PHTRANS:51613_1.WP5
1933 Act File No. 33-
1940 Act File No. 811-5950
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MONEY MARKET OBLIGATIONS TRUST
(Exact Name of Registrant as Specified in Charter)
(412) 288-1900
(Area Code and Telephone Number)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
JOHN W. MCGONIGLE, ESQUIRE
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Copy to:
Matthew G. Maloney, Esquire
Dickstein, Shapiro & Morin, L.L.P.
2101 L. Street, N.W.
Washington, D.C. 20037
(Name and Address of Agent for Service)
It is proposed that this filing will become effective thirty days
after it is filed pursuant to Rule 488.
(Approximate Date of Proposed Public Offering)
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of 1940 that
it elects to register an indefinite amount of securities under the Securities
Act of 1933 during the most recent fiscal year ended July 31, 1994. Therefore,
a filing fee will not be submitted because of the Registrant's reliance on Rule
24f-2.
CROSS-REFERENCE SHEET
Pursuant to Item 1(a) of Form N-14 Showing Location in
Prospectus of Information Required by Form N-14
Item of Part A of Form N-14 and Caption Caption or Location in Combined
Proxy Statement and
Prospectus
1. Beginning of Registration Statement
and Outside Front Cover Page
of Combined Proxy Statement
and Prospectus........................ Cross-Reference Sheet; Cover Page
2. Beginning and Outside Back Cover
Page of Combined Proxy Statement
and Prospectus........................ Table of Contents
3. Synopsis Information and Risk Factors. Summary; Comparison of the Funds
4. Information About the Transaction..... Information About the Proposed
Reorganization
5. Information About the Registrant...... Additional Information About MMOT
and Pacific Horizon
6. Information About the Company
Being Acquired........................ Additional Information About MMOT
and Pacific Horizon
7. Voting Information.................... Information Relating to Voting
Matters
8. Interest of Certain Persons
and Experts........................... Not Applicable
9. Additional Information Required
for Reoffering by Persons Deemed
to be Underwriters.................... Not Applicable
Item of Part B of Form N-14 and Caption Caption or Location in Statement
of Additional Information
10. Cover Page .......................... Cover Page
11. Table of Contents ................... Table of Contents
12. Additional Information About the
Registrant.......................... Combined Statement of Additional
Information of Prime Obligations
Fund, dated November 30, 1994
13. Additional Information About the
Company Being Acquired............... Statement of Additional Information
of Prime Value Fund, dated July 1,
1995
14. Financial Statements................. Annual Report of Prime Obligations
Fund; Annual Report of Prime Value
Fund
PRELIMINARY COPY
PACIFIC HORIZON FUNDS, INC.
125 West 55th Street
New York, New York 10019
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF THE PRIME VALUE FUND
To be held on ___________, 1995
To the Shareholders of the
Prime Value Fund, an
Investment Portfolio Offered by
Pacific Horizon Funds, Inc.
NOTICE IS HEREBY GIVEN THAT a Special Meeting of Shareholders of the PRIME
VALUE FUND, an investment portfolio offered by Pacific Horizon Funds, Inc.
("Pacific Horizon"), will be held at Pacific Horizon's offices, 125 West 55th
Street, New York, New York 10019 on _____________, 1995 at 10:30 a.m., Eastern
time (the "Meeting"), for the following purposes:
ITEM 1. To approve or disapprove an Agreement and Plan of Reorganization
by and between Pacific Horizon and Money Market Obligations
Trust ("MMOT") and the transactions contemplated thereby,
including (1) the transfer of all of the assets and known
liabilities of Pacific Horizon's Prime Value Fund ("Prime
Value Fund") to MMOT's Prime Obligations Fund ("Prime
Obligations Fund") in exchange for Institutional Shares of the
Prime Obligations Fund which shall thereafter be distributed
by Pacific Horizon to the holders of Pacific Horizon shares
and Horizon shares of the Prime Value Fund; and (2) the
amendment of Pacific Horizon's Charter to cancel all of the
issued and outstanding shares of the Prime Value Fund in
connection with the liquidation of the Prime Value Fund.
ITEM 2. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
Your directors recommend that you vote in favor of Item 1.
The proposed reorganization and related matters are described in the attached
Combined Proxy Statement and Prospectus. A copy of the Agreement and Plan of
Reorganization is attached as Appendix A thereto.
Shareholders of record as of the close of business on ____________, 1995 are
entitled to notice of, and to vote at, the Meeting or any adjournment thereof.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE THE ACCOMPANYING PROXY CARD, WHICH IS BEING SOLICITED BY THE BOARD OF
DIRECTORS OF PACIFIC HORIZON. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE
MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY
SUBMITTING TO PACIFIC HORIZON A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY
EXECUTED PROXY OR BY ATTENDING THE MEETING AND ELECTING TO VOTE IN PERSON.
By the Order of the
Board of Directors
W. Bruce McConnel, III
Secretary
_________________, 1995
PRELIMINARY COPY
PACIFIC HORIZON FUNDS, INC.
125 West 55th Street, New York, New York 10019
Phone: (800) 332-3863
MONEY MARKET OBLIGATIONS TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222
Phone: (800) 235-4669
COMBINED PROXY STATEMENT AND PROSPECTUS
Dated ____________, 1995
This Combined Proxy Statement and Prospectus is being furnished in connection
with the solicitation of proxies by the Board of Directors of Pacific Horizon
Funds, Inc. ("Pacific Horizon") in connection with the Special Meeting of
Shareholders of the Prime Value Fund (the "Prime Value Fund") to be held at
10:30 a.m. Eastern time on _____________, 1995 (the "Meeting") at Pacific
Horizon's offices, 125 W. 55th Street, New York, New York 10019, at which
shareholders of the Prime Value Fund of Pacific Horizon will be asked to approve
a proposed Agreement and Plan of Reorganization dated as of ____________, 1995
(the "Reorganization Agreement") by and between Pacific Horizon and Money Market
Obligations Trust ("MMOT") and the transactions contemplated thereby (the
"Reorganization").
Pacific Horizon and MMOT are open-end, series type management investment
companies. The Board of Directors of Pacific Horizon, including the non-
interested Directors at the meeting, has determined that it is in the best
interests of Pacific Horizon and the shareholders of the Prime Value Fund to be
reorganized into MMOT's Prime Obligations Fund (the "Prime Obligations Fund").
The Reorganization Agreement provides that all of the assets and known
liabilities of the Prime Value Fund will be transferred to the Prime Obligations
Fund. In exchange for the transfer of these assets, and known liabilities, MMOT
will simultaneously issue a number of full and fractional shares of stock in the
Prime Obligations Fund of its Institutional Shares class (the "Institutional
Shares") equal in number to the number of full and fractional Pacific Horizon
shares and Horizon shares (the "Pacific Horizon Shares" and "Horizon Shares,"
respectively) representing interests in the Prime Value Fund outstanding
immediately prior to the time the Reorganization becomes effective (the
"Effective Time of the Reorganization"), provided that at the Effective Time of
the Reorganization the price per Pacific Horizon Share and Horizon Share of the
Prime Value Fund and the price per Institutional Share of the Prime Obligations
Fund for purposes of sales and redemptions is $1.00 based on the amortized cost
valuation procedures that have been adopted by Pacific Horizon and MMOT.
The Prime Value Fund will then make a liquidating distribution to its
shareholders of the Prime Obligations Fund's Institutional Shares received from
MMOT, so that holders of Pacific Horizon Shares and Horizon Shares of the Prime
Value Fund at the Effective Time of the Reorganization will receive that number
of full and fractional Institutional Shares of the Prime Obligations Fund having
a value equal to the value of the shareholder's shares in the Prime Value Fund
immediately before the Effective Time of the Reorganization. Holders of Pacific
Horizon Shares or Horizon Shares of the Prime Value Fund will receive shares of
the Prime Obligations Fund without the imposition of any fees or other charges.
The Reorganization Agreement further provides that following the liquidation of
the Prime Value Fund all of the issued and outstanding shares of the Prime Value
Fund will be cancelled.
This Combined Proxy Statement and Prospectus sets forth concisely the
information that a shareholder of the Prime Value Fund should know before voting
on the Reorganization Agreement (and the transactions contemplated thereby), and
should be retained for future reference. A Statement of Additional Information
relating to this Combined Proxy Statement and Prospectus dated __________, 1995,
is incorporated herein by reference and is available upon oral or written
request and at no charge from Pacific Horizon at the address or telephone number
shown above. The Reorganization Agreement is attached to this Combined Proxy
Statement and Prospectus as Appendix A and is incorporated herein by reference.
The Prospectus relating to the Institutional Shares of the Prime Obligations
Fund of MMOT dated November 30, 1994, which describes the investment objective,
policies, and operations of the Institutional Shares of the Prime Obligations
Fund, accompanies this Combined Proxy Statement and Prospectus. Additional
information is set forth in the Statement of Additional Information of the Prime
Obligations Fund dated November 30, 1994, in this Combined Proxy Statement and
Prospectus, and in Pacific Horizon's Prospectus and Statement of Additional
Information dated July 1, 1995. Each of these documents is on file with the
Securities and Exchange Commission (the "SEC"), and is available without charge
upon oral or written request by writing or calling Pacific Horizon or MMOT at
the respective addresses or telephone numbers shown above on the cover page of
this Combined Proxy Statement and Prospectus. The information contained in each
of these Prospectuses and Statements of Additional Information is incorporated
herein by reference.
Copies of MMOT's and Pacific Horizon's Annual Reports and MMOT's most recent
Semi-Annual Report for the Prime Value Fund and Prime Obligations Fund are
available upon request and without charge to any shareholder of the Prime Value
Fund by writing or calling Pacific Horizon or MMOT at the respective addresses
or telephone numbers indicated above.
This Combined Proxy Statement and Prospectus constitutes the proxy statement
of Pacific Horizon for the Meeting and the Prospectus for Institutional Shares
of MMOT's Prime Obligations Fund, which shares have been registered with the SEC
and are to be issued in connection with the Reorganization.
This Combined Proxy Statement and Prospectus is expected to first be sent to
shareholders of the Prime Value Fund on or about ____________, 1995.
Shareholders of Pacific Horizon may redeem their shares of the Prime Value Fund
at any time prior to the Effective Time of the Reorganization.
Shares of the Prime Value Fund and Prime Obligations Fund (collectively, the
"Funds") are not bank deposits or obligations of, or guaranteed or endorsed by,
Bank of America National Trust and Savings Association or any of its affiliates
and are not federally insured by, guaranteed by, obligations of, or otherwise
supported by the U.S. Government, the Federal Deposit Insurance Corporation, the
Federal Reserve Board, or any other governmental agency. Each Fund seeks to
maintain its net asset value per share at $1.00 for purposes of purchases and
redemptions, although there can be no assurance that it will be able to do so on
a continuous basis. Investments in the Funds involve investment risk, including
the possible loss of principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS COMBINED PROXY STATEMENT AND PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. NO PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED IN THIS COMBINED PROXY STATEMENT AND PROSPECTUS AND IN THE
MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND, IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY PACIFIC HORIZON OR MMOT.
Pacific Horizon Funds, Inc.
Money Market Obligations Trust
Combined Proxy Statement and Prospectus
Table of Contents
Page
SUMMARY
Proposed Reorganization
Reasons for Reorganization.
Federal Income Tax Consequences
Comparison of the Investment Objectives of the Funds
Risk Factors
Comparative Fee Table
Investment Advisers and Advisory Fees
Purchase Procedures
Redemption Procedures.
Exchange Procedures.
Dividends, Distributions and Pricing.
INFORMATION RELATING TO THE PROPOSED REORGANIZATION
Description of the Reorganization Agreement
Board Considerations
Federal Income Tax Consequences.
Capitalization.
Performance
COMPARISON OF THE FUNDS
Investment Objectives and Policies - Prime Value Fund and Prime Obligations Fund
Fundamental Investment Limitations of the Prime Value Fund and the Prime
Obligations Fund
Other Information
INFORMATION RELATING TO VOTING MATTERS
General Information
Shareholder and Board Approval
Quorum
Appraisal Rights
Principal Shareholders.
ADDITIONAL INFORMATION ABOUT MMOT AND PACIFIC HORIZON
FINANCIAL STATEMENTS AND EXPERTS
OTHER BUSINESS
LITIGATION
NOTICE TO BANKS, BROKER-DEALERS, VOTING DIRECTORS AND THEIR NOMINEES
SHAREHOLDER INQUIRIES
APPENDIX A - AGREEMENT AND PLAN OF REORGANIZATION
SUMMARY
Proposed Reorganization. Based upon their evaluations of the relevant
information presented to them, and in light of their fiduciary duties under
Federal and state law, Pacific Horizon's Board of Directors and MMOT's Board of
Trustees, including all of the non-interested members of each Board present at
the meetings, have determined that the proposed Reorganization is in the best
interests of the shareholders of Pacific Horizon and MMOT, respectively.
Pacific Horizon's Board recommends the approval of the Reorganization Agreement
by the shareholders of the Prime Value Fund at the Meeting.
Subject to shareholder approval, the Reorganization Agreement provides for:
(a) the acquisition by the Prime Obligations Fund of all of the assets, and the
assumption by the Prime Obligations Fund of the known liabilities of the Prime
Value Fund in exchange for Institutional Shares of the Prime Obligations Fund;
(b) the distribution of the Institutional Shares of the Prime Obligations Fund
to the holders of Pacific Horizon Shares and Horizon Shares in liquidation of
the Prime Value Fund; and (c) the amendment of Pacific Horizon's Charter to
cancel all of the issued and outstanding shares of the Prime Value Fund.
As a result of the proposed Reorganization, each holder of Pacific Horizon
Shares and Horizon Shares of the Prime Value Fund will become a holder of
Institutional Shares of the Prime Obligations Fund and will hold, immediately
after the Effective Time of the Reorganization, the same number of Institutional
Shares of the Prime Obligations Fund as the number of Pacific Horizon Shares and
Horizon Shares the shareholder held in the Prime Value Fund immediately before
the Effective Time of the Reorganization.
See "Information Relating to the Proposed Reorganization -- Description of
the Reorganization Agreement" for further information.
Reasons for Reorganization. In light of certain potential benefits and other
factors, the Board of Directors of Pacific Horizon, including the non-interested
Directors, has determined that it is in the best interests of Pacific Horizon,
and of the Prime Value Fund's shareholders, to reorganize into the Prime
Obligations Fund of MMOT. The Board of Directors considered, among other
things, as described more fully below under "Information Relating to the
Proposed Reorganization -- Board Considerations," the similarity of the
investment objectives and policies of the Prime Value Fund with those of the
Prime Obligations Fund, the relative performance and expense ratios, and the
tax-free nature of the exchange, as well as the fact that all expenses of the
Reorganization would be borne by Bank of America National Trust and Savings
Association ("Bank of America").
Similarly, the Board of Directors of MMOT, in approving the Reorganization,
determined that, based upon the business agreement discussed below, it would be
advantageous for MMOT, and specifically for the Prime Obligations Fund and its
shareholders, to acquire the assets and liabilities of the Prime Value Fund.
Federal Income Tax Consequences. As a condition to the Reorganization,
Pacific Horizon and MMOT will receive an opinion of counsel that the
Reorganization will be considered a tax-free "reorganization" under applicable
provisions of the Internal Revenue Code so that no gain or loss will be
recognized by either Pacific Horizon or MMOT or their shareholders. The tax
cost basis of the Institutional Shares of Prime Obligations Fund received by
Pacific Horizon shareholders will be the same as the tax cost basis of their
shares in the Pacific Horizon Shares and Horizon Shares.
Comparison of the Investment Objectives of the Funds. The investment
objectives of Prime Value Fund and Prime Obligations Fund are similar and are
each described in the Pacific Horizon and MMOT Prospectuses dated July 1, 1995,
and November 30, 1994, respectively. The Prime Value Fund and Prime Obligations
Fund are each a money market fund that seeks to maintain a net asset value of
$1.00 per share. There can be no guarantee that the Funds will achieve their
objective or that they will maintain a net asset value of $1.00 per share.
Risk Factors. Because of the similarities of the investment objectives
and policies between the Prime Value Fund and Prime Obligations Fund, an
investment in either the Prime Value Fund or the Prime Obligations Fund involves
investment risks that are similar but different in certain respects. Investment
risks involved in investing in the Prime Value Fund and the Prime Obligations
Fund, in general, are those typically associated with investing in a portfolio
of money market instruments.
Comparative Fee Table. The following table sets forth: (i) the current
fees and expenses of the Pacific Horizon Shares and Horizon Shares of the Prime
Value Fund as of February 28, 1995, as restated for the Pacific Horizon Shares
to reflect current fees; and (ii) the fees and expenses of the Institutional
Shares of the Prime Obligations Fund based on expenses expected during the
fiscal year ended July 31, 1995. Hypothetical examples based on the table are
shown following the table.
Comparative Fee Table
<TABLE>
<CAPTION>
Prime Value Estimated Prime
Fund Prime Value Obligations Fund
Pacific Horizon Fund Institutional
Shares Horizon Shares Shares
<S> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
daily net assets)
Management Fees 0.14%(1) 0.14%(2) 0.08%(3)
All Other Expenses (after 0.08%(1) 0.08%(2) 0.12%(3)
waivers)
Shareholder Services Fee 0.00%(1) ---%(2) ---%(3)
(after waivers)
Other Expenses 0.08%(1) 0.20%(2) 0.12%(3)
Total Fund Operating Expenses 0.22%(1) 0.22%(2) 0.20%(3)
(after waivers)
</TABLE>
__________________________
(1) Management Fees consist of an investment advisory fee and an
administration fee, each fee payable at a maximum annual rate of .10% of
the Prime Value Fund's net assets, and a special management services fee
payable at the annual rate of .32% of the Prime Value Fund's average net
assets. The investment adviser and administrator may voluntarily waive a
portion of their respective fees and may voluntarily reimburse expenses
from time to time. This voluntary waiver and reimbursement may be
modified or terminated at any time. Absent such fee waivers and/or
expense reimbursements, it is estimated that the total operating expenses
for Pacific Horizon Shares of the Prime Value Fund would be 0.60%.
(2) Management Fees consist of an investment advisory fee and an
administration fee, each payable at a maximum annual rate of .10% of the
Prime Value Fund's net assets. The investment adviser and administrator
may voluntarily waive a portion of their respective fees and may
voluntarily reimburse expenses from time to time. This voluntary waiver
and reimbursement may be modified or terminated at any time. Absent such
waivers and/or reimbursements, it is estimated that the total operating
expenses of the Horizon Shares of the Prime Value Fund would be 0.28%.
(3) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The investment adviser can terminate this
voluntary waiver at any time at its sole discretion. The maximum
management fee is 0.20% and the maximum shareholder services fee is 0.25%.
The Total Institutional Shares Operating Expenses in the table above are
based on expenses expected during the fiscal year ending July 31, 1995.
The Total Institutional Shares Operating Expenses were 0.20% for the
fiscal year ended July 31, 1994, and were 0.34% absent the voluntary
waiver of a portion of the management fee. MMOT anticipates that the
Total Institutional Shares Operating Expenses will not change as a result
of the Reorganization, although there can be no assurances that this will
be the case.
______________________________
Example: The following table illustrates the expenses on a $1,000 investment
based on the fees and expenses stated in the above Comparative Fee
Table, assuming (1) a 5% annual return and (2) redemption at the end
of each time period.
1 Year 3 Years 5 Years 10 Years
Prime Value Fund
(Pacific Horizon Shares) $2 $7 $12 $28
Prime Value Fund
(Horizon Shares) $2 $7 $12 $28
Estimated Prime Obligations Fund
(Institutional Shares) $2 $6 $11 $26
The purpose of the Example and Table is to assist investors in
understanding the various costs and expenses of investing in shares of the
Funds. The example above should not be considered a representation of past or
future expenses of the Funds. Actual expenses in the Example and Table may vary
from year to year and may be higher or lower than those shown above.
Investment Advisers and Advisory Fees. Bank of America, 555 California
Street, San Francisco, California 94104, serves as investment adviser to the
Prime Value Fund. Bank of America is a subsidiary of BankAmerica Corporation, a
registered bank holding company. Federated Management, Federated Investors
Tower, Pittsburgh, Pennsylvania 15222, serves as investment adviser to the Prime
Obligations Fund. Federated Management ("Federated"), a Delaware business
trust, is a registered investment adviser under the Investment Advisers Act of
1940.
For investment advisory services rendered to the Prime Value Fund, Bank of
America is entitled to receive a fee accrued daily and paid monthly, at the
following annual rates: .10% of the first $7 billion of the Prime Value Fund's
net assets, plus .09% of the next $3 billion of the Prime Value Fund's net
assets, plus .08% of the Prime Value Fund's net assets over $10 billion.
For investment advisory services rendered to the Prime Obligations Fund,
Federated Management is entitled to receive a fee equal to .20 of 1% of the
Prime Obligations Fund's average daily net assets.
Purchase Procedures. Pacific Horizon Shares and Horizon Shares of the
Prime Value Fund are sold without a sales charge. Pacific Horizon Shares of the
Prime Value Fund may be purchased directly by mail or by wire from Pacific
Horizon's distributor, by clients of Bank of America through their qualified
trust and agency accounts or by clients of certain institutions such as banks or
broker-dealers ("Service Organizations") without a charge imposed by the Prime
Value Fund, although Bank of America and Service Organizations may charge a fee
for providing administrative services in connection with investments in shares
of the Prime Value Fund. The minimum initial investment in Pacific Horizon
Shares of the Prime Value Fund is $500, except for purchases through Bank of
America's trust and agency accounts or through a Service Organization whose
clients have made aggregate minimum purchases of $1,000,000, in which event the
minimum initial investment is $100. The minimum subsequent investment in
Pacific Horizon Shares of the Prime Value Fund is $50, except for investments
arising from automatic investment transactions on behalf of Bank of America's
trust and agency accounts, as to which there is no minimum. Horizon Shares of
the Prime Value Fund may be ordered directly through Pacific Horizon's transfer
agents or through broker-dealers. The minimum initial investment requirement
for Horizon Shares of the Prime Value Fund is $500,000, and there is no minimum
subsequent investment requirement. Payment for shares may be made only in
federal funds or other funds immediately available to the transfer agents.
Purchase orders for Pacific Horizon Shares of the Prime Value Fund which
are in proper form are effected on a day on which both the Prime Value Fund's
custodian and the New York Stock Exchange (the "Exchange") are open for business
(a "PH Business Day") at the net asset value per share next determined after
receipt by Pacific Horizon's transfer agent at its Kansas City office of both an
order and federal funds. Purchases of Pacific Horizon Shares will not be
effected until payments made in other than federal funds are converted to
federal funds, which is ordinarily within two PH Business Days of receipt.
Purchase orders for Pacific Horizon Shares effected through automatic investment
transactions on behalf of Bank of America's trust and agency accounts that are
received by Bank of America before 12:00 noon Pacific Time are effected as of
4:00 p.m. Eastern Time on the same day. Orders for Horizon Shares received by
Pacific Horizon's transfer agent before 12:00 noon Eastern time on a PH Business
Day will be executed at such time on that day if payment is received by 4:00
p.m. Eastern time on such PH Business Day. Orders for Horizon Shares of the
Prime Value Fund received after 12:00 noon Eastern time on a PH Business Day,
and orders for which payment has not been received by 4:00 p.m. Eastern time,
will not be accepted.
Institutional Shares of the Prime Obligations Fund are also sold without a
sales charge and may be purchased by wire or by mail to Federated Services
Company. The minimum initial investment for Institutional Shares of the Prime
Obligations Fund is $25,000. Eligibility for investment in the Prime Obligations
Fund is contingent upon an investor accumulating and maintaining a minimum
aggregate investment of $200,000,000 in those mutual funds which are distributed
by Federated Securities Corp. or are advised by or administered by investment
advisers or administrators affiliated with Federal Securities Corp. ("Federated
Funds"). Prime Value Fund shareholders who become shareholders of the Prime
Obligations Fund as a result of the Reorganization will be exempt from the
$200,000,000 investment eligibility requirement.
Federal Reserve wire orders for Institutional Shares of the Prime
Obligations Fund must be received before 3:00 p.m. Eastern time. Orders by wire
for Institutional Shares are considered received immediately. Payment for
Institutional Shares by federal funds must be received before 3:00 p.m. Eastern
time that day. Mail orders for Institutional Shares are considered received
when payment by check is converted into federal funds, which is normally the
next business day after the check is received.
Redemption Procedures. Shareholders of Pacific Horizon Shares and Horizon
Shares of the Prime Value Fund may redeem all or any part of the value of their
accounts. Shareholders of Pacific Horizon Shares may redeem their shares by
written request, by TeleTrade or by wire. Shareholders of Horizon Shares may
redeem their shares by telephone or by terminal access. Redemptions of Pacific
Horizon Shares and Horizon Shares are effected at the net asset value per share
next determined after receipt of the redemption request by the transfer agent
(or transfer agents with respect to Horizon Shares). Proceeds for Pacific
Horizon Shares redeemed by teletrade ordinarily will be on deposit in the
shareholder's account at a domestic financial institution which is an Automated
Clearing House member bank two PH Business Days after receipt of the redemption
request, unless the shareholder has requested redemption proceeds be sent by
check. A check for redemption proceeds will be sent only to the registered
owner(s) and only to the address of record. Proceeds for Pacific Horizon Shares
redeemed by wire normally will be wired in federal funds to the commercial bank
specified by the shareholder on his account application. Wire redemption
proceeds must be in an amount of at least $1,000.
The Prime Value Fund ordinarily will make payment for all Pacific Horizon
Shares redeemed within seven days after receipt by the transfer agent of a
request in proper form, except as provided by the rules of the SEC. However, if
the Pacific Horizon Shares to be redeemed have been purchased by check or
TeleTrade, Pacific Horizon will, upon clearance of the purchase check or
TeleTrade payment, mail the redemption proceeds within seven PH Business Days.
Where redemption is requested other than by mail, Pacific Horizon Shares
purchased by check or by TeleTrade will not be redeemed for a period of seven PH
Business Days after their purchase. This procedure does not apply to situations
where the Prime Value Fund receives payment in cash or immediately available
funds for the purchase of Pacific Horizon Shares. During the period prior to
the time the Pacific Horizon Shares are redeemed, dividends on such shares will
accrue and be payable, and a shareholder will be entitled to exercise all other
rights of beneficial ownership. Payment for redeemed Horizon Shares for which a
redemption order is received by the transfer agents before 12:00 noon Eastern
time on a PH Business Day is normally made in federal funds wired to the
redeeming shareholder's account on the same PH Business Day. Payment for
redeemed Horizon Shares for which a redemption order is received by the transfer
agents after 12:00 noon Eastern time on a PH Business Day is normally made is
federal funds wired to the redeeming shareholder's account on the next PH
Business Day following redemption. Pacific Horizon Shares and Horizon Shares
for which certificates have been issued may not be redeemed unless the
certificates have been submitted to the transfer agents and endorsed for
transfer. The Prime Value Fund reserves the right to redeem Pacific Horizon
Shares and Horizon Shares in any account at their net asset value if the value
of the account as a result of redemptions is less than $500 and $500,000,
respectively.
Shareholders of the Prime Obligations Fund may redeem all or any part of
the value of their accounts. Redemption may be requested by mail or by
telephone and are effected at the net asset value next determined after receipt
of the redemption request by the Prime Obligations Fund. A check for the
proceeds of redeemed shares is normally mailed within one business day, but in
no event more than seven days, after receipt of a properly written redemption
request. If a redemption request by telephone is received before 3:00 p.m.
Eastern time, the proceeds will be wired the same day to the shareholder's bank
account at a domestic commercial bank which is a member of the Federal Reserve
System, and those shares redeemed will not be entitled to that day's dividend.
A daily dividend will be paid on shares redeemed if the redemption request is
received after 3:00 p.m. Eastern time, but the proceeds will not be wired until
the following business day. The Prime Obligations Fund may redeem shares in any
account and pay the proceeds to the shareholder if the account balance falls
below a required minimum value of $25,000, or the aggregate investment in
Federated Funds falls below the required minimum of $200,000,000 to be
maintained from and after twelve months from account opening, due to shareholder
redemptions.
