Securities Act File No. 33-34080
Investment Company Act File No. 811-6076
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. ___ / /
Post-Effective Amendment No. 27 /X/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 27 /X/
(Check appropriate box or boxes)
THE INFINITY MUTUAL FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (614) 470-8000
George O. Martinez, Esq.
3435 Stelzer Road
Columbus, Ohio 43219
(Name and Address of Agent for Service)
copy to:
Stuart H. Coleman, Esq.
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004-2696
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b)
X on July 1, 1996 pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)(i)
____ on (date) pursuant to paragraph (a)(i)
____ 75 days after filing pursuant to paragraph (a)(ii)
____ on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
____ this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
Registrant has registered an indefinite number of its shares of Common Stock
under the Securities Act of 1933 pursuant to Section 24(f) of the Investment
Company Act of 1940. Registrant's Rule 24f-2 Notice for its fiscal year ended
December 31, 1995 was filed on February 28, 1996.
<PAGE>
THE INFINITY MUTUAL FUNDS, INC.
ValueStar Portfolios
Cross-Reference Sheet Pursuant to Rule 495(a)
Items in
Part A of
FORM N-1A CAPTION
Prime Money Market
and U.S. Treasury
Money Market Portfolios
Trust
SHARES
1 Cover Page 1
2 Synopsis 3
3 Condensed Financial Information *
4 General Description of Registrant 4
5 Management of the Fund 8
5(a) Management's Discussion of Fund's Performance *
6 Capital Stock and Other Securities 17
7 Purchase of Securities Being Offered 11
8 Redemption or Repurchase 12
9 Pending Legal Proceedings *
Items in
Part B of Trust and
FORM N-1A INVESTOR SHARES
10 Cover Page B-1
11 Table of Contents B-1
12 General Information and History *
13 Investment Objectives and Policies B-2
14 Management of the Fund B-9
15 Control Persons and Principal Holders B-12, B-20
of Securities
16 Investment Advisory and Other Services B-12
17 Brokerage Allocation B-19
<PAGE>
ValueStar Portfolios
Items in
Part B of
FORM N-1A CAPTION
Prime Money Market
and U.S. Treasury
Money Market Portfolios
Trust and
INVESTOR SHARES
18 Capital Stock and Other Securities B-20
19 Purchase, Redemption and Pricing of B-15
Securities Being Offered
20 Tax Status *
21 Underwriters *
22 Calculations of Performance Data B-18
23 Financial Statements B-25
Items in
Part C of
FORM N-1A
24 Financial Statements and Exhibits C-1
25 Persons Controlled by or Under Common
Control with Registrant C-5
26 Number of Holders of Securities C-5
27 Indemnification C-5
28 Business and Other Connections of C-6
Investment Adviser
29 Principal Underwriters C-10
30 Location of Accounts and Records C-10
31 Management Services C-11
32 Undertakings C-11
- ------------
*Omitted since answer is negative or inapplicable.
<PAGE>
PROSPECTUS JULY 1, 1996
THE INFINITY MUTUAL FUNDS, INC.
VALUESTAR FUNDS
PRIME MONEY MARKET PORTFOLIO
U.S. TREASURY MONEY MARKET PORTFOLIO
Trust Shares
The Infinity Mutual Funds, Inc. (the "Fund") is an open-end,
management investment company, known as a series fund. By this Prospectus, the
Fund is offering Trust Shares of two diversified money market portfolios (the
"Portfolios"), that seek to provide investors with as high a level of current
income as is consistent with the preservation of capital and the maintenance of
liquidity.
o The PRIME MONEY MARKET PORTFOLIO will invest in short-term money market
instruments consisting of securities issued or guaranteed by the U.S. Government
or its agencies or instrumentalities, bank obligations, repurchase agreements,
commercial paper and other corporate obligations.
o The U.S. TREASURY MONEY MARKET PORTFOLIO will invest only in U.S.
Treasury securities and in other securities guaranteed as to principal and
interest by the U.S. Government, and repurchase agreements in respect thereof.
An investment in a Portfolio is neither insured nor guaranteed by the U.S.
Government. There can be no assurance that each Portfolio will be able to
maintain a stable net asset value of $1.00 per share.
Each Portfolio's investment adviser is First American National Bank (the
"Adviser").
BISYS Fund Services Limited Partnership (the "Administrator") serves as
each Portfolio's administrator.
Concord Financial Group, Inc. (the "Distributor"), an affiliate of the
Administrator, serves as distributor of each Portfolio's shares.
Trust Shares are offered without a sales charge and are sold only to
clients of the Adviser for their qualified trust, custody and/or agency accounts
and to clients of the Adviser's affiliated and correspondent banks and certain
other affiliated and non-affiliated institutions for their similar accounts
maintained at such affiliates or institutions. These accounts are referred to
herein as "Fiduciary Accounts."
Another class of shares -- the Investor Shares -- are offered by a separate
prospectus to individuals and are not offered hereby. The Trust Shares and
Investor Shares are identical, except as to the services offered to each class
and the expenses borne by each class which may affect performance. Investors
desiring to obtain information about Investor Shares should ask their sales
representative or call 1-800-852-0045.
Portfolio shares are not deposits or obligations of, or endorsed or
guaranteed by, the Adviser or any other bank, and are not federally insured by
the Federal Deposit Insurance Corporation, the Federal Reserve Board or any
other governmental agency. Portfolio shares involve certain risks, including the
possible loss of principal.
This Prospectus sets forth concisely information about the Fund and the
Portfolios that an investor should know before investing. It should be read and
retained for future reference.
The Statement of Additional Information, dated July 1, 1996, which may be
revised from time to time, provides a further discussion of certain areas in
this Prospectus and other matters which may be of interest to some investors. It
has been filed with the Securities and Exchange Commission and is incorporated
herein by reference. For a free copy, write to the Fund at 3435 Stelzer Road,
Columbus, Ohio 43219-3035, or call 1-800- 852-0045.
TABLE OF CONTENTS
Page
Annual Operating Expenses....................................
Description of the Portfolios................................
Management of the Portfolios.................................
How to Buy Shares............................................
How to Redeem Shares.........................................
Exchange Privilege...........................................
Dividends, Distributions and Taxes...........................
Yield Information............................................
General Information..........................................
Appendix.....................................................
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.
<PAGE>
ANNUAL OPERATING EXPENSES*
(as a percentage of average daily net assets)
U.S. Treasury
PRIME PORTFOLIO PORTFOLIO
----------------- ---------
Trust Trust
SHARES SHARES
------ ------
Management Fees........... .25% .25%
Other Expenses............ .40% .25%
Total Portfolio Operating
Expenses*............... .65% .50%
EXAMPLE:
An investor would pay the
following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at
the end of each time period:
1 YEAR $ 7 $ 5
3 YEARS $21 $16
- --------------------
* The Adviser, its affiliates and certain other institutions may charge
their clients customary account and account transaction fees, which are
not Fund related, with respect to accounts through which or for which
Portfolio shares are purchased or redeemed; such fees are not reflected in
the foregoing table.
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN,
EACH PORTFOLIO'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN
GREATER OR LESS THAN 5%.
The purpose of the foregoing table is to assist investors in
understanding the costs and expenses borne by a Portfolio, the payment of which
will reduce investors' annual return. Other Expenses are based on estimated
amounts for the current fiscal year. For a further description of the various
costs and expenses incurred in a Portfolio's operation, as well as expense
reimbursement or waiver arrangements, see "Management of the Portfolios."
DESCRIPTION OF THE PORTFOLIOS
INVESTMENT OBJECTIVES
Each Portfolio seeks to provide investors with as high a level of current
income as is consistent with the preservation of capital and the maintenance of
liquidity. Each Portfolio's investment objective cannot be changed without
approval by the holders of a majority (as defined in the Investment Company Act
of 1940, as amended (the "1940 Act")) of such Portfolio's outstanding voting
shares. There can be no assurance that each Portfolio's investment objective
will be achieved. Securities in which each Portfolio will invest may not earn as
high a level of current income as long-term or lower quality securities which
generally have less liquidity, greater market risk and more fluctuation in
market value.
MANAGEMENT POLICIES
Each Portfolio seeks to maintain a net asset value of $1.00 per share for
purchases and redemptions. To do so, each Portfolio uses the amortized cost
method of valuing its securities pursuant to Rule 2a-7 under the 1940 Act,
certain requirements of which are summarized below.
In accordance with Rule 2a-7, each Portfolio will maintain a
dollar-weighted average portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of 13 months or less and invest only in
U.S. dollar denominated securities determined in accordance with procedures
established by the Fund's Board of Directors to present minimal credit risks
and, with respect to the Prime Portfolio, which are rated in one of the two
highest rating categories for debt obligations by at least two nationally
recognized statistical rating organizations ("NRSRO") (or one NRSRO if the
instrument was rated by only one such organization) or, if unrated, are of
comparable quality as determined in accordance with procedures established by
the Fund's Board of Directors. The NRSROs currently rating instruments of the
type the Prime Portfolio may purchase are Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Ratings Group ("S&P"), Duff & Phelps Credit
Rating Co. ("Duff"), Fitch Investors Service, L.P. ("Fitch"), IBCA Limited and
IBCA Inc. and Thomson BankWatch, Inc. and their rating criteria are described in
the "Appendix" to the Statement of Additional Information. For further
information regarding the amortized cost method of valuing securities, see
"Determination of Net Asset Value" in the Statement of Additional Information.
There can be no assurance that the Portfolios will be able to maintain a stable
net asset value of $1.00 per share.
PRIME PORTFOLIO--The Prime Portfolio will invest in U.S. dollar denominated
short-term money market obligations, including securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities, certificates of
deposit, time deposits and bankers' acceptances issued by domestic banks,
foreign branches of domestic banks, foreign subsidiaries of domestic banks, and
domestic and foreign branches of foreign banks, loan participation agreements,
guaranteed investment contracts, municipal obligations, repurchase agreements,
and high quality domestic and foreign commercial paper and other high quality
short-term corporate obligations, such as floating or variable rate U.S. dollar
denominated demand notes and bonds. The Prime Portfolio will invest in U.S.
dollar denominated obligations issued or guaranteed by one or more foreign
governments or any of their political subdivisions, agencies or
instrumentalities, including obligations of supranational entities. The Prime
Portfolio will not invest more than 35% of the value of its total assets in
foreign securities. See "Appendix--Portfolio Securities." The Prime Portfolio
also may lend securities from its portfolio, enter into reverse repurchase
agreements and purchase restricted securities pursuant to Rule 144A under the
Securities Act of 1933, as amended. See "Appendix--Investment Practices." During
normal market conditions, at least 25% of the Prime Portfolio's total assets
will be invested in domestic and/or foreign bank obligations. See "Risk Factors
Related to the Prime Portfolio" below.
U.S. TREASURY PORTFOLIO--The U.S. Treasury Portfolio will
invest, as a fundamental policy, at least 65% of the value of its total
assets in U.S. Treasury securities and repurchase agreements in
respect thereof. The remainder of its assets may be invested in
other securities guaranteed as to principal and interest by the
U.S. Government and repurchase agreements in respect thereof.
See "Appendix--Portfolio Securities." The U.S. Treasury
Portfolio also may lend its portfolio securities, enter into
reverse repurchase agreements and purchase restricted securities
pursuant to Rule 144A under the Securities Act of 1933, as
amended. See "Appendix--Investment Practices."
Instruments which are issued or guaranteed as to principal and interest by
the U.S. Government constitute direct obligations of the United States of
America. The U.S. Treasury Portfolio will not invest in securities issued or
guaranteed by U.S. Government agencies, instrumentalities or government-
sponsored enterprises that are not backed by the full faith and credit of the
United States. Dividends and distributions paid by the U.S. Treasury Portfolio
that are attributable to interest from direct obligations of the United States
currently are not subject to personal income tax in most states. However,
dividends and distributions attributable to interest from repurchase agreements
may be subject to state tax.
CERTAIN FUNDAMENTAL POLICIES--Each Portfolio may (i) borrow money in an amount
up to 33-1/3% of the value of its total assets and (ii) invest up to 25% of the
value of its total assets in the securities of issuers in a single industry,
provided there is no limitation on the purchase of obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. In
addition, the Prime Portfolio (i) may invest up to 5% of its total assets in the
obligations of any one issuer, except that up to 25% of the value of the Prime
Portfolio's total assets may be invested (subject to the provisions of Rule
2a-7), and obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities may be purchased, without regard to any such limitation and
(ii) will invest, except when the Prime Portfolio has adopted a temporary
defensive position, at least 25% of its total assets in securities issued by
banks, including foreign banks and branches. This paragraph describes
fundamental policies that cannot be changed as to a Portfolio without approval
by the holders of a majority (as defined in the 1940 Act) of such Portfolio's
outstanding voting shares. See "Investment Objectives and Management
Policies--Investment Restrictions" in the Statement of Additional Information.
RISK FACTORS RELATING TO THE PRIME PORTFOLIO--To the extent the Prime
Portfolio's investments are concentrated in the banking industry, it will have
correspondingly greater exposure to the risk factors which are characteristic of
such investments. Sustained increases in interest rates can adversely affect the
availability or liquidity and cost of capital funds for a bank's lending
activities, and a deterioration in general economic conditions could increase
the exposure to credit losses. In addition, the value of and the investment
return on the Prime Portfolio's shares will be affected by economic or
regulatory developments in or related to the banking industry, and competition
within the banking industry as well as with other types of financial
institutions. The Prime Portfolio, however, will seek to minimize its exposure
to such risks by investing only in debt securities which are determined to be of
high quality.
Since the Prime Portfolio may invest in securities issued by foreign
governments and any of their political subdivisions, agencies or
instrumentalities, and by foreign branches and foreign subsidiaries of domestic
banks, domestic and foreign branches of foreign banks, and commercial paper
issued by foreign issuers, it may be subject to additional investment risks with
respect to those securities 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 foreign withholding taxes on interest income payable on
the securities, the possible establishment of exchange controls, the possible
seizure or nationalization of foreign deposits, or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on these securities.
OTHER INVESTMENT CONSIDERATIONS--Each Portfolio will attempt to increase yields
by trading to take advantage of short-term market variations. This policy is
expected to result in high portfolio turnover but should not adversely affect
the Portfolios since each Portfolio usually will not pay brokerage commissions
on purchases of short-term debt obligations. The value of the securities held by
a Portfolio will vary inversely to changes in prevailing interest rates. Thus,
if interest rates have increased from the time a security was purchased, such
security, if sold, might be sold at a price less than its cost. Similarly, if
interest rates have declined from the time a security was purchased, such
security, if sold, might be sold at a price greater than its purchase cost. In
either instance, if the security is held to maturity, no gain or loss will be
realized. The value of U.S. Treasury securities also will be affected by the
supply and demand, as well as the perceived supply and demand, for such
securities.
Federal income tax law requires the holder of a zero coupon security or of
certain pay-in-kind bonds to accrue income with respect to these securities
prior to the receipt of cash payments. To maintain its qualification as a
regulated investment company and avoid liability for Federal income taxes, each
Portfolio that invests in such securities may be required to distribute such
income accrued with respect to these securities and may have to dispose of
portfolio securities under disadvantageous circumstances in order to generate
cash to satisfy these distribution requirements.
Investment decisions for each Portfolio are made independently from those
of the Fund's other portfolios and other investment companies or accounts
managed by the Adviser or Sub- Adviser. However, if such other entities are
prepared to invest in, or desire to dispose of, securities of the type in which
a Portfolio may invest at the same time as such Portfolio, available investments
or opportunities for sales will be allocated equitably to each of them. In some
cases, this procedure may adversely affect the size of the position obtained for
or disposed of by the Portfolio or the price paid or received by the Portfolio.
