(THE PRIMARY TREND FUNDS LOGO)
PROSPECTUS
THE PRIMARY
TREND FUND
THE PRIMARY
INCOME FUND
THE PRIMARY U.S.
GOVERNMENT FUND
MILWAUKEE, WISCONSIN
OCTOBER 31, 1999
PROSPECTUS OCTOBER 31, 1999
(THE PRIMARY TREND FUNDS LOGO)
The Primary Trend Funds are a family of three 100% no load mutual funds
offering various investment choices:
o THE PRIMARY TREND FUND
(invests mainly in common stocks)
o THE PRIMARY INCOME FUND o THE PRIMARY U.S. GOVERNMENT FUND
(invests mainly in dividend-paying (invests mainly in U.S.
common stocks and to a lesser government securities)
extent in fixed-income securities
and preferred stocks)
Please read this Prospectus and keep it for future reference. It contains
important information, including information on how The Primary Trend Funds
invest and the services they offer to shareholders.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Primary Trend Fund, Inc.
The Primary Income Funds, Inc.
700 North Water Street
Milwaukee, WI 53202
1-800-443-6544
(Fund Information Provided by Arnold
Investment Counsel Incorporated)
1-800-968-2122
(Account Information Provided by Firstar
Mutual Fund Services, LLC)
www.primarytrendfunds.com
TABLE OF CONTENTS
Questions Every Investor Should Ask Before
Investing in The Primary Trend Funds. 1
Fees and Expenses 7
Who Manages the Funds? 8
How Are The Funds' Share Prices
Determined? 8
How Do I Open An Account and
Purchase Shares? 8
How Do I Sell My Shares? 11
May Shareholders Make Exchanges
Between Funds? 12
What About Dividends, Capital Gains
Distributions and Taxes? 13
What About the Year 2000 Issue? 13
Financial Highlights 14
QUESTIONS EVERY INVESTOR SHOULD ASK BEFORE INVESTING
IN THE PRIMARY TREND FUNDS
1. WHAT ARE THE GOALS OF THE PRIMARY TREND FUNDS?
THE PRIMARY TREND FUND NASDAQ SYMBOL: PTFDX
The Primary Trend Fund seeks capital growth and income.
THE PRIMARY INCOME FUND NASDAQ SYMBOL: PINFX
The Primary Income Fund seeks current income with an opportunity for capital
growth.
THE PRIMARY U.S. GOVERNMENT FUND NASDAQ SYMBOL: PGUSX
The Primary U.S. Government Fund seeks current income.
Although they have no intention of doing so, each Fund may change its
investment objective without obtaining shareholder approval.
2. WHAT ARE THE PRINCIPAL INVESTMENT STRATEGIES OF THE PRIMARY TREND FUNDS?
THE PRIMARY TREND FUND
The Primary Trend Fund invests primarily in common stocks of U.S. companies.
Most, but not all, of its common stock investments pay dividends. Typically The
Primary Trend Fund invests in well-established mid- to large-capitalization
companies (market capitalizations of $1 billion or more) having an operating
history of ten or more years. The Fund's investment adviser favors "value"
stocks and shuns stocks where the price reflects a premium because of their
popularity. The Fund's investment adviser considers a number of financial
characteristics such as earnings growth, book value, dividends, asset value and
liquidation value in determining whether or not a company's stock is
undervalued.
THE PRIMARY INCOME FUND
The Primary Income Fund invests primarily in dividend-paying common stocks
of United States companies. The Primary Income Fund typically invests in well-
established mid- to large-capitalization companies (market capitalizations of $1
billion or more) having an operating history of ten or more years, favors
"value" stocks, and shuns stocks where the price reflects a premium because of
their popularity. The Primary Income Fund also invests in preferred stocks,
which may or may not be convertible into common stock. When the Fund invests in
non-convertible preferred stock, the investment adviser considers the amount of
the dividend payment and the capacity and the willingness of the issuer to
continue to make dividend payments. When the Fund invests in convertible
preferred stocks (as well as other convertible securities) the investment
adviser also considers whether the underlying common stock investment is a
suitable investment for the Fund.
The Primary Income Fund also invests in investment-grade (i.e., ranked in
one of the four highest credit ratings by a nationally recognized rating agency)
corporate bonds and U.S. Government securities. In purchasing debt securities,
the investment adviser considers the maturity of the security as well as the
credit quality of the issuer. It will lengthen or shorten the maturity of the
Fund's portfolio of debt securities depending on its view of the direction of
interest rates. The weighted average maturity of its portfolio of debt
securities may be as short as two years or as long as thirty years. It will
increase or decrease the percentage of debt securities invested in corporate
bonds as compared to U.S. Government securities depending on the relative
attractiveness of these classes of debt securities.
The Primary Income Fund normally has more than 25% of its assets invested in
the utilities industry.
