2 300,000,000
Class C 5,000,000
Class C-Special Series 1 50,000,000
Class C-Special Series 2 20,000,000
Class C-Special Series 3 50,000,000
Class D 5,000,000
Class D-Special Series 1 50,000,000
Class D-Special Series 2 20,000,000
Class D-Special Series 3 50,000,000
Class E 5,000,000
Class E-Special Series 1 15,000,000
Class E-Special Series 2 20,000,000
Class E-Special Series 3 50,000,000
Class F 5,000,000
Class F-Special Series 1 15,000,000
Class F-Special Series 2 20,000,000
Class F-Special Series 3 50,000,000
Class G 5,000,000
Class G-Special Series 1 15,000,000
Class G-Special Series 2 20,000,000
Class G-Special Series 3 50,000,000
Class H 10,000,000
Class H-Special Series 1 10,000,000
Class H-Special Series 2 10,000,000
Class H-Special Series 3 50,000,000
Unclassified 300,000,000
</TABLE>
The aggregate par value of all shares having par value remains Five
Million Dollars ($5,000,000). The total number of shares the
Corporation is authorized to issue and the aggregate par value of all
shares having par value remains unchanged.
-6-
<PAGE> 7
IN WITNESS WHEREOF, The ARCH Fund, Inc. has caused these presents to
be signed in its name and on its behalf by its President and its corporate seal
to be hereunto affixed and attested to by its Assistant Secretary as of April
17, 1995.
THE ARCH FUND, INC.
Attest:
By: /s/ Jerry Woodham
---------------------------
Jerry V. Woodham, President
/s/ W. Bruce McConnel, III
- --------------------------
W. Bruce McConnel, III
Secretary
-7-
<PAGE> 8
CERTIFICATE
THE UNDERSIGNED, Chairman of the Board and President of THE ARCH FUND,
INC., who executed on behalf of said Corporation the attached Articles
Supplementary of said Corporation, of which this Certificate is made a part,
hereby acknowledges, in the name and on behalf of said Corporation, the
attached Articles Supplementary to be the corporate act of said Corporation,
and certifies that to the best of his knowledge, information and belief the
matters and facts set forth in the attached Articles Supplementary with respect
to authorization and approval are true in all material respects, under the
penalties for perjury.
/s/ Jerry Woodham
---------------------------
Jerry V. Woodham, President
Dated: April 17, 1995
<PAGE> 1
Exhibit (1)(p)
THE ARCH FUND, INC.
ARTICLES SUPPLEMENTARY
THE ARCH FUND, INC., a Maryland corporation having its
principal office in Maryland in the City of Baltimore, Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The total number of shares of capital stock
which the Corporation was heretofore authorized to issue was Five
Billion (5,000,000,000) shares (of the par value of One Mill ($.001)
each) of Common Stock classified as follows:
<TABLE>
<CAPTION>
Number of Shares
Classification Authorized
-------------- ----------------
<S> <C>
Class A 550,000,000
Class A-Special Series 1 1,800,000,000
Class A-Special Series 2 300,000,000
Class A-Special Series 3 50,000,000
Class B 100,000,000
Class B-Special Series 1 1,000,000,000
Class B-Special Series 2 300,000,000
Class C 5,000,000
Class C-Special Series 1 50,000,000
Class C-Special Series 2 20,000,000
Class C-Special Series 3 50,000,000
Class D 5,000,000
Class D-Special Series 1 50,000,000
Class D-Special Series 2 20,000,000
Class D-Special Series 3 50,000,000
Class E 5,000,000
Class E-Special Series 1 15,000,000
Class E-Special Series 2 20,000,000
Class E-Special Series 3 50,000,000
Class F 5,000,000
Class F-Special Series 1 15,000,000
Class F-Special Series 2 20,000,000
Class F-Special Series 3 50,000,000
Class G 5,000,000
Class G-Special Series 1 15,000,000
Class G-Special Series 2 20,000,000
Class G-Special Series 3 50,000,000
Class H 10,000,000
Class H-Special Series 1 10,000,000
Class H-Special Series 2 10,000,000
Class H-Special Series 3 50,000,000
Unclassified 300,000,000
</TABLE>
SECOND: Pursuant to its powers under Section (4) of
Article VI of the Corporation's Articles of Incorporation (the
"Charter"), the Board of Directors of the Corporation has classified
Fifty Million (50,000,000) authorized and
<PAGE> 2
unissued shares of previously unclassified Common Stock as follows:
<TABLE>
<CAPTION>
Number of Shares
Classification Classified
-------------- ---------------
<S> <C>
Class I 25,000,000
Class I-Special Series 1 25,000,000
</TABLE>
pursuant to resolutions unanimously adopted by the Board of Directors
of the Corporation on June 27, 1995.
THIRD: Pursuant to Article VI, Section (5) of the
Charter, the shares of Common Stock newly classified hereby shall have
the following preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms
and conditions of redemption:
1. ASSETS BELONGING TO A CLASS. All consideration received
by the Corporation for the issue and sale of shares of such Class I
Common Stock and Class I Common Stock - Special Series 1 shall be
invested and reinvested with the consideration received by the
Corporation for the issue and sale of all other shares now or
hereafter classified as shares of the Class I Common Stock
(irrespective of whether said shares have been classified as a part of
a series of said Class and, if so classified as a part of a series,
irrespective of the particular series classification), together with
all income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange, or liquidation thereof, and
any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, and any general assets of the
Corporation allocated to Class I shares and Class I - Special Series 1
shares or such other shares with respect to such Class by the Board of
Directors in accordance with the Corporation's Charter. All income,
earnings, profits, and proceeds, including any proceeds derived from
the sale, exchange or liquidation of such shares, and any assets
derived from any reinvestment of such proceeds in whatever form shall
be allocated among Class I shares and Class I - Special Series 1
shares and all other shares now or hereafter designated as Class I
Common Stock, respectively, (irrespective of whether said shares have
been classified as a part of a series of said Class and, if so
classified as a part of a series, irrespective of the particular
series classification), in proportion to their respective net asset
values.
-2-
<PAGE> 3
2. LIABILITIES BELONGING TO A CLASS. All the
liabilities (including expenses) of the Corporation in respect of
Class I shares and Class I - Special Series 1 shares and all other
shares now or hereafter designated as Class I Common Stock and in
respect of any general liabilities (including expenses) of the
Corporation allocated to Class I shares and Class I - Special Series 1
shares or such other shares by the Board of Directors in accordance
with the Corporation's Charter shall be allocated among Class I shares
and Class I - Special Series 1 shares and such other shares,
respectively, (irrespective of whether said shares have been
classified as a part of a series of said Class and, if so classified
as a part of a series, irrespective of the particular series
classification), in proportion to their respective net asset values:
a. If in the future the Board of Directors determines to
enter into agreements which provide for services only for
Class I shares or Class I-Special Series 1 shares and to
allocate any related expenses to the extent that may be from
time to time determined by the Board of Directors:
(1) only the shares of Class I Common Stock
shall bear: (i) the expenses and liabilities of
payments to institutions under any agreements entered
into by or on behalf of the Corporation which provide
for services by the institutions exclusively for
their customers who own of record or beneficially
such shares; and (ii) such other expenses and
liabilities as the Board of Directors may from time
to time determine are directly attributable to such
shares and which therefore should be borne solely by
shares of Class I Common Stock;
(2) only the shares of Class I - Special
Series 1 Common Stock shall bear: (i) the expenses
and liabilities of payments to institutions under any
agreements entered into by or on behalf of the
Corporation which provide for services by the
institutions exclusively for their customers who own
of record or beneficially such shares; and (ii) such
other expenses and liabilities as the Board of
Directors may from time to time determine are
directly attributable to such shares and which
therefore should be borne solely by shares of Class I
- Special Series 1 Common Stock;
-3-
<PAGE> 4
(3) No shares of Class I Common Stock
shall bear the expenses and liabilities described in
subparagraph (2) above; and
(4) No shares of Class I - Special
Series 1 Common Stock shall bear the expenses and
liabilities described in subparagraph (1) above.
3. PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS,
RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS, QUALIFICATIONS, AND TERMS
AND CONDITIONS OF REDEMPTION. Except as provided hereby, each share
of Class I Common Stock and Class I Common Stock - Special Series 1
shall have the same preferences, conversion, and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption applicable to all other shares of
Common Stock as set forth in the Charter and shall also have the same
preferences, conversion, and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms
and conditions of redemption as each other share formerly, now or
hereafter classified as a share of Class I Common Stock (irrespective
of whether said share has been classified as a part of a series of
said Class and, if so classified as a part of a series, irrespective
of the particular series classification) except that:
(a) on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause
a.(1) (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only the shares of Class I Common Stock
(excluding the other shares classified as a series of such
Class other than Class I Common Stock) shall be entitled to
vote, except that: (i) if said matter affects shares of
capital stock in the Corporation other than shares of Class I
Common Stock, such other affected shares of capital stock in
the Corporation shall also be entitled to vote, and in such
case, such shares of Class I Common Stock shall be voted in
the aggregate together with such other affected shares and not
by class or series except where otherwise required by law or
permitted by the Board of Directors of the Corporation; and
(ii) if said matter does not affect the shares of Class I
Common Stock, such shares shall not be entitled to vote
(except where required by law or permitted by the Board of
Directors) even though the matter is submitted to a vote of
the holders of shares of capital stock in the Corporation
other than said shares of Class I Common Stock; and
-4-
<PAGE> 5
(b) on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause
a.(2) above (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only shares of Class I Common Stock - Special
Series 1 (excluding shares designated as a series of such
Class other than Class I Common Stock - Special Series 1)
shall be entitled to vote, except that: (i) if said matter
affects shares of capital stock of the Corporation other than
shares of Class I Common Stock - Special Series 1, such other
affected shares of capital stock of the Corporation shall also
be entitled to vote, and in such case shares of Class I Common
Stock - Special Series 1 shall be voted in the aggregate
together with such other affected shares and not be class or
series except were otherwise required by law or permitted by
the Board of Directors of the Corporation; and (ii) if said
matter does not affect shares of Class I Common Stock -
Special Series 1, said shares shall not be entitled to vote
(except where required by law or permitted by the Board of
Directors) even though the matter is submitted to a vote of
holders of shares of capital stock of the Corporation other
than said shares of Class I Common Stock - Special Series 1.
FOURTH: The total number of shares of capital stock
which the Corporation is presently authorized to issue remains Five
Billion (5,000,000,000) shares (of the par value of One Mill ($.001)
each) of Common Stock classified as follows:
-5-
<PAGE> 6
<TABLE>
<CAPTION>
Number of Shares
Classification Authorized
-------------- ----------------
<S> <C>
Class A 550,000,000
Class A-Special Series 1 1,800,000,000
Class A-Special Series 2 300,000,000
Class A-Special Series 3 50,000,000
Class B 100,000,000
Class B-Special Series 1 1,000,000,000
Class B-Special Series 2 300,000,000
Class C 5,000,000
Class C-Special Series 1 50,000,000
Class C-Special Series 2 20,000,000
Class C-Special Series 3 50,000,000
Class D 5,000,000
Class D-Special Series 1 50,000,000
Class D-Special Series 2 20,000,000
Class D-Special Series 3 50,000,000
Class E 5,000,000
Class E-Special Series 1 15,000,000
Class E-Special Series 2 20,000,000
Class E-Special Series 3 50,000,000
Class F 5,000,000
Class F-Special Series 1 15,000,000
Class F-Special Series 2 20,000,000
Class F-Special Series 3 50,000,000
Class G 5,000,000
Class G-Special Series 1 15,000,000
Class G-Special Series 2 20,000,000
Class G-Special Series 3 50,000,000
Class H 10,000,000
Class H-Special Series 1 10,000,000
Class H-Special Series 2 10,000,000
Class H-Special Series 3 50,000,000
Class I 25,000,000
Class I-Special Series 1 25,000,000
Unclassified 250,000,000
</TABLE>
The aggregate par value of all shares having par value remains Five
Million Dollars ($5,000,000). The total number of shares the
Corporation is authorized to issue and the aggregate par value of all
shares having par value remains unchanged.
-6-
<PAGE> 7
IN WITNESS WHEREOF, The ARCH Fund, Inc. has caused these presents to
be signed in its name and on its behalf by its President and its corporate seal
to be hereunto affixed and attested to by its Secretary as of June 27, 1995.
THE ARCH FUND, INC.
Attest:
By: /s/ Jerry V. Woodham
--------------------------
Jerry V. Woodham, President
/s/ W. Bruce McConnel, III
- --------------------------
W. Bruce McConnel, III
Secretary
-7-
<PAGE> 8
CERTIFICATE
THE UNDERSIGNED, Chairman of the Board and President of THE ARCH FUND,
INC., who executed on behalf of said Corporation the attached Articles
Supplementary of said Corporation, of which this Certificate is made a part,
hereby acknowledges, in the name and on behalf of said Corporation, the
attached Articles Supplementary to be the corporate act of said Corporation,
and certifies that to the best of his knowledge, information and belief the
matters and facts set forth in the attached Articles Supplementary with respect
to authorization and approval are true in all material respects, under the
penalties for perjury.
/s/ Jerry V. Woodham
---------------------------
Jerry V. Woodham, President
Dated: June 27, 1995
<PAGE> 1
Exhibit (1)(q)
THE ARCH FUND, INC.
ARTICLES SUPPLEMENTARY
THE ARCH FUND, INC., a Maryland corporation having its
principal office in Maryland in the City of Baltimore, Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The total number of shares of capital stock
which the Corporation was heretofore authorized to issue was Five
Billion (5,000,000,000) shares (of the par value of One Mill ($.001)
each) and of the aggregate par value of Five Million Dollars
($5,000,000) of Common Stock classified as follows:
<TABLE>
<CAPTION>
Number of Shares
Classification Authorized
-------------- ----------------
<S> <C>
Class A 550,000,000
Class A-Special Series 1 1,800,000,000
Class A-Special Series 2 300,000,000
Class A-Special Series 3 50,000,000
Class B 100,000,000
Class B-Special Series 1 1,000,000,000
Class B-Special Series 2 300,000,000
Class C 5,000,000
Class C-Special Series 1 50,000,000
Class C-Special Series 2 20,000,000
Class C-Special Series 3 50,000,000
Class D 5,000,000
Class D-Special Series 1 50,000,000
Class D-Special Series 2 20,000,000
Class D-Special Series 3 50,000,000
Class E 5,000,000
Class E-Special Series 1 15,000,000
Class E-Special Series 2 20,000,000
Class E-Special Series 3 50,000,000
Class F 5,000,000
Class F-Special Series 1 15,000,000
Class F-Special Series 2 20,000,000
Class F-Special Series 3 50,000,000
Class G 5,000,000
Class G-Special Series 1 15,000,000
Class G-Special Series 2 20,000,000
Class G-Special Series 3 50,000,000
Class H 10,000,000
Class H-Special Series 1 10,000,000
Class H-Special Series 2 10,000,000
Class H-Special Series 3 50,000,000
Class I 25,000,000
Class I-Special Series 1 25,000,000
Unclassified 250,000,000
</TABLE>
SECOND: Pursuant to Article VI of the Corporation's
Articles of Incorporation (the "Charter") and
<PAGE> 2
Section 2-105(c) of the Maryland General Corporation Law, the Board of
Directors of the Corporation has increased the total number of
authorized shares of capital stock of the Corporation to Seven Billion
(7,000,000,000) shares of Common Stock of the par value of One Mill
($.001) each and of the aggregate par value of Seven Million Dollars
($7,000,000) and has classified Four Hundred Seventy Million
(470,000,000) shares of the Corporation's newly authorized,
unclassified and unissued Common Stock as follows:
<TABLE>
<CAPTION>
Number of Shares
Classification Classified
-------------- ---------------
<S> <C>
Class J 50,000,000
Class J-Special Series 1 300,000,000
Class K 25,000,000
Class K-Special Series 1 25,000,000
Class K-Special Series 2 10,000,000
Class L 25,000,000
Class L-Special Series 1 25,000,000
Class L-Special Series 2 10,000,000
</TABLE>
pursuant to resolutions unanimously adopted by the Board of Directors
of the Corporation on June 27, 1995.
THIRD: Pursuant to Article VI, Section (5) of the
Charter, the shares of Common Stock newly classified hereby shall have
the following preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms
and conditions of redemption:
A.1. ASSETS BELONGING TO A CLASS. All consideration received
by the Corporation for the issue and sale of shares of Class J Common
Stock and Class J Common Stock - Special Series 1 shall be invested
and reinvested with the consideration received by the Corporation for
the issue and sale of all other shares now or hereafter classified as
shares of Class J Common Stock (irrespective of whether said shares
have been classified as a part of a series of said Class and, if so
classified as a part of a series, irrespective of the particular
series classification), together with all income, earnings, profits,
and proceeds thereof, including any proceeds derived from the sale,
exchange, or liquidation thereof, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may
be, and any general assets of the Corporation allocated to Class J
shares and Class J - Special Series 1 shares or such other shares with
respect to such Class by the Board of Directors in accordance with the
Corporation's Charter. All income, earnings, profits, and proceeds,
including any proceeds derived from the sale,
-2-
<PAGE> 3
exchange or liquidation of such shares, and any assets derived from
any reinvestment of such proceeds in whatever form shall be allocated
among Class J shares and Class J - Special Series 1 shares and all
other shares now or hereafter designated as Class J Common Stock,
respectively, (irrespective of whether said shares have been
classified as a part of a series of said Class and, if so classified
as a part of a series, irrespective of the particular series
classification), in proportion to their respective net asset values.
2. LIABILITIES BELONGING TO A CLASS. All the
liabilities (including expenses) of the Corporation in respect of
Class J shares and Class J - Special Series 1 shares and all other
shares now or hereafter designated as Class J Common Stock and in
respect of any general liabilities (including expenses) of the
Corporation allocated to Class J shares and Class J - Special Series 1
shares or such other shares by the Board of Directors in accordance
with the Corporation's Charter shall be allocated among Class J shares
and Class J - Special Series 1 shares and such other shares,
respectively, (irrespective of whether said shares have been
classified as a part of a series of said Class and, if so classified
as a part of a series, irrespective of the particular series
classification), in proportion to their respective net asset values:
a. If in the future the Board of Directors determines to
enter into agreements which provide for services only for
Class J shares or Class J-Special Series 1 shares and to
allocate any related expenses to the extent that may be from
time to time determined by the Board of Directors:
(1) only the shares of Class J Common Stock
shall bear: (i) the expenses and liabilities of
payments to institutions under any agreements entered
into by or on behalf of the Corporation which provide
for services by the institutions exclusively for
their customers who own of record or beneficially
such shares; and (ii) such other expenses and
liabilities as the Board of Directors may from time
to time determine are directly attributable to such
shares and which therefore should be borne solely by
shares of Class J Common Stock;
(2) only the shares of Class J - Special
Series 1 Common Stock shall bear: (i) the expenses
and liabilities of payments to institutions under any
agreements entered into by
-3-
<PAGE> 4
or on behalf of the Corporation which provide for
services by the institutions exclusively for their
customers who own of record or beneficially such
shares; and (ii) such other expenses and
liabilities as the Board of Directors may from time
to time determine are directly attributable to such
shares and which therefore should be borne solely by
shares of Class J - Special Series 1 Common Stock;
(3) No shares of Class J Common Stock
shall bear the expenses and liabilities described in
subparagraph (2) above; and
(4) No shares of Class J - Special
Series 1 Common Stock shall bear the expenses and
liabilities described in subparagraph (1) above.
3. PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS,
RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS, QUALIFICATIONS, AND TERMS
AND CONDITIONS OF REDEMPTION. Except as provided hereby, each share
of Class J Common Stock and Class J Common Stock - Special Series 1
shall have the same preferences, conversion, and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption applicable to all other shares of
Common Stock as set forth in the Charter and shall also have the same
preferences, conversion, and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms
and conditions of redemption as each other share formerly, now or
hereafter classified as a share of Class J Common Stock (irrespective
of whether said share has been classified as a part of a series of
said Class and, if so classified as a part of a series, irrespective
of the particular series classification) except that:
(a)(i) on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause
a.(1) (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only the shares of Class J Common Stock
(excluding the other shares classified as a series of such
Class other than Class J Common Stock) shall be entitled to
vote, except that if said matter affects shares of capital
stock in the Corporation other than shares of Class J Common
Stock, such other affected shares of capital stock in the
Corporation shall also be entitled to vote, and in such case,
such shares of Class J Common Stock shall be voted in the
aggregate together with such other
-4-
<PAGE> 5
affected shares and not by class or series except where
otherwise required by law or permitted by the Board of
Directors of the Corporation; and (ii) if any matter submitted
to a vote of the shareholders of the Corporation does not
affect the shares of Class J Common Stock, such shares shall
not be entitled to vote (except where required by law or
permitted by the Board of Directors) even though the matter is
submitted to a vote of the holders of shares of capital stock
in the Corporation other than said shares of Class J Common
Stock; and
(b)(i) on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause
a.(2) above (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only shares of Class J Common Stock - Special
Series 1 (excluding shares designated as a series of such
Class other than Class J Common Stock - Special Series 1)
shall be entitled to vote, except that if said matter affects
shares of capital stock of the Corporation other than shares
of Class J Common Stock - Special Series 1, such other
affected shares of capital stock of the Corporation shall also
be entitled to vote, and in such case shares of Class J Common
Stock - Special Series 1 shall be voted in the aggregate
together with such other affected shares and not by class or
series except were otherwise required by law or permitted by
the Board of Directors of the Corporation; and (ii) if any
matter submitted to a vote of the shareholders of the
Corporation does not affect shares of Class J Common Stock -
Special Series 1, said shares shall not be entitled to vote
(except where required by law or permitted by the Board of
Directors) even though the matter is submitted to a vote of
holders of shares of capital stock of the Corporation other
than said shares of Class J Common Stock - Special Series 1.
B.1. ASSETS BELONGING TO A CLASS. All consideration received
by the Corporation for the issue and sale of shares of Class K Common
Stock, Class K Common Stock - Special Series 1 and Class K Common
Stock - Special Series 2 shall be invested and reinvested with the
consideration received by the Corporation for the issue and sale of
all other shares now or hereafter classified as shares of Class K
Common Stock (irrespective of whether said shares have been classified
as a part of a series of said Class and, if so classified as a part of
a series, irrespective of the particular series classification),
together with all income, earnings, profits, and proceeds thereof,
including any
-5-
<PAGE> 6
proceeds derived from the sale, exchange, or liquidation thereof, and
any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, and any general assets of the
Corporation allocated to Class K shares, Class K - Special Series 1
shares and Class K - Special Series 2 shares or such other shares with
respect to such Class by the Board of Directors in accordance with the
Corporation's Charter. All income, earnings, profits, and proceeds,
including any proceeds derived from the sale, exchange or liquidation
of such shares, and any assets derived from any reinvestment of such
proceeds in whatever form shall be allocated among Class K shares,
Class K - Special Series 1 shares and Class K - Special Series 2
shares and all other shares now or hereafter designated as Class K
Common Stock, respectively, (irrespective of whether said shares have
been classified as a part of a series of said Class and, if so
classified as a part of a series, irrespective of the particular
series classification), in proportion to their respective net asset
values.
2. LIABILITIES BELONGING TO A CLASS. All the
liabilities (including expenses) of the Corporation in respect of
Class K shares, Class K - Special Series 1 shares and Class K -
Special Series 2 shares and all other shares now or hereafter
designated as Class K Common Stock and in respect of any general
liabilities (including expenses) of the Corporation allocated to Class
K shares, Class K - Special Series 1 shares and Class K - Special
Series 2 shares or such other shares by the Board of Directors in
accordance with the Corporation's Charter shall be allocated among
Class K shares, Class K - Special Series 1 shares and Class K -
Special Series 2 shares and such other shares, respectively,
(irrespective of whether said shares have been classified as a part of
a series of said Class and, if so classified as a part of a series,
irrespective of the particular series classification), in proportion
to their respective net asset values:
a. If in the future the Board of Directors determines to
enter into agreements which provide for services only for
Class K shares, Class K - Special Series 1 shares or Class K -
Special Series 2 shares and to allocate any related expenses
to the extent that may be from time to time determined by the
Board of Directors:
(1) only the shares of Class K Common Stock
shall bear: (i) the expenses and liabilities of
payments to institutions under any agreements entered
into by or on behalf of the Corporation which provide
for services by the institutions exclusively for
their customers who own of record
-6-
<PAGE> 7
or beneficially such shares; and (ii) such other
expenses and liabilities as the Board of Directors
may from time to time determine are directly
attributable to such shares and which therefore
should be borne solely by shares of Class K Common
Stock;
(2) only the shares of Class K - Special
Series 1 Common Stock shall bear: (i) the expenses
and liabilities of payments to institutions under any
agreements entered into by or on behalf of the
Corporation which provide for services by the
institutions exclusively for their customers who own
of record or beneficially such shares; and (ii) such
other expenses and liabilities as the Board of
Directors may from time to time determine are
directly attributable to such shares and which
therefore should be borne solely by shares of Class K
- Special Series 1 Common Stock;
(3) Only the shares of Class K - Special
Series 2 Common Stock shall bear: (i) the expenses
and liabilities of payments to institutions under any
agreements entered into by or on behalf of the
Corporation which provide for services by the
institutions exclusively for their customers who own
of record or beneficially such shares; and (ii) such
other expenses and liabilities as the Board of
Directors may from time to time determine are
directly attributable to such shares and which
therefore should be borne solely by shares of Class K
- Special Series 2 Common Stock;
(4) No shares of Class K Common Stock
shall bear the expenses and liabilities described in
subparagraphs (2) and (3) above;
(5) No shares of Class K - Special
Series 1 Common Stock shall bear the expenses and
liabilities described in subparagraphs (1) and (3)
above; and
(6) No shares of Class K - Special
Series 2 Common Stock shall bear the expenses and
liabilities described in subparagraphs (1) and (2)
above.
3. PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS,
RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS, QUALIFICATIONS, AND TERMS
AND CONDITIONS OF REDEMPTION.
-7-
<PAGE> 8
Except as provided hereby, each share of Class K Common Stock, Class K
Common Stock - Special Series 1 and Class K Common Stock - Special
Series 2 shall have the same preferences, conversion, and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption applicable to
all other shares of Common Stock as set forth in the Charter and shall
also have the same preferences, conversion, and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption as each other share formerly, now
or hereafter classified as a share of Class K Common Stock
(irrespective of whether said share has been classified as a part of a
series of said Class and, if so classified as a part of a series,
irrespective of the particular series classification) except that:
(a)(i) on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause
a.(1) (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only the shares of Class K Common Stock
(excluding the other shares classified as a series of such
Class other than Class K Common Stock) shall be entitled to
vote, except that if said matter affects shares of capital
stock in the Corporation other than shares of Class K Common
Stock, such other affected shares of capital stock in the
Corporation shall also be entitled to vote, and in such case,
such shares of Class K Common Stock shall be voted in the
aggregate together with such other affected shares and not by
class or series except where otherwise required by law or
permitted by the Board of Directors of the Corporation; and
(ii) if any matter submitted to a vote of shareholders of the
Corporation does not affect the shares of Class K Common
Stock, such shares shall not be entitled to vote (except where
required by law or permitted by the Board of Directors) even
though the matter is submitted to a vote of the holders of
shares of capital stock in the Corporation other than said
shares of Class K Common Stock;
(b)(i) on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause
a.(2) above (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only shares of Class K Common Stock - Special
Series 1 (excluding shares designated as a series of such
Class other than Class K Common Stock - Special Series 1)
-8-
<PAGE> 9
shall be entitled to vote, except that if said matter affects
shares of capital stock of the Corporation other than shares
of Class K Common Stock - Special Series 1, such other
affected shares of capital stock of the Corporation shall also
be entitled to vote, and in such case shares of Class K Common
Stock - Special Series 1 shall be voted in the aggregate
together with such other affected shares and not by class or
series except where otherwise required by law or permitted by
the Board of Directors of the Corporation; and (ii) if any
matter submitted to a vote of the shareholders of the
Corporation does not affect shares of Class K Common Stock -
Special Series 1, said shares shall not be entitled to vote
(except where required by law or permitted by the Board of
Directors) even though the matter is submitted to a vote of
holders of shares of capital stock of the Corporation other
than said shares of Class K Common Stock - Special Series 1;
and
(c)(i) on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause
a.(3) above (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only shares of Class K Common Stock - Special
Series 2 (excluding shares designated as a series of such
Class other than Class K Common Stock - Special Series 2)
shall be entitled to vote except that if said matter affects
shares of capital stock other than shares of Class K Common
Stock - Special Series 2, such other affected shares of
capital stock in the Corporation shall also be entitled to
vote, and in such case, such shares of Class K Common Stock -
Special Series 2 shall be voted in the aggregate together with
such other affected shares and not by class or series except
where otherwise required by law or permitted by the Board of
Directors of the Corporation; and (ii) if any matter submitted
to a vote of the shareholders of the Corporation does not
affect the shares of Class K Common Stock - Special Series 2,
such shares shall not be entitled to vote (except where
required by law or permitted by the Board of Directors) even
though the matter is submitted to a vote of the holders of
shares of capital stock in the Corporation other than said
shares of Class K Common Stock - Special Series 2.
(d) At such times, which may vary among the
holders of shares within the series, as may be determined by
the Board of Directors (or with the authorization of the Board
of Directors, the officers of the Corporation) in accordance
with the Investment
-9-
<PAGE> 10
Company Act of 1940, as amended, and applicable rules and
regulations of the National Association of Securities Dealers,
Inc. and reflected in the registration statement relating to
the Corporation's Class K - Special Series 2 Common Stock,
shares of the Class K - Special Series 2 Common Stock may be
automatically converted into shares of Class K Common Stock of
the Corporation based on the relative net asset values of such
series at the time of conversion, subject, however, to any
conditions of conversion that may be imposed by the Board of
Directors (or with the authorization of the Board of Directors,
the officers of the Corporation) and reflected in the
registration statement relating to the Class K - Special Series
2 Common Stock as aforesaid.
C.1. ASSETS BELONGING TO A CLASS. All consideration received
by the Corporation for the issue and sale of shares of Class L Common
Stock, Class L Common Stock - Special Series 1 and Class L Common
Stock - Special Series 2 shall be invested and reinvested with the
consideration received by the Corporation for the issue and sale of
all other shares now or hereafter classified as shares of Class L
Common Stock (irrespective of whether said shares have been classified
as a part of a series of said Class and, if so classified as a part of
a series, irrespective of the particular series classification),
together with all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange, or liquidation
thereof, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, and any general assets
of the Corporation allocated to Class L shares, Class L - Special
Series 1 shares and Class L - Special Series 2 shares or such other
shares with respect to such Class by the Board of Directors in
accordance with the Corporation's Charter. All income, earnings,
profits, and proceeds, including any proceeds derived from the sale,
exchange or liquidation of such shares, and any assets derived from
any reinvestment of such proceeds in whatever form shall be allocated
among Class L shares, Class L - Special Series 1 shares and Class L -
Special Series 2 shares and all other shares now or hereafter
designated as Class L Common Stock, respectively, (irrespective of
whether said shares have been classified as a part of a series of said
Class and, if so classified as a part of a series, irrespective of the
particular series classification), in proportion to their respective
net asset values.
2. LIABILITIES BELONGING TO A CLASS. All the
liabilities (including expenses) of the Corporation in respect of
Class L shares, Class L - Special Series 1 shares
-10-
<PAGE> 11
and Class L - Special Series 2 shares and all other shares now or
hereafter designated as Class L Common Stock and in respect of any
general liabilities (including expenses) of the Corporation allocated
to Class L shares, Class L - Special Series 1 shares and Class L -
Special Series 2 shares or such other shares by the Board of
Directors in accordance with the Corporation's Charter shall be
allocated among Class L shares, Class L - Special Series 1 shares and
Class L - Special Series 2 shares and such other shares, respectively,
(irrespective of whether said shares have been classified as a part of
a series of said Class and, if so classified as a part of a series,
irrespective of the particular series classification), in proportion
to their respective net asset values:
a. If in the future the Board of Directors determines to
enter into agreements which provide for services only for
Class L shares, Class L - Special Series 1 shares or Class L -
Special Series 2 shares and to allocate any related expenses
to the extent that may be from time to time determined by the
Board of Directors:
(1) only the shares of Class L Common Stock
shall bear: (i) the expenses and liabilities of
payments to institutions under any agreements entered
into by or on behalf of the Corporation which provide
for services by the institutions exclusively for
their customers who own of record or beneficially
such shares; and (ii) such other expenses and
liabilities as the Board of Directors may from time
to time determine are directly attributable to such
shares and which therefore should be borne solely by
shares of Class L Common Stock;
(2) only the shares of Class L - Special
Series 1 Common Stock shall bear: (i) the expenses
and liabilities of payments to institutions under any
agreements entered into by or on behalf of the
Corporation which provide for services by the
institutions exclusively for their customers who own
of record or beneficially such shares; and (ii) such
other expenses and liabilities as the Board of
Directors may from time to time determine are
directly attributable to such shares and which
therefore should be borne solely by shares of Class L
- Special Series 1 Common Stock;
(3) Only the shares of Class L - Special
Series 2 Common Stock shall bear: (i) the expenses
and liabilities of payments to
-11-
<PAGE> 12
institutions under any agreements entered into by or
on behalf of the Corporation which provide for
services by the institutions exclusively for
their customers who own of record or beneficially
such shares; and (ii) such other expenses and
liabilities as the Board of Directors may from time
to time determine are directly attributable to such
shares and which therefore should be borne solely by
shares of Class L - Special Series 2 Common Stock;
(4) No shares of Class L Common Stock
shall bear the expenses and liabilities described in
subparagraphs (2) and (3) above;
(5) No shares of Class L - Special
Series 1 Common Stock shall bear the expenses and
liabilities described in subparagraphs (1) and 3)
above; and
(6) No shares of Class L - Special
Series 2 Common Stock shall bear the expenses and
liabilities described in subparagraphs (1) and (2)
above.
3. PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS,
RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS, QUALIFICATIONS, AND TERMS
AND CONDITIONS OF REDEMPTION. Except as provided hereby, each share
of Class L Common Stock, Class L Common Stock - Special Series 1 and
Class L Common Stock - Special Series 2 shall have the same
preferences, conversion, and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms
and conditions of redemption applicable to all other shares of Common
Stock as set forth in the Charter and shall also have the same
preferences, conversion, and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms
and conditions of redemption as each other share formerly, now or
hereafter classified as a share of Class L Common Stock (irrespective
of whether said share has been classified as a part of a series of
said Class and, if so classified as a part of a series, irrespective
of the particular series classification) except that:
(a)(i) on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause
a.(1) (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only the shares of Class L Common Stock
(excluding the other
-12-
<PAGE> 13
shares classified as a series of such Class other than Class L
Common Stock) shall be entitled to vote, except that if said
matter affects shares of capital stock in the Corporation other
than shares of Class L Common Stock, such other affected
shares of capital stock in the Corporation shall also be
entitled to vote, and in such case, such shares of Class L
Common Stock shall be voted in the aggregate together with such
other affected shares and not by class or series except where
otherwise required by law or permitted by the Board of
Directors of the Corporation; and (ii) if any matter submitted
to a vote of the shareholders of the Corporation does not
affect the shares of Class L Common Stock, such shares shall
not be entitled to vote (except where required by law or
permitted by the Board of Directors) even though the matter is
submitted to a vote of the holders of shares of capital stock
in the Corporation other than said shares of Class L Common
Stock;
(b)(i) on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause
a.(2) above (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only shares of Class L Common Stock - Special
Series 1 (excluding shares designated as a series of such Class
other than Class L Common Stock - Special Series 1) shall be
entitled to vote, except that if said matter affects shares of
capital stock of the Corporation other than shares of Class L
Common Stock - Special Series 1, such other affected shares of
capital stock of the Corporation shall also be entitled to
vote, and in such case shares of Class L Common Stock - Special
Series 1 shall be voted in the aggregate together with such
other affected shares and not by class or series except where
otherwise required by law or permitted by the Board of
Directors of the Corporation; and (ii) if any matter submitted
to a vote of the shareholders of the Corporation does not
affect shares of Class L Common Stock - Special Series 1, said
shares shall not be entitled to vote (except where required by
law or permitted by the Board of Directors) even though the
matter is submitted to a vote of holders of shares of capital
stock of the Corporation other than said shares of Class L
Common Stock - Special Series 1; and
(c)(i) on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause
a.(3) above (or to any plan or other document adopted by the
Corporation relating to said
-13-
<PAGE> 14
agreements, expenses or liabilities) and is submitted to a vote
of shareholders of the Corporation, only shares of Class L
Common Stock - Special Series 2 (excluding shares designated as
a series of such Class other than Class L Common Stock -
Special Series 2) shall be entitled to vote except that if said
matter affects shares of capital stock other than shares
of Class L Common Stock - Special Series 2, such other affected
shares of capital stock in the Corporation shall also be
entitled to vote, and in such case, such shares of Class L
Common Stock - Special Series 2 shall be voted in the aggregate
together with such other affected shares and not by class or
series except where otherwise required by law or permitted by
the Board of Directors of the Corporation; and (ii) if any
matter submitted to a vote of the shareholders of the
Corporation does not affect the shares of Class L Common Stock
- Special Series 2, such shares shall not be entitled to vote
(except where required by law or permitted by the Board of
Directors) even though the matter is submitted to a vote of the
holders of shares of capital stock in the Corporation other
than said shares of Class L Common Stock - Special Series 2.
(d) At such times, which may vary among the holders
of shares within the series, as may be determined by the Board
of Directors (or with the authorization of the Board of
Directors, the officers of the Corporation) in accordance with
the Investment Company Act of 1940, as amended, and applicable
rules and regulations of the National Association of Securities
Dealers, Inc. and reflected in the registration statement
relating to the Corporation's Class L - Special Series 2 Common
Stock, shares of the Class L - Special Series 2 Common Stock
may be automatically converted into shares of Class L Common
Stock of the Corporation based on the relative net asset values
of such series at the time of conversion, subject, however, to
any conditions of conversion that may be imposed by the Board
of Directors (or with the authorization of the Board of
Directors, the officers of the Corporation) and reflected in
the registration statement relating to the Class L - Special
Series 2 Common Stock as aforesaid.
FOURTH: The total number of shares of capital stock
which the Corporation is presently authorized to issue is Seven
Billion (7,000,000,000) shares (of the par value of One Mill ($.001)
each) of Common Stock classified as follows:
-14-
<PAGE> 15
<TABLE>
<CAPTION>
Number of Shares
Classification Authorized
-------------- ----------------
<S> <C>
Class A 550,000,000
Class A-Special Series 1 1,800,000,000
Class A-Special Series 2 300,000,000
Class A-Special Series 3 50,000,000
Class B 100,000,000
Class B-Special Series 1 1,000,000,000
Class B-Special Series 2 300,000,000
Class C 5,000,000
Class C-Special Series 1 50,000,000
Class C-Special Series 2 20,000,000
Class C-Special Series 3 50,000,000
Class D 5,000,000
Class D-Special Series 1 50,000,000
Class D-Special Series 2 20,000,000
Class D-Special Series 3 50,000,000
Class E 5,000,000
Class E-Special Series 1 15,000,000
Class E-Special Series 2 20,000,000
Class E-Special Series 3 50,000,000
Class F 5,000,000
Class F-Special Series 1 15,000,000
Class F-Special Series 2 20,000,000
Class F-Special Series 3 50,000,000
Class G 5,000,000
Class G-Special Series 1 15,000,000
Class G-Special Series 2 20,000,000
Class G-Special Series 3 50,000,000
Class H 10,000,000
Class H-Special Series 1 10,000,000
Class H-Special Series 2 10,000,000
Class H-Special Series 3 50,000,000
Class I 25,000,000
Class I-Special Series 1 25,000,000
Class J 50,000,000
Class J-Special Series 1 300,000,000
Class K 25,000,000
Class K-Special Series 1 25,000,000
Class K-Special Series 2 10,000,000
Class L 25,000,000
Class L-Special Series 1 25,000,000
Class L-Special Series 2 10,000,000
Unclassified 1,780,000,000
</TABLE>
The aggregate par value of all shares having par value is Seven
Million Dollars ($7,000,000).
FIFTH: The Corporation is registered as an open-end company
under the Investment Company Act of 1940.
-15-
<PAGE> 16
IN WITNESS WHEREOF, The ARCH Fund, Inc. has caused these presents to
be signed in its name and on its behalf by its President and its corporate seal
to be hereunto affixed and attested to by its Secretary as of September 18,
1995.
THE ARCH FUND, INC.
Attest:
By: /s/ Jerry V. Woodham
-----------------------------
Jerry V. Woodham, President
/s/ W. Bruce McConnel, III
- --------------------------
W. Bruce McConnel, III
Secretary
-16-
<PAGE> 17
CERTIFICATE
THE UNDERSIGNED, Chairman of the Board and President of THE ARCH FUND,
INC., who executed on behalf of said Corporation the attached Articles
Supplementary of said Corporation, of which this Certificate is made a part,
hereby acknowledges, in the name and on behalf of said Corporation, the
attached Articles Supplementary to be the corporate act of said Corporation,
and certifies that to the best of his knowledge, information and belief the
matters and facts set forth in the attached Articles Supplementary with respect
to authorization and approval are true in all material respects, under the
penalties for perjury.
/s/ Jerry V. Woodham
-----------------------------
Jerry V. Woodham, President
Dated: September 18, 1995
<PAGE> 1
Exhibit (1)(r)
THE ARCH FUND, INC.
ARTICLES SUPPLEMENTARY
THE ARCH FUND, INC., a Maryland corporation having its principal office in
Maryland in the City of Baltimore, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The total number of shares of capital
stock which the Corporation was heretofore authorized to issue was
Seven Billion (7,000,000,000) shares (of the par value of One
Mill ($.001) each) and of the aggregate par value of Seven Million
Dollars ($7,000,000) of Common Stock classified as follows:
<TABLE>
<CAPTION>
Number of Shares
Classification Authorized
-------------- ----------------
<S> <C>
Class A 550,000,000
Class A-Special Series 1 1,800,000,000
Class A-Special Series 2 300,000,000
Class A-Special Series 3 50,000,000
Class B 100,000,000
Class B-Special Series 1 1,000,000,000
Class B-Special Series 2 300,000,000
Class C 5,000,000
Class C-Special Series 1 50,000,000
Class C-Special Series 2 20,000,000
Class C-Special Series 3 50,000,000
Class D 5,000,000
Class D-Special Series 1 50,000,000
Class D-Special Series 2 20,000,000
Class D-Special Series 3 50,000,000
Class E 5,000,000
Class E-Special Series 1 15,000,000
Class E-Special Series 2 20,000,000
Class E-Special Series 3 50,000,000
Class F 5,000,000
Class F-Special Series 1 15,000,000
Class F-Special Series 2 20,000,000
Class F-Special Series 3 50,000,000
Class G 5,000,000
Class G-Special Series 1 15,000,000
Class G-Special Series 2 20,000,000
Class G-Special Series 3 50,000,000
Class H 10,000,000
Class H-Special Series 1 10,000,000
Class H-Special Series 2 10,000,000
Class H-Special Series 3 50,000,000
Class I 25,000,000
Class I-Special Series 1 25,000,000
Class J 50,000,000
Class J-Special Series 1 300,000,000
Class K 25,000,000
Class K-Special Series 1 25,000,000
Class K-Special Series 2 10,000,000
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
Class L 25,000,000
Class L-Special Series 1 25,000,000
Class L-Special Series 2 10,000,000
Unclassified 1,780,000,000
</TABLE>
SECOND: Pursuant to Article VI of the Corporation's
Articles of Incorporation (the "Charter"), the Board of Directors of
the Corporation has classified Two Hundred Fifty Million (250,000,000)
authorized and unissued shares of previously unclassified Common Stock
as follows:
<TABLE>
<CAPTION>
Number of Shares
Classification Classified
-------------- ---------------
<S> <C>
Class M 25,000,000
Class M-Special Series 1 25,000,000
Class M-Special Series 2 25,000,000
Class M-Special Series 3 25,000,000
Class N 25,000,000
Class N-Special Series 1 25,000,000
Class N-Special Series 2 25,000,000
Class O 25,000,000
Class O-Special Series 1 25,000,000
Class O-Special Series 2 25,000,000
</TABLE>
pursuant to resolutions unanimously adopted by the Board of Directors
of the Corporation on March 19, 1996.
THIRD: Pursuant to Article VI, Section (5) of the
Charter, the shares of Common Stock newly classified hereby shall have
the following preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms
and conditions of redemption:
A.1. ASSETS BELONGING TO A CLASS. All consideration received
by the Corporation for the issue and sale of shares of Class M Common
Stock, Class M Common Stock - Special Series 1, Class M Common Stock -
Special Series 2 and Class M Common Stock - Special Series 3 shall be
invested and reinvested with the consideration received by the
Corporation for the issue and sale of all other shares now or
hereafter classified as shares of Class M Common Stock (irrespective
of whether said shares have been classified as a part of a series of
said Class and, if so classified as a part of a series, irrespective
of the particular series classification), together with all income,
earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange, or liquidation thereof, and any funds
or payments derived from any reinvestment of such proceeds in whatever
form the same may be, and any general assets of the Corporation
allocated to Class M shares, Class M - Special Series 1 shares, Class
M - Special Series 2 shares and Class M - Special Series 3 shares or
such other
-2-
<PAGE> 3
shares with respect to such Class by the Board of Directors in
accordance with the Corporation's Charter. All income, earnings,
profits, and proceeds, including any proceeds derived from the sale,
exchange or liquidation of such shares, and any assets derived from
any reinvestment of such proceeds in whatever form shall be allocated
among Class M shares, Class M - Special Series 1 shares, Class M -
Special Series 2 shares and Class M - Special Series 3 shares and all
other shares now or hereafter designated as Class M Common Stock,
respectively, (irrespective of whether said shares have been
classified as a part of a series of said Class and, if so classified
as a part of a series, irrespective of the particular series
classification), in proportion to their respective net asset values.
2. LIABILITIES BELONGING TO A CLASS. All the
liabilities (including expenses) of the Corporation in respect of
Class M shares, Class M - Special Series 1 shares, Class M - Special
Series 2 shares and Class M - Special Series 3 shares and all other
shares now or hereafter designated as Class M Common Stock and in
respect of any general liabilities (including expenses) of the
Corporation allocated to Class M shares, Class M - Special Series 1
shares, Class M - Special Series 2 shares and Class M - Special Series
3 shares or such other shares by the Board of Directors in accordance
with the Corporation's Charter shall be allocated among Class M
shares, Class M - Special Series 1 shares, Class M - Special Series 2
shares and Class M - Special Series 3 shares and such other shares,
respectively, (irrespective of whether said shares have been
classified as a part of a series of said Class and, if so classified
as a part of a series, irrespective of the particular series
classification), in proportion to their respective net asset values:
a. If in the future the Board of Directors determines to
enter into agreements which provide for services only for
Class M shares, Class M - Special Series 1 shares, Class M -
Special Series 2 shares and Class M - Special Series 3 shares
and to allocate any related expenses to the extent that may be
from time to time determined by the Board of Directors:
(1) only the shares of Class M Common Stock
shall bear: (i) the expenses and liabilities of
payments to institutions under any agreements entered
into by or on behalf of the Corporation which provide
for services by the institutions exclusively for
their customers who own of record or beneficially
such shares; and (ii) such other expenses and
liabilities as the Board of Directors may from time
to time determine are directly
-3-
<PAGE> 4
attributable to such shares and which therefore
should be borne solely by shares of Class M
Common Stock;
(2) only the shares of Class M - Special
Series 1 Common Stock shall bear: (i) the expenses
and liabilities of payments to institutions under any
agreements entered into by or on behalf of the
Corporation which provide for services by the
institutions exclusively for their customers who own
of record or beneficially such shares; and (ii) such
other expenses and liabilities as the Board of
Directors may from time to time determine are
directly attributable to such shares and which
therefore should be borne solely by shares of Class M
- Special Series 1 Common Stock;
(3) only the shares of Class M - Special
Series 2 Common Stock shall bear: (i) the expenses
and liabilities of payments to institutions under any
agreements entered into by or on behalf of the
Corporation which provide for services by the
institutions exclusively for their customers who own
of record or beneficially such shares; and (ii) such
other expenses and liabilities as the Board of
Directors may from time to time determine are
directly attributable to such shares and which
therefore should be borne solely by shares of Class M
- Special Series 2 Common Stock;
(4) only the shares of Class M - Special
Series 3 Common Stock shall bear: (i) the expenses
and liabilities of payments to institutions under any
agreements entered into by or on behalf of the
Corporation which provide for services by the
institutions exclusively for their customers who own
of record or beneficially such shares; and (ii) such
other expenses and liabilities as the Board of
Directors may from time to time determine are
directly attributable to such shares and which
therefore should be borne solely by shares of Class M
- Special Series 3 Common Stock;
(5) No shares of Class M Common Stock
shall bear the expenses and liabilities described in
subparagraphs (2), (3) and (4) above; and
(6) No shares of Class M - Special Series
1 Common Stock shall bear the expenses and
-4-
<PAGE> 5
liabilities described in subparagraph (1), (3) and
(4) above.
(7) No shares of Class M - Special
Series 2 Common Stock shall bear the expenses and
liabilities described in subparagraphs (1), (2) and
(4) above.
(8) No shares of Class M - Special
Series 3 Common Stock shall bear the expenses and
liabilities described in subparagraphs (1), (2) and
(3) above.
3. PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS,
RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS, QUALIFICATIONS, AND TERMS
AND CONDITIONS OF REDEMPTION. Except as provided hereby, each share
of Class M Common Stock, Class M Common Stock - Special Series 1,
Class M Common Stock - Special Series 2 and Class M Common Stock -
Special Series 3 shall have the same preferences, conversion, and
other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption
applicable to all other shares of Common Stock as set forth in the
Charter and shall also have the same preferences, conversion, and
other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption as
each other share formerly, now or hereafter classified as a share of
Class M Common Stock (irrespective of whether said share has been
classified as a part of a series of said Class and, if so classified
as a part of a series, irrespective of the particular series
classification) except that:
(a)(i) on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause
a.(1) (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only the shares of Class M Common Stock
(excluding the other shares classified as a series of such
Class other than Class M Common Stock) shall be entitled to
vote, except that if said matter affects shares of capital
stock in the Corporation other than shares of Class M Common
Stock, such other affected shares of capital stock in the
Corporation shall also be entitled to vote, and in such case,
such shares of Class M Common Stock shall be voted in the
aggregate together with such other affected shares and not by
class or series except where otherwise required by law or
permitted by the Board of Directors of the Corporation; and
(ii) if any matter
-5-
<PAGE> 6
submitted to a vote of the shareholders of the Corporation
does not affect the shares of Class M Common Stock, such
shares shall not be entitled to vote (except where required by
law or permitted by the Board of Directors) even though the
matter is submitted to a vote of the holders of shares of
capital stock in the Corporation other than said shares
of Class M Common Stock; and
(b)(i) on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause
a.(2) above (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only shares of Class M Common Stock - Special
Series 1 (excluding shares designated as a series of such
Class other than Class M Common Stock - Special Series 1)
shall be entitled to vote, except that if said matter affects
shares of capital stock of the Corporation other than shares
of Class M Common Stock - Special Series 1, such other
affected shares of capital stock of the Corporation shall also
be entitled to vote, and in such case shares of Class M Common
Stock - Special Series 1 shall be voted in the aggregate
together with such other affected shares and not by class or
series except were otherwise required by law or permitted by
the Board of Directors of the Corporation; and (ii) if any
matter submitted to a vote of the shareholders of the
Corporation does not affect shares of Class M Common Stock -
Special Series 1, said shares shall not be entitled to vote
(except where required by law or permitted by the Board of
Directors) even though the matter is submitted to a vote of
holders of shares of capital stock of the Corporation other
than said shares of Class M Common Stock - Special Series 1.
(c)(i) on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause
a.(3) above (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only shares of Class M Common Stock - Special
Series 2 (excluding shares designated as a series of such
Class other than Class M Common Stock - Special Series 2)
shall be entitled to vote, except that if said matter affects
shares of capital stock of the Corporation other than shares
of Class M Common Stock - Special Series 2, such other
affected shares of capital stock of the Corporation shall also
be entitled to vote, and in such case shares of Class M Common
Stock - Special
-6-
<PAGE> 7
Series 2 shall be voted in the aggregate together with such
other affected shares and not by class or series except were
otherwise required by law or permitted by the Board of
Directors of the Corporation; and (ii) if any matter submitted
to a vote of the shareholders of the Corporation does not
affect shares of Class M Common Stock - Special Series 2, said
shares shall not be entitled to vote (except where required by
law or permitted by the Board of Directors) even though the
matter is submitted to a vote of holders of shares of capital
stock of the Corporation other than said shares of Class M
Common Stock - Special Series 2.
(d)(i) on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause
a.(4) above (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only shares of Class M Common Stock - Special
Series 3 (excluding shares designated as a series of such
Class other than Class M Common Stock - Special Series 3 shall
be entitled to vote, except that if said matter affects shares
of capital stock of the Corporation other than shares of Class
M Common Stock - Special Series 3, such other affected shares
of capital stock of the Corporation shall also be entitled to
vote, and in such case shares of Class M Common Stock -
Special Series 3 shall be voted in the aggregate together with
such other affected shares and not by class or series except
were otherwise required by law or permitted by the Board of
Directors of the Corporation; and (ii) if any matter submitted
to a vote of the shareholders of the Corporation does not
affect shares of Class M Common Stock - Special Series 3, said
shares shall not be entitled to vote (except where required by
law or permitted by the Board of Directors) even though the
matter is submitted to a vote of holders of shares of capital
stock of the Corporation other than said shares of Class M
Common Stock - Special Series 3.
(d) At such times, which may vary among the
holders of shares within the series, as may be determined by
the Board of Directors (or with the authorization of the Board
of Directors, the officers of the Corporation) in accordance
with the Investment Company Act of 1940, as amended, and
applicable rules and regulations of the National Association
of Securities Dealers, Inc. and reflected in the registration
statement relating to the Corporation's Class M - Special
Series 3 Common Stock, shares of the Class M - Special Series
3 Common Stock may be
-7-
<PAGE> 8
automatically converted into shares of Class M Common Stock of
the Corporation based on the relative net asset values of such
series at the time of conversion, subject, however, to any
conditions of conversion that may be imposed by the Board of
Directors (or with the authorization of the Board of
Directors, the officers of the Corporation) and reflected in
the registration statement relating to the Class M - Special
Series 3 Common Stock as aforesaid.
B.1. ASSETS BELONGING TO A CLASS. All consideration received
by the Corporation for the issue and sale of shares of Class N Common
Stock, Class N Common Stock - Special Series 1 and Class N Common
Stock - Special Series 2 shall be invested and reinvested with the
consideration received by the Corporation for the issue and sale of
all other shares now or hereafter classified as shares of Class N
Common Stock (irrespective of whether said shares have been classified
as a part of a series of said Class and, if so classified as a part of
a series, irrespective of the particular series classification),
together with all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange, or liquidation
thereof, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, and any general assets
of the Corporation allocated to Class N shares, Class N - Special
Series 1 shares and Class N - Special Series 2 shares or such other
shares with respect to such Class by the Board of Directors in
accordance with the Corporation's Charter. All income, earnings,
profits, and proceeds, including any proceeds derived from the sale,
exchange or liquidation of such shares, and any assets derived from
any reinvestment of such proceeds in whatever form shall be allocated
among Class N shares, Class N - Special Series 1 shares and Class N -
Special Series 2 shares and all other shares now or hereafter
designated as Class N Common Stock, respectively, (irrespective of
whether said shares have been classified as a part of a series of said
Class and, if so classified as a part of a series, irrespective of the
particular series classification), in proportion to their respective
net asset values.
2. LIABILITIES BELONGING TO A CLASS. All the
liabilities (including expenses) of the Corporation in respect of
Class N shares, Class N - Special Series 1 shares and Class N -
Special Series 2 shares and all other shares now or hereafter
designated as Class N Common Stock and in respect of any general
liabilities (including expenses) of the Corporation allocated to Class
N shares, Class N - Special Series 1 shares and Class N - Special
Series 2 shares or such other shares by the Board of Directors in
-8-
<PAGE> 9
accordance with the Corporation's Charter shall be allocated among
Class N shares, Class N - Special Series 1 shares and Class N -
Special Series 2 shares and such other shares, respectively,
(irrespective of whether said shares have been classified as a part of
a series of said Class and, if so classified as a part of a series,
irrespective of the particular series classification), in proportion
to their respective net asset values:
a. If in the future the Board of Directors determines to
enter into agreements which provide for services only for
Class N shares, Class N - Special Series 1 shares or Class N -
Special Series 2 shares and to allocate any related expenses
to the extent that may be from time to time determined by the
Board of Directors:
(1) only the shares of Class N Common Stock
shall bear: (i) the expenses and liabilities of
payments to institutions under any agreements entered
into by or on behalf of the Corporation which provide
for services by the institutions exclusively for
their customers who own of record or beneficially
such shares; and (ii) such other expenses and
liabilities as the Board of Directors may from time
to time determine are directly attributable to such
shares and which therefore should be borne solely by
shares of Class N Common Stock;
(2) only the shares of Class N - Special
Series 1 Common Stock shall bear: (i) the expenses
and liabilities of payments to institutions under any
agreements entered into by or on behalf of the
Corporation which provide for services by the
institutions exclusively for their customers who own
of record or beneficially such shares; and (ii) such
other expenses and liabilities as the Board of
Directors may from time to time determine are
directly attributable to such shares and which
therefore should be borne solely by shares of Class N
- Special Series 1 Common Stock;
(3) Only the shares of Class N - Special
Series 2 Common Stock shall bear: (i) the expenses
and liabilities of payments to institutions under any
agreements entered into by or on behalf of the
Corporation which provide for services by the
institutions exclusively for their customers who own
of record or beneficially such shares; and (ii) such
other expenses and liabilities as the Board of
Directors may from
-9-
<PAGE> 10
time to time determine are directly attributable to
such shares and which therefore should be borne
solely by shares of Class N - Special Series 2 Common
Stock;
(4) No shares of Class N Common Stock
shall bear the expenses and liabilities described in
subparagraphs (2) and (3) above;
(5) No shares of Class N - Special
Series 1 Common Stock shall bear the expenses and
liabilities described in subparagraphs (1) and (3)
above; and
(6) No shares of Class N - Special
Series 2 Common Stock shall bear the expenses and
liabilities described in subparagraphs (1) and (2)
above.
3. PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS,
RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS, QUALIFICATIONS, AND TERMS
AND CONDITIONS OF REDEMPTION. Except as provided hereby, each share
of Class N Common Stock, Class N Common Stock - Special Series 1 and
Class N Common Stock - Special Series 2 shall have the same
preferences, conversion, and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms
and conditions of redemption applicable to all other shares of Common
Stock as set forth in the Charter and shall also have the same
preferences, conversion, and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms
and conditions of redemption as each other share formerly, now or
hereafter classified as a share of Class N Common Stock (irrespective
of whether said share has been classified as a part of a series of
said Class and, if so classified as a part of a series, irrespective
of the particular series classification) except that:
(a)(i) on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause
a.(1) (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only the shares of Class N Common Stock
(excluding the other shares classified as a series of such
Class other than Class N Common Stock) shall be entitled to
vote, except that if said matter affects shares of capital
stock in the Corporation other than shares of Class N Common
Stock, such other affected shares of capital stock in the
Corporation shall also be entitled to vote, and in
-10-
<PAGE> 11
such case, such shares of Class N Common Stock shall be voted
in the aggregate together with such other affected shares and
not by class or series except where otherwise required by law
or permitted by the Board of Directors of the Corporation; and
(ii) if any matter submitted to a vote of the shareholders of
the Corporation does not affect the shares of Class N Common
Stock, such shares shall not be entitled to vote (except where
required by law or permitted by the Board of Directors) even
though the matter is submitted to a vote of the holders of
shares of capital stock in the Corporation other than said
shares of Class N Common Stock;
(b)(i) on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause
a.(2) above (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only shares of Class N Common Stock - Special
Series 1 (excluding shares designated as a series of such
Class other than Class N Common Stock - Special Series 1)
shall be entitled to vote, except that if said matter affects
shares of capital stock of the Corporation other than shares
of Class N Common Stock - Special Series 1, such other
affected shares of capital stock of the Corporation shall also
be entitled to vote, and in such case shares of Class N Common
Stock - Special Series 1 shall be voted in the aggregate
together with such other affected shares and not by class or
series except where otherwise required by law or permitted by
the Board of Directors of the Corporation; and (ii) if any
matter submitted to a vote of the shareholders of the
Corporation does not affect shares of Class N Common Stock -
Special Series 1, said shares shall not be entitled to vote
(except where required by law or permitted by the Board of
Directors) even though the matter is submitted to a vote of
holders of shares of capital stock of the Corporation other
than said shares of Class N Common Stock - Special Series 1;
and
(c)(i) on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause
a.(3) above (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only shares of Class N Common Stock - Special
Series 2 (excluding shares designated as a series of such
Class other than Class N Common Stock - Special Series 2 shall
be entitled to vote except that if said matter
-11-
<PAGE> 12
affects shares of capital stock other than shares of Class N
Common Stock - Special Series 2, such other affected shares of
capital stock in the Corporation shall also be entitled to
vote, and in such case, such shares of Class N Common Stock -
Special Series 2 shall be voted in the aggregate together with
such other affected shares and not by class or series except
where otherwise required by law or permitted by the Board of
Directors of the Corporation; and (ii) if any matter submitted
to a vote of the shareholders of the Corporation does not
affect the shares of Class N Common Stock - Special Series 2,
such shares shall not be entitled to vote (except where
required by law or permitted by the Board of Directors) even
though the matter is submitted to a vote of the holders of
shares of capital stock in the Corporation other than said
shares of Class N Common Stock - Special Series 2.
(d) At such times, which may vary among the
holders of shares within the series, as may be determined by
the Board of Directors (or with the authorization of the Board
of Directors, the officers of the Corporation) in accordance
with the Investment Company Act of 1940, as amended, and
applicable rules and regulations of the National Association
of Securities Dealers, Inc. and reflected in the registration
statement relating to the Corporation's Class N - Special
Series 2 Common Stock, shares of the Class N - Special Series
2 Common Stock may be automatically converted into shares of
Class N Common Stock of the Corporation based on the relative
net asset values of such series at the time of conversion,
subject, however, to any conditions of conversion that may be
imposed by the Board of Directors (or with the authorization
of the Board of Directors, the officers of the Corporation)
and reflected in the registration statement relating to the
Class N - Special Series 2 Common Stock as aforesaid.
C.1. ASSETS BELONGING TO A CLASS. All consideration received
by the Corporation for the issue and sale of shares of Class O Common
Stock, Class O Common Stock - Special Series 1 and Class O Common
Stock - Special Series 2 shall be invested and reinvested with the
consideration received by the Corporation for the issue and sale of
all other shares now or hereafter classified as shares of Class O
Common Stock (irrespective of whether said shares have been classified
as a part of a series of said Class and, if so classified as a part of
a series, irrespective of the particular series classification),
together with all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange, or liquidation
-12-
<PAGE> 13
thereof, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, and any general assets
of the Corporation allocated to Class O shares, Class O - Special
Series 1 shares and Class O - Special Series 2 shares or such other
shares with respect to such Class by the Board of Directors in
accordance with the Corporation's Charter. All income, earnings,
profits, and proceeds, including any proceeds derived from the sale,
exchange or liquidation of such shares, and any assets derived from
any reinvestment of such proceeds in whatever form shall be allocated
among Class O shares, Class O - Special Series 1 shares and Class O -
Special Series 2 shares and all other shares now or hereafter
designated as Class O Common Stock, respectively, (irrespective of
whether said shares have been classified as a part of a series of said
Class and, if so classified as a part of a series, irrespective of the
particular series classification), in proportion to their respective
net asset values.
2. LIABILITIES BELONGING TO A CLASS. All the
liabilities (including expenses) of the Corporation in respect of
Class O shares, Class O - Special Series 1 shares and Class O -
Special Series 2 shares and all other shares now or hereafter
designated as Class O Common Stock and in respect of any general
liabilities (including expenses) of the Corporation allocated to Class
O shares, Class O - Special Series 1 shares and Class O - Special
Series 2 shares or such other shares by the Board of Directors in
accordance with the Corporation's Charter shall be allocated among
Class O shares, Class O - Special Series 1 shares and Class O -
Special Series 2 shares and such other shares, respectively,
(irrespective of whether said shares have been classified as a part of
a series of said Class and, if so classified as a part of a series,
irrespective of the particular series classification), in proportion
to their respective net asset values:
a. If in the future the Board of Directors determines to
enter into agreements which provide for services only for
Class O shares, Class O - Special Series 1 shares or Class O -
Special Series 2 shares and to allocate any related expenses
to the extent that may be from time to time determined by the
Board of Directors:
(1) only the shares of Class O Common Stock
shall bear: (i) the expenses and liabilities of
payments to institutions under any agreements entered
into by or on behalf of the Corporation which provide
for services by the institutions exclusively for
their customers who own of record or beneficially
such shares; and (ii) such other
-13-
<PAGE> 14
expenses and liabilities as the Board of Directors
may from time to time determine are directly
attributable to such shares and which therefore
should be borne solely by shares of Class O Common
Stock;
(2) only the shares of Class O - Special
Series 1 Common Stock shall bear: (i) the expenses
and liabilities of payments to institutions under any
agreements entered into by or on behalf of the
Corporation which provide for services by the
institutions exclusively for their customers who own
of record or beneficially such shares; and (ii) such
other expenses and liabilities as the Board of
Directors may from time to time determine are
directly attributable to such shares and which
therefore should be borne solely by shares of Class O
- Special Series 1 Common Stock;
(3) Only the shares of Class O - Special
Series 2 Common Stock shall bear: (i) the expenses
and liabilities of payments to institutions under any
agreements entered into by or on behalf of the
Corporation which provide for services by the
institutions exclusively for their customers who own
of record or beneficially such shares; and (ii) such
other expenses and liabilities as the Board of
Directors may from time to time determine are
directly attributable to such shares and which
therefore should be borne solely by shares of Class O
- Special Series 2 Common Stock;
(4) No shares of Class O Common Stock
shall bear the expenses and liabilities described in
subparagraphs (2) and (3) above;
(5) No shares of Class O - Special
Series 1 Common Stock shall bear the expenses and
liabilities described in subparagraphs (1) and (3)
above; and
(6) No shares of Class O - Special
Series 2 Common Stock shall bear the expenses and
liabilities described in subparagraphs (1) and (2)
above.
3. PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS,
RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS, QUALIFICATIONS, AND TERMS
AND CONDITIONS OF REDEMPTION. Except as provided hereby, each share
of Class O Common
-14-
<PAGE> 15
Stock, Class O Common Stock - Special Series 1 and Class O Common
Stock - Special Series 2 shall have the same preferences, conversion,
and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption
applicable to all other shares of Common Stock as set forth in the
Charter and shall also have the same preferences, conversion, and
other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption as
each other share formerly, now or hereafter classified as a share of
Class O Common Stock (irrespective of whether said share has been
classified as a part of a series of said Class and, if so classified
as a part of a series, irrespective of the particular series
classification) except that:
(a)(i) on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause
a.(1) (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only the shares of Class O Common Stock
(excluding the other shares classified as a series of such
Class other than Class O Common Stock) shall be entitled to
vote, except that if said matter affects shares of capital
stock in the Corporation other than shares of Class O Common
Stock, such other affected shares of capital stock in the
Corporation shall also be entitled to vote, and in such case,
such shares of Class O Common Stock shall be voted in the
aggregate together with such other affected shares and not by
class or series except where otherwise required by law or
permitted by the Board of Directors of the Corporation; and
(ii) if any matter submitted to a vote of the shareholders of
the Corporation does not affect the shares of Class O Common
Stock, such shares shall not be entitled to vote (except where
required by law or permitted by the Board of Directors) even
though the matter is submitted to a vote of the holders of
shares of capital stock in the Corporation other than said
shares of Class O Common Stock;
(b)(i) on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause
a.(2) above (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only shares of Class O Common Stock - Special
Series 1 (excluding shares designated as a series of such
Class other than Class O Common Stock - Special Series 1)
-15-
<PAGE> 16
shall be entitled to vote, except that if said matter affects
shares of capital stock of the Corporation other than shares
of Class O Common Stock - Special Series 1, such other
affected shares of capital stock of the Corporation shall also
be entitled to vote, and in such case shares of Class O Common
Stock - Special Series 1 shall be voted in the aggregate
together with such other affected shares and not by class or
series except where otherwise required by law or permitted by
the Board of Directors of the Corporation; and (ii) if any
matter submitted to a vote of the shareholders of the
Corporation does not affect shares of Class O Common Stock -
Special Series 1, said shares shall not be entitled to vote
(except where required by law or permitted by the Board of
Directors) even though the matter is submitted to a vote of
holders of shares of capital stock of the Corporation other
than said shares of Class O Common Stock - Special Series
1; and
(c)(i) on any matter that pertains to the agreements
or expenses and liabilities described in Section 2, clause
a.(3) above (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses or
liabilities) and is submitted to a vote of shareholders of the
Corporation, only shares of Class O Common Stock - Special
Series 2 (excluding shares designated as a series of such
Class other than Class O Common Stock - Special Series 2)
shall be entitled to vote except that if said matter affects
shares of capital stock other than shares of Class O Common
Stock - Special Series 2, such other affected shares of
capital stock in the Corporation shall also be entitled to
vote, and in such case, such shares of Class O Common Stock -
Special Series 2 shall be voted in the aggregate together with
such other affected shares and not by class or series except
where otherwise required by law or permitted by the Board of
Directors of the Corporation; and (ii) if any matter submitted
to a vote of the shareholders of the Corporation does not
affect the shares of Class O Common Stock - Special Series 2,
such shares shall not be entitled to vote (except where
required by law or permitted by the Board of Directors) even
though the matter is submitted to a vote of the holders of
shares of capital stock in the Corporation other than said
shares of Class O Common Stock - Special Series 2.
-16-
<PAGE> 17
FOURTH: The total number of shares of capital stock
which the Corporation is presently authorized to issue is Seven
Billion (7,000,000,000) shares (of the par value of One Mill ($.001)
each) of Common Stock classified as follows:
<TABLE>
<CAPTION>
Number of Shares
Classification Authorized
-------------- ----------------
<S> <C>
Class A 550,000,000
Class A-Special Series 1 1,800,000,000
Class A-Special Series 2 300,000,000
Class A-Special Series 3 50,000,000
Class B 100,000,000
Class B-Special Series 1 1,000,000,000
Class B-Special Series 2 300,000,000
Class C 5,000,000
Class C-Special Series 1 50,000,000
Class C-Special Series 2 20,000,000
Class C-Special Series 3 50,000,000
Class D 5,000,000
Class D-Special Series 1 50,000,000
Class D-Special Series 2 20,000,000
Class D-Special Series 3 50,000,000
Class E 5,000,000
Class E-Special Series 1 15,000,000
Class E-Special Series 2 20,000,000
Class E-Special Series 3 50,000,000
Class F 5,000,000
Class F-Special Series 1 15,000,000
Class F-Special Series 2 20,000,000
Class F-Special Series 3 50,000,000
Class G 5,000,000
Class G-Special Series 1 15,000,000
Class G-Special Series 2 20,000,000
Class G-Special Series 3 50,000,000
Class H 10,000,000
Class H-Special Series 1 10,000,000
Class H-Special Series 2 10,000,000
Class H-Special Series 3 50,000,000
Class I 25,000,000
Class I-Special Series 1 25,000,000
Class J 50,000,000
Class J-Special Series 1 300,000,000
Class K 25,000,000
Class K-Special Series 1 25,000,000
Class K-Special Series 2 10,000,000
Class L 25,000,000
Class L-Special Series 1 25,000,000
Class L-Special Series 2 10,000,000
Class M 25,000,000
Class M-Special Series 1 25,000,000
Class M-Special Series 2 25,000,000
Class M-Special Series 3 25,000,000
Class N 25,000,000
Class N-Special Series 1 25,000,000
Class N-Special Series 2 25,000,000
Class O 25,000,000
Class O-Special Series 1 25,000,000
Class O-Special Series 2 25,000,000
Unclassified 1,530,000,000
</TABLE>
-17-
<PAGE> 18
The aggregate par value of all shares having par value is Seven
Million Dollars ($7,000,000).
FIFTH: The Corporation is registered as an open-end company
under the Investment Company Act of 1940.
IN WITNESS WHEREOF, The ARCH Fund, Inc. has caused these presents to
be signed in its name and on its behalf by its President and its corporate seal
to be hereunto affixed and attested to by its Secretary as of ,
1996.
THE ARCH FUND, INC.
Attest:
By:___________________________
Jerry V. Woodham, President
______________________
W. Bruce McConnel, III
Secretary
-18-
<PAGE> 19
CERTIFICATE
THE UNDERSIGNED, Chairman of the Board and President of THE ARCH FUND,
INC., who executed on behalf of said Corporation the attached Articles
Supplementary of said Corporation, of which this Certificate is made a part,
hereby acknowledges, in the name and on behalf of said Corporation, the
attached Articles Supplementary to be the corporate act of said Corporation,
and certifies that to the best of his knowledge, information and belief the
matters and facts set forth in the attached Articles Supplementary with respect
to authorization and approval are true in all material respects, under the
penalties for perjury.
___________________________
Jerry V. Woodham, President
Dated: , 1996
<PAGE> 1
Exhibit (5)(a)
AMENDED AND RESTATED ADVISORY AGREEMENT
---------------------------------------
AGREEMENT made as of April 1, 1991 between THE ARCH FUND, INC.
a Maryland corporation (herein called the "Fund"), and MISSISSIPPI VALLEY
ADVISORS, INC., a Missouri corporation (the "Adviser").
WHEREAS, the Fund is registered as an open-end diversified, management
investment company under the Investment Company Act of 1940, as amended ("1940
Act"); and
WHEREAS, the Fund desires to retain the Adviser to furnish investment
advisory and administrative services to the Fund and the Adviser is willing to
so furnish such services;
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT.
(a) The Fund hereby appoints the Adviser to act
as investment adviser to The Arch Money Market, Capital Appreciation,
Diversified Fixed Income, and U.S. Government Securities Portfolios
(collectively, the "Portfolios) for the period and on the terms set forth in
this Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
(b) In the event that the Fund establishes one or
more portfolios other than the Portfolios with respect to which it desires to
retain the Adviser to act as investment adviser hereunder, the Fund shall
notify the Adviser in writing. If the Adviser is willing to render such
services, it shall notify the Fund in writing whereupon, subject to such
shareholder approval as may be required pursuant to Paragraph 9 hereof, such
portfolio shall become a Portfolio hereunder and the compensation payable by
such new Portfolio to the Adviser will be as agreed in writing at the time.