MANAGEMENT OF THE PORTFOLIOS
BOARD OF DIRECTORS
The business affairs of the Fund are managed under the general supervision
of its Board of Directors. The Statement of Additional Information contains the
name and general business experience of each Director.
INVESTMENT ADVISER
First American National Bank, located at First American Center, 315
Deaderick Street, Nashville, Tennessee 37237, serves as each Portfolio's
investment adviser. The Adviser is a wholly- owned subsidiary of First American
Corporation, a registered bank holding company having assets as of December 31,
1995 of $9.7 billion. First American National Bank provides personal trust,
estate, employee benefit trust, corporate trust and custody services to over
3,000 individual and business clients and investment advisory services. The
Adviser and its affiliates, as of December 31, 1995, had approximately $4.4
billion under trust and approximately $2.5 billion under management.
The Adviser and its affiliates deal, trade and invest for their own
accounts and for the accounts of clients which they manage in the types of
securities in which the Portfolios may invest and may have deposit, loan and
commercial banking relationships with issuers of securities purchased by the
Prime Portfolio. The Adviser has informed the Fund that in making its investment
decisions it does not obtain or use material inside information in its or its
affiliates' possession.
The Adviser supervises and assists in the management of each Portfolio's
affairs under an Investment Advisory Agreement between the Adviser and the Fund,
subject to the overall authority of the Fund's Board of Directors in accordance
with Maryland law. All activities of the Adviser are conducted by persons who
are also officers of one or more of the Adviser's affiliates.
The Adviser has engaged Barnett Banks Trust Company, N.A. (the
"Sub-Adviser"), located at 9000 Southside Boulevard, Building 100, Jacksonville,
Florida 32256, to provide the day-to-day management of the Prime Portfolio's
investments.
Under the terms of the Investment Advisory Agreement, the Fund has agreed
to pay the Adviser a monthly fee at the annual rate of .25 of 1% of the value of
each Portfolio's average daily net assets less, in the case of the Prime
Portfolio, any amount payable by the Fund to the Sub-Adviser. Pursuant to the
Sub-Investment Advisory Agreement among the Fund, the Adviser and the
Sub-Adviser, the Fund has agreed to pay the Sub-Adviser, a monthly fee at the
annual rate of .15 of 1% of the value of the Prime Portfolio's average daily net
assets. For the fiscal year ended December 31, 1995, the Fund paid the Adviser a
monthly fee at the annual rate of .10 of 1% of the value of the Prime
Portfolio's and .25 of 1% of the value of the U.S. Treasury Portfolio's average
daily net assets. For such year, the Fund paid the Sub-Adviser at the annual
rate of .15 of 1% of the value of the Prime Portfolio's average daily net
assets.
From time to time, the Adviser and/or the Sub-Adviser may waive receipt of
their respective fees and/or voluntarily assume certain expenses of a Portfolio,
which would have the effect of lowering the overall expense ratio of that
Portfolio and increasing yield to its investors. The Portfolio will not pay the
Adviser and/or the Sub-Adviser at a later time for any amounts that may be
waived, nor will the Portfolio reimburse the Adviser and/or the Sub-Adviser for
any amounts that may be assumed.
ADMINISTRATOR
BISYS Fund Services Limited Partnership, located at 3435 Stelzer Road,
Columbus, Ohio 43219-3035, serves as each Portfolio's administrator. The
Administrator currently provides administrative services or sub-administrative
services to other investment companies with over $60 billion in assets. The
Administrator is a wholly-owned subsidiary of The BISYS Group, Inc.
Under its Administration Agreement with the Fund, the Administrator
generally assists in all aspects of the Fund's operations, other than providing
investment advice, subject to the overall authority of the Fund's Board of
Directors in accordance with Maryland law. In connection therewith, the
Administrator provides the Fund with office facilities, personnel, and certain
clerical and bookkeeping services (E.G., preparation of reports to shareholders
and the Securities and Exchange Commission and filing of Federal, state and
local income tax returns) that are not being furnished by The Bank of New York,
the Fund's Custodian.
For the fiscal year ended December 31, 1995, the Fund paid Concord Holding
Corporation, an affiliate of the Administrator and the Portfolios' predecessor
administrator, a monthly administration fee at the annual rate of .10 of 1% of
the value of each Portfolio's average daily net assets.
DISTRIBUTOR
Concord Financial Group, Inc., located at 125 West 55th Street, New York,
New York 10019, serves as the Fund's principal underwriter and distributor of
the Portfolio's shares. The Distributor, an affiliate of the Administrator, was
organized to distribute shares of mutual funds to institutional and retail
investors. The Distributor distributes the shares of other investment companies
with over $80 billion in assets. The Distributor is the Fund's sponsor.
The Distributor makes a continuous offering of each Portfolio's shares and
bears the costs and expenses of printing and distributing to prospective
investors copies of any prospectuses, statements of additional information and
annual and interim reports of each Portfolio (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 in connection with the
offering of such Portfolio's shares for sale to the public. Under a shareholder
services plan adopted by the Fund's Board of Directors, the Fund pays the
Distributor for the provision of certain services to the holders of Investor
Shares at an annual rate of .25 of 1% of the value of each Portfolio's average
daily net assets represented by Investor Shares. The services provided may
include personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding a Portfolio and providing reports and other
information, and services related to the maintenance of such shareholder
accounts.
CUSTODIAN AND TRANSFER AGENT
The Bank of New York, 90 Washington Street, New York, New York 10286, is
the Fund's Custodian. BISYS Fund Services Ohio, Inc., an affiliate of the
Administrator, located at 3435 Stelzer Road, Columbus, Ohio 43219-3035, is the
Fund's Transfer and Dividend Disbursing Agent (the "Transfer Agent").
EXPENSES
All expenses incurred in the operation of the Fund are borne by the Fund,
except to the extent specifically assumed by others. The expenses borne by the
Fund include: organizational costs, taxes, interest, brokerage fees and
commissions, if any, fees of Directors who are not officers, directors,
employees or holders of 5% or more of the outstanding voting securities of the
Adviser, Sub-Adviser or Administrator, or any of their affiliates, Securities
and Exchange Commission fees, state Blue Sky qualification fees, advisory and
administration fees, charges of custodians, transfer and dividend disbursing
agents' fees, certain insurance premiums, industry association fees, auditing
and legal expenses, costs of maintaining corporate existence, costs of
independent pricing services, costs of calculating the net asset value of each
Portfolio's shares, costs of shareholders' reports and corporate meetings, costs
of preparing and printing certain prospectuses and statements of additional
information, and any extraordinary expenses. Expenses attributable to a
particular Portfolio are charged against the assets of that Portfolio; other
expenses of the Fund are allocated among the Portfolios on the basis determined
by the Board of Directors, including, but not limited to, proportionately in
relation to the net assets of each Portfolio.
HOW TO BUY SHARES
GENERAL
Orders for purchases of Trust Shares may be placed only for clients of the
Adviser, its affiliated and correspondent banks and other affiliated and
non-affiliated institutions (collectively, "Institutions") for their Fiduciary
Accounts maintained at such Institutions. When purchasing Portfolio shares, the
investor must specify the Portfolio being purchased and that the purchase is for
Trust Shares. Institutions may receive different levels of compensation for
selling different classes of Portfolio shares. Stock certificates will not be
issued. The Fund reserves the right to reject any purchase order.
The minimum initial investment for each Portfolio is $100,000, with no
subsequent minimum investment. The Institution through which Trust Shares are
purchased may impose initial or subsequent investment minimums which are higher
or lower than those specified above and may impose different minimums for
different types of accounts or purchase arrangements.
Investors may purchase Portfolio shares through procedures established by
their Institution and an investor should contact such entity directly for
appropriate instructions, as well as for information about conditions pertaining
to the account and any related fees. The investor's Institution will transmit an
investor's payment to the Fund and will supply the Fund with the required
information. It is the Institution's responsibility to transmit the order
properly on a timely basis.
Shares are sold on a continuous basis at the net asset value per share next
determined after an order in proper form and Federal Funds (monies of member
banks within the Federal Reserve System which are held on deposit at a Federal
Reserve Bank) are received by the Transfer Agent. See "Terms of Purchase" below.
Prior to receipt of Federal Funds, the investor's money will not be invested.
TERMS OF PURCHASE
If an order for Trust Shares is received by the Transfer Agent by 2:00
p.m., Eastern time, on a business day (which, as used herein, shall include each
day the New York Stock Exchange and the Fund's Custodian are open for business),
shares will be purchased as of 2:00 p.m., Eastern time, on such business day if
payment is received in, or converted into, Federal Funds by 4:00 p.m., Eastern
time, by the Transfer Agent on that day. If a purchase order for Trust Shares is
received after 2:00 p.m., Eastern time, or if payment in Federal Funds is not
received by 4:00 p.m., Eastern time, shares will be purchased as of 2:00 p.m.,
Eastern time, on the business day on which Federal Funds are available. The New
York Stock Exchange or the Fund's Custodian currently is closed on the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day,
Thanksgiving and Christmas. It is the Institution's responsibility to transmit
orders so that they will be received by the Transfer Agent in time to receive
the next determined net asset value as described above.
Each Portfolio's net asset value per share is determined as of 2:00 p.m.,
Eastern time, on each business day. Net asset value per Trust Share is computed
by dividing the value of the Portfolio's net assets attributable to Trust Shares
(i.e., the value of its assets less liabilities) by the total number of Trust
Shares of such Portfolio outstanding. See "Determination of Net Asset Value" in
the Statement of Additional Information.
Federal regulations require that an investor provide a certified Taxpayer
Identification Number ("TIN") upon opening or reopening an account. See
"Dividends, Distributions and Taxes" for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject the
investor to a $50 penalty imposed by the Internal Revenue Service ("IRS").
HOW TO REDEEM SHARES
An investor may redeem Trust Shares by following the instructions
pertaining to the investor's Fiduciary Account provided by the Institution at
which such account is maintained. It is the responsibility of the investor's
Institution to transmit the redemption request to the Transfer Agent and credit
the investor's Fiduciary Account with the redemption proceeds on a timely basis.
When a request is received in proper form, the Fund will redeem the shares
at the next determined net asset value. If a request for redemption is received
in proper form by the Transfer Agent prior to 2:00 p.m., Eastern time, on a
business day the proceeds of the redemption, if transfer by wire is requested,
ordinarily will be made in Federal Funds wired to the investor's account at his
Institution on the same day. To allow the Adviser to most effectively manage
each Portfolio, investors are urged to initiate redemptions of shares as early
in the day as possible and to notify the Transfer Agent at least one day in
advance of redemptions in excess of $1 million. The Fund reserves the right to
wire redemption proceeds up to seven days after receiving the redemption order
if 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.
The Fund imposes no charges when shares are redeemed. An investor's
Institution may charge their clients a nominal fee for effecting redemptions of
Portfolio shares. The value of Portfolio shares redeemed may be more or less
than their original cost, depending upon the Portfolio's then-current net asset
value.
The Fund reserves the right to redeem an investor's account at its option
upon not less than 45 days' written notice if the net asset value of the
investor's account is $500 or less, for reasons other than market conditions,
and remains so during the notice period.
The Transfer Agent is authorized to act on telephone instructions from any
person representing himself or herself to be a representative of the investor's
Institution and reasonably believed by the Transfer Agent to be genuine. The
Fund will require the Transfer Agent to employ reasonable procedures, such as
requiring a form of identification, to confirm that instructions are genuine
and, if it does not follow such procedures, the Fund or the Transfer Agent may
be liable for any losses due to unauthorized or fraudulent instructions. Neither
the Fund nor the Transfer Agent will be liable for following telephone
instructions reasonably believed to be genuine.
EXCHANGE PRIVILEGE
The Exchange Privilege enables an investor to purchase, in exchange for
shares of a Portfolio, shares of the other Portfolio offered by this Prospectus,
or shares of ValueStar Capital Growth Portfolio, ValueStar Short-Intermediate
Duration Bond Portfolio, ValueStar Investment Grade Bond Portfolio or ValueStar
Tennessee Tax Exempt Bond Portfolio, to the extent such shares are offered for
sale in the investor's state of residence. The Exchange Privilege may not be
available to clients of certain Institutions and some Institutions may impose
certain conditions on their clients which are different from those described in
this Prospectus. If an investor desires to use this Privilege, the investor
should consult the Institution at which the investor maintains his or her
Fiduciary Account to determine if it is available and whether any conditions are
imposed on its use.
To use this Privilege, an investor must give exchange instructions in
accordance with the instructions pertaining to the investor's Fiduciary Account
maintained at the investor's Institution. Before any exchange into a Portfolio
offered by another prospectus, an investor must obtain and should review a copy
of the current prospectus of the Portfolio into which the exchange is being
made. Prospectuses may be obtained from the investor's Institution or the
Distributor. The shares being exchanged must have a current value of at least
$500; furthermore, when establishing a new account by exchange, the shares being
exchanged must have a value of at least the minimum initial investment required
for the Portfolio into which the exchange is being made.
Shares will be exchanged at the next determined net asset value. No fees
currently are charged shareholders directly in connection with exchanges
although the Fund reserves the right, upon not less than 60 days' written
notice, to charge shareholders a nominal fee in accordance with rules
promulgated by the Securities and Exchange Commission. The Fund reserves the
right to reject any exchange request in whole or in part. The Exchange Privilege
may be modified or terminated at any time upon notice to shareholders.
The exchange of shares of one Portfolio for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize a taxable gain
or loss.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Portfolio declares dividends from net investment income on each day
that the Portfolio is open for business. Dividends usually are paid on the last
calendar day of each month, and are automatically reinvested in additional
Portfolio shares at net asset value or, at the investor's option, paid in cash.
Each Portfolio's earnings for Saturdays, Sundays and holidays are declared as
dividends on the preceding business day. Shares begin accruing dividends on the
day the purchase order is received in proper form by the Transfer Agent, and
continue to earn dividends through the day before a redemption order for such
shares is processed by the Transfer Agent. Dividends paid by each class of
shares of a Portfolio will be calculated at the same time and in the same manner
and will be of the same amount, except that the expenses attributable solely to
a class will be borne exclusively by such class. If an investor redeems all
shares in his account at any time during the month, all dividends to which such
investor is entitled will be paid to the investor along with the proceeds of the
redemption.
If a shareholder elects to receive distributions in cash and the
shareholder's distribution checks (1) are returned to the Fund marked
"undeliverable" or (2) remain uncashed for six months, the shareholder's cash
election will be changed automatically and future dividend and capital gains
distributions will be reinvested in Portfolio shares at the net asset value
determined as of the date of payment of the distribution. In addition, any such
undeliverable checks or checks that remain uncashed for six months will be
canceled and will be reinvested in Portfolio shares at the net asset value
determined as of the date of cancellation.
Distributions from net realized securities gains, if any, are declared and
paid once a year, but each Portfolio may make distributions on a more frequent
basis to comply with the distribution requirements of the Internal Revenue Code
of 1986, as amended (the "Code"), in all events in a manner consistent with the
provisions of the 1940 Act. Each investor may choose whether to receive
distributions in cash or to reinvest in additional Portfolio shares at net asset
value. All expenses are accrued daily and deducted before declaration of
dividends to investors.
Dividends derived from interest and distributions from any net realized
short-term securities gains are generally taxable to investors as ordinary
income, whether received in cash or reinvested in additional Portfolio shares.