THE PRIMARY U.S. GOVERNMENT FUND
The Primary U.S. Government Fund invests 80% or more of its assets in U.S.
government securities. The securities may include direct obligations of the
U.S. Treasury as well as securities of agencies or instrumentalities of the U.S.
government. Securities of U.S. agencies or instrumentalities may or may not be
backed by the full faith and credit of the United States. The balance of the
Primary U.S. Government Fund's investments may be invested in investment-grade
corporate bonds or money market instruments.
The Primary U.S. Government Fund's weighted average maturity of the
portfolio may be as short as two years or as long as thirty years. The Primary
U.S. Government Fund considers interest rate trends as well as economic and
market information before determining its desired weighted average maturity.
The Primary U.S. Government Fund will invest in investment-grade corporate bonds
instead of U.S. government securities when the yield differential between U.S.
government securities and investment-grade corporate bonds widens sufficiently
to justify the increased credit risk associated with investment-grade corporate
bonds.
ALL FUNDS
Each of the Funds, in response to adverse market, economic, political or
other conditions, may take temporary defensive positions. This means a Fund
will invest some or all of its assets in money market instruments (like U.S.
Treasury Bills, commercial paper or commercial paper master notes). The Primary
Trend Fund and The Primary Income Fund will not be able to achieve their
investment objective of capital growth to the extent that they invest in money
market instruments since these securities earn interest but do not appreciate in
value. Also these investments will usually have a lower yield than the longer
term debt securities in which The Primary Income Fund and The Primary U.S.
Government Fund may invest. When a Fund is not taking a temporary defensive
position, it still may hold some cash and money market instruments in order to
take advantage of investment opportunities, or so it can pay expenses and
satisfy redemption requests.
None of the Funds attempt to achieve their investment objectives by frequent
trading of securities. None of the Funds use options, futures and other
derivative instruments to enhance yield or to hedge against loss. The Funds
believe such instruments are highly speculative and not in the best interest of
the conservative investor for whom the Funds are designed.
3. WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE PRIMARY TREND FUNDS?
Investors in the Primary Trend Funds may lose money. There are risks
associated with investments in the types of securities in which the Primary
Trend Funds invest. These risks include:
THE PRIMARY THE PRIMARY THE PRIMARY
TREND FUND INCOME FUND U.S. GOVERNMENT FUND
---------------------- ----------------------------- --------------------
o Market Risk o Market Risk o Market Risk
o Value Investing Risk o Value Investing Risk o Interest Rate Risk
o Industry Concentration Risk o Credit Risk
o Interest Rate Risk o Prepayment Risk
o Credit Risk
o Prepayment Risk
o MARKET RISK: The prices of the securities in which the Primary Trend
Funds invest may decline for a number of reasons. The price declines of
common stocks and bonds may be steep, sudden and/or prolonged.
o VALUE INVESTING RISK: The Primary Trend Fund and The Primary Income Fund
primarily invest in "value" stocks. Our investment adviser may be wrong
in its assessment of a company's value and the stocks these Funds hold may
not reach what the investment adviser believes are their full values.
From time to time, "value" investing falls out of favor with investors.
During these periods, these Funds' relative performance may lag.
o INDUSTRY CONCENTRATION RISK: The Primary Income Fund's policy of normally
investing more than 25% of its assets in the utilities industry means that
this Fund may be adversely affected by developments affecting this
industry. Utility companies are sensitive to changes in interest rates
and other economic conditions, governmental regulation, the price and
availability of fuel, environmental protection or energy conservation
practices, the level and demand for services, increased competition in
deregulated sectors, and the cost and delay of technological developments.
The value of shares of The Primary Income Fund may fluctuate more than if
it invested in a broader variety of industries.
o INTEREST RATE RISK: The Primary U.S. Government Fund will invest only in
debt securities and each of The Primary Trend Fund and The Primary Income
Fund may invest in debt securities. In general, the value of bonds and
other debt securities falls when interest rates rise. Longer term
obligations are usually more sensitive to interest rate changes than
shorter term obligations. There have been extended periods of increases
in interest rates that have caused significant declines in bond prices.
o CREDIT RISK: Each of the Funds may invest in debt securities not backed
by the full faith and credit of the United States. The issuers of such
bonds and other debt securities may not be able to make interest or
principal payments. Even if these issuers are able to make interest or
principal payments, they may suffer adverse changes in financial condition
that would lower the credit quality of the issuer, leading to greater
volatility in the price of the security.
o PREPAYMENT RISK: The issuers of bonds and other debt securities held by
the Funds may prepay principal due on securities, particularly during
periods of declining interest rates. Securities subject to prepayment
risk generally offer less potential for gain when interest rates decline,
and may offer a greater potential for loss when interest rates rise.
Rising interest rates may cause prepayments to occur at a slower than
expected rate thereby increasing the average life of the security and
making the security more sensitive to interest rate changes.
BECAUSE OF THESE RISKS THE FUNDS ARE A SUITABLE INVESTMENT ONLY FOR THOSE
INVESTORS WHO HAVE LONG-TERM INVESTMENT GOALS. PROSPECTIVE INVESTORS WHO ARE
UNCOMFORTABLE WITH AN INVESTMENT THAT WILL FLUCTUATE IN VALUE SHOULD NOT INVEST
IN THE FUNDS.
