RULE 497(c)
Registration No. 33-25137
PROSPECTUS
THE BRADFORD MONEY FUND
THE BRADFORD FUNDS, INC.
600 Fifth Avenue
New York, New York 10020
(888) 226-5504
The Securities And Exchange Commission Has Not Approved Or Disapproved These
Securities Or Passed Upon The Adequacy Of This Prospectus. Any Representation To
The Contrary Is A Criminal Offense.
TABLE OF CONTENTS
Page
----
Risk/Return Summary: Investments, Risks and Performance........................2
Fees and Expenses of the Fund..................................................4
Investment Objective and Principal Investment Strategies.......................5
Principal Risks................................................................6
Management.....................................................................6
Shareholder Account Information................................................7
Distribution Arrangements......................................................9
Financial Highlights..........................................................10
April 28, 2000
<PAGE>
RISK/RETURN SUMMARY: INVESTMENTS, RISKS, AND PERFORMANCE
The Fund's investment objective: As a money market fund, The Bradford
Money Fund (the Fund) seeks as high
a level of current interest income
as is consistent with maintaining
liquidity and stability of
principal.
The Fund's principal investment strategy: The Fund invests primarily in
short term debt securities
considered by the Adviser to be high
quality. Most commonly, the
Fund invests in commercial paper and
other obligations of U.S.
corporations that are considered to
mature in less than 13 months, which
have received the highest rating for
short-term debt from two or more
national rating agencies, and in
securities issued or guaranteed by
the U.S. Government or its agencies
or instrumentalities.
Principal risks of investing in the Fund: The rate of income will vary from
day to day depending upon
short-term interest rates.
It is possible that a major
change in interest rates or
a default on a security
held by the Fund could
cause the value of your
investment to decline.
Although the Fund seeks to
preserve the value of your
investment at $1.00 per
share, it is possible to
lose money by investing in
the Fund.
Investments in the Fund are
not insured or guaranteed
by the Federal Deposit
Insurance Corporation or
any other government
agency.
2
<PAGE>
PERFORMANCE AND ANNUAL RETURNS
The bar chart and table below indicate that the Fund's performance
generally varies from year-to-year and show how returns compare with a broad
based performance index for money market funds. You should also remember that
past performance does not necessarily indicate how the Fund will perform in the
future.
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS AS OF DECEMBER 31 FOR EACH YEAR (%):
- ---------------------------------------------------------------------------
[GRAPHIC OMITTED]
<S> <C>
Calendar Year End % Total Return
- ----------------- ---------------
1990 7.61%
1991 5.44%
1992 3.13%
1993 2.50%
1994 3.48%
1995 5.28%
1996 4.78%
1997 4.96%
1998 4.93%
1999 4.59%
================================================================================
</TABLE>
Best Quarter: For 2nd quarter 1990, total return was 1.89%
Worst Quarter: For 2nd quarter 1993, total return was 0.60%
<TABLE>
<CAPTION>
Average annual total returns as of 12/31/99:
<S> <C> <C> <C>
1 Year 5 Years Since Inception 1
------ ------- ----------------
Fund 4.59% 4.92% 4.71%
IBC's Money Fund
Report Average for
First Tier Funds 4.58% 4.92% 4.70%
</TABLE>
The Fund's seven day yield as of December 31, 1998 was 5.16%
3
<PAGE>
FEES AND EXPENSES OF THE FUND
<TABLE>
<CAPTION>
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY
AND HOLD SHARES OF THE FUND.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<S>
<C>
Maximum Account Fee (annual fee)...............................................$50(1)
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND INCOME)
Management Fees.........................................................................0.36%
Distribution (12b-1) Fees...............................................................0.20%
Other Expenses .........................................................................0.13%
Total Annual Fund Operating Expenses...........................................0.69%(2)
========
Less Fee Waiver................................................................(0.03%)
========
Net Annual Operating Expenses..................................................0.66%(3)
=========
</TABLE>
- ---------------------------------------
(1) Shareholders who are part of the BCM Program (as described on page 8 of
this Prospectus) are charged a $50 annual fee. There is no charge for a
regular Bradford securities account. If you have an IRA, you are
charged an additional $35 annual fee.
(2) These are the gross fees and expenses that the Fund would have incurred
for the fiscal year ended December 31, 1999, if Bradford Capital
Management, Ltd., as the Fund's investment adviser, did not waive any
fees.
(3) These are the net fees and expenses that the Fund actually incurred for
the fiscal year ended December 31, 1999, because the Adviser
voluntarily agreed to waive a portion of its investment advisory fees.
The Adviser has contractually agreed to continue to waive advisory fees
for the Fund's fiscal year ending December 31, 2000, such that it
receives 0.30% on the Fund's average daily net assets in excess of $1
billion up to $2 billion, and 0.29% on the Fund's average daily net
assets in excess of $2 billion.
<TABLE>
<CAPTION>
Example
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year. Expenses for the one year period are
calculated net of any fee waivers. Example expenses for the three year, five
year and ten year periods do not reflect fee waivers. Although your actual costs
may be higher or lower, based on these assumptions your costs would be:
<S> <C> <C> <C> <C>
1 year 3 years 5 years 10 years
------ ------- ------- --------
$117 $369 $629 $1,336
</TABLE>
4
<PAGE>
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
The Fund's investment objective is to provide as high a level of
current interest income as is consistent with maintaining liquidity and
stability of principal. This investment objective may not be changed without the
approval of the Fund's shareholders.
The Fund invests almost exclusively in low-risk corporate obligations
which the Adviser considers to be high quality, including commercial paper, and
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. Such obligations will have remaining maturities of 397 days
(13 months) or less and the dollar-weighted average maturity of the Fund will be
90 days or less. The Adviser generally follows a "buy and hold" philosophy,
meaning that the securities purchased for the Fund are held until maturity.
However, the Adviser may determine that it is in the Fund's best interest to
sell a portfolio security prior to its maturity when, for example, the Adviser
becomes concerned with the credit risks associated with that security.
All obligations at the time of purchase are either rated by at least
two major rating organizations, such as Standard & Poor's Rating Group or
Moody's Investor Services (Rating Agencies), in the highest short-term rating
category for short-term debt obligations (or, for securities rated by only one
Rating Agency, so rated by such Rating Agency) or, for securities that are
unrated, those determined to be of comparable quality by the Adviser. In order
to minimize the risks associated with investing in any one company and to comply
with the rules under the Investment Company Act of 1940, the Fund also
diversifies its investments so that, with minor exceptions and except for U.S.
Government obligations, not more than 5% of its total assets is invested in
securities of any one company.
The Rating Agencies and their respective short-term rating categories
are described in the Appendix to the Statement of Additional Information.
The following descriptions illustrate the types of obligations in which
the Fund may invest:
o U.S. GOVERNMENT OBLIGATIONS. These obligations or securities are notes,
bills or other debt obligations issued by, or whose principal and interest
are guaranteed by, the U.S. Government or one of its agencies or
instrumentalities. U.S. Treasury securities and some obligations of U.S.
Government agencies or instrumentalities, such as the Government National
Mortgage Association, are backed by the "full faith and credit" of the
United States. Some obligations of a U.S. Government agency, such as the
Federal National Mortgage Association, are backed by the right of the
issuer to borrow from the U.S. Treasury, and others only by the credit of
the issuing agency or instrumentality. U.S. Government obligations
generally have less credit risk (the risk that interest and principal will
not be paid on time) than other debt obligations.
o BANK OBLIGATIONS. U.S. dollar-denominated bank obligations, such as
certificates of deposit, bankers' acceptances and time deposits, from banks
having total assets at the time of purchase in excess of $10 billion.
o Commercial Paper. Commercial paper or other corporate obligations that
mature or are payable within 397 days of the date they are purchased by the
Fund. Such obligations may
5
<PAGE>
be offered only through a private placement by
the issuer but must be considered to be liquid, i.e., readily saleable, by
the Adviser.
PRINCIPAL RISKS
The principal risks of investing in the Fund and the circumstances
reasonably likely, in the opinion of the Adviser, to affect adversely your
investment are described below. Please note that there are other circumstances
that could adversely affect your investment and that could prevent the Fund from
achieving its objectives, which are not described here. The principal risks of
investing in the Fund are:
o INTEREST RATE RISK: In general, debt obligations' prices rise when interest
rates fall and fall when interest rates rise. The longer the term of a debt
obligation, the more sensitive that obligation is to interest rate changes.
The Adviser generally attempts to manage the Fund's interest rate risk by
shortening the average maturity of the Fund's holdings during periods of
rising interest rates.
o CREDIT RISK: It is possible that some of the issuers will not make payments
on debt obligations held by the Fund. Or, an issuer may suffer adverse
changes in financial condition that could lower the credit quality of an
obligation, leading to greater volatility in the price of the obligation,
including a substantial decrease in its value. A change in the rating by a
Rating Agency for an obligation may also affect the obligation's liquidity
and make it more difficult for the Fund to sell. The Adviser attempts to
manage the Fund's credit risk by investing almost exclusively in short-term
corporate obligations that receive the Rating Agencies' highest rating and
in U.S. Government obligations.
MANAGEMENT
The Fund's investment adviser is Bradford Capital Management, Ltd. (the
Adviser), J.C Bradford Financial Center, 330 Commerce Street, Nashville,
Tennessee 37201. The Adviser was formed on September 15, 1988, as a Tennessee
limited partnership for the purpose of becoming the Fund's investment adviser.
J.C. Bradford & Co., LLC, a Tennessee limited liability company (Bradford or the
Distributor), is the Adviser's limited partner. Bradford is an investment firm
which conducts a substantial brokerage and investment banking business and also
acts as the Distributor and transfer agent for the Fund.
The Adviser furnishes the Fund with investment advice and, in general,
supervises the investment program of the Fund. The Adviser furnishes, at its own
expense, office space, equipment and personnel (other than the services of
directors of the Company who are not affiliated with the Adviser) for
supervising the investment program of and placing orders for the portfolio
transactions for the Fund.
For these services and expenses, the Adviser receives from the Fund a fee
at an annual rate of 0.40% of the first $500 million of the Fund's daily net
assets and 0.35% of daily net assets in excess of $500 million. This fee is
computed daily and payable monthly. For 1999, the fee was 0.33% of the Fund's
average net assets (after a 0.03% fee waiver). The Adviser may from time to
6
<PAGE>
time waive some or all of its advisory fee. Currently, the Adviser is charging
only 0.30% on the Fund's average daily net assets greater than $1 billion up to
$2 billion and 0.29% on the Fund's average daily net assets greater than $2
billion.
On April 27, 2000, PaineWebber Group, Inc. ("PaineWebber") entered into a
merger agreement with all of the members of Bradford pursuant to which Bradford
will merge with a wholly-owned subsidiary of PaineWebber (the "Acquisition").
As a result, Bradford will become a wholly-owned subsidiary of PaineWebber. The
Acquisition is expected to be effective on or about June 15, 2000. The
Acquisition is subject to a number of conditions and there can be no assuarance
that it will be completed. The Acquisition, if completed, will result in a
change in control of both Bradford and the Adviser and will cause the Fund's
investment advisory agreement with the Adviser to terminate automatically. The
Adviser will propose that the Fund's Board of Directors approve an interim
investment advisory agreement that will take effect upon completion of the
Acquisition. Such interim investment advisory agreement will require the Adviser
to continue to provide the same services for the same compensation as are
currently in place. Such agreement, if approved by the Company's Directors, will
be in effect until a new investment advisory agreement is approved
by shareholders of the Fund as required by the Investment Company Act of 1940.
SHAREHOLDER ACCOUNT INFORMATION
PRICING OF FUND SHARES
The Fund is open the same days that both the New York Stock Exchange
(NYSE) and the Fund's custodian, State Street-Kansas City (SSKC) are open for
regular business - generally Monday through Friday. Currently, either NYSE or
SSKC, or both, are closed in observance of the following holidays:
o New Year's Day o Labor Day
o Martin Luther King's Birthday o Columbus Day
o President's Day o Veteran's Day
o Good Friday o Thanksgiving Day
o Memorial Day o Christmas Day
o Independence Day
The Fund tries to maintain a constant $1 per share value. To achieve this
$1 per share price, the Fund's portfolio securities are valued at cost, and any
discount or premium created by market movement, including changes in interest
rates, is amortized to maturity.
The Fund prices its shares for purposes of your buying or selling shares
once each day as of the close of regular trading on the NYSE - generally 4:00
p.m. Eastern Time. When you purchase or sell shares of the Fund, the shares to
be bought or sold will be priced as of the next time the Fund prices its shares
after your order is received by the Fund.
7
<PAGE>
BUYING FUND SHARES
Fund shares may only be purchased on a day the Fund is open and are
sold only to customers of Bradford. For assistance in buying Fund shares, you
should contact your Bradford broker.