Exchange Procedures. Shareholders of Pacific Horizon Shares may exchange
those shares for Pacific Horizon Shares of another fund of Pacific Horizon
provided that such other shares may be legally be sold in the state of the
investor's residence. When Prime Value Fund shares are exchanged for shares of
another portfolio in Pacific Horizon which are sold with a sales load, the
applicable sales load, if any, will be deducted. The Pacific Horizon shares
that are exchanged must have a current value of at least $500 and, in
establishing a new account through use of an exchange, the shares being
exchanged must have a value at least equal to the minimum initial investment
required by the particular portfolio in which the exchange is being made.
Pacific Horizon reserves the right to reject any exchange request and the
exchange privilege may be modified or terminated at any time. At least 60 days'
notice will be given to shareholders of any material modification or termination
except where notice is not required under the regulations of the SEC. Horizon
Shares of the Prime Value Fund and Institutional Shares of the Prime Obligations
Fund do not have an exchange privilege.
Dividends, Distributions and Pricing. Dividends on Pacific Horizon Shares
and Horizon Shares of the Prime Value Fund and Institutional Shares of the Prime
Obligations Fund are declared daily and paid monthly. Pacific Horizon Shares
and Horizon Shares of the Prime Value Fund begin accruing dividends on the day
the purchase order is executed and continue to accrue dividends through and
including the day before the redemption order for the shares is executed.
Institutional Shares of the Prime Obligations Fund purchased by wire before 3:00
p.m. Eastern time begin accruing dividends that day. Institutional Shares of
the Prime Obligations Fund purchased by check begin earning dividends the day
after the check is converted into federal funds. Except as noted in "Redemption
Procedures," dividends are paid up to and including the day that a redemption
request is processed.
Although the Prime Obligations Fund and the Prime Value Fund do not expect
to realize net long-term capital gains, any such capital gains as may be
realized will be distributed no more than twice a year (after reduction for any
available loss carry-forwards with respect to the Prime Value Fund.) The
treatment of dividends and capital gains distributions received by shareholders
of Institutional Shares of the Prime Obligations Fund and by shareholders of
Pacific Horizon Shares or Horizon Shares of the Prime Value Fund is, for federal
income tax purposes, substantially the same. See also "Tax Consequences of
Exchange" below.
The Prime Value Fund and the Prime Obligations Fund each use the amortized
cost method of valuing its shares and each anticipates that its net asset value
per share for purchase and redemption purposes will remain constant at $1.00 per
share, although there can be no assurance that any Fund will be able to do so on
a continuous basis.
INFORMATION RELATING TO THE PROPOSED REORGANIZATION
The terms and conditions under which the Reorganization may be consummated
are set forth in the Reorganization Agreement. Significant provisions of the
Reorganization Agreement are summarized below; however, this summary is
qualified in its entirety by reference to the Reorganization Agreement, a copy
of which is attached as Appendix A to this Combined Proxy Statement and
Prospectus and which is incorporated herein by reference.
Description of the Reorganization Agreement. The Reorganization Agreement
provides that at the Effective Time of the Reorganization, the assets and known
liabilities of the Prime Value Fund will be transferred to and assumed by the
Prime Obligations Fund. In exchange for the transfer of the assets of, and the
assumption of the known liabilities of, the Prime Value Fund, MMOT will issue at
the Effective Time of the Reorganization full and fractional Institutional
Shares of the Prime Obligations Fund equal in number to the number of full and
fractional Pacific Horizon Shares and Horizon Shares of the Prime Value Fund, as
determined at the Valuation Time (as defined below) specified in the
Reorganization Agreement. The Reorganization Agreement provides that the Prime
Value Fund will declare a dividend or dividends prior to the Effective Time of
the Reorganization which, together with all previous dividends, will have the
effect of distributing to the shareholders of the Prime Value Fund all
undistributed net investment income earned and net capital gains realized up to
and including the Effective Time of the Reorganization.
Following the transfer of assets to, and the assumption of the known
liabilities of the Prime Value Fund by the Prime Obligations Fund, Pacific
Horizon will distribute the Institutional Shares of the Prime Obligations Fund
received from MMOT to the holders of Pacific Horizon Shares and Horizon Shares
of the Prime Value Fund in liquidation of the Prime Value Fund. Each holder of
Pacific Horizon Shares and Horizon Shares of the Prime Value Fund at the
Effective Time of the Reorganization will receive an amount of Institutional
Shares of equivalent net asset value, plus the right to receive any dividends or
distributions which were declared before the Effective Time of the
Reorganization but that remained unpaid at that time with respect to the Pacific
Horizon Shares and Horizon Shares of the Prime Value Fund. Following the
liquidation of the Prime Value Fund, the outstanding Pacific Horizon Shares and
Horizon Shares of the Prime Value Fund (designated, respectively, Class P and
Class P, Special Series 2 Common Stock in Pacific Horizon's charter) will be
cancelled on the books of Pacific Horizon and become unissued shares. Articles
of Amendment further effecting the cancellation will be filed thereafter with
the Maryland State Department of Assessments and Taxation.
The stock transfer books of the Prime Value Fund will be permanently
closed at the Effective Time of the Reorganization. If any shares of the Prime
Value Fund are represented by a share certificate, the certificate must be
surrendered to MMOT's transfer agent for cancellation, or verification of such
share certificate's loss and indemnification with respect to such loss must be
established, before the Prime Obligations Fund shares issued to the shareholder
in the Reorganization can be redeemed.
Pursuant to the Reorganization Agreement, if the per share net asset value
of Pacific Horizon Shares or Horizon Shares of the Prime Value Fund exceeds the
per share net asset value of Institutional Shares of the Prime Obligations Fund
at 4:00 p.m., Eastern time, on ___________, 1995, or such earlier or later date
and time as may be mutually agreed by the President or Vice President of each of
Pacific Horizon and MMOT (the "Valuation Time") by $.0010 or more as computed by
using the market values of a portfolio's assets, Pacific Horizon's Board of
Directors will have the right to postpone the Valuation Time and the Effective
Time of the Reorganization with respect to such portfolios until such time as
the per share difference is less than $.0010.
The Reorganization with respect to the Prime Value Fund is subject to a
number of conditions, including approval of the Reorganization Agreement and the
transactions contemplated thereby described in this Combined Proxy Statement and
Prospectus by the shareholders of Pacific Horizon; the receipt of certain legal
opinions described in Sections 9(d), 9(e), 10(c) and 10(d) of the Reorganization
Agreement (which include an opinion of counsel to MMOT that the shares of the
Prime Obligations Fund issued to shareholders of the Prime Value Fund in
accordance with the terms of the Reorganization Agreement will be validly
issued, fully paid and non-assessable); that at the Effective Time of the
Reorganization the number of Prime Value shares outstanding is at least 60% of
the number of Prime Value shares outstanding on May 30, 1995: that Federated
shall have made a capital contribution to the Prime Value Fund in an amount
equal to the Prime Value Fund's realized and unrealized losses; the receipt of
certain certificates from the parties concerning the continuing accuracy of the
representations and warranties in the Reorganization Agreement and other
matters; and the parties' performance in all material respects of their
respective agreements and undertakings in the Reorganization Agreement.
Assuming satisfaction of the conditions in the Reorganization Agreement, the
Effective Time of the Reorganization will be on __________, 1995 or such other
date as is agreed to by the parties.
The Reorganization Agreement provides that with respect to expenses
incurred by Pacific Horizon and MMOT in connection with the Reorganization
Agreement and the transactions contemplated thereby Bank of America shall be
responsible for the payment of such expense.
The Reorganization Agreement and the Reorganization described herein may
be abandoned at any time prior to the Effective Time of the Reorganization by
the mutual consent of the parties to the Reorganization Agreement. The
Reorganization Agreement provides further that at any time prior to or (to the
fullest extent permitted by law) after approval of the Reorganization Agreement
by the shareholders of the Prime Value Fund (a) the parties thereto may, by
written agreement authorized by their respective Boards, and with or without the
approval of their respective shareholders, amend any of the provisions of the
Reorganization Agreement and (b) any party may waive any breach by the other
party for the failure to satisfy any of the conditions to its obligations (such
waiver to be in writing and authorized by the President or Vice President of the
waiving party with or without the approval of such party's shareholders).
Board Considerations. Based upon its evaluations of the information
presented to it, and in light of its fiduciary duties under Federal and state
law, the Board of Directors of Pacific Horizon at a meeting held on May 25,
1995, has determined that the proposed Reorganization is in the best interests
of the shareholders of the Prime Value Fund, and recommends the approval of the
Reorganization Agreement by such shareholders at the Meeting. The following is
a summary of the information that was presented to, and considered by, the Board
of Directors in making its determination.
At the meeting, representatives of Bank of America stated that the Prime
Value Fund as an investment product had not developed as expected and is not
likely to develop further. However, the Prime Obligations Fund had
substantially greater assets ($____ billion as of __________, 1995 versus $____
million for the Prime Value Fund as of __________, 1995). The Board was advised
that management believed that the proposed Reorganization would benefit the
Prime Value Fund and its shareholders. These benefits included: greater
portfolio trading efficiencies, such as quantity discounts; better securities
execution and reduced portfolio volatility resulting from shareholder purchase
and redemption activity; an initial higher mark-to-market net asset value per
share; Federated Management's agreement with Pacific Horizon to make a capital
contribution to the Prime Value Fund at the Effective Date in an amount equal to
the Prime Value Fund's realized and unrealized losses; a broader shareholder
base; and potentially broader portfolio diversification.
The Board of Directors reviewed the terms of the proposed Reorganization
and also considered the compatibility of the investment objectives, policies and
restrictions of the Funds. The Directors also considered the federal tax
consequences of the Reorganization. In addition, the Board of Directors
reviewed the expected costs of the Reorganization, and the fact that all
expenses of the Reorganization would be borne by Bank of America.
The Board reviewed the Prime Obligations Fund's service providers,
including without limitation, the Prime Obligations Fund's investment adviser,
administrator, custodian and transfer agent. The Board also reviewed the
relative performance and expense ratios of the Prime Obligations Fund.
Based upon their evaluation of the relevant information presented to them,
and in light of their fiduciary duties under Federal and state law, Pacific
Horizon's Board of Directors determined that the proposed Reorganization was in
the best interests of Pacific Horizon and the Prime Value Fund and its
shareholders and recommended the approval of the Reorganization Agreement by the
Prime Value Fund's shareholders at the Meeting.
Similarly, at a meeting held on _________, 1995, the Board of Trustees of
MMOT considered the proposed Reorganization with respect to the Prime
Obligations Fund. Based upon its evaluation of the relevant information
provided to it, and in light of its fiduciary duties under Federal and state
law, the Board of Trustees determined that the proposed Reorganization was in
the best interests of the Prime Obligations Fund and its shareholders. Among
the matters considered by the Board of Trustees was Federated Management's
agreement with Pacific Horizon to make a capital contribution to the Prime Value
Fund in an amount equal to the Prime Value Fund's realized and unrealized
losses.
Federal Income Tax Consequences. Consummation of the Reorganization is
subject to the condition that Pacific Horizon and MMOT receive an opinion from
Drinker Biddle & Reath to the effect that for Federal income tax purposes (i)
the transfer of all of the assets and liabilities of the Prime Value Fund to the
Prime Obligations Fund in exchange for Institutional Shares of the Prime
Obligations Fund and the liquidating distributions to holders of Pacific Horizon
Shares and Horizon Shares of the Prime Value Fund of the Institutional Shares of
the Prime Obligations Fund so received, as described in the Reorganization
Agreement, will constitute reorganizations within the meaning of Section
368(a)(1)(C) or Section 368(a)(1)(D) of the Internal Revenue Code of 1986, as
amended, and with respect to the Reorganization, the Prime Value Fund and the
Prime Obligations Fund will each be considered "a party to a reorganization"
within the meaning of 368(b) of the Code; (ii) no gain or loss will be
recognized by the Prime Value Fund as a result of such transactions; (iii) no
gain or loss will be recognized by the Prime Obligations Fund as a result of
such transactions; (iv) no gain or loss will be recognized by the holders of
Pacific Horizon Shares and Horizon Shares of the Prime Value Fund on the
distribution to such holders of Institutional Shares of the Prime Obligations
Fund in exchange for their shares of the Prime Value Fund; (v) the basis of the
Prime Obligations Fund shares received by a shareholder of the Prime Value Fund
will be the same as the basis of the shareholder's Prime Value Fund shares
immediately before the Reorganization; (vi) the basis to the Prime Obligations
Fund of the assets of the Prime Value Fund received pursuant to such
transactions will be the same as the basis of such assets in the hands of the
Prime Value Fund immediately before such transactions; (vii) a shareholder's
holding period for the Prime Obligations Fund shares will be determined by
including the period for which the shareholder held the Prime Value Fund shares
exchanged therefor, provided that the shareholder held such Prime Value Fund
shares as a capital asset; and (viii) the Prime Obligations Fund's holding
period with respect to the assets received in the Reorganization will include
the period for which such assets were held by the Prime Value Fund.
Capitalization. Because the Prime Value Fund will be combined with the
Prime Obligations Fund in the Reorganization, the total capitalization of the
Prime Obligations Fund after the Reorganization is expected to be greater than
the current capitalization of the Prime Value Fund. The following table sets
forth, as of June 30, 1995: (i) the capitalization of the Prime Value Fund; (ii)
the capitalization of the Prime Obligations Fund; and (iii) the pro forma
capitalization of the Prime Obligations Fund as adjusted to give effect to the
proposed Reorganization. There is, of course, no assurance that the
Reorganization will be consummated. Moreover, if consummated, the
capitalization of each Fund is likely to be different at the Effective Time of
the Reorganization as a result of daily share purchase and redemption activity
in the Funds.
Prime Obliga-
Prime tions Fund, as
Prime Obligations adjusted for the
Value Fund Fund Reorganization
Total Net Assets $__________ $__________ $__________
Shares Outstanding $__________ $__________ $__________
Net Asset Value
Per Share $1.00 $1.00 $1.00
Performance. For the seven-day period ended June 30, 1995, the annualized
and effective yields for the Pacific Horizon Shares and Horizon Shares of the
Prime Value Fund; and the Institutional Shares of the Prime Obligations Fund
were as follows:
Annualized
Annualized Effective
Yield Yield
Prime Value Fund ____% ____%
(Pacific Horizon Shares)
Prime Value Fund ____% ____%
(Horizon Shares)
Prime Obligations Fund ____% ____%
(Institutional Shares)
The annualized yield and effective yield are calculated according to
formulas prescribed by the SEC and described in the Prime Value Fund's Statement
of Additional Information dated July 1, 1995 and the Prime Obligations Fund's
Statement of Additional Information dated November 30, 1994.
COMPARISON OF THE FUNDS
Investment Objectives and Policies - Prime Value Fund and Prime
Obligations Fund. The investment objective of the Prime Value Fund is "to seek
high current income and stability of principal." The investment objective of
the Prime Obligations Fund is "to provide current income consistent with
stability of principal." Each of the Prime Value Fund's and Prime Obligations
Fund's investment objective is a fundamental policy that may not be changed
without a vote of the holders of a majority of the particular Fund's outstanding
shares (as defined in the Investment Company Act of 1940 (the "1940 Act")), and
each of the Prime Value Fund and Prime Obligations Fund is a money market fund
that seeks to maintain a net asset value of $1.00 per share. There can be no
guarantee that a Fund will achieve its objective or that it will maintain a net
asset value of $1.00 per share.
Each of the Prime Value Fund and the Prime Obligations Fund seeks to
achieve its investment objective by investing substantially all of its assets in
a diversified portfolio of U.S. dollar-denominated "money market" instruments
such as bank certificates of deposit, time deposits, demand deposits, bankers'
acceptances, commercial paper, repurchase agreements, short term notes, asset
backed securities, corporate bonds and government obligations. Each of the
Prime Obligations Fund and Prime Value Fund may enter into reverse repurchase
agreements and may lend securities. Assets of the Prime Value Fund and Prime
Obligations Fund may be invested in dollar-denominated debt securities with
remaining maturities of thirteen months or less as defined by the SEC, and the
dollar weighted average portfolio maturity of each Fund may not exceed 90 days.
Each of the Prime Value Fund and Prime Obligations Fund limits its investments
to securities that, in the opinion of their respective investment advisers,
present minimal credit risks and which are "First Tier Securities" as defined by
the SEC. First Tier Securities consist of (i) instruments that are rated at the
time of purchase in the top rating category of one or more unaffiliated
nationally recognized statistical rating organizations ("NRSROs") (if the
instrument has been rated by more than one NRSRO, then at least two NRSROs must
rate the instrument in their highest category), (ii) instruments that are issued
by issuers with a class of securities that is comparable in priority and
security having such ratings, or (iii) unrated instruments (including
instruments with long-term but no short-term ratings) that are of comparable
quality to the rated instruments that a Fund may purchase, as determined by a
Fund's investment adviser pursuant to guidelines approved by a Fund's Board.
The Prime Value Fund and the Prime Obligations Fund may each invest in
bank obligations such as certificates of deposit, demand deposits, time
deposits, and bankers' acceptances issued or supported by the credit of domestic
and foreign banks. The Prime Value Fund will invest only in banks which have
total assets at the time of purchase in excess of $1 billion. The Prime
Obligations Fund will only invest in bank instruments either issued by an
institution having capital, surplus and undivided profits over $100 million, or
insured by the Bank Insurance Fund or Savings Association Insurance Fund. In
addition, the Prime Obligations Fund may invest 25% or more of the value of its
total assets in instruments issued by a U.S. branch of a domestic bank or
savings and loan having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment. Bank instruments eligible for
investment by both Funds include Eurodollar Certificates of Deposit and Yankee
Certificates of Deposit. The Prime Value Fund, unlike the Prime Obligations
Fund, is subject to a limitation which restricts its investments in bank
obligations consisting of interest-bearing savings deposits in commercial banks
to amounts not exceeding 5% of the Fund's assets. In addition, the Prime Value
Fund, unlike the Prime Obligations Fund, may invest in Yankee Bankers'
Acceptances.
Both of the Prime Value Fund and the Prime Obligations Fund may invest in
obligations issued or guaranteed by the U.S. Government or its agencies and
instrumentalities. The Prime Value Fund, unlike the Prime Obligations Fund, may
also invest in "stripped" securities issued by the U.S. Treasury.
Both of the Prime Value Fund and the Prime Obligations Fund may purchase
commercial paper, short-term notes, and bonds issued by domestic and foreign
corporations, including Canadian commercial paper and Europaper. Both Funds may
also invest in commercial paper issued in reliance on the so-called "private
placement" exemption from registration afforded by Section 4(2) of the
Securities Act of 1933. invests 25% or more of its total assets in commercial
paper issued by commercial finance companies and consumer finance companies.
Concentrating investments in any one industry may subject the Prime Obligations
Fund to more risk than if it did not concentrate investments.
Both of the Funds may purchase asset-backed securities, which are
securities backed by mortgages, installments sales contracts, credit car
receivables or other assets. Asset-backed securities acquired by the Funds
include collateralized mortgage obligations issued by private companies.
Both of the Funds may invest in repurchase agreements and variable and
floating rate demand instruments, engage in when-issued and delayed delivery
transactions, enter into reverse repurchase agreements, and lend portfolio
securities. Although both Funds may enter into repurchase agreements, the Prime
Value Fund, unlike the Prime Obligations Fund, intends only to enter into
repurchase agreements having maturities not exceeding 60 days. Both Funds may
invest up to 10% of their net assets in securities that are illiquid.
The Prime Value Fund, unlike the Prime Obligations Fund, may invest in (1)
U.S. dollar denominated obligations issued or guaranteed by foreign governments
or any of their political subdivisions, agencies or instrumentalities, including
debt obligations of supranational entities; (2) "Yankee" Bankers' Acceptances;
(3) municipal securities; and (4) participation interests in high quality debt
securities issued by domestic financial institutions.
The Prime Obligations Fund, unlike the Prime Value Fund, may (1) enter
into, or acquire participations in, short-term borrowing arrangements with
corporations, consisting of either a short-term credit facility or a master note
agreement payable upon demand; and (2) invest 25% or more of its total assets in
commercial paper issued by commercial finace companies and consumer finance
companies. Concentrating investments in any one industry may subject the Prime
Obligations Fund to more risk than if it did not concentrate investments.
In accordance with current regulations of the SEC and, as a matter of non-
fundamental policy that may be changed without shareholder approval, both the
Prime Value Fund and the Prime Obligations Fund generally intend to limit their
investments in the securities of any single issuer (other than securities issued
by the U.S. Government, its agencies or instrumentalities) to not more than 5%
of the respective Fund's total assets at the time of purchase.
Fundamental Investment Limitations of the Prime Value Fund and the Prime
Obligations Fund. The Prime Value Fund and Prime Obligations Fund may not
change their fundamental investment limitations without an affirmative vote of
the holders of a majority of such Fund's outstanding shares (as defined in the
1940 Act). The following is a comparison of certain fundamental investment
limitations of the Prime Value Fund and Prime Obligations Fund.
The Prime Value Fund may not purchase any securities which would cause, at
the time of purchase, less than 25% of the value of its total assets to be
invested in obligations of issuers in the banking industry or in obligations,
such as repurchase agreements, secured by such obligations (unless the Prime
Value Fund is in a temporary defensive position) or which would cause, at the
time of purchase, 25% or more of the Prime Value Fund's total assets to be
invested in the securities of one or more issuers conducting their principal
business activities in any other industry, provided that (a) there is no
limitation with respect to obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or repurchase agreements secured
by such obligations; (b) wholly-owned finance companies will be considered to be
in the industries of their parents if their activities are primarily related to
financing the activities of the parents; and (c) the industry classification of
utilities will be determined according to their service. For example, gas, gas
transmission, electric and gas, electric and telephone will each be considered a
separate industry. For purposes of this investment limitation, the Prime Value
Fund treats, in accordance with the current views of the staff of the SEC and as
a matter of non-fundamental policy that may be changed without a vote of
shareholders, all supranational organizations as a single industry and each
foreign government (and all of its agencies) as a separate industry. In
addition, for purposes of the Prime Value Fund's investment limitation
concerning industry concentration, U.K. Building Societies will be considered to
be in the banking industry.
The Prime Obligations Fund will not invest 25% or more of its total assets
in any one industry, except that the Prime Obligations Fund will generally
invest 25% or more of the value of its total assets in the commercial paper
issued by finance companies. Concentrating investments in any one industry may
subject the Prime Obligations Fund to more risk than if it did not concentrate
investments.
The Prime Value Fund and the Prime Obligations Fund generally may not
borrow money or issue senior securities, except that the Funds may borrow money
from banks and enter into reverse repurchase agreements for temporary purposes
in amounts up to one-third of the value of the total assets at the time of such
borrowing.
Other Information. Both Pacific Horizon and MMOT are registered as open-
end management investment companies under the 1940 Act. The Prime Value Fund
and Prime Obligations Fund are each classified as diversified funds. Currently,
Pacific Horizon and MMOT maintain sixteen and six separate investment portfolios
which have commenced operations, respectively.
Pacific Horizon is organized as a Maryland corporation and is subject to
the provisions of its Charter and By-laws and to the Maryland General
Corporation Law. MMOT is organized as a Massachusetts business trust, and is
subject to the provisions of its Declaration of Trust and By-Laws. Although the
rights of shareholders of a Maryland corporation vary in certain respects from
the rights of shareholders of a Massachusetts business trust, the attributes of
a share of common stock in Pacific Horizon are comparable to those of a share of
beneficial interest in MMOT. When issued for payment as described in their
respective Prospectuses, Pacific Horizon and MMOT shares are fully paid and non-
assessable by such entities except, with respect to MMOT shares, that under
Massachusetts law, shareholders may, under certain circumstances, be personally
liable for MMOT's obligations and liabilities.
INFORMATION RELATING TO VOTING MATTERS
General Information. This Combined Proxy Statement and Prospectus is
being furnished in connection with the solicitation of proxies by the Board of
Directors of Pacific Horizon for use at the Meeting. It is expected that the
solicitation of proxies will be primarily by mail. Pacific Horizon's officers
and service providers may also solicit proxies by telephone, telegraph or
personal interview. Pacific Horizon will request that each bank or broker
holding shares for others in its name of custody, or in the names of one or more
nominees, forward copies of the proxy materials to the persons for whom it holds
such shares and to request authorization to execute the proxies. In addition,
although it has not done so to date, Pacific Horizon may retain the services of
one or more outside organizations to aid in the solicitation of proxies. Such
organizations normally charge a fee plus out-of-pocket expenses. Any
shareholder giving a proxy may revoke it at any time before it is exercised by
submitting to Pacific Horizon a written notice of revocation or a subsequently
executed proxy or by attending the Meeting and electing to vote in person.
Only shareholders of record at the close of business on _____________ 1995
will be entitled to vote at the Meeting. On that date, there were outstanding
and entitled to be voted ____________ shares of the Prime Value Fund,
(____________ Pacific Horizon Shares and ____________ Horizon Shares). Each
share or fraction thereof is entitled to one vote or fraction thereof.
If the accompanying proxy is executed and returned in time for the
Meeting, the shares covered thereby will be voted in accordance with the proxy
on all matters that may properly come before the meeting (or any adjournment
thereof).
Shareholder and Board Approval. Approval of the Reorganization Agreement
(and the transactions contemplated thereby) requires the affirmative vote of a
majority of all votes entitled to be cast on the matter.
In tallying shareholder votes, abstentions and broker non-votes (i.e.,
proxies sent in by brokers and other nominees which cannot be voted on a
proposal because instructions have not been received from the beneficial owners)
will be counted for purposes of determining whether or not a quorum is present
for the purposes of convening the Meeting. On the Reorganization proposal,
abstentions and broker non-votes will have the same effect as a vote against the
Reorganization proposal.
The vote of the shareholders of MMOT is not being solicited, because their
approval or consent is not necessary for the Reorganization.
Quorum. In the event that a quorum is not present at the Meeting, or in
the event that a quorum is present at the Meeting but sufficient votes to
approve the Reorganization Agreement are not received, the persons named as
proxies, or their substitutes, may propose one or more adjournments of the
Meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of those shares affected by the
adjournment represented at the Meeting in person or by proxy. If a quorum is
present, the persons named as proxies will vote those proxies which they are
entitled to vote FOR the Reorganization Agreement in favor of such adjournment,
and will vote those proxies required to be voted AGAINST such proposal, against
any adjournment. Under Pacific Horizon's By-laws, a quorum is constituted with
respect to the Prime Value Fund by the presence in person or by proxy of the
holders of more than 50% of the outstanding shares of the Prime Value Fund
entitled to vote at the Meeting.
Appraisal Rights. Shareholders of Pacific Horizon Shares and Horizon
Shares are not entitled to any rights of share appraisal under Pacific Horizon's
Charter or under the laws of the State of Maryland in connection with the
Reorganization. Shareholders have, however, the right to redeem from the Prime
Value Fund their shares at net asset value until the Effective Time of the
Reorganization, and thereafter shareholders may redeem from MMOT the shares
acquired by them in the Reorganization at net asset value subject to the forward
pricing requirements of Rule 22c-1 under the 1940 Act.
Principal Shareholders. As of ____________, 1995, the name, address and
percentage ownership of the persons which may have owned beneficially or of
record more than 5% of the outstanding Pacific Horizon Shares and Horizon Shares
of the Prime Value Fund and the percentage of Institutional Shares of the
corresponding pro forma combined Prime Obligations Fund that would be
beneficially owned by such persons upon consummation of the reorganization based
upon their holdings and outstanding shares at ___________, 1995 are as follows:
Prime Value Fund-[CONCORD TO SUPPLY INFORMATION]
As of ____________, 1995, the directors and officers of Pacific Horizon as
a group owned beneficially less than 1% of the outstanding shares of the Prime
Value Fund. [Concord to confirm: if statement is not true, Concord will
provide % holdings]
As of ____________, 1995, the name, address and percentage ownership of
the persons which may have owned beneficially or of record more than 5% of the
outstanding Institutional Shares of MMOT's Prime Obligations Fund and the
percentage of Institutional Shares of the corresponding pro forma combined Prime
Obligations Fund that would be beneficially owned by such persons upon
consummation of the Reorganization based upon their holdings and outstanding
shares at _____________, 1995 are as follows:
Prime Obligations Fund-[FEDERATED TO SUPPLY INFORMATION]
As of _______________, 1995, the trustees and officers of MMOT as a group
owned beneficially less than 1% of the outstanding shares of the Prime
Obligations Fund.