4. HOW HAVE THE PRIMARY TREND FUNDS PERFORMED?
The bar charts and tables that follow provide some indication of the risks
of investing in the Primary Trend Funds by showing changes in their performance
from year to year and how their average annual returns over various periods
compare to the performance of various broad-based securities indexes. Please
remember that each Fund's past performance is not necessarily an indication of
its future performance.
THE PRIMARY TREND FUND
(Total return per calendar year)
1989 8.91%
1990 -1.73%
1991 19.55%
1992 0.23%
1993 11.41%
1994 -0.13%
1995 16.20%
1996 29.98%
1997 18.19%
1998 -2.01%
Note: During the ten year period shown on the bar chart, the Fund's highest
total return for a quarter was 13.43% (quarter ended March 31, 1991) and
the lowest total return for a quarter was -10.31% (quarter ended
September 30, 1998).
The Fund's 1999 year to date total return is 2.30% (January 1, 1999
through the quarter ended September 30, 1999).
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING
DECEMBER 31, 1998) PAST YEAR PAST FIVE YEARS PAST TEN YEARS
- ---------------------------- --------- --------------- --------------
The Primary Trend Fund -2.01% 11.80% 9.58%
S&P 500*<F1> 28.58% 24.06% 19.21%
*<F1> The S&P 500 is the Standard & Poor's Composite Index of 500 Stocks, a
widely recognized unmanaged index of common stock prices.
THE PRIMARY INCOME FUND
(Total return per calendar year)
1990 3.77%
1991 21.49%
1992 2.28%
1993 15.43%
1994 -2.59%
1995 20.62%
1996 20.09%
1997 25.51%
1998 0.53%
Note: During the nine year period shown on the bar chart, the Fund's highest
total return for a quarter was 10.67% (quarter ended September 30, 1991)
and the lowest total return for a quarter was -4.85% (quarter ended
September 30, 1990).
The Fund's 1999 year to date total return is -3.71% (January 1, 1999
through the quarter ended September 30, 1999).
AVERAGE ANNUAL TOTAL RETURNS SINCE THE INCEPTION
(FOR THE PERIODS ENDING OF THE FUND
DECEMBER 31, 1998) PAST YEAR PAST FIVE YEARS (SEPTEMBER 1, 1989)
- ---------------------------- --------- --------------- -------------------
The Primary Income Fund 0.53% 12.23% 11.55%
S&P 500 28.58% 24.06% 17.41%
S&P Utilities Index*<F2> 14.79% 13.89% 12.36%
*<F2> The S&P Utilities Index is a market capitalization weighted composite of
the electric, natural gas and telephone utility companies in the S&P
500.
THE PRIMARY U.S. GOVERNMENT FUND
(Total return per calendar year)
1990 8.27%
1991 14.71%
1992 3.56%
1993 8.46%
1994 -3.14%
1995 14.03%
1996 3.76%
1997 6.13%
1998 5.74%
Note: During the nine year period shown on the bar chart, the Fund's highest
total return for a quarter was 5.76% (quarter ended December 31, 1990)
and the lowest total return for a quarter was -2.63% (quarter ended
March 31, 1994).
The Fund's 1999 year to date total return is 1.31% (January 1, 1999
through the quarter ended September 30, 1999).
AVERAGE ANNUAL TOTAL RETURNS SINCE THE INCEPTION
(FOR THE PERIODS ENDING OF THE FUND
DECEMBER 31, 1998) PAST YEAR PAST FIVE YEARS (SEPTEMBER 1, 1989)
- ---------------------------- --------- --------------- -------------------
The Primary U.S.
Government Fund 5.74% 5.16% 6.84%
Lehman Intermediate U.S.
Government Bond Index*<F3> 8.47% 6.45% 8.01%
*<F3> The Lehman Intermediate U.S. Government Bond Index is an unmanaged index
consisting of all U.S. Treasury and agency bonds having an effective
maturity of not less than one year or more than ten years weighted
according to market capitalization.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy
and hold shares of the Primary Trend Funds.
<TABLE>
SHAREHOLDER FEES (fees paid directly from your investment)
THE PRIMARY THE PRIMARY THE PRIMARY U.S.
TREND FUND INCOME FUND GOVERNMENT FUND
--------------- --------------- ----------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a Percentage of offering price) No Sales Charge No Sales Charge No Sales Charge
Maximum Deferred Sales Charge (Load) No Deferred No Deferred No Deferred
Sales Charge Sales Charge Sales Charge
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends And Distributions No Sales Charge No Sales Charge No Sales Charge
Redemption Fee None*<F4> None*<F4> None*<F4>
Exchange Fee None**<F5> None**<F5> None**<F5>
*<F4> Our transfer agent charges a fee of $12.00 for each wire redemption.