Minimum Investments Initial Additional
- ------------------- ------- ----------
Regular Bradford Securities Account $250.00 None
Bradford IRAs $100.00 None
BCM Program None None
An account through the BCM Program is like a regular Bradford securities
account except that such accounts have unlimited checkwriting privileges, an
optional VISA Delayed Debit Card as well as other options. For further
information regarding the regular Bradford securities account, a Bradford IRA or
the BCM Program, including the frequency with which excess available cash will
be invested in the Fund for you automatically, please contact your Bradford
broker.
SELLING FUND SHARES
You may sell (redeem) Fund shares only on a day the Fund is open for
business. You may choose to sell Fund shares by any of the following methods:
o By written or oral request to your Bradford broker. To have your shares
priced that day, your Bradford broker must receive your request by 12 noon
Eastern time. If your request is received after 12 noon Eastern time, your
shares will be priced the next day the Fund is open for business.
o By check if you have requested check writing privileges in connection with
your Fund account. Your checks may be made payable to anyone and are
subject to a $500 minimum amount for each check written. There is no per
check charge although a fee will be imposed by Bankers Trust Company, which
will clear the checks, for each check for which you request stop payment.
You may not present a check for immediate cash payment at the offices of
either Bradford or Bankers Trust Company.
Your shares in the Fund may also be sold (redeemed) automatically in
the following instances:
o To satisfy any debit balances in a regular Bradford securities account or
BCM account resulting from settlement of securities transactions in that
account.
o To satisfy debit balances on any VISA card issued to you in connection with
a BCM account.
o To satisfy debit balances in your BCM account as a result of checks written
on that account.
o Upon the closing of your regular securities account or BCM account with
Bradford.
o If your account in the Fund falls below the required minimum amount and,
after 30 days prior written notice to you, you have not increased the
balance in your account to at least that minimum.
While the Fund generally pays cash for all redemptions of shares, it has
reserved the right to redeem your shares in kind. However, this right is subject
to certain limitations which are described more fully in the Fund's Statement of
Additional Information.
8
<PAGE>
Generally, the Fund will make payment for any shares you sell (redeem)
within one business day, but in no event later than seven days. Exceptions to
this general rule are: (1) when trading on the NYSE has been suspended; or (2)
when your check for the purchase of such shares has not yet cleared (which may
take up to fifteen days).
There are no charges imposed upon your sale (redemption) of Fund shares.
DIVIDENDS AND DISTRIBUTIONS
The Fund distributes all of its net income to shareholders; it declares
dividends daily and pays them monthly. Although the Fund does not expect to
realize net long-term capital gains, any such capital gains realized will be
distributed at least annually.
Dividends are paid in the form of additional full and fractional shares of
the Fund. However, you may elect to receive dividends in cash. This election
must be made in writing to Bradford and becomes effective upon receipt of your
instructions by Bradford.
TAXES
Dividends you receive from the Fund, whether reinvested or taken as cash,
are generally considered taxable to you as ordinary income. Dividends, if any,
from the Fund's long-term capital gains are taxable as capital gains.
Any time you sell shares, it is considered a taxable event for you.
Depending on the purchase price and the sale price of the shares you sell, you
may have a gain or a loss on the transaction. You are responsible for any tax
liabilities generated by your transactions.
You should also note:
o The Form 1099 that is mailed to you in January details your dividends and
their Federal tax category, although you should verify your tax liability
with your tax professional.
o By law, the Fund must withhold 31% of your dividends and redemption
proceeds if you have not provided complete, correct taxpayer information.
You are also advised to consult your tax adviser concerning the application
of state and local taxes, which may have different consequences from those of
the Federal income tax law.
DISTRIBUTION ARRANGEMENTS
The Fund has adopted a Plan of Distribution under Rule 12b-1 of the
Investment Company Act of 1940 (the Plan). The Plan provides that Bradford, as
Distributor of the Fund's shares, is entitled to reimbursement from the Fund
each month for Bradford's current costs incurred in connection with the
distribution and marketing of the Fund's shares up to an amount equal to 0.20%
of the Fund's average net assets on an annual basis. Because these fees are paid
out of the Fund's assets on an on-going basis, over time these fees will
increase the costs of your investment and may cost more than other types of
sales charges.
9
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance for the past five years. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned on an investment in
the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche, LLP, whose report, along with
the Fund's financial statements, are included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
Financial Highlights For the Year Ended December 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income 0.045 0.048 0.049 0.047 0.052
----- ----- ----- ----- -----
Total From Investment 0.045 0.048 0.049 0.047 0.052
----- ----- ----- ----- -----
Operations
LESS DISTRIBUTIONS:
Dividend (from net investment
income) (0.045) (0.048) (0.049) (0.047) (0.052)
------- ------- ------- ------- -------
Total Distributions (0.045) (0.048) (0.049) (0.047) (0.052)
------- ------- ------- ------- -------
Net Asset Value,
End of Year $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ======
TOTAL RETURN 4.59% 4.93% 4.96% 4.78% 5.28%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Year (in
thousands)
$2,372,362 $2,037,509 $1,563,288 $1,234,321 $1,009,370
Ratio to Average Daily Net
Assets:
Expenses Before Waiver of
Advisory and/or Distribution
Fees 0.69% 0.73% 0.75% 0.78% 0.81%
Expenses After Waiver of
Advisory and/or Distribution
Fees 0.66% 0.70% 0.74% 0.77% 0.80%
Net Investment Income Before
Waiver of Advisory and/or
Distribution Fees 4.47% 4.79% 4.85% 4.67% 5.14%
Net Investment Income After
Waiver of Advisory and/or
Distribution Fees 4.50% 4.82% 4.87% 4.68% 5.15%
</TABLE>
10
<PAGE>
[BACK COVER PAGE]
THE BRADFORD MONEY FUND A series of The Bradford Funds, Inc.
SEC File Number: 811-5682
The Fund's Statement of Additional Information (SAI) includes
additional information about the Fund. In addition, information about the Fund's
investments is available in the Fund's annual and semi-annual reports to
shareholders. The SAI and the annual and semi-annual reports are available to
you without any charge. To request the SAI and/or the most recent annual and
semi-annual reports, or if you have any other questions regarding the Fund or
would like further information, please call 1-888-226-5504.
Information about the Fund, including the SAI, may be reviewed and
copied at the Public Reference Room of the U.S. Securities and Exchange
Commission (the Commission) located in Washington, D.C. To obtain further
information about the Public Reference Room and its operation, you may call the
Commission at 1-202-942-8090. Finally, you may also obtain copies of the Fund's
SAI and annual and semi-annual reports and other information from the
Commission's internet site at http://www.sec.gov, by electronic request to
[email protected], or, upon payment of a duplicating fee, by writing the Public
Reference Section of the Commission, Washington, D.C. 20549-6009. The Fund's SAI
is incorporated by reference into the Prospectus (is legally considered part of
this Prospectus).
11
<PAGE>
THE BRADFORD FUNDS, INC.
THE BRADFORD MONEY FUND
600 Fifth Avenue
New York, New York 10020
(888) 226-5504
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary
information pertaining to The Bradford Funds, Inc. (the "Company"), an open-end
management investment company currently offering shares in one investment
portfolio, The Bradford Money Fund (the "Money Fund" or "Fund"). This Statement
of Additional Information is not a prospectus and should be read only in
conjunction with the Prospectus of the Fund dated April 28, 2000 (the
"Prospectus"). A copy of the Prospectus may be obtained upon request free of
charge from the Fund at the address and telephone number set forth above. This
Statement of Additional Information is dated April 28, 2000.
CONTENTS
Page
GENERAL..............................................................B-2
INVESTMENT STRATEGIES AND POLICIES...................................B-2
DIRECTORS AND OFFICERS...............................................B-8
INVESTMENT ADVISORY, ADMINISTRATION AND DISTRIBUTION ARRANGEMENTS....B-11
PORTFOLIO TRANSACTIONS...............................................B-14
PURCHASE AND REDEMPTION INFORMATION..................................B-16
VALUATION OF SHARES..................................................B-16
PERFORMANCE INFORMATION..............................................B-18
TAXES................................................................B-19
DESCRIPTION OF SHARES................................................B-21
MISCELLANEOUS........................................................B-22
FINANCIAL STATEMENTS.................................................B-24
APPENDIX.............................................................A-1
<PAGE>
GENERAL
The Company is an open-end management investment company currently
offering shares in one investment portfolio, the Fund. Accordingly, the terms
"Company" and the "Money Fund" (or the "Fund") are used interchangeably in this
Statement of Additional Information, unless the context indicates otherwise. The
Company was organized as a Maryland corporation on October 26, 1988, and
commenced operations on February 8, 1989. The Fund is considered diversified,
meaning that with respect to 75% of its assets, it invests no more than 5% of
its assets in the securities of any one issuer.
INVESTMENT STRATEGIES AND POLICIES
The following supplements the information summarized in the Prospectus
concerning the principal investment strategies and policies of the Money Fund
and also describes the Money Fund's non-principal investment strategies and
policies. A description of ratings of short-term commercial paper is set forth
in the Appendix hereto.
Additional Information on Investment Strategies.
- -----------------------------------------------
(1) U.S. Government Obligations. Examples of types of U.S. Government
obligations in which the Fund may invest include U.S. Treasury bills, Treasury
notes and Treasury bonds and the obligations of Federal Home Loan Banks, Federal
Farm Credit Banks, Federal Land Banks, the Federal Housing Administration,
Farmers Home Administration, Export-Import Bank of the United States, Small
Business Administration, Government National Mortgage Association, General
Services Administration, Central Bank for Cooperatives, Federal Home Loan
Mortgage Corporation, Federal Intermediate Credit Banks and Maritime
Administration.
The Fund may also invest in separately traded principal and interest
components of securities issued or guaranteed by the U.S. Treasury ("stripped
securities"). The principal and interest components of selected securities are
traded independently under the Separate Trading of Registered Interest and
Principal of Securities Program ("STRIPS"). Under the STRIPS program, the
principal and interest components are individually numbered and separately
issued by the U.S. Treasury at the request of depository financial institutions,
which then trade the component parts independently.
Stripped securities are U.S. Treasury securities that pay no interest
during the life of the security. Interest builds up and is paid in a lump sum
when the security matures. These securities are usually sold at a discount
because the buyer is only purchasing the right to receive a future payment and
has no right to receive interest payments. Stripped securities may be subject to
greater price changes as a result of changing interest rates than securities
that make regular interest payments, and rising interest rates may leave the
Fund with a low-paying investment that may be difficult to sell.
(2) Bank Obligations. Investments in bank obligations may include
obligations of foreign banks, domestic branches of foreign banks and foreign
branches of domestic banks. Such investments may entail risks that are different
from those of investments in U.S. banks and domestic branches thereof, such as
unfavorable political and economic conditions, possible withholding taxes on
interest income, seizure or nationalization of foreign deposits, currency
controls, interest limitations, or other governmental restrictions which might
affect the payment of principal or interest on the securities held in the Fund.
Additionally, these institutions may be subject to less stringent reserve
requirements and different accounting, auditing, financial
B-2
<PAGE>
reporting and recordkeeping requirements and practices than those applicable to
domestic branches of U.S. banks. For purposes of the Money Fund's investment
policies with respect to bank obligations, the total assets of a bank or savings
institution will be deemed to include the assets of its domestic and foreign
branches.
(3) Commercial Paper. "Section 4(2) paper" is commercial paper which
is issued in reliance on the "private placement" exemption from registration
which is afforded by Section 4(2) of the Securities Act of 1933 (the "1933
Act"). The sale of Section 4(2) paper is restricted under the Federal securities
laws, and generally is sold to institutional investors such as the Fund. If the
Fund were to try to resell Section 4(2) paper, the Fund would normally have to
sell it to other institutional investors through or with the assistance of the
issuer or investment dealers who make a market in Section 4(2) paper. The Fund
will not purchase Section 4(2) paper which has not been determined to be liquid
in excess of 10% of the total assets of the Money Fund. The Company's Board of
Directors has delegated to Bradford Capital Management, Ltd., the Fund's
investment adviser (the "Adviser"), the day-to-day authority to determine
whether a particular issue of Section 4(2) paper, including Section 4(2) paper
that is eligible for resale under Rule 144A under the 1933 Act ("144A Paper"),
should be treated as liquid. Rule 144A provides a safe-harbor exemption from the
registration requirements of the 1933 Act for resales to "qualified
institutional buyers" as defined in the Rule. With the exception of registered
broker-dealers, a qualified institutional buyer must generally own and invest on
a discretionary basis at least $100 million in securities.