ADDITIONAL INFORMATION ABOUT MMOT AND PACIFIC HORIZON
Information about the Prime Obligations Fund and its Institutional Shares
is included in the Prospectus dated November 30, 1994, accompanying this
Combined Proxy Statement and Prospectus, and is incorporated by reference
herein, and information about the Prime Value Fund is included in the Prospectus
dated July 1, 1995, which is also incorporated herein by reference. Additional
information about the Prime Value Fund is included in the Prime Value Fund's
Statement of Additional Information dated July 1, 1995, with respect to its
Pacific Horizon Shares and Horizon Shares, which have been filed with the SEC.
Additional Information about the Prime Obligations Fund is included in the Prime
Obligations Fund's Statement of Additional Information dated November 30, 1994
which have been filed with the SEC. Copies of the Prime Obligations Fund's
Annual Report to Shareholders and most recent Semi-Annual Report to Shareholders
may be obtained without charge by writing to Federated Administrative Services,
Federated Investors Tower, Pittsburgh, PA 15222-3771 or calling 1-800-235-4669.
Copies of the Prime Value Fund's Annual Report to Shareholders may be obtained
without charge by writing to Concord, 125 West 55th Street, New York, New York
10019 or by calling 1-800-332-3863. Pacific Horizon and MMOT are subject to the
informational requirements of the Securities Exchange Act of 1934 and the 1940
Act, as applicable, and, in accordance with such requirements, file proxy
materials, reports and other information with the SEC. These materials can be
inspected and copied at the Public Reference Facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, at the office of Concord listed
above and at the SEC's Regional Offices at 7 World Trade Center, Suite 1300, New
York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can also be obtained from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, D.C. 20549, at prescribed rates.
FINANCIAL STATEMENTS AND EXPERTS
The Financial Highlights of the Prime Value Fund incorporated herein by
reference and the financial statements set forth in the Annual Report to
Shareholders for the fiscal year ended February 28, 1995, and incorporated by
reference in the Statement of Additional Information dated ___________, 1995 and
in the Prime Value Fund's Statement of Additional Information dated July 1, 1995
have been audited by Price Waterhouse LLP. The financial statements and
Financial Highlights audited by Price Waterhouse LLP have been incorporated
herein by reference in reliance on their reports given on their authority as
experts in auditing and accounting.
The Financial Highlights for the Institutional Shares of the Prime
Obligations Fund for the six-month period ended January 31, 1995 are
incorporated herein by reference to MMOT's Semi-Annual Report to Shareholders
for such period. The Financial Highlights of the Prime Obligations Fund
incorporated herein by reference and the financial statements set forth in the
Annual Report to Shareholders for the fiscal year ended July 31, 1994, and
incorporated by reference in the Statement of Additional Information dated
__________, 1995 and in the Prime Obligations Funds' Statement of Additional
Information dated November 30, 1994 have been audited (except for the six month
period ended January 31, 1995) by Arthur Andersen LLP, Independent Public
Accountants, for the periods indicated in their report with respect thereto, and
are included herein in reliance upon the authority of said firm as experts in
auditing and accounting.
OTHER BUSINESS
Pacific Horizon's Board of Directors knows of no other business to be
brought before the Meeting. However, if any other matters come before the
Meeting, it is the intention of the Board that proxies that do not contain
specific restrictions to the contrary will be voted on such matters in
accordance with the judgment of the persons named in the enclosed form of proxy.
LITIGATION
Neither Pacific Horizon nor MMOT is involved in any litigation which would
have any material adverse financial effect upon either the Prime Value Fund or
the Prime Obligations Fund.
NOTICE TO BANKS, BROKER-DEALERS,
VOTING DIRECTORS AND THEIR NOMINEES
Please advise Pacific Horizon, c/o___________________________________, 125
West 55th Street, New York, New York 10019 whether other persons are the
beneficial owners of the shares for which proxies are being solicited, and if
so, the number of copies of this Combined Proxy Statement and Prospectus and
other soliciting material you wish to receive in order to supply copies to
beneficial owners. Pacific Horizon will pay persons holding shares in their
names or those of their nominees their reasonable expenses incurred in sending
soliciting materials to their principals.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to Pacific Horizon in writing at
the address on the cover page of this Combined Proxy Statement and Prospectus or
by telephoning (800) 332-3863.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED
TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
AGREEMENT AND PLAN OF
REORGANIZATION
BY AND BETWEEN
PACIFIC HORIZON FUNDS, INC.
AND
MONEY MARKET OBLIGATIONS TRUST
DATED , 1995
Table of Contents
Page
Transfer of Assets of the Prime Value Fund 2
Liquidating Distributions of the Prime Value Fund 5
Valuation Time 7
Certain Representations, Warranties and
Agreements of Pacific Horizon 7
Certain Representations, Warranties and Agreements of MMOT 14
Shareholder Action on Behalf of the Prime Value Fund 19
N-14 Registration Statement 20
Effective Time of the Reorganization 20
MMOT Conditions 21
Pacific Horizon Conditions 28
Tax Documents 32
Further Assurances 32
Termination of Representations and Warranties 33
Termination of Agreement 33
Amendment and Waiver 34
Governing Law 34
Successors and Assigns 34
Beneficiaries 35
MMOT Liability 35
Pacific Horizon Liability 36
Notices 37
Expenses 38
Entire Agreement 38
Counterparts 38
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") made as of the
of , 1995 by and between Pacific Horizon Funds, Inc. ("Pacific
Horizon"), a corporation organized under the laws of the State of Maryland on
October 27, 1982, and Money Market Obligations Trust ("MMOT"), a business trust
organized under the laws of the Commonwealth of Massachusetts on October 3,
1988.
WHEREAS, each of Pacific Horizon and MMOT is an open-end management
investment company registered with the Securities and Exchange Commission (the
"SEC") under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the parties desire that all of the assets and known liabilities
of the Prime Value Fund, an investment portfolio offered by Pacific Horizon
("Prime Value Fund"), be transferred to, and be acquired and assumed by, the
Prime Obligations Fund, an investment portfolio offered by MMOT ("Prime
Obligations Fund"), as stated herein, in exchange for Institutional Class Shares
of the Prime Obligations Fund which shall thereafter be distributed by Pacific
Horizon to the holders of Pacific Horizon Shares and Horizon Shares of the Prime
Value Fund in connection with the liquidation of the Prime Value Fund as
described in this Agreement (the "Reorganization").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and subject to the terms and conditions thereof, the
parties hereto, intending to be legally bound, agree as follows:
1. Transfer of Assets of the Prime Value Fund. (a) At the Effective
Time of the Reorganization (as defined below), all property of every
description, and all interests, rights, privileges and powers of the Prime Value
Fund other than cash in an amount necessary to pay any unpaid dividends and
distributions as provided in Section 2 hereof (such assets are herein referred
to as the "Prime Value Fund Assets") shall be transferred and conveyed by the
Prime Value Fund to MMOT, on behalf of its Prime Obligations Fund, and shall be
accepted by MMOT, on behalf of the Prime Obligations Fund, and MMOT on behalf of
the Prime Obligations Fund, shall assume all known liabilities whether accrued,
absolute, contingent or otherwise, of the Prime Value Fund (such known
liabilities are herein referred to as the "Prime Value Fund Liabilities") as
more particularly set forth in the following paragraph, such that at and after
the Effective Time of the Reorganization: (i) all assets of the Prime Value
Fund shall become and be the assets of the Prime Obligations Fund; and (ii) all
known liabilities of the Prime Value Fund shall attach to the Prime Obligations
Fund as aforesaid and may thenceforth be enforced against the Prime Obligations
Fund to the extent as if the same had been incurred by it. Without limiting the
generality of the foregoing, it is understood that the Prime Value Fund Assets
shall include all property and assets of any nature whatsoever, including,
without limitation, all cash, cash equivalents, securities, and claims and
receivables (including interest receivables) owned by the Prime Value Fund, at
the Effective Time of the Reorganization, and all good will, all other
intangible property and all books and records belonging to the Prime Value Fund.
It is further understood that recourse for the Prime Value Fund Liabilities
assumed by the Prime Obligations Fund shall, at and after the Effective Time of
the Reorganization, be limited to the assets of the Prime Obligations Fund.
(b) In exchange for the transfer of the Prime Value Fund Assets and the
assumption of the Prime Value Fund Liabilities, MMOT shall simultaneously issue
at the Effective Time of the Reorganization to the Prime Value Fund a number of
full and fractional shares of the Prime Obligations Fund (to the third decimal
place), of the Institutional Shares Class (the "Institutional Shares"), all
determined and adjusted as provided in this Section 1. The number of
Institutional Shares of the Prime Obligations Fund so issued will be equal in
number to the number of full and fractional Pacific Horizon Shares and Horizon
Shares, representing interests in the Prime Value Fund outstanding immediately
prior to the Effective Time of the Reorganization, provided that at the
Effective Time of the Reorganization the price per Pacific Horizon Share and
Horizon Share of the Prime Value Fund and the price per Institutional Share of
the Prime Obligations Fund for purposes of sales and redemptions is $1.00 based
on the amortized cost valuation procedures that have been adopted by Pacific
Horizon and MMOT, respectively.
(c) The net asset value of Institutional Shares of the Prime Obligations
Fund and the net asset value of Pacific Horizon Shares and Horizon Shares of the
Prime Value Fund shall be determined as of the Valuation Time specified in
Section 3. The net asset value of Institutional Shares of the Prime Obligations
Fund shall be computed in the manner set forth in the Prime Obligations Fund's
then current prospectus under the Securities Act of 1933, as amended (the "1933
Act"). In determining the value of the securities transferred by the Prime
Value Fund to the Prime Obligations Fund, each security shall be priced in
accordance with the policies and procedures of Pacific Horizon as described in
its then current prospectus for the Prime Value Fund. For such purposes, price
quotations and the security characteristics relating to establishing such
quotations shall be determined by Pacific Horizon, provided that such
determination shall be subject to the approval of MMOT.
(d) In addition to the computations made pursuant to Sections 1(a), 1(b),
1(c) and 3, the net asset values of Pacific Horizon Shares and Horizon Shares of
the Prime Value Fund and the Institutional Shares of the Prime Obligations Fund
will be computed as of the Valuation Time by marking to market the portfolio's
assets. If the per share net asset value of Pacific Horizon Shares or Horizon
Shares of the Prime Value Fund exceeds the per share net asset value of
Institutional Shares of the Prime Obligations Fund at the Valuation Time (as set
forth in Section 3) by $.0010 or more as computed by using the market values of
such portfolio's assets, Pacific Horizon's Board of Directors will have the
right to postpone the Valuation Time and the Effective Time of the
Reorganization (as defined in Section 8) until such time as the per share
difference is less than $.0010.
2. Liquidating Distributions of the Prime Value Fund. At the Effective
Time of the Reorganization, the Prime Value Fund shall distribute in complete
liquidation and redemption of its outstanding shares, pro rata to the
recordholders of Pacific Horizon Shares and Horizon Shares at the Effective Time
of the Reorganization the Institutional Shares of the Prime Obligations Fund
received by the Prime Value Fund pursuant to Section 1. In addition, each
shareholder of record of the Prime Value Fund shall have the right to receive
any unpaid dividends or other distributions which were declared before the
Effective Time of the Reorganization with respect to the shares of the Prime
Value Fund that are held by the shareholder at the Effective Time of the
Reorganization. In accordance with instructions it receives from Pacific
Horizon, MMOT shall record on its books the ownership of the Institutional
Shares of the Prime Obligations Fund by the recordholders of the Pacific Horizon
Shares and the Horizon Shares of the Prime Value Fund. No redemption or
repurchase of the Prime Obligations Fund's shares credited to former Pacific
Horizon shareholders in respect to the Prime Value Fund's shares represented by
unsurrendered share certificates shall be permitted until such certificates have
been surrendered to MMOT's transfer agent for cancellation. The holder of any
certificate or certificates representing Pacific Horizon or Horizon Shares of
the Prime Value Fund shall immediately notify MMOT of any loss, destruction or
mutilation of such certificate or certificates, and MMOT may issue a new
certificate representing common stock in the Prime Obligations Fund in the place
of any certificate theretofore issued by Pacific Horizon, on behalf of the Prime
Value Fund, which the owner thereof shall allege to have been lost or destroyed
or which shall have been mutilated, and the Board of Trustees of MMOT, in its
discretion, may require such owner or his or her legal representative to give to
MMOT a bond in such sum, limited or unlimited, and in such form and with such
surety or sureties, as the Board of Trustees of MMOT in its absolute discretion
shall determine, to indemnify MMOT against any claim that may be made against it
or on account of the alleged loss or destruction of any such certificate or
certificates, or issuance of a new certificate. Following the liquidation of
the Prime Value Fund, the outstanding Pacific Horizon Shares and Horizon Shares
of the Prime Value Fund (designated, respectively, Class P and Class P, Special
Series 2 Common Stock) will be cancelled on the books of Pacific Horizon and
become unissued shares and shall thereafter represent only the right to receive
Institutional Shares of the Prime Obligations Fund, and the Prime Value Fund's
transfer books shall be closed permanently. Pacific Horizon will file Articles
of Amendment to the Company's Charter with the Maryland State Department of
Assessments and Taxation in substantially the form attached hereto as Annex I to
effect the cancellation of such shares.
3. Valuation Time. Subject to Section 1(d) hereof, the Valuation Time
shall be 4:00 P.M., Eastern Time, on _______ , 1995, or such earlier or later
date and time as may be mutually agreed by the President or Vice President of
each of the parties and set forth in writing signed by such President or Vice
President.
4. Certain Representations, Warranties and Agreements of Pacific
Horizon. Pacific Horizon, on behalf of itself and the Prime Value Fund,
represents and warrants to, and agrees with, MMOT as follows:
(a) It is a corporation duly organized under the laws of the
State of Maryland on October 27, 1982, and is validly
existing and in good standing under the laws of the
State of Maryland. It is registered with the SEC as an
open-end, management investment company under the 1940
Act and its registration with the SEC as an investment
company is in full force and effect.
(b) It
has power to own all of its properties and assets and,
subject to the approval of shareholders referred to in
Section 6, to carry out and consummate the transactions
contemplated herein, and has all necessary federal,
state and local authorizations to carry on its business
as now being conducted and to consummate the
transactions contemplated by this Agreement.
(c) This Agreement has been duly authorized, executed and
delivered by Pacific Horizon, and represents Pacific
Horizon's valid and binding contract, enforceable in
accordance with its terms, subject as to enforcement to
the effect of bankruptcy, insolvency, reorganization,
arrangement, moratorium, and other similar laws of
general applicability relating to or affecting
creditors' rights and to general equity principles and
provided that the provisions of this Agreement intended
to limit liability for particular matters to the Prime
Value Fund and its assets, including but not limited to
Sections 1(a), 19 and 20 of this Agreement, may not be
enforceable. The execution and delivery of this
Agreement did not, and the consummation of the
transactions contemplated by this Agreement will not,
violate Pacific Horizon's Articles of Incorporation or
By-laws or any agreement or arrangement to which it is a
party or by which it is bound.
(d) The Prime Value Fund has elected to qualify and has
qualified as a regulated investment company under Part I
of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), as of and since its first taxable
year; has been a regulated investment company under such
Part of the Code at all times since the end of its first
taxable year when it so qualified; and qualifies and
shall continue to qualify as a regulated investment
company for its taxable year ending on the date on which
the Effective Time of the Reorganization occurs.
(e) All federal, state, local and foreign income, profits,
franchise, sales, withholding, customs, transfer and
other taxes, including interest, additions to tax and
penalties (collectively, "Taxes") relating to the Prime
Value Fund Assets due or properly shown to be due on any
return filed by the Prime Value Fund with respect to
taxable periods ending on or prior to, and the portion
of any interim period up to, the date hereof have been
fully and timely paid or provided for; and there are no
levies, liens, or other encumbrances relating to Taxes
existing, threatened or pending with respect to the
Prime Value Fund Assets.
(f) The financial statements of the Prime Value Fund for its
fiscal year ended February 28, 1995, examined by Price
Waterhouse LLP, copies of which have been previously
furnished to MMOT, present fairly the financial position
of the Prime Value Fund as of the respective dates
indicated and the results of its operations for the
periods indicated, in conformity with generally accepted
accounting principles.
(g) Prior to the Valuation Time, the Prime Value Fund shall
have declared a dividend or dividends, with a record
date and ex-dividend date prior to the Valuation Time,
which, together with all previous dividends, shall have
the effect of distributing to its shareholders all of
its net investment company income, if any, for the
taxable periods or years ended on or before February 28,
1995 and for the period from said date to and including
the Effective Time of the Reorganization (computed
without regard to any deduction for dividends paid), and
all of its net capital gain, if any, realized in taxable
periods or years ended on or before December 31, 1994
and in the period from said date to and including the
Effective Time of the Reorganization.
(h) At both the Valuation Time and the Effective Time of the
Reorganization, there shall be no liabilities of the
Prime Value Fund, whether accrued, absolute, contingent
or otherwise, not reflected in the aggregate net asset
value per share of a Pacific Horizon Share and Horizon
Share of the Prime Value Fund.
(i) There are no legal, administrative or other proceedings
pending or, to its knowledge threatened, against Pacific
Horizon or the Prime Value Fund which could result in
liability on the part of Pacific Horizon or the Prime
Value Fund.
(j) Subject to the approvals of shareholders referred to in
Section 6, at both the Valuation Time and the Effective
Time of the Reorganization, it shall have full right,
power and authority to sell, assign, transfer and
deliver the Prime Value Fund Assets and, upon delivery
and payment for the Prime Value Fund Assets as
contemplated herein, the Prime Obligations Fund shall
acquire good and marketable title thereto, free and
clear of all liens and encumbrances, and subject to no
restrictions on the ownership or transfer thereof
(except as imposed by federal or state securities laws).
(k) No consent, approval, authorization or order of any
court or governmental authority is required for the
consummation by Pacific Horizon of the transactions
contemplated by this Agreement, except such as may be
required under the 1933 Act, the Securities Exchange Act
of 1934, as amended ("1934 Act"), the 1940 Act, the
rules and regulations under those Acts, or state
securities laws.
(l) Insofar as the following relate to Pacific Horizon,
(i) the registration statement filed by MMOT on Form N-
14 relating to the shares of the Prime Obligations Fund
that will be registered with the SEC pursuant to this
Agreement, which, without limitation, shall include or
incorporate by reference the proxy statement of Pacific
Horizon and the prospectuses of Pacific Horizon and MMOT
with respect to the transactions contemplated by this
Agreement, and any supplement or amendment thereto or to
the documents contained or incorporated therein by
reference (the "N-14 Registration Statement") on the
effective date of the N-14 Registration Statement, at
the time of the shareholders' meeting referred to in
Section 6 and at the Effective Time of the
Reorganization: (i) shall comply in all material
respects with the provisions of the 1933 Act, the 1934
Act and the 1940 Act, the rules and regulations
thereunder, and state securities laws, and (ii) shall
not contain any untrue statement of a material fact or
omit to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading.
(m) All of the issued and outstanding Pacific Horizon Shares
and Horizon Shares of the Prime Value Fund have been
duly and validly issued, are fully paid and non-
assessable, and were offered for sale and sold in
conformity with all applicable federal and state
securities laws, and no shareholder of the Prime Value
Fund has any preemptive right of subscription or
purchase in respect of such shares.
(n) It shall not sell or otherwise dispose of any shares of
the Prime Obligations Fund to be received in the
transactions contemplated herein, except in distribution
to its shareholders as contemplated herein.
5. Certain Representations, Warranties and Agreements of MMOT. MMOT,
on behalf of itself and the Prime Obligations Fund, represents and warrants to,
and agrees with, Pacific Horizon as follows:
(a) It is a Massachusetts business trust duly created
pursuant to its Declaration of Trust for the purpose of
acting as a management investment company under the 1940
Act and is validly existing under the laws of, and duly
authorized to transact business in, the Commonwealth of
Massachusetts. It is registered with the SEC as an
open-end management investment company under the
1940 Act and
its registration with the SEC as an investment company
is in full force and effect.
(b) It has power to own all of its properties and assets and
to carry out and consummate the transactions
contemplated herein, and has all necessary federal,
state and local authorizations to carry on its business
as now being conducted and to consummate the
transactions contemplated by this Agreement.
(c) This Agreement has been duly authorized, executed and
delivered by MMOT, and represents MMOT's valid and
binding contract, enforceable in accordance with its
terms, subject as to enforcement to the effect of
bankruptcy, insolvency, reorganization, arrangement,
moratorium and other similar laws of general
applicability relating to or affecting creditors' rights
and to general equity principles. The execution and
delivery of this Agreement did not, and the consummation
of the transactions contemplated by this Agreement will
not, violate MMOT's Declaration of Trust or By-laws or
any agreement or arrangement to which it is a party or
by which it is bound.
(d) The Prime Obligations Fund has elected to qualify and
has qualified as a regulated investment company under
Part I of Subchapter M of the Code, as of and since its
first taxable year; has been a regulated investment
company under such Part of the Code at all times since
the end of its first taxable year when it so qualified;
and intends to continue to qualify as a regulated
investment company.
(e) The financial statements of the Prime Obligations Fund
for its fiscal year ended July 31, 1994, examined by
Arthur Andersen LLP, Independent Public Accountants,
copies of which have been previously furnished to
Pacific Horizon, present fairly the financial position
of the Prime Obligations Fund as of the date indicated
and the results of its operations for the periods
indicated, in conformity with generally accepted
accounting principles.
(f) The unaudited financial statements of the Prime
Obligations Fund for the six-month period ended January
31, 1995, copies of which have been previously furnished
to Pacific Horizon, present fairly the financial
position of the Prime Obligations Fund as of the
respective date indicated and the results of its
operations for the periods indicated, in conformity with
generally accepted accounting principles.
(g) At both the Valuation Time and the Effective Time of the
Reorganization, there shall be no liabilities of the
Prime Obligations Fund, whether accrued, absolute,
contingent or otherwise, not reflected in the net asset
value per share of its Institutional Shares issued
pursuant to this Agreement.
(h) There are no legal, administrative or other proceedings
pending or, to its knowledge, threatened against MMOT or
the Prime Obligations Fund which could result in
liability on the part of MMOT or the Prime Obligations
Fund.
(i) No consent, approval, authorization or order of any
court or governmental authority is required for the
consummation by MMOT of the transactions contemplated by
this Agreement, except such as may be required under the
1933 Act, the 1934 Act, the 1940 Act, the rules and
regulations under those Acts, or state securities laws.
(j) Insofar as the following relate to MMOT, the N-14
Registration Statement, on the effective date of the N-
14 Registration Statement, at the time of the
shareholders' meeting referred to in Section 6 and at
the Effective Time of the Reorganization: (i) shall
comply in all material respects with the provisions of
the 1933 Act, the 1934 Act and the 1940 Act, the rules
and regulations thereunder, and state securities laws,
and (ii) shall not contain any untrue statement of a
material fact or omit to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading.
(k) The Institutional Shares of the Prime Obligations Fund
to be issued and delivered to the Prime Value Fund for
the account of recordholders of Pacific Horizon Shares
and Horizon Shares of the Prime Value Fund, pursuant to
the terms hereof, shall have been duly authorized as of
the Effective Time of the Reorganization and, when so
issued and delivered, shall be registered under the 1933
Act and shall be registered or exempt from registration
under applicable state securities laws, and shall be
duly and validly issued, fully paid and non-assessable,
and no shareholder of MMOT shall have any preemptive
right of subscription or purchase in respect thereto.
6. Shareholder Action on Behalf of the Prime Value Fund. As soon as
practicable after the effective date of the N-14 Registration Statement, but in
any event prior to the Effective Time of the Reorganization and as a condition
thereto, the Board of Directors of Pacific Horizon shall call, and Pacific
Horizon shall hold, a meeting of the shareholders of the Prime Value Fund for
the purpose of considering and voting upon:
(a) Approval of this Agreement and the transactions
contemplated hereby, including, without limitation:
(i) The transfer of the Prime Value Fund Assets to the
Prime Obligations Fund, and the assumption by the
Prime Obligations Fund of the Prime Value Fund
Liabilities, in exchange for Institutional Shares
of the Prime Obligations Fund.
(ii) The liquidation of the Prime Value Fund through
the distribution to its recordholders of Pacific
Horizon Shares and Horizon Shares of the
Institutional Shares of the Prime Obligations Fund
as described in this Agreement.
(b) Such other matters as may be determined by the Board of
Directors of Pacific Horizon.
7. N-14 Registration Statement. MMOT shall file the N-14 Registration
Statement. MMOT and Pacific Horizon have cooperated and shall continue to
cooperate with each other, and have furnished and shall continue to furnish each
other with the information relating to itself that is required by the 1933 Act,
the 1934 Act, the 1940 Act, the rules and regulations under each of those Acts
and state securities laws, to be included in the N-14 Registration Statement.
8. Effective Time of the Reorganization. Subject to Section 1(d)
hereof, delivery of the Prime Value Fund Assets and the Institutional Shares of
the Prime Obligations Fund to be issued pursuant to Section 1 and the
liquidation of the Prime Value Fund pursuant to Section 2 shall occur at the
opening of business on the next business day following the Valuation Time, or on
such other date, and at such place and time and date, agreed to by the President
or Vice President, of each of the parties. The date and time at which such
actions are taken are referred to herein as the "Effective Time of the
Reorganization." To the extent the Prime Value Fund Assets are, for any reason,
not transferred at the Effective Time of the Reorganization, Pacific Horizon
shall cause the Prime Value Fund Assets to be transferred in accordance with
this Agreement at the earliest practicable date thereafter.
9. MMOT Conditions. The obligations of MMOT hereunder shall be subject
to the following conditions precedent:
(a) This Agreement and the transactions contemplated by this
Agreement shall have been approved by the Board of
Directors of Pacific Horizon and by the shareholders of
the Prime Value Fund of Pacific Horizon, both in the
manner required by law.
(b) Pacific Horizon shall have duly executed and delivered
to MMOT such bills of sale, assignments, certificates
and other instruments of transfer ("Transfer Documents")
as MMOT may reasonably deem necessary or desirable to
transfer all of the Prime Value Fund's right, title and
interest in and to the Prime Value Fund Assets. The
Prime Value Fund Assets shall be accompanied by all
necessary state stock transfer stamps or cash for the
appropriate purchase price therefor.
(c) All representations and warranties of Pacific Horizon
made in this Agreement shall be true and correct in all
material respects as if made at and as of the Valuation
Time and the Effective Time of the Reorganization. As
of the Valuation Time and the Effective Time of the
Reorganization there shall have been no material adverse
change in the financial position of the Prime Value Fund
since the date of the financial statements referred to
in Section 4(f) other than those changes incurred in the
ordinary course of business as an investment company
since the date of the financial statement referred to in
Section 4(f). No action, suit or other proceeding shall
be threatened or pending before any court or
governmental agency in which it is sought to restrain or
prohibit, or obtain damages or other relief in
connection with, this Agreement or the transactions
contemplated herein. MMOT shall have received a
certificate from the President or Vice President of
Pacific Horizon stating that each of the conditions set
forth in this Section 9(a) and in this Section 9(c) have
been met.