Distributions from net realized long-term securities gains, if any, generally
are taxable as long-term capital gains regardless of how long shareholders have
held their shares and whether such distributions are received in cash or
reinvested in additional Portfolio shares. Dividends and distributions may be
subject to certain state and local taxes. No dividend will qualify for the
dividends-received deduction allowable to certain corporations.
Dividends paid by a Portfolio derived from net investment income and
distributions from net realized short-term securities gains paid by such
Portfolio to a foreign investor generally are subject to U.S. nonresident
withholding taxes at the rate of 30%, unless the investor claims the benefit of
a lower rate specified in a tax treaty. Distributions from net realized
long-term securities gains paid by a Portfolio to a foreign investor generally
will not be subject to U.S. nonresident withholding tax. However, such
distributions may be subject to backup withholding, as described below, unless
the foreign investor certifies his non-U.S. residency status.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends and distributions
from net realized securities gains paid to a shareholder if such shareholder
fails to certify either that the TIN furnished in connection with opening an
account is correct, or that such shareholder has not received notice from the
IRS of being subject to backup withholding as a result of a failure to properly
report taxable dividend or interest income on a Federal income tax return.
Furthermore, the IRS may notify the Fund to institute backup withholding if the
IRS determines a shareholder's TIN is incorrect or if a shareholder has failed
to properly report taxable dividend and interest income on a Federal income tax
return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the record
owner of the account, and may be claimed as a credit on the record owner's
Federal income tax return.
Notice as to the tax status of dividends and distributions is mailed
annually. Investors also will receive periodic summaries of their account which
will include information as to income dividends and distributions from
securities gains, if any, paid during the year.
Dividends and distributions attributable to interest from direct
obligations of the United States and paid by a Portfolio to individuals
currently are not subject to tax in most states. Dividends and distributions
attributable to interest from other securities in which the Portfolios may
invest may be subject to state tax. The Fund will provide shareholders with a
statement which sets forth the percentage of dividends and distributions paid by
the U.S. Treasury Portfolio that is attributable to interest income from direct
obligations of the United States.
Management of the Fund believes that each Portfolio qualified for the
fiscal year ended December 31, 1995 as a "regulated investment company" under
the Code. Each Portfolio intends to continue to so qualify if such qualification
is in the best interests of its shareholders. Such qualification relieves the
Portfolio of any liability for Federal income tax to the extent its earnings are
distributed in accordance with applicable provisions of the Code. Each Portfolio
is subject to a non-deductible 4% excise tax, measured with respect to certain
undistributed amounts of taxable investment income and capital gains.
Each investor should consult its tax adviser regarding specific questions
as to Federal, state or local taxes. In addition, investors should consult their
financial and tax advisers before buying Portfolio shares to determine, among
other matters, the tax consequences to them of their purchase, including the
effect of selling any assets to fund such purchase.
YIELD INFORMATION
From time to time, each Portfolio will advertise its yield and effective
yield. Both yield figures are based on historical earnings and are not intended
to indicate future performance. It can be expected that these yields will
fluctuate substantially. The yield of the Portfolio refers to the income
generated by an investment in such Portfolio over a seven-day period (which
period will be stated in the advertisement). 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 Portfolio is assumed
to be reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment. Each Portfolio's
yield and effective yield may reflect absorbed expenses pursuant to any
undertaking that may be in effect.
Yield information is useful in reviewing the Portfolio's performance, but
because yields will fluctuate, under certain conditions such information may not
provide a basis for comparison with domestic bank deposits, other investments
which pay a fixed yield for a stated period of time, or other investment
companies which may use a different method of computing yield.
Comparative performance information may be used from time to time in
advertising or marketing each Portfolio's shares, including data from Lipper
Analytical Services, Inc., Morningstar, Inc., Bank Rate Monitor(TM), N. Palm
Beach, Fla. 33408, IBC's Money Fund Report(TM) and other industry publications.
Yield information for each class will be calculated separately.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on March 6, 1990, and
commenced operations on August 28, 1990.
The Fund is authorized to issue eleven billion five hundred million shares
of Common Stock (with 750 million shares allocated to each Portfolio), par value
$.001 per share. Each Portfolio's shares are classified into Trust Shares (375
million) and Investor Shares (375 million). Investor Shares, which are described
in a separate prospectus, are sold through a number of institutions, including
the Adviser and its affiliates, the Distributor and certain Service
Organizations. Each share has one vote and shareholders will vote in the
aggregate and not by class except as otherwise required by law. Only holders of
the Investor Shares, however, will be entitled to vote on matters submitted to
shareholders pertaining to the Fund's Shareholder Services Plan.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
shareholders may not consider each year the election of Directors or the
appointment of auditors. However, pursuant to the Fund's By-Laws, the holders of
at least 10% of the shares outstanding and entitled to vote may require the Fund
to hold a special meeting of shareholders for purposes of removing a Director
from office or for any other purpose. Shareholders may remove a Director by the
affirmative vote of a majority of the Fund's outstanding voting shares. In
addition, the Board of Directors will call a meeting of shareholders for the
purpose of electing Directors if, at any time, less than a majority of the
Directors then holding office have been elected by shareholders.
The Fund is a "series fund," which is a mutual fund divided into separate
portfolios, each of which is treated as a separate entity for certain matters
under the 1940 Act, and for other purposes. A shareholder of one portfolio is
not deemed to be a shareholder of any other portfolio. For certain matters Fund
shareholders vote together as a group; as to others they vote separately by
portfolio. By this Prospectus, Trust Shares of two of the Fund's ValueStar
Portfolios are being offered-- Prime Money Market Portfolio and U.S. Treasury
Money Market Portfolio, each of which is a diversified money market fund. From
time to time, other portfolios may be established and sold pursuant to other
offering documents.
To date, 12 portfolios have been authorized. The other portfolios are not
being offered by this Prospectus. All consideration received by the Fund for
shares of one of the portfolios, and all assets in which such consideration is
invested, belong to that portfolio (subject only to the rights of creditors of
the Fund) and will be subject to the liabilities related thereto. The income and
expenses attributable to one portfolio are treated separately from those of the
other portfolios.
The Transfer Agent maintains a record of each investor's ownership and
sends confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 3435 Stelzer
Road, Columbus, Ohio 43219-3035.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN
THE FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
<PAGE>
APPENDIX
PORTFOLIO SECURITIES
To the extent set forth in this Prospectus, each Portfolio may invest in
the securities described below.
U.S. TREASURY SECURITIES--Each Portfolio may invest in U.S. Treasury
securities which include Treasury Bills, Treasury Notes and Treasury Bonds that
differ in their interest rates, maturities and times of issuance. Treasury Bills
have initial maturities of one year or less; Treasury Notes have initial
maturities of one to ten years; and Treasury Bonds generally have initial
maturities of greater than ten years.
U.S. GOVERNMENT SECURITIES--In addition to U.S. Treasury securities, the
Prime Portfolio and, to a limited extent, the U.S. Treasury Portfolio may invest
in securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities, for example, Government National Mortgage
Association pass-through certificates, are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Federal Home Loan
Banks, by the right of the issuer to borrow from the Treasury; others, such as
those issued by the Federal National Mortgage Association, by discretionary
authority of the U.S. Government to purchase certain obligations of the agency
or instrumentality; and others, such as those issued by the Student Loan
Marketing Association, only by the credit of the agency or instrumentality.
These securities bear fixed, floating or variable rates of interest. Interest
may fluctuate based on generally recognized reference rates or the relationship
of rates. While the U.S. Government provides financial support to such U.S.
Government- sponsored agencies or instrumentalities, no assurance can be given
that it will always do so, since it is not so obligated by law. Each Portfolio
will invest in such securities only when it is satisfied that the credit risk
with respect to the issuer is minimal.
ZERO COUPON AND STRIPPED SECURITIES--Each Portfolio may invest in zero
coupon U.S. Treasury securities, which are Treasury Notes and Bonds that have
been stripped of their unmatured interest coupons, the coupons themselves and
receipts or certificates representing interests in such stripped debt
obligations and coupons. A zero coupon security pays no interest to its holder
during its life and is sold at a discount to its face value at maturity. The
amount of the discount fluctuates with the market price of the security. The
market prices of zero coupon securities generally are more volatile than the
market prices of securities that pay interest periodically and are likely to
respond to a greater degree to changes in interest rates than non-zero coupon
securities having similar maturities and credit qualities.
REPURCHASE AGREEMENTS--Each Portfolio may enter into repurchase agreements,
which involve the acquisition by a Portfolio of an underlying debt instrument,
subject to an obligation of the seller to repurchase, and such Portfolio to
resell, the instrument at a fixed price usually not more than one week after its
purchase. Certain costs may be incurred by a Portfolio in connection with the
sale of the securities if the seller does not repurchase them in accordance with
the repurchase agreement. In addition, if bankruptcy proceedings are commenced
with respect to the seller of the securities, realization on the securities by
the Portfolio may be delayed or limited.
FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL ENTITIES--The
Prime Portfolio may invest in obligations issued or guaranteed by one or more
foreign governments or any of their political subdivisions, agencies or
instrumentalities that are determined by the Sub-Adviser to be of comparable
quality to the other obligations in which the Prime Portfolio may invest. Such
securities also 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 include the International Bank for Reconstruction and
Development (the World Bank), the European Coal and Steel Community, the Asian
Development Bank and the InterAmerican Development Bank. The percentage of the
Prime Portfolio's assets invested in securities issued by foreign governments
will vary depending on the relative yields of such securities, the economic and
financial markets of the countries in which the investments are made and the
interest rate climate of such countries. See "Description of the
Portfolios--Risk Factors Relating to the Prime Portfolio."
BANK OBLIGATIONS--The Prime Portfolio will invest in bank obligations
(other than those issued by the Adviser or its affiliates), including
certificates of deposit, time deposits, bankers' acceptances and other
short-term obligations of domestic banks, foreign subsidiaries of domestic
banks, foreign branches of domestic banks, and domestic and foreign branches of
foreign banks, domestic savings and loan associations and other banking
institutions. See "Description of the Portfolios--Risk Factors Relating to the
Prime Portfolio." Certificates of deposit are negotiable certificates evidencing
the obligation of a bank to repay funds deposited with it for a specified period
of time. Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. Time
deposits which may be held by the Prime Portfolio will not benefit from
insurance from the Bank Insurance Fund or the Savings Association Insurance Fund
administered by the Federal Deposit Insurance Corporation. Bankers' acceptances
are credit instruments evidencing the obligation of a bank to pay a draft drawn
on it by a customer. These instruments reflect the obligation both of the bank
and of the drawer to pay the face amount of the instrument upon maturity. The
other short-term obligations may include uninsured, direct obligations, bearing
fixed, floating or variable interest rates.
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS--The Prime
Portfolio may invest in commercial paper, which consists of short-term,
unsecured promissory notes issued to finance short-term credit needs. The
commercial paper purchased by the Prime Portfolio will consist only of direct
obligations issued by domestic and foreign entities. The other corporate
obligations in which the Prime Portfolio may invest consist of high quality,
U.S. dollar denominated short-term bonds and notes (including variable amount
master demand notes) issued by domestic and foreign corporations.
FLOATING AND VARIABLE RATE OBLIGATIONS--The Prime Portfolio also may
purchase floating and variable rate demand notes and bonds, which are
obligations ordinarily having stated maturities in excess of 13 months, but
which permit the holder to demand payment of principal at any time, or at
specified intervals not exceeding 13 months, in each case upon not more than 30
days' notice. Variable rate demand notes include master demand notes which are
obligations that permit the Prime Portfolio to invest fluctuating amounts, which
may change daily without penalty, pursuant to direct arrangements between the
Prime Portfolio, as lender, and the borrower. The interest rates on these notes
fluctuate from time to time. The issuer of such obligations normally has a
corresponding right, after a given period, to prepay in its discretion the
outstanding principal amount of the obligations plus accrued interest upon a
specified number of days' notice to the holders of such obligations. The
interest rate on a floating rate demand obligation is based on a known lending
rate, such as a bank's prime rate, and is adjusted automatically each time such
rate is adjusted. The interest rate on a variable rate demand obligation is
adjusted automatically at specified intervals. Frequently, such obligations are
secured by letters of credit or other credit support arrangements provided by
banks. Because these obligations are direct lending arrangements between the
lender and borrower, it is not contemplated that such instruments generally will
be traded, and there generally is no established secondary market for these
obligations, although they are redeemable at face value. Accordingly, where
these obligations are not secured by letters of credit or other credit support
arrangements, the Prime Portfolio's right to redeem is dependent on the ability
of the borrower to pay principal and interest on demand. Such obligations
frequently are not rated by credit rating agencies and, if not so rated, the
Prime Portfolio may invest in them only if the Sub-Adviser, acting upon
delegated authority from the Fund's Board of Directors, determines that at the
time of investment the obligations are of comparable quality to the other
obligations in which the Prime Portfolio may invest. The Sub- Adviser, on behalf
of the Prime Portfolio, will consider on an ongoing basis the creditworthiness
of the issuers of the floating and variable rate demand obligations held by the
Portfolio. The Prime Portfolio will not invest more than 10% of the value of its
net assets in floating or variable rate demand obligations as to which it cannot
exercise the demand feature on not more than seven days' notice if the
Sub-Adviser determines, acting upon delegated authority from, and procedures
established by, the Fund's Board of Directors, that there is no secondary market
available for these obligations, and in other securities that are illiquid.
NOTES--The Prime Portfolio also may purchase unsecured promissory notes
("Notes") which are not readily marketable and have not been registered under
the Securities Act of 1933, provided such investments are consistent with its
investment objective. The Notes purchased by the Prime Portfolio will have
remaining maturities of 13 months or less and will be deemed by the Board of
Directors to present minimal credit risks and will meet the quality criteria set
forth under "Description of the Portfolios--Management Policies." The Portfolio
will invest no more than 10% of its net assets in such Notes and in other
securities that are illiquid.
PARTICIPATION INTERESTS AND TRUST RECEIPTS--The Prime Portfolio may
purchase from financial institutions and trusts created by such institutions
participation interests and trust receipts in securities in which it may invest
and may enter into loan participation agreements. See "Investment Objectives and
Management Policies--Portfolio Securities" in the Statement of Additional
Information. A participation interest or receipt gives the Prime Portfolio an
undivided interest in the security in the proportion that the Prime Portfolio's
participation interest or receipt bears to the total principal amount of the
security. These instruments may have fixed, floating or variable rates of
interest with remaining maturities of 13 months or less. If the instrument is
unrated, or has been given a rating below that which is permissible for purchase
by the Prime Portfolio, the instrument will be backed by an irrevocable letter
of credit or guarantee of a bank or other entity the debt securities of which
are rated high quality, or the payment obligation otherwise will be
collateralized by U.S. Government securities, or, in the case of unrated
instrument, the Sub-Adviser, acting upon delegated authority from the Fund's
Board of Directors, must have determined that the instrument is of comparable
quality to those instruments in which the Prime Portfolio may invest.
Participation interests or trust receipts with a rating below high quality that
are backed by an irrevocable letter of credit or guarantee as described above
will be purchased only if the Sub-Adviser, acting as described above, determines
after an analysis of, among other factors, the creditworthiness of the guarantor
that such instrument is high quality, and if the rating agency did not include
the letter of credit or guarantee in its determination of the instrument's
rating. If the rating of a participation interest or trust receipt is reduced
subsequent to its purchase by the Prime Portfolio, the Sub-Adviser will
consider, in accordance with procedures established by the Board of Directors,
all circumstances deemed relevant in determining whether the Prime Portfolio
should continue to hold the instrument. The guarantor of a participation
interest or trust receipt will be treated as a separate issuer. For certain
participation interests and trust receipts, the Prime Portfolio will have the
unconditional right to demand payment, on not more than seven days' notice, for
all or any part of the Prime Portfolio's interest in the security, plus accrued
interest. As to these instruments, the Prime Portfolio intends to exercise its
right to demand payment only upon a default under the terms of the security, as
needed to provide liquidity to meet redemptions, or to maintain or improve the
quality of its investment portfolio. Not more than 10% of the value of the Prime
Portfolio's net assets will be invested in participation interests and trust
receipts that do not have this demand feature, and in other securities that are
illiquid.