The Adviser may deem Section 4(2) paper liquid if (i) it believes that,
based on the trading markets for such security, such security can be disposed of
within seven days in the ordinary course of business at approximately the amount
at which the Fund has valued the security and (ii) it is rated by at least two
Rating Agencies (as defined in the Prospectus), or by the only Rating Agency
that has rated the paper, in the highest short-term category, or with respect to
144A paper only, is a comparable unrated security. In making such determination,
the Adviser generally considers any and all factors that it deems relevant,
which may include (i) the credit quality of the issuer; (ii) the frequency of
trades and quotes for the security; (iii) the number of dealers willing to
purchase or sell the security and the number of other potential purchasers; (iv)
dealer undertakings to make a market in the security; and (v) the nature of the
security and the nature of market-place trades. In addition, with respect to
Section 4(2) paper which is not 144A paper, it must not be traded flat or be in
default as to principal or interest.
Treatment of Section 4(2) paper as liquid could have the effect of
decreasing the level of the Fund's liquidity to the extent that buyers,
including qualified institutional buyers, become, for a time, uninterested in
purchasing these securities.
(4) Variable Rate Notes. The Fund may acquire variable amount master
demand notes and variable rate notes (collectively, "variable rate notes"),
subject to the Fund's investment objective, policies and restrictions. Variable
amount master demand notes are unsecured demand notes that permit the
indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate according to the terms of the instrument. Because master demand
notes are direct lending arrangements between a Fund and the issuer, they are
not normally traded. A variable rate note is one whose terms provide for the
adjustment of its interest rate on set dates and which, upon such adjustment,
can reasonably be expected to have a market value that approximates its par
value. Such notes are frequently not rated by credit rating agencies; however,
unrated variable rate notes purchased by the Fund will be determined by the
Adviser to be of comparable quality at the time of purchase to rated instruments
eligible for purchase under the Fund's investment policies. In making such
determinations, the Adviser will consider the earning power, cash flow and other
liquidity ratios of the issuers of such notes (such issuers
B-3
<PAGE>
include financial, merchandising, bank holding and other companies) and will
continuously monitor their financial condition. Although there may be no active
secondary market with respect to a particular variable rate note purchased by
the Fund, the Fund may resell the note at any time to a third party. The absence
of an active secondary market, however, could make it difficult for the Fund to
dispose of a variable rate note in the event the issuer of the note defaulted on
its payment obligations and the Fund could, as a result or for other reasons,
suffer a loss to the extent of the default. To the extent that the Fund is not
entitled to receive the principal amount of a note within seven days of demand,
such a note will be treated as an illiquid security for purposes of calculation
of the 10% limitation on the Fund's investment in illiquid securities as set
forth in the Fund's investment restrictions. Variable rate notes may be secured
by bank letters of credit.
Variable rate securities invested in by the Fund may have maturities of
more than 397 days, as follows:
1. An instrument that is issued or guaranteed by the United States
Government or any agency thereof which has a variable rate of interest
readjusted no less frequently than every 762 days will be deemed by the Fund to
have a maturity equal to the period remaining until the next readjustment of the
interest rate.
2. A variable rate security, the principal amount of which, in
accordance with its terms, must unconditionally be paid in 397 calendar days or
less, shall be deemed to have a maturity equal to the earlier of the period
remaining until the next readjustment of the interest rate or the period
remaining until the principal amount can be recovered through demand.
3. A variable rate security, the principal amount of which is
scheduled to be paid in more than 397 calendar days, that is subject to a demand
feature, will be deemed by the Fund to have a maturity equal to the longer of
the period remaining until the next readjustment of the interest rate or the
period remaining until the principal amount can be recovered through demand.
As used above, a security is "subject to a demand feature" where the Fund
is entitled to receive the approximate amortized cost of the security, plus
accrued interest, either at any time on no more than 30 days' notice or at
specific intervals not exceeding 397 days and upon no more than 30 days' notice.
(5) Repurchase Agreements. The Money Fund may enter into repurchase
agreements with respect to U.S. Government obligations. A repurchase agreement
involves the Fund's purchase of securities subject to the seller's agreement, at
the time of sale, to repurchase the securities at an agreed upon time and place.
Although the securities held by the Money Fund subject to a repurchase agreement
may have stated maturities exceeding 397 days, the repurchase agreement must
call for delivery in less than 397 days. The Fund may enter into repurchase
agreements only with banks whose securities would be acceptable for purchase by
the Fund and non-bank dealers of U.S. Government securities that are listed on
the Federal Reserve Bank of New York's list of reporting dealers. The Adviser
will consider the creditworthiness of a seller when determining to have the Fund
enter into a repurchase agreement. The Adviser will continue to monitor the
creditworthiness of the seller during the term of the repurchase agreement. The
seller under a repurchase agreement will be required to maintain securities in a
segregated account having a value (marked to market daily) not less than 100% of
the repurchase price (including an amount representing accrued interest).
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<PAGE>
The repurchase price under the repurchase agreements generally equals the
price paid by the Fund plus an amount representing accrued interest negotiated
on the basis of short-term rates existing at the time of purchase (which may be
more or less than the rate on the securities underlying the repurchase
agreement). Securities subject to repurchase agreements will be held by the
Fund's custodian in the Federal Reserve/Treasury book-entry system or by another
authorized securities depository.
Default by the seller would expose the Fund to possible losses which may
include a decline in value of such securities to an amount less than 100% of the
repurchase price and any loss resulting from any delay in foreclosing on such
securities. If the Fund were required to foreclose upon securities underlying a
repurchase agreement with remaining maturities of greater than 397 days, these
instruments would have to be taken into account in calculating the Fund's
dollar-weighted average portfolio maturity. The Fund would have to dispose of
the securities as soon as possible if they were to cause such average maturity
to exceed ninety days or were to exceed thirteen months to maturity.
(6) Foreign Investment. The Money Fund may also purchase Europaper and
Eurobonds (with remaining maturities of 397 days or less), which are U.S. dollar
denominated debt securities of a foreign issuer. Investors should recognize that
investing in foreign securities, such as Europaper and Eurobonds, involves
certain special considerations which are not typically associated with investing
in domestic securities. Such risks include future adverse political and economic
developments, the possible imposition of withholding taxes on interest or other
investment income, possible seizure, nationalization, or expropriation of
foreign investments, the possible establishment of exchange controls or taxation
at the source, less stringent disclosure or auditing requirements or the
adoption of other foreign governmental restrictions which might adversely affect
the payment of principal or interest on such securities or the purchase or sale
thereof. As non-U.S. companies are not generally subject to uniform accounting,
auditing and financial reporting standards and practices comparable to those
applicable to domestic issuers, there may be less publicly available information
about certain foreign securities than about domestic securities. Securities of
some foreign issuers are generally less liquid and more volatile than securities
of comparable domestic companies. There is generally less government supervision
and regulation of securities markets, brokers and listed issuers than in the
U.S. In addition, with respect to certain foreign countries, there is the
possibility of expropriation or confiscatory taxation, political or social
instability, or diplomatic developments which could affect U.S. investments in
those countries.
(7) Unrated Securities. In those instances in which the Fund purchases
securities that are considered "Unrated Securities" within the meaning of Rule
2a-7, the Board has delegated to the Adviser the responsibility to determine
whether such securities are of comparable quality.
Unrated instruments purchased for the Fund may be considered of comparable
quality when, at the time of purchase (i) the security at the time of issuance
had (A) a maturity of greater than thirteen months but currently has a remaining
maturity of thirteen months or less, and (B) does not have a long-term rating
from any Rating Agency that is not within the three highest rating categories
unless the instrument has received a long-term rating from a Rating Agency in
one of the three highest categories, (ii) the instrument is subject to a
guarantee which (A) has received a rating from a Rating Agency or (B) is issued
by a guarantor that has received a rating with respect to a class of debt
securities that is comparable in priority and security to such guarantee (unless
such guarantee is issued by an affiliate of the issuer of the instrument), (iii)
if the instrument is subject to a demand feature or guarantee, some entity has
undertaken to notify the Fund in the event the demand feature or guarantee is
substituted, and (iv) the issuer thereof is believed by the Adviser to have a
financial condition comparable to those issuing rated securities
B-5
<PAGE>
in which the Fund may invest, and the unrated instrument has comparable priority
and security and other relevant characteristics to such rated securities,
provided that with respect to instruments other than Government securities (as
defined in Section 2(a)(16) of the Investment Company Act of 1940, as amended
(the "1940 Act")) not more than 5% of the Fund's assets may be invested pursuant
to subparagraph (iv).
If an instrument has received a rating but is subject to a guarantee that
was not considered or in effect when the instrument (or the issuer) was given
its rating, the Adviser may evaluate the instrument as if it were unrated,
unless the instrument has a rating from a Rating Agency reflecting the existence
of such guarantee.
(8) When-Issued Securities. The Money Fund may purchase securities on
a "when-issued" or "delayed delivery" basis. "When-issued" or delayed delivery
securities include securities purchased for delivery beyond the normal
settlement date at a stated price and yield. The Fund will generally not pay for
such securities or start earning interest on them until they are received.
Securities purchased on a when-issued basis are recorded as an asset (with the
purchase price being recorded as a liability) at the time the commitment is
entered into and are subject to changes in value prior to delivery based upon
changes in the general level of interest rates.
While the Money Fund is committed to purchase such securities, the Fund
will maintain in a segregated account cash, U.S. Government securities or other
liquid debt securities of an amount at least equal to the purchase price of the
securities to be purchased. Normally, the custodian for the Fund will set aside
portfolio securities to satisfy a purchase commitment. Because securities
purchased on a when issued basis may fluctuate in value prior to delivery based
upon changes in the general level of interest rates, the Fund may be required
subsequently to place additional assets in the separate account in order to
ensure that the value of the account remains equal to the amount of the Fund's
commitment. Because the Fund's liquidity and ability to manage its portfolio
might be affected when it sets aside cash or portfolio securities to cover such
purchase commitments, the Fund expects that commitments to purchase
"when-issued" securities will not exceed 25% of the value of its total assets
absent unusual market conditions. When the Fund engages in when-issued
transactions, it relies on the seller to consummate the trade. Failure of the
seller to do so may result in the Fund's incurring a loss or missing an
opportunity to obtain a price considered to be advantageous.
Investment Restrictions.
The Money Fund's policies described above may be changed by the
Company's Board of Directors without shareholder approval. The Fund, however,
may not change its investment objective or the investment restrictions described
immediately below without the affirmative vote of the holders of a "majority of
the outstanding shares" of the Fund, as described below under "DESCRIPTION OF
SHARES."
The Money Fund may not:
(1) issue senior securities (as defined in the 1940 Act) or borrow
money, except from banks for temporary purposes and for reverse repurchase
agreements, and then in an aggregate amount not in excess of 10% of the value of
the Fund's assets; or mortgage, pledge or hypothecate any of its assets except
in connection with such borrowings and in amounts not in excess of 10% of the
value of the Fund's assets; or purchase portfolio securities while borrowings in
excess of 5% of the value of the Fund's assets are outstanding.
B-6
<PAGE>
(2) purchase securities of any one issuer (other than securities
issued or guaranteed by the U.S. Government or its agencies or instrumentalities
and repurchase agreements relating thereto) if immediately after such purchase
more than 5% of the Fund's total assets would be invested in the securities of
such issuer, or more than 10% of the outstanding securities of any class (taking
all debt issues of an issuer as a single class) or more than 10% of the
outstanding voting securities of such issuer would be owned by the Fund, except
that up to 25% of the value of the Fund's total assets may be invested without
regard to such 5% limitation;
(3) purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions;
(4) underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund may be
deemed an underwriter under Federal securities laws;
(5) make short sales of securities or maintain a short position or
write, purchase or sell put or call options or straddles, spreads or
combinations thereof;
(6) purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or issued by companies
which invest in real estate or interests therein;
(7) purchase or sell commodities or commodity contracts or commodity
futures contracts;
(8) invest in oil, gas or mineral exploration or development programs;
(9) make loans except that the Fund may purchase or hold debt
obligations in accordance with its investment objective, policies and
limitations and may enter into repurchase agreements;
(10) purchase any securities issued by any other investment company
except in connection with the merger, consolidation, acquisition or
reorganization of all the securities or assets of such an issuer;
(11) make investments for the purpose of exercising control or
management;
(12) invest 25% or more of its total assets in the securities of
issuers in any particular industry (other than securities issued or guaranteed
by the U.S. Government or its agencies and instrumentalities, or repurchase
agreements relating thereto, or obligations of domestic branches of U.S. banks
and those U.S. branches of foreign banks that are subject to the same regulation
as U.S. banks); or
(13) invest more than 5% of its total assets in securities of issuers
(including their predecessors) with less than three years of continuous
operations.
