File No. 2-95943
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As filed with the SEC on [April 7, 1998]
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
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Post-Effective Amendment No.
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(Check appropriate box or boxes)
THE RIGHTIME FUND, INC.
(Exact Name of Registrant as Specified in Charter)
(215) 887-8111
(Area Code and Telephone Number)
218 Glenside Avenue, Wyncote, PA 19095-1594
(Address of Principal Executive Offices
Number, Street, City, State, Zip Code)
David J. Rights, President; The Rightime Fund, Inc.
218 Glenside Avenue, Wyncote, PA 19095-1594
(Name and Address of Agent for Service,
Number, Street, City, State, Zip Code)
Copies to:
Steven M. Felsenstein, Esquire
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103
Approximate Date of Proposed Public Offering: As soon as
practicable after this Registration Statement becomes effective
under the Securities Act of 1933.
It is proposed that this registration statement will become
effective on May 7, 1998, 1998 pursuant to Rule 488 under the
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Securities Act of 1933.
Calculation of Registration Fee under the Securities Act of 1933
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This registration statement offers common stock, par value
$.01, of the Blue Chip Fund series of the Registrant presently
registered under the Form N-1A registration statement of the
Registrant, File No.2-95943, and will be included on the Rule 24f-2
Notice filed by the Registrant pursuant to such Rule.
Page of pages
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Exhibit Index Page
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THE RIGHTIME FUND, INC.
CROSS REFERENCE SHEET
(Pursuant to Rule 481(a) under the
Securities Act of 1933)
N-14 Item No. and Caption Location in Prospectus
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PART A
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1. Beginning of Registration Statement and Cover Page of Registration Statement; Front Cover
outside Front Cover Page of Prospectus Page of Prospectus
2. Beginning and outside Back Cover Page of Table of Contents
Prospectus
3. Synopsis Information and Risk Factors Summary; Risk Factors
4. Information About the Transaction Summary; Reasons for the Reorganization;
Information About the Reorganization
5. Information About the Registrant Prospectus Cover Page; Summary; Comparison of
Investment Policies and Risks; Information About
Blue Chip Fund
6. Information About the Company Being Prospectus Cover Page; Comparison of Investment
Policies and Risks; Information About the Fund
and Blue Chip Fund
Acquired
7. Voting Information Prospectus Cover Page; Notice of Special Meeting
of Shareholders; Summary-Voting Information;
Voting Information and Principal Stockholders
None
8. Interest of Certain Persons and Experts
9. Additional Information Required for Not Applicable
Reoffering by Persons Deemed to be
Underwriters
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N-14 Item No. and Caption Location in Prospectus
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PART B
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10. Cover Page Cover Page of Statement of Additional Information
11. Table of Contents Not Applicable
12. Additional Information about the Registrant Incorporation of Documents by Reference in the
Statement of Additional Information
13. Additional Information about the Company Incorporation of Documents by Reference in the
being Acquired Statement of Additional Information
14. Financial Statements Incorporation of Documents by Reference in the
Statement of Additional Information
PART C - OTHER INFORMATION
Part C contains the information required by Items 15-17 under the items set forth in the form.
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RIGHTIME GOVERNMENT SECURITIES FUND
of The Rightime Fund, Inc.
Dear Shareholder:
Enclosed is a Notice of a Special Meeting of Shareholders of
The Rightime Government Securities Fund which has been called for
June 24, 1998 at 10:00 a.m., at our principal office at 218 Glenside
Avenue, Wyncote, Pennsylvania 19095-1594. The accompanying Combined
Proxy Statement/Prospectus describes a proposal which affects your
Government Fund. To avoid the expense and delay of further
solicitations, we ask you to give your prompt attention to this
proposal, and vote by sending in the enclosed proxy card.
PLEASE TAKE A MOMENT TO FILL OUT, SIGN AND
RETURN THE ENCLOSED PROXY CARD NOW!
This meeting is very important to your Fund. You are being
asked to consider and approve a Plan of Reorganization which would
result in an exchange of shares in your Government Fund for those of
a separate fund called The Rightime Blue Chip Fund. The Blue Chip
Fund also is managed by Rightime Econometrics, Inc., the "Adviser"
to the Government Fund. If the proposal is approved, on the date of
the exchange you will receive shares in the Blue Chip Fund equal in
value to your investment in the Government Fund.
The transaction is being presented because, at this time, the
assets of the Government Fund are not sufficient to continue to
offer competitive performance and high quality service to
shareholders of the Government Fund over the long term. The Blue
Chip Fund possesses the operating economies of scale which allow
shareholders to enjoy a relatively low cost investment program while
receiving a high level of service, and also will enable shareholders
to continue to have the market timing strategies utilized by the
Adviser applied to your investment.
Please take the time to review this document and vote now! To
ensure that your vote is counted, indicate your position on the
enclosed proxy card. Sign and return your card promptly. If you
determine at a later date that you wish to attend this meeting, you
may revoke your proxy and vote in person.
Thank you for your attention to this matter.
Sincerely,
/S/DAVID J. RIGHTS
David J. Rights
Chairman
THE RIGHTIME FUND, INC.
218 Glenside Avenue
Wyncote, Pennsylvania 19095-1594
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF
THE RIGHTIME GOVERNMENT SECURITIES FUND
To Be Held on June 24, 1998
To the Shareholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders
of The Rightime Government Securities Fund (the "Government Fund")
series of The Rightime Fund, Inc. (the "Company"), will be held at
the Company's offices which are located at 218 Glenside Avenue,
Wyncote, Pennsylvania 19095-1594 on June 24, 1998 at 10:00 a.m., for
the following reasons:
To approve or disapprove a Plan of Reorganization providing for
the transfer of substantially all of the assets of the
Government Fund to, and the assumption of the liabilities of
the Government Fund by, The Rightime Blue Chip Fund series (the
"Blue Chip Fund") of the Company, in exchange for shares of the
Blue Chip Fund to be distributed to the shareholders of the
Government Fund.
To transact any other business as may properly come before the
Special Meeting or any adjournment thereof.
The transaction contemplated by the Plan of Reorganization is
described in the attached Combined Proxy Statement/Prospectus. A
copy of the Plan of Reorganization is attached as Exhibit A thereto
and information about the Blue Chip Fund is also attached.
Shareholders of record as of the close of business on April 30, 1998
are entitled to notice of, and to vote at, the Special Meeting or
any adjournment thereof.
By Order of the Board of Directors,
/S/EDWARD S. FORST, SR.
Edward S. Forst, Sr.
Secretary
May 18, 1998
The Board of Directors urges you to complete, date, sign and return
the enclosed proxy card(s) in the enclosed postage-paid return
envelope. It is important that you return your signed proxy
promptly so that a quorum may be ensured. If you attend the
meeting, you may vote your shares in person.
Combined Proxy Statement/Prospectus
TABLE OF CONTENTS
Page
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Chairman's Letter Cover
Notice to Shareholders
Cover Page
Overview of the Reorganization and the Funds
What is involved in the proposed Reorganization?
Why is the Reorganization being proposed at this time?
What vote is required in order to approve the
Reorganization?
What are the tax consequences of the Reorganization?
How do the investment objectives and policies of the
Funds compare?
How are the Funds each managed?
How are shares of the Funds distributed?
What are the various fees and expenses of the Funds?
How do the risks of the Funds compare?
How did market conditions and the Fund's investment
strategy affect the performance of the Blue Chip fund
for the most recently completed fiscal year
What is the purchase and redemption price of shares of
the Blue Chip Fund?
How are income and gains of the Funds distributed?
Information about the Reorganization
Method of Carrying Out Reorganization
Conditions Precedent to Closing
Expenses of the Transaction
Tax Considerations
Comparison of Investment Policies and Risks
Blue Chip Fund and Government Fund
Investment Policies - Blue Chip Fund
Investment Policies - Government Fund
Investment Policies - Both Funds
Risk Factors
Investment Restrictions
Information about the Company and the Funds
Voting Information and Principal Stockholders
Proposed Plan of Reorganization Exhibit A
Prospectus of The Rightime Fund, Inc. dated February 1,
1998 Exhibit B
PRELIMINARY COPY
COMBINED PROXY STATEMENT/PROSPECTUS
Dated May 18, 1998
Acquisition of the assets of
The Rightime Government Securities Fund
by and in exchange for shares of
The Rightime Blue Chip Fund
(each a series of The Rightime Fund, Inc.)
This Combined Proxy Statement/Prospectus is being furnished to
you by the Board of Directors of The Rightime Fund, Inc., a
registered open-end investment company (the "Company"). The Board
is recommending that shareholders approve a proposed consolidation
of The Rightime Government Securities Fund (the "Government Fund")
into The Rightime Blue Chip Fund (the "Blue Chip Fund"). The Funds
are separate series of the Company and each is managed by Rightime
Econometrics, Inc. (the "Adviser").
The transaction is proposed because the Board has concluded
that the small size of the Government Fund (approximately $7
million) makes it difficult to achieve desired investment returns
for shareholders of the Government Fund, due in part to the
proportionally higher expenses of operating a smaller fund. In
addition, the Board believes that consolidation into the larger Blue
Chip Fund (approximately $271 million) will be a more cost-effective
investment and will continue to provide the benefits of the market
timing strategies developed by the Adviser. The objective of the
Blue Chip Fund is to achieve for its investors a high total return
consistent with reasonable risk. The Blue Chip Fund seeks to
achieve its objective by investing in securities of well known and
established companies ("Blue Chips") and by making other investments
selected in accordance with its investment policies and
restrictions. The Blue Chip Fund also uses a variety of investment
techniques in an effort to balance portfolio risks and to hedge
market risks.
Shareholder voting instructions provided by proxy will be voted
at a Special Meeting of Shareholders called to consider a Plan of
Reorganization (the "Plan"), which provides for the transfer of
substantially all of the Government Fund's assets to the Blue Chip
Fund. Following the transfer, the Government Fund shareholders will
receive shares of the Blue Chip Fund having a net asset value equal
to the net asset value of their investment in the Government Fund
and the Government Fund will cease to exist.
(bullet) This Combined Proxy Statement/Prospectus sets forth
concisely information about the Blue Chip Fund that a prospective
investor should know before investing, and should be retained for
future reference.
(bullet) A Prospectus dated February 1, 1998 containing
information about the Blue Chip Fund (and the other Rightime Funds)
is attached as Exhibit B and is incorporated by reference.
(bullet) A Statement of Additional Information dated May 18, 1998
relating to this Combined Proxy Statement/Prospectus and the
proposed reorganization has been filed with the U.S. Securities and
Exchange Commission and is incorporated by reference. A copy may be
obtained writing or calling the Company at:
The Rightime Fund, Inc.
218 Glenside Avenue
Wyncote, PA 19095-1594
1 (800) 866-9393
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/proxy statement. Any representation to the contrary
is a criminal offense.
No person has been authorized to give any information or to make any
representations other than those contained in this prospectus/proxy
statement and in the materials expressly incorporated herein by
reference and, if given or made, such other information or
representations must not be relied upon as having been authorized by
the Fund.
PROPOSAL
TO APPROVE OR DISAPPROVE A PLAN OF REORGANIZATION PROVIDING FOR
THE TRANSFER OF SUBSTANTIALLY ALL OF THE ASSETS OF THE
GOVERNMENT FUND TO, AND THE ASSUMPTION OF THE LIABILITIES OF
THE GOVERNMENT FUND BY, THE BLUE CHIP FUND IN EXCHANGE FOR
SHARES OF THE BLUE CHIP FUND TO BE DISTRIBUTED TO THE
SHAREHOLDERS OF THE GOVERNMENT FUND.
Overview of the Reorganization and the Funds
This summary of information contained in this Combined Proxy
Statement/Prospectus is qualified by reference to the more complete
information contained elsewhere in this document. The Plan of
Reorganization and the Prospectus of the Blue Chip Fund are attached
as Exhibits A and B, respectively.
What is involved in the proposed Reorganization?
The proposed Plan of Reorganization (the "Plan") provides for the
transfer of substantially all of the assets of the Government Fund
to the Blue Chip Fund in exchange for shares of the Blue Chip Fund
and the assumption by the Blue Chip Fund of any liabilities of the
Government Fund, following which the Blue Chip Fund shares received
by the Government Fund in exchange for its assets will be
distributed to the Government Fund shareholders, who will become
Blue Chip Fund shareholders (collectively, the "Reorganization"),
after which the Government Fund will be dissolved.
As a result of the Reorganization, shareholders of the
Government Fund will receive Blue Chip Fund shares equal in value to
the net asset value of their existing investment in the Government
Fund.
Why is the Reorganization being proposed at this time?
The Board of Directors has concluded that it would be in the
best interest of the shareholders of the Government Fund to combine
the Government Fund with a larger fund in order to benefit from the
economies of operating a larger fund, while achieving better
diversification among investments possible in a larger fund. The
Board has concluded that the anticipated growth in the assets of the
Government Fund would not be sufficient to continue to offer
shareholders a fund with competitive performance and high quality
service over the long term.
At meetings held on December 12, 1997 and March 20, 1998, the
Board of Directors considered various options, including liquidation
or reorganization into another fund. Due to the retirement-oriented
nature of the largest portion of shareholder accounts in the
Government Fund, liquidation was not viewed as a beneficial choice
because retirement assets are generally invested for the long term.
A reorganization with another investment company investing in
government securities of the type held by the Government Fund was
considered, but no suitable candidate was identified which would
provide shareholders the benefits of market timing. The Board
believes that market timing is the defining investment factor which
distinguishes the funds which are operated within the Company, and
therefore is the distinguishing characteristic of an investment in
the Government Fund.
The Board concluded, therefore, that the other series of the
Company offered the best opportunity to continue to provide
investors with the benefits which are sought from market timing.
While the other series of the Company offer a substantially similar
market timing program, none invest primarily in government
securities. The Adviser has noted, however, that the Blue Chip Fund
is a relatively conservative fund that utilizes a market timing
function to produce a historical risk rating, or "beta," that is not
significantly higher than that of the Government Fund. After
considering the compatibility and comparative expenses of the Blue
Chip and the Government Funds and the tax consequences and costs of
the Reorganization, the Board approved the Reorganization and the
Plan and determined to seek shareholder approval at the Special
Meeting.
While the Board recognizes that each shareholder should make an
assessment of the shareholder's own financial situation and
objectives, for the reasons summarized above, the Board, including a
majority of the Directors who are not "interested persons" of either
Fund as defined in the Investment Company Act of 1940, as amended
(the "1940 Act"), has concluded that the Reorganization is in the
best interest of shareholders and therefore recommends that you vote
FOR the Plan. If the Plan is not approved, the Board will consider
other possible courses of action for the Government Fund, including
dissolution and liquidation.
What vote is required in order to approve the Reorganization?
Approval of the Plan (and therefore, the Reorganization) will
require the vote of a majority of the shares of the Government Fund
that are outstanding at the close of business on April 30, 1998 (the
"Record Date"). Each shareholder will be entitled to one vote for
each share of the Government Fund held on the Record Date and a
fractional vote for each fractional share held at that time. On the
Record Date, there were [ ] outstanding shares of the Government
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Fund.
Each shareholder is asked to sign and return the enclosed proxy
card to indicate their voting instructions. You may, however,
revoke your proxy by executing another proxy, by giving written
notice of such revocation to the Company or by attending the meeting
and voting by ballot at that meeting. If you return a signed proxy
card without indicating voting instructions, your shares will be
voted in favor of the Plan. If any other matter is properly placed
before the meeting, your shares will be voted in accordance with the
recommendation of the Board of Directors. The fund has no knowledge
of any other matters which may be presented to the Meeting and,
under corporate law, a special meeting is generally called solely
for the purpose specified in the Notice.
The Company will include abstentions and broker non-votes for
purposes of determining whether a quorum is present at the meeting,
but will treat them as votes not cast and, therefore, not counted
for purposes of determining whether matters to be voted upon at the
meeting have been approved.
What are the tax consequences of the Reorganization?
For most shareholders, the Reorganization will have no
immediate tax consequence, as at least 70% (and possibly as much as
87%) of all shares of the Government Fund are held in tax-advantaged
accounts. For shareholders who hold their shares in accounts which
are not tax-advantaged, the tax effect of the Reorganization will be
the same as if the shareholder sold or redeemed shares of the
Government Fund. This means that such a shareholder will recognize
a taxable gain or loss for federal income tax purposes depending on
whether the net asset value of the shareholder's Government Fund
shares at time of the Reorganization is greater or less than the
total initial purchase price for such shares. For further
information about the tax consequences of the Reorganization, see
"Information About the Reorganization - Tax Considerations."
How do the investment objectives and policies of the Funds compare?
Investment Objectives. While both Funds are managed by the
--------------------- same Adviser using market timing models
intended to reduce risk, there are substantial differences in the
investment portfolios of the two Funds due to the fact that the Blue
Chip Fund invests primarily in high quality equity securities, while
the Government Fund invests primarily in government debt securities.
The investment objective of the Blue Chip Fund is to achieve
for its investors a high total return consistent with reasonable
risk. The investment objective of the Government Fund is to achieve
for its investors a high current income consistent with safety and
liquidity of principal. The main difference between the Blue Chip
Fund's "total return" objective and the Government Fund's "current
income" objective is that the Blue Chip's "total return" objective
seeks both capital gains from changes in stock prices as well as
current income, while the Government Fund primarily seeks current
income. The Blue Chip Fund can not predict what portion of its
total return will consist of income versus capital gains. There can
be no assurance that the Adviser will achieve the investment
objective of either Fund.
Market Timing. Both the Blue Chip Fund and the Government Fund
------------- are managed by the Adviser using a market timing
strategy. Market timing involves the use of analytical techniques
which seek to identify major market trends which, in the opinion of
the Adviser, affect securities markets over periods of time, so a
Fund may restructure its portfolio of investments to increase gains
or income, or avoid losses. If the Adviser incorrectly judges turns
in the market, a Fund may lose opportunities for gains or incur
losses.
The Blue Chip Fund will establish an "aggressive" portfolio
strategy of investing when the Adviser anticipates a generally
rising trend in securities markets. During such periods, the Blue
Chip Fund may supplement its Blue Chip investments by investing up
to 35% of its assets in other, often small to mid-size, common
stocks which the Adviser believes exhibit positive growth potential
in such markets. During periods when the Adviser anticipates a
generally declining trend in securities markets, the Blue Chip Fund
will establish a "conservative" portfolio strategy of investing
primarily in the highest quality, most conservative Blue Chips and
holding up to 35% of its assets in cash or cash equivalent
investments. At such times, the Adviser will seek dividend or
interest income and stability of principal and will emphasize income
and protection of capital rather than gains. While the Blue Chip
Fund will seek total return in all periods, it will do so by using
investment strategies which the Adviser believes offer protection
from risk and more conservative expectations.
Changes in interest rates and in the securities markets
generally will affect the prices of securities that may be held by
the Government Fund. In anticipation of interest rate or securities
market changes, the Adviser may, consistent with the objective of
recognizing safety and liquidity of principal, attempt to protect
against anticipated declines in the value of securities held, or
increases in the cost of securities to be acquired, by hedging
through the purchase or sale of futures contacts on Government
Securities or related options. The Adviser may also adjust the
maturity of the Government securities in the portfolio in response
to market conditions. Such portfolio strategies are driven, in
part, by the market timing analysis utilized by the Adviser.
Investment Policies. The Blue Chip Fund seeks to achieve its
------------------- objective by investing primarily in "blue
chip" common stocks ("Blue Chips"), which include common stocks
listed in the Standard & Poor's Daily Stock Price Index of 500
common stocks or the Dow Jones Industrial Average Index of 30 common
stocks, each of which are widely recognized indexes of general stock
market movement. At least 65% of the Blue Chip Fund's assets will
usually be invested in Blue Chips, and up to 100% may be so
invested. Blue Chips generally have the following characteristics:
(i) large capitalization (greater than $100 million), (ii) history
of earnings and dividends, and (iii) large number of publicly held
shares and high trading volume, resulting in a high degree of
liquidity. The Blue Chip Fund also seeks to achieve its objective
by making other investments selected in accordance with Blue Chip
Fund's investment restrictions and policies. The Blue Chip Fund
generally seeks to invest in securities that the Adviser has
determined are consistent with reasonable risk. The Blue Chip Fund
uses a variety of investment techniques in an effort to generate a
high total return consisting of the sum of interest, dividend and
other income and net realized and unrealized appreciation in the
value of Blue Chip Fund's portfolio of Blue Chips, cash equivalents
(such as repurchase agreements or certificates of deposit), cash,
stocks, bonds and other debt obligations, stock options, stock index
options, stock index futures and options thereon. The Blue Chip
Fund's pursuit of high total return is tempered by an attempt to
limit risk to a reasonable level at all times.
The Government Fund seeks to achieve its objective by investing
primarily in securities that are issued or guaranteed as to
principal and interest by the U.S. Government, its agencies,
authorities or instrumentalities or secured by such securities, and
by making other investments selected in accordance with its policies
and restrictions. The Government Fund may purchase securities on a
delayed delivery basis, or invest in repurchase agreements secured
by U.S. Government securities. The Fund may also write covered call
and put options and purchase call and put options on U.S. Government
Securities in an effort to increase current income and to reduce
fluctuations in net asset value. The Fund may protect against
anticipated declines in the value of securities held or increases in
the cost of securities to be acquired by hedging through purchase
and sale of futures contracts on U.S. Government Securities and
related options.
Each Fund may temporarily take a defensive position by
investing a greater portion of its assets (up to 100%) in cash,
short-term U.S. Government Securities and related repurchase
agreements. The Government Fund may also shorten the maturity of
the Government Securities in its portfolio in response to market
conditions to reduce risk.
How are the Funds each Managed?
The business and affairs of each Fund is supervised by the
Company's Board of Directors.
Investment Management Services. The investments of each Fund
------------------------------ are managed by Rightime
Econometrics, Inc. (the "Adviser"), located 1095 Rydal Road, Rydal,
PA 19046-1711, under investment advisory agreements (each an
"Advisory Agreement") which became effective on the following dates:
Blue Chip Fund, July 1, 1987 and Government Fund, June 25, 1986.
Each Advisory Agreement provides that the Adviser shall supervise
and manage each Fund's investments and shall determine each Fund's
portfolio transactions, in accordance with the stated objective,
policies and restrictions of the Fund subject to periodic review and
ratification by the Board of Directors. The Adviser will also keep
certain books and records in connection with its services to each
Fund. The Adviser is responsible for selecting brokers and dealers
to execute transactions for each Fund. The Board has also
authorized the Adviser and Fund management to consider sales of Fund
shares when allocating brokerage, subject to the policy of obtaining
best price and execution on such transactions.
David J. Rights owns all of the voting common stock of the
Adviser, Rightime Econometrics, Inc. Mr. Rights has provided
Lincoln Investment Planning with investment research and related
consulting services for over eleven years directly or through a
predecessor entity of the same name merged into Rightime
Econometrics, Inc. Mr. Rights is the President and the principal
professional operating the investment advisor.
Administrative Services. Each Fund has selected Rightime
----------------------- Administrators, Inc. (the
"Administrator") to serve as its Administrator. The Administrator,
which is affiliated with both the Adviser and the Funds'
distributor, is also located at 218 Glenside Avenue, Wyncote, PA
19095-1596. The Administrator serves under an agreement (the
"Administration Agreement") relating to each Fund, which is dated
the same date as each Fund's Advisory Agreement and provides that
the Administrator will administer the Fund's affairs subject to the
supervision of the Board of Directors and, in connection therewith,
furnish each Fund with office facilities, and with any ordinary
clerical and bookkeeping services not furnished by the Transfer
Agent or Custodian. With the approval of the Company, the
Administrator obtains certain of these services from Lincoln
Investment Planning, Inc., the Fund's Distributor (see below).
As compensation for its services the Administrator receives a
fee, computed daily and payable monthly, at an annualized rate of
each Fund's average daily net assets of 0.85%.
Transfer and Dividend Disbursing Agent. The Fund has selected
-------------------------------------- Lincoln Investment
Planning to serve as transfer agent, dividend disbursing agent, and
as redemption agent for redemptions for the Blue Chip Fund and the
Government Fund. The address of the transfer agent is 218 Glenside
Avenue, Wyncote, PA 19095-1594.
Custody Services. CoreStates Bank, NA, Broad & Chestnut
---------------- Streets, Philadelphia, Pennsylvania acts as the
Custodian of the securities and cash of the Blue Chip Fund and the
Government Fund.
How are shares of the Funds distributed?
Lincoln Investment Planning, Inc. (the "Distributor") is each
Fund's distributor under Distribution Agreements dated July 1, 1987
for the Blue Chip Fund and June 25, 1986 for the Government Fund.
The Distributor promotes the distribution of the shares of the Funds
in accordance with the agreements and the terms of the Distribution
Plan of each Fund (the "Distribution Plan") adopted pursuant to Rule
12b-1 under the 1940 Act. The Distributor has also entered into a
Wholesaling Agreement with an affiliate of the Adviser which is a
registered broker-dealer, under which that firm assists the
Distributor in certain marketing of the Company's shares.
The Distribution Plans provide for the use of Fund assets to
pay expenses of distributing Fund shares and provide that the Funds
may incur distribution costs which may not exceed .50% per annum of
the Blue Chip Fund's net assets and 0.25% per annum of the
Government Fund's net assets, for payments to the Distributor, sales
representatives or other third parties who render promotional and
distribution services, for items such as advertising expenses,
selling expenses, commissions or travel reasonably intended to
result in sales of shares of the Fund and for printing of
prospectuses sent to prospective investors. The Funds will not bear
any distribution expenses in excess of their payments to the
Distributor under the Plans as described above. The Plans do not
limit the amounts paid to the Distributor by each Fund to amounts
actually expended by the Distributor, and it is therefore possible
for payments to the Distributor to exceed its expenses in a
particular year.
At the present time, however, the budgeted expenses of the
Distributor, including commissions to its representatives and those
of other dealers, will generally exceed the payments under each
Distribution Agreement. The Distributor will advance such amounts
from its own resources. While the Distributor has advised the Fund
it hopes to recover such "excess" payments through its normal fees
in later years, the series of the Fund are not legally obligated to
repay such excess amounts or to continue the Distribution Plans or
the Distribution Agreements for such purpose.
What are the various fees and expenses for the Blue Chip Fund and
the Government Fund.
The following information is provided in order to assist you in
understanding the fees and expenses that an investor in the Blue
Chip Fund and the Government Fund will bear directly or indirectly.
The expense figures and example shown are based on figures from the
fiscal year ended on October 31, 1997. While actual expenses may be
greater or less than those shown, the expenses of the Blue Chip Fund
are not expected to change materially as a result of the proposed
Reorganization.
Blue Chip Fund Government Fund
-------------- ---------------
Shareholder Transaction Expenses
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price) 4.75% 4.75%
Annual Fund Operating Expenses
(as a percentage of average
net assets)
Advisory Fees 0.50% 0.40%
12b-1 Fees (including
distribution and 0.25%
shareholder servicing fees) 0.50% 0.25%
Other Expenses 1.09% 1.64%
----- -----
Total Fund Operating Expenses 2.09% 2.29%
Example
You would pay the following
expenses on a $1000 investment,
assuming a 5% annual return and
redemption at the end of each
time period.
1 year $ 68 $ 70
3 years $110 $116
5 years $155 $164
10 years $279 $298
How do the risks of the Blue Chip Fund and the Government Fund
compare?
Because the Blue Chip Fund invests primarily in equity
securities such as common stocks and the Government Fund invests
primarily in government debt securities, the principal risk factors
are materially different for the two Funds.
Investments in common stocks in general are subject to market,
economic and business risks that cause prices to fluctuate over
time. Stock markets tend to be cyclical, with periods when stocks
prices generally rise and periods when stock prices generally
decline. Blue Chips represent ownership of well known, more
established companies and tend to be viewed as a relatively more
conservative equity investment, since such stocks tend to have large
capitalization, a history of earnings and dividends and a high
trading volume, resulting in a high degree of liquidity.
An investment in the Government Fund involves a lesser degree
of risk due to the general nature of government debt securities.
However, changes and fluctuations in interest rates over time can
result in price fluctuations for government securities, which can be
more dramatic for securities with longer maturities.
The Adviser utilizes a market timing strategy for each Fund,
under which the Adviser seeks to identify major market trends and to
restructure the Funds' portfolio in response to such trends. There
can be no guarantee, however, that the Adviser's market timing
judgments will result in favorable returns or avoidance of risk.
Each Fund may invest in repurchase agreements, which involve
risks of loss if a seller defaults on its obligations under an
agreement. The Blue Chip Fund has the right to engage in futures
transactions, including index futures, for hedging purposes, to
attempt to balance portfolio volatility. The Government Fund may
utilize options and futures on Government Securities, or options on
such futures, as a hedge against interest rate and net asset value
fluctuations. Each of the Funds expects a portfolio turnover rate
higher than that of other funds with similar objectives.
How did market conditions and the Fund's investment strategy affect
the performance of the Blue Chip Fund during the most recently
completed fiscal year?
The fiscal year ending October 31, 1997 was the third straight
year of excellent returns for equity investors. Although there were
turbulent months during the year, investors were rewarded for their
perseverance. Most broad stock indices performed strongly. Large
capitalization stocks and technology issues were strongest over the
previous twelve month period. However, as October wound down,
economic upheaval in Southeast Asia made investing in multi-national
stocks and technology companies riskier.
Unfortunately, the Rightime Blue Chip Fund missed much of these
gains. February and March were difficult months in the market.
Smaller capitalization stocks and technology issues were declining
rapidly. By March even the S&P 500 had given back much of its year-
to-date returns. Our model, the Rightime Market Model (Registration
Mark), turned negative in April and we limited our exposure to equities.
Our model did not tell us to buy equities until July. Typically, we
would expect to see improvement in fundamental indicators, followed
by monetary indicators, then improved sentiment, and finally the
market building momentum changes. These market indicators reversed
their normal course of action in the spring of 1997. Investors were
willing to believe that the fundamentals would improve eventually.
This drove stocks higher. RTE's risk-averse nature kept us out of
the market until the fundamentals supported the rise. The bulk of
the gains which were registered by investors this year took place
during those twelve weeks.
Since April we have seen a downward trend in long-term interest
rates. Earnings have remained strong although not as strong as in
1996. Unemployment is at near-record levels and yet there has been
limited data to indicate that the economy is so strong that
inflation may become a problem. Since July, we have remained
invested in equities in accordance with the Rightime Market Model
(Registration Mark) and have been rewarded with moderate gains.
- ------------------------------------------------------------------
Average Annual Total Return
- ------------------------------------------------------------------
1 Year 5 Years 10 Years Since Inception July 22, 1987
- ------------------------------------------------------------------
-2.24% 8.80% 8.76% 8.63%
- ------------------------------------------------------------------
Performance Comparison
The "Performance Comparison" chart assesses the Rightime Blue Chip
Fund's performance against the S&P 500 Index, an unmanaged index of
common stock prices. The "Risk Adjusted Performance Comparison" more
closely reflects the fund's performance as compared to a consistent
risk level.
The Rightime Blue Chip Fund utilizes a modeled approach to investing
which attempts to minimize risk by moving assets to money market
equivalent investments during periods in which the market appears to
be overvalued. This approach, over full market cycles, tends to
invest in low risk, or money market-like securities approximately
half of the time. In order to provide an equivalent risk level this
comparison assumes that assets are invested half in the S&P 500
Index and half in a money market fund index. This balanced index
approaches the risk level of each fund that has been in existence
for at least one full market cycle and therefore provides a more
meaningful performance comparison.
The performance shown represents past performance and is not a
guarantee of future results. A mutual fund's share price and
investment return will vary with market conditions, and the
principal value of shares, when redeemed, may be more or less than
the original cost.
Average annual total returns are historical in nature and measure
net investment income and capital gain or loss from portfolio
investments assuming reinvestment of dividends and reflecting the
4.75% sales charge.
Performance Comparison
Rightime Blue Chip Fund
S & P 500 Index
Money Market Fund Index
[GRAPHIC WORK TO BE INSERTED BY PRINTER]
Comparison of change in value of $10,000 investment in the Rightime
BlueChip Fund, S & P 500 Index and Money Market Fund Index.
Risk-adjusted Performance Comparison
Rightime Blue Chip Fund
Balanced Reference Index (50% S & P 500/50% Money Market)
Money Market Fund Index
[GRAPHIC WORK TO BE INSERTED BY PRINTER]
Comparison of change in value of $10,000 investment in the Rightime
Blue Chip Fund, Balanced Reference Index (50% S & P 500/50% Money
Market), and Money Market Fund Index.
What is the purchase and redemption price of shares of the Blue Chip
Fund?
Shares of the Blue Chip Fund issued in the Reorganization will
be sold at their net asset value, without any sales charges
whatsoever. Normally, the Blue Chip Fund, like the Government Fund,
offers its shares for sale to the public through the Distributor at
the offering price next computed after the receipt of the purchase
order by the Distributor. The offering price reflects a maximum
sales load of 4.75% and lower sales loads apply for larger purchases
(see the table below). There are no sales loads charged on the
automatic reinvestment of dividends and gains. The minimum initial
investment for each Fund is $2,000 and each subsequent investment
must be not less than $100. The Blue Chip Fund may waive these
minimums for qualified tax sheltered retirement plans.
Sales Load as % of
Amount of Purchase Offering Amount Dealer's
Price Invested Concession
----- -------- ----------
Less than $50,000 4.75% 4.99% 4.25%
$50,000 but under $100,000 3.75 3.90 3.35
$100,000 but under $500,000 2.75 2.83 2.45
$500,000 but under $1,000,000 1.75 1.80 1.55
$1,000,000 but under $2,000,000 .75 .76 .65
- ----------------------
For purchases of $2 million or more there is no sales load.
Purchases of $50,000 or more at offering price carry reduced
sales loads as shown in the preceding table, and may include a
series of purchases over a 13-month period under a Letter of Intent
signed by a purchaser. The reduced sales load shown above is also
available on purchases under all retirement plans. The sales load
table is applicable to purchases made at one time by an individual;
or an individual, his or her spouse and their children under the age
of 21; or a trustee or other fiduciary of a single trust estate or
single fiduciary account (including an employee benefit plan
qualified under Section 401 of the Internal Revenue Code).
Shareholders of the Blue Chip Fund and the Government Fund, may
reduce their sales load by signing a Letter of Intent, which permits
purchases over a 13-month period to obtain a reduced sales load.
They may also combine shares in their accounts and accounts for
other series of the Fund for Rights of Accumulation to provide a
reduced sales load on new purchases. Shareholders in 403(b)(7)
accounts may not combine their accounts with other shareholders for
a reduced sales load.
Shareholders may redeem their shares of the Funds without
charge on any day that the Funds calculate their net asset values.
Redemptions will be effective at the net asset value per share next
determined after the receipt of a redemption request meeting the
requirements described below. The Funds normally send redemption
proceeds on the next business day, but in any event redemption
proceeds are sent within seven days of receipt of a redemption
request in proper form.
If the Board of Directors determines that it would be
detrimental to the best interest of the remaining shareholders of
the Fund to make payment in cash, the Fund may pay the redemption
price in whole or in part by distribution in kind of securities from
the portfolio of the Fund. Such securities will be valued on the
basis of the procedures used to determine the net asset value at the
time of the redemption. If shares are redeemed in kind, the
redeeming shareholder may incur brokerage costs in converting the
assets into cash.
Shareholders of the Blue Chip and Government Funds are
permitted to exchange all or part of their shares into any Fund in
the Rightime Group of Funds at net asset value, in states where
shares of the Fund being acquired can be sold. No fees are charged
for the exchange privilege.
Orders for purchases are effected at the offering price next
calculated by each series of the Fund after receipt of the order by
the Fund's Distributor. The pubic offering price consists of net
asset value per share next calculated plus any applicable sales
load. The offering price and the net asset value of a Fund share
are determined as of 4:00 P.M. Eastern time on each day the New York
Stock Exchange is open for unrestricted trading from Monday through
Friday. The net asset value is determined by dividing the value of
each series of the Fund's securities, plus any cash and other
assets, less all liabilities, by the number of shares outstanding.
Expenses and fees of each Fund, including the administrative, the
advisory and the distributor fees, are accrued daily and taken into
account for the purpose of determining the net asset value.
How are income and gains of the Funds distributed?
The Blue Chip Fund declares and pays annual dividends to
shareholders of substantially all of its net investment income, if
any, earned during the year from investments, and also distributes
net realized capital gains, if any, once each year. The Government
Fund declares and pays monthly dividends of substantially all of its
net investment income, if any, earned from its investments. The
Government Fund also distributes all of its net realized capital
gains, if any, once each year.
Expenses of the Funds, including the Administrative fee, the
Advisory fee and Distribution fees, are accrued each day.
Reinvestment of dividends and distributions in additional shares of
the Funds are made on the payment date at the net asset value
determined on the record date of the dividend or distribution unless
the shareholder has elected in writing to receive dividends or
distributions in cash.
INFORMATION ABOUT THE REORGANIZATION
The following is a summary of the Plan of Reorganization, and
is subject in all respects to the provisions of, and is qualified in
its entirety by reference to, the Plan, a copy of which is attached
hereto as Exhibit A.
Method of Carrying Out the Reorganization. It is expected that
----------------------------------------- the Reorganization of
the Government Fund will be consummated promptly upon approval of
the Plan by the shareholders of the Government Fund, subject to
satisfaction of the various conditions to the obligations of each of
the parties. (See "Conditions Precedent to Closing.") Consummation
of the Reorganization will be on June 24, 1998, or such other date
as is determined by the Company on behalf of the Blue Chip Fund and
the Government Fund (the "Closing Date"), provided that the Plan may
be terminated by the Company on behalf of either Fund if the Closing
Date does not occur on or before October 31, 1998.
On the Closing Date, the Government Fund will transfer
substantially all of its assets to the Blue Chip Fund in exchange
for shares of the Blue Chip Fund having an aggregate net asset value
equal to the aggregate value of assets so transferred as of 4:00
P.M. Eastern time on the Closing Date. It is expected that the
Government Fund will convert its securities holdings to cash prior
to the transfer. In the event that the shareholders of the
Government Fund do not approve the Plan, the assets of the
Government Fund will not be transferred on the Closing Date and the
obligations of the Company under the Plan relating to the Government
Fund shall not be effective.
If the Reorganization is approved, and the conditions to the
Closing have been satisfied, the stock transfer books of the Company
with respect to the Government Fund will be permanently closed as of
4:00 P.M. Eastern time on the Closing Date and only requests for
redemption of shares of the Government Fund received in proper form
prior to 4:00 P.M. on the Closing Date will be accepted. Redemption
requests relating to the Government Fund received thereafter shall
be deemed to be redemption requests for shares of the Blue Chip Fund
which are to be distributed to the former shareholders of the
Government Fund.
Upon consummation of the Reorganization, the Government Fund
will receive shares of the Blue Chip Fund. The number of shares
shall be determined by dividing the aggregate value of the assets of
the Government Fund to be transferred (computed in accordance with
the policies and procedures set forth in the current prospectus of
the Government Fund and using market quotations determined by the
Government Fund) by the net asset value per share of the common
stock of the Blue Chip Fund as of 4:00 P.M. Eastern time on the
Closing Date.