**<F5> Our transfer agent charges a fee of $5.00 for each telephone exchange.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
Management Fees 0.74% 0.74% 0.65%
Distribution and/or Service (12b-1) Fees 0.00% 0.00% 0.00%
Other Expenses 0.53% 1.38% 5.32%
Total Annual Fund Operating Expenses 1.27% 2.12%(1)<F6> 5.97%(1)<F6>
(1)<F6> Both The Primary Income Fund and The Primary U.S. Government Fund had actual Total Annual Fund Operating Expenses for the
most recent fiscal year that were less than the amounts shown. Our investment adviser reimbursed each Fund to the extent
necessary to ensure that Total Annual Fund Operating Expenses did not exceed the amounts set forth below.
The Primary Income Fund 1.00%
The Primary U.S. Government Fund 1.00%
Our investment adviser may discontinue these reimbursements at any time, but will not do so prior to June 30, 2000.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Primary Trend Funds with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in a Fund for the time periods
indicated and then redeem all of your shares at the end of these periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
The Primary Trend Fund $129 $403 $697 $1,534
The Primary Income Fund(1) $215 $664 $1,139 $2,452
The Primary U.S. Government Fund(1)<F7> $594 $1,765 $2,913 $5,688
(1)<F7> During the most recent fiscal year, our investment adviser reimbursed
each of The Primary Income Fund and The Primary U.S. Government Fund
in amounts such that Total Annual Fund Operating Expenses equaled
1.00%. Assuming Total Annual Fund Operating Expenses of 1.00%, your
costs, based on an assumed $10,000 investment and 5% annual return,
would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$102 $318 $552 $1,225
WHO MANAGES THE FUNDS?
Arnold Investment Counsel Incorporated (the "Adviser") is the investment
adviser to each of the Funds. The Adviser's address is:
First Financial Centre
700 North Water Street
Milwaukee, Wisconsin 53202
The Adviser has been in business since 1978 and has been the Funds' only
investment adviser. As the investment adviser to the Funds, the Adviser manages
the investment portfolio of each Fund. All of the decisions it makes concerning
the securities to buy and sell for the Funds are made by the Funds' portfolio
managers, Lilli Gust and Barry Arnold. Ms. Gust has been an officer of the
Adviser since 1978 and Mr. Arnold has been an officer or employee of the Adviser
since 1987. During the last fiscal year, each Fund paid the Adviser an annual
investment advisory fee equal to the following percentages of average net
assets:
The Primary Trend Fund 0.74%
The Primary Income Fund 0.74%
The Primary U.S. Government Fund 0.65%
HOW ARE THE FUNDS' SHARE PRICES DETERMINED?
The price at which investors purchase shares of each Fund and at which
shareholders redeem shares of each Fund is called its net asset value. The
Primary Trend Fund and The Primary Income Fund calculate their net asset values
as of the close of regular trading on the New York Stock Exchange (normally 4:00
p.m. Eastern Time) on each day the New York Stock Exchange is open for trading.
The Primary U.S. Government Fund also calculates its net asset value as of the
close of regular trading on the New York Stock Exchange but not on Columbus Day
and Veterans Day. The New York Stock Exchange is closed on holidays and
weekends. Each Fund calculates its net asset value based on the market prices
of the securities (other than money market instruments) it holds. Each Fund
values most money market instruments it holds at their amortized cost, which the
Board of Directors has determined accurately reflects the fair value of such
instruments. Each Fund will process purchase orders that it receives and
accepts and redemption orders that it receives prior to the close of regular
trading on a day that the New York Stock Exchange is open at the net asset value
determined LATER THAT DAY. It will process purchase orders that it receives and
accepts and redemption orders that it receives AFTER the close of regular
trading at the net asset value determined at the close of regular trading on the
NEXT DAY the New York Stock Exchange is open.
HOW DO I OPEN AN ACCOUNT AND PURCHASE SHARES?
HOW TO PURCHASE SHARES FROM THE FUNDS
1. Read this Prospectus carefully.
2. Determine how much you want to invest keeping in mind the following
minimums:
o New accounts $500
o Automatic Investment Plan $ 50
o Dividend reinvestment No Minimum
o Additional investments:
(by mail) $100
(by wire transfer) $500
3. Complete an Account Application, carefully following the instructions.
For additional investments, complete the remittance form attached to your
individual account statements. If you have any questions or need
applications or forms, please call 1-800-968-2122.
4. Make your check payable to The Primary Trend Funds. All checks must be
drawn on U.S. banks. The Funds will not accept cash or third party
checks. FIRSTAR MUTUAL FUND SERVICES, LLC, THE FUNDS' TRANSFER AGENT,
WILL CHARGE A $20 FEE AGAINST A SHAREHOLDER'S ACCOUNT FOR ANY PAYMENT
CHECK RETURNED FOR INSUFFICIENT FUNDS. THE SHAREHOLDER WILL ALSO BE
RESPONSIBLE FOR ANY LOSSES SUFFERED BY A FUND AS A RESULT.