The following additional investment restriction is non-fundamental and may
be changed by the Company's Board of Directors without shareholder approval. The
Money Fund will limit its purchase of illiquid obligations to 10% of the value
of the Fund's total assets. Illiquid obligations include time deposits with
maturities longer than seven days, Section 4(2) paper which is not determined to
be liquid, and repurchase agreements with maturities longer than seven days.
B-7
<PAGE>
If a percentage restriction is satisfied at the time of an investment,
borrowing or other designated action, a later increase or decrease in percentage
resulting from changes in values or assets will not constitute a violation of
such restriction. However, if due to market fluctuations or other reasons the
assets of the Fund fall below 300% of its borrowings, the Fund will, in
accordance with the 1940 Act, reduce the borrowings of the Fund so that such
borrowings have 300% asset coverage within three days.
Notwithstanding investment restriction no. 2 above and for purposes of
maintaining a stable net asset value pursuant to Rule 2a-7 under the 1940 Act
(see "VALUATION OF SHARES" below), the Fund will, with respect to 100% of its
total assets, limit its investments in the securities of any one issuer in the
manner provided by such Rule.
With respect to limitation (12) above concerning industry concentration,
neither all finance companies, as a group, nor all utility companies, as a
group, are considered a single industry for purposes of this policy. The Fund
will consider wholly owned finance subsidiaries to be in the industries of their
parent companies if their activities are primarily related to financing the
activities of such parent companies, and will categorize utility companies
according to their services; for example, gas, gas transmission, electric and
gas, electric and telephone will each be considered a separate industry. The
policy and practices stated in this paragraph may be changed without the
affirmative vote of a majority of the outstanding shares of the Fund, but any
such change may require the approval of the SEC and would be disclosed in this
Statement of Additional Information.
DIRECTORS AND OFFICERS
The business and affairs of the Company and the Fund are managed under the
direction of the Company's Board of Directors in accordance with the laws of
Maryland governing corporations. The directors and executive officers of the
Company, their business addresses, ages and principal occupations during the
past five years are:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Position(s)
Name, Address Held With the Principal Occupation(s)
and Age Company During Past Five Years
Allan L. Erb* President and Partner in charge of New Business
330 Commerce Street Director Development since 1999; prior thereto and
Nashville, TN 37201 since 1986, Partner in Charge of
Age: 53 Financial Products Department; General
Partner/Voting Member since 1990.**
Douglas C. Altenbern Director Private investor since October 1990;
1025 Chancery Lane Chairman of Pay Systems of America, Inc.
Nashville, TN 37215 (payroll processing) from 1993 to 1997.
Age: 63
Richard W. Hanselman Director Private investor since 1986.
3017 Poston Avenue
Nashville, TN 37203
Age: 72
</TABLE>
B-8
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Edward J. Roach Director Certified Public Accountant and Vice
Suite 100 President and Treasurer of Temporary
400 Bellevue Parkway Investment Fund, Inc., Trust for Federal
Wilmington, DE 19809 Securities, Municipal Fund for Temporary
Age: 75 Investment (each from 1981 through 1997),
Independence Square Income Securities,
Inc. (since 1981) and Municipal Fund for
California Investors, Inc. (from 1983
through 1997); Treasurer of Chestnut
Street Ex-change Fund (since 1981); and
President and Treasurer of The RBB Fund,
Inc. (since 1991) and Municipal Fund for
New York Investors, Inc. (from 1983
through 1997; became President in 1995)
(each a management investment company).
Michael R. Shea* Vice President and Director of Taxable Fixed Income
330 Commerce Street Director Department since 1974; Voting
Nashville, TN 37201 Member/General Partner since 1981.**
Age: 57
Charles G. Smith IV Director Owner of Brookgreen Invest- ments LLC
2627 Sherwood Avenue (investment advisory firm) since 1997;
Charlotte, NC 28207 from 1994 to 1997, managing director of
Age: 56 Gartmore Global Partners (investment
management firm).
William T. Spitz Director Treasurer and Chief Investment Officer,
2100 West End Avenue Vanderbilt University, since November
Suite 900 1985.
Nashville, TN 37203
Age: 49
R. Patrick Shepherd Vice President General Counsel and Director of Legal and
330 Commerce St. Compliance Departments since 1983; Voting
Nashville, TN 37201 Member/General Partner since 1987.**
Age: 44
</TABLE>
B-9
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Judy K. Abroms Vice President Equity Member/Limited Partner since 1994;
330 Commerce St. from 1990 to 1994, Investment Limited
Nashville, TN 37201 Partner.**
Age: 56
Randall R. Harness Secretary and Chief Financial Partner since 1976;
330 Commerce St. Treasurer Voting Member/General Partner since
Nashville, TN 37201 1981.**
Age: 57
</TABLE>
* "Interested" director of the Fund as that term is defined in the 1940 Act.
** Positions are with J. C. Bradford & Co. LLC.
Messrs. Erb, Shea, Harness and Shepherd and Ms. Abroms hold positions
with J. C. Bradford & Co. LLC ("Bradford") as described above and are also
officers of the Adviser, serving in comparable positions to those they hold with
the Company. The only other officer of the Adviser is Robert P. DeBastiani. Mr.
DeBastiani has been an Equity Member/Limited Partner of Bradford since July 1990
and has served as Institutional Trader for Taxable Fixed Income Securities of
Bradford since April 1987.
The Fund pays directors who are not "affiliated persons" of the Adviser,
as that term is defined in the 1940 Act, a fee of $6,000 annually plus $1,000
per Board meeting attended and $500 per Audit Committee meeting attended.
Directors who are not affiliated persons of the Adviser are also reimbursed for
any expenses incurred in attending meetings of the Board of Directors or any
committee thereof.
The following table sets forth information regarding all compensation
paid by the Fund to its directors, who are not affiliated "persons" of the Fund,
for their services as directors during the fiscal year ended December 31, 1999.
The Fund has no pension or retirement plans nor does it pay compensation to its
executive officers.
COMPENSATION TABLE
Total Compensation From
Name and Position Aggregate Compensation the Fund and
With the Fund From the Fund the Fund Complex*
------------- ------------- -----------------
Douglas C. Altenbern $10,000 $10,000
Director
Richard W. Hanselman $10,000 $10,000
Director
Edward J. Roach $10,000 $10,000
Director
Charles G. Smith, IV $0 $0
Director**
B-10
<PAGE>
William T. Spitz $10,000 $10,000
Director
- --------------
*For purposes of this Table, Fund Complex means one or more mutual
funds, including the Money Fund, which have a common investment adviser or
affiliated investment advisers or which hold themselves out to the public as
being related. The Money Fund is currently the only member of its Fund Complex.
**Mr. Smith did not receive any compensation for serving as a director
for the year ended December 31, 1999 because he was not appointed to the Board
until November 12, 1999, and did not attend any Board meetings during the year.
The Fund currently has no employees, as substantially all of the
services necessary for the operation of the Fund are performed by the Adviser;
State Street - Kansas City ("SSKC"), the Fund's custodian; Reich & Tang Asset
Management L.P. ("R&T"), the Fund's administrator and fund accountant; and
Bradford, the Fund's distributor and transfer and dividend disbursing agent. No
officer or employee of the Adviser, SSKC, R&T or Bradford receives any
compensation directly from the Fund.
Certain of the directors and officers and the organizations with which
they are associated have had in the past, and may in the future have,
transactions with Bradford and its affiliates. The Fund believes that all such
transactions have been and are expected to be in the ordinary course of business
and the terms of such transactions have been and are expected to be
substantially the same as the prevailing terms for comparable transactions of
other customers.
INVESTMENT ADVISORY, ADMINISTRATION
AND DISTRIBUTION ARRANGEMENTS
General. Bradford Capital Management, Ltd. serves as the investment
adviser for the Fund (the "Adviser"). The Adviser is a Tennessee limited
partnership. J.C.B. Financial Services, Inc. acts as the general partner to the
Adviser (the "General Partner") and J. C. Bradford & Co. LLC ("Bradford" or the
"Distributor"), the Fund's distributor, is the Adviser's limited partner.
The General Partner is a wholly owned subsidiary of Bradford & Co.,
Incorporated ("Bradford Incorporated"). Bradford Incorporated, through the
General Partner and other subsidiaries, is engaged in various aspects of the
financial services industry. All of the outstanding voting securities of
Bradford Incorporated are owned by various partners of Bradford. Bradford is an
investment firm which conducts a substantial brokerage and investment banking
business and also acts as the distributor of the Fund.
Advisory Agreement. The Adviser renders advisory services to the Fund
pursuant to an Investment Advisory Agreement. As compensation for such services,
the Adviser receives from the Fund a fee at an annual rate of 0.40% of the first
$500 million of the Fund's daily net assets and 0.35% of daily net assets in
excess of $500 million. This fee is computed daily and payable
B-11
<PAGE>
monthly. The Adviser may from time to time waive some or all of its advisory
fee. Currently, the Adviser is charging only 0.30% on the Fund's average daily
net assets greater than $1 billion up to $2 billion and 0.29% on the Fund's
average daily net assets greater than $2 billion. Subject to the authority of
the Company's Board of Directors, the Adviser furnishes the Money Fund with
investment advice and, in general, supervises the investment program of the
Fund. The Adviser furnishes, at its own expense, office space, equipment and
personnel (other than the services of directors of the Company who are not
affiliated persons of the Adviser) for supervising the investment program of,
and placing orders for the portfolio transactions for the Fund.
The Adviser has licensed the name "Bradford" to the Fund on a
royalty-free basis and the Adviser has reserved to itself the right to grant the
non-exclusive right to use the name "Bradford" to any other person. At such time
as the Advisory Agreement is no longer in effect, the Adviser may require the
Fund to cease using the name "Bradford."
For the fiscal years ended December 31, 1997, 1998 and 1999, the
Adviser's fees under the Advisory Agreement were $5,228,609, $6,715,668 and
$8,171,267, respectively. For those years ended December 31, 1997, 1998 and
1999, the Adviser waived $211,230, $423,905 and $657,930, respectively, which
were payable to it under the Advisory Contract. Such fee waiver causes the yield
of the Fund to be higher than it would be in the absence of such a waiver.
Administration Agreement. R&T, a Delaware limited partnership, serves
as administrator to the Fund pursuant to an Administrative Services Agreement
dated August 15, 1997 (the "Administrative Services Agreement"), under which R&T
provides various administrative and accounting services. These services include
(a) maintenance of the Fund's books and records, (b) preparation of regulatory
filings and shareholder reports, (c) computation of net asset values and daily
dividends, (d) accounting with respect to income and expense items, cash
balances, market value, yield, portfolio turnover and average maturity of the
Fund and its assets, (e) preparation of financial statements and tax returns,
and (f) reconciliation of trades. For its services to the Fund under the
Administrative Services Agreement, R&T receives a fee computed as described in
the Prospectus. For the period from August 18, 1997 to December 31, 1997, and
the years ended December 31, 1998 and 1999, R&T earned $201,543, $569,735 and
$611,324, respectfully, for such services.
Distribution Agreement. Pursuant to the terms of the Distribution
Agreement entered into between Bradford and the Company on behalf of the Fund,
and a Plan of Distribution (the "Plan"), which was adopted and the continuation
of which has been approved in the manner prescribed by Rule 12b-1 under the 1940
Act, Bradford uses its best efforts to distribute the shares of the Fund, and
Bradford is reimbursed for certain current distribution expenses as described in
the Prospectus.
The Plan was last approved by the Company's Board of Directors,
including the directors who are not "interested persons" of the Company (as
defined in the 1940 Act) and who have no direct or indirect financial interest
in the operation of the Plan or any agreements relating to the Plan ("Rule 12b-1
directors"), on October 18, 1999. In approving the Plan, the Company's directors
concluded, in the exercise of reasonable business judgment and in light of their
B-12
<PAGE>
fiduciary duties under state law, and under Sections 36(a) and (b) of the 1940
Act, that there is a reasonable likelihood that the Plan and the services
provided to the Fund pursuant thereto will benefit the Fund and its
shareholders. The Plan was also approved by the Fund's shareholders on October
18, 1989.
Among other things, the Plan provides that: (a) Bradford is required to
submit quarterly reports to the directors of the Company (which are reviewed by
the directors) regarding all amounts expended under the Plan and the purposes
for which such expenditures were made; (b) the Plan will continue in effect only
so long as it is approved at least annually by the Company's Board of Directors,
including the Rule 12b-1 directors, and any material amendment thereto is
approved by the Company's Board of Directors, including the Rule 12b-1
directors, acting in person at a meeting called for such purpose; (c) the
aggregate amount to be spent by the Fund on the distribution of the Fund's
shares under the Plan shall not be materially increased without the affirmative
vote of the holders of a majority of the Fund's outstanding shares (as defined
in "DESCRIPTION OF SHARES") and (d) while the Plan remains in effect, the
selection and nomination of the Company's directors who are not "interested
persons" of the Company (as defined in the 1940 Act) shall be committed to the
discretion of the directors who are not interested persons of the Company.