2. DELIVERY OF DOCUMENTS. The Fund has furnished the
Adviser with copies properly certified or authenticated of each of the
following:
(a) The Fund's Articles of Incorporation as filed
with the Department of Assessments and Taxation of the State
of Maryland on September 9, 1982 and all amendments thereto
(such Articles, as presently in effect and as they shall from
time to time be amended, are herein called the "Articles of
Incorporation");
<PAGE> 2
(b) The Fund's By-Laws and amendments thereto
(such By-Laws, as presently in effect and as they shall from
time to time be amended, are herein called the "By-Laws");
(c) Resolutions of the Fund's Board of Directors
authorizing the appointment of the Adviser as investment
adviser and approving this Agreement;
(d) The Fund's Notification of Registration on
Form N-8A under the 1940 Act as filed with the Securities and
Exchange Commission on September 10, 1982 and all amendments
thereto;
(e) The Fund's Registration Statement on Form N-1
under the Securities Act of 1933 as amended ("1933 Act") (File
No. 2-79285) and under the 1940 Act as filed with the
Securities and Exchange Commission on September 10, 1982 and
all amendments thereto; and
(f) The Fund's most recent Prospectus or
Prospectuses (such prospectus or prospectuses, as presently in
effect and all amendments and supplements thereto, are herein
called the "Prospectus").
The Fund will furnish the Adviser from time to time with
copies of all amendments of or supplements to the foregoing.
3. MANAGEMENT. Subject to the supervision of the Fund's
Board of Directors, the Adviser will provide a continuous investment program
for each of the Portfolios, including investment research and management with
respect to all securities and investments and cash equivalents in the
Portfolios. The Adviser will determine from time to time what securities and
other investments will be purchased, retained or sold by the Fund for each of
its Portfolios. The Adviser will provide the services under this Agreement in
accordance with the investment objectives, policies and restrictions of each
Portfolio as stated in the Prospectus and resolutions of the Fund's Board of
Directors. The Adviser further agrees that it:
(a) will conform with all applicable Rules and
Regulations of the Securities and Exchange Commission and will
in addition conduct its activities under this Agreement in
accordance with regulations of the Board of Governors of the
Federal Reserve System pertaining to investment advisory
activities of bank holding companies to the same extent as if
such regulations were by their terms applicable to its
activities;
(b) will not make loans to any person to
purchase or carry Fund shares or make loans to the Fund;
<PAGE> 3
(c) will place orders pursuant to its investment
determinations for each Portfolio either directly with the
issuer or with any broker or dealer. In placing orders with
brokers and dealers the Adviser will attempt to obtain the
best net price and the most favorable execution of its orders.
Consistent with this obligation, when the execution and price
offered by two or more brokers or dealers are comparable, the
Adviser may, in its discretion, purchase and sell portfolio
securities to and from brokers and dealers who provide the
Fund with research advice and other services. In no instance
will portfolio securities be purchased from or sold to the
Adviser, TBC Funds Distributor, Inc. (the Fund's distributor),
or any affiliated person of either the Fund, the Adviser or
TBC Funds Distributor, Inc., unless permitted pursuant to an
order of the Securities and Exchange Commission or applicable
rules;
(d) will maintain books and records with respect
to the securities transactions of the Portfolios and will
furnish the Fund's Board of Directors such periodic and
special reports as the Board may request;
(e) will maintain a policy and practice of
conducting its operations independently of the Commercial
Division of Mercantile Bank National Association ("Mercantile
Bank"). When the Adviser makes investment recommendations for
a Portfolio, its personnel will not inquire or take into
consideration whether the issuer of securities proposed for
purchase or sale for the Portfolio's account are customers of
the Commercial Division. In dealing with commercial
customers, the Commercial Division of Mercantile Bank will not
inquire or take into consideration whether securities of those
customers are held by a Portfolio;
(f) will not purchase shares of any of the
Portfolios for itself or for accounts with respect to which it
exercises sole investment discretion in connection with such
transactions except as permitted by the Fund's Board of
Directors or by federal, state and local law; and
(g) will treat confidentially and as proprietary
information of the Fund all records and other information
relative to any of the Portfolios and prior, present or
potential shareholders, and will not use such records and
information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior
notification to and approval in writing by the Fund, which
approval shall
<PAGE> 4
not be unreasonably withheld and may not be withheld where
the Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or
when so requested by the Fund.
4. SERVICES NOT EXCLUSIVE. The investment management
services furnished by the Adviser hereunder are not to be deemed exclusive, and
the Adviser shall be free to furnish similar services to others so long as its
services under this Agreement are not impaired thereby.
5. BOOKS AND RECORDS. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Adviser hereby agrees that
all records which it maintains for each Portfolio are the property of the Fund
and further agrees to surrender promptly to the Fund any of such records upon
the Fund's request. The Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
6. EXPENSES. During the term of this Agreement, the
Adviser will pay all expenses incurred by it in connection with its activities
under this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Portfolios.
7. COMPENSATION.
(a) For the services provided and the expenses
assumed pursuant to this Agreement, the Fund will pay the
Adviser and the Adviser will accept as full compensation
therefor a fee, computed daily and paid monthly (in arrears),
at an annual rate of .40% of the first $1.5 billion, .35% of
the next $1.0 billion, and .25% on amounts over $2.5 billion
of the average net assets held in The Arch Money Market
Portfolio, .55% of the average net assets of The Arch Capital
Appreciation Portfolio, .45% of the average net assets of The
Arch Diversified Fixed Income Portfolio, and .45% of the
average net assets of The Arch U.S. Government Securities
Portfolio.
(b) If in any fiscal year the aggregate expenses
of one or more Portfolios (as defined under the securities
regulations of any state having jurisdiction over the Fund)
exceed the expense limitations of any such state, the Adviser
will reimburse the Fund for 60% of such excess expenses. The
obligation of the Adviser to reimburse the Fund hereunder is
limited in any fiscal year to the amount of its fee hereunder
<PAGE> 5
attributable to all Fund Portfolios for such fiscal year,
PROVIDED, HOWEVER, that notwithstanding the foregoing,
the Adviser shall reimburse the Fund for 60% of such excess
expenses regardless of the amount of fees paid to it during
such fiscal year to the extent that the securities regulations
of any state having jurisdiction over the Fund so require.
Such expense reimbursement, if any, will be estimated,
reconciled and paid on a monthly basis.
(c) The Adviser may voluntarily waive from time
to time a portion or all of its advisory fee otherwise payable
to it hereunder with respect to one or more of the Portfolios.
(d) The fee attributable to each Portfolio shall
be the several (and not joint or joint and several) obligation
of each Portfolio.
8. LIMITATION OF LIABILITY. The Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Adviser in the performance of its
duties or from reckless disregard by it of its obligations and duties under
this Agreement.
9. DURATION AND TERMINATION. This Agreement will become
effective with respect to a Portfolio upon approval of this Agreement by vote
of a majority of the outstanding voting securities of such Portfolio, and,
unless sooner terminated as provided herein, shall continue with respect to
such Portfolio until March 31, 1992. Thereafter, if not terminated, this
Agreement shall continue with respect to a Portfolio for successive periods of
twelve months each ending on March 31 each year, PROVIDED such continuance is
specifically approved at least annually (a) by the vote of a majority of those
members of the Fund's Board of Directors who are not interested persons of any
party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the Fund's Board of Directors or by vote of
a majority of the outstanding voting securities of such Portfolio.
Notwithstanding the foregoing, this Agreement may be terminated with respect to
a Portfolio at any time, without the payment of any penalty, by the Fund (by
vote of the Fund's Board of Directors or by vote of a majority of the
outstanding voting securities of such Portfolio), or by the Adviser on sixty
days' written notice. This Agreement will immediately terminate in the event
of its assignment. (As used in this Agreement, the terms "majority of the
outstanding
<PAGE> 6
voting securities," "interested persons" and "assignment" shall have the same
meaning of such terms in the 1940 Act.)
10. AMENDMENT OF THIS AGREEMENT. No provision of this
Agreement may be changed, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
changes, discharge or termination is sought. Any amendment of this Agreement
shall be subject to the 1940 Act.
11. MISCELLANEOUS. The captions in this Agreement are
included for convenience or reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect. If
any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and shall be
governed by Missouri law.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the day and
year first above written.
THE ARCH FUND, INC.
Attest:/s/ Katherine M. Ponte By: /s/ Jerry V. Woodham
---------------------- --------------------
MISSISSIPPI VALLEY ADVISORS INC.
Attest:/s/ Sandra S. Wakefield By: /s/ John H. Blixen
----------------------- ------------------
<PAGE> 1
Exhibit (5)(b)
ADDENDUM NO. 1 TO AMENDED AND RESTATED ADVISORY AGREEMENT
This Addendum, dated as of the 27th day of September, 1991, is
entered into between THE ARCH FUND, INC. (the "Fund"), a Maryland corporation,
and MISSISSIPPI VALLEY ADVISORS INC. ("MVA"), a Missouri corporation.
WHEREAS, the Fund and MVA have entered into an Amended and
Restated Advisory Agreement dated as of April 1, 1991 (the "Advisory
Agreement'), pursuant to which the Fund appointed MVA to act as investment
adviser to the Fund for The Arch Money Market, Capital Appreciation,
Diversified Fixed Income, and U.S. Government Securities Portfolios;
WHEREAS, Section 1(b) of the Advisory Agreement provides that
in the event the Fund establishes one or more additional investment portfolios
with respect to which it desires to retain MVA to act as the investment adviser
under the Advisory Agreement, the Fund shall so notify MVA in writing, and if
MVA is willing to render such services it shall notify the Fund in writing, and
the compensation to be paid to MVA shall be that which is agreed to in writing
by the Fund and MVA; and
WHEREAS, the Fund has notified MVA that it has established The
Arch Treasury Money Market Portfolio (the "Treasury" Portfolio), and that it
desires to retain MVA to act as the investment adviser therefor, and MVA has
notified the Fund that it is willing to serve as investment adviser for the
Treasury Portfolio.
NOW THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. APPOINTMENT. The Fund hereby appoints MVA to act as
investment adviser to the Fund for the Treasury Portfolio for the period and on
the terms set forth in the Advisory Agreement. MVA hereby accepts such
appointment and agrees to render the services set forth in the Advisory
Agreement, for the compensation herein provided.
2. COMPENSATION. For the services provided and expenses
assumed pursuant to the Advisory Agreement with respect to the Treasury
Portfolio, the Fund will pay MVA from the assets belonging to the Treasury
Portfolio, and MVA will accept as full compensation therefor a fee, computed
daily and payable monthly (in arrears), at the following annual rates:
.40% of the first $1.5 billion of the average daily
net assets of the Portfolio; plus
<PAGE> 2
.35% of the next $1.0 billion average daily net
assets of the Portfolio; plus
.25% of the Portfolio's average daily net assets
over $2.5 billion.
The fee attributable to the Portfolio shall be the obligation
of that Portfolio and not of any other Portfolio of the Fund.
3. CAPITALIZED TERMS. From and after the date hereof,
the term "Portfolios" as used in the Advisory Agreement shall be deemed to
include the Treasury Portfolio. Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Advisory
Agreement.
4. MISCELLANEOUS. Except to the extent supplemented
hereby, the Advisory Agreement shall remain unchanged and in full force and
effect and is hereby ratified and confirmed in all respects as supplemented
hereby.
IN WITNESS WHEREOF, the undersigned have executed this
Addendum as of the date and year first above written.
THE ARCH FUND, INC.
By: /s/ Jerry V. Woodham
----------------------
Jerry V. Woodham
President
MISSISSIPPI VALLEY ADVISORS, INC.
By: /s/ John H. Blixen
--------------------
John H. Blixen
President
-2-
<PAGE> 1
Exhibit (5)(c)
ADDENDUM NO. 2 TO AMENDED AND RESTATED ADVISORY AGREEMENT
---------------------------------------------------------
This Addendum, dated as of April 1, 1992, is entered into
between THE ARCH FUND, INC. (the "Fund"), a Maryland corporation, and
MISSISSIPPI VALLEY ADVISORS INC. ("MVA"), a Missouri corporation.
WHEREAS, the Fund and MVA have entered into an Amended and
Restated Advisory Agreement dated as of April 1, 1991 and amended as of
September 27, 1991 (the "Advisory Agreement"), pursuant to which the Fund
appointed MVA to act as investment adviser to the Fund for The Arch Money
Market, Treasury Money Market, Capital Appreciation, Diversified Fixed Income,
and U.S. Government Securities Portfolios;
WHEREAS, Section 1(b) of the Advisory Agreement provides that
in the event the Fund establishes one or more additional investment portfolios
with respect to which it desires to retain MVA to act as the investment adviser
under the Advisory Agreement, the Fund shall so notify MVA in writing, and if
MVA is willing to render such services it shall notify the Fund in writing, and
the compensation to be paid to MVA shall be that which is agreed to in writing
by the Fund and MVA; and
WHEREAS, the Fund has notified MVA that it has established The
Arch Emerging Growth Portfolio (the "Emerging Growth" Portfolio), and that it
desires to retain MVA to act as the investment adviser therefor, and MVA has
notified the Fund that it is willing to serve as investment adviser for the
Emerging Growth Portfolio.
NOW THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. APPOINTMENT. The Fund hereby appoints MVA to act as
investment adviser to the Fund for the Emerging Growth Portfolio for the period
and on the terms set forth in the Advisory Agreement. MVA hereby accepts such
appointment and agrees to render the services set forth in the Advisory
Agreement, for the compensation herein provided.
2. COMPENSATION. For the services provided and expenses
assumed pursuant to the Advisory Agreement with respect to the Emerging Growth
Portfolio, the Fund will pay MVA from the assets belonging to the Emerging
Growth Portfolio, and MVA will accept as full compensation therefor a fee,
computed daily and payable monthly (in arrears), at the annual rate of .75% of
the average daily net assets of the Portfolio.
<PAGE> 2
The fee attributable to the Emerging Growth Portfolio shall be
the obligation of that Portfolio and not of any other Portfolio of the Fund.
3. CAPITALIZED TERMS. From and after the date hereof,
the term "Portfolios" as used in the Advisory Agreement shall be deemed to
include the Emerging Growth Portfolio. Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Advisory
Agreement.
4. MISCELLANEOUS. Except to the extent supplemented
hereby, the Advisory Agreement shall remain unchanged and in full force and
effect and is hereby ratified and confirmed in all respects as supplemented
hereby.
IN WITNESS WHEREOF, the undersigned have executed this
Addendum as of the date and year first above written.
THE ARCH FUND, INC.
By: /s/ Jerry V. Woodham
----------------------
Jerry V. Woodham
President
MISSISSIPPI VALLEY ADVISORS INC.
By: /s/ John H. Blixen
--------------------
John H. Blixen
President
<PAGE> 1
Exhibit (5)(d)
ADDENDUM NO. 3 TO AMENDED AND RESTATED ADVISORY AGREEMENT
---------------------------------------------------------
This Addendum, dated as of April 1, 1993, is entered into between THE ARCH
FUND, INC. (the "Fund"), a Maryland corporation, and MISSISSIPPI VALLEY
ADVISORS INC. ("MVA"), a Missouri corporation.
WHEREAS, the Fund and MVA have entered into an Amended and Restated Advisory
Agreement dated as of April 1, 1991 and amended as of September 27, 1991 and as
of April 1, 1992 (the "Advisory Agreement"), pursuant to which the Fund
appointed MVA to act as investment adviser to the Fund for The Arch Money
Market, Treasury Money Market, Capital Appreciation (now, by change of name,
"Equity & Income Growth"), Emerging Growth, Diversified Fixed Income (now, by
change of name, "Government & Corporate Bond"), and U.S. Government Securities
Portfolios;
WHEREAS, Section 1(b) of the Advisory Agreement provides that in the event
the Fund establishes one or more additional investment portfolios with respect
to which it desires to retain MVA to act as the investment adviser under the
Advisory Agreement, the Fund shall so notify MVA in writing, and if MVA is
willing to render such services it shall notify the Fund in writing, and the
compensation to be paid to MVA shall be that which is agreed to in writing by
the Fund and MVA; and
WHEREAS, the Fund has notified MVA that it has established The Arch Balanced
Portfolio (the "Balanced" Portfolio), and that it desires to retain MVA to act
as the investment adviser therefor, and MVA has notified the Fund that it is
willing to serve as investment adviser for the Balanced Portfolio.
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. APPOINTMENT. The Fund hereby appoints MVA to act as investment adviser
to the Fund for the Balanced Portfolio for the period and on the terms set
forth in the Advisory Agreement. MVA hereby accepts such appointment and
agrees to render the services set forth in the Advisory Agreement, for the
compensation herein provided.
2. COMPENSATION. For the services provided and expenses assumed pursuant to
the Advisory Agreement with respect to the Balanced Portfolio, the Fund will
pay MVA from the assets belonging to the Balanced Portfolio, and MVA will
accept as full compensation therefor a fee, computed daily and payable monthly
<PAGE> 2
(in arrears), at the annual rate of .75% of the average daily net assets of the
Portfolio.
The fee attributable to the Balanced Portfolio shall be the obligation of
that Portfolio and not of any other Portfolio of the Fund.
3. CAPITALIZED TERMS. From and after the date hereof, the term
"Portfolios" as used in the Advisory Agreement shall be deemed to include the
Balanced Portfolio. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Advisory Agreement.
4. MISCELLANEOUS. Except to the extent supplemented hereby, the Advisory
Agreement shall remain unchanged and in full force and effect and is hereby
ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
THE ARCH FUND, INC.
By: /s/ Jerry V. Woodham
----------------------
Jerry V. Woodham
President
MISSISSIPPI VALLEY ADVISORS INC.
By: /s/ John H. Blixen
-------------------
John H. Blixen
President
-2-
<PAGE> 1
Exhibit (5)(e)
ADDENDUM NO. 4 TO AMENDED AND RESTATED ADVISORY AGREEMENT
---------------------------------------------------------
This Addendum, dated as of March 15, 1994, is entered into between THE ARCH
FUND, INC., a Maryland corporation (the "Fund"), and MISSISSIPPI VALLEY
ADVISORS INC., a Missouri corporation ("MVA").
WHEREAS, the Fund and MVA have entered into an Amended and Restated Advisory
Agreement dated as of April 1, 1991, which was extended to additional
investment portfolios of the Fund (pursuant to Section 1(b) of the Agreement)
by Addenda dated September 27, 1991, April 1, 1992 and April 1, 1993 (the
"Advisory Agreement"), pursuant to which the Fund appointed MVA to act as
investment adviser to the Fund for The ARCH Money Market, Treasury Money
Market, Capital Appreciation (now, by change of name, "Growth & Income
Equity"), Emerging Growth, Diversified Fixed Income (now, by change of name,
"Government & Corporate Bond"), U.S. Government Securities and Balanced
Portfolios;
WHEREAS, Section 1(b) of the Advisory Agreement provides that in the event
the Fund establishes one or more additional investment portfolios with respect
to which it desires to retain MVA to act as the investment adviser under the
Advisory Agreement, the Fund shall so notify MVA in writing, and if MVA is
willing to render such services it shall notify the Fund in writing, and the
compensation to be paid to MVA shall be that which is agreed to in writing by
the Fund and MVA; and
WHEREAS, the Fund has notified MVA that it has established The ARCH
International Equity Portfolio (the "International Equity Portfolio"), and that
it desires to retain MVA to act as the investment adviser therefor, and MVA has
notified the Fund that it is willing to serve as investment adviser for the
International Equity Portfolio;
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. APPOINTMENT. The Fund hereby appoints MVA to act as investment adviser
to the Fund for the International Equity Portfolio for the period and on the
terms set forth in the Advisory Agreement. With respect to the International
Equity Portfolio only, MVA is authorized to contract with other investment
advisory or management firms or persons to assist MVA in the performance of the
duties of the Advisory Agreement (a "Sub-Adviser"); provided, however, that the
retention of a Sub-Adviser shall be approved as may be required by the 1940
Act. A Sub-Adviser may perform under MVA's supervision any or all
<PAGE> 2
services described under Section 3 of the Agreement. The fees or other
compensation of any Sub-Adviser shall be paid by MVA. In the event that MVA
appoints a Sub-Adviser, MVA will review, monitor, and report to the Fund's
Board of Directors on the performance and investment procedures of the
Sub-Adviser; assist and consult with the Sub-Adviser in connection with the
International Equity Portfolio's continuous investment program; and approve
lists of foreign countries which may be recommended by the Sub-Adviser for
investment by the International Equity Portfolio.
2. COMPENSATION. For the services provided and expenses assumed pursuant
to the Advisory Agreement with respect to the International Equity Portfolio,
the Fund will pay MVA from the assets belonging to the International Equity
Portfolio, and MVA will accept as full compensation therefor a fee, computed
daily and payable monthly (in arrears), at the annual rate of 1.00% of the
average daily net assets of the Portfolio.
The fee attributable to the International Equity Portfolio shall be the
obligation of that Portfolio and not of any other Portfolio of the Fund.
3. CAPITALIZED TERMS. From and after the date hereof, the term "Portfolios"
as used in the Advisory Agreement shall be deemed to include the International
Equity Portfolio. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Advisory Agreement.
4. MISCELLANEOUS. Except to the extent supplemented hereby, the Advisory
Agreement shall remain unchanged and in full force and effect and is hereby
ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
THE ARCH FUND, INC.
By: /s/ Jerry V. Woodham
---------------------
Jerry V. Woodham
President
MISSISSIPPI VALLEY ADVISORS INC.
By: /s/ John H. Blixen
-------------------
John H. Blixen
President
<PAGE> 1
Exhibit (5)(f)
ADDENDUM NO. 5 TO AMENDED AND RESTATED ADVISORY AGREEMENT
---------------------------------------------------------
This Addendum, dated as of July 10, 1995, is entered into
between THE ARCH FUND, INC., a Maryland corporation (the "Fund"), and
MISSISSIPPI VALLEY ADVISORS INC., a Missouri corporation ("MVA").
WHEREAS, the Fund and MVA have entered into an Amended and
Restated Advisory Agreement dated as of April 1, 1991, which was extended to
additional investment portfolios of the Fund (pursuant to Section 1(b) of the
Agreement) by Addenda dated September 27, 1991, April 1, 1992, April 1, 1993
and March 15, 1994 (the "Advisory Agreement"), pursuant to which the Fund
appointed MVA to act as investment adviser to the Fund for the ARCH Money
Market, Treasury Money Market, Capital Appreciation (now, by change of name,
"Growth & Income Equity"), Emerging Growth, Diversified Fixed Income (now, by
change of name, "Government & Corporate Bond"), U.S. Government Securities,
Balanced and International Equity Portfolios;
WHEREAS, Section 1(b) of the Advisory Agreement provides that
in the event the Fund establishes one or more additional investment portfolios
with respect to which it desires to retain MVA to act as the investment adviser
under the Advisory Agreement, the Fund shall so notify MVA in writing, and if
MVA is willing to render such services it shall notify the Fund in writing, and
the compensation to be paid to MVA shall be that which is agreed to in writing
by the Fund and MVA; and
WHEREAS, the Fund has notified MVA that it has established the
ARCH Short-Intermediate Municipal Portfolio (the "Short-Intermediate Municipal
Portfolio"), and that it desires to retain MVA to act as the investment adviser
therefor, and MVA has notified the Fund that it is willing to serve as
investment adviser for the Short-Intermediate Municipal Portfolio;
NOW THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. APPOINTMENT. The Fund hereby appoints MVA to act as
investment adviser to the Fund for the Short-Intermediate Municipal Portfolio
for the period and on the terms set forth in the Advisory Agreement. MVA
hereby accepts such appointment and agrees to render the services set forth in
the Advisory Agreement, for the compensation herein provided.
2. COMPENSATION. For the services provided and expenses
assumed pursuant to the Advisory Agreement with respect to the
Short-Intermediate Municipal Portfolio, the Fund will pay
<PAGE> 2
MVA from the assets belonging to the Short-Intermediate Municipal Portfolio,
and MVA will accept as full compensation therefor a fee, computed daily and
payable monthly (in arrears), at the annual rate of 0.55% of the average daily
net assets of the Short-Intermediate Municipal Portfolio.
The fee attributable to the Short-Intermediate Municipal
Portfolio shall be the obligation of that Portfolio and not of any other
Portfolio of the Fund.
3. CAPITALIZED TERMS. From and after the date hereof, the term
"Portfolios" as used in the Advisory Agreement shall be deemed to include the
Short-Intermediate Municipal Portfolio. Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Advisory
Agreement.
4. MISCELLANEOUS. Except to the extent supplemented hereby, the
Advisory Agreement shall remain unchanged and in full force and effect and is
hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this
Addendum as of the date and year first above written.
THE ARCH FUND, INC.
By: /s/ Jerry V. Woodham
---------------------
Jerry V. Woodham
President
MISSISSIPPI VALLEY ADVISORS INC.
By: /s/ John H. Blixen
-------------------
John H. Blixen
President
-2-
<PAGE> 1
Exhibit (5)(g)
ADDENDUM NO. 6 TO AMENDED AND RESTATED ADVISORY AGREEMENT
---------------------------------------------------------
This Addendum, dated as of Septemer 29, 1995, is entered into
between THE ARCH FUND, INC., a Maryland corporation (the "Fund"), and
MISSISSIPPI VALLEY ADVISORS INC., a Missouri corporation ("MVA").