(d) MMOT shall have received an opinion of Drinker Biddle &
Reath addressed to MMOT in the form reasonably
satisfactory to it and dated the Effective Time of the
Reorganization, substantially to the effect that:
(i) Pacific Horizon is a Maryland corporation duly
incorporated and validly existing and in good standing
under the laws of the State of Maryland; (ii) the shares
of the Prime Value Fund outstanding at the Effective
Time of the Reorganization are duly authorized, validly
issued, fully paid and non-assessable by the Prime Value
Fund, and to such counsel's knowledge, no shareholder of
Pacific Horizon has any option, warrant or pre-emptive
right to subscription or purchase in respect thereof;
(iii) this Agreement has been duly authorized, executed
and delivered by Pacific Horizon and represents a legal,
valid and binding contract, enforceable in accordance
with its terms, subject to the effect of bankruptcy,
insolvency, moratorium, fraudulent conveyance and
similar laws relating to or affecting creditors' rights
generally and court decisions with respect thereto and
such counsel shall express no opinion with respect to
the application of equitable principles in any
proceeding, whether at law or in equity or with respect
to the provisions of this Agreement intended to limit
liability for particular matters to the Prime Value Fund
and its assets, including but not limited to Sections
1(a), 19 and 20 of this Agreement; (iv) the execution
and delivery of this Agreement did not, and the
consummation of the transactions contemplated by this
Agreement will not, violate the Articles of
Incorporation or By-laws of Pacific Horizon or any
material agreement known to such counsel to which
Pacific Horizon is a party or by which Pacific Horizon
is bound; and (v) to such counsel's knowledge, no
consent, approval, authorization or order of any court
or governmental authority is required for the
consummation by Pacific Horizon of the transactions
contemplated by this Agreement, except such as have been
obtained under the 1933 Act, the 1934 Act, the 1940 Act,
the rules and regulations under those Acts and such as
may be required under the state securities laws. Such
opinion may rely on the opinion of other counsel to the
extent set forth in such opinion, provided such other
counsel is reasonably acceptable to MMOT.
(e) MMOT shall have received an opinion of Drinker Biddle &
Reath, addressed to MMOT and Pacific Horizon in the form
reasonably satisfactory to them and dated the Effective
Time of the Reorganization, substantially to the effect
that for federal income tax purposes (i) the transfer of
all of the Prime Value Fund Assets to the Prime
Obligations Fund, and the assumption by the Prime
Obligations Fund of the Prime Value Fund Liabilities, in
exchange for shares of the Prime Obligations Fund, and
the distribution of said shares to the shareholders of
the Prime Value Fund, as provided in this Agreement,
will constitute a reorganization within the meaning of
Section 368(a)(1)(C) or Section 368(a)(1)(D) of the Code
and with respect to the reorganization, the Prime Value
Fund and the Prime Obligations Fund will each be
considered "a party to a reorganization" within the
meaning of Section 368(b) of the Code; (ii) in
accordance with Sections 361(a), 361(c)(1) and 357(a) of
the Code, no gain or loss will be recognized by the
Prime Value Fund as a result of such transactions;
(iii) in accordance with Section 1032 of the Code, no
gain or loss will be recognized by the Prime Obligations
Fund as a result of such transactions; (iv) in
accordance with Section 354(a)(1) of the Code, no gain
or loss will be recognized by the shareholders of the
Prime Value Fund on the distribution to them by the
Prime Value Fund of shares of the Prime Obligations Fund
in exchange for their shares of the Prime Value Fund;
(v) in accordance with Section 358(a)(1) of the Code,
the basis of the Prime Obligations Fund shares received
by each shareholder of the Prime Value Fund will be the
same as the basis of the shareholder's Prime Value Fund
shares immediately prior to the transactions; (vi) in
accordance with Section 362(b) of the Code, the basis of
the Prime Value Fund Assets to the Prime Obligations
Fund will be the same as the basis of the Prime Value
Fund Assets in the hands of the Prime Value Fund
immediately prior to the exchange; (vii) in accordance
with Section 1223 of the Code, a shareholder's holding
period for the Prime Obligations Fund shares will be
determined by including the period for which the
shareholder held the shares of the Prime Value Fund
exchanged therefor, provided that the shareholder held
such shares of the Prime Value Fund as a capital asset;
and (viii) in accordance with Section 1223 of the Code,
the holding period of the Prime Obligations Fund with
respect to the Prime Value Fund Assets will include the
period for which the Prime Value Fund Assets were held
by the Prime Value Fund.
(f) The N-14 Registration Statement shall have become
effective under the 1933 Act and no stop order
suspending such effectiveness shall have been instituted
or, to the knowledge of MMOT, contemplated by the SEC
and the parties shall have received all permits and
other authorizations necessary under state securities
laws to consummate the transactions contemplated by this
Agreement.
(g) The President or Vice President of Pacific Horizon shall
have certified that Pacific Horizon has performed and
complied in all material respects with each of its
agreements and covenants required by this Agreement to
be performed or complied with by it prior to or at the
Valuation Time and the Effective Time of the
Reorganization.
(h) At the Effective Time of the Reorganization the number
of Prime Value Fund shares outstanding is at least 60%
of the number of Prime Value Fund Shares outstanding on
May 30, 1995.
(i) Federated Management shall have made a capital
contribution to the Prime Value Fund in an amount equal
to the Prime Value Fund's realized and unrealized losses
as of the Valuation Time.
10. Pacific Horizon Conditions. The obligations of Pacific Horizon
hereunder shall be subject to the following conditions precedent:
(a) This Agreement and the transactions contemplated by this
Agreement shall have been approved by the Board of
Trustees of MMOT and by the shareholders of the Prime
Value Fund of Pacific Horizon, both in the manner
required by law.
(b) All representations and warranties of MMOT made in this
Agreement shall be true and correct in all material
respects as if made at and as of the Valuation Time and
the Effective Time of the Reorganization. As of the
Valuation Time and the Effective Time of the
Reorganization there shall have been no material adverse
change in the financial position of the Prime
Obligations Fund since the date of the financial
statements referred to in Section 5(f) other than those
changes incurred in the ordinary course of business as
an investment company since the date of the financial
statements referred to in Section 5(f). No action, suit
or other proceeding shall be threatened or pending
before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or
other relief in connection with, this Agreement or the
transactions contemplated herein. Pacific Horizon shall
have received a certificate from the President or Vice
President of MMOT stating that each of the conditions
set forth in this Section 10(a) and Section 10(b) have
been met.
(c) Pacific Horizon shall have received an opinion of
Dickstein, Shapiro & Morin, L.L.P., addressed to Pacific
Horizon in the form reasonably satisfactory to it and
dated the Effective Time of the Reorganization,
substantially to the effect that: (i) MMOT is a
Massachusetts business trust duly organized and validly
existing under the laws of the Commonwealth of
Massachusetts; (ii) the shares of the Prime Obligations
Fund to be delivered to the Prime Value Fund as provided
for by this Agreement are duly authorized and upon
delivery will be validly issued, fully paid and non-
assessable by the Prime Obligations Fund and to such
counsel's knowledge, no shareholder of MMOT has any
option, warrant or pre-emptive right to subscription or
purchase in respect thereof; (iii) this Agreement has
been duly authorized, executed and delivered by MMOT and
represents a legal, valid and binding contract,
enforceable in accordance with its terms, subject to the
effect of bankruptcy, insolvency, moratorium, fraudulent
conveyance and similar laws relating to or affecting
creditors' rights generally and court decisions with
respect thereto and such counsel shall express no
opinion with respect to the application of equitable
principles in any proceeding, whether at law or in
equity or with respect to the provisions of this
Agreement intended to limit liability for particular
matters to the Prime Obligations Fund and its assets,
including but not limited to Sections 1(a), 19 and 20 of
this Agreement; (iv) the execution and delivery of this
Agreement did not, and the consummation of the
transactions contemplated by this Agreement will not,
violate the Declaration of Trust or By-laws of MMOT, or
any material agreement known to such counsel to which
MMOT is a party or by which MMOT is bound; and (v) to
such counsel's knowledge no consent, approval,
authorization or order of any court or governmental
authority is required for the consummation by MMOT of
the transactions contemplated by this Agreement, except
such as have been obtained under the 1933 Act, the 1934
Act, the 1940 Act, the rules and regulations under those
Acts and such as may be required under the state
securities laws. Such opinion may rely on the opinion
of other counsel to the extent set forth in such
opinion, provided such other counsel is reasonably
acceptable to Pacific Horizon.
(d) Pacific Horizon shall have received an opinion of
Drinker Biddle & Reath, addressed to MMOT and Pacific
Horizon in the form reasonably satisfactory to them and
dated the Effective Time of the Reorganization, with
respect to the matters specified in Section 9(e).
(e) The N-14 Registration Statement shall have become
effective under the 1933 Act and no stop order
suspending such effectiveness shall have been
instituted, or to the knowledge of MMOT, contemplated by
the SEC and the parties shall have received all permits
and other authorizations necessary under state
securities laws to consummate the transactions
contemplated by this Agreement.
(f) The President or Vice President of MMOT shall have
certified that MMOT has performed and complied in all
material respects with each of its agreements and
covenants required by this Agreement to be performed or
complied with by it prior to or at the Valuation Time
and the Effective Time of the Reorganization.
(g) Federated Management shall have made a capital
contribution to the Prime Value Fund in an amount equal
to the Prime Value Fund's realized and unrealized losses
as of the Valuation Time.
11. Tax Documents. Pacific Horizon shall deliver to MMOT at the
Effective Time of the Reorganization confirmations or other adequate evidence as
to the adjusted tax basis of the Prime Value Fund Assets delivered to the Prime
Obligations Fund in accordance with the terms of this Agreement.
12. Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto shall use its best efforts to take, or
cause to be taken, such action, to execute and deliver, or cause to be executed
and delivered, such additional documents and instruments and to do, or cause to
be done, all things necessary, proper or advisable under the provisions of this
Agreement and under applicable law to consummate and make effective the
transactions contemplated by this Agreement, including without limitation,
delivering and/or causing to be delivered to MMOT, each account, book, record or
other document of Pacific Horizon required to be maintained by Section 31(a) of
the 1940 Act and Rules 31a-1 to 31a-3 thereunder (regardless of whose possession
they are in).
13. Termination of Representations and Warranties. The representations
and warranties of the parties set forth in this Agreement shall terminate upon
the delivery of the Prime Value Fund Assets to the Prime Obligations Fund and
the issuance of the shares of the Prime Obligations Fund at the Effective Time
of the Reorganization.
14. Termination of Agreement. This Agreement may be terminated by a
party at any time at or prior to the Effective Time of the Reorganization by a
vote of a majority of its Board of Trustees or Directors, as applicable, as
provided below:
(a) By MMOT if the conditions set forth in Section 9 are not
satisfied as specified in said Section;
(b) By Pacific Horizon if the conditions set forth in
Section 10 are not satisfied as specified in said
Section; or
(c) If the Effective Time of the Reorganization has not
occurred on or before _____________.
This Agreement may be terminated at any time by the mutual consent of the
parties.
15. Amendment and Waiver. At any time prior to or (to the fullest
extent permitted by law) after approval of this Agreement by the shareholders of
Pacific Horizon (a) the parties hereto may, by written agreement authorized by
their respective Boards of Trustees or Directors, as applicable, and with or
without the approval of their shareholders, amend any of the provisions of this
Agreement, and (b) any party may waive any breach by any other party or the
failure to satisfy any of the conditions to its obligations (such waiver to be
in writing and authorized by the President or Vice President of the waiving
party with or without the approval of such party's shareholders).
16. Governing Law. This Agreement and the transactions contemplated
hereby shall be governed, construed and enforced in accordance with the laws of
the Commonwealth of Pennsylvania.
17. Successors and Assigns. This Agreement shall be binding upon the
respective successors and permitted assigns of the parties hereto. This
Agreement and the rights, obligations and liabilities hereunder may not be
assigned by any party without the consent of all other parties.
18. Beneficiaries. Nothing contained in this Agreement shall be deemed
to create rights in persons not parties hereto, other than the successors and
permitted assigns of the parties.
19. MMOT Liability.
(a) The names "Money Market Obligations Trust" and "Trustees
of Money Market Obligations Trust" refer respectively to
the trust created and the trustees, as trustees but not
individually or personally, acting from time to time
under a Declaration of Trust dated October 3, 1988,
which is hereby referred to and a copy of which is on
file at the office of the State Secretary of the
Commonwealth of Massachusetts and at the principal
office of MMOT. The obligations of MMOT entered into in
the name or on behalf thereof by any of the trustees,
representatives or agents are made not individually, but
in such capacities, and are not binding upon any of the
trustees, shareholders or representatives of MMOT
personally, but bind only the trust property, and all
persons dealing with any series of shares of MMOT must
look solely to the trust property belonging to such
series for the enforcement of any claims against MMOT.
(b) Each party specifically acknowledges and agrees that all
obligations of MMOT under this Agreement are binding
only with respect to the Prime Obligations Fund; that
any liability of MMOT under this Agreement with respect
to the Prime Obligations Fund, or in connection with the
transactions contemplated herein with respect to the
Prime Obligations Fund, shall be discharged only out of
the assets of the Prime Obligations Fund; and that no
other portfolio of MMOT, nor any individual shareholder
of MMOT, including Prime Obligations Fund, shall be
liable with respect to this Agreement or in connection
with the transactions contemplated herein.
20. Pacific Horizon Liability.
(a) Each party specifically acknowledges and agrees that all
obligations of Pacific Horizon under this Agreement are
binding only with respect to the Prime Value Fund; and
that any liability of Pacific Horizon under this
Agreement with respect to the Prime Value Fund, or in
connection with the transactions contemplated herein
with respect to the Prime Value Fund, shall be
discharged only out of the assets of the Prime Value
Fund and that no other portfolio of Pacific Horizon, nor
any individual shareholder of Pacific Horizon, including
Prime Value Fund, shall be liable with respect to this
Agreement or in connection with the transactions
contemplated herein.
21. Notices. All notices required or permitted herein shall be in
writing and shall be deemed to be properly given when delivered personally or by
telecopier to the party entitled to receive the notice or when sent by certified
or registered mail, postage prepaid, or delivered to an internationally
recognized overnight courier service, in each case properly addressed to the
party entitled to receive such notice at the address or telecopier number stated
below or to such other address or telecopier number as may hereafter be
furnished in writing by notice similarly given by one party to the other party
hereto:
If to Pacific Horizon:
Pacific Horizon Funds, Inc.
c/o Concord Holding Corporation
125 West 55th Street
New York, NY 10019
With copies to:
Michael P. Malloy, Esq.
Drinker Biddle & Reath
1345 Chestnut Street
Philadelphia, PA 19107
Telecopier Number: (215) 988-2757
If to MMOT:
Money Market Obligations Trust
c/o Federated Investors Tower
Pittsburgh, PA 15222
With copies to:
Matthew G. Maloney, Esq.
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N. W.
Washington, D. C. 20037
Telecopier Number: (202) 887-0689
22. Expenses.
With regard to the expenses incurred by Pacific Horizon and MMOT in
connection with this Agreement and the transactions contemplated hereby, Bank of
America National Trust and Savings Association shall be responsible for the
payment of all such expenses.
23. Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties hereto and supersedes any and all prior agreements,
arrangements and understandings relating to matters provided for herein.
24. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered shall be deemed to be
an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers designated below as of the date first
written above.
PACIFIC HORIZON FUNDS, INC.
ATTEST:
_______________________ By: ______________________________
Secretary President
MONEY MARKET OBLIGATIONS TRUST
ATTEST:
_______________________ By: ______________________________
Secretary President
BANK OF AMERICA NATIONAL TRUST AND SAVING
ASSOCIATION, hereby joins in this Agreement
with respect to, and agrees to be bound by,
Section 22.
ATTEST:
_______________________ By: ______________________________
Secretary President
STATEMENT OF ADDITIONAL INFORMATION
Dated ________, 1995
Acquisition of the Assets of
PRIME VALUE FUND,
a portfolio of PACIFIC HORIZON FUNDS, INC.
By and in exchange for shares of
PRIME OBLIGATIONS FUND,
a portfolio of MONEY MARKET OBLIGATIONS TRUST
125 West 55th Street
New York, New York 10019
This Statement of Additional Information dated ________, 1995, is not a
prospectus. A Proxy Statement and Prospectus dated ________ 1995, related to
the above-referenced matter may be obtained at no charge by calling Concord
Holding Corporation at 1-800-332-3863. This Statement of Additional Information
should be read in conjunction with such Proxy Statement and Prospectus.
TABLE OF CONTENTS
1. Statements of Additional Information of the Pacific Horizon Shares of the
Prime Value Fund and the Horizon Shares of the Prime Value Fund, dated
July 1, 1995.
2. Annual Report of Prime Value Fund, dated _____________, 1995.
3. Combined Statement of Additional Information of Prime Obligations Fund
(Institutional Shares and Institutional Service Shares), dated November
30, 1994.
2. Annual Report of Prime Obligations Fund, dated _____________, 1994.
The Statements of Additional Information of the Pacific Horizon Shares of
the Prime Value Fund and the Horizon Shares of the Prime Value Fund, dated
July 1, 1995 are incorporated herein by reference to Post-Effective
Amendment No. 40 to Pacific Horizon Fund, Inc.'s Registration Statement on
Form N-1A (1933 Act File 2-81110; 1940 Act File No. 811- 4293), which was
filed with the Securities and Exchange Commission on June 21, 1995. The
financial statements and notes thereto in the Annual Report of Prime Value
Fund and the report of Price Waterhouse, LLP, are incorporated herein by
reference. The Annual Report (1933 Act File No. 2-81110; 1940 Act File
No. 811-4293) was filed with the Securities and Exchange Commission on
____________, 1995. Copies of these documents may be obtained free of
charge by calling Concord Holding Corporation at 1-800-332-3863.
The Combined Statement of Additional Information of Prime Obligations Fund
(Institutional Shares and Institutional Service Shares), dated November
30, 1994, is incorporated herein by reference to Post-Effective Amendment
No. 11 to Money Market Obligations Trust's Registration Statement on Form
N-1A (1933 Act File 33-31602; 1940 Act File No. 811- 5950), which was
filed with the Securities and Exchange Commission on November 25, 1994.
The Annual Report of Prime Obligations Fund and the report of Arthur
Andersen LLP, are incorporated herein by reference. The Annual Report
(1933 Act File No. 33-31602; 1940 Act File No. 811-5950) was filed with
the Securities and Exchange Commission on __________, 1994. Copies of
these documents may be obtained free of charge from Money Market
Obligations Trust at Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779, Telephone Number: 1-800-245-5000.
3. The pro forma financial statements required by Rule 11-01 of Regulation S-
X have not been included because the net asset value of the Acquired Fund does
not exceed ten percent of the Acquiring Fund's net asset value as of May 30,
1995.
PACIFIC HORIZON FUNDS, INC.
PRIME VALUE FUND - PACIFIC HORIZON SHARES
SPECIAL MEETING OF SHAREHOLDERS _____________, 1995
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned shareholders of PRIME
VALUE FUND, an investment portfolio of PACIFIC HORIZON FUNDS, INC., hereby
appoint __________________________________________________________________, or
any of them true and lawful attorneys, with power of substitution of each, to
vote all shares of PRIME VALUE FUND, which the undersigned is entitled to vote,
at the Special Meeting of Shareholders to be held on _________, 1995, at 125
West 55th Street, New York, New York 10019, at 10:30 a.m. and at any adjournment
thereof.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting.
PROPOSAL
1. TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PACIFIC HORIZON
FUNDS, INC. The attorneys named will vote the shares represented by this proxy
in accordance with the choice made on this ballot. IF NO CHOICE IS INDICATED AS
TO ANY MATTER, THIS PROXY WILL BE VOTED AFFIRMATIVELY ON THE MATTER PRESENTED.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND RETAIN
THE TOP PORTION. Place the mail-in stub so that the return address, located on
the reverse side of the ballot, appears through the window of the envelope.
PRIME VALUE FUND-
PACIFIC HORIZON SHARES PROXY VOTING MAIL-IN STUB
RECORD DATE SHARES
PROPOSAL 1: TO APPROVE OR
DISAPPROVE AN AGREEMENT AND PLAN OF
REORGANIZATION
o FOR
o AGAINST
o ABSTAIN
Please sign EXACTLY as your name(s) appear above. When signing as attorney,
executor, administrator, guardian, trustee, custodian, etc., please give your
full title as such. If a corporation or partnership, please sign the full name
by an authorized officer or partner. If stock is owned jointly, all owners
should sign.
Dated: ___________________________________, 19_________
_______________________________________________________
_______________________________________________________
Signature(s) of Shareholder(s)
PACIFIC HORIZON FUNDS, INC.
PRIME VALUE FUND - HORIZON SHARES
SPECIAL MEETING OF SHAREHOLDERS _____________, 1995
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned shareholders of PRIME
VALUE FUND, an investment portfolio of PACIFIC HORIZON FUNDS, INC., hereby
appoint __________________________________________________________________, or
any of them true and lawful attorneys, with power of substitution of each, to
vote all shares of PRIME VALUE FUND, which the undersigned is entitled to vote,
at the Special Meeting of Shareholders to be held on _________, 1995, at 125
West 55th Street, New York, New York 10019, at 10:30 a.m. and at any adjournment
thereof.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting.
PROPOSAL
1. TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PACIFIC HORIZON
FUNDS, INC. The attorneys named will vote the shares represented by this proxy
in accordance with the choice made on this ballot. IF NO CHOICE IS INDICATED AS
TO ANY MATTER, THIS PROXY WILL BE VOTED AFFIRMATIVELY ON THE MATTER PRESENTED.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND RETAIN
THE TOP PORTION. Place the mail-in stub so that the return address, located on
the reverse side of the ballot, appears through the window of the envelope.
PRIME VALUE FUND-
HORIZON SHARES PROXY VOTING MAIL-IN STUB
RECORD DATE SHARES
PROPOSAL 1: TO APPROVE OR
DISAPPROVE AN AGREEMENT AND PLAN OF
REORGANIZATION
o FOR
o AGAINST
o ABSTAIN
Please sign EXACTLY as your name(s) appear above. When signing as attorney,
executor, administrator, guardian, trustee, custodian, etc., please give your
full title as such. If a corporation or partnership, please sign the full name
by an authorized officer or partner. If stock is owned jointly, all owners
should sign.
Dated: ___________________________________, 19_________
_______________________________________________________
_______________________________________________________
Signature(s) of Shareholder(s)
PART C - OTHER INFORMATION
Item 15. Indemnification
Indemnification is provided to officers and trustees of the Registrant
pursuant to the Registrant's Declaration of Trust, except where such
indemnification is not permitted by law. However, the Declaration of Trust does
not protect the trustees from liabilities based on willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of their office.
Trustees and officers of the Registrant are insured against certain
liabilities, including liabilities arising under the Securities Act of 1933 (the
"Act").
Insofar as indemnification for liabilities arising under the Act may be
permitted to trustees, officers, and controlling persons of the Registrant by
the Registrant pursuant to the Declaration of Trust or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by trustees, officers, or controlling persons of the Registrant in
connection with the successful defense of any act, suit, or proceeding) is
asserted by such trustees, officers, or controlling persons in connection with
the shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Insofar as indemnification for liabilities may be permitted pursuant to
Section 17 of the Investment Company Act of 1940 for trustees, officers, and
controlling persons of the Registrant by the Registrant pursuant to the
Declaration of Trust or otherwise, the Registrant is aware of the position of
the Securities and Exchange Commission as set forth in Investment Company Act
Release No. IC-11330. Therefore, the Registrant undertakes that in addition to
complying with the applicable provisions of the Declaration of Trust or
otherwise, in the absence of a final decision on the merits by a court or other
body before which the proceeding was brought, that an indemnification payment
will not be made unless in the absence of such a decision, a reasonable
determination based upon factual review has been made: (i) by a majority vote of
a quorum of non-party trustees who are not interested persons of the Registrant;
or (ii) by independent legal counsel in a written opinion that the indemnitee
was not liable for an act of willful misfeasance, bad faith, gross negligence,
or reckless disregard of duties. The Registrant further undertakes that
advancement of expenses incurred in the defense of a proceeding (upon
undertaking for repayment unless it is ultimately determined that
indemnification is appropriate) against an officer, trustee, or controlling
person of the Registrant will not be made absent the fulfillment of at least one
of the following conditions: (i) the indemnitee provides security for his
undertaking; (ii) the Registrant is insured against losses arising by reason of
any lawful advances; or (iii) a majority of a quorum of disinterested non-party
trustees or independent legal counsel in a written opinion makes a factual
determination that there is reason to believe the indemnitee will be entitled to
indemnification.
Item 16. Exhibits
1.1 Conformed Copy of Declaration of Trust of the Registrant dated October 3,
1988(1)
1.2 Conformed Copy of Amendment to the Declaration of Trust of the Registrant
dated October 3, 1989(1)
1.3 Conformed Copy of Amendment No. 8 to the Declaration of Trust of the
Registrant dated December 28, 1994(2)
2. Copy of Bylaws of the Registrant(1)
3. Not Applicable
4. Agreement and Plan of Reorganization is included as Appendix A to the
Combined Proxy Statement and Prospectus of this Registration Statement*
5. Not Applicable
6.1 Conformed Copy of Investment Advisory Contract of the Registrant,
including conformed copies of Exhibits A through F to the Investment
Advisory Contract(1)
6.2 Conformed Copy of Exhibit G to Investment Advisory Contract of the
Registrant(3)
6.3 Conformed Copy of Investment Advisory Contract between Registrant and
Federated Administrative Services dated March 1, 1995(4)
7.1 Conformed Copy of Distributor's Contract of the Registrant, including
conformed copies of Exhibits A, B, and E to the Distributor's Contract(3)
7.2 Conformed Copy of Exhibits G and H to the Distributor's Contract of the
Registrant(5)
7.3 Confirmed Copy of Exhibits C and D to the Distributor's Contract of the
Registrant(4)
8. Not Applicable
9. Conformed Copy of Custodian Agreement of the Registrant(6)
10 Not Applicable
11. Opinion regarding legality of shares being issued*
12. Form of Opinion regarding tax consequences of Reorganization*
13.1 Conformed Copy of Transfer Agency and Service Agreement of the
Registrant(6)
13.2 Conformed Copy of Fund Accounting Agreement of the Registrant(2)
13.3 Conformed Copy of Shareholder Services Plan of the Registrant dated
June 1, 1994(5)
13.4 Conformed Copy of Shareholder Services Sub-Contract of the Registrant
dated June 1, 1994(5)
13.5 Conformed Copy of Exhibit B to Shareholder Services Plan of the Registrant
relating to Government Obligations Tax-Managed Fund, dated March 1,
1995(4)
14. Conformed Copy of Consent of Independent Accountants*
15. Not Applicable
16. Conformed Copy of Power of Attorney(2)
17.1 Copy of Declaration under Rule 24f-2*
17.2 Form of Proxy*
17.3 Prospectuses for the: 1) Pacific Horizon Shares of the Prime Value Fund
and 2) Horizon Shares of the Prime Value Fund dated July 1, 1995.*
17.4 Statements of Additional Information for the: 1) Pacific Horizon Shares of
the Prime Value Fund and 2) Horizon Shares of the Prime Value Fund and
Treasury Fund, dated July 1, 1995, is filed as a document accompanying the
Statement of Additional Information.*
17.5 Prospectus for the Institutional Shares of the Prime Obligations Fund
dated November 30, 1994.(5)
17.6 Statement of Additional Information for the Institutional Shares and
Institutional Service Shares of Prime Obligations Fund dated November 30,
1994.(5)
__________________
* Filed electronically.
(1) Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed October 20, 1989 (File Nos. 33-31602 and 811-5950).
(2) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed on February 21, 1995 (File Nos. 33-31602 and
811-5950).
(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed May 6, 1994 (File Nos. 33-31602 and
811-5950).
(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed May 5, 1995 (File Nos. 33-31602 and
811-5950).
(5) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 11 on Form N-1A filed November 25, 1994 (File Nos. 33-31602 and
811-5950).
(6) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed June 1, 1994 (File Nos. 33-31602 and
811-5950).
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public
reofferring of the securities registered through the use of a prospectus which
is a part of this Registration Statement by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c) of the Securities Act of
1933, the reofferring prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new Registration Statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Money Market Obligations Trust, has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Pittsburgh, Commonwealth of Pennsylvania, on June __,
1995.