GUARANTEED INVESTMENT CONTRACTS--The Prime Portfolio may make limited
investments in guaranteed investment contracts ("GICs") issued by highly rated
U.S. insurance companies. Pursuant to such a contract, the Prime Portfolio would
make cash contributions to a deposit fund of the insurance company's general
account. The insurance company would then credit to the Prime Portfolio on a
monthly basis interest which is based on an index (in most cases the Salomon
Brothers CD Index), but is guaranteed not to be less than a certain minimum
rate. The Portfolio will invest no more than 10% of its net assets in GICs that
are illiquid and in other illiquid securities. The Prime Portfolio currently
does not expect to invest more than 5% of its net assets in GICs.
MUNICIPAL OBLIGATIONS--The Prime Portfolio may make limited investments (up
to 5% of its net assets) in municipal obligations when their yield on a pre-tax
basis is comparable to that of taxable money market instruments. Municipal
obligations are debt obligations issued by states, territories and possessions
of the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or multistate agencies or
authorities. While in general, municipal obligations are tax exempt securities
having relatively low yields as compared to taxable, non-municipal obligations
of similar quality, certain issues of municipal obligations, both taxable and
non-taxable, offer yields comparable and in some cases greater than the yields
available on other permissible investments. Municipal obligations generally
include debt obligations issued to obtain funds for various public purposes as
well as certain industrial development bonds issued by or on behalf of public
authorities. Municipal obligations are classified as general obligation bonds,
revenue bonds and notes. General obligation bonds are secured by the issuer's
pledge of its faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are payable from the revenue derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source, but not from the general taxing
power. Industrial development bonds, in most cases, are revenue bonds and
generally do not carry the pledge of the credit of the issuing municipality, but
generally are guaranteed by the corporate entity on whose behalf they are
issued. Notes are short-term instruments which are obligations of the issuing
municipalities or agencies and are sold in anticipation of a bond sale,
collection of taxes or receipt of other revenues. Municipal obligations include
municipal lease/purchase agreements which are similar to installment purchase
contracts for property or equipment issued by municipalities. Municipal
obligations bear fixed, floating or variable rates of interest. Municipal
obligations may be in the form of custodial receipts that give the Prime
Portfolio the right to receive specific future interest or principal payments on
securities held in trust or a special custody account. Certain municipal
obligations are subject to redemption at a date earlier than their stated
maturity pursuant to call options, which may be separated from the related
municipal obligation and purchased and sold separately. Dividends received by
shareholders of the Prime Portfolio which are attributable to interest income
received by it from municipal obligations generally will be subject to Federal
income tax. The Prime Portfolio currently intends to invest no more than 5% of
its net assets in municipal obligations. However, this percentage may be varied
from time to time without shareholder approval.
INVESTMENT PRACTICES
LENDING PORTFOLIO SECURITIES--From time to time, each Portfolio may lend
securities from its investment portfolio to brokers, dealers and other financial
institutions needing to borrow securities to complete certain transactions. Such
loans may not exceed 33-1/3% of the value of the relevant Portfolio's total
assets. In connection with such loans, each Portfolio will receive collateral
consisting of cash or U.S. Government securities which will be maintained at all
times in an amount equal to at least 100% of the current market value of the
loaned securities. Each Portfolio can increase its income through the investment
of such collateral. Each Portfolio continues to be entitled to payments in
amounts equal to the interest and other distributions payable on the loaned
security and receives interest on the amount of the loan. Such loans will be
terminable at any time upon specified notice. A Portfolio might experience risk
of loss if the institution with which it has engaged in a portfolio loan
transaction breaches its agreement with such Portfolio.
REVERSE REPURCHASE AGREEMENTS--Each Portfolio may enter into reverse
repurchase agreements with banks, brokers or dealers. Reverse repurchase
agreements involve the transfer by the Portfolio of an underlying debt
instrument in return for cash proceeds based on a percentage of the value of the
security. Each Portfolio retains the right to receive interest and principal
payments on the security. The Portfolio will use the proceeds of reverse
repurchase agreements only to make investments which generally either mature or
have a demand feature to resell to the issuer at a date simultaneous with or
prior to the expiration of the reverse repurchase agreement. At an agreed upon
future date, the Portfolio repurchases the security at principal plus accrued
interest. In certain types of agreements, there is no agreed upon repurchase
date and interest payments are calculated daily, often based on the prevailing
overnight repurchase rate. As a result of these transactions, each Portfolio may
be exposed to greater potential fluctuations in the value of its assets and its
net asset value per share. Interest costs on the money borrowed may exceed the
return received on the securities purchased. The Fund's Directors have
considered the risks to each Portfolio and its shareholders which may result
from the entry into reverse repurchase agreements and have determined that the
entry into such agreements is consistent with each Portfolio's investment
objective and management policies.
WHEN-ISSUED SECURITIES--Each Portfolio may purchase money market securities
on a when-issued or forward commitment basis, which means that delivery and
payment for such securities ordinarily take place within 45 days after the date
of the commitment to purchase. The payment obligation and the interest rate that
will be received on the securities are fixed at the time the buyer enters into
the commitment. A Portfolio will make commitments to purchase such securities
only with the intention of actually acquiring the securities, but such Portfolio
may sell these securities before the settlement date if it is deemed advisable.
A Portfolio will not accrue income in respect of a security purchased on a
forward commitment basis prior to its stated delivery date.
ILLIQUID SECURITIES--Each Portfolio may invest up to 10% of the value of
its net assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with its investment objective. Such
securities may include securities that are not readily marketable, such as
certain securities that are subject to legal or contractual restrictions on
resale, participation interests that are not subject to the demand feature
described above, floating and variable rate demand obligations as to which the
Portfolio cannot exercise the related demand feature described above on not more
than seven days' notice and as to which there is no secondary market and
repurchase agreements providing for settlement in more than seven days after
notice. As to these securities, the Portfolio is subject to a risk that should
the Portfolio desire to sell them when a ready buyer is not available at a price
the Portfolio deems representative of their value, the value of the Portfolio's
net assets could be adversely effected.
BORROWING MONEY--As a fundamental policy, each Portfolio is permitted to
borrow money in an amount up to 33-1/3% of the value of its total assets.
However, each Portfolio currently intends to borrow money only (a) for temporary
or emergency (not leveraging) purposes or (b) in connection with the entry into
reverse repurchase agreements, in an amount up to 33- 1/3% of the value of its
total assets (including the amount borrowed) valued at the lesser of cost or
market, less liabilities (not including the amount borrowed) at the time the
borrowing is made. While borrowings exceed 5% of a Portfolio's total assets,
such Portfolio will not make any investments.
THE INFINITY MUTUAL FUNDS, INC.
VALUESTAR FUNDS
PRIME MONEY MARKET PORTFOLIO
U.S. TREASURY MONEY MARKET PORTFOLIO
TRUST SHARES AND INVESTOR SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
JULY 1, 1996
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the applicable current
Prospectus of the ValueStar Prime Money Market Portfolio and U.S.Treasury Money
Market Portfolio (the "Portfolios") of The Infinity Mutual Funds, Inc. (the
"Fund"), dated May 1, 1996 for Investor Shares and July 1, 1996 for Trust
Shares, as each may be revised from time to time. To obtain a copy of the
Portfolios' applicable Prospectus, please write to the Fund at 3435 Stelzer
Road, Columbus, Ohio 43219-3035. This Statement of Additional Information
relates only to the Portfolios and not to any of the Fund's other portfolios.
First American National Bank (the "Adviser") serves as each Portfolio's
investment adviser. Barnett Banks and Trust Company, N.A. (the "Sub-Adviser")
serves as the Prime Portfolio's sub-investment adviser.
BISYS Fund Services Limited Partnership (the "Administrator") serves as
each Portfolio's administrator.
Concord Financial Group, Inc. (the "Distributor"), an affiliate of the
Administrator, serves as the distributor of each Portfolio's shares.
TABLE OF CONTENTS
PAGE
Investment Objectives and Management Policies...................... B-2
Management of the Fund............................................. B-9
Management Arrangements............................................ B-12
Purchase and Redemption of Shares.................................. B-16
Determination of Net Asset Value................................... B-18
Yield Information.................................................. B-19
Portfolio Transactions............................................. B-20
Information About the Portfolios................................... B-21
Custodian, Transfer and Dividend Disbursing
Agent, Counsel and Independent Auditors.......................... B-22
Appendix........................................................... B-23
Financial Statements............................................... B-26
<PAGE>
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE PORTFOLIOS' PROSPECTUS ENTITLED "DESCRIPTION OF THE
PORTFOLIOS."
PORTFOLIO SECURITIES. (Prime Portfolio only). Domestic commercial banks
organized under Federal law are supervised and examined by the Comptroller of
the Currency and are required to be members of the Federal Reserve System and to
have their deposits insured by the Federal Deposit Insurance Corporation (the
"FDIC"). Domestic banks organized under state law are supervised and examined by
state banking authorities but are members of the Federal Reserve System only if
they elect to join. In addition, state banks whose certificates of deposit
("CDs") may be purchased by the Portfolio are insured by the Bank Insurance Fund
administered by the FDIC (although such insurance may not be of material benefit
to the Prime Portfolio, depending upon the principal amount of the CDs of each
bank held by such Portfolio) and are subject to Federal examination and to a
substantial body of Federal law and regulation. As a result of Federal and state
laws and regulations, domestic branches of domestic banks, among other things,
are generally required to maintain specified levels of reserves, and are subject
to other supervision and regulation designed to promote financial soundness.
Obligations of foreign branches of domestic banks, foreign subsidiaries of
domestic banks and domestic and foreign branches of foreign banks, such as CDs
and time deposits ("TDs"), may be general obligations of the parent banks in
addition to the issuing branch, or may be limited by the terms of a specific
obligation or governmental regulation. Such obligations are subject to different
risks than are those of domestic banks. These risks include foreign economic and
political developments, foreign governmental restrictions that may adversely
affect payment of principal and interest on the obligations, foreign exchange
controls and foreign withholding and other taxes on interest income. Foreign
branches and subsidiaries are not necessarily subject to the same or similar
regulatory requirements that apply to domestic banks, such as mandatory reserve
requirements, loan limitations, and accounting, auditing and financial
recordkeeping requirements. In addition, less information may be publicly
available about a foreign branch of a domestic bank or about a foreign bank than
about a domestic bank. If a domestic bank with deposits insured by the FDIC
becomes insolvent, unsecured deposits and other general obligations of such
bank's foreign branches will be subordinated to the receivership expenses of the
FDIC and such bank's domestic deposits and would be subject to the loss of
principal to a greater extent than such bank's domestic branch deposits. The
Prime Portfolio's investment in obligations of foreign subsidiaries of domestic
banks are subject, to the extent required by the Investment Company Act of 1940,
as amended (the "1940 Act"), to the limitations on investing in the securities
of other investment companies.
Obligations of United States branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by Federal and state
regulation as well as governmental action in the country in which the foreign
bank has its head office. In addition, Federal branches licensed by the
Comptroller of the Currency and branches licensed by certain states ("State
Branches") may be required to: (1) pledge to the regulator, by depositing assets
with a designated bank within the state, a certain percentage of their assets as
fixed from time to time by the appropriate regulatory authority; and (2)
maintain assets within the state in an amount equal to a specified percentage of
the aggregate amount of liabilities of the foreign bank payable at or through
all of its agencies or branches within the state. The deposits of Federal and
State Branches generally must be insured by the FDIC if such branches take
deposits of less than $100,000.
In view of the foregoing factors associated with the purchase of CDs and
TDs issued by foreign branches of domestic banks, by foreign subsidiaries of
domestic banks, by foreign branches of foreign banks or by domestic branches of
foreign banks, the Sub-Adviser carefully evaluates such investments on a
case-by-case basis pursuant to procedures established by the Fund's Board of
Directors.
The Prime Portfolio may invest in short-term U.S. dollar denominated
corporate obligations that are originated, negotiated and structured by a
syndicate of lenders ("Co-Lenders") consisting of commercial banks, thrift
institutions, insurance companies, finance companies or other financial
institutions one or more of which administers the security on behalf of the
syndicate (the "Agent Bank"). Co-Lenders may sell such securities to third
parties called "Participants." The Prime Portfolio may invest in such securities
either by participating as a Co-Lender at origination or by acquiring an
interest in the security from a Co- Lender or a Participant (collectively,
"participation interests"). Co-Lenders and Participants interposed between the
Fund and the corporate borrower (the "Borrower"), together with Agent Banks, are
referred herein as "Intermediate Participants." The Prime Portfolio also may
purchase a participation interest in a portion of the rights of an Intermediate
Participant, which would not establish any direct relationship between the Prime
Portfolio and the Borrower. In such cases, the Prime Portfolio would be required
to rely on the Intermediate Participant that sold the participation interest not
only for the enforcement of the Prime Portfolio's rights against the Borrower
but also for the receipt and processing of payments due to the Prime Portfolio
under the security. Because it may be necessary to assert through an
Intermediate Participant such rights as may exist against the Borrower, in the
event the Borrower fails to pay principal and interest when due, the Prime
Portfolio may be subject to delays, expenses and risks that are greater than
those that would be involved if the Portfolio could enforce its rights directly
against the Borrower. Moreover, under the terms of a participation interest, the
Prime Portfolio may be regarded as a creditor of the Intermediate Participant
(rather than of the Borrower), so that the Fund may also be subject to the risk
that the Intermediate Participant may become insolvent. Similar risks may arise
with respect to the Agent Bank if, for example, assets held by the Agent Bank
for the benefit of the Prime Portfolio were determined by the appropriate
regulatory authority or court to be subject to the claims of the Agent Bank's
creditors. In such cases, the Prime Portfolio might incur certain costs and
delays in realizing payment in connection with the participation interest or
suffer a loss of principal and/or interest. Further, in the event of the
bankruptcy or insolvency of the Borrower, the obligation of the Borrower to
repay the loan may be subject to certain defenses that can be asserted by such
Borrower as a result of improper conduct by the Agent Bank or Intermediate
Participant.
Under normal circumstances, and as a matter of fundamental policy, the
Prime Portfolio will "concentrate" at least 25% of its assets in debt
instruments issued by domestic and foreign companies engaged in the banking
industry, including bank holding companies. Such investments may include CDs,
TDs, bankers' acceptances and obligations issued by bank holding companies, as
well as repurchase agreements entered into with banks (as distinct from non-bank
dealers) in accordance with the policies set forth in "Repurchase Agreements"
below. During periods when the Sub-Adviser determines that the Prime Portfolio
should be in a temporary defensive position, the Portfolio may invest less than
25% of its total assets in the banking industry; during such times the Prime
Portfolio's assets will be invested in accordance with its other investment
policies. The Sub-Adviser may determine that the adoption of a temporary
defensive position with respect to issuers in the banking industry is
appropriate on the basis of such factors as political, economic, market or
regulatory developments adversely affecting that industry as compared to the
industries of other issuers of securities available for investment by the Prime
Portfolio.