5. Send the application and check to:
BY FIRST CLASS MAIL
The Primary Trend Funds
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
BY OVERNIGHT DELIVERY SERVICE OR EXPRESS MAIL
The Primary Trend Funds
c/o Firstar Mutual Fund Services, LLC
3rd Floor
615 East Michigan Street
Milwaukee, WI 53202-5207
PLEASE DO NOT SEND LETTERS BY OVERNIGHT DELIVERY SERVICE OR EXPRESS MAIL TO THE
POST OFFICE BOX ADDRESS.
If you wish to open an account by wire, please call 1-800-968-2122 prior to
wiring funds in order to obtain a confirmation number and to ensure prompt and
accurate handling of funds. YOU SHOULD WIRE FUNDS TO:
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, WI 53202
ABA #075000022
CREDIT:
Firstar Mutual Fund Services, LLC
Account #112-952-137
FURTHER CREDIT:
(name of Fund to be purchased)
(shareholder registration)
(shareholder account number, if known)
You should then send a properly signed Account Application marked "FOLLOW-
UP" to either of the addresses listed above. PLEASE REMEMBER THAT FIRSTAR BANK
MILWAUKEE, N.A. MUST RECEIVE YOUR WIRED FUNDS PRIOR TO THE CLOSE OF REGULAR
TRADING ON THE NEW YORK STOCK EXCHANGE FOR YOU TO RECEIVE SAME DAY PRICING. THE
FUNDS AND FIRSTAR BANK MILWAUKEE, N.A. ARE NOT RESPONSIBLE FOR THE CONSEQUENCES
OF DELAYS RESULTING FROM THE BANKING OR FEDERAL RESERVE WIRE SYSTEM, OR FROM
INCOMPLETE WIRING INSTRUCTIONS.
PURCHASING SHARES FROM BROKER-DEALERS, FINANCIAL INSTITUTIONS AND OTHERS
Some broker-dealers may sell shares of the Funds. These broker-dealers may
charge investors a fee either at the time of purchase or redemption. The fee,
if charged, is retained by the broker-dealer and not remitted to the Funds or
the Adviser. Some broker-dealers may purchase and redeem shares on a three-day
settlement basis.
The Funds may enter into agreements with broker-dealers, financial
institutions or other service providers ("Servicing Agents") that may include
the Funds as investment alternatives in the programs they offer or administer.
Servicing agents may:
o Become shareholders of record of the Funds. This means all requests
to purchase additional shares and all redemption requests must be sent
through the Servicing Agent. This also means that purchases made
through Servicing Agents are not subject to the Funds' minimum
purchase requirements.
o Use procedures and impose restrictions that may be in addition to, or
different from, those applicable to investors purchasing shares
directly from the Funds.
o Charge fees to their customers for the services they provide them.
Also, the Funds and/or the Adviser may pay fees to Servicing Agents to
compensate them for the services they provide their customers.
o Be allowed to purchase shares by telephone with payment to follow the
next day. If the telephone purchase is made prior to the close of
regular trading on the New York Stock Exchange, it will receive same
day pricing.
o Be authorized to accept purchase orders on behalf of the Funds. This
means that a Fund will process the purchase order at the net asset
value which is determined following the Servicing Agent's receipt of
the customer's order.
If you decide to purchase shares through Servicing Agents, please carefully
review the program materials provided to you by the Servicing Agent. When you
purchase shares of the Funds through a Servicing Agent, it is the responsibility
of the Servicing Agent to place your order with the Fund on a timely basis. If
the Servicing Agent does not, or if it does not pay the purchase price to the
Funds within the period specified in its agreement with the Funds, it may be
held liable for any resulting fees or losses.
OTHER INFORMATION ABOUT PURCHASING SHARES OF THE FUNDS
The Funds may reject any Account Application for any reason. The Funds will
not accept purchase orders made by telephone unless they are from a Servicing
Agent which has an agreement with the Funds.
The Funds will not issue certificates evidencing shares purchased unless the
investor makes a written request for a certificate. The Funds will send
investors a written confirmation for all purchases of shares, whether or not
evidenced by certificates.
The Funds offer an automatic investment plan allowing shareholders to make
purchases on a regular and convenient basis. The Funds also offer the following
retirement plans:
o Traditional IRA
o Roth IRA
o SEP-IRA
o Simple IRA
o Defined Contribution Retirement Plans
o 401(k) Plan
o 403 (b)(7) Custodial Accounts
Investors can obtain further information about the automatic investment plan and
the retirement plans by calling the Funds at 1-800-968-2122. The Funds
recommend that investors consult with a competent financial and tax advisor
regarding the retirement plans before investing through them.
HOW DO I SELL MY SHARES?
HOW TO REDEEM (SELL) SHARES DIRECTLY WITH THE FUND
1. Complete a redemption form that may be obtained by calling the Funds at
1-800-443-6544 or prepare a letter of instruction containing:
o the name of the Fund(s)
o account number(s)
o the amount of money or number of shares being redeemed
o the name(s) on the account
o daytime phone number
o additional information that the Funds may require for
redemptions by corporations, executors, administrators,
trustees, guardians, or others who hold shares in a fiduciary
or representative capacity. Please contact the Funds'
transfer agent, Firstar Mutual Fund Services, LLC, in
advance, at 1-800-968-2122 if you have any questions.