MONEY MARKET OBLIGATIONS TRUST
(Registrant)
By:/s/ Jeannette Fisher-Garber
Jeannette Fisher-Garber, Assistant Secretary
Attorney in Fact for John F. Donahue
June __, 1995
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated:
NAME TITLE DATE
By: /s/Jeannette Fisher-Garber
Jeannette Fisher-Garber Attorney In Fact June __, 1995
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
J. Christopher Donahue* President and Trustee
Edward C. Gonzales* Vice President and Treasurer
(Principal Financial and
Accounting Officer)
Thomas G. Bigley* Trustee
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
Gregor F. Meyer* Trustee
John E. Murray, Jr.* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
Exhibit 11
MONEY MARKET OBLIGATIONS TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Phone: 412-288-8515
Fax: 412-288-8141
June 29, 1995
The Trustees of
Money Market Obligations Trust
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
Money Market Obligations Trust (the "Trust") proposes to issue
Trust Shares of beneficial interest representing interests in a separate
portfolio of securities known as Prime Obligations Fund (such shares of
beneficial interest being herein collectively referred to as the "Shares") in
connection with the acquisition of the assets of Prime Value Fund, a separate
portfolio of Pacific Horizon Funds, Inc., pursuant to the Agreement and Plan
of Reorganization dated as of June 26, 1995 (the "Agreement"), filed as an
exhibit to the registration statement of the Trust filed on Form N-14
(Securities Act of 1933 No. to be assigned) under the Securities Act of 1933
as amended (the "N-14 Registration").
As counsel, I have participated in the organization of the Trust,
its registration under the Investment Company Act of 1940, as amended, the
registration of its securities on Form N-1A under the Securities Act of 1933,
and its N-14 Registration. I have examined and am familiar with the written
Declaration of Trust dated October 3, 1989, (the "Declaration of Trust"), the
Bylaws of the Trust, the Agreement and such other documents and records deemed
relevant. I have also reviewed questions of law and consulted with counsel
thereon as deemed necessary or appropriate by me for the purposes of this
opinion.
Based upon the foregoing, it is my opinion that:
1. The Trust is duly organized and validly existing pursuant to
the Declaration of Trust.
2. The Shares which are currently being registered by the N-14
Registration may be legally and validly issued in accordance with the
provisions of the Agreement and the Declaration of Trust upon receipt of
consideration sufficient to comply with the provisions of Article III, Section
3, of the Declaration of Trust and subject to compliance with the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and
applicable state laws regulating the sale of securities. Such Shares, when so
issued, will be fully paid and non-assessable.
The Trustees of
Money Market Obligations Trust
June 29, 1995
Page 2
I consent to your filing this opinion as an exhibit to the N-14
Registration referred to above and to any application or registration
statement filed under the securities laws of any of the states of the United
States. I further consent to the reference to myself under the caption "Legal
Counsel" in the prospectus filed as a part of such Registration Statement,
applications, and registration statements.
Very truly yours,
By: /s/ Robert C. Rosselot
Robert C. Rosselot
Fund Attorney
RCR/dlm
PHTRANS:48325_1.WP5
June 23, 1995
Pacific Horizon Funds, Inc.
125 W. 55th Street, 11th Fl.
New York, NY 10019
Re: Agreement and Plan of Reorganization
By and Between Pacific Horizon Funds, Inc.
and Money Market Obligations Trust with
Respect to the Prime Value Fund
Dear Sirs and Mesdames:
We have been asked to give our opinion on the Federal income tax
consequences to shareholders of the transactions contemplated in the above
Agreement and Plan of Reorganization. In our opinion, the material Federal
income tax consequences to shareholders of such transactions are accurately
described in the subsection entitled "INFORMATION RELATING TO THE PROPOSED
REORGANIZATION -- Federal Income Tax Consequences" in the Combined Proxy
Statement and Prospectus contained in the Registration Statement being filed
this day with the Securities and Exchange Commission.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement. This does not constitute a consent under section
7 of the Securities Act of 1933,and in so consenting we have not certified any
part of the Registration Statement and do not otherwise come within the
categories of persons whose consent is required under section 7 or under the
rules and regulations of the Securities and Exchange Commission issued
thereunder.
Very truly yours,
/s/ Drinker Biddle & Reath
DRINKER BIDDLE & REATH
Exhibit (14) to N-14
ARTHUR ANDERSEN & CO.
Pittsburgh, Pennsylvania
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in Form
N-14 Registration Statement of Prime Obligations Fund (a portfolio of Money
Market Obligations Trust) of our report dated September 15, 1994, on the
financial statements as of July 31, 1994, included in or made part of this
registration statement.
By: ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
June 29, 1995
Exhibit (14) to N-14
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
related Statement of Additional Information dated July 1, 1995 of the
Pacific Horizon Funds, Inc. which Prospectus and Statement of Additional
Information are incorporated by reference in the Combined Proxy Statement
and Prospectus and related Statement of Additional Information constituting
parts of this registration statement on Form N-14, (the "Registration
Statement") of our report dated April 21, 1995, relating to the financial
statements and financial highlights appearing in the February 28, 1995
Annual Report to Shareholders of Pacific Horizon Prime Value Fund, one of
the portfolios constituting the Pacific Horizon Funds, Inc. which report is
also incorporated by reference and included in the Registration Statement.
We also consent to the references to us under the headings "Financial
Highlights", and "Financial Statements and Experts" in the Registration
Statement.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
June 29, 1995
Rule 24f-2 Notice
MONEY MARKET OBLIGATIONS TRUST
(Fund Name)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
1933 Act No. 33-31602
(i) fiscal period for which notice is filed July 31, 1994
(ii) The number or amount of securities of the
same class or series, if any, which had
been registered under the Securities Act
of 1933, other than pursuant to Rule 24f-2
but which remained unsold at August 1, 1993,
the beginning of the Registrant's fiscal
period -0-
(iii) The number or amount of securities, if
any, registered during the fiscal period
of this notice other than pursuant to
Rule 24f-2 -0- -0-
(iv) The number or amount of securities
sold during the fiscal period of this
notice 24,781,509,667
(v) The number or amount of securities sold
during the fiscal period of this notice
in reliance upon registration pursuant
to Rule 24f-2 (see attached Computation
of Fee) 24,781,509,667
WITNESS the due execution hereof this 15th day of September, 1994.
By: /s/ Jeannette Fisher-Garber
Fund Attorney
Assistant Secretary
COMPUTATION OF FEE
1. Actual aggregate sale price of Registrant's
securities sold pursuant to Rule 24f-2 during
the fiscal period for which the 24f-2 notice
is filed (see Section v)..................................... $24,781,509,667
2. Reduced by the difference between:
(a) actual aggregate redemption price
of such securities redeemed by the
issuer during the fiscal period for
which the 24f-2 notice is filed........ $24,155,454,045
(b) actual aggregate redemption price
of such redeemed securities
previously applied by the issuer
pursuant to Section 24e(2)(a) for
the fiscal period for which the
24f-2 notice is filed.................. -0- 24,155,454,045
Total amount upon which the fee calculation specified
in Section 6(b) of the Securities Act of 1933 is
based........................................................... $ 626,055,622
FEE SUBMITTED (1/29 of 1% of Total amount)................. $ 215,883
PHTRANS:51917_1.WP5
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to
our Firm included in the Registration Statement on Form N-14 under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940,
respectively,
/s/ Drinker Biddle & Reath
DRINKER BIDDLE & REATH
Philadelphia, Pennsylvania
June 23, 1995
Reverse Conversion
PROSPECTUS
July 1, 1995
Pacific Horizon Shares of the
Pacific Horizon Prime Value Fund
(An Investment Portfolio Offered by Pacific Horizon Funds, Inc.)
This Prospectus applies to Pacific Horizon Shares of the Pacific Horizon Prime
Value Fund (the "Fund"). The Fund is designed to provide investors with daily
liquidity.
The Fund's investment objective is to seek high current income and stability
of principal. It seeks to achieve this objective by investing substantially
all of its assets in a diversified portfolio of U.S. dollar-denominated "money
market" instruments such as bank certificates of deposit and bankers'
acceptances, commercial paper and repurchase agreements, in addition to
obligations issued or guaranteed by U.S. and foreign governmental entities.
Portfolio securities held by the Fund have remaining maturities of thirteen
months or less from the date of purchase by the Fund. Portfolio securities
which are subject to repurchase agreements or have certain put or demand
features exercisable by the Fund within thirteen months (as well as certain
U.S. Government obligations with floating or variable interest rates) may have
longer maturities.
Shares of the Fund may be purchased or redeemed at any time without charge or
penalty imposed by the Fund. Bank of America National Trust and Savings
Association ("Bank of America") acts as investment adviser to the Fund.
Concord Financial Group, Inc. sponsors the Fund and acts as its distributor
and Concord Holding Corporation acts as its administrator, neither of which is
affiliated with Bank of America.
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. It should be read and retained for
future reference. Additional information about the Fund, contained in a
Statement of Additional Information dated July 1, 1995, has been filed with
the Securities and Exchange Commission and is available to investors upon
request and without charge by calling the Fund's distributor at (800) 332-
3863. The Statement of Additional Information, as it may from time to time be
further revised, is incorporated in its entirety by reference into this
Prospectus.
[--- Unable To Translate Graphic ---]
Shares of the Fund are not bank deposits or obligations of, or guaranteed or
endorsed by, Bank of America or any of its affiliates and are not federally
insured by, guaranteed by, obligations of or otherwise supported by the U.S.
Government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board or any other governmental agency. The Fund seeks to maintain its net
asset value per share at $1.00 for purposes of purchases and redemptions,
although there can be no assurance that it will be able to do so on a
continuous basis. Investment in the Fund involves investment risk, including
the possible loss of principal amount invested.
[--- Unable To Translate Graphic ---]
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
[--- Unable To Translate Graphic ---]
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus and in the
Statement of Additional Information, in connection with the offering of the
Fund's shares and, if given or made, such information or representations must
not be relied upon as having been authorized by the Company or its
distributor. This prospectus does not constitute an offer by the fund or by
the distributor to sell, or a solicitation of any offer to buy, any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful for the fund or the distributor to make such offer in such
jurisdiction.
Contents
Expense Information 2
Financial Highlights 3
Investment Objective and Policies 4
Management of the Fund 9
Purchases of Shares 11
Redemption of Shares 13
Shareholder Services 15
Dividends, Distributions and
Taxes 16
Description of Shares 17
Performance Calculations 19
Distributor: Investment Adviser:
Concord Financial Group, Inc. Bank of America National Trust and Savings
Association
125 West 55th Street 555 California Street
New York, NY 10019 San Francisco, CA 94104
Expense Information
The following table sets forth certain information regarding
shareholder transaction expenses imposed by the Fund and the annual operating
expenses the Fund expects to incur during its current fiscal year with respect
to its Pacific Horizon Shares. This information has been restated to assume
that current fees had been in effect during the previous fiscal year. Actual
expenses may vary.
Hypothetical examples based on the table are also shown.
Prime Value
Fund
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees (After Fee Waivers) .14%
All Other Expenses (After Fee Waivers) .08%
Special Management Services Fee (After Fee
Waivers) .00%
Other Expenses .08%
Total Fund Operating Expenses (After Fee Waivers) 0.22%
Example 1 Year 3 Years 5 Years 10 Years
You would pay the following expenses
on a $1,000 investment, assuming
(1) a 5% annual return and
(2) redemption at the end of each
time period: $2 $7 $12 $28
The foregoing Expense Summary and Example are intended to assist investors in
the Fund's Pacific Horizon Shares in understanding the expenses the class will
pay. Investors bear these expenses indirectly since they reduce the amount of
income paid by the Fund to investors as dividends. Management Fees consist of
an investment advisory fee and an administration fee, each fee payable at a
maximum annual rate of .10% of the Fund's net assets, and a special management
services fee payable at the annual rate of .32% of the Fund's average net
assets. The Fund's Adviser and Administrator may voluntarily waive a portion
of their respective fees and may voluntarily reimburse expenses from time to
time. This voluntary waiver and reimbursement may be modified or terminated at
any time. Absent such fee waivers and expense reimbursements, it is estimated
that the total operating expenses for Pacific Horizon Shares of the Fund would
be .60%. See "Management of the Fund" for more complete descriptions of the
various expenses referred to above.
THE EXAMPLES SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE INVESTMENT RETURNS AND OPERATING EXPENSES. ACTUAL INVESTMENT RETURNS
AND OPERATING EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
Financial Highlights
The table below sets forth certain information concerning the investment
results of Pacific Horizon Shares of the Fund for the periods indicated. The
information contained in the Financial High lights has been audited by Price
Waterhouse LLP, the Fund's independent accountants, whose unqualified report
on the financial statements containing such information is incorporated by
reference in the Statement of Additional Information. The Financial Highlights
should be read in conjunction with the Fund's audited financial statements and
notes thereto and the unqualified report of the independent accountants which
are incorporated by reference in the Statement of Additional Information.
Selected Data for a Pacific Horizon Share Outstanding Throughout Each of the
Periods Indicated:
Year Ended Period Ended
February 28,
February 28,
1995 1995
Net asset value per share, beginning of period $1.00
$1.00
Income from Investment Operations:
Net investment income 0.0456 0.0302
Less Dividends:
Dividends from net investment income (0.0456) (0.0302)
Net change in net asset value per share 0.0000 0.0000
Net asset value per share, end of period $1.00 $1.00
Total return 4.66% 3.06%
Ratios/Supplemental Data:
Net assets, end of period (000) $77,733 $151,447
Ratio of expenses to average net assets** 0.21%
0.18%_
Ratio of net investment income to average
net assets** 4.32% 3.15%_
_______________
* For the period March 16, 1993 (commencement of operations) through
February 28, 1994.
** Net of fee waivers which had the effect of reducing the ratio of
expenses to average net assets and increasing the ratio of net
investment income to average net assets by 0.44% for the year ended
February 28, 1995 and 0.58% (annualized) for the period ended
February 28, 1994.
_ Annualized.
Not annualized.
Investment Objective and Policies
This section describes the investment objective and policies of the Fund.
Assets of the Fund will be invested in dollar-denominated debt securities with
remaining maturities of thirteen months or less as defined by the Securities
and Exchange Commission, and the dollar-weighted average portfolio maturity of
the Fund will not exceed 90 days. All securities acquired by the Fund will be
determined by the adviser, under guidelines established by the Board of
Directors of Pacific Horizon Funds, Inc. (the "Company"), to present minimal
credit risks and will be "First Tier Securities" as defined by the Securities
and Exchange Commission. First Tier Securities consist of instruments that are
either rated at the time of purchase in the top rating category by one (if
rated by only one) or more unaffiliated nationally recognized statistical
rating organizations ("NRSROs") including Standard and Poor's Ratings Group,
Division of McGraw Hill ("Standard & Poor's"), Moody's Investors Service, Inc.
("Moody's"), Duff & Phelps Credit Co. ("Duff & Phelps") or Fitch Investors
Service, Inc. ("Fitch") or issued by issuers with such ratings. The
Appendix to the Statement of Additional Information includes a description of
the applica ble NRSRO ratings. Unrated instruments (including instruments with
long-term but no short-term ratings) purchased by the Fund will be of
comparable quality as determined by the Fund's adviser pursuant to guidelines
approved by the Board of Directors.
The Fund's investment objective is to seek high current income and stability
of principal. The Fund invests substantially all of its assets in a
diversified portfolio of U.S. dollar-denominated money market instruments.
Portfolio securities held by the Fund have remaining maturities of thirteen
months or less from the date of purchase by the Fund. (Portfolio securities
which are subject to repurchase agreements or have certain put or demand
features exercisable by the Fund within thirteen months, as well as certain
U.S. Government obligations with floating or variable interest rates, may have
longer maturities.) The money market instruments in which the Fund invests
will generally have neither as much risk nor as high a return as longer-term
or lower-rated instruments.
In pursuing its investment objective, the Fund invests in a broad range of
government, bank and commercial obligations that may be available in the money
markets. In accordance with regulations of the Securities and Exchange
Commission, the Fund intends to limit investments in the securities of any
single issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) to not more than 5% of the
Fund's total assets at the time of purchase, provided that the Fund may invest
up to 25% of its total assets in the securities of any one issuer for a period
of up to three business days. The following descriptions illustrate the types
of instruments in which the Fund invests.
Bank Obligations. The Fund may purchase U.S. dollar-denominated bank
obligations such as time deposits, certificates of deposit and bankers'
acceptances issued by domestic and foreign banks. Such banks must have total
assets at the time of purchase in excess of $1 billion. The Fund may also make
interest-bearing savings deposits in commercial banks in amounts not in excess
of 5% of the Fund's total assets.
Commercial Obligations. The Fund may purchase commercial paper, short-
term notes, and bonds issued by domestic and foreign corpo rations that meet
the Fund's maturity limitations. These instruments may include Canadian
Commercial Paper ("CCP"), which is U.S. dollar-denominated commercial paper
issued by a Canadian corporation or a Canadian counterpart of a
U.S. corporation, and Europaper, which is U.S. dollar-denominated commercial
paper of a foreign issuer.
The Fund may also invest in commercial paper issued in reliance on the so-
called "private placement" exemption from registration afforded by
Section 4(2) of the Securities Act of 1933 ("Section 4(2) paper").
Section 4(2) paper is restricted as to disposition under the federal
securities laws and generally is sold to institutional investors such as the
Fund that agree that they are purchasing the paper for investment and not with
a view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) paper normally is resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers that make a market in Section 4(2) paper.
Section 4(2) paper will not be subject to the Fund's 10% limitation on
illiquid securities set forth below where the Board of Directors or the Fund's
adviser (pursuant to guidelines adopted by the Board) determines that a liquid
trading market exists.
U.S. Government Obligations. The Fund may purchase obligations issued or
guaranteed by the U.S. Government or its agencies and instrumentalities.
Examples of the types of U.S. Treasury obligations that may be held by the
Fund include U.S. Treasury bills and notes, including "stripped" securities
(both interest-only and principal-only) issued by the U.S. Treasury and
recorded in the Federal Reserve book-entry record-keeping system. "Stripped"
U.S. Treasury securities include zero coupon obligations that are normally
issued at a discount to their "face value," and may exhibit greater price
volatility than ordinary debt securities. Obligations of certain agencies and
instrumentalities of the U.S. Government, such as the Small Business
Administration, are backed by the full faith and credit of the United States.
Others are backed by the right of the issuer to borrow from the U.S. Treasury
(such as obligations of the Federal Home Loan Bank), by the discretionary
authority of the U.S. Government to purchase the agency's obligations (such as
obligations of the Federal National Mortgage Association), or only by the
credit of the agency or instrumentality issuing the obligation (such as the
Student Loan Marketing Association). Securities issued or guaranteed by the
U.S. Government and its agencies and instrumentalities have historically
involved little risk of loss of principal if held to maturity. However, no
assurance can be given that the U.S. Government would provide financial
support to any agency or instrumentality if it is not obligated to do so by
law.
Foreign Government Obligations. The Fund may invest in U.S. dollar-
denominated obligations issued or guaranteed by foreign governments or any of
their political subdivisions, agencies or instrumentalities. Such obligations
include debt obligations of supranational entities. Supranational entities
include international organizations designated or supported by governmental
entities to promote economic reconstruction or development and international
banking institutions and related government agencies. Examples of these
include the International Bank for Reconstruction and Development (the "World
Bank"), the Asian Development Bank and the InterAmerican Development Bank.
Asset-Backed Securities. The Fund may purchase asset-backed securities,
which are securities backed by mortgages, installment sales contracts, credit
card receivables or other assets. The average life of asset-backed securities
varies with the maturities of the underlying instruments, and the average life
of a mortgage-backed instrument, in particular, is likely to be substantially
less than the original maturity of the mortgage pools underlying the
securities as the result of mortgage prepayments. For this and other reasons,
an asset-backed security's stated maturity may be shortened, and the
security's total return may be difficult to predict precisely. Such
difficulties are not, however, expected to have a significant effect on the
Fund since the remaining maturity of any asset-backed security acquired will
be thirteen months or less. Asset-backed securities acquired by the Fund may
include collateralized mortgage obligations ("CMOs") issued by private
companies.
Participations. The Fund may purchase from domestic financial
institutions participation interests in high quality debt securities. A
participation interest gives the Fund an undivided interest in the security in
the proportion that the Fund's participation interest bears to the total
principal amount of the security. Participation interests may have fixed,
floating or variable rates of interest, and will have remaining maturities of
thirteen months or less (as defined by the Securities and Exchange
Commission). If a participation interest is unrated, the adviser will have
determined that the interest is of comparable quality to those instruments in
which the Fund may invest pursuant to guidelines approved by the Company's
Board of Directors. The Fund intends only to purchase participations from an
entity or syndicate, and does not intend to serve as a co-lender in any
participation. For certain participation interests, the Fund will have the
right to demand payment, on not more than 30 days' notice, for all or any part
of the Fund's participation interest in the security, plus accrued interest.
As to these instruments, the Fund intends to exercise its right to demand
payment only upon a default under the terms of the security, as needed to
provide liquidity, or to maintain or improve the quality of its investment
portfolio. It is possible that a participation interest might be deemed to be
an extension of credit by the Fund to the issuing financial institution that
is not a direct interest in the credit of the obligor of the underlying
security and is not directly entitled to the protection of any collateral
security provided by such obligor. In such event, the ability of the Fund to
obtain repayment might depend on the issuing financial institution.
Repurchase Agreements. The Fund may agree to purchase securities from
financial institutions, such as banks and broker-dealers as are deemed
creditworthy by the adviser under guidelines approved by the Board of
Directors, subject to the seller's agreement to repurchase them at an agreed
upon time and price ("repurchase agreements"). Although the securities subject
to a repurchase agreement may bear maturities exceeding thirteen months, the
Fund intends only to enter into repurchase agreements having maturities not
exceeding 60 days. Securities subject to repurchase agreements are held either
by the Fund's custodian or subcustodian, or in the Federal Reserve/Treasury
Book-Entry System. The seller under a repurchase agreement will be required to
maintain the value of the securities subject to the agreement in an amount
that exceeds the repurchase price, and such value (including accrued interest)
will be continuously monitored by the adviser on an ongoing basis. Default by
the seller would, however, expose the Fund to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations. Repurchase agree ments are considered to be loans under the
Investment Company Act of 1940.
Reverse Repurchase Agreements. The Fund may borrow monies for temporary
purposes by entering into reverse repurchase agreements in accordance with the
investment restrictions described below. Pursuant to such agreements, the Fund
would sell portfolio securities to financial institutions and agree to
repurchase them at an agreed upon date and price. At the time the Fund enters
into a reverse repurchase agreement, it will place in a segregated custodial
account liquid assets or high grade debt securities having a value equal to or
greater than the repurchase price and the adviser will continuously monitor
the account to insure that the value is maintained. The Fund would only enter
into reverse repurchase agreements to avoid otherwise selling securities
during unfavorable market conditions to meet redemptions. Reverse repurchase
agreements involve the risk that the market value of the portfolio securities
sold by the Fund may decline below the price of the securities the Fund is
obligated to repurchase. Interest paid by the Fund in connection with a
reverse repur chase agreement will reduce the Fund's net investment income.
Reverse repurchase agreements are considered to be borrowings under the
Investment Company Act of 1940.
Variable and Floating Rate Instruments. Securities purchased by the
Fund may include variable and floating rate instruments, which may have a
stated maturity in excess of the Fund's maturity limitations but which will,
except for certain U.S. Government obligations, permit the Fund to demand
payment of the principal of the instrument at least once every thirteen months
upon not more than thirty days' notice. Such instruments may include variable
amount master demand notes that permit the indebtedness thereunder to vary in
addition to providing for periodic adjustments in the interest rate. There may
be no active secondary market with respect to a particular variable or
floating rate instrument. Nevertheless, the periodic readjustments of their
interest rates tend to assure that their value to the Fund will approximate
their par value. Illiquid variable and floating rate instruments (instruments
which are not payable upon seven days notice and do not have an active trading
market) that are acquired by the Fund are subject to the percentage
limitations described below under "Illiquid Investments." The adviser will
continuously monitor the creditworthiness of issuers of variable and floating
rate instruments in which the Fund invests, and their ability to repay
principal and interest.
Variable and floating rate instruments purchased by the Fund may include
participation certificates issued by trusts or financial institutions in
variable and floating rate obligations owned by such issuers or affiliated
organizations. A participation certificate gives the Fund a specified
undivided interest (up to 100%) in the underlying obligation and the right to
demand payment of the unpaid principal balance plus accrued interest on the
participation interest from the institution upon a specified number of days'
notice. If the credit of the obligor is of minimal credit risk, no credit
support from a bank or other financial institution will be necessary. In other
circumstances, the participation certificate will be backed by an irrevocable
letter of credit or guarantee of a bank, or will be insured by an insurer,
that the Fund's adviser has determined meets the quality standards for the
Fund.
The Fund may also invest in obligations which provide for a variable or
floating interest rate which is determined through a periodic "auction
process." From time to time, holders of the obligations have the right to
tender any such obligations to a remarketing agent which then remarkets the
obligations which have been tendered and thereby determines a new interest
rate for the following period.
When-Issued Purchases, Forward Commitments and Delayed Settlements.
The Fund may purchase securities on a "when-issued basis" and may purchase or
sell securities on a "forward commitment" basis. The Fund may also purchase or
sell securities on a "delayed settlement" basis. When-issued and forward
commitment transactions, which involve a commitment by the Fund to purchase or
sell particular securities with payment and delivery taking place at a future
date (perhaps one or two months later), permit the Fund to lock in a price or
yield on a security it owns or intends to purchase, regardless of future
changes in interest rates. Delayed settlement describes a securities
transaction in the secondary market for which settlement will occur sometime
in the future. When-issued, forward commitment and delayed settlement
transactions involve the risk, however, that the yield or price obtained in a
transaction may be less favorable than the yield or price available in the
market when the securities delivery takes place. The Fund's forward
commitments, when-issued purchases and delayed settlements are not expected to
exceed 25% of the value of the Fund's total assets absent unusual market
conditions. The Fund's liquidity and the ability of the adviser to manage the
Fund's portfolio may be adversely affected in the event the Fund's forward
commitments, commitments to purchase when-issued securities and delayed
settlements ever exceeded 25% of the value of the Fund's assets. The Fund does
not intend to engage in these transactions for speculative purposes but only
in furtherance of its investment objective.
Securities Lending. To increase income on portfolio securities, the Fund
may lend its portfolio securities to broker-dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least the market value
of the securities loaned plus accrued interest. Collateral for such loans may
include cash or securities of the U.S. Government, securities of U.S.
Government agencies or instrumentalities, or an irrevocable letter of credit
issued by a bank which meets the investment standards of the Fund. Such loans
will not be made if, as a result, the aggregate of all outstanding loans of
the Fund exceeds 30% of the value of its total assets. There may be risks of
delay in receiving additional collateral or in recovering the securities
loaned or even a loss of rights in the collateral should the borrower of the
securities fail financially. However, loans will be made only to borrowers
deemed by the adviser to be of good standing and when, in the adviser's
judgment, the income to be earned from the loan justifies the attendant risks.
Foreign Investments. Because the Fund may hold securities issued by
foreign issuers, the Fund may be subject to investment risks that are
different in some respects from those incurred by a fund which invests only in
debt obligations of U.S. domestic issuers. Such risks include future political
and economic developments, the possible imposition of withholding taxes on
interest income payable on the securities by the particular country in which
the issuer is located, the possible seizure or nationalization of foreign
deposits, the possible establishment of exchange controls or the adoption of
other foreign governmental restrictions which might adversely affect the
payment of principal and interest on these securities. In addition, foreign
banks and other issuers are not necessarily subject to the same regulatory
requirements that apply to domestic issuers (such as reserve requirements,
loan limitations, examinations, accounting, auditing and recordkeeping
requirements, and public availability of information) and the Fund may
experience difficulties in obtaining or enforcing a judgment against a foreign
issuer.