Since the relative asset value of the Government Fund and the Blue
Chip Fund have not yet been ascertained for the purposes of the
Closing, it is not possible to determine the exact exchange ratio
until the Closing Date. Fluctuations and relative performances of
the Government Fund and the Blue Chip Fund, among other matters,
will affect this ratio. However, if the Closing Date had been March
31, 1998, a shareholder of the Government Fund would have received
.312085 shares of the Blue Chip Fund for each share of the
Government Fund held.
Conditions Precedent to Closing. The obligation to transfer
------------------------------- the assets of the Government
Fund to the Blue Chip Fund pursuant to the Plan is subject to the
satisfaction of certain conditions precedent, including performance
by the Blue Chip Fund, in all material respects, of its agreements
and undertakings under the Plan, the receipt of certain documents
from the Blue Chip Fund, and requisite approval of the Plan by the
shareholders of the Government Fund, as described above. The
obligations of the Blue Chip Fund to consummate the Reorganization
is subject to the satisfaction of certain conditions precedent,
including the performance by the Company of its undertakings under
the Plan, the receipt of certain documents and financial statements.
Expenses of the Transaction. The Government Fund will bear the
--------------------------- expenses incurred in connection
with entering into and consummating the transaction contemplated by
the Plan.
Tax Considerations. It is intended that the Reorganization
------------------ will be treated as a purchase and sale
transaction for federal income tax purposes, with gain or loss
recognized as a consequence of the Reorganization by the
shareholders of the Government Fund.
As noted under "Overview of the Reorganization..." above, at
least 70% (and possibly as much as 87%) of the shares of the
Government Fund are held in tax-advantaged accounts, and will not be
required to pay taxes on gains, if any, realized in connection with
the Closing. Other shares may be held in accounts required to
recognize currently the gains, if any, resulting from the
disposition of such shares. The Board has concluded that the
obligation to recognize and pay taxes on such gains will not result
in a material adverse effect for such shareholders, as the current
investment practices of the Government Fund generally result in the
recognition of gains, if any, during the current tax year. In
accordance with Sub-chapter M of the Internal Revenue Code, the
Government Fund must distribute each year all realized gains, which
are then currently taxable to the recipient.
Shareholders of the Government Fund should consult their tax
advisors regarding the effect, if any, of the Reorganization in
light of their individual circumstances. Since the foregoing
discussion only relates to the federal income tax consequences of
the Reorganization, shareholders of the Government Fund should also
consult their tax advisers as to state and local tax consequences,
if any, of a Reorganization.
Description of Shares of the Blue Chip Fund. Shares of the
------------------------------------------- Blue Chip Fund will
be issued to shareholders of the Government Fund in accordance with
the procedures under the Plan as described above. Each share will
be fully paid and nonassessable when issued with no personal
liability attaching to the ownership thereof, will have no
preemptive or conversion rights and will be transferable upon the
books of the Blue Chip Fund. In accordance with the Blue Chip
Fund's normal procedures as specified in its prospectus, the Blue
Chip Fund will not issue certificates for shares of its capital
stock to shareholders of the Government Fund as part of the
Reorganization. Instead, ownership of Blue Chip Fund shares will be
recorded electronically and the Blue Chip Fund will issue a
confirmation to shareholders who acquire shares as a result of the
Reorganization. No redemption or repurchase of Blue Chip Fund
shares issued to shareholders whose Government Fund shares were
represented by unsurrendered stock certificates shall be permitted
until such certificates have been surrendered for cancellation.
As shareholders of the Blue Chip Fund, former shareholders of
the Government Fund will have substantially similar voting rights
and rights upon dissolution with respect to the Blue Chip Fund as
they currently have with respect to the Government Fund.
It is the position of the Division of Investment Management of
the U.S. Securities and Exchange Commission that shareholders of the
Government Fund will not be entitled to any "dissenters' rights"
since the proposed reorganization is between two open-end investment
companies registered under the 1940 Act. Although no dissenters'
rights may be available to shareholders of the Government Fund,
shareholders have the right to redeem their shares at net asset
value until the Closing Date, and thereafter such shareholders may
redeem their Blue Chip Fund shares at net asset value or exchange
their Blue Chip Fund shares into shares of any other fund in the
Rightime Family of Funds subject to the terms of the Prospectus of
the fund being acquired.
To the extent permitted by law, the Plan may be amended without
shareholder approval by the Fund on behalf of the Blue Chip Fund or
the Government Fund. The Plan may be terminated and the
Reorganization abandoned at any time before or, to the extent
permitted by law, after the approval of shareholders of the
Government Fund by the Company on behalf of the Blue Chip Fund or
the Government Fund.
COMPARISON OF INVESTMENT POLICIES AND RISKS
Blue Chip Fund and Government Fund. The Blue Chip Fund's
---------------------------------- objective is to achieve for
its investors a high total return consistent with reasonable risk.
The Fund seeks to achieve its objective by investing primarily in
equity securities of well-known and established companies. The
objective of the Government Fund is to achieve for its investors a
high current income consistent with safety and liquidity of
principal. The investment objective of each Fund is fundamental,
which means that it may not be changed without the approval of
shareholders in the manner described herein. Unless otherwise
specified, the investment policies of each of the Blue Chip Fund and
the Government Fund may be changed without shareholder approval and
the investment restrictions may not. Policies or restrictions
stated as fundamental may not be changed without the approval of the
lesser of (i) a majority of the outstanding shares, or (ii) 67% of
the shares represented at a meeting of shareholders at which the
holders of more than 50% of the outstanding shares are represented.
Investment Policies - Blue Chip Fund. The Blue Chip Fund
------------------------------------ varies its investment
strategies, including its hedging activities, in an effort to
generate a high total return.
The Blue Chip Fund seeks to take advantage of opportunities to
achieve its objective by establishing an "aggressive" portfolio
strategy during periods when the Adviser anticipates a generally
rising trend in securities markets which will produce income or
gains contributing to the Fund's return. The Blue Chip Fund
evaluates its efforts to achieve its objective against the
risks it must bear to generate that return. The Blue Chip Fund also
seeks to take advantage of opportunities for dividend or interest
income and stability of principal by establishing a "conservative"
portfolio strategy during periods of time when the Adviser
anticipates a generally declining trend in securities markets,
emphasizing protection of gains and income over gains. In addition,
when the Adviser anticipates volatile or abnormal market conditions,
the Blue Chip Fund may adopt a temporary "defensive" posture which
accords a priority to protecting the inherent value of the Fund's
capital.
Blue Chip equity securities (such as common and preferred
stock) will be selected for the Blue Chip Fund based upon the
expected appreciation potential, income, and/or liquidity of the
security. In selecting preferred stock, the Adviser does not rely
upon published ratings of issuers, but may consider such ratings in
making its recommendations. Debt securities (such as bonds or other
obligations, including money market securities), will be selected
after considering factors such as the interest rate and the
soundness of the issuer. The Adviser does not rely upon published
ratings of such issuers, but may consider such ratings in making its
recommendations.
The Blue Chip Fund may also invest in preferred stock and debt
securities. Preferred stocks and debt securities in which the Fund
may invest are rated at the time of purchase Baa or higher by
Moody's Investor Service, Inc. or BBB or higher by Standard and
Poor's Corporation, or in the opinion of the Adviser will be of
comparable quality.
The Blue Chip Fund may invest in money market securities, which
include: marketable securities issued or guaranteed as to principal
and interest by the government of the United States or by its
agencies or instrumentalities; domestic bank certificates of
deposit; bankers' acceptances; prime commercial paper rated in the
two highest categories by Moody's and Standard & Poor's Corp.; and
repurchase agreements (secured by United States Treasury or agency
obligations).
Investment Policies - Government Fund The Government Fund varies
------------------------------------- its investment strategies,
including hedging activities, in an effort to protect against
anticipated declines in the value of securities held or increases in
the cost of securities to be acquired. Depending on market conditions,
the Government Fund may temporarily take a defensive position by
investing a greater portion of its assets in cash, short-term Government
Securities and related repurchase agreements or by otherwise reducing the
general maturity of its portfolio.
Under normal circumstances at least 65% of the Government Fund's
assets will be invested in Government Securities, including such
securities purchased on a delayed delivery basis, or repurchase
agreement secured by such securities. Government Securities
include: (1) U.S. Treasury obligations, which differ only as to
their interest rates, maturities and times of issuance: U.S.
Treasury bills (Maturity of one year or less), U.S. Treasury notes
(maturities of one to ten years), and U.S. Treasury bonds (generally
maturities of greater than ten years), and separated or dividend
U.S. Treasury securities (stripped by the U.S. Treasury) whose
payments of principal and interest are all backed by the full faith
and credit of the United States; and (2) obligations issued or
guaranteed by U.S. Government agencies and instrumentalities, or
guaranteed by U.S. Government agencies and instrumentalities, some
of which are backed by the full faith and credit of the U.S.
Treasury, e.g., direct pass-through certificates of the Government
National Mortgage Association (generally referred to as "GNMA");
some of which are supported by the right of the issuer to borrow
from the U.S. Government, e.g., obligations of Federal Home Loan
Banks; and some of which are backed only by the credit of the issuer
itself, e.g., obligations of the Student Loan Marketing Association.
Generally, GNMA's are inversely affected by changes in interest
rates, i.e., as interest rates decline, market value increases and
as interest rates rise, market value declines. Consequently, GNMA's
are subject to the risk of market price fluctuations. The Fund
cannot "lock-in" long-term interest rates by purchasing such
securities because the average life of the underlying mortgage
instrument is likely to be substantially less than the original
maturity. As a result of the need to reinvest prepayment of
principal generally and the possibility of significant unscheduled
prepayments resulting from decline in mortgage interest rates, the
Fund may have to invest such assets at current rates which may be
less favorable.
The Fund may also purchase U.S. Treasury securities that have been
separated or divided by financial institutions and also receipts or
certificates representing interests in such stripped debt
obligations and coupons. Separated U.S. Treasury securities are
sold under different names including: Certificate of Accrual of
Treasury Securities, Treasury Receipts, Separated Trading of
Registered Interest and Principal of Securities and Treasury
Investment Growth Receipts.
Other Investment Policies - Both Funds Each Fund may seek to
-------------------------------------- protect itself from
anticipated market action by using "hedging" techniques which the
Fund expects will generate gains which would offset losses on other
securities owned by the Fund. For the Blue Chip Fund, hedging may
involve combinations of various techniques, such as the purchase or
sale of stocks or the use of stock options, stock index options, stock
index futures and options thereon to seek to achieve increases in the
values of such options and futures which offset decreases in the values
of other securities owned by the Fund. The Adviser may, for example,
use these techniques to hedge the risks of a portfolio that was
purchased during a period where a more aggressive strategy was used,
without having to restructure the portfolio. The Government may hedge
against anticipated declines in the value of securities held or the
cost of securities to be acquired by buying and/or selling futures
contracts or Government securities or related options.
Risk Factors. The risks associated with an investment in either
------------ Blue Chip Fund or the Government Fund may vary
substantially in some respects, but have similarities as well. The
differences in risks associated with equity investments compared to
government debt investment are described above in the Summary of the
Proposal.
Both of the Funds may invest in repurchase agreements. Under
a repurchase agreement the Fund acquires a debt instrument for a
relatively short period (usually not more than one week) subject to
the obligations of the seller to repurchase and of the Fund to
resell such instrument at a fixed price. For example, if the seller
of the agreement defaults on its obligation to repurchase the
underlying securities at a time when the value of these securities
has declined, the Fund may incur a loss upon disposition of them.
If the seller of the agreement becomes insolvent and subject to
liquidation or reorganization under the Bankruptcy Code or other
laws, a bankruptcy court may determine that the underlying
securities are collateral not within the control of the Fund and
therefore subject to sale by the trustee in bankruptcy. Finally, it
is possible that the Fund may not be able to substantiate its
interest in the underlying securities.
Both of the Funds have the right to engage in options and futures
transactions. An option may be closed out only on an exchange or
with a dealer who provides a secondary market for an option of the
same series. Although the Funds will generally purchase or write
only those options for which the Adviser believes there is an active
secondary market, there is no assurance that a liquid secondary
market on an exchange will exist for any particular option. In such
event, it might not be possible to effect closing transactions in
particular options, with the result that the Fund would have to
exercise its options in order to realize any profit or allow the
option to expire. The inability to close-out these options may
result in a loss to the Fund. If exercised, the Fund would incur
brokerage commissions upon the subsequent disposition of underlying
securities acquired. An imperfect correlation exists between the
options and securities being hedged. The success of any hedging
position depends on the ability of the investment advisor to predict
stock and interest rate movement. The loss from investing in
futures transactions is potentially unlimited. Each of the Funds
expect a portfolio turnover rate higher than that of other funds
with similar objectives. The Adviser applies a market timing
approach in making investments on behalf of the Funds, which
involves the risk that the Adviser's market timing judgments may not
be profitable.
Investment Restrictions The investment restrictions set forth
----------------------- below have been adopted by both the Blue
Chip Fund and Government Fund to limit certain risks that may result
from investment in specific types of securities or engaging in certain
kinds of transactions. These restrictions may not be changed without
the affirmative vote of a majority of the outstanding voting securities
of each particular Fund. The various restrictions are briefly described
below and are set forth in greater detail in both the Prospectus and
the Statement of Additional Information relating to each Fund.
With respect to asset diversification, the Blue Chip Fund may not,
as to 75% of its total assets, invest more than 5% of its total
assets in the securities of any one issuer or more than 10% of the
voting securities of any issuer. (This limitation does not apply to
cash and cash items, obligations issued or guaranteed by the United
States Government, its agencies or instrumentalities, or securities
of other investment companies.) The Government Fund has a similar
diversification restriction, however, the restriction applies to
100% of the Government Fund's total assets.
Neither Fund may purchase or sell commodities or commodity futures
contracts, except that the Blue Chip Fund may purchase those related
to stock indexes, and the Government Fund may purchase and sell
financial futures contracts and related options.
Neither Fund may make loans except by investment in repurchase
agreements. However, the Government Fund may lend its portfolio
securities to qualified brokers/dealers or institutional investors
for their use relating to short sales or other securities
transactions in an amount that does not exceed 30% of its total
assets.
Neither Fund may borrow money or pledge its assets except as a
temporary measure for extraordinary or emergency purposes, and then
not in excess of 33-1/3% of the value of its total assets. If
borrowings exceed 5% of a Fund's asset, that Fund will not purchase
securities.
Neither Fund may purchase the securities of any issuer if more than
10% of the value of the Fund's net assets would be invested in
restricted securities (including repurchase agreements maturing in
more than seven days).
Neither the Blue Chip Fund nor the Government Fund may:
(bullet) issue senior securities;
(bullet) engage in underwriting securities;
(bullet) invest for the purpose of exercising control or management
(This is a nonfundamental restriction for the Government Fund
and a fundamental restriction for the Blue Chip Fund.);
(bullet) purchase securities on margin; or
(bullet) sell securities short.
The Blue Chip Fund may not invest in the securities of any company
if any officer or director of the Blue Chip Fund or the Adviser owns
more than 0.5%, or if such officers and directors in the aggregate
own more than 5%, of the outstanding securities of that company.
The Government Fund has no such restriction.
The Blue Chip Fund is also subject to additional investment
restrictions under which it may not: (1) purchase or sell real
estate or interests therein; (2) purchase oil, gas or other mineral
leases; or (3) concentrate its investments in any industry.
The Government Fund may not write, purchase, or sell any put or call
option or any combination, provided that this shall not prevent the
writing, purchasing and selling of puts, call or combinations
thereof with respect to Government Securities. The Blue Chip Fund
has no such restriction. The Government Fund is subject to an
additional non-fundamental restriction that it may not invest more
than 5% of its total assets at the time of investment in companies
which, including predecessors, have a record of less than three
years' continuous operation.
INFORMATION ABOUT THE COMPANY AND THE FUNDS
Information about the Blue Chip Fund and the Government Fund is
included in the Company's current Prospectus dated February 1, 1998
which is attached to this Combined Proxy Statement/Prospectus and
incorporated by reference herein. Additional information about the
Reorganization and the Funds is included in a Statement of
Additional Information, dated May 18, 1998, which has been filed with
the Securities and Exchange Commission and is incorporated by
reference herein. A copy of the Statement of Additional Information
may be obtained without charge by writing to the Company or calling
1 (800) 866-9393. The Funds are subject to the informational
requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, as applicable, and, in accordance with such
requirements, file proxy materials, reports and other information with
the Securities and Exchange Commission. These materials can be
inspected and copied at the Public Reference Facilities maintained by
the Securities and Exchange Commission at 450 Fifth Street NW,
Washington, DC 20549; at the offices of the Fund at 218 Glenside Avenue,
Wyncote, Pennsylvania 19095; and at the Philadelphia Regional Office of
the Securities and Exchange Commission at The Curtis Center, Suite 1005
E, 601 Walnut Street, Philadelphia, Pennsylvania 19106-3322. Copies of
such material can also be obtained from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities and
Exchange Commission, Washington, DC 20549, at prescribed rates, and from
the internet site maintained by the Commission at http://www.sec.gov.
The authorized capital stock of the Company consists of 500,000,000
shares of Common Stock with a par value of $.01 each. At the
present time 50,000,000 shares have been allocated to The Rightime
Fund, and 20,000,000 shares of stock have been allocated to each of
The Rightime Blue Chip Fund, The Rightime Growth Fund, The Rightime
Social Awareness Fund, The Rightime MidCap Fund and The Rightime
Government Securities Fund series. Each share has equal dividend,
voting, liquidation and redemption rights. There are no conversion
or preemptive rights. Shares, when issued will be fully paid and
nonassessable. Fractional shares have proportional voting rights.
Shares of the Company do not have cumulative voting rights which
means that the holders of more than 50% of the shares voting for the
election of Directors can elect all of the Directors if they choose
to do so and, in such event, the holders of the remaining shares
will not be able to elect any person to the Board of Directors. The
Company's shareholders will vote together to elect Directors and on
other matter affecting the entire corporation, but will vote
separately on matters affecting separate Trusts. The Company does
not intend to hold annual meetings of shareholders. The Company
will call a meeting of shareholders if such a meeting is requested
in writing by the holders of not less than 10% of the outstanding
shares of the Company. The Company will assist shareholder
communications in such matters.
The following table sets forth as of March 31, 1998, (i) the
capitalization of the Government Fund, (ii) the capitalization of
the Blue Chip Fund, and (iii) the pro forma combined capitalization
of the Blue Chip Fund as adjusted to give effect to the proposed
Reorganization. The adjustment was due to expenses of approximately
$27,700 incurred by the Government Fund in connection with the
proposed combination of the Funds.
Pro Forma
Blue Chip Combined After
Government Fund Fund Reorganization
--------------- --------- --------------
Net assets $7,451,502 $271,251,533 $278,675,335
Net asset value
per share $12.14 $38.75 $38.75
Shares outstanding 613,878 7,000,828 7,192,410
VOTING INFORMATION AND PRINCIPAL STOCKHOLDERS
In the event that sufficient votes in favor of the proposal set
forth in the Notice of Special Meeting of Shareholders are not
received by the date of the Meeting, the proxy holders present may
propose one or more adjournments of the Meeting to permit further
solicitation of proxies to obtain a quorum. Even if a quorum is
present, if enough votes have not been received to approve the
proposed Plan, a motion to adjourn the Special Meeting may be
presented. Proxies which direct a vote against the Plan will be
votes against any motion to adjourn; all other proxies will be voted
in favor of adjournment. Any such adjournment will require the
affirmative vote of a majority of the votes cast on the question in
person or by proxy at the session of the Meeting to be adjourned.
The proxies will be voted in the best judgment of management. The
costs of any such additional solicitation and of any adjourned
session will be borne by the Government Fund.
To the knowledge of the Company, no person owned 5% or more of the
outstanding securities of the Blue Chip Fund or the Government Fund
as of the Record Date, although from time to time, the number of
shares held in "street name" accounts of various securities dealers
for the benefit of their clients or in centralized securities
depositories may exceed 5% of the total outstanding shares of a
Fund. All of the respective officers and directors of the Company,
as a group, owned less than l% of the outstanding voting securities
of the Blue Chip Fund and the Government Fund, respectively.
EXHIBITS TO COMBINED PROXY
STATEMENT/PROSPECTUS
Exhibit
- -------
A Agreement and Plan of Reorganization on behalf of the
Rightime Government Securities Fund and the Rightime Blue
Chip Fund
B Prospectus of The Rightime Fund, Inc. dated February 1,
1998
EXHIBIT A
PLAN OF REORGANIZATION
PLAN OF REORGANIZATION (the "Plan"), made as of this day of
, 1998 by The Rightime Fund, Inc. (the "Fund"), a
- -------------- corporation organized under the laws of the State of
Maryland, with its principal place of business at 218 Glenside Avenue,
Wyncote, Pennsylvania 19095-1594, on behalf of the Rightime Blue Chip
Fund series of shares ("the Blue Chip Fund") and the Rightime Government
Securities Fund series of shares ("the Government Fund") .
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Plan of
Reorganization" or "Plan") will consist of (i) the acquisition by
the Blue Chip Fund of substantially all of the property, assets and
goodwill of the Government Fund in exchange for shares of common
stock of the Blue Chip Fund, with $0.01 per share par value, and the
assumption of other liabilities, if any, of the Government Fund,
(ii) the distribution of such shares of common stock of the Blue
Chip Fund to the shareholders of the Government Fund according to
their respective interests, and (iii) the dissolution of the
Government Fund as soon as practicable after the closing (as defined
in Section 3, hereinafter called the "Closing"), all upon and
subject to the terms and conditions of this Agreement hereinafter
set forth.
AGREEMENT
In order to consummate the Plan of Reorganization and in
consideration of the premises and of the covenants hereinafter set
forth, and intending to be legally bound, the Fund covenants as
follows:
1. Sale and Transfer of Assets, Liquidation and Dissolution of
-----------------------------------------------------------
the Portfolio
-------------
(a) Subject to the terms and conditions of this Plan, and in
reliance on the representations and warranties of the Fund on behalf
of the Blue Chip Fund herein contained, and in consideration of the
delivery by the Blue Chip Fund of the number of its shares
hereinafter provided and the assumption by the Blue Chip Fund of
other liabilities, if any, of the Government Fund, the Fund on
behalf of the Government Fund agrees that it will convey, transfer
and deliver to the Blue Chip Fund at the Closing all of the then
existing assets of the Government Fund free and clear of all liens,
encumbrances, and claims for which the Government Fund has reserved
cash, bank deposits, or cash equivalent securities in an estimated
amount necessary (l) to pay its costs and expenses of carrying out
this Plan (including, but not limited to, fees of counsel and
accountants, and expenses of its liquidation and dissolution
contemplated hereunder), which costs and expenses shall be
established on the Government Fund's books as liability reserves,
(2) to discharge its unpaid liabilities on its books at the closing
date (as defined in Section 3, hereinafter called the "Closing
Date"), including, but not limited to, its income dividends and
capital gains distributions, if any, payable for the period prior to
the Closing Date, and (3) to pay such contingent liabilities as the
directors shall reasonably deem to exist against the Government
Fund, if any, at the Closing Date, for which contingent and other
appropriate liability reserves shall be established on the
Government Fund's books (hereinafter "Net Assets"). The Government
Fund shall also retain any and all rights which it may have over and
against any person which may have accrued up to and including the
close of business on the Closing Date.
(b) Subject to the terms and conditions of this Plan, and in
reliance on the representations and warranties of the Fund herein
contained, and in consideration of such sale, conveyance, transfer,
and delivery, the Fund on behalf of the Blue Chip Fund agrees at the
Closing to deliver to the Government Fund the number of Blue Chip
Fund shares of common stock (with $0.01 per share par value)
determined by dividing the aggregate value of the net assets of the
Government Fund on the Closing Date by the net asset value per share
of common stock of the Blue Chip Fund on the Closing Date and
multiplying the result by the number of outstanding shares of the
Government Fund on the Closing Date. All such values shall be
determined in the manner and as of the time set forth in Section 2
hereof.
(c) Immediately following the Closing, the Government Fund shall
distribute pro rata to its shareholders of record as of the close of
business on the Closing Date the shares of common stock of the Blue
Chip Fund received by the Government Fund pursuant to this Section
l, and shall thereafter dissolve. Such distribution shall be
accomplished by the establishment of accounts on the share records
of the Blue Chip Fund of the type and in the amounts due such
shareholders based on their respective holdings as of the close of
business on the Closing Date. Fractional shares of beneficial
interest of the Blue Chip Fund shall be carried to the third decimal
place. As promptly as practicable after the Closing, each holder of
any outstanding certificate or certificates representing shares of
beneficial interest of the Government Fund shall be entitled to
surrender the same to the transfer agent for the Blue Chip Fund and
request in exchange therefor a certificate or certificates
representing the number of whole shares of common stock of the Blue
Chip Fund into which the shares of beneficial interest of the
Government Fund theretofore represented by the certificate or
certificates so surrendered shall have been converted. Certificates
representing fractional shares of common stock of the Blue Chip Fund
shall not be issued, but such fractional interests shall continue to
be carried by the Blue Chip Fund for the account of such shareholder
as unissued shares. Until so surrendered, each outstanding
certificate which, prior to the Closing, represented shares of
beneficial interest of the Government Fund shall be deemed for all
purposes to evidence ownership of the number of shares of common
stock of the Blue Chip Fund into which the shares of beneficial
interest of the Government Fund (which prior to the Closing were
represented thereby) have been converted.
2. Valuation
---------
(a) The net asset value of a share of common stock of the Blue
Chip Fund shall be determined to the nearest full cent as of 4:00
P.M. Eastern Time on the Closing Date, using the valuation
procedures as set forth in the Fund's then effective prospectus.
(b) The net asset value of a share of common stock of the
Government Fund shall be determined to the nearest full cent as of
4:00 P.M. Eastern Time on the Closing Date, using the valuation
procedures as set forth in the Fund's then effective prospectus.
3. Closing and Closing Date
------------------------
The Closing Date shall be June 24, 1998 or such later date as the
Fund may determine. The Closing shall take place at the principal
office of the Fund, 218 Glenside Avenue, Wyncote, PA 19095 at 4:00
P.M. Eastern Time on the Closing Date. The Government Fund shall
have provided for delivery as of the Closing of those Net Assets to
be transferred to the Blue Chip Fund's Custodian, CoreStates Bank
NA, Broad and Chestnut Streets, Philadelphia, Pennsylvania 19101.
Also, the Fund shall deliver at the Closing a list of names and
addresses of the shareholders of record of the Government Fund and
the number of shares of beneficial interest of the Government Fund
owned by each such shareholder, indicating thereon which such shares
are represented by outstanding certificates and which by book-entry
accounts, all as of 4:00 P.M. Eastern Time on the Closing Date,
certified by its Transfer Agent or by the President to the best of
their knowledge and belief. The Fund shall issue and deliver a
certificate or certificates evidencing the shares of common stock of
the Blue Chip Fund to be delivered to said Transfer Agent registered
in such manner as the Government Fund may request, or provide
evidence that such shares of the Blue Chip Fund have been registered
in an account on the books of the Blue Chip Fund.
4. Representations and Warranties by the Fund on behalf of the
Government Fund
The Fund represents and warrants that:
(a) The Government Fund is a validly existing series of the
Fund, and that the Fund is duly registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end,
management investment company and all its Government Fund shares
sold have been sold pursuant to an effective registration statement
filed under the Securities Act of 1933, as amended.
(b) The Fund is authorized to issue a series of shares
designated as The Rightime Government Securities Fund series,
consisting of 20,000,000 shares of Common Stock, with a par value of
$0.01, each outstanding share of which is fully paid, non-
assessable, fully transferable and has full voting rights.
(c) The financial statements appearing in the Fund's Annual
Report to Shareholders for the period ending October 31, 1997,
audited by Tait, Weller & Baker, fairly present the financial
position of the Government Fund as of the date indicated, in
conformity with generally accepted accounting principles applied on
a consistent basis.
(d) The books and records of the Government Fund accurately
summarize the accounting data represented and contain no material
omissions with respect to the business and operations of the
Portfolio.
(e) The Fund on behalf of the Government Fund has the necessary
power and authority to conduct the business of the Government Fund
as such business is now being conducted.
5. Representations and Warranties by the Fund on behalf of the
Blue Chip Fund
The Fund represents and warrants that:
(a) The Blue Chip Fund is a validly existing series of the Fund,
and that the Fund is duly registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end, management
investment company and all its shares sold have been sold pursuant
to an effective Registration Statement filed under the Securities
Act of 1933, as amended.
(b) The Fund is authorized to issue a series of shares
designated as The Rightime Blue Chip Fund series, consisting of
20,000,000 shares of common stock, with $0.01 per share no par
value. Each outstanding share is fully paid, non-assessable, fully
transferable, and has full voting rights. The shares of common
stock of the Blue Chip Fund issued pursuant to this Plan will be
fully paid, non-assessable, freely transferable and have full voting
rights.
(c) At the Closing, the shares of common stock of the Blue Chip
Fund will be duly qualified for offering to the public in all states
of the United States in which the sale of shares of the Government
Fund are qualified, and there are a sufficient number of such shares
registered under the Securities Act of 1933, as amended, to permit
the transfers contemplated by this Agreement to be consummated.
(d) The financial statements appearing in the Fund's Annual
Report to Shareholders for the fiscal year ending October 31, 1997,
audited by Tait, Weller & Baker, fairly present the financial
position of the Blue Chip Fund as of the date indicated and the
results of its operations for the periods indicated in conformity
with generally accepted accounting principles applied on a
consistent basis.
(e) The Fund on behalf of the Blue Chip Fund has the necessary
power and authority to conduct the business of the Blue Chip Fund as
such business is now being conducted.
(f) The Fund on behalf of the Blue Chip Fund has full power and
authority to perform its obligations under this Plan. The execution
and delivery of this Plan and the performance of the matters
contemplated hereby by The Fund on behalf of the Blue Chip Fund have
been duly authorized by the Board of Directors of the Fund.
(g) Except as disclosed in the Fund's currently effective
prospectus, there are no legal, administrative or other proceedings
pending against or, to the knowledge of the Fund, threatened against
the Fund which would materially affect its financial condition or
its ability to consummate the transactions contemplated by this
Plan. The Fund is not charged with or, to the best of its
knowledge, threatened with any violation or investigation of any
possible violation of any provisions of any federal, state or local
law or regulation or administrative ruling related to any aspect of
its business.
(h) The Fund is not a party to or obligated under any provision
of its certificate of incorporation, bylaws, or any contract or any
other commitment or obligation, and is not subject to any order or
decree, which would be violated by its execution of or performance
under this Plan.
6. Representations and Warranties by the Fund
------------------------------------------
The Fund, on behalf of the Blue Chip Fund and the Government Fund
represents and warrants that:
(a) The statement of assets and liabilities to be furnished by
it, as of 4:00 P.M. Eastern Time for the Government Fund and the
Blue Chip Fund on the Closing Date, for the purpose of determining
the number of shares of common stock of the Blue Chip Fund to be
issued pursuant to Section 1 of this Agreement will accurately
reflect its net assets in the case of the Government Fund and its
net assets in the case of the Blue Chip Fund and outstanding shares
of common stock as of such date in conformity with generally
accepted accounting principles applied on a consistent basis.
(b) At the Closing it will have good and marketable title to all
of the securities and other assets shown on the statement of assets
and liabilities referred to in "(a)" above, free and clear of all
liens or encumbrances of any nature whatever except such
imperfections of title or encumbrances as do not materially detract
from the value or use of the assets subject thereto, or materially
affect title thereto.
(c) Except as disclosed in its currently effective prospectus,
there is no material suit, judicial action, or legal or
administrative proceeding pending or threatened against it.
(d) There are no known actual or proposed deficiency assessments
with respect to any taxes payable by it.
(e) The execution, delivery and performance of this Plan
has been duly authorized by all necessary action of its Board of
Directors and this Plan constitutes its valid and binding obligation
enforceable in accordance with its terms.
(f) It anticipates that consummation of this Plan will not cause
it to fail to conform to the requirements of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), for Federal
income taxation as a regulated investment company at the end of its
fiscal year.
7. Covenants of the Fund on behalf of the Government Fund and
the Blue Chip Fund
(a) The Fund, on behalf of the Government Fund and the Blue Chip
Fund, covenants to operate the respective businesses of the Blue
Chip Fund and the Government Fund as presently conducted between the
date hereof and the Closing, subject to such actions as are
necessary in connection with the approval and implementation of this
Plan.
(b) The Fund undertakes that it will not acquire the Blue Chip
Fund's shares for the purpose of making distributions thereof other
than to the Government Fund's shareholders.
(c) The Fund on behalf of the Government Fund and the Blue Chip
Fund agrees that by the Closing, all of its Federal and other tax
returns or tax extensions and reports required by law to be filed on
or before such date shall have been filed and all Federal and other
taxes shown as due on said returns shall have either been paid or
adequate liability reserves shall have been provided for the payment
of such taxes.
(d) The Fund will at the Closing provide a copy of the
shareholder ledger accounts for all the shareholders of record of
the Government Fund as of 4:00 P.M. Eastern Time on the Closing Date
who are to become stockholders of the Blue Chip Fund as a result of
the transfer of assets which is the subject of this Plan, certified
by its Transfer Agent or its President to the best of their
knowledge and belief.
(e) The Fund agrees to mail to each shareholder of record of the
Government Fund entitled to vote at the special meeting of
shareholders at which action on this Plan is to be considered, in
sufficient time to comply with requirements of the General
Corporation Law of Maryland as to notice thereof, a Combined Proxy
Statement/Prospectus which complies in all material respects with
the applicable provisions of Section 14(a) of the Securities
Exchange Act of 1934, as amended, and Section 20(a) of the
Investment Company Act of 1940, as amended, and the rules and
regulations, respectively, thereunder.
(f) The Fund will file with the Securities and Exchange
Commission a Registration Statement on Form N-14 under the
Securities Act of 1933, as amended ("Registration Statement")
relating to the issuance of the shares of common stock of the Blue
Chip Fund issuable hereunder, and will use its best efforts to
provide that the Registration Statement becomes effective as
promptly as practicable. At the time the Registration Statement
becomes effective, it (i) will comply in all material respects with
the applicable provisions of the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder; and (ii) will
not contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; at the time the Registration
Statement becomes effective, at the time of the Government Fund's
shareholders meeting, and at the Closing Date, the prospectus and
statement of additional information included therein will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
8. Conditions Precedent to be Fulfilled by the Fund on behalf of
the Government Fund and the Blue Chip Fund
The obligations of the Fund on behalf of the Government Fund and the
Blue Chip Fund to effectuate this Plan hereunder shall be subject to
the following respective conditions:
(a) That (l) all the representations and warranties contained
herein shall be true and correct as of the Closing with the same
effect as though made as of and at such date; (2) the Fund shall
have performed all obligations required by this Plan to be performed
by it prior to the Closing; and (3) the Fund shall have delivered a
certificate signed by the President and by the Secretary or
equivalent officer to the foregoing effect.
(b) That the Fund shall have delivered a copy of the resolutions
approving this Plan adopted by the Fund's Board of Directors,
certified by the Secretary or equivalent officer.
(c) That the Securities and Exchange Commission shall not have
issued an unfavorable management report under Section 25(b) of the
Investment Company Act of 1940, as amended, nor instituted nor
threatened to institute any proceeding seeking to enjoin consummation of
the Plan under Section 25(c) of the Investment Company Act of 1940, as
amended, and no other legal, administrative or other proceeding shall be
instituted or threatened which would materially affect the financial
condition of either party or would prohibit the transactions
contemplated hereby.
(d) That the holders of at least a majority of the outstanding
shares of common stock of the Government Fund shall have voted in
favor of the adoption of this Plan contemplated hereby at an annual
or special meeting to be held no later than June 24, 1998 or other
such date as the Fund may determine.
(e) That the Fund shall have declared a distribution or
distributions prior to the Closing date which, together with all
previous distributions, shall have the effect of distributing to the
shareholders (i) all of its net investment income and all of its net
realized capital gains, if any, for the period from the close of its
last fiscal year to 4:00 P.M. Eastern Time for the Government Fund
on the Closing Date, and (ii) any undistributed net investment
income and net realized capital gains from any prior period.
(f) That the Fund on behalf of the Blue Chip Fund shall have
received an opinion in form and substance satisfactory to it from
Messrs. Stradley, Ronon, Stevens & Young, LLP, counsel to the
Government Fund, to the effect that, subject in all respects to the
effects of bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and other laws now or hereafter affecting
generally the enforcement of creditors' rights:
(1) The Fund was incorporated under the laws of the State of
Maryland on November 15, 1984, and is validly existing and in good
standing under the laws of the State of Maryland;
(2) The Fund has an authorized capital of five hundred million
(500,000,000) shares of common stock, with a par value of $0.01, of
which one series of shares has been designated as shares of the
Government Fund, and, assuming that the initial capital shares of
the Fund were issued in accordance with the Investment Company Act
of 1940, as amended, and the Articles of Incorporation and By-Laws
of the Fund and that all outstanding shares of the Government Fund
were sold, issued and paid for in accordance with the terms of the
Fund's prospectus in effect at the time of such sales, each such
outstanding share is fully paid, non-assessable, fully transferable
and has full voting rights;
(3) The Fund is an open-end, diversified investment company of the
management type registered as such under the Investment Company Act
of 1940, as amended;
(4) Except as disclosed in the Fund's currently effective
prospectus, such counsel does not know of any material suit, action,
or legal or administrative proceeding pending or threatened against
the Fund, the unfavorable outcome of which would materially and
adversely affect the Fund or the Government Fund;
(5) All corporate actions required to be taken by the Fund to
authorize and to effect the Plan of Reorganization contemplated
hereby have been duly authorized by all necessary corporate action
on the part of the Fund; and
(6) This Plan is the legal, valid and binding obligation of the
Fund and is enforceable against the Fund in accordance with its terms.
In giving the opinion set forth above, this counsel may state that
it is relying on certificates of the officers of the Fund with
regard to matters of fact and certain certifications and written
statements of governmental officials with respect to the good
standing of the Fund.