2. Sign the redemption form or letter of instruction exactly as the shares
are registered. Joint ownership accounts must be signed by all owners.
3. If there are certificates representing your shares, enclose the
certificates or execute a stock power exactly as your shares are
registered.
4. Have the SIGNATURES GUARANTEED by a commercial bank or trust company in
the United States, a member firm of the New York Stock Exchange or other
eligible guarantor institution in the following situations:
o The redemption proceeds will be in excess of $10,000
o The redemption request is made within 15 days of a change of
address
o The redemption proceeds are to be sent to a person other than
the person in whose name the shares are registered
o The redemption proceeds are to be sent to an address other
than the address of record
A NOTARIZED SIGNATURE IS NOT AN ACCEPTABLE SUBSTITUTE FOR A SIGNATURE
GUARANTEE.
5. Send the redemption form or letter of instruction to:
BY FIRST CLASS MAIL
The Primary Trend Funds
c/o Firstar Mutual Fund Services, LLC
Shareholder Services Center
P.O. Box 701
Milwaukee, WI 53201-0701
BY OVERNIGHT DELIVERY SERVICE OR EXPRESS MAIL
The Primary Trend Funds
c/o Firstar Mutual Fund Services, LLC
3rd Floor
615 East Michigan Street
Milwaukee, WI 53202-5207
PLEASE DO NOT SEND REDEMPTION FORMS OR LETTERS OF INSTRUCTION BY OVERNIGHT
DELIVERY SERVICE OR EXPRESS MAIL TO THE POST OFFICE BOX ADDRESS.
HOW TO REDEEM (SELL) SHARES THROUGH SERVICING AGENTS
If your shares are held by a Servicing Agent, you must redeem your shares
through the Servicing Agent. Contact the Servicing Agent for instructions on
how to do so.
REDEMPTION PRICE
The redemption price per share you receive for redemption requests is the
next determined net asset value after:
o Firstar Mutual Fund Services, LLC receives your written request in
proper form with all required information.
o A Servicing Agent that has been authorized to accept redemption
requests on behalf of the Funds receives your request in accordance
with its procedures.
PAYMENT OF REDEMPTION PROCEEDS
o For those shareholders who redeem shares by mail, Firstar Mutual
Fund Services, LLC will mail a check in the amount of the redemption
proceeds no later than the seventh day after it receives the
redemption request in proper form with all required information.
o For those shareholders who redeem shares through Servicing Agents,
the Servicing Agent will transmit the redemption proceeds in
accordance with its redemption procedures.
OTHER REDEMPTION CONSIDERATIONS
When redeeming shares of the Funds, shareholders should consider the
following:
o The redemption may result in a taxable gain.
o Shareholders who redeem shares held in an IRA must indicate on their
redemption request whether or not to withhold federal income taxes.
If not, these redemptions, as well as redemptions of other
retirement plans not involving a direct rollover to an eligible
plan, will be subject to federal income tax withholding.
o The Funds may delay the payment of redemption proceeds for up to
seven days in all cases.
o If you purchased shares by check, the Funds may delay the payment of
redemption proceeds until they are reasonably satisfied the check
has cleared (which may take up to 15 days from the date of
purchase).
o Firstar Mutual Fund Services, LLC currently charges a fee of $12
when transferring redemption proceeds to your designated bank
account by wire.
o If your account balance falls below $500 because you redeem shares,
you will be given 60 days to make additional investments so that
your account balance is $500 or more. If you do not, the Funds may
close your account and mail the redemption proceeds to you.
o While highly unlikely, the Funds may pay redemption requests "in
kind." This means that the Funds may pay redemption requests
entirely or partially with securities rather than with cash.
MAY SHAREHOLDERS MAKE EXCHANGES BETWEEN FUNDS?
Shares of any of the Primary Trend Funds may be exchanged for shares of any
other Primary Trend Fund or the Firstar Money Market Fund at their relative net
asset values. (An affiliate of Firstar Mutual Fund Services, LLC advises the
Firstar Money Market Fund. Please call 1-800-968-2122 for a prospectus
describing Firstar Money Market Fund.) You may have a taxable gain or loss as a
result of an exchange because the Internal Revenue Code treats an exchange as a
sale of shares.
HOW TO EXCHANGE SHARES
1. Read carefully this Prospectus and, if applicable, the prospectus for
Firstar Money Market Fund.
2. Determine the number of shares you want to exchange keeping in mind that
telephone exchanges are subject to a $1,000 minimum.
3. Write to The Primary Trend Funds, c/o Firstar Mutual Fund Services, LLC,
3rd Floor, P.O. Box 701, Milwaukee, Wisconsin 53201-0701 or call Firstar
Mutual Fund Services, LLC at 1-800-968-2122. Firstar Mutual Fund
Services, LLC charges a fee of $5.00 for each telephone exchange. There
is no charge for a written exchange.