INVESTMENT COMPANY SECURITIES. (Both Portfolios). Each Portfolio may invest
in securities issued by other investment companies which principally invest in
securities of the type in which such Portfolio invests. Under the 1940 Act, each
Portfolio's investments in such securities, subject to certain exceptions,
currently are limited to (i) 3% of the total voting stock of any one investment
company, (ii) 5% of the Portfolio's total assets with respect to anyone
investment company and (iii) 10% of the Portfolio's total assets in the
aggregate. Investments in the securities of other investment companies may
involve duplication of advisory fees and certain other expenses.
REPURCHASE AGREEMENTS. (Both Portfolios). Each Portfolio may enter into
repurchase agreements. The Fund's custodian or sub-custodian employed in
connection with third-party repurchase transactions will have custody of, and
will hold in a segregated account, securities acquired by a Portfolio under a
repurchase agreement. In connection with its third-party repurchase
transactions, the Fund will employ only eligible sub-custodians which meet the
requirements set forth in Section 17(f) of the 1940 Act and the rules
thereunder. Repurchase agreements are considered by the staff of the Securities
and Exchange Commission to be loans by the Portfolio entering into them. In an
attempt to reduce the risk of incurring a loss on a repurchase agreement, each
Portfolio will enter into repurchase agreements only with domestic banks
(including foreign branches and subsidiaries of domestic banks) with total
assets in excess of one billion dollars or primary government securities dealers
reporting to the Federal Reserve Bank of New York, with respect to securities in
which such Portfolio may invest or government securities regardless of their
remaining maturities, and will require that additional securities be deposited
with it if the value of the securities purchased should decrease below resale
price. The Adviser and, with respect to the Prime Portfolio, the Sub-Adviser
will monitor on an ongoing basis the value of the collateral to assure that it
always equals or exceeds the repurchase price. Each Portfolio will consider on
an ongoing basis the creditworthiness of the institutions with which it enters
into repurchase agreements.
REVERSE REPURCHASE AGREEMENTS. (Both Portfolios). Each Portfolio may enter
into reverse repurchase agreements. Each Portfolio will maintain in a segregated
custodial account cash, cash equivalents or U.S. Government securities or,
except for the U.S. Treasury Portfolio, other high quality liquid debt
securities equal to the aggregate amount of its reverse repurchase obligations,
plus accrued interest, in certain cases, in accordance with releases promulgated
by the Securities and Exchange Commission. The Securities and Exchange
Commission views reverse repurchase agreement transactions as collateralized
borrowings, and, pursuant to the 1940 Act, each Portfolio must maintain
continuous asset coverage (that is, total assets including borrowings, less
liabilities exclusive of borrowings) of 300% of the amount borrowed. If the 300%
asset coverage should decline as a result of market fluctuations or other
reasons, the Portfolio may be required to sell some of its portfolio holdings
within three days to reduce the debt and restore the 300% asset coverage, even
though it may be disadvantageous from an investment standpoint to sell
securities at that time.
ILLIQUID SECURITIES. Where a substantial market of qualified institutional
buyers has developed for certain restricted securities purchased by a Portfolio
pursuant to Rule 144A under the Securities Act of 1933, as amended, the Fund
intends to treat such securities as liquid securities in accordance with
procedures approved by the Fund's Board. Because it is not possible to predict
with assurance how the market for specific restricted securities sold pursuant
to Rule 144A will develop, the Fund's Board has directed the Adviser and the
Sub-Adviser to monitor carefully each Portfolio's investments in such securities
with particular regard to trading activity, availability of reliable price
information and other relevant information. To the extent that, for a period of
time, qualified institutional buyers cease purchasing restricted securities
pursuant to Rule 144A, the Portfolio's investing in such securities may have the
effect of increasing the level of illiquidity in its investment portfolio during
such period.
FORWARD COMMITMENTS. Securities purchased on a forward commitment or
when-issued basis are subject to changes in value (generally changing in the
same way, i.e., appreciating when interest rates decline and depreciating when
interest rates rise) based upon the public's perception of the creditworthiness
of the issuer and changes, real or anticipated, in the level of interest rates.
Securities purchased on a forward commitment or when-issued basis may expose the
Portfolio to risks because they may experience such fluctuations prior to their
actual delivery. Purchasing securities on a when-issued basis can involve the
additional risk that the yield available in the market when the delivery takes
place actually may be higher than that obtained in the transaction itself.
Purchasing securities on a forward commitment or when- issued basis when the
Portfolio is fully or almost fully invested may result in greater potential
fluctuation in the value of the Portfolio's net assets and its net asset value
per share.
LENDING PORTFOLIO SECURITIES. (Both Portfolios). To a limited extent, each
Portfolio may lend its portfolio securities to brokers, dealers and other
financial institutions, provided it receives cash collateral which at all times
is maintained in an amount equal to at least 100% of the current market value of
the securities loaned. By lending its portfolio securities, each Portfolio can
increase its income through the investment of the cash collateral. For the
purposes of this policy, the Fund considers collateral consisting of U.S.
Government securities to be the equivalent of cash. Such loans may not exceed
33-1/3% of the Portfolio's total assets. From time to time, the Fund may pay a
part of the interest earned from the investment of collateral received for
securities loaned to the borrower or a third party which is unaffiliated with
the Fund, and which is acting as a "placing broker," in an amount determined by
the Board of Directors to be reasonable and based solely on services rendered.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned: (1)
the Portfolio must receive at least 100% cash collateral from the borrower; (2)
the borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the Portfolio must be
able to terminate the loan at any time; (4) the Portfolio must receive
reasonable interest on the loan, as well as any interest or other distributions
payable on the loaned securities, and any increase in market value; and (5) the
Portfolio may pay only reasonable custodian fees in connection with the loan.
These conditions may be subject to future modification.
INVESTMENT RESTRICTIONS. Each Portfolio has adopted investment restrictions
numbered 1 through 7 as fundamental policies and the Prime Portfolio has adopted
investment restrictions numbered 13 and 14 and the U.S. Treasury Portfolio has
adopted investment restriction number 15 as additional fundamental policies.
These restrictions cannot be changed, as to a Portfolio, without approval by the
holders of a majority (as defined in the 1940 Act) of the outstanding voting
shares of such Portfolio. Investment restrictions numbered 8 through 12 are not
fundamental policies and may be changed by vote of a majority of the Fund's
Directors at any time. Neither Portfolio may:
1. Invest in commodities, except that each Portfolio may purchase and sell
options, forward contracts, futures contracts, including those relating to
indexes, and options on futures contracts or indexes.
2. Purchase, hold or deal in real estate, or oil, gas or other mineral
leases or exploration or development programs, but each Portfolio may purchase
and sell securities that are secured by real estate or issued by companies that
invest or deal in real estate.
3. Borrow money, except that the Portfolio may borrow up to 33-1/3% of its
total assets. For purposes of this investment restriction, a Portfolio entry
into options, forward contracts, futures contracts, including those relating to
indexes, and options on futures contracts or indexes shall not constitute
borrowing.
4. Make loans to others, except through the purchase of debt obligations
and the entry into repurchase agreements. However, each Portfolio may lend its
securities in an amount not to exceed 33-1/3% of the value of its total assets.
Any loans of portfolio securities will be made according to guidelines
established by the Securities and Exchange Commission and the Fund's Board of
Directors.
5. Act as an underwriter of securities of other issuers, except to the
extent the Fund may be deemed an underwriter under the Securities Act of 1933,
as amended, by virtue of disposing of portfolio securities.
6. Issue any senior security (as such term is defined in Section 18(f) of
the 1940 Act). The Portfolio's investments permitted under Investment
Restriction Nos. 1, 3, 9 and 10 are not considered senior securities for
purposes of this investment restriction.
7. Purchase securities on margin, but each Portfolio may make margin
deposits in connection with transactions in options, forward contracts, futures
contracts, including those relating to indexes, and options on futures contracts
or indexes.
8. Invest in the securities of a company for the purpose of exercising
management or control, but each Portfolio will vote the securities it owns in
its portfolio as a shareholder in accordance with its views.
9. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow in connection with writing covered put and call
options and the purchase of securities on a when-issued or forward commitment
basis and collateral and initial or variation margin arrangements with respect
to options, forward contracts, futures contracts, including those relating to
indexes, and options on futures contracts or indexes.
10. Purchase, sell or write puts, calls or combinations thereof, except as
described in the Portfolio's Prospectus and this Statement of Additional
Information.
11. Enter into repurchase agreements providing for settlement in more than
seven days after notice or purchase securities which are illiquid, if, in the
aggregate, more than 10% of the value of the Portfolio's net assets would be so
invested.
12. Invest in securities of other investment companies, except to the
extent permitted under the 1940 Act.
The following investment restrictions numbered 13 and 14 apply only to the
Prime Portfolio. The Prime Portfolio may not:
13. Invest more than 5% of its assets in the obligations of any one issuer,
except that up to 25% of the value of the Prime Portfolio's total assets may be
invested without regard to any such limitation, provided that not more than 10%
of its assets may be invested in securities issued or guaranteed by any single
guarantor of obligations held by the Prime Portfolio.
14. Invest less than 25% of its total assets in securities issued by banks
or invest more than 25% of its assets in the securities of issuers in any other
industry, provided that there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Notwithstanding the foregoing, for temporary defensive
purposes the Prime Portfolio may invest less than 25% of its assets in bank
obligations.
The following investment restriction number 15 applies only to the U.S.
Treasury Portfolio. The U.S. Treasury Portfolio may not:
15. Invest more than 25% of its total assets in the securities of issuers
in any single industry, provided that there shall be no such limitation on
investments in obligations issued or guaranteed by the U.S. Government.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values or
assets will not constitute a violation of that restriction.
The Fund may make commitments more restrictive than the restrictions listed
above so as to permit the sale of shares of a Portfolio in certain states.
Should the Fund determine that a commitment is no longer in the best interest of
the Portfolio, and its shareholders, the Fund reserves the right to revoke the
commitment by terminating the sale of such Portfolio's shares in the state
involved.
MANAGEMENT OF THE FUND
Directors and officers of the Fund, together with information as to their
principal business occupations during at least the last five years, are shown
below. Each Director who is an "interested person" of the Fund, as defined in
the 1940 Act, is indicated by an asterisk.
DIRECTORS OF THE FUND
*WILLIAM B. BLUNDIN, PRESIDENT AND CHAIRMAN OF THE BOARD OF DIRECTORS.
An employee of Concord Holding Corporation, an affiliate of
the Administrator. Mr. Blundin also is an officer of other
investment companies administered by the Administrator or its
affiliates and President and Chief Executive Officer of Vista
Broker/Dealer Services, Inc. and BNY Hamilton Distributors,
Inc., registered broker/dealers. He is 58 years old and his
address is 125 West 55th Street, New York, New York 10019.
NORMA A. COLDWELL, DIRECTOR. International Economist and Consultant;
Executive Vice President of Coldwell Financial Consultants;
Trustee and Treasurer of Meridian House International
(International Education and Cultural Group);
Member of the Board of Advisors of Meridian International
Center and Emerging Capital Markets, S.A. (Montevideo,
Uruguay); formerly, Chief International Economist of Riggs
National Bank, Washington, D.C. She is 70 years old and
her address is 3330 Southwestern Boulevard, Dallas, Texas
75225.
RICHARD H. FRANCIS, DIRECTOR. Former Executive Vice President
and Chief Financial Officer of Pan American World
Airways, Inc. (currently, debtor-in-possession under the
U.S. Bankruptcy Code), March 1988 to October 1991;
Senior Vice President and Chief Financial Officer of American
Standard Inc., 1960 to March 1988. Mr. Francis is a
director of Allendale Mutual Insurance and The Indonesia
Fund, Inc. He is 63 years old and his address is 40
Grosvenor Road, Short Hills, New Jersey 07078.
WILLIAM W. McINNES, DIRECTOR. Private investor. From July 1978
to February 1993, he was Vice-President--Finance and
Treasurer of Hospital Corp. of America. He is also a
director of Gulf South Medical Supply and Diversified
Trust Co. He is 47 years old and his address is 116
30th Avenue South, Nashville, Tennessee 37212.
ROBERT A. ROBINSON, DIRECTOR. Private investor. Since 1991, President
Emeritus, and from 1968 to 1991, President of The Church
Pension Group, NYC. From 1956 to 1966, Senior Vice President
of Colonial Bank & Trust Co. He is also a director of Mariner
Institutional Funds, Inc., Mariner Tax-Free Institutional
Funds, Inc., UST Master Funds, UST Master Tax Exempt Funds,
H.B. and F.H. Bugher Foundation, Morehouse-Barlow Co.
Publishers, The Canterbury Cathedral Trust in America, The
Living Church Foundation and Hoosac School. He is 70 years
old and his address is 2 Hathaway Common, New Canaan,
Connecticut 06840.
OFFICERS OF THE FUND
JEFFREY C. CUSICK, VICE PRESIDENT AND ASSISTANT SECRETARY. An employee
of BISYS Fund Services, Inc., the Administrator's general
partner, since July 1995, and an officer of other investment
companies administered by the Administrator or its affiliates.
From September 1993 to July 1995, he was Assistant Vice
President and, from 1989 to September 1993, he was
Manager--Client Services, of Federated Administrative
Services. He is 37 years old and his address is 3435 Stelzer
Road, Columbus, Ohio 43219.
WILLIAM TOMKO, VICE PRESIDENT. An employee of BISYS Fund Services, Inc. and
an officer of other investment companies administered the
Administrator or its affiliates. He is 37 years old and
his address is 3435 Stelzer Road, Columbus, Ohio 43219.
ANN E. BERGIN, VICE PRESIDENT. An employee of Concord Holding
Corporation, an affiliate of the Administrator, and an
officer of other investment companies administered by the
Administrator or its affiliates. She is 35 years old and
her address is 125 West 55th Street, New York, New York
10019.
GEORGE O. MARTINEZ, SECRETARY. Senior Vice President
and Director of Legal and Compliance Services with BISYS Fund
Services, Inc., since April 1995, and an officer of other
investment companies administered by the Administrator or its
affiliates. Prior thereto, he was Vice President and Associate
General Counsel with Alliance Capital Management, L.P. He is
36 years old and his address is 3435 Stelzer Road, Columbus,
Ohio 43219.
MARTIN R. DEAN, TREASURER. An employee of BISYS Fund Services, Inc.,
since May 1994, and an officer of other investment companies
administered by the Administrator or its affiliates. Prior
thereto, he was a Senior Manager of KPMG Peat Marwick LLP. He
is 32 years old and his address is 3435 Stelzer Road,
Columbus, Ohio 43219.
ROBERT L. TUCH, ASSISTANT SECRETARY. An employee of BISYS Fund
Services, Inc., since June 1991, and an officer of other
investment companies administered by the Administrator or its
affiliates. From July 1990 to June 1991, he was Vice President
and Associate General Counsel with National Securities
Research Corp. Prior thereto, he was an Attorney with the
Securities and Exchange Commission. He is 44 years old and his
address is 3435 Stelzer Road, Columbus, Ohio 43219.
ALAINA METZ, ASSISTANT SECRETARY. An employee of BISYS Fund Services,
Inc. and an officer of other investment companies administered
by the Administrator or its affiliates. She is 28 years old
and her address is 3435 Stelzer Road, Columbus, Ohio 43219.
For so long as the Shareholder Services Plan described in the section
captioned "Management Arrangements--Shareholder Services Plan" remains in
effect, the Directors of the Fund who are not "interested persons" of the Fund,
as defined in the 1940 Act, will be selected and nominated by the Directors who
are not "interested persons" of the Fund.