For the fiscal year ended December 31, 1999, the Fund reimbursed
Bradford for distribution expenses totaling $4,526,439. Bradford's distribution
expenses for the Fund consisted principally of the following: allocated expenses
of Bradford's money fund operations department; allocated expenses of Bradford's
branch office overhead; allocated expenses of Bradford's financial services
department, including mutual fund sales; statement processing; allocated
expenses of management sales and branch administration, marketing and training
departments; and compensation paid to account executives. Directors and officers
of the Company who are affiliated with Bradford may have a direct or indirect
financial interest in the operation of the Plan. No director of the Company who
is not an "interested person" of the Company (as defined in the 1940 Act) has
any such financial interest. Bradford may, from time to time, voluntarily waive
all or a portion of the fees payable to it under the Plan. Any such fee waiver
will cause the yield of the Fund to be higher than it would be in the absence of
such a waiver.
Proposed Acquisition of Bradford. On April 27, 2000, PaineWebber Group,
Inc. ("PaineWebber") entered into a merger agreement with all of the members of
Bradford pursuant to which Bradford will merge with a wholly-owned subsidiary of
PaineWebber (the "Acquisition"). As a result, Bradford will become a
wholly-owned subsidiary of PaineWebber. The Acquisition is expected to be
effective on or about June 15, 2000. The Acquisistion is subject to a number of
conditions and there can be no assurance that it will be completed. The
Acquisition, if completed, will result in a change in control of both Bradford
and the Adviser and will cause the Fund's investment advisory agreement with the
Adviser and the Distribution Agreement with Bradford to terminate automatically.
The Adviser and Bradford will propose that the Fund's Board of Directors approve
an interim investment advisory agreement and a new Distribution Agreement that
will take effect upon completion of the Acquisition. Such interim investment
advisory agreement will require the Adviser to continue to provide the same
services for the same compensation as are currently in place. Such agreement
will be in
B-13
<PAGE>
effect until the new investment advisory agreement is approved by
shareholders of the Fund as required by the 1940 Act. The new Distribution
Agreement, if approved by the Directors, will contain substantially identical
terms and conditions as the current Distribution Agreement.
PORTFOLIO TRANSACTIONS
The Adviser is responsible for decisions to buy and sell securities for
the Fund, the selection of brokers or dealers to effect the transactions and the
negotiation of brokerage commissions, if any. Transactions are typically
effected with dealers acting as principal for their own account. The Fund did
not pay any brokerage commissions during the three most recent fiscal years.
In determining which brokers to use for the portfolio transactions
effected on an agency basis, the Adviser will attempt to obtain the best net
price and the most favorable execution in light of the overall quality of
brokerage and research services provided. In so selecting brokers, the Adviser
may consider a number of factors, including, but not limited to, the skill of
the firm's securities traders and the firm's financial responsibility and
administrative efficiency.
When consistent with these objectives, brokerage may be placed with
broker-dealers who furnish investment research or services to the Adviser. Such
research or services include advice as to the value of securities; the
advisability of investing in, purchasing or selling securities; and the
availability of securities, or purchasers or sellers of securities; as well as
analyses and reports concerning issues, industries, securities, economic factors
and trends, portfolio strategy and the performance of accounts. This allows the
Adviser to supplement its own investment research activities and enables the
Adviser to obtain the views and information of individuals and research staffs
of many different securities firms prior to making investment decisions for the
Fund. In the event portfolio transactions are effected with brokers or dealers
who furnish research services to the Adviser, the Adviser receives a benefit,
not capable of evaluation in dollar amounts, without providing any direct
monetary benefit to the Fund from these transactions. These services may
indirectly benefit not just the Fund but also other accounts which the Adviser
may manage.
The Adviser is authorized to cause the Fund to pay an amount of
commission for effecting a securities transaction in excess of the amount of
commission another broker or dealer would have charged if the Adviser determines
that such amount of commission is reasonable in relation to the overall quality
of the brokerage and research services provided by such broker or dealer, viewed
in terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the accounts as to which it exercises
investment discretion. Under the terms of the Advisory Contract, the Fund may
not pay any compensation in the form of brokerage commissions to the Distributor
(1) which would exceed the amount permitted under Section 17(e) of the 1940 Act
and the rules and regulations thereunder or (2) for research services within the
meaning of Section 28(e) of the Securities Exchange Act of 1934. In payment of
brokerage commissions to the Distributor acting as agent in over-the-counter
transactions, the Adviser intends to comply with Section 17(e)(2)(C) of the 1940
Act which requires that such commissions not exceed one percent of the purchase
or sale price of the securities involved.
B-14
<PAGE>
The Fund purchases only securities with remaining maturities of 397
days (13 months) or less and may attempt to maximize yield through portfolio
trading. This may involve selling portfolio instruments and purchasing different
instruments to take advantage of disparities of yield in different segments of
the high-grade money market or among particular instruments within the same
segment of the market. Accordingly, its portfolio turnover rate may be
relatively high. However, because brokerage commissions are not normally paid
with respect to investments made by the Fund, the turnover rate should not
materially adversely affect the Fund's net asset value or net income.
Investment decisions for the Fund and for other investment accounts that
the Adviser may manage in the future, including other portfolios which may be
created by the Company, will be made independently of each other in the light of
differing investment objectives or circumstances. However, the same investment
decision may be made for two or more of such accounts. In such cases, purchases
or sales will be averaged as to price and allocated as to amount according to a
formula deemed equitable to each such account. While in some cases this practice
could have a detrimental effect upon the price or value of the security as far
as the Fund is concerned, in other cases it could be beneficial to the Fund. The
Fund will not purchase securities during the existence of any underwriting or
selling group relating to such security of which the Adviser or any affiliated
person (as defined in the 1940 Act) thereof is a member except pursuant to
procedures adopted by the Company's Board of Directors pursuant to Rule 10f-3
under the 1940 Act. Among other things, these procedures, which will be reviewed
by the Company's directors annually, require that the commission paid in
connection with such a purchase be reasonable and fair, that the purchase be
made prior to the end of the first day on which any sales are made and at a
price that is not more than the price paid by each other purchaser of securities
in that offering, and that the Adviser (or any affiliate) not participate in or
benefit from the sale to the Fund.
The Fund has from time to time during 1999 held securities of its
regular brokers or dealers, as defined in Rule 10b-1 under the 1940 Act, or
their parent companies, including those of Ford Motor Credit Company, GECC
Capital Markets Group, Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc. and
Goldman Sachs Group L.P. At December 31, 1999, the Fund held the following
amounts of commercial paper or notes of Ford Motor Credit Company, General
Electric Capital Corporation, Merrill Lynch & Co., Inc. and Goldman Sachs Group
L.P.: $68,832,630, $111,707,193, $112,709,497 and $111,556,818, respectively.
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase of the
Fund's shares by making payment in whole or in part in securities chosen by the
Fund and valued in the same way as they would be valued for purposes of
computing the Fund's net asset value. If payment is made in securities, a
shareholder will incur transaction costs in converting these securities into
cash. The Company has elected, however, to be governed by Rule 18f-1 under the
1940 Act so that the Fund is obligated to redeem its shares solely in cash up to
the lesser of $250,000 or 1% of its net asset value during any 90-day period for
any one shareholder of the Fund.
B-15
<PAGE>
Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the New
York Stock Exchange (the "NYSE") is closed (other than customary weekend and
holiday closings), or during which trading on the NYSE is restricted, or during
which (as determined by the SEC by rule or regulation) an emergency exists as a
result of which disposal or valuation of portfolio securities is not reasonably
practicable, or for such other periods as the SEC may permit.
VALUATION OF SHARES
The method for determining the net asset value per share of the Fund is
summarized in the Prospectus under the heading "SHAREHOLDER ACCOUNT INFORMATION
- - Pricing of Fund Shares." The Fund intends to use its best efforts to maintain
its net asset value of $1.00 per share. Net asset value per share, the value of
an individual share in the Fund, is computed by dividing the Fund's net assets
by the number of its outstanding shares. The Fund's "net assets" equal the value
of the Fund's investments and other securities less its liabilities. The Fund's
net asset value per share is computed once each day as of the close of trading
(currently 4:00 p.m. Eastern time) on the NYSE on each day, Monday through
Friday, when the NYSE and SSKC are both open for business.
The Fund calculates the value of its portfolio securities by using the
amortized cost method of valuation in accordance with Rule 2a-7 under the 1940
Act. Under this method, the market value of an instrument is approximated by
amortizing the difference between the acquisition cost and value at maturity of
the instrument on a straight-line basis over the remaining life of the
instrument. The effect of changes in the market value of a security as a result
of fluctuating interest rates is not taken into account. The market value of
debt securities usually reflects yields generally available on securities of
similar quality. When such yields decline, market values can be expected to
increase, and when yields increase, market values can be expected to decline.
The amortized cost method of valuation may result in the value of a security
being higher or lower than its market price, the price the Fund would receive if
the security were sold prior to maturity. In addition, if a large number of
redemptions take place at a time when interest rates have increased, the Fund
may have to sell portfolio securities prior to maturity and at a price which
might be lower than their value under the amortized cost method of valuation.
In determining the approximate market value of portfolio investments,
the Fund may use outside organizations, which may use a matrix or formula method
that takes into consideration market indices, matrices, yield curves and other
specific adjustments. This may result in the securities being valued at a price
different from the price that would have been determined had the matrix or
formula method not been used. All cash, receivables and current payables are
carried at their face value. Other assets, if any, are valued at fair value as
determined in good faith by the Company's Board of Directors.
B-16
<PAGE>
PERFORMANCE INFORMATION
The Fund's current and effective yields are computed using standardized
methods required by the SEC. The annualized yields for the Fund are computed by:
(a) determining the net change in the value of a hypothetical account having a
balance of one share at the beginning of a seven-calendar-day period; (b)
dividing the net change by the value of the account at the beginning of the
period to obtain the base period return; and (c) annualizing the results (i.e.,
multiplying the base period return by 365/7). The net change in the value of the
account reflects the value of additional shares purchased with dividends
declared and all dividends declared on both the original share and such
additional shares, but does not include realized gains and losses or unrealized
appreciation and depreciation. Compound effective yields are computed by adding
1 to the base period return (calculated as described above), raising the sum to
a power equal to 365/7 and subtracting 1.
The yield for the seven day period ending December 31, 1999, for the Fund
was 5.16%, and the effective yield for the same period was 5.29%.
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yields of the Fund will fluctuate, they cannot be
compared with yields on savings accounts or other investment alternatives that
provide an agreed to or guaranteed fixed yield for a stated period of time.
However, yield information may be useful to an investor considering temporary
investments in money market instruments. In comparing the yield of one money
market fund to another, consideration should be given to each fund's investment
policies, including the types of investments made, lengths of maturities of the
portfolio securities, the method used by each fund to compute the yield and
whether there are any special account charges which may reduce the effective
yield.
The yields on certain obligations, including the money market
instruments in which the Fund invests (such as commercial paper and bank
obligations), are dependent on a variety of factors, including general money
market conditions, conditions in the particular market for the obligation, the
financial condition of the issuer, the size of the offering, the maturity of the
obligation and the ratings of the issue. The ratings issued by the Rating
Agencies, such as Moody's Investors Service and Standard & Poor's Ratings Group,
represent their respective opinions as to the quality of the obligations they
undertake to rate. Ratings, however, are general and are not absolute standards
of quality. Consequently, obligations with the same rating, maturity and
interest rate may have different market prices. In addition, subsequent to its
purchase by the Fund, an issue may cease to be rated or may have its rating
reduced below the minimum required for purchase. In such an event, the Adviser
will consider whether the Fund should continue to hold the obligation.
From time to time, in advertisements or in reports to shareholders, the
yields of the Fund may be quoted and compared to those of other mutual funds
with similar investment objectives. For example, the yield of the Fund may be
compared to the iMoneyNet, Inc.'s Money Fund Averages, which are averages
compiled by iMoneyNet, Inc.'s Money Fund Report of Westborough, MA 01581, a
widely recognized independent publication that monitors the
B-17
<PAGE>
performance of money market funds, or to the data prepared by Lipper Analytical
Services, Inc., a widely recognized independent service that monitors the
performance of mutual funds.
TAXES
The Fund has qualified, and intends to remain qualified, as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). As a regulated investment company, the Fund is
generally not subject to U.S. federal income tax on its income and gains
distributed to shareholders, provided the Fund distributes to its shareholders
at least 90% of its net investment income (i.e., net income exclusive of net
long-term capital gains) each year.