(g) That the Fund on behalf of the Government Fund shall have
received an opinion in form and substance satisfactory to it from
Messrs. Stradley, Ronon, Stevens & Young, LLP, counsel to the Blue
Chip Fund, to the effect that, subject in all respects to the
effects of bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other laws now or hereafter affecting
generally the enforcement of creditors' rights:
(1) The Fund was incorporated under the laws of the State of
Maryland on November 15, 1984, and is validly existing and in good
standing under the laws of that state;
(2) The Fund has an authorized capital of five hundred million
(500,000,000) shares of common stock, with $0.01 per share par
value, and, assuming that the initial capital shares of the Fund
were issued in accordance with the Investment Company Act of 1940,
as amended, and its Articles of Incorporation and By-Laws and that
all the outstanding shares of the Blue Chip Fund were sold, issued
and paid for in accordance with the terms of the Fund's prospectus
in effect at the time of such sales, each such outstanding share is
fully paid, non-assessable, fully transferable and has full voting
rights;
(3) The Fund is an open-end, diversified investment company of the
management type registered as such under the Investment Company Act
of 1940, as amended;
(4) Except as disclosed in the Fund's currently effective
prospectus, such counsel does not know of any material suit, action,
or legal or administrative proceeding pending or threatened against
the Fund, the unfavorable outcome of which would materially and
adversely affect the Fund;
(5) The shares of common stock of the Blue Chip Fund to be issued
pursuant to the terms of this Plan have been duly authorized and,
when issued and delivered as provided in this Plan, will have been
validly issued and fully paid and will be non-assessable by the
Fund;
(6) All corporate actions required to be taken by the Fund to
authorize and to effect the Plan of Reorganization contemplated
hereby have been duly authorized by all necessary corporate action
on the part of the Fund;
(7) Neither the execution, delivery nor performance of this Plan by
the Fund violates any provision of its Articles of Incorporation,
its By-laws, or the provisions of any agreement or other instrument,
known to such counsel to which the Fund is a party or by which the
Fund is otherwise bound; this Plan is the legal, valid and binding
obligation of the Fund and is enforceable against the Fund in
accordance with its terms except as enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws
pertaining to the enforcement of creditors' rights generally and by
equitable principles; and
(8) The Registration Statement of which the Prospectus of the Blue
Chip Fund is a part, dated February 1, 1998, (the "Prospectus"), is,
at the time of the signing of this Plan, effective under the
Securities Act of 1933, as amended, and, to the best knowledge of
such counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for such
purpose have been instituted or are pending before or threatened by
the Securities and Exchange Commission under the Securities Act of
1933, as amended, and nothing has come to its attention which causes
it to believe that at the time the Prospectus became effective, or
at the time of the signing of this Plan, or at the Closing, such
Prospectus (except for the financial statements and other financial
and statistical data included therein, as to which counsel need
express no opinion), contained any untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
and such counsel knows of no legal or government proceedings
required to be described in the Prospectus or of any contract or
document of a character required to be described in the Prospectus
that is not described as required.
In giving the opinion set forth above, this counsel may state that
it is relying on certificates of the officers of the Fund with
regard to matters of fact and certain certifications and written
statements of governmental officials with respect to the good
standing of the Fund.
(h) That the Fund on behalf of the Government Fund shall have
received a certificate from the President and Secretary of the Fund
to the effect that the statements contained in the Fund's Prospectus
dated February 1, 1998, at the time the Prospectus became effective,
at the date of the signing of this Agreement and at the Closing, did
not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make
the statements therein not misleading; and
(i) That the Fund on behalf of the Government Fund shall have
received a letter from Tait, Weller & Baker, dated the Closing, in
form and substance satisfactory to the Fund stating in respect of
the Blue Chip Fund that:
(1) On the basis of (a) reading the latest available unaudited
interim financial statements of the Blue Chip Fund, (b) inquiries of
officers of the Fund responsible for financial and accounting
matters, (c) reading the minutes of the meetings of the shareholders
and the Board of Directors of the Fund for the period from November
1, 1997 to the Closing Date, nothing came to their attention which
caused them to believe that during the period from November 1, 1997,
to a date specified not more than five days prior to the date of the
letter, there were any changes in the shares of common stock of the
Blue Chip Fund or any decrease in the net investment income or net
assets except those which may occur in the normal course of
operations, including but not limited to changes or decreases which
this Plan and/or the current Prospectus disclose have occurred or
may occur, as calculated using the procedures set forth in the Blue
Chip Fund's currently effective prospectus.
(2) After completion of the above procedures, nothing came to their
attention which caused them to believe that the Blue Chip Fund's
unaudited financial statements are not fairly presented in
conformity with generally accepted accounting principles applied on
a basis consistent with that followed by the Fund in the October 31,
1997 financial statements reported on by them in the Annual report
to Shareholders.
(j) That the Fund's Registration Statement with respect to its
shares to be delivered to the Government Fund shareholders in
accordance with this Plan shall have become effective, and no stop
order suspending the effectiveness of the Registration Statement or
any amendment or supplement thereto, shall have been issued prior to
the Closing Date or shall be in effect at Closing, and no
proceedings for the issuance for such an order shall be pending or
threatened on that date.
(k) That the shares of the Blue Chip Fund to be delivered
hereunder shall have been registered by the Fund with each state
commission or agency with which such registration is required in
order to permit the shares lawfully to be delivered to each the
Government Fund shareholder.
(l) That at the Closing the Fund on behalf of the Government
Fund transfers to the Blue Chip Fund aggregate Net Assets of the
Government Fund comprising at least 90% in fair market value of the
total net assets and 70% of the fair market value of the total gross
assets recorded on the books of the Government Fund on the Closing
Date.
9. Brokerage Fees and Expenses
---------------------------
(a) the Government Fund and the Blue Chip Fund each represent
and warrant to the other that there are no broker or finders fees
payable by it in connection with the transactions provided for
herein.
(b) The expenses of entering into and carrying out the
provisions of this Plan shall be borne as follows: the Government
Fund and the Blue Chip Fund shall each bear its own expenses
incurred in connection with this Plan.
10. Termination; Waiver; Order
--------------------------
(a) Anything contained in this Plan to the contrary
notwithstanding, this Plan may be terminated and abandoned at any
time (whether before or after adoption thereof by the shareholders
of the Government Fund) prior to the Closing by the Board of
Directors of the Fund.
(b) If the transactions contemplated by this Plan have not been
consummated by October 31, 1998, the Plan shall automatically
terminate on that date, unless a later date is selected by the Board
of Directors of the Fund.
(c) In the event of termination of this Plan pursuant to the
provisions hereof, the same shall become void and have no further
effect, and there shall not be any liability on the part of the Fund
or persons who are its directors, officers, agents or shareholders
in respect of this Plan.
(d) At any time prior to the Closing, any of the terms or
conditions of this Plan may be waived by the Fund, by action taken
by the Board of Directors of the Fund, if, in the judgment of the
Board of Directors of the Fund such action or waiver will not have a
material adverse affect on the benefits intended under this Plan to
the holders of shares of the Government Fund or the Blue Chip Fund,
on behalf of which such action is taken.
(e) The respective representations and warranties contained in
Sections 4-7 hereof shall expire with, and be terminated by, the
Plan of Reorganization, and neither the Fund nor any of their
officers, directors, agents or shareholders shall have any liability
with respect to such representations or warranties after the
Closing. This provision shall not protect any officer, director,
agent or shareholder of the Fund against any liability to the entity
for which that officer, director, agent or shareholder so acts or to
which that officer, director, agent or shareholder would otherwise
be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties in the conduct of
such office.
(f) If any order or orders of the U.S. Securities and Exchange
Commission with respect to this Plan shall be issued prior to the
Closing and shall impose any terms or conditions which are
determined by action of the Board of Directors of the Fund to be
acceptable, such terms and conditions shall be binding as if a part
of this Plan without further vote or approval of the shareholders of
the Government Fund, unless such terms and conditions shall result
in a change in the method of computing the number of shares of the
Blue Chip Fund to be issued to the Government Fund in which event,
unless such terms and conditions shall have been included in the
proxy solicitation material furnished to the shareholders of the
Government Fund, prior to the meeting at which the transactions
contemplated by this Plan shall have been approved, this Plan shall
not be consummated and shall terminate unless the Fund shall
promptly call a special meeting of shareholders of the Government
Fund at which such conditions so imposed shall be submitted for
approval.
This Plan of Reorganization has been executed on behalf of the
Government Fund and on behalf of the Blue Chip Fund by the Fund's
duly authorized officers, all as of the day and year first above
written.
THE RIGHTIME FUND, INC.
Attest:
By:
- ------------------------ -------------------
Edward S. Forst, Sr. David J. Rights
Secretary President
Exhibit B:
[Graphic omitted: Rightime Logo]
Prospectus
February 1, 1998
(bullet) The Rightime Fund
(bullet) The Rightime
Blue Chip Fund
(bullet) The Rightime
MidCap Fund
(bullet) The Rightime
Social Awareness Fund
(bullet) The Rightime
Government Securities Fund
Printed on recycled paper
[Graphic omitted: Rightime Logo]
PROSPECTUS
February 1, 1998
218 Glenside Ave.
Wyncote, PA 19095
(800) 866-9393
The Rightime Fund, Inc. (the "Company"), is an open-end diversified
management investment company. It was organized as a series Maryland
Corporation on November 15, 1984 and currently offers shares of multiple
Series (hereinafter a "Fund" or "Series"), each of which has a specific
investment objective. Each Fund's investment objective is summarized
below with more information in "Investment Objectives and Policies."
The Rightime Fund. The objective of the Fund is to achieve for its
investors a high total return consistent with reasonable risk. The Fund
uses a variety of investment techniques in an effort to balance
portfolio risks and to hedge market risks. The Fund seeks to achieve its
objective by concentrating in shares of registered investment companies
and by making other investments selected in accordance with the Fund's
investment policies and restrictions.
The Rightime Blue Chip Fund. The objective of the Fund is to achieve for
its investors a high total return consistent with reasonable risk. The
Fund uses a variety of investment techniques in an effort to balance
portfolio risks and to hedge market risks. The Fund seeks to achieve its
objective by investing in securities of well known and established
companies ("Blue Chips") and by making other investments selected in
accordance with the Fund's investment policies and restrictions.
The Rightime MidCap Fund. The objective of the Fund is to achieve for
its investors a high total return consistent with reasonable risk. The
Fund uses a variety of investment techniques in an effort to balance
portfolio risks and to hedge market risks. The Fund seeks to achieve its
objective by investing in securities of companies with medium-size
market capitalization ("MidCaps") and by making other investments
selected in accordance with the Fund's investment policies and
restrictions.
The Rightime Social Awareness Fund. The objective of the Fund is to
achieve for its investors growth of capital and its secondary objective
is current income, consistent with reasonable risk. The Fund uses a
variety of investment techniques in an effort to balance portfolio risks
and to hedge market risks. The Fund seeks to achieve its objective by
investing in securities of companies with prospects for above-average
capital growth which, in the opinion of the Fund's Advisor, show
evidence in the conduct of their business, relative to other companies
in the same industry, of contributing to the enhancement of the quality
of human life, and by making other investments selected in accordance
with the Fund's investment policies and restrictions and social
criteria.
The Rightime Government Securities Fund. The objective of the Fund is to
achieve for its investors a high current income consistent with safety
and liquidity of principal. The Fund seeks to achieve this objective by
investing in securities that are issued or guaranteed as to principal
and interest by the U.S. Government, its agencies, authorities or
instrumentalities or secured by such securities, and by making other
investments selected in accordance with the Fund's investment policies
and restrictions.
- ----------------------------------------------------------------------
This Prospectus sets forth concisely the information about the Funds
that a prospective investor ought to know before investing. Investors
should read and retain this Prospectus for future reference. More
information about the Funds has been filed with the Securities and
Exchange Commission, and is contained in the "Statement of Additional
Information," dated February 1, 1998, which is available at no charge by
calling or writing the Fund. The Fund's Statement of Additional
Information is incorporated herein by reference.
- ----------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ----------------------------------------------------------------------
Investment Policies
The Rightime Fund, The Rightime Blue Chip Fund, and The Rightime MidCap
Fund will vary their investment strategies, including their hedging
activities, in an effort to generate a high total return, and The
Rightime Social Awareness Fund will vary its investment strategies,
including hedging activities, in an effort to achieve growth of capital
and other returns, consisting of the sum of interest, dividend and other
income and net realized and unrealized appreciation in the value of the
respective Fund's portfolio of securities, cash and cash equivalents,
and options and futures thereon. The Funds are unable to predict what
portion of their total return will consist of income, short-term capital
gains or long-term capital gains. Each Fund will take advantage of
opportunities to achieve its objective by establishing an "aggressive"
portfolio strategy during periods when the Advisor anticipates a
generally rising trend in securities markets which will produce income
or gains contributing to the Fund's return. Each Fund will seek to take
advantage of opportunities for dividend or interest income and stability
of principal by establishing a "conservative" portfolio strategy during
periods of time when the Advisor anticipates a generally declining trend
in securities markets, emphasizing protection of gains and income over
gains. While each Fund will continue to seek its objective, it will do
so by using investment strategies which the Advisor believes offer
protection from risk and offer more conservative expectations. In
addition, when the Advisor anticipates volatile or abnormal market
conditions, each Fund may adopt a temporary "defensive" posture which
accords a priority to protecting the inherent value of the Fund's
capital. (See "Investment Objectives and Policies" and "Investment
Restrictions.")
The Rightime Government Securities Fund will invest its assets primarily
in U.S. Government Securities, including such securities purchased on a
delayed delivery basis, or repurchase agreements secured by such
securities. The Fund may write covered call and put options and purchase
call and put options on U.S. Government Securities in an effort to
increase current income and to reduce fluctuations in net asset value.
The Fund may protect against anticipated declines in the value of
securities held or increases in the cost of securities to be acquired by
hedging through purchase and sale of futures contracts on U.S.
Government Securities and related options. The Fund may temporarily take
a defensive position by investing a greater portion of its assets in
cash, short-term U.S. Government Securities and related repurchase
agreements or otherwise reducing the general maturity of its portfolio.
(See "Investment Objectives and Policies" and "Investment
Restrictions.")
Special Considerations and Risk Factors
Prospective investors should consider a number of factors:
1. Each Fund may invest in repurchase agreements which involves risk of
loss if a seller defaults on its obligations under an agreement. (See
"Investment Objectives and Policies.")
2. Each Fund has a right to engage in futures transactions, including
index futures, for hedging purposes, to attempt to balance portfolio
volatility, and in connection therewith will maintain certain collateral
in special accounts established by our Futures Commission Merchants in
the care of our Custodian Bank. While the Fund does not engage in
futures for speculative purposes, there are risks which result from the
use of futures which are described in this Prospectus and the Statement
of Additional Information. The Fund is not registered as a commodity
pool operator nor the Advisor as a commodities trading Advisor, in
reliance upon various exemptive rules. (See "Hedging.")
3. The Rightime Fund invests in the shares of other registered
investment companies, is affected by their performance, and contributes
to the expenses of operating those companies. (See "Investment
Objectives and Policies"). The Fund has the right to investment in
investment companies which impose a sales load or sales charges. While
the Fund will seek to minimize such charges, they can reduce the Fund's
investment results.
4. The Funds expect a portfolio turnover rate higher than that of other
funds with similar objectives. The Advisor applies a market timing
approach in making investments on behalf of the Funds. (See "Investment
Objectives and Policies.")
Investment Advisor
Rightime Econometrics, Inc. (the "Advisor") serves as investment advisor
to each Fund (managing the assets and allocating portfolio
transactions). For these services, the Advisor is paid an advisory fee
by each Fund, based on its average net assets. (See "Investment
Advisor.")
How to Purchase Shares
Shares of each Fund are distributed by Lincoln Investment Planning,
Inc., the Funds' Distributor, and selected dealers. The minimum initial
investment is $1,000 and subsequent purchases must be at least $25. The
Funds have a maximum sales load of 4.75%, except for The Rightime Fund,
which has no sales load. The Funds each allow waivers of the sales load
under certain circumstances. Accounts worth less than $1,000 may be
subject to an annual maintenance fee. All the Funds bear a portion of
the costs of distributing their shares. (See "How to Purchase Shares"
and "Distribution of Shares.")
How to Redeem Shares (Sell Shares)
Shares may be redeemed by each Fund (sold by a shareholder) at any time
at the net asset value next determined after receipt of the request by
the Fund at no charge. A shareholder may submit written instructions to
the Fund, or the shareholder and/or their dealer representative may make
telephone redemptions. Each Fund has the right to redeem accounts that
are less than the minimum initial investment, currently $1,000, when the
account is not brought up to the minimum after 90 days prior notice to
the shareholder. The Fund also offers exchange privileges for
shareholders and their dealer representatives. (See "How to Redeem
Shares" and "How to Exchange Shares.")
<TABLE>
<CAPTION>
EXPENSE TABLE
The The The
Rightime Rightime Rightime The
The Government Blue Social Rightime
Rightime Securities Chip Awareness MidCap
Fund Fund Fund Fund Fund
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
A. Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None 4.75% 4.75% 4.75% 4.75%
B. Annual Fund Operating Expenses
(as a percentage of average net assets)
Advisory Fees 0.50% 0.40% 0.50% 0.50% 0.50%
12b-1 Fees (including Distribution Fees and
0.25% Shareholder Servicing Fees) 0.75% 0.25% 0.50% 0.50% 0.50%
Other Expenses (including Administration
Fees Paid to Affiliates) 1.20% 1.64% 1.09% 1.35% 1.15%
------ ------ ------ ------ ------
Total Fund Operating Expenses 2.45% 2.29% 2.09% 2.35% 2.15%
C. Example:
You would pay the following expenses on a
$1,000 investment assuming (1) 5% annual
return; and (2) redemption at end of time period
1 Year $ 25 $ 70 $ 68 $ 70 $ 68
3 Years $ 76 $116 $110 $118 $112
5 Years $131 $164 $155 $167 $158
10 Years $279 $298 $279 $304 $285
</TABLE>
The purpose of this table is to assist in understanding the various
costs and expenses that an investor in the Funds will bear directly or
indirectly. This example should not be considered a representation of
past or future expenses and actual expenses may be greater or less than
those shown. The fees incurred by The Rightime Social Awareness Fund and
The Rightime MidCap Fund may be higher than those incurred by similar
type funds. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the NASD.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
The following information for each of the periods, as indicated below, during the five year
period ended October 31, 1997 has been examined by Tait, Weller & Baker, independent certified
public accountants, whose report thereon appears in the Funds' Annual Report to shareholders for
the period ended October 31, 1997 and is incorporated by reference in this Prospectus.
Net Net Realized Distributions
Year Net Asset Investment and Unrealized Total from Net
Ended Value Income Gain (Loss) from Investment
October 31 Beg. of Period (Loss)(a) on Investments Operations Income)
- ---------- -------------- ------------ -------------- ---------- --------
<S> <C> <C> <C> <C> <C>
The Rightime Fund
1997 $32.09 $ .43 $(1.24) $(0.81) $(0.42)
1996 37.55 1.14 2.11 3.25 (0.77)
1995 35.50 (0.10) 7.21 7.11 (0.30)
1994 37.42 0.29 (0.49) (0.20) --
1993 34.70 (0.32) 5.47 5.15 (0.05)
1992 37.33 0.06 2.16 2.22 (0.17)
1991 31.82 0.16 7.43 7.59 (0.61)
1990 32.52 0.95 (1.30) (0.36) (0.35)
1989 31.86 0.05* 1.53 1.58 (0.04)
1988 34.35 0.25 1.90 2.15 (0.39)
The Rightime Government Securities Fund
1997 $12.65 $ 0.53 $(0.81) $(0.28) $(0.49)
1996 13.06 0.52 (0.32) 0.20 (0.61)
1995 12.93 0.68 0.08 0.76 (0.63)
1994 14.31 0.61 (1.34) (0.73) (0.65)
1993 13.16 0.66 1.21 1.87 (0.72)
1992 12.86 0.71 0.19 0.90 (0.60)
1991 12.63 0.82 0.17 0.99 (0.76)
1990 14.97 0.85 (1.85) (1.00) (0.88)
1989 13.61 0.95 1.10 2.05 (0.89)
1988 13.49 0.93 0.41 1.34 (1.02)
The Rightime Blue Chip Fund
1997 $31.88 $ 0.03 $ 0.83 $ 0.86 $(0.40)
1996 32.84 0.40 3.52 3.92 (0.28)
1995 33.08 0.35 5.66 6.01 (0.46)
1994 33.14 0.39 (0.04) 0.35 (0.23)
1993 29.70 0.26 3.41 3.67 (0.23)
1992 28.22 0.25 1.55 1.80 (0.32)
1991 26.23 0.32 4.53 4.85 (0.55)
1990 27.24 0.44 0.34 0.78 (0.47)
1989 26.81 0.45 1.59 2.04 (1.61)
1988 25.28 1.66 (0.02) 1.66 (0.13)
The Rightime Social Awareness Fund
1997 $29.09 $ 0.17 $ 1.52 $ 1.69 $(0.43)
1996 32.37 0.41 3.88 4.29 --
1995 26.84 0.08 5.91 5.99 (0.46)
1994 29.07 0.33 (0.72) (0.39) --
1993 29.64 (0.02) 1.76 1.74 (0.04)
1992 25.56 0.12 4.30 4.42 (0.23)
1991 22.29 0.16 3.51 3.67 (0.40)
1990(1) 25.00 0.32 (3.03) (2.71) --
The Rightime MidCap Fund
1997 $29.02 $ 0.27 $ 1.33 $ 1.60 $(0.54)
1996 32.95 0.49 2.56 3.05 (0.14)
1995 28.44 0.26 5.25 5.51 (0.45)
1994 31.07 0.32 (0.78) (0.46) --
1993 27.08 (0.03) 4.80 4.77 (0.05)
1992(2) 25.00 0.03 2.07 2.10 (0.02)
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED)
Distributions Distributions
Year from from Net Asset
Ended Realized Paid-in Total Value Total
October 31 Capital Gains Capital(b) Distributions End of Period Return(c)
- ---------- ------------ ------------ -------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
The Rightime Fund
1997 $(0.91) $ -- $(1.33) $29.95 (2.77)%
1996 (7.94) -- (8.71) 32.09 8.96
1995 (4.76) -- (5.06) 37.55 23.38
1994 (1.72) -- (1.72) 35.50 (0.48)
1993 (2.38) -- (2.43) 37.42 15.49
1992 (4.68) -- (4.85) 34.70 6.15
1991 (1.47) -- (2.08) 37.33 25.21
1990 -- -- (0.35) 31.82 (1.10)
1989 (0.78) (0.10) (0.92) 32.52 5.25
1988 (3.97) (0.28) (4.64) 31.86 6.37
The Rightime Government Securities Fund
1997 $ -- $ -- $(0.49) $11.88 (2.10)%
1996 -- -- (0.61) 12.65 1.48
1995 -- -- (0.63) 13.06 6.00
1994 -- -- (0.65) 12.93 (5.15)
1993 -- -- (0.72) 14.31 14.60
1992 -- -- (0.60) 13.16 7.20
1991 -- -- (0.76) 12.86 8.14
1990 (0.46) -- (1.34) 12.63 (7.13)
1989 -- -- (0.89) 14.97 15.38
1988 -- -- (1.02) 13.81 10.32
The Rightime Blue Chip Fund
1997 $(0.07) $ -- $(0.47) $32.27 2.63%
1996 (4.60) -- (4.88) 31.88 12.26
1995 (5.79) -- (6.25) 32.84 22.31
1994 (0.18) -- (0.41) 33.08 1.06
1993 -- -- (0.23) 33.14 12.41
1992 -- -- (0.32) 29.70 6.41
1991 (2.31) -- (2.86) 28.22 20.27
1990 (1.32) -- (1.79) 26.23 2.68
1989 -- -- (1.61) 27.24 8.42
1988 -- -- (0.13) 26.81 6.50
The Rightime Social Awareness Fund
1997 $(1.04) $ -- $(1.47) $29.31 5.77%
1996 (7.57) -- (7.57) 29.09 13.62
1995 -- -- (0.46) 32.37 22.70
1994 (1.84) -- (1.84) 26.84 (1.27)
1993 (2.27) -- (2.31) 29.07 5.82
1992 (0.11) -- (0.34) 29.64 17.43
1991 -- -- (0.40) 25.56 16.69
1990(1) -- -- 0.00 22.29 (10.84)
The Rightime MidCap Fund
1997 $(0.96) $ -- $(1.50) $29.12 5.55%
1996 (6.84) -- (6.98) 29.02 9.65
1995 (0.55) -- (1.00) 32.95 20.07
1994 (2.17) -- (2.17) 28.44 (1.38)
1993 (0.73) -- (0.78) 31.07 17.93
1992(2) -- -- (0.02) 27.08 8.40
(a) The Advisor reimbursed the respective Funds for a portion of
the Funds' expenses during certain periods.
(b) Distributions from Paid-in Capital result from required
distributions for federal excise tax purposes in excess of book
income. The Rightime Fund's statement of changes in net assets
and selected per share data for the year ended October 31, 1988
have been restated to reflect a reclass of the distribution
from net investment income to a distribution from paid-in
capital for the reason explained above.
(c) Excludes sales charge.
* Based on average monthly shares.
(1) Inception of Fund was March 1, 1990.
(2) Inception of Fund was November 11, 1991.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
Expenses to Average Net Investment Income (Loss)
Net Assets to Average Net Assets
------------------------------- -------------------------------
Average
Net Assets at the Before After Before After Portfolio Commission
RATIOS End of Period Reimbursement Reimbursement Reimbursement Reimbursement Turnover Rate Paid (#)
- ------ -------------- ------------- ------------- ------------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
The Rightime Fund
1997 $126,001,807 2.45% 2.45% 1.16% 1.16% 62.01% --
1996 166,490,280 2.45 2.45 3.11 3.11 15.40 --
1995 158,966,039 2.47 2.47 (0.27) (0.27) 9.45 --
1994 149,207,566 2.51 2.51 0.78 0.78 11.50 --
1993 172,178,587 2.52 2.52 (0.83) (0.83) 1.86 --
1992 170,955,840 2.56 2.56 0.15 0.15 72.63 --
1991 162,972,329 2.67 2.67 0.45 0.45 136.19 --
1990 134,295,952 2.67 2.67 1.52 1.52 383.38 --
1989 166,638,724 2.58 2.58 0.14 0.14 168.23 --
1988 284,923,878 2.58 2.58 0.53 0.53 187.25 --
The Rightime Government Securities Fund
1997 $ 8,132,287 2.29% 2.29% 4.42% 4.42% 52.14% --
1996 10,712,611 2.15 2.15 4.08 4.08 109.47 --
1995 18,632,859 1.90 1.90 5.29 5.29 77.98 --
1994 25,746,377 1.90 1.90 4.62 4.62 216.70 --
1993 33,934,808 1.98 1.98 4.72 4.72 120.80 --
1992 30,312,806 2.03 2.03 5.53 5.53 126.25 --
1991 42,234,866 1.82 1.82 5.55 5.55 309.57 --
1990 49,625,703 1.85 1.85 6.32 6.32 420.13 --
1989 35,476,441 1.99 1.99 6.63 6.63 451.57 --
1988 14,152,947 2.07 1.60 6.11 6.58 476.12 --
The Rightime Blue Chip Fund
1997 $254,386,954 2.09% 2.09% 0.05% 0.05% 39.27% $0.0294
1996 277,639,083 2.08 2.08 1.25 1.25 1.30 0.0304
1995 249,619,271 2.17 2.17 1.13 1.13 17.52 --
1994 221,681,939 2.22 2.22 1.16 1.16 0.98 --
1993 223,687,834 2.16 2.16 0.72 0.72 1.97 --
1992 211,481,090 2.25 2.25 0.87 0.87 -- --
1991 187,307,234 2.27 2.27 1.30 1.30 34.07 --
1990 128,771,363 2.35 2.35 4.36 4.36 257.91 --
1989 94,493,124 2.38 2.38 2.32 2.32 232.92 --
1988 70,136,312 2.66 2.56 9.61 9.71 1,314.65 --
The Rightime Social Awareness Fund
1997 $ 11,467,788 2.35% 2.35% 0.55% 0.55% 107.98% $0.0282
1996 8,694,248 2.42 2.42 1.51 1.51 46.57 0.0500
1995 7,378,063 2.75 2.75 0.32 0.32 36.49 --
1994 7,221,772 2.56 2.56 1.04 1.04 54.85 --
1993 10,556,506 2.40 2.40 (0.19) (0.19) 238.52 --
1992 6,525,545 2.49 2.49 0.45 0.45 276.62 --
1991 5,770,249 2.88 2.88 0.63 0.63 247.22 --
1990(1) 5,491,349 2.85* 2.85* 2.36* 2.36* 734.44 --
The Rightime MidCap Fund
1997 $ 69,295,196 2.15% 2.15% 0.82% 0.82% 107.08% $0.0360
1996 80,303,960 2.19 2.19 1.72 1.72 3.59 0.0211
1995 75,086,295 2.19 2.19 0.84 0.84 24.67 --
1994 65,252,084 2.28 2.28 1.14 1.14 0.75 --
1993 62,124,470 2.28 2.28 (0.19) (0.19) 38.79 --
1992(2) 31,311,779 2.34* 2.34* 0.17* 0.17* 35.10 --
- -------------
* Annualized
(#) Average Commission Rate Paid shows the
average cost per share paid by a Fund for
trades of equity securities for which a
commission was charged.
(1) Inception of Fund was March 1, 1990.
(2) Inception of Fund was November 11, 1991.
</TABLE>
PERFORMANCE
Total return data may from time to time be included in advertisements
about the Funds. "Total return" of a Fund refers to the average annual
compounded rates of return over certain periods that would equate an
initial amount invested at the beginning of a stated period from which
the maximum sales load is deducted to the ending redeemable value of the
investment. The Fund will provide total return for one, five and ten
year periods, as well as from inception. Non-standardized total return
quotations may also be presented for other periods, or to reflect
voluntary expense limitations in effect for the Fund in question during
the relevant period, or to reflect investment at reduced sales charge
levels or net asset value. Any quotation of total return not reflecting
the maximum sales charge, or which reflects any voluntary expense
limitations, would be reduced if the maximum sales charge were used or
Fund expenses were not voluntarily limited.
Each Fund may also include its yield, accompanied by its total return,
in advertising and other written material. Yield will be computed by
dividing the net investment income per share earned during a recent one-
month period by the maximum offering price per share of the Fund
(reduced by any undeclared earned income expected to be paid shortly as
a dividend) on the last day of the period.
The Funds may also compare their investment performance to appropriate
market indexes such as the Standard & Poor's 500 Stock Index or the
Standard & Poor's MidCap 400 Stock Index and to appropriate mutual fund
indexes such as the Lipper Growth Fund Index or the Lipper Flexible
Portfolio Fund Index. The Funds may also advertise their ranking
compared to other similar mutual funds as reported by industry analysts
such as Lipper Analytical Services, Inc.
All data is based on each Fund's past investment results and does not
predict future performance. Investment performance, which will vary, is
based on many factors, including market conditions, the composition of
the Fund's portfolio and the Fund's operating expenses. Investment
performance also often reflects the risks associated with the Fund's
investment objective and policies. These factors should be considered
when comparing the Fund to other funds and other investment vehicles.
Additional information concerning performance of the Funds is contained
in the Funds' Annual Report to shareholders and the Statement of
Additional Information which may be obtained without charge.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of each Fund are described below.
The investment objective of a Fund may not be changed without the
approval of a majority of the Funds' outstanding voting securities. There
can be no assurance that a Fund will achieve its objective.
The Rightime Fund
The Fund's objective is to achieve for its investors a high total return
consistent with reasonable risk. It seeks to achieve this objective by
concentrating (investing more than 25% of the value of its assets) in
shares of other registered investment companies and by making other
investments selected in accordance with the Fund's investment
restrictions and policies. The Fund generally seeks to invest in
securities that the Advisor has determined are consistent with
reasonable risk. The Fund will use a variety of investment techniques in
an effort to generate a high total return consisting of the sum of
interest, dividend and other income and net realized and unrealized
appreciation in the value of the Fund's portfolio of investment
companies (including money market mutual funds), cash equivalents (such
as repurchase agreements), cash, stocks, bonds and other debt
obligations, stock options, stock index options, stock index futures and
options thereon. The Fund is unable to predict what portion of its total
return will consist of income, short-term capital gains or long-term
capital gains. The Fund's pursuit of high total return is tempered by an
attempt to limit the Fund to a reasonable level of risk in either
strategy.
During periods when the Advisor anticipates a rising trend in the
securities markets, it will seek to achieve the Fund's objective by
establishing an "aggressive strategy" to concentrate in a portfolio of
shares which the Advisor believes will benefit from such a trend. The
Advisor will use a risk adjusted analysis (which considers the relative
volatility of its various investments) to evaluate the investment
companies performance under various market conditions and to consider
the potential reward and potential risk. The Advisor will not select
such investment companies based solely upon their previous performance.
It is expected that such investment companies will generally invest more
than 50% of their assets in common and/or preferred stocks. In order to
make allowance for cash flow needs of the Fund or when the Fund is
otherwise pursuing appreciation in its portfolio the Fund may invest up
to 75% of its asset value in other investment vehicles such as common or
preferred stocks of companies which are not investment companies,
investment companies which are money market funds, cash equivalents, may
make use of various hedging techniques or may hold its assets as cash.
When the Advisor anticipates a generally declining trend in securities
markets, it will establish a "conservative strategy" to seek to achieve
the Fund's objective by investing in the shares of money market funds
and other types of investment companies, and investing up to 75% in cash
equivalents and by retaining cash. In applying the conservative strategy
to securities selection, a greater emphasis is placed in avoiding risk,
consistent with the objective of the Fund. The Fund may also seek to
achieve a high total return during such a period without disturbing or
restructuring the portfolio established by the Fund during an Aggressive
Period by using cash, cash equivalents, proceeds of maturing securities,
new assets, etc. to purchase or sell other investment vehicles such as
stocks, stock options, stock index options, stock index futures or
options on such futures. Stock options, stock index futures and options
thereon are utilized to "hedge" risks arising from the Fund's
investments originally selected under its "Aggressive Portfolio
Strategy," including those risks arising while the Fund is selecting
suitable investments for its assets, and are not entered into for
speculative purposes. Their use may impose a limit on the amount of
gains the Fund can achieve from the investments which are so "hedged."
(See "Hedging" and "Options and Futures.")
The Fund, by investing in shares of investment companies, indirectly
pays a portion of the operating expenses, management expenses and
brokerage costs of such companies as well as the expense of operating
the fund. Thus, the Fund's investors may indirectly pay higher total
operating expenses and other costs than they might pay by owning the
underlying investment companies directly. The Fund attempts to identify
investment companies that have demonstrated superior management in the
past, thus possibly offsetting these factors by producing better results
and/or lower costs and expenses than other investment companies. There
can be no assurance that this result will be achieved.
The Fund must also structure its investments in other investment company
shares to comply with certain provisions of federal securities laws. The
presently applicable provisions impose limits on the amount of the
investment of the Fund's assets, and those of its affiliates, in any
investment company (3% of the total outstanding stock of any such
company) and these laws and regulations also may adversely affect the
operations of the Fund with respect to purchases or redemption of shares
issued by an investment company. (The underlying investment company may
be allowed to delay redemption of its shares held by an investment
company, such as the Fund, in excess of 1% of its total assets per
month.) Consequently, when the Fund is more heavily concentrated in
small investment companies, it may not be able to readily dispose of
such investment company shares and may be forced to redeem Fund shares
in kind to redeeming shareholders by delivering shares of investment
companies that are held in the Fund's portfolio. Although the Fund may
be restricted in its ability to redeem, Fund shareholders who receive
shares upon redemption are not so restricted. Applicable fundamental
policies are reflected in the Fund's investment restrictions.
The Fund expects that it will select the investment companies in which
it will invest based, in part, upon an analysis of the past and
projected performance and investment structure of the investment
companies. However, the Fund must consider other factors in the
selection of the investment companies. These other factors include, but
are not limited to, the investment company's size, shareholder services,
liquidity, investment objective and investment techniques, etc. The Fund
may be affected by the losses of such underlying investment companies,
and the level of risk arising from the investment practices of such
investment companies (such as repurchase agreements, quality standards,
or lending of securities) and has no control over the risks taken by
such investment companies. The Fund can also elect to redeem (subject to
the 1% limitation discussed above) its investment in an underlying
investment company (or sell it if the company is a closed-end one) if
that action is considered necessary or appropriate.
The Fund presently estimates that its annualized portfolio turnover rate
will generally not exceed 300%. See "Financial Highlights" for the
actual rate. Depending on market conditions, the deviation may be
material. In recent years, reduced volatility in the market place, and
the availability of hedging instruments have enabled the Fund to operate
with lower portfolio turnover rates, resulting in additional economic
benefits. In the event of higher portfolio turnover, the Fund may incur
higher brokerage costs and such portfolio turnover may result in greater
realization of gains and losses for tax purposes.
The Rightime Blue Chip Fund
The Fund's objective is to achieve for its investors a high total return
consistent with reasonable risk. It seeks to achieve this objective by
investing primarily in Blue Chip securities ("Blue Chips"). Blue Chips
include common stocks that are included in the Standard & Poor's 500
Stock Index (the "S & P 500"), a stock index of 500 common stocks that
is a widely recognized index of stock market performance, and/or that is
included in the Dow Jones Industrial Average Index of 30 common stocks
(the "DJIA"), a widely recognized index of general stock market movement
and options, stock index options, stock index futures and options on
stock index futures, based on Blue Chip common stocks. At least 65% of
the Fund's assets will usually, except when maintaining a temporary
defensive position, be invested in Blue Chips, and up to 100% may be so
invested. Such securities generally have the following characteristics:
(i) large capitalization (greater than $100 million); (ii) history of
earnings and dividends; and (iii) large number of publicly held shares
and high trading volume, resulting in a high degree of liquidity.
The Fund also seeks to achieve its objective by making other investments
selected in accordance with the Fund's investment restrictions and
policies. The Fund generally seeks to invest in securities that the
Advisor has determined are consistent with reasonable risk. The Fund
will use a variety of investment techniques in an effort to generate a
high total return consisting of the sum of interest, dividend and other
income and net realized and unrealized appreciation in the value of the
Fund's portfolio of Blue Chips, cash equivalents (such as repurchase
agreements), cash, stocks, bonds and other debt obligations, stock
options, stock index options, stock index futures and options thereon.
The Fund is unable to predict what portion of its total return will
consist of income, short-term capital gains or long-term capital gains.
The Fund's pursuit of high total return is tempered by an attempt to
limit the Fund to a reasonable level of risk at all times.
During periods when the Advisor anticipates a rising trend in the
securities markets, it will seek to achieve the Fund's objective by
establishing an "aggressive strategy" to invest in a portfolio of
securities which the Advisor believes will benefit from such a trend. In
order to make allowance for cash needs of the Fund or when the Fund is
otherwise pursuing appreciation in its portfolio, the Fund may also
invest up to 35% of its asset value in investment vehicles which are not
Blue Chips.
When the Advisor anticipates a generally declining trend in securities
markets, it will establish a "conservative strategy" to seek to achieve
its objective by investing up to 35% in securities other than Blue
Chips, such as cash, cash equivalents, bonds and other debt obligations.
In applying the conservative strategy to securities selection, a greater
emphasis is placed on avoiding risk, consistent with the objective of
the Fund. The Fund may also seek to achieve its objective during such a
period without disturbing or restructuring the portfolio established by
the Fund during an Aggressive Period by using cash, cash equivalents,
proceeds of maturing securities, new assets, etc. to purchase or sell
other investment vehicles such as bonds and other debt obligations,
stock options, stock index options, stock index futures or options on
such futures. Stock options, stock index futures and options thereon are
utilized to "hedge" risks arising from the Fund's investments originally
selected under its "Aggressive Portfolio Strategy," including those
risks arising while the Fund is selecting suitable investments for its
assets, and are not entered into for speculative purposes. Their use may
reduce or impose a limit on the amount of gains the Fund can achieve
from the investments which are so "hedged." (See "Hedging" and "Options
and Futures.")