Directors and officers of the Fund, as a group, owned less than 1% of
either Portfolio's shares of common stock outstanding on June 1, 1996.
The Fund does not pay any remuneration to its officers and
Directors other than fees and expenses to those Directors who are not directors,
officers or employees of the Adviser or Administrator or any of their
affiliates. The aggregate amount of compensation paid to each such Director by
the Fund for year ended December 31, 1995 was as follows:
<TABLE>
<CAPTION>
Total Compensation
Aggregate From Fund and
Name of Board Compensation from Fund Complex Paid
MEMBER FUND* TO BOARD MEMBER*
<S> <C> <C>
Norma A. Coldwell $11,250 $11,250
Richard H. Francis $10,000 $10,000
William W. McInnes $ 7,500 $ 7,500
Robert A. Robinson $ 2,500 $ 2,500
- ------------------------------
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $6,434 for all Directors as a group.
</TABLE>
MANAGEMENT ARRANGEMENTS
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE PORTFOLIOS' PROSPECTUS ENTITLED "MANAGEMENT OF THE
PORTFOLIOS."
INVESTMENT ADVISORY AGREEMENT. The Adviser provides investment advisory
services pursuant to the Investment Advisory Agreement (the "Agreement") dated
February 15, 1994 with the Fund. As to each Portfolio, the Agreement is subject
to annual approval by (i) the Fund's Board of Directors or (ii) vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities of
such Portfolio, provided that in either event the continuance also is approved
by a majority of the Board of Directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund or the Adviser, by vote cast in person at a
meeting called for the purpose of voting on such approval. The Agreement was
last approved by the Fund's Board of Directors, including a majority of the
directors who are not "interested persons" of any party to the Agreement, at a
meeting held on October 25, 1995. As to each Portfolio, the Agreement is
terminable without penalty, on 60 days' notice, by the Fund's Board of Directors
or by vote of the holders of a majority of such Portfolio's shares, or, on not
less than 90 days' notice, by the Adviser. The Agreement will terminate
automatically, as to the relevant Portfolio, in the event of its assignment (as
defined in the 1940 Act).
As compensation for the Adviser's services, the Fund has agreed to pay the
Adviser a monthly investment advisory fee at the annual rate of .25 of 1% of the
value of each Portfolio's average daily net assets less, in the case of the
Prime Portfolio, any amount payable by the Fund to the Sub-Adviser. For the
period March 29, 1994 (commencement of operations of each Portfolio) through
December 31, 1994, and for the fiscal year ended December 31, 1995, $50,754 and
$64,959, respectively, was payable by the Prime Portfolio and $183,801 and
$358,127, respectively, was payable by the U.S. Treasury Portfolio pursuant to
the Agreement. The Adviser waived $7,046 and $19,089 of such fees payable for
the period ended December 31, 1994 by the Prime Portfolio and U.S. Treasury
Portfolio, respectively, resulting in net fees being paid to the Adviser of
$43,708 by the Prime Portfolio and $164,712 by the U.S. Treasury Portfolio
during the fiscal period ended December 31, 1994.
SUB-INVESTMENT ADVISORY AGREEMENT. The Adviser has engaged the Sub-Adviser
to provide investment advisory assistance and day-to- day management of the
Prime Portfolio's investments pursuant to the Sub-Investment Advisory Agreement
(the "Sub-Advisory Agreement") among the Fund, the Adviser and the Sub-Adviser
dated February 15, 1994. The fees payable to the Sub-Adviser for its services
are paid by the Fund. The Sub-Advisory Agreement is subject to annual approval
by (a) the Fund's Board of Directors or (b) vote of a majority (as defined in
the 1940 Act) of the Prime Portfolio's outstanding voting securities, provided
that in either event the continuance also is approved by a majority of the
Fund's Directors who are not "interested persons" (as defined in the 1940 Act)
of any party to the Sub-Advisory Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval. The Sub- Advisory Agreement
was last approved by the Fund's Board of Directors who are not "interested
persons" of any party to the Sub-Advisory Agreement, at a meeting held on
October 25, 1995. The Sub-Advisory Agreement may be terminated without penalty
(i) by the Fund's Board of Directors or by vote of the holders of a majority of
the Prime Portfolio's shares, upon written notice to the Sub-Adviser, (ii) by
the Adviser (but only upon the approval of the Fund's Board of Directors) upon
60 days' written notice to the Sub-Adviser, or (iii) by the Sub-Adviser upon not
less than 90 days' written notice to the Fund and the Adviser. The Sub-Advisory
Agreement also will terminate automatically in the event of its assignment (as
defined in the 1940 Act). In addition, if the Fund's Agreement with the Adviser
is terminated for any reason (whether by the Fund, by the Adviser or by
operation of law), the Sub-Advisory Agreement will terminate upon the effective
date of such termination of the Investment Advisory Agreement.
The Sub-Adviser provides investment advisory services in accordance with
the stated policies of the Prime Portfolio, subject to the approval of the
Fund's Board of Directors. The Sub-Adviser provides the Prime Portfolio with
investment personnel who are authorized by the Board of Directors to execute
purchases and sales of securities. The Sub-Adviser also maintains a research
department with a professional staff of portfolio managers and securities
analysts who provide research services for the Prime Portfolio as well as for
other funds advised by the Sub-Adviser. All purchases and sales are reported for
the Board's review at the meeting subsequent to such transactions.
As compensation for the Sub-Adviser's services, the Fund has agreed to pay
the Sub-Adviser a monthly sub-investment advisory fee at the annual rate of .15
of 1% of the value of the Prime Portfolio's average daily net assets. For the
period March 29, 1994 (commencement of operations of the Prime Portfolio)
through December 31, 1994 and for the fiscal year ended December 31, 1995,
$76,130 and $97,438, respectively, was payable by the Prime Portfolio pursuant
to the Sub-Advisory Agreement. The Sub-Adviser waived $10,274 of such fee
payable for the period ended December 31, 1994, resulting in a net fee being
paid to the Sub-Adviser of $65,856 by the Prime Portfolio during the fiscal
period ended December 31, 1994.
ADMINISTRATION AGREEMENT. The Administrator provides certain administrative
services pursuant to the Administration Agreement (the "Administration
Agreement") dated April 25, 1996 with the Fund. As to each Portfolio, the
Administration Agreement will continue until April 25, 2001 and thereafter is
subject to annual approval by (i) the Fund's Board of Directors or (ii) vote of
a majority (as defined in the 1940 Act) of the outstanding voting securities of
such Portfolio, provided that in either event the continuance also is approved
by a majority of the Directors who are not "interested persons" (as defined in
the 1940 Act) of the Fund or the Administrator, by vote cast in person at a
meeting called for the purpose of voting such approval. The Administration
Agreement was last approved by the Fund's Board of Directors, including a
majority of the Directors who are not "interested persons" of any party to the
Administration Agreement, at a meeting held on April 25, 1996. As to each
Portfolio, the Administration Agreement is terminable without penalty, at any
time if for cause, by the Fund's Board of Directors or by vote of the holders of
a majority of such Portfolio's outstanding voting securities, or, on not less
than 90 days' notice, by the Administrator. The Administration Agreement will
terminate automatically, as to the relevant Portfolio, in the event of its
assignment (as defined in the 1940 Act).
As compensation for the Administrator's services, the Fund has agreed to
pay the Administrator a monthly administration fee at the annual rate of .10 of
1% of the value of each Portfolio's average daily net assets. For the period
March 29, 1994 (commencement of operations of each Portfolio) through December
31, 1994 and for the fiscal year ended December 31, 1995, $50,754 and $64,959,
respectively, was payable to Concord Holding Corporation, an affiliate of the
Administrator and the Portfolios' administrator during such periods, by the
Prime Portfolio and $73,520 and $143,251, respectively, was payable to Concord
Holding Corporation as administrator by the U.S. Treasury Portfolio pursuant to
an Administration Agreement with Concord Holding Corporation which was
terminated on April 25, 1996. Concord Holding Corporation waived $7,046 and
$7,767 of such fees payable for the period ended December 31, 1994 by the Prime
Portfolio and U.S. Treasury Portfolio, respectively, resulting in net fees being
paid to Concord Holding Corporation of $43,708 by the Prime Portfolio and
$65,753 by the U.S. Treasury Portfolio during the fiscal period ended December
31, 1994.
DISTRIBUTION AGREEMENT. The Distributor acts as the exclusive distributor
of each Portfolio's shares on a best efforts basis pursuant to a Distribution
Agreement (the "Distribution Agreement") dated March 29, 1995 with the Fund.
Shares are sold on a continuous basis by the Distributor as agent, although the
Distributor is not obliged to sell any particular amount of shares. No
compensation is payable by the Fund to the Distributor for its distribution
services.
SHAREHOLDER SERVICES PLAN. (Applicable only with respect to the Investor
Shares). The Fund's Directors have adopted a shareholder services plan (the
"Plan") with respect to the Investor Shares pursuant to which each Portfolio
pays the Distributor for the provision of certain services to the holders of
Investor Shares at an annual rate of .25% of the value of each Portfolio's
Investor Shares. The Fund's Directors believe that there is a reasonable
likelihood that the Plan will benefit each Portfolio and the holders of its
Investor Shares. In some states, certain institutions effecting transactions in
Investor Shares may be required to register as dealers pursuant to state law.
A quarterly report of the amounts expended under the Plan, and the purposes
for which such expenditures were incurred, must be made to the Directors for
their review. In addition, the Plan provides that material amendments of the
Plan must be approved by the Board of Directors, and by the Directors who are
neither "interested persons" (as defined in the 1940 Act) of the Fund nor have
any direct or indirect financial interest in the operation of the Plan or in the
related Plan agreements, by vote cast in person at a meeting called for the
purpose of considering such amendments. The Plan and related agreements are
subject to annual approval by such vote of the Directors cast in person at a
meeting called for the purpose of voting on the Plan. The Plan was last so
approved on October 25, 1995. The Plan is terminable at any time by vote of a
majority of the Directors who are not "interested persons" and who have no
direct or indirect financial interest in the operation of the Plan or in the
Plan agreements. A Plan agreement is terminable without penalty, at any time, by
such vote of the Directors. A Plan agreement will terminate automatically in the
event of its assignment (as defined in the 1940 Act).
For the fiscal year ended December 31, 1995, the Distributor waived receipt
of $162,474 payable by the Prime Portfolio and $358,053 payable by the U.S.
Treasury Portfolio with respect to Investor Shares pursuant to the Plan.
EXPENSES. All expenses incurred in the operation of the Fund are borne by
the Fund, except to the extent specifically assumed by others. The expenses
borne by the Fund include: organizational costs, taxes, interest, brokerage fees
and commissions, if any, fees of Directors who are not officers, directors,
employees or holders of 5% or more of the outstanding voting securities of the
Adviser, Sub- Adviser or Administrator or any of their affiliates, Securities
and Exchange Commission fees, state Blue Sky qualification fees, advisory and
administration fees, charges of custodians, transfer and dividend disbursing
agents' fees, certain insurance premiums, industry association fees, auditing
and legal expenses, costs of maintaining corporate existence, costs of
independent pricing services, costs attributable to investor services
(including, without limitation, telephone and personnel expenses), costs of
calculating the net asset value of each Portfolio's shares, costs of
shareholders' reports and corporate meetings, costs of preparing and printing
certain prospectuses and statements of additional information, and any
extraordinary expenses. Expenses attributable to a Portfolio are charged against
the assets of that Portfolio; other expenses of the Fund are allocated among the
Portfolios on the basis determined by the Board of Directors, including, but not
limited to, proportionately in relation to the net assets of each Portfolio.
PURCHASE AND REDEMPTION OF SHARES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE PORTFOLIOS' PROSPECTUS ENTITLED "HOW TO BUY SHARES" AND
"HOW TO REDEEM SHARES."
TERMS OF PURCHASE. The Fund reserves the right to reject any purchase order
and to change the amount of the minimum investment and subsequent purchases in
the Portfolios.
"SWEEP" PROGRAM. Each Portfolio's shares may be purchased through the
"sweep" program established by certain financial institutions under which a
portion of their customers' accounts may be automatically invested in the
Portfolio. The customer becomes the beneficial owner of specific shares of the
Portfolio which may be purchased, redeemed and held by the financial institution
in accordance with the customer's instructions and may fully exercise all rights
as a shareholder. The shares will be held by Supervised Service Company, Inc.
(the "Transfer Agent") in book-entry form. A statement with regard to the
customer's shares is generally supplied to the customer monthly, and
confirmations of all transactions for the account of the customer ordinarily are
available to the customer promptly on request. In addition, each customer is
sent proxies, periodic reports and other information from the Fund with regard
to shares of the Portfolios. The customer's shares are fully assignable and may
be encumbered by the customer. The "sweep" agreement can be terminated by the
customer at any time, without affecting its beneficial ownership of the shares.
To obtain the benefits of this service, a customer typically is required to
maintain a minimum balance subject to a monthly maintenance fee, or a higher
minimum balance for which no monthly fee would be imposed. In either case, a
penalty fee is imposed if the minimum should not be maintained. In general, the
automatic investment in a Portfolio's shares occurs on the same day that
withdrawals are made by the financial institution, at the next determined net
asset value after the order is received.
All agreements which relate to the service are with the financial
institution. Neither the Distributor nor the Fund is a party to any of those
agreements and no part of the compensation received by the financial institution
flows to the Fund or to the Distributor or to any of their affiliates, either
directly or indirectly. Further information concerning this program and any
related charges or fees is provided by the financial institution prior to any
purchase of a Portfolio's shares. Any fees charged by the financial institution
effectively reduces the Portfolio's yield for those customers.
USING FEDERAL FUNDS. The Transfer Agent or the Fund may attempt to notify
the investor upon receipt of checks drawn on banks that are not members of the
Federal Reserve System as to the possible delay in conversion into Federal Funds
and may attempt to arrange for a better means of transmitting the money.
REOPENING AN ACCOUNT. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
STOCK CERTIFICATES; SIGNATURES. Any certificate representing Portfolio
shares to be redeemed must be submitted with the redemption request. Written
redemption requests must be signed by each shareholder, including each holder of
a joint account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Fund's
Transfer Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations,
as well as from participants in the New York Stock Exchange Medallion Signature
Program, the Securities Transfer Agents Medallion Program ("STAMP") and the
Stock Exchanges Medallion Program. Signature-guarantees may not be provided by
notaries public. If the signature is guaranteed by a broker or dealer, such
broker or dealer must be a member of a clearing corporation and maintain net
capital of at least $100,000. Guarantees must be signed by an authorized
signatory of the guarantor and "Signature-Guaranteed" must appear with the
signature.
REDEMPTION COMMITMENT. Each Portfolio has committed itself to pay in cash
all redemption requests by any shareholder of record, limited in amount during
any 90-day period to the lesser of $250,000 or 1% of the value of such
Portfolio's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Securities and Exchange
Commission. In the case of requests for redemption in excess of such amount, the
Board of Directors reserves the right to make payments in whole or in part in
securities or other assets in case of an emergency or any time a cash
distribution would impair the liquidity of the Portfolio to the detriment of the
existing shareholders. In this event, the securities would be valued in the same
manner as the Portfolio is valued. If the recipient sold such securities,
brokerage charges would be incurred.
SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or the
date of payment postponed (a) during any period when the New York Stock Exchange
is closed (other than customary weekend and holiday closing), (b) when trading
in the markets the Portfolio normally utilizes is restricted, or when an
emergency exists as determined by the Securities and Exchange Commission so that
disposal of the Portfolio's investments or determination of its net asset value
is not reasonably practicable, or (c) for such other periods as the Securities
and Exchange Commission by order may permit to protect the Portfolio's
shareholders.