If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income and gains will be subject to tax
at regular corporate rates without any deduction for distributions to
shareholders, and all distributions will be taxable as ordinary dividends to the
extent of the Fund's current and accumulated earnings and profits. Such
distributions will be eligible for the dividends received deduction in the case
of corporate shareholders. However, additional federal income taxes may be
imposed on the Fund if it requalifies in a subsequent taxable year as a
regulated investment company.
To so qualify, the Fund must, among other things, (i) derive in each
taxable year at least 90% of its gross income from dividends, interest, payments
with respect to securities loans, and gains from the sale or other disposition
of stock or securities or foreign currencies, or other income derived with
respect to its business of investing in such stock, securities or currencies;
and (ii) diversify its investments so that, at the end of each quarter of its
taxable year, (a) at least 50% of the value of its assets is represented by
cash, cash items, U.S. Government securities, and other securities limited, in
respect of any one issuer, to a value not greater than 5% of the value of the
Fund's total assets and 10% of the outstanding voting securities of such issuer
and (b) not more than 25% of the value of its assets is invested in the
securities of any one issuer (other than the U.S. Government). In addition, to
utilize the tax provisions specially applicable to regulated investment
companies, the Fund must distribute to its shareholders at least 90% of its
investment company taxable income for the year. In general, the Fund's
investment company taxable income will be its taxable income subject to certain
adjustments and excluding the excess of any net long-term capital gain for the
taxable year over the net short-term capital loss, if any, for such year.
As described in the Prospectus under "Taxes," shareholders (other than
tax-exempt shareholders) are subject to federal income tax on distributions of
income and capital gains, regardless of whether they reinvest such distributions
in shares of the Fund. Distributions of net investment income are taxable to
shareholders as ordinary income. The Fund does not intend to make distributions
that will be eligible for the corporate dividends received deduction.
Distributions of net capital gains (the excess of net long-capital gains over
net short-term capital losses) are taxable to shareholders as long-term capital
gains regardless of the length of time shares of the Fund have been held. The
net capital gains of the Fund are expected to be minimal. Shareholders will be
advised annually as to the federal tax status, as capital gain or ordinary
income, of distributions made by the Fund during the year.
B-18
<PAGE>
Any gain or loss realized upon a taxable disposition of Fund shares by
a shareholder who is not a dealer in securities generally will be treated as
long-term capital gain or loss if the shares have been held for more than one
year, and otherwise as short-term capital gain or loss. The holding period for
long-term capital gains is more than one year. Any loss realized upon a taxable
disposition of Fund shares may be deferred if other Fund shares are purchased
(under the dividend reinvestment plan or otherwise) within 30 days before or
after the disposition.
The Fund may acquire certain securities at a discount. Current federal
income tax law requires that a holder (such as the Fund) of such a security
include in taxable income a portion of the discount which accrues on such
security during the tax year even if the Fund receives no payment in cash on the
security during the year. As a regulated investment company, the Fund must pay
out 90% of its net investment income each year, will be subject to
corporate-level tax to the extent it does not distribute all its income and
gains, and will be subject to a 4% excise tax if the additional distribution
requirement described below is not met. The foregoing rules would apply with
respect to any accrued discount included in the Fund's income, even though the
Fund may not receive cash corresponding to the accrued discount. Distributions
will be made from the cash assets of the Fund or by liquidating portfolio
securities, if necessary. If a distribution of cash necessitates the liquidation
of portfolio securities, the Adviser will select which securities to
sell. The Fund may realize a gain or loss from such sales, and any gain so
realized would also need to be distributed.
A non-deductible 4% excise tax will be imposed on the Fund to the
extent the Fund does not distribute during each calendar year (i) 98% of its
ordinary income for such calendar year, (ii) 98% of its capital gain net income
for the one-year period ending October 31 of such calendar year (or the Fund's
actual taxable year ending December 31, if elected) and (iii) certain other
amounts not distributed in previous years. The Fund intends to distribute its
income and gains in a manner so as to avoid the imposition of such 4% excise
tax.
For purposes of applying the distribution requirements described above,
and for purposes of determining the taxable income of shareholders each year,
dividends declared by the Fund in October, November or December of a year,
payable to shareholders as of a record date in such a month, and paid during the
following January, will be treated for Federal income tax purposes as paid by
the Fund and received by shareholders as of December 31 of the calendar year
declared.
Federal income tax is required to be withheld at the rate of 31% of all
taxable distributions payable to shareholders, including the proceeds of any
redemptions, who fail to provide the Fund with their correct taxpayer
identification number or to make required certifications, or who have been
notified by the Internal Revenue Service that they are subject to backup
withholding. Corporate shareholders and certain other shareholders specified in
the Code generally are exempt from such backup withholding.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect, which are
subject to change by legislative or administrative action. No determination can
be made as to whether future legislation addressing the federal income tax
consequences to the Fund or its shareholders will be enacted.
B-19
<PAGE>
The tax consequences to a foreign shareholder of an investment in the
Fund may be different from those described herein. Foreign shareholders are
advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the Fund.
Distributions to shareholders may also be subject to state and local
taxes, depending on each shareholder's particular situation. Investors are urged
to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the Fund.
DESCRIPTION OF SHARES
As of April 24, 2000, to the Fund's knowledge no person held
beneficially 5% or more of the outstanding shares of the Fund, and the directors
and officers of the Company as a group owned less than 1% of such outstanding
shares. All of the Fund's outstanding shares were then owned of record by
Bradford.
The Company is authorized to issue shares of capital stock, par value
$.001 per share, in multiple portfolios at the discretion of the Board of
Directors. To date, the Board has authorized the issuance of shares of only one
portfolio, The Bradford Money Fund. Each share in the Fund is entitled to one
vote for the election of directors and any other matter submitted to a
shareholder vote, but not to cumulate votes in the election of directors.
Fractional shares (which are carried out to three decimal places) will have
fractional voting rights. All shares in the Fund are fully paid and
non-assessable and have no preemptive or conversion rights.
Upon liquidation of the Fund, shareholders are entitled to share pro
rata in the net assets belonging to the Fund available for distribution.
As a general matter, the Fund will not hold annual or other meetings of
shareholders. Under the Company's Articles of Incorporation and By-Laws, an
annual meeting of shareholders is not required to be held in any year in which
the Fund is not required under the 1940 Act to submit for shareholder approval
(i) the election of director(s), (ii) any contract with an investment adviser or
principal underwriter (as such terms are defined in the 1940 Act) or any renewal
or amendment thereof, or (iii) the selection of the Fund's independent public
accountants. Each duly elected director serves until the election and
qualification of his successor, if any, or until such director sooner dies,
resigns, retires or is removed by the shareholders. Under certain circumstances
shareholders have the right to call for a meeting of shareholders to consider
the removal of one or more directors. The Company will assist in shareholder
communication in such matters.
Should the Fund in the future offer shares of one or more other
portfolios, the Articles of Incorporation provide that on any matter submitted
to a vote of the shareholders of the Company, all shares entitled to vote,
irrespective of portfolio, would be voted in the aggregate and not by portfolio
except that (a) as to any matter with respect to which a separate vote of any
portfolio is required by the 1940 Act (such as the Fund's Rule 12b-1 Plan) or
other applicable law, such requirements as to a separate vote by that portfolio
would apply in lieu of the aggregate voting as described above, and (b) as to
any matter which does not affect the interest of all portfolios, only
shareholders of the affected portfolio or portfolios would be entitled to vote
thereon.
B-20
<PAGE>
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted by the provisions of such Act or applicable state law, or otherwise,
to the holders of the outstanding voting securities of an investment company
such as the Company shall not be deemed to have been effectively acted upon
unless approved by the holders of a majority of the outstanding shares (as
defined below) of each portfolio affected by such matter. Rule 18f-2 further
provides that a portfolio shall be deemed to be affected by a matter unless it
is clear that the interests of each portfolio in the matter are identical or
that the matter does not affect any interest of such portfolio. However, such
Rule exempts the selection of independent public accountants and the election of
directors from its separate voting requirements.
As used in this Statement of Additional Information, the term "majority
of the outstanding shares" of the Company or a particular portfolio of the
Company means the vote of the lesser of (i) 67% or more of the shares of the
Company or such portfolio present at a meeting, if the holders of more than 50%
of the outstanding shares of the Company or such portfolio are present or
represented by proxy, or (ii) more than 50% of the outstanding shares of the
Company or such portfolio.
MISCELLANEOUS
Custodian. State Street-Kansas City (f/k/a Investors Fiduciary Trust
Company) ("SSKC"), 127 West 10th Street, Kansas City, Missouri 64105, is
custodian of the Fund's assets pursuant to a Custody Agreement. Under the
Custody Agreement, SSKC (a) maintains a separate account or accounts in the name
of the Fund, (b) holds and transfers portfolio securities for the account of the
Fund, (c) makes receipts and disbursements of money on behalf of the Fund, (d)
collects and receives all income and other payments and distributions on account
of the Fund's portfolio securities and (e) makes periodic reports to the
Company's Board of Directors concerning the Fund's operations. SSKC is
authorized to select one or more banks or trust companies to serve as
sub-custodian on behalf of the Company, provided that SSKC remains responsible
for the performance of all duties under the Custody Agreement and holds the
Company harmless from the acts and omissions of any sub-custodian.
Transfer and Dividend Disbursing Agent. Bradford serves as the transfer
and dividend disbursing agent for the Fund's shares pursuant to a Transfer
Agency Agreement under which Bradford (a) issues and redeems shares of the Fund,
(b) pays or arranges for the payment of dividends and distributions, (c)
addresses and mails communications by the Fund to record owners of shares,
including reports to shareholders and proxy materials for its meetings of
shareholders, (d) maintains shareholder accounts and, if requested,
sub-accounts, and (e) makes periodic reports to the Company's Board of Directors
concerning the operations of the Fund. The Fund pays Bradford a fee at an annual
rate of $11.50 for each active Fund account. In addition, the Fund reimburses
Bradford for its payment of the following expenses: toll free telephone lines
(if required by the Fund), envelopes, checks, postage, hardware and telephone
lines for remote terminals (if required by the Fund), certificate issuance fees,
microfiche and microfilm, and proxy solicitation expenses (if required by the
Fund).
B-21
<PAGE>
Counsel. The law firm of Baker & Hostetler LLP, Capital Square, Suite
2100, 65 East State Street, Columbus, Ohio 43215, serves as counsel to the
Company and will pass upon the legality of the shares offered hereby.
Independent Auditors. Deloitte & Touche LLP, SunTrust Center,
Nashville, Tennessee 37219, serves as the Company's independent auditors. The
financial statements of the Fund appearing in this Statement of Additional
Information have been audited by Deloitte & Touche LLP, as set forth in their
report appearing elsewhere herein, and have been included in reliance on their
report given on their authority as experts in accounting and auditing.
B-22
<PAGE>
FINANCIAL STATEMENTS
B-23
<PAGE>
<TABLE>
<CAPTION>
THE BRADFORD FUNDS, INC.
The Bradford Money Fund
Statement of Net Assets
December 31, 1999
Percentage Par
of Portfolio Maturity (000) Value
------------ -------- --------- ---------------
<S> <C> <C> <C> <C>
AGENCY OBLIGATIONS.......................... 24.84%
Federal Farm Credit Bank
5.60% 04/26/00 $23,650 $ 23,223,249
5.73% 06/01/00 4,200 4,196,637
Federal Home Loan Bank
1.30% 01/03/00 10,000 9,999,278
5.18% 01/05/00 10,000 9,994,244
5.18% 01/07/00 10,000 9,991,367
5.00% 01/26/00 48,600 48,431,250
5.00% 01/28/00 20,000 19,925,000
5.57% 04/19/00 10,000 9,831,353
4.97% 04/20/00 15,000 14,959,457
5.58% 04/20/00 14,000 13,761,172
5.01% 04/28/00 20,000 19,944,152
5.47% 05/10/00 26,200 25,682,477
5.52% 05/12/00 25,000 24,493,542
5.41% 06/14/00 17,600 17,547,054
Federal Home Loan Mortgage Corporation
5.10% 03/07/00 11,000 10,897,150
5.60% 03/07/00 30,000 29,692,000
5.60% 03/21/00 15,700 15,504,622
5.20% 03/30/00 22,500 22,210,694
5.35% 04/20/00 25,000 24,591,014
5.13% 06/02/00 20,000 19,563,950
5.15% 06/02/00 14,590 14,270,537
5.18% 06/02/00 7,307 7,146,137
5.19% 06/02/00 12,000 11,735,310
5.15% 06/06/00 13,000 12,707,513
5.18% 06/08/00 6,357 6,211,563
Federal National Mortgage Association
5.62% 03/21/00 20,500 20,243,978
5.61% 04/05/00 25,000 24,629,896
4.98% 04/20/00 7,000 6,998,011
5.38% 05/01/00 11,800 11,586,623
5.39% 05/01/00 10,000 9,818,836
5.00% 05/04/00 5,000 4,984,666
5.78% 05/09/00 5,000 4,896,442
5.48% 05/11/00 26,083 25,562,876
5.47% 06/12/00 15,000 14,628,496
5.21% 06/15/00 10,000 9,759,761
6.24% 06/19/00 5,000 5,011,091
5.45% 08/16/00 12,000 11,585,800
</TABLE>
See accompanying notes to financial statements.