WHEREAS, the Fund and MVA have entered into an Amended and
Restated Advisory Agreement dated as of April 1, 1991, which was extended to
additional investment portfolios of the Fund (pursuant to Section 1(b) of the
Agreement) by Addenda dated September 27, 1991, April 1, 1992, April 1, 1993,
March 15, 1994 and July 10, 1995 (the "Advisory Agreement"), pursuant to which
the Fund appointed MVA to act as investment adviser to the Fund for the ARCH
Money Market, Treasury Money Market, Growth & Income Equity, Emerging Growth,
Government & Corporate Bond, U.S. Government Securities, Balanced,
International Equity and Short-Intermediate Municipal Portfolios;
WHEREAS, Section 1(b) of the Advisory Agreement provides that
in the event the Fund establishes one or more additional investment portfolios
with respect to which it desires to retain MVA to act as the investment adviser
under the Advisory Agreement, the Fund shall so notify MVA in writing, and if
MVA is willing to render such services it shall notify the Fund in writing, and
the compensation to be paid to MVA shall be that which is agreed to in writing
by the Fund and MVA; and
WHEREAS, the Fund has notified MVA that it has established
three new portfolios, namely, the ARCH Tax-Exempt Money Market, Missouri
Tax-Exempt Bond and Kansas Tax-Exempt Bond Portfolios (collectively, the "New
Portfolios"), and that it desires to retain MVA to act as the investment
adviser therefor, and MVA has notified the Fund that it is willing to serve as
investment adviser for the New Portfolios;
NOW THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. APPOINTMENT. The Fund hereby appoints MVA to act as
investment adviser to the Fund for the New Portfolios for the period and on the
terms set forth in the Advisory Agreement. MVA hereby accepts such appointment
and agrees to render the services set forth in the Advisory Agreement, for the
compensation herein provided.
2. COMPENSATION. For the services provided and expenses
assumed pursuant to the Advisory Agreement with respect to the New Portfolios,
the Fund will pay MVA from the assets
<PAGE> 2
belonging to the respective Portfolios, and MVA will accept as full
compensation therefor a fee, computed daily and payable monthly (in arrears),
at the annual rate of .40%, .45% and .45%, of the average daily net assets of
the ARCH Tax-Exempt Money Market, Missouri Tax-Exempt Bond and Kansas
Tax-Exempt Bond Portfolios, respectively.
The fee attributable to each of the ARCH Tax-Exempt Money
Market, Missouri Tax-Exempt Bond and Kansas Tax-Exempt Bond Portfolios shall be
the obligation of that respective Portfolio and not of any other Portfolio of
the Fund.
3. CAPITALIZED TERMS. From and after the date hereof, the term
"Portfolios" as used in the Advisory Agreement shall be deemed to include the
New Portfolios. Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Advisory Agreement.
4. MISCELLANEOUS. Except to the extent supplemented hereby, the
Advisory Agreement shall remain unchanged and in full force and effect and is
hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this
Addendum as of the date and year first above written.
THE ARCH FUND, INC.
By: /s/ Jerry V. Woodham
----------------------
Jerry V. Woodham
President
MISSISSIPPI VALLEY ADVISORS INC.
By: /s/ John H. Blixen
--------------------
John H. Blixen
President
-2-
<PAGE> 1
Exhibit (5)(h)
ADDENDUM NO. 7 TO AMENDED AND RESTATED ADVISORY AGREEMENT
This Addendum, dated as of , 1996, is entered
into between THE ARCH FUND, INC., a Maryland corporation (the "Fund"), and
MISSISSIPPI VALLEY ADVISORS INC., a Missouri corporation ("MVA").
WHEREAS, the Fund and MVA have entered into an Amended and
Restated Advisory Agreement dated as of April 1, 1991, which was extended to
additional investment portfolios of the Fund (pursuant to Section 1(b) of the
Agreement) by Addenda dated September 27, 1991, April 1, 1992, April 1, 1993,
March 15, 1994, July 10, 1995, and September 29, 1995 (the "Advisory
Agreement"), pursuant to which the Fund appointed MVA to act as investment
adviser to the Fund for the ARCH Money Market, Treasury Money Market, Growth &
Income Equity, Emerging Growth, Government & Corporate Bond, U.S. Government
Securities, Balanced, International Equity, Short-Intermediate Municipal,
Tax-Exempt Money Market, Missouri Tax-Exempt Bond and Kansas Tax-Exempt Bond
Portfolios;
WHEREAS, Section 1(b) of the Advisory Agreement provides that
in the event the Fund establishes one or more additional investment portfolios
with respect to which it desires to retain MVA to act as the investment adviser
under the Advisory Agreement, the Fund shall so notify MVA in writing, and if
MVA is willing to render such services it shall notify the Fund in writing, and
the compensation to be paid to MVA shall be that which is agreed to in writing
by the Fund and MVA; and
WHEREAS, the Fund has notified MVA that it has established
three new portfolios, namely, the ARCH Equity Income, National Municipal Bond
and Short-Intermediate Corporate Bond Portfolios (collectively, the "New
Portfolios"), and that it desires to retain MVA to act as the investment
adviser therefor, and MVA has notified the Fund that it is willing to serve as
investment adviser for the New Portfolios;
NOW THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. APPOINTMENT. The Fund hereby appoints MVA to act as
investment adviser to the Fund for the New Portfolios for the period and on the
terms set forth in the Advisory Agreement. MVA hereby accepts such appointment
and agrees to render the services set forth in the Advisory Agreement, for the
compensation herein provided.
<PAGE> 2
2. COMPENSATION. For the services provided and expenses
assumed pursuant to the Advisory Agreement with respect to the New Portfolios,
the Fund will pay MVA from the assets belonging to the respective Portfolios,
and MVA will accept as full compensation therefor a fee, computed daily and
payable monthly (in arrears), at the annual rates of .75%, .55% and .55%, of
the average daily net assets of the ARCH Equity Income, National Municipal Bond
and Short-Intermediate Corporate Bond Portfolios, respectively.
The fee attributable to each of the ARCH Equity Income,
National Municipal Bond and Short-Intermediate Corporate Bond Portfolios shall
be the obligation of that respective Portfolio and not of any other Portfolio
of the Fund.
3. CAPITALIZED TERMS. From and after the date hereof, the term
"Portfolios" as used in the Advisory Agreement shall be deemed to include the
New Portfolios. Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Advisory Agreement.
4. MISCELLANEOUS. Except to the extent supplemented hereby, the
Advisory Agreement shall remain unchanged and in full force and effect and is
hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this
Addendum as of the date and year first above written.
THE ARCH FUND, INC.
By: ___________________
Jerry V. Woodham
President
MISSISSIPPI VALLEY ADVISORS INC.
By: ____________________
John H. Blixen
President
-2-
<PAGE> 1
Exhibit (5)(i)
SUB-ADVISORY AGREEMENT
(INTERNATIONAL EQUITY FUND)
AGREEMENT made as of January 25, 1994 between Mississippi
Valley Advisors Inc., a Missouri Corporation (the "Adviser"), and Clay Finlay,
Inc., a New York corporation ("SubAdviser").
WHEREAS, The ARCH Fund, Inc. (the "Fund") is registered as an
open-end, diversified management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Adviser has been appointed investment adviser to
the Fund's International Equity Portfolio (the "Portfolio"); and
WHEREAS, the Adviser desires to retain Sub-Adviser to assist
it in the provision of a continuous investment program for the Portfolio and
Sub-Adviser is willing to do so;
WHEREAS, the Board of Directors of the Portfolio and the
Portfolio's sole shareholder have approved this Agreement, and Sub-Adviser is
willing to furnish such services upon the terms and conditions herein set
forth;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Adviser hereby appoints SubAdviser
to act as sub-advisor to the Portfolio as permitted by the Adviser's Advisory
Agreement with the Fund pertaining to the Portfolio. Intending to be legally
bound, Sub-Adviser accepts such appointment and agrees to render the services
herein set forth for the compensation herein provided.
2. SUB-ADVISORY SERVICES. Subject to the supervision of
the Fund's Board of Directors, Sub-Adviser will assist the Adviser in providing
a continuous investment program for the Portfolio, including investment
research and management with respect to all securities and investments and cash
equivalents in the Portfolio. Sub-Adviser will provide services under this
Agreement in accordance with the Portfolio's investment objective, policies and
restrictions as stated in the Portfolio's prospectus and resolutions of the
Fund's Board of Directors applicable to the Portfolio.
Without limiting the generality of the foregoing, SubAdviser
further agrees that it:
<PAGE> 2
(a) will prepare, subject to the Adviser's approval, lists
of foreign countries for investment by the Portfolio and determine from
time to time what securities and other investments will be
purchased, retained or sold for the Portfolio, including, with the
assistance of the Adviser, the Portfolio's investments in futures and
forward currency contracts;
(b) will manage in consultation with the Adviser the
Portfolio's temporary investments in securities;
(c) will place orders pursuant to its investment
determinations for the Portfolio either directly with the issuer or with
any broker or dealer;
(d) will not purchase shares of the Portfolio for itself
or for accounts with respect to which it exercises sole investment
discretion in connection with such transactions except as permitted by the
Fund's Board of Directors or by federal, state and local law;
(e) will manage the Portfolio's overall cash position, and
determine from time to time what portion of the Portfolio's assets will be
held in different currencies;
(f) will provide the Adviser with foreign broker research, a
quarterly review of international economic and investment developments, and
occasional "White Papers" on international investment issues;
(g) will attend regular business and investmentrelated
meetings with the Fund's Board of Directors and the Adviser if requested
to do so by the Fund and/or the Adviser; and
(h) will maintain books and records with respect to the
securities transactions for the Portfolio, furnish to the Adviser and the
Fund's Board of Directors such periodic and special reports as they may
request with respect to the Portfolio, and provide in advance to the
Adviser all reports to the Board of Directors for examination and review
within a reasonable time prior to the Fund's Board meetings.
3. COVENANTS BY SUB-ADVISER. Sub-Adviser agrees with respect to
the services provided to the Portfolio that it:
(a) will conform with all Rules and Regulations of the
Securities and Exchange Commission;
(b) will telecopy trade information to the Adviser on the
first business day following the day of the
-2-
<PAGE> 3
trade and cause broker confirmations to be sent directly to the
Adviser; and
(c) will treat confidentially and as proprietary
information of the Fund all records and other information relative to
the Fund and prior, present or potential shareholders, and will not
use such records and information for any purpose other than
performance of its responsibilities and duties hereunder (except after
prior notification to and approval in writing by the Fund, which
approval shall not be unreasonably withheld and may not be withheld
and will be deemed granted where Sub-Adviser may be exposed to civil
or criminal contempt proceedings for failure to comply, when requested
to divulge such information by duly constituted authorities, or when
so requested by the Fund).
4. SERVICES NOT EXCLUSIVE.
The services furnished by Sub-Adviser hereunder are deemed not
to be exclusive, and nothing in this Agreement shall (i) prevent Sub-Adviser or
any affiliated person (as defined in the 1940 Act) of Sub-Adviser from acting
as investment adviser or manager for any other person or persons, including
other management investment companies with investment objectives and policies
the same as or similar to those of the Portfolio or (ii) limit or restrict
Sub-Adviser or any such affiliated person from buying, selling or trading any
securities or other investments (including any securities or other investments
which the Portfolio is eligible to buy) for its or their own accounts or for
the accounts of others for whom it or they may be acting; PROVIDED, HOWEVER,
that Sub-Adviser agrees that it will not undertake any activities which, in its
reasonable judgment, will adversely affect the performance of its obligations
to the Portfolio under this Agreement.
5. PORTFOLIO TRANSACTIONS. Investment decisions for the
Portfolio shall be made by Sub-Adviser independently from those for any other
investment companies and accounts advised or managed by Sub-/Adviser. The
Portfolio and such investment companies and accounts may, however, invest in
the same securities. When a purchase or sale of the same security is made at
substantially the same time on behalf of the Portfolio and/or another
investment company or account, the transaction will be averaged as to price,
and available investments allocated as to amount, in a manner which Sub-Adviser
believes to be equitable to the Portfolio and such other investment company or
account. In some instances, this investment procedure may adversely affect the
price paid or received by the Portfolio or the size of the position obtained or
sold by the Portfolio. To the extent permitted by law, Sub-Adviser may
aggregate the securities to be sold or purchased for the Portfolio with those
to be sold or
-3-
<PAGE> 4
purchased for other investment companies or accounts in order to obtain best
execution.
Sub-Adviser shall place orders for the purchase and sale of
portfolio securities and will solicit broker-dealers to execute transactions in
accordance with the Portfolio's policies and restrictions regarding brokerage
allocations. Sub-Adviser shall place orders pursuant to its investment
determination for the Portfolio either directly with the issuer or with any
broker or dealer selected by Sub-Adviser. In executing portfolio transactions
and selecting brokers or dealers, Sub-Adviser shall use its reasonable best
efforts to seek the most favorable execution of orders, after taking into
account all factors SubAdviser deems relevant, including the breadth of the
market in the security, the price of the security, the financial condition and
execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. Consistent with this obligation, Sub-Adviser may, to the extent
permitted by law, purchase and sell portfolio securities to and from brokers
and dealers who provide brokerage and research services (within the meaning of
Section 28(e) of the Securities Exchange Act of 1934) to or for the benefit of
the Portfolio and/or other accounts over which Sub-Adviser or any of its
affiliates exercises investment discretion. Sub-Adviser is authorized to pay
to a broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the Portfolio which is in
excess of the amount of commission another broker or dealer would have charged
for effecting that transaction if Sub-Adviser determines in good faith that
such commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or Sub-Adviser's overall responsibilities to the
Portfolio and to the Company. In no instance will portfolio securities be
purchased from or sold to Sub-Adviser, or the Portfolio's principal
underwriter, or any affiliated person thereof except as permitted by the
Securities and Exchange Commission.
6. BOOKS AND RECORDS. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, Sub-Adviser hereby agrees that
all records which it maintains for the Fund are the property of the Fund and
further agrees to surrender promptly to the Fund any of such records upon the
Fund's request. Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
7. EXPENSES. During the term of this Agreement,
SubAdviser will pay all expenses incurred by it in connection with its
activities under this Agreement other than the cost of securities, commodities
and other investments (including
-4-
<PAGE> 5
brokerage commissions and other transaction charges, if any) purchased for the
Portfolio.
8. COMPENSATION. (a) For the services provided and the
expenses assumed with respect to the Portfolio pursuant to this Agreement, the
Sub-Adviser will be entitled to a fee, computed daily and payable monthly, from
Adviser, calculated at the annual rate of .75% of the Portfolio's average daily
net assets;
(b) For at least the first two months of the Portfolio's
operations, the Sub-Adviser will waive its fees, unless otherwise agreed upon
by the Adviser and the Sub-Adviser; and
(c) If the Adviser reimburses the Fund, pursuant to Section 8(b)
of the Advisory Agreement, with respect to the Portfolio, the Sub-Adviser will
bear its share of the amount of such reimbursement by waiving fees otherwise
payable to it hereunder on a proportionate basis to be determined by comparing
the aggregate fees otherwise payable to it hereunder with respect to the
Portfolio to the aggregate fees otherwise payable by the Fund to the Adviser
under the Advisory Agreement with respect to the Portfolio.
9. STANDARD OF CARE; LIMITATION OF LIABILITY.
SubAdviser shall exercise due care and diligence and use the same skill and
care in providing its services hereunder as it uses in providing services to
other investment companies, but shall not be liable for any action taken or
omitted by Sub-Adviser in the absence of bad faith, willful misconduct, gross
negligence or reckless disregard of its duties.
10. REFERENCE TO SUB-ADVISER. Neither the Adviser nor
any affiliate or agent of it shall make reference to or use the name of
Sub-Adviser or any of its affiliates, or any of their clients, except
references concerning the identity of and services provided by Sub-Adviser to
the Portfolio, which references shall not differ in substance from those
included in the current registration statement pertaining to the Portfolio,
this Agreement and the Advisory Agreement between the Adviser and the Fund with
respect to the Portfolio, in any advertising or promotional materials without
the prior approval of Sub-Adviser, which approval shall not be unreasonably
withheld or delayed. The Adviser hereby agrees to make all reasonable efforts
to cause the Fund and any affiliate thereof to satisfy the foregoing
obligation.
11. DURATION AND TERMINATION. Unless sooner terminated,
this Agreement shall continue until January 25, 1995 and thereafter shall
continue automatically for successive annual periods, provided such continuance
is specifically approved at least annually by the Fund's Board of Directors or
vote of the
-5-
<PAGE> 6
lesser of (a) 67% of the shares of the Portfolio represented at a meeting if
holders of more than 50% of the outstanding shares of the Portfolio are present
in person or by proxy or (b) more than 50% of the outstanding shares of the
Portfolio, provided that in either event its continuance also is approved by a
majority of the Fund's Directors who are not "interested persons" (as defined
in the 1940 Act) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval. This Agreement is
terminable at any time without penalty, on 60 days' notice, by Adviser,
Sub-Adviser or by the Fund's Board of Directors or by vote of the lesser of (a)
67% of the shares of the Portfolio represented at a meeting if holders of more
than 50% of the outstanding shares of the Portfolio are present in person or by
proxy or (b) more than 50% of the outstanding shares of the Portfolio. This
Agreement will terminate automatically in the event of its assignment (as
defined in the 1940 Act).
12. AMENDMENT OF THIS AGREEMENT. No provision of this
Agreement may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought. No amendment of this
Agreement shall be effective with respect to the Portfolio until approved by
the vote of a majority of the outstanding voting securities of the Portfolio.
13. NOTICE. Any notice, advice or report to be given
pursuant to this Agreement shall be delivered or mailed:
To Sub-Adviser at:
-----------------
200 Park Avenue
New York, NY 10166
To the Adviser at:
-----------------
One Mercantile Center
7th and Washington Streets
Suite 2100
St. Louis, MO 63101
To the Fund at:
--------------
1345 Chestnut Street, Suite 1100
Philadelphia, PA 19107
14. MISCELLANEOUS. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect. If
any provision of this Agreement shall be held or made invalid by a court,
decision, statute, rule or
-6-
<PAGE> 7
otherwise, the remainder of this Agreement shall not be affected thereby.
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by Maryland law.
15. COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the day and
year first above written.
MISSISSIPPI VALLEY ADVISORS INC.
Attest:
/s/ [signature illegible] By:/s/ John H. Blixen
- ------------------------- ------------------
CLAY FINLAY, INC.
Attest:
/s/ [signature illegible] By:/s/ [signature illegible]
- ------------------------- -------------------------
-7-
<PAGE> 1
Exhibit (6)(e)
ADDENDUM NO. 4 TO DISTRIBUTION AGREEMENT
----------------------------------------
This Addendum, dated as of September 29, 1995, is entered into
between THE ARCH FUND, INC. (the "Fund"), a Maryland corporation, and THE
WINSBURY COMPANY LIMITED PARTNERSHIP ("Winsbury"), an Ohio corporation.
WHEREAS, the Fund and Winsbury have entered into a
Distribution Agreement dated as of October 1, 1993 as amended March 15, 1994,
March 1, 1995 and July 10, 1995 (the "Distribution Agreement"), pursuant to
which the Fund appointed Winsbury to act as Distributor for the Fund's ARCH
Money Market, Treasury Money Market, Growth & Income Equity, Emerging Growth,
Government & Corporate Bond, U.S. Government Securities, Balanced,
International Equity and Short-Intermediate Municipal Portfolios;
WHEREAS, Section 9 of the Distribution Agreement provides that
no provision of the Agreement may be changed, discharged or terminated orally,
but only by an instrument in writing signed by the party against which
enforcement of the change, discharge or termination is sought; and
WHEREAS, the Fund has notified Winsbury that it has
established three new portfolios, namely, the ARCH Tax-Exempt Money Market,
Missouri Tax-Exempt Bond and Kansas Tax-Exempt Bond Portfolios (collectively,
the "New Portfolios"), and that it desires to retain Winsbury to act as the
Distributor therefor, and Winsbury has notified the Fund that it is willing to
serve as Distributor for the New Portfolios.
NOW THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. APPOINTMENT. The Fund hereby appoints Winsbury to act as
Distributor to the Fund for the New Portfolios for the period and on the terms
set forth in the Distribution Agreement. Winsbury hereby accepts such
appointment and agrees to render the services set forth in the Distribution
Agreement.
2. TERMS. From and after the date hereof, the term
"Portfolios" as used in the Distribution Agreement shall be deemed to include
the New Portfolios. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Distribution Agreement.
3. APPENDIX A. Appendix A to the Distribution Agreement is
hereby supplemented to read as set forth in Appendix A attached hereto.
<PAGE> 2
4. MISCELLANEOUS. Except to the extent supplemented hereby,
the Distribution Agreement shall remain unchanged and in full force and effect
and is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this
Addendum as of the date and year first above written.
THE ARCH FUND, INC.
By: /s/ Jerry V. Woodham
----------------------
Jerry V. Woodham
President
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By: BISYS FUND SERVICES, INC.,
General Partner
By: /s/ Stephen G. Mintos
----------------------------
Stephen G. Mintos
Executive Vice President
<PAGE> 3
APPENDIX A
to the
DISTRIBUTION AGREEMENT
between
THE ARCH FUND, INC.
and
THE WINSBURY COMPANY LIMITED PARTNERSHIP
_____________________________________________________________________________
Money Market Portfolio (Trust shares, Investor A shares, Investor B shares and
Institutional shares)
Treasury Money Market Portfolio (Trust shares, Investor A shares and
Institutional shares)
Growth & Income Equity Portfolio (Trust shares, Investor A shares,
Institutional shares and Investor B shares)
Emerging Growth Portfolio (Trust shares, Investor A shares, Institutional
shares and Investor B shares)
Government & Corporate Bond Portfolio (Trust shares, Investor A shares,
Institutional shares and Investor B shares)
U.S. Government Securities Portfolio (Trust shares, Investor A shares,
Institutional shares and Investor B shares)
Balanced Portfolio (Trust shares, Investor A shares, Institutional shares and
Investor B shares)
International Equity Portfolio (Trust shares, Investor A shares, Institutional
shares and Investor B shares)
Short-Intermediate Municipal Portfolio (Trust shares and Investor A shares)
Tax-Exempt Money Market Portfolio (Trust shares and Investor A shares)
Missouri Tax-Exempt Bond Portfolio (Trust shares, Investor A shares and
Investor B shares)
Kansas Tax Exempt Bond Portfolio (Trust shares, Investor A shares and Investor
B shares)
<PAGE> 1
Exhibit (6)(f)
ADDENDUM NO. 5 TO DISTRIBUTION AGREEMENT
----------------------------------------
This Addendum, dated as of , 1996, is entered
into between THE ARCH FUND, INC. (the "Fund"), a Maryland corporation, and
BISYS FUND SERVICES ("BISYS"), an Ohio limited partnership formerly known as
The Winsbury Company Limited Partnership.
WHEREAS, the Fund and BISYS have entered into a Distribution
Agreement dated as of October 1, 1993 as amended March 15, 1994, March 1, 1995,
July 10, 1995 and September 29, 1995 (the "Distribution Agreement"), pursuant
to which the Fund appointed BISYS to act as Distributor for the Fund's ARCH
Money Market, Treasury Money Market, Growth & Income Equity, Emerging Growth,
Government & Corporate Bond, U.S. Government Securities, Balanced,
International Equity, Short-Intermediate Municipal, Tax-Exempt Money Market,
Missouri Tax-Exempt Bond and Kansas Tax-Exempt Bond Portfolios;
WHEREAS, Section 9 of the Distribution Agreement provides that
no provision of the Agreement may be changed, discharged or terminated orally,
but only by an instrument in writing signed by the party against which
enforcement of the change, discharge or termination is sought; and
WHEREAS, the Fund has notified BISYS that it has established
three new portfolios, namely, the ARCH Equity Income, National Municipal Bond
and Short-Intermediate Corporate Bond Portfolios (collectively, the "New
Portfolios"), and that it desires to retain BISYS to act as the Distributor
therefor, and BISYS has notified the Fund that it is willing to serve as
Distributor for the New Portfolios.
NOW THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. APPOINTMENT. The Fund hereby appoints BISYS to act as
Distributor to the Fund for the New Portfolios for the period and on the terms
set forth in the Distribution Agreement. BISYS hereby accepts such appointment
and agrees to render the services set forth in the Distribution Agreement.
2. TERMS. From and after the date hereof, the term
"Portfolios" as used in the Distribution Agreement shall be deemed to include
the New Portfolios. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Distribution Agreement.
<PAGE> 2
3. APPENDIX A. Appendix A to the Distribution Agreement is
hereby supplemented to read as set forth in Appendix A attached hereto.
4. MISCELLANEOUS. Except to the extent supplemented hereby,
the Distribution Agreement shall remain unchanged and in full force and effect
and is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this
Addendum as of the date and year first above written.
THE ARCH FUND, INC.
By: _____________________
Jerry V. Woodham
President
BISYS FUND SERVICES, INC.
By: _____________________
Stephen G. Mintos
Executive Vice President
<PAGE> 3
APPENDIX A
to the
DISTRIBUTION AGREEMENT
between
THE ARCH FUND, INC.
and
BISYS FUND SERVICES, INC.