DETERMINATION OF NET ASSET VALUE
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE PORTFOLIOS' PROSPECTUS ENTITLED "HOW TO BUY SHARES."
AMORTIZED COST PRICING. The valuation of each Portfolio's investment
securities is based upon their amortized cost which does not take into account
unrealized capital gains or losses. This involves valuing an instrument at its
cost and thereafter assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Portfolio would receive if it sold the
instrument.
The Board of Directors has agreed, as a particular responsibility within
the overall duty of care owed to the Portfolios' investors, to establish
procedures reasonably designed to stabilize each Portfolio's price per share as
computed for the purpose of sales and redemptions at $1.00. Such procedures
include review of each Portfolio's investment holdings by the Board of
Directors, at such intervals as it deems appropriate, to determine whether such
Portfolio's net asset value calculated by using available market quotations or
market equivalents deviates from $1.00 per share based on amortized cost. In
such review, investments for which market quotations are readily available will
be valued at the most recent bid price or yield data for such securities or for
securities of comparable maturity, quality and type, as obtained from one or
more of the major market makers for the securities to be valued. Other
investments and assets will be valued at fair value as determined in good faith
by the Board of Directors.
The extent of any deviation between a Portfolio's net asset value based
upon available market quotations or market equivalents and $1.00 per share based
on amortized cost will be examined by the Board of Directors. If such deviation
exceeds 1/2 of 1%, the Board of Directors promptly will consider what action, if
any, will be initiated. In the event the Board of Directors determines that a
deviation exists which may result in material dilution or other unfair results
to investors or existing shareholders, it has agreed to take such corrective
action as it regards as necessary and appropriate, including: selling portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity; withholding dividends or paying distributions from
capital or capital gains; redeeming shares in kind; or establishing a net asset
value per share by using available market quotations or market equivalents.
NEW YORK STOCK EXCHANGE AND CUSTODIAN CLOSINGS. The holidays (as observed)
on which the New York Stock Exchange and the Custodian are closed currently are:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day,
Thanksgiving Day and Christmas Day.
YIELD INFORMATION
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE PORTFOLIOS' PROSPECTUS ENTITLED "YIELD INFORMATION."
For the seven-day period ended December 31, 1995, the Prime Portfolio's
yield for Investor Shares was 5.26% and its effective yield for Investor Shares
was 5.39%. For such period, the U.S. Treasury Portfolio's yield for Investor
Shares was 5.12% and its effective yield for Investor Shares was 5.24%. These
yield figures reflect the absorption of certain expenses and/or waiver of fees,
without which the yield and effective yield for the seven-day period ended
December 31, 1995 for Investor Shares would have been 5.01% and 5.13%,
respectively, for the Prime Portfolio and 4.87% and 4.98%, respectively, for the
U.S. Treasury Portfolio. Trust Shares had not been offered as of December 31,
1995. Yield will be computed in accordance with a standardized method which
involves determining the net change in the value of a hypothetical pre-existing
Portfolio account having a balance of one share at the beginning of a seven
calendar day period for which yield is to be quoted, dividing the net change by
the value of the account at the beginning of the period to obtain the base
period return, and annualizing the results (i.e., multiplying the base period
return by 365/7). The net change in the value of the account reflects the value
of additional shares purchased with dividends declared on the original share and
any such additional shares and fees that may be charged to shareholder accounts,
in proportion to the length of the base period and the Portfolio's average
account size, but does not include realized gains and losses or unrealized
appreciation and depreciation. Effective annualized yield is computed by adding
1 to the base period return (calculated as described above), raising that sum to
a power equal to 365 divided by 7, and subtracting 1 from the result.
Yields will fluctuate and are not necessarily representative of future
results. The investor should remember that yield is a function of the type and
quality of the instruments held, their maturity and operating expenses. An
investor's principal in the Portfolio is not guaranteed. See "Determination of
Net Asset Value" for a discussion of the manner in which each Portfolio's price
per share is determined.
From time to time, advertising materials for a Portfolio may refer to or
discuss current or past business, political, economic or financial conditions,
such as U.S. monetary or fiscal policies and actual or proposed tax legislation.
In addition, from time to time, advertising materials for a Portfolio may
include information concerning retirement and investing for retirement, average
life expectancy and pension and social security benefits.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased directly from the issuer or
an underwriter or a market maker for the securities. Usually no brokerage
commissions are paid for such purchases. Purchases from underwriters of
portfolio securities include a concession paid by the issuer to the underwriter
and the purchase price paid to market makers for the securities may include the
spread between the bid and asked price. No brokerage commissions have been paid
by either Portfolio to date.
Transactions are allocated to various dealers by each Portfolio's
investment personnel in their best judgment. The primary consideration is prompt
and effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected to act on an agency basis for
research, statistical or other services to enable the Adviser and/or Sub-Adviser
to supplement their own research and analysis with the views and information of
other securities firms.
To the extent any research services are furnished by brokers through which
each Portfolio effects securities transactions, the Adviser and, with respect to
the Prime Portfolio, the Sub-Adviser may use such information in advising other
funds or accounts they advise and, conversely, to the extent any research
services are furnished to the Adviser and/or Sub-Adviser by brokers in
connection with other funds or accounts the Adviser or Sub-Advisers advise, the
Adviser and/or Sub-Adviser also may use such information in advising the
Portfolios. Although it is not possible to place a dollar value on these
services, if they are provided, it is the opinion of each Adviser that the
receipt and study of any such services should not reduce the overall expenses of
its research department.
INFORMATION ABOUT THE PORTFOLIOS
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE PORTFOLIOS' PROSPECTUS ENTITLED "GENERAL INFORMATION."
Each Portfolio share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Shares have no preemptive, subscription or conversion rights and are freely
transferable.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise, to the holders of the outstanding voting securities of an investment
company, such as the Fund, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each portfolio affected by such matter. Rule 18f-2 further provides that a
portfolio shall be deemed to be affected by a matter unless it is clear that the
interests of each portfolio in the matter are identical or that the matter does
not affect any interest of such portfolio. However, the Rule exempts the
election of directors from the separate voting requirements of the Rule.
Each Portfolio will send annual and semi-annual financial statements to all
its shareholders.
As of June 1, 1996, the following shareholders beneficially owned, directly
or indirectly, 5% or more of the indicated Portfolio's outstanding shares:
Percent of
Total Investor
NAME AND ADDRESS SHARES OUTSTANDING
PRIME PORTFOLIO:
First American Trust Company 99%
Attn: Cash Management
800 First American Center
Nashville, TN 37237
U.S. TREASURY PORTFOLIO:
First American Trust Company 99%
Attn: Cash Management
800 First American Center
Nashville, TN 37237
A shareholder who beneficially owns, directly or indirectly, more than 25%
of a Portfolio's voting securities may be deemed a "control person" (as defined
in the 1940 Act) of the Portfolio.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS
The Bank of New York, 90 Washington Street, New York, New York 10286, acts
as custodian of each Portfolio's investments. BISYS Fund Services Ohio, Inc., an
affiliate of the Administrator, 3435 Stelzer Road, Columbus, Ohio 43219, acts as
the Fund's transfer and dividend disbursing agent (the "Transfer Agent"). Under
the transfer agency agreement with the Fund, the Transfer Agent maintains
shareholder account records for the Fund, handles certain communications between
shareholders and the Fund and pays dividends and distributions payable by the
Fund. For these services, the Transfer Agent receives a monthly fee compiled on
the basis of the number of shareholder accounts it maintains for the Fund during
the month, and is reimbursed for certain out-of-pocket expenses. Neither The
Bank of New York nor BISYS Fund Services Ohio, Inc. has any part in determining
the investment policies of either Portfolio or which securities are to be
purchased or sold by a Portfolio.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York 10004-2696,
as counsel for the Fund, has rendered its opinion as to certain legal matters
regarding the due authorization and valid issuance of the shares of Common Stock
being sold pursuant to the Portfolios' Prospectus.
KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 10154,
independent auditors, have been selected as each Portfolio's auditors.
<PAGE>
APPENDIX
Description of the two highest commercial paper, bond and other short- and
long-term rating categories assigned by Standard & Poor's Ratings Group ("S&P"),
Moody's Investors Service, Inc. ("Moody's"), Fitch Investors Service, L.P.
("Fitch"), Duff & Phelps Credit Rating Co. ("Duff"), IBCA Inc. and IBCA Limited
("IBCA"), and Thomson BankWatch, Inc. ("BankWatch"):
Commercial Paper and Short-Term Ratings
The designation A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus sign (+)
designation. Capacity for timely payment on issues with an A-2 designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
The rating Prime-1 (P-1) is the highest commercial paper rating assigned by
Moody's. Issuers of P-1 paper must have a superior capacity for repayment of
short-term promissory obligations, and ordinarily will be evidenced by leading
market positions in well established industries, high rates of return of funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.
Issues rated Prime-2 (P-2) have a strong capacity for repayment of short-term
promissory obligations. This ordinarily will be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
The rating Fitch-1 (Highest Grade) is the highest commercial paper rating
assigned by Fitch. Paper rated Fitch-1 is regarded as having the strongest
degree of assurance for timely payment. The rating Fitch-2 (Very Good Grade) is
the second highest commercial paper rating assigned by Fitch which reflects an
assurance of timely payment only slightly less in degree than the strongest
issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset protection.
Risk factors are minor. Paper rated Duff-2 is regarded as having good certainty
of timely payment, good access to capital markets and sound liquidity factors
and company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a
very strong capacity for timely repayment. Those obligations rated A1+ are
supported by the highest capacity for timely repayment. Obligations rated A2 are
supported by a strong capacity for timely repayment, although such capacity may
be susceptible to adverse changes in business, economic or financial conditions.
The rating TBW-1 is the highest short-term obligation rating assigned by
BankWatch. Obligations rated TBW-1 are regarded as having the strongest capacity
for timely repayment. Obligations rated TBW-2 are supported by a strong capacity
for timely repayment, although the degree of safety is not as high as for issues
rated TBW-1.
Bond and Long-Term Ratings
Bonds rated AAA are considered by S&P to be the highest grade obligations
and possess an extremely strong capacity to pay principal and interest. Bonds
rated AA by S&P are judged by S&P to have a very strong capacity to pay
principal and interest, and in the majority of instances, differ only in small
degrees from issues rated AAA.
Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Bonds rated Aa by Moody's are judged by Moody's to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than Aaa bonds because margins of
protection may not be as large or fluctuations of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger. Moody's applies numerical modifiers 1, 2
and 3 in the Aa rating category. The modifier 1 indicates a ranking for the
security in the higher end of this rating category, the modifier 2 indicates a
mid-range ranking, and the modifier 3 indicates a ranking in the lower end of
the rating category.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade,
broadly marketable, suitable for investment by trustees and fiduciary
institutions and liable to but slight market fluctuation other than through
changes in the money rate. The prime feature of an AAA bond is a showing of
earnings several times or many times interest requirements, with such stability
of applicable earnings that safety is beyond reasonable question whatever
changes occur in conditions. Bonds rated AA by Fitch are judged by Fitch to be
of safety virtually beyond question and are readily salable, whose merits are
not unlike those of the AAA class, but whose margin of safety is less strikingly
broad. The issue may be the obligation of a small company, strongly secured but
influenced as to rating by the lesser financial power of the enterprise and more
local type of market.
Bonds rated AAA are judged by Duff to be of the highest credit quality with
negligible risk factors; only slightly more than U.S. Treasury debt. Bonds rated
AA are judged by Duff to be of high credit quality with strong protection
factors. Risk is modest but may vary slightly from time to time because of
economic conditions.
Obligations rated AAA by IBCA have the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk significantly. Obligations for which there
is a very low expectation of investment risk are rated AA by IBCA. Capacity for
timely repayment of principal and interest is substantial. Adverse changes in
business, economic or financial conditions may increase investment risk albeit
not very significantly.
INTERNATIONAL AND U.S. BANK RATINGS
An IBCA bank rating represents IBCA's current assessment of the strength of
the bank and whether such bank would receive support should it experience
difficulties. In its assessment of a bank, IBCA uses a dual rating system
comprised of Legal Ratings and Individual Ratings. In addition, IBCA assigns
banks Long- and Short-Term Ratings as used in the corporate ratings discussed
above. Legal Ratings, which range in gradation from 1 through 5, address the
question of whether the bank would receive support provided by central banks or
shareholders if it experienced difficulties, and such ratings are considered by
IBCA to be a prime factor in its assessment of credit risk. Individual Ratings,
which range in gradations from A through E, represent IBCA's assessment of a
bank's economic merits and address the question of how the bank would be viewed
if it were entirely independent and could not rely on support from state
authorities or its owners.
In addition to its ratings of short-term obligations, BankWatch assigns a
rating to each issuer it rates, in gradations of A through E. BankWatch examines
all segments of the organization, including, where applicable, the holding
company, member banks or associations, and other subsidiaries. In those
instances where financial disclosure is incomplete or untimely, a qualified
rating (QR) is assigned to the institution. BankWatch also assigns, in the case
of foreign banks, a country rating which represents an assessment of the overall
political and economic stability of the country in which the bank is domiciled.
FINANCIAL STATEMENTS
The Portfolios' Annual Report to Shareholders for the fiscal year ended
December 31, 1995 is a separate document supplied with this Statement of
Additional Information, and the financial statements, accompanying notes and
report of independent auditors appearing therein are incorporated by reference
in this Statement of Additional Information.
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Included in Part B of the Registration Statement
(for Investor Class Shares):
Statements of Investments.*
Statements of Assets and Liabilities.*
Statements of Operations.*
Statements of Changes in Net Assets.*
Notes to Financial Statements.*
Reports of KPMG Peat Marwick LLP, Independent
Auditors.*
- -------------------------
* Incorporated by reference to the Registrant's Annual
Reports to Shareholders.
(b) Exhibits:
(1) (a) Articles of Incorporation are incorporated
by reference to Exhibit (1) of the
Registration Statement on Form N-1A, filed on March 29,
1990.
(b) Articles of Amendment are incorporated by
reference to Exhibit (1)(b) of Pre-Effective
Amendment No. 3 to the Registration
Statement on Form N-1A, filed on June 22,
1990.
(c) Articles Supplementary dated October 16,
1990 are incorporated by reference to
Exhibit(1)(c) of Post-Effective Amendment
No. 3 to the Registration Statement on Form
N-1A, filed on October 25, 1990.
(d) Articles Supplementary dated January 9, 1992
are incorporated by reference to
Exhibit (1)(d) of Post-Effective Amendment No. 10 to
the Registration Statement on Form N-1A,
filed on January 17, 1992.
(e) Articles Supplementary dated February 15,
1994 are incorporated by reference to
Exhibit (1)(e) of Post-Effective Amendment No. 22
to the Registration Statement on Form N-1A,
filed on February 10, 1994.
(f) Articles of Amendment are incorporated by
reference to Exhibit (1)(f) of
Post-Effective Amendment No. 26 to the
Registration Statement on Form N-1A, filed
on May 1, 1996.
(2) By-Laws are incorporated by reference to Exhibit
(2) of Pre-Effective Amendment No. 3 to the
Registration Statement on Form N-1A, filed on
June 22, 1990.
(4) Specimen copies of stock certificates are
incorporated by reference to Exhibit (4) of Post-
Effective Amendment No. 6 to the Registration
Statement on Form N-1A, filed on June 7, 1991.
(5) (a)(i) Amended Investment Advisory Agreement
between the Registrant and BEA
Associates is incorporated by reference
to Exhibit (5)(b)(i) of Post-Effective
Amendment No. 15 to the Registration
Statement on Form N-1A, filed on
August 19, 1992.