The Fund presently estimates that its annualized portfolio turnover rate
will generally not exceed 300%. See "Financial Highlights" for the
actual rate. Depending on market conditions, the deviation may be
material. In recent years, reduced volatility in the market place, and
the availability of hedging instruments have enabled the Fund to operate
with lower portfolio turnover rates, resulting in additional economic
benefits. In the event of higher portfolio turnover, the Fund may incur
higher brokerage costs and such portfolio turnover may result in greater
realization of gains and losses for tax purposes.
The Rightime MidCap Fund
The Fund's objective is to achieve for its investors a high total return
consistent with reasonable risk. It seeks to achieve this objective by
investing primarily in securities of companies with medium-size market
capitalization ("MidCaps"). The Fund generally considers a medium-size
market capitalization to be between $200 million and $5 billion. Market
capitalization means the total market value of a company's outstanding
common stock. MidCaps include common stocks that are included in the
Standard & Poor's MidCap 400 Stock Index, an index of stock market
performance of 400 stocks, and options, stock index options, stock
index futures and options on stock index futures, based on MidCap
common stocks. At least 65% of the Fund's assets will usually,
except when maintaining a temporary defensive position, be invested
in MidCaps, and up to 100% may be so invested. The securities of
companies with medium-size market capitalization are traded on the
New York Stock Exchange and the American Stock Exchange and in the
over-the-counter market. Market capitalization does not necessarily
bear any correlation to other financial attributes used to describe
the size of the company, such as levels of assets, revenues or income.
Investments in MidCaps are generally considered to offer greater
opportunity for appreciation and to involve greater risk of
depreciation than securities of companies with larger market
capitalization. Since MidCaps are not broadly traded as the securities
of larger capitalized companies, they are often subject to wider and
more abrupt fluctuations in market price. Moreover, these securities
might not be as widely researched in the market. There have been
prolonged periods when these securities have substantially
underperformed or outperformed the securities of the larger
capitalization companies included in the popular stock market indices
such as the Dow Jones Industrial Average and the S & P 500.
The Fund also seeks to achieve its objective by making other investments
selected in accordance with the Fund's investment restrictions and
policies. The Fund generally seeks to invest in securities that the
Advisor has determined are consistent with reasonable risk. The Fund
will use a variety of investment techniques in an effort to generate a
high total return consisting of the sum of interest, dividend and other
income and net realized and unrealized appreciation in the value of the
Fund's portfolio of MidCap securities, cash equivalents (such as
repurchase agreements), cash, stocks, bonds and other debt obligations,
stock options, stock index options, stock index futures and options
thereon. The Fund is unable to predict what portion of its total return
will consist of income, short-term capital gains or long-term capital
gains. The Fund's pursuit of high total return is tempered by an attempt
to limit the Fund to a reasonable level of risk at all times.
During periods when the Advisor anticipates a rising trend in the
securities markets, it will seek to achieve the Fund's objective by
establishing an "aggressive strategy" to invest in a portfolio of
securities which the Advisor believes will benefit from such a trend. In
order to make allowance for cash needs of the Fund or when the Fund is
otherwise pursuing appreciation in its portfolio, the Fund may also
invest up to 35% of its asset value in investment vehicles which are not
MidCaps.
When the Advisor anticipates a generally declining trend in securities
markets, it will establish a "conservative strategy" to seek to achieve
its objective by investing up to 35% in securities other than MidCaps,
such as cash, cash equivalents, bonds and other debt obligations. In
applying the conservative strategy to securities selection, a greater
emphasis is placed on avoiding risk, consistent with the objective of
the Fund. The Fund may also seek to achieve its objective during such a
period without disturbing or restructuring the portfolio established by
the Fund during an Aggressive Period by using cash, cash equivalents,
proceeds of maturing securities, new assets, etc. to purchase or sell
other investment vehicles such as bonds and other debt obligations,
stock options, stock index options, stock index futures or options on
such futures. Stock options, stock index futures and options thereon are
utilized to "hedge" risks arising from the Fund's investments originally
selected under its "Aggressive Portfolio Strategy," including those
risks arising while the Fund is selecting suitable investments for its
assets, and are not entered into for speculative purposes. Their use may
reduce or impose a limit on the amount of gains the Fund can achieve
from the investments which are so "hedged." (See "Hedging" and "Options
and Futures.")
The Fund presently estimates that its annualized portfolio turnover rate
will generally not exceed 300%. See "Financial Highlights" for the
actual rate. Depending on market conditions, the deviation may be
material. In recent years, reduced volatility in the market place, and
the availability of hedging instruments have enabled the Fund to operate
with lower portfolio turnover rates, resulting in additional economic
benefits. In the event of higher portfolio turnover, the Fund may incur
higher brokerage costs and such portfolio turnover may result in greater
realization of gains and losses for tax purposes.
The Rightime Social Awareness Fund
The Fund's objective is to achieve for its investors growth of capital
and its secondary objective is current income, consistent with
reasonable risk. It seeks to achieve its objective by investing in
securities of companies with prospects for above-average capital growth,
companies which the Advisor believes demonstrate the ability to exceed
the average of companies in the S & P 500. The Fund will attempt to
invest in companies which, in the opinion of the Advisor, not only meet
the Fund's investment standards, but also show evidence in the conduct
of their business, relative to other companies in the same industry, of
contributing to the enhancement of the quality of human life. This may
include companies which conduct their business in a socially responsible
manner with a demonstrable commitment to certain social issues or
enterprises that make a significant contribution to society through
their products and services and through the way they do business. The
Fund generally seeks to invest in securities that the Advisor has
determined are investments consistent with reasonable risk and offer
prospects for above-average capital growth. The Fund will normally
invest at least 65% of its total assets in securities of companies which
satisfy the financial and social criteria described herein. The Fund
will invest primarily in common stocks, but may also invest in
securities convertible into common stocks, preferred stocks and other
securities (as described below) selected by the Advisor generally on the
basis of industry analysis, including analysis of underlying economic
factors, financial characteristics and trends, securities prices and
trends, sales, earnings, products or services, new technology and
markets. The Fund generally invests in United States equity securities
that are listed on securities exchanges or traded in the over-the-
counter market. The Fund will invest in common stocks which offer
prospects for growth and which may or may not pay current dividends. The
Fund will invest in securities of well-known and established companies
as well as smaller, less well-known companies that it believes have
prospects for above-average capital growth. The Fund's investments in
smaller, less well-known companies may involve greater risk than is
inherent in securities of more established companies.
The Fund also seeks to achieve its objective by making other investments
selected in accordance with the Fund's investment restrictions and
policies. The Fund generally seeks to invest in securities that the
Advisor has determined are consistent with reasonable risk. The Fund
will use a variety of investment techniques in an effort to generate
growth of capital and other returns consisting of the sum of interest,
dividend and other income and net realized and unrealized appreciation
in the value of the Fund's portfolio of stocks, cash equivalents (such
as repurchase agreements), cash, stocks, bonds and other debt
obligations, stock options, stock index options, stock index futures and
options thereon. The Fund is unable to predict what portion of its total
return will consist of income, short-term capital gains or long-term
capital gains. The Fund's pursuit of growth of capital is tempered by an
attempt to limit the Fund to a reasonable level of risk at all times.
During periods when the Advisor anticipates a rising trend in the
securities markets, it will seek to achieve the Fund's objective by
establishing an "aggressive strategy" to invest in a portfolio of
securities which the Advisor believes will benefit from such a trend.
When the Advisor anticipates a generally declining trend in securities
markets, it will establish a "conservative strategy" to seek to achieve
its objective by investing in securities such as cash, cash equivalents,
bonds and other debt obligations. In applying the conservative strategy
to securities selection, a greater emphasis is placed on avoiding risk,
consistent with the objective of the Fund. The Fund may also seek to
achieve its objective during such a period without disturbing or
restructuring the portfolio established by the Fund during an Aggressive
Period by using cash, cash equivalents, proceeds of maturing securities,
new assets, etc. to purchase or sell other investment vehicles such as
bonds and other debt obligations, stock options, stock index options,
stock index futures or options on such futures. Stock options, stock
index futures and options thereon are utilized to "hedge" risks arising
from the Fund's investments originally selected under its "Aggressive
Portfolio Strategy," including those risks arising while the Fund is
selecting suitable investments for its assets, and are not entered into
for speculative purposes. Their use may reduce or impose a limit on the
amount of gains the Fund can achieve from the investments which are so
"hedged." (See "Hedging" and "Options and Futures.")
After determining that a prospective investment meets the financial
criteria described above, the Advisor will seek to select securities for
the Fund based upon an analysis of the relative social performance of
the issuer. The Advisor will numerically rate the social performance of
each issuer regarding specific social issues and rate the overall social
performance of each issuer between 1 and 10, with 1 indicating the
highest rating and 10 indicating the lowest. The Advisor considers
information provided by various sources, including the issuers of
securities, publicly disclosed corporate documents filed with federal
agencies, and information provided by Kinder, Lydenberg, Domini & Co.
("KLD") and its Domini Social Index (the "DSI"). The DSI is a market
capitalization-weighted common stock index which monitors the
performance of 400 corporations that pass multiple, broad-based social
screens. The DSI 400 consists of approximately 250 companies included in
the Standard & Poor's 500 Stock Index, approximately 100 of the largest
companies not included in the S & P 500 or companies providing industry
representation, and 50 companies with particularly strong social
characteristics. The Advisor may select companies listed in the DSI for
investment, but is not limited to the selection of such companies.
The DSI was created to fill two primary needs:
(bullet) To create a diversified benchmark against which social
investors can measure the investment performance of
socially screened portfolios. The DSI is constructed to
represent the broad market available to the social
investor.
(bullet) To provide a resource for social investors wishing a broad
index of companies in a variety of industries that pass
commonly applied social screens.
The DSI uses a combination of exclusionary and qualitative social
screens:
Exclusionary screens:
(bullet) Eliminate companies that derive two percent or more of
sales from military weapons systems; derive any revenues
from the manufacture of alcoholic or tobacco products; or
derive any revenues from the providing of gaming products
or services; and
(bullet) Eliminate electric utilities that own interests in nuclear
power plants or derive electricity from nuclear power
plants in which they have an interest.
Qualitative screens:
(bullet) Evaluate companies' records in areas such as diversity,
employee relations, the environment, and product. KLD makes
an effort to include companies with a positive record in
these areas.
Investors should be aware that the Fund's social criteria may limit the
availability of investment opportunities more than is customary with
other investment companies. The Advisor may change the social criteria
used to rate social performance of an issuer without prior notice or
shareholder approval.
The Fund presently estimates that its annualized portfolio turnover rate
will generally not exceed 300%. See "Financial Highlights" for the
actual rate. Depending on market conditions, the deviation may be
material. In recent years, reduced volatility in the market place, and
the availability of hedging instruments have enabled the Fund to operate
with lower portfolio turnover rates, resulting in additional economic
benefits. In the event of higher portfolio turnover, the Fund may incur
higher brokerage costs and such portfolio turnover may result in greater
realization of gains and losses for tax purposes.
The Rightime Fund, The Rightime Blue Chip Fund, The Rightime MidCap Fund
and The Rightime Social Awareness Fund
The Advisor will select securities for each Fund based upon an analysis
of the expected contribution of the security to the Fund's investment
objective. Equity securities (such as common and preferred stock) will
be selected based upon the expected appreciation potential, income,
and/or liquidity of the security. In selecting preferred stock, the
Advisor does not rely upon published ratings of issuers, but may
consider such ratings in making its recommendations. Debt securities
(such as bonds or other obligations, including money market securities),
will be selected after considering factors such as the interest rate and
the soundness of the issuer. The Advisor does not rely upon published
ratings of such issuers, but may consider such ratings in making its
recommendations. Preferred stocks and debt securities in which the Fund
may invest will be rated at the time of purchase Baa or higher by
Moody's Investor Service, Inc., or BBB or higher by Standard & Poor's
Corporation, or in the opinion of the Advisor will be of comparable
quality. Baa and BBB rated securities are considered to have speculative
characteristics. Adverse economic conditions and changing circumstances
are more likely to lead to a weakened capacity to pay principal and
interest. In the event the rating on an issue held in a Fund's portfolio
is changed by the ratings service, such change will be considered by the
Fund in its evaluation of the overall investment merits of that
security.
The Funds also seek to protect the value of their investments in the
Fund by temporarily foregoing the Fund's objective for protection and
stability of its assets when volatile or abnormal market conditions are
anticipated by the Advisor (as indicated by rapidly accelerating
inflation or interest rates, sharply declining stock markets, increasing
deterioration in the banking situation and/or increasing threats to
national or world security.) This will involve the selection of high
proportions, up to 100%, of temporary defensive investments such as U.S.
Government securities or other money market securities (see "Money
Market Securities"), the use of very short portfolio maturities of 60
days or less, other investments which protect the value of the Fund, and
similar techniques such as holding cash.
The Advisor will attempt to minimize market risk by the use of "market
timing" concepts and procedures. Market timing involves the use of
analytical techniques which seek to anticipate major market trends
which, in the opinion of the Advisor, affect securities markets over
periods of time, so an investor (such as the Fund) may restructure its
portfolio of investments to increase gains or income, or avoid losses.
There can be no assurance the Advisor will achieve timing consistently.
If the Advisor incorrectly judges turns in the market, the Fund may lose
opportunities for gains or incur losses.
The Rightime Government Securities Fund
The Fund's objective is to achieve for its investors a high current
income consistent with safety and liquidity of principal. The Fund seeks
to achieve this objective by investing in securities that are issued or
guaranteed as to principal and interest by the U.S. Government, its
agencies, authorities or instrumentalities ("Government Securities"),
investing in securities secured by Government Securities (such as
repurchase agreements), and by engaging in transactions involving
related options, futures and options on futures. The shares of the Fund
are not issued by the U.S. Government, nor is the Fund's net asset value
guaranteed by the U.S. Government.
Under normal circumstances at least 65% of the Fund's assets will be
invested at all times in Government Securities, including such
securities purchased on a delayed delivery basis, or repurchase
agreements secured by such securities. Government Securities include:
(1) U.S. Treasury obligations, which differ only on their interest
rates, maturities and times of issuance: U.S. Treasury bills (maturity
of one year or less), U.S. Treasury notes (maturities of one to ten
years), and U.S. Treasury bonds (generally maturities of greater than
ten years), and separated or divided U.S. Treasury securities (stripped
by the U.S. Treasury) whose payments of principal and interest are all
backed by the full faith and credit of the United States; and (2)
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, some of which are backed by the full faith and credit
of the U.S. Treasury, e.g., direct pass-through certificates of the
Government National Mortgage Association (generally referred to as
"GNMA"); some of which are supported by the right of the issuer to
borrow from the U.S. Government, e.g., obligations of Federal Home Loan
Banks; and some of which are backed only by the credit of the issuer
itself, e.g., obligations of the Student Loan Marketing Association.
Generally, GNMA's are inversely affected by changes in interest rates,
i.e., as interest rates decline, market value increases and as interest
rates rise, market value declines. Consequently, GNMA's are subject to
the risk of market price fluctuations. The Fund cannot "lock-in" long-
term interest rates by purchasing such securities because the average
life of the underlying mortgage instrument is likely to be substantially
less than the original maturity. As a result of the need to reinvest
prepayment of principal generally and the possibility of significant
unscheduled prepayments resulting from decline in mortgage interest
rates, the Fund may have to invest such assets at current rates which
may be less favorable.
The Fund may also purchase U.S. Treasury securities that have been
separated or divided by financial institutions and also receipts or
certificates representing interests in such stripped debt obligations
and coupons. Separated U.S. Treasury securities are sold under different
names including: Certificate of Accrual on Treasury Securities, Treasury
Receipts, Separated Trading of Registered Interest and Principal of
Securities and Treasury Investment Growth Receipts.
The Fund may write covered call and put options and purchase call and
put options on Government Securities in an effort to increase current
income and to reduce fluctuations in net asset value. Consistent with
the investment objective of recognizing safety and liquidity of
principal, the Fund may protect against anticipated declines in the
value of securities held or increases in the cost of securities to be
acquired by hedging through purchase or sale of futures contracts on
Government Securities and related options.
Depending on market conditions, the Fund may temporarily take a
defensive position by investing a greater portion of its assets in cash,
short-term Government Securities and related repurchase agreements or by
otherwise reducing the general maturity of its portfolio.
Government Securities do not generally involve the credit risks
associated with other types of interest bearing securities, although, as
a result, the yields available from Government Securities are generally
lower than the yields available from corporate interest-bearing
securities. To the extent the Fund purchases U.S. Treasury obligations
of medium term (maturities of one to ten years) or longer, the Fund's
net asset value will vary inversely with changes in market interest
rates. Consequently, investors in the Fund may be subject to more risk
than other funds which do not purchase investments of medium term or
longer. However, on an historical basis, securities issued or
guaranteed by the U.S. Government or its agencies and instrumentalities
have involved minimal risk of loss of principal or interest.
The Fund presently estimates that its annualized portfolio turnover rate
will generally not exceed 300%. See "Financial Highlights" for the
actual rate. Depending on market conditions, the deviation may be
material. In recent years, reduced volatility in the market place, and
the availability of hedging instruments have enabled the Fund to operate
with lower portfolio turnover rates, resulting in additional economic
benefits. In the event of higher portfolio turnover, the Fund may incur
higher brokerage costs and such portfolio turnover may result in greater
realization of gains and losses for tax purposes.
OTHER INVESTMENT POLICIES
The Rightime Fund, The Rightime Blue Chip Fund, The Rightime MidCap
Fund, and The Rightime Social Awareness Fund
Hedging
Under certain conditions, each Fund may choose to restructure its
investments in anticipation of market movement. This could involve the
sale of investments owned by the Fund to secure gains or to avoid losses
before an expected decline in the market reduces the market value of
such securities.
In place of or to supplement such restructuring, each Fund may seek to
protect itself from anticipated market action by using "hedging"
techniques that the Fund expects will generate gains which would offset
losses on other securities owned by the Fund. These hedging techniques
could involve combinations of various techniques, such as the purchase
or sale of stocks or the use of stock options, stock index options,
stock index futures and options thereon to seek to achieve increases in
the values of such options and futures which offset decreases in the
values of other securities owned by the Fund. The Advisor would select
the specific technique(s) based upon analysis of the Fund's portfolio,
market conditions, relative costs and risks, tax effects and other
factors. There can be variations between the relative movements of
investments and hedge selected with respect to that investment. This may
increase or decrease the gains or losses each Fund achieves by its
hedging relative to its losses or gains on the hedged investments.
While the investment companies in which The Rightime Fund invests will
generally not perform in exactly the same proportions as the indexes on
which options or futures are available, the Advisor believes it can
identify certain ratios reflecting relationships between the previous
performance by such companies and the indexes on which the Fund will
engage in options or futures transactions, and will attempt to allow for
such differences in selecting its "hedging" investments. Because the
Fund does not control the underlying investment company, an unexpected
and unprecedented restructuring of the portfolio of an underlying
investment company could have an unexpected, and possibly adverse,
effect on the hedging efforts of the Advisor. If the Fund invested
directly in a portfolio of operating companies its hedging efforts
usually would not involve the risk of such an intervening level of
hedging or defensive investments. This risk is present when the Fund
invests in other investment companies, because each is separately
managed by Advisors or officers who may also hedge simultaneously or
take action which may render the Advisor's action ineffective or
unsuccessful; the Fund benefits, in this respect, from the study of the
prior records of, and the restrictions and limitations applicable to
such companies, but is dependent upon the success or failure in these
efforts of the Advisor.
Options and Futures
The Rightime Fund, The Rightime Blue Chip Fund, The Rightime MidCap
Fund, and The Rightime Social Awareness Fund may use stock options,
stock index futures and options on such futures to "hedge" their
portfolio investments. The following descriptions illustrate some of the
techniques and risks involved in such hedging. Further information
appears in the Statement of Additional Information.
Options: Each Fund intends to purchase and/or write call and put
options that are traded on U.S. securities exchanges or over-the-
counter. Each Fund seeks to enhance its objective by receiving premiums
for writing covered call and put options. Although each Fund receives
premium income from these techniques, any appreciation realized will be
limited by the terms of the option. Each Fund may purchase call options
to protect against an increase in the price of securities that it
ultimately wants to buy. It may purchase put options to protect its
portfolio securities against a decline in market value.
Stock Index Futures: Each Fund intends to purchase and sell stock
index futures contracts. A Fund may sell stock index futures contracts
in anticipation of, or during a market decline to attempt to offset the
decrease in market value of its common stocks and/or investment company
holdings that might otherwise result; and it may purchase such contracts
in order to offset increases in the cost of common stocks and/or
investment company holdings that it intends to purchase.
Options on Stock Indexes and Stock Index Futures: Each Fund intends to
purchase and/or write call and put options on Stock Indexes which are
traded on U.S. exchanges. The Funds also intend to purchase and/or write
call and put options on stock index futures which are traded on U.S.
exchanges. Options on stock index futures are similar to options on
stocks or options on stock indexes.
The selection of the foregoing techniques or any combination of them to
be used at any particular time will depend upon an assessment of the
relative implementation costs and the liquidity of the particular
secondary market in which such options, stock index futures, and options
on stock indexes and stock index futures are traded.
Risks of Transactions in Stock Options, Stock Index Options and Options
on Stock Index Futures: An option position may be closed out only on
an exchange or with a dealer who provides a secondary market for an
option of the same series. Although the Funds will generally purchase or
write only those options for which the Advisor believes there is an
active secondary market, there is no assurance that a liquid secondary
market on an exchange will exist for any particular option. In such
event, it might not be possible to effect closing transactions in
particular options, with the result that the Fund would have to exercise
its options in order to realize any profit or allow the option to
expire. The inability to close-out these options may result in a loss to
the Fund. If exercised, the Fund would incur brokerage commissions upon
the subsequent disposition of underlying securities acquired. It is the
position of the Staff of the Securities and Exchange Commission that
over-the-counter options are illiquid. An imperfect correlation exists
between the options and securities being hedged. The success of any
hedging position depends on the ability of the Advisor to predict stock
and interest rate movement.
While the Funds have not adopted fundamental limitations on their
futures or options activities, they must comply with certain
requirements of the U.S. Securities and Exchange Commission ("SEC") and
the Commodities Futures Trading Commission. For example, these
provisions require that each Fund shall not purchase or sell any
futures or puts or calls on futures if immediately thereafter the sum
of the amount of the Fund's margin deposits (both initial and
variation deposits) and premiums paid for outstanding puts and/or
calls on futures would exceed 5% of the value of its total assets.
(While the amount represented by such premiums or margin may be small,
the value of the assets affected by options of futures may be large.)
This limitation (or the others described below) could, however, change
if regulatory provisions applicable to the Funds were to be changed.
The conditions with which each Fund will comply under the terms of an
Exemptive Order granted by the SEC to Rightime Fund, Inc.include
requirements that: (1) the Fund maintain liquid assets in the
segregated custody of its Custodian Bank equal to the combined
value of its additional obligations for futures and certain other
investments; (2) the sum of specified premiums and margins will not
exceed 5% of the Fund's market value when such investments are made;
(3) the Fund will establish and maintain funds in FCM Accounts in its
Custodian Bank as described in the Exemptive Order; and (4) the Fund
will withdraw excess variation margin from such FCM Accounts as
described in the Exemptive Order.
Money Market Securities
The Funds may invest in money market securities, which include:
marketable securities issued or guaranteed as to principal and interest
by the government of the United States or by its agencies or
instrumentalities; domestic bank certificates of deposit; bankers'
acceptances; prime commercial paper rated in the two highest categories
by Moody's and Standard & Poor's Corp.; and repurchase agreements
(secured by U.S. Treasury or agency obligations).
Under a repurchase agreement the Fund acquires a debt instrument for a
relatively short period (usually not more than one week) subject to the
obligations of the seller to repurchase and of the Fund to resell such
instrument at a fixed price. The use of repurchase agreements involves
certain risks. For example, if the seller of the agreement defaults on
its obligation to repurchase the underlying securities at a time when
the value of these securities has declined, the Fund may incur a loss
upon disposition of them. If the seller of the agreement becomes
insolvent and subject to liquidation or reorganization under the
Bankruptcy Code or other laws, a bankruptcy court may determine that the
underlying securities are collateral not within the control of the Fund
and therefore subject to sale by the trustee in bankruptcy. Finally, it
is possible that the Fund may not be able to substantiate its interest
in the underlying securities. While management of the Funds acknowledges
these risks, it is expected that they can be controlled through
stringent security selection and careful monitoring procedures.
The Funds will select money market securities for investment when such
securities offer a current market rate of return which the Advisor
considers reasonable in relation to the risk of the investment, and the
issuer can satisfy suitable standards of creditworthiness set by the
Advisor and described in the Statement of Additional Information.
The Rightime Government Securities Fund
Futures Contracts and Options on Futures Contracts
The Fund may enter into contracts for the purchase or sale for future
delivery of fixed income securities ("Futures Contracts") and may
purchase and write options to buy or sell Futures Contracts ("Options on
Futures Contracts"). These investment techniques will only be used by
the Fund to hedge against anticipated future changes in interest rates
which otherwise might either adversely affect the value of the Fund's
portfolio securities or adversely affect the prices of Government
Securities which the Fund intends to purchase at a later date. Should
interest rates move in an unexpected manner, the Fund may not achieve
the anticipated benefits of Futures Contracts or Options on Futures
Contracts or may realize a loss.
Options
The Fund may write (sell) "covered" put and call options on optionable
Government Securities. Call options written by the Fund give the holder
the right to buy the underlying securities from the Fund during the term
of the option at a stated exercise price; put options give the holder
the right to sell the underlying security to the Fund during the term of
the option at a stated exercise price. Call options are "covered" when
the Fund owns the underlying securities and put options are "covered"
when the Fund has established a segregated account of cash and
Government Securities which can be liquidated promptly to satisfy any
obligation of the Fund to purchase the underlying securities. The Fund
may also write straddles (combinations of puts and calls on the same
underlying security) in exchange for a combined premium on the two
writing transactions. (See "Dividends, Distributions and Taxes" in the
Statement of Additional Information for a discussion of the tax
consequences of Straddle Writing.)
The Fund will receive a premium from writing a put or call option, which
increases the Fund's gross income in the event the option expires
unexercised or is closed out at a profit. The amount of the premium will
reflect, among other things, the relationship of the market price of the
underlying security to the exercise price of the option and the
remaining term of the option. By writing a call option, the Fund limits
its opportunity to profit from any increase in the market value of the
underlying security above the exercise price of the option. By writing a
put option, the Fund assumes the risk that it may be required to
purchase the underlying for an exercise price higher than its then
current market value, resulting in a potential capital loss unless the
security subsequently appreciates in value.
The Fund may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction in which it
purchases an option having the same terms as the option written. It is
possible, however, that illiquidity in the options markets may make it
difficult from time to time for the Fund to close out its written option
positions. Also, the securities exchanges have established limitations
on the number of options that may be written by an investor or group of
investors acting in concert. It is possible in the future that the Fund
and other investment companies or series of this company might be
considered to be such a group. It is not contemplated that these
position limits will have any adverse impact on the Fund's portfolio
strategies.
The Fund may also purchase listed or over-the-counter put or call
options in anticipation of changes in interest rates which may adversely
affect the value of its portfolio or the prices of Government Securities
that the Fund wants to purchase at a later date. The premium paid for a
put or call option plus any transaction costs will reduce the benefit,
if any, realized by the Fund upon exercise of the option, and, unless
the price of the underlying security changes sufficiently, the option
may expire without value to the Fund. The Fund intends to treat options
in respect of specific securities that are not traded on a national
securities exchange as not readily marketable and therefore subject to
the limitations set forth under "Investment Restrictions" below.
When-Issued Securities
When securities are offered on a "when-issued" basis, the price is fixed
at the time the commitment to purchase is made, but delivery and payment
for the when-issued securities takes place at a later date, normally
within one month. The Fund will establish a segregated account with the
Custodian in which it will maintain cash and marketable securities equal
in value to commitments for when-issued securities. Such segregated
securities either will mature, be replaced with cash or other comparable
securities or, if necessary, be sold on or before the settlement date.
The Fund intends to purchase when-issued securities with the purpose of
actually acquiring them, although they may be sold prior to the
settlement date if a sale appears desirable for investment reasons.
Securities purchased on a when-issued basis are subject to changes in
value based upon the public's perception of the creditworthiness of the
issuer and changes, real and anticipated, in the level of interest
rates. Securities purchased on a when-issued basis may expose the Fund
to additional risks because they may experience such fluctuations prior
to their actual delivery. Purchasing securities on a when-issued basis
can involve a risk that the yields available in the market when the
delivery takes place actually may be higher than those obtained in the
transaction itself.
Lending of Securities and Short-Sales
The Fund may make loans of Government Securities in its portfolio to
broker/dealers under contracts calling for collateral that will consist
of either Government Securities (which may have different maturities) or
cash. The Fund will continue to collect interest on the securities
loaned and will also receive either interest (through investment of cash
collateral) or a fee (if the collateral is Government Securities). The
Fund may pay fees in connection with securities loans. There may be
risks of delay in receiving additional collateral, or risks of delay in
recovery of the securities or even loss of rights of the collateral,
should the borrower of the securities fail financially. However, loans
are made only to borrowers deemed by the Advisor to be of good standing,
and when, in the judgement of the Advisor, the fee which can be earned
from such securities loan justifies the attendant risk. The Fund may
also make short sales involving either securities held in the Fund's
portfolio or securities which the Fund has the right to acquire without
paying additional consideration, generally referred to as "short sales
against the box." Such short sales involve the risk that if the Fund
holds a right to acquire a security it sells short, it may have to go
into the market to acquire the security for delivery if that security is
not received pursuant to the right to acquire. The continued obligation
to hold a security for delivery under the short sale can also cause the
Fund's assets to be tied up in the security for the intervening period,
when the Fund might otherwise determine not to use its assets in such
fashion. It is the present intention of management to make such sales
only for the purpose of deferring realization of gain or loss for
federal income tax purposes. (See "Dividends, Distributions and Taxes"
in the Statement of Additional Information.)
INVESTMENT RESTRICTIONS
The investment restrictions set forth below have been adopted by the
respective Funds to limit certain risks that may result from investment
in specific types of securities or from engaging in certain kinds of
transactions addressed by such restrictions. They may not be changed
without the affirmative vote of a majority of the outstanding voting
securities of the particular Fund. Certain of these policies are
detailed below, while other policies are set forth in the Statement of
Additional Information. Changes in values of a particular Fund's assets
or the assets of the Company as a whole will not cause a violation of
the investment restrictions so long as percentage restrictions are
observed by the Fund at the time it purchases any security.
The Rightime Fund, The Rightime Blue Chip Fund, The Rightime MidCap
Fund, and The Rightime Social Awareness Fund
Each Fund's investment restrictions specifically provide that the Fund
will not:
(a) as to 75% of the Fund's total assets, invest more than 5% of its
total assets in the securities of any one issuer. (This limitation does
not apply to cash and cash items, obligations issued or guaranteed by
the United States government, its agencies or instrumentalities, or
securities of other investment companies);
(b) purchase more than 10% of the voting securities or more than 10% of
any class of securities of any issuer. (For purposes of this
restriction, all outstanding fixed income securities of an issuer are
considered as one class);
(c) purchase or sell commodities or commodity futures contracts, other
than those related to stock indexes as previously outlined in the
section entitled "Investment Objectives and Policies";
(d) make loans of money or securities, except (1) by the purchase of
fixed income obligations in which the Fund may invest consistent with
its investment objective and policies; or (2) by investment in
repurchase agreements (see "Investment Objectives and Policies");
(e) invest in securities of any company if, to the knowledge of the
Fund, any officer or director of the Company or the Advisor owns more
than .5% of the outstanding securities of such company and such officers
and directors (who own more than .5%) in the aggregate own more than 5%
of the outstanding securities of such company;
(f) borrow money, except the Fund may borrow from banks: (1) for
temporary or emergency purposes in an amount not exceeding 5% of the
Fund's assets; or (2) to meet redemption requests that might otherwise
require the untimely disposition of portfolio securities in an amount up
to 33-1/3% of the value of the Fund's total assets (including the amount
borrowed) valued at market less liabilities (not including the amount
borrowed) at the time the borrowing was made. While borrowings exceed 5%
of the value of the Fund's total assets, the Fund will not make
additional investments. Interest paid on borrowings will reduce net
income;
(g) pledge, hypothecate, mortgage or otherwise encumber its assets,
except in an amount up to 33-1/3% of the value of its net assets but
only to secure borrowings for temporary or emergency purposes, such as
to effect redemptions; and,
(h) purchase the securities of any issuer if, as a result, more than
10% of the value of the Fund's net assets would be invested (1) in
securities that are subject to legal or contractual restrictions on
resale ("restricted securities"), (2) in securities for which there are
no readily available market quotations, or (3) in repurchase agreements
maturing in more than seven days.
The Rightime Fund
The Fund has also adopted these two additional investment restrictions.
The Fund will not:
(i) invest in any investment company if a purchase of its shares would
result in the Fund and its affiliates owning more than 3% of the total
outstanding stock of such investment company; and,
(j) invest in any investment company which itself does not qualify as a
diversified investment company under the Internal Revenue Code.
The Rightime Government Securities Fund
The Statement of Additional Information provides a listing of investment
restrictions which govern the Fund's investment policies and a
description of strategies which may be used by the Fund in managing its
portfolio. Among other restrictions set forth therein, the Fund will not
borrow money or pledge its assets except as a temporary measure for
extraordinary or emergency purposes and not in excess of 33-1/3% of the
value of the total assets of the Fund taken at lower of their market
value or cost. If borrowings exceed 5% of the Fund's assets, the Fund
will not purchase securities.
CAPITAL STOCK
The authorized capital stock of the Company consists of 500,000,000
shares of Common Stock with a par value of $0.01 each. At the present
time 50,000,000 shares have been allocated to The Rightime Fund, and
20,000,000 shares of stock have been allocated to each of The Rightime
Blue Chip Fund, The Rightime MidCap Fund, The Rightime Social Awareness
Fund, and The Rightime Government Securities Fund. Each share has equal
dividend, voting, liquidation and redemption rights. There are no
conversion or preemptive rights. Shares, when issued, will be fully paid
and nonassessable. Fractional shares have proportional voting rights.
Shares of the Funds do not have cumulative voting rights which means
that the holders of more than 50% of the shares voting for the election
of directors can elect all of the directors if they choose to do so and,
in such event, the holders of the remaining shares will not be able to
elect any person to the Board of Directors. The Funds' shareholders will
vote together to elect directors and on other matters affecting the
entire corporation, but will vote separately on matters affecting
separate series. The Funds do not intend to hold annual meetings of
shareholders. The Company will call a meeting of Shareholders, if
requested to do so by the holders of at least 10% of the Company's
outstanding shares, for the purpose of voting upon the question of
removal of a director or directors and will assist in communications
with other shareholders as required by Section 16(c) of the Investment
Company Act of 1940, as amended (the "Investment Company Act.")
BOARD OF DIRECTORS
The Board of Directors of the Company are fiduciaries for the Funds'
shareholders and are governed by the law of the State of Maryland in
this regard. They establish policy for the operation of the Funds, and
appoint the Officers who conduct the daily business of the Funds.
INVESTMENT ADVISOR
The investments of each Fund are managed by Rightime Econometrics, Inc.
(previously defined as the "Advisor"), 1095 Rydal Road, Rydal, PA 19046-
1711, under an investment advisory agreement (the "Advisory Agreement")
which became effective as to the Funds on the following dates: The
Rightime Fund, March 26, 1985; The Rightime Blue Chip Fund, July 1,
1987; The Rightime MidCap Fund, November 10, 1991; The Rightime Social
Awareness Fund, March 1, 1990; and The Rightime Government Securities
Fund, December 24, 1986. The Advisor has been providing investment
management services to the Funds and to separately managed accounts
since 1979 and currently has over $2 billion (including the Funds) in
assets under management.
Pursuant to each Advisory Agreement, the Advisor will manage the assets
of each Fund in accordance with the stated objective, policies and
restrictions of the Fund (subject to the supervision of the Fund's Board
of Directors and the Fund's officers.) The Advisor is responsible for
selecting brokers and dealers (including, when appropriate, Lincoln
Investment Planning, Inc. or other affiliated broker/dealers) to execute
transactions for each Fund. The Board has also authorized the Advisor
and the Company's officers to consider sales of Fund shares when
allocating brokerage, subject to the policy of obtaining best price and
execution of such transactions. The Advisor will also keep certain books
and records in connection with its services to each Fund. The Advisor
has also authorized any of its directors, officers and employees who
have been elected as directors or officers of the Company to serve in
the capacities in which they have been elected. Services furnished by
the Advisor under each Advisory Agreement may be furnished through the
medium of any such directors and officers.
As compensation for its services, the Advisor receives a fee, computed
daily and payable monthly, at the annualized rate of .50% of the average
daily net assets of each of The Rightime Fund, The Rightime Blue Chip
Fund, The Rightime MidCap Fund, and The Rightime Social Awareness Fund,
and .40% of the average daily net assets of The Rightime Government
Securities Fund.
David J. Rights, the Chairman of the Board, President, and Treasurer of
The Rightime Fund, Inc., has been the Portfolio Manager of each Fund
since its inception. Mr. Rights is the President and owner of all of the
voting common stock of the Advisor and has provided Lincoln Investment
Planning, Inc. with investment research and related consulting services
for over fourteen years directly or through a predecessor entity of the
same name that merged into the Advisor.
ADMINISTRATOR
Each Fund has selected Rightime Administrators, Inc. (the
"Administrator") to serve as the Administrator of the Fund. The
Administrator, which is affiliated with the Advisor, is located at 218
Glenside Avenue, Wyncote, PA 19095-1595. The Administrator serves under
an agreement (the "Administration Agreement") with the Company on behalf
of each Fund, dated the same date as the respective Fund's Advisory
Agreement. Each Administration Agreement provides that the Administrator
will administer the Fund's affairs subject to the supervision of the
Company's Board of Directors and, in connection therewith, furnish each
Fund with office facilities, and with any ordinary clerical and
bookkeeping services not furnished by the Funds' Transfer Agent or
Custodian. The Administrator has authorized any of its directors,
officers or employees who are elected as directors or officers of the
Company, including a majority of the directors who are not "interested
persons," as defined in the Investment Company Act of 1940, as amended,
with respect to each Fund. The Administrator has retained Lincoln
Investment Planning, Inc., the distributor and transfer agent for each
Fund, to provide certain accounting services and shareholder services
for each Fund.
As compensation for its services, the Administrator receives a fee,
computed daily and payable monthly, at an annualized rate of each Fund's
average daily net assets of .95% for The Rightime Fund, .85% for each of
The Rightime Blue Chip Fund, The Rightime MidCap Fund, and The Rightime
Social Awareness Fund, and .75% for The Rightime Government Securities
Fund. The Administrator will pay the fees of the Distributor for the
accounting and shareholder services referred to in the previous
paragraph.