- -------------------------------------------------------------------------------
Money Market Portfolio (Trust shares, Investor A shares, Institutional shares
and Investor B shares)
Treasury Money Market Portfolio (Trust shares, Investor A shares and
Institutional shares)
Growth & Income Equity Portfolio (Trust shares, Investor A shares,
Institutional shares and Investor B shares)
Emerging Growth Portfolio (Trust shares, Investor A shares, Institutional
shares and Investor B shares)
Government & Corporate Bond Portfolio (Trust shares, Investor A shares,
Institutional shares and Investor B shares)
U.S. Government Securities Portfolio (Trust shares, Investor A shares,
Institutional shares and Investor B shares)
Balanced Portfolio (Trust shares, Investor A shares, Institutional shares and
Investor B shares)
International Equity Portfolio (Trust shares, Investor A shares, Institutional
shares and Investor B shares)
Short-Intermediate Municipal Portfolio (Trust Shares and Investor A shares)
Tax-Exempt Money Market Portfolio (Trust shares and Investor A shares)
Missouri Tax-Exempt Bond Portfolio (Trust shares, Investor A shares and
Investor B shares)
Kansas Tax-Exempt Bond Portfolio (Trust shares, Investor A shares and Investor
B shares)
Equity Income Portfolio (Trust shares, Investor A shares, Institutional shares
and Investor B shares)
<PAGE> 4
National Municipal Bond Portfolio (Trust shares, Investor A shares and Investor
B shares)
Short-Intermediate Corporate Bond Portfolio (Trust shares, Investor A shares
and Institutional shares)
<PAGE> 1
Exhibit (8)(d)
September 29, 1995
Mercantile Bank of St. Louis National Association
One Mercantile Center
St. Louis, Missouri 63101
RE: Custody Fees for the ARCH Tax-Exempt Money Market and
Missouri Tax-Exempt Bond Portfolios
-----------------------------------------------------
Gentlemen:
This letter constitutes our agreement with respect to
compensation to be paid to Mercantile Bank of St. Louis National Association
("Mercantile") with respect to The ARCH Tax-Exempt Money Market Portfolio
(comprised of Class J and Class J - Special Series 1) and The ARCH Missouri
Tax-Exempt Bond Portfolio (comprised of Class K, Class K - Special Series 1 and
Class K - Special Series 2 shares) (each class a "Series") under the terms of
the Custodian Agreement dated as of April 1, 1992 (the "Custodian Agreement")
between The ARCH Fund, Inc. (the "Fund") and Mercantile. Pursuant to
Paragraph 23 of the Custodian Agreement, and in consideration of the services
to be provided by you, we will pay Mercantile the following:
1. An annual custody fee (exclusive of any transaction charges),
which shall be calculated daily and paid monthly (in arrears) for each Series
as follows:
- The ARCH Tax-Exempt Money Market Portfolio - $.125 for each
$1000 of the Series' average daily net assets; and
- The ARCH Missouri Tax-Exempt Bond Portfolio - the greater of
$6,000 or $.30 for each $1,000 of the Series' average daily
net assets.
2. For the Tax-Exempt Money Market Portfolio a transaction charge
of $50.00 for each interest collection or claim item;
3. For the Missouri Tax-Exempt Bond Portfolio a transaction
charge of $15.00 for each purchase, sale or delivery of a security upon its
maturity date, $50.00 for each interest collection or claim item, $20.00 for
each transaction involving
<PAGE> 2
Mercantile Bank of St. Louis, N.A.
September 29, 1995
Page Two
GNMA, tax-free or other non-depository registered items with monthly dividends
or interest, $30.00 for each purchase, sale or expiration of an option
contract, $50.00 for each purchase, sale or expiration of a futures contract,
and $15.00 for each repurchase trade with an institution other than Mercantile;
4. Mercantile's incremental costs in providing foreign custody
services for foreign denominated and held securities; and
5. Mercantile's out-of-pocket expenses, including but not limited
to postage, telephone, telex, Federal Express and Federal Reserve wire fees, on
behalf of the Series.
The fee and expenses attributable to each Series shall be the
obligation of that Series and not of any other portfolio of the Trust. The fee
for the period from the day of the year this agreement is entered into until
the end of that fiscal year of the Series, or for any portion of a fiscal year
immediately prior to its termination, shall be pro-rated according to the
proportion which such period bears to the full annual period.
If the foregoing accurately sets forth our agreement and you
intend to be legally bound thereby, please execute a copy of this letter and
return it to us.
Very truly yours,
THE ARCH FUND, INC.
By: /s/ Jerry V. Woodham
---------------------------
Jerry V. Woodham, President
ACCEPTED: MERCANTILE BANK OF ST. LOUIS
NATIONAL ASSOCIATION
By: /s/ Donald A. Salama
---------------------------------------
Donald A. Salama, Senior Vice President
Dated as of: September 29, 1995
<PAGE> 1
Exhibit (8)(e)
, 1996
Mercantile Bank of St. Louis National Association
One Mercantile Center
St. Louis, Missouri 63101
RE: Custody Fees for the ARCH Equity Income, National Municipal Bond and
Short-Intermediate Corporate Bond Portfolios
--------------------------------------------------------------------
Gentlemen:
This letter constitutes our agreement with respect to compensation to be
paid to Mercantile Bank of St. Louis National Association ("Mercantile") with
respect to The ARCH Equity Income Portfolio (comprised of Class M, Class M -
Special Series 1, Class M - Special Series 2 and Class M - Special Series 3
shares), The ARCH National Municipal Bond Portfolio (comprised of Class N,
Class N - Special Series 1 and Class N - Special Series 2 shares) and The ARCH
Short-Intermediate Corporate Bond Portfolio (comprised of Class O, Class O -
Special Series 1 and Class O - Special Series 2 shares) (each class a "Series")
under the terms of the Custodian Agreement dated as of April 1, 1992 (the
"Custodian Agreement") between The ARCH Fund, Inc. (the "Fund") and Mercantile.
Pursuant to Paragraph 23 of the Custodian Agreement, and in consideration of
the services to be provided by you, we will pay Mercantile the following:
1. An annual custody fee (exclusive of any transaction charges), which shall
be calculated daily and paid monthly (in arrears) for each Series as follows:
* The ARCH Equity Income Portfolio - the greater of $6,000.00 or $.30
for each $1,000.00 of the Series' average daily net assets;
* The ARCH National Municipal Bond Portfolio - the greater of $6,000.00 or
$.30 for each $1,000.00 of the Series' average daily net assets; and
* The ARCH Short-Intermediate Corporate Bond Portfolio - the greater of
$6,000.00 or $.30 for each $1,000.00 of the Series' average daily net
assets.
<PAGE> 2
Mercantile Bank of St. Louis, N.A.
, 1996
Page Two
2. A transaction charge of $15.00 for each purchase, sale or delivery of a
security upon its maturity date, $50.00 for each interest collection or claim
item, $20.00 for each transaction involving GNMA, tax-free or other
non-depository registered items with monthly dividends or interest, $30.00 for
each purchase, sale or expiration of an option contract, $50.00 for each
purchase, sale or expiration of a futures contract, and $15.00 for each
repurchase trade with an institution other than Mercantile;
3. Mercantile's incremental costs in providing foreign custody services for
foreign denominated and held securities; and
4. Mercantile's out-of-pocket expenses, including but not limited to postage,
telephone, telex, Federal Express and Federal Reserve wire fees, on behalf of
the Series.
The fee and expenses attributable to each Series shall be the obligation of
that Series and not of any other portfolio of the Fund. The fee for the period
from the day of the year this agreement is entered into until the end of that
fiscal year of the Series, or for any portion of a fiscal year immediately
prior to its termination, shall be pro-rated according to the proportion which
such period bears to the full annual period.
If the foregoing accurately sets forth our agreement and you intend to be
legally bound thereby, please execute a copy of this letter and return it to
us.
Very truly yours,
THE ARCH FUND, INC.
By:___________________________
Jerry V. Woodham, President
ACCEPTED: MERCANTILE BANK OF ST. LOUIS
NATIONAL ASSOCIATION
By:___________________________
Donald A. Salama, Senior Vice President
Dated as of: , 1996
<PAGE> 1
Exhibit (9)(e)
ADDENDUM NO. 4 TO ADMINISTRATION AGREEMENT
------------------------------------------
This Addendum, dated as of September 29, 1995, is entered into
between THE ARCH FUND, INC. (the "Fund"), a Maryland corporation, and BISYS
FUND SERVICES OHIO, INC. ("BISYS"), an Ohio corporation formerly known as The
Winsbury Service Corporation.
WHEREAS, the Fund and BISYS have entered into an
Administration Agreement dated as of October 1, 1993 as amended March 15, 1994,
March 1, 1995 and July 10, 1995 (the "Administration Agreement"), pursuant to
which the Fund appointed BISYS to act as Administrator for the Fund's ARCH
Money Market, Treasury Money Market, Growth & Income Equity, Emerging Growth,
Government & Corporate Bond, U.S. Government Securities, Balanced,
International Equity and Short-Intermediate Municipal Portfolios;
WHEREAS, Section 10 of the Administration Agreement provides
that no provision of the Agreement may be changed, discharged or terminated
orally, but only by an instrument in writing signed by the party against which
enforcement of the change, discharge or termination is sought; and
WHEREAS, the Fund has notified BISYS that it has established
three new portfolios, namely, the ARCH Tax-Exempt Money Market, Missouri
Tax-Exempt Bond and Kansas Tax-Exempt Bond Portfolios (collectively, the "New
Portfolios"), and that it desires to retain BISYS to act as the Administrator
therefor, and BISYS has notified the Fund that it is willing to serve as
Administrator for the New Portfolios.
NOW THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. APPOINTMENT. The Fund hereby appoints BISYS to act
as Administrator to the Fund for the New Portfolios for the period and on the
terms set forth in the Administration Agreement. BISYS hereby accepts such
appointment and agrees to render the services set forth in the Administration
Agreement, for the compensation herein provided.
2. COMPENSATION. For the services provided and expenses
assumed pursuant to the Administration Agreement with respect to the
Portfolios, the Fund will pay BISYS, as agent for itself, a monthly fee (in
arrears) on the first business day of each month at the annual rate of .10%,
.20% and .20% of the average daily net assets of the ARCH Tax-Exempt Money
Market,
<PAGE> 2
Missouri Tax-Exempt Bond and Kansas Tax-Exempt Bond Portfolios, respectively.
The fee attributable to each of The ARCH Tax-Exempt Money
Market, Missouri Tax-Exempt Bond and Kansas Tax-Exempt Bond Portfolios shall be
the obligation of that respective Portfolio and not of any other Portfolio of
the Fund.
3. TERMS. From and after the date hereof, the term "Portfolios" as
used in the Administration Agreement shall be deemed to include the New
Portfolios. Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Administration Agreement.
4. APPENDIX A. Appendix A to the Administration Agreement is
hereby supplemented to read as set forth in Appendix A attached hereto.
5. MISCELLANEOUS. Except to the extent supplemented hereby, the
Administration Agreement shall remain unchanged and in full force and effect
and is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this
Addendum as of the date and year first above written.
THE ARCH FUND, INC.
By: /s/ Jerry V. Woodham
--------------------
Jerry V. Woodham
President
BISYS FUND SERVICES OHIO, INC.
By: /s/ Stephen G. Mintos
---------------------
Stephen G. Mintos
Executive Vice President
<PAGE> 3
APPENDIX A
to the
ADMINISTRATION AGREEMENT
between
THE ARCH FUND, INC.
and
BISYS FUND SERVICES OHIO, INC. (formerly
known as Winsbury Service Corporation)
_____________________________________________________________________________
Money Market Portfolio (Trust Shares, Investor A Shares, Institutional Shares
and Investor B Shares)
Treasury Money Market Portfolio (Trust Shares, Investor A Shares and
Institutional Shares)
Growth & Income Equity Portfolio (Trust Shares, Investor A Shares,
Institutional and Investor B Shares)
Emerging Growth Portfolio (Trust Shares, Investor A Shares, Institutional and
Investor B Shares)
Government & Corporate Bond Portfolio (Trust Shares, Investor A Shares,
Institutional and Investor B Shares)
U.S. Government Securities Portfolio (Trust Shares, Investor A Shares,
Institutional and Investor B Shares)
Balanced Portfolio (Trust Shares, Investor A Shares, Institutional and Investor
B Shares)
International Equity Portfolio (Trust Shares, Investor A Shares, Institutional
and Investor B Shares)
Short-Intermediate Municipal Portfolio (Trust Shares and Investor A Shares)
Tax-Exempt Money Market Portfolio (Trust Shares and Investor A Shares)
Missouri Tax-Exempt Bond Portfolio (Trust Shares, Investor A Shares and
Investor B Shares)
Kansas Tax Exempt Bond Portfolio (Trust Shares, Investor A Shares and Investor
B Shares)
<PAGE> 1
Exhibit (9)(f)
ADDENDUM NO. 5 TO ADMINISTRATION AGREEMENT
------------------------------------------
This Addendum, dated as of , 1996, is entered into between
THE ARCH FUND, INC. (the "Fund"), a Maryland corporation, and BISYS FUND
SERVICES OHIO, INC. ("BISYS Ohio"), an Ohio corporation formerly known as The
Winsbury Service Corporation.
WHEREAS, the Fund and BISYS Ohio have entered into an Administration
Agreement dated as of October 1, 1993 as amended March 15, 1994, March 1, 1995,
July 10, 1995 and September 29, 1995 (the "Administration Agreement"), pursuant
to which the Fund appointed BISYS Ohio to act as Administrator for the Fund's
ARCH Money Market, Treasury Money Market, Growth & Income Equity, Emerging
Growth, Government & Corporate Bond, U.S. Government Securities, Balanced,
International Equity, Short-Intermediate Municipal, Tax-Exempt Money Market,
Missouri Tax-Exempt Bond and Kansas Tax-Exempt Bond Portfolios;
WHEREAS, Section 10 of the Administration Agreement provides that no
provision of the Agreement may be changed, discharged or terminated orally, but
only by an instrument in writing signed by the party against which enforcement
of the change, discharge or termination is sought; and
WHEREAS, the Fund has notified BISYS Ohio that it has established three new
portfolios, namely, the ARCH Equity Income, National Municipal Bond and
Short-Intermediate Corporate Bond Portfolios (collectively, the "New
Portfolios"), and that it desires to retain BISYS Ohio to act as the
Administrator therefor, and BISYS Ohio has notified the Fund that it is willing
to serve as Administrator for the New Portfolios.
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. APPOINTMENT. The Fund hereby appoints BISYS Ohio to act as
Administrator to the Fund for the New Portfolios for the period and on the
terms set forth in the Administration Agreement. BISYS Ohio hereby accepts
such appointment and agrees to render the services set forth in the
Administration Agreement, for the compensation herein provided.
2. COMPENSATION. For the services provided and expenses assumed pursuant
to the Administration Agreement with respect to the Portfolios, the Fund will
pay BISYS Ohio, as agent for itself, a monthly fee (in arrears) on the first
business day of each month at the annual rates of .20%, .20% and .20% of the
average daily net assets of the ARCH Equity Income, National
<PAGE> 2
Municipal Bond and Short-Intermediate Corporate Bond Portfolios, respectively.
The fee attributable to each of The ARCH Equity Income, National Municipal
Bond and Short-Intermediate Corporate Bond Portfolios shall be the obligation
of that respective Portfolio and not of any other Portfolio of the Fund.
3. TERMS. From and after the date hereof, the term "Portfolios" as used in
the Administration Agreement shall be deemed to include the New Portfolios.
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Administration Agreement.
4. APPENDIX A. Appendix A to the Administration Agreement is hereby
supplemented to read as set forth in Appendix A attached hereto.
5. MISCELLANEOUS. Except to the extent supplemented hereby, the
Administration Agreement shall remain unchanged and in full force and effect
and is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
THE ARCH FUND, INC.
By: _______________________
Jerry V. Woodham
President
BISYS FUND SERVICES OHIO, INC.
By: _______________________
Stephen G. Mintos
Executive Vice President
<PAGE> 3
APPENDIX A
to the
ADMINISTRATION AGREEMENT
between
THE ARCH FUND, INC.
and
BISYS FUND SERVICES OHIO, INC. (formerly
known as The Winsbury Service Corporation)
- --------------------------------------------------------------------------------
Money Market Portfolio (Trust Shares, Investor A Shares, Institutional Shares
and Investor B Shares)
Treasury Money Market Portfolio (Trust Shares, Investor A Shares and
Institutional Shares)
Growth & Income Equity Portfolio (Trust Shares, Investor A Shares,
Institutional and Investor B Shares)
Emerging Growth Portfolio (Trust Shares, Investor A Shares, Institutional and
Investor B Shares)
Government & Corporate Bond Portfolio (Trust Shares, Investor A Shares,
Institutional and Investor B Shares)
U.S. Government Securities Portfolio (Trust Shares, Investor A Shares,
Institutional and Investor B Shares)
Balanced Portfolio (Trust Shares, Investor A Shares, Institutional and Investor
B Shares)
International Equity Portfolio (Trust Shares, Investor A Shares, Institutional
and Investor B Shares)
Short-Intermediate Municipal Portfolio (Trust Shares and Investor A Shares)
Tax-Exempt Money Market Portfolio (Trust Shares and Investor A Shares)
Missouri Tax-Exempt Bond Portfolio (Trust Shares, Investor A Shares and
Investor B Shares)
Kansas Tax Exempt Bond Portfolio (Trust Shares, Investor A Shares and Investor
B Shares)
<PAGE> 4
Equity Income Portfolio (Trust Shares, Investor A Shares, Institutional Shares
and Investor B Shares)
National Municipal Bond Portfolio (Trust Shares, Investor A Shares and Investor
B Shares)
Short-Intermediate Corporate Bond (Trust Shares, Investor A Shares and
Institutional Shares)
<PAGE> 1
Exhibit (9)(k)
ADDENDUM NO. 4 TO TRANSFER AGENCY AGREEMENT
-------------------------------------------
This Addendum, dated as of September 29, 1995, is entered into
between THE ARCH FUND, INC. (the "Fund"), a Maryland corporation, and BISYS
FUND SERVICES OHIO, INC. ("BISYS"), an Ohio corporation formerly known as The
Winsbury Service Corporation.
WHEREAS, the Fund and BISYS have entered into a Transfer
Agency Agreement dated as of October 1, 1993 as amended March 15, 1994, March
1, 1995 and July 10, 1995 (the "Transfer Agency Agreement"), pursuant to which
the Fund appointed BISYS to act as Transfer Agent for the Fund's ARCH Money
Market, Treasury Money Market, Growth & Income Equity, Emerging Growth,
Government & Corporate Bond, U.S. Government Securities, Balanced,
International Equity and Short-Intermediate Municipal Portfolios;
WHEREAS, Section 20 of the Transfer Agency Agreement provides
that no provision of the Agreement may be changed, discharged or terminated
orally, but only by an instrument in writing signed by the party against which
enforcement of the change, discharge or termination is sought; and
WHEREAS, the Fund has notified BISYS that it has established
three new portfolios, namely, the ARCH Tax-Exempt Money Market, Missouri
Tax-Exempt Bond and Kansas Tax-Exempt Bond Portfolios (collectively, the "New
Portfolios"), and that it desires to retain BISYS to act as the Transfer Agent
therefor, and BISYS has notified the Fund that it is willing to serve as
Transfer Agent for the New Portfolios.
NOW THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. APPOINTMENT. The Fund hereby appoints BISYS to act as
Transfer Agent to the Fund for the New Portfolios for the period and on the
terms set forth in the Transfer Agency Agreement. BISYS hereby accepts such
appointment and agrees to render the services set forth in the Transfer Agency
Agreement, for the compensation herein provided.
2. FEES. For the services provided and expenses assumed
pursuant to the Transfer Agency Agreement with respect to the New Portfolios,
the Fund will pay BISYS in accordance with, and in the manner set forth in,
Appendix C hereto. Fees for any additional services to be provided by the
Transfer Agent pursuant to an amendment to Appendix B hereto shall be subject
to mutual agreement at the time such amendment to Appendix B is proposed.
<PAGE> 2
3. TERMS. From and after the date hereof, the term "Portfolios" as
used in the Transfer Agency Agreement shall be deemed to include the New
Portfolios. Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Transfer Agency Agreement.
4. APPENDIX A. Appendix A to the Administration Agreement is hereby
supplemented to read as set forth in Appendix A attached hereto.
5. MISCELLANEOUS. Except to the extent supplemented hereby, the
Transfer Agency Agreement shall remain unchanged and in full force and effect
and is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this
Addendum as of the date and year first above written.
THE ARCH FUND, INC.
By: /s/ Jerry V. Woodham
---------------------
Jerry V. Woodham
President
BISYS FUND SERVICES OHIO, INC.
By: /s/ Stephen G. Mintos
-----------------------
Stephen G. Mintos
Executive Vice President
<PAGE> 3
APPENDIX A
TO THE
TRANSFER AGENCY AGREEMENT
BETWEEN
THE ARCH FUND, INC.
AND
BISYS FUND SERVICES OHIO, INC.(FORMERLY
KNOWN AS THE WINSBURY SERVICE CORPORATION)
Money Market Portfolio (Trust shares, Investor A shares, Investor B shares and
Institutional shares)
Treasury Money Market Portfolio (Trust shares, Investor A shares and
Institutional shares)
Growth & Income Equity Portfolio (Trust shares, Investor A shares,
Institutional shares and Investor B shares)
Emerging Growth Portfolio (Trust shares, Investor A shares, Institutional
shares and Investor B shares)
Government & Corporate Bond Portfolio (Trust shares, Investor A shares,
Institutional shares and Investor B shares)
U.S. Government Securities Portfolio (Trust shares, Investor A shares,
Institutional shares and Investor B shares)
Balanced Portfolio (Trust shares, Investor A shares, Institutional shares and
Investor B shares)
International Equity Portfolio (Trust shares, Investor A shares, Institutional
shares and Investor B shares)
Short-Intermediate Municipal Portfolio (Trust Shares and Investor A shares)
Tax-Exempt Money Market Portfolio (Trust shares and Investor A shares)
Missouri Tax-Exempt Bond Portfolio (Trust shares, Investor A shares and
Investor B shares)
Kansas Tax-Exempt Bond Portfolio (Trust shares, Investor A shares and Investor
B shares)
<PAGE> 4
APPENDIX B
----------
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
THE ARCH FUND, INC. AND THE WINSBURY SERVICE CORPORATION
--------------------------------------------------------
TRANSFER AGENCY SERVICES
------------------------
1. SHAREHOLDER TRANSACTIONS
------------------------
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend
option, taxpayer identification numbers and wire instructions.
c. Issue confirmations in compliance with Rule 10 under the
Securities Exchange Act of 1934, as amended, and in accordance
with Section 8-408 of the Maryland Commercial Law Article, as
amended.
d. Issue periodic statements for shareholders.
e. Process transfers and exchanges.
f. Process dividend payments, including the purchase of new
shares through dividend reinvestment.
2. SHAREHOLDER INFORMATION SERVICES
--------------------------------
a. Make information available to shareholder servicing unit and
other remote access units regarding trade date, share price,
current holdings, yields, and dividend information.
b. Produce detailed history of transactions through duplicate or
special order statements upon request.
c. Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements, or marketing material to
current shareholders.
3. COMPLIANCE REPORTING
--------------------
a. Provide reports to the Securities and Exchange Commission, the
National Association of Securities Dealers and the States in
which the Fund is registered.
b. Prepare and distribute appropriate Internal Revenue Service
forms for corresponding Portfolio and shareholder income and
capital gains.
<PAGE> 5
c. Issue tax withholding reports to the Internal Revenue Service.
4. DEALER/LOAD PROCESSING
----------------------
a. Provide reports for tracking rights of accumulation and
purchases made under a Letter of Intent.
b. Account for separation of shareholder investments from
transaction sale charges for purchases of Portfolio shares.
c. Calculate fees due under 12b-1 plans for distribution and
marketing expenses.
d. Track sales and commission statistics by dealer and provide
for payment of commissions on direct shareholder purchases in
a load Portfolio.
5. SHAREHOLDER ACCOUNT MAINTENANCE
-------------------------------
a. Maintain all shareholder records for each account in the
Company.
b. Issue customer statements on scheduled cycle, providing
duplicate second and third party copies if required.
c. Record shareholder account information changes.
d. Maintain account documentation files for each shareholder.
e. Provide sub-accounting services for a record holder upon
request of such record holder.
<PAGE> 6
APPENDIX C
-----------
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
THE ARCH FUND, INC. AND THE WINSBURY SERVICE CORPORATION
--------------------------------------------------------
FEE SCHEDULE
------------
A. ANNUAL BASE FEE
---------------
1. Each Portfolio with daily dividends shall pay an Annual Base
Fee of $15 per shareholder, and each Portfolio without daily
dividends shall pay an Annual Base Fee of $12 per shareholder,
subject to minimum fees in paragraph A.2.
2. The Annual Base Fee shall not be less than:
$6,000 for a Portfolio with less than 100 shareholders;
$12,000 for a Portfolio with 100 or more shareholders
but less than 500 shareholders; and
$24,000 for a Portfolio with 500 or more shareholders.
B. ANNUAL ADDITIONAL FEES. These fees are in addition to the
----------------------
Annual Base Fees.
1. Each class in a Portfolio subject to a sales load shall pay
an Annual Additional Fee of $1 per shareholder in such class,
but not less than $500 per year.
2. Each class in a Portfolio subject to a 12b-1 Plan shall pay
an Annual Additional Fee of $1 per shareholder in such class,
but not less than $500 per year.
3. Each class in a Portfolio with checkwriting shall pay an
Annual Additional Fee of $1 per shareholder in such class
(including shareholders who do not utilize this service), but
not less than $500 per year.
4. Each class in a Portfolio with ACH in connection with the
Automatic Investment Plan and Automatic Withdrawal Plan or
other file transfer system shall pay an Annual Additional Fee
of $1 per shareholder in such class (including shareholders
who do not utilize this service), but not less than $1,000.