1
<PAGE>
<TABLE>
<CAPTION>
THE BRADFORD FUNDS, INC.
The Bradford Money Fund
Statement of Net Assets -- (Continued)
December 31, 1999
Percentage Par
of Portfolio Maturity (000) Value
------------ -------- --------- ---------------
<S> <C> <C> <C> <C>
AGENCY OBLIGATIONS - (CONTINUED)
Federal National Mortgage Association -
(Continued)
5.46% 08/17/00 $ 8,300 $ 8,011,727
6.11% 09/20/00 5,000 5,008,092
----------------
TOTAL AGENCY OBLIGATIONS 589,237,017
----------------
COMMERCIAL PAPER ............................... 72.74%
Aerospace....................................... 1.80%
Allied Signal (A-1, P-1)
5.71% 02/29/00 18,200 18,029,683
5.72% 03/09/00 25,000 24,729,889
----------------
42,759,572
----------------
Agriculture..................................... 0.62%
Archer Daniels Midland Co. (A-1+, P-1)
5.68% 03/24/00 15,000 14,803,567
----------------
Automobiles..................................... 4.68%
Daimler-Chrysler (A-1, P-1)
5.98% 01/21/00 10,000 9,966,778
5.83% 02/07/00 15,000 14,910,121
5.83% 02/08/00 15,000 14,907,692
5.94% 02/16/00 17,000 16,870,970
5.93% 02/17/00 22,000 21,829,677
5.72% 04/10/00 15,000 14,761,666
5.79% 04/12/00 18,000 17,704,710
----------------
110,951,614
----------------
Beverages....................................... 4.73%
Coca-Cola Co. (A-1, P-1)
5.77% 01/13/00 10,000 9,980,767
5.87% 01/27/00 10,000 9,957,606
5.73% 02/02/00 13,500 13,431,240
5.73% 02/04/00 23,000 22,875,532
5.80% 02/07/00 10,000 9,940,389
5.86% 02/15/00 16,500 16,379,137
5.83% 02/17/00 10,000 9,923,886
5.65% 02/28/00 20,000 19,817,944
----------------
112,306,501
----------------
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
THE BRADFORD FUNDS, INC.
The Bradford Money Fund
Statement of Net Assets -- (Continued)
December 31, 1999
Percentage Par
of Portfolio Maturity (000) Value
------------ -------- --------- ---------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER - (CONTINUED)
Broker-Dealer.................................... 9.45%
Goldman Sachs Group L.P. (A-1+, P-1)
6.00% 01/19/00 $10,000 $ 9,970,000
6.00% 01/20/00 10,000 9,968,333
6.00% 01/24/00 10,000 9,961,667
6.00% 01/25/00 10,000 9,960,000
5.98% 01/26/00 10,000 9,958,472
5.98% 01/28/00 14,900 14,833,173
6.00% 01/31/00 17,200 17,114,000
5.97% 02/11/00 20,000 19,864,017
5.96% 02/14/00 10,000 9,927,156
Merrill Lynch & Co. Inc. (A-1+, P-1)
5.95% 01/18/00 5,100 5,085,670
5.92% 01/19/00 14,000 13,958,560
5.90% 01/20/00 20,000 19,937,722
5.95% 01/25/00 17,800 17,729,393
5.95% 01/26/00 10,000 9,958,681
5.95% 01/27/00 18,000 17,922,650
5.85% 02/09/00 15,400 15,302,403
5.84% 03/29/00 13,000 12,814,418
----------------
224,266,315
----------------
Chemicals........................................ 4.70%
Dupont (E.I.) de Nemours & Co. (A-1+, P-1)
5.82% 01/18/00 16,500 16,454,652
5.76% 01/24/00 15,000 14,944,800
5.76% 01/25/00 10,000 9,961,600
5.66% 02/23/00 25,000 24,791,681
5.79% 03/02/00 7,800 7,723,475
5.79% 03/06/00 14,000 13,853,642
5.79% 03/10/00 10,000 9,889,025
5.80% 04/04/00 14,000 13,787,978
----------------
111,406,853
----------------
Consumer Products................................ 3.04%
Clorox Company (A-1, P-1)
5.85% 01/28/00 12,350 12,295,814
Proctor & Gamble Co. (A-1+, P-1)
5.87% 01/10/00 30,000 29,955,975
5.90% 01/14/00 10,000 9,978,694
5.80% 01/24/00 10,000 9,962,945
5.80% 02/03/00 10,000 9,946,833
----------------
72,140,261
----------------
Electronic....................................... 1.05%
Emerson Electric Company (A-1+, P-1)
5.60% 02/24/00 25,000 24,790,000
----------------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
THE BRADFORD FUNDS, INC.
The Bradford Money Fund
Statement of Net Assets -- (Continued)
December 31, 1999
Percentage Par
of Portfolio Maturity (000) Value
------------ -------- --------- ---------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER - (CONTINUED)
Entertainment.................................... 3.08%
Walt Disney Company Inc. (A-1, P-1)
5.57% 02/01/00 $15,000 $ 14,928,054
5.62% 03/03/00 16,000 15,845,138
5.82% 03/15/00 10,000 9,880,367
5.67% 05/02/00 15,000 14,711,775
5.65% 05/11/00 18,000 17,629,925
----------------
72,995,259
----------------
Finance.......................................... 16.02%
Bellsouth Capital Funding (A-1+, P-1)
5.85% 02/04/00 15,000 14,917,125
5.80% 03/14/00 28,000 27,670,689
5.80% 03/16/00 14,000 13,830,833
Ford Motor Credit Company (A-1, P-1)
5.75% 01/04/00 22,200 22,189,363
5.70% 01/10/00 5,000 4,992,875
5.94% 01/11/00 16,000 15,973,600
5.70% 01/18/00 5,000 4,986,542
5.70% 01/31/00 5,000 4,976,250
5.50% 04/27/00 16,000 15,714,000
General Electric Capital Corporation (A-1+, P-1)
6.04% 02/03/00 10,000 9,944,633
5.98% 02/10/00 10,000 9,933,556
5.95% 02/18/00 12,900 12,797,660
5.74% 03/08/00 26,000 25,722,248
5.71% 04/18/00 12,000 11,794,440
5.72% 04/24/00 22,300 21,896,073
5.97% 04/25/00 20,000 19,618,583
General Motors Acceptance Corp. (A-1, P-1)
5.97% 01/19/00 11,600 11,565,374
5.97% 01/21/00 10,000 9,966,833
5.93% 02/14/00 10,000 9,927,522
IBM Credit Corp. (A-1, P-1)
5.67% 04/11/00 12,000 11,809,110
5.67% 04/13/00 15,000 14,756,662
5.62% 04/26/00 26,000 25,529,169
Private Export Funding (A-1+, P-1)
5.74% 02/16/00 20,000 19,853,311
5.75% 03/10/00 40,000 39,559,167
----------------
379,925,618
----------------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
THE BRADFORD FUNDS, INC.
The Bradford Money Fund
Statement of Net Assets -- (Continued)
December 31, 1999
Percentage Par
of Portfolio Maturity (000) Value
------------ -------- --------- ---------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER - (CONTINUED)
Food............................................ 3.60%
Campbell Soup Co. (A-1+, P-1)
4.82% 01/20/00 $10,000 $ 9,974,561
5.81% 01/26/00 20,000 19,919,306
5.82% 02/01/00 10,000 9,949,883
5.89% 03/02/00 11,000 10,890,217
Heinz (HJ) Co. (A-1, P-1)
6.05% 01/13/00 20,000 19,959,667
Kellogg Co. (A-1+, P-1)
5.77% 03/28/00 15,000 14,790,837
----------------
85,484,471
----------------
Medical......................................... 5.21%
Johnson & Johnson (A-1+, P-1)
5.00% 01/04/00 30,000 29,987,500
5.74% 04/17/00 30,000 29,488,183
5.90% 05/17/00 20,000 19,550,945
5.65% 06/30/00 20,000 19,431,861
Pfizer Inc. (A-1+, P-1)
5.75% 02/11/00 25,300 25,134,320
----------------
123,592,809
----------------
Multimedia...................................... 0.50%
McGraw-Hill Inc. (A-1, P-1)
6.18% 01/18/00 12,000 11,964,980
----------------
Oil & Gas....................................... 3.69%
Atlantic Richfield Co. (A-1, P-1)
5.97% 02/01/00 15,000 14,922,887
6.07% 02/01/00 12,000 11,937,277
5.97% 02/02/00 15,000 14,920,400
BP America Inc. (A-1+, P-1)
5.64% 02/22/00 30,000 29,755,600
Mobil Corp. (A-1+, P-1)
6.02% 01/21/00 16,000 15,946,489
----------------
87,482,653
----------------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
THE BRADFORD FUNDS, INC.
The Bradford Money Fund
Statement of Net Assets -- (Concluded)
December 31, 1999
Percentage Par
of Portfolio Maturity (000) Value
------------ -------- --------- ---------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER - (CONTINUED)
Telecommunications............................... 10.57%
AT&T Corp. (A-1+, P-1)
6.05% 01/27/00 $ 6,000 $ 5,973,783
5.93% 01/31/00 20,100 20,000,672
5.92% 02/03/00 8,000 7,956,587
5.92% 02/08/00 10,000 9,937,511
5.87% 02/10/00 10,000 9,934,778
5.87% 02/18/00 10,000 9,921,733
5.87% 02/28/00 10,000 9,905,428
5.87% 02/29/00 19,000 18,817,215
Bellsouth Telecommunications (A-1+, P-1)
5.88% 02/02/00 10,000 9,947,733
5.90% 02/08/00 10,000 9,937,722
5.90% 02/09/00 10,000 9,936,083
5.90% 02/10/00 10,000 9,934,445
5.62% 02/15/00 10,000 9,929,750
Lucent Technologies (A-1, P-1)
5.80% 01/12/00 24,500 24,456,581
5.80% 01/13/00 15,000 14,971,000
5.75% 03/13/00 25,000 24,712,500
5.75% 03/15/00 20,000 19,763,611
5.75% 03/17/00 25,000 24,696,528
----------------
250,733,660
----------------
TOTAL COMMERCIAL PAPER 1,725,604,133
----------------
U.S. GOVERNMENT OBLIGATIONS...................... 2.11%
U.S. Treasury Bill
4.55% 01/06/00 25,000 24,984,201
U.S. Treasury Note
6.37% 05/15/00 25,000 25,093,688
----------------
TOTAL U.S. GOVERNMENT OBLIGATIONS 50,077,889
----------------
TOTAL INVESTMENTS................................ 99.69% 2,364,919,039
(Amortized Cost $2,364,919,039)*
Cash and Other Assets, Net of Liabilities........ 0.31% 7,443,134
------ ----------------
Net Assets....................................... 100.00% $ 2,372,362,173
====== ================
Net Asset Value, Offering and Redemption
Price Per Share ($2,372,362,173 / 2,372,377,392) $ 1.00
================
------------
*Also cost for Federal Income Tax Purposes.
</TABLE>
See accompanying notes to financial statements
6
<PAGE>
<TABLE>
<CAPTION>
THE BRADFORD FUNDS, INC.
The Bradford Money Fund
Statement of Operations
For The Year Ended December 31, 1999
<S> <C>
INVESTMENT INCOME
Interest................................................................................ $ 116,852,928
------------------
EXPENSES
Advisory fees........................................................................... 8,171,267
Administration fees..................................................................... 611,324
Distribution fees....................................................................... 4,526,439
Directors' fees......................................................................... 57,523
Custodian fees.......................................................................... 114,783
Transfer agent fees..................................................................... 1,772,136
Legal................................................................................... 49,119
Audit................................................................................... 24,812
SEC registration fees................................................................... 93,086
Blue sky registration fees.............................................................. 60,706
Insurance............................................................................... 15,738
Printing and postage.................................................................... 164,410
Miscellaneous........................................................................... 26,048
------------------
TOTAL EXPENSES..................................................................... 15,687,391
Waiver of advisory fees................................................................. (657,930)
------------------
NET EXPENSES....................................................................... 15,029,461
------------------
NET INVESTMENT INCOME...................................................................... 101,823,467
NET REALIZED LOSS ON INVESTMENTS........................................................... (187)
------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................................... $ 101,823,280
==================
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
THE BRADFORD FUNDS, INC.