DISTRIBUTION OF SHARES
Lincoln Investment Planning, Inc. (the "Distributor") is each Fund's
distributor under a distribution agreement ("Distribution Agreement")
dated the same as the respective Fund's Advisory and Administration
Agreements. The Distributor promotes the distribution of the shares of
Funds in accordance with the Distribution Agreements and terms of the
distribution plan of each Fund (the "Plan") adopted pursuant to Rule
12b-1 under the Investment Company Act. The Distributor has retained RTE
Securities, Inc., a separate broker/dealer firm, to provide consulting
services and to assist with wholesaling activities for the Funds. David
J. Rights who is the Chairman of the Board, President and Treasurer of
the Company is also the owner of RTE Securities, Inc., as well as a
consultant for the Distributor. Edward S. Forst, Sr. who is a Director
and the Vice-President and Secretary of the Company is also the Chairman
of the Board of the Distributor, and is considered an "affiliated
person" of the Funds under the Investment Company Act. The Distributor's
offices are at 218 Glenside Avenue, Wyncote, PA 19095-1595.
The Plans provide for the use of Fund assets to pay expenses of
distributing Fund shares. The Distribution Agreements and the Plans were
each approved by 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 each of whom has no direct or indirect financial interest
in the Plan or any agreement related thereto, referred to herein as the
"12b-1 Directors"). Each Fund's Plan and the agreements under each Plan
may be different from, and will operate independently of, any plan
adopted by any other series of the Company. Each Plan may be terminated
at any time by the vote of the Company's Board of Directors or the 12b-1
Directors, or by the vote of a majority of the outstanding voting
securities of the Fund. While a Plan continues in effect, the selection
of the 12b-1 Directors is committed to the discretion of such persons
then in office.
As compensation for its services, the Distributor receives a fee,
computed daily and payable monthly, at an annualized rate of each Fund's
average daily net assets of .75% for The Rightime Fund, .50% for The
Rightime Blue Chip Fund, The Rightime MidCap Fund, The Rightime Social
Awareness Fund, and .25% for The Rightime Government Securities Fund.
The Plans provide that each Fund's costs may not exceed the annual rates
listed above, for payments to the Distributor, sales representatives or
third parties who render promotional and distribution services, for
items such as advertising expenses, selling expenses, commissions or
travel reasonably intended to result in sales of shares of the Fund and
for the printing of prospectuses sent to prospective investors. The
Funds will not bear any distribution expenses in excess of their
payments to the Distributor under the Plans at the rates set forth
above.
The Plans do not limit the amounts paid to the Distributor by each Fund
to amounts actually expended by the Distributor, and it is therefore
possible for payments to the Distributor to exceed its expenses in a
particular year. At the present time, however, the budgeted expenses of
the Distributor, including commissions to its representatives and those
of other dealers, will substantially exceed the payments under each
Distribution Agreement. The Distributor will advance such amounts from
its own resources. While the Distributor has advised the Funds it hopes
to recover such "excess" payments through its normal fees in later
years, the Funds are not legally obligated to repay such excess amounts
or to continue the Plans or the Distribution Agreements for such
purpose. Although the Plans may be amended by the Board of Directors,
any change in a Plan that would materially increase the amounts
authorized to be paid under the Plan must be approved by shareholders.
The total amounts paid by the Funds under the foregoing arrangements may
not exceed the maximum Plan limit specified above, and the amounts and
purposes of expenditures under the Plan must be reported to the 12b-1
Directors quarterly. The amounts allowable under the Plan for each of
the Funds is limited by provisions complying with certain rules of the
National Association of Securities Dealers. The 12b-1 Directors may
require or approve changes in the implementation or operation of the
Plans and may also require the total expenditures by each Fund under its
Plan be kept within limits lower than the maximum amount permitted by
the Plan as stated above. The 12b-1 Directors may terminate the
Distribution Agreement in accordance with its terms on thirty days'
notice.
CUSTODIAN
CoreStates Bank, NA, Philadelphia, Pennsylvania acts as the Custodian of
the securities and cash of each Fund.
TRANSFER AND DIVIDEND DISBURSING AGENT
The Company has selected Lincoln Investment Planning, Inc. to serve as
its transfer agent, dividend disbursing agent, and as redemption agent.
In the opinion of the Board of Directors, the fees charged by Lincoln
Investment Planning, Inc. for these services are comparable to those
charged by others for comparable services. The transfer agent's expenses
will be monitored for reasonableness by the Board of Directors.
GENERAL OPERATIONS
Except as indicated above, each Fund is responsible for the payment of
its expenses, including: (a) the fees payable to the Advisor,
Administrator, and the Distributor; (b) the fees and expenses of
Directors who are not affiliated with the Advisor, the Administrator, or
the Distributor; (c) the fees and certain expenses of the Fund's
Custodian and Transfer Agent; (d) the charges and expenses of the
Company's legal counsel and independent accountants; (e) brokers'
commissions and any issue or transfer taxes in connection with its
securities transactions; (f) all taxes and corporate fees payable to
governmental agencies; (g) the fees of any trade association of which
each Fund is a member; (h) the cost of stock certificates representing
shares of each Fund; (i) reimbursements of the organization expenses of
each Fund; (j) the fees and expenses involved in registering and
maintaining registration of the Company and the shares of each Fund with
the U.S. Securities and Exchange Commission, paying notice filing fees
to states in which Fund shares are sold, and the preparation and
printing of the Company's registration statements and prospectuses; for
such purposes; (k) allocable communication expenses with respect to
investor services and all expenses of shareholders and directors
meetings and of preparing, printing and mailing prospectuses and reports
to shareholders; and (l) litigation and indemnification expenses and
other extraordinary expenses not incurred in the ordinary course of each
Fund's business. Expenses which are identifiable to a specific Fund are
charged to the appropriate Fund and general corporate expenses are
allocated proportionately to each Fund based on relative net assets.
DIVIDENDS, DISTRIBUTIONS AND TAXES
On August 5, 1997, President Clinton signed into law the Taxpayer Relief
Act of 1997 (the "1997 Act"). This new law makes sweeping changes in
the Internal Revenue Code. Because many of these changes are complex
they are discussed in the Statement of Additional Information.
The Rightime Fund, The Rightime Blue Chip Fund, The Rightime MidCap
Fund, and The Rightime Social Awareness Fund will declare and pay annual
dividends to shareholders of substantially all of its net investment
income, if any, earned during the year from investments. The Rightime
Government Securities Fund will declare and pay monthly dividends to its
shareholders of substantially all of its net investment income, if any,
earned during the year from its investments. All Funds will distribute
net realized gains, if any, once each year.
Expenses of the Funds, including the fees of the Advisor, the
Administrator, and the Distributor, are accrued each day. Reinvestments
of dividends and distributions in additional shares of the Fund will be
made at the net asset value determined on the payable date, unless the
shareholder has elected to receive the dividends and/or distributions in
cash. An election may be changed at any time by notifying the Fund.
Each of the Funds is qualified as a "regulated investment company"
under the Internal Revenue Code of 1986 (the "Code") and intends to
continue such qualification in the future. Such qualification removes
each Fund from any liability for federal income taxes upon the portion
of its net investment income and net capital gains distributed to
shareholders and makes federal income tax upon such distributed income
and capital gains the sole responsibility of the shareholders. Continued
qualification requires each Fund to distribute to its shareholders each
year substantially all of its income and capital gains. The Code imposes
a nondeductible, 4% excise tax on regulated investment companies that do
not distribute to shareholders in each calendar year, an amount equal
to: (i) 98% of its calendar year net investment income; (ii) 98% of its
net capital gains for the one-year period ending October 31; and (iii)
100% of any undistributed net investment income or net capital gains
from the prior year. Each Fund intends to declare and pay dividends and
capital gain distributions in a manner to avoid imposition of the excise
tax. Each Fund also proposes to comply with other requirements, such as:
(a) appropriate diversification of its portfolio of investments; and (b)
realization of 90% of annual gross income from dividends, interest,
gains from sale of securities, or other "qualifying income."
The Company is a series corporation. Each series of the Company (each
Fund) is treated as a separate entity for federal tax purposes. Any net
capital gains recognized by a Fund will be distributed to its investors
without need to offset (for federal tax purposes) such gains against any
net capital losses of another series.
The sale of shares of a Fund is a taxable event and may result in a
capital gain or loss. A capital gain or loss may be realized from a
redemption or exchange of shares among the Funds. In calculating any
gain or loss on a share exchange, investors should recognize that they
must hold their shares within The Rightime Blue Chip Fund, The Rightime
MidCap Fund, The Rightime Social Awareness Fund, and The Rightime
Government Securities Fund for more than 90 days in order to take into
account the sales load incurred on such shares (to the extent the
otherwise applicable sales load on the shares received in the exchange
is reduced or waived). Any amount of sales load not so taken into
account is added to the tax basis of the shares received in the
exchange. Any loss incurred on the redemption or exchange of shares held
for six months or less will be treated as a long-term capital loss to
the extent of any long-term capital gains distributed to a shareholder
by a Fund on those shares. All or a portion of any loss realized by a
shareholder upon the redemption of Fund shares will be disallowed to the
extent such a shareholder purchases other shares in the Fund (through
reinvestment of dividends or otherwise) within 30 days before or after
the share redemption. Any loss disallowed under these rules will be
added to the tax basis in the new shares purchased by such shareholder.
Any dividend or distribution to a shareholder shortly after the purchase
of a Fund's shares will have the effect of reducing the net asset value
per share of such shares by the amount of the dividend or distribution.
While such payment (whether made in cash or reinvested in shares) is in
effect a return of capital, it may be subject to income taxes.
Regardless of the length of time Fund shares have been owned by
shareholders who are subject to federal income taxes, distributions from
long-term capital gains are taxable as such.
The dividends paid by The Rightime Fund, The Rightime Blue Chip Fund,
The Rightime MidCap Fund, and The Rightime Social Awareness Fund may
qualify, in part, for the 70% dividends received deduction. Under the
1997 Act, the amount that the Fund may designate as eligible for the
dividends-received deduction will be reduced or eliminated if the shares
on which the dividends were earned by the Fund were debt-financed or
held by the Fund for less than a 46 day period during a 90 day period
beginning 45 days before the ex-dividend date of the corporate stock.
Similarly, if your Fund shares are debt-financed or held by you for less
than this same 46 day period, then the dividends-received deduction may
also be reduced or eliminated. Even if designated as dividends eligible
for the dividends-received deduction, all dividends (including the
deducted portion) must be included in your alternative minimum taxable
income calculation. The dividends paid by The Rightime Government
Securities Fund will not qualify for such deduction. Each Fund will
provide an information return to shareholders describing the Federal
tax status of the dividends paid by the Fund during the preceding
calendar year within 60 days after the end of each year as required
by present tax law. Many states grant tax-free status to dividends
paid to a shareholder from interest earned on direct obligations of
the U.S. Government, subject in some states to minimum investment
requirements that must be met by the Fund. Investments in GNMA/FNMA
securities, bankers' acceptances, commercial paper and repurchase
agreements collateralized by U.S. Government securities do not
generally qualify for tax-free treatment. Shareholders should consult
their tax Advisors concerning the state and local taxation of such
dividends, and the federal, state and local taxation of capital gain
distributions. Dividends declared in October, November or December of
any year to investors of record on any date in such month will be
deemed to have been received by the investors and paid by the series on
the earlier of: (1) the date of payment; or (2) if paid after
December 31, on December 31, provided such dividends are paid before
February 1 of the following year.
In accordance with the Code, each Fund may be required
to withhold a portion of dividends or redemptions or capital gains paid
to a shareholder and remit such amount to the Internal Revenue Service,
if the shareholder fails to furnish the Fund with a correct taxpayer
identification number, if the shareholder fails to supply the Fund with
a taxpayer identification number altogether, if the shareholder fails to
make a required certification, or if the Internal Revenue Service
notifies the Fund to withhold a portion of such distributions from an
investor's account. Certain entities, such as certain types of trusts,
may be exempt from this withholding provided they file an appropriate
exemption certificate with the Fund.
DETERMINATION OF NET ASSET VALUE AND PUBLIC OFFERING PRICE
Orders for purchases are effected at the offering price next calculated
by each Fund after receipt of the order by the Fund's Transfer Agent.
The public offering price consists of the net asset value per share next
calculated plus any applicable sales load. The offering price and the
net asset value of a Fund share are determined as of the close of
regular trading on each day the New York Stock Exchange (the "NYSE") is
open. The net asset value is determined by dividing the value of each
Fund's securities, plus any cash and other assets, less liabilities, by
the number of shares outstanding. Expenses and fees of each Fund are
accrued daily and taken into account for the purpose of determining the
net asset value.
The Rightime Fund will value redeemable securities issued by open-end
investment companies using their respective net asset values determined
at the close of the NYSE. All Funds will value a portfolio security
listed on a securities exchange at the last sales price on the
security's principal exchange on that day. Listed securities not traded
on an exchange that day, and other securities which are traded in the
over-the-counter market will be valued at the last reported bid price in
the market on that day, if any. Stock options, stock index options or
options on stock index futures traded on national security exchanges are
valued at the close of option trading on such exchanges. Stock index
futures which are traded on commodities exchanges are valued at the last
transaction price as of the close of regular trading of the particular
exchange on each day that exchange is open. The value of assets held in
The Rightime Government Securities Fund may be determined on the basis
of market values or valuations furnished by a pricing service, as
described in the Statement of Additional Information. Securities for
which market quotations are not readily available and all other assets
will be valued at their respective fair market value as determined in
good faith by, or under procedures established by the Board of
Directors.
Money market securities with less than 60 days remaining to maturity
when acquired by a Fund will be valued on an amortized cost basis by the
Fund, excluding unrealized gains or losses thereon from the valuation.
This is accomplished by valuing the security at cost and then assuming a
constant amortization to maturity of any premium or discount. If the
Fund acquires a money market security with more than 60 days remaining
to maturity, it may be valued at current market value until the 60th day
prior to maturity, and will then be valued on an amortized cost basis
based upon the value on such a date.
HOW TO PURCHASE SHARES
Each Fund offers its shares for sale to the public through its
Distributor or through any dealer or financial institution ("dealers")
that has a dealers' agreement with the Distributor. The minimum initial
investment for each Fund is $1,000 and each subsequent investment must
be not less than $25. Each Fund may waive these minimums for qualified
tax-sheltered retirement plans. Orders for purchases are effected at the
offering price next calculated by each Fund after receipt of the order
by the Fund's Distributor. (See "Determination of Net Asset Value and
Public Offering Price.") Shares of The Rightime Fund are purchased at
the net asset value without any sales charge. Shares of The Rightime
Blue Chip Fund, The Rightime MidCap Fund, The Rightime Social Awareness
Fund, and The Rightime Government Securities Fund are purchased at the
offering price which reflects a maximum sales load of 4.75%. Lower sales
loads apply for larger purchases. See table below.
<TABLE>
<CAPTION>
Sales Load as % of
Offering Amount Dealer's
Amount of Purchase Price Invested Concession*
- ---------------------------- -------------- -------------- ----------------
<S> <C> <C> <C>
Less than $50,000 4.75% 4.99% 4.25%
$50,000 but under $100,000 3.75 3.90 3.35
$100,000 but under $500,000 2.75 2.83 2.45
$500,000 but under $1,000,000 1.75 1.80 1.55
$1,000,000 but under $2,000,000 0.75 0.76 0.65
</TABLE>
For amounts of $2 million or more there is no sales load.
* In some circumstances, the Distributor may allow a larger percentage
of the sales load to dealers. Such dealers may have additional
responsibilities under the federal securities laws.
- --------------------------------------------
Each Fund must be notified when a sale takes place that would qualify
for the reduced sales load on the basis of previous purchases and
current purchases. The reduced sales load will be granted upon
confirmation of the shareholder's holdings by the Fund.
Shareholders of The Rightime Blue Chip Fund, The Rightime MidCap Fund,
The Rightime Social Awareness Fund, and The Rightime Government
Securities Fund may reduce their sales load by signing a Letter of
Intent, that permits purchases over a 13-month period to obtain a
reduced sales load. They may also combine shares in their Rightime Blue
Chip Fund, Rightime MidCap Fund, Rightime Social Awareness Fund, and/or
Rightime Government Securities Fund accounts for Rights of Accumulation
to provide a reduced sales load on new purchases. Rights of Accumulation
are applicable to purchases made at one time by an individual; or an
individual, his or her spouse and their children under the age of 21; or
a trustee or other fiduciary of a single trust estate or a single
fiduciary account (including an employee benefit plan qualified under
Section 401 of the Internal Revenue Code.)
Shares may be purchased initially by completing the application
accompanying this Prospectus and mailing it, together with a check
payable to The Rightime Fund, Inc. to:
Rightime Fund Quick Mail The Rightime Family of Funds
P.O. Box 13813 OR 218 Glenside Avenue
Philadelphia, PA 19101-3813 Wyncote, PA 19095-1595
(Regular Mail) (Overnight Mail)
Subsequent investments to existing accounts may be made at any time
using the address above. Mail orders should include, when possible, the
"Invest By Mail" stub from your previous confirmation statement. It is
important that your account number be referenced with all subsequent
purchases or correspondence.
Shareholders who want to invest regularly may participate in the
Automatic Investing Plan. This plan allows you to buy shares ($25
minimum) through pre-authorized withdrawals from your bank account.
These investments are made on the 15th day of each month or the next
business day thereafter.
For information on purchasing shares by wire and the issuance of stock
certificates, please contact the Fund at (800) 866-9393.
The Company reserves the right in its sole discretion: (i) to suspend
the offering of its shares; (ii) to reject purchase orders when in the
best interest of the Fund; and, (iii) to reduce or waive the minimum for
initial and subsequent investments as set forth above.
The Company reserves the right to charge a $15 annual maintenance fee to
accounts which have no new purchase during a calendar year (excluding
reinvestment of dividends and capital gains), and which have balances
that remain below $1,000 during the last six months of such calendar
year. Prior to deducting the fee, the Fund will provide 90 days notice
to the shareholder, during which the shareholder may increase their
account balance to $1,000 to avoid any fee. The Fund will not charge a
fee if an account balance is worth less than $1,000 solely as a result
of a market decline or sales load or if the account is actively
participating in a systematic withdrawal plan.
Waiver of Sales Loads
The sales loads will not apply to purchases of The Rightime Blue Chip
Fund, The Rightime MidCap Fund, The Rightime Social Awareness Fund, and
The Rightime Government Securities Fund in the following circumstances
provided that the Funds are notified at the time of purchase:
(bullet) shares acquired through dividend or capital gain
reinvestment from any series of The Rightime Fund, Inc.;
(bullet) shares acquired by the officers, directors and employees of
Rightime Econometrics, Inc., Lincoln Investment
Planning, Inc., and The Rightime Fund, Inc.;
(bullet) shares acquired by any pension, profit-sharing or qualified
retirement plan of Rightime Econometrics, Inc. and
Lincoln Investment Planning, Inc.;
(bullet) shares acquired by registered representatives of dealers
who have entered into dealers' agreements with the
Distributor;
(bullet) shares acquired by certain family members of any such
individual and their spouses identified above and cer-
tain trusts, pension, profit-sharing or qualified
retirement plan for the sole benefit of such persons;
(bullet) shares acquired and paid for with the proceeds from a
Teacher's Insurance Annuity Association (TIAA) or
College Retirement Equity Fund (CREF) account, and ongoing
retirement plan investments after a TIAA-CREF
transfer is received;
(bullet) shares acquired and paid for with the proceeds from
accounts of employees of organizations who have or had a
contract or agreement with TIAA or CREF, and ongoing
retirement plan investments after the transfer is received;
(bullet) shares acquired and paid for with the proceeds of a
redemption of an account in an unaffiliated mutual fund
when the assets were managed by an outside investment
advisor or market timer for a minimum of one year;
and
(bullet) shares acquired and paid for with the proceeds of a
redemption of an account in an unaffiliated mutual fund or
insurance company which had previously incurred an initial
sales charge or contingent deferred sales charge
provided the assets maintain dealer or registered
representative continuity. To qualify for this waiver the
Fund may require evidence of the previously incurred
charges.
HOW TO REDEEM SHARES
Shareholders may redeem their shares of the Funds without charge on any
day that the Funds calculate their net asset values. (See "Determination
of Net Asset Value and Public Offering Price.") Redemptions will be
effected at the net asset value per share next determined after the
receipt of a redemption request meeting the requirements described
below. The Funds normally send redemption proceeds on the next business
day, but in any event redemption proceeds are sent within seven days of
receipt of a redemption request in proper form or within such earlier
period as required under applicable law. Any redemption proceeds may be
reinvested in the Fund at net asset value without any sales charges
within 90 days of the redemption date.
A written redemption request to the Fund must: (i) identify the
shareholder's Fund and account number; (ii) state the dollar amount or
number of shares to be redeemed; and (iii) include the signatures of all
registered owners exactly as the account is registered. If the shares to
be redeemed were issued in certificate form, the certificates must be
endorsed for transfer (or be accompanied by an endorsed stock power) and
must be submitted to the Fund together with the redemption request. A
redemption request must be accompanied by a signature guarantee for the
following:
(bullet) amounts in excess of $25,000;
(bullet) if the proceeds are to be made payable to other than the
registered owner(s); or
(bullet) if the proceeds are to be sent elsewhere than the address
of record.
A signature guarantee verifies the authenticity of the shareholder's
signature(s) and may be obtained from an acceptable financial
institution such as a bank, savings and loan association, trust company,
credit union, broker or dealer, registered securities association or
clearing agency. A notarized signature is not sufficient.
The Fund may require additional supporting documents for redemptions
made by corporations, executors, administrators, trustees and guardians.
A redemption request will not be deemed to be properly received until
the Fund receives all required documents in proper form.
Delivery of the proceeds of a redemption of shares purchased and paid
for by check or shares purchased by the automatic investing plan shortly
before the receipt of the redemption request may be delayed until the
Fund determines that its Custodian Bank has completed collection of the
funds. This may take up to 15 days. The Board of Directors may suspend
the right of redemption or postpone the date of payment for more than
seven days during any period when: (i) trading on the New York Stock
Exchange is restricted as determined by the Securities and Exchange
Commission (the "Commission") or such Exchange is closed for other than
weekends and holidays; (ii) the Commission has by order permitted such
suspension; or (iii) an emergency, as defined by rules of the
Commission, exists during which time the sale of portfolio securities or
valuation of securities held by the Fund are not reasonably practicable.
Shareholders and their dealer representatives are permitted to redeem
shares by telephone. Shareholders who establish new accounts subsequent
to the date of this prospectus by completing and returning a signed
application will automatically receive telephone redemption privileges
for themselves and their dealer representatives listed on the Fund's
records, unless the shareholder waives telephone redemption privileges
for their dealer representative or entirely by checking the appropriate
box on the application. Existing shareholders will have their accounts
converted to this telephone redemption privilege on the date of this
prospectus and must notify the Fund in writing or by telephone if they
wish to waive any portion of this privilege.
To redeem shares of your account by telephone, please call the Fund at
(800) 866-9393. Telephone redemptions:
(bullet) are not available on certain retirement accounts, such as
403(b)(7) accounts;
(bullet) are not available within 15 days of changing the address of
record on an account;
(bullet) may not exceed $25,000 in any 15-day period;
(bullet) must be payable to the registered owner(s) and mailed to
the address of record or wired to the bank account
designated on record at the Fund;
(bullet) may not be available on shares purchased by check or
automatic investing plan within 15 days of the telephone
redemption request; and
(bullet) are not available on outstanding shares issued in
certificate form.
The Funds' Transfer Agent will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine. These
procedures include requiring the shareholder and/or their dealer
representative to provide personal or other identifying information.
These calls will also be recorded. For the protection of the shareholder
and the Fund, a transaction may be delayed or not implemented if the
Funds' Transfer Agent is not reasonably satisfied that the telephone
instructions are genuine. Neither a Fund nor its Transfer Agent will be
responsible for any loss, liability, cost or expense for following
instructions received by telephone that it reasonably believes to be
genuine. The Fund and the Transfer Agent may cancel the telephone
redemption privilege at any time without prior notice.
If the Board of Directors determines that it would be detrimental to the
best interest of the remaining shareholders of a Fund to make payment in
cash, the Fund may pay the redemption price in whole or in part by
distribution in kind of securities from the portfolio of the Fund. Such
securities will be valued on the basis of the procedures used to
determine the net asset value at the time of the redemption. If shares
are redeemed in kind, the redeeming shareholder may incur brokerage
costs in converting the assets into cash.
Each Fund reserves the right to redeem a shareholder's account where the
account is worth less than the minimum initial investment required when
the account is established, presently $1,000. (Any redemption of shares
from an inactive account established with a minimum investment may
reduce the account below the minimum initial investment, and could
subject the account to such redemption.) The Fund will advise the
shareholder of such intention in writing at least 90 days prior to
effecting such redemption, during which time the shareholder may
purchase additional shares in any amount necessary to bring the account
back to $1,000. The Fund will not redeem a shareholder's account that is
worth less than $1,000 solely as a result of a market decline, or if the
account is actively participating in a systematic withdrawal plan. The
Fund will not redeem a shareholder's account that has been charged an
annual maintenance fee within the current calendar year. (See "How To
Purchase Shares.")
Shareholders of a Fund worth at least $5,000 can open a Systematic
Withdrawal Plan. They can arrange to withdraw a specific dollar amount
(at least $25) on a monthly, quarterly, semiannual, or annual basis.
Interested shareholders may contact the Fund for instructions on how to
establish a systematic withdrawal plan.
HOW TO EXCHANGE SHARES
Shareholders of a Fund that has a sales load are permitted to exchange
all or part of their shares into any Fund in the Rightime Family of
Funds at net asset value, in states where shares of the Fund being
acquired can be sold. Shareholders of a Fund that does not have a sales
load, who previously incurred a sales load in connection with the
purchase of shares, which were subsequently exchanged into the Fund with
no sales load, may exchange a dollar amount equal to the current value
of such shares into another Fund at net asset value. No fees are charged
for the exchange privilege. Exchanges will be effected at the net asset
price or public offering price next determined after the receipt of the
exchange request. Exchange instructions may be in writing or by
telephone. Written exchange requests should be mailed to the Fund's
address listed in "How to Purchase Shares."
Telephone exchange requests may be made by calling the Fund at (800)
866-9393. Shareholders and their dealer representatives automatically
receive the telephone exchange privilege, unless the shareholder waives
the privilege for their dealer representative or entirely by checking
the appropriate box on the application or by calling the Fund at the
above telephone number. Telephone exchanges will be processed for
authorized accounts as long as proper identification is given by the
shareholder or dealer representative at the time of the exchange. Shares
issued in certificate form may not be exchanged by telephone.
Shareholders of a Fund may exchange their shares into and from a
designated money market portfolio organized and managed independently of
the Funds.
An exchange, for tax purposes, constitutes the sale of one fund and the
purchase of another. The sale may involve either a capital gain or loss
to the shareholder for federal income tax purposes. See "Dividends,
Distributions and Taxes."
The exchange privilege is subject to termination and its terms are
subject to change without notice to shareholders.
SPECIAL PLANS
Each Fund also offers its shares for use in certain Tax-Sheltered Plans
(such as IRA and 403(b)(7) plans) and Withdrawal Plans. Information on
these Plans is available from the Fund's Distributor or by reviewing the
Statement of Additional Information.
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THE RIGHTIME FUND, INC.
ADMINISTRATOR
Rightime Administrators, Inc.
218 Glenside Avenue
Wyncote, PA 19095-1595
INVESTMENT ADVISOR
Rightime Econometrics, Inc.
1095 Rydal Road
Rydal, PA 19046-1711
DISTRIBUTOR
Lincoln Investment Planning, Inc.
218 Glenside Avenue
Wyncote, PA 19095-1595
CUSTODIAN
CoreStates Bank, NA
Broad & Chestnut Sts.
Philadelphia, PA 19101-7618
TRANSFER AGENT
Lincoln Investment Planning, Inc.
218 Glenside Avenue
Wyncote, PA 19095-1595
Mailing Address
Rightime Fund Quick Mail
P.O. Box 13813
Philadelphia, PA 19101-3813
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
AUDITORS
Tait, Weller & Baker
Eight Penn Center, Suite 800
Philadelphia, PA 19103-2108
Table of Contents
Expense Table 3
Financial Highlights 4
Performance 6
Investment Objectives
and Policies 6
Other Investment Policies 13
Investment Restrictions 17
Capital Stock 18
Board of Directors 18
Investment Advisor 18
Administrator 19
Distribution of Shares 19
Custodian 20
Transfer and Dividend Disbursing
Agent 20
General Operations 21
Dividends, Distributions and Taxes 21
Determination of Net Asset Value
and Public Offering Price 22
How to Purchase Shares 23
How to Redeem Shares 25
How to Exchange Shares 26
Special Plans 27
THE RIGHTIME FUND, INC.
THE RIGHTIME GOVERNMENT SECURITIES FUND
SPECIAL MEETING OF SHAREHOLDERS - JUNE 24, 1998
The undersigned hereby revokes all previous proxies for shares and
appoints David J. Rights and Edward S. Forst, Sr., and each of them,
proxies of the undersigned, with full power of substitution, to vote
all shares of The Rightime Government Securities Fund which the
undersigned is entitled to vote at the Fund's Special Meeting of
Shareholders to be held at the offices of The Rightime Fund, Inc.,
218 Glenside Avenue, Wyncote, Pennsylvania 19095-1594 at 10:00 a.m.
local time, on the 24th day of June, 1998, including any
adjournments thereof, upon such business as may legally be brought
before the Meeting.
PLEASE SIGN AND PROMPTLY RETURN IN THE ACCOMPANYING ENVELOPE. NO
POSTAGE REQUIRED IF MAILED IN THE U.S.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IT
WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY
SHALL BE VOTED IN FAVOR OF PROPOSAL NO. 1 AND WITHIN THE DISCRETION
OF THE PROXYHOLDERS AS TO ANY OTHER ITEM WHICH MAY PROPERLY COME
BEFORE THE MEETING.
FOR AGAINST ABSTAIN
--- ------- -------
No. 1. To approve or disapprove a Plan
of Reorganization providing for the
transfer of substantially all of the
assets of the Government Fund to, and
the assumption of the liabilities of
the Government Fund by, The Rightime
Blue Chip Fund series (the "Blue Chip
Fund") of the Company, in exchange for
shares of the Blue Chip Fund, to be
distributed to the shareholders of the
Government Fund.
* * * * *
In their discretion, the Proxyholders
are authorized to vote upon such other
matters as may legally come before the
Meeting or any adjournment thereof.
Note: Please sign exactly Dated , 1998
as your name appears on ---------------
the proxy. If signing for
Estates, Trusts or Corporations,
Title or Capacity should be -------------------------------
stated. If shares are held Signature
jointly, each holder must sign.
-------------------------------
Signature
IMPORTANT
---------
PLEASE SEND IN YOUR PROXY . . . TODAY!
You are urged to date and sign the
attached proxy and return it promptly.
This will help save the expense of
follow-up letters to stockholders who
have not responded.
STATEMENT OF ADDITIONAL INFORMATION
FOR
THE RIGHTIME FUND, INC.
Relating to the Acquisition of
The Rightime Government Securities Fund by
The Rightime Blue Chip Fund
Dated May 18, 1998
This Statement of Additional Information relates specifically to
the proposed acquisition of substantially all of the assets of The
Rightime Government Securities Fund series of The Rightime Fund,
Inc. (the "Company") by The Rightime Blue Chip Fund (the "Blue Chip
Fund") series of the Company.
This Statement of Additional Information consists of this Cover
Page and the following document, which is attached and incorporated by
reference:
Exhibit: A Statement of Additional Information dated
February 1, 1998 relating to the Prospectus of The Rightime
Fund, Inc., which Prospectus is included in the Combined
Proxy Statement/Prospectus dated May 18, 1998.
This Statement of Additional Information is not a Prospectus; a
Combined Proxy Statement/Prospectus dated May 18, 1998 relating to
the above-referenced transaction may be obtained from The Rightime
Fund, Inc., 218 Glenside Avenue, Wyncote, Pennsylvania 19095-1594,
(800) 866-9393. This document should be read in conjunction with
such Combined Proxy Statement/Prospectus.
Exhibit
*****************************************************
STATEMENT OF ADDITIONAL INFORMATION
THE RIGHTIME FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY 1, 1998
218 GLENSIDE AVENUE
WYNCOTE, PA 19095-1594
The Fund may be telephoned at (800) 866-9393.
The Rightime Fund, Inc. is an open-end diversified investment
company which offers multiple series of shares (each, a "Fund"). This
Statement of Additional Information relates to: The Rightime Fund, The
Rightime Blue Chip Fund, The Rightime MidCap Fund, The Rightime Social
Awareness Fund, and The Rightime Government Securities Fund. The shares
of each Fund may be purchased or redeemed at any time. Purchases will
be effected at the public offering price and redemptions will be
effected at net asset value next computed after the receipt of the
investor's request. A copy of the Fund's Prospectus is available
without charge upon request to the Fund.
The Rightime Fund
The Rightime Blue Chip Fund
The Rightime MidCap Fund
The objective of each of the above Funds is to achieve for its
investors a high total return consistent with reasonable risk. Each
Fund will use a variety of investment strategies in an effort to balance
portfolio risks and to hedge market risks. There is no assurance that
the objective of a Fund will be achieved.
The Rightime Social Awareness Fund
The objective of the above Fund is to achieve for its
investors growth of capital and its secondary objective is current
income, consistent with reasonable risk. The Fund uses a variety of
investment strategies in an effort to balance portfolio risks and to
hedge market risks. There is no assurance that the objective of the
Fund will be achieved.
The Rightime Government Securities Fund
The objective of the above Fund is to achieve for its
investors high current income consistent with safety and liquidity of
principal. The Fund seeks to achieve this objective by investing in
securities that are issued or guaranteed as to principal and interest by
the U.S. Government, its agencies, authorities or instrumentalities or
secured by such securities, and by investing in and by earning premiums
from transactions involving related options, futures and options on
futures. There is no assurance the objective will be achieved.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD
BE READ IN CONNECTION WITH THE FUND'S PROSPECTUS DATED FEBRUARY 1, 1998.
RETAIN THIS STATEMENT OF ADDITIONAL INFORMATION FOR FUTURE REFERENCE.
TABLE OF CONTENTS
Page
Investment Objectives and Policies 1
The Rightime Fund 1
The Rightime Blue Chip Fund and
The Rightime MidCap Fund 4
The Rightime Social Awareness Fund 6
Options and Futures 8
Money Market Securities 11
The Rightime Government Securities Fund 12
Portfolio Turnover 21
Investment Restrictions 21
Investment Advisor 24
Distributor 25
Distribution Plan 26
Allocation of Portfolio Brokerage 28
Transfer Agent 28
Purchase of Shares 29
Dividends, Distribution and Taxes 32
Officers and Directors of the Fund 36
General Information 38
Performance 38
Financial Statements
INVESTMENT OBJECTIVES AND POLICIES
THE RIGHTIME FUND
The investment objective of the Fund is to achieve a high total
return consistent with reasonable risk. It seeks to achieve this
objective by concentrating in shares of investment companies and by
making other investments selected in accordance with the Fund's
investment restrictions and policies. The Fund will vary its investment
strategy as described in the Fund's Prospectus to seek to achieve its
objective. This Statement of Additional Information contains further
information concerning the techniques and operations of the Fund, the
securities in which it will invest, and the policies it will follow.
High Total Return
The Fund seeks to achieve a high total return for its shareholders.
It seeks to achieve this goal by a combination of capital appreciation
on investments (which may be emphasized during periods when a generally
rising trend in securities markets is anticipated by the Fund's
investment advisor, Rightime Econometrics, Inc. (the "Advisor") and high
income (which may be emphasized during periods when the Advisor
anticipates that income producing securities will provide performance
superior to the appreciation the Fund might otherwise achieve). The
Fund also seeks to achieve a high total return by avoiding the full
impact of periods of market decline by either shifting its investments
or by hedging its investments. The Fund does not seek the "maximum
total return" sought by some funds, because the Fund attempts to limit
to a reasonable level the risk which it will bear in the selection of
its investments.
Aggressive Portfolio Strategy
During periods when the Advisor anticipates a rising trend in the
securities markets, it will seek to achieve the Fund's investment
objective by concentrating in a portfolio of shares of investment
companies which the Advisor believes will benefit from such a trend.
The Advisor will use a risk adjusted analysis (which considers the
relative volatility of its various investments) to evaluate the
investment companies' performance under various market conditions and to
consider the potential reward and potential risk. The Advisor will not
select such investment companies based solely upon their previous
performance. It is expected that such investment companies will
generally invest more than 50% of their assets in common and/or
preferred stocks. In order to make allowance for cash flow needs of the
Fund or when the Fund is otherwise pursuing appreciation in its
portfolio the Fund may also invest up to 75% of its asset value in other
investment vehicles such as common or preferred stocks of companies
which are not investment companies, investment companies which are money
market funds, cash equivalents, may make use of various hedging
techniques, or may hold its assets as cash. Though not required by its
policies to do so, the Fund may make such investments, if necessary, to
qualify as a "regulated investment company" under the Internal Revenue
Code (the "IRC"). (See "Dividends, Distributions and Taxes" in the
Prospectus for a discussion of qualification under Subchapter M of the
IRC.)
Conservative Portfolio Strategy
When the Advisor anticipates a generally declining trend in
securities markets, it may seek to achieve the Fund's investment
objective by investing in the shares of money market funds and other
types of investment companies, and investing up to 75% in cash
equivalents and by retaining cash. The Fund may also seek to achieve a
high total return during such a period without disturbing or
restructuring the portfolio established by the Fund during an aggressive
period by using cash, cash equivalents, proceeds of maturing securities,
new assets, etc. to purchase or sell other investment vehicles such as
stocks, stock options, stock index options, stock index futures or
options on such futures. (The Fund may also use such techniques to
accommodate cash needs or to avoid impairing the Fund's status as a
regulated investment company under the IRC.)
To this end, the Fund may, as to 75% or less of its asset value buy
or sell stock, stock options, stock index options, stock index futures
and options thereon to seek to counter-balance portfolio volatility
and/or market risk consistent with the intention of the investment
objective to limit investments to those which involve a reasonable risk.
Stock options, stock index futures and options thereon are utilized to
"hedge" risks arising from the Fund's investments originally selected
under its "Aggressive Portfolio Strategy," including those risks arising
while the Fund is selecting suitable investments for its assets, and are
not entered into for speculative purposes. Unlike funds which seek
"maximum" total return without limitation on the degree of risk the fund
will bear, when such option and futures techniques are used to reduce
the risk of loss (or secure investment gains) for this Fund, their use
will generally reduce or impose a limit on the amount of gains the Fund
can achieve from the investments which are so "hedged." (See "Hedging"
in the Prospectus and "Options and Futures" below.)