5. Each Portfolio that utilizes Fund/SERV (a central clearing
house for settlement of purchases and redemptions of shares)
shall pay an annual Additional Fee of $1,000.
C-1
<PAGE> 7
6. Each Portfolio that has share certificates outstanding shall
pay an annual fee of $1000 plus an additional fee of $25 for
each certificate that is redeposited with the Transfer Agent.
C. ALLOCATION OF FEES. Transfer Agency fees paid under this Agreement
shall be treated as an expense of the Company and shall be accrued and
allocated pro rata each month to the Portfolios on the basis of their
respective net assets at the end of the preceding month and paid
monthly.
C-2
<PAGE> 8
APPENDIX D
----------
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
THE ARCH FUND, INC. AND THE WINSBURY SERVICE CORPORATION
--------------------------------------------------------
REPORTS
-------
I. Daily Shareholder Activity Journal
II. Daily Portfolio Activity Summary Report
A. Beginning Balance
B. Dealer Transactions
C. Shareholder Transactions
D. Reinvested Dividends
E. Exchanges
F. Adjustments
G. Ending Balance
III. Daily Wire and Check Registers
IV. Monthly Dealer Processing Reports
V. Monthly Dividend Reports
VI. Sales Data Reports for Blue Sky Registration
VII. Annual report by independent auditors concerning the
Transfer Agent's shareholder system and internal
accounting control systems to be filed with the Securities and
Exchange Commission pursuant to Rule 17Ad-13
of the Securities Exchange Act of 1934, as amended.
D-1
<PAGE> 1
Exhibit (9)(1)
ADDENDUM NO. 5 TO TRANSFER AGENCY AGREEMENT
This Addendum, dated as of , 1996, is entered into between
THE ARCH FUND, INC. (the "Fund"), a Maryland corporation, and BISYS FUND
SERVICES OHIO, INC. ("BISYS Ohio"), an Ohio corporation formerly known as The
Winsbury Service Corporation.
WHEREAS, the Fund and BISYS Ohio have entered into a Transfer Agency
Agreement dated as of October 1, 1993 as amended March 15, 1994, March 1, 1995,
July 10, 1995 and September 29, 1995 (the "Transfer Agency Agreement"),
pursuant to which the Fund appointed BISYS Ohio to act as Transfer Agent for the
Fund's ARCH Money Market, Treasury Money Market, Growth & Income Equity,
Emerging Growth, Government & Corporate Bond, U.S. Government Securities,
Balanced, International Equity, Short-Intermediate Municipal, Tax-Exempt Money
Market, Missouri Tax-Exempt Bond and Kansas Tax-Exempt Bond Portfolios;
WHEREAS, Section 20 of the Transfer Agency Agreement provides that no
provision of the Agreement may be changed, discharged or terminated orally, but
only by an instrument in writing signed by the party against which enforcement
of the change, discharge or termination is sought; and
WHEREAS, the Fund has notified BISYS Ohio that it has established three
new portfolios, namely, the ARCH Equity Income, National Municipal Bond and
Short-Intermediate Corporate Bond Portfolios (collectively, the "New
Portfolios"), and that it desires to retain BISYS Ohio to act as the Transfer
Agent therefor, and BISYS Ohio has notified the Fund that it is willing to
serve as Transfer Agent for the New Portfolios.
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Appointment. The Fund hereby appoints BISYS Ohio to act as Transfer
Agent to the Fund for the New Portfolios for the period and on the terms set
forth in the Transfer Agency Agreement. BISYS Ohio hereby accepts such
appointment and agrees to render the services set forth in the Transfer Agency
Agreement, for the compensation herein provided.
2. Fees. For the services provided and expenses assumed pursuant to the
Transfer Agency Agreement with respect to the New Portfolios, the Fund will pay
BISYS Ohio in accordance with, and in the manner set forth in, Appendix C
hereto. Fees for any additional services to be provided by the Transfer Agent
pursuant to an amendment to Appendix B hereto shall be subject to
<PAGE> 2
mutual agreement at the time such amendment to Appendix B is proposed.
3. TERMS. From and after the date hereof, the term "Portfolios" as used
in the Transfer Agency Agreement shall be deemed to include the New Portfolios.
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Transfer Agency Agreement.
4. APPENDIX A. Appendix A to the Administration Agreement is hereby
supplemented to read as set forth in Appendix A attached hereto.
5. MISCELLANEOUS. Except to the extent supplemented hereby, the
Transfer Agency Agreement shall remain unchanged and in full force and effect
and is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as
of the date and year first above written.
THE ARCH FUND, INC.
By:
----------------------------------
Jerry V. Woodham
President
BISYS FUND SERVICES OHIO, INC.
By:
----------------------------------
Stephen G. Mintos
Executive Vice President
<PAGE> 3
APPENDIX A
to the
TRANSFER AGENCY AGREEMENT
between
The ARCH FUND, INC.
and
BISYS FUND SERVICES OHIO, INC. (formerly
known as The Winsbury Service Corporation)
- -------------------------------------------------------------------------------
Money Market Portfolio (Trust shares, Investor A shares, Institutional shares
and Investor B shares)
Treasury Money Market Portfolio (Trust shares, Investor A shares and
Institutional shares)
Growth & Income Equity Portfolio (Trust shares, Investor A shares,
Institutional shares and Investor B shares)
Emerging Growth Portfolio (Trust shares, Investor A shares, Institutional
shares and Investor B shares)
Government & Corporate Bond Portfolio (Trust shares, Investor A shares,
Institutional shares and Investor B shares)
U.S. Government Securities Portfolio (Trust shares, Investor A shares,
Institutional shares and Investor B shares)
Balanced Portfolio (Trust shares, Investor A shares, Institutional shares and
Investor B shares)
International Equity Portfolio (Trust shares, Investor A shares, Institutional
shares and Investor B shares)
Short-Intermediate Municipal Portfolio (Trust Shares and Investor A shares)
Tax-Exempt Money Market Portfolio (Trust shares and Investor A shares)
Missouri Tax-Exempt Bond Portfolio (Trust shares, Investor A shares and
Investor B shares)
Kansas Tax-Exempt Bond Portfolio (Trust shares, Investor A shares and Investor
B shares)
Equity Income Portfolio (Trust shares, Investor A shares, Institutional shares
and Investor B shares)
<PAGE> 4
National Municipal Bond Portfolio (Trust shares, Investor A shares and Investor
B shares)
Short-Intermediate Corporate Bond Portfolio (Trust shares, Investor A shares
and Institutional shares)
<PAGE> 5
Appendix B
to the Transfer Agency Agreement
between
The ARCH Fund, Inc. and BISYS Fund Services Ohio, Inc.
(formerly known as The Winsbury Service Corporation)
TRANSFER AGENCY SERVICES
1. Shareholder Transactions
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend option, taxpayer
identification numbers and wire instructions.
c. Issue confirmations in compliance with Rule 10 under the Securities
Exchange Act of 1934, as amended, and in accordance with Section 8-408
of the Maryland Commercial Law Article, as amended.
d. Issue periodic statements for shareholders.
e. Process transfers and exchanges.
f. Process dividend payments, including the purchase of new shares through
dividend reinvestment.
2. Shareholder Information Services
a. Make information available to shareholder servicing unit and other
remove access units regarding trade date, share price, current holdings,
yields, and dividend information.
b. Produce detailed history of transactions through duplicate or special
order statements upon request.
c. Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements, or marketing material to current
shareholders.
3. Compliance Reporting
a. Providing reports to the Securities and Exchange Commission, the
National Association of Securities Dealers and the States in which the
Fund is registered.
<PAGE> 6
b. Prepare and distribute appropriate Internal Revenue Service forms for
corresponding Portfolio and shareholder income and capital gains.
c. Issue tax withholding reports to the Internal Revenue Service.
4. Dealer/Load Processing
a. Provide reports for tracking rights of accumulation and purchases made
under a Letter of Intent.
b. Account for separation of shareholder investments from transaction sale
charges for purchases of Portfolio shares.
c. Calculate fees due under 12b-1 plans for distribution and marketing
expenses.
d. Track sales and commission statistics by dealer and provide for payment
of commissions on direct shareholder purchases in a load Portfolio.
5. Shareholder Account Maintenance
a. Maintain all shareholder records for each account in the Company.
b. Issue customer statements on scheduled cycle, providing duplicate
second and third party copies if required.
c. Record shareholder account information changes.
d. Maintain account documentation files for each shareholder.
e. Provide sub-accounting services for a record holder upon request of
such record holder.
<PAGE> 7
Appendix C
to the Transfer Agency Agreement
between
The ARCH Fund, Inc. and BISYS Fund Services Ohio, Inc.
(formerly known as The Winsbury Service Corporation)
FEE SCHEDULE
A. Annual Base Fee
1. Portfolios which have Investor A Shares shall pay an Annual Base Fee
of $10,000 plus $19 per shareholder per Portfolio.
2. Portfolios which have Investor B Shares shall pay an Annual Base Fee
of $10,000 plus $19 per shareholder per Portfolio.
3. Portfolios which have Trust Shares shall pay an Annual Base Fee
of $8,000 plus $15 per shareholder per Portfolio.
4. Portfolios which have Institutional Shares shall pay an Annual Base
Fee of $8,000 plus $15 per shareholder per Portfolio.
B. Annual Additional Fees. These fees are in addition to the Annual Base
Fees.
1. Portfolios participating in the Asset Advisor (asset allocation)
program shall pay an annual fee of $3,000 per Portfolio.
2. Out of pocket costs, including postage, Tymnet charges,
statement/confirm paper, forms and microfiche will be added to the
Transfer Agency Fees.
C-1
<PAGE> 8
C. Allocation of Fees. Transfer Agency fees paid under this Agreement shall be
treated as an expense of the Company and shall be accrued and allocated pro
rata each month to the Portfolios on the basis of their respective net
assets at the end of the preceding month and paid monthly.
C-2
<PAGE> 9
Appendix D
to the Transfer Agency Agreement
between
The ARCH Fund, Inc. and BISYS Fund Services Ohio, Inc.
(formerly known as The Winsbury Service Corporation)
REPORTS
I. Daily Shareholder Activity Journal
II. Daily Portfolio Activity Summary Report
A. Beginning Balance
B. Dealer Transactions
C. Shareholder Transactions
D. Reinvested Dividends
E. Exchanges
F. Adjustments
G. Ending Balance
III. Daily Wire and Check Registers
IV. Monthly Dealer Processing Reports
V. Monthly Dividend Reports
VI. Sales Data Reports for Blue Sky Registration
VII. Annual report by independent auditors concerning the Transfer Agent's
shareholder system and internal accounting control systems to be filed
with the Securities and Exchange Commission pursuant to Rule 17Ad-13 of
the Securities Exchange Act of 1934, as amended.
D-1
<PAGE> 1
Exhibit (9)(n)
AMENDMENT NO. 2 TO TRANSFER AGENCY AGREEMENT
This Amendment No. 2, dated as of October 1, 1995, is entered into
between THE ARCH FUND, INC. (the "Fund"), a Maryland corporation, and BISYS
FUND SERVICES OHIO, INC. ("BISYS"), an Ohio corporation formerly known as The
Winsbury Service Corporation.
WHEREAS, the Fund and BISYS have entered into a Transfer Agency
Agreement, dated as of October 1, 1993, and certain addenda thereto, dated as
of March 15, 1994, March 1, 1995, July 10, 1995, September 29, 1995 and
September 26, 1995 (the "Transfer Agency Agreement"), pursuant to which the
Fund appointed BISYS to act as Transfer Agent for the Fund's Portfolios;
WHEREAS, Section 20 of the Transfer Agency Agreement provides that no
provision of the Transfer Agency Agreement may be changed, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, discharge or termination is sought; and
WHEREAS, the parties hereto wish to amend Appendix C to the Transfer
Agency Agreement;
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Appendix C. Sections A and B of Appendix C to the Transfer Agency
Agreement are hereby amended to read as follows:
"A. Annual Base Fee
1. Portfolios which have Investor A Shares shall pay an Annual
Base Fee of $10,000 plus $19 per shareholder per
Portfolio.
2. Portfolios which have Investor B Shares shall pay an
Annual Base Fee of $10,000 plus $19 per shareholder per
Portfolio.
3. Portfolios which have Trust Shares shall pay an Annual Base
Fee of $8,000 plus $15 per shareholder per Portfolio.
4. Portfolios which have Institutional Shares shall pay an
Annual Base Fee of $8,000 plus $15 per shareholder per
Portfolio.
<PAGE> 2
B. Annual Additional Fees.
1. Portfolios participating in the Asset Advisor (asset
allocation) program shall pay an annual fee of $3,000 per
Portfolio.
2. Out of pocket costs, including postage, Tymnet charges,
statement/confirm paper, forms, and microfiche will be
added to the Transfer Agent Fees."
2. Miscellaneous. Except to the extent amended hereby, the Transfer
Agency Agreement shall remain unchanged and in full force and effect and is
hereby ratified and confirmed in all respects as amended hereby.
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 2
as of the date and year first above written.
THE ARCH FUND, INC.
By:
-----------------------------------
Name: Jerry V. Woodham
Title: President
BISYS FUND SERVICES OHIO, INC.
By:
-----------------------------------
Name: Stephen G. Mintos
Title:
2
<PAGE> 1
Exhibit 11(a)
CONSENT OF COUNSEL
------------------
We hereby consent to the use of our name and to the reference
to our Firm under the caption "Counsel" in the Statement of Additional
Information that is included in Post-Effective Amendment No. 34 to the
Registration Statement on Form N-1A under the Investment Company Act of 1940,
as amended, of The ARCH Fund, Inc. This consent does not constitute a consent
under Section 7 of the Securities Act of 1933, and in consenting to the use of
our name and the references to our Firm under such caption we have not
certified any part of the Registration Statement and do not otherwise come
within the categories of persons whose consent is required under Section 7 or
the rules and regulations of the Securities and Exchange Commission thereunder.
/s/ Drinker Biddle & Reath
----------------------------
DRINKER BIDDLE & REATH
Philadelphia, Pennsylvania
February 26, 1996
<PAGE> 1
Exhibit (11)(b)
AUDITOR'S CONSENT
-----------------
The Board of Trustees of
The ARCH Fund, Inc.:
We consent to the reference to our firm under the heading "Independent
Auditors" in the Statement of Additional Information.
/s/ KPMG Peat Marwick, L.L.P.
-----------------------------
KPMG Peat Marwick, L.L.P.
Columbus, Ohio
February 26, 1996
<PAGE> 1
Exhibit (13)(e)
PURCHASE AGREEMENT
------------------
The ARCH Fund, Inc. (the "Fund"), a Maryland corporation with
transferable shares, and BISYS Fund Services Ohio, Inc. ("BISYS"), an Ohio
corporation, hereby agree with each other as follows:
1. The Fund hereby offers BISYS and BISYS hereby
purchases ten Class J shares of common stock representing interests in the ARCH
Tax-Exempt Money Market Portfolio (the "Portfolio") at a price of $1.00 per
share (such shares of common stock in the Portfolio being hereinafter known as
the "Shares"). BISYS hereby acknowledges the purchase of the Shares and the
Fund hereby acknowledges receipt from BISYS of funds in the amount of $10.28 in
full payment for the Shares.
2. BISYS represents and warrants to the Fund that the
Shares are being acquired for investment purposes and not with a view to the
distribution thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 29th day of September, 1995.
THE ARCH FUND, INC.
By: /s/ Jerry V. Woodham
--------------------
Title: President
BISYS FUND SERVICES OHIO, INC.
By: /s/ Stephen G. Mintos
---------------------
Title: Executive Vice President
<PAGE> 2
PURCHASE AGREEMENT
------------------
The ARCH Fund, Inc. (the "Fund"), a Maryland corporation with
transferable shares, and BISYS Fund Services Ohio, Inc. ("BISYS"), an Ohio
corporation, hereby agree with each other as follows:
1. The Fund hereby offers BISYS and BISYS hereby
purchases ten Class J - Special Series 1 shares of common stock representing
interests in the ARCH Tax-Exempt Money Market Portfolio (the "Portfolio") at a
price of $1.00 per share (such shares of common stock in the Portfolio being
hereinafter known as the "Shares"). BISYS hereby acknowledges the purchase of
the Shares and the Fund hereby acknowledges receipt from BISYS of funds in the
amount of $10.40 in full payment for the Shares.
2. BISYS represents and warrants to the Fund that the
Shares are being acquired for investment purposes and not with a view to the
distribution thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 29th day of September, 1995.
THE ARCH FUND, INC.
By: /s/ Jerry V. Woodham
--------------------
Title: President
BISYS FUND SERVICES OHIO, INC.
By: /s/ Stephen G. Mintos
-----------------------
Title: Executive Vice President
<PAGE> 3
PURCHASE AGREEMENT
------------------
The ARCH Fund, Inc. (the "Fund"), a Maryland corporation with
transferable shares, and BISYS Fund Services Ohio, Inc. ("BISYS"), an Ohio
corporation, hereby agree with each other as follows:
1. The Fund hereby offers BISYS and BISYS hereby
purchases 0.963 Class K shares of common stock representing interests in the
ARCH Missouri Tax-Exempt Bond Portfolio (the "Portfolio") at a price of $11.48
(such shares of common stock in the Portfolio being hereinafter known as the
"Shares"). BISYS hereby acknowledges the purchase of the Shares and the Fund
hereby acknowledges receipt from BISYS of funds in the amount of $11.06 in full
payment for the Shares.
2. BISYS represents and warrants to the Fund that the
Shares are being acquired for investment purposes and not with a view to the
distribution thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 29th day of September, 1995.
THE ARCH FUND, INC.
By: /s/ Jerry V. Woodham
---------------------
Title: President
BISYS FUND SERVICES OHIO, INC.
By: /s/ Stephen G. Mintos
------------------------
Title: Executive Vice President
<PAGE> 4
PURCHASE AGREEMENT
------------------
The ARCH Fund, Inc. (the "Fund"), a Maryland corporation with
transferable shares, and BISYS Fund Services Ohio, Inc. ("BISYS"), an Ohio
corporation, hereby agree with each other as follows:
1. The Fund hereby offers BISYS and BISYS hereby
purchases 0.945 Class K - Special Series 1 shares of common stock representing
interests in the ARCH Missouri Tax-Exempt Bond Portfolio (the "Portfolio") at a
price of $11.48 (such shares of common stock in the Portfolio being hereinafter
known as the "Shares"). BISYS hereby acknowledges the purchase of the Shares
and the Fund hereby acknowledges receipt from BISYS of funds in the amount of
$10.85 in full payment for the Shares.
2. BISYS represents and warrants to the Fund that the
Shares are being acquired for investment purposes and not with a view to the
distribution thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 29th day of September, 1995.
THE ARCH FUND, INC.
By: /s/ Jerry V. Woodham
---------------------
Title: President
BISYS FUND SERVICES OHIO, INC.
By: /s/ Stephen G. Mintos
----------------------
Title: Executive Vice President
<PAGE> 5
PURCHASE AGREEMENT
------------------
The ARCH Fund, Inc. (the "Fund"), a Maryland corporation with
transferable shares, and BISYS Fund Services Ohio, Inc. ("BISYS"), an Ohio
corporation, hereby agree with each other as follows:
1. The Fund hereby offers BISYS and BISYS hereby
purchases 0.915 Class K - Special Series 2 shares of common stock representing
interests in the ARCH Missouri Tax-Exempt Bond Portfolio (the "Portfolio") at a
price of $11.48 (such shares of common stock in the Portfolio being hereinafter
known as the "Shares"). BISYS hereby acknowledges the purchase of the Shares
and the Fund hereby acknowledges receipt from BISYS of funds in the amount of
$10.50 in full payment for the Shares.
2. BISYS represents and warrants to the Fund that the
Shares are being acquired for investment purposes and not with a view to the
distribution thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 29th day of September, 1995.
THE ARCH FUND, INC.
By: /s/ Jerry V. Woodham
---------------------
Title: President
BISYS FUND SERVICES OHIO, INC.
By: /s/ Stephen G. Mintos
----------------------
Title: Executive Vice President
<PAGE> 1
Exhibit (13)(f)
PURCHASE AGREEMENT
------------------
The ARCH Fund, Inc. (the "Fund"), a Maryland corporation with
transferable shares, and BISYS Fund Services Ohio, Inc. ("BISYS Ohio"), an Ohio
corporation, hereby agree with each other as follows:
1. The Fund hereby offers BISYS Ohio and BISYS Ohio
hereby purchases Class M shares of common stock representing
interests in the ARCH Equity Income Portfolio (the "Portfolio") at a price of
$10.00 (such shares of common stock in the Portfolio being hereinafter known as
the "Shares"). BISYS Ohio hereby acknowledges the purchase of the Shares and
the Fund hereby acknowledges receipt from BISYS Ohio of funds in the amount of
$ in full payment for the Shares.
2. BISYS Ohio represents and warrants to the Fund that
the Shares are being acquired for investment purposes and not with a view to
the distribution thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day of , 1996.
THE ARCH FUND, INC.
By: ____________________
Title: President
BISYS FUND SERVICES OHIO, INC.
By: ____________________
Title: Executive Vice President
<PAGE> 2
PURCHASE AGREEMENT
------------------
The ARCH Fund, Inc. (the "Fund"), a Maryland corporation with
transferable shares, and BISYS Fund Services Ohio, Inc. ("BISYS Ohio"), an Ohio
corporation, hereby agree with each other as follows:
1. The Fund hereby offers BISYS Ohio and BISYS Ohio
hereby purchases Class M - Special Series 1 shares of common
stock representing interests in the ARCH Equity Income Portfolio (the
"Portfolio") at a price of $10.00 (such shares of common stock in the Portfolio
being hereinafter known as the "Shares"). BISYS Ohio hereby acknowledges the
purchase of the Shares and the Fund hereby acknowledges receipt from BISYS Ohio
of funds in the amount of $ in full payment for the Shares.
2. BISYS Ohio represents and warrants to the Fund that
the Shares are being acquired for investment purposes and not with a view to
the distribution thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day of , 1996.
THE ARCH FUND, INC.
By: ____________________
Title: President
BISYS FUND SERVICES OHIO, INC.
By: ____________________
Title: Executive Vice President
<PAGE> 3
PURCHASE AGREEMENT
------------------
The ARCH Fund, Inc. (the "Fund"), a Maryland corporation with
transferable shares, and BISYS Fund Services Ohio, Inc. ("BISYS Ohio"), an Ohio
corporation, hereby agree with each other as follows:
1. The Fund hereby offers BISYS Ohio and BISYS Ohio
hereby purchases Class M - Special Series 2 shares of common
stock representing interests in the ARCH Equity Income Portfolio (the
"Portfolio") at a price of $10.00 (such shares of common stock in the Portfolio
being hereinafter known as the "Shares"). BISYS Ohio hereby acknowledges the
purchase of the Shares and the Fund hereby acknowledges receipt from BISYS Ohio
of funds in the amount of $ in full payment for the Shares.
2. BISYS Ohio represents and warrants to the Fund that
the Shares are being acquired for investment purposes and not with a view to
the distribution thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day of , 1996.
THE ARCH FUND, INC.
By: ____________________
Title: President
BISYS FUND SERVICES OHIO, INC.
By: ____________________
Title: Executive Vice President
<PAGE> 4
PURCHASE AGREEMENT
------------------
The ARCH Fund, Inc. (the "Fund"), a Maryland corporation with
transferable shares, and BISYS Fund Services Ohio, Inc. ("BISYS Ohio"), an Ohio
corporation, hereby agree with each other as follows:
1. The Fund hereby offers BISYS Ohio and BISYS Ohio
hereby purchases Class M - Special Series 3 shares of common
stock representing interests in the ARCH Equity Income Portfolio (the
"Portfolio") at a price of $10.00 (such shares of common stock in the Portfolio
being hereinafter known as the "Shares"). BISYS Ohio hereby acknowledges the
purchase of the Shares and the Fund hereby acknowledges receipt from BISYS Ohio
of funds in the amount of $ in full payment for the Shares.
2. BISYS Ohio represents and warrants to the Fund that
the Shares are being acquired for investment purposes and not with a view to
the distribution thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day of , 1996.
THE ARCH FUND, INC.
By: ____________________
Title: President
BISYS FUND SERVICES OHIO, INC.
By: ____________________
Title: Executive Vice President
<PAGE> 5
PURCHASE AGREEMENT
------------------
The ARCH Fund, Inc. (the "Fund"), a Maryland corporation with
transferable shares, and BISYS Fund Services Ohio, Inc. ("BISYS Ohio"), an Ohio
corporation, hereby agree with each other as follows:
1. The Fund hereby offers BISYS Ohio and BISYS Ohio
hereby purchases Class N shares of common stock representing
interests in the ARCH National Municipal Bond Portfolio (the "Portfolio") at a
price of $10.00 (such shares of common stock in the Portfolio being hereinafter
known as the "Shares"). BISYS Ohio hereby acknowledges the purchase of the
Shares and the Fund hereby acknowledges receipt from BISYS Ohio of funds in the
amount of $ in full payment for the Shares.
2. BISYS Ohio represents and warrants to the Fund that
the Shares are being acquired for investment purposes and not with a view to
the distribution thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day of , 1996.
THE ARCH FUND, INC.
By: ____________________
Title: President
BISYS FUND SERVICES OHIO, INC.