Illiquid Investments. The Fund will not knowingly invest more than 10%
of the value of its net assets in securities that are illiquid. Repurchase
agreements, securities loans and time deposits that do not provide for payment
to the Fund within seven days after notice and securities that are not
registered under the Securities Act of 1933 but that may be purchased by
institutional buyers under Rule 144A, are subject to this 10% limit (unless
such securities are commercial paper and variable amount master demand notes
with maturities of nine months or less or unless the Board or the adviser,
pursuant to guidelines adopted by the Board, determines that a liquid trading
market exists).
Investment Limitations. The Fund's investment objective is a fundamental
policy that may not be changed without a vote of the holders of a majority of
the Fund's outstanding shares (as defined in the Investment Company Act of
1940). The Fund's policies may be changed by the Board of Directors without
the affirmative vote of the holders of a majority of the Fund's outstanding
shares, except that the investment limitations set forth below may not be
changed without such a vote of shareholders. A descrip tion of certain other
fundamental investment limitations is contained in the Statement of Additional
Information.
The Fund may not:
1. Purchase any securities which would cause, at the time of purchase, less
than 25% of the value of its total assets to be invested in obligations
of issuers in the banking industry or in obligations, such as repurchase
agreements, secured by such obligations (unless the Fund is in a
temporary defensive position) or which would cause, at the time of
purchase, 25% or more of the Fund's total assets to be invested in the
securities of one or more issuers conducting their principal business
activities in any other industry, provided that (a) there is no
limitation with respect to obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities or repurchase
agreements secured by such obligations; (b) wholly-owned finance
companies will be considered to be in the industries of their parents if
their activities are primarily related to financing the activities of
the parents; and (c) the industry classification of utilities will be
determined according to their service. For example, gas, gas
transmission, electric and gas, electric and telephone will each be
considered a separate industry.
2. Borrow money or issue senior securities, except that the Fund may borrow
from banks and enter into reverse repurchase agreements for temporary
purposes in amounts up to one-third of the value of the total assets at
the time of such borrowing; or mortgage, pledge or hypothecate any
assets, except in connection with any such borrowing and then in amounts
not in excess of one-third of the value of the Fund's total assets at
the time of such borrowings. The Fund will not purchase securities while
its borrowings (including reverse repurchase agreements) in excess of 5%
of its total assets are outstanding. Securities held in escrow or
separate accounts in connection with the Fund's investment practices
described in this Prospectus or the Statement of Additional Information
are not deemed to be pledged for purposes of this limitation.
Investment Decisions. Investment decisions for the Fund are made independently
from those for other investment companies and accounts managed by the adviser
and its affiliated entities. Such other investment companies and accounts may
also invest in the same securities as the Fund. When a purchase or sale of the
same security is made at substantially the same time on behalf of the Fund and
another investment company or account, available investments or opportunities
for sales will be allocated in a manner which the adviser believes to be
equitable. In some instances, this investment procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
sold by the Fund. In addition, in allocating purchase and sale orders for
portfolio securities (involving the payment of brokerage commissions or dealer
concessions), the adviser may take into account the sale of shares of the Fund
by broker-dealers and other financial institutions (including affiliates of
the adviser and the Fund's Distributor), provided the adviser believes that
the quality of the transaction and the amount of the commission are not less
favorable than what they would be with any other unaffiliated qualified firm.
Management of the Fund
Board of Directors. The business of the Company is managed under the direction
of its Board of Directors. Information about the Directors and officers of the
Company is included in the Statement of Additional Information.
Investment Adviser. Bank of America National Trust and Savings Association
("Bank of America") serves as the Fund's investment adviser. Bank of America,
which has principal offices located at 555 California Street, San Francisco,
California 94104, is a national banking association formed in 1904 which
provides commercial banking and trust business through an extensive system of
branches across the western United States. Bank of America's principal bank
ing affiliates operate branches in ten U.S. states as well as corporate
banking and business credit offices in major U.S. cities and branches,
corporate offices and representative offices in 37 countries. Bank of America
and its affiliates have over $50 billion under management, including over
$10 billion in mutual funds. Bank of America is a subsidiary of BankAmerica
Corporation, a registered bank holding company.
As investment adviser, Bank of America manages the Fund's investments and is
responsible for all purchases and sales of the Fund's portfolio securities.
For its investment advisory services Bank of America is entitled to receive a
fee accrued daily and payable monthly at the follow ing annual rates: .10% of
the first $7 billion of the Fund's net assets, plus .09% of the next
$3 billion of the Fund's net assets, plus .08% of the Fund's net assets over
$10 billion. This amount may be reduced pursuant to certain undertakings by
Bank of America described below under "Fee Waivers." The Fund paid advisory
fees to the Bank of America at an effective annual rate of .07% of the Fund's
net assets for the fiscal year ended February 28, 1995, and Bank of America
waived advisory fees at an effective annual rate of .03% of the Fund's net
assets for the same period.
In addition, Bank of America is also entitled to fees under the Company's
Special Management Services Agreement described below and may also receive
fees charged directly to its custom ers' accounts in connection with
investments in Fund shares.
Administrator. Concord Holding Corporation (the "Administrator") serves as the
Company's administrator and assists generally in supervising the Fund's
operations. The Administrator is a wholly-owned subsidiary of The BISYS
Group, Inc. Its offices are located at 125 West 55th Street, New York, New
York 10019.
Under its basic administrative services agreement for the Fund, the
Administrator has agreed to provide facilities, equipment and personnel to
carry out administrative services for the Fund, including coordination of
reports to shareholders and the Securities and Exchange Commission;
calculation of the net asset value of Fund shares and dividends and capital
gains distributions to shareholders; payment of the costs of maintaining the
Fund's offices; preparation of tax returns; provision of internal legal and
accounting compliance services; maintenance (or oversight of the maintenance
by others approved by the Board of Directors) of the Fund's books and records;
and the provision of various shareholder services for shareholders who have
made a minimum initial investment of at least $500,000, including the
provision of a facility to receive purchase and redemption orders for the
accounts of such shareholders.
For its administrative services the Administrator is entitled to receive an
administration fee computed daily and payable monthly at the following annual
rates: .10% of the first $7 billion of the Fund's net assets, plus .09% of the
next $3 billion of the Fund's net assets, plus .08% of the Fund's net assets
over $10 billion. The Fund paid administration fees to the Administrator at an
effective annual rate of .07% of the Fund's net assets for the fiscal year
ended February 28, 1995, and the Administrator waived administration fees at
an effective annual rate of .03% of the Fund's net assets for the same period.
Pursuant to the authority granted in its agreement with the Company, the
Administrator has entered into an agreement with The Bank of New York under
which the bank performs certain of the services listed above e.g., calculating
the net asset value of Fund shares and dividends to shareholders and
maintaining the Fund's books and records. The Fund bears all fees and expenses
charged by The Bank of New York for these services.
Special Management Services Agreement. The Company has entered into a Special
Management Services Agreement with Bank of America and the Administrator with
respect to the Fund's Pacific Horizon Shares. Under the Agreement, Bank of
America and the Administrator have agreed to develop and monitor the investor
programs that are offered from time to time in connection with Pacific Horizon
Shares; provide dedicated walk-in and telephone facilities to handle
shareholder inquiries and serve investor needs; develop and maintain
specialized systems for the automatic investments of customers of Bank of
America, the Administrator and selected broker/dealers; maintain the
registration or qualification of the Fund's shares for sale under state
securities laws; assume the expense of payments made to third parties for
services provided in connection with the investments of their customers in
Pacific Horizon Shares; and provide various services (such as the provision of
a facility to receive purchase and redemption orders) for shareholders who
have made a minimum initial investment of less than $500,000.
For the services provided and expenses assumed pursuant to the Special
Management Services Agreement, Bank of America and the Administrator waived,
for the fiscal year ended February 28, 1995, an aggregate fee at the annual
rate of .32% of the average net asset value of the Fund's Pacific Horizon
Shares outstanding from time to time. As stated below under "Description of
Shares," this fee is borne by the Fund's Pacific Horizon Shares and is not
paid to the Administrator and Bank of America with respect to the Fund's other
series of shares.
Distributor. Concord Financial Group, Inc. (the "Distributor") is the
principal underwriter and distributor of Fund shares. The Distributor is a
wholly-owned subsidiary of the Administrator organized to distribute shares of
mutual funds to institutional and retail investors. Its offices are located at
125 West 55th Street, New York, New York 10019.
The Distributor makes a continuous offering of the Fund's shares and bears the
costs and expenses of printing and distributing to selected dealers and
prospective investors copies of any prospectuses, statements of additional
information and annual and interim reports of the Fund (after such items have
been prepared and set in type by the Fund) which are used in connection with
the offering of shares, and the costs and expenses of preparing, printing and
distributing any other literature used by the Distributor or furnished by it
for use by selected dealers in connection with the offering of the Fund's
shares for sale to the public.
Custodian and Transfer Agent. The Bank of New York, located at 90 Washington
Street, New York, New York 10286, serves as the Fund's custodian. DST Systems,
Inc. (the "Transfer Agent"), 811 Main, Kansas City, Missouri 64105-2005,
serves as the Fund's transfer agent and dividend disbursing agent.
Fee Waivers. Except as noted in this Prospectus and the Statement of
Additional Information, the Fund's service contractors bear all expenses in
connection with the performance of their services and the Fund bears the
expenses incurred in its operations. Fund expenses include taxes, interest,
brokerage fees and commissions, if any, fees of directors who are not
officers, directors, partners, employees or holders of 5% or more of the
outstanding voting securities of Bank of America or the Administrator or any
of their affiliates, Securities and Exchange Commission fees and state
securities qualification fees, advisory fees, fees payable under the Basic
Administrative Services Agreement and Special Management Services Agreement,
charges of custodians, transfer and dividend disbursing agents fees, certain
insurance premiums, outside audit ing and legal expenses, costs of maintaining
corporate existence, costs attributable to investor services, including
without limitation, telephone and personnel expenses, costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes, costs of shareholders' reports and corporate meetings and any
extraordinary expenses. From time to time during the course of the Fund's
fiscal year, the Administrator and/or Bank of America may voluntarily not
receive payment of fees and/or assume certain expenses of the Fund, while
retaining the ability to be reimbursed by the Fund for such amounts prior to
the end of the fiscal year and, subject to the expense limitations of certain
states, to stop such fee waivers and expense reimbursements at any time. This
will have the effect of increasing yield to investors at the time such fees
are not received or amounts are assumed and decreasing yield when such fees or
amounts are reimbursed.
Purchases of Shares
Pacific Horizon Shares may be purchased directly from the Distributor, by
clients of Bank of America through their qualified trust and agency accounts
or by clients of certain institutions such as banks or broker-dealers
("Service Organizations") without a charge imposed by the Fund, although Bank
of America and Service Organizations may charge a fee for providing
administrative services in connection with investments in shares of the Fund.
The minimum initial investment is $500, except for purchases through Bank of
America's trust and agency accounts or through a Service Organization whose
clients have made aggregate minimum purchases of $1,000,000, in which event
the minimum initial investment is $100, or as otherwise described below under
"Shareholder Services." The minimum subsequent investment is $50, except for
investments arising from automatic investment transactions on behalf of Bank
of America's trust and agency accounts, as to which there is no minimum. Bank
of America and Service Organizations may impose minimum customer account and
other requirements in addition to those imposed by the Fund. The Fund reserves
the right to reject any purchase order. Persons wish ing to purchase shares
through their accounts at Bank of America or a Service Organization should
contact such entity directly for appropriate instructions. Other investors may
purchase shares in the manner described below.
An investor desiring to purchase shares by mail should complete an Account
Application and mail the Application and a check payable to "Pacific Horizon
Prime Value Fund" to the Company c/o DST Systems, Inc., P.O. Box 419955,
Kansas City, Missouri 64141-6955. All subsequent payments should be mailed to
DST Systems, Inc., P.O. Box 419940, Kansas City, Missouri 64173-0298. An
investor desiring to purchase shares by wire should request his bank to
transmit immediately available funds by wire to The Bank of New York, ABA
No. 021000018, Pacific Horizon Funds, Inc. Prime Value Fund, DDA
No. 8900117796 for purchase of shares in the investor's name. It is important
that the wire include the investor's name, address and tax identification
number and indicate whether a new account is being established or a subsequent
payment is being made to an established account. If a subsequent payment is
being made, the investor's Fund account number should be included. An investor
should contact his bank for information on remitting funds in this manner,
including any charges imposed by the bank for wiring funds. Payments which are
hand delivered must be delivered directly to the Transfer Agent at 811 Main,
Kansas City, Missouri 64105-2005.
A fee will be imposed by the Transfer Agent if any check used for investment
in an account does not clear. All payments should be in U.S. dollars. Purchase
orders in proper form are effected on a day on which both the Fund's custodian
and the New York Stock Exchange (the "Exchange") are open for business (a
"Business Day") at the net asset value per share next determined after receipt
by the Transfer Agent at its Kansas City office of both an order and federal
funds. Purchases will not be effected until payments made in other than
federal funds are converted to federal funds, which is ordinarily within two
business days of receipt. Purchase orders effected through automatic
investment transactions on behalf of Bank of America's trust and agency
accounts are received by Bank of America before 12:00 noon (Pacific Time) and
are effected as of 4:00 p.m. (Eastern Time) on the same day. It is the
responsibility of Bank of America or the Service Organization involved to
transmit orders for the purchases of shares by its customers to the Transfer
Agent and deliver required funds on a timely basis, in accordance with the
procedures stated above. Share purchases and redemptions executed through Bank
of America or a Service Organization are executed only on days on which the
particular institution is open for business.
The net asset value per share of the Fund is determined on each Business Day
as of 12:00 noon Eastern Time and the close of regular trading hours on the
Exchange (or 4:00 p.m. Eastern Time if the Exchange is closed). In computing
net asset value, the Fund uses the amortized cost method of valuation as
described in the Statement of Additional Information under "Purchase and
Redemption of Shares." The net asset value per share for purposes of pricing
purchase and redemption orders for the Fund is determined independently of
that for other portfolios of the Company. For voice recorded price and yield
information call (800) 227-1545.
Federal regulations require that each investor provide a certified Taxpayer
Identification Number upon opening or reopening an account. See the Fund's
Account Application for further information about this requirement.
In connection with the sale of shares of the Fund, the Company will obtain a
representation from Service Organizations (as well as from Bank of America and
the Administrator) that they will be licensed as dealers as required by
applicable law or will not engage in activities which would require them to be
so licensed.
TeleTrade. Although the privilege may not be used to make an initial purchase,
an investment in Pacific Horizon Shares of the Fund automatically entitles an
investor to purchase Fund shares (minimum of $500 and maximum of $50,000 per
transaction) without charge by telephone unless he indicates on the Account
Application or in a subsequent written notice to the Transfer Agent that he
does not wish to use the TeleTrade Privilege. Appropriate information
concerning the investor's bank must be provided in the Account Application or
in a subsequent signature guaranteed letter of instruction to the Transfer
Agent before the TeleTrade Privilege may be used. The proceeds will be
transferred between the check ing, NOW or bank money market account designated
in one of these documents and the investor's Fund account. Only an account
maintained at a domestic financial institution which is an Automated Clearing
House member may be so designated.
TeleTrade purchases will be effected at the net asset value next determined
after receipt of payment by the Fund's Transfer Agent. The Company may modify
this Privilege at any time or charge a service fee upon notice to sharehold
ers. No such fee currently is contemplated.
An investor who has selected the TeleTrade Privilege may request TeleTrade
purchases by telephoning the Transfer Agent at (800) 346-2087. The TeleTrade
Privilege may not be available to certain clients of Bank of America or
particular institutional investors.
Redemption of Shares
Investors whose shares are purchased through accounts at Bank of America or a
Service Organization may redeem all or part of their Pacific Horizon Shares in
accordance with the instructions pertaining to such accounts. If such
investors are also the shareholders of record of those accounts on the books
of the Transfer Agent, they may redeem shares in accordance with the
procedures described below under "Regular Redemption." Such investors wishing
to use the other redemption methods must arrange with Bank of America or a
Service Organization for delivery of the required application(s) to the
Transfer Agent. Redemption orders are effected on a Business Day at the net
asset value per share next determined after receipt of the order by the
Transfer Agent. It is the responsibility of Bank of America or the Service
Organization to transmit the redemption order and credit its customer's
account with the redemption proceeds on a timely basis. Other investors may
redeem all or part of their shares in accordance with one of the following
procedures.
Regular Redemption. An investor may redeem shares in any amount by sending a
written request to the Prime Value Fund, c/o DST Systems, Inc.,
P.O. Box 419955, Kansas City, Missouri 64141-6955. Redemption orders are
effected upon receipt by the Transfer Agent at its Kansas City office.
Redemption requests delivered to the Company other than by mail must be
delivered to the offices of the Transfer Agent at 811 Main, Kansas City,
Missouri 64105-2005. Shares for which certificates have been issued may not be
redeemed unless the certificates have been submitted to the Transfer Agent and
endorsed for transfer.
Redemption requests must be signed by each shareholder, including each joint
owner on redemption requests for joint accounts. A redemption request for
(i) an amount in excess of $50,000 per day, (ii) any amount if the proceeds
are to be sent elsewhere than to the address of record, and (iii) an amount of
$50,000 or less if the address of record has not been on file with the
Transfer Agent for a period of 60 days, must be accompanied by a signature
guarantee. The guarantor of a signature must be a bank that is a member of the
FDIC, a trust company, a member firm of a national securities exchange or
other eligible guarantor institution. The Transfer Agent will not accept
guarantees from notaries public. Signatures on endorsed certificates submitted
for redemption must also be guaranteed. Guarantees must be signed by an
authorized signatory of the guarantor institution and "Signature Guaranteed"
must appear with the signature.
TeleTrade. An investor may redeem shares in the same manner and subject to the
same limitations as described under "Purchases of Shares TeleTrade" above.
Redemption proceeds will be on deposit in the investor's account at a domestic
financial institution which is an Automated Clearing House member bank
ordinarily two business days after receipt of the redemption request. An
investor may also request that redemption proceeds be sent by
check. Checks will be sent only to the registered owner(s) and only to the
address of record. An investor who has selected the TeleTrade Privilege may
request TeleTrade redemptions by telephoning the Transfer Agent at (800) 346-
2087. Shares issued in certificate form are not eligible for this Privilege.
Neither the Company nor any of its service contractors will be liable for any
loss, or expense for acting upon any telephone instructions that are
reasonably believed to be genuine. In attempting to confirm that telephone
instructions are genuine, the Company will use such procedures as are
considered reasonable.
Wire Redemption. An investment in Pacific Horizon Shares of the Fund
automatically entitles an investor to redeem shares by wire unless he
indicates on the Account Application or in a subsequent signature guaranteed
written notice to the Transfer Agent that he does not wish to use this method
of redemption. Appropriate information concerning the investor's bank must be
provided on the Account Application or in a subsequent signature guaranteed
letter of instruction to the Transfer Agent before shares may be redeemed by
wire. Shareholders may instruct the Transfer Agent to redeem shares in the
Fund on written, telegraphic or telephone instructions from any person
representing himself to be the investor and believed by the Transfer Agent to
be genuine. The responsibility of the Transfer Agent and certain other parties
for telephonic instructions is discussed in the preceding paragraph. The
proceeds of redemption will normally be wired in federal funds to the
commercial bank specified by the investor on the Account Application.
Redemption proceeds must be in an amount of at least $1,000, and may be
subject to limits as to frequency and overall amount. Wire redemptions may be
terminated or modified by the Fund at any time. Shares issued in certificate
form are not eligible for wire redemption. A shareholder should contact his
bank for information on any charges imposed by the bank in connection with the
receipt of redemption proceeds by wire. During periods of substantial economic
or market change, telephone wire redemptions may be difficult to implement. If
an investor is unable to contact the Transfer Agent by telephone, shares may
also be redeemed by delivering the redemption request in person to the
Transfer Agent or by mail as described above under "Regular Redemption." For
additional information concerning wire redemptions, see the Statement of
Additional Information and the Fund's Account Application.
Other Redemption Information. Redemption orders are effected at the net asset
value per share next determined after receipt of the order by the Transfer
Agent. The Fund ordinarily will make payment for all shares redeemed within
three business days after receipt by the Transfer Agent of a request in proper
form, except as provided by the rules of the Securities and Exchange
Commission. However, if the shares to be redeemed have been purchased by check
or TeleTrade, the Company will, upon clearance of the purchase check or
TeleTrade payment, mail the redemption proceeds within seven business days.
Where redemption is requested other than by mail, shares purchased by check or
by TeleTrade will not be redeemed for a period of seven business days after
their purchase. This procedure does not apply to situations where the Fund
receives payment in cash or immediately available funds for the purchase of
shares. During the period prior to the time the shares are redeemed, dividends
on such shares will accrue and be payable, and an investor will be entitled to
exercise all other rights of beneficial ownership. An investor having
purchased shares by wire must have filed an Account Application before any
redemption requests can be honored.
The Fund imposes no charge when shares are redeemed. However, if shares have
been purchased through Bank of America or a Service Organization, Bank of
America or the Service Organization may charge a fee for providing
administrative services in connection with investments in shares. The Fund
reserves the right to redeem accounts (other than non-working spousal IRA
accounts) involuntarily, upon sixty days' written notice, if the account's net
asset value falls below the $500 minimum balance.
Shareholder Services
The services and privileges described under this heading may not be available
to certain clients of Bank of America and particular Service Organizations,
and Bank of America and some Service Organizations may impose conditions on
their clients which are different from those described in this Prospectus. You
should consult Bank of America or your Service Organization in this regard.
Individual Retirement Accounts ("IRAs"). The Company makes available IRAs,
including IRAs set up under a Simplified Employee Pension Plan ("SEP-IRAs")
and IRA "Rollover Accounts." For details contact the Distributor at (800) 332-
3863. The minimum initial investment for IRAs and SEP- IRAs with only one
participant is normally $500, with no minimum on subsequent purchases.
Individuals who open an IRA may also open a non-working spousal IRA with a
minimum investment of $250. The minimum initial investment for SEP-IRAs with
more than one participant is $2,500, with no minimum on subsequent purchases.
The investor should read the IRA Disclosure Statement and the Bank Custodial
Agreement for further details as to eligibility, service fees and tax
implications, and should consult a tax adviser.
Exchanges. The Exchange Privilege enables an investor to exchange Pacific
Horizon Shares of the Fund for: 1) Pacific Horizon Shares in another portfolio
of the Company, or 2) Class A shares of an investment portfolio of Time
Horizon Funds, provided that such other shares may legally be sold in the
state of the investor's residence. An investment in Pacific Horizon Shares of
the Fund automatically entitles an investor to use this Privilege unless he
indicates on the Account Application or in a subsequent written notice to the
Transfer Agent that he does not wish to use this Privilege. The shares that
are exchanged must have a current value of at least $500; furthermore, in
establishing a new account through use of this Privilege, the shares being
exchanged must have a value at least equal to the minimum initial investment
required by the particular portfolio into which the exchange is being made.
Prospectuses for portfolios of the Company (as well as prospectuses for
investment portfolios of Time Horizon Funds) into which an exchange is being
made may be obtained from the investor's Service Organization or the
Distributor. A shareholder may telephone instructions by calling the Transfer
Agent at (800) 346-2087. See "Redemption of Shares TeleTrade" for a
description of the Company's policy regarding responsibility for telephone
instructions. When Fund shares are exchanged for shares of another portfolio
in the Company (or for Class A shares of an investment portfolio of Time
Horizon Funds) which are sold with a sales load, the applicable sales load, if
any, will be deducted. An investor desiring to use the Exchange Privilege
should read the Statement of Additional Information and consult his or her
Service Organization or the Distributor for further information applica ble to
use of the Exchange Privilege. The Company reserves the right to reject any
exchange request and the Exchange Privilege may be modified or terminated at
any time. At least 60 days' notice will be given to shareholders of any
material modification or termination except where notice is not required under
the regulations of the Securities and Exchange Commission.
Automatic Investment Program. The Automatic Investment Program permits an
investor to purchase Pacific Horizon Shares of the Fund (minimum $50 per
transaction) at regular intervals selected by the investor. Provided the
investor's financial institution allows automatic withdrawals, shares are
purchased by transferring funds from an investor's checking, bank money market
or NOW account designated by the investor. At the investor's option, the
account designated will be debited in the specified amount, and shares will be
purchased, once a month, on either the first or fifteenth day, or twice a
month, on both days. Only an account maintained at a domestic financial
institution which is an Automated Clearing House member may be so designated.
The minimum initial investment requirement for investors establishing an
Automatic Investment account is $50. To establish an Automatic Investment
Account, an investor must check the appropriate box and supply the necessary
information on the Account Application or file a written request with the
Transfer Agent. Such applications are available from the Distributor. An
investor may cancel this Privilege or change the amount of purchase at any
time by mailing written notification to the Transfer Agent at P.O. Box 419955,
Kansas City, Missouri 64141-6955 and notification will be effective three
business days following receipt. The Company may modify or terminate this
Privilege at any time or charge a service fee, although no such fee currently
is contemplated.
Direct Deposit Program. If an investor receives federal salary, social
security, or certain veteran's, military or other payments from the federal
government, he or she is eligible for the Direct Deposit Program. With this
Program, an investor may purchase Pacific Horizon Shares (minimum of $100 and
maximum of $50,000 per transaction) by having these payments automatically
deposited into his or her Fund account. An investor may deposit as much of
such payments as he or she elects. For instructions on how to enroll in the
Direct Deposit Program, an investor should call the Transfer Agent at
(800) 346-2087. Death or legal incapacity will terminate an investor's
participation in the Program. An investor may elect at any time to terminate
his or her participation by notifying the appropriate federal agency. Further,
the Company may terminate an investor's participation upon 30 days' notice to
the investor.
Automatic Withdrawal Plan. Investors having a $5,000 minimum account may
request withdrawal of a dollar amount in multiples of $50 on a monthly,
quarterly, semi-annual or annual basis. At the investor's option, monthly
withdrawals will be made on either the first or fifteenth day of the month and
quarterly, semi-annual or annual withdrawals will be made on either the first
or fifteenth day of the month selected. To participate in the automatic
withdrawal plan, an investor must check the appropriate box and supply the
necessary information on the Account Application which may be obtained from
the Distributor or subsequently file a signature guaranteed written request
with the Transfer Agent.
Dividends, Distributions and Taxes
Dividends and Distributions. The shareholders of the Fund are entitled to
dividends and distributions arising from the net income and realized gains, if
any, earned on investments held by the Fund. The Fund's net income is declared
daily as a dividend. Shares begin accruing dividends on the day the purchase
order for the shares is executed and continue to accrue dividends through and
including the day before the redemption order for the shares is executed.
Dividends are paid within five business days after the end of each month.
Although the Fund does not expect to realize net long-term capital gains, any
such capital gains as may be realized will be distributed no more than twice a
year after reduction for any available capital loss carry-forward. Dividends
are paid in the form of additional full and fractional shares of the same
series as the shares on which the dividends are declared at the net asset
value of such shares on the payment date, unless the shareholder elects to
receive dividends in cash. Reinvestment dividends receive the same tax
treatment as dividends paid in cash. Such election or any revocation thereof
must be made in writing to Pacific Horizon Funds, Inc. Prime Value Fund,
c/o DST Systems, Inc., P.O. Box 419955, Kansas City, Missouri 64141-6955, and
will become effective with respect to dividends paid after its receipt by the
dividend disbursing agent.
Federal Taxes. Management of the Company believes that the Fund qualified for
its last taxable year as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code"), and it is intended that the
Fund will qualify as a regulated investment company as long as such
qualification is in the best interest of the Fund's shareholders. Such
qualification generally will relieve the Fund of liability for federal income
taxes to the extent its earnings are distributed in accordance with the Code.
In connection with such tax qualification, the Fund contemplates declaring as
dividends at least 90% of its investment company taxable income for each
taxable year. An investor of the Fund who receives a dividend derived from net
investment company taxable income (including any excess of net short-term
capital gain over net long-term capital loss) treats it as ordinary income in
the computation of his gross income, whether such dividend is paid in the form
of cash or additional Fund shares. Because all of the net investment income of
the Fund is expected to be derived from earned interest, it is anticipated
that all dividends paid by the Fund will be taxable as ordinary income to
shareholders who are not exempt from federal income taxes and that no part of
any distribution paid by the Fund will be eligible for the dividends received
deduction for corporations.