Other Factors
The Fund seeks to provide its shareholders with a high total return
consistent with reasonable risk. This involves two key concepts:
First, the Advisor will attempt to minimize market risk by
monitoring and responding to factors (such as various monetary, or
market momentum indicators) which the Advisor expects will assist it in
determining an investment posture including whether to restructure the
portfolio for the Fund. This involves the use of "market timing"
concepts and procedures which have been developed and applied by the
Advisor. Market timing involves the use of analytical techniques which
seek to anticipate major market trends which in the opinion of the
Advisor affect securities markets over periods of time, so an investor
(such as the Fund) may restructure its portfolio of investments to
increase gains or income, or avoid losses. The Fund's Advisor will
apply such analytical techniques to the Fund's investments, including
the investment companies in which the Fund invests. It should be noted
that some members of the investment community believe that market timing
cannot be achieved successfully on a consistent basis and there can be
no assurance the Advisor will achieve such a level of consistency. If
the Advisor incorrectly judges turns in the market, the Fund may lose
opportunities for gains or incur losses.
Second, when appropriate to achieve the objective and strategies
described above, the Fund intends to use investment techniques under
which it would buy or sell portfolio securities such as stocks, stock
options, stock index options, stock index futures or options on such
futures to avoid untimely portfolio transactions, costly restructuring
of the portfolio, or adverse market effects while the Fund is investing
its assets. These techniques and securities are generally considered to
be speculative and to involve higher risks or costs to an investor. The
Fund will not, however, use stock index futures and options thereon for
speculative purposes. These techniques will be used by the Fund when
appropriate to "hedge" the usual investment risks attendant upon its
investments, and the Fund believes it will therefore avoid the risks of
such speculative use of these techniques.
The Fund also seeks to protect the value of an investment in the
Fund by temporarily foregoing high total return for protection and
stability of its assets when volatile or abnormal market conditions are
anticipated (as indicated by rapidly accelerating inflation or interest
rates, sharply declining stock markets, increasing deterioration in the
banking situation and/or increasing threats to national or world
security). This will involve the selection of high proportions, up to
100%, of temporary defensive investments such as U.S. Government
securities or other money market securities (see "Money Market
Securities"), the use of very short portfolio maturities of 60 days or
less, other investments which protect the value of the Fund, and similar
techniques such as holding cash.
Investment Company Securities
The other investment companies in which the Fund invests will be
diversified investment companies managed by a number of investment
advisors and portfolio managers. This will offer the Fund an
opportunity to benefit from a variety of diversified portfolios.
Each such company will be a registered investment company, and will
operate subject to a variety of regulatory constraints. While such
regulation does not guarantee the investment success of an investment
company, or assure that it will not suffer investment losses, the
Advisor believes that such investment companies provide a sound
foundation upon which to base an investment portfolio. By investing in
a broad spectrum of such companies the Fund hopes to benefit from the
collective research and analysis of many experienced investment
personnel.
There are many types of investment companies. All maintain
portfolios which are generally liquid, but can be composed of different
kinds of securities and involve different objectives. Such companies
may seek only income, only appreciation, or various combinations of
these. They may invest in money market securities, short or long term
bonds, dividend producing stocks, tax-exempt municipal securities, or a
variety of other instruments. They may seek speculative or conservative
investments ranging from securities issued by new companies to
securities issued by "blue-chip" companies. An investment company which
has a policy of holding 80% of its assets in debt securities maturing in
thirteen months or less, or which holds itself out as a "money market
fund" will be treated as a money market fund by the Fund.
The Advisor be responsible for monitoring and evaluating these
kinds of factors to select investment company fund securities for the
Fund's portfolio in accordance with the policies and techniques
described in the Prospectus.
THE RIGHTIME BLUE CHIP FUND AND THE RIGHTIME MIDCAP FUND
The investment objective of each Fund is to achieve a high total
return consistent with reasonable risk. The Rightime Blue Chip Fund
seeks to achieve this objective by investing in shares of blue chip
securities ("Blue Chips") and by making other investments selected in
accordance with the Fund's investment restrictions and policies. The
Rightime MidCap Fund seeks to achieve this objective by investing
primarily in securities of companies with medium-size market
capitalizations ("MidCaps") and by making other investments selected in
accordance with the Fund's investment restrictions and policies. Each
Fund will vary its investment strategy as described in the Fund's
Prospectus to seek to achieve its objective. This Statement of
Additional Information contains further information concerning the
techniques and operations of each Fund, the securities in which it will
invest, and the policies it will follow.
High Total Return
Each Fund seeks to achieve a high total return for its
shareholders. Each Fund seeks to achieve this goal by a combination of
capital appreciation on investments (which may be emphasized during
periods when a generally rising trend in securities markets is
anticipated by the Advisor Fund's) and high income (which may be
emphasized during periods when the Advisor anticipates that income
producing securities will provide performance superior to the
appreciation the Fund might otherwise achieve). Each Fund also seeks to
achieve a high total return by avoiding the full impact of periods of
market decline by either shifting its investments or by hedging its
investments. The Funds do not seek the "maximum total return" sought by
some funds, because each Fund attempts to limit to a reasonable level
the risk which it will bear in the selection of its investments.
Aggressive Portfolio Strategy
During periods when the Advisor anticipates a rising trend in the
securities markets, it will seek to achieve the Fund's investment
objective by investing in a portfolio of Blue Chips for The Rightime
Blue Chip Fund and MidCaps for The Rightime MidCap Fund, which the
advisor believes will benefit from such a trend. In order to make
allowance for cash flow needs of a Fund or when a Fund is otherwise
pursuing appreciation in its portfolio, the respective Fund may also
invest up to 35% of its asset value in other investment vehicles which
are not classified as such. Though not required by its policies to do
so, the Fund may make such investments, if necessary, to qualify as a
"regulated investment company" under the Internal Revenue Code (the
"IRC"). (See "Dividends, Distributions and Taxes" in the Prospectus for
a discussion of qualification under Subchapter M of the IRC.)
Conservative Portfolio Strategy
When the Advisor anticipates a generally declining trend in
securities markets, it may seek to achieve the respective Fund's
investment objective by investing up to 35% in securities other than
Blue Chips or MidCaps. Each Fund may also seek to achieve a high total
return during such a period without disturbing or restructuring the
portfolio established by the Fund during an aggressive period by using
cash, cash equivalents, proceeds of maturing securities, new assets,
etc. to purchase or sell other investment vehicles such as bonds and
other debt obligations, stock options, stock index options, stock index
futures or options on such futures. (Each Fund may also use such
techniques to accommodate cash needs or to avoid impairing the Fund's
status as a regulated investment company under the IRC.)
To this end, each Fund may, as to 35% or less of its asset value
buy or sell bonds and other debt obligations, stock options, stock index
options, stock index futures and options thereon to seek to counter-
balance portfolio volatility and/or market risk consistent with the
intention of the investment objective to limit investments to those
which involve a reasonable risk. Stock options, stock index futures and
options thereon are utilized to "hedge" risks arising from a Fund's
investments originally selected under its "Aggressive Portfolio
Strategy", including those risks arising while the Fund is selecting
suitable investments for its assets, and are not entered into for
speculative purposes. Unlike funds which seek "maximum" total return
without limitation on the degree of risk the fund will bear, when such
option and futures techniques are used to reduce the risk of loss (or
secure investment gains) for a Fund, their use will generally reduce or
impose a limit on the amount of gains a Fund can achieve from the
investments which are so "hedged." (See "Hedging" in the Prospectus and
"Options and Futures" below.)
Other Factors
Each Fund seeks to provide its shareholders with a high total
return consistent with reasonable risk. This involves two key concepts:
First, the Advisor will attempt to minimize market risk by
monitoring and responding to factors (such as various monetary, or
market momentum indicators) which the Advisor expects will assist it in
determining an investment posture including whether to restructure the
portfolio for each Fund. This involves the use of "market timing"
concepts and procedures which have been developed and applied by the
Advisor. Market timing involves the use of analytical techniques which
seek to anticipate major market trends which in the opinion of the
investment advisor affect securities markets over periods of time, so an
investor (such as the Fund) may restructure its portfolio of investments
to increase gains or income, or avoid losses. The Advisor will apply
such analytical techniques to each Fund's investments, including the
Blue Chips in which The Rightime Blue Chip Fund invests and the MidCaps
in which The Rightime MidCap Fund invests. It should be noted that some
members of the investment community believe that market timing cannot be
achieved successfully on a consistent basis and there can be no
assurance the Advisor will achieve such a level of consistency. If the
Advisor incorrectly judges turns in the market, a Fund may lose
opportunities for gains or incur losses.
Second, when appropriate to achieve the objective and strategies
described above, each Fund intends to use investment techniques under
which it would buy or sell portfolio securities such as stock options,
stock index options, stock index futures or options on such futures to
avoid untimely portfolio transactions, costly restructuring of the
portfolio, or adverse market effects while the Fund is investing its
assets. These techniques and securities are generally considered to be
speculative and to involve higher risks or costs to an investor. The
Funds will not, however, use stock index futures and options thereon for
speculative purposes. These techniques will be used by each Fund when
appropriate to "hedge" the usual investment risks attendant upon its
investments, and the Fund believes it will therefore avoid the risks of
such speculative use of these techniques.
Each Fund also seeks to protect the value of an investment in the
Fund by temporarily foregoing high total return for protection and
stability of its assets when volatile or abnormal market conditions are
anticipated (as indicated by rapidly accelerating inflation or interest
rates, sharply declining stock markets, increasing deterioration in the
banking situation and/or increasing threats to national or world
security). This will involve the selection of high proportions, up to
100%, of temporary defensive investments such as U.S. Government
securities or other money market securities (see "Money Market
Securities"), the use of very short portfolio maturities of 60 days or
less, other investments which protect the value of the Fund, and similar
techniques such as holding cash.
THE RIGHTIME SOCIAL AWARENESS FUND
The investment objective of the Fund is to achieve for its
investors growth of capital and its secondary objective is current
income, consistent with reasonable risk. The Fund seeks to achieve this
objective by investing in securities of well known and established
companies, as well as smaller, less well known companies, with prospects
for above average capital growth and by making other investments
selected in accordance with the Fund's investment restrictions and
policies. As described in the Prospectus, the Fund also imposes certain
social criteria prior to selecting investments for the Fund. The Fund
will vary its investment strategy as described in the Fund's Prospectus
to seek to achieve its objective. This Statement of Additional
Information contains further information concerning the techniques and
operations of the Fund, the securities in which it will invest, and the
policies it will follow.
Growth of Capital and Income
The Fund seeks to achieve primarily growth of capital and
secondarily current income for its shareholders. The Fund seeks to
achieve this goal by a combination of capital appreciation on
investments (which may be emphasized during periods when a generally
rising trend in securities markets is anticipated by the Advisor) and
high income (which may be emphasized during periods when the investment
advisor anticipates that income producing securities will provide
performance superior to the appreciation the Fund might otherwise
achieve, consistent with maintaining the Fund's objective). The Fund
also seeks to achieve a return on its investments by avoiding the full
impact of periods of market decline by either shifting its investments
or by hedging its investments. The Fund attempts to limit to a
reasonable level the risk which it will bear in the selection of its
investments.
Aggressive Portfolio Strategy
During periods when the Advisor anticipates a rising trend in the
securities markets, it will seek to achieve the Fund's investment
objective by investing in a portfolio of securities, primarily common
stocks, which the advisor believes will benefit from such a trend. In
order to make allowance for cash flow needs of the Fund or when the Fund
is otherwise pursuing appreciation in its portfolio, the Fund may also
invest its assets in other investment vehicles. Though not required by
its policies to do so, the Fund may make such investments, if necessary,
to qualify as a "regulated investment company" under the Internal
Revenue Code (the "IRC"). (See "Dividends, Distributions and Taxes" in
the Prospectus for a discussion of qualification under Subchapter M of
the IRC.)
Conservative Portfolio Strategy
When the Advisor anticipates a generally declining trend in
securities markets, it may seek to achieve the Fund's investment
objective by investing in securities other than common stocks,
consistent with maintaining the Fund's objective. The Fund may also
seek to achieve its objective during such a period without disturbing or
restructuring the portfolio established by the Fund during an aggressive
period by using cash, cash equivalents, proceeds of maturing securities,
new assets, etc. to purchase or sell other investment vehicles such as
bonds and other debt obligations, stock options, stock index options,
stock index futures or options on such futures. (The Fund may also use
such techniques to accommodate cash needs or to avoid impairing the
Fund's status as a regulated investment company under the IRC.)
To this end, the Fund may buy or sell bonds and other debt
obligations, stock options, stock index options, stock index futures and
options thereon to seek to counter-balance portfolio volatility and/or
market risk consistent with the intention of the investment objective to
limit investments to those which involve a reasonable risk. Stock
options, stock index futures and options thereon are utilized to "hedge"
risks arising from the Fund's investments originally selected under its
"Aggressive Portfolio Strategy," including those risks arising while the
Fund is selecting suitable investments for its assets, and are not
entered into for speculative purposes. When such option and futures
techniques are used to reduce the risk of loss (or secure investment
gains) for the Fund, their use will generally reduce or impose a limit
on the amount of gains the Fund can achieve from the investments which
are so "hedged." (See "Hedging" in the Prospectus and "Options and
Futures" below.)
Other Factors
The Fund seeks to provide its shareholders with growth of capital
and with current income as a secondary objective, consistent with
reasonable risk. This involves two key concepts:
First, the Advisor will attempt to minimize market risk by
monitoring and responding to factors (such as various monetary, or
market momentum indicators) which the Advisor expects will assist it in
determining an investment posture including whether to restructure the
portfolio for a Fund. This involves the use of "market timing" concepts
and procedures which have been developed and applied by the Fund's
Advisor. Market timing involves the use of analytical techniques which
seek to anticipate major market trends which in the opinion of the
Advisor affect securities markets over periods of time, so an investor
(such as the Fund) may restructure its portfolio of investments to
increase gains or income, or avoid losses. The Advisor will apply such
analytical techniques to the Fund's investments. It should be noted
that some members of the investment community believe that market timing
cannot be achieved successfully on a consistent basis and there can be
no assurance the Advisor will achieve such a level of consistency. If
the Advisor incorrectly judges turns in the market, the Fund may lose
opportunities for gains or incur losses.
Second, when appropriate to achieve the objective and strategies
described above, the Fund intends to use investment techniques under
which it would buy or sell portfolio securities such as stock options,
stock index options, stock index futures or options on such futures to
avoid untimely portfolio transactions, costly restructuring of the
portfolio, or adverse market effects while the Fund is investing its
assets. These techniques and securities are generally considered to be
speculative and to involve higher risks or costs to an investor. The
Fund will not, however, use stock index futures and options thereon for
speculative purposes. These techniques will be used by the Fund when
appropriate to "hedge" the usual investment risks attendant upon its
investments, and the Fund believes it will therefore avoid the risks of
such speculative use of these techniques.
The Fund also seeks to protect the value of an investment in the
Fund by temporarily foregoing growth of capital for protection and
stability of its assets when volatile or abnormal market conditions are
anticipated (as indicated by rapidly accelerating inflation or interest
rates, sharply declining stock markets, increasing deterioration in the
banking situation and/or increasing threats to national or world
security). This will involve the selection of high proportions, up to
100%, of temporary defensive investments such as U.S. Government
securities or other money market securities (see "Money Market
Securities"), the use of very short portfolio maturities of 60 days or
less, other investments which protect the value of the Fund, and similar
techniques such as holding cash.
OPTIONS AND FUTURES
The following descriptions of stock options, stock index options,
stock index futures and options on such futures are summaries of the
vehicles The Rightime Fund, The Rightime Blue Chip Fund, The Rightime
MidCap Fund and The Rightime Social Awareness Fund may use to "hedge"
their respective investments, and illustrate techniques each Fund can
select to achieve such hedging.
Option Characteristics and Transactions: The Fund intends to
purchase and/or write put and call options that are traded on United
States securities exchanges and over-the-counter. A call option is a
short-term contract (having a duration of nine months or less) pursuant
to which the purchaser of the call option, in return for a premium paid,
has the right to buy the security underlying the option at a specified
exercise price at any time during the term of the option. The writer of
the call option, who receives the premium, has the obligation, upon
exercise of the option, to deliver the underlying security against
payment of the exercise price during the option period. A put option is
a similar contract which gives the purchaser of the put option, in
return for a premium, the right to sell the underlying security at a
specified price during the term of the option. The writer of the put,
who receives the premium, has the obligation to buy the underlying
security, upon exercise, at the exercise price during the option period.
A call option is "covered" if the Fund owns the underlying security
(or equivalent in the case of stock index options) covered by the call
or has an absolute and immediate right to acquire that security without
additional cash consideration (or for additional cash consideration held
in a segregated account by its custodian) upon conversion or exchange of
other securities held in its portfolio. A call option is also covered
if the Fund holds on share-for-share basis a call on the same security
as the call written where the exercise price of the call held is equal
to or less than the exercise price of the call written or greater than
the exercise price of the call written if the difference is maintained
by the Fund in cash, Treasury bills or other high grade short-term
obligations in a segregated account with its custodian. A put option is
"covered" if the Fund maintains cash, Treasury bills or other high grade
short-term obligations with a value equal to the exercise price in a
segregated account with its custodian, or else holds on a share-for-
share basis a put on the same security as the put written where the
exercise price of the put held is equal to or greater than the exercise
price of the put written. The premium paid by the purchaser of an
option will reflect, among other things, the relationship of the
exercise price to the market price and volatility of the underlying
security, the remaining term of the option, supply and demand and
interest rates.
If the Fund as the writer of an option wishes to terminate its
obligation, the Fund may effect a "closing purchase transaction." This
is accomplished by buying an option of the same series as the option
previously written. The effect of the purchase is that the writer's
position will be canceled by the clearing corporation. However, a
writer may not effect a closing purchase transaction after it has been
notified of the exercise of an option. Likewise, an investor (such as
the Fund) who is the holder of an option may liquidate his position by
effecting a "closing sale transaction." This is accomplished by selling
an option of the same series as the option previously purchased. There
is no guarantee that either a closing purchase or a closing sale
transaction can be effected.
Effecting a closing transaction in the case of a written call
option will permit the Fund to write another call option on the
underlying security with either a different exercise price or expiration
date, or both, or in the case of a written put option will permit the
Fund to write another put option to the extent that the exercise price
thereof is secured by deposited cash or short-term securities. Also,
effecting a closing transaction will permit the cash or proceeds from
the concurrent sale of any securities subject to the option to be used
for other Fund investments.
The Fund will realize a profit from a closing purchase transaction
if the price of the transaction is less than the premium received from
writing the option or in the case of a closing sale transaction, the
price received on the transaction is more than the premium paid to
purchase the option; the Fund will realize a loss from a closing
purchase transaction if the price of the transaction is more than the
premium received from writing the option or in the case of a closing
sale transaction, the price received on the transaction is less than the
premium paid to purchase the option. Because increases in the market
price of a call option will generally reflect increases in the market
price of the underlying security, any loss resulting from the closing
purchase transaction of a call option is likely to be offset in whole or
in part by appreciation of the underlying security if it is owned by the
Fund.
Stock Index Futures Characteristics: The Fund intends to purchase
and sell stock index futures contracts as a hedge against changes in
market conditions in accordance with the portfolio strategies described
in the Prospectus. A stock index assigns relative values to the common
stocks included in the index, and the index fluctuates with the changes
in the market values of the common stocks so included. A stock index
futures contract is a bilateral agreement pursuant to which two parties
agree to take, or make delivery of, an amount of cash equal to a
specified dollar amount times the difference between the stock index
value at the close of the last trading day of the contract and the price
at which the futures contract is originally struck. No physical
delivery of the underlying stocks in the index is made.
Characteristics of Options on Stock Index Futures: The Fund
intends to purchase and/or write put and call options on stock index
futures which are traded on a U.S. exchange or Board of Trade. Options
on stock index futures are similar to options on stocks except that an
option on a stock index future gives the purchaser the right, in return
for the premiums paid, to assume a position in a stock index futures
contract (a purchase if the option is a call and a sale if the option is
a put), rather than to purchase or sell stock, at a specified exercise
price at any time during the period of the option. Upon exercise of the
option, the delivery of the futures position by the writer of the option
to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account which
represents the amount by which the market price of the stock index
futures contract, at exercise, exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option on the
stock index future. If an option is exercised on the last trading day
prior to the expiration date of the option, the settlement will be made
entirely in cash equal to the difference between the exercise price of
the option and the closing level of the index on which the future is
based on the expiration date.
Risks of Transactions in Stock Options: An option position may be
closed out only on an exchange which provides a secondary market for an
option of the same series. Although the Fund will generally purchase or
write only those options for which there appears to be an active
secondary market, there is no assurance that a liquid secondary market
on an exchange will exist for any particular option, or at any
particular time, and for some options no secondary market on an exchange
may exist. In such event it might not be possible to effect closing
transactions in particular options, with the result that the Fund would
have to exercise its options in order to realize any profit and would
incur brokerage commissions upon the exercise of call options and upon
the subsequent disposition of underlying securities acquired through the
exercise of call options or upon the purchase of underlying securities
for the exercise of put options. If the Fund as a covered call option
writer is unable to effect a closing purchase transaction in a secondary
market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange
could include the following: l) there may be insufficient trading
interest in certain options; 2) restrictions may be imposed by an
exchange on opening transactions or closing transactions or both; 3)
trading-halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying
securities; 4) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; 5) the facilities of an exchange or a
clearing corporation may not at all times be adequate to handle current
trading volume; or 6) 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 the class or
series of options) would cease to exist, although outstanding options on
that exchange that had been issued by a clearing corporation as a result
of trades on that exchange would continue to be exercisable in
accordance with their terms. There is no assurance that higher than
anticipated trading activity or other unforeseen events might not, at
times, render certain of the facilities of any of the clearing
corporations inadequate, and thereby result in the institution by an
exchange of special procedures which may interfere with the timely
execution of customers' orders. However, the Options Clearing
Corporation, based on forecasts provided by the U.S. exchanges, believes
that its facilities are adequate to handle the volume of reasonably
anticipated options transactions, and such exchanges have advised such
clearing corporation that they believe their facilities will also be
adequate to handle reasonably anticipated volume.
When the Fund enters into a futures transaction, it must
deliver to the Futures Commission Merchant (the "FCM") selected by the
Fund an amount referred to as "initial margin." This amount is
maintained by the FCM in an account at the Fund's Custodian Bank.
Thereafter "variation margin" may be paid by the Fund to, or drawn by
the Fund from, such account in accordance with the controls set for such
account. These controls, including the requirement that the Fund draw
out amounts in excess of $50,000 in any one such account, are intended
to protect the Fund from misappropriation of such "margin." The Fund
will carefully monitor such accounts to seek to minimize the risk
attendant upon such accounts.
The Fund will also request that the Custodian Bank segregate
other securities of the Fund equal in value to the Fund's potential
liability under such transactions in excess of any amount held by the
FCM, so that the Fund will always have the necessary assets to fulfill
its obligation. The segregated account procedures will comply with
Investment Company Act Release Number 10666 so the Fund will not be
deemed to be engaged in the issuance of senior securities.
MONEY MARKET SECURITIES
Although The Rightime Fund intends to concentrate its investments
in investment company securities and The Rightime Blue Chip Fund, The
Rightime MidCap Fund, and The Rightime Social Awareness Fund intend to
invest their assets primarily in common stocks, each Fund may invest its
assets directly in money market securities whenever deemed appropriate
by the Advisor to achieve the Fund's investment objective. It may
invest without limitation in such securities on a temporary basis for
defensive purposes.
Securities issued or guaranteed as to principal and interest by the
United States government ("Government Securities") include a variety of
Treasury securities, which differ in their interest rates, maturities
and date of issue. Treasury bills have a maturity of one year or less;
Treasury notes have maturities of one to ten years; Treasury bonds
generally have a maturity of greater than five years. Each Fund will
only acquire Government Securities which are supported by the "full
faith and credit" of the United States. Securities which are backed by
the full faith and credit of the United States include Treasury bills,
Treasury notes, Treasury bonds, and obligations of the Government
National Mortgage Association, the Farmers Home Administration, and the
Export-Import Bank. The Fund's direct investments in money market
securities will generally favor securities with shorter maturities
(maturities of less than 60 days) which are less affected by price
fluctuations than those with longer maturities.
Certificates of deposit are certificates issued against funds
deposited in a commercial bank or a savings and loan association 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. Investments
in bank certificates of deposit and bankers' acceptances are limited to
domestic banks and savings and loan associations that are members of the
Federal Deposit Insurance Corporation having total assets in excess of
five hundred million dollars ("Domestic Banks").
Investments in prime commercial paper may be made in notes, drafts,
or similar instruments payable on demand or having a maturity at the
time of issuance not exceeding nine months, exclusive of days of grace,
or any renewal thereof payable on demand or having a maturity likewise
limited.
Under a repurchase agreement the Fund acquires a debt instrument
for a relatively short period (usually not more than one week) subject
to the obligation of the seller to repurchase and the Fund to resell
such debt instrument at a fixed price. The Fund will enter into
repurchase agreements only with banks which are members of the Federal
Reserve System, or securities dealers who are members of a national
securities exchange or are market makers in government securities and in
either case, only where the debt instrument collateralizing the
repurchase agreement is a U.S. Treasury or agency obligation supported
by the full faith and credit of the U.S. A repurchase agreement may
also be viewed as the loan of money by the Fund to the seller. The
resale price specified is normally in excess of the purchase price,
reflecting an agreed upon interest rate. The rate is effective for the
period of time the Fund is invested in the agreement and may not be
related to the coupon rate on the underlying security. The term of
these repurchase agreements will usually be short (from overnight to one
week) and at no time will the Fund invest in repurchase agreements of
more than sixty days. The securities which are collateral for the
repurchase agreements, however, may have maturity dates in excess of
sixty days from the effective date of the repurchase agreement. The
Fund will always receive, as collateral, securities whose market value,
including accrued interest, will be at least equal to 100% of the dollar
amount to be paid to the Fund under each agreement at its maturity, and
the Fund will make payment for such securities only upon physical
delivery or evidence of book entry transfer to the account of the
Custodian. If the seller defaults, the Fund might incur a loss if the
value of the collateral securing the repurchase agreement declines, and
might incur disposition costs in connection with liquidation of the
collateral. In addition, if bankruptcy proceedings are commenced with
respect to the seller of the security, collection of the collateral by
the Fund may be delayed or limited. The Fund may not enter into a
repurchase agreement with more than seven days to maturity if, as a
result, more than 10% of the market value of the Fund's net assets would
be invested in such repurchase agreements together with any other
illiquid assets.
THE RIGHTIME GOVERNMENT SECURITIES FUND
The objective of the Fund is to achieve for its investors a high
current income, consistent with safety and liquidity of principal.
The Fund seeks to achieve its investment objective by investing in
securities that are issued or guaranteed as to principal and interest by
the U.S. Government, its agencies, authorities or instrumentalities
("Government Securities") or securities secured by such securities, and
by engaging in transactions involving related options, futures and
options on futures.
This Statement of Additional Information contains further
information concerning the techniques and operations of the Fund, the
securities in which it will invest, and the policies it will follow.
Government Securities include: (1) U.S. Treasury obligations, which
differ only in their interest rates, maturities and times of issuance:
U.S. Treasury bills (maturity of one year or less), U.S. Treasury notes
(maturities of one to 10 years), and U.S. Treasury bonds (generally
maturities of greater than 10 years) all of which are backed by the full
faith and credit of the United States; and (2) obligations issued or
guaranteed by U.S. Government agencies or instrumentalities, some of
which are backed by the full faith and credit of the U.S. Treasury,
e.g., direct pass-through certificates of the Government National
Mortgage Association, some of which are supported by the right of the
issuer to borrow from the U.S. Government, e.g., obligations of Federal
Home Loan Banks, and some of which are backed only by the credit of the
issuer itself, e.g., obligations of the Student Loan Marketing
Association.
The Fund may also purchase separated or divided U.S. Treasury
securities. Separated or Divided U.S. Treasury securities is the term
used by the Fund to describe U.S. Treasury bills, notes and bonds which
have been stripped of their unmatured interest coupons. These
securities are often referred to as zero coupon Treasury Securities or
Treasury Receipts. The term also describes the stripped coupons
themselves and receipts or certificates representing interest in the
stripped obligations and coupons. Like a Treasury bill, a zero-coupon
security pays no interest to its holder during its life. Its value to
an investor consists of the difference between its face value at the
time of maturity and the price for which it was acquired, which is
generally an amount substantially less than its face value (sometimes
referred to as a "deep discount" price).
Currently the only U.S. Treasury security issued without coupons is
the Treasury bill. However, in the last few years a number of banks and
brokerage firms have separated ("stripped") the principal portions
("corpus") from the coupon portions of the U.S. Treasury bonds and notes
and sold them separately in the form of receipts or certificates
representing undivided interests in these instruments (which instruments
are generally held by a bank in a custodial or trust account). The
timely payment of interest and principal on the stripped securities
remains guaranteed by the "full, faith and credit" of the U.S.
Government. The receipts and certificates are sold at a discount from
face value. Their prices may exhibit greater volatility than ordinary
debt securities because of the manner in which their principal and
interest is returned to the investor. The investor's yield is computed
by amortizing the difference between the discounted purchase price and
the face value at the purchase price and the face value at the maturity
date over the life of the security, rather than interim interest
payments. More recently, the U.S. Treasury Department has facilitated
the stripping of Treasury notes and bonds by permitting the separated
corpus and coupons to be transferred directly through the Federal
Reserve Banks' book-entry system. This program, which eliminates the
need for custodial or trust accounts to hold the Treasury securities, is
called "Separate Trading of Registered Interest and Principal of
Securities". Each such stripped instrument (or receipt) entitles the
holder to a fixed amount of money from the Treasury at a single,
specified future date. The U.S. Treasury redeems zero coupon securities
consisting of the corpus for the face value thereof at maturity and
those consisting of stripped coupons for the amount of interest, and at
the date, stated thereon.
Separated or divided U.S. Treasury Securities represent a single
interest, or principal, payment on a U.S. Treasury bond which has been
separated from all the other interest coupons as well as the bond
itself. When the Fund purchases such an instrument, it purchases the
right to receive a single payment of a set sum at a known date in the
future. The interest rate on such an instrument is determined by the
difference between the price the Fund pays for the instrument when it
purchases the instrument at a discount and what the instrument entitles
the Fund to receive when the instrument matures. That difference is
amortized and accrued each day during the time the security is held.
The amount of the discount the Fund will receive will depend upon the
length of time to maturity of the separated U.S. Treasury security and
prevailing market interest rates when the separated U.S. Treasury
security is purchased. Separated U.S. Treasury securities can be
considered a zero coupon investment because no payment is made to the
Fund until maturity. These investments' market values are much more
susceptible to changes in market interest rates than income-producing
securities. These securities are purchased with original issue discount
and such discount is includable as gross income to a Fund shareholder
over the life of the security. The Fund does not intend to hold such
securities to maturity for the purpose of achieving potential capital
gains, unless current yields on these securities remain attractive.
The Fund may temporarily take a defensive position by investing a
greater portion of its assets in cash, short term Government Securities
and related repurchase agreements or by reducing the average weighted
maturity of its portfolio. The Fund may enter into repurchase
agreements (a purchase of and simultaneous commitment to resell a
security at an agreed upon price on an agreed upon date) from a seller,
usually a bank or brokerage firm, and only for Government Securities.
The value of the securities held by the custodian pursuant to the
repurchase agreement will at all times be greater than or equal to the
resale price. The resale price is in excess of the purchase price and
reflects an agreed upon market rate unrelated to the coupon rate on the
purchased security. Such transactions afford the Fund the opportunity
to earn a return on temporarily available cash at minimal market rise.
While the underlying security may be a bill, certificate of
indebtedness, note or bond issued by an agency, authority or
instrumentality of the United States Government, the obligation of the
seller is not guaranteed by the United States Government. If the vendor
fails to pay the sum agreed to on the agreed upon delivery date, the
Fund would have the right to sell the Government Securities, but might
incur a loss in so doing and in certain cases may not be permitted to
sell the Government Securities. For additional information concerning
repurchase agreements, see "Investment Restrictions" in this Statement
of Additional Information.
Government Securities do not generally involve the credit risks
associated with other types of interest bearing securities, although, as
a result, the yields available from Government Securities are generally
lower than the yields available from corporate interest bearing
securities. To the extent the Fund purchases U.S. Obligations of medium
term or longer, the Fund's net asset value will vary inversely with
changes in market interest rates. Consequently, investors in the Fund
may be subject to more risk than other funds which do not purchase
investments of medium term or longer. However, on an historical basis,
securities issued or guaranteed by the U.S. Government or its agencies
and instrumentalities have involved minimal risk of loss of principal or
interest.
Changes in the value of the Fund's portfolio securities subsequent
to their acquisition are reflected in the net asset value of shares of
the Fund. Such changes do not affect the income received by the Fund
from such securities. However since available yields vary over time, no
specific level of income can ever be assured. The dividends paid by the
Fund will increase or decrease in relation to the income received by the
Fund from its investments, which will in any case be reduced by the
Fund's expenses before being distributed to the Fund's shareholders.
When Issued and Delayed Delivery Transactions: The Fund may
purchase and sell securities on a "when issued" and "delayed delivery"
basis, that is, obligate itself to purchase or sell securities with
delivery and payment to occur at a later date in order to secure what is
considered to be an advantageous price and yield to the Fund at the time
of entering into the obligation. When the Fund engages in "when issued"
and "delayed delivery" transactions, the Fund relies on the buyer or
seller, as the case may be, to consummate the sale. Failure to do so
may result in the Fund missing the opportunity of obtaining a price or
yield considered to be advantageous. No interest accrues to the Fund
with respect to securities purchased on a "when issued" or "delayed
delivery" basis until delivery and payment take place. Such securities
are subject to market fluctuation; the value at delivery may be less
than the purchase price. "When issued" and "delayed delivery"
transactions may be expected to occur a month or more before delivery is
due. No payment or delivery, however, is made by the Fund until it
receives delivery or payment from the other party to the transaction.
The Fund will maintain in a segregated account with its custodian, cash,
Treasury bills, or other U.S. Government securities having an aggregate
value equal to the amount of such purchase commitments until payment is
made. To the extent the Fund engages in "when issued" and "delayed
delivery" transactions, it will do so for the purpose of acquiring
securities for the Fund's portfolio consistent with the Fund's
investment objective and policies and not for the purpose of investment
leverage.
Futures Contracts and Options on Futures Contracts: The Fund may
enter into contracts for the purchase or sale for future delivery of
fixed income securities ("Futures Contracts"). This investment
technique is designed to hedge (i.e., protect) against anticipated
changes in interest rates which otherwise might either adversely affect
the value of the Fund's portfolio securities or adversely affect the
prices of Government Securities which the Fund intends to purchase at a
later date.
When a Futures Contract is sold, the Fund incurs a contractual
obligation to deliver the securities underlying the contract at a
specified price on a specified date during a specified future month. A
"purchase" of a Futures Contract means the acquisition of a contractual
right to obtain delivery to the Fund of the securities called for by the
contract at a specified price during a specific future month.
Futures Contracts have been designed by exchanges which have been
designated "contract markets" by the Commodity Futures Trading
Commission ("CFTC"), and must be executed through a futures commission
merchant, or brokerage firm, which is a member of the relevant contract
market. Futures Contracts trade on these markets, and the exchanges,
through their clearing organizations, guarantee that the contracts
between the clearing members of the exchange will be performed. The
Fund will only enter into Futures contracts which are based on
Government Securities, including any index of government securities.
While Futures Contracts based on debt securities provide for the
delivery of securities, deliveries usually do not occur. Contracts are
generally terminated by entering into an off-setting transaction. The
Fund will incur brokerage fees when it purchases or sells Futures
Contracts. At the same time such a purchase or sale is made, the Fund
must provide cash or securities as a deposit ("initial deposit") known
as "margin." It is expected that the initial deposit would be
approximately 4% of the contract's face value. Daily thereafter, the
Futures Contract is valued and the payment of "variation margin" may be
required since each day the Fund may provide or receive cash that
reflects the decline or increase in the value of the contract. At the
time of delivery of securities pursuant to such a contract, adjustments
are made to recognize differences in value arising from the delivery of
securities with different interest rate than the specific security that
provides the standard for the contract. In some (but not many) cases,
securities called for by a Futures Contract may not have been issued
when the contract was written.
The purpose of the purchase or sale of a Futures Contract, in the
case of a portfolio such as the Fund's portfolio, which holds or intends
to acquire Government Securities, is to protect the Fund against the
adverse effects of fluctuations in interest rates without actually
buying or selling such securities. For example, if the Fund owns
Government Securities, and if interest rates were expected to increase,
the Fund might enter into Futures Contracts for the sale of such
securities. Such a sale would have much the same economic effect as
selling an equivalent value of the Government Securities the Fund owns.
If interest rates did increase, the value of the securities in the
portfolio would decline, but the value of the Fund Futures Contracts
would increase at approximately the same rate thereby keeping the net
asset value of the Fund from declining, or declining as much as it
otherwise would have.
Similarly, when it is expected that interest rates may decline,
Futures Contracts may be purchased to hedge in anticipation of
subsequent purchases of Government Securities at higher prices. The
Fund could take advantage of the anticipated rise in the value of such
securities without actually buying them until the necessary cash became
available or the market had stabilized. At that time, the Futures
Contracts could be liquidated and the Fund could buy the Government
Securities on the cash market. Due to changing market conditions,
however, and interest rate forecasts, a futures position may be
terminated without a corresponding purchase of securities. The Fund
could accomplish similar results by selling Government Securities with
long maturities and investing in Government Securities with short
maturities when interest rates are expected to increase. However, when
the futures market is more liquid than the cash market, the use of
Futures Contracts as a hedging technique allows the Fund to maintain a
defensive position without having to sell its portfolio securities. To
the extent the Fund enters into Futures Contracts for these purposes, it
will maintain a segregated asset account consisting of cash or high
grade Government Securities in an amount equal to the difference between
the fluctuating market value of such Futures Contracts and the aggregate
value of the initial deposit and variation margin payments made by the
Fund with respect to such Futures Contracts.
The ordinary spreads between prices in the cash and futures
markets, due to differences in the natures of those markets, are subject
to distortions. First, all participants in the futures market are
subject to initial deposit and variation margin requirements. Rather
than meeting additional variation margin requirements, investors may
close Futures Contracts through offsetting transactions which could
distort the normal relationship between the cash and futures markets.
Second, the liquidity of the futures market depends on participants
entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery,
liquidity in the futures market could be reduced, thus producing
distortion. Third, from the point of view of speculators, the margin
deposit requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore increased
participation by speculators in the futures market may cause temporary
price distortions. Due to the possibility of such distortion, a correct
forecast of general interest rate trends by the Advisor may still not
result in a successful transaction.
The liquidity of a market in a futures contract may also be
adversely affected by "daily price fluctuation limits" established by
commodity exchanges which limit the amount of fluctuation in a futures
contract price during a single trading day. Once the daily limit has
been reached in the contract, no trades may be entered into at a price
beyond the limit, thus preventing the liquidation of open futures
positions. Prices have in the past exceeded the daily limit on a number
of consecutive trading days. On any day or days when the price
fluctuation limits have been reached, the Fund may be unable to
liquidate existing futures positions or to implement a hedging strategy
through the purchase or sale of particular futures.