The Bradford Money Fund
Statements of Changes in Net Assets
For the Year For the Year
Ended Ended
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Increase in Net Assets:
Operations:
Net investment income............................................ $ 101,823,467 $ 88,952,853
Net realized loss on investments................................. (187) (674)
----------------- -----------------
Net increase in net assets resulting from operations............. 101,823,280 88,952,179
----------------- -----------------
Dividends to shareholders from:
Net investment income ($.0449 and $.0482 per share,
respectively).................................................. (101,823,467) (88,952,853)
----------------- -----------------
Total dividends to shareholders..................................... (101,823,467) (88,952,853)
----------------- -----------------
Capital Stock Transactions:
Proceeds from sale of capital shares............................. 10,448,950,671 8,663,466,410
Value of shares issued in reinvestment of dividends.............. 98,134,092 85,552,716
Cost of shares repurchased....................................... (10,212,231,114) (8,274,797,889)
----------------- -----------------
Increase in net assets derived from capital stock
transactions................................................... 334,853,649 474,221,237
----------------- -----------------
Total increase in assets............................................ 334,853,462 474,220,563
----------------- -----------------
Net Assets:
Beginning of year................................................... 2,037,508,711 1,563,288,148
----------------- -----------------
End of year......................................................... $ 2,372,362,173 $ 2,037,508,711
================= =================
</TABLE>
See accompanying notes to financial statements
8
<PAGE>
<TABLE>
<CAPTION>
THE BRADFORD FUNDS, INC.
The Bradford Money Fund
Financial Highlights
(for a share outstanding through each year)
For the For the For the For the For the
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
Income From Investment Operations:
Net Investment Income..................... .0449 .0482 .0485 .0468 .0515
---------- ---------- ---------- ---------- ----------
Total From Investment Operations....... .0449 .0482 .0485 .0468 .0515
---------- ---------- ---------- ---------- ----------
Less Distributions:
Dividend to Shareholders from
Net Investment Income.................. (.0449) (.0482) (.0485) (.0468) (.0515)
---------- ---------- ---------- ---------- ----------
Total Distributions.................... (.0449) (.0482) (.0485) (.0468) (.0515)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Year................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total Return................................ 4.59% 4.93% 4.96% 4.78% 5.28%
Ratio/Supplement Data:
Net Assets, End of Year (in thousands).... $2,372,362 $2,037,509 $1,563,288 $1,234,321 $1,009,370
Ratio to Average Daily Net Assets:
Expenses Before Waiver of Advisory
and/or Distribution Fees.............. 0.69% 0.73% 0.75% 0.78% 0.81%
Expenses After Waiver of Advisory and/or
Distribution Fees..................... 0.66% 0.70% 0.74% 0.77% 0.80%
Net Investment Income Before Waiver o
Advisory and/or Distribution Fees..... 4.47% 4.79% 4.85% 4.67% 5.14%
Net Investment Income After Waiver of
Advisory and/or Distribution Fees..... 4.50% 4.82% 4.87% 4.68% 5.15%
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
THE BRADFORD FUNDS, INC.
The Bradford Money Fund
Notes to Financial Statements
December 31, 1999
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Bradford Funds, Inc. (the "Company"), an open-end, diversified
management investment company, was incorporated in Maryland on October 26, 1988.
The Company is authorized to issue 5.0 billion shares of multiple portfolios.
The Company is currently offering shares of one portfolio, The Bradford Money
Fund (the "Fund"). The only transaction occurring in the Fund between the date
of incorporation and the commencement of operations was the sale and issuance of
100,000 shares of capital stock for $100,000 to Bradford Capital Management,
Ltd. ("Bradford Capital Management"), the Fund's investment adviser, on
January 10, 1989. The investment objective of the Fund is to provide as high a
level of current interest income as is consistent with maintaining liquidity and
stability of principal. It seeks to achieve this objective by investing in high
quality, U.S. dollar-dominated instruments, such as short-term U.S. Government
securities, bank certificates of deposit, commercial paper and repurchase
agreements. The ability of issuers of debt securities held by the Fund to meet
their obligations may be affected by economic developments in a specific
industry or region.
A) SECURITY VALUATION--Portfolio securities are valued under the amortized
cost method, which approximates current market value. Under this method,
securities are valued at cost when purchased and thereafter a constant
proportionate amortization of any discount or premium is recorded until maturity
of the security. The Fund seeks to maintain net asset value per share at $1.00.
B) SECURITY TRANSACTIONS AND INVESTMENT INCOME--Security transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
income tax purposes. Interest income is recorded on the accrual basis.
C) DISTRIBUTIONS TO SHAREHOLDERS--Dividends from net investment income are
declared daily and paid monthly. Net realized capital gains, if any will be
distributed at least annually.
D) FEDERAL INCOME TAXES--The Fund intends to qualify for and elect the tax
treatment applicable to regulated investment companies under the Internal
Revenue Code and make the requisite distributions to its shareholders which will
be sufficient to relieve it from Federal income and Federal excise taxes.
Therefore, no provision has been recorded for Federal income or Federal excise
taxes.
E) REPURCHASE AGREEMENTS--Money market instruments may be purchased from
financial institutions, such as banks and non-bank dealers, subject to the
seller's agreement to repurchase them at an agreed upon date and price.
Collateral for repurchase agreements may have longer maturities than the maximum
permissible remaining maturity of portfolio investments. The seller will be
required on a daily basis to maintain the value of the securities subject to the
agreement at not less than the repurchase price. If the seller defaults and the
value of the collateral declines or if bankruptcy proceedings are commenced with
respect to the seller of the security, realization of the collateral by the Fund
may be delayed or limited. The agreements are conditioned upon the collateral
being deposited under the Federal Reserve book-entry system or with the Fund's
custodian or a third party sub-custodian.
10
<PAGE>
THE BRADFORD FUNDS, INC.
The Bradford Money Fund
Notes to Financial Statements -- (Continued)
December 31, 1999
NOTE 2-- INVESTMENT ADVISORY, ADMINISTRATION, DISTRIBUTION AND TRANSFER AGENCY
AGREEMENTS
The Fund has entered into an investment advisory agreement with Bradford
Capital Management. J.C.B. Financial Services, Inc. acts as the general partner
to the adviser and J.C. Bradford & Co. L.L.C., a Tennessee limited liability
company ("Bradford"), is the adviser's limited partner. The general partner is a
wholly owned subsidiary of Bradford & Co., Incorporated. The Fund has also
entered into an Administration and Accounting Services Agreement with Reich &
Tang Asset Management, L.P. and distribution and transfer agency agreements with
Bradford.
For the advisory services provided and expenses assumed by it, Bradford
Capital Management is entitled to receive from the Fund a fee, computed daily
and payable monthly, at an annual rate of .40% of the first $500 million of the
Fund's daily net assets and .35% of the daily net assets of the Fund in excess
of $500 million. Bradford Capital Management may, in its discretion from time to
time, waive voluntarily all or any portion of its advisory fee or reimburse the
Fund for a portion of the expenses of its operations. Bradford Capital
Management has agreed to waive indefinitely a portion of its advisory fee such
that it is receiving .30% of the Fund's average daily net assets in excess of $1
billion and .29% of the Fund's average daily net assets in excess of $2 billion.
For the year ended December 31, 1999, such waiver amounted to $657,930. Advisory
fees, before such waiver amounted to $8,171,267 for the year ended December 31,
1999.
For the administration services provided, Reich & Tang Asset Management,
L.P. is entitled to receive from the Fund a fee, computed daily and payable
monthly, at an annual rate of .10% of the first $200 million of daily net
assets; .07% of the next $200 million of daily net assets; .045% of the next
$200 million of daily net assets; .025% of the next $100 million of daily net
assets; and .01% of the daily net assets in excess of $700 million. Such fees
amounted to $611,324 for the year ended December 31, 1999.
The Fund has adopted a Plan of Distribution and pursuant thereto has
entered into an agreement under which the distributor, Bradford, is entitled to
receive from the Fund reimbursement of its distribution costs at an annual rate
of up to .20% of daily net assets. Bradford may, in its discretion from time to
time, waive voluntarily all or any portion of its distribution fees. Such fees
amounted to $4,526,439 for the year ended December 31, 1999.
For the transfer agency services provided, Bradford is entitled to receive
a fee, computed and paid monthly, at an annual rate of $11.50 per active
account. Such fees amounted to $1,772,136 for the year ended December 31, 1999.
11
<PAGE>
<TABLE>
<CAPTION>
THE BRADFORD FUNDS, INC.
The Bradford Money Fund
Notes to Financial Statements -- (Concluded)
December 31, 1999
NOTE 3-- CAPITAL STOCK
Transactions in capital stock of the Fund were as follows:
For the Year Ended For the Year Ended
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Shares sold..................................................... 10,448,950,671 8,663,466,410
Shares issued in connection with reinvestment of dividends from
net investment income......................................... 98,134,092 85,552,716
Shares redeemed................................................. (10,212,231,114) (8,274,797,889)
--------------- --------------
Net increase.................................................... 334,853,649 474,221,237
=============== ==============
NOTE 4-- NET ASSETS
Net assets consisted of the following:
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Capital stock, at par........................................... $ 2,372,377 $ 2,037,524
Paid-in capital in excess of par................................ 2,370,005,015 2,035,486,219
Net accumulated realized capital loss........................... (15,219) (15,032)
--------------- --------------
$ 2,372,362,173 $2,037,508,711
=============== ==============
</TABLE>
12
<PAGE>
INDEPENDENT AUDITORS' REPORT
Shareholders and Board of Directors
The Bradford Funds, Inc.
The Bradford Money Fund
We have audited the accompanying statement of net assets of The Bradford
Funds, Inc., The Bradford Money Fund as of December 31, 1999 and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of The
Bradford Funds, Inc., The Bradford Money Fund as of December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the five years in the period the ended, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
January 14, 2000
13
<PAGE>
APPENDIX
COMMERCIAL PAPER RATINGS
Standard & Poor's Corporation. Commercial paper ratings are
graded into four categories, ranging from "A" for the highest quality
obligations to "D" for the lowest. Issues assigned the A rating are regarded as
having the greatest capacity for timely payment. Issues in this category are
further refined with designation 1, 2, and 3 to indicate the relative degree of
safety. The "A-1" designation indicates that the degree of safety regarding
timely payment is very strong. Those issues determined to possess overwhelming
safety characteristics will be denoted with a plus sign designation.
Moody's Investors Service, Inc. Moody's commercial paper
ratings are opinions of the ability of the issuers to repay punctually
promissory obligations not having an original maturity in excess of nine months.
Moody's makes no representation that such obligations are exempt from
registration under the Securities Act of 1933, nor does it represent that any
specific note is a valid obligation of a rated issuer or issued in conformity
with any applicable law. Moody's employs the following three designations, all
judged to be investment grade, to indicate the relative repayment capacity of
rated issuers:
Prime-1 Superior capacity for repayment of short-term promissory
obligations.
Prime-2 Strong capacity for repayment of short-term promissory
obligations.
Prime-3 Acceptable capacity for repayment of short-term promissory
obligations.
Duff and Phelps, Inc. Duff & Phelps' commercial paper ratings
are consistent with the short-term rating criteria utilized by money market
participants. The ratings apply to obligations with maturities (when issued) of
under one year.
Duff & Phelps refines the traditional "1" category. As a
consequence, Duff & Phelps has incorporated gradations of "1+" (one plus) and
"1-" (one minus), to, respectively, indicate the "highest" certainty of timely
payment or simply "high" certainty of timely payment. The Duff 2 category has
not been similarly refined but could be at some later date.
Duff 1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk
factors are minor.
Duff 2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing internal funds needs may
enlarge total financing requirements, access to capital markets is
good. Risk factors are small.
Duff 3 Satisfactory liquidity and other protection factors qualify issue as
investment grade. Risk factors are larger and subject to more
variation. Nevertheless, timely payment is expected.
A-1
<PAGE>
All Duff & Phelps' short-term ratings (Duff 1, Duff 2 and Duff 3) are considered
investment grade. No ratings are issued for companies whose commercial paper is
not deemed to be of investment grade.
Fitch IBCA Information Services, Inc. Fitch IBCA Information Services, Inc.
short term ratings, as described by the company, are:
F1+: Commercial paper assigned this rating is regarded as
having the strongest capacity for timely payment of
financial commitments; an added "+" denotes any
exceptionally strong credit feature.
F1: Commercial paper assigned this rating is regarded as
having a capacity for timely payment only slightly less
than the highest rating, i.e., F1+.
F2: Commercial paper assigned this rating is regarded as
having a satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as
great as the two higher ratings.
A-2