WHAT ABOUT DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES?
The Primary Trend Fund distributes substantially all of its net investment
income and substantially all of its capital gains annually. The Primary Income
Fund and the Primary U.S. Government Fund distribute substantially all of their
net investment income monthly and substantially all of their capital gains
annually. You have two distribution options:
o AUTOMATIC REINVESTMENT -- Both dividend and capital gains
distributions will be reinvested in
additional Fund shares.
o ALL CASH OPTION -- Both dividend and capital gains distributions
will be paid in cash.
You may make this election on the Account Application. You may change your
election by writing to Firstar Mutual Fund Services, LLC or by calling 1-800-
968-2122.
Each Fund's distributions, whether received in cash or additional shares of
the Fund, may be subject to federal and state income tax. These distributions
may be taxed as ordinary income and capital gains (which may be taxed at
different rates depending on the length of time the Fund holds the assets
generating the capital gains). The Primary Trend Fund and The Primary Income
Fund expect that their distributions will consist of both ordinary income and
long-term capital gains. The Primary U.S. Government Fund expects that its
distributions will consist primarily of ordinary income.
WHAT ABOUT THE YEAR 2000 ISSUE?
The Funds' operations depend on the seamless functioning of computer systems
in the financial service industry, including those of the Adviser, and the
Funds' administrator, custodian and transfer agent. Many computer systems in
use today cannot properly process date-related information after December
31,1999 because of the method by which dates are encoded and calculated. This
failure, commonly referred to as the "Year 2000 Issue," could adversely affect
the handling of security trades, pricing and account servicing for the Funds.
The Adviser has made compliance with the Year 2000 Issue a high priority and
is taking steps that it believes are reasonably designed to address the Year
2000 Issue with respect to its computer systems. The Funds have also been
informed that comparable steps are being taken by their other major service
providers. The Adviser does not currently anticipate that the Year 2000 Issue
will have a material impact on its ability to continue to fulfill its duties as
investment adviser to the Funds. However, the Funds cannot guarantee that all
Year 2000 Issues will be identified and remedied, and the failure to
successfully identify and remedy all Year 2000 Issues could result in an adverse
impact on the Funds. The Year 2000 Issue could also have a negative impact on
the companies in which the Funds invest, which could hurt the Funds' investment
returns.
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand each
Fund's financial performance for the past five fiscal years of operations.
Certain information reflects financial results for a single Fund share. The
total returns in the tables represent the rate that an investor would have
earned on an investment in a Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Ernst & Young LLP, whose
report, along with the Funds' financial statements, are included in the Annual
Report which is available upon request.
<TABLE>
THE PRIMARY TREND FUND
FOR THE YEARS ENDED JUNE 30,
------------------------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $13.98 $14.82 $12.59 $12.10 $10.98
------ ------ ------ ------ ------
Net investment income 0.19 0.13 0.21 0.21 0.23
Net realized and unrealized gain on investments 0.23 1.60 2.98 1.30 1.55
------ ------ ------ ------ ------
Total from investment operations 0.42 1.73 3.10 1.51 1.78
------ ------ ------ ------ ------
Less distributions:
From net investment income (0.16) (0.06) (0.14) (0.23) (0.26)
------ ------ ------ ------ ------
From net realized gains (1.60) (2.51) (0.73) (0.79) (0.40)
------ ------ ------ ------ ------
Total distributions (1.76) (2.57) (0.87) (1.02) (0.66)
------ ------ ------ ------ ------
Net increase (decrease) (1.34) (0.84) 2.23 0.49 1.12
------ ------ ------ ------ ------
Net asset value, end of year $12.64 $13.98 $14.82 $12.59 $12.10
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN 4.7% 13.1% 26.2% 11.7% 17.0%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of year (000s) $21,351 $23,714 $23,206 $21,123 $21,343
Ratio of expenses to average net assets 1.27% 1.24% 1.18% 1.19% 1.24%
Ratio of net investment income to average net assets 1.53% 0.89% 0.82% 1.68% 1.88%
Portfolio turnover 47.9% 24.4% 63.5% 46.5% 37.1%
</TABLE>
<TABLE>
THE PRIMARY INCOME FUND
FOR THE YEARS ENDED JUNE 30,
------------------------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $13.86 $14.45 $12.77 $12.07 $11.04
------ ------ ------ ------ ------
Net investment income 0.42 0.45 0.42 0.43 0.50
Net realized and unrealized gain (loss) on investments (0.14) 1.50 2.44 1.28 1.10
------ ------ ------ ------ ------
Total from investment operations 0.28 1.95 2.86 1.71 1.60
------ ------ ------ ------ ------