The Fund will not maintain open short positions in futures
contracts if, in the aggregate, the value of its open positions (marked
to market) exceeds the current market value of its securities portfolio
plus or minus the unrealized gain or loss on such open positions,
adjusted for historical volatility relationship between the portfolio
and futures contracts.
Investments in Futures Contracts entail the risk that if the
Advisor's investment judgment about the general direction of interest
rates is incorrect the Fund's overall performance may be poorer than if
it had not entered into any such contract. For example, if the Fund has
hedged against the possibility of an increase in interest rates which
would adversely affect the price of Government Securities held in its
portfolio and interest rates decrease instead, the Fund will lose part
or all of the benefit of the increased value of its Government
Securities which it has because it will have offsetting losses in its
futures position. In addition, in such situations, if the Fund had
insufficient cash, it may have to sell Government Securities from its
portfolio to meet daily variation margin requirements. Such sale of
Government Securities may be, but will not necessarily be, at increased
prices which reflect the rising market. The Fund may have to sell
securities at a time when it may be disadvantageous to do so.
The Fund intends to purchase and sell options on Futures Contracts
for hedging purposes. The purchase of a call option on a futures
contract is similar in some respects to the purchase of a call option on
an individual security. Depending on the pricing of the option compared
to either the price of the futures contract upon which it is based or
the price of the underlying security, it may or may not be less risky
than ownership of the futures contract or underlying security. As with
the purchase of futures contracts, when the Fund is not fully invested
it may purchase a call option on a futures contract to hedge against a
market advance due to declining interest rates.
The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the securities which are
deliverable upon exercise of the futures contract. If the futures price
at expiration of the option is below the exercise price, the Fund will
retain the full amount of the option premium which provides a partial
hedge against any decline that may have occurred in the portfolio
holdings. The writing of a put option on a futures contract constitutes
a partial hedge against increasing prices of the securities which are
deliverable upon exercise of the futures contract. If the futures price
at expiration of the option is higher than the exercise price, the Fund
will retain the full amount of the option premium which provides a
partial hedge against any increase in the price of Government Securities
which the Fund intends to purchase. If a put or call option the Fund
has written is exercised, the Fund will incur a loss which will be
reduced by the amount of the premium it receives. Depending on the
degree of correlation between changes in the value of its portfolio
securities and changes in the value of its futures positions, the Fund's
losses from existing options on futures may to some extent be reduced or
increased by changes in the value of portfolio securities.
The purchase of put options on a futures contract is similar in
some respects to the purchase of protective put options on portfolio
securities. The Fund will purchase a put option on a futures contract
to hedge the Fund's portfolio against the risk of rising interest rates.
The amount of risk the Fund assumes when it purchases an option on
a futures contract is the premium paid for the option plus related
transaction costs. In addition to the correlation risks discussed
above, the purchase of an option also entails the risk that changes in
the value of the underlying futures contract will not be fully reflected
in the value of the option purchased.
The Fund's ability to engage in the options and futures strategies
described above will depend on the availability of a liquid market in
such instruments. Markets in options and futures with respect to
Government Securities are relatively new and still developing. It is
impossible to predict the amount of trading interest that may exist in
various types of options or futures. Therefore no assurance can be
given that the Fund will be able to utilize these instruments
effectively for the purposes set forth above. Furthermore, the Fund's
ability to engage in options and futures transactions may be limited by
tax considerations.
Options: The Fund intends to write covered put and call options
and purchase put and call options on Government Securities and options
on other optionable Government Securities.
Call options written by the Fund give the holder the right to buy
the underlying securities from the Fund at a stated exercise price; put
options written by the Fund give the holder the right to sell the
underlying security to the Fund at a stated exercise price. A call
option written by the Fund is "covered" if the Fund owns the underlying
security covered by the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or for
additional cash consideration held in a segregated account by its
custodian) upon conversion or exchange of other securities held in its
portfolio. A call option is also covered if the Fund holds a call on
the same security and in the same principal amount as the call written
where the exercise price of the call held: (a) is equal to or less than
the exercise price of the call written; or (b) is greater than the
exercise price of the call written if the difference is maintained by
the Fund in cash and Government Securities in a segregated account with
its custodian. A put option written by the Fund is "covered" if the
Fund maintains cash and Government Securities with a value equal to the
exercise price in a segregated account with its custodian, or else holds
a put on the same security and in the same principal amount as the put
written where the exercise price of the put held is equal to or greater
than the exercise price of the put written. The premium paid by the
purchaser of an option will reflect, among other things, the
relationship of the exercise price to the market price and volatility of
the underlying security, the remaining term of the option, supply and
demand and interest rates.
The writer of an option has no control over when the underlying
securities must be sold, in the case of a call option, or purchased, in
the case of a put option, since the writer may be assigned an exercise
notice at any time prior to the termination of the obligation. If an
option expires unexercised, the writer retains the amount of the
premium. This amount, of course, may, in the case of a covered call
option, be offset by a decline in the market value of the underlying
security during the option period. If a call option is exercised, the
writer experiences a profit or loss from the sale of the underlying
security. If a put option is exercised, the writer must fulfill the
obligation to purchase the underlying security at the exercise price,
which will usually exceed the then market value of the underlying
security.
The writer of an option that wishes to terminate its obligation may
effect a "closing purchase transaction." This is accomplished by buying
an option of the same series as the option previously written. The
effect of the purchase is that the writer's position will be canceled by
the clearing corporation. However, a writer may not effect a closing
purchase transaction after being notified of the exercise of an option.
Likewise, an investor who is the holder of an option may liquidate its
position by effecting a "closing sale transaction." This is
accomplished by selling an option of the same series as the option
previously purchased. There is no guarantee that either a closing
purchase or a closing sale transaction can be effected.
Effecting a closing transaction in the case of a written call
option will permit the Fund to write another call option on the
underlying security with either a different exercise price or expiration
date or both, or in the case of a written put option will permit the
Fund to write another put option to the extent that the exercise price
thereof is secured by deposited cash or Government Securities. Also,
effecting a closing transaction will permit the cash or proceeds from
the concurrent sale of any securities subject to the option to be used
for other Fund investments. If the Fund desires to sell a particular
security from its portfolio on which it has written a call option, it
will effect a closing transaction prior to or concurrent with the sale
of the security.
The Fund will realize a profit from a closing transaction if the
price of the transaction is less than the premium received from writing
the option or is more than the premium paid to purchase the option; the
Fund will realize a loss from a closing transaction if the price of the
transaction is more than the premium received from writing the option or
is less than the premium paid to purchase the option. Because increases
in the market price of a call option will generally reflect increases in
the market price of the underlying security, any loss resulting from the
repurchase of a call option is likely to be offset in whole or in part
by appreciation of the underlying security owned by the Fund.
An option position may be closed out only where there exists a
secondary market for an option of the same series. If a secondary
market does not exist, it might not be possible to effect closing
transactions in particular options with the result that the Fund would
have to exercise the options in order to realize any profit. If the
Fund is unable to effect a closing purchase transaction in a secondary
market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise.
Reasons for the absence of a liquid secondary market include the
following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by a national securities
exchange ("Exchange") on opening transactions or closing transactions or
both; (iii) trading halts, suspensions or other restrictions may be
imposed with respect to particular classes or series of options or
underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an Exchange; (v) the facilities of an
Exchange or the Options Clearing Corporation may not at all times be
adequate to handle current trading volume, or (vi) 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 that secondary market on that
Exchange (or in that class or series of options) would cease to exist,
although outstanding options on that Exchange 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.
The Fund may write options in connection with buy-and-write
transactions; that is the Fund may purchase a security and then, either
simultaneously or in a separate transaction, write a call option against
the security. The exercise price of the call the Fund determines to
write will depend upon the expected price movement of the underlying
security. The exercise price of a call option may be below ("in-the-
money"), equal to ("at-the-money") or above ("out-of-the-money") the
current value of the underlying security at the time the option is
written. Buy-and-write transactions using in-the-money call options may
be used when it is expected that the price of the underlying security
will remain flat or decline moderately during the option period. Buy-
and-write transactions using at-the-money call options may be used when
it is expected that the price of the underlying security will remain
fixed or advance moderately during the option period. Buy-and-write
transactions using out-of-the-money call options may be used when it is
expected that the premiums received from writing the call option plus
the appreciation in the market price of the underlying security up to
the exercise price will be greater than the appreciation in the price of
the underlying security alone. If the call options are exercised in
such transactions, the Fund's maximum gain will be the premium received
by it for writing the option, adjusted upwards or downwards by the
difference between the Fund's purchase price of the security and the
exercise price. If the options are not exercised and the price of the
underlying security declines, the amount of such decline will be offset
in part, or entirely, by the premium received.
The writing of covered put options is similar in terms of
risk/return characteristics to buy-and-write transactions. If the
market price of the underlying security rises or otherwise is above the
exercise price, the put option will expire worthless and the Fund's gain
will be limited to the premium received. If the market price of the
underlying security declines or otherwise is below the exercise price,
the Fund may elect to close the position or take delivery of the
security at the exercise price and the Fund's return will be the premium
received from the put option minus the amount by which the market price
of the security is below the exercise price. Out-of-the-money, at-the-
money and in-the-money put options may be used by the Fund in the same
market environments that call options are used in equivalent buy-and-
write transactions.
The Fund may purchase put options to hedge against a decline in the
value of its portfolio. By using put options in this way, the Fund will
reduce any profit it might otherwise have realized in the underlying
security by the amount of the premium paid for the put option and by
transaction costs.
The Fund may purchase call options to hedge against an increase in
the price of Government Securities that the Fund anticipates purchasing
in the future. The premium paid for the call option plus any
transaction costs will reduce the benefit, if any, realized by the Fund
upon exercise of the option, and, unless the price of the underlying
security rises sufficiently, the option may expire worthless to the
Fund.
The Fund will not purchase put and call options if as a result more
than 5% of its total assets would be invested in such options.
Lending of Portfolio Securities: The Fund may seek to increase its
income by lending portfolio securities. Under present regulatory
policies, including those of the Board of Governors of the Federal
Reserve System and the Securities and Exchange Commission, such loans
may be made only to member firms of the New York Stock Exchange, and
would be required to be secured continuously by collateral in cash, cash
equivalents or high quality Government Securities maintained on a
current basis at an amount at least equal to the market value of the
securities loaned. The Fund would have the right to call a loan and
obtain the securities loaned at any time on twenty-four hours' notice.
During the existence of a loan, the Fund would continue to receive the
equivalent of the interest or dividends paid by the issuer on the
securities loaned and would also receive compensation based on
investment of the collateral. As with other extensions of credit, there
are risks of delay in recovery or even loss of rights in the collateral
should the borrower of the securities fail financially. However, the
loans would be made only to firms deemed by the Advisor to be of good
standing, and when, in the judgment of the Advisor the consideration
which could be earned currently from securities loans of this type
justifies the attendant risk. The Fund pays various fees in connection
with such loans including shipping fees and reasonable custodian and
placement fees approved by the Advisor in accordance with instructions
of the Board of Directors of the Fund or designated officers of the
Fund. If the Advisor determines to make securities loans, it is not
intended that the value of the securities loaned would exceed 30% of the
value of the Fund's total assets.
Portfolio Management: The Fund intends to fully manage its
portfolio by buying and selling Government Securities or holding
selected Government Securities to maturity, by purchasing securities
secured by such securities, and by engaging in transactions involving
related Options, Futures and Options on Futures. In managing its
portfolio the Fund seeks a high current income consistent with liquidity
and safety of principal by taking advantage of market developments and
yield disparities, which may include use of the following strategies:
(1) shortening the average maturity of its portfolio in
anticipation of a rise in interest rates so as to reduce the potential
for depreciation of principal;
(2) lengthening the average maturity of its portfolio in
anticipation of a decline in interest rates so as to increase the
potential for appreciation of principal;
(3) selling one type of Government Security (e.g., Treasury
bonds) and buying another (e.g., GNMA direct pass-through certificates)
when disparities arise in the relative values of each; and
(4) changing from one U.S. Government obligation to an
essentially similar U.S. Government obligation when their respective
yields are distorted due to market factors.
The Fund will also use the techniques described above under "When-
Issued Securities," "Futures Contracts and Options on Futures Contracts"
and "Options" to manage its portfolio.
These strategies may result in increases or decreases in the Fund's
current income available for distribution to the Fund's shareholders and
in the holding by the Fund of obligations which sell at moderate to
substantial premiums or discounts from face value. Moreover, if the
Fund's expectations of changes in interest rates or its evaluation of
the normal yield relationship between two obligations proves to be
incorrect, the Fund's income, net asset value per share and potential
capital gain may be decreased or its potential capital loss may be
increased.
PORTFOLIO TURNOVER
It is not the policy of any of the Funds to purchase or sell
securities for short-term trading purposes, but each Fund may sell
securities to recognize gains or avoid potential for loss. Each Fund
will, however, sell any portfolio security (without regard to the time
it has been held) when the Advisor believes that market conditions,
credit-worthiness factors or general economic conditions warrant such a
step. Each Fund may seek to avoid untimely portfolio transactions by
utilizing hedging techniques which reduce the necessity to restructure
portions of each Fund's portfolio. Each Fund presently estimates that
its annualized portfolio turnover rate will generally not exceed 300%.
High portfolio turnover might involve additional transaction costs (such
as brokerage commissions or sales charges) which are borne by the
Fund,or adverse tax effects. (See "Dividends, Distributions and Taxes"
in the Prospectus.)
INVESTMENT RESTRICTIONS
In addition to those set forth in The Rightime Fund, Inc.'s current
Prospectus, each Fund has adopted the Investment Restrictions set forth
below, which cannot be changed without the approval of a majority of the
outstanding voting securities of the Fund. As provided in the
Investment Company Act of 1940 a "vote of a majority of the outstanding
voting securities" of the Fund means the affirmative vote of the lesser
of: (i) more than 50% of the outstanding shares of the Fund; or (ii)
67% or more of the shares present at a meeting if more than 50% of the
outstanding shares are represented at the meeting in person or by proxy.
So long as percentage restrictions are observed by a Fund at the time it
purchases any security, changes in values of particular Fund assets or
the assets of the Fund as a whole will not cause a violation of any of
the following restrictions. These investment restrictions provide that
the Funds will not:
The Rightime Fund, The Rightime Blue Chip Fund,
The Rightime MidCap Fund, and The Rightime Social Awareness Fund
(1) issue senior securities, except to the extent that an
investment technique described in the Fund's prospectus (such as the use
of stock index futures) may be deemed to involve a "senior security;"
(2) engage in the underwriting of securities except insofar as
the Fund may be deemed an underwriter under the Securities Act of 1933
in disposing of a portfolio security;
(3) purchase or sell real estate or interests therein, although
it may purchase securities of issuers which engage in real estate
operations and securities which are secured by real estate or interests
therein;
(4) invest for the purpose of exercising control or management
of another company;
(5) purchase oil, gas or other mineral leases, rights or
royalty contracts or exploration or development programs, except that
the Fund may invest in the securities of companies which invest in or
sponsor such programs;
(6) make purchases of securities on "margin" (though the Fund
will comply with applicable requirements of the Commodities Futures
Trading Commission with respect to futures); or
(7) sell securities short;
The Rightime Fund
(8) concentrate its investments in any industry other than
registered investment companies;
The Rightime Blue Chip Fund, The Rightime MidCap Fund,
and The Rightime Social Awareness Fund
(9) concentrate its investments in any industry;
The Rightime Government Securities Fund
(10) borrow money or pledge its assets except as a temporary
measure for extraordinary or emergency purposes and not in excess of 33
1/3% of the value of the total assets of the Fund taken at the lower of
their market value or cost (the Fund intends to borrow money only from
banks and only to accommodate requests for the redemption of shares of
the Fund while effecting an orderly liquidation of portfolio securities)
(for the purpose of this restriction, collateral arrangements with
respect to options, futures contracts, options on futures contracts and
collateral arrangements with respect to initial and variation margins
are not considered a pledge of assets);
(11) purchase any security or evidence of interest therein on
margin, except that the Fund may obtain such short-term credit as may be
necessary for the clearance of purchases and sales of securities and
except that the Fund may make deposits on margin in connection with
futures contracts and related options;
(12) write, purchase or sell any put or call option or any
combination, provided that this shall not prevent the writing,
purchasing and selling of puts, calls or combinations thereof with
respect to Government Securities and with respect to futures contracts
or the purchase, ownership, holding or sale of contracts for the future
delivery of fixed income securities; etc. as described in "Investment
Objective and Policies";
(13) underwrite securities issued by other persons except
insofar as the Fund may technically be deemed an underwriter under the
Securities Act of 1933 in selling a portfolio security;
(14) purchase or sell commodities or commodity contracts,
except that the Fund may purchase and sell financial futures contracts
and related options as described in "Investment Objective and Policies";
(15) make short sales of securities or maintain a short
position, unless at all times when a short position is open it owns an
equal amount of such securities or securities convertible into or
exchangeable for, without payment of any further consideration,
securities of the same issue as, and equal in amount to, the securities
sold short, and unless not more than 10% of the Fund's net assets (taken
at market value) is held as collateral for such sales at any one time
(It is the present intention of management to make such sales only for
the purpose of deferring realization of gain or loss for Federal income
tax purposes; such sales would not be made of securities subject to
outstanding options);
(16) make loans to other persons except through the lending of
its portfolio securities not in excess of 30% of its total assets (taken
at market value) and except through the use of repurchase agreements
maturing in less than seven days (for these purposes the purchase of all
or a portion of an issue of debt securities in accordance with the
Fund's investment objective and policies shall not be considered the
making of a loan);
(17) knowingly invest in securities which are restricted
securities (including repurchase agreements maturing in more than seven
days) under the Securities Act of 1933 if, as a result thereof, more
than 10% of the Fund's net assets (taken at market value) would be so
invested (the Fund currently does not intend to invest in restricted
securities if such investments would equal 5% of the Fund's net assets);
(18) purchase securities of any issuer if such purchase at the
time thereof would cause more than 10% of the voting securities of such
issuer to be held by the Fund;
(19) purchase securities of any issuer if such purchase at the
time thereof would cause more than 5% of the Fund's assets (taken at
market value) to be invested in the securities of such issuer (other
than securities or obligations issued or guaranteed by the United
States, any state or political subdivision thereof, or any political
subdivision of any such state, or any agency or instrumentality of the
United States or of any state or of any political subdivision of any
state or the United States); or
(20) issue any senior security (as that term is defined in the
Investment Company Act of 1940 (the "1940 Act")), if such issuance is
specifically prohibited by the 1940 Act or the rules and regulations
promulgated thereunder (for the purpose of this restriction, collateral
arrangements with respect to options, futures contracts and collateral
arrangements with respect to initial and variation margin are not deemed
to be the issuance of a senior security).
Other Restrictions: (The Rightime Government Securities Fund) In
addition to the restrictions noted above, the Fund will not, as a matter
of operating policy: (i) invest more than 5% of its total assets at the
time of investment in companies which, including predecessors, have a
record of less than three years' continuous operation; or (ii) invest
for the purpose of exercising control or management.
Non-Fundamental Restrictions
In addition to the restrictions outlined above, the Funds (as
indicated below) will also be subject, as a matter of operating policy,
to the restrictions noted below: (i) (All Funds) the Funds may only
invest in other investment companies within limits set by the Investment
Company Act of 1940. With respect to all Funds other than The Rightime
Fund, this would allow a Fund to invest up to 10% of its total assets in
other investment companies, although not more than 5% of the Fund's
total assets may be invested in any one investment company and the
Fund's investment in another investment company may not represent more
than 3% of the securities of any one investment company. All Funds may
also acquire securities of other investment companies beyond such limits
pursuant to a merger, consolidation or reorganization; (ii) (Government
Securities Fund only) the Fund may not invest more than 5% of its total
assets at the time of investment in companies which, including
predecessors, have a record of less than three years' continuous
operation; and (iii) (Government Securities Fund only) the Fund may not
invest for the purpose of exercising control or management.
INVESTMENT ADVISOR
The Rightime Fund, Inc. has entered into investment advisory
agreements with the Advisor on behalf of each series of the Fund, as of
the following dates: The Rightime Fund, March 26, 1985; The Rightime
Government Securities Fund, December 24, 1986; The Rightime Blue Chip
Fund, July 1, 1987; The Rightime Social Awareness Fund, March 1, 1990;
The Rightime MidCap Fund, November 10, 1991. Each Agreement was
initially approved by the Board of Directors for a term of two years
from its effective date, subject to shareholder ratification. Each
Agreement will continue in effect from year to year thereafter only if
such continuance is approved annually by either the Fund's Board of
Directors or by a vote of a majority of the outstanding voting
securities of the Fund and in either case by the vote of a majority of
the directors who are not parties to the Agreement or interested persons
(as such term is defined in the Investment Company Act of 1940, as
amended) of any party to the Agreement, voting in person at a meeting
called for the purpose of voting on such approval. Each Agreement may
be terminated at any time without penalty by the Fund's Board of
Directors or by a majority vote of the outstanding shares of the Fund,
or by the Investment Advisor, in each instance on not less than 60 days'
written notice and shall automatically terminate in the event of its
assignment. Each Agreement also identifies the right of the Advisor to
control the use of the name "Rightime", and each Fund may be required to
change its name if the Advisor ceases to act as advisor to the Fund.
The following table shows the fees paid by each series pursuant to its
Advisory Agreement, during the three most recent fiscal years:
1997 1996 1995
The Rightime Fund $ 778,525 $ 830,865 $ 747,548
The Rightime Government Securities
Fund 33,110 57,725 91,578
The Rightime Blue Chip Fund 1,432,253 1,360,520 1,163,294
The Rightime Social Awareness Fund 53,093 40,814 35,179
The Rightime MidCap Fund 394,749 396,405 354,183
The sole officer, director and shareholder of the Advisor is David
J. Rights. Mr. Rights is also the Chairman of the Board, President and
Treasurer of the Fund and the President and Treasurer of Rightime
Administrators, Inc., the Fund's administrator. Mr. Rights is the owner
of RTE Securities, Inc., a broker-dealer firm which has been retained by
Lincoln Investment Planning, Inc. the Fund's distributor and transfer
agent, to provide consulting and wholesaling services with respect to
the distribution of the Fund's shares. The Advisor presently serves as
advisor to other clients and may do so in the future.
DISTRIBUTOR
Pursuant to the Distribution Agreement for each Fund, the expenses
of printing all sales literature, including prospectuses, are to be
borne by Lincoln Investment Planning, Inc. (the "Distributor"). Each
Distribution Agreement provides that it will continue in effect from
year to year only so long as such continuance is specifically approved
at least annually by either the Fund's Board of Directors or by a vote
of a majority of the outstanding voting securities of the Fund and in
either case by the vote of a majority of the directors who are 12b-1
Directors as that term is defined in the prospectus, voting in person at
a meeting called for the purpose of voting on such approval. Each
agreement will terminate automatically in the event of its assignment.
Under each Distribution Agreement, the Distributor is the exclusive
agent for the Fund's shares, and has the right to select selling dealers
to offer the shares to investors.
Edward S. Forst, Sr., the Vice-President and Secretary of The
Rightime Fund, Inc., is the Chairman of the Distributor; he is also Vice
President and Secretary of Rightime Administrators, Inc., each Fund's
Administrator. David J. Rights, through RTE Securities, Inc., acts as a
consultant to the Distributor, and holds other positions with Fund
affiliates as described above under "Investment Advisor."
The services provided by the Distributor under each Distribution
Agreement relate to the sale of the Fund's shares. These services are
separate from those provided by the Distributor in its capacity as sub-
administrator to Rightime Administrators, Inc., such as receiving and
responding to shareholder inquiries, assisting each Fund with tax
returns, proxy statements, and other services not undertaken to
distribute shares.
Commissions for distribution of Fund shares and other compensation
received by Lincoln Investment Planning during the Fund's fiscal years
ended October 31, 1997, 1996, and 1995:
<TABLE>
<CAPTION>
Distributor
Net Underwriting Compensation
Total Underwriting Commissions to on Redemption
Commissions Distributor and Repurchases Brokerage Commissions Other Compensation
<S> <C> <C> <C> <C> <C>
1995 1,091,389* 1,091,389 -0- -0- -0-
1996 1,236,367* 1,236,367 -0- -0- -0-
1997 1,148,636 1,148,636 -0- -0- -0-
* Does not include nominal amounts paid to Lincoln Investment
Planning by investment companies whose shares are purchased by The
Rightime Fund to compensate Lincoln Investment Planning for shareholder
servicing and/or distribution activities on behalf of such companies.
</TABLE>
DISTRIBUTION PLAN
Pursuant to each Fund's 12b-1 Distribution Plan, each Fund may
incur distribution costs which may not exceed: .50% per annum of The
Rightime Fund's net assets and .25% per annum for each of The Rightime
Blue Chip Fund's, The Rightime Social Awareness Fund's and The Rightime
MidCap Fund's net assets for payments to the Distributor or others for
items such as advertising expenses, selling expenses, commissions or
travel reasonably intended to result in sales of shares of the Fund.
The 12b-1 Distribution Plan for each Fund also provides that each Fund
may incur a shareholder servicing fee of .25% per annum of the Fund's
net assets which is paid to the Distributor or others for ongoing
servicing and/or maintenance of shareholder accounts.
During the most recent fiscal year, the distribution expenses paid
by the Funds were as follows: The Rightime Fund $778,525; The Rightime
Government Securities Fund $0; The Rightime Blue Chip Fund $716,126; The
Rightime Social Awareness Fund $26,547; and The Rightime MidCap Fund
$197,374. The shareholder servicing expenses paid by the Series of the
Fund were as follows: The Rightime Fund $389,263; The Rightime
Government Securities Fund $20,694; The Rightime Blue Chip Fund
$716,127; The Rightime Social Awareness Fund $26,547; and The Rightime
MidCap Fund $197,375.
The following table sets forth the distribution and shareholder
servicing expenses paid on behalf of each series by the Distributor
during the most recent fiscal year ended October 31. The excess costs
incurred over payments received from the Funds pursuant to each Fund's
12b-1 Distribution Plan were paid by the Distributor from its own
resources and will not be reimbursed by the Fund.
1997
The Rightime Fund
Commissions to Salesmen $704,019
Administration Staff 60,704
Advertising & Printing 23,971
Miscellaneous Selling Expenses 64,519
Office Expenses 77,790
Professional Services 16,754
The Rightime Government Securities Fund
Commissions to Salesmen $ 40,375
Administration Staff 3,481
Advertising & Printing 1,375
Miscellaneous Selling Expenses 3,700
Office Expenses 4,461
Professional Services 961
The Rightime Blue Chip Fund
Commissions to Salesmen $1,268,541
Administration Staff 109,381
Advertising & Printing 43,192
Miscellaneous Selling Expenses 116,254
Office Expenses 140,166
Professional Services 30,189
The Rightime Social Awareness Fund
Commissions to Salesmen $47,870
Administration Staff 4,128
Advertising & Printing 1,630
Miscellaneous Selling Expenses 4,387
Office Expenses 5,289
Professional Services 1,139
The Rightime MidCap Fund
Commissions to Salesmen $356,845
Administration Staff 30,769
Advertising & Printing 12,150
Miscellaneous Selling Expense 32,703
Office Expense 39,429
Professional Services 8,492
ALLOCATION OF PORTFOLIO BROKERAGE
The Advisor, in effecting the purchases and sales of portfolio
securities for the account of each Fund, will seek execution of trades
either: (i) at the most favorable and competitive rate of commission
charged by any broker, dealer or member of an exchange; or (ii) at a
higher rate of commission charges if reasonable in relation to brokerage
and research services provided to the Fund or the Advisor by such
member, broker, or dealer. Such services may include, but are not
limited to, any one or more of the following: Information as to the
availability of securities for purchase or sale; statistical or factual
information or opinions pertaining to investments. The Advisor may use
research and services provided to it by brokers and dealers in servicing
all its clients, however, not all such services will be used by the
Advisor in connection with the Fund. Portfolio orders may be placed
with affiliated broker-dealers, and in such case, the affiliated broker-
dealers will receive brokerage commissions. However, portfolio orders
will be placed with the affiliated broker-dealers only where the price
being charged and the services being provided compare favorably with
those which would be charged to the Fund by non-affiliated broker-
dealers, and with those charged by the affiliated broker to other
unaffiliated customers, on transactions of a like size and nature.
Brokerage may also be allocated to dealers in consideration of Fund
share distribution but only when execution and price are comparable to
that offered by other brokers. The Fund follows the standards of SEC
Rule 17e-1 under the Investment Company Act of 1940 which requires that
the commission paid to the Distributor must be reasonable and fair
compared to the commissions, fees or other remuneration received or to
be received by other brokers in connection with comparable transactions
involving similar securities during a comparable period of time.
For the Fund's last three fiscal years ended October 31, none of
the Fund's aggregate brokerage commissions were paid to Lincoln
Investment Planning, Inc. and for the same periods, none of the Fund's
aggregate amount of portfolio transactions (purchases and sales) were
effected by Lincoln Investment Planning, Inc.
The Advisor is responsible for making the Fund's portfolio
decisions subject to instructions described in the prospectus. The
Board of Directors may however impose limitations on the allocation of
portfolio brokerage.
The Fund expects that purchases and sales of portfolio money market
securities will be principal transactions. Such securities are normally
purchased directly from the issuer or from an underwriter or market
maker for the securities. There will usually be no brokerage
commissions paid by the Fund for such purchases. Purchases from the
underwriters will include the underwriter commission or concession and
purchases from dealers serving as market makers will include the spread
between the bid and asked price.
TRANSFER AGENT
Lincoln Investment Planning, Inc. serves as transfer agent,
dividend disbursing agent and redemption agent for redemptions pursuant
to a Transfer and Dividend Disbursing Agency Agreement approved by the
shareholders of The Rightime Fund, Inc. at a meeting held for such
purpose on October 23, 1986. The agreement is subject to annual renewal
by the Board of Directors of the Fund, including the directors who are
not interested persons of the Fund or of the Transfer Agent. Pursuant
to the agreement, as amended and approved by the Board of Directors, the
Transfer Agent receives a fee calculated at an annual rate of $15.00 per
shareholder account and will be reimbursed out-of-pocket expenses
incurred on the Fund's behalf.
The Transfer Agent acts as paying agent for all Fund expenses and
provides all the necessary facilities, equipment and personnel to
perform the usual or ordinary services of Transfer and Dividend Paying
Agent, including: receiving and processing orders and payments for
purchases of shares, opening stockholder accounts, preparing annual
stockholder meeting lists, mailing proxy material, receiving and
tabulating proxies, mailing stockholder reports and prospectuses,
withholding certain taxes on nonresident alien accounts, disbursing
income dividends and capital distributions, preparing and filing U.S.
Treasury Department Form 1099 (or equivalent) for all stockholders,
preparing and mailing confirmation forms to stockholders for all
purposes and redemption of the Fund's shares and all other confirmable
transactions in stockholders' accounts, recording reinvestment of
dividends and distributions of the Fund's shares and causing redemption
of shares for and disbursements of proceeds to withdrawal plan
stockholders. The Transfer Agent may contract with other parties to
provide services under the agreement. Pursuant to this authority, the
Transfer Agent has entered into an agreement under which DST Systems
Inc. and its subsidiaries provide computer services and the printing and
distribution of confirmations and tax forms.
PURCHASE OF SHARES
The shares of the Fund are continuously offered by the Distributor.
Orders for the purchase of shares of the Fund received by the
Distributor prior to the close of regular trading on any day the New
York Stock Exchange ("NYSE") is open for trading will be confirmed at
the offering price next determined (based upon the sales charges and
valuation procedures described in the Prospectus) as of the close of
regular trading of the NYSE on that day. The New York Stock Exchange is
scheduled to be open Monday through Friday throughout the year except
for New Year's Day, Washington's Birthday, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. Orders
received by the Distributor after the close of regular trading of the
NYSE will be confirmed at the next day's price. It is the
responsibility of dealers to transmit orders received by them promptly
to the Distributor.
Purchases of The Rightime Government Securities Fund, The Rightime
Blue Chip Fund, The Rightime Social Awareness Fund, and The Rightime
MidCap Fund of $50,000 or more at offering price carry reduced sales
loads as shown in the table below and may include a series of purchases
over a 13-month period under a Letter of Intention signed by a
purchaser. The sales loads set forth below are applicable to purchases
made at one time by an individual; or an individual, his or her spouse
and their children under the age of 21; or a trustee or other fiduciary
of a single trust estate or single fiduciary account (including an
employee benefit plan qualified under Section 401 of the Internal
Revenue Code). For purchases of $2 million or more, there is no sales
charge.
<TABLE>
<CAPTION>
Sales Load
as % of
Offering Amount Dealer's
Amount of Purchase Price Invested Concession*
<S> <C> <C> <C>
Less than $50,000 4.75% 4.99% 4.25%
$50,000 but under $100,000 3.75 3.90 3.35
$100,000 but under $500,000 2.75 2.83 2.45
$500,000 but under $1,000,000 1.75 1.80 1.55
$1,000,000 but under $2,000,000 .75 .76 .65
For purchases of $2 million or more there is no sales load.
*In some circumstances, the Distributor may allow a larger percentage of
the sales load to dealers. Such dealers may have additional
responsibilities under the federal securities laws
</TABLE>
The Fund must be notified when a sale takes place which
would qualify for the reduced sales charge on the basis of previous
purchases and current purchases. The reduced sales charge will be
granted upon confirmation of the shareholder's holdings by the Fund.
Officers, directors and employees, and any pension, profit-sharing
or qualified retirement plan of The Rightime Fund, Inc., Rightime
Econometrics, Inc. and Lincoln Investment Planning, Inc., and registered
representatives of dealers who have entered into dealers agreements with
the Distributor, may purchase shares of the Funds at the net asset value
per share. Certain family members of any such individual and their
spouses identified above, and certain trusts, pension, profit-sharing or
qualified retirement plan for the sole benefit of such persons may
purchase shares of the Fund at the net asset value per share. (See
"Waivers of Sales Loads" within "How to Purchase Shares" of the
Prospectus.)
Letter of Intent: The above table is also applicable to the
aggregate amount of purchases made by any such purchaser previously
enumerated within a 13-month period pursuant to a written Letter of
Intent provided by the Distributor, and not legally binding on the
signer or the Fund, which includes provisions for a price adjustment,
depending upon the actual amount purchased within such period, and which
provides for the holding in escrow by the Distributor of 5% of the total
amount intended to be purchased until such purchase is completed within
the 13-month period. If the intended investment is not completed, the
purchaser will be asked to pay an amount equal to the difference between
the sales load on the shares purchased at the reduced rate and the sales
load otherwise applicable to the total shares purchased. If such
payment is not made within 20 days following the expiration of the 13-
month period, the Distributor will surrender an appropriate number of
the escrowed shares for redemption in order to realize the difference.
Such purchasers may include the value (at offering price at the level
designated in their Letter of Intent) of all their shares of the Fund
previously purchased and still held as of the date of their Letter of
Intent toward the completion of such Letter.
Right of Accumulation: The reduced sales load is applicable to any
subsequent purchases of shares of the Fund, by any such purchaser where
the aggregate investment in the Funds by such purchaser is $50,000 or
more. The Right of Accumulation is applicable to purchases made at any
one time by an individual; or an individual, his or her spouse and their
children under the age of 21; or a trustee or other fiduciary of a
single trust estate or single fiduciary account (including an employee
benefit plan qualified under Section 401 of the IRC).
Tax-Sheltered Retirement Plans
Shares of the Funds are available to all types of tax-deferred
retirement plans including custodial accounts described in Section
403(b)(7) of the IRC. Qualified investors benefit
from the tax-free compounding of income dividends and capital gains
distributions. You can transfer an existing plan into the Fund or set
up a new plan in the manner described below.
Individual Retirement Accounts (IRA) -- Individuals, who are not
active participants (and, when a joint return is filed, who do not have
a spouse who is an active participant) in an employer maintained
retirement plan are eligible to contribute on a deductible basis to an
IRA account. The IRA deduction is also available for individual
taxpayers and married couples with adjusted gross incomes not in excess
of certain specified limits. All individuals may make nondeductible IRA
contributions to a separate account to the extent that they are not
eligible for a deductible contribution. Income earned by an IRA account
is tax deferred. Special IRA programs called SEP-IRAs (Simplified
Employee Pension-IRA) and SIMPLE-IRAs (Savings Incentive Match Plan for
Employees-IRA) are also available under which employees may set up IRA
accounts, into which employers can make contributions in lieu of
establishing retirement plans for such employees. SEP-IRAs and SIMPLE-
IRAs can free employers of many of the recordkeeping requirements of
establishing and maintaining a retirement plan trust.
If you have received a lump sum distribution from another qualified
retirement plan, you may rollover all or part of that distribution into
an IRA. Your rollover contribution is not subject to the limits on
annual IRA contributions. By acting within applicable time limits of
the lump sum distribution you can continue to defer Federal income taxes
on your lump sum contribution and on any income that is earned on that
contribution.
KEOGH Plans for Self-Employed -- If you are a self-employed
individual, you may establish a Self-Employed Retirement (KEOGH) Plan
and contribute up to the maximum amounts permitted for your plan under
current tax laws. Under a Defined Benefit KEOGH Plan, you may establish
a program with a specific amount of retirement income as your objective.
The annual contributions needed to achieve this goal are calculated
actuarially and can sometimes exceed the tax-deductible contributions
allowed under a regular KEOGH Plan.
Tax-Sheltered Custodial Accounts -- If you are an employee of a
public school, state college or university, or an employee of a
non-profit organization exempt from tax under Section 501(c)(3) of the
IRC, you may be eligible to make contributions into a custodial account
(pursuant to section 403(b)(7) of the IRC) which invests in Fund shares.
Such contributions, to the extent that they do not exceed certain
limits, are excludable from the gross income of the employee for federal
income tax purposes.
Tax Treatment of Individual Retirement Accounts under the Taxpayer
Relief Act of 1997 (the "1997 Act") -- The 1997 Act also contains
several new or expanded Individual Retirement Accounts which will be
available to the Fund's investors beginning on January 1, 1998.
The 1997 Act creates a new "Roth IRA" which will permit tax free
distributions of account balances if the assets have been invested for
five years or more, and the distributions meet certain qualifying
restrictions. Investors filing as single taxpayers who have adjusted
gross incomes of $95,000 or more, and investors filing as joint
taxpayers with adjusted gross incomes of $150,000 or more may find their
participation in this IRA to be restricted.
The 1997 Act also creates a new education IRA to help parents fund
their children's post-secondary school education. Parents or others may
contribute up to $500 annually to an education IRA on behalf of any
child under age 18. This IRA is subject to the same AGI limits as the
Roth IRA above, and there are other contribution restrictions that may
apply. The education IRA earnings accumulate tax free, and assets that
have accumulated in the IRA may be distributed tax free when used to pay
qualified higher education expenses.
Other Retirement, Savings, and Deferred Compensation Plans -- Our
Investment Advisor and Distributor make available, through their
affiliates, a full range of consulting and plan administrative services,
on a fee basis. Information is available to explain and assist you with
the establishment of various types of corporate retirement plans,
education and charitable organizations deferred compensation plans,
thrift and savings plans. Also available are automated recordkeeping
and actuarial services for tax-sheltered plan sponsors which fulfill all
appropriate accounting and recordkeeping requirements. These services
can also accommodate so called "split-funding" options where plan assets
may be invested in various investments in addition to the Fund.