Although the Fund anticipates that it will not have net long-term capital
gains, any distribution of the Fund's excess of net long-term capital gains
over its net short-term capital losses will be taxable to shareholders as long-
term capital gains regardless of how long the shareholder has held Fund
shares.
Dividends declared in December of any year payable to shareholders of record
on a specified date in December will be deemed for federal tax purposes to
have been paid by the Fund and received by the shareholders on December 31, if
such dividends are paid during January of the following year.
The foregoing is only a brief summary of some of the important federal income
tax considerations generally affecting the Fund and its shareholders, and is
based on federal tax laws and regulations which are in effect as of the date
of this Prospectus. Such laws and regulations may be changed by legislative or
administrative actions. Potential investors in the Fund should consult their
tax advisers with specific reference to their own tax situation. Shareholders
will be advised at least annually as to the federal income tax consequences of
distributions made each year.
State and Local Taxes. Investors are advised to consult their tax advisers
concerning the application of state and local taxes, which may have different
consequences from those of the federal income tax law described above.
Description of Shares
The Company was organized on October 27, 1982 as a Maryland corporation, and
is registered under the Investment Company Act of 1940 as an open-end
management investment company.
The Company's charter authorizes the Board of Directors to issue up to two
hundred billion full and fractional shares of capital stock, and to classify
and reclassify any authorized and unissued shares into one or more classes of
shares. The Board of Directors may similarly classify or reclassify any class
of shares into one or more series.
Pursuant to such authority, the Board of Directors has authorized the issuance
of the following series of shares representing interests in the Fund, which is
classified as a diversified company under the Investment Company Act of 1940:
one and one-half billion Pacific Horizon Shares; one and one-half billion
Horizon Service Shares; and eight billion Horizon Shares. Horizon Service
Shares and Horizon Shares of the Fund are described in a separate Prospectus
available from the Distributor at the telephone number on the cover of this
Prospectus. The Board of Directors has also authorized the issuance of
additional classes of shares representing interests in other investment
portfolios of the Company, which are likewise described in separate
prospectuses available from the Distributor. This Prospectus relates primarily
to Pacific Horizon Shares of the Fund and describes only the investment
objective and policies, operations, contracts and other matters relating to
such shares.
Each Pacific Horizon Share, Horizon Service Share and Horizon Share in the
Fund has a par value of $.001 and is entitled to participate equally in the
dividends and distributions declared by the Board of Directors with respect to
the Fund and in the net distributable assets of the Fund on liquidation.
Holders of the Fund's Pacific Horizon Shares bear the fees described in this
Prospectus that are paid to Bank of America and the Administrator by the Fund
under the Company's Special Management Services Agree ment for Pacific Horizon
Shares. Similarly, hold ers of Horizon Service Shares bear the fees described
in the separate Prospectus for such shares that are paid to Shareholder
Organizations by the Fund under the Company's Shareholder Services Plan. The
fees paid under the Share holder Services Plan are for services provided by
institutional investors to their customers in connection with Horizon Service
Shares, and Share holder Organizations do not receive similar fees with
respect to the Fund's Horizon Shares or Pacific Horizon Shares. As a result,
at any given time, the net yield on the Fund's Pacific Horizon Shares is
expected to be approximately .07% lower than the yield on the Fund's Horizon
Service Shares and .32% lower than the yield on the Fund's Horizon Shares.
Standardized yield quotations will be computed separately for each series of
Shares.
Shareholders are entitled to one vote for each full share held and fractional
votes for fractional shares held, and will vote in the aggregate and not by
class or series except as otherwise required by law or when class voting is
permitted by the Board of Directors. It is contemplated that shareholders of
the Fund will vote separately by class on matters relating to the Fund's
investment advisory agreement and on any change in its fundamental investment
limitations, and that only holders of Pacific Horizon Shares of the Fund will
be entitled to vote on matters submitted to a vote of shareholders pertaining
to the Special Management Services Agreement. Shares have no preemptive rights
and only such conversion and exchange rights as the Board may grant at its
discretion. When issued for payment as described in this Prospectus, shares
will be fully paid and non-assessable. Certificates for shares will not be
issued unless expressly requested in writing and will not be issued for
fractional shares.
The Company does not presently intend to hold annual meetings of shareholders
for the election of directors and other business unless and until such time as
less than a majority of the directors holding office have been elected by the
shareholders of the Company, at which time the directors then in office will
call a shareholders' meeting for the election of directors. Under certain
circumstances, however, shareholders have the right to call a meeting of
shareholders to consider the removal of one or more directors and such
meetings will be called when requested by the holders of record of 10% or more
of the Company's outstanding shares of common stock. To the extent required by
law and the Company's undertaking with the Securities and Exchange Commission,
the Company will assist in shareholder communications in such matters. Shares
have cumulative voting rights to the extent that may be required by applicable
law.
Performance Calculations
From time to time the "yield" or "effective yield" of the Fund may be quoted
in advertisements or reports to shareholders. Both yield figures are based on
historical earnings and are not intended to indicate future performance.
The "yield" of the Fund refers to the income generated by an investment in the
Fund over a seven-day period (which period will be stated in the advertisement
or report). This income is then "annualized" that is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment.
Additionally, the Fund's yield may be compared to those of other mutual funds
with similar investment objectives and to other relevant indices or to
rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
Fund's yield may be compared to Donoghue's Money Fund Averages, which are
averages compiled by Donoghue's Money Fund Report. Yield data as reported in
national financial publications, including Money, Forbes, Bar ron's, The Wall
Street Journal and The New York Times, or in publications of a local or
regional nature, may also be used in comparing the Fund's yield. A complete
listing of the indices, rankings and publications discussed above is contained
in the Statement of Additional Information.
Since yields fluctuate, yield data cannot necessa rily be used to compare an
investment in the shares of the Fund with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that
yield is generally a function of the kind and quality of the instruments held
in a portfolio, portfolio maturity, operating expenses and market conditions.
Any fees charged by Bank of America or other institutional investors directly
to their customers in connection with investments in Fund shares (which fees
may include, for example, account maintenance fees, compensating balance
requirements or fees based upon account transactions, assets or income) are
not included in the Fund's calculations of yield.
_______________
Shareholder inquiries should be addressed to the Distributor at the address or
telephone number stated on the inside cover of this prospectus.
PACIFIC HORIZON MUTUAL FUNDS
COPPVMM95P
Prime Value Fund
PROSPECTUS
July 1, 1995
NOT FDIC INSURED
Reverse Conversion
PROSPECTUS
July 1, 1995
Horizon Shares and
Horizon Service Shares of the
Prime Value Fund
(An Investment Portfolio Offered by Pacific Horizon Funds, Inc.)
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This Prospectus applies to the Horizon Shares and Horizon Service Shares of
the Pacific Horizon Prime Value Fund (the "Fund"), a separate, diversified
investment portfolio offered by Pacific Horizon Funds, Inc. (the "Company").
Horizon Shares and Horizon Service Shares may not be purchased by individuals
directly, but institutional investors may purchase shares for accounts
maintained by individuals. The Fund is designed to provide institutions with
daily liquidity.
The investment objective of the Fund is to seek high current income and
stability of principal. It seeks to achieve this objective by investing
substantially all of its assets in U.S. dollar-denominated "money market"
instruments such as bank certificates of deposit and bankers' acceptances,
commercial paper and repurchase agreements, in addition to obligations issued
or guaranteed by U.S. and foreign governmental entities.
Portfolio securities held by the Fund have remaining maturities of thirteen
months or less from the date of purchase by the Fund. Portfolio securities
which are subject to repurchase agreements or have certain put or demand
features exercisable by the Fund within thirteen months (as well as certain
U.S. Government obligations with floating or variable interest rates) may have
longer maturities.
Bank of America National Trust and Savings Association ("Bank of America")
acts as investment adviser to the Fund. Concord Financial Group, Inc. sponsors
the Fund and acts as its distributor and Concord Holding Corporation acts as
its administrator, neither of which are affiliated with Bank of America.
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. It should be read and retained for
future reference. Additional information about the Fund, contained in a
Statement of Additional Information dated July 1, 1995, as it may from time to
time be revised, has been filed with the Securities and Exchange Commission
and is available to investors upon request and without charge by calling the
Fund's distributor at (800) 426-3863. The Statement of Additional Information
is incorporated in its entirety by reference into this Prospectus.
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Shares of the Fund are not bank deposits or obligations of, or guaranteed or
endorsed by, Bank of America or any of its affiliates, and are not federally
insured by, guaranteed by, obligations of or otherwise supported by the
U.S. Government, the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other governmental agency. The Fund seeks to maintain its
net asset value per share at $1.00 for purposes of purchases and redemptions,
although there can be no assurance that it will be able to do so on a
continuous basis. Investment in the Fund involves investment risks, including
the possible loss of principal amount invested.
[--- Unable To Translate Graphic ---]
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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Estimated Expense Information
The following table sets forth certain information regarding shareholder
transaction expenses imposed by the Fund and (i) the annual operating expenses
the Fund incurred during its last fiscal year with respect to its Horizon
Shares and (ii) the estimated annual operating expenses the Fund expects to
incur for the current fiscal year with respect to its Horizon Service Shares.
Actual expenses may vary. Hypothetical examples based on the table are also
shown.
Horizon Horizon
Shares Service
Shares*
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None None
Sales Load Imposed on Reinvested Dividends None None
Deferred Sales Load None None
Redemption Fees None None
Estimated Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees (After Fee Waivers) .14% .14%
All Other Expenses .08% .33%
Shareholder Service Payments .25%
Other Expenses .08% .08%
Total Fund Operating Expenses (After Fee Waivers) .22% .47%
* The Company understands that institutions that enter into agreements
("Shareholder Service Agreements") with the Company ("Shareholder
Organizations") under the Company's Shareholder Services Plan (the "Plan")
may charge fees to their customers who are the beneficial owners of
Horizon Service Shares in connection with their accounts. The Fund's
Horizon Service Shares bear fees paid to Shareholder Organizations under
the Plan at the annual rate of up to .25% of such Fund's average daily net
asset value.
Example 1 Year 3 Years 5 Years 10 Years
You would pay the following expenses on a $1,000 investment,
assuming (1) a 5% annual return and (2) redemption at the end of
each time period:
Horizon Shares $2 $7 $12 $28
Horizon Service Shares $5 $15 $26 $59
The foregoing Estimated Expense Information and Example are intended to assist
investors in Horizon Shares and Horizon Service Shares of the Fund in
understanding the expenses of each class. Investors bear these expenses
indirectly since they reduce the amount of income paid by the Fund to
investors as dividends. Management Fees consist of an investment advisory fee
and an administration fee, each payable at a maximum annual rate of .10% of
the Fund's net assets. The investment adviser and administrator may
voluntarily waive a portion of their respective fees and may voluntarily
reimburse expenses from time to time. This voluntary waiver and reimbursement
may be modified or terminated at any time.
Absent such waivers and/or reimbursements, it is estimated that the total
operating expenses of the Horizon Shares and Horizon Service Shares of the
Prime Value Fund would be .28% and .53%, respectively. See "Management of the
Fund" for a more complete description of the various expenses referred to
above.
THE EXAMPLE SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE INVESTMENT RETURNS AND OPERATING EXPENSES. ACTUAL INVESTMENT RETURNS
AND OPERATING EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
Financial Highlights
The Fund commenced operations on March 16, 1993 by offering a single series of
shares known as Pacific Horizon Shares, and on May 16, 1994 began offering
Horizon Shares. As of February 28, 1995, no Horizon Service Shares of the Fund
had been issued. Pacific Horizon Shares and Horizon Service Shares bear
certain fees in excess of those borne by Horizon Shares such that at any given
time the yield on the Fund's Horizon Shares will be approximately .25% higher
than the yield on its Horizon Service Shares and approximately .32% higher
than the yield on its Pacific Horizon Shares. See "Description of Shares"
below.
The tables below set forth certain audited information concerning the
investment results for:
1) Pacific Horizon Shares of the Fund for the year ended February 28, 1995 and
the period March 16, 1993 (commencement of operations) through February 28,
1994, and 2) Horizon Shares of the Fund for the period May 16, 1994 (initial
offering of Horizon Shares) to February 28, 1995. The information contained in
the Financial Highlights has been audited by Price Waterhouse LLP, the Fund's
independent accountants, whose unqualified report on the financial statements
containing such information is incorporated by reference in the Statement of
Additional Information. The Financial Highlights should be read in conjunction
with the Fund's audited financial statements and notes thereto and the
unqualified report of the independent accountants which are incorporated by
reference in the Statement of Additional Information.
Selected Data for a Pacific Horizon Share Outstanding Throughout Each of the
Periods Indicated:
Year Ended Period Ended
February 28, February 28,
1995 1994*
PACIFIC HORIZON SHARES
Net asset value per share,
beginning of period $1.00 $1.00
Income from Investment Operations:
Net investment income 0.0456 0.0302
Less Dividends:
Dividends from net investment income (0.0456) (0.0302)
Net change in net asset value per share 0.0000 0.0000
Net asset value per share, end of period $1.00 $1.00
Total return 4.66% 3.06%
Ratios/Supplemental Data:
Net assets, end of period (000) $77,733 $151,447
Ratio of expenses to average net assets** 0.21%
0.18%_
Ratio of net investment income to average
net assets** 4.32%
3.15%_
_______________
* For the period March 16, 1993 (commencement of operations) through
February 28, 1994.
** Net of fee waivers which had the effect of reducing the ratio of
expenses to average net assets and increasing the ratio of net
investment income to average net assets by 0.44% for the year ended
February 28, 1995 and 0.58% (annualized) for the period ended
February 28, 1994.
_ Annualized.
Not annualized.
Selected Data for a Horizon Share Outstanding Throughout the Period
Indicated.
Period Ended
February 28, 1995*
HORIZON SHARES
Net asset value per share, beginning of period $1.00
Income from Investment Operations:
Net investment income 0.0384
Less Dividends from net investment income (0.0384)
Net change in net asset value per share 0.0000
Net asset value per share, end of period $1.00
Total return 3.91%
Ratios/Supplemental Data:
Net assets, end of period (000) $109,605
Ratio of expenses to average net assets** 0.22%_
Ratio of net investment income to average net assets** 4.56%_
_______________
* For the period May 16, 1994 (initial offering of Horizon Shares) through
February 28, 1995.
** Net of fee waivers which had the effect of reducing the ratio of
expenses to average net assets and increasing the ratio of net
investment income to average net assets by 0.04% (annualized).
_ Annualized.
Not annualized.
Yield Information. From time to time the "yield" or "effective yield" of a
series of the Fund may be quoted in advertisements or reports to shareholders.
Both yield figures are based on historical earnings and are not intended to
indicate future performance. The "yield" of a series of the Fund refers to the
income generated by an investment in the particular series of the Fund over a
seven-day period (which period will be stated in the advertisement or report).
This income is then "annualized" that is, the amount of income generated by
the investment during that week is assumed to be generated each week over a 52-
week period and is shown as a percentage of the investment. The "effective
yield" is calculated similarly but, when annualized, the income earned by an
investment in the particular series of the Fund is assumed to be reinvested.
The "effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment.
Additionally, the yield of the Fund's series may be compared to those of other
mutual funds with similar investment objectives and to other relevant indices
or to rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
yield of the Fund's series may be compared to Donoghue's Money Fund Averages,
which are averages compiled by Donoghue's Money Fund Report. Yield data as
reported in national financial publications, including Money, Forbes,
Barron's, The Wall Street Journal and The New York Times, or in publications
of a local or regional nature, may also be used in comparing the yield of the
Fund's series. A complete listing of the indices, rankings and publications
discussed above is contained in the Statement of Additional Information.
Since yields fluctuate, yield data cannot necessarily be used to compare an
investment in the shares of the Fund with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that
yield is generally a function of the kind and quality of the instruments held
in a portfolio, portfolio maturity, operating expenses and market conditions.
Any fees charged by Bank of America or Shareholder Organizations (defined
below) directly to their customer accounts in connection with investments in
Fund shares (which fees may include, for example, account maintenance fees,
compensating balance requirements or fees based upon account transactions,
assets or income) will not be included in the calculations of the yield of the
Fund's series.
Investment Objective and Policies
In General. The Fund's investment objective is to seek high current income and
stability of principal. The Fund invests substantially all of its assets in a
diversified portfolio of U.S. dollar-denominated money market instruments.
Portfolio securities held by the Fund have remaining maturities of thirteen
months or less (as defined by the Securities and Exchange Commission) from the
date of purchase by the Fund. (Portfolio securities which are subject to
repurchase agreements or have certain put or demand features exercisable by
the Fund within thirteen months, as well as certain U.S. Government
obligations with floating or variable interest rates, may have longer
maturities.) The money market instruments in which the Fund invests will
generally have neither as much risk nor as high a return as longer-term or
lower-rated instruments.
In pursuing its investment objective, the Fund invests in a broad range of
government, bank and commercial obligations that may be available in the money
markets. In accordance with regulations of the Securities and Exchange
Commission, the Fund intends to limit investments in the securities of any
single issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) to not more than 5% of the
Fund's total assets at the time of purchase, provided that the Fund may invest
up to 25% of its total assets in the securities of any one issuer for a period
of up to three business days.
Assets of the Fund will be invested in dollar-denominated debt securities and
the dollar-weighted average portfolio maturity of the Fund will not exceed
90 days. All securities acquired by the Fund will be determined by the
adviser, under guidelines established by the Board of Directors of the
Company, to present minimal credit risks and will be "First Tier Securities"
as defined by the Securities and Exchange Commission. First Tier Securities
consist of instruments that are either rated at the time of purchase in the
top rating category by one (if rated by only one) or more unaffiliated
nationally recognized statistical rating organizations ("NRSROs") including
Standard and Poor's Ratings Group, Division of McGraw Hill ("Standard &
Poor's"), Moody's Investors Service, Inc. ("Moody's"), Duff & Phelps Credit
Co. ("Duff & Phelps") or Fitch Investors Service, Inc. ("Fitch") or issued by
issuers with such ratings. The Appendix to the Statement of Additional
Information includes a description of the applicable NRSRO ratings. Unrated
instruments purchased by the Fund will be of comparable quality as determined
by the Fund's adviser pursuant to guidelines approved by the Board of
Directors.
Bank Obligations. The Fund may purchase U.S. dollar-denominated bank
obligations such as time deposits, certificates of deposit and bankers'
acceptances issued by domestic and foreign banks. Such banks must have total
assets at the time of purchase in excess of $1 billion. The Fund may also make
interest-bearing savings deposits in commercial banks in amounts not in excess
of 5% of the Fund's total assets.
Commercial Obligations. The Fund may purchase commercial paper, short-term
notes and bonds issued by domestic and foreign corporations that meet the
Fund's maturity limitations. These instruments may include Canadian Commercial
Paper ("CCP"), which is U.S. dollar-denominated commercial paper issued by a
Canadian corporation or a Canadian counterpart of a U.S. corporation, and
Europaper, which is U.S. dollar-denominated commercial paper of a foreign
issuer.
The Fund may also invest in commercial paper issued in reliance on the so
called "private placement" exemption from registration afforded by Section
4(2) of the Securities Act of 1933 ("Section 4(2) paper"). Section 4(2) paper
is restricted as to disposition under the federal securities laws and
generally is sold to institutional investors such as the Fund who agree that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors like
the Fund through or with the assistance of the issuer or investment dealers
who make a market in Section 4(2) paper. Section 4(2) paper will not be
subject to the Fund's 10% limitation on illiquid securities set forth below
provided that the Board of Directors or the Fund's adviser (pursuant to
guidelines adopted by the Board) determines that a liquid trading market
exists.
U.S. Government Obligations. The Fund may purchase obligations issued or
guaranteed by the U.S. Government or its agencies and instrumentalities.
Examples of the types of U.S. Treasury obligations that may be held by the
Fund include U.S. Treasury bills and notes, including "stripped" securities
(both interest-only and principal-only) issued by the U.S. Treasury and
recorded in the Federal Reserve book-entry record-keeping system. "Stripped"
U.S. Treasury securities include zero coupon obligations that are normally
issued at a discount to their "face value," and may exhibit greater price
volatility than ordinary debt securities. Obligations of certain agencies and
instrumentalities of the U.S. Government, such as the Small Business
Administration, are backed by the full faith and credit of the United States.
Others are backed by the right of the issuer to borrow from the U.S. Treasury
(such as obligations of the Federal Home Loan Bank), by the discretionary
authority of the U.S. Government to purchase the agency's obligations (such as
obligations of the Federal National Mortgage Association) or only by the
credit of the agency or instrumentality issuing the obligation (such as the
Student Loan Marketing Association). Securities issued or guaranteed by the
U.S. Government and its agencies and instrumentalities have historically
involved little risk of loss of principal if held to maturity. However, no
assurance can be given that the U.S. Government would provide financial
support to any agency or instrumentality if it were not obligated to do so by
law.
Foreign Government Obligations. The Fund may invest in U.S. dollar-denominated
obligations issued or guaranteed by foreign governments or any of their
political subdivisions, agencies or instrumentalities. Such obligations
include debt obligations of supranational entities. Supranational entities
include international organizations designated or supported by governmental
entities to promote economic reconstruction or development and international
banking institutions and related government agencies. Examples of these
include the International Bank for Reconstruction and Development (the "World
Bank"), the Asian Development Bank and the InterAmerican Development Bank.
Asset-Backed Securities. The Fund may purchase asset-backed securities, which
are securities backed by mortgages, installment sales contracts, credit card
receivables or other assets. The average life of asset-backed securities
varies with the maturities of the underlying instruments, and the average life
of a mortgage-backed instrument, in particular, is likely to be substantially
less than the original maturity of the mortgage pools underlying the
securities as the result of mortgage prepayments. For this and other reasons,
an asset-backed security's stated maturity may be shortened, and the
security's total return may be difficult to predict precisely. Such
difficulties are not, however, expected to have a significant effect on the
Fund since the remaining maturity of any asset-backed security acquired will
be thirteen months or less. Asset-backed securities acquired by the Fund may
include collateralized mortgage obligations ("CMOs") issued by private
companies.
Participations. The Fund may purchase from domestic financial institutions
participation interests in high quality debt securities. A participation
interest gives the Fund an undivided interest in the security in the
proportion that the Fund's participation interest bears to the total principal
amount of the security. Participation interests may have fixed, floating or
variable rates of interest, and will have remaining maturities of thirteen
months or less (as defined by the Securities and Exchange Commission). If a
participation interest is unrated, the adviser will have determined that the
interest is of comparable quality to those instruments in which the Fund may
invest pursuant to guidelines approved by the Company's Board of Directors.
The Fund intends only to purchase participations from an entity or syndicate,
and does not intend to serve as a co-lender in any participation. For certain
participation interests, the Fund will have the right to demand payment, on
not more than 30 days' notice, for all or any part of the Fund's participation
interest in the security, plus accrued interest. As to these instruments, the
Fund in tends to exercise its right to demand payment only upon a default
under the terms of the security, as needed to provide liquidity, or to
maintain or improve the quality of its investment portfolio. It is possible
that a participation interest might be deemed to be an extension of credit by
the Fund to the issuing financial institution that is not a direct interest in
the credit of the obligor of the underlying security and is not directly
entitled
to the protection of any collateral security provided by such obligor. In such
event, the ability of the Fund to obtain repayment might depend on the issuing
financial institution.
Repurchase Agreements. The Fund may agree to purchase securities from
financial institutions, such as banks and broker-dealers, as are deemed
creditworthy by the adviser under guidelines approved by the Board of
Directors, subject to the seller's agreement to repurchase them at an agreed
upon time and price ("repurchase agreements"). Although the securities subject
to a repurchase agreement may bear maturities exceeding thirteen months, the
Fund intends only to enter into repurchase agreements having maturities not
exceeding 60 days. Securities subject to repurchase agreements are held either
by the Fund's custodian, or sub-custodian, or in the Federal Reserve/Treasury
Book-Entry System.
The seller under a repurchase agreement will be required to maintain the value
of the securities subject to the agreement in an amount that exceeds the
repurchase price, and such value (including accrued interest) will be
continuously monitored by the adviser on an ongoing basis. Default by the
seller would, however, expose the Fund to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations. Repurchase agreements are considered to be loans under the
Investment Company Act of 1940.
Reverse Repurchase Agreements. The Fund may borrow monies for temporary
purposes by entering into reverse repurchase agreements in accordance with the
investment restrictions described below. Pursuant to such agreements, the Fund
would sell portfolio securities to financial institutions and agree to
repurchase them at an agreed upon date and price. At the time the Fund enters
into a reverse repurchase agreement, it will place in a segregated custodial
account liquid assets or high grade debt securities having a value equal to or
greater than the repurchase price and the adviser will continuously monitor
the account to ensure that the value is maintained. The Fund would only enter
into reverse repurchase agreements to avoid otherwise selling securities
during unfavorable market conditions to meet redemptions. Reverse repurchase
agreements involve the risk that the market value of the portfolio securities
sold by the Fund may decline below the price of the securities the Fund is
obligated to repurchase. Interest paid by the Fund in connection with a
reverse repurchase agreement will reduce the Fund's net investment income.
Reverse repurchase agreements are considered to be borrowings under the
Investment Company Act of 1940.
Variable and Floating Rate Instruments. Securities purchased by the Fund may
include variable and floating rate instruments, which may have a stated
maturity in excess of the Fund's maturity
limitations but which will, except for certain U.S. Government obligations,
permit the Fund to demand payment of the principal of the instrument at least
once every thirteen months upon not more than thirty days' notice. Such
instruments may include variable amount master demand notes that permit the
indebtedness thereunder to vary in addition to providing for periodic
adjustments in the interest rate. There may be no active secondary market with
respect to a particular variable or floating rate instrument. Nevertheless,
the periodic readjustments of their interest rates tend to assure that their
value to the Fund will approximate their par value. Illiquid variable and
floating rate instruments (instruments which are not payable upon seven days
notice and do not have an active trading market) that are acquired by the Fund
are subject to the percentage limitations described below under "Illiquid
Investments." The adviser will continuously monitor the creditworthiness of
issuers of variable and floating rate instruments in which the Fund invests,
and their ability to repay principal and interest.
Variable and floating rate instruments purchased by the Fund may include
participation certificates issued by trusts or financial institutions in
variable and floating rate obligations owned by such issuers or affiliated
organizations. A participation certificate gives the Fund a specified
undivided interest (up to 100%) in the underlying obligation and the right to
demand payment of the unpaid principal balance plus accrued interest on the
participation interest from the institution upon a specified number of days'
notice. If the credit of the obligor is of minimal credit risk, no credit
support from a bank or other financial institution will be necessary. In other
circumstances, the participation certificate will be backed by an irrevocable
letter of credit or guarantee of a bank, or will be insured by an insurer,
that the Fund's adviser has determined meets the quality standards for the
Fund.
The Fund may also invest in obligations which provide for a variable or
floating interest rate which is determined through a periodic "auction
process." From time to time, holders of the obligations have the right to
tender any such obligations to a remarketing agent which then remarkets the
obligations which have been tendered and thereby determines a new interest
rate for the following period.
When-Issued Purchases, Forward Commitments and Delayed Settlements. The Fund
may purchase securities on a "when-issued basis" and may purchase or sell
securities on a "forward commitment" basis. The Fund may also purchase or sell
securities on a "delayed settlement" basis. When-issued and forward commitment
transactions, which involve a commitment by the Fund to purchase or sell
particular securities with payment and delivery taking place at a future date
(perhaps one or two months later), permit the Fund to lock in a price or yield
on a security it owns or intends to purchase, regardless of future changes in
interest rates. Delayed settlement describes a securities transaction in the
secondary market for which settlement will occur sometime in the future. When
issued, forward commitment and delayed settlement transactions involve the
risk, however, that the yield or price obtained in a transaction may be less
favorable than the yield or price available in the market when the securities
delivery takes place. The Fund's forward commitments, when-issued purchases
and delayed settlements are not expected to exceed 25% of the value of the
Fund's total assets absent unusual market conditions. The Fund's liquidity and
the ability of the adviser to manage the Fund's portfolio may be adversely
affected in the event the Fund's forward commitments, commitments to purchase
when-issued securities and delayed settlements ever exceeded 25% of the value
of the Fund's assets. The Fund does not intend to engage in these transactions
for speculative purposes but only in furtherance of its investment objective.