Less distributions:
From net investment income (0.43) (0.44) (0.42) (0.43) (0.50)
From net realized gains (1.47) (2.10) (0.76) (0.58) (0.07)
------ ------ ------ ------ ------
Total distributions (1.90) (2.54) (1.18) (1.01) (0.57)
------ ------ ------ ------ ------
Net increase (decrease) (1.62) (0.59) 1.68 0.70 1.03
------ ------ ------ ------ ------
Net asset value, end of year $12.24 $13.86 $14.45 $12.77 $12.07
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN 3.0% 14.7% 24.1% 14.8% 14.8%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of year (000s) $4,276 $4,572 $4,307 $4,510 $4,221
Ratio of net expenses to average net assets 1.00% 0.97% 0.84% 0.84% 0.84%
Ratio of net investment income to average net assets 3.46% 3.16% 3.19% 3.43% 4.35%
Ratio of expenses reimbursed to average net assets 1.12% 1.05% 0.86% 0.73% 0.76%
Portfolio turnover 46.9% 33.5% 48.4% 41.5% 40.9%
</TABLE>
<TABLE>
THE PRIMARY U.S. GOVERNMENT FUND
FOR THE YEARS ENDED JUNE 30,
------------------------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $9.93 $9.88 $9.87 $10.09 $ 9.74
------ ------ ------ ------ ------
Net investment income 0.51 0.55 0.63 0.63 0.57
Net realized and unrealized gain (loss) on investments (0.14) 0.05 0.01 (0.22) 0.38
------ ------ ------ ------ ------
Total from investment operations 0.37 0.60 0.64 0.41 0.95
------ ------ ------ ------ ------
Less distributions:
From net investment income (0.51) (0.55) (0.63) (0.63) (0.57)
From net realized gains -- -- -- -- (0.03)
------ ------ ------ ------ ------
Total distributions (0.51) (0.55) (0.63) (0.63) (0.60)
------ ------ ------ ------ ------
Net increase (decrease) (0.14) 0.05 0.01 (0.22) 0.35
------ ------ ------ ------ ------
Net asset value, end of year $9.79 $9.93 $9.88 $ 9.87 $10.09
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN 3.8% 6.2% 6.7% 4.1% 10.2%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of year (000s) $768 $744 $734 $799 $1,345
Ratio of net expenses to average net assets 1.00% 0.95% 0.75% 0.75% 0.75%
Ratio of net investment income to average net assets 5.13% 5.55% 6.41% 6.24% 5.85%
Ratio of expenses reimbursed to average net assets 4.97% 5.09% 3.84% 2.20% 1.92%
Portfolio turnover 21.3% 62.6% 29.3% 46.6% 63.0%
</TABLE>
(THE PRIMARY TREND FUNDS LOGO)
WWW.PRIMARYTRENDFUNDS.COM
INVESTMENT ADVISER
Arnold Investment Counsel Incorporated
First Financial Centre
700 North Water Street
Milwaukee, Wisconsin 53202
1-800-443-6544
OFFICERS
Lilli Gust, President
Barry S. Arnold, Vice President and Assistant Secretary
James R. Arnold, Jr., Secretary and Treasurer
DIRECTORS
Barry S. Arnold
Lilli Gust
Clark J. Hillery
Harold L. Holtz
ADMINISTRATOR
Sunstone Financial Group, Inc.
207 East Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202
CUSTODIAN
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, Wisconsin 53202
1-800-968-2122
INDEPENDENT AUDITORS
Ernst & Young LLP
111 East Kilbourn Avenue
Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Founding member of
100%
NO-LOAD TM
MUTUAL FUND
COUNCIL
To learn more about the Primary Trend Funds you may want to read the Primary
Trend Funds' Statement of Additional Information (or "SAI") which contains
additional information about the Funds. The Primary Trend Funds have
incorporated the SAI into the Prospectus by reference. This means that you
should consider the contents of the SAI to be part of the Prospectus.
You also may learn more about the Primary Trend Funds' investments by
reading the Primary Trend Funds' annual and semi-annual reports to shareholders.
The annual report includes a discussion of the market conditions and investment
strategies that significantly affected the performance of the Funds during their
last fiscal year.
The SAI and the annual and semi-annual reports are all available to
shareholders and prospective investors without charge, simply by calling 1-800-
443-6544.
Prospective investors and shareholders who have questions about the Primary
Trend Funds may CALL the above number, WRITE to the address below, or visit our
WEB SITE also shown below:
The Primary Trend Funds, Inc.
First Financial Centre
700 North Water Street
Milwaukee, WI 53202
www.primarytrendfunds.com
The general public can review and copy information about the Primary Trend
Funds (including the SAI) at the Securities and Exchange Commission's Public
Reference Room in Washington, D.C. (Please call 1-800-SEC-0330 for information
on the operations of the Public Reference Room.) Reports and other information
about the Primary Trend Funds are also available at the Securities and Exchange
Commission's Internet site at http://www.sec.gov and copies of this information
may be obtained, upon payment of a duplicating fee, by writing to:
Public Reference Section
Securities and Exchange Commission
Washington, D.C. 20549-6009
Please refer to the Primary Trend Funds' Investment Company Act File No. 811-
04704 for The Primary Trend Fund and 811-05831 for The Primary Income Fund and
The Primary U.S. Government Fund, when seeking information about the Primary
Trend Funds from the Securities and Exchange Commission.