(a)(ii) Investment Advisory Agreement between
the Registrant and Mitchell Hutchins
Asset Management Inc. is incorporated
by reference to Exhibit (5)(b)(iii) of
Post-Effective Amendment No. 6 to the
Registration Statement on Form N-1A,
filed on June 7, 1991.
(a)(iii) Investment Advisory Agreement
between Registrant and First
American National Bank is
incorporated by reference to Exhibit
(5)(a)(iii) of Post-Effective
Amendment No. 22 to the Registration
Statement on Form N-1A, filed on
February 10, 1994.
(a)(iv) Investment Advisory Agreement
between the Registrant and BEA
Associates is incorporated by
reference to Exhibit (5)(a)(iv) of
Post-Effective Amendment No. 25 to
the Registration Statement on Form
N-1A, filed on May 1, 1995.
(b) Sub-Investment Advisory Agreement among
Registrant, First American National
Bank and Barnett Banks and Trust Company,
N.A. is incorporated by reference to
Exhibit (5)(b)(i) of Post-Effective
Amendment No. 22 to the Registration
Statement on Form N-14, filed on
February 10, 1994.
(c)(i) Administration Agreement between
Registrant and Concord Holding
Corporation dated March 29, 1995 is
incorporated by reference to
Exhibit (5)(c)(i) of Post-Effective Amendment
No. 26 to the Registration Statement on
Form N-1A, filed on May 1, 1996.
(c)(ii) Administration Agreement between
Registrant and BISYS Fund Services
Limited Partnership dated April 25,
1996 is incorporated by reference to
Exhibit (5)(c)(ii) of Post-Effective Amendment
No. 26 to the Registration Statement on
Form N-1A, filed on May 1, 1996.
(6) (a) Distribution Agreement between
Registrant and Concord Financial Group,
Inc. dated March 29, 1995 is
incorporated by reference to
Exhibit (6)(a) of Post-Effective Amendment No.
25 to the Registration Statement on
Form N-1A, filed on May 1, 1995.
(b)(i) Form of Plan Agreement, with respect to
Registrant's Correspondent Cash
Reserves Money Market Portfolio and
Correspondent Cash Reserves Municipal
Portfolio, is incorporated by reference
to Exhibit (6)(b) of Post-Effective
Amendment No. 6 to the Registration
Statement on Form
N-1A, filed on June 7, 1991.
(b)(ii) Form of Distribution Plan Agreement,
with respect to Registrant's BEA Short
Duration Portfolio is incorporated by
reference to Exhibit (6)(b)(iv) of Post-
Effective Amendment No. 15 to the
Registration Statement on Form N-1A,
filed On August 19, 1992.
(b)(iii) Distribution Plan Agreement, with
respect to Registrant's ValueStar
Equity, Equity Income, Short-
Intermediate Duration Bond, Bond and
Tennessee Tax Exempt Bond Portfolios is
incorporated by reference to
Exhibit (6)(b)(iii) of Post-Effective Amendment
No. 22 to the Registration Statement on
Form N-1A, filed on February 10, 1994.
(8) (a) Custody and Fund Accounting Agreement
with The Bank of New York is
incorporated by reference to
Exhibit (8)(a) of Pre-Effective Amendment No. 3
to the Registration Statement on Form
N-1A, filed on June 22, 1990.
(b) Form of Foreign Sub-Custodian
Agreement is incorporated by
reference to Post- Effective
Amendment No. 22 to the Registration
Statement on Form N-1A, filed on
February 10, 1994.
(9) (a) Special Management Services Agreement
among the Registrant, Mitchell Hutchins
Asset Management Inc. and Concord
Holding Corporation is incorporated by
reference to Exhibit (9) of Post-
Effective Amendment No. 6 to the
Registration Statement on Form N-1A,
filed on June 7, 1991.
(b) Form of Shareholder Services Agreement
is incorporated by reference to
Exhibit (5)(e) of Pre-Effective Amendment No. 3
to the Registration Statement on Form
N-1A, filed on June 22, 1990.
(c) Shareholder Services Plan with respect
to Registrant's ValueStar Prime Money
Market and U.S. Treasury Money Market
Portfolios is incorporated by reference
to Post-Effective Amendment No. 22 to
the Registration Statement on
Form N-1A, filed on February 10, 1994.
(11) Consent of Independent Auditors.
(15) (a) Plan of Distribution pursuant to Rule
12b-1, with respect to Registrant's
Correspondent Cash Reserves Money
Market Portfolio and Correspondent Cash
Reserves Municipal Portfolio, is
incorporated by reference to Exhibit
(15) of Post-Effective Amendment No. 6
to the Registration Statement on Form
N-1A, filed on June 7, 1991.
(b) Distribution Plan pursuant to Rule
12b-1, with respect to Registrant's BEA
Short Duration Portfolio, is
incorporated by reference to
Exhibit (15)(c) of Post-Effective Amendment
No. 15 to the Registration Statement on
Form N-1A filed on August 19, 1992.
(c) Distribution Plan pursuant to Rule
12b-1, with respect to Registrant's
ValueStar Equity, Equity Income, Short-
Intermediate Duration Bond, Bond and
Tennessee Tax Exempt Bond Portfolios is
incorporated by reference to Post-
Effective Amendment No. 22 to the
Registration Statement on Form N-1A,
filed on February 10, 1994.
(16) Computations of Performance Information
are incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement on Form N-1A,
filed on May 1, 1995.
(17) Financial Data Schedules are
incorporated by reference to
Registrant's Annual Report on Form
N-SAR filed on or about February 29, 1996.
(18) (a) Rule 18f-3 Plans for Registrant's BEA,
CCR and ValueStar Prime and U.S.
Treasury Portfolios are incorporated by
reference to Exhibit (18) of Post-
Effective Amendment No. 25 to the
Registration Statement on Form N-1A,
filed on May 1, 1995.
(b) Rule 18f-3 Plan for Registration's
ValueStar Non-Money Market
Portfolios is incorporated by
reference to Exhibit (18)(ii) of
Post-Effective Amendment No. 26 to
the Registration Statement on Form
N-1A, filed on May 1, 1996.
Other Exhibit: (i) Certificate of Corporate Secretary is
incorporated by reference to Other
Exhibit of Pre-Effective Amendment
No. 3 to the Registration Statement
on Form N-1A, filed on June 22, 1990.
(ii) Powers of Attorney are incorporated by
reference to Pre-Effective Amendment No.1
and Post-Effective Amendment No.8 to the
Registration Statement on Form
N-1A, filed on May 23, 1990 and
November 15, 1991, respectively.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
WITH REGISTRANT
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
Number of Record
Holders as of
TITLE OF CLASS MARCH 31, 1996
Common Stock, par value
$.001 per share
Alpha Government 69
Securities Portfolio
BEA Short Duration Portfolio
--Client Shares 25
--Service Shares 1
--Investor Shares 1
Correspondent Cash Reserves
Money Market Portfolio
--Retail Shares 34,901
--Institutional Shares 2
ValueStar Prime Money Market Portfolio
--Trust Shares --
--Investor Shares 25
ValueStar Capital Growth Portfolio
--Trust Shares --
--Investor Shares 1
ValueStar Investment Grade
Bond Portfolio
--Trust Shares --
--Investor Shares 1
ValueStar Short-Intermediate
Duration Bond Portfolio
--Trust Shares --
--Investor Shares 7
ValueStar Tennessee Tax Exempt
Bond Portfolio
--Trust Shares --
--Investor Shares 7
ValueStar U.S. Treasury Money
Market Portfolio
--Trust Shares --
--Investor Shares 10
ITEM 27. INDEMNIFICATION
Reference is made to Article SEVENTH of the Registrant's Articles of
Incorporation filed as Exhibit 1 to the Registration Statement, filed on March
29, 1990, and to Section 2-418 of the Maryland General Corporation Law. The
application of these provisions is limited by Article VIII of the Registrant's
By-Laws filed as Exhibit 2 to Pre-Effective Amendment No. 3 to the Registration
Statement, filed on June 22, 1990, and by the following undertaking set forth in
the rules promulgated by the Securities and Exchange Commission:
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in such Act and will be governed by the final adjudication
of such issue.
Reference also is made to the Distribution Agreement filed as Exhibit 6(a)
hereto.
ITEM 28(A). BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER AND/OR
SUB-INVESTMENT ADVISER
(i) Registrant is fulfilling the requirement of this Item 28(a) to provide
a list of the officers and directors of BEA Associates, the investment adviser
of the Registrant's BEA Short Duration Portfolio and Alpha Government Securities
Portfolio, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by BEA Associates or
those of its officers and directors during the past two years, by incorporating
by reference the information contained in the Form ADV filed with the SEC
pursuant to the Investment Advisers Act of 1940 by BEA Associates (SEC File No.
801-37170).
(ii) Registrant is fulfilling the requirement of this Item 28(a) to provide
a list of the officers and directors of Mitchell Hutchins Asset Management Inc.,
the investment adviser of the Registrant's Correspondent Cash Reserves Money
Market Portfolio, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
Mitchell Hutchins Asset Management Inc. or those of its officers and directors
during the past two years, by incorporating by reference the information
contained in the Form ADV filed with the SEC pursuant to the Investment Advisers
Act of 1940 by the Mitchell Hutchins Asset Management Inc. (SEC File No.
801-13219).
(iii) First American National Bank, the investment adviser of the
Registrant's ValueStar Portfolios, is a wholly-owned subsidiary of First
American Corporation, a registered bank holding company. To the knowledge of the
Registrant, none of the directors or executive officers of First American
National Bank, except those described below, are or have been, at any time
during the past two years, engaged in any other business, profession, vocation
or employment of a substantial nature, except that certain directors and
executive officers of First American National Bank also hold or have held
various positions with bank and non-bank affiliates of First American National
Bank, including First American Corporation.
Principal Occupation or
Other Employment of a
Position with Substantial
NAME ADVISER NATURE
Samuel E. Beale, III Director President and Chief
Executive Officer of
Morrison Restaurants,
Inc.
Dennis C. Bottorff Director and President and Chief
Chief Executive Executive Officer of
Officer First American
Corporation
Earnest W. Deavenport, Jr. Director Group Vice President of
Eastman Kodak Company
Reginald D. Dickson Director President Emeritus of
INROADS, Inc.
T. Scott Fillebrown Director Private Investor
James A. Haslam, II Director President and Chief
Executive Officer of
Pilot Corporation
Martha R. Ingram Director Director of Public
Affairs of Ingram
Industries, Inc.
Walter D. Knestrick Director Chairman of the Board of
Walter Knestrick
Contractor, Inc.
Gene C. Koonce Director President and Chief
Executive Officer of
United Cities Gas Company
James R. Martin Director Chairman and Chief
Executive Officer of
PlastiLine, Inc.
William O. McCoy Director Vice Chairman of the
Board of BellSouth
Corporation
Dale W. Polley Director, Vice Vice Chairman and Chief
Chairman and Administrative Officer
Chief Administrative of First American
Officer Corporation
Toy F. Reid Director Retired Executive Vice
President of Eastman
Kodak Company
Roscoe R. Robinson Director Vice Chancellor for
Health Affairs of
Vanderbilt University
Medical Center
James F. Smith Director Chairman of the Board of
First American
Corporation
Cal Turner, Jr. Director Chairman and Chief
Executive Officer of
Dollar General
Corporation
David K. Wilson Director Chairman of the Board of
Cherokee Equity
Corporation
Toby S. Wilt Director President of TSW
Investment Company
William S. Wire, II Director Chairman of the Board of
Genesco, Inc.
James C. Armistead, Jr. Executive Vice None
President
John W. Boyle, Jr. President, None
Corporate Bank
R. Booth Chapman Executive Vice None
President
Emery F. Hill Executive Vice None
President
Dennis J. Hooks Executive Vice None
President
Rufus B. King Executive Vice None
President
John W. Logan Executive Vice None
President
Robert A. McCabe, Jr. President, None
General Bank
Robert E. McNeilly, Jr. President and None
Chief Executive
Officer, First
American Trust
Company, N.A.
Martin E. Simmons Executive Vice None
President,
General Counsel
and Corporate
Secretary
Terry S. Spencer Executive Vice None
President
Jonn W. Smithwick Executive Vice None
President
M. Terry Turner Executive Vice None
President
Alexander P. Waddell, IV Senior Vice None
President and
Treasurer
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Other investment companies for which Registrant's principal underwriter
(exclusive distributor) acts as principal underwriter or exclusive distributor:
Pacific Horizon Funds, Inc.
Prairie Funds
Prairie Institutional Funds
Prairie Intermediate Bond Fund
Prairie Municipal Bond Fund, Inc.
(b) The information required by this Item 29(b) regarding each director or
officer of Concord Financial Group, Inc. is incorporated by reference to
Schedule A of Form BD filed by Concord Financial Group, Inc. pursuant to the
Securities Exchange Act of 1934 (SEC File No. 8- 37601).
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
1. BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, Ohio 43219-3035
2. The Bank of New York
90 Washington Street
New York, New York 10015
3. BEA Associates
One Citicorp Center, 58th Floor
153 East 53rd Street
New York, New York 10022
4. Concord Financial Group, Inc.
125 West 55th Street
11th Floor
New York, New York 10019
5. First American National Bank
315 Deaderick Street
Nashville, Tennessee 37238
6. Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
(b) Registrant hereby undertakes
(1) to call a meeting of shareholders for the purpose of voting upon the
question of removal of a Director or Directors when requested in writing to do
so by the holders of at least 10% of the Registrant's outstanding Common Stock
and in connection with such meeting to comply with the provisions of Section
16(c) of the Investment Company Act of 1940 relating to shareholders
communications.
(2) to furnish each person to whom a prospectus is delivered with a copy of
its most current annual report to shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment pursuant to Rule 485(b)
under the Securities Act of 1933 and has duly caused this Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, and State of New York, on the 26th day
of June, 1996.
THE INFINITY MUTUAL FUNDS, INC.
(Registrant)
By: /S/WILLIAM B. BLUNDIN*
William B. Blundin, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
/S/WILLIAM B. BLUNDIN* President (Principal
WILLIAM B. BLUNDIN Executive Officer) and
Chairman of the
Board of Directors
/S/MARTIN R. DEAN* Treasurer (Chief
MARTIN R. DEAN Financial and
Accounting Officer)
/S/RICHARD H. FRANCIS* Director
RICHARD H. FRANCIS
/S/NORMA A. COLDWELL* Director
NORMA A. COLDWELL
/S/WILLIAM W. MCINNES* Director
WILLIAM W. McINNES
/S/ROBERT A. ROBINSON* Director
ROBERT A. ROBINSON
*By:/S/ROBERT L. TUCH June 26, 1996
Robert L. Tuch
Attorney-in-fact
THE INFINITY MUTUAL FUNDS, INC.
Post-Effective Amendment No. 27 to
Registration Statement on Form N-1A under
the Securities Act of 1933 and
the Investment Company Act of 1940
EXHIBITS
INDEX TO EXHIBITS
Page
(11) Consent of Independent Auditors
<PAGE>
EXHIBIT (11)
Independent Auditors' Consent
The Board of Directors
ValueStar Prime Money Market Portfolio
ValueStar U.S. Treasury Money Market
Portfolio:
We consent to the use of our report dated February 9, 1996, included in the
Registration Statement on form N-1A and to the reference to our firm under the
heading "Financial Highlights" in the Prospectus.
KPMG PEAT MARWICK LLP
New York, New York
April 30, 1996