By: ____________________
Title: Executive Vice President
<PAGE> 6
PURCHASE AGREEMENT
------------------
The ARCH Fund, Inc. (the "Fund"), a Maryland corporation with
transferable shares, and BISYS Fund Services Ohio, Inc. ("BISYS Ohio"), an Ohio
corporation, hereby agree with each other as follows:
1. The Fund hereby offers BISYS Ohio and BISYS Ohio
hereby purchases Class N - Special Series 1 shares of common
stock representing interests in the ARCH National Municipal Bond Portfolio (the
"Portfolio") at a price of $10.00 (such shares of common stock in the Portfolio
being hereinafter known as the "Shares"). BISYS Ohio hereby acknowledges the
purchase of the Shares and the Fund hereby acknowledges receipt from BISYS Ohio
of funds in the amount of $ in full payment for the Shares.
2. BISYS Ohio represents and warrants to the Fund that
the Shares are being acquired for investment purposes and not with a view to
the distribution thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day of , 1996.
THE ARCH FUND, INC.
By: ____________________
Title: President
BISYS FUND SERVICES OHIO, INC.
By: ____________________
Title: Executive Vice President
<PAGE> 7
PURCHASE AGREEMENT
------------------
The ARCH Fund, Inc. (the "Fund"), a Maryland corporation with
transferable shares, and BISYS Fund Services Ohio, Inc. ("BISYS Ohio"), an Ohio
corporation, hereby agree with each other as follows:
1. The Fund hereby offers BISYS Ohio and BISYS Ohio
hereby purchases Class N - Special Series 2 shares of common
stock representing interests in the ARCH National Municipal Bond Portfolio (the
"Portfolio") at a price of $10.00 (such shares of common stock in the Portfolio
being hereinafter known as the "Shares"). BISYS Ohio hereby acknowledges the
purchase of the Shares and the Fund hereby acknowledges receipt from BISYS Ohio
of funds in the amount of $ in full payment for the Shares.
2. BISYS Ohio represents and warrants to the Fund that
the Shares are being acquired for investment purposes and not with a view to
the distribution thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day of , 1996.
THE ARCH FUND, INC.
By: ____________________
Title: President
BISYS FUND SERVICES OHIO, INC.
By: ____________________
Title: Executive Vice President
<PAGE> 8
PURCHASE AGREEMENT
------------------
The ARCH Fund, Inc. (the "Fund"), a Maryland corporation with
transferable shares, and BISYS Fund Services Ohio, Inc. ("BISYS Ohio"), an Ohio
corporation, hereby agree with each other as follows:
1. The Fund hereby offers BISYS Ohio and BISYS Ohio
hereby purchases Class O shares of common stock representing
interests in the ARCH Short-Intermediate Corporate Bond Portfolio (the
"Portfolio") at a price of $10.00 (such shares of common stock in the Portfolio
being hereinafter known as the "Shares"). BISYS Ohio hereby acknowledges the
purchase of the Shares and the Fund hereby acknowledges receipt from BISYS Ohio
of funds in the amount of $ in full payment for the Shares.
2. BISYS Ohio represents and warrants to the Fund that
the Shares are being acquired for investment purposes and not with a view to
the distribution thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day of , 1996.
THE ARCH FUND, INC.
By: ____________________
Title: President
BISYS FUND SERVICES OHIO, INC.
By: ____________________
Title: Executive Vice President
<PAGE> 9
PURCHASE AGREEMENT
------------------
The ARCH Fund, Inc. (the "Fund"), a Maryland corporation with
transferable shares, and BISYS Fund Services Ohio, Inc. ("BISYS Ohio"), an Ohio
corporation, hereby agree with each other as follows:
1. The Fund hereby offers BISYS Ohio and BISYS Ohio
hereby purchases Class O - Special Series 1 shares of common
stock representing interests in the ARCH Short-Intermediate Corporate Bond
Portfolio (the "Portfolio") at a price of $10.00 (such shares of common stock
in the Portfolio being hereinafter known as the "Shares"). BISYS Ohio hereby
acknowledges the purchase of the Shares and the Fund hereby acknowledges
receipt from BISYS Ohio of funds in the amount of $ in full payment for
the Shares.
2. BISYS Ohio represents and warrants to the Fund that
the Shares are being acquired for investment purposes and not with a view to
the distribution thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day of , 1996.
THE ARCH FUND, INC.
By: ____________________
Title: President
BISYS FUND SERVICES OHIO, INC.
By: ____________________
Title: Executive Vice President
<PAGE> 10
PURCHASE AGREEMENT
------------------
The ARCH Fund, Inc. (the "Fund"), a Maryland corporation with
transferable shares, and BISYS Fund Services Ohio, Inc. ("BISYS Ohio"), an Ohio
corporation, hereby agree with each other as follows:
1. The Fund hereby offers BISYS Ohio and BISYS Ohio
hereby purchases Class O - Special Series 2 shares of common
stock representing interests in the ARCH Short-Intermediate Corporate Bond
Portfolio (the "Portfolio") at a price of $10.00 (such shares of common stock
in the Portfolio being hereinafter known as the "Shares"). BISYS Ohio hereby
acknowledges the purchase of the Shares and the Fund hereby acknowledges
receipt from BISYS Ohio of funds in the amount of $ in full payment for
the Shares.
2. BISYS Ohio represents and warrants to the Fund that
the Shares are being acquired for investment purposes and not with a view to
the distribution thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day of , 1996.
THE ARCH FUND, INC.
By: ____________________
Title: President
BISYS FUND SERVICES OHIO, INC.
By: ____________________
Title: Executive Vice President
<PAGE> 1
THE ARCH FUND, INC.
EXHIBIT 16
TOTAL RETURN
TRUST CLASS
NO LOAD CALCULATIONS
MISSOURI TAX-EXEMPT BOND FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- --------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 07/15/88 TO 11/30/95 ):
( 1,843.0 /1,000) - 1 = 84.30%
YEAR TO DATE: ( 12/31/94 TO 11/30/95 ):
( 1,158.7 /1,000) - 1 = 15.87%
QUARTERLY: ( 08/31/95 TO 11/30/95 ):
( 1,037.5 /1,000) - 1 = 3.75%
MONTHLY: ( 10/31/95 TO 11/30/95 ):
( 1,016.0 /1,000) - 1 = 1.60%
<PAGE> 2
THE ARCH FUND, INC.
EXHIBIT 16
TOTAL RETURN
INVESTOR B SHARES
NO CDSC CALCULATIONS
MISSOURI TAX-EXEMPT BOND FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- --------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 07/15/88 TO 11/30/95 ):
( 1,800.7 /1,000) - 1 = 80.07%
YEAR TO DATE: ( 12/31/94 TO 11/30/95 ):
( 1,148.8 /1,000) - 1 = 14.88%
QUARTERLY: ( 08/31/95 TO 11/30/95 ):
( 1,035.0 /1,000) - 1 = 3.50%
MONTHLY: ( 10/31/95 TO 11/30/95 )
( 1,015.1 /1,000) - 1 = 1.51%
<PAGE> 3
THE ARCH FUND, INC.
EXHIBIT 16
TOTAL RETURN
INVESTOR B SHARES
CDSC LOAD CALCULATIONS
MISSOURI TAX-EXEMPT BOND FUND
AGGREGATE TOTAL RETURN
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
WITH CDSC OF: 0.00%
- -------------------------------------
SINCE INCEPTION: ( 07/15/88 TO 11/30/95 ):
( 1,800.7 /1,000 - 1 = 80.07%
WITH CDSC OF: 5.00%
- -------------------------------------
YEAR TO DATE: ( 12/31/94 TO 11/30/95 ):
( 1,098.8 /1,000 - 1 = 9.88%
QUARTERLY: ( 08/31/95 TO 11/30/95 ):
( 985.0 /1,000 - 1 = -1.50%
MONTHLY ( 10/31/95 TO 11/30/95 ):
( 965.1 /1,000 - 1 = -3.49%
<PAGE> 4
THE ARCH FUND, INC.
EXHIBIT 16
TOTAL RETURN
INVESTOR A SHARES
NO LOAD CALCULATIONS
MISSOURI TAX-EXEMPT BOND FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- -------------------------
T =(ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P= A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 07/15/88 TO 11/30/95 ):
( 1,822.1 /1,000) - 1 = 82.21%
YEAR TO DATE: ( 12/31/94 TO 11/30/95 ):
( 1,156.8 /1,000) - 1 = 15.68%
QUARTERLY: ( 08/31/95 TO 11/30/95 ):
( 1,036.1 /1,000) - 1 = 3.61%
MONTHLY: ( 10/31/95 TO 11/30/95 ):
( 1,015.8 /1,000) - 1 = 1.58%
<PAGE> 5
THE ARCH FUND, INC.
EXHIBIT 16
TOTAL RETURN
INVESTOR A SHARES
LOAD CALCULATIONS
MISSOURI TAX-EXEMPT BOND FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 4.50%
- --------------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 07/15/88 TO 11/30/95 ):
( 1,740.3 /1,000) - 1 = 74.03%
YEAR TO DATE: ( 12/31/94 TO 11/30/95 ):
( 1,104.6 /1,000) - 1 = 10.46%
QUARTERLY: ( 08/31/95 TO 11/30/95 ):
( 989.5 /1,000) - 1 = -1.05%
MONTHLY: ( 10/31/95 TO 11/30/95 ):
( 969.8 /1,000) - 1 = -3.02%
<PAGE> 6
THE ARCH FUND, INC.
EXHIBIT 16
TRUST SHARES
30-DAY S.E.C. YIELD CALCULATIONS
MISSOURI TAX-EXEMPT BOND
WITH WAIVERS
(a-b)
30-Day S.E.C. Yield Equation = 2 *([( ----------- +1)(6)]-1) =
(cd)
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
WITHOUT 0.00% LOAD:
( 206,320.00 - 30,099.86 )
2 * ([( ------------------------------ + 1)(6)]-1) = 4.48%
( 4,053,706.700 * 11.74 )
The performance was computed based on the thirty day period ending
November 30, 1995.
<PAGE> 7
THE ARCH FUND, INC.
EXHIBIT 16
TRUST SHARES
30-DAY S.E.C. YIELD CALCULATIONS
MISSOURI TAX-EXEMPT BOND
WITHOUT WAIVERS
(a-b)
30-Day S.E.C. Yield Equation = 2*([( --------------- +1)(6)]-1) =
(cd)
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (gross)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
WITHOUT 0.00% LOAD:
( 206,320.00 - 34,110.58 )
2*([( --------------------------------- +1)(6)]-1) = 4.38%
( 4,053,706.700 * 11.74 )
The performance was computed based on the thirty day period ending
November 30, 1995.
<PAGE> 8
THE ARCH FUND, INC.
EXHIBIT 16
INVESTOR A SHARES
30-DAY S.E.C. YIELD CALCULATIONS
MISSOURI TAX-EXEMPT BOND
WITH WAIVERS
(a-b)
30-Day S.E.C. Yield Equation = 2*([( ------------- +1)(6)]-1) =
(cd)
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
WITH 4.50% LOAD:
( 107,579.44 - 19,741.29)
2 *([( -------------------------------- +1)(6)]-1) = 4.09%
( 2,113,535.300 * 12.29)
WITHOUT 4.50% LOAD:
( 107,579.44 - 19,741.29)
2 *([( -------------------------------- +1)(6)]-1) = 4.29%
( 2,113,535.300 * 11.74)
The performance was computed based on the thirty day period ending
November 30, 1995.
<PAGE> 9
THE ARCH FUND, INC.
EXHIBIT 16
INVESTOR A SHARES
30-DAY S.E.C. YIELD CALCULATIONS
MISSOURI TAX-EXEMPT BOND
WITHOUT WAIVERS
(a-b)
30-Day S.E.C. Yield Equation = 2 *([( --------------- +1(6)]-1) =
(cd)
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (gross)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
WITH 4.50% LOAD:
( 107,579.44 - 21,832.58 )
2 *([( ------------------------------- +1)(6)]-1) = 3.99%
( 2,113,535.300 * 12.29 )
WITHOUT 4.50% LOAD:
( 107,579.44 - 21,832.58 )
2 *([( ------------------------------- +1)(6)]-1) = 41.8%
( 2,113,535.300 * 11.74 )
The performance was computed based on the thirty day period ending
November 30, 1995.
<PAGE> 10
THE ARCH FUND, INC.
EXHIBIT 16
INVESTOR B SHARES
30-DAY S.E.C. YIELD CALCULATIONS
MISSOURI TAX-EXEMPT BOND
WITH WAIVERS
(a-b)
30-Day S.E.C. Yield Equation = 2*([( ------------- +1)(6)]-1) =
(cd)
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
WITHOUT 0.00% LOAD:
( 1,842.89 - 614.96 )
2 *([( ----------------------- +1(6)]-1) = 3.49%
( 36,203.985* 11.74 )
The performance was computed based on the thirty day period ending
November 30, 1995.
<PAGE> 11
THE ARCH FUND, INC.
EXHIBIT 16
INVESTOR B SHARES
30-DAY S.E.C. YIELD CALCULATIONS
MISSOURI TAX-EXEMPT BOND
WITHOUT WAIVERS
(a-b)
30-Day S.E.C. Yield Equation = 2 *([( --------------- +1(6)]-1) =
(cd)
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (gross)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
WITH 0.00% LOAD:
( 1,842.89 - 650.78 )
2 *([( ------------------------- +1)(6)]-1) = 3.39%
( 36,203.985 * 11.74 )
The performance was computed based on the thirty day period ending
November 30, 1995.
<PAGE> 12
THE ARCH FUND, INC.
TRUST SHARES
DISTRIBUTION RATES
EXHIBIT 16
DISTRIBUTION RATE (INCLUDING CAPITAL GAINS)(NO LOAD)
- ----------------------------------------------------
DISTRIBUTION RATE= D/P
WHERE: D= Distributions per share over a 12 month period
(income and capital gain distributions)
P= Net Asset Value at end of 12 month period
EXAMPLES ( 12/01/92 TO 11/30/93 )
MISSOURI TAX-EXEMPT BOND 0.5729 / 11.74 = 4.88%
DISTRIBUTION RATE (EXCLUDING CAPITAL GAINS)(NO LOAD)
- ----------------------------------------------------
DISTRIBUTION RATE= D/P
WHERE: D= Distributions per share over a 12 month period
(income distributions only)
P= Net Asset Value at end of 12 month period
EXAMPLES ( 12/01/92 TO 11/30/93 )
MISSOURI TAX-EXEMPT BOND 0.5648 / 11.74 = 4.81%
<PAGE> 13
THE ARCH FUND, INC.
INVESTOR SHARES
DISTRIBUTION RATES
EXHIBIT 16
DISTRIBUTION RATE (INCLUDING CAPITAL GAINS)
- -------------------------------------------
DISTRIBUTION RATE = D/P
WHERE: D = Distributions per share over a 12 month period
(income and capital gain distributions)
P = Maximum offering price at end of 12 month period
EXAMPLES ( 12/01/94 TO 11/30/95 )
LOAD = 4.50%
MISSOURI TAX-EXEMPT BOND 0.5517 / 12.29 = 4.49%
DISTRIBUTION RATE (EXCLUDING CAPITAL GAINS)
- -------------------------------------------
DISTRIBUTION RATE = D/P
WHERE: D = Distributions per share over a 12 month period
(income distributions only)
P = Maximum offering price at end of 12 month period
EXAMPLES ( 12/01/94 TO 11/30/95 )
MISSOURI TAX-EXEMPT BOND 0.5436 / 12.29 = 4.42%
DISTRIBUTION RATE (INCLUDING CAPITAL GAINS)(NO LOAD)
- ----------------------------------------------------
DISTRIBUTION RATE = D/P
WHERE: D = Distributions per share over a 12 month period
(income and capital gain distributions)
P = Net Asset Value at end of 12 month period
EXAMPLES ( 12/01/94 TO 11/30/95 )
MISSOURI TAX-EXEMPT BOND 0.5517 / 11.74 = 4.70%
DISTRIBUTION RATE (EXCLUDING CAPITAL GAINS)(NO LOAD)
- ----------------------------------------------------
DISTRIBUTION RATE = D/P
WHERE: D = Distributions per share over a 12 month period
(income distributions only)
P = Net Asset Value at end of 12 month period
EXAMPLES ( 12/01/94 TO 11/30/95 )
MISSOURI TAX-EXEMPT BOND 0.5436 / 11.74 = 4.63%
<PAGE> 14
THE ARCH FUND, INC.
INVESTOR B SHARES
DISTRIBUTION RATES
EXHIBIT 16
DISTRIBUTION RATE (INCLUDING CAPITAL GAINS)(NO LOAD)
- ----------------------------------------------------
DISTRIBUTION RATE = D/P
WHERE: D = Distributions per share over a 12 month period
(income and capital gain distributions)
P = Net Asset Value at end of 12 month period
EXAMPLES ( 12/01/92 TO 11/30/93 )
MISSOURI TAX-EXEMPT BOND 0.4724 / 11.74 = 4.02%
DISTRIBUTION RATE (EXCLUDING CAPITAL GAINS)(NO LOAD)
- ----------------------------------------------------
DISTRIBUTION RATE = D/P
WHERE: D = Distributions per share over a 12 month period
(income distributions only)
P = Net Asset Value at end of 12 month period
EXAMPLES ( 12/01/92 TO 11/30/93 )
MISSOURI TAX-EXEMPT BOND 0.4634 / 11.74 = 3.96%
<PAGE> 15
THE ARCH FUND, INC.
EXHIBIT 16
TOTAL RETURN
TRUST SHARES
MONEY MARKET FUNDS
TAX-EXEMPT MONEY MARKET FUND
AVERAGE ANNUAL TOTAL RETURN
- ---------------------------
T = (ERV/P)(1)/N - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE: *
SINCE INCEPTION: ( 09/28/90 TO 11/30/95 ):
( 1,151.9 /1000((1)/( 1890 /365))-1) = 2.77%
ONE YEAR: ( 11/30/94 TO 11/30/95 ):
( 1,032.5 /1000((1)/( 365 /365))-1) = 3.25%
TWO YEAR: ( 11/30/93 TO 11/30/95 ):
( 1,055.6 /1000((1)/( 730 /365))-1) = 2.74%
THREE YEAR: ( 11/30/92 TO 11/30/95 ):
( 1,076.8 /1000((1)/( 1095 /365))-1) = 2.50%
FOUR YEAR: ( 11/30/91 TO 11/30/95 ):
( 1,105.3 /1000((1)/( 1461 /365))-1) = 2.53%
FIVE YEAR: ( 11/30/90 TO 11/30/95 ):
( 1,151.9 /1000((1)/( 1825 /365))-1) = 2.87%
* Dividend history begins 1/1/88; data not available from previous
administrator.
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 12/31/94 TO 11/30/95 ):
( 1,029.5 /1,000) - 1 = 2.95%
QUARTERLY: ( 08/31/95 TO 11/30/95 ):
( 1,007.9 /1,000) - 1 = 0.79%
MONTHLY: ( 10/31/95 TO 11/30/95 ):
( 1,002.6 /1,000) - 1 = 0.26%
<PAGE> 16
THE ARCH FUND, INC.
EXHIBIT 16
TOTAL RETURN
INVESTOR A SHARES
MONEY MARKET FUNDS
TAX-EXEMPT MONEY MARKET FUND
AVERAGE ANNUAL TOTAL RETURN
- ---------------------------
T = (ERV/P)(1)/N - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE: *
ONE YEAR: ( 11/30/94 to 11/30/95 ):
( 1,030.2 /1000((1)/( 365 /365))-1) = 3.02%
TWO YEAR: ( 11/30/93 to 11/30/95 ):
( 1,050.8 /1000((1)/( 730 /365))-1) = 2.51%
THREE YEAR: ( 11/30/92 to 11/30/95 ):
( 1,069.1 /1000((1)/( 1095 /365))-1) = 2.25%
FOUR YEAR: ( 11/30/91 to 11/30/95 ):
( 1,094.5 /1000((1)/( 1461 /365))-1) = 2.28%
FIVE YEAR: ( 11/30/90 to 11/30/95 ):
( 1,137.4 /1000((1)/( 1825 /365))-1) = 2.61%
* Dividend history begins 1/1/88; data not available from previous
administrator.
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 12/31/94 TO 11/30/95 ):
( 1,027.3 /1,000) - 1 = 2.73%
QUARTERLY: ( 08/31/95 TO 11/30/95 ):
( 1,007.3 /1,000) - 1 = 0.73%
MONTHLY: ( 10/31/95 TO 11/30/95 ):
( 1,002.4 /1,000) - 1 = 0.24%
<PAGE> 17
THE ARCH FUND, INC.
EXHIBIT 16
TRUST SHARES
YIELD COMPUTATION SCHEDULE
TAX-EXEMPT MONEY MARKET
<TABLE>
<CAPTION> 7 DAY YIELD CALCULATION 30 DAY YIELD CALCULATION
----------------------- ------------------------
Base period 7 Days 30 Days
Beginning Account Balance - 1 share at $1.00 1.000000000 1.000000000
----------- -----------
Dividend Declaration
<S> <C> <C>
NOVEMBER 1 0.000084301
NOVEMBER 2 0.000084721
NOVEMBER 3 0.000085567
NOVEMBER 4 0.000085567
NOVEMBER 5 0.000085567
NOVEMBER 6 0.000083035
NOVEMBER 7 0.000085846
NOVEMBER 8 0.000086425
NOVEMBER 9 0.000087650
NOVEMBER 10 0.000088409
NOVEMBER 11 0.000088409
NOVEMBER 12 0.000088409
NOVEMBER 13 0.000087627
NOVEMBER 14 0.000087835
NOVEMBER 15 0.000088032
NOVEMBER 16 0.000088265
NOVEMBER 17 0.000088080
NOVEMBER 18 0.000088080
NOVEMBER 19 0.000088080
NOVEMBER 20 0.000087260
NOVEMBER 21 0.000086365
NOVEMBER 22 0.000084901
NOVEMBER 23 0.000084901
NOVEMBER 24 0.000089038 0.000089038
NOVEMBER 25 0.000089038 0.000089038
NOVEMBER 26 0.000089038 0.000089038
NOVEMBER 27 0.000088542 0.000088542
NOVEMBER 28 0.000088091 0.000088091
NOVEMBER 29 0.000086129 0.000086129
NOVEMBER 30 0.000085457 0.000085457
Less: Deductions from Shareholders Accounts 0.000000000 0.000000000
----------- -----------
Base period return 0.000615333 0.002608662
----------- -----------
Ending Account Balance 1.000615333 1.002608662
Less: Beginning Account Balance 1.000000000 1.000000000
----------- -----------
Difference 0.000615333 0.002608662
Base Period Return
(Difference/Beginning Account Balance) 0.000615333 0.002608662
Yield Quotation
(Base Period Return * 365/Base Period) 3.21% 3.17%
Effective Yield Quotation
[(Base Period Return + 1)(365)/Base Period] - 1 3.26% 3.22%
</TABLE>
The quotations were computed based on the seven and thirty days ending
November 30, 1995.
<PAGE> 18
THE ARCH FUND, INC.
EXHIBIT 16
INVESTOR A SHARES
YIELD COMPUTATION SCHEDULE
TAX-EXEMPT MONEY MARKET
<TABLE>
<CAPTION>
7 DAY YIELD CALCULATION 30 DAY YIELD CALCULATION
----------------------- ------------------------
Base period 7 DAYS 30 DAYS
Beginning Account Balance - 1 share at $1.00 1.000000000 1.000000000
----------- -----------
<S> <C> <C>
Dividend Declaration
NOVEMBER 1 0.000077727
NOVEMBER 2 0.000078146
NOVEMBER 3 0.000078990
NOVEMBER 4 0.000078990
NOVEMBER 5 0.000078990
NOVEMBER 6 0.000076459
NOVEMBER 7 0.000079269
NOVEMBER 8 0.000079850
NOVEMBER 9 0.000081075
NOVEMBER 10 0.000081833
NOVEMBER 11 0.000081833
NOVEMBER 12 0.000081833
NOVEMBER 13 0.000081052
NOVEMBER 14 0.000081261
NOVEMBER 15 0.000081457
NOVEMBER 16 0.000081689
NOVEMBER 17 0.000081505
NOVEMBER 18 0.000081505
NOVEMBER 19 0.000081505
NOVEMBER 20 0.000080683
NOVEMBER 21 0.000079789
NOVEMBER 22 0.000078326
NOVEMBER 23 0.000078326
NOVEMBER 24 0.000082464 0.000082464
NOVEMBER 25 0.000082464 0.000082464
NOVEMBER 26 0.000082464 0.000082464
NOVEMBER 27 0.000081966 0.000081966
NOVEMBER 28 0.000081516 0.000081516
NOVEMBER 29 0.000079554 0.000079554
NOVEMBER 30 0.000078879 0.000078879
Less: Deductions from Shareholders Accounts 0.000000000 0.000000000
----------- -----------
Base period return 0.000569305 0.002411396
----------- -----------
Ending Account Balance 1.000569305 1.002411396
Less: Beginning Account Balance 1.000000000 1.000000000
----------- -----------
Difference 0.000569305 0.002411396
Base Period Return
(Difference/Beginning Account Balance) 0.000569305 0.002411396
Yield Quotation
(Base Period Return *365/Base Period) 2.97% 2.93%
Effective Yield Quotation
[(Base Period Return + 1)(365)/Base Period] - 1 3.01% 2.97%
</TABLE>
The quotations were computed based on the seven and thirty days ending
November 30, 1995.