Securities Lending. To increase income on portfolio securities, the Fund may
lend its portfolio securities to broker-dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least the market value
of the securities loaned plus accrued interest. Collateral for such loans may
include cash or securities of the U.S. Government, securities of U.S.
Government agencies or instrumentalities or an irrevocable letter of credit
issued by a bank which meets the investment standards of the Fund. Such loans
will not be made if, as a result, the aggregate of all outstanding loans of
the Fund exceeds 30% of the value of its total assets. There may be risks of
delay in receiving additional collateral or in recovering the securities
loaned or even a loss of rights in the collateral should the borrower of the
securities fail financially. However, loans will be made only to borrowers
deemed by the adviser to be of good standing and when, in the adviser's
judgment, the income to be earned from the loan justifies the attendant risks.
Foreign Investments. Because the Fund may hold securities issued by foreign
issuers, the Fund may be subject to investment risks that are different in
some respects from those incurred by a fund which invests only in debt
obligations of U.S. domestic issuers. Such risks include future political and
economic developments, the possible imposition of withholding taxes on
interest income payable on the securities by the particular country in which
the issuer is located, the possible seizure or nationalization of foreign
deposits, the possible establishment of exchange controls or the adoption of
other foreign governmental restrictions which might adversely affect the
payment of principal and interest on these securities. In addition, foreign
banks and other issuers are not necessarily subject to the same regulatory
requirements that apply to domestic issuers (such as reserve requirements,
loan limitations, examinations, accounting, auditing and recordkeeping
requirements and public availability of information) and the Fund may
experience difficulties in obtaining or enforcing a judgment against a foreign
issuer.
Illiquid Investments. The Fund will not knowingly invest more than 10% of the
value of its net assets in securities that are illiquid. Repurchase
agreements, securities loans and time deposits that do not provide for payment
to the Fund within seven days after notice and securities that are not
registered under the Securities Act of 1933 but that may be purchased by
institutional buyers under Rule 144A, are subject to this 10% limit (unless
such securities are commercial paper and variable amount master demand notes
with maturities of nine months or less or unless the Board or the adviser,
pursuant to guidelines adopted by the Board, determines that a liquid trading
market exists).
Investment Limitations. The Fund's investment objective is a fundamental
policy that may not be changed without a vote of the holders of a majority of
the Fund's outstanding shares (as defined in the Investment Company Act of
1940). The Fund's policies may be changed by the Company's Board of Directors
without the affirmative vote of the holders of a majority of the Fund's
outstanding shares, except that the investment limitations set forth below may
not be changed without such a vote of shareholders. A description of certain
other fundamental invest men limitations is contained in the Statement of
Additional Information.
The Fund may not:
1. Purchase any securities which would cause, at the time of purchase, less
than 25% of the value of its total assets to be invested in obligations
of issuers in the banking industry or in obligations, such as repurchase
agreements, secured by such obligations (unless the Fund is in a
temporary defensive position) or which would cause, at the time of
purchase, 25% or more of the Fund's total assets to be invested in the
securities of one or more issuers conducting their principal business
activities in any other industry, provided that (a) there is no
limitation with respect to obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities or repurchase
agreements secured by such obligations; (b) wholly-owned finance
companies will be considered to be in the industries of their parents if
their activities are primarily related to financing the activities of
the parents; and (c) the industry classification of utilities will be
determined according to their service. For example, gas, gas
transmission, electric and gas, electric and telephone will each be
considered a separate industry.
2. Borrow money or issue senior securities, except that the Fund may borrow
from banks and enter into reverse repurchase agreements for temporary
purposes in amounts up to one-third of the value of the total assets at
the time of such borrowing; or mortgage, pledge or hypothecate any
assets, except in connection with any such borrowing and then in amounts
not in excess of one-third of the value of the Fund's total assets at
the time of such borrowings. The Fund will not purchase securities while
its borrowings (including reverse repurchase agreements) in excess of 5%
of its total assets are outstanding. Securities held in escrow or
separate accounts in connection with the Fund's investment practices
described in this Prospectus or the Statement of Additional Information
are not deemed to be pledged for purposes of this limitation.
Investment Decisions. Investment decisions for the Fund are made independently
from those for other investment companies and accounts managed by Bank of
America and its affiliated entities. Such other investment companies and
accounts may also invest in the same securities as the Fund. When a purchase
or sale of the same security is made at substantially the same time on behalf
of the Fund and another investment company or account, available investments
or opportunities for sales will be allocated in a manner which Bank of America
believes to be equitable. In some instances, this investment procedure may
adversely affect the price paid or received by the Fund or the size of the
position obtained or sold by the Fund. In addition, in allocating purchase and
sale orders for portfolio securities (involving the payment of brokerage
commissions or dealer concessions), Bank of America may take into account the
sale of shares of the Fund by broker-dealers and other financial institutions
(including affiliates of Bank of America and the Fund's distributor), provided
Bank of America believes that the quality of the transaction and the amount of
the commission are not less favorable than what they would be with any other
unaffiliated qualified firm.
Management of the Fund
Board of Directors. The business of the Company is managed under the direction
of its Board of Directors. Information about the Directors and officers of the
Company is included in the Statement of Additional Information.
Investment Adviser. Bank of America serves as investment adviser to the Fund.
Bank of America, which has principal offices located at 555 California Street,
San Francisco, California 94104, is a national banking association formed in
1904 which provides commercial banking and trust business through an extensive
system of branches across the western United States. Bank of America's
principal banking affiliates operate branches in ten U.S. states as well as
corporate banking and business credit offices in major U.S. cities and
branches, corporate offices and representative offices in 37 countries. Bank
of America and its affiliates have over $50 billion under management,
including over $10 billion in mutual funds. Bank of America is a subsidiary of
BankAmerica Corporation, a registered bank holding company.
As investment adviser Bank of America manages the investments of the Fund and
is responsible for all purchases and sales of the Fund's portfolio securities.
For its investment advisory services Bank of America is entitled to receive a
fee accrued daily and payable monthly at the following annual rates: .10% of
the first $7 billion of the Fund's net assets, plus .09% of the next
$3 billion of the Fund's net assets, plus .08% of the Fund's net assets over
$10 billion. This amount may be reduced pursuant to certain undertakings by
Bank of America described below under "Fee Waivers." The Fund paid advisory
fees to the Bank of America at an effective annual rate of .07% of the Fund's
average net assets for the fiscal year ended February 28, 1995, and Bank of
America waived advisory fees at an effective rate of .03% of the Fund's
average net assets for the same period.
In addition, Bank of America is also entitled to fees under the Company's
Shareholder Services Plan described below and may receive fees charged
directly to its customers' accounts in connection with investments in Fund
shares.
Administrator. Concord Holding Corporation (the "Administrator") serves as the
Company's administrator and assists generally in supervising the Fund's
operations. The Administrator is a wholly-owned subsidiary of The BISYS Group,
Inc. Its offices are located at 125 West 55th Street, New York, New York
10019.
Under its basic administrative services agreement for the Fund, the
Administrator has agreed to provide facilities, equipment and personnel to
carry out administrative services that are for the benefit of the Fund,
including coordination of reports to shareholders and the Securities and
Exchange Commission; calculation of the net asset value of Fund shares and
dividends and capital gains distributions to shareholders; payment of the
costs of maintaining the Fund's offices; preparation of tax returns; provision
of internal legal and accounting compliance services; maintenance (or
oversight of the maintenance by others approved by the Board of Directors) of
the Fund's books and records; and the provision of various services for
shareholders who have made a minimum investment of at least $500,000 including
the provision of a facility to receive purchase and redemption orders for the
accounts of such shareholders.
For its administrative services the Administrator is entitled to receive an
administration fee computed daily and payable monthly at the following annual
rates: .10% of the first $7 billion of the Fund's net assets, plus .09% of the
next $3 billion of the Fund's net assets, plus .08% of the Fund's net assets
over $10 billion. The Fund paid administration fees to the Administrator at an
effective annual rate of .07% of the Fund's average net assets for the fiscal
year ended February 28, 1995, and the Administrator waived administration fees
at an effective annual rate of .03% of the Fund's average net assets for the
same period.
Pursuant to the authority granted in its agreement with the Company, the
Administrator has entered into an agreement with The Bank of New York under
which the bank performs certain of the services listed above e.g. calculating
the net asset value of Fund shares and dividends to shareholders and
maintaining the Fund's books and records. The Fund bears all fees and expenses
charged by The Bank of New York for these services.
Distributor. Concord Financial Group, Inc. (the "Distributor") is the
principal underwriter and distributor of shares of the Fund. The Distributor
is a wholly-owned subsidiary of the Administrator organized to distribute
shares of mutual funds to institutional and retail investors. Its offices are
located at 125 West 55th Street, New York, New York 10019.
The Distributor makes a continuous offering of the Fund's shares and bears the
costs and expenses of printing and distributing to selected dealers and
prospective investors copies of any prospectuses, statements of additional
information and annual and interim reports of the Fund (after such items have
been prepared and set in type by the Fund) which are used in connection with
the offering of shares, and the costs and expenses of preparing, printing and
distributing any other literature used by the Distributor or furnished by it
for use by selected dealers in connection with the offering of the Fund's
shares for sale to the public.
Custodian and Transfer Agent. The Bank of New York, located at 90 Washington
Street, New York, New York 10286, serves as the Fund's custodian. Concord
Financial Services, Inc., a wholly-owned subsidiary of the Administrator
located at First and Market Building, 100 First Avenue, Suite 300, Pittsburgh,
Pennsylvania 15222, serves as transfer agent and dividend disbursing agent for
Horizon Shares of the Fund. DST Systems, Inc. ("DST"), 811 Main, Kansas City,
Missouri 64105-2005, serves as transfer agent and dividend disbursing agent
for Horizon Service Shares of the Fund. Concord Financial Services, Inc. also
provides sub-transfer agency services for certain Horizon Service Share
accounts. DST Systems, Inc. and Concord Financial Services, Inc. are
collectively referred to as the "Transfer Agents." The Company has also
entered into a Cash Management and Related Services Agreement with The Bank of
New York pursuant to which The Bank of New York receives and disburses funds
in connection with the purchase and redemption of, and the payment of
dividends and other distributions with respect to, the Fund's shares.
Fee Waivers. Except as noted in this Prospectus and the Statement of
Additional Information, the Fund's service contractors bear all expenses in
connection with the performance of their services and the Fund bears the
expenses incurred in its operation. Such fund expenses include taxes,
interest, brokerage fees and commissions, if any, fees of directors who are
not officers, directors, partners, employees or holders of 5% or more of the
outstanding voting securities of Bank of America or the Administrator or any
of their affiliates, Securities and Exchange Commission fees and state
securities qualification fees, advisory fees, administration fees, fees
payable to Shareholder Organizations, fund accounting fees, charges of
custodians, transfer and dividend disbursing agents' fees, certain insurance
premiums, outside auditing and legal expenses, costs of maintaining corporate
existence, costs attributable to investor services, including without
limitation certain telephone expenses, costs of preparing and printing
prospectuses and statements of additional information for regulatory purposes,
costs of shareholders' reports and corporate meetings and any extraordinary
expenses. From time to time during the course of the Fund's fiscal year, the
Administrator and/or Bank of America may voluntarily not receive payment of
fees and/or assume certain expenses of the Fund, while retaining the ability
to be reimbursed by the Fund for such amounts prior to the end of the fiscal
year and, subject to the expense limitations of certain states, to stop such
fee waivers and expense reimbursements at any time. This will have the effect
of increasing yield to investors at the time such fees are not received or
amounts are assumed and decreasing yield when such fees or amounts are
reimbursed.
Purchase and Redemption of Shares
Purchase Procedures. Fund shares are sold at the net asset value per share
next determined after receipt of a purchase order by the Transfer Agents.
Purchase orders placed directly with the Transfer Agents without the
assistance of a broker-dealer or other person are without charge. Broker-
dealers (other than the Fund's distributor) and others who process purchase
orders on behalf of customers may charge a fee for their services.
Purchase orders for shares are accepted by the Fund only on a day on which
both the Fund's custodian and the New York Stock Exchange
(the "Exchange") are open for business (a "Business Day"), and must be
transmitted to the Transfer Agents by telephone c/o the Distributor (800) 426-
3863 or terminal access. An investment in Horizon Shares and Horizon Service
Shares of the Fund automatically entitles the investor to purchase Fund
shares, subject to the minimum described below, without charge, by telephone
unless they indicate in a written notice to the Transfer Agents that they do
not wish to use this telephone privilege.
Purchase orders for the Fund that are received by the Transfer Agents before
12:00 noon Eastern time on a Business Day will be executed at such time on
that day if payment is received by 4:00 p.m. Eastern time on such Business
Day. Orders received after 12:00 noon Eastern time on a Business Day, and
orders for which payment has not been received by 4:00 p.m. Eastern time, will
not be accepted. The Fund may in its discretion reject any order for shares.
Payment for orders which are not received or paid for in a timely manner or
are not accepted by the Fund will be returned after prompt notification to the
sending institution.
Payment for shares may be made only in federal funds or other funds
immediately available to the Transfer Agents. The minimum initial investment
for Horizon Shares and Horizon Service Shares in the Fund is $500,000
(although broker-dealers and other institutional investors may set a higher
minimum for their customers) and there is no minimum subsequent investment.
The Fund
reserves the right to suspend the sale of shares to the public at any time, in
response to conditions in the securities markets or otherwise.
Federal regulations require that each investor provide a certified Taxpayer
Identification Number upon opening or reopening an account.
Redemption Procedures. Redemption orders for Horizon Shares and Horizon
Service Shares must be transmitted to the Transfer Agents by telephone c/o the
Distributor or terminal access in the manner described above under "Purchase
Procedures." Shares for which certificates have been issued may not be
redeemed unless the certificates have been submitted to the Transfer Agents
and endorsed for transfer. While the Fund seeks to maintain its net asset
value per share at $1.00 there can be no assurance that it will be able to do
so, and the proceeds paid upon redemption may be more or less than the amount
invested depending upon a share's net asset value at the time of redemption.
Redemption orders submitted directly to the Transfer Agents without the
assistance of a broker-dealer or other person, and orders submitted by the
Distributor for its own brokerage customers, are processed without charge.
Broker-dealers (other than the Distributor) and others who process redemption
orders on behalf of their customers may charge a fee for their services.
Redemption orders are effected at the net asset value per share next
determined after receipt of the order by the Transfer Agents. Payment for
redeemed shares for which a redemption order is received by the Transfer
Agents before 12:00 noon Eastern time on a Business Day is normally made in
federal funds wired to the redeeming shareholder on the same Business Day.
Payment for redeemed shares for which a redemption order is received after
12:00 noon Eastern time on a Business Day is normally made in federal funds
wired to the redeeming shareholder on the next Business Day following
redemption. In order to allow Bank of America to most effectively manage the
Fund's portfolio, investors are urged to initiate redemptions of shares as
early in the day as possible and to notify the Transfer Agents at least one
day in advance of redemptions in excess of $5 million. The Fund reserves the
right to wire redemption proceeds up to seven days after receiving the
redemption order if, in the judgment of the adviser, an earlier payment could
adversely affect the Fund. In making redemption requests the names of the
registered shareholders and their account numbers must be supplied. An
investment in Horizon Shares and Horizon Service Shares of the Fund
automatically entitles the investor to redeem shares, without charge, by
telephone unless the investor indicates through a written notice to the
Transfer Agents that they do not wish to use this telephone privilege. Neither
the Fund, the Distributor nor the Transfer Agents will be responsible for any
loss or expense for acting upon any telephone instructions that are reasonably
believed to be genuine. In attempting to confirm that telephone instructions
are genuine, the Company will use such procedures as are considered
reasonable.
The Fund may suspend the right of redemption or postpone the date of payment
upon redemption (as well as suspend or postpone the recordation of the
transfer of its shares) for such periods as are permitted under the Investment
Company Act of 1940. The Fund reserves the right to redeem shares in any
account at their net asset value if the value of the account is less than
$500,000 as a result of redemptions. The shareholder having the account will
first be notified in writing that its account has a value of less than
$500,000 and will be allowed 60 days to make additional investments to bring
the value of its account to $500,000 before the redemption is processed by the
Fund. In addition, the Fund may redeem shares involuntarily under certain
special circumstances described in the Statement of Additional Information
under "Purchase and Redemption of Shares."
Net Asset Value. The net asset value per share of the Fund is determined on
each Business Day as of 12:00 noon Eastern time and the close of regular
trading hours on the Exchange (or 4:00 p.m. Eastern time if the Exchange is
closed). In computing net asset value, the Fund uses the amortized cost method
of valuation as described in the Statement of Additional Information under
"Purchase and Redemption of Shares."
Dividends and Distributions
The shareholders of the Fund are entitled to dividends and distributions
arising from the net investment income and net realized gains, if any, earned
on investments held by the Fund. Generally, the Fund's net income is declared
daily as a dividend. Shares begin accruing dividends on the day the purchase
order for the shares is executed and continue to accrue dividends through and
including the day before the redemption order for the shares is executed.
Dividends are paid within five business days after the end of each month.
Although the Fund does not expect to realize net long-term capital gains, any
such capital gains as may be realized will be distributed no more than twice a
year after reduction for any available capital loss carry-forward.
Dividends are paid in the form of additional full and fractional shares of the
same series as the shares on which the dividends are declared at the net asset
value of such shares on the payment date, unless the shareholder elects to
receive dividends in cash. Reinvestment dividends receive the same tax
treatment as dividends paid in cash. Such election or any revocation thereof
must be made in writing to Pacific Horizon Funds, Inc. Prime Value Fund,
First and Market Building, 100 First Avenue, Suite 300, Pittsburgh,
Pennsylvania 15222, and will become effective with respect to dividends paid
after its receipt by the dividend disbursing agent.
Taxes
Federal. Management of the Company believes that the Fund qualified for its
last taxable year as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code"), and it is intended that the
Fund will continue to qualify as a regulated investment company as long as
such qualification is in the best interest of the Fund's shareholders. Such
qualification generally relieves the Fund of liability for federal income
taxes to the extent its earnings are distributed in accordance with the Code.
In connection with such tax qualification, the Fund contemplates declaring as
dividends at least 90% of its investment company taxable income for each
taxable year. An investor of the Fund who receives a dividend derived from net
investment company taxable income (including any excess of net short-term
capital gain over net long-term capital loss) treats it as ordinary income in
the computation of his gross income, whether such dividend is paid in the form
of cash or additional Fund shares. Because all of the net investment income of
the Fund is expected to be derived from earned interest, it is anticipated
that all dividends paid by the Fund will be taxable as ordinary income to
shareholders who are not exempt from federal income taxes and that no part of
any distribution paid by the Fund will be eligible for the dividends received
deduction for corporations.
Although the Fund anticipates that it will not have net long-term capital
gain, any distribution of the Fund's excess of net long-term capital gain over
its net short-term capital loss will be taxable to shareholders as long-term
capital gain regardless of how long the shareholder has held Fund shares.
Dividends declared in December of any year payable to shareholders of record
on a specified date in December will be deemed for federal tax purposes to
have been paid by the Fund and received by the shareholders on December 31, if
such dividends are paid during January of the following year.
The foregoing is only a brief summary of some of the important federal income
tax considerations generally affecting the Fund and its shareholders, and is
based on federal tax laws and regulations which are in effect as of the date
of this Prospectus. Such laws and regulations may be changed by legislative or
administrative actions. Potential investors in the Fund should consult their
tax advisers with specific reference to their own tax situation. Shareholders
will be advised at least annually as to the federal income tax consequences of
distributions made each year.
State and Local. Investors are advised to consult their tax advisers
concerning the application of state and local taxes, which may have different
consequences from those of the federal income tax law described above.
Description of Shares
The Company was organized on October 27, 1982 as a Maryland corporation, and
is registered under the Investment Company Act of 1940 as an open-end
management investment company. The Fund, which is classified as diversified
under the Investment Company Act of 1940, commenced operations on March 16,
1993 as a portfolio of the Company with a single series of shares, Pacific
Horizon Shares. Horizon Shares were first offered on May 16, 1994. As of the
date of this Prospectus, no Horizon Service Shares of the Fund have been
issued. The Company's charter authorizes the Board of Directors to issue up to
two hundred billion full and fractional shares of capital stock, and to
classify and reclassify any authorized and unissued shares into one or more
classes of shares. The Board of Directors may similarly classify or reclassify
any class of shares into one or more series. Pursuant to such authority, the
Board of Directors has authorized the issuance of the following series of
shares representing interests in the Prime Value Fund: eight billion Horizon
Shares, one and one-half billion Horizon Service Shares and one and one-half
billion Pacific Horizon Shares. Pacific Horizon Shares of the Fund are
described in a separate Prospectus available from the Distributor at the
telephone number on the cover page of this Prospectus. The Board of Directors
has also authorized the issuance of additional classes of shares representing
interests in other investment portfolios of the Company, which are likewise
described in separate prospectuses available from the Distributor. This
Prospectus relates primarily to the Horizon Shares and Horizon Service Shares
of the Fund and describes only the investment objective and policies,
operations, contracts and other matters relating to such shares.
Each Horizon Share, Horizon Service Share and Pacific Horizon Share in the
Fund has a par value of $.001 and, except as noted below, is entitled to
participate equally in the dividends and distributions declared by the Board
of Directors with respect to the Fund and in the net distributable assets of
the Fund on liquidation. Holders of the Fund's Horizon Service Shares bear the
fees described in the following section that are paid to Shareholder
Organizations (including Bank of America, the Administrator and their
affiliates) by the Fund under the Company's Shareholder Services Plan.
Similarly, holders of the Fund's Pacific Horizon Shares bear the fees
described in the prospectus for such shares that are paid to Bank of America
and the Administrator by the Fund under the Company's Special Management
Services Agreement for Pacific Horizon Shares. The fees paid under the Special
Management Services Agreement are for services related to investor programs
and facilities that are offered in connection with Pacific Horizon Shares.
Holders of Horizon Shares are not subject to fees such as those paid under the
Shareholder Services Plan or the Special Management Services Agreement. As a
result, at any given time, the net yield on the Fund's Horizon Shares is
expected to be approximately .25% higher than the yield on the Fund's Horizon
Service Shares and approximately .32% higher than the yield on its Pacific
Horizon Shares. Standardized yield quotations will be computed separately for
each series of shares.
Shareholders are entitled to one vote for each full share held and fractional
votes for fractional shares held, and will vote in the aggregate and not by
class or series except as otherwise required by law or when class voting is
permitted by the Board of Directors. For example, it is contemplated that all
shareholders of the Fund will vote together as a single class on matters
relating to the Fund's investment advisory agreement and on any change in its
fundamental investment limitations, and that only holders of Horizon Service
Shares of the Fund will be entitled to vote on matters submitted to a vote of
shareholders pertaining to the Fund's arrangements with Shareholder
Organizations. Shares have no preemptive rights and only such conversion and
exchange rights as the Board may grant at its discretion. When issued for
payment as described in this Prospectus, shares will be fully paid and
nonassessable. Certificates for shares will not be issued unless expressly
requested in writing and will not be issued for fractional
shares.
The Company does not presently intend to hold annual meetings of shareholders
for the election of directors and other business unless and until such time as
less than a majority of the directors holding office have been elected by the
shareholders of the Company, at which time the directors then in office will
call a shareholders' meeting for the election of directors. Under certain
circumstances, however, shareholders have the right to call a meeting of
shareholders to consider the removal of one or more directors and such
meetings will be called when requested by the holders of record of 10% or more
of the Company's outstanding shares of common stock. To the extent required by
law and the Company's undertaking with the Securities and Exchange Commission,
the Company will assist in shareholder communications in such matters. Shares
have cumulative voting rights to the extent that may be required by applicable
law.
Shareholder Services Plan. The Company has adopted the Plan pursuant to which
Horizon Service Shares are sold to Shareholder Organizations that enter into
Shareholder Service Agreements with the Company pursuant to the Plan. Such
Shareholder Organizations may include Bank of America, the Administrator and
their affiliates. The Shareholder Service Agreements require the Shareholder
Organizations to provide support services to their customers ("Customers") who
are beneficial owners of Horizon Service Shares in return for payment by the
Fund of up to .25% (on an annualized basis) of the average daily net asset
value of the Horizon Service Shares beneficially owned by Customers of the
Shareholder Organizations. Holders of the Fund's Horizon Service Shares will
bear all fees paid to Shareholder Organizations for their services with
respect to such shares. Such fees are not paid to Shareholder Organizations
with respect to the Fund's Horizon Shares or Pacific Horizon Shares.
The services provided by Shareholder Organizations may include the following:
aggregating and processing purchase and redemption requests from Customers for
Horizon Service Shares and placing net purchase and redemption orders with the
Distributor; providing Customers with a service that invests the assets of
their accounts in Horizon Service Shares pursuant to specific or preauthorized
instructions; processing dividend payments from the Fund on behalf of
Customers; providing information periodically to Customers regarding their
position in Horizon Service Shares; arranging for bank wires; responding to
Customer inquiries regarding services performed by the Shareholder
Organizations; providing sub-accounting with respect to Horizon Service Shares
beneficially owned by Customers or the information necessary for sub-
accounting; forwarding shareholder communications from the Fund to Customers;
and other similar services if requested by the Fund.
The Fund will accrue payments made pursuant to the Plan daily. The Fund will
receive an under taking from each Shareholder Organization waiving a portion
of any payment such Organization is entitled to receive pursuant to the Plan
to the extent necessary to assure that the payments made pursuant to the Plan
which are required to be accrued to the Fund's Horizon Service Shares on any
day do not exceed the income to be accrued to such shares on that day.
The Company understands that Shareholder Organizations may charge fees to
their Customers who are the beneficial owners of Horizon Service Shares in
connection with their Customer ac counts. These fees would be in addition to
any amounts which may be received by a Shareholder Organization under a
Shareholder Service Agreement. Under the terms of the Shareholder Service
Agreements, Shareholder Organizations are required to disclose the
compensation payable to them by the Company and any other compensation payable
by their Customers in connection with the investment of their assets in the
Fund. Customers of Shareholder Organizations should read this Prospectus in
light of the terms governing their accounts with their Share
holder Organizations.
Conflict-of-interest restrictions may apply to an institution's receipt of
compensation paid by the Fund in connection with the investment of fiduciary
funds in Horizon Service Shares. Institutions, including banks regulated by
the Comptroller of the Currency, the Federal Reserve Board or the Federal
Deposit Insurance Corporation, and investment advisers and other money
managers subject to the jurisdiction of the Securities and Exchange
Commission, the Department of Labor or state securities commissions, are urged
to consult their legal advisers before investing fiduciary funds in Horizon
Service Shares.
Banks may act as Shareholder Organizations. The Glass-Steagall Act and other
applicable laws, among other things, prohibit banks from engaging in the
business of underwriting securities. If a bank were prohibited from acting as
a Shareholder Organization, its shareholder clients would be permitted by the
Company to remain shareholders of the Fund and alternative means for
continuing the servicing of such shareholders would be sought. In such event,
changes in the operation of the Fund might occur and a shareholder serviced by
such bank might no longer be able to avail itself of any automatic investment
or other services then being provided by the bank. It is not expected that
shareholders would suffer any adverse financial consequences as a result of
any of these occurrences.
In connection with the sale of shares of the Fund, the Company will obtain
representations from Shareholder Organizations (as well as from Bank of
America and the Administrator) that they are or will be licensed as dealers as
required by applicable law or will not engage in activities which would
require them to be so licensed.
COPIPVM95P
PACIFIC HORIZON MUTUAL FUNDS
Horizon Shares
and
Horizon Service Shares
of the
Prime Value Fund
PROSPECTUS
July 1, 1995
NOT FDIC INSURED