How to establish Retirement Accounts -- All the foregoing
retirement plan options require special applications or plan documents.
Please call us to obtain information regarding the establishing of
retirement plan accounts. CoreStates Bank NA acts as the plan custodian
for retirement plan accounts with the Fund, and charges nominal fees in
connection with plan establishment and maintenance. These fees are
detailed in the plan documents. You may wish to consult with your
attorney or other tax advisor for specific advice prior to establishing
a plan.
Systematic Withdrawal Plan
You can arrange to make systematic cash withdrawals from your
account monthly, quarterly or annually. Your account, initially, must
be at least $5,000 in order to establish this service, although the
withdrawals may continue even though your account subsequently drops
below $5,000. Each payment must be for an amount not less than $25. If
the periodic amount you elect to withdraw is more than the increase in
the value of any income or gains in your account, the withdrawals can
deplete the value of your account. If the withdrawals are to be sent to
someone who is not a registered owner of the shares, a signature
guarantee is required on your application for this service. The Fund
bears the cost of providing this plan at the present time. Please
contact the Fund to obtain information about establishing a systematic
withdrawal plan.
In-Kind Redemptions
To comply with certain state securities regulations, the Fund has
undertaken that any portfolio securities issued in an in-kind redemption
will be readily marketable securities.
DIVIDENDS, DISTRIBUTION AND TAXES
The Funds' investments in options and futures contracts are subject
to many complex and special tax rules. For example, over-the-counter
options on debt and equity securities will generally produce a long-term
or short-term capital gain or loss upon exercise, lapse, or closing out
of the option or sale of the underlying stock or security. By contrast,
the Fund's positions in put or call options (including options it has
written as well as options it has purchased) which are "listed" (traded
on or subject to the rules of a qualified board of Exchange) and which
include non-equity options, regulated futures contracts and options on
futures contracts will be required to be "marked to market" at the end
of the Fund's fiscal year -- that is, treated as closed out or sold at
their fair market value -- for Federal income tax purposes. This means
that the unrealized appreciation or depreciation in such positions will
be treated as having been realized on that date. Sixty percent of such
gain or loss and sixty percent of any gain or loss from the actual
closing out or exercise of such positions, will be treated as long-term
capital gain or loss and the remainder will be treated as short-term
capital gain or loss. In addition, on the stipulated expiration date
sixty percent of any gain realized on the expiration of a listed option
which the Fund has written and sixty percent of any loss realized on the
expiration of such an option it has purchased will also be treated as
long-term capital gain or loss, as the case may be, and the balance as
short-term capital gain or loss. Under legislation pending in technical
corrections to the 1997 Act, the 60% long-term capital gain portion will
qualify as 20% rate gain and will be subject to tax to individual
investors at a maximum rate of 20% for investors in the 28% or higher
federal income tax brackets, or at a maximum rate of 10% for investors
in the 15% federal income tax bracket.
Section 1092 of the Code may affect the taxation of options on
securities, futures contracts and options on futures contracts. Section
1092 defines a "straddle" as offsetting positions with respect to
personal property. A position in personal property is generally defined
as any interest, including an option, in personal property. A position
in personal property, therefore, includes a debt security and an option
written on, or a futures contract to sell, a debt security. Section
1092 generally provides that in the case of a straddle, any loss from
the disposition of a position in the straddle can be deducted only to
the extent that the loss exceeds the unrealized gains on any offsetting
straddle position. For example, if the Fund enters into a straddle
consisting of a U.S. Treasury bond and a purchased put with respect to
such bond, any loss realized from a closing purchase transaction with
respect to the put can be recognized only to the extent that such loss
exceeds any unrealized gain on the underlying bond. Section 1092 also
provides that "wash sale" rules are applicable to transactions where a
position is sold at a loss and a new offsetting position is acquired
within a prescribed period as are "short sale" rules which could (i)
eliminate or stop the Fund's holding period in a security, and (ii)
convert losses arising from the disposition of an option or futures
position from short-term to long-term when a hypothetical sale of the
underlying security on the date of entry into the option or futures
position would have given rise to a long-term capital gain. Management
will manage the Fund so as to take into account Section 1092 and IRS
regulations thereunder. However, the Fund's ability to obtain a high
current income may, under certain circumstances, be adversely affected.
If such a put or call option or futures contract is part of a
"mixed straddle," as defined in the IRC, however, the Fund may be able
to make an election under Section 1256(d) of the IRC under which the
mark to market and 60/40 rules and the straddle rules of Section 1092
will be inapplicable in whole or in part to positions within the
straddle. If a Section 1256(d) election is made and a call or put
option the Fund has written lapses, the Fund will recognize a short-term
capital gain for Federal income tax purposes. If a call option the Fund
has written is exercised and the Fund makes such an election, the Fund
will realize a capital gain or loss (long-term or short-term, depending
on the Fund's holding period in the underlying security) from the sale
of the underlying security and the proceeds from such sale will be
increased by the premium originally received. Also, in such case, if a
put option which the Fund has written is exercised, the amount of the
premium originally received will reduce the cost of the security which
the Fund purchases upon exercise of the option. If the Fund terminates
its obligation under an option it has written by entering a closing
purchase transaction and it makes such an election it will recognize a
short-term gain or loss measured by the difference between the price it
has to pay to close the option position and the premium it received for
writing the option. This election would also apply to options purchased
and futures contracts entered into by the Fund. A Section 1256(d)
election could result in an increase in distributions or ordinary income
(relative to long-term capital gains) to shareholders.
In the case of another election the Fund may make, the Fund may set
up one or more mixed straddle accounts comprising all or some positions
held by the Fund that are required to be "marked to market" as described
above (called "Section 1256 contracts"), and all positions offsetting
such positions. In such a case, the Fund will mark each such position
to market on a daily basis, compute the net Section 1256 contract gain
or loss and net non-Section 1256 contract gain or loss for the account,
and the "daily account net gain or loss" for each account. Any daily
account net gain or loss attributable to a net non-Section 1256 gain or
loss will be treated as short-term and any daily account net gain or
loss attributable to net Section 1256 contract gain or loss will be
treated as sixty percent long-term capital gain or loss, and forty
percent short-term capital gain or loss, with corresponding basis
adjustments. Such daily account net gains and losses will be netted on
an annual basis as will the annual account net gains and losses for all
mixed straddle accounts; however, no more than fifty percent of the
total annual account net gain for a taxable year shall be treated as
long-term capital gain, and no more than forty percent of the total
annual account net loss for a taxable year shall be treated as short-
term capital loss.
Yet a third election the Fund may make would enable it to identify
separately those mixed straddles with respect to which it chooses to
offset gains and losses before applying "60/40 treatment" to the net
amount of any gains or losses attributable to Section 1256 contracts.
Section 1233 of the IRC provides generally for the gain and loss
consequences of short sales. Such gains and losses are capital gains
and losses to the extent the property used to close the short sale
constitutes a capital asset of the Fund (which will always be the case
under the Fund's method of investment). Section 1233 establishes those
rules for determining holding period of securities involved in short
sales and whether the capital gain or loss on short sales is long term
and short term. Under Rule one, if at the time of a short sale, the
Fund has not held short term securities "substantially identical" to the
securities sold short [for a period longer than the short time holding
period], then any gain realized on the closing on the short sale is
short term regardless of the length of time the sale was open or the
period for which the securities used to close the sale were held. Rule
two provides that the holding period of any securities "substantially
identical" to the securities sold short, which were held short term at
the time of the short sale or required thereafter and before its
closing, begins on the earlier of: (a) the date the short sale is
closed; and (b) the date such other acquired securities are sold or
otherwise disposed of. Rule one applies only to the extent gain is
realized; Rule two applies in gain or loss situations. Rule three
provides that when at the time of a short sale the Fund holds securities
long term which are "substantially identical" to those sold short, any
loss resulting from the closing of the short sale is a long term loss
regardless of the holding period of the securities used to close the
short sale. Rules one and three apply only to the extent the securities
used to close the transaction are not in excess of the substantially
identical securities in the order of acquisition and only to the extent
they do not exceed the quantity sold short. The term "substantially
identical" in the case of securities has the same meaning as in Section
1091 of the IRC dealing with "wash sales".
A holder of a zero coupon Treasury security will receive no cash
payment of interest prior to maturity; it will
be required for federal income taxes purposes to include an
imputed amount of interest income on its investment income calculations
each year a particular zero coupon Treasury security is held. In
general, this income computation will be based upon the "effective
interest" method of calculation. This method results in the reporting
of income in increasing amounts each year and in reduced net investment
income on a present value basis when compared to the (former) "straight-
line" method. The straight-line computation of interest simply
allocates the total discount equally over all periods during which the
obligation will exist.
The 1997 Act has also added new provisions for dealing with
transactions that are generally called "Constructive Sale Transactions."
Under these rules, the Fund must recognize gain (but not loss) on any
constructive sale of an appreciated financial position in stock, a
partnership interest or certain debt instruments. The Fund will
generally be treated as making a constructive sale when it: 1) enters
into a short sale on the same property, 2) enters into an offsetting
notional principal contact, or 3) enters into a futures or forward
contract to deliver the same or substantially similar property. Other
transactions (including certain financial instruments called collars)
will be treated as constructive sales as providing in Treasury
regulations to be published. There are also certain expectations that
apply for transactions that are closed before the end of the 30th day
after the close of the taxable year.
Distributions paid to shareholders by the Fund of ordinary income
and short-term capital gains arising from the Fund's investments,
including investments in options, forwards, and futures contracts, will
be taxable as ordinary income. The Fund will monitor its transactions
in such options and contracts and may make certain other tax elections
in order to mitigate the effect of the above rules.
Since it is the Fund's policy to meet the requirements of
Subchapter M of the IRC of 1986, and accordingly
distribute to its shareholders at least 90% of the income, the Fund may
be required to pay out as a dividend each year an amount which is
greater than the total amount of cash interest the Fund actually
received. Such distributions will be made from the cash assets of the
Fund or by liquidation of portfolio securities, if necessary. If a
distribution of cash necessitates the liquidation of portfolio
securities, the Investment Advisor will select which securities to sell.
The Fund may realize a gain or loss from such sales. In the event the
Fund realizes net capital gain from such transactions, its shareholders
may receive a larger capital gain distribution, if any, than they would
in the absence of such transactions.
Under the 1997 Act, the Fund is required to report the capital gain
of portfolio securities using the following categories:
"28% rate gains": gains resulting from securities sold by the
Fund after July 28, 1997 that were held for more than one year but not
more than 18 months, and securities sold by the Fund before May 7, 1997
that were held for more than one year. These gains will be taxable to
individual investors at a maximum rate of 28%.
"20% rate gains": gains resulting from securities sold by the Fund
after July 28, 1997 that were held for more than 18 months, and under a
transitional rule, securities sold by the Fund between May 7 and July
28, 1997 (inclusive) that were held for more than one year. These gains
will be taxable to individual investors at a maximum rate of 20% for
individual investors in the 28% or higher federal income tax brackets,
and at a maximum rate of 10% for investors in the 15% federal income tax
bracket.
The Act also provides for a new maximum rate of tax on capital
gains of 18% for individuals in the 28% or higher federal income tax
brackets and 8% for individuals in the 15% federal income tax bracket
for "qualified 5-year gains." For individuals in the 15% bracket,
qualified 5-year gains are net gains on securities held for more than 5
years which are sold after December 31, 2000. For individuals who are
subject to tax at higher rates, qualified 5-year gains are net gains on
securities which are purchased after December 31, 2000 and are held for
more than 5 years. Taxpayers subject to tax at the higher rates may
also make an election for shares held on January 1, 2001 to recognize
gain on their shares in order to qualify such shares as qualified 5-year
property.
<TABLE>
<CAPTION>
OFFICERS AND DIRECTORS OF THE FUND
<S> <C> <C>
Position and Office Principal Occupation
Name, Address and Age with the Fund During Past Five Years
David J. Rights* Chairman of the Board, President of Rightime, Econometrics, Inc.
1095 Rydal Road President, and a registered investment advisor; President
Rydal, PA 19046 Treasurer and Treasurer of Rightime Administrators;
Age 52 President of RTE Securities, Inc. a
registered broker-dealer; and Consultant
to Lincoln Investment Planning, Inc.,
a registered investment advisor and
broker dealer.
Edward S. Forst Sr. Director, Vice- Chairman of the Board, Lincoln Investment
218 Glenside Avenue President and Planning Inc., a registered investment
Wyncote, PA 19095-1595 Secretary advisor and broker dealer; Vice President
Age 71 and Secretary of Rightime Administrators.
Francis X. Barrett Director Director and Member of the Finance and
3121 Kutztown Road Pension Committee, Sacred Heart Hospital;
Reading, PA 19605 Formerly, Executive Director, National
Age 72 Catholic Education Association; and Pastor,
Church of Holy Guardian Angels, Reading, PA
Dr. Winifred L. Tillery Director Education Consultant to the NJ State Dept.
744 Amsterdam Road of Education; Superintendent of Schools, Camden
Mt. Laurel, NJ 08054 County, New Jersey. Formerly, Director, Division
Age 65 of Direct Services, NJ Dept. of Education; and
Executive Director for Special Education for
the Philadelphia School District
Dr. Carol A. Wacker Director Formerly, Assistant Superintendent for
1659 Landquist Dr. Senior High Schools, the Philadelphia School
Encinitas, CA 92024 District.
Age 64
</TABLE>
The officers conduct and supervise the daily business operations of the
Fund, while the directors, in addition to functions set forth under
"Advisor," "Administrator" and "Distributor" review such actions and
decide on general policy. Compensation to officers and directors of the
Fund who are affiliated with the Administrator, the Investment Advisor
or the Distributor is paid by the Administrator, the Investment Advisor
or the Distributor, respectively, and not by the Fund. Directors
receive a $7,000 annual retainer and $1,250 per board of directors
meeting attended and are reimbursed for expenses incurred in connection
with attendance at such meetings. Directors who are members of the
audit committee receive $1,250 per audit committee meeting if such
meeting is held separately from a board meeting. During the most recent
fiscal year, there were four meetings of the board of directors, and two
separate meetings of the audit committee. The Fund has adopted a Code
of Ethics which governs when and how securities investment personnel may
engage in personal securities transactions.
The officers and directors of The Rightime Fund, Inc. do not,
individually or as a group, beneficially own more than 1% of any of the
Funds.
<TABLE>
<CAPTION>
(5)
(3) Total
Pension or Compensation
Retirement (4) From
(2) Benefits Estimated Registrant
Aggregate Accrued As Annual and Fund
Compensation Part of Benefits Complex
(1) from Fund Upon Paid to
Name of Person, Position Registrant Expenses Retirement Directors
<S> <C> <C> <C> <C>
David J. Rights, Director* $0 None None None
Edward S. Forst, Sr., Director* $0 None None None
Francis X. Barrett, Director $14,500 None None $14,500
Dr. Winifred L. Tillery, Director $14,500 None None $14,500
Dr. Carol A. Wacker, Director $14,500 None None $14,500
* "Interested" person as defined in the Investment Company Act of 1940 (the "1940 Act").
</TABLE>
GENERAL INFORMATION
Audits and Reports
The accounts of The Rightime Fund, Inc., are audited each year by
Tait, Weller & Baker of Philadelphia, PA, independent certified public
accountants. Shareholders receive semiannual and annual reports of the
Fund including the annual audited financial statements and a list of
securities owned.
Custodian
The Fund has retained CoreStates Bank, NA, Philadelphia,
Pennsylvania to act as custodian of the securities and cash of each
series of the Fund.
PERFORMANCE
Current yield and total return may be quoted in advertisements,
shareholder reports or other communications to shareholders.
Occasionally, the Fund may include its distribution rate in sales
literature. Yield is the ratio of income per share derived from the
Fund's portfolio investments to a current maximum offering price
expressed in terms of percent. The yield is quoted on the basis of
earnings after expenses have been deducted. Total return is the total
of all income and capital gains paid to shareholders, assuming
reinvestment of all distributions, plus (or minus) the change in the
value of the original investment, expressed as a percentage of the
purchase price. The distribution rate is the amount of distributions
per share made by the Fund over a twelve-month period divided by the
current maximum offering price.
Securities and Exchange Commission rules require the use of
standardized performance quotations or, alternatively, that every non-
standardized performance quotation furnished by the Fund be accompanied
by certain standardized performance information computed as required by
the Commission. Current yield and total return quotations used by the
Fund are based on the standardized methods of computing performance
mandated by the Commission. An explanation of those and other methods
used by the Fund to compute or express performance follows:
The yield for The Rightime Government Securities Fund for the 30-
day period ended on the date of the audited financial statements
contained herein was 3.91%.
As indicated below, current yield is determined by dividing the net
investment income per share earned during the period by the maximum
offering price per share on the last day of the period and analyzing the
result. Expenses accrued for the period include any fees charged to all
shareholders during the 30-day base period. According to the SEC
formula:
Yield = 2 [( a-b + 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 per share on the last day of the
period.
<TABLE>
<CAPTION>
The average annual total return for each Fund for the
indicated period ended on the date of the balance sheet contained herein
is as follows:
<S> <C> <C> <C> <C>
One Year Five Year Ten Year Since Fund's
Fund Name Period Period Period Inception
The Rightime Fund (2.77)% 8.48% 8.26% 10.24%
The Rightime Government
Securities Fund (6.75)% 1.75% 4.59% 3.80%
The Rightime Blue
Chip Fund (2.24)% 8.80% 8.76% 8.63%
The Rightime Social
Awareness Fund 0.75% 7.97% -- 7.91%
The Rightime MidCap
Fund 0.53% 9.00% -- 8.95%
</TABLE>
As the following formula indicates, the average annual total
return is determined by multiplying a hypothetical initial purchase
order of $1,000 by the average annual compound rate of return (including
capital appreciation/depreciation and dividends and distributions paid
and reinvested) for the stated period less any fees charged to all
shareholder accounts and analyzing the result. The calculation assumes
the maximum sales load is deducted from the initial $1,000 purchase
order and that all dividends and distributions are reinvested at the net
asset value on the reinvestment dates during the period. The quotation
assumes the account was completely redeemed at the end of each one, five
and ten year period or since inception and the deduction of all
applicable charges and fees. According to the SEC formula:
n
P(1+T) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5, or 10 year periods at the
end of the 1, 5, or 10 year periods (or fractional portion
thereof).
Sales literature pertaining to the Fund may quote a
distribution rate in addition to the yield or total return. The
distribution rate is the amount of distributions per share made by the
Fund over a twelve-month period divided by the current maximum offering
price. The distribution rate differs from the yield because it measures
what the Fund paid to shareholders rather than what the Fund earned from
investments. It also differs from the yield because it may include
dividends paid from premium income from option writing, if applicable,
and short-term capital gains in addition to dividends from investment
income. Under certain circumstances, such as when there has been a
change in the amount of dividend payout, or a fundamental change in
investment policies, it might be appropriate to annualize the
distributions paid over the period such policies were in effect, rather
than using the distributions paid during the past twelve months.
With respect to those categories of investors who are
permitted to purchase shares of the Fund at net asset value, sales
literature pertaining to the Fund may quote a "Current Return for Net
Asset Value Investments." This rate is computed by adding the income
dividends paid by the Fund during the last twelve months and dividing
that sum by a current net asset value. Figures for compound yield,
total return and other measures of performance for Net Asset Value
Investments may also be quoted. These will be derived as described
elsewhere in this Statement with the substitution of net asset value for
public offering price.
Sales literature referring to the use of the Fund(s) as a
potential investment for Individual Retirement Accounts (IRAs), and
other tax-advantaged retirement plans may quote a total return based
upon compounding of dividends on which it is presumed no federal income
tax applies.
Regardless of the method used, past performance is not
necessarily indicative of future results, but is an indication of the
return to shareholders only for the limited historical period used.
Comparisons and Advertisements
To help investors better evaluate how an investment in the
Fund(s) might satisfy their investment objective, advertisements
regarding the Fund(s) may discuss yield or total return for the Fund(s)
as reported by various financial publications. Advertisements may also
compare yield or total return to yield or total return as reported by
other investments, indices, and averages. The following publications,
indices, and averages may be used:
a) Dow Jones Composite Average or its component averages - an
unmanaged index composed of 30 blue-chip industrial corporation stocks
(Dow Jones Industrial Average), 15 utilities company stocks (Dow Jones
Utilities Average), and 20 transportation company stocks. Comparisons
of performance assume reinvestment of dividends.
b) Standard & Poor's 500 Stock Index or its component indices
- - an unmanaged index composed of 400 industrial stocks, 40 financial
stocks, 40 utilities stocks, and 20 transportation stocks. Comparisons
of performance assume reinvestment of dividends.
c) Standard & Poor's MidCap 400 Index - an unmanaged index
composed of 400 domestic and Canadian stocks which measures the mid-
range sector of the U.S. stock market.
d) The New York Stock Exchange composite or component indices
- - unmanaged indices of all industrial, utilities, transportation, and
finance stocks listed on the New York Stock Exchange.
e) Lipper - Mutual Fund Performance Analysis, Lipper Fixed
Income Analysis, and Lipper Mutual Fund Indices - measures total return
and average current yield for the mutual fund industry. Ranks
individual mutual fund performance over specified time periods assuming
reinvestment of all distributions, exclusive of sales charges.
f) The Ryan composite or component indices - unmanaged
indices of U.S. government securities as published in Barron's and other
publications.
g) Donoghue money market fund indices - unmanaged indices of
money market funds as published in Barron's and other publications.
h) CDA Mutual Fund Report, published by CDA Investment
Technologies, Inc. - analyzes price, current yields, risk, total return,
and average rate of return (average annual compounded growth rate) over
specified time periods for the mutual fund industry.
i) Weisenberger - Mutual Funds Panorama, Weisenberger
Investment Companies, published by Warren, Gorham & Lamont, Inc. - Lists
distributions, price and fund privileges; measures performance over
varying time period, calculates yield and lists expense ratios.
j) Mutual Fund Values and Mutual Fund Source Book, published
by Morningstar, Inc. - Lists fund assets, portfolio composition, annual
total return, portfolio statistics, income and expense ratios, risk
statistics and ranks funds by objective. Provides statistics on the
mutual fund industry.
k) Financial publications such as Business Week, Changing
Times, Financial World, Forbes, Fortune, Money Magazine, Wall Street
Journal, Barron's et al. which rate fund performance over various time
periods.
l) Consumer Price Index (or Cost of Living Index), published
by the U.S. Bureau of Labor Statistics - a statistical measure of
change, over time, in the price of goods and services, in major
expenditure groups.
In assessing such comparisons of yield, return, or volatility,
an investor should keep in mind that the composition of the investments
in the reported indices and averages is not identical to the Fund's
portfolio, that the averages are generally unmanaged, and that the items
included in the calculations of such averages may not be identical to
the formula used by the Fund to calculate its figures. In addition
there can be no assurance that the Fund will continue this performance
as compared to such other averages.
FINANCIAL STATEMENTS
The Rightime Fund Inc.'s financial statements are contained in its
annual report to shareholders dated October 31, 1997, which is available
without charge upon request, and is incorporated herein by reference.
ADMINISTRATOR
Rightime Administrators Inc.
218 Glenside Avenue
Wyncote, PA 19095-1594
INVESTMENT ADVISOR
Rightime Econometrics, Inc.
1095 Rydal Road
Rydal, PA 19046-1711
DISTRIBUTOR
Lincoln Investment Planning, Inc.
218 Glenside Avenue
Wyncote, PA 19095-1595
CUSTODIAN
CoreStates Bank, NA
Broad and Chestnuts Streets
Philadelphia, PA 19101-7618
TRANSFER AGENT
Lincoln Investment Planning, Inc.
218 Glenside Avenue
Wyncote, PA 19095-1594
MAILING ADDRESS:
Rightime Fund Quick Mail
P.O. Box 13813
Philadelphia, PA 19101-3813
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
AUDITORS
Tait, Weller & Baker
Eight Penn Center, Suite 800
Philadelphia, PA 19103-2108
THE RIGHTIME FUND, INC.
FORM N-14
Part C. OTHER INFORMATION
Item 15. Indemnification
---------------
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by its against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
ITEM 16. Exhibits.
--------
(1) (a) Articles of Incorporation of Registrant
(Exhibit to Form N1A filed 2/19/85; filed
via EDGAR in PE#22 on 3/1/97);*
(b) Articles Supplementary establishing The
Rightime Government Securities Fund
(Exhibit to Post-effective Amendment No. 4 to
Form N1A; filed via EDGAR in PE#22 on
3/1/97);*
(c) Articles Supplementary establishing The
Rightime Blue Chip Fund (Exhibit to
Post-effective Amendment No. 7 to Form N1A;
filed via EDGAR in PE#22 on 3/1/97);*
(d) Articles Supplementary establishing The
Rightime Growth Fund (Exhibit to Post-effective
Amendment No. 11 to Form N1A; filed via EDGAR
in PE#22 on 3/1/97);*
(e) Articles Supplementary establishing The
Rightime Social Awareness Fund
(Exhibit to Post-effective Amendment No. 13 to
Form N1A; filed via EDGAR in PE#22 on
3/1/97);*
(f) Articles Supplementary establishing The
Rightime MidCap Fund
(Exhibit to Post-effective Amendment No. 16 to
Form N-1A; filed via EDGAR in PE#22 on
3/1/97):*
(2) Copies of the existing bylaws of Registrant(Exhibit to Form N1A
filed 219-85; filed via EDGAR in PE#22 on 3/1/97);*
(3) Copies of any voting trust agreement with respect to more
than 5 percent of any class of equity securities of the
Registrant.
Not applicable;
(4) A copy of the Plan of Reorganization is included in this
Registration Statement as Exhibit A to the Combined Proxy
Statement/Prospectus.
(5) (a) Specimen of capital stock certificate of The Rightime
Series of Registrant (Exhibit to Post-effective
Amendment No. 2 to Form N1A);
(b) Specimen of capital stock certificate of The
Rightime Government Securities Series (Exhibit to
Post-effective Amendment No. 4 to Form N1A);
(c) Specimen of capital stock certificate of The
Rightime Blue Chip Fund Series (Exhibit to Post-effective
Amendment No. 7 to Form N1A);
(d) Specimen of capital stock certificate of The
Rightime Social Awareness Fund (Exhibit to Post-effective
Amendment No. 13 to Form N1A);
(e) Specimen of capital stock certificate of The Rightime
MidCap Fund (Exhibit to Post-effective Amendment No. 16
to Form N-1A);
(6) (a) Investment Advisory Agreement between the Registrant and
Rightime Econometrics, Inc. on behalf of The Rightime
Series (Exhibit to Form N1A filed 2/19/85; filed via
EDGAR in PE#22 on 3/1/97);*
(b) Investment Advisory Agreement between the Registrant and
Rightime Econometrics, Inc. on behalf of The Rightime
Government Securities Series (Exhibit to Post-effective
Amendment No. 4 to Form N1A; filed via EDGAR in PE#22 on
3/1/97);*
(c) Investment Advisory Agreement between the Registrant and
Rightime Econometrics, Inc. on behalf of The Rightime
Blue Chip Fund Series (Exhibit to Post-effective
Amendment No. 7 to Form N1A; filed via EDGAR in PE#22 on
3/1/97);*
(d) Investment Advisory Agreement between the Registrant and
Rightime Econometrics, Inc. on behalf of The Rightime
Growth Fund Series (Exhibit to Post-effective Amendment
No. 11 to Form N1A);
(e) Investment Advisory Agreement between the Registrant and
Rightime Econometrics, Inc. on behalf of The Rightime
Social Awareness Fund (Exhibit to Post-effective
Amendment No. 13 to Form N1A; filed via EDGAR in PE#22
on 3/1/97);*
(f) Investment Advisory Agreement between the Registrant and
Rightime Econometrics, Inc. on behalf of The Rightime
MidCap Fund (Exhibit to Post-effective Amendment No. 16
to Form N-1A; filed via EDGAR in PE#22 on 3/1/97);*
(7) (a) Distribution Agreement between Registrant and Lincoln
Investment Planning, Inc. on behalf of The Rightime
Series (Exhibit to Pre-effective Amendment No. 1 to Form
N1A; filed via EDGAR in PE#22 on 3/1/97);*
(b) (i) Distribution Agreement between Registrant and
Lincoln Investment Planning, Inc. on behalf of
The Rightime Government Securities Series
(Exhibit to Post-effective Amendment No. 4 to
Form N1A; filed via EDGAR in PE#22 on 3/1/97);
(ii) Form of Amended Distribution Agreement
between Registrant and Lincoln Investment
Planning, Inc. for the Rightime Government
Securities Series (Exhibit to Post-effective
Amendment No. 9 to Form N1A; filed herewith);
(c) Distribution Agreement between Registrant and Lincoln
Investment Planning, Inc. on behalf of The Rightime
Blue Chip Fund Series (Exhibit to Post-effective
Amendment No. 7 to Form N1A; filed via EDGAR in PE#22
on 3/1/97);*
(d) Distribution Agreement between Registrant and Lincoln
Investment Planning, Inc. on behalf of The Rightime
Growth Fund (Exhibit to Post-effective Amendment No. 11
to Form N1A);
(e) Distribution Agreement between Registrant and Lincoln
Investment Planning, Inc. on behalf of The Rightime
Social Awareness Fund (Exhibit to Post-effective
Amendment No. 13 to Form N1A; filed via EDGAR in PE#22
on 3/1/97);*
(f) Distribution Agreement between Registrant and Lincoln
Investment Planning, Inc. on behalf of The Rightime
MidCap Fund (Exhibit to Post-effective Amendment No. 16
to Form N-1A; filed via EDGAR in PE#22 on 3/1/97);*
(8) Not applicable;
(9) (a) Custody Agreement between the Registrant and First
Pennsylvania Bank, N.A. on behalf of The Rightime Series.
(Exhibit to Form N1A filed 2/19/85).
(b) Custody Agreement between the Registrant and
Investors Fiduciary Trust Company on behalf of The
Rightime Government Securities Series. (Exhibit to
Post-effective Amendment No. 4 to Form N1A).
(c) Custody Agreement between the Registrant and First
Pennsylvania Bank, N.A. on behalf of The Rightime Blue
Chip Fund Series (Exhibit to Post-effective Amendment No.
7 to Form N1A).
(d) Custody Agreement between Registrant and Philadelphia
National Bank for custodial services (Exhibit to
Post-effective Amendment No. 11 to Form N1A; filed via
EDGAR in PE#22 on 3/1/97.)*
(e) Amendment to Custodian Agreement (Exhibit to
Post-effective Amendment No. 13 to Form N1A; filed via
EDGAR in PE#22 on 3/1/97);*
(f) Amendment to Custodian Agreement (Exhibit to
Post-effective Amendment No. 16 to Form N-1A; filed via
EDGAR in PE#22 on 3/1/97);*
(10) (a) 12b-1 Plan regarding: The Rightime Series (Exhibit to
Form N1A filed 2/19/85; filed; via EDGAR in PE#22
on 3/1/97);*
(b) Amendment No. 1 to 12b-1 Plan (Exhibit to
Post-effective Amendment No. 15 to Form N-1A; filed via
EDGAR in PE#22 on 3/1/97);*
(c) 12b-1 Plan regarding: The Rightime Government
Securities Fund series (Exhibit to Post-effective
Amendment No. 4 to Form N1A; filed via EDGAR in PE#22
on 3/1/97);*
(d) Amendment No. 1 to 12b-1 Plan (Exhibit to
Post-effective Amendment No. 15 to Form N-1A; filed via
EDGAR in PE#22 on 3/1/97);*
(e) 12b-1 Plan regarding: The Rightime Blue Chip Fund
Series (Exhibit to Post-effective Amendment No. 7 to Form
N1A; filed via EDGAR in PE#22 on 3/1/97);*
(f) Amendment No. 1 to 12b-1 Plan (Exhibit to
Post-effective Amendment No. 15 to Form N-1A; filed via
EDGAR in PE#22 on 3/1/97);*
(g) 12b-1 Plan regarding: The Rightime Growth Fund Series
(Exhibit to Post-Effective Amendment No. 11 to Form N1A;
filed via EDGAR in PE#22 on 3/1/97);
(h) Amendment No. 1 (Exhibit to Post-effective Amendment No.
15 to Form N-1A; filed via EDGAR in PE#22 on 3/1/97);
(i) 12b-1 Plan regarding: The Rightime Social Awareness
Fund Series (Exhibit to Post-effective Amendment No. 13
to Form N1A; filed via EDGAR in PE#22 on 3/1/97);*
(j) Amendment No. 1 to 12b-1 Plan (Exhibit to
Post-effective Amendment No. 15 to Form N-1A; filed via
EDGAR in PE#22 on 3/1/97);*
(k) 12b-1 Plan regarding: The Rightime MidCap Fund Series
(Exhibit to Post-effective Amendment No. 16 to Form N-
1A; filed via EDGAR in PE#22 on 3/1/97);*
(11) Opinion and consent of counsel as to the legality of the
securities being registered indicating whether they will,
when sold, be legally issued, fully paid and non-assessable was
filed as an exhibit to Post-Effective Amendment No. 23 to the
Registration Statement and is incorporated by reference herein.
(12) An opinion and consent to its use, of counsel supporting the
tax matter and consequences to shareholders discussed in the
prospectus will be filed as a Post-Effective Amendment to
this Registration Statement
(13) (a) (i) Transfer Agency Agreement between the
Registrant and First Pennsylvania Bank, N.A.
on behalf of The Rightime Series. (Exhibit
to Form N1A filed 2/19/85);
(ii) Amendment to the Transfer Agency Agreement
(Exhibit to Post-effective Amendment No. 2 to
Form N1A);
(b) Transfer and Dividend Disbursing Agency Agreement
between the Registrant and Lincoln Investment Planning
(Exhibit to Post-Effective Amendment No. 4 to Form N-1A;
filed via EDGAR in PE#22 on 3/1/97);*
(c) (i) Administration Agreement between Registrant and
Rightime Administrators, Inc. on behalf of The
Rightime Fund series (Exhibit to Pre-effective
Amendment No. 1 to Form N1A filed via EDGAR in
PE#22 on 3/1/97);
(ii) Proposed Form of Amended and Restated
Administration Agreement between Registrant and
Rightime Administrators, Inc. on behalf of The
Rightime Fund series.*
(d) (i) Administration Agreement between Registrant and
Rightime Administrators, Inc. on behalf of The
Rightime Government Securities Fund series
(Exhibit to Post-effective Amendment No. 4 to
Form N1A filed via EDGAR in PE#22 on 3/1/97);
(ii) Proposed form of Amended and Restated
Administration Agreement between Registrant and
Rightime Administrators, Inc. on behalf of The
Rightime Government Securities Fund series.*
(e) (i) Administration Agreement between Registrant and
Rightime Administrators, Inc. on behalf of The
Rightime Blue Chip Fund series (Exhibit to
Post-effective Amendment No. 7 to Form N1A filed
via EDGAR in PE#22 on 3/1/97);
(ii) Proposed form of Amended and Restated
Administration Agreement between Registrant and
Rightime Administrators, Inc. on behalf of The
Rightime Blue Chip Fund series.*
(f) Administration Agreement between Registrant and
Rightime Administrators, Inc. on behalf of The Rightime
Growth Fund (Exhibit to Post-effective Amendment No. 11
to Form N1A);
(g) (i) Administration Agreement between Registrant and
Rightime Administrators, Inc. on behalf of The
Rightime Social Awareness Fund series (Exhibit
to Post-effective Amendment No. 13 to Form N1A
filed via EDGAR in PE#22 on 3/1/97);
(ii) Amended and Restated Administration Agreement
dated as of December 12, 1997 between Registrant
and Rightime Administrators, Inc. on behalf of
The Rightime Social Awareness Fund series.*
(h) (i) Administration Agreement between Registrant and
Rightime Administrators, Inc. on behalf of The
Rightime MidCap Fund series (Exhibit to
Post-effective Amendment No. 16 to Form N-1A
filed via EDGAR in PE#22 on 3/1/97);
(ii) Amended and Restated Administration Agreement
dated September 19, 1997 between the Registrant
and Rightime Administrators, Inc. on behalf of
The Rightime MidCap Fund series.*
(i) Services Agreement dated March 26, 1985 between Rightime
Administrators, Inc. and Lincoln Investment Planning,
Inc. (Exhibit to Form N1A filed 2/19/85);*
(j) Accounting Services Agreement between Rightime
Administrators, Inc. and First Pennsylvania Bank, N.A.
(Exhibit to Post-effective Amendment No. 2 to Form N1A);
(k) Amendment of the Accounting Services Agreement (Exhibit
to Post-effective Amendment No. 2 to Form N1A);
(l) Accounting Services Agreement dated December 1,
1986 between the Registrant and Lincoln
Investment Planning, Inc., together with
Amendment No. 1 thereto;*
(14) Consent of Auditors (filed herewith);
(15) Not applicable;
(16) Not applicable.
*Previously filed and incorporated by reference
Item 17. Undertakings
------------
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this Registration Statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act, the reoffering
prospectus will contain the information called for by the applicable
registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other
items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that
is filed under paragraph (1) above will be filed as a part of an
amendment to the registration statement and will not be used until
the amendment is effective, and that, in determining any liability
under the 1933 Act, each post-effective amendment shall be deemed to
be a new Registration Statement for the securities offered therein,
and the offering of the securities at that time shall be deemed to
be the initial bona fide offering for them.
SIGNATURES
----------
As required by the Securities Act of 1933, this Registration
Statement has been signed on behalf of the Registrant, in the City
of Wyncote, and the Commonwealth of Pennsylvania, on the 6 day
------
of April 6, 1998.
--------------
THE RIGHTIME FUND, INC.
(Registrant)
By:/S/David J. Rights
----------------------
David J. Rights, President
As required by the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities
and on the dates indicated.
Signature: Title: Date:
- --------- ----- ----
/S/David J. Rights Director, President April 6, 1998
- ---------------------- -------
David J. Rights (Principal Executive
Officer), and Treasurer
(Principal Financial
and Accounting
Officer)
/S/Edward S. Forst, Sr. Director April 6, 1998
- ---------------------- -------
Edward S. Forst, Sr.
/S/Francis X. Barrett Director April 6, 1998
- ---------------------- -------
Francis X. Barrett
/S/Winifred L. Tillery Director April 6, 1998
- ---------------------- -------
Winifred L. Tillery
/S/Carol A. Wacker Director April 6, 1998
- ---------------------- -------
Carol A. Wacker
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our report dated November 26, 1997 on the
financial statements and financial highlights for the periods indicated
thereon of The Rightime Fund, The Rightime Government Securities Fund,
The Rightime Blue Chip Fund, The Rightime Social Awareness Fund, and
the Rightime MidCap Fund, each a series of shares of The Rightime Fund,
Inc. Such financial statements and financial highlights appear in the
1997 Annual Report to Shareholders which is incorporated by reference
in the Registration Statement on Form N-14 of The Rightime Fund, Inc.
We also consent to the references to our Firm in such Registration
Statement and Combined Proxy Statement/Prospectus.
/S/TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
April 6, 1998
